-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SARAvms3aV3PdkeS9BlfHd0rZVVzHIfjwLPvzT6JHAVf7sZuitCFiat44Q8oTbDQ elQVqwal+B1e346lBp0a2w== 0000079225-97-000015.txt : 19970721 0000079225-97-000015.hdr.sgml : 19970721 ACCESSION NUMBER: 0000079225-97-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19970530 FILED AS OF DATE: 19970718 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLYMOUTH RUBBER CO INC CENTRAL INDEX KEY: 0000079225 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED RUBBER PRODUCTS, NEC [3060] IRS NUMBER: 041733970 STATE OF INCORPORATION: MA FISCAL YEAR END: 1127 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05197 FILM NUMBER: 97642732 BUSINESS ADDRESS: STREET 1: 104 REVERE ST CITY: CANTON STATE: MA ZIP: 02021 BUSINESS PHONE: 6178280220 MAIL ADDRESS: STREET 1: PLYMOUTH RUBBER CO INC STREET 2: 104 REVERE ST CITY: CANTON STATE: MA ZIP: 02021 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended May 30, 1997 Commission File Number 1-5197 Plymouth Rubber Company, Inc. (Exact name of registrant as specified in its charter) Massachusetts 04-1733970 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 104 Revere Street, Canton, Massachusetts 02021 (Address of principal executive offices) (Zip Code) (617) 828-0220 Registrant's telephone number, including area code Not Applicable (Former name, former address, and former fiscal year, if changed since last report). Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports, and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Class A common stock, par value $1 - 810,586 Class B common stock, par value $1 -1,219,927 1 PLYMOUTH RUBBER COMPANY, INC. PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Statement of Operations and Retained Earnings (Deficit) Consolidated Balance Sheet Consolidated Statement of Cash Flows Notes To Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION 2 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements [CAPTION] PLYMOUTH RUBBER COMPANY, INC. CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) (In Thousands Except Share and Per Share Amounts) (Unaudited) Second Quarter Ended Six Months Ended May 30, May 31, May 30, May 31, 1997 1996 1997 1996 Net sales $ 17,706 $ 14,566 $ 32,990 $ 27,878 Costs and expenses: Cost of products sold 13,802 10,887 25,290 21,238 Selling, general and administrative 3,315 2,504 6,454 4,730 17,117 13,391 31,744 25,968 Operating income 589 1,175 1,246 1,910 Interest expense (345) (327) (681) (629) Other income (expense), net 25 (12) (51) (33) Income before taxes 269 836 514 1,248 Provision for income taxes (99) (217) (203) (324) Net income 170 619 311 924 Retained earnings (deficit) at beginning of period (3,407) (4,272) (3,548) (4,577) Less stock dividend -- (843) -- (843) Retained earnings (deficit) at end of period $ (3,237) $ (4,496) $ (3,237) $ (4,496) Per Share Data: Net income $ .08 $ .28 $ .14 $ .41 Weighted average number of shares outstanding 2,175,475 2,230,952 2,188,390 2,233,967
See Accompanying Notes To Consolidated Financial Statements 3 [CAPTION] PLYMOUTH RUBBER COMPANY, INC. CONSOLIDATED BALANCE SHEET (In Thousands) May 30, Nov. 29, 1997 1996 (Unaudited) ASSETS CURRENT ASSETS Cash $ 93 $ -- Accounts receivable 10,269 7,737 Allowance for doubtful accounts (300) (174) Inventories: Raw materials 4,030 3,730 Work in process 1,484 1,962 Finished goods 5,784 5,633 11,298 11,325 Deferred tax assets, net 1,972 1,972 Prepaid expenses and other current assets 731 744 Total current assets 24,063 21,604 PLANT ASSETS: Plant assets 32,715 27,753 Less: Accumulated depreciation 20,208 17,937 Total plant assets, net 12,507 9,816 OTHER ASSETS: Deferred tax assets, net 2,549 2,802 Other long-term assets 1,307 528 3,856 3,330 Total Assets $ 40,426 $ 34,750 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Revolving line of credit $ 5,855 $ 5,189 Trade accounts payable 5,344 5,626 Accrued expenses 3,845 3,664 Current portion of long-term obligations 1,714 1,538 Current portion of product warranties 100 106 Total current liabilities 16,858 16,123 LONG-TERM LIABILITIES: Borrowings 10,579 5,430 Pension obligation 3,349 3,647 Product warranties 628 678 Other 1,541 1,684 Total long-term liabilities 16,097 11,439 STOCKHOLDERS' EQUITY: Preferred stock $10 par value, authorized 500,000 shares; no shares issued and outstanding -- -- Class A voting common stock 810 810 Class B non-voting common stock 1,220 1,192 Paid in capital 9,081 9,086 Retained earnings (deficit) (3,237) (3,548) Cumulative translation adjustment (70) -- Pension liability adjustment, net of tax (162) (162) Deferred compensation (171) (190) Total stockholders' equity 7,471 7,188 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 40,426 $ 34,750
See Accompanying Notes To Consolidated Financial Statements 4 [CAPTION] PLYMOUTH RUBBER COMPANY, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (In Thousands) (Unaudited) Six Months Ended May 30, May 31, 1997 1996 Cash flows from operating activities: Net Income $ 311 $ 924 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 734 568 Amortization of deferred compensation 19 19 Foreign currency exchange loss 79 -- Change in valuation allowance -- (175) Changes in assets and liabilities: Accounts receivable (1,375) (728) Inventory 277 233 Prepaid expenses 18 725 Other assets 10 (42) Accounts payable (42) (1,110) Accrued expenses (34) 211 Pension obligation (298) (179) Product warranties (56) (48) Other liabilities (160) (113) Net cash provided by (used in) operating activities (517) 285 Cash flows from investing activities: Capital expenditures (1,992) (1,156) Sale/leaseback of plant assets -- 258 Cash paid in connection with the purchase of Cintas Adhesivas Nunez, S.A., net of cash acquired of $90 (2,219) -- Purchase price adjustment - Brite-Line Technologies, Inc. (584) -- Net cash used in investing activities (4,795) (898) Cash flows from financing activities: Net increase (decrease) in revolving line of credit 441 (357) Proceeds from term loan 5,771 3,657 Payments of term loan (626) (2,563) Payments on capital leases (108) (62) Payments on insurance financing (88) (107) Proceeds from issuance of common stock 23 45 Net cash provided by financing activities 5,413 613 Effect of exchange rates on cash (8) -- Net change in cash 93 -- Cash at the beginning of the period -- -- Cash at the end of the period $ 93 $ -- Supplemental Disclosure of Cash Flow Information Cash paid for interest $ 712 $ 513 Cash paid for income taxes $ 106 $ 97 Supplemental Disclosure of Non-Cash Activities: Assets acquired under capital lease obligations $ -- $ 433 Charge to retained earnings for stock dividend $ -- $ 843
See Accompanying Notes To Consolidated Financial Statements 5 PLYMOUTH RUBBER COMPANY, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) (1) The Company, in its opinion, has included all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results for the interim periods. The interim financial information is not necessarily indicative of the results that will occur for the full year. The financial statements and notes thereto should be read in conjunction with the financial statements and notes for the years ended November 29, 1996, December 1, 1995, and December 2, 1994, included in the Company's 1996 Annual Report to the Securities and Exchange Commission on Form 10-K/A. (2) In connection with its former roofing materials business, the Company issued extended warranties as to the workmanship and performance of its products. Over 99% of these warranties had expired prior to the end of 1995, and the last of the ten year warranties expired in 1996. (A small number of certain other, more restrictive, and limited warranties continue thereafter.) The estimated costs of these warranties were accrued at the time of sale, subject to subsequent adjustment to reflect actual experience, which resulted in additional charges to operations during 1994 of $325,000. Some warranty holders have filed claims or brought suits currently aggregating approximately $721,000 against the Company and others relating to alleged roof failures. The Company believes, upon advice of counsel, that its warranty obligation under such warranties is limited to the cost of the roofing materials and that the amounts of the claims are significantly in excess of its ultimate liability. The Company is vigorously defending against these claims and believes that some are without merit and that the damages claimed in others may not bear any reasonable relationship to the merits of the claims or the real amount of damage, if any, sustained by the various claimants. Management believes that the $728,000 reserve included in liabilities recorded at May 30, 1997 is adequate provision for the Company's remaining warranty obligations. In December 1996, the Company entered into a purchase commitment for a significant piece of equipment to be financed with a new term loan. In October 1996, LB Acquisition, Inc., which was renamed Brite-Line Technologies, Inc., a new, wholly-owned subsidiary of the Company, acquired certain assets of Brite-Line Industries, Inc. from senior secured creditors. In connection with this transaction, the Company guaranteed the collection of accounts receivable in the amount of $2,100,000. On or about February 4, 1997, the Company paid $586,324.71 as the full and final balance due under this guarantee. The United States Environmental Protection Agency (EPA) has asserted three (3) outstanding claims against the Company under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), pursuant to which EPA is seeking to recover from the Company and other "generators" the costs associated with the clean-up of certain sites used by licensed disposal companies hired by the Company as independent contractors for the disposal and/or reclamation of hazardous waste materials. In one case, in respect to the Superfund site known as Re-Solve, Inc., of Dartmouth, Massachusetts, the Company entered into a Consent Decree, which required payment by the Company of $100,000 plus interest over a period of five years in full settlement of the EPA claim. The Company has paid $84,000 and owes one payment of $16,000 in 1997. With respect to the second assertion against the Company under CERCLA, a General Notice of Potential Liability was sent to 1,659 Potentially Responsible Parties ("PRP") including the Company, in June, 1992, relative to a Superfund Site known as Solvent Recovery System of New England ("SRS") at a location in Southington, Connecticut, concerning shipments to the site which occurred between June 1, 1956, and January 25, 1974. 6 PLYMOUTH RUBBER COMPANY, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) The EPA has attributed a 1.74% share of the aggregate waste volume to the Company. The Company believes that this attribution may be overstated by failing to account for the portion of the gross waste volume actually returned to the Company. The first phase of a remediation program is estimated to cost $3.6 million. The Administrative Order on Consent for Removal Action and Remedial Investigation/Feasibility ("RI/FS") study was entered on or about February 6, 1997. Phase II of the clean-up and the RI/FS, is projected to cost $2.1 million. The most currently available estimate is that the cost of the clean up for the PRP's will range from approximately $38 million to $48 million. Based on all available information as well as its prior experience, management believes the amount accrued of approximately $426,000, which is net of approximately $200,000 in payments made by the Company, in the accompanying consolidated financial statements as of May 30, 1997 is reasonable in relation to the Company's attributed share of total estimated aggregate cost. This amount is subject to adjustment for future developments that may arise from the long-range nature of this EPA case, legislative changes, insurance coverage, the uncertainties associated with the ultimate outcome of the Record of Decision ("ROD"), the joint and several liability provisions of CERCLA, and the Company's ability to successfully negotiate an outcome similar to its previous experience in these matters. No actions have been filed by the EPA against the Company. Therefore, while the Company is participating in the PRP Group, it is impossible to determine the Company's total ultimate liability and/or responsibility at this time. On January 25, 1994, the Company received a notification of an additional Superfund Site, Old Southington Landfill, (the "OSL Site") regarding which the EPA asserts that the Company is a PRP. The OSL Site is related to the SRS Site in that, the EPA alleges, after receipt and processing of various hazardous substances from PRP's, the owners and/or operators of the SRS Site shipped the resultant contaminated soil from the SRS Site to the OSL Site. Since the Company is alleged to have shipped materials to the SRS Site, the EPA alleges that the Company is also a PRP of the OSL Site. In addition, there were three (3) direct shippers to the site, the Town of Southington, General Electric, and Pratt & Whitney, as well as other transporters and/or users. Based on EPA's asserted volume of shipments to SRS during that time period, the EPA has attributed 4.89% of waste volume of all SRS customers, to the Company; no attempt has been made by EPA to adjust the waste volume for the distillation done by SRS prior to shipment to OSL, or to allocate a percentage to the Company in relation to direct users of the OSL Site, or in relation to a combination of direct and indirect users of the site. An ROD was issued in September, 1994 for the first Phase of the clean-up, estimated to cost approximately $16 million. A PRP Group was formed and the Company became a participant in the Joint Defense Group of OSL/SRS "transshipper" PRP's and in the Alternative Dispute Resolution process. This process resulted in a mediated settlement for the first phase of the clean up, as well as settlement of past costs and orphan shares. The Company will pay $165,000 to $190,000 in settlement of the first phase. The settlement of the second phase is currently being mediated; total costs to the SRS "transshipper" group are not expected to exceed approximately $15 million. The Company has been notified that certain members of the "transshipper" PRP's, including the Company, will likely be precluded from participating in a mediated settlement on a "de minimis" basis at this time, pending a final allocation. Based on all available information as well as its prior experience management believes a reasonable estimate of its ultimate liability for both phases is $365,000 and has accrued this amount in the accompanying consolidated financial statements as of May 30, 1997. This amount is subject to future developments that may arise from the long-range nature of this EPA case, legislative changes, insurance coverage, the uncertainties associated with the ultimate outcome of the ROD and the joint and several liability provisions of CERCLA, and the Company's ability to successfully negotiate an outcome similar to its previous 7 PLYMOUTH RUBBER COMPANY, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) Continued experience in these matters. No actions have been currently filed by the EPA against the Company. Therefore, while the Company intends to vigorously defend this matter, it is impossible to determine the Company's total liability and/or responsibility at this time. In addition, in the process of preparing to eliminate the use of certain underground storage tanks located at the Company's manufacturing facility, the Company determined that some soil contamination had occurred in a small localized area near the tanks in question. According to the preliminary information obtained by an independent Licensed Site Professional, the contamination of the soil appears to be confined to a small area and does not pose an environmental risk to the surrounding property or community. In accord with Massachusetts requirements, the Company notified the Massachusetts Department of Environmental Protection ("DEP") of the foregoing on or about August 24, 1994. Plymouth has employed a licensed site professional as required by statute to investigate the site. Remediation action is in process. It is expected that such assessment and remediation will take several years to complete and that the remaining costs for same will not exceed the additional sum of approximately $185,000, which has been provided for in the accompanying financial statements. On or about January 21, 1997, the Company received a Notice of Responsibility from the Massachusetts Department of Environmental Protection, ("DEP") pursuant to M.G.L. ch. 21E concerning the certain sites identified as The Ledge, 757-782 State Road, Dartmouth: RTN No. 4-0234; and Ridge Hill Road, Freetown: RTN No. 4-0086. The letter indicates that drums containing hazardous materials, some of which may have contained the Company's wastes, were discovered at both sites in April 1979, and that response actions were undertaken at both sites conducted between 1979 and 1981 by DEP. On information and belief, the company which disposed of these drums is H&M Drum to whom the Company shipped wastes between 1977 to 1979. The Company has identified and management believes it may obtain a cost sharing agreement with a group of other potentially responsible parties, and is continuing to investigate and seek DEP enforcement with respect to the site owners and other potentially responsible parties. In compliance with DEP requests and statutory requirements, the Company has hired a licensed site professional to perform certain technical service at the sites. However, the Company has little information regarding these sites and its potential involvement, including the identity and contributions of other PRP's and the scope of the clean-up necessary, and therefore has not recorded any liability as of May 30, 1997. A response to the Notice of Responsibility has been made and cooperative efforts, including an investigation of additional PRP's and the status of the site, will be made. (3) Checks outstanding in excess of certain cash balances totaling $811,000 and $623,000 at May 30, 1997 and November 29, 1996, respectively, have been included in accounts payable. (4) On June 11, 1996, the Company declared a 5% stock dividend on both Class A (voting) and Class B (non-voting) common stock. The dividend was paid in Class B shares on August 19, 1996 to shareholders of record as of June 24, 1996. Retained earnings was charged for $843,000 based on a dividend value of $8.875 per share. Cash was paid in lieu of fractional shares using the closing price of Class B common stock on June 10, 1996, and was less than $2,000. Earnings per share have been adjusted to reflect the stock dividend declared. The common shares outstanding, and the common stock equivalents, are shown below. 8 PLYMOUTH RUBBER COMPANY, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) Continued (4) (Continued) Common and Common Equivalent Shares (Primary Basis): Second Quarter Ended Six Months Ended May 30, May 31, May 30, May 31, 1997 1996 1997 1996 Average shares outstanding 2,030,513 1,995,659 2,021,883 1,988,237 Adjustments thereto(1)(2) 144,962 235,293 166,921 245,730 Weighted average shares outstanding 2,175,475 2,230,952 2,188,390 2,233,967 (1) Adjust for options and warrants under the treasury stock method using average market value during the period. (2) Same as (1) except using market value at the end of the period, if greater than the average market value during the period. (5) In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 128 ("FAS 128"), Earnings per Share. FAS 128, which is effective for both interim and annual periods ending after December 15, 1997, requires the disclosure of basic and diluted earnings per share as well as certain other disclosures. Basic and diluted earnings per share, as computed under the new standard, are not materially different from the Company's current presentation of primary and fully diluted earnings per share, respectively, and accordingly, pro forma disclosure is not presented herein. (6) On January 3, 1997, Plymouth Rubber Europa, S.A. a newly formed, wholly- owned subsidiary of the Company, acquired 100 percent of the outstanding shares of Cintas Adhesivas Nunez, S.A ("CANSA"). The aggregate purchase price of $3,100,000, which includes transaction costs, was allocated as follows: Working capital $ 320,000 Plant assets, net 1,660,000 Goodwill 1,020,000 Other 100,000 $ 3,100,000 The accompanying financial statements include the results of operations and cash flows of CANSA for the five months ended May 30, 1997. The impact of this acquisition was not significant. (7) Financial instruments with off-balance sheet risks During the current year, the Company began to selectively use foreign currency forward contracts to offset the effects of exchange rate changes on cash flow exposures denominated in foreign currencies. At May 30, 1997, the foreign currency forward contracts primarily comprise a buy contract relating to a firm purchase commitment with a maturity prior to November 28, 1997. The buy contract, which was denominated in Deutschmarks, is on a notional amount of $3 million at May 30, 1997. The fair value of the forward exchange contract is estimated based on quoted market prices from the bank, and at May 30, 1997, the Company would have paid approximately $179,000 to terminate the buy contract. 9 PLYMOUTH RUBBER COMPANY, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) Continued (8) On April 11, 1997, Plymouth Rubber Europa, S.A. a subsidiary of the Company, entered a term loan arrangement with a Spanish Bank syndicate in the original amount of 250,000,000 pesetas(approximately $1,721,000) due April 2007, secured by a first interest in real property and supported by a bank guarantee in the amount of $500,000. Semi-annual principal payments of 12,500,000 pesetas (approximately $86,000), plus interest at the one year Madrid inter-bank market rate (MIBOR) plus 1.25%. At May 30, 1997, the interest rate was 6.875%. (9) As of May 30, 1997, the Company was in technical default with respect to the minimum fixed charge coverage ratio of earnings before interest, depreciation and taxes, compared to the current portion of long-term debt, capital leases and interest covenant contained in its Loan and Security Agreements with a major lender. This technical default was subsequently waived by the lender. 10 Item 2. Management's Discussion & Analysis of Financial Condition and Results of Operations. FIRST SIX MONTHS, 1997 COMPARED WITH FIRST SIX MONTHS, 1996 Net sales at $32,990,000 were up 18% compared with the first six months of 1996, which was up 5% from same period in 1995. The sales increase reflects sales from the October, 1996, and January, 1997, acquisitions now operating as Brite- Line Technologies, Inc. and Plymouth Rubber Europa, S.A., respectively, and reflects continued growth in sales of tapes to the domestic automotive wire harnessing industry. Sales to the domestic automotive market increased 18% over the prior year's first six months, and represented 46% of sales. Small sales increases were attained in the other markets, with the exception of sales to the non-automotive OEM market, which declined 30%, due primarily to capacity restrictions. In February, 1997, the Company announced a two-year, $10 million capital investment program to substantially increase the Company's manufacturing capacity, reduce costs and improve productivity. The largest step in the program, accounting for over half of the planned expenditure, is a new vinyl calender and auxiliary equipment, scheduled to be installed in the last quarter of the current year, and to begin production in the second quarter of 1998. Operating income at $1,246,000 is down 35% from the corresponding period of 1996, reflecting a one point gross margin reduction and a 14% increase in selling, general & administrative expenses, both pertaining to Plymouth's tradi- tional business, and a moderate expected loss from operations of Brite-Line Technologies, Inc. (acquired October 4, 1996), offset in part by a small contribution from Plymouth Rubber Europa, S.A. (acquired January 3, 1997). Moderate losses were expected from Brite-Line operations in the first several months of 1997 because of the cost associated with the start-up of operations and the highly seasonal nature of the pavement marking business. The consolidated operating income reduction reflects a 16% increase in gross profit, more than offset by a 36% increase in selling, general & administrative expenses. The $1,060,000 gross profit increase is attributable to the higher sales volume, 75% of which was contributed by the acquisitions. The gross margin decreased one half point, reflecting the parent company's less favorable product mix, higher raw material costs, higher plant maintenance expenses, and production inefficiencies related to limitations on the Company's production capacity. In addition, higher indirect labor and training costs were incurred in preparation for the Company's planned increase of its manufacturing capacity as discussed above. Selling expenses increased 36%, reflecting higher costs and outgoing freight, commissions, salesmen's salaries, and foreign warehouse operations, offset in part by a decrease in travel expenses. General & Administrative expenses, exclusive of the $147,000 recovery from the settlement of a lawsuit in last year's first quarter, increased 27% over the corresponding period of the prior year, due primarily to the addition of Brite-Line and Europa, S.A, administrative personnel, and increased professional fees for legal, audit and recruitment services for the parent company. Income before taxes at $514,000 is down 59% from the first six months of 1996, primarily related to the $147,000 lawsuit settlement and the $664,000 reduction in operating income. In addition, the Company incurred increased interest expense as a result of higher loan volume due primarily to the financing of two acquisitions, offset in part by reduced interest rates attributable to the replacement of the Company's primary lender on June 6, 1996. Net income at $311,000 is down $613,000 from the first six months of the prior year, which included a $175,000 reversal of Deferred Tax Valuation Allowance, resulting in an effective income tax rate of approximately 26% in that period. Changes in Financial Condition; Liquidity and Capital Resources For the first six months of fiscal 1997, cash flows used in operations amounted to $517,000, resulting primarily from net income of $311,000 and noncash charges (depreciation and amortization) of $753,000, which were more than offset by a $1,375,000 increase in accounts receivable, a net $298,000 contribution to the Company's pension plan and a reduction in other current liabilities. 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) During the first six months of 1997, the Company used $5,771,000 in proceeds from additional term debt and $441,000 of its revolving line of credit to (1) finance a $517,000 shortfall in cash provided by operations, (2) purchase Cintas Adhesivas Nunez, S.A. (now operating as Plymouth Rubber Europa, S.A.) for $2,219,000, (3) increase its investment in Brite-Line Technologies, Inc. by $584,000, and (4) to purchase $1,992,000 of capital equipment. As of May 30, 1997, because of collateral limitations and after consideration of the letter of credit related to the purchase of a calender and auxiliary equipment associated therewith, the Company had approximately $1,700,000 of unused borrowing capacity, under its $15 million line of credit with its primary lender. In addition, as of May 30, 1997, the Company was in technical default with respect to the minimum fixed charge coverage ratio of earnings before interest, depreciation and taxes, compared to the current portion of long-term debt, capital leases and interest covenant contained in its Loan and Security Agreements with a major lender. This technical default was subsequently waived by the lender. In the opinion of management, anticipated profits, as well as unused capacity under existing borrowing arrangements with the Company's primary lender will provide sufficient funds to meet expected needs during the remainder of 1997, including necessary working capital expansion to support anticipated moderate sales growth and finance the planned investment in improved technology and capital equipment. This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities & Exchange Act of 1934. The Company's actual results could differ materially from those set forth in the forward-looking statements. 12 SECOND QUARTER, 1997 COMPARED WITH SECOND QUARTER, 1996 Net sales at $17,706,000 were up 22% from the second quarter of 1996, which was up 4% from the same period in 1995. The sales increase reflects (1) a 3% increase in Plymouth's traditional business as sales continue to be restricted by capacity limitations, and (2) sales by the October, 1996 and January, 1997 acquisitions now operating as Brite-Line Technologies, Inc. and Plymouth Rubber Europa, S.A., respectively. Sales to the domestic automotive market increased 23% over the prior year's second quarter, and accounted for 46% of the quarterly sales. Sales to the export and the non-automotive OEM markets declined 12% and 37%, respectively. Operating income at $589,000 is down 50% from the prior year, as an $813,000 increase in selling, general & administrative expense more than offset the $225,000 gross profit increase (up 6% from the corresponding quarter of the prior year). The gross profit increase is the result of the higher sales volume, 85% of which was contributed by the acquisitions, as consolidated margins declined approximately three points, reflecting the parent company's less favorable product mix, higher raw materials costs, higher plant maintenance expenses, and production inefficiencies related to limitations on the Company's production capacity. In addition, higher labor and training costs were incurred in preparation for the Company's planned increase of its manufacturing capacity as discussed above. Selling expenses increased 42%, compared to the second quarter of 1996, reflecting increases in outgoing freight, salesmen's salaries, travel expense, and increased costs of foreign warehousing and distribution. General & Administrative expenses increased 16% over the corresponding period of the prior year, reflecting the addition of Brite-Line and Europa, S.A., administrative personnel, and increased professional fees pertaining to audit, legal and recruitment, offset in part by reduced accruals pertaining to incentive compensation and profit sharing expenses. Income before taxes at $269,000 is down 68% from the prior year's second quarter, reflecting the reduced operating income and a 6% increase in interest expense, offset in part a $37,000 increase in Other income. Net income at $170,000 for the second quarter of 1997 is down $449,000 from the second quarter of the prior year, which benefited from a $117,000 reversal of a Deferred Tax Valuation Allowance, which resulted in an effective income tax rate of approximately 26% in that quarter. 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings Reference is made to the information contained in Item 3 of the Company's Annual Report on Form 10-K/A for its fiscal year ended November 29, 1996, and in Note 14 of the Notes To Financial Statements, contained in said Annual Report. Reference is made to those certain claims asserted by the United States Environmental Protection Agency ("EPA") and the information contained in Item 3 of the Company's Annual Report on Form 10-K/A for its fiscal year ended November 29, 1996, and in Note 14 of the Notes To Financial Statements contained in said Annual Report and as further described in Item 1 of the Company's Quarterly Report for the quarter ended February 28, 1997 and in Note 2 to the Financial Statements contained in said Quarterly Report. With respect to the second assertion against the Company under CERCLA, concerning a General Notice of Potential Liability which was sent to 1,659 Potentially Responsible Parties ("PRP") including the Company, in June, 1992, relative to a Superfund Site known as Solvent Recovery System of New England ("SRS") at a location in Southington, Connecticut, the Administrative Order on Consent for Removal Action and Remedial Investigation/Feasibility ("FI/FS") study was executed by the EPA on or about February 6, 1997. With respect to that certain environmental matter concerning the Notice of Responsibility from the Massachusetts Department of Environmental Protection, ("DEP") pursuant to M.G.L. ch.21E concerning the certain sites identified as The Ledge, 757-782 State Road, Dartmouth: RTN No. 4-0234; and Ridge Hill Road, Freetown: RTN No. 4-0086 received by the Company on or about January 21, 1997, the Company has identified and management believes it may obtain a cost sharing agreement with a group of other potentially responsible parties, and is continuing to investigate and seek DEP enforcement with respect to the site owners and other potentially responsible parties. However, the Company has little information regarding these sites and its potential involvement, including the identity and contributions of other PRP's and the scope of whatever clean- up may be necessary, and therefore has not recorded any liability as of May 31, 1997. A response to the Notice of Responsibility has been made and cooperative efforts, including an investigation of additional PRP's and limited sampling of wells at these sites, have been undertaken by the Company. Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders The Company's Annual Meeting was held on April 25, 1997. The following members were elected to the Company's Board of Directors to hold office for the ensuing three year term: Nominee In Favor Opposed Maurice J. Hamilburg 709,457 3,200 Duane E. Wheeler 14 PART II. OTHER INFORMATION (Continued) Item 4 (Cont.) The results on the voting of the following additional items were as follows: The ratification of the appointment of Price Waterhouse LLP as independent auditors of the Company for the next fiscal year: In Favor Opposed Abstain No Vote 710,657 2,000 0 0 Item 5. Other Information Not Applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: See Index To Exhibits (b) Not Applicable SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. Plymouth Rubber Company, Inc. (Registrant) D. E. Wheeler D. E. Wheeler Vice President - Finance Date: July 18, 1997 PLYMOUTH RUBBER COMPANY, INC. INDEX TO EXHIBITS (a) Exhibits: Exhibit No. Description (2) Not Applicable. (3)(i) Not Applicable. (4)(i) Promissory Note between Plymouth Rubber Company, Inc. and Thrift Institution Fund For Economic Development dated June 14, 1989 -- incorporated by reference to Exhibit (4)(iii) to report on Form 10-Q for the quarter ended May 27, 1994. (4)(ii) Loan and Security Agreement between Plymouth Rubber Company, Inc., and Thrift Institution Fund For Economic Development dated June 14, 1989 -- incorporated by reference to Exhibit (4)(iv) to report on Form 10-Q for the quarter ended May 27, 1994. (4)(iii) Mortgage Note between Plymouth Rubber Company, Inc., and the Board of Education of Charles County, Maryland, dated November 1, 1991 -- incorporated by reference to Exhibit (2)(xiii) to Report on Form 10-Q for the Quarter ended May 30, 1992. (4)(iv) Promissory Note between Plymouth Rubber Company, Inc., and Foothill Capital Corporation dated October 1, 1993 -- incorporated by reference to Exhibit (2)(I) to the Report on Form 8-K with cover page dated October 1, 1993. (4)(v) Loan and Security Agreement between Plymouth Rubber Company, Inc., and Foothill Capital Corporation dated October 1, 1993 -- incorporated by reference to Exhibit (2)(ii) to the Report on Form 8-K with cover page dated October 1, 1993. (4)(vi) Amendment to Promissory Note between Plymouth Rubber Company, Inc., and Thrift Institutions Fund For Economic Development dated November 30, 1993 -- incorporated by reference to Exhibit (4)(x) to Report on 10-K for the year ended November 26, 1993. (4)(vii) Promissory Note between Plymouth Rubber Company, Inc. and General Electric Capital Corporation dated December 29, 1995. (4)(viii)Master Security Agreement between Plymouth Rubber Company, Inc. And General Electric Capital Corporation dated December 29, 1995. (4)(ix) Demand Note between Plymouth Rubber Company, Inc. and LaSalle National Bank dated June 6, 1996 -- incorporated by reference to Exhibit (2)(ii) to the report on Form 8-K with cover page dated June 6, 1996. (4)(x) Loan and Security Agreement between Plymouth Rubber Company, Inc. and LaSalle National Bank dated June 6, 1996 -- incorporated by reference to Exhibit (2)(ii) to the report on Form 8-K with cover page dated June 6, 1996. (4)(xi) Amendment to Master Security Agreement between Plymouth Rubber Company, Inc. and General Electric Capital Corporation dated February 19, 1997. PLYMOUTH RUBBER COMPANY, INC. INDEX TO EXHIBITS (a) Exhibits: Exhibit No. Description (4)(xii) Master Security Agreement between Plymouth Rubber Company, Inc. and General Electric Capital Corporation dated January 29, 1997 -- incorporated by reference to Exhibit (4)(xii) to the Company's report on Form 10-Q for the quarter ended February 28, 1997. (4)(xiii)Demand Note between Brite-Line Technologies, Inc. and LaSalle National Bank dated February 25, 1997. (4)(xiv) Loan and Security Agreement between Brite-Line Technologies, Inc. and LaSalle National Bank dated February 25, 1997. (4)(xv) Continuing Unconditional Guaranty between Brite-Line Technologies, Inc. and LaSalle National Bank dated February 25, 1997. (4)(xvi) Amendment to Loan and Security Agreement between Plymouth Rubber Company, Inc. and LaSalle National Bank dated May 7, 1997. (4)(xvii)Continuing Unconditional Guaranty between Plymouth Rubber Company, Inc. and LaSalle National Bank dated March 20, 1997. (4)(xviii)Public Deed which contains the loan guaranteed by mortgage and granted between Plymouth Rubber Europa, S.A. and Caja de Ahorros Municipal de Vigo, Banco de Bilbao, and Vizcaya y Banco de Comercio dated April 11, 1997. (4)(xix) Corporate Guaranty between Plymouth Rubber Company, Inc. and Caja de Ahorros Municipal de Vigo, Banco de Bilbao, and Vizcaya y Banco de Comercio dated April 11, 1997. (10)(i) 1982 Employee Incentive Stock Option Plan -- incorporated by reference to Exhibit (10)(I) of the Company's Annual Report on Form 10-K for the year ended November 26, 1993. (10)(ii) General Form of Deferred Compensation Agreement entered into between the Company and certain officers -- incorporated by reference to Exhibit (10)(ii) of the Company's Annual Report on Form 10-K for the year ended November 26, 1993. (10)(iii) 1992 Employee Incentive Stock Option Plan -incorporated by reference to Exhibit (10)(iv) of the Company's Annual Report on Form 10-K for the year ended November 26, 1993. (10)(iv) 1995 Non-Employee Director Stock Option Plan -- incorporated by reference to Exhibit (4.3) of the Company's Registration Statement on Form S-8 dated May 4, 1995. (10)(v) 1995 Employee Incentive Stock Option Plan -- incorporated by reference to Exhibit (4.4) of the Company's Registration Statement on Form S-8 dated May 4, 1995. PLYMOUTH RUBBER COMPANY, INC. INDEX TO EXHIBITS (Continued) (a) Exhibits: Exhibit No. Description (10)(vi) Sales contract entered into between the Company and Kleinewefers Kunststoffanlangen GmbH -- incorporated by reference to Exhibit (10)(vi) of the Company's report on Form 10-Q for the quarter ended February 28, 1997. (11) Not applicable (15) Not applicable (18) Not applicable (19) Not applicable (22) Not applicable (23) Not applicable (24) Not applicable (27) Financial data schedule six months ended May 30, 1997. EX-4 2 EXHIBIT (4)(xiii) DEMAND NOTE Executed as of the 25 day of February , 19 97 at Chicago, Illinois. No. 1407980100 Amount $3,500,000.00 FOR VALUE RECEIVED, the Undersigned (jointly and severally, if more than one) promises to pay to the order of LASALLE NATIONAL BANK (hereinafter, together with any holder hereof, called "Bank"), at the main office of the Bank, the principal sum of Three Million five Hundred and No/100 Dollars ($3,500,000.00------) plus the aggregate unpaid principal amount of all advances made by Bank to the Undersigned (or any one of them, if more than one) pursuant to and in accordance with Paragraph 2 of the Loan Agreement (as hereinafter defined) in excess of such amount, or, if less, the aggregate unpaid principal amount of all advances made by Bank to the Undersigned (or any one of them, if more than one) pursuant to and in accordance with Paragraph 2 of the Loan Agreement. The Undersigned (jointly and severally, if more than one) further promises to pay interest on the outstanding principal amount hereof on the dates and at the rates provided in the Loan Agreement from the date hereof until payment in full hereof. This Demand Note is referred to in and was delivered pursuant to that certain Loan and Security Agreement, as it may be amended from time to time, together with all exhibits thereto, dated February 25 , 19, 97 between Bank and the Undersigned (the "Loan Agreement"). All terms which are capitalized and used herein (which are not otherwise defined herein) shall have the meaning ascribed to such term in the Loan Agreement. THE OUTSTANDING PRINCIPAL BALANCE OF THE UNDERSIGNED'S LIABILITIES TO BANK UNDER THIS DEMAND NOTE SHALL BE PAYABLE UPON DEMAND. Prior to demand, principal hereunder shall be payable pursuant to the terms of the Loan Agreement. The Undersigned (and each one of them, if more than one) hereby authorizes the Bank to charge any account of the Undersigned (and each one of them, if more than one) for all sums due hereunder. If payment hereunder becomes due and payable on a Saturday, Sunday or legal holiday under the laws of the United States or the State of Illinois, the due date thereof shall be extended to the next succeeding business day, and interest shall be payable thereon at the rate specified during such extension. Credit shall be given for payments made in the manner and at the times provided in the Loan Agreement. It is the intent of the parties that the rate of interest and other charges to the Undersigned under this Demand Note shall be lawful; therefore, if for any reason the interest or other charges payable hereunder are found by a court of competent jurisdiction, in a final determination, to exceed the limit which Bank may lawfully charge the Undersigned, then the obligation to pay interest or 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 the Undersigned. The principal and all accrued interest hereunder may be prepaid by the Undersigned, in part or in full, at any time; provided, however, that if the Undersigned prepays all of the Liabilities prior to the end of the Original Term or any Renewal Term, the Undersigned shall pay a prepayment fee as provided in the Loan Agreement. The Undersigned (and each one of them, if more than one) waives the benefit of any law that would otherwise restrict or limit Bank in the exercise of its right, which is hereby acknowledged, to set-off against the Liabilities, without notice and at any time hereafter, any indebtedness matured or unmatured owing from Bank to the Undersigned (or any one of them). The Undersigned (and each one of them, if more than one) waives every defense, counterclaim or setoff which the Undersigned (or any one of them) may now have or hereafter may have to any action by Bank in enforcing this Note and/or any of the other Liabilities, or in enforcing Bank's rights in the Collateral and ratifies and confirms whatever Bank may do pursuant to the terms hereof and of the Loan Agreement and with respect to the Collateral and agrees that Bank shall not be liable for any error in judgment or mistakes of fact or law, except for acts of gross negligenceor wilful misconduct. The Undersigned, any other party liable with respect to the Liabilities and any and all endorsers and accommodation parties, and each one of them, if more than one, waive any and all presentment, demand, notice of dishonor, protest, and all other notices and demands in connection with the enforcement of Bank's rights hereunder. The loan evidenced hereby has been made and this Note has been delivered at Chicago, Illinois. THIS NOTE 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, and shall be binding upon the Undersigned (and each one of them, if more than one) and the Undersigned's heirs, legal representatives, successors and assigns (and each of them, if more than one). If this Note contains any blanks when executed by the Undersigned (or any one of them, if more than one), the Bank is hereby authorized, without notice to the Undersigned (or any one of them, if more than one) to complete any such blanks according to the terms upon which the loan or loans were granted. Wherever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or be invalid under such law, such provision shall be severable, and be ineffective to the extent of such prohibition or invalidity, without invalidating the remaining provisions of this Note. If more than one party shall execute this Note, the term "Undersigned" as used herein shall mean all parties signing this Note, and each one of them, and all such parties, their respective heirs, executors, administrators, successors and assigns, shall be jointly and severally obligated hereunder. To induce the Bank to make the loan evidenced by this Note, the Undersigned (and each one of them, if more than one) (i) irrevocably agrees that, subject to Bank's sole and absolute election, all actions arising directly or indirectly as a result or in consequence of this Note or any other agreement with the Bank, or the Collateral, shall be instituted and litigated only in courts having situs in the City of Chicago, Illinois, (ii) hereby consents to the exclusive jurisdiction and venue of any State or Federal Court located and having its situs in said city, and (iii) waives any objection based on forum non-conveniens. IN ADDITION, BANK AND THE UNDERSIGNED (OR ANY ONE OF THEM, IF MORE THAN ONE) HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS NOTE, THE LIABILITIES, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY THE UNDERSIGNED OR BANK. In addition, the Undersigned agrees that all service of process may be made as provided in the Loan Agreement. As used herein, all provisions shall include the masculine, feminine, neuter, singular and plural thereof, wherever the context and facts require such construction and in particular the word "Undersigned" shall be so construed. IN WITNESS WHEREOF, each of the Undersigned, if more than one, has executed this Note on the date above set forth. (INDIVIDUAL(S) SIGN BELOW) (CORPORATION OR PARTNERSHIP SIGN BELOW) Brite-Line Technologies, Inc. Name of Corporation or Partnership By Duane E. Wheeler, Vice President-Finance Name and Title 10660 East 51st Avenue Denver, Colorado 80239 Address By Name Name and Title Address Address FOR BANK USE ONLY Officer's Initials: __________ Approval: __________ (m:\dept\abl\fenton\std-1a\-02) 5/96 EX-4 3 EXHIBIT (4)(xiv) DEFINED TERMS ARE BOLDED -- DO NOT BOLD THE QUOTES. DAYS, PERCENTS AND DOLLAR AMOUNTS ARE WRITTEN OUT AND IN PARENS. DO NOT USE THE WORD "THE" BEFORE BANK AND BORROWER. PLEASE SEARCH THESE TERMS AFTER REVISIONS TO MAKE SURE "THE" IS NOT THERE. REFERENCES ARE TO "PARAGRAPH" NOT "SUBPARAGRAPH" OR "SECTION." LOAN AND SECURITY AGREEMENT THIS LOAN AND SECURITY AGREEMENT (this "Agreement") made this 25th day of February, 19 97 by and between LASALLE NATIONAL BANK, a national banking association ("Bank"), 135 South LaSalle Street, Chicago, Illinois 60674, and Brite-Line Technologies, Inc. 10660 East 51st Avenue Denver, Colorado 80239 ("Borrower") [Insert entity designation(s) and address(es) of principal place of business]. WITNESSETH: WHEREAS, Borrower may, from time to time, request Loans from Bank, and the parties wish to provide for the terms and conditions upon which such Loans, if made by Bank, shall be made; NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal or extension) hereafter made to Borrower by Bank, 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. (a) "Account," "Account Debtor," "Chattel Paper," "Documents," "Equipment," "General Intangibles," "Goods," "Instruments," and "Inventory," shall have the respective meanings assigned to such terms, as of the date of this Agreement, in the Illinois Uniform Commercial Code. (b) "Affiliate" shall mean any Person directly or indirectly controlling, controlled by or under common control with Borrower. (c) "Collateral" shall mean all of the property of Borrower described in paragraph 4 hereof, together with all other real or personal property of any Obligor or any other Person now or hereafter pledged to Bank to secure, either directly or indirectly, repayment of any of the Liabilities. (d) "Eligible Account" shall mean an Account owing to Borrower which is acceptable to Bank in its sole discretion for lending purposes. Without limiting Bank's discretion, Bank 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: (i) it is genuine and in all respects what it purports to be; (ii) it is owned by Borrower and Borrower has the right to subject it to a security interest in favor of Bank or assign it to Bank; (iii) it arises from (A) the performance of services by Borrower 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, and such Goods have been completed in accordance with the Account Debtor's specifications (if any) and delivered to and accepted by the Account Debtor, such Account Debtor has not refused to accept any of the Goods, returned or offered to return any of the Goods, or refused to accept any of the services which are the subject of such Account, and Borrower has possession of, or Borrower has delivered to Bank (at Bank's request) shipping and delivery receipts evidencing delivery of such Goods; (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 not subject to any prior assignment, claim, lien, security interest or encumbrance whatsoever, other than Permitted Liens and the security interest granted to Bank hereunder; (vi) it is a valid, legally enforceable and unconditional obligation of the Account Debtor thereunder, and is not subject to setoff, counterclaim, credit, allowance or adjustment by such Account Debtor, or to any claim by such Account Debtor denying liability thereunder in whole or in part; (vii) it does not arise out of a contract or order which fails in any material respect to comply with the requirements of applicable law; (viii) the Account Debtor thereunder is not a director, officer, employee or agent of Borrower, or a Subsidiary, Parent or Affiliate, unless the Account arises out of a transaction permitted by paragraph 10(i) hereof and is otherwise an Eligible Account; (ix) it is not an Account with respect to which the Account Debtor is the United States of America or any department, agency or instrumentality thereof, unless Borrower assigns its right to payment of such Account to Bank pursuant to, and in full compliance with, the Assignment of Claims Act of 1940, as amended; (x) 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 Bank's satisfaction, that it is exempt from any such requirements under any such state's laws; (xi) it is an Account which arises out of a sale made in the ordinary course of Borrower's business; (xii) See Exhibit A (xiii) it is not an Account with respect to which the Account Debtor's obligation to pay is conditional upon the Account Debtor's approval of the Goods or services or is otherwise subject to any repurchase obligation or return right (except for the right of Account Debtors to return goods for breach of warranty in accordance with Borrower's usual and customary business practices), as with sales made on a bill-and-hold, guaranteed sale, sale on approval, sale or return or consignment basis; (xiv) 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; (xv) it is not an Account which, when added to a particular Account Debtor's other indebtedness to Borrower, exceeds a credit limit determined by Bank in its sole discretion for that Account Debtor (except that Accounts excluded from Eligible Accounts solely by reason of this subparagraph 1(d)(xv) shall be Eligible Accounts to the extent of such credit limit); and (xvi) 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 Bank in its sole discretion. (e) "Eligible Inventory" shall mean Inventory of Borrower which is acceptable to Bank in its sole discretion for lending purposes. Without limiting Bank's discretion, Bank shall, in general, consider Inventory to be Eligible Inventory if it meets, and so long as it continues to meet, the following requirements: (i) it is owned by Borrower and Borrower has the right to subject it to a security interest in favor of Bank ; (ii) it is located on the premises listed on Exhibit B and is not in transit; (iii) it is not subject to any prior assignment, claim, lien, security interest or encumbrance whatsoever, other than Permitted Liens and the security interest granted to Bank hereunder; (iv) if held for sale or lease or furnishing under contracts of service, it is (except as Bank may otherwise consent in writing) new and unused and free from defects which would, in Bank's sole determination, affect its market value; (v) it is not stored with a bailee, consignee, warehouseman, processor or similar party unless Bank has given its prior written approval and Borrower has caused any such bailee, consignee, warehouseman, processor or similar party to issue and deliver to Bank, in form and substance acceptable to Bank, such UCC financing statements, warehouse receipts, waivers and other documents as Bank shall require; (vi) Bank has determined in accordance with Bank's customary business practices that it is not unacceptable due to age, type, category or quantity; and (vii) 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. (f) "Event of Default" shall have the meaning specified in paragraph 12 hereof. (g) "Exhibit A" shall mean the exhibit entitled Exhibit A - Special Provisions which is attached hereto and made a part hereof. (h) "Exhibit B" shall mean the exhibit entitled Exhibit B - Business and Collateral Locations which is attached hereto and made a part hereof. (i) "Indemnified Party" shall have the meaning specified in paragraph 14 hereof. (j) "Liabilities" shall mean any and all obligations, liabilities and indebtedness of Borrower to Bank or to any parent, affiliate or subsidiary of Bank 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. (k) "Loan" or "Loans" shall mean all advances made by Bank to Borrower pursuant to paragraph 2 hereof and all other loans, advances and financial accommodations made by Bank to or on behalf of Borrower hereunder. (l) "Loan Limit" shall have the meaning specified in paragraph 1 of Exhibit A. (m) "Lock Box" and "Lock Box Account" shall have the meanings specified in paragraph 7 hereof. (n) "Obligor" shall mean Borrower and each Person who is or shall become primarily or secondarily liable for any of the Liabilities. (o) "Original Term" shall have the meaning specified in paragraph 9 hereof. (p) "Other Agreements" shall mean all agreements, instruments and documents, 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 Bank or to any parent, affiliate or subsidiary of Bank in connection with the Liabilities or the transactions contemplated hereby. (q) "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 stock of Borrower or any Subsidiary. (r) "Permitted Liens" shall mean (i) statutory liens of landlord's, carriers, warehousemen, 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, (ii) liens or security interests in favor of Bank, (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, and (iv) liens specifically permitted by Bank in writing. (s) "Person" shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, institution, entity, party or foreign or United States government (whether federal, state, county, city, municipal or otherwise), including, without limitation, any instru- mentality, division, agency, body or department thereof. (t) "Renewal Term" shall have the meaning specified in paragraph 9 hereof. (u) "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 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 by any partnership or joint venture of which more than fifty percent (50%) of the outstanding equity interests are at the time, directly or indirectly, owned by Borrower. (v) "Tangible Net Worth" shall have the meaning specified in subparagraph 11(o) hereof. (w) "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 permitted or required to close. (x) "Interest Period" shall have the meaning specified in Paragraph (3)(b) of Exhibit A of the Agreement hereto. (y) "LIBOR Rate Loans" shall mean the Loans bearing interest at the rate set forth in Paragraph (3)(b) of Exhibit A of the Agreement. (z) "Prime Rate Loans" shall mean the Loans bearing interest at the rates set forth in Paragraph (3)(a) of Exhibit A of the Agreement. 2. LOANS. Subject to the terms and conditions of this Agreement (including Exhibit A) and the Other Agreements, during the Original Term and any Renewal Term, Bank may, in its sole discretion, make such Loans to Borrower as Borrower shall from time to time request. The aggregate unpaid principal of all Loans outstanding at any one time shall not exceed the Loan Limit set forth in Exhibit A and shall bear interest at the rates set forth in Exhibit A. ALL LOANS SHALL BE REPAID BY BORROWER UPON DEMAND BY BANK. Prior to Bank making such demand, Loans shall be repaid as provided elsewhere in this Agreement. If at any time the outstanding principal balance of the Loans exceeds the Loan Limit, or any portion of the Loans exceeds any applicable sublimit set forth in Exhibit A, Borrower shall immediately, and without the necessity of a demand by Bank, pay to Bank such amount as may be necessary to eliminate such excess and Bank shall apply such payment to the Liabilities in such order as Bank shall determine in its sole discretion. Borrower hereby authorizes Bank, in its sole discretion, to charge any of Borrower's accounts to make any payments of principal or interest required by this Agreement. All Loans shall, in Bank's sole discretion, be evidenced by one or more promissory notes in form and substance satisfactory to Bank. However, if such Loans are not so evidenced, such Loans may be evidenced solely by entries upon the books and records maintained by Bank. 3. FEES AND CHARGES. Borrower shall pay to Bank, in addition to all other amounts payable hereunder, the fees and charges set forth in Exhibit A. It is the intent of the parties that the rate of interest and the other charges to Borrower under this Agreement shall be lawful; therefore, if for any reason the interest or other charges payable under this Agreement are found by a court of competent jurisdiction, in a final determination, to exceed the limit which Bank 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. 4. GRANT OF SECURITY INTEREST TO BANK. As security for the payment of all Loans now or in the future made by Bank to Borrower hereunder and for the payment or other satisfaction of all other Liabilities, excluding contingent indemnities which survive termination or expiration of this Agreement, Borrower hereby assigns to Bank and grants to Bank 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, tradenames, trade secrets, goodwill, copyrights, registrations, licenses, franchises, customer lists, tax refund claims, claims against carriers and shippers, guarantee claims, contracts rights, security interests, security deposits and any 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 deposits and cash, and any other property of Borrower now or hereafter in the possession, custody or control of Bank or any agent or any parent, affiliate or subsidiary of Bank or any participant with Bank in the Loans for any purpose (whether for safekeeping, deposit, collection, custody, pledge, transmission or otherwise); and (f) 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. 5. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN. Borrower shall, at Bank's request, at any time and from time to time, execute and deliver to Bank 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 Bank) and do such other acts and things as Bank may deem necessary or desirable in order to establish and maintain a valid, attached and perfected security interest in the Collateral in favor of Bank (free and clear of all other liens, claims 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 Bank (and all Persons designated by Bank for that purpose) as Borrower's true and lawful attorney and agent-in-fact to execute such financing statements, documents and other agreements and instruments and do such other acts and things as may be necessary to preserve and perfect Bank'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. 6. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until the commencement of a foreclosure or liquidation to realize upon the Collateral, 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, and (b) use and consume any raw materials, work in process or other materials normally held by Borrower for such purpose; 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. 7. 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, Bank or another financial institution acceptable to Bank. Borrower shall establish an account (the "Lock Box Account") in Borrower's name with Bank or such other financial institution acceptable to Bank, into which all payments received in the Lock Box shall be deposited, and into which Borrower will immediately deposit all payments made for Inventory or services and received by Borrowerin the identical form in which such payments were made, whether by cash or check. If Borrower, any Affiliate or Subsidiary, or 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, Bank and, immediately upon receipt thereof, shall remit the same (or cause the same to be remitted) in kind to the Lock Box Account. If the Lock Box Account is not established with Bank, the financial institution with which the Lock Box Account is established shall acknowledge and agree, in a manner satisfactory to Bank, that the amounts on deposit in such Lock Box Account are the sole and exclusive property of Bank, that such financial institution has no right to setoff against the Lock Box Account or against any other account maintained by such financial institution into which the contents of the Lock Box Account are transferred, and that such financial institution shall wire, or otherwise transfer in immediately available funds in a manner satisfactory to Bank, 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 Bank, whether in respect of the Accounts or as proceeds of other Collateral or otherwise, 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 and is continuing, payments received by Bank shall not be applied to the unmatured portion of the LIBOR Rate Loans, but shall be held in an interest bearing cash collateral account maintained by Bank until the earlier of (i) the last 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 held in such interest bearing 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 Paragraph 1 of Exhibit A of the Agreement at such time equals or exceeds the outstanding Liabilities at such time. If the Lock Box Account is established with Bank, Borrower agrees to pay all fees, costs and expenses which Bank incurs in connection with opening and maintaining the Lock Box Account and depositing for collection by Bank any check or other item of payment received by Bank on account of the Liabilities. All of such fees, costs and expenses shall constitute Loans hereunder, shall be payable to Bank 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 Bank, and, if that endorsement of any such item shall not be made for any reason, Bank is hereby irrevocably authorized to endorse the same on Borrower's behalf. For the purpose of this paragraph, Borrower irrevocably hereby makes, constitutes and appoints Bank (and all Persons designated by Bank 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) Bank may, at any time and from time to time, after the occurrence and 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 contract rights by suit or otherwise; (ii) exercise all of Borrower's rights and remedies with respect to proceedings brought to collect any Accounts; (iii) surrender, release or exchange all or any part of any Accounts, 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 upon such terms, for such amount and at such time or times as Bank 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; and (vi) do all other acts and things which are necessary, in Bank's sole discretion, to fulfill Borrower's obligations under this Agreement and to allow Bank to collect the Accounts. In addition to any other provision hereof, Bank may at any time, after the occurrence and continuance of an Event of Default, at Borrower's expense, notify any parties obligated on any of the Accounts to make payment directly to Bank of any amounts due or to become due thereunder. (c) Bank shall, within one ( 1 ) business days after receipt by Bank at its office in Chicago, Illinois of 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 Bank shall determine in its sole discretion. (d) Bank, 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. All sums paid by Bank 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 Bank shall constitute Loans, payable by Borrower to Bank on demand and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder. (e) Immediately upon Borrower's receipt of any portion of the Collateral evidenced by an agreement, Instrument or Document, including, without limitation, any Chattel Paper, Borrower shall deliver the original thereof to Bank together with an appropriate endorsement or other specific evidence of assignment thereof to Bank (in form and substance acceptable to Bank). If an endorsement or assignment of any such items shall not be made for any reason, Bank is hereby irrevocably authorized, as Borrower's attorney and agent-in-fact, to endorse or assign the same on Borrower's behalf. 8. SCHEDULES AND REPORTS. (a) Within ten (10) days after the close of each fiscal month, and at such other times as may be requested by Bank from time to time hereafter, Borrower shall deliver to Bank (i) a schedule identifying each Eligible Account together with copies of the invoices when requested by Bank (with evidence of shipment attached) pertaining to each such Eligible Account, for the month (or other applicable period) immediately preceding; (ii) such additional schedules, certificates, reports and information with respect to the Collateral as Bank may from time to time require; and (iii) a collateral assignment of any or all items of Collateral to Bank. Bank, through its officers, employees or agents, shall have the right, at any time and from time to time in Bank's name, in the name of a nominee of Bank or in Borrower's name, to verify the validity, amount or any other matter relating to any of Borrower's Accounts, by mail, telephone, telegraph or otherwise. Borrower shall reimburse Bank, on demand, for all costs, fees and expenses incurred by Bank in this regard. (b) Without limiting the generality of the foregoing, Borrower shall deliver to Bank, at least once a month (or more frequently when requested by Bank), a report with respect to Borrower's Inventory. Borrower shall immediately notify Bank of any event causing loss or depreciation in value of Borrower's Inventory (other than normal depreciation occurring in the ordinary course of business). (c) All schedules, certificates, reports, assignments and other items delivered by Borrower to Bank hereunder shall be executed by an authorized representative of Borrower and shall be in such form and contain such information as Bank shall specify. 9. TERMINATION. This Agreement shall be in effect from the date hereof until June 6 , 19 99 (the "Original Term") and shall automatically renew itself from year to year thereafter (each such one-year renewal being referred to herein as a "Renewal Term") unless (a) Bank makes demand for repayment prior to the end of the Original Term or the then current Renewal Term; (b) the due date of the Liabilities is accelerated pursuant to paragraph 13 hereof; or (c) Borrower elects to terminate this Agreement at the end of the Original Term or at the end of any Renewal Term by giving Bank written notice of such election at least ninety (90) days prior to the end of the Original Term or the then current Renewal Term and by paying all of the Liabilities in full on the last day of such term. If one or more of the events specified in clauses (a), (b) and (c) occurs, 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 Bank a release, in form and substance satisfactory to Bank, of all obligations and liabilities of Bank 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 Bank, in form and substance satisfactory to Bank, for checks which Bank has credited to Borrower's account, but which subsequently are dishonored for any reason. 10. REPRESENTATIONS, WARRANTIES AND COVENANTS. Borrower hereby represents, warrants and covenants that: (a) the financial statements delivered or to be delivered by Borrower to Bank at or prior to the date of this Agreement and at all times subsequent thereto accurately reflect, 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 Bank most recently prior to the date of this Agreement; (b) 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 Borrower's other places of business, locations of Collateral and post office boxes are as set forth in Exhibit B; Borrower shall promptly (but in no event less than ten (10) days prior thereto) advise Bank in writing of the proposed opening of any new place of business, the closing of any existing place of business, any change in the location of Borrower's books, records and accounts (or copies thereof) or the opening or closing of any post office box of Borrower; (c) the Collateral, including, without limitation, the Equipment (except any part thereof which prior to the date of this Agreement Borrower shall have advised Bank in writing consists of Collateral normally used in more than one state) is and shall be kept, or, in the case of vehicles, based, only at the addresses set forth on Exhibit B, and at other locations within the continental United States of which Bank has been advised by Borrower in writing; (d) if any of the Collateral consists of Goods of a type normally used in more than one state, whether or not actually so used, Borrower shall immediately give written notice to Bank of any use of any such Goods in any state other than a state in which Borrower has previously advised Bank such Goods shall be used, and such Goods shall not, unless Bank shall otherwise consent in writing, be used outside of the continental United States; (e) no security agreement, financing statement or analogous instrument exists or shall exist with respect to any of the Collateral other than any security agreement, financing statement or analogous instrument evidencing security interests in favor of Bank or evidencing Permitted Liens; (f) each Account or item of Inventory which Borrower shall, expressly or by implication, request Bank 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 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 Bank from time to time, and Borrower shall promptly notify Bank in writing if any such Eligible Account or Eligible Inventory shall subsequently become ineligible; (g) Borrower is and shall at all times during the Original Term or any Renewal Term be 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; (h) 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 and shall not conflict with the provisions of any statute, regulation, ordinance or rule of law, or any agreement, contract or other document which may now or hereafter be binding on Borrower, where such conflict would have a material adverse effect on its business, property, assets, operations or condition, financial or otherwise, 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; (i) Except as previously disclosed to Bank in writing, there are no actions or proceedings which are pending, or to the best of Borrower's knowledge, threatened against Borrower which might result in any material adverse change in its financial condition or materially adversely affect the Collateral and Borrower shall, promptly upon becoming aware of any such pending or threatened action or proceeding, give written notice thereof to Bank; (j) Borrower has obtained all licenses, authorizations, approvals and permits, the lack of which would have a material adverse effect on the operation of its business, and Borrower is and shall remain in compliance in all material respects with all applicable federal, state, local and foreign statutes, orders, regulations, rules and ordinances (including, without limitation, statutes, orders, regulations, rules and ordinances relating to taxes, employer and employee contributions and similar items, securities, employee retirement and welfare benefits, employee health and safety or environmental matters) the failure to comply with which would have a material adverse effect on its business, property, assets, operations or condition, financial or otherwise; (k) all written information now, heretofore or hereafter furnished by Borrower to Bank is and shall be true and correct in all material respects as of the date with respect to which such information was or is furnished; (l) Borrower is not conducting, permitting or suffering to be conducted, nor shall it conduct, permit or suffer to be conducted, any activities pursuant to or in connection with which any of the Collateral is now, or will (while any Liabilities remain outstanding) be owned by any Affiliate; provided, however, that Borrower may enter into transactions with Affiliates in the ordinary course of business pursuant to terms that are no less favorable to Borrower than the terms upon which such transfers or transactions would have been made had they been made to or with a Person that is not an Affiliate and, in connection therewith, may transfer cash or property to Affiliates for fair value; (m) Borrower's name has always been as set forth on the first page of this Agreement and Borrower uses no tradenames or division names in the operation of its business, except as otherwise disclosed in writing to Bank; Borrower shall notify Bank in writing within ten (10) days of the change of its name or the use of any tradenames or division names not previously disclosed to Bank in writing; (n) with respect to Borrower's Equipment: (i) other than Equipment leased by Borrower on the date hereof, and Permitted Liens, Borrower has good and indefeasible and merchantable title to and ownership of all Equipment, including, without limitation, the Equipment described or listed on the schedule of Equipment delivered to Bank concurrently with this Agreement; (ii) Borrower shall keep and maintain the Equipment in good operating condition and repair and shall make all necessary replacements thereof and renewals thereto so that the value and operating efficiency thereof shall at all times be preserved and maintained in all material respects; (iii) Borrower shall not permit any such items to become a fixture to real estate or an accession to other personal property; and (iv) Borrower, immediately on demand by Bank, shall deliver to Bank any and all evidence of ownership of, including, without limitation, certificates of title and applications of title to, any of the Equipment; (o) 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; (p) Borrower is solvent, is able to pay its debts as they become due and has capital sufficient to carry on its business, now owns property having a value both at fair valuation and at present fair saleable 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; (q) Borrower is not now obligated, nor shall it 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) borrow money from a Person other than Bank on an unsecured and subordinated basis if a subordination agreement in favor of Bank and in form and substance satisfactory to Bank is executed and delivered to Bank relative thereto; (ii) maintain any present indebtedness to any Person which has been disclosed to Bank in writing and consented to in writing by Bank, and (iii) incur unsecured indebtedness to trade creditors in the ordinary course of Borrower's business; (r) 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 G or Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time; (s) except as otherwise disclosed in writing to Bank, Borrower has no Parents, Subsidiaries or divisions, nor is Borrower engaged in any joint venture or partnership with any other Person; (t) if Borrower is a corporation or partnership, Borrower is duly organized and in good standing in its state of organization 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 or affecting Bank's rights. (u) Except as heretofore disclosed to Bank in writing, 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 is material to the continued financial success and well-being of Borrower; (v) there are no controversies pending or, to the best of Borrower's knowledge, threatened between Borrower and any of its employees, other than employee grievances arising in the ordinary course of business which are not, in the aggregate, material to the continued financial success and well-being of Borrower, and Borrower is in compliance in all material respects with all federal and state laws respecting employment and employment terms, conditions and practices; and (w) Borrower possesses, and shall continue to possess, adequate licenses, patents, patent applications, copyrights, service marks, trademarks, trademark applications, tradestyles and tradenames to continue to conduct its business as heretofore conducted by it. Borrower represents, warrants and covenants to Bank that all representations and warranties of Borrower contained in this Agreement (whether appearing in paragraphs 10 or 11 hereof or elsewhere) shall be true at the time of Borrower's execution of this Agreement, shall survive the execution, delivery and acceptance hereof by the parties hereto and the closing of the transactions described herein or related hereto, shall remain true until the repayment in full of all of the Liabilities and termination of this Agreement, and shall be remade by Borrower at the time each Loan is made pursuant to this Agreement. 11. ADDITIONAL COVENANTS OF BORROWER. Until payment or satisfaction in full of all Liabilities and termination of this Agreement, unless Borrower obtains Bank's prior written consent waiving or modifying any of Borrower's covenants hereunder in any specific instance, Borrower agrees as follows: (a) 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 B; (b) Borrower agrees to deliver to Bank the following financial information, all of which shall be prepared in accordance with generally accepted accounting principles consistently applied: (i) no later than twenty-five (25) days after each fiscal 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; (ii) no later than forty-five (45) days after the end of each of the first three quarters of Borrower's fiscal year a balance sheet, operating statement and reconciliation of surplus of Borrower, which quarterly financial statements may be unaudited but shall be certified by the Chief Financial Officer of Borrower; and (iii) no later than ninety (90) days after the end of each of Borrower's fiscal years, audited annual financial statements with an unqualified certification by independent certified public accountants selected by Borrower and reasonably satisfactory to Bank, which financial statements shall be accompanied by a letter from such accountants acknowledging that they are aware that a primary intent of Borrower in obtaining such financial statements is to influence Bank and that Bank is relying upon such financial statements in connection with the exercise of its rights hereunder; (c) Borrower shall promptly advise Bank in writing of any material adverse change in the business, assets 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 hereunder after notice or lapse of time (or both); (d) Bank, or any Persons designated by it, shall have the right, at any time, 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 Bank may consider reasonable under the circumstances. Borrower shall furnish to Bank such information relevant to Bank's rights under this Agreement as Bank shall at any time and from time to time request. Borrower authorizes Bank to discuss the affairs, finances and business of Borrower with any officers, employees or directors of Borrower or with any Affiliate or the officers, employees or directors of any Affiliate, and to discuss the financial condition of Borrower with Borrower's independent public accountants. Any such discussions shall be without liability to Bank or to Borrower's independent public accountants. Borrower shall pay to Bank all customary fees and out-of-pocket expenses incurred by Bank in the exercise of its rights hereunder, and all of such fees and expenses shall constitute Loans hereunder, payable on demand and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder; (e) Borrower shall: (i) keep the Collateral properly housed and shall keep the Collateral 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 and under policies in such form as shall be satisfactory to Bank. Original (or certified) copies of such policies of insurance have been or shall be delivered to Bank within thirty (30) days after the date hereof, together with evidence of payment of all premiums therefor, and shall contain an endorsement, in form and substance acceptable to Bank, showing loss under such insurance policies payable to Bank. Such endorsement, or an independent instrument furnished to Bank, shall provide that the insurance company shall give Bank 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 Bank to recover under such policy of insurance in case of loss or damage. Borrower hereby directs all insurers under such policies of insurance to pay all proceeds payable thereunder directly to Bank. Borrower irrevocably, makes, constitutes and appoints Bank (and all officers, employees or agents designated by Bank) 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, that no Event of Default shall have occurred and is continuing, Borrower may make, settle and adjust claims involving less that Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) in the aggregate per fiscal year without Bank's consent; and (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 Bank and original (or certified) copies of such policies have been or shall be delivered to Bank within thirty (30) days after the date hereof, together with evidence of payment of all premiums therefor; each such policy shall contain an endorsement showing Bank as additional insured thereunder and providing that the insurance company shall give Bank 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 in whole or a part relating thereto, then Bank, 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 Bank deems advisable. All sums disbursed by Bank 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 Bank and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder; (f) Borrower shall not use the Collateral, or any part thereof, in any unlawful business or for any unlawful purpose or use or maintain any of the Collateral in any manner that does or could result in material damage to the environment or a violation of any applicable environmental laws, rules or regulations; shall keep the Collateral in good condition, repair and order; shall permit Bank to examine any of the Collateral at any time and wherever the Collateral may be located; shall not permit the Collateral, or any part thereof, to be levied upon under execution, attachment, distraint or other legal process; shall not sell, lease, grant a security interest in or otherwise dispose of any of the Collateral except as expressly permitted by this Agreement; and shall not secrete or abandon any of the Collateral, or remove or permit removal of any of the Collateral from any of the locations listed on Exhibit B or in any written notice to Bank pursuant to paragraph 10(b) hereof, except for the removal of Inventory sold in the ordinary course of Borrower's business as permitted herein; (g) all monies and other property obtained by Borrower from Bank pursuant to this Agreement will be used solely for business purposes of Borrower; (h) Borrower shall, at the request of Bank, indicate on its records concerning the Collateral a notation, in form satisfactory to Bank, of the security interest of Bank hereunder; and Borrower shall not maintain duplicates or copies of such records at any address other than Borrower's principal place of business set forth on the first page of this Agreement; (i) 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 Bank (such deposit to be held without interest) an amount of money which, in the sole judgment of Bank, 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, Bank 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, Bank 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 Bank shall constitute Loans hereunder, shall be payable by Borrower to Bank on demand, and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder; (j) 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; (k) Borrower shall not enter into any merger or consolidation, or sell, lease or otherwise dispose of all or substantially all of its assets, or enter into any 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, and any issuance of any shares of, or warrants or other rights to receive or purchase any shares of, any class of its stock; provided, however, that Borrower may (i) grant options to purchase; (l) 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 or other type of entity); (m) 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; (n) Borrower shall not amend its organizational documents or change its fiscal year; where such actions would have an adverse effect on the Borrower's business, property, assets, operations or condition, financial or otherwise, as determined by Bank in its sole discretion, provided that Bank receives ten (10) days prior written notice of such amendment or change; (o) See Exhibit A (p) Borrower shall reimburse Bank for all costs and expenses, including, without limitation, legal expenses and reasonable attorneys' fees, incurred by Bank in connection with documentation and consummation of this transaction and any other transactions between Borrower and Bank, including, without limitation, Uniform Commercial Code and other public record searches, lien filings, Federal Express or similar express or messenger delivery, appraisal costs, surveys, title insurance and environmental audit or review costs, and in seeking to collect, protect or enforce any rights in or to the Collateral or incurred by Bank in seeking to collect any Liabilities and to administer and enforce any of Bank's rights under this Agreement. Borrower shall also pay all normal service charges with respect to all accounts maintained by Borrower with Bank and any additional services requested by Borrower from Bank. All such costs, expenses and charges shall constitute Loans hereunder, shall be payable by Borrower to Bank on demand, and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder. 12. DEFAULT. The occurrence of any one or more of the following events shall constitute an "Event of Default" by Borrower hereunder: (a) the failure of any Obligor to pay when due, declared due, or demanded by Bank, any of the Liabilities; (b) 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 this Agreement shall not constitute an Event of Default and the continuance thereof hereunder until the tenth (10th) day following written notice thereof. Bank agrees to endeavor to provide a copy of such notice of default to the law firm of Deborah A. Kream, Esq. by mail at the mailing address of 104 Revere Street, Canton, Massachusetts 02021, or by facsimile transmission at facsimile number (617) 828-3168. Failure of Bank to provide such copy of notice of default shall not impair Bank's rights hereunder; (c) the failure of any Obligor to perform, keep or observe any of the covenants, conditions, promises, agreements or obligations of such Obligor under any other agreement with any Person if such failure may have a material adverse effect on such Obligor's business, property, assets, operations or condition, financial or otherwise; (d) the making or furnishing by any Obligor to Bank 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 Bank, which is untrue or misleading in any material respect; (e) the loss, theft, damage or destruction of any of the Collateral in an amount in excess of One Hundred Thousand and No/100 Dollars ($100,000.00) in the aggregate for all such events during any year of the Original Term or any Renewal Term as determined by Bank in its sole discretion, or (except as permitted hereby) sale, lease or furnishing under a contract of service of any of the Collateral; (f) the creation (whether voluntary or involuntary) of, or any attempt to create, any lien or other encumbrance upon any of the Collateral, other than the Permitted Liens, and involuntary liens securing amounts less than One Hundred Thousand and No/100 Dollars ($100,000.00) and which are released within ten (10) days of its creation, or the making or any attempt to make any levy, seizure or attachment thereof; provided that with respect to states in which creditors may obtain a prejudgment attachment without notice, such attachment shall be an Event of Default only if the attachment remains in effect for ten (10) days; (g) 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 sixty (60) days after the commencement of such proceedings; (h) 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 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 sixty (60) days after the commencement of such proceedings; (i) the entry of any judgment or order 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, to the extent such judgments exceed One Hundred Thousand and No/100 Dollars ($100,000.00) outstanding at any time; (j) the death of any Obligor who is a natural Person, or of any partner of any Obligor which is a partnership, or of any natural person who owns a material interest in a corporate Obligor, or the dissolution of any Obligor which is a partnership or corporation; (k) 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 Bank pursuant to which such Person has guaranteed to Bank the payment of all or any of the Liabilities or has granted Bank 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) the institution in any court of a criminal proceeding against any Obligor, or the indictment of any Obligor for any crime; and (m) Bank shall reasonably feel insecure for any material reason whatsoever, including, without limitation, fear of removal or waste of the Collateral, or any part thereof. 13. REMEDIES UPON AN EVENT OF DEFAULT. (a) Upon the occurrence of an Event of Default described in paragraph 12(g) hereof, all of Borrower's 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 Bank, and without demand, notice or legal process of any kind, be declared, and immediately shall become, due and payable. (b) Upon the occurrence of an Event of Default, Bank 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 Bank'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, Bank 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 into 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 Bank shall have the right to store the same at any of Borrower's premises without cost to Bank. At Bank's request, Borrower shall, at Borrower's expense, assemble the Collateral and make it available to Bank at one or more places to be designated by Bank and reasonably convenient to Bank 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 Bank, and agrees that Bank 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 reasonably and properly given if given at least five (5) calendar days before such disposition. Any proceeds of any disposition by Bank of any of the Collateral may be applied by Bank 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 Bank toward the payment of such of the Liabilities, and in such order of application, as Bank may from time to time elect. 14. INDEMNIFICATION. Borrower agrees to defend (with counsel reasonably satisfactory to Bank), protect, indemnify and hold harmless Bank, each affiliate or subsidiary of Bank, and each of their respective officers, directors, 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, environmental 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 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, 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 paragraph 14 shall survive the satisfaction and payment of the other Liabilities and the termination of this Agreement. 15. 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 Bank shall be sent to it at 135 South LaSalle Street, Chicago, Illinois 06063-4105, Attention: Asset Based Lending Division, and in the case of Borrower shall be sent to it at its principal place of business set forth on the first page of this Agreement. 16. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION. This Agreement and the Other Agreements are submitted by Borrower to Bank for Bank's acceptance or rejection at Bank's principal place of business as an offer by Borrower to borrow monies from Bank now and from time to time hereafter, and shall not be binding upon Bank or become effective until accepted by Bank, in writing, at said place of business. If so accepted by Bank, 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 THE COLLATERAL, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION. 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. To induce Bank to accept this Agreement, Borrower irrevocably agrees that, subject to Bank'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 irrevocably appoints and designates the Secretary of State of Illinois, whose address is Springfield, Illinois (or any other person having and maintaining a place of business in such state whom Borrower may from time to time hereafter designate upon ten (10) days written notice to Bank and who Bank has agreed in its sole discretion in writing is satisfactory and who has executed an agreement in form and substance satisfactory to Bank agreeing to act as such attorney and agent), as Borrower's true and lawful attorney and duly authorized agent for acceptance of service of legal process. Borrower agrees that service of such process upon such person shall constitute personal service of such process upon Borrower. Bank agrees to endeavor to provide a copy of such process to the law firm of Deborah A. Kream, Esq. by mail at the mailing address of 104 Revere Street, Canton, Massachusetts 02021 or by facsimile transmission at facsimile number (617) 828-3168. Failure of Bank to provide a copy of such process shall not impair Bank's rights hereunder. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH. 17. 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 and Bank. 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 Bank'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, Bank's rights, titles, interest, remedies, powers and/or duties and agrees that it shall execute and deliver such documents as Bank may request in connection with any such sale, assignment, transfer or other disposition. 18. 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. 19. POWER OF ATTORNEY. Borrower acknowledges and agrees that its appointment of Bank 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 paid in full and this Agreement is terminated. 20. WAIVER OF JURY TRIAL; OTHER WAIVERS. (a) BORROWER AND BANK EACH HEREBY WAIVE 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 BANK OR WHICH, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND BANK. IN NO EVENT SHALL BANK BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL 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 AND BANK EACH HEREBY WAIVE ALL RIGHTS TO NOTICE (EXCEPT AS OTHERWISE PROVIDED HEREIN) AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY BANK 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 Bank seeks to enforce its rights hereunder by judicial process, Bank shall provide Borrower with such notices as are required by law. (d) Bank'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 Bank thereafter to demand strict compliance and performance therewith. Any suspension or waiver by Bank 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 Bank 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 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 Bank unless such suspension or waiver is in writing, signed by a duly authorized officer of Bank and directed to Borrower specifying such suspension or waiver. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the 6th day of June , 19 96 . Plymouth Rubber Company, Inc. LASALLE NATIONAL BANK By Duane E. Wheeler By Title Vice President - Finance Title and By Title EXHIBIT B - BUSINESS AND COLLATERAL LOCATIONS Attached to and made a part of that certain Loan and Security Agreement of even date herewith between ("Borrower") and LASALLE NATIONAL BANK ("Bank"). A. Borrower's Business Locations (please indicate which location is the principal place of business and at which locations originals and all copies of Borrower's books, records and accounts are kept). 1. 2. 3. B. Other locations of Collateral (including, without limitation, warehouse locations, processing locations, consignment locations) and all post office boxes of Borrower. Please indicate the relationship of such location to Borrower (i.e. public warehouse, processor, etc.). 1. 2. 3. \rar (c:\docs\std-1\22) 12/95 EXHIBIT A-SPECIAL PROVISIONS Attached to and made a part of that certain Loan and Security Agreement of even date herewith between Brite-Line Technologies, Inc. ("Borrower") and LaSalle National Bank ("Bank"). CREDIT TERMS (1) LOAN LIMIT: Bank may, in its sole discretion, advance an amount up to the sum of the following sublimits (the "Loan Limit"): (a) Subject to subparagraph (2) of this Exhibit A, 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) of Borrower's Eligible Accounts; provided, that with respect to Eligible Accounts which are payable in currencies other than U.S. Dollars, the face amount and all discounts, credits and allowances shall be determined using the U.S. Dollar equivalent thereof at such time, determined with such frequency as Bank shall require, but not less than weekly, based on the exchange rates published in the Wall Street Journal on the date of determination; plus (b) Up to fifty-five percent (55%) of the lower of the cost or market value of Borrower's Eligible Inventory or One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00), whichever is less; plus (c) Such reserves as Bank elects, in its sole discretion, to establish from time to time; provided, that the aggregate amount of: (i) Loan made pursuant to subparagraph (b) above and (ii) Loans, as such term is defined in that certain Loan and Security Agreement entered into by and between plymouth Rubber Company, inc. ("Plymouth")and Bank dated June 6, 1996, as it may be amended from time to time (the ("Plymouth Agreement"), made pursuant to subparagraph 1(b) of Exhibit A of the Plymouth Agreement shall in no event exceed Seven Million Two Hundred Fifty Thousand No/100 Dollars ($7,250,000); further provided, that the aggregate Loan Limit shall in no event exceed Three Million Five Hundred Thousand and No./100 Dollars ($3,500,000), except as such amount may be increased or decreased by Bank, in its sole discretion, from time to time; and further provided that the aggregate amount of Loans to (i) Borrower under this Agreement and (ii) the aggregate amount of Loans to Plymouth under the Plymouth Agreement shall in no event exceed Fifteen Million and No/100 Dollars ($15,000,000). (2) ELIGIBLE ACCOUNTS CRITERIA REVISIONS: Subparagraph 1(d)(xii) of the Agreement is hereby amended in its entirety to read as follows: The Account Debtor is a resident or citizen of and is located within the United States of America or is a resident or citizen of and is located within a foreign country and with respect to EXHIBIT A - SPECIAL PROVISIONS - PAGE 2 Account Debtors who are residents or citizens of and are located within a foreign country, the Account is supported by (i) a Letter of Credit which is in form and substance satisfactory to Bank, issued by a financial institution acceptable to Bank and assigned to Bank in a manner acceptable to Bank or (ii) credit insurance with an endorsement acceptable to Bank and assigned to Bank in a manner acceptable to Bank. (3) 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 (a) or (b) below: (a) One-fourth of one percent (1/4 of 1%) per annum in excess of Bank's publicly announced prime rate (which is not intended to be Bank's lowest or most favorable rate in effect at any time) (the "Prime Rate") in effect from time to time, payable on the last Business Day of each month in arrears. Said rate 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. (b) Two and one-fourth percent (2-1/4%) per annum in excess of the per annum rate of interest at which U.S. Dollar deposits of an amount comparable to the amount of the Loans and for a period equal to the relevant Interest Period (as hereinafter defined) are offered generally to Bank (rounded upward if necessary to the nearest 1/16 of 1.00%) in the London Interbank Eurodollar market at 11:00 a.m. (London time) two (2) Business Days prior to the commencement of each Interest Period ("LIBOR"), such rate to remain fixed for such Interest Period. "Interest Period" shall mean any continuous period of ninety (90) days, as selected from time to time by Borrower by irrevocable notice (in writing, by telex, telegram or cable) given to Bank not less than three (3) Business Days prior to the first day of each respective Interest Period) commencing on the date hereof; provided that: (i) each such period occurring after such initial period shall commence on the day on which the immediately preceding period expires; (ii) the final Interest Period shall be such that its expiration occurs on or before the end of the Original Term or any Renewal Term; and (iii) 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 last Business Day of each month, at maturity, and on the date of any payment hereon by Borrower. Upon the occurrence of an Event of Default and 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. (3).(1) OTHER LIBOR PROVISIONS: (a) Subject to the provisions of this Agreement, Borrower shall have the option (i) 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, (ii) as of the last day of any Interest EXHIBIT A - SPECIAL PROVISIONS - PAGE 3 Period, to continue all or any portion of the relevant LIBOR Rate Loans as LIBOR Rate Loans; (iii) 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 (iv) 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 Paragraphs (3).(1)(b) and (3).(1)(c) of this Exhibit A or if an Event of Default has occurred and is continuing. (b) Bank's determination of LIBOR as provided above shall be conclusive, absent manifest error. Furthermore, if Bank determines, in good faith (which determination shall be conclusive, absent manifest error), prior to the commencement of any Interest Period that (i) U.S. Dollar deposits of sufficient amount and maturity for funding the Loans are not available to Bank in the London Interbank Eurodollar market in the ordinary course of business, or (ii) 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 Paragraph (3)(b) of this Exhibit A shall not represent the effective pricing to Bank for U.S. Dollar deposits of a comparable amount for the relevant 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), Bank shall promptly notify Borrower and (x) all existing LIBOR Rate Loans shall convert to Prime Rate Loans upon the end of the applicable Interest Period, and (y) no additional LIBOR Rate Loans shall be made until such circumstances are cured. (c) 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 Bank or its lending offices (a "Regulatory Change"), shall, in the opinion of counsel to Bank, make it unlawful for Bank to make or maintain LIBOR Rate Loans, then Bank shall promptly notify Borrower and (i) 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 (ii) no additional LIBOR Rate Loans shall be made until such circumstance is cured. (d) 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 Bank), Borrower agrees to indemnify Bank against any loss (including any loss on redeployment of the funds repaid), cost or expense incurred by Bank as a result of such prepayment. (e) If any Regulatory Change (whether or not having the force of law) shall (i) 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, Bank; (ii) subject Bank or the LIBOR Rate Loans to any tax, duty, charge, stamp tax or EXHIBIT A - SPECIAL PROVISIONS - PAGE 4 fee or change the basis of taxation of payments to Bank of principal or interest due from Borrower to Bank hereunder (other than a change in the taxation of the overall net income of Bank); or (c) impose on Bank any other condition regarding the LIBOR Rate Loans or Bank's funding thereof, and Bank shall determine (which determination shall be conclusive, absent any manifest error) that the result of the foregoing is to increase the cost to Bank of making or maintaining the LIBOR Rate Loans or to reduce the amount of principal or interest received by Bank hereunder, then Borrower shall pay to Bank, on demand, such additional amounts as Bank shall, from time to time, determine are sufficient to compensate and indemnify Bank from such increased cost or reduced amount. (f) Each request for LIBOR Rate Loans shall be in an amount not less than Five Hundred Thousand and No/100 Dollars ($500,000.00), and in integral multiples of One Hundred Thousand and No/100 Dollars ($100,000.00). (g) Unless otherwise specified by Borrower, all Loans shall be Prime Rate Loans. (h) No more than three (3) Interest Periods may be in effect with respect to outstanding LIBOR Rate Loans at any one time. (i) The maximum amount of Libor Rate Loans outstanding at any one time shall not exceed fifty percent (50%) of the aggregate Loan Limit. (4) FEES AND CHARGES: (a) Facilities Fees: Borrower and Plymouth Shall jointly pay to Bank an annual facilities fee equal to three-eighths of one percent (3/8 of 1%) of the aggregate Loan Limit of Borrower and Plymouth, which fee shall be fully earned by Bank and payable on June 6, 1997 and on the date of same day of each year thereafter during the Original Term and any Renewal Term. (b) Prepayment Fee: If Borrower elects to terminate this Agreement prior to the termination date hereof, Borrower shall pay to Bank a prepayment fee equal to (i) three percent (3%) of the aggregate Loan Limit if this Agreement is terminated on or before June 6, 1997 (ii) two percent (2%) of the aggregate Loan Limit if this Agreement is terminated after June 6, 1997 and prior to June 6, 1998; and (iii) one percent (1%) of the aggregate Loan Limit if this Agreement is terminated after June 6, 1998 but prior to the end of the Original Term or any year of any Renewal Term; provided that if Borrower sells all or substantially all of its assets or stock to a Person other than an Affiliate and such sale is consented to by Bank and the Liabilities are prepaid and the Agreement is terminated as a result thereof, then Borrower shall be required to pay a prepayment fee of one percent (1%) of the aggregate Loan Limit of Borrower. ADDITIONS AND CHANGES TO COVENANTS (5) CHECKING ACCOUNT PROVISIONS: Borrower shall maintain its general controlled disbursement account with Bank. Normal charges shall be assessed thereon. EXHIBIT A - SPECIAL PROVISIONS - PAGE 5 (6) TANGIBLE NET WORTH: Notwithstanding the provisions of subparagraph 11(o) of the Agreement, Borrower shall at all times maintain a tangible net worth of not less than the Minimum Tangible Net Worth, as hereinafter defined. At all times from March 1, 1997 through November 29, 1997, "Minimum Tangible Net Worth" shall equal One Million Sixty-Nine Thousand and No/100 Dollars ($1,069,000.00). From November 30, 1997 through November 29, 1998, Minimum Tangible Net Worth shall equal One Million Three Hundred Nineteen Thousand and No/100 dollars ($1,319,000.00) Thereafter, from November 30th of each year through November 29th of the following year, Minimum Tangible Net Worth shall be equal to Minimum Tangible Net Worth on the last day of the immediately preceding fiscal year plus Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00). "Tangible Net Worth" being defined for purposes of this subparagraph as Borrower's shareholders' equity (including retained earnings) less the book value of all intangible assets as determined solely by Bank on a consistent basis plus the amount of any LIFO reserve plus the amount of any debt subordinated to Bank, all as determined under generally accepted accounting principles applied on a basis consistent with the financial statement dated March 1, 1996 except as set forth herein. For purposes of this subparagraph, (a) intangible assets are: (i) intangible asset-FAS #87, (ii) deferred tax asset, net of the valuation reserve-FAS #109, and (iii) trade names and (b) pension liability adjustments are excluded. (7) LOANS TO EMPLOYEES: In addition to the restrictions contained in subparagraph 11(l) of the Agreement, Borrower shall not make any loan to any Person except loans to employees not exceeding One Hundred Thousand and No/100 Dollars ($100,000.00) in the aggregate outstanding at any one time. (8) PERMITTED BORROWINGS: Notwithstanding the provisions of subparagraph 10(q) of the Agreement, Borrower may finance or refinance the acquisition of Equipment, whether by purchase money financing, lease or otherwise. ADDITIONS AND CHANGES TO DEFAULT PROVISIONS (9)ADDITIONAL CROSS DEFAULTS: In addition to the Events of Default specified in Paragraph 12 of the Agreement, it shall be an Event of Default hereunder if Plymouth , subject to any applicable cure period, shall fail to perform, keep or observe any of the covenants, conditions promises, agreements or other obligations or Plymouth to Bank under any agreement now ir hereafter existing between plymouth and Bank, including, without limitation, that certain Plymouth Agreement or in the event of termination of said plymouth Agreement. (10) Change of Control Default: In addition to the Events of Default specified in Paragraph 12 of the Agreement, it shall be an Event of Default hereunder if Plymouth shall cease to own at least 100% of the issued and outstanding stock of Borrower. (11) CHANGE OF MANAGEMENT DEFAULT: In addition of the Events of Default specified in Paragraph 12 of the Agreement, it shall be an Event of Default hereunder if Maurice Hamilburg shall cease to be the Chief Executive Officer and President of Borrower. EXHIBIT A - SPECIAL PROVISIONS - PAGE 6 OTHER PROVISIONS (12) PERMITTED LIENS: Bank acknowledges that the liens evidenced by the following filed financing statements and any amendments thereto, as said financing statements exist as of February 3, 1997, shall constitute Permitted Liens: 9722005452; 9320012721; 932037852; 932073046; 932090200;952091599 CONDITIONS TO CLOSING (13) ADDITIONAL CONDITIONS TO CLOSING: Bank shall be under no obligation to consummate the transactions contemplated by this Agreement until each of the conditions listed in this Paragraph (13) has been satisfied. Whenever a condition contained herein requires delivery of an agreement or other document to Bank, each such agreement or other document shall be in form and substance satisfactory to Bank in its sole discretion. (a) Landlord's Agreement: Borrower shall Cause to be executed in favor of Bank and delivered to Bank a Landlord's Agreement from each lessor of property(ies) set forth on Exhibit B, which landlord's Agreement shall include a copy of the relevant lease. (b) Guaranties: Borrower shall cause to be executed in favor of Bank and delivered to Bank the Continuing Unconditional Guaranty of Plymouth of any and all indebtedness of Borrower to Bank. (c) Warehouseman's Letters: Bank hereby acknowledges that Eligible Inventory is and from time to time may be stored with a bailee, warehouseman, or similar party at the locations set forth in Exhibit B. Relative thereto, Borrower shall cause each such party to execute and deliver to Bank a Warehouseman's Letter. (d) Patent, Trademark and License Mortgage: Borrower shall execute and deliver to Bank a Patent, Trademark and License Mortgage. (e) Attorney's Opinion Letter: Borrower shall cause to be executed and delivered to Bank an Attorney's Opinion Letter. \mam (m:\dept\abl\mercado\docs\plymth\exhibita) 07/02/96 3:15 PM EXHIBIT B - BUSINESS AND COLLATERAL LOCATIONS Attached to and made a part of that certain Loan and Security Agreement of even date herewith between Brite-Line Technologies, Inc. ("Borrower") and LASALLE NATIONAL BANK ("Bank"). A. Borrower's Business Locations (please indicate which lcoation is the principal place of business and at which locations originals and all copies of Borrower's books, records and accounts are kept). 1. 10660 East 51st Avenue (chief place of business/ Denver, Colorado 80239 leased property) 2. 3. B. Other locations of Collateral (including, without limitation, warehouse locations, processing locations, consignment locations) and all post office boxes of Borrower. Please indicate the relationship of such location to Borrower (i.e. public warehouse, processor, etc). 1. c/o Midstates Warehouse 601 West 143rd Street Plainfield, Illinois 60544 2. c/o Hale Intermodal Warehouse 1801 South Clinton Street Baltimore, Maryland 21224 3. c/o Robertson Johnson Warehouse 2600 Shader Orland, Florida 32854 4. c/o Southern Warehouse Corporation 3500 East Crosstimbers Houston, Texas 77093 5. c/o Weber Distribution 15301 Shoemaker Avenue Norwalk, California 90650 Initialled by Borrower: Initialled by Bank: EX-4 4 EXHIBIT (4)(xv) CONTINUING UNCONDITIONAL GUARANTY WHEREAS, Brite-Line Technologies, Inc. ("Borrower") has entered into a Loan and Security Agreement dated February 25, 1997, (the "Loan Agreement") with LaSalle National Bank ("Bank") pursuant to which Bank has made or may, in its sole discretion, from time to time hereafter, made loans and advances to or extend other financial accommodations to Borrower; WHEREAS, the undersigned is desirous of having Bank extend and/or continue the extension of credit to Borrower and Bank has required that Guarantor (as hereinafter defined) execute and deliver this Guaranty to Bank as a condition to the extension and continuation of credit by Bank; and WHEREAS, the extension and/or continued extension of credit, as aforesaid, by Bank is necessary and desirable to the conduct and operation of the business of Borrower and will inure to the personal and financial benefit of Guarantor; NOW, THEREFORE, for value received and in consideration of any loan, advance, or financial accommodation of any kind whatsoever heretofore, now or hereafter made, given or granted to Borrower by Bank (including, without limitation, the Loans as defined in, and made or to be made by Bank to Borrower pursuant to, the Loan Agreement), the undersigned, and each of them, if there be more than one, (collectively, the "Guarantor") unconditionally guaranties (i) the full and prompt payment when due, whether at maturity or earlier, by reason of acceleration or otherwise, and at all times thereafter, of all of the indebtedness, liabilities and obligations of every kind and nature of Borrower to Bank or any parent, affiliate or subsidiary of Bank (the term "Bank" as used hereafter shall include such parents, affiliates and subsidiaries), howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, joint or several, now or hereafter existing, or due or to become due, an howsoever owned, held or acquired by Bank, whether through discount, overdraft, purchase, direct loan or as collateral or otherwise, including without limitation all obligations and liabilities of Borrower to Bank under the Loan Agreement and (ii) the prompt, full and faithful discharge by Borrower of each and every term, condition, agreement, representation and warranty now or hereafter made by Borrower to Bank (all such indebtedness, liabilities and obligations being hereinafter referred to as the "Borrower's Liabilities"). Guarantor further agrees to pay all costs and expenses, including, without limitation, all court costs and reasonable attorneys' and paralegals' fees paid or incurred by Bank in endeavoring to collect all or any part of Borrowers's Liabilities from, or in prosecuting any action against, Guarantor or any other guarantor of all or any part of Borrower's Liabilities. All amounts payable by Guarantor under this Guaranty shall be payable upon demand by Bank. Notwithstanding any provision of this Guaranty to the contrary, it is intended that this Guaranty, and any liens and security interests granted by Guarantor to secure this Guaranty, not constitute a "Fraudulent Conveyance" (as defined below). Consequently, Guarantor agrees that if the Guaranty, or any liens or security interests securing this Guaranty, would, but for the application of this sentence, constitute a Fraudulent Conveyance, this Guaranty and each such lien and security interest shall be valid and enforceable only to the maximum extent that would not cause this Guaranty or such lien or security interest to constitute a Fraudulent Conveyance, and this Guaranty shall automatically be deemed to have been amended accordingly at all relevant times. For purposes hereof, "Fraudulent Conveyance" means a fraudulent conveyance under Section 548 of the "Bankruptcy Code" (as hereinafter defined) or a fraudulent conveyance or fraudulent transfer under the provisions of any applicable fraudulent conveyance or fraudulent transfer law or similar law of any state, nation or other governmental unit, as in effect from time to time. Guarantor hereby agrees that, except as hereinafter provided, its obligations under this Guaranty shall be unconditional, irrespective of (i) the validity or enforceability of Borrower's Liabilities or any part thereof, or of any promissory note or other document evidencing all or any part of Borrower's Liabilities, (ii) the absence of any attempt to collect Borrower's Liabilities from Borrower or any other guarantor or other action to enforce the same, (iii) the waiver or consent by Bank with respect to any provision of any instrument evidencing Borrower's Liabilities, or any part thereof, or any other agreement heretofore, now or hereafter executed by Borrower and delivered to Bank, (iv) failure by Bank to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral for Borrower's Liabilities, (v) the institution of any proceeding under Chapter 11 of Title 11 of the United States Code (11 U.S.C. 101 et seq.), as amended (The "Bankruptcy Code"), or any similar proceeding, by or against Borrower, or Bank's election in any such proceeding of the application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a security interest by Borrower as debtor-in- possession, under Section 364 of the Bankruptcy Code, (vii) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of Bank's claim(s) for repayment of Borrower's Liabilities, or (viii) any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of receivership or bankruptcy of Borrower, protest or notice with respect to Borrower's Liabilities and all demands whatsoever, and covenants that this Guaranty will not be discharged, except by complete performance of the obligations and liabilities contained herein. Upon any default by Borrower as provided in any instrument or document evidencing all or any part of Borrower's Liabilities, including without limitation the Loan Agreement, Bank may, at its sole election, proceed directly and at once, without notice, against Guarantor to collect and recover the full amount or any portion of Borrower's Liabilities, without first proceeding against Borrower, or any other person, firm, or corporation, or against any security or collateral for Borrower's Liabilities. Bank is hereby authorized, without notice or demand and without affecting the liability of Guarantor hereunder, to at any time and from time to time (i) renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, Borrower's Liabilities or otherwise modify, amend or change the terms of any promissory note or other agreement, document or instrument now or hereafter executed by Borrower and delivered to Bank; (ii) accept partial payments on Borrower's Liabilities; (iii) take and hold security or collateral for the payment of Borrower's Liabilities guaranteed hereby, or for the payment of this Guaranty, or for the payment of any other guaranties of Borrower's Liabilities or other liabilities of Borrower, and exchange, enforce, waive and release any such security or collateral; (iv) apply such security or collateral and direct the order or manner of sale thereof as in its sole discretion it may determine; and (v) settle, release, compromise, collect or otherwise liquidate Borrower's Liabilities and any security or collateral therefore in any manner, without affecting or impairing the obligations of Guarantor hereunder. Bank shall have the exclusive right to determine the time and manner of application of any payments or credits, whether received from Borrower or any other source, and such determination shall be binding on Guarantor. All such payments and credits may be applied, reversed and reapplied, in whole or in part, to any of Borrower's Liabilities as Bank shall determine in its sole discretion without affecting the validity or enforceability of this Guaranty. To secure the payment and performance of Guarantor's obligations and liabilities contained herein, Guarantor grants to Bank a security interest in all property of Guarantor delivered concurrently herewith or which is now, or at any time hereafter in transit to, or in the possession, custody or control of Bank, and all proceeds of all such property. Guarantor agrees that Bank shall have the rights and remedies of a secured party under the Uniform Commercial Code of Illinois, as now existing or hereafter amended, with respect to all of the aforesaid property, including without limitation thereof, the right to sell or otherwise dispose of any or all of such property and apply the proceeds of such sale to the payment of Borrower's Liabilities. In addition, at any time after maturity of Borrower's Liabilities by reason of acceleration or otherwise, Bank may, in its sole discretion, without notice to Guarantor and regardless of the acceptance of any security or collateral for the payment hereof, appropriate and apply toward the payment of Borrower's Liabilities (i) any indebtedness due or to become due from Bank to Guarantor, and (ii) any moneys, credits or other property belonging to Guarantor, at any time held by or coming into the possession of Bank whether for deposit or otherwise. Guarantor hereby assumes responsibility for keeping itself informed of the financial condition of Borrower, and any and all endorsers and/or other guarantors of any instrument or document evidencing all or any part of Borrower's Liabilities and of all other circumstances bearing upon the risk of nonpayment of Borrower's Liabilities or any part thereof that diligent inquiry would reveal and Guarantor hereby agrees that Bank shall have no duty to advise Guarantor of information known to Bank regarding such condition or any such circumstances or to undertake any investigation not a part of its regular business routine. If Bank, in its sole discretion, undertakes at any time or from time to time to provide any such information to any Guarantor, Bank shall be under no obligation to update any such information or to provide any such information to Guarantor on any subsequent occasion. Guarantor consents and agrees that Bank shall be under no obligation to marshall any assets in favor of Guarantor or against or in payment of any or all of Borrower's Liabilities. Guarantor further agrees that, to the extent that Borrower makes a payment or payments to Bank, or Bank receives any proceeds of collateral, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to Borrower, its estate, trustee, receiver or any other party, including, without limitation, Guarantor, under any bankruptcy law, state or federal law, common law or equitable theory, then to the extent of such payment or repayment, Borrower's Liabilities or the part thereof which has been paid, reduced or satisfied by such amount, and Guarantor's obligations hereunder with respect to such portion of Borrower's Liabilities, shall be reinstated and continued in full force and effect as of the date such initial payment, reduction or satisfaction occurred. Guarantor agrees that any and all claims of Guarantor against Borrower, any endorser or any other guarantor of all or any part of Borrower's Liabilities, or against any of Borrower's properties, whether arising by reason of any payment by Guarantor to Bank pursuant to the provisions hereof, or otherwise, shall be subordinate and subject in right of payment to the prior payment, in full, of all of Borrower's Liabilities. Bank may, without notice to anyone, sell or assign Borrower's Liabilities or any part thereof, or grant participations therein, and in any such event each and every immediate or remote assignee or holder of, or participant in, all or any of Borrower's Liabilities shall have the right to enforce this Guaranty, by suit or otherwise for the benefit of such assignee, holder, or participant, as fully as if herein by name specifically given such right, but Bank shall have an unimpaired right, prior and superior to that of any such assignee, holder or participant, to enforce this Guaranty for the benefit of Bank, as to any part of Borrower's Liabilities retained by Bank. This Guaranty shall be binding upon Guarantor and upon the successors (including without limitation, any receiver, trustee or debtor in possession of or for Guarantor) of Guarantor and shall inure to the benefit of Bank and its successors and assigns. If there is more than one signatory hereto, all references to Guarantor herein shall include each and every Guarantor and each and every obligation of Guarantor hereunder shall be the joint and several obligation of each Guarantor. Each Guarantor that is a corporation or a partnership hereby represents and warrants that it has all necessary corporate or partnership authority, as the case may be, to execute and deliver this Guaranty and to perform its obligations hereunder. This Guaranty shall continue in full force and effect, and Bank shall be entitled to make loans and advances and extend financial accommodations to Borrower on the faith hereof until such time as Bank has, in writing, notified Guarantor that all of Borrower's Liabilities have been paid in full and discharged and the Loan Agreement has been terminated or until Bank has actually received written notice from any Guarantor of the discontinuance of this Guaranty as to that Guarantor, or written notice of the death, incompetency or dissolution of any Guarantor. In case of any discontinuance by, or death, incompetency or dissolution of, any Guarantor (collectively, a "Termination Event"), this Guaranty and the obligations of such Guarantor and his or its heirs, legal representatives, successors or assigns, as the case may be, shall remain in full force and effect with respect to all of Borrower's Liabilities incurred prior to the receipt by Bank of written notice of the Terminating Event. The occurrence of a Terminating Event with respect to one Guarantor shall not affect or impair the obligations of any other Guarantor hereunder. Wherever possible each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Guaranty. THIS GUARANTY SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. Guarantor irrevocably agrees that, subject to Bank's sold and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS GUARANTY SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. GUARANTOR HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN SAID CITY AND STATE. Guarantor hereby irrevocably appoints and designates the Secretary of State of Illinois, whose address is Springfield, Illinois (or any other person having and maintaining a place of business in such state whom Guarantor may from time to time hereafter designate upon ten (10) days written notice to Bank and who Bank has agreed in its sole discretion in writing is satisfactory and who has executed an agreement in form and substance satisfactory to Bank agreeing to act as such attorney and agent), as Guarantor's true and lawful attorney and duly authorized agent for acceptance of service of legal process. Guarantor agrees that service of such process upon such person shall constitute personal service of such process upon Guarantor. GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST GUARANTOR BY BANK IN ACCORDANCE WITH THIS PARAGRAPH. GUARANTOR HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS GUARANTY. If there is attached to this Guaranty a Rider A - Special Provisions, such Rider is by this reference incorporated into and made a part of this Guaranty. IN WITNESS WHEREOF, this Guaranty has been duly executed by the undersigned as of this 20 day of March , 19 97 . FOR INDIVIDUAL GUARANTOR: FOR CORPORATE OR PARTNERSHIP GUARANTOR: Plymouth Rubber Company, Inc. By Its Address: By Its 104 Revere Street Canton, Massachusetts 02021 Address: RIDER A - SPECIAL PROVISIONS This Rider A - Special Provisions is attached to and made a part of that certain Continuing Unconditional Guaranty (the "Guaranty") of even date herewith executed by Plymouth Rubber Company, Inc. ("Guarantor") in favor of LaSalle National Bank ("Bank"). 1. Notwithstanding anything to the contrary contained in the Guaranty, no payment made by or for the account of Guarantor including, without limitation, (i) a payment made by Guarantor in respect of Borrower's Liabilities or (ii) a payment made by any other person under any other guaranty, shall entitle the Guarantor by subrogation or otherwise, to any payment from Borrower or from or out of any property of Borrower and Guarantor shall not exercise any right or remedy against Borrower or any property of Borrower by reason of any performance by Guarantor under the Guaranty. PLYMOUTH RUBBER COMPANY,INC. By Its Address: 104 Revere Street Canton, Massachusetts 02021 EX-4 5 EXHIBIT (4)(xvi) April 23, 1997 Plymouth Rubber Company, Inc. 104 Revere Street Canton, Massachusetts 02021 Gentlemen: Plymouth Rubber Company, Inc., a Massachusetts corporation ("Borrower") and LaSalle National Bank, a national banking association ("Bank") have entered into that certain Loan and Security Agreement dated June 6, 1996 (the "Security Agreement"). From time to time thereafter, Borrower and Bank may have executed various amendments (each an "Amendment" and collectively the "Amendments") to the Security Agreement (the Security Agreement and the Amendments hereinafter are referred to, collectively, as the "Agreement"). Borrower and Bank now desire to further amend the Agreement as provided herein, subject to the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. The Agreement hereby is amended as follows: (a) Paragraph (8) of Exhibit A of the Agreement is deleted in its entirety and the following is substituted in its place: (8) TANGIBLE NET WORTH: Notwithstanding the provisions of subparagraph 11(o) of the Agreement, Borrower and Brite-Line shall at all times maintain an aggregate tangible net worth of not less than the Minimum Tangible Net Worth, as hereinafter defined. At all times from March 1, 1997 through November 29, 1997, "Minimum Tangible Net Worth" shall equal One Million Sixty-Nine Thousand and No/100 Dollars ($1,069,000.00). From November 30, 1997 through November 29, 1998, Minimum Tangible Net Worth shall equal One Million Three Hundred Nineteen Thousand and No/100 Dollars ($1,319,000.00). Thereafter, from November 30th of each year through November 29th of the following year, Minimum Tangible Net Worth shall be equal to Minimum Tangible Net Worth on the last day of the immediately preceding fiscal year plus Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00). "Tangible Net Worth" being defined for purposes of this subparagraph as Borrower's and Brite-Line's shareholders' equity (including retained earnings) less the book value of all intangible assets as determined solely by Bank on a consistent basis plus the amount of any LIFO reserve plus the amount of any debt subordinated to Bank, all as determined under generally accepted accounting principles applied on a basis consistent with the financial statement dated March 1, 1996 except as set forth herein. For purposes of this subparagraph, (a) intangible assets are: (i) intangible asset-FAS #87,(ii) deferred tax asset, net of the valuation reserve-FAS #109, and (iii) trade names and (b) pension liability adjustments are excluded. Plymouth Rubber Company, Inc. April 23, 1997 Page Two 2. This Amendment shall not become effective until fully executed by all parties hereto. 3. Except as expressly amended hereby and by any other supplemental documents or instruments executed by either party hereto in order to effectuate the transactions contemplated hereby, the Agreement and Exhibit A thereto hereby are ratified and confirmed by the parties hereto and remain in full force and effect in accordance with the terms thereof. LASALLE NATIONAL BANK, a national banking association By: Title: Accepted and agreed to this 7th day of May , 1997. PLYMOUTH RUBBER COMPANY, INC. By: Title: Consented and agreed to by the following guarantor of the obligations of PLYMOUTH RUBBER COMPANY, INC. to LASALLE NATIONAL BANK. BRITE-LINE TECHNOLOGIES, INC. By: Title: Date: EX-4 6 EXHIBIT (4)(xvii) CONTINUING UNCONDITIONAL GUARANTY WHEREAS, Plymouth Rubber Company, Inc. ("Borrower") has entered into a Loan and Security Agreement dated June 6, 1996*, (the "Loan Agreement") with LaSalle National Bank ("Bank") pursuant to which Bank has made or may, in its sole discretion, from time to time hereafter, made loans and advances to or extend other financial accommodations to Borrower; WHEREAS, the undersigned is desirous of having Bank extend and/or continue the extension of credit to Borrower and Bank has required that Guarantor (as hereinafter defined) execute and deliver this Guaranty to Bank as a condition to the extension and continuation of credit by Bank; and WHEREAS, the extension and/or continued extension of credit, as aforesaid, by Bank is necessary and desirable to the conduct and operation of the business of Borrower and will inure to the personal and financial benefit of Guarantor; NOW, THEREFORE, for value received and in consideration of any loan, advance, or financial accommodation of any kind whatsoever heretofore, now or hereafter made, given or granted to Borrower by Bank (including, without limitation, the Loans as defined in, and made or to be made by Bank to Borrower pursuant to, the Loan Agreement), the undersigned, and each of them, if there be more than one, (collectively, the "Guarantor") unconditionally guaranties (i) the full and prompt payment when due, whether at maturity or earlier, by reason of acceleration or otherwise, and at all times thereafter, of all of the indebtedness, liabilities and obligations of every kind and nature of Borrower to Bank or any parent, affiliate or subsidiary of Bank (the term "Bank" as used hereafter shall include such parents, affiliates and subsidiaries), howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, joint or several, now or hereafter existing, or due or to become due, an howsoever owned, held or acquired by Bank, whether through discount, overdraft, purchase, direct loan or as collateral or otherwise, including without limitation all obligations and liabilities of Borrower to Bank under the Loan Agreement and (ii) the prompt, full and faithful discharge by Borrower of each and every term, condition, agreement, representation and warranty now or hereafter made by Borrower to Bank (all such indebtedness, liabilities and obligations being hereinafter referred to as the "Borrower's Liabilities"). Guarantor further agrees to pay all costs and expenses, including, without limitation, all court costs and reasonable attorneys' and paralegals' fees paid or incurred by Bank in endeavoring to collect all or any part of Borrowers's Liabilities from, or in prosecuting any action against, Guarantor or any other guarantor of all or any part of Borrower's Liabilities. All amounts payable by Guarantor under this Guaranty shall be payable upon demand by Bank. Notwithstanding any provision of this Guaranty to the contrary, it is intended that this Guaranty, and any liens and security interests granted by Guarantor to secure this Guaranty, not constitute a "Fraudulent Conveyance" (as defined below). Consequently, Guarantor agrees that if the Guaranty, or any liens or security interests securing this Guaranty, would, but for the application of this sentence, constitute a Fraudulent Conveyance, this Guaranty and each such lien and security interest shall be valid and enforceable only to the maximum extent that would not cause this Guaranty or such lien or security interest to constitute a Fraudulent Conveyance, and this Guaranty shall automatically be deemed to have been amended accordingly at all relevant times. For purposes hereof, "Fraudulent Conveyance" means a fraudulent conveyance under Section 548 of the "Bankruptcy Code" (as hereinafter defined) or a fraudulent conveyance or fraudulent transfer under the provisions of any applicable fraudulent conveyance or fraudulent transfer law or similar law of any state, nation or other governmental unit, as in effect from time to time. Guarantor hereby agrees that, except as hereinafter provided, its obligations under this Guaranty shall be unconditional, irrespective of (i) the validity or enforceability of Borrower's Liabilities or any part thereof, or of any promissory note or other document evidencing all or any part of Borrower's Liabilities, (ii) the absence of any attempt to collect Borrower's Liabilities from Borrower or any other guarantor or other action to enforce the same, (iii) the waiver or consent by Bank with respect to any provision of any instrument evidencing Borrower's Liabilities, or any part thereof, or any other agreement heretofore, now or hereafter executed by Borrower and delivered to Bank, (iv) failure by Bank to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral for Borrower's Liabilities, (v) the institution of any proceeding under Chapter 11 of Title 11 of the United States Code (11 U.S.C. 101 et seq.), as amended (The "Bankruptcy Code"), or any similar proceeding, by or against Borrower, or Bank's election in any such proceeding of the application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a security interest by Borrower as debtor-in- possession, under Section 364 of the Bankruptcy Code, (vii) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of Bank's claim(s) for repayment of Borrower's Liabilities, or (viii) any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of receivership or bankruptcy of Borrower, protest or notice with respect to Borrower's Liabilities and all demands whatsoever, and covenants that this Guaranty will not be discharged, except by complete performance of the obligations and liabilities contained herein. Upon any default by Borrower as provided in any instrument or document evidencing all or any part of Borrower's Liabilities, including without limitation the Loan Agreement, Bank may, at its sole election, proceed directly and at once, without notice, against Guarantor to collect and recover the full amount or any portion of Borrower's Liabilities, without first proceeding against Borrower, or any other person, firm, or corporation, or against any security or collateral for Borrower's Liabilities. Bank is hereby authorized, without notice or demand and without affecting the liability of Guarantor hereunder, to at any time and from time to time (i) renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, Borrower's Liabilities or otherwise modify, amend or change the terms of any promissory note or other agreement, document or instrument now or hereafter executed by Borrower and delivered to Bank; (ii) accept partial payments on Borrower's Liabilities; (iii) take and hold security or collateral for the payment of Borrower's Liabilities guaranteed hereby, or for the payment of this Guaranty, or for the payment of any other guaranties of Borrower's Liabilities or other liabilities of Borrower, and exchange, enforce, waive and release any such security or collateral; (iv) apply such security or collateral and direct the order or manner of sale thereof as in its sole discretion it may determine; and (v) settle, release, compromise, collect or otherwise liquidate Borrower's Liabilities and any security or collateral therefore in any manner, without affecting or impairing the obligations of Guarantor hereunder. Bank shall have the exclusive right to determine the time and manner of application of any payments or credits, whether received from Borrower or any other source, and such determination shall be binding on Guarantor. All such payments and credits may be applied, reversed and reapplied, in whole or in part, to any of Borrower's Liabilities as Bank shall determine in its sole discretion without affecting the validity or enforceability of this Guaranty. To secure the payment and performance of Guarantor's obligations and liabilities contained herein, Guarantor grants to Bank a security interest in all property of Guarantor delivered concurrently herewith or which is now, or at any time hereafter in transit to, or in the possession, custody or control of Bank, and all proceeds of all such property. Guarantor agrees that Bank shall have the rights and remedies of a secured party under the Uniform Commercial Code of Illinois, as now existing or hereafter amended, with respect to all of the aforesaid property, including without limitation thereof, the right to sell or otherwise dispose of any or all of such property and apply the proceeds of such sale to the payment of Borrower's Liabilities. In addition, at any time after maturity of Borrower's Liabilities by reason of acceleration or otherwise, Bank may, in its sole discretion, without notice to Guarantor and regardless of the acceptance of any security or collateral for the payment hereof, appropriate and apply toward the payment of Borrower's Liabilities (i) any indebtedness due or to become due from Bank to Guarantor, and (ii) any moneys, credits or other property belonging to Guarantor, at any time held by or coming into the possession of Bank whether for deposit or otherwise. Guarantor hereby assumes responsibility for keeping itself informed of the financial condition of Borrower, and any and all endorsers and/or other guarantors of any instrument or document evidencing all or any part of Borrower's Liabilities and of all other circumstances bearing upon the risk of nonpayment of Borrower's Liabilities or any part thereof that diligent inquiry would reveal and Guarantor hereby agrees that Bank shall have no duty to advise Guarantor of information known to Bank regarding such condition or any such circumstances or to undertake any investigation not a part of its regular business routine. If Bank, in its sole discretion, undertakes at any time or from time to time to provide any such information to any Guarantor, Bank shall be under no obligation to update any such information or to provide any such information to Guarantor on any subsequent occasion. Guarantor consents and agrees that Bank shall be under no obligation to marshall any assets in favor of Guarantor or against or in payment of any or all of Borrower's Liabilities. Guarantor further agrees that, to the extent that Borrower makes a payment or payments to Bank, or Bank receives any proceeds of collateral, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to Borrower, its estate, trustee, receiver or any other party, including, without limitation, Guarantor, under any bankruptcy law, state or federal law, common law or equitable theory, then to the extent of such payment or repayment, Borrower's Liabilities or the part thereof which has been paid, reduced or satisfied by such amount, and Guarantor's obligations hereunder with respect to such portion of Borrower's Liabilities, shall be reinstated and continued in full force and effect as of the date such initial payment, reduction or satisfaction occurred. Guarantor agrees that any and all claims of Guarantor against Borrower, any endorser or any other guarantor of all or any part of Borrower's Liabilities, or against any of Borrower's properties, whether arising by reason of any payment by Guarantor to Bank pursuant to the provisions hereof, or otherwise, shall be subordinate and subject in right of payment to the prior payment, in full, of all of Borrower's Liabilities. Bank may, without notice to anyone, sell or assign Borrower's Liabilities or any part thereof, or grant participations therein, and in any such event each and every immediate or remote assignee or holder of, or participant in, all or any of Borrower's Liabilities shall have the right to enforce this Guaranty, by suit or otherwise for the benefit of such assignee, holder, or participant, as fully as if herein by name specifically given such right, but Bank shall have an unimpaired right, prior and superior to that of any such assignee, holder or participant, to enforce this Guaranty for the benefit of Bank, as to any part of Borrower's Liabilities retained by Bank. This Guaranty shall be binding upon Guarantor and upon the successors (including without limitation, any receiver, trustee or debtor in possession of or for Guarantor) of Guarantor and shall inure to the benefit of Bank and its successors and assigns. If there is more than one signatory hereto, all references to Guarantor herein shall include each and every Guarantor and each and every obligation of Guarantor hereunder shall be the joint and several obligation of each Guarantor. Each Guarantor that is a corporation or a partnership hereby represents and warrants that it has all necessary corporate or partnership authority, as the case may be, to execute and deliver this Guaranty and to perform its obligations hereunder. This Guaranty shall continue in full force and effect, and Bank shall be entitled to make loans and advances and extend financial accommodations to Borrower on the faith hereof until such time as Bank has, in writing, notified Guarantor that all of Borrower's Liabilities have been paid in full and discharged and the Loan Agreement has been terminated or until Bank has actually received written notice from any Guarantor of the discontinuance of this Guaranty as to that Guarantor, or written notice of the death, incompetency or dissolution of any Guarantor. In case of any discontinuance by, or death, incompetency or dissolution of, any Guarantor (collectively, a "Termination Event"), this Guaranty and the obligations of such Guarantor and his or its heirs, legal representatives, successors or assigns, as the case may be, shall remain in full force and effect with respect to all of Borrower's Liabilities incurred prior to the receipt by Bank of written notice of the Terminating Event. The occurrence of a Terminating Event with respect to one Guarantor shall not affect or impair the obligations of any other Guarantor hereunder. Wherever possible each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Guaranty. THIS GUARANTY SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. Guarantor irrevocably agrees that, subject to Bank's sold and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS GUARANTY SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. GUARANTOR HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN SAID CITY AND STATE. Guarantor hereby irrevocably appoints and designates the Secretary of State of Illinois, whose address is Springfield, Illinois (or any other person having and maintaining a place of business in such state whom Guarantor may from time to time hereafter designate upon ten (10) days written notice to Bank and who Bank has agreed in its sole discretion in writing is satisfactory and who has executed an agreement in form and substance satisfactory to Bank agreeing to act as such attorney and agent), as Guarantor's true and lawful attorney and duly authorized agent for acceptance of service of legal process. Guarantor agrees that service of such process upon such person shall constitute personal service of such process upon Guarantor. GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST GUARANTOR BY BANK IN ACCORDANCE WITH THIS PARAGRAPH. GUARANTOR HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS GUARANTY. If there is attached to this Guaranty a Rider A - Special Provisions, such Rider is by this reference incorporated into and made a part of this Guaranty. IN WITNESS WHEREOF, this Guaranty has been duly executed by the undersigned as of this 20 day of March , 19 97 . FOR INDIVIDUAL GUARANTOR: FOR CORPORATE OR PARTNERSHIP GUARANTOR: Brite-Line Technologies, Inc. By Its Address: By Its 10660 East 51st Avenue Denver, Colorado 80239 Address: RIDER A - SPECIAL PROVISIONS This Rider A - Special Provisions is attached to and made a part of that certain Continuing Unconditional Guaranty (the "Guaranty") of even date herewith executed by BRITE-LINE TECHNOLOGIES, INC. ("Guarantor") in favor of LaSalle National Bank ("Bank"). 1. Notwithstanding anything to the contrary contained in the Guaranty, no payment made by or for the account of Guarantor including, without limitation, (i) a payment made by Guarantor in respect of Borrower's Liabilities or (ii) a payment made by any other person under any other guaranty, shall entitle the Guarantor by subrogation or otherwise, to any payment from Borrower or from or out of any property of Borrower and Guarantor shall not exercise any right or remedy against Borrower or any property of Borrower by reason of any performance by Guarantor under the Guaranty. BRITE-LINE TECHNOLOGIES, INC. By Its EX-4 7 EXHIBIT (4)(xviii) DRAFT SUBJECT TO CHANGES TRANSLATION OF THE PUBLIC DEED AND LOAN AGREEMENT DOCUMENTING THE CONCESSION OF A LOAN TO PLYMOUTH RUBBER EUROPA, S.A. NOTARY PUBLIC: Mr. Ernesto Regueira Nunez, Notary of Porrino. DATE: 11 April 1997 NUMBER: 479 "LOAN GUARANTEED BY MORTGAGE AND GUARANTEE NUMBER: FOUR HUNDRED AND SEVENTY NINE In Porrino, my residence, on the 11th day of April nineteen hundred and ninety seven. Before me, ERNESTO REGUEIRA NUNEZ, Notary Public of the Association of La Coruna. APPEAR MR. PLACIDO OTERO ESTEVEZ, married, economist, residing at Porrinno, domiciled at Calle Domingo el Bueno number 4, holder of a National Identity Card, which he exhibits to me, numbered 35.550.317. MR. MANUEL ALCAIDE NUNEZ, manager of the office for company banking, Vigo branch, of the Banco del Comercio, residing at Vigo, domiciled at Plaza de Compostela number 27-28, holder of a National Identity Card, which he exhibits to me, numbered 34.867.925. MR. JUAN JOSE LAGO ESCORCIA, duly empowered member of the office for company banking, Vigo branch, of the Banco del Comercio, residing at Vigo, domiciled at Plaza de Compostela number 27-28, holder of a National Identity Card, which he exhibits to me, numbered 32.590.099. MR. ALBERTO ESTEVEZ RODRIGUEZ, legally separated, residing at Porrino, manager of the Porrino branch of the Banco de Bilbao Vizcaya, with domicile at Plaza del Ayuntamiento number 5, holder of a National Identity Card, which he exhibits to me, numbered 35.997.966. MR. MANUEL DOMINGO DOMINGUEZ VARELA, married, employee of the Banco de Bilbao Vizcaya, residing in Porrino, with domicile at Plaza del Ayuntamiento number 5, holder of a National Identity Card, which he exhibits to me, numbered 36.602.902. MR. ALBERTO MIGUEZ LOURIDO, duly empowered person from the Caja de Ahorros Municipal de Vigo, residing in Vigo, domiciled at Calle Garcia Barbon number 1, holder of a National Identity Card, which he exhibits to me, numbered 36.012.559. All of them are of full legal age. THEY INTERVENE: a) Mr. Placido Otero Estevez, in the name and on behalf of the mercantile entity "PLYMOUTH RUBBER EUROPA, S.A.", Unipersonal Company, with corporate address at Porrino (Pontevedra), Carretera Porrino-Salceda Km. 1,500; constituted for indefinite time by Public Deed before the Notary Public of Madrid, Mr. Jose Maria Alvarez Vega, on August 26,1996, under number 3.241 of his official record and registered in the Mercantile Registry of Pontevedra, in Folio 49, Book 1.847 of Companies, PO-18.045. Fiscal Identity Code number A-36269694. Exercises this representation in virtue of the special power, in the name of the represented, Ms. Beatriz Satrustegui Menchaca, granted before me on the present day under number __________ of my official record; in execution of the agreement of the Board of Administration, held ond April, 7, 1997. From said Public Deed I transcribe: "...... To grant powers to ... Mr. Placido Otero Estevez ..., so, .... he may, by himself, subscribe in the name of the company a loan, for the amount of 250,000,000 Pesetas which shall be granted to the company by a syndicate of financial credit entities formed by the Banco del Comercio, Banco Bilbao Vizcaya and Caja Municipal de Ahorros de Vigo, as well as: 1. To constitute on behalf of the above mentioned credit entities mortgage on real states property of the company, in the conditions established as convenient, apply for the registration of said mortgage in the Property Registry, grant the public deeds that may deem necessary for clarification, amendment, and rectification to obtain the final registration of the above mentioned mortgage in the Property Registry. 2. To appear before the Notary Public or the business agent of his choice to incorporate the loan contract guaranteed by mortgage to a public deed and to perform all acts that may deem necessary for the conclusion and complete effectiveness of the same ... ". Whatever is not established herein will not alter, vary, condition or limit the preceding. Mr. Otero assures that the faculties he invokes are dully in force and that the entity he represents subsists. b) Mr. Alcaide Nunez and Mr. Lago Escorcia in the name and on behalf of the mercantile entity "BANCO DEL COMERCIO, S.A.", with corporate address at Madrid, Paseo de la Castellana, number 108, constituted for indefinite time under the denomination of "Banco Hispano Suizo, S.A.", by Public Deed on October, 12, 1920, before the Notary Public of Madrid, Mr. Antonio Turon y Bosca; Afterwards said mercantile entity adopted the denomination of "BANCO DE FINANCIACION INDUSTRIAL, S.A.", by Public Deed, on March 7, 1964, under number 1.303 of his official record; registered in the Mercantile Registry of Madrid, in Folio 131 of Book 402, page 4.315. The present denomination of "BANCO DE COMERCIO, S.A.", is the result of the merger carried out by "BANCO DE FINANCIACION INDUSTRIAL, S.A." absorbing the "BANCO DE COMERCIO, S.A.", adopting notwithstanding the preceding, this denomination, as results of the Public Deed granted on January 1, 1989, before Notary Public of Madrid, Mr. Juan Bolas Alfonso, under number 1 of his official record, and registered in the Mercantile Registry of Madrid, in folio 156, Book 1.063 general, 1.011 of section 3 of Companies Book, Page number 4.314-2, inscription number 89. Fiscal Identity Code number A-28000545. They have faculties for this act by power of attorney granted for them by Mr. Carlos Gorria Cortazar and Mr. Luis Antonio Delso Heras, acting in the name and on behalf of the "BANCO DE FINANCIACION INDUSTRIAL, S.A.", on November 30, 1988, before the Notary Public of Madrid, Mr. Jose Antonio Escartin Ipiens, under number 4.590 of his official record, from which among others, I transcribe: "... for in the name and on behalf of the "BANCO DE FINANCIACION INDUSTRIAL, S.A." (INDUBAN) may exercise ... the faculties .. under numbers ... to be indicated ... jointly... B) Jointly, this is, with any other empowered person from the Bank, who may be empowered upon the present power or any other power, within the same faculties: ... 6. Grant loans or credits. a) Grant loans or credits, financial or commercial discounts, overdrafts in current accounts, exceeds in credit accounts, or under any other modality, in national or foreign currency, both the empowering entity individually or jointly with any other public or private entity, national or foreign, simple or with any type of guarantee, personal, real, ordinary pledge or pledge without transmission, mortgage or chattel mortgage, or any other guarantee, as well as renew, defer, amend, extend, reduce, decline, transmit, dispose, cancel, extinguish the granted loans or credits, or those which the Bank is holder whether they are simple or with any of the above mentioned personal or real guarantees. b) To open documentary credits, request the confirmation of the opened documentary credits by this entity, confirm the credits opened by other entity, advise documentary credits and in all cases, whether they are revocable or irrevocable, simple or with any of the above mentioned guarantees. c) To intervene in the syndicated loans and accept the designation as Agent Bank, Director Bank or any other directive designation, both individually or jointly with other loan entities, accepting all kind of compromises and carrying out all acts for the performing of those designations... 10.- Guarantees. ... c) Acceptation of guarantees. = To accept and retain all kind of guarantees and counter-guarantees, on behalf of the Bank, both real and personal, mortgage or chattel mortgage, ordinary pledge or pledge without transmission, or any other guarantee. d) Substitution and cancellation of guarantees. = To substitute, amend, postpone, divide, reduce and cancel and totally or partially extinguish all kind of personal and real guarantees, bonds, securities, pledge without transmission or ordinary pledge, mortgage or chattel mortgage, constituted on behalf of the Bank. Thus it results from authentic copy of said Power of Attorney public deed that they show me (registered in the Mercantile Registry of Madrid, folio number 134, volume number 1.063 general, number 1.011 of section 3 of Companies Book, Page number 4.314, inscription 893), and whatever is omitted will not alter, vary or condition the above established. Mr. Alcaide Nunez and Mr. Lago Escorcia assure that the faculties they invoke are duly in force and that the entity they represent subsists. c) Mr. Alberto Estvez Rodriguez and Mr. Manuel Domingo Dominguez Varela, in the name and on behalf of the entity "BANCO BILBAO VIZCAYA, S.A." (from now on, in this public deed, "the Bank"), with Fiscal Identity Code number A- 48/265169, domiciled in Bilbao, Plaza San Nicolas 4, which proceeds from merger, formalized in public deed authorized by Notary Public of Bilbao, Mr. Jose Maria Arriola Arana, on October 1, 1988, of the entities "Banco de Bilbao. S.A." and "Banco de Vizcaya, S.A.", in which public deed was adopted the present denomination. It is registered in the Mercantile Registry of Vizcaya in the Volume 2.083, Book 1.545 of Section 3 of Companies, Folio 1, Page number 14.741, inscription 1. They have faculties for this act: From the public deed of power of attorney granted in the name of said entity, by Mr. Emilio de Ybarra y Churruca, on the 1st of October nineteen hundred and eighty-eight, before the Notary Public of Bilbao, Mr. Jose Ignacio Uranga Otaegui, under number 4.903 of his official records, registered in the Mercantile Registry of Vizcaya in Volume 2.083 general, Book 1.545 of Section 3 of Companies, Folio 57, Page number 14.741, inscription 6, in use of the faculties granted in public deed authorized by the same Notary Public in the same date. The contents of this public deed, insofar interests to point out herein, is: "... for each one of them, in the name and on behalf of the "Banco de Bilbao Vizcaya, S.A." and as for this entity and all its offices, Branches and urban Agencies, established or to be established in the future, both in Spain and abroad ... and jointly, with any other duly empowered person who, in his turn, holds, at least, the same faculties that may be exercise in each case." = " ... 6 ... a) To grant loans and credits, commercial discounts, overdrafts in current accounts, exceeds in credit accounts, or under any other modality, in national or foreign currency, both the empowering entity individually or jointly with any other public or private entity, national or foreign, simple or with any type of guarantee, personal, real, ordinary pledge or pledge without transmission, mortgage or chattel mortgage, or any other guarantee, as well as renew, defer, amend, extend, reduce, decline, transmit, dispose, cancel, extinguish the granted loans or credits, or those which the Bank is holder whether they are simple or with any of the above mentioned personal or real guarantees. b) To open documentary credits, request the confirmation of the opened documentary credits by this entity, confirm the credits opened by other entity, advise documentary credits and in all cases, whether they are revocable or irrevocable, simple or with any of the above mentioned guarantees. c) To intervene in the syndicated loans and accept the designation as Agent Bank, Director Bank or any other directive designation, both individually or jointly with other loan entities, accepting all kind of compromises and carrying out all acts for the performing of those designations. 10.- Guarantees. ... c) Acceptation of guarantees. = To accept and retain all kind of guarantees and counter-guarantees, on behalf of the Bank, both real and personal, mortgage or chattel mortgage, ordinary pledge or pledge without transmission, or any other guarantee. d) Substitution and cancellation of guarantees. = To substitute, amend, postpone, divide, reduce and cancel and totally or partially extinguish all kind of f personal and real guarantees, bonds, securities, pledge without transmission or ordinary pledge, mortgage or chattel mortgage, constituted on behalf of the Bank ..." Thus it results from the copies of said public deed, which are shown to me, in which the non transcribed will not alter, vary or condition the established herein. Mr. Estevez Rodriguez and Dominguez Varela assure that the faculties invoked are duly in force and that the entity they represent subsists. d) Mr. Alberto Miguez Lourido, in the name and on behalf of the "CAJA DE AHORROS MUNICIPAL DE VIGO" - "CAIXAVIGO", with corporate address in Vigo - Avenida de Garcia Barbon, 1 and 3 -, with Fiscal Identity Code number G-36600369; Institution governed by the By-laws approved by General Shareholders Meeting dated on the 18th June 1996, elevated on to a public deed authorized by the Notary Public of Vigo, Mr. Alvaro Moure Goyanes, the 19th of the same month and year, under number 770 of his official records, corrected by another public deed authorized by the same Notary Public, the 21st of the same month and year, under number 785 of his official records; registered in the Mercantile Registry of Pontevedra in Folio 15 of the Book 1.134 of Companies, inscription 117 of Page number PO- 4.111. The first By-laws of the Company were approved by Royal Order of August 7, 1880, created as "Caja de Ahorros y Monte de Piedad Municipal de Vigo" and changed the actual denomination by agreement of the General Shareholders Meeting of the company on February 1, 1989, which was elevated on to a public deed authorized by the Notary Public of Vigo, Mr. Alfonso Zulueta de Haz, on the 10th of March of the same year, under number 833 of his official records. He supports said representation with copy, which is shown to me, of the public deed granted by the General Manager of the "Caja de Ahorros Municipal de Vigo", Mr. Julio Fernandez Gayoso, the twenty-first of November of nineteen hundred ninety-four, before Notary Public of Vigo, Mr. Manuel Martinez Rebollido, under number 2.466 of his official records, in his quality of General Manager of said Savings Bank and in execution of the agreements of the Administration Board dated 27th October 1994. Resulting from said public deed (registered in the Mercantile Registry of Pontevedra in Folio 99 of the Book 1.134 of Companies, inscription 127 of Page number PO- 4.111) Mr. Miguez Lourino holds the following faculties, among others: "...II.- ORDINARY BANK OPERATIONS."- Constitute, defer, amend, renew, cancel or extinguish, in the name and on behalf of the Savings Bank, all acts and contracts regarding the operations of the Entity and all other operation due to the banking activity as listed herein, formalizing and subscribing all public and private documents that may deem necessary: ... 8. Credits and loans of all kind, without guarantee or with any kind of guarantee (mortgage or chattel mortgage, pledge, ordinary or without transmission, etc.), subscribing public deed policy, as well as accepting those guarantees, enclosed the superposition of these ... 18. Totally or partially cancel mortgages or chattel mortgages and ordinary pledges or pledges without transmission, granting the corresponding payment letters, as well as division, segregation, aggregation and release of mortgages and other guarantees.- 19. Request, accept, constitute and cancel bonds or securities of any kind, jointly or individually whether they are personal, cash or title pledging, in the name of the Savings Bank or on behalf of a third (Areitio dixit) person and to be duly effective in the sphere of contract, whether private, civil, mercantile or labor ... 38.- ... 4.- The managers... Mr. Alberto Miguez Lourido, may exercise the following faculties: a) Jointly and severally, anyone of them, those included in epigraphs ... 8 ... b) ... they will have to present certification granted by the General Manager of the Entity by any of the Assistant Manager, which supports that the operation has been approved by the entity; and those included in sections 18 and 19 ..., they will have to present ... certification ... when the amount exceeds 15,000,000 Pesetas. Mr. Miguez Lourido for the incorporation to the present certification issued by Mr. Angel Lopez-Corona Davila, Assistanat Manager of "Caja de Ahorros Municipal de Vigo", clearing that on the twenty-first of November of nineteen hundred ninety-six the "Caja de Ahorros de Vigo" agreed the participation in a syndicated loan operation of 250,000,000 Pesetas, with mortgage guarantee on behalf of "PLYMOUTH RUBBER EUROPA, S.A.", for an amount of 83,400,000 Pesetas and accept the bond of 26,666,666 Pesetas granted by ABN AMRO, to answer to the payment of this loan operation, and which issued in one sole sheet of common paper, I include it to incorporate to the present deed. Whatever is not established herein as not being necessary, will not alter, vary, condition or limit the preceding. Mr. Muiguez Lourido assures that the faculties invoked are duly in force and that the entity he represents subsists. THEY HAVE, IN MY JUDGMENT, the necessary legal capacity to grant the present public deed of LOAN GUARANTEED BY MAXIMUM MORTGAGE AND GUARANTEE, and to that effect, they STATE A.- Mr. Placido Otero Estevez, that the mercantile entity "PLYMMOUTH RUBBER EUROPA, S.A." is legal title holder, by the title which shall be explained afterwards, of the following property located in: PROVINCE OF PONTEVEDRA, "MUNICIPIO DE PORRINO, PARROQUIA DE ATIOS": "RIO A RIO", "COUTO VELLO", COUTO ANCHO, "COUTO VELLO DEL REGATO" and "MARCO", mountain and furze with the following buildings : - - A SINGLE-STOREY INDUSTRIAL PLANT, destined for storage, which takes up a surface area of nine hundred and twenty square metres (920 m2). - - INDUSTRIAL PLANT AND OFFICES, composed of ground floor and first floor, in part. The ground floor destined for industrial uses which takes up two thousand and forty one square metres (2.041 m2) and a first floor for office purposes which takes up three hundred and sixty four square metres (264 m2). - - A SINGLE-STOREY INDUSTRIAL PLANT, which takes up a surface area of five hundred and sixty square metres (560 m2), destined for production. All this forms one sole land of one hectare, thirty three areas and forty centiareas, which limits: to the North property of "Sial, S.A."; South, the company "Solfer" and pool; East, from the company "Solfer" and road from Porrino to Salcedo de Caselas, and West, Juana Davila Lago and "Sial S.A.". TITLE: It belongs to them by virtue of universal and patrimonial transmission due to spin-off of "PLYMOUTH RUBBER EUROPA, S.A." and "CINTAS ADHESIVAS NUNEZ S.A." as result of Public Deed granted by the Notary Public of Bilbao, Mr Emilio Fernandez Valdes Cruzat, the 25th February 1997, under number 406 of his official records. The actual description of the property results from the Public Deed of New York Declaration and Association, granted by the preceding title holder "Cintas Adhesivas Nunez, S.A." before the Notary Public of Porrino, Mr. Ernesto Regueira Nunez, on the 27th of November of 1996, under number 1.372 of his official records. REGISTRATION: The property is registered at the Tuy Land Registry, under book 171, volume 891, folio 177, estate number 26.620. CHARGES, LIENS AND REGISTRY INFORMATION: The property is free of charges and limitations, and I, the Notary Public, assert that the registry information obtained on the tenth of April of the present year, consisting in a simple note of the Tuy Land Registry, coincides with the above exposed about the estate of charges. Concerning the title holder the preceding title holder is recorded, even though the spin-off Public Deed is presented with estate number 1.509, of Diary 47, which it has been taken away by the person who had presented the public deed for the registration in the Mercantile Registry; all this has been previously notified to the granters and it is ratified in this moment by the representatives of the borrower entity. Likewise I, the Notary Public, expressly advise the appear that about the obtained information the preceding Registry situation will prevail before the presentation to the Registry of the authorized copy of this Public Deed. XXXX : Free of hirers and all kind of occupants, as declared by D. Placido Otero Estevez. URBAN SITUATION: There are no circumstances. ADMINISTRATIVE REGISTRY: The urban contribution is established with references E416071 0001B0 and E416072 0001YQ relating to the Property register. The invoices corresponding the 1996 fix assets tax ("IBI") is incorporated in this copy obtained in my bureau. B.- Mr. Placido Otero Estevez, that the mercantile entity "PLYMOUTH RUBBER EUROPA, S.A." (from now on the BORROWER) has appoint the LENDER entities requesting a loan of TWO HUNDRED AND FIFTY MILLION PESETAS (250,000,000). C.- That the LENDER entities agree to grant the BORROWER the requested loan. D.- That, in consequence, the parties agree in formalizing a Syindicated Loan Contract with the following, CLAUSES FIRST.- Amount of the Loan 1.1. Total compromise on the part of the Lenders The banking entities listed under clause SECOND below hereby jointly and separately make available to the Borrower a loan up to a limit of 250,000,000 (Two Hundred and Fifty million) pesetas, of which amount the Borrower may dispose subject to the conditions established in the present Agreement. 1.2. Compromise assumed by the Borrower The Borrower hereby accepts the loan and obliges to return to the Lenders the funds withdrawn, on each and all of the scheduled dates established in clause ELEVENTH, as well as to pay, on the dates and in accordance with the conditions established in the present Agreement, all interests and commissions accrued by the loan as well as the expenses and taxes that it may give rise to. SECOND.- Distribution of the loans and nature of the rights and obligations of the Lenders 2.1 Total amount of the loan The Lenders shall make available the total amount of the loan in accordance with the following distribution: ENTITY UNDERTAKING CAJA DE AHORROS MUNICIPAL DE VIGO 83,400,000 Pesetas BANCO DE BILBAO VIZCAYA, S.A. 83,300,000 Pesetas BANCO DE COMERCIO, S.A. 83,300,000 Pesetas 2.2 Independent nature of the obligations of the Lenders. The contractual obligations are assumed by The Lenders in a joint but separate manner. Each one of the Lenders may exercise its own rights in an individual way, up to the limit of his participation, without prejudice to the exercise of the rights which may correspond to the rest of them, unless expressly agreed otherwise. Each one of the Lenders may also, individually, take any many extra-judicial actions directed to the conservation and defense of the rights of the rest of the Lenders, except for the Agent, who, in the cases hereby established, may carry out actions directed to the conservation and defense of the rights of The rest of the Lenders. Each one of the Lenders shall only be entitled to exercise its own individual rights. In the event that any one of the Lenders does not make the funds available to the Borrower, through the agent, on the time and under the conditions hereby established, this shall not affect the obligations of the rest of the Lenders, who shall be exclusively obliged to provide the funds up to the limit of their respective undertakings, notwithstanding the legal actions against the non-complying Lender which may correspond to the Borrower. 2.3. Majority of Lenders For the contractual situations upon which this may be necessary, it shall be understood as "majority" of Lenders the conjunction of those whose interests represent, at a given time, more than 50% (Fifty per cent) of the total amount of the loan or of the outstanding amount of the loan, if applicable. 2.4.The Agent CAJA MUNICIPAL DE AHORROS DE VIGO assumes the position of Agent to the present loan Agreement, together with all the rights and obligations which, in consideration to said role, are conferred to it under the present Agreement. THIRD.- Special accounts for the loan 3.1. The Agent's accountancy With regards to the present Agreement, the agent, as such, shall open a special credit account in favor of the Borrower. The agent shall debit on that account the amount of the funds withdrawn by the Borrower, as well as the accrued interests over the loan, the commissions, the expenses, delay interests, additional costs and all any amounts which, according to the present agreement, are payable by the Borrower. Equally, all amounts received by the Agent from the Borrower shall be credited on the same account, so that the balance of said account represents, at any given time, the total amount owed by the Borrower to the Lenders. 3.2. Accountancy of the Lenders Each one of the Lenders shall open in its accountancy a special account for the loan under the name of the Borrower, in which it shall debit all amounts given to the Borrower through the Agent, as well as the accrued interests over the loan, the commissions, the expenses, delay interests, additional costs and all any amounts which, according to the present agreement, are payable by the Borrower. Equally, all Lenders shall credit on the same account all amounts received by the Borrower, so that the balance of said account represents, at any given time, the amount owed by the Borrower to each said Lender. 3.3.Certification of the balance of the accounts. With regards to the loan being or not judicially or extra-judicially claimable the parties agree to consider as the outstanding claimable amount the figure resulting from the balance of the accounts referred to in the present clause, unless the existence of an error, falsehood or any other obstative circumstance is proven by whoever invokes it. The liquidation of the account shall be carried out by the Agent, or by each one of the Lenders in accordance to whatever results of their respective accounts, when reduced to their own individual undertaking, thus considering as the outstanding claimable amount the figure established in the certification issued by the Lender in question, as long as a Public Notary or Stock Broker confirms, in a public document or by an official confirmation written out on the certification, that the figure on said certification agrees with the balance of the special account, and that the latter has been liquidated in accordance to the agreed rules. FOURTH.- Withdrawals 4.1 Withdrawals of loan funds The Borrower shall have available the total amount of the loan on the eleventh of April of nineteen hundred and ninety seven by means of a sole withdrawal of 250,000,000 pesetas. 4.62. Funds to be made available to the Agent Each of the Lenders shall, notifying it to the Agent by fax or telex, make immediately available to the latter the corresponding amount prior to 12 a.m. on the date on which the funds are to be withdrawn, with effectiveness on that same date, by crediting said amount to the account 2080 which CAJA MUNICIPAL DE AHORROS DE VIGO has at the Bank of Spain in Madrid, using the Orders of Transfer of Funds System (O.M.F.) or to whichever other account the agent may indicate in the future. 4.73. Delivery of the funds to the Borrower The Agent shall deliver to the Borrower the funds requested on the date fixed, after twelve o'clock (12:00 a.m.) with effectiveness on that same date, for the amount requested or, failing that, for the amount credited by the Lenders on the Agents account. The delivery shall be effected by crediting said amount in account number 2080/0054/004002314, which the Borrower has opened in CaixaVigo's branch in Porrino. FIFTH.- General rules concerning the interests 5.1.Interest accrual The amounts withdrawn of the loan shall accrue daily interest in favor of the Lenders at the annual nominal rate which, for each period, is established in the following clauses. 5.2.Interest payment The accrued interests shall be paid in money by the Borrower on the last day of each period of interest, not being it necessary for the Lenders to request said payments. 5.3.Liquidation and calculation of the interests. The interest shall be calculated for the days effectively consumed within each interest period. With regards to the accrual and liquidation of said interest, it shall be deemed as the first day of each interest period as effectively not consumed, and the last day of said period, as effectively consumed. The calculation of the interests corresponding to each liquidation period shall be carried out multiplying the amount of the withdrawn and not re-paid funds times the percentage of the nominal interest rate applicable to said period and dividing it by One hundred. The nominal interest rate applicable to any given period shall be determined dividing the annual nominal interest rate applicable by 360 and multiplying the result by the number of days of the period of liquidation. 5.4.Binding nature of the interest rates The annual nominal interest rate corresponding to each interest period, as calculated in accordance with the rules herein established, and communicated equally according to what is established in the present contract, shall be deemed as accepted by the Borrower, and shall be binding for the latter if the Agent does not receive, for whichever cause, including "force majeure", prior to 9 a.m. on the date on which the interest period is to start, a communication from the Borrower stating that it does not accept the applicable interest rate. The Borrower hereby expressly renounces any other term for communication to which it may be legally entitled. If the non acceptance of the interest by the borrower were to be communicated within the period established in the preceding paragraph the borrower will have to reimburse all pending capital, as well as any other amount due by virtue of the present agreement within the thirty days following that date, an interest will accrue, at which ever rate was applicable to the preceding interest period. 5.5.Error in the calculation of the interests Should there be a manifest error in the calculation of the applicable interest rate, the Agent shall immediately amend said error, the effects of said amendment being effective as from the date on which the erroneous interest rate was first applied. SIXTH.- Interest periods 6.1. Division into interest periods With regards to the present Agreement, it shall be understood as Interest Periods: each one of the three month periods following the date on which the funds are withdrawn and until total repayment of the loan in accordance with clause ELEVENTH hereafter, or, should it be applicable, the interest period established in the second paragraph of clause FIFTH, point 5.4. 6.2.Maximum duration of the interest periods Under no circumstances may the last date of the last interest period may exceed the date of the loan final repayment. If the interval between the first day of the last interest period and the date of the loan's final re-payment is less than three (3) months, the duration of said interest period shall be that of the period of time which goes from the first day of the last interest period to the date of the loan's final re- payment. SEVENTH.- Annual nominal interest rate applicable to the loan 7.1.Normal annual nominal interest rate. Determination. The normal annual nominal interest rate applicable to each interest period shall be determined by the Agent by adding up the (a) MIBOR plus the (b) Margin. (a) It is understood as MIBOR the interest rate applicable by the Madrid inter-banking Market, for a one year period, according to the quoting shown by REUTERS' MIBOR screen for deposits in pesetas at 11 a.m. of the working day immediately preceding the date on which each interest period is to commence, for a period of twelve (12) months. To said resulting MIBOR shall be added the usual costs for obtaining funds at the Inter-Banking Market, there including broker fees as well as any other applicable tax, levies or charges, be them nationally imposed or not, which are now applicable or may become applicable in the future to the obtaining of funds in the Inter-banking Market or for the use of the services of a broker. (b) To the result of the addition of the MIBOR plus the expenses mentioned under (a) above, it shall be added an additional Margin equal to 1.25% a year. Said margin will remain invariable for the duration of the loan. Should the addition of the MIBOR plus the Margin result not to be a multiple of 1/8 % , said figure shall be rounded up to become a multiple of 1/8 %. If at the time and date fixed for the determination of the interest rate there were to be no official quoting for the twelve month interest, the interest rate shall be immediately fixed at that established for the next inferior period of six months, three months, one month, fifteen days, seven days and one day, in this order of preference, for which there is an official quoting. 7.2.Substitute Interest rate In case that, for whichever reasons affecting the Madrid Inter-banking Market it becomes impossible to determine the interest rate in the manner prescribed in clause 7.1 above, a substitute interest rate shall be calculated and applied as follows: Once the Agent realizes the need to apply a substitute interest rate, it shall so notify it, simultaneously, to the Borrower and the rest of the Lenders, prior to 11:30 a.m. on the working day before the interest period is due to start. The substitute nominal interest rate is understood to mean the addition of the substitute MIBOR plus the usual costs for obtaining funds at the Inter-Banking Market, plus the Margin. The substitute MIBOR shall be the average of the interest rates offered for deposits in pesetas to the Reference Entities of the Madrid Inter-Banking Market at around 11 a.m. on the working day immediately preceding to the date in which the interest period is to commence, for terms of twelve, six, three or one month (in that same order of preference). To the substitute MIBOR shall be added the usual costs for obtaining funds at the Inter-Banking Market plus a 1.25% annual Margin. The result of this addition shall be rounded up to the nearest multiple of 1/8 %, should it not be a multiple thereof. With respect to the present clause and the present Agreement, the Reference Entities shall be the following: Bank of America S.A.E. Mitshubishi Bank, Sucursal en Espana. Banco Central Hispano Americano, S.A. It shall be understood as the "majority of the Reference Entities", two of the above mentioned. Should any of the Reference Entities merge with another banking entity, or be absorbed by another banking entity, the new resulting entity shall substitute with respect to what is established in the present Agreement. 7.3. Communication of the normal and substitute interest rates Once the normal or substitute interest rate, as applicable, has been calculated, the Agent shall so notify the Borrower and the rest of the Lenders before 2 p.m. on the working day prior to the date on which each interest period is to commence. Every time it may be necessary to apply a substitute interest rate, the interest period shall be of 15 (fifteen) days duration. EIGHT.- Delay interests 8.1.Delay interests. Accrual and calculation Notwithstanding the termination right granted to the Lenders, should the Borrower delay the fulfilment of its payment obligation, for whichever cause, even if this happens due to no fault of the Borrower, the latter shall be obliged to satisfy, without need of a prior request in that sense, a delay interest as established under clause 8.2 below. The delay interest shall accrue day on a daily basis, being liquidated at the end of the corresponding month, and will be drawn over the amounts whose re-payment has not been made, taking as base a year of three hundred and sixty (360) days. The accrued and non satisfied interests will be capitalized at the months' end, as if an increase of the capital, thus accruing additional delay interests at the corresponding rate. 8.2 Delay Interest Rate The delay interest rate will be determined by adding four percentage points (4%) to the interest rate established in clause SEVENTH hereafter .. NINTH.- Commissions 9.1 Opening Commission The Borrower will pay the Agent, only once, as from 30 days after the signature of the Agreement or, if this were before, as from the first disposition, a commission of the one percent (1%), as opening commission over the total amount of the loan. This commission will be distributed by the Agent among the Lenders in the proportions agreed with the same. 9.2.Cancellation Commission The Borrower will pay the Agent, whenever this occurs, an early cancellation commission of one percent, over the amount to cancel, should cancellation occur the first three years of the life of the loan, or a commission of point five percent (0.50%) over the amount to cancel if the cancellation occurs during the fourth or fifth year of life of the loan. As from the fifth year no cancellation commission shall be due. This commission will be distributed by the Agent among the Lenders according to their undertakings in the loan. 9.3.Agency Commission The Borrower will pay the Agent, as Agency commission upon the withdrawal of the loan 0.50% over the total amount thereof, on the date of the first disposal in a sole time. TENTH.- Expenses, Taxes and costs Increases 10.1Expenses and Taxes The Borrower assumes as his charge the expenses, taxes, charges, fees and other pecuniary obligations, present and future, which may arise or accrue as consequence of the preparation, celebration and execution of the present Agreement. Among those and merely for informative purposes, are included: a) The fees, brokerages and expenses of the public Notaries or Stock Brokers. b) The Local, Provincial, Autonomous and Estate levies and taxes applicable to the constitution, modification, execution, and extinction of the same. c) The expenses accrued as consequence of the judicial execution of the Agreement. The Agent is hereby enable to pay the amounts owed by the borrower, in case of lack of payment by the borrower, and debit them in its account and claim those from the borrower at any time. The debited amounts will accrue, as from the date they are debited and without the necessity of a prior requirement, delay interests in accordance with what it is established in clause EIGHT, and shall be guaranteed by the amount provided for expenses in clause EIGHTEENTH . 10.2 Increase of costs for the Lenders In case that due to legal or statutory disposition, whatever their origin, additional obligations, such as the respect of certain coefficients, reserves or necessary deposits, are imposed on any or all of the Lenders, thus producing an increase of the costs of the funds that the Lenders are to employ in the financing of the present loan, or in case limitations were imposed, be them limitations over the amount of the commissions or the interests, or be them of any other different nature, which would imply a decrease of amount of the payments to which the Lenders have right by virtue of this Agreement, the Borrower, will be obliged to compensate them in the amount of the increase of the costs of the mentioned funds or the decrease of the payments, as long as the Lenders justify with documentary evidence that they have incurred in a repeated increase of the costs and/or determine by means of a detailed liquidation the decrease of the amounts of the payments. 10.3Deductions and retentions. All the amounts which the Borrower is to pay in accordance with the present Agreement will be satisfied clear of any deduction or withholding tax, being the Borrower liable for payment of any taxes which may, now or in a near future, be applicable to said payments, there excluding, in any case, Corporation Tax payable on the earnings obtained by the Lenders. 10.4. Reimbursements In case the Borrower reimburses, for any cause, the amount of any withdrawal of funds, on in a different date to the one agreed, it will be obliged to communicate the Lenders fifteen days in advance. ELEVENTH.- Duration of the Loan. Normal and advance Repayment 11.1. Duration of the Loan. The Loan will be definitively due on the eleventh of April of the year 2007, date in which it the balance in favor of the Lenders shown in the accounts will have to be definitely satisfied. 11.2 Normal Repayment of the Loan. The loan will be repaid through twenty (20) six month installments, all equal and consecutive, each for an amount of Twelve Million Five Hundred Thousand (12,500,000) Pesetas each one, being the first of them payable on the eleventh of October of 1997 and the last one on the eleventh of April of the year 2007, date on which the Loan will be definitively due. 11.3Advance Repayment of the Loan. The Borrower will be able to partially or totally repay the loan in advance at the date of termination of an interest period. Were early repayment to be partial, this will be made for a minimum of Thirty Million Pesetas (30,000,000) or for that amount plus one or several times Twelve Million Pesetas (12,000,000). Partial repayments of a lower amount will only admitted when said repayment constitutes the total repayment of outstanding amount of the loan. For any advance repayment to take place it will be necessary that the Borrower notifies it to the Agent with a previous notice of fifteen (15) working days. In the advance partial repayment notice the Borrower will give details as to the amount and date (working day) on which the same shall take place. If the advance repayment were to be total, it will indicate the date (working day) on which this will take place. Each advance cancellation notice, total or partial shall be irrevocable and its non fulfilment, concerning the amount or the date of the repayment, shall constitute a cause for the total termination of the Agreement. The Agent will communicate the receipt of the notification to the Lenders within the next three (3) working days. The advance repaid amount will be applied by the Lenders to reduce the amount of the rest of the repayment installments, without causing any modifications to the schedule of the normal repayment contained in point 11.2 of this clause. The commissions for advance cancellation are those specified in point 9.2 of clause NINTH. TWELFTH.- Termination of the Agreement 12.1 Causes of the resolution The present Agreement may be terminated by the Lenders, who may demand payment of whichever amount is due on that date, prior to its normal termination date upon the occurrence of the following: a) If for whatever cause registration of the present public deed in the Property Registry is denied. b) If there were to be any charge, encumbrance or lien over the mortgage property which has not been specified in the present deed, even if those are of a posterior date. c) By annulment or revocation, even if not final, of the administrative resolutions which have authorized the use of the land, the construction of the buildings, or the exercise of the business at the mortgage property except in case of correction of the same in a period of 40 days. d) When it has not been sufficiently proven that the property is insured and that the Insurance Company is aware of the existence of the loan within the thirty day period counted as from the date on which the Agent so requires. e) Lack of payment by the Borrower at its corresponding payment date of any of the amounts due by virtue of the present Agreement, be those part of the capital, interests, commissions, expenses or any other concept, once a maximum period of ten days as from the said date, has elapsed. f) In case the insurance premiums over the mortgage property or the taxes and expenses related to those which are preferential to the mortgage, are not paid on time. g) Lack of payment on time by the borrower of any other monetary amount arising from this agreement. h) Non fulfilment of any of the obligations assumed by the Borrower by virtue of the present contract and which are indicated by the Agent and not remedied by the borrower within fifteen days as from said indication. i) Non fulfilment by the Borrower of any payment obligation or compromise with respect to third parties for an amount of over Twenty Five Million Pesetas (25,000,000), or in case there is an attachment of over that amount, over the borrower's property, unless it is withdrawn within thirty calendar days; or in case the borrower formally requests from its creditors a moratory in the repayment of its monetary obligations, or when, in whichever way their insolvency or lack of liquidity. j) When it is proven that the borrower has hidden information, or supplied false and inaccurate information of material relevance to the lenders, even if there has been no malice on the part of the borrower; or in case the borrower does not provide the Agent with the balance sheet and the profit and loss account corresponding to the last financial year within the fifteen day period following the requirements to do so. k) Upon the essential alteration of the corporate object of the borrower, its cessation in its activity, its transformation, liquidation, dissolution or merger save express consent from the lenders. l) If the borrower files for bankruptcy or suspension of payments, or a request for those is filed by its creditors. m) Upon the existence of any other cause which according to Law gives way to the termination or advance expiration. n) Upon the impossibility of establishing an interest rate in accordance with the agreed rules, or upon non acceptance by the borrower of the applicable interest rate. o) Ruin, demolition, or deterioration of the mortgage property if the damage to it is more than 1/4 of its value and the owner or possessor of the same does not proceed to its repair within two months. p) In case the Borrower, three months before the expiration of the guarantee mentioned in the clause 21, does not provide the Borrowers a new bank guarantee in the same conditions as the existent guarantee or sufficient proves (as established by the Borrowers) that the guarantee will be renewed in the right time and conditions, the Borrowers may terminate the present agreement. 12.2 Termination proceedings Upon the existence of any of the circumstances mentioned in point 12.1, the Lenders as Majority will be able to totally terminate the loan Agreement. In any case, and upon the existence of any of the circumstances established in point 12.1, each Lender is unilaterally entitled to terminate the present Agreement in the part that it may correspond to it. 12.3 Effects of termination Once the Agreement is partially or totally terminated, the Lender will be obliged to the reimburse part or the whole of the amount of the loan, whichever applicable, as well as its interests, commissions, expenses and any other legitimate concept within the next twenty (20) natural days as from the date of notification of the termination, being it applicable to each interest period in course during said period (which shall not be extendible), the last interest rates notified by the Agent and which will be understood as accepted by the Lender to the sole and exclusive effect of practicing final liquidation. The Borrower hereby accepts the complementary liquidation of interests resulting from the application of the above mentioned difference. Once the period has elapsed without repayment by Borrower of the pending amounts, the Lenders shall be entitled to file the corresponding legal actions, and the amount then due amount to the Lenders shall commence to accrue delay interest as established in clause EIGHTH. 12.4 Partial Resolution The amounts repaid by the Borrower as a result of the exercise of a partial termination action of the Agreement as established in the last paragraph of point 12.2, shall not be subject the obligation of proportional distribution established in points 13.3 of clause THIRTEENTH. THIRTEENTH.- Payments to be made by the Borrower. 13.1 Form of Payment All payments to be made by the Borrower to the Lenders or to the Agent according to the present Agreement, shall be made without the necessity of a prior requirement in that sense, before 10.00 a.m. on the day on which said payment is due by crediting the corresponding amount in the account number 2080/0054/004002314/1 in favor of the BORROWER that keeps with the Agent at the branch of CAJA MUNICIPAL DE AHORROS DE VIGO in Porrino, which, to all effects shall be deemed as the payment address. If the day of payment falls on a non working day, the date of payment shall then be the next working day, unless the next working day is part of another month of the Gregorian calendar, in which case payment shall be due on the working day immediately preceding. All payments which, in the concept of capital or interests, are made by the borrower in relation with this contract, will be distributed by the Agent among the lenders in such a way that all the lenders are paid in proportion to their participation in the loan, at any given time. The Agent shall credit the corresponding amounts to the lenders by the transfer of said amount to the account which each one of them has at the Bank of Spain. Any possible rights which may entitle the lenders to obtain payments from the borrower based on any other cause than those contained in the present agreement will not be affected by what has been established earlier on. 13.2 Allocation of Payments The payments made by the Borrower in connection with the present Agreement, will be charged to the longest standing due amounts resulting from this Agreement in the following order: 1.- Delay Interests 2.- Commissions 3.- Taxes 4.- Expenses 5.- Indemnities and additional costs 6.- Judicial Costs 7.- Ordinary interests 8.- Principal of the loan, withdrawn and pending repayment. 13.3 Payments made to the Lenders With prejudice of established in point 12.4 of clause TWELFTH, if any of the Lenders were to receive at any moment payment of any outstanding amount in accordance to the present Agreement, they will notify it to the Agent and to the rest of the Lenders, and they shall then internally proceed to carry out the necessary adjustment to ensure that each one of the Lenders receives the sums paid by the Borrower in the proportion which corresponds to its undertaking of the total amount of the loan. FOURTEENTH.- Declarations 14.1Declarations made by the Borrower The Borrower makes the declarations listed hereinafter to the Lenders. The Lenders, in consideration thereof, grant the present Loan Agreement based on the accuracy and veracity said declarations. The Borrowers declarations are as follows: a) The Borrower is a "Sociedad Anonima" (Stock Company) of Spanish Nationality, validly incorporated and duly registered at the Mercantile Registry, with independent legal personality and sufficient legal capacity to enter into the present Agreement, and to assume all obligations herein established. b) The Borrower is up to date with all its social, mercantile, civil, labor and tax obligations. c) No judicial or administrative measure/action which could adversely influence (i) the Borrower's economical situation or (ii) its ability/capacity to comply with all the obligations assumed vis a vis third parties, there including the Lenders, has been initiated or, to the best of its faithful knowledge, is there a risk of it being initiated. d) All accountancy and financial reports and accounts that the Borrower has facilitated to the Lenders are correct and exact and they reflect, in accordance to the accountancy principles generally accepted in Spain and which have been uniformly applied by the Borrower for all past years, the real economical and financial situation of the Borrower. e) On this date of the execution of the present Agreement, there does not exist any circumstance or omission, which could distort or leave without effect the documents and information referred to in the preceding point d), as for the loyal acknowledge and comprehension of the Borrower. The Borrower has obtained all necessary permits and authorizations and has fulfilled all necessary requisites for the execution of the present Agreement, this credit operation not violating any legal, statutory or contractual obligation binding to the Borrower, being the obligations herein contained thus valid and enforceable by the lenders. The granting of the present Agreement does not and shall not result in the constitution or enlargement or any mortgage, pledge, or charge of any other kind on any of the Borrower's assets, except for the one established for the Borrowers. 14.2 Subsistence of the Borrower's declarations The declarations herein made by the Borrower in favor of the Lenders shall outlive the granting of the present Agreement and shall be understood as repeated by the Borrower for the duration of the Agreement. FIFTEENTH.- Obligations The Borrower, for the duration of the present Agreement, hereby assumes the following obligations towards the Lenders: a) Not to alter its legal status or nature by dissolution, transformation, merger or total assignment of its assets and liabilities. b) To immediately (and in any case within a period of no more than three working days) inform the Agent about any situation which constitutes or may constitute non compliance or be a cause for early termination of the present Agreement, or any other circumstance which has or may have a substantial adverse effect on the ability to fulfil the obligations herein contained. c) To immediately, (and in any case within a period of no more than three working days,) inform the Agent about any action or suit/claim, arbitration, proceeding, judicial or administrative investigation, or any other kind of proceeding the result of which may have an adverse material effect on its business, properties or assets. d) To maintain all its assets insured with a well reputed insurance company. The insured amounts shall correspond with the real value of said assets and, in any case, the insurance policy may not be lower than 170,000,000 pesetas. The declaration herein made must be annually proven to the Lenders through the Agent. The Borrower equally obliges to keep up the premium payments and to fulfil all obligations imposed by the insurance policies already in force or which may be entered into in the future. e) To keep and maintain all and any properties, rights, faculties and authorizations necessary for the normal conduction of its business and, in any case, not to dispose, in whichever way it may be, of all or part of its fixed assets without receiving its due worth. f) Notwithstanding the preceeding, the Borrower obliges not to spin off or segregate assets of a total value of over 20% of its total overall assets to a third party, without the prior written consent of the Lenders, unless this does not imply a decrease of the Borrower's total net worth. g) To carry out as many acts, and grant as many public or private documents as may be necessary to ensure that the credit rights of the Lenders resulting from the present Agreement enjoy, at all times of at least the same status and privileges as those which may correspond, at present or in the future, to any creditor with the exception of (i). The credit rights corresponding to third party creditors with a "real" guarantee granted prior to the present Agreement, however said guarantee may not be extended, increased or prolonged and (ii) Those rights of credit evidenced on a public deed or a public policy issued by a Stockbroker granted prior to this Agreement, and (iii) those rights of credit which are privileged or singularly privileged as listed in points 1,2 and 3 of article 913 of the Code of Commerce as long as said privilege does not result from a voluntary act on the part of the Borrower directed to give way to such privilege as well as (iv) the preferential rights granted to the workers by article 32 of the Workers Statute. As a consequence of the preceding, the Borrower, unless authorized by the Lenders, shall not grant, do or favor the granting by the third parties of any real or personal guarantees in favor of other creditors, neither shall it carry out any act or favour the carrying out of any act by a third party which may grant another creditor a pre-eminence or privilege in the repayment of its credit superior to those which correspond or may correspond to the Lenders by virtue of the present Agreement, with the exception of those acts or guarantees which result on a contingency for the Borrower of less than 20% of the total value of its assets. h) To apply for as many authorizations or permits as may be necessary, at present or in the future, for the conclusion and fulfilment of the present Agreement, should any be necessary. i) To take all necessary actions so that any Company in which the borrower holds a majority or substantial shareholding may also carry out or refrain from carrying out all actions which the Borrower has obliged to carry out or refrain from carrying out in accordance with whatever is established in the preceding points e), f) and g). All acts carried out by entities belonging to the same corporate group - understanding as such those which in accordance to article 42 of the Code of Commerce are to consolidate its accounts with the Borrower - are hereby excluded from the preceding obligation. j) To hand over to the Agent the first copy of the present Public Deed, once it is duly registered at the Property Registry, and hand a copy thereof to each one of the lenders. k) To hand over a certification from the Property Registry evidencing that the mortgage over the property is duly registered in accordance with the clauses established herein, and that there are no charges or limitations either registered or recorded (nor documents presented to this effect) which may be preferential to the present mortgage or may diminish its effectivity, and that the registry has no registration concerning any limit as to the owners faculty to freely dispose of the property. l) To hand over the policy and other documents which evidence that the property is insured, and in which the lenders rights are established. The borrower undertakes to obtain complete and correct compliance of the preceding obligations within the term of One Hundred and Twenty (120) days as from today, after which term the lenders may exercise their right to terminate the contract in accordance with the provisions of clause TWELVE. SIXTEENTH.- Assignments. The BORROWER will not be able to assign, transfer, substitute or surrogate the obligations and rights contracted in the present contract, except express consent in writing of the Lenders. During the life of the contract any of the LENDERS will be able to partial or totally assign or transfer the loan participation to other of the LENDERS or to a third party, whatever is the assigned participation amount, whenever the following requirements are fulfilled: a) That the assignment is of its contractual position to expiration. b) That the assignment coincides with an interest period of expiration date. c) That the assignment does not imply a cost increase, taxes or expenses for the BORROWER. d) That the participation amount purpose of the assignment is not inferior to one hundred millions of pesetas, unless the total participation is assigned and this is of an inferior amount to the above mentioned one. e) That the assignor informs the Agent by written notice and this to the BORROWER about the assignment project and name, social address and telefax number of the assign entity. The assignments will only have effect with respect to the BORROWER, the LENDERS and the Agent when all the requirements expressed in the above points have been fulfilled and are formalized in a public document. SEVENTEENTH.- The Agent. 17.1 Appointment. The LENDERS appoint Caja de Ahorros at Vigo as Agent, who accepts the appointment. 17.2 Special Warrant. Unimpaired the joint character of the LENDERS in the operation with regard to the development and operative of the same, the Agent acts, not only for himself but as special agent with an irrevocably character of the LENDERS, understanding that payments from any nature derived from the contract will have to be made by the BORROWER precisely to the Agent, providing liberator effects to the BORROWER as if they had been received in the corresponding proportion by the others who take part in the loan. Whereas, and whenever the contrary is not expressed, any modification made or received by the Agent will provide the same effects as if it had been formulated by all the LENDERS. 17.34 LENDERS Representation. Liability limitation. The representation faculties that the LENDERS give to the Agent will be understood as limited to those actions and measures that specially foreseen in this contract, were necessary to procure the good end of the same. In no case the Agent will have the LENDERS or BORROWERS fiduciary character remaining their duties and obligations limited to the ones expressly determined in this contract. According to these principles and as a matter of information: a) The agent will not be responsible with regard to the other LENDERS for the celebration causes, validity and contract exigency or other complementary document, or the veracity or certainty of the declarations contained in the same or the communications that he receives and neither for the loan drawn. b) The agent will not be obliged to take any decision or to make any investigation regarding the fulfilment of the contract. Only when he has real knowledge or had received a communication from any of the LENDERS or BORROWER about the non fulfilment of the contract or something that could cause the resolution of the same, will notify it to the other LENDERS. c) The information duty of the Agent will be understood as limited to the communications that have been expressly entrusted in this contract for its normal fulfilment and development or for its exigency in case of non fulfilment. d) Each of the LENDERS declares to the Agent to have achieved with regard to this loan his own and independent investigation and valuation of the financial situation of the BORROWER. 17.45 Expenses reimbursement. The LENDERS will immediately reimburse the Agent proportionally to its participation in the total of the loan, all the amounts that being to the BORROWER's charge, had not been paid by this in a voluntary way and that represent for the Agent a disbursement due to any concept and due to the contract he achieves in the LENDERS common interest with independence of the favorable or adverse result of the act or measure that provoked the disbursement. 17.56 Rights of the Agent The agent in his condition of LENDER, will have the same rights and faculties of any other creditor entity due to his participation in the loan. With independence of the present contract, the Agent will be able to accept deposits, lend money and, in general, achieve any other bank operations with the BORROWER. 17.67 Agent's renounce. Appointment of a new Agent. The Agent will be able to renounce to said post, by written notice to the other LENDERS and BORROWER. In that case, the LENDERS will proceed to appoint, as majority among them, a new Agent, with the previous approval of the BORROWER who will not be able to deny it without a justified cause. The renounce and appointment will have effect from the new Agent acceptance date, that will be formalized by notarial act and will be notified by the same public feudatory to the BORROWER and to the rest of the LENDERS. The new Agent will be invested with the same obligations and rights of the ceased one in accordance with the terms of the present contract. The expenses and taxes derived from the change of Agent will be on the entity that had renounced to said post. 17.78 Assignment of its participation by the Agent. In case the Agent would totally assign his participation in the loan, he will be obliged to renounce to said post, without prejudice of continuing it till the appointment and acceptance of the new Agent. EIGHTEENTH.- Mortgage 18.1 Universal patrimonial liability The BORROWER is responsible for the fulfilment of the obligations derived from the present contract in the terms of the article 1911 of the Civil Code. 18.2 Constitution of the Mortgage In addition of the personal, unlimited and universal responsibility of the borrower in respect of the fulfilment of the present contract; a voluntary mortgage is constituted to guarantee the repayment of the loan for 42% of the capital, interests over three years up to a maximum of 14% per year, as well as 15% over the said capital for delay interests, and 20% over said capital for expenses and legal fees and 5% over said capital to cover the expenses incurred by the lenders on behalf of the borrower with respect to payments of insurance premiums over the mortgage property. In this sense Mr. Placido Estevez Otero in the name and on behalf of mercantile entity "PLYMOUTH RUBBER EUROPA, S.A.", constitutes a voluntary mortgage in favor of CAJA DE AHORROS MUNICIPAL DE VIGO (CAIXAVIGO), BANCO BILBAO VIZCAYA, S.A. and BANCO DE COMERCIO, S.A. which they accept, the mortgage is constituted over the property described herein below and its extension is expressly agreed by the parties to be that established in article 109, 110 and 111 of the Mortgage Act in all its points. (description of the property) The mortgaged property guarantees a maximum of 375,000,000 Pesetas.: The lenders have the following participation in each of the responsibilities concerning the merger: CAIXAVIGO 33,334% BANCO DE BILBAO VIZCAYA 33,333% BANCO DE COMERCIO 33,333% NINETEENTH.- Procedure 19.1 Procedure Notwithstanding the exercise of whichever other legal action directed to obtain the acknowledgment or effectiveness of their rights, the Lenders are entitled to initiate the ordinary executive procedure, the summary judicial procedure established in article 131 of the Mortgage Act, the extrajudicial procedure established in article 129 of the same Act, or any other legal procedure which may be applicable. The use of any one out of these procedures will not prevent the initiation of any of the others as long as the loan is not totally repaid. The lenders are entitled to use these judicial actions either on their own or through the Agent. In case they decide to do it through the Agent, the lenders hereby empower the Agent so that in the name and on their behalf, as well as in its own name and behalf, the Agent may initiate the General Executive Procedure established in the Civil Procedures Act, or the summary judicial procedure of the Mortgage Act, or the extrajudicial procedure of the Mortgage Act and the Mortgage Ruling. For the appropriate judicial effects, the parties here establish the following determinations: a) The amount for the eventual auction is fixed at 170,000,000 Pesetas. b) The notifications' address for the borrower is established at the address of the mortgaged properties. c) For the effects of article 234 of the Mortgage Ruling the borrower hereby appoints CAIXAVIGO as mandatory, who may act through any of the persons it empowers. d) The lenders may request, for themselves or for any other person who represents them, the administration and interim possession of the properties in all cases of claims, judicial or extrajudicial execution, there including the cases contemplated by article 117 of the Mortgage Act, in this case the produce or rents of the property will be applied to the interests and capital owed, once the expenses of the Administration have been deducted. The expense of the Administration shall be determined in view of the type and produce of the properties and, under no circumstance, will it be lower than that established in the Civil Procedures Act for a Testamentary Administrator. Notwithstanding the preceding the procedure in course shall continue. e) In case the lenders decide to initiate the ordinary executive procedure, it is expressly agreed by the parties, in respect of what it is established in articles 1.429 and 1.435 of the Civil Procedures Act, that the liquidation to determine the amount of the claimable debt will be carried out by the Agent or, in case of individual claims, by each one of the lenders, who will issue the corresponding certification showing the balance of the account at the time of its closing. For the initiation of the executive action it will suffice to present an authorized copy or a second copy of the present deed, together with the certification established in article 1429.6 of the Civil Procedures Act, as well as providing another certificate issued by the Agent or the lenders showing the balance against the borrower. Said certificate will be incorporated on to a public document in which the Intervening Notary Public shall, at the request of the lenders, shall give faith that the balance in the certificate agrees with that shown in the borrower's account, and that the liquidation of the debt has been carried out in the manner established by the parties in the present document. For the event contemplated by rule 12, of article 131 of the Mortgage Act, which refers to the event that the third option is declared desert, the borrower hereby gives his authorization for the auction to be repeated as many times as the Agent or the lenders so request. In accordance with what is established in article 234 and corresponding of the Notarial Ruling, the borrower hereby expressly consents that any second copies of the present deed requested by the Agent or the lenders, have an executive character and hereby giving the Notary Public their authorization to dispense of any other requisite established to that end. The parties hereby request the authorization notary that this be so recorded at the end of the deed. The borrower hereby undertakes to grant, on its own expense, should the fault be attributable to the BORROWER, as many public deeds as be necessary in order to remedy all faults contained herein, or to clarify the contents hereof, so that the present deed may be registered at the Property Registry. The Borrowers opposition to do this, once requested by the Agent and within the period of time established by the latter, will be cause for termination of the present agreement. 19.2 Extrajudicial executive procedure In order to comply with what is established in article 242.2 of the Mortgage Ruling, as amended by Royal Decree 290/1992 of 27th March, the parties hereby agree to the extrajudical execution of the mortgage, notwithstanding the creditor right to elect whichever procedure, out of those legally available, that it may deem fit. In order to establish the auction going out price, the address for notification and the person who is to grant the corresponding deed of sale of the property on behalf of the borrower, the parties expressly refer to what is established under clause 19.1 of the present deed. TWENTIETH.- Conservation of the guarantee The Borrower is obligated to: i. Maintain/Keep the mortgaged property, carrying out the necessary acts for its upkeep and conservation so that its value is not diminished and undertaking to inform the Agent, within the period of one month, about any deterioration it may suffer for whichever cause or whatever may affect its value or of any act which may threaten or forsake their property rights. ii. Not to celebrate any lease agreement in which three monthly rents are pre-paid or the annual rent is lower than 25% of the action price established in clause 19, without the prior consent of the Lenders, as well as to give the Agent sufficient evidence, every six months, of the communal expenses, insurance premiums payable with respect of the mortgaged property as well as any other debt related to credits which may be preferential to the present mortgage. The Agent is hereby enabled to pay these debts to the corresponding creditors and to debit them in the Borrowers account and claim them from the borrower in accordance with what is established in the present Deed, notwithstanding the possibility of termination as established hereinafter, and being all those amounts guaranteed by the amounts of the mortgage reserved for expenses and legal fees in clause 18. iii. To provide the lenders, through the Agent, the annual accountancy statements required by the legislation in force and whichever data is necessary for them to ascertain the financial state of the borrower and its economic situation, for the duration of the present contract and within the 15 days following their approval and in any case no later than July 15, each year, they will also provide the Agent, every six months, with their financial statements. iv. To maintain the property insured, evidencing it 120 days in advance, for the duration of the present contract under the terms which the Agent may establish with regards to the name of the Insurance Company as well as the contents of the policy, hereby agreeing that the Lenders be beneficiary of the insurance at the borrowers risk and expense, the Borrower hereby irrevocably and formally assigns to the Lenders the proceeds of any indemnity which, in consideration of the insured capital or in any other concept, the Insurance Company may be liable to pay. The Agent may carry out, with respect of the Insurance Company, the necessary acts, for which the Borrower hereby grants the Agent the necessary powers and undertakes not to revoke those as long as the loan herein granted is not totally repaid. In addition to the general terms of the above mentioned insurance policy, and the appointment of the Lenders as beneficiary to the same in proportion to their respective participations in the loan, the following clauses must be established in the corresponding policies: 1. The insured party may not rescind the insurance policy or substitute, reduce or modify the essential terms thereof without the prior consent of the majority of the Lenders. 2. If the resolution, substitution, modification, reduction of the terms regulating the insurance be due to the initiative of the Insurance Company, the latter shall have to inform the Lenders by means of a certified letter, as soon as possible, at least within one month, and in any case prior in three months to the expiration of the policy. 3. The insured party, in case of accidents which gives rise to insurance claim, is obliged to fulfil the obligations the assurance policy establishes and specially to justify its quantity, conceding the Lenders the right to carry out , if they deem convenient, all the acts concerning the accident, practicing any necessary diligence. The amount of these indemnities and of any other indemnities which may be due upon expropriation of the property may be applied, at the Agent's decision to the payment of the debts arising from this contract, even is they are not yet due. In order to control the state of conservation of the properties and the correct compliance of its obligations by the borrower, the Agent shall be entitled to carry out as many inspections as it may deem convenient, and the Borrower undertakes to allow access to the mortgaged property to the person whom the Agent may appoint. TWENTY FIRST.- Bank Guarantee The Borrower provides the Lender with three bank guarantees (annexed to the present contract) for an amount of twenty six million six hundred and sixty six thousand six hundred and sixty six (Pesetas.- 26,666,666) granted by ABN-AMROBANK, guaranteeing to each of the lenders the amount of their participation in the operation, for five years, renewable for a period of other five years, being the non renew of this period termination cause of this agreement, which are included as Annex I of this agreement . TWENTY SECOND.- Calculation of the dates and periods. To all effects foreseen in this contract it will be understood for: "DAY" or "NATURAL DAY".- All of the days of the Gregorian schedule. "WORKING DAY".- Any day of the week in which transactions at the Inter-Bank Market at Madrid can be made except Saturdays as to the effect of this contract these are not considered working days. "WEEK" or "SEVEN DAYS".- The period comprized between a day of a specific week and the same denomination of the next week in the schedule, both inclusive. "FORTHNIGHT" or "FIFTEEN DAYS".- The period comprized between a day of a specific week and the one of the same denomination of the second consecutive week that follows in the schedule, both inclusive. "MONTH, QUARTER (or THREE MONTHS), SEMESTER (or SIX MONTHS) and YEAR (or TWELVE MONTHS)." - The period comprized between any specific day and the day of the same number of the first month, of the third month, of the sixth month or of the twelfth consecutive month that follows as it is appropriate, in the Gregorian schedule, both inclusive; if this would not exist the period of time will be understood as finished the last day of the month that corresponds. TWENTY THIRD - Communications between the parties. The communications between the BORROWER, the LENDERS and the Agent that did not have foreseen in this contract a special form will be made using any way that allows to leave constancy of the deliver and reception. The communications will be duly understood as made when they are performed through the deliver, with the necessary priority in each case, e.g. a telex or a telefax to the numbers listed below. The telex or telefax emission receipt in which appears its reception in said numbers will be an irrefutable proof of the communications, without prejudice of a later communication by a letter signed by powered personal with regard to the communications made, or an acknowledge of receipt is made in same way with regard to the ones received. The communications of general nature regarding this contract and the ones referred to the same that may produce the BORROWER will be managed in any case by the Agent who will force the LENDERS to follow it. For any communication or notification the social addresses and telefax numbers of the contractor entities are the following: PLYMOUTH RUBBER EUROPA, S.A. Ctra. Porrino-Salceda, km. 1,5 Porrino (Pontevedra) Telephone: 986/ 330558 - 330562 - 330258. Telefax: 986/ 331713. CAJA DE AHORROS MUNICIPAL DE VIGO Avda. Garcia Barbon, 1 36201 VIGO Telephone: 986 - 431133. Telefax: 986 - 430190. BANCO BILBAO VIZCAYA, S.A. Plaza del Ayuntamiento 5. 36400 Porrino (Pontevedra) Telephone: 966 - 330804. Telefax: 986 - 330616. BANCO DE COMERCIO, S.A. Plaza de Compostela 27-28. 36201 VIGO (Pontevedra) Telephone: 986 - 435522 - 226305. Telefax: 986 - 226306. TWENTY FOURTH.- Compensation of balances The Agent and the Lenders are hereby expressly and irrevocably enabled by the Borrower to apply to the payment of any amounts owed in relation with this contract, the credits which may exist in favor of the Borrower in the hands of the Agent and of the rest of the Lenders in accounts, savings accounts, or accounts of any other kind and consequently to carry out the appropriate credits and debits, and whichever other sums or credits which may belong to the borrower and be in the hands of the Agent or the other Lenders; or any amounts which the Lenders may owe the Borrower, and even by selling the shares or whichever other deposit which the Borrower may have at the main office or at any branch of the Agent or the Lenders. If the currency of the deposits were to be Pesetas or any other currency to which loan refers, the Agent shall convert that to the currency in which the loan is established at the official vendor rate of the date upon which the operation is carried out, and charging for the conversion the appropriate commissions. TWENTY FIFTH.- Processal submission and legal regime The contracting parties with express renounce to the law- code could correspond, they submit for all incidence concerning this document to the Courts and Tribunals that exercise jurisdiction in Vigo. TWENTY SIXTH.- Joint Guarantee The Lenders, in the way they are represented, accept, by this act, the joint guarantee, constituted, in compliance of the obligations assumed by the Borrower in this Public Deed, by PLYMOUTH RUBBER COMPANY, INC. a U.S. Corporation incorporated under the Laws of the Commonwealth of Massachusetts, domiciled in Canton, Massachusetts, 104 Revere Street MA 02021, and duly registered at the Commonwealth of Massachusetts (USA). The guarantee is extended to any and all the obligations of the borrower contemplated in the present agreement. The guarantee shall remain in force for as long as the obligations it guarantees have not been totally canceled. The guarantors hereby expressly accept, in all their effects, all the extensions of the payment periods or all other payment facilities which the lending institutions may grant to the borrower. ANNEX I - Bank Guarantee The Bank ABN AMRO BANK, N.V. Spanish branch, with corporate address in Bilbao at Plaza de Espana 4, 6th floor and holder of Fiscal Identity Code Number A-0031021-1 and in its name and on its behalf Mr. Jose Maria Bilboa and Mrs. Lourdes Orio Gonzalez, with sufficient powers to bind the bank to this act, as evidenced in the Public Deed granting said powers, dated 26.9.90 and 27.9.95 and granted before the Notary Public Mrs. Laurina Christina Klein of Amsterdam and Mr. Pedro Conde Martin de Mijas of Madrid, declared sufficient by the Legal Counsel of the State on in Vizcaya on Arpil 6, 1992 and May 28, 1996 registry numbers 182/92 and 422/96, declares that said banking entity GUARANTEES In a manner as ample as legally possible, and hereby renouncing all privileges of order, excuse and division, the obligations of: PLYMOUTH RUBBER EUROPA, S.A. Before Caja Municipal de Ahorros de Vigo For payments related to the loan for an amount of Ptas.- 250.000.000 (TWO HUNDRED AND FIFTY MILLION) granted to PLYMOUTH RUBBER EUROPA, S.A. by Caja de Ahorros Municipal de Vigo, Banco de Bilbao Vizcaya y Banco de Comercio, as Lenders, each for one third of the total amount, as formalized on 11.04.97; and thus guarantees before Caja Municipal de Ahorros de Vigo, and up the maximum limit, for all concepts (capital, interests, delay interests and other expenses), of Ptas.- 26.666.668 (TWENTY SIX MILLION SIX HUNDRED AND SIXTY SIX THOUSAND SIX HUNDRED AND SIXTY EIGHT). The present guarantee shall be in force for a period of five years as from the present date, and should be renewed in successive periods till the total expiration of the loan on 11th April 2007, as in case it would not be renewed, the beneficiary, could proceed to its execution within 30 following days to the valid period mentioned, and all in case the loan is updated as far as its payment obligations are concerned. The Bank ABN AMRO BANK, N.V. Spanish branch declares that it knows and assumes all general and particular conditions of the loan policy herein referred to, being this document of guarantee an annex and part thereof. The Bank ABN AMRO BANK, N.V. Spanish branch shall effectively pay, in one or several payments, the amount corresponding to the present guarantee, up to its maximum amount, upon receipt of a mere request to do so by the Caja de Ahorros Municipal de Vigo, without no need for a prior notification or consent by the guaranteed party. The present guarantee has been registered at the Guarantee Registry kept by this banking entity under number 00438/9704 In Bilbao, on 11th April 1.997. The Bank ABN AMRO BANK, N.V. Spanish branch, with address in Bilbao at Plaza de Espana number 4, 6th floor and holder of Fiscal Identity Code Number A-0031021-I and in its name and on its behalf Mr. Josed Maria Bilbao and Mrs. Lourdes Orio Gonzalez, with sufficient powers to bind the bank to this act, as evidenced in the Public Deed granting said powers, dated 26,9.90 ans 27.9.95 and granted before the Notary Public Mrs. Laurina Christina Kein of Amsterdam and Mr. Pedro Conde Martin de Mijas of Madrid, declared sufficient by the Legal Counsel of the State on in Vizcaya on April 6, 1992 and May 28, 1996 registry numbers 182/92 and 422/96, declares that said banking entity GUARANTEES In a manner as ample as legally possible, and hereby renouncing all privileges of order, excuse and division, the obligations of: PLYMOUTH RUBBER EUROPA, S.A., Before Banco de Bilbao Vizcaya, S.A. For payments related to the loan for an amount of Ptas.- 250.000.000 (TWO HUNDRED AND FIFTY MILLION) granted to PLYMOUTH RUBBER EUROPA, S.A. by Caja de Ahorros Municipal de Vigo, Banco de Bilbao Vizcaya y Banco de Comercio, as Lenders, each for one third of the total amount, as formalized on 11.04.97; and thus guarantees before Banco de Bilbao, and up the maximum limit, for all concepts (capital, interests, delay interests and other expenses), of Ptas.- 26.666.666 (TWENTY SIX MILLION SIX HUNDRED AND SIXTY SIX THOUSAND SIX HUNDRED AND SIXTY SIX). The present guarantee shall be in force for a period of five years as from the present date, and should be renewed in successive periods till the total expiration of the loan on 11th April 2007, as in case it would not be renewed, the beneficiary, could proceed to its execution within 30 following days to the valid period mentioned, and all in case the loan is updated as far as its payment obligations are concerned. The Bank ABN AMRO BANK, N.V. Spanish branch declares that it knows and assumes all general and particular conditions of the loan policy herein referred to, being this document of guarantee an annex and part thereof. The Bank ABN AMRO BANK, N.V. Spanish branch shall effectively pay, in one or several payments, the amount corresponding to the present guarantee, up to its maximum amount, upon receipt of a mere request to do so by the Caja de Ahorros Municipal de Vigo, without no need for a prior notification or consent by the guaranteed party. The present guarantee has been registered at the Guarantee Registry kept by this banking entity under number 00436/9704 In Bilbao, on 11th April 1997. The Bank ABN AMRO BANK, N.V. Spanish branch, with address in Bilbao at Plaza de Espana number 4, 6th and holder of Fiscal Identity Code Number A-0031021-I and in its name and on its behalf Mr. Jose Maria Bilbao and Mrs. Lourdes Orio Gonzalez, with sufficient powers to bind the bank to this act, as evidenced in the Public Deed granting said powers, dated 26.9.90 and 27.9.95 and granted before the Notary Public Mrs. Laurina Christina Klein, of Amsterdam and Mr. Pedro Conde Martin de Mijas of Madrid, declared sufficient by the Legal Counsel of the State on in Vizcaya on April 6, 1992 and May 28, 1996 registry numbers 182/92 and 422/96, declares that said banking entity GUARANTEES In a manner as ample as legally possible, and hereby renouncing all privileges of order, excuse and division, the obligations of: PLYMOUTH RUBBER EUROPA, S.A. Before Banco de Comercio, S.A. For payments related to the loan for an amount of Ptas.- 250.000.000 (TWO HUNDRED AND FIFTY MILLION) granted to PLYMOUTH RUBBER EUROPA, S.A. by Caja de Ahorros Municipal de Vigo, Banco de Bilbao Vizcaya y Banco de Comercio, as Lenders, each for one third of the total amount, as formalized on 11.04.97; and thus guarantees before Banco de Comercio, S.A., and up the maximum limit, for all concepts (capital, interests, delay interests and other expenses), of Ptas.- 26.666.666 (TWENTY SIX MILLION SIX HUNDRED AND SIXTY SIX THOUSAND SIX HUNDRED AND SIXTY SIX). The present guarantee shall be in force for a period of five years as from the present date, and should be renewed in successive periods till the total expiration of the loan on 11th April 2007, as in case it would not be renewed, the beneficiary, could proceed to its execution within 30 following days to the valid period mentioned, and all in case the loan is updated as far as its payment obligations are concerned. The Bank ABN AMRO BANK, N.V. Spanish branch declares that it knows and assumes all general and particular conditions of the loan policy herein referred to, being this document of guarantee an annex and part thereof. The Bank ABN AMRO BANK, N.V. Spanish branch shall effectively pay, in one or several payments, the amount corresponding to the present guarantee, up to its maximum amount, upon receipt of a mere request to do so by the Banco de Comercio, S.A., without no need for a prior notification or consent by the guaranteed party. The present guarantee has been registered at the Guarantee Registry kept by this banking entity under number 00437/9704 In Bilbao, on 11th April 1997. EX-4 8 EXHIBIT (4)(xix) TRANSLATION OF THE EXTRACT FROM THE PUBLIC DEED PROVIDED BY THE BANK PERSONAL GUARANTEE PLYMOUTH RUBBER COMPANY, INC. a U.S. Corporation incorporated under the Laws of the Commonwealth of Massachusetts, domiciled in Canton, Massachusetts, 104 Revere Street MA 02021, and duly registered at the Commonwealth of Massachusetts (USA) under number 482350 shall answer jointly with PLYMOUTH RUBBER EUROPA (the "Borrower") of the obligations contained in the Loan Agreement signed by the Borrower and CAJA MUNICIPAL DE AHORROS DE VIGO, BANCO DE BILBAO VIZCAYA, S.A. y BANCO DEL COMERCIO, S.A., expressly renouncing to the privileges of order, "excusion" and division. The present guarantee is also subject to the following rules: 1. The guarantee is extended to any and all the obligations of the borrower contemplated in the present agreement. 2. The guarantee shall remain in force for as long as the obligations it guarantees have not been totally cancelled. 3. The guarantors hereby expressly accept, in all their effects, all the extensions of the payment periods or all other payment facilities which the lending institutions may grant to the borrower" _______________________________ 1 This "privilege" refers to the creditor's obligation to demand payment first from the borrower and then, once this has been done, from the guarantors. Renouncing this implies that the creditor may demand payment from any of the guarantors of the borrower without any pre-established order of preference. This renouncing is standard in most personal guarantees. 2 This refers to the obligation of the creditor to demonstrate that the borrower has no resources with which to pay the debt, before he proceeds against the guarantors. This necessity is hereby renounced. This is standard practice in guarantees such as this one. 3 The "privilege" of division granted to the guarantors means that, if there were to be more than one guarantor, the guaranteed debt shall be divided in as many parts as guarantors are, and each of them shall only respond up to his corresponding amount. This privilege is hereby renounced being the creditor thus allowed to claim the total amount of the debt from any of the guarantors. 4 This clause is included because, in accordance to Spanish Law, if the lender and borrower extend the payment period for longer than originally convened, the guarantors are not obliged by this additional period, but their guarantee is expires on the date initially convened. In order to avoid the cancellation of the guarantees if additional time for payment is granted by the banks, this clause normally is inserted. EX-27 9
5 6-MOS NOV-28-1997 MAY-30-1997 93 0 10269 300 11298 24063 32715 20208 40426 16858 0 0 0 2030 5441 40426 32990 32990 25290 31744 51 36 681 514 203 311 0 0 0 311 .14 .14
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