EXHIBIT 10.37
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
$35,000,000.00 REVOLVING CREDIT FACILITY TO
THE ▇▇▇▇▇▇ SUBSCRIPTION AGENCY, INCORPORATED,
▇▇▇▇▇▇▇▇ SUBSCRIPTION SERVICE, INC., AND
THE ▇▇▇▇▇ COMPANY, INC.
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO/
THE ▇▇▇▇▇▇ SUBSCRIPTION AGENCY, INCORPORATED,
▇▇▇▇▇▇▇▇ SUBSCRIPTION SERVICE, INC., AND
THE ▇▇▇▇▇ COMPANY, INC.
LOAN AND SECURITY AGREEMENT
TABLE OF CONTENTS
1. DEFINITIONS AND TERMS ............................................... 1
2. LOANS: DISBURSEMENTS, INTEREST RATES AND LOAN REQUESTS ............. -8-
2.1 REVOLVING LOANS ....................................... -8-
2.2 INTEREST RATES ON LOANS ............................... -8-
2.3 COMPUTATION OF INTEREST ............................... -9-
3. LOANS: GENERAL TERMS ............................................... -9-
3.1 PAYMENTS .............................................. -9-
A. SCHEDULED PAYMENTS ........................... -9-
B. REVOLVING LOAN MANDATORY PREPAYMENTS ......... -9-
3.2 NOTES ................................................. -10-
3.3 ONE LOAN .............................................. -10-
3.4 USE OF LOAN PROCEEDS .................................. -10-
3.5 MAXIMUM REVOLVING LOANS ............................... -10-
3.6 REPRESENTATION AND WARRANTY ........................... -10-
3.7 AUTHORIZATION TO DISBURSE ............................. -10-
3.8 BANK CHARGES .......................................... -10-
3.9 PAYMENT OF COSTS, FEES AND EXPENSES ................... -11-
3.10 DEBIT OF ACCOUNTS ..................................... -11-
3.11 APPLICATION OF PAYMENTS ............................... -11-
3.12 CO-OBLIGOR PROVISIONS ................................. -11-
3.13 CLOSING FEE ........................................... -12-
3.14 UNUSED COMMITMENT FEE ................................. -12-
4. COLLATERAL: GENERAL TERMS .......................................... -12-
4.1 GRANT OF SECURITY INTEREST ............................ -12-
4.2 SUPPLEMENTAL DOCUMENTATION ............................ -13-
4.3 INSPECTIONS AND VERIFICATIONS ......................... -13-
4.4 LIENS/COLLATERAL LOCATIONS ............................ -13-
4.6 ACCOUNT EARNINGS CREDIT ............................... -14-
4.7 ASSIGNMENT OF COMPETING SECURITY INTEREST ............. -14-
4.8 SPECIAL COLLATERAL .................................... -14-
4.9 ADDITIONAL COLLATERAL ................................. -15-
4.10 NO CUSTOM OR WAIVER ................................... -15-
4.11 LIEN ON REALTY ........................................ -15-
5. COLLATERAL: ACCOUNTS ............................................... -15-
5.1 ELIGIBLE ACCOUNTS ..................................... -15-
5.2 NOTICE OF INELIGIBLE ACCOUNTS ......................... -16-
5.3 ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS .. -16-
5.4 REVOLVING LOANS ....................................... -17-
5.5 VERIFICATION OF ACCOUNTS .............................. -17-
5.6 SCHEDULE OF ACCOUNTS .................................. -17-
5.7 NOTICES REGARDING ACCOUNT DEBTORS ..................... -17-
5.8 FAILURE TO DIRECT ACCOUNT DEBTORS ..................... -18-
5.9 NOTICE REGARDING DISPUTED ACCOUNTS .................... -18-
5.10 ATTORNEY AND AGENT-IN-FACT ............................ -18-
6. COLLATERAL: INVENTORY .............................................. -18-
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS ............. -18-
7. EQUIPMENT ...................................................... -19-
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS ............. -19-
7.2 MAINTENANCE OF EQUIPMENT .............................. -19-
7.3 EVIDENCE OF OWNERSHIP ................................. -19-
7.4 RECORDS AND SCHEDULES OF EQUIPMENT .................... -19-
8. INSURANCE AND TAXES ................................................. -19-
8.1 INSURANCE ............................................. -19-
8.2 TAXES ................................................. -20-
9. REPRESENTATIONS, WARRANTIES AND COVENANTS: GENERAL ................ -20-
9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS ............. -20-
(A) ORGANIZATION AND QUALIFICATION ............... -20-
(B) CORPORATE POWER AND AUTHORITY ................ -21-
(C) NO VIOLATION OF LAW .......................... -21-
(D) TITLE TO COLLATERAL .......................... -21-
(E) SOLVENCY ..................................... -21-
(F) LITIGATION ................................... -21-
(G) INDEBTEDNESS ................................. -21-
(H) GOVERNMENT CONTRACTS ......................... -21-
(I) ADEQUATE ASSETS/TRADEMARKS/COPYRIGHTS/PATENTS. -21-
(J) GOOD STANDING ................................ -21-
(K) BURDENSOME AGREEMENTS ........................ -22-
(L) VIOLATION OF LAW ............................. -22-
(M) BREACH OF OTHER LOAN DOCUMENTS ............... -22-
(N) FINANCIAL INFORMATION ........................ -22-
(O) FINANCIAL STATEMENTS ......................... -22-
(P) MATERIAL ADVERSE CHANGE ...................... -22-
(Q) CHANGE OF CORPORATE NAME OR STRUCTURE ........ -22-
(R) CAPITAL STRUCTURE ............................ -22-
(S) PENSION PLANS ................................ -23-
(T) LABOR RELATIONS ............................... -23-
(U) TRADE RELATIONS ............................... -23-
(V) NOTICES TO THE BANK ........................... -23-
(W) LANDLORD AND STORAGE AGREEMENTS ............... -24-
(X) SUBORDINATIONS ................................ -24-
(Y) ENVIRONMENTAL MATTERS ......................... -24-
(Z) FINANCIAL PROJECTIONS ......................... -24-
(AA) SURVEY ........................................ -24-
9.2 REPRESENTATIONS, WARRANTIES AND NEGATIVE COVENANTS ..... -25-
(A) ADDITIONAL ENCUMBRANCES ....................... -25-
(B) LEVIES AND ATTACHMENTS ........................ -25-
(C) RECEIVER, TRUSTEE OR ASSIGNEE ................. -25-
(D) MERGERS AND ACQUISITIONS ...................... -25-
(E) ORDINARY COURSE OF BUSINESS ................... -25-
(F) INVESTMENTS ................................... -25-
(G) SURETY ........................................ -25-
(H) CAPITAL STRUCTURE ............................. -25-
(I) ENCUMBRANCE OR SALE ........................... -25-
(J) SALE OF STOCK ................................. -25-
(K) INDEBTEDNESS .................................. -25-
(L) RESTRICTED PAYMENTS ........................... -25-
(M) CONSTITUENT DOCUMENTS ......................... -26-
(N) AFFILIATE TRANSACTIONS ........................ -26-
9.3 FINANCIAL COVENANTS .................................... -26-
(A) WORKING CAPITAL ............................... -26-
(B) TANGIBLE NET WORTH ............................ -26-
(C) CAPITAL EXPENDITURES .......................... -26-
9.4 FINANCIAL REPORTING .................................... -26-
10. CONDITIONS PRECEDENT ................................................ -27-
10.1 CONDITIONS TO INITIAL FUNDING .......................... -27-
10.2 CONDITIONS TO SUBSEQUENT FUNDINGS ...................... -28-
11. EVENT OF DEFAULT; REMEDIES .......................................... -29-
11.1 EVENTS OF DEFAULT ...................................... -29-
11.2 CUMULATIVE REMEDIES .................................... -30-
11.3 DISCONTINUING ADVANCES ................................. -30-
11.4 REMEDIES ............................................... -31-
11.5 ASSEMBLING COLLATERAL .................................. -31-
11.6 NOTICE OF SALE ......................................... -31-
11.7 POSTPONEMENT OF SALE ................................... -31-
12. GENERAL ............................................................. -31-
12.1 BANK ACCOUNTS .......................................... -31-
12.2 APPLICATION OF PAYMENTS ................................ -32-
12.3 ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS ... -32-
12.4 MODIFICATION AND ASSIGNMENT OF LOAN DOCUMENTS .......... -32-
12.5 WAIVER OF UNMATURED EVENT OF DEFAULTS .................. -32-
12.6 SEVERABILITY ........................................... -33-
12.7 SUCCESSORS AND ASSIGNS ................................. -33-
12.8 INCORPORATION OF OTHER AGREEMENTS; EXHIBITS ............ -33-
12.9 SURVIVAL OF TERMINATION ................................ -33-
12.10 WAIVER OF NOTICES ...................................... -33-
12.11 AUTHORITY TO EXECUTE AND BORROW ........................ -33-
12.12 COSTS, FEES AND EXPENSES ............................... -33-
12.13 BINDING AGREEMENT; GOVERNING LAW ....................... -34-
12.14 NOTICES ................................................ -34-
12.15 OTHER COSTS, FEES AND EXPENSES ......................... -35-
12.16 RELEASE OF CLAIMS ...................................... -35-
12.17 CAPITAL ADEQUACY CHARGE ................................ -36-
12.18 HEADINGS ............................................... -36-
12.19 MAXIMUM INTEREST ....................................... -36-
12.20 CONSTRUCTION ........................................... -36-
12.21 REVIVAL OF LIABILITIES ................................. -36-
12.22 GENERAL INDEMNITY ...................................... -37-
12.23 ENVIRONMENTAL AND SAFETY AND HEALTH INDEMNITY .......... -37-
12.24 YEAR 2000 .............................................. -37-
12.25 JOINT AND SEVERAL LIABILITY ............................ -38-
12.27 MERGER CLAUSE .......................................... -38-
12.28 SERVICE OF PROCESS ..................................... -38-
12.29 JURISDICTION; VENUE; WAIVER OF JURY TRIAL .............. -38-
12.30 JURY WAIVER ............................................ -38-
Exhibit "A"
FORM OF BORROWING BASE CERTIFICATE ................................... -40-
Exhibit "B"
PERMITTED LIENS ...................................................... -41-
Exhibit "C"
REQUEST FOR ADVANCE AT THE LIBOR RATE ................................ -42-
Exhibit "D"
PRINCIPAL PLACES OF BUSINESS AND COLLATERAL LOCATIONS ................ -43-
Exhibit "E"
REAL PROPERTY OWNED BY BORROWERS ..................................... -44-
Exhibit "F"
SCHEDULE OF INDEBTEDNESS (OTHER THAN TRADE DEBT) ..................... -45-
Exhibit "G"
BORROWERS AND ITS SUBSIDIARIES' CORPORATE INFORMATION;
STOCK OPTIONS AND AGREEMENTS .......................................... -▇▇-
▇▇▇▇▇▇▇ "▇"
▇▇▇▇▇ RELATIONS ....................................................... -47-
Exhibit "I"
BORROWERS' FISCAL YEAR 2000 FINANCIAL PROJECTIONS ..................... -48-
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this "Loan Agreement") is
made and entered into as of December 14, 1999, by and between American National
Bank and Trust Company of Chicago, a national banking association, with its
principal office located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(the "Bank"), and The ▇▇▇▇▇▇ Subscription Agency, Incorporated, a Delaware
corporation ("▇▇▇▇▇▇"), ▇▇▇▇▇▇▇▇ Subscription Service, Inc., an Illinois
corporation ("▇▇▇▇▇▇▇▇"), and The ▇▇▇▇▇ Company, Inc., a Massachusetts
corporation ("▇▇▇▇▇") (▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ are individually a "Borrower"
and collectively the "Borrowers").
W I T N E S S E T H:
WHEREAS, Borrowers desire the Bank to provide certain
extensions of credit, loans or other financial accommodations to Borrowers in a
maximum aggregate principal amount not to exceed Thirty-Five Million and no/100
Dollars ($35,000,000.00) (the "Financial Accommodations"); and
WHEREAS, the Bank is willing to provide the Financial
Accommodations to Borrowers, but solely on the terms and subject to the
conditions set forth in this Loan Agreement and the other documents, instruments
and agreements executed and delivered pursuant to this Loan Agreement or
referenced herein.
NOW THEREFORE, in consideration of the Financial
Accommodations, the mutual promises and understandings of the Bank and Borrowers
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Bank and Borrowers hereby agree
as set forth in this Loan Agreement.
1. DEFINITIONS AND TERMS
1.1 The following words, terms or phrases shall have the
following meanings:
"ACCOUNT", "CHATTEL PAPER", "DEPOSIT ACCOUNT", "DOCUMENT",
"DOCUMENT OF TITLE", "EQUIPMENT", "FIXTURE", "GENERAL INTANGIBLE", "GOODS",
"INSTRUMENT", "INVENTORY" and "INVESTMENT PROPERTY": shall have their respective
meanings as set forth in the Illinois Uniform Commercial Code.
"ACCOUNT DEBTOR": shall mean any Person who is or shall become
obligated to any Borrower under or on account of any Accounts.
"AFFILIATE": shall mean any Person that directly or
indirectly, through one or more intermediaries, owns, controls or is controlled
by, or is under common control with, any Borrower. A Person shall be presumed to
control a Borrower if such Person is the direct or indirect legal or beneficial
owner of more than fifteen percent (15%) of the outstanding Stock of such
Borrower.
"BORROWING BASE": shall mean the total, without duplication,
of the following:
A. From the date of initial funding, through and including
May 30, 2000:
(1) eighty-five percent (85%) of the difference between (a)
the face amount of all then existing Eligible Accounts as set
forth on the Borrowing Base Certificate delivered by
Borrowers to the Bank from time to time minus all finance
charges and prompt payment, volume and all other discounts,
credits or allowances which may be taken by or granted to
Account Debtors, minus 100% of the face amount of all proceeds
of the Eligible Accounts listed on such Borrowing Base
Certificate which Borrowers have received since the date of
the most recently delivered Borrowing Base Certificate
delivered to the Bank, and (b) 70% of the Deferred Revenue
Account,
(2) plus the Secured Over Formula Advance.
B. From May 31, 2000, and thereafter, zero and no/100
Dollars ($0).
"BORROWING BASE CERTIFICATE" shall mean the certificate delivered from
time to time by Borrowers to the Bank in accordance with this Loan Agreement in
the form attached hereto as Exhibit "A", as such form may be modified by the
Bank from time to time.
"BUSINESS DAY": shall mean any day that is not a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in the State of
Illinois.
"CAPITAL EXPENDITURES": shall mean as to any Person, any and all
expenditures of such Person for fixed or capital assets, including, without
limitation, the incurrence of Capitalized Lease Obligations, all as determined
in accordance with GAAP; provided, however, Capital Expenditures shall not
include expenditures for fixed or capital assets to the extent such expenditures
are paid for or reimbursed from the proceeds of insurance.
"CAPITALIZED LEASE OBLIGATIONS": shall mean all obligations or
liabilities created or arising under any capitalized lease of real or personal
property, or conditional sale or other title retention agreement, whether or not
the rights and remedies of the lessor, seller or lender thereof are limited to
repossession of the property giving rise to such obligations or liabilities.
"CHARGES": shall mean all national, federal, state, county, city,
municipal or other governmental, including, but not limited to, any
instrumentality, division, agency, body or department thereof, taxes, levies,
assessments, charges, liens, claims or encumbrances upon or relating to the
Collateral, the Liabilities, each Borrower's business, ownership or use of any
of its assets, or Borrowers' income or gross receipts.
"COLLATERAL": shall have the meaning ascribed to such term in Section
4.1 below.
"COVENANTS": shall mean all now existing and hereafter arising
covenants, duties, obligations and agreements of Borrowers to and with the Bank,
whether pursuant to this Loan Agreement, the Other Agreements or otherwise.
"▇▇▇▇▇▇": shall mean ▇▇▇▇▇▇, Inc., a Delaware corporation, and its
successors and assigns.
"▇▇▇▇▇▇ GUARANTY": shall mean that certain ▇▇▇▇▇▇ Corporate Guaranty of
even date herewith executed and delivered by ▇▇▇▇▇▇ to the Bank, as amended,
renewed or restated from time to time.
-2-
"DEFAULT RATE": shall mean two percent (2%) per annum in excess of the
Prime Rate.
"DEFERRED REVENUE ACCOUNT": shall mean the deferred revenue of the
Borrowers shown on Borrowers' balance sheet which consists of customer advances,
including, without limitation, customer advances for which Borrowers have not
placed a corresponding order to the publisher/vendor. The Deferred Revenue
Account shall be determined on a basis consistent with Borrowers' accounting
practices utilized in the Financials delivered to the Bank prior to the date
hereof.
"DESIGNATED PERSON": for each Borrower, shall mean Dr. ▇▇▇▇▇▇▇ ▇▇▇▇, or
any other officers of such Borrower, or any other person from time to time
designated by any officer of such Borrower.
"ELIGIBLE ACCOUNTS": shall have the meaning ascribed to such term in
Section 5.1 below.
"ENVIRONMENTAL LAWS": shall mean all federal, state and local laws,
rules, regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters, including, but not
limited to, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Toxic
Substances Control Act as amended, the Clean Water Act, the River and Harbor
Act, Water Pollution Control Act, the Marine Protection Research and Sanctuaries
Act, the Deep-Water Port Act, the Safe Drinking Water Act, the SuperFund
Amendments and Reauthorization Act of 1986, the Federal Insecticide, Fungicide
and Rodenticide Act, the Mineral Lands and Leasing Act, the Surface Mining
Control and Reclamation Act, state and federal superlien and environmental clean
up programs and laws, and U.S. Department of Transportation regulations.
"ERISA": shall mean the Employee Retirement Income Security Act of 1974
and all rules and regulations from time to time promulgated thereunder.
"EVENT OF DEFAULT": shall have the meaning ascribed to such term in
Section 11.1 below.
"FINANCIALS": shall mean all year-end financial statements,
projections, interim financial statements, tax returns, reports and similar
documentation and information previously delivered by Borrowers to the Bank and
the documents described in Section 9.4, individually or collectively.
"GAAP": shall mean generally accepted accounting principles
consistently applied from time to time.
"HAZARDOUS SUBSTANCES": shall have the meaning set forth in 42 USC ss.
9601(14), 42 USC ss. 9601(33) and 42 USC ss. 6991(8) or any state or local
counterpart Environmental Law.
"INDEBTEDNESS": shall mean all obligations and liabilities of Borrowers
to any Person other than the Bank, including, but not limited to, (1) all
indebtedness whether primary or secondary, direct or indirect, absolute or
contingent, liquidated or unliquidated, insured or uninsured, fixed or
otherwise, heretofore, now or from time to time hereafter owing, due or payable,
however evidenced, created, incurred or acquired, and howsoever arising, whether
by written or oral agreement, operation of law or otherwise; (2) all obligations
or liabilities of any Person that are secured by any lien, claim,
-3-
encumbrance or security interest upon the Collateral or other assets of
Borrowers, whether or not Borrowers have assumed or become liable for the
payment thereof; (3) all Capitalized Lease Obligations; (4) all unfunded pension
obligations; and (5) all deferred taxes.
"INDEMNIFIED LIABILITIES": shall have the meaning ascribed to such term
in Section 12.22 below.
"INDEMNITEES": shall have the meaning ascribed to such term in Section
12.22 below.
"INTEREST PERIOD": shall mean the period commencing on the date a LIBOR
Loan is made and ending, as Borrowers shall select in advance, thirty (30),
sixty (60) or ninety (90) days thereafter.
"LETTERS OF CREDIT" shall mean any letters of credit which are now or
at any time hereafter issued by the Bank at the request of and for the account
of Borrowers.
"LIABILITIES": shall mean any and all obligations, liabilities,
indebtedness, Rate Hedging Obligations, fees, costs and expenses, now or
hereafter owed or owing by Borrowers to the Bank, including, but not limited to,
all principal, interest, debts, claims and indebtedness of any and every kind
and nature, howsoever created, arising or evidenced, whether primary or
secondary, direct or indirect, absolute or contingent, insured or uninsured,
liquidated or unliquidated, or otherwise, and whether arising or existing under
written or oral agreement or by operation of law, together with all costs, fees
and expenses of the Bank, including, but not limited to, the indebtedness
evidenced by the Revolving Note, and attorneys' and paralegals' fees or charges
relating to the preparation of this Loan Agreement and the Other Agreements and
the enforcement of the Bank's rights and remedies pursuant to this Loan
Agreement and the Other Agreements.
"LIBOR LOAN": shall mean any Loan bearing interest based upon the LIBOR
Rate.
"LIBOR RATE": means, for any Interest Period, the interest rate per
annum (rounded upwards, if necessary to the next 1/100th of 1%) at which
deposits in U.S. Dollars in immediately available funds are being offered to
prime banks in the London interbank market at 11:00 a.m. (London, England, time)
two (2) Business Days before the beginning of such Interest Period for a period
equal to such Interest Period and in an amount as nearly comparable as possible
to the principal balance of the applicable LIBOR Loan, determined in accordance
with the Bank's normal practice in the London Interbank Eurodollar Market for
U.S. dollar deposits. Each determination of the LIBOR Rate made by the Bank
shall be conclusive and binding on Borrowers absent manifest error.
"LOAN OR LOANS": shall mean, individually and collectively, the
Revolving Loans.
"MASSACHUSETTS ASSIGNMENT OF RENTS": shall mean that certain Assignment
of Rents and Leases of even date herewith executed and delivered by ▇▇▇▇▇ to the
Bank, as amended, renewed or restated from time to time.
"MASSACHUSETTS MORTGAGE": shall mean that certain Mortgage, Security
Agreement, Assignment of Rents and Fixture Filing of even date herewith executed
and delivered by ▇▇▇▇▇ to the Bank encumbering the real property commonly known
as ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as amended, renewed or
restated from time to time.
-4-
"MAXIMUM REVOLVING LOAN": shall mean (a) from the date hereof through
and including January 31, 2000, an amount equal to Thirty-Five Million and
no/100 Dollars ($35,000,000.00), (b) from February 1, 2000, through and
including February 29, 2000, an amount equal to Twenty-Five Million and no/100
Dollars ($25,000,000.00), (c) from March 1, 2000, through and including March
31, 2000, an amount equal to Fifteen Million and no/100 Dollars
($15,000,000.00), (d) from April 1, 2000, through and including April 30, 2000,
an amount equal to Ten Million and no/100 Dollars ($10,000,000.00), (e) from May
1, 2000, through and including May 30, 2000, Five Million and no/100 Dollars,
and (f) from and after May 31, 2000, zero and no/100 Dollars ($0).
"MULTIEMPLOYER PLAN": shall have the meaning ascribed to such term in
Section 4001(a)(3) of ERISA.
"OTHER AGREEMENTS": shall mean all agreements, instruments and
documents, including, but not limited to, guaranties, mortgages, deeds of trust,
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 Borrowers or any
other Person and delivered to the Bank in connection with the Liabilities or any
of the transactions contemplated herein, together with any amendments,
modifications, extensions or renewals thereto, including, but not limited to,
(1) the Revolving Note, (2) the Massachusetts Mortgage, (3) the Massachusetts
Assignment of Rents, (4) the RoweCom Guaranty, (5) the ▇▇▇▇▇▇ Guaranty, and (6)
the other documents, instruments and agreements described in Section 10.1(A) of
this Loan Agreement.
"PARENT": shall mean any Person, now or at any time or times hereafter,
owning or controlling, directly or indirectly, at least a majority of the issued
and outstanding Stock or other ownership interest of Borrowers or any
Subsidiary.
"PERMITTED INDEBTEDNESS": shall mean (1) renewals or extensions of
existing Indebtedness, (2) trade payables arising in the ordinary course of
Borrowers' business, (3) other obligations of Borrowers incurred in the ordinary
course of Borrowers' business as presently conducted that are not (a) past due,
or (b) incurred through the borrowing of money or the obtaining of credit, (4)
Indebtedness in respect of taxes, assessments, governmental charges or levies
and claims for labor, materials and supplies that is incurred in the ordinary
course of Borrowers' business as presently conducted and is not past due, (5)
Indebtedness in respect of judgments or awards which does not constitute an
Event of Default hereunder, (6) Indebtedness constituting contingent liabilities
arising under, relating to, or in connection with, any agreements with employees
of Borrowers, including, without limitation, any employment agreements, in an
aggregate amount not to exceed $500,000.00 at any time, (7) Indebtedness in
respect of employee benefit plans and programs that is incurred in the ordinary
course of Borrowers' business as presently conducted and is not past due, and
(8) purchase money Indebtedness incurred in connection with the acquisition of
Equipment in an aggregate amount not to exceed $500,000.00 at any time.
"PERMITTED LIENS": shall mean (1) liens for current taxes and duties
not delinquent or for taxes being contested in good faith, by appropriate
proceedings which do not involve, in the sole determination of the Bank, any
material danger of the sale or loss of any of the Collateral and with respect to
which Borrowers has provided for and is maintaining adequate reserves in
accordance with GAAP, (2) liens granted by any Subsidiary to secure such
Subsidiary's indebtedness to Borrowers, (3) Liens in the Bank's favor, (4) Liens
incurred in the ordinary course of business in connection with
-5-
workers' compensation, unemployment insurance and other statutory obligations,
provided that such obligations are not past due and owing, (5) easements, rights
of way, restrictions and other similar charges or encumbrances with respect to
real property not interfering in any material respect with the ordinary conduct
of Borrower's business, (6) the security interests and liens listed on Exhibit
"B", and (7) liens securing purchase money Indebtedness allowed in the
definition of Permitted Indebtedness.
"PERSON": shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or foreign or United States
government, whether federal, state, county, city, municipal or otherwise,
including, but not limited to, any instrumentality, division, agency, body or
department thereof.
"PLAN": shall mean an employee benefit plan now or hereafter maintained
for employees of Borrowers that is covered by Title IV of ERISA.
"PRIME RATE": shall mean the daily rate equivalent of the annual rate
of interest announced from time to time by the Bank as its corporate prime,
reference or base rate of interest, as the case may be, which rate may not be
the most favorable or lowest rate of interest offered or charged by the Bank to
its commercial or other borrowers.
"PROHIBITED TRANSACTION": shall mean any transaction set forth in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986.
"RATE HEDGING OBLIGATIONS": shall mean any and all obligations of
Borrowers, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (1) any and all
agreements designed to protect Borrowers from the fluctuations of interest
rates, exchange rates or forward rates applicable to such party's assets,
liabilities or exchange transactions, including, but not limited to: interest
rate swap agreements, dollar-denominated or cross-currency interest rate
exchange agreements, forward currency exchange agreements, interest rate cap,
floor or collar agreements, forward rate currency agreements relating to
interest options, puts and warrants, and (2) any and all agreements relating to
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
"REPORTABLE EVENT": shall mean any of the events set forth in Section
4043(b) of ERISA.
"RESTRICTED PAYMENTS": shall mean any of the following: (1) any
dividend, distribution or return of capital to any shareholder of any Borrower,
or any other payment or delivery of property or cash to any of Borrower's
shareholders, or any redemption, retirement, purchase or other acquisition of
all or any portion of the Stock of Borrower, and (2) any distribution, loan, or
advance to any Affiliate.
"REVOLVING LOAN": shall mean, individually and collectively, the loans
provided by the Bank from time to time to Borrowers pursuant to Section 2.1
below.
"REVOLVING LOAN TERMINATION DATE": shall mean November 28, 2000;
provided, however, the Revolving Loan Termination Date may be extended for an
additional 364 day period if (a) after August 1, 2000, but prior to September
15, 2000, Borrowers request that the Bank consider extending the Revolving Loan
Termination Date for an additional 364 day period, and (b) the Bank, in its sole
and
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absolute discretion, elects to extend the Revolving Loan Termination Date.
Nothing in this Agreement shall be interpreted as a commitment by the Bank to
extend the Revolving Loan Termination Date beyond November 28, 2000.
"REVOLVING NOTE": shall mean that certain Revolving Note of even date
herewith executed and delivered by Borrowers to the Bank in a maximum aggregate
principal amount not to exceed the Maximum Revolving Loan, as amended, renewed,
restated or replaced from time to time.
"ROWECOM": shall mean RoweCom Inc., a Delaware corporation, and its
successors and assigns.
"ROWECOM GUARANTY": shall mean that certain RoweCom Corporate Guaranty
of even date herewith executed and delivered by RoweCom to the Bank, as amended,
renewed or restated from time to time.
"SCHEDULE OF ACCOUNTS": shall have the meaning set forth in Section 5.6
below.
"SECURED OVER FORMULA ADVANCE": shall mean the lesser of (a) Four
Million and no/100 Dollars ($4,000,000.00), or (b) an amount equal to ten
percent (10%) of the face amount of Borrowers' gross Accounts from time to time.
"SPECIAL COLLATERAL": shall mean that portion of the Collateral
evidenced by Chattel Paper, Instruments or Documents.
"STOCK": shall mean any and all shares and other equity and ownership
interests, however designated, of or in a corporation, whether or not voting,
including, but not limited to, common stock, warrants, preferred stock,
convertible debentures and all agreements, instruments and documents
convertible, in whole or in part, into any one or more of the foregoing.
"SUBORDINATED DEBT": shall mean Borrowers' Indebtedness which is
subordinated to the payment of all of the Liabilities to Lender pursuant to a
written subordination agreement in form and substance acceptable to the Bank.
"SUBSIDIARY": shall mean any Person who is under the direct or indirect
ownership or control of Borrowers.
"SUPPLEMENTAL DOCUMENTATION": shall have the meaning set forth in
Section 4.2 below.
"TANGIBLE NET WORTH": shall mean, as of any particular date and
calculated for Borrowers on a consolidated basis in a manner consistent with
GAAP, the total of (1) Borrowers' total stockholder's equity, as it is shown on
the Borrowers' consolidated balance sheet, plus (2) Subordinated Debt, less (3)
all values attributable to prepaid expenses, goodwill, patents, copyrights,
trademarks, licenses, capital leases and other intangible assets and loans and
Accounts due from officers, employees, Subsidiaries and Affiliates.
"UNMATURED EVENT OF DEFAULT": shall mean the occurrence or existence of
any event or condition which with notice, lapse of time or both would constitute
an Event of Default.
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"WORKING CAPITAL": shall mean, as of any particular date and calculated
for Borrowers on a consolidated basis in a manner consistent with GAAP, the
difference between (1) Borrowers' current assets, and (2) Borrowers' current
liabilities other than the Revolving Loan.
1.2 Except as otherwise defined in this Loan Agreement or the Other
Agreements, any accounting terms used in this Loan Agreement which are not
specifically defined herein shall have the meanings customarily given them in
accordance with GAAP. Unless the context indicates otherwise, all other words,
terms or phrases used herein shall be defined by the applicable definition
therefor, if any, in the Uniform Commercial Code as adopted by the State of
Illinois.
2. LOANS: DISBURSEMENTS, INTEREST RATES AND LOAN REQUESTS
2.1 REVOLVING LOANS.
(A) Provided that an Unmatured Event of Default or Event of Default does
not then exist and all of the conditions precedent in Section 10 of this Loan
Agreement have been satisfied, the Bank shall loan to Borrowers on a revolving
credit basis the lesser of (1) the Maximum Revolving Loan, or (2) the Borrowing
Base. The Revolving Loan shall be evidenced by and repaid in accordance with the
Revolving Note. Notwithstanding anything contained in this Loan Agreement or the
Other Agreements to the contrary, effective immediately upon notice from the
Bank to Borrowers, the Bank may, in its reasonable discretion, change, at any
time and from to time, the method of calculating the Borrowing Base, including,
but not limited to, reducing advance rates against Eligible Accounts, excluding
certain accounts from the Secured Over Formula Advance calculation and deducting
additional or other reserves from the Borrowing Base; provided, however, if any
change in the method of calculating the Borrowing Base under this Section 2.1(A)
causes the total amount of the outstanding Revolving Loans to exceed the
Borrowing Base, Borrowers shall have a period of five (5) days after notice of
such change to reduce the amount of the outstanding Revolving Loans to an amount
equal to or less than the Borrowing Base. During such five (5) day period, the
Bank shall not be obligated to make any Revolving Loan advances to Borrowers
until such time as the outstanding Revolving Loans are less than or equal to the
revised Borrowing Base.
(B) A request for a Revolving Loan shall be made, or shall be deemed made,
in the following manner: (1) Borrowers may give the Bank notice of its intention
to borrow in accordance with the provisions of this Section 2.1, or (2) if any
amount required to be paid under this Loan Agreement or the Other Agreements
becomes due and is not timely paid, such occurrence shall be deemed irrevocably
to be a request for a Revolving Loan on the due date in the amount then due.
(C) Each request for a Revolving Loan shall be made by notice, given not
later than 11:00 A.M. (Chicago time) on the Business Day of the proposed
Revolving Loan, from Borrowers to the Bank. If requested by the Bank, such
notice shall be accompanied by a Borrowing Base Certificate in form and
substance satisfactory to the Bank.
2.2 INTEREST RATES ON LOANS.
2.2.1 Borrowers hereby promise to pay interest on the unpaid principal
amount of the Revolving Loan as provided in Section 3.1 below at the floating
per annum rate of interest equal to the Prime Rate for the period commencing on
the date such Loan is disbursed until the date such Loan is paid in full.
Provided, however, Borrowers shall have the option of converting the interest
rate for all or
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a portion of the Revolving Loan to the LIBOR Rate, plus Two Hundred Fifty (250)
basis points, in accordance with Section 2.2.2 below. Notwithstanding the
foregoing, upon the occurrence of an Event of Default, the unpaid principal
amount of the Revolving Loan shall, at the Bank's option, bear interest after
such Event of Default at the Default Rate.
2.2.2 Each LIBOR Loan shall be in the minimum amount of Five Million and
no/100 Dollars ($5,000,000.00), with integral amounts of Five Hundred Thousand
and no/100 Dollars ($500,000.00) thereafter. Not more than five (5) nor less
than two (2) Business Days prior to the requested date of any LIBOR Loan, any
Borrower shall deliver to the Bank an irrevocable written or telephonic notice
setting forth the requested date and amount of such LIBOR Loan and the duration
of the Interest Period applicable thereto. Each such notice shall be accompanied
by a Request for Advance at the LIBOR Rate in the form of Exhibit "C" to this
Loan Agreement. Unless Borrowers notifies the Bank to the contrary, upon the
expiration of any Interest Period for a LIBOR Loan, such LIBOR Loan shall
automatically convert to a Loan at the Prime Rate. Borrowers shall not (A)
request a LIBOR Loan for an Interest Period that expires on any date after the
repayment date of all or any portion of such LIBOR Loan, (B) request, nor permit
to be in effect, more than three (3) LIBOR Loans at any time, nor (C) prepay any
advance bearing interest at the LIBOR Rate unless Borrowers pay to the Bank all
breakage costs incurred by the Bank as a result of such prepayment. If Borrowers
pay any LIBOR Loan on any day other than the last day of the Interest Period,
then Borrowers shall pay to the Bank all of the Bank's costs, fees and expenses
incurred in connection therewith, including, without limitation, charges or
costs associated with changing LIBOR Rates prior to the expiration of their
scheduled Interest Period.
2.3 COMPUTATION OF INTEREST. Interest on the Loans shall be computed for
the actual number of days elapsed on the basis of a three hundred sixty (360)
day year.
3. LOANS: GENERAL TERMS
3.1 PAYMENTS.
A. SCHEDULED PAYMENTS. Except as otherwise provided in this Loan Agreement
or the Other Agreements, that portion of the Liabilities consisting of: (A) the
principal portion of the Revolving Loan shall be payable in full by Borrowers to
the Bank on or before May 31, 2000; (B) interest on the Revolving Loans shall be
payable by Borrowers to the Bank on the last Business Day of each month, as
debited by the Bank; (C) all costs, fees and expenses payable pursuant to this
Loan Agreement and the Other Agreements shall be payable by Borrowers to the
Bank, or to such other Persons designated by the Bank, on demand; and (D) the
balance of the Liabilities, if any, shall be payable by Borrowers to the Bank on
demand. All such payments to the Bank shall be payable at the Bank's principal
office in Chicago, Illinois, or at such other place or places as the Bank may
designate in writing to Borrowers. All such payments to Persons other than the
Bank shall be payable at such place or places as the Bank may designate in
writing to Borrowers.
B. REVOLVING LOAN MANDATORY PREPAYMENTS. Borrowers agrees that if at any
time the aggregate unpaid principal amount of all Revolving Loans shall exceed
the Borrowing Base, it will forthwith make a mandatory prepayment of principal
in an amount equal to such excess. Each such mandatory prepayment shall be
without premium or penalty except with respect to LIBOR Loans as to which the
provisions of Section 2.2.2 shall apply.
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3.2 NOTES. Loans made by the Bank to Borrowers pursuant to this Loan
Agreement may or may not, at the Bank's discretion, be evidenced by notes or
other instruments issued or executed and delivered by Borrowers to the Bank,
including, but not limited to, the Revolving Note. Where such loans are not so
evidenced, such loans shall be evidenced by entries upon the ledgers, books,
records or computer records of the Bank maintained for that purpose. The Bank's
failure to record any portion of the Liabilities on such books and records shall
not limit or otherwise affect the obligations and liabilities of Borrowers to
repay the Liabilities due and owing to the Bank pursuant to this Loan Agreement
and the Other Agreements.
3.3 ONE LOAN. All of the Liabilities shall constitute one loan secured by
the Bank's security interest and lien in and to the Collateral and by all other
security interests, liens, mortgages, claims and encumbrances heretofore, now or
from time to time hereafter granted by Borrowers to the Bank.
3.4 USE OF LOAN PROCEEDS. Each Borrower represents, warrants and covenants
unto the Bank that each Borrower shall use the proceeds of all Loans made by the
Bank to such Borrower pursuant to this Loan Agreement and the Other Agreements
as follows: (A) from time to time hereafter, the Revolving Loan shall be used to
meet Borrowers' general operating capital needs to the extent consistent with
this Loan Agreement, and (B) proceeds of the Loans shall be used solely for
proper business purposes and consistent with all applicable laws and statutes,
including, but not limited to, Illinois Compiled ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇,
Section 4 (815 ILCS 205/4). Each Borrower further represents and warrants to the
Bank that such Borrower does not and will not at any time hereafter own any
margin securities, and that none of the proceeds of the loans hereunder shall be
used for the purpose of (i) purchasing or carrying any margin securities, (ii)
reducing or retiring any indebtedness which was originally incurred to purchase
any margin securities, or (iii) any other purpose not permitted by Regulation U
of the Board of Governors of the Federal Reserve System, as in effect from time
to time.
3.5 MAXIMUM REVOLVING LOANS. Notwithstanding anything contained in this
Loan Agreement or the Other Agreements to the contrary, the principal amount of
the Revolving Loans outstanding at any one time, or from time to time, shall not
exceed the Maximum Revolving Loan. Furthermore, as of May 31, 2000, and
thereafter, all of the Revolving Loans shall be paid and satisfied in full.
3.6 REPRESENTATION AND WARRANTY. Each request for a Loan advance made by
Borrowers to the Bank pursuant to this Loan Agreement and the Other Agreements
shall constitute an automatic representation and warranty by Borrowers to the
Bank that there does not then exist an Unmatured Event of Default or Event of
Default.
3.7 AUTHORIZATION TO DISBURSE. Each Borrower hereby authorizes and directs
the Bank to disburse for and on behalf of such Borrower, and for the Borrowers'
account, the proceeds of Loans made by the Bank to Borrowers pursuant to this
Loan Agreement to such Person or Persons as any Borrower or any Person specified
in Paragraph 12.11 of this Loan Agreement shall direct, whether in writing or
orally.
3.8 BANK CHARGES. Borrowers shall pay to the Bank, on demand, any and all
charges customarily asserted by a bank or similar institution against the Bank
for or with respect to the Bank's forwarding to Borrowers proceeds of loans made
by the Bank to Borrowers pursuant to this Loan Agreement or the Other
Agreements, or for or with respect to the Bank's depositing for collection any
check or item of payment received by or delivered to the Bank on account of the
Liabilities.
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3.9 PAYMENT OF COSTS, FEES AND EXPENSES. The Bank, in its discretion, may
disburse any or all proceeds of Loans made to Borrowers pursuant to this Loan
Agreement or the Other Agreements to pay any costs, fees, expenses or other
amounts required to be paid by Borrowers hereunder and not timely paid, or to
pay any Person as the Bank deems necessary to insure that the security interest
and lien granted to the Bank in and to the Collateral shall at all times be a
first priority, perfected security interest and lien. All monies so disbursed by
the Bank shall be part of the Liabilities, secured by the Collateral and payable
by Borrowers to the Bank on demand.
3.10 DEBIT OF ACCOUNTS. Each Borrower hereby authorizes the Bank to debit
such Borrower's accounts with the Bank for (A) the principal, interest and other
costs, fees and expenses arising under or pursuant to this Loan Agreement and
the Other Agreements, when the same are due, and (B) all amounts due the Bank,
and any principal, interest and other costs, fees and expenses arising under or
pursuant to this Loan Agreement, the Other Agreements or otherwise.
3.11 APPLICATION OF PAYMENTS. Any check, draft, wire transfer or similar
item of payment by or for the account of Borrowers delivered to the Bank on
account of the Liabilities shall be applied by the Bank to the Liabilities as
follows: (A) wire transfers of immediately available funds and other cash
deposits will be credited on the same Business Day of receipt by the Bank, and
(B) checks and other instruments will be credited by the Bank, provided the same
is honored by the Bank and final settlement thereof is reflected by irrevocable
credit to the Bank, on available funds.
3.12 CO-OBLIGOR PROVISIONS.
(A) The Bank shall not be required or obligated to take any of the
following action prior to pursuing any rights or remedies the Bank may have
against any Borrower: (1) take any action to collect from, or to file any claim
of any kind against, any other Borrower, any guarantor, or any other person or
entity liable, jointly or severally, for the full and timely performance of the
Covenants or the full and timely payment of any of the Liabilities; (2) take any
steps to protect, enforce, take possession of, perfect any interest in,
foreclose or realize on any collateral or security, if any, securing the
Covenants or the Liabilities; or (3) in any other respect, exercise any
diligence whatsoever in enforcing, collecting or attempting to collect any of
the Liabilities by any means.
(B) Each Borrower unconditionally and irrevocably waives each and every
defense which would otherwise impair, restrict, diminish or affect any of the
Liabilities. Without limiting the foregoing, the Bank shall have the exclusive
right from time to time without impairing, restricting, diminishing or affecting
any of the Liabilities, and without notice of any kind to the Borrowers, to (1)
provide additional financial accommodations to Borrowers; (2) accept partial
payments on the Liabilities; (3) take and hold collateral or security to secure
the Covenants and the Liabilities, or take any other guaranty to secure the
Covenants and the Liabilities; (4) in its sole discretion, apply any such
collateral or security, and direct the order or manner of sale thereof, and the
application of the proceeds thereof; (5) release any guarantor or co-obligor of
the Liabilities; and (6) settle, release, compromise, collect or otherwise
liquidate the Liabilities or exchange, enforce, sell, lease, use, maintain,
impair and release any collateral or security therefor in any commercially
reasonable manner, without affecting or impairing any of the Liabilities
hereunder.
(C) Each Borrower hereby unconditionally waives (1) notice of any default
by Borrowers in the full and prompt performance of the Covenants or the full and
prompt payment of the Liabilities, and (2) presentment, notice of dishonor,
protest, demand for payment and any other notices of any kind.
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(D) Each Borrower assumes full responsibility for keeping informed of (1)
the financial condition of the other Borrowers; (2) the extent of the
Liabilities; and (3) all other circumstances bearing upon Borrowers or the risk
of non-payment of the Liabilities. Each Borrower agrees that the Bank shall have
no duty or obligation to advise, furnish or supply such Borrower of or with any
information known to the Bank, including, but not limited to, the financial
condition of the other Borrowers, any other circumstances relating to
non-payment of the Liabilities or otherwise. If the Bank, in its sole
discretion, provides any advice or information to any Borrower, the Bank shall
be under no obligation to investigate the matters contained in such advice or
information, or to correct such advice or information if the Bank thereafter
knows or should have known that such advice or information is misleading or
untrue, in whole or in part, or to update or provide any other advice or
information in the future.
(E) Each Borrower acknowledges and agrees that it may have a right of
indemnification, subrogation, contribution and reimbursement from the other
Borrowers, the Bank or any guarantor of the Liabilities based upon its execution
of this Loan Agreement. Each Borrower understands the benefits of having such
rights, including, but not limited to, (1) such Borrower's right to
reimbursement from the other Borrowers of all monies expended for the payment of
the Liabilities; and (2) such Borrower's subrogation to the rights of the Bank
after payment of the Liabilities. No Borrower shall exercise any such rights of
indemnification, subrogation, contribution or reimbursement from the other
Borrower, the Bank or any guarantor of the Liabilities prior to the indefeasible
payment and satisfaction in full to the Bank of the Liabilities.
3.13 CLOSING FEE. Contemporaneously with the execution of this Agreement,
Borrowers shall pay to the Bank a fully earned non-refundable closing fee in the
amount of One Hundred Seventy-Five Thousand and no/100 Dollars ($175,000.00).
3.14 UNUSED COMMITMENT FEE. From and after the date of this Loan Agreement
until the Revolving Loan Termination Date, Borrowers shall pay to the Bank,
monthly in arrears on the first Business Day of each calendar month, an unused
commitment fee at the rate of one-half of one percent (1/2 %) per annum of the
difference between (i) the average daily Maximum Revolving Loan for the prior
month, and (ii) the average daily balance of all Revolving Loans outstanding
during the prior month.
4. COLLATERAL: GENERAL TERMS
4.1 GRANT OF SECURITY INTEREST. To secure the full and timely payment by
Borrowers to the Bank of the Liabilities and the full and timely performance by
Borrowers of the Covenants, each Borrower hereby grants to the Bank a first
position priority security interest and lien in and to all of Borrowers' now
existing or owned and hereafter arising or acquired: (A) Accounts; (B) Goods for
sale, lease or other disposition by such Borrower which have given rise to
Accounts and have been returned to or repossessed or stopped in transit by such
Borrower; (C) contract rights and documents, instruments, contracts or other
writings executed in connection therewith, including, but not limited to, all
real and personal property lease rights, and all sums now due or which may
become due from Borrowers to the Bank; (D) Chattel Paper, Documents of Title,
Instruments, Documents and General Intangibles; (E) patents, trademarks, trade
names, trademark registrations and copyrights, all applications therefor,
service marks, trade secrets, goodwill, inventions, processes, designs,
formulas, and other intellectual or proprietary rights or interests, of any
kind, nature or description whatsoever, and all registrations, licenses,
franchises, customer lists, tax refund claims, claims against carrier and
shippers, insurance claims, guaranty claims, all other claims, proof of claims
filed in any bankruptcy, insolvency or other proceeding, contract rights, choses
in action, security interests, security deposits and rights to indemnification;
(F) Inventory; (G) Investment Property; (H) Equipment, Fixtures and trade
fixtures; (I) deposits, cash and cash
-12-
equivalents and any other property of Borrowers now or hereafter in the
possession, custody or control of the Bank, whether for safekeeping, deposit,
collection, custody, pledge, transmission or otherwise; (J) deposit accounts
held with the Bank or any other depository institution; and (K) additions and
accessions to, substitutions for and replacements, products and cash and
non-cash proceeds of all of the foregoing property, including, but not limited
to, proceeds of all insurance policies insuring the foregoing and all of
Borrowers' books and records relating to any of the foregoing and to Borrowers'
business (all of the foregoing property is collectively referred to as the
"Collateral"). Borrowers shall make appropriate entries upon their respective
financial statements and books and records disclosing the Bank's first position
priority security interest and lien in and to the Collateral.
4.2 SUPPLEMENTAL DOCUMENTATION. Borrowers shall execute and deliver to the
Bank, at any time and from time to time, all agreements, instruments, documents
and other written matter (the "Supplemental Documentation"), including, without
limitation, Uniform Commercial Code financing statements, that the Bank may
request, in form and substance acceptable to the Bank, to perfect and maintain
perfected the Bank's first position priority security interest and lien in and
to the Collateral and to consummate the transactions contemplated by this Loan
Agreement and the Other Agreements. Each Borrower, irrevocably, hereby makes,
constitutes and appoints the Bank, and all Persons designated by the Bank for
that purpose, as such Borrower's true and lawful attorney and agent-in-fact, to
sign the name of such Borrower on the Supplemental Documentation and to deliver
such Supplemental Documentation to such Persons as the Bank may reasonably
elect. To the extent permitted by law, each Borrower agrees that a carbon,
photographic, photostatic copy or other reproduction of this Loan Agreement or
of any financing statement shall be sufficient as a financing statement.
4.3 INSPECTIONS AND VERIFICATIONS. The Bank shall have the right, at any
time while all or any portion of the Revolving Loan is outstanding, to inspect
the Collateral, all related records and the premises upon which it is located,
and to verify the amount and condition of or any other matter relating to the
Collateral. All reasonable costs, fees and expenses incurred by the Bank in
connection with such inspection or verification shall constitute part of the
Liabilities, secured by the Collateral and payable by Borrowers to the Bank on
demand.
4.4 LIENS/COLLATERAL LOCATIONS. Each Borrower represents, warrants and
covenants unto the Bank that: (A) the Bank's security interest and lien in and
to the Collateral is now and at all times hereafter shall be perfected and have
a first priority; (B) except for the Permitted Liens, the Collateral is and
shall remain free and clear of all security interests, liens and other
encumbrances; (C) Borrowers' principal places of business, all other offices and
places of business and the offices and locations where Borrowers keeps the
Collateral at the locations specified on Exhibit "D"; (D) Borrowers shall not
remove the Collateral from the locations specified on Exhibit "D" and shall not
keep any of the Collateral at any other office or location unless Borrowers give
the Bank thirty (30) days prior written notice; and (E) the Collateral is and
shall remain within the continental United States of America. Each Borrower
shall provide the Bank with thirty (30) days prior written notice of the opening
of any new office or place of business, the closing of any existing office or
place of business or delivering any Collateral to a warehouse or other storage
facility not listed on Exhibit "D". Each Borrower covenants unto and agrees with
the Bank that any new office or place of business shall be within the
continental United States of America.
4.5 LOCKBOX AND CASH COLLATERAL ACCOUNT.
A. Except as otherwise permitted in Section 12.1 below, each Borrower shall
direct all of its Account Debtors to make payments on Accounts directly into a
lockbox established by Borrower over which
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the Bank shall have sole control and authority pursuant to a Lockbox Agreement
between Borrowers and the Bank (the "Lockbox"). If any monies, checks, notes,
drafts or other payment for or proceeds of the Collateral shall come into the
possession or under the control of any Borrower, or any of its shareholders,
directors, officers, employees, agents or those Persons acting for or in concert
with said Borrower, said Borrower shall receive same as the sole and exclusive
property of the Bank and as trustee for the Bank, and said Borrower shall remit
or cause the same to be remitted, in kind, to the Bank or to any agent or agents
appointed by the Bank for that purpose, and such monies, checks, notes, drafts
or other payment for or proceeds of the Collateral shall be credited to the Cash
Collateral Account, unless the Bank shall otherwise elect. The Bank, now or at
any time or times hereafter, in its sole discretion, may take control of and
endorse any Borrower's name to any of the items of payment or proceeds described
in this Section 4.5. For the purposes of this Section, each Borrower,
irrevocably, hereby makes, constitutes and appoints the Bank, and all persons
designated by the Bank for that purpose, as said Borrower's true and lawful
attorney and agent-in-fact to take any such actions. All such items of payment
or proceeds received through the Lockbox or directly from Borrowers shall,
unless the Bank shall otherwise elect, be deposited into a cash collateral
account maintained with the Bank (the "Cash Collateral Account") over which the
Bank has sole control and authority and shall be applied by the Bank to the
Liabilities; provided, however, all proceeds received in the Lockbox which are
in excess of the amount necessary to reduce the Liabilities to zero, shall be
deposited into Borrowers' operating account at the Bank. The amounts deposited
into the Cash Collateral Account are and shall continue to be the sole and
exclusive property of the Bank.
B. Each Borrower shall execute all documents requested by the Bank with
respect to the Cash Collateral Account, the Lockbox and any blocked account
agreements and agrees to pay to the Bank promptly upon demand for any and all
fees, costs and expenses which the Bank incurs or customarily charges in
connection with the opening and maintaining of the Cash Collateral Account and
the Lockbox and depositing for collection by the Bank any monies, checks, notes,
drafts or other items of payment received and/or delivered on account of the
Liabilities.
4.6 ACCOUNT EARNINGS CREDIT. Should the Bank's operating costs and fees
relating to Borrowers' operating accounts and any lockbox exceed the earnings
credit rate associated with the account balances in any one month, such
deficiency shall be part of the Liabilities, secured by the Collateral and
payable by Borrowers to the Bank on demand.
4.7 ASSIGNMENT OF COMPETING SECURITY INTEREST. The Bank, in its discretion,
without waiving or releasing any obligation, liability or duty of Borrowers
under this Loan Agreement and the Other Agreements or any Unmatured Event of
Default or Event of Default, may at any time or times hereafter, but shall not
be obligated to do so, pay, acquire or accept an assignment of any security
interest, lien, encumbrance or claim asserted by any Person against the
Collateral. All sums paid by the Bank in connection therewith and all costs,
fees and expenses, including, but not limited to, attorneys' fees, court costs,
expenses and other charges relating thereto incurred by the Bank on account
thereof shall be part of the Liabilities, secured by the Collateral and payable
by Borrowers to the Bank on demand.
4.8 SPECIAL COLLATERAL. Immediately upon any Borrower's receipt of any
Special Collateral, such Borrower shall ▇▇▇▇ the same to show that such Special
Collateral is subject to a first position security interest and lien in favor of
the Bank and shall deliver the original thereof to the Bank, together with an
appropriate endorsement or other specific evidence of assignment in form and
substance acceptable to the Bank.
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4.9 ADDITIONAL COLLATERAL. Upon the occurrence of an Unmatured Event of
Default or Event of Default, the Bank may, in its discretion, retain as
additional Collateral, such portion of the monies, reserves and proceeds
received by the Bank with respect to the Collateral as the Bank may determine.
Each Borrower hereby grants to the Bank a first position priority security
interest and lien in and to all such monies, reserves and proceeds and other
property of such Borrower in the possession of the Bank at any time or times
hereafter as additional Collateral hereunder, and, in the Bank's discretion, may
be held by the Bank until the Liabilities are indefeasibly paid in full or be
applied by the Bank on account of the Liabilities.
4.10 NO CUSTOM OR WAIVER. No authorization given by the Bank pursuant to
this Loan Agreement or the Other Agreements to sell any specified portion of the
Collateral or any items thereof, and no waiver by the Bank in connection
therewith, shall establish a custom or constitute a waiver of the prohibition
contained in this Loan Agreement or the Other Agreements against such sales,
with respect to any portion of the Collateral or any item thereof not covered by
said authorization.
4.11 LIEN ON REALTY. Each Borrower represents and warrants to the Bank that
such Borrower is not the direct or indirect legal or beneficial owner of any
real property, except the real property set forth on Exhibit "E" hereto. If any
Borrower shall acquire at any time or times hereafter an interest in any fee
interest on real property other than as set forth on Exhibit "E" hereto, such
Borrower agrees promptly to execute and deliver to the Bank as additional
security and Collateral for the Liabilities, deeds of trust, security deeds,
mortgages or other collateral assignments satisfactory in form and substance to
the Bank, and its counsel (herein collectively referred to as "New Mortgages")
covering such real property. Each New Mortgage shall be duly recorded in each
office where such recording is required to constitute a valid lien on the real
property covered thereby. Borrowers shall deliver to the Bank at Borrowers'
expense, mortgagee title insurance policies issued by a title insurance company
satisfactory to the Bank insuring the Bank as mortgagee; such policies shall be
in form and substance satisfactory to the Bank and shall insure a valid lien in
favor of the Bank and the property covered thereby, subject only to those
exceptions acceptable to the Bank and its counsel. Said policies shall be in
form and substance satisfactory to the Bank. Borrowers shall deliver to the Bank
such other documents as the Bank and its counsel may reasonably request relating
to any such New Mortgages. From time to time hereafter, upon the Bank's request,
Borrowers shall deliver to the Bank a current appraisal for any real property
encumbered by a mortgage or deed of trust which secures the Liabilities.
Borrowers shall be required to pay for the cost of preparing appraisals which
(a) are prepared after the occurrence of an Event of Default, and (b) are
prepared prior to the occurrence of an Event of Default, but not to exceed one
(1) appraisal per Borrowers' fiscal year commencing with the fiscal year
beginning October 1, 2000.
5. COLLATERAL: ACCOUNTS
5.1 ELIGIBLE ACCOUNTS. An "Eligible Account" is an Account that, when
scheduled to the Bank and at all times thereafter, does not violate the negative
covenants and other provisions of this Section 5 and does satisfy the positive
covenants and other provisions of this Section 5. The following Accounts are not
and shall not be considered Eligible Accounts:
(A) Accounts which remain unpaid for more than ninety (90) days after their
invoice date;
(B) Accounts with respect to which the Account Debtor is a director,
officer, employee or agent of any Borrower or is a Parent, a Subsidiary or an
Affiliate of any Borrower;
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(C) Accounts with respect to which payment by the Account Debtor
is or becomes 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;
(D) Accounts with respect to which the Account Debtor (1) is not a
resident, a citizen of or otherwise located in the United States of America; or
(2) is not subject to service of process in the United States of America;
(E) The face amount of any Accounts with respect to which a Borrower is or
may become liable to the Account Debtor for Goods sold or services rendered by
such Account Debtor to such Borrower, but only to the extent of the maximum
aggregate amount of such Borrower's liability to such Account Debtor;
(F) Accounts which are owing by any Account Debtor involved in any
bankruptcy or insolvency proceeding;
(G) Accounts as to which the Bank, at any time or times hereafter,
determines in good faith that the prospect of payment or performance by the
Account Debtor is or will be impaired; and
(H) It is an Account with respect to which the Account Debtor is located in
a state which requires such Borrower, as a precondition to commencing or
maintaining an action in the courts of that state, either to (1) receive a
certificate of authority to do business and be in good standing in such state,
or (2) file a notice of business activities report or similar report with such
state's taxing authority, unless (a) such Borrower has taken one of the actions
described in clauses (1) or (2), (b) the failure to take one of the actions
described in either clause (1) or (2) may be cured retroactively by such
Borrower at its election, or (c) such Borrower has proven, to the Bank's
satisfaction, that it is exempt from any such requirements under any such
state's laws.
(I) All or any portion of an Account to the extent there exists or the
Account Debtor has asserted a counterclaim or dispute; provided, however, if the
amount of such counterclaim or dispute is equal to or greater than ten percent
(10%) of the total Account owing from such Account Debtor to the applicable
Borrower, then the full amount of such Account shall be deemed an ineligible
Account.
5.2 NOTICE OF INELIGIBLE ACCOUNTS. Immediately upon learning thereof,
Borrowers shall notify the Bank that an Account is no longer an Eligible
Account. Borrowers shall immediately pay to the Bank an amount of money equal to
the monies theretofore advanced by the Bank to Borrowers upon an Account that is
no longer an Eligible Account to the extent that the total outstanding Revolving
Loan exceeds the Borrowing Base as a result thereof, and the Bank shall apply
such payment to and on account of the Liabilities, or the Bank, in its
discretion, may pay to itself, for the account of Borrowers, from (A) future
loans or advances to be made by the Bank to Borrowers pursuant to this Loan
Agreement and the Other Agreements, and (B) monies, reserves and proceeds
received or collected by the Bank pursuant to Section 4.9 above, in an amount
necessary to satisfy in whole or in part the foregoing requirement. If Borrowers
do not fully and timely make such payment or if the funds referred to in clauses
(A) and (B) above are not sufficient therefor, the same shall be deemed an Event
of Default by Borrowers under this Loan Agreement.
5.3 ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to
each of the Accounts, each Borrower represents, warrants and covenants unto the
Bank that: (A) they are and shall be genuine, in all respects what they purport
to be and are not evidenced by a judgment; (B) they represent
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undisputed, bona fide transactions completed in accordance with the terms and
provisions contained in the invoices and other documents delivered to the Bank
with respect thereto; (C) the amounts thereof, which may be shown on any
Schedule of Accounts or invoices and statements delivered to the Bank with
respect thereto, are and shall be actually and absolutely owing to Borrowers and
are not contingent for any reason; (D) no payments have been or shall be made
thereon except payments immediately delivered to the Bank pursuant to this Loan
Agreement and the Other Agreements; (E) except as disclosed to the Bank in
writing, there are no setoffs, counterclaims or disputes existing or asserted
with respect thereto and Borrowers have not made and will not make any agreement
with any Account Debtor for any deduction therefrom, except regular discounts
allowed by Borrowers in the ordinary course of their respective businesses for
prompt payment; (F) except as disclosed to the Bank, there are no facts, events
or occurrences which in any way impair the validity or enforcement thereof or
tend to reduce the amount payable thereunder; (G) to Borrower's knowledge, all
Account Debtors have the capacity to contract and are solvent; (H) the services
furnished or Goods sold giving rise thereto are not subject to any lien, claim,
encumbrance or security interest, except the first position priority security
interest and lien of the Bank; (I) except as disclosed to the Bank, Borrowers
have no knowledge of any fact or circumstance which would impair the validity or
collectibility thereof; and (J) to Borrower's knowledge, except as disclosed to
the Bank, there are no proceedings or actions which are threatened or pending
against any Account Debtor which might result in any material adverse change in
its financial condition.
5.4 REVOLVING LOANS. Borrowers shall not request nor permit the Bank to
make any Revolving Loans with respect to any Account contained on any Schedules
of Accounts, except and only so long as such Account is an Eligible Account.
5.5 VERIFICATION OF ACCOUNTS. Any of the Bank's officers, employees or
agents shall have the right, at any time or times hereafter, in the Bank's name
or in the name of a nominee of the Bank, to verify the validity, amount or any
other matter relating to any Accounts by mail, telephone, facsimile
transmission, telegraph or otherwise. All costs, fees and expenses relating
thereto incurred by the Bank, or for which the Bank becomes obligated, shall be
part of the Liabilities, secured by the Collateral and payable by Borrowers to
the Bank on demand.
5.6 SCHEDULE OF ACCOUNTS. Within fifteen (15) days after the last day of
each month from and after the date hereof, Borrowers shall deliver to the Bank,
in form and substance acceptable to the Bank, certified as to accuracy and
completeness by the controller or any Designated Person of Borrowers, (A) a
detailed aged schedule of Accounts and such other matters and information
relating to the status of then existing Accounts as the Bank shall reasonably
request, (B) an Accounts reconciliation statement, in form and substance
acceptable to the Bank, and (C) an accounts payable aging report (collectively
"Schedule of Accounts"). Borrowers shall keep accurate and complete records of
their Accounts which shall be available to the Bank at all times for the Bank's
inspection, copying, verification or otherwise.
5.7 NOTICES REGARDING ACCOUNT DEBTORS. Each Borrower shall: (A) promptly
upon any Borrower learning thereof, inform the Bank, in writing, of any material
delay in such Borrower's performance of any of its obligations to any Account
Debtor and of any assertion of any claims, offsets or counterclaims by any
Account Debtor and of any allowances, credits or other monies granted by such
Borrower to any Account Debtor; (B) not permit or agree to any extension,
compromise or settlement or make any change or modification of any kind or
nature with respect to any Account, including, but not limited to, any of the
terms relating thereto; and (C) promptly upon Borrowers' receipt or learning
thereof, furnish to and inform the Bank of all material adverse information
relating to the financial condition of any Account Debtor.
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5.8 FAILURE TO DIRECT ACCOUNT DEBTORS. The Bank shall have the right, now
and at any time or times hereafter, in its discretion, to take control, in any
manner, of any item of payment or proceeds referred to in Section 4.5 above. If
Borrowers fail to timely direct any Account Debtors to make payments on Accounts
in accordance with Section 4.5 of this Loan Agreement, then the Bank shall have
the right to: (A) notify any or all Account Debtors that the Accounts and
Special Collateral have been assigned to the Bank and that the Bank has a first
position priority security interest and lien therein; (B) direct such Account
Debtors to make all payments due from them to Borrowers upon the Accounts and
Special Collateral directly to the Bank; and (C) enforce payment of and collect,
by legal proceedings or otherwise, the Accounts and Special Collateral in the
name of the Bank and Borrowers.
5.9 NOTICE REGARDING DISPUTED ACCOUNTS. In the event any amount due and
owing in excess of Ten Thousand and no/100 Dollars ($10,000.00) is in dispute
for a period of thirty (30) days or more after any Borrower receives notice or
obtains knowledge thereof between any Borrower and an Account Debtor, such
Borrower shall provide the Bank with written notice thereof at the time of
submission of the next Schedule of Accounts explaining in detail the reason for
the dispute, all claims related thereto and the amount in controversy; provided,
however, in the event the aggregate total of such amounts in dispute exceeds
Fifty Thousand and no/100 Dollars ($50,000.00), such written notice must be
provided to the Bank immediately upon such Borrower having knowledge of such
disputes.
5.10 ATTORNEY AND AGENT-IN-FACT. Each Borrower irrevocably hereby
designates, makes, constitutes and appoints the Bank, and all Persons designated
by the Bank, as such Borrower's true and lawful attorney and agent-in fact, in
any Borrower's or the Bank's name, to at any time: (A) demand payment of the
Accounts and Special Collateral during the continuance of an Event of Default;
(B) enforce payment of the Accounts and Special Collateral by legal proceedings
or otherwise during the continuance of an Event of Default; (C) exercise all of
Borrowers' rights and remedies with respect to the collection of the Accounts
and Special Collateral during the continuance of an Event of Default; (D)
settle, adjust, compromise, extend or renew the Accounts and Special Collateral
during the continuance of an Event of Default; (E) settle, adjust or compromise
any legal proceedings brought to collect the Accounts and Special Collateral
during the continuance of an Event of Default; (F) sell or assign the Accounts
and Special Collateral upon such terms, for such amounts and at such time or
times as the Bank deems advisable during the continuance of an Event of Default;
(G) discharge and release the Accounts and Special Collateral during the
continuance of an Event of Default; (H) take control, in any manner, of any item
of payment or proceeds referred to in Section 4.5 above; (I) prepare, file and
sign any Borrowers' name on any notice of lien, assignment or satisfaction of
lien or similar document in connection with the Accounts and Special Collateral;
(J) prepare, file and sign any Borrower's name on any Proof of Claim in
bankruptcy or similar document against any Account Debtor; (K) do all acts and
things necessary, in the Bank's sole discretion, to fulfill Borrowers'
obligations under this Loan Agreement during the continuance of an Event of
Default; (L) endorse the name of any Borrower upon any of the items of payment
or proceeds referred to in Section 4.5 above and to deposit the same on account
of the Liabilities; (M) endorse the name of any Borrower upon any Chattel Paper,
Document, Instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of lading or similar document
or agreement relating to the Accounts and Special Collateral; and (N) sign the
name of any Borrower to verifications of the Accounts and Special Collateral and
notices thereof to Account Debtors.
6. COLLATERAL: INVENTORY
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Borrower represents and
warrants to and covenants with the Bank that such Borrower does not now and
hereafter shall not have any Inventory.
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7. EQUIPMENT
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Borrower represents and
warrants to and covenants with the Bank that (A) Borrowers have and shall have
good, indefeasible and merchantable title, free and clear of all security
interests, claims and encumbrances to and ownership of the Equipment, except for
the Permitted Liens; and (B) the Equipment owned by Borrowers shall be kept and
maintained solely at each Borrower's respective places of business specified on
Exhibit "D".
7.2 MAINTENANCE OF EQUIPMENT. Each 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 of the Equipment shall at all times be maintained and preserved,
except to the extent that such Equipment is obsolete. No Borrower shall permit
any of the Equipment to become a Fixture to the real estate or accession to
other personal property.
7.3 EVIDENCE OF OWNERSHIP. Upon the Bank's request, each Borrower shall
deliver to the Bank any and all evidence of ownership to, including, without
limitation, certificates of title to and applications for title to, any of the
Equipment owned by Borrowers.
7.4 RECORDS AND SCHEDULES OF EQUIPMENT. Each Borrower shall maintain
accurate records itemizing and describing the kind, type, quality, quantity and
value of its Equipment and all dispositions thereof, and shall furnish the Bank
with a current schedule containing the foregoing information upon request by the
Bank.
8. INSURANCE AND TAXES
8.1 INSURANCE.
(A) Borrowers, at their sole cost and expense, shall keep and maintain: (1)
the Collateral insured for the full insurable value against loss or damage by
fire, theft, explosion, sprinklers and all other hazards and risks ordinarily
insured against by other owners or users of such properties in similar
businesses; and (2) business interruption insurance, workmen's compensation
insurance, public liability insurance and property damage insurance relating to
Borrowers' businesses and ownership and use of their assets.
(B) All such policies of insurance shall be in form and substance, in such
amounts and with insurers recognized as adequate by prudent business persons, as
may be satisfactory to the Bank. Borrowers shall deliver to the Bank the
original, or certified copy, of each policy of insurance or a certificate of
insurance, and evidence of payment of all premiums for each such policy. All
policies of insurance shall contain an endorsement, in form and substance
acceptable to the Bank, showing the Bank as additional insured and lender's loss
payee, except for public liability insurance, which policies shall name the Bank
as additional insured. Such endorsement or independent instrument furnished to
the Bank shall provide that the insurance companies will give the Bank at least
thirty (30) days written notice before any such policy or policies of insurance
shall be altered or canceled and that no act or default of Borrowers or any
other person shall affect the right of the Bank to recover under such policy or
policies of insurance in case of loss or damage.
(C) Borrowers hereby direct all insurers under such policies of insurance
to pay all proceeds payable thereunder directly to the Bank. Each Borrower
irrevocably, makes, constitutes and appoints the Bank, and all officers,
employees or agents designated by the Bank, as such Borrower's true and lawful
attorney and agent-in-
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fact for the purpose of making, settling and adjusting claims under such
policies of insurance with respect to the Collateral, endorsing the name of such
Borrower on any check, draft, instrument or other item of payment constituting
the proceeds of such policies of insurance with respect to the Collateral at any
time or times hereafter, and for making all determinations and decisions with
respect to such policies of insurance. If Borrowers 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
the Bank, without waiving or releasing any obligation, Unmatured Event of
Default or Event of Default by Borrowers hereunder, may at any time or times
thereafter, but shall not be obligated to do so, obtain and maintain such
policies of insurance, pay such premium and take any other action with respect
thereto which the Bank deems advisable. All sums so disbursed by the Bank,
including, but not limited to, attorneys' fees, court costs, expenses and other
charges relating thereto, shall be part of the Liabilities, secured by the
Collateral and payable by Borrowers to the Bank on demand.
(D) Each Borrower hereby acknowledges that the following notice by the Bank
is required by and given in full compliance with the Illinois Collateral
Protection Act, 815 ILCS 180/15:
Unless Borrowers provide the Bank with evidence of the insurance coverage
required by this Loan Agreement, the Bank may purchase insurance at
Borrowers' expense to protect the Bank's interest in the Collateral. This
insurance may, but need not, protect Borrowers' interest. The coverage that
the Bank purchases may not pay any claim that Borrowers make or any claim
that is made against Borrowers in connection with the Collateral. Borrowers
may later cancel any insurance purchased by the Bank, but only after
providing the Bank with evidence that Borrowers have obtained insurance as
required by this Loan Agreement. If the Bank purchases insurance for the
Collateral, Borrowers will be responsible for the cost of that insurance,
including interest and any other charges the Bank may impose in connection
with the placement of the insurance, until the effective date of the
cancellation or expiration of the insurance. The cost of the insurance may
be added to Borrowers' total outstanding balance or obligation. The cost of
insurance may be more than the cost of insurance Borrowers may be able to
obtain on their own.
8.2 TAXES. Each Borrower represents, warrants and covenants unto the Bank
that it shall fully and timely pay, when due, all of the Charges, and that it
shall not permit the Charges to arise, or to remain, and will promptly discharge
the same, except as such charges are being contested as permitted in the
definition of Permitted Liens. In the event Borrowers, at any time or times
hereafter, shall fail to pay the Charges or to obtain such discharges, Borrowers
shall so advise the Bank thereof in writing. The Bank may, without waiving or
releasing any obligation or liability of Borrowers hereunder or any Event of
Default, at any time or times thereafter, make such payment, or any part
thereof, obtain such discharge or take any other action with respect thereto
which the Bank deems advisable. All sums so paid by the Bank and any expenses,
including, but not limited to, attorneys' fees, court costs, expenses and other
charges relating thereto, shall be part of the Liabilities, secured by the
Collateral and payable by Borrowers to the Bank on demand.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS: GENERAL
9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Borrower represents,
warrants and covenants unto the Bank as follows:
(A) ORGANIZATION AND QUALIFICATION. Each Borrower is and at all times
hereafter shall be (i) a corporation, duly organized and existing and in good
standing under the laws of the State of its incorporation
-20-
reflected in the first paragraph of this Loan Agreement, and (ii) qualified or
licensed to do business in all states in which the laws thereof require
Borrowers to be so qualified or licensed.
(B) CORPORATE POWER AND AUTHORITY. Each Borrower has the right, power and
capacity and is duly authorized and empowered to enter into, execute, deliver
and perform this Loan Agreement and the Other Agreements.
(C) NO VIOLATION OF LAW. The execution, delivery and performance by
Borrowers of this Loan Agreement and the Other Agreements shall not, by the
lapse of time, the giving of notice or otherwise, constitute a violation of any
applicable law or breach of any provision contained in any Borrower's Articles
of Incorporation or By-Laws, or contained in any agreement, instrument or
document to which any Borrower is now or hereafter a party or by which it is or
may become bound.
(D) TITLE TO COLLATERAL. Each Borrower has and at all times hereafter shall
have good, indefeasible and merchantable title to and ownership of the
Collateral, free and clear of all liens, claims, security interests and
encumbrances, except for the Permitted Liens; provided, however, Borrower may
from time to time hereafter fail to have merchantable title to and ownership of
Collateral, other than Accounts, which has an aggregate value of less than
$100,000.00.
(E) SOLVENCY. Each Borrower (1) was and is solvent, (2) had and has
adequate cash flow to pay its debts as they mature or otherwise become due, (3)
had and has sufficient capital to conduct its business in the ordinary course,
and (4) has property and assets which, if valued at fair market valuation, are
greater than the sum of such Borrower's debts and liabilities.
(F) LITIGATION. There are no actions or proceedings which are pending or
threatened against any Borrower which could reasonably be expected to result in
any material or adverse change in its financial condition or materially affect
such Borrower's assets or the Collateral.
(G) INDEBTEDNESS. No Borrower has Indebtedness, except (1) for trade
payables arising in the ordinary course of its business since the dates
reflected in the Financials, (2) as disclosed in the Financials and as more
fully described on Exhibit "F" to this Loan Agreement by creditor, amount due,
interest rate, payment schedule and collateral description, if any, and (3)
Permitted Indebtedness.
(H) GOVERNMENT CONTRACTS. No Borrower is subject to the renegotiation of
any material government contracts.
(I) ADEQUATE ASSETS/TRADEMARKS/COPYRIGHTS/PATENTS. Each Borrower possesses
adequate assets, licenses, patents, copyrights, trademarks and trade names to
continue to conduct its respective business as previously conducted by it. As of
the date hereof, Borrowers do not own any patents, trademarks or copyrights.
Borrowers shall notify the Bank if any Borrower acquires ownership of or a
license or other interest in any patents, trademarks or copyrights and shall
execute and deliver such documents to the Bank as the Bank shall request to
assign to the Bank as security such Borrower's interest in such patents,
copyrights and trademarks.
(J) GOOD STANDING. Each Borrower has been and is in good standing with
respect to all governmental permits, certificates, consents and franchises
necessary to (i) continue to conduct its business as previously conducted by it,
and (ii) own or lease and operate its properties as now owned or leased by it
and none of said permits, certificates, consents or franchises contain any term,
provision, condition or limitation
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more burdensome than such as are generally applicable to persons engaged in the
same or similar business as such Borrower.
(K) BURDENSOME AGREEMENTS. No Borrower is a party to any contract or
agreement or subject to any charge, restriction, judgment, decree or order
materially and adversely affecting its business, property, assets, operations or
condition, financial or otherwise.
(L) VIOLATION OF LAW. No Borrower is in violation of any applicable
statute, regulation or ordinance of the United States of America, any state,
city, town, municipality, county, or any other jurisdiction, or any agency
thereof, in any material respect affecting its business, property, assets,
operations or condition, financial or otherwise.
(M) BREACH OF OTHER LOAN DOCUMENTS. No Borrower is in default with respect
to any indenture, loan agreement, mortgage, deed or other similar agreement
relating to the borrowing of monies to which it is a party or by which it is
bound other than a default which does not constitute an Event of Default under
Section 11.1(M).
(N) FINANCIAL INFORMATION. The Financials fairly and accurately present the
information set forth therein which may include, but is not limited to, the
assets, liabilities, financial conditions and results of operations of Borrowers
and such other Persons described therein as of and for the period ending on such
dates and have been prepared in accordance with GAAP and such principles have
been applied on a basis consistently followed in all material respects
throughout the periods involved.
(O) FINANCIAL STATEMENTS. Borrowers shall, from time to time, provide
annual audited Financials to the Bank pursuant to Section 9.4 which fairly and
accurately present the assets, liabilities and financial conditions and results
of operations of Borrowers and such other Persons described therein as of and
for the period ending on such dates and have, unless otherwise indicated
therein, been prepared in accordance with GAAP and such principles have been
applied on a basis consistently followed in all material respects throughout the
periods involved.
(P) MATERIAL ADVERSE CHANGE. There has been no material adverse change in
the assets, liabilities or financial condition of any Borrower since the date of
the most recent Financials for the Borrowers delivered to the Bank.
(Q) CHANGE OF CORPORATE NAME OR STRUCTURE. No Borrower has within the
previous two (2) years and no Borrower shall at any time hereafter, without the
Bank's prior written consent, which shall not be unreasonably withheld, change
its name, identity, corporate structure or ownership, except for the acquisition
of ▇▇▇▇▇▇ and the Borrowers by RoweCom.
(R) CAPITAL STRUCTURE. Exhibit "G" attached hereto and made a part hereof
states (1) the correct name of each of the Subsidiaries of ▇▇▇▇▇▇ and Borrowers,
and the jurisdiction of incorporation and the percentage of voting Stock owned
by ▇▇▇▇▇▇ and Borrowers, (2) the name of each Borrower's corporate or joint
venture Affiliates and the nature of the affiliation, (3) the number, nature and
holder of all outstanding Stock of ▇▇▇▇▇▇ and Borrowers and each Subsidiary of
any Borrower, and (4) the number of authorized, issued and treasury shares of
▇▇▇▇▇▇, each Borrower and each Subsidiary of each Borrower. ▇▇▇▇▇▇ and each
Borrower has good and marketable title to all of the shares they purports to own
of the Stock of each Subsidiary, free and clear in each case of any lien other
than Permitted Liens. All such shares of Stock have been duly issued and are
fully paid and non-assessable. Except as described on Exhibit "G", there are not
outstanding any
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options to purchase, or any rights or warrants to obligations convertible into,
or any powers of attorney relating to, shares of the capital Stock of ▇▇▇▇▇▇ or
any Borrower. Except as described on Exhibit "G", there are not outstanding any
agreements or instruments binding upon any of ▇▇▇▇▇▇'▇ or any Borrower's
shareholders relating to the ownership of its shares of capital Stock.
(S) PENSION PLANS. No Borrower has received any notice to the effect that
it is not in full compliance with any of the requirements of ERISA and the
regulations promulgated thereunder. No fact or situation that could lead to a
material adverse change in the financial condition of any Borrower, including,
but not limited to, any Reportable Event or Prohibited Transaction, exists or
will hereafter exist in connection with any Plan. Borrowers have no and shall
continue to have no withdrawal liability in connection with a Multiemployer
Plan.
(T) LABOR RELATIONS. Except as described on Exhibit "H" attached hereto and
made a part hereof, no Borrower is a party to any collective bargaining
agreement, and there are no material grievances, disputes or controversies with
any union or any other organization of each Borrower's employees, or threats of
strikes, work stoppages or any asserted pending demands for collective
bargaining by any union or organization. Borrowers shall notify the Bank prior
to entering into any collective bargaining agreement.
(U) TRADE RELATIONS. There exists no actual or threatened termination,
cancellation or limitation of, or any modification or change in, the business
relationship between any Borrower and any customer or any group of customers
whose purchases individually or in the aggregate are material to the business of
such Borrower, or with any material supplier, which could reasonably be expected
to have a material adverse effect on any Borrower or such Borrower's business,
and there exists no present condition or state of facts or circumstances which
would materially adversely affect any Borrower or prevent any Borrower from
conducting such business after the consummation of the transaction contemplated
by this Loan Agreement in substantially the same manner in which it has
heretofore been conducted.
(V) NOTICES TO THE BANK. Each Borrower shall notify the Bank in writing:
(1) promptly after any Borrower learns thereof, of the commencement of any
litigation affecting a Borrower or any of its real or personal property, whether
or not the claim is considered by such Borrower to be covered by insurance, and
of the institution of any administrative proceeding which may materially and
adversely affect such Borrower's operations, financial condition, real or
personal property or business or the Bank's Lien upon any of the Collateral; (2)
at least thirty (30) days prior thereto, of any Borrower's opening of any new
office or place of business or any Borrower's closing of any existing office or
place of business; (3) promptly after any Borrower learns thereof, of any labor
dispute to which a Borrower may become a party, any strikes or walkouts relating
to any of its plants or other facilities, and the expiration of any labor
contract to which it is a party or by which it is bound; (4) promptly after
Borrower learns thereof, of any material default by a Borrower under any note,
indenture, loan agreement, mortgage, lease, deed, guaranty or other similar
agreement relating to any Indebtedness of such Borrower exceeding Ten Thousand
and no/100 Dollars ($10,000.00); (5) promptly after the occurrence thereof, of
any Unmatured Event of Default or Event of Default; (6) promptly after the
occurrence thereof, of any default by any obligor under any note or other
evidence of Indebtedness payable to a Borrower; (7) promptly after the rendition
thereof, of any judgment rendered against a Borrower or any of its Subsidiaries;
and (8) promptly after any Borrower learns thereof, of any material adverse
finding of any state or federal government entity in connection with all or any
part of the Collateral.
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(W) LANDLORD AND STORAGE AGREEMENTS. Each Borrower shall provide the Bank
with copies of all agreements between such Borrower and any landlord or
warehouseman which owns any premises at which any Collateral may, from time to
time, be kept.
(X) SUBORDINATIONS. Each Borrower shall provide the Bank with a debt
subordination agreement, in form and substance satisfactory to the Bank,
executed by such Borrower and any Person who is an officer, director or
Affiliate of such Borrower to whom any Borrower is or hereafter becomes indebted
for borrowed money, subordinating in right of payment and claim all of such
Indebtedness and any future advances thereon to the full and final payment and
performance of the Liabilities and the Covenants.
(Y) ENVIRONMENTAL MATTERS.
(1) Each Borrower shall and shall cause each of its Subsidiaries to (a)
comply strictly and in all respects with all applicable Environmental Laws, (b)
take promptly any remediation and/or corrective action necessary to cure any
violation of Environmental Laws of which a Borrower has knowledge, (c) notify
the proper governmental agency promptly in the event of any release of any
Hazardous Substances reportable under 42 USC ss.9603, 42 USC ss.11044, 33 USC
ss.1321(b)(5) or any counterpart or similar state or local requirements, (d)
promptly forward to the Bank, upon its request, a copy of any order, notice,
permit, application, or any other communication or report in connection with any
such release of any Hazardous Substance or any other material matter relating to
the Environmental Laws as they may affect their premises.
(2) Borrowers shall jointly and severally indemnify the Bank and hold
the Bank harmless from and against any loss, liability, damage or expense,
including reasonable attorneys' fees, suffered or incurred by the Bank, whether
as mortgagee pursuant to any mortgage, as mortgagee in possession, or as
successor in interest to a Borrower or any of its Subsidiaries as owner or
lessee of any premises by virtue of foreclosure or acceptance of deed in lieu of
foreclosure (a) under or on account of the Environmental Laws, including the
assertion of any lien thereunder; (b) with respect to any release of any
Hazardous Substance reportable under 42 USC ss.9603, 42 USC ss.11044, 33 USC
ss.1321(b)(5) or any counterpart or similar state or local requirements,
affecting such premises or the premises of any other place, including any loss
of value of such premises as a result of a release of any Hazardous Substance;
and (c) with respect to any other environmental matter within the jurisdiction
of any federal, state or municipal official administering the Environmental
Laws; provided, however, Borrowers will not be liable for such indemnification
to the Bank to the extent that any such loss, liability, damage or expense
results from the willful misconduct of the Person who would otherwise be
entitled to be indemnified pursuant to this Section 9.1(Y). The procedures to be
followed as to any indemnity pursuant to this Section shall be as set forth in
Section 12.22 hereof.
(3) Borrowers shall provide the Bank with such evidence, reports and/or
other documentation as reasonably requested by the Bank to insure that Borrowers
are in compliance with the terms of this Section 9.1(Y).
(Z) FINANCIAL PROJECTIONS. Attached hereto as Exhibit "I" are Borrowers'
consolidated and consolidating financial projections for Borrowers' 2000 fiscal
year.
(AA) SURVEY. On or before January 24, 2000, Borrowers shall deliver to the
Bank an A.L.T.A. standard survey with respect to the real property encumbered by
the Massachusetts Mortgage, certified to the Bank and First American Title
Insurance Company, in form and substance satisfactory to the Bank.
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9.2 REPRESENTATIONS, WARRANTIES AND NEGATIVE COVENANTS. Each Borrower
represents, warrants and covenants unto the Bank that such Borrower shall not
now or at any time hereafter, unless such Borrower obtains the prior written
consent of the Bank:
(A) ADDITIONAL ENCUMBRANCES. Grant a security interest in, assign, sell or
transfer any of the Collateral to any Person except as permitted herein or
permit, grant, or suffer a lien, claim or encumbrance upon any of the
Collateral, except for the Permitted Liens.
(B) LEVIES AND ATTACHMENTS. Permit or suffer any levy, attachment or
restraint to be made affecting any of its assets or the Collateral.
(C) RECEIVER, TRUSTEE OR ASSIGNEE. Permit or suffer any receiver, trustee
or assignee for the benefit of creditors to be appointed to take possession of
all or any of such Borrower's assets or any of the Collateral.
(D) MERGERS AND ACQUISITIONS. Merge, consolidate with or acquire any
Person.
(E) ORDINARY COURSE OF BUSINESS. Enter into any transaction not in the
ordinary course of its business as presently conducted.
(F) INVESTMENTS. Other than in the ordinary course of business, make any
investment in the securities of any Person; provided, however, notwithstanding
the foregoing, Borrowers may (i) make investments in certificates of deposit of
the Bank or any of its affiliates or such other banking institution having a net
worth in excess of $100,000,000, or in securities of the United States of
America or commercial paper with a P1 rating (all of the foregoing maturing
within one year), and (ii) with the Bank's prior consent, make investments of
deposits received by Borrowers from Account Debtors.
(G) SURETY. Guaranty or otherwise, in any way, become liable with respect
to the obligations or liabilities of any Person except by endorsement of
instruments or items of payment for deposit to the general account of Borrowers
or for delivery to the Bank on account of the Liabilities.
(H) CAPITAL STRUCTURE. Make any material change in such Borrower's capital
structure or in any of its business objectives, purposes and operations which
might in any way adversely affect the repayment of the Liabilities.
(I) ENCUMBRANCE OR SALE. Encumber, sell, pledge, mortgage, lease, or
otherwise dispose of or transfer, whether by merger, consolidation or otherwise,
any of such Borrower's assets, except sales of Equipment (i) to the extent that
such Equipment is obsolete or de minimus and has a fair market value of less
than One Hundred Thousand and 00/100 Dollars ($100,000.00), or (ii) as otherwise
expressly permitted herein.
(J) SALE OF STOCK. Sell or issue any Stock of such Borrower.
(K) INDEBTEDNESS. Incur indebtedness, except Permitted Indebtedness
(L) RESTRICTED PAYMENTS. Make any Restricted Payments, other than
Restricted Payments made when the Revolving Loan Commitment is Zero Dollars ($0)
and all of the Liabilities have been satisfied in full.
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(M) CONSTITUENT DOCUMENTS. Amend or restate such Borrower's By-Laws or
Articles or Certificate of Incorporation.
(N) AFFILIATE TRANSACTIONS. Enter into any transaction with an Affiliate ,
except for transactions in the ordinary course of business pursuant to the
reasonable requirements of each such Borrower's business and upon fair and
reasonable terms no less favorable to such Borrower than such Borrower would
obtain in a comparable arms-length transaction.
9.3 FINANCIAL COVENANTS. During the term of this Loan Agreement, and
thereafter for so long as there are any outstanding Liabilities owed to the
Bank, Borrowers covenant that they shall:
(A) WORKING CAPITAL. Not permit their consolidated Working Capital to be
less than Zero Dollars ($0) at any time.
(B) TANGIBLE NET WORTH. Not permit their consolidated Tangible Net Worth to
be less than Five Million and no/100 Dollars ($5,000,000.00) at any time.
(C) CAPITAL EXPENDITURES. Not make or be committed to make, directly and
indirectly, Capital Expenditures (including new Capitalized Lease Obligations
valued in accordance with GAAP) amounting in the aggregate for the Borrowers to
more than One Million and no/100 Dollars ($1,000,000.00) during each of the
Borrowers' fiscal years.
9.4 FINANCIAL REPORTING. Borrowers represent, warrant and covenant unto the
Bank that they will deliver to the Bank the following financial information, all
of which shall accurately reflect the financial condition of Borrowers at and
for the periods of time described therein and shall be prepared in accordance
with GAAP:
(A) As soon as available but in no event later than one hundred twenty
(120) days after the close of each of Borrowers' fiscal years, the audited
consolidated and unaudited consolidating financial statements of RoweCom, ▇▇▇▇▇▇
and Borrowers, including, but not limited to, (1) a balance sheet, (2) a
statement of income and retained earnings, and (3) a statement of cash flows,
together with an unqualified opinion of a firm of independent certified public
accountants selected by RoweCom and reasonably approved by the Bank.
(B) Concurrently with the delivery of the audited financial statements
described in Section 9.4(A) above, certificates of the controller or any
Designated Person of each Borrower in form and substance acceptable to the Bank,
certifying to the Bank that, based upon such financial statements, (1) Borrowers
are in compliance with all financial covenants and ratios contained in this Loan
Agreement, together with the calculations for the financial covenants and ratios
described therein; and (2) the controller or such Designated Person, as the case
may be, is not aware of any event or occurrence which constitutes an Unmatured
Event of Default or Event of Default.
(C) As soon as available but in no event later than thirty (30) days after
the end of each month, ▇▇▇▇▇▇'▇ and Borrowers' internally prepared consolidated
and consolidating financial statements, including, but not limited to, (1) a
balance sheet, (2) a statement of income and retained earnings, and (3) a
statement of cash flows all for the previous month, and the year-to-date
statement for that portion of ▇▇▇▇▇▇'▇ and Borrowers' fiscal year then elapsed.
(D) Concurrently with the delivery of Borrowers' internally prepared
financial statements pursuant to Section 9.4(C) above, certificates of the
controller or any Designated Person of each Borrower, in form and
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substance acceptable to the Bank, certifying to the Bank that, based upon the
internally prepared financial statements, (1) the controller or such Designated
Person, as the case may be, is not aware of any event or occurrence which
constitutes an Unmatured Event of Default or Event of Default, and (2) Borrowers
are in compliance with all financial covenants contained in this Loan Agreement,
together with the calculations for the financial covenants and ratios described
herein.
(E) As soon as available, but in no event later than thirty (30) days prior
to each Borrower's fiscal year end, such Borrowers' internally prepared
consolidated and consolidating financial projections, including, without
limitation, (1) a balance sheet, (2) a statement of income and retained
earnings, and (3) a statement of cash flows, all for the forthcoming year
prepared on a month by month basis.
(F) On the 1st Business Day of each week, a current Borrowing Base
Certificate, sales and collection report and detailed summary of the Deferred
Revenue Account.
(G) Such other data and information, financial and otherwise as the Bank,
from time to time, may request.
10. CONDITIONS PRECEDENT
10.1 CONDITIONS TO INITIAL FUNDING. The Bank's obligation to make the
initial loan pursuant to this Loan Agreement and the Other Agreements is subject
to the full and timely performance of the following covenants prior to or
contemporaneously with the making of the initial loan.
(A) The Bank shall have received each of the following, in form and
substance satisfactory to the Bank and its counsel:
(1) (a) A copy of the Articles or Certificate of Incorporation of each
Borrower certified by the Secretary of State of such Borrower's
state of incorporation, and a certificate or other satisfactory
evidence as to the qualification to conduct business and good
standing of Borrowers from the Secretary of State of each state in
which Borrowers is required to be so qualified; (b) certificates of
the Secretary or an Assistant Secretary of Borrowers dated the date
hereof and certifying (i) that attached thereto are true and
complete copies of the by-laws of Borrowers and true and complete
copies of resolutions duly adopted by the Board of Directors of
Borrowers authorizing the execution, delivery and performance of
this Loan Agreement and any Other Agreements and the borrowing by
Borrowers hereunder and all aspects of the financing transactions
with the Bank requiring approval by Borrowers, (ii) that such
resolutions have not been modified, rescinded or amended and are in
full force and effect and that the Articles of Incorporation of
Borrowers have not been amended as shown on the good standing
certificate furnished pursuant to (a) above, and (iii) as to the
incumbency and specimen signature of each officer of Borrowers
executing this Loan Agreement and the Other Agreements; and (c)
such other instruments, documents and agreements as the Bank or its
counsel may reasonably request.
(2) A fully executed original of this Loan Agreement.
(3) A fully executed original of the Revolving Note.
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(4) A favorable written opinion of ▇▇▇▇▇▇▇ ▇▇▇▇ LLP, counsel for
Borrowers, acceptable to the Bank and its counsel.
(5) File-stamped acknowledgment copies of all Uniform Commercial Code
financing statements required to perfect the Bank's security
interest and lien in and to the Collateral.
(6) Copies of the Uniform Commercial Code, tax lien and pending suit
and judgment searches from such jurisdictions as the Bank deems
necessary, which shall not have disclosed any prior lien or
security interest in the Collateral, except for the Permitted
Liens.
(7) An initial Borrowing Base Certificate and Schedule of Accounts
dated as of the date of this Loan Agreement.
(8) Certificates of insurance with lender's loss payable and additional
insured clauses covering the Collateral and meeting the
requirements of this Loan Agreement.
(9) A fully executed original of the RoweCom Guaranty and the ▇▇▇▇▇▇
Guaranty.
(10) A fully executed original of the Massachusetts Mortgage and the
Massachusetts Assignment of Rents.
(11) A fully executed original of a landlord's agreement for each
location leased by Borrowers.
(12) An Environmental Indemnity Agreement executed and delivered by the
Borrowers, RoweCom and ▇▇▇▇▇▇ in favor of the Bank.
(13) A copy of the Appraisal dated April 26, 1999, prepared by
Commonwealth Valuation Group for the real property encumbered by
the Massachusetts Mortgage.
(14) A duly executed blocked account agreement by and among Borrowers,
The Chase Manhattan Bank and the Bank.
(15) Such other documents, instruments or agreements as the Bank may
request.
(B) No Unmatured Event of Default or Event of Default shall have occurred
and be continuing.
(C) There shall have been no material or adverse change in the business,
financial condition or results of operations since the date of Borrowers' then
most recently delivered Financials.
(D) The representations and warranties contained in this Loan Agreement
shall be true and correct as of the making of the initial Loan.
10.2 CONDITIONS TO SUBSEQUENT FUNDINGS. The Bank's obligation to make any
subsequent loans pursuant to this Loan Agreement and the Other Agreements is
subject to the full and timely performance of each of the following covenants
either prior to or contemporaneously with the making of each subsequent loan.
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(A) No Unmatured Event of Default or Event of Default shall have occurred
and be continuing.
(B) No claims, litigation, arbitration proceedings or governmental
proceedings not disclosed in writing to the Bank prior to the date of the last
previous loan shall be pending or known to be threatened against any Borrower
and no known material development not so disclosed shall have occurred in any
claims, litigation, arbitration proceedings or governmental proceedings so
disclosed which, in each case or in the aggregate, in the reasonable opinion of
the Bank is likely to materially or adversely affect the financial position or
business of Borrowers or capability of Borrowers to pay the Liabilities.
(C) There shall have been no material or adverse change in the business,
financial condition or results of operations since the date of Borrowers' then
most recently delivered Financials or the previous Loan advance.
(D) The representations and warranties of Borrowers contained in this Loan
Agreement shall be true and correct as of the making of any subsequent Loan,
with the same effect as though made on such date of each subsequent Loan.
11. EVENT OF DEFAULT; REMEDIES
11.1 EVENTS OF DEFAULT. The occurrence of any one of the following events
shall constitute an Unmatured Event of Default ("Event of Default") by Borrowers
under this Loan Agreement:
(A) Borrowers fail to fully and timely pay any of the Liabilities
consisting of principal and interest, when due and payable or declared due and
payable or Borrowers fail to fully and timely pay any of the other Liabilities
when due and payable or declared due and payable, and such failure continues for
a period of five (5) days after notice thereof from the Bank;
(B) Any Borrower fails or neglects to perform, keep or observe any of the
Covenants; provided, however, Borrower shall have a period of 30 days from the
occurrence thereof to cure a default under Sections 9.1(A)(ii), 9.1(J)(i),
9.1(W) and 9.1(X) of this Loan Agreement;
(C) any material statement, report or certificate made or delivered by a
Borrower, or any of its officers, employees, or agents, to the Bank is not true
and correct;
(D) any assets of any Borrower are attached, seized, subjected to a writ or
distress warrant, or are levied upon, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors;
(E) a petition under the United States Bankruptcy Code or any similar
federal, state or local law, statute or regulation shall be filed by any
Borrower;
(F) a petition under the United States Bankruptcy Code or any similar
federal, state or local law, statute or regulation shall be filed against any
Borrower;
(G) any Borrower shall make an assignment for the benefit of creditors, or
an application is made by any Borrower for the appointment of a receiver,
trustee, custodian or conservator for such Borrower or any of its assets;
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(H) an application is made against any Borrower for the appointment of a
receiver, trustee, custodian or conservator for such Borrower or any of its
assets;
(I) Any Borrower is enjoined, restrained or in any way prevented by court
order from conducting any material part of its business affairs, as determined
by the Bank in its sole discretion;
(J) a lawsuit or other proceeding is filed against any Borrower to
liquidate, in the aggregate, more than One Hundred Thousand and no/100 Dollars
($100,000.00) of such Borrower's assets;
(K) a lawsuit or other proceeding is filed by any Borrower to liquidate any
of such Borrower's assets;
(L) a notice of a lien, levy or assessment is filed of record with respect
to any of the assets of any Borrower by the United States of America or any
department, agency or instrumentality thereof, or by any state, county,
municipal or other governmental department, agency, or instrumentality,
including without limitation, the Pension Benefit Guaranty Corporation;
(M) any Borrower defaults in the payment of any of its other obligations or
liabilities, and such default is not cured within the time, if any, specified
therefor. Notwithstanding the foregoing, it shall not be considered an Event of
Default if Borrower is contesting such obligations or liabilities in good faith,
and such liabilities and obligations are less than One Hundred Thousand and
00/100 Dollars ($100,000.00);
(N) the occurrence of a breach, default or event of default under any
agreement, instrument or document executed and delivered by any Person to the
Bank pursuant to which such Person has guarantied to the Bank the payment of all
or any portion of the Liabilities or provided collateral to secure all or any
portion of the Liabilities, including, without limitation, the ▇▇▇▇▇▇ Guaranty
and the RoweCom Guaranty, or such Person terminates or purports to terminate his
guaranty of the Liabilities to the Bank;
(O) a breach, default or event of default occurs under any of the Other
Agreements beyond any period of grace contained therein;
(P) there shall be entered against any Borrower one or more judgments or
decrees in excess of Ten Thousand and no/100 Dollars ($10,000.00) in the
aggregate at any one time outstanding for such Borrower, excluding those
judgments or decrees (i) that shall have been stayed, vacated or bonded, (ii)
that shall have been outstanding less than 30 days from the entry thereof, or
(iii) for and to the extent to which such Borrower is insured and with respect
to which the insurer specifically has assumed responsibility in writing; or
(Q) the Bank, in good faith, reasonably believes its prospect of payment or
performance of the Liabilities and the Covenants is impaired or it deems itself
insecure for whatever reason.
11.2 CUMULATIVE REMEDIES. All of the Bank's rights and remedies under this
Loan Agreement and the Other Agreements are cumulative and non-exclusive.
11.3 DISCONTINUING ADVANCES. Upon the occurrence of an Unmatured Event of
Default or Event of Default, without notice or demand by the Bank to Borrowers,
the Bank shall have no further obligation to and may immediately cease advancing
monies or extending credit to or for the benefit of Borrowers under this Loan
Agreement and the Other Agreements. Upon the occurrence of an Event of Default
under Sections 11.1(E) or
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11.1(F) hereof, without notice or demand by the Bank to Borrowers, the
Liabilities shall be immediately due and payable, including, without limitation,
all of Borrowers' contingent liabilities with respect to any Letters of Credit.
Upon the occurrence of any Event of Default (other than an Event of Default
under Sections 11.1(E) or 11.1(F)), at the election of the Bank with notice by
the Bank to Borrowers, the Liabilities shall be immediately due and payable,
including, without limitation, all of Borrowers' contingent liabilities with
respect to any Letters of Credit. ANY ADVANCES MADE BY THE BANK TO BORROWERS
AFTER THE OCCURRENCE OF AN UNMATURED EVENT OF DEFAULT OR AN EVENT OF DEFAULT
SHALL NOT ESTABLISH A CUSTOM OR COURSE OF DEALING AND THE BANK SHALL BE ENTITLED
TO CEASE MAKING ADVANCES AT ANY TIME THEREAFTER.
11.4 REMEDIES. Upon the occurrence of an Event of Default, the Bank, in its
discretion, may: (A) exercise any one or more of the rights and remedies
accruing to a "secured party" under the Uniform Commercial Code of Illinois and
any other applicable law upon Unmatured Event of Default by a debtor; (B) enter,
with or without process of law and without breach of the peace, any premises
where the Collateral is or may be located, and without charge or liability to
the Bank therefor, seize and remove the Collateral from said premises or remain
upon said premises and use the same for the purpose of collecting, preparing and
disposing of the Collateral; and (C) sell or otherwise dispose of the Collateral
at public or private sale for cash or credit, provided, however, that Borrowers
shall be credited with the net proceeds of such sale only when such proceeds are
actually received by the Bank.
11.5 ASSEMBLING COLLATERAL. Upon an Event of Default, each Borrower,
immediately upon demand by the Bank, shall assemble the Collateral and make it
available to the Bank at a place or places to be designated by the Bank which
are reasonably convenient to the Bank and Borrowers. Each Borrower recognizes
that if it fails to perform, observe or discharge any of its obligations or
liabilities under this Loan Agreement or the Other Agreements, no remedy of law
will provide adequate relief to the Bank, and each Borrower agrees that the Bank
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
11.6 NOTICE OF SALE. Any notice required to be given by the Bank of a sale,
lease or other disposition of the Collateral or any other intended action by the
Bank, if provided not less than ten (10) days prior to such proposed action,
shall constitute commercially reasonable and fair notice to Borrowers thereof.
11.7 POSTPONEMENT OF SALE. Each Borrower agrees that the Bank may, if the
Bank deems it reasonable, postpone or adjourn any such sale of the Collateral
from time to time by an announcement at the time and place of sale, without
being required to give a new notice of sale. Further, each Borrower agrees that
the Bank has no obligation to preserve rights against prior parties to the
Collateral.
12. GENERAL
12.1 BANK ACCOUNTS. Borrowers shall keep and maintain all of their
checking, depository and other bank accounts with the Bank; provided, however,
notwithstanding the foregoing, (a) Borrowers shall be entitled to keep and
maintain checking accounts with another bank at any time, (b) at any time while
the Maximum Revolving Loan Amount is Zero and all of the Liabilities are paid in
full, with the Bank's prior written consent, Borrowers shall be entitled to keep
and maintain their depository Accounts with another bank, (c) Borrowers shall be
entitled to keep and maintain their depository accounts with an affiliate of the
Bank provided that Borrowers and such affiliate execute and deliver to the Bank
a blocked account agreement in form and substance satisfactory to the Bank, and
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(d) Borrowers shall be entitled to continue utilizing the depository accounts
currently maintained with The Chase Manhattan Bank for a period of sixty (60)
days after the date hereof provided that The Chase Manhattan Bank and Borrower
execute and deliver to the Bank a blocked account agreement in form and
substance satisfactory to the Bank. Each statement of account by the Bank
delivered to any Borrower relating to the Liabilities shall be presumed correct
and accurate and shall constitute an account stated between such Borrower and
the Bank unless, within thirty (30) days after such Borrower's receipt of said
statement, such Borrower delivers to the Bank notice specifying the error or
errors, if any, contained in any such statement.
12.2 APPLICATION OF PAYMENTS. Each Borrower waives the right to direct the
application of any and all payments at any time or times hereafter received by
the Bank on account of the Liabilities and each Borrower agrees that the Bank
shall have the continuing exclusive right to apply and re-apply any and all such
payments in such manner and in such order as the Bank may deem advisable,
including, without limitation, to the payment of any costs, fees and expenses
payable by Borrowers under this Loan Agreement, notwithstanding any entry by the
Bank upon any of its books and records.
12.3 ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Borrower
represents, warrants and covenants unto the Bank that (A) all representations
and warranties of Borrowers contained in this Loan Agreement and the Other
Agreements shall be true at the time of Borrowers' execution of this Loan
Agreement and the Other Agreements, shall survive the execution, delivery and
acceptance thereof by the parties thereto and the closing of the transactions
described therein and shall be true from the time of Borrowers' execution of
this Loan Agreement until the expiration of this Loan Agreement; and (B) there
shall be no material or adverse change in the financial condition of any
Borrower from the time of execution, delivery and acceptance of this Loan
Agreement and the Other Agreements until the closing of the transactions
described therein or related thereto.
12.4 MODIFICATION AND ASSIGNMENT OF LOAN DOCUMENTS. This Loan Agreement and
the Other Agreements may not be modified, altered or amended, except by an
agreement in writing signed by Borrowers and the Bank. Borrowers may not sell,
assign or transfer this Loan Agreement or the Other Agreements or any portion
thereof, including, without limitation, Borrowers' rights, titles, interests,
remedies, powers or duties thereunder. Each Borrower hereby consents to the
Bank's sale, assignment, grant of participations, transfer or other disposition,
at any time and from time to time hereafter, of this Loan Agreement and the
Other Agreements or of any portion thereof, including, without limitation, the
Bank's rights, titles, interests, remedies, powers or duties. Notwithstanding
the foregoing, the Bank shall not sell or assign this Loan Agreement or the
Other Agreements to a bank unaffiliated with the Bank at any time while an Event
of Default does not exist without providing Borrowers sixty (60) days notice
prior to the effective date of such sale or assignment.
12.5 WAIVER OF UNMATURED EVENT OF DEFAULTS. The Bank's failure at any time
or times hereafter to require strict performance by Borrowers of any provision
of this Loan Agreement shall not waive, affect or diminish any right of the Bank
thereafter to demand strict compliance and performance therewith. Any suspension
or waiver by the Bank of an Unmatured Event of Default or Event of Default by
Borrowers under this Loan Agreement or the Other Agreements shall not suspend,
waive or affect any other Unmatured Event of Default or Event of Default by
Borrowers under this Loan Agreement or the Other Agreements, whether the same is
prior or subsequent thereto and whether of the same or of a different type. NONE
OF THE UNDERTAKINGS, AGREEMENTS, WARRANTIES, COVENANTS AND REPRESENTATIONS OF
BORROWERS CONTAINED IN THIS LOAN AGREEMENT OR THE OTHER AGREEMENTS AND NO EVENT
OF DEFAULT BY BORROWERS UNDER THIS LOAN AGREEMENT OR THE OTHER AGREEMENTS SHALL
BE DEEMED TO HAVE BEEN SUSPENDED OR WAIVED BY THE BANK UNLESS SUCH SUSPENSION OR
WAIVER IS IN WRITING
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SIGNED BY AN OFFICER OF THE BANK AND DIRECTED TO BORROWERS SPECIFYING SUCH
SUSPENSION OR WAIVER.
12.6 SEVERABILITY. Wherever possible, each provision of this Loan Agreement
shall be interpreted in such manner as to be valid and enforceable under
applicable law, but if any provision of this Loan Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, such provision
shall be severed herefrom and such invalidity or unenforceability shall not
affect any other provision of this Loan Agreement, the balance of which shall
remain in and have its intended full force and effect. Provided, however, if
such provision may be modified so as to be valid and enforceable as a matter of
law, such provision shall be deemed to be modified so as to be valid and
enforceable to the maximum extent permitted by law.
12.7 SUCCESSORS AND ASSIGNS. This Loan Agreement and the Other Agreements
shall be binding on each Borrower and upon the successors of each Borrower, and
shall inure to the benefit of the Bank, its successors, assigns, affiliates,
divisions and parents and may be assigned by the Bank without notice to
Borrowers. This provision, however, shall not be deemed to modify Section 12.4
hereof. Each Borrower acknowledges and agrees that the Bank may at any time and
from time to time, sell or assign all or any portion of this Loan Agreement, the
Other Agreements or the Loans, and may sell participations therein, all without
notice to Borrowers.
12.8 INCORPORATION OF OTHER AGREEMENTS; EXHIBITS. The terms and provisions
of the Other Agreements are incorporated herein by this reference thereto. The
Exhibits referred to herein are attached hereto, made a part hereof and
incorporated herein by this reference thereto.
12.9 SURVIVAL OF TERMINATION. Except as otherwise provided in this Loan
Agreement or the Other Agreements, no termination or cancellation of this Loan
Agreement or the Other Agreements shall in any way affect or impair the powers,
obligations, duties, rights and liabilities of Borrowers or the Bank in any way
or respect relating to (A) any transaction or event occurring prior to such
termination or cancellation, (B) the Collateral, or (C) any of the undertakings,
agreements, covenants, warranties and representations of Borrowers contained in
this Loan Agreement or the Other Agreements. All such undertakings, agreements,
representations, warranties and covenants shall survive such termination or
cancellation.
12.10 WAIVER OF NOTICES. Except as otherwise expressly provided herein,
each Borrower waives any and all notices or demands which such Borrower might be
entitled to receive with respect to this Loan Agreement or the Other Agreements
by virtue of any applicable law, statute or regulation, and waives presentment,
demand, protest, notice, default, dishonor, non-payment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
Accounts, contract rights, Documents, Instruments, Chattel Paper and guaranties
at any time held by the Bank on which Borrowers may in any way be liable, and
hereby ratifies and confirms whatever the Bank may do in this regard.
12.11 AUTHORITY TO EXECUTE AND BORROW. Until the Bank is notified by
Borrowers to the contrary, the signature upon this Loan Agreement or upon any of
the Other Agreements of (A) a Designated Person, or (B) any other Person
designated in writing to the Bank by any of the foregoing, shall bind all
Borrowers and be deemed to be the duly authorized act of all Borrowers. Each
Designated Person shall have the authority to Borrow funds on behalf of
Borrowers pursuant to the terms of this Loan Agreement.
12.12 COSTS, FEES AND EXPENSES. Borrowers shall reimburse the Bank for all
costs, fees and expenses incurred by the Bank, or for which the Bank becomes
obligated, in connection with the negotiation, preparation,
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administration, enforcement and conclusion of this Loan Agreement and the Other
Agreements, including, but not limited to, audit fees and expenses incurred by
the Bank, attorneys' and paralegals' fees, costs and expenses, other
professional fees, search fees, costs and expenses, filing and recording fees
and all taxes payable in connection with this Loan Agreement or the Other
Agreements. Borrowers shall further reimburse the Bank, upon demand, for the
costs, fees and expenses incurred by the Bank, its agents or employees, with
respect to audits or other business analysis performed in the administration of
this Loan Agreement, plus all of the auditor's expenses.
12.13 BINDING AGREEMENT; GOVERNING LAW. This Loan Agreement and
the Other Agreements are submitted by Borrowers to the Bank, for the Bank's
acceptance or rejection thereof, at the Bank's office in Chicago, Illinois, as
an offer by Borrowers to borrow monies from the Bank and shall not be binding
upon the Bank or become effective until and unless accepted by the Bank, in
writing, at said place of business. THIS LOAN AGREEMENT AND THE OTHER AGREEMENTS
SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND UNDER THE LAWS OF THE STATE
OF ILLINOIS AS TO INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT,
AND IN ALL OTHER RESPECTS INCLUDING, BUT NOT LIMITED TO, THE LEGALITY OF THE
INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING ILLINOIS' CHOICE OF LAW
PROVISIONS.
12.14 NOTICES. Any and all notices, demands, requests, consents,
designations, waivers and other communications required or desired hereunder
shall be in writing and shall be deemed effective upon personal delivery, upon
confirmed facsimile transmission, upon receipted delivery by Federal Express or
another overnight carrier, or three (3) days after mailing if mailed by
registered or certified mail, return receipt requested, postage prepaid, to
Borrowers or the Bank at the following addresses or facsimile numbers or such
other addresses and facsimile numbers as Borrowers or the Bank may specify in
like manner; provided, however, that notices of a change of address or facsimile
number shall be effective only upon receipt thereof.
If to Borrowers, then to: If to the Bank, then to:
The ▇▇▇▇▇ Company, Inc. American National Bank and
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ Trust Company of Chicago
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇: Dr. ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇ Subscription Service, Inc. with a copy to:
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇
Attention: Dr. ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Des Laurier, Esq.
The ▇▇▇▇▇▇ Subscription Agency, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Incorporated
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Dr. ▇▇▇▇▇▇▇ ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
12.15 OTHER COSTS, FEES AND EXPENSES. If, prior to or after the
occurrence of an Unmatured Event of Default or Event of Default, the Bank:
(A) employs an accountant, consultant, counsel or any other
representative or advisor:
(1) with respect to the Liabilities, this Loan Agreement,
the Other Agreements, the Collateral or otherwise;
(2) to represent or consult with the Bank in connection with
any litigation, contest, dispute, suit or proceeding, or
to commence, defend, intervene or take any other action in
or with respect to any litigation, contest, dispute, suit
or proceeding, whether initiated by the Bank, Borrowers, a
guarantor or any other person or entity, in any way or
respect arising from, relating to or in connection with
the Liabilities, this Loan Agreement, the Other Agreements
and the Collateral; or
(3) to enforce any of the Bank's rights or remedies;
(B) takes any action or initiates any proceeding to protect,
collect, sell, liquidate or otherwise dispose of any of the Collateral for the
Liabilities, this Loan Agreement and the Other Agreements; or
(C) attempts to or enforces any of the Bank's rights or remedies
against any Borrower or any guarantor,
then the costs and expenses so incurred by the Bank shall be part of
the Liabilities payable by Borrowers to the Bank upon demand with interest at
the Default Rate until actually paid. Without limiting the generality of the
foregoing, such costs and expenses shall include the fees, expenses and charges
of attorneys, paralegals, accountants, investment bankers, appraisers, valuation
and other specialists, experts, expert witnesses, auctioneers, court reporters,
telegram, management consultants, telex and telefax charges, overnight delivery
services, messenger services and expenses for travel, lodging and meals.
Notwithstanding the foregoing, Borrowers shall not be liable to the Bank for
accountant or consultant fees incurred by the Bank at any time while an
Unmatured Event of Default or Event of Default does not exist.
12.16 RELEASE OF CLAIMS. Excepting only causes of action or claims
for the Bank's wilful misconduct or gross negligence, each Borrower hereby
releases the Bank from any and all causes of action or claims which Borrowers
may now or hereafter have for any asserted loss or damage to any Borrower caused
by or arising from: (A) any failure of the Bank to protect, enforce or collect
in whole or in part any of the Collateral; (B) the Bank's notification to any
Account Debtor of the Bank's security interest and lien in and to the Accounts
and Special
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Collateral; (C) the Bank directing any Account Debtor to pay any sums owing to
any Borrower directly to the Bank; and (D) any other act or omission to act on
the part of the Bank, its officers, agents or employees.
12.17 CAPITAL ADEQUACY CHARGE. In the event that the Bank 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 the Bank with any directive regarding capital adequacy
(whether or not having the force of law) from any central bank or governmental
authority does or shall have the effect of reducing the rate of return on the
Bank's capital as a consequence of its obligations hereunder to a level below
that which the Bank could have achieved but for such adoption, change or
compliance (taking into consideration the Bank's policies with respect to
capital adequacy) by an amount deemed by the Bank, in its sole discretion, to be
material, then from time to time, after submission by the Bank to Borrowers of a
written demand therefor, Borrowers shall pay to the Bank such additional amount
or amounts as will compensate the Bank for such reduction. A certificate of the
Bank 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 payment, the additional amount or amounts to
be paid to the Bank, and the method by which such amounts were determined. In
determining such amount, the Bank may use any reasonable averaging and
attribution method.
12.18 HEADINGS. The captions contained in this Loan Agreement are
inserted only as a matter of convenience and shall in no way define, limit or
extend the scope or intent of this Loan Agreement or any provision of this Loan
Agreement, and shall not affect the construction or interpretation of this Loan
Agreement.
12.19 MAXIMUM INTEREST. It is the intent of Borrowers and the Bank
that the rate of interest and the other charges of Borrowers under this Loan
Agreement shall be lawful; therefore, if for any reason, the interest or other
charges payable under this Loan Agreement are found by a court of competent
jurisdiction to exceed the limit which the Bank may lawfully charge Borrowers,
then the obligation to pay interest and other charges shall automatically be
reduced to such limits. If Borrowers have paid an amount in excess of such
limit, then such amount shall be applied to reduce the principal portion of the
Liabilities.
12.20 CONSTRUCTION. Any provision of this Loan Agreement which
requires a party to perform any act shall be construed as requiring the party to
perform the act or cause such act to be performed. Any provision of this Loan
Agreement which requires a party to refrain from taking any act shall be
construed as requiring the party to refrain from taking the act, to refrain from
causing such act to be taken and to cause those under his/her control from
taking the act. Wherever the term "including" is used, the same shall be deemed
to mean, "including, but not limited to". "Any" shall be deemed to mean "any and
all" whenever applicable. The singular shall be deemed to include the plural,
and the plural shall be deemed to include the singular. The masculine pronoun
shall be deemed to include the feminine and neuter pronouns, and vice versa.
"Copies" means photostatic or other reproduced originals which accurately,
truly, correctly and completely present the original of the document copied.
12.21 REVIVAL OF LIABILITIES. To the extent that the Bank receives
any payment on account of the Liabilities, or any proceeds of the Collateral are
applied on account of the Liabilities, and any such payment or proceeds or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid by the Bank to any Borrower,
its estate, trustee, receiver or any other party under the United States
Bankruptcy Code or any similar federal, state or local law, statute or
regulation, then, to the extent of such payment or proceeds received, the
Liabilities shall be revived and continue in full force and effect, as if such
payment or proceeds had not been received by the Bank and applied on account of
the Liabilities.
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12.22 GENERAL INDEMNITY. In addition to the payment of expenses
pursuant to Sections 12.12 and 12.15, whether or not the transactions
contemplated hereby shall be consummated, Borrowers agree to indemnify, pay and
hold the Bank and its successors and assigns and the officers, directors,
employees, agents, and affiliates of the Bank and its successors and assigns
(collectively the "Indemnitees"), harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of counsel
for any of such Indemnitees in connection with any investigative, administrative
or judicial proceeding commenced or threatened, whether or not any of such
Indemnitees shall be designated a party thereto) that may be imposed on,
incurred by, or asserted against any Indemnitee in any manner relating to or
arising out of this Loan Agreement, any of the Other Agreements or any other
agreements executed and delivered by any Borrower or any guarantor of the
Liabilities in connection herewith, the statements contained in any commitment
or proposal letter delivered by the Bank, the Bank's agreement to make the Loans
or the use or intended use of the proceeds of any of the Loans hereunder
(collectively the "Indemnified Liabilities"); provided that Borrowers shall have
no obligation to an Indemnitee hereunder with respect to Indemnified Liabilities
arising from the gross negligence or willful misconduct of such Indemnitee. To
the extent that the undertaking to indemnify, pay and hold harmless set forth in
the preceding sentence may be unenforceable because it is violative of any law
or public policy, Borrowers shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them. The provisions of the undertakings and indemnification set out in this
Section shall survive satisfaction and payment of the Liabilities and
termination of this Loan Agreement.
12.23 ENVIRONMENTAL AND SAFETY AND HEALTH INDEMNITY. Each Borrower
hereby indemnifies the Bank and agrees to hold the Bank and its predecessors and
successors in interest, and its affiliates, employees, agents, directors and
officers harmless from and against any and all losses, liabilities, damages,
injuries, costs, expenses and claims of any and every kind whatsoever
(including, without limitation, court costs, consulting fees, costs of
investigation and reasonable attorneys' fees) which at any time or from time to
time may be paid, incurred or suffered by, or asserted against, the Bank for,
with respect to, or as a direct or indirect result of (i) the violation or
alleged violation by Borrowers or any of its predecessors in interest of any
Environmental Laws regarding past, present or future property or operations;
(ii) the presence on or under, or the release from, at or to, properties
utilized by Borrowers and/or any predecessor in interest of any Hazardous
Substances; (iii) the existence of any unsafe or unhealthful condition on or at
any premises utilized by Borrowers or any predecessor in interest in the past,
present or future; (iv) transport, treatment, recycling, storage, disposal, or
release or threatened release, or arrangement therefor, to, at or from any
facility owned or operated by another Person, of any Hazardous Substances
generated by Borrowers or its predecessors in interest; (v) any remedial action
or corrective action arising out of, related to, or in connection with any past,
present or future property or operations of Borrowers or any of its predecessors
in interest; (vi) asbestos-containing material, in or at any past, present or
future property of Borrowers or any of its predecessors in interest; (vii)
failure to comply with any representations, warranties, covenants, terms or
conditions of this Loan Agreement that relate to Environmental Laws or Hazardous
Substances; and (viii) any environmental, health or safety investigation or
review conducted by or on behalf of the Bank in connection with this Loan
Agreement; provided that Borrowers shall have no obligation to the Bank
hereunder with respect to any such liabilities arising from the gross negligence
or willful misconduct of the Bank. The provisions of and undertakings and
indemnification set out in this Section shall survive satisfaction and payment
of the Liabilities and termination of this Loan Agreement and shall expressly
cover time periods when the Bank may have come into possession or control of any
of the property of Borrowers at any time thereafter.
12.24 YEAR 2000. Borrowers and their Subsidiaries have reviewed
the areas within their business and operations which could be adversely affect
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
Borrowers and their
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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, each Borrower believes
that the "Year 2000 Problem" will not have a material adverse effect on such
Borrower. From time to time, at the request of the Bank, Borrowers and its
Subsidiaries shall provide to the Bank such updated information or documentation
as is requested regarding the status of their efforts to address the "Year 2000
Problem.
12.25 JOINT AND SEVERAL LIABILITY. All references to Borrowers
shall mean ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, both individually and collectively, and
jointly and severally, and all representations, warranties, duties, covenants,
agreements and obligations of Borrowers shall be the individual and collective
representations, warranties, duties, covenants, agreements and obligations of
each of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇.
12.26 RELEASE OF COLLATERAL. Upon the payment and satisfaction in
full of the Liabilities and the expiration or termination of the Bank's
commitment to lend any money to the Borrowers', upon Borrowers' request and at
Borrowers' expense, the Bank shall execute and deliver to Borrowers releases and
terminations of all mortgages, security interests and liens granted by Borrowers
to the Bank, whether herein or in the Other Agreements.
12.27 MERGER CLAUSE. This Loan Agreement constitutes the entire
agreement between the Bank and Borrowers with regard to the subject matter
hereof, and supersedes all prior and contemporaneous communications, agreements
and assurances, whether verbal or written.
12.28 SERVICE OF PROCESS. EACH BORROWER 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 THE BORROWERS
AS SET FORTH HEREIN IN THE MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF
COURT OR OTHERWISE.
12.29 JURISDICTION; VENUE; WAIVER OF JURY TRIAL. BORROWERS AND THE
BANK IRREVOCABLY AGREE, AND HEREBY CONSENT AND SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE CIRCUIT COURT OF ▇▇▇▇ COUNTY, ILLINOIS, AND THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION,
WITH REGARD TO ANY ACTIONS OR PROCEEDINGS ARISING FROM, RELATING TO OR IN
CONNECTION WITH THE LIABILITIES, THIS LOAN AGREEMENT, THE OTHER AGREEMENTS OR
THE COLLATERAL. BORROWERS HEREBY WAIVES ANY RIGHT BORROWERS MAY HAVE TO TRANSFER
OR CHANGE THE VENUE OF ANY LITIGATION FILED IN THE CIRCUIT COURT OF ▇▇▇▇ COUNTY,
ILLINOIS, OR THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS, EASTERN DIVISION.
12.30 JURY WAIVER. EACH BORROWER AND THE BANK HEREBY VOLUNTARILY,
KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) BETWEEN OR AMONG ALL OR ANY BORROWERS AND THE BANK ARISING OUT OF OR
IN ANY WAY RELATED TO THIS LOAN AGREEMENT OR ANY OF THE OTHER AGREEMENTS. THIS
PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO PROVIDE THE FINANCING
DESCRIBED HEREIN AND IN THE OTHER AGREEMENTS. EACH BORROWER HEREBY REPRESENTS
AND WARRANTS TO THE BANK THAT IT HAS CONSULTED WITH AND BEEN COUNSELED BY
COMPETENT COUNSEL CONCERNING THE WAIVER SET FORTH IN THIS SECTION AND HAS
KNOWINGLY MADE SUCH WAIVER.
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IN WITNESS WHEREOF, the Bank and Borrowers have caused this Loan
Agreement to be executed and delivered by their duly authorized officers as of
the date first set forth above.
AMERICAN NATIONAL BANK AND THE ▇▇▇▇▇▇ SUBSCRIPTION AGENCY,
TRUST COMPANY OF CHICAGO, INCORPORATED, a Delaware corporation
a national banking association
By: By:
----------------------------- ----------------------------------
Title: Name:
-------------------------- ------------------------------
Title:
-----------------------------
▇▇▇▇▇▇▇▇ SUBSCRIPTION SERVICE, INC.,
an Illinois corporation
By:
----------------------------------
Name:
------------------------------
Title:
-----------------------------
THE ▇▇▇▇▇ COMPANY, INC.,
a Massachusetts corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
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