U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the three months ending June 30, 1999
-------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
OF THE EXCHANGE ACT
For the transition period from ______________ to ______________
Commission file number 0-7267
------
WEB PRESS CORPORATION
- -----------------------------------------------------
(Exact name of registrant as specified in its charter)
Washington 91-0851298
- ------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
22023 68th Avenue S., Kent, Washington 98032
- --------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (253) 395-3343
--------------
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past ninety (90) days
Yes X No
- --
All reports during the preceding 12 months have been filed.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date
(applicable only to corporate issuers): Common Stock, $.025 par
value per share; 3,105,413 shares outstanding as of August 11,
1999.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Page 1 of 14 pages in this document
<PAGE>
INTRODUCTORY REMARKS
The condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not
misleading.
The information furnished reflects all adjustments which are, in
the opinion of management, necessary to a fair statement of the
results for the interim period.
It is suggested that these condensed financial statements be read
in conjunction with the financial statements and the notes therein
included in the Company's latest annual report on Form 10-KSB.
<PAGE>
PART I
------
FINANCIAL INFORMATION
---------------------
WEB PRESS CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS June 30, 1999
-------------
<S> <C>
Current Assets:
Cash......................... $ 3
Accounts receivable, less
allowance for doubtful
accounts of $12............ 594
Inventories.................. 5,375
Refundable Income Taxes...... 84
Deposits..................... 70
Prepaid expenses............. 64
------
Total Current Assets........... 6,190
Machinery and Leasehold
Improvements, at cost:
Machinery and equipment...... 3,378
Leasehold improvements....... 197
------
3,575
Less accumulated depreciation
and amortization........... 2,742
------
Machinery and Leasehold
Improvements (Net)........... 833
------
Total Assets................... $7,023
______
______
</TABLE>
The above figures are unaudited. The accompanying notes are an
integral part of the balance sheet.
<PAGE>
WEB PRESS CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, 1999
-------------
<TABLE>
<CAPTION>
<S> <C>
Current Liabilities:
Accounts payable......................... $ 579
Customer deposits........................ 400
Accrued expenses......................... 381
Deferred income taxes.................... 3
Current portion of long-term debt........ 21
------
Total Current Liabilities................... 1,384
Long-Term Debt, less current portion........ 2,229
Deferred taxes on income.................... 474
Stockholders' Equity:
Common stock, par value $.025 per share:
Authorized, 4,000,000 shares
Issued, 3,436,513 shares................. 86
Paid-in capital........................... 320
Retained earnings......................... 2,627
------
3,033
Treasury stock, 331,100 shares at cost.... (97)
------
Total Stockholders' Equity.................. 2,936
------
Total Liabilities and
Stockholders' Equity..................... $7,023
------
------
</TABLE>
The above figures are unaudited. The accompanying notes are an
integral part of the balance sheet.
<PAGE>
WEB PRESS CORPORATION
Consolidated Statements of Operations
For the three and six months ending June 30th,
(Dollars in Thousands Except Earnings Per Share)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
------------ ----------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales.................... $2,289 $3,104 $3,694 $4,119
Cost of sales............ 1,754 2,363 2,868 3,131
------ ------ ------ ------
535 741 826 988
Selling, general and
administrative
expenses.............. 458 408 805 742
------ ------ ------ ------
77 333 21 246
Interest expense......... 45 57 95 103
------ ------ ------ ------
Earnings (loss) before
taxes (benefit)........ 32 276 (74) 143
Taxes (benefit) on
earnings(loss)......... 11 94 (25) 49
------ ------ ------ ------
Net earnings ............ $ 21 $ 182 $ (49) $ 94
------ ------ ------ ------
------ ------ ------ ------
Earnings (loss) per share $.006 $.06 $(.02) $.03
</TABLE>
The above figures are unaudited. The accompanying notes are an
integral part of these statements of earnings.
<PAGE>
WEB PRESS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ending June 30th,
(Dollars in Thousands)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) .................. $ (49) $ 94
Adjustments to reconcile net
earnings (loss) to net cash provided
(used)by operating activities:
Depreciation and amortization....... 95 109
Provision for losses on accounts
receivable........................ 3 4
Deferred taxes on income............ (40) 48
Inventory valuation reserve......... 56 79
Retirement of plant assets.......... 3
Increase (Decrease) in cash from
changes in operating accounts:
Accounts receivable................ 1,375 1,382
Inventory.......................... (1,457) (879)
Deposits........................... (44) (7)
Prepaid expenses................... (19) (32)
Accounts payable................... (297) (155)
Customer deposits.................. 131 139
Accrued expenses................... (380) (830)
------ ------
Total adjustments (577) (98)
------ ------
Net cash used by operating
activities......................... (626) (4)
Cash flows from investing activities:
Capital expenditures.................. (57) (521)
Proceeds from retirement of assets.... 55
------ ------
Net Cash used by investing activities... (57) (466)
Continued on following page
---------------------------
<PAGE>
Continued from previous page
----------------------------
Cash Flows from financing activities:
Proceeds from issuance of long-term
debt................................ 421
Payments on long-term debt............ (974) (149)
Net borrowings under short-term
line of credit...................... (487) 264
Net borrowings under long-term
line of credit...................... 2,141
------ ------
Net cash provided by
financing activities................ 680 536
------ ------
Net increase (decrease) in cash......... (3) 66
Cash at beginning of period............. 6 6
------ ------
Cash at end of period................... $ 3 $ 72
------ ------
Supplemental disclosures of cash ------ ------
flow information:
Cash was paid during the year for:
Interest.............................. $82 $123
</TABLE>
The above figures are unaudited. The accompanying notes are an
integral part of these statements of cash flows.
<PAGE>
WEB PRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDING JUNE 30, 1999
Note 1 - 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 inventories are
stated at the lower of average cost or market. Used presses and
other related press equipment are stated at the lower of cost
(specific identification basis) or market. Inventory costs
include material, labor, and manufacturing overhead.
Inventories were classified as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
June 30, 1999
-------------
<S> <C>
Raw materials and parts
(including subassemblies)..... $2,630
Work-in-progress.............. 1,167
Finished goods................ 1,221
Used equipment................ 357
------
$5,375
------
------
</TABLE>
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 twelve 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 that 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
<PAGE>
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.
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.
Income taxes
------------
Income taxes are provided on income for financial reporting
purposes without regard to the period in which such taxes are
payable. Deferred taxes are provided for all significant items
which are reported for tax purposes in different periods than the
consolidated statements of earnings. Investment tax credits are
recorded as a reduction of Federal income taxes in the year
available.
Earnings per share
------------------
Earnings per share calculations are based on the weighted average
number of shares outstanding.
Note 2 - Financing:
The Company has a revolving line of credit with a commercial bank
for borrowing up to $3 million. Borrowings against this line were
$2.141 million on June 30, 1999. That amount is included in long-
term debt on the balance sheet. The loan matures on June 1, 2002.
The interest rate charged is the bank's prime rate. That rate was
7.75 percent on June 30, 1999. Accounts receivable, firm orders
in production, inventories, and values in excess of the long-term
financing on equipment are pledged as collateral.
The Company has another agreement with the bank for borrowing on a
short-term basis up to an additional $2 million to manufacture
equipment for export. On June 30, 1999, there were no borrowings
under this agreement. On July 20, 1999, the Company executed a
loan using this agreement allowing it to borrow up to $315
thousand to manufacture a specific foreign order. The loan is to
be repaid when the press ships or after six months, whichever
occurs first. The interest rate charged is .25 percent under the
bank's prime rate. The initial rate was 7.75 percent. The loan
is secured by an "export working capital guarantee" from the
Export-Import Bank of the United States.
<PAGE>
Long-term debt consists of the following:
<TABLE>
<CAPTION>
(Dollars in Thousands)
June 30, 1999
-------------
<S> <C>
Note payable for equipment, 9.38%, due
due in monthly installments of $2,198
including interest. Final payment
due in March, 2004........................ $ 101
Note payable for equipment, 8.23%,
due in monthly installments of
$277 including interest. Final
payment due in December, 2001............. 8
------
109
Less current portion...................... 21
------
$ 88
------
------
</TABLE>
Equipment with original cost of $151 thousand is pledged as
collateral under the notes payable for equipment and the equipment
purchase contracts.
Note 3 - 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 June 30, 1999, no
options had been granted under this Plan.
<PAGE>
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
-----------------
Sales during the second quarter and for the first six months of
1999 were $2.289 million and $3.694 million, respectively. In
1998, sales were $3.104 million in the second quarter and $4.119
million for the six-month period. Lower used equipment sales
accounted for most of the decline in sales in 1999. For the six-
month period, used equipment sales were $134 thousand in 1999,
compared with $554 thousand in 1998. New equipment sales in 1999
were $1.848 million in the second quarter and $2.893 million for
the first six months, compared with 1998 sales of $2.225 million in
the second quarter and $2.843 million for the first six months. In
1999, the sale of parts and service declined 29.8 percent in the
second quarter and 7.6 percent for the first six months, compared
with the same periods in 1998. For the first six months,
international sales as a percentage of total sales, were 41.6 in
1999 and 33.8 percent in 1998.
Cost of sales, as a percentage of sales, was 76.6 percent in the
second quarter and 77.6 percent for the first six months of 1999.
In 1998, it was 76.1 percent in the second quarter and 76 percent
for the six-month period. New equipment sales and the gross profit
margin on those sales were both slightly higher in 1999 compared
with 1998; however, lower gross profits on used equipment sales and
parts sales, and cost overruns on certain 1998 sales installed in
1999, counteracted the benefit of the increases on the consolidated
gross profit margin.
Selling, general and administrative expenses for the second quarter
of 1999 were 12.3 percent higher than they were for the same period
in 1998. For the first six months of 1999, they increased 8.5
percent over 1998 expenses for the same period. Higher selling
expenses, which increased $56 thousand during the first six months
of 1999, caused most of the increase. Commissions and payroll
costs increased 9.7 percent, the cost of attending certain trade
shows increased 7.9 percent, and advertising costs increased 31.6
percent in 1999 from 1998. Most other selling, general and
administrative expenses did not change significantly.
Interest expense was $45 thousand in the second quarter and $95
thousand for the first six months of 1999, compared with $57
thousand and $103 thousand for the respective periods in 1998. The
average interest rate on the Company's revolving lines of credit
from the bank was 7.9 percent for the second quarter and 8.7
percent for the first six months of 1999, compared with 10.3
percent in the second quarter and 10.4 percent for the first six
months of 1998. Average borrowings from the Company's revolving
lines of credit with the bank in 1999 were $2.076 million in the
second quarter and $1.539 million for the first six months,
<PAGE>
compared with $768 thousand and $560 thousand for the corresponding
periods in 1998. The higher average borrowings in 1999 results
from the conversion of most of the Company's long-term debt into a
long-term revolving line of credit, allowing the Company to pay
interest only on the money it needs. The lower average interest
rate on those borrowings in 1999 is because the interest rate on
the new revolving line of credit is 2 percent lower than the rate
for the retired short-term revolving line of credit used by the
Company in 1998.
Net earnings in the second quarter were $21 thousand in 1999,
compared with net earnings of $182 thousand in the second quarter
of 1998. For the six-month period, the Company had a net loss of
$49 thousand in 1999, compared with net earnings of $94 thousand in
1998.
The Company's operating results for the first six months of 1999
are not necessarily indicative of results to be expected for the
full year, particularly because of the high value of each order for
the Company's equipment and their irregular timing. The Company
expects 1999 sales and earnings to meet or exceed those of 1998.
LIQUIDITY
---------
On April 7, 1999, the Company converted its short-term borrowings
and two long-term notes with a bank into a new, longer term,
revolving line of credit with another bank. The total amount
borrowed to make these payments was $2.018 million. The new
revolving line of credit, which allows for borrowing up to $3
million, matures on June 1, 2002. This financing facility
increased the company's working capital. One June 30, 1999, net
working capital was $4.806 million and the current ratio was 4.5:1.
Other changes in working capital components from December 31, 1998,
included a decrease in accounts receivable of $1.375 million, an
increase in inventories of $1.457 million, a decrease in accounts
payable and accrued expenses of $297 thousand and $380 thousand,
respectively, and an increase in customer deposits of $131
thousand.
The Company is manufacturing equipment in larger lots to meet
demand for certain modules and to achieve other manufacturing
efficiencies. This has caused inventories to increase. On June
30, 1999, raw material and parts inventories had increased $862
thousand; work-in-progress had increased $50 thousand; finished
goods had increased $500 thousand; and used equipment had decreased
by $11 thousand, from December 31, 1998.
CAPITAL RESOURCES
-----------------
Total assets were $7.023 million on June 30, 1999. Stockholder's
equity was $2.936 million, a decrease of $49 thousand from December
31, 1998. Long-term debt, primarily in the form of the new
<PAGE>
revolving line of credit, was $2.250 million. Long-term debt and
deferred incomes taxes, as a percentage of total capitalization was
48 percent on June 30, 1999. The Company believes that its
borrowing capacity is sufficient to provide for orderly growth.
YEAR 2000
---------
The Company's computer software systems consist primarily of
programs written for the Company. The Company has tested the
system using year 2000 data. The systems functioned properly in
almost every respect. The Company has hired two outside
consultants to make improvements and certain changes as a result of
these tests. The Company expects these changes to be completed by
September 30, 1999.
The equipment used to manufacture the Company's presses are all
year 2000 compliant. The Company has contacted "critical" vendors
and service providers about their ability to deliver products or
services without interruption at the year 2000. Based on the
assurances of these vendors or service providers, the Company has
concluded that it is highly unlikely to have its supply of raw
material or basic services interrupted by a year 2000 computer
problem.
The equipment manufactured by the Company is not date sensitive nor
run by computer. The Company, therefore, does not have to upgrade
or change any of the equipment it manufactures to be year 2000
compliant.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
(10) Material Contracts
The following exhibits are filed herewith:
(10a) being the Business Loan Agreement between Web Press
Corporation and KeyBank National Association dated
July 20, 1999.
(10b) being the Borrowing Agreement between Web Press
Corporation and the Export-Import Bank of the
United States dated July 20, 1999.
(b) Reports on Form 8-K -- There are not reports on Form 8-K filed
for the three months ending June 30, 1999.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
WEB PRESS CORPORATION
--------------------------------
(Registrant)
August 11, 1999 /s/Gary B. Palmer
Date --------------------------------
Gary B. Palmer, President
August 11, 1999 /s/Craig L. Mathison
Date ---------------------------------
Craig L. Mathison, Vice
President of Finance
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3
<SECURITIES> 0
<RECEIVABLES> 606
<ALLOWANCES> 12
<INVENTORY> 5375
<CURRENT-ASSETS> 6190
<PP&E> 3575
<DEPRECIATION> 2742
<TOTAL-ASSETS> 7023
<CURRENT-LIABILITIES> 1384
<BONDS> 0
0
0
<COMMON> 86
<OTHER-SE> 2947
<TOTAL-LIABILITY-AND-EQUITY> 7023
<SALES> 3694
<TOTAL-REVENUES> 3694
<CGS> 2868
<TOTAL-COSTS> 2868
<OTHER-EXPENSES> 805
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95
<INCOME-PRETAX> (74)
<INCOME-TAX> (25)
<INCOME-CONTINUING> (49)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
Exhibit (10a)
BUSINESS LOAN AGREEMENT
______________________________________________________________________________
Principal Loan Date Maturity Loan No. Call Collateral
$315,000.00 07-20-1999 01-16-2000 30100009703 402 322
Account Officer Initials
E93826 TWE02
_____________________________________________________________
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 Lender: KEYBANK NATIONAL ASSOCIATION
22023 68TH AVE SOUTH SEATTLE COMMUNITY BANKING CENTER
KENT, WA 98032 700 FIFTH AVENUE
48TH FLOOR
SEATTLE, WA 98104
THIS LOAN AGREEMENT between WEB PRESS CORPORATION ("Borrower") and KEYBANK
NATIONAL ASSOCIATION ("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 July 20, 1999, 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 Loan Agreement, as this Loan
Agreement may be amended or modified from time to time, together with all
exhibits and schedules attached to this Loan Agreement from time to time.
Borrower. The word "Borrower" means WEB PRESS CORPORATION. The word
"Borrower" also includes, 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.
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.
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 KeyBank National Association, its
successors and assigns.
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
07-20-1999 BUSINESS LOAN AGREEMENT Page 2
(Continued)
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,
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.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance 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 interest 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 Documents.
Representations and Warranties. The representations and warranties set
forth in this Agreements, in the Related Documents, and in any documents 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 and 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 Interest, 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, 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.
07-20-1999 BUSINESS LOAN AGREEMENT Page 3
(Continued)
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.
Year 2000. Borrower warrants and represents that all software utilized in
the conduct of Borrower's business will have appropriate capabilities and
compatibility for operation to handle calendar dates falling on or after
January 1, 2000, and all information pertaining to such calendar dates, in
the same manner and with the same functionality as the software does
respecting calendar dates falling on or before December 31, 1999. Further,
Borrower warrants and represents that the data-related user interface
functions, data-fields, and data-related program instructions and functions
of the software include the indication of the century.
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 one hundred twenty (120) 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.
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, coverage's 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 coverage's 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.
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.
Guarantor Amount
WEB LEADER INTERNATIONAL, INC. 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.
07-20-1999 BUSINESS LOAN AGREEMENT Page 4
(Continued)
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
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 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; or (e) Lender in good faith deems
itself insecure, even though no Event of Default shall have occurred.
ADDITIONAL COVENANTS. Borrower convenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Maximum Capital Expenditures. The Borrower's Capital expenditures shall not
exceed $600,000.00 in any fiscal year.
Interest Coverage Ratio. The ratio of Borrower's earnings before interest and
taxes divided by interest expenses shall not be less than 2.5 to 1.0;
calculated at the end of each quarter.
Senior Liabilities to Adjusted Tangible Capital Ratio. Borrower shall
maintain a ratio of Total Senior Liabilities to Adjusted Tangible Capital of
not more than 2.5 to 1.0; calculated at the end of each quarter. The words
"Total Senior Liabilities" means total liabilities less Subordinated Debt.
The words "Adjusted Tangible Capital" mean Tangible Capital less investments
in, advances to, promissory notes and any receivables from, any affiliate or
other
07-20-1999 BUSINESS LOAN AGREEMENT Page 5
(Continued)
related entity of Borrower. The words "Tangible Capital" mean Tangible Net
Worth plus Subordinated Debt. 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. The
words "Total Debt" means all of Borrower's liabilities including Subordinated
Debt. The words "Subordinated Debt" mean indebtedness and liabilities of
Borrower which have been subordinated by written agreement to indebtedness
owned by Borrower to Lender in form and substance acceptable to Lender.
RIGHT OF SETOFF. Borrower grants to Lender a contractual 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.
Insecurity. Lender, in good faith, deems itself insecure.
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 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
or Pierce County, the State of Washington. Lender and Borrower hereby
waive the right to any jury trail in any action, proceeding, or
counterclaim brought by either Lender or Borrower against the other. 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.
07-20-1999 BUSINESS LOAN AGREEMENT Page 6
(Continued)
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.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
JULY 20,1999.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT,
OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
BORROWER:
WEB PRESS CORPORATION
By: /s/ GARY B. PALMER _ By: /s/ CRAIG L. MATHISON
GARY B. PALMER, President CRAIG L. MATHISON, Vice
President of Finance
LENDER:
KEYBANK NATIONAL ASSOCIATION
By: /s/THOMAS W. ESSIG_____________
THOMAS W. ESSIG, VICE PRESIDENT
PROMISSORY NOTE
______________________________________________________________________________
Principal Loan Date Maturity Loan No. Call Collateral
$315,000.00 07-20-1999 01-16-2000 30100009703 402 322
Account Officer Initials
E93826 TWE02
_____________________________________________________________
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 Lender: KEYBANK NATIONAL ASSOCIATION
22023 68TH AVENUE SOUTH SEATTLE COMMUNITY BANKING CENTER
KENT, WA 98032 700 FIFTH AVENUE
48TH FLOOR
SEATTLE, WA 98104
______________________________________________________________________________
Principal Amount:$315,000.00 Initial Rate:7.75% Date of Note:July 20, 1999
PROMISE TO PAY. WEB PRESS CORPORATION ("Borrower") promises to pay to KEYBANK
NATIONAL ASSOCIATION ("Lender"), or order, in lawful money of the United
States of America, the principal amount of Three Hundred Fifteen Thousand &
00/100 Dollars ($315,000.00) 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 in one payment of all outstanding
principal plus all accrued unpaid interest on January 16, 2000. In addition,
Borrower will pay regular monthly payments of accrued unpaid interest
beginning August 16, 1999, and all subsequent interest payments are due on the
same day of each month after that. Interest on 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 Prime Rate announced
by Lender (the "Index"). The interest rate will change automatically and
correspondingly on the date of each announced change of the Index by Lender.
The Index is not necessarily the lowest rate charged by Lender on its loans
and is set by Lender in its sole discretion. If the Index becomes unavailable
during the term of this loan, the lender may designate a substitute index
after notifying Borrower. 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 that the Index changes. The Index currently is 8.000% per
annum. The interest rate to be applied to the unpaid principal balance of
this Note will be at a rate of 0.250 percentage points under the Index,
resulting in an initial rate of 7.750% 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 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 of accrued
unpaid interest. Rather, they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment or $50.00, 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. (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. (i) Lender in good faith deems itself insecure.
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 variable interest rate on this
Note to 3.000 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 or Pierce County, the State of Washington. Lender and
Borrower hereby waive the right to any jury trail in any action, proceeding,
or counteraction brought by either Lender or Borrower against the other. This
Note shall be governed by and construed in accordance with the laws of the
State of Washington.
RIGHT OF SETOFF. Borrower grants to Lender a contractual 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
07-20-1999 PROMISSORY NOTE Page 2
(Continued)
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 straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to further
loan advances. Advances under this Note, as well as directions for payment
from Borrower's accounts, may be requested orally or in writing by Borrower or
by an authorized person. Lender may, but need not, require that all oral
requests be confirmed in writing. 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; and CRAIG L. MATHISON, Vice
President of Finance. 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. (e) Lender in good faith deems itself insecure under
this Note or any other agreement between Lender and Borrower.
ADDITIONAL PROVISION. Any advance that Lender in its sole discretion may
permit after the final payment date provided in this Note will be due on
demand and otherwise subject to the terms of this Note.
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, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE
NOTE.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT,
OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
BORROWER:
WEB PRESS CORPORATION
BY: /s/ GARY B. PALMER BY: /s/ CRAIG L. MATHISON
____________________________ ___________________________
GARY B. PALMER, President CRAIG L. MATHISON,Vice President
of Finance
COMMERCIAL SECURITY AGREEMENT
______________________________________________________________________________
Principal Loan Date Maturity Loan No. Call Collateral
$315,000.00 07-20-1999 01-16-2000 30100009703 401 322
Account Officer Initials
E93826 TWE02
_____________________________________________________________
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 Lender: KEYBANK NATIONAL ASSOCIATION
22023 68TH AVENUE SOUTH SEATTLE COMMUNITY BANKING CENTER
KENT, WA 98032 700 FIFTH AVENUE
48TH FLOOR
SEATTLE, WA 98104
______________________________________________________________________________
THIS COMMERCIAL SECURITY AGREEMENT is entered into between WEB PRESS
CORPORATION (referred to below as "Grantor"); and KEYBANK NATIONAL ASSOCIATION
(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, chattel paper, accounts, equipment, general intangibles
and fixtures, together with the following specifically described
property: Machinery.
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, 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 KEYBANK NATIONAL ASSOCIATION, its
successors and assigns.
Note. The word "Note" means the note or credit agreement dated JULY
20,1999, in the principal amount of $315,000.00 from WEB PRESS CORPORATION
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.
07-20-1999 COMMERCIAL SECURITY AGREEMENT Page 2
(Continued)
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 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 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 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. 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
07-20-1999 COMMERCIAL SECURITY AGREEMENT Page 3
(Continued)
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 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, coverage's 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
coverage's 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; (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
07-20-1999 COMMERCIAL SECURITY AGREEMENT Page 4
(Continued)
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 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 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.
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 mailer 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 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, choices 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 or
Pierce 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 Lenders
07-20-1999 COMMERCIAL SECURITY AGREEMENT Page 5
(Continued)
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 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
JULY 20, 1999.
GRANTOR:
WEB PRESS CORPORATION
By: /s/ Gary B. Palmer By: /s/ Craig L. Mathison
_________________________ _______________________
Gary B. Palmer, President Craig L. Mathison, Vice
President of Finance
COMMERCIAL GUARANTY
______________________________________________________________________________
Principal Loan Date Maturity Loan No. Call Collateral
402 322
Account Officer Initials
E93826 TWE02
_____________________________________________________________________________
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 Lender: KEYBANK NATIONAL ASSOCIATION
22023 68TH AVENUE SOUTH SEATTLE COMMUNITY BANKING CENTER
KENT, WA 98032 700 FIFTH AVENUE
48TH FLOOR
SEATTLE, WA 98104
Guarantor: WEB LEADER INTERNATIONAL, INC.
22023 68TH AVENUE SOUTH
KENT, WA 98032
______________________________________________________________________________
AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited.
CONTINUING UNLIMITED GUARANTY. For good and valuable consideration, WEB
LEADER INTERNATIONAL, INC. ("Guarantor") absolutely and unconditionally
guarantees and promises to pay to KEYBANK NATIONAL ASSOCIATION ("Lender") or
its order, in legal tender of the United States of America, the indebtedness
(as that term is defined below) of WEB PRESS CORPORATION ("Borrower") to
Lender on the terms and conditions set forth in this Guaranty. Under this
Guaranty, the liability of Guarantor is unlimited and the obligations of
Guarantor are continuing.
DEFINITIONS. The following words shall have the following meanings when used
in this Guaranty:
Borrower. The word "Borrower" means WEB PRESS CORPORATION.
Guarantor. The word "Guarantor" means WEB LEADER INTERNATIONAL, INC.
Indebtedness. The word "Indebtedness" is used in its most comprehensive
sense and means and includes any and all of Borrower's liabilities,
obligations, debts, and indebtedness to Lender, now existing or hereinafter
incurred or created, including, without limitation, all loans, advances,
interest, costs, debts, overdraft indebtedness, credit card indebtedness,
lease obligations, other obligations, and liabilities, and liabilities of
Borrower, or any of them, and any present or future judgments against
Borrower, or any of them; and whether any such Indebtedness is voluntarily
or involuntarily incurred, due or not due, absolute or contingent,
liquidated or unliquidated, determined; whether Borrower may be liable
individually or jointly with others, or primarily or secondarily, or as
guarantor or surety; whether recovery on the Indebtedness may be or may
become barred or unenforceable against Borrower for any reason whatsoever;
and whether the Indebtedness arised from transactions which may be voidable
on account of infancy, insanity, ultra vires, or otherwise.
Lender. The word "Lender" means KEYBANK NATIONAL ASSOCIATION, its
successors and assigns.
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.
MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty
shall be unlimited.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open
and continuous for so long as this Guaranty remains in force. Guarantor
intends to guarantee at all times the performance and prompt payment when due,
whether at maturity or earlier by reason of acceleration or otherwise, of all
Indebtedness. Accordingly, no payments made upon the Indebtedness will
discharge or diminish the continuing liability of Guarantor in connection with
any remaining portions of the Indebtedness or any of the Indebtedness which
subsequently arises or is thereafter incurred or contracted. Any married
person who signs this Guaranty as the Guarantor hereby expressly agrees that
recourse under this agreement may be had against both his or her separate
property and community property, whether now owned or hereafter acquired.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor
or to Borrower, and will continue in full force until all Indebtedness
incurred or contracted before receipt by Lender or any notice of revocation
shall have been fully and finally paid and satisfied and all other obligations
of Guarantor under this Guaranty shall have been performed in full. If
Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing.
Guarantor's written notice of revocation must be mailed to Lender, by
certified mail, at the address of Lender listed above or such other place as
Lender may designate in writing. Written revocation of this Guaranty will
apply only to advances or new Indebtedness created after actual receipt by
Lender of Guarantor's written revocation. For this purpose and without
limitation, the term "new Indebtedness" does not include Indebtedness which at
the time of notice of revocation is contingent, unliquidated, undetermined or
not due and which later becomes absolute, liquidated, determined or due.
Notice of revocation shall be effective only as to the particular Guarantor
providing the notice, and shall not affect the liability of other guarantors.
This Guaranty will continue to bind Guarantor for all Indebtedness incurred by
Borrower or committed by Lender prior to receipt of Guarantor's written notice
of revocation, including any extensions, renewals, substitutions or
modifications of the Indebtedness. All renewals, extensions, substitutions,
and modifications of the Indebtedness granted after Guarantor's revocation,
are contemplated under this Guaranty and, specifically will not be considered
to be new Indebtedness. This Guaranty shall bind the estate of Guarantor as
to Indebtedness created both before and after the death or incapacity of
Guarantor, regardless of Lender's actual notice of Guarantor's death. Subject
to the forgoing, Guarantor's executor or administrator or other legal
representative may terminate this Guaranty in the same manner in which
Guarantor might have terminated it and with the same effect. Release of any
other guarantor or termination of any other guaranty of the Indebtedness shall
not affect the liability of Guarantor under this Guaranty. A revocation
received by Lender from any one or more Guarantors shall not affect the
liability of any remaining Guarantors under this Guaranty. It is anticipated
that fluctuations may occur in the aggregate amount of Indebtedness covered by
this Guaranty, and it is specifically acknowledged and agreed by Guarantor
that reductions in the amount of Indebtedness, even to zero dollars ($0.00),
prior to written revocation of this Guaranty by Guarantor shall not constitute
a termination of this Guaranty. This Guaranty is binding upon Guarantor and
Guarantor's heirs, successors and assigns so long as any of the guaranteed
Indebtedness remains unpaid and even though the Indebtedness guaranteed may
from time to time be zero dollars ($0.00).
07-20-1999 COMMERCIAL GUARANTY Page 2
(Continued)
GURANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either
before or after any revocation hereof, without notice or demand and without
lessening Guarantor's liability under this Guaranty, from time to time: (a)
prior to revocation as set forth above, to make one or more additional secured
or unsecured loans to Borrower, to lease equipment or other goods to Borrower,
or otherwise to extend additional credit to Borrower; (b) to alter,
compromise, renew, extend, accelerate, or otherwise change one or more times
the time for payment or other terms of the Indebtedness or any part of the
Indebtedness, including increases and decreases of the rate of interest on the
Indebtedness; extensions may be repeated and may be for longer than the
original loan term; (c) to take and hold security for the payment of this
Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail
or decide not to perfect, and release any such security, with or without the
substitution of new collateral; (d) to release, substitute, agree not to sue,
or deal with any one or more of Borrower's sureties, endorsers, or other
guarantors on any terms or in any manner Lender may choose; (e) to determine
how, when and what application of payments and credits shall be made on the
Indebtedness; (f) to apply such security and direct the order or manner of
sale thereof, including without limitation, and nonjudicial sale permitted by
the terms of the controlling security agreement or deed of trust, as Lender in
its discretion may determine; (g) to sell, transfer, assign, or grant
participations in all or any part of the Indebtedness; and (h) to assign or
transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants
to Lender that (a) no representations or agreements on any king have been made
to Guarantor which would limit or qualify in any way the terms of this
Guaranty; (b) this Guaranty is executed at Borrower's request and not at the
request of Lender; (c) Guarantor has full power, right and authority to enter
into this Guaranty; (d) the provisions of this Guaranty do not conflict with
or result in a default under any agreement or other instrument binding upon
Guarantor and do not result in a violation of any law, regulation, court
decree or order applicable to Guarantor; (e) Guarantor has not and will not,
without the prior written consent of Lender, sell, lease, assign, encumber,
hypothecate, transfer, or otherwise dispose of all of substantially all of
Guarantor's assets, or any interest therein; (f) upon Lender's request,
Guarantor will provide to Lender financial and credit information in form
acceptable to Lender, and all such financial information which currently has
been, and all future financial information which will be provided to Lender is
and will be true and correct in all material respects and fairly present the
financial condition of Guarantor as of the dates the financial information is
provided; (g) no material adverse change has occurred in Guarantor's financial
condition since the date of the most recent financial statements provided to
Lender and no event has occurred which may materially adversely affect
Guarantor's financial condition; (h) no litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid taxes)
against Guarantor is pending or threatened; (i) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and (j)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis information regarding Borrower's financial condition.
Guarantor agrees to keep adequately informed from such means of any facts,
events, or circumstances which might in any way affect Guarantor's risks under
this Guaranty, and Guarantor further agrees that, absent a request for
information, Lender shall have no obligation to disclose to Guarantor any
information or documents acquired by Lender in the course of its relationship
with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (a) to continue lending money or to extend other
credit to Borrower; (b) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans or obligations; (c) to resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor; (d) to proceed directly against or exhaust any collateral held by
Lender from Borrower, and other guarantor, or any other person; (e) to pursue
any other remedy within Lender's power; or (f) to commit any act or omission
of any kind, or at any time, with respect to any matter whatsoever.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and Borrower, and their respective successors, any claim or right to
payment Guarantor may now have or hereafter have or acquire against Borrower,
by subrogation or otherwise, so that at no time shall Guarantor be or become a
"creditor" of Borrower within the meaning of 11 U.S.C. section 547(b), or any
successor provision of the Federal bankruptcy laws.
Guarantor also waives any and all rights or defenses arising by reason of (a)
any "one action" or "anti-deficiency" law or any other law which may prevent
Lender from bringing any action, including a claim for deficiency, against
Guarantor, before or after Lender's commencement or completion of any
foreclosure action, either judicially or by exercise of a power of sale; (b)
any election of remedies by Lender which destroys or otherwise adversely
affects Guarantor's subrogation rights or Guarantor's rights to proceed
against Borrower for reimbursement, including without limitation, any loss of
rights Guarantor may suffer by reason of any law limiting, qualifying or
discharging the Indebtedness; (c) any disability or other defense of Borrower,
of any other guarantor, or of any other person, or by reason of the cessation
of Borrower's liability from any cause whatsoever, other than payment in full
in legal tender, of the Indebtedness; (d) any right to claim discharge of the
Indebtedness on the basis of unjustified impairment of any collateral for the
Indebtedness; (e) any statue of limitations, if at any time any action or suit
brought by Lender against Guarantor is commenced there is outstanding
Indebtedness of Borrower to Lender which is not barred by any applicable
statue of limitations; or (f) any defenses given to guarantors at law or in
equity other than actual payment and performance of the Indebtedness. If
payment is made by Borrower, whether voluntarily or otherwise, or by any third
party, on the Indebtedness and thereafter Lender is forced to remit the amount
of that payment to Borrower's trustee in bankruptcy or to any similar person
under any federal or state bankruptcy law or law relief of debtors, the
Indebtedness shall be considered unpaid for the purpose of enforcement of this
Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of
setoff, counterclaim, counter demand, recoupment or similar right, whether
such claim, demand or right may be asserted by the Borrower, the Guarantor, or
both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and
agrees that each of the waivers set forth above is made with Guarantor's full
knowledge of its significance and consequences and that, under the
circumstances, the waivers are reasonable and not contrary to public policy or
law. If any such waiver is determined to be contrary to any applicable law or
public policy, such waiver shall be effective only to the extent permitted by
law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender
by law, Lender shall have, with respect to Guarantor's obligations to Lender
under this Guaranty and to extent permitted by law, a contractual security
interest in and a right of setoff against, and Guarantor hereby assigns,
conveys, delivers, pledges, and transfers to Lender all of Guarantor's right,
title and interest in and to, all deposits, moneys, securities and other
property of Guarantor now or hereafter in the possession of or on deposit with
Lender, whether held in a general or special account or deposit, whether held
jointly with someone else, or whether held for safekeeping or otherwise,
excluding however all IRA, Keogh, and trust accounts. Every such security
interest and right of setoff may be exercised without demand upon or notice to
Guarantor. No security interest or right of setoff shall be deemed to have
been waived by any act or conduct on the part of Lender or by any neglect to
exercise such right of setoff or to enforce such security interest or by any
delay in do doing. Every right of setoff and security interest shall continue
in full force and effect until such right of setoff or security interest is
specifically waived or released by an instrument in writing executed by
Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets
of Borrower,
07-20-1999 COMMERCIAL GUARANTY Page 3
(Continued)
through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a
legend that the same are subject to this Guaranty and shall be delivered to
Lender. Guarantor agrees, and Lender hereby is authorized, in the name of
Guarantor, from time to time to execute and file financing statements and
continuation statements and to execute such other documents and to take such
other actions as Lender deems necessary or appropriate to perfect, preserve
and enforce its rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
of this Guaranty:
Amendments. This Guaranty, together with any Related Documents,
constitutes the entire and final understanding and agreement of the parties
as to matters set forth in this Guaranty. No alteration of or amendment to
this Guaranty 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 Guaranty has been delivered to Lender and accepted by
Lender in the State of Washington. If there is a lawsuit, Guarantor agrees
upon Lender's request to submit to the jurisdiction of the courts of King
or Pierce County, State of Washington. Lender and Guarantor hereby waive
the right to any jury trial in any action, proceeding or counteraction
brought by either Lender or Guarantor against the other. This Guaranty
shall be governed by and construed in accordance with the laws of the State
of Washington.
Attorney's Fees; Expenses. Guarantor 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 Guaranty.
Lender may pay someone else to help enforce this Guaranty, and Guarantor
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. Guarantor also shall pay all court costs and such additional
fees as may be directed by the court.
Notices. All notices required to be given by either party to the other
under this Guaranty shall be in writing, may be sent by telefacsimile
(unless otherwise required by law), and except for revocation notices by
Guarantor, shall be effective when actually delivered or when deposited
with a nationally recognized overnight courier, or when 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 or to such other
addressed as either party may designate to the other in writing. All
revocation notices by Guarantor shall be in writing and shall be effective
only upon delivery to Lender as provided above in the section titled
"DURATION OF GUARANTY". If there is more than one Guarantor, notice to any
Guarantor will constitute notice to all Guarantors. For notice purposes,
Guarantor agrees to keep Lender informed at all times of Guarantor's
current address.
Interpretation. In all cases where there is more than one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall be
deemed to have been used in the plural where the context and construction
so require; and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the
words "Borrower" and "Guarantor" respectively shall mean all and any one or
more of them. The words "Guarantor", "Borrower", and "Lender" include the
heirs, successors, assigns, and transferees of each of them. Caption
headings in this Guaranty are for convenience purposes only and are not to
be used to interpret or define the provisions of this Guaranty. If a court
of competent jurisdiction finds any provision of this Guaranty 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, and all provisions of this Guaranty in all other
respects shall remain valid and enforceable. If any one or more of
Borrower or Guarantor are corporations or partnerships, it is not necessary
for Lender to inquire into the powers of Borrower or Guarantor or of the
officers, partners, or agents acting or purporting to act on their behalf,
and any Indebtedness made or created in reliance upon the professed
exercise of such powers shall be guaranteed under this Guaranty.
Waiver. Lender shall not be deemed to have waived any rights under this
Guaranty 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
or a provision of this Guaranty 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 Guaranty. No prior waiver by Lender, nor
any course of dealing between Lender and Guarantor, shall constitute a
waiver of any of Lender's rights or of any of Guarantor's obligations as to
any future transactions. Whenever the consent of Lender is required under
this Guaranty, 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.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF
THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR
UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND
DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE
UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED "DURATION OF
GUARANTY". NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS
GUARANTY EFFECTIVE. THIS GUARANTY IS DATED JULY 20, 1999.
GUARANTOR:
WEB LEADER INTERNATIONAL, INC.
By:________________________
GARY B. PALMER, Chairman
ANNEX B
EXPORT-IMPORT BANK OF THE UNITED STATES WORKING CAPITAL
GUARANTEE PROGRAM
BORROWER AGREEMENT
THIS BORROWER AGREEMENT (this "Agreement") is made and entered into by
the entity identified as the Borrower on the signature page hereof (the
"Borrower") and is acknowledged by the institution identified as the
Lender on the signature page hereof (the "Lender").
RECITALS
A. The Lender shall make a loan (the "Loan") to the Borrower for the
purpose of providing the Borrower with pre-export working capital to
finance the manufacture, production or purchase and subsequent export sale
of the Items (as hereinafter defined).
B. The Loan shall be in a principal amount (the "Loan Amount") not to
exceed at any time outstanding the amount specified in Section (5)(A) of
the Loan Authorization Agreement between the Lender and the Export-Import
Bank of the United States (Eximbank") which is attached hereto as Annex A1
or Annex A2 and incorporated herein as a part of this Agreement. If the
Loan is being made pursuant to the Lender's Delegated Authority from
Eximbank, all references herein to the Loan Authorization Agreement shall
be deemed to be to the Loan Authorization Notice provided to Eximbank and
the Borrower by the Lender.
C. The Loan shall be evidenced by a valid and enforceable promissory note
payable by the Borrower to the order of the Lender (the "Note") and shall
be made pursuant to a written agreement related solely thereto between the
Borrower and the Lender (the "Loan Agreement").
D. A condition precedent to the making of the Loan by the Lender is that
Eximbank guarantee the payment of ninety percent (90%) of the Loan Amount
and all interest accrued thereon, subject to the terms and conditions of a
master guarantee agreement (the "Master Guarantee Agreement") between
Eximbank and the Lender.
E. In consideration for and as a condition precedent to the Lender's
making the Loan and Eximbank's entering into the Master Guarantee
Agreement, the Borrower shall execute this Agreement for the benefit of
the Lender and Eximbank.
NOW, THEREFORE, the Borrower hereby agrees as follows:
2
ARTICLE I
DEFINITIONS
"Accounts Receivable" shall mean those trade accounts from the sale of the
Items due and payable to the Borrower in the United States and any notes,
drafts, letters of credit or insurance proceeds supporting payment
thereof.
"Availability Date" shall mean the last date on which the Lender may make
a Disbursement as set forth in Section (10) of the Loan Authorization
Agreement or, if such date is not a Business Day, the next Business Day
thereafter.
"Borrowing Base" shall mean the Collateral Value as discounted by the
applicable Disbursement Rate(s).
"Borrowing Base Certificate" shall mean the certificate in form provided
by the Lender and executed by the Borrower setting forth the Borrowing
Base supporting one or more Disbursements.
"Business Day" shall mean any day on which the Federal Reserve Bank of New
York is open for business.
"Buyer" shall mean an entity which has entered into one or more Export
Orders with the Borrower.
"Closing Date" shall mean the date on which the Loan Documents are
executed by the Borrower.
"Collateral" shall mean the property of the Borrower in which the Borrower
has granted to the Lender a valid and enforceable security interest as
security for the payment of all principal and interest due under the Loan,
and which is identified in Section (6) of the Loan Authorization
Agreement, including all proceeds (cash and non-cash) thereof.
"Collateral Value" shall mean at any given time the value of all
Collateral against which Disbursements may be made as set forth in Section
(5)(C) of the Loan Authorization Agreement, valued according to GAAP.
"Country Limitation Schedule" shall mean the most recent schedule
published by Eximbank and provided to the Borrower by the Lender which
sets forth on a country by country basis whether and under what conditions
Eximbank will provide coverage for the financing of export transactions to
countries listed therein.
Debarment Regulations shall have the meaning set forth in Section 2.16.,
3
"Disbursed Amount" shall mean the aggregate outstanding amount of the
Disbursements.
"Disbursement" shall mean an advance of the Loan from the Lender to the
Borrower under the Loan Agreement.
"Disbursement Rate" shall mean the rate specified in Section (5)(C) of the
Authorization Agreement for each category of Collateral.
"Dollars" or "$" shall mean the lawful money of the United States of
America.
"Export Order" shall mean a written export order or contract for the
purchase by the Buyer from the Borrower of any of the Items.
"GAAP" shall mean the generally accepted accounting principles issued by
the American Institute of Certified Public Accountants.
"Guarantor" shall mean each person or entity, if any, identified in
Section (3) of the Loan Authorization Agreement who shall guarantee
(jointly and severally if more than one)the Borrower' s obligation to
repay all mounts outstanding under the Note.
"Inventory" shall mean the raw materials work-in-process and finished
goods purchased or manufactured by the Borrower for resale and located in
the United States.
"Items" shall mean the finished goods or services which are intended for
export, as specified in Section (4)(A) of the Loan Authorization
Agreement.
"Letter of Credit" shall mean an irrevocable letter of credit subject to
UCP 500, payable in the United States or at the issuing bank and issued
for the benefit of the Borrower on behalf of a Buyer in connection with
the purchase of the Items.
"Loan Documents" shall mean the Note, the Loan Agreement, this Agreement
and any other instrument, agreement or document previously, simultaneously
or hereafter executed by the Borrower or any Guarantors evidencing,
securing, guaranteeing or in connection with the Loan.
Principals shall have the meaning set forth in Section 2.16.
"Revolving Loan" shall mean a Loan under which amounts disbursed and
repaid may be disbursed on a continuous basis during the term of the Loan.
"Transaction Specific Loan" shall mean a Loan under which amounts
disbursed and repaid may not be disbursed again.
"U.S." or "United States" shall mean the United States of America and its
territorial
4
possessions.
"U.S. Content" shall mean with respect to any Item all the labor,
materials and services which are of U.S. origin or manufacture, and which
are incorporated into an Item in the United States.
ARTICLE II
OBLIGATIONS OF THE BORROWER
Until payment in full of the Loan, the Borrower agrees to the following:
Section 2.1 Use of Disbursements. The Borrower shall use Disbursements
only for the purpose of enabling the Borrower to finance the cost of
manufacturing, producing, purchasing or selling the Items. The Borrower
may not use Disbursements for the purpose of: (a) servicing any of the
Borrower' s pre-existing or future indebtedness unrelated to the Loan; (b)
acquiring fixed assets or capital goods for use in the Borrower's
business; (c) acquiring, equipping or renting commercial space outside of
the United States; (d) paying the salaries of non-U.S. citizens or non-
U.S. permanent residents who are located in offices outside the United
States; or (e) serving as a retainage or warranty bond.
In addition, Disbursements may not be used to finance the manufacture,
purchase or sale of any of the following:
(a) Items to be sold to a Buyer located in a country in which Eximbank is
legally prohibited from doing business as designated in the Country
Limitation Schedule;
(b) that part of the cost of the Items which is not U.S. Content unless
such part is not greater than fifty percent (50 % ) of the cost of the
Items and is incorporated into the Items in the United States;
(c) defense articles or defense services; or
(d) without Eximbank's prior written consent, any Items to be used in the
construction, alteration, operation or maintenance of nuclear power,
enrichment, reprocessing, research or heavy water production facilities.
Section 2.2 Borrowing Base Certificates and Export Orders. In order to
receive a Disbursement under the Loan, the Borrower shall deliver to the
Lender a Borrowing Base Certificate current within the past five (5)
Business Days and a copy of the Export Order(s) (or, for Revolving Loans,
if permitted by the Lender, a written summary of the Export
Orders) against which the Borrower is requesting a Disbursement. If the
Lender permits summaries of Export Orders, the Borrower shall also deliver
promptly to the Lender copies of any Export Orders
5
requested by the Lender. Additionally, the Borrower shall deliver to the
Lender at least once every thirty (30) calendar days a Borrowing Base
Certificate current within the past five (5) Business Days, which
requirement may be satisfied by submission of a Borrowing Base Certificate
when requesting a Disbursement.
Section 2.3 Exclusions from the Borrowing Base. In determining the amount
of a requested Disbursement, the Borrower shall exclude from the Borrowing
Base the following:
(a) any Inventory which is not located in the United States;
(b) any demonstration Inventory or Inventory sold on consignment;
(c) any Inventory consisting of proprietary software;
(d) any Inventory which is damaged, obsolete, returned, defective,
recalled or unfit for further processing;
(e) any Inventory which has been previously exported from the United
States;
(f) any Inventory which constitutes defense articles or defense services
or any Accounts Receivable generated by sales of such Inventory;
(g) any Inventory which is to be incorporated into Items destined for
shipment to, and any Account Receivable in the name of a Buyer located in,
a country in which Eximbank is legally prohibited from doing business as
designated in the Country Limitation Schedule;
(h) any Inventory which is to be incorporated into Items destined for
shipment to, and any Account Receivable in the name of a Buyer located in,
a country in which Eximbank coverage is not available for commercial
reasons as designated in the Country Limitation Schedule, unless and only
to the extent that such Items are to be sold to such country on terms of a
Letter of Credit confirmed by a bank acceptable to Eximbank;
(i) any Inventory which is to be incorporated in the Items whose sale
would result in an ineligible Account Receivable;
(j) any Account Receivable with a term in excess of net one hundred eighty
(180) days;
(k) any Account Receivable which is more than sixty (60) calendar days
past the original due date, unless it is insured through Eximbank export
credit insurance for comprehensive commercial and political risk, or
through Eximbank approved private insurers for comparable coverage, in
which case ninety (90) calendar days shall apply;
6
(l) any intra-company Account Receivable or any Account Receivable from a
subsidiary of the Borrower, from a person or entity with a controlling
interest in the Borrower or from an entity which shares common controlling
ownership with the Borrower;
(m) any Account Receivable evidenced by a Letter of Credit, until the date
of shipment of the Items covered by the subject Letter of Credit;
(n) any Account Receivable which the Lender or Eximbank, in its reasonable
judgment, deems uncollectible for any reason;
(o) any Account Receivable payable in a currency other than Dollars,
except as may be approved in writing by Eximbank;
(p) any Account Receivable from a military Buyer, except as may be
approved in writing by Eximbank; and
(q) any Account Receivable due and collectible outside the United States,
except as may be approved in writing by Eximbank.
Section 2.4 Schedules, Reports and Other Statements. The Borrower shall
submit to the Lender in writing each month (a) an Inventory schedule for
the preceding month and (b)an Accounts Receivable aging report for the
preceding month detailing the terms of the amounts due from each Buyer.
The Borrower shall also furnish to the Lender promptly upon request such
information, reports, contracts, invoices and other data concerning the
Collateral as the Lender may from time to time specify..
Section 2.5 Additional Security or Payment. The Borrower shall at all
times ensure that the Borrowing Base exceeds the Disbursed Amount. If
informed by the Lender or if the Borrower otherwise has actual knowledge
that the Borrowing Base is at any time less than the Disbursed Amount, the
Borrower shall, within five (5) Business Days, either (a) furnish
additional security to the Lender, in form and amount satisfactory to the
Lender and Eximbank, or (b) pay to the Lender an amount equal to the
difference between the Disbursed Amount and the Borrowing Base.
Section 2.6 Continued Security Interest. The Borrower shall notify the
Lender in writing within five (5) Business Days if (a) the Borrower
changes its name or identity in any manner, (b) the Borrower changes the
location of its principal place of business, (c) the nature of any of the
Collateral is changed or any of the Collateral is transferred to another
location or (d) any of the books or records related to the Collateral are
transferred to another location. The Borrower shall execute such
additional financing statements or other documents as the Lender may
reasonably request in order to maintain its perfected security
interest in the Collateral.
Section 2.7 Inspection of Collateral. The Borrower shall permit the
representatives of the Lender and Eximbank to make at any time during
normal business hours reasonable inspections
7
of the Collateral and of the Borrower's facilities, activities, and books
and records, and shall cause its officers and employees to give full
cooperation and assistance in connection therewith.
Section 2.8 Notice of Debtor's Relief, Dissolution and Litigation. The
Borrower shall notify the Lender in writing within five (5) Business Days
of the occurrence of any of the following:
(a) a proceeding in bankruptcy or an action for debtor's relief is filed
by, against, or on behalf of the Borrower;
(b) the Borrower fails to obtain the dismissal or termination within
thirty (30) calendar days of the commencement of any proceeding or action
referred to in (a) above;
(c) the Borrower begins any procedure for its dissolution or liquidation,
or a procedure therefore has been commenced against it; or
(d) any material litigation is filed against the Borrower.
Section 2.9 Insurance. The Borrower shall maintain insurance coverage in
the manner and to the extent customary in businesses of similar character.
Section 2.10 Merger or Consolidation. Without the prior written consent of
Eximbank and the Lender, the Borrower shall not (a) merge or consolidate
with any other entity, (b) sell, lease, transfer or otherwise dispose of
any substantial part of its assets, or any part of its assets which are
essential to the conduct of its business or operations, (c) make any
material change in its organizational structure or identity, or (d) enter
into any agreement to do any of the foregoing.
Section 2.11 Reborrowings and Repayment Terms. (a) If the Loan is a
Revolving Loan, provided that the Borrower is not in default under any of
the Loan Documents, the Borrower may borrow, repay and reborrow amounts
under the Loan until the close of business on the Availability Date.
Unless the Revolving Loan is renewed or extended by the Lender, the
Borrower shall pay in full the outstanding Loan Amount and all accrued and
unpaid interest thereon no later than the first Business Day after the
Availability Date.
(b) If the Loan is a Transaction Specific Loan, the Borrower shall, within
two (2) Business Days of the receipt thereof, pay to the Lender (for
application against the outstanding Loan Amount and accrued and unpaid
interest thereon) all checks, drafts, cash and other remittances it may
receive in payment or on account of the Accounts Receivable or any other
Collateral, in precisely the form received (except for the endorsement of
the Borrower where necessary). Pending such deposit, the Borrower shall
not commingle any such items of payment with any of its other funds or
property, but will hold them separate and apart.
Section 2.12 Cross Default. The Borrower shall be deemed in default under
the Loan if
8
the Borrower fails to pay when due any amount payable to the Lender under
any loan to the Borrower not guaranteed by Eximbank.
Section 2.13 Financial Statements. The Borrower shall provide quarterly
financial statements to the Lender no later than forty-five (45) days
after the end of each quarter. This is in addition to any other financial
statements that may be required by the Lender under the Loan Agreement.
Section 2.14 Taxes, Judgments and Liens. The Borrower shall remain current
on all of its federal, state and local tax obligations. In addition, the
Borrower shall notify the Lender in the event (i) any judgment is rendered
against the Borrower, or (ii) any lien is filed against any of the assets
of the Borrower.
Section 2.15 Munitions List. If any of the Items are articles, services,
or related technical data that are listed on the United States Munitions
List (part 121 of title 22 of the Code of Federal Regulations), the
Borrower shall send a written notice promptly to the Lender describing the
Item(s) and the corresponding invoice amount.
Section 2.16 Suspension and Debarment, etc. On the date of this Agreement
neither the Borrower nor its Principals (as defined below) are (A)
debarred, suspended, proposed for debarment with a final determination
still pending, declared ineligible or voluntarily excluded (as such terms
are defined under any of the Debarment Regulations referred to below) from
participating in procurement or nonprocurement transactions with any
United States federal government department or agency pursuant to any of
the Debarment Regulations (as defined below) or (B ) indicted, convicted
or had a civil judgment rendered against the Borrower or any of its
Principals for any of the offenses listed in any of the Debarment
Regulations. Unless authorized by Eximbank, the Borrower will not
knowingly enter into any transactions in connection with the Item with any
person who is debarred, suspended, declared ineligible or voluntarily
excluded from participation in procurement or nonprocurement transactions
with any United States federal government department or agency pursuant to
any of the Debarment Regulations. The Borrower will provide immediate
written notice to the Leader if at any time it learns that the
certification set forth in this Section 2.16 was erroneous when made or
has become erroneous by reason of changed circumstances. For the purposes
hereof, (1) "Principals" shall mean any officer, director, owner, partner,
key employee, or other person with primary management or supervisory
responsibilities with respect to the Borrower; or any other person
(whether or not an employee) who has critical influence on or substantive
control over the transaction covered by this Agreement and (2) the
Debarment Regulations shall mean (x) the Governmentwide Debarment and
Suspension (Nonprocurement) regulations (Common Rule), 53 Fed. Reg. 19204
(May 26, 1988), (y) Subpart 9.4 (Debarment, Suspension, and Ineligibility)
of the Federal Acquisition Regulations, 48 C.F.R. 9.400-9.409 and (z) the
revised overnmentwide Debarment and Suspension (Nonprocurement)
regulations (Common Rule), 60 Fed. Reg. 33037 (June 26, 1995).
Section 2.17 Special Conditions. The Borrower shall comply with all
Special Conditions, if any, referenced in Section (11 ) of the Loan
Authorization Agreement or the Loan Authorization Notice.
9
ARTICLE III
RIGHTS AND REMEDIES
Section 3.1 Indemnification. Upon Eximbank's payment of a claim to the
Lender in connection with the Loan pursuant to the Master Guarantee
Agreement, Eximbank shall assume all rights and remedies of the Lender
under the Loan Documents and may enforce any such rights or remedies
against the Borrower, the Collateral and any Guarantors. Additionally, the
Borrower shall hold Eximbank and the Lender harmless from and indemnify
them against any and all liabilities, damages, claims, costs and losses
incurred or suffered by either of them resulting from (a) any materially
incorrect certification or statement knowingly made by the Borrower or its
agent to Eximbank or the Lender in connection with the Loan, this
Agreement or any of the other Loan Documents or (b) any material breach by
the Borrower of the terms and conditions of this Agreement or any of the
other Loan Documents. The Borrower also acknowledges that any statement,
certification or representation made by the Borrower in connection with
the Loan is subject to the penalties provided in Article 18 U.S.C. Section
1001.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Governing Law. This Agreement shall be governed by, and
construed in accordance with the law of the State of New York, United
States of America.
Section 4.2 Notification. All notifications required by this Agreement
shall be given in the manner provided in the Loan Agreement.
Section 4.3 Partial Invalidity. If at any time any of the provisions of
this Agreement becomes illegal, invalid or unenforceable in any respect
under the law of any jurisdiction, neither the legality, the validity nor
the enforceability of the remaining provisions hereof shall in any way be
affected or impaired.
10
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly
executed as of the 20 day of July, 1999.
Web Press Corporation
(Name of Borrower)
By /s/ Craig L. Mathison
(Print or Type)
Title Vice President of Finance
(Print or Type)
ACKNOWLEDGED:
KeyBank National Association
(Name of Lender)
By /s/Richard C. Allen
Name Richard C. Allen
(Print or Type)
Title Vice President
(Print or Type)
Guaranteed Loan No. AP073281XX
ANNEXES:
A1 - Loan Authorization Agreement or
A2 - Loan Authorization Notice
(Revised April 1, 1996)
