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EXHIBIT 10.3
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LOAN AND SECURITY AGREEMENT
BORROWER: PERFORMANCE PRINTING CORPORATION
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
DATE: AS OF DECEMBER 19, 1996
THIS LOAN AND SECURITY AGREEMENT ("Agreement") dated the date set forth above,
is entered into by and between the borrower named above (the "Borrower"), whose
address is set forth above and FINOVA CAPITAL CORPORATION ("FINOVA"), whose
address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
1. LOANS.
1.1 Total Facility. Upon the terms and conditions set forth herein and
provided that no Event of Default or event which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default, shall have
occurred and be continuing, FINOVA shall, upon Borrower's request, make advances
to Borrower from time to time in an aggregate outstanding principal amount not
to exceed the Total Facility amount (the "Total Facility") set forth on the
schedule hereto (the "Schedule"), subject to deduction of reserves for accrued
interest and such other reserves as FINOVA deems proper from time to time, and
less amounts FINOVA may be obligated to pay in the future on behalf of Borrower.
The Schedule is an integral part of this Agreement and all references to
"herein", "herewith" and words of similar import shall for all purposes be
deemed to include the Schedule.
1.2 Loans. Advances under the Total Facility ("Loans") shall be comprised
of the amounts shown on the Schedule.
1.3 Overlines. If at any time or for any reason the outstanding amount of
advances made pursuant hereto exceeds any of the dollar or percentage
limitations contained in the Schedule (any such excess, an "Overline"), then
Borrower shall, upon FINOVA's demand, immediately pay to FINOVA, in cash, the
full amount of such Overline. Without limiting Borrower's obligation to repay to
FINOVA on demand the amount of any Overline, Borrower agrees to pay FINOVA
interest on the outstanding principal amount of any Overline, on demand, at the
rate set forth in on the Schedule.
1.4 Loan Account. All advances made hereunder shall be added to and deemed
part of the Obligations when made. FINOVA may from time to time charge all
Obligations of Borrower to Borrower's loan account with FINOVA.
2. CONDITIONS PRECEDENT.
2.1 Initial Advance. The obligation of FINOVA to make the initial advance
hereunder is subject to the fulfillment, to the satisfaction of FINOVA and its
counsel, of each of the following conditions on or prior to the date set forth
on the Schedule:
(a) Loan Documents. FINOVA shall have received each of the following Loan
Documents: (i) Continuing Personal Guaranty on FINOVA's standard form, executed
by the Guarantor; (ii) such security agreements, intellectual property
assignments and deeds of trust as FINOVA may require with respect to this
Agreement, executed by each of the parties thereto and, if applicable, duly
acknowledged for recording or filing in the appropriate governmental offices;
(iii) Subordination Agreements on FINOVA's standard form, executed by each of
the Subordinating Creditors, together with copies of all instruments subject
thereto showing a legend indicating such subordination; (iv) such Blocked
Account or Dominion Account agreements as it shall determine; (v) Validity
Agreement on FINOVA's standard form, executed by Mr. ▇▇▇▇ ▇▇▇▇▇; and (vi) such
other documents, instruments and agreements in connection herewith as FINOVA
shall require, executed, certified and/or acknowledged by such parties as FINOVA
shall designate;
(b) Terminations by Existing Lender. Comerica shall have executed and
delivered UCC termination statements and other documentation evidencing the
termination of its liens and security interests in the assets of Borrower;
(c) Charter Documents. FINOVA shall have received copies of Borrower's
By-laws and Articles of Incorporation, as amended, modified, or supplemented to
the Closing Date, certified by the Secretary of Borrower;
(d) Good Standing. FINOVA shall have received a certificate of corporate
status with respect to Borrower, dated within thirty (30) days of the Closing
Date, by the Secretary of State of the state of incorporation of Borrower, which
certificate shall indicate that Borrower is in good standing in such state;
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(e) Foreign Qualification. FINOVA shall have received certificates of
corporate status with respect to Borrower, each dated within thirty (30) days of
the Closing Date, issued by the Secretary of State of each state in which
Borrower's failure to be duly qualified or licensed would have a material
adverse effect on its financial condition or assets, indicating that such party
is in good standing;
(f) Authorizing Resolutions and Incumbency. FINOVA shall have received a
certificate from the Secretary of Borrower attesting to (i) the adoption of
resolutions of Borrower's Board of Directors authorizing the borrowing of money
from FINOVA and execution and delivery of this Agreement and the other Loan
Documents to which Borrower is a party, and authorizing specific officers of
Borrower to execute same, and (ii) the authenticity of original specimen
signatures of such officers;
(g) Insurance. FINOVA shall have received the insurance certificates and
certified copies of policies required by Section 4.4 hereof, in form and
substance satisfactory to FINOVA and its counsel;
(h) Searches. FINOVA shall have received searches reflecting the filing of
its financing statements in such jurisdictions as it shall determine;
(i) Landlord and Mortgagee Waivers. FINOVA shall have received landlord and
mortgagee waivers from the lessors and mortgagees of all locations where any
Collateral is located;
(j) Fees. Borrower shall have paid all fees payable by it on the Closing
Date pursuant to this Agreement;
(k) Opinion of Counsel. FINOVA shall have received an opinion of Borrower's
counsel covering such matters as FINOVA shall determine in its sole discretion;
(l) Officer Certificate. FINOVA shall have received a certificate of the
President and the Chief Financial Officer or similar official of Borrower,
attesting to the accuracy of each of the representations and warranties of
Borrower set forth in this Agreement and the fulfillment of all conditions
precedent to the initial advance hereunder;
(m) Solvency Certificate. If requested by FINOVA, a signed certificate of
the Borrower's duly elected Chief Financial Officer concerning the solvency and
financial condition of Borrower, on FINOVA's standard form;
(n) Blocked Account. The Blocked Account referred to in Section 7.3 hereof
shall have been established to the satisfaction of FINOVA in its sole
discretion;
(o) Disbursement Request. FINOVA shall have received written instructions
from Borrower directing application of proceeds of the initial advance made
pursuant to this Agreement;
(p) Environmental Assessment. If required by FINOVA, Borrower shall have
caused a Phase I Environmental Assessment to be conducted on the property or
properties occupied by Borrower and owned by Borrower or Guarantor, all at
Borrower's own expense and the results of such assessment(s) shall have been in
form and substance satisfactory to FINOVA in its sole discretion. Such
assessment(s) shall have included, in FINOVA's discretion, core samplings, and
shall have been conducted by an environmental engineer acceptable to FINOVA.
FINOVA may, in its sole and absolute discretion, require that an escrow account
be set up by Borrower to provide funds necessary for any environmental
remediation to correct any matters reflected in such assessment(s);
(q) Environmental Certificate. FINOVA shall have received an Environmental
Certificate from Borrower, in form and substance satisfactory to FINOVA in its
discretion, with respect to all locations of Collateral;
(r) Borrower shall have paid and/or reimbursed FINOVA for all legal fees
and expenses incurred by FINOVA in connection with the documentation, execution
and delivery of the Loan Documents; and
(s) Other Matters. All other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed and recorded and shall be in form and substance satisfactory to FINOVA
and its counsel.
2.2 Subsequent Advances. The obligation of FINOVA to make any advance shall
be subject to the further conditions precedent that, on and as of the date of
such advance: (a) the representations and warranties of Borrower set forth in
this Agreement shall be accurate, before and after giving effect to such advance
or issuance and to the application of any proceeds thereof; (b) no Event of
Default and no event which, with notice or passage of time or both, would
constitute an Event of Default has occurred and is continuing, or would result
from such advance or issuance or from the application of any proceeds thereof;
(c) no material adverse change has occurred in the Borrower's business,
operations, financial condition, or assets or in the prospect of repayment of
the Obligations; and (d) FINOVA shall have received such other approvals,
opinions or documents as FINOVA shall reasonably request.
3. INTEREST RATE AND OTHER CHARGES.
3.1 Interest; Fees. Borrower shall pay FINOVA interest on the daily
outstanding balance of Borrower's loan
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account at the per annum rate set forth on the Schedule. Borrower shall also pay
FINOVA the fees set forth on the Schedule.
3.2 Default Interest Rate. Upon the occurrence and during the continuation
of an Event of Default, Borrower shall pay FINOVA interest on the daily
outstanding balance of Borrower's loan account at a rate per annum which is two
percent (2%) in excess of the rate which would otherwise be applicable thereto
pursuant to the Schedule ("Default Interest").
3.3 Examination Fees. Borrower agrees to pay to FINOVA an examination fee
in the amount set forth on the Schedule in connection with each audit or
examination of Borrower performed by FINOVA prior to or after the date hereof.
Without limiting the generality of the foregoing, Borrower shall pay to FINOVA
an initial examination fee in an amount equal to the amount set forth on the
Schedule. Such initial examination fee shall be deemed fully earned at the time
of payment and due and payable upon the closing of this transaction, and shall
be deducted from any good faith deposit paid by Borrower to FINOVA prior to the
date of this Agreement.
3.4 Excess Interest.
(a) The contracted for rate of interest of the loan contemplated hereby,
without limitation, shall consist of the following: (i) the interest rate set
forth on the Schedule, calculated and applied to the principal balance of the
Obligations in accordance with the provisions of this Agreement; (ii) interest
after an Event of Default, calculated and applied to the amount of the
Obligations in accordance with the provisions hereof; and (iii) all additional
Sums (as herein defined), if any. Borrower agrees to pay an effective contracted
for rate of interest which is the sum of the above-referenced elements. The
examination fees, attorneys fees, expert witness fees, letter of credit fees,
collateral monitoring fees, closing fees, facility fees, Termination Fees,
Minimum Interest Charges, other charges, goods, things in action or any other
sums or things of value paid or payable by Borrower (collectively, the
"additional Sums"), whether pursuant to this Agreement or any other documents or
instruments in any way pertaining to this lending transaction, or otherwise with
respect to this lending transaction, that under any applicable law may be deemed
to be interest with respect to this lending transaction, for the purpose of any
applicable law that may limit the maximum amount of interest to be charged with
respect to this lending transaction, shall be payable by Borrower as, and shall
be deemed to be, additional interest and for such purposes only, the agreed upon
and "contracted for rate of interest" of this lending transaction shall be
deemed to be increased by the rate of interest resulting from the inclusion of
the additional Sums.
(b) It is the intent of the parties to comply with the usury laws of the
State of Arizona (the "Applicable Usury Law"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Agreement, or in any of
the documents securing payment hereof or otherwise relating hereto, in no event
shall this Agreement or such documents require the payment or permit the
collection of interest in excess of the maximum contract rate permitted by the
Applicable Usury Law (the "Maximum Interest Rate"). In the event (a) any such
excess of interest otherwise would be contracted for, charged or received from
Borrower or otherwise in connection with the loan evidenced hereby, or (b) the
maturity of the Obligations is accelerated in whole or in part, or (c) all or
part of the Obligations shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, shared or received in
connection with the loan evidenced hereby, would exceed the Maximum Interest
Rate, then in any such event (1) the provisions of this paragraph shall govern
and control, (2) neither Borrower nor any other person or entity now or
hereafter liable for the payment of the Obligations shall be obligated to pay
the amount of such interest to the extent that it is in excess of the Maximum
Interest Rate, (3) any such excess which may have been collected shall be either
applied as a credit against the then unpaid principal amount of the Obligations
or refunded to Borrower, at FINOVA's option, and (4) the effective rate of
interest shall be automatically reduced to the Maximum Interest Rate. It is
further agreed, without limiting the generality of the foregoing, that to the
extent permitted by the Applicable Usury Law; (x) all calculations of interest
which are made for the purpose of determining whether such rate would exceed the
Maximum Interest Rate shall be made by amortizing, prorating, allocating and
spreading during the period of the full stated term of the loan evidenced
hereby, all interest at any time contracted for, charged or received from
Borrower or otherwise in connection with such loan; and (y) in the event that
the effective rate of interest on the loan should at any time exceed the Maximum
Interest Rate, such excess interest that would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law shall be paid to
FINOVA from time to time, if and when the effective interest rate on the loan
otherwise falls below the Maximum Interest Rate, to the extent that interest
paid to the date of calculation does not exceed the Maximum Interest Rate, until
the entire amount of interest which would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law has been paid in full.
Borrower further agrees that should the Maximum Interest Rate be increased at
any time hereafter because of a change in the Applicable Usury Law, then to the
extent not prohibited by the Applicable Usury Law, such increases shall apply to
all indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law,
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should the Maximum Interest Rate be decreased because of a change in the
Applicable Usury Law, such decreases shall not apply to the indebtedness
evidenced hereby regardless of when incurred.
4. COLLATERAL.
4.1 Security Interest in the Collateral. To secure the payment and
performance of the Obligations when due, Borrower hereby grants to FINOVA a
security interest in all of Borrower's now owned or hereafter acquired or
arising Inventory, Equipment, Receivables, and General Intangibles, including,
without limitation, all of Borrower's Deposit Accounts, money, any and all
property now or at any time hereafter in FINOVA's possession (including claims
and credit balances), and all proceeds (including proceeds of any insurance
policies, proceeds of proceeds and claims against third parties), all products
and all books and records related to any of the foregoing (all of the foregoing,
together with all other property in which FINOVA may be granted a lien or
security interest, is referred to herein, collectively, as the "Collateral").
4.2 Perfection and Protection of Security Interest. Borrower shall, at its
expense, take all actions requested by FINOVA at any time to perfect, maintain,
protect and enforce FINOVA's security interest and other rights in the
Collateral and the priority thereof from time to time, including, without
limitation, (i) executing and filing financing or continuation statements and
amendments thereof, all in form and substance satisfactory to FINOVA, (ii)
maintaining a perpetual inventory and complete and accurate stock records, (iii)
delivering to FINOVA warehouse receipts covering any portion of the Collateral
located in warehouses and for which warehouse receipts are issued, and
transferring Inventory to warehouses designated by FINOVA, (iv) placing
notations on Borrower's books of account to disclose FINOVA's security interest
therein and (v) delivering to FINOVA all letters of credit on which Borrower is
named beneficiary. FINOVA may file, without Borrower's signature, one or more
financing statements disclosing FINOVA's security interest under this Agreement.
Borrower agrees that a carbon, photographic, photostatic or other reproduction
of this Agreement or of a financing statement is sufficient as a financing
statement. If any Collateral is at any time in the possession or control of any
warehouseman, bailee or any of Borrower's agents or processors, Borrower shall
notify such Person of FINOVA's security interest in such Collateral and, upon
FINOVA's request, instruct them to hold all such Collateral for FINOVA's account
subject to FINOVA's instructions. From time to time, Borrower shall, upon
FINOVA's request, execute and deliver confirmatory written instruments pledging
the Collateral to FINOVA, but Borrower's failure to do so shall not affect or
limit FINOVA's security interest or other rights in and to the Collateral. Until
the Obligations have been fully satisfied and FINOVA's obligation to make
further advances hereunder has terminated, FINOVA's security interest in the
Collateral shall continue in full force and effect.
4.3 Preservation of Collateral. FINOVA may, in its sole discretion, at any
time discharge any lien or encumbrance on the Collateral or bond the same, pay
any insurance, maintain guards, pay any service bureau, obtain any record or
take any other action to preserve the Collateral and charge the cost thereof to
Borrower's loan account as an Obligation.
4.4 Insurance. Borrower will maintain and deliver evidence to FINOVA of
such insurance as is required by FINOVA, written by insurers, in amounts, and
with lender's loss payee and other endorsements, satisfactory to FINOVA. All
premiums with respect to such insurance shall be paid by Borrower as and when
due. Accurate and complete copies of the policies shall be delivered by Borrower
to FINOVA. If Borrower fails to comply with this Section, FINOVA may (but shall
not be required to) procure such insurance at Borrower's expense and charge the
cost thereof to Borrower's loan account as an Obligation.
5. EXAMINATION OF RECORDS; FINANCIAL REPORTING.
5.1. Examinations. FINOVA shall at all reasonable times and, in any event,
at least four (4) times a year have full access to and the right to examine,
audit, make abstracts and copies from and inspect Borrower's records, files,
books of account and all other documents, instruments and agreements relating to
the Collateral and the right to check, test and appraise the Collateral.
Borrower shall deliver to FINOVA any instrument necessary for FINOVA to obtain
records from any service bureau maintaining records for Borrower. All
instruments and certificates prepared by Borrower showing the value of any of
the Collateral shall be accompanied, upon FINOVA's request, by copies of related
purchase orders and invoices. FINOVA may, at any time after the occurrence of an
Event of Default, remove from Borrower's premises Borrower's books and records
(or copies thereof) or require Borrower to deliver such books and records or
copies to FINOVA. FINOVA may, without expense to FINOVA, use such of Borrower's
personnel, supplies and premises as may be reasonably necessary for maintaining
or enforcing FINOVA's security interest.
5.2. Reporting Requirements. Borrower shall furnish FINOVA, upon request,
such information and statements as FINOVA shall request from time to time
regarding Borrower's business affairs, financial condition and the results of
its operations. Without limiting the generality of the foregoing, Borrower shall
provide FINOVA with: (i)
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copies of sales journals, cash receipt journals, deposit slips and FINOVA's
standard form collateral and loan report, daily; (ii) upon FINOVA's request,
copies of sales invoices, customer statements and credit memoranda issued,
remittance advices and reports; (iii) copies of shipping and delivery documents,
upon request; (iv) on or prior to the date set forth on the Schedule, monthly
agings and reconciliations of Receivables, payables reports, inventory reports
and unaudited financial statements (which shall include, without limitation, a
balance sheet and income statement) with respect to the prior month prepared on
a basis consistent with such statements prepared in prior months and otherwise
in accordance with generally accepted accounting principles, consistently
applied; (v) audited annual consolidated and consolidating financial statements,
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with the most recent Prepared Financials provided to FINOVA
by Borrower, including balance sheets, income and cash flow statements,
accompanied by the unqualified report thereon of independent certified public
accountants acceptable to FINOVA, as soon as available, and in any event, within
ninety (90) days after the end of each of Borrower's fiscal years; and (vi) such
certificates relating to the foregoing as FINOVA may request, including, without
limitation, a monthly certificate from the president and the chief financial
officer of Borrower showing Borrower's compliance with each of the financial
covenants set forth in this Agreement, and stating whether any Event of Default
has occurred or event which, with giving of notice or the passage of time, or
both, would constitute an Event of Default, and if so, the steps being taken to
prevent or cure such Event of Default.
5.3. Guarantor's Financial Statements and Tax Returns. Borrower shall cause
the Guarantor to deliver to FINOVA the Guarantor's annual financial statement
(in form acceptable to FINOVA) and a copy of the Guarantor's federal income tax
return with respect to the corresponding year, in each case on the date when
such tax return is due or, if earlier, on the date when available.
6. COLLATERAL REPORTING; INVENTORY.
6.1 Invoices. Borrower shall not re-date any invoice or sale from the
original date thereof or make sales on extended terms beyond those customary in
Borrower's industry, or otherwise extend or modify the term of any Receivable.
If Borrower becomes aware of any matter affecting any Receivable, including
information affecting the credit of the account debtor thereon, Borrower shall
promptly notify FINOVA in writing.
6.2 Instruments. In the event any Receivable is or becomes evidenced by a
promissory note, trade acceptance or any other instrument for the payment of
money, Borrower shall immediately deliver such instrument to FINOVA
appropriately endorsed to FINOVA and, regardless of the form of any presentment,
demand, notice of dishonor, protest and notice of protest with respect thereto,
Borrower shall remain liable thereon until such instrument is paid in full.
6.3 Physical Inventory. Borrower shall conduct a physical count of the
Inventory at such intervals as FINOVA requests and promptly supply FINOVA with a
copy of such accounts accompanied by a report of the value (calculated at the
lower of cost or market value on a first in, first out basis) of the Inventory
and such additional information with respect to the Inventory as FINOVA may
request from time to time.
6.4 Returns. For so long as no Event of Default has occurred and is
continuing and subject to the provisions of Section 9.2, if any account debtor
returns any Inventory to Borrower in the ordinary course of its business,
Borrower shall promptly determine the reason for such return and promptly issue
a credit memorandum to the account debtor (sending a copy to FINOVA) in the
appropriate amount. In the event any attempted return occurs after the
occurrence of any Event of Default, Borrower shall (i) hold the returned
Inventory in trust for FINOVA, (ii) segregate all returned Inventory from all of
Borrower's other property, (iii) conspicuously label the returned Inventory as
FINOVA's property, and (iv) immediately notify FINOVA of the return of any
Inventory, specifying the reason for such return, the location and condition of
the returned Inventory, and on FINOVA's request deliver such returned Inventory
to FINOVA. Borrower shall not consign any Inventory.
7. PRINCIPAL PAYMENTS; PROCEEDS OF COLLATERAL;APPLICATION OF PAYMENTS.
7.1 Principal Payments. Except where evidenced by notes or other
instruments issued or made by Borrower to FINOVA specifically containing payment
provisions which are in conflict with this Section 7.1 (in which event the
conflicting provisions of said notes or other instruments shall govern and
control), that portion of the Obligations consisting of principal payable on
account of Receivable Loans and Inventory Loans shall be payable by Borrower to
FINOVA immediately upon the earliest of (i) the receipt by FINOVA or Borrower of
any proceeds of any of the Collateral, to the extent of said proceeds, (ii) the
occurrence of an Event of Default in consequence of which FINOVA elects to
accelerate the maturity and payment of such loans, or (iii) any termination of
this Agreement pursuant to Section 16 hereof; provided, however, that any
Overline shall be payable on demand pursuant to the provisions of Section 1.3
hereof.
7.2 Collections; Application of Payments.
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(a) Collections. Until FINOVA notifies Borrower to the contrary, Borrower
may make collection of all Receivables for FINOVA and shall receive all payments
as trustee of FINOVA and immediately deliver all payments to FINOVA in their
original form as set forth below, duly endorsed in blank. FINOVA or its designee
may, at any time, notify account debtors that the Receivables have been assigned
to FINOVA and of FINOVA's security interest therein, and may collect the
Receivables directly and charge the collection costs and expenses to Borrower's
loan account. Borrower agrees that, in computing the charges under this
Agreement and the other Loan Documents, all items of payment shall be deemed
applied by FINOVA on account of the Obligations two (2) Business Days after
receipt by FINOVA of good funds which have been finally credited to FINOVA's
account, whether such funds are received directly from Borrower or from the
Blocked Account bank or the Dominion Account bank, pursuant to Section 7.3
hereof, and this provision shall apply regardless of the amount of the
Obligations outstanding or whether any Obligations are outstanding. In this
Agreement or any other Loan Document, whenever there is a reference to the
"receipt by FINOVA of funds", or any similar language regarding receipt of funds
by FINOVA, in order to be credited to the applicable account on the date that
good funds were received by FINOVA (either directly or through a bank account or
lockbox arrangement, etc.), the funds must reach FINOVA no later than 10:00 a.m.
on that date (using the time zone of the FINOVA office where the Borrower's loan
is managed on the date the transfer of funds is made). Any funds received by
FINOVA after 10:00 a.m. central time will be credited to the appropriate account
on the next immediately following Business Day. FINOVA is not, however, required
to credit Borrower's account for the amount of any item of payment which is
unsatisfactory to FINOVA in its sole discretion and FINOVA may charge Borrower's
loan account for the amount of any item of payment which is returned to FINOVA
unpaid.
b. Application of Payments. The amount of all payments or amounts received
by FINOVA with respect to the Loans shall be applied to the extent applicable
under this Agreement: (i) first, to accrued interest through the date of such
payment, including any Default Interest; (ii) then, to any late fees, overdue
risk assessments, examination fees and expenses, collection fees and expenses
and any other fees and expenses due to FINOVA hereunder; (iii) last, the
remaining balance, if any, to the unpaid principal balance of the Loans;
provided, however, while a default exists under the Loan Documents, each payment
hereunder shall be applied to amounts owed to FINOVA by Borrower as FINOVA in
its sole discretion may determine. In calculating interest and applying payments
as set forth above: (a) interest shall be calculated and collected through the
date a payment is actually applied by FINOVA under the terms of this Agreement;
(b) interest on the outstanding balance shall be charged during any grace period
permitted hereunder; (c) at the end of each month, all accrued and unpaid
interest and other charges provided for hereunder shall be added to the
principal balance and other charges provided for hereunder shall be added to the
principal balance of the Loans; and (d) to the extent that Borrower makes a
payment or FINOVA receives any payment of proceeds of the Collateral for
Borrower's benefit that is subsequently invalidated, set aside or required to be
repaid to any other person or entity, then, to such extent, the Obligations
intended to be satisfied shall be revived and continue as if such payment or
proceeds had not been received by FINOVA and FINOVA may adjust the Loan balances
as FINOVA, in its sole discretion, deems appropriate under the circumstances.
7.3 Establishment of a Lockbox Account or Dominion Account. All proceeds of
Collateral shall, at the direction of FINOVA, be deposited by Borrower into a
lockbox account, or such other "blocked account" as FINOVA may require (each, a
"Blocked Account") pursuant to an arrangement with such bank as may be selected
by Borrower and be acceptable to FINOVA. Borrower shall issue to any such bank
an irrevocable letter of instruction directing said bank to transfer such funds
so deposited to FINOVA, either to any account maintained by FINOVA at said bank
or by wire transfer to appropriate account(s) of FINOVA. All funds deposited in
a Blocked Account shall immediately become the sole property of FINOVA and
Borrower shall obtain the agreement by such bank to waive any offset rights
against the funds so deposited. FINOVA assumes no responsibility for any Blocked
Account arrangement, including, without limitation, any claim of accord and
satisfaction or release with respect to deposits accepted by any bank
thereunder. Alternatively, FINOVA may establish depository accounts in the name
of FINOVA at a bank or banks for the deposit of such funds (each, a "Dominion
Account") and Borrower shall deposit all proceeds of Receivables and all cash
proceeds of any sale of Inventory or, to the extent permitted herein, Equipment
or cause same to be deposited, in kind, in such Dominion Accounts of FINOVA in
lieu of depositing same to Blocked Accounts.
7.4 Payments Without Deductions. Borrower shall pay principal, interest,
and all other amounts payable hereunder, or under any related agreement, without
any deduction whatsoever, including, but not limited to, any deduction for any
setoff or counterclaim.
7.5 Collection Days Upon Repayment. In the event Borrower repays the
Obligations in full at any time hereafter, such payment in full shall be
credited (conditioned upon final collection) to Borrower's loan
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account five (5) Business Days after FINOVA's receipt thereof.
7.6 Monthly Accountings. FINOVA shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by FINOVA), unless Borrower
notifies FINOVA in writing to the contrary within thirty (30) days after each
account is rendered, describing the nature of any alleged errors or admissions.
8. POWER OF ATTORNEY.
Borrower appoints FINOVA and its designees as Borrower's attorney, with the
power to endorse Borrower's name on any checks, notes, acceptances, money orders
or other forms of payment or security that come into FINOVA's possession; to
sign Borrower's name on any invoice or ▇▇▇▇ of lading relating to any
Receivable, on drafts against customers, on assignments of Receivables, on
notices of assignment, financing statements and other public records, on
verifications of accounts and on notices to customers or account debtors; to
send requests for verification of Receivables to customers or account debtors;
after the occurrence of any Event of Default, to notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by FINOVA and to open and dispose of all mail addressed to Borrower;
and to do all other things FINOVA deems necessary or desirable to carry out the
terms of this Agreement. Borrower hereby ratifies and approves all acts of such
attorney. Neither FINOVA nor any of its designees shall be liable for any acts
or omissions nor for any error of judgment or mistake of fact or law while
acting as Borrower's attorney. This power, being coupled with an interest, is
irrevocable until the Obligations have been fully satisfied and FINOVA's
obligation to provide loans hereunder shall have terminated.
9. RECEIVABLES.
9.1 Eligibility. Borrower represents and warrants that each Receivable
covers and shall cover a bona fide sale or lease and delivery by it of goods or
the rendition by it of services in the ordinary course of its business, and
shall be for a liquidated amount and FINOVA's security interest shall not be
subject to any offset, deduction, counterclaim, rights of return or
cancellation, lien or other condition. If any representation or warranty herein
is breached as to any Receivable or any Receivable ceases to be an Eligible
Receivable for any reason other than payment thereof, then FINOVA may, in
addition to its other rights hereunder, designate any and all Receivables owing
by that account debtor as not Eligible Receivables; provided, that FINOVA shall
in any such event retain its security interest in all Receivables, whether or
not Eligible Receivables, until the Obligations have been fully satisfied and
FINOVA's obligation to provide loans hereunder has terminated.
9.2 Disputes. Borrower shall notify FINOVA promptly of all disputes or
claims and settle or adjust such disputes or claims at no expense to FINOVA, but
no discount, credit or allowance shall be granted to any account debtor and no
returns of merchandise shall be accepted by Borrower without FINOVA's consent,
except for discounts, credits and allowances made or given in the ordinary
course of Borrower's business. FINOVA may, at any time after the occurrence of
an Event of Default, settle or adjust disputes or claims directly with account
debtors for amounts and upon terms which FINOVA considers advisable in its
reasonable credit judgment and, in all cases, FINOVA shall credit Borrower's
loan account with only the net amounts received by FINOVA in payment of any
Receivables.
10. EQUIPMENT.
Borrower shall keep and maintain the Equipment in good operating condition
and repair and make all necessary replacements thereto to maintain and preserve
the value and operating efficiency thereof at all times consistent with
Borrower's past practice, ordinary wear and tear excepted. Borrower shall not
permit any item of Equipment to become a fixture (other than a trade fixture) to
real estate or an accession to other property.
11. OTHER LIENS; NO DISPOSITION OF COLLATERAL.
Borrower represents, warrants and covenants that (a) all Collateral is and
shall continue to be owned by it free and clear of all liens, claims and
encumbrances whatsoever (except for FINOVA's security interest, Permitted
Encumbrances, and such other liens, claims and encumbrances as may be permitted
by FINOVA in its sole discretion from time to time in writing), and (b) Borrower
shall not, without FINOVA's prior written approval, sell, encumber or dispose of
or permit the sale, encumbrance or disposal of any Collateral or any interest of
Borrower therein, except for the sale of Inventory in the ordinary course of
Borrower's business. In the event FINOVA gives any such prior written approval,
the same may be conditioned on the sale price being equal to, or greater than,
an amount acceptable to FINOVA. The proceeds of any such sales shall be remitted
to FINOVA pursuant to this Agreement for application to the Obligations.
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12. GENERAL REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
12.1 Due Organization. It is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas, is qualified and
authorized to do business and is in good standing in all states in which such
qualification and good standing are necessary in order for it to conduct its
business and own its property, and has all requisite power and authority to
conduct its business as presently conducted, to own its property and to execute
and deliver each of the Loan Documents to which it is a party and perform all of
its Obligations thereunder, and has not taken any steps to wind-up, dissolve or
otherwise liquidate its assets;
12.2 Other Names. Borrower has not, during the preceding five (5) years,
been known by or used any other corporate or fictitious name except as set forth
on the Schedule, nor has Borrower been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any person
during such time except as set forth on the Schedule;
12.3 Due Authorization. The execution, delivery and performance by Borrower
of the Loan Documents to which it is a party have been authorized by all
necessary corporate action and do not and shall not constitute a violation of
any applicable law or of Borrower's Articles of Incorporation or By-Laws or any
other document, agreement or instrument to which Borrower is a party or by which
Borrower or its assets are bound;
12.4 Binding Obligation. Each of the Loan Documents to which Borrower is a
party is the legal, valid and binding obligation of Borrower enforceable against
Borrower in accordance with its terms;
12.5 Intangible Property. Borrower possesses adequate assets, licenses,
patents, patent applications, copyrights, trademarks, trademark applications and
trade names for the present and planned future conduct of its business without
any known conflict with the rights of others, and each is valid and has been
duly registered or filed with the appropriate governmental authorities;
12.6 Capital. Borrower has capital sufficient to conduct its business, is
able to pay its debts as they mature, and owns property having a fair salable
value greater than the amount required to pay all of its debts (including
contingent debts);
12.7 Material Litigation. Borrower has no pending or overtly threatened
litigation, actions or proceedings which would materially and adversely affect
its business, assets, operations, prospects or condition, financial or
otherwise, or the Collateral or any of FINOVA's interests therein;
12.8 Title; Security Interests of FINOVA. Borrower has good, indefeasible
and merchantable title to the Collateral and, upon the filing of UCC-1 Financing
Statements in the appropriate offices, this Agreement and such documents shall
create valid and perfected first priority liens in the Collateral, subject only
to Permitted Encumbrances;
12.9 Restrictive Agreements; Labor Contracts. Borrower is not a party or
subject to any contract or subject to any charge, corporate restriction,
judgment, decree or order materially and adversely affecting its business,
assets, operations, prospects or condition, financial or otherwise, or which
restricts its right or ability to incur Indebtedness, and it is not party to any
labor dispute. In addition, no labor contract is scheduled to expire during the
Initial Term of this Agreement, except as disclosed to FINOVA in writing prior
to the date hereof;
12.10 Laws. Borrower is not in violation of any applicable statute,
regulation, ordinance or any order of any court, tribunal or governmental
agency, in any respect materially and adversely affecting the Collateral or its
business, assets, operations, prospects or condition, financial or otherwise;
12.11 Consents. Borrower has obtained or caused to be obtained or issued
any required consent of a governmental agency or other Person in connection with
the financing contemplated hereby;
12.12 Defaults. Borrower is not in default with respect to any note,
indenture, loan agreement, mortgage, lease, deed or other agreement to which it
is a party or by which it or its assets are bound, nor has any event occurred
which, with the giving of notice or the lapse of time, or both, would cause such
a default;
12.13 Financial Condition. The Prepared Financials fairly present
Borrower's financial condition and results of operations and those of such other
Persons described therein as of the date thereof; there are no material
omissions from the Prepared Financials or other facts or circumstances not
reflected in the Prepared Financials; and there has been no material and adverse
change in such financial condition or operations since the date of the initial
Prepared Financials delivered to FINOVA hereunder;
12.14 ERISA. None of Borrower, any ERISA Affiliate, or any Plan is or has
been in violation of any of the provisions of ERISA, any of the qualification
requirements of IRC Section 401(a) or any of the published interpretations
thereunder, nor has Borrower or any ERISA Affiliate received any notice to such
effect. No notice of intent to terminate a Plan has been filed under Section
4041 of ERISA, nor has any Plan been terminated under ERISA. The PBGC has not
instituted proceedings to terminate, or appointed a trustee to administer, a
Plan. No lien upon the
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assets of Borrower has arisen with respect to a Plan. No prohibited transaction
or Reportable Event has occurred with respect to a Plan. Neither Borrower nor
any ERISA Affiliate has incurred any withdrawal liability with respect to any
Multiemployer Plan. Borrower and each ERISA Affiliate have made all
contributions required to be made by them to any Plan or Multiemployer Plan when
due. There is no accumulated funding deficiency in any Plan, whether or not
waived;
12.15 Taxes. Borrower has filed all tax returns and such other reports as
it is required by law to file and has paid or made adequate provision for the
payment on or prior to the date when due of all taxes, assessments and similar
charges that are due and payable;
12.16 Locations; Federal Tax ID No. Borrower's chief executive office and
the offices and locations where it keeps the Collateral (except for Inventory in
transit) are at the locations set forth on the Schedule, except to the extent
that such locations may have been changed after notice to FINOVA in accordance
with Section 13.5 below; Borrower's federal tax identification number is as
shown on the Schedule;
12.17 Relationships Business. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower and any customer or any group of
customers whose purchases individually or in the aggregate are material to the
business of Borrower, or with any material supplier, and there exists no present
condition or state of facts or circumstances which would materially and
adversely affect Borrower or prevent Borrower from conducting such business
after the consummation of the transactions contemplated by this Agreement in
substantially the same manner in which it has heretofore been conducted; and
12.18 Reaffirmations. Each request for a loan made by Borrower pursuant to
this Agreement shall constitute (i) an automatic representation and warranty by
Borrower to FINOVA that there does not then exist any Event of Default and (ii)
a reaffirmation as of the date of said request of all of the representations and
warranties of Borrower contained in this Agreement and the other Loan Documents.
13. AFFIRMATIVE COVENANTS.
Borrower covenants that, so long as any Obligation remains outstanding and
this Agreement is in effect, it shall:
13.1 Expenses. Promptly reimburse FINOVA for all costs, fees and expenses
incurred by FINOVA in connection with the negotiation, preparation, execution,
delivery, administration and enforcement of each of the Loan Documents,
including, but not limited to, the attorneys' and paralegals' fees of in-house
and outside counsel, expert witness fees, lien, title search and insurance fees,
appraisal fees, all charges and expenses incurred in connection with any and all
environmental reports and environmental remediation activities, and all other
costs, expenses, taxes and filing or recording fees payable in connection with
the transactions contemplated by this Agreement, including, without limitation,
all such costs, fees and expenses as FINOVA shall incur or for which FINOVA
shall become obligated in connection with (i) any inspection or verification of
the Collateral, (ii) any proceeding relating to the Loan Documents or the
Collateral, (iii) actions taken with respect to the Collateral and FINOVA's
security interest therein, including, without limitation, the defense or
prosecution of any action involving FINOVA and Borrower or any third party, (iv)
enforcement of any of FINOVA's rights and remedies with respect to the
Obligations or Collateral and (v) consultation with FINOVA's attorneys and
participation in any workout, bankruptcy or other insolvency or other proceeding
involving any Loan Party or any Affiliate, whether or not suit is filed.
Borrower shall also pay all FINOVA charges in connection with bank wire
transfers, forwarding of loan proceeds, deposits of checks and other items of
payment, returned checks, establishment and maintenance of lockboxes and other
Blocked Accounts, and all other bank and administrative matters, in accordance
with FINOVA's schedule of bank and administrative fees and charges in effect
from time to time;
13.2 Taxes. File all tax returns and pay or make adequate provision for the
payment of all taxes, assessments and other charges on or prior to the date when
due;
13.3 Notice of Litigation. Promptly notify FINOVA in writing of any
litigation, suit or administrative proceeding which may materially and adversely
affect the Collateral or Borrower's business, assets, operations, prospects or
condition, financial or otherwise, whether or not the claim is covered by
insurance;
13.4 ERISA. Notify FINOVA in writing (i) promptly upon the occurrence of
any event described in Paragraph 4043 of ERISA, other than a termination,
partial termination or merger of a Plan or a transfer of a Plan's assets and
(ii) prior to any termination, partial termination or merger of a Plan or a
transfer of a Plan's assets;
13.5 Change in Location. Notify FINOVA in writing forty-five (45) days
prior to any change in the location of Borrower's chief executive office or the
location of any Collateral, or Borrower's opening or closing of any other place
of business;
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13.6 Corporate Existence. Maintain its corporate existence and its
qualification to do business and good standing in all states necessary for the
conduct of its business and the ownership of its property and maintain adequate
assets, licenses, patents, copyrights, trademarks and trade names for the
conduct of its business;
13.7 Labor Disputes. Promptly notify FINOVA in writing of any labor dispute
to which Borrower is or may become subject and the expiration of any labor
contract to which Borrower is a party or bound;
13.8 Violations of Law. Promptly notify FINOVA in writing of any violation
of any law, statute, regulation or ordinance of any governmental entity, or of
any agency thereof, applicable to Borrower which may materially and adversely
affect the Collateral or Borrower's business, assets, prospects, operations or
condition, financial or otherwise;
13.9 Defaults. Notify FINOVA in writing within five (5) business days of
Borrower's default under any note, indenture, loan agreement, mortgage, lease or
other agreement to which Borrower is a party or by which Borrower is bound, or
of any other default under any Indebtedness of Borrower;
13.10 Capital Expenditures. Promptly notify FINOVA in writing of the making
of any Capital Expenditure materially affecting Borrower's business, assets,
prospects, operations or condition, financial or otherwise;
13.11 Books and Records. Keep adequate records and books of account with
respect to its business activities in which proper entries are made in
accordance with generally accepted accounting principles consistently applied,
reflecting all of its financial transactions;
13.12 Leases; Warehouse Agreements. Provide FINOVA with (i) copies of all
agreements between Borrower and any landlord or warehouseman which owns any
premises at which any Collateral may, from time to time, be located, and (ii)
without limiting the landlord and mortgagee waivers to be provided pursuant to
Section 2.1(j) above, additional landlord and mortgagee waivers in form
acceptable to FINOVA with respect to all locations where any Collateral is
hereafter located;
13.13 additional Documents. At FINOVA's request, promptly execute or cause
to be executed and delivered to FINOVA any and all documents, instruments or
agreements deemed necessary by FINOVA to facilitate the collection of the
Obligations or the Collateral or otherwise to give effect to or carry out the
terms or intent of this Agreement or any of the other Loan Documents. Without
limiting the generality of the foregoing, if any of the Receivables with a face
value in excess of $1,000.00 arises out of a contract with the United States of
America or any department, agency, subdivision or instrumentality thereof,
Borrower shall promptly notify FINOVA of such fact in writing and shall execute
any instruments and take any other action required or requested by FINOVA to
comply with the provisions of the Federal Assignment of Claims Act; and
13.14 Financial Covenants. Comply with the financial covenants set forth on
the Schedule.
14. NEGATIVE COVENANTS.
Without FINOVA's prior written consent, which consent FINOVA may withhold
in its sole discretion, so long as any Obligation remains outstanding and this
Agreement is in effect, Borrower shall not:
14.1 Mergers. Merge or consolidate with or acquire any other Person, or
make any other material change in its capital structure or in its business or
operations which might adversely affect the repayment of the Obligations;
14.2 Loans. Make advances, loans or extensions of credit to, or invest in,
any Person;
14.3 Dividends. Declare or pay cash dividends upon any of its stock or
distribute any of its property or redeem, retire, purchase or acquire directly
or indirectly any of its stock; provided, however, that so long as no Event of
Default exists or would result therefrom, Borrower may make Tax Distributions to
its shareholders in accordance with this Section 14.3. Tax Distributions shall
be paid annually based upon Borrower's taxable income through the end of its
preceding fiscal year and upon FINOVA's receipt of copies of Borrower's "U.S.
Income Tax Return for an S Corporation" and related Schedules K-1 for such
fiscal year. If the Tax Distributions actually paid with respect to any of
Borrower's fiscal years exceed the Tax Distributions permitted by this Section
14.3 based upon Borrower's actual taxable net income as disclosed by copies of
such tax returns and schedules described above and the calculations of the Tax
Distributions delivered to FINOVA, then Borrower shall immediately recover the
excess amount from the recipient shareholder and shall not pay any further Tax
Distributions to any shareholder until such excess amount is recovered;
14.4 Adverse Transactions. Enter into any transaction which materially and
adversely affects the Collateral or its ability to repay the Obligations in full
as and when due;
14.5 Indebtedness of Others. Become directly or contingently liable for the
Indebtedness of any Person, except by endorsement of instruments for deposit;
14.6 Repurchase. Make a sale to any customer on a ▇▇▇▇-and-hold, guaranteed
sale, sale and return, sale on approval, consignment, or any other repurchase or
return basis;
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14.7 Name. Use any corporate or fictitious name other than its corporate
name as set forth in its Articles of Incorporation on the date hereof or as set
forth on the Schedule;
14.8 Prepayment. Prepay any Indebtedness other than trade payables and
other than the Obligations;
14.9 Restricted Payments. Make any payments on (i) the Debentures other
than regularly scheduled payments of principal and interest, and (ii) the
Subordinated Debt other than regularly scheduled interest payments; provided,
however, that, notwithstanding the foregoing, any payments otherwise permitted
by this Section 14.9 shall not be made if, after taking into account such
payment, such payment would result in an Overline. In addition, Borrower shall
not amend, modify or supplement the Debentures and/or any documents evidencing
the Subordinated Debt without FINOVA's prior written approval;
14.10 Capital Expenditure. Make or incur any Capital Expenditure if, after
giving effect thereto, the aggregate amount of all Capital Expenditures by
Borrower in any fiscal year would exceed the amount set forth on the Schedule;
14.11 Compensation. Pay total compensation, including salaries,
withdrawals, fees, bonuses, commissions, drawing accounts and other payments,
whether directly or indirectly, in money or otherwise, during any fiscal year to
all of Borrower's executives, officers and directors (or any relative thereof)
in an amount in excess of the amount set forth on the Schedule;
14.12 Indebtedness. Create, incur, assume or permit to exist any
Indebtedness (including Indebtedness in connection with Capital Leases) in
excess of the amount set forth on the Schedule, other than (i) the Obligations,
(ii) trade payables and other contractual obligations to suppliers and customers
incurred in the ordinary course of business, and (iii) other Indebtedness
existing on the date of this Agreement and reflected in the Prepared Financials
(except Indebtedness paid on the date of this Agreement from proceeds of the
initial advances hereunder);
14.13 Affiliate Transactions. Except as set forth below, sell, transfer,
distribute or pay any money or property to any Affiliate, or invest in (by
capital contribution or otherwise) or purchase or repurchase any stock or
Indebtedness, or any property, of any Affiliate, or become liable on any
guaranty of the indebtedness, dividends or other obligations of any Affiliate.
Notwithstanding the foregoing, Borrower may pay compensation permitted by
Section 14.11 to employees who are Affiliates and, if no Event of Default has
occurred, Borrower may engage in transactions with Affiliates in the normal
course of business, in amounts and upon terms which are fully disclosed to
FINOVA and which are no less favorable to Borrower than would be obtainable in a
comparable arm's length transaction with a Person who is not an Affiliate;
14.14 Nature of Business. Enter into any new business or make any material
change in any of Borrower's business objectives, purposes or operations;
14.15 FINOVA's Name. Use the name of FINOVA in connection with any of
Borrower's business or activities, except in connection with internal business
matters or as required in dealings with governmental agencies and financial
institutions or with trade creditors of Borrower, solely for credit reference
purposes; or
14.16 Margin Security. Own, purchase or acquire (or enter into any contract
to purchase or acquire) any "margin security" as defined by any regulation of
the Federal Reserve Board as now in effect or as the same may hereafter be in
effect.
15. ENVIRONMENTAL MATTERS.
15.1 Definitions. The following definitions apply to the provisions of this
Section 15: (a) the term "Applicable Law" shall include, but shall not be
limited to, each statute named or referred to in this Section 15.1 and all rules
and regulations thereunder, and any other local, state and/or federal laws,
rules, regulations or ordinances, whether currently in existence or hereafter
enacted, which govern, to the extent applicable to the Property or to Borrower,
(i) the existence, cleanup and/or remedy of contamination on real property; (ii)
the protection of the environment from soil, air or water pollution, or from
spilled, deposited or otherwise emplaced contamination; (iii) the emission or
discharge of hazardous substances into the environment; (iv) the control of
hazardous wastes; or (v) the use, generation, transport, treatment, removal or
recovery of Hazardous Substances; (b) the term "Hazardous Substance" shall mean
(i) any oil, flammable substance, explosives, radioactive materials, hazardous
wastes or substances, toxic wastes or substances or any other wastes, materials
or pollutants which either pose a hazard to the Property or to persons on or
about the Property or cause the Property to be in violation of any Applicable
Law; (ii) asbestos in any form which is or could become friable, urea
formaldehyde foam insulation, transformers or other equipment which contain
dielectric fluid containing levels of polychlorinated biphenyls, or radon gas;
(iii) any chemical, material or substance defined as or included in the
definition of "hazardous substances," "waste," "hazardous wastes," "hazardous
materials," "extremely hazardous waste," "restricted hazardous waste," or "toxic
substances" or words of similar import under any Applicable Law, including, but
not limited to, the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 USC ▇▇.▇▇. 9601 et seq.;
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the Resource Conservation and Recovery Act ("RCRA"), 42 USC ▇▇.▇▇. 6901 et seq.;
the Hazardous Materials Transportation Act, 49 USC ▇▇.▇▇. 1801 et seq.; the
Federal Water Pollution Control Act, 33 USC ▇▇.▇▇. 1251 et seq.; the California
Hazardous Waste Control Law ("HWCL"), Cal. Health & Safety ▇▇.▇▇. 25100 et seq.;
the Underground Storage of Hazardous Substances Act (Cal. Health & Safety ▇▇.▇▇.
25280 et seq.; Hazardous Substance Account Act ("HSAA"), Cal. Health & Safety
Code ▇▇.▇▇. 25300 et seq.; the ▇▇▇▇▇▇-Cologne Water Quality Control Act (the
"▇▇▇▇▇▇-Cologne Act"), Cal. Water Code ▇▇.▇▇. 13000 et seq.; the Safe Drinking
Water and Toxic Enforcement Act of 1986 (Proposition 65); Title 22 of the
California Code of Regulations, Division 4, Chapter 30; (iv) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated by
any governmental authority which may or could pose a hazard to the health or
safety of the occupants of the Property or the owners and/or occupants of
property adjacent to or surrounding the Property, or any other person coming
upon the Property or adjacent property; and (v) any other chemical, materials or
substance which may or could pose a hazard to the environment; and (c) the term
"Property" shall mean all real property, wherever located, in which Borrower or
any Affiliate of Borrower has any right, title or interest, whether now existing
or hereafter arising, and including, without limitation, as owner, lessor or
lessee.
15.2 Covenants and Representations. (a) Borrower represents and warrants
that there have not been during the period of Borrower's possession of any
interest in the Property and, to the best of its knowledge after reasonable
inquiry, there have not been at any other times, any activities on the Property
involving, directly or indirectly, the use, generation, treatment, storage or
disposal of any Hazardous Substances except in compliance with Applicable Law
(i) under, on or in the land included in the Property, whether contained in
soil, tanks, sumps, ponds, lagoons, barrels, cans or other containments,
structures or equipment, (ii) incorporated in the buildings, structures or
improvements included in the Property, including any building material
containing asbestos, or (iii) used in connection with any operations on or in
the Property. (b) Without limiting the generality of the foregoing and to the
extent not included within the scope of this Section 15.2, Borrower represents
and warrants that it is in full compliance with Applicable Law and has received
no notice from any person or any governmental agency or other entity of any
violation by Borrower or its Affiliates of any Applicable Law. (c) Borrower
shall be solely responsible for and agrees to indemnify FINOVA, protect and
defend FINOVA with counsel reasonably acceptable to FINOVA, and hold FINOVA
harmless from and against any claims, actions, administrative proceedings,
judgments, damages, punitive damages, penalties, fines, costs, liabilities
(including sums paid in settlements of claims), interest or losses, attorneys'
fees (including any fees and expenses incurred in enforcing this indemnity),
consultant fees, expert fees, and other out-of-pocket costs or expenses actually
incurred by FINOVA (collectively, the "Environmental Costs"), that may, at any
time or from time to time, arise directly or indirectly from or in connection
with: (i) the presence, suspected presence, release or suspected release of any
Hazardous Substance whether into the air, soil, surface water or groundwater of
or at the Property, or any other violation of Applicable Law, or (ii) any breach
of the foregoing representations and covenants; except to the extent any of the
foregoing result from the actions of FINOVA, its employees, agents and
representatives. All Environmental Costs incurred or advanced by FINOVA shall be
deemed to be made by FINOVA in good faith and shall constitute Obligations
hereunder.
16. TERM; TERMINATION.
16.1 Term. The initial term of this Agreement shall be as set forth on the
Schedule (the "Initial Term") and shall be automatically renewed for successive
periods of one (1) year (each, a "Renewal Term"), unless earlier terminated as
provided herein.
16.2 Prior Notice. Each party, at their sole discretion, shall have the
right to terminate this Agreement at the end of the Initial Term or at the end
of any Renewal Term by giving the other party written notice not less than sixty
(60) days prior to the effective date of such termination, by registered or
certified mail.
16.3 Payment in Full. Upon the effective date of termination, the
Obligations shall become immediately due and payable in full in cash.
16.4 Early Termination; Termination Fee. In addition to the procedure set
forth in Section 16.2, Borrower may terminate this Agreement at any time but
only upon sixty (60) days' prior written notice and prepayment of the
Obligations. Upon any such early termination by Borrower or any termination of
this Agreement by FINOVA upon the occurrence of an Event of Default, then, and
in any such event, Borrower shall pay to FINOVA upon the effective date of such
termination a fee (the "Termination Fee") in an amount equal to the amount shown
on the Schedule.
17. DEFAULT.
17.1 Events of Default. Any one or more of the following events shall
constitute an Event of Default under this Agreement:
(a) Borrower fails to pay when due and payable any portion of the
Obligations at stated maturity, upon acceleration or otherwise;
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(b) Borrower or any other Loan Party fails or neglects to perform, keep, or
observe any Obligation including, but not limited to, any term, provision,
condition, covenant or agreement contained in any Loan Document to which
Borrower or such other Loan Party is a party;
(c) Any material adverse change occurs in Borrower's business, assets,
operations, prospects or condition, financial or otherwise;
(d) The prospect of repayment of any portion of the Obligations or the
value or priority of FINOVA's security interest in the Collateral is materially
impaired;
(e) Any material portion of Borrower's assets is seized, attached,
subjected to a writ or distress warrant, is levied upon or comes into the
possession of any judicial officer;
(f) Borrower shall generally not pay its debts as they become due or shall
enter into any agreement (whether written or oral), or offer to enter into any
agreement, with all or a significant number of its creditors regarding any
moratorium or other indulgence with respect to its debts or the participation of
such creditors or their representatives in the supervision, management or
control of the business of Borrower;
(g) Any bankruptcy or other insolvency proceeding is commenced by Borrower,
or any such proceeding is commenced against Borrower and remains undischarged or
unstayed for forty-five (45) days;
(h) Any notice of lien, levy or assessment is filed of record with respect
to any of Borrower's assets;
(i) Any judgments are entered against Borrower in an aggregate amount
exceeding $25,000;
(j) Any default shall occur under any material agreement between Borrower
and any third party including, without limitation, any default which would
result in a right by such third party to accelerate the maturity of any
Indebtedness of Borrower to such third party;
(k) Any representation or warranty made or deemed to be made by Borrower,
any Affiliate or any other Loan Party in any Loan Document or any other
statement, document or report made or delivered to FINOVA in connection
therewith shall prove to have been misleading in any material respect;
(l) The Guarantor dies, terminates or attempts to terminate his Guaranty or
any security therefor or becomes subject to any bankruptcy or other insolvency
proceeding;
(m) Any Prohibited Transaction or Reportable Event shall occur with respect
to a Plan which could have a material adverse effect on the financial condition
of Borrower; any lien upon the assets of Borrower in connection with any Plan
shall arise; Borrower or any of its ERISA Affiliates shall fail to make full
payment when due of all amounts which Borrower or any of its ERISA Affiliates
may be required to pay to any Plan or any Multiemployer Plan as one or more
contributions thereto; Borrower or any of its ERISA Affiliates creates or
permits the creation of any accumulated funding deficiency, whether or not
waived; or
(n) Any transfer of more than ten percent (10%) of the issued and
outstanding shares of common stock or other evidence of ownership of Borrower.
17.2 Remedies. Upon the occurrence of an Event of Default, FINOVA may, at
its option and in its sole discretion and in addition to all of its other rights
under the Loan Documents, terminate this Agreement and declare all of the
Obligations to be immediately payable in full. Borrower agrees that FINOVA shall
also have all of its rights and remedies under applicable law, including,
without limitation, the default rights and remedies of a secured party under the
Code, and upon the occurrence of an Event of Default Borrower hereby consents to
the appointment of a receiver by FINOVA in any action initiated by FINOVA
pursuant to this Agreement and to the jurisdiction and venue set forth in
Section 19.7 hereof, and Borrower waives notice and posting of a bond in
connection therewith. Further, FINOVA may, at any time, take possession of the
Collateral and keep it on Borrower's premises, at no cost to FINOVA, or remove
any part of it to such other place(s) as FINOVA may desire, or Borrower shall,
upon FINOVA's demand, at Borrower's sole cost, assemble the Collateral and make
it available to FINOVA at a place reasonably convenient to FINOVA. FINOVA may
sell and deliver any Collateral at public or private sales, for cash, upon
credit or otherwise, at such prices and upon such terms as FINOVA deems
advisable, at FINOVA's discretion, and may, if FINOVA deems it reasonable,
postpone or adjourn any sale of the Collateral by an announcement at the time
and place of sale or of such postponed or adjourned sale without giving a new
notice of sale. Borrower agrees that FINOVA has no obligation to preserve rights
to the Collateral or ▇▇▇▇▇▇▇▇ any Collateral for the benefit of any Person.
FINOVA is hereby granted a license or other right to use, without charge,
Borrower's labels, patents, copyrights, name, trade secrets, trade names,
trademarks and advertising matter, or any similar property, in completing
production, advertising or selling any Collateral and Borrower's rights under
all licenses and all franchise agreements shall inure to FINOVA's benefit. Any
requirement of reasonable notice shall be met if such notice is mailed postage
prepaid to Borrower at its address set forth in the heading to this Agreement at
least five (5) days before sale or other disposition. The proceeds of sale shall
be applied, first, to all attorneys fees and other expenses of sale, and second,
to the Obligations in such order as FINOVA shall elect, in its sole discretion.
FINOVA shall
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return any excess to Borrower and Borrower shall remain liable for any
deficiency to the fullest extent permitted by law.
17.3 Standards for Determining Commercial Reasonableness. Borrower and
FINOVA agree that the following conduct by FINOVA with respect to any
disposition of Collateral shall conclusively be deemed commercially reasonable
(but other conduct by FINOVA, including, but not limited to, FINOVA's use in its
sole discretion of other or different times, places and manners of noticing and
conducting any disposition of Collateral shall not be deemed unreasonable): Any
public or private disposition: (i) as to which on no later than the fifth
calendar day prior thereto written notice thereof is mailed or personally
delivered to Borrower and, with respect to any public disposition, on no later
than the fifth calendar day prior thereto notice thereof describing in general
non-specific terms, the Collateral to be disposed of is published once in a
newspaper of general circulation in the county where the sale is to be conducted
(provided that no notice of any public or private disposition need be given to
the Borrower or published if the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market); (ii) which is conducted at any place designated by FINOVA, with or
without the Collateral being present; and (iii) which commences at any time
between 8:00 a.m. and 5:00 p.m. Without limiting the generality of the
foregoing, Borrower expressly agrees that, with respect to any disposition of
accounts, instruments and general intangibles, it shall be commercially
reasonable for FINOVA to direct any prospective purchaser thereof to ascertain
directly from Borrower any and all information concerning the same, including,
but not limited to, the terms of payment, aging and delinquency, if any, the
financial condition of any obligor or account debtor thereon or guarantor
thereof, and any collateral therefor.
18. DEFINITIONS.
18.1 Defined Terms. As used in this Agreement, the following terms have the
definitions set forth below:
"Affiliate" means any Person controlling, controlled by or under common control
with Borrower. For purposes of this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause direction of the
management and policies of any Person, whether through ownership of common or
preferred stock or other equity interests, by contract or otherwise. Without
limiting the generality of the foregoing, each of the following shall be an
Affiliate: any officer, director, employee or other agent of Borrower, any
shareholder or subsidiary of Borrower, and any other Person with whom or which
Borrower has common shareholders, officers or directors.
"Business Day" means any day on which commercial banks in both Los Angeles,
California and Phoenix, Arizona are open for business.
"Capital Expenditures" means all expenditures made and liabilities incurred for
the acquisition of any fixed asset or improvement, replacement, substitution or
addition thereto which has a useful life of more than one year and including,
without limitation, those arising in connection with Capital Leases.
"Capital Lease" means any lease of property by Borrower that, in accordance with
generally accepted accounting principles, should be capitalized for financial
reporting purposes and reflected as a liability on the balance sheet of
Borrower.
"Closing Date" means the date of the initial advance made by FINOVA pursuant to
this Agreement.
"Code" means the Uniform Commercial Code as adopted and in effect in the State
of Arizona from time to time.
"Collateral" has the meaning set forth in Section 4.1 above.
"Comerica" means Comerica Bank-Texas, a banking association organized under the
laws of the State of Texas.
"Current Assets" at any date means the amount at which the current assets of
Borrower would be shown on a balance sheet of Borrower as at such date, prepared
in accordance with generally accepted accounting principles, provided that
amounts due from Affiliates and investments in Affiliates shall be excluded
therefrom.
"Current Liabilities" at any date means the amount at which the current
liabilities of Borrower would be shown on a balance sheet of Borrower as at such
date, prepared in accordance with generally accepted accounting principles.
"Debentures" means each of the following notes: (a) that certain Promissory
Note, dated as of July 15, 1996, executed by Borrower and payable to the order
of ▇▇▇▇ ▇. ▇▇▇▇▇, as trustee for White, Cox & ▇▇▇▇▇▇, P.C., Profit Sharing
Trust, in the original principal amount of $50,000; (b) that certain Promissory
Note, dated as of July 15, 1996, executed by Borrower and payable to the order
of ▇▇▇▇ ▇. ▇▇▇▇▇, as trustee for White, Cox & ▇▇▇▇▇▇, P.C., Money Purchase
Trust, in the original principal amount of $50,000; (c) that certain Promissory
Note, dated as of July 15, 1996, executed by Borrower and payable to the order
of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ in the original principal amount of $50,000; (d) that
certain Promissory Note, dated as of September 27, 1996, executed by Borrower
and payable to the order of ▇▇▇▇ ▇. ▇▇▇ in the original principal amount of
$50,000; and (e) that certain Promissory Note, dated as of July 15, 1996,
executed by Borrower and payable to the order of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. in the
original principal amount of $100,000.
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"Deposit Accounts" has the meaning set forth in Section 9105 of the Code.
"EBITDA" for any fiscal period of Borrower means the net income of Borrower for
such fiscal period, plus interest expense and provision for income taxes for
such fiscal period, plus depreciation, amortization and other non-cash changes
deducted in arriving at such net income, and minus non-recurring miscellaneous
income and expenses, all calculated in accordance with generally accepted
accounting principles, consistently applied.
"Eligible Inventory" means Inventory which FINOVA, in its sole judgment, deems
Eligible Inventory, based on such considerations as FINOVA may from time to time
deem appropriate. Without limiting the generality of the foregoing, no Inventory
shall be Eligible Inventory unless, in FINOVA's sole judgment, such Inventory
(i) consists of raw materials; (ii) meets all standards imposed by any
governmental agency or authority; (iii) conforms in all respects to the
warranties and representations set forth herein; (iv) is at all times subject to
FINOVA's duly perfected, first-priority security interest; and (v) is situated
at a location in compliance with Section 12.16 hereof.
"Eligible Receivables" means Receivables arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services, which
FINOVA, in its sole judgment, shall deem eligible based on such considerations
as FINOVA may from time to time deem appropriate. Without limiting the
foregoing, a Receivable shall not be deemed to be an Eligible Receivable if (i)
the account debtor has failed to pay the Receivable within a period of ninety
(90) days after invoice date, to the extent of any amount remaining unpaid after
such period; (ii) the account debtor has failed to pay more than 25% of all
outstanding Receivables owed by it to Borrower within ninety (90) days after
invoice date; (iii) the account debtor is an Affiliate of Borrower; (iv) the
goods relating thereto are placed on consignment, guaranteed sale or other terms
pursuant to which payment by the account debtor may be conditional; (v) the
account debtor is not located in the United States, unless the Receivable is
supported by a letter of credit or other form of guaranty or security, in each
case in form and substance satisfactory to FINOVA; (vi) the account debtor is
the United States or any department, agency or instrumentality thereof or any
State, city or municipality of the United States; (vii) Borrower is or may
become liable to the account debtor for goods sold or services rendered by the
account debtor to Borrower; (viii) the account debtor's total obligations to
Borrower exceed 15% of all Eligible Receivables, to the extent of such excess;
provided, however, that, with respect to obligations owed by Pinnacle Brands,
Inc. to Borrower, Pinnacle Brands, Inc.'s total obligations to Borrower exceed
25% of all Eligible Receivables, to the extent of such excess; (ix) the account
debtor disputes liability or makes any claim with respect thereto (up to the
amount of such liability or claim), or is subject to any insolvency or
bankruptcy proceeding, or becomes insolvent, fails or goes out of a material
portion of its business; (x) the amount thereof consists of late charges or
finance charges; (xi) the amount thereof consists of a credit balance more than
ninety (90) days past due; or (xii) the face amount thereof exceeds $25,000,
unless accompanied by evidence of shipment of the goods relating thereto
satisfactory to FINOVA in its sole discretion.
"Equipment" means all of Borrower's present and hereafter acquired machinery,
molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dyes, jigs, goods and other tangible
personal property (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"ERISA" means the Employment Retirement Income Security Act of 1974, as amended,
and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not incorporated and
whether or not foreign) which is or may hereafter become a member of a group of
which Borrower is a member and which is treated as a single employer under ERISA
Section 4001(b)(1), or IRC Section 414.
"Event of Default" means any of the events set forth in Section 17.1 of this
Agreement.
"General Intangibles" means all general intangibles of Borrower, whether now
owned or hereafter created or acquired by Borrower, including, without
limitation, all chooses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against FINOVA, rights to purchase or sell
real or personal property, rights as a licensor or licensee of any kind,
royalties, telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including without limitation credit, liability,
property and other insurance) tax refunds and claims, computer programs, discs,
tapes and tape files, claims under guaranties, security interests or other
security held by or
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granted to Borrower to secure payment of any of the Receivables by an account
debtor, all rights to indemnification and all other intangible property of every
kind and nature (other than Receivables).
"Guarantor" means Mr. ▇▇▇▇ ▇▇▇▇▇.
"Indebtedness" means all of Borrower's present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or otherwise,
however evidenced, created, incurred, acquired, owing or arising, whether under
written or oral agreement, operation of law or otherwise, and includes, without
limiting the foregoing (i) the Obligations, (ii) obligations and liabilities of
any Person secured by a lien, claim, encumbrance or security interest upon
property owned by Borrower, even though Borrower has not assumed or become
liable therefor, (iii) obligations and liabilities created or arising under any
lease (including Capital Leases) or conditional sales contract or other title
retention agreement with respect to property used or acquired by Borrower, even
though the rights and remedies of the lessor, seller or lender are limited to
repossession, (iv) all unfunded pension fund obligations and liabilities and (v)
deferred taxes.
"Initial Term" has the meaning set forth on the Schedule.
"Inventory" means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease, all raw materials, work in
process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in Borrower's business or
used in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, merchandise or other personal property, and all
documents of title or other documents representing them.
"Inventory Loans" has the meaning set forth on the Schedule.
"IRC" means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
"Loan Documents" means, collectively, this Agreement, any note or notes executed
by Borrower and payable to FINOVA, and any other agreement entered into in
connection with this Agreement, together with all alterations, amendments,
changes, extensions, modifications, refinancings, refundings, renewals,
replacements, restatements, or supplements, of or to any of the foregoing.
"Loan Party" means Borrower, Guarantor, each Subordinating Creditor and each
other party (other than FINOVA) to any Loan Document.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA Sections
3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of Borrower or
any ERISA Affiliate.
"Net Worth" at any date means the Borrower's net worth as determined in
accordance with generally accepted accounting principles, consistently applied.
"Obligations" means all present and future loans, advances, debts, liabilities,
obligations, covenants, duties and indebtedness at any time owing by Borrower to
FINOVA, whether evidenced by this Agreement, any note or other instrument or
document, whether arising from an extension of credit, opening of a letter of
credit, banker's acceptance, loan, guaranty, indemnification or otherwise,
whether direct or indirect (including, without limitation, those acquired by
assignment and any participation by FINOVA in Borrower's debts owing to others),
absolute or contingent, due or to become due, including, without limitation, all
interest, charges, expenses, fees, attorney's fees, expert witness fees,
examination fees, letter of credit fees, collateral monitoring fees, closing
fees, facility fees, Termination Fees, Minimum Interest Charges and any other
sums chargeable to Borrower hereunder or under any other agreement with FINOVA.
"Overlines" has the meaning set forth in Section 1.3.
"PBGC" means the Pension Benefit Guarantee Corporation.
"Permitted Encumbrance" means each of the liens, mortgages and other security
interests set forth on the Schedule and incorporated herein by this reference.
"Person" means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, government, or any
agency or political division thereof, or any other entity.
"Plan" means any plan described in ERISA Section 3(2) maintained for employees
of Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
"Prepared Financials" means the balance sheets of Borrower as of the date set
forth in the Schedule, and as of each subsequent date on which audited balance
sheets are delivered to FINOVA from time to time hereunder, and the related
statements of operations, changes in stockholder's equity and changes in cash
flow for the periods ended on such dates.
"Prohibited Transaction" means any transaction described in Section 406 of ERISA
which is not exempt by reason of Section 408 of ERISA, and any transaction
described in Section 4975(c) of the IRC which is not exempt by reason of Section
4975(c)(2) of the IRC.
"Receivable Loans" has the meaning set forth on the Schedule.
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"Receivables" means all of Borrower's now owned and hereafter acquired accounts
(whether or not earned by performance), proceeds of any letters of credit naming
Borrower as beneficiary, contract rights, chattel paper, instruments, documents
and all other forms of obligations at any time owing to Borrower, all guaranties
and other security therefor, whether secured or unsecured, all merchandise
returned to or repossessed by Borrower, and all rights of stoppage in transit
and all other rights or remedies of an unpaid vendor, lienor or secured party.
"Renewal Term" has the meaning set forth on the Schedule.
"Reportable Event" means a reportable event described in Section 4043 of ERISA
or the regulations thereunder, a withdrawal from a Plan described in Section
4063 of ERISA, or a cessation of operations described in Section 4068(f) of
ERISA.
"Subordinated Debt" means liabilities of Borrower the repayment of which is
subordinated, to the payment and performance of the Obligations, pursuant to a
subordination agreement on FINOVA's standard form.
"Subordinating Creditor" means the persons set forth on the Schedule.
"Tax Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, and the regulations promulgated thereunder.
"Tax Distributions" shall mean, with respect to Borrower, cash distributions
made to Borrower's shareholders with respect to any of Borrower's fiscal years
ending on December 31 for which Borrower has made an effective S corporation
election, in an amount equal to the combined federal and state income tax
liability of such shareholders arising from their respective allocable share of
the earnings and profits of Borrower, with each shareholder's federal and state
income tax liability, including any minimum tax liability, to be computed on the
basis of the highest marginal tax rate for any individual under the Tax Code and
relevant state law as reduced by deductions for state income taxes with respect
to the Tax Code and for federal income taxes with respect to the relevant state
law; but not including any penalty tax provisions such as provisions for
accumulated earnings taxes or personal holding taxes.
"Total Facility" has the meaning set forth on the Schedule.
18.2 Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with generally accepted accounting principles, consistently applied. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the Code, to the extent such terms are defined therein.
19. MISCELLANEOUS.
19.1 Recourse to Security; Certain Waivers. All Obligations shall be
payable by Borrower as provided for herein and, in full, at the termination of
this Agreement; recourse to security shall not be required at any time. Borrower
waives presentment and protest of any instrument and notice thereof, notice of
default and, to the extent permitted by applicable law, all other notices to
which Borrower might otherwise be entitled.
19.2 No Waiver by FINOVA. Neither FINOVA's failure to exercise any right,
remedy or option under this Agreement, any supplement, the Loan Documents or
other agreement between FINOVA and Borrower nor any delay by FINOVA in
exercising the same shall operate as a waiver. No waiver by FINOVA shall be
effective unless in writing and then only to the extent stated. No waiver by
FINOVA shall affect its right to require strict performance of this Agreement.
FINOVA's rights and remedies shall be cumulative and not exclusive.
19.3 Binding on Successor and Assigns. All terms, conditions, promises,
covenants, provisions and warranties shall inure to the benefit of and bind
FINOVA's and Borrower's respective representatives, successors and assigns.
19.4 Severability. If any provision of this Agreement shall be prohibited
or invalid under applicable law, it shall be ineffective only to such extent,
without invalidating the remainder of this Agreement.
19.5 Amendments; Assignments. This Agreement may not be modified, altered
or amended, except by an agreement in writing signed by Borrower and FINOVA.
Borrower may not sell, assign or transfer any interest in this Agreement or any
other Loan Document, or any portion thereof, including, without limitation, any
of Borrower's rights, title, interests, remedies, powers and duties hereunder or
thereunder. Borrower hereby consents to FINOVA's participation, sale,
assignment, transfer or other disposition, at any time or times hereafter, of
this Agreement and any of the other Loan Documents, or of any portion hereof or
thereof, including, without limitation, FINOVA's rights, title, interests,
remedies, powers and duties hereunder or thereunder. In connection therewith,
FINOVA may disclose all documents and information which FINOVA now or hereafter
may have relating to Borrower or Borrower's business. To the extent that FINOVA
assigns its rights and obligations hereunder to a third party, FINOVA shall
thereafter be released from such assigned obligations to Borrower and such
assignment shall effect a novation between Borrower and such third party.
19.6 Integration. This Agreement, together with the Schedule (which is a
part hereof) and the other Loan
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Documents, reflect the entire understanding of the parties with respect to the
transactions contemplated hereby.
19.7 Governing Law; Waivers. THIS AGREEMENT SHALL BE INTERPRETED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF THE
STATE OF ARIZONA GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF MARICOPA IN THE STATE OF ARIZONA OR, AT THE
SOLE OPTION OF FINOVA, IN ANY OTHER COURT IN WHICH FINOVA SHALL INITIATE LEGAL
OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE
MATTER IN CONTROVERSY. BORROWER WAIVES ANY OBJECTION OF FORUM NON CONVENIENS AND
VENUE. BORROWER FURTHER WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT,
AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE IN THE MANNER SET FORTH IN
SECTION 19.13 HEREOF FOR THE GIVING OF NOTICE. BORROWER FURTHER WAIVES ANY RIGHT
IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT ENTERED AGAINST IT.
19.8 Survival. All of the representations and warranties of Borrower
contained in this Agreement shall survive the execution, delivery and acceptance
of this Agreement by the parties. No termination of this Agreement or of any
guaranty of the Obligations shall affect or impair the powers, obligations,
duties, rights, representations, warranties or liabilities of the parties hereto
and all shall survive such termination.
19.9 Evidence of Obligations. Each Obligation may, in FINOVA's discretion,
be evidenced by notes or other instruments issued or made by Borrower to FINOVA.
If not so evidenced, such Obligation shall be evidenced solely by entries upon
FINOVA's books and records.
19.10 Collateral Security. The Obligations shall constitute one loan
secured by the Collateral. FINOVA may, in its sole discretion, (i) exchange,
enforce, waive or release any of the Collateral, (ii) apply Collateral and
direct the order or manner of sale thereof as it may determine, and (iii)
settle, compromise, collect or otherwise liquidate any Collateral in any manner
without affecting its right to take any other action with respect to any other
Collateral.
19.11 Application of Collateral. Except as otherwise provided herein,
FINOVA shall have the continuing and exclusive right to apply or reverse and
re-apply any and all payments to any portion of the Obligations in such order
and manner as FINOVA shall determine in its sole discretion. To the extent that
Borrower makes a payment or FINOVA receives any payment or proceeds of the
Collateral for Borrower's benefit which is subsequently invalidated, declared to
be fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver or any other party under any bankruptcy law,
common law or equitable cause, then, to such extent, the Obligations or part
thereof intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by FINOVA.
19.12 Loan Requests. Each oral or written request for a loan by any Person
who purports to be any employee, officer or authorized agent of Borrower shall
be made to FINOVA on or prior to 10:00 a.m., Chicago time, on the Business Day
on which the proceeds thereof are requested to be paid to Borrower and shall be
conclusively presumed to be made by a Person authorized by Borrower to do so and
the crediting of a loan to Borrower's operating account shall conclusively
establish Borrower's obligation to repay such loan. Unless and until Borrower
otherwise directs FINOVA in writing, all loans shall be wired to Borrower's
operating account set forth on the Schedule.
19.13 Notices. Any notice required hereunder shall be in writing and
addressed to the Borrower and FINOVA at their addresses set forth at the
beginning of this Agreement. Notices hereunder shall be deemed received on the
earlier of receipt, whether by mail, personal delivery, facsimile, or otherwise,
or upon deposit in the United States mail, postage prepaid.
19.14 Brokerage Fees. Borrower represents and warrants to FINOVA that, with
respect to the financing transaction herein contemplated, no Person is entitled
to any brokerage fee or other commission and Borrower agrees to indemnify and
hold FINOVA harmless against any and all such claims.
19.15 Disclosure. No representation or warranty made by Borrower in this
Agreement, or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to Borrower
or which reasonably should be known to Borrower which Borrower has not disclosed
to FINOVA in writing with respect to the transactions contemplated by this
Agreement which materially and adversely affects the business, assets,
operations, prospects or condition (financial or otherwise), of Borrower.
19.16 Publicity. FINOVA is hereby authorized to issue appropriate press
releases and to cause a tombstone to be published announcing the consummation of
this transaction and the aggregate amount thereof.
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19.17 Captions. The Section titles contained in this Agreement are without
substantive meaning and are not part of this Agreement.
19.18 Injunctive Relief. Borrower recognizes that, in the event Borrower
fails to perform, observe or discharge any of its Obligations under this
Agreement, any remedy at law may prove to be inadequate relief to FINOVA.
Therefore, FINOVA, if it so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
19.19 Counterparts. This Agreement may be executed in one or more
counterparts, each of which taken together shall constitute one and the same
instrument.
19.20 Construction. The parties acknowledge that each party and its counsel
have reviewed this Agreement and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any amendments or
exhibits hereto.
19.21 Time of Essence. Time is of the essence for the performance by
Borrower of the Obligations set forth in this Agreement.
19.22 Limitation of Actions. Borrower agrees that any claim or cause of
action by Borrower against FINOVA, or any of FINOVA's directors, officers,
employees, agents, accountants or attorneys, based upon, arising from, or
relating to this Agreement, or any other present or future agreement, or any
other transaction contemplated hereby or thereby or relating hereto or thereto,
or any other matter, cause or thing whatsoever, whether or not relating hereto
or thereto, occurred, done, omitted or suffered to be done by FINOVA, or by
FINOVA's directors, officers, employees, agents, accountants or attorneys,
whether sounding in contract or in tort or otherwise, shall be barred unless
asserted by Borrower by the commencement of an action or proceeding in a court
of competent jurisdiction by the filing of a complaint within one year after the
first act, occurrence or omission upon which such claim or cause of action, or
any part thereof, is based and service of a summons and complaint on an officer
of FINOVA or any other person authorized to accept service of process on behalf
of FINOVA, within 30 days thereafter. Borrower agrees that such one-year period
of time is a reasonable and sufficient time for Borrower to investigate and act
upon any such claim or cause of action. The one-year period provided herein
shall not be waived, tolled, or extended except by a specific written agreement
of FINOVA. This provision shall survive any termination of this Loan Agreement
or any other agreement.
19.23 Liability. Neither FINOVA nor any FINOVA Affiliate shall be liable
for any indirect, special, incidental or consequential damages in connection
with any breach of contract, tort or other wrong relating to this Agreement or
the Obligations or the establishment, administration or collection thereof
(including without limitation damages for loss of profits, business
interruption, or the like), whether such damages are foreseeable or
unforeseeable, even if FINOVA has been advised of the possibility of such
damages. Neither FINOVA, nor any FINOVA Affiliate shall be liable for any
claims, demands, losses or damages, of any kind whatsoever, made, claimed,
incurred or suffered by the Borrower through the ordinary negligence of FINOVA,
or any FINOVA Affiliate. "FINOVA Affiliate" shall mean FINOVA's directors,
officers, employees, agents, attorneys or any other person or entity affiliated
with or representing FINOVA.
19.24 Notice of Breach by FINOVA. Borrower agrees to give FINOVA written
notice of (i) any action or inaction by FINOVA or any attorney of FINOVA in
connection with any Loan Documents that may be actionable against FINOVA or any
attorney of FINOVA or (ii) any defense to the payment of the Obligations for any
reason, including, but not limited to, commission of a tort or violation of any
contractual duty or duty implied by law. Borrower agrees that unless such notice
is fully given as promptly as possible (and in any event within thirty (30)
days) after Borrower has knowledge, or with the exercise of reasonable diligence
should have had knowledge, of any such action, inaction or defense, Borrower
shall not assert, and Borrower shall be deemed to have waived, any claim or
defense arising therefrom.
19.25 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND BORROWER EACH HEREBY
WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; (II) ANY OTHER
PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN FINOVA AND BORROWER; OR (III)
ANY CONDUCT, ACTS OR OMISSIONS OF FINOVA OR BORROWER OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
FINOVA OR BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE.
-19-
20
BORROWER:
PERFORMANCE PRINTING CORPORATION
BY: /S/
-----------------------------
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
FINOVA:
FINOVA CAPITAL CORPORATION
BY: /S/
-----------------------------
TITLE
---------------------------
-20-
21
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: PERFORMANCE PRINTING CORPORATION
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
DATE: AS OF DECEMBER 19, 1996
This Schedule forms an integral part of the Loan and Security Agreement between
the above Borrower and FINOVA Capital Corporation dated the above date, and all
references herein and therein to "this Agreement" shall be deemed to refer to
said Agreement and to this Schedule.
================================================================================
TOTAL FACILITY (SECTION 1.1):
$3,500,000.00
================================================================================
LOANS (SECTION 1.2):
REVOLVING LOANS: A revolving line of credit consisting of
loans against Borrower's Eligible Receivables ("Receivable
Loans") and against Borrower's Eligible Inventory
("Inventory Loans") in an aggregate outstanding principal
amount not to exceed the lesser of (a) or (b) below:
(a) the amount of the Total Facility, or
(b) the sum of
(i) an amount equal to 85% of the net amount of
Eligible Receivables; plus
(ii) an amount not to exceed the lesser of:
(A) 50% of the value of Borrower's Eligible
Inventory, calculated at the lower of cost or
market value and determined on a first-in,
first-out basis, or
(B) $350,000.00.
22
================================================================================
CONDITIONS PRECEDENT (SECTION 2.1):
The obligation of FINOVA to make the initial advance
hereunder is subject to the fulfillment, to the satisfaction
of FINOVA and its counsel, of each of the following
conditions, in addition to the conditions set forth in
Sections 2.1 and 2.2 above:
(a) Borrower shall have excess borrowing availability under
the Revolving Loan facility of not less than $200,000.00,
after giving effect to the initial advance hereunder and
after giving effect to payment in full of all of Borrower's
accounts payable outstanding 30 days or more from their
invoice date and all book overdrafts;
(b) No material adverse change has occurred in the
Borrower's business, operations, financial condition, or
assets or in the prospect of repayment of the Obligations
since September 30, 1996; and
(c) Upon FINOVA's request, Borrower shall (i) furnish FINOVA
with a ▇▇▇▇▇▇'▇ report on individuals, selected by FINOVA,
associated with the operations and/or ownership of Borrower;
(ii) furnish FINOVA with credit reports and/or UCC, tax and
judgment lien searches on Borrower and/or Borrower's senior
management; and (iii) customer and vendor credit reference
checks.
Borrower shall cause the conditions precedent set forth in
Section 2.1 of this Agreement and set forth above in this
Schedule to be satisfied, and shall provide evidence to
FINOVA that all such conditions precedent have been
satisfied, on or before December 19, 1996.
================================================================================
INTEREST AND FEES (SECTION 3.1):
Interest. Borrower shall pay FINOVA interest on the daily
outstanding balance of Borrower's loan account at a per
annum rate of 1.5% in excess of the rate of interest
announced publicly by Citibank, N.A., from time to time as
its "base rate" (or any successor thereto), which may or may
not be such institution's lowest rate (the "Base Rate");
provided, however, if Borrower's EBITDA (plus equipment
rental payments) for its 1996 fiscal year, as reflected in
the audited consolidated financial statements respecting
such fiscal year delivered by Borrower to FINOVA pursuant to
Section 5.2 hereof, is more than Two Million and No/100
Dollars ($2,000,000.00), then, beginning on the later of (i)
the first anniversary of the date of this Agreement or (ii)
the first day of the month following FINOVA's receipt of
such financial statements, Borrower shall pay FINOVA
interest on the daily outstanding balance of Borrower's loan
account at a per annum rate of (1.0%) in excess of the Base
Rate. The interest rate chargeable hereunder shall be
increased or decreased, as the case may be, without
23
notice or demand of any kind, upon the announcement of any
change in the Base Rate. Each change in the Base Rate shall
be effective hereunder on the first day following the
announcement of such change; provided, however, that a
cumulative change of less than one-fourth of one percent
(0.25%) shall not be considered. Interest charges and all
other fees and charges herein shall be computed on the basis
of a year of 360 days and actual days elapsed and shall be
payable to FINOVA in arrears on the first day of each month.
Minimum Interest Charge. With respect to each calendar month
or portion thereof during the term of this Agreement
(excluding the calendar month in which this Agreement is
executed), Borrower shall also pay FINOVA, on the first day
of the next month, as a minimum charge, the amount by which
accrued interest pursuant to the section above for such
month or portion thereof is less than $2,000.00 (the
"Minimum Interest Charge"). Notwithstanding the occurrence
of any Event of Default hereunder or termination of this
Agreement by FINOVA as a result thereof, the Minimum
Interest Charge shall be paid by Borrower for the unexpired
portion of the Initial Term or any Renewal Term of this
Agreement.
Loan Commitment Fee. In consideration for Lender's
commitment to make the Revolving Loans available to
Borrower, Borrower has agreed to pay to FINOVA a loan
commitment fee in an amount equal to one-half of one percent
(.50%) of the amount of the Total Facility, all of which
shall be due and payable on the Closing Date. The entire
loan commitment fee should be deemed to be fully earned on
the Closing Date.
Renewal Fee. Borrower shall pay to FINOVA a facility renewal
fee equal to one-quarter of one percent (0.25%) per annum of
the amount of the Total Facility. The facility renewal fee
shall be deemed fully earned at the time when due and is
otherwise due and payable annually, commencing upon the
second anniversary of the date of this Agreement and
continuing on each subsequent anniversary thereof.
Examination Fees. Borrower agrees to pay to FINOVA an
examination fee in the amount of $500 per person per day in
connection with each audit or examination of Borrower
performed by FINOVA prior to or after the date hereof, plus
all costs and expenses incurred in connection therewith.
24
Unused Line Fee. From the Closing Date, Borrower agrees to
pay FINOVA a quarterly unused line fee, in an amount equal
to one-quarter of one percent (0.25%) per annum (calculated
on the basis of a year of 360 days) of the average amount of
the unused portion of the revolving line of credit for such
quarter. Such unused line fee shall be deemed fully earned
at the time when due and is otherwise due and payable in
arrears on the first Business day of each calendar quarter,
commencing on the Closing Date, during the term of this
Agreement, and upon the termination hereof.
================================================================================
REPORTING REQUIREMENTS (SECTION 5.2):
1. Borrower shall provide FINOVA with monthly agings aged by
invoice date and reconciliations of Receivables within ten
(10) days after the end of each month.
2. Borrower shall provide FINOVA with monthly accounts payable
agings aged by invoice date, outstanding or held check
registers and inventory certificates within fifteen (15)
days after the end of each month.
3. Borrower shall provide FINOVA with monthly perpetual
inventory reports for the Inventory valued on a first-in,
first-out basis at the lower of cost or market (in
accordance with generally accepted accounting principles) or
such other inventory reports as are reasonably requested by
FINOVA, all within fifteen (15) days after the end of each
month.
4. Borrower shall provide FINOVA with monthly unaudited
financial statements within thirty (30) days after the end
of each month.
5. Borrower shall provide FINOVA with annual operating budgets
(including income statements, balance sheets and cash flow
statements, by month) for the upcoming fiscal year of
Borrower within thirty (30) days prior to the end of each
fiscal year of Borrower.
================================================================================
BORROWER INFORMATION:
Fictitious Names/Prior Corporate Names (Section 12.2):
Prior Names: Performance Printing, Ltd.
Fictitious Names: Performance Display, Performance Marketing, and
Performance Printing, Ltd.
Borrower Locations (Section 12.16) ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Borrower's Federal Tax Identification Number (Section 12.16): ▇▇-▇▇▇▇▇▇▇
25
Permitted Encumbrances (Section 18.1): see Exhibit A attached hereto.
FINANCIAL COVENANTS (SECTION 13.14):
Borrower shall comply with all of the following
covenants. Compliance shall be determined as of the end
of each month, except as otherwise specifically provided
below:
Current Ratio. Borrower shall maintain a ratio of Current Assets to
Current Liabilities of not less than 1.4 to 1.0;
NetWorth. Borrower shall maintain Net Worth of not less than (i)
Seven Hundred Forty Thousand Dollars ($740,000) at all
times from and after the date hereof through and
including December 30, 1997, and (ii) One Million
Dollars ($1,000,000) at all times from and after
December 31, 1997;
Debt to Net Worth. Borrower shall maintain a ratio of Indebtedness to Net
Worth of not greater than (i) 10.5 to 1.0 at all times
from and after the date hereof through and including
December 30, 1997, and (ii) 10.0 to 1.0 at all times
from and after December 31, 1997; and
EBITDA Borrower shall maintain EBITDA of not less than (i) One
Million Three Hundred Thousand Dollars ($1,300,000) at
all times from and after the date hereof through and
including December 30, 1997, and (ii) One Million Five
Hundred Thousand Dollars ($1,500,000) at all times from
and after December 31, 1997.
EBITDA shall be measured as of the last day of each
calendar month over a period consisting of the preceding
twelve (12) months (i.e., on a rolling, 12-month basis).
Senior Debt Coverage: Borrower shall at all times maintain a ratio (the
"Senior Debt Coverage Ratio") of (A) EBITDA, to (B) the
sum of (i) interest payments on the Obligations, and
(ii) principal and interest payments on Indebtedness
(excluding the Obligations) of not less than
1.20 to 1.0.
The Senior Debt Coverage Ratio shall be measured as of
the last day of each calendar month over a period
consisting of the preceding twelve (12) months (i.e., on
a rolling, 12-month basis).
26
================================================================================
NEGATIVE COVENANTS (SECTION 14):
Capital Expenditures: Borrower shall not make or incur any unfinanced Capital
Expenditure if, after giving effect thereto, the
aggregate amount of all Capital Expenditures by Borrower
in any fiscal year (beginning with the 1997 fiscal year)
would exceed $60,000.
Compensation: Borrower shall not pay total compensation, including
salaries, withdrawals, fees, bonuses, commissions,
drawing accounts and other payments, whether directly or
indirectly, in money or otherwise, during any fiscal
year to all of Borrower's executives, officers and
directors (or any relative thereof) in an amount in
excess of one hundred ten percent (110%) of the prior
year's aggregate compensation for each such executive,
officer or director.
Indebtedness: Borrower shall not create, incur, assume or permit to
exist any Indebtedness (including Indebtedness in
connection with Capital Leases) in excess of $50,000
other than (i) the Obligations, (ii) trade payables and
other contractual obligations to suppliers and customers
incurred in the ordinary course of business and (iii)
other Indebtedness existing on the date of this
Agreement and reflected in the Prepared Financials
(other than Indebtedness paid on the date of this
Agreement from proceeds of the initial advances
hereunder).
================================================================================
TERM (SECTION 16.1):
The initial term of this Agreement shall be TWO (2)
year(s) from the date hereof (the "Initial Term") and
shall be automatically renewed for successive periods of
one (1)year each (each, a "Renewal Term"), unless
earlier terminated as provided in Section 16 or 17 above
or elsewhere in this Agreement.
================================================================================
TERMINATION FEE (SECTION 16.4):
The Termination Fee provided in Section 16.4 shall be an
amount equal to the following percentage of the average
daily outstanding balance of the Obligations for the
180-day period (or lesser period if applicable)
preceding the date of termination:
(i) three percent (3%), if such early termination occurs
on or prior to the first anniversary of the date of this
Agreement;
(ii) two percent (2%), if such early termination occurs
after the first anniversary of the date of this
Agreement and prior to the second anniversary of the
date of this Agreement.
27
================================================================================
additional DEFINITIONS (SECTION 18.1):
"Prepared Financials" means the balance sheets of Borrower as of December 31,
1995, and as of each subsequent date on which audited
balance sheets are delivered to FINOVA from time to time
hereunder, and the related statements of operations,
changes in stockholder's equity and changes in cash flow
for the periods ended on such dates.
"Subordinating means ▇▇▇▇ ▇. ▇▇▇▇▇.
Creditor"
================================================================================
DISBURSEMENT (SECTION 19.12):
Unless and until Borrower otherwise directs FINOVA in
writing, all loans shall be wired to Borrower's
operating account at Comerica Bank-Texas, account number
▇▇▇▇-▇▇▇▇▇-▇.
BORROWER: FINOVA:
PERFORMANCE PRINTING CORPORATION FINOVA CAPITAL CORPORATION
BY: /S/ BY: /S/
---------------------------- ------------------------------
PRESIDENT OR VICE PRESIDENT TITLE
----------------------------