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CREDIT AND SECURITY AGREEMENT
BY AND BETWEEN
WINDSOR ART, INC.
AND
NORWEST BUSINESS CREDIT, INC.
As of January 14, 1997
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS 1
Section 1.1 Definitions........................................................................ 1
Section 1.2 Cross References................................................................... 9
ARTICLE II AMOUNT AND TERMS OF THE CREDIT FACILITY............................................ 10
Section 2.1 Revolving Advances................................................................. 10
Section 2.2 Interest; Minimum Interest Charge; Default Interest; Participations; Usury......... 10
Section 2.3 Fees............................................................................... 12
Section 2.4 Computation of Interest and Fees; When Interest Due and Payable.................... 12
Section 2.5 Issuance of Letters of Credit...................................................... 12
Section 2.6 Payment of Amounts Drawn Under Letters of Credit................................... 13
Section 2.7 Collateral Account................................................................. 14
Section 2.8 Voluntary Prepayment Termination of Credit
Facility by the Borrower; Waiver of Termination Fees............................... 14
Section 2.9 Mandatory Prepayment............................................................... 15
Section 2.10 Payment............................................................................ 15
Section 2.11 Payment on Non-Banking Days........................................................ 15
Section 2.12 Use of Proceeds.................................................................... 15
Section 2.13 Liability Records.................................................................. 15
ARTICLE III SECURITY INTEREST; OCCUPANCY; SETOFF............................................... 16
Section 3.1 Grant of Security Interest......................................................... 16
Section 3.2 Notification of Account Debtors and Other Obligors................................. 16
Section 3.3 Assignment of Insurance............................................................ 16
Section 3.4 Occupancy.......................................................................... 16
Section 3.5 License............................................................................ 17
Section 3.6 Financing Statement................................................................ 17
Section 3.7 Setoff............................................................................. 18
ARTICLE IV CONDITIONS OF LENDING.............................................................. 18
Section 4.1 Conditions Precedent to Lender's Making the Initial
Revolving Advance or Issuance of Initial Letter of Credit.......................... 18
Section 4.2 Conditions Precedent to All Advances............................................... 20
ARTICLE V REPRESENTATIONS AND WARRANTIES..................................................... 21
Section 5.1 Corporate Existence and Power; Name; Chief Executive
Office; Inventory and Equipment Locations; Tax Identification Number............... 21
Section 5.2 Authorization of Borrowing; No Conflict as to Law or Agreements.................... 21
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Section 5.3 Legal Agreements................................................................... 22
Section 5.4 Subsidiaries....................................................................... 22
Section 5.5 Financial Condition; No Adverse Change............................................. 22
Section 5.6 Litigation......................................................................... 22
Section 5.7 Regulation U....................................................................... 22
Section 5.8 Taxes.............................................................................. 22
Section 5.9 Titles and Liens................................................................... 22
Section 5.10 Plans.............................................................................. 23
Section 5.11 Default............................................................................ 23
Section 5.12 Environmental Matters.............................................................. 23
Section 5.13 Submissions to Lender.............................................................. 24
Section 5.14 Financing Statements............................................................... 24
Section 5.15 Rights to Payment.................................................................. 24
Section 5.16 Obligations of Third Parties....................................................... 25
ARTICLE VI BORROWER'S AFFIRMATIVE COVENANTS................................................... 25
Section 6.1 Reporting Requirements............................................................. 25
Section 6.2 Books and Records; Inspection and Examination...................................... 28
Section 6.3 Account Verification............................................................... 28
Section 6.4 Compliance with Laws............................................................... 28
Section 6.5 Payment of Taxes and Other Claims.................................................. 28
Section 6.6 Maintenance of Properties.......................................................... 29
Section 6.7 Insurance.......................................................................... 29
Section 6.8 Preservation of Existence.......................................................... 29
Section 6.9 Delivery of Instruments, etc....................................................... 30
Section 6.10 Collateral Account................................................................. 30
Section 6.11 Key Person Life Insurance.......................................................... 30
Section 6.12 Performance by the Lender.......................................................... 30
Section 6.13 Minimum Debt Service Coverage Ratio................................................ 31
Section 6.14 Minimum Book Net Worth............................................................. 31
Section 6.15 Minimum Net Income................................................................. 31
ARTICLE VII NEGATIVE COVENANTS................................................................. 31
Section 7.1 Liens.............................................................................. 32
Section 7.2 Indebtedness....................................................................... 32
Section 7.3 Guaranties......................................................................... 32
Section 7.4 Investments and Subsidiaries....................................................... 33
Section 7.5 Dividends.......................................................................... 33
Section 7.6 Sale or Transfer of Assets; Suspension of Business Operations...................... 34
Section 7.7 Consolidation and Merger; Asset Acquisitions....................................... 34
Section 7.8 Sale and Leaseback................................................................. 34
Section 7.9 Restrictions on Nature of Business................................................. 34
Section 7.10 Capital Expenditures............................................................... 34
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Section 7.11 Accounting......................................................................... 34
Section 7.12 Discounts, etc..................................................................... 34
Section 7.13 Defined Benefit Pension Plans...................................................... 35
Section 7.14 Other Defaults..................................................................... 35
Section 7.15 Place of Business; Name............................................................ 35
Section 7.16 Organizational Documents; C Corporation Status..................................... 35
Section 7.17 Salaries........................................................................... 35
Section 7.18 Change in Ownership................................................................ 35
ARTICLE VIII EVENTS OF DEFAULT, RIGHTS AND REMEDIES............................................. 35
Section 8.1 Events of Default.................................................................. 35
Section 8.2 Rights and Remedies................................................................ 38
Section 8.3 Certain Notices.................................................................... 39
ARTICLE IX MISCELLANEOUS...................................................................... 39
Section 9.1 No Waiver; Cumulative Remedies..................................................... 39
Section 9.2 Amendments, Etc.................................................................... 39
Section 9.3 Addresses for Notices, Etc......................................................... 39
Section 9.4 [Intentionally Omitted]............................................................ 40
Section 9.5 Further Documents.................................................................. 40
Section 9.6 Collateral......................................................................... 40
Section 9.7 Costs and Expenses................................................................. 40
Section 9.8 Indemnity.......................................................................... 41
Section 9.9 Participants....................................................................... 41
Section 9.10 Execution in Counterparts.......................................................... 42
Section 9.11 Binding Effect; Assignment; Complete Agreement; Exchanging Information............. 42
Section 9.12 Severability of Provisions......................................................... 42
Section 9.13 Headings........................................................................... 42
Section 9.14 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial........................... 42
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CREDIT AND SECURITY AGREEMENT
Dated as of January 14, 1997
WINDSOR ART, INC., a Missouri corporation (the "Borrower"), and
NORWEST BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), hereby
agree as follows:
ARTICLE I
Definitions
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Section 1.1 Definitions. For all purposes of this Agreement,
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except as otherwise expressly provided or unless the context otherwise
requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well
as the singular; and
(b) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with GAAP.
"Accounts" means all of the Borrower's accounts, as such term is
defined in the UCC, including without limitation the aggregate unpaid
obligations of customers and other account debtors to the Borrower arising out
of the sale or lease of goods or rendition of services by the Borrower on an
open account or deferred payment basis.
"Advance" means a Revolving Advance.
"Affiliate" or "Affiliates" means Bentley International, Inc.,
▇▇▇▇▇ Designs, Inc., and any other Person controlled by, controlling or under
common control with the Borrower, including (without limitation) any
Subsidiary of the Borrower. For purposes of this definition, "control," when
used with respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement, as amended,
supplemented or restated from time to time.
"Banking Day" means a day other than a Saturday, Sunday or other
day on which banks are generally not open for business in Minneapolis,
Minnesota.
"Base Rate" means the rate of interest publicly announced from
time to time by Norwest Bank Minnesota as its "base rate" or, if such bank
ceases to announce a rate so designated, any similar successor rate designated
by the Lender.
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"Book Net Worth" means the aggregate of the common and preferred
stockholders' equity in the Borrower, determined in accordance with GAAP.
"Borrowing Base" means, at any time and subject to change from
time to time in the Lender's sole discretion, the lesser of:
(a) the Maximum Line; or
(b) the sum of:
(i) 80% of Eligible Accounts, and
(ii) the lesser of (A) the sum of (w) 60% of Eligible
Inventory consisting of raw materials, (x) 40%
of Eligible Inventory consisting of print
finished goods, (y) 60% of Eligible Inventory
consisting of mirror finished goods, and (z) 50%
of Eligible Inventory consisting of finished
goods manufactured for Dolbi-Cashier, or
(B) $900,000.00.;
"Capital Expenditures" for a period means any expenditure of money
for the purchase or construction of assets, or for improvements or additions
thereto, which are capitalized on the Borrower's balance sheet.
"Collateral" means all of the Borrower's Equipment, General
Intangibles, Inventory, Receivables, all sums on deposit in any Collateral
Account, and any items in any Lockbox; together with (i) all substitutions and
replacements for and products of any of the foregoing; (ii) proceeds of any
and all of the foregoing; (iii) in the case of all tangible goods, all
accessions; (iv) all accessories, attachments, parts, equipment and repairs
now or hereafter attached or affixed to or used in connection with any
tangible goods; (v) all warehouse receipts, bills of lading and other
documents of title now or hereafter covering such goods; and (vi) the Life
Insurance Policy.
"Collateral Account" has the meaning given in the Collateral
Account Agreement.
"Collateral Account Agreement" means the Collateral Account
Agreement of even date herewith by and among the Borrower, Sanwa Bank
California, and the Lender.
"Credit Facility" means the credit facility being made available
to the Borrower by the Lender pursuant to Article II.
"Current Maturities of Long Term Debt" as of a given date means
the amount of the Borrower's long-term debt and capitalized leases which will
become due during the fiscal period beginning on the designated date.
"Debt" of any Person means all items of indebtedness or liability
which in accordance with GAAP would be included in determining total
liabilities as shown on the
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liabilities side of a balance sheet of that Person as at the date as of which
Debt is to be determined. For purposes of determining a Person's aggregate Debt
at any time, "Debt" shall also include the aggregate payments required to be
made by such Person at any time under any lease that is considered a capitalized
lease under GAAP.
"Debt Service Coverage Ratio" means the ratio of (i) the sum of
(A) Funds from Operations and (B) Interest Expense minus (C) Capital
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Expenditures to (ii) the sum of (A) Current Maturities of Long Term Debt and
(B) Interest Expense.
"Default" means an event that, with giving of notice or passage of
time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the first
day of any month during which a Default or Event of Default has occurred and
ending on the date the Lender notifies the Borrower in writing that such
Default or Event of Default has been cured or waived.
"Default Rate" means an annual rate equal to two percent (2%) over
the Floating Rate, which rate shall change when and as the Floating Rate
changes.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Excess Cash Flow" means Net Income, plus depreciation, minus the
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sum of (i) the current portion of any long term debt, (ii) the amount of any
unfinanced capital expenditures, (iii) twenty percent (20%) of the increase in
Accounts, if any, from the most recent audited year-end financial statement,
and (iv) fifty percent (50%) of the increase in Inventory, if any, from the
most recent audited year-end financial statement.
"Eligible Accounts" means all unpaid Accounts, net of any credits,
except the following shall not in any event be deemed Eligible Accounts:
(i) that portion of Accounts over 60 days past the due
date stated in the Account, but in no event shall any Account be
Eligible if it is unpaid more than 120 days after the invoice date
(except Accounts payable by Sears ▇▇▇▇▇▇▇ & Co., which may be
unpaid up to 150 days past the invoice date and not be ineligible
by reason of this subparagraph (i);
(ii) That portion of Accounts that is disputed or subject
to a claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the final
delivery of goods or rendition of services, as applicable, by the
Borrower to the customer;
(iv) Accounts owed by any unit of government, whether
foreign or domestic (provided, however, that there shall be
included in Eligible Accounts
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that portion of Accounts owed by such units of government for which
the Borrower has provided evidence satisfactory to the Lender that
(A) the Lender has a first priority perfected security interest and
(B) such Accounts may be enforced by the Lender directly against
such unit of government under all applicable laws);
(v) Accounts owed by an account debtor located outside the
United States which are not (A) backed by a bank letter of credit
naming the Lender as beneficiary or assigned to the Lender, in the
Lender's possession and acceptable to the Lender in all respects,
in its sole discretion, or (B) covered by a foreign receivables
insurance policy acceptable to the Lender in its sole discretion;
(vi) Accounts owed by an account debtor that is insolvent,
the subject of bankruptcy proceedings or has gone out of business;
(vii) Accounts owed by a shareholder, subsidiary, Affiliate,
officer or employee of the Borrower;
(viii) Accounts not subject to a duly perfected security
interest in the Lender's favor or which are subject to any lien,
security interest or claim in favor of any Person other than the
Lender including without limitation any payment or performance
bond;
(ix) That portion of Accounts that has been restructured,
extended, amended or modified;
(x) That portion of Accounts that constitutes advertising,
finance charges, service charges or sales or excise taxes;
(xi) Accounts owed by an account debtor, regardless of
whether otherwise eligible, if 10% or more of the total amount due
under Accounts from such debtor is ineligible under clauses (i),
(ii) or (ix) above; and
(xii) Accounts, or portions thereof, otherwise deemed
ineligible by the Lender in its sole discretion, including,
without limitation, any portion of Accounts from a single account
debtor even if other Accounts from such account debtor are
eligible.
"Eligible Inventory" means all Inventory of the Borrower, at the
lower of cost or market value as determined in accordance with
GAAP; provided, however, that the following shall not in any event
be deemed Eligible Inventory:
(i) Inventory that is: in-transit; located at any
showroom, warehouse, job site or other premises not approved by
the Lender in writing; located outside of the states, or
localities, as applicable, in which the Lender has filed financing
statements to perfect a first priority security interest in such
Inventory; covered
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by any negotiable or non-negotiable warehouse receipt, ▇▇▇▇ of
lading or other document of title; on consignment from any Person;
on consignment to any Person or subject to any bailment unless such
consignee or bailee has executed an agreement with the Lender;
(ii) Supplies, packaging, parts or sample Inventory;
(iii) Work-in-process Inventory;
(iv) Inventory that is damaged, obsolete, slow moving or
not currently saleable in the normal course of the Borrower's
operations;
(v) Inventory that the Borrower has returned, has
attempted to return, is in the process of returning or intends to
return to the vendor thereof;
(vi) Inventory that is perishable or live;
(vii) Inventory manufactured by the Borrower pursuant to a
license unless the applicable licenser has agreed in writing to
permit the Lender to exercise its rights and remedies against such
Inventory;
(viii) Inventory that is subject to a security interest
in favor of any Person other than the Lender; and
(ix) Inventory otherwise deemed ineligible by the Lender in
its sole discretion.
"Environmental Laws" has the meaning specified in Section 5.12.
"Equipment" means all of the Borrower's equipment, as such term is
defined in the UCC, whether now owned or hereafter acquired, including but not
limited to all present and future machinery, vehicles, furniture, fixtures,
manufacturing equipment, shop equipment, office and recordkeeping equipment,
parts, tools, supplies, and including specifically (without limitation) the
goods described in any equipment schedule or list herewith or hereafter
furnished to the Lender by the Borrower.
"Event of Default" has the meaning specified in Section 8.1.
"Floating Rate" means an annual rate equal to the sum of the Base
Rate plus one and one-half percent (1.5%), which annual rate shall change when
and as the Base Rate changes.
"Funding Date" has the meaning given in Section 2.1.
"Funds From Operations" for a given period means the sum of
(i) Net Income, (ii) depreciation and amortization, (iii) deferred income
taxes, and (iv) other non cash items, each as determined for such period in
accordance with GAAP.
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"GAAP" means generally accepted accounting principles, applied on
a basis consistent with the accounting practices applied in the financial
statements described in Section 5.5, except for any change in accounting
practices to the extent that, due to a promulgation of the Financial
Accounting Standards Board changing or implementing any new accounting
standard, the Borrower either (i) is required to implement such change, or
(ii) for future periods will be required to and for the current period may in
accordance with generally accepted accounting principles implement such
change, for its financial statements to be in conformity with generally
accepted accounting principles (any such change is hereinafter referred to as
a "Required GAAP Change"), provided that (1) the Borrower shall fully disclose
in such financial statements any such Required GAAP Change and the effects of
the Required GAAP Change on the Borrower's income, retained earnings or other
accounts, as applicable, and (2) the Borrower's financial covenants set forth
in Article 6 and Section 7.10 shall be adjusted as necessary to reflect the
effects of such Required GAAP Change.
"General Intangibles" means all of the Borrower's general
intangibles, as such term is defined in the UCC, whether now owned or
hereafter acquired, including (without limitation) all present and future
patents, patent applications, copyrights, trademarks, trade names, trade
secrets, customer or supplier lists and contracts, manuals, operating
instructions, permits, franchises, the right to use the Borrower's name, and
the goodwill of the Borrower's business.
"Guarantor(s)" means ▇▇▇▇▇ ▇▇▇▇▇▇ and Bentley International, Inc.
"Hazardous Substance" has the meaning given in Section 5.12.
"Interest Expense" means, for a fiscal year-to-date period, the
Borrower's total gross interest expense during such period (excluding interest
income), and shall in any event include, without limitation, (i) interest
expensed (whether or not paid) on all Debt, (ii) the amortization of debt
discounts, (iii) the amortization of all fees payable in connection with the
incurrence of Debt to the extent included in interest expense, and (iv) the
portion of any capitalized lease obligation allocable to interest expense.
"Inventory" means all of the Borrower's inventory, as such term is
defined in the UCC, whether now owned or hereafter acquired, whether
consisting of whole goods, spare parts or components, supplies or materials,
whether acquired, held or furnished for sale, for lease or under service
contracts or for manufacture or processing, and wherever located.
"Issuer" means the issuer of any Letter of Credit which is not
issued directly by Lender.
"L/C Amount" means the sum of (i) the aggregate face amount of any
issued and outstanding Letters of Credit and (ii) the unpaid amount of the
Obligation of Reimbursement, provided, however, that in no event shall the L/C
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Amount at any time exceed $200,000.
"L/C Application" means an application and agreement for letters
of credit in the Lender's then-current standard form or a form acceptable to
the Issuer and Lender.
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"Letter of Credit" has the meaning specified in Section 2.5
hereof.
"Life Insurance Assignment" means an Assignment of Life Insurance
Policy as Collateral to be executed by the owner and the beneficiary thereof,
in form and substance satisfactory to the Lender, granting the Lender a lien
on the Life Insurance Policy to secure payment of the Obligations.
"Life Insurance Policy" has the meaning given in Section 6.11.
"Loan Documents" means this Agreement, the Note, the Security
Documents, and any L/C Applications.
"Lockbox" has the meaning given in the Lockbox Agreement.
"Lockbox Agreement" means the Lockbox Agreement by and among the
Borrower, Sanwa Bank California, and the Lender, dated as of even date
herewith.
"Maturity Date" means December 1, 1998.
"Maximum Line" means $2,000,000.00.
"Minimum Interest Charge" has the meaning given in Section 2.2(b).
"Net Income" means fiscal year-to-date after-tax net income,
increased by the sum of any extraordinary, non-operating or non-cash income
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recorded by the Borrower and decreased by any extraordinary, non-cash or
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non-operating expense or loss recorded by the Borrower, as determined in
accordance with GAAP.
"Norwest Bank Minnesota" means Norwest Bank Minnesota, National
Association.
"Note" means the Revolving Note.
"Obligations" means the Note, the Obligation of Reimbursement, and
each and every other debt, liability and obligation of every type and
description which the Borrower may now or at any time hereafter owe to the
Lender, whether such debt, liability or obligation now exists or is hereafter
created or incurred, whether it arises in a transaction involving the Lender
alone or in a transaction involving other creditors of the Borrower, and
whether it is direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole, joint,
several or joint and several, and including specifically, but not limited to,
all indebtedness of the Borrower arising under this Agreement, the Note, the
Obligation of Reimbursement, or any other loan or credit agreement or guaranty
between the Borrower and the Lender, whether now in effect or hereafter
entered into.
"Obligation of Reimbursement" has the meaning given in Section 2.6
hereof.
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"Original Maturity Date" means December 1, 1998.
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained for
the Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrower conducts its
business and has any rights of possession, including (without limitation) the
premises listed on Exhibit C attached hereto.
"Receivables" means each and every right of the Borrower to the
payment of money, whether such right to payment now exists or hereafter
arises, whether such right to payment arises out of a sale, lease or other
disposition of goods or other property, out of a rendering of services, out of
a loan, out of the overpayment of taxes or other liabilities, or otherwise
arises under any contract or agreement, whether such right to payment is
created, generated or earned by the Borrower or by some other person who
subsequently transfers such person's interest to the Borrower, whether such
right to payment is or is not already earned by performance, and howsoever
such right to payment may be evidenced, together with all other rights and
interests (including all liens and security interests) which the Borrower may
at any time have by law or agreement against any account debtor or other
obliger obligated to make any such payment or against any property of such
account debtor or other obligor; all including but not limited to all present
and future accounts, contract rights, loans and obligations receivable,
chattel papers, bonds, notes and other debt instruments, tax refunds and
rights to payment in the nature of general intangibles.
"Reportable Event" shall have the meaning assigned to that term in
Title IV of ERISA.
"Revolving Advance" has the meaning given in Section 2.1.
"Revolving Note" means the Borrower's revolving promissory note,
payable to the order of the Lender in substantially the form of Exhibit A
hereto, as the same may hereafter be amended, supplemented or restated from
time to time and any note or notes issued in substitution therefor.
"Security Documents" means this Agreement, the Collateral Account
Agreement, the Lockbox Agreement, the Life Insurance Assignment, and any other
document delivered to the Lender from time to time to secure the Obligations,
as the same may hereafter be amended, supplemented or restated from time to
time.
"Security Interest" has the meaning given in Section 3.1.
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"Subordination Agreements" means, collectively, those certain
Subordination Agreement from the Subordinate Creditors fully subordinating
their liens on the Collateral to the Security Interest, and "Subordination
Agreement" means any one of them.
"Subordinate Creditors" means, collectively, The ▇▇▇▇▇▇, ▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ Trust, the ▇▇▇▇▇▇ Family Trust, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and the ▇▇▇▇▇ ▇.
▇▇▇▇ Marital Trust, and "Subordinate Creditor" means any one of them.
"Subsidiary," means any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such
corporation, irrespective of whether or not at the time stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency, is at the time directly or indirectly owned by
the Borrower, by the Borrower and one or more other Subsidiaries, or by one or
more other Subsidiaries.
"Tangible Net Worth" means the difference between (i) the tangible
assets of the Borrower, which, in accordance with GAAP are tangible assets,
after deducting adequate reserves in each case where, in accordance with GAAP,
a reserve is proper and (ii) all Debt of the Borrower; provided, however, that
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notwithstanding the foregoing in no event shall there be included as such
tangible assets patents, trademarks, trade names, copyrights, licenses,
goodwill, receivables from Affiliates, directors, officers or employees,
prepaid expenses, deposits, deferred charges or treasury stock or any
securities or Debt of the Borrower or any other securities unless the same are
readily marketable in the United States of America or entitled to be used as a
credit against federal income tax liabilities, and any other assets designated
from time to time by the Lender, in its sole discretion.
"Tax Expense" as of any date means state and federal income taxes
recorded by the Borrower for the Applicable period ending on such date.
"Termination Date" means the earliest of (i) the Maturity Date,
(ii) the date the Borrower terminates the Credit Facility, or (iii) the date
the Lender demands payment of the Obligations.
"UCC" means the Uniform Commercial Code as in effect from time to
time in the state designated in Section 9.14 as the state whose laws shall
govern this Agreement, or in any other state whose laws are held to govern
this Agreement or any portion hereof.
Section 1.2 Cross References. All references in this Agreement to
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Articles, Sections and subsections, shall be to Articles, Sections and
subsections of this Agreement unless otherwise explicitly specified.
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ARTICLE II
Amount and Terms of the Credit Facility
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Section 2.1 Revolving Advances. The Lender agrees to make advances
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to the Borrower from time to time from the date all of the conditions set
forth in Section 4.1 are satisfied (the "Funding Date") to the Termination
Date, on the terms and subject to the conditions herein set forth (the
"Revolving Advances"). The Lender shall not consider any request for a
Revolving Advance if, after giving effect to such requested Revolving Advance,
the sum of the outstanding and unpaid Revolving Advances plus the L/C Amount
would exceed the Borrowing Base. The Borrower's obligation to pay the
Revolving Advances shall be evidenced by the Revolving Note and shall be
secured by the Collateral as provided in Article III. Within the limits set
forth in this Section 2.1, the Borrower may request Revolving Advances, prepay
pursuant to this Article 2, and request additional Revolving Advances. The
Borrower agrees to comply with the following procedures in requesting
Revolving Advances under this Section 2.1:
(a) The Borrower shall make each request for a Revolving
Advance to the Lender before 12:00 noon (Minneapolis time) of the
day of the requested Revolving Advance. Requests may be made in
writing or by telephone, specifying the date of the requested
Revolving Advance and the amount thereof. Each request shall be
by (i) any officer of the Borrower; or (ii) any person designated
as the Borrower's agent by any officer of the Borrower in a
writing delivered to the Lender; or (iii) any person whom the
Lender reasonably believes to be an officer of the Borrower or
such a designated agent.
(b) Upon fulfillment of the applicable conditions set
forth in Article IV, the Lender shall disburse the proceeds of the
requested Revolving Advance by crediting the same to the
Borrower's demand deposit account maintained with a financial
institution reasonably acceptable to Lender, unless the Lender and
the Borrower shall agree in writing to another manner of
disbursement. Upon the Lender's request, the Borrower shall
promptly confirm each telephonic request for an Advance by
executing and delivering an appropriate confirmation certificate
to the Lender. The Borrower shall repay all Advances even if the
Lender does not receive such confirmation and even if the person
requesting an Advance was not in fact authorized to do so. Any
request for an Advance, whether written or telephonic, shall be
deemed to be a representation by the Borrower that the conditions
set forth in Section 4.2 have been satisfied as of the time of the
request.
Section 2.2 Interest; Minimum Interest Charge; Default
------------------------------------------
Interest; Participations; Usury. Interest accruing on the Note shall be due
-------------------------------
and payable in arrears on the first day of each month.
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(a) Revolving Note. Except as set forth in Sections
2.2(c), 2.2(d) and 2.2(f), the outstanding principal balance of
the Revolving Note shall bear interest at the Floating Rate.
(b) Minimum Interest Charge. Notwithstanding the
interest payable pursuant to Section 2.2(a), the Borrower shall
pay to the Lender interest of not less than $8,000.00 per calendar
month (the "Minimum Interest Charge") during the term of this
Agreement, and the Borrower shall pay any deficiency between the
Minimum Interest Charge and the amount of interest otherwise
calculated under Sections 2.2(a) and 2.2(d) on the date and in the
manner provided in Section 2.4.
(c) Default Interest Rate. At any time during any
Default Period, in the Lender's sole discretion and without
waiving any of its other rights and remedies, the principal of the
Advances outstanding from time to time shall bear interest at the
Default Rate, effective for any periods designated by the Lender
from time to time during that Default Period.
(d) Participations. If any Person shall acquire a
participation in the Advances under this Agreement, the Borrower
shall be obligated to the Lender to pay the full amount of all
interest calculated under, along with all other fees, charges and
other amounts due under this Agreement, regardless if such Person
elects to accept interest with respect to its participation at a
lower rate than the Floating Rate, or otherwise elects to accept
less than its prorata share of such fees, charges and other
amounts due under this Agreement.
(e) Usury. In any event no rate change shall be put into
effect which would result in a rate greater than the highest rate
permitted by law. Notwithstanding anything to the contrary
contained in any Loan Document, all agreements which either now
are or which shall become agreements between the Borrower and the
Lender are hereby limited so that in no contingency or event
whatsoever shall the total liability for payments in the nature of
interest, additional interest and other charges exceed the
applicable limits imposed by the usury laws of the States of
Missouri and California. If any payments in the nature of
interest, additional interest and other charges made under any
Loan Document are held to be in excess of the applicable limits
imposed by the usury laws of the States of Missouri and
California, it is agreed that any such amount held to be in excess
shall be considered payment of principal hereunder, and the
indebtedness evidenced hereby shall be reduced by such amount so
that the total liability for payments in the nature of interest,
additional interest and other charges shall not exceed the
applicable limits imposed by the usury laws of the States of
Missouri and California, in compliance with the desires of the
Borrower and the Lender. This provision shall never be superseded
or waived and shall control every other provision of the Loan
Documents and all agreements between the Borrower and Lender, or
their successors and assigns.
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Section 2.3 Fees.
----
(a) Origination Fee. The Borrower hereby agrees to pay
the Lender a fully earned and non-refundable origination fee of
$10,000.00, due and payable upon the execution of this Agreement.
The Lender acknowledges receipt of $20,000.00 toward payment of
this fee and the fees, costs and expenses described in Sections
2.3(b) and 9.7.
(b) Audit Fees. Except for the preliminary audit of the
Collateral made before the Funding Date, which fees will be split
equally between Borrower and Lender, the Borrower hereby agrees to
pay the Lender, on demand, audit fees in connection with any
audits or inspections conducted by the Lender of any Collateral or
the Borrower's operations or business at the rates established
from time to time by the Lender as its audit fees (which fees are
currently $400.00 per day per auditor), together with all actual
out-of-pocket costs and expenses incurred in conducting any such
audit or inspection; provided, however, that except during Default
-------- -------
Periods, the Borrower shall not have to reimburse the Lender for
such fees, costs and expenses to the extent they exceed $8,400.00
per annum.
(c) Facility Fee. The Borrower hereby agrees to pay a
Facility Fee of one-half of one percent (0.5%) on the difference
between the Maximum Line and the aggregate of all Advances and
Letter of Credit, payable for each fiscal quarter on the first day
of the month following the end of such quarter, commencing January
1, 1997.
(d) Letter of Credit Fees. The Borrower agrees to pay
a fee of two percent (2%) of the face amount of each Letter of
Credit, payable upon issuance of the Letter of Credit.
Section 2.4 Computation of Interest and Fees; When Interest Due and
-------------------------------------------------------
Payable. Interest accruing on the outstanding principal balance of the
-------
Advances and fees hereunder outstanding from time to time shall be computed on
the basis of actual number of days elapsed in a year of 360 days. Interest
shall be payable in arrears on the first day of each month and on the
Termination Date.
Section 2.5 Issuance of Letters of Credit.
-----------------------------
(a) The Lender agrees, on the terms and subject to the
conditions herein set forth, to issue or cause to be issued by an
Issuer one or more letters of credit for the account of the Borrower
(each a "Letter of Credit") from time to time during the period from
the date hereof until the Termination Date, in an aggregate amount
at any time outstanding not to exceed the lesser of (x) $200,000.00,
or (y) the Borrowing Base less the sum of (i) all outstanding and
unpaid Advances hereunder and (ii) the unpaid amount of the
Obligation of Reimbursement. Each Letter of Credit, if any, shall
be issued pursuant to a
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separate L/C Application entered into between the Borrower and the
Lender, or by the Borrower and the Lender as co-applicants for the
benefit of the Issuer, completed in a manner satisfactory to the
Lender and the Issuer. The terms and conditions set forth in each
such L/C Application shall supplement the terms and conditions
hereof, but in the event of inconsistency between the terms of any
such L/C Application and the terms hereof, the terms hereof shall
control.
(b) No Letter of Credit shall be issued under this
Agreement if, after the issuance of such requested Letter of
Credit, the sum of the face amounts of all issued and outstanding
Letters of Credit would exceed the lesser of (x) $200,000.00, or
(y) the Borrowing Base less the sum of (i) all outstanding and
unpaid Advances hereunder and (ii) the unpaid amount of the
Obligation of Reimbursement.
(c) No Letter of Credit shall be issued with an expiry
date later than the Termination Date in effect as of the date of
issuance.
(d) Any request for the issuance of a Letter of Credit
shall be deemed to be a representation by the Borrower that
(i) the condition set forth in subsection (b) hereof has been met,
and (ii) the statements set forth in Section 4.2 hereof are
correct as of the time of the request.
Section 2.6 Payment of Amounts Drawn Under Letters of Credit.
------------------------------------------------
Draws under any Letter of Credit issued by Lender shall be reimbursed to the
Lender in accordance with the applicable L/C Application and as set forth
below. In the case of Letters of Credit not issued by the Lender, the
Borrower acknowledges that the Lender, as co-applicant, will be liable to the
Issuer of any Letter of Credit for reimbursement of any and all draws
thereunder and all other amounts required to be paid under the applicable L/C
Application. Accordingly, the Borrower agrees to pay to the Lender any and
all amounts required to be paid under the applicable L/C Application, when and
as required to be paid thereby, and the amounts designated below, when and as
designated.
(a) The Borrower hereby agrees to pay the Lender on the
day a draft is honored under any Letter of Credit a sum equal to
all amounts drawn under such Letter of Credit plus any and all
reasonable charges and expenses that the Issuer or the Lender may
pay or incur relative to such draw, plus interest on all such
amounts, charges and expenses as set forth below (all such amounts
are hereinafter referred to, collectively, as the "Obligation of
Reimbursement").
(b) The Borrower hereby agrees to pay the Lender on demand
interest on all amount, charges and expenses payable by the
Borrower to the Lender under this Section, accrued from the date
any such draft, charge or expense is paid by the Lender or Issuer
until payment in full by the Borrower at the Default Rate.
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If the Borrower fails to pay to the Lender promptly the amount of its
Obligation of Reimbursement in accordance with the terms hereof and the L/C
Application pursuant to which such Letter of Credit was issued, the Lender is
hereby irrevocably authorized and directed, in its sole discretion, to make an
Advance in an amount sufficient to discharge the Obligation of Reimbursement,
including all interest accrued thereon but unpaid at the time of such Advance,
and such Advance shall be evidenced by the Note and shall bear interest as
provided in this Agreement.
Section 2.7 Collateral Account. If the Lender terminates the
------------------
Credit Facility upon an Event of Default, or the Credit Facility is otherwise
terminated for any reason whatsoever, while any Letter of Credit is
outstanding, the Borrower shall thereupon pay the Lender in immediately
available funds for deposit in the Collateral Account an amount equal to the
maximum aggregate amount available to be drawn under all Letters of Credit
then outstanding, assuming compliance with all conditions for drawing
thereunder. The Collateral Account shall be maintained for the Lender by any
financial institution acceptable to the Lender. Any interest earned on
amounts deposited in the Collateral Account shall be credited to the
Collateral Account. Amounts on deposit in the Collateral Account may be
applied by the Lender at any time or from time to time to the Borrower's
Obligation of Reimbursement or any other Obligations, in the Lender's sole
discretion, and shall not be subject to withdrawal by the Borrower so long as
the Lender maintains a security interest therein. The Lender agrees to
transfer any balance in the Collateral Account to the Borrower at such time as
the Lender is required to release its security interest in the Collateral
Account under applicable law.
Section 2.8 Voluntary Prepayment; Termination of Credit Facility by
-------------------------------------------------------
the Borrower; Waiver of Termination Fees. Except as otherwise provided
----------------------------------------
herein, the Borrower may terminate the Credit Facility or prepay the Advances
in whole at any time or from time to time in part and, subject to payment and
performance of all Obligations and termination of the Credit Facility, the
Lender shall release or terminate the Security Interest and the Security
Documents to which the Borrower is entitled by law.
(a) Termination by Borrower. The Borrower may
terminate the Credit Facility as of the Maturity Date by giving at
least 90 days' prior written notice to the Lender of the
Borrower's intention to terminate the Credit Facility as of the
specified Maturity Date. The Borrower may also terminate the
Credit Facility at any time by (i) giving at least 30 days' prior
written notice to the Lender of the Borrower's intention to
terminate the Credit Facility; and (ii) paying the Lender
termination fees in accordance with subsection (b) if the Borrower
terminates the Credit Facility effective as of any date other than
the Maturity Date.
(b) Termination Fee. If the Borrower desires to
terminate the Credit Facility as of any date other than the
Maturity Date, or as of the Maturity Date but without giving at
least 90 days' prior written notice thereof, it shall give at
least 30 days' prior written notice to the Lender of the
Borrower's intention to do so and pay to the Lender a premium in
an amount equal to a percentage of the Maximum Line as follows:
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19
(A) two percent (2.0%) if the termination occurs on
or before the first anniversary of the Funding Date;
(B) one percent (1.0%) if the termination occurs
after the first anniversary of the Funding Date but on or
before the second anniversary of the Funding Date; provided,
--------
however, that no termination fee shall be payable if the
-------
Credit Facility is terminated within 30 days before the
Maturity Date.
(c) Waiver of Termination Fees. The Borrower will
not be required to pay the termination fees otherwise due under
subsection (b) if such prepayment is made because of increased
cash flow generated from the Borrower's operations or refinancing
by an affiliate of the Lender.
Section 2.9 Mandatory Prepayment. Without notice or demand, if the
--------------------
outstanding principal balance of the Revolving Advances plus the L/C Amount
shall at any time exceed the Borrowing Base, the Borrower shall immediately
prepay the Revolving Advances to the extent necessary to eliminate such
excess. Any payment received by the Lender under this section or the
immediately preceding section may be applied to the Obligations, in such order
and in such amounts as the Lender, in its discretion, may from time to time
determine.
Section 2.10 Payment. All payments to the Lender shall be made in
-------
immediately available funds and shall be applied to the Obligations two
Banking Days after receipt by the Lender. The Lender may hold all payments
not constituting immediately available funds for three (3) additional days
before applying them to the Obligations. Notwithstanding anything in Section
2.1, the Borrower hereby authorizes the Lender, in its discretion at any time
or from time to time without the Borrower's request and even if the conditions
set forth in Section 4.2 would not be satisfied, to make a Revolving Advance
in an amount equal to the portion of the Obligations from time to time due and
payable.
Section 2.11 Payment on Non-Banking Days. Whenever any payment to
---------------------------
be made hereunder shall be stated to be due on a day which is not a Banking
Day, such payment may be made on the next succeeding Banking Day, and such
extension of time shall in such case be included in the computation of
interest on the Advances or the fees hereunder, as the case may be.
Section 2.12 Use of Proceeds. The Borrower shall use the proceeds
---------------
of Advances for repayment of indebtedness to Commerce Bank of St. Louis, N.A.,
and for ordinary working capital purposes.
Section 2.13 Liability Records. The Lender may maintain from time
-----------------
to time, at its discretion, liability records as to the Obligations. All
entries made on any such record shall be presumed correct until the Borrower
establishes the contrary. Upon the Lender's demand, the Borrower will admit
and certify in writing the exact principal balance of the Obligations that the
Borrower then asserts to be outstanding. Any billing statement or
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accounting rendered by the Lender shall be conclusive and fully binding on the
Borrower unless the Borrower gives the Lender specific written notice of
exception within 30 days after receipt.
ARTICLE III
Security Interest; Occupancy; Setoff
------------------------------------
Section 3.1 Grant of Security Interest. The Borrower hereby
--------------------------
pledges, assigns and grants to the Lender a security interest (collectively
referred to as the "Security Interest") in the Collateral, as security for the
payment and performance of the Obligations.
Section 3.2 Notification of Account Debtors and Other Obligors.
--------------------------------------------------
The Lender may at any time (whether or not a Default Period then exists)
notify any account debtor or other person obligated to pay the amount due that
such right to payment has been assigned or transferred to the Lender for
security and shall be paid directly to the Lender. The Borrower will join in
giving such notice if the Lender so requests. At any time after the Borrower
or the Lender gives such notice to an account debtor or other obliger, the
Lender may, but need not, in the Lender's name or in the Borrower's name,
(a) demand, ▇▇▇ for, collect or receive any money or property at any time
payable or receivable on account of, or securing, any such right to payment,
or grant any extension to, make any compromise or settlement with or otherwise
agree to waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obliger; and (b) as the
Borrower's agent and attorney-in-fact, notify the United States Postal Service
to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and
receive, open and dispose of the Borrower's mail, applying all Collateral as
permitted under this Agreement and holding all other mail for the Borrower's
account or forwarding such mail to the Borrower's last known address.
Section 3.3 Assignment of Insurance. As additional security for
-----------------------
the payment and performance of the Obligations, the Borrower hereby assigns to
the Lender any and all monies (including, without limitation, proceeds of
insurance and refunds of unearned premiums) due or to become due under, and
all other rights of the Borrower with respect to, any and all policies of
insurance now or at any time hereafter covering the Collateral or any evidence
thereof or any business records or valuable papers pertaining thereto, and the
Borrower hereby directs the issuer of any such policy to pay all such monies
directly to the Lender. At any time, whether or not a Default Period then
exists, the Lender may (but need not), in the Lender's name or in the
Borrower's name, execute and deliver proof of claim, receive all such monies,
endorse checks and other instruments representing payment of such monies, and
adjust, litigate, compromise or release any claim against the issuer of any
such policy.
Section 3.4 Occupancy.
---------
(a) The Borrower hereby irrevocably grants to the Lender
the right to take possession of the Premises at any time during a
Default Period.
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(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that
the Lender may in good ▇▇▇▇▇ ▇▇▇▇ to be related or incidental
purposes.
(c) The Lender's right to hold the Premises shall cease
and terminate upon the earlier of (i) payment in full and
discharge of all Obligations, and (ii) final sale or disposition
of all goods constituting Collateral and delivery of all such
goods to purchasers.
(d) The Lender shall not be obligated to pay or account
for any rent or other compensation for the possession, occupancy
or use of any of the Premises; provided, however, that if the
Lender does pay or account for any rent or other compensation for
the possession, occupancy or use of any of the Premises, the
Borrower shall reimburse the Lender promptly for the full amount
thereof. In addition, the Borrower will pay, or reimburse the
Lender for, all taxes, fees, duties, imposts, charges and expenses
at any time incurred by or imposed upon the Lender by reason of
the execution, delivery, existence, recordation, performance or
enforcement of this Agreement or the provisions of this Section 3.4.
Section 3.5 License. The Borrower hereby grants to the
-------
Lender a nonexclusive, worldwide and royalty-free license to use or otherwise
exploit all trademarks, franchises, trade names, copyrights and patents of the
Borrower for the purpose of selling, leasing or otherwise disposing of any or
all Collateral during any Default Period.
Section 3.6 Financing Statement. A carbon, photographic or
-------------------
other reproduction of this Agreement or of any financing statements signed by
the Borrower is sufficient as a financing statement and may be filed as a
financing statement in any state to perfect the security interests granted
hereby. For this purpose, the following information is set forth:
Name and address of Debtor:
Windsor Art, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
Name and address of Secured Party:
Norwest Business Credit, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
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22
Section 3.7 Setoff. The Borrower agrees that the Lender may
------
at any time or from time to time, at its sole discretion and without demand
and without notice to anyone, set off any liability owed to the Borrower by
the Lender, whether or not due, against any Obligation, whether or not due.
In addition, each other Person holding a participating interest in any
Obligations shall have the right to appropriate or set off any deposit or
other liability then owed by such Person to the Borrower, whether or not due,
and apply the same to the payment of said participating interest, as fully as
if such Person had lent directly to the Borrower the amount of such
participating interest.
ARTICLE IV
Conditions of Lending
---------------------
Section 4.1 Conditions Precedent to Lender's Making the Initial
---------------------------------------------------
Revolving Advance or Issuance of Initial Letter of Credit. The Lender's
---------------------------------------------------------
obligation to make the initial Revolving Advance hereunder or to issue or
cause to be issued any Letter of Credit hereunder shall be subject to the
condition precedent that the Lender shall have received all of the following,
each in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Note, properly executed by the Borrower.
(c) A true and correct copy of any and all leases pursuant
to which the Borrower is leasing the Premises, together with a
landlord's disclaimer and consent with respect to each such lease.
(d) A true and correct copy of any and all mortgages
pursuant to which the Borrower has mortgaged the Premises,
together with a mortgagee's disclaimer and consent with respect to
each such mortgage.
(e) A true and correct copy of any and all agreements
pursuant to which the Borrower's property is in the possession of
any Person other than the Borrower, together with, in the case of
any goods held by such Person for resale, (i) a consignee's
acknowledgment and waiver of liens, (ii) UCC financing statements
sufficient to protect the Borrower's and the Lender's interests in
such goods, and (iii) UCC searches showing that no other secured
party has filed a financing statement against such Person and
covering property similar to the Borrower's other than the
Borrower, or if there exists any such secured party, evidence that
each such secured party has received notice from the Borrower and
the Lender sufficient to protect the Borrower's and the Lender's
interests in the Borrower's goods from any claim by such secured
party.
(f) An acknowledgment and waiver of liens from each
warehouse in which the Borrower is storing Inventory.
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23
(g) A true and correct copy of any and all agreements
pursuant to which the Borrower's property is in the possession of
any Person other than the Borrower, together with, (i) an
acknowledgment and waiver of liens from each subcontractor who has
possession of the Borrower's goods from time to time, (ii) UCC
financing statements sufficient to protect the Borrower's and the
Lender's interests in such goods, and (iii) UCC searches showing
that no other secured party has filed a financing statement
covering such Person's properly other than the Borrower, or if
there exists any such secured party, evidence that each such
secured party has received notice from the Borrower and the Lender
sufficient to protect the Borrower's and the Lender's interests in
the Borrower's goods from any claim by such secured party.
(h) The Life Insurance Assignment, properly executed by
the beneficiary and owner thereof, and the Life Insurance Policy,
each in form and substance satisfactory to the Lender, together
with such evidence as the Lender may request that the Life
Insurance Policy is subject to no assignments or encumbrances
other than the Life Insurance Assignment.
(i) The Collateral Account Agreement, properly executed by
the parties thereto.
(j) The Lockbox Agreement, properly executed by the
parties thereto.
(k) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain
in effect against the Borrower, (ii) no financing statements have
been filed and remain in effect against the Borrower except those
financing statements relating to Permitted Liens or to liens held
by Persons who have agreed in writing that upon receipt of
proceeds of the Advances, they will deliver UCC releases and/or
terminations satisfactory to the Lender, and (iii) the Lender has
duly filed all financing statements necessary to perfect the
Security Interest, to the extent the Security Interest is capable
of being perfected by filing.
(l) A certificate of the Borrower's Secretary or Assistant
Secretary certifying as to (i) the resolutions of the Borrower's
directors and, if required, shareholders, authorizing the
execution, delivery and performance of the Loan Documents,
(ii) the Borrower's articles of incorporation and bylaws, and
(iii) the signatures of the Borrower's officers or agents
authorized to execute and deliver the Loan Documents and other
instruments, agreements and certificates, including Advance
requests, on the Borrower's behalf.
(m) A current certificate issued by the Secretary of State
of Missouri certifying that the Borrower is in compliance with all
applicable organizational requirements of the State of Missouri.
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24
(n) Evidence that the Borrower is duly licensed or
qualified to transact business in all jurisdictions where the
character of the property owned or leased or the nature of the
business transacted by it makes such licensing or qualification
necessary.
(o) A certificate of an officer of the Borrower
confirming, in his personal capacity, the representations and
warranties set forth in Article V.
(p) An opinion of counsel to the Borrower, addressed to
the Lender.
(q) Certificates of the insurance required hereunder, with
all hazard insurance containing a lender's loss payable
endorsement in the Lender's favor and with all liability insurance
naming the Lender as an additional insured.
(r) A separate guaranty, properly executed by each
Guarantor, pursuant to which each Guarantor unconditionally
guarantees the full and prompt payment of all Obligations, except
for certain limitations contained in the Guaranty executed by
▇▇▇▇▇ ▇▇▇▇▇▇.
(s) A waiver of interest, properly executed by the spouse
of ▇▇▇▇▇ ▇▇▇▇▇▇, waiving any and all interest such spouse may have
in the assets disclosed to the Lender in the financial statements
of such Guarantor and in any future earnings or assets acquired by
such Guarantor.
(t) An opinion of counsel to each Guarantor, addressed to
the Lender.
(u) Payment of the fees and commissions due through the
date of the initial Advance and expenses incurred by the Lender
through such date and required to be paid by the Borrower under
Section 9.7, including all legal expenses incurred through the
date of this Agreement.
(v) Evidence that the Borrower shall have, after paying
(i) all indebtedness to Commerce Bank of St. Louis, N.A.,
(ii) trade accounts payable older than sixty (60) days, (iii) book
overdraft, and (iv) all closing costs and expenses, more than
$150,000 available to be borrowed under this Agreement.
(w) Such other documents as the Lender in its sole
discretion may require, including, without limitation, properly
executed L/C Applications in the case of issuance of any Letter of
Credit.
Section 4.2 Conditions Precedent to All Advances. The Lender will
------------------------------------
not make any Advance or issue or cause to be issued any Letter of Credit
unless on such date:
(a) the representations and warranties contained in
Article V are correct on and as of the date of such Advance or
issuance of such Letter of Credit
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as though made on and as of such date, except to the extent that
such representations and warranties relate solely to an earlier
date; and
(b) no event has occurred and is continuing, or would
result from such Advance or issuance of such Letter of Credit, as
the case may be, which constitutes a Default or an Event of
Default.
ARTICLE V
Representations and Warranties
------------------------------
The Borrower represents and warrants to the Lender as follows:
Section 5.1 Corporate Existence and Power; Name; Chief Executive
----------------------------------------------------
Office; Inventory and Equipment Locations; Tax Identification Number. The
--------------------------------------------------------------------
Borrower is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Missouri and is duly licensed or
qualified to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary. The Borrower has all requisite
power and authority, corporate or otherwise, to conduct its business, to own
its properties and to execute and deliver, and to perform all of its
obligations under, the Loan Documents. During its existence, the Borrower has
done business solely under the names set forth in Schedule 5.1 hereto. The
Borrower's chief executive office and principal place of business is located
at the address set forth in Schedule 5.1 hereto, and all of the Borrower's
records relating to its business or the Collateral are kept at that location.
All Inventory and Equipment is located at that location or at one of the other
locations set forth in Schedule 5.1 hereto. The Borrower's tax identification
number is correctly set forth in Section 3.6 hereto.
Section 5.2 Authorization of Borrowing; No Conflict as to Law or
----------------------------------------------------
Agreements. The execution, delivery and performance by the Borrower of the
----------
Loan Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not
(i) require any consent or approval of the Borrower's stockholders;
(ii) require any authorization, consent or approval by, or registration,
declaration or filing with, or notice to, any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
any third party, except such authorization, consent, approval, registration,
declaration, filing or notice as has been obtained, accomplished or given
prior to the date hereof; (iii) violate any provision of any law, rule or
regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System) or of any order, writ, injunction or
decree presently in effect having applicability to the Borrower or of the
Borrower's articles of incorporation or bylaws; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which the Borrower is a party
or by which it or its properties may be bound or affected; or (v) result in,
or require, the creation or imposition of any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance of any nature (other
than
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the Security Interest) upon or with respect to any of the properties now
owned or hereafter acquired by the Borrower.
Section 5.3 Legal Agreements. This Agreement constitutes and, upon
----------------
due execution by the Borrower, the other Loan Documents will constitute the
legal, valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms.
Section 5.4 Subsidiaries. Except as set forth in Schedule 5.4
------------
hereto, the Borrower has no Subsidiaries.
Section 5.5 Financial Condition; No Adverse Change. The Borrower
--------------------------------------
has heretofore furnished to the Lender audited financial statements of the
Borrower for its fiscal year ended December 31, 1995 and unaudited financial
statements of the Borrower for the fiscal year-to-date period ended October
31, 1996, and those statements fairly present the Borrower's financial
condition on the dates thereof and the results of its operations and cash
flows for the periods then ended and were prepared in accordance with
generally accepted accounting principles. Since the date of the most recent
financial statements, there has been no material adverse change in the
Borrower's business, properties or condition (financial or otherwise).
Section 5.6 Litigation. Other than as is shown on Schedule 5.6
----------
hereto, there are no actions, suits or proceedings pending or, to the
Borrower's knowledge, threatened against or affecting the Borrower or any of
its Affiliates or the properties of the Borrower or any of its Affiliates
before any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, which, if determined adversely to the
Borrower or any of its Affiliates, would have a material adverse effect on the
financial condition, properties or operations of the Borrower or any of its
Affiliates.
Section 5.7 Regulation U. The Borrower is not engaged in the
------------
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Advance will be
used to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock.
Section 5.8 Taxes. The Borrower and its Affiliates have paid or
-----
caused to be paid to the proper authorities when due all federal, state and
local taxes required to be withheld by each of them. The Borrower and its
Affiliates have filed all federal, state and local tax returns which to the
knowledge of the officers of the Borrower or any Affiliate, as the case may
be, are required to be filed, and the Borrower and its Affiliates have paid or
caused to be paid to the respective taxing authorities all taxes as shown on
said returns or on any assessment received by any of them to the extent such
taxes have become due.
Section 5.9 Titles and Liens. The Borrower has good and absolute
----------------
title to all Collateral described in the collateral reports provided to the
Lender and all other Collateral, properties and assets reflected in the latest
financial statements referred to in Section 5.5 and all proceeds thereof, free
and clear of all mortgages, security interests, liens and encumbrances,
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except for Permitted Liens. No financing statement naming the Borrower as
debtor is on file in any office except to perfect only Permitted Liens.
Section 5.10 Plans. Except for the Borrower's 401(k) plan, which
-----
has been disclosed to the Lender prior to the date hereof, neither the
Borrower nor any of its Affiliates maintains or has maintained any Plan.
Neither the Borrower nor any Affiliate has received any notice or has any
knowledge to the effect that it is not in full compliance with any of the
requirements of ERISA. No Reportable Event or other fact or circumstance
which may have an adverse effect on the Plan's tax qualified status exists in
connection with any Plan. Neither the Borrower nor any of its Affiliates has:
(a) Any accumulated funding deficiency within the meaning
of ERISA; or
(b) Any liability or knows of any fact or circumstances
which could result in any liability to the Pension Benefit
Guaranty Corporation, the Internal Revenue Service, the Department
of Labor or any participant in connection with any Plan (other
than accrued benefits which or which may become payable to
participants or beneficiaries of any such Plan).
Section 5.11 Default. The Borrower is in compliance with all
-------
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or
default of which could have a material adverse effect on the Borrower's
financial condition, properties or operations.
Section 5.12 Environmental Matters.
---------------------
(a) Definitions. As used in this Agreement, the following
-----------
terms shall have the following meanings:
(i) "Environmental Law" means any federal, state,
local or other governmental statute, regulation, law or
ordinance dealing with the protection of human health and
the environment.
(ii) "Hazardous Substances" means pollutants,
contaminants, hazardous substances, hazardous wastes,
petroleum and fractions thereof, and all other chemicals,
wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
(b) To the Borrower's best knowledge, there are not
present in, on or under the Premises any Hazardous Substances in
such form or quantity as to create any liability or obligation for
either the Borrower or the Lender under common law of any
jurisdiction or under any Environmental Law, and no Hazardous
Substances have ever been stored, buried, spilled, leaked,
discharged, emitted or released in, on or under the Premises in
such a way as to create any such liability.
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(c) To the Borrower's best knowledge, the Borrower has not
disposed of Hazardous Substances in such a manner as to create any
liability under any Environmental Law.
(d) There are not and there never have been any requests,
claims, notices, investigations, demands, administrative
proceedings, hearings or litigation, relating in any way to the
Premises or the Borrower, alleging liability under, violation of,
or noncompliance with any Environmental Law or any license, permit
or other authorization issued pursuant thereto. To the Borrower's
best knowledge, no such matter is threatened or impending.
(e) To the Borrower's best knowledge, the Borrower's
businesses are and have in the past always been conducted in
accordance with all Environmental Laws and all licenses, permits
and other authorizations required pursuant to any Environmental
Law and necessary for the lawful and efficient operation of such
businesses are in the Borrower's possession and are in full force
and effect. No permit required under any Environmental Law is
scheduled to expire within 12 months and there is no threat that
any such permit will be withdrawn, terminated, limited or
materially changed.
(f) To the Borrower's best knowledge, the Premises are not
and never have been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability
Information System or any similar federal, state or local list,
schedule, log, inventory or database.
(g) The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other
documents describing or relating in any way to the Premises or
Borrower's businesses.
Section 5.13 Submissions to Lender. All financial and other
---------------------
information provided to the Lender by or on behalf of the Borrower in
connection with the Borrower's request for the credit facilities contemplated
hereby is true and correct in all material respects and, as to projections,
valuations or proforma financial statements, present a good faith opinion as
to such projections, valuations and proforma condition and results.
Section 5.14 Financing Statements. The Borrower has provided to
--------------------
the Lender signed financing statements sufficient when filed to perfect the
Security Interest and the other security interests created by the Security
Documents. When such financing statements are filed in the offices noted
therein, the Lender will have a valid and perfected security interest in all
Collateral and all other collateral described in the Security Documents which
is capable of being perfected by filing financing statements. None of the
Collateral or other collateral covered by the Security Documents is or will
become a fixture on real estate, unless a sufficient fixture filing is in
effect with respect thereto.
Section 5.15 Rights to Payment. Each right to payment and each
-----------------
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other
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collateral covered by the Security Documents is (or, in the case of all future
Collateral or such other collateral, will be when arising or issued) the valid,
genuine and legally enforceable obligation, subject to no defense, setoff or
counterclaim, of the account debtor or other obligor named therein or in the
Borrower's records pertaining thereto as being obligated to pay such obligation.
Section 5.16 Obligations of Third Parties. Except as set forth on
----------------------------
Schedule 7.2 hereof, Borrower has not guaranteed and is not otherwise liable
in any way for the indebtedness or other obligations of any other person or
entity, including, without limitation, any Affiliate, except to the extent of
Borrower's assets pledged to secure indebtedness of ▇▇▇▇▇, Inc., which lien is
subordinated to Lender's lien pursuant to the Subordination Agreements.
ARTICLE VI
Borrower's Affirmative Covenants
--------------------------------
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 Reporting Requirements. The Borrower will deliver, or
----------------------
cause to be delivered, to the Lender each of the following, which shall be in
form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 90 days
after the end of each fiscal year of the Borrower and the
corporate Guarantor, as the case may be, such Borrower's or
Guarantor's audited financial statements with the unqualified
opinion of independent certified public accountants selected by
the Borrower and acceptable to the Lender, which annual
financial statements shall include the Borrower's and corporate
Guarantor's balance sheet as at the end of such fiscal year and
the related statements of the Borrower's income, retained
earnings and cash flows for the fiscal year then ended,
prepared, if the Lender so requests, on a consolidating and
consolidated basis to include any Affiliates, all in reasonable
detail and prepared in accordance with GAAP, together with
(i) copies of all management letters prepared by such
accountants; (ii) a report signed by such accountants stating
that in making the investigations necessary for said opinion
they obtained no knowledge, except as specifically stated, of
any Default or Event of Default hereunder and all relevant facts
in reasonable detail to evidence, and the computations as to,
whether or not the Borrower is in compliance with the
requirements set forth in Sections 6.13, 6.14, 6.15, and 7.10;
and (iii) a certificate of the Borrower's chief financial
officer stating that such financial statements have been
prepared in accordance with GAAP and whether or not such officer
has knowledge of the occurrence of any Default or Event of
Default hereunder and, if so, stating in reasonable detail the
facts with respect thereto;
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(b) as soon as available and in any event within 21 days
after the end of each month, an unaudited/internal balance sheet
and statements of income and retained earnings of the Borrower
as at the end of and for such month and for the year to date
period then ended, prepared, if the Lender so requests, on a
consolidating and consolidated basis to include any Affiliates,
in reasonable detail and stating in comparative form the figures
for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, subject to year-end audit
adjustments; and accompanied by a certificate of the Borrower's
chief financial officer, substantially in the form of Exhibit B
hereto stating (i) that such financial statements have been
prepared in accordance with GAAP, subject to year-end audit
adjustments, (ii) whether or not such officer has knowledge of
the occurrence of any Default or Event of Default hereunder not
theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto, and (iii) all
relevant facts in reasonable detail to evidence, and the
computations as to, whether or not the Borrower is in compliance
with the requirements set forth in Sections 6.13, 6.14, 6.15,
and 7.10;
(c) within 15 days after the end of each month or more
frequently if the Lender so requires, agings of the Borrower's
accounts receivable and its accounts payable, an inventory
certification report, and a calculation of the Borrower's
Accounts, Eligible Accounts, Inventory and Eligible Inventory as
at the end of such month or shorter time period;
(d) at least 30 days before the beginning of each fiscal
year of the Borrower, the projected balance sheets and income
statements for each month of such year, each in reasonable
detail, representing the Borrower's good faith projections and
certified by the Borrower's chief financial officer as being the
most accurate projections available and identical to the
projections used by the Borrower for internal planning purposes,
together with such supporting schedules and information as the
Lender may in its discretion require;
(e) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting the Borrower of the
type described in Section 5.12 or which seek a monetary recovery
against the Borrower in excess of $10,000.00;
(f) as promptly as practicable (but in any event not later
than five business days) after an officer of the Borrower
obtains knowledge of the occurrence of any breach, default or
event of default under any Security Document or any event which
constitutes a Default or Event of Default hereunder, notice of
such occurrence, together with a detailed statement by a
responsible officer of the Borrower of the steps being taken by
the Borrower to cure the effect of such breach, default or
event;
(g) as soon as possible and in any event within 30 days
after the Borrower knows or has reason to know that any
Reportable Event with respect
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to any Plan has occurred, the statement of the Borrower's chief
financial officer setting forth details as to such Reportable Event
and the action which the Borrower proposes to take with respect
thereto, together with a copy of the notice of such Reportable Event
to the Pension Benefit Guaranty Corporation;
(h) as soon as possible, and in any event within 10 days
after the Borrower fails to make any quarterly contribution
required with respect to any Plan under Section 412(m) of the
Internal Revenue Code of 1986, as amended, the statement of the
Borrower's chief financial officer setting forth details as to
such failure and the action which the Borrower proposes to take
with respect thereto, together with a copy of any notice of such
failure required to be provided to the Pension Benefit Guaranty
Corporation;
(i) promptly upon knowledge thereof, notice of (i) any
disputes or claims by the Borrower's customers exceeding
$25,000.00 individually, or $50,000.00 in the aggregate for any
of Borrower's customers (except ▇.▇. ▇▇▇▇▇▇ Co., for which such
aggregate limit shall be $150,000.00) during any fiscal year;
(ii) any goods returned to or recovered by the Borrower in an
amount exceeding $25,000.00 individually, and in an aggregate of
$50,000.00 to any one customer during any fiscal year, and
(iii) any change in the persons constituting the Borrower's
officers and directors;
(j) promptly upon knowledge thereof, notice of any loss of
or material damage to any Collateral or other collateral covered
by the Security Documents or of any substantial adverse change
in any Collateral or such other collateral or the prospect of
payment thereof;
(k) promptly upon their distribution, copies of all
financial statements, reports and proxy statements which the
Borrower or the corporate Guarantor shall have sent to its
stockholders;
(l) promptly after the sending or filing thereof, copies
of all regular and periodic reports which the Borrower or the
corporate Guarantor shall file with the Securities and Exchange
Commission or any national securities exchange;
(m) as soon as possible, and in any event by not later
than April 30th of each year, copies of the tax returns and all
schedules thereto of each owner of the Borrower and each
Guarantor and such other financial information about each
Guarantor as Lender may request;
(n) promptly upon knowledge thereof, notice of the
Borrower's violation of any law, rule or regulation, the
non-compliance with which could materially and adversely affect
the Borrower's business or its financial condition; and
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32
(o) from time to time, with reasonable promptness, any and
all receivables schedules, collection reports, deposit records,
equipment schedules, copies of invoices in amounts greater than
$10,000.00 to account debtors, copies of all credit memos in
excess of $5,000.00, shipment documents and delivery receipts
for goods sold, and such other material, reports, records or
information as the Lender may request.
Section 6.2 Books and Records; Inspection and Examination. The
---------------------------------------------
Borrower will keep accurate books of record and account for itself pertaining
to the Collateral and pertaining to the Borrower's business and financial
condition and such other matters as the Lender may from time to time request
in which true and complete entries will be made in accordance with GAAP and,
upon the Lender's request, will permit any officer, employee, attorney or
accountant for the Lender to audit, review, make extracts from or copy any and
all corporate and financial books and records of the Borrower at all times
during ordinary business hours, to send and discuss with account debtors and
other obligors requests for verification of amounts owed to the Borrower, and
to discuss the Borrower's affairs with any of its directors, officers,
employees or agents. The Borrower will permit the Lender, or its employees,
accountants, attorneys or agents, to examine and inspect any Collateral, other
collateral covered by the Security Documents or any other property of the
Borrower at any time during ordinary business hours.
Section 6.3 Account Verification. The Lender may at any time and
--------------------
from time to time send or require the Borrower to send requests for
verification of accounts or notices of assignment to account debtors and other
obligors. The Lender may also at any time and from time to time telephone
account debtors and other obligors to verify accounts.
Section 6.4 Compliance with Laws.
--------------------
(a) The Borrower will (i) comply with the requirements of
applicable laws and regulations, the noncompliance with which
would materially and adversely affect its business or its
financial condition and (ii) use and keep the Collateral, and
require that others use and keep the Collateral, only for lawful
purposes, without violation of any federal, state or local law,
statute or ordinance.
(b) Without limiting the foregoing undertakings, the
Borrower specifically agrees that it will comply with all
applicable Environmental Laws and obtain and comply with all
permits, licenses and similar approvals required by any
Environmental Laws, and will not generate, use, transport, treat,
store or dispose of any Hazardous Substances in such a manner as
to create any liability or obligation under the common law of any
jurisdiction or any Environmental Law.
Section 6.5 Payment of Taxes and Other Claims. The Borrower will
---------------------------------
pay or discharge, when due, (a) all taxes, assessments and governmental
charges levied or imposed upon it or upon its income or profits, upon any
properties belonging to it (including, without limitation, the Collateral) or
upon or against the creation, perfection or continuance of the Security
Interest, prior to the date on which penalties attach thereto, (b) all
federal, state and
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local taxes required to be withheld by it, and (c) all lawful claims for labor,
material and supplies which, if unpaid, might by law become a lien or charge
upon any properties of the Borrower, provided, that the Borrower shall not be
required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which proper reserves have been made.
Section 6.6 Maintenance of Properties.
-------------------------
(a) The Borrower will keep and maintain the Collateral,
the other collateral covered by the Security Documents and all of
its other properties necessary or useful in its business in good
condition, repair and working order (normal wear and tear
excepted) and will from time to time replace or repair any worn,
defective or broken parts; provided, however, that nothing in this
Section 6.6 shall prevent the Borrower from discontinuing the
operation and maintenance of any of its properties if such
discontinuance is, in the Lender's judgment, desirable in the
conduct of the Borrower's business and not disadvantageous in any
material respect to the Lender.
(b) The Borrower will defend the Collateral against all
claims or demands of all persons (other than the Lender) claiming
the Collateral or any interest therein.
(c) The Borrower will keep all Collateral and other
collateral covered by the Security Documents free and clear of all
security interests, liens and encumbrances except Permitted Liens.
Section 6.7 Insurance. The Borrower will obtain and at all times
---------
maintain insurance with insurers believed by the Borrower to be responsible
and reputable, in such amounts and against such risks as may from time to time
be required by the Lender, but in all events in such amounts and against such
risks as is usually carried by companies engaged in similar business and
owning similar properties in the same general areas in which the Borrower
operates. Without limiting the generality of the foregoing, the Borrower will
at all times maintain business interruption insurance including coverage for
force majeure and keep all tangible Collateral insured against risks of fire
(including so-called extended coverage), theft, collision (for Collateral
consisting of motor vehicles) and such other risks and in such amounts as the
Lender may reasonably request, with any loss payable to the Lender to the
extent of its interest, and all policies of such insurance shall contain a
lender's loss payable endorsement for the Lender's benefit. All policies of
liability insurance required hereunder shall name the Lender as an additional
insured.
Section 6.8 Preservation of Existence. The Borrower will preserve
-------------------------
and maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall conduct
its business in an orderly, efficient and regular manner.
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34
Section 6.9 Delivery of Instruments, etc. Upon request by the
----------------------------
Lender, the Borrower will promptly deliver to the Lender in pledge all
documents and chattel papers constituting Collateral, duly endorsed or
assigned by the Borrower.
Section 6.10 Collateral Account.
------------------
(a) If, notwithstanding the instructions to debtors to
make payments to the Lockbox, the Borrower receives any payments
on Receivables, the Borrower shall deposit such payments into the
Collateral Account. Until so deposited, the Borrower shall hold
all such payments in trust for and as the property of the Lender
and shall not commingle such payments with any of its other funds
or property.
(b) Amounts deposited in the Collateral Account shall not
bear interest and shall not be subject to withdrawal by the
Borrower, except after full payment and discharge of all
Obligations.
(c) All deposits in the Collateral Account shall
constitute proceeds of Collateral and shall not constitute payment
of the Obligations. The Lender from time to time at its
discretion may, after allowing 2 Banking Days, apply deposited
funds in the Collateral Account to the payment of the Obligations,
in any order or manner of application satisfactory to the Lender,
by transferring such funds to the Lender's general account.
(d) All items deposited in the Collateral Account shall be
subject to final payment. If any such item is returned uncollected,
the Borrower will immediately pay the Lender, or, for items
deposited in the Collateral Account, the bank maintaining
such account, the amount of that item, or such bank at its
discretion may charge any uncollected item to the Borrower's
commercial account or other account. The Borrower shall be liable
as an endorser on all items deposited in the Collateral Account,
whether or not in fact endorsed by the Borrower.
Section 6.11 Key Person Life Insurance. The Borrower shall
-------------------------
maintain insurance upon the life of ▇▇▇▇▇ ▇▇▇▇▇▇, its President and CEO, with
the death benefit thereunder in an amount not less than $2,000,000.00 (the
"Life Insurance Policy"). The right to receive the proceeds of the Life
Insurance Policy shall be assigned to the Lender by the Life Insurance
Assignment.
Section 6.12 Performance by the Lender. If the Borrower at any
-------------------------
time fails to perform or observe any of the foregoing covenants contained in
this Article VI or elsewhere herein, and if such failure shall continue for a
period of ten calendar days after the Lender gives the Borrower written notice
thereof (or in the case of the agreements contained in Sections 6.5 and 6.7,
immediately upon the occurrence of such failure, without notice or lapse of
time), the Lender may, but need not, perform or observe such covenant on
behalf and in the name, place and stead of the Borrower (or, at the Lender's
option, in the Lender's name) and may, but need
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35
not, take any and all other actions which the Lender may reasonably deem
necessary to cure or correct such failure (including, without limitation, the
payment of taxes, the satisfaction of security interests, liens or encumbrances,
the performance of obligations owed to account debtors or other obligors, the
procurement and maintenance of insurance, the execution of assignments, security
agreements and financing statements, and the endorsement of instruments); and
the Borrower shall thereupon pay to the Lender on demand the amount of all
monies expended and all costs and expenses (including reasonable attorneys' fees
and legal expenses) incurred by the Lender in connection with or as a result of
the performance or observance of such agreements or the taking of such action by
the Lender, together with interest thereon from the date expended or incurred
at the Floating Rate. To facilitate the Lender's performance or observance of
such covenants of the Borrower, the Borrower hereby irrevocably appoints the
Lender, or the Lender's delegate, acting alone, as the Borrower's attorney in
fact (which appointment is coupled with an interest) with the right (but not
the duty) from time to time to create, prepare, complete, execute, deliver,
endorse or file in the name and on behalf of the Borrower any and all
instruments, documents, assignments, security agreements, financing
statements, applications for insurance and other agreements and writings
required to be obtained, executed, delivered or endorsed by the Borrower under
this Section 6.12.
Section 6.13 Minimum Debt Service Coverage Ratio. The Borrower
-----------------------------------
will maintain, during each period described below, its Debt Service Coverage
Ratio, determined as at the end of each fiscal quarter, at not less than the
ratio set forth opposite such period:
Period Minimum Debt Service
------ --------------------
Coverage Ratio
--------------
Funding Date through 3/31/97 2.5 to 1.00
4/1/97 and thereafter through the 3.0 to 1.00
Termination Date
Section 6.14 Minimum Book Net Worth. The Borrower will have as of
----------------------
the Funding Date a Book Net Worth in an amount not less than $765,000;
provided, however, that the item designated "excess of acquired assets" on
-------- -------
Borrower's financial statement shall be excluded from the calculation of Book
Net Worth for purposes of this covenant.
Section 6.15 Minimum Net Income. The Borrower will achieve each
------------------
month during the term of this Agreement a Net Income of not less than a
negative $25,000.00.
ARTICLE VII
Negative Covenants
------------------
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower agrees that, without the
Lender's prior written consent:
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36
Section 7.1 Liens. The Borrower will not create, incur or suffer
-----
to exist any mortgage, deed of trust, pledge, lien, security interest,
assignment or transfer upon or of any of its assets, now owned or hereafter
acquired, to secure any indebtedness; excluding, however from the
--------- -------
operation of the foregoing, the following (collectively, "Permitted Liens"):
(a) in the case of any of the Borrower's property which is
not Collateral or other collateral described in the Security
Documents, covenants, restrictions, rights, easements and minor
irregularities in title which do not materially interfere with
the Borrower's business or operations as presently conducted;
(b) mortgages, deeds of trust, pledges, liens, security
interests and assignments in existence on the date hereof and
listed in Schedule 7.1 hereto, securing indebtedness for
borrowed money permitted under Section 7.2;
(c) the Security Interest and liens and security interests
created by the Security Documents;
(d) purchase money security interests relating to the
acquisition of machinery and equipment of the Borrower not
exceeding the lesser of cost or fair market value thereof, not
exceeding $25,000.00 for any one purchase or $50,000.00 in the
aggregate during any fiscal year, and so long as no Default
Period is then in existence and none would exist immediately
after such acquisition; and
(e) the security interests subject to the Subordination
Agreements.
Section 7.2 Indebtedness. The Borrower will not incur, create,
------------
assume or permit to exist any indebtedness or liability on account of deposits
or advances or any indebtedness for borrowed money or letters of credit issued
on the Borrower's behalf, or any other indebtedness or liability evidenced by
notes, bonds, debentures or similar obligations, except:
(a) indebtedness (including all Obligations of
Reimbursement) arising hereunder or pursuant to this Agreement;
(b) indebtedness of the Borrower in existence on the date
hereof and listed in Schedule 7.2 hereto; and
(c) indebtedness relating to liens permitted in accordance
with Section 7.1.
Section 7.3 Guaranties. The Borrower will not assume, guarantee,
----------
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except:
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(a) the endorsement of negotiable instruments by the
Borrower for deposit or collection or similar transactions in the
ordinary course of business; and
(b) guaranties, endorsements and other direct or
contingent liabilities in connection with the obligations of other
Persons, in existence on the date hereof and listed in Schedule
7.2 hereto.
Section 7.4 Investments and Subsidiaries.
----------------------------
(a) The Borrower will not purchase or hold beneficially
any stock or other securities or evidences of indebtedness of, make
or permit to exist any loans or advances to, or make any investment
or acquire any interest whatsoever in, any other Person, including
specifically but without limitation any partnership or joint
venture, except:
(i) investments in direct obligations of the United
States of America or any agency or instrumentality thereof
whose obligations constitute full faith and credit obligations
of the United States of America having a maturity of one year
or less, commercial paper issued by U.S. corporations rated
"A-1" or "A-2" by Standard & Poors Corporation or "P-1" or
"P-2" by ▇▇▇▇▇'▇ Investors Service or certificates of deposit
or bankers' acceptances having a maturity of one year or less
issued by members of the Federal Reserve System having
deposits in excess of $100,000,000 (which certificates of
deposit or bankers' acceptances are fully insured by the
Federal Deposit Insurance Corporation);
(ii) travel advances or loans to the Borrower's
officers and employees not exceeding at any one time an
aggregate of $10,000.00; and
(iii) advances in the form of progress payments,
prepaid rent not exceeding six months or security deposits.
(b) The Borrower will not create or permit to exist any
Subsidiary, other than any Subsidiary in existence on the date
hereof and listed in Schedule 5.4 hereto.
Section 7.5 Dividends. Except as set forth below, the Borrower
---------
will not declare or pay any dividends (other than dividends payable solely in
stock of the Borrower) on any class of its stock or make any payment on
account of the purchase, redemption or other retirement of any shares of such
stock or make any distribution in respect thereof, either directly or
indirectly. Notwithstanding the provisions of this Section 7.5, the Borrower
may (a) make distributions to Bentley, Inc. for management fees up to an
aggregate of $180,000 per year, and (b) make cash dividends to its
shareholders to the extent of seventy-five percent (75%) of the Borrower's
Excess Cash Flow (as shown on the Borrower's year-end audited financial
statements), but only (i) after the first anniversary of the Funding Date and
after Lender has
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received the Borrower's audited year-end financial statements for calendar year
1997, (ii) if the Borrower's Borrowing Base, as certified to Lender, has an
average excess availability of more than $250,000 for the sixty-day period
immediately before the date of such proposed dividend, (iii) if the Borrower
will have an average excess availability of more than $250,000 for the sixty-day
periods immediately after the date of payment of such proposed dividend, (iv) if
the Borrower's accounts payable are all less than 60 days past due, and (v) no
default or event of default has occurred and is continuing hereunder.
Section 7.6 Sale or Transfer of Assets; Suspension of Business
--------------------------------------------------
Operations. The Borrower will not sell, lease, assign, transfer or otherwise
----------
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and will not liquidate;
dissolve or suspend business operations. The Borrower will not in any manner
transfer any property without prior or present receipt of full and adequate
consideration.
Section 7.7 Consolidation and Merger, Asset Acquisitions. The
--------------------------------------------
Borrower will not be acquired by, consolidate with or merge into any Person,
or permit any other Person to merge into it, or acquire (in a transaction
analogous in purpose or effect to a consolidation or merger) all or
substantially all the assets of any other Person.
Section 7.8 Sale and Leaseback. The Borrower will not enter into
------------------
any arrangement, directly or indirectly, with any other Person whereby the
Borrower shall sell or transfer any real or personal property, whether now
owned or hereafter acquired, and then or thereafter rent or lease as lessee
such property or any part thereof or any other property which the Borrower
intends to use for substantially the same purpose or purposes as the property
being sold or transferred.
Section 7.9 Restrictions on Nature of Business. The Borrower will
----------------------------------
not engage in any line of business materially different from that presently
engaged in by the Borrower and will not purchase, lease or otherwise acquire
assets not related to its business.
Section 7.10 Capital Expenditures. The Borrower will not incur or
--------------------
contract to incur Capital Expenditures of more than $50,000.00 in the
aggregate during any fiscal year, or more than $25,000.00 in any one
transaction.
Section 7.11 Accounting. The Borrower will not adopt any material
----------
change in accounting principles other than as required by GAAP. The Borrower
will not adopt, permit or consent to any change in its fiscal year.
Section 7.12 Discounts, etc. The Borrower will not, after notice
--------------
from the Lender, grant any discount, credit or allowance to any customer of
the Borrower or accept any return of goods sold, or at any time (whether
before after notice from the Lender) modify, amend, subordinate, cancel or
terminate the obligation of any account debtor or other obligor of the
Borrower.
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Section 7.13 Defined Benefit Pension Plans. The Borrower will not
-----------------------------
adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10.
Section 7.14 Other Defaults. The Borrower will not permit any
--------------
breach, default or event of default to occur under any note, loan agreement,
indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon the Borrower.
Section 7.15 Place of Business; Name. The Borrower will not
-----------------------
transfer its chief executive office or principal place of business, or move,
relocate, close or sell any business location. The Borrower will not permit
any tangible Collateral or any records pertaining to the Collateral to be
located in any state or area in which, in the event of such location, a
financing statement covering such Collateral would be required to be, but has
not in fact been, filed in order to perfect the Security Interest. The
Borrower will not change its name.
Section 7.16 Organizational Documents; C Corporation Status. The
----------------------------------------------
Borrower will not amend its certificate of incorporation, articles of
incorporation or bylaws. The Borrower shall not change or rescind its status
as an C Corporation.
Section 7.17 Salaries. The Borrower will not pay excessive or
--------
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary, bonus, commissions, consultant fees or
other compensation of any director, officer or consultant, or any member of
their families, by more than 10% in any one year, either individually or for
all such persons in the aggregate, or pay any such increase from any source
other than profits earned in the year of payment.
Section 7.18 Change in Ownership. The Borrower will not issue or
-------------------
sell any stock of the Borrower so as to change the percentage of voting and
non-voting stock owned by each of the Borrower's shareholders, and the
Borrower will not permit or suffer to occur the sale, transfer, assignment,
pledge or other disposition of any or all of the issued and outstanding shares
of stock of the Borrower.
ARTICLE VIII
Events of Default, Rights and Remedies
--------------------------------------
Section 8.1 Events of Default: "Event of Default" when used herein
-----------------
means any one of the following events:
(a) Default in the payment of the Obligations on demand or
on any portion of the Obligations that otherwise becomes due and
payable;
(b) Default in the payment of any fees, commissions, costs
or expenses required to be paid by the Borrower under this
Agreement;
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(c) Default in the performance, or breach, of any covenant
or agreement of the Borrower contained in this Agreement;
(d) The Borrower or any Guarantor shall be or become
insolvent, or admit in writing its or his inability to pay its
or his debts as they mature, or make an assignment for the
benefit of creditors; or the Borrower or any Guarantor shall
apply for or consent to the appointment of any receiver,
trustee, or similar officer for it or him or for all or any
substantial part of its or his property, or such receiver,
trustee or similar officer shall be appointed without the
application or consent of the Borrower or such Guarantor, as the
case may be; or the Borrower or any Guarantor shall institute
(by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar
proceeding relating to it or him under the laws of any
jurisdiction; or any such proceeding shall be instituted (by
petition, application or otherwise) against the Borrower or any
such Guarantor; or any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied against a
substantial part of the property of the Borrower or any
Guarantor;
(e) A petition shall be filed by or against the Borrower
or any Guarantor under the United States Bankruptcy Code naming
the Borrower or such Guarantor as debtor;
(f) The Life Insurance Policy shall be terminated, by the
Borrower or otherwise; or the Life Insurance Policy shall be
scheduled to terminate within 30 days and the Borrower shall not
have delivered a satisfactory renewal thereof to the Lender, or
the Borrower shall fail to pay any premium on the Life Insurance
Policy when due; or the Borrower shall take any other action that
impairs the value of the Life Insurance Policy.
(g) Any representation or warranty made by the Borrower in
this Agreement, by any Guarantor in any guaranty delivered to
the Lender, or by the Borrower (or any of its officers) or any
Guarantor in any agreement, certificate, instrument or financial
statement or other statement contemplated by or made or
delivered pursuant to or in connection with this Agreement or
any such guaranty shall prove to have been incorrect in any
material respect when deemed to be effective;
(h) The rendering against the Borrower of a final
judgment, decree or order for the payment of money in excess of
$10,000.00 and the continuance of such judgment, decree or order
unsatisfied and in effect for any period of 30 consecutive days
without a stay of execution;
(i) A default under any bond, debenture, note or other
evidence of indebtedness of the Borrower owed to any Person
other than the Lender, or under any indenture or other
instrument under which any such evidence of indebtedness
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has been issued or by which it is governed, or under any lease of
any of the Premises, and the expiration of the applicable period
of grace, if any, specified in such evidence of indebtedness,
indenture, other instrument or lease;
(j) Any Reportable Event, which the Lender determines in
good faith might constitute grounds for the termination of any
Plan or for the appointment by the appropriate United States
District Court of a trustee to administer any Plan, shall have
occurred and be continuing 30 days after written notice to such
effect shall have been given to the Borrower by the Lender; or a
trustee shall have been appointed by an appropriate United
States District Court to administer any Plan; or the Pension
Benefit Guaranty Corporation shall have instituted proceedings
to terminate any Plan or to appoint a trustee to administer any
Plan; or the Borrower shall have filed for a distress
termination of any Plan under Title IV of ERISA; or the Borrower
shall have failed to make any quarterly contribution required
with respect to any Plan under Section 412(m) of the Internal
Revenue Code of 1986, as amended, which the Lender determines in
good faith may by itself, or in combination with any such
failures that the Lender may determine are likely to occur in
the future, result in the imposition of a lien on the Borrower's
assets in favor of the Plan;
(k) An event of default shall occur under any Security
Document or under any other security agreement, mortgage, deed
of trust, assignment or other instrument or agreement securing
any obligations of the Borrower hereunder or under any note;
(l) The Borrower shall liquidate, dissolve, terminate or
suspend its business operations or otherwise fail to operate its
business in the ordinary course, or sell all or substantially
all of its assets, without the Lender's prior written consent;
(m) The Borrower shall fail to pay, withhold, collect or
remit any tax or tax deficiency when assessed or due (other than
any tax deficiency which is being contested in good faith and by
proper proceedings and for which it shall have set aside on its
books adequate reserves therefor) or notice of any state or
federal tax liens shall be filed or issued;
(n) Default in the payment of any amount owed by the
Borrower to the Lender other than any indebtedness arising
hereunder;
(o) Any Guarantor shall repudiate, purport to revoke or
fail to perform any such Guarantor's obligations under such
Guarantor's guaranty in favor of the Lender, any individual
Guarantor shall die or any other Guarantor shall cease to exist;
(p) The Borrower shall take or participate in any action
which would be prohibited under the provisions of any
Subordination Agreement or make any
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42
payment on the Subordinated Indebtedness (as defined in the
Subordination Agreement) that any Person was not entitled to receive
under the provisions of the Subordination Agreement;
(q) Any event or circumstance with respect to the Borrower
shall occur such that the Lender shall believe in good faith that
the prospect of payment of all or any part of the Obligations or
the performance by the Borrower under the Loan Documents is
impaired or any material adverse change in the business or
financial condition of the Borrower shall occur.
(r) Any breach, default or event of default by or
attributable to any Affiliate under any agreement between such
Affiliate and the Lender.
Section 8.2 Rights and Remedies. During any Default Period, the
-------------------
Lender may exercise any or all of the following rights and remedies:
(a) The Lender may, by notice to the Borrower, declare the
Obligations to be forthwith due and payable, whereupon all
Obligations shall become and be forthwith due and payable, without
presentment, notice of dishonor, protest or further notice of any
kind, all of which the Borrower hereby expressly waives;
(b) The Lender may, without notice to the Borrower and
without further action, apply any and all money owing by the
Lender to the Borrower to the payment of the Obligations;
(c) The Lender may exercise and enforce any and all rights
and remedies available upon default to a secured party under the
UCC, including, without limitation, the right to take possession
of Collateral, or any evidence thereof, proceeding without
judicial process or by judicial process (without a prior hearing
or notice thereof, which the Borrower hereby expressly waives) and
the right to sell, lease or otherwise dispose of any or all of the
Collateral, and, in connection therewith, the Borrower will on
demand assemble the Collateral and make it available to the Lender
at a place to be designated by the Lender which is reasonably
convenient to both parties;
(d) the Lender may exercise and enforce its rights and
remedies under the Loan Documents; and
(e) the Lender may exercise any other rights and remedies
available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section 8.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind.
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43
Section 8.3 Certain Notices. If notice to the Borrower of any
---------------
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 9.3) at least ten
calendar days before the date of intended disposition or other action.
ARTICLE IX
Miscellaneous
-------------
Section 9.1 No Waiver; Cumulative Remedies. No failure or delay by
------------------------------
the Lender in exercising any right, power or remedy under the Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy under the Loan Documents.
The remedies provided in the Loan Documents are cumulative and not exclusive
of any remedies provided by law.
Section 9.2 Amendments, Etc. No amendment, modification,
---------------
termination or waiver of any provision of any Loan Document or consent to any
departure by the Borrower therefrom or any release of a Security Interest
shall be effective unless the same shall be in writing and signed by the
Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No notice to
or demand on the Borrower in any case shall entitle the Borrower to any other
or further notice or demand in similar or other circumstances.
Section 9.3 Addresses for Notices, Etc. Except as otherwise
--------------------------
expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice is
being given at its address or telecopier number as set forth below:
If to the Borrower:
Windsor Art, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: 310/949-1386
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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44
If to the Lender:
Norwest Business Credit, Inc.
Norwest Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier 314/726-0903
Attention: Loan Officer: Windsor Art, Inc.
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given
on (a) the date received if personally delivered, (b) when deposited in the
mail if delivered by mail, (c) the date sent if sent by overnight courier, or
(d) the date of transmission if delivered by telecopy, except that notices or
requests to the Lender pursuant to any of the provisions of Article II shall
not be effective until received by the Lender.
Section 9.4 [Intentionally Omitted]
---------------------
Section 9.5 Further Documents. The Borrower will from time to time
-----------------
execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements and other
agreements and writings that the Lender may reasonably request in order to
secure, protect, perfect or enforce the Security Interest or the Lender's
rights under the Loan Documents (but any failure to request or assure that the
Borrower executes, delivers or endorses any such item shall not affect or
impair the validity, sufficiency or enforceability of the Loan Documents and
the Security Interest, regardless of whether any such item was or was not
executed, delivered or endorsed in a similar context or on a prior occasion).
Section 9.6 Collateral. This Agreement does not contemplate a sale
----------
of accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any
deficiency. The Lender's duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if it exercises
reasonable care in physically keeping such Collateral, or in the case of
Collateral in the custody or possession of a bailee or other third person,
exercises reasonable care in the selection of the bailee or other third
person, and the Lender need not otherwise preserve, protect, insure or care
for any Collateral. The Lender shall not be obligated to preserve any rights
the Borrower may have against prior parties, to realize on the Collateral at
all or in any particular manner or order or to apply any cash proceeds of the
Collateral in any particular order of application.
Section 9.7 Costs and Expenses. The Borrower agrees to pay on
------------------
demand all costs and expenses, including (without limitation) attorneys' fees,
incurred by the Lender in connection with the Obligations, this Agreement, the
Loan Documents, and any other document or agreement related hereto or thereto,
and the transactions contemplated herein, including without limitation all
such costs, expenses and fees incurred in connection with the negotiation,
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45
preparation, execution, amendment, administration, performance, collection and
enforcement of the Obligations and all such documents and agreements and the
creation, perfection, protection, satisfaction, foreclosure or enforcement of
the Security Interest.
Section 9.8 Indemnity. In addition to the payment of expenses
---------
pursuant to Section 9.7, the Borrower agrees to indemnify, defend and hold
harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and
all present and future officers, directors, employees, attorneys and agents of
the foregoing (the "Indemnitees") from and against any of the following
(collectively, "Indemnified Liabilities"):
(i) any and all transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by
reason of the execution and delivery of the Loan Documents, the
making of the Advances or the issuance of any Letter of Credit;
(ii) any claims, loss or damage to which any Indemnitee may
be subjected if any representation or warranty contained in
Section 5.12 proves to be incorrect in any respect or as a result
of any violation of the covenant contained in Section 6.4(b); and
(iii) any and all other liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any kind
or nature whatsoever (including, without limitation, the
reasonable fees and disbursements of counsel) in connection with
the foregoing and any other investigative, administrative or
judicial proceedings, whether or not such Indemnitee shall be
designated a party thereto, which may be imposed on, incurred by
or asserted against any such Indemnitee, in any manner related to
or arising out of or in connection with the making of the Advances
and the Loan Documents or the use or intended use of the proceeds
of the Advances.
If any investigative, judicial or administrative proceeding arising from any
of the foregoing is brought against any Indemnitee, upon such Indemnitee's
request, the Borrower, or counsel designated by the Borrower and satisfactory
to the Indemnitee, will resist and defend such action, suit or proceeding to
the extent and in the manner directed by the Indemnitee, at the Borrower's
sole costs and expense. Each Indemnitee will use its best efforts to
cooperate in the defense of any such action, suit or proceeding. If the
foregoing undertaking to indemnify, defend and hold harmless may be held to be
unenforceable because it violates any law or public policy, the Borrower shall
nevertheless make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
The Borrower's obligation under this Section 9.8 shall survive the termination
of this Agreement and the discharge of the Borrower's other obligations
hereunder.
Section 9.9 Participants. The Lender and its participants, if any,
------------
are not partners or joint venturers, and the Lender shall not have any
liability or responsibility for any obligation, act or omission of any of its
participants. All rights and powers specifically conferred upon the
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46
Lender may be transferred or delegated to any of the Lender's participants,
successors or assigns.
Section 9.10 Execution in Counterparts. This Agreement and other
-------------------------
Loan Documents may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed to be an original and all of
which counterparts, taken together, shall constitute but one and the same
instrument.
Section 9.11 Binding Effect; Assignment; Complete Agreement;
----------------------------------------------
Exchanging Information. The Loan Documents shall be binding upon and inure to
----------------------
the benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its
rights thereunder or any interest therein without the Lender's prior written
consent. This Agreement, together with the Loan Documents, comprises the
complete and integrated agreement of the parties on the subject matter hereof
and supersedes all prior agreements, written or oral, on the subject matter
hereof. Without limiting the Lender's right to share information regarding
the Borrower and its Affiliates with the Lender's participants, accountants,
lawyers and other advisors, the Lender, Norwest Corporation, and all direct
and indirect subsidiaries of Norwest Corporation, may exchange any and all
information they may have in their possession regarding the Borrower and its
Affiliates, and the Borrower waives any right of confidentiality it may have
with respect to such exchange of such information.
Section 9.12 Severability of Provisions. Any provision of this
--------------------------
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 9.13 Headings. Article and Section headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 9.14 Governing Law; Jurisdiction; Venue; Waiver of Jury
--------------------------------------------------
Trial. The Loan Documents shall be governed by and construed in accordance
-----
with the substantive laws (other than conflict laws) of the State of Missouri.
The Guaranty shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Missouri. The
parties hereto hereby (i) consents to the personal jurisdiction of the state
and federal courts located in the State of Missouri in connection with any
controversy related to this Agreement; (ii) waives any argument that venue in
any such forum is not convenient, (iii) agrees that any litigation initiated
by the Lender or the Borrower in connection with this Agreement or the other
Loan Documents shall be venued in any state court located in St. Louis County,
Missouri or the United States District Court, Eastern District of Missouri,
and (iv) agrees that a final judgment in any such suit, action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. THE PARTIES WAIVE ANY
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR
PERTAINING TO THIS AGREEMENT.
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47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of
the date first above written.
NORWEST BUSINESS CREDIT, INC. WINDSOR ART, INC.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇ /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------- --------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------- --------------------------------
Its Assistant Vice President Its President
----------------------------- ----------------------------
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