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Exhibit 2.3
AMENDED AND RESTATED COMMERCIAL LOAN AND SECURITY AGREEMENT
THIS
IS AN AMENDED AND RESTATED COMMERCIAL LOAN AND SECURITY AGREEMENT
made
this ____ day of ___________, 2007 (this "Agreement"), by and
between:
Stanford International
Bank Ltd., a company
organized under the laws of
Antigua and Barbuda having its principal office at c/o Stanford
Financial Group
Company, 6075 Poplar Avenue, Memphis, Tennessee 38119 (hereinafter
referred to
as "Lender"), and Superior Galleries, Inc., a Delaware corporation with
a place
of business
at 9478 W. Olympic Blvd., Beverly Hills, California 90212
(hereinafter referred to as "Borrower"), with reference to the
following facts:
RECITALS
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A. Pursuant to a
Commercial
Loan and Security
Agreement originally
dated October 1, 2003,
as amended (the
"Existing Loan
Agreement"),
Stanford
Financial Group
Company ("SFG") has provided certain credit facilities to
Borrower. On November
30, 2004, the Lender was assigned all of SFG's right,
title and interest in the Existing Loan Agreement and the
promissory note issued
thereunder.
B. Pursuant to the Existing Loan Agreement, Lender provides Borrower a
revolving credit
facility of up to
Nineteen Million Eight
Hundred Ninety Two
Thousand Three Hundred and Forty Dollars ($19,892,340).
C. Borrower and Lender wish to enter into this Agreement, which shall
amend and restate the Existing Loan Agreement in its entirety and which
hereinafter shall
govern the terms and
conditions
under which
Lender shall
provide credit facilities to Borrower.
NOW,
THEREFORE,
THE PARTIES HERETO DO
HEREBY AGREE AS FOLLOWS (reference
being hereby made to Section 10 below for the definition of certain
capitalized
terms used herein):
Section 1. The Loans,
Advances, Interest,
Security Interest, Financing
----------------------------------------------------------------
Statements, Collateral, Subordinations.
---------------------------------------
1.1
Loan Authorization
(a) The First Revolving Loan
Subject to all the terms and conditions of this Agreement, including
the preconditions
to loan advances as herein provided and so long as there
exists no Event of Default nor any event which with the passage of time, the
giving of notice or both would constitute an Event of Default,
Lender will make
advances to Borrower
(the "First Revolving
Loan") in an
aggregate principal
amount outstanding at any time not to exceed the lesser of (i) Five
Million Five
Hundred Thousand Dollars ($5,500,000) or (ii) the Borrowing Base.
Advances under
the First Revolving Loan shall be made in minimum amounts of One Hundred
Thousand Dollars ($100,000) for each advance. The First Revolving Loan shall
be
evidenced by the
First Revolving Loan Note in the form of Schedule "A-1"
attached hereto
and made a part
hereof (referred to herein as the "First
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Revolving Loan Note").
The aforesaid
First Revolving Loan Note and advances
thereunder may be
continued or extended by mutual agreement of the parties;
provided, however, the parties acknowledge that Lender is under no
obligation to
extend the term of the First Revolving Loan and whether or not to continue or
extend the term of the First Revolving Loan is in the Lender's sole
and absolute
discretion.
Notwithstanding the above provisions, the security interest
granted
to Lender in the Collateral as herein defined shall not in any way
be limited to
such amount or be
dependent upon the use
to which such funds are put but shall
at all times fully secure the Obligations (as hereinafter
defined).
(b) The Second Revolving Loan
Subject to all the terms and conditions of this Agreement, including
the preconditions
to loan advances as herein provided and so long as there
exists no Event of Default nor any event which with the passage of time, the
giving of notice or both would constitute an Event of Default,
Lender will make
advances to Borrower
(the "Second Revolving
Loan") in an aggregate
principal
amount outstanding at
any time not to exceed Six Million Dollars ($6,000,000).
Advances under the Second Revolving Loan shall be made in minimum
amounts of One
Hundred Thousand Dollars ($100,000) for each advance. The Second Revolving Loan
shall be evidenced by a Second Revolving Loan Note in the form of
Schedule "A-2"
attached hereto
and made a part
hereof (referred to herein as the "Second
Revolving Loan Note").
The aforesaid
Second Revolving Loan Note and
advances
thereunder may be
continued or extended by mutual agreement of the parties;
provided, however, the parties acknowledge that Lender is under no
obligation to
extend the term of the Second Revolving Loan and whether or not to
continue or
extend the
term of the
Second Revolving Loan is in the Lender's sole and
absolute discretion. Notwithstanding the above provisions, the
security interest
granted to Lender in the Collateral (as hereinafter defined) shall not in any
way be limited to such amount or be dependent upon the use to which such
funds
are put but shall at all times fully secure the Obligations (as hereinafter
defined). It is the
specific intent of the parties that advances under the
Second Revolving
Loan shall be made
without regard to the
Borrowing Base and
that the entire principal amount of the Second Revolving Loan shall
be available
to Borrower.
1.2
Obligations
It is specifically agreed by Borrower and Lender that in the event
that
further financial
accommodations of any
type, including,
but not limited
to,
letters of credit,
coverage of overdrafts
and the like,
are now or
hereafter
extended by Lender to Borrower, the parties intend that this Agreement shall
govern any and all such financial accommodations. An extension of
the foregoing,
all advances
now or hereafter made by Lender to Borrower pursuant to this
Agreement and/or any of the other Documents or any renewal or
extensions thereof
or otherwise, whether
or not evidenced by notes, and all liability whether now
existing or hereafter arising, absolute or contingent,
direct or indirect
with
respect to or under letters of credit, banker's acceptances or
guarantees now or
hereafter established
by Lender pursuant to this Agreement, together with all
other obligations
and indebtedness of every kind and nature, whether now
existing or hereafter arising, absolute or contingent, direct or
indirect, under
or pursuant to this
Agreement or any of the other Documents or otherwise, of
Borrower to Lender, to
the extent the same are outstanding from time to time,
are sometimes collectively referred to herein as the
"Obligations".
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1.3
Interest
All amounts
outstanding
from time to time
under either of the
Notes
shall bear interest
at a per annum rate
equal to a daily
average of the Prime
Rate as reported in the Wall Street Journal. Upon the occurrence of an Event
of
Default, interest
shall accrue for the period of time for which any payment was
due, during any
applicable
grace or cure period,
and at all times while
such
default shall continue at a rate of five percent (5%) per annum
greater than the
rate then in effect.
In the event that the total amount of any payment required
under either of the
Notes is not received
by Lender within
fifteen (15) days
after its due date,
Borrower shall pay to
Lender a late charge
equal to five
percent (5%) of any such late payment.
1.4
Repayment
(a) The First
Revolving Loan Note
and the Second
Revolving Loan Note
shall provide that the
payment of interest
only for the actual
number of days
elapsed in each payment period on the daily outstanding principal
balance of the
First Revolving Loan and the Second Revolving Loan, respectively, shall be due
and payable
in monthly payments in arrears on the 10th day of each
month
commencing __________
10, 2007 and
continuing on the
tenth (10th) day of each
month thereafter
until the entire
outstanding
principal balance and accrued
interest has been paid in full.
(b) For all advances
under the First
Revolving Loan,
Borrower shall
repay said advances in full upon disposition of the Collateral on the basis
of
which such advances were made, with the understanding that
"disposition"
shall
be defined as follows: (i) for auctions, the settlement date for the
auction or
whenever the
Collateral
is shipped, whichever is later, (ii) for dealer
inventory financing,
when Borrower receives
good funds from the dealer; (iii)
for loans to
Borrower itself, as necessary to repay advances which are
outstanding in an aggregate amount in excess of the limitations set
forth in the
first sentence of Section 1.1(a).
(c) Notwithstanding
anything herein, the entire outstanding principal
balance of all advances under the First Revolving Loan and the
Second Revolving
Loan and accrued
and unpaid interest thereon shall be due and payable on
____________, 2011
unless said
maturity date shall be extended in writing
by
Lender in accordance with this Agreement.
Payment of principal
or interest shall be
deemed received by
Lender only upon
receipt of good funds as determined by Lender.
1.5
Limitation on Use of Funds
Borrower may use
advances of proceeds of the Loan only for (a) general
corporate purposes of
Borrower and (b)
Permitted
Inter-Company
Transactions.
Borrower agrees that to the extent any funds are made available to
it under this
Agreement, they shall
be used in strict
accordance with the policies set forth
in Schedule "B"
hereof, and that a
material violation by
Borrower of any such
policy, which
violation is not cured
within ten (10) days after written notice
of same is given by Lender to Borrower, shall be an Event of Default
hereunder.
Borrower shall
certify to Lender quarterly, on each of the compliance
certificates that
Borrower delivers to Lender under clauses (i) and (ii) of
Section 3.5,
that Borrower has used the proceeds of each advance made to
Borrower hereunder
during the relevant
fiscal quarter for
purposes permitted
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under this Section 1.5. In addition, Borrower hereby agrees that Lender, not
more frequently than once each year, following at least thirty (30)
days notice
to Borrower, shall
have the option to engage an independent accounting firm, at
Borrower's expense, to
conduct an independent
compliance audit with respect to
Borrower's obligations hereunder.
1.6
Security
As security for the performance of Borrower's Obligations pursuant to
this Agreement, and the other Documents, Borrower hereby mortgages, pledges
and
assigns to Lender, and
gives and grants to Lender a security interest in all of
its right,
title and interest in and to the items and types of property
described or referred to below, whether now owned or hereafter
acquired, and the
proceeds and products
thereof (all of which property is herein collectively
called the "Collateral"), which security interest has and shall
remain first and
prior to all other security interests therein and which
Collateral shall remain
free and clear of all mortgages, pledges, security interests, liens and other
encumbrances and
restrictions on the transfer thereof, except as specifically
set forth below and in Schedule "D" attached hereto:
(i) Accounts
All accounts
(as such term is defined in the Uniform
Commercial Code) of Borrower.
(ii) Third-Party Owned Inventory
All inventories
of every kind owned by third parties,
presently existing or hereafter acquired, wherever located, including
all goods intended for auction sale or owned by third parties,
against
which Borrower has loaned funds and which serve as collateral
therefor,
and all contract rights with respect to any of the same and all
documents representing any of the same, all whether now or
hereafter in
Borrower's possession
or in which Borrower may now have or may
hereafter acquire any
interest, all whether
now existing or hereafter
arising (the
"Third-Party-Owned
Inventory").
(For the avoidance of
doubt, the Third-Party
Owned Inventory shall not include inventory
owned by third parties and consigned to Borrower, as to which Borrower
has not made any
loans to the
consignor and with respect to which
Borrower has no payment obligation to the consignor
prior to the sale
of such consigned inventory.) The security interest in the
Third-Party-Owned
Inventory shall continue in all Collateral described
in this paragraph (except goods sold as provided in Section
9-307(1) of
the Uniform Commercial
Code), notwithstanding
the sale, exchange or
other disposition
hereof
by Borrower (sale, exchange or other
disposition of any of
said Collateral
is not authorized by Lender,
other than sale in the ordinary course of business).
(iii) Borrower-Owned Inventory
All items of Borrower's wholesale and retail inventory,
presently existing or
hereafter acquired,
wherever located,
and all
contract rights
with respect to any of the same and all documents
representing any of
the same, all whether now owned or hereafter
acquired by Borrower or in which Borrower may now have or may
hereafter
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acquire any ownership
interest, all whether
now existing or hereafter
arising (the "Borrower-Owned Inventory"). The security interest
in the
Borrower-Owned
Inventory shall continue in all Collateral described in
this paragraph
(except goods sold as
provided in Section
9-307(1) of
the Uniform Commercial
Code), notwithstanding
the sale, exchange or
other disposition
hereof
by Borrower (sale, exchange or other
disposition of any of
said Collateral
is not authorized by Lender,
other than sale in the ordinary course of business).
(iv) Notes and Liens
All promissory notes
and related loan and security documents
relating to or evidencing any loans made by Borrower, whether
presently
existing or hereafter
acquired by Borrower,
or in which Borrower
may
now have or may
hereafter acquire
any interest, including without
limitation, any
ownership interest or security or collateral interest,
all whether now existing or hereafter arising.
(v)
Documents
All documents and
instruments
relating to any and
all loans
made by Borrower,
whether presently
existing or hereafter acquired by
Borrower, or in which
Borrower may now have
or may hereafter
acquire
any interest,
including without limitation, any ownership interest or
security or collateral interest, all whether now existing or
hereafter
arising.
(vi) Records
All books,
records and other documents of every nature
relating to the above described types of property, including, without
limitation, all tapes,
cards, discs, cassettes, papers, documents and
computer software in
the possession
or control of
Borrower, or any
Affiliate of Borrower,
all whether now owned or hereafter acquired by
Borrower or in which
Borrower now has or may hereafter acquire any
interest, including
without limitation, any ownership interest or
security or collateral interest, all whether now existing or
hereafter
arising.
(vii) Insurance Policies
All rights in, to and
under policies
of insurance on said
Inventory,
including claims
or rights to payment and proceeds
heretofore or hereafter arising therefrom, with respect to the herein
described types of
property, all whether now owned or hereafter
acquired by Borrower or in which Borrower may now have or may
hereafter
acquire any interest,
including without limitation, any ownership
interest or security or collateral interest, all whether now existing
or hereafter arising.
(viii) Proceeds and Products
All proceeds
and all products of all Collateral described
above.
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1.7
Financing Statements
Borrower hereby authorizes Lender to file financing statements
pursuant
to the provisions of the Uniform Commercial Code with respect to
the Collateral
in which Lender has been granted a security interest by Borrower
pursuant to the
provisions of this Agreement and the other Documents. Borrower hereby agrees to
execute any and all further documents deemed necessary by Lender, in its sole
discretion, to perfect
its security interest
in the Collateral and
authorizes
the Lender to file any and all further documents deemed necessary by
Lender, in
its sole discretion,
to perfect
its interest in the Collateral, including
without limitation, any UCC financing statements.
1.8
[ Intentionally Omitted. ]
1.9
Insurance on the Collateral
Borrower is
contemporaneously with
the execution hereof delivering to
Lender a Certificate
or Certificates of Insurance (and shall deliver the
originals of the policies referred to herein upon request of
Lender), respecting
hazard (including, but not limited to, fire and extended coverage
including "all
risk"), liability,
loss of rental and
flood (if any of the Borrower's tangible
assets are located on premises in a special flood hazard area), with coverage
for the fair market
value at the
time of a loss of the
Collateral
and in an
amount of at least
Two Million ($2,000,000) Dollars with no co-insurance.
Borrower shall
further be required
to provide
evidence to Lender of
adequate
property insurance for all Collateral, which shall list the Lender
as loss payee
as its interests may appear.
Section 2. Representations and Warranties
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Borrower hereby represents and warrants to Lender that:
2.1
Incorporation and Qualification
Borrower is a corporation duly organized and validly existing and in
good standing under
the laws of Delaware,
has the corporate
power to own its
assets and conduct its business as it is now being conducted and is
qualified to
do business in each jurisdiction wherein the nature of the business
conducted by
it or the property
owned or held
under lease by it make such qualification
necessary.
2.2
Capitalization, Business and Subsidiaries
Except as disclosed on
Schedule "F"
attached hereto and made a part
hereof, as of the date
of this Agreement,
Borrower does not own stock of any
other corporation, active or inactive. The information set forth on
Schedule "G"
attached hereto with respect to Borrower and as to Borrower's
authorized, issued
and outstanding
capital stock, all of
which stock has been duly authorized and
validly issued and is fully paid and non-assessable, the holders of such stock,
the officers, the
directors,
the principal and
other places of business, the
place where its
Inventory, Equipment
and Records of its Accounts are kept, and
Borrower's present
business activities
and status, is complete and accurate as
of the date of this
Agreement.
As of the date of this Agreement, Borrower
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neither has a place of business nor maintains or stores any of the
Collateral at
any location other than those set forth in Schedule "G" attached
hereto.
2.3
Corporate Authorization
Borrower has the corporate power to execute, deliver, and carry out
the
terms and provisions of this Agreement and the other Documents to which it is a
party and has taken all necessary corporate and legal action with respect
thereto (including,
without limitation,
obtaining any consent
of stockholders
required by law or its
Certificate
of Incorporation or By-Laws), and this
Agreement and
such other Documents to which it is a party
have been duly
authorized, executed
and delivered by it and constitute its valid, legal and
binding agreement and obligation in accordance with the terms
thereof and Lender
is entitled to the benefits thereof in accordance with such
terms.
2.4
Financial Statements
There have been
furnished to Lender
financial statements
of Borrower
described or referred to in Schedule "H" attached hereto and made a
part hereof.
Each such financial
statement,
including the comments and notes contained
therein, fairly
presents the
financial position of the entity or business
to
which such
statement applies at the date thereof and the results of its
operations for the period purported to be covered thereby. Each such financial
statement has been prepared in conformity with Generally Accepted Accounting
Principles applied on
a consistent
basis throughout all periods involved,
subject, in
the case of unaudited statements, to normal year-end audit
adjustments.
2.5
Indebtedness
As of the date of this Agreement, Borrower has no material
outstanding
indebtedness except for liabilities reflected in said financial
statements and
liabilities incurred
since the date thereof to trade creditors in the ordinary
course of business
and/or except as
described or set forth in Schedule "I"
attached and made apart hereof and has performed and complied with all of the
terms of such
Indebtedness and all instruments and agreements relating thereto
and no default exists
as of the date hereof
nor does there exist
any state of
facts which would after notice or lapse of time, or both, constitute a default
under or with respect to any such Indebtedness, instruments or
agreements.
2.6
Title to Properties and Assets; Liens, etc.
Borrower has good and
marketable title to
its properties and
assets,
including, but not
limited to the
Collateral, free and
clear of any mortgage,
pledge, lien,
lease, encumbrance or charge other than those set forth on
Schedule "J" attached hereto and made a part hereof, with respect to assets (if
any) other
than the Collateral. No financing statement under the Uniform
Commercial Code which
names Borrower as debtor has been filed
in any state or
other jurisdiction
which covers the Collateral and has not been terminated
except as set forth on Schedule "J". As of the date of this
Agreement,
Borrower
has not signed any such financing statement or any security agreement
authorizing any mortgagee or secured party thereunder to file any
such financing
statement on the
Collateral or its assets except in connection herewith or as
set forth on Schedule "J" attached hereto. As of the date of this
Agreement,
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Borrower is not a consignor or lessee under any consignment agreement or lease
agreement, except as described in Schedule "J" attached hereto.
2.7
Patents, Trademarks, etc.
Borrower owns or holds
licenses for the use of or has the right to use
all patents,
trademarks, service
marks, trade names, copyrights and rights
necessary for the conduct of its business as now conducted and as
contemplated,
including those
identified
in Schedule
"K" attached hereto and made a part
hereof.
2.8
Litigation, etc.
Except as set forth in
Schedule "L"
attached hereto and made a part
hereof, as of the date of this Agreement, there are no actions, proceedings or
investigations pending
or to the knowledge of Borrower threatened (or any basis
therefor known to it)
which, either in any case or in the aggregate, might
result in any
material adverse change in Borrower's business, prospects,
profits, properties,
liabilities,
operations,
or conditions (financial or
otherwise), or which
might affect its ability to perform this Agreement or any
other Documents executed by it.
2.9
Changes in Condition
Since the date of the financial statements referred to in Schedule
"H"
there has been no
material adverse
change, by reason of any matter or cause
whatsoever, in Borrower's business, prospects, profits, properties,
liabilities,
operations or condition (financial or otherwise).
2.10
Tax Returns and Payments
All tax returns
and reports required by law to be filed by
Borrower
have been duly filed
or the time for filing
has been extended
and all taxes,
assessments, fees and
other governmental charges (U.S., foreign, state or local
or other) upon Borrower or upon any of its properties, assets, income or
franchises, which are
due and payable have been paid. To the best of Borrower's
knowledge the
provisions on Borrower's books respectively, regarding income
taxes for all
fiscal periods to date are adequate according to Generally
Accepted Accounting Principles.
2.11
Compliance With Instruments, Charter and Law
Borrower is in full compliance with and is not in-violation or default
of any term or provision of (a) its charter, Certificate of Incorporation or
by-laws, if a corporation, (b) any loan agreement, debt instrument,
mortgage or
indenture, (c) any
other material
contract, agreement or
instrument, (d)
any
judgment, decree or
order, nor has it, he or she been notified of any violation
of any statute, rule or regulation including but not limited to the
Occupational
Safety and Health Act and the Employee Retirement Income Security
Act ("ERISA"),
and the regulations issued by the Department of Environmental
Protection and (e)
any licensing or governmental requirement. The execution,
delivery,
performance
of, and compliance
with this Agreement or
any of the other
Documents will not
result in any such
violation or default or be in conflict with any such term or
provision or result in the creation of any mortgage, lien,
encumbrance or charge
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upon any of Borrower's
properties or assets except in favor of Lender and there
is no such term or provision which materially adversely affects or
in the future
may materially adversely affect its business, prospects, profits, properties,
liabilities,
operations or condition (financial or otherwise) or its ability
to
perform this Agreement or any of the other Documents executed by
Borrower. As of
the date of this
Agreement, all
material contracts, agreements, mortgages,
indentures,
instruments,
judgments, decrees and
orders to which Borrower is a
party or which are
effective against it
are listed in Schedule
"M" attached
except entered into in the normal course of business.
2.12
Governmental Consents, etc.
No consent, approval
or authorization for designation, declaration or
filing with any governmental authority, federal, foreign or other
is required in
connection with the execution and delivery of this Agreement or the
Documents or
the consummation of any transaction contemplated hereby or thereby by
Borrower.
While no consent is required by the Securities and Exchange
Commission, Borrower
will be required to file a form 8-K, and will comply with such
requirements.
2.13
Solvency
Borrower is solvent,
having assets of a value which exceeds the amount
of its liabilities
and is able to and
will be able to meet
its debts as they
mature and has
adequate capital to
conduct the business in which it is engaged
and is about to engage.
2.14
Change of name, etc.
As of the date of this
Agreement, except as
set forth on Schedule "N"
attached hereto and
made a part hereof,
Borrower has not within five (5) years
changed its name, been
a party to any
consolidation or
merger other than
the
Merger, acquired
all or a substantial portion of the assets of any
Person or
purchased any of its or his assets included in the Collateral from a
Person not
in the business of selling such assets.
2.15
Full Disclosure
The financial
statements referred to in Section 2.4 hereof do not, nor
does this Agreement or any Schedule hereto or any other Document,
certificate or
statement furnished to
Lender by Borrower in
connection with this
Agreement,
contain any
untrue statement of a material fact or omit to state a fact
necessary in order to
make the statements
contained therein and herein not
misleading. Borrower is not aware of any fact which materially
adversely affects
or in the future may
materially and adversely affect its business, prospects,
profits, properties,
liabilities,
operations
or condition (financial or
otherwise), or its
ability to perform
this Agreement or any other Document
executed by it,
which has not been set
forth or referred
to herein, in any
report or statement filed by Borrower or Parent with the Securities
and Exchange
Commission or in a certificate or statement furnished by Borrower
to Lender.
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2.16
No Event of Default
No Event of Default or event or condition that with the passage of
time
or giving of notice or both might become an Event of Default
has occurred or
exists.
Section 3. Affirmative Covenants
---------------------
Except with the prior written consent of Lender, Borrower covenants
and
agrees that so long as there is outstanding any portion of the First
Revolving
Loan or the Second
Revolving Loan, or any
agreement of Lender to make advances
to Borrower, it will comply or cause compliance with the following
provisions:
3.1 Punctual
Payment
Borrower will duly and punctually pay all principal, interest, charges
and other items
included in the First
Revolving Loan or the
Second Revolving
Loan which is owing by it in accordance with the provisions hereof and of the
other Documents.
3.2
Prompt Payment of Taxes, Mortgages, Leases and Indebtedness
Borrower will
promptly pay and discharge, or cause to be paid and
discharged, on the
date due so as to prevent the accruing of interest thereon,
all lawful taxes,
assessments, and
governmental charges or levies imposed upon
items of the Collateral owned by it, or in which it has an
interest or upon its
income, profits,
property or business
or of any of its Subsidiaries. Borrower
will promptly pay or cause to be paid when due (or in conformity
with customary
trade terms) all of its other Indebtedness incident to its operations and
will
promptly pay and
perform all of its obligations under leases of real and
personal property and
under material
contracts and will promptly notify Lender
of any default or notice of alleged default received with respect to any such
Indebtedness, lease or contract.
3.3
Conduct of Business
Borrower will do all
things necessary to
preserve, renew and
keep in
full force and effect and in good standing, its current corporate existence,
qualification and any
franchises,
licenses, patents, trademarks and items
necessary to continue its business. It will maintain its properties and assets
in good order and repair, all in compliance with applicable
federal, state,
and
local judgments, decrees, orders, statutes, rules and regulations,
including but
not limited to state
and federal
environmental
regulations
and those of the
Occupational Safety and Health Administration.
3.4
Insurance
Borrower will maintain insurance in amounts, coverage and with
insurers
satisfactory to Lender
with respect to the Collateral owned by it, or in which
they have an interest and their other properties and business against loss or
damage to the extent that property of similar character is usually
so insured by
other companies engaged in a similar business. Without limiting the
foregoing,
such insurance
shall include (a) liability insurance in such amounts and
covering such
risks as Lender may reasonably require, (b) all worker's
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compensation and other employees' liability insurance as may be
required by law,
and (c) property insurance with respect to the items of the Collateral
constituting tangible
personal property and
fixtures, and with
respect to the
other properties
both real and personal, including, if necessary, flood
insurance, to the full
extent of the insurable value thereof, and covering such
risks as Lender may reasonably require. All of Borrower's property insurance
policies with respect
to the Collateral
shall contain loss payable and/or
mortgagee clauses
in form and
substance reasonably satisfactory to Lender,
naming Lender as loss payee as appropriate and providing (i) that all
proceeds
thereunder shall be payable to Lender as its interests may appear,
and (ii) that
such insurance
shall not be
affected by any act or neglect of the
insured or
owner of the property
described in said policy, and (iii) that such policy and
loss payable clause may not be canceled, amended or terminated
unless Lender has
received written
notice thereof at least thirty (30) days' prior to the
effective date of such
cancellation,
amendment or
termination. Borrower
will
furnish a certificate
with respect to the insurance at the time which is in
force pursuant to this
Section 3.4, specifying the amount and character of
coverage, identifying
the insurers and certifying as to no default in the
payment of current
premiums thereon and
will furnish Lender
with original or
duplicate original
copies of all
policies. All insurance proceeds for any
occurrence or any
series of related
occurrences
which exceed Ten Thousand
Dollars ($10,000)
and which are
subject to a security interest under this
Agreement may, upon Lender's request, in Lender's sole and absolute
discretion,
be paid to Lender and shall be applied by Lender to the payment of any of the
principal, whether
or not due, or interest or such other obligation or
Indebtedness which constitutes a part of the Loan as Lender may
determine in its
sole discretion.
Proceeds of Ten
Thousand Dollars
($10,000) or less
shall be
payable to Borrower for general corporate purposes. Borrower does hereby grant
Lender an Irrevocable Power of Attorney and appoint Lender as its
attorney-in-fact (said power of Attorney being coupled with an
interest) for the
sole purpose
of executing, negotiating and signing any drafts, checks,
instruments or documents to carry out the terms hereof.
3.5
Accounting Financial Statements and Other Information
Borrower will
maintain
a system of accounts established and
administered in
accordance
with Generally Accepted Accounting Principles
consistently applied. Borrower will deliver or cause to be
delivered to Lender:
Financial Reports
-----------------
(i) as soon as available and in any event within forty-five (45) days
after the end of each of the first three (3) fiscal quarters of
each fiscal
year
of Parent,
consolidated and
consolidating
financial statements of
Parent and its
Subsidiaries
(including,
after the Merger, Borrower),
including a balance sheet as of the end of period, and statements
of income
for
the period(s)
that have been included as part of the consolidated
financial statement
disclosure of Parent's SEC Form 10-Q filing, which in
the
case only of the consolidated financial statements of Parent, have
been
reviewed by Parent's
appointed independent
accounting
firm, along with
statements of cash flows for that period. In connection with the delivery
of
such quarterly financial statements, an officer, on behalf of
Borrower,
will provide written
representation that
there is no knowledge of an Event
of
Default or an event that with notice or lapse of time or both
could
constitute and Even of Default, has occurred and is continuing or
if in the
opinion of said
individual
an Event of Default or such an event has
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<PAGE>
occurred and is
continuing a statement
as to the nature
thereof and the
action which Borrower
proposes to take with respect thereto (the provision
for
such a statement
herein shall in no way
be construed as a
consent to
the
existence of such an Event of Default and of
the granting of time
to
cure);
(ii) as soon as available and in any event within one
hundred twenty
(120) days after the end of each fiscal year of Parent,
consolidated
and
consolidating financial statements of Parent (including,
after the Merger,
Borrower), including a
balance sheet as of the end of such fiscal year and
statements of income for the year(s) that have been included as
part of the
consolidated financial
statement disclosure of Parent's SEC Form 10-K
filing, which in the case only of the consolidated financial statements of
Parent, have been
audited by Parent's
appointed independent accounting
firm, and statements of cash flow for that period. In connection with the
delivery of such
annual financial
statements,
an officer,
on behalf of
Borrower, will provide written representation that there is no
knowledge of
an
Event of Default or an
event that with notice
or lapse of time or both
could constitute an Event of Default, has occurred and is continuing or
if
in
the opinion
of such accounting firm such an Event of Default has
occurred and is
continuing,
a statement
as to the nature
thereof (the
provisions for such a
statement herein
shall in no way be
construed as a
consent to the
existence of such an
Event of Default or the
