Document:

Exhibit 10.2

 

FIRST AMENDMENT TO LEASE AGREEMENT

 

THIS FIRST AMENDMENT TO LEASE AGREEMENT (“First
Amendment”) is made and entered into between City Centre,
L.L.C. a Wisconsin Limited Liability Company (hereinafter “Landlord”, and Tower Tech Systems, A Wisconsin
Corporation (hereinafter “Tenant”).

 

WITNESSETH:

 

WHEREAS, Tenant and Landlord entered into that
certain Lease Agreement made as of January 1, 2005 whereby Tenant leases
from Landlord the approximately 138,186 square foot of premises located in the
City of Manitowoc, County of Manitowoc, State of Wisconsin, know municipally as
101 South 16th Street, Manitowoc, Wisconsin, and more particularly described in
the Lease as the “Demised Premises”;

 

WHEREAS, the initial Term of the Lease
currently expires on December 31, 2009, and there are five (5) separate
consecutive additional Renewal Periods of five (5) years each; and

 

WHEREAS, Landlord and Tenant agree to extend
the initial Lease Term for a period of five
(5) years expiring December 31, 2014 (initial lease term); and to
retain the existing five (5) separate options to extend the Term of the
Lease for five (5) separate consecutive additional Renewal Periods of five
(5) years each, and otherwise amend other provisions of the Lease as
provided herein.

 

NOW, THEREFORE, In consideration of the mutual promises, covenants and
agreements, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledge, the parties agree to amend the
Lease as follows:

 

1.               The recitals set forth above are
incorporated herein as true and correct.

 

2.               Landlord and Tenant hereby agree that
the current Term of the Lease is hereby extended for a period of five (5) years,
and shall hereafter expire on December 31, 2014.  Landlord and Tenant hereby agree that the
Rent is currently Thirty-Three thousand, three-hundred nineteen dollars and
eighty-three cents ($33,319.83) per month, and shall be increased throughout
the remainder of the Term as herein set forth:

 

a.               Per listed item #3 (RENTAL)
of the Lease the Tenant shall pay to the Landlord at 100 Maritime Drive, Suite 3C
(Address Change), Manitowoc, Wisconsin, 54220, or at such other place as the
Landlord shall from time to time designate in writing, rental increases as
computed as follows:

 

	
  Effective Date

  	
   

  	
  Bldg/Area

  	
   

  	
  Sq. Ft.

  	
   

  	
  $  Per Sq. Ft.

  	
   

  
	
  See Orig. Lease

  	
   

  	
  Various

  	
   

  	
  138,186

  	
   

  	
  N/A

  	
   

  
	
  12/01/07

  	
   

  	
  #230 (Leeco)

  	
   

  	
  25,159

  	
   

  	
  $

  	
  3.00

  	
   

  
	
  12/01/07

  	
   

  	
  2nd
  Flr. Office (new)

  	
   

  	
  4,617

  	
   

  	
  $

  	
  7.00

  	
   

  
	
  12/01/07

  	
   

  	
  Total

  	
   

  	
  167,962

  	
   

  	
   

  	
   

  

 

 

Note:  Effective August 1,
2005, the monthly rent through November 30, 2007 was $33,319.83
(excluding the Leeco Steel Bay #230) or annually $399,832.99.  Effective on December 1,
2007, the monthly rent is hereby increased to $42,302.83 or annually
to $507,633.96.  The annual revised rent
is hereby considered the new “base year rent”
which includes 100% of the 2007 Real Estate taxes and insurance.  Deleted from
the Lease is any and all calculations based on “additional” Tower production
(see item #3).

 

3.               Item #12 of the Lease is hereby deleted
in its entirety.

 

4.               All of the other terms and conditions of
the Lease are hereby reaffirmed and remain in full force and effect.  If there is a conflict between the terms and
conditions of the First Amendment and the terms and conditions of the Lease,
the terms and conditions of this First Amendment shall control.

 

IN WITNESS WHEREOF, the parties hereto have fully executed this First
Amendment as of this               
day of December, 2007.

 

	
  Landlord:

  	
   

  	
  Tenant:

  
	
   

  	
   

  	
   

  
	
  City Centre, L.L.C.

  	
   

  	
   

  
	
  A Wisconsin Limited Liability Company

  	
   

  	
  Tower Tech Systems, Inc.

  
	
   

  	
   

  	
   

  
	
  By: 

  	
   /s/ Christopher C. Allie

  	
   

  	
  By:

  	
   /s/ Steven A. Huntington

  
	
   

  	
  Christopher C. Allie

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Member

  	
   

  	
  Title: 

  	
   CFO

  
							

 

2Exhibit 10.3

 

LEASE AGREEMENT

 

THIS
AGREEMENT is entered into this 26th
day of December, 2007,
by and between City Centre LLC of 100 Maritime Dr., Suite 3C Manitowoc, WI
54220 (herein after Lessor) and Tower Tech Systems, Inc. of 200 S. 16th
Street, Manitowoc, WI 54220 (herein after Lessee).

 

Recitals

 

WHEREAS,
Lessor and Lessee have agreed to enter into a lease for the Building known as
the “Boat Worx” building (see attached Exhibit “A”) located at 500 South
16th Street, Manitowoc, Wisconsin, 54220 (herein after “Building”).

 

NOW
THEREFORE, in consideration of the mutual conditions hereinafter set forth and
for good and valuable consideration, the receipt of which is hereby
acknowledged, Lessor and Lessee hereby agree as follows:

 

1.                                       Lessee will
assume the existing lease between Boat Worx Inc. and City Centre LLC,
originally dated the 10th day of August, 2004.  It is understood that Boatworx, Inc.
will pay Their existing monthly rent per the lease directly to City Centre LLC
through May 31, 2008.  From January 1,
2008 through May 31, 2008 Lessee agrees to be liable for all of the 2008
Real Estate taxes on said premise along with interest due on the $200,000
advance to Boat Worx Inc. in lieu of City Centre LLC repaying Boat Worx for the
balance of their Lease Hold improvements.

 

2.                                       Lessee agrees
to enter into a new 15 year lease on said Premise at the Current Rental of $
93,034.00 per year (payable monthly) plus additional
rent of $129,432.00 for a total annual rent of $222,466.00 payable monthly at
$ 18,538.83.

 

3.                                       Lessee agrees
to alter item number 1. (page #1)
(Subject and purpose) which hereby states the use of said premise.  Lessor grants Lessee the same use as required
under the City Centre Lease with RBA, Inc. and Tower Tech Systems under
their existing lease with City Centre, LLC.

 

4.                                       Lessee agrees
to assume all of the remaining items in the Existing lease of Boat Worx, Inc.
except for the changes Agreed upon in items # 1 thru #3 above.

 

IN WITNESS WHEREOF, the
parties hereto have caused this Lease Agreement to be signed on the date
written above.

 

	
  City Centre LLC

  	
  Tower Tech
  Systems, Inc.

  
	
   

  	
   

  
	
  By:

  	
    /s/ Christopher C. Allie

  	
   

  	
  By:

  	
    /s/ Steven A. Huntington

  
	
   

  	
   

  
	
  Its: 

  	
    Agent

  	
   

  	
  Its: 

  	
    CFOExhibit 10.17

 

LOAN AND SECURITY AGREEMENT

 

THIS
LOAN AND SECURITY AGREEMENT (herein “Agreement”) dated as of January 17,
1997 between BFG ACQUISITION CORP., an Illinois corporation (hereafter, the “Borrower”)
1309 S. Cicero Avenue, Cicero, Illinois 60650 and LASALLE BANK NI, an Illinois
state banking corporation (hereafter, the “Lender”), 3201 N. Ashland Avenue,
Chicago, Illinois 60657.

 

W I T N E S S E T H:

 

WHEREAS,
the Borrower has asked the Lender to make to the Borrower a secured
$2,700,000.00 term loan and a secured $2,200,000.00 revolving loan to finance
the acquisition of certain assets (the “Acquisition”) which are currently owned
by Brad Foote Gear Works, Inc., a Delaware corporation (the “Seller”) and
to provide working capital for the Borrower; and

 

WHEREAS,
the Lender has agreed to make such loans on the terms and subject to the
conditions set forth in this Agreement;

 

NOW
THEREFORE, in consideration of the foregoing premises, the terms and conditions
contained herein, and of any loans or extension of credit heretofore, now or
hereafter made to or for the benefit of Borrower by Lender, the Borrower and
the Lender hereby agree as follows:

 

SECTION 1.  DEFINITION.

 

1.1           Defined Terms.  As used in this Agreement, the following
terms shall have the following respective meanings:

 

“Accounts”, “Inventory”, “Equipment”, and “General Intangibles”
shall have the meanings assigned to them in Section 7 hereof.

 

“Acquisition” - see Preamble.

 

“Agreement” shall mean this Loan and Security Agreement, as
amended, modified, restated or supplemented from time to time.

 

“Bank Commitment” shall mean the commitment letter dated December 16,
1996 issued by the Lender with respect to the Loans.

 

“Bankruptcy Code” shall mean Title 11 of the United States
Code (11 U.S.C.  §101 et seq.), as
amended from time to time, and any successor statute.

 

“Borrower” - see Preamble.

 

1

 

“Borrowing Base” shall mean, as of any applicable date of
determination, an amount equal to (i) eighty-five percent (85%) of
Borrower’s Eligible Accounts, less (ii) until the Reserve Elimination
Date, the Reserve.

 

“Borrowing Base Certificate” shall mean a certificate in such
form and content as the Lender may request, completed in all appropriate
respects and executed by the President of Borrower or such other officer of
Borrower authorized in writing by the Borrower, and setting forth Borrower’s
computation of the Borrowing Base as of the date of such certificate.

 

“Business Day” shall mean a day on which the Lender is open
to carry on its normal commercial lending business.

 

“Capital Expenditures” shall mean such expenditures
(including, in any event, all capitalized rentals and leasehold improvements)
as shall be determined in accordance with GAAP to constitute capital
expenditures.

 

“Cash Flow Coverage” shall mean, as of any applicable date of
determination, (i) EBITDA, divided by (ii) current maturities of bank
long term debt, plus interest expense (including interest owed to Lender and
former owners), plus lease payments for Leased Equipment.

 

“Cash Interest Expense” shall mean, as of any applicable date
of determination, Borrower’s total interest expense, whether paid or accrued
(including the interest component of capital leases), including, without limitation,
all commissions, discounts and other fees and charges owed with respect to
letters of credit, but excluding, however, interest expense not payable in cash
(including amortization of discount), all as determined in conformity with
GAAP.

 

“Charges” shall mean all national, federal, state, county,
city, municipal, and/or other governmental (including, without limitation, the
Pension Benefit Guaranty Corporation) taxes, levies, assessments, charges,
liens, claims or encumbrances upon and/or relating to (i) the Collateral
or any portion thereof, (ii) the Indebtedness or any portion thereof, (iii) Borrower’s
employees, payroll, income and/or gross receipts, (iv) Borrower’s
ownership and/or use of any of its assets, or (v) any other aspect of
Borrower’s business.

 

“Collateral” shall mean all property and interests in
property now owned or hereafter acquired by the Borrower in or upon which a
security interest, lien or mortgage is granted or in which a collateral
assignment is made under this Agreement or under the other Collateral
Documents.

 

“Collateral Assignment of Life Insurance” shall mean the
collateral assignment of the life insurance policy on the life of J. Cameron
Drecoll described in Section 6 hereof.

 

“Collateral Documents” shall mean this Agreement, the
Collateral Assignment of Life Insurance, the Stock Pledge Agreements, the
Security Agreement-Leased Equipment, and any other agreement, instrument,
mortgage, deed of trust or document pursuant to which a security

 

2

 

interest
or lien is granted by the Borrower or any other obligor, to secure the payment
and performance of the Indebtedness.

 

“Commitment Amount” shall mean, as of any applicable date of
determination, Two Million Two Hundred Thousand and 00/100 ($2,200,000.00)
Dollars.

 

“Debt” shall mean, as of any applicable date of
determination, all items of indebtedness, obligation or liability of a Person,
whether matured or unmatured, liquidated or unliquidated, direct or indirect,
absolute or contingent, joint or several, that should be classified as
liabilities in accordance with GAAP.

 

“Default” shall mean a condition or event which, with the
giving of notice or the passage of time, or both, would become an Event of
Default.

 

“Disbursement Date” shall mean each date upon which the
Lender makes a loan to the Borrower under Section 2 of this Agreement.

 

“EBIT” shall mean, as of any applicable date of
determination, with respect to Borrower, the sum of the amounts for such
periods, of (i) Net Income, plus (ii) Cash Interest Expense, plus (iii) federal
and state income taxes, plus (iv) extraordinary losses (and any unusual
losses arising in or outside of the ordinary course of business not included in
extraordinary losses determined in accordance with GAAP, which have been
included in the determination of Net Income), minus, (v) extraordinary
gains (and any unusual gains arising in or outside of the ordinary course of
business not included in extraordinary gains determined in accordance with GAAP
which have been included in the determination of Net Income).

 

“EBITDA” shall mean, as of any applicable date of
determination, with respect to Borrower, the sum of the amounts for such
periods, of (i) Net Income, plus (ii) depreciation and amortization
expense, plus (iii) Cash Interest Expense, plus (iv) federal and
state income taxes, plus (v) extraordinary losses (and any unusual losses
arising in or outside of the ordinary course of business not included in
extraordinary losses determined in accordance with GAAP, which have been
included in the determination of Net Income), minus, (vi) extraordinary
gains (and any unusual gains arising in or outside of the ordinary course of
business not included in extraordinary gains determined in accordance with GAAP
which have been included in the determination of Net Income).

 

“Eligible Accounts” shall mean those Accounts included in a
Borrowing Base Certificate which, as of the date of such Borrowing Base
Certificate and at all times thereafter: 
(i) satisfy the requirements for eligibility as described in Section 2.6
of this Agreement, (ii) do not violate the negative covenants and other
provisions of this Agreement and do satisfy the affirmative covenants and other
provisions of this Agreement, and (iii) are deemed by Lender, in its
reasonable credit judgment, to be Eligible Accounts.

 

“Equipment Lease” shall mean that certain Equipment Lease
Agreement dated January 17, 1997 between Seller as lessor and Borrower as
lessee, covering the Leased Equipment.

 

3

 

“ERISA” shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time, and any successor statute.

 

“Event of Default” shall mean any of those conditions or
events listed in Section 15 of this Agreement.

 

“Financing Statements” shall mean UCC financing statements
describing the Lender as secured party and Borrower as debtor covering the
Collateral and otherwise in such form, for filing in such jurisdictions and
with such filing offices, as the Lender shall deem necessary or advisable.

 

“GAAP” shall mean, as of any applicable date of
determination, generally accepted accounting principles, consistently applied,
set forth in the rules, regulations, statements, opinions and pronouncements of
the American Institute of Certified Public Accountants and of the Financial
Accounting Standards Board (or agencies with similar functions of comparable
stature and authority within the accounting profession).

 

“Guarantors” shall mean collectively, J. Cameron Drecoll,
Patrick Rosmonowski and Dennis Palmer, and “Guarantor” shall refer to any one
of them.

 

“Guaranties” shall mean the continuing guaranties to be
executed by the Guarantors in accordance with Section 5 hereof, pursuant
to which the Guarantors jointly and severally unconditionally guarantee
repayment to the Lender of all the Indebtedness, and “Guaranty”
shall refer to any one of the Guaranties.

 

“Hazardous Material” shall have the meaning set forth in Section 13.1(u) hereof.

 

“Indebtedness” shall mean and include all loans, advances,
debts, liabilities, obligations, covenants and duties owing to the Lender by
the Borrower, whether now existing, or hereafter created or arising, including,
without limitation:  (1) the
Revolving Loan, together with all loans, advances and overadvances now or
hereafter made thereunder, and all extensions, renewals, amendments,
refinancings, modifications, consolidations and conversions thereof or
increases thereto; and (2) the Term Loan, together with all extensions,
renewals, amendments, refinancings, modifications, consolidations and
conversions thereof; and (3) all interest, fees, charges, expenses,
attorneys’ fees and other costs and sums now or hereafter payable by the
Borrower under the terms of this Agreement, the Notes, or any of the other Loan
Documents; and (4) any and all other loans, advances, overdrafts,
indebtedness, liabilities and obligations now or hereafter owed by Borrower to
Lender, of every kind and nature, howsoever created, arising or evidenced, and
howsoever owned, held or acquired, whether now due or to become due, whether
direct or indirect, or absolute or contingent, whether several, joint or joint
and several, whether liquidated or unliquidated, whether legal or equitable,
whether disputed or undisputed, whether secured or unsecured, or whether
arising under this Agreement or any of the other Loan Documents or any other
document or instrument, and, advances made by Lender to pay or discharge any
other lien, security interest or encumbrance upon the Collateral; and (5) all
advances made by Lender to protect the Collateral, and/or Lender’s security
interest therein; and (6) all costs, expenses and fees (including
reasonable attorneys’ fees) incurred by Lender pursuant to the terms of this
Agreement or any of the other Loan Documents, or in connection 

 

4

 

with
(i) the drafting and preparation of this Agreement and the other Loan
Documents, (ii) the administration, enforcement and defense of this
Agreement and any other Loan Documents, or the relationships and security
interests created hereunder or thereunder, (iii) the collection of the
Indebtedness and any other obligation or indebtedness secured hereby, and (iv) the
sale or other disposition of the Collateral, or any portion thereof.

 

“Leased Equipment” shall mean all of the equipment described
in the Equipment Lease, as described in Exhibit A
attached hereto.

 

“Lender” - see Preamble.

 

“Loan Documents” shall mean this Agreement, the Notes, the
Negative Pledge Agreement, the Collateral Assignment of Life Insurance, and all
other agreements, instruments and documents, including, without limitation, the
Collateral Documents, and any other security agreements, notes, guaranties,
mortgages, assignments, financing statements, and all other writings
heretofore, now, or hereafter executed by the Borrower or any other obligor,
and delivered to Lender in connection with or relating to this Agreement,
together with all agreements, instruments and documents referred to therein or
contemplated thereby.

 

“Loans” shall mean collectively, the Revolving Loan, the Term
Loan and all extensions, renewals, amendments, refinancings, modifications,
consolidations, conversions, and increases thereof or thereto.

 

“Lock Box” shall mean the United States post office lock box
established pursuant to the terms of Section 2 of this Agreement.

 

“Negative Pledge Agreement” shall mean the negative pledge
agreement to be executed by Borrower in accordance with Section 6 hereof.

 

“Net Income” shall mean the net income or loss of the
Borrower for any period determined in accordance with GAAP, but excluding in
any event:

 

(a)                                  any gains or
losses on the sale or other disposition, not in the ordinary course of
business, of investments or fixed or capital assets, and any taxes on excluded
gains and any tax deductions or credits on account of any excluded losses; and

 

(b)                                 net earnings of
any Person in which the Borrower has an ownership interest, unless such net
earnings have actually been received by the Borrower in the form of cash
distributions.

 

“Notes” shall mean collectively, the Revolving Note, the Term
Note and all extensions, renewals, amendments, refinancings, modifications,
consolidations and conversions thereof or thereto.

 

“PBGC” shall mean the Pension Benefit Guaranty Corporation
and any Person succeeding to the functions thereof.

 

“Permitted Liens” shall mean:

 

5

 

(a)                                  Liens and
encumbrances in favor of the Lender;

 

(b)                                 Liens for
taxes, assessments or other governmental charges incurred in the ordinary
course of business and for which no interest, late charge or penalty is
attaching or which is being contested in good faith by appropriate proceedings
and, if requested by the Lender, bonded in an amount and manner satisfactory to
the Lender;

 

(c)                                  Liens, not
delinquent, created by statute in connection with worker’s compensation,
unemployment insurance, social security and similar statutory obligations; and

 

(d)                                 Liens of
mechanics, materialmen, carriers, warehousemen or other like statutory or
common law liens securing obligations incurred in good faith in the ordinary
course of business that are not yet due and payable.

 

(e)                                  The subordinate
security interest in the Collateral granted by Borrower to Seller, which has
been subordinated to Lender’s security interest in the Collateral pursuant to
the terms of the Seller/Bank Intercreditor Agreement.

 

“Person” shall mean and include any individual, corporation
(including, without limitation, any affiliate or subsidiary of Borrower),
partnership, joint venture, limited liability company, limited liability
partnership, sole proprietorship, association, trust, unincorporated
association, joint stock company, government, institution, municipality,
political subdivision or agency, or other entity of whatever nature.

 

“Pledged Stock” shall have the meaning ascribed to it in Section 6
hereof.

 

“Prime Rate” shall mean the rate of interest publicly
announced by LaSalle National Bank from time to time as its “prime rate”,
without regard to whether such announced “prime rate” is the lowest rate of
interest then offered by the Lender to its borrowers.

 

“Real Property” shall mean, for purposes of all provisions of
this Agreement relating to Hazardous Materials, all real property now or
hereafter occupied, owned or controlled by the Borrower.

 

“Reserve” shall have the meaning ascribed to it in Section 2.7
hereof.

 

“Reserve Elimination Date” shall have the meaning ascribed to
it in Section 2.7 hereof.

 

“Revolving Loan” shall mean the $2,200,000.00 revolving line
of credit loan extended by the Lender to the Borrower under Section 2 of
this Agreement, and any and all extensions, renewals, amendments,
modifications, refinancings, conversions, consolidations and increases thereof
or thereto.

 

“Revolving Note” shall mean the promissory note evidencing
the Revolving Loan executed by Borrower in accordance with Section 2
hereof, and any and all extensions, renewals, amendments, refinancings, or
modifications, conversions or consolidations thereof or thereto.

 

6

 

“Seller/Bank Intercreditor Agreement” shall mean the
intercreditor agreement of even date herewith between Seller and the Lender
described in Section 6 hereof.

 

“Seller Note” shall mean the subordinated promissory note
dated January 17, 1997 in the principal sum of $1,200,000.00 issued by
Borrower to Seller in connection with the Acquisition.

 

“Stock Pledge Agreements” shall have the meaning ascribed to
it in Section 6 hereof.

 

“Security Agreement-Leased Equipment” shall have the meaning
ascribed to it in Section 6 hereof.

 

“Subordinated Debt” shall mean indebtedness of the Borrower
to third parties (including, without limit, the indebtedness evidenced by the
Seller Note and all payments due and to become due under the Equipment Lease)
which has been subordinated to the Indebtedness pursuant to a subordination
agreement in form and content satisfactory to the Lender.

 

“Subsidiary” shall mean any corporation (whether now existing
or hereafter organized or acquired) in which more than fifty percent (50%) of
the outstanding securities having ordinary voting power for the election of
directors, as of any applicable date of determination, shall be owned directly,
or indirectly through one or more Subsidiaries, by Borrower.

 

“Tangible Net Worth” shall mean, as of any applicable date of
determination, an amount equal to (i) the net book value of all assets of
Borrower (other than patents, patent rights, trademarks, trade names,
franchises, copyrights, licenses, goodwill, and similar intangible assets)
after all appropriate deductions in accordance with GAAP, including, without
limitation, reserves for doubtful receivables, obsolescence, depreciation, and
amortization, less (ii) all loans due from officers, directors,
shareholders, employees and/or affiliates of Borrower, less (iii) prepaid
expenses, less (iv) all Debt, other than Subordinated Debt.

 

“Term Loan” shall mean the term loan described in Section 3
hereof and all extensions, renewals, amendments, refinancings, modifications,
and consolidations thereof or thereto.

 

“Term Note” shall mean the promissory note evidencing the
Term Loan executed by Borrower in accordance with Section 3 hereof, and
any and all extensions, renewals, amendments, refinancings, modifications or
consolidations thereof or thereto.

 

“Termination Date” shall mean April 1, 1999, or such
earlier date upon which the Revolving Note becomes due and payable.

 

“UCC” shall mean the Illinois Uniform Commercial Code, 810
ILCS 5\1-101 et.  seq., as amended.

 

1.2                                 Accounting
Terms.  All accounting terms not
specifically defined in this Agreement shall be construed in accordance with
GAAP.

 

1.3                                 Other Terms.  All other terms contained in this Agreement
which are not otherwise defined in this Section 1 or in any other section
of this Agreement, shall, unless the

 

7

 

context
indicates otherwise, have the meanings provided for by the UCC to the extent
the same are used or defined therein.

 

1.4                                 Singular and
Plural.  Where the context herein
requires, the singular number shall be deemed to include the plural, the
masculine gender shall include the feminine and neuter genders, and vice versa.

 

SECTION 2.  REVOLVING LOAN.

 

2.1                                 Revolving
Credit Commitment.  Subject to
and upon the terms and conditions of this Agreement, the Lender agrees to makes
loans to Borrower on a revolving basis in such amount as the Borrower shall
request pursuant to Section 2.2 of this Agreement at any time from the
date of this Agreement until the Termination Date, up to an aggregate principal
amount outstanding at any time not to exceed the lesser of the Commitment
Amount or the Borrowing Base, provided that each Disbursement Date under this
Agreement must be a Business Day and provided that the principal amount of each
advance under the Revolving Loan must be in the minimum amount of One Thousand
and no/100 ($1,000) Dollars.

 

2.2                                 Borrowing
Procedures.

 

2.2.1                        Notice.  The Borrower shall give written notice to the
Lender not later than 2:00 p.m. on or before the Business Day on which the
Borrower requests the Lender to make an advance under the Revolving Loan.

 

2.2.2                        Lender
Obligations.  The Lender,
in its reasonable discretion and upon its reasonable determination, that the
conditions set forth in this Agreement have been duly satisfied, will make the
amount set forth in the Borrower’s notice available to or upon the order of the
Borrower in immediately available funds at the Lender’s principal office, on
the date of the proposed borrowing (which shall be a Business Day), provided,
however, that the Lender shall not be obligated if:

 

(a)                                  With respect to
the initial disbursement under the Revolving Loan, any of the conditions
precedent set forth in Section 6 hereof shall not have been satisfied, or

 

(b)                                 With respect to
all other advances under the Revolving Loan:

 

(i)                                     Any Default or
Event of Default has occurred and is continuing, or

 

(ii)                                  Any of the
warranties or representations set forth in this Agreement shall not be true or
correct on and as of such Disbursement Date, or

 

(iii)                               Such proposed
advance under the Revolving Loan would cause the aggregate unpaid principal
amount of the Revolving Loan outstanding under this Agreement to exceed the
lesser of the Commitment Amount or the Borrowing Base on the Disbursement Date,
or

 

(iv)                              The
Disbursement Date is on or after the Termination Date.

 

8

 

2.3                                 Revolving Note.  The Revolving Loan shall be evidenced by a
revolving note, executed by the Borrower, dated the date of this Agreement,
payable to the Lender on April 1, 1999, and in the principal sum of Two
Million Two Hundred Thousand and 00/100 ($2,200,000.00) Dollars (the “Revolving
Note”).  The date and amount of each
advance under the Revolving Loan made by the Lender and of each repayment of
principal thereon received by the Lender shall be recorded by the Lender in its
records.  The aggregate unpaid principal
amount so recorded by the Lender shall be rebuttable presumptive evidence as to
the principal amount outstanding thereunder, provided, however,
that the failure by the Lender so to record any such amount or any error in so
recording any such amount shall not limit or otherwise affect the obligations
of the Borrower under this Agreement or the Revolving Note to repay the
principal amount of the-entire Revolving Loan together with all interest
accrued or accruing thereon.

 

Interest
on the Revolving Note shall be payable monthly, commencing on February 1,
1997 and continuing on the same day of each month thereafter.  Interest shall accrue on the unpaid principal
balances of the Revolving Note calculated at a variable rate per annum equal to
the Prime Rate plus one-half percent (.50%) per annum, such rate to change on
the day or days the Prime Rate changes. 
Interest after maturity of the Revolving Note or an Event of Default
shall be calculated on the unpaid principal balances of the Revolving Note at
the variable rate per annum equal to the Prime Rate plus three and one-half
percent (3.5%) per annum, such rate to change on the day or days the Prime Rate
changes.  Interest on the Revolving Note
shall be calculated on the basis of a 360-day year for the actual number of
days the principal is outstanding.

 

Lender
will reduce the interest rate charged on the Revolving Note by one-half percent
(.5%) to Prime floating if (i) at Borrower’s fiscal year ended December 31,
1997, Borrower’s EBIT is equal to or greater than $2,000,000, and (ii) no
Event of Default shall then have occurred and be continuing hereunder and
Borrower shall be in full compliance with all of its financial covenants made
in Section 14.1 hereof.

 

In
addition, a late charge equal to five percent (5%) of each late payment may be
charged on any payment not received by the Lender within five (5) calendar
days after the payment due date, but acceptance of payment of this charge shall
not waive any Default or Event of Default.

 

Immediately
upon demand by Lender, the Borrower shall pay to Lender an amount of money
equal to the amount theretofore advanced by the Lender to the Borrower upon any
Account that is no longer an Eligible Account, and the Lender shall apply such
payment to and on account of the Revolving Loan.  The Borrower shall notify the Lender within a
reasonable time after learning that an Account is no longer an Eligible
Account, but in any event, not later than the date of the next request by the
Borrower for an advance under the Revolving Loan.

 

Borrower
covenants to Lender and agrees that if at any time the then unpaid principal
balance of the Revolving Loan shall be in excess of the lesser of the (i) Commitment
Amount and (ii) the Borrowing Base as then determined and computed, the
Borrower shall immediately without notice or demand pay over the amount of the
excess to the Lender as and for a mandatory prepayment on the Revolving Loan.

 

9

 

If
Borrower shall voluntarily terminate the Revolving Loan for any reason prior to
January 17, 1998, Borrower promises to pay to Lender on the date of such
termination, in addition to the entire outstanding principal balance of the
Revolving Note and all accrued interest thereon, a prepayment premium in the
amount of Twenty-Two Thousand ($22,000.00) Dollars.

 

2.4                                 Lock Box.  Borrower shall at its sole expense establish
and maintain, so long as the Revolving Loan shall remain unpaid, a United
States post office lock box (the “Lock Box”), to which the Lender shall have
exclusive access, and to which the Borrower shall have no access.  Borrower expressly authorizes Lender, from
time to time to remove all contents from the Lock Box, for disposition in
accordance with this Agreement.  Borrower
agrees to notify all Account Debtors and other parties obligated to it that all
payments made on any Account, invoice, or other Collateral shall be remitted,
for the credit of Borrower, to the Lock Box, and Borrower shall include a like
statement on all invoices.  Borrower
shall execute all documents, authorizations and other agreements necessary to
establish the Lock Box, and Lender’s exclusive access thereto.

 

Any
and all cash, checks, drafts and other instruments for the payment of money
received by Borrower at any time, in full or partial payment of any of the
Collateral shall forthwith, upon receipt, be transmitted to and delivered to
Lender (properly endorsed, where required, so that such items may be collected
by Lender).  Any such items received by
Borrower shall not be commingled with any other of Borrower’s funds or
property, but will be held separate and apart from Borrower’s own funds or
property, and upon express trust for the benefit of Lender until delivery is
made to Lender.

 

All
items or amounts which are remitted to the Lock Box or otherwise delivered by
or for the benefit of the Borrower to Lender on account of partial or full
payment of, or any other amount payable with respect to, any of the Collateral
shall, at Lender’s option:  (i) be
applied to the payment of the Indebtedness, in such order of application as
Lender may determine in its sole discretion, or (ii) shall be deposited to
the credit of a non-interest bearing cash collateral account in the name of
Lender for the benefit of Borrower, to be established by Borrower with Lender
pursuant to this section, as security for payment of the Indebtedness.  Borrower shall have no right whatsoever to
withdraw any funds so deposited. 
Borrower further grants to Lender a first priority security interest in
and lien on all funds on deposit in such account.  Borrower hereby irrevocably authorizes and
directs Lender to endorse all items received for deposit to said cash
collateral account, notwithstanding the inclusion on any such item of a
restrictive notation, e.g., “paid in full”, “balance of account”, or other
restriction.

 

2.5                                 Collection of
Proceeds.  Borrower
agrees to collect and enforce payment of all Accounts until Lender shall direct
Borrower to the contrary and, from and after this direction, Borrower agrees to
fully and promptly cooperate and assist Lender (or any other person designated
by Lender) in the collection and enforcement of all Accounts.  Borrower shall not grant any extension of
time for the payment of Accounts, shall not compromise, compound or settle the
Accounts or any part thereof for less than the full amount thereof, shall not
release, in whole or in part, any person liable for the payment of the Accounts
or any part thereof, or allow any credit, discount or allowance whatsoever upon
the Accounts or any part thereof, unless such

 

10

 

activity
shall be deemed to be in the ordinary course of business and shall not occasion
or threaten a material adverse change in the financial condition, results of
operation or business of the Borrower, without first obtaining the written
consent of the Lender.

 

Borrower
irrevocably authorizes Lender or any employee or agent of Lender to endorse the
name of Borrower upon any checks or other items which are received in payment
of any Accounts or for any Inventory, and to do any and all things necessary in
order to reduce these items to money.

 

The
Lender shall have no duty as to the collection or protection of Collateral or
the proceeds thereof, nor as to the preservation of any related rights, beyond
the use of reasonable care in the custody and preservation of Collateral in the
possession of Lender.  Borrower agrees to
take all steps necessary to preserve rights against prior parties with respect
to Borrower’s property in the possession of Lender.

 

For
the purpose of calculating interest on the Revolving Loan, Borrower understands
that the Lender imposes a minimum two Business Days delay in crediting payments
received by the Lender on Eligible Accounts or other Collateral against the
Revolving Loan to allow time for collection and Borrower agrees that the Lender
may, at Lender’s option, make such credits only when payments are actually
collected by Lender in immediately available funds.  Any credit of payment by Lender prior to
receipt by Lender of immediately available funds is conditional upon Lender’s
receipt of those funds.

 

All
remittances will be received by Lender subject to collection, and the Lender
assumes no responsibility in connection therewith beyond the exercise of
ordinary care and will not be liable for default, negligence or willful
misconduct of any correspondent or for losses in transit.

 

Borrower
agrees that the Lender shall not be liable for any loss or damage which
Borrower suffers or may suffer as a result of the Lender’s processing of items
or its exercise of any other rights or remedies under this Agreement,
including, without limitation, indirect, special or consequential damages, loss
of revenues or profits, or any claim, demand or action by any third party
arising out of or in connection with the processing of items or the exercise of
any other rights or remedies hereunder. 
Borrower further agrees to indemnify and hold Lender harmless from and
against all such third party claims, demands or actions, including, without
limitation, litigation costs and reasonable attorneys’ fees.

 

2.6                                 Eligible
Accounts.  Upon
Borrower’s delivery to Lender of a Borrowing Base Certificate, Lender shall
determine, in its reasonable discretion, which Accounts listed thereon are “Eligible
Accounts”.  In making this determination,
Lender will consider the following requirements:

 

(a)                                  The Account is
not owing more than ninety (90) days after the date of the original invoice or
other writing evidencing such Account;

 

(b)                                 it is not owing
by an Account Debtor who has failed to pay twenty-five percent (25%) or more of
the aggregate amount of its Accounts owing to Borrower within ninety (90) days
after the date of the respective invoices or other writings evidencing such
Accounts;

 

11

 

(c)                                  it arises from
the sale of goods and such goods have been shipped or delivered to the Account
Debtor under such Account; or it arises from services rendered and such
services have been performed;

 

(d)                                 it is evidenced
by an invoice, dated not later than the date of shipment or performance,
rendered to such Account Debtor or some other evidence of billing acceptable to
Lender;

 

(e)                                  it is not
evidenced by any note, trade acceptance, draft or other negotiable instrument
or by any chattel paper, unless such note or other document or instrument
previously has been endorsed and delivered by Borrower to Lender and is
acceptable to Lender;

 

(f)                                    it is a valid,
legally enforceable obligation of the Account Debtor thereunder, and is not
subject to any offset, counterclaim or other defense on the part of such
Account Debtor or to any claim on the part of such Account Debtor denying
liability thereunder in whole or in part;

 

(g)                                 it is not
subject to any sale of accounts, any rights of offset, assignment, lien or
security interest whatsoever other than to Lender, and the subordinate security
interest of Seller;

 

(h)                                 it is not owing
by a parent, subsidiary, affiliate, officer, employee or partner of Borrower,
nor by an Account Debtor which (i) does not maintain its chief executive
office in the United States of America or Canada, (ii) is not organized
under the laws of the United States of America, or any state thereof, or under
the laws of any province in Canada, or (iii) is the government of any
foreign country or sovereign state, or of any state, province, municipality or
other instrumentality thereof;

 

(i)                                     it is not an
Account owing by the United States of America or any state or political
subdivision thereof, or by any department, agency, public body corporate or
other instrumentality of any of the foregoing, unless all necessary steps are
taken to comply with the Federal Assignment of Claims Act of 1940, as amended,
or with any comparable state law, if applicable, and all other necessary steps
are taken to perfect Lender’s security interest and collection rights in such
Account.

 

(j)                                     it is not owing
by an Account Debtor for which Borrower has received a notice of (i) the
death of the Account Debtor or any partner of the Account Debtor, (ii) the
dissolution, liquidation, termination of existence, insolvency or business
failure of the Account Debtor, (iii) the appointment of a receiver for any
part of the property of the Account Debtor, or (iv) an assignment for the
benefit of creditors, the filing of a petition in bankruptcy, or the
commencement of any proceeding under any bankruptcy or insolvency laws by or
against the Account Debtor;

 

(k)                                  it is not an
account billed in advance, payable on delivery, for consigned goods, for
guaranteed sales, for unbilled sales, for progress billings, payable at a
future date in accordance with its terms, subject to a retainage or holdback by
the Account Debtor or insured by a surety company;

 

12

 

(1)                                  If the Account
Debtor is located in either the State of New Jersey, the State of Minnesota, or
the State of Indiana, Borrower has filed a Notice of Business Activities Report
or comparable report with the applicable state authority for the then current
year;

 

(m)                               it is not owing
by any Account Debtor whose obligations Lender, acting in its sole discretion,
shall have notified Borrower are not deemed to constitute Eligible Accounts.

 

For
purposes of determining eligibility, should twenty percent (20%) or more of the
Eligible Accounts be due and owing from any one Account Debtor at any time,
then the excess of said twenty percent (20%) of such Accounts shall not be
eligible, regardless of whether such Accounts otherwise satisfy the criteria
for eligibility set forth above.

 

An
Account which is at any time an Eligible Account, but which subsequently fails
to meet any of the foregoing requirements, shall forthwith cease to be an
Eligible Account.

 

2.7                                 Reserve/Reserve
Elimination Date.  The
borrowing availability under the Revolving Loan shall be reduced by a
$50,000.00 reserve (the “Reserve”).  The
Reserve shall be eliminated on the date the first annual $50,000.00 payment is
made by Borrower to Regal-Beloit Corporation pursuant to that certain
Settlement Agreement dated December 2, 1996 by and among Borrower,
Regal-Beloit Corporation, Seller and the Guarantors (the “Reserve Elimination
Date”).

 

Proceeds
of the Revolving Loan and the Term Loan will be used solely for the purpose of
providing financing for the Acquisition and working capital for the Borrower in
the Borrower’s ordinary course of business.

 

2.8                                 Unused Facility
Fee.  The Borrower will pay to
Lender an unused facility fee of one-quarter percent (1/4%) on the unused
portion of the Revolving Loan, which fee shall be paid monthly in arrears.

 

SECTION 3.  TERM LOAN.

 

3.1                                 Term Loan.  The Lender agrees to make the Borrower a
secured term loan in the principal amount of Two Million Seven Hundred Thousand
and no/100 ($2,700,000.00) Dollars (herein, the “Term Loan”).  The Term Loan shall be evidenced by a term
note of even date herewith, executed by Borrower, in the principal sum of Two
Million Seven Hundred Thousand and no/100 ($2,700,000.00) Dollars (the “Term
Note”), payable to the order of the Lender in twenty-three (23) successive
monthly installments of principal in the sum of $32,143.00 each, plus interest,
commencing March 1, 1997, and payable on the first (1st) day of each month
thereafter, followed by a final balloon payment of the entire unpaid principal
balance and accrued interest due on February 1, 1999.  Interest shall be payable monthly on the
unpaid principal balance of the Term Note (concurrently with each principal
payment), calculated at a per annum rate equal to the Prime Rate plus one-half
percent (1/2%) per annum, and after default or maturity, at a rate per annum
equal to the Prime Rate plus three and one-half percent (3-1/2%) per
annum.  In addition, a late charge equal
to five percent (5%) of each late payment may be charged on any payment not
received by the Lender within five (5) calendar days after the payment due
date, but acceptance of payment of this charge shall not waive any Default or
Event 

 

13

 

of
Default.  Interest on the Term Note shall
be calculated on the basis of a 360-day year for the actual number of days the
principal is outstanding.

 

Lender
will reduce the interest rate charged on the Term Note by one-half percent
(.5%) to Prime floating if (i) at Borrower’s fiscal year ended December 31,
1997, Borrower’s EBIT is equal to or greater than $2,000,000, and (ii) no
Event of Default shall then have occurred and be continuing hereunder and
Borrower shall be in full compliance with all of its financial covenants made
in Section 14.1 hereof.

 

If
Borrower shall prepay the Term Loan for any reason prior to January 17,
1998, Borrower promises to pay to Lender on the date of such prepayment, in
addition to the entire outstanding principal balance of the Term Note and all
accrued interest thereon, a prepayment premium in the amount of Twenty-Seven
Thousand ($27,000.00) Dollars.

 

SECTION 4.  COLLATERAL;
LOANS CROSS-DEFAULTED AND CROSS-COLLATERALIZED.

 

All
Loans and other Indebtedness shall be secured by Borrower’s grant to the Lender
of a first priority security interest in and to the Collateral (except that
Lender shall maintain a second priority security interest in the Pledged Stock
as herein provided).

 

Borrower
acknowledges and agrees that all Loans shall be cross-defaulted, meaning that a
default under any of the Loans shall constitute a default under all Loans, and (b) all
Loans shall be cross-collateralized, meaning that the Collateral, and all other
collateral in which the Lender is granted a security interest in connection
with the Loans, shall secure all of the Loans, and all other Indebtedness.

 

SECTION 5.  GUARANTORS.

 

The
payment and performance of all indebtedness, liabilities and obligations of the
Borrower to the Lender, whether now existing or hereafter created or arising,
including, without limitation, the Loans (and all renewals, extensions,
modifications, amendments, refinancings and consolidations thereof or thereto),
shall be jointly and severally unconditionally guaranteed by Guarantors,
pursuant to continuing guaranties, in form and substance satisfactory to the
Lender.

 

The
Guaranty of J. Cameron Drecoll shall be unlimited.  The Guaranties of Patrick Rosmonowski and
Dennis Palmer shall each be limited to the aggregate sum of $50,000.00 each.

 

SECTION 6.  CONDITIONS
PRECEDENT TO INITIAL LOAN DISBURSEMENT.

 

The
obligation of the Lender to make the Loans to Borrower is subject to the
fulfillment of each and every one of the following conditions precedent:

 

(a)                                  The Lender
shall have received on or before the day of the initial disbursement of the
Loans, each of the following, in form, substance and execution satisfactory to
the Lender and 

 

14

 

its
counsel:  this Agreement, the Notes,
Guaranties, UCC Financing Statements, Negative Pledge Agreement, Stock Pledge
Agreement, Collateral Assignment of Life Insurance, lockbox agreement, Borrower’s
opinion of counsel, consent of shareholders, authority to procure loans,
authorization certificate, insurance certificates, projected opening day
balance sheet prepared on a compiled basis (prepared by a firm of independent
certified public accountants acceptable to Lender), cash flow projections,
solvency affidavit, and such other documents, instruments, certificates,
affidavits, debt subordination, landlord’s waiver certificate(s), supporting
documents, approvals, evidence of insurance coverages, payoff letters, and
searches of public records required by the Lender in connection with the Loans.

 

(b)                                 The Lender
shall have received from Seller on or before the day of the initial
disbursement of the Loans (i) the original executed Equipment Lease in
pledge, a security agreement and assignment of lease (the “Security
Agreement-Leased Equipment”) and UCC financing statements, each in such form
and content satisfactory to the Lender, and sufficient to grant to the Lender a
first priority security interest in the Equipment Lease and Leased Equipment, (ii) a
certified copy of the Seller Note, in such form and content satisfactory to the
Lender, which Seller Note shall contain a legend on the face page thereof
disclosing that the indebtedness evidenced thereby has been subordinated to all
indebtedness owed by the Borrower to the Lender pursuant to the intercreditor
agreement hereafter described, (iii) an intercreditor agreement executed
by Seller, in form and content satisfactory to the Lender, whereby Seller shall
have subordinated its security interest in the Collateral to the Lender’s
security interest therein, and its right to payment of the Seller Note and the
Equipment Lease, to the Lender’s right to receive payment of the Indebtedness
(the “Seller/Bank Intercreditor Agreement”); and (iv) copies of the final
security agreement and UCC financing statement to be executed by Borrower in
favor of Seller (which UCC financing statement shall contain a legend on the
face page thereof, in form acceptable to the Lender, disclosing that the
Seller’s security interest in the collateral described therein is subordinate
to the Lender’s security interest in such collateral pursuant to the
Seller/Bank Intercreditor Agreement.

 

(c)                                  The Lender
shall have received on or before the day of the initial disbursement of the
Loans copies of all other documents to be delivered by Borrower and Seller or
others in connection with the Acquisition, including, without limit, a complete
copy of the asset purchase agreement, bill of sale, consulting and employment
agreements, leases or subleases of leased premises, and all other documents and
instruments executed in connection with the Agreement, and the Lender shall
have approved the terms and conditions thereof, in its sole discretion.

 

(d)                                 Borrower shall
have furnished to the Lender, in form, content and amount satisfactory to the
Lender, a negative pledge agreement (the “Negative Pledge Agreement”), agreeing
not to mortgage, encumber or sell the commercial real property commonly known
as 1310 S. 47th Avenue, Cicero, Illinois, being acquired from Seller.

 

(e)                                  Lender shall
have received such valuations, appraisals and certifications as it may require
to satisfy itself as to the value of the Collateral and the Leased Equipment
and the financial condition of the Borrower and the Guarantors, each
satisfactory to the Lender, in its sole discretion.

 

15

 

 

(f)                                    Borrower shall
have complied with all conditions set forth in the Lender Commitment, and no
Event of Default shall have occurred thereunder.

 

(g)                                 The Borrower
shall be in full compliance with all of the terms and conditions of this
Agreement and the other Loan Documents, and the Borrower and other obligors
shall be in full compliance with all of the terms and conditions of the
Collateral Documents.

 

(h)                                 The Lender
shall be satisfied with the corporate and legal structure and capitalization of
Borrower, including the terms and conditions of its articles of incorporation
and bylaws.

 

(i)                                     There shall
have been no material adverse change in the business of Borrower or the
financial condition of Borrower or any Guarantor from the most recent financial
statements submitted by each of them to the Lender.

 

(j)                                     The Lender
shall be satisfied with the corporate and legal structure and capitalization of
Seller, including the terms and conditions of its articles of incorporation and
bylaws.

 

(k)                                  The
representations and warranties of Borrower contained in this Agreement and in
all other Loan Documents shall be true and correct on the day of the initial
loan disbursement.

 

(1)                                  The
representations and warranties of Seller contained in the security agreement
executed by it shall be true and correct on the day of the initial loan
disbursement, and no event of default shall have occurred under such agreement.

 

(m)                               There shall
exist no Event of Default as defined in Section 15 hereof and no
condition, event or act which with notice or lapse of time, or both, would
constitute an Event of Default.

 

(n)                                 All actions,
proceedings, instruments and documents required to carry out the transactions
contemplated by this Agreement or other Loan Documents and all other related
legal matters shall have been satisfactory to and approved by legal counsel for
the Lender, and said counsel shall have been furnished with such certified
copies of actions and proceedings and such other instruments and documents as
they shall have reasonably requested.

 

(o)                                 The Lender
shall have been provided with evidence of all requisite governmental and third
party approvals required for Borrower, Borrower’s conduct of business and the
Real Property.

 

(p)                                 The Lender
shall have been furnished with an original life insurance policy on the life of
J. Cameron Drecoll in the sum of $1,000,000.00, together with an executed
collateral assignment of such policy by Borrower to the Lender, on the Lender’s
form or a form acceptable to Lender (“Collateral Assignment of Life Insurance”),
acknowledged by the life insurer, and evidence of the payment of at least one
year’s premium.  Borrower covenants to
provide the Lender annually with evidence of payment of the then current
premium for such insurance.

 

16

 

(q)                                 The Guarantors
shall have executed and delivered to the Lender security agreements (the “Stock
Pledge Agreements”), granting the Lender a second priority security interest in
all shares of stock of the Borrower (the “Pledged Stock”), subordinate only to
the first priority security interest therein being granted to the Seller.  In addition, Guarantors shall execute and
deliver to the Lender UCC financing statements and such other documents required
by the Lender to perfect its second priority security interest in the Pledged
Stock.

 

(r)                                    The Lender
shall receive evidence that Borrower has received a minimum cash infusion of
$500,000.00, injected by shareholders of Borrower in accordance with the terms
of the Bank Commitment.

 

(s)                                  Borrower must
have a minimum of $500,000.00 of borrowing availability under the Revolving
Loan on the date hereof, in accordance with the terms of the Bank Commitment.

 

(t)                                    On or prior to
the initial loan disbursement, Borrower shall have paid all accrued fees and
expenses of the Lender.

 

SECTION 7.  SECURITY
INTEREST.

 

7.1                                 Grant of
Security Interest.  To secure
the prompt and complete payment, observance and performance of the
Indebtedness, Borrower hereby gives, grants and pledges to the Lender a continuing
security interest in and to all of the Borrower’s right, title and interest in
and to the following property and interests in property, whether now owned or
existing or hereafter acquired or arising and wheresoever located:

 

ACCOUNTS:  All present and future accounts, accounts
receivable, and other rights of the Borrower to payment for goods sold or
leased or for services rendered (except those evidenced by instruments or
chattel paper), whether now existing or hereafter arising and wherever arising,
and whether or not they have been earned by performance (collectively, “Accounts”);

 

INVENTORY:  All inventory and goods now owned or
hereafter acquired by the Borrower (wherever located, whether in the possession
of the Borrower or of a bailee or other person for sale, storage, transit,
processing, use or otherwise and whether consisting of whole goods, spare
parts, components, supplies, materials, or consigned, returned, repossessed or
reconsigned goods) which are held for sale or lease or to be furnished (or have
been furnished) under any contract of service or which are raw materials, work
in process or materials used or consumed in the Borrower’s business
(collectively, “Inventory”);

 

EQUIPMENT:  All machinery, all manufacturing,
distribution, selling, data processing and office equipment, all furniture,
furnishings, appliances, fixtures and trade fixtures, tools, tooling, molds,
dies, vehicles, vessels, aircraft and all other goods of every type and
description (other than Inventory), in each instance whether now owned or
hereafter acquired by the Borrower and wherever located (collectively, “Equipment”);

 

GENERAL
INTANGIBLES:  All rights, interests,
choses in action, causes of action, claims and other intangible property of the
Borrower of every kind and nature (other than Accounts), in each instance
whether now owned or hereafter acquired by the Borrower and 

 

17

 

however
and whenever arising, including, without limitation, all corporate and other
business records; all loans and other obligations receivable and all rights,
remedies and security with respect thereto, all inventions, designs, all trade
processes and trade secrets, computer programs, software, printouts and other
computer materials, goodwill, corporate name, trade names, registration,
copyrights, royalties, licenses, franchises, customer lists, credit files,
correspondence, and advertising materials; all customer and supplier contracts,
firm sale orders, rights under license and franchise agreements, and all other
contracts and contract rights; all interests in partnerships and joint
ventures; all tax refunds and tax refund claims; all right, title and interest
under leases, subleases, licenses and concessions and other agreements relating
to real or personal property; all payments due or made to Borrower in
connection with any reacquisition, confiscation, condemnation, seizure or
forfeiture of any property by any person or governmental authority; all deposit
accounts (general or special) with any bank or other financial institution,
including, without limitation, any deposits or other sums at any time credited
by or due to the Borrower from Lender; all credits with and other claims
against carriers and shippers; all rights to indemnification; all patents,
trademarks, patent applications and trademark applications, and all other
intellectual property not described herein, all reversionary interests in
pension and profit sharing plans and reversionary, beneficial and residual
interest in trusts; all proceeds of insurance of which the Borrower is the
beneficiary; and all letters of credits, guaranties, liens, security interests
and other security held by or granted to the Borrower; all return insurance
premiums, and all other intangible property, whether or not similar to the
foregoing (all of the foregoing collectively, “General Intangibles”);

 

CHATTEL
PAPER, INSTRUMENTS AND DOCUMENTS:  All
chattel paper, all leases, all instruments, all notes and debt instruments and
all payments thereunder and instruments and other property from time to time
delivered in respect thereof or in exchange therefor and all of the Borrower’s
right, title and interest and all of the Borrower’s rights, remedies,
collateral security, liens in, and in respect of any of the foregoing, and all
bills of lading, warehouse receipts and other documents of title and all other
documents, in each instance whether now owned or hereafter acquired by the
Borrower;

 

OTHER
PROPERTY:  All property and interest in
property now owned or hereafter acquired by the Borrower which now may be owned
or hereafter may come into the possession, custody or control of the Lender in
any way or for any purpose (whether for safekeeping, deposit, custody, pledge,
transmission, collection or otherwise); and all rights and interests of the
Borrower, now existing or hereafter arising and however and wherever arising,
in respect of any and all (i) notes, drafts, letters of credit, stocks,
bonds, and debt and equity securities, whether or not certificated.  and warrants, options, puts and calls and
other rights to acquire or otherwise relating to the same, and all other
investment property now owned or hereafter acquired by Borrower; (ii) money;
(iii) proceeds of loans, including, without limitation, the Loans; and (iv) insurance
proceeds and books and records relating to any of the property covered by this
Agreement; together, in each instance, with all accessions and additions
thereto, substitutions therefor, and all renewals, replacements, proceeds and
products thereof.

 

7.2                                 Authorization.  The Borrower hereby authorizes the Lender to
set-off and retain, without any necessity on the Lender’s part to resort to
other security or sources of reimbursement 

 

18

 

for
the Indebtedness, at any time following the occurrence and during the
continuance of any Event of Default, and without further notice to Borrower
(such notice being expressly waived), any of the deposits referred to in Section 7.1
or elsewhere in this Agreement (whether general, or special, time or demand,
provisional or final) or other sums or property held by Lender, for application
against any Indebtedness, irrespective of whether any demand has been made or
whether such Indebtedness is mature.  The
Lender will promptly notify Borrower of the Lender’s receipt of such funds or
other property for application against the Indebtedness, but failure to do so
will not affect the validity or enforceability thereof.

 

7.3                                 Attachment and
Continuity of Security Interest.  The pledge of, lien upon, and security
interest granted and hereby created in the Collateral shall extend and attach
to the entire Collateral which is presently in existence and which is owned by
Borrower or in which Borrower has an interest, and all Collateral which
Borrower may purchase or in which Borrower may acquire an interest at any time
and from time to time in the future, whether such Collateral is in transit or
in Lender’s constructive, actual or exclusive occupancy or possession or not,
or held by Borrower or others for Borrower’s or Lender’s account and wherever
the same may be located, including, but without limiting the generality of the
foregoing, all Collateral which may be located on Borrower’s premises or upon
the premises of any carriers, forwarding agents, truckers, warehousemen,
vendors, selling agents, consignees, finishers, converters or other third
parties who may have possession of the Collateral.

 

Upon
the sale, exchange, or other disposition of the Collateral, the security
interest and lien created and provided for herein shall, without break in
continuity and without further formality or act, continue in and attach to the
instruments for the payment of money, Accounts, documents of title, shipping
documents, chattel paper and all other cash and noncash proceeds of such sale,
exchange or disposition, including Collateral returned or rejected by customers
or repossessed by Borrower or Lender.  As
to any such sale, exchange or disposition, Lender shall have all the rights of
an unpaid seller, including stoppage in transit, replevin and reclamation.

 

7.4                                 Perfection and
Maintenance of Security Interest.  The Borrower agrees that until all of the
Indebtedness has been indefeasibly paid in full and this Agreement has been
terminated, the Lender’s security interests in and liens on and against the
Collateral, and all proceeds and products thereof, shall continue in full force
and effect.  Borrower shall perform any
and all steps reasonably requested by the Lender to perfect, maintain and protect
the Lender’s security interests in and liens on and against the Collateral
granted or purported to be granted hereby and by the other Loan Documents or
Collateral Documents, or to enable the Lender to exercise its rights and
remedies hereunder and under the other Loan Documents or Collateral Documents
with respect to any Collateral, including, without limitation, (i) executing
and filing financing and continuation statements, or amendments thereof, in
form and substance reasonably satisfactory to the Lender, (ii) executing
and recording the Collateral Documents in form and substance reasonably
satisfactory to the Lender, (iii) delivering to the Lender all
certificates, notes and other instruments (including, without limitation, all
letters of credit on which Borrower is named as a beneficiary) representing or
evidencing Collateral duly endorsed and accompanied by duly executed
instruments of transfer or assignment, including, but not limited to, note
powers, all in form and substance satisfactory to the Lender, (iv) maintaining
complete and accurate stock records, (v) delivering to the Lender
warehouse receipts covering that portion of the Collateral, if any, located in
warehouses and for which warehouse receipts are

 

19

 

issued,
(vi) after the occurrence and during the continuance of an Event of
Default, transferring Inventory to warehouses designated by the Lender or
taking such other steps as are deemed necessary by the Lender to maintain the
Lender’s control of the Inventory, (vii) placing notations on Borrower’s
books of account to disclose the Lender’s security interest therein and marking
conspicuously each document, contract, chattel paper and all records pertaining
to the Collateral with a legend, in form and substance satisfactory to the
Lender, indicating that such document, contract, chattel paper, or Collateral
is subject to the security interest granted herein and (viii) executing
and delivering all further instruments and documents, and taking all further
action, as the Lender may reasonably request.

 

7.5                                 Financing
Statements.  To the
extent permitted by applicable law, the Borrower hereby authorizes the Lender
to file one or more financing or continuation statements and amendments
thereto, disclosing the security interest granted to the Lender under this
Agreement without Borrower’s signature appearing thereon and Lender agrees to
notify Borrower when such a filing has been made.  Borrower agrees that a carbon, photographic,
photostatic, or other reproduction of this Agreement or of a financing
statement is sufficient as a financing statement.

 

SECTION 8.  COLLATERAL:  ACCOUNTS.

 

8.1                                 Verification of
Accounts.  Any of
Lender’s officers, employees or agents shall have the right, at any time or
times hereafter, in Lender’s name, or in the name of a firm of independent
certified public accountants acceptable to Lender, to verify the validity,
amount or any other matter relating to any Accounts by mail, telephone,
telegraph or otherwise.

 

8.2                                 Assignments, Records
and Borrowing Base Certificate.  Borrower shall keep accurate and complete
records of its Accounts.  Borrower shall
deliver to Lender a daily Borrowing Base Certificate, together with formal
written assignments of all of its Accounts and copies of the invoices related
thereto if requested by Lender.  Borrower
shall also deliver to Lender upon demand, the original copy of all documents,
including, without limitation, repayment histories, present status reports and
shipment reports, relating to the Accounts included in any Borrowing Base
Certificate and such other matters and information relating to the status of
then existing Accounts as Lender shall reasonably request.

 

8.3                                 Notice
Regarding Disputed Accounts.  Borrower shall give Lender prompt written
notice of any Accounts in excess of Ten Thousand and no/100 ($10,000.00)
Dollars which are in dispute between any Account Debtor and Lender.

 

SECTION 9.  COLLATERAL:  INVENTORY.

 

9.1                                 Sale of
Inventory.  Until an
Event of Default occurs, Borrower may sell Inventory in the ordinary course of
its business (which does not include a transfer in partial or total
satisfaction of indebtedness).

 

9.2                                 Safekeeping of
Inventory; Inventory Covenants.  Lender shall not be responsible for (i) the
safekeeping of the Inventory; (ii) any loss or damage thereto or
destruction thereof occurring or arising in any manner or fashion from any
cause; (iii) any diminution in the value of

 

20

 

the
Inventory; or (iv) any act or default of any carrier, warehouseman, bailee
or forwarding agency or any other Person in any way dealing with or handling
the Inventory.  All risk of loss, damage,
distribution or diminution in value of the Inventory shall be borne by the
Borrower except in the case of gross negligence or willful misconduct by
Lender.

 

9.3                                 Records and
Schedules of Inventory. 
Borrower shall keep correct and accurate daily records on a first-in,
first-out basis, itemizing and describing the kind, type, quality and quantity
of Inventory, and shall, at the request of Lender, furnish to Lender, copies of
the working papers related thereto.  A
physical count of the Inventory shall be conducted no less often than annually
and a report based on such count of Inventory shall promptly thereafter be
provided to Lender together with such supporting information (including,
without limitation, invoices relating to Borrower’s purchase of goods listed in
said report) as Lender shall, in its sole and absolute discretion, request.

 

9.4                                 Returned and Repossessed
Inventory.  If at any
time prior to the occurrence of an Event of Default, any Account Debtor returns
any Inventory to Borrower in excess of Ten Thousand and 00/100 ($10,000.00)
Dollars, Borrower shall promptly determine the reason for such return and, if
Borrower accepts such return, issue a credit memorandum (with a copy to be sent
to Lender if Lender has so requested) in the appropriate amount to such Account
Debtor.  After the occurrence of an Event
of Default, Borrower shall hold all returned Inventory in trust for Lender,
shall segregate all returned Inventory from all other property of Borrower or
in Borrower’s possession and shall conspicuously label said returned Inventory
as the property of Lender.  Borrower
shall, at all times subsequent to the occurrence of an Event of Default,
immediately notify Lender of the return of any Inventory, specifying the reason
for such return and the location and condition of the returned Inventory.

 

SECTION 10.  FINANCIAL
REPORTING AND AUDITS.

 

As
soon as available, but not later than ninety (90) days after the end of each
fiscal year of Borrower, Borrower shall furnish the Lender with annual audited
financial statements of Borrower, containing the balance sheet of the Borrower
as of the close of each such fiscal year, statements of income and retained
earnings and a statement of cash flows for each such fiscal year; and such
other comments and financial details as are usually included in similar
reports.  Such financial statements shall
(a) be in form and reporting basis satisfactory to the Lender, (b) be
prepared in accordance with GAAP by an independent certified public accounting
firm selected by Borrower and acceptable to the Lender (“Borrower’s Accounting
Firm”), and (c) contain unqualified opinions as to the fairness of the
statements therein contained.  Borrower
shall also provide to the Lender any management letters that may accompany the
statements.  Concurrently with such annual
statements, Borrower shall furnish to the Lender a copy of Borrower’s corporate
federal income tax return and annual updated financial statements of each
Guarantor.

 

As
soon as available, but not later than fifteen (15) days after the end of each
month, Borrower shall furnish the Lender with (i) internally prepared
monthly financial statements of Borrower, in form and content satisfactory to
Lender, and (ii) a monthly covenant compliance certificate, in form and
content satisfactory to Lender (including a certificate by the chief

 

21

 

executive
or financial officer of Borrower containing a computation of, and showing
compliance with, each of the financial covenants contained in Section 14.1
hereof).  The validity and accuracy of
said financial statements shall be certified by the chief executive or
financial officer of the Borrower, in a form satisfactory to the Lender.

 

Borrower
shall deliver to the Lender monthly accounts receivable agings and monthly
accounts payable agings within fifteen (15) days after month-end, in form acceptable
to Lender.

 

Borrower
shall deliver to the Lender a daily borrowing base certificate, in form
acceptable to Lender.

 

Borrower
shall deliver to the Lender annually copies of the federal income tax returns
of each Guarantor within thirty (30) days after the filing of such returns.

 

Borrower
shall deliver to the Lender a quarterly backlog report within fifteen (15) days
after the end of each fiscal quarter.

 

Upon
request by Lender and from time to time (but no more often than annually)
Borrower’s Accounting Firm shall issue Borrower and Lender an accountant’s
reliance letter, in form and substance acceptable to Lender in its sole
discretion.

 

Borrower
shall also promptly provide the Lender with such other information, financial
or otherwise, concerning the Borrower or the Guarantors, as the Lender may
reasonably request from time to time.

 

The
Lender shall make any and all audits and investigations which it deems
reasonably necessary in connection with the Collateral.  For the purposes of this Agreement, the
Lender shall have free and ready access at all times during normal business
hours, upon reasonable advance oral or written notice (unless in the Lender’s
reasonable judgment a rapid deterioration or loss to any Collateral is
threatened, in which case no notice shall be given and access shall not be
limited to normal business hours), to the books of account, records, papers and
documents of Borrower.  Without limiting
the generality of the foregoing, the Lender shall conduct quarterly field
audits of the Borrower (or more frequent audits if deemed reasonably necessary
by the Lender under the circumstances then existing), and Borrower shall
reimburse the Lender for all reasonable costs and expenses incurred by Lender’s
internal auditors for such audits, plus $500 per auditor per diem during the
duration of the Loans.

 

SECTION 11.  OPINION OF
COUNSEL.

 

Prior
to the initial disbursement of the Loans, Borrower shall provide a favorable
opinion of counsel for the Borrower, addressed to the Lender in the form required
by the Lender.

 

SECTION 12.  INSURANCE.

 

Borrower
shall, at its sole cost and expense, keep and maintain the Collateral insured
for its full insurable value against loss or damage by fire, theft, explosion,
sprinklers and all other hazards and risks as are customarily insured against
by Persons engaged in businesses similar to that of

 

22

 

Borrower
with such companies, in such amounts, with such deductibles, and under policies
in such form, as shall be reasonably satisfactory to Lender.  Each such policy shall contain an
endorsement, in form and substance satisfactory to Lender, showing loss under
such insurance policies payable to Lender pursuant to a Lender’s Loss Payee
endorsement and not containing a co-insurance clause.  Such endorsement, or an independent
instrument furnished to Lender, shall provide that the insurer shall give
Lender at least thirty (30) days written notice before any such policy of
insurance is altered or cancelled and that no act, whether willful or
negligent, or default of Borrower or any other Person shall affect the right of
Lender to recover under such policy of insurance in case of loss or
damage.  Borrower hereby directs all
insurers under such policies of insurance to pay all proceeds payable
thereunder directly to Lender.

 

In
addition, Borrower will maintain, at its sole expense, such public liability
and third party property damage insurance as is customary for Persons engaged
in businesses similar to that of Borrower with such companies and in such
amounts, with such deductibles and under policies in such form, as shall be
reasonably satisfactory to Lender.  Each
such policy shall contain an endorsement showing Lender as additional insured
thereunder and providing that the insurer shall give Lender at least thirty
(30) days written notice before any such policy shall be altered or cancelled.

 

Upon
Lender’s request, Borrower shall deliver to Lender certified copies of all such
policies of insurance, together with evidence of payment of all premiums
therefor.

 

If
Borrower shall at any time or times hereafter fail to obtain and/or maintain
any of the policies of insurance required herein, or fail to pay any premium in
whole or in part relating to such policies, after ten (10) days written
notice to Borrower, the Lender may, but shall not be obligated to, obtain
and/or cause to be maintained insurance coverage(s) required herein, and
pay all or any part of the premium therefor, without waiving any default by
Borrower; and any sums so disbursed shall be additional loans to Borrower by
Lender payable on demand.  In the event
of loss or damage to any Collateral exceeding $20,000.00 in value, Borrower
will give immediate notice to the Lender and the Lender may make proof of loss
if not made by Borrower within twenty (20) days after such occurrence.  In addition, the Lender shall have the right
to settle and compromise any and all claims exceeding $20,000.00 under any of
the policies required to be maintained by Borrower hereunder and Borrower
hereby appoints the Lender as its attorney-in-fact with power to demand,
receive, and receipt for all monies payable thereunder, to execute in the name
of Borrower or the Lender or both any proof of loss, notice, draft or other
instruments in connection with such policies or any loss thereunder and
generally to do and perform any and all acts as Borrower, but for this
appointment might or could perform.  If
on the date of a loss, no Event of Default shall have occurred and be
continuing, Borrower will be allowed to employ the insurance proceeds to
restore any portion of the Collateral which has been damaged or destroyed.

 

SECTION 13.  REPRESENTATIONS
AND WARRANTIES.

 

13.1                           General
Representations and Warranties.  Borrower hereby represents and warrants to
the Lender that:

 

(a)                                  The correct
corporate name of Borrower is set forth in the first paragraph of this
Agreement.  The Borrower currently
conducts business under its correct legal name as set forth

 

23

 

in
the first paragraph of this Agreement. 
Except as set forth in Exhibit B
attached hereto, Borrower has not changed its corporate name or used any trade
or fictitious name in the last (5) five years.  The locations listed on Exhibit C
constitute all locations at which Borrower’s Inventory and/or Equipment is
located and Borrower has exclusive possession and/or control of its Equipment
and Inventory.  The chief place of
business and chief executive office of the Borrower is located at the Borrower’s
address specified above in the first paragraph of this Agreement.  All records concerning Borrower’s Accounts,
General Intangibles and all originals of all chattel paper which evidence any
Account or General Intangible of Borrower are located at the Borrower’s address
set forth in the first paragraph of this Agreement, and none of the Borrower’s
Accounts or General Intangibles is evidenced by a promissory note or other
instrument except for such notes and other instruments delivered to Lender; and

 

(b)                                 The Borrower is
a corporation duly organized, validly existing, and in good standing under the
laws of the State of Illinois, and is qualified or licensed to do business in
all other countries, states and provinces in which the laws thereof require
Borrower to be so qualified and/or licensed; and

 

(c)                                  The Borrower
has the full power and authority to enter into and perform all of its
obligations under this Agreement, and all other Loan Documents; and

 

(d)                                 The execution,
delivery and performance by Borrower of this Agreement and all other Loan
Documents have been duly authorized by all necessary corporate action and will
not violate any provision of law or Borrower’s articles of incorporation or
bylaws, or result in the breach of or constitute a default or require any consent
under, or result in the creation of any lien, charge, or encumbrance upon any
property or assets of Borrower (except the security interest of the Lender)
pursuant to any indenture or other agreement or instrument to which Borrower is
a party or by which Borrower or its property may be bound or affected; and

 

(e)                                  This Agreement
is, and each of the other Loan Documents when executed and delivered by
Borrower under this Agreement will be, the legal, valid and binding obligations
of Borrower enforceable against Borrower in accordance with their respective
terms; and

 

(f)                                    The Borrower is
the sole lawful owner of the Collateral and has the sole right and lawful
authority to deliver this Agreement.  The
Collateral and every part thereof is, and will hereafter remain, free and clear
of all security interests, liens, attachments, levies, and encumbrances of
every kind, nature and description, except the security interest of the Lender
and Permitted Liens.  Borrower will warrant
and defend the Collateral against any claims and demands of all Persons at any
time claiming the same or any interest therein adverse to the Lender; and

 

(g)                                 No financing
statement covering the Collateral or any part thereof, is on file in any public
office (other than financing statements in favor of Lender and the financing
statement evidencing Seller’s subordinate security interest in the
Collateral).  The security interest in
the Collateral granted by Borrower to Lender is valid and enforceable and
constitutes a first priority security interest therein.  The security interest in the Leased Equipment
and Equipment Lease granted by Seller to Lender is valid and enforceable and
constitutes a first priority security interest therein.  The security interest in the Pledged Stock
granted by the Guarantors to Lender is valid and

 

24

 

enforceable
and constitute a second priority security interest therein (behind the first
priority security interest of Seller therein); and

 

(h)                                 No
authorization, approval or other action by, and no notice to or filing with,
any governmental authority that have not already been taken or made and which
are in full force and effect, is required (i) for the grant by the
Borrower of the security interest in the Collateral granted hereby; (ii) the
execution, delivery or performance of this Agreement by the Borrower; or (iii) for
the exercise by the Lender of its rights or remedies hereunder; and

 

(i)                                     Borrower’s use
of the proceeds of any advances and readvances by Lender made by Lender to
Borrower pursuant to this Agreement are, and will continue to be, legal and
proper corporate uses (duly authorized by its Board of Directors, if necessary
pursuant to applicable corporate law, rule or regulation) and such uses
are consistent with all applicable laws and statutes, as in effect as of the
date hereof; and

 

(j)                                     The balance
sheets and statements of income and retained earnings of Borrower, heretofore
furnished to the Lender, and all accompanying financial information heretofore
furnished to the Lender, are complete and correct in all material respects and
fairly represent the financial condition of Borrower as at the dates of said
financial statements and the results of its operations for the periods ending
on said dates.  Borrower has no material
contingent obligations, liabilities for taxes, long-term leases, or unusual
forward or long-term commitments not disclosed by, or reserved against in, said
balance sheets or the notes thereto; and at the present time there are no
material unrealized or anticipated losses from current operations.  Said financial statements were prepared in
accordance with GAAP; and

 

(k)                                  Prior to the
closing of the Loans, there has been no material change in the financial
condition of Borrower or any Guarantor from that set forth in the Borrower’s
most recent financial statement, and, to the best of Borrower’s knowledge, the
financial statements of Guarantors, and the financial information contained
therein was true and correct on the date the statements were issued and there
has been no material adverse changes as of the closing date of the Loans; and

 

(1)                                  There are no
suits or proceedings pending, or to the knowledge of Borrower threatened
against or affecting Borrower which, if adversely determined, would have an
adverse effect on the financial condition or business of Borrower or its
ability to perform its obligations under this Agreement or any of the other
Loan Documents, and there are no proceedings by or before any court,
governmental commission, board, bureau, or other administrative agency pending
or, to the knowledge of Borrower, threatened against Borrower; and

 

(m)                               Borrower has
filed all federal, state and local tax returns required to be filed by it
(including, but not limited to, income and payroll tax returns) and other
reports, which Borrower is required by law, rule or regulation to file,
and all Charges that are due and payable have been paid; and

 

(n)                                 Now and after
consummation of the Loans, Borrower has and shall have capital sufficient to
carry on its business and transactions and all businesses and transactions in
which it is about to

 

25

 

engage
and is now and shall be solvent and able to pay its debts as they mature, and
Borrower now owns and shall own property the fair salable value of which is and
shall be greater than the amount required to pay Borrower’s debts.  For the purposes of this subsection, the term
“fair salable value” shall mean the amount that would be agreed upon between a
willing buyer and a willing seller under no compulsion to make the sale, in the
sale of the assets and business of the Borrower as a going concern; and

 

(o)                                 Borrower is in
compliance with all other statutes, ordinances, governmental rules and
regulations to which it is subject, and has not and shall not fail to obtain
any licenses, permits, franchises, or other governmental authorizations
necessary to the ownership of its properties or to the conduct of its business,
which violation or failure to obtain would adversely affect the business,
prospects, profits, properties, condition (financial or otherwise) of the
Borrower, or the security interest, liens, or rights of the Lender in the
Collateral; and

 

(p)                                 To the best of
its knowledge, Borrower has duly complied with, and its businesses, operations,
assets, Equipment, property, leaseholds, or other facilities are in compliance
with, the provisions of all applicable federal, state, and local environmental,
health, and safety laws, codes and ordinances; and

 

(q)                                 To the best of
its knowledge, Borrower’s present uses of the Real Property comply with all
federal, state and local environmental laws, and regulations; and Borrower has
never received any notice of any violations of environmental laws, rules or
regulations and no actions have been commenced or threatened for
noncompliance.  The Borrower shall
immediately provide the Lender with any notice received by the Borrower
pertaining to any violations of environmental laws, rules or regulations;
and

 

(r)                                    Neither the
business nor the properties of Borrower are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy, or other casualty
(whether or not covered by insurance), materially and adversely affecting such
business or properties or the operation of the Borrower; and

 

(s)                                  The Borrower is
not a party to any indenture, loan or credit agreement, or to any lease or
other agreement or instrument, or subject to any charter or corporate
restriction which could have a material adverse effect on the business,
properties, assets, operations, or conditions, financial or otherwise, of the
Borrower, or the ability of the Borrower to carry out its obligations under
this Agreement and the other Loan Documents. 
The Borrower is not in default in any material respect in the
performance, observance, or fulfillment of any of the obligations, covenants,
or conditions contained in any agreement or instrument (material to its
business) to which it is a party.  The
Borrower has disclosed to the Lender in writing all facts which might
materially and adversely affect the business, credit, operations, financial
condition or prospects of the Borrower or any Subsidiary or which might
materially and adversely affect any material portion of the Borrower’s
properties, or the Borrower’s ability to perform its obligations under this
Agreement or the other Loan Documents; and

 

(t)                                    The Borrower
has satisfied all judgments and is not in default with respect to any judgment,
writ, injunction, decree, rule, or regulation of any court, arbitrator, or
federal, state,

 

26

 

municipal,
or other governmental authority, commission, board, bureau, agency, or
instrumentality, domestic or foreign; and

 

(u)                                 To the best of
its knowledge, the Borrower has not used Hazardous Materials on or affecting
the Real Property in any manner which violates federal, state or local laws,
ordinances, statutes, rules, regulations or judgments governing the use,
storage, treatment, handling, manufacture, transportation, or disposal of
Hazardous Materials (“Environmental Laws”), and that, to the best of Borrower’s
knowledge, no prior owner of the Real Property or any current or prior occupant
has used Hazardous Materials on or affecting the Real Property in any manner
which violates Environmental Laws.  The
Borrower covenants and agrees that neither it nor any occupant shall use,
introduce or maintain Hazardous Materials on the Real Property in any manner
unless done in strict compliance with all Environmental Laws.

 

“Hazardous
Materials” includes, without limitation, any flammable explosives, radioactive
materials, hazardous materials, hazardous wastes, hazardous or toxic substances
or related materials defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et
seq.), the Hazardous Materials Transportation Act, as amended (42 U.S.C. Section 1801,
et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C.
Sections 9601, et seq.) and in the regulations adopted and publications
promulgated pursuant thereto, or any other federal, state or local governmental
law, ordinance, rule, or regulation.

 

13.2                           Account Representations
and Warranties.  Borrower
represents and warrants that Lender may rely, in determining which Accounts
listed on any Borrowing Base Certificate are Eligible Accounts, without
independent investigation of any statements or representations made by Borrower
on or with respect to any such Borrowing Base Certificate, and unless otherwise
indicated in writing by Borrower, that:

 

(a)                                  Such Accounts
are genuine, are in all respects what they purport to be, are not evidenced by
a judgment and, if evidenced by an instrument, agreement, contract or document,
are evidenced by only one executed original instrument, agreement, contract or
document, which has been endorsed and delivered to Lender;

 

(b)                                 Such Accounts
represent undisputed, bona fide transactions completed in accordance with the
terms and provisions contained in any documents related thereto;

 

(c)                                  Except for
credits issued to any Account Debtor in the ordinary course of Borrower’s
business for Inventory returned pursuant to Section 9.4 of this Agreement,
the amounts shown on the Borrowing Base Certificate, and all invoices and
statements delivered to Lender with respect to any Account, are actually and
absolutely owing to Borrower and are not contingent for any reason;

 

(d)                                 To the best of
Borrower’s knowledge, except as may be disclosed on such Borrowing Base
Certificate, there are no setoffs, counterclaims or disputes existing or
asserted with respect to any Accounts included on a Borrowing Base Certificate,
and Borrower has not made any agreement with any Account Debtor for any
deduction from such Account, except for discounts 

 

27

 

or
allowances allowed by Borrower in the ordinary course of its business for
prompt payment, all of which discounts or allowances are reflected in the
calculation of the invoice related to such Account;

 

(e)                                  To the best of
Borrower’s knowledge, there are no facts, events or occurrences which in any
way impair the validity or enforcement of any of the Accounts or tend to reduce
the amount payable thereunder from the amount of the invoice shown on any
Borrowing Base Certificate, and on all contracts, invoices and statements
delivered to Lender with respect thereto;

 

(f)                                    To the best of
Borrower’s knowledge, all Account Debtors are solvent and had the capacity to
contract at the time any contract or other document giving rise to the Account
was executed;

 

(g)                                 The goods, the
sale of which gave rise to the Accounts are not, and were not at the time of
the sale thereof, subject to any lien, claim, security interest or other
encumbrance, except those of Lender and the subordinate security interest of
Seller, and those removed or terminated prior to the date hereof;

 

(h)                                 Borrower has no
knowledge of any fact or circumstance which would impair the validity or
collectibility of any of the Accounts;

 

(i)                                     To the best of
Borrower’s knowledge, there are no proceedings or actions which are threatened
or pending against any Account Debtor which might result in any material
adverse change in its financial or other condition;

 

(j)                                     The Accounts
have not been pledged or assigned to any other Person, and the Lender has a
first and valid fully perfected security interest in the Accounts; and

 

(k)                                  No covenant,
representation or warranty contained in this Agreement with respect to such
Accounts has been breached.

 

13.3                           Automatic
Representation and Warranty and Reaffirmation of Representations and Warranties.  Each request for an advance by Borrower
pursuant to this Agreement or the other Loan Documents shall-constitute (i) an
automatic representation and warranty by Borrower to Lender, as of the date of
said request, that there does not exist a Default or an Event of Default, and (ii) a
reaffirmation, as of the date of said request, of all of the representations
and warranties of Borrower contained in this Agreement and the other Loan
Documents.

 

13.4                           Survival of
Representations and Warranties.  Borrower covenants, warrants and represents
to Lender that all representations and warranties of Borrower contained in this
Agreement and the other Loan Documents shall be true at the time of Borrower’s
execution of this Agreement and the other Loan Documents, and shall survive the
execution, delivery and acceptance thereof by the parties thereto and the
closing of the transactions described therein or related thereto.

 

28

 

SECTION 14.  COVENANTS AND
CONTINUING AGREEMENTS.

 

14.1                           Financial
Covenants.  Borrower
covenants to Lender and agrees that so long as any Indebtedness shall remain
unpaid:

 

(a)                                  Minimum
Tangible Net Worth.  Borrower
will maintain at all times a minimum Tangible Net Worth of not less than
$1,250,000.00 (to be tested quarterly).

 

(b)                                 Cash Flow
Coverage.  Borrower
will maintain at all times a Cash Flow Coverage of not less than 1.3 to 1.0 (to
be tested quarterly, initially on a cumulative basis, and after the first four
quarters, on a rolling four quarter basis, beginning with the 3/31/97 income
statement).

 

(c)                                  Total
Unsubordinated Debt to Tangible Net Worth.  Borrower will maintain at all times a ratio
of total unsubordinated Debt to Tangible Net Worth of not greater than 6.0 to
1.0.

 

(d)                                 Capital
Expenditures.  Borrower
will not make or incur Capital Expenditures in excess of $500,000.00 in the
aggregate in any fiscal year.

 

(e)                                  Limit on Lease
Expense.  Borrower will not create,
incur, assume or suffer to exist any obligation as lessee for the rental or
hire of any real or personal property, except leases that do not in the
aggregate require the Borrower to make payments (including taxes, insurance,
maintenance, and similar expenses required to be paid under the leases) in any
fiscal year of Borrower in excess of $120,000.00, exclusive of the lease
payments required under the Equipment Lease.

 

The
financial requirements set forth hereinabove shall be computed in accordance
with GAAP.

 

14.2                           Affirmative
Covenants.  Borrower
covenants to Lender and agrees that until the Loans and all other Indebtedness
shall be fully paid and discharged, it will:

 

(a)                                  Preserve and
maintain its corporate existence and good standing in the state of Illinois and
its qualification to do business in each other country, state or province
where, because of the nature of its activities or properties, the failure of
Borrower to be so qualified would have a material adverse effect on its
financial conditions or operations or on the security interest or rights of the
Lender in the Collateral; and

 

(b)                                 Keep its chief
place of business and chief executive office and the office where it keeps its
records concerning its Accounts and General Intangibles, and the office where
it keeps all originals of all chattel paper which evidence Accounts and General
Intangibles, at the Borrower’s address specified above in the first paragraph
of this Agreement, or, upon thirty (30) days prior written notice to the
Lender, at such other location in the State of Illinois.  The Borrower will hold and preserve such
records and chattel paper and will permit representatives of the Lender at any
time during normal business hours to inspect and make abstracts from such
records and chattel paper; and

 

(c)                                  Keep Borrower’s
Equipment, Inventory and all other tangible personal property at the Borrower’s
address(es) specified in Exhibit C
attached hereto, or, upon thirty (30) days prior written notice to the Lender,
at such other location in the State of Illinois; and

 

29

 

(d)                                 Maintain, keep
and preserve all of its properties (tangible and intangible) necessary or
useful in the proper conduct of its business in good working order and
condition, ordinary wear and tear excepted; and

 

(e)                                  Take all
actions necessary or required by law to protect and preserve the Collateral,
the rights of the Borrower and Lender thereunder, and the priority of the lien
granted thereby, including, without limitation, the payment of all amounts
required for that purpose; and

 

(f)                                    Continue to
engage in a business of the same general type as now conducted by it on the
date of this Agreement; and

 

(g)                                 Keep adequate
records and books of account, in which complete entries will be made in
accordance with GAAP, reflecting all of its financial transactions; and

 

(h)                                 Keep and
maintain at Borrower’s own cost and expense satisfactory and complete records
of the Collateral in a manner consistent with Borrower’s current business
practice, including, without limitation, a record of all payments received and
all credits granted with respect to such Collateral.  Borrower shall, for the Lender’s further
security, deliver and turn over to the Lender or the Lender’s designated
representatives at any time following the occurrence of an Event of Default and
upon three (3) days’ notice from the Lender or the Lender’s designated
representative, any such books and records (including, without limitation, any
and all computer tapes, programs and source codes relating to such Collateral
in which Borrower has an interest or any part or parts thereof; in such event
Lender shall provide Borrower with true and complete copies of such books and
records); and

 

(i)                                     Furnish Lender,
from time to time, with such information relevant to this Agreement and
Borrower’s performance hereunder as Lender may request; and

 

(j)                                     Immediately
upon the execution of this Agreement, make appropriate entries upon its books
disclosing Lender’s security interest in the Collateral.  Upon Lender’s request, following an Event of
Default, Borrower will execute and deliver all papers and instruments, and do
all things required by Lender to facilitate collection of the Collateral; and

 

(k)                                  Provide Lender
from time to time, promptly upon request of Lender, with a comprehensive
updated list of all Account Debtors of Borrower, including their current
addresses and telephone numbers; and

 

(1)                                  Advise the
Lender promptly, in reasonable detail, of (i) any lien, security interest,
encumbrance, or claim made by or asserted against any or all of the Collateral,
and (ii) the occurrence of any other event which would have a material
adverse effect on the aggregate value of such Collateral or on the security
interests and liens with respect to such Collateral created hereunder; and

 

(m)                               At all times
during normal business hours, upon reasonable advance notice (unless in the
Lender’s reasonable judgment a rapid deterioration or loss to any Collateral is
threatened, in which case no notice shall be given), permit the Lender, or any
agent or representative thereof to examine and make copies of and abstracts
from the records and books of account of Borrower

 

30

 

and
visit the properties of Borrower, and to discuss the affairs, finances, and
accounts of Borrower with any of its officers, directors and independent
accountants; and

 

(n)                                 Promptly, upon
the Borrower’s learning thereof, (a) inform the Lender in writing, of any
material delay in Borrower’s performance of any of its obligations to any
Account Debtor; and (b) furnish to and inform the Lender of all material
adverse information relating to the financial condition of any Account Debtor;
and

 

(o)                                 Comply in all
material respects with all applicable laws, ordinances, rules and
regulations to which it is subject and not fail to obtain any licenses,
permits, franchises, or other governmental authorizations necessary to the
ownership of its properties or to the conduct of its business, which violation
or failure to obtain would materially and adversely affect the business,
prospects, profits, properties, condition (financial or otherwise) of Borrower,
or the security interest, or rights of the Lender in the Collateral; and

 

(p)                                 Promptly after
the commencement thereof, give the Lender notice of all actions, suits and
proceedings before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, affecting Borrower,
which, if determined adversely to Borrower, could have a material adverse
effect on its financial condition, properties or operations; and

 

(q)                                 Pay and
discharge all material obligations of whatever nature, or otherwise satisfy
them at or before maturity or before they become delinquent and any additional
costs are imposed as a result thereof, except those contested by Borrower in
good faith, with due diligence, provided the Lender’s security interest or
rights in the Collateral or any portion thereof, is not, or could not be, in
the Lender’s sole opinion, affected, impaired or modified; and

 

(r)                                    Give the Lender
written notice as soon as possible and in any event within three (3) days
after Borrower obtains knowledge of the occurrence of each Event of Default
hereunder, setting forth the details of such Event of Default and the action
which is proposed to be taken by Borrower with respect thereto; and

 

(s)                                  In any suit,
proceeding or action brought by the Lender with respect to any of Borrower’s
Accounts or General Intangibles or other property comprising part of the
Collateral, the Borrower will save, indemnify and keep the Lender harmless from
and against all expenses, loss or damage suffered by reason of any defense,
setoff, counterclaim, recoupment or reduction of liability whatsoever of the
obligor thereunder, arising out of a breach by Borrower of any obligation or
arising out of any other agreement, indebtedness or liability at any time owing
to or in favor of such obligor or its successors from Borrower, and all such
obligations of Borrower shall be and shall remain enforceable against and only
against Borrower and shall not be enforceable against the Lender; and

 

(t)                                    Promptly after
the sending or filing thereof, provide the Lender with copies of all proxy
statements, financial statements, and reports which Borrower sends to its
stockholders, and copies of all regular, periodic, and special reports, and all
registration statements which Borrower files with the Securities and Exchange
Commission or any governmental authority which may be substituted thereof, or
with any national securities exchange; and

 

31

 

(u)                                 As soon as
possible, and in any event within ten (10) days after Borrower knows or
has reason to know that any circumstances exist that constitute grounds
entitling the PBGC to institute proceedings to terminate a Plan of Borrower
subject to ERISA, and the regulations promulgated thereunder, or to appoint a
Trustee to administer such Plan, or to impose withdrawal liability against
Borrower, Borrower will notify the Lender in writing setting forth all relevant
details and the action which Borrower proposes to take with respect thereto;
and

 

(v)                                 Give Lender
written notice thirty (30) days prior to any change in Borrower’s name, mailing
address, principal place of business, chief executive office, or location of
the Collateral or Borrower’s books and records. 
Borrower further agrees to advise Lender promptly, in sufficient detail,
of any substantial change relating to the type, quantity or quality of the
Collateral, or any event which would have a material adverse effect on the value
of the Collateral or on the lien and security interest granted to Lender
herein; and

 

(w)                               Execute and
deliver to Lender, concurrently with the execution of this Agreement, and at
any time or times thereafter at the reasonable request of Lender, all Financing
Statements and other Collateral Documents (and pay the cost of filing and
recording the same in all public offices deemed necessary by the Lender) as the
Lender may request, in a form reasonably satisfactory to the Lender, to perfect
and keep perfected the security interest in the Collateral granted by Borrower
to the Lender or to otherwise protect and preserve the Collateral and the
Lender’s security interest therein. 
Should Borrower fail to do so, the Lender is authorized to sign any such
Financing Statements as Borrower’s agent; and

 

(x)                                   Deliver to
Lender forthwith upon its demand, such other collateral as the Lender may
request from time to time should the value of the Collateral decline,
deteriorate, depreciate or become impaired, and Borrower shall execute such
documents deemed necessary by the Lender to perfect its security interest in
such other collateral; and

 

(y)                                 In the event
any of the Borrower’s Inventory is consigned to third persons dealing in goods
of that kind, Borrower agrees to obtain and provide Lender with such Financing
Statements, notices and other documents signed by Borrower and the consignees
deemed reasonably necessary by Lender to insulate such consigned collateral
from the claims of the consignee’s creditors; and

 

(z)                                   Cause its
compliance with all present and future Environmental Laws pertaining to
Borrower, the Real Property, or Borrower’s business, and voluntarily to clean
up all Hazardous Materials released, discharged, stored or discharged upon
their discovery and to be fully liable to the Lender for all costs and expenses
incurred by the Lender arising from such Environmental Materials.

 

The
Borrower shall protect, and does hereby agree to defend, indemnify and hold the
Lender harmless from and against any and all loss, damage, cost, expense and
liability (including without limitation reasonable attorneys’ fees and costs)
directly or indirectly arising out of or attributable to the installation, use,
generation, manufacture, production, storage, release, threatened release,
discharge, disposal or presence of any Hazardous Materials on, under or about
the Real Property, including without limitation (i) all foreseeable
consequential damages; and (ii) the costs of any required or necessary
repair, cleanup, detoxification of the Real

 

32

 

Property;
and (iii) the preparation and implementation of any closure, or remedial
or other required plans.  This indemnity
shall survive the satisfaction, release or extinguishment of the lien of the
Lender’s security interest in the Collateral; and

 

(aa)                            Keep in effect
a $1,000,000.00 life insurance policy upon the life of J. Cameron Drecoll with
an insurance company acceptable to the Lender and at all times keep the
Collateral Assignment of Life Insurance in full force and effect and pay all
required policy premiums.

 

14.3                           Negative
Covenants. Borrower further covenants to Lender and agrees
that until the Loans and all other Indebtedness shall be fully paid and
discharged, it will not, without the prior written consent of the Lender:

 

(a)                                  Create, incur,
assume, or suffer to exist, any mortgage, deed of trust, pledge, lien, security
interest, hypothecation, assignment, deposit arrangement, or other preferential
arrangement, charge, or encumbrance (including, without limitation, any
conditional sale, or other title retention agreement, or finance lease), of any
nature, upon or with respect to any of its properties, now owned or hereafter
acquired, or sign or file, under the UCC of any jurisdiction a financing
statement which names the Borrower as a debtor, or sign any agreement
authorizing any party thereunder to file such financing statement, except
mortgages, deeds of trust, pledges, liens, security interests, assignments,
deposit arrangements, or other arrangements, charges, or encumbrances in favor
of the Lender and Permitted Liens; or

 

(b)                                 Sell, lease,
transfer or otherwise dispose of any of its now owned or hereafter acquired
assets (including, without limitation, shares of stock and indebtedness of
Subsidiaries, receivables, and leasehold interests), except for Inventory
disposed of in the ordinary course of business, and sales of obsolete, worn out
or unusable tangible personal property which is concurrently replaced with
similar personal property at least equal in value, quality and condition to
that sold, and owned by Borrower free and clear of all liens, claims and
encumbrances except the security interest of the Lender and Permitted Liens; or

 

(c)                                  Store any
assets with any third party against whom or with respect to which location, the
Lender has not filed such UCC-1 financing statements and taken all other
actions as Lender deems necessary to preserve its security interest in such
assets unless Borrower gives Lender at least thirty (30) days prior written
notice thereof; or

 

(d)                                 Change its
corporate name or adopt any fictitious or trade name unless Borrower gives
Lender at least thirty (30) days prior written notice thereof; or

 

(e)                                  Wind up,
liquidate, or dissolve itself, reorganize, merge or consolidate with or into,
or convey, sell, assign, transfer, lease, or otherwise dispose of (whether in
one transaction or a series of transactions) all or substantially all of it
assets (whether now owned or hereafter acquired) or its business to any Person,
or acquire all or substantially all of the assets or the business of any Person
or enter in the sale of any capital stock of Borrower, which shall result in a
change of control of the Borrower; or

 

33

 

(f)                                    Suffer any
judgment for money in excess of $10,000.00 to be entered and not discharged,
stayed or appealed with a supersedeas bond within a period of thirty (30) days,
provided, however, that this subparagraph shall not apply to any judgment for
which the Borrower is fully insured, and with respect to which the insurer has
admitted liability in writing; or

 

(g)                                 Permit any
change in the ownership of the shares of Borrower which shall result in a
change of control of the Borrower; or

 

(h)                                 Make loans to
one or more Persons which in the aggregate exceed $5,000.00 outstanding at any
time (including, without limitation, any officer, shareholder, director or
employee of Borrower except for temporary advances and reimbursements to such
officers and employees for necessary expenses incurred in the ordinary course
of business) or purchase or otherwise acquire any capital stock, assets,
obligations, or other securities of, make any capital contribution to, or
otherwise invest in (except obligations of the United States Government, open
market commercial paper rated one of the top two ratings by a rating agency of
recognized national standing or certificates of deposit in insured financial
institutions) or acquire any interest in any Person, or participate as a
partner or joint venturer with any other Person; or

 

(i)                                     Declare or pay
any dividends in any fiscal year (except if Borrower is an S corporation, the
minimum amount as shall be necessary for shareholders of Borrower to pay
federal and state incomes taxes on net earnings from the Borrower without
jeopardizing the Subchapter S election of the Borrower), or purchase, redeem,
retire, or otherwise acquire for value any of its capital stock now or
hereafter outstanding; or make any distribution of assets to its shareholders
as such, whether in cash, assets, or in obligations of the Borrower; or
allocate or otherwise set apart any sum for the payment of any dividend or
distribution on, or for the purchase, redemption, or retirement of any shares
of its capital stock; or make any other distribution by reduction of capital or
otherwise in respect of any shares of its capital stock; or

 

(j)                                     Assume,
guaranty, endorse, or otherwise be or become directly or contingently
responsible or liable (including, but not limited to, an agreement to purchase
any obligation, stock, assets, goods or services or to supply or advance any
funds, assets, goods or services, or an agreement to maintain or cause any
Person to maintain a minimum working capital or net worth, or otherwise to
assure the creditors of any Person against loss) for obligations of any Person,
except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; or

 

(k)                                  Install, use,
generate, manufacture, produce, store, release, discharge or dispose of on,
under or about the Real Property, nor transport to or from any property, any
Hazardous Materials nor allow any other Person to do so, except in full
compliance with any and all applicable environmental laws, rules and
regulations; or

 

(1)                                  Directly or
indirectly use any part of the proceeds of the Loans for the purpose of
purchasing or carrying any margin stock within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System or to extend credit to any
Person for the purpose of purchasing or carrying any such margin stock or for
any purpose which violates, or is inconsistent with, Regulation X of said Board
of Governors.

 

34

 

SECTION 15.  EVENTS OF
DEFAULT.

 

The
Notes and any and all other Indebtedness shall, at the option of Lender and
notwithstanding any maturity to the contrary, become immediately due and
payable, without notice or demand, upon the occurrence of any of the following
events of default (each an “Event of Default”):

 

(a)                                  Borrower shall
fail to pay when due, any Indebtedness, including, without limitation, any
principal of or interest on any Note, or any other sum payable by the Borrower
to the Lender, and such failure shall continue for five (5) days after
written notice of such default is sent to Borrower by Lender; or

 

(b)                                 Borrower shall
fail duly and punctually to perform or observe any other agreement, covenant or
obligation binding on the Borrower under this Agreement or any of the other
Loan Documents and such failure shall continue for ten (10) days after
written notice of such default is sent to Borrower by Lender; or

 

(c)                                  Any warranty,
representation, statement or financial statement made by Borrower in this
Agreement or by Borrower or any Guarantor in any other Loan Document or in any
other agreement, document, instrument, request, report, schedule or certificate
executed by Borrower or any Guarantor shall prove to have been incorrect or
misleading in any material respect when made; or

 

(d)                                 Any event
occurs or condition exists (other than those described in clauses (a) through
(c) above) which is specified as an event of default under any of the Loan
Documents; or

 

(e)                                  Filing of a
petition in bankruptcy by or against Borrower, or institution of any proceeding
by Borrower for corporate reorganization, readjustment, or similar arrangement
under any insolvency statute (and with respect to any involuntary petition or
proceeding, such petition or proceeding is not dismissed within sixty (60) days
after filing), filing of any proceeding by or against Borrower or any Guarantor
for appointment of a receiver, trustee or liquidator of it, him or her, or all
or any substantial part of its, his or her assets or properties, filing of a
petition for dissolution or liquidation of Borrower, or making by Borrower or
any Guarantor of an assignment for the benefit of creditors, or filing or
imposition of any tax lien against the Collateral, or Borrower or any Guarantor
admits in writing its, his or her inability to pay its, his or her debts as
they become due, or Borrower ceases doing business as a going concern; or

 

(f)                                    The Lender, in
good faith, deems itself reasonably insecure for any reason due to any material
adverse change in the business, assets or liabilities, financial condition,
results of operations or business prospects of Borrower, or in the financial
condition of any Guarantor; or

 

(g)                                 There shall
occur any uninsured damage to or loss, theft, or destruction of any of the
Collateral exceeding $10,000.00; or

 

(h)                                 All or any
portion of the Collateral is attached, seized, levied upon or subjected to a
writ or distress warrant, or comes within the possession of any receiver,
trustee, custodian or assignee

 

35

 

for
the benefit of creditors; or an application is made by Borrower or any other
Person for the appointment of a receiver, trustee, or custodian for such
Collateral; or

 

(i)                                     A notice of
lien, levy or assessment is filed of record with respect to all or any portion
of Borrower’s assets by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipal or other
governmental agency, including, without limitation, the PBGC, or any taxes or
debts owing to any of the foregoing becomes a lien or encumbrance upon all or
any portion of Borrower’s assets; or

 

(j)                                     Creation by
Borrower of a security interest in any Collateral now existing or hereafter
acquired by Borrower in favor of any Person other than the Lender and the
Permitted Liens; or

 

(k)                                  Borrower is
enjoined, restrained, or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any part of its
business affairs; or

 

(1)                                  Insolvency of
any Guarantor, or any Guarantor shall file a petition in bankruptcy or shall be
adjudicated a bankrupt, or any Guarantor shall die, or become incompetent, or
shall terminate, repudiate, revoke or disavow any of his or her obligations
under the Guaranty or breach any of the terms thereof; or

 

(m)                               Any judgment or
order requiring the payment of money exceeding $10,000.00 shall be rendered
against Borrower and such judgment or order shall remain unsatisfied or
undischarged and in effect for thirty (30) consecutive days without a stay of
enforcement or execution, provided, however, this subparagraph shall not apply
to any judgment for which Borrower is fully insured, and with respect to which
the insurer has admitted liability in writing; or

 

(n)                                 This Agreement
shall at any time after its execution and delivery and for any reason cease (i) to
create a valid and perfected first priority security interest in such of the
Collateral owned by Borrower or in which Borrower has rights therein; or (ii) to
be in full force and effect or shall be declared null and void, or the validity
or enforceability hereof shall be contested by the Borrower or Borrower shall
deny it has any further liability or obligation hereunder; or

 

(o)                                 The Guaranty
shall at any time after its execution and delivery and for any reason cease to
be in full force and effect or shall be declared null and void, or the validity
or enforceability thereof shall be contested by any Guarantor or any Guarantor
shall deny he or she has any further liability or obligation thereunder, or
shall fail to perform his or her obligations thereunder; or

 

(p)                                 Any event shall
occur which results in the acceleration of the maturity of any indebtedness of
Borrower to any other lender or creditor exceeding $20,000.00; or

 

(q)                                 Any proceeding
shall be commenced or filing made under applicable law by any stockholder,
officer or director of Borrower to dissolve or liquidate the Borrower, or any
order, judgment or decree shall be entered against Borrower decreeing its involuntary
dissolution or split up; or Borrower shall otherwise dissolve or cease to
exist; or

 

(r)                                    An event of
default shall occur under any of the Stock Pledge Agreements, and shall not be
cured within the applicable grace period, if any; or

 

36

 

(s)                                  An event of
default shall occur under the Security Agreement-Leased Equipment, and shall
not be cured within the applicable grace period, if any; or

 

(t)                                    Borrower shall
default in the payment or performance of the Equipment Lease, and such default
shall not be cured within the applicable grace period, if any; or

 

(u)                                 Borrower shall
make any payment to Seller in violation of the terms of the Seller/Bank
Intercreditor Agreement; or

 

(v)                                 If within one
hundred twenty (120) days from the date of this Agreement, Borrower shall fail
to provide to Lender all of the following documents, in form and substance
acceptable to Lender:  (i) an
original executed release (in recordable form) of that certain mortgage dated January 15,
1987 and recorded January 21, 1987 in the office of the Recorder of Deeds
of Cook County as Document No. 87040330 in favor of American National Bank
and Trust Company of Chicago (the “Trustee”), as Trustee under Trust Agreement
dated April 25, 1966 and known as Trust No. 23191 and its
beneficiaries, (ii) an original landlord waiver for the Borrower’s leased
premises commonly known as 1309 S. Cicero Avenue, Cicero, Illinois, executed by
the Trustee and all current beneficiaries of the Trustee, and (iii) a
lease extension letter extending the lease for such premises executed by the
Trustee and all such beneficiaries; or

 

(w)                               If the life
insurance policy described in Section 6 hereof shall expire, lapse or
otherwise cease to be in full force and effect or Borrower shall fail to pay
any premium for such policy when due.

 

SECTION 16.  REMEDIES.  (a) if any Event of Default shall have
occurred and be continuing:

 

(i)                                     The Lender
may:  (x) immediately terminate the
Lender’s commitment hereunder to make any further advances under the Revolving
Loan and/or (y) declare the Indebtedness, including, without limitation,
all principal of and interest accrued on the Notes and all other Indebtedness,
to be forthwith due and payable, whereupon the same shall become forthwith due
and payable, notwithstanding the maturity date or dates expressed in any
evidence thereof.  Borrower waives
presentment and protest of any instruments and notice thereof, notice of
default and all other notices to which Borrower might otherwise be entitled
except as specifically provided herein.

 

(ii)                                  The Lender or
its designee may notify the Account Debtors under any Accounts, General
Intangibles and chattel paper, of the assignment of such Accounts, General
Intangibles and chattel paper, to the Lender and direct such Account Debtors to
make payment of all amounts due or to become due to the Borrower thereunder
directly to the Lender and, upon such notification and at the expense of the
Borrower, Lender or its designee may enforce collection of any such Accounts,
General Intangibles and chattel paper, and adjust, settle and compromise the
amount or payment thereof, in the same manner and to the same extent as the
Borrower might have done.  After such
notification all amounts and proceeds (including instruments) received in any
manner by the Borrower in respect of the Accounts, General Intangibles and
chattel paper, shall be segregated from other funds of the Borrower and shall
be forthwith paid over to the Lender in the same form as received (with any necessary
endorsement), and the Borrower shall

 

37

 

not
adjust, settle or compromise the amount of payment of any Account, General
Intangibles or chattel paper, or release wholly or partly any Account Debtor or
obligor thereof, or allow any credit or discount thereon.  To facilitate the foregoing collection rights
of the Lender, the Borrower hereby agrees to provide the Lender with such
information and documentation which the Lender reasonably requests.

 

(iii)                               The Lender may
exercise and pursue any and all rights and remedies available to it hereunder,
and under the other Loan Documents, the Collateral Documents and applicable
law, including, but not limited to, all the rights and remedies of a secured
party upon default under the UCC (whether or not the UCC applies to the
affected Collateral), or any other applicable law.  The Lender may without notice, demand or
legal process of any kind, all of which Borrower waives, at any time or times, (x) peaceably
enter into the Borrower’s premises and take physical possession of the
Collateral and maintain such possession on the Borrower’s premises, at no cost
to the Lender, or remove the Collateral, or any part thereof, to such other
place(s) as the Lender may desire or (y) require the Borrower to, and
the Borrower hereby agrees that it will at its expense and upon request of the
Lender forthwith, assemble all or any part of the Collateral (and the records
pertaining thereto) as directed by the Lender and make it available to the
Lender at a place to be designated by the Lender which is reasonably convenient
to the Lender and (z) without notice except as specified below, sell,
lease, assign, grant an option or options to purchase or otherwise dispose of
the Collateral or any part thereof in one or more parcels at public or private
sale, at any exchange, broker’s board or at any of the Lender’s offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Lender may deem reasonable (and Lender may, to the extent
permitted by applicable law, purchase the Collateral at any such sale).  The Borrower agrees that, to the extent
notice of sale shall be required by law, ten (10) days’ notice to the
Borrower of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification.  The Lender shall not be obligated to make any
sale of Collateral regardless of a notice of sale having been given.  The Lender may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and place to
which it was so adjourned.

 

(iv)                              The Lender
shall apply all net cash proceeds received in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
(after deducting all costs, expenses and reasonable attorneys’ fees incurred at
any time in the collection of the Indebtedness and in the protection and sale
of the Collateral and after payment of any amounts payable to the Lender
pursuant to Section 20), for the benefit of the Lender, against all or any
part of the Indebtedness in such order as Lender shall determine in its sole
discretion.  Any surplus of such cash or
cash proceeds held by the Lender and remaining after payment in full of all the
Indebtedness shall be paid over to the Borrower or to whomsoever may be
lawfully entitled to receive such surplus. 
Borrower and the Guarantors shall remain liable for any deficiency
remaining after such application, and shall pay such deficiency forthwith.  In addition to all other sums due the Lender,
the Borrower shall pay the Lender all costs and expenses incurred by the
Lender, including court costs and reasonable attorneys’ fees, to obtain,
liquidate and/or enforce payment of the Collateral or the Indebtedness,
including the Loans and all other Indebtedness, or in the prosecution or
defense of any action or proceeding either against the

 

38

 

Lender
or against Borrower concerning any matter arising out of or connected with the
Collateral, this Agreement, or the Indebtedness.

 

(b)                                 Borrower waives
all claims, damages and demands against the Lender arising out of the repossession,
retention or sale of any of the Collateral, or any part or parts thereof,
except any such claims, damages and awards arising out of the gross negligence
or willful misconduct of the Lender.

 

(c)                                  The rights and
remedies provided under this Agreement are cumulative and may be exercised
singly or concurrently and are not exclusive of any rights and remedies
provided by law or equity.

 

(d)                                 To the extent
that the Indebtedness is now or hereafter secured by property other than the
Collateral or by the guarantee, endorsement or property of any other person,
firm or corporation, then Lender shall have the right in its sole discretion to
determine which rights, security, liens, security interests or remedies Lender
shall at any time pursue, relinquish, subordinate, modify or take any other
action with respect thereto, without in any way modifying or affecting any of
them or any of Lender’s rights hereunder.

 

SECTION 17.  EXERCISE OF
REMEDIES.  In
connection with the exercise of its remedies pursuant to Section 16, the
Lender may (i) exchange, enforce, waive or release any portion of the
Collateral or Collateral Documents in favor of the Lender or relating to any
other security for the Indebtedness; (ii) apply such Collateral or
security and direct the order or manner of sale thereof as the Lender may, from
time to time, determine; and (iii) settle, compromise, collect or otherwise
liquidate any such Collateral or security in any manner following the
occurrence of an Event of Default, without affecting or impairing the Lender’s
right to take any other further action with respect to any Collateral or
security or any part thereof.

 

SECTION 18.  LICENSE.  The Lender is hereby granted a license or
other right to use, following the occurrence and during the continuance of an
Event of Default, without charge, the Borrower’s labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, customer lists and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral, and the Borrower’s rights
under all licenses and all franchise agreements shall inure to the Lender’s
benefit.

 

SECTION 19.  INJUNCTIVE
RELIEF.  The Borrower recognizes that in
the event the Borrower fails to perform, observe or discharge any of its
obligations or liabilities under this Agreement, any remedy of law may prove to
be inadequate relief to the Lender; therefore, the Borrower agrees that the
Lender, if the Lender so requests, shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages.

 

SECTION 20.  EXPENSES.  The Borrower will upon demand reimburse the
Lender for all costs, fees, and expenses incurred by the Lender in connection
with the negotiation, preparation and conclusion of this Agreement, the other
Loan Documents, the Collateral Documents, and any amendment thereof, including,
but not limited to, reasonable attorneys’

 

39

 

fees,
corporate status, audit fees, appraisal fees, survey fees, lien and title
searches, title insurance policy fees and charges, all taxes and filing or
recording fees payable in connection with the transactions contemplated by this
Agreement, the other Loan Documents and the Collateral Documents and, after the
occurrence of an Event of Default, all reasonable attorneys’ fees and all other
costs, fees and expenses incurred by Lender as a result of, or following such
Event of Default, in collection of the Indebtedness, or the sale or other
disposition of the Collateral.  All of
the foregoing fees, costs and expenses shall be part of the Indebtedness,
payable upon demand, and secured by the Collateral.

 

SECTION 21.  NOTICES.  All notices and other communications provided
for hereunder shall be given in writing and shall be addressed to the party
intended to receive the same at its address hereinbefore set forth (or to such
other and different address as Borrower or Lender may designate pursuant to a
written notice sent in accordance with the provisions hereof), and will be
deemed given or furnished (i) when delivered at such address to such party
(or to an officer of such party) or (ii) when received if deposited in the
United States mail as first-class registered or certified mail, return receipt
requested, postage prepaid, or (iii) when received if deposited at the
office of a nationally-recognized overnight delivery service; or (iv) when
received if sent by facsimile transmission.

 

SECTION 22.  CONTINUING
SECURITY INTEREST; TERMINATION.  (a) This Agreement shall create a
continuing security interest in the Collateral and shall (i) remain in
full force and effect until payment in full of the Indebtedness and the termination
of this Agreement, (ii) be binding upon the Borrower, its successors and
assigns (except that Borrower shall not assign any of its rights nor delegate
any of its obligations under this Agreement without the prior written consent
of the Lender, and no such consent by the Lender shall, in any event, relieve
Borrower of any of its obligations under this Agreement), and (iii) inure,
together with the rights and remedies of the Lender hereunder, to the benefit
of the Lender, and any successor Lender. 
Nothing set forth herein or in any other Loan Document is intended or
shall be construed to give any other Person any right, remedy or claim under,
to or in respect of this Agreement or any other Loan Document or any
Collateral.  The Borrower’s successors and
assigns shall include, without limitation, a receiver, trustee or
debtor-in-possession thereof or therefor.

 

(b) Upon
the payment in full of the Indebtedness and the termination of this Agreement,
Lender shall terminate its security interest by executing UCC-3 termination
statements, and thereupon, the security interest granted hereby shall terminate
and all rights to the Collateral shall revert to the Borrower.  Upon any such termination of security
interest, the Borrower shall be entitled to the return, upon its request and at
its expense, of such of the Collateral held by the Lender as shall not have
been sold or otherwise applied pursuant to the terms hereof and the Lender
will, at the Borrower’s expense, execute and deliver to the Borrower such other
documents as the Borrower shall reasonably request to evidence such
termination.

 

SECTION 23.  NON-WAIVER.  The Lender’s failure at any time or times
hereafter to require strict performance by the Borrower of any provision of
this Agreement shall not waive, affect or diminish any right of the Lender
thereafter to demand strict compliance and performance therewith.  Any suspension or waiver by the Lender of a
default by the Borrower under this Agreement shall not suspend, waive or affect
any other default by Borrower under this

 

40

 

Agreement,
whether the same is prior or subsequent thereto and whether of the same or of a
different kind or character.  None of the
undertakings, agreements, warranties, covenants and representations of the
Borrower contained in this Agreement and no default by the Borrower hereunder
shall be deemed to have been suspended or waived by the Lender unless such
suspension or waiver is in writing signed by an officer of the Lender and directed
to the Borrower specifying such suspension or waiver.

 

SECTION 24.  PERFORMANCE OF
BORROWER’S DUTIES.  If not
discharged or paid when due, Lender may (but shall not be obligated to)
discharge or pay any amounts required to be discharged or paid by Borrower
under this Agreement, including, without limitation, all taxes, liens, security
interests, encumbrances, and other claims, at any time levied or placed on the
Collateral.  Lender may also (but shall
not be obligated to) pay all costs for insuring, maintaining and preserving the
Collateral.  All such expenditures
incurred or paid by Lender for such purposes will then bear interest at the
highest default rate set forth in the Notes from the date incurred or paid by
Lender to the date of repayment by Borrower. 
All such expenses shall automatically become a part of the Indebtedness
secured hereby, and, at Lender’s option, will be payable on demand.

 

SECTION 25.  SEVERABILITY.  It is the parties’ intention that this
Agreement be interpreted in such a way that it is valid and effective under
applicable law.  However, if one or more
of the provisions of this Agreement shall for any reason be found to be invalid
or unenforceable, the remaining provisions of this Agreement shall be
unimpaired.

 

SECTION 26.  CAPTIONS.  The captions and headings of the various
sections used in this Agreement are for convenience only, and are not to be
construed as confining or limiting in any way the scope or intent of the
provisions hereof.

 

SECTION 27.  REINSTATEMENT
OF INDEBTEDNESS.  To the
extent that Borrower makes a payment or payments to Lender or Lender receives
any payment or proceeds of the Collateral for Borrower’s benefit, which payment(s) or
proceeds or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside and/or required to be repaid to a trustee, receiver
or any other party under any bankruptcy act, state or federal law, common law
or equitable cause, then, to the extent of such payment(s) or proceeds
received, the Indebtedness or part thereof intended to be satisfied shall be
reinstated and shall continue in full force and effect, as if such payment(s) or
proceeds had not been received by Lender.

 

SECTION 28.  INDEMNITY.  In addition to all of the Borrower’s other
Indebtedness under this Agreement, the Borrower agrees to defend, protect,
indemnify, pay and hold harmless the Lender and its officers, directors,
employees, attorneys, consultants, agents and affiliates (collectively, the “Indemnitees”)
from and against any and all losses, damages, liabilities, obligations,
penalties, fees, costs, and expenses (including, without limitation, attorneys’
and paralegals’ fees, costs and expenses) incurred by such Indemnitees, whether
prior to or from and after the initial loan disbursement hereunder, whether
direct, indirect or consequential, as a result of or arising from or relating
to any suit, investigation, action or proceeding by any Person, whether
threatened or initiated, asserting a claim for any legal or equitable remedy against
any Person under any statute or regulation (other than suits or other actions
by Borrower against an

 

41

 

Indemnitee),
including, without limitation, any federal or state securities or labor laws,
or under any federal, state or local environmental, health or safety laws,
regulations, or common law principles, arising from or in connection with the
past, present or future operations of the Borrower, any of its Subsidiaries or
its predecessors in interest, or the past, present or future environmental
condition of the Real Property), the presence of any Hazardous Materials on the
Real Property, or the release or threatened release of any Hazardous Materials
into the environment from the Real Property, or under any common law or
equitable cause or otherwise, arising from or in connection with any of the
following:  (i) the negotiation,
preparation, execution or performance of this Agreement or of any document
executed in connection with the transactions contemplated by this Agreement, (ii) the
Lender’s furnishing of funds to the Borrower under this Agreement, including,
without limitation, the management of the Loans, or (iii) any matter
relating to the financing transactions contemplated by this Agreement or by any
document executed in connection with the transactions contemplated by this
Agreement (collectively, the “Indemnified Matters”), provided, however, the
Borrower shall not be liable to indemnify any Indemnitee for claims arising as
a result of such Indemnitee’s gross negligence or willful misconduct.  Such indemnification for all of the foregoing
losses, damages, liabilities, obligations, fees, penalties, costs and expenses
of Lender shall be part of the Indebtedness. 
In no event shall the Lender be liable to Borrower for indirect,
special, consequential or punitive damages as a result of or arising from or
relating to any suit, investigation, action or proceeding by Borrower against
the Lender.

 

SECTION 29.  BANK ACCOUNTS.  Borrower covenants to Lender and agrees to
establish and maintain all of its operating accounts with Lender at all times
so long as the Loans or any other Indebtedness owed by Borrower to Lender shall
remain outstanding.

 

SECTION 30.  BROKERAGE FEES.  Borrower covenants to Lender that there is no
broker fee due in connection with the Loans. 
Borrower agrees to indemnify and hold the Lender harmless with respect
to any costs, expenses or liabilities relating to any such claims.

 

SECTION 31.  LAWFUL
INTEREST.  It is the
intent of the Borrower and Lender that the rates of interest and other charges
to Borrower under this Agreement shall be lawful; therefore, if for any reason
the interest or other charges payable under this Agreement are found by a court
of competent jurisdiction, in a final determination, to exceed the limit which
the Lender may lawfully charge Borrower, then the obligation to pay interest
and other charges shall automatically be reduced to such limit, and if any
amount in excess of such limit shall have been paid, then such amount shall be
refunded to Borrower.

 

SECTION 32.  SURVIVAL.  All covenants, agreements, representations,
warranties and indemnities made herein and in all other Loan Documents shall
survive the making by the Lender of the Loans herein contemplated and shall
continue in full force and effect for so long as the Loans and any other
Indebtedness remain outstanding and unpaid.

 

SECTION 33.  ENTIRE
AGREEMENT.  This
Agreement, together with the other Loan Documents, constitute the entire
understanding and agreement of the parties as to the matters set forth in this
Agreement.  No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound

 

42

 

by
the alteration or amendment.  No
amendment or waiver of any provision of this Agreement nor consent to any
departure by the Borrower herefrom shall in any event be effective unless the
same shall be given in writing and signed by the Lender and Borrower, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.

 

SECTION 34.  CHOICE OF LAW.  ANY DISPUTE BETWEEN THE LENDER AND BORROWER,
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING
IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH
THE INTERNAL LAWS AND NOT THE CONFLICTS OF LAW PROVISIONS OF THE STATE OF
ILLINOIS.

 

SECTION 35.  PERSONAL
JURISDICTION.

 

(i)                                     Exclusive
Jurisdiction.  EXCEPT AS
PROVIDED IN SUBSECTION (ii) BELOW, THE LENDER AND BORROWER AGREE THAT
ALL DISPUTES BETWEEN THEM ARISING OUT OF, CONNECTED WITH, RELATED, TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL
BE RESOLVED ONLY BY STATE OR FEDERAL COURTS LOCATED IN COOK COUNTY, ILLINOIS.  BORROWER WAIVES IN ALL DISPUTES ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.

 

(ii)                                  Other
Jurisdictions.  BORROWER
AGREES THAT THE LENDER SHALL HAVE THE RIGHT TO PROCEED AGAINST BORROWER OR ITS
PROPERTY IN A COURT IN ANY LOCATION TO ENABLE THE LENDER TO OBTAIN A JUDGMENT
AGAINST THE BORROWER OR TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR
THE INDEBTEDNESS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN
FAVOR OF THE LENDER.  BORROWER WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE
LENDER HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH.

 

SECTION 36.  WAIVER OF JURY
TRIAL.  BORROWER AND THE LENDER EACH
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN THE LENDER AND BORROWER OR
ANY OF ITS SUBSIDIARIES ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT.  INSTEAD, ANY DISPUTES
RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

 

SECTION 37.  WAIVER OF
NOTICE, HEARING AND BOND. 
BORROWER WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY KIND PRIOR TO
THE EXERCISE BY THE LENDER OF ITS RIGHTS, FROM AND AFTER THE OCCURRENCE

 

43

 

OF
AN EVENT OF DEFAULT, TO REPOSSESS THE COLLATERAL WITH JUDICIAL PROCESS OR TO
REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL, OR OTHER SECURITY FOR THE
INDEBTEDNESS.  BORROWER WAIVES THE
POSTING OF ANY BOND OTHERWISE REQUIRED OF THE LENDER IN CONNECTION WITH ANY
JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY, ATTACH, OR
LEVY UPON COLLATERAL OR OTHER SECURITY FOR THE INDEBTEDNESS TO ENFORCE ANY
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE LENDER, OR TO ENFORCE BY
SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER, PRELIMINARY OR PERMANENT
INJUNCTION, THIS AGREEMENT, OR ANY OTHER OF THE LOAN DOCUMENTS.

 

SECTION 38.  ADVICE OF
COUNSEL.  BORROWER
REPRESENTS TO THE LENDER THAT IT HAS DISCUSSED THIS AGREEMENT WITH ITS LAWYER.

 

IN
WITNESS WHEREOF, the Borrower and Lender have caused this Agreement to be duly
executed and delivered by their duly authorized officers thereunto duly
authorized as of the date first above written.

 

	
  BORROWER:

  	
   

  	
  LENDER:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BFG
  ACQUISITION CORP.

  	
   

  	
  LASALLE
  BANK NI

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  J. Cameron Drecoll

  	
   

  	
  By:

  	
  /s/
  [ILLEGIBLE]

  
	
   

  	
  J.
  Cameron Drecoll

  	
   

  	
   

  	
   

  
	
  Title:

  	
  President

  	
   

  	
  Title:

  	
  Commercial
  Loan Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
  /s/
  Joan M. Drecoll

  	
   

  	
   

  	
   

  
	
   

  	
  Joan
  M. Drecoll

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Secretary

  	
   

  	
   

  	
   

  

 

44

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