Nevada
|
84-0925128
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer identification No.)
|
Large
accelerated filer
o
|
|
Accelerated
filer
o
|
Non-accelerated
filer
o
|
|
Smaller
reporting company
x
|
|
|
Page
|
|
INDEX
|
|
|
|
PART
I— FINANCIAL INFORMATION
|
|
|
|
Item
1.
|
Financial
Statements
|
|
|
|
Consolidated
Balance Sheets as of June 30, 2008 and December 31, 2007
|
|
2
|
|
Consolidated
Statements of Operations for Three and Six Months Ended June 30,
2008 and
2007 and for the period from November 29, 2005 (inception) to June
30,
2008
|
|
3
|
Consolidated
Statements of Cash Flows for the Six Months Ended June 30, 2008 and
2007
and for the period from November 29, 2005 (inception) to June 30,
2008
|
|
4
|
|
|
Notes
to Consolidated Financial Statements
|
|
5
|
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
25
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
|
32
|
Item
4T.
|
Controls
and Procedures
|
|
33
|
|
|
|
|
PART
II— OTHER INFORMATION
|
|
|
|
Item
1.
|
Legal
Proceedings
|
|
34
|
Item
1A.
|
Risk
Factors
|
|
34
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
|
34
|
Item
3.
|
Defaults
Upon Senior Securities
|
|
34
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
|
34
|
Item
5.
|
Other
Information
|
|
35
|
Item
6.
|
Exhibits
|
|
35
|
SIGNATURES
|
|
|
June
30,
2008
|
December
31,
2007
|
|||||
(Unaudited)
|
|
||||||
Assets
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
636,654
|
$
|
720,402
|
|||
Marketable
securities
|
-
|
2,635,892
|
|||||
Accounts
receivable
|
-
|
3,447,039
|
|||||
Accounts
receivable - related party
|
-
|
6,127,727
|
|||||
Prepaid
expenses
|
120,029
|
58,872
|
|||||
Other
current assets
|
1,235,837
|
674,235
|
|||||
Total
current assets
|
1,992,520
|
13,664,167
|
|||||
|
|||||||
Property,
plant and equipment, net
|
22,354,249
|
19,585,087
|
|||||
Intangible
assets
|
133,334
|
233,334
|
|||||
Other
assets
|
483,193
|
68,488
|
|||||
Total
assets
|
$
|
24,963,296
|
$
|
33,551,076
|
|||
|
|||||||
Liabilities
and Stockholders' Equity
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable and accrued liabilities
|
$
|
1,857,401
|
$
|
9,985,639
|
|||
Income
taxes payable
|
37,040
|
36,750
|
|||||
Short
term borrowings (related party)
|
600,000
|
-
|
|||||
Short
term borrowings, net of discount
|
3,788,962
|
-
|
|||||
Other
current liabilities
|
3,745,060
|
-
|
|||||
Total
current liabilities
|
10,028,463
|
10,022,389
|
|||||
|
|||||||
Commitments
and contingencies (Notes 6, 7, 8, 13, 14 and 16)
|
|||||||
Stockholders'
equity:
|
|||||||
Series
B preferred stock, $0.001 par value - 40,000,000 authorized; 6,149,821
and
6,487,491 shares issued and outstanding, respectively (aggregate
liquidation preference of $18,811,473 and $19,462,473)
|
6,149
|
6,487
|
|||||
Common
Stock, $0.001 par value - 400,000,000 authorized; 84,916,020 and
84,557,462 shares issued and outstanding, respectively
|
84,915
|
84,557
|
|||||
Additional
paid-in capital
|
36,066,476
|
33,707,953
|
|||||
Deficit
accumulated during the development stage
|
(21,501,134
|
)
|
(11,995,395
|
)
|
|||
Accumulated
other comprehensive income
|
278,427
|
1,725,085
|
|||||
Total
stockholders' equity
|
14,934,833
|
23,528,687
|
|||||
|
|
|
|||||
Total
liabilities and stockholders' equity
|
$
|
24,963,296
|
$
|
33,551,076
|
|
For
the six months ended
|
For
the three months
ended
|
Period
from
November
29,
2005
(Date of
Inception)
to
|
|||||||||||||
|
June
30,
2008
|
June
30,
2007
|
June
30,
2008
|
June
30,
2007
|
June
30,
2008
|
|||||||||||
|
||||||||||||||||
Sales
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
744,450
|
||||||
|
||||||||||||||||
Cost
of Goods Sold
|
-
|
-
|
-
|
-
|
735,000
|
|||||||||||
|
||||||||||||||||
Gross
Profit
|
-
|
-
|
-
|
-
|
9,450
|
|||||||||||
|
||||||||||||||||
Research
and Development
|
512,056
|
120,000
|
387,708
|
60,000
|
769,817
|
|||||||||||
General
and Administrative Expenses
|
5,619,348
|
3,254,514
|
3,657,343
|
1,874,068
|
26,433,814
|
|||||||||||
|
||||||||||||||||
Operating
Loss
|
(6,131,404
|
)
|
(3,374,514
|
)
|
(4,045,051
|
)
|
(1,934,068
|
)
|
(27,194,181
|
)
|
||||||
|
||||||||||||||||
Other
Income (Expense)
|
||||||||||||||||
Interest
income
|
32,486
|
6,170
|
18,945
|
2,640
|
130,235
|
|||||||||||
Interest
expense
|
(253,019
|
)
|
(55,060
|
)
|
(253,019
|
)
|
(13,394
|
)
|
(253,019
|
)
|
||||||
Other
income, net of expenses
|
42,161
|
16,670
|
6,200
|
16,670
|
230,477
|
|||||||||||
Gain
from dissolution of joint venture
|
-
|
1,491,742
|
-
|
637,047
|
9,061,141
|
|||||||||||
Gain
on foreign currency exchange
|
-
|
52,116
|
-
|
52,116
|
497,954
|
|||||||||||
Shareholder
agreement cancellation payment
|
(900,000
|
)
|
-
|
-
|
-
|
(900,000
|
)
|
|||||||||
Registration
rights payment
|
(2,274,402
|
)
|
-
|
-
|
-
|
(2,274,402
|
)
|
|||||||||
Income
related to 50/50 joint venture
|
-
|
155,626
|
-
|
155,626
|
182,923
|
|||||||||||
|
||||||||||||||||
Loss
before income taxes
|
(9,484,178
|
)
|
(1,707,250
|
)
|
(4,272,925
|
)
|
(1,083,363
|
)
|
(20,518,872
|
)
|
||||||
|
||||||||||||||||
Income
Taxes
|
(21,560
|
)
|
-
|
-
|
-
|
(100,145
|
)
|
|||||||||
|
||||||||||||||||
Net
Loss
|
$
|
(9,505,738
|
)
|
$
|
(1,707,250
|
)
|
$
|
(4,272,925
|
)
|
$
|
(1,083,363
|
)
|
$
|
(20,619,017
|
)
|
|
Loss
per common share
|
||||||||||||||||
Basic
and diluted
|
$
|
(0.11
|
)
|
$
|
(0.02
|
)
|
$
|
(0.05
|
)
|
$
|
(0.01
|
)
|
$
|
(0.27
|
)
|
|
Weighted
average shares outstanding
|
||||||||||||||||
Basic
and diluted
|
84,717,979
|
74,611,093
|
84,870,320
|
74,354,167
|
76,480,633
|
|
For the six months ended
|
Period from
November 29,
2005 (Date of
Inception) to
|
||||||||
|
June 30,
2008
|
June 30,
2007
|
June 30,
2008
|
|||||||
Operating
activities:
|
||||||||||
Net
loss
|
$
|
(9,505,738
|
)
|
$
|
(1,707,250
|
)
|
$
|
(20,619,016
|
)
|
|
Adjustments
to reconcile net loss to
|
||||||||||
net
cash provided by (used in) operating activities:
|
||||||||||
Stock
based compensation
|
1,561,043
|
60,409
|
3,199,002
|
|||||||
Expired
land options
|
124,536
|
-
|
569,660
|
|||||||
Amortization
and depreciation
|
108,977
|
-
|
178,752
|
|||||||
Amortization
of debt discount
|
165,317
|
165,317
|
||||||||
Registration
rights payment
|
2,274,402
|
-
|
2,274,402
|
|||||||
Gain
on sale of subsidiary
|
-
|
(854,695
|
)
|
(854,695
|
)
|
|||||
Loss
on impairment of assets
|
-
|
-
|
5,114,236
|
|||||||
Gain
on dissolution of joint venture
|
-
|
-
|
(8,206,446
|
)
|
||||||
Gains
on forward currency contracts
|
-
|
-
|
(436,154
|
)
|
||||||
Changes
in assets and liabilities:
|
||||||||||
Accounts
receivable
|
9,490,481
|
(105,290
|
)
|
557,206
|
||||||
Prepaid
expenses
|
(91,190
|
)
|
163,500
|
(151,987
|
)
|
|||||
Other
assets
|
(1,586,041
|
)
|
(2,516,396
|
)
|
(1,169,274
|
)
|
||||
Accounts
payable
|
(8,924,355
|
)
|
959,322
|
450,577
|
||||||
Other
liabilities
|
2,362,968
|
399,644
|
2,305,937
|
|||||||
Income
taxes payable
|
290
|
-
|
37,040
|
|||||||
Net
cash used in operating activities
|
(4,019,310
|
)
|
(3,600,756
|
)
|
(16,585,443
|
)
|
||||
Investing
activities:
|
||||||||||
Purchases
of property, plant and equipment
|
(4,155,864
|
)
|
(5,936,212
|
)
|
(30,996,967
|
)
|
||||
Purchases
of marketable securities
|
-
|
-
|
(2,459,292
|
)
|
||||||
Sales
of marketable securities
|
2,568,216
|
-
|
2,568,216
|
|||||||
Cash
restricted by letter of credit
|
500,000
|
-
|
-
|
|||||||
Purchase
of Marwich II, Ltd., net of losses
|
-
|
-
|
(662,406
|
)
|
||||||
Exchange
rate gain
|
-
|
(46,820
|
)
|
(193,399
|
)
|
|||||
Additions
to other assets and intangibles
|
-
|
-
|
(1,073,872
|
)
|
||||||
Refund
of property expenditures
|
-
|
-
|
2,775,000
|
|||||||
Return
of assets from dissolution of joint venture
|
-
|
-
|
8,206,446
|
|||||||
Sale
of Wahoo facility
|
-
|
2,000,000
|
2,000,000
|
|||||||
Net
cash used in investing activities
|
(1,087,648
|
)
|
(3,983,032
|
)
|
(19,836,274
|
)
|
||||
Financing
activities:
|
||||||||||
Proceeds
from short term borrowings
|
5,044,732
|
-
|
5,044,732
|
|||||||
Payments
of short term borrowings
|
(175,000
|
)
|
||||||||
Proceeds
from long-term debt
|
-
|
-
|
250,000
|
|||||||
Payments
on long-term debt
|
-
|
(241,071
|
)
|
(250,000
|
)
|
|||||
Proceeds
from settlement
|
-
|
-
|
200,000
|
|||||||
Refund
of investment
|
-
|
-
|
(90,000
|
)
|
||||||
Proceeds
from sale of preferred stock, net of offering costs
|
10
|
8,424,148
|
31,910,522
|
|||||||
Net
cash provided by financing activities
|
5,044,742
|
8,008,077
|
37,065,254
|
|||||||
Effect
of exchange rate fluctuations on cash and cash equivalents
|
(21,532
|
)
|
-
|
(6,883
|
)
|
|||||
Net
(decrease) increase in cash and cash equivalents for
period
|
(83,748
|
)
|
424,289
|
636,654
|
||||||
Cash
and cash equivalents, beginning of period
|
720,402
|
1,213,134
|
-
|
|||||||
Cash
and cash equivalents, end of period
|
$
|
636,654
|
$
|
1,637,423
|
$
|
636,654
|
·
|
Valuation
and amortization method
—
We estimate the fair value of stock options granted using the
Black-Scholes option-pricing formula and a single option award approach.
This fair value is then amortized on a straight-line basis over the
requisite service periods of the awards, which is generally the vesting
period.
|
·
|
Expected
Term
—
The expected term represents the weighted-average period that our
stock-based awards are expected to be outstanding. We applied the
“Simplified Method” as defined in the Securities and Exchange Commission’s
Staff Accounting Bulletin No. 107 and
110.
|
·
|
Expected
Volatility
—
The expected volatility is calculated by considering, among other
things,
the expected volatilities of public companies engaged in similar
industries.
|
·
|
Expected
Dividend
—
The Black-Scholes valuation model calls for a single expected dividend
yield as an input. The Company currently pays no dividends and does
not
expect to pay dividends in the foreseeable
future.
|
·
|
Risk-Free
Interest Rate
—
The Company bases the risk-free interest rate on the implied yield
currently available on United States Treasury zero-coupon issues
with an
equivalent remaining term.
|
June
30,
2008
|
December
31,
2007
|
||||||
Land
|
$
|
3,745,285
|
$
|
3,734,623
|
|||
Furniture
and fixtures
|
52,890
|
52,747
|
|||||
Construction
in progress
|
18,567,920
|
15,800,752
|
|||||
Total
gross property, plant and equipment
|
22,366,095
|
19,588,122
|
|||||
Less
accumulated depreciation
|
(11,826
|
)
|
(3,035
|
)
|
|||
Total
net property, plant and equipment
|
$
|
22,354,249
|
$
|
19,585,087
|
|
June
30,
2008
|
December
31,
2007
|
|||||
Current
|
|||||||
Letter
of credit securing material purchases
|
$
|
-
|
$
|
500,000
|
|||
Short
term deposits
|
1,050,000
|
-
|
|||||
Purchased
commodity
|
110,231
|
-
|
|||||
Land
options
|
40,000
|
164,536
|
|||||
Other
|
35,606
|
9,699
|
|||||
|
$
|
1,235,837
|
$
|
674,235
|
|||
Long
Term
|
|||||||
Domain
names
|
46,098
|
46,098
|
|||||
Deposits
|
437,095
|
22,390
|
|||||
$
|
483,193
|
$
|
68,488
|
·
|
Increase
or decrease (other than by redemption or conversion) the total number
of
authorized shares of Series B preferred
stock;
|
·
|
Effect
an exchange, reclassification, or cancellation of all or a part of
the
Series B preferred stock, including a reverse stock split, but excluding
a
stock split;
|
·
|
Effect
an exchange, or create a right of exchange, of all or part of the
shares
of another class of shares into shares of Series B preferred stock;
or
|
·
|
Alter
or change the rights, preferences or privileges of the shares of
Series B
preferred stock so as to affect adversely the shares of such
series.
|
Number
of
Warrants
|
Weighted-
Average
Exercise
Price
|
Warrants
Exercisable
|
Remaining
Term
(years)
|
||||||||||
Outstanding,
December 31, 2007
|
1,548,074
|
$
|
2.22
|
1,548,074
|
6.1
|
||||||||
Exercised
|
(29,166
|
)
|
3.00
|
(29,166
|
)
|
||||||||
Outstanding,
June 30, 2008
|
1,518,908
|
2.21 |
1,518,908
|
5.6
|
Shares
|
Options
Outstanding
|
|||||||||
Available
|
Number
|
Weighted-Average
|
||||||||
For
Grant
|
Of
Shares
|
Exercise Price
|
||||||||
Balance
as of December 31, 2007
|
2,016,000
|
1,984,000
|
$
|
3.00
|
||||||
Authorized
|
-
|
|||||||||
Granted
|
(1,105,000
|
) |
1,105,000
|
3.70
|
||||||
Exercised
|
-
|
-
|
-
|
|||||||
Cancelled
|
8,250
|
(8,250
|
) |
3.00
|
||||||
Balance
as of June 30, 2008
|
919,250
|
3,080,750
|
$
|
3.25
|
·
|
American
Ethanol agreed to sell all of its interest in and to its wholly-owned
subsidiary, Wahoo Ethanol, LLC, to E85 for the purchase price of
$2
million, resulting in a gain on sale to American Ethanol of
$854,000;
|
·
|
American
Ethanol, through its wholly owned subsidiary Sutton Ethanol, LLC,
was
developing an ethanol production facility to be located near Sutton,
Nebraska, which had a permitted production capacity of approximately
115
million gallons per year (the "Sutton Project"). E85 agreed to acquire
a
50% membership interest in Sutton Ethanol, LLC for a total equity
contribution of $58 million, of which $24 million was funded on March
26,
2007 and American Ethanol agreed to make an additional equity contribution
to Sutton Ethanol, LLC of $34 million. American Ethanol would retain
a 50%
membership interest in Sutton Ethanol,
LLC;
|
·
|
In
addition, American Ethanol would have the lead responsibility to
negotiate, on behalf of Sutton Ethanol, LLC, the terms and conditions
of a
turnkey, engineering, procurement and construction contract ("EPC
Contract") with a suitable qualified construction contractor
("Contractor"), which EPC Contract would have terms and conditions
sufficient to allow the Sutton Project to obtain, on commercially
reasonable terms, non-recourse construction and term loan financing
in an
amount of approximately $100,000,000 (the "Financing"), including,
without
limitation, a completion guarantee from the Contractor that would
be
backed by a performance bond. E85 would assist American Ethanol in
such
negotiations as reasonably requested by American Ethanol. In addition,
American Ethanol would have the lead responsibility to negotiate,
on
behalf of Sutton Ethanol, LLC, the terms and conditions of the Financing.
E85 would assist American Ethanol in such negotiations as reasonably
requested by American Ethanol;
|
·
|
E85
and American Ethanol agreed that American Ethanol would enter into
a
management agreement with Sutton Ethanol, LLC to manage the operation
of
the Sutton ethanol facility on such terms and conditions as are consistent
with an arms-length management agreement for ethanol facilities of
a
similar type and size;
|
·
|
E85
and American Ethanol agreed that American Ethanol or its biofuels
marketing subsidiary would enter into an exclusive marketing agreement
with Sutton Ethanol, LLC to market ethanol and any other products
from the
Sutton ethanol facility for a fee to American Ethanol of one percent
(1.0%) of gross sales, and on such terms and conditions as are consistent
with arms-length marketing agreements for ethanol facilities of a
similar
type and size; and
|
·
|
The
parties recited their intent to pursue the development and construction
of
three additional ethanol facilities on terms and conditions substantially
similar to those for the Sutton
Project.
|
·
|
Siva
Limited agreed to loan American Ethanol up to $4.5 million for the
purpose
of investing in American Ethanol’s International Biofuels subsidiary for
the continued construction of a 50 million gallon biodiesel facility.
If
the note was repaid prior to thirty days from the date of the advance,
no
interest would be due. If the note was not fully paid in that time
period,
interest would accrue at the rate of 2.5% per month and the note
would
mature 12 months from the date of closing. Interest was payable quarterly.
The loan was secured by a pledge by American Ethanol of 6% of the
membership units of Sutton Ethanol, LLC;
and
|
·
|
Siva
Limited agreed to loan American Ethanol $32 million for the purpose
of
funding American Ethanol’s remaining equity contribution to Sutton
Ethanol, LLC. If the funds were borrowed, the loan would bear interest
at
the rate of 15% per annum, and would be due and payable on December
30,
2007. Interest was payable quarterly. The loan was secured by a pledge
by
American Ethanol of 35% of the membership units of Sutton Ethanol,
LLC.
American Ethanol was not obligated to borrow under this
facility.
|
Six
Months
Ended
|
Six
Months
Ended
|
||||||
|
June
30, 2008
|
June
30, 2007
|
|||||
%
|
%
|
||||||
Salaries,
wages and compensation
|
40
|
%
|
43
|
%
|
|||
Supplies
and services
|
6
|
%
|
7
|
%
|
|||
Repair
and maintenance
|
0
|
%
|
0
|
%
|
|||
Taxes,
insurance, rent and utilities
|
6
|
%
|
2
|
%
|
|||
Professional
services
|
41
|
%
|
35
|
%
|
|||
Depreciation
and amortization
|
2
|
%
|
0
|
%
|
|||
Travel
and entertainment
|
5
|
%
|
12
|
%
|
|||
Miscellaneous
expense
|
0
|
%
|
1
|
%
|
|||
Total
|
100
|
%
|
|
Three
Months
Ended
|
Three
Months
Ended
|
|||||
|
June
30, 2008
|
June
30, 2007
|
|||||
|
%
|
%
|
|||||
Salaries,
wages and compensation
|
44
|
%
|
44
|
%
|
|||
Supplies
and services
|
8
|
%
|
7
|
%
|
|||
Repair
and maintenance
|
0
|
%
|
0
|
%
|
|||
Taxes,
insurance, rent and utilities
|
6
|
%
|
2
|
%
|
|||
Professional
services
|
37
|
%
|
35
|
%
|
|||
Depreciation
and amortization
|
1
|
%
|
0
|
%
|
|||
Travel
and entertainment
|
4
|
%
|
12
|
%
|
|||
Miscellaneous
expense
|
0
|
%
|
0
|
%
|
|||
Total
|
100
|
%
|
100
|
%
|
·
|
Valuation
and amortization method — We estimate the fair value of stock options
granted using the Black-Scholes option-pricing formula and a single
option
award approach. This fair value is then amortized on a straight-line
basis
over the requisite service periods of the awards, which is generally
the
vesting period.
|
·
|
Expected
Term — The expected term represents the weighted-average period that our
stock-based awards are expected to be outstanding. We applied the
“Simplified Method” as defined in the Securities and Exchange Commission’s
Staff Accounting Bulletin No. 107.
|
·
|
Expected
Volatility — The Company’s expected volatilities are based on historical
volatility of comparable companies’
stock.
|
·
|
Expected
Dividend — The Black-Scholes valuation model calls for a single expected
dividend yield as an input. The Company currently pays no dividends
and
does not expect to pay dividends in the foreseeable
future.
|
·
|
Risk-Free
Interest Rate — The Company bases the risk-free interest rate on the
implied yield currently available on United States Treasury zero-coupon
issues with an equivalent remaining
term.
|
·
|
the
prices for our convertible preferred stock sold to outside investors
in
arm’s-length transactions;
|
·
|
the
rights, preferences and privileges of that convertible preferred
stock
relative to those of our common
stock;
|
·
|
our
operating and financial
performance;
|
·
|
the
hiring of key personnel;
|
·
|
the
introduction of new products;
|
·
|
our
stage of development and revenue
growth;
|
·
|
the
fact that the option grants involved illiquid securities in a private
company;
|
·
|
the
risks inherent in the development and expansion of our operations;
and
|
·
|
the
likelihood of achieving a liquidity event, such as an initial public
offering or a sale of the Company, for the shares of common stock
underlying the options given prevailing market
conditions.
|
Name
of Director
|
For
|
Withhold
Authority
|
Eric
A. McAfee
|
57,153,189
|
1,150
|
Surendra
Ajjarapu
|
57,153,189
|
1,150
|
Harold
Sorgenti
|
57,153,289
|
1,050
|
Michael
DeLong
|
57,153,289
|
1,050
|
Laird
Cagan
|
57,153,189
|
1,150
|
Michael
Peterson
|
57,153,289
|
1,050
|
For
|
Against
|
Abstain
|
57,153,504
|
635
|
200
|
For
|
Against
|
Abstain
|
56,741,770
|
69,575
|
300
|
AE
Biofuels, Inc.
|
|
By:
|
/s/
Eric A. McAfee
|
Eric
A. McAfee
|
|
Chief
Executive Officer
(Principal
Executive Officer)
|
1.
|
The
Borrower’s application dated
n/a
and subsequent correspondence
with the Bank (hereinafter collectively referred to as “the Borrower’s
proposal”) shall be deemed to constitute the basis of this Agreement and
of the credit facilities to be granted by the Bank hereinafter and
the
Borrower hereby warrants the correctness of each and every statement
and
particulars therein contained and undertakes to carry out the proposal
therein set forth.
|
2.
|
The
Borrower declares and confirms that the aforesaid credit facilities
agreed
to be granted to the Borrower shall be governed by the terms and
conditions as set out in the sanction/arrangement letter
No. 0BH/MCSHR/07-08/462 dt. 22.02.08 and OBH/MCSHR/08-09/96 dt.
11.06.2008 as also herein contained, as well as those embodied in
the
relative security documents.
|
3.
|
The
Borrower undertakes to notify in writing to the Bank of any circumstances
affecting the correctness of any of the particulars set forth in
the
Borrower’s proposal immediately on the happening or occurrence of any such
circumstance.
|
4.
|
The
Borrower declares affirms confirms and covenants
that:
|
a.
|
The
execution on behalf of the Borrower of this Agreement has been and
the
execution on behalf of the Borrower of the security documents will
be
validly authorized and the obligations expressed as being assumed
by the
Borrower hereinunder and under the security documents by the Borrower
constitute and will constitute valid legal and binding obligations
of the
Borrower enforceable against the Borrower in accordance with their
terms;
|
b.
|
Neither
the execution and delivery hereof and of the security documents by
the
Borrower nor the performance or observance of any of obligations
of the
Borrower hereunder or thereunder
shall:
|
i.
|
Conflict
with or result in any breach of laws, statute rule, order, trust,
agreement or other instrument, agreement, obligation or duty by which
the
Borrower is bound; or
|
ii.
|
Cause
any limitation on any of the powers whatsoever of the Borrower however
imposed, on the right or ability of the directors of the Borrower
where
the Borrower is a company to exercise such powers to be
exceeded;
|
c.
|
The
Borrower is not in default under any law, rule, regulation order,
mortgage, trust, instrument, agreement or other instrument, arrangement,
obligation or duty by the Borrower is
bound;
|
d.
|
The
copies, certified by the Borrower’s Secretary, of the Certificate of
Incorporation and the Memorandum and Articles of Association of the
Borrower are true and effective and the Borrower shall not during
the
currency of this Agreement cause any alteration to be made in any
of them
without the prior notification to and written consent of the
Bank;
|
e.
|
The
resolution passed by the Borrower in general meeting on
n/a
consenting under Section 293(id) of the Companies Act, 1956 to the
Board
of Directors borrowing moneys in excess of the aggregate of the paid
up
capital of the Borrower and its free reserves, a certified copy of
the
minutes of which has been delivered by the Borrower to the Bank is
and,
during the currency of this Agreement, shall remain adequate and
effective
to enable the Bank to grant and the Borrower to receive the credit
facilities aforesaid;
|
f.
|
The
audited profit and loss account of the Borrower for the year
ended
n/a
and the audited balance sheet of the Borrower as of
that date give a true and fair view of the results of the operations
of
the Borrower for that period and the financial position of the Borrower
as
of that date and that there has been no material change adverse to
the
business, assets, conditions or operations of the Borrower since
that
date;
|
g.
|
No
litigation or administrative or arbitration proceedings of or before
any
court governmental authority or arbitrator is presently taking place
pending or threatened against the Borrower or against any of the
assets of
the B;
|
h.
|
All
necessary resolutions, consents, licenses, approvals and authorizations
of
the Government of India and any political subdivision thereof and
of any
governmental ministry, authority, bureau or agency and of any other
person
or entity required in connection with execution, delivery, performance,
validity and enforceability of this A and/or the establishment and
continuance of the business activity of the Borrower and the transactions
relating thereto have been duly obtained and are in full force and
effect
and in respect of all payments to be made by the Borrower to the
Bank
hereunder in foreign currencies are exempt and exonerated from Indian
withholding tax and any other taxes assessed or imposed by any Government
or taxing authority thereof;
|
i.
|
The
approval of the Reserve Bank of India in respect of credit facilities
granted/to be granted by the Bank in foreign currencies has been
duly
obtained and a certified copy hereof has been delivered to the
Bank;
|
j.
|
To
take or cause to be taken in respect of credit facilities and repayments
thereof in foreign currencies all action which may be or become necessary
or appropriate in order to ensure the immediate availability of such
foreign currencies for all repayments and discharge of the obligations
of
the Borrower hereunder;
|
k.
|
In
the event of default by the Borrower, the bank
may:
|
i.
|
Apply
and/or appropriate and/or set off any credit balance standing upon
any
account of the Borrower with any branch of the Bank in India or abroad
and
in whatever currency first in or towards satisfaction of any sum
(whether
of principal, interest or otherwise) due in the Bank from the Borrower
hereunder and;
|
ii.
|
In
the name of the Borrower as the attorney of the Borrower to do all
such
acts and execute all such documents as the Bank may consider necessary
or
expedient in this regard:
|
l.
|
There
exists no mortgage, charge, hypothecation pledge, lien, encumbrance
or
other security interest whatsoever over the whole or any part of
the
undertaking or assets, present or future, including uncalled capital
of
the Borrower except the following:
None
|
5.
|
The
Bank may at its sole and absolute discretion grant to the Borrower
all or
some or any of the aforesaid credit facilities either in Indian or
foreign
currencies by way of overdrafts, demand loans, loans, cash credits
(by way
of pledge lock and key type, factory type or mundy type or by way
of
hypothecation or in any other form including working capital term
loan),
terms loans (including funding of interest or in any other form granted
as
part of rehabilitation packages), pre-shipment and post-shipment
credits,
opening of letters of credit, issuing of guarantees including deferred
payment guarantees and indemnities, negotiation and discounting of
demand
and/or usance bills and cheques inland as well as foreign and such
other
facilities as may be agreed upon, from time to time, for sums not
exceeding at any one time in the aggregate the sum of Rs. 2500 Lacs
(Rupees Two Thousand Five Hundred Lacs only) to be made available
at SBI,
Borrower, Hydrabad or at any one or more branches of the Bank or
at any
one or more branches of any one or more Associate Banks of the Bank
in
India and/or abroad.
|
6.
|
The
Bank shall not be required to extend or continue any of the aforesaid
credit facilities granted or to be granted to the Borrower otherwise
than
at the Bank’s sole and absolute discretion and in no circumstances to an
amount at any one time exceeding in the aggregate with the interest
thereon and other costs, if any, such limit as the Bank may, from
time to
time, decide in respect of each facility or in the
aggregate.
|
7.
|
As
security for payment and discharge by the Borrower to the Bank of
the said
sum of Rs. 2500 lacs and interest and costs, charges, expenses and
other
monies due and payable by the Borrower to the Bank under or in respect
of
the aforesaid credit facilities or any of them the Borrower shall,
as may
be required, create in favour of the
Bank:
|
a.
|
A
mortgage in a form satisfactory to the Bank of all the Borrower’s
immovable properties both present and future;
and
|
b.
|
A
first charge by way of hypothecation and/or pledge of the Borrower’s
entire goods, movables and other assets present and future including
documents of title to the goods and other assets such as book debts,
outstanding moneys, receivables including receivables by way of cash,
assistance and /or cash incentives under the cash incentive scheme
or any
other scheme, claims, including claims by way of refund of customs/excise
duties under the duty drawback credit scheme or any other scheme,
bills,
invoices, documents, contracts, insurance policies, guarantees,
engagements, securities, investments, and rights uncalled capital
and all
machinery present and future of such form satisfactory to the
bank.
|
8.
|
The
Borrower shall if required, procure irrevocable and unconditional
guarantees from its Directors and/or others for the payment and discharge
by the Borrower to the Bank of the sum of Rs. and interest, all costs,
charges and expenses and other monies due and payable by the Borrower
to
the Bank under or in respect of the aforesaid credit facilities in
the
form prescribed by the Bank.
|
9.
|
The
Bank shall have the absolute right to decide whether or not it will
accept
as security for the purpose of any/some/all of the aforesaid credit
facilities any goods, book-debts, movables and other assets offered
from
time to time to the Bank by the Borrower. The Bank shall be at liberty
at
its sole discretion at any time without previous notice and without
previous notice and without assigning any reason whatsoever to cease
to
accept the security from the Borrower and/or to cease making advances
thereagainst.
|
10.
|
All
the goods, book-debts, movables and other assets hypothecated and/or
pledged shall be valued at the proper rates whether fixed by the
Bank or
not and the Borrower shall not overvalue the same. Indigenous raw
materials/packing materials/consumable stores/spares shall be valued
at
current market rates or invoice rates or Government controlled rates
whichever are the lowest. Imported raw materials shall be valued
at landed
cost (i.e. invoice plus customs duty but exclusive of sales-tax and
demurrage) or market price whichever is lower. Semi-finished goods
shall
be valued at cost or market price or Government controlled rates
or
selling price whichever are the lowest. The Bank shall be at liberty
to
have any goods book-debts movables and other assets hypothecated
and/or
pledged as aforesaid valued by an appraiser appointed by the Bank
and the
Borrower agrees and confirms to give all the required
assistance/co-operation to such appraiser for such valuation and
the said
valuation shall be binding on the Borrower and the fees and expenses
of
such appraisal shall be borne by the Borrower and may be debited
to any
account(s) of the Borrower.
|
11.
|
The
Borrower declares and assures that all immovable properties to be
mortgaged and all goods book-debts, movables and other assets to
be
hypothecated and/or pledged to the Bank are the absolute properties
of the
Borrower at the sole disposal of the Borrower and free from any prior
charge, lien or encumbrance except such charge, lien or encumbrance
as
have been notified to the Bank and accepted by it as having priority
over
its charge and that all the future immovable properties and goods,
book-debts, movables and other assets to be given as security to
the Bank
shall be likewise the unencumbered absolute and disposable property
of the
Borrower and the Borrower shall not without the Bank’s prior written
permission lease or sell or exchange or create any mortgage, charge,
lien
or encumbrance of any kind upon or over the same or on its undertaking
and
assets including uncalled share capital or any part thereof) except
to the
Bank nor suffer any such mortgage, charge, lien or encumbrance to
affect
the same or any part thereof nor do or allow anything that may prejudice
the security while the Borrower remains indebted or liable to the
Bank in
any manner.
|
12.
|
Subject
always to the Bank’s rights, powers and discretion under this Agreement,
any security documents or otherwise the Borrower may with the prior
written approval of the Bank and in due course of business sell from
time
to time the goods movables and other assets and receive the book-debts
which may be/have been hypothecated, pledged mortgaged or charged
to the
Bank provided the margin(s) of security required by the Bank are
always
fully maintained and on the terms of payment and delivery to the
Bank of
the proceeds thereof and on the express understanding that the security
created thereunder and all realizations, recoveries and insurance
proceeds
thereof and all rights and interest in respect thereof and all documents
therefore, shall always be kept distinguishable and held as the Bank’s
exclusive property specifically appropriated to the security created
thereunder to be dealt with only in accordance with the directions
of the
Bank. It is further agreed that the Borrower shall keep the machinery
charged to the Bank by way of hypothecation, pledge or otherwise
in good
condition and shall do or cause to be done all acts an things necessary
to
keep the said machinery in good condition, provided that the Bank
in its
absolute discretion without being bound to do so, spend such money
as may
be necessary to maintain its undisturbed possession of the said machinery
and to preserve the security and the moneys so spent shall on demand
be
paid by the Borrower to the Bank and until payment shall be debited
to the
accounts opened by the Bank in respect of the aforesaid credit facilities
and carry interest accordingly. It is, however, understood that the
Borrower shall not with out the written consent of the bank first
had and
obtained remove the plant and machinery attached to the premises,
if any,
mortgaged to the Bank and incase of such removal shall replace the
same by
machinery, plant and fixtures and things of equivalent nature and
value,
provided that in the event of the Bank agreeing in writing that any
machinery plant or things as aforesaid to removed was redundant or
became
worn out or absolute and need not be replaced the same may be sold
and the
sale proceeds applied towards the satisfaction o payment of the amount(s)
due to the Bank.
|
13.
|
Registers
of immovable properties and goods, book-debts, movables and other
assets
hypothecated/pledged/mortgaged or otherwise charged to the Bank shall
be
kept by the Borrower in respect o f each of the aforesaid credit
facilities and such registers shall contain all particulars of such
immovable properties and goods book-debts movables and other assets
hypothecated, pledged, mortgaged or otherwise charged and/or such
immovable properties and goods book-debt movables and other assets
as have
been released by the bank and withdraws by the Borrower. such Registers
shall at all times be open for inspection of the Bank and the Borrower
shall if so required by the Bank furnish to the bank daily or at
such
intervals as the Bank may direct from time to time a schedule or
copy of
all the entries which shall have been made to the said
Registers.
|
14.
|
Interest
shall be charged on the outstanding(s) in the accounts opened in
respect
of the aforesaid credit facilities at such rate(s) as may be determined
by
the Bank from time to time at the Bank’s sole discretion on the basis of
any internal credit rating accorded to the Borrower or otherwise
provided
also that the rate(s) shall be subject to changes in the State Bank
Advance rate and/or changes in interest rates prescribed by the Reserve
Bank of India from time to time. Where interest is charged by the
Bank at
a concessionary rate or rates because of the credit facilities being
granted by the Bank to the Borrower under the interest Subsidy Scheme
or
any other Scheme(s) formulated by the government and/or Reserve Bank
of
India and/or any authority from time to time, the Borrower agrees,
declares, confirms and affirms that in the event of the withdrawal,
modifications and/or variation of such scheme(s), the concessionary
rate
or rates of interest that stand withdrawn and the usual rate or rates
of
interest of the Bank applicable at the material time to such credit
facilities shall become effective and the Bank shall become entitled
to
charge the Borrower such rate or rates of interest and the Borrower
shall
pay to the Bank on demand the difference between such concessionary
rate
or rates and the usual rate or rates of interest of the Bank applicable
at
the material time to such credit facilities and such difference shall
become due and payable by the Borrower to the Bank from the date
the
withdrawal, modification and/or variation of such Scheme(s) becomes
effective. Interest shall be calculated respectively on the daily
balance
of such account(s) and be debited thereto on the last working day
of the
month or quarter according to the practice of the Bank. The Bank
shall
also be entitled to charge at its own discretion such enhanced rates
of
interest on the account(s) either on the entire outstanding or on
a
portion thereof as it may fix for any irregularity and for such period
as
the irregularity continues or for such time as the Bank deems it
necessary
regard being had to the nature of the irregularity and the charging
of
such enhanced rate of interest shall be without prejudice to the
Bank’s
other rights and remedies.
|
15.
|
In
respect of security created by way of hypothecation/pledge/mortgage
or
otherwise the Borrower shall at all times maintain a sufficient quantity
and market value of goods, book-debts, movables and other assets
and also
all immovable properties given as security, to provide the margins
of
security required by the Bank from time to time and will forthwith
whenever necessary provide further goods, the Borrower shall deposit
sufficient cash or other security as may be acceptable the Bank as
margin
money as stipulated by the Bank. The Bank shall be entitled to and
shall
at its discretion which shall be final and binding on the Borrower,
change
the margins and the Borrower shall be bound by it notwithstanding
any
margins earlier agreed to by the
Bank.
|
16.
|
the
Borrower expressly agrees and undertakes that all the aforesaid credit
facilities or any of them shall be utilized exclusively for the purposes
set forth in the Borrower’s proposal and for no other purpose and no
change shall be made therein without the written sanction of the
Bank.
|
17.
|
the
Borrower shall from time to time and at all times during the continuance
of the aforesaid credit facilities or any of them keep all properties,
goods, machineries and other assets specified and mentioned in the
Agreement or any other relative security documents in good working
condition and substantial state of repairs and shall pay all ground
rent,
rates, taxes and assessments presents as well as future payable in
respect
of the same immediately they shall become due and also pay all electricity
charges, municipal rates and all other charges and assessments, connected
with the business regularly and punctually and in case the Borrower
neglects to keep the properties, goods, machineries, and other assets
secured to the Bank or any part thereof in good and substantial repair
or
pay the electricity charges, ground rent, rates, taxes, charges and
assessments as aforesaid, it shall be lawful for, but not obligatory
upon,
the Bank to have the said securities or any part thereof repaired
and to
pay any such electricity charges, ground rent, rates, taxes, charges
and
assessments, All moneys, premia, costs, charges of such repairs,
the
payment of the electricity charges, ground rent, rates, taxes, charges
and
assessments as aforesaid shall be a charge upon such securities jointly
with all principal moneys and interest as if they formed a part
thereof.
|
18.
|
The
Borrower shall at all times maintain sufficient financial interest
in the
business and shall if so considered necessary by the Bank bring additional
funds or assets by ways of capital deposits or otherwise. The Borrower
shall not withdraw except with the bank’s prior permission in writing or
divert or misuse the funds and assets invested in or brought into
the
business by the Borrower as capital, deposits or
otherwise.
|
19.
|
The
Borrower shall carry on the business efficiently, properly and profitably
and such business shall be confined to such manufacturing and/or
trading
activity as have been notified to the Bank and for which the Bank
has
sanctioned or agreed to sanction the aforesaid credit facilities
and shall
keep all the licenses, leases, contracts, engagements, essential
for
carrying on the manufacturing and/or trading activity renewed from
time to
time and shall not allow any interruption or disturbance to happen
so as
to hamper/hinder/adversely affect the business of the Borrower. the
Borrower shall maintain proper books of accounts and such other registers,
books, documents, relating to the business as may be statutorily
required
or as may be required by the bank or as may be necessary and/or generally
kept in the business of the kind carried on by the Borrower and shall
get
the accounts books duly audited and furnish to the Bank a copy of
the
audited statements and the auditor’s report. The Borrower shall, if so
required by the Bank, allow the Bank, its officers, agents and nominees
and/or qualified auditors and/or technical experts and/or management
consultants as may be appointed by the Bank to inspect … such books of
accounts, registers, books and documents and also furnish to the
Bank at
such intervals as the Bank may direct from time to time a schedule
or copy
of all the entries which shall have been made in such
books.
|
20.
|
The
Borrower shall submit to the Bank periodically as required by the
Bank
copies of the Balance Sheet and Profit and Loss Account duly audited
and
stock statements in the formats as may be prescribed by the Bank
from time
to time indicating correctly the quantity and value of the stocks
and also
statements of receivables indicating the names of the debtors, amounts
of
the debts and the periods for which they are outstanding together
with a
certificate that the quantities and amounts stated are correct and
that
all stocks are fully covered by insurance unless such insurance is
waived
by the Bank and will also furnish and verify all statements, reports,
returns, certificates and the information and will also execute all
documents and do all acts and things which the Bank may require to
give
effect to any of the terms and conditions set out herein or in the
security documents or any of them that may be executed and the Borrower
authorizes the Bank and each of its agents and nominees as Attorney
for
and in the name of the Borrower to do whatever the Borrower may be
required to do under this
Agreement.
|
21.
|
The
Borrower shall carry on the entire banking transactions of the business
including merchant banking business through the Bank or any of its
Associate Banks wherever the Bank does not have a branch established.
In
particular, the Borrower’s entire foreign exchange business inland bill
business and deposits if any shall be placed with the Bank or any
of its
Associate Banks where the Bank does not have a branch established
thereat.
The Borrower may, however, with the prior permission in writing of
the
Bank in this regard and to the extent allowed and on such other terms
and
conditions as may be stipulated deal with any other
Bank(s).
|
22.
|
Where
goods, movables and other assets are pledged to the Bank, the Bank
may in
its own discretion and at the Borrower’s specific request and without
detriment to the pledge release the goods movables and other assets
pledged to the Bank from its possession to the Borrower on trust
under a
factory/mundy type pledge or other basis and/or for any purpose connected
with the Borrower’s trade business or industry and in consideration of the
Bank so handing over to the Borrower from time to time any goods,
movables
and other assets lying at the godown, factory or other place approved
by
the bank under pledge to the Bank the Borrower shall hold the goods,
movables and other assets as trustees and agents for an on behalf
of the
Bank. The Borrower undertakes that such goods, movables and other
assets
shall in all respects be treated by the Borrower in the books of
the
Borrower as belonging to and held on behalf of the
Bank.
|
23.
|
Where
goods movables or other assets pledged to the Bank are released to
the
Borrower on trust for any purpose connected with Borrower’s trade,
business, industry or otherwise and are put in transit by the Borrower
for
any purpose including for sale thereof the Borrower shall hand over
to the
Bank the relative railway or other transport receipts, invoices and
all
documents and shall deliver back to the Bank goods, movables and
other
assets when the purpose for which they are released on trust is
accomplished or to pay to the Bank the sale proceeds of or the proceeds
of
the bills relating to the said goods, movables or other assets. The
Borrower undertakes that the proceeds of sale of such goods, movables
or
other assets shall in … be treated by the Borrower in the books of
Borrower as belonging to and held on behalf of the
Bank.
|
24.
|
The
Bank may at its own discretion and at the specific request of the
Borrower
grant the facility of cash credit accommodation to the Borrower by
fixing
limits in respect of goods, book debts, movables and other assets
hypothecated or against the security of pledge of goods, movables
and
other assets for the purpose of either (i) retiring documentary bills
drawn on the Borrower covering purchase of goods required for the
Borrower’s manufacturing activities consigned from various place, or (ii)
making remittances of the cost price of the materials direct to the
suppliers by the Bank subject, of course, to the advance being limited
in
each case to such percent of the said bills or the cost price of
the
materials respectively as may be decided by the Bank from time to
time and
where the Bank so grants the facility the Borrower hereby acknowledges
in
consideration thereof that Bank shall have a charge by way of pledge
over
the document of title to goods, movables and other assets received
with
the bills or otherwise which will be in the custody of the Bank or
which
may come into the Bank’s custody and for this purpose the documents of
title to goods movables and other assets shall be deemed to have
been
delivered by the Borrower to the Bank for creating pledge of goods,
movables and other assets covered by the documents and in further
consideration of the delivery by the Bank o the said documents of
title to
goods, movables and other assets to the Borrower or to the clearing
agents
of the Borrower under the Borrower’s instructions and on behalf of the
Borrower while the Bank’s charge hereon and the Borrower’s own
indebtedness or obligation in respect of the said advances or other
valuable consideration are subsisting, the Borrower undertakes to
clear
land store and hold the goods movables and other assets received
under the
said documents for and on behalf of the Bank as trustees and agents
and if
so required by the Bank to deliver possession of the goods, movables
and
other assets to the Bank to be held by the Bank as pledgee of the
said
goods, movables and other
assets.
|
25.
|
For
the purpose of clauses 22 and 23 the Borrower undertakes and declares
that:
|
a.
|
To
handover and redeliver goods etc. the Borrower shall at any time
hand over
or redeliver or cause to be handed over or redelivered to the Bank
forthwith on demand all goods, movables and other assets and documents
of
title thereto and goods movables and other assets covered by such
documents including any policies of insurance pertaining thereto
and
authorize the Bank or any person or persons authorised by the Bank
in
writing in that behalf to enter the Borrower’s godown premises or any
other place where such goods, movables and other assets and document
of
title thereto are lying kept or stored and to take possession of
the said
goods, movables and other assets and documents of title thereto
wheresoever situated at any time without giving to the Borrower any
notice
of the Bank’s intention to do so and the Borrower hereby desires and
requires all persons in whose custody the said goods movables and
other
assets are for the time being to yield possession thereof according
to the
Bank.
|
b.
|
The
Borrower shall not deal with the goods movables and other assets
and
documents of title thereto or the goods movables and other assets
covered
by the documents except under and in accordance with the Bank’s written
instructions.
|
c.
|
The
Borrower shall whether or not in possession of the goods movables
and
other assets or document of title thereto are delivered to the Bank
repay
the outstandings in the said accounts within such number of days
of its
being utilized as may be specified by the Bank from time to
time.
|
d.
|
The
Borrower shall indemnify the Bank (i) against all losses, costs,
damages
expenses whatsoever that the Bank may incur or sustain by reason
of the
Borrower’s act, default or omission of the Borrower’s servants or
employees or other persons acting on behalf of the Borrower in respect
of
goods movables and other assets pledged to the Bank and released
to the
Borrower on trust; (ii) against all losses, costs, damages, expense
or
consequences whatsoever that the Bank may incur or sustain as a result
of
the Banks complying with the Borrower’s instructions to deliver to the
Borrower or to the Borrower’s clearing agents the documents covering the
goods movables and other assets (a) whether or not said documents
are in
order; (b) notwithstanding any discrepancies that may be present
in
documents; and (c notwithstanding any discrepancy between the price/value,
quantity and quality of the goods movables and other assets covered
by the
documents and price, quantity and quality specified in the contract;
and
(iii) against all consequences losses and damages that may arise
a s a
result of the Banks complying with the Borrower’s requests to effect
advance payments form time to time to the suppliers (a) whether or
not the
suppliers consign the goods, movables and other assets; (b) whether
or not
the document in respect thereof are received by the Bank; and (c)
notwithstanding any discrepancy between the quantity or quality of
the
goods, movables and other assets received from the suppliers and
that of
the contracted quantity and
quality.
|
26.
|
The
Borrower shall (if so required by the Bank) display the Bank’s name on the
godown factory and other places approved by the Bank where such goods,
movables and other assets hypothecated and/or pledged to the Bank
and
against which limits for purposes of drawings have been fixed under
and
some/all of the aforesaid credit facilities have been stored indicating
that such goods, movables and other assets are hypothecated and/or
pledged
to the Bank.
|
27.
|
In
respect of credit facilities granted to the Borrower against pledge
of
goods, movables and other assets all such goods, movables and other
assets
shall be placed in the Bank’s possession under its control and in such
manner that such possession and control may be apparent and indisputable.
In pursuance hereof, inter alia, the godown, factory and other places
approved by the Bank in this respect where the goods, movables and
other
assets that are pledged have been stored shall bear the banks name
boards
indicating that the goods, movables and other assets lying therein
are
pledged to the Bank. Where the goods, movables or other assets which
are
pledged with the Bank are released to the Borrower on trust under
a
factory, mundy type pledge, or other basis for the limited purpose
of
facilitating the Borrower carrying on the manufacturing or other
activity,
the Borrower undertakes that the Bank’s padlocks will be use don the
godown factory or other place where they are stored and such godown,
factory or other place will be locked by the Borrower when not in
use and
the keys thereof shall be returned to the Bank on demand and that
the
Bank’s name boards shall be displayed on such factory, mundy or other
place where such manufacturing or other activity is carried on indicating
that the goods, movables and other assets are pledged to the Bank.
The
Borrower further agrees that all sea, rail and other transport freight,
demurrages, customs duties, terminal taxes, cartage godown rents
and all
other charges and expenses paid or incurred by the Bank in obtaining
actual physical possession of and in clearing, storing and forwarding
the
said goods movables and other assets shall be debitable to the accounts
of
the Borrower and form a part of the aggregate amount
secured.
|
28.
|
All
the machineries of the Borrower hypothecated, pledged, mortgaged
or
otherwise charged to the Bank shall be treated as movable properties
and
not as immovable properties and shall bear the nameplate of the Bank
indicating that the said machineries are hypothecated, pledged, mortgaged
or otherwise charged, as the case may be, to the Bank. The Borrower
shall
also exhibit conspicuously in the main hall of the factory a list
showing
the items of machineries hypothecated, pledged, mortgaged or otherwise
charged to the Bank.
|
29.
|
In
respect of goods, movables and other assets stored and held in godowns
owned or hired by or let to the Borrower, the Borrower shall provide
the
Bank and its agents and nominees with an unimpaired access to the
godowns
at all times and where the godowns are hired by or let to the Borrower
the
Borrower shall furnish to the Bank a letter from the landlord/owner
consenting to continue such unimpaired access to the godown to the
Bank
and its agents and nominees and also declaring that notwithstanding
any
claim for any unpaid rent the landlord/owner acknowledge the prior
claim
of the Bank on all the goods movables and other assets stored and
held
therein and hypothecated, pledged, mortgaged or otherwise charged
to the
Bank and that the Bank its agents and nominees shall have the right
to
remove the goods, movables and other assets so stored and held in
the
godowns whenever desired by the
Bank.
|
30.
|
In
respect of goods, book-debts, movable and other assets hypothecated,
pledged, mortgaged or otherwise charged to the Bank or which are
released
to the Borrower on trust under a factory/mundy type pledged or other
assets, the Banks agents ad nominees shall be entitled at all times
without notice to the Borrower but at the Borrower’s risk and expenses and
if so required as Attorney for and in the name of the Borrower to
enter
any place where the said goods, book-debts, movables and other assets
may
be and inspect value insure, superintend dispose and/or take particulars
of all or any part of the said goods, book-debts, movables and other
assets and check any statements accounts, reports and information
and do
all such acts, deeds and things necessary to preserve and protect
the same
and the Borrower confirms, affirms and undertakes to give all
assistance/co-operation as may be necessary in this
regard.
|
31.
|
All
goods, book-debts, movables and other assets hypothecated pledged,
mortgaged or otherwise charged to the Bank as security for any of
the
aforesaid credit facilities and also all immovable properties given
as
security for all such facilities or any of them as may be required
by the
Bank shall be kept at the Borrower’s risk and expense in good condition
and fully insured against loss or damages as may be required by the
Bank
due to any reason whatsoever and damages as may be required by the
Bank
due to any reason whatsoever and particularly the machineries hypothecated
and/or pledged to the Bank against fire and/or such other risk(s)
as the
Bank may from time to time stipulate in the joint names of the Borrower
and the Bank with an insurance company approved by the bank and for
such
amount as the Bank may consider necessary and that the insurance
policies
shall be delivered to the bank when required by the Bank, to do so.
If the
Borrower fails to effect such insurance the bank may, but without
being
obliged to do so, insure the said goods, movables and other assets
and
immovable properties against fire and/or such risk(s) in such joint
names
and debit the premium and other charges to any account of the Borrower
opened or to be opened and in the event of the bank being at anytime
apprehensive that the safety of the goods, movables and other assets
and
machinery is likely to be endangered owing to riot and/or strike
(including fire arising therefrom) and/or floods, earthquakes, etc.
and/or
also resulting in the loss of production therefrom the Bank may at
its
discretion but without being bound to do so insure or require the
Borrower
to insure the same in such joint names against any damage arising
therefrom the cost of such extra insurance being payable by the Borrower
and be debited to any such account. If the Bank desires that the
gods,
movables and other assets shall be insured against theft the Borrower
shall provide the necessary cover therefore. The Borrower shall provide,
if the Bank so directs, a sufficient insurance cover against breakdown
of
such machineries and against loss and damage by fire, lightning and
flood
to any immovable properties of the BORROWER. the Borrower further
expressly agrees that the Bank shall be entitled to adjust, settle,
compromise or refer to arbitration any dispute arising under or in
connection with any insurance and such adjustment, settlement, compromise
and any award made on such arbitration shall be valid and binding
on the
Borrower and also to receive all moneys payable under any such insurance
or under any claim made thereunder and to give a valid receipt therefore,
and that the amount so received shall be credited to the Borrower’s
account and the Borrower shall not raise question that a larger sum
might
or ought to have been received or be entitled to dispute its liability
for
the balance remaining due on any account or accounts after such credit.
Provided that the Bank may at its sole, absolute and unqualified
discretion waive all or any of these
requirements.
|
32.
|
The
Borrower shall not compound or release any of the book-debs not do
anything whereby the recovery of the same may be impeded, delayed
or
prevented, without the consent in writing of the Bank first had and
obtained.
|
33.
|
The
Borrower shall as soon as any call in respect of its shares has been
resolved upon by the Directors or as soon as it shall have been resolved
to issue any unissued share capital or to create any new shares
immediately give notice of such call to the Bank or give notice to
the
Bank of the intention of the Borrower to issue or create any such
share
capital as aforesaid and the proposed amount thereof. And shall not
until
the expiration of seven clear days from the time when such notice
shall
have been sent to the Bank issue any notice to the members of the
Borrower
in respect of payment of any call or issue or create any such existing
or
new shares respectively as aforesaid. And if the Bank shall so require
every notice, prospectus, application form or allotment letter sent
out by
the Borrower in pursuance of any such resolution shall direct the
members
or applicants for allotment of the shares of the Borrower to pay
the call
so made or the moneys payable in respect of the aid existing or new
shares
to the Bank or as it shall direct and if no such requisition be made
by
the Bank the members, applicants or allottees shall be directed to
pay any
call or other moneys into the Bank’s office (as may be informed or
notified) of the joint account of the Borrower and the Bank or in
such
manner as the Bank may direct and the bank shall be entitled to require
all such calls or moneys received by the Borrower to be applied either
wholly or partly in or towards the payment or satisfaction of the
principal sum, interest and other moneys due to the bank but in default
of
the bank requiring the said calls or moneys to be so applied as aforesaid
within one month of their being paid, the Borrower may without the
consent
of the Bank apply the whole or the balance thereof over and above
what
shall be required by the Bank to be otherwise applied to the general
purposes of the Borrower as it shall think fit provided also that
all
moneys hereunder to be received by the Borrower from its members
in
advance of calls upon the shares be held by the Borrower upon trust
for
the Bank and so as to form part of the security and shall be dealt
with in
the manner hereinbefore mentioned in the case of calls or other moneys
received by the Borrower.
|
34.
|
The
Borrower shall not (a) allow any Receiver to be appointed of the
undertaking or of the properties, immovable and movable, of the Borrower
mortgaged, pledged and/or charged to the Bank or any part thereof
(b)
allow any distress or execution to be levied upon or against the
same or
any thereof and (c) make or attempt to make without the previous
consent
of the Bank in writing any alterations of its Memorandum or Articles
of
Association or in its capital
structure.
|
35.
|
The
Borrower shall forthwith and from time to time as may be required
by the
Bank make such alterations or additions to its Memorandum or Articles
of
Association or in its capital structure as may be necessary to conform
to
this Agreement.
|
36.
|
The
Borrower shall make long term arrangements for a steady and regular
supply
of raw materials as may be required for its
business.
|
37.
|
During
the currency of these presents the shareholding of such of the
shareholders in the Borrower who are its Directors at present and
the
principal shareholders and promoters of the Borrower shall not be
varied
without the previous written consent of the Bank first
obtained.
|
38.
|
During
the subsistence of the liability of the Borrower under or in respect
of
any of the aforesaid credit facilities, the Bank without prejudice
to its
rights referred to in this Agreement shall have a right to appoint
and/or
remove, from time to time, a Director or Directors on the Board of
Directors of the Borrower as nominee Director(s) to protect the interests
of the Bank, subject however that the director or Directors so appointed
by the Bank shall not be liable to retire by rotation and need not
possess
any share qualification prescribed by the Articles of association
of the
Borrower.
|
39.
|
The
Borrower shall at all times confine the borrowings to the drawing
power
allotted within the limit of the particular facility, namely, the
value of
the security less than stipulated margin, and in no case shall exceed
such
limit. The Bank may, however, at the specific request of the Borrower
and
in its own discretion allow drawing beyond such drawing power for
such
time as may be considered necessary and shall at any time without
any
notice call upon the Borrower to repay such excess drawings. All
rights
and obligations of the Bank and the Borrower respectively hereunder
and
under any Arrangement Letter or other documents shall extend to such
excess drawings notwithstanding the specific limit stipulated. All
the
rights and securities created hereunder in favour of the Bank and
the
obligation of the Borrower thereunder will extend to cover the Borrower’s
liabilities to the Bank under any account whatsoever of the Borrower
with
the Bank notwithstanding that such account may not related to any
particular facility agreed to be granted by the Bank to the
Borrower.
|
40.
|
At
any time or from time to time before repayment of the amount due
to the
Bank whenever the value of the security for the time being held by
the
Bank under the security documents or otherwise shall be in excess
of
amount due to the Bank, the Bank may at the request of the Borrower
and at
its discretion release to the Borrower such excess or security or
any part
of such excess security. Provided always that the Bank may refuse
to
release such excess security as aforesaid in its discretion if there
are
any other liabilities whatsoever of the Borrower to the Bank absolute
or
contingent which in the opinion of the Bank might not be adequately
secured. Nothing contained in this clause in particular and in this
Agreement or any security documents between the Bank and the Borrower
in
general shall be construed as excluding the general lien and/or the
right
of set-off the Bank for any balance due to the Bank on any account
or in
respect of any liability whatsoever over any security for the time
being
held by or remaining with the
Bank.
|
41.
|
The
Bank shall not be under any liability whatsoever towards the Borrower
or
any other person for verification of the quantity and/or quality
of any
goods movables or other assets shown in the relevant invoices statements
or other documents notwithstanding hat it may have taken possession
of
such goods movables or other assets by way of hypothecation pledge
or
otherwise or for any loss or damage to the goods, movables and other
assets and other documents and given as security from whatever cause
or in
whatever manner arising whether such goods movables or other assets
shall
be in the possession of the Bank or not at the time of such loss
or damage
or the happening of the cause thereof. The Borrower doth and shall
at all
times indemnify and keep indemnified the Bank from and against all
actions, suits, proceedings, costs, charges, claims and demands whatsoever
that may at any time arise or be brought or made by any person against
the
Bank in respect of any acts, mattes and things lawfully done or caused
by
the Bank in connection with the said goods, movables and other assets
or
in pursuance of the rights and powers of the Bank under this a or
other
security documents. No responsibility will lie with the Bank in respect
of
the quantity, quality or condition or on whatever account on final
out-turn of the goods, movables and other assets in possession of
the Bank
under this a or under security documents between the Bank and the
Borrower
including goods, movables and other assets which may have come into
the
possession of the Bank by the Bank exercising any of its rights under
this
Agreement or any security documents or otherwise and/or in respect
of the
correctness, validity, sufficiency or genuineness of any of the documents
relating thereto.
|
42.
|
The
Borrower shall not during the subsistence of the liability of the
Borrower
to the Bank under or in respect of any of the aforesaid credit facilities
without the written consent of the
Bank:
|
a.
|
Change
or in any way alter the capital structure of the borrowing
concern;
|
b.
|
Effect
any scheme of amalgamation or
reconstitution;
|
c.
|
Implement
a new scheme of expansion or take up an allied line of business or
manufacture;
|
d.
|
Declare
a dividend or distributes profits after deduction of axes, except
where
the instalments of principal and interest payable to the Bank in
respect
of the aforesaid credit facilities are being paid regularly and there
are
no irregularities whatsoever in respect of any of the aforesaid credit
facilities.
|
e.
|
Enlarge
the scope of the other manufacturing/trading activities, if any,
undertaken at the time of the application and notified to the Bank
as
such;
|
f.
|
Withdraw
or allow to be withdrawn any moneys brought in by the promoters and
directors or relatives and friends of the promoters or directors
of the
Bank;
|
g.
|
Invest
any funds by way of deposits, or loans or in share capital of any
other
concern (including subsidiaries) so long as any money is due to the
Bank;
the Borrower will, however, be free to deposit funds by way of security,
with third parties in the normal course of business or if required
for the
business;
|
h.
|
Borrow
or obtain credit facilities of any description from any other bank
or
credit agency or money-lenders or enter into any hire-purchase arrangement
during the subsistence of the liability of the Borrower to the
Bank.
|
43.
|
In
respect of advances granted by the Bank to the Borrower by way of
purchase/negotiation/discounting of clean/documentary/demand/usuance
bills
of exchange drawn by the Borrower on his/it/their various customers
and
expressed in foreign currency or Indian rupees and whether under
letters
of credit or otherwise and/or in respect of said bills tendered for
collection the Borrower agrees and covenants with the Bank as
under:
|
a.
|
That
the bills shall bear, where necessary adequate stamp duty before
purchase/negotiations/discounting and shall be drawn by the Borrower
in
conformity with the proforma prescribed under the Reserve Bank of
India
New bill market Scheme, indicating on the face thereon the description
and
quantity of goods sold and the number and date of the carrier’s
receipt;
|
b.
|
That
the bills shall be drawn with a usuance, ordinarily, of not exceeding
90
days;
|
c.
|
That
the bills pertaining to supplies made to Government departments and
quasi-Government bodies as well as statutory Corporations and government
Companies shall be drawn in conformity with the pro forma prescribed
under
the Reserve Bank of India Scheme.
|
d.
|
That
at the time of offering upcountry usance bills for discount the bills
shall be accompanied by railway receipts or motor transport receipts
of
approved transport companies together with the relative original
invoices
and that the documents will be delivered to the drawees only after
the
bills accepted;
|
e.
|
That
in the case of local sales, bills shall be accompanied by copies
of
invoices bearing acknowledgements of the purchasers in token of their
having received the goods and shall be offered for discount only
after
acceptance of bills by the drawees;
|
f.
|
That
upcountry or local bills will not be collected by the Borrower through
other banks;
|
g.
|
That
the Borrower shall ensure that upcountry bills are accepted by the
drawees
on presentation and retired on due dates. In the event of the bills
remaining unaccepted on presentation or unpaid on due dates, the
Bank
shall be entitled to recover the amount of such bills along with
overdue
interest and other incidental charges by debit to the accounts of
the
Borrower.
|
h.
|
That
the Bank shall be at liberty not to accept cheques drawn on local
banks
from the drawees in payment of bills drawn on them unless such cheques
are
tendered at the Bank before clearing hours on due dates. In the event
of
cheques being received late after clearing hours on due dates, the
Bank
may treat the relative bills as unpaid and may debit the amounts
thereof
to the account of the Borrower on due
dates;
|
i.
|
That
the Borrower shall furnish to the Bank in advance a list of local
parties
on whom the Borrower intends to draw usance bills for prior approval
of
the Bank;
|
j.
|
That
the Borrower shall abide by such terms and conditions as the Bank
may from
time to time stipulate;
|
k.
|
That
unless otherwise specified the rates for discounting the bills will
be the
same rate which is applicable to advances granted to the Borrower
against
stocks;
|
l.
|
That
the Bank shall be entitled to
chare:
|
i.
|
Service
charge on the amount of each bill and out-of-pocket expenses towards
registration, postal charges etc. per instrument as per the Bank’s
schedule of standard charges in force from time to time;
and
|
ii.
|
Overdue
interest on bills from the due to the date of payment and in the
case of
returned bills from the due date to the date of reimbursement at
the rates
prescribed by the Bank from time to time. Provided always the Bank
a its
discretion shall be entitled to revise the aforesaid charges from
time to
time;
|
m.
|
The
Bank may send the bills either by registered acknowledgement due
post or
registered post or ordinary post or by any courier service, as is
decided
by the Bank in its discretion to any of its own offices or to any
of the
scheduled banks reference being to Schedule II of the Reserve Bank
of
India act, 1934) or other commercial bank and/or co-operative bank
or
directly to the drawees at the Borrower’s risk and responsibility as to
the losses if any on the bills or the proceeds of the bills or of
the
goods represented by the bills due to any cause whatsoever and the
Borrower agrees to hold the Bank harmless and indemnified from and
against
all consequences that may arise from is doing so and form and against
all
losses, charges and expenses in sending the bill accepted under these
arrangements in the manner
aforesaid;
|
n.
|
Where
the bills accepted for collection are drawn on central/state government
departments/agencies and/or public sector undertakings and/or railways
and/or other parties and/or Borrower’s customers accompanied by either
railway receipt, shipping documents or other documents evidencing
title to
goods like motor receipts or receipt notes, take delivery notes receipted
challans or inspection notes in cases where the railway receipts,
shipping
documents or motor receipts have been forwarded/direct to the concerned
drawees/consignees and offered by the Borrower to the Bank for collection
the Borrower shall deposit with the Bank copies or the relevant documents
along with the bills signed by the Borrower and invoices evidencing
dispatch of goods to the parties mentioned
therein;
|
o.
|
Where
at the request of the Borrower the Bank ha agreed to include in the
facilities granted under this Agreement credit sales made by the
Borrower
to the customers of the Borrower whereby finished goods are directly
sent
to the customers at their requests and copies of the relative invoices
with or without receipted challans or accepted delivery notes, receipts
notes, inspection notes, are tendered by the Borrower to the Bank
as
evidencing dispatch of finished goods and where under such circumstances
or any other circumstances the Borrower receives payment of the bills
the
Borrower shall immediately deposit the proceeds of the bills and
the sale
proceeds of the goods covered by invoices directly received by the
Borrower or the agents of the Borrower whether in cash or by cheques
or by
any other mode of payment in the said account(s) with the Bank towards
payment of the outstandings in respect of the advances granted on
the
evidence of such invoices;
|
p.
|
The
Borrower shall repay the Bank’s advances within such number of days as may
be stipulated by the Bank of the utilization of the advances by the
Borrower on each occasion whether or not the payment of the said
bills/invoices is received by the Borrower or if the bills are returned
unpaid for any reason whatsoever the Borrower shall reimburse the
Bank
immediately on receipt of the Bank’s
advice;
|
q.
|
The
Borrower shall indemnify the Bank and keep the Bank harmless and
indemnified at all times against all losses, damages, actions, costs
(as
between Advocate and client) charges or expense which may be made
against
or sustained or incurred by the Bank (and whether paid by the Bank
or not)
as a result of or in consequence of the Bank having agreed to
purchase/negotiate/discount/collect the said bills as also as a result
of
or in consequence of the Bank through any of its offices or correspondents
in India and elsewhere guaranteeing any irregularities or discrepancies
that may be existing in the documents relating to the said bills
in
connection therewith.
|
r.
|
The
Bank shall have first and paramount lien on the bills and the moneys
received thereunder and the goods in course of transit covered by
the
documents of title to goods or other documents which purport to represent
rights of title to goods accompanying the bills shall remain pledged
to
the Bank and irrespective of its rights as a pledge of such goods
in case
of any dispute the Bank shall also have the banker’s lien on all bills,
goods, securities, documents and moneys belonging or purporting to
belong
to the Borrower for all moneys claims and demands due or to become
due
from the Borrower to the Bank;
|
s.
|
In
case the bills/invoices are passed for payment for a reduced amount,
the
Borrower authorizes the Bank to accept such reduced payment and the
Borrower shall make good the shortage or any loss arising therefrom
and
the Bank will not be responsible in any manner
whatsoever;
|
t.
|
Where
the drawees return unpaid the bills/invoices to the Borrower direct,
the
Borrower shall immediately on receipt thereof return the bills/invoices
to
the Bank and the Bank’s acceptances thereof shall be without prejudice to
its right of recovery of the amounts covered by the bills/invoices
from
the Borrower.
|
44.
|
In
respect of advances granted by the Bank to the Borrower by way of
drawee
bills acceptance limit and/or drawee bills discounting limit wherein
usance bills drawn on the Borrower by the suppliers of goods and
accepted
by the Borrower are lodged with the Bank for discounting, the Borrower
hereby agrees and covenants with the Bank as
under:
|
a.
|
The
Borrower hereby confirms that at the request of the Borrower the
Bank has
agreed in its sole and absolute discretion to discount usance bills
with
usance ordinarily not exceeding 90 days, drawn on the Borrower by
the
suppliers of goods and accepted by the Borrower for an amount at
any time
not exceeding the drawee bills discounting limit granted within the
overall limit (hereinafter referred to as “the
bills’).
|
b.
|
Whenever
the Borrower requires the Bank to discount the bills, the Borrower
shall
lodge with the Bank the bills together with the original and/or copies
of
invoices and the receipted delivery challans evidencing the supply
to the
Borrower of the goods drawn by the drawers of the bills (hereinafter
called “the Suppliers”).
|
c.
|
The
Borrower hereby confirms and declares that the amounts represented
by the
Bills drawn on the Borrower by the Suppliers will be due and owing
by the
Borrower to the Suppliers and that the goods represented by the invoices
accompany the Bills will have been duly ordered and received by the
Borrower and that the amounts of such bills will be paid by the Borrower
to the bank at maturity.
|
d.
|
The
Borrower declares and confirms that on the Bank discounting the Bills
the
Bank will have good title thereto and will be entitled to have the
Bills
rediscounted with Reserve Bank of India, Discounted and Finance House
of
India Limited, any scheduled commercial bank or any other approved
financial institution or otherwise deal with the Bills as the holder
thereof.
|
e.
|
The
Borrower further confirms that notwithstanding anything to the contrary
contained in ay documents or letters written by the Borrower to the
Suppliers or by the Suppliers to the Borrower, the Borrower shall
be
irrevocably, absolutely and unconditionally liable to pay to the
Bank the
amounts of the Bills discounted with the Bank at the maturity of
such
Bills.
|
f.
|
The
Borrower agrees, declares and confirms that the Borrower will be
liable to
the Bank as aforesaid on the Bills and that the Bank shall be entitled
to
enforce all its rights against the Borrower as the holder of such
bills
and that the Borrower shall continue to be so liable notwithstanding
any
claim, right, dispute or litigation arising or which may arise between
the
Borrower and the Suppliers/drawers.
|
g.
|
The
Borrower agrees and confirms that on the acceptance of the Bills
by the
Borrower and as the same being discounted by the Bank, the proceeds
thereof shall be paid by the Bank to the Suppliers by means of bankers
cheque or by any other means as may be deemed fit by the
Bank.
|
h.
|
The
amount of discount/commission/or exchange at the same rate as applicable
to the discounting of drawer bill or such other rate as may be decided
by
the Bank, as the case may be, will be recovered by the Bank by debit
to
the cash credit account of the Borrower at the front end, i.e., at
the
time of discounting the Bills.
|
i.
|
Although
the amount of the Bills is payable by the Borrower at maturity of
the
Bills, the Borrower shall provide adequate funds in the cash credit
account to enable the Bank to recover the same by debit to the cash
credit
account of the Borrower in the event of non-payment thereof by the
Borrower on the due date.
|
45.
|
Notwithstanding
any of the provisions of the Contract Act or any other law in respect
of
advances against accepted usance bills where the bills are drawn
by the
Borrower and accepted by the drawees the Borrower agrees that the
subsequent credit to the account(s) under these facilities, unless
specifically apportioned by the Borrower or the Bank to the discharge
of
any particular bill, will not discharge the debt represented by such
bills.
|
46.
|
The
Borrower hereby declares that bills shall not be drawn on any of
the
Borrower’s branches nor on any firm in which the Borrower has any
proprietary partnership or other interest and that if on any occasion
or
occasions the Bank in its sole discretion accepts such bulls for
collection and makes advances there against the same shall not be
deemed
as the Bank having agreed to accept thereafter other bills of such
nature.
|
47.
|
The
Borrower undertakes that all bills and documents tendered by the
Borrower
to the Bank shall represent genuine sales transactions covering movement
of goods represented by the railway receipts or truck receipts or
shipping
or other documents accompanying such bills that the amounts of such
bills
shall truly represent the value of the goods so transported/shipped
and
that every such bills tendered by the Borrower to the Bank shall
be in
respect of execution of definite orders received by the
Borrower.
|
48.
|
In
respect of advances granted by the Bank to the Borrower for the purpose
of
the business of the Borrower of leasing or hire-purchase the Borrower
agrees and covenants with the Bank as
under:
|
a.
|
The
monies advanced by the Bank to the Borrower for hire of vehicles
shall be
utilized for acquisition of machinery, equipment, vehicles and such
other
movable assets as may be the subject matter of leasing and hire purchase
and which shall be hypothecated to the
Bank.
|
b.
|
Before
availing of any advance, the Borrower shall deposit with the Bank
the
original agreement of lease and/or hire-purchase in respect of the
hypothecated assets. The Borrower shall also deposit with the
Bank:
|
i.
|
Copies
of invoices; and
|
ii.
|
Letters
confirming that the hypothecated assets are covered for comprehensive
risks for the entire period of the
Agreement.
|
c.
|
The
Borrower undertakes to provide the Bank in respect of vehicles
hypothecated to the Bank with all particulars of registration entered
in
the registration book of the hypothecated vehicle by the relevant
road
transport authority including the entry to the effect that the interest
of
the Borrower is duly recorded in the registration book. Such particulars,
certified by the Borrower to be rue particulars, shall be lodged
with the
Bank within 60 (sixty) days of presenting the relative agreements
of lease
and/or hire purchase to the Bank.
|
d.
|
The
amount of instalments received by the Borrower from the lessees and/or
the
hirers will as and when received be forthwith paid by the Borrower
to the
credit of the relevant account.
|
e.
|
The
Borrower undertakes not to enter into any lease and/or hire purchase
agreements without satisfying themselves about the financial status
of the
lessees and/or hirers and their capacity to pay instalments and without
verifying the statements made by the lessees and/or hirers in their
proposal forms. The Borrower shall give the hypothecated assets on
leases
and/or hire-purchases only after obtaining from the lessees and/or
hirers
the proposal forms and the agreements of lease and/or hire-purchase
duly
signed by them. The Borrower shall no vary the terms or wording of
the
proposal form and/or the lease agreements and/or hire-purchase agreements
without the prior consent of the Bank and should the Borrower contravene
the terms of this clause, the Bank shall have the right to terminate
this
Agreement and decline to finance the Borrower further. The Bank retains
the rights to decline to accept for making advances any lease and/or
hire-purchase agreements executed by any lessees and/or hirers without
assigning any reasons for such
non-acceptance.
|
f.
|
The
Borrower undertakes to see that the lessees and/or hirers discharge
their
obligations under the lease and/or hire-purchase agreements executed
by
them without any prejudice to the rights of the Bank and any failure
on
the part of the lessees and/or hirers to carry out their obligations
shall
be promptly reported to the Bank. In the event of any failure or
default
in payment of the advance or any part thereof, insolvency or winding-up
or
liquidation of the lessees and/or hirers or any of them, or termination
of
the said lease and/or hire purchase agreements, the Borrower undertakes
to
repay the advance made and outstandings in respect thereof at the
time of
such failure, default, insolvency, winding-up or liquidation without
the
Bank being obliged either to take steps to recover the amount from
the
Lessees and/or hirers or to exhaust the
security.
|
g.
|
The
Borrower agrees, declares, confirms and affirms that the Bank shall
be at
liberty to fix and/or revise drawing power in the relevant cash credit
account each month by suitably reducing the drawing power in respect
of
instalments/rentals due during the month or adding the amounts of
instalments/rentals relating to fresh advances, if any, granted.
Provided
always that the drawing power shall be allowed only against hypothecated
assets leased and/or hired under the lease and/or hire purchase agreements
and the relative receivables till such time as suitable security
documents
as desired by the Bank have been executed by the Borrower. provided
further that no drawing power shall be allowed against hypothecated
assets
which are found to be second hand. And provided further that the
drawing
power shall be restricted to such per cent of the value of the
hypothecated assets or the value of the relating rentals or receivables
accruing to the Borrower within such period as may be prescribed
by the
Bank from time to time.
|
h.
|
He
Borrower undertakes and assures the Bank that the monthly instalments
in
respect of all the agreements of lease and/or hire purchase deposited
with
the Bank are/or will be duly paid as and when
due.
|
i.
|
In
the event of the Borrower or any lessee and/or hirer of the hypothecated
assets terminating the relative lease and/or hire-purchase agreement,
the
Borrower undertakes to notify immediately the Bank of such termination
and
the Borrower undertakes forthwith to pay the Bank the total amount
of
instalments then outstanding under the terminated lease and/or
hire-purchase agreement to the Bank together with
interest.
|
j.
|
The
Borrower shall keep and maintain a proper register of assets leased
ad/or
hired by them showing therein full and correct particulars of assets
leased and/or hired by them, the price of such assets and sales tax
thereon, the name of the lessee and/or hirer to whom each of such
assets
is given on lease and/or hire, the instalments agreed to and amounts
of
instalments received. The said register and all books of accounts
maintained by the Borrower in respect of all lease and/or hire-purchase
agreements shall be open for inspection at all times by the manager,
auditor, inspector or any other officer of the Bank. The Borrower
shall
once a month, in a form approved by the Bank, submit to the Bank
a
statement before the 5
th
day of every month in respect of the previous month giving details
of the
instalment due under each lease and/or hire-purchase agreements which
have
been deposited with the Bank and giving such other particulars as
may be
required by the Bank.
|
k.
|
The
Borrower agrees, declares, confirms and affirms that the outstandings
in
the relevant account shall at all times be fully covered by the value
of
the hypothecated assets less the stipulated margins. If at any time,
the
drawing power yielded by the hypothecated assets held by the Borrower
falls below the amount borrowed, the Borrower shall forthwith adjust
such
excess borrowings under advice to the Bank. the Borrower shall submit
to
the Bank at monthly intervals statements showing the total outstandings
against lease and/or hire purchase agreements (separately) entered
into by
the Borrower adding thereto the fresh lease and/or hire purchase
agreements entered into by it and reducing the instalments and/or
rentals
received form the lessee and/or hirers during the relative month.
The
Borrower shall indicate in the monthly statements separately the
overdue
instalments/rentals if any, under the lease and/or hire-purchase
agreements.
|
l.
|
The
Borrower undertakes to get in respect of the vehicles registered
in the
name of the lessees and/or hirers an endorsement in the respective
certificate of registration that the vehicle is under lease and/or
hire
purchase agreement with the Borrower. The Borrower shall not cancel
such
endorsement the certificate of registration of the vehicle until
the
advances made by the Bank against the vehicle are paid in full to
the
Bank. All charges of registration, payment of any taxes, licence
fees or
insurance premia on the vehicle(s) or any charge for upkeep or repairs
or
maintenance shall be that of the lessee and/or hirers or the Borrower
and
the Bank shall not be called upon or be bound to pay such charge
sunder
any circumstances. The Borrower hereby agrees to indemnify the Bank
and/r
any of its officer, servants or agents against loss by reason of
damage or
destruction or loss of the hypothecated assets or any of them from
any
cause whatsoever or by reason or by reason of all claims whatsoever
by
third parties in respect of the
same.
|
m.
|
The
Borrower shall not avail of any advance from any other bank or from
any
other person on the assets hypothecated and charged to the Bank and
the
Borrower and/or lessees and/or hirers shall not have or be deemed
to any
authority to create a lien or charge upon the hypothecated asset
s in
respect of any repairs, alterations or additions
thereto.
|
n.
|
The
Borrower doth hereby lastly agree that the Borrower will at any time
on
demand by the Bank execute at the cost in all respect of the Borrower
(a)
assignments in favour of the Bank of all or any of the lease and/or
hire-purchase agreements deposited by the Borrower with the Bank
in
respect of the hypothecated assets in such forms as the Bank may
require
and will also sign and give notices of such assignments to the lessees
and/or hirers or other persons concerned and (b) irrevocable power
of
attorney authorizing the Bank to recover the instalments, purchase
price,
interest and all other moneys payable under the relevant lease and/or
hire-purchase agreements and to have and exercise all the rights
authorities of the Borrower under such agreements and to file suits
for
the purpose, such power to be in the form required by the
Bank.
|
49.
|
The
Borrower agrees, declares, affirms and confirms that notwithstanding
any
of the provisions of the Contract Act or any other law, on any terms
and
conditions to the contrary contained in this Agreement and/or any
security
documents any payment made by the Borrower to the Bank unless otherwise
agreed to by the Bank in writing be appropriated by the Bank in the
manner
following:
|
a.
|
Firstly
towards costs, charges, expenses and other moneys, due and payable
or
becoming due and payable to the
Bank.
|
b.
|
Secondly
towards interest due and payable and/or accruing due and payable
to the
Bank; and
|
c.
|
Lastly
towards repayment of the amount of any instalment(s) of the principal
sum
due and payable or becoming due and payable to the Bank; All the
aforesaid
amounts having become due and payable and/or becoming due and payable
by
the Borrower to the Bank under this Agreement and/or under any of
the
security documents executed between the Borrower and the Bank whether
the
recovery thereof has or has not become barred by any law in force
for the
time being as to the limitation of
suits.
|
50.
|
The
Bank shall not be responsible for any damage caused to goods, movables
and
other assets in course of transit covered by the bills accepted by
the
Bank as security or for loss of the goods, movables and other assets
or
for delayed delivery short delivery or wrong delivery of goods, movables
and other assets, or for delayed or wrong presentation of bills to
paying
authorities or drawees for any reason whatsoever and incase the bills
are
sent for collection direct to other banks or bankers or government
departments/agencies/institutions or quasi-government bodies/public
sector
undertakings/railways or other parties or the Borrower’s customers the
Bank shall not be responsible for the non-receipt by it of the remittance
representing the proceeds of the bills and the relative bills will
be
collected entirely at the Borrower’s risk and responsibility. The Borrower
shall be responsible for the costs and charges incurred by the collecting
bank or bankers in this behalf and shall pay the Bank these costs
and
charges.
|
51.
|
The
Bank may at any time whether a demand for the payment of any money
for any
account has been made or not call upon the Borrower to give possession
of
the goods, movables and other assets hypothecated to the Bank and
the
Borrower declares that on the Borrower doing so the goods, movables
and
other assets shall stand pledged to the Bank without in any manner
affecting the rights of the Bank under the security documents executed
in
favour of the Bank.
|
52.
|
(a)
That in respect of the credit facilities by way of term loans granted
by
the Bank to the Borrower, the Borrower shall repay the amount of
the
principal together with interest, costs, charges, expenses and other
monies due to the Bank by such instalments and on such dates as may
be
stipulated by the Bank from time to time until the entire amounts
due
under the term loans facilities have been repaid. If there is any
default
in payment of any one of such instalments n due date the agreement
to
receive payment by instalments shall stand determined at the option
of the
Bank and the Bank shall be at liberty to demand payment of and the
Borrower shall be bound and liable to pay forthwith on such demand
the
balance amount due to the Bank. (b) that in respect of all other
credit
facilities granted by the Bank to the Borrower, the Borrower shall
pay to
the Bank forthwith on demand by the Bank the balance or balances
then
outstanding and owing to the Bank under any of the Borrower’s account or
accounts in respect of such credit facilities together with interest
costs
charges and expenses due in respect
thereof.
|
53.
|
a. |
The
Borrower irrevocably constitutes and appoints the Bank to be
the
Borrower’s true and lawful attorney to do and execute for an in the
name
and on behalf of the Borrower and where the Borrower is more
than one
individual jointly and severally, all or any of the following
acts, deeds
and things, that is to
say:
|
i.
|
To
take over and carry on the business of the Borrower and complete
engagements and contracts;
|
ii.
|
To
sign, register, file any application forms, contracts, agreements,
transfers, acceptance, receipts, acquittances, returns and
any other
documents and to sign and endorse all cheques, promissory notes,
bills of
exchange, bills of lading, dividend mandates or other orders
for payment
of money or delivery of
property;
|
iii.
|
To
sell, transfer, sign or deal with any goods, movables and other
assets;
|
iv.
|
To
demand and receive all debts, sums of money, principal money,
dividends,
interest and dues of whatever
nature;
|
v.
|
To
appoint selling agents and if necessary to undertake new kinds
of
activity;
|
vi.
|
To
realize all the assets whether movable or immovable including
the goodwill
of the business;
|
vii.
|
If
considered proper, to wind up the Borrower’s
business;
|
viii.
|
To
tender contract for purchase, accept and sign the transfer
into the name
of the Borrower of any securities, shares, stocks, debentures,
funds or
any other securities, to apply for and accept allotment of
any shares and
securities and to sell, endorse, negotiate, transfer and assign
any
securities, shares, stocks, debentures, funds, and other securities
which
now or shall hereafter stand in the name of the Borrower or
to which the
Borrower is now or may at any time hereafter be entitled to
demand,
receive and collect interest and dividend due or to accrue
due on any such
securities, shares, stocks, debentures, funds and other securities
and
apply the proceeds of such sale, endorsement, transfer, negotiations
and
assignment and the recovery o any interest and dividend in
satisfaction of
any monies due by the Borrower to the Bank and to endorse and
transfer all
or any such securities, shares, stocks, debentures, funds and
other
securities which may from time to time or at any time be in
the possession
of the Bank whether for safe custody or otherwise or held by
the Bank as
security for any money payable to the Bank by the Borrower
in respect of
any account or general balance of account or
otherwise;
|
ix.
|
To
appoint a proxy or proxies for the purpose of representing the
Borrower
and voting in meeting or meetings of any company or corporation
in which
the Borrower holds any shares, debentures, stocks,
etc.
|
x.
|
To
deal with the assessment of the Borrower in respect of income tax,
super
ax, wealth tax, gift tax, expenditure tax, capital gains tax and
any other
taxes on income revenue or capital and levy of customs and/or excise
duties and to apply for and to receive refunds of any such tax or
taxes or
levy or levies.
|
xi.
|
To
attend and represent the Borrower before any authority or tribunal
and for
that purpose to sign, execute and deliver all such documents and
make all
such declaration as may be
necessary;
|
xii.
|
Generally
to act in the premises as fully and effectually with all intents
and
purposes and to do all things as are necessary and which the Borrower
would do if personally present;
|
xiii.
|
For
all and any of the purposes aforesaid to appoint a substitute or
substitutes;
|
b.
|
the
Borrower hereby ratifies and confirms all the acts, things, deeds
performed or to be performed by the Bank or its nominees or substitutes
in
pursuance of any of the aforesaid powers and the powers hereby conferred
shall not be determined or affected Borrower the fact of the Borrower
acting personally or through another in the
premises.
|
c.
|
the
powers vested in the Bank shall be irrevocable and subsist in favour
of
the Bank till all the dues of the Borrower to the Bank are fully
satisfied.
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d.
|
the
aforesaid powers under this clause may be exercised by the Bank in
its
sole discretion but the exercise of the powers is not obligatory
on the
Bank.
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54.
|
The
security created and indemnities and undertakings given herein and/or
by
the security documents executed in favour of the Bank for various
credit
facilities shall operate as continuing security and/or indemnities
and/or
undertakings for all moneys, indebtedness and liabilities of the
Borrower
under such credit facilities and will operate as security and/or
indemnities and/or undertakings for the ultimate balance or aggregate
balance with interest thereon and costs, charges and expenses if
any to
become payable upon the account(s) to be opened and the said account(s)
is/are not closed and is/are not to be considered to be closed for
the
purpose of such security and/or indemnity and/or undertaking and
the
security and/or indemnity and/or undertaking is not to be considered
exhausted merely by reason of the said account(s) being closed and
fresh
accounts being opened in respect of fresh credit facilities being
granted
within the overall limit sanctioned to the Borrower or either or
any of
them being brought to credit at any time or from time to time or
any
partial payments made thereto or any fluctuations of such account(s)
and
if the whole of the Bank’s duties dues shall be repaid and the whole of
the security be withdrawn the account(s) or either or any of them
may
nevertheless at any time before such account(s) has or have been
closed,
be continued under this Agreement upon the security as aforesaid
being
again furnished.
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55.
|
In
respect of the credit facilities granted or to be granted by the
Bank by
way of term loans either in Indian or foreign currencies the Borrower
agrees and declares that notwithstanding anything contained herein
or in
any other security documents the entire amounts of the term loans
or the
balances then due shall, if so decided by the Bank, become forthwith
due
and payable by the Borrower to the Bank, upon the happening of any
of the
following events and the Bank shall be entitled to enforce its
security:
|
a.
|
Any
instalments of the principal remaining unpaid for a period exceeding
one
month after the due date for payment thereof has
expired;
|
b.
|
Any
interest remaining unpaid and in arrears for a period of one month
after
the same have become due whether demanded or
not;
|
c.
|
The
Borrower committing any breach or default in the performance or observance
of any of the covenants contained in these present and/or the Borrower’s
proposal and/or the security documents or any other term or condition
relating to the term loans;
|
d.
|
The
Borrower entering into any arrangement or composition with the Borrower’s
creditors or committing any act of
insolvency;
|
e.
|
Any
execution or distress being enforced or levied against the whole
or any
part of the Borrower’s property;
|
f.
|
On
a winding up petition being filed or the Borrower being a limited
company
going into liquidation (except for the purpose of amalgamation or
reconstruction);
|
g.
|
A
receiver being appointed in respect of the whole or any part of the
property of the Bank;
|
h.
|
The
Borrower ceasing, or threatening to cease, to carry on
business;
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i.
|
The
occurrence of any circumstance which is prejudicial to or impairs,
imperils or depreciates or which is likely to prejudice, impair,
imperil
or depreciate the security given to the Bank;
and
|
j.
|
The
occurrence of any event or circumstance which prejudicially or adversely
affect in any manner the capacity of the Borrower to repay the amount
due
under the term loans. On the question whether any of the above events
has
happened, the decision of the Bank shall be conclusive and binding
on the
Borrower. Provided always that the Bank may in its discretion refrain
from
forthwith enforcing its rights under this Agreement in site of the
happening of any of the contingencies aforesaid and provided further
that
the failure or deal by the Bank in exercising any right, power or
privilege hereunder or under any of the security documents shall
no
impair/extinguish the same or operate as waiver of the same nor shall
any
single or partial exercise of any right, power or privilege preclude
any
further exercise of the same or the exercise of any other right,
power or
privilege. The rights and remedies provided herein and in the security
documents are cumulative and not exclusive of any rights and remedies
provided by law.
|
56.
|
In
respect of the credit facilities granted or to be granted by way
of term
loans or such facilities/liens of credit as may be granted in foreign
currencies (hereinafter referred to as foreign currency loans), the
Borrower hereby agrees and covenants with the Bank as
under:
|
a.
|
The
Bank may, without prejudice to any of the rights as may be available
to
the Bank under any other agreement, remit the instalments under the
foreign currency loans by debiting the rupee equivalents of such
instalments, as and when falling due, converted at such rate of exchange
as may be ruling at the material time as between the concerned foreign
currency and Indian Rupee and the Borrower hereby indemnifies the
Bank
against any claim or claims, loss or losses or damages, actions,
costs and
expenses whatsoever which may be brought or made against or sustained
or
incurred by the Bank (and whether paid by the Bank or not) or which
the
bank may become liable in making such remittances;
|
b.
|
In
the event of the Borrower defaulting in effecting the remittance
of any of
the instalments falling due under the foreign currency loans, the
Bank
may, without prejudice to any other remedy or without being obliged
to do
so, shall be entitled to debit the Rupee equivalent of the said instalment
(converted at such rate of exchange as may be ruling at the material
time
as between the concerned foreign currency and Indian rupee) to any
cash
credit/overdraft account of the Borrower opened or to be opened with
the
Bank and all such amounts so debited shall be charged with interest
as
applicable to the said account as provided in clause No. 14
above;
|
c.
|
Such
remittances made by the Bank shall not absolve the Borrower protanto
from
his liability under the foreign currency loans nor shall they be
deemed,
in so far as the Borrower’s liability to the Bank and the relative
security charged therefore in favour of the Bank are concerned, to
reduce
the outstandings under the foreign currency loans to the extent of
the
defaulted amounts of instalments so remitted by the Bank and
notwithstanding the remittances so made, the Bank reserves the right
of
set off or other legal remedies as against the Borrower according
to the
law of the country where such foreign currency loans have been made
available.
|
57.
|
In
respect of the facilities granted by the Bank by issue of letters
of
credit, guarantees including deferred payment guarantees and indemnities
whether in Indian or foreign currencies, the Borrower hereby agrees
and
covenants with the Bank as under:
|
a.
|
To
indemnify the Bank against any claim or claims, loss or damage actions
costs (as between Advocate and client), charges and expenses whatsoever
which may be brought or made against or sustained or incurred by
the Bank
(and whether paid by the Bank or note) or which the Bank may become
liable
under or in respect of such letters of credit guarantees and
indemnities;
|
b.
|
The
Bank may in its sole absolute and unqualified discretion and without
reference to the Borrower and without the Bank being required to
ascertain
whether or not there was any breach on the part of the Borrower of
the a
executed between the Borrower and the beneficiaries in whose favour
the
guarantees and/or indemnities are or were executed by the Bank and
without
the Bank being required to into the validity or otherwise of the
demand
for payment made against the Bank and notwithstanding any directions
to
the contrary given by the Borrower or any other person on the ground
or
dispute as to the liability of the Borrower or otherwise admit or
compromise and pay or submit to arbitration or dispute or resist
any claim
or demand made against the Bank under or in respect of such guarantees
and
indemnities, the counter-indemnity/guarantee contained herein of
the
Borrower being available to the Bank in respect of any action or
payment
which the Bank may take or make; and
|
c.
|
In
the event of any payment being made by the Bank pursuant to any letter
of
credit, guarantee/indemnity issued by the Bank on behalf of the Borrower,
the Bank without prejudice to any other remedy it may have shall
be
entitled to debit the said payment to any account of the Borrower
opened/to be opened with the Bank and all such amounts unless adjusted
against any cash margin available and properly applicable to the
said
letter of credit, guarantee/indemnitee shall also be charged with
interest
as applicable to the account in which they are debited as provided
in
clause no. 14 above.
|
58.
|
If
the Borrower be more than one individual all shall be bound hereunder
jointly and severally or if a firm or members of a firm, such firm
and all
such members and all the members thereof, from time to time, shall
be
bound hereunder jointly and severally notwithstanding any changes
in the
constitution or style thereof and whether such firm consist of or
be
reduced to one individual at any time and that the Borrower be more
than
one individual at any time, any notice served on any such one individual
shall be deemed to be service of such notice on all such
individuals.
|
59.
|
Any
notice or communication or demand by the Bank in writing to the Borrower
under this a or any security documents shall be deemed to have been
duly
given to the Borrower by sending the same by post addressed to the
Borrower at the address notified by the Borrower and such notice
or
communication or demand shall be deemed to have been received by
the
Borrower four days after the date of posting thereof and shall be
sufficient if signed by any officer of the Bank and in proving such
service it shall be sufficient if it is established that the envelope
containing such notice, communication or demand was properly addressed
and
put into the post office.
|
60.
|
The
Borrower shall bear and pay all costs, charges and expenses (between
Advocate and Client) including stamp duty registration and other
charges
payable in respect of this a and also in respect of other security
documents to be executed between the parties hereto as stipulated
in this
a and if any penalty or charges are paid or become payable by the
Bank,
the Borrower shall pay to the Bank the amount thereof with interest
thereon at the rate aforesaid forthwith on demand by the
Bank.
|
/s/
Surendra Ajjarapu
|
Name:
/s/ Smt. Anita Chandran, Director
|
By:
|
/s/
Eric A. McAfee
|
Eric
A. McAfee
Chief
Executive Officer
|
By:
|
/s/
William J. Maender
|
William
J. Maender
Chief
Financial Officer
|
By:
|
/s/
Eric A. McAfee
|
Eric
A. McAfee
Chief
Executive Officer
|
By:
|
/s/
William J. Maender
|
William
J. Maender
Chief
Financial Officer
|