Exhibit 99.2
Date: January 24, 2002
▇▇▇▇▇▇▇▇▇▇/LANSING COMPANY
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ACCOUNTS RECEIVABLE FINANCING AGREEMENT
---------------------------------------
Gentlemen:
In consideration of our extending loans and other financial accommodations to
you on one or more occasions, in our sole discretion exercised by us in
accordance with our reasonable business judgment in each instance, the following
shall constitute the accounts receivable financing agreement (the "Agreement")
between us.
I. DEFINITIONS
1.1 All terms used herein and defined in the Uniform Commercial Code shall
have the meanings given therein unless otherwise defined herein.
1.2 "Accounts" shall mean and include all of your accounts created by or
arising from your sales of goods or rendition of services (including, without
limitation, all accounts arising from sales made or services rendered under any
of your tradenames or styles, or through any of your divisions), instruments,
documents, chattel paper (including electronic chattel paper), general
intangibles (including, without limitation, all federal, state and local income
tax refunds, payment intangibles and all other rights to payment), and all forms
of obligations owing to you, whether secured or unsecured, all whether now
existing or hereafter created or arising, and whether or not specifically
assigned to us hereunder.
1.3 "Chase Rate" shall mean the per annum rate of interest publicly
announced by JPMorganChase Bank (or any successor thereof) in New York, New
York, from time to time as its prime rate. (The prime rate is not intended to be
the lowest rate of interest charged by JPMorganChase Bank to its borrowers.)
1.4 "Collateral" shall mean and include: (a) Accounts; (b) all of your
present and future monies, securities and other property now or hereafter held
or received by or in transit to us from or for your account, whether for
1
safekeeping, pledge, custody, transmission, collection or otherwise; (c) all of
your present and future deposits, balances, sums and credits in our possession
or control, and all of your present and future claims against us; (d) all of
your present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of all present and future Accounts and other
Collateral, including, without limitation: (i) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit, credit
insurance, supporting obligations, letter of credit rights or other types of
credit enhancements, (ii) rights of stoppage in transit, rescission, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (iii) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing Accounts
or other Collateral, including, without limitation, returned, repossessed and
reclaimed goods, and (iv) deposits by and property of Customers or other persons
securing the Obligations of Customers; (e) all of your right, title and interest
in, to and in respect of any and all other real or personal property in or upon
which you have granted or may hereafter grant a security interest or lien to us
in this Agreement or otherwise; (f) all of your books of account of every kind
or nature, purchase and sale agreements, invoices, ledger cards, computer
programs, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data (written, electronic or
otherwise) relating to the Collateral or any Customer, together with the file
cabinets or containers in which the foregoing are stored ("Records"); (g) all of
your present and future general intangibles, including patents, trademarks, and
copyrights whether or not registered in the United States Copyright or Patent
Offices, the goodwill of the business in connection with which such patents,
trademarks, and copyrights are or may be used, and any royalties and other fees
which are or may become due for the use of any such patents, trademarks, or
copyrights; (h) investment property, including any stock of your wholly owned
subsidiaries; (i) any collateral and assets, including without limitation
securities and cash equivalents, pledged to us as additional collateral security
for your Obligations hereunder by any guarantor or pledgor; and (j) all proceeds
and products of the foregoing, in any form, including, without limitation,
insurance proceeds and any claims against third parties for loss or damage to or
destruction of any or all of the foregoing.
1.5 "Customer" shall mean and include the account debtor with respect to
any of the Accounts and/or the prospective purchaser or user of goods, services
or both with respect to any contract or contract right, and/or any party who
enters into or proposes to enter into any contract or other arrangement with
you, pursuant to which you are to deliver any personal property or perform any
services.
1.6 "Eligible Accounts" shall mean such Accounts arising in the ordinary
course of your business and which we, in our sole discretion, deem to be
Eligible Accounts based on such considerations as we may from time to time deem
appropriate, including that it is evidenced by an invoice or other documentation
satisfactory to us. An Account shall not be deemed eligible in any event unless
such Account is subject to our first priority perfected security interest and is
not subject to any other lien or security interest. In addition, no Account
shall be an Eligible Account if:
2
(i) it arises out of a sale made by you to your affiliate or to a
person controlled by you or your affiliate; or
(ii) it is due or unpaid more than one hundred twenty (120) days after
invoice date or sixty (60) days after the due date; or
(iii) more than fifty percent (50%) of the Accounts owed by such
Customer are not deemed to be Eligible Accounts hereunder; or
(iv) any representation, warranty or covenant contained in this
Agreement with respect to such Account has, in our sole
discretion, been breached; or
(v) the Customer is also your creditor or supplier (unless prior to
our acceptance, a no-offset letter has been received by and is,
in our sole discretion, acceptable to us); or
(vi) the Customer shall (a) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a
substantial part of its property or call a meeting of its
creditors, (b) admit in writing its inability, or be generally
unable, to pay its debts as they become due, (c) cease or
materially decrease operation of its present business, (d) make a
general assignment for the benefit of creditors, (e) commence a
voluntary case under any State or Federal bankruptcy or
insolvency law (as now or hereafter in effect), (f) be
adjudicated a bankrupt or insolvent, (g) file a petition seeking
to take advantage of any other law providing for the relief of
debtors, (h) acquiesce to, or fail to have dismissed, any
petition which is filed against it in an involuntary case under
any such bankruptcy or insolvency law, or (i) take any action for
the purpose of effecting any of the foregoing; or
(vii) it arises out of a sale made by you to a Customer outside the
United States provided that sales to Customers located in Canada
or Puerto Rico, which otherwise comply with the terms hereof and
which do not exceed $75,000 in the aggregate for sales by you and
your affiliate Westwater Industries, Inc., unless the payment
thereof is assured by a letter of credit, guaranty or acceptance
on terms acceptable to us in our sole discretion; or
(viii) it arises out of a sale made by you to a Customer on a
▇▇▇▇-and-hold, guaranteed sale, sale-and-return, sale on
approval, consignment or any other repurchase or return basis or
is evidenced by chattel paper; or
(ix) we, in our sole discretion, determine that collection of such
Account is insecure or that payment of such Account may not be
made by reason of the Customer's financial inability to pay; or
3
(x) the Customer is the United States of America, any state, any
other governmental entity, or any department, agency or
instrumentality of any of them, unless you assign to us, in a
manner acceptable to us, your right to payment of such Account
pursuant to the Assignment of Claims Act of 1940, as amended, or
any other applicable statute, rule, regulation or the like; or
(xi) the goods giving rise to such Account have not been shipped and
delivered to and accepted by the Customer or the services giving
rise to such Account have not been completely performed by you
and accepted by the Customer or the Account otherwise does not
represent a final sale or performance; or
(xii) the Accounts from such Customer exceed a credit limit determined
by us, in our sole discretion and exercised by us in our
reasonable business judgment, to the extent such Account exceeds
such limit; or
(xiii) the Customer has disputed liability, or the Customer has made any
claim with respect to any other Account due from such Customer to
you, or the Account otherwise is or may become subject to any
set-off or recoupment by the Customer, or the Account is
contingent in any respect or for any reason; or
(xiv) you have allowed or made any agreement with any Customer for any
deduction therefrom, except for discounts or allowances made in
the ordinary course of business for prompt payment, all of which
discounts or allowances are reflected in the calculation of the
face value of each respective invoice related thereto.
1.7 "Net Amount of Eligible Accounts" shall mean and include the gross
amount of Eligible Accounts less (a) returns, discounts, claims, credits and
allowances of any nature at any time issued, owing, granted, outstanding,
available or claimed with respect thereto, (b) amounts thereof which are not
paid by the subject Customer due to an existing or alleged dispute, offset,
recoupment or counter-claim, and (c) any reserves which we, in our sole
discretion, deem necessary or desirable to maintain with respect thereto,
including, without limitation, reserves for any sales, excise or similar taxes
included in the amount thereof.
1.8 "Obligations" shall mean and include: (a) any and all of your
indebtedness, liabilities and obligations to us of every kind, nature and
description, direct or indirect, secured or unsecured, joint or several,
absolute or contingent, due or to become due, now existing or hereafter arising,
regardless of how they arise or were acquired or by what agreement or instrument
they may be evidenced or whether evidenced by any agreement or instrument,
including, but not limited to, all amounts owing by you to us by reason of
purchases made by you from other entities factored or financed by us, (b) any
and all of your obligations to perform acts or refrain from taking any action,
and (c) any and all amounts of charges, commissions, interest, costs, expenses
4
and attorneys' fees chargeable in connection with all of the foregoing, all of
which indebtedness, liabilities, obligations and amounts, whether or not matured
and whether or not disputed, may be charged to your account hereunder, without
prior notice to you.
II. GRANT OF SECURITY INTEREST
2.1 To secure the prompt payment, performance and observance in full of all
Obligations, you hereby pledge, transfer, set over and assign to us, and grant
to us a continuing general security interest in, a lien upon and a right of
set-off against, all of the Collateral. Records shall, until delivered to or
removed by us, be kept by you in trust for us and without cost to us in
appropriate containers in safe places on your premises. Each confirmatory
assignment schedule or other form of assignment at any time executed by you
shall be deemed to include the foregoing pledge, transfer, assignment and grant
whether or not same appears therein.
2.2 You will, upon the creation of each Account, or at such intervals as we
may from time to time require, provide us with: (a) confirmatory assignment
schedules; (b) copies of all documents (whether maintained in written or
electronic form) evidencing the sale and delivery of goods or the performance of
services which created any Accounts, including, but not limited to, contracts,
orders, invoices, bills of lading, warehouse receipts, delivery tickets and
shipping receipts; and (c) such further schedules and/or information as we may
reasonably request. The items to be provided under this paragraph are to be in
form satisfactory to us and executed and delivered to us from time to time so
that we can confirm and maintain records of the Collateral. Your failure to give
any of such items to us or to otherwise comply with the provisions hereof shall
not affect, terminate, modify, diminish or otherwise limit our lien upon or
security interest in the Collateral, or your representations, warranties or
covenants under this Agreement.
III. ADVANCES AND INTEREST
3.1 Subject to the terms and conditions of this Agreement, we shall make up
to an aggregate of $7,500,000.00 (the "Maximum Credit Facility") available to
you and your affiliates, Westwater Industries, Inc. (under our separate Accounts
Receivable Financing Agreement with such borrower) and Carlyle Industries, Inc.
(under our separate Financing Agreement with such borrower) (available to each
such affiliate under their respective financing agreements)upon request
therefor, as follows:
(a) we will make revolving credit advances to you, in our sole
discretion exercised by us in accordance with our reasonable
business judgment, in amounts of up to eighty-five percent (85%)
of the Net Amount of Eligible Accounts.
(b) subject to your execution and delivery of an inventory security
agreement supplement in form and substance satisfactory to us, we
will make revolving credit advances to you, in our sole
discretion exercised by us in accordance with our reasonable
5
business judgment, in amounts of up to twenty percent (20%) of
the value of your Eligible Inventory (as hereinafter defined)
calculated on the basis of the lower of cost or market, with cost
calculated on a first in-first out basis. (For purposes hereof,
"Eligible Inventory" shall mean such of your inventory which we,
in our sole discretion exercised by us in accordance with our
reasonable business judgment, deem to be Eligible Inventory based
on such considerations as we may from time to time deem
appropriate.)
(c) subject to your execution and delivery of a letter of credit
security agreement supplement in form and substance satisfactory
to us, we will, in our sole discretion exercised by us in
accordance with our reasonable business judgment, assist you in
establishing or opening letters of credit for your account or
guarantee the payment or performance of such letters of credit up
to an aggregate face amount not exceeding $500,000 at any one
time outstanding to you and your affiliate Westwater Industries,
Inc. Credit extended under this sub-paragraph will be deducted
from credit available under sub-paragraphs (a) and (b) above.
3.2 Without in any way circumscribing our rights under this Agreement, and
by way of illustration only and not by way of limitation, we may, in the
exercise of our sole discretion, at any time and from time to time, hold any
reserve we deem necessary as security for the payment and performance of your
Obligations, and/or change any advance rates or entirely cease making advances
(including, without limitation, any overadvances). In no event shall the
aggregate amount of all revolving credit advances (including, without
limitation, any overadvances) made pursuant to paragraph 3.1 (a) and (b) above,
plus the aggregate face amount of letters of credit issued or guaranteed
pursuant to paragraph 3.1(c) above, from time to time outstanding, exceed the
Maximum Credit Facility.
3.3 All loans and advances (including, without limitation, any
overadvances) by us to you under this Agreement shall constitute Obligations
secured by our security interest in all of the Collateral granted hereunder, and
by all other security interests, liens, and encumbrances heretofore, now or at
any time or times hereafter granted by you to us. All loans or advances
(including, without limitation, any overadvances) shall be charged to your
account on our books, and shall be payable on demand at our offices or at such
other place as we may from time to time designate.
3.4 Interest shall be payable by you (and charged to your account as of the
end of each month) on the average of the net balances owing by you to us in your
account at the close of each day during such month. The rate of interest shall
be one-half of one percent (.50%) per annum in excess of the Chase Rate but in
no event less than five percent (5%) per annum. Any change in the rate of
interest hereunder due to a change in the Chase Rate shall take effect as of the
first of the month following such change in the Chase Rate. Interest shall be
calculated based on a 360-day year. Interest shall be charged on all advances
(including, without limitation, any overadvances), all charges hereunder, and
any debit balance in your account. We shall be entitled to charge your account
at the rate provided for herein until all Obligations have been paid and
6
satisfied in full. In no event shall the rate charged hereunder exceed the
highest rate permissible under applicable law; however, in the event that we
receive or have received interest hereunder in excess of the highest rate
permissible under applicable law, your sole remedy shall be to seek repayment of
such excess, and you hereby waive any and all other rights and remedies which
may be available to you under law or in equity.
3.5 In addition to the fees and charges under this Agreement, you and your
affiliates Carlyle Industries, Inc. and Westwater Industries, Inc., agree to pay
to us, jointly and severally, as of the date hereof, a Documentation Fee in the
aggregate amount of $10,000.00 to compensate us for the use of our in-house
legal department and facilities in documenting the respective financing
agreements.
3.6 You and your affiliates Carlyle Industries, Inc. and Westwater
Industries, Inc., agree to pay to us, jointly and severally, a Monthly
Collateral Management Fee in an aggregate amount of $2,500.00, which shall be
due and payable by you on the first day of each month and shall be charged to
your account as of such date. As an accommodation to you and your affiliates,
and subject to our rights hereunder, we shall charge your account with your pro
rata share thereof on such date in the amount of $833.34. Such facility fee
shall be deemed earned as of the first day of each month and shall not be
subject to rebate or proration for any reason.
3.7 We shall render to you each month a statement of your account which
shall be deemed to be correct and accepted by and binding upon you, and shall
constitute an account stated between us except to the extent that we receive a
written statement of your specific exceptions within sixty (60) days after such
statement has been rendered to you.
IV. REPRESENTATIONS, WARRANTIES AND COVENANTS
You hereby make the following representations, warranties and covenants which
shall survive the execution and delivery of this Agreement, shall be deemed to
be incorporated by reference in each confirmatory assignment schedule or other
form of assignment submitted by you to us, and shall be deemed repeated and
confirmed with respect to each item of Collateral as it is created or otherwise
acquired:
4.1 Your legal name is exactly as set forth on the signature page of this
Agreement, you are a duly organized and validly existing corporation (or other
business entity), incorporated or registered in the state of Delaware, and are
qualified to do business in all states where required; there are no actions,
suits or other legal proceedings of any kind or nature pending against you which
involve the possibility of materially and adversely affecting your business,
assets, operations, condition or prospects, financial or otherwise, or the
Collateral, or your ability to perform this Agreement; the execution, delivery
and performance hereof are within your corporate (or other business entity)
powers, have been duly authorized, and are not in contravention of any law or
the terms of your certificate of incorporation or bylaws (or other documents
7
establishing your legal status), or of any indenture, agreement or undertaking
to which you are a party or by which you or your properties are bound; and the
most recent financial statements provided to us by you accurately state your
financial condition and there has been no material adverse change in your
financial condition since the date of such financial statements. You agree that
you will promptly notify us of any change in your: name, state of incorporation
or registration, location of your chief executive office, place(s) of business,
and legal or business structure. Further, you agree that you will promptly
notify us of any change in control of the ownership of your business
organization, and of significant lawsuits or proceedings against you.
4.2 With respect to each item of Collateral at the time our security
interest attaches thereto: (a) you shall be the sole owner, free and clear of
all liens, claims, security interests and encumbrances except in our favor, and
fully authorized to sell, transfer, pledge and grant a security interest in,
such item of Collateral; (b) each Account shall be genuine, valid and legally
enforceable, and represent an undisputed bona fide indebtedness incurred by the
Customer therein named, for a fixed sum as set forth in the invoice relating
thereto with respect to an absolute sale and delivery of goods upon your stated
terms or services theretofore rendered by you as of the date each Account is
created; (c) no Account is or shall be subject to any offset, recoupment,
deduction, defense, dispute, claim, counterclaim, discount or allowance except
as may be stated in the copy of the invoice delivered by you to us; (d) no
agreement under which any deduction, discount, credit or allowance of any kind
may be granted or allowed shall have been or shall thereafter be made by you
with any Customer except in keeping with your ordinary course of business which
business practices have been made known to us, and as indicated in writing to us
at or before the time such agreement is made; (e) all statements made and all
unpaid balances appearing in the invoices, documents and agreements relating to
each Account shall be true and correct in all respects and what they purport to
be; (f) none of the Accounts arise from sales to consumers of goods to be used
for personal, family or household purposes; (g) all signatures and endorsements
that appear thereon shall be genuine and all signatories and endorsers shall
have full capacity to contract; and (h) none of the transactions underlying or
giving rise to any item of Collateral shall violate any applicable state or
federal laws or regulations, and all documents relating to such item of
Collateral shall be legally sufficient under such laws or regulations and shall
be legally enforceable in accordance with their terms.
4.3 You agree to comply with the requirements of all state and federal laws
in order to grant to us a valid and perfected first security interest in the
Collateral. We are hereby authorized by you to file from time to time any
financing statements, continuations or amendments covering the Collateral. You
hereby consent to and ratify any and all execution and/or filing of financing
statements heretofore and hereafter filed by us pursuant to the foregoing
authorization. You further agree to do whatever we may reasonably request, from
time to time, by way of: (a) filing notices of liens, financing statements,
amendments, renewals and continuations thereof; (b) cooperating with our agents
and employees; (c) keeping Collateral records; (d) transferring proceeds of
Collateral to our possession; and (e) performing such further acts as we may
reasonably require in order to effect the purposes of this Agreement.
8
4.4 You shall not pledge, sell, assign, transfer, create or suffer to exist
any security interest in or other lien or encumbrance on any part of the
Collateral, or grant or suffer to exist any security interest in or other lien
or encumbrance on any of your inventory or other assets to anyone other than us
without our prior written consent. You hereby agree to defend the same against
any and all persons whatsoever.
4.5 Each Customer is to the best of your knowledge solvent and will
continue to be fully able to pay all Accounts on which it is obligated in full
when due.
4.6 You shall maintain your books, records and accounts in accordance with
generally accepted accounting principles consistently applied. You shall, at any
time and from time to time, furnish to us such balance sheets, earnings
statements, financial statements and other reasonable information regarding your
business affairs and financial condition, including, without limitation,
schedules, agings and reports, as we may request, and in any event you shall
furnish us: (a) as soon as possible, but not later than one hundred twenty (120)
days after the close of each of your fiscal years, your and your consolidated
subsidiaries' financial statements as of the end of such year, with (i) such
consolidated statements audited by a firm of independent certified public
accountants of recognized standing, selected by you and acceptable to us, and
(ii) such consolidating statements certified by an authorized financial or
accounting officer of your company; and (b) as soon as possible, but not later
than sixty (60) days after the end of each quarter hereafter, your and your
consolidated subsidiaries' interim financial statements as of the end of such
period and of the portion of your fiscal year then elapsed, certified by an
authorized financial or accounting officer of your company all prepared in
accordance with generally accepted accounting principles consistently applied,
and fairly presenting the financial position and results of your and your
consolidated subsidiaries' operations for such period. All such financial
statements do or shall fairly present your financial condition as of the dates
thereof or the results of your operations for the periods for which the same are
furnished. All such other information is or shall be, at the time the same is so
furnished, accurate and correct in all material respects and complete insofar as
completeness may be necessary to give us a true and accurate depiction of the
subject matter thereof.
4.7 You hereby irrevocably authorize and direct all accountants and
auditors employed by you at any time prior to or during the term of this
Agreement to exhibit and deliver to us copies of any of your financial
statements, trial balances or other accounting records of any sort in their
possession and to disclose to us any information they may have concerning your
financial condition and business operations.
4.8 You shall keep all your insurable properties and properties in which
you have an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged
in businesses similar to yours. You shall pay when due all premiums on any
insurance policies for your properties or assets, including the Collateral (and
9
including any life insurance policies assigned to us as Collateral), whether
required to be maintained by you under this Agreement, any supplement hereto, or
otherwise, and shall keep in force, without modification or amendment, the
assignment and endorsement to such policies so that any and all rights we may
have as assignee and secured party thereunder shall not be adversely affected.
You shall also pay when due and discharge all taxes, assessments, contributions
and other charges upon or against you or your properties or assets, including
the Collateral unless such taxes, assessments, contributions or other charges
are being contested in good faith and by appropriate proceedings and adequate
reserves are established in accordance with GAAP, provided that we may in our
sole discretion exercised by us in accordance with our reasonable business
judgment establish a reserve against the availability of loans and advances
hereunder in the amount of any such taxes assessments, contributions or other
charges being contested. If any such premium, tax, assessment, contribution or
other charge remains unpaid after the date fixed for the payment of same, or if
any lien shall be claimed, we may without notice to you pay such premium, tax,
assessment, contribution, charge or claim, and the amount thereof shall be
payable on demand, and until paid by you, shall be charged to your account and
added to and deemed part of the Obligations.
4.9 You shall be liable for any tax or penalty imposed upon any transaction
under this Agreement or giving rise to the Account or which we may be required
to withhold or pay for any reason; you agree to indemnify and hold us harmless
with respect thereto, and to repay to us on demand the amount thereof, and until
paid by you, such amount shall be charged to your account and added to and
deemed part of the Obligations. If any Account includes a charge for any tax
payable to any governmental taxing authority, we are hereby authorized in our
sole discretion to pay the amount thereof to the proper taxing authority for
your account and to charge your account therefor. You shall notify us if any
Account includes any tax due to any such taxing authority and in the absence of
your notice, we shall have the right to retain the full proceeds of such
Account.
4.10 You shall comply with all laws, rules, regulations and orders of any
legislative, administrative or judicial body or official, applicable to your
properties and assets, including the Collateral, or to the operation of your
business.
4.11 You shall not assume, guarantee, endorse or otherwise become liable
upon the obligations of any person, firm, entity or corporation, except by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
4.12 You shall not undergo any merger or consolidation into or with another
entity, or make any change in your controlling ownership, or enter into or
engage in any operation or activity materially different from that presently
being conducted by you.
4.13 You shall not make any distribution of any kind on, or purchase,
acquire, redeem or retire, any of your capital stock or equity interest, of any
class whatsoever, whether now or hereafter outstanding, except that you and your
affiliate, Westwater Industries, Inc., may, on an aggregate basis, (a) declare
and pay dividends to Carlyle Industries, Inc. in an amount not to exceed
10
$300,000 in the aggregate during any fiscal year, and (b) make loans, in the
ordinary course of your business and subsequent to the date of this Agreement,
to your affiliate Carlyle Industries, Inc., in an amount not to exceed
$1,000,000 in the aggregate at any time outstanding, provided further that, you
hereby agree that any notes which may be issued to you therefor are hereby
pledged to us as collateral security for your Obligations hereunder, and
provided further that in any such instance, prior to making any such dividend or
loan no Default or Event of Default has occurred hereunder or will arise after
giving effect thereto.
4.14 Your Records and chief executive office shall be kept at your address
as it appears on the first page of this Agreement. You shall give us thirty (30)
days' prior written notice of any change in your name, tradenames or styles, or
location(s).
4.15 You shall from time to time make such payments to us as we shall
request so that the aggregate balance in your loan account shall not at any time
exceed the lesser of: (a) the Maximum Credit Facility, or (b) the sum of: (i)
the applicable percentage of the Net Amount of Eligible Accounts, and (ii) the
applicable percentage of the value of your Eligible Inventory at such time.
V. CUSTODY, INSPECTION, COLLECTION AND HANDLING
OF COLLATERAL AND RECORDS
5.1 Upon an Event of Default or until your authority to do so is curtailed
or terminated (which we may do at any time when we, in our reasonable business
judgment, may deem it to be in our best interest to do so), you will, at your
own cost and expense but on our behalf and for our account, collect and
otherwise enforce as our property and in trust for us, all remittances and all
amounts unpaid on Accounts, and shall not commingle such collections with your
own funds or use the same for any purpose. You will establish and maintain a
Lock Box at a bank approved by us pursuant to an agreement acceptable to us, and
which is titled to reflect our ownership, in order to receive all payments from
your Customers. Payments received into the Lock Box will be immediately
deposited into our account at the bank. This Lock Box arrangement shall be
maintained at your sole cost and expense. As to all such collections, including
all prepayments by Customers, you shall receive in trust, and deliver to us in
original form, duly endorsed by you for deposit with us, and on the date of
receipt thereof, all checks, drafts, notes, money orders, acceptances, cash and
other evidences of indebtedness. All amounts received by us in payment of
Accounts will be credited to your account immediately upon our receipt thereof,
conditional upon final payment to us, but to allow for the collection and
clearance thereof we shall debit your account monthly with the cost of three(3)
collection days on all such amounts computed at the rate set forth in paragraph
3.4 hereof. As set forth above, upon curtailment or termination of your
authority, or at any other time and without any cause or notice thereof to you,
we shall have the right to send notice(s) of our security interest to any
Customers or any other persons obligated on, holding or otherwise concerned with
any of the Collateral, and thereafter we shall have the sole right to collect
the Accounts and/or take possession of the Collateral and the Records. Any and
all of our collection expenses, including, but not limited to, the reasonable
11
fees and expenses of our attorneys (both internal and external), the fees of our
collection agencies, stationery and postage, telephone and facsimile,
secretarial and clerical expenses, and the salaries of any collection persons
utilized, shall be charged to your account and added to the Obligations. (For
purposes hereof, "Business Day" shall mean a day on which banks are open for the
general transaction of business in Charlotte, North Carolina.)
5.2 You shall keep and maintain, at your cost and expense, books and
records pertaining to the Collateral in such detail, form and scope as we shall
from time to time require.
5.3 At all reasonable times and, at our sole discretion upon prior notice
to you, we shall have: full access to, and the right to check, inspect, examine
and make abstracts and copies from, your Records and all other books, records,
audits, correspondence and papers relating to the Collateral; the right to
confirm and verify all Accounts; and the right to do whatever we may deem
necessary to preserve or protect our interests in the Obligations and the
Collateral, and in furtherance thereof, we may, without cost or expense to us,
use such of your personnel, supplies and space as may be reasonably necessary.
We or our agents may enter upon any of your premises at any time and from time
to time during business hours for the purpose of inspecting the Collateral and
any and all Records pertaining thereto. At any time we may take possession of
and remove or require you to deliver copies of any or all such Records, and to
the extent required by us to enforce our rights and/or exercise our remedies
hereunder, the original thereof. In order to cover any costs and expenses we may
incur in connection with performing any of the aforementioned checks,
verifications, inspections or examinations (collectively, "Examinations"), we
shall be entitled to charge your account a fee of $750.00 for each day or part
thereof in which such Examinations are conducted, plus any additional
out-of-pocket costs and expenses we incur as a result of conducting such
Examinations. Such Examination Fee shall be due and payable on the first day of
each month and shall be charged by us to your account as of such first day of
each month. Such Examination Fee shall be deemed to be earned in full on the
date when due and shall not be subject to rebate or proration for any reason.
5.4 You shall, immediately upon obtaining knowledge thereof, notify us of
any reclamation, return or repossession of goods; any claim or dispute asserted
by any Customer or other obligor; any loss or destruction of, or substantial
damage to, any of the Collateral; and any other matter affecting the value,
enforceability or collectibility of any of the Collateral. Except in the normal
course of business and consistent with your historical practices, you shall not,
without our consent, settle, compromise or adjust any Account (or extend the
time for payment thereof) or grant any additional discounts, allowances or
credits thereon.
5.5 You hereby constitute us and any of our agents or designees, as your
attorneys-in-fact, at your own cost and expense, to exercise at any time as set
forth herein all or any of the following powers, which being coupled with an
interest, shall be irrevocable until all Obligations have been paid in full: to
receive, take, endorse, assign, deliver, accept and deposit, in our name or
yours, any and all checks, notes, remittances, wire transfers or other
12
electronic forms of payment, drafts and other documents and instruments and
documents relating to the Collateral; to receive, open and dispose of all mail
addressed to you and to notify postal authorities to change the address for
delivery of mail to such address as we may designate; to give Customers notice
of our interest in the Accounts and to request from Customers at any time, in
your name or ours or that of our designee, information concerning the Accounts;
to notify Customers to make payment directly to us; to execute in your name and
on your behalf any financing statements (including, without limitation, any
continuations thereof or amendments thereto); and to take or bring, in your name
or ours, all steps, actions or proceedings deemed by us necessary or desirable
to effect collection of the Collateral or to preserve, protect or enforce our
interest therein. We and any of our agents or designees shall not be liable for
any acts of omission or commission, nor for any errors of judgment or mistakes
of fact or law.
5.6 Nothing herein contained shall be construed to constitute you as our
agent for any purpose whatsoever. We shall not be responsible nor liable for any
shortage, discrepancy, damage, loss or destruction of any Collateral wherever
the same may be located and regardless of the cause thereof. We shall not, under
any circumstances or in any event whatsoever, have any liability for an error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Accounts or any instrument received in payment thereof or for any
damage resulting therefrom. We may, without notice to or consent from you, ▇▇▇
upon or otherwise collect, extend the time of payment of, or compromise or
settle for cash, credit or otherwise upon any terms, any of the Accounts or any
securities, instruments or insurance applicable thereto and release the obligor
thereon, free of any claims or defenses based upon suretyship law or the like.
We are authorized and empowered to accept the return of goods represented by any
of the Accounts, without notice to or consent by you, all without discharge or
in any way affecting your liability hereunder. We do not, by anything herein or
in any assignment or otherwise, assume any of your obligations under any
contract or agreement, and we shall not be responsible in any way for the
performance by you of any of the terms and conditions thereof.
5.7 We have the right at any time and from time to time to employ and have
present on any of your premises one or more custodians selected by us, each of
whom shall have the right to exercise any and all of our rights hereunder. You
hereby agree to cooperate with any such custodian and to do whatever we may
reasonably request by way of preserving and protecting the Collateral. All
expenses incurred by us by reason of the employment of the custodian shall be
payable on demand, and until paid by you, shall be charged to your account and
added to and deemed part of the Obligations.
5.8 We shall be entitled to charge your account with, and add to and deem
part of the Obligations, all costs and expenses incurred by us subsequent to the
date of this Agreement in connection with the preparation, execution,
administration and enforcement of this Agreement (and all related instruments
and documents), and all costs and expenses incurred by us in connection with the
protection, maintenance, disposition, preservation and enforcement of the
Obligations, the Collateral or the pledges, liens and security interests granted
to us hereunder. The foregoing costs and expenses shall include, without
13
limitation, all reasonable fees and expenses of our attorneys (both internal and
external), all search fees, the cost of all public record filings, and wire
transfer charges.
VI. EVENTS OF DEFAULT; ACCELERATION
6.1 All Obligations shall, at our option and notwithstanding any time or
credit allowed by any instrument evidencing or representing same, be immediately
due and payable without notice or demand upon the occurrence of any one or more
of the following events of default ("Default"): (a) default in the payment or
performance, when due or payable, of any of the Obligations including, without
limitation, your failure to pay to us any Obligation due on demand when such
demand is made and continues unremedied for five (5) days; (b) default by any
guarantor, endorser or other person liable on the Obligations under any
guarantee, endorsement, suretyship agreement or other agreement of such person
with, or in favor of us; (c) your making any misrepresentation, orally or in
writing, to us whether for the purpose of obtaining credit or an extension of
credit, or otherwise; (d) your breach of any representation, warranty or
covenant contained in this Agreement or in any other agreement between us; (e)
any representation, warranty, or statement of fact made to us at any time by you
or on your behalf is false or misleading in any material respect; (f) the
discontinuance or suspension of the operation of your present business; (g) your
becoming insolvent, or your becoming unable to meet your debts as they mature;
(h) your calling any meeting of creditors, or having a creditors' committee
appointed; (i) the commencement by or against you of any action, case or
proceeding for relief under any provision of the Federal bankruptcy laws or any
other applicable Federal or State bankruptcy, insolvency or other similar law;
(j) the rendition, issuance or filing of any injunction, attachment, judgment or
lien against you or any of your property, or the appointment of a receiver,
custodian or trustee of any kind for you or any of your property; (k) any change
in your condition or affairs (financial or otherwise) or that of any endorser,
guarantor or other person liable on the Obligations, that in our sole discretion
exercised by us in accordance with our reasonable business judgment materially
impairs our Collateral or increases our risk; or (l) the termination of, or the
occurrence of a Default under: (A) our Accounts Receivable Financing Agreement
with Westwater Industries, Inc.; (B) our Accounts Receivable Financing Agreement
with Carlyle Industries, Inc.; and (C) the Brokerage Account Pledge and Security
Agreement or Guaranty with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
VII. RIGHTS AND REMEDIES AFTER DEFAULT
7.1 Upon the occurrence of any Default, and at any time thereafter if such
or any other Default shall then be continuing, we shall have the right (in
addition to any other rights we may have under this Agreement or otherwise)
without further notice to you: (a) to appropriate, set-off and apply to the
payment of any or all of the Obligations, any or all Collateral, in such manner
as we shall in our sole discretion determine; (b) to enforce payment of the
Obligations or any Collateral; (c) to settle, compromise or release, in whole or
in part, any amounts owing on the Collateral; (d) to prosecute any action, suit
or proceeding with respect to the Collateral; (e) to extend the time of payment
of any and all Collateral, to make allowances and adjustments with respect
thereto and to issue credits in your or our name; and (f) to sell, assign and
deliver the Collateral (or any part thereof), at public or private sale, for
14
cash, upon credit or otherwise, at our sole option and discretion, and we may
bid or become purchaser at any such sale, if public, free from any right of
redemption which is hereby expressly waived. You agree that the giving of five
(5) days notice by us to your address shown on the first page hereof (or such
other address of which we have received notice as provided herein), designating
the place and time of any public sale or of the time after which any private
sale or other intended disposition of the Collateral is to be made, shall be
deemed to be reasonable notice thereof and you waive any other notice with
respect thereto. The net cash proceeds resulting from the exercise of any of the
foregoing rights or remedies shall be applied by us to the payment of the
Obligations in such order as we may elect, and you shall remain liable to us for
any deficiency.
7.2 We shall have the right in our sole discretion to determine which
rights or remedies, and in which order any of the same, are to be exercised, and
we may at any time pursue, relinquish, subordinate, modify or take any other
action with respect thereto, without in any way modifying or affecting any of
them. We may, at all times, proceed directly against you to enforce payment of
the Obligations and shall not be required to take any action of any kind to
preserve, collect or protect our or your rights in the Collateral.
7.3 The enumeration of the foregoing rights and remedies is not intended to
be exclusive, and such rights and remedies are in addition to, and not by way of
limitation of, any other rights or remedies we may have under applicable law
including the Uniform Commercial Code. The exercise of any right or remedy shall
not preclude the exercise of any other right or remedy, all of which shall be
cumulative and not alternative.
VIII. WAIVERS
8.1 You hereby waive notice of dishonor, demand, presentment, protest and
notice of protest with respect to this Agreement and any and all instruments
included in or evidencing any of the Obligations or the Collateral, notice of
acceptance hereof, notice of loans or advances made, credit extended,
Obligations incurred, Collateral received, delivered, or released, or any other
action taken in reliance hereon, and any and all other demands and notices of
any description, except such as are expressly provided for herein.
8.2 No act, delay or omission on our part in exercising any right or remedy
shall operate as a waiver of such or any other right or remedy. No single or
partial waiver by us of any provision of this Agreement, or breach or default
hereunder, or of any right or remedy shall operate as a waiver of such or any
other provision, breach, default, right or remedy on a future occasion.
IX. TERMINATION; APPLICABLE LAW AND WAIVER
OF JURY TRIAL; MISCELLANEOUS
9.1 Upon acceptance by us, this Agreement shall become effective as of the
date appearing on the first page hereof, and shall continue in full force and
effect until twenty-six (26) months from the date of such acceptance (the
"Initial Term"), and from year to year thereafter, unless sooner terminated as
15
herein provided. You may terminate this Agreement as of the end of the Initial
Term, or as of the anniversary of its effective date in any year after the
Initial Term (herein each a "Subsequent Term"), by giving us at least sixty (60)
days' prior written notice. You may terminate this Agreement during the Initial
Term, and at any time thereafter, by giving us at least sixty (60) days' prior
written notice and paying to us, in addition to the then outstanding
Obligations, a termination charge of $40,000.00 less the aggregate amount of the
Monthly Collateral Management Fees paid to us during such Initial Term or any
Subsequent Term during which this Agreement is terminated. We may terminate this
Agreement at any time by giving you written notice stating a termination date
not less than sixty (60) days from the date such notice is given, or immediately
at any time without prior notice upon the occurrence or during the continuance
of a Default. Unless sooner demanded, all of your Obligations shall become due
and payable as of any termination, and pending a final accounting, we may
withhold any balances in your account (unless supplied with an indemnity
satisfactory to us) to cover all of your Obligations.
9.2 Notwithstanding any termination of this Agreement, all of our rights,
liens and security interests hereunder shall continue in full force and effect
until all Obligations have been paid and satisfied in full.
9.3 This Agreement, together with any written and duly executed
supplement(s), contains the entire understanding between us with respect to the
subject matter hereof. Neither this Agreement nor any portion or provision
hereof may be changed, modified, amended, waived, supplemented, discharged,
cancelled or terminated orally or by any course of dealing between us, or in any
manner other than by an agreement in writing, expressly referring hereto and
signed by the party to be charged. The section titles contained in this
Agreement are intended for convenience only and do not constitute and shall not
be interpreted as part of this Agreement. You, if two or more in number, shall
be jointly and severally bound hereunder.
9.4 Except as otherwise provided herein, all notices, requests and demands
hereunder shall be: (a) addressed to the party to be served at the address shown
on the first page hereof, or to such other address as either party may designate
by written notice to the other in accordance with this provision; and (b) deemed
to have been given or made: if by hand, immediately upon delivery; if by telex
or facsimile, immediately upon sending; if by overnight delivery service, one
day after dispatch; and if by ordinary mail or registered/certified mail-return
receipt requested (with proper postage prepaid), three (3) days after mailing.
9.5 This Agreement shall be binding upon and inure to the benefit of each
of the parties hereto and their respective successors and assigns, except that
you may not assign or transfer any of your rights or obligations under this
Agreement without our prior written consent.
9.6 The parties hereto acknowledge that each party and its counsel have
reviewed this Agreement and that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any amendments or
supplements thereto.
16
9.7 This Agreement shall be deemed to have been made in New York, New York
and shall be interpreted, and the rights and liabilities of the parties hereto
shall be determined, in accordance with the laws of the State of New York
without reference to principles of conflicts of law other than Sections 5-1401
and 5-1402 of the New York General Obligations Law. As part of the consideration
for new value this day given, you hereby consent to the jurisdiction of any
state or federal court located within the State of New York.
9.8 If any provision of this Agreement, including, without limitation, any
provision relating to charges constituting interest payable by you under this
Agreement, is contrary to, prohibited by, or deemed invalid under applicable
laws or regulations, such provision shall be inapplicable and deemed omitted to
the extent so contrary, prohibited or invalid, but the remainder hereof shall
not be invalidated thereby and shall be given effect so far as possible.
9.9 TO THE EXTENT PERMITTED BY APPLICABLE LAW, WE HEREBY MUTUALLY WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS
AGREEMENT OR ANY OTHER AGREEMENTS OR TRANSACTIONS BETWEEN US.
If the foregoing is in accordance with your understanding, please so indicate by
signing and returning to us the original and one copy of this Agreement. After
being accepted below by one of our officers in New York, we shall forward a copy
to you with signatures completed for your files.
Very truly yours,
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Assistant Vice President
Read and Agreed to:
▇▇▇▇▇▇▇▇▇▇/LANSING COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
17
Accepted at New York, New York
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
18