Document:

Exhibit 10.1

 

EXTENSION AND MODIFICATION AGREEMENT

This EXTENSION AND MODIFICATION AGREEMENT (this “Agreement”) is made as of September 16, 2005 by and among (a) Mack-Cali Realty, L.P. (the “Borrower”), (b) the Lenders party hereto, and (c) JPMorgan Chase Bank, N.A. as Administrative Agent (in such capacity, the “Administrative Agent”) for the Lenders.

WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties to a Second Amended and Restated Revolving Credit Agreement dated as of November 23, 2004 (the “Credit Agreement”), pursuant to which the Lenders have agreed to make loans to the Borrower on the terms and conditions set forth therein; and

WHEREAS, the Borrower has requested that the Lenders extend the maturity date of and make certain other modifications to the Credit Agreement, and the Lenders party hereto are willing to so extend and modify the Credit Agreement on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the foregoing premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and fully intending to be legally bound by this Agreement, the parties hereto agree as follows:

1.          Definitions.  Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Credit Agreement.

2.          Modifications to Credit Agreement.  As of the Effective Date (as defined in §4 hereof) the Credit Agreement is modified as follows:

	
            2.1.
 	
            Modifications to §1.1.  §1.1. is hereby modified as follows:
 

2.1.1.    The definition of the term “Capitalized Unencumbered Property NOI” is hereby modified by restating such definition in its entirety to read as follows:

“Capitalized Unencumbered Property NOI.  As of any date of determination with respect to an Unencumbered Property (other than an Acquisition Property), an amount equal to the Revised Adjusted Unencumbered Property NOI for such Unencumbered Property for the most recent two (2) complete fiscal quarters multiplied by two (2), with the product being divided by 8.50%; provided that if such Unencumbered Property has been owned for fewer than two (2) complete fiscal quarters, the Revised Adjusted Unencumbered Property 

 

 

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NOI for such Unencumbered Property shall be calculated by using the actual results for the period that such Unencumbered Property has been owned and adjusting such results for a period of two (2) complete fiscal quarters.”

2.1.2.       The definition of the term “Consolidated Capitalized NOI” is hereby modified by restating such definition in its entirety to read as follows:

“Consolidated Capitalized NOI.  As of any date of determination, an amount equal to Revised Consolidated Adjusted Net Income for the most recent two (2) completed fiscal quarters multiplied by two (2), with the product being divided by 8.50%; provided that if any Real Estate has been owned for fewer than two (2) complete fiscal quarters, the Revised Consolidated Adjusted Net Income for such Real Estate shall be calculated by using the actual results for the period that such Real Estate has been owned and adjusting such results for a period of two (2) complete fiscal quarters.”

2.1.3.       The definition of the term “Consolidated Total Capitalization” is hereby modified by restating such definition in its entirety to read as follows:

“Consolidated Total Capitalization.  As of any date of determination, with respect to MCRC, the Borrower and their respective Subsidiaries determined on a consolidated basis in accordance with GAAP, the sum (without double-counting) of (a) Consolidated Capitalized NOI (other than with respect to Acquisition Properties), plus (b) the cost of all Acquisition Properties, plus (c) the value of Unrestricted Cash and Cash Equivalents (excluding until forfeited or otherwise entitled to be retained by the Borrower or its Subsidiaries, tenant security and other restricted deposits), plus (d) the aggregate costs incurred and paid to date by the Borrower and its Subsidiaries with respect to
Construction-In-Process, plus (e) the value of Indebtedness of third parties to the Borrower and its Subsidiaries for borrowed money which is secured by mortgage liens on real estate (valued in accordance with GAAP at the book value of such Indebtedness and not then more than 90 days past due or declared by the Borrower or its relevant Subsidiary to be past due), plus (f) the actual net cash investment by the Borrower and its Subsidiaries in any Other Investments (wherein such any Other Investment (x) does not have any Indebtedness that is then more than 90 days past due or (y) has not been declared to be in default of any monetary or material monetizable obligations), plus (g) the book value of Unimproved Non-Income Producing Land plus (h) the value of Eligible Cash 1031 

 

 

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Proceeds; provided that the value of all permitted investments included within Consolidated Total Capitalization (other than Eligible Cash 1031 Proceeds) shall not exceed the limitations set forth in §9.8 hereof.”

2.1.4.       The definition of the term “Maturity Date” is hereby modified by deleting the date “November 23, 2007” on the first line of such definition and substituting the date “November 23, 2009” in place thereof.

2.1.5.       The following new definition shall be inserted in §1.1 immediately after the definition of “Accountants”:

“Acquisition Property.  Any Real Estate that has been owned for fewer than four (4) fiscal quarters, unless the Borrower has made a one-time election to no longer treat such Real Estate as an Acquisition Property for purposes of this Agreement.”

2.2.          Modification to §2.4(f).  §2.4(f) of the Credit Agreement is hereby modified by deleting the percentage “0.20%” under the column heading “Facility Fee Percentage” in the third line of the table set forth in said §2.4(f) (for an S&P Rating of BBB, a Moody’s Rating of Baa2, and a Third Rating of BBB/Baa2 equivalent) and substituting the percentage “0.15%” in place thereof.

2.3.          Modification to §9.1 of Credit Agreement.  §9.1 of the Credit Agreement is hereby modified by restating §9.1 in its entirety to read as follows:

“§9.1.                   Leverage Ratio.  As at the end of any fiscal quarter or other date of measurement, the Borrower shall not permit the ratio of Consolidated Total Liabilities to Consolidated Total Capitalization to exceed 60%; provided that such ratio may exceed 60% from time to time so long as (a) such ratio does not exceed 65%, (b) such ratio ceases to exceed 60% within 180 days following each date such ratio first exceeded 60%, and (c) the Borrower provides a certificate in substantially the form of Exhibit O hereto to the Administrative Agent when such ratio first exceeds 60% and when such
ratio ceases to exceed 60%.”

2.4.          Modification to §9.4 of Credit Agreement.  §9.4 of the Credit Agreement is hereby modified by deleting said §9.4 in its entirety and substituting the following in place thereof:

“§9.4.  [Intentionally Deleted.]”

 

 

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2.5.          Modification to §9.6 of Credit Agreement.  §9.6 of the Credit Agreement is hereby modified by restating said §9.6 in its entirety to read as follows:

“§9.6.  Unsecured Indebtedness.  As at the end of any fiscal quarter or other date of measurement, the Borrower shall not permit the ratio of (i) Consolidated Unsecured Indebtedness to (ii) the sum (the “Section 9.6 Sum”) of (a) aggregate Capitalized Unencumbered Property NOI for all Unencumbered Properties (other than Acquisition Properties), plus (b) the cost of all Unencumbered Properties which are Acquisition Properties, plus (c) the value of all Eligible Cash 1031 Proceeds resulting from the sale of Unencumbered Properties to exceed 60%; provided that such ratio may exceed 60% from time to time so
long as (x) such ratio does not exceed 65%, (y) such ratio ceases to exceed 60% within 180 days following each date such ratio first exceeded 60%, and (z) the Borrower provides a certificate in substantially the form of Exhibit O hereto to the Administrative Agent when such ratio first exceeds 60% and when such ratio ceases to exceed 60%.”

2.6.          Modification to §9.9(b) of Credit Agreement.  §9.9(b) of the Credit Agreement is hereby modified by deleting clause (ii) thereof and renumbering clause (iii) as clause (ii).

2.7.          Schedule 1.2.  Schedule 1.2 to the Credit Agreement is hereby modified by deleting said Schedule 1.2 in its entirety and substituting the Schedule 1.2 attached to this Agreement in place thereof.

2.8.          Exhibit O.  Exhibit O attached to this Agreement is hereby added to the Credit Agreement as Exhibit O thereto.

	
            3.
 	
            Provisions Of General Application.
 

3.1.          Representations and Warranties. The Borrower hereby represents and warrants as of the date hereof that (a) each of the representations and warranties of the Borrower contained in the Credit Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Credit Agreement or this Agreement are true and correct in all material respects as of the date as of which they were made and are true and correct in all material respects at and as of the date of this Agreement (except to the extent (i) of changes resulting from transactions contemplated or not prohibited by the Credit Agreement or the other Loan Documents, (ii) of changes occurring in the ordinary course of business, or
(iii) that such representations and warranties relate expressly to an earlier date), (b) no Default or Event of Default exists on the date hereof 

 

 

-5-

 

(before and after giving effect to this Agreement), and (c) this Agreement has been duly authorized, executed and delivered by the Borrower and is in full force and effect as of the Effective Date, and the agreements and obligations of the Borrower contained herein constitute the legal, valid and binding obligations of the Borrower, enforceable against it in accordance with its terms, subject only to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights and to the fact that the availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought.

The Borrower hereby further represents and warrants as of the date hereof that the execution, delivery and performance of this Agreement (i) are within the authority of the Borrower, (ii) do not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which the Borrower is subject or any judgment, order, writ, injunction, license or permit applicable to the Borrower, (iii) do not conflict with any provision of the agreement of limited partnership, any certificate of limited partnership, the charter documents or by-laws of the Borrower or any general partner or other controlling Person thereof, (iv) do not contravene any provisions of, or constitute a default, Default or Event of Default hereunder or a failure to comply with any term, condition or provision of, any other agreement, instrument, judgment, order,
decree, permit, license or undertaking binding upon or applicable to the Borrower or any of the Borrower’s properties (except for any such failure to comply under any such other agreement, instrument, judgment, order, decree, permit, license, or undertaking as would not materially and adversely affect the condition (financial or otherwise), properties, business or results of operations of the Borrower, the Operating Subsidiaries or any Guarantor) or result in the creation of any mortgage, pledge, security interest, lien, encumbrance or charge upon any of the properties or assets of the Borrower, the Operating Subsidiaries or any Guarantor, and (v) do not require (A) the approval or consent of any governmental agency or authority other than those already obtained, or (B) filing with any governmental agency or authority, other than filings which will be made with the SEC when and as required by law.

3.2.          No Other Changes.  Except as otherwise expressly provided or contemplated by this Agreement, all of the terms, conditions and provisions of the Credit Agreement remain unaltered and in full force and effect.  The Credit Agreement and this Agreement shall be read and construed as one agreement.  The making of the modifications in this Agreement does not imply any obligation or agreement by the Administrative Agent or any Lender to make any other amendment, waiver, modification or consent as to any 

 

 

-6-

 

matter on any subsequent occasion.  This Agreement shall be a Loan Document under the Credit Agreement.

3.3.          Governing Law.  This Agreement shall be deemed to be a contract under the laws of the State of New York.  This Agreement and the rights and obligations of each of the parties hereto are contracts under the laws of the State of New York and shall for all purposes be construed in accordance with and governed by the laws of such State (excluding the laws applicable to conflicts or choice of law).

3.4.          Assignment.  This Agreement shall be binding upon and inure to the benefit of each of the parties hereto and their respective permitted successors and assigns.

3.5.          Counterparts.  This Agreement may be executed in any number of counterparts, but all such counterparts shall together constitute but one and the same agreement.  In making proof of this Agreement, it shall not be necessary to produce or account for more than one counterpart thereof signed by each of the parties hereto.

4.              Effectiveness of this Agreement.  This Agreement shall become effective on the date on which the following conditions precedent are satisfied (such date being hereinafter referred to as the “Effective Date”):

(a)               Execution and delivery to the Administrative Agent by each of the Lenders, the Borrower, the Guarantors and the Administrative Agent of this Agreement.

(b)               Execution and delivery to the Administrative Agent of (i) a certificate of each of the Borrower and MCRC confirming that there have been no changes to their respective charter documents since November 23, 2004, or (ii) if there have been changes to the Borrower’s or MCRC’s charter document since such date, a secretary’s certificate of the Borrower or MCRC certifying as to such changes.

(c)               Delivery to the Administrative Agent of an incumbency certificate of the Borrower and MCRC and of resolutions of the board of directors of MCRC authorizing this Agreement.

(d)               Payment to the Administrative Agent, for the accounts of the Agents and the Lenders, as applicable, all fees due and payable on or before the Effective Date and all expenses due and payable on or before the Effective Date, including, without limitation, reasonable attorneys’ fees and expenses and other costs and expenses incurred in connection with this Agreement.

 

 

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(e)               Delivery to the Administrative Agent by Pryor Cashman Sherman & Flynn LLP, as counsel to the Borrower, and Ballard Spahr Anderson & Ingersoll, LLP, as corporate counsel to MCRC, of opinions addressed to the Lenders and the Administrative Agent in form and substance reasonably satisfactory to the Administrative Agent.

[Remainder of page left blank intentionally]

 

 

 

IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement as of the date first set forth above.

 

MACK-CALI REALTY, L.P.

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

 

	
            By:
 	
            /s/ Barry Lefkowitz
 	
             

	
             
	
            Name:
 	
            Barry Lefkowitz
 	
             

	
             
	
            Title:
 	
            Executive Vice President
 
						

and Chief Financial Officer

 

 

 

 

JPMORGAN CHASE BANK, N.A., individually and as Administrative Agent, Swing Lender and Fronting Bank

 

 

By:/s/ Marc E. Costantino

	
            Name: Marc E. Costantino
 
	
            Title: Vice President
 	
             

 

 

 

 

BANK OF AMERICA, N.A.

 

 

By:/s/ Charlotte W. Deinhart

	
            Name: Charlotte W. Deinhart
 
	
            Title: Vice President
 	
             

 

 

 

 

THE BANK OF NOVA SCOTIA, NEW YORK AGENCY

 

 

By: /s/ Robert H. Boese  

	
            Name: Robert H. Boese
 	
             

	
            Title: Managing Director
 

 

 

 

 

WACHOVIA BANK, NATIONAL ASSOCIATION

 

 

By: /s/ Cynthia A. Bean

	
            Name: Cynthia A. Bean
 
	
            Title: Vice President
 	
             

 

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

 

 

By: /s/ Christopher B. Wilson

	
            Name: Christopher B. Wilson
 
	
            Title: Vice President
 	
             

 

 

 

 

SUNTRUST BANK

 

 

By: /s/ Blake K. Thompson

	
            Name: Blake K. Thompson
 
	
            Title: Vice President
 	
             

 

 

 

 

PNC BANK, NATIONAL ASSOCIATION

 

 

By: /s/ J. Richard Litton

	
            Name: J. Richard Litton
 
	
            Title: Vice President
 	
             

 

 

 

 

CITICORP NORTH AMERICA, INC.

 

 

By: /s/ Jeanne M. Craig

	
            Name: Jeanne M. Craig
 
	
            Title: Vice President
 	
             

 

 

 

 

US BANK NATIONAL ASSOCIATION

 

 

By: /s/ Walter Whitt

	
            Name: Walter Whitt
 
	
            Title: VP
 	
             

 

 

 

 

BANK OF CHINA, NEW YORK BRANCH

 

 

By: /s/ William Smith

	
            Name: William Smith
 	
             

	
            Title: Deputy General Manager
 

 

 

 

 

THE BANK OF NEW YORK

 

 

By: /s/ Anthony A. Filorimo

	
            Name: Anthony A. Filorimo
 
	
            Title: Vice President
 	
             

 

 

 

 

CHEVY CHASE BANK, F.S.B.

 

 

By:/s/ Ronald W. Huffman

	
            Name: Ronald W. Huffman
 
	
            Title: Vice President
 	
             

 

 

 

 

DEUTSCHE BANK TRUST COMPANY AMERICAS

 

 

By: /s/ Brenda Casey

	
            Name: Brenda Casey
 
	
            Title: Vice President
 	
             

 

 

DEUTSCHE BANK TRUST COMPANY AMERICAS

 

 

By: /s/ Joanna Soliman  

	
            Name: Joanna Soliman
 
	
            Title: Associate
 	
             

 

 

 

 

 

MIZUHO CORPORATE BANK, LTD.

 

 

By: /s/ Yasuo Imaizumi

	
            Name: Yasuo Imaizumi
 	
             

	
            Title: Senior Vice President & Sub Team Leader
 

 

 

 

 

UFJ BANK LIMITED, NEW YORK BRANCH

 

 

By: /s/ Jesse McDonald

	
            Name: Jesse McDonald
 
	
            Title: Vice President
 	
             

 

 

 

 

THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND

 

 

By: /s/ Carla Ryan

	
            Name: Carla Ryan
 	
             

	
            Title: Authorized Signatory
 

 

By: /s/ Philip Allen

	
            Name: Philip Allen
 	
             

	
            Title: Authorized Signatory
 

 

 

 

 

 

COMERICA BANK

 

 

By: /s/ Leslie A. Vogel

	
            Name: Leslie A. Vogel
 
	
            Title: Vice President
 	
             

 

 

 

 

CHANG HWA COMMERCIAL BANK, LTD., NEW YORK BRANCH

 

 

By: /s/ Jim C. Y. Chen

	
            Name: Jim C. Y. Chen
 	
             

	
            Title: VP & General Manager
 

 

 

 

 

FIRST COMMERCIAL BANK, NEW YORK AGENCY

 

 

By: /s/ Bruce M. J. Ju

	
            Name: Bruce M. J. Ju
 	
             

	
            Title: V.P. & General Manager
 

 

 

 

 

CHIAO TUNG BANK CO., LTD., NEW YORK AGENCY

 

 

By: /s/ Kuang-Hua Wei

	
            Name: Kuang-Hua Wei
 	
             

	
            Title: SVP & General Manager
 

 

 

 

 

THE ROYAL BANK OF SCOTLAND

 

 

By: /s/ Bruce G. Ferguson

	
            Name: Bruce G. Ferguson
 	
             

	
            Title: Senior Vice President
 

 

 

 

 

HUA NAN COMMERCIAL BANK, NEW YORK AGENCY

 

 

By: /s/ Yu-Yen Lin Chien

	
            Name: Yu-Yen Lin Chien
 	
             

	
            Title: Deputy General Manager
 

 

 

 

 

BANK HAPOALIM B.M.

 

 

By: /s/ Marc Bosc

	
            Name: Marc Bosc
 	
             

	
            Title: Vice President
 

 

 

BANK HAPOALIM B.M.

 

 

By: /s/ Lenroy Hacket

	
            Name: Lenroy Hacket
 	
             

	
            Title: First Vice President
 

 

 

 

 

 

Each of the undersigned Guarantors hereby acknowledges the foregoing Extension and Modification Agreement and reaffirms its guaranty of the Obligations (as defined in the Guaranty executed and delivered by such Guarantor) under the Credit Agreement and the other Loan Documents, each as modified hereby or in connection herewith, in accordance with the Guaranty executed and delivered by such Guarantor.

 

MACK-CALI REALTY CORPORATION

 

By: /s/ Barry Lefkowitz

	
            Name:
 	
            Barry Lefkowitz
 	
             

	
            Title:
 	
            Executive Vice President and
 
	
             
	
            Chief Financial Officer
 	
             

				

 

 

	
            11 COMMERCE DRIVE ASSOCIATES L.L.C.
 

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

SIX COMMERCE DRIVE ASSOCIATES  L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

20 COMMERCE DRIVE ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

 

 

 

CENTURY PLAZA ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

C.W. ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

D.B.C. REALTY L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

MACK-CALI BUILDING V ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

500 COLUMBIA TURNPIKE ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

 

 

 

ROSELAND II L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

OFFICE ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

600 PARSIPPANY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

400 RELLA REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

VAUGHN PRINCETON ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

 

MONMOUTH/ATLANTIC REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

JUMPING BROOK REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

COMMERCENTER REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

MOUNT AIRY REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

300 TICE REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

 

 

BRIDGE PLAZA REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

MACK-CALI CW REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

CROSS WESTCHESTER REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

ELMSFORD REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

TALLEYRAND REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

 

 

MID-WESTCHESTER REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

MACK-CALI MID-WEST REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

SO. WESTCHESTER REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

MACK-CALI SO. WEST REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member 

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

MACK-CALI WP REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

 

 

 

WHITE PLAINS REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

MOORESTOWN REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

PRINCETON CORPORATE CENTER REALTY

ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member 

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

PRINCETON OVERLOOK REALTY L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member 

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

BMP SOUTH REALTY L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member 

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

 

 

LINWOOD REALTY L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

MOUNTAINVIEW REALTY L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

120 PASSAIC STREET L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

M-C PROPERTIES CO. REALTY L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

MACK-CALI EAST LAKEMONT L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

 

 

 

WESTAGE REALTY L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

COLLEGE ROAD REALTY L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

SKYLINE REALTY L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

MACK-CALI B PROPERTIES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

ONE SYLVAN REALTY L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

 

 

 

1717 REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

12 SKYLINE ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

9 CAMPUS REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

MAPLE 6 CAMPUS L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

5/6 SKYLINE REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

 

 

 

MACK-CALI MORRIS REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

MACK-CALI CAMPUS REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

BMP MOORESTOWN REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

MACK-CALI TAXTER ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

SYLVAN/CAMPUS REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 
	
             
	
            its general partner
 	
             

 

 

 

 

 

5 WOOD HOLLOW REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

14 COMMERCE REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

400 CHESTNUT REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

232 STRAWBRIDGE REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

MACK-CALI WILLOWBROOK COMPANY L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

 

 

 

TERRI REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

1000 BRIDGEPORT REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

WEST AVENUE REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

KEMBLE PLAZA II REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its manager

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

KNIGHTSBRIDGE REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its manager

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

 

 

 

4 GATEHALL REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Realty. L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

MONUMENT 150 REALTY L.L.C.

 

	
            By:
 	
            Monument Holding L.L.C.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

101 HUDSON STREET ASSOCIATES

 

	
            By:
 	
            MC Hudson Holding L.L.C.,
 

its general partner

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

	
            By:
 	
            MC Hudson Realty L.L.C.,
 

its general partner

 

	
            By:
 	
            Mack-Cali Realty, L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

 

 

 

 

 

MACK-CALI PROPERTIES CO.

 

	
            By:
 	
            Mack-Cali Sub III, Inc.,
 

its general partner

 

	
            By:
 	
            Mack-Cali Realty, L.P.
 

its general partner

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

CAL-TREE REALTY ASSOCIATES L.P.

 

	
            By:
 	
            Mack–Cali Sub XV Trust
 

its general partner

 

FIVE SENTRY REALTY ASSOCIATES

L.P.

 

	
            By:
 	
            Mack–Cali Sub XV Trust
 

its general partner  

 

MACK-CALI AIRPORT REALTY ASSOCIATES L.P.

 

	
            By:
 	
            Mack–Cali Sub XV Trust
 

its general partner

 

MACK-CALI PENNSYLVANIA REALTY

ASSOCIATES L.P.

 

	
            By:
 	
            Mack–Cali Sub XV Trust
 

its general partner

 

MACK-CALI-R COMPANY NO. 1 L.P.

 

	
            By:
 	
            Mack-Cali Sub XV Trust
 

its general partner

 

 

 

 

MACK-CALI TEXAS PROPERTY L.P.

 

	
            By:
 	
            Mack–Cali Sub XVII, Inc.,
 

its general partner

 

MAPLE 4 CAMPUS L.L.C.

 

	
            By:
 	
            Mack-Cali Texas Property L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Sub XVII, Inc.,
 
	
             
	
            its general partner
 	
             

 

 

CLEARBROOK ROAD ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack-Cali Texas Property L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Sub XVII, Inc.,
 
	
             
	
            its general partner
 	
             

 

 

25 COMMERCE REALTY L.L.C.

 

By:  Mack-Cali Texas Property L.P.,

	
            its member
 

 

	
            By:
 	
            Mack-Cali Sub XVII, Inc.,
 

its general partner

 

 

	
            600 HORIZON CENTER L.L.C.
 

 

	
            By:
 	
            Mack-Cali Texas Property L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Sub XVII, Inc.,
 

its general partner

 

 

 

 

 

	
            LITTLETON REALTY ASSOCIATES L.L.C.
 

 

	
            By:
 	
            Mack-Cali Texas Property L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Sub XVII, Inc.,
 

its general partner

 

 

	
            3 ODELL REALTY L.L.C.
 

 

	
            By:
 	
            Mack-Cali Texas Property L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Sub XVII, Inc.,
 

its general partner

 

 

	
            4 SENTRY REALTY L.L.C.
 

 

	
            By:
 	
            4 Sentry Holding L.L.C.,
 

its member

 

	
            By:
 	
            Mack-Cali Texas Property L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Sub XVII, Inc.,
 

its general partner

 

3 SKY REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Texas Property L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Sub XVII, Inc.,
 

its general partner

 

 

 

 

PARSIPPANY 4/5 REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Texas Property L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Sub XVII, Inc.,
 

its general partner

 

6 PARSIPPANY L.L.C.

 

	
            By:
 	
            Mack-Cali Texas Property L.P.,
 

its member

 

	
            By:
 	
            Mack-Cali Sub XVII, Inc.,
 

its general partner

 

PHELAN REALTY ASSOCIATES L.P.

 

	
            By:
 	
            Mack–Cali Sub VI, Inc.,
 

its general partner

 

795 FOLSOM REALTY ASSOCIATES L.P.

 

	
            By:
 	
            Mack-Cali Sub VI, Inc.,
 

its general partner

 

CALI HARBORSIDE (FEE) ASSOCIATES L.P.

 

	
            By:
 	
            Mack-Cali Sub X, Inc.,
 

its general partner

 

MACK-CALI PLAZA I, L.L.C. (successor by merger to Cali-Harborside Plaza I (Fee) Associates, L.P.)

 

	
            By:
 	
            Mack-Cali Realty, L.P., its sole member
 

 

	
            By:
 	
            Mack-Cali Realty Corporation,
 

its general partner

 

 

 

 

 

MACK-CALI PROPERTIES CO. #3 L.P.

 

By: Mack-Cali Sub II, Inc., 

its general partner

 

MACK-CALI PROPERTY TRUST

 

300 HORIZON REALTY L.L.C.

 

	
            By:
 	
            Mack-Cali Property Trust,
 

its member

 

HORIZON CENTER REALTY ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Property Trust,
 

its member

 

M-C CAPITOL ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack–Cali Property Trust,
 

its manager

 

ROSELAND OWNERS ASSOCIATES L.L.C.

 

	
            By:
 	
            Mack-Cali Property Trust,
 

its member

 

 

 

 

SENTRY PARK WEST L.L.C.

 

	
            By:
 	
            Mack-Cali Glendale Limited Partnership,
 

its member

 

	
            By:  
 	
            Mack-Cali Sub XXII, Inc.,
 

its general partner

 

By: /s/ Barry Lefkowitz

	
            Name:
 	
            Barry Lefkowitz
 	
             

	
            Title:
 	
            Executive Vice President and
 

Chief Financial Officer of 

each of the above named 

entitiesLoan and Security Agreement - Exhibit 10.1

LOAN AND SECURITY AGREEMENT

DATED AS OF JULY 19TH, 2005

BETWEEN

LASALLE BUSINESS CREDIT, LLC

THE LENDER,

AND

UNITED EXPRESSLINE, INC.

THE BORROWER

TABLE OF CONTENTS

Page

		
	1.    DEFINITIONS	1 
	 
	2.    LOANS	9 
	      (a)   Revolving Loans	9 
	      (b)     Term Loan	11 
	      (c)     Repayments	11 
	      (d)     Note	11 
		
	 
	3.    LETTERS OF CREDIT	12 
	      (a)     General Terms	12 
	      (b)     Requests for Letters of Credit	12 
	      (c)     Obligations Absolute	12 
	      (d)     Expiration Dates of Letters of Credit	13 
		
	 
	4.    INTEREST, FEES AND CHARGES	13 
	      (a)     Interest Rate	13 
	      (b)     Other LIBOR Provisions	14 
	      (c)     Fees And Charges	16 
	      (d)     Maximum Interest	17 
		
	 
	5.    COLLATERAL	17 
	      (a)    Grant of Security Interest to Lender	17 
	      (b)    Other Security	18 
	      (c)    Possessory Collateral	18 
	      (d)    Electronic Chattel Paper	19 
		
	 
	6.    PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN	19 
	 
	7.    POSSESSION OF COLLATERAL AND RELATED MATTERS	19 
	 
	8.    COLLECTIONS	20 
	 
	9.    COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES	22 
	      (a)    Daily Reports	22 
	      (b)    Monthly Reports	22 
	      (c)    Financial Statements	22 
	      (d)    Annual Projections	23 
	      (e)    Explanation of Budgets and Projections	23 
	      (f)    Public Reporting	23 
	      (g)    Other Information	23 

-i-

	10.    TERMINATION; AUTOMATIC RENEWAL	23 
	 
	 
	11.    REPRESENTATIONS AND WARRANTIES	24 
	      (a)     Financial Statements and Other Information	25 
	      (b)     Locations	25 
	      (c)     Loans by Borrower	25 
	      (d)     Accounts and Inventory	25 
	      (e)     Liens	25 
	      (f)     Organization, Authority and No Conflict	26 
	      (g)     Litigation	26 
	      (h)     Compliance with Laws and Maintenance of Permits	26 
	      (i)     Affiliate Transactions	27 
	      (j)     Names and Trade Names	27 
	      (k)     Equipment	27 
	      (l)     Enforceability	27 
	      (m)     Solvency	27 
	      (n)     Indebtedness	27 
	      (o)     Margin Security and Use of Proceeds	28 
	      (p)     Parent, Subsidiaries and Affiliates	28 
	      (q)     No Defaults	28 
	      (r)     Employee Matters	28 
	      (s)     Intellectual Property	28 
	      (t)     Environmental Matters	28 
	      (u)     ERISA Matters	29 
	 
	12.    AFFIRMATIVE COVENANTS	29 
	      (a)    Maintenance of Records	29 
	      (b)    Notices	29 
	      (c)    Compliance with Laws and Maintenance of Permits	31 
	      (d)    Inspection and Audits	31 
	      (e)    Insurance	32 
	      (f)    Collateral	33 
	      (g)    Use of Proceeds	33 
	      (h)    Taxes	33 
	      (i)    Intellectual Property	34 
	      (j)    Checking Accounts and Cash Management Services	34 
	      (k)    Patriot Act, Bank Secrecy Act and Office of Foreign Assets Control	34 
	 
	13.    NEGATIVE COVENANTS	34 
	      (a)    Guaranties	34 
	      (b)    Indebtedness	35 
	      (c)    Liens	35 
	      (d)    Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions Outside the Ordinary
	                Course of Business	35 
	      (e)    Dividends and Distributions	35 
	      (f)    Investments; Loans	35 

-ii-

	      (g)    Fundamental Changes, Line of Business	36 
	      (h)    Equipment	36 
	      (i)    Affiliate Transactions	36 
	      (j)    Settling of Accounts	36 
	      (k)    Management Fees; Compensation	36 
	 
	14.    FINANCIAL COVENANTS	37 
	      (a)    Tangible Net Worth	37 
	      (b)    Fixed Charge Coverage	37 
	      (c)    Capital Expenditure Limitations	37 
	 
	15.    DEFAULT	37 
	      (a)    Payment	37 
	      (b)    Breach of this Agreement and the Other Agreements	38 
	      (c)    Breaches of Other Obligations	38 
	      (d)    Breach of Representations and Warranties	38 
	      (e)    Loss of Collateral	38 
	      (f)    Levy, Seizure or Attachment	38 
	      (g)    Bankruptcy or Similar Proceedings	38 
	      (h)    Appointment of Receiver	39 
	      (i)    Judgment	39 
	      (j)    Death or Dissolution of Obligor	39 
	      (k)    Default or Revocation of Guaranty	39 
	      (l)    Criminal Proceedings	39 
	      (m)    Change of Control	40 
	      (n)    Change of Management	40 
	      (o)    Material Adverse Change	40 
	 
	16.    REMEDIES UPON AN EVENT OF DEFAULT	40 
	 
	17.    CONDITIONS PRECEDENT	41 
	 
	18.    INDEMNIFICATION	42 
	 
	19.    NOTICE	43 
	 
	20.    CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION	43 
	 
	21.    MODIFICATION AND BENEFIT OF AGREEMENT	44 
	 
	22.    HEADINGS OF SUBDIVISIONS	44 
	 
	23.    POWER OF ATTORNEY	44 
	 
	24.    CONFIDENTIALITY	44 
	 

-iii-

	25.    COUNTERPARTS	45 
	 
	26.    ELECTRONIC SUBMISSIONS	45 
	 
	27.    WAIVER OF JURY TRIAL; OTHER WAIVERS	45 

EXHIBIT A –BUSINESS AND COLLATERAL LOCATIONS

EXHIBIT B – COMPLIANCE CERTIFICATE

EXHIBIT C –COMMERCIAL TORT CLAIMS

SCHEDULE 1 –PERMITTED LIENS

SCHEDULE 11(i)    – AFFILIATE TRANSACTIONS

SCHEDULE 11(g)    –LITIGATION

SCHEDULE 11(j)    – NAMES & TRADE NAMES

SCHEDULE 11(n)    –INDEBTEDNESS

SCHEDULE 11(p)    – PARENT, SUBSIDIARIES AND AFFILIATES

SCHEDULE 17(a)    – CLOSING DOCUMENT CHECKLIST

-iv-

 

 

All bolded and bracketed language is optional and must be considered in the context of the proposed transaction.

If you have any questions regarding whether to use any optional or alternative language, consult the loan

officer for the transaction.

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (as amended, modified or supplemented from time to time, this "Agreement") made this 19th day of July, 2005 by and between LASALLE BUSINESS CREDIT, LLC, a Delaware limited liability company ("Lender"), 135 South LaSalle Street, Chicago, Illinois 60603-4105, and United ExpressLine, Inc., an Indiana corporation, having its principal place of business at 19985 County Road 8, Bristol, Indiana 46507 ("Borrower").

WITNESSETH:

WHEREAS, Borrower may, from time to time, request Loans from Lender, and the parties wish to provide for the terms and conditions upon which such Loans or other financial accommodations, if made by Lender, shall be made;

NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal or extension) hereafter made to Borrower by Lender, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Borrower, the parties agree as follows:

	
             
  	
            1.
 	
            DEFINITIONS.
 

"Account", "Account Debtor", "Chattel Paper", "Commercial Tort Claims", "Deposit Accounts", "Documents", "Electronic Chattel Paper", "Equipment", "Fixtures", "General Intangibles", "Goods", "Instruments", "Inventory", "Investment Property",
"Letter-of-Credit Right", "Proceeds" and "Tangible Chattel Paper" shall have the respective meanings assigned to such terms in the Illinois Uniform Commercial Code, as the same may be in effect from time to time.

"Affiliate" shall mean (x) Fair Holdings, Inc., (y) DC Investments, LLC and (z) any Person (i) which directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, Borrower, (ii) which beneficially owns or holds five percent (5%) or more of the voting control or equity interests of Borrower, or (iii) five percent (5%) or more of the voting control or equity interests of which is beneficially owned or held by Borrower.

"Business Day" shall mean any day other than a Saturday, a Sunday or (i) with respect to all matters, determinations, fundings and payments in connection with LIBOR Rate Loans, any day on which banks in London, England or Chicago, Illinois are required or permitted to close, and (ii) with respect to all other matters any day that banks in Chicago, Illinois are required or permitted to close.

 

Ver 9

 

 

"Capital Expenditures" shall mean with respect to any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities and including expenditures for capitalized lease obligations) by Borrower during such period that are required by generally accepted accounting principles, consistently applied, to be included in or reflected by the property, plant and equipment or similar fixed asset accounts (or intangible accounts subject to amortization) on the balance sheet of Borrower.

"Collateral" shall mean all of the property of Borrower described in Section 5 hereof, together with all other real or personal property of any Obligor or any other Person now or hereafter pledged to Lender to secure, either directly or indirectly, repayment of any of the Liabilities.

"EBITDA" shall mean, with respect to any period, Borrower's net income after taxes for such period (excluding any after-tax gains or losses on the sale of assets (other than the sale of Inventory in the ordinary course of business) and excluding other after-tax extraordinary gains or losses) plus interest expense, income tax expense, depreciation and amortization for such period, plus or minus any other non-cash charges or gains which have been subtracted or added in calculating net income after taxes for such period.

"Eligible Account" shall mean an Account owing to Borrower which is acceptable to Lender in its sole discretion determined in good faith for lending purposes (provided that Lender shall give Borrower written notice of any eligibility criteria established by Lender and not set forth herein).  Without limiting Lender's discretion, Lender shall, in general, consider an Account to be an Eligible Account if it meets, and so long as it continues to meet, the following requirements:

Manually Numbered(i)           it is genuine and in all respects what it purports to be;

(ii)          it is owned by Borrower, Borrower has the right to subject it to a security interest in favor of Lender or assign it to Lender and it is subject to a first priority perfected security interest in favor of Lender and to no other claim, lien, security interest or encumbrance whatsoever, other than Permitted Liens;

(iii)        it arises from (A) the performance of services by Borrower in the ordinary course of Borrower's business, and such services have been fully performed and acknowledged and accepted by the Account Debtor thereunder; or (B) the sale or lease of Goods by Borrower in the ordinary course of Borrower's business, and (x) such Goods have been completed in accordance with the Account Debtor's specifications (if any) and delivered to the Account Debtor, (y) such Account Debtor has not refused to accept, returned or offered to return, any of the Goods which are the subject of such Account, and (z) Borrower has possession of, or Borrower has delivered to Lender (at Lender's request) shipping and delivery receipts evidencing delivery of such Goods;

 

Ver 9

-2-

 

 

(iv)        it is evidenced by an invoice rendered to the Account Debtor thereunder, is due and payable within ninety (90) days after the date of the invoice and does not remain unpaid ninety (90) days past the invoice date thereof; provided, however, that if more than twenty-five percent (25%) of the aggregate dollar amount of invoices owing by a particular Account Debtor remain unpaid ninety (90) days after the respective invoice dates thereof, then all Accounts owing by that Account Debtor shall be deemed ineligible;

(v)          it is a valid, legally enforceable and unconditional obligation of the Account Debtor thereunder, and it shall not be an Eligible Account to the extent of any setoff, counterclaim, credit, allowance or adjustment by such Account Debtor, or if it is subject to any claim by such Account Debtor denying liability thereunder in whole or in part;

(vi)        it does not arise out of a contract or order which fails in any material respect to comply with the requirements of applicable law;

(vii)       the Account Debtor thereunder is not a director, officer, employee or agent of Borrower, or a Subsidiary, Parent or Affiliate;

(viii)      it is not an Account with respect to which the Account Debtor is the United States of America or any state or local government, or any department, agency or instrumentality thereof, unless Borrower assigns its right to payment of such Account to Lender pursuant to, and in full compliance with, the Assignment of Claims Act of 1940, as amended, or any comparable state or local law, as applicable;

(ix)        it is not an Account with respect to which the Account Debtor is located in a state which requires Borrower, as a precondition to commencing or maintaining an action in the courts of that state, either to (A) receive a certificate of authority to do business and be in good standing in such state; or (B) file a notice of business activities report or similar report with such state's taxing authority, unless (x) Borrower has taken one of the actions described in clauses (A) or (B); (y) the failure to take one of the actions described in either clause (A) or (B) may be cured retroactively by Borrower at its election; or (z) Borrower has proven, to Lender's satisfaction, that it is exempt from any such requirements under any such state's laws;

(x)          the Account Debtor is located within the United States of America or Canada;

(xi)        it is not an Account with respect to which the Account Debtor's obligation to pay is subject to any repurchase obligation or return right, as with sales made on a bill-and-hold, guaranteed sale, sale on approval, sale or return or consignment basis;

 

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(xii)       it is not an Account (A) with respect to which any representation or warranty contained in this Agreement is untrue; or (B) which violates any of the covenants of Borrower contained in this Agreement;

(xiii)      it is not an Account which, when added to a particular Account Debtor's other indebtedness to Borrower, exceeds a credit limit determined by Lender in its sole discretion determined in good faith for that Account Debtor (except that Accounts excluded from Eligible Accounts solely by reason of this clause (xiii) shall be Eligible Accounts to the extent of such credit limit), provided that Lender shall give Borrower written notice of any such credit limit;

(xiv)      it is not an Account with respect to which the prospect of payment or performance by the Account Debtor is or will be impaired, as determined by Lender in its sole discretion determined in good faith; and

	
             
 	
            (xv)
 	
            the Account Debtor is not Quality Trailer.
 

"Eligible Inventory" shall mean Inventory of Borrower which is acceptable to Lender in its sole discretion determined in good faith for lending purposes (provided that Lender shall give Borrower written notice of any eligibility criteria established by Lender and not set forth herein).  Without limiting Lender's discretion, Lender shall, in general, consider Inventory to be Eligible Inventory if it meets, and so long as it continues to meet, the following requirements:

Manually Numbered(i)             it is owned by Borrower, Borrower has the right to subject it to a security interest in favor of Lender and it is subject to a first priority perfected security interest in favor of Lender and to no other claim, lien, security interest or encumbrance whatsoever, other than Permitted Liens;

(ii)          it is located on one of the premises listed on Exhibit A (or other locations of which Lender has been advised in writing pursuant to subsection 12(b)(i) hereof), such locations are within the United States and is not in transit;

(iii)        if held for sale or lease or furnishing under contracts of service, it is (except as Lender may otherwise consent in writing) new and unused and free from defects which would, in Lender's sole determination determined in good faith, affect its market value;

(iv)        it is not stored with a bailee, consignee, warehouseman, processor or similar party unless Lender has given its prior written approval and Borrower has caused any such bailee, consignee, warehouseman, processor or similar party to issue and deliver to Lender, in form and substance acceptable to Lender, such Uniform Commercial Code financing statements, warehouse receipts, waivers and other documents as Lender shall require, provided that in no event shall “Danzer Inventory” constitute Eligible Inventory;

 

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(v)          Lender has determined in good faith, in accordance with Lender's customary business practices, that it is not unacceptable due to age, type, category or quantity; 

(vi)        it is not Inventory (A) with respect to which any of the representations and warranties contained in this Agreement are untrue; or (B) which violates any of the covenants of Borrower contained in this Agreement; and

	
             
 	
            (vii)
 	
            it is not Inventory which is more than six (6) months old.
 

 

"Environmental Laws" shall mean all federal, state, district, local and foreign laws, rules, regulations, ordinances, and consent decrees relating to health, safety, hazardous substances, pollution and environmental matters, as now or at any time hereafter in effect, applicable to Borrower’s business or facilities owned or operated by Borrower, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contamination, chemicals, or hazardous, toxic or dangerous substances, materials or wastes into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, modified or restated from time to time.

"Event of Default" shall have the meaning specified in Section 15 hereof.

"Excess Availability"  shall mean, as of any date of determination by Lender, the lesser of (i) the Maximum Revolving Loan Limit less the sum of the outstanding Revolving Loans and Letter of Credit Obligations and (ii) the Revolving Loan Limit less the sum of the outstanding Revolving Loans and Letter of Credit Obligations, in each case as of the close of business on such date and assuming, for purposes of calculation, that all accounts payable (excluding accounts payable to Affiliates) which remain unpaid more than sixty (60) days after the invoice dates thereof as the close of business on such date are treated as additional Revolving Loans outstanding on such date. 

"Fiscal Year" shall mean each twelve (12) month accounting period of Borrower, which ends on October 31st of each year.

"Fixed Charges" shall mean for any period, without duplication, scheduled payments of principal during the applicable period with respect to all indebtedness of Borrower  for borrowed money (which, for purposes hereof, shall be limited to scheduled payments of principal to Lender based on $5,208.33 per month on a proforma basis until such time as an actual trailing twelve months has been established), plus cash payments of principal during the applicable period with respect to all capitalized lease obligations of Borrower, plus scheduled payments of interest during the applicable period with respect to all indebtedness of Borrower  for borrowed money including capital lease obligations, plus 

 

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unfinanced Capital Expenditures of Borrower during the applicable period, plus payments during the applicable period in respect of income or franchise taxes of Borrower.

"Hazardous Materials" shall mean any hazardous, toxic or dangerous substance, materials and wastes, including, without limitation, hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including, without limitation, materials which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are or become regulated under any Environmental Law (including, without limitation any that are or become classified as hazardous or toxic under any Environmental Law).

"Indemnified Party" shall have the meaning specified in Section 18 hereof.

"Interest Period" shall have the meaning specified in subsection 4(a)(ii) hereof.

"LaSalle Bank" shall mean LaSalle Bank National Association, Chicago, Illinois.

"Letter of Credit" shall mean any Letter of Credit issued on behalf of Borrower in accordance with this Agreement.

"Letter of Credit Obligations" shall mean, as of any date of determination, the sum of (i) the aggregate undrawn face amount of all Letters of Credit, and (ii) the aggregate unreimbursed amount of all drawn Letters of Credit not already converted to Loans hereunder.

"Liabilities" shall mean any and all obligations, liabilities and indebtedness of Borrower to Lender or to any parent, affiliate or subsidiary of Lender of any and every kind and nature, howsoever created, arising or evidenced and howsoever owned, held or acquired, whether now or hereafter existing, whether now due or to become due, whether primary, secondary, direct, indirect, absolute, contingent or otherwise (including, without limitation, obligations of performance), whether several, joint or joint and several, and whether arising or existing under written or oral agreement or by operation of law.

"LIBOR Rate" shall mean, with respect to any LIBOR Rate Loan for any Interest Period, a rate per annum equal to (a) the offered rate for deposits in United States dollars for a period equal to such Interest Period as displayed in the Bloomberg Financial Markets system (or such other authoritative source as selected by Lender in its sole discretion) as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period divided by (b) a number equal to 1.0 minus the maximum reserve percentages (expressed as a decimal fraction) including, without limitation, basic supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal 

 

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Reserve System or other governmental authority having jurisdiction with respect thereto, as now and from time to time in effect, for Eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) which are required to be maintained by Lender by the Board of Governors of the Federal Reserve System.  The LIBOR Rate shall be adjusted automatically on and as of the effective date of any change in such reserve percentage.

"LIBOR Rate Loans" shall mean the Loans bearing interest with reference to the LIBOR Rate.

"Loans" shall mean all loans and advances made by Lender to or on behalf of Borrower hereunder.

"Lock Box" and "Lock Box Account" shall have the meanings specified in subsection 8(a) hereof.

"Material Adverse Effect" shall mean a material adverse effect on the business, property, assets, prospects, operations or condition, financial or otherwise, of a Person.

"Maximum Loan Limit" shall mean Five Million Five Hundred Thousand and No/100 Dollars ($5,500,000.00).

"Maximum Revolving Loan Limit" shall have the meaning specified in subsection 2(a) hereof.

"Obligor" shall mean Borrower and each other Person who is or shall become primarily or secondarily liable for any of the Liabilities.

"Original Term" shall have the meaning specified in Section 10 hereof.

"Other Agreements" shall mean all agreements, instruments and documents, other than this Agreement, including, without limitation, guaranties, mortgages, trust deeds, pledges, powers of attorney, consents, assignments, contracts, notices, security agreements, leases, financing statements and all other writings heretofore, now or from time to time hereafter executed by or on behalf of Borrower or any other Person and delivered to Lender or to any parent, affiliate or subsidiary of Lender in connection with the Liabilities or the transactions contemplated hereby, as each of the same may be amended, modified or supplemented from time to time.

"Parent" shall mean any Person now or at any time or times hereafter owning or controlling (alone or with any other Person) at least a majority of the issued and outstanding equity of Borrower and, if Borrower is a partnership, the general partner of Borrower.

"PBGC" shall have the meaning specified in subsection 12(b)(v) hereof.

 

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"Permitted Liens" shall mean (i) statutory liens of landlords, carriers, warehousemen, processors, mechanics, materialmen or suppliers incurred in the ordinary course of business and securing amounts not yet due or declared to be due by the claimant thereunder or amounts which are being contested in good faith and by appropriate proceedings and for which Borrower has maintained adequate reserves; (ii) liens or security interests in favor of Lender; (iii) zoning restrictions and easements, licenses, covenants and other restrictions affecting the use of real property that do not individually or in the aggregate have a material adverse effect on Borrower's ability to use such real property for its intended purpose in connection with Borrower's business; (iv) liens in connection with purchase money indebtedness and
capitalized leases otherwise permitted pursuant to this Agreement, provided, that such liens attach only to the assets the purchase of which was financed by such purchase money indebtedness or which is the subject of such capitalized leases; (v) liens set forth on Schedule 1; (vi) liens specifically permitted by Lender in writing; and (vii) involuntary liens securing amounts less than $10,000.00 and which are released or for which a bond acceptable to Lender in its sole discretion, determined in good faith, has been posted within ten (10) days of its creation.

"Person" shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, entity, party or foreign or United States government (whether federal, state, county, city, municipal or otherwise), including, without limitation, any instrumentality, division, agency, body or department thereof.

"Plan" shall have the meaning specified in subsection 12(b)(v) hereof.

"Prime Rate" shall mean LaSalle Bank's publicly announced prime rate (which is not intended to be LaSalle Bank's lowest or most favorable rate in effect at any time) in effect from time to time.

"Prime Rate Loans" shall mean the Loans bearing interest with reference to the Prime Rate.

"Revolving Loan Limit" shall have the meaning specified in subsection 2(a) hereof.

"Revolving Loans" shall have the meaning specified in subsection 2(a) hereof.

“Subordinated Indebtedness” shall mean Borrower’s present subordinated indebtedness (including, without limitation, accounts payable to Obsidian Enterprises, Inc.) to each of Fair Holdings, Inc., UX, Inc. formerly known as United ExpressLine, Inc., an Indiana corporation, The Huntington Capital Investment Company and Obsidian Enterprises, Inc., a Delaware corporation formerly known as Danzer Corporation, a New York corporation.

"Subsidiary" shall mean any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the 

 

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board of directors of such corporation (irrespective of whether at the time stock of any other class of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned by Borrower, or any partnership, joint venture or limited liability company of which more than fifty percent (50%) of the outstanding equity interests are at the time, directly or indirectly, owned by Borrower or any partnership of which Borrower is a general partner. 

"Tangible Net Worth" shall have the meaning specified in subsection 14(a) hereof.

"Tax" shall mean, in relation to any LIBOR Rate Loans and the applicable LIBOR Rate, any tax, levy, impost, duty, deduction, withholding or charges of whatever nature required to be paid by Lender and/or to be withheld or deducted from any payment otherwise required hereby to be made by Borrower to Lender; provided, that the term "Tax" shall not include any taxes imposed upon the net income of Lender.

"Term Loan" shall have the meaning specified in subsection 2(b) hereof.

	
             
  	
            2.
 	
            LOANS.
 	
             

	
             
  	
            (a)
 	
            Revolving Loans.
 

Subject to the terms and conditions of this Agreement and the Other Agreements, during the Original Term, Lender may, in its sole discretion, determined in good faith, make revolving loans and advances (the "Revolving Loans") in an amount up to the sum of the following sublimits (the "Revolving Loan Limit"):

(i)           Up to eighty-five percent (85%) of the face amount (less maximum discounts, credits and allowances which may be taken by or granted to Account Debtors in connection therewith in the ordinary course of Borrower's business) of Borrower's Eligible Accounts; plus

(ii)          Up to sixty percent (60%) of the lower of cost or market value of Borrower's Eligible Inventory (consisting solely of raw materials and finished goods) or Three Million and No/100 Dollars ($3,000,000.00), whichever is less; plus

(iii)        Up to twenty-five percent (25%) of the lower of cost or market value of Borrower’s Eligible Inventory (consisting solely of work-in-process) or One Hundred Fifty Thousand and No/100 Dollars ($150,000.00), whichever is less; minus

(iv)        such reserves as Lender elects, in its sole discretion, determined in good faith, to establish from time to time including without limitation, a Seventy-Five Thousand and No/100 Dollars ($75,000.00) reserve with respect to warranties; 

 

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provided, that  the Revolving Loan Limit shall in no event exceed Five Million and No/100 Dollars ($5,000,000.00) (the "Maximum Revolving Loan Limit") except as such amount may be increased or decreased by Lender, in its sole discretion.

The aggregate unpaid principal balance of the Revolving Loans shall not at any time exceed the lesser of the (i) Revolving Loan Limit minus the Letter of Credit Obligations and (ii) the Maximum Revolving Loan Limit minus the Letter of Credit Obligations.  If at any time the outstanding Revolving Loans exceeds either the Revolving Loan Limit or  the Maximum Revolving Loan Limit, in each case minus the Letter of Credit Obligations, or any portion of the Revolving Loans and Letter of Credit Obligations exceeds any applicable sublimit within the Revolving Loan Limit, Borrower shall immediately, and without the necessity of demand by Lender, pay to Lender such amount as may be necessary to eliminate such excess and Lender shall apply such payment to the Revolving Loans to eliminate such excess.

Borrower hereby authorizes Lender, in its sole discretion, to charge any of Borrower's accounts or advance Revolving Loans to make any payments of principal, interest, fees, costs or expenses required to be made under this Agreement or the Other Agreements.  

A request for a Revolving Loan shall be made or shall be deemed to be made, each in the following manner:  Borrower shall give Lender same day notice, no later than 1:00 P.M. (determined based on the local time of Borrower at its principal place of business) for such day, of its request for a Revolving Loan as a Prime Rate Loan, and at least three (3) Business Days prior notice of its request for a Revolving Loan as a LIBOR Rate Loan, in which notice Borrower shall specify the amount of the proposed borrowing and the proposed borrowing date; provided, however, that no such request may be made at a time when there exists an Event of Default or an event which, with the passage of time or giving of notice, will become an Event of Default.  In the event that Borrower maintains a controlled disbursement account at LaSalle Bank, each check presented for payment against such controlled
disbursement account and any other charge or request for payment against such controlled disbursement account shall constitute a request for a Revolving Loan as a Prime Rate Loan.  As an accommodation to Borrower, Lender may permit telephone requests for Revolving Loans and electronic transmittal of instructions, authorizations, agreements or reports to Lender by Borrower.  Unless Borrower specifically directs Lender in writing not to accept or act upon telephonic or electronic communications from Borrower, Lender shall have no liability to Borrower for any loss or damage suffered by Borrower as a result of Lender's honoring of any requests, execution of any instructions, authorizations or agreements or reliance on any reports communicated to it telephonically or electronically and purporting to have been sent to Lender by Borrower and Lender shall have no duty to verify the origin of any such communication or the authority of the Person sending it.

Borrower hereby irrevocably authorizes Lender to disburse the proceeds of each Revolving Loan requested by Borrower, or deemed to be requested by Borrower, as follows:  the proceeds of each Revolving Loan requested under Section 2(a) shall be 

 

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disbursed by Lender in lawful money of the United States of America in immediately available funds, in the case of the initial borrowing, in accordance with the terms of the written disbursement letter from Borrower, and in the case of each subsequent borrowing, by wire transfer or Automated Clearing House (ACH) transfer to such bank account as may be agreed upon by Borrower and Lender from time to time, or elsewhere if pursuant to a written direction from Borrower.

	
             
  	
            (b)
 	
            Term Loan.
 

Subject to the terms and conditions of this Agreement and the Other Agreements, on the date that the conditions to the initial Loans are satisfied, Lender shall make a term loan to Borrower in an amount equal to Five Hundred Thousand and No/100 Dollars ($500,000.00) against Borrower’s real properties commonly known as 68939 M-103, White Pigeon, Michigan 49099 and 19985 County Road 8, Bristol, Indiana 46507.  Amounts repaid with respect to the Term Loan may not be reborrowed.  

(c)  Repayments.

The Liabilities shall be repaid as follows:

(i)           Repayment of Revolving Loans.  The Revolving Loans and all other Liabilities (other than the Term Loan) shall be repaid on the last day of the Original Term if this Agreement is renewed pursuant to Section 10 hereof.

(ii)          Repayment of Term Loan.  The Term Loan shall be repaid in ninety-six (96) equal monthly installments of Five Thousand Two Hundred Eight and 33/100 Dollars ($5,208.33)  payable on the day that is thirty (30) days from the date of such advance and on the last day of each month thereafter; provided, that any remaining outstanding principal balance of the Term Loan shall be repaid at the end of the Original Term.  If any such payment due date is not a Business Day, then such payment may be made on the next succeeding Business Day and such extension of time shall be included in the computation of the amount of interest and fees due hereunder.

	
             
  	
            (iii)
 	
            Mandatory Prepayments of the Term Loan.
 

(A)         Sales of Assets.  Upon receipt of the proceeds of the sale or other disposition of any Equipment or real property of Borrower which is subject to a mortgage in favor of Lender, or if any of the Equipment or real property subject to such mortgage is damaged, destroyed or taken by condemnation in whole or in part, the proceeds thereof shall be paid by Borrower to Lender as a mandatory prepayment of the Term Loan, such payment to be applied against the remaining installments of principal in the inverse order of their maturities until repaid in full, and then against the other Liabilities, as determined by Lender, in its sole discretion.

 

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(d)  Notes. 

The Loans shall, in Lender's sole discretion, be evidenced by one or more promissory notes in form and substance satisfactory to Lender.  However, if such Loans are not so evidenced, such Loans may be evidenced solely by entries upon the books and records maintained by Lender.

	
             
  	
            3.
 	
            LETTERS OF CREDIT.
 
	
             
  	
            (a)
 	
            General Terms.
 	
             

Subject to the terms and conditions of this Agreement and the Other Agreements, during the Original Term, Lender may, in its sole discretion, determined in good faith, from time to time cause to be issued and co-sign for or otherwise guarantee, upon Borrower's request, commercial and/or standby Letters of Credit; provided, that the aggregate undrawn face amount of all such Letters of Credit shall at no time exceed Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00).  Payments made by the issuer of a Letter of Credit to any Person on account of any Letter of Credit shall be immediately payable by Borrower without notice, presentment or demand and Borrower agrees that each payment made by the issuer of a Letter of Credit in respect of a Letter of Credit shall constitute a request by Borrower for a Loan to reimburse such issuer.  In the event such Loan is not advanced by Lender for
any reason, such reimbursement obligations (whether owing to the issuer of the Letter of Credit or Lender if Lender is not the issuer) shall become part of the Liabilities hereunder and shall bear interest at the rate then applicable to Revolving Loans constituting Prime Rate Loans until repaid.  Borrower shall remit to Lender a Letter of Credit fee equal to one-sixth of one percent (1/6th of 1%) per month on the aggregate undrawn face amount of all Letters of Credit outstanding, which fee shall be payable monthly in arrears on the first Business Day of each month. Said fee shall be calculated on the basis of a 360 day year. Borrower shall also pay on demand the normal and customary administrative charges of the issuer of the Letter of Credit for issuance, amendment, negotiation, renewal or extension of any Letter of Credit.

	
             
  	
            (b)
 	
            Requests for Letters of Credit.
 

Borrower shall make requests for Letters of Credit in writing at least two (2) Business Days prior to the date such Letter of Credit is to be issued.  Each such request shall specify the date such Letter of Credit is to be issued, the amount thereof, the name and address of the beneficiary thereof and a description of the transaction to be supported thereby.  Any such notice shall be accompanied by the form of Letter of Credit requested and any application or reimbursement agreement required by the issuer of such Letter of Credit.  If any term of such application or reimbursement agreement is inconsistent with this Agreement, then the provisions of this Agreement shall control to the extent of such inconsistency.

 

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            (c)
 	
            Obligations Absolute.
 

Borrower shall be obligated to reimburse the issuer of any Letter of Credit, or Lender if Lender has reimbursed such issuer on Borrower's behalf, for any payments made in respect of any Letter of Credit, which obligation shall be unconditional and irrevocable and shall be paid regardless of:  (i) any lack of validity or enforceability of any Letter of Credit, (ii) any amendment or waiver of or consent or departure from all or any provisions of any Letter of Credit, this Agreement or any Other Agreement, (iii) the existence of any claim, set off, defense or other right which Borrower or any other Person may have against any beneficiary of any Letter of Credit, Lender or the issuer of the Letter of Credit, (iv) any draft or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect, (v) any payment under any Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, and (vi) any other act or omission to act or delay of any kind of the issuer of such Letter of Credit, the Lender or any other Person or any other event or circumstance that might otherwise constitute a legal or equitable discharge of Borrower's obligations hereunder.  It is understood and agreed by Borrower that the issuer of any Letter of Credit may accept documents that appear on their face to be in order without further investigation or inquiry, regardless of any notice or information to the contrary.

	
             
  	
            (d)
 	
            Expiration Dates of Letters of Credit.
 

The expiration date of each Letter of Credit shall be no later than the earlier of (i) one (1) year from the date of issuance and (ii) the thirtieth (30th) day prior to the end of the Original Term.  Notwithstanding the foregoing, a Letter of Credit may provide for automatic extensions of its expiration date for one or more one (1) year periods, so long as the issuer thereof has the right to terminate the Letter of Credit at the end of each one (1) year period and no extension period extends past the thirtieth (30th) day prior to the end of the Original Term.

	
             
  	
            4.
 	
            INTEREST, FEES AND CHARGES.
 
	
             
  	
            (a)
 	
            Interest Rate.
 	
             

Subject to the terms and conditions set forth below, the Loans shall bear interest at the per annum rate of interest set forth in subsection (i), (ii) or (iii) below:

(i)           (a) each Revolving Loan shall bear interest at the rate of one-half of one percent (1/2 of 1%) per annum in excess of the Prime Rate in effect from time to time and (b) the Term Loan shall bear interest at the rate of one percent (1%) per annum in excess of the Prime Rate in effect from time to time, payable on the first Business Day of each month in arrears.  Said rates of interest shall increase or decrease by an amount equal to each increase or decrease in the Prime Rate effective on the effective date of each such change in the Prime Rate.

 

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(ii)          (a) each Revolving Loan shall bear interest at the rate of three hundred (300) basis points in excess of the LIBOR Rate for the applicable Interest Period and (b) the Term Loan shall bear interest at the rate of three hundred fifty (350) basis points in excess of the LIBOR Rate for the applicable Interest Period, such rates to remain fixed for such Interest Period.  "Interest Period" shall mean any continuous period of one (1), two (2) or three (3) months, as selected from time to time by Borrower by irrevocable notice (in writing, by telecopy, telex, electronic mail or cable) given to Lender not less than three (3) Business Days prior to the first day of each respective
Interest Period; provided that:  (A) each such period occurring after such initial period shall commence on the day on which the immediately preceding period expires; (B) the final Interest Period shall be such that its expiration occurs on or before the end of the Original Term; and (C) if for any reason Borrower shall fail to timely select a period, then such Loans shall continue as, or revert to, Prime Rate Loans.  Interest shall be payable on the first Business Day of each month in arrears and on the last Business Day of such Interest Period.

(iii)        Upon the occurrence of an Event of Default and during the continuance thereof, the Loans shall bear interest at the rate of two percent (2.0%) per annum in excess of the interest rate otherwise payable thereon, which interest shall be payable on demand.  All interest shall be calculated on the basis of a 360-day year.

	
             
  	
            (b)
 	
            Other LIBOR Provisions.
 

(i)           Subject to the provisions of this Agreement, Borrower shall have the option (A) as of any date, to convert all or any part of the Prime Rate Loans to, or request that new Loans be made as, LIBOR Rate Loans of various Interest Periods, (B) as of the last day of any Interest Period, to continue all or any portion of the relevant LIBOR Rate Loans as LIBOR Rate Loans; (C) as of the last day of any Interest Period, to convert all or any portion of the LIBOR Rate Loans to Prime Rate Loans; and (D) at any time, to request new Loans as Prime Rate Loans; provided, that Loans may not be continued as or converted to LIBOR Rate Loans, if the continuation or conversion thereof would violate the provisions of subsections 4(b)(ii) or 4(b)(iii) of this Agreement or if an Event of Default has occurred.

(ii)         Lender's determination of the LIBOR Rate as provided above shall be conclusive, absent manifest error.  Furthermore, if Lender determines, in good faith (which determination shall be conclusive, absent manifest error), prior to the commencement of any Interest Period that (A) U.S. Dollar deposits of sufficient amount and maturity for funding the Loans are not available to Lender in the London Interbank Eurodollar market in the ordinary course of business, or (B) by reason of circumstances affecting the London Interbank Eurodollar market, adequate and fair means do not exist for ascertaining the rate of interest to be applicable to the Loans requested by Borrower to be LIBOR Rate Loans or the Loans bearing interest at the rates set forth in subsection 4(a)(ii) of this Agreement shall not represent the effective pricing to Lender for U.S. Dollar deposits of a comparable amount for the relevant 

 

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period (such as for example, but not limited to, official reserve requirements required by Regulation D to the extent not given effect in determining the rate), Lender shall promptly notify Borrower and (1) all existing LIBOR Rate Loans shall convert to Prime Rate Loans upon the end of the applicable Interest Period, and (2) no additional LIBOR Rate Loans shall be made until such circumstances are cured.

(iii)        If, after the date hereof, the introduction of, or any change in any applicable law, treaty, rule, regulation or guideline or in the interpretation or administration thereof by any governmental authority or any central bank or other fiscal, monetary or other authority having jurisdiction over Lender or its lending offices (a "Regulatory Change"), shall, in the opinion of counsel to Lender, make it unlawful for Lender to make or maintain LIBOR Rate Loans, then Lender shall promptly notify Borrower and (A) the LIBOR Rate Loans shall immediately convert to Prime Rate Loans on the last Business Day of the then existing Interest Period or on such earlier date as required by law and (B) no additional LIBOR Rate Loans shall be made until
such circumstance is cured.

(iv)        If, for any reason, a LIBOR Rate Loan is paid prior to the last Business Day of any Interest Period or if a LIBOR Rate Loan does not occur on a date specified by Borrower in its request (other than as a result of a default by Lender), Borrower agrees to indemnify Lender against any loss (including any loss on redeployment of the deposits or other funds acquired by Lender to fund or maintain such LIBOR Rate Loan) cost or expense incurred by Lender as a result of such prepayment.

(v)          If any Regulatory Change (whether or not having the force of law) shall (A) impose, modify or deem applicable any assessment, reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of or loans by, or any other acquisition of funds or disbursements by, Lender; (B) subject Lender or the LIBOR Rate Loans to any Tax or change the basis of taxation of payments to Lender of principal or interest due from Borrower to Lender hereunder (other than a change in the taxation of the overall net income of Lender); or (C) impose on Lender any other condition regarding the LIBOR Rate Loans or Lender's funding thereof, and Lender shall determine (which determination shall be conclusive, absent any manifest error) that the result of
the foregoing is to increase the cost to Lender of making or maintaining the LIBOR Rate Loans or to reduce the amount of principal or interest received by Lender hereunder, then Borrower shall pay to Lender, on demand, such additional amounts as Lender shall, from time to time, determine are sufficient to compensate and indemnify Lender from such increased cost or reduced amount.

(vi)        Lender shall receive payments of amounts of principal of and interest with respect to the LIBOR Rate Loans free and clear of, and without deduction for, any Taxes.  If (A) Lender shall be subject to any Tax in respect of any LIBOR Rate Loans or any part thereof or, (B) Borrower shall be required to withhold 

 

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or deduct any Tax from any such amount, the LIBOR Rate applicable to such LIBOR Rate Loans shall be adjusted by Lender to reflect all additional costs incurred by Lender in connection with the payment by Lender or the withholding by Borrower of such Tax and Borrower shall provide Lender with a statement detailing the amount of any such Tax actually paid by Borrower. Determination by Lender of the amount of such costs shall be conclusive, absent manifest error.  If after any such adjustment any part of any Tax paid by Lender is subsequently recovered by Lender, Lender shall reimburse Borrower to the extent of the amount so recovered.  A certificate of an officer of Lender setting forth the amount of such recovery and the basis therefor shall be conclusive, absent manifest error.

(vii)       Each request for LIBOR Rate Loans shall be in an amount not less than One Million and No/100 Dollars ($1,000,000.00), and in integral multiples of, One Hundred Thousand and No/100 Dollars ($100,000.00).

(viii)      Unless otherwise specified by Borrower, all Loans shall be Prime Rate Loans.

(ix)        No more than three (3) Interest Periods may be in effect with respect to outstanding LIBOR Rate Loans at any one time.

	
             
  	
            (c)
 	
            Fees And Charges.
 

(i)           Facilities Fee:  Borrower shall pay to Lender an annual facilities fee of Ten Thousand and No/100 Dollars ($10,000.00), which fee shall be fully earned by Lender and payable on the date that Lender makes its initial disbursement under this Agreement and on each anniversary of the date hereof during the Original Term.

(ii)          Closing Fee:  Borrower shall pay to Lender a closing fee of one-half of one percent (1/2 of 1%) of the Maximum Loan Limit, which fee shall be fully earned and payable on the date of disbursement of the initial Loans hereunder.

(iii)        Unused Line Fee:  Borrower shall pay to Lender an unused line fee of one-half of one percent (1/2 of 1%) of the difference between the Maximum Revolving Loan Limit and the average daily balance of the Revolving Loans plus the Letter of Credit Obligations for each month, which fee shall be fully earned by Lender and payable monthly in arrears on the first Business Day of each month.  Said fee shall be calculated on the basis of a 360 day year.

(iv)        Costs and Expenses: Borrower shall reimburse Lender for all costs and expenses, including, without limitation, legal expenses and reasonable attorneys' fees (whether for internal or outside counsel), incurred by Lender in connection with the (i) documentation and consummation of this transaction and any other transactions between Borrower and Lender, including, without limitation, Uniform Commercial Code and other public record searches and filings, overnight courier or other express or messenger delivery, appraisal costs, surveys, title insurance 

 

Ver 9

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and environmental audit or review costs; (ii) collection, protection or enforcement of any rights in or to the Collateral; (iii) collection of any Liabilities; and (iv) administration and enforcement of any of Lender's rights under this Agreement or any Other Agreement (including, without limitation, any costs and expenses of any third party provider engaged by Lender for such purposes).  Borrower shall also pay all normal service charges with respect to all accounts maintained by Borrower with Lender and LaSalle Bank and any additional services requested by Borrower from Lender and LaSalle Bank.  All such costs, expenses and charges shall, if owed to LaSalle Bank, be reimbursed by Lender and in such event or in the event such costs and expenses are owed to Lender, shall constitute Liabilities hereunder, shall be payable by
Borrower to Lender on demand, and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder.

(v)          Capital Adequacy Charge.  If Lender shall have determined that the adoption of any law, rule or regulation regarding capital adequacy, or any change therein or in the interpretation or application thereof, or compliance by Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or governmental authority enacted after the date hereof, does or shall have the effect of reducing the rate of return on such party's capital as a consequence of its obligations hereunder to a level below that which Lender could have achieved but for such adoption, change or compliance (taking into consideration Lender's policies with respect to
capital adequacy) by a material amount, then from time to time, after submission by Lender to Borrower of a written demand therefor ("Capital Adequacy Demand") together with the certificate described below, Borrower shall pay to Lender such additional amount or amounts ("Capital Adequacy Charge") as will compensate Lender for such reduction, such Capital Adequacy Demand to be made with reasonable promptness following such determination.  A certificate of Lender claiming entitlement to payment as set forth above shall be conclusive in the absence of manifest error.  Such certificate shall set forth the nature of the occurrence giving rise to such reduction, the amount of the Capital Adequacy Charge to be paid to Lender, and the method by which such amount was determined.  In determining such amount, Lender may use any reasonable averaging and attribution method, applied on a non-discriminatory
basis.

	
             
  	
            (d)
 	
            Maximum Interest.
 

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

 

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            5.
 	
            COLLATERAL.
 	
             

	
             
  	
            (a)
 	
            Grant of Security Interest to Lender.
 

As security for the payment of all Loans now or in the future made by Lender to Borrower hereunder and for the payment or other satisfaction of all other Liabilities, Borrower hereby assigns to Lender and grants to Lender a continuing security interest in the following property of Borrower, whether now or hereafter owned, existing, acquired or arising and wherever now or hereafter located:  (a) all Accounts (whether or not Eligible Accounts) and all Goods whose sale, lease or other disposition by Borrower has given rise to Accounts and have been returned to, or repossessed or stopped in transit by, Borrower; (b) all Chattel Paper, Instruments, Documents and General Intangibles (including, without limitation, all patents, patent applications, trademarks, trademark applications, trade names, trade secrets, goodwill, copyrights, copyright applications, registrations, licenses,
software, franchises, customer lists, tax refund claims, claims against carriers and shippers, guarantee claims, contract rights, payment intangibles, security interests, security deposits and rights to indemnification); (c) all Inventory (whether or not Eligible Inventory); (d) all Goods (other than Inventory), including, without limitation, Equipment, vehicles and Fixtures; (e) all Investment Property; (f) all Deposit Accounts, bank accounts, deposits and cash; (g)  all Letter-of-Credit Rights; (h)  Commercial Tort Claims listed on Exhibit C hereto (i) any other property of Borrower now or hereafter in the possession, custody or control of Lender or any agent or any parent, affiliate or subsidiary of Lender or any participant with Lender in the Loans, for any purpose (whether for safekeeping, deposit, collection, custody, pledge, transmission or otherwise) and (j) all additions and accessions to,
substitutions for, and replacements, products and Proceeds of the foregoing property, including, without limitation, proceeds of all insurance policies insuring the foregoing property, and all of Borrower's books and records relating to any of the foregoing and to Borrower's business.

	
             
  	
            (b)
 	
            Other Security.
 

Lender, in its sole discretion, without waiving or releasing any obligation, liability or duty of Borrower under this Agreement or the Other Agreements or any Event of Default, may at any time or times hereafter, but shall not be obligated to, pay, acquire or accept an assignment of any security interest, lien, encumbrance or claim asserted by any Person in, upon or against the Collateral, provided, that Lender may take such actions with respect to Permitted Liens only after the occurrence and during the continuance of an Event of Default.  All sums paid by Lender in respect thereof and all costs, fees and expenses including, without limitation, reasonable attorney fees, all court costs and all other charges relating thereto incurred by Lender shall constitute Liabilities, payable by Borrower to Lender on demand and, until paid, shall bear interest at the highest rate then applicable to
Loans hereunder.

	
             
  	
            (c)
 	
            Possessory Collateral.
 

Immediately upon Borrower's receipt of any portion of the Collateral evidenced by an agreement, Instrument or Document, including, without limitation, any 

 

Ver 9

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Tangible Chattel Paper and any Investment Property consisting of certificated securities, Borrower shall deliver the original thereof to Lender together with an appropriate endorsement or other specific evidence of assignment thereof to Lender (in form and substance acceptable to Lender).  If an endorsement or assignment of any such items shall not be made for any reason, Lender is hereby irrevocably authorized, as Borrower's attorney and agent-in-fact, to endorse or assign the same on Borrower's behalf.

	
             
  	
            (d)
 	
            Electronic Chattel Paper.  
 

To the extent that Borrower obtains or maintains any Electronic Chattel Paper, Borrower shall create, store and assign the record or records comprising the Electronic Chattel Paper in such a manner that (i) a single authoritative copy of the record or records exists which is unique, identifiable and except as otherwise provided in clauses (iv), (v) and (vi) below, unalterable, (ii) the authoritative copy identifies Lender as the assignee of the record or records, (iii) the authoritative copy is communicated to and maintained by the Lender or its designated custodian, (iv) copies or revisions that add or change an identified assignee of the authoritative copy can only be made with the participation of Lender, (v) each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy and (vi) any revision of the authoritative copy
is readily identifiable as an authorized or unauthorized revision.

6.            PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.

Borrower shall, at Lender's request, at any time and from time to time, authenticate, execute and deliver to Lender such financing statements, documents and other agreements and instruments (and pay the cost of filing or recording the same in all public offices deemed necessary or desirable by Lender) and do such other acts and things or cause third parties to do such other acts and things as Lender may deem necessary or desirable in its sole discretion in order to establish and maintain a valid, attached and perfected security interest in the Collateral in favor of Lender (free and clear of all other liens, claims, encumbrances and rights of third parties whatsoever, whether voluntarily or involuntarily created, except Permitted Liens) to secure payment of the Liabilities, and in order to facilitate the collection of the Collateral.  Borrower irrevocably hereby makes, constitutes and
appoints Lender (and all Persons designated by Lender for that purpose) as Borrower's true and lawful attorney and agent-in-fact to execute and file such financing statements, documents and other agreements and instruments and do such other acts and things as may be necessary to preserve and perfect Lender's security interest in the Collateral.  Borrower further agrees that a carbon, photographic, photostatic or other reproduction of this Agreement or of a financing statement shall be sufficient as a financing statement.  Borrower further ratifies and confirms the prior filing by Lender of any and all financing statements which identify the Borrower as debtor, Lender as secured party and any or all Collateral as collateral.

 

Ver 9

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            7.
 	
            POSSESSION OF COLLATERAL AND RELATED MATTERS.
 

Until otherwise notified by Lender following the occurrence of an Event of Default, Borrower shall have the right, except as otherwise provided in this Agreement, in the ordinary course of Borrower's business, to (a) sell, lease or furnish under contracts of service any of Borrower's Inventory normally held by Borrower for any such purpose; (b) use and consume any raw materials, work in process or other materials normally held by Borrower for such purpose; and (c) dispose of obsolete or unuseful Equipment so long as all of the proceeds thereof are paid to Lender for application to the Liabilities (except for such proceeds which are  required to be delivered to the holder of a Permitted Lien which is prior in right of payment); provided, however, that a sale in the ordinary course of business shall not include any transfer or sale in satisfaction, partial or complete, of a debt
owed by Borrower.

	
             
  	
            8.
 	
            COLLECTIONS.
 

(a)          Borrower shall direct all of its Account Debtors to make all payments on the Accounts directly to a post office box (the "Lock Box") designated by, and under the exclusive control of, Lender, at a financial institution acceptable to Lender.  Borrower shall establish an account (the "Lock Box Account") in Lender's name with a financial institution acceptable to Lender, into which all payments received in the Lock Box shall be deposited, and into which Borrower will immediately deposit all payments received by Borrower on Accounts in the identical form in which such payments were received, whether by cash or check.  If Borrower, any Affiliate or Subsidiary, any shareholder, officer, director,
employee or agent of Borrower or any Affiliate or Subsidiary, or any other Person acting for or in concert with Borrower shall receive any monies, checks, notes, drafts or other payments relating to or as Proceeds of Accounts or other Collateral, Borrower and each such Person shall receive all such items in trust for, and as the sole and exclusive property of, Lender and, immediately upon receipt thereof, shall remit the same (or cause the same to be remitted) in kind to the Lock Box Account.  The financial institution with which the Lock Box Account is established shall acknowledge and agree, in a manner satisfactory to Lender, that the amounts on deposit in such Lock Box and Lock Box Account are the sole and exclusive property of Lender, that such financial institution will follow the instructions of Lender with respect to disposition of funds in the Lock Box and Lock Box Account without further consent from Borrower, that such financial institution has no right to setoff against
the Lock Box or Lock Box Account or against any other account maintained by such financial institution into which the contents of the Lock Box or Lock Box Account are transferred, and that such financial institution shall wire, or otherwise transfer in immediately available funds to Lender in a manner satisfactory to Lender, funds deposited in the Lock Box Account on a daily basis as such funds are collected.  Borrower agrees that all payments made to such Lock Box Account or otherwise received by Lender, whether in respect of the Accounts or as Proceeds of other Collateral or otherwise (except for proceeds of Collateral which are required to be delivered to the holder of a Permitted Lien which is prior in right of payment), will be applied on account of the Liabilities in accordance with the terms of this Agreement; provided, that so long as no Event of Default has occurred, payments received by Lender shall not be applied 

 

Ver 9

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to the unmatured portion of the LIBOR Rate Loans, but shall be held in a cash collateral account maintained by Lender, until the earlier of (i) the last Business Day of the Interest Period applicable to such LIBOR Rate Loan and (ii) the occurrence of an Event of Default; provided further, that so long as no Event of Default has occurred, the immediately available funds in such cash collateral account may be disbursed, at Borrower's discretion, to Borrower so long as after giving effect to such disbursement, Borrower's availability under subsection 2(a) hereof at such time, equals or exceeds the outstanding Revolving Loans at such time. Borrower agrees to pay all customary fees, costs and expenses in connection with opening and maintaining the Lock Box and Lock Box Account.  All of such fees, costs and expenses if not paid by Borrower, may be paid by Lender and
in such event all amounts paid by Lender shall constitute Liabilities hereunder, shall be payable to Lender by Borrower upon demand, and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder.  All checks, drafts, instruments and other items of payment or Proceeds of Collateral shall be endorsed by Borrower to Lender, and, if that endorsement of any such item shall not be made for any reason, Lender is hereby irrevocably authorized to endorse the same on Borrower's behalf.  For the purpose of this section, Borrower irrevocably hereby makes, constitutes and appoints Lender (and all Persons designated by Lender for that purpose) as Borrower's true and lawful attorney and agent-in-fact (i) to endorse Borrower's name upon said items of payment and/or Proceeds of Collateral and upon any Chattel Paper, Document, Instrument, invoice or similar document or agreement relating to any Account of Borrower or Goods pertaining thereto; (ii) to take control
in any manner of any item of payment or Proceeds thereof and (iii) to have access to any lock box or postal box into which any of Borrower's mail is deposited, and open and process all mail addressed to Borrower and deposited therein.

(b)          Lender may, at any time and from time to time after the occurrence and during the continuance of an Event of Default, whether before or after notification to any Account Debtor and whether before or after the maturity of any of the Liabilities, (i) enforce collection of any of Borrower's Accounts or other amounts owed to Borrower by suit or otherwise; (ii) exercise all of Borrower's rights and remedies with respect to proceedings brought to collect any Accounts or other amounts owed to Borrower; (iii) surrender, release or exchange all or any part of any Accounts or other amounts owed to Borrower, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder; (iv) sell or assign any Account of Borrower
or other amount owed to Borrower upon such terms, for such amount and at such time or times as Lender deems advisable; (v) prepare, file and sign Borrower's name on any proof of claim in bankruptcy or other similar document against any Account Debtor or other Person obligated to Borrower; and (vi) do all other acts and things which are necessary, in Lender's sole discretion, to fulfill Borrower's obligations under this Agreement and the Other Agreements and to allow Lender to collect the Accounts or other amounts owed to Borrower.  In addition to any other provision hereof, Lender may at any time, after the occurrence and during the continuance of an Event of Default, at Borrower's expense, notify any parties obligated on any of the Accounts to make payment directly to Lender of any amounts due or to become due thereunder.

 

Ver 9

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(c)          For purposes of calculating interest and fees, Lender shall, within two (2) Business Days after receipt by Lender at its office in Chicago, Illinois of (i) checks and (ii) cash or other immediately available funds from collections of items of payment and Proceeds of any Collateral, apply the whole or any part of such collections or Proceeds against the Liabilities in such order as Lender shall determine in its sole discretion.  For purposes of determining the amount of Loans available for borrowing purposes, checks and cash or other immediately available funds from collections of items of payment and Proceeds of any Collateral shall be applied in whole or in part against the Liabilities, in such order as Lender shall determine in its sole discretion, on the day of receipt, subject
to actual collection.

(d)          On a monthly basis, Lender shall deliver to Borrower an account statement showing all Loans, charges and payments, which shall be deemed final, binding and conclusive upon Borrower unless Borrower notifies Lender in writing, specifying any error therein, within thirty (30) days of the date such account statement is sent to Borrower and any such notice shall only constitute an objection to the items specifically identified.

9.            COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.

	
             
  	
            (a)
 	
            Daily Reports.
 

Borrower shall deliver to Lender an executed daily loan report and certificate in Lender's then current form at least two times each week, which shall be accompanied by copies of Borrower's sales journal, cash receipts journal and credit memo journal for the relevant period.  Such report shall reflect the activity of Borrower with respect to Accounts for the period commencing from the date the prior daily report was submitted to Lender to the date the current daily report is submitted to Lender, and shall be in a form and with such specificity as is satisfactory to Lender and shall contain such additional information concerning Accounts and Inventory as may be requested by Lender including, without limitation, but only if specifically requested by Lender, copies of all invoices prepared in connection with such Accounts.

	
             
  	
            (b)
 	
            Monthly Reports.
 

Borrower shall deliver to Lender, in addition to any other reports, as soon as practicable and in any event: (i) within ten (10) days after the end of each month, (A) a detailed trial balance of Borrower's Accounts aged per invoice date, in form and substance reasonably satisfactory to Lender including, without limitation, the names and addresses of all Account Debtors of Borrower, and (B) a summary and detail of accounts payable (such Accounts and accounts payable divided into such time intervals as Lender may require in its sole discretion), including a listing of any held checks; and (ii) within twenty (20) days after the end of each month, the general ledger inventory account balance, a perpetual inventory report and Lender's standard form of Inventory report then in effect or the form most recently requested from Borrower by Lender, for Borrower by each category of Inventory,
together with a description of the monthly change in each category of Inventory.

 

Ver 9

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            (c)
 	
            Financial Statements.
 

Borrower shall deliver to Lender the following financial information, all of which shall be prepared in accordance with generally accepted accounting principles onsistently applied, and shall be accompanied by a compliance certificate in the form of Exhibit B hereto, which compliance certificate shall include a calculation of all financial covenants contained in this Agreement:  (i) no later than twenty (20) days after each calendar month, copies of internally prepared financial statements, including, without limitation, balance sheets and statements of income, retained earnings and cash flow of Borrower, certified by the Chief Financial Officer of Borrower and (ii) no later than ninety (90) days after the end of each of Borrower's Fiscal Years, audited annual financial statements with an unqualified opinion by independent certified public
accountants selected by Borrower and reasonably satisfactory to Lender which shall include, without limitation, McGladrey & Pullen, LLP, which financial statements shall be accompanied by (A) a letter from such accountants acknowledging that they are aware that a primary intent of Borrower in obtaining such financial statements is to influence Lender and that Lender is relying upon such financial statements in connection with the exercise of its rights hereunder, provided, that Borrower shall only be required to use its reasonable efforts exercised in good faith to obtain such letter; (B) copies of any management letters sent to the Borrower by such accountants and (C) a peer review letter of Borrower’s accountants.

	
             
  	
            (d)
 	
            Annual Projections.
 

As soon as practicable and in any event prior to the beginning of each Fiscal Year, Borrower shall deliver to Lender projected balance sheets, statements of income and cash flow for Borrower, for each of the twelve (12) months during such Fiscal Year, which shall include the assumptions used therein, together with appropriate supporting details as reasonably requested by Lender.

	
             
  	
            (e)
 	
            Explanation of Budgets and Projections.
 

In conjunction with the delivery of the annual presentation of projections or budgets referred to in subsection 9(d) above, Borrower shall deliver a letter signed by the President or a Vice President of Borrower and by the Treasurer or Chief Financial Officer of Borrower, describing, comparing and analyzing, in detail, all changes and developments between the anticipated financial results included in such projections or budgets and the historical financial statements of Borrower.

	
             
  	
            (f)
 	
            Public Reporting.
 

Promptly upon the filing thereof, Borrower shall deliver to Lender copies of all registration statements and annual, quarterly, monthly or other regular reports which Borrower or any of its Subsidiaries files with the Securities and Exchange Commission, as well as promptly providing to Lender copies of any reports and proxy statements delivered to its shareholders.

 

Ver 9

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            (g)
 	
            Other Information.
 

Promptly following request therefor by Lender, such other business or financial data, reports, appraisals and projections as Lender may reasonably request.

	
             
  	
            10.
 	
            TERMINATION; AUTOMATIC RENEWAL.
 

THIS AGREEMENT SHALL BE IN EFFECT FROM THE DATE HEREOF UNTIL THE EARLIER TO OCCUR OF: (w) JULY 19, 2008 (THE “FINAL MATURITY DATE”) AND (x) A DATE THAT IS THIRTY (30) DAYS PRIOR TO THE EARLIEST MATURITY DATE (WHETHER BY ACCELERATION OR OTHERWISE) SET FORTH IN ANY INSTRUMENT, DOCUMENT OR AGREEMENT CONSTITUTING THE SUBORDINATED INDEBTEDNESS, AS SUCH INSTRUMENT, DOCUMENT OR AGREEMENT IS IN EFFECT AS OF THE DATE HEREOF OR AS SUCH INSTRUMENT, DOCUMENT OR AGREEMENT EVIDENCING THE SUBORDINATED INDEBTEDNESS MAY BE AMENDED IN ACCORDANCE WITH THE TERMS OF ANY SUBORDINATION AGREEMENT BETWEEN LENDER AND THE HOLDER OF SUCH SUBORDINATED INDEBTEDNESS, PROVIDED THAT ANY EXTENSION OF THE MATURITY DATE OF ANY SUBORDINATED INDEBTEDNESS SHALL NOT BE EFFECTIVE TO EXTEND THE ORIGINAL TERM HEREOF WITHOUT THE CONSENT OF LENDER (THE "ORIGINAL TERM") UNLESS THE DUE DATE OF THE LIABILITIES IS
ACCELERATED PURSUANT TO SECTION 16 HEREOF.  If one or more of the events specified above occurs or this Agreement otherwise expires, then (i) Lender shall not make any additional Loans on or after the date identified as the date on which the Liabilities are to be repaid; and (ii) this Agreement shall terminate on the date thereafter that the Liabilities are paid in full.  At such time as Borrower has repaid all of the Liabilities and this Agreement has terminated, Borrower shall deliver to Lender a release, in form and substance satisfactory to Lender, of all obligations and liabilities of Lender and its officers, directors, employees, agents, parents, subsidiaries and affiliates to Borrower, and if Borrower is obtaining new financing from another lender, Borrower shall deliver such lender's indemnification of Lender, in form and substance satisfactory to Lender, for checks which Lender has
credited to Borrower's account, but which subsequently are dishonored for any reason or for automatic clearinghouse or wire transfers not yet posted to Borrower’s account.  If, during the term of this Agreement, Borrower prepays all of the Liabilities and this Agreement is terminated, Borrower agrees to pay to Lender as a prepayment fee, in addition to the payment of all other Liabilities, an amount equal to (i) three percent (3%) of the Maximum Loan Limit if such prepayment occurs two (2) years or more prior to the Final Maturity Date, (ii) two percent (2%) of the Maximum Loan Limit if such prepayment occurs less than two (2) years, but at least one (1) year prior to the Final Maturity Date, or (iii) one percent (1%) of the Maximum Loan Limit if such prepayment occurs less than one (1) year prior to the end of the Final Maturity Date.  Notwithstanding the foregoing, in the event that the Loans are prepaid in full in conjunction with a refinance of the Subordinated
Indebtedness and this Agreement is terminated, then Borrower shall not be required to pay a prepayment fee.

 

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            11.
 	
            REPRESENTATIONS AND WARRANTIES.
 

Borrower hereby represents and warrants to Lender, which representations and warranties (whether appearing in this Section 11 or elsewhere) shall be true at the time of Borrower's execution hereof and the closing of the transactions described herein or related hereto, shall remain true until the repayment in full and satisfaction of all the Liabilities and termination of this Agreement, and shall be remade by Borrower at the time each Loan is made pursuant to this Agreement, provided, that representations and warranties made as of a particular date shall be true and correct as of such date.

	
             
  	
            (a)
 	
            Financial Statements and Other Information.
 

The financial statements and other information delivered or to be delivered by Borrower to Lender at or prior to the date of this Agreement fairly present in all material respects the financial condition of Borrower, and there has been no material adverse change in the financial condition, the operations or any other status of Borrower since the date of the financial statements delivered to Lender most recently prior to the date of this Agreement.  All written information now or heretofore furnished by Borrower to Lender is true and correct as of the date with respect to which such information was furnished.

 

	
             
  	
            (b)
 	
            Locations.
 

The office where Borrower keeps its books, records and accounts (or copies thereof) concerning the Collateral, Borrower's principal place of business and all of orrower's other places of business, locations of Collateral and post office boxes and locations of bank accounts are as set forth in Exhibit A and at other locations within the continental United States of which Lender has been advised by Borrower in accordance with subsection 12(b)(i).  The Collateral, including, without limitation, the Equipment (except any part thereof which Borrower shall have advised Lender in writing consists of Collateral normally used in more than one state) is kept, or, in the case of vehicles, based, only at the addresses set forth on Exhibit A, and at other
locations within the continental United States of which Lender has been advised by Borrower in writing in accordance with subsection 12(b)(i) hereof.

	
             
  	
            (c)
 	
            Loans by Borrower.
 

Borrower has not made any loans or advances to any Affiliate or other Person except for advances authorized hereunder to employees, officers and directors of Borrower for travel and other expenses arising in the ordinary course of Borrower's business.

	
             
  	
            (d)
 	
            Accounts and Inventory.
 

Each Account or item of Inventory which Borrower shall, expressly or by implication, request Lender to classify as an Eligible Account or as Eligible Inventory, respectively, shall, as of the time when such request is made, conform in all respects to the 

 

Ver 9

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requirements of such classification as set forth in the respective definitions of "Eligible Account" and "Eligible Inventory" as set forth herein and as otherwise established by Lender from time to time.

	
             
  	
            (e)
 	
            Liens.
 

Borrower is the lawful owner of all Collateral now purportedly owned or hereafter purportedly acquired by Borrower, free from all liens, claims, security interests and encumbrances whatsoever, whether voluntarily or involuntarily created and whether or not perfected, other than the Permitted Liens.

	
             
  	
            (f)
 	
            Organization, Authority and No Conflict.
 

Borrower is a corporation, duly organized, validly existing and in good standing in the State of Indiana, its state organizational identification number is 2001042700056 and Borrower is duly qualified and in good standing in all states where the nature and extent of the business transacted by it or the ownership of its assets makes such qualification necessary or, if Borrower is not so qualified, Borrower may cure any such failure without losing any of its rights, incurring any liens or material penalties, or otherwise affecting Lender’s rights.  Borrower has the right and power and is duly authorized and empowered to enter into, execute and deliver this Agreement and the Other Agreements and perform its obligations hereunder and thereunder. Borrower's execution, delivery and performance of this Agreement and the Other Agreements does not conflict with the provisions of the
organizational documents of Borrower, any statute, regulation, ordinance or rule of law, or any agreement, contract or other document which may now or hereafter be binding on Borrower, except for conflicts with agreements, contracts or other documents which would not have a Material Adverse Effect on Borrower, and Borrower's execution, delivery and performance of this Agreement and the Other Agreements shall not result in the imposition of any lien or other encumbrance upon any of Borrower's property (other than Permitted Liens) under any existing indenture, mortgage, deed of trust, loan or credit agreement or other agreement or instrument by which Borrower or any of its property may be bound or affected.

	
             
  	
            (g)
 	
            Litigation.
 

Except as disclosed to Lender on Schedule 11(g) hereto, there are no actions or proceedings which are pending or, to the best of Borrower’s knowledge, threatened against Borrower which is, in the determination of Lender, reasonably likely to have a Material Adverse Effect on Borrower, and Borrower shall, promptly upon becoming aware of any such pending or threatened action or proceeding, give written notice thereof to Lender.  Borrower has no Commercial Tort Claims pending other than those set forth on Exhibit C hereto as Exhibit C may be amended from time to time.

 

Ver 9

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            (h)
 	
            Compliance with Laws and Maintenance of Permits.
 

Borrower has obtained all governmental consents, franchises, certificates, licenses, authorizations, approvals and permits, the lack of which would have a Material Adverse Effect on Borrower.  Borrower is in compliance in all material respects with all applicable federal, state, local and foreign statutes, orders, regulations, rules and ordinances (including, without limitation, Environmental Laws and statutes, orders, regulations, rules and ordinances relating to taxes, employer and employee contributions and similar items, securities, ERISA or employee health and safety) the failure to comply with which would have a Material Adverse Effect on Borrower.

	
             
  	
            (i)
 	
            Affiliate Transactions.
 

Except as set forth on Schedule 11(i) hereto or as permitted pursuant to subsection 11(c) hereof, Borrower is not conducting, permitting or suffering to be conducted, transactions with any Affiliate other than transactions with Affiliates for the purchase or sale of Inventory or services in the ordinary course of business pursuant to terms that are no less favorable to Borrower than the terms upon which such transactions would have been made had they been made to or with a Person that is not an Affiliate.

	
             
  	
            (j)
 	
            Names and Trade Names.
 

Borrower's name has always been as set forth on the first page of this Agreement and Borrower uses no trade names, assumed names, fictitious names or division names in the operation of its business, except as set forth on Schedule 11(j) hereto.

	
             
  	
            (k)
 	
            Equipment.
 

Except for Permitted Liens, Borrower has good and indefeasible and merchantable title to and ownership of all Equipment.  No Equipment is a Fixture to real estate unless such real estate is owned by Borrower and is subject to a mortgage in favor of Lender, or if such real estate is leased, is subject to a landlord's agreement in favor of Lender on terms acceptable to Lender, or an accession to other personal property unless such personal property is subject to a first priority lien in favor of Lender.

 

	
             
  	
            (l)
 	
            Enforceability.
 

This Agreement and the Other Agreements to which Borrower is a party are the legal, valid and binding obligations of Borrower and are enforceable against Borrower in accordance with their respective terms.

	
             
  	
            m)
 	
            Solvency.
 

Borrower is, after giving effect to the transactions contemplated hereby, solvent, able to pay its debts as they become due, has capital sufficient to carry on its business, now owns property having a value both at fair valuation and at present fair saleable 

 

Ver 9

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value greater than the amount required to pay its debts, and will not be rendered insolvent by the execution and delivery of this Agreement or any of the Other Agreements or by completion of the transactions contemplated hereunder or thereunder.

	
             
  	
            (n)
 	
            Indebtedness.
 

Except as set forth on Schedule 11(n) hereto or as permitted herein, Borrower is not obligated (directly or indirectly), for any loans or other indebtedness for borrowed money other than the Loans.

	
             
  	
            (o)
 	
            Margin Security and Use of Proceeds.
 

Borrower does not own any margin securities, and none of the proceeds of the Loans hereunder shall be used for the purpose of purchasing or carrying any margin securities or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase any margin securities or for any other purpose not permitted by Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.

	
             
 	
            (p)
 	
            Parent, Subsidiaries and Affiliates.
 

Except as set forth on Schedule 11(p) hereto, Borrower has no Parents, Subsidiaries or other Affiliates or divisions, nor is Borrower engaged in any joint venture or partnership with any other Person.

	
             
 	
            (q)
 	
            No Defaults.
 

Borrower is not in default under any material contract, lease or commitment to which it is a party or by which it is bound, nor does Borrower know of any dispute regarding any contract, lease or commitment which would have a Material Adverse Effect on Borrower.

	
             
 	
            (r)
 	
            Employee Matters.
 

There are no controversies pending or threatened between Borrower and any of its employees, agents or independent contractors other than employee grievances arising in the ordinary course of business which would not, in the aggregate, have a Material Adverse Effect on Borrower, and Borrower is in compliance with all federal and state laws respecting employment and employment terms, conditions and practices except for such non-compliance which would not have a Material Adverse Effect on Borrower.

	
             
 	
            (s)
 	
            Intellectual Property.
 

Borrower possesses adequate licenses, patents, patent applications, copyrights, service marks, trademarks, trademark applications, tradestyles and trade names to continue to conduct its business as heretofore conducted by it, except to the extent that the failure to possess such items would not have a Material Adverse Effect on Borrower.

 

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            (t)
 	
            Environmental Matters.
 

Borrower has not generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any manner which at any time violates in any material respect any Environmental Law or any license, permit, certificate, approval or similar authorization thereunder and the operations of the Borrower comply in all material respects with all Environmental Laws and all licenses, permits, certificates, approvals and similar authorizations thereunder.  There has been no investigation, proceeding, complaint, order, directive, claim, citation or notice by any governmental authority or any other Person, nor is any pending or to the best of the Borrower’s knowledge threatened with respect to any non-compliance with or violation of the requirements of any Environmental Law by the Borrower or the
release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter, which affects the Borrower or its business, operations or assets or any properties at which the Borrower has transported, stored or disposed of any Hazardous Materials.  Borrower has no material liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials.

	
             
 	
            (u)
 	
            ERISA Matters.
 

Borrower has paid and discharged 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.

	
             
  	
            12.
 	
            AFFIRMATIVE COVENANTS.
 

Until payment and satisfaction in full of all Liabilities and termination of this Agreement, unless Borrower obtains Lender's prior written consent waiving or modifying any of Borrower's covenants hereunder in any specific instance, Borrower covenants and agrees as follows:

	
             
  	
            (a)
 	
            Maintenance of Records.
 

Borrower shall at all times keep accurate and complete books, records and accounts with respect to all of Borrower's business activities, in accordance with sound accounting practices and generally accepted accounting principles consistently applied, and shall keep such books, records and accounts, and any copies thereof, only at the addresses indicated for such purpose on Exhibit A.

 

Ver 9

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            (b)
 	
            Notices.
 

Borrower shall:

(i)           Locations.  Promptly (but in no event less than ten (10) days prior to the occurrence thereof) notify Lender of the proposed opening of any new place of business or new location of Collateral, the closing of any existing place of business or location of Collateral, any change of in the location of Borrower's books, records and accounts (or copies thereof), the opening or closing of any post office box, the opening or closing of any bank account or, if any of the Collateral consists of Goods of a type normally used in more than one state, the use of any such Goods in any state other than a state in which Borrower has previously advised Lender that such Goods will be used.

(ii)         Eligible Accounts and Inventory.  Promptly upon becoming aware thereof, notify Lender if any Account or Inventory identified by Borrower to Lender as an Eligible Account or Eligible Inventory becomes ineligible for any reason.

(iii)        Litigation and Proceedings.  Promptly upon becoming aware thereof, notify Lender of any actions or proceedings which are pending or threatened against Borrower which might have a Material Adverse Effect on Borrower and of any Commercial Tort Claims of Borrower which may arise, which notice shall constitute Borrower's authorization to amend Exhibit C to add such Commercial Tort Claim.

(iv)        Names and Trade Names.  Notify Lender within ten (10) days of the change of its name or the use of any trade name, assumed name, fictitious name or division name not previously disclosed to Lender in writing.

(v)          ERISA Matters.  Promptly notify Lender of (x) the occurrence of any "reportable event" (as defined in ERISA) which might result in the termination by the Pension Benefit Guaranty Corporation (the "PBGC") of any employee benefit plan ("Plan") covering any officers or employees of the Borrower, any benefits of which are, or are required to be, guaranteed by the PBGC, (y) receipt of any notice from the PBGC of its intention to seek termination of any Plan or appointment of a trustee therefor or (z) its intention to terminate or withdraw from any Plan.

(vi)        Environmental Matters.  Immediately notify Lender upon becoming aware of any investigation, proceeding, complaint, order, directive, claim, citation or notice with respect to any non-compliance with or violation of the requirements of any Environmental Law by Borrower or the generation, use, storage, treatment, transportation, manufacture handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter which affects Borrower or its business operations or assets or any properties at which Borrower has 

 

Ver 9

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transported, stored or disposed of any Hazardous Materials, unless the foregoing could not reasonably be expected to have a Material Adverse Effect on Borrower.

(vii)       Default; Material Adverse Change.  Promptly advise Lender of any material adverse change in the business, property, assets, prospects, operations or condition, financial or otherwise, of Borrower, the occurrence of any Event of Default hereunder or the occurrence of any event which, if uncured, will become an Event of Default after notice or lapse of time (or both).

All of the foregoing notices shall be provided by Borrower to Lender in writing.

	
             
  	
            (c)
 	
            Compliance with Laws and Maintenance of Permits.
 

Borrower shall maintain all governmental consents, franchises, certificates, licenses, authorizations, approvals and permits, the lack of which would have a Material Adverse Effect on Borrower and Borrower shall remain in compliance with all applicable federal, state, local and foreign statutes, orders, regulations, rules and ordinances (including, without limitation, Environmental Laws and statutes, orders, regulations, rules and ordinances relating to taxes, employer and employee contributions and similar items, securities, ERISA or employee health and safety) the failure with which to comply would have a Material Adverse Effect on Borrower.  Following any determination by Lender that there is non-compliance, or any condition which requires any action by or on behalf of Borrower in order to avoid non-compliance, with any Environmental Law, at Borrower's expense cause an independent
environmental engineer acceptable to Lender to conduct such tests of the relevant site(s) as are appropriate and prepare and deliver a report setting forth the results of such tests, a proposed plan for remediation and an estimate of the costs thereof.

	
             
  	
            (d)
 	
            Inspection and Audits.
 

Borrower shall permit Lender, or any Persons designated by it, to call at Borrower's places of business at any reasonable times, and, without hindrance or delay, to inspect the Collateral and to inspect, audit, check and make extracts from Borrower's books, records, journals, orders, receipts and any correspondence and other data relating to Borrower's business, the Collateral or any transactions between the parties hereto, and shall have the right to make such verification concerning Borrower's business as Lender may consider reasonable under the circumstances.  Borrower shall furnish to Lender such information relevant to Lender's rights under this Agreement and the Other Agreements as Lender shall at any time and from time to time request.  Lender, through its officers, employees or agents shall have the right, at any time and from time to time, in Lender's name, to verify the
validity, amount or any other matter relating to any of Borrower's Accounts, by mail, telephone, telecopy, electronic mail, or otherwise, provided that prior to the occurrence of an Event of Default, Lender shall conduct such verification in the name of a nominee of Lender or in Borrower’s name.  Borrower authorizes Lender to discuss the affairs, finances and business of Borrower with any officers, employees or directors of Borrower or with its Parent or any Affiliate or the officers, employees or directors of its Parent or any Affiliate, and to discuss the financial condition of Borrower with Borrower's independent public 

 

Ver 9

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accountants.  Any such discussions shall be without liability to Lender or to Borrower's independent public accountants.  Borrower shall pay to Lender all customary fees and all costs and out-of-pocket expenses incurred by Lender in the exercise of its rights hereunder, and all of such fees, costs and expenses shall constitute Liabilities hereunder, shall be payable on demand and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder.

	
             
  	
            (e)
 	
            Insurance.
 

Borrower shall:

(i)           Keep the Collateral properly housed and insured for the full insurable value thereof against loss or damage by fire, theft, explosion, sprinklers, collision (in the case of motor vehicles) and such other risks as are customarily insured against by Persons engaged in businesses similar to that of Borrower, with such companies, in such amounts, with such deductibles, and under policies in such form, as shall be satisfactory to Lender.  Original (or certified) copies of such policies of insurance have been or shall be, within ninety (90) days of the date hereof, delivered to Lender, together with evidence of payment of all premiums therefor, and shall contain an endorsement, in form and substance acceptable to Lender, showing loss under such insurance policies
payable to Lender.  Such endorsement, or an independent instrument furnished to Lender, shall provide that the insurance company shall give Lender at least thirty (30) days written notice before any such policy of insurance is altered or canceled and that no act, whether willful or negligent, or default of Borrower or any other Person shall affect the right of Lender to recover under such policy of insurance in case of loss or damage.  In addition, Borrower shall cause to be executed and delivered to Lender an assignment of proceeds of its business interruption insurance policies.  Borrower hereby directs all insurers under all policies of insurance to pay all proceeds payable thereunder directly to Lender.  Borrower irrevocably makes, constitutes and appoints Lender (and all officers, employees or agents designated by Lender) as Borrower's true and lawful attorney (and agent-in-fact) for the purpose of making, settling and adjusting claims under such policies of insurance, endorsing
the name of Borrower on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and making all determinations and decisions with respect to such policies of insurance, provided however, that if no Event of Default shall have occurred and is continuing, Borrower may make, settle and adjust claims involving less than $25,000.00 in the aggregate without Lender’s consent.

(ii)          Maintain, at its expense, such public liability and third party property damage insurance as is customary for Persons engaged in businesses similar to that of Borrower with such companies and in such amounts, with such deductibles and under policies in such form as shall be satisfactory to Lender and original (or certified) copies of such policies have been or shall be, within ninety (90) days after the date hereof, delivered to Lender, together with evidence of payment of all 

 

Ver 9

 

-32-

 

premiums therefor; each such policy shall contain an endorsement showing Lender as additional insured thereunder and providing that the insurance company shall give Lender at least thirty (30) days written notice before any such policy shall be altered or canceled.

If Borrower at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above or to pay any premium relating thereto, then Lender, without waiving or releasing any obligation or default by Borrower hereunder, may (but shall be under no obligation to) obtain and maintain such policies of insurance and pay such premiums and take such other actions with respect thereto as Lender deems advisable upon notice to Borrower.  Such insurance, if obtained by Lender, may, but need not, protect Borrower's interests or pay any claim made by or against Borrower with respect to the Collateral.  Such insurance may be more expensive than the cost of insurance Borrower may be able to obtain on its own and may be cancelled only upon Borrower providing evidence that it has obtained the insurance as required above.  All sums disbursed by Lender in connection with any such actions,
including, without limitation, court costs, expenses, other charges relating thereto and reasonable attorneys' fees, shall constitute Loans hereunder, shall be payable on demand by Borrower to Lender and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder.

	
             
  	
            (f)
 	
            Collateral.
 

Borrower shall keep the Collateral in good condition, repair and order and shall make all necessary repairs to the Equipment and replacements thereof so that the operating efficiency and the value thereof shall at all times be preserved and maintained in all material respects.  Borrower shall permit Lender to examine any of the Collateral at any time and wherever the Collateral may be located and, Borrower shall, immediately upon request therefor by Lender, deliver to Lender any and all evidence of ownership of any of the Equipment including, without limitation, certificates of title and applications of title.  Borrower shall, at the request of Lender, indicate on its records concerning the Collateral a notation, in form satisfactory to Lender, of the security interest of Lender hereunder.

	
             
  	
            (g)
 	
            Use of Proceeds.
 

All monies and other property obtained by Borrower from Lender pursuant to this Agreement shall be used solely for business purposes of Borrower.

	
             
  	
            (h)
 	
            Taxes.
 

Borrower shall file all required tax returns and pay all of its taxes when due, subject to any extensions granted by the applicable taxing authority, including, without limitation, taxes imposed by federal, state or municipal agencies, and shall cause any liens for taxes to be promptly released; provided, that Borrower shall have the right to contest the payment of such taxes in good faith by appropriate proceedings so long as (i) the amount so contested is shown on Borrower's financial statements; (ii) the contesting of any such payment does not give rise to a lien for taxes; (iii) Borrower keeps on deposit with Lender 

 

Ver 9

-33-

 

 

(such deposit to be held without interest) or a reserve is maintained against Borrower’s availability to borrow money under subsection 2(a), in either case, in an amount of money which, in the sole judgment of Lender, is sufficient to pay such taxes and any interest or penalties that may accrue thereon; and (iv) if Borrower fails to prosecute such contest with reasonable diligence, Lender may apply the money so deposited in payment of such taxes.  If Borrower fails to pay any such taxes and in the absence of any such contest by Borrower, Lender may (but shall be under no obligation to) advance and pay any sums required to pay any such taxes and/or to secure the release of any lien therefor, and any sums so advanced by Lender shall constitute Loans hereunder, shall be payable by Borrower to Lender on demand, and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder.

	
             
  	
            (i)
 	
            Intellectual Property.
 

Borrower shall maintain adequate licenses, patents, patent applications, copyrights, service marks, trademarks, trademark applications, tradestyles and trade names to continue its business as heretofore conducted by it or as hereafter conducted by it unless the failure to maintain any of the foregoing could not reasonably be expected to have a Material Adverse Effect on Borrower.

	
             
  	
            (j)
 	
            Checking Accounts and Cash Management Services.
 

Borrower shall maintain its controlled disbursement account with LaSalle Bank.  Normal charges shall be assessed thereon.  In addition, Borrower shall enter into agreements with LaSalle Bank for standard cash management services.  Borrower shall be responsible for all normal charges assessed thereon.  

(k)          Patriot Act, Bank Secrecy Act and Office of Foreign Assets Control.

As required by federal law and the Lender’s policies and practices, Lender may need to obtain, verify and record certain customer identification information and documentation in connection with opening or maintaining accounts, or establishing or continuing to provide services and Borrower agrees to provide such information. In addition, and without limiting the foregoing sentence, the Borrower shall (a) ensure, and cause each Subsidiary to ensure, that no Person who owns a controlling interest in or otherwise controls the Borrower or any Subsidiary is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control ("OFAC"), the Department of the Treasury or included in any Executive Orders, (b) not use or permit the use of the proceeds of the Loans to violate any of the foreign asset
control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (c) comply, and cause each Subsidiary to comply, with all applicable Bank Secrecy Act ("BSA") laws and regulations, as amended.

 

 

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            13.
 	
            NEGATIVE COVENANTS.
 

Until payment and satisfaction in full of all Liabilities and termination of this Agreement, unless Borrower obtains Lender's prior written consent waiving or modifying any of Borrower's covenants hereunder in any specific instance, Borrower agrees as follows:

	
             
  	
            (a)
 	
            Guaranties.
 

Borrower shall not assume, guarantee or endorse, or otherwise become liable in connection with, the obligations of any Person, except by endorsement of instruments for deposit or collection or similar transactions in the ordinary course of business.

	
             
  	
            (b)
 	
            Indebtedness.
 

Borrower shall not create, incur, assume or become obligated (directly or indirectly), for any loans or other indebtedness for borrowed money other than the Loans, except that Borrower may (i) except as provided in clause (iii) of this subsection (b), borrow money from a Person other than Lender on an unsecured and subordinated basis if a subordination agreement in favor of Lender and in form and substance satisfactory to Lender is executed and delivered to Lender relative thereto; (ii) maintain its present indebtedness listed on Schedule 11(n) hereto; (iii) maintain indebtedness that constitutes Subordinated Indebtedness provided that each holder of Subordinated Indebtedness shall execute and deliver to Lender a Subordination Agreement in form and substance satisfactory to Lender, provided further that Borrower shall not extend the
maturity date of any of such Subordinated Indebtedness without the prior written consent of Lender; (iv) incur unsecured indebtedness to trade creditors in the ordinary course of business and (v) incur purchase money indebtedness or capitalized lease obligations in connection with Capital Expenditures permitted pursuant to subsection 14(c) hereof. 

	
             
 	
            (c)
 	
            Liens
 

Borrower shall not grant or permit to exist (voluntarily or involuntarily) any lien, claim, security interest or other encumbrance whatsoever on any of its assets, other than Permitted Liens.

(d)          Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions Outside the Ordinary Course of Business.

Borrower shall not (i) enter into any merger or consolidation; (ii) change the state of Borrower's organization or enter into any transaction which has the effect of changing Borrower's state of organization; (iii) sell, lease or otherwise dispose of any of its assets other than in the ordinary course of business; (iv) purchase the stock, other equity interests or all or a material portion of the assets of any Person or division of such Person; or (v) enter into any other transaction outside the ordinary course of Borrower's business, including, without limitation, any purchase, redemption or retirement of any shares of any class of its stock or any other equity interest, and any issuance of any shares of, or warrants 

 

Ver 9

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or other rights to receive or purchase any shares of, any class of its stock or any other equity interest.  Borrower shall not form any Subsidiaries or enter into any joint ventures or partnerships with any other Person.

	
             
 	
            (e)
 	
            Dividends and Distributions.
 

Borrower shall not declare or pay any dividend or other distribution (whether in cash or in kind) on any class of its stock (if Borrower is a corporation) or on account of any equity interest in Borrower (if Borrower is a partnership, limited liability company or other type of entity).

	
             
 	
            (f)
 	
            Investments; Loans.
 

Borrower shall not purchase or otherwise acquire, or contract to purchase or otherwise acquire, the obligations or stock of any Person, other than direct obligations of the United States, obligations insured by the Federal Deposit Insurance Corporation and obligations unconditionally guaranteed by the United States; nor shall Borrower lend or otherwise advance funds to any Person except for advances made to employees, officers and directors for travel and other expenses arising in the ordinary course of business and loans to employees not exceeding One Hundred Thousand and No/100 Dollars ($100,000.00) in the aggregate outstanding for all Persons at any one time.

	
             
 	
            (g)
 	
            Fundamental Changes, Line of Business.
 

Borrower shall not amend its organizational documents or change its Fiscal Year or enter into a new line of business materially different from Borrower's current business unless (i) such actions would not have a Material Adverse Effect on the Borrower; (ii) such actions would not affect the obligations of Borrower to Lender; (iii) such actions would not affect the interpretation of any of the terms of this Agreement or the Other Agreements and (iv) Lender has received ten (10) days prior written notice of such amendment or change.

	
             
 	
            (h)
 	
            Equipment.
 

Borrower shall not (i) permit any Equipment to become a Fixture to real property unless such real property is owned by Borrower and is subject to a mortgage in favor of Lender, or if such real estate is leased, is subject to a landlord's agreement in favor of Lender on terms acceptable to Lender, or (ii) permit any Equipment to become an accession to any other personal property unless such personal property is subject to a first priority lien in favor of Lender.

	
             
 	
            (i)
 	
            Affiliate Transactions.
 

Except as set forth on Schedule 11(i) hereto or as permitted pursuant to subsection 11(c) hereof, Borrower shall not conduct, permit or suffer to be conducted, transactions with Affiliates other than transactions for the purchase or sale of Inventory or 

 

Ver 9

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services in the ordinary course of business pursuant to terms that are no less favorable to Borrower than the terms upon which such transactions would have been made had they been made to or with a Person that is not an Affiliate.

	
             
 	
            (j)
 	
            Settling of Accounts.
 

Borrower shall not settle or adjust any Account identified by Borrower as an Eligible Account or with respect to which the Account Debtor is an Affiliate without the consent of Lender, provided, that following the occurrence and during the continuance of an Event of Default, Borrower shall not settle or adjust any Account without the consent of Lender.

	
             
 	
            (k)
 	
            Management Fees; Compensation.
 

Borrower shall not pay any management or consulting fees to any Persons.

	
             
  	
            14.
 	
            FINANCIAL COVENANTS.
 

Borrower shall maintain and keep in full force and effect each of the financial covenants set forth below:

	
             
  	
            (a)
 	
            Tangible Net Worth.
 

Borrower's Tangible Net Worth shall not at any time be less than the Minimum Tangible Net Worth; "Minimum Tangible Net Worth" being defined for purposes of this subsection as (i) $500,000.00 at all times from the date hereof through July 30, 2005 and (ii) thereafter, commencing July 31, 2005 and on the last day of each fiscal quarter of Borrower thereafter, the Minimum Tangible Net Worth during the immediately preceding fiscal quarter plus $50,000.00; and "Tangible Net Worth" being defined for purposes of this subsection as Borrower's shareholders' equity (including retained earnings) less the book value of all intangible assets as determined
solely by Lender on a consistent basis plus the amount of any LIFO reserve plus the amount of any debt subordinated to Lender, including, without limitation, the Subordinated Indebtedness, all as determined under generally accepted accounting principles applied on a basis consistent with the financial statement dated March 31, 2005 except as set forth herein;

	
             
  	
            (b)
 	
            Fixed Charge Coverage.
 

As of the last day of each fiscal month, for the twelve (12) month period ending on such date, Borrower shall not permit the ratio of its EBITDA to Fixed Charges to be less than 1.0 to 1.00.

	
             
  	
            (c)
 	
            Capital Expenditure Limitations.
 

Commencing November 1, 2005, Borrower  shall not make any Capital Expenditures if, after giving effect to such Capital Expenditure, the aggregate cost of all Capital Expenditures would exceed $75,000.00 during any Fiscal Year. 

 

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            15.
 	
            DEFAULT.
 

The occurrence of any one or more of the following events shall constitute an "Event of Default" by Borrower hereunder:

	
             
  	
            (a)
 	
            Payment.
 

The failure of any Obligor to pay when due, declared due, or demanded by Lender, any of the Liabilities.

	
             
  	
            (b)
 	
            Breach of this Agreement and the Other Agreements.
 

The failure of any Obligor to perform, keep or observe any of the covenants, conditions, promises, agreements or obligations of such Obligor under this Agreement or any of the Other Agreements; provided that any such failure by Borrower under subsections 12(b)(i), (iv), (v), (vi), 12(c) and 12(i) of this Agreement shall not constitute an Event of Default hereunder until the fifteenth (15th) day following the occurrence thereof.

	
             
  	
            (c)
 	
            Breaches of Other Obligations.
 

The failure of any Obligor to perform, keep or observe (after any applicable notice and cure period) any of the covenants, conditions, promises, agreements or obligations of such Obligor under any other agreement with any Person if such failure might have a Material Adverse Effect on such Obligor.

	
             
  	
            (d)
 	
            Breach of Representations and Warranties.
 

The making or furnishing by any Obligor to Lender of any representation, warranty, certificate, schedule, report or other communication within or in connection with this Agreement or the Other Agreements or in connection with any other agreement between such Obligor and Lender, which is untrue or misleading in any material respect as of the date made.

	
             
  	
            (e)
 	
            Loss of Collateral.
 

The loss, theft, damage or destruction of any of the Collateral in an amount in excess of $25,000.00 in the aggregate for all such events during any year of the Original Term as determined by Lender in its sole discretion determined in good faith, or (except as permitted hereby) sale, lease or furnishing under a contract of service of, any of the Collateral.

	
             
  	
            (f)
 	
            Levy, Seizure or Attachment.
 

The making or any attempt by any Person to make any levy, seizure or attachment upon any of the Collateral.

 

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            (g)
 	
            Bankruptcy or Similar Proceedings.
 

The commencement of any proceedings in bankruptcy by or against any Obligor or for the liquidation or reorganization of any Obligor, or alleging that such Obligor is insolvent or unable to pay its debts as they mature, or for the readjustment or arrangement of any Obligor's debts, whether under the United States Bankruptcy Code or under any other law, whether state or federal, now or hereafter existing, for the relief of debtors, or the commencement of any analogous statutory or non-statutory proceedings involving any Obligor; provided, however, that if such commencement of proceedings against such Obligor is involuntary, such action shall not constitute an Event of Default unless such proceedings are not dismissed within  forty-five (45) days after the commencement of such proceedings, though Lender shall have no obligation to make Loans to or issue, or cause to be issued, Letters of
Credit on behalf of Borrower during such  forty-five (45) day period or, if earlier, until such proceedings are dismissed.

	
             
  	
            (h)
 	
            Appointment of Receiver.
 

The appointment of a receiver or trustee for any Obligor, for any of the Collateral or for any substantial part of any Obligor's assets or the institution of any proceedings for the dissolution, or the full or partial liquidation, or the merger or consolidation, of any Obligor which is a corporation, limited liability company or a partnership; provided, however, that if such appointment or commencement of proceedings against such Obligor is involuntary, such action shall not constitute an Event of Default unless such appointment is not revoked or such proceedings are not dismissed within forty-five (45) days after the commencement of such proceedings, though Lender shall have no obligation to make Loans to or issue, or cause to be issued, Letters of Credit on behalf of Borrower during such forty-five (45) day period or, if earlier, until such appointment is revoked or such proceedings are dismissed.

	
             
  	
            (i)
 	
            Judgment.
 

The entry of any judgments or orders aggregating in excess of $10,000.00 against any Obligor which remains unsatisfied or undischarged and in effect for thirty (30) days after such entry without a stay of enforcement or execution.

	
             
  	
            (j)
 	
            Death or Dissolution of Obligor.
 

The death of any Obligor who is a natural Person, or of any general partner who is a natural Person of any Obligor which is a partnership, or any member who is a natural Person of any Obligor which is a limited liability company or the dissolution of any Obligor which is a partnership, limited liability company, corporation or other entity.

	
             
  	
            (k)
 	
            Default or Revocation of Guaranty.
 

The occurrence of an event of default under, or the revocation or termination of, any agreement, instrument or document executed and delivered by any Person to Lender 

 

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pursuant to which such Person has guaranteed to Lender the payment of all or any of the Liabilities or has granted Lender a security interest in or lien upon some or all of such Person's real and/or personal property to secure the payment of all or any of the Liabilities.

	
             
  	
            (l)
 	
            Criminal Proceedings.
 

The institution in any court of a criminal proceeding against any Obligor which would have a Material Adverse Effect on such Obligor, or the indictment of any Obligor for any crime other than traffic and boating tickets and misdemeanors not punishable by jail terms.

	
             
  	
            (m)
 	
            Change of Control.
 

The failure of Obsidian Enterprises, Inc. to own and have voting control of at least one hundred percent (100%) of the issued and outstanding voting equity interest of Borrower. 

	
             
  	
            (n)
 	
            Material Adverse Change.
 

Any material adverse change in the Collateral, business, property, assets, prospects, operations or condition, financial or otherwise of any Obligor, as determined by Lender in its sole judgment or the occurrence of any event which, in Lender's sole judgment, could have a Material Adverse Effect.

	
             
  	
            16.
 	
            REMEDIES UPON AN EVENT OF DEFAULT.
 

(a)          Upon the occurrence and during the continuance of an Event of Default described in subsection 15(g) hereof, all of the Liabilities shall immediately and automatically become due and payable, without notice of any kind.  Upon the occurrence of any other Event of Default, all Liabilities may, at the option of Lender, and without demand, notice or legal process of any kind, be declared, and immediately shall become, due and payable.

(b)          Upon the occurrence and during the continuance of an Event of Default, Lender may exercise from time to time any rights and remedies available to it under the Uniform Commercial Code and any other applicable law in addition to, and not in lieu of, any rights and remedies expressly granted in this Agreement or in any of the Other Agreements and all of Lender's rights and remedies shall be cumulative and non-exclusive to the extent permitted by law.  In particular, but not by way of limitation of the foregoing, Lender may, without notice, demand or legal process of any kind, take possession of any or all of the Collateral (in addition to Collateral of which it already has possession), wherever it may be found, and for that purpose may pursue the same wherever it may be found, and may
enter onto any of Borrower's premises where any of the Collateral may be, and search for, take possession of, remove, keep and store any of the Collateral until the same shall be sold or otherwise disposed of, and Lender shall have the right to store the same at any of Borrower's premises without cost to Lender.  At Lender's request, Borrower shall, at 

 

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Borrower's expense, assemble the Collateral and make it available to Lender at one or more places to be designated by Lender and reasonably convenient to Lender and Borrower.  Borrower recognizes that if Borrower fails to perform, observe or discharge any of its Liabilities under this Agreement or the Other Agreements, no remedy at law will provide adequate relief to Lender, and agrees that Lender shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.  Any notification of intended disposition of any of the Collateral required by law will be deemed to be a reasonable authenticated notification of disposition if given at least ten (10) days prior to such disposition and such notice shall (i) describe Lender and Borrower, (ii) describe the Collateral that is the subject of the intended disposition, (iii) state the method of the intended
disposition, (iv) state that Borrower is entitled to an accounting of the Liabilities and state the charge, if any, for an accounting and (v) state the time and place of any public disposition or the time after which any private sale is to be made.  Lender may disclaim any warranties that might arise in connection with the sale, lease or other disposition of the Collateral and has no obligation to provide any warranties at such time.  Any Proceeds of any disposition by Lender of any of the Collateral may be applied by Lender to the payment of expenses in connection with the Collateral, including, without limitation, legal expenses and reasonable attorneys' fees, and any balance of such Proceeds may be applied by Lender toward the payment of such of the Liabilities, and in such order of application, as Lender may from time to time elect.

	
             
  	
            17.
 	
            CONDITIONS PRECEDENT.
 

The obligation of Lender to fund the Term Loan(s), to fund the initial Revolving Loan, and to issue or cause to be issued the initial Letter of Credit, is subject to the satisfaction or waiver on or before the date hereof of the following conditions precedent:

(a)          Lender shall have received each of the agreements, opinions, reports, approvals, consents, certificates and other documents set forth on the closing document list attached hereto as Schedule 17(a) (the "Closing Document List") in each case in form and substance satisfactory to Lender;

(b)          Since March 31, 2005, no event shall have occurred which has had or could reasonably be expected to have a Material Adverse Effect on any Obligor, as determined by Lender in its sole discretion, determined in good faith;

(c)          Lender shall have received payment in full of all fees and expenses payable to it by Borrower or any other Person in connection herewith, on or before disbursement of the initial Loans hereunder;

(d)          Lender shall have determined that immediately after giving effect to (A) the making of the initial Loans, including without limitation the Term Loan and the Revolving Loans, if any, requested to be made on the date hereof, (B) the issuance of the initial Letter of Credit, if any, requested to be made on such date, (C) the payment of all fees due upon such date and (D) the payment or reimbursement by Borrower of Lender for all closing costs and expenses incurred in connection with the transactions contemplated hereby, 

 

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Borrower has Excess Availability of not less than One Million and No/100 Dollars ($1,000,000.00).

(e)          The Obligors shall have executed and delivered to Lender all such other documents, instruments and agreements which Lender determines are reasonably necessary to consummate the transactions contemplated hereby, including, without limitation, a Continuing Unconditional Guaranty from Obsidian Enterprises, Inc.

(f)           Borrower shall pledge to Lender two Certificates of Deposit, each in the amount of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) and shall execute and deliver to Lender such documents, instruments and agreements which Lender determines are reasonably necessary, including, without limitation, a Collateral Assignment of Certificate of Deposit and Deposit Account Control Agreement, provided that one (1) of the Certificates of Deposit shall be released by Lender in the event that Borrower’s audited financial statement for Fiscal Year ending October 31, 2005 reflects EBITDA greater than $1,675,000.00.

(g)          (i) The Subordinated Indebtedness to Obsidian Enterprises, Inc. shall not be less than One Million Eight Hundred Twenty-Eight Thousand Nine Hundred Sixty-Two and No/100 Dollars ($1,828,962.00), (ii) the Subordinated Indebtedness to the Huntington Capital Investment Company shall not be less than Three Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00) (discounted), (iii) the Subordinated Indebtedness to Fair Holdings, Inc. shall not be less than Two Million Seven Hundred Thirty-Two Thousand Eight Hundred Eighteen and No/100 Dollars ($2,732,818.00) and (iv) the Subordinated Indebtedness to UX, Inc. shall not be less than One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00).

	
             
  	
            18.
 	
            INDEMNIFICATION.
 

Borrower agrees to defend (with counsel satisfactory to Lender), protect, indemnify and hold harmless Lender, each affiliate or subsidiary of Lender, and each of their respective shareholders, members, officers, directors, managers, employees, attorneys and agents (each an "Indemnified Party") from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature (including, without limitation, the disbursements and the reasonable fees of counsel for each Indemnified Party in connection with any investigative, administrative or judicial proceeding, whether or not the Indemnified Party shall be designated a party thereto), which may be imposed on, incurred by, or asserted against, any Indemnified Party (whether direct, indirect or
consequential and whether based on any federal, state or local laws or regulations, including, without limitation, securities laws and regulations, Environmental Laws and commercial laws and regulations, under common law or in equity, or based on contract or otherwise) in any manner relating to or arising out of this Agreement or any Other Agreement, or any act, event or transaction related or attendant thereto, the making or issuance and the management of the Loans or any Letters of Credit or the use or intended use of the proceeds of the Loans or any Letters of Credit; provided, 

 

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however, that Borrower shall not have any obligation hereunder to any Indemnified Party with respect to matters caused by or resulting from the willful misconduct or gross negligence of such Indemnified Party. To the extent that the undertaking to indemnify set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, Borrower shall satisfy such undertaking to the maximum extent permitted by applicable law.  Any liability, obligation, loss, damage, penalty, cost or expense covered by this indemnity shall be paid to each Indemnified Party on demand, and, failing prompt payment, shall, together with interest thereon at the highest rate then applicable to Loans hereunder from the date incurred by each Indemnified Party until paid by Borrower, be added to the Liabilities of Borrower and be secured by the Collateral.  The provisions of this Section 18 shall survive the satisfaction and payment of the other Liabilities and the termination of this Agreement.

	
             
  	
            19.
 	
            NOTICE.
 

All written notices and other written communications with respect to this Agreement shall be sent by ordinary, certified or overnight mail, by telecopy or delivered in person, and in the case of Lender shall be sent to it at 135 South LaSalle Street, Chicago, Illinois 60603-4105, attention: Andrew Heinz, facsimile number: (312) 904-6450, and in the case of Borrower shall be sent to it at its principal place of business set forth on Exhibit A hereto or as otherwise directed by Borrower in writing.  All notices shall be deemed received upon actual receipt thereof or refusal of delivery.

20.         CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.

This Agreement and the Other Agreements are submitted by Borrower to Lender for Lender's acceptance or rejection at Lender's principal place of business as an offer by Borrower to borrow monies from Lender now and from time to time hereafter, and shall not be binding upon Lender or become effective until accepted by Lender, in writing, at said place of business.  If so accepted by Lender, this Agreement and the Other Agreements shall be deemed to have been made at said place of business.  THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS AS TO INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN COLLATERAL LOCATED OUTSIDE OF
THE STATE OF ILLINOIS, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED.  If any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or remaining provisions of this Agreement.

 

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To induce Lender to accept this Agreement, Borrower irrevocably agrees that, subject to Lender's sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.  BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN SAID CITY AND STATE.  BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH FOR NOTICE IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE
SAME HAS BEEN POSTED.  Lender agrees to endeavor to provide a copy of such process to the law firm of Riley Bennett & Egloff LLP by mail at the address of 141 East Washington Street, 4th Floor, Indianapolis, Indiana 46206 or by facsimile transmission at facsimile number (317) 636-8027. Failure of Lender to provide a copy of such process shall not impair Lender’s rights hereunder, create a cause of action against Lender or create any claim or right on behalf of Borrower or any third party.  BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY LENDER IN ACCORDANCE WITH THIS SECTION.

	
             
  	
            21.
 	
            MODIFICATION AND BENEFIT OF AGREEMENT.
 

This Agreement and the Other Agreements may not be modified, altered or amended except by an agreement in writing signed by Borrower or such other Person who is a party to such Other Agreement and Lender.  Borrower may not sell, assign or transfer this Agreement, or the Other Agreements or any portion thereof, including, without limitation, Borrower's rights, titles, interest, remedies, powers or duties hereunder and thereunder.  Borrower hereby consents to Lender's sale, assignment, transfer or other disposition, at any time and from time to time hereafter, of this Agreement, or the Other Agreements, or of any portion thereof, or participations therein, including, without limitation, Lender's rights, titles, interest, remedies, powers and/or duties and agrees that it shall execute and deliver such documents as Lender may request in connection with any such sale, assignment, transfer or
other disposition.

	
             
  	
            22.
 	
            HEADINGS OF SUBDIVISIONS.
 

The headings of subdivisions in this Agreement are for convenience of reference only, and shall not govern the interpretation of any of the provisions of this Agreement.

 

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            23.
 	
            POWER OF ATTORNEY.
 

Borrower acknowledges and agrees that its appointment of Lender as its attorney and agent-in-fact for the purposes specified in this Agreement is an appointment coupled with an interest and shall be irrevocable until all of the Liabilities are satisfied and paid in full and this Agreement is terminated.

	
             
  	
            24.
 	
            CONFIDENTIALITY.
 

Lender hereby agrees to use commercially reasonable efforts to assure that any and all information relating to Borrower which is (i) furnished by Borrower to Lender (or to any affiliate of Lender); and (ii) non-public, confidential or proprietary in nature, shall be kept confidential by Lender or such affiliate in accordance with applicable law; provided, however, that such information and other credit information relating to Borrower may be distributed by Lender or such affiliate to Lender’s or such affiliate’s directors, managers, officers, employees, attorneys, affiliates, assignees, participants, auditors, agents and regulators, and upon the order of a court or other governmental agency having jurisdiction over Lender or such affiliate, to any other party.  In addition such information and other credit information may be distributed by Lender to potential
participants or assignees of any portion of the Liabilities, provided, that such potential participant or assignee agrees to follow the confidentiality requirements set forth herein.  Borrower and Lender further agree that this provision shall survive the termination of this Agreement.  Notwithstanding the foregoing, Borrower hereby consents to Lender publishing a tombstone or similar advertising material relating to the financing transaction contemplated by this Agreement.  

	
             
  	
            25.
 	
            COUNTERPARTS.
 

This Agreement, any of the Other Agreements, and any amendments, waivers, consents or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which, when so executed and delivered, shall be deemed an original, but all of which counterparts together shall constitute but one agreement.

	
             
  	
            26.
 	
            ELECTRONIC SUBMISSIONS.
 

Upon not less than thirty (30) days' prior written notice (the "Approved Electronic Form Notice"), Lender may permit or require that any of the documents, certificates, forms, deliveries or other communications, authorized, required or contemplated by this Agreement or the Other Agreements, be submitted to Lender in "Approved Electronic Form" (as hereafter defined), subject to any reasonable terms, conditions and requirements in the applicable Approved Electronic Forms Notice.  For purposes hereof "Electronic Form" means e-mail, e-mail attachments, data submitted on web-based forms or any other communication method that delivers machine readable data or information to Lender, and "Approved Electronic Form" means an Electronic Form that has been approved in writing by Lender (which approval has not been revoked or modified by Lender) and sent to Borrower in an Approved Electronic Form Notice.  Except as otherwise 

 

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specifically provided in the applicable Approved Electronic Form Notice, any submissions made in an applicable Approved Electronic Form shall have the same force and effect that the same submissions would have had if they had been submitted in any other applicable form authorized, required or contemplated by this Agreement or the Other Agreements.

	
             
  	
            27.
 	
            WAIVER OF JURY TRIAL; OTHER WAIVERS.
 

(a)          BORROWER AND LENDER EACH HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY BORROWER OR LENDER OR WHICH, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND LENDER.  IN NO EVENT SHALL LENDER BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.

(b)          Borrower hereby waives demand, presentment, protest and notice of nonpayment, and further waives the benefit of all valuation, appraisal and exemption laws.

(c)          Borrower hereby waives the benefit of any law that would otherwise restrict or limit Lender or any affiliate of Lender in the exercise of its right, which is hereby acknowledged and agreed to, to set-off against the Liabilities, without notice at any time hereafter, any indebtedness, matured or unmatured, owing by Lender or such affiliate of Lender to Borrower, including, without limitation any Deposit Account at Lender or such affiliate.

(d)          BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH COLLATERAL, PROVIDED THAT IN THE EVENT THAT LENDER SEEKS TO ENFORCE ITS RIGHTS HEREUNDER BY JUDICIAL PROCESS OR SELF HELP, LENDER SHALL PROVIDE BORROWER WITH SUCH NOTICES AS ARE REQUIRED BY LAW.

(e)          Lender's failure, at any time or times hereafter, to require strict performance by Borrower of any provision of this Agreement or any of the Other Agreements shall not waive, affect or diminish any right of Lender thereafter to demand strict compliance and performance therewith.  Any suspension or waiver by Lender of an Event of Default under this Agreement or any default under any of the Other Agreements shall not suspend, waive or affect any other Event of Default under this Agreement or any other default under any of the Other Agreements, whether the same is prior or subsequent thereto and whether of the same or of a different kind or character.  No delay on the part of Lender in the exercise of any right or remedy under this Agreement or any Other Agreement shall preclude other or
further exercise thereof or the exercise of any right or remedy.  None of the 

 

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undertakings, agreements, warranties, covenants and representations of Borrower contained in this Agreement or any of the Other Agreements and no Event of Default under this Agreement or default under any of the Other Agreements shall be deemed to have been suspended or waived by Lender unless such suspension or waiver is in writing, signed by a duly authorized officer of Lender and directed to Borrower specifying such suspension or waiver.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first written above.

	
            UNITED EXPRESSLINE, INC.
 
 
 By _______________________________
 Title _____________________________

and

By _______________________________
 Title _____________________________
 	
            LASALLE BUSINESS CREDIT, LLC
 
 
 By _______________________________
 Title ______________________________
 

 

 

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        [Certain schedules and exhibits
have been omitted from this Agreement as filed with the Securities and Exchange
Commission (the "SEC"). The omitted information is considered immaterial from an
investor's perspective. The Registrant will furnish supplementally a copy of any
of the omitted schedules or exhibits to the SEC upon request from the
SEC.]

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