Exibit 9
LOAN AND SECURITY AGREEMENT
by and between
Telecom Corporation of Chicago ("Debtor")
and
American National Bank and Trust Company of Chicago,
a National Banking Association ("Secured Party")
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (herein "Agreement") is made and
entered into this 10th day of December, 1998, by and between Telecom
Corporation of Chicago, a corporation organized and existing under the laws of
the State of Illinois, with its principal place of business located at 285
Industrial Drive, Wauconda, Illinois 60084, (herein "Debtor") and American
National Bank and Trust Company of Chicago, a national banking association,
with its office located at 120 S. LaSalle, Street, Chicago, Illinois 60603
(herein "Secured Party").
RECITALS
WHEREAS, Debtor has requested that Secured Party make loans and/or
otherwise extend credit to or on behalf of Debtor;
WHEREAS, Secured Party is willing to make such loans and/or
extensions of credit to Debtor upon the terms and conditions hereinafter set
forth.
NOW THEREFORE, in consideration of the mutual promises herein
contained, and each intending to be legally bound thereby, the parties hereto
agree as follows:
Section 1. DEFINITIONS
The following terms, when used in this Agreement or Other Agreements
(as hereinafter defined) shall have the meanings set forth herein, and such
meanings shall be applicable to the singular and plural form thereof giving
effect to the numerical difference.
1.01 "Acceptable Inventory"
"Acceptable Inventory" shall mean the Debtor's Inventory which meets
each of the following requirements:
(a) It is in good and marketable condition such that it
may be sold in the ordinary course of Debtor's business;
(b) In the case of goods held for sale or lease, it is of
the quantity, type and quality normally maintained in the ordinary
course of Debtor's business;
(c) It is not now and shall not at any time hereafter be
stored with a bailee, warehouseman or similar party;
(d) It is owned by Debtor and is subject to a perfected
security interest in favor of Secured Party and is not subject to any
other claim, lien, security interest or encumbrance whatsoever; and
(e) Secured Party, in good faith, has determined, in
accordance with Secured Party's customary business practices, that it
is not unacceptable due to age, type, category, quality and/or
quantity.
Any of Debtor's Inventory which is Acceptable Inventory at any time,
but which subsequently fails to meet any of the foregoing requirements, shall
forthwith cease to be Acceptable Inventory.
1.02 "Acceptable Receivables"
"Acceptable Receivables" shall mean those Receivables (as defined
herein):
(a) which do not violate the warranties, representations and
negative covenants contained herein;
(b) which comply with the affirmative covenants contained
herein;
(c) which are due within ninety (90) days from the date of
the original invoice issued by Debtor (in the event more than 50% of
the Receivables owed by a particular Receivables Debtor, (as defined
herein) become or remain due more than (ninety) 90 days after the
date of the original invoice therefore, all Receivables owed by that
Receivables Debtor shall be unacceptable);
(d) which arise from sales made in the ordinary course of
Debtor's business to any Person (as defined herein) unless such
Person
(i) is an Affiliate (as defined herein) of the
Debtor (unless such Receivables from such Affiliate arise
from transactions based upon fair and reasonable terms which
are no less favorable to Debtor than those Debtor would
obtain in a comparable arm's length transaction with a
Person not Debtor's Affiliate); or
(ii) has filed a petition for bankruptcy or other
relief under the then existing Bankruptcy Code, made an
assignment for the benefit of its creditors, suspended its
business operations, become insolvent, suffered a receiver
or trustee to be appointed for its assets or affairs or
suffered a petition or other application for relief to be
filed against it; or
(iii) is a supplier to or creditor of Debtor,
unless such person has entered into an agreement with
Secured Party waiving its rights of setoff or unless the
Debtor's obligations to such supplier or creditor are backed
by a letter of credit acceptable to Secured Party, issued or
confirmed by a bank acceptable to Secured Party; or
(iv) is located outside the continental United
States or not subject to service of process in the United
States (except for Guarantor (as defined below)), unless
such sale is backed by a letter of credit acceptable to
Secured Party, confirmed or issued by a bank acceptable to
Secured Party, or which is insured by the Foreign Credit
Insurance Association upon such terms and conditions
acceptable to Secured Party; or
(v) is the United States of America or any
department, instrumentality, agency or political subdivision
thereof, unless Debtor has complied to Secured Party's
satisfaction with the provisions of the Federal Assignment
of Claims Act of 1940, as amended, including without
limitation, executing such assignments and notifications as
may be required by Secured Party to effectuate the
assignment of such account; or
(vi) is a Receivables Debtor whose total
Receivables, Acceptable or otherwise, owed to Debtor, exceed
a credit limit determined by Secured Party in its sole
discretion;
(e) which the Receivables Debtor has not disputed, nor
objected to the goods or services of the Debtor nor rejected,
returned or refused to accept such goods or services nor made any
claim with respect to any other Receivables due from such Receivables
Debtor;
(f) which is not and may not become subject to any right of
setoff by the Receivables Debtor, unless the Receivables Debtor shall
have entered into an agreement with Secured Party waiving such right
of setoff;
(g) which does not arise out of a sale made on a
bill-and-hold, guaranteed sale, sale on approval, consignment, or any
other return or repurchase basis;
(h) which does not arise out of a contract containing a
prohibition against assigning or granting a security interest
therein; and
(i) which does not arise from an invoice, statement or other
evidence of indebtedness which has been re-dated.
1.03 "Affiliate"
"Affiliate" shall mean any Person (as defined herein) under common
control or having common shareholders owning at least ten percent (10%)
thereof, whether such common control be direct or indirect. All of Debtor's
officers, shareholders, directors, parent and subsidiary corporations, joint
venturers, and partners (whether general or limited) shall be deemed Debtor's
Affiliates for purposes of this Agreement.
1.04 "Borrowing Base"
"Borrowing Base" shall mean an amount equal to the sum of:
(a) 80% of the net value of Acceptable Receivables assigned
to Secured Party; and
(b) the lesser of (i) 50% of the lower of cost or market
value, determined in accordance with GAAP, of Acceptable Inventory
assigned to Secured Party and (ii) $1,500,000.
1.05 "Business Day"
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks in Chicago, Illinois are required to close.
1.05A "Cash Flow Available"
"Cash Flow Available" shall mean, with reference to any period,
Debtor's net income before interest expense and taxes for such period; plus
(1) all amounts properly charges for depreciation for fixed assets and
amortization of intangible assets during such period on the books of Debtor,
minus (2) federal, state and local income taxes for such period; plus or minus
(3) net changes in deferred taxes and LIFO adjustments for such period; minus
(4) Debtor's cash payments for capital expenditures not
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reflected as an expense (net of any borrowings to support the expenditures)
for such period; minus (5) dividends and distributions for such period.
1.06 "Charges"
"Charges" shall mean all national, federal, state, county, city,
municipal, and/or other governmental (including without limitation, the
Pension Benefit Guaranty Corporation) taxes, levies, assessments, charges,
liens, claims or encumbrances upon and/or relating to
(i) the Collateral,
(ii) the Obligations (as defined herein),
(iii) Debtor's employees, payroll, income and/or gross
receipts,
(iv) Debtor's ownership and/or use of any of its assets,
or
(v) any other aspect of Debtor's business.
1.07 "Closing Date"
"Closing Date" shall mean the date of initial disbursement of all or
any portion of the proceeds of the Loans which date shall occur no later than
December 10, 1998.
1.08 "Collateral"
"Collateral" shall mean all of Debtor's tangible and intangible
property, whether now or hereafter existing, and whether now or hereafter
owned, licensed, leased, consigned or acquired by Debtor, including without
limitation, all of Debtor's:
(a) All accounts, Receivables, contract rights, general
intangibles, goodwill, trademarks, trade names, copyrights, patent
rights, chattel paper, instruments, documents, acceptances, notes,
drafts, Inventory, goods, securities, deposits, cash, tax refunds,
books, records, customer and supplier lists, ledgers, invoices,
purchase and sales orders, data processing, computer and
telecommunications systems, including software systems incidental
thereto, insurance policies and certificates, guaranties, liens, and
other personal property, and all proceeds, products, renewals,
substitutions, replacements, additions and accessions thereto; and
(b) All monies, reserves, deposits, deposit accounts and
interest or dividends thereon, securities, cash, and cash equivalents
and other property now or at any time or times hereafter in the
possession or under the control of Secured Party or its bailee; and
(c) All machinery, equipment, apparatus, appliances,
furniture, furnishings, fixtures, supplies, whether now owned or
hereafter acquired, and all proceeds, substitutions, replacements,
additions and accessions; and
(d) All other Collateral or property with respect to which
Debtor has or may hereafter grant to Secured Party a lien or security
interest.
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1.08A "Debt"
"Debt" of any Person shall mean, without duplication, each of the
following, whether primary, secondary, direct, indirect, absolute, contingent,
fixed or otherwise, previously, currently or subsequently owing, due or
payable, however evidenced, created, incurred, acquired or owing, and however
arising, whether by agreement (written or oral), at law, in equity or
otherwise: (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than trade payables on
terms of 30 days or less incurred in the ordinary course of business of such
Person); (ii) all indebtedness of such Person evidenced by a note, bond,
debenture, or similar instrument; (iii) the principal component of all
capitalized lease obligations of such Person; (iv) the face amount of all
letters of credit issued for the account of such Person and, without
duplication, all unreimbursed amounts drawn under such letters of credit; (v)
all indebtedness of any other Person secured by any lien on any property such
Person owns, whether or not such indebtedness has been assumed; (vi) all
contingent obligations of such Person; and (vii) all payment obligations of
such Person under any interest rate protection agreement (including without
limitation any interest rate swaps, caps, floors, collars and similar
agreements) and currency swaps and similar agreements.
1.08B "Debt Service"
"Debt Service" shall mean, with reference to any period, the sum
(without duplication) of (i) the aggregate amount of payments required to be
made by Debtor during such period in respect of principal on all Debt of
Debtor, plus (ii) all interest expense for such period determined in
accordance with GAAP.
1.08C "Debt Service Coverage Ratio"
"Debt Service Coverage Ratio" shall mean the ratio of Debt Service to
Cash Flow Available.
1.09 "Default Rate"
2% in excess of the rates of interest in effect under Section 4.02.
1.10 "Event of Default"
"Event of Default:" shall mean any of the events listed in Section 9
hereof.
1.11 "Financials"
Except as listed on Exhibit A attached hereto, Debtor has provided
Secured Party with copies prior to the Closing Date of all requested financial
statements.
1.12 "Guaranty"
"Guaranty" shall mean the Continuing Guaranty executed by Officeland,
("Guarantor") in favor of Secured Party pursuant to which Guarantor shall
guarantee the Debtor's Obligations.
1.13 "Inventory"
"Inventory" shall mean all inventory of Debtor, whether now owned or
hereafter acquired, including without limitation:
(i) all goods manufactured or acquired for sale or lease,
and any piece goods, raw materials, work in process and finished
merchandise, goods, incidentals, office supplies,
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packaging materials, and any and all items, including machinery and
equipment used or consumed in the operation of the business of the
Debtor and which contribute to the finished product or to the sale,
promotion and shipment thereof, in which Debtor now or at any time
hereafter may have an interest whether or not such inventory is listed
in this Agreement or on any reports furnished to Secured Party from
time to time;
(ii) all inventory whether or not the same is in transit or
in the constructive, actual or exclusive occupancy or possession of
Debtor or is held by Debtor or by others for Debtor's account,
including without limitation all goods covered by purchase orders and
contracts with suppliers and all goods billed and held by suppliers;
(iii) all inventory which may be located on premises of
Debtor or of any carrier, forwarding agents, truckers, warehousemen,
vendors, selling agents or third parties;
(iv) all general intangibles relating to or arising out of
inventory; and
(v) all proceeds and products of the foregoing resulting
from the sale, lease or other disposition of inventory, including
cash, accounts receivable, other non-cash proceeds and trade-ins.
1.14 "Loan Instruments"
"Loan Instruments" shall mean:
(i) Loan and Security Agreement, with attached exhibits;
(ii) Revolving Credit Note;
(iii) Guaranty;
(iv) Closing Certificate;
(v) Appropriate Uniform Commercial Code financing
statements; and
(vi) Such other instruments and documents as Secured Party
may require to evidence and perfect its Security Interest
1.15 "Loan"
"Loan" shall mean the Loan made by Secured Party to Debtor pursuant
to this Agreement and the Revolving Credit Loan.
1.15A "Maturity Date"
"Maturity Date" shall mean March 31, 1999.
1.16 "Obligations"
"Obligations" shall mean and include all loans, advances, debts,
liabilities, obligations, covenants and duties owing to Secured Party from
Debtor or any Affiliate of Debtor (other than the
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Guarantor if such obligation is not directly related to the business of
Debtor) of any kind or nature, present or future, whether or not evidenced by
any note, guaranty or other instrument, whether arising under this Agreement
or under any other agreement, instrument or document, whether or not for the
payment of money, whether arising by reason of an extension of credit, opening
of a letter of credit, loan, guaranty, indemnification or in any other manner,
whether direct or indirect (including those acquired by assignment), absolute
or contingent, due or to become due, now existing or hereafter arising and
however acquired. The term includes, without limitation, all interest,
charges, expenses, fees, and any other sums chargeable to Debtor or Affiliate
of Debtor under this Agreement or any other Agreement with Debtor. The term
further includes, without limitations, all costs and expenses of attorneys
engaged by Secured Party, including local counsel fees and costs and expenses
incurred by paralegals and other staff employed by such attorneys, and
further, the fees, costs and expenses of appraisers, consultants, accountant
or other professionals, other than the salaried employees of Secured Party,
engaged in connection with the drafting and preparation of this Agreement or
the Other Agreements, and the administration, enforcement and defense of this
Agreement, the Other Agreements or the relationships and security interest
created thereunder, or Agreements or the relationships and security interest
created thereunder, or the collection of the Obligations. The term further
includes all out-of-pocket expenses incurred by Secured Party, or its agents
or employees incurred with respect to this Agreement, the Other Agreements,
the relationship and security interest created thereunder, or the
administration, defense or enforcement thereof and the collection of the
Obligations.
1.17 "Other Agreements"
"Other Agreements" shall mean all agreements, instruments and
documents including, without limitation, the Revolving Credit Note, the
Guaranty, notes, guaranties, mortgages, deeds of trust, pledges, powers of
attorney, consents, assignments, contracts, letters of credit, notices,
security agreements, leases, financing statements, applications and all other
written matter heretofore, now or hereafter executed by or on behalf of Debtor
and delivered to Secured Party, or in connection with which Debtor or any
Affiliate of Debtor (other than the Guarantors if such obligation is not
directly related to the business of Debtor) may be indebted, the provisions of
which are incorporated herein by reference.
1.18 "Person"
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (whether national, federal, state,
county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body, political subdivision or departments
thereof).
1.19 "Principal Balance"
"Principal Balance" shall mean the unpaid principal balance of the
Loan outstanding from time to time.
1.20 "Prime Rate"
"Prime Rate" shall mean the prime rate of interest Secured Party
quotes or announces from time to time, whether or not such rate is the best or
lowest rate available from Secured Party.
1.21 "Receivables"
"Receivables" shall mean and include all of Debtor's present and
future rights to payment for goods, merchandise or Inventory sold or leased or
for services rendered, including, without limitation, those which are not
evidenced by instruments or chattel paper, and whether or not they have been
earned
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by performance, whether or not the same are listed on any schedules, reports
or assignments furnished to Secured Party from time to time, or any letters of
credit on which Debtor is named as beneficiary, contract rights, chattel
paper, instruments, documents, insurance proceeds, and all such obligations
whatsoever owing to Debtor, together with all instruments and all documents of
title representing any of the foregoing, all rights in any goods, merchandise
or Inventory which any of the same may represent, all rights in any returned
or repossessed goods, merchandise and Inventory, and all right, title,
security and guaranties with respect to each of the foregoing, including,
without limitation, any right of stoppage in transit, replevin and reclamation
and all other rights and remedies of an unpaid vendor or lienor, and any liens
held by the Debtor as a mechanic, contractor, subcontractor, processor,
materialman, mechanist, manufacturer, artisan or otherwise.
1.22 "Receivables Debtor"
"Receivables Debtor" shall mean that Person obligated to Debtor on
any Receivable, whether one or more.
1.23 "Revolving Loan"
"Revolving Loan" shall mean the revolving line of credit made
available by Secured Party to Debtor in accordance with Section 4.01 hereof.
1.24 "Tangible Net Worth"
"Tangible Net Worth" shall mean as of any time, the difference
between: (a) Debtor's total assets as they would normally be shown on Debtor's
balance sheet, plus subordinated Debt, but excluding therefrom all values
attributable to goodwill, patents, copyrights, trademarks, licenses, prepaid
expenses, general intangibles, and receivables due to Debtor from its
Affiliates (other than those receivables from Affiliates that are Acceptable
Receivables as defined herein); and (b) Debtor's combined total liabilities
and deferred charges as they would usually be shown on the balance sheets,
including as liabilities all guaranties which Debtor has executed concerning
the indebtedness of any of its Affiliates, if any.
1.25 "Unsubordinated Debt"
"Unsubordinated Debt" shall mean all Debt of Debtor not subordinated
to Debtor's Obligations to Secured Party and evidenced by a subordination
agreement reasonably acceptable to Secured Party.
1.26 "General"
Unless otherwise specifically defined in this Agreement, any
accounting terms used in this Agreement which are not specifically defined
shall have the meanings customarily given them in accordance with Generally
Accepted Accounting Principles ("GAAP"). All other terms contained in this
Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the Uniform Commercial Code of the State of Illinois ("Code")
to the extent the same are defined therein.
Section 2. REPRESENTATIONS AND WARRANTIES
Debtor makes the following representations and warranties to Secured Party and
all future holders of any part of the Obligations. Such representations and
warranties shall be true in all material respects throughout the entire term
of this Agreement and thereafter so long as any of the Obligations remain
unpaid.
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2.01 Places of Business.
The principal place of business of the Debtor is 285 Industrial
Drive, Wauconda, Illinois 60084. Debtor has no other place of business. Debtor
shall provide Secured Party written notice at least thirty (30) days in
advance of any change in, addition to, or discontinuance of Debtor's place of
business.
2.02 Financials and Information.
The Financials and other information which Debtor has submitted to
Secured Party to induce it to make and continue in force the Obligations have
been prepared from its books and records and fairly present the financial
condition of Debtor as of and for the periods ending and the respective dates
stated herein. There have been no material adverse changes in either Debtor's
financial condition or business since the date as of which the most recent
balance sheet submitted to Secured Party was prepared. The financial
statements and other information submitted by any guarantors of the
Obligations pursuant to Section 6.01(c) fairly present the financial condition
of such guarantors as of the respective dates stated therein, and there have
been no material adverse changes in such financial condition since those
dates.
2.03 Liens and Encumbrances.
None of the properties or assets of Debtor is subject to any liens or
encumbrances, except those listed on Exhibit F attached hereto.
2.04 Contingent Liabilities.
Debtor is not a party to any suretyship, guarantyship, or other
similar type agreement; nor has it offered its endorsement to any individual
concern or acted or failed to act in any manner which would in any way create
a contingent liability that does not appear in the Financials. Debtor has no
pending obligations or liabilities, except trade payables arising since the
date of the Financials in the ordinary course of business, which would
adversely affect its business operations or the Collateral.
2.05 Use of Proceeds.
The proceeds of the advances contemplated hereunder shall be used for
legal and proper corporate purposes, duly authorized by Debtor's Board of
Directors, but in no event shall be used, directly or indirectly, to purchase
traded securities or to repay indebtedness incurred to purchase such
securities. The proceeds of the Revolving Loan shall be used for working
capital purposes.
2.06 Authority.
The execution and delivery of this Agreement, and the performance by
Debtor of its obligations hereunder and under the Other Agreements has been
duly authorized by resolution of the Board of Directors of the Debtor, which
resolution remains in full force and effect, will not constitute a default
under or violate (whether by the lapse of time, the giving of notice or
otherwise) any provision of the Articles of Incorporation of the Debtor, its
Bylaws, or any contract, deed, agreement or other instrument to which the
Debtor or any of its properties are bound.
2.07 Organization.
Debtor is duly organized and existing in good standing under the laws
of the state of its incorporation, is qualified to do business and is in good
standing in all other states in which such qualifications and good standing
are necessary in order for Debtor to conduct its business and own its property
as conducted and owned in such states, and has all requisite powers and
authority, corporate or otherwise to conduct its business, to own its property
and to execute, deliver and perform all of its obligations under this Agreement.
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2.08 Other Identity.
During the preceding five years, Debtor has not been known by or done
business under any other name, corporate or fictitious.
2.09 Tax Returns, Assessments.
Except as listed on Exhibit B attached hereto, Debtor has duly filed
all required (federal, state and local) tax returns and has paid all taxes and
other sums due to any governmental authority. Debtor has provided Secured
Party with copies of any documents evidencing any government liens against
Debtor or its property.
2.10 Bankruptcies.
During the preceding five (5) years, Debtor has not filed or had
filed against it any bankruptcy, receivership or similar petitions nor has it
made any assignments for the benefit of creditors.
2.11 Contracts.
No contract, governmental or otherwise, to which Debtor is a party,
is subject to renegotiation, nor is Debtor in material default of any material
contract.
2.12 Litigation.
No actions or proceedings have been or expected by Debtor to be filed
before any court or administrative agency nor is there any basis or claim
therefore which will materially adversely affect the financial condition or
operation of Debtor.
2.13 Collective Bargaining Agreements, Employee Benefit Plans.
Debtor is not a party to any collective bargaining, union or pension
plan agreement.
2.14 ERISA Compliance.
No fact, including but not limited to, any "Reportable Event," as
that term is defined in Section 4043 of the Employee Retirement Income
Security Act of 1974, as the same may be amended from time to time ("Pension
Reform Act") exists in connection with any Pension Plan (herein called a
"Plan") of the Debtor which might constitute grounds for termination of any
such Plan by the Pension Benefit Guaranty Corporation or for the appointment
by the appropriate United States District Court of a Trustee to administer any
such Plan. No "Prohibited Transaction" within the meaning of Section 406 of
the Pension Reform Act exists to Debtor's knowledge or will exist upon the
execution and delivery of this Agreement or the performance by the parties
hereto of their respective duties, and obligations hereunder. Debtor agrees to
do all acts, including but not limited to contributions, necessary to maintain
compliance with the Pension Reform Act and agrees not to terminate any such
Plan in a manner or do or fail to do any act which could result in the
imposition of a lien on any property of the Debtor pursuant to Section 406B of
the Pension Reform Act. Debtor has incurred no withdrawal liability under the
Multiemployer Pension Plan Amendment Act of 1980.
2.15 Compliance with Laws, Regulations.
Debtor is not in violation of any notice, order, petition, or similar
document in connection with or arising out of any environmental, health or
safety law, regulation or order, and knows of no basis for any such violation
or threat thereof. To the best of Debtor's knowledge, Debtor is not in
violation of any other federal, state or local law, regulation or order.
Debtor covenants that it shall file or cause to be
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filed in a timely manner all other reports, applications, estimates, licenses
and other documents required by any governmental authority. If Debtor receives
(i) any notice of any violation or administrative or judicial complaint or
order having been filed or about to be requiring Debtor to take any action in
connection with the release and or clean-up of any "Hazardous Material" (any
hazardous, toxic or dangerous waste, substance or material defined as such in
or for purposes of "CERCLA" (the Comprehensive Environmental Response,
Compensation and Liability Act of 1990 (42 U.S.C. Sec. 9601, et seq.)) and all
other applicable federal, state or local laws, ordinances and regulations
referred to herein) or (ii) any notice from any governmental body or any other
Person alleging that Debtor is or may be liable for costs associated with a
response or clean-up of any Hazardous Materials or any damages resulting from
such release, Debtor, promptly upon receipt thereof, shall provide Secured
Party with a copy of such notice. Debtor shall, without cost and expense to
Secured Party, comply or cause compliance with the requirements of all
federal, state and local environmental protection, occupational, health,
safety and similar laws, ordinances, restrictions, licenses, and regulations,
including, without limitation, CERCLA, the Federal Water Pollution Control Act
(33 U.S.C. Sec. 1251 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. Sec. 6901 et seq.), the Safe Drinking Water Act (42 U.S.C. Sec. 300f et
seq.,), the Toxic Substances Control Act (15 U.S.C. Sec. 2601 et seq.), the
Clean Air Act (42 U.S.C. Sec. 7401 et seq.) and other comparable federal,
state or local laws, rules and/or regulations.
2.16 Licenses, Permits.
Debtor requires no license, permit or other permission from any
governmental, agency or subdivision thereof, or from any licensing entity,
other than those listed in Exhibit C, which Debtor represents to be in good
standing and full force and effect. Debtor possesses adequate licenses, to
continue to conduct its business as heretofore conducted by it. Debtor has
provided Secured Party with copies of all items listed on Exhibit C.
2.17 Ownership of Collateral.
Subjected to the liens and encumbrances listed on Exhibit F attached
hereto, with respect to the Collateral at the time the Collateral becomes
subject to Secured Party's security interest, Debtor has and shall continue to
have so long as Debtor is obligated to Secured Party, good, indefeasible and
merchantable title to and ownership of the Collateral, free and clear of all
liens, encumbrances, security interest and claims except the lien and security
interests hereby granted Secured Party. Debtor is fully authorized to sell,
transfer, pledge and/or grant a security interest in each and every item of
the Collateral to Secured Party; all documents and agreements evidencing
ownership of Collateral shall be true and correct in all material respects
what they purport to be; all signatures and endorsements that appear thereon
shall be genuine and all signatories and endorsers shall have full capacity to
contract; none of the transactions underlying or giving rise to the Collateral
shall violate any applicable state or federal laws or regulations; all
documents relating to the Collateral shall be legally sufficient under such
laws or regulations and shall be legally enforceable in accordance with their
terms; and the Debtor agrees to defend the Collateral against the claims of
all persons other than Secured Party.
2.18 Additional Instruments.
Debtor shall from time to time do whatever Secured Party reasonably
may request by way of obtaining, executing, delivering and filing financing
statements, landlord's or mortgagee's waivers, and other notices, agreements,
documents, instruments and amendments and renewals thereof, and Debtor will
take any and all reasonable steps and observe such formalities as Secured
Party may request, in order to create and maintain a valid and enforceable
first lien upon, pledge of, and paramount security
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interest in, any and all of the Collateral. Secured Party is authorized to
file financing statements without Debtor's signature or to execute and file
such financing statements in Debtor's behalf as specified by the Uniform
Commercial Code to perfect or maintain its security interest in all of the
Collateral. Debtor agrees that a carbon, photographic, photostatic, or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. All charges, expenses and fees Secured Party may incur in
filing any of the foregoing, together with costs and expenses of any lien
search required by Secured Party, and any taxes relating thereto, shall be
charged to Debtor's Loan and added to the Obligations.
2.19 Debtor's Financial Condition.
Debtor now has and shall have at all times hereafter capital
sufficient to carry on its current business and other transactions and those
in which it may hereafter engage. Debtor is now and at all times hereafter
shall be solvent and able to pay its debts as they mature. Debtor now owns
property having a value, both at fair valuation and at present fair salable
value, greater than the amounts required to pay Debtor's debts.
2.20 Ownership of Receivables.
Debtor is the true and lawful owner of its Receivables, and has, or
at the time each Receivable comes into existence will have, good and clear
title to each Receivable, subject to Secured Party's rights thereto.
Each Receivable is, or at the time it comes into existence will be a
true and correct statement of:
a) the bona fide indebtedness of each Receivable Debtor; and
b) the amount owing for merchandise sold and delivered to,
or for services performed for and accepted by, such Receivable
Debtor.
There are no defenses, counterclaims, discounts or set offs that may
be asserted against Acceptable Receivables.
2.21 Machinery and Equipment - Vehicles.
Debtor has delivered to Secured Party a certificate of title for each
item of vehicles or mobile equipment. In the event any additions to machinery
and equipment consist of vehicles or mobile equipment for which a Certificate
of Title is required under the laws of the appropriate state, Debtor shall
transfer possession of such Certificate of Title to Secured Party and shall
take such other actions as may be required by Secured Party in connection
therewith. In addition, Debtor covenants to report to Secured Party, in
writing, no later than ten (10) days prior to the transfer of any item of
machinery, equipment or vehicles to any State other than that where it is
located at the date of this Agreement when such transfer is likely to be for a
period of more than ninety (90) days. Such writing shall identify the item,
the point to which it is being transferred and such other information as
Secured Party may require.
2.22 Incorporated Representations.
All representations and warranties of the Debtor contained in the
Loan Instruments are herein incorporated as if fully set forth herein.
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Section 3. COVENANTS
Debtor makes the following covenants which shall survive the initial
disbursement of any proceeds of the Loan and shall be in effect throughout the
term of this Agreement and so long as any Obligations remain unpaid:
3.01 Insurance.
Debtor shall have and maintain at all times:
(a) with respect to its property, including Inventory,
insurance against risks of fire, theft, pilferage, so-called extended
coverage and sprinkler leakage,
(b) with respect to motor vehicles, collision, comprehensive
and bodily injury insurance, and
(c) insurance against other risks (including without
limitation product and umbrella liability) customarily insured
against by companies engaged in businesses similar to that of Debtor.
All insurance shall be in amounts satisfactory to Secured Party, and
shall contain such terms, be in such form, be for such periods and be
written by such companies as may be satisfactory to Secured Party.
Debtor shall cause Secured Party to be endorsed as a loss payee with
a loss payable clause acceptable to Secured Party. In the event of
failure to provide and maintain insurance as herein provided, Secured
Party may, at its option, provide such insurance and charge the
amount thereof to the appropriate Loan account. Debtor shall furnish
to Secured Party certificates or other evidence satisfactory to
Secured Party of compliance with the foregoing insurance provisions.
In the Event of Default, Secured Party is hereby appointed Debtors'
attorney-in-fact to make proofs of loss and claims for insurance, and
to receive payments of the insurance and execute all documents,
checks and drafts in connection with payment of the insurance.
3.02 Taxes and Charges.
Debtor will comply with all applicable statutes and governmental
regulations and pay and discharge, before any penalty attaches thereto for
nonpayment thereof, all taxes, assessments and governmental charges of any
kind levied upon or assessed against Debtor, the Collateral, any income
therefrom or upon the subject of the security interest of Secured Party;
provided, however, that Debtor shall not be required to pay any such taxes,
assessments, or other governmental charges so long as it shall in good faith
contest the validity thereof, and if such contest is made Debtor will provide
for the payment of the taxes, assessments or other governmental charges so
contested in a manner satisfactory to Secured Party. In the event Debtor, at
any time, fails to pay such taxes and charges, or to obtain discharges,
subject to the provisions of the preceding sentence relative to contesting
such items, Secured Party may, in its sole discretion, without waiving or
releasing any Obligation or liability of Debtor or any Event of Default, make
such payment, or any part thereof, or obtain such discharge or take other
action with respect thereto which Secured Party deems advisable. All sums so
paid by Security Party and any expenses incurred by Secured Party in
connection therewith, including attorney's fees, shall be immediately due and
payable from Debtor to Secured Party.
3.03 Liens.
Secured Party shall have the right, but shall not be obligated, to
pay and to charge as an advance to Debtor's Revolving Loan account any lien or
other charge upon or against any or all Collateral
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including, without limitation, those liens or charges arising under any
statute or in favor of landlords, taxing authorities (including but not
limited to withholding taxes), governments, public and private warehousemen,
common and private carriers, processors, finishers, stevedores, mechanics,
artisans, laborers, attorneys, courts or others.
3.04 Notices to Secured Party.
Debtor shall give prompt written notice to Secured Party of:
(a) any substantial dispute that may arise between Debtor
and any governmental regulatory body or law enforcement authority
including tax liability;
(b) any Event of Default or any event which, upon a lapse of
time or notice or both, would become an Event of Default;
(c) all litigation which could adversely affect Debtor where
the amount claimed in any one suit or action is Twenty-Five Thousand
Dollars ($25,000) or more and all litigation where the amount claimed
in the aggregate is Fifty Thousand Dollars ($50,000) or more;
(d) any labor controversy resulting in or threatening to
result in a strike or work stoppage against Debtor;
(e) any proposal by any public authority to acquire the
assets or business or Debtor;
(f) the location of any Collateral any place other than
Debtor's place of business;
(g) any proposed or actual change of Debtor's name, identity
or corporate structure; or
(h) any other matter which has resulted or may result in a
material adverse change in Debtor's financial condition or
operations.
3.05 Merger, Sale or Consolidation.
Without Secured Party's prior written consent, Debtor shall not merge
into, consolidate with, be acquired by or acquire any other Person, or sell or
otherwise dispose of substantially all its assets or any of its assets except
in the ordinary course of its business, during the term of this Agreement or
so long as any of Debtor's Obligations remain unpaid; provided, however, that
Debtor may become an indirect, wholly-owned subsidiary of Guarantor through a
corporate restructuring whereby it is anticipated that Guarantor will create a
wholly-owned domestic subsidiary (the "Domestic Parent") which will in turn
own 100% of the issued and outstanding stock of Debtor (the "Guarantor
Restructuring") and so long as Debtor causes Domestic Parent and Guarantor
to execute such other documents as reasonably requested by Secured Party in
conjunction with the Guarantor Restructuring.
3.06 Operation of Debtor's Business.
Except with the prior consent of Secured Party, Debtor makes the
following covenants during the term of this Agreement or so long as any of
Debtor's obligations remain unpaid:
(a) Dividends/Distributions.
Debtor shall not declare or pay cash or stock dividends upon
any of Debtor's stock or make any distributions of Debtor's property
or assets or make any loans, advances and/or extensions of credit to,
or investments in, any Persons, including without limitation, any of
Debtor's Affiliates, officers or employees, if, as a result of any
such event, Debtor would not be in compliance with any of the
financial covenants in Section 3.13 hereof;
(b) Capital Structure.
Other than in connection with the Guarantor Restructuring,
Debtor shall not redeem, retire, purchase or otherwise acquire,
directly or indirectly, any of Debtor's capital stock, or make any
material change in Debtor's capital structure or in any of Debtor's
business objectives, purposes and operations which might in any way
adversely affect the repayment of the Obligations. Guarantor owns
100% of the issued and outstanding stock of Debtor. After the
Guarantor Restructuring, if it occurs, Domestic Parent will own 100%
of the issued and outstanding stock of Debtor and Guarantor will own
100% of the issued and outstanding stock of Domestic Parent. All of
the outstanding shares of the capital of Debtor are validly issued,
fully paid and non-assessable, and have been issued in compliance
with all applicable federal and state laws, rules and regulations,
including, without limitation, all so-called "Blue-Sky" laws;
(c) Transactions With Affiliates.
Other than the Guarantor Restructuring, Debtor shall not
enter into, or be a party to any transaction with one of Debtor's
Affiliates, except in the ordinary course of business and pursuant to
the reasonable requirements of Debtor's business and upon fair and
reasonable terms which are fully disclosed to Debtor and are no less
favorable to Debtor than Debtor would obtain in a comparable arm's
length transaction with a Person not Debtor's Affiliate;
(d) Other Transactions.
Debtor shall not enter into any transaction which materially
and adversely affects its business, operations, assets, or condition
(financial or otherwise) or the Collateral or Debtor's ability to
repay all Obligations or permit or agree to any extension, compromise
or settlement or make any change or modification of any kind or
nature with respect to any Receivable, including any of the terms
relating thereto;
(e) Guaranties.
Debtor shall not directly or indirectly become liable with
respect to the obligations or liabilities of any Person, except to a
spouse, descendants, or any trust created for the benefit of a spouse
or descendant in connection with an obligation of a non-business
nature or as expressly permitted herein;
(f) Deposits/Withdrawals.
Debtor shall not, except with respect to transactions
otherwise permitted hereunder, make deposits to or withdrawals from
any of Debtor's deposit accounts for the benefit of any of its
Affiliates;
(g) Encumbrances.
Debtor shall not, except as otherwise expressly permitted
herein, encumber, pledge, mortgage, grant a security interest in,
assign, sell, lease or otherwise, dispose of or transfer,
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whether by sale, merger, consolidation, liquidation, dissolution, or
otherwise any of Debtor's assets;
(h) Indebtedness.
Debtor shall not incur, without consent of Secured Party,
Debt for borrowed money other than the Obligations, except in the
ordinary conduct of Debtor's business (e.g. trade payables to
suppliers of Inventory);
(i) Capital Expenditures.
Debtor shall not, in the aggregate make or incur obligations
for any capital expenditures in any fiscal year, including, without
limitation, capitalized lease obligations, in an amount that exceeds
the greater of (i) prior tax year depreciation, or (ii) $100,000.
(j) Contingent Sales.
Debtor shall not make a sale to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval,
consignment, or any other repurchase or return basis;
(k) Books and Records.
Debtor shall not remove its books and records concerning the
Collateral, or the Collateral, from the locations set forth in
Section 2.01 or keep any of such books and records or the Collateral
at any other office or location, unless Debtor gives Secured Party
written notice thereof at least thirty (30) days prior thereto and
the same is within the continental United States of America;
(l) Intentionally Deleted.
(m) Investments.
Debtor shall not, other than in the ordinary course of its
business, make any investment in the securities of any Person;
provided, however, notwithstanding the foregoing, Debtor may make
investments in certificates of deposits of a banking institution
insured by the Federal Deposit Insurance Corporation the ("FDIC"), in
the amounts not to exceed the maximum amount insured by the FDIC;
(n) Intentionally Deleted.
(o) Type of Business.
Debtor shall not make any material change in the type of
business it now conducts.
3.07 Inventory.
Secured Party may examine and inspect the Inventory upon reasonable
advance notice to Debtor. Debtor shall maintain a perpetual Inventory. Debtor
agrees to perform any and all steps reasonably requested by Secured Party to
protect Secured Party's rights in the Inventory such as leasing warehouses to
Secured Party or Secured Party's designee, placing and maintaining signs,
appointing custodians, maintaining Inventory records, placing notations on
Debtor's books of account to disclose Secured Party's security interest
therein, delivering to Secured Party warehouse receipts covering that portion
of the Inventory located in warehouses for which warehouse receipts are
issued, transferring Inventory to warehouses designated by Secured Party's
account and subject to Secured Party's instructions. Debtor will deliver to
Secured Party a negotiable document of title to any Inventory becoming subject
thereto
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and any letters of credit on which Debtor is named as beneficiary.
From time to time, Debtor shall, upon Secured Party's request, execute and
deliver confirmatory written instruments pledging to Secured Party the
Inventory described in any such listings or otherwise; provided, however, the
Secured Party's failure to execute and deliver such confirmatory instruments
shall not affect or limit Secured Party's security interest in other rights in
and to the Inventory. Until all Obligations have been fully satisfied, Secured
Party's security interest in the Collateral, whether now owned, or hereafter
acquired, and all proceeds and products thereof, shall continue in full force
and effect.
Debtor, immediately, upon Secured Party's request and not later than
the 30th day of each month, shall execute and deliver to Secured Party
schedules of Inventory specifying Debtor's cost of Inventory and such other
matters as Secured Party may request.
3.08 Inspection of Books and Records/Field Exams.
Debtor shall permit, upon advanced reasonable notice, representatives
of Secured Party to inspect Debtor's books and records during regular business
hours, and make copies thereof or extracts therefrom and to arrange for
verification of Receivables, under reasonable procedures established by
Secured Party, directly with the Receivable Debtors. Debtor specifically
agrees that Secured Party may conduct field examinations at Debtor's cost one
time in each fiscal year, the costs of which shall be consistent with Secured
Party's past practices.
3.09 Payment and Compliance with Agreements.
Debtor will cause all payments to be made as required by this
Agreement and Other Agreements. Debtor will promptly and fully perform and
discharge all of the agreements and indebtedness of Debtor under or in
connection with this Agreement and Other Agreements and will refrain from
doing any act or acts that would violate any covenant or Agreement thereunder.
3.10 Bank as Principal Depository.
During the term of this Agreement, Debtor will establish and maintain
with Secured Party accounts as its principal depository. Debtor will pay to
Secured Party any and all fees due Secured Party to the extent not otherwise
satisfied by demand deposits.
3.11 Machinery and Equipment
Debtor shall keep and maintain its machinery and equipment in good
operating condition and repair and shall make all necessary replacements
thereof so that the value, utility and operating efficiency thereof at all
times will be maintained and preserved. Debtor shall promptly inform Secured
Party of any material additions to or deletions from the machinery and
equipment. Debtor shall not permit any such items to become affixed to real
estate in such manner that such items of machinery and equipment will become a
fixture or any accession to other personal property. Debtor shall, upon
Secured Party's request, deliver to Secured Party all evidence of ownership of
the machinery and equipment (including, without limitation, bills of sale,
certificates of title and applications for title).
Debtor shall not sell, transfer, lease, grant a security interest in
or otherwise dispose of or encumber the machinery and equipment or any part
thereof to any Person other than Secured Party; provided however, that in any
fiscal year Debtor may sell or otherwise dispose of machinery and equipment
with an aggregate book value not to exceed $50,000. If any machinery and
equipment is sold, transferred or otherwise disposed of as permitted in this
Section, Debtor promptly shall notify Secured
17
Party of such fact and, upon Secured Party's request, deliver all the cash
proceeds of such sale, transfer or disposition to Secured Party, which
proceeds shall be applied to the repayment of the Obligations; provided,
however, that with Secured Party's prior consent Debtor may use the proceeds
of such sale, transfer or disposition to finance the purchase or replacement
machinery and equipment. Debtor shall deliver to Secured Party written
evidence, satisfactory to Secured Party, of the use of the proceeds for such
purchase. All replacement machinery and equipment purchased by Debtor shall be
free and clear of all liens, claims, security interests and other
encumbrances, except for the security interests granted to Secured Party,
purchase money security interests consented to in writing by Secured Party,
and the liens permitted as described in Exhibit F.
3.12 Year 2000 Compliance.
Debtor has reviewed the areas within its business and operations
which could be adversely affected by, and has developed or is developing a
program to address on a timely basis, the "Year 2000 Problem" (that is, the
risk that computer applications used by Debtor 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 has made related appropriate
inquiry of material suppliers and vendors. Based on such review and program,
Debtor believes that the "Year 2000 Problem" will not materially adversely
affect Debtor.
3.13 Financial Covenants.
(a) Debtor shall maintain Tangible Net Worth of not less than
$800,000, which shall be measured on a quarter annual basis first beginning on
December 31, 1998; and
(b) At all times, Debtor shall maintain a ratio of Unsubordinated
Debt to Tangible Net Worth of not greater than 3.0:1; and
(c) Debtor shall maintain a Debt Service Coverage Ratio of not less
than 1.15:1, which shall be measured on a quarter annual basis first beginning
on December 31, 1998.
Section 4. LOANS AND TERMS OF PAYMENT
4.01 Amount of Loan.
Subject to the terms and conditions of this Agreement on the Closing
Date, provided (i) no Event of Default exists and (ii) all of the terms and
conditions of this Agreement have been satisfied, Secured Party shall lend to
Debtor as follows:
Revolving Loan.
Secured Party agrees to lend to Debtor from time to time
after the Closing Date and on or before the Maturity Date, such sums
for working capital or the issuance of letters of credit as the
Debtor may from time to time request, not exceeding $2,500,000. The
aggregate principal amount of borrowings at any one time outstanding
under the Revolving Loan shall be the lesser of (i) $2,500,000, and
(ii) the Borrowing Base, each as reduced by (A) the amount of all
advances Secured Party makes to Debtor under the Revolving Loan then
remaining unpaid, and
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(b) all letters of credit, other credits or indulgences Secured Party
grants to Debtor under the Revolving Loan from time to time, if any.
4.02 Interest
(a) Interest.
Except as set forth in Section 4.02(g), Debtor's Obligations
shall bear interest at the Prime Rate.
(b) Interest Computation.
Interest shall be computed on the basis of a year consisting
of 360 days and charged for actual number of days during the period
for which interest is being charged.
(c) Maximum Interest.
Notwithstanding any provision to the contrary herein
contained, Secured Party shall not collect a rate of interest on any
obligation or liability due and owing by Debtor to Secured Party in
excess of the maximum contract rate of interest permitted by
applicable law. Secured Party and Debtor have agreed that the
interest laws of the State of Illinois shall govern the relationship
between them. All interest found in excess of that rate of interest
allowed and collected by Secured Party shall be applied to the
principal balance of each Loan in such manner as to prevent the
payment and collection of interest in excess of the rate permitted by
applicable law.
(d) Payment of Principal and Interest.
Debtor shall pay interest on the unpaid principal amount of
the Loan, from time to time, from and including the date of any
advance thereunder to the day of repayment of such advance or until
the Maturity Date equal to the Prime Rate, all as more specifically
described in Section 4.03 below.
(e) Prepayment.
(i) Voluntary Prepayment. The Debtor may prepay
the Principal Balance of the Loan in whole or in part without
penalty or premiums.
(ii) Application of Prepayments. All prepayments of
the Principal Balance of the Loan shall be applied to the
Principal Balance of said Loan as directed by Debtor in the
inverse order of maturity thereof.
(f) Payments after Event of Default.
All payments received by Secured Party during the existence
of an Event of Default and after the acceleration of Debtor's
Obligations shall be applied to Debtor's Obligations in such manner
as Secured Party shall elect.
(g) Default Rate; Late Charge.
During the existence of an Event of Default, Debtor's
Obligations shall bear interest at the Default Rate. In addition, if
any installment of principal or interest to be made pursuant to
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this Loan Agreement is not made within ten (10) days of the due
date, Debtor shall pay a late charge equal to the greater of: (a)
Fifty Dollars ($50.00) per late payment; or (b) five percent (5%) of
such installment, which late charge shall be due and payable
immediately without demand.
(h) Method of Payment; Good Funds.
Payment on the Revolving Credit Note shall not be deemed to
have been received by Secured Party until Secured Party is in receipt
of funds available to Secured Party at or before 2:00 p.m. Illinois
time on a Business Day.
4.03 Revolving Credit Note.
The borrowing under Section 4.01(a) above shall be evidenced by a
Revolving Credit Note in the principal amount of $2,500,000 (herein, together
with any and all amendments, modifications, renewals, extensions, restatements
and substitutions thereof and therefor, collectively called the "Revolving
Credit Note"). The Revolving Credit Note shall be in the form set forth in
Exhibit D, shall be dated the Closing Date and shall mature on the Maturity
Date unless sooner due in accordance with the terms of this Agreement or the
Revolving Credit Note. At the time of the initial borrowing under the
Revolving Loan, and at each time an additional borrowing shall be requested
under said Revolving Loan, or a repayment made in whole or in part, thereon,
an appropriate notation thereof shall be entered by Secured Party in its books
and records, provided, however, that no borrowing under the Revolving Loan or
unpaid balance under the Revolving Credit Note shall exceed the Borrowing
Base. The Revolving Credit Note shall bear interest from the date all or any
portion thereof shall be disbursed or advanced until maturity at a fluctuating
interest rate equal to the Prime Rate on the outstanding principal adjusted
every Business Day as may be necessary to correspond with changes in the Prime
Rate, payable on the first day of each month (commencing November 1, 1998) on
the unpaid principal balance of the Revolving Loan from time to time for the
preceding month. All amounts outstanding borrowed under the Revolving Loan,
with accrued interest thereon, shall be due and payable on the Maturity Date.
Debtor shall advise Secured Party by 2:00 p.m. on any Business Day of
the amount and date of any requested borrowing under the Revolving Loan. Upon
the performance of all conditions precedent and provided no Event of Default,
as described herein shall exist, Secured Party will credit the account of the
Debtor with the specific amount of said borrowing. The amount outstanding
after each request for a borrowing under the Revolving Loan shall not exceed
the Borrowing Base, as reduced by (A) the amount of all advances Secured Party
makes to Debtor under the Revolving Loan then remaining unpaid, and (b) all
letters of credit, other credits or indulgences Secured Party grants to Debtor
under the Revolving Loan from time to time, if any. Debtor shall deliver to
Secured Party on a monthly basis or at the time of each requested advance, a
borrowing certificate in the form attached hereto as Exhibit E.
4.04 Intentionally Deleted.
4.05 Guaranty.
Debtor's Obligations relating to the Revolving Loan shall be
guaranteed by the Guaranty.
4.06 Statement of Account.
At least once each month during the term of this Agreement, Secured
Party shall render to Debtor a statement of account which statement shall be
presumed correct and accurate and shall
20
constitute an account stated between Secured Party and Debtor unless
thereafter waived in writing by Secured Party in its sole discretion or unless
Debtor notifies Secured Party in writing to the contrary within thirty (30)
days of the date on which said statement was sent to Debtor, specifying the
errors or omissions therein, provided that Secured Party's failure to render
such statement shall not be considered a breach of this Agreement.
4.07 Terms of Repayment; Waivers.
Except as otherwise expressed provided for in this Agreement, Debtor
waives presentment and protest of any instrument and notice thereof, notice of
default and, to the extent permitted by applicable law, all other notices to
which Debtor might otherwise be entitled. Secured Party shall have the
continuing and exclusive right to apply or reverse and re-apply any and all
payments to any portion of the Obligations. To the extent that Debtor makes a
payment or payments to Secured Party or Secured Party receives any payment or
proceeds of the Collateral for Debtor's benefit, which payment(s) of proceeds
or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential set aside and/or required to be repaid to a trustee, debtor in
possession, receiver or any other party under any bankruptcy law, state or
federal law, common law or equitable cause, then, to the extent of such
payment or proceeds received, the obligations or part thereof intended to be
satisfied shall be revived and continue in full force and effect, as if such
payment or proceeds had not been received by Secured Party.
Section 5. SECURITY INTEREST
Debtor, in order to secure its Obligations, hereby grants to Secured
Party, and its successors and assigns, a continuing first and prior security
interest in the Collateral, whether now owned or hereafter acquired. The
security interests in the Collateral which the Debtor has granted to Secured
Party under this Agreement are first position, indefeasible security interests
in all the Collateral, except as expressly indicated otherwise on Exhibit F
hereto. Notwithstanding any termination of this Agreement, until Debtor pays
in full, all of the Obligations arising under the Loans, Secured Party shall
retain its security interests in the Collateral, and Debtor shall continue to
remit to Secured Party, collections of Receivables and proceeds of Collateral
as provided in this Agreement, and Secured Party shall retain all of its
rights and remedies under this Agreement.
Section 6. FINANCIAL INFORMATION
6.01 Financial Statements and Other Information.
Debtor will maintain a standard system of accounting and furnish to
Secured Party:
(a) Quarterly Statements.
As soon as available, and in any event within 45 days after
the close of each fiscal quarter of each fiscal year, a copy of (i)
the balance sheet of Debtor, as of the end of such quarter, (ii) the
statements of income, cash flow, and shareholder's equity for such
quarter and for the period from the beginning of the then current
year to the end of such quarter setting forth in each case in
comparative form with the corresponding figures as of and through the
corresponding period in the preceding fiscal year, all in reasonable
detail, containing such information as Secured Party may require and
compiled by the Debtor, and certified as complete and correct
(subject to year-end adjustments) by the chief financial officer of
Debtor and (iii) a
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certificate of Debtor executed by the chief financial officer
confirming the compliance by Debtor of the covenants set forth in
Section 3.06 and 3.13 hereof.
(b) Annual Statements of Debtor.
As soon as available and in any event within 90 days after
the close of each fiscal year, a copy of (i) the balance sheet of
Debtor as of the end of such year, and (ii) the statements of
earnings, cash flow and retained earnings of Debtor for such year
setting forth in each case in comparative form with the corresponding
figures of the previous year, all in reasonable detail, and in each
case prepared by Debtor, and accompanied by an opinion of Debtor's
independent certified public accounts ("Accountants") selected by
Debtor and satisfactory to Secured Party, together with a certificate
of the Accountants which shall state that (a) the audit by the
Accountants in connection with the preparation of such financial
statements has been conducted in accordance with generally accepted
auditing standards and that the Accountants believe that the audit
provides a reasonable basis for their opinion, (b) such financial
statements have been prepared in accordance with GAAP and that such
financial statements prepared are consistent with those prepared by
the Borrower in prior periods, (c) such financial statements fairly
present the financial position, results of operations and cash flows
of Borrower, (d) in making the examination of the books and records
of Borrower, it has obtained no knowledge of any violation of any
term or provision of this Agreement.
(c) Financial Statements of Guarantor.
(i) as soon as available and in any event within 90
days after the last day of each fiscal year, (A) the consolidated
balance sheet of Guarantor as of the end of each such fiscal year,
and (B) the consolidated statements of earnings, cash flow and
retained earnings of Guarantor for such year setting forth in each
case in comparative form with the corresponding figures of the
previous fiscal year, all in reasonable detail, and in each case
prepared by Guarantor, and accompanied by an opinion of Guarantor's
independent certified public accountants ("Guarantor's Accountants")
selected by Guarantor and reasonably satisfactory to Lender, together
with a certificate of the Accountants which shall state that (1) the
audit by the Guarantor's Accountants in connection with the
preparation of such financial statements has been conducted in
accordance with generally accepted auditing standards and that the
Accountants believe that the audit provides a reasonable basis for
their opinion; (2) such financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") and
that such financial statements prepared are consistent with those
prepared by Guarantor in prior periods; (3) such financial statements
fairly present the financial position, results of operations and cash
flows of Guarantor; and (4) in making the examination of the books
and records of Guarantor, it has obtained no knowledge of any
violation of any term or provision of this Guaranty; and
(ii) as soon as available and in any event within
45 days after the last day of each fiscal quarter occurring while the
Guaranteed Obligations are outstanding, (A) the consolidated balance
sheet of Guarantor, as of the end of such quarter, and (B) the
consolidated statements of income, cash flow and shareholder's equity
for such quarter and for the period from the beginning of the then
current year to the end of such quarter setting forth in each case
figures as of and through the corresponding period in the preceding
fiscal year in comparative form with the corresponding figures of the
previous fiscal quarter, all in reasonable detail, containing such
information as Lender may require, and compiled by the Guarantor, and
certified as complete and correct (subject to year-end adjustments)
by the chief financial officer of Guarantor.
22
(d) Receivable and Payable Aging.
An aging schedule for Debtor's accounts Receivable and
accounts payable by the 30th day following each month of each year
based upon the account balances as of the end of the preceding month.
Section 7. COLLECTION OF RECEIVABLES BY DEBTOR
7.01 Collection.
Until Secured Party exercises its rights to collect the Receivables
under Section 8 hereof, Debtor will collect with diligence all Debtor's
Receivables, whether or not said Receivables are deemed Acceptable Receivables
hereunder.
7.02 Returned Merchandise.
Until Secured Party exercises its rights to collect the Receivables
under Section 8 hereof, Debtor may continue its present policies for returned
merchandise and adjustments, but shall promptly notify Secured Party of any
material credits, adjustments or disputes arising about the goods or services
represented by Acceptable Receivables. In any event, Debtor will immediately
pay Secured Party from its own funds (and not from the proceeds of Acceptable
Receivables), for application to Debtor's Obligations secured by this
Agreement, an amount equal to any credit or adjustment made to any Acceptable
Receivables; provided, however, that so long as no Event of Default has
occurred hereunder, such payment need not be made if Debtor shall have, after
making such credit or adjustment, sufficient Acceptable Receivables, to
maintain the aggregate outstanding balance of the Revolving Loan at an amount
not to exceed the Borrowing Base.
Section 8. DIRECT COLLECTION OF RECEIVABLES BY SECURED PARTY
Debtor's authority to collect receivables may be terminated by
Secured Party in the event of the occurrence of any of the events or
conditions set forth in Section 9.
Section 9. DEFAULT
9.01 Events of Default.
The following occurrences are Events of Default:
(a) a default by Debtor in the prompt payment of any
Obligations within five (5) days after the due date under this
Agreement or any Other Agreement;
(b) Debtor fails to perform or observe any agreement,
covenant or obligation arising under Article 3 of this Agreement;
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(c) failure of Debtor, within thirty (30) days after notice
and demand to promptly, fully and faithfully satisfy, perform,
discharge, observe any agreement, covenant or obligation arising
under this Agreement or any Other Agreement not specifically
described above, or Debtor otherwise fails to perform any Obligation
when due, unless such performance by its nature, requires, more than
thirty (30) days to complete, in which case, Debtor shall have begun
such performance within such thirty (30) days and constantly is
pursuing such performance with due diligence;
(d) any material statement or representation made for the
purpose of obtaining credit under this Agreement or Other Agreement
proves false in any material respect;
(d) Debtor or any guarantor of Debtor's Obligations to
Secured Party becomes insolvent, makes assignment for the benefit of
creditors, becomes unable to pay its debts as they mature, or ceases
business operations;
(e) commencement of any proceeding by or against Debtor or
Guarantor under any bankruptcy, reorganization, state receivership,
arrangement, readjustment of debts or moratorium law or statute which
is not dismissed within 30 days;
(f) issuance of any writ of attachment or execution,
garnishment, tax lien or other legal process against the Collateral
or any other property of Debtor which is not dismissed within 30
days;
(g) any assessment for taxes against Debtor, other than for
real property taxes and taxes being contested in good faith by
Debtor, by any federal, state or any local government body or
department or agency thereof which has not been discharged or paid
within 30 days; or
(h) if there is any material loss, theft or substantial
damage to or destruction, sale or encumbrance of any Collateral
(except as permitted under the terms of this Agreement) or if at any
time Secured Party loses any of its security interests under this
Agreement, or if said security interests are in any way diminished,
altered or modified in a manner which is or could be to the material
detriment of Secured Party; or
(i) if Debtor defaults in the payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise) of any amount owing in respect of any Debt, or Debtor or
any guarantor of Debtor's Obligations defaults in the performance or
observance of any obligation or condition with respect to such Debt.
An Event of Default also shall exist if any other event occurs or
condition exists, if the effect of such event or condition is to
accelerate the maturity of any Debt Debtor or any guarantor of
Debtor's Obligations owes to any Person or to permit (or with the
giving of notice, lapse of time or both, would permit) the holder or
holders or any trustee or agent for such holders, to accelerate the
maturity of any such Debt, or if any such Debt otherwise becomes or
is declared to be due and payable prior to its stated maturity other
than as a result of a regularly schedule payment, or if any other
event of default occurs under any documents evidencing such Debt
and/or any law of any governmental authority concerning such Debt.
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9.02 Acceleration in Event of Default or Demand.
Upon the occurrence of any Event of Default, then all Obligations of
Debtor to Secured Party, shall, at the option of Secured Party and
notwithstanding any time allowed in any instrument evidencing an Obligation or
in any Other Agreement, immediately become due and payable without demand and
without notice to Debtor. Thereafter, Secured Party shall have no obligation
to make any further advances pursuant to this Agreement.
Section 10. REMEDIES UPON DEFAULT
10.01 Remedies.
If Debtor fails to pay its Obligations upon the occurrence of an
Event of Default or on the Maturity Date thereof, Secured Party may, at its
option and without further demand or notice to Debtor and without a prior
court hearing, do any one or more of the following:
(a) immediately take possession of the Collateral wherever
it may be found, together with all or any of Debtor's records
identifying the Collateral, and Debtor waives all claims for damages
due to or arising from any such taking;
(b) Secured Party shall have the right to require the Debtor
to assemble the Collateral and make it available to Secured Party at
a place designated by Secured Party;
(c) proceed in the foreclosure of Secured Party's security
interest and sale of the Collateral in any manner permitted by law,
or provided for herein or in any other security document;
(d) sell, lease or otherwise dispose of the Collateral in a
commercially reasonable manner at public or private sale, with or
without having the Collateral at the place of sale, and on terms and
in such manner as Secured Party may determine;
(e) retain the Collateral in full satisfaction of the
obligations secured by it;
(f) setoff the Obligations against the funds of Debtor on
deposit with Secured Party, on demand, or represented by any
obligations issued by Secured Party to Debtor;
(g) apply to any court of appropriate jurisdiction for the
appointment of a receiver to take possession of the Collateral, to
which appointment Debtor hereby expressly consists; or
(h) exercise any other rights or remedies of a secured
creditor under the Uniform Commercial Code.
10.02 Alternative Remedies/Waiver by Debtor.
Secured Party shall have the right to enforce one or more remedies
partially, successively, or concurrently, and any such action shall not stop
or prevent Secured Party from pursuing any further remedy that it may have
hereunder or by law. Secured Party shall have the right to proceed against any
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Collateral of any Debtor in any manner or order it so chooses to satisfy all
Obligations and Debtor waives any right it may have requiring the Secured
Party to proceed against Debtor, or any or all Debtor's Collateral. To the
fullest extent permitted by applicable law, Debtor covenants that it will not
at any time insist upon or plead or in any manner whatever claim or take any
benefit or advantage of any law requiring the marshalling of assets. Secured
Party is hereby granted a license or other right to use, without charge,
Debtor's labels, patents, copyrights, trade secrets, trade names, trade marks
or any property of a similar nature pertaining to the Collateral, and Debtor's
rights under all licenses and franchise Agreements shall inure to the benefit
of Secured Party.
10.03 Power of Attorney.
Upon an Event of Default, Debtor irrevocably designates, makes,
constitutes and appoints Secured Party (and all persons designated by Secured
Party) as Debtor's attorney-in-fact, with a power coupled with an interest,
without notice to Debtor and at such time or times thereafter as Secured Party
in its sole and absolute discretion, may determine, in Debtor's or Secured
Party's name do as follows:
(a) to demand payment of the Receivables and Collateral;
(b) to enforce payment of the Receivables and Collateral by
legal proceedings or otherwise;
(c) to exercise all of Debtor's rights and remedies with
respect to the collection of the Receivables, and Collateral;
(d) to settle, adjust, compromise, extend or renew the
Receivables and Collateral;
(e) to settle, adjust or compromise any legal proceedings
brought to collect the Receivables and Collateral;
(f) to sell or assign the Receivables and Collateral upon
such terms, for such amounts and at such time or times as Secured
Party deems advisable;
(g) to discharge and release the Receivables and Collateral;
(h) to take control, in any manner, of any time of payment
of proceeds referred to in Section 1.07 above;
(i) to prepare, file and sign Debtor's name on any proof of
claim in bankruptcy or similar document against any Receivables
Debtor;
(j) to prepare, file and sign Debtor's name on any notice of
lien, assignment or satisfaction of lien or similar document in
connection with the Receivables and Collateral;
(k) to do all acts and things necessary, in Secured Party's
sole discretion, to fulfill Debtor's obligations under this
Agreement;
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(l) to endorse the name of Debtor upon any of the items of
payment or proceeds referred to in Section 1.08 above and to deposit
the same to the account of Secured party to and on account of
Debtor's Obligations;
(m) to endorse the name of Debtor upon any chattel paper,
document, instrument, invoice, freight bill, bill of lading or
similar document or Agreement relating to the Receivables and
Collateral;
(n) to sign the name of Debtor to verifications of the
Receivables and Collateral and notices thereof to Receivables Debtor;
and
(o) to execute, file and deliver such documents, instruments
and agreements as Secured Party may deem necessary to perfect and/or
protect Secured Party's security interest and the collateral.
All costs, expenses and fees (including, but not limited to,
attorney's fees) incurred by Secured Party (or for which Secured Party becomes
obligated to pay) in connection with the foregoing shall be paid by Debtor to
Secured Party.
10.04 Deficiency.
If a sufficient sum is not realized from disposition of the
Collateral to pay all Obligations of Debtor to Secured Party, Debtor promises
and agrees to pay to Secured Party any deficiency, including any unpaid
balance of the Loan.
Section 11. TERM OF AGREEMENT
This Agreement shall commence as of the date first above written and
shall continue until the earlier of (i) the Maturity Date; or (ii) the
occurrence of an Event of Default. Upon termination of this Agreement, Secured
Party shall have no further obligations under this Agreement, including the
agreement to advance any further proceeds of the Loan. Notwithstanding
anything to the contrary herein contained, all provisions of this Agreement
for the benefit of Secured Party shall remain in effect until the Obligations
have been satisfied in full.
Section 12. CONDITIONS OF CLOSING
Secured Party's obligations to make the Loan shall be subject to the
satisfaction of all of the following conditions on or before the "Closing
Date", in a manner, form and substance satisfactory to Secured Party:
12.01 Delivery of Instruments.
The following shall have been delivered to Secured Party, each duly
authorized and executed:
(a) the Loan Instruments;
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(b) a copy of the executed lease between Debtor and John
Einarsen expiring not sooner than December 31, 2000 with a monthly
rental payment of not less than $7,730 per month;
(c) a landlord waiver and consent executed by John Einarsen
in favor of Secured Party with respect to the lease referenced in
subsection (b) above and the Debtor's premises located at 285
Industrial Drive, Wauconda, Illinois, in form satisfactory to Secured
Party;
(d) a certificate of incumbency for Debtor;
(e) a certificate of good standing for Debtor in Illinois;
(f) certified copies of the articles of incorporation and
by-laws, and all amendments thereto, of Debtor;
(g) certified copies of resolutions adopted by the board of
director of Debtor authorizing the execution and delivery of the Loan
Instruments to which it is a party and the consummation of the
transactions completed therein;
(h) a confirmation of business accounts;
(i) confirmation that the closing of the sale of Debtor to
Guarantor has taken place;
(j) a copy of the executed three year employment agreement
between Debtor and John Einarsen; and
(k) such other instruments, documents, certificates,
consents and waivers as Secured Party may request, including
specifically the items set forth on the closing checklist delivered
to Borrower.
12.02 Approvals and Permits.
Secured Party shall have received evidence satisfactory to Secured
Party to the issuance by appropriate federal, state, county, municipal or
local authorities having jurisdiction over the business of Debtor, of all
licenses, approvals or permits necessary in connection with the operation of
the business of Debtor, including such licenses, approvals and permits
relating to environmental protection, if any.
12.03 Opinion of Counsel.
Secured Party shall have received from counsel to Debtor, an opinion
in form and substance acceptable to Secured Party covering matters incident to
the transactions contemplated by this Agreement.
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12.04 Secured Party's Security Interest.
All filings of Uniform Commercial Code Financing Statements and all
other recordings and actions necessary to perfect and maintain the security
interests as first, valid and perfected liens in Collateral.
12.05 Proceedings and Documents.
All corporate and other proceedings in connection with the
transaction contemplated by this Agreement and other Loan Instruments as all
documents and interests incident to such transaction shall be satisfactory to
Secured Party, and Secured Party shall have received all such counterpart
originals or certified or other copies as Secured Party reasonably may
request.
12.06 Representations and Warranties.
On the Closing Date the representations and warranties of Debtor set
forth in this Agreement and other Loan Instruments shall be true and correct
when made and at and as of the time of Closing, except as affected by the
consummation of the transactions contemplated by this Agreement.
12.07 Performance; No Default.
Debtor shall have performed and complied with all agreements and
conditions contained in the Loan Instruments to be performed by or complied
with prior to or at the Closing.
12.08 Material Adverse Change.
No event shall be occurred which has a material adverse effect on the
business or the financial condition, property, operations, prospects or
profits of Debtor or upon the ability of Debtor to perform its obligations
under the Loan Instruments.
12.09 Reimbursement of Expenses.
On the Closing Date, Debtor shall have reimbursed Secured Party or
paid to the applicable party, all fees and expenses due and payable pursuant
to Section 13.11.
Section 13. MISCELLANEOUS.
13.01 Notices.
All notices and communications under this Agreement shall be in
writing and shall be (i) delivered in person, or (ii) mailed, postage prepaid,
either by registered or certified mail, return receipt requested, or by
overnight express carrier, addressed in each case as follows:
To Debtor: Telecom Corporation of Chicago
285 Industrial Drive
Wauconda, Illinois 60084
Attn: John Einarsen
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Copies to: Officeland, Inc.
312 Dolomite, Suite 212
Downsview, Ontario, Canada M3J2N2
Attn: Christopher Walker
and
Moskowitz Altman & Hughes, LLP
11 East 44th Street, Suite 504
New York, New York 10017-1121
Attn: Stanley Moskowitz
and
Michael Best & Friedrich
77 West Wacker Drive, Suite 4300
Chicago, Illinois 60601
Attn:
To Secured Party: American National Bank and Trust
Company of Chicago
499 Lake Cook Road
Deerfield, Illinois 60015
Attn: Joseph E Miltimore
Copy to: Much Shelist Freed Denenberg
Ament & Rubenstein, P.C.
200 North LaSalle Street, Suite 2100
Chicago, Illinois 60601
Attn: David T. Brown
or in such other manner, or to any address, as to either of the parties
hereto, as such party shall designate in a written notice to the other party
hereto. All notices sent pursuant to the terms an this Section 14.1 shall be
deemed received or (i) if sent by overnight, express carrier, on the next
Business Day immediately following the day sent, or (ii) if sent by registered
or certified mail, on the third Business Day following the day sent.
13.02 Intentionally Deleted.
13.03 Taxes and Fees.
Should any tax (other than taxes based upon the net income of Secured
Party), recording or filing fees become payable in respect of any of the Loan
Instruments, or any amendment, modification or supplement thereof, Debtor
agrees to pay the same to Secured Party on demand, together with any interest
or penalties thereon and agree to hold Secured Party harmless with respect
thereto.
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13.04 Severability.
In the event that any provision of this Agreement is deemed to be
invalid by reason of the operation of any law, or by reason of the
interpretation placed thereon by any Governmental Body or any court, as
applicable, this Agreement shall be construed as not containing such provision
and the invalidity of such provision shall not affect the validity or any
other provisions hereof, and any and all other provisions hereof which
otherwise are lawful and valid shall remain in full force and effect.
13.05 Waiver.
No delay on the part of Secured Party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof, and no single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof, or be deemed to establish a custom or
course of dealing or performance between the parties hereto, or preclude the
exercise of any other right, power or privilege.
13.06 Modification of Loan Instruments.
No modification or waiver of any provision of any of the Loan
Instruments shall be effective unless the same shall be in writing, and then
such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice to or demand on Debtor as the case
may be in any case shall entitle Debtor to any other or further notice or
demand in the same, similar or other circumstances.
13.07 Captions.
The headings in this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.
13.08 Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the respective successors and assigns of the parties hereto.
13.09 Remedies Cumulative.
All rights and remedies of Secured Party pursuant to this Agreement,
any other Loan Instruments or otherwise, shall be cumulative and
non-exclusive, and may be exercised singularly or concurrently.
13.10 Entire Agreement, Conflict.
This Agreement and the other Loan Instruments executed prior or
pursuant hereto constitute the entire agreement among the parties hereto with
respect to the transactions contemplated hereby or thereby and supersede any
prior agreements, whether written or oral, relating to the subject matter
hereof. In such event as a conflict between the terms and conditions of this
Agreement and any other Loan Instrument, the terms and conditions of this
Agreement shall supersede and govern in all respects.
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13.11 Fees and Expenses.
Upon demand by Secured Party therefor, Debtor shall reimburse Secured
Party for all out-of-pocket costs, fees and expenses incurred by Secured
Party, or for which Secured Party become obligated, in connection with the
negotiations preparation and conclusion of this Agreement and the Other
Agreements including, but not limited to, reasonable attorney's fees, costs
and expenses, search fees, costs and expenses, title insurance policy fees,
costs and expenses, filing and recording fees and all taxes payable in
connection with this Agreement or the Other Agreements.
13.12 Attorney Fees.
If at any time or times hereafter whether or not Debtor's Obligations
are outstanding at such time, Secured Party (a) employs counsel for advice or
other representation (i) with respect to the Collateral, this Agreement, the
Other Agreements or the administration of Debtor's Obligations, (ii) to
represent Secured Party in any litigation, arbitration, contest, dispute, suit
or proceeding or to commence, defend or intervene or to take any other action
in or with respect to any litigation, arbitration, contest, dispute, suit or
proceeding (whether instituted by Secured Party, Debtor or any other Person)
in any way or respect relating to the Collateral, this Agreement, the Other
Agreements, or Debtor's affairs, or (iii) to enforce any rights of Secured
Party against Debtor or any other Person which may be obligated to Secured
Party by virtue of this Agreement of the Other Agreements, including, without
limitation, any obligor; (b) takes any action with respect to the
administration of Debtor's Obligations or to protect collect, sell, liquidate
or otherwise dispose of the Collateral; and/or (c) attempts to or enforces any
of Secured Party's rights or remedies under this Agreement or the Other
Agreements, including without limitation, Secured Party's rights or remedies
with respect to the Collateral, the reasonable costs and expenses (including
but not limited to court costs, expert fees, paralegal fees, attorneys' fees
and disbursements, accountant's fees and expenses and court reporter fees and
expenses) incurred by Secured Party in any manner or way with respect to the
foregoing, shall be part of Debtor's Obligations, payable by Debtor to Secured
Party on demand.
13.13 Jurisdiction and Venue.
DEBTOR IRREVOCABLY AGREES THAT, SUBJECT TO SECURED PARTY'S SOLE AND
ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR
THE COLLATERAL SHALL BE LITIGATED ONLY IN COURTS HAVING SITUS WITHIN THE CITY
OF CHICAGO, STATE OF ILLINOIS. DEBTOR HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND
STATE. DEBTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE
VENUE OF ANY LITIGATION BROUGHT AGAINST DEBTOR BY SECURED PARTY IN ACCORDANCE
WITH THIS PARAGRAPH.
13.14 Waiver and Trial by Jury.
DEBTOR HEREBY IRREVOCABLY WAIVES ANY RIGHTS TO TRIAL BY JURY IN ANY
ACTION, SUIT, COUNTERCLAIM OR PROCEEDING (i) TO ENFORCE OR DEFEND ANY RIGHTS
UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE OTHER AGREEMENTS, OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (ii) ARISING FROM
ANY DISPUTE OR CONTROVERSY ARISING IN CONNECTION WITH
32
OR RELATED TO THIS AGREEMENT, THE OTHER AGREEMENT, OR ANY SUCH AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREES THAT ANY SUCH ACTION, SUIT,
COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
day and year specified at the beginning hereof.
DEBTOR:
TELECOM CORPORATION OF CHICAGO
By: /s/ Christopher Walker
-----------------------------------------
Its: Assistant Secretary
-----------------------------------------
Christopher Walker
Title: Assistant Secretary
Accepted this 10th day of December, 1998, at Secured Party's principal
place of business in the City of Chicago, State of Illinois.
SECURED PARTY:
AMERICAN NATIONAL BANK AND TRUST COMPANY
OF CHICAGO
By: /s/ Joseph E. Mittmore
----------------------------------------
Its: Vice President
----------------------------------------
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