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Tidel Technologies - Purchase Order Finance And Security Agreement
Exhibit 10.6
PURCHASE ORDER FINANCE AND SECURITY
AGREEMENT
DATED AS OF NOVEMBER 26, 2004
BETWEEN
LAURUS MASTER FUND, LTD.
AS LENDER
AND
TIDEL ENGINEERING, LP
AS BORROWER
This PURCHASE
ORDER FINANCE AND SECURITY AGREEMENT is dated as of November 26, 2004 and agreed to by and between TIDEL ENGINEERING, LP, a Delaware limited partnership ("Borrower"), any other Credit Party executing this Agreement, and LAURUS MASTER FUND, LTD., a Cayman
Island company ("Lender").
RECITALS
Borrower desires to obtain financing from Lender to enable Borrower to purchase the required materials to fulfill purchase orders and Lender is
willing to provide such financing in accordance with the terms of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained,
the parties hereto agree as follows:
1. DEFINITIONS
1.1 GENERAL DEFINITIONS AND RULES OF CONSTRUCTION.
Capitalized terms used in this Agreement and the other Loan Documents shall
have (unless otherwise provided elsewhere in this Agreement or in the other Loan Documents) the meanings as assigned to them in SCHEDULE A. For purposes of this Agreement and the other Loan Documents, the rules of construction, unless specifically indicated
to the contrary, set forth in SCHEDULE A shall apply.
1.2 APPENDICES.
All Schedules, Attachments, Addenda and Exhibits (collectively, "Appendices") hereto, or expressly identified to this Agreement, are
incorporated herein by reference, and taken together with this Agreement, constitute but a single agreement.
2. AMOUNT AND TERMS OF ADVANCES
2.1 ADVANCES.
(a) Subject to the terms
and conditions of this Agreement, from the Closing Date and until the Facility Termination Date, Lender, in its sole discretion, may make advances to Borrower (each, an "Advance" and collectively, "Advances") to enable Borrower to purchase the required
Products to fulfill P.O.s. The aggregate outstanding amount of Advances shall not at any time exceed the Maximum Amount. The Advances shall be repayable in accordance with the terms of this Agreement.
(b) Borrower expressly
acknowledges, represents and agrees that: (i) Lender has made no commitment or agreement to make, provide or arrange for any one or more Advances hereunder; (ii) Lender may at any time determine not to provide or arrange for any Advance requested by Borrower
hereunder; and (iii) although the absence of commitments or agreements to provide or arrange for
Advances hereunder at any time may cause significant risk to Borrower's business, Borrower in acknowledging its understanding of this
Agreement as modified or amended in writing, is willing to assume such risk based upon its independent evaluation.
(c) Borrower shall request each Advance by written notice to Lender substantially in the form of a Request
Certificate. Lender shall be fully protected under this Agreement in relying upon, and shall be entitled to rely upon, (i) any Request Certificate believed by Lender to be genuine, and (ii) the assumption that the Persons making electronic requests or
executing and delivering a Request Certificate were duly authorized, unless the responsible individual acting thereon for Lender shall have actual knowledge to the contrary. As an accommodation to Borrower, Lender may permit telephonic or facsimile requests
for an Advance and electronic or facsimile 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, facsimile 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, by facsimile 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 identity or authority of the Person sending it. In making any
Advance hereunder Lender shall be entitled to rely upon the Request Certificate delivered to Lender by Borrower and other information available to Lender.
(d) Lender will notify Borrower by 5:00 p.m. (New York City time) on
or before the second full Business Day after Lender receives the Request Certificate whether or not it will make the Advance requested in the Request Certificate. No Advance will be made by Lender if Borrower does not have a P.O. with respect to the Products
to be provided thereunder or such P.O. is not an Accepted P.O. A P.O. shall be deemed an Accepted P.O. only when (i) the P.O. is submitted pursuant to a Request Certificate, (ii) Lender shall issue an Advance with respect thereto, (iii) the P.O. shall
meet each of the requirements set forth in Section 2.3 and (iv) it is not a Cancelled P.O.
(e) Borrower shall use the proceeds of the Advances to purchase the required Products to fulfill Accepted P.O.s.
(f) The Advances and all of the other Obligations of Borrower to Lender shall constitute one general obligation of Borrower secured by all of the Collateral.
2.2 ADVANCE AMOUNT. No Advance with respect to any P.O. shall
exceed the lesser of (i) fifty-five percent (55%) of the P.O. Price, and (ii) the Landed Cost of the Products (the "Advance Amount").
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2.3 TERMS OF ACCEPTED P.O.
Lender is not required to consider a P.O. as eligible for the basis of an Advance unless such P.O. meets each of the following requirements (a P.O. which meets such requirements, an "Accepted P.O."):
(a) the P.O. shall have
been approved for an advance rate of at least 55% of the P.O. Price by Lender;
(b) Borrower has irrevocably directed the Customer to make payments of all amounts due Borrower to Lender or the Lockbox Account pursuant to such
written direction as Lender may request from time to time;
(c) an original, signed copy of the Request Certificate shall have been delivered to Lender, together with the P.O. in the exact form received by Borrower (which P.O.
shall be returned by Lender in the event an Advance is not made by Lender);
(d) Lender shall be satisfied with the supplier of the Products;
(e) Lender has taken such action as it chooses to verify
information contained on the Request Certificate including the accuracy and reasonableness of the Products Delivery Date and P.O. Delivery Date and validity of the P.O. (which verification may include, without limitation, direct confirmation from the
Customer and any vendors and any such verification action or lack thereof shall not relieve Borrower from any of its obligations or representations under any Loan Document);
(f) if so requested by Lender, Borrower shall have
obtained a waiver and release of Lender by the Customer of any and all liability for breach of any and all express or implied warranties or product liability claims with respect to the Products or the use and distribution thereof;
(g) the P.O. shall be for goods which do not require any further processing after they have been delivered by the supplier of Products;
(h) the P.O. is not a Cancelled P.O. or a Delinquent P.O.;
(i) the P.O., the Products and the P.O. Proceeds are free and clear of all Liens except Permitted Encumbrances;
(j) the Products covered by the P.O. are covered by the insurance and Lender is named as lender loss
payee under such insurance policies as required by Section 4.11;
(k) the Products are deliverable pursuant to documents, instruments, and statements in form and substance satisfactory to Lender, all of which to the extent
required by Lender, have been delivered to Lender or a representative designated by Lender;
(l) to the extent that the Products are or will be covered by a negotiable document of title, such documents have been delivered to
Lender with all necessary endorsements;
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(m) transportation of the Products to the Customer shall be controlled by Borrower and shall be on terms and conditions
satisfactory to Lender;
(n) Lender has received executed Customs Broker Agreements and Collateral Access Agreements, as applicable;
(o) Borrower shall have delivered to Lender such additional information
and documentation as Lender may have from time to time requested; and
(p) All other terms and conditions of the P.O. shall be satisfactory to Lender in its sole discretion.
2.4 CHARGES.
(a) Borrower shall pay interest to Lender on the aggregate outstanding Advances at a fixed rate of fourteen percent (14%) per annum (the "Interest Rate"). All computations of interest and fees shall be made by Lender on the basis of a three
hundred and sixty (360) day year, for the actual number of days occurring in the period for which such interest or fee is payable. The actual number of days includes the day on which the funds are advanced for an Advance and includes the day on which
interest is paid. Each determination by Lender of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. Following the occurrence and during the continuance of an Event of Default, Borrower shall pay interest
to Lender on the aggregate outstanding Advances at a fixed rate of two percent (2%) per month.
(b) Interest shall be payable monthly on the outstanding Advances or, if earlier, the Facility Termination Date. At Lender's option,
Lender may charge Borrower's account for said interest when due.
(c) If any interest or other payment (including fees) to Lender under this Agreement becomes due and payable on a day other than a Business Day, such payment
date shall be extended to the next succeeding Business Day and interest thereon shall be payable at the then applicable rate during such extension.
(d) Notwithstanding anything to the contrary set forth in this Agreement or
any other Loan Document, if a court of competent jurisdiction determines in a final order that the rate of interest payable hereunder exceeds the highest rate of interest permissible under law (the "Maximum Lawful Rate"), then so long as the Maximum Lawful
Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; PROVIDED, however, that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrower shall
continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Lender, is equal to the total interest that would have been received had the interest rate payable hereunder been (but for the operation of
this paragraph) the interest rate payable since the Closing Date as otherwise provided in this Agreement. Thereafter, interest hereunder shall be paid at the rate(s) of interest and in the manner provided in this Agreement and the other Loan Documents,
unless and until the rate of interest again exceeds the Maximum Lawful Rate, and at that time this Section shall again apply. In no event shall the total interest received by Lender pursuant to the terms hereof exceed the
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amount that Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. If the Maximum Lawful Rate is calculated pursuant to this paragraph,
such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made. If, notwithstanding the provisions of this Section 2.4(d), a court of competent jurisdiction
shall finally determine that Lender has received interest hereunder in excess of the Maximum Lawful Rate, Lender shall, to the extent permitted by applicable law, promptly apply such excess in the order specified in Section 2.8 and thereafter shall refund
any excess to Borrower or as a court of competent jurisdiction may otherwise order.
2.5 FEES. Borrower agrees to pay to Lender the following fees:
(a) Closing Fee. Upon execution of this Agreement
by Company and Laurus, Company shall pay to Laurus Capital Management, LLC a closing payment in an amount equal to three and one-half percent (3.50%) of the Maximum Amount. Such payment shall be deemed fully earned on the Closing Date and shall not be
subject to rebate or proration for any reason.
(b) Late Fees. In the event of a Delinquent P.O., a late payment fee in a sum equal to two percent (2%) of the amount of such P.O. per month for the period commencing on the date
an Accepted P.O. becomes a Delinquent P.O. and ending on the Clearance Date.
2.6 CASH MANAGEMENT. On or prior to the Closing Date and until the Termination Date, Borrower will establish and maintain the cash management system
described in SCHEDULE B.
2.7 RECEIPT OF PAYMENTS. Borrower shall make each payment under this Agreement without set-off, counterclaim or deduction and free and clear of all Taxes not later than on the day when due in lawful money
of the United States of America in immediately available funds to the Lockbox Account. If Borrower shall be required by law to deduct any Taxes from any payment to Lender under any Loan Document, then the amount payable to Lender shall be increased so
that, after making all required deductions, Lender receives an amount equal to that which it would have received had no such deductions been made.
2.8 APPLICATION AND ALLOCATION OF PAYMENTS. If there has not been a Default and
in the absence of a specific determination by Lender with respect to the order of applying payments, payments received by Lender on account of Accepted P.O.s will be applied as follows: (i) first, to pay Lender's expenses which have been incurred or committed;
(ii) second, to the payment of Lender's fees and interest in connection with the Advance; and (iii) third, to the payment or reimbursement in full of all Obligations to Lender in connection with an Accepted P.O. and all other Accepted P.O.s. As to any
other payment, and as to all payments made after a Default has occurred or following the Facility Termination Date, Borrower hereby irrevocably waives the right to direct the application of any and all payments received from or on behalf of Borrower and
Borrower hereby irrevocably agrees that Lender shall have the continuing exclusive right to apply any and all such payments against the Obligations in such order as Lender shall determine. Lender is authorized to, and at its option may (without prior
notice or precondition and at any time or times), but shall not be obligated to, make or cause to be made Advances on behalf of Borrower
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for: (a) payment of all fees, expenses, indemnities,
charges, costs, principal, interest, or other Obligations owing by Borrower under this Agreement or any of the other Loan Documents, (b) the payment, performance or satisfaction of any of Borrower's obligations with respect to preservation of the Collateral
or otherwise under this Agreement, or (c) any premium in whole or in part required in respect of any of the policies of insurance required by this Agreement, even if the making of any such Advances causes the outstanding balance of the Advances to exceed
the Maximum Amount, and Borrower agrees to repay immediately, in cash such Advances.
2.9 ACCOUNTING. Lender is authorized to record on its books and records the date and amount of each Advance and each payment of principal thereof
and such recordation shall constitute prima facie evidence of the accuracy of the information so recorded. Lender shall provide Borrower access to an accounting of such recordations but any failure on the part of the Lender to keep any such recordation
(or any errors therein) shall not in any manner affect the obligation of Borrower to repay (with applicable interest) the Advances made to Borrower under this Agreement. Such statement and accounting shall be deemed final, binding and conclusive upon
Borrower, absent manifest error.
2.10 TERM AND PAYMENT.
(a) On the Facility Termination Date Borrower shall pay to Lender in full, in cash: (i) all outstanding Advances and all accrued but unpaid interest
thereon; and (ii) all other non-contingent Obligations due to or incurred by Lender.
(b) If any Accepted P.O. becomes a Canceled P.O. or a Delinquent P.O., then Borrower shall immediately repay the Advance relating thereto.
(c) Each Advance shall be payable on the earlier of (i) the Advance Due Date or (ii) receipt of the P.O. Proceeds.
(d) Borrower shall have the right, at any time upon thirty (30) days' prior written notice to
Lender to (i) terminate voluntarily Borrower's right to receive or benefit from, and Lender's obligation to make and to incur, Advances and (ii) prepay all of the Obligations. The effective date of termination specified in such notice shall be the Facility
Termination Date.
3. CONDITIONS PRECEDENT
3.1 CONDITIONS TO THE INITIAL ADVANCES. Lender shall not be obligated to make any Advance, or to perform any other action hereunder, until the following conditions
have been satisfied in a manner satisfactory to Lender in its sole discretion, or waived in writing by Lender:
(a) Lender shall have received the following, each, unless otherwise specified below or the context otherwise requires,
dated the Closing Date, in form and substance satisfactory to Lender and its counsel:
(i) this Agreement duly executed by Borrower;
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(ii) acknowledgement copies of proper Financing Statements
(Form UCC-l) (the "Financing Statements") duly filed under the Code in all
jurisdictions as may be necessary or, in the opinion of Lender, desirable
to perfect Lender's Lien on the Collateral;
(iii) certified copies of UCC Searches, or other evidence
satisfactory to Lender, listing all effective financing statements which
name Borrower (under
present name, any previous name or any trade or doing
business name) as debtor and covering all jurisdictions referred to in
DISCLOSURE SCHEDULE (4.3), together with copies of such other financing
statements;
(iv) evidence of the completion of all other recordings and
filings (including UCC-3 termination statements and other Lien release
documentation) as may be necessary or, in the opinion of and at the request
of Lender, desirable to perfect Lender's Lien on the Collateral and ensure
such Collateral is free and clear of other Liens other than Permitted
Encumbrances;
(v) Powers of Attorney duly executed
by each Credit Party
executing the Agreement;
(vi) duly executed Collateral Access Agreements;
(vii) duly executed Lockbox Account Agreements;
(viii) to the extent required by Lender, duly executed
Custom Broker Agreements;
(ix) Guarantee executed by the following Persons: Tidel
Technologies, Inc., and Guaranty Reaffirmations executed
by Tidel Cash
Systems, Inc., AnyCard International, Inc. and Tidel Services, Inc.
(x) Resolutions of each Credit Party executing the
Agreement, together with all attachments thereto; and
(xi) copies of such financial statements and projections as
Lender shall require.
(b) Lender shall have received evidence satisfactory to it that the insurance policies provided for in Section
4.11 are in full force and effect, together with appropriate evidence showing loss payable or additional insured clauses or endorsements in favor of Lender as required under such Section; and
(c) If required by Lender, Lender
shall have received opinion(s) of counsel to Borrower with respect to the Loan Documents in form and substance satisfactory to Lender.
3.2 FURTHER CONDITIONS TO THE ADVANCES. Lender shall not be obligated to make any Advance (including
the initial Advances), if, as of the date thereof:
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(a) any representation or warranty by any Credit Party contained herein or in any of the other Loan Documents shall
be untrue or incorrect as of such date, except to the extent that any such representation or warranty is expressly stated to relate to a specific earlier date, in which case, such representation and warranty shall be true and correct as of such earlier
date; or
(b) any event or circumstance that has had or reasonably could be expected to have a Material Adverse Effect shall have occurred since the Closing Date; or
(c) any Default shall have occurred
and be continuing or would result after giving effect to such Advance; or
(d) after giving effect to such Advance the aggregate amount of Advances would exceed the Maximum Amount.
The request by Borrower for an Advance
and the acceptance thereof shall be deemed to constitute, as of the date of such request and the date of such acceptance, (i) a representation and warranty by Borrower that the conditions in this Article 3 and Section 2.3 have been satisfied and (ii)
a restatement by Borrower of each of the representations and warranties made by it in any Loan Document and a reaffirmation by Borrower of the granting and continuance of Lender's Liens pursuant to the Loan Documents.
4. REPRESENTATIONS,
WARRANTIES AND AFFIRMATIVE COVENANTS
To induce Lender to enter into this Agreement and to make the Advances, Borrower and each other Credit Party executing this Agreement represent and warrant to Lender (each of which representations
and warranties shall survive the execution and delivery of this Agreement), and promise to and agree with Lender until the Termination Date as follows:
4.1 P.O.S.
(a) Each P.O. submitted with a Request
Certificate (i) is a bona fide P.O. and conforms in all respects to the representations contained in the Request Certificate and this Agreement, which Request Certificate is true and correct in all respects, (ii) shall constitute the legal, valid and
binding obligations of the Borrower and shall be enforceable against the Borrower in accordance with its terms, (iii) contains all of the terms and conditions relating to the Customer's purchase of Products, (iv) at the time such P.O. is submitted, such
P.O. is not the subject of a claimed dispute or a claimed request for a modification, and (v) is not the subject of an arrangement for goods or payments to be applied to other purchase orders, invoices or other obligations.
(b) Borrower shall (i) fully perform in accordance with the terms and conditions of each P.O. submitted with a Request Certificate, (ii) not give any other authorization or direction to make payment of all or any part of the P.O. Proceeds except as
expressly provided for in this Agreement, (iii) not agree to any amendments, modification of cancellation or revocation of, or substitution for any P.O. and shall not waive any of its rights thereunder without the prior written consent of Lender.
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(c) Upon delivery of Products to the Customer pursuant to an Accepted P.O., Borrower shall issue or cause to be issued a P.O. Invoice (and deliver any other related documents required
by the applicable P.O. for issuance of an invoice on account of such P.O.) to the Customer for the full P.O. Price. The P.O. Invoice shall direct the Customer to make payment to Lender or, if applicable, the Lockbox Account. Borrower shall not accept
any payment (including rebates, set-offs, and other Customer adjustments) with respect to any P.O. Invoice other than through Lender or the Lockbox Account. Borrower shall receive and hold in trust for the sole and exclusive benefit of Lender all sums
and instruments representing payment of any P.O. Invoice and all P.O. Proceeds which for any reason come into the possession of Borrower, its agents, representatives or any other party acting on behalf of Borrower, and promptly to deliver or cause delivery
of such sums to Lender.
(d) Borrower shall (i) take all actions necessary for the packaging and the shipment of Products to Customers in accordance with Accepted P.O.s, including, without limitation, processing, packaging,
shipping, warehousing, and insuring Products in accordance with the specifications set forth in the applicable Accepted P.O. and this Agreement, and to deliver the same to the Customer on or before the P.O. Delivery Date, (ii) provide Lender with written
notice (including the date shipped, the destination, the expected delivery date and the shipper) of each shipment of P.O. Inventory immediately following shipment thereof, (iii) immediately after issuance to the Customer deliver a copy of each P.O. Invoice
to Lender, and (iv) endeavor to collect in a manner consistent with past practices, payment with respect to each P.O. Invoice.
(e) Borrower is not in breach of any obligations it may have to Customer under a P.O. Borrower
shall immediately notify Lender in writing if an Accepted P.O. becomes a Cancelled P.O. or a Delinquent P.O. and of any claims, returns, disputes or offsets made by a Customer regarding the Products or payment therefore.
(f)
All P.O. Inventory shall be in compliance with all Environmental Laws and shall contain no Hazardous Materials. No P.O. Inventory (i) is produced under a license of any Intellectual Property except as disclosed in the applicable Request Certificate nor
(ii) was manufactured wholly or in part by forced or child labor. Forced labor shall include any labor, including convict labor or forced labor or indentured labor, where the work undertaken was not completed voluntarily and/or was extracted under the
threat of punishment or penalty. Child labor shall include any and all labor undertaken by children younger than the age of 14 or the age at which labor is allowed under the local law.
(g) Borrower shall deliver or cause to
be delivered to Lender all documents, notices, instruments, statements and bills of lading relating to Products and P.O. Inventory.
4.2 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Corporate Credit Party: (a) is, as of the Closing
Date, and will continue to be (i) a corporation, limited liability company or limited partnership, as applicable, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, (ii) duly
qualified to do business and in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified could not reasonably be expected
to
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have a Material Adverse Effect, and (iii) in compliance with all Requirements of Law and Contractual Obligations, except to the extent failure to comply therewith could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (b) has and will continue to have (i) the requisite corporate power and authority and the legal right to execute, deliver and perform its obligations under the Loan Documents,
and to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease, and to conduct its business as now, heretofore or proposed to be conducted, and (ii) all licenses, permits, franchises, rights,
powers, consents or approvals from or by all Persons or Governmental Authorities having jurisdiction over such Corporate Credit Party that are necessary or appropriate for the conduct of its business.
4.3 LOCATIONS; CORPORATE
OR OTHER NAMES. (a) Each Corporate Credit Party's name as it appears in official filing in the state of its incorporation or organization, (b) the type of entity of each Corporate Credit Party, (c) the organizational identification number issued by each
such Credit Party's state of incorporation or organization or a statement that no such number has been issued, (d) each Corporate Credit Party's state of organization or incorporation, and (e) the location of each Corporate Credit Party's chief executive
office, corporate offices, warehouses, other locations of Collateral and locations where records with respect to Collateral are kept (including in each case the county of such locations) are as set forth in DISCLOSURE SCHEDULE (4.3) and, except as set
forth in such Disclosure Schedule, such locations have not changed during the preceding twelve months. To the extent not previously delivered to Lender, each Corporate Credit Party shall deliver to Lender a Collateral Access Agreement and/or Customs Broker
Agreement from each person other than Borrower who at any time has possession of any Collateral. As of the Closing Date, during the prior five years, except as set forth in DISCLOSURE SCHEDULE (4.3), no Corporate Credit Party has been known as or conducted
business under any other name (including trade names). Each Corporate Credit Party has only one state of incorporation or organization.
4.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution, delivery and performance
by each Credit Party of the Loan Documents to which it is a party, and the creation of all Liens provided for herein and therein: (a) are and will continue to be within such Credit Party's power and authority; (b) have been and will continue to be duly
authorized by all necessary or proper action; (c) are not and will not be in violation of any Requirement of Law applicable to or Contractual Obligation of such Credit Party; (d) do not and will not result in the creation or imposition of any Lien (other
than Permitted Encumbrances) upon any of the Collateral; and (e) do not and will not require the consent or approval of any Governmental Authority or any other Person. As of the Closing Date, each Loan Document shall have been duly executed and delivered
on behalf of each Credit Party thereto, and each such Loan Document upon such execution and delivery shall be and will continue to be a legal, valid and binding obligation of such Credit Party, enforceable against it in accordance with its terms, except
as such enforcement may be limited by bankruptcy, insolvency and other similar laws affecting creditors' rights generally.
4.5 FINANCIAL STATEMENTS; BOOKS AND RECORDS.
(a) The Financial Statements
delivered by Borrower to Lender for its Fiscal Year ended September 30, 2004 and Fiscal Month ended October 31, 2004, are true, correct and complete and reflect fairly and accurately the
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financial condition of Borrower as of the date of each such Financial Statement in accordance with GAAP.
(b) Borrower and each other Corporate Credit Party shall keep adequate Books and Records with respect to the Collateral
and its business activities in which proper entries, reflecting all consolidated and consolidating financial transactions, and payments and credits received on, and all other dealings with, the Collateral, will be made in accordance with GAAP and all
Requirements of Law and on a basis consistent with the Financial Statements.
(c) All financial information provided by Borrower to Lender regarding any Customer or any Guarantor is true, correct and complete and reflect fairly
and accurately the financial condition of such Person as of the date thereof.
4.6 MATERIAL ADVERSE CHANGE. Between the date of Borrower's most recently audited Financial Statements delivered to Lender and the Closing Date, other
than as previously disclosed to the Lender in writing: (a) no Corporate Credit Party has incurred any obligations, contingent or non-contingent liabilities, or liabilities for Charges, long-term leases or unusual forward or long-term commitments that
could, alone or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (b) no events have occurred that alone or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect. No Requirement of Law
or Contractual Obligation of any Credit Party has or have had or could reasonably be expected to have a Material Adverse Effect and no Credit Party is in default, and to such Credit Party's knowledge no third party is in default under or with respect
to any of its Contractual Obligations, that alone or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect.
4.7 GOVERNMENT REGULATION. No Corporate Credit Party is subject to or regulated under
any Federal or state statute, rule or regulation that restricts or limits such Person's ability to incur indebtedness, pledge its assets, or to perform its obligations under the Loan Documents. The making of the Advances, the application of the proceeds
and repayment thereof, and the consummation of the transactions contemplated by the Loan Documents do not and will not violate any Requirement of Law.
4.8 TAXES; PAYMENT OF OBLIGATIONS. No tax Lien has been filed against any Credit
Party or any Credit Party's property. Each Credit Party will pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all of its Charges and other obligations of whatever nature, except where the
amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of such Credit Party and none of the Collateral is or could reasonably
be expected to become subject to any Lien or forfeiture or loss as a result of such contest.
4.9 LITIGATION. No Litigation is pending or, to the knowledge of any Credit Party, threatened by or against any Credit Party or against
any Credit Party's properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) that could reasonably be expected to have a Material Adverse Effect.
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4.10 FULL DISCLOSURE. No information contained in any Loan Document, the Financial Statements or any written statement furnished by or on behalf of any Credit Party under any Loan Document,
or to induce Lender to execute the Loan Documents, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which
they were made.
4.11 INSURANCE. As of the Closing Date, Disclosure SCHEDULE (4.11) lists all insurance of any nature maintained for current occurrences by Borrower and each other Corporate Credit Party, as well as a summary of
the terms of such insurance. Each Corporate Credit Party shall deliver to Lender certified copies and endorsements to all of its and those of its Subsidiaries (a) "All Risk" and cargo and marine insurance policies that are currently maintained by any
Corporate Credit Party naming Lender loss payee, and (b) general liability and other liability policies naming Lender as an additional insured. All policies of insurance on personal property will contain an endorsement, in form and substance acceptable
to Lender, showing loss payable to Lender (Form 438 BFU or equivalent). Such endorsement, or an independent instrument furnished to Lender, will provide that the insurance companies will give Lender at least thirty (30) days' prior written notice before
any such policy or policies of insurance shall be altered or canceled and that no act or default of Borrower or any other Person shall affect the right of Lender to recover under such policy or policies of insurance in case of loss or damage. Each Corporate
Credit Party ...
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