F O R M 10 - KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
______________
For the fiscal year ended December 31, 1997
_______________________________
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
_________________
For the transition period from ______________ to _______________
Commission file number O-7267
__________
WEB PRESS CORPORATION
_________________________________________________________________
Washington 91-0851298
_______________________________ ________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
22023 68th Avenue South, Kent, Washington 98032
_________________________________________ _____________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (253) 395-3343
______________
Securities Registered Pursuant to 12(b) of the Act:
Title of each class Name of each exchange on which registered
None
____ _________________________________________
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.025
_________________________________________________________________
(Title of Class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
_____ ______
All reports during the preceding 12 months have been filed.
State issuer's revenues for its most recent fiscal year....$9,822,433.
<PAGE>
As of March 5, 1998, 3,105,413 common shares were outstanding, and
the aggregate market value of the common shares (based upon the
closing bid price provided by the National Quotation Bureau, Inc.)
held by non-affiliates was approximately $418 thousand.
Documents incorporated by reference: Exhibits as described in
Part III, Item 13.
<PAGE>
WEB PRESS CORPORATION
TABLE OF CONTENTS TO ANNUAL REPORT ON FORM 10-KSB
ITEM DESCRIPTION PAGE
____ ___________ ____
PART I
1. BUSINESS........................................ 4
2. PROPERTIES...................................... 7
3. LEGAL PROCEEDINGS............................... 7
4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS................................ 7
PART II
5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS............. 8
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS... 8
7 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.....13
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE..........13
PART III
9. DIRECTORS AND EXECUTIVE OFFICERS
OF REGISTRANT...................................14
10. EXECUTIVE COMPENSATION..........................16
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT...........................17
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..19
13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K.........................19
<PAGE>
ANNUAL REPORT ON FORM 10-KSB
WEB PRESS CORPORATION
PART I
ITEM 1. BUSINESS
(A) General Development of Business
Web Press Corporation (herein referred to as "Web" or "Company")
was founded in late 1967 under the name "Web Press Aid" as a sole
proprietorship. The company was incorporated in November, 1969
under the laws of the State of Washington. Initially, the
Company was involved primarily in the rebuilding and repair of
web-fed printing presses and related equipment. Shortly after
incorporation, the Company undertook the development of a line of
printing press equipment of its own design. During 1972, the
Company commenced production of this equipment. While the
manufacture of new equipment is now the Company's primary
business, it continues to deal in rebuilt and used equipment as
an adjunct to its new press sales. The Company also sells parts
and service for its new equipment. The sale of new and used
presses accounted for approximately 83% and 2%, respectively, of
the Company's revenues in 1997. The Company's presses are
primarily designed to print on absorbent paper such as newsprint.
Products produced by the presses are newspapers (both broadsheet
and tabloid sizes), shoppers, advertising inserts, and paperback
books.
During 1984 and 1985, the Company developed four models of a new
high-speed press and added them to its product line. In 1992,
the Company added a new size cutoff to this line of presses,
increasing the number of models to six.
In 1995, the Company introduced and sold its first integrated
rollstand perfecting unit (IRU). The IRU has a single roll
position under the perfecting unit in place of a free-standing
two-position rollstand.
(B) Financial Information About Segments
See Note 7 of Notes to Consolidated Financial Statements for
information about the Company's operations by segment and
geographic area for the years ended December 31, 1997 and 1996.
(C) Narrative Description of Business
Equipment which Web Press Corporation manufactures consists of
two basic products, the Web Leader and the Atlas. The Atlas is
made in six different models. The principal difference between
the Web Leader and the Atlas is that the Atlas is fifty percent
faster. Each press is composed of standard modules to unwind,
print, cutoff and fold the roll of paper into a finished product.
Each is arranged to meet the particular printer's requirements
<PAGE>
for the number of pages, color, and size of his products.
Following are descriptions of these modules:
PERFECTOR. Web's perfector is a rotary offset perfecting
printing press unit, consisting of two printing couples running
"back-to-back". Each perfector will print four broadsheet-size
newspaper pages, in one color, on each revolution of the printing
couples. Perfectors can be configured to print up to four
colors. They can print up to 32 broadsheet-size pages.
QUADRA-COLOR UNIT. Web's Quadra-Color unit consists of four
printing stations mounted around a common impression cylinder.
This unit prints four colors on two broadsheet-size pages at a
time. It offers better control over color register and thus is
capable of greater accuracy in color printing than conventional,
unit-to-unit methods for color printing. It is used in
conjunction with the Company's other products to provide close
register, four-color capability in the printing system.
FOLDER. Web's folder is used in conjunction with perfecting and
Quadra-Color units to fold the printed paper into a finished
product. The folder cuts the paper off in every plate cylinder
revolution and folds it in standard broadsheet-size newspapers,
tabloid-size papers, and shopping-flyer or magazine-size
products. The Company also produces two folder styles which have
the capability of making a second parallel fold to produce
"digest"-size signatures which are used in printing some books
and pamphlets.
TWO-POSITION ROLL ROLLSTANDS. Web's rollstand supports two, 42-
inch diameter rolls of 36-inch wide paper and is used in
conjunction with the perfector and Quadra-Color units. The
rollstand controls the unwinding of the paper roll and feeds it
to the printing units under controlled tension.
Web Press Corporation markets its products through Company
employed representatives in the United States and Canada.
Foreign sales are made through independent organizations in Latin
America, Asia, Europe, and the Middle East.
The Company's presses are sold in a highly competitive world
market. Competition is based on a combination of price, service,
quality, and the versatility of the equipment. Web's presses are
priced competitively with similar products. The Company believes
that features incorporated in its presses, as well as the
Company's policies of supporting its customers, will allow it to
continue to be very competitive. Web Press Corporation is the
only manufacturer in the United States producing a Quadra-Color
unit for its market.
The primary competitors of the Company are Goss Graphic Systems,
P.E.C. Corporation (King Press Division), and Harris Graphics.
Certain of these companies have financial resources in excess of
the Company's.
<PAGE>
The most important materials employed in Web's product line are
steel and aluminum (plate and bar stock), tubing, bearings, and
rubber coverings. All are available through local suppliers.
The Company believes that its sources of supply for these
materials are adequate for its needs and that it is not
substantially dependent upon any one supplier. Lead times of up
to six months are required at some times for certain materials.
Web Press Corporation maintains an ongoing program of product
development and improvement. This program consists primarily of
technical improvements and supplementary developments which have
produced features and capabilities that management believes will
result in competitive marketing advantages for Web's product
line. In 1997, $292 thousand was expended for research and
development compared to $282 thousand in 1996.
Total employment of 50 persons as of December 31, 1997 compares
with approximately 54 at December 31, 1996.
Substantially all of the Company's operations are run by electri
cal energy purchased from a local utility. The Company has not
experienced energy shortages and does not anticipate any
difficulties in the foreseeable future. Extended shortages of
energy would have an adverse impact on the Company.
Compliance with federal, state and local environmental protection
laws during 1997 had no material effect upon capital
expenditures, earnings, or the competitive position of Web Press
Corporation.
The Company's computer software systems consist primarily of
programs written for the Company. Certain of these programs will
need to be upgraded prior to the turn of the century to process
date sensitive items where the year is entered "00" for the year
2000. The Company has determined which programs will need to be
upgraded and held discussions with outside software vendors and
programmers familiar with the Company's computer software
programs. Based on their advice, the Company does not believe
upgrading its current computer software programs to recognize the
year 2000 will present the Company with any significant problems.
The Company intends to test and make the necessary upgrades in
1998. The cost of upgrading the Company's computer software
programs should be immaterial to the financial statements.
(D) Foreign Operations
The Company's foreign operations consist entirely of export sales
and related services originating at its facilities within the
United States. Export sales accounted for 56.7% of total sales
in 1997 and 62.3% in 1996. Further financial information
relating to foreign operations for the two years ended December
31, 1997, is set forth in Note 7 (Segment Information) of the
Notes to Consolidated Financial Statements.
<PAGE>
ITEM 2. PROPERTIES
OFFICE AND MANUFACTURING FACILITIES. The Company presently
occupies approximately 49,000 square feet of leased office and
manufacturing space at 22023 68th Avenue South, Kent, Washington.
The term of the lease is ten years, commencing six months from
the date of occupancy by the Company in May 1988, with two five-
year renewal options. There was no rent for the first six months
after the Company occupied the premises. In addition, the lease
required the lessor to finance $150,000 of leasehold improvements
and other costs incurred by the Company. The total monthly
payment, including amortization of the $150,000 financed, is
$14,451. The Company notified the lessor in September, 1997 that
it would exercise the first extension option of the lease,
covering a period of five years through October, 2003. The new
monthly rental payment will be $16,155, commencing in November,
1998.
The Company has arrangements for small offices for each of its
three salesmen who are located in Burlington, Vermont; Blue
Springs, Missouri and Charlotte, North Carolina.
ITEM 3. LEGAL PROCEEDINGS
LITIGATION. There are no material pending legal proceedings,
other than ordinary legal matters incidental to the Company's
business, to which the Company is a party or in which any of the
Company's property is the subject.
ENVIRONMENTAL PROCEEDINGS. There are no proceedings against the
Company involving federal, state or local statutes or ordinances
dealing with environmental protection.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
_______
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
(A) Principal Market, Stock Price, and Dividend Information
Although certain dealers regularly provide quotations on the
Company's stock, actual trading activity is limited.
The following table sets forth the high and low bid quotations
per share for the Company's common stock for the periods
indicated. These figures were provided by the National Quotation
Bureau, LLC, and may reflect inter-dealer prices, without retail
mark-up, mark-down or commission. They do not necessarily
represent actual transactions.
1997 1996
____ ____
Quarter High Low High Low
_______ ____ ___ ____ ___
First $.375 $.375 $.375 $.3125
Second .375 .1875 .4375 .375
Third .1825 .15 .4375 .375
Fourth .25 .17 .375 .375
The Company has paid no dividends during the two years ended
December 31, 1997.
(B) Approximate Number of Holders of Common Stock
The number of holders of record for the Company's common stock as
of March 5, 1998 was 548.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
________
Web Press operates in a segment of the graphic arts industry.
Its primary business is the manufacture and sale of rotary
offset, web-fed printing presses. These products are designed
for the use in printing newspapers, shoppers, advertising
inserts, paperback books and similar products. The market is
dominated by four domestic manufacturers. Sales in the industry
are sensitive to advertising expenditures, long-term interest
rates and newsprint shortages. The product is labor intensive;
materials shortages are rare; and technical obsolescence has not
been a significant factor.
OPERATING RESULTS
_________________
1997 Compared with 1996
_______________________
Sales grew 48.4 percent in 1997 to $9.822 million from 1996 sales
of $6.617 million. Most of the growth was in new equipment
sales, which increased $2.709 million in 1997 from 1996. New
equipment sales were 83.2 percent of total sales in 1997,
compared to 82.5 percent in 1996. Domestic sales of new
equipment in 1997 were $2.908 million, an increase of 84.5
percent from 1996. The increase included a significantly higher
than normal amount of auxiliary equipment. Domestic customers
continued to purchase smaller press configurations than
international customers. International sales of new equipment
continued to grow in 1997, increasing 35.4 percent from 1996 to
$5.263 million--53.6 percent of total sales. The Company had
major sales to customers in Ireland, Greece, Romania, Germany and
Argentina. Parts and used equipment sales in 1997 grew too,
increasing $454 thousand and $43 thousand from 1996,
respectively.
The gross profit margin on sales declined to 22.3 percent in
1997, from 26.9 percent in 1996. The primary reason for the
lower gross profit margin was a decrease in the average gross
profit percentage for new equipment to 27.9 percent in 1997 from
33.2 percent in 1996. The higher than normal amount of auxiliary
equipment sold in 1997, on which the Company only makes a nominal
gross profit, caused much of the decline. The gross profit
percentage for new equipment in 1997 would have been 31.1 percent
if it had not included the auxiliary equipment. In 1997, used
equipment was sold for a total gross loss of $94 thousand,
compared to a gross profit of $59 thousand in 1996. Cost of
sales in 1997 included a write-down of $57 thousand for obsolete
parts and certain used equipment, compared to a write-down of $80
thousand in 1996. The gross profit margin on parts increased 7.2
percent in 1997 due to higher selling prices.
Selling, general and administrative expenses declined by $387
thousand in 1997 from 1996. Expenses in 1996 included a $400
separation payment due the former president/general manager of
the Company. Selling expenses increased 7.2 percent in 1997.
Incentive compensation increased $44 thousand in 1997 due to
higher sales and promotional and travel expenses were $31
thousand higher. Excluding the $400 thousand separation payment,
general and administrative expenses decreased 6.3 percent in 1997
compared to 1996. Compensation expense in 1997 was lower by $92
thousand. This saving was partially offset by higher bank fees
and accrued termination costs. Most other selling, general and
administrative expenses did not change significantly.
Interest expense increased 18.7 percent in 1997 from 1996. In
1997, average short-term borrowings from the bank were $683
thousand, compared to $531 thousand in 1996. The average
interest rates on all of the Company's short-term borrowings from
the bank were 10.3 percent in 1997 and 10.8 percent in 1996.
Higher de-
<PAGE>
ferred earnings in the DISC, on which the Company must
pay interest, also contributed to the increase in interest
expense in 1997.
In 1997, the Company had an operating profit of $542 thousand,
before federal income tax expense of $187 thousand. The Company
had an operating loss of $220 thousand in 1996, before a tax
benefit of $76 thousand. In 1996, the Company would have had a
$180 thousand pre-tax profit had it not been for the $400
thousand separaton expense. Net earnings for the year were $355
thousand in 1997, compared to a net loss of $144 thousand in
1996. Higher sales in 1997 are the primary reason for the
improvement in earnings.
1996 Compared with 1995
_______________________
Sales in 1996 were $6.617 million, a decrease of $2.334 million
from 1995 sales of $8.951 million. The Company anticipated lower
sales of both used presses and parts in 1996. The Company had
fewer used presses in inventory to sell and the number of
acceptable used presses being offered as trade-ins has declined.
In 1995, the Company received an exceptionally high number of
very large parts orders for rebuilding presses. New equipment
sales, domestically, were lower in 1996 because customers bought
smaller press configurations, reducing the average sales price
per order received. International sales of new equipment
continued to grow in 1996, increasing 7.5 percent to $3.887
million, 58.7 percent of total sales. The Company sold presses
to new customers in two countries where it previously had no
equipment installed.
The gross profit margin on sales increased to 26.9 percent in
1996, compared to 24.1 percent in 1995. The improved gross
profit margin was the result of a 16.2 percent improvement in the
average gross profit percentage for new equipment, and because
new equipment sales, which have a higher gross profit margin than
used equipment, were a larger percentage of total sales. New
equipment accounted for 82.5 percent of total sales in 1996,
compared to 72.9 percent in 1995. Cost of sales in 1996 included
a write-down of $80 thousand for certain used equipment and
obsolete parts. The gross profit margin on parts sales declined
6.5 percent in 1996, compared to 1995, due to lower sales volume
and because the Company has not raised its selling prices for
parts in over two years.
Selling, general and administrative expenses increased $332
thousand in 1996 from 1995. The increase was the result of a
$400 thousand separation payment due the former president/general
manager of the Company upon his retirement. Without that
expense, selling, general and administrative expenses would have
declined $68 thousand, or 4.6 percent in 1996. Excluding the
$400 thousand separation expense, payroll costs declined $114
thousand in 1996, compared to 1995. The decrease was the result
of lower incentive compensation in 1996, due to lower sales. In
1996, advertising costs were $47 thousand higher and the Company
spent
<PAGE>
$46 thousand more attending several international trade
shows, compared to 1995. Most other selling, general and
administrative expenses did not change significantly.
Interest expense decreased 16.5 percent in 1996 from 1995. In
1996, average short-term borrowings from the bank were $531
thousand, compared to $643 thousand in 1995. The average
interest rate on all of the Company's borrowings from the bank
were 10.8 percent in 1996 and 11.3 percent in 1995.
The Company had an operating loss of $220 thousand in 1996,
before a tax benefit of $76 thousand. Had it not been for the
$400 thousand separation expense, the Company would have had a
$180 thousand profit from operations in 1996. In 1995, the
Company had pre-tax operating income of $451 thousand. Lower
sales in 1996 is the primary reason for the lower operating
income. The 16.2 percent increase in the average gross profit
percentage on new equipment sales partially offset the lower
sales volume. The net loss for the year was $144 thousand in
1996, compared to a net earnings of $300 thousand in 1995.
1998
____
Because of the high value of each order for the Company's
equipment and the irregular timing of orders, projections for
particular time periods are very difficult to make.
The strength of local economies is the primary determinant of
revenues and, therefore, profits for the Company's customers. To
the extent the economies of the cities our customers produce and
sell newspapers and other products into remain strong in 1998,
their advertising revenues should continue to grow. For 1998,
economists are forecasting real domestic economic growth to be 2
percent to 2.4 percent. The Newspaper Association of America
projects newspaper advertising to grow by 6.7 percent in 1998.
The Company believes that continued strong advertising growth,
well above the overall growth rate for the general economy, will
help domestic sales of presses in 1998. However, excess printing
capacity still exists, restraining demand and pricing for
printing equpment. Other factors that should help sales in 1998
are an ample supply of low priced newsprint and that funds for
capital equipment purchases are available at very favorable
interest rates.
The economic problems in Asia resulted in postponement of several
orders in 1997. It is highly unlikely that the Asian market will
improve in 1998. The local economies of Western European
countries are strong, Eastern European countries continue to grow
economically and most economies in Central and South America have
improved, too. The Company has prospects in all of these areas.
Export sales should account for over 50 percent of the Company's
business again in 1998.
<PAGE>
In June 1998, the Company will show for the first time a new 4+4
perfecting unit at the NEXPOr98 trade show in Orlando, Florida.
The new module, called a "QUAD-STACK," will be sold as part of
the Atlas product line. It has several unique features--most
notable being its inimitable compact size for a 4+4 perfecting
unit. The compact size will allow pressmen to operate the press
from a ground floor platform. Initially, two models of the QUAD-
STACK will be available.
In March 1998, the Company installed a new AWEA CNC vertical
machining center in its plant. The new machine will increase
capacity, reduce production time, and allow the Company to
continue its cost reduction program. The AWEA joins two
additional new CNC machine tools the Company purchased in 1997.
The new machines will insure that our products are produced to
the highest engineering standards, at an economical cost.
LIQUIDITY
_________
Net working capital was $3.285 million and the current ratio was
2:1 on December 31, 1997. Changes in working capital components
include an increase in accounts receivable of $2.027 million; a
reduction in total inventories of $650 thousand; an increase in
accrued expenses of $495 thousand; lower customer deposits of
$348 thousand; a net increase in deferred taxes of $224 thousand;
and a federal tax refund of $111 thousand. Net cash used by
operations was $453 thousand in 1997.
Most of the decrease in inventories was in finished goods, which
were $522 thousand lower in 1997 than in 1996. Used equipment
inventories and work-in-progress were reduced by $172 thousand
and $111 thousand, respectively. Raw materials and parts
inventories were up slightly in 1997.
Funds provided by operations are the Company's primary source of
liquidity. In addition, the Company uses short-term debt from
two separate revolving lines of credit with a commercial bank to
finance flutuating working capital requirements. On December 31,
1997, the Company had additional borrowing capacity of $176
thousand from its operating line of credit and $752 thousand from
its export working capital line of credit.
In February 1998, the bank renewed the Company's operating line
of credit through April 15, 1999, and increased the borrowing
limit by $500 thousand to $1.2 million.
The Company and the bank currently have an application pending
with the U.S. Export-Import Bank for a working capital guarantee.
The guarantee would support an additional revolving line of
credit with the bank for borrowing up to $1 million to be used to
manufacture equipment for export. The new loan would have more
flexible terms than the export working capital line that expired
in February 1998.
<PAGE>
CAPITAL RESOURCES
_________________
Total assets increased by $1.309 million in 1997. Stockholder's
equity increased by $355 thousand; working capital increased by
$1.031 million; non-current deferred income taxes increased by
$23 thousand; and long-term debt increased by $643 thousand.
Long-term financing in the form of secured notes are used to
acquire manufacturing equipment. The Company incurred $1.111
million of new debt in 1997. Most of the proceeds were used to
retire term debt with another bank. The Company made payments of
$1.109 million on its long-term debt in 1997.
In February 1998, the Company secured a second term note from the
bank for $420,700 to purchase a new machine tool. Monthly
payments will be $6,794, with a final payment of $156 thousand
due in February 2003.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data filed as part of this
report are listed in the index appearing in Item 13 to this Form
10-KSB Annual Report.
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None.
<PAGE>
PART III
________
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of the Company are:
Name Position Age
____ ________ ___
G. B. Palmer President and Director 49
E. P. Beierlorzer Vice President of Engineering 58
and Director
R. G. Mercer Vice President of Manufacturing 56
and Director
R. B. Thompson Vice President of Technical 57
Services and Director
A. W. White Vice President of Purchasing 43
and Director
R. M. Sprague Director 58
P. F. Dunn Director 49
C. L. Mathison Secretary/Treasurer 55
C. A. Gath Vice President of Sales 57
There are no family relationships between any directors or
executive officers of the registrant. Officers are appointed by
the Board of Directors and serve at its will or until they
resign.
BUSINESS EXPERIENCE:
G. B. Palmer
____________
Mr. Palmer has been president and a director of the Company
since December 1996. He has served as the Company's director of
manufacturing from August 1990 to December 1996 and has been
employed by the Company since 1986. Prior to joining the
Company, he was director of manufacturing of Pacific Hoe
Corporation. He is a metallurgical engineer.
<PAGE>
E. P. Beierlorzer
_________________
Mr. Beierlorzer rejoined the Company as director of engineering
in June 1997. He was elected to the board of directors at that
time and appointed vice president of engineering in November
1997. From July 1996 to June 1997, he was a consultant. Mr.
Beierlorzer was chief engineer with the Ecopak division of
Ranpak Corporation from August 1992 to June 1996. From March
1984 to August 1992, he was director of engineering for the
Company. He holds four patents for equipment design.
R. G. Mercer
____________
Mr. Mercer has worked for the Company in manufacturing since
1972. He was elected to the board of directors in June 1997 and
appointed vice president of manufacturing in November 1997. He
was director of manufacturing from December 1996 to November
1997. From August 1990 to December 1996, he was production
manager.
R. B. Thompson
______________
Mr. Thompson has worked for the Company in technical services
since 1970. He was elected to the board of directors in June
1997 and appointed vice president of technical services in
November 1997. He was customer service manager from October
1985 to November 1997.
A. W. White
___________
Mr. White has worked for the Company in purchasing since 1976.
He was elected to the board of directors in June 1997 and
appointed vice president of purchasing in November 1997. He has
been the Company's purchasing manager for 21 years.
R. M. Sprague
_____________
Mr. Sprague has been a director of the Company since January
1997. He is the founder and owner of Sprague Metal Company, a
manufacturer of specialty sheet metal products. He founded the
company in 1974 and has been employed in the metal trades
business for over 30 years.
P. F. Dunn
__________
Mr. Dunn has been a director of the Company since February 1997.
He has been employed by the Boeing Company in various financial
positions since 1973. He currently is tax manager for the the
State and Local Division.
<PAGE>
C. L. Mathison
______________
Mr. Mathison has been secretary/treasurer of the Company since
January 1997. He has served as the Company's controller since
October 1979. Prior to joining the Company, he was assistant
controller of Bayliner Marine Corporation.
C. A. Gath
__________
Prior to joining the Company as vice president of sales in May
of 1985, Mr. Gath was manager of South and Western Operations in
the Cheshire Division of Xerox Corporation, a manufacturer of
addressing and labeling equipment. He started with that
division in 1976 as a sales representative and progressed
through several management positions in sales and marketing.
401(K) PLAN:
Effective January 1, 1988, the Company established a 401(K) plan
under the Internal Revenue Service Regulations. Employees are
eligible to participate after one year of service. Plan
participants self-direct their investments choosing from five
options sponsored by Merrill Lynch. An employee who elects to
participate may contribute in a year up to the lower of 15% of
gross pay or the dollar limit under the regulations, which in
1997 was $9,500. The Company contributes a matching amount of
10% of the first $1,000 contributed by an employee in a year.
In addition, the Company may make a discretionary matching
contribution. The total amount is determined by the Company's
Board of Directors and allocated to the participants based on
their contributions. There were no discretionary contributions
in 1997 and 1996.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the aggregate total cash
compensation accrued during the fiscal years ended December 31,
1997, 1996, and 1995 for the chief executive officer of the
Company.
<PAGE>
Annual Compensation
___________________
Long-Term All Other
Name/Principal Salary Bonus Compensation Compensation
Position Year ($) ($) $ $
______________ ____ _______ _____ ____________ ____________
G. B. Palmer 1997 65,614 0 0 0
President/ 1996 55,000 0 0 0
General Manager/
Director (Effective December 20, 1996)
W. R. Marcouiller 1996 168,301 25,763 0 400,000 (1)
President/General 1995 164,145 64,416 0 0
Manager/Director (Retired December 20, 1996)
(1) On December 20, 1996, Mr. Marcouiller retired as
president/general manager of the Company and resigned as a
director of the Company. His employment agreement with the
Company stipulated that a payment of $400 thousand would be due
him upon termination of his employment. That amount is included
in All Other Compensation.
The Compensation Committee has established an incentive plan for the
Company's president. Effective June 1, 1997, the president's base
salary is $72,500 per year. The president is to receive a bonus of 5%
of the Company's pre-tax earnings in excess of $600 thousand, plus .5%
of gross sales in excess of $11 million. No bonus was earned in 1997.
The registrant and Mr. Marcouiller entered into a separation agreement
on March 5, 1997. Under terms of the agreement, the Company is to pay
Mr. Marcouiller a performance bonus of 12.5% of the pre-tax earnings
of the Company for the six month period ending June 30, 1997. That
bonus was $7,230.
The vice president of sales is paid commissions equal to 1% of firm
orders accepted. The remainder of the officers and directors are
under no formal compensation agreements.
During 1997, there were no options outstanding under the Company's
Stock Option Plan.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of February 27, 1998,
information with respect to the beneficial ownership of common
stock of the Company by each person who is known by the Company
to have owned beneficially more than 5% of the Company's common
stock, by each of its officers and directors, and by its
officers and directors as a group:
<PAGE>
Percent
Name and Address Shares Owned Of Class
________________ ____________ ________
Alan W. White 551,400 17.76%
4702 Fremont Ave. N.
Seattle, WA 98103
Rolynn G. Mercer 520,667 (1) 16.77%
14409 - 151 Pl. SE
Renton, WA 98056
Roy B. Thompson 513,000 (2) 16.52%
3901 NE 22
Renton, WA 98056
Gary B. Palmer 264,833 8.53%
285 Mt. Rainier Pl.
Issaquah, WA 98027
Edwin P. Beierlorzer 256,500 8.26%
4714 - 161 Ave. SE
Bellevue, WA 98006
William F. Carmody 155,800 (3) 5.02%
10826 Auburn Ave. S
Seattle, WA 98178
Rufus M. Sprague 63,200 2.04%
417 Milwaukee Blvd. N.
Pacific, WA 98047
Charles A. Gath 6,000 (4) .19%
640 Jasmine Pl. N.W.
Issaquah, WA 98027
Patrick F. Dunn -0- *
9768 Waters Ave. S
Seattle, WA 98118
Craig L. Mathison -0- *
4504 SW Director Pl.
Seattle, WA 98136
All Directors and Officers
as a Group (9 persons) 2,175,600 70.06%
* Less than 1%
(1) Includes 73,894 shares owned by Mr. Mercer's wife.
(2) Includes 54,605 shares owned by Mr. Thompson's wife.
<PAGE>
(3) Includes 800 shares held as custodian for Mr. Carmody's
child as to which he disclaims beneficial ownership.
(4) Includes 1,000 shares held as custodian for Mr. Gath's
grandchild as to which he disclaims beneficial ownership.
Except as noted, each person named in the table is believed to
have sole voting and investment power over the shares owned.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No officer, director, nominee or associate of any officer,
director, or nominee was indebted to the Company in an amount in
excess of $60,000 at any time during the fiscal year ended
December 31, 1997.
R. M. Sprague, a director of the Company and owner of Sprague
Metal Company, has an ongoing relationship with the Company as a
supplier of sheet metal products and other miscellaneous parts.
This relationship is expected to continue in the future. During
the fiscal year ended December 31, 1997, the Company purchased
parts costing $147,010 from the Sprague Metal Company. The
Company's management negotiates purchase orders and prices for
the items purchased. Management believes the prices paid are
competitive with other sources.
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS
ON FORM 8-K
(a) (1) and (2) The response to this portion of Item 13 is
submitted as a separate section of this report.
(a) (3) The following exhibits are incorporated herein by
reference:
(3) Articles of Incorporation and by-laws. Exhibit 1 to
Registrant's Form 10-K for the year ended December 31,
1980, File No. 0-7267.
(10) Material Contracts
(10a) Exhibit 3 to Registrant's Form 10-K for the year
ended December 31, 1980, File No. 0-7267 being
Web Press Corporation's Company Stock Option
Plan.
(10b) being the lease for the Company's facilities
between Web Press Corporation (lessee) and
William J. Bennett (lessor) dated October 16,
1987.
(10c) being the Promissory Note for term financing
between Web Press Corporation and Washington
First International Bank dated February 3, 1997.
<PAGE>
The following exhibits are filed herewith:
(10d) being the Business Loan Agreement between Web
Press Corporation and Washington First
International Bank dated February 17, 1998.
(10e) being the Promissory Note for term financing
between Web Press Corporation and Washington
First International Bank dated February 18,
1998.
(22) Subsidiaries of Registrant
(b) Report on Form 8-K
There have been no reports on Form 8-K filed during the
three months ended December 31, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WEB PRESS CORPORATION
March 20, 1998 By: _____________________
Gary B. Palmer
President and Chairman
of the Board
March 20, 1998 By: _____________________
Craig L. Mathison
Secretary/Treasurer
(Principal Accounting
Officer)
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, this report was signed below by the following persons on
behalf of the Company and in the capacities and on the dates
indicated.
____________________ March 20, 1998
Gary B. Palmer
President and Chairman
of the Board
____________________ March 20, 1998
Edwin P. Beierlorzer
Vice President of Engineering
and Director
____________________ March 20, 1998
Rolynn G. Mercer
Vice President of Manufacturing
and Director
____________________ March 20, 1998
Roy B. Thompson
Vice President of Technical Services
and Director
____________________ March 20, 1998
Alan W. White
Vice President of Purchasing
and Director
____________________ March 20, 1998
Rufus M. Sprague
Director
____________________ March 20, 1998
Patrick F. Dunn
Director
<PAGE>
WEB PRESS CORPORATION
FORM 10-KSB
ITEMS 7, 13(a) (1) AND (2)
INDEX OF FINANCIAL STATEMENTS
The following financial statements of the registrant and
its subsidiary required to be included in Item 7 are listed
below:
Page
____
Consolidated Financial Statements:
Independent Auditors' Report............................ 23
Balance Sheet as of December 31, 1997................... 24
Statements of Operations for each of the two
years in the period ended December 31, 1997........... 26
Statements of Stockholders' Equity for each of
the two years in the period ended December 31, 1997... 27
Statements of Cash Flows for each of the two
years in the period ended December 31, 1997........... 28
Notes to Consolidated Financial Statements.............. 30
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
Web Press Corporation
Kent, Washington
We have audited the accompanying consolidated balance sheet of
Web Press Corporation (a Washington corporation) and Subsidiary
as of December 31, 1997 and the related consolidated statements
of operations, stockholders' equity, and cash flows for the years
ended December 31, 1997 and 1996. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Web Press Corporation and Subsidiary as of
December 31, 1997, and the consolidated results of their
operations and their consolidated cash flows for the years ended
December 31, 1997 and 1996, in conformity with generally accepted
accounting principles.
/s/ Grant Thornton LLP
Grant Thornton LLP
Seattle, Washington
March 10, 1998
<PAGE>
WEB PRESS CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
ASSETS December 31, 1997
_________________
Current Assets:
Cash......................................... $ 6
Accounts receivable, less allowance for
doubtful accounts of $4 (Note 3)........... 3,473
Inventories (Notes 2 and 3).................. 2,750
Refundable income taxes (Note 4)............. 111
Deposits..................................... 107
Deferred tax assets (Note 4)................. 38
Prepaid expenses............................. 38
______
Total Current Assets......................... 6,523
Machinery and Leasehold Improvements,
at cost (Notes 2 and 3):
Machinery and equipment..................... 3,132
Leasehold improvements...................... 195
______
3,327
Less accumulated depreciation
and amortization........................... 2,770
______
Machinery and Leasehold Improvements (Net)... 557
______
Total Assets................................. $7,080
______
______
The accompanying notes are an integral part of the Consolidated
Financial Statements.
<PAGE>
WEB PRESS CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' December 31, 1997
EQUITY _________________
Current Liabilities:
Note payable to bank (Note 3)............... $ 772
Accounts payable............................ 688
Customer deposits........................... 194
Accrued expenses............................ 1,308
Current portion of long-term debt........... 276
______
Total Current Liabilities................... 3,238
Long-Term Debt, less current
portion (Note 3).......................... 696
Deferred tax liabilities (Note 4)........... 438
Commitments (Note 6)
Stockholders' Equity (Note 5):
Common stock, par value $.025
per share:
Authorized, 4,000,000 shares
Issued, 3,436,513 shares 86
Paid-in capital.......................... 320
Retained earnings........................ 2,399
______
2,805
Treasury stock, 331,100 shares
at cost................................ (97)
______
Total Stockholders' Equity................. 2,708
______
Total Liabilities and Stockholders' Equity. $7,080
______
______
The accompanying notes are an integral part of the Consolidated
Financial Statements.
<PAGE>
WEB PRESS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
Year Ended December 31,
_______________________
1997 1996
____ ____
Sales (Note 7)...................... $9,822 $6,617
Cost of Sales....................... 7,629 4,836
______ ______
2,193 1,781
Selling, general and
administrative expenses (Note 6).. 1,418 1,805
______ ______
775 (24)
Other income........................ 7 7
Interest expense.................... (240) (203)
______ ______
(233) (196)
______ ______
Earnings (loss) before taxes
(benefit)......................... 542 (220)
Taxes (benefit) on earnings
(loss)(Note 4).................... 187 (76)
______ ______
Net earnings (loss)................. $ 355 $ (144)
______ ______
______ ______
Net earnings (loss) per share....... $.11 $(.05)
____ _____
____ _____
The accompanying notes are an integral part of the Consolidated
Financial Statements.
<PAGE>
WEB PRESS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)
<TABLE>
<CAPTION>
Common Stock Treasury Paid-in Retained
__________________
Shares Amount Stock Capital Earnings
______ ______ ________ _______ ________
<S> <C> <C> <C> <C> <C>
Balance, January 31, 1996 3,436,513 $86 $97 $320 $2,188
Net loss for the year (144)
_________ ___ ___ ____ _____
Balance, December 31, 1996 3,436,513 86 97 320 2,044
Net earnings for the year 355
_________ ___ ___ ____ ______
Balance, December 31, 1997 3,436,513 $86 $97 $320 $2,399
_________ ___ ___ ____ ______
_________ ___ ___ ____ ______
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
<PAGE>
WEB PRESS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Year Ended December 31,
_______________________
1997 1996
____ ____
Cash flows from operating activities:
Net earnings (loss)................... $ 355 $ (144)
Adjustments to reconcile net
earnings (loss) to net cash
provided (used) by operating
activities:
Depreciation and amortization...... 211 218
Provision for losses on accounts
receivable....................... (6) 3
Inventory valuation reserve........ 57 80
Deferred taxes..................... 224 (114)
Retirement of plant assets......... 2 1
Increase (Decrease) in cash from
changes in operating accounts:
Accounts receivable................ (2,027) 527
Refundable income taxes............ (111)
Inventory.......................... 650 (543)
Deposits........................... (107)
Prepaid expenses................... 24 7
Accounts payable................... 147 137
Customer deposits.................. (348) 529
Accrued expenses................... 495 156
Income taxes payable............... (38) 38
______ ______
Total adjustments.................. (827) 1,039
______ ______
Net cash provided (used) by operating
activities (472) 895
Cash flows from investing activities:
Capital expenditures.................. (222) (92)
Proceeds from retirement of plant
assets............................. 19
______ ______
Net cash used in investing activities. (203) (92)
(Continued on following page)
<PAGE>
(Continued from previous page)
Cash Flows from financing activities:
Proceeds from issuance of
long-term debt.................... 1,111 14
Payments on long-term debt.......... (1,109) (369)
Net borrowings (payments) on line
of credit........................ 673 (568)
______ ______
Net cash provided (used) by
financing activities.............. 675 (923)
______ ______
Net increase (decrease) in cash........ 0 (120)
Cash at beginning of period............ 6 126
______ ______
Cash at end of period.................. $ 6 $ 6
______ ______
______ ______
Supplemental disclosures of cash
flow information:
Cash was paid during the year for:
Interest $215 $241
Taxes 111
The accompanying notes are an integral part of the Consolidated
Financial Statements.
<PAGE>
WEB PRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 1997
Note 1 - Nature of the Company's Business:
The Company manufactures web-fed offset printing presses.
It has two product lines, the Web Leader and the Atlas. The
primary difference between the Web Leader and the Atlas is that
the Atlas is fifty percent faster and is manufactured in three
different broadsheet newspaper page lengths. The Company's
presses are designed to print on absorbent paper such as
newsprint. Among the products produced by the presses are
newspapers (both broadsheet and tabloid sizes), shoppers,
advertising inserts, and paperback books. Each press is
composed of standard modules to unwind, print, cut-off and fold
the roll of paper into a finished product. The equipment is
arranged to meet the particular printer's requirements for the
number of pages, color, and size of products.
The Company markets its presses worldwide. Company
employed sales representatives sell the Company's presses in the
United States and Canada. Foreign sales are made through
independent agents in Central and South America, Asia, Europe,
and the Middle East. Sales are based on a combination of price,
service, quality, and the versatility of the equipment.
Note 2 - Summary of Significant Accounting Policies:
Principles of consolidation
___________________________
The accompanying consolidated financial statements include
the accounts of Web Press Corporation and Web Leader
International, Inc., its wholly-owned Domestic International
Sales Corporation (DISC). All significant inter-company
accounts and transactions have been eliminated in consolidation.
Inventories
___________
Raw materials, work-in-progress and finished goods are
stated at the lower of average cost or market. Used presses and
other related press equipment are stated at the lower of cost
<PAGE>
(specific identification basis) or market. Inventory costs
include material, labor, and manufacturing overhead.
Inventories were classified as follows at December 31:
(Dollars in Thousands)
1997
____
Raw materials and parts
(including subassemblies)........ $1,224
Work-in-progress................. 511
Finished goods................... 770
Used equipment................... 245
______
$2,750
______
______
Machinery and leasehold improvements
____________________________________
Machinery and equipment are depreciated on the straight-
line method for financial statement purposes, based upon useful
lives of three to ten years. Leasehold improvements are
amortized over their useful lives or the term of the lease,
whichever is shorter. For income tax purposes, accelerated
methods are used for all eligible assets.
Maintenance and repairs are charged directly to costs or
expenses as incurred. Equipment of only nominal value and
renewals and betterments which do not appreciably extend the
life of the asset are charged directly to costs or expenses.
Fully depreciated or fully amortized assets which are no
longer in use or are not identifiable are written off by charges
to the allowance for accumulated depreciation and amortization.
When assets are retired or disposed of, the costs and
accumulated depreciation of such assets are removed from the
accounts and the difference between the net depreciated cost and
the amount received is recorded in the statements of operations.
Research and development costs
______________________________
Research and development costs are expensed as incurred.
Total research and development costs charged to operations
during the years ended December 31, 1997 and 1996 were $292
thousand and $282 thousand, respectively.
Revenue recognition
___________________
Revenue from sales of manufactured products under firm
contracts is recognized generally at the time equipment is
available for shipment. All freight and installation costs are
accrued at the time revenue is recognized. Estimated costs
related to product warranties are provided at the time of sale.
Proceeds received on contracts prior to recognition as a sale
are recorded as deposits.
<PAGE>
Earnings (loss) per share
_________________________
Earnings (loss) per share calculations are based on the
weighted average number of shares outstanding. The weighted
average number of shares outstanding was 3,105,413 in 1997 and
1996.
Estimates
_________
The Company makes certain cost estimates when it records a
press sale and uses other estimates and assumptions regarding
certain types of assets, liabilities, revenues, and expenses.
Such estimates primarily relate to unsettled transactions and
events as of the date of the financial statements. All are
reported in conformity with generally accepted accounting
principles. Company management believes the basis for these
estimates are accurately reflected in the financial statements;
however, actual results may differ from estimated amounts.
Note 3 - Financing:
On December 31, 1997, the Company had a financing facility
with a commercial bank consisting of a term note and two
separate revolving lines of credit.
The term note is dated February 3, 1997, and was for $975
thousand. It requires the Company to make 48 monthly payments,
with the first payment due March 3, 1997, and the final payment
due February 3, 2001. The interest rate charged is 2 percent
above the bank's prime rate. On December 31, 1997, the balance
outstanding on the term note was $804 thousand, the interest
rate was 10.5 percent, and the monthly payment was $24,948.
The Company had a line of credit for borrowing up to $700
thousand that expired on February 3, 1998. On December 31, 1997,
the balance owing on the line was $524 thousand. The interest
rate charged is 2 percent above the bank's prime rate. The rate
was 10.5 percent on December 31, 1997.
In February 1998, the Company and the bank renewed the line
of credit through April 15, 1999, and increased the borrowing
limit to $1.2 million. The interest rate charged is 2 percent
above the bank's prime rate.
On December 31, 1997, the Company had a second line of
credit with the bank for borrowing up to an additional $1
million to manufacture equipment for export. The loan is a
revolving line of credit based on a series of transactions
backed by letter of credit orders acceptable to the bank. The
interest rate charged is 1.5 percent above the bank's prime
rate. Borrowings against this line were $248 thousand on
December 31, 1997, and the interest rate charged was 10 percent.
The line is
<PAGE>
secured by an "export working capital guarantee"
from the Small Business Administration. The line expired on
February 20, 1998.
In February 1998, the Company secured a second term note
from the bank for $420,700 to purchase a new machine tool. The
loan is amortized over 7 years and the interest rate charged is
9 percent. The first payment was due on March 18, 1998, and is
for interest only, to be followed by 59 monthly payments of
$6,794. The final payment of $155,675 is due on February 18,
2003.
Accounts receivable, firm orders in production, inventories
and values in excess of the long-term financing on equipment are
pledged as collateral.
Long-term debt consists of the following:
(Dollars in Thousands)
December 31, 1997
_________________
Term note, 2% above prime rate,
due in monthly installments of $24,948
including interest. Final payment
due February, 2001....................... $804
Note payable for equipment, 9.3%,
due in monthly installments of $2,198
including interest. Final payment due
in March, 2004............................ 125
Note payable for equipment and leasehold
improvements, 12%, due in monthly install-
ments of $2,262 including interest.
Final payment due in October, 1998........ 21
Note payable for equipment, 10%, due in
monthly installments of $1,039 including
interest. Final payment due in
November, 1998............................ 11
Note payable for equipment, 8.23%, due in
monthly installments of $277 including
interest. Final payment due in December,
2001...................................... 11
____
972
Less current portion...................... 276
____
$696
____
____
Equipment with an original cost of $200 thousand is pledged
as collateral under the notes payable for equipment.
<PAGE>
Maturities of the long-term debt for the next five years
are as follows:
(Dollars in Thousands)
1998 $276
1999 270
2000 300
2001 73
2002 33
Thereafter 20
____
$972
____
____
The estimated fair value of long-term debt approximates
carrying value at December 31, 1997 and 1996, based on the
borrowing rates currently available to the Company for bank
loans with similar terms and average maturities.
Note 4 - Income Taxes:
The taxes (benefit) on earnings (loss) consist of the
following:
(Dollars in Thousands)
Year Ended December 31,
_______________________
1997 1996
____ ____
Currently payable (refundable) $(37) $ 38
Deferred taxes (benefit) 224 (114)
____ ____
$187 $(76)
____ ____
____ ____
The taxes (benefit) on earnings (loss) differ from the
federal statutory rate as follows:
(Dollars in Thousands)
Year Ended December 31,
_______________________
1997 1996
____ ____
Taxes (benefit) at statutory rate $184 $(75)
Permanent difference 3 3
Prior year tax adjustment 1
Other (5)
____ ____
$187 $(76)
____ ____
____ ____
<PAGE>
The components of deferred taxes included in the balance
sheet as of December 31, 1997 are as follows:
(Dollars in Thousands)
______________________
Current deferred tax assets:
Gross margin on deferred sales.. $(246)
Inventory valuation reserve..... 119
Compensation payable............ 56
Tax loss carry forward.......... 76
Other........................... 33
_____
$ 38
_____
_____
Non-current deferred tax liabilities:
Deferred DISC income............ $407
Excess tax depreciation......... 31
____
$438
____
____
The Company has a net operating loss carryforward of $76
thousand which expires in 2012.
Note 5 - Common Stock:
The Company's Stock Option Plan permits issuance of stock
options to key employees at prices not less than 100% of market
price at the date of grant. An aggregate of 600,000 shares of
common stock is reserved in connection with this Plan. As of
December 31, 1997, no options have been granted under this Plan.
Note 6 - Commitments:
In October 1987, the Company executed a ten-year lease,
commencing six months from the date of occupancy, for a 49,000
square foot manufacturing and office facility located in Kent,
Washington. The Company moved into this facility in May 1988.
The lease included two five-year renewal options and required
the lessor to finance $150,000 of leasehold improvements and
other costs incurred by the Company. The total monthly payment
is $14,451.
The Company notified the lessor in September, 1997 that it
would exercise the first extension option of the lease, covering
a period of five years through October, 2003. The new monthly
rental payment will be $16,155, commencing in November, 1998.
Rental expense was $159 thousand in 1997 and $152 thousand
in 1996.
<PAGE>
Remaining minimum rental commitments are as follows:
(Dollars in Thousands)
1998......... $ 154
1999......... 194
2000......... 194
2001......... 194
2002......... 194
Thereafter... 173
______
$1,103
______
______
Note 7 - Market Segment and Concentration Information:
Substantially all of the Company's operations relate to the
manufacture and sale of printing presses and associated equipment.
The Company markets its presses worldwide. International sales
accounted for 56.7% of total sales in 1997 and 62.3% in 1996. The
Company is not dependent on any country or region of the world for
international sales and domestic sales are disseminated throughout
the United States.
Export sales of equipment by geographical area were as
follows:
(Dollars in Thousands)
Year Ended December 31,
_______________________
1997 1996
____ ____
Asia $ 15 $1,529
Western Hemisphere 1,416
Europe 3,891 2,405
______ ______
$5,322 $3,934
______ ______
______ ______
The Company normally has one or more individual press sales
which account for more than 10% of revenues in a given year. It
is uncommon for a customer to place a large order for additional
equipment in the years immediately following purchase of a press.
On an ongoing basis, the Company does not believe it is dependent
on any one customer for a significant portion of its business.
During 1997, the Company had sales to two separate customers
which, as a percentage of total consolidated sales, were 10.1%
and 22.4%. In 1996, the Company had sales to two separate
customers which accounted for 17.1% and 20.4% of sales.
Note 8 - Retirement Savings Plan:
The Company has a 401(k) plan covering all employees who have
completed one year of service. Plan participants self-direct
their investments choosing from five options sponsored by
Merrill Lynch. The Company matches up to 10% of the first
$1,000 contributed by the employee in a year. The Company may
<PAGE>
also make discretionary contributions to the plan. Fees paid
the insurance company plus the Company's matching contribution
totaled approximately $10 thousand in 1997 and $6 thousand in
1996.
<PAGE>
(/DOCUMENT)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 6
<SECURITIES> 0
<RECEIVABLES> 3,477
<ALLOWANCES> 4
<INVENTORY> 2,750
<CURRENT-ASSETS> 6,523
<PP&E> 3,327
<DEPRECIATION> 2,770
<TOTAL-ASSETS> 7,080
<CURRENT-LIABILITIES> 3,238
<BONDS> 0
<COMMON> 86
0
0
<OTHER-SE> 2,622
<TOTAL-LIABILITY-AND-EQUITY> 7,080
<SALES> 9,822
<TOTAL-REVENUES> 9,829
<CGS> 7,629
<TOTAL-COSTS> 7,629
<OTHER-EXPENSES> 1,418
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 240
<INCOME-PRETAX> 542
<INCOME-TAX> 187
<INCOME-CONTINUING> 355
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 355
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
Exhibit (10d)
BUSINESS LOAN AGREEMENT
_________________________________________________________________________
Principal Loan Date Maturity Loan No. Call Collateral
$1,200,000.00 02-17-1998 04-15-1999 8015480007 40
Account Officer Initials
801548 305
_____________________________________________________________
References in the shaded area are for Lender's use only and do
not limit the applicability of this document to any particular
loan or item.
_________________________________________________________________
Borrower: WEB PRESS CORPORATION AND Lender: Washington First
WEB LEADER INTERNATIONAL, INC. International Bank
22023 68TH AVENUE SOUTH 9709 Third Avenue NE
KENT, WA 98032 Suite 110
Seattle, WA 98115
THIS BUSINESS LOAN AGREEMENT between WEB PRESS CORPORATION AND
WEB LEADER International, INC. ("Borrower") and Washington First
International Bank ("Lender") is made and executed on the
following terms and conditions. Borrower has received prior
commercial loans from Lender or has applied to Lender for a
commercial loan or loans and other financial accommodations,
including those which may be described on any exhibit or schedule
attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial
accommodations from Lender to Borrower, are referred to in this
Agreement individually as the "Loan" and collectively as the
"Loans." Borrower understands and agrees that: (a) In granting,
renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties, and agreements, as set
forth in this Agreement; (b) the granting, renewing, or extending
of any Loan by Lender at all times shall be subject to Lender's
sole judgment and discretion; and (c) all such Loans shall be and
shall remain subject to the following terms and conditions of
this Agreement.
TERM. This Agreement shall be effective as of February 18, 1998,
and shall continue thereafter until all Indebtedness of Borrower
to Lender has been performed in full and the parties terminate
this Agreement in writing.
DEFINITIONS. The following words shall have the following
meanings when used in this Agreement. Terms not otherwise
defined in this Agreement shall have the meanings attributed to
such terms in the Uniform Commercial Code. All references to
dollar amounts shall mean amounts in lawful money of the United
States of America
Agreement. The word "Agreement" means this Business Loan
Agreement, as this Business Loan Agreement may be amended or
modified from time to time, together with all exhibits and
schedules attached to this Business Loan Agreement from time
to time.
Borrower. The word "Borrower" means WEB PRESS CORPORATION AND
WEB LEADER INTERNATIONAL, INC. The word "Borrower" also
oncludes, as applicable, all subsidiaries and affiliates of
Borrower as provided below in the paragraph titled
"Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive
Environmental Response, Compensation, and Liability Act of
1980, as amended.
Cash Flow. The words "Cash Flow" mean net income after taxes,
and exclusive of extraordinary gains and income, plus
depreciation and amortization.
Collateral. The word "Collateral" means and includes without
limitation all property and assets granted as collateral
security for a Loan, whether real or personal property,
whether granted directly or indirectly, whether granted now or
in the future, and whether granted in the form of a security
mortgage, deed of trust, assignment, pledge chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional
sale, trust receipt, lien, charge, lien or title retention
contract, lease or consignment intended as a security device,
or any other security or lien interest whatsoever, whether
created by law, contract, or otherwise.
Debt. The word "Debt" means all of Borrower's liabilities
excluding Subordinated Debt
ERISA. The word "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
Event of Default. The words "Event of Default" mean and
include without limitation any of the Events of Default set
forth below in the section titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without
limitation each and all of the persons or entities granting a
Security Interest in any Collateral for the Indebtedness,
including without limitation all Borrowers granting such a
Security Interest.
Guarantor. The word "Guarantor" means and includes without
limitation each and all of the guarantors, sureties, and
accommodation parties in connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes
without limitation all Loans, together with all other
obligations, debts and liabilities of Borrower to Lender, or
any one or more of them, as well as all claims by Lender
against Borrower, or any one or more of them; whether now or
hereafter existing, voluntary or involuntary, due or not due,
absolute or contingent, liquidated or unliquidated; whether
Borrower may be liable individually or jointly with others;
whether Borrower may be obligated as a guarantor, surety, or
otherwise; whether recovery upon such Indebtedness may be or
hereafter may become barred by any statute of limitations; and
whether such Indebtedness may be or hereafter may become
otherwise unenforceable.
Lender. The word "Lender" means Washington First International
Bank, its successors and assigns.
Liquid Assets. The words "Liquid Assets" mean Borrower's cash
on hand plus Borrowers readily marketable securities.
Loan. The word "Loan" or "Loans" means and includes without
limitation any and all commercial loans and financial
accommodations from Lender to Borrower, whether now or
hereafter existing, and however evidenced, including without
limitation those loans and financial accommodations described
herein or described on any exhibit or schedule attached to
this Agreement from time to time.
Note. The word "Note" means' and includes without limitation
Borrower's promissory note or notes, it any, evidencing
Borrower's Loan obligations In favor of Lender, as well as any
substitute, replacement or refinancing note or notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens
and security interests securing Indebtedness owed by Borrower
to Lender; (b) liens for taxes, assessments, or similar
charges either not yet due or being contested in good faith;
(c) liens of materialmen, mechanics, warehousemen, or
carriers, or other like liens arising in the ordinary course
of business and securing obligations which are not yet
delinquent; (d) purchase money liens or purchase money
security interests upon or in any property acquired or held by
Borrower in the ordinary course of business to secure
indebtedness outstanding on the date of this Agreement or
permitted to be incurred under the paragraph of this Agreement
titled "Indebtedness and Liens"; (e) liens and security
interests which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (f)
those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount
with respect to the net value of Borrower's assets.
Related Documents. The words "Related Documents" mean and
include without limitation all promissory notes, credit
agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust,
and all other instruments, agreements and documents, whether
now or hereafter existing, executed in connection with the
Indebtedness.
Security Agreement. The words "Security Agreement" mean and
include without limitation any agreements, promises,
covenants, arrangements,
<PAGE>
02-17-1998 BUSINESS LOAN AGREEMENT Page 2
(Continued)
understandings or other agreements, whether created by law,
contract, or otherwise, evidencing, governing, representing,
or creating a Security Interest.
Security Interest. The words "Security Interest" mean and
include without limitation any type of collateral security,
whether in the form of a lien, charge, mortgage, deed of
trust, assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or
consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by law,
contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
Subordinated Debt. The words "Subordinated Debt" mean
indebtedness and liabilities of Borrower which have been
subordinated by written agreement to indebtedness owed by
Borrower to Lender in form and substance acceptable to Lender.
Tangible Net Worth. The words 'Tangible Net Worth" mean
Borrower's total assets excluding all intangible assets (i.e.,
goodwill, trademarks, patents, copyrights, organizational
expenses, and similar intangible items, but including
leaseholds and leasehold improvements) less total Debt.
Working Capital. The words "Working Capital" mean Borrower's
current assets, excluding prepaid expenses, less Borrower's
current liabilities.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make
the initial Loan Advance and each subsequent Loan Advance under
this Agreement shall be subject to the fulfillment to Lender's
satisfaction of all of the conditions set forth in this Agreement
and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form
satisfactory to Lender the following documents for the Loan:
(a) the Note, (b) Security Agreements granting to Lender
security interests in the Collateral, (c) Financing Statements
perfecting Lender's Security Interests; (d) evidence of
insurance as required below; and (e) any other documents
required under this Agreement or by Lender or its counsel,
including without limitation any guaranties described below.
Borrower's Authorization. Borrower shall have provided in form
and substance satisfactory to Lender properly certified
resolutions, duly authorizing the execution and delivery of
this Agreement, the Note and the Related Documents, and such
other authorizations and other documents and instruments as
Lender or its counsel, in their sole discretion, may require.
Payment of Fees and Expenses. Borrower shall have paid to
Lender all fees, charges, and other expenses which are then
due and payable as specified in this Agreement or any Related
Document.
Representations and Warranties. The representations and
warranties set forth In this Agreement, in the Related
Documents, and in any document or certificate delivered to
Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time of any
advance a condition which would constitute an Event of Default
under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
to Lender, as of the date of this Agreement, as of the date of
each disbursement of Loan proceeds, as of the date of any
renewal, extension or modification of any Loan, and at all times
any Indebtedness exists:
Organization. Borrower is a corporation which is duly
organized, validly existing, and in good standing under the
laws of the State of Washington and is validly existing and in
good standing in all states in which Borrower is doing
business. Borrower has the full power and authority to own its
properties and to transact the businesses in which it is
presently engaged or presently proposes to engage. Borrower
also is duly qualified as a foreign corporation and is in good
standing in all states in which the failure to so qualify
would have a material adverse effect on its businesses or
financial condition.
Authorization. The execution, delivery, and performance of
this Agreement and all Related Documents by Borrower, to the
extent to be executed, delivered or performed by Borrower,
have been duly authorized by all necessary action by Borrower;
do not require the consent or approval of any other person,
regulatory authority or governmental body; and do not conflict
with, result in a violation of, or constitute a default under
(a) any provision of its articles of incorporation or
organization, or bylaws, or any agreement or other instrument
binding upon Borrower or (b) any law, governmental regulation,
court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower
supplied to Lender truly and completely disclosed Borrowers
financial condition as of the date of the statement, and there
has been no material adverse change in Borrower's financial
condition subsequent to the date of the most recent financial
statement supplied to Lender. Borrower has no material
contingent obligations except as disclosed in such financial
statements.
Legal Effect. This Agreement constitutes, and any instrument
or agreement required hereunder to be given by Borrower when
delivered will constitute, legal, valid and binding
obligations of Borrower enforceable against Borrower in
accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as
previously disclosed in Borrower's financial statements or in
writing to Lender and as accepted by Lender, and except for
property tax liens for taxes not presently due and payable,
Borrower owns and has good title to all of Borrower's
properties free and clear of all Security Interests, and has
not executed any security documents or financing statements
relating to such properties. All of Borrower's properties are
titled in Borrower's legal name, and Borrower has not used, or
filed a financing statement under, any other name for at least
the last five (5) years.
Hazardous Substances. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release,"
as used in this Agreement, shall have the same meanings as set
forth in the "CERCLA," "SARA," the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq., or other applicable state or Federal laws,
rules, or regulations adopted pursuant to any of the
foregoing. Except as disclosed to and acknowledged by Lender
in writing, Borrower represents and warrants that: (a) During
the period of Borrower's ownership of the properties, there
has been no use, generation, manufacture, storage, treatment,
disposal, release or threatened release of any hazardous waste
or substance by any person on, under, about or from any of the
properties. (b) Borrower has no knowledge of, or reason to
believe that there has been (i) any use, generation,
manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance on,
under, about or from the properties by any prior owners or
occupants of any of the properties, or (ii) any actual or
threatened litigation or claims of any kind by any person
relating to such matters. (c) Neither Borrower nor any tenant,
contractor, agent or other authorized user of any of the
properties shall use, generate, manufacture, store, treat,
dispose of, or release any hazardous waste or substance on,
under, about or from any of the properties; and any such
activity shall be conducted in compliance with all applicable
federal, state, and local laws, regulations, and ordinances,
including without limitation those laws, regulations and
ordinances described above. Borrower authorizes Lender and its
agents to enter upon the properties to make such inspections
and tests as Lender may deem appropriate to determine
compliance of the properties with this section of the
Agreement. Any inspections or tests made by Lender shall be at
Borrower's expense and for Lender's purposes only and shall
not be construed to create any responsibility or liability on
the part of Lender to Borrower or to any other person. The
representations and warranties contained herein are based on
Borrower's due diligence in investigating the properties for
hazardous waste and hazardous substances. Borrower hereby (a)
releases and waives any future claims against Lender for
indemnity or contribution in the event Borrower becomes liable
for cleanup or other costs under any such laws, and (b) agrees
to indemnify and hold harmless Lender against any and all
claims, losses, liabilities, damages, penalties, and expenses
which Lender may directly or indirectly sustain or suffer
resulting from a breach of this section of the Agreement or as
a consequence of any use, generation, manufacture,
<PAGE>
02-17-1998 BUSINESS LOAN AGREEMENT Page 3
(Continued)
storage, disposal, release or threatened release occurring
prior to Borrower's ownership or interest in the properties,
whether or not the same was or should have been known to
Borrower. The provisions of this section of the Agreement,
including the obligation to indemnity, shall survive the
payment of the Indebtedness and the termination or expiration
of this Agreement and shall not be affected by Lender's
acquisition of any interest in any of the properties, whether
by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation,
administrative proceeding or similar action (including those
for unpaid taxes) against Borrower is pending or threatened,
and no other event has occurred which may materially adversely
affect Borrower's financial condition or properties, other
than litigation, claims, or other events, if any, that have
been disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns
and reports of Borrower that are or were required to be filed,
have been filed, and all assessments and other governmental
charges have been paid in full, except those presently being
or to be contested by Borrower in good faith in the ordinary
course of business and for which adequate reserves have been
provided.
Lien Priority. Unless otherwise previously disclosed to Lender
in writing, Borrower has not entered into or granted any
Security Agreements, or permitted the filing or attachment of
any Security Interests on or affecting any of the Collateral
directly or indirectly securing repayment of Borrower's Loan
and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to
such collateral.
Binding Effect. This Agreement, the Note, all Security
Agreements directly or indirectly securing repayment of
Borrower's Loan and Note and all of the Related Documents are
binding upon Borrower as well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in
accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds
solely for business or commercial related purposes
Employee Benefit Plans Each employee benefit ,plan as to which
Borrower may have any liability complies in all material
respects with all applicable requirements of law and
regulations, and (i) no Reportable Event nor Prohibited
Transaction (as defined in ERISA) has occurred with respect to
any such plan, (ii) Borrower has not withdrawn from any such
plan or initiated steps to do so, (iii) no steps have been
taken to terminate any such plan, and (iv) there are no
unfunded liabilities other than those previously disclosed to
Lender in writing.
Location of Borrowers Offices and Records. Borrower's place of
business, or Borrower's Chief executive office, if Borrower
has more than one place of business, is located at 22023 -
68TH AVENUE SOUTH, KENT, WA 98032. Unless Borrower has
designated otherwise in writing this location is also the
office or offices where Borrower keeps its records concerning
the Collateral.
Information. All information heretofore or contemporaneously
herewith furnished by Borrower to Lender for the purposes of
or in connection with this Agreement or any transaction
contemplated hereby is, and all information hereafter
furnished by or on behalf of Borrower to Lender will be, true
and accurate in every material respect on the date as of which
such information is dated or certified; and none of such
information is or will be incomplete by omitting to state any
material fact necessary to make such information not
misleading.
Survival of Representations and Warranties. Borrower
understands and agrees that Lender, without independent
investigation,, is relying upon the above representations and
warranties in extending Loan Advances to Borrower. Borrower
further agrees that the foregoing representations and
warranties shall be continuing in nature and shall remain in
full force and effect until such time as Borrower's
Indebtedness shall be paid in full, or until this Agreement
shall be terminated in the manner provided above, whichever is
the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender
that, while this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all
material adverse changes in Borrower's financial condition,
and (b) all existing and all threatened litigation, claims,
investigations, administrative proceedings or similar actions
affecting Borrower or any Guarantor which could materially
affect the financial condition of Borrower or the financial
condition of any Guarantor.
Financial Records. Maintain its books and records in
accordance with generally accepted accounting principles,
applied on a consistent basis, and permit Lender to examine
and audit Borrower's books and records at all reasonable
times.
Financial Statements.- Furnish Lender with, as soon as
available, but in no event later than ninety (90) days after
the end of each fiscal year, Borrower's balance sheet and
income statement for the year ended, audited by a certified
public accountant satisfactory to Lender, and, as soon as
available, but in no event later than forty five (45) days
after the end of each fiscal quarter, Borrowers balance sheet
and profit and loss statement for the period ended, prepared
and certified as correct to the best knowledge and belief by
Borrower's chief financial officer or other officer or person
acceptable to Lender. All financial reports required to be
provided under this Agreement shall be prepared in accordance
with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and
correct.
Additional Information. Furnish such additional information
and statements, lists of assets and liabilities, agings of
receivables and payables, inventory schedules, budgets,
forecasts, tax returns, and other reports with respect to
Borrower's financial condition and business operations as
Lender may request from time to time.
Financial Covenants and Ratios. Comply with the following
covenants and ratios:
Net Worth Ratio. Maintain a ratio of Total Liabilities to
Tangible Net Worth of less than 1.90 to 1.00.
Working Capital. Maintain Working Capital in excess of
$2,250,000.00.
Current Ratio. Maintain a ratio of Current Assets to Current
Liabilities in excess of 1.50 to 1.00.
Other Ratio. Maintain a ratio of Earnings Before Interest
and Taxes to Interest Expense in excess of 1.50 to 1.00.
Except as provided above, all computations made to determine
compliance with the requirements contained in this paragraph
shall be made in accordance with generally accepted
accounting principles, applied on a consistent basis, and
certified by Borrower as being true and correct.
Insurance. Maintain fire and other risk insurance, public
liability insurance, and such other insurance as Lender may
require with respect to Borrower's properties and
operations, in form, amounts, coverages and with insurance
companies reasonably acceptable to Lender. Borrower, upon
request of Lender, will deliver to Lender from time to time
the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that
coverages will not be canceled or diminished without at
least ten (10) days' prior written notice to Lender. Each
insurance policy also shall include an endorsement providing
that coverage in favor of Lender will not be Impaired In any
way by any act, omission or default of Borrower or any other
person. In connection with all policies covering assets in
which Lender holds or is offered a security interest for the
Loans, Borrower will provide Lender with such loss payable
or other endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender,
reports on each existing insurance policy showing such
information as Lender may reasonably request, including
without limitation the following: (a) the name of the insurer;
(b) the risks insured; (c) the amount of the policy; (d) the
properties insured; (e) the then current property values on
the basis of which insurance has been obtained, and the manner
of determining those values; and (f) the expiration date of
the policy. In addition, upon request of Lender (however not
more often than annually), Borrower will have an independent
appraiser satisfactory to Lender determine, as applicable, the
actual cash value or replacement cost of any Collateral. The
cost of such appraisal shall be paid by Borrower.
<PAGE>
02-11-1998 BUSINESS LOAN AGREEMENT Page 4
(Continued)
Guaranties. Prior to disbursement of any Loan proceeds,
furnish executed guaranties of the Loans in favor of Lender,
executed by the guarantors named below, on Lenders forms, and
in the amounts and under the conditions spelled out in those
guaranties.
Guarantors Amounts
ALAN W. WHITE Unlimited
ROY B. THOMPSON Unlimited
EDWIN P. BEIERLORZER Unlimited
ROLYNN G. MERCER Unlimited
Other Agreements. Comply with all terms and conditions of all
other agreements, whether now or hereafter existing, between
Borrower and any other party and notify Lender immediately in
writing of any default in connection with any other such
agreements.
Loan Fees and Charges. In addition to all other agreed upon
fees and charges, pay the following: $6,000.00.
Loan Proceeds. Use all Loan proceeds solely for the following
specific purposes: Working Capital.
Taxes, Charges and Liens. Pay and discharge when due all of
its indebtedness and obligations, including without limitation
all assessments, taxes, governmental charges, levies and
liens, of every kind and nature, imposed upon Borrower or its
properties, income, or profits, prior to the date on which
penalties would attach, and all lawful claims that, if unpaid,
might become a lien or charge upon any of Borrower's
properties, income, or profits. Provided however, Borrower
will not be required to pay and discharge any such assessment,
tax, charge, levy, lien or claim so long as (a) the legality
of the same shall be contested in good faith by appropriate
proceedings, and (b) Borrower shall have established on its
books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance
with generally accepted accounting practices. Borrower, upon
demand of Lender, will furnish to Lender evidence of payment
of the assessments, taxes, charges, levies, liens and claims
and will authorize the appropriate governmental official to
deliver to Lender at any time a written statement of any
assessments, taxes, charges, levies, liens and clams against
Borrower's properties, income, or profits.
Performance. Perform and comply with all terms, conditions,
and provisions set forth in this Agreement and in the Related
Documents in a timely manner, and promptly notify Lender if
Borrower learns of the occurrence of any event which
constitutes an Event of Default under this Agreement or under
any of the Related Documents.
Operations. Maintain executive and management personnel with
substantially the same qualifications and experience as the
present executive and management personnel; provide written
notice to Lender of any change in executive and management
personnel; conduct its business affairs in a reasonable and
prudent manner and in compliance with all applicable federal,
state and municipal laws, ordinances, rules and regulations
respecting its properties, charters, businesses and
operations, including without limitation, compliance with the
Americans with Disabilities Act and with all minimum funding
standards and other requirements of ERISA and other laws
applicable to Borrower's employee benefit plans.
Inspection. Permit employees or agents of Lender at any
reasonable time to inspect any and all Collateral for the Loan
or Loans and Borrower's other properties and to examine or
audit Borrower's books, accounts, and records and to make
copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains
any records (including without limitation computer generated
records and computer software programs for the generation of
such records) in the possession of a third party, Borrower,
upon request or Lender, shall notify such party to permit
Lender free access to such records at all reasonable times and
to provide Lender with copies of any records it may request,
all at Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender,
provide Lender at least annually and at the time of each
disbursement of Loan proceeds with a certificate executed by
Borrower's chief financial officer, or other officer or person
acceptable to Lender, certifying that the representations and
warranties set forth in this Agreement are true and correct as
of the date of the certificate and further certifying that, as
of the date of the certificate, no Event of Default exists
under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in
all respects with all environmental protection federal, state
and local laws, statutes, regulations and ordinances; not
cause or permit to exist, as a result of an intentional or
unintentional action or omission on its part or on the part of
any third party, on property owned occupied by Borrower, any
environmental activity where damage may result to the
environment, unless such environmental activity is pursuant to
and in compliance with the conditions of a permit issued by
the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event
within thirty (30) days after receipt thereof a copy of any
notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality
concerning any intentional or unintentional action or omission
on Borrowers part in connection with any environmental
activity whether or not there is damage to the environment
and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender
such promissory notes, mortgages, deeds of trust, security
agreements, financing statements, instruments, documents and
other agreements as Lender or Its attorneys may reasonably
request to evidence and secure the Loans and to perfect all
Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender
that while this Agreement is in effect, Borrower shall not,
without the prior written consent of Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in
the normal course of business and indebtedness to Lender
contemplated by this Agreement, create, incur or assume
indebtedness for borrowed money, including capital leases, (b)
except as allowed as a Permitted Lien, sell, transfer,
mortgage, assign, pledge, lease, grant a security interest in,
or encumber any of Borrower's assets, or (c) sell with
recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (a) engage in any business
activities substantially different than those in which
Borrower is presently engaged, (b) cease operations,
liquidate, merge, transfer, acquire or consolidate with any
other entity, change ownership, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of
business, (C) pay any dividends on Borrower's stock (other
than dividends payable in its stock), provided, however that
notwithstanding the foregoing, but only so long as no Event of
Default has occurred and is continuing or would result from
the payment of dividends, if Borrower is a "Subchapter S
Corporation" (as defined in the Internal Revenue Code of 1986,
as amended), Borrower may pay cash dividends on its stock to
its shareholders from time to time in amounts necessary to
enable the shareholders to pay income taxes and make estimated
income tax payments to satisfy their liabilities under federal
and state law which arise solely from their status as
Shareholders of a Subchapter S Corporation because of their
ownership of shares of stock of Borrower, or (d) purchase or
retire any of Borrower's outstanding shares or alter or amend
Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or
advance money or assets, (b) purchase, create or acquire any
interest in any other enterprise or entity, or (c) incur any
obligation as surety or guarantor other than in the ordinary
course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make
any Loan to Borrower, whether under this Agreement or under any
other agreement, Lender shall have no obligation to make Loan
Advances or to disburse Loan proceeds if: (a) Borrower or any
Guarantor is in default under the terms of this Agreement or any
of the Related Documents or any other agreement that Borrower or
any Guarantor has with Lender; (b) Borrower or any Guarantor
becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (c) there occurs a
material adverse
<PAGE>
02-17-1998 BUSINESS LOAN AGREEMENT Page 5
(Continued)
change in Borrower's financial condition, in the financial
condition of any Guarantor, or in the value of any Collateral
securing any Loan; or (d) any Guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such Guarantor's
guaranty of the Loan or any other loan with Lender.
DISPOSITION OF CASH COLLATERAL ACCOUNT PROCEEDS.
Account proceeds will be deposited to cash collateral account
#120004015:
______ all proceeds
______ proceeds of accounts or invoices assigned
______ (specify)___________________________________
Cash Collateral account funds will be applied to note balance:
___MONDAY__, ___TUESDAY__ , ___ WEDNESDAY__, ___THURSDAY__,
and____FRIDAY____
__________of each week. (day of week)
or____ days after deposit.
or____ business days after deposit.
PAYMENT OF INTEREST.
_______Interest is to be paid, first from each payment.
_______Interest is to be paid, monthly per billing statement.
X Interest is to be paid, by charging account #120004023.
_______
_______Interest is to be paid, (specify)_________________________.
COLLATERAL SCHEDULE TIMETABLES.
Borrower shall execute and deliver to Lender the following
schedules:
Accounts Receivables Agings X Monthly _____ Quarterly _____
___
Other____within 20 days.
Accounts Payable Agings X Monthly _____ Quarterly _____ Other
___
_____ within 20 days.
Inventory Schedules X Quarterly ______ Other____within _____ days.
_____
Other Schedules ___________________________..
CAPITAL EXPENDITURES PROVISION. Any capital expenditures in any
fiscal year in excess of $100,000 must be prior approved by the
Lender.
PERSONAL FINANCIAL STATEMENTS AND TAX RETURNS. Personal financial
statements and tax returns of all guarantors to be submitted to
Lender annually.
RIGHT OF SETOFF. Borrower grants to Lender a contractual
possessory security interest in, and hereby assigns, conveys,
delivers, pledges, and transfers to Lender all Borrower's right,
title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else
and all accounts Borrower may open in the future, excluding
however all IRA and Keogh accounts, and all trust accounts for
which the grant of a security interest would be prohibited by
law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
Default on Indebtedness. Failure of Borrower to make any
payment when due on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply
with or to perform when due any other term, obligation,
covenant or condition contained in this Agreement or in any of
the Related Documents, or failure of Borrower to comply with
or to perform any other term, obligation, covenant or
condition contained in any other agreement between Lender and
Borrower.
Default In Favor of Third Parties. Should Borrower or any
Grantor default under any loan, extension of credit, security
agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's or
any Grantor's ability to repay the Loans or perform their
respective obligations under this Agreement or any of the
Related Documents.
False Statements. Any warranty, representation or statement
made or furnished to Lender by or on behalf of Borrower or any
Grantor under this Agreement or the Related Documents is false
or misleading in any material respect at the time made or
furnished, or becomes false or misleading at any time
thereafter.
Defective Collateralization. This Agreement or any of the
Related Documents ceases to be in full force and effect
(including failure of any Security Agreement to create a valid
and perfected Security Interest) at any time and for any
reason.
Insolvency. The dissolution or termination of Borrower's
existence as a going business, the insolvency of Borrower, the
appointment of a receiver for any part of Borrower's property,
any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under
any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of
foreclosure or forfeiture proceedings, whether by judicial
proceeding, self-help, repossession or any other method, by
any creditor of Borrower, any creditor of any Grantor against
any collateral securing the Indebtedness, or by any
governmental agency. This includes a garnishment, attachment,
or levy on or of any of Borrower's deposit accounts with
Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Borrower or Grantor, as the
case may be, as to the validity or reasonableness of the claim
which is the basis of the creditor or forfeiture proceeding,
and if Borrower or Grantor gives Lender written notice of the
creditor or forfeiture proceeding and furnishes reserves or a
surety bond for the creditor or forfeiture proceeding
satisfactory to Lender.
Events affecting Guarantor. Any of the preceding events occurs
with respect to any Guarantor of any of the Indebtedness or
any Guarantor dies or becomes incompetent, or revokes or
disputes the validity of, or liability under, any Guaranty of
the Indebtedness. Lender, at its option, may, but shall not be
required to, permit the Guarantor's estate to assume
unconditionally the obligations arising under the guaranty in
a manner satisfactory to Lender, and, in doing so, cure the
Event of Default.
Change In Ownership. Any change in ownership of twenty-five
percent (25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of
payment or performance of the Indebtedness is impaired.
Right to Cure. If any default, other than a Default on
Indebtedness, is curable and if Borrower or Grantor, as the
case may be, has not been given a notice of a similar default
within the preceding twelve (12) months, it may be cured (and
no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, after receiving written notice
from Lender demanding cure of such default: (a) cures the
default within fifteen (15) days; or (b) if the cure requires
more than fifteen (15) days, immediately initiates steps which
Lender deems in Lenders sole discretion to be sufficient to
cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall
occur, except where otherwise provided in this Agreement or the
Related Documents, all commitments and obligations of Lender
under this Agreement or the Related Documents or any other
agreement immediately will terminate (including any obligation to
make Loan Advances or disbursements), and, at Lender's option,
all Indebtedness immediately will become due
<PAGE>
02-17-1998 BUSINESS LOAN AGREEMENT Page 6
(Continued)
and payable, all without notice of any kind to Borrower, except
that in the case of an Event of Default of the type described in
the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all
the rights and remedies provided in the Related Documents or
available at law, in equity, or otherwise. Except as may be
prohibited by applicable law, all of Lender's rights and remedies
shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of
Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are a part of this Agreement:
Amendments. This Agreement, together with any Related
Documents, constitutes the entire understanding and agreement
of the parties as to the matters set forth in this Agreement.
No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or
amendment
Applicable Law. This Agreement has been delivered to Lender
and accepted by Lender in the State of Washington. If there is
a lawsuit, Borrower agrees upon Lender's request to submit to
the jurisdiction of the courts of King County, the State of
Washington. This Agreement shall be governed by and construed
in accordance with the laws of the State of Washington.
Caption headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret
or define the provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of
Borrower under this Agreement shall be joint and several, and
all references to Borrower shall mean each and every Borrower.
This means that each of the persons signing below is
responsible for all obligations in this Agreement.
Consent to Loan Participation. Borrower agrees and consents to
Lender's sale or transfer, whether now or later, of one or
more participation interests in the Loans to one or more
purchasers, whether related or unrelated to Lender. Lender may
provide, without any limitation whatsoever, to any one or more
purchasers, or potential purchasers, any information or
knowledge Lender may have about Borrower or about any other
matter relating to the Loan, and Borrower hereby waives any
rights to privacy it may have with respect to such matters.
Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any
repurchase of such participation interests. Borrower also
agrees that the purchasers of any such participation interests
will be considered as the absolute owners of such interests in
the Loans and will have all the rights granted under the
participation agreement or agreements governing the sale of
such participation interests. Borrower further waives all
rights of offset or counterclaim that it may have now or later
against Lender or against any purchaser of such a
participation interest and unconditionally agrees that either
Lender or such purchaser may enforce Borrower's obligation
under the Loans irrespective of the failure or insolvency of
any holder of any interest in the Loans. Borrower further
agrees that the purchaser of any such participation interests
may enforce its interests irrespective of any personal claims
or defenses that Borrower may have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of
Lender's expenses, including without limitation attorneys'
fees, incurred in connection with the preparation, execution,
enforcement, modification and collection of this Agreement or
in connection with the Loans made pursuant to this Agreement.
Lender may pay someone else to help collect the Loans and to
enforce this Agreement, and Borrower will pay that amount.
This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses, whether
or not there is a lawsuit, including attorneys' fees for
bankruptcy proceedings (including efforts to modify or vacate
any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Borrower also
will pay any court costs, in addition to all other sums
provided by law.
Notices. All notices required to be given under this Agreement
shall be given in writing, may be sent by telefacsimile
(unless otherwise required by law), and shall be effective
when actually delivered or when deposited with a nationally
recognized overnight courier or deposited in the United States
mail, first class, postage prepaid, addressed to the party to
whom the notice is to be given at the address shown above. Any
party may change its address for notices under this Agreement
by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the
party's address. To the extent permitted by applicable law, if
there is more than one Borrower, notice to any Borrower will
constitute notice to all Borrowers. For notice purposes,
Borrower will keep Lender informed at all times of Borrowers
current address(es).
Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as
to any person or circumstance, such finding shall not render
that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending
provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be
stricken and all other provisions of this Agreement in all
other respects shall remain valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the
context of any provisions of this Agreement makes it
appropriate, including without limitation any representation,
warranty or covenant, the word "Borrower" as used herein shall
include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances
shall this Agreement be construed to require Lender to make
any Loan or other financial accommodation to any subsidiary or
affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained
by or on behalf of Borrower shall bind its successors and
assigns and shall inure to the benefit of Lender, its
successors and assigns. Borrower shall not, however, have the
right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
Survival. All warranties, representations, and covenants made
by Borrower in this Agreement or in any certificate or other
instrument delivered by Borrower to Lender under this
Agreement shall be considered to have been relied upon by
Lender and will survive the making of the Loan and delivery to
Lender of the Related Documents, regardless of any
investigation made by Lender or on Lender's behalf.
Waiver. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing
and signed by Lender. No delay or omission on the part of
Lender in exercising any right shall operate as a waiver of
such right or any other right. A waiver by Lender of a
provision of this Agreement shall not prejudice or constitute
a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of
dealing between Lender and Borrower, or between Lender and any
Grantor, shall constitute a waiver of any of Lender's rights
or of any obligations of Borrower or of any Grantor as to any
future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by
Lender in any instance shall not constitute continuing consent
in subsequent instances where such consent is required, and in
all cases such consent may be granted or withheld in the sole
discretion of Lender.
<PAGE>
02-17-1998 BUSINESS LOAN AGREEMENT Page 7
(Continued)
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
BUSINESS LOAN AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS
AGREEMENT IS DATED AS OF FEBRUARY 17,1998.
BORROWER:
WEB PRESS CORPORATION AND WEB LEADER INTERNATIONAL, INC.
By: /s/ GARY B. PALMER
__________________________________
President: WEB PRESS CORPORATION
By: /s/ GARY B. PALMER
__________________________________________
Chairman: WEB LEADER INTERNATIONAL, INC.
LENDER:
Washington First International Bank
By: /s/ MICHAEL C.C. LUM
____________________
Authorized Officer
<PAGE>
COMMERCIAL SECURITY AGREEMENT
________________________________________________________________________
Principal Loan Date Maturity Loan No. Call Collateral
$1,200,000.00 02-17-1998 04-15-1999 8015480007 40
Account Officer Initials
801548 305
_____________________________________________________________
References in the shaded area are for Lender's use only and do
not limit the applicability of this document to any particular
loan or item.
________________________________________________________________________
Borrower: WEB PRESS CORPORATION AND Lender: Washington First
WEB LEADER INTERNATIONAL, INC. International Bank
22023 68TH AVENUE SOUTH 9709 Third Avenue NE
KENT, WA 98032 Suite 110
Seattle, WA 98115
_________________________________________________________________________
THIS COMMERCIAL SECURITY AGREEMENT is entered into between WEB
PRESS CORPORATION AND WEB LEADER INTERNATIONAL, INC. (referred to
below as "Grantor"); and Washington First International Bank
(referred to below as "Lender"). For valuable consideration,
Grantor grants to Lender a security interest in the Collateral to
secure the Indebtedness and agrees that Lender shall have the
rights stated in this Agreement with respect to the Collateral,
in addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following
meanings when used in this Agreement. Terms not otherwise defined
in this Agreement shall have the meanings attributed to such
terms in the Uniform Commercial Code. All references to dollar
amounts shall mean amounts in lawful money of the United States
of America.
Agreement. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be
amended or modified from time to time, together with all
exhibits and schedules attached to this Commercial Security
Agreement from time to time.
Collateral. The word "Collateral" means the following
described property of Grantor, whether now owned or hereafter
acquired, whether now existing or hereafter arising, and
wherever located:
All inventory, accounts, equipment, general intangibles and
fixtures, together with the following specifically described
property: WHEREVER LOCATED
In addition, the word "Collateral" includes all the following,
whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:
(a) All attachments, accessions, accessories, tools, parts,
supplies, increases, and additions to and all replacements
of and substitutions for any property described above.
(b) All products and produce of any of the property
described in this Collateral section.
(c) All accounts, general intangibles, instruments, rents,
monies, payments, and all other rights, arising out of a
sale, lease, or other disposition of any of the property
described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the
sale, destruction, loss, or other disposition of any of the
property described in this Collateral section.
(e) All records and data relating to any of the property
described in this Collateral section, whether in the form of
a writing, photograph, microfilm, microfiche, or electronic
media, together with all of Grantor's right, title, and
interest in and to all computer software required to
utilize, create, maintain, and process any such records or
data on electronic media.
Event of Default. The words "Event of Default" mean and
include without limitation any of the Events of Default set
forth below in the section titled "Events of Default."
Grantor. The word "Grantor" means WEB PRESS CORPORATION AND
WEB LEADER INTERNATIONAL, INC., its successors and assigns.
Guarantor. The word "Guarantor" means and includes without
limitation each and all of the guarantors, sureties, and
accommodation parties in connection with the Indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness
evidenced by the Note, including all principal and interest,
together with all other indebtedness and costs and expenses
for which Grantor is responsible under this Agreement or under
any of the Related Documents. In addition, the word
"Indebtedness" includes all other obligations, debts and
liabilities, plus interest thereon, of Grantor, or any one or
more of them, to Lender, as well as all claims by Lender
against Grantor, or any one or more of them, whether existing
now or later; whether they are voluntary or involuntary, due
or not due, direct or indirect, absolute or contingent,
liquidated or unliquidated; whether Grantor may be liable
individually or jointly with others; whether Grantor may be
obligated as guarantor, surety, accommodation party or
otherwise; whether recovery upon such indebtedness may be or
hereafter may become barred by any statute of limitations; and
whether such indebtedness may be or hereafter may become
otherwise unenforceable.
Lender. The word "Lender" means Washington First International
Bank, its successors and assigns.
Note. The word "Note" means the note or credit agreement dated
February 17,1998, in the principal amount of $1,200,000.00
from WEB PRESS CORPORATION AND WEB LEADER INTERNATIONAL, INC.
to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of and
substitutions for the note or credit agreement.
Related Documents. The words "Related Documents" mean and
include without limitation all promissory notes, credit
agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust,
and all other instruments, agreements and documents, whether
now or hereafter existing, executed in connection with the
Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual
possessory security interest in and hereby assigns, conveys,
delivers, pledges, and transfers all of Grantor's right, title
and interest in and to Grantor's accounts with Lender (whether
checking, savings, or some other account), including all accounts
held jointly with someone else and all accounts Grantor may open
in the future, excluding, however, all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest
would be prohibited by law. Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all
Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender
as follows:
Perfection of Securlty Interest. Grantor agrees to execute such
financing statements and to take whatever other actions are
requested by Lender to perfect and continue Lender's security
interest in the Collateral. Upon request of Lender, Grantor will
deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and Grantor will note Lender's
interest upon any and all chattel paper if not delivered to
Lender for possession by Lender. Grantor hereby appoints Lender
as its irrevocable attorney-in-fact for the purpose of executing
any documents necessary to perfect or to continue the security
interest granted in this Agreement. Lender may at any time, and
without further authorization from Grantor, file a carbon,
photographic or other reproduction of any financing statement or
of this Agreement for use as a
<PAGE>
02-17-1998 COMMERCIAL SECURITY AGREEMENT Page 2
(Conunued)
financing statement. Grantor will reimburse Lender for all
expenses for the perfection and the continuation of the
perfection of Lenders security interest in the Collateral.
Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names
of Grantor. This is a continuing Security Agreement and will
continue in effect even though all or any part of the
Indebtedness is paid in full and even though for a period of time
Grantor may not be indebted to Lender.
No Violation. The execution and delivery of this Agreement will
not violate any law or agreement governing Grantor or to which
Grantor is a party, and its certificate or articles of
incorporation and bylaws do not prohibit any term or condition of
this Agreement.
Enforceability of Collateral. To the extent the Collateral
consists of accounts, chattel paper, or general intangibles, the
Collateral is enforceable in accordance with its terms, is
genuine, and complies with applicable laws concerning form,
content and manner of preparation and execution, and all persons
appearing to be obligated on the Collateral have authority and
capacity to contract and are in fact obligated as they appear to
be on the Collateral. At the time any account becomes subject to
a security interest in favor of Lender, the account shall be a
good and valid account representing an undisputed, bona fide
indebtedness incurred by the account debtor, for merchandise held
subject to delivery instructions or theretofore shipped or
delivered pursuant to a contract of sale, or for services
theretofore performed by Grantor with or for the account debtor;
there shall be no setoffs or counterclaims against any such
account; and no agreement under which any deductions or discounts
may be claimed shall have been made with the account debtor
except those disclosed to Lender in writing.
Location of the Collateral. Grantor, upon request of Lender, will
deliver to Lender in form satisfactory to Lender a schedule of
real properties and Collateral locations relating to Grantor's
operations, including without limitation the following: (a) all
real property owned or being purchased by Grantor; (b) all real
property being rented or leased by Grantor; (c) all storage
facilities owned, rented, leased, or being used by Grantor; and
(d) all other properties where Collateral is or may be located.
Except in the ordinary course of its business, Grantor shall not
remove the Collateral from its existing locations without the
prior written consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral (or to
the extent the Collateral consists of intangible property such as
accounts, the records concerning the Collateral) at Grantor's
address shown above, or at such other locations as are acceptable
to Lender. Except in the ordinary course of its business,
including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written
consent of Lender. To the extent that the Collateral consists of
vehicles, or other titled property, Grantor shall not take or
permit any action which would require application for
certificates of title for the vehicles outside the State of
Washington, without the prior written consent of Lender.
Transactions Involving Collateral. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business,
Grantor shall not sell, offer to sell, or otherwise transfer or
dispose of the Collateral. While Grantor is not in default under
this Agreement, Grantor may sell inventory, but only in the
ordinary course of its business and only to buyers who qualify as
a buyer in the ordinary course of business. A sale in the
ordinary course of Grantor1s business does not include a transfer
in partial or total satisfaction of a debt or any bulk sale.
Grantor shall not pledge, mortgage, encumber or otherwise permit
the Collateral to be subject to any lien, security interest,
encumbrance, or charge, other than the security interest provided
for in this Agreement, without the prior written consent of
Lender. This includes security interests even if junior in right
to the security interests granted under this Agreement. Unless
waived by Lender, all proceeds from any disposition of the
Collateral (for whatever reason) shall be held in trust for
Lender and shall not be commingled with any other funds; provided
however, this requirement shall not constitute consent by Lender
to any sale or other disposition. Upon receipt, Grantor shall
immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds
good and marketable title to the Collateral, free and clear of
all liens and encumbrances except for the lien of this Agreement.
No financing statement covering any of the Collateral is on file
in any public office other than those which reflect the security
interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in
the Collateral against the claims and demands of all other
persons.
Collateral Schedules and Locations. As often as Lender shall
require and insofar as the Collateral consists of accounts and
general intangibles, Grantor shall deliver to Lender schedules of
such Collateral, including such
information as Lender may require, including without limitation
names and addresses of account debtors and agings of accounts and
general intangibles. Insofar as the Collateral consists of
inventory and equipment, Grantor shall deliver to Lender, as
often as Lender shall require, such lists, descriptions, and
designations of such Collateral as Lender may require to identify
the nature, extent, and location of such Collateral. Such
information shall be submitted for Grantor and each of its
subsidiaries or related companies.
Maintenance and Inspection of Collateral. Grantor shall maintain
all tangible Collateral in good condition and repair. Grantor
will not commit or permit damage to or destruction of the
Collateral or any part of the Collateral. Lender and its
designated representatives and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral
wherever located. Grantor shall immediately notify Lender of all
cases involving the return, rejection, repossession, loss or
damage of or to any Collateral; of any request for credit or
adjustment or of any other dispute arising with respect to the
Collateral; and generally of all happenings and events affecting
the Collateral or the value or the amount of the Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all
taxes, assessments and liens upon the Collateral, its use or
operation, upon this Agreement, upon any promissory note or notes
evidencing the Indebtedness, or upon any of the other Related
Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an
appropriate proceeding to contest the obligation to pay and so
long as Lender's interest in the Collateral is not jeopardized in
Lender's sole opinion. If the Collateral is subjected to a lien
which is not discharged within fifteen (15) days, Grantor shall
deposit with Lender cash, a sufficient corporate surety bond or
other security satisfactory to Lender in an amount adequate to
provide for the discharge of the lien plus any interest, costs,
attorneys' fees or other charges that could accrue as a result of
foreclosure or sale of the Collateral. In any contest Grantor
shall defend itself and Lender and shall satisfy any final
adverse judgment before enforcement against the Collateral.
Grantor shall name Lender as an additional obligee under any
surety bond furnished in the contest proceedings.
Compliance With Governmental Requirements. Grantor shall comply
promptly with all laws, ordinances, rules and regulations of all
governmental authorities, now or hereafter in effect, applicable
to the ownership, production, disposition, or use of the
Collateral. Grantor may contest in good faith any such law,
ordinance or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not
jeopardized.
Hazardous Substances. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this
Agreement remains a lien on the Collateral, used for the
generation, manufacture, storage, transportation, treatment,
disposal, release or threatened release of any hazardous waste or
substance, as those terms are defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C Section 9601, et seq. ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986, Pub. L. No.
99-499 ("SARA"), the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted
pursuant to any of the foregoing. The terms "hazardous waste" and
"hazardous substance" shall also include, without limitation,
petroleum and petroleum by-products or any fraction thereof and
asbestos. The representations and warranties contained herein are
based on Grantor's due diligence in investigating the Collateral
for hazardous wastes and substances. Grantor hereby (a) releases
and waives any future claims against Lender for indemnity or
contribution in the event Grantor becomes liable for cleanup or
other costs under any such laws, and (b) agrees to indemnify and
hold harmless Lender against
<PAGE>
02-17-1998 COMMERCIAL SECURITY AGREEMENT Page 3
(Continued)
any and all claims and losses resulting from a breach of this
provision of this Agreement. This obligation to indemnify shall
survive the payment of the Indebtedness and the satisfaction of
this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and
maintain all risks insurance, including without limitation fire,
theft and liability coverage together with such other insurance
as Lender may require with respect to the Collateral, in form,
amounts, coverages and basis reasonably acceptable to Lender and
issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request or Lender, will deliver to Lender from time
to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages
will not be cancelled or diminished without at least ten (10)
days' prior written notice to Lender and not including any
disclaimer of the insurer's liability for failure to give such a
notice. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired
in any way by any act, omission or default of Grantor or any
other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest, Grantor
will provide Lender with such loss payable or other endorsements
as Lender may require. If Grantor at any time fails to obtain or
maintain any insurance as required under this Agreement, Lender
may (but shall not be obligated to) obtain such insurance as
Lender deems appropriate, including if it so chooses "single
interest insurance," which will cover only Lender's interest in
the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify
Lender of any loss or damage to the Collateral. Lender may make
proof of loss if Grantor fails to do so within fifteen (15) days
of the casualty. All proceeds of any insurance on the Collateral,
including accrued proceeds thereon, shall be held by Lender as
part of the Collateral. If Lender consents to repair or
replacement of the damaged or destroyed Collateral1 Lender shall,
upon satisfactory proof of expenditure, pay or reimburse Grantor
from the proceeds for the reasonable cost of repair or
restoration. If Lender does not consent to repair or replacement
of the Collateral, Lender shall retain a sufficient amount of the
proceeds to pay all of the Indebtedness, and shall pay the
balance to Grantor. Any proceeds which have not been disbursed
within six (6) months after their receipt and which Grantor has
not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with
Lender reserves for payment of insurance premiums, which reserves
shall be created by monthly payments from Grantor of a sum
estimated by Lender to be sufficient to produce, at least fifteen
(15) days before the premium due date, amounts at least equal to
the insurance premiums to be paid. It fifteen (15) days before
payment is due, the reserve funds are insufficient, Grantor shall
upon demand pay any deficiency to Lender. The reserve funds shall
be held by Lender as a general deposit and shall constitute a non-
interest-bearing account which Lender may satisfy by payment of
the insurance premiums required to be paid by Grantor as they
become due. Lender does not hold the reserve funds in trust for
Grantor, and Lender is not the agent of Grantor for payment of
the insurance premiums required to be paid by Grantor. The
responsibility for the payment of premiums shall remain Grantor's
sole responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish
to Lender reports on each existing policy of insurance showing
such information as Lender may reasonably request including the
following: (a) the name of the insurer; (b) the risks insured;
(c) the amount of the policy; (d) the property insured; (e) the
then current value on the basis of which insurance has been
obtained and the manner of determining that value; and (f) the
expiration date of the policy. In addition, Grantor shall upon
request by Lender (however not more often than annually) have an
independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until
default and except as otherwise provided below with respect to
accounts, Grantor may have possession of the tangible personal
property and beneficial use of all the Collateral and may use it
in any lawful manner not inconsistent with this Agreement or the
Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where
possession of the Collateral by Lender is required by law to
perfect Lender's security interest in such Collateral. Until
otherwise notified by Lender, Grantor may collect any of the
Collateral consisting of accounts. At any time and even though no
Event of Default exists, Lender may exercise its rights to
collect the accounts and to notify account debtors to make
payments directly to Lender for application to the Indebtedness.
If Lender at any time has possession of any Collateral, whether
before or after an Event of Default, Lender shall be deemed to
have exercised reasonable care in the custody and preservation of
the Collateral if Lender takes such action for that purpose as
Grantor shall request or as Lender in Lender's sole discretion,
shall deem appropriate under the circumstances, but failure to
honor any request by Grantor shall not of itself be deemed to be
a failure to exercise reasonable care. Lender shall not be
required to take any steps necessary to preserve any rights in
the Collateral against prior parties, nor to protect, preserve or
maintain any security interest given to secure the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due,
Lender may (but shall not be obligated to) discharge or pay any
amounts required to be discharged or paid by Grantor under this
Agreement, including without limitation all taxes, liens,
security interests, encumbrances, and other claims, at any time
levied or placed on the Collateral. Lender also may (but shall
not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid
by Lender for such purposes will then bear interest at the rate
charged under the Note from the date incurred or paid by Lender
to the date of repayment by Grantor. All such expenses shall
become a part of the Indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note
and be apportioned among and be payable with any installment
payments to become due during either (i) the term of any
applicable insurance policy or (ii) the remaining term of the
Note, or (c) be treated as a balloon payment which will be due
and payable at the Note's maturity. This Agreement also will
secure payment of these amounts. Such right shall be in addition
to all other rights and remedies to which Lender may be entitled
upon the occurrence of an Event of Default
EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
Default on Indebtedness. Failure of Grantor to make any
payment when due on the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to
perform any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents
or in any other agreement between Lender and Grantor.
Default in Favor of Third Parties. Should Borrower or any
Grantor default under any loan, extension of credit security
agreement, purchase or
sales agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of
Borrower's property or
Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or
any of the Related
Documents.
False Statements. Any warranty, representation or statement
made or furnished to Lender by or on behalf of Grantor under
this Agreement, the Note or the Related Documents is false or
misleading in any material respect, either now or at the time
made or furnished.
Defective Collateralization. This Agreement or any of the
Related Documents ceases to be in full force and effect
(including failure of any collateral documents to create a
valid and perfected security interest or lien) at any time and
for any reason.
Insolvency. The dissolution or termination of Grantor's
existence as a going business, the insolvency of Grantor, the
appointment of a receiver for any part of Grantor's property,
any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under
any bankruptcy or insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of
foreclosure or forfeiture proceedings, whether by judicial
proceeding, self-help, repossession or any other method, by
any creditor of Grantor or by any governmental agency against
the Collateral or any other collateral securing the
Indebtedness. This includes a garnishment of any of Grantor's
deposit accounts with Lender. However, this Event of Default
shall not apply if there is a good faith dispute by Grantor as
to the validity or reasonableness of the claim which is the
basis of the creditor or forfeiture proceeding and if Grantor
gives Lender written notice of the creditor or forfeiture
proceeding and deposits with Lender monies or a surety bond
<PAGE>
02-17-1998 COMMERCIAL SECURITY AGREEMENT Page 4
(Continued)
for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs
with respect to any Guarantor of any of the Indebtedness or
such Guarantor dies or becomes incompetent. Lender, at its
option, may, but shall not be required to, permit the
Guarantor's estate to assume unconditionally the obligations
arising under the guaranty in a manner satisfactory to Lender,
and, in doing so, cure the Event of Default.
Adverse Change. A material adverse change occurs in Grantor's
financial condition, or Lender believes the prospect of
payment or performance of the Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on
Indebtedness, is curable and if Grantor has not been given a
prior notice of a breach of the same provision of this
Agreement, it may be cured (and no Event of Default will have
occurred) if Grantor, after Lender sends written notice
demanding cure of such default, (a) cures the default within
() days; or (b), if the cure requires more than () days,
immediately initiates steps which Lender deems in Lender's
sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and
necessary steps sufficient to produce compliance as soon as
reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. If an Event io Default occurs
under this Agreement, at any time thereafter, Lender shall have
all the rights of a secured party under the Washington Uniform
Commercial Code. In addition and without limitation, Lender may
exercise any one or more of the following rights and remedies:
Accelerate Indebtedness. Lender may declare the entire
Indebtedness, including any prepayment penalty which Grantor
would be required to pay, immediately due and payable, without
notice.
Assemble Collateral. Lender may require Grantor to deliver to
Lender all or any portion of the Collateral and any and all
certificates of title and other documents relating to the
Collateral. Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to
enter upon the property of Grantor to take possession of and
remove the Collateral. If the Collateral contains other goods
not covered by this Agreement at the time of repossession,
Grantor agrees Lender may take such other goods, provided that
Lender makes reasonable efforts to return them to Grantor
after repossession.
Sell the Collateral. Lender shall have full power to sell,
lease, transfer, or otherwise deal with the Collateral or
proceeds thereof in its own name or that of Grantor. Lender
may sell the Collateral at public auction or private sale.
Unless the Collateral threatens to decline speedily ln value
or is of a type customarily sold on a recognized market,
Lender will give Grantor reasonable notice of the time after
which any private sale or any other intended disposition of
the Collateral is to be made. The requirements of reasonable
notice shall be met if such notice is given at least ten (10)
days before the time of the sale or disposition. All expenses
relating to the disposition of the Collateral, including
without limitation the expenses of retaking, holding,
insuring, preparing for sale and selling the Collateral, shall
become a part of the Indebtedness secured by this Agreement
and shall be payable on demand, with interest at the Note rate
from date of expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law,
Lender shall have the following rights and remedies regarding
the appointment of a receiver: (a) Lender may have a receiver
appointed as a mailer of right, (b) the receiver may be an
employee of Lender and may serve without bond3 and (c) all
fees of the receiver and his or her attorney shall become part
of the Indebtedness secured by this Agreement and shall be
payable on demand, with interest at the Note rate from date of
expenditure until repaid.
Collect Revenues, Apply Accounts. Lender, either itself or
through a receiver, may collect the payments, rents, income,
and revenues from the Collateral. Lender may at any time in
its discretion transfer any Collateral into its own name or
that of its nominee and receive the payments, rents, income,
and revenues therefrom and hold the same as security for the
indebtedness or apply it to payment of the Indebtedness in
such order of preference as Lender may determine. Insofar as
the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choses in
action, or similar property, Lender may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose,
or realize on the Collateral as Lender may determine, whether
or not Indebtedness or Collateral is then due. For these
purposes, Lender may, on behalf of and in the name of Grantor,
receive, open and dispose of mail addressed to Grantor; change
any address to which mail and payments are to be sent; and
endorse notes, checks, drafts, money orders, documents of
title, instruments and items pertaining to payment, shipment,
or storage of any Collateral. To facilitate collection, Lender
may notify account debtors and obligors on any Collateral to
make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a Judgment against Grantor for
any deficiency remaining on the Indebtedness due to Lender
after application of all amounts received from the exercise of
the rights provided in this Agreement. Grantor shall be
liable for a deficiency even if the transaction described in
this subsection is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights
and remedies of a secured creditor under the provisions of the
Uniform Commercial Code, as may be amended from time to time.
In addition, Lender shall have and may exercise any or all
other rights and remedies it may have available at law, in
equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies,
whether evidenced by this Agreement or the Related Documents
or by any other writing, shall be cumulative and may be
exercised singularly or concurrently. Election by Lender to
pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action
to perform an obligation of Grantor under this Agreement,
after Grantor's failure to perform, shall not affect Lender's
right to declare a default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are a part of this Agreement:
Amendments. This Agreement, together with any Related
Documents, constitutes the entire understanding and agreement
of the parties as to the matters set forth in this Agreement.
No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or
amendment.
Applicable Law. This Agreement has been delivered to Lender
and accepted by Lender in the State of Washington. If there is
a lawsuit, Grantor agrees upon Lenders request to submit to
the jurisdiction of the courts of King County, the State of
Washington. This Agreement shall be governed by and construed
in accordance with the laws of the State of Washington.
Attoreys' Fees; Expenses. Grantor agrees to pay upon demand
all of Lender's costs and expenses, including attorneys' fees
and Lenders legal expenses, incurred in connection with the
enforcement of this Agreement. Lender may pay someone else to
help enforce this Agreement, and Grantor shall pay the costs
and expenses of such enforcement. Costs and expenses include
Lender's attorneys' fees and legal expenses whether or not
there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (and including efforts to
modify or vacate any automatic stay or injunction), appeals,
and any anticipated post-judgment collection services Grantor
also shall pay all court costs and such additional fees as may
be directed by the court.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret
or define the provisions of this Agreement.
<PAGE>
02-17-1998 COMMERCIAL SECURITY AGREEMENT Page 5
(Continued)
Multiple Parties; Corporate Authority. All obligations of
Grantor under this Agreement shall be joint and several, and
all references to Grantor shall mean each and every Grantor.
This means that each of the persons signing below is
responsible for all obligations in this Agreement.
Notices. All notices required to be given under this Agreement
shall be given in writing, may be sent by telefacsimile
(unless otherwise required by law), and shall be effective
when actually delivered or when deposited with a nationally
recognized overnight courier or deposited in the United States
mail, first class, postage prepaid, addressed to the party to
whom the notice is to be given at the address shown above. Any
party may change its address for notices under this Agreement
by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the
party's address. To the extent permitted by applicable law, if
there is more than one Grantor, notice to any Grantor will
constitute notice to all Grantors. For notice purposes,
Grantor will keep Lender informed at all times of Grantor's
current address(es).
Power of Attorney. Grantor hereby appoints Lender as its true
and lawful attorney-in-fact, irrevocably with full power of
substitution to do the following: (a) to demand, collect,
receive, receipt for, sue and recover all sums of money or
other property which may now or hereafter become due, owing or
payable from the Collateral; (b) to execute, sign and endorse
any and all claims, instruments, receipts, checks, drafts or
warrants issued in payment for the Collateral; (c) to settle
or compromise any and all claims arising under the Collateral,
and, in the place and stead of Grantor to execute and deliver
its release and settlement for the claim; and (d) to file any
claim or claims or to take any action or institute or take
part in any proceedings, either in its own name or in the
name of Grantor, or otherwise, which in the discretion of
Lender may seem to be necessary or advisable. This power is
given as security for the Indebtedness, and the authority
hereby conferred is and shall be irrevocable and shall remain
in full force and effect until renounced by Lender.
Preference Payments. Any monies Lender pays because of an
asserted preference claim in Borrower's bankruptcy will become
a part of the Indebtedness and, at Lender's option, shall be
payable by Borrower as provided above in the "EXPENDITURES BY
LENDER" paragraph.
Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as
to any person or circumstance, such finding shall not render
that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending
provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be
stricken and all other provisions of this Agreement in all
other respects shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth
above on transfer of the Collateral, this Agreement shall be
binding upon and inure to the benefit of the parties, their
successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing
and signed by Lender. No delay or omission on the part of
Lender in exercising any right shall operate as a waiver of
such right or any other right. A waiver by Lender of a
provision of this Agreement shall not prejudice or constitute
a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of
dealing between Lender and Grantor, shall constitute a waiver
of any of Lender's, rights or of any of Grantor's obligations
as to any future transactions. Whenever the consent of Lender
is required under this Agreement, the granting of such consent
by Lender in any instance shall not constitute continuing
consent to subsequent instances where such consent is required
and in all cases such consent may be granted or withheld in
the sole discretion of Lender.
Waiver of Co-obligor's Rights. If more than one person is
obligated for the Indebtedness, Borrower irrevocably waives,
disclaims and relinquishes all claims against such other
person which Borrower has or would otherwise have by virtue of
payment of the Indebtedness or any part thereof, specifically
including but not limited to all rights of indemnity,
contribution or exoneration.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS.
THIS AGREEMENT IS DATED FEBRUARY 17, 1998.
GRANTOR:
WEB PRESS CORPORATION AND WEB LEADER INTERNATIONAL, INC.
By: /s/ Gary B. Palmer
___________________________________________
Gary B. Palmer, President, WEB PRESS CORP.
By: /s/ Gary B. Palmer
__________________________________________________________
Gary B. Palmer, Chairman: WEB LEADER INTERNATIONAL, INC.
<PAGE>
CORPORATE RESOLUTION TO BORROW
__________________________________________________________________________
Principal Loan Date Maturity Loan No. Call Collateral
$1,200,000.00 02-17-1998 04-15-1999 8015480007 40
Account Officer Initials
801548 305
__________________________________________________________________________
References in the shaded area are for Lender's use only and do
not limit the applicability of this document to any particular
loan or item.
__________________________________________________________________________
Borrower: WEB PRESS CORPORATION AND Lender: Washington First
WEB LEADER INTERNATIONAL, INC. International Bank
22023 68TH AVENUE SOUTH 9709 Third Avenue NE
KENT, WA 98032 Suite 110
Seattle, WA 98115
____________________________________________________________________________
I, the undersigned Secretary or Assistant Secretary of WEB PRESS
CORPORATION AND WEB LEADER INTERNATIONAL, INC. (the "Corporation"),
HEREBY CERTIFY that the Corporation is organized
and existing under and by virtue of the laws of the State of
Washington as a corporation for profit, with its principal office
at 22023-68TH AVENUE SOUTH, KENT, WA 98032, and is duly
authorized to transact business in the State of Washington.
I FURTHER CERTIFY that at a meeting of the Directors of the
Corporation, duly called and held on February 17, 1998, at which
a quorum was present and voting, or by other duly authorized
corporate action in lieu of a meeting, the following resolutions
were adopted:
BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures
are shown below:
NAMES POSITIONS ACTUAL SIGNATURES
GARY B. PALMER President: WEB PRESS CORP. /s/ GARY B. PALMER
__________________
CRAIG L. MATHISON Secretary/Treasurer: WEB PRESS CORP. /s/ CRAIG L. MATHISON
_____________________
GARY B. PALMER Chairman: WEB LEADER INTERNATIONAL,INC. /s/ GARY B. PALMER
__________________
CHARLES A. GATH President: WEB LEADER INTERNATIONAL,INC. /s/CHARLES A. GATH
__________________
acting for and on behalf of the Corporation and as its act and
deed be, and they hereby are, authorized and empowered:
Borrow Money. To borrow from time to time from Washington
First International Bank ("Lender"), on such terms as may be
agreed upon between the Corporation and Lender, such sum or
sums of money as in their judgment should be borrowed,
without limitation.
Execute Notes. To execute and deliver to Lender the
promissory note or notes, or other evidence of credit
accomodations of the Corporation, on Lender's forms, at such
rates of interest and on such terms as may be agreed upon,
evidencing the sums of money so borrowed or any indebtedness
of the Corporation to Lender, and also to execute and
deliver to Lender one or more renewals, extensions,
modifications, refinanclngs, consolidations, or
substitutions for one or more of the notes, any portion of
the notes, or any other evidence of credit accomodations.
Grant Security. To mortgage, pledge, transfer, endorse,
hypothecate, or otherwise encumber and deliver to Lender, as
security for the payment of any loans or credit
accomodations so obtained, any promissory notes so executed
(including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or
further indebtedness of the Corporation to Lender at any
time owing, however the same may be evidenced, any property
now or hereafter belonging to the Corporation or in which
the Corporation now or hereafter may have an interest,
including without limitation all real property and all
personal property (tangible or intangible) of the
Corporation. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated, or encumbered at the
time such loans are obtained or such indebtedness is
incurred, or at any other time or times, and may be either
in addition to or in lieu of any property theretofore
mortgaged, pledged, transferred, endorsed, hypothecated, or
encumbered.
Execute Security Documents. To execute and deliver to Lender
the forms of mortgage, deed of trust, pledge agreement,
hypothecation agreement, and other security agreements and
financing statements which may be submitted by Lender, and
which shall evidence the terms and conditions under and
pursuant to which such liens and encumbrances, or any of
them, are given; and also to execute and deliver to Lender
any other written instruments, any chattel paper, or any
other collateral1 of any kind or nature, which they may in
their discretion deem reasonably necessary or proper in
connection with or pertaining to the giving of the liens and
encumbrances.
Negotiate Items. To draw, endorse, and discount with Lender
all drafts, trade acceptances, promissory notes, or other
evidences of indebtedness payable to or belonging to the
Corporation in which the Corporation may have an interest,
and either to receive cash for the same or to cause such
proceeds to be credited to the account of the Corporation
with Lender, or to cause such other disposition of the
proceeds derived therefrom as they may deem advisable.
Further Acts. In the case of lines of credit to designate
additional or alternate individuals as being authorized to
request advances thereunder, and in all cases, to do and
perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents
and agreements as they may in their discretion deem
reasonably necessary or proper in order to carry into effect
the provisions of these Resolutions. The following person or
persons currently are authorized to request advances and
authorize payments under the line of credit until Lender
receives written notice of revocation of their authority:
GARY B. PALMER, President/Chairman of Web Press Corp. and
Web Leader International, Inc.; and CRAIG L. MATHISON,
Secretary/Treasurer.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant
to these Resolutions and performed prior to the passage of these
Resolutions are hereby ratified and approved, that these
Resolutions shall remain in full force and effect and Lender may
rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Lender.
Any such notice shall not affect any of the Corporation's
agreements or commitments in effect at the time notice is given.
BE IT FURTHER RESOLVED, that the Corporation will notify Lender
in writing at Lender's address shown above (or such other
addresses as Lender may designate from time to time) prior to any
(a) change in the name of the Corporation, (b) change in the
assumed business name(s) of the Corporation, (c) change in the
management of the Corporation, (d) change in the authorized
signer(s), (e) conversion of the Corporation to a new or
different type of business entity, or (f) change in any other
aspect of the Corporation that directly or indirectly relates to
any agreements between the Corporation and Lender. No change in
the name of the Corporation will take effect until after Lender
has been notified.
I FURTHER CERTIFY that the officers, employees, and agents named
above are duly elected, appointed, or employed by or for the
Corporation, as the case may be, and occupy the positions set
opposite their respective names; that the foregoing Resolutions
now stand of record on the books of the Corporation; and that the
Resolutions are in full force and effect and have not been
modified or revoked in any manner whatsoever. The Corporation has
no corporate seal, and therefore, no seal is affixed to this
certificate.
<PAGE>
02-17-1998 CORPORATE RESOLUTION TO BORROW Page 2
(Continued)
IN TESTIMONY WHEREOF, I have hereunto set my hand on February
17,1998 and attest that the signatures set opposite the names
listed above are their genuine signatures.
CERTIFIED TO AND ATTESTED BY:
/s/ CRAIG L. MATHISON
_____________________
<PAGE>
PROMISSORY NOTE
________________________________________________________________________
Principal Loan Date Maturity Loan No. Call Collateral
$1,200,000.00 02-17-1998 04-15-1999 8015480007 40
Account Officer Initials
801548 305
________________________________________________________________________
References in the shaded area are for Lender's use only and do
not limit the applicability of this document to any particular
loan or item.
________________________________________________________________________
Borrower: WEB PRESS CORPORATION AND Lender: Washington First
WEB LEADER INTERNATIONAL, INC. International Bank
22023 68TH AVENUE SOUTH 9709 Third Avenue NE
KENT, WA 98032 Suite 110
Seattle, WA 98115
________________________________________________________________________
Principal Amount: $1,200,000.00 Initial Rate: 10.500%
Date of Note: February 17, 1998
PROMISE TO PAY. WEB PRESS CORPORATION AND WEB LEADER
INTERNATIONAL, INC. ("Borrower") promises to pay to Washington
First International Bank ("Lender"), or order, in lawful money of
the United States of America, the principal amount of One Million
Two Hundred Thousand & 00/100 Dollars ($1,200,000.00) or so much
as may be outstanding, together with interest on the unpaid
outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each
advance.
PAYMENT. Borrower will pay this loan on demand, or if no demand
is made, in one payment of all outstanding principal plus all
accrued unpaid interest on April 15, 1999. In addition, Borrower
will pay regular monthly payments of accrued unpaid interest
beginning March 15, 1998, and all subsequent interest payments
are due on the same day of each month after that. The annual
interest rate for this Note is computed on a 365/360 basis; that
is, by applying the ratio of the annual interest rate over a year
of 360 days, multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal balance is
outstanding. Borrower will pay Lender at Lender's address shown
above or at such other place as Lender may designate in writing.
Unless otherwise agreed or required by applicable law, payments
will be applied first to any unpaid collection costs and any late
charges, then to any unpaid interest, and any remaining amount to
principal.
VARIABLE INTEREST RATE. The interest rate on this Note is subject
to change from time to time based on changes in an index which is
Lender's Prime Rate (the "Index"). This is the rate Lender
charges, or would charge, on 90~day unsecured loans to the most
creditworthy corporate customers. This rate may or may not be the
lowest rate available from Lender at any given time. Lender will
tell Borrower the current Index rate upon Borrower's request.
Borrower understands that Lender may make loans based on other
rates as well. The interest rate change will not occur more often
than each DAY. The Index currently is 8.500% per annum. The
interest rate to be applied to the unpaid principal balance of
this Note will be at a rate of 2.000 percentage points over the
Index, resulting in an initial rate of 10.500% per annum. NOTICE:
Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepald
finance charges are earned fully as of the date of the loan and
will not be subject
to refund upon early payment (whether voluntary or as a result of
default), except as otherwise required by law. Except for the
foregoing, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued
unpaid interest. Rather, they will reduce the principal balance
due.
LATE CHARGE. If a payment is 15 days or more late, Borrower will
be charged 5.000% of the regularly scheduled payment or $15.00,
whichever is greater.
DEFAULT. Borrower will be in default if any of the following
happens: (a) Borrower fails to make any payment when due. (b)
Borrower breaks any promise Borrower has made to Lender, or
Borrower fails to comply with or to perform when due any other
term, obligation, covenant, or condition contained in this Note
or any agreement related to this Note, or in any other agreement
or loan Borrower has with Lender. (c) Borrower defaults under any
loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor
or person that may materially affect any of Borrower's property
or Borrower's ability to repay this Note or perform Borrower's
obligations under this Note or any of the Related Documents. (d)
Any representation or statement made or furnished to Lender by
Borrower or on Borrower's behalf is false or misleading in any
material respect either now or at the time made or furnished. (e)
Borrower becomes insolvent, a receiver is appointed for any part
of Borrower's property, Borrower makes an assignment for the
benefit of creditors, or any proceeding is commenced either by
Borrower or against Borrower under any bankruptcy or insolvency
laws. (f) Any creditor tries to take any of Borrower's property
on or in which Lender has a lien or security interest. This
includes a garnishment of any of Borrowers accounts with Lender.
(9) Any guarantor dies or any of the other events described in
this default section occurs with respect to any guarantor of this
Note. (h) A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment
or performance of the Indebtedness is impaired.
If any default, other than a default in payment, is curable and
if Borrower has not been given a notice of a breach of the same
provision of this Note within the preceding twelve (12) months,
it may be cured (and no event of default will have occurred) if
Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cures the default within fifteen (15)
days; or (b) if the cure requires more than fifteen (15) days,
immediately initiates steps which Lender deems in Lender's sole
discretion to be sufficient to cure the default and thereafter
continues and completes all reasonable and necesaary steps
sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire
unpaid principal balance on this Note and all accrued unpaid
interest immediately due, without notice, and then Borrower will
pay that amount. Upon default, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted
under applicable law, increase the variable interest rate on this
Note to 7.000 percentage points over the Index. The interest rate
will not exceed the maximum rate permitted by applicable law.
Lender may hire or pay someone else to help collect this Note if
Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law,
Lender1s attorneys' fees and Lender's legal expenses whether or
not there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. If not prohibited
by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been
delivered to Lender and accepted by Lender in the State of
Washington. If there is a lawsuit, Borrower agrees upon Lender's
request to submit to the jurisdiction of the courts of King
County, the State of Washington. This Note shall be governed by
and construed in accordance with the laws of the State of
Washington.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00
if Borrower makes a payment on Borrower's loan and the check or
preauthorized charge with which Borrower pays is later
dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual
possessory security interest in and hereby assigns, conveys,
delivers, pledges, and transfers to Lender all Borrower's right,
title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else
and all accounts Borrower may open in the future, excluding
however all IRA and Keogh accounts, and all trust accounts for
which the grant of a security interest would be prohibited by
law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note
against any and all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit.
Advances under this Note may be requested only in writing by
Borrower or by an authorized person. All communications,
instructions, or directions by telephone or otherwise to Lender
are to be directed to Lender's office shown above. The following
party or parties are authorized to request advances under the
line of credit until Lender receives from Borrower at Lender's
address shown above written notice of revocation of their
authority: GARY B. PALMER, President/Chaorman of Web Press Corp.
and Web Leader
<PAGE>
02-17-1998 PROMISSORY NOTE Page 2
(Continued)
International, Inc.; and CRAIG L. MATHISON, Secretary/Treasurer.
Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender. The unpaid
principal balance owing on this Note at any time may be evidenced
by endorsements on this Note or by Lenders internal records,
including daily computer printouts. Lender will have no
obligation to advance funds under this Note if: (a) Borrower or
any guarantor is in default under the terms of this Note or any
agreement that Borrower or any guarantor has with Lender,
including any agreement made in connection with the signing of
this Note; (b) Borrower or any guarantor ceases doing business or
is insolvent; (c) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of
this Note or any other loan with Lender; or (d) Borrower has
applied funds provided pursuant to this Note for purposes other
than those authorized by Lender.
CREDIT LIMIT PROVISION. CREDIT LIMIT TO INCREASE FROM $700,000.00
TO $1,200,000.00 ON FEBRUARY 18, 1998.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion
of specific default provisions or rights of Lender shall not
preclude Lenders right to declare payment of this Note on its
demand. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any
other person who signs, guarantees or endorses this Note, to the
extent allowed by law, waive presentment demand for payment
protest and notice of dishonor. Upon any change in the terms of
this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend
(repeatedly and for any length of time) this loan, or release any
party or guarantor or collateral; or impair, fail to realize upon
or perfect Lender's security interest in the collateral; and take
any other action deemed necessary by Lender without the consent
of or notice to anyone. All such parties also agree that Lender
may modify this loan without the consent of or notice to anyone
other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE
PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
WEB PRESS CORPORATION AND WEB LEADER INTERNATIONAL, INC.
BY: /s/ GARY B. PALMER
____________________________
President: WEB PRESS CORP.
BY: /s/ GARY B. PALMER
_________________________________________
Chairman: WEB LEADER INTERNATIONAL, INC.
Exhibit (10e)
PROMISSORY NOTE
_________________________________________________________________
Principal Loan Date Maturity Loan No. Collateral
$420,700.00 02-18-1998 03-18-2003 8015480006 40
Account Officer Initials
801548 305
_________________________________________________________________
References in the shaded area are for Lender's use only and do
not limit the applicability of this document to any particular
loan or item.
_________________________________________________________________
Borrower: WEB PRESS CORPORATION AND Lender: WASHINGTON FIRST
WEB LEADER INTERNATIONAL INTERNATIONAL BANK
22023 - 68TH AVENUE SOUTH 9709 Third Avenue NE
KENT, WA 98032 Suite 110
Seattle, WA 98115
=================================================================
Principal Amount: $420,700.00 Date of Note: February 18, 1998
PROMISE TO PAY. WEB PRESS CORPORATION AND WEB LEADER
INTERNATIONAL, ("Borrower") promises to pay to Washington First
International Bank ("Lender"), or order, in lawful money of the
United States of America, the principal amount of Four Hundred
Twenty Thousand Seven Hundred & 00/100 Dollars ($420,700.00),
together with interest on the unpaid principal balance from
February 18, 1998, until paid in full.
PAYMENT. Borrower will pay this loan in accordance with the
following payment schedule:
1 interest payment on March 18, 1998, with interest
calculated on the unpaid principal balances at an interest
rate of 9.000% per annum; 59 consecutive monthly principal
and interest payments of $6,794.31 each, beginning April 18,
1998, with interest calculated on the unpaid principal
balances at an interest rate of 9.000% per annum; and 1
principal and interest payment of $155,675.02 on March 18,
2003, with interest calculated on the unpaid principal
balances at an interest rate of 9.000% per annum. This
estimated final payment is based on the assumption that all
payments will be made exactly as scheduled; the actual final
payment will be for all principal and accrued interest not
yet paid, together with any other unpaid amounts under this
Note.
The annual interest rate for this Note is computed on a 365/360
basis; that is, by applying the ratio of the annual interest rate
over a year of 360 days, multiplied by the outstanding principal
balance, multiplied by the actual number of days the principal
balance is outstanding. Borrower will pay Lender at Lender's
address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to any unpaid
collection costs and any late charges, then to any unpaid
interest, and any remaining amount to principal.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid
finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether
voluntary or as a result of default), except as otherwise
required by law. Except for the foregoing, Borrower may pay
without penalty all or a portion of the amount owed earlier than
it is due. Early payments will not, unless agreed to by Lender
in writing, relieve Borrower of Borrower's obligation to continue
to make payments under the payment schedule. Rather, they will
reduce the principal balance due and may result in Borrower
making fewer payments.
LATE CHARGE. If a payment is 15 days or more late, Borrower will
be charged 5.000% of the regularly scheduled payment or $15.00,
whichever is greater.
DEFAULT. Borrower will be in default if any of the following
happens: (a) Borrower fails to make any payment when due. (b)
Borrower breaks any promise Borrower has made to Lender, or
Borrower fails to comply with or to perform when due any other
term, obligation, covenant, or condition contained in this Note
or any agreement related to this Note, or in any other agreement
or loan Borrower has with Lender. (c) Borrower defaults under
any loan, extension of credit, security agreement, purchase or
sales agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of Borrower's
property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related
Documents. (d) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false
or misleading in any material respect either now or at the time
made or furnished. (e) Borrower becomes insolvent, a receiver
is appointed for any part of Borrower's property, Borrower makes
an assignment for the benefit of creditors, or any proceeding is
commenced either by Borrower or against Borrower under any
bankruptcy or insolvency laws. (f) Any creditor tries to take
any of Borrower's property on or in which Lender has a lien or
security interest. This includes garnishment of any of
Borrower's accounts with Lender. (g) Any guarantor dies or any
of the other events described in this default section occurs with
respect to any guarantor of this Note. (h) A material adverse
change occurs in Borrower's financial condition, or Lender
believes the prospect of payment or performance of the
Indebtedness is impaired.
If any default, other than a default in payment, is curable and
if Borrower has not been given a notice of a breach of the same
provision of this Note within the preceding twelve (12) months,
it may be cured (and no event of default will have occurred) if
Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cures the default within fifteen (15)
days; or (b) if the cure requires more than fifteen (15) days,
immediately initiates steps which Lender deems in Lender's sole
discretion to be sufficient to cure the default and thereafter
continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire
unpaid principal balance on this Note and all accrued unpaid
interest immediately due, without notice, and then Borrower will
pay that amount. Upon default, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted
under applicable law, increase the interest rate on this Note
5.000 percentage points. The interest rate will not exceed the
maximum rate permitted by applicable law. Lender may hire or pay
someone else to help collect this Note if Borrower does not pay.
Borrower also will pay Lender that amount. This includes,
subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-
judgment collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all
other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of Washington. If
there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of King County, the
State of Washington. This Note shall be governed by and
construed in accordance with the laws of the State of Washington.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00
if Borrower makes a payment on Borrower's loan and the check or
preauthorized charge with which Borrower pays is later
dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual
possessory security interest in, and hereby assigns, conveys,
delivers, pledges, and transfers to Lender all Borrower's right,
title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including
without limitation all accounts jointly with someone else and all
accounts Borrower may open in the future, excluding however all
IRA and Keogh accounts, and all trust accounts for which the
grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Note against any
and all such accounts.
<PAGE>
PROMISSORY NOTE Page 2
(Continued)
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of
its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses
this Note, to the extent allowed by law, waive presentment,
demand for payment, protest and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly
stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be
released from liability. All such parties agree that Lender may
renew or extend (repeatedly and for any length of time) this
loan, or release any party or guarantor or collateral; or impair,
fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent
of or notice to anyone other than the party with whom the
modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE
NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
WEB PRESS CORPORATION AND WEB LEADER INTERNATIONAL
By: \s\ GARY B. PALMER By: \s\ GARY B. PALMER
GARY B. PALMER, President: GARY B. PALMER, Chairman:
WEB PRESS CORPORATION WEB LEADER INTERNATIONAL
=================================================================
<PAGE>
COMMERCIAL SECURITY AGREEMENT
____________________________________________________________________
Principal Loan Date Maturity Loan No. Call Collateral
$420,700.00 02-18-1998 03-18-2003 8015480006 40
Account Officer Initials
801548 305
____________________________________________________________________
References in the shaded area are for Lender's use only and do
not limit the applicability of this document to any particular
loan or item.
____________________________________________________________________
Borrower: WEB PRESS CORPORATION AND Lender: WASHINGTON FIRST
WEB LEADER INTERNATIONAL INTERNATIONAL BANK
22023 - 68TH AVENUE SOUTH 9709 Third Avenue NE, Ste 110
KENT, WA 98032 Seattle, WA 98115
=================================================================
THIS COMMERCIAL SECURITY AGREEMENT is entered into between WEB
PRESS CORPORATION AND WEB LEADER INTERNATIONAL (referred to below
as "Grantor"); and Washington First International Bank (referred
to below as "Lender"). For valuable consideration, Grantor
grants to Lender a security interest in the Collateral to secure
the indebtedness and agrees that Lender shall have the rights
stated in this Agreement with respect to the Collateral, in
addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following
meanings when used in this Agreement. Terms not otherwise
defined in this Agreement shall have the meanings attributed to
such terms in the Uniform Commercial Code. All references to
dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Commercial
Security Agreement, as this Commercial Security Agreement
may be amended or modified from time to time, together with
all exhibits and schedules attached to this Commercial
Security Agreement from time to time.
Collateral. The word "Collateral" means the following
described property of Grantor, whether now owned or
hereafter acquired, whether now existing or hereafter
arising, and wherever located:
ONE (1) LP-3021 AWEA DOUBLE COLUMN MACHINE WITH FANUC
OM CONTROL AND STANDARD ACCESSORIES, SERIAL NO. 8222,
ONE (1) 35 HORSE POWER MOTOR, ONE (1) COOLANT THRU THE
TOOL, ONE (1) AUTOMATIC TOOL MEASURING, AND ONE (1) 60
TOOL MAGAZINE - CAT 50; TOGETHER WITH ALL PARTS,
FITTINGS, ACCESSORIES, SPECIAL TOOLS, RENEW OR
REPLACEMENTS OF ALL OR ANY PART THEREOF, EITHER NOW
OWNED OR HEREAFTER ACQUIRED, AND WHEREVER LOCATED, AND
PROCEEDS THEREOF.
In addition, the word "Collateral" includes all the
following, whether now owned or hereafter acquired, wither
now existing or hereafter arising, and wherever located:
(a) All attachments, accessions, accessories, tools,
parts, supplies, increases, and additions to and all
replacements of and substitutions for any property
described above.
(b) All products and produce of any of the property
described in this Collateral section.
(c) All accounts, general intangibles, instruments,
rents, monies, payments, and all other rights, arising
out of a sale, lease, or other disposition of any of
the property described in this Collateral section.
(d) All proceeds (including insurance proceeds) from
the sale, destruction, loss, or other disposition of
any of the property described in this Collateral
section.
(e) All records and data relating to any of the
property described in this Collateral section, whether
in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of
Grantor's right, title, and interest in and to all
computer software required to utilize, create,
maintain, and process any such records or data on
electronic media.
Event of Default. The words "Event of Default" mean and
include without limitation any of the Events of Default set
forth below in the section titled "Events of Default."
Grantor. The word "Grantor" means WEB PRESS CORPORATION AND
WEB LEADER INTERNATIONAL, its successors and assigns.
Guarantor. The word "Guarantor" means and includes without
limitation each and all of the guarantors, sureties, and
accommodation parties in connection with the indebtedness.
Indebtedness. The word "Indebtedness" means the
indebtedness evidenced by the Note, including all principal
and interest, together with all other indebtedness and costs
and expenses for which Grantor is responsible under this
Agreement or under any of the Related Documents. In
addition, the work "Indebtedness" includes all other
obligations, debts and liabilities, plus interest thereon,
of Grantor, or any one or more of them, to Lender, as well
as all claims by Lender against Grantor, or any one or more
of them, whether existing now or later; whether they are
voluntary or involuntary, due or not due, direct or
indirect, absolute or contingent, liquidated or
unliquidated; whether Grantor may be liable individually or
jointly with others; whether Grantor may be obligated as
guarantor, surety, accommodation party or otherwise; whether
recovery upon such indebtedness may be or hereafter may
become barred by any statute of limitations; and whether
such indebtedness may be or hereafter may become otherwise
unenforceable.
Lender. The word "Lender" means Washington First
International Bank, its successors and assigns.
Note. The word "Note" means the note or credit agreement
dated February 18, 1998, the principal amount of $420,700.00
from WEB PRESS CORPORATION AND WEB LEADER INTERNATIONAL to
Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of and
substitutions for the note or credit agreement.
Related Documents. The words "Related Documents" mean and
include without limitation all promissory notes, credit
agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust,
and all other instruments, agreements and documents, whether
now or hereafter existing, executed in connection with the
Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual
possessory security interest in and hereby assigns, conveys,
delivers, pledges, and transfers all of Grantor's right, title
and interest in and to Grantor's accounts with Lender (whether
checking, savings, or some other account), including all accounts
held jointly with someone else and all accounts Grantor may open
in the future, excluding, however, all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest
would be prohibited by law. Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all
Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender
as follows:
Perfection of Security Interest. Grantor agrees to execute
such financing statements and to take whatever other actions
are requested by Lender to perfect and continue Lender's
security interest in the Collateral. Upon request of
Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and
Grantor will note Lender's interest upon any and all chattel
paper if not delivered to
<PAGE>
02-18-1998 COMMERCIAL SECURITY AGREEMENT Page 2
(Continued)
Lender for possession by Lender. Grantor hereby appoints
Lender as its irrevocable attorney-in-fact for the purpose
of executing any documents necessary to perfect or to
continue the security interest granted in this Agreement.
Lender may at any time, and without further authorization
from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement
for use as a financing statement. Grantor will reimburse
Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest
in the Collateral. Grantor promptly will notify Lender
before any change in Grantor's name including any change to
the assumed business names of Grantor. This is a continuing
Security Agreement and will continue in effect even though
all or any part of the indebtedness is paid in full and even
though for a period of time Grantor may not be indebted to
Lender.
No Violation. The execution and delivery of this Agreement
will not violate any law or agreement covering Grantor or to
which Grantor is a party, and its certificate or articles of
incorporation and bylaws do not prohibit any term or
condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral
consists of accounts, chattel paper, or general intangibles,
the Collateral is enforceable in accordance with its terms,
is genuine, and complies with applicable laws concerning
form, content and manner of preparation and execution, and
all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated
as they appear to be on the Collateral.
Location of the Collateral. Grantor, upon request of
Lender, will deliver to Lender in form satisfactory to
Lender a schedule of real properties and Collateral
locations relating to Grantor' operations, including without
limitation the following: (a) all real property owned or
being purchased by Grantor; (b) all real property being
rented or leased by Grantor, (c) all storage facilities
owned, rented, leased, or being used by Grantor; and (d)
all other properties where Collateral is or may be located.
Except in the ordinary course of its business, Grantor shall
not remove the Collateral from its existing locations
without the prior written consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral
(or to the extent the Collateral consists of intangible
property such as accounts, the records concerning the
Collateral) at Grantor's address shown above, or at such
other locations as are acceptable to Lender. Except in the
ordinary course of its business, including the sales of
inventory, Grantor shall not remove the Collateral from its
existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of
vehicles, or other titled property, Grantor shall not take
or permit any action which would require application for
certificates of title for the vehicles outside the State of
Washington, without the prior written consent of Lender.
Transactions involving Collateral. Except for inventory
sold or accounts collected in the ordinary course of
Grantor's business, Grantor shall not sell, offer to sell,
or otherwise transfer or dispose of the Collateral. While
Grantor is not in default under this Agreement, Grantor may
sell inventory, but only in the ordinary course of its
business and only to buyers who qualify as a buyer in the
ordinary course of business. A sale in the ordinary course
of Grantor's business does not include a transfer in partial
or total satisfaction of a debt or any bulk sale. Grantor
shall not pledge, mortgage, encumber or otherwise permit the
Collateral to be subject to any lien, security interest,
encumbrance, or charge, other than the security interest
provided for in this Agreement, without the prior written
consent of Lender. This includes security interests even if
junior in right to the security interests granted under this
Agreement. Unless waived by Lender, all proceeds from any
disposition of the Collateral (for whatever reason) shall be
held in trust for Lender and shall not be commingled with
any other funds; provided however, this requirement shall
not constitute consent by Lender to any sale or other
disposition. Upon receipt, Grantor shall immediately
deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it
holds good and marketable title to the Collateral, free and
clear of all liens and encumbrances except for the lien of
this Agreement. No financing statement covering any of the
Collateral is on file in any public office other than those
which reflect the security interest created by this
Agreement or to which Lender has specifically consented.
Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
Collateral Schedules and Locations. Insofar as the
Collateral consists of inventory, Grantor shall deliver to
Lender, as often as Lender shall require, such lists,
descriptions, and designations of such Collateral as Lender
may require to identify the nature, extent, and location of
such Collateral. Such information shall be submitted for
Grantor and each of its subsidiaries or related companies.
Maintenance and Inspection of Collateral. Grantor shall
maintain all tangible Collateral in good condition and
repair. Grantor will not commit or permit damage to or
destruction of the Collateral or any part of the Collateral.
Lender and its designated representatives and agents shall
have the right at all reasonable times to examine, inspect,
and audit the Collateral wherever located. Grantor shall
immediately notify Lender of all cases involving the return,
rejection, repossession, loss or damage of or to any
Collateral; of any request for credit or adjustment or of
any other dispute arising with respect to the Collateral;
and generally of all happenings and events affecting the
Collateral or the value or the amount of the Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all
taxes, assessments and liens upon the Collateral, its use or
operation, upon this Agreement, upon any promissory note or
notes evidencing the indebtedness, or upon any of the other
Related Documents. Grantor may withhold any such payment or
may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender's interest in the
Collateral is not jeopardized in Lender's sole opinion. If
the Collateral is subjected to a lien which is not
discharged within fifteen (15) days, Grantor shall deposit
with Lender cash, a sufficient corporate surety bond or
other security satisfactory to Lender in an amount adequate
to provide for the discharge of the lien plus any interest,
costs, attorneys' fees or other charges that could accrue as
a result of foreclosure or sale of the Collateral. In any
contest Grantor shall defend itself and Lender and shall
satisfy any final adverse judgment before enforcement
against the Collateral. Grantor shall name Lender as an
additional obligee under any surety bond furnished in the
contest proceedings.
Compliance With Governmental Requirements. Grantor shall
comply promptly with all laws, ordinances, rules and
regulations of all government authorities, now or hereafter
in effect, applicable to the ownership, production,
disposition, or use of the Collateral. Grantor may contest
in good faith any such law, ordinance or regulation and
withhold compliance during any proceeding, including
appropriate appeals, so long as Lender's interest in the
Collateral, in Lender's opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that
the Collateral never has been, and never will be so long as
this Agreement remains a lien on the Collateral, used for
the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in
the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601,
et seq. ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"),
the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing. The terms
"hazardous waste" and "hazardous substance" shall also
include, without limitation, petroleum and petroleum by-
products or any fraction thereof and asbestos. The
representations and warranties contained herein are based on
Grantor's due diligence in investigating the Collateral for
hazardous wastes and substances. Grantor hereby (a)
releases and waives any future claims against Lender for
indemnity or contribution in the event Grantor becomes
liable for cleanup or other costs under any such laws, and
(b) agrees to indemnify and hold harmless Lender against any
and all claims and losses resulting from breach of this
provision of this Agreement. This obligation to indemnify
shall survive the payment of the Indebtedness and the
satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure
and maintain all risks insurance, including without
limitation fire, theft and liability coverage together with
such other insurance as Lender may require with respect to
the Collateral, in form, amounts, coverages and basis
<PAGE>
02-18-1998 COMMERCIAL SECURITY AGREEMENT Page 3
(Continued)
reasonably acceptable to Lender and issued by a company or
companies reasonably acceptable to Lender. Grantor, upon
request of Lender, will deliver to Lender from time to time
the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that
coverages will not be canceled or diminished without at
least ten (10) days' prior written notice to Lender and not
including any disclaimer of the insurer's liability for
failure to give such a notice. Each insurance policy also
shall include an endorsement providing that coverage in
favor of Lender will not be impaired in any way by any act,
omission or default of Grantor or any other person. In
connection with all policies covering assets in which Lender
holds or is offered a security interest, Grantor will
provide Lender with such loss payable or other endorsements
as Lender may require. If Grantor at any time fails to
obtain or maintain any insurance as required under this
Agreement, Lender may (but shall not be obligated to) obtain
such insurance as Lender deems appropriate, including if it
so chooses "single interest insurance," which will cover
only Lender's interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly
notify Lender of any loss or damage to the Collateral.
Lender may make proof of loss if Grantor fails to do so
within fifteen (15) days of the casualty. All proceeds of
any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral.
If Lender consents to repair or replacement of the damaged
or destroyed Collateral, Lender shall, upon satisfactory
proof of expenditure, pay or reimburse Grantor from the
proceeds for the reasonable cost of repair or restoration.
If Lender does not consent to repair or replacement of the
Collateral, Lender shall retain a sufficient amount of the
proceeds to pay all of the Indebtedness, and shall pay the
balance to Grantor. Any proceeds which have not been
disbursed within six (6) months after their receipt and
which Grantor has not committed to the repair or restoration
of the Collateral shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain
with Lender reserves for payment of insurance premiums,
which reserves shall be created by monthly payments from
Grantor of a sum estimated by Lender to be sufficient to
produce, at least fifteen (15) days before the premium due
date, amounts at least equal to the insurance premiums to be
paid. If fifteen (15) days before payment is due, the
reserve funds are insufficient, Grantor shall upon demand
pay any deficiency to Lender. The reserve funds shall be
held by Lender as a general deposit and shall constitute a
non-interest-bearing account which Lender may satisfy by
payment of the insurance premiums required to be paid by
Grantor as they become due. Lender does not hold the
reserve funds in trust for Grantor, and Lender is not the
agent of Grantor for payment of the insurance premiums
required to be paid by Grantor. The responsibility for the
payment of premiums shall remain Grantor's sole
responsibility.
Insurance Reports. Grantor, upon request of Lender, shall
furnish to Lender reports on each existing policy of
insurance showing such information as Lender may reasonably
request including the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy
(d) the property insured; (3) the then current value on the
basis of which insurance has been obtained and the manner of
determining that value; and (f) the expiration date of the
policy. In addition, Grantor shall upon request by Lender
(however not more often than annually) have an independent
appraiser satisfactory to Lender determine, as applicable,
the cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have
possession of the tangible personal property and beneficial use
of all the Collateral and may use it in any lawful manner not
inconsistent with this Agreement or the Related Documents,
provided that Grantor's right to possession and beneficial use
shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's
security interest in such Collateral. If Lender at any time has
possession of any Collateral, whether before or after an Event of
Default, Lender shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral if Lender takes
such action for that purpose as Grantor shall request or as
Lender, in Lender's sole discretion, shall deem appropriate under
the circumstances, but failure to honor any request by Grantor
shall not of itself be deemed to be a failure to exercise
reasonable care. Lender shall not be required to take any steps
necessary to preserve any rights in the Collateral against prior
parties, nor to protect, preserve or maintain any security
interest given to secure the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due,
Lender may (but shall not be obligated to) discharge or pay any
amounts required to be discharged or paid by Grantor under this
Agreement, including without limitation all taxes, liens,
security interests, encumbrances, and other claims, at any time
levied or placed on the Collateral. Lender also may (but shall
not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or
paid by Lender for such purposes will then bear interest at the
rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Guarantor. All such expenses
shall become a part of the indebtedness and, at Lender's option,
will (a) be payable on demand, (b) be added to the balance of the
Note and be apportioned among and be payable with any installment
payments to become due during either (i) the term of any
applicable insurance policy or (ii) the remaining term of the
Note, or (c) be treated as a balloon payment which will be due
and payable at the Note's maturity. This Agreement also will
secure payment of these amounts. Such right shall be in addition
to all other rights and remedies to which Lender may be entitled
upon the occurrence of an Event of Default.
EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
Default on Indebtedness. Failure of Grantor to make any
payment when due on the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to
perform any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related
Documents or in any other agreement between Lender and
Grantor.
Default in Favor of Third Parties. Should Borrower or any
grantor default under any loan, extension of credit,
security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or
Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or
any of the Related Documents.
False Statements. Any warranty, representation or statement
made or furnished to Lender by or on behalf of Grantor under
this Agreement, the Note or the Related Documents is false
or misleading in any material respect, either now or at the
time made or furnished.
Defective Collateralization. This Agreement or any of the
Related Documents ceases to be in full force and effect
(including failure of any collateral documents to create a
valid and perfected security interest or lien) at any time
and for any reason.
Insolvency. The dissolution or termination of Grantor's
existence as a going business, the insolvency of Grantor,
the appointment of a receiver for any part of Grantor's
property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or
against Grantor.
Credit or Forfeiture Proceedings. Commencement of
foreclosure or forfeiture proceedings, whether by judicial
proceeding, self-help, repossession or any other method, by
any creditor of Grantor or by any governmental agency
against the Collateral or any other collateral securing the
Indebtedness. This includes a garnishment of any of
Grantor's deposit accounts with Lender. However, this Event
of Default shall not apply if there is a good faith dispute
by Grantor as to the validity or reasonableness of the claim
which is the basis of the creditor or forfeiture proceeding
and if Grantor gives Lender written notice of the creditor
or forfeiture proceeding and deposits with Lender monies or
a surety bond for the creditor or forfeiture proceeding, in
an amount determined by Lender, in its sole discretion, as
being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events
occurs with respect to any Guarantor of any of the
Indebtedness or such Guarantor dies or becomes incompetent.
Lender, at its option, may, but shall not be required to,
permit the Guarantor's estate to assume unconditionally the
obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure the Event of
Default.
Adverse Change. A material adverse change occurs in
Grantor's financial condition, or
<PAGE>
02-18-1998 COMMERCIAL SECURITY AGREEMENT Page 4
(Continued)
Lender believes the prospect of payment or performance of
the Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on
Indebtedness, is curable and if Grantor has not been given a
prior notice of a breach of the same provision of this
Agreement, it may be cured (and no Event of Default will
have occurred) if Grantor, after Lender sends written notice
demanding cure of such default, (a) cures the default within
() days; or (b), if the cure requires more than () days,
immediately initiates steps which Lender deems in Lender's
sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and
necessary steps sufficient to produce compliance as soon as
reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs
under this Agreement, at any time thereafter, Lender shall have
all the rights of a secured party under the Washington Uniform
Commercial Code. In addition and without limitation, Lender may
exercise any one or more of the following rights and remedies:
Accelerate Indebtedness. Lender may declare the entire
Indebtedness, including any prepayment penalty which Grantor
would be required to pay, immediately due and payable,
without notice.
Assemble Collateral. Lender may require Grantor to deliver
to Lender all or any portion of the Collateral and any and
all certificates of title and other documents relating to
the Collateral. Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to
enter upon the property of Grantor to take possession of and
remove the Collateral. If the Collateral contains other
goods not covered by this Agreement at the time of
repossession, Grantor agrees Lender may take such other
goods, provided that Lender makes reasonable efforts to
return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell,
lease, transfer, or otherwise deal with the Collateral or
proceeds thereof in its own name or that of Grantor. Lender
may sell the Collateral at public auction or private sale.
Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market,
Lender will give Grantor reasonable notice of the time after
which any private sale or any other intended disposition of
the Collateral is to be made. The requirements of
reasonable notice shall be met if such notice is given at
least ten (10) days before the time of the sale or
disposition. All expenses relating to the disposition of
the Collateral, including without limitation the expenses of
retaking, holding, insuring, preparing for sale and selling
the Collateral, shall become a part of the Indebtedness
secured by this Agreement and shall be payable on demand,
with interest at the Note rate from date of expenditure
until repaid.
Appoint Receiver. To the extent permitted by applicable
law, Lender shall have the following rights and remedies
regarding the appointment of a receiver: (a) Lender may
have a receiver appointed as a matter of right, (b) the
receiver may be an employee of Lender and may serve without
bond, and (c) all fees of the receiver and his or her
attorney shall become part of the Indebtedness secured by
this Agreement and shall be payable on demand, with interest
at the Note rate from date of expenditure until repaid.
Collect Revenues, Apply Accounts. Lender, either itself or
through a receiver, may collect the payments, rents, income,
and revenues from the Collateral. Lender may at any time in
its discretion transfer any Collateral into its own name or
that of its nominee and receive the payments, rents, income,
and revenues therefrom and hold the sale as security for the
Indebtedness or apply it to payment of the Indebtedness in
such order of preference as Lender may determine. Insofar
as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, chooses in
action, or similar property, Lender may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose,
or realize on the Collateral as Lender may determine,
whether or not Indebtedness or Collateral is then due. For
these purposes, Lender may, on behalf of and in the name of
Grantor, receive, open and dispose of mail addressed to
Grantor; change any address to which mail and payments are
to be sent; and endorse notes, checks, drafts, money orders,
documents of title, instruments and items pertaining to
payment, shipment, or storage of any Collateral. To
facilitate collection, Lender may notify account debtors and
obligors on any Collateral to make payments directly to
Lender.
Obtain Deficiency. If Lender chooses to sell any or all of
the Collateral, Lender may obtain a judgment against Grantor
for any deficiency remaining on the Indebtedness due to
Lender after applications of all amounts received from the
exercise of the rights provided in this Agreement Grantor
shall be liable for deficiency even if the transaction
described in this subsection is a sale of accounts or
chattel paper.
Other Rights and Remedies. Lender shall have all the rights
and remedies of a secured creditor under the provisions of
the Uniform Commercial Code, as may be amended from time to
time. In addition, Lender shall have and may exercise any
or all other rights and remedies it may have available at
law, in equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies,
whether evidenced by this Agreement or the Related Documents
or by any other writing, shall be cumulative and may be
exercised singularly or concurrently. Election by Lender to
pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take
action to perform an obligation of Grantor under this
Agreement, after Grantor's failure to perform, shall not
affect Lender's right to declare a default and to exercise
its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are a part of this Agreement:
Amendments. This Agreement, together with any Related
Documents, constitutes the entire understanding and
agreement of the parties as to the matters set forth in this
Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the
alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender
and accepted by Lender in the State of Washington. If
there is a lawsuit, Grantor agrees upon Lender's request to
submit to the jurisdiction of the courts of King County,
the State of Washington. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Washington.
Attorneys' Fees; Expenses. Grantor agrees to pay upon
demand all of Lender's costs and expenses, including
attorneys' fees and Lender's legal expenses, incurred in
connection with the enforcement of this Agreement. Lender
may pay someone else to help enforce this Agreement, and
Grantor shall pay the costs and expenses of such
enforcement. Costs and expenses include Lender's attorneys'
fees and legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy
proceedings (and including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Grantor also shall pay
all court costs and such additional fees as may be directed
by the court.
Caption Headings. Caption headings in this Agreement are
for convenience purposes only and are not to be used to
interpret or define the provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of
Grantor under this Agreement shall be joint and several, and
all references to Grantor shall mean each and every Grantor.
This means that each of the persons signing below is
responsible for all obligations in this Agreement.
Notices. All notices required to be given under this
Agreement shall be given in writing, may be sent by
telefacsimile (unless otherwise required by law), and shall
be effective when actually delivered or when deposited with
a nationally recognized overnight courier or deposited in
the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at
the address shown above. Any party may change its address
for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of
the notice is to change the party's address. To the extent
permitted by applicable law, if there is more than one
Grantor, notice to any Grantor will
<PAGE>
02-18-1998 COMMERCIAL SECURITY AGREEMENT Page 5
(Continued)
constitute notice to all Grantors. For notice purposes,
Grantor will keep Lender informed at all times of Grantor's
current address(es).
Power of Attorney. Grantor hereby appoints Lender as its
true and lawful attorney-in-fact, irrevocably, with full
power of substitution to do the following: (a) to demand,
collect, receive, receipt for, sue and recover all sums of
money or other property which may now or hereafter become
due, owing or payable from the Collateral; (b) to execute,
sign and endorse any and all claims, instruments, receipts,
checks, drafts or warrants issued in payment for the
Collateral; (c) to settle or compromise any and all claims
arising under the Collateral, and, in the place and stead of
Grantor, to execute and deliver its release and settlement
for the claim; and (d) to file any claim or claims or to
take any action or institute or take part in any
proceedings, either in its own name or in the name of
Grantor, or otherwise, which in the discretion of Lender may
seem to be necessary or advisable. This power is given as
security for the Indebtedness, and the authority hereby
conferred is and shall be irrevocable and shall remain in
full force and effect until renounced by Lender.
Preference Payments. Any monies Lender pays because of an
asserted preference claim in Borrower's bankruptcy will
become a part of the Indebtedness and, at Lender's option,
shall be payable by Borrower as provided above in the
"EXPENDITURES BY LENDER" paragraph.
Severability. If a court of competent jurisdiction finds
any provision of this Agreement to be invalid or
unenforceable as to any person or circumstance, such finding
shall not render that provision invalid or unenforceable as
to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to
be within the limits of enforceability or validity; however,
if the offending provision cannot be so modified, it shall
be stricken and all other provisions of this Agreement in
all other respects shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth
above on transfer of the Collateral, this Agreement shall be
binding upon and inure to the benefit of the parties, their
successors and assigns.
Waiver. Lender shall not be deemed to have waived any
rights under this Agreement unless such waiver is given in
writing and signed by Lender. No delay or omission on the
part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender's right otherwise to demand
strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Grantor, shall
constitute a waiver of any of Lender's rights or of any of
Grantor's obligations as to any future transactions.
Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent to
subsequent instances where such consent is required and in
all cases such consent may be granted or withheld in the
sole discretion of Lender.
Waiver of Co-obligor's Rights. If more than one person is
obligated for the indebtedness, Borrower irrevocably waives,
disclaims and relinquishes all claims against such other
person which Borrower has or would otherwise have by virtue
of payment of the Indebtedness or any part thereof,
specifically including but not limited to all rights of
indemnity, contribution or exoneration.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS.
THIS AGREEMENT IS DATED FEBRUARY 18, 1998.
GRANTOR:
WEB PRESS CORPORATION AND WEB LEADER INTERNATIONAL
By: \s\ GARY B. PALMER By: \s\ GARY B. PALMER
_____________________________ _________________________
GARY B. PALMER, President: GARY B. PALMER, Chairman:
WEB PRESS CORPORATION WEB LEADER INTERNATIONAL
____________________________________________________________________________
