EXHIBIT 10.1
FINANCING AND SECURITY AGREEMENT
BY AND AMONG
FLANDERS CORPORATION, FLANDERS FILTERS, INC.,
FLANDERS AIRPURE PRODUCTS COMPANY, LLC,
FLANDERS INTERNATIONAL PTE, LTD,
PRECISIONAIRE, INC.,
FLANDERS AIRPURE WEST, INC.,
CHARCOAL SERVICE CORPORATION, AND
AIR SEAL FILTERS HOUSINGS, INC.
AND
NATIONSBANK, N.A.
Dated: September 19, 1996
ARTICLE 1
DEFINITIONS
SECTION 1.1 Certain Defined Terms ....................................... 1
SECTION 1.2 Accounting Terms and Other Definitional Provisions .......... 27
ARTICLE 2
THE CREDIT FACILITIES
SECTION 2.1 The Revolving Credit Facility ............................... 28
2.1.1 Revolving Credit Facility ................................... 28
2.1.2 Procedure for Making Advances Under the Revolving
Loan; Lender Protection Loans ............................... 29
2.1.3 Borrowing Base ............................................. 29
2.1.4 Borrowing Base Report ....................................... 31
2.1.5 Revolving Credit Note ....................................... 31
2.1.6 Mandatory Prepayments of Revolving Loan ..................... 31
2.1.7 Optional Prepayments of Revolving Loan ...................... 32
2.1.8 The Collateral Account ...................................... 32
2.1.9 Revolving Loan Account ...................................... 33
2.1.10 Revolving Credit Unused Line Fee ............................ 34
2.1.11 Early Termination Fee ....................................... 34
2.1.12 Required Availability under the Revolving Credit
Facility .................................................... 35
SECTION 2.2 The Term Loan Facility ...................................... 35
2.2.1 Term Loan Commitment ........................................ 35
2.2.2 The Term Note ............................................... 35
2.2.3 Mandatory Prepayments of Term Loan .......................... 36
2.2.4 Optional Prepayments of Term Loan ........................... 37
SECTION 2.3 General Financing Provisions ................................ 37
2.3.1 Borrowers' Representatives .................................. 37
2.3.2 Use of Proceeds of the Loans ................................ 39
2.3.3 Origination Fee ............................................. 39
2.3.4 Field Examination Fees ...................................... 39
2.3.5 Computation of Interest and Fees ............................ 40
2.3.6 Payments .................................................... 40
2.3.7 Liens; Setoff ............................................... 40
2.3.8 Requirements of Law ......................................... 41
2.3.10 Guaranty .................................................... 43
ARTICLE 3
THE COLLATERAL
SECTION 3.1 Debt and Obligations Secured ................................ 46
SECTION 3.2 Grant of Liens .............................................. 46
SECTION 3.3 Collateral Disclosure List .................................. 47
SECTION 3.4 Personal Property ........................................... 48
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3.4.1 Securities, Chattel Paper, Promissory Notes, etc. ........... 48
3.4.2 Patents, Copyrights and Other Property Requiring
Additional Steps to Perfect ................................. 49
SECTION 3.5 Record Searches ............................................. 49
SECTION 3.6 Costs ....................................................... 49
SECTION 3.7 Release ..................................................... 49
SECTION 3.8 Inconsistent Provisions 50
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties .............................. 50
4.1.1 Subsidiaries ................................................ 50
4.1.2 Good Standing ............................................... 50
4.1.3 Power and Authority ......................................... 50
4.1.4 Binding Agreements .......................................... 51
4.1.5 No Conflicts ................................................ 51
4.1.6 No Defaults, Violations ..................................... 51
4.1.7 Compliance with Laws ........................................ 52
4.1.8 Margin Stock ................................................ 52
4.1.9 Investment Company Act; Margin Securities ................... 52
4.1.10 Litigation .................................................. 52
4.1.11 Financial Condition ......................................... 53
4.1.12 Proforma Financial Statements ............................... 53
4.1.13 Full Disclosure ............................................. 54
4.1.14 Indebtedness for Borrowed Money ............................. 54
4.1.15 Subordinated Debt ........................................... 54
4.1.16 Equity Offering Documents; Purchase Agreement
Documents ................................................... 54
4.1.17 Taxes ....................................................... 55
4.1.18 ERISA ....................................................... 55
4.1.19 Title to Properties ......................................... 55
4.1.20 Patents, Trademarks, Etc. ................................... 56
4.1.21 Employee Relations .......................................... 56
4.1.22 Presence of Hazardous Materials or Hazardous
Materials Contamination ..................................... 56
4.1.23 Perfection and Priority of Collateral ....................... 57
4.1.24 Places of Business and Location of Collateral ............... 57
4.1.25 Equipment ................................................... 57
4.1.26 Inventory ................................................... 57
4.1.27 Accounts .................................................... 58
4.1.28 Compliance with Eligibility Standards ....................... 58
4.1.29 Equity ...................................................... 58
4.1.30 Purchase Agreement Transactions ............................. 59
4.1.31 Securities Acts ............................................. 59
4.1.32 Governmental Regulation ..................................... 59
SECTION 4.2 Survival; Updates of Representations and
Warranties .................................................. 60
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ARTICLE 5
CONDITIONS PRECEDENT
SECTION 5.1 Conditions to the Initial Advance ........................... 60
5.1.1 Organizational Documents - Borrower ......................... 60
5.1.2 Opinion of Borrower's Counsel ............................... 61
5.1.3 Consents, Licenses, Approvals, Etc. ......................... 61
5.1.4 Notes ....................................................... 61
5.1.5 Financing Documents and Collateral .......................... 61
5.1.6 Other Financing Documents ................................... 62
5.1.7 Other Documents, Etc. ....................................... 62
5.1.8 Payment of Fees ............................................. 62
5.1.9 Collateral Disclosure List .................................. 62
5.1.10 Recordings and Filings ...................................... 62
5.1.11 Insurance Certificate ....................................... 62
5.1.12 Landlord's Waivers .......................................... 62
5.1.13 Field Examination ........................................... 62
5.1.14 Appraisal ................................................... 63
5.1.15 Proforma Balance Sheet and Projections ...................... 63
5.1.16 Stock Certificates and Stock Powers ......................... 63
5.1.17 Subordination Agreement ..................................... 63
5.1.18 Subordinated Indebtedness; Equity ........................... 63
5.1.19 Closing Escrow .............................................. 64
5.1.20 Purchase Agreement Transactions ............................. 64
5.1.21 Opinions .................................................... 65
SECTION 5.2 Conditions to all Extensions of Credit ...................... 65
5.2.1 Compliance .................................................. 65
5.2.2 Borrowing Base .............................................. 65
5.2.3 Default ..................................................... 65
5.2.4 Representations and Warranties .............................. 65
5.2.5 Adverse Change .............................................. 65
5.2.6 Legal Matters ............................................... 65
ARTICLE 6
COVENANTS OF THE BORROWERS
SECTION 6.1 Affirmative Covenants ....................................... 66
6.1.1 Financial Statements ........................................ 66
6.1.2 Reports to SEC and to Stockholders .......................... 68
6.1.3 Recordkeeping, Rights of Inspection, Field Exami-
nation, Etc. ................................................ 68
6.1.4 Existence ................................................... 69
6.1.5 Compliance with Laws ........................................ 69
6.1.6 Preservation of Properties .................................. 69
6.1.7 Line of Business ............................................ 69
6.1.8 Insurance ................................................... 69
6.1.9 Taxes ....................................................... 70
6.1.10 ERISA ....................................................... 70
6.1.11 Notification of Events of Default and Adverse
Developments ................................................ 71
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6.1.12 Hazardous Materials; Contamination .......................... 72
6.1.13 Disclosure of Significant Transactions ...................... 73
6.1.14 Financial Covenants ......................................... 73
(a) Tangible Net Worth .......................................... 73
(b) Fixed Charge Coverage Ratio ................................. 73
6.1.15 Collection of Receivables ................................... 76
6.1.16 Assignments of Receivables .................................. 76
6.1.17 Government Accounts ......................................... 77
6.1.18 Notice of Returned Goods, etc. .............................. 77
6.1.19 Inventory ................................................... 77
6.1.20 Insurance With Respect to Equipment and Inventory ........... 78
6.1.21 Maintenance of the Collateral ............................... 78
6.1.22 Equipment ................................................... 79
6.1.23 Defense of Title and Further Assurances ..................... 79
6.1.24 Business Names; Locations ................................... 80
6.1.25 Subsequent Opinion of Counsel as to Recording
Requirements ................................................ 80
6.1.26 Use of Premises and Equipment ............................... 80
6.1.27 Protection of Collateral .................................... 80
SECTION 6.2 Negative Covenants .......................................... 81
6.2.1 Capital Structure, Merger, Acquisition or Sale of
Assets ...................................................... 81
6.2.2 Subsidiaries ................................................ 81
6.2.3 Issuance of Stock ........................................... 81
6.2.4 Purchase or Redemption of Securities, Dividend
Restrictions ................................................ 82
6.2.5 Indebtedness ................................................ 82
6.2.6 Investments, Loans and Other Transactions ................... 82
6.2.7 Operating Lease Obligations ................................. 83
6.2.8 Capital Expenditures ........................................ 83
6.2.9 Stock of Subsidiaries ....................................... 84
6.2.10 Subordinated Indebtedness ................................... 84
6.2.11 Liens; Confessed Judgment ................................... 85
6.2.12 Transactions with Affiliates ................................ 85
6.2.13 Other Businesses ............................................ 85
6.2.14 ERISA Compliance ............................................ 85
6.2.15 Prohibition on Hazardous Materials .......................... 85
6.2.16 Amendments .................................................. 86
6.2.17 Method of Accounting; Fiscal Year ........................... 86
6.2.18 Compensation ................................................ 86
6.2.19 Transfer of Collateral ...................................... 86
6.2.20 Sale and Leaseback .......................................... 86
6.2.21 Disposition of Collateral ................................... 86
ARTICLE 7
DEFAULT AND RIGHTS AND REMEDIES
SECTION 7.1 Events of Default ........................................... 87
7.1.1 Failure to Pay .............................................. 87
7.1.2 Breach of Representations and Warranties .................... 87
7.1.3 Failure to Comply with Specific Covenants ................... 87
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7.1.4 Failure to Comply with Other Covenants ...................... 87
7.1.5 Default Under Other Financing Documents or
Obligations ................................................. 88
7.1.6 Receiver; Bankruptcy ........................................ 88
7.1.7 Involuntary Bankruptcy, etc. ................................ 88
7.1.8 Judgment .................................................... 89
7.1.9 Execution; Attachment ....................................... 89
7.1.10 Default Under Other Borrowings .............................. 89
7.1.12 Material Adverse Change ..................................... 90
7.1.13 Change in Ownership ......................................... 90
7.1.14 Liquidation, Termination, Dissolution, Change in
Management, etc. ............................................ 90
SECTION 7.2 Remedies .................................................... 90
7.2.1 Acceleration ................................................ 90
7.2.2 Further Advances ............................................ 90
7.2.3 Uniform Commercial Code ..................................... 90
7.2.4 Specific Rights With Regard to Collateral ................... 92
7.2.5 Application of Proceeds ..................................... 93
7.2.6 Performance by Lender ....................................... 93
7.2.7 Other Remedies .............................................. 94
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 Notices ..................................................... 94
SECTION 8.2 Amendments; Waivers ......................................... 95
SECTION 8.3 Cumulative Remedies ......................................... 96
SECTION 8.4 Severability ................................................ 97
SECTION 8.5 Assignments by Lender ....................................... 97
SECTION 8.6 Successors and Assigns ...................................... 98
SECTION 8.7 Continuing Agreements ....................................... 98
SECTION 8.8 Enforcement Costs ........................................... 99
SECTION 8.9 Applicable Law; Jurisdiction ................................ 99
SECTION 8.10 Duplicate Originals and Counterparts ........................100
SECTION 8.11 Headings ....................................................100
SECTION 8.12 No Agency ...................................................100
SECTION 8.13 Date of Payment .............................................101
SECTION 8.14 Entire Agreement ............................................101
SECTION 8.15 Waiver of Trial by Jury .....................................101
SECTION 8.16 Liability of the Lender .....................................101
v
FINANCING AND SECURITY AGREEMENT
THIS FINANCING AND SECURITY AGREEMENT (this "Agreement") is made this 19th
day of September, 1996, by and among FLANDERS CORPORATION, a corporation
organized and existing under the laws of the State of North Carolina ("Flanders
Corporation"), FLANDERS FILTERS, INC., a corporation organized and existing
under the laws of the State of North Carolina ("Flanders Filters"), FLANDERS
AIRPURE PRODUCTS COMPANY, LLC, a limited liability company organized and
existing under the laws of the State of North Carolina ("Flanders AirPure"),
FLANDERS INTERNATIONAL PTE, LTD., a corporation organized and existing under the
laws of Singapore ("Flanders International"), PRECISIONAIRE, INC., a corporation
organized and existing under the laws of the State of Florida ("Precisionaire"),
FLANDERS AIRPURE WEST, INC., a corporation organized and existing under the laws
of the State of North Carolina ("Flanders AirPure West"), CHARCOAL SERVICE
CORPORATION, a corporation organized and existing under the laws of the State of
North Carolina ("Charcoal"), and AIR SEAL FILTER HOUSINGS, INC., a corporation
organized and existing under the laws of the State of Texas ("Air Seal")
(Flanders Corporation, Flanders Filters, Flanders AirPure, Flanders
International, Precisionaire, Flanders AirPure West, Charcoal and Air Seal are
herein collectively referred to as the "Borrowers" and each individually as a
"Borrower"); and NATIONSBANK, N.A., a national banking association (the
"Lender").
RECITALS
A. The Borrowers have applied jointly and severally to the Lender for
certain credit facilities consisting of (i) a revolving credit facility in the
maximum principal amount of $25,000,000 and (ii) a term facility in the maximum
principal amount of $6,500,000, each to be used by and available to the
Borrowers for the Permitted Uses described in this Agreement.
B. The Lender is willing to make the credit facilities available to the
Borrowers upon the terms and subject to the conditions set forth in this
Agreement.
ARTICLE 1
DEFINITIONS
SECTION 1.1 Certain Defined Terms. As used in this Agreement, the terms
defined in the Preamble and Recitals hereto shall have the respective meanings
specified therein, and the following terms shall have the following meanings:
"Account" individually and "Accounts" collectively mean all presently
existing or hereafter acquired or created accounts, accounts receivable,
contract rights, notes, drafts, instruments, acceptances, chattel paper, leases
and writings evidencing a monetary obligation or a security interest in, or a
lease of, goods, all rights to receive the payment of money or other
consideration under present or future contracts (including, without limitation,
all rights to receive payments under presently existing or hereafter acquired or
created letters of credit), or by virtue of merchandise sold or leased, services
rendered, loans and advances made or other considerations given, by or set forth
in or arising out of any present or future chattel paper, note, draft, lease,
acceptance, writing, bond, insurance policy, instrument, document or general
intangible, and all extensions and renewals of any thereof, all rights under or
arising out of present or future contracts, agreements or general interest in
merchandise which gave rise to any or all of the foregoing, including all goods,
all claims or causes of action now existing or hereafter arising in connection
with or under any agreement or document or by operation of law or otherwise, all
collateral security of any kind (including, without limitation, real property
mortgages and deeds of trust) and letters of credit given by any person with
respect to any of the foregoing, all books and records in whatever media (paper,
electronic or otherwise) recorded or stored, with respect to any or all of the
foregoing and all equipment and general intangibles necessary or beneficial to
retain, access and/or process the information contained in those books and
records, and all proceeds (cash and non-cash) of the foregoing.
"Account Debtor" means any Person who is obligated on a Receivable and
"Account Debtors" mean all Persons who are obli- gated on the Receivables.
"Affiliate" means, with respect to any designated Person, any other
Person, (i) directly or indirectly controlling, directly or indirectly
controlled by, or under direct or indirect common control with the Person
designated, (ii) directly or indirectly owning or holding 10 percent (10%) or
more of any equity interest in such designated Person, or (iii) ten percent
(10%) or more of whose stock or other equity interest is directly or indirectly
owned or held by such designated Person, excluding, however any corporation
whose common stock is traded on a national securities exchange. For purposes of
this definition, the term "control" (including with correlative meanings, the
terms "controlling", "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities or other equity interests or by contract or otherwise.
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"Agreement" means this Financing and Security Agreement, as amended,
restated, supplemented or otherwise modified in writing in accordance with the
provisions of Section 8.2 of this Agreement.
"Asset Disposition" means the disposition of any or all of the Assets
of any Borrower or any Subsidiary of any Borrower, whether by sale, lease,
transfer or other disposition (including any such disposition effected by way of
merger or consolidation) other than (i) sales of Inventory, (ii) licensing of
Patents, Trademarks and/or Copyrights, and (iii) dispositions of worn, used,
surplus or obsolete Equipment, all in the ordinary course of business.
"Assets" means at any date all assets that, in accordance with GAAP
consistently applied, should be classified as assets on a consolidated balance
sheet of the Borrowers and their respective Subsidiaries.
"Assignment of Copyrights" means (i) that certain assignment of
copyrights dated as of the Closing Date from Flanders Filters for the benefit of
the Lender and (ii) that certain assignment of copyrights dated as of the
Closing Date from Precisionaire for the benefit of the Lender, each as the same
may from time to time be amended, restated, supplemented or otherwise modified
in writing at any time and from time to time.
"Assignment of Limited Liability Company Interest" means that certain
assignment and security agreement dated as of the Closing Date from Flanders
Filters for the benefit of the Lender with respect to its ownership interests in
Flanders AirPure, as amended, restated, supplemented or otherwise modified in
writing at any time and from time to time.
"Assignment of Patents and Trademarks" means (i) that certain patent
and trademark assignment and security agreement dated as of the Closing Date
from Flanders Filters for the benefit of the Lender, (ii) that certain patent
and trademark assignment and security agreement dated as of the Closing Date
from Charcoal for the benefit of the Lender, and (iii) that certain patent and
trademark assignment and security agreement dated as of the Closing Date from
Precisionaire for the benefit of the Lender, each as amended, restated,
supplemented or otherwise modified in writing at any time and from time to time.
"Bankruptcy Code" means the United States Bankruptcy Code, as amended
from time to time.
"Base Rate" means the floating and fluctuating per annum prime rate of
interest of the Lender, as established and declared
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by the Lender at any time or from time to time. The Base Rate does not
necessarily represent the lowest or best rate of interest charged by the Lender
to borrowers.
"Borrowing Base" has the meaning described in Section 2.1.3 (Borrowing
Base).
"Borrowing Base Borrowers" means collectively Flanders Filters,
Flanders AirPure, Charcoal, Precisionaire and such other Borrowers as the Lender
may designate as "Borrowing Base Borrowers" in writing at any time and from time
to time. Upon the Borrowers' written request that one or more additional
Borrowers be added as Borrowing Base Borrowers, the Lender will proceed
diligently and in good faith, at the Borrowers' expense, to conduct, complete
and review an audit of the operations, administrative and reporting procedures,
property, and books and records of each such Borrower as soon as commercially
practicable. In addition, the Borrowers shall furnish or cause to be furnished
to the Lender such additional information as the Lender may reasonably request
in connection with the Lender's determination as and to what extent any other
Borrower is to be a Borrowing Base Borrower. After completion and review of an
acceptable audit of each such Borrower and such other information as shall have
been received by the Lender, the Lender will determine, in its sole but
commercially reasonable discretion if and to the extent the Inventory and/or
Receivables of any such Borrower shall be included in the Borrowing Base and
whether and to what extent such Borrower shall be considered a Borrowing Base
Borrower for purposes of this Agreement. The Borrowers understand that the
Lender shall be entitled to establish such advance rates, reserves, eligibility
criteria and other conditions to the addition of any other Borrower as a
Borrowing Base Borrower which it may reasonably determine to be necessary based
on its review of the audit and other information and that such advance rates,
reserves, eligibility criteria and other conditions may be different or in
addition to those then in effect with respect to the then current Borrowing Base
Borrowers. The Borrowers agree that the Lender shall have no commitment or
obligation to designate any other Borrower as a "Borrowing Base Borrower" for
purposes of this Agreement.
"Borrowing Base Deficiency" has the meaning described in Section 2.1.3
(Borrowing Base).
"Borrowing Base Report" has the meaning described in Section 2.1.4
(Borrowing Base Report).
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in the State are authorized or required to close.
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"Capital Expenditure" means an expenditure for Fixed or Capital Assets
including, without limitation, the entering into of a Capital Lease.
"Capital Lease" means any lease of real or personal property, for which
the related Lease Obligations have been or should be, in accordance with GAAP
consistently applied, capitalized on the balance sheet.
"Cash Equivalents" means (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit with
maturities of one (1) year or less from the date of acquisition of, or money
market accounts maintained with, the Lender, any Affiliate of the Lender, or any
other domestic commercial bank having capital and surplus in excess of One
Hundred Million Dollars ($100,000,000.00) or such other domestic financial
institutions or domestic brokerage houses to the extent disclosed to, and
approved by, the Lender and (c) commercial paper of a domestic issuer rated at
least either A-1 by Standard & Poor's Corporation or P-1 by ▇▇▇▇▇'▇ Investors
Service, Inc. with maturities of six (6) months or less from the date of
acquisition.
"Cash Flow" means as to all Borrowers and all Subsidiaries, on a
consolidated basis, for any period of deter- mination thereof, the sum of (a)
consolidated net income (or loss) after deduction of interest expenses and taxes
for such period, plus (b) the aggregate amount of depreciation and amortization
expense deducted in determining such net income, all calculated in accordance
with GAAP consistently applied.
"Chattel Paper" means a writing or writings which evidence both a
monetary obligation and a security interest in or lease of specific goods; any
returned, rejected or repossessed goods covered by any such writing or writings
and all proceeds (in any form including, without limitation, accounts, contract
rights, documents, chattel paper, instruments and general intangibles) of such
returned, rejected or repossessed goods; and all proceeds (cash and non-cash) of
the foregoing.
"Closing Date" means the Business Day, in any event not later than
September 30, 1996, on which the Lender shall be satisfied that the conditions
precedent set forth in Section 5.1 (Conditions) have been fulfilled.
"Closing Escrow" has the meaning described in Section 2.2.3(b) of this
Agreement.
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"Closing Escrow Agreement" has the meaning described in Section
2.2.3(b) of this Agreement.
"Collateral" means all property of each Borrower subject from time to
time to the Liens of this Agreement, any of the Security Documents and/or any of
the other Financing Documents, together with any and all cash and non-cash
proceeds and products thereof.
"Collateral Account" has the meaning described in Section 2.1.8
(Collateral Account).
"Collateral Disclosure List" has the meaning described in Section 3.3
(Collateral Disclosure List).
"Collection" means each check, draft, cash, money, instrument, item,
and other remittance in payment or on account of payment of the Accounts or
otherwise with respect to any Collateral, including, without limitation, cash
proceeds of any returned, rejected or repossessed goods, the sale or lease of
which gave rise to an Account, and other proceeds of Collateral; and
"Collections" means the collective reference to all of the foregoing.
"Commitment" means the collective reference to Revolving Credit
Commitment and the Term Loan Commitment.
"Committed Amount" means the Revolving Credit Committed Amount or the
Term Loan Committed Amount, as the case may be, and "Committed Amounts" means
collectively the Revolving Credit Committed Amount and the Term Loan Committed
Amount.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with any Borrower within the meaning
of Section 414(b) or (c) of the Internal Revenue Code.
"Compliance Certificate" has the meaning described in Section 6.1.1
(Financial Statements).
"Copyrights" means and includes, in each case whether now existing or
hereafter arising, all of each Borrower's rights, title and interest in and to
(a) all copyrights, rights and interests in copyrights, works protectable by
copyright, copyright registrations copyright applications, and all renewals of
any of the foregoing, (b) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing, including, without
limitation, damages or payments for past, current or future infringements of any
of the foregoing, (c) the right to ▇▇▇ for
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past, present and future infringements of any of the foregoing, and (d) all
rights corresponding to any of the foregoing throughout the world.
"Credit Facility" means the Revolving Credit Facility or the Term Loan
Facility, as the case may be, and "Credit Facilities" means collectively the
Revolving Credit Facility and the Term Loan Facility and any and all other
credit facilities now or hereafter extended under or secured by this Agreement.
"Debt Service" means as to all Borrowers and all Subsidiaries, on a
consolidated basis, for any period of deter- mination thereof an amount equal to
the total of the aggregate amount of all payments of principal and interest with
respect to Indebtedness for Borrowed Money of each Borrower and each Subsidiary
scheduled to be due and payable during such period, excluding any Term Loan
Mandatory Prepayments with respect to Excess Cash Flow, but including any
non-financed expenditures for Fixed or Capital Assets to the extent such
expenditures are permitted under Section 6.2.8 of this Agreement.
"Debt to Worth Ratio" means with respect to the Borrowers, on a
consolidated basis, for the date of any determination thereof, the ratio of (a)
consolidated Liabilities (excluding Subordinated Indebtedness) to (b) the
consolidated Tangible Net Worth.
"Default" means an event which, with the giving of notice or lapse of
time, or both, could or would constitute an Event of Default under the
provisions of this Agreement.
"Documents" means all documents of title, whether now existing or
hereafter acquired or created, and all proceeds (cash and non-cash of the
foregoing).
"Early Termination Fee" has the meaning described in Section 2.1.11
(Early Termination Fee).
"EBITDA" means as to the Borrowers, on a consolidated basis, for any
period of determination thereof, the sum of (a) the net profit (or loss)
determined in accordance with GAAP consistently applied, plus (b) interest
expense and income tax provisions for such period, plus (c) depreciation and
amortization of assets for such period.
"Eligible Inventory" means the collective reference to all Inventory of
each Borrowing Base Borrower held for sale in the ordinary course of business,
valued at the lowest of (i) net pur- chase cost or net manufacturing cost, (ii)
the lowest bulk market
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price, (iii) the lowest bulk selling price, minus estimated expenses for
completion and disposal, and minus an allowance for normal profit margin for
bulk sales, (iv) any ceiling prices which may be established by any Law of any
Governmental Authority or (v) prevailing market value, reduced by a reserve for
slow moving or obsolete Inventory in the aggregate amount of $200,000;
excluding, however, any Inventory which consists of:
(a) any goods located outside of the United States,
(b) any goods located outside of a state in which the Lender has
properly and unavoidably perfected its security interests by filing in that
state, free and clear of all other Liens,
(c) any goods not in the actual possession of a Borrowing Base
Borrower, except to the extent provided in subsection (d) below,
(d) any goods in the possession of a bailee, warehouseman, consignee or
similar third party, except to the extent that such bailee, warehouseman,
consignee or similar third party has entered into an agreement with the
Lender in which such bailee, warehouseman, consignee or similar third party
consents and agrees to the Lender's Lien on such goods and to such other
terms and conditions as may be required by the Lender,
(e) any goods located on premises leased or rented to a Borrowing Base
Borrower or otherwise not owned by a Borrowing Base Borrower, unless the
Lender has received a waiver and consent from the lessor, landlord and/or
owner, in form and substance satisfactory to the Lender and from any
mortgagee of such lessor, landlord or owner to the extent required by the
Lender,
(f) any goods the sale or other disposition of which has given rise to
a Receivable,
(g) any goods which fail to meet all standards and requirements imposed
by any Governmental Authority over such goods, their production, storage,
use or sale,
(h) Inventory consisting of work-in-process, packaging materials,
supplies, and private label materials (for purposes of this Agreement
"private label materials" shall mean Inventory, including raw materials,
work-in-process and finished goods which are manufactured and distributed by
a Borrowing Base Borrower for resale
-8-
by one or more Account Debtors and are labeled, marked or otherwise
expressly designated as the property or product of such Account Debtor),
(i) Inventory consisting of finished goods of Flanders Filters or
Charcoal,
(j) any goods as to which the Lender determines in the exercise of its
commercially reasonable discretion at any time and in good faith are not in
good condition or are defective, unmerchantable, post-seasonal, slow moving
or obsolete and against which the Lender has not established a reserve or
other reduction, and
(k) any goods which the Lender in the good faith exercise of its
commercially reasonable discretion has deemed to be ineligible because the
Lender otherwise considers the collateral value to the Lender to be impaired
or its ability to realize such value to be insecure.
In the event of any dispute under the foregoing criteria, as to whether
goods are, or have ceased to be, Eligible Inventory, the decision of the Lender
in the good faith exercise of its commercially reasonable discretion shall
control.
"Eligible Receivable" and "Eligible Receivables" mean, at any time of
determination, the collective reference to the unpaid portion of each account
receivable of each Borrowing Base Borrower (net of any returns, discounts,
claims, credits, charges, accrued rebates or other allowances, offsets,
deductions, counterclaims, disputes or other defenses and reduced by the
aggregate amount of all reserves, limits and deductions provided for in this
definition and elsewhere in this Agreement) in United States Dollars, provided
each account receivable conforms and continues to conform to the following
criteria to the satisfaction of the Lender:
(a) the account arose in the ordinary course of business from a bona
fide outright sale of goods by a Borrowing Base Borrower or from services
performed by a Borrowing Base Borrower;
(b) the account is a valid, legally enforceable obligation of the
Account Debtor and requires no further act on the part of any Person under
any circumstances to make the account payable by the Account Debtor;
(c) the account is based upon an enforceable order or contract, written
or oral, for goods shipped or for
-9-
services performed, and the same were shipped or performed in accordance
with such order or contract;
(d) if the account arises from the sale of goods, the goods the sale of
which gave rise to the account have been shipped or delivered to the Account
Debtor on an absolute sale basis and not on a ▇▇▇▇ and hold sale basis, a
consignment sale basis, a guaranteed sale basis, a sale or return basis, or
on the basis of any other similar understanding;
(e) if the account arises from the performance of services, such
services have been fully rendered and do not relate to any warranty claim or
obligation;
(f) the account is evidenced by an invoice or other documentation in
form acceptable to the Lender, dated no later than the date of shipment or
performance and containing only terms normally offered by the respective
Borrowing Base Borrower;
(g) the amount shown on the books of a Borrowing Base Borrower and on
any invoice, certificate, schedule or statement delivered to the Lender is
owing to such Borrowing Base Borrower and no partial payment has been
received unless reflected with that delivery;
(h) the account if with respect to Flanders Filters or Flanders AirPure
is not outstanding more than one hundred twenty (120) days from the date of
the invoice therefor or past due more than ninety (90) days after its due
date, which shall not be later than thirty (30) days after the invoice date;
(i) the account if with respect to Charcoal or Precisionaire is not
past due more than sixty (60) days after its due date, but in any event
shall not be outstanding more than one hundred twenty (120) days after the
date of invoice;
(j) the account is not owing by any Account Debtor for which the Lender
has deemed fifty percent (50%) or more of such Account Debtor's other
accounts (or any portion thereof) due to any or all Borrowing Base Borrowers
to be non-Eligible Receivables;
(k) the account is not owing by an Account Debtor or a group of
affiliated Account Debtors (other than WalMart Corporation) whose then
existing accounts owing to a
-10-
Borrowing Base Borrower exceed, in the aggregate, the face amount of twenty
percent (20%) of such Borrowing Base Borrower's total Eligible Receivables
or is not owing by WalMart Corporation whose then existing accounts owing to
such Borrowing Base Borrower exceed, in the aggregate, thirty percent (30%)
of such Borrower Base Borrower's Eligible Receivables;
(l) the Account Debtor has not returned, rejected or refused to retain,
or otherwise notified a Borrowing Base Borrower of any dispute concerning,
or claimed nonconformity of, any of the goods or services from the sale or
furnishing of which the account arose;
(m) the account is not subject to any present or contingent (and no
facts exist which are the basis for any future) offset, claim, deduction or
counterclaim, dispute or defense in law or equity on the part of such
Account Debtor, or any claim for credits, allowances, or adjustments by the
Account Debtor because of returned, inferior, or damaged goods or
unsatisfactory services, or for any other reason including, without
limitation, those arising on account of a breach of any express or implied
representation or warranty. The Lender agrees that only that portion of an
account which is subject to a present or contingent offset, claim,
deduction, counterclaim, dispute, defense, or claim for credits, allowances
or adjustments shall be considered ineligible;
(n) the Account Debtor is not a Borrower or a Subsidiary or Affiliate
of any Borrower or an employee, officer, director of shareholder of any
Borrower or any Subsidiary or Affiliate of any Borrower;
(o) the Account Debtor is not incorporated or primarily conducting
business or otherwise located in any jurisdiction outside of the United
States of America (each a "Foreign Account Debtor"), unless (i) the sale
giving rise to such account is secured by a letter of credit, guaranty or
eligible banker's acceptance having terms, and from such issuers and
confirmation banks as are reasonably acceptable to the Lender (which letter
of credit, guaranty or banker's acceptance has been assigned to or otherwise
made subject to the Lien of the Lender in a manner satisfactory to the
Lender or (ii) the Borrowing Base Borrower has obtained credit insurance or
other form of credit protection covering such account on terms and
conditions and from a financial institution satisfactory to the Lender and
such credit insurance or other form of
-11-
credit protection is in full force and effect and not in dispute (in either
case, a "Secured Foreign Receivable"). Notwithstanding the foregoing, the
Lender shall not deem an account from a Foreign Account Debtor as ineligible
solely because the account does not qualify as a Secured Foreign Receivable
(an "Unsecured Foreign Receivable" and collectively, the "Unsecured Foreign
Receivables"); provided that the aggregate amount of all Unsecured Foreign
Receivables then included in the Borrowing Base does not exceed, or will not
exceed with the inclusion of such account, the sum of Five Hundred Thousand
Dollars ($500,000);
(p) the Account Debtor with respect to such account is not insolvent or
the subject of any bankruptcy or insolvency proceedings of any kind or of
any other proceeding or action, threatened or pending;
(q) the Account Debtor is not a Governmental Authority, unless the
Borrowing Base Borrower has complied in all respects with the Federal
Assignment of Claims Act of 1940 and all other Laws applicable to the grant,
creation, perfection or enforcement of Liens on the accounts of such Account
Debtor as and to the extent required by the Lender. The Lender agrees that
it shall not require that the Borrowing Base Borrowers comply with the
Federal Assignment of Claims Act of 1940 if and to the extent the aggregate
amount of all accounts to Account Debtors which are Governmental Authorities
then included in the Borrowing Base does not exceed, or will not exceed with
the inclusion of any such accounts, Five Hundred Thousand Dollars
($500,000);
(r) the respective Borrowing Base Borrower is not indebted in any
manner to the Account Debtor (as creditor, lessor, supplier otherwise), with
the exception of customary credits, adjustments and/or discounts given to an
Account Debtor by such Borrowing Base Borrower in the ordinary course of its
business;
(s) the account does not arise from services under or related to any
warranty obligation of a Borrowing Base Borrower or out of service charges,
finance charges or other fees for the time value of money;
(t) the account is not evidenced by chattel paper or an instrument of
any kind and is not secured by any letter of credit;
-12-
(u) the title of the Borrowing Base Borrower to the account is absolute
and is not subject to any prior assignment, claim, Lien, or security
interest, except Permitted Liens;
(v) no bond or other undertaking by a guarantor or surety has been or
is required to be obtained, supporting the performance of the Borrowing Base
Borrower or any other obligor in respect of any of such Borrowing Base
Borrower's agreements with the Account Debtor;
(w) no bond or other undertaking by a guarantor or surety has been or
is required to be obtained, supporting the account and any of the Account
Debtor's obligations in respect of the account;
(x) the respective Borrowing Base Borrower has the full and unqualified
right and power to assign and grant a security interest in, and Lien on, the
account to the Lender as security and collateral for the payment of the
Obligations;
(y) the account does not arise out of a contract with, or order from,
an Account Debtor that, by its terms, forbids or makes void or unenforceable
the assignment or grant of a security interest by a Borrowing Base Borrower
to the Lender of the account arising from such contract or order;
(z) the account is subject to a Lien in favor of the Lender, which Lien
is perfected as to the account by the filing of financing statements and
which Lien upon such filing constitutes a first priority security interest
and Lien;
(aa) the goods giving rise to the account were not, at the time of the
sale thereof, subject to any Lien, except those in favor of the Lender;
(bb) no part of the account represents a retainage;
(cc) the Lender in the good faith exercise of its commercially
reasonable discretion has not deemed the account ineligible because of
uncertainty as to the creditworthiness of the Account Debtor or because the
Lender otherwise considers the collateral value of such account to the
Lender to be impaired or its ability to realize such value to be insecure.
-13-
In the event of any dispute, under the foregoing criteria, as to whether an
account is, or has ceased to be, an Eligible Receiv- able, the decision of the
Lender in the good faith exercise of its commercially reasonable discretion
shall control.
"Enforcement Costs" means all expenses, charges, costs and fees
whatsoever (including, without limitation, reasonable outside and allocated
in-house counsel attorney's fees and expenses) of any nature whatsoever paid or
incurred by or on behalf of the Lender in connection with (a) any or all of the
Obligations, this Agreement and/or any of the other Financing Documents, (b) the
creation, perfection, collection, maintenance, preservation, defense,
protection, realization upon, disposition, sale or enforcement of all or any
part of the Collateral, this Agreement or any of the other Financing Documents,
including, without limitation, those costs and expenses more specifically
enumerated in Section 3.6 (Costs) and/or Section 8.8 (Enforcement Costs), and
(c) the monitoring, administration, processing and/or servicing of any or all of
the Obligations, the Financing Documents, and/or the Collateral.
"Equipment" means all equipment, machinery, computers, chattels, tools,
parts, machine tools, furniture, furnishings, fixtures and supplies of every
nature, presently existing or hereafter acquired or created and wherever
located, whether or not the same shall be deemed to be affixed to real property,
together with all accessions, additions, fittings, accessories, special tools,
and improvements thereto and substitutions therefor and all parts and equipment
which may be attached to or which are necessary or beneficial for the operation,
use and/or disposition of such personal property, all licenses, warranties,
franchises and general intangibles related thereto or necessary or beneficial
for the operation, use and/or disposition of the same, together with all
Accounts, Chattel Paper, Instruments and other consideration received by any
Borrower on account of the sale, lease or other disposition of all or any part
of the foregoing, and together with all rights under or arising out of present
or future Documents and contracts relating to the foregoing and all proceeds
(cash and non-cash) of the foregoing.
"Equity Offering Documents" means collectively the term sheet,
subscription agreements and all other agreements, documents or instruments
executed and delivered in connection with the closing and consummation of the
Equity Offering Transactions, as particularly set forth in Schedule 4.1.29, all
as amended, restated, supplemented or otherwise modified at any time and from
time to time.
-14-
"Equity Offering Transaction" means the sale of equities and/or debt as
described in the Equity Offering Documents.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" has the meaning described in Article 7.
"Excess Cash Flow" means for any annual period of determination
thereof, an amount equal to fifty percent (50%) of the Borrowers' consolidated
Cash Flow less the Borrowers' consolidated Debt Service, as shown on the annual
financial statements for such annual period, furnished to the Lender in
accordance with Section 6.1.1; or in the event that the Borrowers fail to
deliver such financial statements to the Lender as and when required, the Lender
shall estimate, in its commercially reasonable discretion, the amount of Excess
Cash Flow for such period.
"Facilities" means the collective reference to the loan, letter of
credit, interest rate protection, foreign exchange risk, cash management, and
other credit facilities now or hereafter provided to any or all of the Borrowers
by the Lender whether under this Agreement or otherwise.
"Fees" means the collective reference to each fee payable to the Lender
under the terms of this Agreement or under the terms of any of the other
Financing Documents, including, without limitation, Revolving Credit Unused Line
Fees, the Early Termination Fee, the Origination Fee, and Field Examination
Fees.
"Field Examination Fee" and "Field Examination Fees" have the meanings
described in Section 2.3.4 (Field Examination Fees).
"Financing Documents" means at any time collectively this Agreement,
the Notes, the Security Documents, and any other instrument, agreement or
document previously, simultaneously or hereafter executed and delivered by any
Borrower and/or any other Person, singly or jointly with another Person or
Persons, evidenc- ing, securing, guarantying or in connection with this
Agreement, any Note, any of the Security Documents, any of the Facilities,
and/or any of the Obligations.
"Fixed or Capital Assets" of a Person at any date means all assets
which would, in accordance with GAAP consistently applied, be classified on the
balance sheet of such Person as property, plant or equipment at such date.
-15-
"Fixed Charges" means for any period of determination, the scheduled or
required payments of principal and interest on any and all Indebtedness for
Borrowed Money (including any and all Subordinated Indebtedness) of any or all
of the Borrowers, plus non-financed Capital Expenditures of any or all of the
Borrowers, plus cash Taxes paid or payable by any or all of the Borrowers, plus
any cash dividends paid or payable by Flanders Corporation.
"Fixed Charge Coverage Ratio" means for the period of any determination
thereof the ratio of (a) EBITDA to (b) Fixed Charges.
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time.
"GE" means the Trustee of General Electric Pension Trust, and its
successors and assigns.
"General Intangibles" means all general intangibles of every nature,
whether presently existing or hereafter acquired or created, and without
implying any limitation of the foregoing, further means all books and records,
claims (including without limitation all claims for income tax and other
refunds), choses in action, claims, causes of action in tort or equity, contract
rights, judgments, customer lists, Patents, Trademarks, licensing agreements,
rights in intellectual property, goodwill (including goodwill of the Borrower's
business symbolized by and associated with any and all trademarks, trademark
licenses, Copyrights and/or service marks), royalty payments, licenses, rights
as lessee under any lease of real or personal property, literary rights,
Copyrights, service names, service marks, logos, trade secrets, amounts received
as an award in or settlement of a suit in damages, deposit accounts, interests
in joint ventures, general or limited partnerships, or limited liability
companies or partnerships, rights in applications for any of the foregoing,
books and records in whatever media (paper, electronic or otherwise) recorded or
stored, with respect to any or all of the foregoing and all equipment and
general intangibles necessary or beneficial to retain, access and/or process the
information contained in those books and records, and all proceeds (cash and
non-cash) of the foregoing.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any department, agency or instrumentality thereof.
"Hazardous Materials" means (a) any "hazardous waste" as defined by the
Resource Conservation and Recovery Act of 1976, as
-16-
amended from time to time, and regulations promulgated there- under; (b) any
"hazardous substance" as defined by the Comprehen- sive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, and
regulations promulgated thereunder; (c) any substance the presence of which on
any property now or hereafter owned, acquired or operated by a Borrower is
prohibited by any Law similar to those set forth in this definition; and (d) any
other substance which by Law requires special handling in its collection,
storage, treatment or disposal.
"Hazardous Materials Contamination" means the contamination (whether
presently existing or occurring after the date of this Agreement) by Hazardous
Materials of any property owned, operated or controlled by a Borrower or for
which a Borrower has responsibility, including, without limitation,
improvements, facilities, soil, ground water, air or other elements on, or of,
any property now or hereafter owned, acquired or operated by a Borrower, and any
other contamination by Hazardous Materials for which a Borrower is, or is
claimed to be, responsible.
"Indebtedness" of a Person means at any date the total liabilities of
such Person at such time determined in accordance with GAAP consistently
applied.
"Indebtedness for Borrowed Money" of a Person means at any time the sum
at such time of (a) indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, (b) any obligations of such
Person in respect of letters of credit, banker's or other acceptances or similar
obligations issued or created for the account of such Person, (c) Lease
Obligations of such Person with respect to Capital Leases, (d) all liabilities
secured by any Lien on any property owned by such Person, to the extent attached
to such Person's interest in such property, even though such Person has not
assumed or become personally liable for the payment thereof, (e) obligations of
third parties which are being guarantied or indemnified against by such Person
or which are secured by the property of such Person; (f) any obligation of such
Person under a employee stock ownership plan or other similar employee benefit
plan; (g) any obligation of such Person or a Commonly Controlled Entity to a
Multiemployer Plan; and (h) any obligations, liabilities or indebtedness,
contingent or otherwise, under or in connection with, any interest rate or
currency swap agreements, cap, floor, and collar agreements, currency spot,
foreign exchange and forward contracts and other similar agreements and
arrangements; but excluding trade and other accounts payable in the ordinary
course of business in accordance with customary trade terms and which are not
overdue (as determined in accordance with customary trade practices) or which
are being disputed in good faith by such Person and for which adequate
-17-
reserves are being provided on the books of such Person in accordance with GAAP.
"Installment Payment Date" means the first day of each January, April,
July, and October commencing on January 1, 1997.
"Interest Payment Date" means the first day of each calendar month
commencing on November 1, 1996 and continuing thereafter until the Obligations
have been irrevocably paid in full.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the Income Tax Regulations issued and proposed to
be issued thereunder.
"Instrument" means a negotiable instrument (as defined under Article 3
of the Uniform Commercial Code), a "certificated security" (as defined under
Article 8 of the Uniform Commercial Code), or any other writing which evidences
a right to payment of money and is not itself a security agreement or lease and
is of a type which is in the ordinary course of business transferred by delivery
with any necessary indorsement.
"Inventory" means all inventory of each Borrower and all right, title
and interest of each Borrower in and to all of its now owned and hereafter
acquired goods, merchandise and other personal property furnished under any
contract of service or intended for sale or lease, including, without
limitation, all raw materials, work-in-progress, finished goods and materials
and supplies of any kind, nature or description which are used or consumed in
any Borrower's business or are or might be used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise and other licenses, warranties, franchises, General Intangibles,
personal property and all documents of title or documents relating to the same
and all proceeds (cash and non-cash) of the foregoing.
"Item of Payment" means each check, draft, cash, money, instrument,
item, and other remittance in payment or on account of payment of the
Receivables or otherwise with respect to any Collateral, including, without
limitation, cash proceeds of any returned, rejected or repossessed goods, the
sale or lease of which gave rise to a Receivable, and other proceeds of
Collateral; and "Items of Payment" means the collective reference to all of the
foregoing.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any Governmental
-18
Authority or political subdivision or agency thereof, or any court or similar
entity established by any thereof.
"Lease Obligations" of a Person means for any period the rental
commitments of such Person for such period under leases for real and/or personal
property (net of rent from subleases thereof, but including taxes, insurance,
maintenance and similar expenses which the lessee is obligated to pay under the
terms of said leases, except to the extent that such taxes, insurance,
maintenance and similar expenses are payable by sublessees), including rental
commitments under Capital Leases.
"Liabilities" means at any date all liabilities that in accordance with
GAAP consistently applied should be classified as liabilities on a consolidated
balance sheet of the Borrowers and their respective Subsidiaries.
"Lien" means any mortgage, deed of trust, deed to secure debt, grant,
pledge, security interest, assignment, encumbrance, judgment, lien,
hypothecation, provision in any instrument or other document for confession of
judgment, cognovit or other similar right or remedy, claim or charge of any
kind, whether perfected or unperfected, avoidable or unavoidable, including,
without limitation, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction,
excluding the precautionary filing of any financing statement by any lessor in a
true lease transaction, by any ▇▇▇▇▇▇ in a true bailment transaction or by any
consignor in a true consignment transaction under the Uniform Commercial Code of
any jurisdiction or the agreement to give any financing statement by any lessee
in a true lease transaction, by any bailee in a true bailment transaction or by
any consignee in a true consignment transaction.
"Loan" means each of the Revolving Loan or the Term Loan, as the case
may be, and "Loans" means the collective reference to the Revolving Loan and the
Term Loan.
"Loan Notice" has the meaning described in Section 2.1.2 (Procedure for
Making Advances).
"Lockbox" has the meaning described in Section 2.1.8 (The Collateral
Account).
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
-19-
"Net Worth" means as to each Borrower, such Borrower's shareholders'
equity (including Subordinated Indebtedness of such Borrower) as defined in
accordance with GAAP consistently applied. "Net Worth" means to the Borrowers,
collectively, at any date the consolidated shareholders' equity (including all
Subordinated Indebtedness) as defined in accordance with GAAP consistently
applied.
"Note" means the Revolving Credit Note or the Term Note, as the case
may be, and "Notes" means collectively the Revolving Credit Note and the Term
Note, and any other promissory note which may from time to time evidence all or
any portion of the Obligations.
"Obligations" means all present and future indebtedness, duties,
obligations, and liabilities, whether now existing or contemplated or hereafter
arising, of any or all of the Borrowers to the Lender under, arising pursuant
to, in connec- tion with and/or on account of the provisions of this Agreement,
each Note, each Security Document, and/or any of the other Financing Documents,
the Loans, and/or any of the Facilities including, without limitation, the
principal of, and interest on, each Note, late charges, the Fees, Enforcement
Costs, and prepayment fees (if any), letter of credit fees or fees charged with
respect to any guaranty of any letter of credit; also means all other present
and future indebtedness, liabilities and obligations, whether now existing or
contemplated or hereafter arising, of any or all of the Borrowers to the Lender
of any nature whatsoever regardless of whether such debts, obligations and
liabilities be direct, indirect, primary, secondary, joint, several, joint and
several, fixed or contingent; and also means any and all renewals, extensions,
substitutions, amendments, restatements and rearrangements of any such debts,
obligations and liabilities.
"Origination Fee" has the meaning described in Section 2.3.3
(Origination Fee).
"Patents" means and includes, in each case whether now existing or
hereafter arising, all of each Borrower's rights, title and interest in and to
(a) any and all patents and patent applications, (b) any and all inventions and
improvements described and claimed in such patents and patent applications, (c)
reissues, divisions, continuations, renewals, extensions and
continuations-in-part of any patents and patent applications, (d) income,
royalties, damages, claims and payments now or hereafter due and/or payable
under and with respect to any patents or patent applications, including, without
limitation, damages and payments for past and future infringements, (e) rights
to ▇▇▇ for past,
-20-
present and future infringements of patents, and (f) all rights corresponding to
any of the foregoing throughout the world.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" means: (a) Liens for Taxes which are not delinquent
or which the Lender has determined in the exercise of its commercially
reasonable discretion (i) are being diligently contested in good faith and by
appropriate proceedings, (ii) the respective Borrower has the financial ability
to pay, with all penalties and interest, at all times without materially and
adversely affecting such Borrower, and (iii) are not, and will not be with
appropriate filing, the giving of notice and/or the passage of time, entitled to
priority over any Lien of the Lender; (b) deposits or pledges to secure
obligations under workers' compensation, social security or similar laws, or
under unemployment insurance in the ordinary course of business; (c) Liens in
favor of the Lender; (d) judgment Liens to the extent the entry of such judgment
does not constitute a Default or an Event of Default under the terms of this
Agreement or result in the sale or levy of, or execution on, any of the
Collateral; and (e) such other Liens, if any, as are set forth on Schedule
4.1.23 attached hereto and made a part hereof.
"Permitted Uses" means (i) the acquisition of one hundred percent
(100%) of the capital stock of Precisionaire by Flanders Corporation, (ii) the
refinancing and payment of all obligations of any or all of the Borrowers to any
lenders with respect to any Indebtedness for Borrowed Money existing as of the
Closing Date, (iii) the payment of all costs and expenses incurred in connection
with the closing and consummation of the transactions contemplated by this
Agreement, and (iv) the payment of expenses incurred in the ordinary course of
any Borrower's business.
"Person" means and includes an individual, a corporation, a
partnership, a joint venture, a limited liability company or partnership, a
trust, an unincorporated association, a Governmental Authority, or any other
organization or entity.
"Plan" means any pension plan which is covered by Title IV of ERISA and
in respect of which a Borrower or a Commonly Controlled Entity is an "employer"
as defined in Section 3 of ERISA.
"Post-Default Rate" means with respect to the principal balance of any
of the Obligations, the then applicable rate of interest on such Obligations,
plus two percent (2%) per annum.
-21-
"Prepayment" means a Revolving Loan Mandatory Prepayment a Revolving
Loan Optional Prepayment, a Term Loan Mandatory Prepayment, or a Term Loan
Optional Prepayment, as the case may be, and "Prepayments" mean collectively all
Revolving Loan Mandatory Prepayments, all Revolving Loan Optional Prepayments,
all Term Loan Mandatory Prepayments and all Term Loan Optional Prepayments.
"Proforma Financial Projections" has the meaning described in Section
4.1.12 (Proforma Financial Statements) below.
"Proforma Financial Statements" has the meaning described in Section
4.1.12 (Proforma Financial Statements) below.
"Purchase Agreement - Air Seal" means that certain stock purchase
agreement dated as of June 13, 1996 by and between Flanders Corporation and The
Shareholders of Air Seal Filter Housing, Inc., together with any and all
amendments, modifications, and supplements thereto, restatements thereof, and
substitutes therefor.
"Purchase Agreement - Charcoal" means that certain stock purchase
agreement dated as of March 1, 1996 by and between Flanders Corporation and The
Shareholders of Charcoal Service Corporation, together with any and all
amendments, modifications, and supplements thereto, restatements thereof, and
substitutes therefor.
"Purchase Agreement - Precisionaire" means that certain stock purchase
agreement dated as of July 1, 1996 by and between Flanders Corporation and The
Shareholders of Precisionaire, Inc., together with any and all amendments,
modifications, and supplements thereto, restatements thereof, and substitutes
therefor.
"Purchase Agreement Documents - Air Seal" means collectively the
Purchase Agreement - Air Seal and any and all other agreements, documents or
instruments, previously, now or hereafter executed and delivered by Flanders
Corporation, The Shareholders of Air Seal Filter Housing, Inc., or any other
Person in connection with the Purchase Agreement Transaction - Air Seal.
"Purchase Agreement Documents - Charcoal" means collectively the
Purchase Agreement - Charcoal and any and all other agreements, documents or
instruments, previously, now or hereafter executed and delivered by Flanders
Corporation, The Shareholders of Charcoal Service Corporation, or any other
Person in connection with the Purchase Agreement Transaction - Charcoal.
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"Purchase Agreement Documents - Precisionaire" means collectively the
Purchase Agreement - Precisionaire and any and all other agreements, documents
or instruments, previously, now or hereafter executed and delivered by Flanders
Corporation, The Shareholders of Precisionaire, Inc., or any other Person in
connection with the Purchase Agreement Transaction - Precisionaire.
"Purchase Agreement Transaction - Air Seal" means the stock purchase
agreement transaction contemplated by the provisions of the Purchase Agreement -
Air Seal.
"Purchase Agreement Transaction - Charcoal" means the stock purchase
agreement transaction contemplated by the provisions of the Purchase Agreement -
Charcoal.
"Purchase Agreement Transaction - Precisionaire" means the stock
purchase agreement transaction contemplated by the provisions of the Purchase
Agreement - Precisionaire.
"Purchase Agreements" means the collective reference to the Purchase
Agreement - Air Seal, the Purchase Agreement - Charcoal and the Purchase
Agreement - Precisionaire.
"Purchase Agreement Documents" means the collective reference to the
Purchase Agreement Documents - Air Seal, the Purchase Agreement Documents -
Charcoal and the Purchase Agreement Documents - Precisionaire.
"Purchase Agreement Transactions" means the collective reference to the
Purchase Agreement Transaction - Air Seal, the Purchase Agreement Transaction -
Charcoal and the Purchase Agreement Transaction - Precisionaire.
"Receivable" means each Borrower's now owned and hereafter owned,
acquired or created Accounts, Chattel Paper, General Intangibles and
Instruments; and "Receivables" means all of each Borrower's now or hereafter
owned, acquired or created Accounts, Chattel Paper, General Intangibles and
Instruments, and all cash and non-cash proceeds and products thereof.
"Reportable Event" means any of the events set forth in Section 4043(b)
of ERISA or the regulations thereunder.
"Responsible Officer" means the chief executive officer, chief
financial officer or controller of Flanders Corporation.
"Revolving Credit Commitment" means the agreement of the Lender
relating to the making of the Revolving Loan and advances
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thereunder subject to and in accordance with the provisions of this Agreement.
"Revolving Credit Commitment Period" means the period of time from the
Closing Date to the Business Day preceding the Revolving Credit Termination
Date.
"Revolving Credit Committed Amount" has the meaning described in
Section 2.1.1 (Revolving Credit Facility).
"Revolving Credit Expiration Date" means September 30, 1998.
"Revolving Credit Facility" means the facility established by the
Lender pursuant to Section 2.1 (Revolving Credit Facility) of this Agreement.
"Revolving Credit Note" has the meaning described in Section 2.1.5
(Revolving Credit Note).
"Revolving Credit Termination Date" means the earlier of (a) the
Revolving Credit Expiration Date, or (b) the date on which the Revolving Credit
Commitment is terminated pursuant to Section 7.2 or otherwise.
"Revolving Credit Unused Line Fee" and "Revolving Credit Unused Line
Fees" have the meanings described in Section 2.1.10 (Revolving Credit Unused
Line Fee).
"Revolving Loan" has the meaning described in Section 2.1.1 (Revolving
Credit Facility).
"Revolving Loan Account" has the meaning described in Section 2.1.9
(Revolving Loan Account).
"Revolving Loan Mandatory Prepayment" and "Revolving Loan Mandatory
Prepayments" have the meanings described in Section 2.1.6 (Mandatory
Prepayments).
"Revolving Loan Optional Prepayment" and "Revolving Loan Optional
Prepayments" have the meanings described in Section 2.1.7 (Revolving Loan
Optional Prepayment).
"Securities" means the collective reference to each and every
certificated or uncertificated security which constitutes a "security" under the
provisions of Title 8 of the Uniform Commercial Code, and all proceeds (cash and
non-cash) of the foregoing.
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"Security Documents" means collectively any assignment, pledge
agreement, security agreement, mortgage, deed of trust, deed to secure debt,
financing statement and any similar instrument, document or agreement under or
pursuant to which a Lien is now or hereafter granted to, or for the benefit of,
the Lender on any real or personal property of any Person to secure all or any
portion of the Obligations, all as the same may from time to time be amended,
restated, supplemented or otherwise modified, including, without limitation,
this Agreement, the Stock Pledge Agreement, the Assignment of Copyrights, the
Assignment of Patents and Trademarks, and the Assignment of Limited Liability
Company Interest.
"Security Procedures" means the rules, policies and procedures adopted
and implemented by the Lender and its Affiliates at any time and from time to
time with respect to security procedures and measures relating to electronic
funds transfers, all as the same may be amended, restated, supplemented,
terminated, or otherwise modified at any time and from time to time by the
Lender in its commercially reasonable discretion.
"State" means the State of Maryland.
"Stock Pledge Agreement" means that certain pledge, assignment and
security agreement dated the date hereof from Flanders Corporation for the
benefit of the Lender, as the same may from time to time be amended, restated,
supplemented or otherwise modified.
"Subordinated Debt" means (i) that certain Indebtedness for Borrowed
Money of Flanders Corporation in a principal amount not to exceed One Million
Seven Hundred Thousand Dollars ($1,700,000) which is to be loaned on a bridge
basis and is intended to be repaid from the funds deposited by GE into the
Closing Escrow and (ii) those certain convertible debentures comprising part of
the Equity Offering Documents in an aggregate principal amount up to Four
Million Dollars ($4,000,000).
"Subordinated Debt Loan Documents" means any and all promissory notes,
agreements, documents or instruments now or at any time evidencing, securing,
guarantying or otherwise executed and delivered in connection with the
Subordinated Debt, as the same may from time to time be amended, restated,
supplemented or modified.
"Subordinated Indebtedness" means all Indebtedness, including, without
limitation, the Subordinated Debt, incurred at any time by any or all of the
Borrowers, which is in amounts, subject to repayment terms, and subordinated to
the Obligations, as
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set forth in one or more written agreements, all in form and substance
satisfactory to the Lender in its commercially reasonable discretion.
"Subsidiary" means any corporation or limited liability company the
majority of the voting ownership interests of which at the time are owned
directly by any Borrower and/or by one or more Subsidiaries of any Borrower.
"Tangible Net Worth" means as to the Borrowers, collectively, at any
date of determination thereof, the sum at such time of the Borrowers'
consolidated Net Worth, plus (a) all Subordinated Indebtedness, if any, less the
total of (b) all Assets of all Borrowers which would be classified as intangible
assets under GAAP consistently applied, (b) leasehold improvements, (c)
applicable reserves, allowances and other similar properly deductible items to
the extent such reserves, allowances and other similar properly deductible items
have not been previously deducted by the Lender in the calculation of Net Worth,
(d) any revaluation or other write-up in book value of assets subsequent to the
date of the most recent financial statements delivered to the Lender, and (e)
the amount of all loans and advances to, or investments in, any Person (other
than a Borrower), excluding Cash Equivalents and deposit accounts maintained by
any of the Borrowers with any financial institution..
"Taxes" means all taxes and assessments whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character
(including all penalties or interest thereon), which at any time may be
assessed, levied, confirmed or imposed by any Governmental Authority on any
Borrower or any of its properties or assets or any part thereof or in respect of
any of its franchises, businesses, income or profits.
"Term Loan" has the meaning described in Section 2.2.1.
"Term Loan Commitment" has the meaning described in Section 2.2.1.
"Term Loan Committed Amount" has the meaning described in Section
2.2.1.
"Term Loan Facility" means the facility established by the Lender
pursuant to Section 2.2 (Term Loan Facility) of this Agreement.
"Term Loan Mandatory Prepayment" and "Term Loan Mandatory Prepayments"
have the meanings described in Section 2.2.3.
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"Term Loan Optional Prepayment" and "Term Loan Optional Prepayments"
have the meanings described in Section 2.2.4.
"Term Note" has the meaning described in Section 2.2.2.
"Trademarks" means and includes in each case whether now existing or
hereafter arising, all of each Borrower's rights, title and interest in and to
(a) any and all trademarks (including service marks), trade names and trade
styles, and applications for registration thereof and the goodwill of the
business symbolized by any of the foregoing, (b) any and all licenses of
trademarks, service marks, trade names and/or trade styles, whether as licensor
or licensee, (c) any renewals of any and all trademarks, service marks, trade
names, trade styles and/or licenses of any of the foregoing, (d) income,
royalties, damages and payments now or hereafter due and/or payable with respect
thereto, including, without limitation, damages, claims, and payments for past,
present and future infringements thereof, (e) rights to ▇▇▇ for past, present
and future infringements of any of the foregoing, including the right to settle
suits involving claims and demands for royalties owing, and (f) all rights
corresponding to any of the foregoing throughout the world.
"Uniform Commercial Code" means, unless otherwise provided in this
Agreement, the Uniform Commercial Code as adopted by and in effect from time to
time in the State or in any other jurisdiction, as applicable.
"Wholly Owned Subsidiary" means any domestic United States corporation
or limited liability company, all the equity interests of all classes of which
(other than directors' qualifying shares) at the time are owned directly or
indirectly by a Borrower and/or by one or more Wholly Owned Subsidiaries of a
Borrower.
"Wire Transfer Procedures" means the rules, policies and procedures
adopted and implemented by the Lender and its Affiliates at any time and from
time to time with respect to electronic funds transfers, including, without
limitation, the Security Procedures, all as the same may be amended, restated,
supplemented, terminated or otherwise modified at any time and from time to time
by the Lender in its commercially reasonable discretion.
SECTION 1.2 Accounting Terms and Other Definitional
Provisions.
Unless otherwise defined herein, as used in this Agreement and in any
certificate, report or other document made or delivered pursuant hereto,
accounting terms not otherwise defined herein, and accounting terms only partly
defined herein, to the extent not
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defined, shall have the respective meanings given to them under GAAP. Unless
otherwise defined herein, all terms used herein which are defined by the Uniform
Commercial Code shall have the same meanings as assigned to them by the Uniform
Commercial Code unless and to the extent varied by this Agreement. The words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, subsection, schedule and
exhibit references are references to articles, sections or subsections of, or
schedules or exhibits to, as the case may be, this Agreement unless otherwise
specified. As used herein, the singular number shall include the plural, the
plural the singular and the use of the masculine, feminine or neuter gender
shall include all genders, as the context may require. Without implying any
limitation on the foregoing, any reference to "Borrowers" or "Borrower" in the
provisions of this Agreement or any of the Financing Documents shall be deemed
to refer to each and any one or more of the Borrowers, jointly and severally.
Reference to any one or more of the Financing Documents shall mean the same as
the foregoing may from time to time be amended, restated, substituted, extended,
renewed, supplemented or otherwise modified.
ARTICLE 2
THE CREDIT FACILITIES
SECTION 2.1 The Revolving Credit Facility.
2.1.1 Revolving Credit Facility. Subject to and upon the provisions of
this Agreement, the Lender establishes a revolving credit facility jointly and
severally in favor of the Borrowers. The aggregate of all advances under the
Revolving Credit Facility are sometimes referred to in this Agreement
collectively as the "Revolving Loan".
The principal amount of TWENTY-FIVE MILLION DOLLARS ($25,000,000) is the
"Revolving Credit Committed Amount". If at any time the unpaid principal balance
of the Revolving Loan exceeds the Revolving Credit Committed Amount in effect
from time to time, the Borrowers, jointly and severally, shall pay such excess
to the Lender within five (5) days following DEMAND.
During the Revolving Credit Commitment Period, the Lender agrees to make
advances under the Revolving Loan requested by or on behalf of any Borrower from
time to time provided that after giving effect to the request, the outstanding
principal balance of the Revolving Loan would not exceed the lesser of (a) the
Revolving
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Credit Committed Amount, or (b) the then most current Borrowing Base.
Unless sooner paid, the unpaid Revolving Loan, together with interest
accrued and unpaid thereon, and all other Obligations shall be due and payable
in full on the Revolving Credit Expiration Date.
2.1.2 Procedure for Making Advances Under the Revolving Loan; Lender
Protection Loans.
The Borrowers may borrow under the Revolving Credit Commit- ment on any
Business Day. Advances under the Revolving Loan shall be deposited to a demand
deposit account of one or more of the Borrowers with the Lender (or an Affiliate
of the Lender) or shall be otherwise applied as directed by the Borrowers, which
direction the Lender may require to be in writing. No later than 12:00 p.m.
(Baltimore time) on the date of the requested borrowing, a Responsible Officer
of the Borrowers shall give the Lender oral or written notice (a "Loan Notice")
of the amount and (if requested by the Lender) the purpose of the requested
borrowing. Any oral Loan Notice shall be confirmed in writing by a Responsible
Officer of the Borrowers within five (5) Business Days after the making of the
requested Revolving Loan. In addition, each Borrower hereby irrevocably
authorizes the Lender at any time and from time to time, without further request
from or notice to any Borrower, to make advances under the Revolving Loan which
the Lender, in its commercially reasonable discretion, deems necessary or
appropriate to protect the Lender's interests under this Agreement, including,
without limitation, advances under the Revolving Loan made to cover debit
balances in the Revolving Loan Account, principal of, and/or interest on, any
Loan, any of the Obligations, and/or Enforcement Costs, prior to, on, or after
the termination of other advances under this Agreement, regardless of whether
the outstanding principal amount of the Revolving Loan which the Lender may make
hereunder exceeds the Revolving Credit Committed Amount.
The Borrowers understand and agree that although certain of the Obligations
are payable within five (5) days of DEMAND before such non-payment shall
constitute a Default or an Event of Default, nevertheless during such five (5)
day period, the Lender shall be entitled to suspend the making of or limit
advances under the Revolving Loan without further notice to or consent of the
Borrowers.
2.1.3 Borrowing Base. As used in this Agreement, the term "Borrowing
Base" means at any time, an amount equal to the aggregate of (a) eighty-five
percent (85%) of the amount of Eligible Receivables, plus (b) the lesser of (i)
fifty
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percent (50%) of the amount of Eligible Inventory or (ii) Ten Million Dollars
($10,000,000).
The Borrowing Base shall be computed based on the Borrowing Base Report
most recently delivered to, and accepted by, the Lender in its commercially
reasonable discretion. In the event the Borrowers shall fail to furnish a
Borrowing Base Report required by Section 2.1.4 below, the Lender may, at its
option exercised from time to time and without limiting its other rights and
remedies under this Agreement, suspend the making of or limit advances under the
Revolving Loan. The Borrowing Base shall be subject to reduction by amounts
credited to the Collateral Account since the date of the most recent Borrowing
Base Report and by the amount of any Receivable or any Inventory which was
included in the Borrowing Base but which the Lender determines fails to meet the
respective criteria applicable from time to time for Eligible Receivables or
Eligible Inventory.
If at any time the total of the aggregate principal amount of the Revolving
Loan exceeds the Borrowing Base, a borrowing base deficiency ("Borrowing Base
Deficiency") shall exist. Each time a Borrowing Base Deficiency exists, the
Borrowers, jointly and severally and at the option of the Lender exercised from
time to time, shall pay the Borrowing Base Deficiency within five (5) days
following DEMAND to the Lender.
Without implying any limitation on the Lender's discretion with respect to
the Borrowing Base, the criteria for Eligible Receivables and for Eligible
Inventory contained in the respective definitions of Eligible Receivables and of
Eligible Inventory are in part based upon the business operations of the
Borrowers existing on or about the Closing Date and upon information and records
furnished to the Lender by the Borrowers. If at any time or from time to time
hereafter, the business operations of the Borrowers change or such information
and records furnished to the Lender is incorrect or misleading in any material
respect, the Lender in its commercially reasonable discretion, may at any time
and from time to time during the duration of this Agreement change such criteria
or add new criteria; provided, that if the Lender elects to change such criteria
or add new criteria because of a change in business operations of the Borrowers,
the Lender agrees that it shall not change such criteria or add new criteria
unless the Lender has reasonably determined that any such change in business
operations has a materially adverse effect on the busi- ness, properties,
condition (financial or otherwise) or opera- tions, present or prospective, of
any or all of the Borrowers. The Lender may communicate such changed or
additional criteria to the Borrowers from time to time either orally or in
writing.
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2.1.4 Borrowing Base Report. The Borrowers will furnish to the Lender
no less frequently than weekly and at such other times as may be requested by
the Lender a report of the Borrowing Base (each a "Borrowing Base Report";
collectively, the "Borrowing Base Reports") in the form required from time to
time by the Lender, appropriately completed and duly signed, which Borrowing
Base Reports shall include a detailed breakdown as to Accounts which constitute
progress ▇▇▇▇▇▇▇▇. The Borrowing Base Report shall contain the amount and
payments on the Receivables, the value of Inventory, and the calculations of the
Borrowing Base, all in such detail, and accompanied by such supporting and other
information, as the Lender may from time to time request. Upon the Lender's
request upon the creation of any Receivables or at such other intervals as the
Lender may require, the Borrowers will provide the Lender with: (a) confirmatory
assignment schedules; (b) copies of Account Debtor invoices; (c) evidence of
shipment or delivery; and (d) such further schedules, documents and/or
information regarding any of the Receivables and Inventory as the Lender may
reasonably require. The items to be provided under this subsection shall be in
form satisfactory to the Lender, certified as true and correct by a Responsible
Officer, and delivered to the Lender from time to time solely for the Lender's
convenience in maintaining records of the Collateral. The failure of the
Borrowers to deliver any such items to the Lender shall not affect, terminate,
modify, or otherwise limit the Lender's security interests in, and Liens on, the
Collateral.
2.1.5 Revolving Credit Note. The joint and several obligation of the
Borrowers to pay the Revolving Loan, with interest, shall be evidenced by a
promissory note (as from time to time extended, amended, restated, supplemented
or otherwise modified, the "Revolving Credit Note") substantially in the form of
EXHIBIT "A-1" attached hereto and made a part hereof, with appropriate
insertions. The Revolving Credit Note shall be dated as of the Closing Date,
shall be payable to the order of the Lender at the times provided in the
Revolving Credit Note, and shall be in the principal amount of the Revolving
Credit Committed Amount. The Borrowers acknowledge and agree that, if the
outstanding principal balance of the Revolving Loan outstanding from time to
time exceeds the face amount of the Revolving Credit Note, the excess shall bear
interest at the Post-Default Rate and shall be payable, jointly and severally,
with accrued interest, within five (5) days following DEMAND. The Revolving
Credit Note shall not operate as a novation of any of the Obligations or
nullify, discharge, or release any such Obligations or the continuing
contractual relationship of the parties hereto in accordance with the provisions
of this Agreement.
2.1.6 Mandatory Prepayments of Revolving Loan. The Borrowers, jointly
and severally, shall make the mandatory
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prepayments (each a "Revolving Loan Mandatory Prepayment" and collectively, the
"Revolving Loan Mandatory Prepayments") of the Revolving Loan at any time and
from time to time in such amounts requested by the Lender pursuant to Section
2.1.3 (Borrowing Base) of this Agreement in order to cover any Borrowing Base
Deficiency.
2.1.7 Optional Prepayments of Revolving Loan. Subject to the
limitations and fees of Section 2.1.11 below, the Borrowers shall have the
option, at any time and from time to time, to prepay (each a "Revolving Loan
Optional Prepayment" and collectively the "Revolving Loan Optional Prepayments")
the Revolving Loan, in whole or in part without premium or penalty; partial
Revolving Loan Optional Prepayments shall be in amounts not less than Five
Hundred Thousand Dollars ($500,000) and may only be made in integral multiples
of One Hundred Thousand ($100,000). All Revolving Loan Optional Prepayments
shall be made following a timely and proper written notice to the Lender
specifying the date and amount of any intended Revolving Loan Optional
Prepayment. The amount to be prepaid shall be paid jointly and severally by the
Borrowers to the Lender on the date specified for such prepayment. 2.1.8 The
Collateral Account. The Borrowers will deposit, or cause to be deposited, all
Items of Payment to a bank account designated by the Lender and from which the
Lender alone has power of access and withdrawal (the "Collateral Account"). Each
deposit shall be made not later than the next Business Day after the date of
receipt of the Items of Payment. The Items of Payment shall be deposited in
precisely the form received, except for the endorsements of the Borrowers, as
appropriate, where necessary to permit the collection of any such Items of
Payment, each Borrower hereby agreeing to make such endorsement. In the event
any Borrower shall fail to do so, the Lender is hereby authorized by each such
Borrower to make the endorsement in the name of such Borrower. Prior to such a
deposit, the Borrowers will not commingle any Items of Payment with any of the
other funds or property of the Borrowers, but will hold them separate and apart
in trust and for the account of the Lender.
In addition, if so directed by the Lender, the Borrowers shall direct the
mailing of all Items of Payment from their respective Account Debtors to a
post-office box designated by the Lender, or to such other additional or
replacement post-office boxes pursuant to the request of the Lender from time to
time (collectively, the "Lockbox"). The Lender shall have unrestricted and
exclusive access to the Lockbox.
Each Borrower hereby authorizes the Lender to inspect all Items of Payment,
endorse all Items of Payment in the name of such Borrower, and deposit Items of
Payment in the Collateral Account.
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The Lender reserves the right, exercised in its commercially reasonable
discretion from time to time, to provide to the Collateral Account credit prior
to final collection of an Item of Payment and to disallow credit for any Item of
Payment which is unsatisfactory to the Lender. In the event Items of Payment are
returned to the Lender for any reason whatsoever, the Lender may, in the
exercise of its discretion from time to time, forward such Items of Payment a
second time. Any returned Items of Payment shall be charged back to the
Collateral Account, the Revolving Loan Account, or other account, as
appropriate.
The Lender will apply the whole or any part of the collected funds credited
to the Collateral Account against the Revolving Loan (or with respect to Items
for Payments which are not proceeds of accounts or inventory or after a Default
or Event of Default, against any of the Obligations) or credit such collected
funds to the depository account of any or all of the Borrowers with the Lender
(or an Affiliate of the Lender), the order and method of such application to be
in the sole, but reasonable discretion of the Lender.
2.1.9 Revolving Loan Account. The Lender will establish and maintain a
loan account on its books (the "Revolving Loan Account") to which the Lender
will (a) debit (i) the principal amount of each advance of the Revolving Loan
made by the Lender hereunder as of the date made, (ii) the amount of any
interest accrued on the Revolving Loan as and when due, and (iii) any other
amounts due and payable by any or all of the Borrowers to the Lender from time
to time under the provisions of this Agreement in connection with the Revolving
Loan, including, without limitation, Enforcement Costs, Fees, late charges, and
service, collection and audit fees, as and when due and payable, and (b) credit
all payments made by any and all of the Borrowers to the Lender on account of
the Revolving Loan as of the date made including, without limitation, funds
credited to the Revolving Loan Account from the Collateral Account. The Lender
may debit the Revolving Loan Account for the amount of any Item of Payment which
is returned to the Lender unpaid. All credit entries to the Revolving Loan
Account are conditional and shall be readjusted as of the date made if final and
indefeasible payment is not received by the Lender in cash or solvent credits.
Any and all periodic or other statements or reconciliations, and the information
contained in those statements or reconciliations, of the Revolving Loan Account
shall be final, binding and conclusive upon each Borrower in all respects,
absent manifest error, unless the Lender receives specific written objection
thereto from a Borrower within thirty (30) Business Days after such statement or
reconciliation shall have been sent by the Lender.
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2.1.10 Revolving Credit Unused Line Fee. The Borrowers jointly and
severally shall pay to the Lender a monthly revolving credit facility fee
(collectively, the "Revolving Credit Unused Line Fees" and individually, a
"Revolving Credit Unused Line Fee") in an amount equal to three-eighths percent
(3/8%) per annum of the average daily unused and undisbursed portion of the
Revolving Credit Committed Amount for the then preceding month. The accrued and
unpaid portion of the Revolving Credit Unused Line Fee shall be paid jointly and
severally by the Borrowers to the Lender on the first day of each month,
commencing on the first such date following the date hereof, and on the
Revolving Credit Termination Date.
2.1.11 Early Termination Fee. In the event of the termination by, or on
behalf of, any or all of the Borrowers, of the Revolving Credit Commitment, the
Borrowers jointly and severally shall pay a fee (the "Early Termination Fee")
equal to the following amount at the following times:
Period Early Termination Fee
October 1, 1996, through and 2% of the Committed Amount
including September 30, 1997
October 1, 1997, through and 1% of the Committed Amount
including, the day preceding
the Revolving Credit Expiration
Date
Payment of the Revolving Loan in whole or in part by or on behalf of the
Borrowers, by court order or otherwise, following and as a result of the
institution of any bankruptcy proceeding by or against the Borrowers, shall be
deemed to be a prepayment of the Revolving Loan subject to the Early Termination
Fee provided in this subsection.
Notwithstanding the foregoing, the Borrowers shall not be required to pay
the Early Termination Fee in connection with a repayment of all Obligations and
termination of the Revolving Loan from the proceeds of a public or private
offering of equities which generates sufficient proceeds to repay all
Obligations in full. In addition, if the Borrowers request that the Lender
consent to the purchase of Fixed or Capital Assets or the purchase or
acquisition of, or investment in, any Person which would not otherwise be
permitted by the provisions of this Agreement, and the Lender refuses to agree
and consent to any such purchase, acquisition or investment, the Borrowers may,
at their option, repay the Obligations in full and terminate the Revolving Loan
and shall have no obligation to pay an Early Termination Fee in connection with
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any such prepayment and termination. Nothing contained in this Section shall be
deemed a waiver by the Lender of any Default or Event of Default which results
from any such public or private offering of equities and/or the closing of a
purchase, acquisition or investment otherwise prohibited by the provisions of
this Agreement.
2.1.12 Required Availability under the Revolving Credit Facility.
(a) On the Closing Date, the aggregate outstanding principal amount
of the Revolving Loan shall not exceed an amount equal to (i) the lesser of the
Borrowing Base or the Revolving Credit Committed Amount, minus (ii) Three
Million Dollars ($3,000,000).
(b) The Borrowers shall not at any time after the Closing Date
permit on a monthly basis the average aggregate outstanding principal amount of
the Revolving Loan to exceed an amount equal to (i) the lesser of Borrowing Base
or the Revolving Credit Committed Amount, minus (ii) One Million Dollars
($1,000,000).
(c) The Borrowers shall make a Revolving Loan Mandatory Prepayment
pursuant to the provisions of Section 2.1.6 to the extent necessary to achieve
compliance with this Section.
SECTION 2.2 The Term Loan Facility.
2.2.1 Term Loan Commitment. Subject to and upon the provisions of
this Agreement, the Lender agrees to make a loan (the "Term Loan") jointly and
severally to the Borrowers on the Closing Date in a principal amount equal to
SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($6,500,000) (herein called the "Term
Loan Committed Amount"). Notwithstanding the foregoing, if the aggregate amount
of paid in cash equity and subordinated Indebtedness received by Flanders
Corporation as of the Closing Date in connection with the Equity Offering
Transaction exceeds Eight Million Five Hundred Thousand Dollars ($8,500,000)
(excluding the Four Million Dollars ($4,000,000) deposited into escrow by GE in
connection with its agreement to purchase equities in accordance with Equity
Offering Documents), the Term Loan Committed Amount shall be reduced by the
amount of any excess on a dollar for dollar basis. The obligation of the Lender
to make the Term Loan is herein called its "Term Loan Commitment".
2.2.2 The Term Note. The joint and several obligation of the
Borrowers to pay the Term Loan with interest shall be evidenced by a promissory
note (as from time to time
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extended, amended, restated, supplemented or otherwise modified, the "Term
Note") substantially in the form of EXHIBIT "A-2" attached hereto and made a
part hereof with appropriate insertions.
2.2.3 Mandatory Prepayments of Term Loan. The Borrowers jointly and
severally shall make mandatory prepayments (each a "Term Loan Mandatory
Prepayment" and collectively the "Term Loan Mandatory Prepayments") of the Term
Loan to the Lender as follows:
(a) The Borrowers shall jointly and severally make Term Loan
Mandatory Prepayments of Excess Cash Flow annually. Each such Term Loan
Mandatory Prepayment shall be in the amount of the Excess Cash Flow for the then
preceding fiscal year and shall be payable on the date the Borrowers shall
furnish to the Lender the annual financial statements referred to in Section
6.1.1 of this Agreement. If, however, the Borrowers fail to furnish such
financial statements in any given year as and when required, the Borrowers
jointly and severally shall be required to pay the Term Loan Mandatory
Prepayment payable during such calendar year on the date which is ninety (90)
days after the close of the then preceding fiscal year of Flanders Corporation.
(b) The Lender understands that after the Closing Date, Flanders
Corporation may make one or more underwritten public offerings of equities.
Immediately upon closing and consummation of any such public offering, the
Borrowers shall make a Term Loan Mandatory Prepayment in an amount sufficient to
repay the then outstanding balance of the Term Loan in full. Notwithstanding the
foregoing, the Borrowers shall not be required to make a Term Loan Mandatory
Prepayment in connection with any public offering of equities which does not
generate any proceeds (other than proceeds relating to the exercise of any
warrants), including, for example, the issuance or exercise of warrants with
registration rights or the issuance of a resale prospectus for any existing
shares of capital stock.
(c) In connection with the Equity Offering Transaction, GE has
established a cash escrow in an amount equal to Four Million Dollars
($4,000,000) in accordance with the provisions of a written escrow agreement
(the "Closing Escrow Agreement"). Under the terms of the Closing Escrow
Agreement, upon (i) closing of the Purchase Agreement Transaction -
Precisionaire and (ii) upon registration of the stock to be issued by Flanders
Corporation to GE in accordance with the Equity Offering Documents, a portion of
the funds on deposit pursuant to the Closing Escrow Agreement in an amount up
to, but not exceeding $1,700,000, shall be released and paid to the Person that
made a bridge loan to Flanders Corporation in the amount of $1,700,000 on or
before the Closing Date; the
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balance of the funds on deposit in the Closing Escrow shall be paid to the
Lender as a Term Loan Mandatory Prepayment.
The Borrowers jointly and severally shall pay to the Lender on the date of each
Term Loan Mandatory Prepayment accrued interest to such date on the amount
prepaid. Each Partial Term Loan Mandatory Prepayment shall be applied to the
balloon payment due at maturity and then to principal against the principal
installments in the inverse order of their maturity.
2.2.4 Optional Prepayments of Term Loan. The Borrowers shall have the
option, at any time and from time to time, to prepay (each a "Term Loan Optional
Prepayment" and collectively the "Term Loan Optional Prepayments") the Term
Loan, in whole or in part, upon five (5) Business Days prior written notice,
specifying the date and amount of prepayment. The amount to be so prepaid,
together with interest accrued thereon to date of prepayment if the amount is
intended as a prepayment of the Term Loan in whole, shall be paid by the
Borrowers to the Lender on the date specified for such prepayment. Partial Term
Loan Optional Prepayments shall be in an amount not less than the aggregate
amount of the next principal installment under the Term Note and shall be
applied first to all accrued and unpaid interest on the principal of the Term
Note, then to the balloon payment due at maturity and then to principal against
the principal install- ments in the inverse order of their maturity.
SECTION 2.3 General Financing Provisions.
2.3.1 Borrowers' Representatives.
(a) The Borrowers each hereby represent and warrant to the Lender
that each of them will derive benefits, directly and indirectly, from each Loan,
both in their separate capacity and as a member of the integrated group to which
each of the Borrowers belong, because the successful operation of the integrated
group is dependent upon the continued successful performance of the functions of
the integrated group as a whole. The Borrowers in the discretion of their
respective managements are to agree among themselves as to the allocation of the
proceeds of Loans, and the purposes for which such benefits and proceeds will be
used so long as any such allocation or purpose is not in violation of this
Agreement.
(b) For administrative convenience, Flanders Corporation is hereby
irrevocably appointed by each of the Borrowers as agent for each of the
Borrowers for the purpose of requesting Loans, receiving the proceeds of Loans,
and disbursing the proceeds of Loans as between the Borrowers. By reason
thereof,
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Flanders Corporation is hereby irrevocably appointed by each of the Borrowers as
the attorney-in-fact of each of the Borrowers with power and authority through
its duly authorized officer or officers to (i) endorse any check (if any) for
the proceeds of any Loan for and on behalf of each of the Borrowers and in the
name of each of the Borrowers and (i) instruct the Lender to credit the proceeds
of any Loan directly to an account of any of the Borrowers which shall evidence
the making of such Loan and shall constitute the acknowledgement by each of the
Borrowers of the receipt of the proceeds of such Loan.
(c) Each of the Borrowers hereby irrevocably authorizes the Lender
to make Loans to any or all of the Borrowers, pursuant to the provisions of this
Agreement upon the written, oral or telephone request of any one of the Persons
who are from time to time a Responsible Officer of a Borrower under the
provisions of the most recent "Certificate" of corporate resolutions of the
Borrowers on file with the Lender and also upon the written, oral or telephone
request of any one of the Persons who are from time to time a Responsible
Officer of Flanders Corporation under the provisions of the most recent
"Certificate" of corporate resolutions and/or incumbency for Flanders
Corporation on file with the Lender.
(d) The Lender assumes no responsibility or liability for any
errors, mistakes, and/or discrepancies in the oral, telephonic, written or other
transmissions of any instructions, orders, requests and confirmations between
the Lender and the Borrowers in connection with the Credit Facilities, any Loan
or any other transaction in connection with the provisions of this Agreement,
except and to the extent attributable to the gross negligence or willful
misconduct of the Lender.
(e) Without implying any limitation on the joint and several nature
of the Obligations, the Lender agrees that, notwithstanding any other provision
of this Agreement, the Borrowers may create reasonable inter-company
indebtedness between or among the Borrowers with respect to the allocation of
the benefits and proceeds of the advances under this Agreement; provided,
however, that the Lender may from time to time, following notice to the
Borrowers (i) require that the proceeds of the Loans be made available to a
Borrower only to the extent the aggregate amount of that Borrower's Eligible
Receivables and Eligible Inventory exceed that Borrower's aggregate net use of
proceeds of the Loans, and (ii) require that the portion of the proceeds of
Loans based on that portion of the Borrowing Base which is attributable to a
Borrower which is or may be insolvent, may be used only by that Borrower. The
Borrowers agree among themselves, and the Lender consents to that agreement,
that each Borrower shall
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have rights of contribution from all of the other Borrowers to the extent such
Borrower incurs Obligations in excess of the proceeds of the Loans received by,
or allocated to purposes for the direct benefit of, such Borrower. All such
indebtedness and rights shall be, and is hereby agreed by the Borrowers to be,
subordinate in priority and payment to the indefeasible repayment in full of the
Obligations, and, unless the Lender agrees in writing otherwise, shall not be
exercised or repaid in whole or in part until all of the Obligations have been
satisfied. The Borrowers agree that all of such indebtedness and rights is part
of the Collateral of a Borrower who is the creditor and secures the Obligations.
Each Borrower hereby waives all rights of counterclaim, recoupment and offset
between or among themselves arising on account of that indebtedness and
otherwise. Each Borrower shall not evidence that indebtedness or rights by note
or other instrument, and shall not secure that indebtedness with any mortgages,
security interests or otherwise, even though any such instrument and security
shall be part of the Collateral.
2.3.2 Use of Proceeds of the Loans. The proceeds of each advance under
the Loans shall be used by the Borrowers for Permitted Uses, and for no other
purposes except as may otherwise be agreed by the Lender in writing. The
Borrowers shall use the proceeds of the Loans promptly.
2.3.3 Origination Fee. The Borrowers jointly and severally shall pay to
the Lender on or before the Closing Date a loan origination fee (the
"Origination Fee") in the amount of THREE HUNDRED NINETY-THREE THOUSAND SEVEN
HUNDRED FIFTY DOLLARS ($393,750), which fee has been fully earned and is
non-refundable. The Borrowers have previously paid to the Lender a commitment
fee and expense deposit in the amount of One Hundred Thousand Dollars
($100,000). Twenty-five Thousand Dollars ($25,000) of this fee and expense
deposit have been fully earned by the Lender and shall be retained by the Lender
as a commitment fee. The remaining Seventy-five Thousand Dollars ($75,000) shall
be applied first to any expenses reasonably incurred by the Lender on or before
the Closing Date in connection with the approval and underwriting of the Credit
Facilities, and second to the Origination Fee payable on the Closing Date.
2.3.4 Field Examination Fees. The Borrowers jointly and severally shall
pay to the Lender a field examination fee (collectively, the "Field Examination
Fees" and individually a "Field Examination Fee") at the time of each field
examination or audit of any of the Borrowers. Each Field Examination Fee shall
be in an amount equal to the sum of Six Hundred Dollars ($600) per day per
person conducting such field examination.
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2.3.5 Computation of Interest and Fees. All applicable Fees and
interest shall be calculated on the basis of a year of 360 days for the actual
number of days elapsed. Any change in the interest rate on any of the
Obligations resulting from a change in the Base Rate shall become effective as
of the opening of business on the day on which such change in the Base Rate is
announced.
2.3.6 Payments. All payments of the Obligations, including, without
limitation, principal, interest, Prepayments, and Fees, shall be paid by the
Borrowers, jointly and severally, without setoff, recoupment or counterclaim to
the Lender in immediately available funds not later than 12:00 noon, Baltimore,
Maryland time on the due date of such payment. All such payments shall be made
to the Lender's principal office in Baltimore, Maryland or at such other
location as the Lender may at any time and from time to time notify the
Borrowers. Alternatively, at its sole, but reasonable discretion, the Lender may
charge any deposit account of any Borrower at the Lender or any Affiliate of the
Lender with all or any part of any amount due to the Lender under this Agreement
or any of the other Financing Documents to the extent that any Borrower shall
have not otherwise tendered payment to the Lender. Notwithstanding the
foregoing, the Lender agrees that prior to the occurrence of a Default or an
Event of Default, the Lender shall not charge any deposit account for any of the
Obligations other than out-of-pocket expenses reasonably incurred by the Lender
under or in connection with the Credit Facilities. All payments shall be applied
first to any unpaid Fees, second to any and all accrued and unpaid late charges
and Enforcement Costs, third to any and all accrued and unpaid interest on the
Obligations, and then to the then unpaid principal balance of the Obligations,
all in such order and manner as shall be determined by the Lender in its sole
discretion.
2.3.7 Liens; Setoff. Each Borrower hereby grants to the Lender as
additional collateral and security for all of the Obligations, a continuing Lien
on any and all monies, Securities, and other personal property of such Borrower
and any and all proceeds thereof, now or hereafter held or received by, or in
transit to, the Lender or any Affiliate of the Lender from, or for the account
of, any Borrower, and also upon any and all depository accounts (whether general
or special) and credits of each Borrower, if any, with the Lender or any
Affiliate of the Lender, at any time existing, excluding any depository accounts
held by any Borrower in its capacity as trustee for Persons who are not
Affiliates of a Borrower. Without implying any limitation on any other rights
the Lender may have under the Financing Documents or applicable Laws, during the
continuance of an Event of Default, the Lender is hereby authorized by each
Borrower at any time and
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from time to time at the Lender's option, without notice to, or consent of, any
Borrower, to set off, appropriate, seize, freeze and apply any or all items
hereinabove referred to against all Obligations then outstanding (whether or not
then due), all in such order and manner as shall be determined by the Lender in
its sole discretion.
2.3.8 Requirements of Law. In the event that the Lender shall have
determined in good faith that (a) the adoption of any Laws regarding capital
adequacy, or (b) any change in such Laws or in the interpretation or application
thereof or (c) compliance by the Lender or any corporation controlling the
Lender with any request or directive regarding capital adequacy (whether or not
having the force of law) from any Governmental Authority or central bank, does
or shall have the effect of reducing the rate of return on the capital of the
Lender or such controlling corporation as a consequence of the Lender's
obligations under this Agreement to a level below that which the Lender or such
corporation would have achieved but for such adoption, change or compliance
(taking into consideration the policies of the Lender and its controlling
corporation with respect to capital adequacy) by an amount deemed by the Lender,
in its discretion, to be material, then from time to time, after submission by
the Lender to the Borrowers of a written request therefor and a statement of the
basis for the Lender's determination, the Borrowers jointly and severally shall
pay to the Lender within five (5) days following DEMAND such additional amount
or amounts in order to compensate the Lender or its controlling corporation for
any such reduction.
2.3.9 Funds Transfer Services.
(a) The Borrowers have requested that the Lender and its Affiliates
make available to the Borrowers electronic funds transfer services and related
security measures in connection with the Obligations. A copy of the Lender's
current Wire Transfer Procedures, including the Security Procedures, is attached
to this Agreement as EXHIBIT B. Each Borrower acknowledges and agrees that all
electronic funds transfers made by the Lender or any Affiliate of the Lender to,
or for the account of, any Borrower shall be governed by, and subject to, the
Wire Transfer Procedures and the Security Procedures in effect from time to
time. The Borrowers and the Lender agree that the current Wire Transfer
Procedures and the Security Procedures are commercially reasonable. Each
Borrower further acknowledges and agrees, however, that the full scope of the
Security Procedures which the Lender and its Affiliates offer and strongly
recommend for electronic funds transfers is available only if the Borrowers
communicate directly with the Lender or its Affiliate, as applicable, in
accordance with and as required by the Wire Transfer Procedures
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and the Security Procedures. If a Borrower attempts to communicate with the
Lender or any Affiliate of the Lender by any other method or otherwise does not
communicate with the Lender and/or its Affiliate, as appropriate, in accordance
with the Wire Transfer Procedures and the Security Procedures, the Lender and/or
its Affiliate, as applicable, shall not be required to execute the instructions
of such Borrower, but if the Lender or such Affiliate, as applicable, does so,
such Borrower will be deemed to have refused and waived the Security Procedures
that the Lender or its Affiliate, as applicable, offers and strongly recommends,
and such Borrower will be bound by any funds transfer, whether or not
authorized, which is issued in such Borrower's name and accepted by the Lender
or any Affiliate, as applicable, in good faith. The Lender or it Affiliate, as
applicable, may modify the Wire Transfer Procedures including, without
limitation, the Security Procedures at such time or times and in such manner as
the Lender and/or any Affiliate of the Lender, as applicable, in its or their
commercially reasonable discretion, deems appropriate to meet then prevailing
standards of good banking practice. The Lender shall notify the Borrowers of any
material change or modification to the Wire Transfer Procedures and/or the
Security Procedures. By continuing to use the wire transfer services of the
Lender and/or any Affiliate of the Lender following notice to the Borrowers of
any such change or modification to the Wire Transfer Procedures and/or the
Security Procedures, the Borrowers shall be deemed automatically to have agreed
to the Wire Transfer Procedures and the Security Procedures, as changed and/or
modified and to have further agreed that the Wire Transfer Procedures and the
Security Procedures, as changed and/or modified, are likewise commercially
reasonable. Each Borrower further agrees to establish and maintain procedures to
safeguard the Security Procedures and any information related thereto. Neither
the Lender or any Affiliate of the Lender is responsible for detecting any error
in any payment order sent by any Borrower to the Lender or any Affiliate of the
Lender.
(b) The Lender and its Affiliates, as applicable, will generally
use the Fedwire funds transfer system for domestic funds transfers, and the
funds transfer system operated by the Society for Worldwide International
Financial Telecommunication (SWIFT) for international funds transfers.
International funds transfers may also be initiated through the Clearing House
InterBank Payment System (CHIPs) or international cable. However, the Lender
and/or its Affiliates, as applicable, may use any means and routes that the
Lender or any such Affiliate, as applicable, in its sole discretion, may
consider suitable for the transmission of funds. Each payment order, or
cancellation thereof, carried out through a funds transfer system or a
clearinghouse will be governed by all applicable funds transfer system rules and
clearing house rules and clearing arrangements,
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whether or not the Lender or any Affiliate, as applicable, is a member of the
system, clearinghouse or arrangement and each Borrower acknowledges that the
right of the Lender or any Affiliate, as applicable, to reverse, adjust, stop
payment or delay posting of an executed payment order is subject to the Laws,
regulations, rules, circulars and arrangements described herein.
2.3.10 Guaranty.
(a) Each Borrower hereby unconditionally and irrevocably,
guarantees to the Lender:
(i) the due and punctual payment in full (and not merely
the collectibility) by the other Borrowers of the principal of the Notes and
the interest thereon, in each case when due and payable, all according to
the terms of the Notes and the other Financing Documents;
(ii) the due and punctual payment in full (and not merely
the collectibility) by the other Borrowers of all other sums and charges
which may at any time be due and payable in accordance with the Notes or any
of the other Financing Documents;
(iii) the due and punctual performance by the other
Borrowers of all of the other terms, covenants and conditions contained in
the Financing Documents; and
(iv) all the other Obligations of the other Borrowers.
(b) The obligations and liabilities of each Borrower as a guarantor
under this Section 2.3.10 shall be absolute and unconditional, irrespective of
the genuineness, validity, priority, regularity or enforceability of the Notes
or any of the Financing Documents or any other circumstance which might
otherwise constitute a legal or equitable discharge of a surety or guarantor.
Each Borrower in its capacity as a guarantor expressly agrees that the Lender
may, in its commercially reasonable discretion, without notice to or further
assent of any Borrower and without in any way releasing, affecting or in any way
impairing the obligations and liabilities of any Borrower as a guarantor
hereunder:
(i) waive compliance with, or any defaults under, or grant
any other indulgences under or with respect to any of the Financing
Documents;
(ii) modify, amend, change or terminate any provisions of
any of the Financing Documents;
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(iii) grant extensions or renewals of or with respect to
the Notes or any of the other Financing Documents;
(iv) effect any release, subordination, compromise or
settlement in connection with the Notes or any of the other Financing
Documents;
(v) agree to the substitution, exchange, release or other
disposition of the Collateral or any part thereof, or any other collateral
for the Loan or to the subordination of any lien or security interest
therein;
(vi) make advances for the purpose of performing any term,
provision or covenant contained in the Notes or any of the other Financing
Documents with respect to which the Borrowers shall then be in default;
(vii) make future advances pursuant to the Financing
Agreement or any of the other Financing Documents;
(viii) assign, pledge, hypothecate or otherwise transfer
the Notes, any of the other Financing Documents or any interest therein;
(ix) deal in all respects with the other Borrowers as if
this Section 2.3.10 were not in effect;
(x) effect any release, compromise or settlement with any
of the other Borrowers, whether in their capacity as Borrower or as
guarantor under this Section 2.3.10, or any other guarantor; and
(xi) provide debtor-in-possession financing or allow use of
cash collateral in proceedings under the Bankruptcy Code, it being expressly
agreed by all Borrowers that any such financing and/or use would be part of
the Obligations.
(c) The obligations and liabilities of each Borrower, as guarantor
under this Section 2.3.10, shall be primary, direct and immediate, shall not be
subject to any counterclaim, recoupment, set off, reduction or defense based
upon any claim that a Borrower may have against any one or more of the other
Borrowers, the Lender and/or any other guarantor and shall not be conditional or
contingent upon pursuit or enforcement by the Lender of any remedies it may have
against the Borrowers with respect to the Notes or any of the other Financing
Documents, whether pursuant to
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the terms thereof or by operation of law. Without limiting the generality of the
foregoing, the Lender shall not be required to make any demand upon the
Borrowers, or to sell the Collateral or otherwise pursue, enforce or exhaust its
remedies against the Borrowers or the Collateral either before, concurrently
with or after pursuing or enforcing its rights and remedies hereunder. Any one
or more successive or concurrent actions or proceedings may be brought against
each Borrower under this Section 2.3.10, either in the same action, if any,
brought against any one or more of the Borrowers or in separate actions or
proceedings, as often as the Agent may deem expedient or advisable. Without
limiting the foregoing, it is specifically understood that any modification,
limitation or discharge of any of the liabilities or obligations of any one or
more of the Borrowers, any other guarantor or any obligor under any of the
Financing Documents, arising out of, or by virtue of, any bankruptcy,
arrangement, reorganization or similar proceeding for relief of debtors under
federal or state law initiated by or against any one or more of the Borrowers,
in their respective capacities as Borrowers and guarantor under this Section
2.3.10, or under any of the Financing Documents shall not modify, limit, lessen,
reduce, impair, discharge, or otherwise affect the liability of each Borrower
under this Section 2.3.10 in any manner whatsoever, and this Section 2.3.10
shall remain and continue in full force and effect. It is the intent and purpose
of this Section 2.3.10 that each Borrower shall and does hereby waive all rights
and benefits which might accrue to any other guarantor by reason of any such
proceeding, and the Borrowers agree that they shall be liable for the full
amount of the obligations and liabilities under this Section 2.3.10, regardless
of, and irrespective to, any modification, limitation or discharge of the
liability of any one or more of the Borrowers, any other guarantor or any
obligor under any of the Financing Documents, that may result from any such
proceedings.
(d) Each Borrower, as guarantor under this Section 2.3.10, hereby
unconditionally, jointly and severally, irrevocably and expressly waives:
(i) presentment and demand for payment of the principal of
or interest on the Notes and protest of non-payment;
(ii) notice of acceptance of this Section 2.3.10 and of
presentment, demand and protest thereof;
(iii) notice of any default hereunder or under the Notes or
any of the other Financing Documents and notice of all indulgences;
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(iv) notice of any increase in the amount of any portion of
or all of the indebtedness guaranteed by this Section 2.3.10;
(v) demand for observance, performance or enforcement of
any of the terms or provisions of this Section 2.3.10, the Notes or any of
the other Financing Documents;
(vi) all errors and omissions in connection with the
Lender's administration of all indebtedness guaranteed by this Section
2.3.10, except errors and omissions resulting from acts of gross negligence
or willful misconduct;
(vii) any right or claim of right to cause a marshalling of
the assets of any one or more of the other Borrowers; and
(viii) any act or omission of the Lender which changes the
scope of the risk as guarantor hereunder.
(e) Within ten (10) days following any request of the Lender so to
do, each Borrower will furnish the Lender and such other persons as the Lender
may direct with a written certificate, duly acknowledged stating in detail
whether or not any credits, offsets or defenses exist with respect to this
Section 2.3.10.
ARTICLE 3
THE COLLATERAL
SECTION 3.1 Debt and Obligations Secured. All property and Liens assigned,
pledged or otherwise granted under or in connection with this Agreement
(including, without limitation, those under Section 3.2 (Grant of Liens) below)
or any of the Financing Documents shall secure (a) the payment of all of the
Obligations, and (b) the performance, compliance with and observance by each
Borrower of the provisions of this Agreement and all of the other Financing
Documents or otherwise under the Obligations.
SECTION 3.2 Grant of Liens. Each Borrower hereby assigns, pledges and
grants to the Lender, and agrees that the Lender shall have a perfected and
continuing security interest in, and Lien on, (a) all of such Borrower's
Accounts, Inventory, Chattel Paper, Documents, Instruments, Equipment,
Securities, and General Intangibles, whether now owned or existing or hereafter
acquired or arising, (b) all returned, rejected or repossessed goods, the sale
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or lease of which shall have given or shall give rise to an Account or Chattel
Paper, (c) all insurance policies relating to the foregoing, (d) all books and
records in whatever media (paper, electronic or otherwise) recorded or stored,
with respect to the foregoing and all Equipment and General Intangibles
necessary or beneficial to retain, access and/or process the information
contained in those books and records, and (e) all cash and non-cash proceeds and
products of the foregoing. Each Borrower further agrees that the Lender shall
have in respect thereof all of the rights and remedies of a secured party under
the Uniform Commercial Code as well as those provided in this Agreement, under
each of the other Financing Documents and under applicable Laws.
Without implying any limitation to the foregoing, as additional Collateral
and security for the Obligations, Flanders Corporation hereby assigns to the
Lender all of its respective rights, title and interest in, to, and under, each
of the Purchase Agreements and all of the Purchase Agreement Documents,
including, without limitation, all of the benefits of any representations and
warranties provided by the seller or any other Person and any and all rights of
Flanders Corporation to indemnification from the seller or any other Person
contained therein. Neither the assignment to the Lender nor any other provision
contained in this Agreement or any of the other Financing Documents shall impose
on the Lender any obligation or liability of Flanders Corporation or any other
Borrower under any of the Purchase Agreements and/or under any of the other
Purchase Agreement Documents. The Borrowers hereby agree jointly and severally
to indemnify the Lender and hold the Lender harmless from any and all claims,
actions, suits, losses, damages, costs, expenses, fees, obligations and
liabilities which may be incurred by or imposed upon the Lender by virtue of the
assignment of and Lien on the rights, title and interest of Flanders Corporation
in, to, and under the Purchase Agreements and the Purchase Agreement Documents.
Each Borrower further acknowledges and agrees that following the occurrence of
an Event of Default, the Lender shall be entitled to enforce any and all rights
and remedies available to Flanders Corporation under the Purchase Agreements
and/or under any or all of the Purchase Agreement Documents and/or applicable
Laws with respect to the Purchase Agreement Transactions.
SECTION 3.3 Collateral Disclosure List. On or prior to the Closing Date,
each Borrower shall deliver to the Lender a list (the "Collateral Disclosure
List") which shall contain such information with respect to that Borrower's
business and real and personal property as the Lender may require and shall be
certified by a Responsible Officer of that Borrower, all in the form provided to
the Borrowers by the Lender. Promptly after demand by the Lender, the Borrowers
shall furnish to the Lender an update of the
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information contained in the Collateral Disclosure List at any time and from
time to time as may be requested by the Lender.
SECTION 3.4 Personal Property. Each Borrower acknowledges and agrees that
it is the intention of the parties to this Agreement that the Lender shall have
a first priority, perfected Lien, in form and substance satisfactory to the
Lender and its counsel, on all of each Borrower's personal property of any kind
and nature whatsoever, whether now owned or hereafter acquired, subject only to
the Permitted Liens, if any. In furtherance of the foregoing:
3.4.1 Securities, Chattel Paper, Promissory Notes, etc.
(a) On the Closing Date and without implying any limitation on the
scope of Section 3.2 (Grant of Liens) above, each Borrower shall deliver to the
Lender all originals of all of that Borrower's letters of credit, Securities,
Chattel Paper, Documents and Instruments and, if the Lender so requires, shall
execute and deliver to the Lender separate pledges, assignments and security
agreements in form and content acceptable to the Lender, which pledges,
assignments and security agreements shall assign, pledge and ▇▇▇▇▇ ▇ ▇▇▇▇ to the
Lender on all letters of credit, Securities (other than those covered by the
Stock Pledge Agreement and the Assignment of Limited Liability Company
Interests), Chattel Paper, Documents, and Instruments. Notwithstanding the
foregoing, Precisionaire shall not be required to grant to the Lender a Lien on
any rights, title or interest in, to or under (i) a certain life insurance
policy on the life of ▇▇▇▇▇ ▇▇▇▇ and (ii) certain stock issued to Precisionaire
by an insurance company and owned by Precisionaire as of the Closing Date.
(b) In the event that any Borrower shall acquire after the Closing
Date any letters of credit, Securities, Chattel Paper, Documents, or Instruments
and any such letters of credit, Securities, Chattel Paper, Documents or
Instruments relate to any Accounts or Inventory included in the Borrowing Base,
such Borrower shall promptly so notify the Lender and deliver the originals of
all of the foregoing to the Lender promptly and in any event within ten (10)
days of each acquisition.
(c) All letters of credit, Securities, Chattel Paper, Documents and
Instruments shall be delivered to the Lender endorsed and/or assigned as
required by any pledge, assignment and security agreement and/or as the Lender
may require and, if applicable, shall be accompanied by blank irrevocable and
unconditional stock or bond powers and/or notices as the Lender may require.
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3.4.2 Patents, Copyrights and Other Property Requiring Additional
Steps to Perfect.
On the Closing Date and without implying any limitation on the scope of
Section 3.2 above, each Borrower shall execute and deliver all Financing
Documents and take all actions requested by the Lender in order to perfect a
first priority assignment of Patents, Copyrights, Trademarks or any other type
or kind of intellectual property acquired by such Borrower after the Closing
Date.
SECTION 3.5 Record Searches. As of the Closing Date and thereafter at the
time any Financing Document is executed and delivered by any Borrower pursuant
to this Section, the Lender shall have received, in form and substance
satisfactory to the Lender, such Lien or record searches with respect to that
Borrower and/or any other Person, as appropriate, and the property covered by
such Financing Document showing that the Lien of such Financing Document will be
a perfected first priority Lien on the property covered by such Financing
Document subject only to Permitted Liens or to such other matters as the Lender
may approve.
SECTION 3.6 Costs. The Borrowers jointly and severally agree to pay, as
part of the Enforcement Costs and to the fullest extent permitted by applicable
Laws, on demand all costs, fees and expenses incurred by the Lender in
connection with the taking, perfection, preservation, protection and/or release
of a Lien on the Collateral, including, without limitation:
(a) customary fees and expenses incurred in preparing Financing
Documents from time to time (including, without limitation, reasonable
attorneys' fees incurred in connection with preparing the Financing
Documents);
(b) all filing and/or recording taxes or fees;
(c) all costs of Lien and record searches;
(d) reasonable attorneys' fees in connection with all legal
opinions required;
(e) appraisal costs; and
(f) all related costs, fees and expenses.
SECTION 3.7 Release. Upon the payment and performance of all Obligations of any
or all of the Borrowers and all obligations and liabilities of each other
Person, other than the Lender, under this Agreement and all other Financing
Documents, the termination and/or expiration of the Commitment, upon the
Borrowers' request
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and at the Borrowers' sole cost and expense, the Lender shall release and/or
terminate any Financing Document but only if and provided that there is no
commitment or obligation (whether or not conditional) of the Lender to
re-advance amounts which would be secured thereby.
SECTION 3.8 Inconsistent Provisions. In the event that the provisions of
any Financing Document directly conflict with any provision of this Agreement,
the provisions of this Agreement govern.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties. The Borrowers for themselves
and for each other represent and warrant to the Lender and shall be deemed to
represent and warrant at the time of each request for an advance under the Loans
under the terms of this Agreement and again at the time of the making of any
advance under the Loans, as follows:
4.1.1 Subsidiaries. The Borrowers have the Sub- sidiaries listed on the
Collateral Disclosure List attached hereto and made a part hereof and no others.
Each of the Subsidiaries is a Wholly Owned Subsidiary except as shown on the
Collateral Disclosure List, which correctly indicates the nature and amount of
each Borrower's ownership interests therein.
4.1.2 Good Standing. Each Borrower and its Subsidiaries (a) is a
corporation or limited liability company duly organized, existing and in good
standing under the laws of the jurisdiction of its incorporation, (b) has the
power to own its property and to carry on its business as now being conducted,
and (c) is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned by it therein or in
which the transaction of its business makes such qualification necessary, except
where the failure to do so could or would not have a materially adverse effect
on the business, properties, condition (financial or otherwise) or opera- tions,
present or prospective, of any or all of the Borrowers.
4.1.3 Power and Authority. Each Borrower has full power and authority
to execute and deliver this Agreement, the other Financing Documents, the
Purchase Agreement Documents, the Equity Offering Documents to which it is a
party, to make the borrowings under this Agreement, to close and consummate each
of the Purchase Agreement Transactions and the Equity Offering Transaction and
to incur and perform the Obligations whether under
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this Agreement, the other Financing Documents or otherwise, all of which have
been duly authorized by all proper and necessary action. No consent or approval
of shareholders or members or any creditors of any Borrower, and no consent,
approval, filing or registration with or notice to any Governmental Authority on
the part of any Borrower, is required as a condition to the execution, delivery,
validity or enforceability of this Agreement, the other Financing Documents, any
of the Equity Offering Documents or any of the Purchase Agreement Documents, the
performance by any Borrower of the Obligations or the closing and consummation
of any of the Purchase Agreement Transactions or the Equity Offering
Transaction, or if required the same has been duly obtained. The Lender
understands and agrees that the Borrowers shall not be considered to have made
any representation or warranty as to the power or authority of any seller under
any of the Purchase Agreement Documents.
4.1.4 Binding Agreements. This Agreement and the other Financing
Documents executed and delivered by the Borrowers have been properly executed
and delivered and constitute the valid and legally binding obligations of the
Borrowers and are fully enforceable against each of the Borrowers in accordance
with their respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general applications affecting the rights and
remedies of creditors and secured parties, and general principles of equity
regardless of whether applied in a proceeding in equity or at law.
4.1.5 No Conflicts. Neither the execution, delivery and performance of
the terms of this Agreement or of any of the other Financing Documents executed
and delivered by any Borrower nor the consummation of the transactions
contemplated by this Agreement will conflict with, violate or be prevented by
(a) any Borrower's charter, bylaws, operating agreement, articles of
organization or other organizational document, (b) any existing mortgage,
indenture, contract or agreement binding on any Borrower or affecting its
property, or (c) any Laws.
4.1.6 No Defaults, Violations.
(a) No Default or Event of Default has occurred and is continuing.
(b) None of the Borrowers nor any of their respective Subsidiaries
is in default under or with respect to any obligation under any existing
mortgage, indenture, contract or agreement binding on it or affecting its
property in any respect which could be materially adverse to the business,
operations, property or financial condition of that Borrower, or which could
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materially adversely affect the ability of any Borrower to perform its
obligations under this Agreement or the other Financing Documents, to which that
Borrower is a party.
4.1.7 Compliance with Laws. None of the Borrowers nor any of their
respective Subsidiaries is in violation of any applicable Laws (including,
without limitation, any Laws relating to employment practices, to environmental,
occupational and health standards and controls) or order, writ, injunction,
decree or demand of any court, arbitrator, or any Governmental Authority
affecting that Borrower or any of its properties, the violation of which,
considered in the aggregate, could materially adversely affect the business,
operations or properties of that Borrower and/or its Subsidiaries.
4.1.8 Margin Stock. None of the proceeds of the Loans will be used,
directly or indirectly, by any Borrower or any Subsidiary for the purpose of
purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry, any "margin
security" within the meaning of Regulation G (12 CFR Part 207), or "margin
stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of
Governors of the Federal Reserve System or for any other purpose which might
make the transactions contemplated in this Agreement a "purpose credit" within
the meaning of said Regulation G or Regulation U, or cause this Agreement to
violate any other regulation of the Board of Governors of the Federal Reserve
System or the Securities Exchange Act of 1934 or the Small Business Investment
Act of 1958, as amended, or any rules or regulations promulgated under any of
such statutes.
4.1.9 Investment Company Act; Margin Securities.
None of the Borrowers nor any of their respective Subsidiaries is an
investment company within the meaning of the Investment Company Act of 1940, as
amended, nor is it, directly or indirectly, controlled by or acting on behalf of
any Person which is an investment company within the meaning of said Act. None
of the Borrowers nor any of their respective Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying "margin security" within the
meaning of Regulation G (12 CFR Part 207), or "margin stock" within the meaning
of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal
Reserve System.
4.1.10 Litigation. Except as otherwise disclosed to the Lender on
Schedule 4.1.10 attached to and made a part of this Agreement, there are no
proceedings, actions or investigations
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pending or, so far as any Borrower knows, threat- ened before or by any court,
arbitrator any Governmental Authority which, in any one case or in the
aggregate, if determined ad- versely to the interests of any Borrower or any
Subsidiary, would have a material adverse effect on the business, properties,
condition (financial or otherwise) or operations, present or prospective, of
any Borrower.
4.1.11 Financial Condition. The consolidated and consolidating
financial statements of the Borrowers dated June 30, 1996, are complete and
correct and fairly present the financial position of each of and all of the
Borrowers and their Subsidiaries, both on a consolidated and on a consolidating
basis, and the results of their operations and transactions in their surplus
accounts as of the date and for the period referred to and have been prepared in
accordance with GAAP applied on a consistent basis throughout the period
involved. There are no liabilities, direct or indirect, fixed or contingent, of
any Borrower or any Subsidiary as of the date of such financial statements which
are not reflected therein or in the notes thereto. There has been no material
adverse change in the financial condition or operations of any Borrower or any
Subsidiary since the date of such financial statements and to the Borrowers'
knowledge no such material adverse change is pending or threatened. None of the
Borrowers nor any Subsidiary has guaranteed the obligations of, or made any
investment in or advances to, any Person, except as disclosed in such financial
statements and except for (i) a personal loan in the original principal amount
of Two Hundred Thousand Dollars ($200,000) made by Flanders Corporation to ▇▇▇
▇▇▇▇▇ secured by all of his rights, title and interest in and to any stock
issued by Flanders Corporation to ▇▇▇ ▇▇▇▇▇ and (ii) a personal loan in an
original principal not greater than Six Hundred Fifty Thousand Dollars
($650,000) made by one of the Borrowers to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
4.1.12 Proforma Financial Statements. The Borrowers have furnished to
the Lender a proforma consolidated and consolidating balance sheet of the
Borrowers and their Subsidiaries as of immediately after consummation of the
Purchase Agreement Transaction - Precisionaire and the Equity Offering
Transaction and the transactions incident thereto (the "Proforma Balance
Sheet"), together with proforma financial projections for the three-year period
subsequent to June 30, 1996 (the "Proforma Financial Projections"). A copy of
the Proforma Balance Sheet and the Proforma Financial Projections are attached
hereto as Exhibits D-1 and D-2, respectively. The Proforma Balance Sheet is
correct and complete, has been prepared in accordance with GAAP, and fairly
presents the consolidated and consolidating financial condition of the Borrowers
and their Subsidiaries as of immediately after consummation of the Purchase
Agreement Transaction - Precisionaire and the Equity Offering Transaction and
the transactions incident
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thereto. The Proforma Financial Projections represent the Borrowers' best
estimate of the future operations of the Borrowers and are based on reasonable
and conservative assumptions.
4.1.13 Full Disclosure. The financial statements referred to in Section
4.1.11 (Financial Condition) of this Agreement, the Financing Documents
(including, without limitation, this Agreement), and the statements, reports or
certificates furnished by any Borrower in connection with the Financing
Documents (a) do not contain any untrue statement of a material fact and (b)
when taken in their entirety, do not omit any material fact necessary to make
the statements contained therein not misleading. There is no fact known to any
Borrower which such Borrower has not disclosed to the Lender in writing prior to
the date of this Agreement with respect to the transactions contemplated by the
Financing Documents which materially and adversely affects or in the future
could, in the reasonable opinion of that Borrower materially adversely affect
the condition, financial or otherwise, results of operations, business, or
assets of any Borrower or of any Subsidiary.
4.1.14 Indebtedness for Borrowed Money. Except for the Obligations and
except as set forth in Schedule 4.1.14 attached to and made a part of this
Agreement, the Borrowers have no Indebtedness for Borrowed Money. The Lender has
received photocopies of all promissory notes evidencing any Indebtedness for
Borrowed Money set forth in Schedule 4.1.14, together with any and all
subordination agreements, other agreements, documents, or instruments securing,
evidencing, guarantying or otherwise executed and delivered in connection
therewith.
4.1.15 Subordinated Debt. None of the Subordinated Debt Loan Documents
has been amended, supplemented, restated or otherwise modified except as
otherwise disclosed to the Lender in writing on or before the effective date of
any such amendment, supplement, restatement or other modification. In addition,
there does not exist any default or any event which upon notice or lapse of time
or both would constitute a default under the terms of any of the Subordinated
Debt Loan Documents.
4.1.16 Equity Offering Documents; Purchase Agreement Documents. None of
the Equity Offering Documents nor any of the Purchase Agreement Documents have
been amended, supplemented, restated or otherwise modified except as otherwise
disclosed to the Lender in writing on or before the effective date of any such
amendment, supplement, restatement or other modification. In addition, there
does not exist any default or any event which upon notice or lapse of time or
both would constitute
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a default under the terms of any of the Equity Offering Documents or any of the
Purchase Agreement Documents.
4.1.17 Taxes. Each of the Borrowers and its Subsidiaries has filed all
returns, reports and forms for Taxes which, to the knowledge of the Borrowers,
are required to be filed, and has paid all Taxes as shown on such returns or on
any assessment received by it, to the extent that such Taxes have become due,
unless and to the extent only that such Taxes, assessments and governmental
charges are currently contested in good faith and by appropriate proceedings by
a Borrower, such Taxes are not the subject of any Liens other than Permitted
Liens, and adequate reserves therefor have been established as required under
GAAP. All tax liabilities of the Borrowers were as of the date of audited
financial statements referred to in Section 4.1.11 (Financial Condition) above,
and are now, adequately provided for on the books of the Borrowers and its
Subsidiaries, as appropriate. No tax liability has been asserted by the Internal
Revenue Service or any state or local authority against any Borrower for Taxes
in excess of those already paid.
4.1.18 ERISA. With respect to any "pension plan" as defined in SECTION
3(2) of ERISA, which plan is now or previously has been maintained or
contributed to by any Borrower and/or by any commonly controlled entity: (a) no
"accumulated funding deficiency" as defined in Code '412 or ERISA '302 has
occurred, whether or not that accumulated funding deficiency has been waived;
(b) no Reportable Event has occurred; (c) no termination of any plan subject to
Title IV of ERISA has occurred; (d) no Borrower nor any commonly controlled
entity (as defined under ERISA) has incurred a "complete withdrawal" within the
meaning of ERISA '4203 from any Multiemployer Plan; (e) no Borrower nor any
commonly controlled entity has incurred a "partial withdrawal" within the
meaning of ERISA '4205 with respect to any Multiemployer Plan; (f) no
Multiemployer Plan to which a Borrower or any commonly controlled entity has an
obligation to contribute is in "reorganization" within the meaning of ERISA
'4241 nor has notice been received by any Borrower or any commonly controlled
entity that such a Multiemployer Plan will be placed in "reorganization".
4.1.19 Title to Properties. The Borrowers have good and marketable
title to all of their respective properties, including, without limitation, the
Collateral and the properties and assets reflected in the balance sheets
described in Section 4.1.11 (Financial Condition) above. The Borrowers have
legal, enforceable and uncontested rights to use freely such property and
assets. All of such properties, including, without limitation, the Collateral
which were purchased, were purchased for fair
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consideration and reasonably equivalent value in the ordinary course of business
of both the seller and the Borrowers and not, by way of example only, as part of
a bulk sale.
4.1.20 Patents, Trademarks, Etc. Each of the Borrowers and its
Subsidiaries owns, possesses, or has the right to use all necessary Patents,
licenses, Trademarks, Copyrights, permits and franchises to own its properties
and to conduct its business as now conducted, without known conflict with the
rights of any other Person. Any and all obligations to pay royalties or other
charges with respect to such properties and assets are properly reflected on the
financial statements described in Section 4.1.11 (Financial Condition) above.
4.1.21 Employee Relations. Except as disclosed on Schedule 4.1.21
attached hereto and made a part hereof, (a) no Borrower nor any Subsidiary
thereof nor any Borrower's or Subsidiary's employees is subject to any
collective bargaining agreement, (b) no petition for certification or union
election is pending with respect to the employees of any Borrower or any
Subsidiary and no union or collective bargaining unit has sought such
certification or recognition with respect to the employees of a Borrower, (c)
there are no strikes, slowdowns, work stoppages or controversies pending or, to
the best knowledge of the Borrowers after due inquiry, threatened between any
Borrower and its employees, and (d) no Borrower nor any Subsidiaries is subject
to an employment contract, severance agreement, commission contract, consulting
agreement or bonus agreement, except as described on Schedule 4.1.21. Hours
worked and payments made to the employees of any of the Borrowers have not been
in violation of the Fair Labor Standards Act or any other applicable law dealing
with such matters. All payments due from any Borrower or for which any claim may
be made against a Borrower, on account of wages and employee and retiree health
and welfare insurance and other benefits have been paid or accrued as a
liability on its books. The consummation of the transactions contemplated by the
Financing Agreement, the other Financing Documents, the Equity Offering
Documents, the Purchase Agreements or any of the other Purchase Agreement
Documents will not give rise to a right of termination or right of renegotiation
on the part of any union under any collective bargaining agreement to which any
Borrower is a party or by which it is bound.
4.1.22 Presence of Hazardous Materials or Hazardous Materials
Contamination.
To the best of each Borrower's knowledge, and except as disclosed on the
Phase I environmental audits and any supplemental reports relating to such
audits performed with respect to the
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Terrell, Texas, Auburn, Pennsylvania, and Bartow, Florida locations of
Precisionaire, copies of which audits have been furnished to the Lender prior to
the Closing Date (a) no Hazardous Materials are located on any real property
owned, controlled or operated by any Borrower or for which any Borrower is, or
is claimed to be, responsible, except for reasonable quantities of necessary
supplies for use by a Borrower in the ordinary course of its current line of
business and stored, used and disposed in accordance with applicable Laws; and
(b) no property owned, controlled or operated by any Borrower or for which any
Borrower has, or is claimed to have, responsibility has ever been used as a
manufacturing, storage, or dump site for Hazardous Materials nor is affected by
Hazardous Materials Contamination at any other property.
4.1.23 Perfection and Priority of Collateral. The Lender has, or upon
execution and recording of this Agreement and the Security Documents will have,
and will continue to have as security for the Obligations, a valid and perfected
Lien on and security interest in all Collateral, free of all other Liens, claims
and rights of third parties whatsoever except Permitted Liens, including,
without limitation, those described on Schedule 4.1.23.
4.1.24 Places of Business and Location of Collateral.
The information contained in the Collateral Disclosure List is complete and
correct. The Collateral Disclosure List completely and accurately identifies the
address of (a) the chief executive office of each Borrower, (b) any and each
other place of business of each Borrower, (c) the location of all books and
records pertaining to the Collateral, and (d) each location, other than the
foregoing, where any of the Collateral is located. The proper and only places to
file financing statements with respect to the Collateral within the meaning of
the Uniform Commercial Code are the filing offices for those jurisdictions in
which the Borrowers maintain a place of business as identified on the Collateral
Disclosure List.
4.1.25 Equipment. All Equipment is personalty and is not and will not
be affixed to real estate in such manner as to become a fixture or part of such
real estate.
4.1.26 Inventory. Substantially all of the Inventory of the Borrowers
is (a) of good and merchantable quality, free from defects, (b) not stored with
a bailee, warehouseman, carrier, or similar party, except as set forth in
Schedule 4.1.26, (c) not on consignment, sale on approval, or sale or return,
and (d) located at the places of business set forth on the Collateral
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Disclosure List. No goods offered for sale by a Borrower are consigned to or
held on sale or return terms by that Borrower.
4.1.27 Accounts. With respect to all Accounts and to the best of the
Borrowers' knowledge (a) they are genuine, and in all material respects what
they purport to be, and are not evidenced by a judgment, an Instrument, or
Chattel Paper (unless such judgment has been assigned and such Instrument or
Chattel Paper has been endorsed and delivered to the Lender); (b) they represent
bona fide transactions completed in accordance with the terms and provisions
contained in the invoices, purchase orders and other contracts relating thereto,
and the underlying transaction therefor is in accordance with all applicable
Laws; (c) the amounts shown on the respective Borrower's books and records, with
respect thereto are actually and absolutely owing to that Borrower and are not
contingent or subject to reduction for any reason other than regular discounts,
credits or adjustments allowed by that Borrower in the ordinary course of its
business; (d) no payments have been or shall be made thereon except payments
turned over to the Lender by the Borrowers; (e) all Account Debtors thereon have
the capacity to contract; and (f) the goods sold, leased or transferred or the
services furnished giving rise thereto are not subject to any Liens except the
security interest granted to the Lender by this Agreement and Permitted Liens.
4.1.28 Compliance with Eligibility Standards. Each Account and all
Inventory included in the calculation of the Borrowing Base does and will at all
times meet and comply with all of the standards for Eligible Receivables and
Eligible Inventory. With respect to those Accounts which the Lender has deemed
Eligible Receivables (a) there are no facts, events or occurrences which in any
way materially impair the validity, collectibility or enforceability thereof or
tend to reduce the amount payable thereunder; and (b) there are no proceedings
or actions known to any Borrower which are threatened or pending against any
Account Debtor which might result in any material adverse change in the
Borrowing Base.
4.1.29 Equity. In accordance with the provisions of the Equity Offering
Documents, Flanders Corporation has received paid in cash equity and
subordinated indebtedness aggregating not less than Eight Million Five Hundred
Thousand Dollars ($8,500,000) from the Persons, in the forms and in the amounts
more particularly set forth in Schedule 4.1.29 attached hereto (which does not
include, however, the Four Million Dollars ($4,000,000) deposited into escrow by
GE (the "Closing Escrow") in accordance with the provisions of the Equity
Offering Documents and the Closing Escrow Agreement); the cash equity and
subordinated indebtedness has been paid to Flanders Corporation at such times,
by such purchasers, and on such terms and conditions as shall have been
disclosed to, and
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approved by, the Lender in writing on or before the Closing Date and as
accurately reflected in the Equity Offering Documents. The Equity Offering
Transaction has been closed and consummated in accordance with all applicable
Laws. In connection with the Equity Offering Transaction, GE has established a
cash escrow in an amount at least equal to Four Million Dollars ($4,000,000) in
accordance with the provisions of a written escrow agreement (the "Closing
Escrow Agreement") which is one of the Equity Offering Documents. The Lender
understands and agrees that upon satisfaction of certain conditions precedent a
portion of the funds on deposit pursuant to the Closing Escrow Agreement in an
amount up to, but not exceeding $1,700,000, shall be released and paid to the
Person that made a bridge loan to Flanders Corporation in the amount of
$1,700,000 on or before the Closing Date; the balance of the funds on deposit in
the Closing Escrow shall be paid to the Lender as a Term Loan Mandatory
Prepayment.
4.1.30 Purchase Agreement Transactions. The Lender has received true
and correct photocopies of each of the Purchase Agreements and each of the
Purchase Agreement Documents, executed, delivered and/or furnished on or before
the Closing Date in connection with the Purchase Agreement Transactions. None of
the Purchase Agreements nor any of the Purchase Agreement Documents have been
modified, changed, supplemented, canceled, amended or otherwise altered or
affected, except as otherwise disclosed to the Lender in writing on or before
the Closing Date. Each of the Purchase Agreement Transactions has been effected,
closed and consummated pursuant to, and in accordance with, the terms and
conditions of the respective Purchase Agreement and in accordance with all
applicable Laws. The Lender understands and agrees that the Purchase Agreement
Transaction - Precisionaire is to be closed and consummated effective as of the
Closing Date immediately following the initial advance of the Loan.
4.1.31 Securities Acts. The Borrowers have not issued any unregistered
securities in violation of the registration requirements of Section 5 of the
Securities Act of 1933, as amended, or any other Law, and is not in violation of
any rule, regulation, or requirement under the Securities Act of 1933, as
amended, or the Securities and Exchange Act of 1934, as amended. The Borrowers
are not required to qualify any indenture under the Trust Indenture Act of 1939,
as amended, in connection with the execution and delivery of any of the Notes.
4.1.32 Governmental Regulation. Neither the Borrowers nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act or the Interstate Commerce Act or to any
Federal or state
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Laws limiting its ability to incur Indebtedness for Borrowed Money.
SECTION 4.2 Survival; Updates of Representations and Warranties.
All representations and warranties contained in or made under or in
connection with this Agreement and the other Financing Documents shall survive
the Closing Date, the making of any advance under the Loans and extension of
credit made hereunder, and the incurring of any other Obligations and shall be
deemed to have been made at the time of each request for, and again at the time
the making of, each advance under the Loans, except that the representations and
warranties which relate to financial statements which are referred to in Section
4.1.11, shall also be deemed to cover financial statements furnished from time
to time to the Lender pursuant to Section 6.1.1 (Financial Statements) of this
Agreement.
ARTICLE 5
CONDITIONS PRECEDENT
SECTION 5.1 Conditions to the Initial Advance.
The making of the initial advance under the Loans is subject to the
fulfillment on or before the Closing Date of the following conditions precedent
in a manner satisfactory in form and substance to the Lender and its counsel:
5.1.1 Organizational Documents - Borrower. The Lender shall have
received:
(a) a certificate of good standing for each Borrower certified by
the Secretary of State, or other appropriate Governmental Authority, of the
state of incorporation or organization for such Borrower;
(b) a certificate of qualification to do business for each Borrower
certified by the Secretary of State or other Governmental Authority of each
state in which such Borrower conducts business;
(c) a certificate dated as of the Closing Date by the Secretary or
an Assistant Secretary of each Borrower covering:
(i) true and complete copies of that Borrower's corporate
charter, bylaws, articles of organization, member agreement and all
amendments thereto, as appropriate;
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(ii) true and complete copies of the resolutions of its Board
of Directors or members, as appropriate, authorizing (i) the execution,
delivery and performance of the Financing Documents, the Equity Offering
Documents and the Purchase Agreement Documents to which such Borrower is
a party, (ii) the borrowings by such Borrower hereunder, (iii) the
granting of the Liens contemplated by this Agreement and the Financing
Documents to which such Borrower is a party, and (iv) the Purchase
Agreement Transactions and the Equity Offering Transaction, as
appropriate;
(iii) the incumbency, authority and signatures of the officers
of such Borrower authorized to sign this Agreement and the other
Financing Documents to which such Borrower is a party; and
(iv) the identity of such Borrower's current directors, common
stock holders, members and other equity holders, as well as their
respective percentage ownership interests.
5.1.2 Opinion of Borrower's Counsel. The Lender shall have received the
favorable opinion of counsel for the Borrowers addressed to the Lender.
5.1.3 Consents, Licenses, Approvals, Etc. The Lender shall have
received copies of all consents, licenses and approvals, required in connection
with the execution, delivery, performance, validity and enforceability of the
Financing Docu- ments, the Equity Offering Documents and the Purchase Agreement
Documents, and such consents, licenses and approvals shall be in full force and
effect.
5.1.4 Notes. The Lender shall have received the Term Note and the
Revolving Credit Note, each conforming to the requirements hereof and executed
by a Responsible Officer of each Borrower and attested by a duly authorized
representative of such Borrower.
5.1.5 Financing Documents and Collateral. Each Borrower shall have
executed and delivered the Financing Documents to be executed by it, and shall
have delivered original Chattel Paper, Instruments, Securities, and related
Collateral and all opinions, title insurance, and other documents contemplated
by Article 3 hereof.
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5.1.6 Other Financing Documents. In addition to the Financing Documents
to be delivered by the Borrowers, the Lender shall have received the Financing
Documents duly executed and delivered by Persons other than the Borrowers.
5.1.7 Other Documents, Etc. The Lender shall have received such other
certificates, opinions, documents and instru- ments confirmatory of or otherwise
relating to the transactions contemplated hereby as may have been reasonably
requested by the Lender.
5.1.8 Payment of Fees. The Lender shall have received payment of any
Fees due on or before the Closing Date.
5.1.9 Collateral Disclosure List. Each Borrower shall have delivered
the Collateral Disclosure List required under the provisions of Section 3.3
(Collateral Disclosure List) hereof duly executed by a Responsible Officer of
each Borrower.
5.1.10 Recordings and Filings. Each Borrower shall have: (a) executed
and delivered all Financing Documents (including, without limitation, UCC-1 and
UCC-3 statements) required to be filed, registered or recorded in order to
create, in favor of the Lender, a perfected Lien in the Collateral (subject only
to the Permitted Liens) in form and in sufficient number for filing,
registration, and recording in each office in each jurisdiction in which such
filings, registrations and recordations are required, and (b) delivered such
evidence as the Lender require that all necessary filing fees and all recording
and other similar fees, and all Taxes and other expenses related to such
filings, registrations and recordings will be or have been paid in full.
5.1.11 Insurance Certificate. The Lender shall have received an
insurance certificate in accordance with the provisions of Section 6.1.8
(Insurance) and Section 6.1.20 (Insurance With Respect to Equipment and
Inventory) of this Agreement.
5.1.12 Landlord's Waivers. The Lender shall have received a landlord's
waiver from each landlord of each and every business premise leased by a
Borrower, except for the business premises described on Schedule 5.1.12 attached
hereto and made a part hereof and on which any of the Collateral is or may
hereafter be located, which landlords' waivers must be reasonably acceptable to
the Lender and its counsel in their commercially reasonable discretion.
5.1.13 Field Examination. The Lender shall have completed a field
examination and audit of each Borrowing Base
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Borrower's business, operations and income, the results of which field
examination and audit shall be in all respects acceptable to the Lender in its
commercially reasonable discretion and shall include reference discussions with
key customers and vendors.
5.1.14 Appraisal. The Lender shall have received an appraisal of all
Equipment of Precisionaire, which appraisal shall be performed by an appraiser
satisfactory in all respects to the Lender, shall be in such form and content as
may be required by the Lender, and shall support, on a reviewed basis, a forced
liquidation value of not less than $1,500,000.
5.1.15 Proforma Balance Sheet and Projections. The Lender shall have
received and approved the Borrowers' Proforma Balance Sheet and Proforma
Financial Projections, which Proforma Balance Sheet and Proforma Financial
Projections must be in form and content acceptable to the Lender in its
commercially reasonable discretion.
5.1.16 Stock Certificates and Stock Powers. The Lender shall have
received all of the original stock certificates of each Borrower (other than
Flanders Corporation and Flanders AirPure) and fully executed irrevocable stock
powers from the holders of all such stock certificates.
5.1.17 Subordination Agreement. The Lender shall have received the
fully executed Subordination Agreement in form and content acceptable to the
Lender. The Lender shall have received and approved copies of the fully executed
Subordinated Debt Loan Documents, all of which must be in form and content
acceptable to the Lender.
5.1.18 Subordinated Indebtedness; Equity.
The Lender shall have received a certificate signed by a Responsible
Officer of Flanders Corporation, certifying to the Lender that Flanders
Corporation (a) has received the proceeds of the Subordinated Debt, in
accordance with, and pursuant to, the terms and conditions of the Subordinated
Debt Loan Documents, and has applied the same to such purposes as has been
previously disclosed to, and approved by, the Lender, (b) has delivered to the
Lender a true and correct photocopy of all Subordinated Debt Loan Documents, (c)
has received paid in cash equity and subordinated indebtedness in an aggregate
amount at least equal to Eight Million Five Hundred Thousand Dollars
($8,500,000) from the Persons, in the forms and in the amounts more particularly
set forth in Schedule 4.1.29 attached hereto and made a part hereof, all in
accordance with, and pursuant to, the terms and conditions of the Equity
Offering Documents, and has applied the same to such purposes as
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has been previously disclosed to, and approved by, the Lender, and (d) has
delivered to the Lender a true and correct photocopy of all Equity Offering
Documents. Flanders Corporation shall have delivered such evidence of the Equity
as may be requested by the Lender. The Lender must be satisfied that such Equity
has been paid to Flanders Corporation on such terms and conditions as shall have
been previously disclosed to, and approved by, the Lender.
5.1.19 Closing Escrow. The Lender shall have received a certificate
signed by a Responsible Officer of Flanders Corporation, certifying to the
Lender that (a) the balance of funds on deposit in the Closing Escrow is at
least equal to Four Million Dollars ($4,000,000), (b) has delivered to the
Lender a true and correct photocopy of the Closing Escrow Agreement, (c)
Flanders Corporation has received the proceeds of a bridge loan in the amount of
One Million Five Hundred Thousand Dollars ($1,500,000) as of the Closing Date
which is to be repaid with the funds on deposit in the Closing Escrow, and (d)
has delivered to the Lender true and correct photocopies of all agreements,
documents and instruments which evidence the bridge loan made against the
Closing Escrow. Flanders Corporation shall have delivered such evidence of the
Closing Escrow as may be requested by the Lender. The Lender must be satisfied
that the Closing Escrow has been established and will thereafter be maintained
on such terms and conditions as shall be acceptable to the Lender.
5.1.20 Purchase Agreement Transactions.
(a) Each of the Purchase Agreement Transactions shall have been
completed and closed prior to or simultaneously herewith upon terms and
conditions satisfactory to the Lender.
(b) The Lender shall have received photo- copies of all Purchase
Agreement Documents executed, delivered and/or furnished in connection with each
Purchase Agreement Transaction, together with a certificate signed by a
Responsible Officer of Flanders Corporation certifying that (i) the Purchase
Agreement Documents furnished to the Lender are true, correct, in full force and
effect and the provisions thereof have not been in any way modified, amended or
waived, (ii) the Purchase Agreement Transactions have been closed and completed
in accordance with the Purchase Agreement Documents furnished to the Lender and
in accordance with all applicable Laws, including, any and all securities Laws,
and (iii) Flanders Corporation has obtained all consents, licenses and approvals
to permit it to acquire and own Air Seal, Charcoal and Precisionaire as
Wholly-Owned Subsidiaries.
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5.1.21 Opinions. The Lender shall have received all opinions of counsel
for Flanders Corporation and each seller, respectively required under or in
connection with each Purchase Agreement and each Purchase Agreement Transaction.
SECTION 5.2. Conditions to all Extensions of Credit. The making of all
advances under the Loans is subject to the fulfillment of the following
conditions precedent in a manner satisfactory in form and substance to the
Lender and its counsel:
5.2.1 Compliance. Each Borrower shall have complied and shall then be
in compliance with all terms, covenants, conditions and provisions of this
Agreement and the other Financing Documents which are binding upon it.
5.2.2 Borrowing Base. The Borrowers shall have furnished all Borrowing
Base Reports required by Section 2.1.4 (Borrowing Base Report) of this
Agreement, there shall exist no Borrowing Base Deficiency, and as evidence
thereof, the Borrowers shall have furnished to the Lender such reports,
schedules, certificates, records and other papers as may be requested by the
Lender, and the Borrowers shall be in compliance with the provisions of Section
2.1.12 of this Agreement both immediately before and immediately after the
making of the advance requested.
5.2.3 Default. There shall exist no Event of Default or Default
hereunder.
5.2.4 Representations and Warranties. The representations and
warranties of each Borrower contained among the provisions of this Agreement
shall be true and with the same effect as though such representations and
warranties had been made at the time of the making of, and of the request for,
each advance under the Loans, except that the representations and warranties
which relate to financial statements which are referred to in Section 4.1.11,
shall also be deemed to cover financial statements furnished from time to time
to the Lender pursuant to Section 6.1.1 (Financial Statements) of this
Agreement.
5.2.5 Adverse Change. No adverse change shall have occurred in the
condition (financial or otherwise), operations or business of any Borrower which
would, in the good faith judgment of the Lender, materially impair the ability
of a Borrower to pay or perform any of the Obligations.
5.2.6 Legal Matters. All legal documents incident to each advance under
the Loans shall be reasonably satisfactory to counsel for the Lender.
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ARTICLE 6
COVENANTS OF THE BORROWERS
SECTION 6.1 Affirmative Covenants. So long as any of the Obligations or
the Commitment shall be outstanding hereunder, the Borrowers agree with the
Lender as follows:
6.1.1 Financial Statements. The Borrowers shall furnish to the
Lender:
(a) Annual Statements and Certificates. The Borrowers shall furnish
to the Lender as soon as available, but in no event more than ninety (90) days
after the close of each fiscal year of the Borrowers, (i) a copy of the 10K
filed by Flanders Corporation with the Securities and Exchange Commission for
such fiscal year, together with supplemental information setting forth the
consolidating numbers for all Subsidiaries of Flanders Corporation, all in
reasonable detail satisfactory to the Lender relating to all Borrowers and
Subsidiaries, prepared in accordance with GAAP and examined and certified by
independent certified public accountants satisfactory to the Lender, which 10K
and supplemental information shall include a consolidated and consol- idating
balance sheet of all Borrowers and Subsidiaries as of the end of such fiscal
year and consolidated and consolidating statements of income, cash flows and
changes in shareholders equity of all Borrowers and Subsidiaries for such fiscal
year, (ii) a Compliance Certificate, in substantially the form attached to this
Agreement as EXHIBIT C, as may be amended by the Lender from time to time,
containing a detailed computation of each financial covenant which is applicable
for the period reported, a certification that no material change has occurred to
the information contained in the Collateral Disclosure List (except as set forth
in a schedule attached to the certification), prepared by a Responsible Officer
of Flanders Corporation in a format acceptable to the Lender, and (iii) a
management letter in the form prepared by the Borrowers' independent certified
public accountants. In addition, on or before each fiscal year end, the
Borrowers shall furnish to the Lender a detailed cash flow projection report on
a month to month basis for the then next succeeding fiscal year and a then
current list of all customers of all Borrowers, including all names and
addresses of such customers.
(b) Annual Opinion of Accountant. The Borrowers shall furnish to
the Lender as soon as available, but in no event more than ninety (90) days
after the close of the Borrowers' fiscal years, a letter or opinion of the
accountant who examined and certified the annual financial statement relating to
all Borrowers and Subsidiaries stating whether anything in such
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accountant's examination has revealed the occurrence of a Default or an Event of
Default hereunder, and, if so, stating the facts with respect thereto.
(c) Monthly Statements and Certificates. The Borrowers shall
furnish to the Lender as soon as available, but in no event more than thirty
(30) days after the close of the Borrowers' fiscal months, consolidated and
consolidating balance sheets of all Borrowers and Subsidiaries as of the close
of such period, consolidated and consolidating income, cash flows and changes in
shareholders equity statements for such period, and projected income statements,
and a Compliance Certificate, in substantially the form attached to this
Agreement as EXHIBIT C, containing a detailed computation of each financial
covenant which is applicable for the period reported, all as prepared and
certified by a Responsible Officer of Flanders Corporation and accompanied by a
certificate of that officer stating whether any event has occurred which
constitutes a Default or an Event of Default hereunder, and, if so, stating the
facts with respect thereto.
(d) Monthly reports. The Borrowers shall furnish to the Lender
within fifteen (15) days after the end of each fiscal month, a report containing
the following information with respect to each Borrower on an individual basis:
(i) a detailed aging schedule of all Receivables by Account
Debtor, in such detail, and accompanied by such supporting information, as
the Lender may from time to time reasonably request;
(ii) a detailed aging of all accounts payable by supplier, in
such detail, and accompanied by such supporting information, as the Lender
may from time to time reasonably request;
(iii) a listing of all Inventory by component, category and
location, in such detail, and accom- panied by such supporting information
as the Lender may from time to time reasonably request; and
(iv) such other information as the Lender may reasonably
request.
(e) Additional Reports and Information. The Borrowers shall furnish
to the Lender promptly, such additional information, reports or statements as
the Lender may from time to time reasonably request.
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6.1.2 Reports to SEC and to Stockholders. The Borrowers will furnish
to the Lender, promptly upon the filing or making thereof, at least one (1) copy
of all financial statements, reports, notices and proxy statements sent by any
Borrower to its stockholders, and of all regular and other reports filed by any
Borrower with any securities exchange or with the Securities and Exchange
Commission.
6.1.3 Recordkeeping, Rights of Inspection, Field Examination, Etc.
(a) Each Borrower shall, and shall cause each of its Subsidiaries
to, maintain (i) a standard system of accounting in accordance with GAAP, and
(ii) proper books of record and account in which full, true and correct entries
are made of all dealings and transactions in relation to its properties,
business and activities.
(b) Each Borrower shall, and shall cause each of its Subsidiaries
to, permit authorized representatives of the Lender to visit and inspect the
properties of such Borrower and its Subsidiaries, to review, audit, check and
inspect the Collateral at any time with or without notice, to review, audit,
check and inspect such Borrower's other books of record at any time with or
without notice and to make abstracts and photocopies thereof, and to discuss the
affairs, finances and accounts of each Borrower and its Subsidiaries, with the
officers, directors, employees and other representatives of any Borrower and/or
any Subsidiary and their respective accountants, all at such times during normal
business hours and other reasonable times and as often as the Lender may
reasonably request.
(c) Each Borrower hereby irrevocably authorizes and directs all
accountants and auditors employed by any Borrower and/or any Subsidiary at any
time prior to the repayment in full of the Obligations to exhibit and deliver to
the Lender copies of any and all of the financial statements, trial balances,
management letters, or other accounting records of any nature of any Borrower
and/or any Subsidiary in the accountant's or auditor's possession, and to
disclose to the Lender any informa- tion they may have concerning the financial
status and business operations of any Borrower and any Subsidiary. Further, each
Borrower hereby authorizes all Governmental Authorities to furnish to the Lender
copies of reports or examinations relating to a Borrower and/or any Subsidiary,
whether made by a Borrower or otherwise.
(d) Any and all costs and expenses incurred by, or on behalf of,
the Lender in connection with the conduct of any of the foregoing shall be part
of the Enforcement Costs and
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shall be payable to the Lender upon demand. The Borrowers acknowledge and agree
that such expenses may include, but shall not be limited to, any and all
out-of-pocket costs and expenses of the Lender's employees and agents in, and
when, travelling to any Borrower's facilities.
6.1.4 Existence. Each Borrower shall maintain, and cause each of its
Subsidiaries to maintain, its corporate or limited liability company existence,
as appropriate, in good standing in the jurisdiction in which it is incorporated
or organized and in each other jurisdiction where it is required to register or
qualify to do business if the failure to do so in such other jurisdiction might
have a material adverse effect on (a) the ability of any Borrower to perform the
Obligations, (b) the conduct of any Borrower's operations, (c) any Borrower's
financial condition, or (d) the value of, or the ability of the Lender to
realize upon, the Collateral.
6.1.5 Compliance with Laws. Each Borrower shall comply, and cause
each of its Subsidiaries to comply, with all applicable Laws and observe the
valid requirements of Governmental Authorities, the noncompliance with or the
nonobservance of which might have a material adverse effect on the ability of
(a) any Borrower to perform the Obligations, (b) the conduct of any Borrower's
operations, (c) any Borrower's financial condition, or (d) the value of, or the
ability of the Lender to realize upon, the Collateral.
6.1.6 Preservation of Properties. Each Borrower will, and will cause
each of its Subsidiaries to, at all times (a) maintain, preserve, protect and
keep its properties, whether owned or leased, in good operating condition,
working order and repair (ordinary wear and tear excepted), and from time to
time will make all proper repairs, maintenance, replacements, additions and
improvements thereto needed to maintain such properties in good operating
condition, working order and repair, and (b) do or cause to be done all things
necessary to preserve and to keep in full force and effect its material
franchises, leases of real and personal property, trade names, Patents,
Trademarks, Copyrights and permits which are necessary for the orderly
continuance of its business.
6.1.7 Line of Business. Each Borrower will continue to engage
substantially only in the business of the manufacture and distribution of air
filtration systems and related products.
6.1.8 Insurance. Each Borrower will, and will cause each of its
Subsidiaries to, at all times maintain with A-or
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better rated insurance companies such insurance as is required by applicable
Laws and such other insurance, all in such amounts not less than the Lender
shall reasonably determine from time to time, of such types and against such
risks, hazards, liabilities, casualties and contingencies as are usually insured
against in the same geographic areas by business entities engaged in the same or
similar business. Without limiting the generality of the fore- going, each
Borrower will, and will cause each of its Subsidiaries to, keep adequately
insured all of its property against loss or damage resulting from fire or other
risks insured against by extended coverage and maintain public liability
insurance against claims for personal injury, death or property damage occurring
upon, in or about any properties occupied or controlled by it, or arising in any
manner out of the businesses carried on by it. Within thirty (30) days after
notice in writing from the Lender, a Borrower will obtain such additional
insurance as the Lender may reasonably request.
6.1.9 Taxes. Except to the extent that the validity or amount thereof
is being contested in good faith and by appropriate proceedings, each Borrower
will, and will cause each of its Subsidiaries to, pay and discharge all Taxes
prior to the date when any interest or penalty would accrue for the nonpayment
thereof. Each Borrower shall furnish to the Lender at such times as the Lender
may require proof satisfactory to the Lender of the making of payments or
deposits required by applicable Laws including, without limitation, payments or
deposits with respect to amounts withheld by such Borrower from wages and
salaries of employees and amounts contributed by such Borrower on account of
federal and other income or wage taxes and amounts due under the Federal
Insurance Contributions Act, as amended.
6.1.10 ERISA. Each Borrower will, and will cause each of its
Subsidiaries and Affiliates to, comply with the funding requirements of ERISA
with respect to employee pension benefit plans for its respective employees. No
Borrower will permit with respect to any employee benefit plan or plans covered
by Title IV of ERISA (a) any prohibited transaction or transactions under ERISA
or the Internal Revenue Code, which results, or may result, in any material
liability of any Borrower or of any Subsidiary or Affiliate, or (b) any
Reportable Event if, upon termination of the plan or plans with respect to which
one or more such Reportable Events shall have occurred, there is or would be any
material liability of any Borrower or any Subsidiary or any Affiliate to the
PBGC. Upon the Lender's request, a Borrower will deliver to the Lender a copy of
the most recent actuarial report, financial statements and annual report
completed with respect to any "defined benefit plan", as defined in ERISA.
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6.1.11 Notification of Events of Default and Adverse Developments.
Each Borrower shall promptly notify the Lender upon obtaining knowledge of
the occurrence of:
(a) any Event of Default;
(b) any Default;
(c) any litigation instituted or threatened against such Borrower
or any of its Subsidiaries and of the entry of any judgment or Lien (other
than any Permitted Liens) against any of the assets or properties of such
Borrower or any of its Subsidiaries where the claims against such Borrower
or Subsidiary exceed Fifty Thousand Dollars ($50,000) and are not covered by
insurance;
(d) any event, development or circumstance whereby the financial
statements furnished hereunder fail in any material respect to present
fairly, in accordance with GAAP, the financial condition and operational
results of such Borrower or any of its Subsidiaries;
(e) any judicial, administrative or arbitral proceeding pending
against such Borrower or any of its Subsidiaries and any judicial or
administrative proceeding known by such Borrower to be threatened against it
or any of its Subsidiaries which, if adversely decided, could materi- ally
adversely affect its financial condition or operations (present or
prospective);
(f) the receipt by such Borrower or any of its Subsidiaries of any
notice, claim or demand from any Governmental Authority which alleges that
such Borrower or any of its Subsidiaries is in violation of any of the terms
of, or has failed to comply with any applicable Laws regulating its
operation and business, including, but not limited to, the Occupational
Safety and Health Act and the Environmental Protection Act; and
(g) any proposed public offering or private placement prior to
issuance of any offering statement or private placement memorandum;
(h) any other development in the business or affairs of any
Borrower and any of its Subsidiaries which may be materially adverse;
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in each case describing in detail satisfactory to the Lender the nature
thereof and the action the Borrowers propose to take with respect thereto.
6.1.12 Hazardous Materials; Contamination. Each Borrower agrees to:
(a) give notice to the Lender immediately upon acquiring knowledge
of the presence of any Hazardous Materials and of any Hazardous Materials
Contamination on any property owned or controlled by a Borrower or for which
any Borrower is, or is claimed to be, responsible (provided that such notice
shall not be required for Hazardous Materials placed or stored on such
property in accordance with applicable Laws in the ordinary course
(including, without limitation, quantity) of a Borrower's line of business
expressly described in this Agreement) or of any Hazardous Materials
Contamination, with a full description thereof;
(b) promptly comply with any Laws requiring the removal, treatment
or disposal of Hazardous Materials or Hazardous Materials Contamination
and provide the Lender with satisfactory evidence of such compliance;
(c) provide the Lender, within thirty (30) days after a demand by
the Lender, with a bond, letter of credit or similar financial assurance
evidencing to the Lender's satisfaction that the necessary funds are
available to pay the cost of removing, treating, and disposing of such
Hazardous Materials or Hazardous Materials Contamination and discharging any
Lien which may be established as a result thereof on any property owned or
controlled by any Borrower or for which any Borrower is, or is claimed to
be, responsible; and
(d) as part of the Obligations, defend, indemnify and hold harmless
the Lender and its agents, employees, trustees, successors and assigns from
any and all claims which may now or in the future (whether before or after
the termination of this Agreement) be asserted as a result of the presence
of any Hazardous Materials or of any Hazardous Materials Contamination on
any property owned or controlled by any Borrower or for which any Borrower
is, or is claimed to be, responsible. Each Borrower acknowledges and agrees
that this indemnification shall survive the termination of this Agreement
and the Commitment and the payment and performance of all of the other
Obligations.
6.1.13 Disclosure of Significant Transactions.
Each Borrower shall deliver to the Lender a written notice describing in detail
each transaction by it involving the purchase, sale, lease, or other acquisition
or loss or casualty to or disposition of an interest in Fixed or Capital Assets
which exceeds Fifty Thousand Dollars ($50,000.00), said notices to be delivered
to the Lender within thirty (30) days of the occurrence of each such
transaction.
6.1.14 Financial Covenants.
(a) Tangible Net Worth. The Borrowers will at all times maintain,
on a consolidated basis, tested as of the end of each of the Borrowers' fiscal
quarters, a Tangible Net Worth of not less than the following:
Fiscal Quarter Ending Amount
--------------------- ------
December 31, 1996 $20,290,000
March 31, 1997 $21,320,000
June 30, 1997 $23,350,000
September 30, 1997 $25,380,000
December 31, 1997 $28,890,000
March 31, 1998 $30,515,000
June 30, 1998 $35,140,000
September 30, 1998 $35,265,000
(b) Fixed Charge Coverage Ratio. The Borrowers will maintain, on a
consolidated basis, tested as of the end of each of the Borrowers' fiscal
quarters on a rolling four (4) quarter basis, a Fixed Charge Coverage Ratio so
that it is not more than the following:
Period Ratio
------ -----
December 31, 1996 through, and
including September 30, 1997 1.2 to 1.0
December 31, 1997 through, and
including, September 30, 1998 1.5 to 1.0
(c) Debt to Worth Ratio. The Borrowers will maintain, on a
consolidated basis, tested as of the end of each of the Borrowers' fiscal
quarters, a Debt to Worth Ratio so that it is not more than the following:
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Fiscal Quarter Ending Ratio
--------------------- -----
December 31, 1996 2.5 to 1.0
March 31, 1997 2.5 to 1.0
June 30, 1997 2.0 to 1.0
September 30, 1997 2.0 to 1.0
December 31, 1997 1.5 to 1.0
March 31, 1998 1.5 to 1.0
June 30, 1998 1.5 to 1.0
September 30, 1998 1.5 to 1.0
(d) Net Worth. Each Borrower will at all times maintain, on an
individual and non-consolidated basis, tested as of the end of each such
Borrower's fiscal quarters, a Net Worth of not less than the following:
Flanders Filters:
Fiscal Quarter Ending Amount
--------------------- ------
December 31, 1996 $ 7,000,000
March 31, 1997 $ 7,425,000
June 30, 1997 $ 7,850,000
September 30, 1997 $ 8,275,000
December 31, 1997 $ 8,700,000
March 31, 1998 $ 9,230,000
June 30, 1998 $ 9,760,000
September 30, 1998 $10,290,000
Flanders AirPure:
Fiscal Quarter Ending Amount
--------------------- ------
December 31, 1996 $ 540,000
March 31, 1997 $ 700,000
June 30, 1997 $ 860,000
September 30, 1997 $ 1,020,000
December 31, 1997 $ 1,180,000
March 31, 1998 $ 1,435,000
June 30, 1998 $ 1,690,000
September 30, 1998 $ 1,945,000
-▇▇-
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇:
Fiscal Quarter Ending Amount
--------------------- ------
December 31, 1996 $ 45,000
March 31, 1997 $ 105,000
June 30, 1997 $ 165,000
September 30, 1997 $ 225,000
December 31, 1997 $ 285,000
March 31, 1998 $ 495,000
June 30, 1998 $ 705,000
September 30, 1998 $ 915,000
Charcoal:
Fiscal Quarter Ending Amount
--------------------- ------
December 31, 1996 $ 4,800,000
March 31, 1997 $ 4,900,000
June 30, 1997 $ 5,000,000
September 30, 1997 $ 5,100,000
December 31, 1997 $ 5,200,000
March 31, 1998 $ 5,365,000
June 30, 1998 $ 5,530,000
September 30, 1998 $ 5,695,000
Precisionaire:
Fiscal Quarter Ending Amount
--------------------- ------
December 31, 1996 $17,500,000
March 31, 1997 $17,500,000
June 30, 1997 $18,500,000
September 30, 1997 $19,500,000
December 31, 1997 $21,500,000
March 31, 1998 $21,500,000
June 30, 1998 $23,000,000
September 30, 1998 $24,500,000
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Air Seal:
Fiscal Quarter Ending Amount
--------------------- ------
December 31, 1996 $ 800,000
March 31, 1997 $ 935,000
June 30, 1997 $ 1,070,000
September 30, 1997 $ 1,205,000
December 31, 1997 $ 1,340,000
March 31, 1998 $ 1,655,000
June 30, 1998 $ 1,970,000
September 30, 1998 $ 2,285,000
Notwithstanding the foregoing, the Lender agrees that any Borrower's failure to
achieve the minimum individual Net Worth amounts required for each Borrower as
set forth above shall not constitute a Default or an Event of Default if (i) the
Borrowers' on a consolidated basis are in compliance with all other financial
covenants contained in this Section 6.1.14 and (ii) the Net Worth of the
individual Borrower which has failed to achieve its minimum Net Worth
requirements set forth above shall have a Net Worth at least equal to eighty
percent (80%) of the amount otherwise required above for any Borrower other than
Flanders AirPure, Air Seal or Flanders AirPure West and at least sixty percent
(60%) of the amount otherwise required if the individual Borrower is Flanders
AirPure, Air Seal or Flanders AirPure West.
6.1.15 Collection of Receivables. Until such time that the Lender shall
notify the Borrowers of the revocation of such privilege, the Borrowers and each
of the Subsidiaries shall at its own expense have the privilege for the account
of, and in trust for, the Lender of collecting its Receivables and receiving in
respect thereto all Items of Payment and shall otherwise completely service all
of the Receivables including (a) the billing, posting and maintaining of
complete records applica- ble thereto, (b) the taking of such action with
respect to the Receivables as the Lender may request or in the absence of such
request, as each of the Borrowers and each of the Subsidiaries may deem
advisable; and (c) the granting, in the ordinary course of business, to any
Account Debtor, any rebate, refund or adjustment to which the Account Debtor may
be lawfully entitled, and may accept, in connection therewith, the return of
goods, the sale or lease of which shall have given rise to a Receivable and may
take such other actions relating to the settling of any Account Debtor's claim
as may be commercially reasonable. The Lender may, at its option, at any time or
from time to time after and during the continuance of an Event of Default
hereunder, revoke the collection privilege given in this Agreement to any or all
of the Borrowers and any or all of the Subsidiaries by either giving notice of
its
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assignment of, and lien on the Collateral to the Account Debtors or giving
notice of such revocation to the respective Borrower or Subsidiary. The Lender
shall not have any duty to, and the Borrowers hereby release the Lender from all
claims of loss or damage caused by the delay or failure to collect or enforce
any of the Receivables or to preserve any rights against any other party with an
interest in the Collateral unless due to the gross negligence of willful
misconduct of the Lender. The Lender shall be entitled at any time and from time
to time to confirm and verify Receivables.
6.1.16 Assignments of Receivables. The Borrowers will promptly, upon
request, execute and deliver to the Lender written assignments, in form and
content acceptable to the Lender, of specific Receivables or groups of
Receivables; provided, however, the Lien and/or security interest granted to the
Lender under this Agreement shall not be limited in any way to or by the
inclusion or exclusion of Receivables within such assignments. Receivables so
assigned shall secure payment of the Obligations and are not sold to the Lender
whether or not any assignment thereof, which is separate from this Agreement, is
in form absolute. The Borrowers agree that neither any assignment to the Lender
nor any other provision contained in this Agreement or any of the other
Financing Documents shall impose on the Lender any obligation or liability of
any Borrower with respect to that which is assigned and the Borrowers hereby
agree jointly and severally to indemnify the Lender and hold the Lender harmless
from any and all claims, actions, suits, losses, damages, costs, expenses, fees,
obligations and liabilities which may be incurred by or imposed upon the Lender
by virtue of the assignment of and Lien on any Borrower's rights, title and
interest in, to, and under the Collateral.
6.1.17 Government Accounts. If and to the extent the aggregate amount
of Receivables with respect to which the United States or any other Governmental
Authority is or will be an Account Debtor at any time exceeds Five Hundred
Thousand Dollars ($500,000), each Borrower will immediately notify the Lender
and execute any instruments and take any steps required by the Lender in order
that all moneys due and to become due under such contracts shall be assigned to
the Lender and notice thereof given to the Governmental Authority under the
Federal Assignment of Claims Act or any other applicable Laws.
6.1.18 Notice of Returned Goods, etc. Each Borrower will promptly
notify, and will cause the Subsidiaries to promptly notify, the Lender of the
return, rejection or repossession of any goods sold or delivered in respect of
any Receivables, and of any claims made in regard thereto to the extent that the
aggregate purchase price of any such goods in any given calendar month
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exceeds in the aggregate Twenty-five Thousand Dollars ($25,000.00) in any given
calendar month.
6.1.19 Inventory. With respect to the Inventory, all Borrowers and all
Subsidiaries will: (a) as soon as possible upon demand by the Lender from time
to time, prepare and deliver to the Lender designations of Inventory specifying
the Borrowers' and Subsidiaries' cost of Inventory, the retail price thereof,
and such other matters and information relating to the Inventory as the Lender
may reasonably request; (b) keep correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, the Borrowers' and
Subsidiaries' cost therefor and the selling price thereof, all of which records
shall be available to the officers, employees or agents of the Lender upon
demand for inspection and copying thereof; (c) not store any of its Inventory
with a bailee, warehouseman or similar Person without the Lender's prior written
consent, which consent may be conditioned on, among other things, delivery by
the bailee, warehouseman or similar Person to the Lender of warehouse receipts,
in form acceptable to the Lender, in the name of the Lender evidencing the
storage of Inventory and the Lender's interests therein; and (d) permit the
Lender and its agents or representatives to inspect and examine the Inventory
and to check and test the same as to quality, quantity, value and condition at
any time or times hereafter during the Borrowers' and Subsidiaries' usual
business hours or at other reasonable times. The Borrowers shall be permitted to
sell its Inventory in the ordinary course of their business until the occurrence
of a Default or an Event of Default.
6.1.20 Insurance With Respect to Equipment and Inventory.
The Borrowers will (a) maintain and cause each of their Subsidiaries to
maintain hazard insurance with fire and extended coverage and naming the Lender
as an additional insured with loss payable to the Lender as its respective
interest may appear on the Equipment and Inventory in an amount at least equal
to the lesser amount of the outstanding principal amount of the Obligations or
the fair market value of the Equipment and Inventory (but in any event
sufficient to avoid any co-insurance obligations) and with a specific
endorsement to each such insurance policy pursuant to which the insurer agrees
to give the Lender at least thirty (30) days written notice before any
alteration or termination of such insurance policy and that no act or default of
any Borrower shall affect the right of the Lender to recover under such policy
in the event of loss or damage; (b) file, and cause each of its Subsidiaries to
file, with the Lender, upon its request, a detailed list of the insurance then
in effect and stating the names of the insurance companies, the amounts and
rates of the insurance, dates
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of the expiration thereof and the properties and risks covered thereby; and (c)
within thirty (30) days after notice in writing from the Lender, obtain, and
cause each of its Subsidiaries to obtain, such additional insurance as the
Lender may reasonably request.
6.1.21 Maintenance of the Collateral. The Borrowers will maintain the
Collateral in good working order, saving and excepting ordinary wear and tear,
and will not permit anything to be done to the Collateral which may materially
impair the value thereof. The Lender, or an agent designated by the Lender,
shall be permitted to enter the premises of each Borrower and each Subsidiary
and examine, audit and inspect the Collateral at any reasonable time and from
time to time without notice. The Lender agrees to act in a commercially
reasonable manner when inspecting the premises of any Borrower and any
Subsidiary and when examining, auditing and/or inspecting the Collateral. The
Lender shall not have any duty to, and the Borrowers hereby release the Lender
from all claims of loss or damage caused by the delay or failure to collect or
enforce any of the Receivables or to, preserve any rights against any other
party with an interest in the Collateral unless due to the gross negligence or
willful misconduct of the Lender.
6.1.22 Equipment. The Borrowers shall (a) maintain all Equipment as
personalty and (b) not affix any Equipment to any real estate in such manner as
to become a fixture or part of such real estate. The Borrowers hereby declare
their intent that, notwithstanding the means of attachment, no goods of the
Borrowers hereafter attached to any realty shall be deemed a fixture, which
declaration shall be irrevocable, without the Lender's consent, until all of the
Obligations have been paid in full and all of the Commitment have been
terminated,
6.1.23 Defense of Title and Further Assurances. At their joint and
several expense, the Borrowers will defend the title to the Collateral (and any
part thereof), and will immediately execute, acknowledge and deliver any
financing statement, renewal, affidavit, deed, assignment, continuation
statement, security agreement, certificate or other document which the Lender
may require in order to perfect, preserve, maintain, continue, protect and/or
extend the Lien granted to the Lender under this Agreement or under any of the
other Financing Documents and the first priority of that Lien subject only to
the Permitted Liens. Each Borrower will from time to time do whatever the Lender
may require by way of obtaining, executing, delivering, and/or filing financing
statements, landlords', mortgagees' or bailees' waivers, notices of assignment
and other notices and amendments and renewals thereof and each Borrower will
take any and all steps and
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observe such formalities as the Lender may require, in order to create and
maintain a valid Lien upon, pledge of, or paramount security interest in, the
Collateral, subject to the Permitted Liens. The Borrowers jointly and severally
shall pay to the Lender on demand all taxes, costs and expenses incurred by the
Lender in connection with the preparation, execution, recording and filing of
any such document or instrument. To the extent that the proceeds of any of the
Accounts or Receivables of any Borrower are expected to become subject to the
control of, or in the possession of, a party other than a Borrower or the
Lender, the Borrowers shall cause all such parties to execute and deliver on the
Closing Date security documents, financing statements or other documents as
requested by the Lender and as may be necessary to evidence and/or perfect the
security interest of the Lender in those proceeds. The Borrowers agree that a
copy of a fully executed security agreement and/or financing statement shall be
sufficient to satisfy for all purposes the requirements of a financing statement
as set forth in Article 9 of the applicable Uniform Commercial Code. Each
Borrower hereby irrevocably appoints the Lender as such Borrower's
attorney-in-fact, with power of substitution, in the name of the Lender or in
the name of any or all of the Borrowers or otherwise, for the use and benefit of
the Lender, but at the joint and several cost and expense of the Borrowers and
without notice to the Borrowers, to execute and deliver any and all of the
instruments and other documents and take any action which the Lender may require
pursuant the foregoing provisions of this Section 6.1.23.
6.1.24 Business Names; Locations. Each Borrower will notify and cause
each of the Subsidiaries to notify the Lender not less than thirty (30) days
prior to (a) any change in the name under which a Borrower or the applicable
Subsidiary conducts its business, (b) any change of the location of the chief
executive office of a Borrower or the applicable Subsidiary, and (c) the opening
of any new place of business or the closing of any existing place of business,
and any change in the location of the places where the Collateral, or any part
thereof, or the books and records, or any part thereof, are kept.
6.1.25 Subsequent Opinion of Counsel as to Recording Requirements.
In the event that any Borrower or any Subsidiary shall transfer its
principal place of business or the office where it keeps its records pertaining
to the Collateral, upon the Lender's request, the Borrowers will provide to the
Lender a subsequent opinion of counsel as to the filing, recording and other
requirements with which the Borrowers and the Subsidiaries have complied to
maintain the Lien and security interest in favor of the Lender in the
Collateral.
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6.1.26 Use of Premises and Equipment. The Borrowers agree that until
the Obligations are fully paid and this Agreement has been terminated, the
Lender (a) after and during the continuance of a Default or an Event of Default,
may use any Borrower's owned or leased lifts, hoists, trucks and other
facilities or equipment for handling or removing the Collateral; and (b) shall
have, and is hereby granted, a right of ingress and egress to the places where
the Collateral is located, and may proceed over and through any Borrower's owned
or leased property.
6.1.27 Protection of Collateral. The Borrowers agree that the Lender
may at any time following an Event of Default take such steps as the Lender
deems reasonably necessary to protect the Lender's interest in, and to preserve
the Collateral, including, the hiring of such security guards or the placing of
other security protection measures as the Lender deems appropriate, may employ
and maintain at any Borrower's premises a custodian who shall have full
authority to do all acts necessary to protect the Lender's interests in the
Collateral and may lease warehouse facilities to which the Lender may move all
or any part of the Collateral to the extent commercially reasonable. The
Borrowers agree to cooperate fully with the Lender's efforts to preserve the
Collateral and will take such actions to preserve the Collateral as the Lender
may reasonably direct. All of the Lender's expenses of preserving the
Collateral, including any reasonable expenses relating to the compensation and
bonding of a custodian, shall be part of the Enforcement Costs.
SECTION 6.2 Negative Covenants. So long as any of the Obligations or
the Commitment shall be outstanding hereunder, the Borrowers agree with the
Lender that without the prior written consent of the Lender:
6.2.1 Capital Structure, Merger, Acquisition or Sale of Assets.
No Borrower will alter or amend its capital structure, authorize any
additional class of equity, issue any stock or equity of any class, enter into
any merger or consolidation or amalgamation, windup or dissolve itself (or
suffer any liquidation or dissolution) or acquire all or substantially all the
assets of any Person, except for the permitted acquisitions of real property set
forth in Schedule 6.2.1, or sell, lease or otherwise dispose of any of its
assets, except Inventory disposed of in the ordinary course of business prior to
an Event of Default), except that without the prior consent of the Lender
Flanders Corporation (a) may close and consummate the transactions contemplated
by the Equity Offering Documents, (b) may issue stock as and to the extent
permitted by
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any employee stock option plan offered by Flanders Corporation on terms and
conditions previously disclosed to and approved by the Lender, (c) may issue any
additional class of equity or stock for cash, (d) may issue stock as and to the
extent required by the provisions of any outstanding warrants issued prior to
the Closing Date, and (e) may issue stock as and to the extent required by the
provisions of any stock options issued prior to the Closing Date. Any consent of
the Lender to the disposition of any assets may be conditioned on a specified
use of the proceeds of disposition, but shall not be unreasonably withheld or
delayed.
6.2.2 Subsidiaries. No Borrower will create or acquire any
Subsidiaries other than the Subsidiaries identified on the Collateral Disclosure
List.
6.2.3 Issuance of Stock. No Borrower will issue, or grant any option
or right to purchase, any of its capital stock, except pursuant to the Equity
Offering Documents and except as otherwise permitted by Section 6.2.1.
6.2.4 Purchase or Redemption of Securities, Dividend Restrictions.
No Borrower will purchase, redeem or otherwise acquire any shares of its
capital stock or warrants now or hereafter out- standing, declare or pay any
dividends thereon (other than stock dividends and other than dividends paid by
any Borrower to Flanders Corporation), apply any of its property or assets to
the purchase, redemption or other retirement of, set apart any sum for the
payment of any dividends on, or for the purchase, redemption, or other
retirement of, make any distribution by reduction of capital or otherwise in
respect of, any shares of any class of capital stock of any Borrower, or any
warrants, permit any Subsidiary to purchase or acquire any shares of any class
of capital stock of, or warrants issued by, any Borrower, make any distribution
to stockholders or set aside any funds for any such purpose, and not prepay,
purchase or redeem any Indebtedness for Borrowed Money other than the
Obligations.
6.2.5 Indebtedness. No Borrower will, and will permit any Subsidiary
to, create, incur, assume or suffer to exist any Indebtedness for Borrowed
Money, or permit any Subsidiary so to do, except:
(a) the Obligations;
(b) current accounts payable arising in the ordinary course;
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(c) Indebtedness secured by Permitted Liens;
(d) Subordinated Indebtedness; and
(e) Indebtedness of the Borrowers existing on the date hereof and
reflected on the financial statements furnished pursuant to Section 4.1.11
(Financial Condition).
6.2.6 Investments, Loans and Other Transactions.
Except as otherwise provided in this Agreement, no Borrower will, and will
permit any of its Subsidiaries to, (a) make, assume, acquire or continue to hold
any investment in any real property (unless used in connection with its business
and treated as a Fixed or Capital Asset of any Borrower or any Subsidiary) or
any Person, whether by stock purchase, capital contribution, acquisition of
indebtedness of such Person or otherwise (including, without limitation,
investments in any joint venture or partnership), (b) guaranty or otherwise
become contingently liable for the indebtedness or obligations of any Person, or
(c) make any loans or advances, or otherwise extend credit to any Person,
except:
(i) any advance to an officer of any Borrower or of any
Subsidiary for travel or other business expenses in the ordinary course of
business, provided that the aggregate amount of all such advances by the
Borrowers and their Subsidiaries (taken as a whole) outstanding at any time
shall not exceed Twenty Thousand Dollars ($20,000);
(ii) the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business;
(iii) any investment in Cash Equivalents, which are pledged
to the Lender as collateral and security for the Obligations;
(iv) trade credit extended to customers in the ordinary
course of business;
(v) the permitted acquisitions of real property set forth in
Schedule 6.2.1;
(vi) the personal loan in the original principal amount of Two
Hundred Thousand Dollars ($200,000) made by Flanders Corporation to ▇▇▇
▇▇▇▇▇ secured by all of his rights, title and interest in and to any stock
issued by Flanders Corporation to ▇▇▇ ▇▇▇▇▇; and
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(vii) the personal loan in an original principal amount not
greater than Six Hundred Fifty Thousand Dollars ($650,000) to ▇▇▇▇▇▇ ▇.
▇▇▇▇▇.
6.2.7 Operating Lease Obligations. The Borrowers will not incur or
permit to exist any Lease Obligations except Capital Leases expressly permitted
by this Agreement or permit any Subsidiary so to do, if the aggregate amount of
all such Lease Obligations of the Borrowers and the Subsidiaries (taken as a
whole) would at any time exceed One Million Three Hundred Thousand Dollars
($1,300,000) during any fiscal year of the Borrowers.
6.2.8 Capital Expenditures. The Borrowers will not, and will permit any
Subsidiary to, directly or indirectly (by way of the acquisition of the
securities of a Person or otherwise), make any Capital Expenditures in the
aggregate for the Borrowers and the Subsidiaries (taken as a whole) in the
following amounts for the following fiscal years:
Fiscal Year Ending Amount
------------------ ------
December 31, 1996 $3,100,000
December 31, 1997 $2,550,000
December 31, 1998 $1,500,000
Notwithstanding the foregoing, during the fiscal year ending December 31, 1997,
Flanders Corporation shall be entitled to make up to an additional Five Hundred
Thousand Dollars ($500,000) in Capital Expenditures and during the fiscal year
ending December 31,1998, Flanders Corporation shall be entitled to make up to an
additional One Million Five Hundred Thousand Dollars ($1,500,000) in Capital
Expenditures; provided, that (i) at the time of any such Capital Expenditures
there does not exist a Default or an Event of Default and (ii) the making of any
such Capital Expenditure will not or could not reasonably be expected to give
rise to a Default or an Event of Default.
6.2.9 Stock of Subsidiaries. No Borrower will sell or otherwise
dispose of any shares of capital stock of any Subsidiary (except in connection
with a merger or consolidation of a Wholly Owned Subsidiary into a Borrower or
another Wholly Owned Subsidiary or with the dissolution of any Subsidiary) or
permit any Subsidiary to issue any additional shares of its capital stock except
pro rata to its stockholders.
6.2.10 Subordinated Indebtedness. No Borrower will, and will permit any
Subsidiary to make:
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(a) any payment of principal of, or interest on, any of the
Subordinated Indebtedness, including, without limitation, the Subordinated
Debt, if a Default or an Event of Default then exists hereunder or would
result from such payment;
(b) any payment of the principal or interest due on the
Subordinated Indebtedness as a result of acceleration thereunder or a
mandatory prepayment thereunder;
(c) any amendment or modification of or supplement to the
documents evidencing or securing the Subordinated Indebtedness; or
(d) payment of principal or interest on the Subordinated
Indebtedness other than when due (without giving effect to any acceleration
of maturity or mandatory prepayment).
6.2.11 Liens; Confessed Judgment. No Borrower (a) will create, incur,
assume or suffer to exist any Lien upon any of its properties or assets, whether
now owned or hereafter acquired, or permit any Subsidiary so to do, except for
Liens securing the Obligations and Permitted Liens, (b) will agree to, assume or
suffer to exist any provision in any instrument or other document for confession
of judgment, cognovit or other similar right or remedy, (c) will allow or suffer
to exist any Permitted Liens to be superior to Liens securing the Obligations
and Permitted Liens, (d) will enter into any contracts for the consignment of
goods to any Borrower, (e) will execute or suffer the filing of any financing
statements or the posting of any signs giving notice of consignments to any
Borrower, and (f) will, as a material part of its business, engage in the sale
of goods belonging to others, and (g) will allow or suffer to exist the failure
of any Lien described in the Security Documents to attach to, and/or remain at
all times perfected on, any of the property described in the Security Documents.
6.2.12 Transactions with Affiliates. No Borrower will enter into or
participate in any transaction with any Affiliate with terms which would not
otherwise be available in a transaction negotiated in good faith between
independent third parties having equal bargaining power, except for any
intercompany transactions as between Borrowers.
6.2.13 Other Businesses. The Borrowers and its Subsidiaries will not
engage directly or indirectly in any business other than the current lines of
business described elsewhere in this Agreement.
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6.2.14 ERISA Compliance. None of the Borrowers nor any Commonly
Controlled Entity shall: (a) engage in or permit any "prohibited transaction"
(as defined in ERISA); (b) cause any "accumulated funding deficiency" as defined
in ERISA and/or the Internal Revenue Code; (c) terminate any pension plan in a
manner which could result in the imposition of a lien on the property of any
Borrower pursuant to ERISA; (d) terminate or consent to the termination of any
Multiemployer Plan; or (e) incur a complete or partial withdrawal with respect
to any Multiemployer Plan.
6.2.15 Prohibition on Hazardous Materials. No Borrower shall place,
manufacture or store or permit to be placed, manufactured or stored any
Hazardous Materials on any property owned, operated or controlled by any
Borrower or for which any Borrower is responsible other than Hazardous Materials
placed or stored on such property in accordance with applicable Laws in the
ordinary course.
6.2.16 Amendments. The Borrowers will not amend or terminate or agree
to amend or terminate any of the Equity Offering Documents, any of the Purchase
Agreement Documents or the Closing Escrow Agreement or consent to or waive any
material provisions thereof.
6.2.17 Method of Accounting; Fiscal Year.
(a) The Borrowers shall not change the method of accounting
employed in the preparation of any financial statements furnished to the Lender
under the provisions of Section 6.1.1 (Financial Statements) of this Agreement,
unless required to conform to GAAP and on the condition that the Borrowers'
accountants shall furnish such information as the Lender may request to
reconcile the changes with the Borrowers' prior financial statements.
(b) The Borrowers will not change their fiscal year from a year
ending on December 31.
6.2.18 Compensation. None of the Borrowers nor any Subsidiaries will
pay any bonuses, fees, compensation, commissions, salaries, drawing accounts, or
other payments (cash and non-cash), whether direct or indirect, to any
stockholders of any Borrower or its Subsidiaries, or any Affiliate of any
Borrower or its Subsidiaries, other than reasonable compensation for actual
services rendered by stockholders in their capacity as officers or employees of
a Borrower.
6.2.19 Transfer of Collateral. None of the Borrowers and nor any of
the Subsidiaries will transfer, or permit
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the transfer, to another location of any of the Collateral or the books and
records related to any of the Collateral.
6.2.20 Sale and Leaseback. None of the Borrowers nor any of the
Subsidiaries will directly or indirectly enter into any arrangement to sell or
transfer all or any substantial part of its fixed assets and thereupon or
within one year thereafter rent or lease the assets so sold or transferred.
6.2.21 Disposition of Collateral. None of the Borrowers will sell,
discount, allow credits or allowances, transfer, assign, extend the time for
payment on, convey, lease, assign, transfer or otherwise dispose of the
Collateral, except, prior to an Event of Default, dispositions expressly
permitted elsewhere in this Agreement, the sale of Inventory in the ordinary
course of business, and the sale of unnecessary or obsolete Equipment, but only
if the proceeds of the sale of such Equipment are (a) used to purchase similar
Equipment to replace the unnecessary or obsolete Equipment, (b) or to purchase
other Fixed or Capital Assets if and to the extent permitted by the provisions
of this Agreement, or (c) immediately turned over to the Lender for application
to the Obligations.
ARTICLE 7
DEFAULT AND RIGHTS AND REMEDIES
SECTION 7.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under the provisions of
this Agreement:
7.1.1 Failure to Pay. The failure of the Borrowers to pay any of the
Obligations as and when due and payable in accordance with the provisions of
this Agreement, the Notes and/or any of the other Financing Documents;
7.1.2 Breach of Representations and Warranties. Any representation or
warranty made in this Agreement or in any report, statement, schedule,
certificate, opinion (including any opinion of counsel for any or all of the
Borrowers), financial statement or other document furnished in connection with
this Agreement, any of the other Financing Documents, or the Obligations, shall
prove to have been false or misleading when made (or, if applicable, when
reaffirmed) in any material respect.
7.1.3 Failure to Comply with Specific Covenants. The failure of any of
the Borrowers to perform, observe or comply with any covenant, condition or
agreement contained in Section
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6.1.1 (Financial Statements), Section 6.1.3(a) (Bookkeeping, Rights of
Inspection, Field Examination, Etc.) with respect to inspection rights only,
Section 6.1.8 (Insurance), Section 4.1.17, 6.1.9 (Taxes), Section 6.1.14
(Financial Covenants), Section 6.1.20 (Insurance with Respect to Equipment),
Section 6.1.23 (Defense of Title and Further Assurances), Section 6.1.24
(Business Names; Locations), or Section 6.2 (Negative Covenants) (except that
the Borrowers shall be permitted a period not to exceed thirty (30) days to
repay any unsecured Indebtedness incurred in violation of Section 6.2.5).
7.1.4 Failure to Comply with Other Covenants. The failure of any of
the Borrowers to perform, observe or comply with any covenant, condition or
agreement contained in this Agreement other than those set forth in Section
7.1.1, 7.1.2 or 7.1.3 above, which failure shall remain unremedied for a period
of thirty (30) days after written notice thereof to the Borrowers by the Lender.
7.1.5 Default Under Other Financing Documents or Obligations.
A default shall occur under any of the other Financing Documents or under
any other Obligations, and such default is not cured within any applicable grace
period provided therein.
7.1.6 Receiver; Bankruptcy. Any Borrower or any Subsidiary shall
(a) apply for or consent to the appointment of a receiver, trustee or liquidator
of itself or any of its property, (b) admit in writing its inability to pay its
debts as they mature, (c) make a general assignment for the benefit of credi-
tors, (d) be adjudicated a bankrupt or insolvent, (e) file a voluntary petition
in bankruptcy or a petition or an answer seeking or consenting to reorganization
or an arrangement with creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation law
or statute, or an answer admitting the material allegations of a petition filed
against it in any proceeding under any such law, or take corporate action for
the purposes of effecting any of the foregoing, or (f) by any act indicate its
consent to, approval of or acquiescence in any such proceeding or the
appointment of any receiver of or trustee for any of its property, or suffer any
such receivership, trusteeship or proceeding to continue undischarged for a
period of sixty (60) days, or (g) by any act indicate its consent to, approval
of or acquiescence in any order, judgment or decree by any court of competent
jurisdiction or any Governmental Authority enjoining or otherwise prohibiting
the operation of a material portion of any Borrower's or any Subsidiary's
business or the use
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or disposition of a material portion of any Borrower's or any Subsidiary's
assets.
7.1.7 Involuntary Bankruptcy, etc. (a) An order for relief shall be
entered in any involuntary case brought against any Borrower or any Subsidiary
under the Bankruptcy Code, or (b) any such case shall be commenced against any
Borrower or any Subsidiary and shall not be dismissed within sixty (60) days
after the filing of the petition, or (c) an order, judgment or decree under any
other Law is entered by any court of competent jurisdiction or by any other
Governmental Authority on the application of a Governmental Authority or of a
Person other than any Borrower or any Subsidiary (i) adjudicating any Borrower,
or any Subsidiary bankrupt or insolvent, or (ii) appointing a receiver, trustee
or liquidator of any Borrower or of any Subsidiary, or of a material portion of
any Borrower's or any Subsidiary's assets, or (iii) enjoining, prohibiting or
otherwise limiting the operation of a material portion of any Borrower's or any
Subsidiary's business or the use or disposition of a material portion of any
Borrower's or any Subsidiary's assets, and such order, judgment or decree
continues unstayed and in effect for a period of thirty (30) days from the date
entered.
7.1.8 Judgment. Unless adequately insured in the opinion of the
Lender, the entry of a final judgment for the payment of money involving more
than $100,000 against any Borrower or any Subsidiary, and the failure by such
Borrower or Subsidiary to discharge the same, or cause it to be discharged,
within thirty (30) days from the date of the order, decree or process under
which or pursuant to which such judgment was entered, or to secure a stay of
execution pending appeal of such judgment. The Lender agrees that the judgment
entered against Flanders Filters in favor of St. ▇▇▇▇ Fire & Marine in the
current outstanding amount of $265,500 on or about January 3, 1996 (Case No.
93CV002798) in the Superior Court for Beaufort County, North Carolina shall not
constitute an Event of Default; provided that the Borrowers furnish to the
Lender evidence that Flanders Filters has been duly indemnified for all amounts
payable under such judgment on such terms and conditions as shall be acceptable
to the Lender.
7.1.9 Execution; Attachment. Any execution or attachment shall be
levied against the Collateral, or any part thereof, and such execution or
attachment shall not be set aside, discharged or stayed within thirty (30) days
after the same shall have been levied.
7.1.10 Default Under Other Borrowings. Default shall be made with
respect to any Indebtedness for Borrowed Money (other than the Loans) if the
effect of such default is to
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accelerate the maturity of such Indebtedness for Borrowed Money or to permit the
holder or obligee thereof or other party thereto to cause any such Indebtedness
for Borrowed Money to become due prior to its stated maturity.
7.1.11 Challenge to Agreements. Any Borrower shall challenge the
validity and binding effect of any provision of any of the Financing Documents
or shall state its intention to make such a challenge of any of the Financing
Documents or any of the Financing Documents shall for any reason (except to the
extent permitted by its express terms) cease to be effective or to create a
valid and perfected first priority Lien (except for Permitted Liens) on, or
security interest in, any of the Collateral purported to be covered thereby.
7.1.12 Material Adverse Change. The Lender in its sole, but
commercially reasonable, discretion determines in good faith that a material
adverse change has occurred in the financial condition of any of the Borrowers.
7.1.13 Change in Ownership. Any change shall occur in the ownership of
any of the Borrowers other than Flanders Corporation and other than the transfer
of Precisionaire stock to Flanders Corporation contemplated by the Purchase
Agreement Transaction - Precisionaire.
7.1.14 Liquidation, Termination, Dissolution, Change in Management,
etc.
Any Borrower shall liquidate, dissolve or terminate its existence or shall
suspend or terminate a substantial portion of its business operations or any
change occurs in the key management of such Borrower (which shall include the
chief executive officer, the chief financial officer, the controller and the
president of each Borrower) without the prior written consent of the Lender.
SECTION 7.2 Remedies. Upon the occurrence of any Default or Event of
Default, the Lender may at any time thereafter exercise any one or more of the
following rights, powers or remedies:
7.2.1 Acceleration. The Lender may declare the Obligations to be
immediately due and payable, notwithstanding anything contained in this
Agreement or in any of the other Financing Documents to the contrary, without
presentment, demand, protest, notice of protest or of dishonor, or other notice
of any kind, all of which each Borrower hereby waives.
7.2.2 Further Advances. The Lender may from time to time without
notice to any Borrower suspend, terminate or
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limit any further loans or other extensions of credit under this Agreement and
under any of the other Financing Documents. Further, upon the occurrence of an
Event of Default or Default specified in Sections 7.1.6 (Receiver; Bankruptcy)
or 7.1.7 (Involuntary Bankruptcy, etc.) above, the Revolving Credit Commit- ment
and any agreement in any of the Financing Documents to provide additional credit
shall immediately and automatically terminate and the unpaid principal amount of
the Notes (with accrued interest thereon) and all other Obligations then out-
standing, shall immediately become due and payable without further action of any
kind and without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by all Borrowers.
7.2.3 Uniform Commercial Code. The Lender shall have all of the
rights and remedies of a secured party under the applicable Uniform Commercial
Code and other applicable Laws. Upon demand by the Lender, the Borrowers shall
assemble the Collateral and make it available to the Lender, at a place
designated by the Lender. The Lender or its agents may without notice from time
to time enter upon any Borrower's premises to take possession of the Collateral,
to remove it, to render it unusable, to process it or otherwise prepare it for
sale, or to sell or otherwise dispose of it.
Any written notice of the sale, disposition or other intended action by the
Lender with respect to the Collateral which is sent by regular mail, postage
prepaid, to the Borrowers at the address set forth in Section 8.1 of this
Agreement, or such other address of the Borrowers which may from time to time be
shown on the Lender's records, at least ten (10) days prior to such sale,
disposition or other action, shall constitute commercially reasonable notice to
the Borrowers. The Lender may alternatively or additionally give such notice in
any other commercially reasonable manner. Nothing in this Agreement shall
require the Lender to give any notice not required by applicable Laws.
If any consent, approval, or authorization of any state, municipal or other
governmental department, agency or authority or of any person, or any person,
corporation, partnership or other entity having any interest therein, should be
necessary to effectuate any sale or other disposition of the Collateral, the
Borrowers agree to execute all such applications and other instruments, and to
take all other action, as may be required in connection with securing any such
consent, approval or authorization.
The Borrowers recognize that the Lender may be unable to effect a public
sale of all or a part of the Collateral consisting of securities by reason of
certain prohibitions contained in the
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Securities Act of 1933, as amended, and other applicable federal and state Laws.
The Lender may, therefore, in its discretion, take such steps as it may deem
appropriate to comply with such Laws and may, for example, at any sale of the
Collateral consisting of securities restrict the prospective bidders or
purchasers as to their number, nature of business and investment intention,
including, without limitation, a requirement that the Persons making such
purchases represent and agree to the satisfaction of the Lender that they are
purchasing such securities for their account, for investment, and not with a
view to the distribution or resale of any thereof. The Borrowers covenant and
agree to do or cause to be done promptly all such acts and things as the Lender
may request from time to time and as may be necessary to offer and/or sell the
securities or any part thereof in a manner which is valid and binding and in
conformance with all applicable Laws. Upon any such sale or disposition, the
Lender shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral consisting of securities so sold.
7.2.4 Specific Rights With Regard to Collateral.
In addition to all other rights and remedies provided hereunder or as shall
exist at law or in equity from time to time, the Lender may (but shall be under
no obligation to), without notice to the Borrowers, and each Borrower hereby
irrevocably appoints the Lender as its attorney-in-fact, with power of
substitution, in the name of the Lender or in the name of any or all of the
Borrowers or otherwise, for the use and benefit of the Lender, but at the joint
and several cost and expense of the Borrowers and without notice to the
Borrowers:
(a) request any account debtor obligated on any of the Accounts to
make payments thereon directly to the Lender, with the Lender taking control
of the cash and non- cash proceeds thereof;
(b) compromise, extend or renew any of the Collateral or deal with
the same as it may deem advisable;
(c) make exchanges, substitutions or surrenders of all or any part
of the Collateral;
(d) copy, transcribe, or remove from any place of business of any
Borrower or any Subsidiary all books, records, ledger sheets,
correspondence, invoices and documents, relating to or evidencing any of the
Collateral or without cost or expense to the Lender, make such use of any
Borrower's or any Subsidiary's place(s) of business as may be
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reasonably necessary to administer, control and collect the Collateral;
(e) repair, alter or supply goods if necessary to fulfill in whole
or in part the purchase order of any Account Debtor;
(f) demand, collect, receipt for and give renewals, extensions,
discharges and releases of any of the Collateral;
(g) institute and prosecute legal and equitable proceedings to
enforce collection of, or realize upon, any of the Collateral;
(h) settle, renew, extend, compromise, compound, exchange or adjust
claims in respect of any of the Collateral or any legal proceedings brought
in respect thereof;
(i) endorse or sign the name of any Borrower upon any Items of
Payment, certificates of title, Instruments, Securities, stock powers,
documents, documents of title, financing statements, assignments, notices,
or other writing relating to or part of the Collateral and on any Proof of
Claim in Bankruptcy against an Account Debtor;
(j) notify the Post Office authorities to change the address for
the delivery of mail to any or all of the Borrowers to such address or Post
Office Box as the Lender may designate and receive and open all mail
addressed to any or all of the Borrowers; and
(k) take any other action necessary or beneficial to realize upon
or dispose of the Collateral or to carry out the terms of this Agreement.
7.2.5 Application of Proceeds. Any proceeds of sale or other
disposition of the Collateral will be applied by the Lender to the payment of
the Enforcement Costs, and any balance of such proceeds will be applied by the
Lender to the payment of the balance of the Obligations in such order and manner
of application as the Lender may from time to time in its sole discretion
determine. If the sale or other disposition of the Collateral fails to fully
satisfy the Obligations, the Borrowers shall remain jointly and severally liable
to the Lender for any deficiency.
7.2.6 Performance by Lender. Upon the occurrence and continuation of
an Event of Default, the Lender
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without notice to or demand upon the Borrowers and without waiving or releasing
any of the Obligations or any Default or Event of Default, may (but shall be
under no obligation to) at any time thereafter make such payment or perform such
act for the account and at the joint and several expense of the Borrowers, and
may enter upon the premises of any Borrower for that purpose and take all such
action thereon as the Lender may consider necessary or appropriate for such
purpose and each Borrower hereby irrevocably appoints the Lender as its
attorney-in-fact to do so, with power of substitution, in the name of the Lender
or in the name of any or all of the Borrowers or otherwise, for the use and
benefit of the Lender, but at the joint and several cost and expense of the
Borrowers and without notice to the Borrowers. All sums so paid or advanced by
the Lender, together with interest thereon from the date of payment, advance or
incurring until paid in full at the Post-Default Rate and all costs and
expenses, shall be deemed part of the Enforcement Costs, shall be paid by the
Borrowers to the Lender on demand, and shall constitute and become a part of the
Obligations.
7.2.7 Other Remedies. The Lender may from time to time proceed to
protect or enforce its rights by an action or actions at law or in equity or by
any other appropriate proceeding, whether for the specific performance of any of
the covenants contained in this Agreement or in any of the other Financing
Documents, or for an injunction against the violation of any of the terms of
this Agreement or any of the other Financing Documents, or in aid of the
exercise or execution of any right, remedy or power granted in this Agreement,
the Financing Documents, and/or applicable Laws. The Lender is authorized to
offset and apply to all or any part of the Obligations all moneys, credits and
other property of any nature whatsoever of any or all of the Borrowers now or at
any time hereafter in the possession of, in transit to or from, under the
control or custody of, or on deposit with, the Lender or any Affiliate of the
Lender.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 Notices. All notices, requests and demands to or upon the
parties to this Agreement shall be in writing and shall be deemed to have been
given or made when delivered by hand on a Business Day, or two (2) days after
the date when deposited in the mail, postage prepaid by registered or certified
mail, return receipt requested, or when sent by overnight courier, on the
Business Day next following the day on which the notice is delivered to such
overnight courier, addressed as follows:
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Borrowers: c/o Flanders Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Lender: NATIONSBANK, N.A.
NationsBank Business Credit
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
MD4-325-04-14
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Miles & Stockbridge,
a Professional Corporation
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By written notice, each party to this Agreement may change the address to which
notice is given to that party, provided that such changed notice shall include a
street address to which notices may be delivered by overnight courier in the
ordinary course on any Business Day.
SECTION 8.2 Amendments; Waivers. This Agreement and the other Financing
Documents may not be amended, modified, or changed in any respect except by an
agreement in writing signed by the Lender and the Borrowers. No waiver of any
provision of this Agreement or of any of the other Financing Documents, nor
consent to any departure by any Borrower therefrom, shall in any event be
effective unless the same shall be in writing. No course of dealing between any
Borrower and the Lender and no act or failure to act from time to time on the
part of the Lender shall constitute a waiver, amendment or modification of any
provision of this Agreement or any of the other Financing Documents or any right
or remedy under this Agreement, under any of the other Financing Documents or
under applicable Laws.
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Without implying any limitation on the foregoing:
(a) Any waiver or consent shall be effective only in the specific
instance, for the terms and purpose for which given, subject to such conditions
as the Lender may specify in any such instrument.
(b) No waiver of any Default or Event of Default shall extend to
any subsequent or other Default or Event of Default, or impair any right
consequent thereto.
(c) No notice to or demand on any Borrower in any case shall
entitle a Borrower to any other or further notice or demand in the same, similar
or other circumstance.
(d) No failure or delay by the Lender to insist upon the strict
performance of any term, condition, covenant or agreement of this Agreement or
of any of the other Financing Documents, or to exercise any right, power or
remedy consequent upon a breach thereof, shall constitute a waiver, amendment or
modification of any such term, condition, covenant or agreement or of any such
breach or preclude the Lender from exercising any such right, power or remedy at
any time or times.
(e) By accepting payment after the due date of any amount payable
under this Agreement or under any of the other Financing Documents, the Lender
shall not be deemed to waive the right either to require prompt payment when due
of all other amounts payable under this Agreement or under any of the other
Financing Documents, or to declare a default for failure to effect such prompt
payment of any such other amount.
SECTION 8.3 Cumulative Remedies. The rights, powers and remedies
provided in this Agreement and in the other Financing Documents are cumulative,
may be exercised concurrently or separately, may be exercised from time to time
and in such order as the Lender shall determine and are in addition to, and not
exclusive of, rights, powers and remedies provided by existing or future
applicable Laws. In order to entitle the Lender to exercise any remedy reserved
to it in this Agreement, it shall not be necessary to give any notice, other
than such notice as may be expressly required in this Agreement. Without
limiting the generality of the foregoing, the Lender may:
(a) proceed against any or all of the Borrowers with or without
proceeding against any other Borrower or any other Person who may be liable
(by endorsement, guaranty, indemnity or otherwise) for all or any part of
the Obligations;
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(b) proceed against any or all of the Borrowers with or without
proceeding under any of the other Financing Documents or against any
Collateral or other collateral and security for all or any part of the
Obligations;
(c) without reducing or impairing the joint and several obligations
of any of the Borrowers and without notice, release or compromise with any
guarantor or other Person liable for all or any part of the Obligations
under the Financing Documents or otherwise;
(d) without reducing or impairing the joint and several obligations
of any of the Borrowers and without notice thereof: (i) fail to perfect the
Lien in any or all Collateral or to release any or all the Collateral or to
accept substitute Collateral, (ii) approve the making of advances under the
Revolving Loan under this Agreement, (iii) waive any provision of this
Agreement or the other Financing Documents, (iv) exercise or fail to
exercise rights of set- off or other rights, or (v) accept partial payments
or extend from time to time the maturity of all or any part of the
Obligations.
SECTION 8.4 Severability. In case one or more provisions, or part
thereof, contained in this Agreement or in the other Financing Documents
shall be invalid, illegal or unenforceable in any respect under any Law,
then without need for any further agreement, notice or action:
(a) the validity, legality and enforceability of the remaining
provisions shall remain effective and binding on the parties thereto and
shall not be affected or impaired thereby;
(b) the obligation to be fulfilled shall be reduced to the limit of
such validity;
(c) if such provision or part thereof pertains to repayment of the
Obligations, then, at the sole and absolute discretion of the Lender, all of
the Obligations of any or all of the Borrowers to the Lender shall become
immediately due and payable; and
(d) if the affected provision or part thereof does not pertain to
repayment of the Obligations, but operates or would prospectively operate to
invalidate this Agreement in whole or in part, then such provision or part
thereof only
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shall be void, and the remainder of this Agreement shall remain
operative and in full force and effect.
SECTION 8.5 Assignments by Lender. The Lender may, without notice to,
or consent of, the Borrowers, sell, assign or transfer to or participate with
any Person or Persons all or any part of the Obligations, and each such Person
or Persons shall have the right to enforce the provisions of this Agreement and
any of the other Financing Documents as fully as the Lender, provided that the
Lender shall continue to have the unimpaired right to enforce the provisions of
this Agreement and any of the other Financing Documents as to so much of the
Obligations that the Lender has not sold, assigned or transferred. In connection
with the foregoing, the Lender shall have the right to disclose to any such
actual or potential purchaser, assignee, transferee or participant all financial
records, information, reports, financial statements and documents obtained in
connection with this Agreement and any of the other Financing Documents or
otherwise. Notwithstanding the foregoing, the Lender agrees that if at any time
the Lender assigns all or any portion of the Obligations and the Commitments to
any Person (other than an Affiliate of the Lender) and the Lender fails to
retain authority to take all actions required by or permitted to the Lender
under this Agreement without obtaining the consent of any such assignee, the
Borrowers shall have a period of ninety (90) days after Notice of any such
actual or proposed assignment from the Lender to the Borrowers, which Notice
shall identify the actual or proposed assignee and the amount of the Obligations
and Commitments assigned, to prepay all of the Obligations and terminate the
Commitment and the Lender agrees that no Early Termination Fee shall be payable
in connection with any such prepayment of the Obligations and termination of the
Commitments. The foregoing rights of the Borrowers which arise upon an
assignment of any of the Obligations and/or the Commitment to any Person (other
than an Affiliate of the Lender) shall not apply to the sale of a participation
interest to any Person.
SECTION 8.6 Successors and Assigns. This Agreement and all other
Financing Documents shall be binding upon and inure to the benefit of the
Borrowers and the Lender and their respective successors and assigns, except
that the Borrowers shall not have the right to assign their rights hereunder or
any interest herein without the prior written consent of the Lender.
SECTION 8.7 Continuing Agreements. All covenants, agreements,
representations and warranties made by any or all of the Borrowers in this
Agreement, in any of the other Financing Documents, and in any certificate
delivered pursuant hereto or thereto shall survive the making by the Lender of
the Loans and the execution and delivery of the Notes, shall be binding upon the
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Borrowers regardless of how long before or after the date hereof any of the
Obligations were or are incurred, and shall continue in full force and effect so
long as any of the Obligations are outstanding and unpaid. From time to time
upon the Lender's request, and as a condition of the release of any one or more
of the Security Documents, the Borrowers and other Persons obligated with
respect to the Obligations shall provide the Lender with such acknowledgments
and agreements as the Lender may require to the effect that there exists no
defenses, rights of setoff or recoupment, claims, counterclaims, actions or
causes of action of any kind or nature whatsoever against the Lender, its agents
and others, or to the extent there are, the same are waived and released.
SECTION 8.8 Enforcement Costs. The Borrowers jointly and severally
shall pay to the Lender on demand all Enforcement Costs, together with interest
thereon from the date incurred or advanced until paid in full at a per annum
rate of interest equal at all times to the Post-Default Rate. Enforcement Costs
shall be immediately due and payable at the time advanced or incurred, whichever
is earlier. Without implying any limitation on the foregoing, the Borrowers
jointly and severally shall pay, as part of the Enforcement Costs, upon demand
any and all stamp and other Taxes and fees payable or determined to be payable
in connection with the execution and delivery of this Agreement and the other
Financing Documents and to save the Lender harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay any Taxes or fees referred to in this Section. The provisions of this
Section shall survive the execution and delivery of this Agreement, the
repayment of the other Obligations and shall survive the termination of this
Agreement.
SECTION 8.9 Applicable Law; Jurisdiction.
8.9.1 As a material inducement to the Lender to enter into this
Agreement, the Borrowers acknowledge and agree that the Financing Documents,
including, this Agreement, shall be governed by the Laws of the State, as if
each of the Financing Documents and this Agreement had each been executed,
delivered, administered and performed solely within the State even though for
the convenience and at the request of the Borrowers, one or more of the
Financing Documents may be executed elsewhere. The Lender acknowledges, however,
that remedies under certain of the Financing Documents which relate to property
outside the State may be subject to the laws of the state in which the property
is located.
8.9.2 Each Borrower irrevocably submits to the jurisdiction of any
state or federal court sitting in the State
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over any suit, action or proceeding arising out of or relating to this Agreement
or any of the other Financing Documents. Each Borrower irrevocably waives, to
the fullest extent permitted by law, any objection that it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding brought
in any such court and any claim that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum. Final judgment in
any such suit, action or proceeding brought in any such court shall be
conclusive and binding upon the Borrowers and may be enforced in any court in
which any Borrower is subject to jurisdiction, by a suit upon such judgment,
provided that service of process is effected upon such Borrower in one of the
manners specified in this Section or as otherwise permitted by applicable Laws.
8.9.3 Each Borrower hereby irrevocably designates and appoints The
Corporation Trust, Incorporated, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as
such Borrower's authorized agent to receive on such Borrower's behalf service of
any and all process that may be served in any suit, action or proceeding of the
nature referred to in this Section in any state or federal court sitting in the
State. If such agent shall cease so to act, the Borrowers shall irrevocably
designate and appoint without delay another such agent in the State satisfactory
to the Lender and shall promptly deliver to the Lender evidence in writing of
such other agent's acceptance of such appointment and its agreement that such
appointment shall be irrevocable.
8.9.4 Each Borrower hereby consents to process being served in any
suit, action or proceeding of the nature referred to in this Section by (i) the
mailing of a copy thereof by registered or certified mail, postage prepaid,
return receipt requested, to the Borrowers at the Borrowers' address designated
in or pursuant to Section 8.1 hereof, and (ii) serving a copy thereof upon the
agent, if any, designated and appointed by the Borrowers as the Borrowers' agent
for service of process by or pursuant to this Section. The Borrowers irrevocably
agree that such service (i) shall be deemed in every respect effective service
of process upon the Borrowers in any such suit, action or proceeding, and (ii)
shall, to the fullest extent permitted by law, be taken and held to be valid
personal service upon the Borrowers. Nothing in this Section shall affect the
right of the Lender to serve process in any manner otherwise permitted by law or
limit the right of the Lender otherwise to bring proceedings against any or all
of the Borrowers in the courts of any jurisdiction or jurisdictions.
SECTION 8.10 Duplicate Originals and Counterparts. This Agreement may be
executed in any number of duplicate originals or counterparts, each of such
duplicate originals or counterparts
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shall be deemed to be an original and all taken together shall constitute but
one and the same instrument.
SECTION 8.11 Headings. The headings in this Agreement are included
herein for convenience only, shall not constitute a part of this Agreement for
any other purpose, and shall not be deemed to affect the meaning or construction
of any of the provisions hereof.
SECTION 8.12 No Agency. Nothing herein contained shall be construed to
constitute any of the Borrowers as the Lender's agent for any purpose whatsoever
or to permit any Borrower to pledge any of the Lender's credit. The Lender shall
not be responsible nor liable for any shortage, discrepancy, damage, loss or
destruction of any part of the Collateral wherever the same may be located and
regardless of the cause thereof. The Lender shall not, by anything herein or in
any of the Financing Documents or otherwise, assume any Borrower's obligations
under any contract or agreement assigned to the Lender, and the Lender shall not
be responsible in any way for the performance by any Borrower of any of the
terms and conditions thereof.
SECTION 8.13 Date of Payment. Should the principal of or interest on any
of the Notes become due and payable on other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day and in the case of
principal, interest shall be payable thereon at the rate per annum specified in
the Notes during such extension.
SECTION 8.14 Entire Agreement. This Agreement is intended by the Lender
and the Borrowers to be a complete, exclusive and final expression of the
agreements contained herein. Neither the Lender nor the Borrowers shall
hereafter have any rights under any prior agreements pertaining to the matters
addressed by this Agreement but shall look solely to this Agreement for
definition and determination of all of their respective rights, liabilities and
responsibilities under this Agreement.
SECTION 8.15 Waiver of Trial by Jury. THE BORROWERS AND THE LENDER
HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
WHICH ANY OF THE BORROWERS AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN
ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR
(C) THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL
CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS
AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT.
This waiver is knowingly, willingly and voluntarily made by the Borrowers
and the Lender, and the Borrowers and the Lender
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hereby represent that no representations of fact or opinion have been made by
any individual to induce this waiver of trial by jury or to in any way modify or
nullify its effect. The Borrowers and the Lender further represent that they
have been represented in the signing of this Agreement and in the making of this
waiver by independent legal counsel, selected of their own free will, and that
they have had the opportunity to discuss this waiver with counsel.
SECTION 8.16 Liability of the Lender. The Borrowers hereby agree that
the Lender shall not be chargeable for any negligence, mistake, act or omission
of any accountant, examiner, agency or attorney employed by the Lender in making
examinations, investigations or collections, or otherwise in perfecting,
maintaining, protecting or realizing upon any lien or security interest or any
other interest in the Collateral or other security for the Obligations.
By inspecting the Collateral or any other properties of any Borrower or by
accepting or approving anything required to be observed, performed or fulfilled
by any Borrower or to be given to the Lender pursuant to this Agreement or any
of the other Financing Documents, the Lender shall not be deemed to have
warranted or represented the condition, sufficiency, legality, effectiveness or
legal effect of the same, and such acceptance or approval shall not constitute
any warranty or representation with respect thereto by the Lender.
IN WITNESS WHEREOF, each of the parties hereto have executed and delivered
this Agreement under their respective seals as of the day and year first written
above.
WITNESS OR ATTEST: FLANDERS CORPORATION
/s/ XXXXXX By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Seal)
_________________________ ______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive
Officer
WITNESS OR ATTEST: FLANDERS FILTERS, INC.
/s/ XXXXXX By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Seal)
_________________________ ______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
WITNESS OR ATTEST: FLANDERS AIRPURE PRODUCTS
COMPANY, LLC
By: Flanders Filters, Inc.
Member and Manager
/s/ XXXXXX By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Seal)
_________________________ ______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
WITNESS OR ATTEST: FLANDERS AIRPURE WEST, INC.
/s/ XXXXXX By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Seal)
_________________________ ______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
WITNESS OR ATTEST: FLANDERS INTERNATIONAL PTE, LTD.
/s/ XXXXXX By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Seal)
_________________________ ______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Director
WITNESS OR ATTEST: CHARCOAL SERVICE CORPORATION
/s/ XXXXXX By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Seal)
_________________________ ______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
WITNESS OR ATTEST: AIR SEAL FILTER HOUSINGS, INC.
/s/ XXXXXX By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Seal)
_________________________ ______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
WITNESS OR ATTEST: PRECISIONAIRE, INC.
/s/ XXXXXX By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Seal)
_________________________ ______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman of the Board
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WITNESS: NATIONSBANK, N.A.
/s/ XXXXXX By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (Seal)
_________________________ ________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President
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LIST OF EXHIBITS
A-1. Revolving Credit Note
A-2. Term Note
B. Security Procedures
C. Form of Compliance Certificate
D-1. Proforma Financial Statements
D-2. Proforma Financial Projections
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EXHIBIT B
NATIONSBANK BUSINESS CREDIT
WIRE TRANSFER PROCEDURES
The transfer of funds by means of wire may be made by NationsBank (lender) at
the request of its customer (borrower). Such wire transfers are categorized by
lender as either repetitive or non-repetitive.
Repetitive:
Repetitive wire transfers may vary in amount, but are consistent in terms of the
payee, the location to which funds are wired, the bank name, account number and
the routing transit number.
Either borrower or lender may initiate a repetitive wire transfer. The borrower
may identify the repetitive nature of transfers and request they be established
as such via the "Repetitive Wire Transfer Authorization Form" (copy attached).
Lender, after observing numerous transfers to the same recipient and
destination, may initiate the repetitive process by faxing or mailing the
"Repetitive Wire Authorization Form" to the borrower for completion and return.
Although a first request for a repetitive wire transfer may be honored from a
faxed copy of the "Repetitive Wire Transfer Authorization Form", a copy of the
form containing an original signature must be received from the borrower. All
transfer authorization forms must be approved by and contain the signature of a
person authorized by the borrower to advance funds from borrower's line of
credit with the lender.
After receipt of the original "Repetitive Wire Transfer Authorization Form" by
the lender, subsequent wire transfers to the recipient named thereon may be
initiated by telephone request, provided the requesting party is identified by
the lender as a person authorized by borrower to advance funds from the
borrower's line of credit with lender.
Non-Repetitive:
Non-Repetitive wire transfers are directed to recipients on a one- time or
infrequent basis or are directed to varied destinations. Non-repetitive wire
transfers require that written notification be provided to lender by borrower,
showing payee, location, account number, routing transit number and name and
location of bank into which funds are to be transferred. Such written
notification may
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be provided by means of a "Non-Repetitive Wire Transfer Authorization Form"
(copy attached).
Required information may be faxed to lender in order to expedite the transfer;
however, a copy of the transfer authorization form with an original signature(s)
must be received by lender from borrower. The transfer authorization form must
be approved by and contain the signature of a person authorized by the borrower
to advance funds from borrower's line of credit with the lender.
For any non-repetitive wire transfer, Lender may, at its discretion, perform a
telephone verification with an authorized representative (the original signer or
another authorized representative) of borrower prior to initiating the transfer.
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NATIONSBANK BUSINESS CREDIT
REPETITIVE WIRE TRANSFER AUTHORIZATION
CUSTOMER INFORMATION
Customer Name: _______________________ Date: _______________________
Name of Person Authorizing Transfer for Customer: _____________________________
Note: Must be Person Authorized to
Advance Funds
Signature of Person Authorizing Transfer for Customer: ________________________
PAYEE
Name of Recipient of Funds: ___________________________________________________
Location: _____________________________________________________________________
Account Number into Which Funds are to be Transferred: ________________________
DESTINATION OF FUNDS
Name and Location of Bank Receiving Funds:
Bank Name: ____________________________________________________________________
Routing Information (ABA Number): _____________________________________________
Bank Location: City: _______________________________________________
State: ________________________________________________________
(for International Wires) Country: ____________________________________________
Special Instructions: _________________________________________________________
_______________________________________________________________
_______________________________________________________________
BANK USE ONLY
Business Credit Department
Business Credit Authorization: ________________________________________________
Print name of person at Bank approved to authorize Wire
Transfers
Business Credit Authorization: ________________________________________________
Signature of person at Bank approved to authorize Wire
Transfers
WIRE TRANSFER DEPARTMENT
F.D. Number Assigned: _________________________________________________________
Account Number to Debit: ______________________________________________________
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