LOAN AND SECURITY AGREEMENT
Dated as of December 10, 1998
between
ACCOM, INC.
as Borrower
and
LASALLE BUSINESS CREDIT, INC.,
as Lender
$7,500,000
TABLE OF CONTENTS
-----------------
Page
1. DEFINITIONS.................................................................1
(a)General Definitions.....................................................1
(b)Accounting Terms and Definitions.......................................10
2. REVOLVING LOANS............................................................11
3. [INTENTIONALLY OMITTED.]...................................................12
4. LETTERS OF CREDIT..........................................................12
5. INTEREST, FEES AND CHARGES.................................................13
(a)Rates of Interest......................................................13
(b)Computation of Interest and Fees.......................................13
(c)Maximum Interest.......................................................13
(d)Letter of Credit Fees..................................................13
(e)Facility Fee...........................................................13
(f)Unused Line Fee........................................................14
(g)Examination Fees.......................................................14
(h)Capital Adequacy Charge................................................14
6. LOAN ADMINISTRATION........................................................14
(a)Loan Requests..........................................................14
(b)Disbursement...........................................................15
7. GRANT OF SECURITY INTEREST TO LASALLE......................................15
8. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN....16
9. POSSESSION OF COLLATERAL AND RELATED MATTERS...............................16
10. COLLECTIONS...............................................................16
11. SCHEDULES AND REPORTS.....................................................18
12. TERMINATION...............................................................19
13. REPRESENTATIONS AND WARRANTIES............................................19
14. COVENANTS.................................................................23
15. CONDITIONS PRECEDENT......................................................31
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16. DEFAULT...................................................................34
17. REMEDIES UPON AN EVENT OF DEFAULT.........................................35
18. INDEMNIFICATION...........................................................35
19. NOTICES...................................................................36
20. CHOICE OF GOVERNING LAW AND CONSTRUCTION..................................36
21. FORUM SELECTION AND SERVICE OF PROCESS....................................36
22. MODIFICATION AND BENEFIT OF AGREEMENT.....................................37
23. HEADINGS OF SUBDIVISIONS..................................................37
24. POWER OF ATTORNEY.........................................................37
25. WAIVER OF JURY TRIAL; OTHER WAIVERS.......................................37
26. ADVERTISING...............................................................38
27. BORROWER'S ACKNOWLEDGMENT.................................................39
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EXHIBITS AND SCHEDULES
EXHIBIT A CONCENTRATION LIMITS
EXHIBIT B BUSINESS AND COLLATERAL LOCATIONS
EXHIBIT C PERMITTED LIENS
EXHIBIT D FORM OF OFFICER'S CERTIFICATE
EXHIBIT E REPORTING REQUIREMENTS
SCHEDULE 13(i) LITIGATION
SCHEDULE 13(q) INDEBTEDNESS
SCHEDULE 13(s) PARENTS, SUBSIDIARIES AND DIVISIONS
SCHEDULE 15(a) CLOSING AGENDA
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of this 10th
day of December, 1998, by and between LASALLE BUSINESS CREDIT, INC., a Delaware
corporation ("LaSalle"), with its principal office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and ACCOM, INC., a Delaware corporation ("Borrower"),
with its principal office at ▇▇▇▇ ▇'▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
WITNESSETH:
WHEREAS, from time to time Borrower may request LaSalle to make loans
and advances to and extend certain credit accommodations to Borrower, and the
parties wish to provide for the terms and conditions upon which such loans,
advances and credit accommodations will be made.
NOW, THEREFORE, in consideration of any loans, advances and credit
accommodations (including any loans by renewal or extension) hereafter made to
Borrower by LaSalle, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by Borrower, the parties agree
as follows:
1. DEFINITIONS.
(a) General Definitions.
"A/R Advance Rate" means, at any time, the percentage set forth below
opposite the applicable average Dilution of Borrower's Accounts for the six
months preceding the time of such determination:
Dilution A/R Advance Rate
-------- ----------------
0-5% 85%
5.1-6% 83%
6.1-7% 81%
7.1-8% 79%
8.1-9% 77%
9.1-10% 75%
More than 10% Rate determined by LaSalle
in the exercise of its sole
credit judgment
"Account," "Account Debtor," "Chattel Paper," "Deposit Accounts,"
"Documents," "Equipment," "General Intangibles," "Goods," "Instruments,"
"Inventory," and "Investment Property" shall have the respective meanings
assigned to such terms, as of the date of this Agreement, in the Oregon Uniform
Commercial Code.
"Affiliate" shall mean any Person directly or indirectly controlling,
controlled by or under common control with Borrower.
"Appraisal" shall mean the net liquidation value appraisal of
Borrower's inventory to be performed by Emerald Technology Valuation at
Borrower's expense as provided in paragraph 14(t) below.
"Asset Purchase Agreement" shall mean the Asset Purchase Agreement
dated December 10, 1998 among Borrower, Scitex Digital Video, Inc. ("Scitex"),
Scitex Digital Video (Europe) Ltd., Scitex Digital Video (Asia Pacific), Inc.,
Scitex Development Corp. and Scitex Corporation Ltd.
"Borrowing Base" shall have the meaning specified in paragraph 2(b)(i)
hereof.
"Business Day" shall mean any day other than a Saturday, Sunday, or
such other day as banks in Chicago, Illinois or Portland, Oregon are authorized
or required to be closed for business.
"Capital Expenditures" shall mean, with respect to any period, the
aggregate of all expenditures (whether paid in cash or accrued as liabilities
and including expenditures for capitalized lease obligations) by Borrower during
such period that are required by GAAP to be included in or reflected by the
property, plant or equipment or similar fixed asset accounts in the balance
sheet of Borrower.
"Cash Flow" shall mean net income before tax, plus depreciation and
amortization, minus tax payments, plus tax refunds received , less Capital
Expenditures (unless financed by Persons other than LaSalle in compliance with
the provisions of this Agreement), less Other Capitalized Expenses, less all
scheduled principal payments made on indebtedness (excluding, however, payments
made under this Agreement and prepayments permitted under the Subordination
Agreement between LaSalle and Scitex Digital Video, Inc.).
"Change of Control" shall mean if the current shareholders of Borrower
shall cease, directly or indirectly, of record or beneficially, to own or
control in the aggregate at least sixty percent (60%) of the voting shares of
Borrower free and clear of all liens and security interests.
"Closing Agenda" shall have the meaning specified in paragraph 15(a)(i)
hereof.
"Closing Date" shall mean the date first stated above.
"Collateral" shall mean all of the personal property of Borrower
described in paragraph 7 hereof, and all other real or personal property of any
Obligor or any other Person now or hereafter pledged to LaSalle to secure,
either directly or indirectly, repayment of any of the Liabilities.
"Debt Service Coverage Ratio" shall mean, with respect to any period,
the ratio of (i) net income before taxes for such period (excluding any pre-tax
gains on the sale of assets
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other than the sale of Inventory in the ordinary course of business and
excluding other pre-tax extraordinary gains), minus any income taxes as paid
during such period, plus any income tax refunds received, plus depreciation and
amortization deducted in determining net income for such period, minus Capital
Expenditures for such period not financed, minus Other Capitalized Expenses for
such period and minus any cash dividends paid or accrued and cash withdrawals
paid or accrued to shareholders or other Affiliates for such period which were
not calculated in determining pre-tax net income, to (ii) current principal
maturities of long term debt and capitalized leases paid or scheduled to be paid
during such period, plus any prepayments on indebtedness owed to any Person
(except trade payables, revolving loans and prepayments allowed on subordinated
indebtedness pursuant to paragraph 14(u) below) and paid during such period.
"Default" shall mean any event, condition or default which with the
giving of notice, the lapse of time, or both, would be an Event of Default.
"Dilution" shall mean, with respect to any period, the percentage
obtained by dividing: (a) the sum of non-cash credits against Accounts of
Borrower for such period, plus pending or probable, but not yet applied,
non-cash credits against Accounts of Borrower for such period, as determined by
LaSalle, by (b) gross invoiced sales of Borrower for such period.
"EBITDA" shall mean, with respect to any period, net income before
taxes for such period (excluding any before-tax gains on the sale of assets
other than the sale of inventory in the ordinary course of business and
excluding other pre-tax extraordinary gains) plus interest expense, plus
depreciation and amortization for such period, less Other Capitalized Expenses.
"Eligible Account" shall mean an Account owing to Borrower which is
acceptable to LaSalle in its sole discretion for lending purposes. LaSalle
shall, in general, consider an Account to be an Eligible Account if it meets,
and so long as it continues to meet, the following requirements:
(i) it is genuine and in all respects is what it purports to
be;
(ii) it is owned by Borrower and Borrower has the right to
subject it to a security interest in favor of LaSalle;
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(iii) it arises from (A) the performance of services by
Borrower and such services have been fully performed and have been
acknowledged and accepted by the Account Debtor thereunder; or (B) the
sale of Goods by Borrower, and such Goods have been completed in
accordance with the Account Debtor's specifications (if any) and
delivered to and accepted by the Account Debtor, such Account Debtor
has not refused to accept and has not returned or offered to return any
of the Goods, and has not refused to accept any of the services which
are the subject of such Account, and Borrower has possession of, or has
delivered to LaSalle at LaSalle's request, shipping and delivery
receipts evidencing delivery of such Goods;
(iv) it is evidenced by an invoice rendered to the Account
Debtor thereunder, is due and payable within thirty (30) days after the
stated invoice date thereof and does not remain unpaid more than ninety
(90) days past the invoice date thereof; provided, however, that if
more than twenty-five percent (25%) of the aggregate dollar amount of
invoices owing by a particular Account Debtor remain unpaid for more
than ninety (90) days past the respective invoice dates thereof, then
all Accounts owing to Borrower by that Account Debtor shall be deemed
ineligible;
(v) it is not subject to any prior assignment, claim, lien,
security interest or encumbrance whatsoever, other than Permitted
Liens;
(vi) it is a valid, legally enforceable and unconditional
obligation of the Account Debtor thereunder, and is not subject to
setoff, counterclaim, credit, allowance or adjustment by such Account
Debtor, or to any claim by such Account Debtor denying liability
thereunder in whole or in part;
(vii) it does not arise out of a contract or order which fails
in any material respect to comply with the requirements of applicable
law;
(viii) the Account Debtor thereunder is not a director,
officer, employee or agent of Borrower, or a Subsidiary, Parent or
Affiliate of Borrower;
(ix) it is not an Account with respect to which the Account
Debtor is the United States of America or any department, agency or
instrumentality thereof, unless Borrower assigns its right to payment
of such Account to LaSalle pursuant to, and in full compliance with,
the Assignment of Claims Act of 1940, as amended, or Borrower then has
in effect in accordance with paragraph 10 hereof a lockbox satisfactory
in all respects to LaSalle;
(x) it is not an Account with respect to which the Account
Debtor is located in a state which requires Borrower, as a precondition
to commencing or maintaining an action in the courts of that state,
either to (A) receive a certificate of authority to do business and be
in good standing in such state, or (B) file a
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notice of business activities report or similar report with such
state's taxing authority, unless (x) Borrower has taken one of the
actions described in clauses (A) or (B), (y) the failure to take one of
the actions described in either clause (A) or (B) may be cured
retroactively by Borrower at its election, or (z) Borrower has proven,
to LaSalle's satisfaction, that it is exempt from any such requirements
under any such state's laws;
(xi) it is an Account which arises out of a sale made in the
ordinary course of Borrower's business;
(xii) after December 31, 1998, the Account Debtor is a
resident or citizen of, and is located within, the United States of
America or Canada or if the Account Debtor is not a resident of the
United States or Canada, either (A) the Account Debtor has supplied
Borrower with an irrevocable commercial letter of credit issued by a
financial institution and in form and substance satisfactory to
LaSalle, and, if so requested by LaSalle, delivered to LaSalle or its
agent in pledge for negotiation and presentment, or (B) the Account is
covered by credit insurance acceptable to LaSalle;
(xiii) it is not an Account with respect to which the Account
Debtor's obligation to pay is conditional upon the Account Debtor's
approval of the Goods or services or is otherwise subject to any
repurchase obligation or return right, as with sales made on a
▇▇▇▇-and-hold, guaranteed sale, sale on approval, sale or return or
consignment basis;
(xiv) it is not an Account (A) with respect to which any
representation or warranty contained in this Agreement is untrue or (B)
which violates any of the covenants of Borrower contained in this
Agreement;
(xv) except to the extent otherwise permitted with respect to
Account Debtors listed in Exhibit A attached hereto (as such exhibit
may be amended from time to time by a writing signed by LaSalle), it is
not an Account which, when added to a particular Account Debtor's other
indebtedness to Borrower, exceeds the lesser of ten percent (10%) of
the aggregate of Borrower's Accounts or a credit limit determined by
LaSalle in its reasonable credit judgment for that Account Debtor,
provided, however, that Accounts excluded from Eligible Accounts solely
by reason of this paragraph 1(a)(xv) shall be Eligible Accounts to the
extent of such credit limit; and
(xvi) it is not an Account with respect to which the prospect
of payment or performance by the Account Debtor is or will be impaired,
as determined by LaSalle in its sole discretion.
"Eligible Inventory" shall mean Inventory of Borrower which is
acceptable to LaSalle in its sole discretion. Without limiting LaSalle's
discretion, LaSalle shall, in general,
5
consider Inventory to be Eligible Inventory if it meets, and so long as it
continues to meet, the following requirements:
(i) it is owned by Borrower and Borrower has the right to
subject it to a security interest in favor of LaSalle;
(ii) it is not in transit and it is located on the premises
listed in Section A on Exhibit B and if any such premises are leased,
LaSalle has received a landlord's waiver with respect to such premises
satisfactory to LaSalle;
(iii) it is not subject to any prior assignment, claim, lien,
security interest or encumbrance whatsoever, other than Permitted
Liens;
(iv) It is not raw materials, component parts, service/spare
parts, supplies or work in process; it is either finished goods held
for immediate sale (subject only to brief, final testing) or finished
goods which are otherwise ready for sale but are being used by
Borrower's employees at Borrower's business premises for purposes of
software development, service or similar purposes for a period not
exceeding three months ("Rotational Inventory"); it is not used for
demonstration or other marketing purposes; it is not obsolete; it is
(except for Rotational Inventory as provided above and except as
LaSalle may otherwise consent in writing) new and unused; and it is
free from defects which would, in LaSalle's sole determination, affect
its market value;
(v) it is not stored with a bailee, consignee, warehouseman,
processor or similar party unless such party is listed in Section B on
Exhibit B (as such exhibit may be amended from time to time by a
writing signed by LaSalle) and Borrower has caused any such bailee,
consignee, warehouseman, processor or similar party to issue and
deliver to LaSalle, in form and substance acceptable to LaSalle, such
UCC financing statements, warehouse receipts, waivers and other
documents as LaSalle shall require;
(vi) LaSalle has determined in accordance with LaSalle's
customary business practices that it is not unacceptable due to age,
type, category or quantity; and
(vii) it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Agreement are untrue
or (B) which violates any of the covenants of Borrower contained in
this Agreement.
Eligible Inventory may change after LaSalle receives the Appraisal.
"Environmental Laws" shall mean all applicable foreign, Federal, State
and local laws (including common law), legislation, rules, codes, licenses,
permits (including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or
6
agreements between Borrower and any governmental authority, (a) relating to
pollution and the protection, preservation or restoration of the environment
(including air, water vapor, surface water, ground water, drinking water,
drinking water supply, surface land, subsurface land, plant and animal life or
any other natural resource), or to human health or safety (including under the
Occupational Health and Safety Act), (b) relating to the exposure to, or the
use, storage, recycling, treatment, generation, manufacture, processing,
distribution, transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials, or (c) relating to all
laws with regard to record keeping, notification, disclosure and reporting
requirements respecting Hazardous Materials. The term "Environmental Laws"
includes (i) the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act,
the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act,
the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal Act and the Federal Toxic Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Safe
Drinking Water Act of 1974, (ii) applicable state counterparts to such laws, and
(iii) any common law or equitable doctrine that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Materials.
"Event of Default" shall have the meaning specified in paragraph 16
hereof.
"Excess Availability" means the excess, if any, of (x) the Borrowing
Base over (y) the total outstanding Revolving Loans. For purposes of calculating
Borrower's Excess Availability and the amount of the Borrowing Base relating
thereto, all of Borrower's trade payables and outstanding debt, other than the
Liabilities hereunder, which remain unpaid 30 days or more after the due dates
thereof shall, on the date of the determination of Excess Availability, be
deemed to have been paid by Borrower from proceeds of a Revolving Loan.
"Exhibit B" shall mean the exhibit entitled "Exhibit B - Business and
Collateral Locations" which is attached hereto and made a part hereof.
"Fiscal Year" shall mean with respect to Borrower, the twelve (12)
month accounting period of Borrower commencing January 1 of each calendar year
and ending December 31 of such calendar year.
"GAAP" shall mean generally accepted accounting principles and policies
in the United States as in effect from time to time.
"Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes
7
that are or become subject to regulation under any Environmental Law (including
any that are or become classified as hazardous or toxic under any Environmental
Law).
"Indemnified Party" shall have the meaning specified in paragraph 18
hereof.
"Interest Coverage Ratio" shall mean, with respect to any period, the
ratio of (i) EBITDA, to (ii) interest expense for such period.
"Inventory Advance Rate" shall mean (a) with respect to Eligible
Inventory which is not Rotational Inventory, the lesser of (i) forty percent
(40%) or (ii) eighty-five percent (85%) of the net liquidation value of such
Inventory as determined by the Appraisal and (b) with respect to Eligible
Inventory which is Rotational Inventory, the lesser of (i) thirty-five percent
(35%) or (ii) eighty-five percent (85%) of the net liquidation value of such
Inventory as determined by the Appraisal.
"Letters of Credit" shall mean those documentary or stand-by letters of
credit issued for Borrower's account in accordance with the terms of paragraph 4
hereof.
"Letter of Credit Obligations" shall mean, as of any date of
determination, the sum of (i) the aggregate undrawn face amount of all Letters
of Credit and (ii) the aggregate unreimbursed amount of all drawn Letters of
Credit not already converted to a Loan hereunder.
"Liabilities" shall mean any and all obligations, liabilities and
indebtedness of Borrower to LaSalle or to any parent, affiliate or subsidiary of
LaSalle of any and every kind and nature, howsoever created, arising or
evidenced and howsoever owned, held or acquired, whether now or hereafter
existing, whether now due or to become due, whether primary, secondary, direct,
indirect, absolute, contingent or otherwise (including, without limitation,
obligations of performance), whether several, joint or joint and several, and
whether arising or existing under written or oral agreement or by operation of
law.
"Loan" or "Loans" shall mean any and all Revolving Loans made by
LaSalle to Borrower pursuant to paragraph 2 hereof and all other loans, advances
and financial accommodations made by LaSalle to or on behalf of Borrower
hereunder.
"Lock Box" and "Blocked Account" shall have the meanings specified in
paragraph 10 hereof.
"Material Adverse Effect" shall mean with respect to any event, act,
condition or occurrence of whatever nature (including but not limited to any
adverse determination in any litigation, arbitration or governmental
investigation or proceeding), whether singly or in conjunction with any other
event or events, act or acts, condition or conditions, occurrence or
occurrences, whether or not related, a material adverse change in, or a material
adverse effect upon, any of the business, property, assets, operations,
condition (financial or otherwise) or prospects of Borrower.
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"Note" shall mean the Revolving Note.
"Obligor" shall mean Borrower and each Person who is or shall become
primarily or secondarily liable for any of the Liabilities; provided, however,
that such term shall not include any Account Debtor.
"Original Term" shall have the meaning specified in paragraph 12
hereof.
"Other Agreements" shall mean all agreements, instruments and documents
including, without limitation, guaranties, mortgages, trust deeds, pledges,
powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements and all other writings heretofore, now
or from time to time hereafter executed by or on behalf of Borrower or any other
Person and delivered to LaSalle or to any parent, affiliate or subsidiary of
LaSalle in connection with the Liabilities or the transactions contemplated
hereby.
"Other Capitalized Expenses" shall mean, with respect to any period,
the aggregate of all expenditures (whether paid in cash or accrued as
liabilities) by Borrower which are capitalized as assets by Borrower and which
are not included within the definition of Capital Expenditures in this
Agreement.
"Parent" shall mean any Person now or at any time or times hereafter
owning or controlling (alone or with any other Person) at least a majority of
the issued and outstanding stock or other similar ownership interests of
Borrower or any Subsidiary.
"Permitted Liens" shall mean (i) statutory liens of landlords,
carriers, warehousemen, mechanics, materialmen or suppliers incurred in the
ordinary course of business and securing amounts not yet due or declared to be
due by the claimant thereunder, (ii) liens or security interests in favor of
LaSalle, (iii) zoning restrictions and easements, rights of way, licenses,
covenants and other restrictions affecting the use of real property that do not
individually or in the aggregate have a Material Adverse Effect on Borrower's
ability to use such real property for its intended purpose in connection with
Borrower's business, (iv) liens securing the payment of taxes or other
governmental charges not yet delinquent or being contested in good faith and by
appropriate proceedings, (v) liens incurred or deposits made in the ordinary
course of Borrower's business in connection with capitalized leases or purchase
money security interests for purchase of, and applying only to, Equipment
included in the permitted borrowings under paragraphs 13(q) or 14(i) or
permitted as Capital Expenditures under paragraph 14(n), such capitalized leases
and purchase money security interests to apply only to the specific Equipment
which is purchased or leased, the amount secured thereby not to exceed the
purchase price for such equipment, and the documents relating to such liens to
be in form and substance acceptable to LaSalle, (vi) liens securing indebtedness
owing by any Subsidiary to Borrower to the extent such indebtedness is permitted
under paragraph 14(i), or to any other Subsidiary of Borrower, (vii) deposits to
secure performance of bids, trade contracts, leases and statutory obligations
(to the extent not excepted elsewhere herein); (viii) liens specifically
permitted by LaSalle in writing as set forth on Exhibit C attached hereto; (ix)
any lien arising out of the refinancing, extension, renewal or refunding of any
indebtedness secured by any lien permitted by any of the foregoing
9
subparagraphs (i) through (viii) inclusive; provided, that (a) such indebtedness
is not secured by any additional assets, and (b) the amount of such indebtedness
is not increased, (x) pledges or deposits in connection with worker's
compensation, unemployment insurance and other social security legislation, (xi)
securities and other properties held at banks or financial institutions to
secure the payment or reimbursement under overdraft, acceptance and other
facilities, and (xii) rights of setoff, banker's lien and other similar rights
arising solely by operation of law.
"Person" shall mean any individual, sole proprietorship, partnership,
limited liability company, venture, trust, unincorporated organization,
association, corporation, institution, entity, party or foreign or United States
government (whether federal, state, county, city, municipal or otherwise),
including, without limitation, any instrumentality, division, agency, body or
department thereof.
"Prime Rate" shall mean the publicly announced prime rate of LaSalle
National Bank, Chicago, Illinois, in effect from time to time. The Prime Rate is
not intended to be the lowest or most favorable rate of LaSalle National Bank in
effect at any time.
"Renewal Term" shall have the meaning specified in paragraph 12 hereof.
"Revolving Loans" shall have the meaning specified in paragraph 2
hereof.
"Revolving Loan Facility" shall mean the sum of $7,500,000.
"Revolving Note" shall mean the promissory note in the original
principal amount of $7,500,000, executed by Borrower to the order of LaSalle,
dated as of the Closing Date.
"Subsidiary" shall mean any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time stock of any other class of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned by Borrower or by any partnership or joint
venture of which more than fifty percent (50%) of the outstanding equity
interests are at the time, directly or indirectly, owned by Borrower.
"Tangible Net Worth" shall mean shareholders' equity (including
retained earnings) less the book value of all intangible assets, determined by
LaSalle on a consistent basis.
(b) Accounting Terms and Definitions. Unless otherwise defined or
specified herein, all accounting terms used in this Agreement shall be construed
in accordance with GAAP, applied on a basis consistent in all material respects
with the audited financial statements delivered by Borrower to LaSalle on or
before the Closing Date. All accounting determinations for purposes of
determining compliance with the covenants contained in paragraph 14 shall be
made in accordance with GAAP as in effect on the Closing Date and applied on a
basis consistent in all material respects with the audited financial statements
delivered to LaSalle by Borrower on or before the Closing Date. The financial
statements required to be delivered
10
hereunder from and after the Closing Date, and all financial records, shall be
maintained in accordance with GAAP. LaSalle agrees that interim financial
statements will not include footnotes or a statement of cash flow.
2. REVOLVING LOANS. Subject to the terms and conditions of this Agreement
and the Other Agreements, during the Original Term and any Renewal Term:
(a) LaSalle will make revolving loans and advances (the "Revolving
Loans") to Borrower from time to time based upon Borrower's requests, in
accordance with the terms of paragraph 2(b) hereof. The aggregate unpaid
principal amount of all Revolving Loans outstanding at any one time made to
Borrower shall not exceed the lesser of (i) the Borrowing Base or (ii) the
Revolving Loan Facility less the outstanding Letter of Credit Obligations. All
Revolving Loans shall be repaid in full upon the earlier to occur of (A) the end
of the Original Term or any Renewal Term, if either LaSalle or Borrower elects
to terminate this Agreement as of the end of any such term, and (B) the
acceleration of the Liabilities pursuant to paragraph 17 of this Agreement. If
at any time the outstanding principal balance of the Revolving Loans made to
Borrower exceeds (i) the Borrowing Base or (ii) the Revolving Loan Facility less
the outstanding Letter of Credit Obligations, Borrower shall immediately, and
without the necessity of a demand by LaSalle, pay to LaSalle such amount as may
be necessary to eliminate such excess, and LaSalle shall apply such payment
against the outstanding principal balance of the Revolving Loans. In addition,
if at any time the sum of (A) the outstanding principal balance of the Revolving
Loans and (B) the outstanding Letter of Credit Obligations exceeds the Revolving
Credit Facility, Borrower shall immediately and without the necessity of a
demand by LaSalle pay to LaSalle such amount as may be necessary to eliminate
such excess, and LaSalle shall apply such payment against the outstanding
principal balance of the Loans in such order as LaSalle shall determine in its
sole discretion. Borrower hereby authorizes LaSalle to charge any of Borrower's
accounts to make any payments of principal, interest, fees or reimbursable
expenses required by this Agreement. All Revolving Loans shall, in LaSalle's
sole discretion, be evidenced by one or more promissory notes in form and
substance satisfactory to LaSalle. However, if such Revolving Loans are not so
evidenced, such Revolving Loans may be evidenced solely by entries upon the
books and records maintained by LaSalle.
(b) LaSalle agrees to make Revolving Loans to Borrower up to the lesser
of the following amounts, the amount calculated pursuant to subparagraph (i)
below being the "Borrowing Base":
(i) an amount equal to the sum of:
(A) the applicable A/R Advance Rate applied to the
face amount of Eligible Accounts plus,
(B) the lesser of three million five hundred thousand
dollars ($3,500,000) or the sum of
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(x) the Inventory Advance Rate applied to the
value of Eligible Inventory other than
Rotational Inventory, calculated on the lower
of cost or market value on a first-in,
first-out basis; plus
(y) the lesser of (1) the Inventory Advance
Rate for Eligible Inventory which is
Rotational Inventory applied to the value of
such Rotational Inventory, calculated on the
lower of cost or market value on a first-in,
first-out basis or (2) one million dollars
($1,000,000), less
(C) the amount of all Letter of Credit Obligations,
less
(D) such reserves as LaSalle in its sole discretion
may from time to time establish in determining the Borrowing
Base to reflect events, conditions, contingencies or risks
which may affect the Collateral, the business, business
prospects or financial condition of Borrower, the security
interests of LaSalle, or the security of the Loans, including
but not limited to a five hundred thousand dollar ($500,000)
reserve to be maintained until LaSalle has received and
approved the Appraisal and the Inventory Advance Rate has been
adjusted in LaSalle's reasonable credit judgment based on the
Appraisal, or
(ii) the Revolving Loan Facility, less the amount of all
Letter of Credit Obligations.
3. [INTENTIONALLY OMITTED.]
4. LETTERS OF CREDIT. Subject to the terms and conditions of this
Agreement, and the Other Agreements, during the Original Term or any Renewal
Term, LaSalle may, at its discretion, absent the existence of an Event of
Default, from time to time cause the issuance of and co-sign for, upon
Borrower's request, Letters of Credit; provided, that the Letters of Credit
shall be in form and substance acceptable to LaSalle in its sole discretion and
that the aggregate undrawn face amount of all such Letters of Credit shall at no
time exceed Five Hundred Thousand Dollars ($500,000); and provided further, that
no Letter of Credit shall have an expiry date (a) more than 365 days from the
date of issuance or (b) beyond five (5) days prior to the expiration of the
Original Term or the Renewal Term, as the case may be. Borrower's reimbursement
obligation in respect of the Letters of Credit shall automatically reduce,
dollar for dollar, the amount which Borrower may borrow based upon the Revolving
Loan Facility and the Borrowing Base. Any payment made by LaSalle to any Person
on account of any Letter of Credit shall constitute a Revolving Loan hereunder.
At no time shall the aggregate sum of direct Revolving Loans by LaSalle to
Borrower plus the Letter of Credit Obligations be in excess of the Revolving
Loan Facility or the Borrowing Base.
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5. INTEREST, FEES AND CHARGES.
(a) Rates of Interest. Interest accrued on all Loans shall be due on
the earliest of: (i) the first day of each month (for the immediately preceding
month), computed through the last calendar day of the preceding month; (ii)
LaSalle's election to accelerate the maturity and payment of the Liabilities in
accordance with paragraph 17 hereof; or (iii) termination of this Agreement
pursuant to paragraph 12 hereof. Interest shall accrue on the principal amount
of the Revolving Loans made to Borrower outstanding at the end of each day at a
fluctuating rate per annum equal to one and one-quarter percent (1.25%) above
the Prime Rate. The rate of interest payable on Loans shall increase or decrease
by an amount equal to any increase or decrease in the Prime Rate, effective as
of the opening of business on the day that any such change in the Prime Rate
occurs. Upon and after the occurrence of an Event of Default, and during the
continuation thereof, the principal amount of all Loans shall bear interest on
demand at a rate per annum equal to the rate of interest then in effect under
this paragraph 5(a) plus two percent (2%).
(b) Computation of Interest and Fees. Interest and collection charges
hereunder shall be calculated daily and shall be computed on the actual number
of days elapsed over a year consisting of three hundred and sixty (360) days.
For the purpose of computing interest hereunder, all items of payment received
by LaSalle shall be deemed applied by LaSalle on account of the Liabilities
(subject to final payment of such items) on the first Business Day after receipt
by LaSalle of good funds in LaSalle's account located in Chicago, Illinois.
(c) Maximum Interest. It is the intent of the parties that the rate of
interest and the other charges to Borrower under this Agreement shall be lawful;
therefore, if for any reason the interest or other charges payable under this
Agreement are found by a court of competent jurisdiction, in a final
determination, to exceed the limit which LaSalle may lawfully charge Borrower,
then the obligation to pay interest and other charges shall automatically be
reduced to such limit and, if any amount in excess of such limit shall have been
paid, then such amount shall be refunded to Borrower.
(d) Letter of Credit Fees. Borrower shall remit to LaSalle a Letter of
Credit fee equal to two percent (2.0%) per annum on the aggregate undrawn face
amount of all outstanding Letters of Credit issued for the account of Borrower,
which fee shall be payable monthly in arrears on each day that interest is
payable hereunder. Borrower shall also pay on demand the normal and customary
administrative charges for issuance, amendment, negotiation, renewal or
extension of any Letter of Credit imposed by the bank issuing such Letter of
Credit. Upon the occurrence and during the continuance of an Event of Default,
all Letter of Credit fees shall be payable on demand at a rate equal to four
percent (4.0%) per annum on the aggregate undrawn face amount thereof.
(e) Facility Fee. Borrower shall pay to LaSalle a facility fee equal to
seventy-five thousand dollars ($75,000) , which shall be fully earned,
nonrefundable and due on the Closing Date.
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(f) Unused Line Fee. Borrower shall pay to Lender monthly, in arrears
on the first day of each month, an unused line fee at a rate equal to
three-eighths of one percent (.375%) per annum calculated upon the daily average
amount by which the Revolving Loan Facility exceeds the sum of (i) the
outstanding principal balance of the Revolving Loans plus (ii) the outstanding
Letter of Credit Obligations. The Unused Line Fee shall accrue from the Closing
Date until the last day of the Original Term, and if applicable, from the first
day to the last day of each Renewal Term.
(g) Examination Fees. In addition to the costs and expenses described
in paragraph 14(o) below, Borrower shall pay to LaSalle an examination fee of
$600 per auditor per day, plus reasonable costs and expenses (including but not
limited to airfare, lodging, transportation and meals) for each examination
performed by or at LaSalle's direction of Borrower's books and records and
Collateral and such other matters as LaSalle shall deem appropriate in its
commercially reasonable judgment, such fees to be paid upon demand by LaSalle.
(h) Capital Adequacy Charge. If LaSalle shall have determined that the
adoption of any law, rule or regulation regarding capital adequacy, or any
change therein or in the interpretation or application thereof, or compliance by
LaSalle with any request or directive regarding capital adequacy (whether or not
having the force of law) from any central bank or governmental authority enacted
after the Closing Date, does or shall have the effect of reducing the rate of
return on LaSalle's capital as a consequence of its obligations hereunder to a
level below that which LaSalle could have achieved but for such adoption, change
or compliance (taking into consideration LaSalle's policies with respect to
capital adequacy) by a material amount, then from time to time, after submission
by LaSalle to Borrower of a written demand therefor ("Capital Adequacy Demand")
together with the certificate described below, Borrower shall pay to LaSalle
such additional amount or amounts ("Capital Adequacy Charge") as will compensate
LaSalle for such reduction, such Capital Adequacy Demand to be made with
reasonable promptness following such determination. A certificate of LaSalle
claiming entitlement to payment as set forth above shall be conclusive in the
absence of manifest error. Such certificate shall set forth the nature of the
occurrence giving rise to such reduction, the amount of the Capital Adequacy
Charge to be paid to LaSalle, and the method by which such amount was
determined. In determining such amount, LaSalle may use any reasonable averaging
and attribution method, applied on a non-discriminatory basis.
6. LOAN ADMINISTRATION.
(a) Loan Requests. A request for a Revolving Loan shall be made or
shall be deemed to be made, each in the following manner: (i) Borrower shall
give LaSalle same day notice, no later than 10:30 A.M. (Portland time) of such
day, of its intention to borrow a Revolving Loan, in which notice Borrower shall
specify the amount of the proposed borrowing and the proposed borrowing date;
provided, however, that no such request may be made at a time when there exists
a Default or an Event of Default; and (ii) the coming due of any amount required
to be paid under this Agreement or any Note, whether on account of interest or
for any other Liability, shall be deemed irrevocably to be a request for a
Revolving Loan on the due date
14
thereof in the amount required to pay such interest or other Liability. As an
accommodation to Borrower, LaSalle may permit telephone requests for Revolving
Loans and electronic transmittal of instructions, authorizations, agreements or
reports to LaSalle by Borrower. Unless Borrower specifically directs LaSalle in
writing not to accept or act upon telephonic or electronic communications from
Borrower, LaSalle shall have no liability to Borrower for any loss or damage
suffered by Borrower as a result of LaSalle's honoring of any requests,
execution of any instructions, authorizations or agreements or reliance on any
reports communicated to it telephonically or electronically and purporting to
have been sent to LaSalle by Borrower and LaSalle shall have no duty to verify
the origin of any such communication or the authority of the Person sending it.
Each notice of borrowing shall be irrevocable by and binding on Borrower.
(b) Disbursement. Borrower hereby irrevocably authorizes LaSalle to
disburse the proceeds of each Revolving Loan requested by Borrower, or deemed to
be requested by Borrower, as follows: (i) the proceeds of each Revolving Loan
requested under paragraph 6(a)(i) shall be disbursed by LaSalle in lawful money
of the United States of America in immediately available funds, in the case of
the initial borrowing, in accordance with the terms of the written disbursement
letter from Borrower, and in the case of each subsequent borrowing, by wire
transfer to such bank account as may be agreed upon by Borrower and LaSalle from
time to time, or elsewhere if pursuant to a written direction from Borrower; and
(ii) the proceeds of each Revolving Loan requested under paragraph 6(a)(ii)
shall be disbursed by LaSalle by way of direct payment of the relevant interest
or other Liability.
7. GRANT OF SECURITY INTEREST TO LASALLE. As security for the payment of
all Loans now or in the future made by LaSalle to Borrower hereunder and for the
payment or other satisfaction of all other Liabilities, Borrower hereby assigns
to LaSalle and grants to LaSalle a continuing security interest in the following
property of Borrower, whether now or hereafter owned, existing, acquired or
arising and wherever now or hereafter located: (a) all Accounts (whether or not
Eligible Accounts) and all Goods whose sale, lease or other disposition by
Borrower has given rise to Accounts and have been returned to or repossessed or
stopped in transit by Borrower; (b) all Chattel Paper, Instruments, Documents
and General Intangibles (including, without limitation, all patents, patent
applications, trademarks, trademark applications, trade names, trade secrets,
goodwill, copyrights, registrations, licenses, franchises, customer lists, tax
refund claims, claims against carriers and shippers, guarantee claims, contracts
rights, security interests, security deposits and any rights to
indemnification); (c) all Inventory; (d) all Goods (other than Inventory)
including, without limitation, Equipment, vehicles and fixtures; (e) all Deposit
Accounts; (f) all Investment Property; (g) all deposits and cash and any other
property of Borrower now or hereafter in the possession, custody or control of
LaSalle or any agent or any parent, affiliate or subsidiary of LaSalle or any
participant with LaSalle in the Loans for any purpose (whether for safekeeping,
deposit, collection, custody, pledge, transmission or otherwise); and (h) all
additions and accessions to, substitutions for, and replacements, products and
proceeds of the foregoing property, including, without limitation, proceeds of
all insurance policies insuring the foregoing property, and all of Borrower's
books and records relating to any of the foregoing and to Borrower's business.
15
8. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.
Borrower shall, at LaSalle's request, at any time and from time to time, execute
and deliver to LaSalle such financing statements, documents and other agreements
and instruments (and pay the cost of filing or recording the same in all public
offices deemed reasonably necessary or desirable by LaSalle) and do such other
acts and things as LaSalle may deem necessary or desirable in order to establish
and maintain a valid, attached and perfected security interest in the Collateral
in favor of LaSalle (free and clear of all other liens, claims and rights of
third parties whatsoever, whether voluntarily or involuntarily created, except
Permitted Liens) to secure payment of the Liabilities, and in order to
facilitate the collection of the Collateral. Borrower irrevocably hereby makes,
constitutes and appoints LaSalle (and all Persons designated by LaSalle for that
purpose) as Borrower's true and lawful attorney and agent-in-fact to execute
such financing statements, documents and other agreements and instruments and do
such other acts and things as may be necessary to preserve and perfect LaSalle's
security interest in the Collateral. Borrower further agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement shall be sufficient as a financing statement.
9. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until an Event of Default
has occurred, Borrower shall have the right, except as otherwise provided in
this Agreement, in the ordinary course of Borrower's business, to (a) sell,
lease or furnish under contracts of service any of Borrower's Inventory normally
held by Borrower for any such purpose, and (b) use and consume any raw
materials, work in process or other materials normally held by Borrower for such
purpose; provided, however, that a sale in the ordinary course of business shall
not include any transfer or sale in satisfaction, partial or complete, of a debt
owed by Borrower.
10. COLLECTIONS.
(a) Borrower shall, at LaSalle's election, direct all of its Account
Debtors to make all payments on the Accounts directly to a post office box
("Lock Box") with a financial institution acceptable to, and in the name and
under exclusive control of, LaSalle. Borrower shall establish an account
("Blocked Account") in LaSalle's name for the benefit of Borrower with a
financial institution acceptable to LaSalle, into which all payments received in
the Lock Box shall be deposited, and into which Borrower will immediately
deposit all payments made for Inventory or services sold or rendered by Borrower
and received by Borrower in the identical form in which such payments were made,
whether by cash or check. If Borrower, any Affiliate or Subsidiary of Borrower,
or any shareholder, officer, director, employee or agent of Borrower or any
Affiliate or Subsidiary, or any other Person acting for or in concert with
Borrower, shall receive any monies, checks, notes, drafts or other payments
relating to or as proceeds of Accounts or other Collateral, Borrower and each
such Person shall receive all such items in trust for, and as the sole and
exclusive property of, LaSalle and, immediately upon receipt thereof, shall
remit the same (or cause the same to be remitted) in kind to the Blocked
Account. Each financial institution with which a Lock Box and Blocked Account
are established shall acknowledge and agree, in a manner satisfactory to
LaSalle, that the amounts on deposit in such Lock Box and Blocked Account are
the sole and exclusive property of LaSalle, that such
16
financial institution has no right to setoff against such Lock Box or Blocked
Account or against any other account maintained by such financial institution
into which the contents of such Blocked Account are transferred, and that such
financial institution shall wire, or otherwise transfer in immediately available
funds in a manner satisfactory to LaSalle, funds deposited in the Blocked
Account on a daily basis as such funds are collected. Borrower agrees that all
payments made to the Blocked Account established by Borrower or otherwise
received by LaSalle, whether in respect of the Accounts of Borrower or as
proceeds of other Collateral of Borrower or otherwise, will be applied on
account of the Liabilities of Borrower in accordance with the terms of this
Agreement. Borrower agrees to pay all fees, costs and expenses which Borrower or
LaSalle incurs in connection with opening and maintaining a Lock Box and Blocked
Account. All of such fees, costs and expenses which remain unpaid by Borrower
pursuant to any Lock Box or Blocked Account Agreement with Borrower, to the
extent same shall have been paid by LaSalle hereunder, shall constitute
Revolving Loans hereunder, shall be payable to LaSalle by Borrower upon demand,
and, until paid, shall bear interest at the highest rate then applicable to
Revolving Loans hereunder. All checks, drafts, instruments and other items of
payment or proceeds of Collateral delivered to LaSalle in kind shall be endorsed
by Borrower to LaSalle, and, if endorsement of any such item shall not be made
for any reason, LaSalle is hereby irrevocably authorized to endorse the same on
Borrower's behalf. For the purpose of this paragraph, Borrower irrevocably
hereby makes, constitutes and appoints LaSalle (and all Persons designated by
LaSalle for that purpose) as Borrower's true and lawful attorney and
agent-in-fact (i) to endorse Borrower's name upon said items of payment and/or
proceeds of Collateral of Borrower and upon any Chattel Paper, document,
instrument, invoice or similar document or agreement relating to any Account of
Borrower or goods pertaining thereto; (ii) to take control in any manner of any
item of payment or proceeds thereof; (iii) to have access to any lock box or
postal box into which any of Borrower's mail is deposited; and (iv) to open and
process all mail addressed to Borrower and deposited therein; provided, however,
that LaSalle shall not exercise any such powers described in subparagraphs (i),
(ii) (except for routine Lock Box payments/proceeds) and (iv) unless and until
an Event of Default has occurred.
(b) LaSalle may, at any time and from time to time after the occurrence
of an Event of Default, whether before or after notification to any Account
Debtor and whether before or after the maturity of any of the Liabilities, (i)
enforce collection of any of Borrower's Accounts or contract rights by suit or
otherwise; (ii) exercise all of Borrower's rights and remedies with respect to
proceedings brought to collect any Accounts; (iii) surrender, release or
exchange all or any part of any Accounts of Borrower, or compromise or extend or
renew for any period (whether or not longer than the original period) any
indebtedness thereunder; (iv) sell or assign any Account of Borrower upon such
terms, for such amount and at such time or times as LaSalle deems advisable; (v)
prepare, file and sign Borrower's name on any proof of claim in bankruptcy or
other similar document against any Account Debtor indebted on an Account of
Borrower; and (vi) do all other acts and things which are necessary, in
LaSalle's sole discretion, to fulfill Borrower's obligations under this
Agreement and to allow LaSalle to collect the Accounts. LaSalle, through its
officers, employees or agents, shall have the right, at any time and from time
to time in LaSalle's name, in the name of a nominee of LaSalle or in Borrower's
name, to verify the validity, amount or any other matter relating to any of
Borrower's Accounts, by mail, telephone, telegraph or otherwise. Borrower shall
reimburse LaSalle, on demand, for all
17
reasonable costs, fees and expenses incurred by LaSalle in this regard after the
occurrence and during the continuation of any Event of Default. In addition to
any other provision hereof, LaSalle may at any time on or after the occurrence
of an Event of Default, at Borrower's expense, notify any parties obligated on
any of the Accounts of Borrower to make payment directly to LaSalle of any
amounts due or to become due thereunder.
(c) For the purpose of determining Borrower's Borrowing Base hereunder,
LaSalle shall, upon receipt by LaSalle in its bank account in Chicago, Illinois,
of cash or other immediately available funds from collections of items of
payment and proceeds of any Collateral, apply the whole or any part of such
collections or proceeds against the Liabilities in such order as LaSalle shall
determine in its sole discretion.
(d) In its sole credit judgment, without waiving or releasing any
obligation, liability or duty of Borrower under this Agreement or the Other
Agreements or any Event of Default, at any time or times hereafter, LaSalle may
(but shall not be obligated to) pay, acquire or accept an assignment of any
security interest, lien, encumbrance or claim asserted by any Person in, upon or
against the Collateral. All sums paid by LaSalle in respect thereof and all
costs, fees and expenses (including, without limitation, reasonable attorney
fees for both inside and outside counsel, all court costs and all other charges
relating thereto) incurred by LaSalle shall constitute Revolving Loans, payable
by Borrower to LaSalle on demand and, until paid, shall bear interest at the
highest rate then applicable to Revolving Loans hereunder.
(e) Immediately upon Borrower's receipt of any portion of the
Collateral evidenced by an agreement, Instrument or Document including, without
limitation, any Chattel Paper, Borrower shall deliver the original thereof to
LaSalle together with an appropriate endorsement or other specific evidence of
assignment thereof to LaSalle (in form and substance acceptable to LaSalle). If
an endorsement or assignment of any such item shall not be made for any reason,
LaSalle is hereby irrevocably authorized, as Borrower's attorney and
agent-in-fact, to endorse or assign the same on Borrower's behalf.
11. SCHEDULES AND REPORTS.
(a) Borrower shall provide to LaSalle compliance certificates in the
form attached as Exhibit D and the periodic reports and other information and
schedules described on Exhibit E at the times specified on Exhibit E. In
addition, Borrower shall furnish LaSalle with such other statements and reports
as LaSalle may request from time to time, including, without limitation,
providing the reports, information, and schedules listed on Exhibit E on a more
frequent basis than specified on Exhibit E.
(b) Borrower shall immediately notify LaSalle of any event causing loss
or depreciation in value of the Collateral (other than normal depreciation
occurring in the ordinary course of business).
(c) All schedules, certificates, reports and assignments and other
items delivered by Borrower to LaSalle hereunder shall be executed by an
authorized representative of
18
Borrower and shall be in such form and contain such information as LaSalle shall
reasonably request.
12. TERMINATION.
(a) This Agreement shall be in effect from the date hereof until the
third anniversary of the Closing Date ("Original Term") and shall automatically
renew itself from year to year thereafter (each such one year renewal being
referred to herein as a "Renewal Term") unless (i) the due date of the
Liabilities is accelerated pursuant to paragraph 17 hereof; or (ii) Borrower
elects or LaSalle elects to terminate this Agreement at the end of the Original
Term or at the end of any Renewal Term by giving the other party written notice
of such election at least ninety (90) days prior to the end of the Original Term
or the then current Renewal Term, in which case Borrower shall pay all of the
Liabilities in full on the last day of such term. If one or more of the events
specified in subparagraphs (i) or (ii) occurs, this Agreement shall terminate on
the date thereafter that the Liabilities are paid in full and the security
interests and liens created under this Agreement and the Other Agreements shall
survive such termination until the date upon which payment and satisfaction in
full of the Liabilities shall have occurred. At such time as Borrower has repaid
all of the Liabilities and this Agreement has terminated, (A) Borrower shall
deliver to LaSalle a release, in form and substance reasonably satisfactory to
LaSalle, of all obligations and liabilities of LaSalle and its officers,
directors, employees, agents, parents, subsidiaries and affiliates to Borrower,
and if Borrower is obtaining new financing from another lender, Borrower shall
deliver such lender's indemnification of LaSalle, in form and substance
satisfactory to LaSalle, for checks which LaSalle has credited to Borrower's
account, but which subsequently are dishonored for any reason and (B) upon
Borrower's request, LaSalle shall deliver to Borrower a release in form and
substance reasonably satisfactory to Borrower.
(b) If, during the term of this Agreement, (including any Renewal Term)
Borrower prepays all or any portion of the Liabilities, Borrower agrees to pay
to LaSalle, as a prepayment fee, in addition to the payment of all other
Liabilities owing by Borrower, an amount equal to three percent (3.0%) of the
Revolving Credit Facility if such prepayment occurs prior to the first
anniversary of the Closing Date, two percent (2.0%) of the Revolving Credit
Facility if such prepayment occurs on or after the first anniversary but prior
to the second anniversary of the Closing Date, and one percent (1.0%) if the
prepayment occurs on or after the second anniversary of the Closing Date, except
if terminated at the end of the Original Term or any Renewal Term, pursuant to
the terms set forth herein.
13. REPRESENTATIONS AND WARRANTIES. Borrower hereby makes the following
representations, warranties and covenants:
(a) the financial statements delivered or to be delivered by Borrower
to LaSalle at or prior to the date of this Agreement and at all times subsequent
thereto accurately reflect the financial condition of Borrower, and since the
date of the Borrower's financial statements delivered to LaSalle most recently
prior to the date of this Agreement, no event or condition has occurred which
has had, or is reasonably likely to have, a Material Adverse Effect;
19
(b) the office where Borrower keeps its books, records and accounts (or
copies thereof) concerning the Collateral, Borrower's principal place of
business and all of Borrower's other places of business, locations of Collateral
and post office boxes are as set forth in Exhibit B; Borrower shall promptly
(but in no event less than ten (10) days prior thereto) advise LaSalle in
writing of the proposed opening of any new place of business, the closing of any
existing place of business, any change in the location of Borrower's books,
records and accounts (or copies thereof) or the opening or closing of any post
office box of Borrower;
(c) the Collateral, including without limitation, the Equipment (except
any part thereof which prior to the date of this Agreement Borrower shall have
advised LaSalle in writing consists of Collateral normally used in more than one
state) is and shall be kept, or, in the case of vehicles, based, only at the
addresses set forth on the first page of this Agreement or on Exhibit B, and at
other locations within the continental United States of which LaSalle has been
previously advised by Borrower in writing;
(d) Borrower shall immediately give written notice to LaSalle of any
use of any such Goods in any state other than a state in which Borrower has
previously advised LaSalle such Goods shall be used, and such Goods shall not,
unless LaSalle shall otherwise consent in writing, be used outside of the
continental United States;
(e) no security agreement, financing statement or analogous instrument
exists or shall exist with respect to any of the Collateral other than any
security agreement, financing statement or analogous instrument evidencing
Permitted Liens;
(f) each Account or item of Inventory which Borrower shall, expressly
or by implication, request LaSalle to classify as an Eligible Account or as
Eligible Inventory, respectively, shall, as of the time when such request is
made, conform in all respects to the requirements of such classification as set
forth in the respective definitions of Eligible Account and Eligible Inventory
and as otherwise established by LaSalle from time to time, and Borrower shall
promptly notify LaSalle in writing if any such Eligible Account or Eligible
Inventory shall subsequently become ineligible;
(g) Borrower is and shall at all times during the Original Term or any
Renewal Term be the lawful owner of all Collateral now purportedly owned or
hereafter purportedly acquired by Borrower, free from all liens, claims,
security interests and encumbrances whatsoever, whether voluntarily or
involuntarily created and whether or not perfected, other than the Permitted
Liens;
(h) Borrower has the right and power and is duly authorized and
empowered to enter into, execute and deliver this Agreement and the Other
Agreements and perform its obligations hereunder and thereunder; Borrower's
execution, delivery and performance of this Agreement and the Other Agreements
does not and shall not conflict with the provisions of any statute, regulation,
ordinance or rule of law, or any agreement, contract or other document which may
now or hereafter be binding on Borrower, and Borrower's execution, delivery and
performance of this Agreement and the Other Agreements shall not result in the
imposition of
20
any lien or other encumbrance upon any of Borrower's property under any existing
indenture, mortgage, deed of trust, loan or credit agreement or other agreement
or instrument by which Borrower or any of its property may be bound or affected;
(i) except as otherwise disclosed on Schedule 13(i), there are no
actions or proceedings which are pending or, to the best of Borrower's
knowledge, threatened against Borrower which are reasonably likely to have a
Material Adverse Effect and Borrower shall, promptly upon becoming aware of any
such pending or threatened action or proceeding, give written notice thereof to
LaSalle;
(j) Borrower has obtained all licenses, authorizations, approvals and
permits, the lack of which would have a Material Adverse Effect on the operation
of its business, and Borrower is and shall remain in compliance in all material
respects with all applicable federal, state, local and foreign statutes, orders,
regulations, rules and ordinances (including, without limitation, statutes,
orders, regulations, rules and ordinances relating to taxes, employer and
employee contributions and similar items, securities, employee retirement and
welfare benefits, employee health and safety or environmental matters), the
failure to comply with which would have a Material Adverse Effect on its
business, property, assets, operations or condition, financial or otherwise;
(k) all written information now, heretofore or hereafter furnished by
Borrower to LaSalle is and shall be true and correct in all material respects as
of the date with respect to which such information was or is furnished (except
for financial projections, which have been prepared in good faith based upon
reasonable assumptions);
(l) Borrower is not conducting, permitting or suffering to be
conducted, nor shall it conduct, permit or suffer to be conducted, any
activities pursuant to or in connection with which any of the Collateral is now,
or will (while any Liabilities remain outstanding) be owned by any Affiliate;
(m) Borrower's name has always been as set forth on the first page of
this Agreement and Borrower uses no trade names or division names in the
operation of its business, except as disclosed in Section C on Exhibit B;
Borrower shall notify LaSalle in writing within ten (10) days of the change of
its name or the use of any trade names or division names not previously
disclosed to LaSalle in writing;
(n) with respect to Borrower's Equipment: (i) Borrower has good and
indefeasible and merchantable title to and ownership of all Equipment; (ii)
Borrower shall keep and maintain the Equipment in good operating condition and
repair and shall make all necessary replacements thereof and renewals thereto so
that the value and operating efficiency thereof shall at all times be preserved
and maintained, ordinary wear and tear excepted; (iii) from time to time
Borrower may sell, exchange or otherwise dispose of obsolete, unused or worn out
Equipment, and (iv) Borrower, immediately on demand by LaSalle, shall deliver to
LaSalle any and all evidence of ownership of, including, without limitation,
certificates of title and applications of
21
title to, any of the Equipment, excepting titles to vehicles subject to a
Permitted Lien having priority over the security interest of LaSalle;
(o) this Agreement and the Other Agreements to which Borrower is a
party are the legal, valid and binding obligations of Borrower and are
enforceable against Borrower in accordance with their respective terms, except
to the extent that such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the rights of
creditors generally;
(p) Borrower is solvent, is able to pay its debts as they become due
and has capital sufficient to carry on its business, now owns property having a
value both at fair valuation and at present fair saleable value greater than the
amount required to pay its debts, and will not be rendered insolvent by the
execution and delivery of this Agreement or any of the Other Agreements, the
Asset Purchase Agreement or any related agreements, or by completion of the
transactions contemplated hereunder or thereunder;
(q) Borrower is not now obligated, whether directly or indirectly, for
any loans or other indebtedness for borrowed money other than (i) the
Liabilities; (ii) indebtedness disclosed to LaSalle on Schedule 13(q); (iii)
unsecured indebtedness to trade creditors arising in the ordinary course of
Borrower's business; and (iv) unsecured indebtedness arising from the
endorsement of drafts and other instruments for collection, in the ordinary
course of Borrower's business;
(r) Borrower does not own any margin securities, and none of the
proceeds of the Loans hereunder shall be used for the purpose of purchasing or
carrying any margin securities or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase any margin securities or
for any other purpose not permitted by Regulation G or Regulation U of the Board
of Governors of the Federal Reserve System as in effect from time to time;
(s) except as otherwise disclosed on Schedule 13(s), Borrower has no
Parents, Subsidiaries or divisions, nor is Borrower engaged in any joint venture
or partnership with any other Person;
(t) Borrower is duly organized and in good standing in its state of
organization and Borrower is duly qualified and in good standing in all states
where the nature and extent of the business transacted by it or the ownership of
its assets makes such qualification necessary, except for such other states in
which the failure to so qualify would not have a Material Adverse Effect;
(u) Borrower is not in default under any material contract, lease or
commitment to which it is a party or by which it is bound, nor does Borrower
know of any dispute regarding any contract, lease or commitment which is
material to the continued financial success and well-being of Borrower;
22
(v) there are no controversies pending or threatened between Borrower
and any of its employees, other than employee grievances arising in the ordinary
course of business which are not, in the aggregate, material to the continued
financial success and well-being of Borrower, and Borrower is in compliance in
all material respects with all federal and state laws respecting employment and
employment terms, conditions and practices, except where the failure to so
comply would not have a Material Adverse Effect;
(w) Borrower possesses, and shall continue to possess, adequate
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and trade names to continue to conduct its
business as heretofore conducted by it; and
(x) Borrower and its Subsidiaries have reviewed the areas within their
business and operations which could be adversely affected by, and have developed
or are developing a program to address on a timely basis, the "Year 2000
Problem" (that is, the risk that computer applications used by Borrower and its
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date on or after December 31,
1999), and have made related appropriate inquiry of material suppliers and
vendors. Based on such review and program, Borrower believes that the "Year 2000
Problem" will not have a Material Adverse Effect. From time to time, at the
request of LaSalle, Borrower and its Subsidiaries shall provide to LaSalle such
updated information or documentation as is requested regarding the status of
their efforts to address the Year 2000 problem.
Borrower represents, warrants and covenants to LaSalle that all representations,
warranties and covenants of Borrower contained in this Agreement (whether
appearing in paragraphs 13 or 14 hereof or elsewhere) shall be true at the time
of Borrower's execution of this Agreement, shall survive the execution, delivery
and acceptance hereof by the parties hereto and the closing of the transactions
described herein or related hereto, shall remain true until the repayment in
full of all of the Liabilities and termination of this Agreement, and shall be
remade by Borrower at the time each Revolving Loan is made and each Letter of
Credit is issued pursuant to this Agreement.
14. COVENANTS. Until payment or satisfaction in full of all Liabilities and
termination of this Agreement, unless Borrower obtains LaSalle's prior written
consent waiving or modifying any of Borrower's covenants hereunder in any
specific instance, Borrower agrees as follows:
(a) Borrower shall at all times keep accurate and complete books,
records and accounts with respect to all of Borrower's business activities, in
accordance with sound accounting practices and using the accounting terms and
definitions specified in paragraph 1(b) and shall keep such books, records and
accounts, and any copies thereof, only at the addresses indicated for such
purpose on Exhibit B;
(b) Borrower agrees to deliver to LaSalle the following financial
information, all of which shall be prepared in accordance with accounting terms
and definitions specified in paragraph 1(b): (i) no later than thirty (30) days
after each calendar month, copies of internally prepared financial statements of
Borrower and its Subsidiaries, on a consolidated, monthly and
23
year-to-date basis including, without limitation, balance sheets and statements
of income and retained earnings of Borrower and its Subsidiaries, certified by
an officer of Borrower and accompanied by an officer's certificate in the form
of Exhibit D attached hereto and (ii) no later than ninety (90) days after the
end of each of Borrower's fiscal years, annual financial statements of Borrower
and its Subsidiaries on a consolidated and consolidating basis audited by
independent certified public accountants selected by Borrower and reasonably
satisfactory to LaSalle, together with such accountants' "management letter," if
any;
(c) LaSalle, or any Persons designated by it, shall have the right in
the exercise of its commercially reasonable credit judgment, to call at
Borrower's places of business at any reasonable times, and, without hindrance or
delay, to inspect the Collateral and to inspect, audit, check and make extracts
from Borrower's books, records, journals, orders, receipts and any
correspondence and other data relating to Borrower's business, the Collateral or
any transactions between the parties hereto, and shall have the right to make
such verification concerning Borrower's business as LaSalle may consider
reasonable under the circumstances. Borrower shall furnish to LaSalle such
information relevant to LaSalle's rights under this Agreement as LaSalle shall
at any time and from time to time reasonably request. Borrower shall also
furnish to LaSalle, at the time of filing or distribution, all reports and
filings submitted to the Securities Exchange Commission and all materials
distributed generally to Borrower's shareholders. Borrower authorizes LaSalle to
discuss the affairs, finances and business of Borrower with any officers or
directors of Borrower or any Affiliate, or with those employees of Borrower with
whom LaSalle has determined in its commercially reasonable judgment to be
necessary or desirable to converse, and to discuss the financial condition of
Borrower with Borrower's independent public accountants. Any such discussions
shall be without liability to LaSalle or to such accountants. Borrower shall pay
to or reimburse LaSalle for all reasonable fees, costs, and out-of-pocket
expenses incurred by LaSalle in the exercise of its rights hereunder (in
addition to the fees payable by Borrower pursuant to paragraph 14(o) hereof in
connection with LaSalle's examination of Borrower's books and records and
Collateral) and all of such costs, fees and expenses shall constitute Revolving
Loans hereunder, shall be payable on demand and, until paid, shall bear interest
at the highest rate then applicable to Revolving Loans hereunder;
(d) (i) Borrower shall keep the Collateral properly housed and shall
keep the Collateral insured against such risks and in such amounts as are
customarily insured against by Persons engaged in businesses similar to that of
Borrower with such companies, in such amounts and under policies in such form as
shall be reasonably satisfactory to LaSalle. Originals or certified copies of
such policies of insurance have been, or within fifteen (15) days after the
Closing Date, shall be, delivered to LaSalle together with evidence of payment
of all premiums therefor, and shall contain an endorsement, in form and
substance acceptable to LaSalle, showing loss under such insurance policies
payable to LaSalle. Such endorsement, or an independent instrument furnished to
LaSalle, shall provide that the insurance company shall give LaSalle at least
thirty (30) days' written notice before any such policy of insurance is altered
or cancelled and that no act, whether willful or negligent, or default of
Borrower or any other Person shall affect the right of LaSalle to recover under
such policy of insurance in case of loss or damage. Borrower hereby directs all
insurers under such policies of insurance to pay all proceeds payable thereunder
directly to LaSalle (subject, however, to the rights of holders of Permitted
Liens with
24
priority over LaSalle's security interest). Borrower irrevocably makes,
constitutes and appoints LaSalle (and all officers, employees or agents
designated by LaSalle) as Borrower's true and lawful attorney (and
agent-in-fact) for the purpose of making, settling and adjusting claims under
such policies of insurance, endorsing the name of Borrower on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and making all determinations and decisions with respect to such
policies of insurance; provided, however, that LaSalle shall exercise such
rights only upon the occurrence of an Event of Default;
(ii) Borrower shall maintain, at its expense, such public
liability and third party property damage insurance as is customary for Persons
engaged in businesses similar to that of Borrower with such companies and in
such amounts, with such deductibles and under policies in such form as shall be
reasonably satisfactory to LaSalle, and originals or certified copies of such
policies have been, or within fifteen (15) days after the Closing Date shall be,
delivered to LaSalle together with evidence of payment of all premiums therefor;
each such policy shall contain an endorsement showing LaSalle as additional
insured thereunder and providing that the insurance company shall give LaSalle
at least thirty (30) days' written notice before any such policy shall be
altered or cancelled; and
(iii) If Borrower at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required above or to pay any
premium in whole or in part relating thereto, then LaSalle, without waiving or
releasing any obligation or default by Borrower hereunder, may (but shall be
under no obligation to) obtain and maintain such policies of insurance and pay
such premiums and take such other actions with respect thereto as LaSalle deems
advisable. All sums disbursed by LaSalle in connection with any such actions,
including, without limitation, court costs, expenses, other charges relating
thereto and reasonable attorneys' fees, shall constitute Revolving Loans
hereunder and, until paid, shall bear interest at the highest rate then
applicable to Revolving Loans hereunder.
WARNING
UNLESS BORROWER PROVIDES LASALLE WITH EVIDENCE OF THE
INSURANCE COVERAGE AS REQUIRED BY THIS AGREEMENT, LASALLE MAY PURCHASE
INSURANCE AT BORROWER'S EXPENSE TO PROTECT LASALLE'S INTEREST. THIS
INSURANCE MAY, BUT NEED NOT, ALSO PROTECT BORROWER'S INTEREST. IF THE
COLLATERAL BECOMES DAMAGED, THE COVERAGE LASALLE PURCHASES MAY NOT PAY
ANY CLAIM BORROWER MAKES OR ANY CLAIM MADE AGAINST BORROWER. BORROWER
MAY LATER CANCEL THIS COVERAGE BY PROVIDING EVIDENCE THAT BORROWER HAS
OBTAINED THE REQUIRED COVERAGE ELSEWHERE.
25
BORROWER IS RESPONSIBLE FOR THE COST OF ANY INSURANCE
PURCHASED BY LASALLE. THE COST OF THIS INSURANCE MAY BE ADDED TO
BORROWER'S LIABILITIES. IF THE COST IS ADDED TO BORROWER'S LIABILITIES,
THE INTEREST RATE APPLICABLE TO THE REVOLVING LOANS WILL APPLY TO THIS
ADDED AMOUNT. THE EFFECTIVE DATE OF COVERAGE MAY BE THE DATE BORROWER'S
PRIOR COVERAGE LAPSED OR THE DATE BORROWER FAILED TO PROVIDE PROOF OF
COVERAGE.
THE COVERAGE LASALLE PURCHASES MAY BE CONSIDERABLY MORE
EXPENSIVE THAN INSURANCE BORROWER CAN OBTAIN ON ITS OWN AND MAY NOT
SATISFY ANY NEED FOR PROPERTY DAMAGE COVERAGE OR ANY MANDATORY
LIABILITY INSURANCE REQUIREMENTS IMPOSED BY APPLICABLE LAW.
(e) Borrower shall not use the Collateral, or any part thereof, in any
unlawful business or for any unlawful purpose or use or maintain any of the
Collateral in any manner that does or could result in material damage to the
environment or a violation of any applicable environmental laws, rules or
regulations; Borrower shall keep the Collateral in good condition, repair and
order, ordinary wear and tear excepted; Borrower shall not permit the
Collateral, or any part thereof, to be levied upon under execution, attachment,
distraint or other legal process; Borrower shall not sell, lease, grant a
security interest in or otherwise dispose of any of the Collateral except as
expressly permitted by this Agreement; and Borrower shall not secrete or abandon
any of the Collateral, or remove or permit removal of any of the Collateral from
any of the locations listed on Exhibit B or in any written notice to LaSalle
pursuant to paragraph 13(c) hereof, except for the removal of Inventory sold in
the ordinary course of Borrower's business as permitted herein;
(f) All monies and other property obtained by Borrower from LaSalle
pursuant to this Agreement will be used solely for business purposes of
Borrower;
(g) Borrower shall, at the request of LaSalle, indicate on its records
concerning the Collateral a notation, in form satisfactory to LaSalle, of the
security interest of LaSalle hereunder, and Borrower shall not maintain
duplicates or copies of such records at any address other than Borrower's
principal place of business set forth on the first page of this Agreement;
provided, however, that Borrower, in the ordinary course of its business, may
furnish copies of such records to its accountants, attorneys and other agents or
advisors as it may determine to be necessary or desirable, in the exercise of
its commercially reasonable judgment;
26
(h) Borrower shall file all required tax returns and pay all of its
taxes when due, including, without limitation, taxes imposed by federal, state
or municipal agencies, and shall cause any liens for taxes to be promptly
released; provided, however, that Borrower shall have the right to contest the
payment of such taxes in good faith by appropriate proceedings so long as (i)
the amount so contested is shown on Borrower's financial statements, (ii) the
contesting of any such payment does not give rise to a lien for taxes, (iii)
upon the occurrence of an Event of Default, Borrower keeps on deposit with
LaSalle (such deposit to be held without interest) an amount of money which, in
the sole judgment of LaSalle, is sufficient to pay such taxes and any interest
or penalties that may accrue thereon, and (iv) if Borrower fails to prosecute
such contest with reasonable diligence, LaSalle may apply the money so deposited
in payment of such taxes. If Borrower fails to pay any such taxes and in the
absence of any such contest by Borrower, LaSalle may (but shall be under no
obligation to) advance and pay any sums required to pay any such taxes and/or to
secure the release of any lien therefor, and any sums so advanced by LaSalle
shall constitute Revolving Loans hereunder, shall be payable by Borrower to
LaSalle on demand, and, until paid, shall bear interest at the highest rate then
applicable to Revolving Loans hereunder;
(i) Borrower shall not (i) incur, create, assume or suffer to exist any
indebtedness other than (A) indebtedness arising under this Agreement, (B)
unsecured indebtedness owing in the ordinary course of business to trade
suppliers, (C) any other indebtedness described on Schedule 13(q), (D) purchase
money security interests incurred to finance Capital Expenditures after the
Closing Date provided such Capital Expenditures do not to exceed the limit set
forth in paragraph 14(n) below, and (E) indebtedness to any shareholder of
Borrower provided such indebtedness is fully subordinated to the Liabilities on
such terms and conditions and by such documentation as is approved in writing by
LaSalle in its sole discretion; or (ii) assume, guarantee or endorse, or
otherwise become liable in connection with, the obligations of any Person,
except by endorsement of instruments for deposit or collection or similar
transactions in the ordinary course of business;
(j) Borrower shall not enter into any merger or consolidation, or sell,
lease or otherwise dispose of all or substantially all of its assets; Borrower
shall not create any new Subsidiary or Affiliate; Borrower shall not enter into
any transaction outside the ordinary course of Borrower's business;
(k) Borrower shall not (i) declare or pay any dividend or other
distribution (whether in cash or in kind) on, purchase, redeem or retire any
shares of any class of its stock, or make any payment on account of, or set
apart assets for the repurchase, redemption, defeasance or retirement of, any
class of its stock; or (ii) make any optional payment or prepayment on or
redemption (including without limitation by making payments to a sinking fund or
analogous fund) or repurchase of any indebtedness for borrowed money other than
indebtedness pursuant to this Agreement;
27
(l) Borrower shall not make any loans to, or investment in, any Person,
whether in cash, securities or other property of any kind, other than
investments that are direct obligations of the United States;
(m) Borrower shall not amend its organizational documents or change its
fiscal year to end on any date other than December 31;
(n) Borrower shall maintain and keep in full force and effect each of
the financial covenants set forth below. The calculation and determination of
each such financial covenant, and all accounting terms contained therein, shall
be calculated and construed in accordance with GAAP, applied on a basis
consistent with the reviewed financial statements of Borrower delivered on or
before the Closing Date:
(i) Consolidated Tangible Net Worth. Borrower and its
Subsidiaries, on a consolidated basis, shall maintain as of the end of
(A) the month ending December 31, 1998 a Tangible Net Worth of not less
than the Base Amount (as defined below) and (B) each month thereafter,
a Tangible Net Worth of not less than the sum of (1) the Base Amount
and (2) an aggregate amount equal to ninety percent (90%) of the net
income after taxes of Borrower and its Subsidiaries, on a consolidated
basis, for each fiscal quarter ending subsequent to the Closing Date
(provided, however, that such aggregate amount shall not be reduced by
the amount of any net loss before taxes of Borrower and its
Subsidiaries, on a consolidated basis, for any fiscal quarter). For
purposes of this paragraph (i), the "Base Amount" shall mean the
greater of (x) five million dollars ($5,000,000) or (y) the sum of the
Consolidated Tangible Net Worth of Borrower and its Subsidiaries as
reflected on Borrower's audited December 31, 1998 balance sheet less
five hundred thousand ---- dollars ($500,000), less any net after-tax
loss in excess of $50,000 sustained by Borrower and ----- its
Subsidiaries on a consolidated basis for the month of December 1998;
(ii) Cash Flow. Borrower and its Subsidiaries, on a
consolidated basis, shall have Cash Flow of no less than the following
amounts:
Period Minimum Cash Flow
------ -----------------
Quarter ending March 31, 1999 $375,000
Two quarters ending June 30, 1999 $750,000
Three quarters ending September 30, 1999 $1,125,000
The twelve (12) month period ending as of the
end of each fiscal quarter thereafter $1,500,000
28
(iii) Consolidated Debt Service Coverage Ratio. Borrower and
its Subsidiaries, on a consolidated basis, shall maintain as of each
fiscal quarter for the twelve (12) month period ending with such fiscal
quarter (or, with respect to the fiscal quarters ending March 31, June
30, and September 30, 1999, for the three, six and nine month periods
ending with such fiscal quarters, respectively), a Debt Service
Coverage Ratio of not less than 1.5 to 1.0;
(iv) Consolidated Interest Coverage Ratio. Borrower and its
Subsidiaries, on a consolidated basis, shall maintain as of each fiscal
quarter for the twelve (12) month period ending with such fiscal
quarter (or, with respect to the fiscal quarters ending March 31, June
30, and September 30, 1999, for the three, six and nine month periods
ending with such fiscal quarters, respectively), an Interest Coverage
Ratio of not less than 1.5 to 1.0; and
(v) Consolidated Capital Expenditures. Borrower and its
Subsidiaries, on a consolidated basis, shall not make Capital
Expenditures in any fiscal year in an aggregate amount which exceeds
the sum of three hundred fifty thousand dollars ($350,000).
(o) Borrower shall reimburse LaSalle for all reasonable costs and
expenses including, without limitation, legal expenses and reasonable attorneys'
fees (both in-house and outside counsel), incurred by LaSalle in connection with
the documentation and consummation of this transaction and any amendments or
modifications of this Agreement or the Other Agreements or other transactions
between Borrower and LaSalle, including, without limitation, Uniform Commercial
Code and other public record searches, lien filings, Federal Express or similar
express or messenger delivery, appraisal costs, surveys, title insurance and
environmental audit or review costs, and in seeking to collect, protect or
enforce any rights in or to the Collateral or incurred by LaSalle in seeking to
collect any Liabilities and to administer and enforce any of LaSalle's rights
under this Agreement. Borrower shall also pay all normal service charges with
respect to accounts maintained by LaSalle for the benefit of Borrower. All such
costs, expenses and charges shall constitute Revolving Loans hereunder, shall be
payable by Borrower to LaSalle on demand, and, until paid, shall bear interest
at the highest rate then applicable to Revolving Loans hereunder;
(p) [Deleted.]
(q) Borrower shall not enter into or be a party to, or permit any
Subsidiary to enter into or be a party to, any transaction with any Affiliate of
Borrower except in the ordinary course of business in a manner and to an extent
consistent with past practices of Borrower and necessary or desirable for the
prudent operation of its business, for fair consideration and on terms no less
favorable to Borrower or such Subsidiary as are available from unaffiliated
third parties;
29
(r) Borrower shall promptly advise LaSalle in writing of any Material
Adverse Effect or the occurrence of any Default or Event of Default; and
(s) With respect to Environmental Laws and Hazardous Materials:
(i) Borrower shall establish and maintain, at its expense, a
system to assure and monitor its compliance with all Environmental Laws
in all of its operations. Copies of all environmental surveys, audits,
assessments, feasibility studies and results of remedial investigations
shall be promptly furnished by Borrower to LaSalle upon request.
Borrower shall take prompt and appropriate action to respond to any
non-compliance with any of the Environmental Laws;
(ii) Borrower shall give written notice to LaSalle immediately
upon Borrower's receipt of any notice of, or Borrower's otherwise
obtaining knowledge of, (i) the occurrence of any event involving the
release, spill or discharge, threatened or actual, of any Hazardous
Material (unless the release, spill or discharge is fully remediated
within 30 days after Borrower first obtains knowledge of it and
Borrower has no liability or potential liability resulting from the
release, spill or discharge other than remediation costs not exceeding
$10,000) or (ii) any investigation, proceeding, complaint, order,
directive, claim, citation or notice with respect to: (A) any
non-compliance with or violation of any Environmental Law by Borrower;
or (B) the release, spill or discharge, threatened or actual, of any
Hazardous Material except in compliance with applicable Environmental
Laws; or (C) the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous
Materials except in compliance with applicable Environmental Laws; or
(D) any other environmental, health or safety matter which affects
Borrower or its business, operations or assets or any properties at
which Borrower transported, stored or disposed of any Hazardous
Materials (unless, in any such case the investigation, proceeding,
complaint, order, directive, claim, citation or notice is terminated,
dismissed or withdrawn within 30 days and Borrower has no liability or
potential liability resulting therefrom in excess of $10,000); and
30
(iii) Borrower shall indemnify and hold harmless LaSalle, its
directors, officers, employees, agents, insurers, representatives,
successors and assigns, from and against any and all losses, claims,
damages, liabilities, costs, and expenses (including attorneys' fees
and legal expenses) directly or indirectly arising out of or
attributable to any violation of any Environmental Law or the use,
generation, manufacture, reproduction, storage, release, threatened
release, spill, discharge, disposal or presence of a Hazardous
Material, including the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of
Borrower, and the preparation and implementation of any closure,
remedial or other required plans. All covenants and indemnifications in
this subsection 14(s) shall survive the payment of the Liabilities and
the termination or nonrenewal of this Agreement.
(t) On or before January 15, 1999, Borrower shall cause Emerald
Technology Valuation, at Borrower's expense, to complete and deliver to LaSalle
a net liquidation value appraisal of Borrower's Inventory in form and substance
satisfactory to LaSalle. After review of the Appraisal, the Inventory Advance
Rate shall be adjusted in accordance with this Agreement.
(u) Borrower shall not make any prepayments of any indebtedness to
Scitex; provided, however, that so long as Borrower is in compliance with all
covenants in this Agreement, and such payments would not cause Borrower to be
out of compliance with any of such covenants, and (ii) so long as Borrower has
at least $1,500,000 of Excess Availability, will have at least $1,500,000 of
Excess Availability after such payments are made, and would have had average
Excess Availability of at least $1,500,000 on a pro forma basis for the 30 days
immediately preceding the date of payment, such pro forma Excess Availability to
be calculated as if such payments had been made on the 31st day prior to the
proposed date of payment, Borrower, after May 31, 1999, may make prepayments on
indebtedness to Scitex. After the occurrence and during the continuance of any
Default or Event of Default, Borrower shall not make any payments on
indebtedness to Scitex, including any scheduled payments of principal or
interest.
15. CONDITIONS PRECEDENT.
(a) The funding of the initial Revolving Loan and LaSalle's co-signing
as applicant for the initial Letter of Credit are subject to the satisfaction or
waiver on or before the Closing Date of the following conditions precedent:
(i) LaSalle shall have received each of the agreements,
opinions, reports, approvals, consents, certificates and other
documents which it requests in its discretion, including those set
forth on the closing document list attached hereto as Schedule 15(a)(i)
(the "Closing Agenda");
31
(ii) Since September 30, 1997, no event shall have occurred
which has had or could reasonably be expected to have a Material
Adverse Effect, as determined by LaSalle in its sole discretion;
(iii) LaSalle shall have received payment in full of all fees
and expenses payable to it by Borrower on or before the Closing Date;
(iv) LaSalle shall have determined that immediately after
giving effect to (A) the making of the initial Revolving Loan requested
to be made on the Closing Date, (B) the issuance of the initial Letter
of Credit, if any, requested to be made on the Closing Date and (C) the
payment or reimbursement by Borrower of LaSalle for all closing costs
and expenses incurred in connection with the transactions contemplated
hereby, (D) the closing of the transactions provided for in the Asset
Purchase Agreement and all related agreements, and (E) the payment by
Borrower of all payments, costs, fees and expenses relating to the
Asset Purchase Agreement and the transactions provided for therein and
in all related agreements, including but not limited to all severance
and other payments to terminated employees, on a pro forma basis the
Excess Availability of Borrower shall not be less than Five Hundred
Thousand Dollars ($500,000);
(v) LaSalle shall have received a certificate from Borrower's
chief executive officer or chief financial officer, pursuant to which
such officer shall certify that in calculating the Excess Availability
described in clause (iv) above, none of Borrower's outstanding trade
payables were (and are) past due 30 days or more;
(vi) LaSalle shall continue to be satisfied with the assets,
books, records, financial and business conditions of Borrower;
(vii) LaSalle shall have entered into a subordination
agreement satisfactory to LaSalle with Scitex which subordination shall
cover not less than one million six hundred fifteen thousand dollars
($1,615,000) of indebtedness;
(viii) Borrower shall have received no less than $1.5 million
in new cash equity capital;
(ix) The transaction shall have received LaSalle's credit
approval;
(x) Borrower shall have its completed acquisition of the
assets of Scitex Digital Video, Inc. LaSalle shall have reviewed and
approved all terms, conditions, and documents relating to such
acquisition and any related transactions; and
32
(xi) LaSalle shall have determined in its sole discretion that
the fair saleable value of Borrower's assets will exceed its
liabilities as of the funding of the initial Revolving Loan and that
Borrower will have sufficient working capital to pay its debts as they
become due.
(b) After the Closing Date, the making of any requested Revolving Loan
or LaSalle's co-signing as applicant for any requested Letter of Credit shall be
subject to the satisfaction of the conditions precedent set forth below. Each
such request shall constitute a representation and warranty that such conditions
are satisfied:
(i) All representations and warranties contained in this
Agreement and the Other Agreements shall be true and correct on and as
of the date of such request, as if then made, other than
representations and warranties that relate solely to an earlier date;
(ii) No Default or Event of Default shall have occurred, or
would result from the making of the requested Revolving Loan or the
issuance of the requested Letter of Credit, which has not been waived;
and
(iii) Since the Closing Date, no event has occurred which has
had or could reasonably be expected to have a Material Adverse Effect.
16. DEFAULT. The occurrence of any one or more of the following events
shall constitute an "Event of Default" hereunder:
(a) the failure of any Obligor to pay when due, or when declared due by
LaSalle in accordance with the terms hereof, any of the Liabilities;
(b) the failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor under
this Agreement or any of the Other Agreements;
(c) the making or furnishing by any Obligor to LaSalle of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with this Agreement or the Other Agreements or in
connection with any other agreement between such Obligor and LaSalle, which is
untrue or misleading in any respect, or the failure of any Obligor to perform,
keep or observe any of the covenants, conditions, promises, or agreements of
such Obligor under any other agreement with any Person if such failure has or is
reasonably likely to have a Material Adverse Effect;
(d) the creation (whether voluntary or involuntary) of, or any attempt
to create, any lien or other encumbrance upon any of the Collateral, other than
the Permitted Liens, or the making or any attempt to make any levy, seizure or
attachment thereof;
33
(e) the commencement of any proceedings (i) in bankruptcy by or against
any Obligor, (ii) for the liquidation or reorganization of any Obligor, (iii)
alleging that such Obligor is insolvent or unable to pay its debts as they
mature, or (iv) for the readjustment or arrangement of any Obligor's debts,
whether under the United States Bankruptcy Code or under any other law, whether
state or federal, now or hereafter existing for the relief of debtors, or the
commencement of any analogous statutory or non-statutory proceedings involving
any Obligor; provided, however, that if such commencement of proceedings against
such Obligor is involuntary, such action shall not constitute an Event of
Default unless such proceedings are not dismissed within thirty (30) days after
the commencement of such proceedings;
(f) the appointment of a receiver or trustee for any Obligor, for any
of the Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation or a partnership; provided, however, that if such appointment or
commencement of proceedings against such Obligor is involuntary, such action
shall not constitute an Event of Default unless such appointment is not revoked
or such proceedings are not dismissed within thirty (30) days after the
commencement of such proceedings;
(g) the entry of any judgment or order in excess of $50,000 against any
Obligor which remains unsatisfied or undischarged and in effect for thirty (30)
days after such entry without a stay of enforcement or execution;
(h) the occurrence of an event of default under, or the revocation or
termination of, any agreement, instrument or document executed and delivered by
any Person to LaSalle pursuant to which such Person has guaranteed to LaSalle
the payment of all or any of the Liabilities or has granted LaSalle a security
interest in or lien upon some or all of such Person's real and/or personal
property to secure the payment of all or any of the Liabilities, or the death of
any such Person;
(i) the occurrence of an event of default under any other agreement or
instrument evidencing indebtedness for borrowed money in excess of $25,000
executed or delivered by Borrower or pursuant to which agreement or instrument
Borrower or its properties is or may be bound;
(j) a Change of Control shall have occurred; or
(k) the occurrence of a material adverse change in Borrower's business,
assets, prospects or financial condition, or the occurrence of any other event
or condition which has or is reasonably likely to have a Material Adverse
Effect.
Notwithstanding anything contained in this paragraph 16 or contained in
any other provision of this Agreement or Other Agreements to the contrary, in
the event of the institution of any proceedings described in paragraphs 16(e) or
16(f) hereof against Borrower, LaSalle may cease to make advances to Borrower
during the thirty (30) day grace periods provided in paragraphs 16(e) and 16(f).
34
17. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in paragraphs
16(e) and 16(f) hereof, all of the Liabilities shall immediately and
automatically become due and payable, without notice or demand of any kind. Upon
the occurrence of any other Event of Default, all of the Liabilities may, at the
option of LaSalle, and without demand, notice or legal process of any kind, be
declared, and immediately shall become, due and payable.
(b) Upon the occurrence of an Event of Default, LaSalle may exercise
from time to time any rights and remedies available to it under the Uniform
Commercial Code and any other applicable law in addition to, and not in lieu of,
any rights and remedies expressly granted in this Agreement or in any of the
Other Agreements and all of LaSalle's rights and remedies shall be cumulative
and non-exclusive to the extent permitted by law. In particular, but not by way
of limitation of the foregoing, LaSalle may, without notice, demand or legal
process of any kind, take possession of any or all of the Collateral (in
addition to Collateral of which it already has possession), wherever it may be
found, and for that purpose may pursue the same wherever it may be found, and
may enter into any of Borrower's premises where any of the Collateral may be,
and search for, take possession of, remove, keep and store any of the Collateral
until the same shall be sold or otherwise disposed of, and LaSalle shall have
the right to store the same at any of Borrower's premises without cost to
LaSalle. At LaSalle's request, Borrower shall, at Borrower's expense, assemble
the Collateral and make it available to LaSalle at one or more places to be
designated by LaSalle and reasonably convenient to LaSalle and Borrower.
Borrower recognizes that if Borrower fails to perform, observe or discharge any
of its Liabilities under this Agreement or the Other Agreements, no remedy at
law will provide adequate relief to LaSalle, and Borrower agrees that LaSalle
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages. Any notification of intended
disposition of any of the Collateral required by law will be deemed reasonably
and properly given if given at least ten (10) calendar days before such
disposition. Any proceeds of any disposition by LaSalle of any of the Collateral
may be applied by LaSalle to the payment of expenses in connection with the
Collateral including, without limitation, legal expenses and reasonable
attorneys' fees (both in-house and outside counsel) and any balance of such
proceeds may be applied by LaSalle toward the payment of such of the
Liabilities, and in such order of application, as LaSalle may from time to time
elect.
18. INDEMNIFICATION. Borrower agrees to defend (with counsel reasonably
satisfactory to LaSalle), protect, indemnify and hold harmless LaSalle, each
affiliate or subsidiary of LaSalle, and each of their respective officers,
directors, employees, attorneys and agents (each an "Indemnified Party") from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature (including, without limitation, the disbursements and the reasonable
fees of counsel for each Indemnified Party in connection with any investigative,
administrative or judicial proceeding, whether or not the Indemnified Party
shall be designated a party thereto), which may be imposed on, incurred by, or
asserted against, any Indemnified Party (whether direct, indirect or
consequential and whether based on any federal, state or local laws or
35
regulations including, without limitation, securities, environmental and
commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any Other Agreement, or any act, event or transaction related or
attendant thereto, the Collateral, the making and the management of the Loans or
any Letters of Credit or the use or intended use of the proceeds of the Loans or
any Letters of Credit; provided, however, that Borrower shall not have any
obligation hereunder to any Indemnified Party with respect to matters caused by
or resulting solely from the willful misconduct or gross negligence of such
Indemnified Party. To the extent that the undertaking to indemnify set forth in
the preceding sentence may be unenforceable because it is violative of any law
or public policy, Borrower shall satisfy such undertaking to the maximum extent
permitted by applicable law. Any liability, obligation, loss, damage, penalty,
cost or expense covered by this indemnity shall be paid to each Indemnified
Party on demand, and, failing prompt payment, shall, together with interest
thereon at the highest rate then applicable to Revolving Loans hereunder from
the date incurred by each Indemnified Party until paid by Borrower, be added to
the Liabilities of Borrower and be secured by the Collateral. The provisions of
this paragraph 18 shall survive the satisfaction and payment of the other
Liabilities and the termination of this Agreement.
19. NOTICES. All written notices and other written communications with
respect to this Agreement shall be sent by ordinary, certified or overnight
mail, by telecopy or delivered in person, and in the case of LaSalle shall be
sent to it at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (if by telecopy to (▇▇▇) ▇▇▇-▇▇▇▇), and in the
case of Borrower shall be sent to Borrower at its principal place of business as
set forth on the first page of this Agreement (if by telecopy to (650)
327-2511); provided, however, that either party may designate another address or
contact person for itself from time to time by notice given as provided in this
paragraph.
20. CHOICE OF GOVERNING LAW AND CONSTRUCTION. This Agreement and the Other
Agreements are submitted by Borrower to LaSalle for LaSalle's acceptance or
rejection as an offer by Borrower to borrow monies from LaSalle now and from
time to time hereafter, and shall not be binding upon LaSalle or become
effective until accepted by LaSalle, in writing. THIS AGREEMENT AND THE OTHER
AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF
OREGON AS TO INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN
ALL OTHER RESPECTS, INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST
RATE AND OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN
THE COLLATERAL, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE
RELEVANT JURISDICTION. If any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or remaining provisions of this
Agreement.
21. FORUM SELECTION AND SERVICE OF PROCESS. To induce LaSalle to accept
this Agreement, Borrower irrevocably agrees that, subject to LaSalle's sole and
absolute
36
election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT
OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL
SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN CLACKAMAS OR MULTNOMAH
COUNTIES, STATE OF OREGON. BORROWER HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN SAID COUNTIES
AND STATE. Borrower waives personal service of any process and consents that all
such service of process may be made by certified mail, return receipt requested,
directed to Borrower at the address indicated in LaSalle's records; and service
so made shall be complete five (5) days after the same has been deposited in the
U.S. mail. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE
THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY LASALLE IN ACCORDANCE
WITH THIS PARAGRAPH.
22. MODIFICATION AND BENEFIT OF AGREEMENT. This Agreement and the Other
Agreements may not be modified, altered or amended except by an agreement in
writing signed by Borrower and LaSalle. Borrower may not sell, assign or
transfer this Agreement, or the Other Agreements or any portion thereof
including, without limitation, Borrower's rights, titles, interest, remedies,
powers or duties thereunder. Borrower hereby consents to LaSalle's sale,
assignment, transfer or other disposition, at any time and from time to time
hereafter, of this Agreement, or the Other Agreements, or of any portion
thereof, or participations therein including, without limitation, LaSalle's
rights, titles, interests, remedies, powers and/or duties thereunder. Borrower
agrees that it shall execute and deliver such documents as LaSalle may request
in connection with any such sale, assignment, transfer or other disposition.
23. HEADINGS OF SUBDIVISIONS. The headings of subdivisions in this
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Agreement.
24. POWER OF ATTORNEY. Borrower acknowledges and agrees that its
appointment of LaSalle as its attorney and agent-in-fact for the purposes
specified in this Agreement is an appointment coupled with an interest and shall
be irrevocable until all of the Liabilities are paid in full and this Agreement
is terminated.
25. WAIVER OF JURY TRIAL; OTHER WAIVERS.
(a) LASALLE AND BORROWER HEREBY WAIVE ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY
ALLEGED TORTIOUS CONDUCT OF BORROWER OR LASALLE OR WHICH, IN ANY WAY, DIRECTLY
OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND
LASALLE. IN NO EVENT SHALL
37
LASALLE BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
(b) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY LASALLE OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF
BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
(c) Borrower hereby waives demand, presentment, protest and notice of
nonpayment with respect to any promissory note or other instrument, and further
waives the benefit of all valuation, appraisal and exemption laws.
(d) LaSalle's failure, at any time or times hereafter, to exercise any
of its rights or remedies (including the right to establish reserves or adjust
advance rates) or to require strict performance by Borrower of any provision of
this Agreement or any of the Other Agreements shall not waive, affect or
diminish any right of LaSalle thereafter to exercise such rights or remedies or
to demand strict compliance and performance therewith. Any suspension or waiver
by LaSalle of an Event of Default under this Agreement or any default under any
of the Other Agreements shall not suspend, waive or affect any other Event of
Default under this Agreement or any other default under any of the Other
Agreements, whether the same is prior or subsequent thereto and whether of the
same or of a different kind or character. No delay on the part of LaSalle in the
exercise of any right or remedy under this Agreement or any Other Agreement
shall preclude other or further exercise thereof or the exercise of any other
right or remedy. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any of
the Other Agreements shall be deemed to have been suspended or waived by LaSalle
unless such suspension or waiver is in writing, signed by a duly authorized
officer of LaSalle and directed to Borrower specifying such suspension or
waiver.
26. ADVERTISING. Subject to Borrower's prior consent, LaSalle may use
Borrower's name and trade names, together with variants of such name and related
logotypes in advertising promoting LaSalle and the business transaction between
LaSalle and Borrower through the use of so-called "tombstones" and similar
publicity. Borrower hereby releases LaSalle and its parent, subsidiaries,
affiliates, officers, employees and advertising agents, from any and all
liability to Borrower arising out of or related to the exercise of the rights
granted to LaSalle in this section.
38
27. BORROWER'S ACKNOWLEDGMENT. Borrower hereby acknowledges that it has
read and fully understands and accepts this Agreement and each and every
provision hereof. Borrower acknowledges that this Agreement and the Other
Agreements have been prepared by ▇▇▇▇▇▇ ▇▇▇▇ LLP on behalf of, and as counsel
for, LaSalle. Borrower further acknowledges that it has had a full and adequate
opportunity to have this Agreement reviewed by other attorneys of its choosing
and by all such other professionals of its choosing as Borrower has deemed
appropriate.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY
LASALLE AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS
WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY
THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED
BY LASALLE TO BE ENFORCEABLE.
ACCOM, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Title: CEO
------------------------------------
LASALLE BUSINESS CREDIT, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
Title: V.P.
------------------------------------
39
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT, dated as of December 10, 1998, is
made by ACCOM, INC., a corporation organized under the laws of the state of
Delaware ("Pledgor"), in favor of LASALLE BUSINESS CREDIT, INC., a corporation
organized under the laws of the state of Delaware ("Lender").
RECITALS
A. Lender has entered into, or is preparing to enter into, a
Loan and Security Agreement with Pledgor. Such Loan and Security Agreement, as
it now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, is referred to herein as the "Loan Agreement."
Capitalized terms not otherwise defined herein shall have the meanings provided
in the Loan Agreement.
B. As a condition to the making of Loans and the provision of
other financial accommodations pursuant to the Loan Agreement and Other
Agreements, Lender requires that Pledgor pledge and grant to Lender a first
priority security interest in all of the capital stock of Accom Virtual Studio,
Inc., a Delaware corporation ("AVS"), Accom Europe, Ltd., a United Kingdom
corporation, Accom International, Inc., a Barbados corporation, Accom Virtual
Studio GmbH, a German corporation ("AVS GmbH"), ELSET Electronic-Set GmbH, a
German corporation, which is owned by AVS and AVS GmbH, Accom Poland,
s.p.z.o.o., a Polish corporation, which is owned by AVS (collectively, the
"Subsidiaries").
AGREEMENT
Therefore, for valuable consideration, receipt and sufficiency
of which are acknowledged, Pledgor and Lender have agreed as follows:
1. Pledge. To secure payment and performance of the
Liabilities described in Section 2 below, Pledgor hereby irrevocably and
unconditionally pledges, assigns, hypothecates and transfers to Lender, and
grants to Lender a first and prior pledge and security interest in (a) all
shares of capital stock of each and every one of the Subsidiaries now or
hereafter owned beneficially or of record by Pledgor, including but not limited
to the shares described in Exhibit A attached hereto, (b) all proceeds thereof,
and (c) all distributions, dividends, increases and profits received therefrom
(collectively, the "Collateral").
2. Liabilities Secured. The Collateral shall secure payment
and performance of the following (collectively, the "Liabilities"):
a. All Revolving Loans and all other obligations,
liabilities and indebtedness of every kind, nature and description
owing by Pledgor to Lender and/or its affiliates, including principal,
interest, charges, fees, costs and expenses, however evidenced, whether
as principal, surety, endorser, guarantor or otherwise, whether arising
under the Loan Agreement or otherwise, whether now existing or
hereafter arising, whether arising before, during or after the initial
or any renewal term of the Loan Agreement or after the commencement of
any case with respect to Pledgor under the United States Bankruptcy
Code or any similar statute (including the payment of interest and
other amounts which would accrue and become due but for the
commencement of such case, whether or not such amounts are allowed or
allowable in whole or in part in such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, secured or unsecured,
and however acquired by Lender; and
b. All costs incurred by Lender to enforce this
Agreement, the Loan Agreement and the Other Agreements, and the pledge
and security interest granted hereby, to collect the Liabilities, and
to maintain, preserve, collect and enforce the Collateral, including
without limitation taxes, assessments, attorneys' fees, and expenses of
sale.
3. Representations and Warranties. Pledgor represents and
warrants that (a) it is the sole legal and beneficial owner of the Collateral;
(b) it has full power, authority and legal right to execute, deliver and perform
this Agreement; (c) the shares of stock pledged hereunder are duly authorized,
validly issued, fully paid and nonassessable; and (d) the pledge, assignment and
delivery of the Collateral create a valid first and prior perfected security
interest in the Collateral, and no other security agreement covering the
Collateral, or any part thereof, has been made, and no pledge or security
interest, other than the one herein created, has attached or been perfected in
the Collateral or in any part thereof. The delivery at any time by Pledgor to
Lender of Collateral shall constitute a representation and warranty by Pledgor
under this Agreement that, with respect to such Collateral, and each item
thereof, Pledgor is the sole legal and beneficial owner of the Collateral, and
that the matters warranted in this paragraph are then true and correct.
4. Covenants.
a. Affirmative Covenants. Pledgor covenants and
agrees (i) promptly to deliver to Lender all instruments, certificates,
documents or agreements evidencing any of the Collateral, together with
executed stock powers or assignments in form acceptable to Lender with
respect to all shares of capital stock included in the Collateral; (ii)
from time to time promptly to execute and deliver to Lender all such
other assignments, certificates, supplemental writings and financing
statements, and do all other acts or things, as Lender may request in
order more fully to evidence and perfect the security interest and
pledge herein created or to effect the purposes of this Agreement;
(iii) promptly to furnish Lender with any information or writings which
Lender may request concerning the Collateral; (iv) to allow Lender to
inspect all records of Pledgor relating to the Collateral, and to make
and take away copies of such records, at Pledgor's expense, at such
reasonable times and as often as may be reasonably requested by Lender;
(v) promptly to notify Lender of any change in any fact or
circumstances warranted or represented by Pledgor in this Agreement or
in any other writings furnished by or on
2
behalf of Pledgor to Lender in connection with the Collateral; and (vi)
promptly to notify Lender of any claim, action or proceeding affecting
title to the Collateral, or any part thereof, or Lender's interest
therein, and, at the request of Lender, to appear in and defend, at
Pledgor's expense, any such action or proceeding.
b. Negative Covenants. Pledgor covenants and agrees
that Pledgor will not (i) sell, assign or transfer any of Pledgor's
rights in the Collateral; (ii) create any other security interest or
pledge in, mortgage on, or otherwise encumber the Collateral or any
part thereof, or permit the same to be or become subject to any lien,
attachment, execution, sequestration, other legal or equitable process,
or any encumbrance of any kind or character; or (iii) cause, permit, or
suffer to be taken any action that would cause Pledgor to own less than
100 percent of the outstanding capital stock of any of the
Subsidiaries.
5. Rights to Dividends and Distributions. With respect to such
instruments which are stock certificates, bonds or other securities, Lender may
demand of the corporate obligor issuing the same, and may receive and receipt
for, any and all stock dividends and other distributions (other than cash
dividends) payable in respect thereof, whether ordinary or extraordinary. Lender
shall have the authority, following an Event of Default and without notice to
Pledgor, to have such certificates, bonds or other securities registered either
in Lender's name or in the name of a nominee. If, while this Agreement is in
effect, Pledgor shall become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate representing a stock
dividend or a distribution in connection with any reclassification, increase or
reduction of capital, or issued in connection with any reorganization), option
or rights, whether as an addition to, in substitution of, as a conversion of or
in exchange for any of the Collateral, or otherwise, Pledgor agrees to accept
the same as Lender's agent and to hold the same in trust on behalf of and for
the benefit of Lender, and to deliver the same forthwith to Lender in the exact
form received, with appropriate undated stock powers, duly executed in blank, to
be held by Lender, subject to the terms hereof, as additional Collateral for the
Liabilities. Until an Event of Default shall have occurred, Pledgor shall be
entitled to receive all cash dividends paid in respect of the Collateral. After
the occurrence of an Event of Default, Lender shall be entitled to all cash
dividends, and to any sums paid upon or in respect of the Collateral upon the
liquidation, dissolution or reorganization of the issuer thereof which shall be
paid to Lender to be held by it as additional Collateral for the Liabilities. In
case any distribution shall be made on or in respect of the Collateral pursuant
to the reorganization, liquidation or dissolution of the issuer thereof, the
property so distributed shall be delivered to Lender to be held by it as
additional Collateral for the Liabilities. After an Event of Default, all sums
of money and property so paid or distributed in respect of the Collateral which
are received by Pledgor shall, until paid or delivered to Lender, be held by
Pledgor in trust as additional Collateral for the Liabilities.
6. Preservation of Collateral. Lender shall not have any duty
to fix or preserve rights against prior parties to the Collateral, nor be liable
for any delay in the collection of, or failure to use diligence to collect on,
the Liabilities or any amount payable in respect of the Collateral.
3
7. Performance by Lender. Should Pledgor fail to perform any
covenant, duty or agreement of Pledgor in accordance with the terms of this
Agreement, Lender may, but shall not be obligated to, perform or attempt to
perform such covenant, duty or agreement on behalf of Pledgor, and any amount
expended by Lender in such performance or attempted performance shall become a
part of the Liabilities, shall be payable upon demand and shall bear interest at
a per annum rate equal to the highest rate payable under the Loan Agreement.
8. Voting Rights. It is expressly understood and agreed that
Pledgor shall retain all voting rights with respect to the Collateral until the
occurrence of an Event of Default, at which time such voting rights shall
transfer to Lender, at its sole discretion; provided, however, that no voting or
corporate rights shall be exercised, vote cast, or consent, waiver or
ratification given or action taken by Pledgor that would impair the Collateral
or be inconsistent with or violate any provision of this Agreement or any Other
Agreements.
9. Power of Attorney. PLEDGOR HEREBY IRREVOCABLY GRANTS TO
LENDER PLEDGOR'S PROXY (EXERCISABLE FROM AND AFTER THE OCCURRENCE OF AN EVENT OF
DEFAULT WHICH IS CONTINUING) TO VOTE ANY COLLATERAL AND APPOINTS LENDER
PLEDGOR'S ATTORNEY-IN-FACT WITH POWER OF SUBSTITUTION TO PERFORM ALL LIABILITIES
OF PLEDGOR UNDER THIS AGREEMENT AND TO EXERCISE ALL OF LENDER'S RIGHTS
HEREUNDER. THE PROXY AND POWER OF ATTORNEY HEREIN GRANTED (INCLUDING ANY
EVIDENCED BY A SEPARATE WRITING) ARE COUPLED WITH AN INTEREST AND ARE
IRREVOCABLE PRIOR TO FINAL PAYMENT IN FULL OF THE LIABILITIES.
10. Rights and Remedies. Upon the occurrence of an Event of
Default, in addition to any and all other rights and remedies which Lender may
then have hereunder, under any Other Agreements, under applicable law or
otherwise, Lender at its option may, subject to any limitation or restriction
imposed by any applicable bankruptcy, insolvency or other law relating to the
relief of debtors, (a) obtain from any Person information regarding Pledgor, any
issuer of the Collateral, or any of their businesses, which information any such
Person may furnish without liability to Pledgor; (b) require Pledgor to give
possession or control of any of the Collateral to Lender; (c) take control of
funds generated by the Collateral and any other proceeds and exercise all other
rights which an owner of such Collateral may exercise; (d) declare the entire
unpaid balance of principal and interest of the Liabilities immediately due and
payable, without notice, demand or presentment, which are hereby expressly
waived; (e) reduce its claim to judgment, foreclose or otherwise enforce its
security interest in all or any part of the Collateral by any available judicial
procedure; (f) after notification, if any, provided for in this Agreement or any
Other Agreements, sell or otherwise dispose of, at the office of Lender, or at
such other location as Lender may select, all or any part of the Collateral, and
any such sale or other disposition shall be in accordance with applicable law,
and may be as a unit or in parcels, by public or private proceedings, and by way
of one or more contracts (it being agreed that the sale of any part of the
Collateral shall not exhaust Lender's power of sale, but sales may be made from
time to time until all of the Collateral has been sold or until the Liabilities
have been paid in full), and at any such sale it shall not be necessary to
exhibit the Collateral; (g) at its discretion, retain the Collateral in
satisfaction of the Liabilities whenever the circumstances are such that Lender
is
4
entitled to do so under applicable law; (h) apply by appropriate judicial
proceedings for appointment of a receiver for the Collateral, or any part
hereof, and Pledgor hereby consents to any appointment; (i) buy the Collateral
at any public sale; and (j) buy the Collateral at any private sale, subject to
any restrictions imposed by applicable law. Pledgor agrees that, if notice is
required to be given by applicable law, 20 days' advance written notice shall
constitute reasonable notice. Lender shall apply the proceeds of any collection,
sale, disposition or other realization upon any Collateral as follows:
First, to the payment of the costs and expenses of
such collection, sale, disposition, or other realization,
including reasonable out-of-pocket costs and expenses of
Lender and the fees and expenses of its agents and counsel;
Next, to the payment of the Liabilities; and
Finally, to the payment to Pledgor, or its successors
or assigns, or as a court of competent jurisdiction may
direct, of any surplus then remaining.
If the proceeds of collection, sale, disposition, or other realization are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Liabilities, Pledgor shall be liable for any deficiency.
11. Securities Laws; Transfer.
a. Immediately upon the occurrence of a Event of
Default, Pledgor hereby grants to Lender the right to have the
Collateral, or any portion thereof, registered and sold under the
Securities Act of 1933, as amended ("Securities Act"), or under any
applicable state blue sky laws. If Lender shall determine to exercise
its right to sell any or all of the Collateral pursuant to the terms
hereof, and if in the reasonable opinion of Lender it is necessary or
advisable to have the Collateral (or that portion thereof to be sold)
registered under the provisions of the Securities Act, Pledgor will
cause the issuer of the Collateral to execute and deliver, and cause
the directors and officers thereof to execute and deliver all such
instruments and documents, and to do or cause to be done all such other
acts and things as may be necessary or, in the opinion of Lender
advisable, to register such Collateral under the provisions of the
Securities Act and to cause the registration statement relating thereto
to become effective and to remain effective for a period of one year
from the date of the first public offering of such Collateral, or that
portion thereof to be sold, and to make all amendments thereto and/or
to the related prospectus which, in the opinion of Lender, are
necessary or advisable, all in conformity with the requirements of
applicable law. Pledgor shall be liable for any costs and expenses
incurred in connection with the registration of the Collateral pursuant
to this paragraph (a). Pledgor agrees to cause the issuer of the
Collateral to comply with the provisions of the securities or "blue
sky" laws of any jurisdiction which Lender shall designate and to cause
the issuer of the Collateral to make available to its security holders,
as soon as practicable, an earnings statement which will satisfy the
provisions of Section 11(a) of the Securities Act.
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b. Pledgor recognizes that Lender may be unable to
effect a public sale of any or all of the Collateral by reason of
certain prohibitions contained in the Securities Act and applicable
state securities laws, but may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers who will be
obliged to agree, among other things, to acquire such Collateral for
their own account for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges and agrees that
any such private sale conducted in the manner described herein may
result in prices and other terms less favorable to the seller than if
such sale were a public sale. Lender shall be under no obligation to
delay a sale of any of the Collateral for the period of time necessary
to permit the issuer of the Collateral to register such Collateral for
public sale under the Securities Act, or under applicable state
securities laws, even if the issuer of the Collateral would agree to do
so.
c. Pledgor further agrees to do or cause to be done
all such other acts and things as may be necessary to make any sales of
any portion or all of the Collateral pursuant to paragraphs (a) and (b)
of this Section valid and binding and in compliance with any and all
applicable laws (including, without limitation, the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the
Securities and Exchange Commission applicable thereto), regulations,
orders, writs, injunctions, decrees or awards of any and all courts,
arbitrators or governmental instrumentalities, domestic or foreign,
having jurisdiction over any such sale or sales. Pledgor further agrees
that a breach of any of the covenants contained in this section will
cause irreparable injury to Lender and that Lender may not have an
adequate remedy at law in respect of such breach. As a consequence,
Pledgor agrees that each and every covenant contained in this section
shall be specifically enforceable against Pledgor. Pledgor hereby
waives and agrees not to assert any defenses against an action for
specific performance of such covenants.
d. Pledgor agrees (i) that in the event Lender shall,
upon any Event of Default, sell the Collateral or any portion thereof,
at a private sale or sales, Lender shall have the right to rely upon
the advice and opinion of a member of a nationally recognized
investment banking firm acceptable to Lender, as to the best price
reasonably obtainable upon such a private sale thereof, and (ii) in the
absence of fraud, willful misconduct and gross negligence, that such
reliance shall be conclusive evidence that Lender handled such matter
in a commercially reasonable manner under the Uniform Commercial Code.
12. Notice. Notification of the time and place of any public
sale of the Collateral, or reasonable notification of the time after which any
private sale or other intended disposition of the Collateral is to be made,
shall be sent to Pledgor and to any other Person entitled under applicable law
to notice.
13. Lender's Duties. The powers conferred on Lender hereunder
are solely to protect its interest in the Collateral and Lender shall not have
any duty to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for monies actually received by
it hereunder, Lender shall have no duty as to any Collateral, as to
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ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders, or other matters relative to any Collateral, whether or not
Lender has or is deemed to have knowledge of such matters, or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to any reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which Lender accords its own property. Except as set
forth herein, Lender shall not have any duty or liability to protect or preserve
any Collateral or to preserve rights pertaining thereto. Nothing contained in
this Agreement shall be construed as requiring or obligating Lender, and Lender
shall not be required or obligated, (a) to present or file any claim or notice
or take any action, with respect to any Collateral or in connection therewith or
(b) to notify Pledgor of any decline in the value of any Collateral.
14. Cumulative Rights. All rights and remedies of Lender
hereunder are cumulative of each other and of every other right or remedy which
Lender may otherwise have at law or in equity or under any other contract or
other writing for the enforcement of the pledge and security interest herein
granted or the collection of the Liabilities, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
15. Waiver. Should any part of the Liabilities be payable in
installments, the acceptance at any time and from time to time of partial
payment of the aggregate amount of all installments then matured shall not be
deemed a waiver of any Event of Default then existing. No waiver by Lender of
any Event of Default shall be deemed to be a waiver of any other subsequent
Event of Default, nor shall any such waiver by Lender be deemed to be a
continuing waiver. No delay or omission by Lender in exercising any right or
power hereunder, or under any Other Agreements, shall impair any such right or
power or be construed as a waiver thereof or an acquiescence therein, nor shall
any single or partial exercise of any such right or power preclude other or
further exercise thereof, or the exercise of any other right or power of Lender
hereunder or under such other writings.
16. Interest: Limitation of Law. No provision herein or in any
Other Agreements shall require the payment or permit the collection of interest
in excess of the maximum permitted by applicable law. If, in any contingency
whatsoever, Lender shall receive anything of value from Pledgor deemed interest
under applicable law which would exceed the maximum amount of interest
permissible under applicable law, the pertinent provisions of the Loan Agreement
shall govern.
17. Parties Bound. This Agreement shall be binding on Pledgor
and its successors and assigns, and shall inure to the benefit of Lender, and
its successors and assigns; provided, however, that Pledgor may not assign its
rights or delegate its Liabilities hereunder without the prior written consent
of Lender. The rights, powers and interests held by Lender hereunder may be
transferred and assigned by Lender, in whole or in part, at such time and upon
such terms as permitted by the Loan Agreement.
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18. Notice. Except as otherwise provided herein, notice shall
be deemed effective if sent by certified mail, return receipt requested, postage
prepaid, or by a reputable commercial overnight delivery service, to the address
of Pledgor given on the signature page below.
19. Waivers by Pledgor. Pledgor waives all rights of appraisal
or valuation and waives any requirement that Lender exhaust any right or take
any action against any other Person or any collateral or pursue any other remedy
in Lender's power whatsoever before exercising its rights under this Agreement.
20. Modifications. No provision hereof shall be modified or
limited except by a written agreement expressly referring hereto and to the
provisions so modified or limited and signed by Lender.
21. Pledge Absolute. The pledge, assignment and security
interest granted pursuant to this Agreement shall be absolute and unconditional
irrespective of, and shall not be impaired, modified or otherwise affected by:
a. the taking or accepting of any other security or
guaranty for any or all of the Liabilities;
b. any increase, reduction or payment at any time or
from time to time of any part of the Liabilities;
c. any lack of validity or enforceability of the Loan
Agreement or any of the Other Agreements or other agreement or
instrument relating thereto, including but not limited to the
unenforceability of all or any part of the Liabilities by reason of the
fact that (i) the Liabilities, and/or the interest paid or payable with
respect thereto, exceeds the amount permitted by applicable law, (ii)
the act of creating the Liabilities, or any part thereof, is ultra
▇▇▇▇▇, (iii) the officers creating same acted in excess of their
authority, or (iv) for any other reason;
d. any lack of corporate power of Pledgor or any
other Person at any time liable for the payment of any or all of the
Liabilities;
e. any insolvency, bankruptcy, reorganization,
receivership or other proceeding under any applicable liquidation,
conservatorship, bankruptcy, moratorium, arrangement, receivership,
insolvency, reorganization, or similar laws from time to time in effect
affecting the rights of creditors generally (collectively, "Debtor
Relief Laws") involving Pledgor or the issuer of any of the Collateral;
f. any renewal, compromise, extension, acceleration
or other change in the time, manner or place of payment of, or in any
other term of, all or any of the Liabilities; any adjustment,
indulgence, forbearance, or compromise that may be granted or given by
Lender to Pledgor, or any Person at any time liable for the payment of
any or
8
all of the Liabilities; or any other modification, amendment, or waiver
of or any consent to departure from the Loan Agreement, or any of the
Other Agreements and any other agreement or instrument relating
thereto;
g. any exchange, release, sale, subordination, or
non-perfection of any collateral or any lack of validity or
enforceability or change in priority, destruction, reduction, or loss
or impairment of value of any collateral;
h. any release or amendment or waiver of or consent
to departure from any guaranty for all or any of the Liabilities;
i. the failure by Lender to make any demand upon or
to bring any legal, equitable, or other action against Pledgor or any
other Person, or the failure or delay by Lender to, or the manner in
which Lender shall, proceed to exhaust rights against any direct or
indirect security for the Liabilities;
j. any failure of Lender to notify Pledgor of any
renewal, extension, or assignment of the Liabilities or any part
thereof, or the release of any security, or of any other action taken
or refrained from being taken by any Lender; or
k. any payment by Pledgor to Lender is held to
constitute a preference under any Debtor Relief Law or if for any other
reason Lender is required to refund such payment or pay the amount
thereof to another Person.
22. Governing Law. The validity, interpretation and
enforcement of this Agreement and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of Oregon (without giving
effect to principles of conflicts of law).
23. Jurisdiction. Pledgor and Lender irrevocably consent and
submit to the jurisdiction of the Circuit Courts of the State of Oregon for
Multnomah County and Clackamas County and the United States District Court for
the District of Oregon and waive any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this
Agreement or in any way connected with or related or incidental to the dealings
of the parties hereto in respect of this Agreement or the transactions related
hereto or thereto, in each case whether now existing or hereafter arising, and
whether in contract, tort, equity or otherwise, and agree that any dispute with
respect to any such matters shall be heard only in the courts described above
(except that Lender shall have the right to bring any action or proceeding
against Pledgor or its property in the courts of any other jurisdiction which
Lender deems necessary or appropriate in order to realize on the Collateral or
to otherwise enforce its rights against Pledgor or its property).
24. Service. Pledgor hereby waives personal service of any and
all process and consents that all such service of process may be made by
certified mail (return receipt requested) directed to Pledgor's address set
forth on the signature page hereof, and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited
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in the U.S. mails, or, at Lender's option, by service upon Pledgor in any other
manner provided under the rules of any such courts. Within thirty (30) days
after such service, Pledgor shall appear in answer to such process, failing
which Pledgor shall be deemed in default and judgment may be entered by Lender
against Pledgor for the amount of the claim and other relief requested.
25. Jury Trial Waiver. PLEDGOR AND LENDER EACH HEREBY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i)
ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR
THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. PLEDGOR
AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT
PLEDGOR OR LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
26. Limitation of Liability. Lender shall not have any
liability to Pledgor (whether in tort, contract, equity or otherwise), for
losses suffered by Pledgor in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by this Agreement, or
any act, omission or event occurring in connection herewith, unless it is
determined by a final and non-appealable judgment or court order binding on
Lender, that the losses resulted solely from acts or omissions constituting
gross negligence or willful misconduct. In any such litigation, Lender shall be
entitled to the benefit of the rebuttable presumption that it acted in good
faith and with the exercise of ordinary care in the performance by it of the
terms of this Agreement.
27. Entire Agreement. THIS AGREEMENT, TOGETHER WITH THE OTHER
AGREEMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
BETWEEN THE PARTIES.
(Signatures on following page.)
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IN WITNESS WHEREOF, Pledgor and Lender have executed this
Pledge Agreement as of the date first above written.
ACCOM, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Title: CEO
-------------------------------
Address of Pledgor:
▇▇▇▇ ▇'▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
LASALLE BUSINESS CREDIT, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------
Title: V.P.
-------------------------------
Address of Lender:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
REVOLVING PROMISSORY NOTE
Amount $7,500,000 December 10, 1998
FOR VALUE RECEIVED, the Undersigned (jointly and severally, if
more than one) promises to pay to the order of LASALLE BUSINESS CREDIT, INC.
(hereinafter, together with any holder hereof, called "LaSalle"), at the main
office of the LaSalle, the principal sum of SEVEN MILLION FIVE HUNDRED THOUSAND
DOLLARS ($7,500,000) plus the aggregate unpaid principal amount of all advances
made by LaSalle to the Undersigned pursuant to and in accordance with Paragraph
2 of the Loan Agreement (as hereinafter defined) in excess of such amount, or,
if less, the aggregate unpaid principal amount of all advances made by LaSalle
to the Undersigned pursuant to and in accordance with Paragraph 2 of the Loan
Agreement. The Undersigned further promise(s) to pay interest on the outstanding
principal amount hereof on the dates and at the rates provided in the Loan
Agreement from the date hereof until payment in full hereof.
This Revolving Promissory Note is referred to in and was
delivered pursuant to that certain Loan and Security Agreement, as it may be
amended from time to time, together with all exhibits thereto, dated December
10, 1998, between LaSalle and the Undersigned (the "Loan Agreement"). All terms
which are capitalized and used herein and (which are not otherwise defined
herein) shall have the meanings ascribed to such terms in the Loan Agreement.
Prior to maturity, principal hereunder shall be payable
pursuant to the terms of the Loan Agreement. This Note shall immediately mature,
and the full remaining balance hereof shall become immediately due and payable
without demand, upon the earlier of the expiration or termination of the Loan
Agreement or the acceleration of the liabilities of the Undersigned pursuant to
terms of the Loan Agreement.
The Undersigned hereby authorize(s) LaSalle to charge any
account of the Undersigned for all sums due hereunder. If payment hereunder
becomes due and payable on a Saturday, Sunday or legal holiday under the laws of
the United States or the State of Oregon, the due date thereof shall be extended
to the next succeeding business day, and interest shall be payable thereon at
the rate specified during such extension. Credit shall be given for payments
made in the manner and at the times provided in the Loan Agreement. It is the
intent of the parties that the rate of interest and other charges to the
Undersigned under this Note shall be lawful; therefore, if for any reason the
interest or other charges payable hereunder are found by a court of competent
jurisdiction, in a final determination, to exceed the limit which LaSalle may
lawfully charge the Undersigned, then the obligation to pay interest or other
charges shall automatically be reduced to such limit and, if any amount in
excess of such limit shall have been paid, then such amount shall be refunded to
the Undersigned.
Principal of this Note may only be prepaid if the Undersigned
pays a prepayment fee as provided in the Loan Agreement.
The Undersigned waive(s) the benefit of any law that would
otherwise restrict or limit LaSalle in the exercise of its right, which is
hereby acknowledged, to set-off against the Liabilities, without notice and at
any time hereafter, any indebtedness matured or unmatured owing from LaSalle to
the Undersigned. The Undersigned waive(s) every defense, counterclaim or setoff
which the Undersigned may now have or hereafter may have to any action by
LaSalle in enforcing this Note and/or any of the other Liabilities, or in
enforcing LaSalle's rights in the Collateral and ratifies and confirms whatever
LaSalle may do pursuant to the terms hereof and of the Loan Agreement and with
respect to the Collateral and agrees that LaSalle shall not be liable for any
error or omission unless caused by or resulting from the willful misconduct or
gross negligence of LaSalle.
The Undersigned, any other party liable with respect to the
Liabilities and any and all endorsers and accommodation parties, and each one of
them, if more than one, waive any and all presentment, demand, notice of
dishonor, protest, and all other notices and demands in connection with the
enforcement of LaSalle's rights hereunder.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL
LAWS OF THE STATE OF OREGON AS TO INTERPRETATION, ENFORCEMENT, VALIDITY,
CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING WITHOUT LIMITATION,
THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, and shall be binding upon
the Undersigned and the Undersigned's successors and assigns. If this Note
contains any blanks when executed by the Undersigned, LaSalle is hereby
authorized, without notice to the Undersigned, to complete any such blanks
according to the terms upon which the loan or loans were granted. Wherever
possible, each provision of this Note shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Note
shall be prohibited by or be invalid under such law, such provision shall be
severable, and shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remaining provisions of this Note. If more
than one party shall execute this Note, the term "Undersigned" as used herein
shall mean all parties signing this Note, and each one of them, and all such
parties, their respective successors and assigns, shall be jointly and severally
obligated hereunder.
To induce LaSalle to make the loan evidenced by this Note, the
Undersigned (i) irrevocably agree(s) that, subject to LaSalle's sole and
absolute election, all actions arising directly or indirectly as a result or in
consequence of this Note or any other agreement with LaSalle, or the Collateral,
shall be instituted and litigated only in courts having situs in Clackamas or
Multnomah County, Oregon, (ii) hereby consent(s) to the exclusive jurisdiction
and venue of any State or Federal Court located and having its situs in said
counties, and (iii) waive(s) any objection based on forum non-conveniens. IN
ADDITION, THE UNDERSIGNED HEREBY WAIVE(S) TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS NOTE, THE LIABILITIES,
THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY THE UNDERSIGNED OR LASALLE OR
WHICH IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE
RELATIONSHIP BETWEEN THE
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UNDERSIGNED AND LASALLE, waive(s) personal service of any and all process, and
consent(s) that all such service of process may be made by certified mail,
return receipt requested, directed to the Undersigned at the address indicated
in LaSalle's records; and service so made shall be complete five (5) days after
the same has been deposited in the U.S. mails as aforesaid.
As used herein, all provisions shall include the masculine,
feminine, neuter, singular and plural thereof, wherever the context and facts
require such construction and in particular the word "Undersigned" shall be so
construed.
IN WITNESS WHEREOF, each of the Undersigned, if more than one,
has executed this Note on the date above set forth.
ACCOM, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
Title: CEO
------------------------------------
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