Document:

Exhibit 10.8

 

Silicon Valley Bank

3003 Tasman Drive

Santa Clara, CA 95054

(408) 654–1000 – Fax (408) 980–6410

 

ACCOUNTS RECEIVABLE PURCHASE AGREEMENT

 

This Accounts Receivable

Purchase Agreement (the “Agreement”) is made on this 29th day of July, 2002, by

and between Silicon Valley Bank (“Buyer”) having a place of business at the

address specified above and Zarnba Corporation, a Delaware corporation

(“Seller”), having its principal place of business and chief executive office

at 3033 Excelsior Boulevard, Suite 200, Minneapolis, Minnesota 55416 and with a

FAX number of

 

1.             Definitions.  When used herein, the following

terms shall have the following meanings.

                “Account

Balance” shall mean, on any given day, the gross amount of all Purchased

Receivables unpaid on that day.

                “Account Debtor” shall have the meaning set forth in the California

Uniform Commercial Code and shall include any person liable on any Purchased

Receivable, including without limitation, any guarantor of the Purchased Receivable

and any issuer of a letter of credit or banker’s acceptance.

                “Adjustments”

shall mean all discounts, allowances, returns, disputes, counterclaims,

offsets, defenses, rights of recoupment, rights of return, warranty claims, or

short payments, asserted by or on behalf of any Account Debtor with respect to

any Purchased Receivable.

                “Administrative

Fee” shall have the meaning as set forth in Section 3.3 hereof.

                “Advance”

shall have the meaning set forth in Section 2.2 hereof.

                “Business

Day” is any day that is not a Saturday, Sunday or a day on which the Bank is

closed.

                “Closing

Date” is the date of this Agreement.

                “Collateral”

shall have the meaning set forth in Section 8 hereof.

                “Collections”

shall mean all good funds received by Buyer from or on behalf of an Account

Debtor with respect to Purchased Receivables.

                “Compliance

Certificate” shall mean a certificate, in a form provided by Buyer to Seller,

which contains the certification of the chief financial officer of Seller that,

among other things, the representations and warranties set forth in this

Agreement are true and correct as of the date such certificate is delivered.

                “Event

of Default” shall have the meaning set forth in Section 9 hereof.

                “Facility

Fee” is defined in Section 3.6 hereof.

                “Finance

Charges” shall have the meaning set forth in Section 3.2 hereof.

                “Invoice

Transmittal” shall mean a writing signed by an authorized representative of

Seller which accurately identifies the receivables which Buyer, at its

election, may purchase, and includes for each such receivable the correct

amount owed by the Account Debtor, the name and address of the Account Debtor,

the invoice number, the invoice date and the account code.

                “Obligations”

shall mean all advances, financial accommodations, liabilities, obligations,

covenants and duties owing, arising, due or payable by Seller to Buyer of any

kind or nature, present or future, arising under or in connection with this

Agreement or under any other document, instrument or agreement, whether or not

evidenced by any note, guarantee or other instrument, whether arising on

account or by overdraft, whether direct or indirect (including those acquired

by assignment) absolute or contingent, primary or secondary, due or to become

due, now owing or hereafter arising, and however acquired; including, without

limitation, all Advances, Finance Charges, Administrative Fees, interest,

Repurchase Amounts, fees, expenses, professional fees and attorneys’ fees and

any other sums chargeable to Seller hereunder or otherwise.

                “Purchased

Receivables” shall mean all those accounts, receivables, chattel paper,

instruments, contract rights, documents, general intangibles, letters of

credit, drafts, bankers acceptances, and rights to payment, and all proceeds

thereof (all of the foregoing being referred to as “receivables”), arising out

of the invoices and other agreements identified on or delivered with any

Invoice Transmittal delivered by Seller to Buyer which Buyer elects to purchase

and for which Buyer makes an Advance.

                “Refund”

shall have the meaning set forth in Section 3.5 hereof.

                “Reserve”

shall have the meaning set forth in Section 2.4 hereof.

                “Repurchase

Amount” shall have the meaning set forth in Section 4.2 hereof.

 

 

 

                “Reconciliation

Date” shall mean the last calendar day of each Reconciliation Period. 

                “Reconciliation

Period” shall mean each calendar month of every year.

 

2.             Purchase and

Sale of Receivables.

 

                2.1.  Offer to

Sell Receivables.  During the

term hereof, and provided that there does not then exist any Event of Default

or any event that with notice, lapse of time or otherwise would constitute an

Event of Default, Seller may request that Buyer purchase receivables and Buyer

may, in its sole discretion, elect to purchase receivables. Seller shall

deliver to Buyer an Invoice Transmittal with respect to any receivable for

which a request for purchase is made. An authorized representative of Seller

shall sign each Invoice Transmittal delivered to Buyer. Buyer shall be entitled

to rely on all the information provided by Seller to Buyer on or with the

Invoice Transmittal and to rely on the signature on any Invoice Transmittal as

an authorized signature of Seller.

 

                2.2.  Acceptance

of Receivables.  Buyer shall

have no obligation to purchase any receivable listed on an Invoice Transmittal.

Buyer may exercise its sole discretion in approving the credit of each Account

Debtor before buying any receivable. Upon acceptance by Buyer of all or any of

the receivables described on any Invoice Transmittal, Buyer shall pay to Seller

80(%)  percent

of the face amount of each receivable Buyer desires to purchase. Such payment

shall be the “Advance” with respect to such receivable. Buyer may, from time to

time, in its sole discretion, change the percentage of the Advance. Upon

Buyer’s acceptance of the receivable and payment to Seller of the Advance, the

receivable shall become a “Purchased Receivable.” It shall be a condition to

each Advance that (i) all of the representations and warranties set forth in

Section 6 of this Agreement be true and correct on and as of the date of the

related Invoice Transmittal and on and as of the date of such Advance as though

made at and as of each such date, and (ii) no Event of Default or any event or

condition that with notice, lapse of time or otherwise would constitute an

Event of Default shall have occurred and be continuing, or would result from

such Advance. Notwithstanding the foregoing, in no event shall the aggregate amount

of all Purchased Receivables outstanding at any time exceed Two Million

Five Hundred Thousand Dollars ($2,500,000).

 

                2.3.  Effectiveness of Sale to Buyer.  Effective upon Buyer’s payment of

an Advance, and for and in consideration therefor and in consideration of the

covenants of this Agreement, Seller hereby absolutely sells, transfers and

assigns to Buyer, all of Seller’s right, title and interest in and to each

Purchased Receivable and all monies due or which may become due on or with

respect to such Purchased Receivable. Buyer shall be the absolute owner of each

Purchased Receivable. Buyer shall have, with respect to any goods related to

the Purchased Receivable, all the rights and remedies of an unpaid seller under

the California Uniform Commercial Code and other applicable law, including the

rights of replevin, claim and delivery, reclamation and stoppage in transit.

 

                2.4.  Establishment of a Reserve.  Upon the purchase by Buyer of each Purchased

Receivable, Buyer shall establish a reserve. The reserve shall be the amount by

which the face amount of the Purchased Receivable exceeds the Advance on that

Purchased Receivable (the “Reserve”); provided, the Reserve with respect to all

Purchased Receivables outstanding at any one time shall be an amount not less

than 20(%)  percent

of the Account Balance at that time and may be set at a higher percentage at

Buyer’s sole discretion. The reserve shall be a book balance maintained on the

records of Buyer and shall not be a segregated fund.

 

3.             Collections,

Charges and Remittances.

 

                3.1.  Collections.  In

computing Finance Charges on the Obligations, all checks and other items of

payment received by Buyer (including proceeds of Purchased Receivables and

payment of Obligations in full) shall be deemed applied by Buyer on account of

the Obligations three (3) Business

Days after receipt by Buyer of immediately available funds. If Seller is in

default under this Agreement, Buyer shall apply all Collections to Seller’s

Obligations hereunder in such order and manner as Buyer may determine. If an

item of collection is not honored or Buyer does not receive good funds for any

reason, the amount shall be included in the Account Balance as if the

Collections had not been received and Finance Charges under Section 3.2 shall

accrue thereon.

 

                3.2.  Finance Charges. 

On each Reconciliation Date Seller shall pay to Buyer a

finance charge in an amount equal to 1(%)  percent per month of the average

daily Account Balance outstanding during the applicable Reconciliation Period (the

“Finance Charges”). Buyer shall deduct the accrued Finance Charges from the

Reserve as set forth in Section 3.5 below.

 

                3.3.  Administrative Fee. 

On each Reconciliation Date Seller shall pay to Buyer an

Administrative Fee equal to 0.25(%)

percent of the face amount of each Purchased Receivable first purchased during

that Reconciliation Period

 

 

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(the “Administrative Fee”). Buyer shall

deduct the Administrative Fee from the Reserve as set forth in Section 3.5

below.

 

                3.4.  Accounting.  Buyer

shall prepare and send to Seller after the close of business for each

Reconciliation Period, an accounting of the transactions for that

Reconciliation Period, including the amount of all Purchased Receivables, all

Collections, Adjustments, Finance Charges, and the Administrative Fee. The

accounting shall be deemed correct and conclusive unless Seller makes written

objection to Buyer within thirty (30) days after the Buyer mails the accounting

to Seller.

 

                3.5.  Refund to Seller. 

Provided that there does not then exist an Event of Default

or any event or condition that with notice, lapse of time or otherwise would

constitute an Event of Default, Buyer shall refund to Seller by check after the

Reconciliation Date, the amount, if any, which Buyer owes to Seller at the end

of the Reconciliation Period according to the accounting prepared by Buyer for

that Reconciliation Period (the “Refund”). The Refund shall be an amount equal

to:

	

  (A)

  	

  (1)

  	

  The Reserve as of the

  beginning of that Reconciliation Period, plus

  
	

   

  	

  (2)

  	

  the Reserve created for

  each Purchased Receivable purchased during that Reconciliation Period, minus 

  
	

  (B)

  	

  The total for that

  Reconciliation Period of:

  
	

   

  	

  (1)

  	

  the Administrative Fee;

  
	

   

  	

  (2)

  	

  Finance Charges;

  
	

   

  	

  (3)

  	

  Adjustments;

  
	

   

  	

  (4)

  	

  Repurchase Amounts, to the

  extent Buyer has agreed to accept payment thereof by deduction from the

  Refund;

  
	

   

  	

  (5)

  	

  the Reserve for the

  Account Balance as of the first day of the following Reconciliation Period in

  the minimum percentage set forth in Section 2.4 hereof; and

  
	

   

  	

  (6)

  	

  all amounts due, including

  professional fees and expenses, as set forth in Section 12 for which oral 

  

or written demand has been made by Buyer to

Seller during that Reconciliation Period to the extent Buyer has agreed to

accept payment thereof by deduction from the Refund. In the event the formula

set forth in this Section 3.5 results in an amount due to Buyer from Seller,

Seller shall make such payment in the same manner as set forth in Section 4.3

hereof for repurchases. If the formula set forth in this Section 3.5 results in

an amount due to Seller from Buyer, Buyer shall make such payment by check,

subject to Buyer’s rights under Section 4.3 and Buyer’s rights of offset and

recoupment.

 

                3.6.  Facility Fee.  A

fully earned, non–refundable facility fee of $10,000.00 shall be due upon

the Closing Date.

 

4.             Recourse and

Repurchase Obligations.

 

                4.1.  Recourse.  Buyer’s

acquisition of Purchased Receivables from Seller shall be with full recourse

against Seller. In the event the Obligations exceed the amount of Purchased

Receivables and Collateral, Seller shall be liable for any deficiency.

 

                4.2.  Seller’s Agreement to Repurchase.  Seller agrees to pay to Buyer on

demand, the full face amount, or any unpaid portion, of any Purchased

Receivable:

 

(A) which remains unpaid ninety (90) calendar days after the invoice

date; or

(B) which is owed by any

Account Debtor who has filed, or has had filed against it, any bankruptcy case,

assignment for the benefit of creditors, receivership, or insolvency proceeding

or who has become insolvent (as defined in the United States Bankruptcy Code)

or who is generally not paying its debts as such debts become due; or

(C) with respect to which

there has been any breach of warranty or representation set forth in Section 6

hereof or any breach of any covenant contained in this Agreement; or

(D) with respect to which

the Account Debtor asserts any discount, allowance, return, dispute,

counterclaim, offset, defense, right of recoupment, right of return, warranty

claim, or short payment;

together with all reasonable attorneys’ and

professional fees and expenses and all court costs incurred by Buyer in

collecting such Purchased Receivable and/or enforcing its rights under, or

collecting amounts owed by Seller in connection with, this Agreement

(collectively, the “Repurchase Amount”).

 

                4.3.  Seller’s Payment of the Repurchase Amount or Other

Amounts Due Buyer.  When any

Repurchase Amount or other amount owing to Buyer becomes due, Buyer shall inform

Seller of the manner of payment which may be any one or more of the following

in Buyer’s sole discretion: (a) in cash immediately upon demand therefor; (b)

by delivery of substitute invoices and an Invoice Transmittal acceptable to

Buyer which shall thereupon become

 

 

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Purchased Receivables; (c) by adjustment to

the Reserve pursuant to Section 3.5 hereof; (d) by deduction from or offset

against the Refund that would otherwise be due and payable to Seller–,

(e) by deduction from or offset against the amount that otherwise would be

forwarded to Seller in respect of any further Advances that may be made by

Buyer, or (f) by any combination of the foregoing as Buyer may from time to

time choose.

 

                4.4.  Seller’s Agreement to Repurchase All Purchased

Receivables.  Upon and after

the occurrence of an Event of Default, Seller shall, upon Buyer’s demand (or,

in the case of an Event of Default under Section 9(B), immediately without

notice or demand from Buyer) repurchase all the Purchased Receivables then

outstanding, or such portion thereof as Buyer may demand. Such demand may, at

Buyer’s option, include and Seller shall pay to Buyer immediately upon demand,

cash in an amount equal to the Advance with respect to each Purchased

Receivable then outstanding together with all accrued Finance Charges,

Adjustments, Administrative Fees, attorney’s and professional fees, court costs

and expenses as provided for herein, and any other Obligations. Upon receipt of

payment in full of the Obligations, Buyer shall immediately instruct Account

Debtors to pay Seller directly, and return to Seller any Refund due to Seller.

For the purpose of calculating any Refund due under this Section only, the

Reconciliation Date shall be deemed to be the date Buyer receives payment in

good funds of all the Obligations as provided in this Section 4.4.

 

5.             Power of Attorney.  Seller does

hereby irrevocably appoint Buyer and its successors and assigns as Seller’s

true and lawful attorney in fact, and hereby authorizes Buyer, regardless of

whether there has been an Event of Default, (a) to sell, assign, transfer,

pledge, compromise, or discharge the whole or any part of the Purchased

Receivables; (b) to demand, collect, receive, sue, and give releases to any

Account Debtor for the monies due or which may become due upon or with respect

to the Purchased Receivables and to compromise, prosecute, or defend any

action, claim, case or proceeding relating to the Purchased Receivables,

including the filing of a claim or the voting of such claims in any bankruptcy

case, all in Buyer’s name or Seller’s name, as Buyer may choose; (c) to

prepare, file and sign Seller’s name on any notice, claim, assignment, demand,

draft, or notice of or satisfaction of lien or mechanics’ lien or similar

document with respect to Purchased Receivables–, (d) to notify all

Account Debtors with respect to the Purchased Receivables to pay Buyer

directly; (e) to receive, open, and dispose of all mail addressed to Seller for

the purpose of collecting the Purchased Receivables; (f) to endorse Seller’s

name on any checks or other forms of payment on the Purchased Receivables; (g)

to execute on behalf of Seller any and all instruments, documents, financing

statements and the like to perfect Buyer’s interests in the Purchased

Receivables and Collateral; and (h) to do all acts and things necessary or

expedient, in furtherance of any such purposes. If Buyer receives a check or

item which is payment for both a Purchased Receivable and another receivable,

the funds shall first be applied to the Purchased Receivable and, so long as

there does not exist an Event of Default or an event that with notice, lapse of

time or otherwise would constitute an Event of Default, the excess shall be

remitted to Seller. Upon the occurrence and continuation of an Event of

Default, all of the power of attorney rights granted by Seller to Buyer

hereunder shall be applicable with respect to all Purchased Receivables and all

Collateral.

 

6.             Representations,

Warranties and Covenants.

 

                6.1.  Receivables’ Warranties, Representations and

Covenants.  To induce Buyer

to buy receivables and to renders its services to Seller, and with full

knowledge that the truth and accuracy of the following are being relied upon by

the Buyer in determining whether to accept receivables as Purchased

Receivables, Seller represents, warrants, covenants and agrees, with respect to

each Invoice Transmittal delivered to Buyer and each receivable described

therein, that:

(A) Seller is the absolute

owner of each receivable set forth in the Invoice Transmittal and has full

legal right to sell, transfer and assign such receivables;

(B) The correct amount of each receivable is as set forth in the

Invoice Transmittal and is not in dispute;

(C) The payment of each

receivable is not contingent upon the fulfillment of any obligation or

contract, past or future and any and all obligations required of the Seller

have been fulfilled as of the date of the Invoice Transmittal;

(D) Each receivable set

forth on the Invoice Transmittal is based on an actual sale and delivery of

goods and/or services actually rendered, is presently due and owing to Seller,

is not past due or in default, has not been previously sold, assigned,

transferred, or pledged, and is free of any and all liens, security interests

and encumbrances other than liens, security interests or encumbrances in favor

of Buyer or any other division or affiliate of Silicon Valley Bank;

(E) There are no defenses,

offsets, or counterclaims against any of the receivables, and no agreement has

been made under which the Account Debtor may claim any deduction or discount,

except as otherwise stated in the Invoice Transmittal;

 

 

4

 

(F) Each Purchased

Receivable shall be the property of the Buyer and shall be collected by Buyer,

but if for any reason it should be paid to Seller, Seller shall promptly notify

Buyer of such payment, shall hold any checks, drafts, or monies so received in

trust for the benefit of Buyer, and shall promptly transfer and deliver the

same to the Buyer;

(G) Buyer shall have the

right of endorsement, and also the right to require endorsement by Seller, on

all payments received in connection with each Purchased Receivable and any

proceeds of Collateral;

(H) Seller, and to Seller’s

best knowledge, each Account Debtor set forth in the Invoice Transmittal, are

and shall remain solvent as that term is defined in the United States

Bankruptcy Code and the California Uniform Commercial Code, and no such Account

Debtor has filed or had filed against it a voluntary or involuntary petition

for relief under the United States Bankruptcy Code;

(1) Each Account Debtor

named on the Invoice Transmittal will not object to the payment for, or the

quality or the quantity of the subject matter of, the receivable and is liable

for the amount set forth on the Invoice Transmittal;

(J) Seller will remit all

payments for accounts to Buyer by the close of business on each Friday along

with a detailed cash receipts journal and shall immediately notify and direct

all of the Seller’s Account Debtor’s to make all payments for Seller’s accounts

to a lockbox account established with Buyer (“Lockbox”) or to wire transfer

payments to a cash collateral account that Buyer controls. It will be

considered an immediate Event of Default if the Lockbox is not set–up and

operational within 45 days from the date of this Agreement; and

(K) All receivables

forwarded to and accepted by Buyer after the date hereof, and thereby becoming

Purchased Receivables, shall comply with each and every one of the foregoing

representations, warranties, covenants and agreements referred to above in this

Section 6.1.

 

                6.2.  Additional Warranties, Representations and

Covenants.  In addition to

the foregoing warranties, representations and covenants, to induce Buyer to buy

receivables and to render its services to Seller, Seller hereby represents,

warrants, covenants and agrees that:

(A) Seller will not assign,

transfer, sell, or grant, or permit any lien or security interest in any

Purchased Receivables or Collateral to or in favor of any other party, without

Buyer’s prior written consent;

(B) The Seller’s name, form

of organization, chief executive office, and the place where the records

concerning all Purchased Receivables and Collateral are kept is set forth at

the beginning of this Agreement, Collateral is located only at the location set

forth in the beginning of this Agreement, or, if located at any additional

location, as set forth on a schedule attached to this Agreement, and Seller

will give Buyer at least thirty (30) days prior written notice if such name,

organization, chief executive office or other locations of Collateral or

records concerning Purchased Receivables or Collateral is changed or added and

shall execute any documents necessary to perfect Buyer’s interest in the

Purchased Receivables and the Collateral;

(C) Seller shall (i) pay all

of its normal gross payroll for employees, and all federal and state taxes, as

and when due, including without limitation all payroll and withholding taxes

and state sales taxes; (ii) deliver at any time and from time to time at

Buyer’s request, evidence satisfactory to Buyer that all such amounts have been

paid to the proper taxing authorities; and (iii) if requested by Buyer, pay its

payroll and related taxes through a bank or an independent payroll service

acceptable to Buyer,

(D) Seller has not, as of

the time Seller delivers to Buyer an Invoice Transmittal, or as of the time

Seller accepts any Advance from Buyer, filed a voluntary petition for relief

under the United States Bankruptcy Code or had filed against it an involuntary

petition for relief;

(E) If Seller owns, holds or

has any interest in, any copyrights (whether registered, or unregistered),

patents or trademarks, and licenses of any of the foregoing, such interest has

been disclosed to Buyer and is specifically listed and identified on a schedule

to this Agreement, and Seller shall immediately notify Buyer if Seller

hereafter obtains any interest in any additional copyrights, patents,

trademarks or licenses that are significant in value or are material to the

conduct of its business;

(F) Seller shall provide

Buyer, as soon as available, but no later than 30 days following each

Reconciliation Period, a company prepared balance sheet and income statement,

prepared under GAAP, consistently applied, covering Seller’s operations during

the period;

(G) On request by Buyer,

Seller will promptly furnish any information Buyer may reasonably request to

determine financial condition of Seller, including, but not limited to all of

Seller’s Obligations, and the condition of any of Seller’s receivables which

may include but are not limited to Purchased Receivables;

(H) Seller will maintain its

primary operating deposit accounts with Buyer;

(1) Seller shall provide

Buyer with, (i) as soon as available, but no later than 30 days following each

Reconciliation Period, a deferred revenue, deposits report, and an aged listing

of accounts receivable and accounts payable; (ii) as soon as available, but no

later than 120 days after the last day of Seller’s fiscal year, audited

consolidated financial statements prepared under GAAP, consistently applied,

together with an unqualified opinion on the financial statements from an

independent certified public accounting firm

 

 

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reasonably acceptable to

Buyer; (iii) a prompt report of any legal actions pending or threatened against

Seller that could result in damages or costs to Seller; and (iv) budgets, sales

projections, operating plans or other financial information Buyer reasonably

requests; and

(J) Seller shall provide

Buyer with, as soon as available, but no later than 30 days following each

Reconciliation Period, a Compliance Certificate, or on a more frequent or other

basis if and as requested by Buyer.

 

7.             Adjustments.  In the event of a breach of any of the representations, warranties, or

covenants set forth in Section 6.1, or in the event any Adjustment or

dispute is asserted by any Account Debtor, Seller shall promptly advise Buyer

and shall, subject to the Buyer’s approval, resolve such disputes and advise

Buyer of any adjustments. Unless the disputed Purchased Receivable is

repurchased by Seller and the full Repurchase Amount is paid, Buyer shall

remain the absolute owner of any Purchased Receivable which is subject to

Adjustment or repurchase under Section 4.2 hereof, and any rejected, returned,

or recovered personal property, with the right to take possession thereof at

any time. If such possession is not taken by Buyer, Seller is to resell it for

Buyer’s account at Seller’s expense with the proceeds made payable to Buyer.

While Seller retains possession of said returned goods, Seller shall segregate

said goods and mark them “property of Silicon Valley Bank.”

 

8.             Security

Interest.  To secure the

prompt payment and performance to Buyer of all of the Obligations, Seller

hereby grants to Buyer a continuing lien upon and security interest in all of

Seller’s now existing or hereafter arising rights and interest in the

following, whether now owned or existing or hereafter created, acquired, or

arising, and wherever located (collectively, the “Collateral”):

(A) All accounts,

receivables, contract rights, chattel paper, instruments, documents, letters of

credit, bankers acceptances, drafts, checks, cash, securities, and general

intangibles (including, without limitation, all claims, causes of action,

deposit accounts, guaranties, rights in and claims under insurance policies

(including rights to premium refunds), rights to tax refunds, copyrights,

patents, trademarks, rights in and under license agreements, and all other

intellectual property);

(B) All inventory, including

Seller’s rights to any returned or rejected goods, with respect to which Buyer

shall have all the rights of any unpaid seller, including the rights of

replevin, claim and delivery, reclamation, and stoppage in transit;

(C) All monies, refunds and

other amounts due Seller, including, without limitation, amounts due Seller

under this Agreement (including Seller’s right of offset and recoupment);

(D) All equipment,

machinery, furniture, furnishings, fixtures, tools, supplies and motor

vehicles; 

(E) All farm products,

crops, timber, minerals and the like (including oil and gas); 

(F) All accessions to,

substitutions for, and replacements of, all of the foregoing; 

(G) All books and records

pertaining to all of the foregoing; and

(H) All proceeds of the

foregoing, whether due to voluntary or involuntary disposition, including

insurance proceeds.

Seller is not authorized to

sell, assign, transfer or otherwise convey any Collateral without Buyer’s prior

written consent, except for the sale of finished inventory in the Seller’s

usual course of business. From time to time the Seller sells private

securities, consent for these securities will not be unreasonably withheld or

delayed. Proceeds of the sale of private securities are to be directed to the

lockbox, as set forth in Section 14 hereof. Seller agrees to sign UCC financing

statements, in a form acceptable to Buyer, and any other instruments and

documents requested by Buyer to evidence, perfect, or protect the interests of

Buyer in the Collateral. Seller agrees to deliver to Buyer the originals of all

instruments, chattel paper and documents evidencing or related to Purchased

Receivables and Collateral.

 

9.             Default.  The occurrence of any one or more

of the following shall constitute an Event of Default hereunder.

(A) Seller fails to pay any

amount owed to Buyer as and when due;

(B) There shall be commenced

by or against Seller any voluntary or involuntary case under the United States

Bankruptcy Code, or any assignment for the benefit of creditors, or appointment

of a receiver or custodian for any of its assets;

(C) Seller shall become insolvent or Seller is generally not paying its

debts as they become due;

(D) Any involuntary lien,

garnishment, attachment or the like is issued against or attaches to the

Purchased Receivables or any Collateral;

(E) Seller shall breach any

covenant, agreement, warranty, or representation shall constitute an immediate

default hereunder;

(F) Seller is not in

compliance with, or otherwise is in default under, any term of any document,

instrument or agreement evidencing a debt, obligation or liability of any kind

or character of Seller, now or hereafter existing, in favor of Buyer or any

division or affiliate of Silicon Valley Bank, regardless of whether such debt,

obligation or liability is direct or indirect, primary or secondary, joint,

several or joint and several, or fixed or

 

 

6

 

contingent, together with

any and all renewals and extensions of such debts, obligations and liabilities,

or any part thereof;

(G) An event of default

shall occur under any guaranty executed by any guarantor of the Obligations of

Seller to Buyer under this Agreement, or any material provision of any such

guaranty shall for any reason cease to be valid or enforceable or any such

guaranty shall be repudiated or terminated, including by operation of law;

(H) A default or event of

default shall occur under any agreement between Seller and any creditor of

Seller that has entered into a subordination agreement with Buyer;

(1) Any creditor that has

entered into a subordination agreement with Buyer shall breach any of the terms

of or not comply with such subordination agreement; or

(J) (i) There is a material

adverse change in the business, operations, or condition (financial or

otherwise) of the Seller, or (ii) there is a material impairment of the

prospect of repayment of any portion of the Obligations or (iii) there is a

material impairment of the value or priority of Buyer’s security interests in

the Collateral.

 

10.           Remedies

Upon Default.  Upon the

occurrence of an Event of Default, (1) without implying any obligation to buy

receivables, Buyer may cease buying receivables or extending any financial

accommodations to Seller; (2) all or a portion of the Obligations shall be, at

the option of and upon demand by Buyer, or with respect to an Event of Default

described in Section 9(B), automatically and without notice or demand, due and

payable in full; and (3) Buyer shall have and may exercise all the rights and

remedies under this Agreement and under applicable law, including the rights

and remedies of a secured party under the California Uniform Commercial Code,

all the power of attorney rights described in Section 5 with respect to all

Collateral, and the right to collect, dispose of, sell, lease, use, and realize

upon all Purchased Receivables and all Collateral in any commercial reasonable

manner. Seller and Buyer agree that any notice of sale required to be given to

Seller shall be deemed to be reasonable if given five (5) days prior to the

date on or after which the sale may be held. In the event that the Obligations

are accelerated hereunder, Seller shall repurchase all of the Purchased

Receivables as set forth in Section 4.4.

 

11.           Accrual of

Interest.  If any amount owed

by Seller hereunder is not paid when due, including, without limitation, amounts

due under Section 3.5, Repurchase Amounts, amounts due under Section 12, and

any other Obligations, such amounts shall bear interest at a per annum rate

equal to the per annum rate of the Finance Charges until the earlier of (i)

payment in good funds or (ii) entry of a final judgment thereof, at which time

the principal amount of any money judgment remaining unsatisfied shall accrue

interest at the highest rate allowed by applicable law.

 

12.           Fees, Costs

and Expenses; Indemnification.  The

Seller will pay to Buyer immediately upon demand all fees, costs and expenses

(including fees of attorneys and professionals and their costs and expenses)

that Buyer incurs or may from time to time impose in connection with any of the

following: (a) preparing, negotiating, administering, and enforcing this

Agreement or any other agreement executed in connection herewith, including any

amendments, waivers or consents in connection with any of the foregoing, (b)

any litigation or dispute (whether instituted by Buyer, Seller or any other

person) in any way relating to the Purchased Receivables, the Collateral, this

Agreement or any other agreement executed in connection herewith or therewith,

(c) enforcing any rights against Seller or any guarantor, or any Account Debtor,

(d) protecting or enforcing its interest in the Purchased Receivables or the

Collateral, (e) collecting the Purchased Receivables and the Obligations, and

(f) the representation of Buyer in connection with any bankruptcy case or

insolvency proceeding involving Seller, any Purchased Receivable, the

Collateral, any Account Debtor, or any guarantor. Seller shall indemnify and

hold Buyer harmless from and against any and all claims, actions, damages,

costs, expenses, and liabilities of any nature whatsoever arising in connection

with any of the foregoing.

 

13.            Severability, Waiver, and Choice of Law.  In the event that any provision

of this Agreement is deemed invalid by reason of law, this Agreement will be

construed as not containing such provision and the remainder of the Agreement

shall remain in full force and effect. Buyer retains all of its rights, even if

it makes an Advance after an Event of Default. If Buyer waives an Event of

Default, it may enforce a later Event of Default. Any consent or Waiver under,

or amendment of, this Agreement must be in writing. Nothing contained herein,

or any action taken or not taken by Buyer at any time, shall be construed at

any time to be indicative of any obligation or willingness on the part of Buyer

to amend this Agreement or to grant to Seller any waivers or consents. This

Agreement has been transmitted by Seller to Buyer at Buyer’s office in the

State of California and has been executed and accepted by Buyer in the State of

California. This Agreement shall be governed by and interpreted in accordance

with the internal laws of the State of California.

 

 

7

 

14.           Lockbox

Account Collection Services.  Seller

shall enter into a three party agreement (the “Lockbox Agreement”) with Buyer

and a lockbox provider (the “Lockbox Provider”). The Lockbox Agreement and

Lockbox Provider shall be acceptable to Buyer. Seller shall use the lockbox

address as the payment address on all invoices issued by Seller and shall

direct all its Account Debtors to remit their payments to the lockbox address.

The Lockbox Agreement shall provide that the Lockbox Provider shall remit all

collections received in the lockbox to Buyer. Upon Buyer’s receipt of such

collections, and provided that there does not then exist an Event of Default or

event that with notice, lapse or time or otherwise would constitute an Event of

Default, and subject to Buyer’s rights in the Collateral, Buyer agrees to remit

promptly to Seller the amount of the receivables collections it receives with

respect to receivables other than Purchased Receivables. It is understood and

agreed by Seller that this Section does not impose any affirmative duty on

Buyer to do any act other than to turn over such amounts. All such receivables

and collections are Collateral and in the event of Seller’s default hereunder,

Buyer shall have no duty to remit collections of Collateral and may apply such

collections to the obligations hereunder and Buyer shall have the rights of a

secured party under the California Uniform Commercial Code.

 

15.           Notices.  All notices shall be given to

Buyer and Seller at the addresses or faxes set forth on the first page of this

Agreement and shall be deemed to have been delivered and received: (a) if

mailed, three (3) calendar days after deposited in the United States mail,

first class, postage pre–paid, (b) one (1) calendar day after deposit

with an overnight mail or messenger service; or (c) on the same date of

confirmed transmission if sent by hand delivery, telecopy, telefax or telex.

 

16.           Jury

Trial.  SELLER AND BUYER EACH

HEREBY (a) WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL ON ANY CLAIM OR ACTION

ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY RELATED AGREEMENTS, OR

ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY; (b) RECOGNIZE AND AGREE

THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER

INTO THIS AGREEMENT; AND (c) REPRESENT AND WARRANT THAT IT HAS REVIEWED THIS

WAIVER, HAS DETERMINED FOR ITSELF THE NECESSITY TO REVIEW THE SAME WITH ITS

LEGAL COUNSEL, AND KNOWINGLY AND VOLUNTARILY WAIVES ALL RIGHTS TO A JURY TRIAL.

 

17.           Term and

Termination.  The term of

this Agreement shall be for one (1) year from the date hereof, and from year to

year thereafter unless terminated in writing by Buyer or Seller. Seller and

Buyer shall each have the  right to

terminate this Agreement at any time. Notwithstanding the foregoing, any

termination of this Agreement shall not affect Buyer’s security interest in the

Collateral and Buyer’s ownership of the Purchased Receivables, and this

Agreement shall continue to be effective, and Buyer’s rights and remedies

hereunder shall survive such termination, until all transactions entered into

and Obligations incurred hereunder or in connection herewith have been–completed

and satisfied in full.

 

18.             Titles and Section Headings.  The titles and section headings

used herein are for convenience only and shall not be used in interpreting this

Agreement.

 

19.           Other

Agreements.  The terms and

provisions of this Agreement shall not adversely affect the rights of Buyer or

any other division or affiliate of Silicon Valley Bank under any other

document, instrument or agreement. The terms of such other documents,

instruments and agreements shall remain in full force and effect

notwithstanding the execution of this Agreement. In the event of a conflict

between any provision of this Agreement and any provision of any other

document, instrument or agreement between Seller on the one hand, and Buyer or

any other division or affiliate of Silicon Valley Bank on the other hand, Buyer

shall determine in its sole discretion which provision shall apply. Seller

acknowledges specifically that any security agreements, liens and/or security

interests currently securing payment of any obligations of Seller owing to

Buyer or any other division or affiliate of Silicon Valley Bank also secure

Seller’s obligations under this Agreement, and are valid and subsisting and are

not adversely affected by execution of this Agreement. Seller further acknowledges

that (a) any collateral under other outstanding security agreements or other

documents between Seller and Buyer or any other division or affiliate of

Silicon Valley Bank secures the obligations of Seller under this Agreement and

(b) a default by Seller under this Agreement constitutes a default under other

outstanding agreements between Seller and Buyer or any other division or

affiliate of Silicon Valley Bank.

 

 

8

 

IN WITNESS WHEREOF, Seller and Buyer have

executed this Agreement on the day and year above written.

 

	

  SELLER: ZAMBA CORPORATION

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  By

  	

  /s/ Michael H. Carrel

  
	

  Title

  	

  EVP & CFO

  
	

   

  
	

   

  
	

   

  
	

  BUYER: SILICON VALLEY BANK

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  By

  	

  /s/ Ryan Dammeyer

  
	

  Title

  	

  V.P.

  

 

 

9

 

EXHIBIT “A”

 

TO

FINANCING STATEMENT AND SECURITY AGREEMENT

 

This FINANCING STATEMENT and SECURITY

AGREEMENT covers the following types or items of property (in addition to, and

without limiting the types of property set forth on page 1 hereof):

 

A)                                  All accounts,

receivables, contract rights, chattel paper, instruments, documents, letters of

credit, bankers acceptances, drafts, checks, cash, securities, deposit

accounts, and general intangibles (including, without limitation, all claims,

causes of action, guaranties, rights in and claims under insurance policies

(including rights to premium refunds), rights to tax refunds, copyrights,

patents, trademarks, rights in and under license agreements, and all other

intellectual property);

 

B)                                    All inventory,

including Seller’s rights to any returned or rejected goods, with respect to

which Buyer shall have all the rights of any unpaid seller, including the

rights of replevin, claim and delivery, reclamation, and stoppage in transit;

 

C)                                    All monies,

refunds and other amounts due Seller, including, without limitation, amounts

due Seller under this Agreement (including Seller’s right of offset and

recoupment);

 

D)                                   All equipment,

machinery, furniture, furnishings, fixtures, tools, supplies and motor

vehicles;

 

E)                                     All farm

products, crops, timber, minerals and the like (including oil and gas),

 

F)                                     All accessions

to, substitutions for, and replacements of, all of the foregoing;

 

G)                                    All books and

records pertaining to all of the foregoing; and

 

H)                                   All proceeds of

the foregoing, whether due to voluntary or involuntary disposition, including

insurance proceeds.

 

 

 

 

	

  Initials

  	

   

  

 

 

 

10

Silicon

Valley Bank

3003 Tasman Drive

Santa Clara, California 95054

(408) 654–1000 – Fax (408) 980–6410

 

CERTIFICATION of OFFICERS

 

The undersigned, being all the officers of Zamba

Corporation, a Delaware corporation (the “Corporation”), hereby

certify to Silicon Valley Bank (“SVB”) that:

 

                1.             The correct name of the Corporation

is Zamba Corporation, as set forth in the Articles of Incorporation.

 

                2.             The Corporation was incorporated

on                   ,

under the laws of the State of Delaware, and is in good standing under such

laws.

 

                3.             The Corporation’s place of business

and chief executive office being the place at which the Corporation maintains

its books and records pertaining to accounts, accounts receivables, contract

rights, chattel paper, general intangibles, instruments, documents, inventory,

and equipment, is located at:

 

3033

Excelsior Boulevard, Suite 200

Minneapolis,

Minnesota 55416

 

                4.             The Corporation has other places of

business at the following addressees:

 

None

 

 

                5.             There is no provision in the

Certificate of Incorporation, Articles of Incorporation, or Bylaws of the

Corporation, or in the laws of the State of its incorporation, requiring any

vote or consent of shareholders to authorize ‘the sale of receivables or the

grant of a security interest in any assets of the Corporation. Such power is

vested exclusively in the Corporation’s Board of Directors.

 

                6.             The officers of the Corporation,

and their respective titles and signatures are as follows:

 

	

  President:

  
	

   

  
	

  (Signature)

  
	

   

  
	

  Vice President:

  
	

   

  
	

  (Signature)

  
	

   

  
	

  Secretary:

  
	

   

  
	

  (Signature)

  
	

   

  
	

  Treasurer:

  
	

   

  
	

  (Signature)

  
	

   

  
	

  Other Officer:

  Title:

  
	

   

  
	

  (Signature)

  

 

 

11

 

                7.             Except as indicated in this

paragraph 7, each of the officers listed in paragraph 6 has signatory powers

with respect to all the Corporation’s transactions with SVB.  Explanation of exceptions:

 

                8.             The undersigned shall give SVB

prompt written notice of any change or amendment with respect to any of the

foregoing.  Until such written notice is

received by SVB, SVB shall be entitled to rely upon the foregoing in all

respects.

 

                IN

WITNESS WHEREOF, the undersigned have executed this Certification of Officers

on 07/29/02.

 

	

  President:

  	

   

  
	

  Vice President:

  	

   

  
	

  Secretary:

  	

   

  
	

  Treasurer:

  	

   

  

 

 

12

Silicon

Valley Bank

3003 Tasman Drive

Santa Clara, California 95054

(408) 654–1000 – Fax (408) 980–6410

 

SECRETARY’S CERTIFICATE OF RESOLUTION

 

                The

undersigned, as Secretary of Zamba Corporation, a Delaware corporation (the

“Corporation”), hereby certifies to Silicon Valley Bank that at a meeting duly

convened at which a quorum was present the following resolutions were adopted

by the Board of Directors of the Corporation and that such resolutions have not

been modified, amended, or rescinded in any respect and are in full force and

effect as of today’s date.

 

                RESOLVED,

that this corporation be and hereby is authorized to sell this corporation’s

accounts receivable to Silicon Valley Bank, and to grant Silicon Valley Bank a

security interest in this corporation’s assets, including, without limitation,

accounts, accounts receivable, contract rights, chattel paper, general intangibles,

instruments, documents, letters of credit, drafts, inventory and equipment,

presently owned or hereafter acquired and proceeds and products of the

foregoing (the “ Collateral,” as defined in the Accounts Receivable Purchase

Agreement).

 

                RESOLVED,

that this corporation be and hereby is authorized and directed to execute and

deliver certain agreements in connection with the sale of receivables, and

granting of security interests in the Collateral to Silicon Valley Bank

including, without limitations, a Accounts Receivable Purchase Agreement and

UCC-1 financing statement.

 

                RESOLVED,

that the following named officers of this corporation (“Authorized Officers”)

be, and any of them hereby are, authorized, empowered, and directed to execute

and deliver to Silicon Valley Bank on behalf of this corporation all such

further agreements and instruments as may be deemed necessary or advisable in

order to fully effectuate the purposes and intent of the foregoing resolutions.

 

	

  Print

  Names of Authorized Officers:

  	

   

  	

  Title:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  

 

                                RESOLVED, that the Secretary or Assistant Secretary of this corporation

be, and hereby is authorized, empowered and directed to certify to the

passage of the foregoing resolutions under the seal of this corporation.

 

IN WITNESS WHEREOF, the undersigned has duly

executed this Certificate this 29th day of July, 2002.

 

	

   

  
	

  Signature

  
	

   

  
	

  Secretary of Zarnba

  Corporation

  

 

 

13

 

 

Consent and

Release

 

Silicon Valley Bank sincerely appreciates

your business and would like to publicize your Company recently joining our

“family”.  In order to do so, kindly

complete the following and return to us.

 

Zamba Corporation (“Client”) consents to and

releases Silicon Valley Bank (“Bank”) from any liability in its use of (check

all that apply):

 

	

  Company Name

  	

   

  
	

   

  	

   

  
	

  Individual Name

  	

   

  
	

   

  	

   

  
	

  Quotation

  	

   

  
	

   

  	

   

  
	

  Photograph

  	

   

  
	

   

  	

   

  
	

  Client Reference

  	

   

  
	

   

  	

   

  
	

  Type of Credit Facility

  	

   

  
	

   

  	

   

  
	

  Amount of Credit Facility

  	

   

  

 

in Bank’s written and oral presentations,

advertising and promotional materials and Internet Web site.

 

Client Name:

 

Zamba

Corporation

 

 

	

   

  
	

  Signature

  
	

   

  
	

   

  
	

  Name and Title

  
	

   

  
	

   

  
	

  Date

  

 

 

 

14EXHIBIT 10.44

 

LOAN

AGREEMENT

 

THIS LOAN AGREEMENT

(“Agreement”), is made and entered into this 29th day of May, 2002, by and

among American Chartered Bank, an Illinois banking association (“Bank”),

Electric City Corp., a Delaware corporation (“Electric”), Switchboard

Apparatus, Inc., a Delaware corporation (“Switchboard”), and Great Lakes

Controlled Energy Corporation, a Delaware corporation (“Great Lakes”,

collectively with Electric and Switchboard, “Borrowers” and each individually a

“Borrower”).

 

R E C I T A

L S

 

A.            Borrowers, now and from time

to time hereafter, may request loans, advances, extensions of credit and/or

other financial accommodations from Bank; and

 

B.            Bank has agreed to lend

monies and/or make advances, extensions of credit or other financial

accommodations to, on behalf of or for the benefit of Borrowers pursuant to the

terms and conditions set forth herein. 

Capitalized terms in this Agreement which are not otherwise defined

shall have the meanings set forth in Section 2.

 

NOW THEREFORE, in

consideration of any loan, advance, extension of credit and/or other financial

accommodation at any time made by Bank to or for the benefit of Borrowers, and

of the promises set forth herein, the parties hereby agree as follows:

 

1.             CREDIT FACILITIES.  Subject to and upon the terms and conditions

herein set forth, Bank agrees to make available to Borrowers the following

credit facilities:

 

1.1           Revolving Credit.

 

(a)   Borrowing Capacity.  Bank shall make available to Borrowers, a secured revolving credit

facility (the “Revolving Credit”) with a maximum principal amount at any one

time outstanding equal to the lesser of (i) $2,000,000.00 or (ii) the Borrowing

Base.  The Revolving Credit shall be

subject to all of the terms hereof, may be availed of by Borrowers from time to

time, may be repaid by Borrowers and may be availed of by Borrowers again.

 

(b)   Revolving Note.  The Revolving Credit shall be evidenced by a Revolving Note of

Borrowers (as amended from time to time, the “Revolving Note”).

 

 

(c)   Interest Rate.  All advances under the Revolving Credit shall bear interest

(computed for the actual number of days elapsed on the basis of a 360-day year)

until maturity (whether by lapse of time, acceleration or otherwise) at the

Revolving Credit Interest Rate.

 

(d)   Interest and Principal Payments.  Borrowers shall jointly and severally make

monthly payments of all accrued and unpaid interest under the Revolving Credit.

The monthly interest payments shall be due on the first day of each month

(commencing June 1, 2002) until April 1, 2003. 

All outstanding principal and all accrued and unpaid interest under the

Revolving Credit shall be due and payable on April 30, 2003.

 

(e)   Advances.  Borrowers shall give Bank notice prior to 2:00 p.m. (Chicago

time) on the date it requests that any advance be made to it under the

Revolving Credit.  The proceeds of each

advance under the Revolving Credit shall be made available to Borrowers at the

office of Bank.  As a condition of any

advance under the Revolving Credit, Borrowers shall deliver to Bank such

certifications and other materials as may be required by Bank including,

without limitation, a current Borrowing Base certificate in a form satisfactory

to Bank.

 

(f)    Unused Line Fee.  Borrowers shall pay to Bank an unused commitment fee on the

average unused balance of the Revolving Credit at the per annum rate of 0.50%

on the amount by which $2,000,000 exceeds the average principal amount of the

Revolving Credit outstanding from time to time (computed on a daily basis.  This fee shall be payable on a quarterly

basis and shall be due within 30 days following the end of each calendar

quarter commencing June 30, 2002; provided, however, upon the

maturity date of the Revolving Credit any fees due hereunder shall become

immediately due and payable at maturity.

 

1.2           Term Loan.

 

(a)   Principal Amount; Term Note.  Bank shall provide to Borrowers a secured

term loan in the amount of $400,000.00 (the “Term Loan”).  The Term Loan shall be evidenced by a term

note of Borrowers (as amended from time to time, the “Term Note”).

 

(b)   Interest Rate.  The Term Loan shall bear interest (computed for the actual number

of days elapsed on the basis of a 360-day year) at the Term Interest Rate.

 

(c)   Interest and Principal Payments.  Borrowers shall jointly and severally make

equal consecutive monthly principal installments of $8,500.00, plus monthly

payments of all accrued and unpaid interest. 

The monthly principal and

 

2

 

interest payments shall be due on the first day of each month

(commencing June 1, 2002) until April 1, 2004. 

A final payment of all outstanding principal and all accrued and unpaid

interest shall be due and payable on April 30, 2004.

 

(d)   Prepayment.  Borrowers may prepay amounts outstanding under the Term Loan, in

whole or in part, from time to time as Borrowers may desire in the minimum

amount of $10,000 or an integral multiple thereof, without penalty.  Borrowers shall give Bank one business day’s

notice prior to such repayment.

 

1.3           Mortgage Loan.

 

(a)   Principal Amount; Mortgage Note.  Bank shall provide to Borrowers a mortgage

loan (the “Mortgage Loan”) in the amount of $735,000.00.  The Mortgage Loan shall be evidenced by a

Mortgage Note of Borrowers (as amended from time to time, the “Mortgage Note”).

 

(b)   Interest Rate.  The Mortgage Loan shall bear interest (computed for the actual

number of days elapsed on the basis of a 360-day year) at the Mortgage Loan

Interest Rate.

 

(c)   Interest and Principal Payments.  Borrowers shall jointly and severally make

equal consecutive monthly principal installments of $3,000.00, plus monthly

payments of all accrued and unpaid interest. 

The monthly principal and interest payments shall be due on the first

day of each month (commencing June 1, 2002) until April 1, 2004.  A final payment of all outstanding principal

and all accrued and unpaid interest shall be due and payable on April 30, 2004.

 

(d)   Prepayment.  Borrowers may prepay amounts outstanding under the Term Loan, in

whole or in part, from time to time as Borrowers may desire in the minimum

amount of $10,000 or an integral multiple thereof, without penalty.  Borrowers shall give Bank one business day’s

notice prior to such prepayment.

 

1.4           Late Charge.  Bank may, at its sole option, assess a late

charge equal to 5.0% of the amount of any delinquent payment which is not

received within 5 days after such payment is due to cover the additional

expense involved in handling such payment, which charge shall constitute

additional indebtedness, payable in immediately available funds on demand.

 

1.5           Security.  As security for the payment of the Revolving

Credit, the Term Loan and the Mortgage Loan, Borrowers have concurrently

herewith granted to Bank a first security interest in all assets of Borrowers

including, but not limited to, all of Borrowers’ accounts receivable,

inventory, equipment, trademarks, general intangibles, insurance and the

proceeds therefrom and any and all other assets and property (real and

personal) of Borrowers, wherever located, and all the products and proceeds

therefrom,

 

3

 

whether now existing

or hereafter acquired, including a first priority mortgage and assignment of

rents on the land and building located at the Property.

 

1.6           Lockbox.  All checks, monies, drafts and proceeds of

Collateral shall, at Bank’s option, be collected through a lock box or be

immediately deposited in kind by Borrowers in a depository account in Bank’s

name.  Upon request of Bank, all

proceeds deposited in such lock box or depository account shall be applied to

the outstanding principal balance of the credit facilities hereunder one

business day after receipt of such payment. 

Each Borrower shall execute any agreements or instruments necessary, in

Bank’s discretion, to effect the foregoing.

 

2.             DEFINED TERMS.

 

2.1           Affiliate.  The term “Affiliate” shall mean any person,

firm, corporation or entity (herein collectively called a “Person”) directly or

indirectly controlling or controlled by, or under direct or indirect common

control with, another Person.  A Person

shall be deemed to control another Person for the purposes of this definition

if such first Person possesses, directly or indirectly, the power to direct, or

cause the direction of, the management and policies of the second Person,

whether through the ownership of voting securities, common directors, trustees

or officers, by contract or otherwise. 

Notwithstanding anything to the contrary, the term “Affiliate” shall not

include EP Power Finance, L.L.C., Newcourt Capital USA, Inc., Morgan Stanley

Dean Witter Equity Funding, Inc., Originators Investment Plan, L.P., Duke

Capital Partners, LLC, and Joe Marino.

 

2.2           Borrowing Base.  The term “Borrowing Base” shall mean (i) 70%

of the face amount of Eligible Receivables of Electric, and (ii) 80% of the

face amount of Eligible Receivables of Switchboard and Great Lakes.  The Borrowing Base shall be computed only as

against and on so much of the Eligible Receivables as are included in the

certifications or other appropriate evidence, in the Bank’s sole discretion,

from time to time furnished by Electric and Switchboard to Bank pursuant

hereto.  Notwithstanding anything to the

contrary, the Eligible Receivables of Great Lakes shall not be included in the Borrowing

Base until Bank receives the field exam results for Great Lakes and Bank is

satisfied with such results, in its sole discretion.

 

2.3           Collateral.  The term “Collateral” shall mean all

property (personal and real) from time to time subject to the security interest

granted to Bank pursuant to the Loan Documents.

 

2.4           Current Assets.  The term “Current Assets” shall mean the sum

of all cash and cash equivalents, accounts, inventory and income tax refunds

due and all other assets considered current in accordance with generally

accepted accounting principles.

 

4

 

2.5           Current Liabilities.  The term “Current Liabilities” shall mean

all accounts payable, all accrued and unpaid liabilities due and payable within

12 months, all promissory notes or the portions thereof due and payable within

12 months, all accrued and unpaid income or taxes, and all other liabilities

considered current in accordance with generally accepted accounting principles.

 

2.6           Eligible Receivables.  The term “Eligible Receivables” shall mean

an Account (as defined in the Uniform Commercial Code from time to time in

effect in the State of Illinois) arising out of the sale of inventory or the

rendering of services in the ordinary course of Electric and Switchboard’s

business less any discounts, credits, allowances and reserves for returns in

accordance with industry custom and practice and generally accepted accounting

principles consistently applied, which meets the following requirements at all

times:  (a) it is evidenced by an

invoice rendered to the account debtor thereunder and is due and payable within

90 days after the date of the invoice; (b) it is not outstanding for more than

90 days after the date of the invoice therefore; (c) it is not subject to any

assignment, claim, lien, security interest or encumbrance whatsoever, other

than the perfected security interest of Bank; (d) it is a valid, legally

enforceable and unconditional obligation of the account debtor thereunder, and

is not subject to set off, counterclaim, credit, allowance (other than trade

allowances granted in the ordinary course of business) or adjustment by the

account debtor thereunder and such account debtor has not refused to accept

and/or has not returned or offered to return any of the inventory which is

subject of such Account or, in the case of services rendered, has not contested

the adequacy of services which is the subject of the Account; (e) there are no

proceedings or actions which are then threatened or pending against the account

debtor or any other facts or circumstances, as reasonably determined by Bank,

which might result in any material adverse change in the account debtor’s

financial condition or in its ability to pay any account in full; (f) the account

debtor is not a director, officer, employee, agent or Affiliate of Borrower;

(g) the account debtor is a resident or citizen of and is located within the

United States of America or has established a letter of credit to support the

purchase of inventory or services of Electric on terms acceptable to Bank in

its sole discretion; (h) it does not arise out of a contract or order which, by

its terms, forbids or makes void or unenforceable the assignment by Electric to

Bank of the Account arising with respect thereto; (i) it is not an Account of

an account debtor, 25% or more of the Accounts of such account debtor have been

outstanding for more than 90 days following the invoice date therefor; (j) it

is not an Account arising from inventory sold on consignment, “sale on

approval” or “sale or return”; and (k) is not an Account with respect to which

the State in which the account debtor thereof is located requires the

applicable Borrower, as a condition precedent to commencing litigation in such

State, to either (A) obtain a certificate of qualification to do business in

such State or (B) file a notice of business activity in such State, unless (1)

the applicable Borrower has taken all such required actions, (2) such failure

may, in the Bank’s sole discretion, be cured retroactively, or (3) in Bank’s

sole discretion, the applicable Borrower is exempt from such requirements.  Any Account which is at any time an Eligible

Receivable, may cease to be an Eligible Receivable if, at any time, it fails to

satisfy any of the requirements of this Section.

 

5

 

2.7           Environmental Laws.  The term “Environmental Laws” shall mean any

applicable federal, state, county or local statutes, laws, regulations, rules,

ordinances, codes, licenses or permits of any governmental authorities relating

to environmental matters including, but not limited to, the Clean Air Act, the

Federal Water Pollution Control Act of 1972, the Resource Conservation and

Recovery Act of 1976, the Comprehensive Environmental Response, Compensation

and Liability Act of 1980, as amended by the Superfund Amendments and

Reauthorization Act of 1986 (and any amendments or extensions thereof), and the

Toxic Substances Control Act.

 

2.8           Event of Default.  The term “Event of Default” shall have the

meaning assigned to it in Section 6.1.

 

2.9           Liabilities.  The term “Liabilities” shall mean all

obligations and liabilities of Borrowers to Bank howsoever arising, whether

primary, secondary, direct, contingent, fixed or otherwise, heretofore, now

and/or from time to time hereafter owing, due or payable, however evidenced,

credited, incurred, owing and however arising under this Agreement, the other

Loan Documents or otherwise.

 

2.10         Loan Documents.  The term “Loan Documents” shall mean this

Agreement, the Notes, the Mortgage, and all other documents, instruments and

agreements in connection with the Loans, as the same are hereafter amended from

time to time.

 

2.11         Loans.  The term “Loans” shall mean the Revolving

Credit, the Term Loan and the Mortgage Loan, as the same are hereafter amended

from time to time.

 

2.12         Mortgage Loan

Interest Rate.  The term

“Mortgage Loan Interest Rate” shall mean the variable per annum rate determined

by adding 0.5% to the Prime Rate from time to time in effect and after an Event

of Default or maturity (whether by lapse of time, acceleration or otherwise)

until paid in full, the variable per annum rate determined by adding 3.5% to

the Prime Rate from time to time in effect.

 

2.13         Net Working Capital.  The term “Net Working Capital” shall mean

the sum of the excess of the Current Assets of the Borrowers over the Current

Liabilities of Borrowers.

 

2.14         Notes.  The term “Notes” shall mean the Revolving

Note, the Term Note and the Mortgage Note as the same are hereafter amended

from time to time.

 

2.15         Payables Report.  The term “Payables Report” shall mean a

monthly report that includes, as of the last business day of the preceding

calendar month, an aged trial balance of Borrowers’ accounts payable, a listing

of the names and addresses of all applicable account creditors and such other

information as may be required by Bank.

 

6

 

2.16         Prime Rate.  The term “Prime Rate” shall mean the rate at

any time and from time to time most recently announced or published by The

Wall Street Journal, Midwest Edition.

 

2.17         Property.  The term “Property” shall mean the real

property located at 1280 Landmeier Road, Elk Grove Village, Illinois 60007.

 

2.18         Receivables Report.  The term “Receivables Report” shall mean a

monthly report that includes, as of the last business day of the preceding

calendar month, an aged trial balance of Accounts, the invoice date thereof, a

listing of the names and addresses of all applicable account debtors, an

indication as to which Accounts listed therein do not qualify as Eligible

Receivables hereunder and such other information as may be required by Bank.

 

2.19         Revolving Credit

Interest Rate.  The term

“Revolving Credit Interest Rate” shall mean the variable per annum rate

determined by adding 0.25% to the Prime Rate from time to time in effect and

after an Event of Default or maturity (whether by lapse of time, acceleration

or otherwise) until paid in full, the variable per annum rate determined by adding

3.25% to the Prime Rate from time to time in effect.

 

2.20         Tangible Net Worth.  The term “Tangible Net Worth” shall mean the

sum of the excess of total assets of Borrowers over total liabilities of

Borrowers.  For purposes hereof, total

assets and total liabilities shall each be determined in accordance with

generally accepted accounting principles consistently applied, deducting,

however, from the determination of total assets, all prepaid expenses and all

assets which would be classified as intangible assets under generally accepted

accounting principles including, without limitation, goodwill, patents,

trademarks, trade names, copyrights, franchises and deferred charges (such as

unamortized debt discount and expense, organization costs and deferred research

and development expense) and similar assets and excluding therefrom the

write-up of assets above cost and any and all assets created by loans to

shareholders, directors, officers, employees and agents of Borrowers or

Affiliates of Borrowers.

 

2.21         Term Interest Rate.  The term “Term Interest Rate” shall mean the

variable per annum rate determined by adding 0.5% to the Prime Rate from time

to time in effect and after an Event of Default or maturity (whether by lapse

of time, acceleration or otherwise) until paid in full, the variable per annum

rate determined by adding 3.5% to the Prime Rate from time to time in effect.

 

7

 

3.             CONDITIONS OF BORROWING.  Notwithstanding any other provision of this

Agreement, Bank shall not be required to disburse or make (and may cease to

make available) all or any portion of the Loans if any of the following

conditions shall have occurred:

 

3.1           Loan Documents.  Borrowers shall have failed to execute

and/or deliver to the Bank any of the following Loan Documents, all of which

must be satisfactory to the Bank and the Bank’s counsel in form, substance and

execution:

 

(a)   Loan Agreement.  This Agreement executed by Borrowers.

 

(b)   Revolving Note.  The Revolving Note executed by Borrowers.

 

(c)   Term Note.  The Term Note executed by Borrowers.

 

(d)   Mortgage Note.  The Mortgage Note executed by Borrowers.

 

(e)   Mortgage.  The Mortgage, Security Agreement, Assignment of Rents, and Leases

and Fixture Filings dated as of the date of this Agreement, executed by

Electric (the “Mortgage”).

 

(f)    Environmental Indemnity Agreement.  The Environmental Indemnity Agreement dated

as of the date of this Agreement, executed by Borrowers.

 

(g)   Collateral Assignment of Leases - Switchboard.  The Collateral Assignment of Leases dated as

of the date of this Agreement, executed by Switchboard and Broadview Property

Partnership, an Illinois general partnership.

 

(h)   Collateral Assignment of Leases.  The Collateral Assignment of Leases dated as

of the date of this Agreement, executed by Great Lakes and Eugene Borucki and

Denis Enberg.

 

(i)    Security Agreements.  The Security Agreements dated as of the date of this Agreement,

executed by each of the Borrowers (the “Security Agreements”).

 

(j)    Landlord Lien Waivers.  Those certain Landlord Lien Waivers from all landlords who lease

real property to Borrowers.

 

(k)   Additional Documents.  Such other financial statements, schedules, notes, agreements and

other documents which are provided for hereunder or which the Bank shall

request.

 

8

 

3.2           Event of Default.  Any Event of Default, or any event which,

with notice or lapse of time, or both, would constitute an Event of Default,

shall have occurred and be continuing.

 

3.3           Adverse Changes.  A material adverse change in the financial

condition or affairs of the Borrowers, as determined in the Bank’s sole

discretion, shall have occurred.

 

3.4           Litigation.  Any litigation or governmental proceeding

shall have been instituted against any Borrower which in the discretion of the

Bank, reasonably exercised, adversely affects the financial condition or

continued operation of any Borrower.

 

3.5           Representations and

Warranties.  Any

representation or warranty of the Borrowers’ contained herein or in any Loan

Document shall be untrue or incorrect in any material respect.

 

3.6           Bank’s Attorneys’

Fees.  The

Borrowers have not paid to Horwood Marcus & Berk Chartered (“HMB”), Bank’s

legal counsel, HMB’s legal fees and expenses incurred in connection with the

Loans, payable on or before the execution of this Agreement by the Bank.

 

3.7           Due Diligence.  Bank shall have completed its due diligence

and is not satisfied with the results thereof, in its sole discretion.  Such due diligence includes, but is not

limited to, an appraisal on the Property and field exam.

 

4.             REPRESENTATIONS AND

WARRANTIES OF BORROWERS.  As

of the date hereof (and as of the date of each advance hereunder) Borrowers

represent and warrant to Bank as follows:

 

4.1           Organization;

Ownership of Borrowers.  Each

Borrower is an entity duly formed, validly existing and in good standing under

the laws of the state in which such Borrower is incorporated/formed and is duly

qualified and licensed to do business and is in good standing as a foreign

corporation in all other jurisdictions where the character of its properties or

the nature of its activities makes such qualification necessary, except where

not being qualified or licensed to do business in a jurisdiction does not have

a material adverse effect.  Except as

provided for on Schedule 4.1, Borrowers own no capital stock of any

corporation or any interest in any partnership, joint venture or other

entity.  Schedule 4.1 sets forth

each Borrower’s state issued organizational identification number, the legal

and beneficial owners of the issued and outstanding capital stock/interests of

Switchboard and Great Lakes and the amount and type of capital stock held by

each such person.  Schedule 4.1(A) sets

forth the amount of capital stock held by each of the officers and directors of

Electric and the shareholders known to Electric to own 5% or more of the

capital stock of Electric.  Except as

provided for on Schedule 4.1(A), there are no options, warrants or other

rights of any individual or entity to acquire any interest in any Borrower or

Borrower’s capital stock.  The exact

legal name and state 

 

9

 

of

incorporation/formation of each Borrower is as set forth in the preamble of

this Agreement, and Borrowers currently do not conduct, nor have they in the

last five years conducted, business under any other name or trade name, except

as set forth on Schedule 4.1.

 

4.2           Duties and Nature of

Obligations.  Borrowers

are authorized to execute, deliver and perform all of their duties and

obligations under the Loan Documents, and upon the execution and delivery of

the Loan Documents, such documents shall constitute the legal, valid and

binding obligations of Borrowers, enforceable in accordance with their

respective terms, except to the extent the same are limited by bankruptcy,

insolvency, reorganization, moratorium or similar laws affecting creditors’

rights generally or by general equitable principles.  Except as provided for on Schedule 4.2, the execution and

delivery of the Loan Documents by Borrowers and the performance by Borrowers of

the obligations under the Loan Documents do not constitute the breach of any

provision contained in Borrowers’ articles of incorporation, shareholder

agreement or bylaws or any agreement to which any Borrower is now a party or by

which its assets are bound and do not violate any applicable order, decree,

restriction, regulation or law.

 

4.3           Liens and

Encumbrances.  Except as

set forth on Schedule 4.3 and other than security interests in favor of

Bank, each Borrower is lawfully possessed and the sole owner of its assets free

and clear of any security interest, lien or encumbrance of any kind or

character, legal or equitable.

 

4.4           Licenses.  Borrowers have and are current and in good

standing with respect to all approvals, permits, licenses, certificates,

inspections, consents and franchises necessary to conduct their business as

heretofore conducted by them and to own or lease and operate the properties now

owned or leased by them.

 

4.5           Taxes.  Each Borrower has duly filed all federal,

state and other tax returns which are required by law to be filed by it and has

paid all taxes and assessments payable by it, which have become due, except for

tax returns for which such Borrower has secured extensions to file, except for

those contested in good faith and adequately disclosed and fully provided for

on the consolidated financial statements of such Borrower in accordance with

generally accepted accounting principles. 

Each Borrower has at all times paid, or has provided adequate reserves

to for the payment of, all United States federal, state and other income taxes

applicable for all prior fiscal years and for the current fiscal year to

date.  Borrowers have not entered into

an agreement or waiver or been requested to enter into an agreement or waiver

extending any statute of limitations relating to the payment or collection of

taxes of any Borrower, and Borrowers are not aware of any circumstances that

would cause the taxable years or other taxable periods of any Borrower not to

be subject to the normally applicable statute of limitations.

 

4.6           Litigation.  Except as set forth on Schedule 4.6,

there is no litigation or any governmental proceeding pending, nor to the

knowledge of any Borrower threatened, 

 

10

 

against any Borrower

which, if adversely determined, would result in any adverse change in the

financial condition, business, operations or properties of any Borrower.

 

4.7           Financial Statements.  Each balance sheet, profit and loss

statement and statement of cash flows and each interim financial statement

heretofore furnished to Bank by Borrowers reflects the financial condition of

Borrowers as of the date thereof and the results of operations of Borrowers for

the period covered thereby in accordance with generally accepted accounting

principles in effect from time to time. 

Borrowers have no contingent liabilities which are material to them

other than as indicated on said financial statements and since the date of such

financial statements there has been no material adverse change in the financial

condition, properties, business or operations of Borrowers.

 

4.8           Collateral.  All of the Collateral is currently located

and maintained at the location(s) set forth on Schedule 4.8 and has been

located at such location(s) for the 4-month period ending as of the date

hereof, or in the case of collateral acquired by Borrowers during the 4-month

period ending as of the date hereof, for the entire time such collateral has

been in the possession of Borrowers.

 

4.9           ERISA.  Each Borrower is in compliance in all

material respects with the Employee Retirement Income Security Act of 1974

(“ERISA”) to the extent applicable to it and has received no notice to the

contrary from the Pension Benefit Guaranty Corporation (“PBGC”) or any other

governmental entity or agency; and, except as to the “Union Plan” (as defined

below), each Borrower would have no liability to PBGC in respect of unfunded

employee benefit plan liabilities if all employee benefit plans covering any of

the officers or employees of any Borrower were terminated as of the date

hereof.  With respect to the “Union

Plan,” Electric and Switchboard contribute $1.00 per hour for each hour worked

by eligible Unit Assemblers into a defined contribution pension plan (the

“Union Plan”) established between the Electrical Contractors Association and

Local No. 134, International Brotherhood of Electrical Workers.  Eligible Unit Assemblers are those who have

two or more years of service with Electric or Switchboard or who have combined

service of three or more years with companies whose similar employees are

represented by Local No. 134.  Borrowers

have made all required contributions to the Union Plan.

 

4.10         Burdensome Contracts

with Affiliates.  Except as

provided for on Schedule 4.10, Borrowers are not a party to any

contract, agreement, lease or business arrangement with an Affiliate on terms

and conditions which are less favorable to Borrowers than would be usual and

customary in similar contracts, agreements or business arrangements between

Persons not affiliated with each other.

 

4.11         Environmental.  Borrowers’ business operations and the

ownership, use, maintenance and operation of their businesses and property

(personal and real) have been, at all times, in material compliance with all

Environmental Laws.

 

11

 

4.12         Compliance with Law.  Borrowers are in compliance with all laws,

rules and regulations, determinations of any arbitrator, court or any federal,

state or local government or other political subdivision thereof exercising

executive, legislative, judicial, regulatory or administrative functions in the

United States and all other countries and jurisdictions.

 

4.13         True and Complete

Disclosure.  All

factual information (taken as a whole) heretofore or contemporaneously

furnished by or on behalf of Borrowers to Bank for purposes of or in connection

with this Agreement or any transaction contemplated herein is, and all other

such factual information (taken as a whole) hereafter furnished by or on behalf

of any such Person to Bank hereunder will be true and accurate in all material

respects on the date as of which such information is provided and not incomplete

by omitting to state any material fact necessary to make such information

(taken as a whole) not misleading at such time in light of the circumstances

under which such information was provided. 

There is no fact known to any Borrower which could reasonably be

expected to have a material adverse effect, which has not been disclosed herein

or in such other documents, certificates and statements furnished to Bank for

use in connection with the transactions contemplated hereby.

 

4.14         Margin Regulations.  Neither the making of any of the Loans

hereunder, nor the use of proceeds thereof, will violate the provisions of

Regulation T, U or X of the Board of Governor of the Federal Reserve System and

no part of the proceeds of any Loan will be used to purchase or carry any

Margin Stock (as defined in Regulation U) or to extend credit for the purpose

of purchasing or carrying any Margin Stock.

 

4.15         Labor Relations.  Borrowers are not engaged in any unfair

labor practice that could reasonably be expected to have a material adverse

effect on the businesses of any Borrower. 

There are (i) no unfair labor practice complaint pending against any

Borrower or, to the best knowledge of Borrowers, threatened against any of

them, before the National Labor Relations Board nor, to the best knowledge of

Borrowers, is there any basis for such complaint, and no grievance or

arbitration proceeding arising out of or under any collective bargaining

agreement is so pending against any Borrower or, to the best knowledge of Borrowers,

threatened against any Borrower, (ii) no strike, labor dispute, slowdown or

stoppage pending against any Borrower or, to the best knowledge of Borrowers,

threatened against any of them and (iii) no union representation question

existing with respect to the employees of any Borrower and, to the best

knowledge of Borrowers, no union organizing activities are taking place, except

with respect to any matter specified in clause (i), (ii) or (iii) above, either

individually or in the aggregate, such as could not reasonably be expected to

have a material adverse effect on the businesses of any Borrower.

 

12

 

5.             COVENANTS OF BORROWERS.  Each Borrower agrees that, so long as any

amount remains unpaid on the Notes or any credit is available to or in use by

Borrowers hereunder or any fees or other amounts payable by Borrowers to Bank

hereunder remains unpaid:

 

5.1           No Liens or

Encumbrances.  Except as

provided for on Schedule 4.3, Borrowers will not pledge, mortgage or

otherwise encumber, or permit to exist any lien, security interest or charge

upon, any assets or property of any kind or character at any time owned by any

Borrower without the prior written consent of Bank; provided, however,

that nothing contained in this Section shall operate to prevent liens, pledges

or deposits in connection with workmen’s compensation, taxes, assessments,

statutory obligations or other similar charges, provided in each case that the

obligation or liability arises in the ordinary course of business and is not

overdue, or if overdue, is being contested in good faith by appropriate

proceedings.

 

5.2           Maintain Licenses.  Each Borrower will maintain and keep in

force and effect all licenses and permits necessary to conduct its business and

will, upon request of Bank, furnish to Bank evidence of renewal of any and all

licenses and permits within 30 days prior to the expiration thereof.

 

5.3           No Other Indebtedness.  No Borrower will issue, incur, assume,

create or have outstanding any indebtedness for borrowed money (including,

without limitation, any indebtedness representing the deferred purchase price

of property, any liability in respect of banker’s acceptances or letters of

credit, any indebtedness, whether or not assumed, secured by liens on property

acquired by such Borrower at the time of the acquisition thereof or the

liability of such Borrower under any leases which should be capitalized under

generally accepted accounting principles) in an amount greater than $75,000.00

without the prior written consent of Bank; provided, however,

that the foregoing provisions shall not restrict nor operate to prevent (a) the

indebtedness of such Borrower owing to Bank, (b) trade indebtedness incurred by

such Borrower in the ordinary course of business, or (c) indebtedness fully

subordinated to Bank on terms and conditions acceptable to Bank in its sole

discretion.

 

5.4           Payment of Taxes.  Borrowers will duly pay and discharge all

taxes, rates, assessments, fees and governmental charges upon or against them

or against their properties, in each case before the same become delinquent and

before penalties accrue thereon, unless and to the extent that the same are

being contested in good faith and by appropriate proceedings.

 

5.5           Notice of Litigation.  Borrowers shall notify Bank within 10 days

after (a) becoming aware of any facts or circumstances (other than trade

payables and other liabilities arising in the ordinary course of any Borrower’s

business) which involve an aggregate liability of any Borrower in excess of

$25,000 in excess of the amount, if any, covered by any insurance policy of

such Borrower or which, if adversely determined, would otherwise result in any

material adverse change in the financial condition,

 

13

 

properties, business

or operations of any Borrower or (b) receiving any notice of an actual or

threatened claim, litigation or governmental proceeding against any Borrower

which involves an aggregate liability of any Borrower in excess of $25,000 in

excess of the amount, if any, covered by any insurance policy of such Borrower

or which, if adversely determined, would otherwise result in any material

adverse change in the financial condition, properties, business or operations

of such Borrower.

 

5.6           Use of Proceeds.  Proceeds from the Revolving Credit shall be

used to finance the working capital and general business needs of

Borrowers.  Proceeds from the Term Loan

shall be used to refinance the existing indebtedness from Electric’s

acquisition of Switchboard.  Proceeds

from the Mortgage Loan shall be used to refinance the Property and improvements

thereto.

 

5.7           Financial Reports.  Borrowers shall maintain a standard and

modern system of accounting in accordance with generally accepted accounting principles

consistently applied, shall furnish to Bank and its duly authorized

representatives such information respecting the business and financial

condition of Borrowers as Bank may reasonably request from time to time, and

shall permit Bank from time to time during business hours to examine, inspect,

make extracts from books and records of Borrowers (whether at Borrowers’ place

of business or elsewhere) and make such other investigations as Bank may deem

necessary or appropriate.  Each Borrower

shall furnish to Bank:

 

(a)   As soon as available, and in any event within 15

days following the final day of each calendar month, (A) a Borrowing Base

certificate in form and substance reasonably satisfactory to Bank (i)

certifying that such Borrower has complied with all of the terms of this

Agreement and the Loan Documents and that all representations and warranties in

this Agreement and the Loan Documents remain true and correct as of the date

thereof, (ii) certifying that no Event of Default has occurred or is continuing

as of the date thereof and no condition exists that with notice or the passage

of time or both would constitute an Event of Default and (iii) showing, in

reasonable detail satisfactory to Bank, computations supporting the calculation

of the Borrowing Base as of the last day of such calendar month, (B) a

Receivables Report and (C) a Payables Report, each certified to Bank by such

Borrower’s chief executive officer or chief financial officer; and

 

(b)   As soon as available, and in any event within 90

days after the close of each fiscal year of Borrower, the balance sheet, profit

and loss statement and statement of cash flows of such Borrower for such fiscal

year, all as prepared and audited by BDO Seidman, LLP, or by another

independent certified public accountant selected by such Borrower and

satisfactory to Bank and certified to Bank by such Borrower’s chief executive

officer or chief financial officer; and

 

14

 

(c)   As soon as available, and in any event within 15

days following the final day of each calendar month, the balance sheet, profit

and loss statement and statement of cash flows of Borrower for such month, all

as prepared by Borrower’s management and certified to Bank by Borrower’s chief

executive officer or chief financial officer.

 

5.8           Plant, Properties,

Equipment and Collateral.  Each

Borrower will maintain, preserve and keep its properties and equipment in good

repair, working order and condition and will from time to time make all needful

and proper repairs, renewals, replacements, additions and betterments thereto

so that at all times the efficiency thereof shall be fully preserved and

maintained.  All Collateral will be

located and maintained at the locations set forth in Schedule 4.8 and at

no other place or location, except for inventory sold in the ordinary course of

business.  Each Borrower shall deliver

to Bank such UCC Financing Statements, mortgages, assignments, filings,

recordations, notices, and other documents as are required by Bank, in its

reasonable discretion, in connection with the maintenance and perfection of

Bank’s security interest in the Collateral. 

Schedule 5.8 sets for a true and complete list of each lease of

real property by any each Borrower and warehouse where goods of each Borrower

are stored.

 

5.9           Proceeds of Sale,

Loss, Destruction or Condemnation of Collateral.  Except for dispositions of Collateral not

prohibited hereunder or under the other Loan Documents, to the extent the

Collateral is sold, lost, destroyed or taken by condemnation, each Borrower

shall immediately pay to Bank, as and when received by a Borrower, a sum equal

to the net cash proceeds (including insurance payments) received by such

Borrower from such sale, loss, destruction or condemnation for application to

any Liabilities, and thereafter any excess will be transferred to such

Borrower’s operating account at Bank. Notwithstanding the foregoing, with

Bank’s prior consent, which consent shall not be unreasonably withheld, such

proceeds shall not be applied in repayment of any Liabilities so long as (i)

such proceeds are used to repair or replace such sold, lost, destroyed or

condemned Collateral with Collateral of comparable value and usefulness in the

operation of the applicable Borrower’s business within six months following

such disposition; (ii) no Event of Default has occurred and is then continuing;

(iii) the applicable Borrower has delivered notice to Bank of the occurrence of

the sale, loss, destruction or condemnation, the projected effect on the

applicable Borrower’s business and the applicable Borrower’s proposed use of

the proceeds within 30 days of such disposition; (iv) such loss, sale,

destruction or condemnation has not resulted in a material adverse effect, as

determined in Bank’s sole discretion; and (v) the use of the proceeds would not

result in an Event of Default under this Agreement or the other Loan Documents.

 

5.10         Notice of Event of

Default.  Promptly

after knowledge thereof shall have come to the attention of either of Jeffrey

Mistarz, Greg Rice or John Mitola, and in any event within three days of such

knowledge, Borrowers shall provide to Bank written notice of the occurrence of

any Event of Default or the existence of any condition which would, with notice

or the passage of time or both, constitute an Event of Default.

 

15

 

5.11         Compliance With Bank

Regulatory Requirements.  Upon

demand by Bank, Borrowers shall reimburse Bank for Bank’s additional costs

and/or reductions in the amount of principal or interest received or receivable

by Bank if at any time after the date of this Agreement any law, treaty or

regulation or any change in any law, treaty or regulation or the interpretation

thereof by any governmental authority charged with the administration thereof

or any central bank or other fiscal, monetary or other authority having

jurisdiction over Bank or the Loans, whether or not having the force of law,

shall impose, modify or deem applicable any reserve and/or special deposit

requirement against or in respect to assets held by or deposits in or for the

account of the Loans by Bank or impose on Bank any other condition with respect

to this Agreement or the Loans, the result of which is to either increase the

cost to Bank of making or maintaining the Loans or to reduce the amount of

principal or interest received or receivable by Bank with respect to the

Loans.  Said additional costs and/or

reductions will be those which directly result from the imposition of such

requirement or condition on the making or maintaining of the Loans.  Notwithstanding the foregoing, Borrowers

shall not be required to pay any such additional costs which occur because of

Bank’s gross negligence and/or willful misconduct.

 

5.12         Insurance.  Each Borrower will insure and keep insured,

with insurance companies reasonably satisfactory to Bank, all tangible property

owned directly or indirectly by such Borrower which is of a character usually

insured by entities similarly situated and operating like properties and as may

otherwise be required by Bank; and will insure such other hazards and risks

(including employers’ and public liability risks) with insurance companies

acceptable to Bank to the extent usually insured by entities similarly situated

in conducting similar businesses and as may otherwise be required by Bank.  Borrowers will cause Bank to be named as a

lender’s loss payee and additional named insured on all such insurance policies

and shall cause all such policies to contain a prohibition against

cancellation, modification or amendment without 30 days prior written notice to

Bank and, at the request of Bank, collaterally assign such insurance to Bank as

additional security for the Liabilities. 

Each Borrower will deliver to Bank, upon the signing of this Agreement

and, at the request of Bank from time to time hereafter, a certificate

evidencing such Borrower’s compliance with its obligations hereunder and/or a

certificate setting forth in summary form the nature and extent of the

insurance maintained pursuant to this Section.

 

5.13         Access to Facilities

and Equipment.  Bank

shall have the right, from time to time, upon reasonable notice to any Borrower

and during normal business hours, to inspect, examine and make investigations

of such Borrower’s facilities and the Collateral.

 

5.14         Mergers,

Consolidations and Sales.  Borrowers

will not sell, lease or otherwise dispose of all or a substantial part of their

tangible properties or assets except for sales of inventory in the ordinary

course of business, sell or discount any of their loans, or consolidate or be a

party to a merger, business combination or other reorganization with any other

Person.  The term “substantial” as used

herein shall mean the aggregate amount of 10% or more, in any calendar year, of

the property and assets of any Borrower.

 

16

 

5.15         ERISA.  Borrowers shall (a) promptly pay and

discharge all obligations and liabilities arising under ERISA of a character

which if unpaid or unperformed might result in the imposition of a lien against

any of its properties or assets, (b) shall promptly notify Bank of the

occurrence of any reportable event (as defined in ERISA) which might result in

the termination by the PBGC of any employee benefit plan covering any officers

or employees of any Borrower, any benefits of which are, or are required to be,

guaranteed by PBGC (a “Plan”) or of receipt of any notice from PBGC of its

intention to terminate or withdraw from any Plan and (c) shall not terminate any

such Plan or withdraw therefrom unless it shall be in compliance with all of

the terms and conditions of this Agreement after giving effect to any liability

to PBGC resulting from such termination or withdrawal.

 

5.16         Burdensome Contracts

with Affiliates.  Borrowers

will not enter into any contract, agreement, lease or business arrangement with

an Affiliate on terms and conditions which are less favorable to Borrowers than

would be usual and customary in similar contracts, agreements or business

arrangements between persons not affiliated with each other.

 

5.17         Environmental.  Borrowers’ business operations and the

ownership, use, maintenance and operation of its businesses and property

(personal and real) will, at all times, be in material compliance with all

Environmental Laws.

 

5.18         Operating Accounts.  Each Borrower shall maintain all of its

operating, cash management, depository, payment and investment accounts with

Bank and shall collectively maintain balances in such accounts as are necessary

to compensate Bank for any service charges on such accounts.  Each Borrower shall deposit into such

accounts all amounts necessary to pay any service charges payable to Bank

immediately following notice from Bank of the amount by which such service

charges exceed the balance in such accounts. 

Each Borrower grants Bank the right to debit such Borrower’s accounts

for all monthly payments of principal and interest and service charges due and

payable to Bank.

 

5.19         Restricted Payments.  No Borrower will during any fiscal year (a)

directly or indirectly purchase, redeem or otherwise acquire or retire any

interest of any stockholder of such Borrower; or (b) make or declare any

partial or full liquidating distributions to any stockholder of such Borrower

with respect to such stockholder’s interest in such Borrower.  No Borrower shall make or declare

non-liquidating distributions to such Borrower’s shareholders payable in cash.

 

5.20         Tangible Net Worth.  Borrowers Tangible Net Worth shall not at

any time be less than $4,500,000.00.

 

5.21           Net Working

Capital.  Borrowers Net Working

Capital shall not at any time be less than $3,250,000.00.

 

17

 

5.22         Financial Covenant

Certificate.  As soon

as available, and in any event within 15 days after the close of each calendar

month of Borrowers, Borrowers shall deliver to Bank a certificate in form and

substance satisfactory to Bank, certified to Bank by each Borrower’s chief

executive officer or chief financial officer and showing a computation of all

financial covenants contained herein.

 

5.23         Name, Organization

Changes.  No less

than 30 days prior to the effective date thereof, Borrowers will immediately

notify Bank in writing of any change in the name, type of organization,

organizational identification number, or jurisdiction of organization of any

Borrower or the use of any assumed name by any Borrower.  Borrowers shall execute and deliver to Bank

any and all financing statements and other documents requested by Bank in

connection therewith prior to any name change.

 

6.             EVENTS OF DEFAULT; REMEDIES

 

6.1           Events of Default.  The occurrence of any one of the following

shall constitute an “Event of Default” hereunder:

 

(a)   Default in the payment of any principal on the Notes

when due, whether at the stated maturity thereof or at any other time provided

for therein or in this Agreement or in the payment when due of interest on the

Notes or of any fee, charge or other payment payable by Borrowers under the

Notes, this Agreement or any of the Loan Documents when due;

 

(b)   Default in the observance or performance of any

other provision of this Agreement or the other Loan Documents which is not

cured within 10 days following the occurrence thereof;

 

(c)   Default shall occur under any other evidence of

indebtedness for money borrowed, issued, assumed or guaranteed by any Borrower

or under any indenture, agreement or other instrument under which the same may

be issued which involves or could involve an aggregate amount in excess of

$100,000.00, and such default shall continue for a period of time sufficient to

permit the acceleration of the maturity of any such indebtedness;

 

(d)   Any judgment or judgments, writ or writs or warrant

or warrants of attachment, or any similar process or processes in an aggregate

amount in excess of $100,000.00 over the amount covered by insurance shall be

entered or filed against any Borrower or against any of their respective

properties or assets and remains unvacated, unbonded, unstayed or unpaid for a

period of 30 days;

 

(e)   Any representation or warranty made by any Borrower

in this Agreement or the other Loan Documents or any statement or certificate

furnished pursuant hereto or thereto is untrue;

 

18

 

(f)    Any Borrower becomes insolvent or bankrupt, or

bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings

or other proceedings for relief under any bankruptcy law or laws for the relief

of debtors are instituted against any Borrower of the Liabilities and are not

dismissed within 30 days after such institution or a decree or order for the

appointment of a trustee or receiver for any Borrower of the Liabilities for

the major part of their respective properties is entered by a court of

competent jurisdiction and the trustee or receiver appointed pursuant to such

decree or order is not discharged within 30 days after such appointment;

 

(g)   Any Borrower shall institute bankruptcy,

reorganization, arrangement, insolvency or liquidation proceedings or other

proceedings for relief under any bankruptcy law or laws for the relief of

debtors or shall consent to the institution of such proceedings against it by

others or to the entry of any decree or order adjudging such Borrower bankrupt

or insolvent or approving as filed any petition seeking reorganization under

any bankruptcy or similar law or shall apply for or shall consent to the

appointment of a receiver or trustee for any Borrower for the major part of its

properties or any Borrower shall make an assignment for the benefit of

creditors or shall admit in writing its inability to pay its debts as they

mature or shall take any corporate action in contemplation or in furtherance of

any of the aforesaid purposes;

 

(h)   Any Borrower shall, for any reason, fail to operate

all or substantially all of its business and facilities for a period of greater

than five consecutive business days;

 

(i)    The transfer of any interest in, the pledge of, or

conveyance of the capital stock of Switchboard or Great Lakes other than a

pledge in favor of Bank;

 

(j)     There is a material adverse change in the business,

operations or financial condition of any Borrower, as determined by Bank in its

reasonable discretion.

 

6.2           Remedies.

 

(a)   Upon the occurrence of any Event of Default described

in Section 6.1 (other than Section 6.1(f) or (g)), then

all outstanding principal and accrued and unpaid interest under the Notes and

all fees, charges, costs and expenses payable hereunder and thereunder and

under the other Loan Documents may, at the sole discretion of Bank, become due

and payable without presentment, demand, protest or notice of any kind and the

obligations of Bank to extend further credit pursuant to any of the terms

hereof may, at the sole discretion of Bank, immediately terminate.

 

19

 

(b)   Upon the occurrence of any Event of Default

described in Section 6.1(f) or (g), then all outstanding principal and

accrued and unpaid interest under the Notes and all fees, charges, costs and

expenses payable hereunder and thereunder and under the other Loan Documents

shall immediately become due and payable without presentment, demand, protest

or notice of any kind and the obligation of Bank to extend further credit

pursuant to any of the terms hereof shall immediately terminate.

 

7.             MISCELLANEOUS

 

7.1           Changes in Prime Rate.  Any change in the interest rate on advances

under any of the Loans resulting from a change in the Prime Rate shall be and

become effective as of and on the date of the relevant change in the Prime

Rate.

 

7.2           Cross-Default;

Cross-Collateralization.  Each

Borrower hereby expressly agrees and acknowledges that: (i) the Liabilities

include liabilities and obligations of each Borrower to Bank, whether or not

related to the liabilities and obligations evidenced by this Agreement, and

whether or not now existing or contemplated, including liabilities and

obligations hereafter arising and accruing, (ii) all of the Liabilities are

secured by the security interest granted by each Borrower to Bank pursuant to

the terms hereof and pursuant to the other Loan Documents and (iii) any Event

of Default under the terms of any agreement evidencing or securing any

Liabilities, whether now existing or hereafter arising shall constitute an

Event of Default hereunder.

 

7.3           Record Keeping.  The amount and date of each advance made

under the Loans and the amount and date of each payment of principal and

interest thereon shall be recorded by Bank on its books and records and the

amount of principal and interest shown on the Bank’s books and records as owing

on the Loans from time to time shall be prima facie evidence of the amount so

owing.  The failure to so record any

amount or any error in so recording any such amount, however, shall not limit

or otherwise affect Borrowers’ obligations hereunder or under the Notes to

repay the principal amount of the Loans together with all accrued interest

thereon.  Bank agrees that it will not

negotiate or otherwise transfer the Notes without first endorsing thereon a reference

to the actual unpaid principal balance of the advances evidenced thereby.

 

7.4           Application of

Payment.  All

payments on the Loans shall be applied first to accrued and unpaid interest

under the respective Loan with the remainder, if any, to be applied to the

payment of the outstanding principal balance of the respective Loan.

 

7.5           Holidays.  If any principal of or interest on the Notes

shall fall due on a Saturday, Sunday or another day which is a legal holiday

for banks in the State of Illinois, such principal or interest shall be due on

the next succeeding business day, and interest at the rate the respective Note

bears for the period prior to maturity shall continue to accrue from the stated

due date thereof to and including the next succeeding bank business day on

which the same shall become payable.

 

20

 

7.6           No Waiver, Cumulative

Remedies.  No delay

or failure on the part of Bank or on the part of the holder or holders of the

Notes to exercise any power or right shall preclude any other or further

exercise thereof, or the exercise of any other power or right, and the rights

and remedies hereunder of Bank and of the holder or holders of the Notes are

cumulative and not exclusive of any rights or remedies of which any of them

would otherwise be entitled.

 

7.7           Amendments, etc.  No amendment, modification, termination or

waiver of any provision of this Agreement, the Notes or the other Loan

Documents shall be effective unless the same shall be in writing and signed by

Bank and Borrowers.  No notice to or

demand on Borrowers in any case shall entitle Borrowers to any other or further

notice or demand in any similar or other circumstances.

 

7.8           Survival of

Representations and Warranties.  Until all principal, interest, fees and

other amounts due to Bank under the Loan Documents have been paid in full and

the credit facilities hereunder are no longer available to Borrowers, the

representations, warranties and covenants set forth herein shall remain in full

force and effect.

 

7.9           Costs and Expenses.  Borrowers jointly and severally agree to

pay, within 10 days following the execution and delivery by Borrowers of this

Loan Agreement, all out of pocket costs and expenses of Bank not paid at

closing, including, without limitation, the reasonable attorneys’ fees and

costs not paid at closing incurred in connection with the making of the Loans

and the negotiation, preparation, execution and delivery of the Loan Documents,

appraisal fees, environmental exam fees, title company charges, lien searches

and recording fees.  Borrowers further

agree to pay, on demand, all costs and expenses (including attorneys’ and

paralegals’ fees, as well as costs and expenses incurred pursuant to Section

6.2), if any, incurred by Bank or any holder of the Notes in connection

with the enforcement of this Agreement, the Notes, the Mortgage, the Security

Agreement or the other Loan Documents.

 

7.10         Notices.  All communications provided for herein shall

be in writing and shall be deemed to have been given or made when delivered

personally, three days after deposited in the United States mail (certified

mail, postage prepaid) or one day after deposited with a nationally recognized

overnight courier (delivery prepaid), or upon receipt of a confirmation of a

facsimile transmission, addressed as follows: (a) if to Borrowers, to Electric

City Corp., 1280 Landmeier Road, Elk Grove Village, Illinois 60007, telecopy

no. (847) 437-4969, Attn: Jeffrey R. Mistarz, with a copy to Schwartz Cooper

Greenberger & Krauss Chartered, 180 North LaSalle Street, Suite 2700,

Chicago, Illinois 60601, telecopy no. (312) 782-8416, Attn: Andrew H. Connor,

and (b) if to Bank, to American Chartered Bank, 1199 East Higgins Road,

Schaumburg, Illinois 60173, telecopy no. (847) 517-2848, Attn: William D.

Provan, with a copy to Horwood Marcus & Berk Chartered, 180 North LaSalle

Street, Suite 3700, Chicago, Illinois 60601, telecopy no. (312) 606-3232,

Attn:  Jeffrey A. Hechtman, Esq.

 

21

 

7.11         Binding Nature,

Governing Law, Etc.  This

Agreement, the Notes and the other Loan Documents shall be binding upon

Borrowers and their successors and assigns and shall inure to the benefit of

Bank and its successors and assigns, including any subsequent holder of the

Notes. This Agreement, the Notes and the other Loan Documents and the rights

and duties of the parties hereto and thereto shall be governed by and construed

in accordance with the laws of the State of Illinois.  This Agreement, the Notes and the other Loan Documents constitute

the entire understanding of the parties with respect to the subject matter

hereof and any prior agreements, whether written or oral, with respect thereto

are superseded hereby.  Borrowers may

not assign its rights hereunder or thereunder without the prior written consent

of Bank.

 

7.12         General.  Article and paragraph headings used in this

Agreement are for convenience of reference only and are not to be part of this

Agreement for any other purpose.  Any

provision of this Agreement which is prohibited or unenforceable in any

jurisdiction shall as to such jurisdiction be ineffective to the extent of such

prohibition or unenforceability without invalidating the remaining provisions

hereof or affecting the validity or enforceability of such provision in any

other jurisdiction.  This Agreement may

be executed in any number of counterparts and by different parties hereto on

separate counterparts, and all such counterparts taken together shall be deemed

to constitute one instrument.

 

7.13         Field Audits and

Financial Examinations.  Bank

shall have the right, at Borrowers’ sole cost and expense, to conduct field

audits and financial examinations of each Borrower from time to time; provided,

however, that as long as no Event of Default has occurred or is

continuing and no event has occurred that with notice or the passage of time or

both would constitute an Event of Default, Bank shall not perform more than one

field audit or financial examination of each Borrower during any calendar year.

 

7.14         Loan Documents.  All documents required pursuant to the

credit facilities to be extended by Bank to Borrowers hereunder including,

without limitation, the Notes and the other Loan Documents, shall be acceptable

to Bank and its counsel in both form and substance and unless otherwise agreed

to by Bank shall be prepared by counsel for Bank.

 

7.15         Jury Trial, Venue,

Jurisdiction.  EACH

BORROWER WAIVES ANY RIGHT TO TRIAL BY JURY ON ANY ACTION OR PROCEEDING TO

ENFORCE OR DEFEND ANY RIGHTS (I) UNDER THIS AGREEMENT, THE NOTES OR ANY OF THE

OTHER LOAN DOCUMENTS OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT WHICH

MAY BE DELIVERED IN THE FUTURE IN CONNECTION WITH THE LOANS OR (II) ARISING

FROM THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE NOTES, THE OTHER LOAN

DOCUMENTS OR ANY BANKING RELATIONSHIP BETWEEN ANY BORROWER AND BANK IN

CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, AND

AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT

 

22

 

BEFORE A JURY.  EACH BORROWER IRREVOCABLY AGREES THAT ALL

ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT ARISING OUT OF OR FROM OR

RELATED TO THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS SHALL

BE LITIGATED ONLY IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF

ILLINOIS.  EACH BORROWER HEREBY CONSENTS

AND SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT

LOCATED WITHIN SAID CITY AND STATE. 

EACH BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE

VENUE OF ANY SUCH ACTION OR PROCEEDING.

 

 

[Remainder of Page Left Intentionally Blank]

 

23

 

IN WITNESS WHEREOF, this

Agreement has been duly executed as of the day and year specified at the

beginning hereof.

 

	

   

  	

  BORROWERS:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  ELECTRIC CITY CORP.,

  
	

   

  	

  a Delaware corporation

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

    /s/ Jeffrey Mistarz

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  Its:

  	

    Chief Financial Officer & Treasurer

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  SWITCHBOARD APPARATUS, INC.,

  
	

   

  	

  a Delaware corporation

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

    /s/ Jeffrey Mistarz

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  Its:

  	

    Vice President

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  GREAT LAKES CONTROLLED ENERGY

  CORPORATION, a Delaware corporation

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

    /s/ Jeffrey Mistarz

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  Its:

  	

    Vice President

  	

   

  
					

 

Accepted and agreed to at

Chicago, Illinois as of the day and year first above written.

 

24

 

	

   

  	

  BANK:

  
	

   

  	

   

  	

   

  
	

   

  	

  AMERICAN CHARTERED BANK

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

    /s/ William Provan

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  Its:

  	

    Senior Vice President

  	

   

  
					

 

25

 

Schedule 4.1

 

 

Legal and Beneficial Owners

of Issued and Outstanding Capital Stock of Switchboard and Great Lakes

 

 

Organizational

Identification Number

 

 

Names or Trade Names Used

During Five Previous Years

 

 

 

Schedule 4.1(A)

 

 

SEC Disclosure

 

 

 

Schedule 4.2

 

 

Duties and Nature of

Obligations

 

 

 

Schedule 4.3

 

Liens and Encumbrances

 

 

 

Schedule 4.6

 

Litigation

 

 

 

Schedule 4.8

 

Collateral/Locations

 

 

 

Schedule 4.10

 

 

Burdensome Contracts with

Affiliates

 

 

 

Schedule 5.8

 

 

Leases of Real Property by

Borrower and Warehouse Where Goods of Borrower are Stored

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