Exhibit 10.3
BUSINESS LOAN AGREEMENT
THIS BUSINESS LOAN AGREEMENT (the "Agreement") is made and entered into by
and between ▇▇▇▇▇▇▇ BANK, NATIONAL ASSOCIATION (herein termed "Bank") and CE
SOFTWARE, INC. (herein termed "Borrower"). CE SOFTWARE HOLDINGS, INC. (herein
termed "Guarantor") also appears as a party to this Agreement.
RECITALS:
A. Borrower has requested Bank to make available to Borrower certain credit
facilities for the operation of Borrower's business in the form of a revolving
credit loan and a mortgage Loan.
B. Bank is willing to provide to Borrower, and Borrower desires to obtain, such
credit facilities on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and the extension
of credit set forth herein, and subject to Borrower's satisfactory fulfillment
of all conditions precedent to the borrowing, the parties hereto agree as
follows:
Article I - Definitions and References
1.1. Definitions. Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to them below.
"Affiliate" shall mean, with respect to Borrower or Guarantor, as the case
may be, any person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under control with,
Borrower or Guarantor, as the case may be.
"Borrowing Base" shall mean an amount equal to seventy percent (70%) of
Eligible Receivables. The amount of the Borrowing Base shall be set forth
from time to time in accordance with the terms of this Agreement in a
Borrowing Base Certificate.
"Borrowing Base Certificate" shall mean a certificate of Borrower duly
executed by Borrower's president, chief financial officer or controller in
the form attached hereto as Exhibit G or in such other form as Bank may
from time to time request.
"Business Day" shall mean any day other than a Saturday, Sunday or day on
which Bank is required by law to close, or elects to close.
"Citibank Prime Rate" shall mean the rate of interest described as the
"prime rate" (or by similar reference) of Citibank, N.A., New York, New
York, as determined by such bank's management from time to time as part of
its internal procedures. No representation is made by Bank to Borrower
that the Citibank Prime Rate is the lowest, the best or a favorable rate.
"Closing" shall mean the consummation of the transactions set forth in
this Agreement, including the execution and delivery of the Loan
Documents.
"Closing Date" shall mean the date determined in accordance with Section
2.11 of this Agreement.
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"Compliance Certificate" shall mean a certificate of Borrower duly executed by
Borrower's president, chief financial officer or controller in the form attached
hereto as Exhibit H or in such other form as Bank may from time to time request.
"Distributor Receivables" shall mean all amounts owing to Borrower as the
purchase price for inventory sold and delivered to any distributor which intends
to resell such inventory at retail to end users.
"Eligible Receiveables" shall mean all amounts owing to Borrower as the purchase
price for inventory sold and delivered or for services rendered as to which an
invoice for payment has been issued by Borrower, except: (i) such amounts (other
than Distributor Receivables) which are sixty (60) days or more past the
original invoice date; (ii) Distributor Receivables which are ninety (90) days
or more past the original invoice date; (iii) except as otherwise agreed by Bank
from time to time in writing, all amounts owing with respect to any one account
when more than twenty percent (20%) of the total amount owing on such account
becomes more than ninety (90) days past the original invoice date; (iv) amounts
owing from the government of the United States of America or any agency or
instrumentality thereof; (v) amounts owing from any Affiliate; and (vi) amounts
owing from any employee of Borrower or an Affiliate.
"Event of Default" shall have the meaning delineated in Article XI of this
Agreement.
"Financial Statements" shall mean the financing statements to be prepared and
filed in accordance with Section 3.1 and Section 3.4 of this Agreement with
respect to the Security Agreement and the Guarantor Security Agreement, or
otherwise to perfect the security interests of Bank in the Security Property.
"Generally Accepted Accounting Principles" or "GAAP" shall mean those generally
accepted accounting principles and practices that are recognized as such by the
American Institute of Certified Public Accountants and by the Financial
Accounting Standards Board.
"Guarantor Security Agreement" shall mean the security agreement to be executed
by Guarantor pursuant to Section 3.3 of this Agreement.
"Guaranty" shall mean the guaranty to be executed by Guarantor pursuant to
Section 3.3 of this Agreement.
"Indebtedness" shall mean, collectively, the following:
(a) the Notes (and all evidences of renewal, extension or refunding
thereof, if any) and all other indebtedness and obligations of Borrower or
Guarantor to Bank incurred pursuant to the Loan Documents (whether such
indebtedness is from time to time reduced and thereafter increased or
entirely extinguished and thereafter reincurred);
(b) all other indebtedness and obligations of Borrower or Guarantor
to Bank, whether direct or indirect, primary or secondary, of every kind
and character, whether from time to time reduced and thereafter increased
or entirely extinguished and thereafter reincurred, heretofore or
hereafter incurred, whether or not such other indebtedness and obligations
are secured by additional or different collateral than the Security
Property and whether or not such additional indebtedness and obligations
arise or arose from or are or were acquired by Bank by purchase,
assignment or otherwise; and
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(c) all future advances which Bank at any time may, but shall not be
required to, make for the protection or preservation of Bank's rights and
interests arising hereunder, and all costs and expenses incurred by Bank
in the protection and preparation for sale of the Security Property or
other collateral including, without limitation, attorneys' fees and court
costs.
"Loan Documents" shall mean, collectively, this Agreement, the Notes, the
Security Agreement, the Mortgage, the Guaranty, the Guarantor Security
Agreement, the Financing Statements, the Lockbox Agreement, and any
further documents delivered pursuant to Section 3.4 or Section 4.1 of this
Agreement.
"Lockbox Agreement" shall mean the lockbox agreement between Borrower and
Bank in the form attached hereto as Exhibit I.
"Mortgage Note" shall mean the $1,000,000 promissory note described in
Section 2.5 of this Agreement.
"Mortgage Note Maturity Date" shall mean May 1, 2009.
"Mortgage" shall mean the real estate mortgage referred to in Section 3.2
of this Agreement.
"Notes" shall mean the Revolving Note and the Mortgage Note collectively.
"Revolving Note" shall mean the $2,000,000 promissory note described in
Section 2.2 of this Agreement.
"Revolving Note Maturity Date" shall mean April 30, 1996.
"Security Agreement" shall mean the security agreement described in
Section 3.1 of this Agreement.
"Security Property" means, collectively, the property of Borrower and
Guarantor as to which Bank has been granted a security interest, mortgage,
lien or assignment, all as referred to in Article III of this Agreement.
"Subordinated Debt" shall mean indebtedness of Borrower owed to any
officer, employee, director, shareholder or Affiliate which is
subordinated to all Indebtedness of Borrower to Bank, under the terms and
conditions approved in writing by Bank.
"Treasury Note Rate" shall mean, with respect to any date on which such
rate shall need to be determined, the previous four week average of the 5
year constant maturity United States Treasury Note as published by the
Federal Reserve System.
"West Des Moines Real Estate" shall mean the real estate and improvements
and fixtures thereon, including all easements and servient estates,
described in Schedule 1 attached hereto.
1.2 Accounting Terms. All accounting terms not specifically defined herein
shall have the meaning of such terms as used in accordance with generally
accepted accounting principles. In the event of a dispute relative to the
meaning of an accounting term, the determination thereof by an independent
Certified Public Accountant, chosen by Borrower and acceptable to Bank,
shall be controlling.
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Article II - General Loan Terms
2.1 Description of Credit Facility. The credit facility to be provided to
Borrower hereunder consists of the following components:
(a) A revolving line of credit in the principal amount of up to Two
Million Dollars ($2,000,000) to be evidenced by the Revolving Note
in the form attached hereto as Exhibit A. The proceeds of the
Revolving Note shall be applied to the purchase of the assets of
Powercore Inc. and subsequently to fund the business operations of
Borrower.
(b) A mortgage loan in the principal amount of One Million Dollars
($1,000,000) to be evidenced by the Mortgage Note in the form
attached hereto as Exhibit B. The proceeds of the Mortgage Note
shall be applied to the purchase of the assets of Powercore Inc.
2.2 Revolving Note. At the Closing, Borrower will execute and deliver to Bank
the Revolving Note in the form attached hereto as Exhibit A in the principal
amount of Two Million Dollars ($2,000,000.00) and Bank shall extend or make
available funds to Borrower up to such amount in accordance with the terms and
conditions of this Agreement. Interest shall accrue on the unpaid principal
balance of the Revolving Note at an annual rate equal to the Citibank Prime Rate
plus one and one-half percent (1.50%) per annum, with such interest to be
calculated on the basis of a 360-day year counting the actual number of days
elapsed. The applicable rate of interest shall be adjusted immediately upon any
change in the Citibank Prime Rate. Interest shall be payable monthly commencing
on the first day of the month immediately succeeding the month during which the
first advance under the Revolving Note is made, and continuing on the first day
of each month thereafter. The entire unpaid principal balance plus all accrued
and unpaid interest on the Revolving Note shall be due and payable in full on
the Revolving Note Maturity Date.
2.3 Advances Under Revolving Note. Bank agrees, on the terms and subject to the
conditions of this Agreement, to advance funds to Borrower, and Borrower may
borrow, repay and reborrow within the limits of the Revolving Note from time to
time prior to the Revolving Note Maturity Date. No amount may be borrowed under
the Revolving Note if the aggregate principal amount of the Revolving Note
outstanding after giving effect to the advance requested by Borrower would
exceed the lesser of: (a) $2,000,000; or (b) the Borrowing Base as in effect at
the time a request for an advance under the Revolving Note is made to Bank. At
the request of Borrower, and subject to the terms and conditions of this
Agreement, Bank shall make advances under the Revolving Note on any Business
Day, provided: (i) that Borrower shall have given Bank notice of its request (a
"Notice of Borrowing") prior to 2:00 p.m. of the Business Day on which the
advance is requested; and (ii) Borrower shall have provided Bank with a current
Borrowing Base Certificate. Each Notice of Borrowing shall specify the date of
the requested advance (which shall be a Business Day) and the principal amount
of the advance to be made (which shall be not less than $10,000, with increases
in increments of $1,000). Bank shall thereafter deposit the amount of the
requested advance into Borrower's operating account at Bank on the Business Day
specified in the Notice of Borrowing. Borrower acknowledges and agrees that
Borrower shall be limited to a maximum of two (2) advances per week under the
Revolving Note. Bank shall not be required to honor any request for an advance
under the Revolving Note other than as set forth in this Section 2.3.
2.4 Reductions of Principal on Revolving Note. The method of making payments to
reduce the outstanding principal balance of the Revolving Note shall depend on
whether the arrangements contemplated by the Lockbox Agreement have been
implemented and shall be made as follows:
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(a) Payments Prior to Implementation of Lockbox. During those periods
when the arrangements contemplated by the Lockbox Agreement have not
been implemented by Bank, the timing and amount of payments made by
Borrower to reduce the outstanding principal balance of the
Revolving Note shall be within the discretion of Borrower. Borrower
agrees to notify Bank by telephone or otherwise prior to 2:00 p.m.
on any Business Day on which Borrower desires to make a payment to
reduce the outstanding principal balance of the Revolving Note and
Bank shall transfer funds from Borrower's operating account in
accordance with the instructions provided by Borrower and apply such
funds toward payment of the principal balance of the Revolving Note.
Bank shall be under no obligation to make transfers from Borrower's
operating account to make payments on the Revolving Note unless
instructed to do so by Borrower in accordance with this Section
2.4(a). Payments on the Revolving Note shall be applied in the
manner specified In Section 2.4(b) below.
(b) Implementation of Lockbox and Payments Thereafter. Bank may, at its
option, implement the arrangements contemplated by the Lockbox
Agreement in the event: (i) the outstanding principal balance under
the Revolving Note exceeds $1,000,000 for more than ninety (90)
days; or (ii) any event occurs which, upon the giving of notice or
the passage of time or both, would become an Event of Default
hereunder; provided, however, that Bank shall notify Borrower of
such event in writing and Borrower shall have a period of ten (10)
days thereafter to cure such default prior to the implementation of
the Lockbox Agreement by Bank. In the event that Bank shall be
entitled under this Section 2.4(b) to implement the arrangements
contemplated by the Lockbox Agreement, Borrower agrees to cooperate
in establishing such arrangements and to take all action required of
Borrower under the terms of the Lockbox Agreement. At such times as
Bank may in its discretion deem appropriate (but in no event to
exceed twice weekly), Bank shall, without the consent of, or notice
to, Borrower, withdraw all collected funds then deposited in the
cash collateral account and apply such funds to reduce the
outstanding principal balance of the Revolving Note; provided,
however, such funds may first be applied toward payment of late
charges or costs of collection arising under the Revolving Note, if
any, and then to past due interest payments on the Revolving Note,
if any, with the remainder to be applied against the outstanding
principal balance of the Revolving Note. Bank shall inform Borrower
in writing of the amount withdrawn and applied to payment of the
Revolving Note on each occasion.
2.5 Mortgage Note. At the Closing, Borrower will execute and deliver to Bank the
Mortgage Note in the form attached hereto Exhibit B in the principal amount of
One Million Dollars ($1,000,000.00) and Bank shall extend funds to Borrower in
such amount in accordance with the terms and conditions of this Agreement.
Interest shall accrue on the unpaid principal balance of the Mortgage Note from
the date of funding through the fifth anniversary of such date at an annual rate
equal to the Treasury Note Rate plus two and three-quarter percent (2.75%). The
applicable rate of interest shall be adjusted on the fifth anniversary of the
date of funding and on the same day every five years thereafter during the term
of the Mortgage Note, with such rate to be equal to the Treasury Note Rate then
in effect plus two and three-quarter percent (2.75%) per annum. All interest
will be calculated on the basis of a 360-day year counting the actual number of
days elapsed. Repayment of the Mortgage Note shall be amortized over a period of
fifteen (15) years, with payments of principal and interest to be made on the
first day of each month, commencing on June 1, 1994 and continuing on the first
day of each month thereafter. The entire unpaid principal balance plus all
accrued and unpaid interest on the Mortgage Note shall be due and payable in
full on the Mortgage Note Maturity Date.
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2.6 Late Payments. In the event that any payment of principal or interest due
under the Notes, or repayment of any advance made by Bank pursuant to Section
2.9 of this Agreement, is not actually received by Bank within ten (10) days of
the date such payment is due, Borrower agrees to pay a late payment charge of
Twenty-five Dollars ($25.00).
2.7 Application of Payments. All payments received by Bank with respect to each
of the Notes shall be applied first to late charges and costs of collection, if
any, then to accrued and unpaid interest, and then to reduce the outstanding
principal balance of the respective Notes, except to the extent otherwise
provided in Section 2.4 hereof.
2.8 No Prepayment Penalty. In the event Borrower prepays any or all of the Notes
at a time earlier than provided for herein, no prepayment penalty shall be
assessed.
2.9 Advances by Bank. In the event Borrower shall fail to provide adequate
insurance, pay taxes or pay any other charges which may affect the Security
Property, Bank may, at its option, without notice, but without any obligation or
liability to do so, procure insurance, pay taxes or pay any other charges and
add said sum to the balance of any of the Notes, or divide such sum between the
Notes, as Bank shall determine in its sole discretion, which advance then shall
bear interest from the date of payment by Bank at the Citibank Prime Rate plus
one and one-half percent (1.50%) per annum. Any such advance and the interest
accrued thereon shall be paid to Bank on the last day of the month in which such
advance is made.
2.10 Loan Fee. At the Closing, the Borrower agrees to pay loan fees to Bank as
follows:
(a) A fee of Two Thousand Five Hundred Dollars ($2,500) for the loan
made pursuant to the Revolving Note, of which One Thousand Dollars
($1,000) has been prepaid and received by Bank.
(b) A fee of Ten Thousand Dollars ($10,000) for the loan made pursuant
to the Mortgage Note, of which One Thousand Dollars ($1,000) has
been prepaid and received by Bank.
2.11 Closing. The Closing of the Revolving Note contemplated by this Agreement
shall take place at the offices of Bank on or before June 30, 1994 and the
Mortgage Note shall be closed on or before December 31, 1994, or at such other
time and place as Bank and Borrower shall mutually agree.
2.12 Interest on Default. Upon the occurrence of an Event of Default hereunder,
the rate of interest payable on the Notes and on any advances made pursuant to
Section 2.9 hereof may, at Bank's option and in its sole discretion, be
increased to three percent (3%) per annum over the stated rate of the Notes.
Article III - Security
To secure payment and performance of the Indebtedness, Bank shall receive
at the Closing the collateral and Guaranty set forth below:
3.1 Security Agreement. Borrower shall execute and deliver to Bank the
Commercial Security Agreement in the form attached hereto as Exhibit C granting
Bank a security interest in all of Borrower's business assets, including, but
not limited to, all accounts, chattel paper, documents, instruments, inventory,
equipment, fixtures and general intangibles (and all proceeds thereof) now or
hereafter owned by Borrower, except for any equipment held by Borrower subject
to operating leases
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as specified in Schedule 2 hereto. Borrower shall additionally execute and
deliver to Bank such financing statements as Bank may require in order to
perfect the security interest granted pursuant to the Security Agreement.
3.2 Mortgage. Borrower shall execute and deliver to Bank the Commercial Mortgage
in the form attached hereto as Exhibit D conveying to Bank a first mortgage lien
upon the West Des Moines Real Estate owned by Borrower.
3.3 Guaranty and Security Agreement. Guarantor agrees to execute and deliver to
Bank the Commercial Guaranty in the form attached hereto as Exhibit E
guaranteeing performance of all of the Indebtedness of Borrower. Guarantor also
agrees to execute and deliver to Bank the Commercial Security Agreement in the
form attached hereto as Exhibit F to secure its obligations owing to Bank under
the terms of the Guaranty. Guarantor shall additionally execute and deliver to
Bank such financing statements as Bank may require in order to perfect the
security interest granted pursuant to the Guarantor Security Agreement.
3.4 Further Documentation. Borrower and Guarantor agree to execute and deliver
or cause to be executed and delivered to Bank such security agreements,
financing statements, continuation statements, applications for notation of
security interests, title certificates, assignments and other documentation
which Bank shall require from time to time in connection with the attachment,
perfection or continuation of any of the security interests, mortgage, pledges
or assignments granted or to be granted to Bank hereunder. The Financing
Statements and the Mortgage may be prepared and filed prior to the Closing, and
Borrower and Guarantor agree to cooperate with Bank in the execution and filing
thereof prior to the Closing.
3.6 Priority of Liens. The security interests and mortgage lien granted to Bank
shall be and shall remain of the first priority at all times while any of the
Indebtedness remains unpaid or unperformed.
3.6 Cross Default and Cross Collateralization. Borrower acknowledges and agrees
that the Security Property shall secure repayment of all Indebtedness and that a
default in the terms of any of the Loan Documents shall constitute a default of
all of the Loan Documents, and that Bank may proceed in exercising its rights
under the Loan Documents in any order or manner as Bank may choose, the purpose
of this Agreement being to cross default cross collateralize all Indebtedness.
3.7 Acknowledgment. Borrower acknowledges that the terms of this Agreement
provide for a mortgage loan of fifteen years and a revolving loan maturing on
April 30, 1996. Borrower acknowledges and agrees that the Security Property
stands as collateral for all of the Notes and as security for all of the
Indebtedness. As a consequence, in the event that Bank elects not to renew the
Revolving Note after April 30, 1996, and Borrower deems it necessary to obtain
financing through a source other than Bank, it will be necessary for Borrower to
pay all of the Notes (including the Mortgage Note) in full in order to obtain a
release of the Security Property.
Article IV-Closing
4.1 Delivery to Bank. Borrower and Guarantor, as the case may be, shall deliver
to Bank at the Closing, with all documents and instruments duly authorized and
executed by the appropriate party or parties, the following:
(a) This Agreement (unless executed and delivered prior to Closing);
(b) The loan fees referred to in Section 2.10 hereof;
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(c) The Revolving Note;
(d) The Mortgage Note
(e) The Security Agreement;
(f) The Financing Statements (unless filed prior to Closing);
(g) The Mortgage (unless recorded prior to Closing);
(h) The Guaranty;
(i) The Guarantor Security Agreement;
(j) Certificates of Borrower and Guarantor to the effect that all of the
representations and warranties of Borrower and Guarantor as set
forth in this Agreement are made again and are true and correct as
of the Closing Date;
(k) The legal opinion referred to in Section 7.1(h) of this Agreement;
(l) Certificate of Borrower or other evidence satisfactory to Bank that
all conditions precedent as set forth in Article VI of this
Agreement have been satisfied;
(m) An acknowledgement of Borrower and Guarantor that each has received
a copy of the Loan Documents at the time of execution thereof;
(n) The Lockbox Agreement;
(o) Termination statements, releases of mortgages or liens or similar
documentation relating to the Security Property as directed by Bank;
(p) A flood insurance notice from Bank to Borrower.
Article V - Representations and Warranties of Borrower
5.1 Representations and Warranties. Borrower represents and warrants to Bank
that:
(a) Borrower is a duly organized, legally existing corporation in good
standing under the laws of the State of Iowa, and has all requisite
power and authority and all necessary licenses and permits to own,
operate and lease its properties and to carry on its business as it
is now conducted and as it may be conducted in the future. Borrower
is qualified to do business and is in good standing as a foreign
corporation in any other state in which the nature of its activities
make such qualification necessary.
(b) All financial statements and other information furnished by Borrower
to Bank in connection with this Agreement do in all material
respects fairly represent the financial condition of Borrower on the
respective dates thereof and have been prepared in accordance with
Generally Accepted Accounting Principles, consistently applied.
Borrower has no material liabilities, fixed or contingent, which are
not fully shown or provided for in such financial statements as of
the dates thereof except obligations to
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perform after such dates under contracts, purchase orders or other
commitments incurred by Borrower in the ordinary course of business.
No material adverse changes in Borrower's financial condition are
imminent or threatened.
(c) Except any actions, suite or proceedings disclosed in writing to
Bank, no action, suit or proceeding against or affecting Borrower is
presently pending or threatened in any court, or before any
governmental authority or any arbitration board or tribunal, which
involves the possibility of any judgment or liability not fully
covered by insurance or which may result in any material adverse
change in the properties, business, prospects, profits or condition
(financial or otherwise) of Borrower, nor is Borrower aware of any
existing basis for any such action, suit or proceeding.
(d) Borrower has good and marketable title to all of the properties and
assets purported to be owned by it, including that portion of the
Security Property owned by it (and, in particular, the West Des
Moines Real Estate), and all of such property is free and clear of
any and all liens, claims, security interests and encumbrances
whatsoever.
(e) Borrower is not aware of any default in the performance of any
obligation, covenant or condition contained in any agreement to
which it is a party, nor is Borrower in default with respect to any
judgment, order, writ, injunction or decree of any court,
governmental authority or arbitration board or tribunal.
(f) The execution, delivery and performance of this Agreement, the other
Loan Documents and all documents and instruments referred to herein
will not violate the provisions of the Articles of Incorporation or
Bylaws of Borrower or of any note, indenture, mortgage, lease or
other agreement to which Borrower is a party or by which it is
bound, and will not result in the breach of any judgment, order,
rule or regulation of any court or governmental agency having
jurisdiction over Borrower or any of its properties. No consent,
approval, authorization or order of any court or governmental agency
or third party is required in connection with the execution,
delivery and performance by Borrower of this Agreement, the other
Loan Documents or any documents or instruments referred to herein.
(g) The execution and delivery of, and the performance of the
obligations set forth in, this Agreement and the other Loan
Documents and all documents or instruments referred to herein to
which Borrower is a party or signatory, have been duly authorized by
all appropriate proceedings of Borrower, and this Agreement and the
other Loan Documents and all documents and instruments referred to
herein to which Borrower is a party or signatory are valid and
binding obligations of Borrower, enforceable in accordance with
their respective terms.
(h) There exists on this date no Event of Default and no event or
condition which, with notice or the lapse of time or both, would
become an Event of Default.
(i) Borrower has filed all tax returns and reports required to be flied
with the United States government and with all state and local
governments which are required to be filed, and has paid in full, or
made adequate provision on its books for the payment of, all taxes,
interest, penalties, assessments, deficiencies, franchise fees and
other governmental charges shown to be due or claimed to be due on
or in respect of such tax returns or reports or otherwise levied
upon or in respect of any of its properties, assets, income or
franchises.
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(j) Borrower is not in violation in any material manner of any federal,
state, county or city statutes, ordinances, orders, rules or
regulations pertaining to its business, and does not presently
anticipate that future expenditures needed to meet the provisions of
such federal, state, county or city statutes, ordinances, orders,
rules or regulations will be so burdensome as to affect or impair in
a materially adverse manner its financial condition.
(k) All of the funds loaned to Borrower pursuant to this Agreement will
be used exclusively in Borrower's normal business operations and
will not be diverted to or used in any other manner.
(l) To the extent that any of the Security Property is located in an
area identified by the Secretary of Housing and Urban Development or
a successor thereto as an area having special flood hazards pursuant
to the terms of the National Flood Insurance Act of 1968, or the
Flood Disaster Protection Act of 1973, as amended, or any successor
law, Borrower has obtained and will maintain insurance on such
Security Property protecting against such risk to the full extent of
the value of such Security Property.
5.2 Environmental Matters. Borrower represents and warrants that: (a) to the
best of Borrower's actual knowledge, the Security Property (and all other
property now or heretofore owned by Borrower) and Borrower are now and
heretofore have been at all times in compliance with all Environmental Laws (as
hereinafter defined); (b) there have been no conditions on or about the Security
Property (or any other property now or heretofore owned by Borrower) which
required or will require clean-up, removal, remedial action or other response
pursuant to Environmental Laws; (c) there are no conditions on or about the
Security Property (or any other property now or heretofore owned by Borrower)
now existing or likely to exist during the term of this Agreement which require
or are likely to require clean-up, removal, remedial action, or other response
pursuant to Environmental Laws; (d) Borrower has never been and is not now a
party to any litigation or administrative proceeding, nor is any litigation or
administrative proceeding threatened against it, which asserts or alleges that
Borrower violated Environmental Laws; (e) to the best of Borrower's actual
knowledge, neither the Security Property (or any other property now or
heretofore owned by Borrower) nor Borrower is now or ever has been subject to
any judgment, decree, order or citation related to or arising out of
Environmental Laws; and (f) no permits or licenses are required under
Environmental Laws relative to the Security Property or Borrower.
The term "Environmental Laws" shall mean all federal, state and local laws
including statutes, regulations, ordinances, codes, rules and other governmental
restrictions and requirements relating to the environment or hazardous
substances now or at any time hereafter in effect.
Borrower covenants and agrees at all times while the Indebtedness remains
unpaid to (a) comply with all applicable Environmental Laws; (b) provide to
Bank, immediately upon receipt, copies of any correspondence, notice, pleading,
citation, indictment, complaint, order, decree, or other document from any
source asserting or alleging a circumstance or condition which requires or may
require a clean-up, removal, remedial action or other response by or on the part
of Borrower under Environmental Laws or which seeks criminal or punitive
penalties from Borrower for an alleged violation of Environmental Laws; and (c)
advise Bank in writing as soon as Borrower becomes aware of any condition or
circumstance which makes the foregoing covenants incomplete or inaccurate. In
the event of any such circumstance, Borrower agrees, at its expense and at the
request of Bank, to permit an environmental audit solely for the benefit of
Bank, to be conducted by Bank or an independent agent selected by Bank. This
provision shall not relieve Borrower from conducting its own environmental
audits or taking any other steps necessary to comply with Environmental Laws
which in the reasonable judgment of Bank is likely to impair materially the
value of the Security Property or the operations of Borrower. If in the opinion
of Bank there exists any provision of an Environmental Law
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or any condition which requires, or may require, a clean-up, removal or other
remedial action by Borrower under any Environmental Laws and such clean-up,
removal or other remedial action is not completed within one hundred twenty
(120) days from the date of written notice from Bank to Borrower (or such longer
period as may be required under the circumstances), the name shall at the option
of Bank constitute a default hereunder.
Borrower hereby agrees to defend, indemnify and hold Bank harmless from
and against any loss, liability, cost, damage, or expense, including, without
limitation, attorneys' fees, arising from the imposition or recordation of a
lien, the incurrence of any clean-up and removal costs under any Environmental
Laws with respect to the Security Property or Borrower, any liability to any
third party in connection with any violation of any Environmental Laws or other
action by Borrower or its agents or any diminution in value of the Security
Property as a result of any violation or alleged violation of any Environmental
Laws by Borrower.
Article VI - Representations and Warranties of Guarantor
6.1 Representations and Warranties. Guarantor represents and warrants to Bank
that:
(a) Guarantor is a duly organized, legally existing corporation in good
standing under the laws of the State of Delaware, and has all
requisite power and authority and all necessary licenses and permits
to own, operate and lease its properties and to carry on its
business as it is now conducted and as it may be conducted in the
future. Guarantor is qualified to do business and is in good
standing as a foreign corporation in the State of Iowa.
(b) All financial statements and other information furnished by
Guarantor to Bank in connection with this Agreement do in all
material respects fairly represent the financial condition of
Guarantor on the respective dates thereof and have been prepared in
accordance with Generally Accepted Accounting Principles,
consistently applied. Guarantor has no material liabilities, fixed
or contingent, which are not fully shown or provided for in such
financial statements as of the dates thereof except obligations to
perform after such dates under contracts, purchase orders or other
commitments incurred by Guarantor in the ordinary course of
business. No material adverse changes in Guarantor's financial
condition are imminent or threatened.
(c) Except for any actions, suits or proceedings disclosed in writing to
Bank, no action, suit or proceeding against or affecting Guarantor
is presently pending or threatened in any court, or before any
governmental authority or any arbitration board or tribunal, which
involves the possibility of any judgment or liability not fully
covered by insurance or which may result in any material adverse
change in the properties, business, prospects, profits or condition
(financial or otherwise) of Guarantor, nor is Guarantor aware of any
existing basis for any such action, suit or proceeding.
(d) Guarantor is not aware of any default in the performance of any
obligation, covenant or condition contained in any agreement to
which it is a party, nor is Guarantor in default with respect to any
judgment, order, writ, injunction or decree of any court,
governmental authority or arbitration board or tribunal.
(e) Guarantor has good and marketable title to that portion of the
Security Property purported to be owned by it, free and clear of any
and all liens, claims, security interests and encumbrances
whatsoever.
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(f) The execution, delivery and performance of this Agreement, the
Guaranty and Guarantor Security Agreement will not violate the
provisions of the Certificate of Incorporation or Bylaws of
Guarantor or of any note, indenture, mortgage, lease or other
agreement to which Guarantor is a party or by which it is bound, and
will not result in the breach of any judgment, order, rule or
regulation of any court or governmental agency having jurisdiction
over Guarantor or any of its properties. No consent, approval,
authorization or order of any court or governmental agency or third
party is required in connection with the execution, delivery and
performance by Guarantor of this Agreement, the Guaranty or the
Guarantor Security Agreement.
(g) The execution and delivery of, and the performance of the
obligations set forth in, this Agreement, the Guaranty and the
Guarantor Security Agreement have been duly authorized by all
appropriate proceedings of Guarantor, and this Agreement, the
Corporate Guaranty and the Guarantor Security Agreement are valid
and binding obligations of Guarantor, enforceable in accordance with
their respective terms.
(h) Guarantor has filed all tax returns and reports required to be filed
with the United States government and with all state and local
governments which are required to be filed, and has paid in full, or
made adequate provision on its books for the payment of, all taxes,
interest, penalties, assessments, deficiencies, franchise fees and
other governmental charges shown to be due or claimed to be due on
or in respect of such tax returns or reports or otherwise levied
upon or in respect of any of its properties, assets, income or
franchies.
(i) Guarantor is not in violation in any material manner of any federal,
state, county or city statutes, ordinances, orders, rules or
regulations pertaining to its business, and does not presently
anticipate that future expenditures needed to meet the provisions of
such federal, state, county or city statutes, ordinances, orders,
rules or regulations will be so burdensome as to affect or impair in
a materially adverse manner its financial condition.
Article VII - Conditions Precedent to Bank's Obligations
7.1 Conditions Precedent to Closing. Bank's obligations to close hereunder, to
make disbursements to Borrower in accordance herewith and otherwise to perform
hereunder shall be subject to satisfaction of the following conditions on or
before the Closing, any or all of which may be waived by Bank in its sole
discretion:
(a) Borrower and Guarantor shall have performed all agreements required
to be performed prior to the Closing under this Agreement, and shall
not be in breach of any covenant, agreement, representation or
warranty made herein or in any other Loan Document.
(b) Bank shall have received all of the documents, agreements and
instruments referred to in Article IV of this Agreement.
(c) All representations and warranties of Borrower and Guarantor
contained in this Agreement shall be true in all material respects
as of the Closing and shall be made again on the Closing Date
effective as of the Closing Date.
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(d) No Event of Default and no event or condition which, with notice or
the lapse of time, or both, would constitute an Event of Default,
shall have occurred prior to or shall exist at the time of the
Closing.
(e) Neither Borrower nor Guarantor shall have incurred any material
liabilities, direct or contingent, other than in the ordinary course
of business, since the date of the last financial statement given to
Bank by each party.
(f) Borrower shall have obtained hazard and/or fire and extended
coverage insurance on all Security Property, as required by Section
8.1(c) hereof and, if requested by Bank, shall have delivered
certified copies of such insurance policies to Bank.
(g) Borrower shall have paid Bank for all costs incurred by Bank in
connection with this Agreement and the other Loan Documents,
including, but not limited to, the payment of all recording and
filing fees and the fees and expenses of Bank's counsel incurred in
connection with the preparation of this Agreement and all other Loan
Documents.
(h) Borrower and Guarantor shall have delivered to Bank an opinion of
counsel to Borrower and Guarantor in the form attached hereto as
Exhibit J, which opinion shall be satisfactory in form and substance
to Bank and its counsel.
(i) Neither Borrower nor Guarantor shall, at the time of Closing, be
subject to or party in a liquidation or reorganization agreement or
subject to any insolvency proceedings.
(j) Borrower shall have provided Bank with an abstract of title for the
West Des Moines Real Estate and Bank shall have obtained an opinion
of its counsel indicating that marketable title to the Wet Des
Moines Real Estate is in the name of Borrower and the existence of
any liens, encumbrances and exceptions with respect to such title.
(k) The Mortgage and any releases of prior encumbrances shall have been
recorded with the office of the Polk County Recorder, and Bank shall
have received an oral report from the abstracter that no liens or
other encumbrances have been filed of record against the West Des
Moines Real Estate since the date of the preliminary title opinion
referred to in Section 7.1(j) above, which report shall be
satisfactory to Bank.
(l) Bank shall have received an appraisal of the West Des Moines Real
Estate by a qualified appraiser, which appraisal shall reflect a
value resulting in a loan to value ratio of not more than
seventy-five percent (75%), and which appraisal shall otherwise be
satisfactory to Bank in its sole discretion.
(m) Borrower shall have provided to Bank an as-built survey of the West
Des Moines Real Estate certified to Bank as of the date no earlier
than sixty (60) days prior to the Closing Date, with the signature
and seal of a registered engineer or surveyor affixed thereto, which
survey shall be satisfactory to Bank in its sole discretion.
In the event that any of the foregoing conditions precedent have not been
satisfied at the Closing Date, Bank shall then have the option of waiving any
such unsatisfied condition or of terminating this Agreement. In the event Bank
elects not to waive such unsatisfied conditions and to terminate this Agreement,
Bank shall then have no further obligation or liability hereunder or under any
prior
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commitment letter whatsoever. Borrower, however, shall be and remain fully
liable to Bank for payment of all costs incurred by Bank in connection with this
transaction, which shall be due and payable immediately upon such termination.
7.2 Conditions Precedent to All Borrowings. The obligation of Bank to make any
advances of funds to Borrower under the Revolving Note shall be subject to the
fulfillment at or prior to the time of the making of each such advance of each
of the following further conditions:
(a) No change shall have occurred or become known since the Closing Date
in the assets, business, operations, prospects or financial
condition of Borrower or Guarantor which Bank reasonably deems to be
material and adverse to Borrower or Guarantor.
(b) The representations and warranties of Borrower and Guarantor
contained in this Agreement and in any of the Loan Documents shall
each be true and correct in all material respects at and as of the
borrowing date for such advance as though made on and as of such
date (except to the extent that such representations and warranties
expressly relate to an earlier date or as may be agreed to in
writing by Bank) and each of the Loan Documents shall be in full
force and effect.
(c) Borrower and Guarantor shall be in compliance with the terms and
conditions of this Agreement and the other Loan Documents,
including, but not limited to, the various covenants contained in
Articles VIII, IX and X of this Agreement.
(d) Bank shall continue to have a valid and duly perfected first
priority security interest in and mortgage lien on the Security
Property subject to no lien or encumbrance and such security
interest and mortgage lien shall secure, on a first priority base
subject to no lien or encumbrance, the full amount of the advance to
be so made and all advances then outstanding under the Notes.
(e) Bank shall have received the most recent Borrowing Base Certificate
due in accordance with Section 8.1(b) hereof.
(f) Borrower shall have acquired those assets of Powercore Inc. provided
for pursuant to the terms of the acquisition agreement between
Borrower and Powercore Inc., and Borrower shall have provided Bank
with such documentation as may reasonably be necessary to satisfy
Bank and its counsel that the assets acquired from Powercore Inc.
are free and clear of any liens, security interests, or encumbrances
of any nature granted by Powercore Inc. to any third party.
Each time Bank is given a Notice of Borrowing, such notification shall be
deemed to constitute a representation and warranty of Borrower that each of the
conditions set forth in this Section 7.2 will be satisfied on the relevant
borrowing date.
Article VIII - Affirmative Covenants of Borrower
8.1 Covenants. So long as any part of the Indebtedness remains unpaid or any
obligations of Borrower or Guarantor under the Loan Documents remain
unsatisfied, Borrower and Guarantor respectively covenant and agree with Bank as
follows:
(a) Borrower will duly and punctually pay all sums to be paid by
Borrower in accordance with the terms and conditions of this
Agreement and the other Loan Documents.
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(b) In the event there are outstanding balances under the Revolving
Note, Borrower shall: (i) submit a Borrowing Base Certificate to
Bank on Tuesday of each week, certified by the president, chief
financial officer or controller of Borrower and current as of a date
not more than three (3) business days prior to the date of
submission to Bank; and (ii) submit to Bank within fifteen (15) days
after the end of each calendar month a Borrowing Base Certificate
completed as of the end of the immediately preceding calendar month.
(c) Borrower shall maintain hazard and/or fire and extended coverage
insurance on all Security Property and on its other insurable real
and personal property, issued by a company or companies satisfactory
to Bank and in amounts acceptable to Bank, which policy or policies
shall name Bank as loss payee under a standard loss payee clause.
Borrower shall additionally maintain any other insurance as Bank may
reasonably require insuring against such risks and in such amounts
as are customarily carried by like businesses operating in the same
vicinity. Such policy or policies shall provide that they shall not
be amended, modified or cancelled without thirty (80) days prior
written notice to Bank. Borrower shall also maintain insurance
against liability on account of damage to persons or property and
such insurance as may be required under all applicable workers
compensation laws. If during the term of this Agreement and the term
of the other Loan Documents, any of the insured property is
destroyed by fire or other hazard, Borrower may, so long as not then
in default under any of the Loan Documents, replace or rebuild the
damaged or destroyed property, as the case may be, with the
insurance proceeds, and Bank's lien shall attach and remain affixed
to the replaced or rebuilt property
(d) Borrower and Guarantor will promptly pay and discharge their
respective federal, state and other governmental taxes, assessments,
fees and charges imposed upon them or upon any of their respective
assets.
(e) Borrower and Guarantor will maintain at all times proper books of
record and account in accordance with Generally Accepted Accounting
Principles, consistently applied, and permit Bank's officers or any
of Bank's authorized representatives or accountants to visit and
inspect their offices and property, examine their books of account
and other records and discuss their affairs, finances and accounts
with their officers, employees, accountants and auditors, all at
such reasonable times and as often as Bank may desire. Bank will
periodically audit Borrower's accounts receivable, inventory and
accounts payable and Borrower agrees to pay Bank an hourly fee of
$30.00 for time spent by Bank personnel performing such audits;
provided, however, such fees shall not exceed $4,000 during any
fiscal year. Moreover, if an Event of Default has occurred or is
continuing, Borrower will pay the reasonable fees and disbursements
of any accountants or other agent of Bank selected by Bank for the
foregoing purposes (which fees shall not be subject to the $4,000
annual limitation).
(f) In the event there are outstanding balances under the Revolving
Note, Guarantor shall submit to Bank, within fifteen (15) days of
the end of each calendar month, an unaudited balance sheet and
income statement as of the end or the immediately preceding calendar
month, prepared in accordance with Generally Accepted Accounting
Principles consistently applied and certified as being true and
correct by the president, chief financial officer or controller of
Borrower.
(g) In the event there are outstanding balances under the Revolving
Note, Borrower shall, within fifteen (15) days of the end of each
calendar month, submit to Bank a
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Compliance Certificate completed as of the end of the immediately
preceding calendar month. The Compliance Certificate shall be
submitted within fifteen (15) days of the end of each fiscal quarter
during those periods when there is no outstanding balance under the
Revolving Note.
(h) In the event there are outstanding balances under the Revolving
Note, Borrower shall, within fifteen (15) days of the end of each
calendar month, submit to Bank an account receivable aging report
listing, for each outstanding account receivable as of the end of
the immediately preceding calendar month, the account name, balance
and payment status. Such report shall be submitted within fifteen
(15) days of the end of each fiscal quarter during those periods
when there is no outstanding balance under the Revolving Note.
(i) Within forty-five (45) days following the end of each fiscal
quarter, Guarantor shall submit to Bank a copy of its Quarterly
Report on Form 10-Q containing unaudited financial statements as of
the end of such fiscal quarter, prepared in accordance with
Generally Accepted Accounting Principles consistently applied.
(j) Within one hundred twenty (120) days following the end of each
fiscal year, Guarantor shall submit to Bank its Annual Report on
Form 10-K containing audited financial statements prepared in
accordance with Generally Accepted Accounting Principles
consistently applied and examined by an independent certified public
accountant chosen by Guarantor and acceptable to Bank, which
statements shall include a balance sheet, income statement,
statement of cash flows, notes to financial statements and auditor's
report.
(k) Guarantor shall, within ten (10) days of filing thereof with the
Securities and Exchange Commission, provide Bank with copies of any
Current Report on Form 8-K, any registration statement filed under
the Securities Act of 1933 or any other report concerning a material
event with respect to Borrower or Guarantor.
(l) Promptly upon receipt thereof, Borrower or Guarantor, as the case
may be, will submit to Bank copies of all audit reports submitted by
independent public accountants in connection with any special audit
of the books of Borrower or Guarantor made by such accountants.
(m) Borrower and Guarantor further agree to supply to Bank such
additional financial information as Bank may, from time to time,
reasonably request to ascertain their respective financial
conditions.
(n) Borrower or Guarantor, as the case may be, will, within five (5)
days of receiving notice thereof, advise Bank in writing of any
condition, event or act of the kind set forth in subparagraphs (1)
through (4) below which comes to its attention that would or might
prejudice Bank's rights under this Agreement or any other Loan
Document:
(1) The filing of a lien, suit, action or other proceeding
against Borrower or Guarantor wherein a claim is made in excess of
Ten Thousand Dollars ($10,000.00);
(2) The filing, recording or assessment of a federal, state,
or local tax lien against any of Borrower's or Guarantor's asset;
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(3) The occurrence of any Event of Default or any act or event
which, with notice or the lapse of time, or both, would constitute
an Event of Default; or
(4) Any legal or administrative proceeding or investigation
initiated against Borrower or Guarantor.
(m) Borrower will maintain, preserve and keep its buildings and
properties and every part thereof in good repair, working order and
condition and from time to time make all necessary repairs,
renewals, replacements, additions, betterments and improvements
thereto, so that at all times the efficiency thereof shall be fully
preserved and maintained.
Article IX - Negative Covenants of Borrower
9.1 Covenants. So long as any part of the Indebtedness remains unpaid or any
obligations of Borrower or Guarantor under the Loan Documents remain
unsatisfied, Borrower and Guarantor covenant and agree that, without the prior
written consent of Bank (which shall not unreasonably be withheld), they shall
not:
(a) Merge or consolidate with any company or enterprise, or acquire or
purchase any other company or enterprise, or suffer or permit the
sale, lease, transfer or other disposition of a substantial part of
Borrower's or Guarantor's properties or assets, unless replaced in
the ordinary course of business with properties of substantially
equal value. For purposes of the foregoing, any transaction
involving the disposition of properties or assets having a value in
excess of Two Hundred Fifty Thousand Dollars ($250,000) as measured
by the consideration for the transaction in question shall be deemed
to be substantial.
(b) Incur indebtedness for borrowed money, other than to Bank, or act as
a guarantor for any indebtedness of others. For purposes hereof,
entering into capital leases of personal property shall be deemed
the incurring of indebtedness for borrowed money.
(c) Invest in, organize or participate in the organization or creation
of any other business entity; provided, however, that Borrower
and/or Guarantor shall be permitted to invest in and organize other
business entities without the prior consent of Bank to the extent
that; (i) the investment into any one business entity by Borrower
and/or Guarantor does not exceed $250,000; and (ii) the investment
into all business entities by Borrower and/or Guarantor does not
exceed $750,000 in the aggregate at any one time.
(d) Redeem, retire, repurchase or otherwise acquire directly or
indirectly any of Borrower's capital stock, or make any change in
its capital structure, or pay or declare any dividend or other
capital distribution, in cash or property, upon its capital stock.
(e) Change the general character of the business of Borrower or
Guarantor as conducted on the date hereof and the Closing Date or
engage in any type of business not reasonably related to such
business as presently conducted.
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(f) Permit the aggregate of all judgments or liens against Borrower
and/or Guarantor at any one time to exceed Fifty Thousand Dollars
($50,000), whether aided by attachment or not, to remain unpaid,
undischarged, unbonded or undismissed for a period of thirty (30)
day.
(g) At any time permit Borrower or Guarantor to make any loans to
others, including, but not limited to, any Affiliate or to any
officer or employee of Borrower, Guarantor or an Affiliate, except
that: (i) Borrower or Guarantor shall be permitted to make loans or
extend credit to its officers or employees in an amount not to
exceed $5,000 per person, provided, however, all such loans or
extensions of credit by Borrower and/or Guarantor shall not exceed
$50,000 in the aggregate at any given time; and (ii) the use of
corporate credit cards for expenses incurred in the ordinary course
of business shall not be deemed a loan or an extension of credit for
purposes of this Section 9.1(g).
(h) Permit the pledge or encumbrance of any property of Borrower or
Guarantor as security for any indebtedness incurred after the date
of this Agreement except to Bank, with the exception of a purchase
money security interest.
Article X - Additional Covenants of Borrower
10.1 Covenants. So long as any part of the Indebtedness remains unpaid or any
obligations of Borrower or Guarantor under the Loan Documents remain
unsatisfied, Borrower and Guarantor respectively covenant and agree with Bank as
follows:
(a) Guarantor agrees to maintain a Tangible Net Worth of not less than
$4,500,000. "Tangible Net Worth" shall mean the amount of total
assets (excluding the amount of Intangible Assets) less the amount
of total liabilities (exclusive of Subordinated Debt, if any).
"Intangible Assets" shall mean the book value of Guarantor's
intangible assets including, but not limited to, goodwill, patents,
trademarks, copyrights, secret processes, deferred expenses relating
to general administrative, research and development expenses and all
amounts due from any officer, employee, director, shareholder or
Affiliate.
(b) Guarantor agrees to maintain a ratio of Debt to Tangible Net Worth
of not more than 2.2 to 1.0 during the period commencing with the
Closing Date and at all times thereafter, "Debt" shall mean all
liabilities of Guarantor (less Subordinated Debt, if any). "Tangible
Net Worth" shall have the meaning set forth in Section 10.1(a)
hereof.
(c) Guarantor agrees to maintain Net Working Capital of not less than
$1,500,000 and a Current Ratio of not less than 1.35 to 1.00. "Net
Working Capital" shall mean the excess of Current Assets over
Current Liabilities. "Current Ratio" shall mean the ratio of Current
Assets to Current Liabilities. "Current Assets" shall mean the sum
of cash, marketable securities, inventory at lower of cost or market
and ordinary trade accounts receivable, excluding any amount due
from any officer, employee, director, shareholder or Affiliate. In
the event of a dispute relative to the carrying value of said
inventory or accounts receivable, the determination thereof by an
independent Certified Public Accountant chosen by Guarantor and
acceptable to Bank shall be controlling. "Current Liabilities" shall
mean any indebtedness due within one (1) year (exclusive of
Subordinated Debt, if any), and any unsubordinated debt due to any
officer, employee, director, shareholder or Affiliate. For purposes
of this calculation, outstanding principal on Revolving Note shall
be classified as a current liability.
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(d) Borrower and Guarantor agree not to purchase, lease or otherwise
acquire or enter into any commitment to purchase, lease or otherwise
acquire additional capital assets where the aggregate liability or
expenditure therefor in any one fiscal year exceeds ??? $500,000,
except with the prior written consent by Bank.
(e) Any officer, employee, director, shareholder or Affiliate of
Borrower or Guarantor shall subordinate all indebtedness including
interest thereon (herein termed "Junior Indebtedness"), which may at
any time now or hereafter be owed to any officer, employee,
director, shareholder or Affiliate by Borrower or Guarantor in favor
of the Indebtedness, including interest thereon. Borrower or
Guarantor, as the case may be, shall obtain and deliver to Bank
subordination agreements from said officers, employees, directors,
shareholders or Affiliates for said Junior Indebtedness in form and
content acceptable to Bank. Upon the occurrence of an Event of
Default under this Agreement, Borrower or Guarantor, as the case may
be, shall without notice from Bank immediately cease payment of any
fees or advances to any officer, employee, director, shareholder or
Affiliate and shall also cease payment of the sums, if any allowed
to be paid by the terms of the subordination agreement(s).
(f) Borrower shall establish and maintain its principal deposit accounts
at Bank as long as any Indebtedness remains outstanding or so long
as this Agreement remains in effect.
Article XI - Default and Remedies
11.1 Default. Any one or more of the following events shall be considered an
"Event of Default" as that term is used herein:
(a) If Borrower should default in the payment of any principal, interest
or any other sum payable under the Notes or hereunder (it is being
understood that default in the payment of principal or interest of
any of the Notes shall constitute default under all of the Notes),
and such default shall not be cured within ten (10) days after
written notice thereof is given by Bank to Borrower, provided,
however, that Bank shall not be required to provide written notice
of a default hereunder more than two times during any twelve
consecutive month period.
(b) If a default occurs or there shall be non-compliance with any of the
terms or provisions of any of the other Loan Documents.
(c) Non-payment when due of any Indebtedness.
(d) If any representation or warranty made by Borrower or Guarantor in
any report or certification to Bank, in this Agreement or in any
other Loan Document proves to be untrue or false in any material
respect when made.
(e) If there shall be non-compliance with, or a breach of, any of the
Affirmative Covenants contained in Article VIII hereof, any of the
Negative Covenants contained in Article IX hereof, any of the
Additional Covenants contained in Article X hereof, or any other
covenant of Borrower or Guarantor set forth herein or in any other
Loan Document, and such default, non-compliance or breach shall not
be cured within ten (10) days in the case of a payment default, or
thirty (30) days in the case of a non-payment default, after written
notice thereof is given by Bank to Borrower.
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(f) If: (i) Borrower or Guarantor shall be liquidated or dissolved or
discontinue business; (ii) Borrower or Guarantor shall become
insolvent or make an assignment for the benefit of creditors, or
apply for or consent to the appointment of a receiver, trustee or
liquidator for all of or a substantial portion of their respective
assets; or (iii) any governmental agency or bankruptcy court or
other court of competent jurisdiction shall assume custody or
control of the whole or any part of the assets of Borrower or
Guarantor and such action shall be consented to by Borrower or
Guarantor, as the case may be, or shall remain undismissed for sixty
(60) days.
(g) If a default occurs under Section 5.2 of this Agreement relating to
environmental matters.
(h) If Bank reasonably believes that the prospect of payment of the
Indebtedness is impaired due to acts or events materially and
adversely bearing upon the financial condition of Borrower or
Guarantor, or Bank on any other reasonable basis otherwise deems
itself insecure.
11.2 Effect of Default; Cross Default. It is understood and agreed that any
Event of Default occurring under this Agreement or under any other Loan Document
shall constitute an event of default under each and every Loan Document. Upon
the happening of any Event of Default specified in Section 11.1 of this Article,
the entire amount owing under the Notes and the other Indebtedness, at the
option of Bank and without prior notice to Borrower or Guarantor, shall
thereupon mature and become immediately due and payable in full. In such event,
Bank may proceed to enforce payment in such manner as Bank may elect and realize
upon any and all rights of Bank in the Security Property. Additionally, without
prior notice to Borrower or Guarantor, Bank may appropriate and apply any and
all moneys in its possession, by deposit or otherwise, to the credit of or
belonging to Borrower or Guarantor, to any amounts owing to Bank under the
Notes, this Agreement, any of the other Loan Documents or the Indebtedness. Upon
the happening of any Event of Default, then in conjunction with, in addition to
or in substitution for those rights and remedies above described, and without
notice or demand which are, to the extent permitted by law, expressly waived,
the following shall be applicable:
(a) So long as it does not constitute a breach of the peace, Bank may
enter upon any of Borrower's or Guarantor's premises to take
possession of, assemble and collect the Security Property or to
render it unusable;
(b) Bank may notify the account debtors or obligors of any accounts,
chattel paper, negotiable instruments, general intangibles or other
evidences of indebtedness in favor of Borrower or Guarantor to pay
Bank directly and Bank may take control of the proceeds paid to
Bank. Until Bank elects to exercise these rights, Borrower or
Guarantor, as the case may be, is authorized to collect and enforce
the collection of such accounts (subject to collection terms
provided for in Section 2.4 hereof). The cost of collection and
enforcement, including attorneys' fees and expenses, shall be borne
solely by Borrower or Guarantor whether incurred by Bank or by
Borrower or Guarantor;
(c) Bank may require Borrower or Guarantor to assemble the Security
Property and make it available on Borrower's or Guarantor's premises
or at a place Bank designates to allow Bank to take possession of or
dispose of the Security Property;
(d) Bank may waive any Event of Default or remedy any Event of Default
without waiving the Event of Default remedied and without waiving
any other prior or subsequent Event of Default.
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(e) Written notice given to Borrower or Guarantor, not less than ten
(10) days prior to the date of public sale of the Security Property
or prior to the date after which private sale or other disposition
of the Security Property will be made, shall constitute reasonable
notice;
(f) Bank may sell any unit of inventory or equipment at private sale or
to a distributor or dealer at Borrower's current price for such
inventory or at such lower price as may be then obtainable, which
shall constitute disposition thereof in a commercially reasonable
manner;
(g) It shall not be necessary that Bank take possession of the Security
Property or any part thereof prior to the time that any sale
pursuant to the provisions of this Section is conducted and it shall
not be necessary that the Security Property or any part thereof be
present at the location of such sale;
(h) Bank may proceed to protect and enforce its rights by any
appropriate proceeding, whether for specific performance of any
covenant or agreement contained in this Agreement or to enforce the
payment of the Notes or other Indebtedness or to enforce any other
legal or equitable right;
(i) Pursuant to the relevant procedures set forth in the UCC, Bank may
take possession of the Security Property without the necessity for
foreclosure proceedings and utilize and employ such procedures to
protect the Security Property in such manner and for such length of
time as Bank in its sole discretion may see fit. Borrower and
Guarantor agrees that Bank shall not be liable for any damages
resulting to Borrower or Guarantor from such actions; and
(j) Bank may cause the Mortgage to be foreclosed in the manner
prescribed by law and upon the commencement of foreclosure
proceedings, shall be entitled to have a receiver appointed to take
possession and charge of the mortgaged property during the pendency
of the foreclosure proceedings and during the redemption period, to
rent same and receive and collect rents and profits therefrom, and
to apply same in accordance with the law.
All rights, remedies or powers hereby conferred upon Bank shall be deemed
cumulative and not exclusive of any other rights, remedies or powers available
under the Loan Documents or applicable law.
Article XII - Sale of Business
12.1 Sale of Business. The entire amount of unpaid principal and accrued
interest shall become due and payable forthwith at the option of Bank if control
of Borrower or Guarantor shall be sold to any other person, firm or corporation,
whether for cash or by merger or consolidation, or if the assets of Borrower or
Guarantor shall be sold or transferred to any other person, firm or corporation,
unless all of the following shall be satisfied:
(a) The survivor of such merger or the successor formed by such
consolidated or the person that acquires by conveyance, transfer or
lease substantially all of the assets of Borrower or Guarantor, as
the case may be, shall be a corporation organized and existing under
the laws of the United States or any state thereof, and such
survivor, successor or other
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person shall have executed and delivered to Bank its assumption of
the due and punctual performance and observation of each covenant
and condition of this Agreement and each of the other Loan
Documents;
(b) Bank shall continue to have a valid and duly perfected first
priority security interest in and mortgage lien on the Security
Property securing the Indebtedness; and
(c) Immediately after giving effect to such transaction, no Event of
Default shall have occurred and be continuing or no event shall have
occurred which, upon the giving of notice or the passage of time, or
both, would become an Event of Default hereunder.
Article XIII - Miscellaneous
13.1 Notices. Any notice required or desired to be given hereunder shall be in
writing and deemed given when personally delivered (including delivery by
recognized overnight courier such as Federal Express) or deposited in the United
States mail, postage prepaid, sent certified or registered, addressed as
follows:
(a) If to Borrower, to:
CE Software, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Ford ▇. ▇▇▇▇▇▇▇, President
(b) If to Guarantor, to:
CE Software Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Ford ▇. ▇▇▇▇▇▇▇, Executive Vice President
(c) If to Bank, to:
▇▇▇▇▇▇▇ Bank, N.A
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Vice President
or to such other address or person as hereafter designated in writing by the
applicable party in the manner provided in this paragraph for the giving of
notices.
13.2 Governing Law. This Agreement, the other Loan Documents and all other
documents and instruments delivered pursuant hereto shall be construed and
interpreted in accordance with the laws of the State of Iowa (excluding conflict
of laws rules), shall be deemed to have been entered into in Des Moines, Polk
County, Iowa, and shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
13.3 Cumulative Rights. To the full extent permitted by law, all rights and
remedies of Bank hereunder are cumulative and not alternative. No course of
dealing on the part of Bank, its officers
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or employees shall operate as a waiver of any right, power or privilege of Bank
under this Agreement or other Loan Documents. Indulgence by Bank with respect to
any of the terms and conditions of this Agreement or other Loan Documents or the
failure or delay of Bank in exercising any of its rights, power or privileges
hereunder or thereunder shall not constitute a waiver of any future breach of
any such terms and conditions and shall not prevent any future exercise of
Bank's rights, power or privileges, and the persons obligated shall remain
liable for the strict performance of all of their respective undertakings until
all sums payable under the Loan Documents shall have been fully paid in
accordance with the terms hereof and thereof.
13.4 Participation. Bank may, without notice to Borrower or Guarantor, sell,
assign or otherwise transfer its right, title and interest in and to this
Agreement or the other Loan Documents, or any part thereof, or grant
participations therein, and in such event each and every immediate or remote
assignee, transferee or holder of or participant in the Notes or other rights
sold, assigned or transferred shall have the right to enforce this Agreement and
the other Loan Documents, by suit or otherwise, for its benefit, as fully as if
herein by name specifically given such right.
13.5 Additional Documents. Borrower and Guarantor agree to deliver such further
financing statements, continuation statements, termination statements and other
documents as Bank may from time to time reasonably request to more fully
effectuate the intent hereof.
13.6 Costs. Borrower agrees to pay the costs of recording or filing all
financing statements, continuation statements, termination statements and other
documents Bank deems necessary for the perfection of any liens and security
interests granted to Bank pursuant hereto or pursuant to any of the other Loan
Documents, and to pay any and all other costs of Closing hereunder, as well as
any and all taxes (other than Bank's income taxes) which may be payable as a
result of the execution of the Loan Document or any agreement supplemental
thereto, or as a result of the execution or recordation of any of the Loan
Documents, including, but not limited to, fees and expenses of Bank's counsel
incurred in connection with the preparation of this Agreement and all other Loan
Documents. Borrower further agrees that in the event of a default hereunder it
shall pay all out-of-pocket expenses of Bank.
13.7 Conflicting Provisions. In the event the provisions of any of the Loan
Documents are in conflict with the provisions of this Agreement, the provisions
of this Agreement shall control over the conflicting provisions of any other
Loan Document.
13.8 Indemnification. Borrower shall defend, indemnify and hold Bank harmless
from any loss, liability, damage, or expense, including reasonable attorneys'
fees, arising in connection with or resulting from any breach of warranty,
misrepresentation or nonfulfillment of any agreement on the part of Borrower or
Guarantor under this Agreement (unless waived by Bank). All of the
representations, warranties, covenants and agreements contained herein and in
the other Loan Documents and in any documents delivered pursuant hereto and
thereto shall survive the Closing and remain in full force and effect regardless
of the Closing and irrespective of any investigation which ban its counsel or
representatives may make in connection with this agreement or in any manner
involved herein or in any other Loan Document and they shall be fully
enforceable at law or in equity.
13.9 Entire Agreement. This Agreement and all exhibits and schedules hereto, the
other Loan Documents, and all other documents and certificates referred to
herein or in any other Loan Document, constitute the entire agreement between
the parties hereto pertaining to the subject matters hereof and supersede all
negotiations, preliminary agreements and all prior or contemporaneous
discussions and understandings of the parties hereto in connection with the
subject matters hereof. All exhibits and schedules are incorporated into this
Agreement as if set forth in their entirety and constitute a part hereof.
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13.10 Amendments; No Waiver. No amendment, change or modification of any of the
terms, provisions or conditions of this Agreement or any of the other Loan
Documents shall be effective unless made in writing and signed or initialed by
the parties or by their duly authorized agents. Waiver of any provision of this
Agreement or any of the other Loan Documents shall not be deemed a waiver of
future compliance therewith and such provision shall remain in full force and
effect.
13.11 Severability. In the event any provision of this Agreement or other Loan
Documents is held invalid, illegal or unenforceable, in whole or in part, the
remaining provisions of this Agreement and other Loan Documents shall not be
affected thereby and shall continue to be valid and enforceable. In the event
any provision of this Agreement or other Loan Document is held to be
unenforceable as written, but enforceable if modified, then such provision shall
be deemed to be amended to such extent as shall be necessary for such provision
to be enforceable and it shall be enforced to that extent.
13.12 Headings and Captions. The titles or captions of sections and paragraphs
in this Agreement are provided for convenience of reference only and shall not
be considered a part hereof for purposes of interpreting or applying this
Agreement, and such titles or captions do not define, limit, extend, explain or
describe the scope or extent of this Agreement or any of its terms and
conditions.
13.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument, and in making proof hereof, it shall not
be necessary to produce or account for more than one such counterpart.
13.14 Gender and Number. Words and phrases herein shall be construed as in the
singular or plural number and as masculine, feminine or neuter gender, according
to the context.
13.15 Third Parties. Nothing in this Agreement or the other Loan Documents,
express or implied, is intended to confer upon any party other than the parties
hereto and thereto (and their respective heirs, successors, legal
representatives and permitted assigns) any rights, remedies, liabilities or
obligations under or by reason of this Agreement or other Loan Documents.
13.16 Receipt. Borrower and Guarantor by their signatures below acknowledge
receipt of a copy of this Agreement and all the other Loan Documents at the time
of execution thereof.
NOTICE
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
ADDITIONALLY, AFTER RECEIVING THIS NOTICE YOU MAY CHANGE THE TERMS OF ANY OTHER
CREDIT AGREEMENT(S) NOW IN FORCE
85
BETWEEN YOU AND BANK ONLY BY ANOTHER WRITTEN AGREEMENT. ORAL OR IMPLIED CHANGES
TO THIS OR ANY OTHER CREDIT AGREEMENT(S) WITH BANK ARE NOT ENFORCEABLE AND
SHOULD NOT BE RELIED UPON.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
________ day of May, 1994.
BANK: BORROWER:
▇▇▇▇▇▇▇ Bank, National Association CE Software, Inc.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By /s/ ▇▇▇▇▇▇ ▇. Lack
-------------------------------- -----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Vice President ▇▇▇▇▇▇ ▇. Lack, Secretary/Treasurer
GUARANTOR:
CE Software Holdings, Inc.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
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DESCRIPTION OF REAL ESTATE
The West Des Moines Real Estate shall consist of the following property
owned by Borrower in Polk County, Iowa:
Lots sixteen (16), seventeen (17) and eighteen (18) in West Grand
Industrial Acres Plat Two, an Official Plat, in the City of West Des
Moines, Polk County, Iowa.
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EQUIPMENT SUBJECT TO OPERATING LEASES
The following items of equipment held by Borrower shall not be subject to
the security interest to be granted to Bank pursuant to Section 3.1 hereof:
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