EXHIBIT 4.13
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT executed as of June
16, 2003, to be effective for all purposes as of July 1, 2003, by and between
COLOR IMAGING, INC. ("Borrower"), a Delaware corporation, and SOUTHTRUST BANK
("Bank"), an Alabama banking corporation.
R E C I T A L S:
1. CURRENT CIRCUMSTANCES. Borrower is indebted to Bank under a revolving
loan in the maximum principal amount of One Million Five Hundred Thousand
Dollars ($1,500,000) evidenced by Loan and Security Agreement (as amended and
modified prior to the date hereof, the "LOAN AGREEMENT") dated as of May 5,
2000, between Color Image, Inc. ("Georgia Color"), a Georgia corporation and
Bank, as amended and affected by Amendment of Loan Documents dated as of August
30, 2000, Second Amendment of Loan Documents dated as of November 30, 2000,
Third Amendment of Loan Documents made as of July 5, 2001, to be effective for
all purposes as of June 30, 2001, Fourth Amendment of Loan Documents dated as of
November 1, 2001, Fifth Amendment of Loan Documents made as of December 31,
2001, Sixth Amendment of Loan Documents made as of February 5, 2002, Seventh
Amendment of Loan Documents made as of June 28, 2002, effective for all purposes
as of June 30, 2002, and Eighth Amendment of Loan Documents dated as of April 7,
2003.
2. AGREEMENT. Borrower and Bank have agreed further to amend the Loan
Agreement and to restate the Loan Agreement in its entirety as so amended.
NOW, THEREFORE, Borrower and Bank, intending to be legally bound, agree as
follows:
1. RECITALS. The foregoing recitals and provisions are true and correct and
are hereby incorporated herein by this reference as an integral part hereof.
2. RESTATEMENT; NO NOVATION. Borrower and Bank hereby restate, without
novation, Articles I through XII of the Loan Agreement, and the Exhibits to the
Loan Agreement as required, in their entirety as follows:
ARTICLE I
DEFINED TERMS, GENERAL MATTERS
1.1. DEFINED TERMS. As used in this Loan and Security Agreement, the
following terms shall have the following meanings:
Account Debtor - any Person who is or may become obligated under or on
account of an Account.
Accounts - all accounts, accounts receivable, chattel paper, chattel
mortgages, leases, instruments, documents, promissory Note, contracts for
receipt of money, conditional sales contracts, and evidences of Debt of or owing
to or acquired by Borrower whether now existing or hereafter arising, including,
without limitation, (i) all accounts and other rights to payment of money which
arise or result from Borrower's selling or other disposition of Borrower's goods
or the providing of services by the Borrower, (ii) the proceeds of any insurance
covering the Collateral and (iii) the return of unearned insurance premiums.
Adjusted Net Earnings - with respect to any fiscal period, means the
net earnings (or loss) after provision for income taxes for such fiscal period
of Borrower, all as reflected on the financial statement of Borrower supplied to
Bank pursuant to Sections 6.5 and 6.6 hereof, but excluding:
(i) any gain or loss arising from the sale of capital assets;
(ii) any gain arising from any write-up of assets;
(iii) earnings of any Subsidiary accrued prior to the date it became a
Subsidiary;
(v) earnings of any corporation, substantially all the assets of which
have been acquired in any manner by Borrower, realized by such corporation prior
to the date of such acquisition;
(v) net earnings of any business entity (other than a Subsidiary) in
which Borrower has an ownership interest unless such net earnings shall have
actually been received by Borrower in the form of cash distributions;
(vi) any portion of the net earnings of any Subsidiary which for any
reason is unavailable for payment of dividends to Borrower;
(vii) the earnings of any Person to which any assets of Borrower shall
have been sold, transferred or disposed of, or into which Borrower shall have
merged, or been a party to any consolidation or other form of reorganization,
prior to the date of such transaction;
(viii) any gain arising from the acquisition of any securities of
Borrower; and
(ix) any gain arising from extraordinary or non-recurring items.
Affiliate - any director or officer of Borrower or any Person who,
directly, indirectly or beneficially, owns 5% or more of the capital stock of
Borrower or any member of the immediate family of any such officer, director or
stockholder, or any corporation or other entity which is controlled by,
controls, or is under common control with the Borrower.
Aggregate Loan Values - the lesser of (i) the sum of $ 1,500,000 or
(ii) the sum of the Loan Value of Accounts and the Loan Value of Inventory.
Agreement - this Amended and Restated Loan and Security Agreement.
Authorized Affiliate Debt - collectively, the liability of Borrower
under (a) the promissory note dated as of August 21, 2002, in the face amount of
$500,000 payable to Jui-Hung Wang; (b) the promissory note dated as of August
21, 2002, in the face amount of $100,000 payable to Jui-Chi Wang and (c) the
promissory note dated as of March 14, 2002, in the face amount of $500,000
payable to Sueling Wang, as amended August 27, 2002.
Applicable Laws - all laws, rules and regulations applicable to the
Person, conduct, transaction, covenant or Loan Document in question, including,
but not limited to, all applicable common law and equitable principles; all
provisions of all applicable state and federal constitutions, statutes, rules,
regulations and order of governmental bodies; and all orders, judgments and
decrees of all courts and arbitrators.
Average Monthly Loan Balance - the amount obtained by adding the
unpaid balance of the Loan owing by Borrower to Bank at the end of each day for
each day during the month in question and by dividing such sum by the number of
days in such month.
2
Bank - SouthTrust Bank, an Alabama banking corporation, successor by
conversion to SouthTrust Bank, National Association.
Borrower - Color Imaging, Inc., a Delaware corporation.
Borrower's Report - the certificate or report of Borrower referred to
in Section 2. 1 (c) of this Agreement.
Business Day - a day, other than Saturday, Sunday or days on which
banks located in Atlanta, Georgia are authorized by law to close.
Capital Expenditures - expenditures made or liabilities incurred for
the acquisition of any fixed assets or improvements, replacements, substitutions
or additions thereto which have a useful life of more than one year, including
the direct or indirect acquisition of such assets by way of increased product or
service charges, offset items or otherwise and the principal portion of payments
with respect to Capitalized Lease Obligations.
Capitalized Lease Obligations - any Debt represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP, and the amount of such Debt shall be the
capitalized amount of such obligations determined in accordance with GAAP.
Closing Date - the date of this Agreement. The Closing Date is not
necessarily the date of initial funding of the Loan, and the execution and
delivery of this Agreement and acceptance hereof shall not be deemed waiver by
Bank of any of the conditions to lending set forth in Article III hereof.
Collateral - collectively, the Borrower's Accounts, General
Intangibles, Equipment, and Inventory, the other property and interests
described in Section 8.1 hereof and elsewhere in the Loan Documents, and the
proceeds and products of each, as the case may be.
Collected Balance - the book balance in a bank account, minus the
aggregate amount of all checks and other items of payment in the process of
collection, said amount to be computed in accordance with the Bank's standard
practices.
Commitment Period - shall mean that period during which Bank is
obligated to make advances under the Loan, as provided in Section 2.1 hereof.
The Commitment Period shall commence upon satisfaction of the conditions to
lending set forth in Article III and shall continue until July 1, 2004, unless
sooner terminated according to the provisions hereof.
Current Assets - at any date means the amount at which all of the
current assets of a Person would be properly classified as current assets shown
on a balance sheet at such date in accordance with GAAP.
Current Liabilities - at any date means the amount at which all of the
current liabilities of a Person would be properly classified as current
liabilities on a balance sheet at such date in accordance with GAAP.
Debt - the sum of (i) indebtedness for borrowed money or for the
deferred purchase price of property or services, (ii) Capitalized Lease
Obligations and (iii) all other items which in accordance with GAAP would be
included in determining total liabilities as shown on a balance sheet of a
Person as of the date as of which Debt is to be determined.
Debt Service Coverage - a ratio in which the initial number is the sum
of Borrower's net income (after provision for federal and state taxes and
excluding any extraordinary income) plus Interest Expense, lease expenses,
depreciation and amortization of intangible expenses for the 12-month period
3
preceding the applicable date, and the second number is the sum of lease
expenses plus Interest Expense of the Borrower for the 12-month period preceding
the applicable date plus the current portion of long-term debt as of the
applicable date.
Debt to Tangible Net Worth Ratio - for any period, the ratio of (a)
Debt (including Subordinated Debt) to (b) Tangible Net Worth for such period.
Default Rate - a rate of interest equal to two percent (2%) in excess
of the rate that would otherwise be applicable under this Agreement, calculated
daily and computed on the actual days elapsed over a year of 360 days (unless
reference to a 365 or a 366-day year is necessary in order not to exceed the
highest rate permitted by Applicable Law), said rate to change as and when the
rate otherwise applicable changes.
Eligible Account - an Account arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services which Bank,
in its sole credit judgment, deems to be an Eligible Account. Without limiting
the generality of the foregoing, no Account shall be an Eligible Account if: (i)
it arises out of a sale made by Borrower to a Subsidiary or to an Affiliate of
Borrower or to a Person controlled by an Affiliate or Subsidiary of Borrower; or
(ii) it is unpaid for more than ninety (90) days after the original due date
shown on the invoice; or (iii) it is due or unpaid more than ninety (90) days
after the original invoice date; or (iv) twenty-five percent (25%) or more of
the Accounts from the Account Debtor are not deemed Eligible Accounts hereunder;
or (v) the total unpaid Accounts of the Account Debtor exceed twenty-five
percent (25%) of the net amount of all Accounts, to the extent of such excess;
or (vi) any covenant, representation or warranty contained in this Agreement
with respect to such Account has been breached; or (vii) the Account Debtor is
also Borrower's or an Affiliate's creditor or supplier, or has disputed
liability with respect to such Account, or has made any claim with respect to
any other Account due from such Account Debtor to Borrower or an Affiliate, or
the Account otherwise is or may become subject to any right of setoff by the
Account Debtor or an Affiliate of the Account Debtor; or (viii) the Account
Debtor has commenced a voluntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or made an assignment for the benefit of
creditors, or a decree or order for relief under the federal bankruptcy laws has
been filed against the Account Debtor, or the Account Debtor has failed,
suspended business, ceased to be Solvent, or consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed of it or for all or a
significant portion of its assets or affairs; or (ix) it arises from a sale to
an Account Debtor outside the United States or to an Account Debtor who is not a
resident of the United States or involves a shipment to an address outside of
the United States; or (x) it arises from a sale to the Account Debtor on a
bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment or
any other repurchase or return basis; or (xi) Bank believes, in its sole
judgment, that collection of such Account is insecure or that payment thereof is
doubtful or will be delayed by reason of the Account Debtor's financial
condition; or (xii) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless Borrower assigns its right
to payment of such Account to Bank, in form and substance satisfactory to Bank,
so as to comply with the Assignment of Claims Act of 1940, as amended; or (xiii)
the Account is subject to a Lien; or (xiv) the goods giving rise to such Account
have not been delivered to and accepted by the Account Debtor or the services
giving rise to such Account have not been performed by Borrower and accepted by
the Account Debtor or the Account otherwise does not represent a final sale; or
(xv) the total unpaid Accounts of the Account Debtor exceed a credit limit
determined by Bank, in its sole discretion, to the extent such Account exceeds
such limit; or (xvi) the Account is evidenced by chattel paper, a note, or an
instrument of any kind, or has been reduced to judgment; or (xvii) Borrower has
made any agreement with the Account Debtor for any deduction therefrom, except
for discounts or allowances which are made in the ordinary course of business
for prompt payment and which discounts or allowances are reflected in the
calculation of the face value of each invoice related to such Account; or
(xviii) Borrower has made an agreement with the Account Debtor to extend the
time of payment thereof, or (xix) the Account arises from a retail sale of goods
to a Person who is purchasing same primarily for personal, family or household
purposes; or (xx) the Account is deemed ineligible by the Bank in its sole
judgment and discretion. In addition, Eligible Accounts shall not include any
portion of an Account which consists of service charges, late charges or
4
penalties, interest or other charges relating to the extension of credit by the
Borrower or the timing of payment by Account Debtor. In determining the
aggregate amount of Eligible Accounts, there shall be excluded from
consideration any credit balance of an Account Debtor which is more than 90 days
old as measured from the date of original posting of said credit balance to
Borrower's books and records.
Eligible Inventory - Inventory valued at the lesser of cost or current
market value, all of which Inventory is, at any given time, (a) not damaged or
defective in any way; (b) not sold or segregated for sale and reflected as an
Account of Borrower; (c) not consigned Inventory; (d) not inventory-in-transit
or located in a place other than at the location's listed in Section 5.10 of
this Agreement; (e) not work-in-process Inventory; (f) not constituting
packaging materials and supplies; (g) not Inventory evidenced by negotiable
warehouse receipts or by non-negotiable warehouse receipts or documents of title
which have not been issued in the name of Bank; (h) not subject to a document of
title such as a warehouse receipt or bill of lading; and (i) not Inventory
deemed ineligible by Bank in its sole discretion.
Environmental Regulations - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to the environment or to public health, safety and
environmental matters, or petroleum products, or radon radiation, or oil or
hazardous substances, including, but not limited to, the Resource Conversation
and Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Toxic Substances Control Act, the Clean Water Act,
the Clean Air Act, the River and Harbor Act, the Water Pollution Control Act,
the Marine Protection Research and Sanctuaries Act, the Deep-Water Port Act, the
Safe Drinking Water Act, the Superfund Amendments and Reauthorization Act of
1986, the Federal Insecticide, Fungicide and Rodenticide Act, the Mineral Lands
and Leasing Act, the Surface Mining Control and Reclamation Act, the Oil
Pollution Act of 1990, state and federal superlien and environmental cleanup
programs and laws, U.S. Department Transportation regulations, laws regulating
hazardous, radioactive and toxic materials and underground petroleum products
storage tanks, and all similar state, federal and local laws and regulations.
Equipment - all equipment and fixtures of whatever kind or nature now
owned or hereafter acquired by Borrower, including, without limitation, all
machinery, vehicles, tools, dies, trade fixtures, furnishings and equipment,
patterns, cranes, furniture, furnishings, motor vehicles, tractors, trailers,
rolling stock, office machines and equipment, material handling equipment,
manufacturing equipment, conveyors, forklifts, machine systems, computers, and
all other goods used in the operation of Borrower's business, together with all
accessories, parts and additions now or hereafter affixed thereto or used in
connection therewith.
ERISA - the Employee Retirement Income Security Act of 1974 and all
rules and regulations promulgated thereunder.
Event of Default - any one of the events enumerated in Section 10. 1
hereof.
Fixed Charge Coverage Ratio - adjusted net earnings plus depreciation,
amortization, interest expense and lease expense, less dividends and
distributions for the rolling twelve (12) month period preceding the applicable
date, divided by the current portion of the long-term debt of Borrower as of the
applicable date plus the interest expense and lease expense of Borrower for the
twelve (12)-month period preceding the applicable date.
GAAP - generally accepted accounting principles in the United States
of America in effect from time to time consistently applied.
General Intangibles - all general intangibles of Borrower, whether now
owned or hereafter acquired, including, without limitation, all payment
intangibles, software, choses in action, causes of action, corporate or other
5
business records, deposit accounts, inventions, designs, patents, patent
applications, trademarks, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, tax refund claims, computer
programs, all claims under guaranties, performance and payments bonds or bonds
for the furnishing of labor and materials, rights under non-compete agreements
with third parties, cash surrender value of life insurance policies owned by
Borrower, security interests or other security held by or granted to Borrower to
secure payment of any of the Accounts by an Account Debtor, all rights to
indemnification, and all other intangible property of every kind and nature
(other than Accounts).
Interest Expense - for any period, Borrower's consolidated interest
expense accrued during such period in respect of all Debt of Borrower.
Inventory - all inventory of whatever kind or nature of Borrower, now
owned or hereafter acquired by Borrower, and wherever located, including,
without limitation, all goods held for sale or lease or furnished or to be
furnished under contracts, and any raw materials, goods in transit, work in
process or finished goods, supplies, returned or repossessed goods, together
with all goods and materials used or consumed in Borrower's business.
Inventory Cap - the sum of $ 750,000, said sum being the maximum value
that can be given to the Loan Value of Inventory pursuant to this Agreement.
Kings Brothers - King Brothers, LLC, a Georgia limited liability
company.
Ledger Balance - the balance reflected on the books of the Bank of the
amounts deposited in the Special Collection Account as further described in
Section 4.2 of this Agreement.
LIBOR Rate - a per annum rate of interest (rounded upwards, if
necessary, to the nearest 1/16th of one percent) equal to the "London Interbank
Offered Rate (LIBOR)" for contracts with a maturity date of thirty (30) days, as
quoted in the MONEY RATES section of The Wall Street Journal as effective for
contracts entered into on the first day of the applicable interest period
(expressed as a decimal).
Lien - any interest in property (real, personal or mixed, and tangible
or intangible) securing an obligation owed to, or a claim by, a Person other
than the owner of the property, whether such interest is based on the common
law, statute or contract, and including, but not limited to, the security
interest, security title or Lien arising from a security agreement, mortgage,
deed of trust, deed to secure debt, encumbrance, pledge, conditional sale or
trust receipt or a lease, consignment or bailment for security purposes. The
term "Lien" shall include covenants, conditions, restrictions, leases and other
encumbrances affecting any property. For the purpose of this Agreement, Borrower
shall be deemed to be the owner of any property which it has acquired or holds
subject to a conditional sale agreement or other arrangement pursuant to which
title to the property has been retained by or vested in some other Person for
security purposes.
Loan - the revolving loan in the maximum principal amount of up to
$1,500,000 advanced by the Bank to the Borrower from time to time evidenced by
the Note (and any substitutions therefor, extensions thereof and renewals
thereof).
Loan Account - the loan account established on the books of Bank
pursuant to Section 2.1 hereof.
Loan Documents - this Agreement, the Note and each and every mortgage,
deed of trust, guarantee, reimbursement agreement, credit agreement, loan
agreement, note, security agreement, financing statement or other instrument
executed and delivered to evidence the Loan or any other Obligation, to
constitute collateral for the Loan or any other Obligation, or to evidence
security for the Loan or any other Obligation, and any and all other agreements,
6
instruments, and documents heretofore, now or hereafter, executed by Borrower
and delivered to Bank in respect to the transactions contemplated by this
Agreement.
Loan Value of Accounts - at any time, an amount which is not more than
75% of the aggregate Eligible Accounts of Borrower.
Loan Value of Inventory - an amount which is not more than 50% of
Borrower's Eligible Inventory consisting of raw materials and 50% of Borrower's
Eligible Inventory consisting of finished goods; provided, however, the Loan
Value of Inventory shall not at any time exceed the lesser of the Inventory Cap
or fifty percent (50%) of the outstanding principal balance of the Loan.
Maximum Rate - the maximum non-usurious rate of interest permitted by
Applicable Law that at any time, or from time to time, may be contracted for,
taken, reserved, charged or received on the Debt in question or, to the extent
permitted by Applicable Law, under such Applicable Laws that may hereafter be in
effect and which allow a higher maximum non-usurious interest rate than
Applicable Laws now allow. Notwithstanding any other provision hereof, the
Maximum Rate shall be calculated on a daily basis (computed on the actual number
of days elapsed over a year of 365 or 366 days, as the case may be).
Multiemployer Plan - has the meaning set forth in Section 4001 (a)(3)
of ERISA.
Note - the Amended and Restated Revolving Note dated as of the date
hereof executed by Borrower for the benefit of Bank in the maximum principal
amount of One Million Five Hundred Thousand Dollars ($1,500,000), together with
and any substitutions therefor, extensions thereof and renewals thereof.
Obligations - the Loan and all other advances, debts, liabilities,
obligations, covenants and duties owing, arising, due or payable from Borrower
to Bank 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
any of the other Loan Documents or otherwise, whether direct or indirect
(including those acquired by assignment), absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising and however
evidenced or acquired. The term includes, without limitation, all interest,
charges, expenses, fees, attorneys' fees and any other sums chargeable to
Borrower under any of the Loan Documents and all rights Bank may at any time or
times have to reimbursement in connection with any letter of credit or guaranty
issued for Borrower' s benefit.
Overadvance - an advance by Bank hereunder or under the Note when an
Overadvance Condition exists or would result from the making of such advance.
Overadvance Condition - at any date, a condition such that the
outstanding principal amount of the Loan on such date exceeds the Aggregate Loan
Values on such date.
Permitted Liens - any Lien of a kind specified in Section 7.2 of this
Agreement.
Person - an individual, partnership, corporation, joint stock company,
firm, land trust, business trust, limited liability company, limited liability
partnership, unincorporated organization, or other business entity, or a
government or agency or political subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for
employees of Borrower that is covered by Title IV of ERISA.
Prohibited Transaction - any transaction set forth in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986.
7
Reimbursement Agreement - Reimbursement Agreement dated as of June 1,
1999, among Color Image, Inc., a Georgia corporation, Kings Brothers and Bank,
as amended.
Reportable Event - any of the events set forth in Section 4043(b) of
ERISA.
Solvent - as to any Person, means such Person (i) owns property, real,
personal, and mixed, whose aggregate fair saleable value is greater than the
amount required to pay all of such Person's Debt (including contingent debts),
(ii) is able to pay all of its Debt as such Debt matures and (iii) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
Subordinated Debt - excluding Authorized Affiliated Debt, the Debt of
the Borrower owed to any officer, owner or employee of Borrower or to any
Affiliate which is fully subordinated to the Loan (including principal,
interest, and agreed charges) in a manner satisfactory to the Bank (which may be
either according to its terms or by separate agreement) and which Debt arises
from the Borrower's actual receipt of cash and not from "in kind" or non-cash
consideration.
Subsidiary - any corporate entity or partnership, or other business
entity, controlling interest of which is owned by the Borrower.
Tangible Net Worth - for any period, total equity, plus Subordinated
Debt less intangible assets, which include goodwill, patents, trademarks
organizational costs, capitalized financing costs and amounts due from officers,
shareholders or Affiliates.
1.2. ACCOUNTING TERMS. All accounting terms used herein shall be construed
in accordance with GAAP.
1.3. INTERPRETATION. The terms "herein", "hereof, and "hereunder", and
other words of similar import refer to this Agreement as a whole and not to any
particular section, paragraph or subdivision. Any pronouns used shall be deemed
to cover all genders. Whenever the singular or plural number is used herein, it
shall equally include the other. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any instruments or agreements, including, without
limitation, references to any of the Loan Documents shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
1.4. UNIFORM COMMERCIAL CODE. All other terms contained in this Agreement
shall, unless otherwise defined herein or unless the context otherwise
indicates, have the meanings provided for by the Uniform Commercial Code of the
State of Georgia.
ARTICLE II
THE LOAN
2.1. LOAN.
(a) Subject to all terms set forth herein but only during the
Commitment Period and for so long as no Event of Default exists, Bank agrees,
from time to time and on the terms hereinafter set forth, to loan to Borrower,
when requested by Borrower, principal amounts under the Loan aggregating up to
the lesser of (i) $1,500,000 or (ii) the Aggregate Loan Values as determined by
the Bank from the periodic reports submitted by Borrower to the Bank. Within the
aforesaid limits, the Borrower may borrow, make payments, and reborrow under the
Loan, subject to the provisions hereof. Advances made under the Loan shall be
subject to the Note.
8
(b) The obligation to repay the Loan shall be evidenced by the Note
payable to the order of the Bank and maturing upon the earlier to occur of an
Event of Default or the expiration of the Commitment Period. Amounts due under
the Note and otherwise under this Agreement and under the Loan Documents in
regard to the Loan shall be reflected in the Loan Account.
(c) Not later than July 31, 2003, Borrower shall submit a Borrower's
Report in the form attached hereto as EXHIBIT "A" (or in such other form as may
be furnished by Bank from time to time) effective as of June 30, 2003, and
thereafter at least quarterly (or on such other schedule as Bank may request
from time to time) thereafter during the term of this Agreement. Bank may, in
its sole discretion, require that each advance made under the Loan be effected
by Borrower's submitting (and the Bank's receiving) a Borrower's Report at least
one Business Day prior to the date Borrower desires the advance to be made. Bank
shall, if all the terms and provisions of this Agreement have been met,
including, without limitation, the absence of an Event of Default hereunder,
make such advances. Each such Borrower's Report shall be signed by an officer or
employee of Borrower authorized by Borrower to execute such reports, whose
name(s) shall be included in a certificate furnished to the Bank.
(d) At its discretion, Bank may make advances to Borrower under the
Loan without specific request by automatic advance based on availability in
accordance with procedures established by Bank. In addition, as an accommodation
to Borrower, Bank may permit telephonic requests for Loan and electronic
transmittal of instructions, authorizations, agreements or reports to Bank by
Borrower. Unless Borrower specifically directs Bank in writing not to accept or
act upon telephonic or electronic communications from Borrower, Bank shall have
no liability to Borrower for any loss or damage suffered by Borrower as a result
of Bank's honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to Bank
telephonically or electronically and purporting to have been sent to Bank by
Borrower and Bank shall have no duty to verify the origin of any such
communication or the authority of the person sending it.
(e) If the outstanding principal amount of the Loan at any time
exceeds the lesser of $ 1,500,000 or the Aggregate Loan Values as reflected on
the Borrower's Report, the Borrower shall immediately, upon demand by Bank, pay
the Bank an amount equal to such excess as a payment on the principal amount of
the Loan. Without limiting the foregoing, which provision may be enforced by
Bank at any time and which provision, as well as the other provisions hereof,
may not under any circumstance be waived or altered by a course of dealing or
otherwise, insofar as Borrower may request and Bank may be willing in its sole
and absolute discretion to make Overadvances, Bank shall enter such Overadvances
as debits in the Loan Account. All Overadvances shall be payable on demand,
shall be secured by the Collateral and shall bear interest as provided in this
Agreement for the Loan generally. Bank may in its sole discretion honor any
request (or deemed request) for an advance even though an Overadvance Condition
then exists, or would exist with the making of such advance, and without regard
to the existence of, and without waiving, any default or Event of Default.
(f) Each borrowing under the Loan shall be effected by crediting the
amount thereof to the regular checking account of Borrower maintained with the
Bank or with another bank approved by the Bank.
(g) The principal amount of the Loan shall bear interest at a rate per
annum equal to the LIBOR Rate plus two hundred fifty (250) basis points.
Interest shall be paid to Bank on the amount of the Loan outstanding and shall
be payable monthly in arrears on the first day of each month beginning with
August 1, 2003, and continuing on the same day of each month thereafter through
and until such time as there remains no unpaid principal balance on the amounts
advanced to the Borrower. Interest shall be calculated based on a 360-day year
(i.e., computed on the actual number of days elapsed over a year of 360 days
unless reference to a 365 or a 366-day year is necessary in order not to exceed
the highest rate permitted by Applicable Law). The applicable LIBOR Rate shall
be initially calculated on the date of initial applicability and shall be
recalculated by Bank on each regularly-scheduled payment date thereafter,
notwithstanding that such recalculation date is more or less than thirty (30)
days from the previous calculation date. If the recalculation date falls on a
9
date upon which Bank is not open for business, the recalculation shall occur on
the next business day on which Bank is open for business. From and after the
occurrence of an Event of Default, the principal amount of the Loan outstanding
from time to time shall, subject to the provisions of the following subsection,
bear interest at the Default Rate.
(h) Borrower acknowledges and agrees that the provisions herein and in
the Note relating to the Default Rate represent a fair and reasonable estimate
by Borrower and Bank of a fair average compensation for the loss that may be
sustained by Bank due to the failure of Borrower to make timely payments with
respect to the Obligations and for the cost and expenses that may be incurred by
Bank by reason of the occurrence of an Event of Default, the parties recognizing
that the damages caused by such extra administrative expenses and loss of the
use of funds is impracticable or extremely difficult to ascertain or estimate.
Interest at the Default Rate shall be paid without prejudice to the rights of
Bank to collect any other amounts provided to be paid hereunder.
(i) Bank shall enter disbursements under the Loan as debits to the
Loan Account and shall also record in the Loan Account all payments made by
Borrower and all proceeds of Collateral which are finally paid to Bank in regard
to the Loan, and may record therein, in accordance with customary accounting
practice, all charges and expenses properly chargeable to Borrower hereunder in
regard to the Loan.
(j) Borrower shall use the proceeds of the Loan for working capital
purposes only.
(k) Notwithstanding any provision in this Agreement, the Bank may, in
its sole discretion, at any time limit the amount of the Loan advanced to the
Borrower to an amount less than the Aggregate Loan Values. The Loan shall,
notwithstanding any course of dealing or conduct on the part of the parties
hereto, or any other covenants or undertakings of the parties hereunder, be
fully due and payable without further notice or demand from Bank upon the
expiration of the Commitment Period.
2.2. TERM. This Agreement shall remain in force and effect until the Loan
and the Obligations, and any renewals or extensions, and all interest thereon
and costs provided for herein with regard to either of them have been
indefeasibly paid or satisfied in full and until the Bank has no further
obligation to advance funds to the Borrower hereunder. The indemnities provided
for in Article XI shall survive the payment in full of the Loan and the
Obligations and the termination of this Agreement.
2.3. PAYMENTS. All sums paid to the Bank by Borrower hereunder the Note
shall be paid directly to the Bank in immediately available funds no later than
2:00 P.M., Atlanta, Georgia time on the date on which payment is due, except if
such date is not a Business Day such payment shall then be due on the first
Business Day after such date, but interest shall continue to accrue until the
date payment is received. Any payment received after 2:00 p.m. Atlanta, Georgia,
time shall be deemed to have been received on the immediately following Business
Day for all purposes, including, without limitation, the accrual of interest on
principal. The Bank shall send Borrower statements of all amounts due hereunder,
which statements shall be considered correct and conclusively binding on the
Borrower unless the Borrower notifies the Bank to the contrary within ten (10)
days of its receipt of any statement which it deems to be incorrect. The Bank
may, in its sole discretion, without waiver of any default or Event of Default
and without prejudice to any other remedy, (a) charge against any deposit
account of the Borrower all or any part of any amount due hereunder, including,
without limitation, the fees and expenses of the Bank to be paid by Borrower as
provided for in Sections 12.1 through 12.3 of this Agreement, any advances made
by Bank to protect the Collateral, and any commitment or servicing fee due the
Bank, and (b) advance to Borrower, and charge to the Loan, a sum sufficient each
month to pay all interest accrued on the Loan and fees and expenses due under
this Agreement, including, without limitation, the fees and expenses of the Bank
to be paid by Borrower as provided for in Sections 12.1 through 12.3 of this
Agreement, any advances made by Bank to protect the Collateral, and any
commitment or servicing fee due the Bank, during or for the immediately
preceding month or any month prior. Borrower shall be deemed to have requested
an advance under the Loan upon the occurrence of an overdraft in any of
10
Borrower's checking accounts maintained with the Bank or another bank owned by
SouthTrust Corporation.
2.4. APPLICATION OF PAYMENTS. Borrower irrevocably waives the right to
direct the application of any and all payments and collections at any time or
times hereafter received by Bank from or on behalf of Borrower or from any of
the Collateral, and Borrower does hereby irrevocably agree that Bank shall have
the continuing exclusive right to apply such payments and collections received
at any time or times hereafter by Bank or its agent against the Obligations, in
such manner as Bank may deem advisable, notwithstanding any entry by Bank upon
any of its books and records. If as the result of collections of Accounts or for
any other reason, a credit balance exists in the Loan Account, such credit
balance shall not accrue interest in favor of Borrower but shall be available to
Borrower at any time or times for so long as no Event of Default exists.
2.5 PREPAYMENT. Borrower shall have the right to prepay the Loan at any
time.
ARTICLE III
CONDITIONS OF LENDING
Bank shall not be obligated to make or continue the Loan, or to make any
advance under the Loan, unless at the time thereof the following conditions
shall have been met:
3.1. CORPORATE PROCEEDINGS. All proper corporate proceedings shall have
been taken by Borrower to authorize this Agreement and the transactions
contemplated hereby.
3.2. DOCUMENTATION. All instruments and proceedings in connection with the
transactions contemplated by this Agreement shall be satisfactory in form and
substance to Bank, and Bank shall have received on the date of this Agreement
copies of all documents, including records of corporate proceedings, which it
may have requested in connection therewith, including, without limitation,
certified copies of resolutions adopted by the Board of Directors of the
Borrower, certificates of good standing, and certified copies of the Articles of
Incorporation and By-Laws, and all amendments thereto, of the Borrower.
3.3. LOAN DOCUMENTS. Bank shall have received executed copies of all
instruments evidencing security for the Loan and copies of the insurance
policies and related certificates of insurance referred to in Sections 6.1 and
9.6 of this Agreement.
3.4. NO DEFAULT. No event shall have occurred or be continuing which
constitutes an Event of Default or which would constitute an Event of Default
with the giving of notice or the lapse of time or both; and neither the business
nor assets nor the condition, financial or otherwise, of Borrower shall have
been adversely affected in any material manner as the result of any fire,
explosion, accident, strike, riot, condemnation, act of God, or any other event
or development.
3.5. REPORTS. Bank shall have received all reports and information from
Borrower called for under the Agreement as and when due.
3.6. PAYMENT OF FEES. Payment by Borrower of all fees and expenses required
by this Agreement.
3.7. INCUMBENCY CERTIFICATE. Bank shall have received an incumbency
certificate, dated as of the date of this Loan Agreement, executed by the
Secretary or Assistant Secretary of Borrower, which shall identify by name and
title and bear the signature of the officer of such Borrower authorized to sign
this Loan Agreement and the Note on behalf of the Borrower. The Bank shall be
entitled to rely upon such incumbency certificate in completing the transactions
contemplated herein or in any Loan Document and in all its other dealings with
Borrower.
11
3.8. CONSENTS. Bank shall have received consents and agreements of the
landlords of each of the premises leased by Borrower on which the Collateral is
located as provided in Section 4.1 hereof, all in form satisfactory to Bank.
3.9. LIEN SEARCH. Bank shall have received a report acceptable to Bank
indicating that there are no Liens against that portion of the Collateral
constituting personal property except Permitted Liens.
3.10. DISBURSEMENT AUTHORIZATION. Borrower shall have delivered to bank
such disbursement authorizations, draw requests, and other documents and
writings as Bank shall have requested evidencing Borrower's request for
disbursement of funds.
3.11. ADDITIONAL DOCUMENTS. Bank shall have received such additional legal
opinions, certificates, proceedings, instruments and other documents as the Bank
or its counsel may reasonably request to evidence (i) compliance by the Borrower
with legal requirements, (ii) the truth and accuracy, as of the date of this
Agreement, of the representations and warranties of Borrower contained herein,
and (iii) the due performance or satisfaction by the Borrower, at or prior to
the date hereof, of all agreements required to be performed and all conditions
required to be satisfied by the Borrower pursuant hereto, including, without
limitation, all such matters as are listed on any preliminary closing checklist
issued by Bank and furnished to Borrower.
ARTICLE IV
SECURITY FOR LOAN
The Loan and the Note shall be secured by each of the following:
(a) A first priority security interest in Borrower's Accounts, General
Intangibles, Equipment, and Inventory, the Collateral, and other properties and
interests as provided for in Section 8.1 and other parts of this Agreement
(except that Lender's security interest shall be second (2nd) priority in regard
to the Equipment described on EXHIBIT "G" attached hereto and by this reference
made a part hereof, subject only to Lender's security interest therein to secure
Borrower's obligations under the Reimbursement Agreement, as more particularly
set out in the Partial Liability Severance and Limitation Agreement dated as of
April 7, 2003, among Bank, Borrower, Kings Brothers and others); and
(b) This Agreement and the other Loan Documents.
Part of the Equipment may constitute motor vehicles and other vehicles
subject to registration under the motor vehicle title registration statutes of
Georgia or other states, and with respect to which the security interest of Bank
therein is required to be registered on the vehicle title certificate. Borrower
agrees to execute and deliver on a timely basis all such title certificates and
instruments as shall be requested by Bank from time to time.
Part of the Equipment may be affixed to real estate owned or leased by
Borrower and constitute fixtures under the Uniform Commercial Code. The Borrower
agrees that any such fixtures shall be included within the meaning of Equipment
as used and defined herein and that the Bank is hereby granted a security
interest in and a lien upon such fixtures.
The Borrower agrees to execute and deliver, or cause the execution and
delivery of, such security agreements, deeds of trust, mortgages, assignments,
guaranties, consents, subordination agreements, and financing statements as may
be required by Bank to evidence such security, all in form satisfactory to Bank,
as well as such consents and agreements of the landlords of each of the premises
leased by Borrower on which the Collateral is located, all in form satisfactory
to Bank.
12
ARTICLE V
REPRESENTATIONS, WARRANTIES AND GENERAL COVENANTS
Borrower represents, warrants and covenants to and with Bank, which
representations, warranties and covenants shall survive until the Obligations
are indefeasibly satisfied in full, that:
5.1. ORGANIZATION AND QUALIFICATION. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has the corporate power to own its properties and to carry on its
business as now being conducted; and is duly qualified to do business and is in
good standing in every jurisdiction in which the character of the properties
owned by it or in which the transaction of its business makes its qualification
necessary.
5.2. CORPORATE POWER AND AUTHORIZATION. Borrower has full power and
authority to enter into this Agreement, to borrow hereunder, to execute and
deliver the Note and the other Loan Documents and to incur the obligations
provided for herein, all of which have been authorized by all proper and
necessary corporate action.
5.3. ENFORCEABILITY. This Agreement, the Note and each of the other Loan
Documents constitute a valid and legally binding obligation of Borrower
enforceable in accordance with their respective terms and will not violate,
conflict with, or constitute any default under any law, government regulation,
Borrower's Articles of Incorporation or By-Laws, or any other agreement or
instrument binding upon Borrower.
5.4. PENDING ACTIONS. Borrower is not a defendant, or a plaintiff against
whom a counterclaim or crossclaim has been asserted, in any civil or criminal
action, suit or litigation, and no action or investigation is pending or, so far
as Borrower's officers and directors know, threatened before or by any court or
administrative agency which might result in any material adverse change in the
financial condition, operations or prospects of Borrower.
5.5. FINANCIAL STATEMENTS. The financial statements of Borrower dated
heretofore delivered to Bank and all other financial statements and reports
furnished by Borrower to Bank are complete and correct and fairly present the
financial condition of Borrower and the results of its operations and
transactions as of the dates and for the periods referred to and have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved. There are no liabilities, direct or indirect, fixed or
contingent, of Borrower as of the date of such financial statements which are
not reflected therein or in the Note thereto. Neither said financial statements
nor any other financial statements, reports, and information furnished by
Borrower to Bank contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein or herein not
misleading. There is no fact which Borrower has failed to disclose to Bank in
writing which materially affects adversely or, so far as Borrower can now
foresee, will materially affect adversely the Collateral, business, prospects,
profits or condition (financial or otherwise) of Borrower or the ability of
Borrower to perform this Agreement.
5.6. TITLE TO PROPERTIES. Borrower has good and marketable title to all of
its assets, other than the Collateral, subject to no Lien, mortgage, pledge,
encumbrance, or charge of any kind except inchoate Liens arising by operation of
law for obligations which are not yet due and except for Permitted Liens.
Borrower enjoys peaceable and undisturbed possession under all leases under
which it is operating, and none of such leases contain any provisions which may
materially and adversely affect or impair the operations of the Borrower, and
all of such leases are valid and subsisting and in full force and effect.
5.7. PENSION PLANS. Except as set forth on EXHIBIT "D", Borrower has not
established and is not a party to any Plan or to any stock option or deferred
compensation plan or contract for the benefit of its employees or officers, any
pension, profit sharing or retirement plan, stock redemption agreement, or any
other agreement or arrangement with any officer, director or stockholder,
members of their families, or trusts for their benefit. Borrower is in
compliance with all applicable provisions of ERISA. Neither Borrower nor any of
its Subsidiaries has received any notice to the effect that it is not in full
compliance with any of the requirements of ERISA and the regulations promulgated
13
thereunder. No fact or situation that could result in a material adverse change
in the financial condition of Borrower, including, but not limited to, any
Reportable Event or Prohibited Transaction, exists in connection with any Plan.
Neither Borrower nor any of its Subsidiaries has any withdrawal liability in
connection with a Multiemployer Plan.
5.8. TAXES. Borrower has filed all federal, state and local tax returns
which are required to be filed and has paid, or made adequate provision for the
payment of, all taxes which have or may become due pursuant to said returns or
to assessments received by Borrower, including, without limitation, all
applicable federal, state, and local employee withholding taxes.
5.9. TITLE TO COLLATERAL. Except for Permitted Liens, Borrower is, or as to
Collateral to be acquired after the date hereof will be, the sole owner of the
Collateral free from any adverse Liens, security interests or other
encumbrances. Borrower shall defend the Collateral against all claims and
demands of all other parties who at any time claim any interest in the
Collateral.
5.10. PLACE OF BUSINESS. Borrower's chief executive office is located at
4350 Peachtree Industrial Avenue, Suite 100, Norcross, Gwinnett County, Georgia
30071. The Inventory and Equipment and other Collateral is and shall be located
only at the locations listed on EXHIBIT "C" to this Agreement. Except as
indicated on said exhibit, the real estate constituting each said location is
owned by Borrower. With respect to locations not owned by Borrower, said exhibit
sets forth the name and address of each landlord, the location of the property,
and the remaining term of the lease. Borrower has separately furnished to Bank
true and correct copies of the lease agreements for each said parcel.
5.11. FULL DISCLOSURE. All information furnished by Borrower to the Bank
concerning the Borrower, its financial condition, the Collateral, or otherwise
for the purpose of obtaining credit or an extension of credit, is, or will be at
the time the same is furnished, accurate and correct in all material respects
and complete insofar as completeness may be necessary to give the Bank a true
and accurate knowledge of the subject matter.
5.12. BORROWER'S NAME. Borrower has not changed its name or been known by
any other name within the last five (5) years, nor has it been the surviving
corporation in a merger effected within the last five (5) years, except for (a)
consummation of the transactions described in Merger Agreement and Plan of
Reorganization dated as of May 16, 2000, among Advatex Associates, Inc., Logical
Acquisition Corp., Color Acquisition Corp., Logical Imaging Solutions, Inc. and
Color Image, Inc., a Georgia corporation, as amended June 15, 2000, and (b)
merger with Color Image, Inc., a Georgia corporation, in which Borrower was the
surviving corporation. Borrower does not now use nor has it ever used any trade
or fictitious name in the conduct of its business, except for "Color Image".
5.13. EXISTING DEBT. Borrower is not in default with respect to any of its
existing Debt or with respect to any material agreement to which Borrower is a
party.
5.14. INSOLVENCY. Borrower is now and, after giving effect to the
transactions contemplated hereby, at all times will be, Solvent. The benefits
received by Borrower as a result of this Agreement and the Loan equal or exceed
in value the obligations incurred under this Agreement and the value of
Borrower's interest in the Collateral. The execution, delivery and performance
of this Agreement will assist Borrower in preserving its assets and continuing
its business activities.
5.15. SUBSIDIARIES. Borrower has no Subsidiaries.
5.16. ENVIRONMENTAL MATTERS. Borrower is in compliance with all
Environmental Regulations and with all other federal, state and local laws and
regulations relating to the environment and pollution, including such laws and
regulations regulating hazardous, radioactive and toxic materials and
underground petroleum products storage tanks. No assessment, notice of (primary
or secondary) liability or notice of financial responsibility, and no notice of
14
any action, claim, investigation, proceeding, or inquiry to determine such
liability or responsibility, or the amount thereof, or to impose civil penalties
has been received by Borrower, and there are no facts, conditions or
circumstances known to Borrower which could result in any investigation or
inquiry if all such facts, conditions, and circumstances, if any, were fully
disclosed to the applicable governmental authority. Borrower has paid any
environmental excise taxes due and payable, including without limitation, those
imposed pursuant to Sections 4611, 4661, or 4681 of the Internal Revenue Code of
1986, as amended from time to time. Borrower has not obtained and is not
required to obtain any permits, licenses, or similar authorizations to
construct, occupy, operate or use any buildings, improvements, fixtures or
equipment in connection with its business by reason of any Environmental
Regulations. No oil, toxic or hazardous substances or solid wastes have been
disposed of or released by Borrower in connection with the operation of its
business and Borrower will not dispose of or release oil, toxic or hazardous
substances or solid wastes at any time in its operation of its business (the
terms "hazardous substance" and "release" shall have the meanings specified in
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), and the terms "solid waste" and "disposal,"
"dispose" or "disposed" shall have the meanings specified in the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), except that if such
acts are amended to broaden the meanings thereof, the broader meaning shall
apply herein).
5.17. OWNERSHIP. Borrower is a public corporation, the shares of which are
traded over the counter.
5.18. INVENTORY. All Inventory has been produced, and during the term
hereof will be produced, in compliance with the requirements of the Federal Fair
Labor Standards Act. No Inventory is now, nor shall any Inventory at any time or
times hereafter be, stored with a bailee, warehouseman or similar party without
Bank's prior written consent and, if Bank gives such consent, Borrower will
concurrently therewith cause any such bailee, warehouseman, or similar party to
issue and deliver to Bank, in form and substance acceptable to Bank, warehouse
receipts therefor in Bank's name. No Inventory is or will be consigned to any
Person without Bank's prior written consent, and, if such consent is given,
Borrower shall, prior to the delivery of any Inventory on consignment, (i)
provide Bank with all consignment agreements to be used in connection with any
consigned inventory, all of which shall be acceptable to Bank, (ii) prepare,
execute and file appropriate financing statements with respect to any such
consigned inventory, showing Bank as assignee, (iii) conduct a search of all
filings made against the consignee in all jurisdictions in which any consigned
Inventory is to be located and deliver to Bank copies of the results of all such
searches, (iv) notify, in writing, all the creditors of the consignee which are
or may be holders of Liens in the Inventory to be consigned that Borrower
expects to deliver certain inventory to the consignee, all of which Inventory
shall be described in such notice by item or type, and (v) do all such other
things and acts as may be necessary or desirable to fully perfect on a first
priority basis Bank's security interest in said Inventory.
5.19. LABOR RELATIONS. Neither Borrower nor any of its Subsidiaries is a
party to any collective bargaining agreement, and there are no material
grievances, disputes or controversies with any union or any other organization
of Borrower's employees, or threats of strikes, work stoppages or any asserted
pending demands for collective bargaining by any union or organization.
5.20. TRADE RELATIONS. There exists no actual or threatened termination,
cancellation or limitation of, or any modification or change in, the business
relationship between Borrower and any customer or any group of customers whose
purchases individually or in the aggregate are material to the business of
Borrower, or with any material supplier, and there exists no present condition
or state of facts or circumstances which would materially affect adversely
Borrower or prevent Borrower from conducting such business after the
consummation of the transaction contemplated by this Agreement in substantially
the same manner in which it has heretofore been conducted.
15
5.21. PARTNERSHIPS. Borrower is not a partner or joint venturer with any
other Person or a participant in any business enterprise other than its own for
which it is generally liable, nor does Borrower have any contingent liabilities
of any description other than as indicated in the financial statements
heretofore delivered to Bank.
5.22. SURETY OBLIGATIONS. Borrower is not obligated as guarantor, surety or
indemnitor under any indemnity, guaranty, surety or similar bond or other
contract issued or entered into or any agreement to assure payment, performance
or completion of performance of any undertaking or obligation of any Person,
except under manufacturer's warranties issued in the ordinary course of
Borrower's business.
5.23. NO APPROVAL. No authorization or approval or other action by, and no
notice to or filing with, any federal, state, or local government body, agency,
or authority is required for the due execution, delivery, and performance by
Borrower of this Agreement, the Note, or the Loan Documents.
5.24. RACKETEERING. Borrower is not engaged in any activity that might
constitute a pattern of racketeering activity or in any other conduct that might
subject all or a material portion of Borrower's assets to forfeiture.
5.25. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Borrower owns or
possesses all the patents, trademarks, service marks, trade names, copyrights
and licenses necessary for the present and planned future conduct of its
business without any known conflict with the rights of others. All patents,
trademarks, service marks, tradenames, copyrights, licenses and other similar
rights owned or used by Borrower are listed on EXHIBIT "E" attached hereto and
made a part hereof. Where said patents are not owned outright by Borrower, said
exhibit lists the owner thereof and identifies the license or other agreement
pursuant to which they are used by Borrower.
5.26. REPRESENTATIONS TRUE. No representation or warranty by the Borrower
contained herein or in any certificate or other document furnished by the
Borrower pursuant hereto contains any untrue statement of material fact or omits
to state a material fact necessary to make such representation or warranty not
misleading in light of the circumstances under which it was made.
ARTICLE VI
GENERAL COVENANTS
Borrower agrees and covenants that until the Obligations have been
indefeasibly paid in full and until the Bank has no further obligation to make
advances under the Loan, Borrower shall:
6.1. INSURANCE. Maintain insurance with insurance companies satisfactory to
Bank on such of its properties, in such amounts and against such risks as is
customarily maintained in similar businesses operating in the same vicinity, and
shall file with Bank upon request, from time to time, a detailed list of the
insurance then in effect, stating the names of the insurance companies, the
amounts and rates of the insurance, dates of expiration thereof, and the
properties and risks covered thereby, and, within 10 days after notice in
writing from Bank, shall obtain such additional insurance as Bank may reasonably
request. All such policies shall name the Bank as a named insured and provide
that any losses payable thereunder shall (pursuant to loss payable clauses, in
form and content acceptable to the Bank, to be attached to each policy) be
payable to the Bank, and provide that the insurance provided thereby, as to the
interest of the Bank, shall not be invalidated by any act or neglect of the
Borrower, nor by the commencing of any proceedings by or against the Borrower in
bankruptcy, insolvency, receivership or any other proceedings for the relief of
a debtor, nor by any foreclosure, repossession or other proceedings relating to
the property insured, nor by any occupation of such property or the use of such
property for purposes more hazardous than permitted in the policy. Borrower
hereby assigns to the Bank all right to receive proceeds, directs any insurer to
pay all proceeds directly to the Bank, and authorizes the Bank to endorse any
check or draft for such proceeds and apply the same toward satisfaction of the
Obligations. The Borrower shall furnish to the Bank insurance certificates, in
form and substance satisfactory to the Bank, evidencing compliance by it with
16
the terms of this Section and, upon the request of the Bank at any time, the
Borrower shall furnish the Bank with photostatic copies of the policies required
by the terms of this Section. The Borrower will cause each insurer under each of
the policies to agree (either by endorsement upon such policy or by letter
addressed to the Bank) to give the Bank at least 10 days' prior written notice
of the cancellation of such policies in whole or in part or the lapse of any
coverage thereunder. Borrower agrees that it will not take any action or fail to
take any action which action or inaction would result in the invalidation of any
insurance policy required hereunder. At least 10 days prior to the date the
premiums on each such policy or policies shall become due and payable, the
Borrower shall furnish to the Bank evidence of the payment of such premiums.
Borrower shall furnish to the Bank such evidence of insurance as Bank may
require.
6.2. CORPORATE EXISTENCE: QUALIFICATION. Maintain its corporate existence
and, in each jurisdiction in which the character of the property owned by it or
in which the transaction of its business makes its qualification necessary,
maintain good standing.
6.3. TAXES. During each fiscal year, accrue all current tax liabilities of
all kinds, all required withholding of income taxes of employees, all required
old age and unemployment contributions, all required payments to employee
benefit plans, and pay the same when they become due.
6.4. COMPLIANCE WITH LAWS. Comply with all Applicable Laws, including,
without limitation, Environmental Regulations, and pay all taxes, assessments,
charges, claims for labor, supplies, rent, and other obligations. Specifically,
Borrower shall pay when due all taxes and assessments upon the Collateral, this
Agreement, the Note, or any Loan Document, including, without limitation, any
stamp taxes or intangibles taxes imposed by virtue of the transactions outlined
herein.
6.5. ANNUAL FINANCIAL STATEMENTS. Within 120 days after the close of each
fiscal year, furnish Bank with annual audited financial statements of Borrower
consisting of balance sheets, operating statements and such other statements as
Bank may reasonably request, for the period(s) involved, prepared in accordance
with GAAP consistently applied for the period involved and for the preceding
fiscal year and certified as reviewed by independent certified public
accountants acceptable to the Bank. At the time of furnishing said financial
statements, Borrower shall furnish Bank with (i) a certificate from the
President or the chief financial officer of Borrower, or any other officer of
Borrower properly authorized as evidenced by a Secretary's Certificate,
including resolution and incumbency certificate, in form and substance
acceptable to Bank, stating that (A) the certifier has reviewed this Agreement
and the affairs of Borrower, (B) to the best of the certifier's knowledge and
belief the certifier is unaware of the occurrence of an event which constitutes
an Event of Default hereunder or which would constitute such an Event of Default
with the giving of notice or the lapse of time or both, and, if so, stating the
facts with respect thereto, (C) setting forth the calculations to show
compliance with the financial covenants set forth herein, said certificate to be
in the form of EXHIBIT "F" hereto unless otherwise specified by Bank, and (ii) a
letter from such independent certified public accountants stating that the Bank
may rely on such financial statements and their opinion with respect thereto.
6.6. INTERIM FINANCIAL STATEMENTS. Within 45 days after the close of each
fiscal quarter, furnish Bank with unaudited quarterly and year-to-date financial
statements of Borrower, consisting of balance sheets and operating statements
and a listing of all contingent liabilities of the Borrower for the periods
involved and such other statements as Bank may request, prepared in accordance
with GAAP applied on a basis consistent with the financial statement(s)
previously furnished to Bank, taken from the books and records of Borrower and
certified as correct by the chief financial officer of Borrower. At the time of
furnishing such financial statements, Borrower shall furnish Bank with a
certificate from the President or the chief financial officer of Borrower, or
any other officer of Borrower properly authorized as evidenced by a Secretary's
Certificate, including resolution and incumbency certificate, in form and
substance acceptable to Bank, stating that the certifier has reviewed this
Agreement and the affairs of the Borrower and that to the best of the
certifier's knowledge and belief the certifier is unaware of the occurrence of
an event which constitutes an Event of Default hereunder or which would
constitute such an Event of Default with the giving of notice or the lapse of
17
time or both, and if so, stating the facts with respect thereto. Said
certificates shall further confirm that Borrower was at the time of issuance of
said financial statements, and has at all times since, been Solvent. Unless
otherwise specified by Bank, said certificate shall be in the form of EXHIBIT
"F" hereto. In addition, Borrower shall furnish to Bank upon request by Bank
from time to time all federal and state tax returns and informational reports,
including, without limitation, the Form 941 Quarterly payroll tax information
form and all other forms filed with any state, federal, or local agency
pertaining to payment of applicable payroll and other federal, state and local
taxes.
6.7. VISITS AND INSPECTIONS. Permit persons designated by Bank to inspect
any and all of the property and corporate and financial books and records of
Borrower and to discuss its affairs with its officers and employees at such
reasonable times as Bank shall request and furnish Bank with such miscellaneous
information as it may request.
6.8. PAYMENTS ON NOTE. Duly and punctually pay the principal and interest
on the Note, in accordance with the terms of this Agreement and of the Note, and
pay all other Debt of Borrower reflected on the financial statements delivered
to Bank and referred to in Section 5.5 hereof and all other Debt incurred after
the date hereof in accordance with the terms of such Debt, it being understood,
however, that this Section shall not be deemed to permit any Debt in violation
of the provisions of Sections 7.1 and 7.2 hereof.
6.9. CONDUCT OF BUSINESS. Conduct its business as now conducted and do all
things necessary to preserve, renew and keep in full force and effect its
rights, privileges and franchises necessary to continue its business.
6.10. MAINTENANCE OF PROPERTIES. Keep its properties in good repair,
working order and condition, reasonable wear and tear excepted, and from time to
time make all needed and proper repairs, renewals, replacements, additions, and
improvements thereto and comply with the provisions of all leases to which it is
a party or under which it occupies property so as to prevent any loss or
forfeiture thereof or thereunder.
6.11. ADDITIONAL DOCUMENTS. Join the Bank in executing any security
agreements, assignments, consents, financing statements or other instruments, in
form satisfactory to the Bank, as the Bank may from time to time request in
connection with the Collateral and the other security for the Loan referred to
in Section 4.1 hereof.
6.12. NOTICE TO BANK. Immediately notify the Bank of (i) any event causing
a material loss or depreciation in value of the Collateral and the amount of
such loss or depreciation, (ii) if Borrower becomes aware of the occurrence of
any Event of Default or of any fact, condition or event that, with the giving of
notice or passage of time, or both, could become an Event of Default or of the
failure of the Borrower to observe any of its undertakings hereunder, or (iii)
any material lawsuit involving Borrower.
6.13. COLLATERAL REPORTS. Furnish to Bank at least quarterly (and more
frequently if requested by Bank) a detailed accounts receivable aging report, a
detailed accounts payable aging report, and an inventory report, all in form and
substance, and containing such detail and information, as Bank shall request,
and furnish to Bank copies of all physical inventory listings when prepared by
Borrower.
6.14. SUBORDINATION OF DEBT. Provide Bank with a debt subordination
agreement, in form and substance satisfactory to Bank, executed by Borrower and
any Person who is an officer, director, shareholder or Affiliate of Borrower to
whom Borrower is or hereafter becomes indebted, subordinating in right of
payment and claim all Debt owed by Borrower to any said Person and any future
advances thereon to the full and final payment of the Obligations.
6.15. COLLECTION OF ACCOUNTS. Diligently pursue collection of all Accounts
and other amounts due Borrower by others, including Affiliates of Borrower.
18
6.16. LANDLORD AND STORAGE AGREEMENTS. Provide Bank with copies of all
agreements between Borrower and any landlord or warehouseman which owns any
premises at which any inventory or other Collateral may, from time to time, be
kept.
6.17. AUDITORS, INSURANCE REPRESENTATIVES AND AGENTS. Furnish the Bank with
a copy of each letter written to the Borrower by its independent certified
public accountant concerning internal controls and management review immediately
upon receipt of same and any comments made by the Borrower with respect thereto
and permit Bank to communicate directly with said accountants and with
Borrower's insurance representatives and agents regarding the financial affairs
and condition of Borrower, the books and records of Borrower, and insurance
matters pertaining to Borrower's business.
6.18. ERISA COMPLIANCE. (i) At all times make prompt payment of
contributions required to meet the minimum funding standards set forth in ERISA
with respect to each Plan; (ii) promptly after the filing thereof, furnish to
Bank copies of any annual report required to be filed pursuant to ERISA in
connection with each Plan and any other employee benefit plan of it and its
Affiliates; (iii) notify Bank as soon as practicable of any Reportable Event and
of any additional act or condition arising in connection with any Plan which
Borrower believes might constitute grounds for the termination thereof by the
Pension Benefit Guaranty Corporation or for the appointment by the appropriate
United States district court of a trustee to administer the Plan; and (iv)
furnish to Bank, promptly upon Bank's request therefor, such additional
information concerning any Plan or any other such employee benefit plan as may
be reasonably requested.
6.19. BANK ACCOUNTS. Maintain its principal bank accounts with the Bank or
another bank designated by the Bank, except that Borrower may continue to
maintain its payroll account where it is presently located.
6.20. BUSINESS RECORDS. Keep, and cause each Subsidiary to keep, adequate
records and books of account with respect to its business activities in which
proper entries are made in accordance with GAAP reflecting all its financial
transactions.
6.21 FINANCIAL COVENANTS. Maintain at all times that this Agreement is in
effect the following:
(a) Fixed Charge Coverage Ratio with respect to the twelve-month
period ending on the last day of any Fiscal Quarter of any Fiscal
Year of not less than 1.2:1:00, excluding from the calculation
(i) Authorized Affilate Debt and (ii) liabilities and obligations
of Kings Brothers under the Reimbursement Agreement;
(b) a ratio of Debt to Tangible Net Worth of not more than 2.1 to 1,
including in the definition of "Debt" Authorized Affiliate Debt,
but excluding liabilities and obligations of Kings Brothers under
the Reimbursement Agreement; and
(c) Tangible Net Worth of not less than $7,000,000.
The note receivable of $974,000 owed to Borrower from Kings Brothers in regard
to Kings Brother's portion of the $1,100,000 industrial revenue bond obligation
to which the Reimbursement Agreement pertains shall not be deducted from equity
to determine Tangible Net Worth. The offsetting debt of $974,000 shall not be
included in the definition of Debt for covenant calculation purposes.
6.22. FILING. Deliver to Bank a copy of any filings with any governmental
body, agency or authority which regulates Borrower's business (except for tax
returns filed in the ordinary course of business).
19
ARTICLE VII
NEGATIVE COVENANTS
Until the Obligations have been indefeasibly repaid and satisfied in full
and until the Bank has no further obligation to make advances under the Loan,
without the prior written consent of Bank, the Borrower shall not:
7.1. INDEBTEDNESS. Except as permitted or contemplated by this Agreement,
create, incur, assume or suffer to exist any Debt or obligation for money
borrowed, or guarantee, or endorse, or otherwise be or become contingently
liable in connection with the obligations of any Person (including, without
limitation, any Affiliate), except
7. 1. 1. Indebtedness for taxes not at the time due and payable or
which are being actively contested in good faith by appropriate proceedings and
against which reserves deemed adequate by Bank have been established by
Borrower, but only if the non-payment of such taxes being contested does not
result in a Lien upon any property of Borrower that has priority over the Lien
held by Bank;
7.1.2. Contingent liabilities arising out of the endorsement of
negotiable instruments in the ordinary course of collection or similar
transactions in the ordinary course of business;
7.1.3. Accounts payable to trade creditors which are not aged more
than one hundred twenty (120) days from billing date and current operating
expenses (other than for borrowed money) which are not more than sixty (60) days
past due, in each case incurred in the ordinary course of business and paid
within such time period, unless the same are actively being contested in good
faith and by appropriate and lawful proceedings and Borrower shall have set
aside such reserves, if any, with respect thereto as have been recommended by
independent public accountants;
7.1.4. Debt to third parties for purchase money borrowing incurred in
connection with the purchase of capital assets used in the business of Borrower
not to exceed $100,000 during any fiscal year of Borrower;
7.1.5. Debt for money borrowed from the Bank;
7.1.6 Subject to Section 7.1.7, Debt to Affiliates provided that and
so long as (a) such Debt at no time exceeds One Million Dollars ($1,000,000) in
outstanding principal amount in the aggregate; (b) such Debt is in all respects
and at all times subordinate and subject to the Obligations pursuant to
subordination agreements acceptable to Bank in its sole discretion; (c) such
Debt requires Borrower to pay only interest thereon so long as the Obligations
or any portion thereof is outstanding, except that such Debt may require
Borrower to pay principal to the extent of additional cash equity investments
actually made in Borrower, and (d) no Event of Default exists; and
7.1.7 Authorized Affiliate Debt, provided that and so long as no Event
of Default exists hereunder or results from any payment under Authorized
Affiliated Debt.
7.2. LIENS AND SECURITY INTERESTS. Create, incur, assume, or suffer to
exist any mortgage, security deed, deed of trust, security interest, pledge,
encumbrance, Lien or charge of any kind (including charges on property purchased
under conditional sales or other title-retention agreements) on any of its
property or assets, now owned or hereafter acquired, except for the following
(all of which are referred to herein as "Permitted Liens"):
20
7.2.1. Liens for taxes not yet due or which are being contested in
good faith by appropriate proceeding and against which reserves deemed adequate
by Bank have been set up (excluding any Lien imposed pursuant to any of the
provisions of ERISA);
7.2.2. Other Liens, charges and encumbrances incidental to the conduct
of its business or the ownership of its property and assets and created by
operation of law;
7.2.3. Purchase money Liens and encumbrances created to secure the
indebtedness permitted by Section 7.1.4 hereof;
7.2.4. Liens, charges and encumbrances in favor of the Bank; and
7.2.5. Liens, charges and encumbrances reflected on EXHIBIT "B" to
this Agreement.
7.3. DIVIDENDS AND DISTRIBUTIONS. Declare any dividends on any shares of
any class of its capital stock, or apply any of its property or assets to the
purchase, redemption or other retirement of, or set apart any sum for the
payment of any dividends on, or for the purchase, retirement of, or make any
other distribution by reduction of capital or otherwise in respect of, any
shares of any class of capital stock of the Borrower, except under the stock
repurchase plans described on SCHEDULE 7.3 hereto; provided, however, that
during such time as Borrower maintains an effective election to be taxed under
the provisions of Chapter "S" of the Internal Revenue Code of 1978, as amended,
Borrower shall be entitled to distribute to its shareholders in each year an
amount not to exceed that portion of the federal income tax liability incurred
by each said shareholder on income tax returns for the prior year which resulted
from its holdings of shares in Borrower.
7.4. AFFILIATE TRANSACTIONS. Purchase, acquire or lease property from, or
sell, transfer or lease any inventory, materials, goods, equipment, assets,
rights or property to, any Affiliate of Borrower, except in the ordinary course
of Borrower's business and under terms and conditions which would apply if
disinterested parties were involved.
7.5. FINANCING STATEMENTS. Permit any financing statement (except Bank's
financing statements) to be on file with respect to the Collateral.
7.6. LOCATION OF COLLATERAL. Change the locations at which the Collateral
is maintained; change the name, identity, or corporate structure of Borrower;
adopt or make use of any fictitious or trade name not disclosed elsewhere in
this Agreement; or change the location of its chief executive office.
7.7. DESTRUCTION OF COLLATERAL. Waste or destroy the Collateral or use it
in violation of any statute or ordinance.
7.8. MERGER OR CONSOLIDATION. Enter into any merger or consolidation or
acquire all or substantially all of the assets of any Person; or sell, lease, or
otherwise dispose of any of its assets in an aggregate amount exceeding $50,000
during any fiscal year, except sales in the ordinary course of its business.
7.9. LOANS OR ADVANCES. Make Loan or make advances or pay any management or
similar fees to any Person.
7.10. ACQUISITIONS. Purchase or acquire the obligations or stock of or any
other interest in any Person, except direct obligations of the United States of
America or certificates of deposit or other investments issued by the Bank or by
any bank designated in writing by the Bank.
7.11. PAYMENT OF DEBT. Pay any portion of the principal of, or prepay, any
Debt except Debt to the Bank; provided, however, the Borrower may take ordinary
trade discounts on purchases made in the ordinary course of business and make
21
payments or prepayments under Authorized Affiliate Debt provided that and so
long as no Event of Default exists or results from any such payment.
7.12. LEASE TRANSACTIONS. Enter into any sale and lease-back arrangement,
either directly or indirectly.
7.13. AMENDMENTS. Amend any instrument evidencing a Permitted Lien or the
indebtedness secured thereby.
7.14. SALARIES. Increase the salary and fringe benefits of any officer or
director or shareholder or any Affiliate of any officer or director or
shareholder of Borrower by more than 15% in any fiscal year from the amount paid
in the previous fiscal year.
7.15. ADVERSE TRANSACTIONS. Enter into any transaction, or permit any
Subsidiary to enter into any transaction, which materially and adversely affects
or may materially and adversely affect the Collateral or Borrower's ability to
repay the Obligations or permit or agree to any material extension, compromise
or settlement or make any change or modification of any kind or nature with
respect to any Account, including any of the terms relating thereto, other than
discounts and allowances in the ordinary course of business.
7.16. SUBSIDIARY ACQUISITIONS. Hereafter create any Subsidiary or divest
itself of any material assets by transferring them to any Subsidiary.
7.17. SUBSIDIARY DIVESTITURES. Transfer, sell, pledge, encumber or
otherwise assign any shares of stock or other interest in any Subsidiary or
permit any Subsidiary to sell or otherwise dispose of all of substantially all
of its assets.
7.18 PARTNERSHIPS OR JOINT VENTURES. Become or agree to become a general or
limited partner in any general or limited partnership or a joint venturer in any
joint venture.
7.19. SUBORDINATED DEBT. Make any payment (principal or interest) with
respect to Subordinated Debt, or with respect to any Debt that would be
Subordinated Debt but for the absence of a subordination agreement in effect
with respect thereto.
ARTICLE VIII
GRANT OF SECURITY INTEREST
8.1. SECURITY INTEREST. As security for the payment of the Loan and all
other Obligations, now existing or in the future incurred, and including any
extensions or renewals or changes in form of the Loan, any Overadvances, and any
other Debt of Borrower to the Bank, and all costs and expenses of collection
thereof, including, without limitation, attorneys' fees, Borrower hereby assigns
to Bank and grants to Bank a security interest in and Lien upon the following:
(a) All of Borrower's Accounts;
(b) All of Borrower's General Intangibles;
(c) All of Borrower's Inventory;
(d) All of Borrower's Equipment;
(e) All of Borrower's chattel paper, documents and instruments and
rights of payment evidenced thereby;
22
(f) All of Borrower's investment property, deposit accounts, letters
of credit and letter of credit rights;
(g) All of proceeds and products, as the case may be, of Borrower's
Accounts, General Intangibles, Equipment, and Inventory and all other of the
foregoing portions of the Collateral;
(h) All monies and other property of any kind, real, personal, or
mixed, and tangible or intangible, now or at any time or times hereafter, in the
possession or under the control of Bank or a bailee of Bank;
(i) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (a) through (h) above, including,
without limitation, proceeds of and unearned premiums with respect to insurance
policies insuring any of the Collateral;
(j) All books and records (including, without limitation, customer
lists, credit files, magnetic, digital and laser tapes and disks, electronic and
computer storage media, computer programs, print-outs, and other computer
materials and records) of Borrower pertaining to any of (a) through (i) above.
8.2. SALE OF INVENTORY. Until the occurrence of an Event of Default
hereunder or until expiration of the Commitment Period, whichever occurs first,
Borrower may use and dispose of the Inventory in the ordinary course of business
where such is not inconsistent with this Agreement, provided that the ordinary
course of business does not include a transfer in partial or total satisfaction
of Debt nor a transfer (other than a sale on terms and conditions which would
apply if disinterested parties were involved) to an Affiliate of Borrower.
8.3. NOTICE TO ACCOUNT DEBTORS. At any time after the occurrence of an
Event of Default, but without prior notice to Borrower, except such notice as
may be required by law, Bank shall have the right to notify the Account Debtors
obligated on any or all of the Accounts to make payment thereof directly to Bank
and to take control of all proceeds of any such Accounts. Any such notice by the
Bank to such Account Debtors shall be given by an authorized representative of
the Bank. Borrower, if requested by Bank, shall stamp or cause to be stamped on
each Account item in legible letters "Pledged to SouthTrust Bank" and shall turn
over physical possession of the Accounts to Bank. Borrower authorizes Bank to
sign and endorse Borrower's name upon any check, draft, money order, or other
form of payment of any Account item and to sign and endorse satisfactions and
releases of Account items in Borrower's name. Until such time as Bank elects to
exercise the right to collect and enforce said Accounts, Borrower is authorized,
as agent of the Bank, to collect and enforce said Accounts in Borrower's name.
The costs of such collection and enforcement, including attorneys' fees and
out-of-pocket expenses and all other expenses and liabilities resulting
therefrom, shall be borne solely by Borrower whether the same are incurred by
the Bank or Borrower.
8.4. VERIFICATION OF ACCOUNTS. Whether or not an Event of Default has
occurred, any of Bank's officers, authorized representatives, employees or
agents shall have the right, at any time or times hereafter, in the name of Bank
or in any trade or fictitious name selected by Bank, or in the name of any
designee of Bank or Borrower, to verify the validity, amount or any other matter
relating to any Accounts by mail, telephone, telegraph, or otherwise. Borrower
shall cooperate fully with Bank in an effort to facilitate and promptly conclude
any such verification process.
8.5 CONTROL. Borrower will cooperate with Bank for Bank to obtain control
of the Collateral consisting of deposit accounts, investment property, letter of
credit rights and electronic chattel paper. Borrower will not create any
electronic chattel paper without taking all steps deemed necessary by Bank to
confer control of the electronic chattel paper upon Bank.
23
8.6. GOVERNMENTAL ACCOUNTS. If any of Borrower's Accounts in excess of $
10,000 arise out of contracts with the United States or any department, agency,
or instrumentality thereof, Borrower will immediately notify the Bank thereof in
writing and execute any instruments and take any steps required by the Bank in
order that all monies due and to become due under such Account shall be assigned
to the Bank and notice thereof given to the Government under the Federal
Assignment of Claims Act.
8.7. ACCOUNTS EVIDENCED BY INSTRUMENTS. If any of Borrower's Accounts are
or should become evidenced by promissory Note, trade acceptances, chattel paper,
chattel mortgages, conditional sales contracts, or other instruments, Borrower
will immediately deliver same to Bank, endorsed or assigned with recourse to the
Bank's order and, regardless of the form of such endorsement or assignment,
Borrower hereby waives presentment, demand, notice of dishonor, protest and
notice of protest and all other notices with respect thereto.
8.8. LEASE OF RECORDS. Borrower hereby leases to the Bank, and the Bank
hires from Borrower, for a term which shall be effective so long as the Loan or
other Obligations secured hereby are owing to the Bank by Borrower and until the
Bank has no further obligation under the Agreement, all of Borrower's present
and future books of Accounts, computer printouts, magnetic, digital and laser
tapes and disks, computer and electronic storage media, computer software
programs, trial balance records, ledgers and cabinets in which they are located,
reflected or maintained, in any way relating to the Collateral, and all present
and future supporting evidence and documents relating thereto in the form of
written applications, credit information, account cards, payment records, trial
balances, correspondence, delivery receipts, certificates and the like, as well
as the past and current information stored in computer software programs for and
on Borrower's behalf by third parties. Borrower, if requested by Bank, agrees to
legend all of the foregoing to indicate the lease thereof to the Bank. If an
Event of Default occurs, then, in addition to all of the other rights and
remedies of the Bank herein, the Bank will have the right forthwith or at any
time thereafter to remove from Borrower's premises all of the foregoing and keep
and retain the same in Bank's possession until the Loan and other Obligations
secured hereby shall have been fully paid and discharged and the Bank has no
further obligation under the Agreement. The provisions of this Section shall not
be deemed to diminish or contravene the security interest of the Bank in the
Borrower's General Intangibles or in the property, materials, and interests
described in this Section but shall be deemed to be in addition to any rights
the Bank may have with respect to the Borrower's grant of a security interest in
its General Intangibles to the Bank.
8.9. LICENSE OF RIGHTS. Bank is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, tradenames, trademarks and advertising matter or any
property of a similar nature as it pertains to the Collateral, in advertising
for sale and in selling any Collateral, and Borrower's rights under all licenses
and all franchise agreements shall inure to Bank's benefit.
8.10. ATTORNEY-IN-FACT. Borrower hereby irrevocably designates, makes,
constitutes and appoints Bank (and all Persons designated by Bank) as Borrower's
true and lawful attorney (and agent-in-fact) and Bank, or Bank's agent, may,
without notice to Borrower and in either Borrower's or Bank's name, but at the
cost and expense of Borrower:
8.10.1. At such time or times hereafter as Bank or said agent, in its
sole discretion, may determine, endorse Borrower's name on any checks, Note,
acceptances, drafts, money orders or any other evidence of payment or proceeds
of the Collateral which come into the possession of Bank or under Bank's
control; and
8.10.2. At such time or times as Bank or its agent in its sole
discretion may determine (and irrespective of whether an Event of Default
exists): (i) demand payment of the Accounts from the Account Debtors, enforce
payment of the Accounts by legal proceedings or otherwise, and generally
exercise all of Borrower's rights and remedies with respect to the collection of
the Accounts; (ii) settle, adjust, compromise, discharge or release any of the
Accounts or other Collateral; (iii) sell or collect any of the Accounts or other
24
Collateral upon such terms, and for such amounts and at such time or times as
Bank deems advisable; (iv) take possession, in any manner, of any item of
payment or proceeds relating to any Collateral and apply the same to the
Obligations; (v) prepare, file and sign Borrower's name to a proof of claim in
bankruptcy or similar document against any Account Debtor or to any notice of
lien, assignment or satisfaction of lien or similar document in connection with
any of the Collateral; (vi) receive, open and dispose of all mail addressed to
Borrower and to notify postal authorities to change the address for delivery
thereof to such address as Bank may designate; (vii) endorse the name of
Borrower upon any of the items of payment or proceeds relating to any Collateral
and deposit the same to the account of Bank or any other bank on account of the
Obligations; (viii) endorse the name of Borrower upon any chattel paper,
document, instrument, invoice, freight bill, bill of lading or similar document
or agreement relating to the Accounts, Inventory and any other Collateral; (ix)
use Borrower's stationery and sign the name of Borrower to verifications of the
Accounts and notices thereof to Account Debtors; (x) use the information
recorded on or contained in any data processing equipment and computer hardware
and software relating to the Accounts, Inventory, and any other Collateral and
to which Borrower has access; (xi) make and adjust claims under policies of
insurance; and (xii) for and in the name of Borrower to give instructions and
direct any bank or financial institution in which proceeds of the Collateral are
deposited to turn over said proceeds to Bank; and (xiii) do all other acts and
things necessary, in Bank's determination, to fulfill Borrower's obligations
under this Agreement.
ARTICLE IX
ADDITIONAL REPRESENTATIONS, COVENANTS, AND
AGREEMENTS RELATING TO COLLATERAL
9.1. RELIANCE ON STATEMENTS. With respect to all Accounts, Borrower
represents and warrants to Bank that Bank may rely, in determining which
Accounts are Eligible Accounts, on all statements and representations made by
Borrower with respect to any Account or Accounts, and unless otherwise indicated
in writing to Bank, that with respect to each Account:
9.1.1. It is genuine and in all respects what it purports to be, and
it is not evidenced by a judgment;
9.1.2. It arises out of a completed, bona fide sale and delivery of
goods or rendition of services by Borrower in the ordinary course of its
business and in accordance with the terms and conditions of all purchase orders,
contracts or other documents relating thereto and forming a part of the contract
between Borrower and the Account Debtor;
9.1.3. It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy of which
has been furnished or is available to Bank;
9.1.4. Such Account, and Bank's security interest therein, is not, and
will not be in the future, subject to any offset, Lien, deduction, defense,
dispute, counterclaim or any other adverse condition except for disputes
resulting in returned goods where the amount in controversy is deemed by Bank to
be immaterial, and each such Account is absolutely owing to Borrower and is not
contingent in any respect or for any reason;
9.1.5. Borrower has made no agreement with any Account Debtor
thereunder for any deduction therefrom, except discounts or allowances which are
granted by Borrower in the ordinary course of its business for prompt payment
and which are reflected in the calculation of the net amount of each respective
invoice related thereto;
9.1.6. There are no facts, events or occurrences which in any way
impair the validity or enforceability thereof or tend to reduce the amount
payable thereunder from the face amount of the invoice and statements delivered
to Bank with respect thereto;
25
9.1.7. To the best of Borrower's knowledge, the Account Debtor
thereunder (i) had the capacity to contract at the time any contract or other
document giving rise to the Account was executed and (ii) such Account Debtor
was and is Solvent;
9.1.8. Borrower has no knowledge of any fact or circumstance which
would impair the validity or collectibility of the Account, and to the best of
Borrower's knowledge there are no proceedings or actions which are threatened or
pending against any Account Debtor thereunder which might result in any material
adverse change in such Account Debtor's financial condition or the
collectibility of such Account; and
9.1.9. Borrower will have paid or provided for the payment of all
taxes arising from the transaction creating the Account.
9.2. NOTIFICATION. Borrower shall immediately notify Bank of any event,
occurrence or circumstance which causes any representation pertaining to any
Account set forth in Section 9.1 above to cease to be true in all respects, and
Borrower will promptly notify Bank (i) if any Account Debtor or any Affiliate of
any Account Debtor has or may have any right of setoff, deduction, or defense
against any Account or (ii) if any such Account Debtor or Affiliate of such
Account Debtor has or may have a contractual or business relationship with
Borrower such that at any time such right may exist or be asserted or (iii) if
Borrower ships any inventory or goods or furnishes any services to any Person
which has or may have any right of setoff, deduction or defense against any
asset, including any Account, of Borrower.
9.3. AFFIRMATION OF REPRESENTATIONS. Each request for a loan or advance
made by Borrower pursuant to this Agreement or any of the other Loan Documents
shall constitute (i) an automatic representation and warranty by Borrower to
Bank that there does not then exist any default or Event of Default and (ii) a
reaffirmation as of the date of said request that all of the representations and
warranties of Borrower contained in this Agreement and the other Loan Documents
are true in all material respects except for any changes in the nature of
Borrower's business or operations that would render the information contained in
any exhibit attached hereto either inaccurate or incomplete, so long as Bank has
consented to such changes or such changes are expressly permitted by this
Agreement.
9.4. WAIVERS. Borrower hereby releases and waives any and all actions,
claims, causes of action, demands and suits which it may ever have against the
Bank as a result of any possession, collection, settlement, compromise or sale
by Bank of any of the Collateral upon the occurrence of an Event of Default
hereunder, notwithstanding the effect of such possession, collection,
settlement, compromise or sale upon the business of Borrower. Said waiver shall
include all causes of action and claims which may result from the exercise of
the power of attorney conferred upon Bank in Section 8.10. The failure at any
time or times hereafter to require strict performance by Borrower of any of the
provisions, warranties, terms and conditions contained in this Agreement or any
other agreement, document or instrument now or hereafter executed by Borrower,
and delivered to the Bank, shall not waive, affect, or diminish any right of the
Bank thereafter to demand strict compliance and performance therewith and with
respect to any other provisions, warranties, terms and conditions contained in
such agreements, documents or instruments, and any waiver of default shall not
waive or affect any other default, whether prior or subsequent thereto, and
whether the same are of a different type. None of the warranties, conditions,
provisions and terms contained in the Agreement or any other agreement, document
or instrument now or hereafter executed by Borrower and delivered to the Bank
shall be deemed to have been waived by any act or knowledge of the Bank, its
agents, representatives, officers or employees, but only by an instrument in
writing signed by an officer of the Bank and directed to the Borrower specifying
such waiver.
9.5. DISCHARGE OF TAXES AND LIENS. At its option, the Bank may discharge
taxes, Liens, security interests or other encumbrances at any time levied or
placed on the Collateral and may pay for the maintenance and preservation of the
Collateral. Borrower agrees to reimburse the Bank, on demand, for any payment
26
made or expense incurred by Bank pursuant to the foregoing authorization,
including, without limitation, attorneys' fees.
9.6. INSURANCE. Without limiting any other provision hereof, Borrower will
keep the Collateral insured in amounts equal to its full insurable value, with
companies, and against such risks as may be satisfactory to the Bank. Borrower
will pay the costs of all such insurance and deliver policies evidencing such
insurance to the Bank with mortgagee loss payable clauses in favor of the Bank.
Borrower hereby assigns to the Bank all right to receive proceeds, directs any
insurer to pay all proceeds directly to the Bank, and authorizes the Bank to
endorse any check or draft for such proceeds and apply the same toward
satisfaction of the Loan and other Obligations secured hereby.
9.7. COMPLETE RECORDS, INSPECTION RIGHTS. Borrower will at all times keep
accurate and complete records of the Collateral, and the Bank or its agents
shall have the right to call at Borrower's place or places of business at
intervals to be determined by Bank, upon reasonable notice and during Borrower's
regular business hours, and without hindrance or delay, to inspect and examine
the Inventory and the Equipment and to inspect, audit, check, and make abstracts
from the books, records, journals, orders, receipts, computer printouts,
correspondence and other data relating to the Collateral or to any other
transactions between the parties hereto. If requested by Bank, Borrower agrees
to make its books, records, journals, orders, receipts, computer printouts,
correspondence, and other data relating to the Collateral available at the
Bank's main office for inspection, audit and checking by the Bank or its agents.
9.8. U.C.C. FINANCING STATEMENT. The Borrower agrees that a carbon,
photographic or other reproduction of this Agreement or a financing statement
with respect to the Collateral shall be sufficient as a financing statement and
may be filed as such by the Bank.
ARTICLE X
EVENTS OF DEFAULT; CERTAIN REMEDIES
10.1. EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an Event of Default hereunder:
10.1.1. Payment Default. If Borrower shall fail to make any payment of
any installment of principal or interest on the Note when and as the same shall
become due and payable, whether at stated maturity, upon expiration of the
Commitment Period, by declaration, upon acceleration, or otherwise; or
10.1.2. Fees and Expenses. If Borrower shall fail to pay when due any
other expense, fee or charge provided for in this Agreement and such failure
shall continue for a period of ten (10) days; or
10.1.3. Other Defaults. If Borrower shall fail for a period of fifteen
(15) days after written notice from Bank to perform, keep, or observe any
covenant, agreement or provision of any of the following Sections of this
Agreement: 6.4, 6.9, 6.10, 6.11, 6.14, 6.17, 6.18, 6.20, and 6.21; or if
Borrower shall fail or neglect to perform, keep or observe, or shall default
with respect to, any other covenant, agreement or provision contained in this
Agreement (other than a covenant, agreement or provision a default in the
performance of which is dealt with specifically elsewhere in this Section 10.1);
or
10.1.4. Representations False. If any warranty, representation, or
other statement made or furnished to Bank by or on behalf of Borrower or in any
of the Loan Documents proves to be false or misleading in any material respect
when made or furnished; or
10.1.5. Financial Difficulties. If the Borrower shall be involved in
financial difficulties as evidenced.
27
(a) by its admission in writing of its inability to pay its debts
generally as they become due or of its ceasing to be Solvent;
(b) by its filing a petition in bankruptcy or for reorganization
or for the adoption of an arrangement under the U.S. Bankruptcy Code (as now or
in the future amended) or any similar law regarding debtors' rights and remedies
or an admission seeking the relief therein provided;
(c) by its making a general assignment for the benefit of its
creditors;
(d) by its consenting to the appointment of a receiver for all or
a substantial part of its property;
(e) by its being adjudicated a bankrupt;
(f) by the entry of a court order appointing a receiver or
trustee for all or a substantial part of its property without its consent, which
order shall not be vacated, set aside or stayed within ninety (90) days from the
date of entry; or
(g) by the assumption of custody or sequestration by a court of
competent jurisdiction of all or substantially all of its property, which
custody or sequestration shall not be suspended or terminated within 60 days
from its inception; or
10.1.6. ERISA. If a Reportable Event shall occur which Bank, in its
sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee shall be requested
or appointed, or if Borrower is in "default" (as defined in Section 4219(c) (5)
of ERISA) with respect to payments to a Multiemployer Plan resulting from
Borrower's complete or partial withdrawal from such Plan; or
10.1.7. Cancellation of Subordination Agreement. If any subordination
agreement executed by any creditor of Borrower or pertaining to any Subordinated
Debt should be canceled, terminated, or breached; or
10.1.8. Default on Other Obligations. If Borrower shall default in
payment of more than $10,000 due on any Debt of Borrower to others or if
Borrower shall default under any loan or security agreement with others or under
any material lease involving a payment of more than $10,000 and any such default
shall not be cured within 30 days after written notice to Borrower from Bank or
any holder; or
10.1.9. Judgments. If a final judgment for the payment of money in
excess of $ 10,000 shall be rendered against the Borrower and the same shall
remain undischarged for a period of 30 days during which execution shall not be
effectively stayed, unless such judgment is fully covered by collectible
insurance; or
10.1.10. Actions. If Borrower shall be criminally indicted or
convicted under any law that could lead to a forfeiture of any property of
Borrower; or
10.1.11. Uninsured Losses; Unauthorized Dispositions. Any material
loss, theft, damage or destruction not fully covered by insurance (as required
by this Agreement and subject to such deductibles as Bank shall have agreed to
in writing), or sale, lease or encumbrance of any of the Collateral or the
making of any levy, seizure, or attachment thereof or thereon except in all
cases as may be specifically permitted by other provisions of this Agreement; or
10.1.12. Adverse Changes. There shall occur any material adverse
change in the financial condition or business prospects of Borrower; or
28
10.1.13. Collateral. If a creditor of Borrower shall obtain possession
of any of the Collateral by any legal means; or
10.1.14. Business Disruption; Condemnation. There shall occur a
cessation of a substantial part of the business of Borrower for a period which
significantly affects Borrower's capacity to continue its business, on a
profitable basis; or Borrower shall suffer the loss or revocation of any license
or permit now held or hereafter acquired by Borrower which is necessary to the
continued or lawful operation of its business; or Borrower shall be enjoined,
restrained or in any way prevented by court, governmental or administrative
order from conducting all or any material part of its business affairs; or any
material lease or agreement pursuant to which Borrower leases, uses or occupies
any of its properties shall be canceled or terminated prior to the expiration of
its stated term; or any part of the Collateral shall be taken through
condemnation or the value of such properties shall be impaired through
condemnation; or
10.1.15. Bank Insecurity. Bank shall reasonably and in good faith deem
itself insecure; or
10.1.16. Change in Control. If any of the present executive officers
of Borrower should resign or be removed or if there occurs a change in majority
stock ownership of Borrower; or
10.1.17. Subordination Agreements. If a breach or default shall occur
with respect to any subordination agreement executed by any creditor of Borrower
(including any Affiliate), or if any said agreement shall otherwise terminate or
cease to have legal effect; or
10.1.18. Other Documents. If a default or event of default or breach
occurs under any Loan Document (other than the breaches enumerated in Sections
10. 1. 1 through 10. 1. 17 above), or under or with respect to any of the
Obligations, or under any other note, evidence of indebtedness, loan agreement,
security agreement, guaranty, pledge, mortgage, assignment, or security document
executed by Borrower and delivered to the Bank.
The Borrower agrees that default under any Loan Document shall constitute
default with respect to all Loan Documents and vice versa.
10.2. REMEDIES. Upon or at any time after the occurrence of any one or more
of the foregoing Events of Default, Bank or the holder of the Note may at its
option (i) proceed to protect and enforce its rights by suit in equity, action
at law and/or the appropriate proceeding either for specific performance of any
covenant or condition contained in the Note or in any Loan Document, (ii)
terminate the Commitment Period and cease disbursing advances under the Note,
and/or (iii) declare the unpaid balance of the Loan and Note together with all
accrued interest to be forthwith due and payable, and thereupon such balance
shall become so due and payable without presentation, protest or further demand
or notice of any kind, all of which are hereby expressly waived.
Without limiting the foregoing, upon the occurrence of any Event of
Default, and at any time thereafter, Bank shall have the rights and remedies of
a secured party under the Uniform Commercial Code in addition to the rights and
remedies provided herein or in any other instrument or paper executed by
Borrower. The Bank may require the Borrower to assemble the Equipment and the
Inventory and to make the same available to the Bank at a place to be designated
by the Bank which is reasonably convenient to both parties. Unless the
Collateral is perishable or threatens to decline speedily in value, or is of a
style customarily sold on a recognized market, the Bank will give Borrower
reasonable notice of the time after which any private sale or other intended
disposition thereof is to be made. The requirement of reasonable notice shall be
met if such notice is mailed postage prepaid to the Borrower at least ten (10)
days before the time of such sale or disposition. The Borrower shall pay the
Bank on demand any and all expenses, including legal expenses and reasonable
attorneys' fees, incurred or paid by the Bank in protecting or enforcing the
29
Loan and all other Obligations secured hereby and other rights of the Bank
hereunder, including its right to take possession of the Collateral.
The Bank shall not be liable for failure to collect the Accounts or to
enforce any contract rights or for any action or omission on the part of the
Bank, its officers, agents and employees, except willful misconduct. No remedy
herein conferred upon, or reserved to, the Bank is intended to be exclusive of
any other remedy or remedies, including those of any note or other evidence of
Debt held by the Bank, and each and every remedy shall be cumulative and shall
be in addition to every other remedy given hereunder or now or hereafter
existing in law or in equity. Exercise or omission to exercise any right of the
Bank shall not affect any subsequent right of the Bank to exercise the same.
Borrower waives notice prior to Bank's taking possession or control of any
of the Collateral or any bond or security that might be required by any court
prior to allowing Bank to exercise any of Bank's remedies, including, without
limitation, the issuance of an immediate writ of possession.
The Borrower agrees that the Bank may apply the net proceeds received from
the Collateral among the Loan and the Obligations toward satisfaction of the
same in its sole discretion. Any such proceeds remaining after satisfaction in
full of the Loan, the Obligations, and the other obligations and liabilities of
the Borrower to the Bank shall be distributed as required by Applicable Laws.
10.3. RIGHT OF SET-OFF. Upon and after the occurrence of any Event of
Default, Bank may, and is hereby authorized by Borrower to, at any time and from
time to time, to the fullest extent permitted by Applicable Laws, and without
advance notice to Borrower (any such notice being expressly waived by Borrower),
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and any other indebtedness at any time
owing by Bank to, or for the credit or the account of, Borrower against any or
all of the Loan and Obligations and other liabilities and obligations of
Borrower now or hereafter existing whether or not such obligations have matured
and irrespective of whether Bank has exercised any other rights that it has or
may have with respect to the Loan and Obligations and other liabilities and
obligations, including, without limitation, any acceleration rights. The
aforesaid right of set-off may be exercised by Bank against Borrower or against
any trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor of Borrower,
notwithstanding the fact that such right of set-off shall not have been
exercised by Bank prior to the making, filing or issuance, or service upon Bank
of, or of notice of, any such petition, assignment for the benefit of creditors,
appointment or application for the appointment of a receiver, or issuance of
execution, subpoena, order or warrant. Bank agrees to notify Borrower after any
such set-off and application, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
Bank under this Section are in addition to the other rights and remedies
(including, without limitation, other rights of setoff) which Bank may have.
ARTICLE XI
INDEMNIFICATION
11.1. INDEMNIFICATION. Borrower agrees to defend, indemnify and hold
harmless the Bank, its directors, officers, employees, accountants, attorneys,
and agents (collectively, the "Indemnitees") from and against any and all
claims, demands, judgments, damages, actions, causes of action, injuries,
orders, penalties, costs and expenses (including attorneys' fees and costs of
court) of any kind whatsoever arising out of or relating to any breach or
default by Borrower or any other Person under this Agreement or any Loan
Document or the failure of Borrower to observe, perform or discharge Borrower's
duties hereunder or thereunder. Without limiting the generality of the
foregoing, Borrower's obligation to indemnify Bank shall include indemnity from
any and all claims, demands, judgments, damages, actions, causes of action,
injuries, orders, penalties, costs and expenses arising out of or in connection
with the activities of the Borrower, its predecessors in interest, third parties
who have trespassed on Borrower's property, or parties in a contractual
relationship with Borrower, whether or not occasioned wholly or in part by any
condition, accident or event caused by an act or omission of the Indemnitees,
which: (a) arise out of the actual, alleged or threatened discharge, dispersal,
30
release, storage, treatment, generation, disposal, or escape of radioactive
materials, radioactivity, pollutants or other toxic or hazardous substances,
including any solid, liquid, gaseous, or thermal irritant or contaminant,
including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste
(including materials to be recycled, reconditioned or reclaimed); or (b)
actually or allegedly arise out of the use, specification, or inclusion of any
product, material, or process containing chemicals or radioactive material, the
failure to detect the existence or proportion of chemicals or radioactive
material in the soil, air, surface water or groundwater, or the performance or
failure to perform the abatement of any pollution source or the replacement or
removal of any soil, water, surface water, or groundwater containing chemicals
or radioactive material; or (c) arises out of or relates to breach by Borrower
of any of the provisions of Section 5.16 hereof relating to Environmental
Regulations. In addition, Borrower will indemnify and hold Bank harmless from
and against any liability, claim, cost or expense incurred by Bank or imposed
against Bank for any stamp tax, intangible tax, or other tax, fee or charge
imposed by any governmental entity arising out of or relating to the Note or
this Agreement or the transactions anticipated herein.
ARTICLE XII
COSTS AND EXPENSES, MISCELLANEOUS
12.1. COSTS OF PREPARATION; BROKERS FEES. Borrower shall bear all expenses
of the Bank in connection with the Loan and with the investigation, review and
approval of this transaction, the preparation of the Agreement and the Loan
Documents, and the issuance and delivery of the Note to Bank and also in
connection with any amendment or modification thereto, and the administration
thereof, including, without limitation, (i) all legal fees, expenses and
disbursements and other actual third-party expense reimbursements incurred or
sustained by Bank in connection with this transaction, (ii) all travel,
appraisal, audit, search and filing fees incurred or sustained by Bank in
connection with this transaction or the administration of the Loan; (iii) all
recording and filing fees, intangibles taxes, documentary and revenue stamps,
other taxes or other expenses and charges payable in connection with this
Agreement, the Note or any Loan Document and (iv) all costs, expenses (including
fees and expenses of outside consultants), related to the administration of this
Agreement or any of the other Loan Documents and the transactions contemplated
hereby and thereby and/or periodic audits and appraisals performed by Bank. The
Borrower agrees to indemnify and save Bank harmless against all broker's and
finder's fees, if any.
12.2. OTHER COSTS AND EXPENSES. If, at any time or times hereafter, whether
before or after the occurrence of an Event of Default, the Bank employs counsel
to advise or provide other representation with respect to this Agreement or any
Loan Document, or to collect the balance of the Loan, or to take any action in
or with respect to any suit or proceeding relating to this Agreement or any of
the Loan Documents, or to protect, collect, or liquidate the Collateral or to
attempt to enforce any security interest or Lien granted to the Bank by
Borrower; then in any such events, all of the reasonable attorneys' fees arising
from such services, and any expenses, costs and charges relating thereto, shall
constitute additional obligations of Borrower payable on demand of the Bank.
12.3. LEGAL COUNSEL. Borrower acknowledges and agrees that legal counsel to
Bank does not represent Borrower as Borrower's attorney, that Borrower has
retained (or has had an opportunity to retain) counsel of its own choice and has
not and will not rely upon any advice from Bank's counsel. In no event shall
Borrower's reimbursement of expenses pursuant to this Agreement (even if
effected by payment directly by Borrower to Bank's counsel) be deemed to
establish any attorney-client relationship between Borrower and Bank's counsel.
12.4. NO WAIVER. No waiver of any Event of Default hereunder, and no waiver
of any default or Event of Default under any other Loan Document shall extend to
or affect any subsequent or other then existing default or shall impair any
rights, remedies or powers of Bank. No delay or omission of Bank or any
subsequent holder of the Note to exercise any right, remedy, power or privilege
hereunder after the occurrence of such default or Event of Default shall be
construed as a waiver of any such default, or acquiescence therein.
31
12.5. HEADINGS. Except for the definitions set forth in Section 1.1, the
headings of the articles, sections, paragraphs and subdivisions of this
Agreement are for convenience of reference only, are not to be considered a part
hereof, and shall not limit or otherwise affect any of the terms hereof.
12.6. MARSHALLING OF ASSETS; PAYMENTS SET ASIDE. Bank shall be under no
obligation to marshall any assets or securities in favor of Borrower or any
other Person or against or in payment of any or all of the Obligations. To the
extent that any sum credited against the Obligations is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then to the extent of such
recovery, the Obligations or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
12.7. SURVIVAL OF COVENANTS. All covenants, agreements, representations and
warranties made herein and in certificates or reports delivered pursuant hereto
shall be deemed to have been material and relied on by Bank, notwithstanding any
investigation made by or on behalf of Bank, and shall survive the execution and
delivery to Bank of the Note or Loan Document.
12.8. ADDRESSES. Any notice or demand which by any provision of this
Agreement is required or provided to be given shall be deemed to have been
sufficiently given or served for all purposes by (i) being delivered in person
to the party to whom the notice or demand is directed or (ii) by being sent as
first class mail, postage prepaid, in either event to the following address: If
to Borrower, 4350 Peachtree Industrial Avenue, Suite 100, Norcross, Georgia
30071; or if any other address shall at any time be designated by Borrower in
writing to the holders of record of the Note at the time of such designation to
such other address; and if to Bank, One Georgia Center, Suite 450, 600 West
Peachtree Street, Atlanta, GA 30308; or if any other address shall at any time
be designated in writing to Borrower, to such other address. Notwithstanding the
foregoing, no notice shall be effective as to Bank until actually received by
Bank. Any written notice that is not sent in conformity with the provisions
hereof shall nevertheless be effective on the date that such notice is actually
received by the noticed party.
12.9. VENUE AND JURISDICTION. Borrower agrees that any legal action brought
by the Bank to collect the Loan or any Obligation or to assert any claim against
Borrower under any Loan Document, or any part thereof, may be brought in any
court in the State of Georgia having subject matter jurisdiction, waives its
right to object to any such action on grounds it is brought in the improper
venue, and irrevocably consents that any legal action or proceeding against it
under, arising out of, or in any manner relating to the Loan, the Obligations,
or any Loan Document may be brought in the Superior Court of Fulton County,
Georgia or in any other court of jurisdiction in Fulton County, Georgia or in
the U.S. District Court for the Northern District of Georgia. Borrower, by the
execution of this Agreement, expressly and irrevocably assents and submits to
the personal jurisdiction of any such court in any such action or proceeding.
Borrower consents to the service of process relating to any such action or
proceeding by mail to the address set forth in this Agreement.
12.10. CONTINUING OBLIGATION; BENEFITS. This Agreement, and each and every
provision hereof, is a continuing obligation and shall (i) be binding upon the
Borrower and the Bank, their successors and assigns, and (ii) inure to the
benefit of and be enforceable by the Borrower and Bank and their successors and
assigns; provided, that the Borrower may not assign all or any part of this
Agreement without the prior written consent of Bank, which consent may be
granted or withheld in the sole discretion of Bank.
12.11. CONTROLLING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia; provided, however, that if
any of the Collateral shall be located in any jurisdiction other than Georgia,
the laws of such jurisdiction shall govern the applicable law for the method,
manner and procedure for foreclosure of Bank's lien upon such Collateral and the
enforcement of Bank's other remedies in respect of such Collateral to the extent
32
that the laws of such jurisdiction are different from or inconsistent with the
laws of Georgia.
12.12. STANDARD OF REVIEW. Any document, writing or instrument required or
permitted to be delivered to Bank under this Agreement shall be deemed
satisfactory only if approved by Bank in the exercise of its sole discretion,
and any act or approval permitted to be done by Bank under this Agreement shall
be in Bank's sole discretion. Where in this Agreement reference is made to
Bank's "discretion", or "sole discretion", said reference shall mean that with
respect to the matter so designated, Bank shall have the absolute right to make
decision with respect thereto and shall not be subject to any standard of good
faith, fair dealing, reasonableness, or any other standard implied by any court
or imposed by law, it being the intention of the parties that the decision of
the Bank with respect to said matter shall be absolutely final and binding.
12.13. PARTICIPATION. Borrower acknowledges that Bank may, at its option,
sell participation interests in the Loan to participating banks. The amounts of
any such participations shall be determined solely by the Bank. Borrower agrees
with each present and future participant in the Loan, the names and addresses of
which will be furnished to Borrower, that if an Event of Default should occur,
each present and future participant shall have all of the rights and remedies of
Bank with respect to any deposit due from any participant to Borrower. The
execution by a participant of a participation agreement with Bank, and the
execution by Borrower of this Agreement, regardless of the order of execution,
shall evidence an agreement between Borrower and said participant in accordance
with the terms of this Section.
12.14. MISCELLANEOUS. The Loan Documents, this Agreement and the agreements
and instruments executed in connection with this Agreement constitute the entire
agreement between Borrower and Bank in regard to the subject matter hereof. This
Agreement may not be varied, altered, or amended except by a written instrument
executed by an authorized officer of the Bank. This Agreement may be executed in
any number of counterparts, each of which, when executed and delivered, shall be
an original, but such counterparts shall together constitute one and the same
instrument. Any provision in this Agreement which may be unenforceable or
invalid under any law shall be ineffective to the extent of such
unenforceability or invalidity without affecting the enforceability or validity
of any other provisions hereof.
12.15. GENERAL WAIVERS. To the fullest extent permitted by Applicable Law,
Borrower waives (i) presentment, demand and protest and notice of presentment,
protest, default, nonpayment, maturity, release, compromise, settlement,
extension or renewal of any or all commercial paper, accounts, contract rights,
documents, instruments, chattel paper and guaranties at any time held by Bank on
which Borrower may in any way be liable; (ii) notice prior to Bank's taking
possession or control of any of the Collateral or any bond or security which
might be required by any court prior to allowing Bank to exercise any of Bank's
remedies, including the issuance of an immediate writ of possession; (iii) the
benefit of all valuation, appraisement and exemption laws; (iv) any right
Borrower may have upon payment in full of the Obligations to require Bank to
terminate its security interest in the Collateral until the execution by
Borrower of an agreement indemnifying Bank from any loss or damage Bank may
incur as the result of dishonored checks or other items of payment received by
Bank from Borrower or any Account Debtor and applied to the Obligations; and (v)
notice of Bank's acceptance hereof or of any Loan Document.
12.16. MAXIMUM INTEREST. Regardless of any provision contained in this
Agreement or any of the Loan Documents, in no event shall the aggregate of all
amounts that are contracted for, charged or collected pursuant to the terms of
this Agreement, the Note or any of the Loan Documents, and that are deemed
interest under Applicable Law, exceed the Maximum Rate. No provision of this
Agreement or in any of the Loan Documents or the exercise by Bank of any right
hereunder or under any Loan Document or the prepayment by Borrower of any of the
Obligations or the occurrence of any contingency whatsoever, shall entitle Bank
to charge or receive, or to require Borrower to pay, interest or any amounts
deemed interest by Applicable Law (such amounts being referred to herein
collectively as "Interest") in excess of the Maximum Rate, and all provisions
hereof or in any Loan Document which may purport to require Borrower to pay
33
Interest exceeding the Maximum Rate shall be without binding force or effect to
the extent only of the excess of Interest over such Maximum Rate. Any Interest
charged or received in excess of the Maximum Rate ("Excess"), shall be
conclusively presumed to be the result of an accident and bona fide error, and
shall, to the extent received by Bank, at the option of Bank, either be applied
to reduce the principal amount of the Obligations or returned to Borrower. The
right to accelerate the maturity of any of the Obligations does not include the
right to accelerate unaccrued interest, and no such interest will be collected
by Bank. All monies paid to Bank hereunder or under any of the Loan Documents
shall be subject to any rebate of unearned interest as and to the extent
required by Applicable Law. By the execution of this Agreement, Borrower
covenants that (i) the credit or return of any Excess shall constitute the
acceptance by Borrower of such Excess, and (ii) Borrower shall not seek or
pursue any other remedy, legal or equitable, against Bank, based in whole or in
part upon contracting for, charging or receiving any Interest in excess of the
Maximum Rate. For the purpose of determining whether or not any Excess has been
contracted for, charged or received by Bank, all interest at any time contracted
for, charged or received from Borrower in connection with this Agreement shall,
to the extent permitted by Applicable Law, be amortized, prorated, allocated and
spread in equal parts throughout the full term of the Obligations. Borrower and
Bank shall, to the maximum extent permitted under Applicable Law, (i)
characterize any non-principal payment as an expense, fee or premium rather than
as Interest and (ii) exclude voluntary prepayments and the effects thereof. The
provisions of this Section shall be deemed to be incorporated into the Note and
each Loan Document (whether or not any provision of this Section is referred to
therein).
12.17. WAIVER OF RIGHT TO TRIAL BY JURY. As and to the extent allowed by
Applicable Law, Borrower and Bank hereby waive any right to trial by jury on any
claim, counterclaim, setoff, demand, action or cause of action (a) arising out
of or in any way pertaining or relating to this Agreement, the Note, the Loan
Documents, or any other instrument, document or agreement executed or delivered
in connection with this Agreement or (b) in any way connected with or pertaining
or related to or incidental to any dealings of the parties hereto with respect
to this Agreement, the Note, the Loan Documents, or any other instrument,
document or agreement executed or delivered in connection herewith or in
connection with the transactions related thereto or contemplated thereby or the
exercise of either party's rights and remedies thereunder, in all of the
foregoing cases whether now existing or hereafter arising, and whether sounding
in contract, tort or otherwise. Borrower and Bank agree that either or both of
them may file a copy of this paragraph with any court as written evidence of the
knowing, voluntary and bargained agreement between the parties irrevocably to
waive trial by jury, and that any dispute or controversy whatsoever between them
shall instead be tried in a court of competent jurisdiction by a judge sitting
without a jury.
12.18 TIME OF ESSENCE. Time is of the essence of this Agreement.
[EXECUTIONS COMMENCE ON NEXT PAGE]
34
IN WITNESS WHEREOF, each of the Borrower and the Bank has caused this
instrument to be executed under seal by its duly authorized officer as of the
date first above written.
- --------------------------------------------------------------------------------
DEBTOR, BY EXECUTING THIS AGREEMENT, HEREBY EXPRESSLY WAIVES ANY AND ALL
RIGHTS DEBTOR MAY HAVE TO NOTICE PRIOR TO THE SEIZURE OF THE COLLATERAL. THIS
WAIVER IS GIVEN BY DEBTOR TO SECURED PARTY IN ACCORDANCE WITH SECTION 44-14-263
OF THE OFFICIAL CODE OF GEORGIA IN ORDER TO ELIMINATE THE REQUIREMENT THAT
SECURED PARTY FURNISH A BOND SHOULD SECURED PARTY SEEK AN IMMEDIATE WRIT OF
POSSESSION.
- --------------------------------------------------------------------------------
BORROWER:
COLOR IMAGING, INC., a Delaware corporation
By: /S/ SUELING WANG
---------------------------------------
Dr. Sue-Ling Wang, President
Attest: /S/ MORRIS E. VAN ASPEREN
-------------------------------------
Morris E. Van Asperen
Its: Executive Vice President
[CORPORATE SEAL]
BANK:
SOUTHTRUST BANK
By: /S/ SCOTT M. SMITH
--------------------------------------
Its: ASSISTANT VICE PRESIDENT
--------------------------------------
[BANK SEAL]
EXHIBIT "A"
BORROWER'S REPORT
SEE FOLLOWING PAGES
A-1
SOUTHTRUST BANK
COLLATERAL LOAN BANK REPORT
COMPANY: Color Imaging, Inc.
Report Date: __________________________
This certifies that the information herein is true and correct and in compliance
with the Amended and Restated Loan and Security Agreement between the Company
and SouthTrust Bank dated ____________, 2003. This form is subject to change.
SECTION 1: ACCOUNTS RECEIVABLE AVAILABILITY
1. Accounts Receivables forward
(from line 4 prior report) ---------------
2. Additions to A/R:
a. Invoices/Billings, Opening balance ---------------
b. Return items debited to A/R ---------------
c. Other Increases to A/R
(non-A/R deposits, etc.) ---------------
d. Subtotal 0.00 0.00
--------------
3. Deductions from A/R:
a. Applied collections
(from _____ to ________) ---------------
b. Discounts, returns, allowances,
adjustments ---------------
c. Credit memos ---------------
d. Other - Progress Billings ---------------
e. Subtotal 0.00
--------------
4. Total Ending A/R (line 1 plus line 2d less line 3e) 0.00
--------------
5. Ineligible A/R
a. 60 past due date on N30 invoices ---------------
b. 30 days or more past due date
on datings ---------------
c. 50% Rule ---------------
d. 25% Concentration ---------------
e. Contra accounts
f. Related party accounts --------------
g. Credit balances --------------
h. Cash/COD --------------
i. Other(foreign A/R not backed by
L/Cs or credit insured.) --------------
j. Total Ineligibles
0.00
--------------
6. Eligible Receivables(Line 4 less Line 5j) 0.00
--------------
7. A/R Availability (Line 6 x 75%) 0.00
--------------
A-2
SECTION 2: INVENTORY AVAILABILITY
8. Gross Inventory (including inventory
in transit)
a. In House ---------------
b. In Transit ---------------
c. In Transit - L/C ---------------
d. Total Inventory (Line8 a, b, c)
0.00
--------------
9. Ineligible Inventory
a. Obsolete Inventory and
used inventory ---------------
b. Inventory at third party
location ---------------
c. Packaging and shipping supplies ---------------
d. Work in process/inventory ---------------
e. Total Ineligible Inventory
(Line 9a, b, c, d) 0.00
--------------
10. Eligible Inventory (Line 8d less Line 9e) 0.00
--------------
11. Inventory Availability
a. Line 10 x 50% ---------------
b. Inventory Cap = $750,000 ---------------
12. Inventory Availability - the
lesser of Lines 11 a and 11 b. 0.00
--------------
SECTION 3: TOTAL AVAILABLE AND EXCESS AVAILABILITY
13. Total Availability (LINE 7 PLUS LINE 12) 0.00
--------------
14 a. Loan balance forward ---------------
b. Deduct Payments in transit ---------------
c. Add advances requested ---------------
d. Add miscellaneous reserves ---------------
e. Add reserves for L/Cs on
inventory in-transit (100%) ---------------
f. Add reserves for L/Cs on
non-inventory in-transit (50%) ---------------
g. Add reserve for Standby L/Cs (100%) ---------------
h. Adjusted line balance ---------------
15. Line Limit $1,500,000
16. Excess Availability
(OVERADVANCE)-LINE 13 LESS LINE 14h 0.00
--------------
SECTION 4: CERTIFICATION
In compliance with the Amended Loan and Security Agreement between Borrower and
SouthTrust Bank, the Borrow hereby certifies that all of said inventories are
now at the below listed location(s), have the dollar values listed, are valued
in accordance with generally accepted accounting principles at the lower of cost
or market (unless otherwise specified), and are owned by the Borrower free and
clear of all claims or encumbrances, except for the security interest of
SouthTrust Bank. The Borrower agrees that said inventories will not be removed
without the written permission of SouthTrust Bank except for delivery to buyers
in the ordinary course of business or other normal business reason. The Borrower
certifies that all of said inventories have been produced in compliance with the
requirements of the Federal Fair Labor Standards Act. The Borrower understands
that SouthTrust Bank will rely upon these representations in making or
A-3
continuing Loan under the Amended and Restated Loan and Security Agreement with
the Borrower, and that SouthTrust Bank's security interest attaches to all such
inventories through all stages of manufacture or production, and to the finished
products and goods, and to all other inventories acquired by the Borrower from
time to time in the future.
SECTION 5: LOCATION(S) OF INVENTORY
WAREHOUSE INVENTORY THIRD PARTY
ADDRESS INVENTORY IN-TRANSIT WAREHOUSE
- ------- --------- ---------- ---------
Company Name: Color Imaging, Inc.
BY: _______________________________________
ITS: _______________________________________
DATE: _______________________________________
A-4
EXHIBIT "B"
-----------
LIENS AND ENCUMBRANCES
----------------------
NONE
B-1
EXHIBIT "C"
-----------
COLLATERAL LOCATIONS AND OWNERSHIP INFORMATION
----------------------------------------------
Location Name and Address of Landlord
- -------- ----------------------------
4350 Peachtree Industrial Avenue Kings Brothers, LLC
Suite 100 4350 Peachtree Industrial Blvd
Norcross, Georgia 30071 Suite 800
Norcross, GA 30071
C-1
EXHIBIT "D"
-----------
PENSION PLANS
-------------
1. The Color Imaging, Inc. 2003 Stock Incentive Plan
2. The Color Imaging, Inc 401(k) Plan
3. Salary Continuation and Deferred Compensation Agreement dated May 1, 1998,
as amended, between Color Imaging, Inc. and Charles Allison
D-1
EXHIBIT "E"
-----------
INTELLECTUAL PROPERTY RIGHTS
----------------------------
NONE
E-1
EXHIBIT "F"
-----------
COMPLIANCE CERTIFICATE
----------------------
SEE FOLLOWING PAGES
F-1
COVENANT COMPLIANCE CERTIFICATE
-------------------------------
This certificate is submitted pursuant to that Amended and Restated Loan and
Security Agreement (the "Loan Agreement") dated ___________, 2003, between Color
Imaging, Inc. as Borrower and SouthTrust Bank as Lender. When terms that are
defined in the Loan Agreement are used herein, they shall have the same meanings
as assigned to them in the Loan Agreement.
The information set forth herein is as of the ___________day of
____________________________20__.
We hereby certify that the following covenants are calculated in accordance with
the Loan Agreement and that they are in compliance with the terms of the Loan
Agreement. There currently exists no default under the covenants nor any other
Event of Default. These covenants are calculated based on the financial
statement(s) dated______________________,.20__, copies of which are enclosed
with this certificate.
A. FIXED CHARGE COVERAGE RATIO
Adjusted Net Earnings 0.00
-------------
Plus: Depreciation 0.00
-------------
Amortization 0.00
-------------
Interest Expense 0.00
-------------
Lease Expense 0.00
-------------
Less: Dividends (0.00)
-------------
Distributions (0.00)
-------------
A. 1. Sub-Total 0.00
--------------
Interest Expense 0.00
-------------
Plus: Lease Expense 0.00
-------------
Current Maturities
of Long Term Debt 0.00
--------------
Less: Current Maturities
of Authorized
Affiliate Debt (0.00)
-------------
Less: Kings Brothers
Obligations under
Reimbursement
Agreement (0.00)
---------------
A.2. Sub-Total 0.00
--------------
A.3. Total of A. 1. divided by A.2. 0.00
--------------
COVENANT LEVEL NOT LESS THAN 1.2 TO 1.00. COMPLIANCE: Y/N
---
F-2
B. DEBT TO TANGIBLE NET WORTH RATIO; TANGIBLE NET WORTH
B. 1. Total Debt 0.00
--------------
Total Equity 0.00
--------------
Plus: Subordinated Debt 0.00
--------------
Less: Intangible Assets (0.00)
--------------
Amounts Due from Officers,
Shareholders, Affiliates (0.00)
--------------
Less: Kings Brothers
Obligations under
Reimbursement
Agreement (only to
extent, if at all,
included in Total
Debt above) (0.00)
--------------
B.2. Tangible Net Worth 0.00
--------------
B.3. B.1. divided by B.2. 0.00
--------------
RATIO OF DEBT TO TANGIBLE NET WORTH NOT GREATER
THAN 2.1 TO 1.00. COMPLIANCE: Y/N
---
TANGIBLE NET WORTH NOT LESS THAN $7,000,000 COMPLIANCE: Y/N
---
Color Imaging, Inc. is Solvent as of the date hereof.
Color Imaging, Inc. hereby certifies the above to be true and correct to the
best of its knowledge.
COLOR IMAGING, INC.
By:____________________________________
Its:___________________________________
F-3
EXHIBIT "G"
-----------
SECOND PRIORITY EQUIPMENT
-------------------------
SEE FOLLOWING PAGES
G-1
SCHEDULE 7.3
STOCK REPURCHASE ARRANGEMENTS
1. Purchase and Sale and Release Agreement between Stephen Chromik and
Color Imaging, Inc. dated February 27, 2003.
2. Stock Repurchase Program as described in Borrower's April 22, 2003, SEC
Form 8-k.