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EXHIBIT 10.38
LOAN AND SECURITY AGREEMENT
GMAC BUSINESS CREDIT, LLC ("Lender"), a Delaware limited liability
company, with offices at 300 Galleria Officentre, Suite 110, Southfield,
Michigan 48034 and MCINNES STEEL COMPANY, a Pennsylvania corporation,
("McInnes"), and ERIE BRONZE AND ALUMINUM COMPANY, a Pennsylvania corporation,
("Erie" or together with McInnes, the "Borrowers" or individually a "Borrower")
with principal places of business at the addresses set forth in Section 6.12
below, enter into this Loan and Security Agreement on July 12, 2000 (the
"Agreement").
1. GENERAL LENDING TERMS
The following are the general terms of the loans to be made under this
Agreement:
(a) A revolving line of credit for each Borrower (the "Revolving
Loans") up to the lesser of the sum the respective Borrower's
"Borrowing Base" (defined below) or $11,000,000 for McInnes and
$1,714,330 for Erie (the "Revolving Advance Limits"), with
Revolving Loans based on Eligible Inventory not to exceed
$5,600,000 for McInnes and $400,000 for Erie; provided that in the
aggregate for all Borrower's, Revolving Loans based upon Eligible
Inventory shall not exceed $6,000,000 and aggregate Revolving Loans
against Eligible Inventory which is work in process shall not
exceed $2,250,000 in the aggregate or $70,000 for Erie and
$2,180,000 for McInnes. The "Borrowing Base" for each Borrower is
initially 85% of the aggregate outstanding amount of such
Borrower's Eligible Accounts plus 65% of the aggregate value of raw
materials which are Eligible Inventory, plus 65% of the aggregate
value of finished goods which are Eligible Inventory plus the
Applicable WIP Rate times the aggregate value of work in process
which is Eligible Inventory. The advance rate against Eligible
Accounts for each Borrower will reduce by one percentage point for
each percentage point (or fraction thereof) that Dilution exceeds
5% for that Borrower. Revolving Loans will be advanced to each
individual Borrower subject to the forgoing formula.
(b) A $10,688,040 term loan to McInnes and a $1,597,680 term loan to
Erie (collectively, the "Term Loans").
(c) Subject to Section 3.8 below, the applicable interest rate (prior
to an Event of Default) on all Revolving Loans is three-quarters of
one percent (0.75%) per annum in excess of the Prime Rate and on
all other Loans, one and one-quarter percent (1.25%) per annum in
excess of the Prime Rate (the forgoing interest rates are referred
to as the "Base Rates" or a "Base Rate", as applicable). All
interest shall be payable monthly in arrears on the first day of
each month.
(d) All Loans are guaranteed by each Borrower, are subject to Validity
Certificates executed by George E. Wells and Timothy M. Hunter (the
"Validity Certificators") and the Guaranty of Centrum Industries,
Inc., Eballoy
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Glass Products Company, McInnes Services, Inc. and McInnes
International, Inc. (the "Guarantors").
(e) Unless renewed as provided in Section 3.2 below and absent prior
termination under the terms of this Agreement, this Agreement
expires on June 30, 2002 (the "Initial Term").
(f) Borrowers shall pay Lender a loan origination fee of $250,000,
payable one-half on the date of the first Revolving Loans made
hereunder and the remaining one-half on December 31, 2000; the
foregoing fee shall be deemed fully earned on the date of this
Agreement and the unpaid portion shall be part of the Obligations
and shall accrue interest from and after the date such installment
is due if not timely paid. Borrowers shall receive a credit against
the due diligence fee as provided in Lender's proposal letter dated
February 10, 2000.
2. DEFINITIONS.
In addition to the terms defined in this Agreement, the following terms
have the given definitions:
"ACCOUNT DEBTOR" means any obligor under, with respect to, or on
account of an Account.
"ACCOUNTS" means all presently existing and hereafter arising
accounts receivable, contract rights, and all other forms of obligations owing
to any Borrower arising out of the sale or lease of goods or the rendition of
services by any Borrower, whether or not earned by performance, all credit
insurance, guaranties, and other security therefor, as well as all goods
returned to or reclaimed by any Borrower, and each Borrower's Business Records
relating to any of the foregoing.
"ADVANCE LIMIT" means the Revolving Advance Limit plus the from
time-to-time outstanding principal balance owing on all Notes.
"APPLICABLE WIP RATE" initially means 50%, reduced by 2 basis
points per month commencing August 1, 2000 and continuing on the first day of
each month thereafter until the same equals 20%.
"BUSINESS DAY" means a day on which Lender is open for business in
Southfield, Michigan.
"BUSINESS RECORDS" means all of each Borrower's books and records
including all of the following: ledgers, records indicating, summarizing or
evidencing each Borrower's assets (including the Collateral) or liabilities; all
information relating to each Borrower's business operations or financial
condition; and all computer programs, disk or tape files, printouts, runs or
other computer prepared information.
"CLAIMS" means any demand, claim, action or cause of action,
damage, liability, loss, cost, debt, expense, obligation, tax, assessment,
charge, lawsuit, contract,
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agreement, undertaking or deficiency, of any kind or nature, whether known or
unknown, fixed, actual, accrued or contingent, liquidated or unliquidated
(including interest, penalties, attorneys' fees and other costs and expenses
incident to proceedings or investigations relating to any of the foregoing or
the defense of any of the foregoing), whether or not litigation has commenced.
"COLLATERAL" means all of the following: the Accounts; the
Equipment; the General Intangibles; the Inventory; the Negotiable Collateral;
the Real Estate; the Business Records, any money or other assets of any Borrower
which hereafter come into the possession, custody or control of Lender; and all
proceeds and products, whether tangible or intangible, of any of the foregoing,
including proceeds of insurance covering any or all of the Collateral, and any
and all Accounts, Equipment, General Intangibles, Inventory, Negotiable
Collateral, Business Records, money, deposit accounts or other tangible or
intangible property resulting from the sale or other disposition of the
Collateral or any portion thereof or interest therein, and the proceeds thereof.
"DILUTION" means the aggregate amount of credits, returned goods,
adjustments, deductions, setoffs and recoupments granted by a Borrower or taken
by Account Debtors in any calendar month divided by the aggregate amount of
Borrower's sales during the calendar month, all as calculated for each Borrower
individually.
"ELIGIBLE ACCOUNTS" means a Borrower's Accounts listed on Borrowing
Base Certificates delivered to Lender which Lender, in its reasonable
discretion, determines to be an Eligible Account. Without limiting the
generality of the immediately preceding sentence, no Account will be an Eligible
Account unless it meets all of the following minimum requirements:
(1) The Account is valued at its face amount and represents a
completed, bona fide transaction for Eligible Inventory sold,
delivered, and accepted by the Account Debtor or for services
rendered (but excluding any amounts in the nature of a service
charge added to the amount due on an invoice because the invoice
has not been paid when due) that requires no further act under any
circumstances on the part of the Borrower or any other person or
entity to make such Account payable by the Account Debtor, and the
Account arises from an arm's-length transaction in the ordinary
course of the Borrower's business between the Borrower and an
Account Debtor that is not an affiliate, partner, officer, or
employee of a Borrower, a member of the family of any partner,
officer, or employee of a Borrower, or one of the other Borrowers.
(2) The Account is not unpaid more than 90 days from the date
on which the original invoice rendered in connection with such
Account was issued.
(3) The goods the sale of which gave rise to the Account were
shipped or delivered or provided to the Account Debtor on a final
sale basis and not on a bill and hold sale basis (unless subject to
an agreement with the Account Debtor in form and substance
acceptable to Lender), a consignment sale basis, a guaranteed sale
basis, a sale or return basis or on the basis of
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any other similar understanding, and no part of such goods have
been returned or rejected.
(4) The Account is not evidenced by chattel paper or an
instrument of any kind.
(5) The Account Debtor with respect to the Account (A) is not
insolvent, (B) is not the subject of any bankruptcy or insolvency
proceedings of any kind or of any other proceeding or action,
threatened or pending, which might have a materially adverse effect
on its business, and (C) is not, in Lender's reasonable discretion,
deemed ineligible for credit for other reasons (including, without
limitation, unsatisfactory past experience of Borrower or Lender
with the Account Debtor or unsatisfactory reputation of the Account
Debtor).
(6) The Account Debtor is located within the United States of
America or Ontario, Canada (or if located in another country or
province, the Account is covered by credit insurance or a letter of
credit assigned and acceptable to Lender or is backed by the
guaranty of a U.S. based parent company in form acceptable to
Lender).
(7) (A) The Account Debtor is not the government of the United
States of America, or any department, agency or instrumentality
thereof, or (B) if the Account Debtor is an entity mentioned in the
preceding clause, the Federal Assignment of Claims Act (or
applicable similar legislation) has been fully complied with so as
to validly perfect Lender's first-priority security interest to
Lender's satisfaction.
(8) The Account is a valid, legally enforceable obligation of
the Account Debtor with respect thereto and is not subject to any
dispute, condition, contingency, setoff, recoupment, reduction,
claim for credit, allowance, adjustment, counterclaim or defense on
the part of such Account Debtor, and no fact exists that may
provide a basis for any of the foregoing in the present or future
(however such Account will only be ineligible to the extent of such
dispute, condition, contingency, setoff, recoupment, etc.).
(9) The Account is subject to a first-priority security
interest in Lender's favor and is not subject to any other lien,
claim, encumbrance, or security interest whatsoever.
(10) The Account is evidenced by an invoice or other
documentation in form reasonably acceptable to Lender and arises
from a contract, purchase order, or release that is satisfactory in
form and substance to Lender.
(11) The Borrower has observed and complied with (A) all
applicable laws of the United States of America (including the Fair
Labor Standards Act) and (B) all laws of the state and country in
which the Account
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Debtor or the Account is located which, if not observed and
complied with, would deny to the Borrower access to the courts of
such state.
(12) No material representation or warranty contained in this
Agreement or any other agreement between the Borrower and Lender,
or in any Borrowing Base Certificate with respect to such Account
has been breached.
(13) The Account is not subject to any provision prohibiting
its assignment.
(14) The Account does not represent any manufacturer's or
supplier's credits, discounts, incentive plans, or other similar
arrangements entitling the Borrower to discounts on future
purchases.
(15) The Eligible Inventory giving rise to the Account was
not, at the time of sale thereof, subject to any lien or
encumbrance except in Lender's favor.
(16) The Account is payable in freely transferable United
States Dollars.
In addition to the foregoing requirements, Accounts of any Account
Debtor that are otherwise qualified will be reduced to the extent
of (1) any accounts payable (including, without limitation,
Lender's good faith estimate of any contingent liabilities) by the
Borrower to such Account Debtor ("Contras") and (2) that portion of
an Account representing a retainage or holdback by the Account
Debtor; provided that Lender, in its reasonable discretion may
determine that none of such Accounts are Eligible Accounts if
Contras represent 10% or more of the amount owing to all or any of
the Borrowers from such Account Debtor. Finally, all Accounts owing
by a given Account Debtor will be ineligible if more than 50% of
the total Accounts owing by such Account Debtor to all or any of
the Borrowers are otherwise ineligible.
Any Account that is at any time an Eligible Account and that
subsequently fails to meet any of the requirements set forth above
will immediately cease to be an Eligible Account and must be
removed from the Borrowing Base immediately.
"ELIGIBLE INVENTORY" means that portion of each Borrower's
Inventory consisting of finished goods Inventory in respect of which no further
manufacturing, processing, or other work has to be done (other than packaging or
crating for shipment or distribution), raw materials held for use in the
ordinary course of each Borrower's business in manufacturing finished goods
Inventory and work in process Inventory being manufactured or processed that is
listed on a Borrowing Base Certificate delivered to Lender in accordance with
this Agreement that Lender determines in its reasonable discretion to be
Eligible Inventory. Without limiting the generality of the immediately preceding
sentence, no Inventory will be Eligible Inventory unless it meets all the
following minimum requirements:
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(1) The Inventory has not been shipped, delivered,
provided to, purchased or sold by the Borrower on a bill and
hold, consignment sale, guaranteed sale, or sale or return
basis, or any other similar basis or understanding.
(2) No Account has arisen with respect to such
Inventory.
(3) The Inventory has not been billed to a customer
on a "progress billing" or similar basis prior to shipment to
the customer.
(4) The Inventory is valued at the lower of cost or
market, on a first-in-first-out basis.
(5) The Inventory is in the Borrower's possession, or
if the Inventory is located on premises not owned by the
Borrower, the landlord or owner of such premises must have
waived its distraint, lien, and similar rights with respect to
such Inventory and must have agreed in a written agreement
satisfactory to Lender (an "Acceptable Bailee Agreement")
providing the following: (A) that Lender has a valid,
perfected first priority security interest in the Inventory,
(B) to give Lender notice of any default by the Borrower and
the option to cure such default, (C) to permit Lender to enter
such premises to repossess or remove the Inventory at any
time, and (D) to grant Lender such other rights as Lender may
reasonably request. Notwithstanding the foregoing, assignments
of Borrowers' existing lender's bailee agreements shall
constitute Acceptable Bailee Agreements through July 31, 2000;
thereafter, Borrowers must obtain replacement Acceptable
Bailee Agreements acceptable to Lender.
(6) The Inventory is not subject to any royalty,
copyright, trademark, trade name, or licensing arrangement, or
any law, rule, or regulation that could limit or impair
Lender's ability to exercise its rights with respect to such
Inventory.
(7) In case of finished goods Inventory and
work-in-process Inventory, if otherwise eligible, the
Inventory (a) has been produced in accordance with a release
issued by the applicable customer and is an amount equal to
the quantity specified in such release, or (b) is in
quantities that do not exceed projected sales of such
Inventory over the succeeding 3 month period. To the extent
Inventory does not qualify to be Eligible Inventory under this
subparagraph, such Inventory will also not qualify to be
Eligible Inventory by classifying such Inventory as raw
materials or work-in-process.
(8) The Inventory is not packaging, labels, manuals
or supplies.
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(9) The Inventory meets all standards imposed by any
governmental or agency, department, or division having
regulatory authority over such Inventory or its use or sale
including, without limitation, standards set forth in the Fair
Labor Standards Act.
(10) No material representation or warranty in this
Agreement, any other agreement between the Borrower and
Lender, or any Borrowing Base Certificate has been breached
with respect to such Inventory.
(11) The Inventory is not obsolete, is of good and
merchantable quality, and is readily salable in the ordinary
course of Borrower's business.
(12) The Inventory is subject to a first-priority
security interest in Lender's favor and is not subject to any
other lien or encumbrance.
Any Inventory that is at any time Eligible Inventory and that
subsequently fails to meet any of the requirements set forth
above will cease to be Eligible Inventory immediately and must
be removed from the Borrowing Base immediately.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act of 1976, the Hazardous Materials Transportation
Act, the Toxic Substances Control Act, the regulations pertaining to such
statutes, and any other safety, health or environmental statutes, laws,
regulations or ordinances of the United States or of any state, county or
municipality in which any Borrower conducts its business or the Collateral is
located.
"EQUIPMENT" means all of each Borrower's present and hereafter
acquired equipment, machinery, machine tools, motors, furniture, furnishings,
fixtures, motor vehicles, rolling stock, processors, tools, parts, dies, jigs,
goods (other than consumer goods, farm products or Inventory), wherever located,
and any interest of any Borrower in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions and improvements
to any of the foregoing, wherever located.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"ERISA AFFILIATE" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which any Borrower is a member and which is treated as a
single employer under ERISA Section 4001(b)(1), or IRC Section 414.
"EXCESS AVAILABILITY" means excess Borrowing Base availability
net of all past due liabilities, including accounts payable which are more than
45 days past written due date.
"EXCESS CASH FLOW" means, for each Borrower, one-half of the
following (calculated each fiscal year according to GAAP): net income plus
depreciation and
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amortization less current maturities on long term debt and capital expenditures
made during the year exclusive of leased or debt financed capital expenditures.
"EXPENSES" means all fees and out-of-pocket disbursements
incurred by Lender, including reasonable fees of counsel and court costs, in any
way arising from or in connection with this Agreement, any Loan Documents, any
of the Collateral, any of the Obligations or the business relationship between
Lender, on the one hand, and any one or more of the Borrowers or the Validity
Certificators, on the other hand, including, without limitation, (a) audit fees;
at the per day rate provided in Section 8.6 below; (b) all fees and expenses
(including recording fees and insurance policy fees) of Lender and counsel for
Lender for the preparation, examination, approval, negotiation, execution and
delivery of, or the closing of any of the transactions contemplated by, this
Agreement and any Loan Documents; (c) all fees and out-of-pocket disbursements
incurred by Lender, including reasonable attorneys' fees, in any way arising
from or in connection with any action taken by Lender to monitor, advise,
administer, enforce or collect any of the Obligations under this Agreement, any
Loan Documents or any other obligations of the Borrowers or any Guarantor,
whether joint, joint and several, or several, under this Agreement (or any Loan
Documents), or any other existing or future document or agreement, or arising
from or relating to the business relationship between Lender, on the one hand,
and any one or more of the Borrowers or the Validity Certificators, on the other
hand, or otherwise securing any of the Obligations, including any actions to
lift the automatic stay or to otherwise in any way monitor or participate in any
Insolvency Proceeding of any one or more of the Borrowers or the Validity
Certificators; (d) all expenses and fees (including reasonable attorneys' fees)
incurred in relation to, in connection with, in defense of and/or in prosecution
of any litigation instituted by any one or more of the Borrowers, the Validity
Certificators, Lender or any third party against or involving Lender arising
from, relating to, or in connection with any of the Obligations or the
Borrower's or any Guarantor's other obligations, this Agreement (or any Loan
Documents), any of the Collateral, or the business relationship between Lender,
on the one hand, and any one or more of the Borrowers or the Validity
Certificators, on the other hand, including any so-called "lender liability"
action, any claim and delivery or other action for possession of, or foreclosure
on, any of the Collateral, post-judgment enforcement of any rights or remedies
including enforcement of any judgments, and prosecution of any appeals (whether
discretionary or as of right and whether in connection with pre-judgment or
post-judgment matters); (e) all costs, expenses and fees incurred by Lender or
its agents in connection with any appraisals or environmental assessments of all
or any of the Collateral (and Borrowers shall fully cooperate with such
appraisers and make their property available for appraisal in connection with as
many appraisals or environmental assessments as Lender may reasonably request);
(f) all fees described in Section 1 above, and (g) all costs, expenses and fees
incurred by Lender and/or its counsel in connection with consultants, expert
witnesses or other professionals retained by Lender and/or its counsel in order
to assist, advise and/or give testimony with respect to any matter relating to
this Agreement or any Loan Documents, the Collateral or the business
relationship between Lender, on the one hand, and any one or more of the
Borrowers or the Validity Certificators, on the other hand (and Borrowers and
Validity Certificators shall fully cooperate with such consultant, expert
witness or other professional and shall make their premises, books and records,
accounting systems, computer systems and other media for the recordation of
information available to such persons).
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"GENERAL INTANGIBLES" means all of each Borrower's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes or regulations, choses or
things in action, goodwill, going concern value, patents, trade names,
trademarks, service marks, copyrights, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, monies due under
any royalty or licensing agreements, route lists, infringement claims, computer
programs, computer discs, computer tapes, literature, reports, catalogs, deposit
accounts, insurance premium rebates, tax refunds and tax refund claims) other
than goods and Accounts, and each Borrower's Business Records relating to any of
the foregoing.
"HAZARDOUS MATERIAL" means any substance, material, emission
or waste which is or hereafter becomes regulated or classified as a hazardous
substance, hazardous material, toxic substance or solid waste under any
Environmental Law, asbestos, petroleum products, urea formaldehyde,
polychlorinated biphenyls (PCBs), radon and any other hazardous or toxic
substance, material, emission or waste.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or
against any Borrower or any Guarantor under any provision of the Bankruptcy Code
or under any other bankruptcy or insolvency law, including assignments for the
benefit of creditors, formal or informal moratoria, compositions, extensions
generally with its creditors or proceedings seeking reorganization, liquidation,
arrangement or other similar relief.
"INVENTORY" means all present and future inventory in which
any Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service, each Borrower's present and future raw
materials, work in process, finished goods and supplies and materials used in or
consumed in any Borrower's business, goods which have been returned to,
repossessed by or stopped in transit by any Borrower, packing and shipping
materials, wherever located, any documents of title representing any of the
above, and each Borrower's Business Records relating to any of the foregoing.
"LINE OF CREDIT" means the revolving lines of credit provided
for in this Agreement under which Lender will make Revolving Loans.
"LOAN DOCUMENTS" means, collectively, this Agreement, any
Notes, any security agreements, pledge agreements, assignments, deeds of trust,
mortgages or other encumbrances or agreements which secure or relate to the
Obligations or the collateral security for the Obligations, any guaranties of
the Obligations, any lock box or blocked account agreements and any other
agreements entered into between any one or more Borrowers or any guarantor of
the Obligations and Lender relating to or in connection with this Agreement.
"LOANS" means the Revolving Loans together with all Term
Loans.
"MORTGAGES" means all real estate mortgages or similar
documents given by Borrowers in favor of Lender.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in
ERISA Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees
of any Borrower or any ERISA Affiliate.
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"NEW SUBORDINATED DEBT" means additional or new subordinated
debt and/or preferred stock financing (or subordinated debt convertible into
preferred stock) obtained by Borrowers after the date hereof that provides for
(i) interest only for at least 12 months at a rate not to exceed 15% per annum,
and (ii) principal and incentive interest payments only if (A) no Event of
Default has occurred or is continuing hereunder (after any applicable grace
periods) and (B) after making any principal payments, Borrower has at least
$900,000 in Excess Availability and the amortization of principal and incentive
interest is over a period of not less than 24 months; provided, however,
regardless of whether or not an Event of Default has occurred or is continuing,
the new Subordinated Debt may call for principal payments equal to the amount of
new equity contributed to Borrowers from the sale or liquidation of assets of
Micafil, Inc.
"NEGOTIABLE COLLATERAL" means all of each Borrower's present
and future letters of credit, notes, drafts, instruments, certificated and
uncertificated securities, documents, leases and chattel paper, and each
Borrower's Business Records relating to any of the foregoing.
"NOTES" means all promissory notes evidencing the Term Loans.
Likewise, the term a "NOTE" refers to any of the Notes.
"OBLIGATIONS" means all Loans, advances, debts, liabilities
(including all amounts charged to Borrower's loan account pursuant to any
agreement authorizing Lender to charge any Borrower's loan account),
obligations, fees, lease payments, guaranties, covenants and duties owing by any
Borrower to Lender of any kind and description for the payment of money or
otherwise, (whether pursuant to or evidenced by the Loan Documents, by any Note
or other instrument or by any other agreement between Lender and Borrower),
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, including any Borrower's reimbursement
obligations under letters of credit issued for such Borrower's benefit and any
debt, liability or obligation owing from any Borrower to others which Lender may
obtain by assignment or otherwise, and all interest thereon, including any
interest that, but for the provisions of the Bankruptcy Code, would have
accrued, and all Expenses which any Borrower is required to pay or reimburse
pursuant to the Loan Documents, by law or otherwise.
"OVERADVANCE" means if at any time and for any reason, the
aggregate amount of the outstanding Revolving Loans exceeds the dollar or
percentage limitations set forth in Section 1 (a) of this Agreement.
"PERMITTED LIENS" means:
(i) liens for taxes, assessments or governmental
charges, and liens incident to construction, which are either
not delinquent or are being contested in good faith by any
Borrower by appropriate proceedings, which will prevent
foreclosure of such liens, and against which adequate reserves
have been provided, and upon demand by Lender, with adequate
security being posted with Lender;
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(ii) liens or deposits in connection with workers'
compensation or other insurance or to secure customs' duties,
public or statutory obligations in lieu of surety, stay or
appeal bonds, or to secure performance of contracts or bids
(other than contracts for the payment of money borrowed), or
deposits required by law or governmental regulations or by any
court order, decree, judgment or rule as condition to the
transaction of business or the exercise of any right,
privilege or license; or other liens or deposits of a like
nature made in the ordinary course of business;
(iii) security interests or mortgages granted to
Lender;
(iv) liens and security interests identified on
Schedule 2;
(v) subject to Section 7.13 below,
purchase money security interests in and capitalized leases
for Equipment and informational financing statements for
operating leases; and
(vi) subject to execution of an Intercreditor and
Subordination Agreement(s) reasonably acceptable to Lender,
liens and security interests to secure the New Subordinated
Debt.
"PLAN" means any plan described in ERISA Section 3(2)
maintained for employees of any Borrower or any ERISA Affiliate, other than a
Multiemployer Plan.
"PRIME RATE" means the variable rate of interest, per annum,
which is quoted from time to time in The Wall Street Journal as the base "prime
rate" on corporate loans posted as of such time by at least 75% of the nation's
30 largest banks, adjusted daily. The Prime Rate is nothing more nor less than
an index for determining the interest rate payable under the terms of this
Agreement. The Prime Rate is not necessarily the best rate, or any other
definition of rates, offered by Lender.
"REAL ESTATE" means all real estate and rights in real estate
and all related property which is covered by any mortgages or deeds of trust
executed by any Borrower in favor of Lender.
"REPORTABLE EVENT" means a "reportable event" as that term is
defined and applied in connection with ERISA.
3. LINE OF CREDIT, OTHER LOANS, INTEREST AND PAYMENTS
3.1 REVOLVING LINE OF CREDIT. From time to time prior to the expiration
of the Initial Term, or any extension terms provided for in Section 3.2 below,
so long as an Event of Default has not occurred or if an Event of Default has
occurred, such Event of Default has been timely remedied, Lender will, in its
reasonable discretion and subject to the terms and conditions set forth in this
Agreement, make Revolving Loans to each Borrower in such amounts as Borrower may
request, provided that the aggregate principal amount of all Revolving Loans
shall not exceed the applicable Revolving Advance Limit, or such Borrower's
Borrowing Base.
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Lender shall not be obligated to make Revolving Loans to Borrower at
any time; each Revolving Loan which is made under this Agreement will be made at
the option of, and in the discretion of, Lender. The Revolving Loans will not be
evidenced by a promissory note and a copy of Lender's books and records related
to the Revolving Loans shall constitute prima facie evidence of the outstanding
amount of Revolving Loans.
Unless otherwise agreed by Lender, should an Overadvance exist, the
applicable Borrower shall immediately make principal reduction payments of such
excess to Lender as are required to reduce the outstanding balance of the
Revolving Loans such that no Overadvance exists.
Borrowers may request from time to time Revolving Loan advances by
submitting a signed, completed Borrowing Base Certificate to Lender, in each
case given no later than 11:00 a.m. (Southfield, Michigan time) on the Business
Day of the proposed Revolving Loan advance. Subject to the terms and conditions
of this Agreement, Lender will make the proceeds of each such requested
Revolving Loan advance available to the applicable Borrower on a daily basis.
3.2 RENEWAL OF AGREEMENT. Unless Lender provides Borrowers at least 90
days written notice of its intention to not renew this Agreement after the
Initial Term or any annual anniversary thereafter, Lender will extend this
Agreement from year to year on the terms set forth in this Agreement and any
amendments to this Agreement.
3.3 TERM LOANS. Simultaneously with the execution of this Agreement,
the Borrowers have obtained from Lender the Term Loan(s), which shall be
evidenced by promissory note(s) of the Borrowers (the "Term Notes") payable to
the order of and dated on the date of this Agreement. In addition to principal
payments called for by the Term Notes, until the principal balances of each Term
Loan are less than or equal to the amounts set forth on Schedule 3.3, each
Borrower shall be obligated to make additional principal payments on account of
the Term Notes equal to such Borrower's Excess Cash Flow, with such principal
payments due and payable within 120 days of end of the respective Borrower's
fiscal year end(s).
3.4 TERMINATION PREMIUM. If this Agreement is terminated at any time
prior to March 31, 2002, Borrowers shall be obligated to pay Lender a
termination premium of $375,000 (the "Termination Premium"). The Termination
Premium will also be due and payable in connection with any termination of this
Agreement by Lender or by or on behalf of Borrower(s), whether voluntary or
involuntary, including upon an Event of Default which is not timely cured, and
including in connection with termination of this Agreement or payment of the
Obligations by any trustee or debtor-in-possession in any Insolvency Proceeding.
The Termination Premium is presumed to be a reasonable estimate of the amount of
damages sustained by Lender as a result of the early termination of this
Agreement and Borrowers agree that such amount is reasonable under the
circumstances currently existing. Notwithstanding the foregoing, no Termination
Premium shall be payable in connection with payments made from insurance
proceeds resulting from a casualty loss or payments from condemnation proceeds.
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3.5 CROSS-DEFAULTS AND CROSS-COLLATERALIZATION. A default (and the
expiration of any applicable cure period) under any Loan or Note is a default
under all other Notes and Loans and under all Obligations. All Collateral
secures all Obligations.
3.6 INTEREST RATES; DEFAULT INTEREST RATES. The aggregate outstanding
amount of all Obligations shall bear interest at the rates set forth in Section
1 above. The aggregate outstanding amount of all Obligations shall also bear
interest, from and after the occurrence of an Event of Default and without
constituting a waiver of any such Event of Default, at the rate of three percent
(3%) per annum above the otherwise applicable Base Rates. All interest payable
under the Loan Documents shall be computed on the basis of a three hundred sixty
(360) day year for the actual number of days elapsed, based on the aggregate
amount of the Obligations that are outstanding on each day. Interest shall
continue to accrue until all of the Obligations are paid in full.
3.7 PAYMENTS. All payments, including any prepayments, by Borrowers on
account of principal, interest, fees, or other Obligations must be made without
setoff or counterclaim to Lender at the address specified on the first page of
this Agreement in lawful money of the United States of America and in
immediately available funds. If any payment under this Agreement or any Note
becomes due on a day other than a day which is a Business Day, its maturity will
be extended to the next succeeding Business Day, and with respect to payments of
principal and interest thereon, will be payable at the then-applicable rate
during such extension.
3.8 CREDITING PAYMENTS. For the purpose of calculating Borrowing Base
availability for Revolving Loans, the receipt by Lender of any wire transfer or
electronic funds transfer of funds, check or other item of payment shall be
applied immediately to provisionally reduce the Obligations, but such receipt
shall not be considered a payment on account unless such wire transfer or
electronic funds transfer is of immediately available federal funds and is made
to the appropriate deposit account of Lender or unless and until such check or
other item of payment is honored when presented for payment. For the purpose of
calculating interest, the receipt by Lender of any check or other item of
payment shall be deemed to have occurred one (1) Business Day after the date
Lender actually receives such item of payment and as to any wire transfer or
electronic funds transfer, one (1) Business Day after the date Lender actually
receives such item of payment. In the event any check or other item of payment
is not honored when presented for payment, the Borrower shall be deemed not to
have made such payment. Notwithstanding anything to the contrary contained
herein, any wire transfer, electronic funds transfer, check or other item of
payment received by Lender after 1:00 p.m. Southfield time shall be deemed to
have been received by Lender as of the opening of business on the immediately
following Business Day.
3.9 PAYMENT MECHANICS. As an administrative convenience to Borrowers to
ensure the timely payment of amounts owing by Borrowers to Lender under this
Agreement, Borrowers hereby request Lender to advance for the account of the
applicable Borrower an amount each month sufficient to pay interest accrued on
the principal amount of the Obligations during the immediately preceding month
and all monthly principal installments or other payments due under the Notes or
other Loan Document and, provided prior notice is given to Borrowers, amounts
from time to time sufficient to pay all fees and Expenses owing by the Borrowers
under this Agreement. Borrowers authorize Lender, in Lender's
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sole discretion, to make Revolving Loans for Borrowers' accounts of a sum
sufficient each month to pay, on the due date thereof, all interest accrued on
the principal amount of the Obligations during the immediately preceding month
and all monthly principal installments or other payments due under the Notes or
other Loan Documents and sums from time to time sufficient to pay, on the due
date thereof, all fees and Expenses owing by such Borrower under this Agreement,
and Lender may apply the proceeds of each such Revolving Loan to the payment of
such interest, installments, fees and Expenses. Each such Revolving Loan shall
thereafter accrue interest at the rate then applicable under this Agreement.
Lender, however, shall not be obligated to make any such Revolving Loan and
Borrowers acknowledge that Lender will be particularly disinclined to do so if
an Event of Default or an Overadvance exists at the time of, or would result
from the making of, such Revolving Loan.
3.10 ALLOCATION OF EXPENSES. Because of the interrelationship of the
Borrowers and the benefits to each Borrower of being a party to a consolidated
financing arrangement with Lender, Borrowers agree that Lender may allocate (and
in turn charge to any Borrower's Revolving Loans) all Expenses between the
Borrowers as Lender deems appropriate and any re-allocation between the
Borrowers shall have no effect on Lender's rights under this Agreement.
3.11 BORROWERS' APPOINTMENT OF AGENT. Each Borrower hereby appoints
McInnes as its agent for purposes of requesting Loans, signing Borrowing Base
Certificates and providing Lender with any information requested by Lender in
connection with this Agreement and to receive any notices from Lender hereunder.
Each Borrower ratifies the acts of McInnes pursuant to this section and agrees
that Lender shall have the right to rely on certificates, requests, Borrowing
Base Certificates and other documents and information provided by McInnes in its
capacity as agent for all Borrowers with the same legal effect as if the same
were signed and/or delivered by the respective Borrower(s). The appointment of
McInnes as agent pursuant to this Section 3.11 is coupled with an interest and
shall be irrevocable until all Obligations are fully and finally paid.
4. CONDITIONS OF BORROWING
Notwithstanding any other terms of this Agreement, Lender is not
required to make any Loan to the Borrowers under this Agreement unless all of
the following conditions are met at or prior to the time such Loan is made:
4.1 REPRESENTATIONS TRUE. Each Borrower's representations and
warranties in this Agreement (and in all agreements referred to or executed in
connection with this Agreement) are true as of the date of each Loan or advance
under this Agreement with the same effect as though such representations and
warranties had been made by each Borrower at such time, except to the extent
such representations and warranties specifically relate to a prior date.
4.2 NO DEFAULT. No Event of Default under this Agreement exists, nor
does any event exist which, upon the lapse of time, service of notice, or both,
would constitute an Event of Default under this Agreement, and no suit or
proceeding at law or in equity or of any governmental body has been instituted
or, to the knowledge of any Borrower,
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threatened which, in either case, would materially and adversely affect any
Borrower's financial condition or business operations.
4.3 COUNSEL OPINION. Simultaneously with the execution of this
Agreement, Lender must have received from Borrowers a satisfactory legal
opinion.
4.4 INITIAL EXCESS AVAILABILITY. In the aggregate, Borrowers have at
least $1,250,000 in excess Borrowing Base availability prior to the first
Revolving Loans to be made hereunder, net of the sum of all past due
liabilities, including accounts payable which are more than 45 days past written
due date.
4.5 SUBORDINATED DEBT OR CAPITAL. If Borrower does not have the minimum
excess availability at closing required by Section 4.4 above, Borrower has
received additional equity or subordinated debt (which if in the form of debt,
must be subordinated to Lender's Obligations pursuant to a Subordination
Agreement in form and substance acceptable to Lender) to satisfy Section 4.4
above.
5. SECURITY FOR THE OBLIGATIONS
5.1 GRANT OF SECURITY. Borrowers each hereby grant Lender a continuing
security interest in all of their respective presently existing and hereafter
acquired or arising Collateral to secure prompt repayment of all Obligations and
to secure the prompt performance by such Borrower of each of its covenants and
duties in this Agreement and any other agreements with Lender. Lender's security
interests in the Collateral shall attach to all Collateral without further act
on the part of Lender or Borrowers. Other than sales of finished goods Inventory
to buyers in the ordinary course of business, or sales of obsolete or worn out
equipment having a book value of $50,000 or less in the aggregate in any fiscal
year, Borrowers have no authority, express or implied, to dispose of, sell or
transfer any of the Collateral.
5.2 NEGOTIABLE COLLATERAL. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, each Borrower
shall, upon the request of Lender, immediately endorse (without recourse) and
assign such Negotiable Collateral to Lender and deliver physical possession of
such Negotiable Collateral to Lender.
5.3 ADDITIONAL DOCUMENTATION. At the request of Lender, each Borrower
shall execute and deliver to Lender, all financing statements, continuation
financing statements, fixture filings, security agreements, pledges,
assignments, endorsements of certificates of title, applications for title,
affidavits, reports, notices, schedules of accounts, letters of authority, and
all other documents that Lender may reasonably request, in form satisfactory to
Lender, to perfect and continue perfected Lender's security interest in the
Collateral and in order to fully consummate all of the transactions contemplated
hereunder and under the other Loan Documents.
5.4 POWER OF ATTORNEY. Borrowers each hereby irrevocably designate,
make, constitute and appoint Lender (and any of Lender's officers, employees or
agents designated by Lender) as such Borrower's true and lawful
attorney-in-fact. Pursuant to this power of attorney, Lender, or Lender's agent,
may, without notice to Borrowers and in either
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the name of the respective Borrower or Lender, but at the cost and expense of
such Borrower, at such time or times as Lender in its reasonable discretion may
determine: (a) demand payment of the Accounts from the Account Debtors, enforce
payment of the Accounts by legal proceedings or otherwise, and generally
exercise all of Borrower's rights and remedies with respect to the collection of
the Accounts; (b) take control, in any manner, of any item of payment or
proceeds relating to any Collateral; (c) upon the occurrence and during the
continuance of an Event of Default, prepare, file and sign Borrower's name to a
proof of claim in bankruptcy or similar document against any Account Debtor or
to any notice of lien, assignment or satisfaction of lien or similar document in
connection with any of the Collateral; (d) sign Borrower's name on any of
documents described in Section 5.3 or on any other similar documents to be
executed, recorded or filed in order to perfect or continue perfected Lender's
security interest in the Collateral; (e) upon the occurrence and during the
continuance of an Event of Default, sign Borrower's name on any invoices, bills
of lading, freight bills, chattel paper, documents, instruments or similar
documents or agreements relating to the Accounts, Inventory or other Collateral,
drafts against Account Debtors, schedules and assignments of Accounts,
verifications of Accounts and notices to Account Debtors; (f) send requests for
verification of Accounts; (g) endorse the applicable Borrower's name on any
checks, notes, acceptances, money orders, drafts or other items of payment or
proceeds relating to any Collateral that may come into Lender's possession and
deposit the same to the account of Lender for application to the Obligations;
(h) upon the occurrence and during the continuance of an Event of Default, do
all other acts and things necessary, in Lender's determination, to fulfill
Borrower's obligations under this Agreement or any of the other Loan Documents;
(i) upon the occurrence and during the continuance of an Event of Default,
notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender, to receive and open all mail
addressed to any Borrower, and to retain all mail relating to the Collateral and
forward all other mail to Borrowers; (j) use the information recorded on or
contained in any data processing equipment and computer hardware and software
relating to the Accounts, Inventory, Equipment and any other Collateral and to
which Borrower has access; (k) upon the occurrence and during the continuance of
an Event of Default, make, settle and adjust all claims under Borrower's
policies of insurance relating to the Collateral, make all determinations and
decisions with respect to such policies of insurance and endorse the name of any
Borrower on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance; (l) upon the occurrence and during the
continuance of an Event of Default, sell or assign any of the Accounts and other
Collateral upon such terms, for such amounts and at such time or times as Lender
deems advisable; and (m) upon the occurrence and during the continuance of an
Event of Default, settle, adjust or compromise disputes and claims respecting
the Accounts directly with Account Debtors, for amounts and upon terms that
Lender determines to be reasonable, and, in furtherance thereof, execute and
deliver any documents and releases that Lender determines to be necessary. The
appointment of Lender as Borrower's attorney-in-fact and each and every one of
Lender's rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and this Agreement
has been terminated. Lender shall promptly provide Borrowers with copies of any
documents signed by Lender on any Borrower's behalf pursuant to this Section
5.4.
5.5 RIGHT TO INSPECT. Lender, through any of its officers, employees or
agents, shall have the right at any time or times during any Borrower's usual
business hours, or during the usual business hours of any third party having
control over any of any Borrower's
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Business Records, to inspect and copy (by electronic or other means) any
Business Records in order to verify the amount or condition of, or any other
matter relating to, the Collateral or any Borrower's financial condition. Lender
also shall have the right at any time or times during Lender's usual business
hours to inspect and examine the Inventory and the Equipment and to check and
test the same as to quality, quantity, value and condition. If an Event of
Default has occurred or if Lender reasonably believes that an Event of Default
has occurred, Lender may conduct any of the inspections referenced in this
Section 5.5 at any time without regard to any Borrower's or any third party's
usual business hours.
6. REPRESENTATIONS AND WARRANTIES
In order to induce Lender to make Loans as provided in this Agreement
and to accept any Notes, each Borrower represents and warrants to Lender as
follows:
6.1 ORGANIZATION. The Borrower is a corporation duly organized and
existing under the laws of the State of its incorporation as set forth in the
preamble to this Agreement, and the execution, delivery and performance of the
Loan Documents, including this Agreement and the issuance of the Notes as
provided in this Agreement are within Borrower's corporate powers, have been
duly authorized, are not in contravention of law or the terms of the Borrower's
Articles of Incorporation or Code of Regulations or Bylaws, as applicable, and
do not require the consent or approval of any governmental body, agency or
authority. The Borrower is duly licensed or qualified to do business in all
jurisdictions in which the Borrower has substantial property or business
operations.
6.2 FINANCIAL STATEMENTS. Borrower's balance sheets and the statements
of profit and loss and surplus furnished to Lender from time to time will be in
all material respects in accordance with generally accepted accounting
principles, consistently applied ("GAAP") and will fairly present Borrower's
financial condition as of the relevant dates and the results of its operations
for the applicable time periods.
6.3 LIENS. Except for Permitted Liens, the Borrower has good and
marketable title to all its assets, including all Collateral, free and clear of
all liens and encumbrances.
6.4 ABSENCE OF CONFLICTING OBLIGATIONS. The making and execution of the
Loan Documents and compliance with its terms and the issuance of the Notes will
not result in a breach of any of the terms and conditions of or result in the
imposition of any lien, charge, or encumbrance upon any property of the Borrower
pursuant to, or constituting a default under, any indenture or other agreement
or instrument to which the Borrower is a party or by which it is bound.
6.5 TAXES. Borrower has no outstanding unpaid tax liabilities (except
for taxes which are currently accruing from its current operations and ownership
of property, and which are not delinquent), and no tax deficiencies have been
proposed or assessed against Borrower. There have been no audits of Borrower's
federal income tax returns, which have resulted in or are likely to result in
the assessment of any material tax liability against Borrower and all taxes
shown by any returns have been paid.
6.6 ABSENCE OF MATERIAL LITIGATION. The Borrower is not a party to any
litigation or administrative proceeding, nor so far as is known by the Borrower
is any litigation or
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administrative proceeding threatened against it, which in either case would, if
adversely determined, cause any material adverse change in its properties or the
conduct of its business.
6.7 ABSENCE OF ENVIRONMENTAL PROBLEMS. Except as disclosed in writing
to Lender, the Borrower is in substantial compliance with all Environmental Laws
involving Borrower's past or present operations, facilities and property
(provided that any non-compliance does not have a materially adverse affect on
Borrower, its assets or its business operations). Further, Borrower has not been
cited for violating any applicable Environmental Laws and Borrower has all
necessary environmental permits and licenses to operate its business.
6.8 LEGAL NAME. Borrower's full legal name is exactly as set forth on
the signature page of this Agreement and, except as provided on Schedule 6.8,
Borrower has not changed its name since the date of its organization, nor has it
used any assumed name, tradename, or tradestyle.
6.9 FINANCING STATEMENTS. Except for financing statements covering
Permitted Liens and Lender's liens, no financing statements covering any
Collateral, proceeds of Collateral, or any other of Borrower's property are on
file in any public office.
6.10 ERISA. No Reportable Event has occurred with respect to any Plan.
6.11 BROKER'S FEES. Borrower has made no commitment, and has taken no
action, that could result in a claim for any brokers', finders', or similar fees
or commitments in respect to the transactions with Lender described in this
Agreement. Borrower agrees to pay all finders' fees or similar fees payable to
any persons or entities in connection with this Agreement and to defend and hold
Lender harmless against any and all such fees.
6.12 PRINCIPAL EXECUTIVE OFFICE, BUSINESS LOCATION.
(a) Borrower's principal place of business, all physical
Collateral, records concerning the Collateral and all other Business
Records are located at or about the address set forth on Schedule 6.12
(except for Inventory subject to an Acceptable Bailee Agreement); and
(b) Borrower will provide Lender with 30 days prior written
notice of any change with respect to any of the foregoing.
6.13 FULL DISCLOSURE. This Agreement and all of the Exhibits, Schedules
and other written material delivered by the Borrower to Lender in connection
with the transactions contemplated by this Agreement do not contain any
statement that is false or misleading with respect to any material fact and do
not omit to state a material fact necessary in order to make the statements
therein not false or misleading. There is no additional fact that the Borrower
is aware of that has not been disclosed in writing to Lender that materially
affects adversely or, so far as the Borrower can reasonably foresee, will
materially affect adversely the Borrower's financial condition or business
prospects.
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6.14 FLOOD HAZARD. Except for real estate subject to flood insurance
reasonably acceptable to Lender, no location at which the Borrower does business
falls within the boundaries of a special flood hazard area so designated by the
United States Federal Emergency Management Administration.
6.15 INTELLECTUAL PROPERTY. To the best of Borrower's knowledge, the
Borrower owns or possesses adequate licenses or other rights to use all patents,
processes, trademarks, trade names, and copyrights necessary to conduct its
business as now conducted or presently intended to be conducted and the Borrower
has no reason to believe that any such rights conflict or will conflict with the
rights of others. All of Borrower's patents, trademarks and copyrights are
described in the Collateral Assignment of Intellectual Property and Security
Agreement executed by Borrower in favor of Lender in connection with this
Agreement.
6.16 COMPLIANCE WITH LAW. Borrower is in substantial compliance with
all laws and regulations applicable to it, its business and properties (provided
that any non-compliance does not have a materially adverse effect on Borrower,
its assets or its business operations). To the best of Borrower's knowledge,
Borrower has all licenses, permits, orders and approvals that are required under
any governmental law or regulation in connection with the Borrower's business
and properties ("Permits"). No notice of any violation has been received with
respect of any Permits and no proceeding is pending or, to the best of the
Borrower's knowledge, threatened to terminate, revoke or limit any Permits.
6.17 ACCOUNTS. All of Borrower's Accounts constitute bona fide existing
obligations created by the sale and delivery of Inventory or the rendition of
services to Account Debtors in the ordinary course of Borrower's business, and,
in the case of Accounts created by the sale and delivery of Inventory, the
Inventory giving rise to such Accounts has been delivered to the Account Debtor.
At the time of the creation of each Eligible Account or the assignment thereof
to Lender, each such Eligible Account is unconditionally owed to Borrower
without defense, dispute, offset, counterclaim or right of return or
cancellation and Borrower has not received notice of actual or imminent
bankruptcy, insolvency or material impairment of the financial condition of the
Account Debtor regarding such Eligible Account.
6.18 LABOR MATTERS. No strikes or other labor disputes against Borrower
are pending or, to Borrower's knowledge, threatened. Hours worked by and payment
made to employees of Borrower have not been in violation of the Fair Labor
Standards Act or any other applicable federal, state, local or foreign law
dealing with such matters. All payments due from Borrower on account of employee
health and welfare insurance have been paid or accrued as a liability on the
books of Borrower. Except as set forth in Schedule 6.18, Borrower has no
obligation under any collective bargaining agreement, management agreement,
consulting agreement or any employment agreement. There is no organizing
activity involving Borrower pending or, to Borrower's knowledge, threatened by
any labor union or group of employees. Except as set forth in Schedule 6.18,
there are no representation proceedings pending or, to Borrower's knowledge, no
group of employees of Borrower has made a pending demand for recognition. Except
as set forth in Schedule 6.18, there are no complaints or charges against
Borrower pending or threatened to be filed where the amount at issue exceeds
$50,000 with any federal, state, local or foreign court,
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governmental agency or arbitrator based on, arising out of, in connection with,
or otherwise relating to the employment or termination of employment by Borrower
of any individual.
6.19 SUBSIDIARIES; OWNERSHIP. Except as set forth on Schedule 6.19,
Borrower has no subsidiaries and is not engaged in any joint venture or
partnership with any other person, or is an affiliate of any other person other
than the other Borrowers. All of the issued and outstanding stock of Borrower is
owned by the entity or individuals disclosed on Schedule 6.19. There are no
outstanding rights to purchase options, warrants or similar rights or agreements
pursuant to which Borrower may be required to issue or sell any stock or other
equity security.
6.20 DEPOSIT ACCOUNTS. Schedule 6.20 lists all banks and other
financial institutions at which Borrower maintains deposits and/or other
accounts, including any disbursement accounts, and Schedule 6.20 correctly
identifies the name, address and telephone number of each depository, the name
in which the account is held, a description of the purpose of the account, and
the complete account number.
6.21 CUSTOMER RELATIONS. There exists no actual or threatened
termination or cancellation of, or any material adverse modification or change
in: (a) the business relationship of Borrower with any customer or group of
customers whose purchases during the preceding twelve (12) months caused them to
be ranked among the ten largest customers of Borrower; or (b) the business
relationship of Borrower with any supplier material to the operations of
Borrower. The ratings ("Customer Ratings") assigned to Borrower by its customers
and any other applicable customer have not been withdrawn, rescinded or
downgraded in the past twelve (12) months, nor has Borrower received any notice
of any adverse action taken or proposed to be taken by any customer in respect
of any Customer Ratings.
6.22 CUSTOMER SUPPLY PROGRAMS. Except as disclosed on Schedule 6.22,
Borrower does not participate in any resale, "off-load" or other programs under
which any of Borrower's customers (or any affiliates of any customer) sell or
supply raw materials, component parts or other inventory to Borrower, including
without limitation, on a bailment, consignment or another basis.
6.23 INTEGRATED OPERATIONS. Borrower and the other Borrowers are a part
of an integrated group which share business operations, functions and services,
including sales, marketing, finance, accounting, management, manufacturing,
engineering, quality control and shipping. As a result of the foregoing,
Borrower will benefit in a direct and substantial way from Loans and advances
made by Lender to the other Borrowers and, but for Lender making Loans to the
other Borrowers and such other Borrowers being able to provide business services
to Borrower, Borrower's business operations would be materially and negatively
impacted.
7. NEGATIVE COVENANTS
While any of the Obligations remain unpaid, each Borrower must not
agree to and must not (without Lender's prior written consent):
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7.1 RESTRICTION ON LIENS. Except for Permitted Liens, create or
permit to be created or allow to exist any mortgage, pledge, encumbrance, or
other lien upon or security interest in any property or assets now owned or
acquired in the future by the Borrower.
7.2 RESTRICTION ON INDEBTEDNESS. Create, incur, assume, or have
outstanding any indebtedness for borrowed money except:
(a) The Obligations;
(b) Indebtedness incurred in the ordinary course of
Borrower's business for necessary materials, supplies, etc., all of
which must be due not more than 90 days from the date of invoice or any
extended terms granted to Borrower and none of which may be past due;
(c) Indebtedness for Permitted Liens;
(d) Indebtedness for capital expenditures which are
otherwise permitted by this Agreement (regardless of whether via
purchase money security interests, or capital or operating leases);
(e) indebtedness to The Erie, Pennsylvania Enterprise
Zone, and Taylor Forge International, Inc. (provided, however, through
June 30, 2001, Borrowers shall not pay any principal to Taylor Forge
International, Inc. and thereafter, principal payments shall not exceed
a 24 month amortization); and
(f) debt subordinated to Lender pursuant to an agreement
reasonably satisfactory to Lender.
7.3 MERGERS; CONSOLIDATIONS; DISPOSITION OF ASSETS. Except to the
extent necessary to comply with Section 8.11, merge with or into or consolidate
with or into any other corporation or entity; or sell, lease, transfer or
otherwise dispose of all or any part of its property, assets or business (other
than by sales of Inventory made in the ordinary course of business).
Notwithstanding the foregoing, Lender agrees to not unreasonably withhold or
delay its consent to a sale of substantially all of any Borrowers' assets
provided all Obligations are paid in full as a result of the sale and no Event
of Default has occurred and is continuing.
7.4 SALE AND LEASEBACK. Enter into an agreement under which
Borrower leases or purchases any property that Borrower has sold or is to sell.
7.5 DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS. Except for Tax
Distributions and dividends payable in shares of its stock, pay or declare any
dividend, or make any other distribution on account of any shares of any class
of its stock, or redeem, purchase, or otherwise acquire directly or indirectly,
any shares of any class of its capital stock.
7.6 INVESTMENTS. Make any loans or advances to, or investments in,
other persons, corporations or entities, except:
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(a) investments in (i) bank certificates of deposit and
savings accounts; (ii) obligations of the United States; and (iii)
prime commercial paper maturing within 90 days of the date of
acquisition by the Borrower.
(b) aggregate outstanding loans and advances made to
employees and agents in the ordinary course of business, such as travel
and entertainment advances and similar items, not to exceed in the
aggregate $20,000 (for all Borrowers) at any time.
7.7 CONTINGENT LIABILITIES. Except for guaranties of the other
Borrower's Obligations to Lender or in connection with Permitted Liens,
guarantee or become a surety or otherwise contingently liable for any
obligations of others, except pursuant to the deposit and collection of checks
and similar items in the ordinary course of business.
7.8 SALARIES AND OTHER COMPENSATION. Subject to Section 7.12
below, pay salaries, bonuses, profit sharing payments, consulting or management
fees, or any other compensation of any kind to Borrower's shareholders,
affiliates, officers, directors, or the Validity Certificators, whether as
officers, directors, employees, members or otherwise, in excess of (a) 110% of
that paid in the prior fiscal year, plus (b) bonuses based on earnings as called
for by Schedule 7.8.
7.9 STOCK. Pledge, hypothecate or otherwise encumber or sell or
otherwise transfer any shares of any class of its capital stock or make any
change in Borrower's capital structure.
7.10 NATURE OF BUSINESS. Make any substantial change in the nature
of its business from that engaged in on the date of this Agreement or engage in
any other businesses other than those engaged in on the date of this Agreement.
7.11 INSIDER TRANSACTIONS. Enter into, or permit or suffer to
exist, any transaction or arrangement with any shareholder, member, employee,
director, officer, affiliate, or member of management, except on terms that are
reasonably comparable to what Borrower could obtain in arm's-length
transactions, with persons who have no relationship with Borrower.
7.12 INSIDER PAYMENTS. Make any payment or distribution to any
other Borrower or to Centrum Industries, Inc. or its affiliates or shareholders
("Centrum"); however, provided that no Event of Default will result, each
Borrower may make periodic payments to Centrum in an aggregate amount equal to
Centrum's reasonable accounting fees and costs, Borrower's pro rata share of (a)
Centrum's actual out of pocket legal fees and costs, not to exceed $50,000 per
year and (b) the salary for Centrum's Chairman not to exceed $230,000 per year.
7.13 CAPITAL ASSET EXPENDITURES. Expend sums for the acquisition of
capital assets exceeding in the aggregate the amounts set forth on Schedule 7.13
per fiscal year, including payments under any new or additional capital or
operating lease of real or personal property.
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8. AFFIRMATIVE COVENANTS
While any of the Obligations remain unpaid, each Borrower must at all
times:
8.1 INSURANCE. Maintain adequate fire and extended coverage and
liability insurance covering all of its present and future real and personal
property, including the Collateral, with Lender's loss payable and
noncontributory mortgagee clauses in Lender's favor, protecting Lender's
interest, as such interest may appear, together with such policies of business
interruption insurance and products liability insurance as Lender may reasonably
request and insurance in accordance with all applicable workers' compensation
laws. Such insurance must be in such form, with such companies, and in such
amounts as is acceptable to Lender, insuring against liability for damage to
persons or property, and must provide for thirty (30) days prior written notice
to Lender of cancellation or material alteration. Borrower must provide Lender
with satisfactory evidence of insurance for all such coverages or upon Lender's
request true copies of the policies, simultaneously with the execution of this
Agreement, showing that Lender's interest has properly been endorsed on the
applicable policy. Lender may, in its sole discretion, on 30 days written notice
to the Borrower, require the Borrower to obtain additional or different
insurance coverages as Lender may reasonably request. Provided an Event of
Default has not occurred and is not continuing, Borrowers shall have the right
to settle and compromise casualty insurance claims and to use proceeds for (a)
repair or replacement of the damaged property and/or (b) repayment of the
Obligations. The provisions in the Mortgages, if any, with respect to Lender's
rights to retain insurance proceeds in the event of a casualty, are to be
treated as consistent with those contained in this paragraph.
8.2 EXISTENCE; PAYMENT OF TAXES AND OTHER LIABILITIES. Maintain
its corporate existence and pay all taxes, assessments and other governmental
charges against it or its property, and all of its other liabilities, before the
same become delinquent and before penalties accrue on these debts and
obligations except to the extent and so long as the same are being contested in
good faith by appropriate proceedings in such manner as not to cause any
material adverse effect upon its financial condition, with adequate reserves
provided for such payments, and, upon demand by Lender, posting with Lender of
adequate security to protect Lender.
8.3 ACCOUNTING RECORDS; REPORTS. Maintain a standard and modern
system for accounting in accordance with generally accepted accounting
principles consistently applied throughout all accounting periods, and furnish
to Lender:
(a) Within 15 calendar days after the end of each month, as of
the last day of the preceding month, aging and summary reports of
Accounts in such form and detail as Lender may reasonably request.
(b) On each Business Day, borrowing base certificates for each
Borrower (each, a "Borrowing Base Certificate") as of the close of
business of the preceding day in a form provided by Lender.
(c) Accounts receivable and collection reports, on a daily
basis.
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(d) Within 15 calendar days of each month end, a physical
inventory report covering all Inventory (wherever located), including
raw material, work-in-process, and finished goods in such form and
detail as Lender may reasonably request, accompanied by a certificate
of an officer of the applicable Borrowers in form and substance
acceptable to Lender.
(e) Within 10 Business Days of Lender's request, an Inventory
report listing of all inventories of each Borrower including raw
material, work-in-process and finished goods in such form and detail as
Lender may reasonably request, accompanied by a certificate of an
officer of such Borrower in form and substance acceptable to Lender.
(f) Within 30 calendar days after the end of each of the
month, an internally prepared balance sheet of each Borrower as of the
close of each such month and of the comparable month in the preceding
fiscal year, and statements of income and surplus of the Borrower for
each month and for that part of the fiscal year ending with each such
month and for the corresponding period of the preceding fiscal year,
all in reasonable detail and certified as true and correct (subject to
audit and normal year-end adjustments) by an officer of the Borrower.
(g) As soon as available and in any event within 90 calendar
days after the close of each fiscal year of Borrower, a copy of
Centrum's audited financial statements and audit report, including
consolidating financial statements showing each Borrower, as prepared
by independent certified public accountants of recognized standing
selected by the Borrower and reasonably acceptable to Lender, together
with all management letters, to the effect that the financial
statements fairly present the financial condition of the Borrower and
the results of its operations as of the relevant dates, and each such
financial statement shall, if available at a reasonable cost to
Borrower, be accompanied by a certification by the public accountants
that there exists no Event of Default or other action, condition or
event which, with the giving of notice or lapse of time or both, would
constitute an Event of Default under this Agreement, or if such
condition does exist, stating the nature thereof and the action, if
any, Borrower is taking to correct such condition.
(h) Within 90 calendar days after the end of each fiscal year
of Borrower, a detailed schedule of all insurance policies which the
Borrower had in force as of the end of such fiscal year, signed by an
officer of the Borrower.
(i) (1) As soon as possible and in any event within 30
calendar days after Borrower knows that any Reportable Event with
respect to any Plan has occurred, a statement of an officer of the
Borrower setting forth details as to such Reportable Event and the
action which the Borrower proposes to take with respect to the
Reportable Event, together with a copy of the notice of such Reportable
Event given to the Pension Benefit Guaranty Corporation, (2) promptly
after the filing with the United States Secretary of Labor or the
Pension Benefit Guaranty Corporation, copies of each annual report with
respect to each Plan administered by the Borrower, and (iii) promptly
after receipt, a copy of any notices the Borrower may receive from the
Pension Benefit Guaranty Corporation or the Internal Revenue Service
with respect to any Plan administered by the Borrower; provided,
however,
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this subpart (iii) shall not apply to notices of general application
promulgated by the Pension Benefit Guaranty Corporation or the Internal
Revenue Service.
(j) Within 90 calendar days after the end of each fiscal
year, pro forma cash flow, profit and loss and balance sheet forecasts
for the succeeding 12 month period.
(k) Within 60 calendar days after the end of each quarter
of each fiscal year, a letter of "covenant compliance" regarding
Borrower's obligations under this Agreement, delivered to Lender and
prepared, in form and substance acceptable to Lender, signed by an
officer of Borrower.
(l) Within 90 calendar days after the end of each fiscal
year, a listing of the names and addresses of all customers who
purchased goods or services from each Borrower during the fiscal year.
(m) All other reports, documents and information that
Lender may reasonably request.
8.4 INSPECTIONS. Permit Lender's representatives to visit and
inspect any of Borrower's properties and premises and examine, copy (by
electronic or other means) and abstract any Business Records and Collateral
records at any reasonable time, during business hours, and as often as may be
reasonably desired.
8.5 LITIGATION. Promptly furnish Lender, in writing, the details
of all material litigation, legal or administrative proceedings, or other
actions of any nature adversely affecting the Borrower, including, without
limitation, any notices of violation, citation, commencement of administrative
proceeding or similar notice under any applicable Environmental Laws, commenced
after the date hereof, in which more than $50,000.00 is at issue and, upon the
request of Lender, submit to Lender the opinion of the Borrower's counsel as to
the merits of such proceedings.
8.6 AUDITS AND EXAMINATIONS. Permit Lender's representatives to
conduct on-site audits and examinations (an "Examination") of Borrower's
business operations and Business Records as often as Lender desires. Borrowers
will pay $750 per day per auditor plus out-of-pocket expenses incurred by Lender
for each Examination performed by or on behalf of Lender.
8.7 COMPLIANCE WITH LAWS. Comply in all respects with all material
applicable laws and regulations, in effect from time to time, including without
limitation all applicable environmental laws and regulations.
8.8 MAINTENANCE OF PROPERTIES. Maintain and preserve all of its
properties that are necessary or useful in the proper conduct of its business in
good working order and condition, ordinary wear and tear excepted, and comply at
all times with the provisions of all leases to which it is a party as lessee or
under which it occupies property, so as to prevent any loss or forfeiture
thereof or thereunder; provided, however, Borrowers shall have a reasonable time
to repair or replace any property damaged by an unavoidable casualty.
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8.9 FURTHER ASSURANCES. At Lender's reasonable request, promptly
execute or cause to be executed and delivered to Lender any and all documents,
instruments and agreements deemed necessary or appropriate to facilitate the
collection of any of the Collateral, or otherwise to give effect to or carry out
the terms, conditions or intent of this Agreement (or any agreements or
documents referred to or incorporated herein).
8.10 DOMINION OF FUNDS. All collections of any nature and kind,
including payments and deposits received by Lender and proceeds subject to the
liens and security interests of Lender, including, without limitation, proceeds
realized from the Collateral, will be turned over to Lender in the form received
or, if applicable, deposited into a lockbox or blocked account designated by
Lender.
9. DEFAULTS
Without limiting the discretionary nature of Lender's agreement to make
Loans, if any one or more of the following events occurs (each an "Event of
Default" and collectively, "Events of Default"), then Lender's obligation to
make or accept any Note or any Loan under this Agreement will, at Lender's
option, immediately terminate, and the unpaid principal balance of, and accrued
interest on, all Obligations will be immediately due and payable, without
further notice of any kind, notwithstanding anything contained to the contrary
in this Agreement or in any other agreement, Note or document:
9.1 DEFAULT IN PAYMENT OF OBLIGATIONS. Unless Lender, in its
discretion, elects to charge the Revolving Loans as provided in Section 3.9
above, any Borrower fails to make a payment of any principal or interest when
and as due on any Note or any other Obligations, including the Expenses.
9.2 DEFAULT UNDER ANY AGREEMENTS. A default in the performance or
observance of any term, condition or covenant in this Agreement, or in any other
agreement or instrument made or given by any Borrower to Lender required to be
observed or performed by any Borrower for a period of 10 days after receipt of
written notice from Lender if such default or breach is curable.
9.3 REPRESENTATIONS OR STATEMENTS FALSE. Any representation or
warranty made by any Borrower in this Agreement or any certificate delivered in
accordance with this Agreement, or any financial statement delivered to Lender
proves to have been false in any material respect as of the time when made or
given.
9.4 DEFAULT ON OTHER DEBT. Any Borrower fails to pay all or any
part of the principal of or interest on any indebtedness of or assumed by such
Borrower for borrowed money as and when due and payable, whether at maturity, by
acceleration or otherwise, and such default is not cured within the period of
grace, if any, specified in the documents(s) evidencing such indebtedness, in
excess of $50,000 in the aggregate per fiscal year.
9.5 JUDGMENTS. A judgment (which is not otherwise fully covered by
insurance) is entered against any Borrower which, together with other
outstanding judgments entered against any Borrowers, exceeds in the aggregate
$50,000, and remains outstanding and unsatisfied, unbonded or unstayed for 30
days after the date of entry of such judgment,
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unless the judgment creditor commences enforcement action, in which case the
commencement of such enforcement action shall constitute an Event of Default.
9.6 BANKRUPTCY; INSOLVENCY. Any Borrower: (a) dies or becomes
insolvent; or (b) is unable, or admits in writing its inability to pay debts as
they generally mature; or (c) makes a general assignment for the benefit of
creditors or to an agent authorized to liquidate any substantial amount of its
property; or (d) files on its behalf or consents to an Insolvency Proceeding; or
(e) has an Insolvency Proceeding filed or instituted against it which is not
released or dismissed within 45 days; or (f) applies to a court for the
appointment of a receiver, trustee or custodian for any of its or their assets;
or (g) has a receiver, trustee or custodian appointed for any of its or their
assets (with or without their respective consent) which is not released or
dismissed within 45 days; provided, however as to subparagraphs (e) and (g),
Lender shall be under no obligation to make any Loans during the referenced 45
day period.
9.7 REPORTABLE EVENT. If any Reportable Event occurs and continues
for 30 days or any Plan is terminated within the meaning of Title IV of ERISA,
or a trustee is appointed by the appropriate United States District Court to
administer any Plan, or the Pension Benefit Guaranty Corporation institutes
proceedings to terminate any Plan or to appoint a trustee to administer any
Plan.
9.8 MATERIAL LOSS OR ADVERSE CHANGE. Any Borrower suffers: (i) a
casualty as to any material asset or assets used in the conduct of Borrower's
business which is not, except for deductibles acceptable to Lender, fully
covered by insurance conforming to the requirements of this Agreement; or (ii) a
material adverse change in any Borrower's business prospects or financial
condition.
9.9 REVOCATION OF VALIDITY CERTIFICATE. If any present or future
Validity Certificator notifies Lender that it intends to terminate all or a
portion of its liability under any present or future Validity Certificate in
Lender's favor, disputes its liability under any present or future Validity
Certificate in Lender's favor, or defaults under any other agreement in Lender's
favor; provided, however, it shall not be an Event of Default if a Validity
Certificator dies or terminates his employment with Borrower if such Validity
Certificator is replaced within 90 days by a substitute reasonably acceptable to
Lender.
9.10 DEFAULT UNDER OTHER DOCUMENTS. If any Borrower or any
subordinated creditor which is affiliated with Borrower which is party to any
agreement or instrument with or in favor of Lender entered into or delivered in
connection with the Loans or the Collateral defaults under any such agreement or
instrument and such default is not cured within the grace period, if any,
contained in such agreement or instrument.
9.11 GOVERNMENT LIEN. A notice of lien, levy or assessment is filed
of record with respect to any of any Borrower's assets by the United States
government, or any department, agency or instrumentality thereof, or by any
state, county, municipal or other governmental agency, or any tax or debt owing
at any time hereafter to anyone becomes a lien, whether choate or otherwise,
upon a material portion of any Borrower's assets and the same is not paid on the
payment date thereof.
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9.12 LEVY OR ATTACHMENT. A material portion of Borrower's assets
are attached, seized, subjected to a writ or distress warrant, or levied upon,
or come into the possession of any judicial officer.
9.13 NEW SUBORDINATED DEBT. Borrowers fail to obtain at least
$250,000 in New Subordinated Debt by August 31, 2000.
10. REMEDIES ON OCCURRENCE
OF AN EVENT OF DEFAULT
10.1 RIGHT AND REMEDIES. Upon the occurrence of an Event of Default
(not cured within any time or grace period specifically provided in Section 9),
Lender has all rights and remedies provided by law, and all such rights and
remedies granted under any guaranty agreement relating to the Obligations or any
security agreement or Mortgage relating to the Collateral, and under all other
existing and future agreements between Lender and the Borrowers. All such rights
and remedies are cumulative. Upon the occurrence of an Event of Default not
cured within any applicable cure period specifically provided for in Section 9
above, Lender may, at its election, without notice of its election and without
demand, do any one or more of the following, all of which are authorized by each
Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, a Note, any of the other Loan Documents or otherwise, immediately due
and payable in full;
(b) Cease making Loans or advances under this Agreement,
any of the other Loan Documents or any other agreement between any Borrower and
Lender;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Lender, but without
affecting Lender's rights, security interests and mortgages in the Collateral
and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Lender considers advisable and,
in such cases, Lender will credit the applicable Borrower's loan account with
only the net amounts received by Lender in payment of such disputed Accounts,
after deducting all Expenses incurred or expended in connection therewith;
(e) Cause each Borrower to hold all returned Inventory in
trust for Lender, segregate all returned Inventory from all other property of
such Borrower or in such Borrower's possession and conspicuously label said
returned Inventory as being subject to Lender's security interest;
(f) Without notice to or demand upon Borrowers or any
guarantor, make such payments and do such acts as Lender considers necessary or
reasonable to protect its security interest in the Collateral. Each Borrower
agrees to assemble the Collateral if Lender so requires and to deliver or make
the Collateral available to Lender at a place designated by Lender. Each
Borrower authorizes Lender to enter any premises where the Collateral is
located, to take and maintain possession of the Collateral, or any part of it,
and to pay, purchase, contest or compromise any encumbrance, charge or lien that
in Lender's determination appears to be prior or superior to its security
interest and to pay all expenses incurred in connection therewith. With respect
to any of any Borrower's owned premises,
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each Borrower hereby grants Lender a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Lender's rights or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to any Borrower (such notice being
expressly waived) and without constituting a retention of any Collateral in
satisfaction of an obligation (within the meaning of Section 9-505 of the
Uniform Commercial Code), hold or set off and apply to the Obligations any and
all (i) balances and deposits of any Borrower held by Lender (including any
amounts received in a lockbox or blocked account), or (ii) indebtedness at any
time owing to or for the credit or the account of any Borrower held by Lender;
(h) Hold, or set off and apply, as cash collateral, any
and all balances and deposits of any Borrower held by Lender (including any
amounts received in a lockbox or blocked account) to secure the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale and sell the Collateral (in the
manner provided for herein). Lender is hereby granted a license and right to
use, without charge, each Borrower's labels, patents, copyrights, rights of use
of any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale and selling any
Collateral. Each Borrower's rights under all licenses and all franchise
agreements shall inure to Lender's benefit;
(j) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including at each Borrower's premises)
as Lender determines is commercially reasonable. It is not necessary that the
Collateral be present at any such sale;
(k) Lender shall give notice of the disposition of the
Collateral as follows:
(1) Lender shall give the involved Borrower and
each holder of a security interest in the Collateral who has
filed with Lender a written request for notice, a notice in
writing of the time and place of public sale or, if the sale
is a private sale or some other disposition other than a
public sale is to be made, then the time on or after which the
private sale or other disposition is to be made;
(2) The notice will be delivered to the involved
Borrower as provided in Section 12.8, at least ten Business
Days before the date fixed for the sale, or at least ten
Business Days before the date on or after which the private
sale or other disposition is to be made, unless the Collateral
is perishable or threatens to decline speedily in value.
Notice to persons other than the involved Borrower claiming an
interest in the Collateral shall be sent to such addresses as
they have furnished to Lender;
(l) Lender may credit bid and purchase at any public
sale;
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(m) Any deficiency that exists after disposition of the
Collateral as provided above shall be paid immediately by the Borrowers. Any
excess will be remitted without interest by Lender to the party or parties
legally entitled to such excess; and
(n) In addition to the foregoing, Lender shall have all
rights and remedies provided by law and any rights and remedies contained in any
other Loan Documents. All such rights and remedies shall be cumulative.
10.2 NO WAIVER. No delay on the part of Lender in exercising any
right, power or privilege under this Agreement or any Loan Document shall
operate as a waiver, nor shall any single or partial exercise of any right,
power or privilege under this Agreement or otherwise, preclude other or further
exercise of the right, power or privilege or the exercise of any other right,
power or privilege.
11. CROSS-GUARANTY
11.1 CROSS-GUARANTY. Each Borrower hereby acknowledges and agrees
that such Borrower is jointly and severally liable for, and hereby absolutely
and unconditionally guarantees to Lender and its successors and assigns, the
full and prompt payment (whether at stated maturity, by acceleration or
otherwise) and performance of, all Obligations owed or hereafter owing to Lender
by the other Borrowers. Each Borrower agrees that its guaranty obligation
hereunder is a guaranty of payment and performance and not of collection, and
that its obligations under this Section 11 shall be absolute and unconditional,
irrespective of, and unaffected by,
(a) the genuineness, validity, regularity, enforceability
or any future amendment of, or change in, this Agreement, any other
Loan Document or any other agreement, document or instrument to which
any Borrower is or may become a party;
(b) the absence of any action to enforce this Agreement
(including this Section 11) or any other Loan Document or the waiver or
consent by Lender with respect to any of the provisions thereof;
(c) the existence, value or condition of, or failure to
perfect its lien or security interest against, any security for the
Obligations or any action, or the absence of any action, by Lender in
respect thereof (including, without limitation, the release of any such
security); or
(d) any other action or circumstances which might
otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor,
it being agreed by each Borrower that its obligations under this Section 11
shall not be discharged until the payment and performance, in full, of the
Obligations has occurred. Each Borrower shall be regarded, and shall be in the
same position, as principal debtor with respect to the Obligations guaranteed
hereunder. Each Borrower expressly waives all rights it may have now or in the
future under any statute, or at common law, or at law or in equity, or
otherwise, to compel Lender to proceed in respect of the Obligations guaranteed
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hereunder against any other Borrower or any other party or against any security
for the payment and performance of the Obligations before proceeding against, or
as a condition to proceeding against, such Borrower. Each Borrower agrees that
any notice or directive given at any time to Lender which is inconsistent with
the waiver in the immediately preceding sentence shall be null and void and may
be ignored by Lender, and, in addition, may not be pleaded or introduced as
evidence in any litigation relating to this Agreement (including this Section
11) for the reason that such pleading or introduction would be at variance with
the written terms of this Agreement (including this Section 11), unless Lender
has specifically agreed otherwise in writing. It is agreed among each Borrower
and Lender that the foregoing waivers are of the essence of the transaction
contemplated by this Agreement and the other Loan Documents and that, but for
the provisions of this Section 11 and such waivers, Lender would decline to
enter into this Agreement.
11.2 DEMAND BY LENDER. In addition to the terms of the guaranty set
forth in Section 11.1 hereof, and in no manner imposing any limitation on such
terms, it is expressly understood and agreed that, if the then outstanding
principal amount of the Obligations under this Agreement (together with all
accrued interest thereon) is declared to be immediately due and payable, then
each Borrower shall, without demand, pay to the holders of the Obligations the
entire outstanding Obligations due and owing to such holders. Payment by any
Borrower shall be made to Lender, to be credited and applied to the Obligations,
in immediately available Federal funds to an account designated by Lender or at
the address set forth herein for the giving of notice to Lender or at any other
address that may be specified in writing from time to time by Lender.
11.3 ENFORCEMENT OF GUARANTY. Each Borrower agrees that in no event
shall Lender have any obligation (although it is entitled, at its option) to
proceed against any other Borrower or any other person or any real or personal
property pledged to secure the Obligations before seeking satisfaction from such
Borrower, and Lender may proceed, prior or subsequent to, or simultaneously
with, the enforcement of Lender's rights under this Section 11, to exercise any
right or remedy which it may have against any property, real or personal, as a
result of any lien or security interest it may have as security for all or any
portion of the Obligations.
11.4 WAIVER. In addition to the waivers contained in Section 11.1
hereof, each Borrower waives, and agrees that it shall not at any time insist
upon, plead or in any manner whatever claim or take the benefit or advantage of,
any appraisal, valuation, stay, extension, marshaling of assets or redemption
laws, or exemption, whether now or at any time hereafter in force, which may
delay, prevent or otherwise affect the performance by such Borrower of the
Obligations guaranteed under, or the enforcement by Lender of, this Section 11.
Each Borrower hereby waives diligence, presentment and demand (whether for
non-payment or protest or of acceptance, maturity, extension of time, change in
nature or form of the Obligations, acceptance of further security, release of
further security, composition or agreement arrived at as to the amount of, or
the terms of, the Obligations, notice of adverse change in any other Borrower's
financial condition or any other fact which might materially increase the risk
to such Borrower) with respect to any of the Obligations guaranteed hereunder or
all other demands whatsoever and waives the benefit of all provisions of law
which are or might be in conflict with the terms of this Section 11. Each
Borrower represents, warrants and agrees that, as of the date hereof, its
obligations under this Section 11 are not subject to any offsets or defenses
against Lender or any other
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Borrower of any kind. Each Borrower further agrees that its obligations under
this Section 11 shall not be subject to any counterclaims, offsets or defenses
against Lender or against any other Borrower of any kind which may arise in the
future.
11.5 BENEFIT OF GUARANTY. Each Borrower agrees that the provisions of
this Section 11 are for the benefit of Lender and its successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between any
other Borrower and Lender, the obligations of any such other Borrower under the
Loan Documents. In the event all or any part of the Obligations are transferred,
endorsed or assigned by Lender to any person or persons, any reference to
"Lender" herein shall be deemed to refer equally to such person or persons.
11.6 REINSTATEMENT. The provisions of this Section 11 shall remain in
full force and effect and continue to be effective should any petition be filed
by or against any Borrower for liquidation or reorganization, should any
Borrower become insolvent or make an assignment for the benefit of creditors or
should a receiver or trustee be appointed for all or any significant part of any
Borrower's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by Lender, whether as a "voidable
preference", "fraudulent conveyance", or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
11.7 WAIVER OF SUBROGATION, ETC. Notwithstanding anything to the
contrary in this Agreement or in any other Loan Document, and except as set
forth in Section 11.11, each Borrower hereby:
(a) expressly and irrevocably waives, to the fullest extent
possible at all times prior to the expiration or termination of this Agreement,
on behalf of itself and its successors and assigns (including any surety) and
any other person, any and all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification, set off or any other
rights that could accrue to a surety against a principal, to a guarantor against
a principal, to a guarantor against a maker or obligor, to an accommodation
party against the party accommodated, to a holder or transferee against a maker,
or to the holder of any claim against any person, and which such Borrower may
have or hereafter acquire against any other Borrower or any person in connection
with or as a result of such Borrower's performance of this Section 11, or any
other documents to which such Borrower is a party or otherwise;
(b) expressly and irrevocably waives any "claim" (as such term
is defined in the United States Bankruptcy Code) of any kind against any other
Borrower, and further agrees that it shall not have or assert any such rights
against any person (including any surety), either directly or as an attempted
set off to any action commenced against such Borrower by Lender or any other
person;
(c) acknowledges and agrees (i) that this waiver is intended
to benefit Lender and shall not limit or otherwise effect such Borrower's
liability hereunder or the
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enforceability of this Section 11, and (ii) that Lender and its respective
successors and assigns are intended third party beneficiaries of the waivers and
agreements set forth in this Section 11.7.
11.8 ELECTION OF REMEDIES. If Lender, under applicable law, proceeds to
realize its benefits under any of the Loan Documents giving Lender a lien or
security interest upon any Collateral, (whether owned by any Borrower or by any
other person), either by judicial foreclosure or by non-judicial sale or
enforcement permitted herein, Lender may, at its sole option, determine which of
its remedies or rights it may pursue without affecting any of its rights and
remedies under this Section 11. If, in the exercise of any of its rights and
remedies, Lender shall forfeit any of its rights or remedies, including its
right to enter a deficiency judgment against any Borrower or any other person,
whether because of any applicable laws pertaining to "election of remedies" or
the like, each Borrower hereby consents to such action by Lender and waives any
claim based upon such action, even if such action by Lender shall result in a
full or partial loss of any rights of subrogation which each Borrower might
otherwise have had but for such action by Lender. Any election of remedies which
results in the denial or impairment of the right of Lender to seek a deficiency
judgment against any Borrower shall not impair any other Borrower's obligation
to pay the full amount of the Obligations. In the event Lender shall bid at any
foreclosure or trustee's sale or at any private sale permitted by law or the
Loan Documents, Lender may bid all or less than the amount of the Obligations
and the amount of such bid need not be paid by Lender but shall be credited
against the Obligations. So long as the sale is commercially reasonable, and
regardless of whether Lender or a third party is the successful bidder, the
amount of the successful bid at any such sale, shall be conclusively deemed to
be the fair market value of the Collateral and the difference between such bid
amount and the remaining balance of the Obligations shall be conclusively deemed
to be the amount of the Obligations guaranteed under this Section 11,
notwithstanding that any present or future law or court decision or ruling may
have the effect of reducing the amount of any deficiency claim to which Lender
might otherwise be entitled but for such bidding at any such sale.
11.9 CONTINUING GUARANTY. Each Borrower agrees that the guaranty set
forth in this Section 11 is a continuing guaranty and shall remain in full force
and effect until the payment and performance in full of the Obligations.
11.10 LIMITATION. Notwithstanding any provision herein contained to the
contrary, each Borrower's liability under this Section 11 shall be limited to an
amount not to exceed as of any date of determination the greater of:
(i) the net amount of all Loans advanced to the other
Borrowers under this Agreement and then re-loaned or otherwise transferred to
such Borrower; or
(ii) the amount which could be claimed by the Lender from such
Borrower under this Section 11 without rendering such claim voidable or
avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law after taking into account, among other
things, such Borrower's right of contribution and indemnification from the other
Borrowers under Section 11.2 hereof.
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11.11 CONTRIBUTION WITH RESPECT TO GUARANTY OBLIGATIONS.
(a) To the extent that any Borrower shall make a payment under
this Section 11 of all or any of the Obligations (other than Loans made to that
Borrower for which it is primarily liable) (a "Guarantor Payment") which, taking
into account all other Guarantor Payments then previously or concurrently made
by the other Borrowers, exceeds the amount which such Borrower would otherwise
have paid if each Borrower had paid the aggregate Obligations satisfied by such
Guarantor Payment in the same proportion that such Borrower's "Allocable Amount"
(as defined below) (as determined immediately prior to such Guarantor Payment)
bore to the aggregate Allocable Amounts of each of the Borrowers as determined
immediately prior to the making of such Guarantor Payment, then such Borrower
shall be entitled to receive contribution and indemnification payments from, and
be reimbursed by, the other Borrowers for the amount of such excess, pro rata
based upon their respective Allocable Amounts in effect immediately prior to
such Guarantor Payment.
(b) As of any date of determination, the "Allocable Amount" of
any Borrower shall be equal to the maximum amount of the claim which could then
be recovered from such Borrower under this Section 11 without rendering such
claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy
Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or similar statute or common law.
(c) This Section 11.11 is intended only to define the relative
rights of Borrowers and nothing set forth in this Section 11.11 is intended to
or shall impair the obligations of Borrowers, jointly and severally, to pay any
amounts as and when the same shall become due and payable in accordance with the
terms of this Agreement. Nothing contained in this Section 11.11 shall limit the
liability of any Borrower to pay any Loans made to that Borrower and accrued
interest, and Expenses with respect thereto for which such Borrower shall be
primarily liable.
(d) The parties hereto acknowledge that the rights of
contribution and indemnification hereunder shall constitute assets of the
Borrower to which such contribution and indemnification is owing.
(e) The rights of the parties under this Section 11.11 shall
be exercisable from and after the expiration or termination of this Agreement.
11.12 LIABILITY CUMULATIVE. The liability of Borrowers under this
Section 11 is in addition to and shall be cumulative with all liabilities of
each Borrower to Lender under this Agreement and the other Loan Documents to
which such Borrower is a party or in respect of any Obligations or obligation of
the other Borrowers, without any limitation as to amount, unless the instrument
or agreement evidencing or creating such other liability specifically provides
to the contrary.
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12. GENERAL TERMS
12.1 EXPENSES, FEES AND COSTS; INDEMNIFICATION.
(a) Each Borrower is responsible for the payment of all
Expenses. Each Borrower also agrees to indemnify Lender for any and all Claims
that may be imposed on, incurred by or asserted against Lender in connection
with this Agreement or any Loan Document or transaction contemplated hereby or
thereby or the business relationship between Lender, on the one hand, and any
one or more of the Borrowers or the Validity Certificators, on the other hand,
except for willful misconduct or gross negligence.
(b) Each Borrower's obligation to pay the Expenses and all of
the reimbursement obligations and indemnification obligations provided for in
this Section 12.1 are part of the Obligations, are secured by all of the
Collateral, and survive the repayment of the Obligations.
12.2 SUCCESSORS. The provisions of this Agreement shall inure to the
benefit of and be binding upon any successor to any of the parties to this
Agreement and shall extend and be available to any holder of any of the Notes;
provided, however, that persons or entities which succeed to the rights of any
Borrower under this Agreement shall not be entitled to enforce any rights or
remedies of any Borrower under or by reason of the terms of this Agreement, or
any other agreement referred to or incorporated by reference into this
Agreement, unless they shall have obtained Lender's prior written consent to
succeed to such rights, which consent will not be unreasonably withheld or
delayed.
12.3 ASSIGNMENTS AND PARTICIPATIONS. Each Borrower consents to Lender's
sale of participations in the Loans and to Lender's assignment of the Loan
Documents or any interest therein to any third party. Provided Lender gives
Borrowers prompt notice of such sale, including the percentage interest of each
participant, each Borrower also acknowledges and agrees that any participation
will give rise to a direct obligation of each Borrower to the participant and
the participant shall, for purposes of Sections 12.1, be considered to be
"Lender."
12.4 WAIVERS BY BORROWERS. Except as otherwise provide for in this
Agreement or by applicable law, each Borrower waives: (i) presentment, demand
and protest and notice of presentment, dishonor, notice of intent to accelerate,
notice of acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Lender on which Borrower may in any way be liable, and
hereby ratifies and confirms whatever Lender may do in this regard, (ii) all
rights to notice and a hearing prior to Lender's taking possession or control
of, or to Lender's replevy, attachment or levy upon, the Collateral or any bond
or security which might be required by any court prior to allowing Lender to
exercise any of its remedies, and (iii) the benefit of all valuation, appraisal
and exemption laws.
12.5 ANTI-WAIVER; AMENDMENTS; AND CUMULATIVE REMEDIES PROVISIONS. No
failure or delay on the part of Lender or the holder of any Note in the exercise
of any power or right, and no course of dealing between any Borrower and Lender
or the holder of any Note, shall operate as a waiver of such power or right, nor
shall any single or partial
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exercise of any power or right preclude other or further exercise thereof or the
exercise of any other power or right. The remedies provided for herein are
cumulative and not exclusive of any remedies which may be available to Lender at
law or in equity. No notice to or demand on any Borrower not required hereunder
or under any Note or other agreement shall in any event entitle any Borrower to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of Lender or the holder of any Note to any
other or further action in any circumstances without notice or demand. Any
waiver of any provision of this Agreement, any Note or other agreement, and any
consent to any departure by any Borrower from the terms of any provision of this
Agreement, any Note or other agreement, shall be effective only in the specific
instance and for the specific purpose for which given. Neither this Agreement
nor any Note or other agreement nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the applicable Borrower and Lender.
12.6 CONTROLLING LAW. This Agreement, the Notes and any other
agreements between the parties shall be governed by and construed in accordance
with the internal laws of the State of Michigan applicable to contracts made and
performed within Michigan without regard to conflict of laws provisions.
12.7 COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if all signatures were upon the same
instrument.
12.8 NOTICES. All communications or notices that are required or may be
given under this Agreement shall be deemed to have been served when personally
delivered or actually received if sent via telecopier or on the date when
deposited for delivery with a nationally recognized overnight courier, and
addressed as follows (unless and until Lender or any Borrower advises the other
party, in writing, of a change in such address): (a) if to any Borrower, with
the name and address of such Borrower shown at the beginning of this Agreement
with a copy to John W. Hilbert, Esq. Shumaker, Loop & Kendrick, LLP, 1000
Jackson St., Toledo, Ohio, 43624; and (b) if to Lender, addressed to Lender, to
the attention of Senior Credit Manager, at the address set forth at the
beginning of this Agreement with a copy to Donald F. Baty, Jr., Honigman Miller
Schwartz & Cohn, 2290 First National Building, 660 Woodward Avenue, Detroit,
Michigan 48226-3583.
12.9 LOAN AGREEMENT CONTROLS. Anything contained in any other agreement
referred to in this Agreement or in any other agreement now existing between
Lender and the Borrowers to the contrary notwithstanding, in the event of any
express conflict between the terms and provisions of such other agreement and
those contained in this Agreement, the terms of this Agreement shall govern and
control.
12.10 PARTIAL INVALIDITY. The unenforceability for any reason of any
provision of this Agreement shall not impair or limit the operation or validity
of any other provisions of this Agreement or any other existing or future
agreements between Lender and any Borrower.
12.11 LEGAL RATE ADJUSTMENT. This Agreement, the Notes and all other
Loan Documents between each Borrower and Lender are expressly limited so that in
no event whatsoever shall the amount of interest paid or agreed to be paid to
Lender exceed the highest rate of interest permissible under applicable law. If,
from any circumstances,
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fulfillment of any provision of this Agreement or the Notes at the time
performance of such provisions shall be due, shall involve exceeding the
interest limitation validly prescribed by law which a court of competent
jurisdiction may deem applicable to this Agreement and any Loans under this
Agreement, then the obligation to be fulfilled shall be reduced to an amount
computed at the highest rate of interest permissible under applicable law, and
if, for any reason whatsoever, Lender shall ever receive as interest an amount
which would be deemed unlawful under applicable law, such interest shall be
automatically applied to the payment of the principal of the Notes, as the case
may be (whether or not then due and payable), and not to the payment of
interest, or shall be refunded to the involved Borrower, if such principal has
been paid in full.
12.12 SETOFF. In addition to any rights and remedies of Lender provided
by law, Lender has the right, without prior written notice to any Borrower, any
such required notice being expressly waived by each Borrower to the extent
permitted by applicable law, upon the occurrence of any Event of Default and so
long as such Event of Default is continuing, to set off and apply against any
Obligations, whether matured or unmatured, of each Borrower to Lender, any
amount owing by Lender to any Borrower, at or at any time after the happening of
any of the above mentioned events, and such right of setoff may be exercised by
Lender against any Borrower or against any assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor of any
Borrower, or against anyone else claiming through or against any Borrower of
such assignee for the benefit of creditors, receiver, or execution, judgment or
attachment creditor, notwithstanding the fact that such right of setoff has not
been exercised by Lender prior to the making, filing or issuance or service upon
Lender of, or of notice of, assignment for the benefit of creditors, appointment
or application for the appointment of a receiver, or issuance of execution,
subpoena or order or warrant.
12.13 NO MARSHALLING. Each Borrower, on its own behalf and on behalf of
its successors and assigns hereby expressly waives all rights, if any, to
require a marshalling of assets by Lender or to require that Lender first resort
to some or any portion of the Collateral before foreclosing upon, selling or
otherwise realizing on any other portion thereof.
12.14 REINSTATEMENT OF OBLIGATIONS AND SECURITY. To the extent that any
Borrower makes a payment to Lender or Lender receives any payment(s) or proceeds
of Accounts or other Collateral for any Borrower's benefit, which payment(s) or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable doctrine, then, to the extent of such payment(s) or
proceeds received, any Borrower's obligations or part thereof intended to be
satisfied thereby shall be reinstated and continue in full force and effect, and
all collateral security therefor shall remain in full force and effect (or be
reinstated), as if such payment(s) or proceeds had not been received by Lender,
and an appropriate adjustment to Borrower's loan balance may be recorded, until
payment shall have been made to Lender, which payment shall be due on demand.
12.15 SURVIVAL; RELIANCE. All agreements, representations and
warranties made in this Agreement (and all agreements referred to or
incorporated herein) shall survive the execution of this Agreement (and all
documents and agreements referred to or incorporated
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herein) and the making of the Loans and the execution and delivery of the Notes.
Notwithstanding anything in this Agreement (or any documents or agreements
referred to or incorporated herein) to the contrary, no investigation or inquiry
by any party with respect to any matter which is the subject of any
representation, warranty, covenant or other agreement set forth herein or
therein is intended, nor shall it be interpreted, to limit, diminish or
otherwise affect the full scope and effect of any such representation, warranty,
covenant or other agreement. All terms, covenants, agreements, representations
and warranties of any Borrower made herein (or in any documents or agreements
referred to or incorporated herein), or in any certificate or other document
delivered pursuant hereto shall be deemed to be material and to have been relied
upon by Lender, notwithstanding any investigation heretofore or hereafter made
by Lender or its agents.
12.16 INTERPRETATION. This Agreement (and all agreements referred to or
incorporated into this Agreement) are being entered into among competent
persons, who are experienced in business and represented by counsel, and has
been reviewed by the parties and their counsel. Therefore, any ambiguous
language in this Agreement (and all agreements referred to or incorporated
herein) will not necessarily be construed against any particular party as the
drafter of such language.
12.17 INDEPENDENCE OF COVENANTS. All covenants hereunder are to be
given independent effect so that if a particular action or condition is not
permitted by any such covenant, the fact that it would be permitted by an
exception to, or would be otherwise within the limitations of, another covenant
shall not avoid the occurrence of a default or an Event of Default if such
action is taken or such condition exists.
12.18 COMMUNICATION WITH ACCOUNTANTS. Each Borrower authorizes Lender
to communicate directly with its independent certified public accountants
including PriceWaterhouse Coopers and authorizes all such accountants to make
available to Lender all financial statements and other supporting financial
documents and schedules with respect to the business, financial condition and
other affairs of any Borrower. Such accountants are hereby instructed to make
available to Lender such information and records as Lender may reasonably
request and to otherwise comply with the provisions of this Section 12.18;
Borrowers shall have no liability if such accountants fail to make the requested
information available to Lender, but in all respects Borrowers shall not be
excused from compliance with other applicable provisions of this Agreement.
After the closing date, if any Borrower engages the services of accountants
other than PriceWaterhouse Coopers, each Borrower shall deliver a letter
addressed to and acknowledged by such accountants containing the same terms and
provisions as described above.
12.19 COMMUNICATION WITH CUSTOMERS. During the continuance of any Event
of Default (or prior thereto with Borrower's prior consent, which will not be
unreasonably withheld), each Borrower authorizes Lender to communicate directly
with its customers regarding Borrower and Borrower's business relationship and
authorizes Lender to obtain, and the customers to provide, information and
documentation regarding Borrower's performance of its contracts, purchase orders
and other obligations to such customers.
12.20 CERTAIN RULES OF CONSTRUCTION. For purposes of this Agreement:
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(a) Certain References. The words "herein," "hereof" and
"hereunder," and words of similar import, refer to this Agreement as a
whole and not to any particular provision of this Agreement, and
references to Sections, Paragraphs and Exhibits, and similar
references, are to Sections or Paragraphs of, or Exhibits to, this
Agreement unless otherwise specified.
(b) General Rules. Unless the context otherwise requires: (i)
the singular includes the plural, and vice versa; (ii) all pronouns and
any variations thereof refer to the masculine, feminine or neuter, as
the identity of the person or persons may require; (iii) all
definitions and references to an agreement, instrument or document
means such agreement, instrument or document together with all exhibits
and schedules thereto and any and all amendments, restatements,
supplements, replacements, or modifications thereto as the same may be
in effect at the time such definition or reference is applicable for
any purpose; (iv) all references to any party shall include such
party's successors and permitted assigns; (v) "include", "includes",
and "including" are to be treated as if followed by "without
limitation" whether or not they are followed by these words or words
with a similar meaning; and (vi) attorneys' fees shall include
allocated costs of in-house counsel.
(c) Accounting Terms and Determinations. Except as otherwise
provided in this Agreement, all accounting terms used in this Agreement
must be interpreted, all accounting determinations hereunder must be
made, and all financial statements required to be delivered hereunder
must be prepared in accordance with GAAP; provided that, if Borrower
adopts a change in accounting principles (including any changes in
generally accepted accounting principles) from those used in preparing
the financial statements of Borrower or that affects in any material
respect (as determined by Lender) the computation of or compliance with
any of the provisions of this Agreement, then, unless this Agreement
has been amended to modify such provisions to take account of such
change in accounting principles, all financial restrictions,
provisions, and ratios must continue to be computed based upon
accounting principles in effect prior to adoption of such change.
(d) Uniform Commercial Code. All other terms contained in this
Agreement shall have, when the context so indicates, the meanings
provided for by the Uniform Commercial Code as adopted in the State of
Michigan to the extent such terms are used or defined in the statute.
(e) Headings. The headings of the various subdivisions hereof
are for convenience of reference only and shall in no way modify or
affect the interpretation of any of the terms or provisions hereof.
12.21 ENTIRE AGREEMENT OF THE PARTIES. This Agreement, including all
agreements referred to or incorporated into this Agreement, and all recitals in
this Agreement (which recitals are incorporated as covenants of the parties),
constitute the entire agreement between the parties relating to the subject
matter of this Agreement. This Agreement supersedes all prior agreements,
commitments and understandings between the parties relating to the subject
matter of this Agreement and cannot be changed or terminated orally, and shall
be deemed effective as of the date noted above.
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12.22 ACKNOWLEDGMENT OF BORROWERS. THIS AGREEMENT HAS BEEN FREELY AND
VOLUNTARILY ENTERED INTO WITH THE LENDER BY EACH BORROWER, WITHOUT ANY DURESS OR
COERCION, AND AFTER EACH BORROWER HAS EITHER CONSULTED WITH COUNSEL OR HAS BEEN
GIVEN AN OPPORTUNITY TO DO SO, AND EACH BORROWER, ACKNOWLEDGES THAT IT HAS
CAREFULLY AND COMPLETELY READ AND UNDERSTANDS ALL OF THE TERMS AND PROVISIONS OF
THIS AGREEMENT.
12.23 SUBMISSION TO JURISDICTION AND VENUE. ANY JUDICIAL PROCEEDING
AGAINST ANY BORROWER BROUGHT BY LENDER WITH RESPECT TO ANY TERM OR CONDITION OF
THIS AGREEMENT, OR ANY OTHER PRESENT OR FUTURE AGREEMENT BETWEEN ANY BORROWER
AND LENDER MAY BE BROUGHT BY LENDER IN A COURT OF COMPETENT JURISDICTION IN THE
STATE OF MICHIGAN, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH
BORROWER AND LENDER ACCEPT FOR THEMSELVES AND IN CONNECTION WITH THEIR
RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY
FINAL JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, OR ANY OTHER
PRESENT AND FUTURE AGREEMENT BETWEEN ANY BORROWER AND LENDER. TO THE FULLEST
EXTENT PERMITTED BY LAW, EACH BORROWER WAIVES ANY BOND OR SURETY OR SECURITY
UPON SUCH BOND OR SURETY WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF
LENDER. NOTHING CONTAINED IN THIS SECTION AFFECTS THE RIGHT OF LENDER TO BRING
ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF ANY
OTHER PROPER JURISDICTION UNDER APPLICABLE LAW. ANY JUDICIAL PROCEEDING BY ANY
BORROWER AGAINST LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER OR CLAIM
IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT OR ANY
PRESENT OR FUTURE AGREEMENT BETWEEN BORROWER AND LENDER, MAY BE BROUGHT ONLY IN
A FEDERAL COURT LOCATED IN THE STATE OF MICHIGAN OR IN STATE COURTS IN OAKLAND
COUNTY, MICHIGAN. EACH BORROWER WAIVES ANY OBJECTION TO JURISDICTION AND VENUE
OF ANY ACTION INSTITUTED HEREUNDER OR IN CONNECTION HEREWITH AND MAY NOT ASSERT
ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE OR BASED UPON FORUM NON
CONVENIENS. ANY BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVERS AND CONSENTS
CONTAINED HEREIN.
12.24 WAIVER OF JURY TRIAL. EACH BORROWER AND LENDER ACKNOWLEDGE THAT
THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED.
LENDER AND EACH BORROWER, AFTER CONSULTING COUNSEL OF THEIR CHOICE, EACH HEREBY
KNOWINGLY AND VOLUNTARILY, WITHOUT COERCION, WAIVE ALL RIGHTS TO A TRIAL BY JURY
OF ALL DISPUTES BETWEEN THEM. NEITHER BORROWERS NOR LENDER SHALL BE DEEMED TO
HAVE GIVEN UP THIS WAIVER OF JURY TRIAL UNLESS SUCH
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RELINQUISHMENT IS IN A WRITTEN INSTRUMENT SIGNED BY THE PARTY TO BE CHARGED.
GMAC BUSINESS CREDIT, LLC,
a Delaware Limited Liability Company
By: /s/ William J. Stewart
-----------------------------------------------
Name: William J. Stewart
-----------------------------------
Title: Vice President
----------------------------
MCINNES STEEL COMPANY,
a Pennsylvania corporation
By: /s/ Timothy M. Hunter
------------------------------------------------
Name: Timothy M. Hunter
-----------------------------------
Title: Treasurer
----------------------------
ERIE BRONZE AND ALUMINUM COMPANY,
a Pennsylvania corporation
By: /s/ Timothy M. Hunter
------------------------------------------------
Name: Timothy M. Hunter
-----------------------------------
Title: Treasurer
----------------------------
Schedules
2 - Permitted Liens
3.3 60% OLV levels
6.8 - Prior Names
6.12 - Principal places of business
6.18 - Labor matters
6.19 - Subsidiaries, Ownership
6.20 - Deposit and Bank Accounts
6.22 - Details of customer inventory programs
7.8 - Bonus Program
7.13 - Capital Expenditures
41
