EXHIBIT 4.01
CREDIT AGREEMENT
made and entered into
as of June 12, 1997
by and between
TIDEL ENGINEERING, INC.
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
a National Banking Association
INDEX TO CREDIT AGREEMENT
PAGE
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1. Definitions.......................................................... 1
1.1. CERTAIN DEFINED TERMS...........................................1
Adjusted LIBOR Rate.............................................1
Affiliate.......................................................1
Alternate Base Rate.............................................1
Alternate Base Rate Borrowing...................................2
Annual Audited Financial Statements.............................2
Applicable Lending Office.......................................2
Applicable Margin...............................................2
Applications....................................................2
Assessment Rate.................................................3
Availability....................................................3
Base CD Rate....................................................3
Borrower .......................................................3
Borrowing Base..................................................3
Business Day....................................................3
Business Entity.................................................3
Capital Expenditures............................................4
Capital Lease Obligations.......................................4
Closing Date....................................................4
Code............................................................4
Collateral......................................................4
Commitment......................................................4
Commitment Fee..................................................4
Consequential Loss..............................................4
Consolidated....................................................5
Contingent Obligation...........................................5
Current Sum.....................................................5
Discontinued Operations.........................................5
Domestic Lending Office.........................................5
EBITDA..........................................................5
Eligibility Reserves............................................5
Eligible Inventory..............................................5
Eligible Receivables............................................6
Environmental Claim.............................................7
Environmental Liabilities.......................................8
Environmental Permit............................................8
ERISA...........................................................8
ERISA Affiliate.................................................8
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Event of Default................................................8
Excess Interest Amount..........................................9
Federal Funds Effective Rate....................................9
Financial Officer...............................................9
GAAP............................................................9
Governmental Authority..........................................9
Grantor.........................................................9
Guarantors......................................................9
Guaranty........................................................9
Hazardous Substance.............................................9
Highest Lawful Rate............................................10
Indebtedness...................................................10
Interest Coverage Ratio........................................10
Interest Expense...............................................10
Interest Option................................................11
Interest Payment Dates.........................................11
Interest Period................................................11
Interest Reserves..............................................11
Investment.....................................................11
Joinder Agreement..............................................11
Legal Requirement..............................................11
Lender.........................................................11
Letters of Credit..............................................11
Letter of Credit Advances......................................11
Letter of Credit Exposure Amount...............................12
LIBOR Borrowing................................................12
LIBOR Lending Office...........................................12
LIBOR Rate.....................................................12
Lien...........................................................12
Loan Documents.................................................12
Loans..........................................................12
Lockbox Agreement..............................................12
Material Adverse Effect........................................13
Maturity Date..................................................13
Monthly Unaudited Financial Statements.........................13
Net Amount of Eligible Receivables.............................13
Net Income.....................................................13
Note...........................................................13
Obligations....................................................13
Officer's Certificate..........................................14
Organizational Documents.......................................14
Parties........................................................14
Past Due Rate..................................................14
PBGC...........................................................14
Permitted Affiliate Transactions...............................14
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Permitted Dispositions.........................................14
Permitted Investments..........................................15
Permitted Investment Securities................................16
Person.........................................................16
Plan...........................................................16
Prime Rate.....................................................16
Principal Office...............................................16
Proper Form....................................................16
Quarterly Unaudited Financial Statements.......................16
Rate Selection Date............................................17
Rate Selection Notice..........................................17
Receivables....................................................17
Refinancing Indebtedness.......................................17
Regulation D...................................................17
Regulatory Change..............................................17
Reportable Event...............................................18
Request for Extension of Credit................................18
Requirements of Environmental Law..............................18
Responsible Officer............................................18
Security Agreements............................................18
Security Documents.............................................18
Statutory Reserves.............................................18
Stock..........................................................19
Subordinated Indebtedness......................................19
Subsidiary.....................................................19
Tangible Net Worth.............................................19
Three-Month Secondary CD Rate..................................19
Unused Commitment..............................................20
1.2. Accounting Terms and Determinations............................20
2. Loans; Letters of Credit; Notes; Payments; Prepayments;
Interest Rates.................................................21
2.1. Commitments....................................................21
2.2. Loans..........................................................21
2.3. Commitment and Other Fees......................................21
2.4. Termination and Reductions of Commitments......................22
2.5. Mandatory and Voluntary Prepayments............................23
2.6. Notes: Payments................................................24
2.7. Application of Payments and Prepayments........................25
2.8. Interest Rates for Loans.......................................25
2.9. Special Provisions Applicable to LIBOR Borrowings..............26
2.10 Letters of Credit............................................. 30
2.11 Recapture..................................................... 33
2.12 Use of Proceeds............................................... 33
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3. Collateral...........................................................33
3.1. Security Documents.............................................33
3.2. Filing and Recording...........................................33
4. Conditions...........................................................34
4.1. All Loans......................................................34
4.2. First Loan.....................................................35
5. Representations and Warranties.......................................37
5.1. Organization...................................................37
5.2. Financial Statements...........................................38
5.3. Enforceable Obligations; Authorization.........................38
5.4. Other Debt.....................................................38
5.5. Litigation.....................................................38
5.6. Taxes..........................................................39
5.7. No Material Misstatements......................................39
5.8. Subsidiaries...................................................39
5.9. Representations by Others......................................39
5.10 Permits, Licenses, Etc.........................................39
5.11 ERISA..........................................................39
5.12. Title to Properties; Possession Under Leases.............39
5.13. Assumed Names............................................40
5.14. Investment Company Act...................................40
5.15. Public Utility Holding Company Act.......................40
5.16. Indebtedness Agreements..................................40
5.17. Environmental Matters....................................41
5.18. No Change in Credit Criteria or Collection Policies......41
5.19. Solvency.................................................41
5.20. Status of Receivables and Other Collateral...............42
6. Affirmative Covenants................................................43
6.1. Businesses and Properties......................................43
6.2. Taxes..........................................................43
6.3. Financial Statements and Information...........................43
6.4. Inspection.....................................................44
6.5. Further Assurances.............................................45
6.6. Books and Records..............................................45
6.7. Insurance......................................................45
6.8. ERISA..........................................................46
6.9. Use of Proceeds................................................46
6.10 Guarantor; Joinder Agreement...................................46
6.11 Notice of Events...............................................47
6.12 Environmental Matters..........................................47
6.13 End of Fiscal Year.............................................47
6.14 Pay Obligations and Perform Other Covenants....................47
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6.15. Collection of Receivables: Application of
Lockbox Agreement Proceeds.....................................47
6.16. Additional Receivables Documentation...........................48
7. Negative Covenants...................................................49
7.1. Indebtedness...................................................49
7.2. Liens..........................................................49
7.3. Contingent Liabilities.........................................51
7.4. Mergers, Consolidations and Dispositions and
Acquisitions of Assets.........................................52
7.5. Nature of Business.............................................52
7.6. Transactions with Related Parties..............................53
7.7. Investments; Loans.............................................53
7.8. ERISA Compliance...............................................54
7.9. Credit Extensions..............................................54
7.10 Change in Accounting Method....................................54
7.11 Interest Coverage Ratio........................................54
7.12 Tangible Net Worth.............................................54
7.13 Capital Expenditures...........................................54
7.14 Sales of Receivables...........................................54
7.15 Sale and Lease-Back Transactions...............................54
7.16 Change of Name or Place of Business............................55
7.17. Availability...................................................55
8. Events of Default and Remedies.......................................55
8.1. Events of Default..............................................55
8.2. Remedies Cumulative............................................58
9. Miscellaneous........................................................58
9.1. No Waiver......................................................58
9.2. Notices........................................................58
9.3. Governing Law..................................................59
9.4. Survival; Parties Bound........................................59
9.5. Counterparts...................................................59
9.6. Limitation of Interest.........................................59
9.7. Survival.......................................................61
9.8. Captions.......................................................61
9.9. Expenses, Etc..................................................61
9.10 Indemnification................................................61
9.11. Amendments, Waivers, Etc.......................................62
9.12. Successors and Assigns.........................................62
9.13. Entire Agreement...............................................63
9.14. Severability...................................................63
9.15. Disclosures....................................................63
9.16. Intentionally Left Blank.......................................63
9.17 Taxes..........................................................63
9.18. Waiver of Claims...............................................65
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9.19. Right of Setoff................................................65
9.20. Waiver of Right to Jury Trial..................................65
9.21. Additional Provisions Regarding Collection of Receivables;
Control of Inventory and Other Collateral......................65
9.22. Joint and Several Obligations..................................67
9.23. Venue; Service of Process......................................67
9.24. No Other Agreements............................................68
EXHIBITS
A - Note Form (ss. 1.1)
B - Standard Lockbox Agreement (ss. 1.1)
C - Officer's Certificate (ss. 1.1)
D - Request for Extension of Credit (ss. 1.1)
E - Rate Selection Notice (ss. 2.8[b][1])
F - Secretary's Certificate (ss. 4.2[c])
G - Borrowing Base Compliance Certificate Form (ss. 6.3[g])
SCHEDULES
5.5 - Material Litigation
5.12 - Leases of Real Property
5.13 - List of Assumed Names
5.16 - Indebtedness & Capital Leases
5.17 - Environmental Matters
7.2 - Liens
7.6 - List of Existing Transaction with Related Parties
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT (together with all amendments, modifications and
supplements hereto and restatements hereof, this "AGREEMENT") is made and
entered into as of June 12th, 1997, by and among TIDEL ENGINEERING, INC.
("BORROWER"), a Delaware corporation, and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association ("LENDER").
W I T N E S S E T H:
THAT, in consideration of the mutual covenants, agreements and
undertakings herein contained, the parties hereto agree as follows:
1. DEFINITIONS.
1.1 CERTAIN DEFINED TERMS. Unless a particular word or phrase is otherwise
defined or the context otherwise requires, capitalized words and phrases used in
the Loan Documents have the meanings provided below.
ADJUSTED LIBOR RATE shall mean, with respect to any LIBOR Borrowing for
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the sum of (a) the product of (i) the sum of
the LIBOR Rate in effect for such Interest Period and (ii) Statutory Reserves
and (b) the Applicable Margin.
AFFILIATE of any Person shall mean any other Person which controls or is
controlled by or under common control with such Person and, without limiting the
generality of the foregoing, includes (a) any Person which beneficially owns or
holds five percent (5 %) or more of any class of voting securities of such
Person or five percent (5%) of the equity interest in such Person, (b) any
Person of which such Person beneficially owns or holds five percent (5%) or more
of any class of voting securities or in which such Person beneficially owns or
holds five percent (5%) or more of the equity interest in such Person, and (c)
any director, officer or employee of such Person. For purposes of this
definition, "control" (including "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of securities, partnership or other ownership interests,
by contract or otherwise.
ALTERNATE BASE RATE shall mean, for any day, a rate per annum (rounded
upwards to the nearest 1/16 of 1%) equal to the sum of (a) the greater of (i)
the Prime Rate (computed on the basis of the actual number of days elapsed over
a year of 360 days, as the case may be) in effect on such day, (ii) the Federal
Funds Effective Rate (computed on the basis of the actual number of days elapsed
over a 360-day year) in effect for such day plus 1/2 of 1%, and (iii) the Base
CD Rate in effect for such day plus 1 % and (b) the Applicable Margin. For
purposes of this
Agreement, any change in the Alternate Base Rate due to a change in the Prime
Rate, Federal Funds Effective Rate or the Three-Month Secondary CD Rate shall be
effective on the effective date of such change in the Prime Rate, Federal Funds
Effective Rate or the Three-Month Secondary CD Rate, respectively. If for any
reason the Lender shall have determined (which determination shall be conclusive
and binding, absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate or Base CD Rate, or both, for any reason, including the
inability or failure of the Lender to obtain sufficient quotations in accordance
with the terms hereof, the Alternate Base Rate shall be determined without
regard to clauses (a)(ii) or (a)(iii), or both, as appropriate, until the
circumstances giving rise to such inability no longer exist.
ALTERNATE BASE RATE BORROWING shall mean as of any date, that portion of
the principal balance of the Loans bearing interest at the Alternate Base Rate
as of such date.
ANNUAL AUDITED FINANCIAL STATEMENTS shall mean the annual audited
Consolidated and consolidating financial statements of a Person, including all
notes thereto, which statements shall include a balance sheet as of the end of
such fiscal year and an income statement, a retained earnings statement and a
statement of cash flows for such fiscal year, all setting forth in comparative
form the corresponding figures from the previous fiscal year, all prepared in
conformity with GAAP and accompanied by a report and opinion of independent
certified public accountants with a "Big 6" accounting firm or other accounting
firm of similar national standing and reputation, which report shall not contain
any qualification except with respect to new accounting principles mandated by
the Financial Accounting Standards Board and shall state that such financial
statements, in the opinion of such accountants, present fairly, in all material
respects, the financial position of such Person as of the date thereof and the
results of its operations and cash flows for the period covered thereby in
conformity with GAAP. The Annual Audited Financial Statements for the Borrower
and its Subsidiaries shall be prepared on a Consolidated and consolidating basis
in accordance with GAAP. All such Annual Audited Financial Statements shall be
accompanied by a certificate of such accountants that in making the appropriate
audit and/or investigation in connection with such report and opinion, such
accountants did not become aware of any Default or Event of Default, or if in
the opinion of such accountant any such Default or Event of Default exists, a
description of the nature and status thereof.
APPLICABLE LENDING OFFICE shall mean, the Domestic Lending Office in the
case of an Alternate Base Rate Borrowing and the LIBOR Lending Office in the
case of a LIBOR Borrowing.
APPLICABLE MARGIN shall mean with respect to any LIBOR Borrowing, two and
one-half percent (2.50%), and with respect to any Alternate Base Rate Borrowing,
zero percent (0.00%); provided, however, when and if the daily collection and
application procedure for Receivables is implemented and is continuing in
accordance with the provisions of SECTION 6.15(B) hereof, each applicable
percentage above shall be increased by one quarter of one percent (0.25%).
APPLICATIONS shall mean all applications and agreements for Letters of
Credit, or similar instruments or agreements, in Proper Form, now or hereafter
executed by any Person in
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connection with any Letter of Credit now or hereafter issued or to be issued
under the terms hereof at the request of any Person.
ASSESSMENT RATE shall mean the annual assessment rate (net of refunds and
rounded upwards, if necessary, to the next 1/16 of 1 %) estimated by the Lender
(in good faith, but in no event in excess of statutory or regulatory maximums)
to be payable by the Lender to the Federal Deposit Insurance Corporation (or any
successor) for insurance by such Corporation (or such successor) of time
deposits made in dollars at the Lender's domestic offices during the current
calendar year.
AVAILABILITY shall mean at any time (a) the lesser at such time of (i) the
Commitment (as such amount may be reduced in accordance with the provisions of
this Agreement) and (ii) the Borrowing Base, less (b) the sum of (i) the
aggregate amount of Lender's Current Sum at such time, (ii) the aggregate amount
of accrued interest outstanding under the Loans at such time and (iii) all other
Obligations outstanding hereunder or any other Loan Documents at such time.
BASE CD RATE shall mean the sum of (a) the product of (i) the sum of the
Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the Assessment
Rate.
BORROWER shall have the meaning assigned to such term in the preamble of
this Agreement.
BORROWING BASE shall mean, as of any date, the amount of the then most
recent computation of the Borrowing Base, determined by calculating the amount
equal to the sum of (i) 80% of the Net Amount of Eligible Receivables at such
date, plus (ii) the lesser of (a) 50% of the Eligible Inventory, and (b)
$2,500,000. For purposes of this definition, Eligible Receivables and Eligible
Inventory, in each case, and as of the date of any determination, shall be
determined after deduction of all Eligibility Reserves and Interest Reserves
then effective with respect to such items. The Borrowing Base will be computed
initially hereunder on a weekly basis (based on all information reasonably
available to the Lender, including without limitation, the periodic reports and
listings delivered to the Lender in accordance with SECTION 6.3(F) hereof), and
a monthly Borrowing Base Compliance Certificate from a Responsible Officer of
the Borrower presenting the Borrower's computation of the Borrowing Base will be
periodically delivered to the Lender in accordance with SECTION 6.3(G) hereof.
When and if the daily collection and application procedure for Receivables is
implemented and is continuing in accordance with the provisions of SECTION
6.15(B) hereof, the Borrowing Base will be computed on a daily basis (based on
all information reasonably available to the Lender, including without
limitation, the periodic reports and listings delivered to Lender in accordance
with SECTIONS 6.3(F) and 6.15(D) hereof), and a weekly Borrowing Base Compliance
Certificate from a Responsible Officer of the Borrower shall continue to be
periodically delivered to the Lender in accordance with SECTION 6.3(G) hereof.
BUSINESS DAY shall mean a day when the principal office in Dallas, Texas
of the Lender is open for business and banks in New York City are generally open
for business.
BUSINESS ENTITY shall mean corporations, partnerships, joint ventures,
joint stock associations, business trusts and other business entities.
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CAPITAL EXPENDITURES shall mean, with respect to any Person for any
period, the capital expenditures of such person during such period determined in
accordance with GAAP, consistently applied, and shall in any event include,
without limitation, all expenditures made and liabilities incurred for the
acquisition of any fixed asset, or improvement, replacement, substitution or
addition thereto, which has a useful life of more than one year, and Capital
Lease Obligations.
CAPITAL LEASE OBLIGATIONS shall mean the obligations of a Person to pay
rent or other amounts under a lease of (or other agreement conveying the right
to use) real and/or personal Property which obligations are required to be
classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP (including Statement of Financial Accounting Standards No. 13
of the Financial Accounting Standards Board, as amended) and, for purposes of
this Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP (including such Statement No. 13).
FINANCIAL OFFICER shall mean, with respect to any Person, the Financial
Officer of such Person.
CLOSING DATE shall mean the earlier to occur of (a) the date of the first
Loan under this Agreement or (b) June 12, 1997.
CODE shall mean the Internal Revenue Code of 1986, as amended, as now or
hereafter in effect, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.
COLLATERAL shall mean all collateral and security as described in the
Security Documents.
COMMITMENT shall mean the obligation of Lender to make Loans and incur
liability for the Letter of Credit Exposure Amount in an aggregate principal
amount at any one time outstanding up to, but not exceeding, $5,000,000 (as the
same may be reduced from time to time pursuant to SECTION 2.4 hereof).
COMMITMENT FEE shall have the meaning assigned to it in SECTION 2.3(A).
CONSEQUENTIAL LOSS shall mean, with respect to (a) the Borrower's payment
of principal of a LIBOR Borrowing on a day other than the last day of the
applicable Interest Period, (b) the Borrower's failure to borrow a LIBOR
Borrowing on the date specified by the Borrower for any reason, or (c) any
cessation of the Adjusted LIBOR Rate to apply to the Loans or any part thereof
pursuant to SECTION 2.9 hereof, in each case whether voluntary or involuntary,
any loss, expense, penalty, premium or liability incurred by the Lender as a
result thereof, including without limitation, any interest paid by the Lender to
lenders of funds borrowed by it to make or carry the Loans and any other costs
and expenses sustained or incurred in liquidating or employing deposits from
third parties acquired to effect or maintain the Loans.
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CONSOLIDATED shall mean, for any Person, as applied to any financial or
accounting term, such term determined on a consolidated basis in accordance with
GAAP (except as otherwise required herein) for such Person and all Subsidiaries
thereof.
CONTINGENT OBLIGATION shall mean, as to any Person, any obligation of such
Person guaranteeing or intended to guarantee the payment or performance of any
Indebtedness, leases, dividends or other obligations (collectively "primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including without limitation, any obligation of the
Person for whom Contingent Obligations is being determined, whether or not
contingent, (a) to purchase any such primary obligation or other property
constituting direct or indirect security therefor, (b) assume or contingently
agree to become or be secondarily liable in respect of any such primary
obligation, (c) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working capital or equity
capital for the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (d) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation, or (e) otherwise to assure or hold harmless the owner of such
primary obligation against loss in respect thereof; PROVIDED, HOWEVER, that the
term "Contingent Obligation" shall not include (x) endorsements of checks or
other negotiable instruments in the ordinary course of business or (y) issuance
of indemnities in the ordinary course of business.
CURRENT SUM shall mean on any day the sum of (a) the outstanding principal
balance of Lender's Note on such day PLUS (b) the Letter of Credit Exposure
Amount on such day.
DISCONTINUED OPERATIONS shall mean, as of any day, operations of the
Borrower or any of its Subsidiaries which have been discontinued, and which, as
of such day, have been fully terminated, disposed of or liquidated.
DOMESTIC LENDING OFFICE shall mean the office of Lender specified as its
"Domestic Lending Office" opposite its name on the signature pages hereof, or
such other office of Lender as Lender may from time to time specify to the
Borrower.
EBITDA shall mean with respect to any Person for any period the sum of (i)
Net Income, (ii) Interest Expense, (iii) depreciation and amortization of
assets, and (iv) federal, state and local income taxes, in each case of such
Person for such period, computed and calculated in accordance with GAAP
consistently applied.
ELIGIBILITY RESERVES shall mean such amounts as the Lender, in the
exercise of its sole discretion, may from time to time establish against the
gross amounts of Eligible Receivables or Eligible Inventory to reflect risk or
contingencies arising after the Closing Date which may affect such items.
ELIGIBLE INVENTORY means an amount equal to the lesser of (i) the original
cost to Borrower, or (ii) the fair market value, of all its domestic raw
materials and finished goods inventory owned by it at the time in question,
determined on a first-in first-out basis in accordance
5
with GAAP, (provided that, the cost or fair market value, as the case may
be, of finished goods inventory eligible for inclusion in the Borrowing Base
shall not exceed thirty-five percent (35.00%) of cost or fair market value, as
the case may be, of raw materials eligible for inclusion in the Borrowing Base)
so long as such inventory (a) is owned by Borrower free and clear of all Liens
other than Liens permitted under SECTION 7.2 and, if held or stored on leased
premises, is subject to the terms of a landlord's waiver and agreement executed
by the landlord of such premises in form and substance acceptable to Lender, (b)
is fully and adequately insured with Lender named as loss payee pursuant to
SECTION 6.7 and is located in the United States, (c) is not on lease or
consignment or furnished under any contract of service from or to any Person to
or from Borrower, (d) is subject to an enforceable and duly perfected first
priority security interest in favor of Lender, (e) is not in transit, (f) is in
good and merchantable condition, meets all standards or regulations imposed by
any Governmental Authority, where or when applicable, having regulatory
authority over such goods, their use and/or sale and is either currently usable
or currently saleable in the normal course of Borrower's business and is not, in
the opinion of the Lender, work-in-process, unsaleable, damaged, slow moving,
discontinued or non-current production, obsolete or otherwise not readily
usable, and (g) is not a demonstration unit nor an AnyCard II.
ELIGIBLE RECEIVABLES shall mean, as at any date of determination thereof,
Receivables created by the Borrower (but only to the extent that such
Receivables are Collateral hereunder and are subject to a first priority
perfected Lien in favor of the Lender) in the ordinary course of business
arising out of the sale of goods or rendering of services by the Borrower, which
do, and at all times shall continue to, satisfy the standards of eligibility
applicable thereto as established by the Lender in accordance with the terms
hereof. Standards of eligibility for Receivables may be fixed and revised from
time to time by the Lender in the Lender's reasonable, exclusive judgment;
PROVIDED, that the Lender shall give the Borrower notice within a reasonable
time after giving effect to any change in such standards of eligibility. In
general, without limiting the foregoing, an Eligible Receivable must comply with
all of the following requirements: (a) all payments due on the Receivable have
been billed and invoiced in a timely fashion and in the normal course of
business; (b) no payment is outstanding on the Receivable for more than 90 days
after the date of invoice; (c) the payments due on 50% or more of all
Receivables of the applicable account debtor are less than 90 days past the date
of invoice; (d) the total Receivables owing to the Borrower by the applicable
account debtor constitute 10% or less of the aggregate Receivables owing to the
Borrower by all account debtors, or if the total Receivables of the applicable
account debtor (other than Hanco Systems, in which case 25%, and Retriever
Payment Systems, in which case 15%) exceed 10% of the aggregate of all
Receivables owing to the Borrower and its Subsidiaries by all account debtors,
the Receivables of the applicable account debtor up to such respective
percentage limit shall be deemed to constitute Eligible Receivables (subject to
compliance with all other applicable standards of eligibility) and the
Receivables of the applicable account debtor exceeding such respective
percentage limit shall be included within Eligible Receivables (subject to
compliance with all other applicable standards of eligibility) only if the
Receivables exceeding such respective percentage limit are backed or secured by
credit insurance reasonably satisfactory to the Lender in all respects and such
credit insurance has been assigned to the Lender upon terms reasonably
acceptable to the Lender in its discretion; (e) the Receivable is free and clear
of all security interests, liens, charges and encumbrances of any nature
whatsoever (except for the Lien
6
in favor of the Lender); (f) the Receivable arose from a completed, outright and
lawful sale of goods, to which title has passed to the applicable account debtor
on an absolute sales basis, or from the rendering of services by or on behalf of
the Borrower; (g) the Receivable constitutes an "account" within the meaning of
the Uniform Commercial Code of the state in which the Borrower's principal
offices are located; (h) the Borrower is not aware that the Receivable arises
out of a ▇▇▇▇ and hold (other than Receivables which have been specifically
identified to Lender and for which, as a condition of eligibility, appropriate
documentation has been delivered to Lender), consignment or progress billing
arrangement or is subject to any setoff, contra, offset, deduction, dispute,
chargeback, credit, counterclaim or other defense arising out of the
transactions represented by the Receivable or independently thereof (such
Receivable to be excluded only to the extent of such setoff, contra, offset,
etc., subject to compliance with all other standards of eligibility); (i) the
applicable account debtor has finally accepted the goods or services from the
sale out of which the Receivable arose and has not objected to such account
debtor's liability thereon or returned, rejected or repossessed any of such
goods, except for complaints made or goods returned in the ordinary course of
business for which, in the case of goods returned, goods of equal or greater
value have been shipped in return (such Receivable to be excluded to the extent
of such objection, return, rejection or repossession, subject to compliance with
all other standards of eligibility); (j) the applicable account debtor is not
any Governmental Authority, unless there has been in compliance reasonably
satisfactory to the Lender in all respects with the Assignment of Claims Act or
similar state statutes; (k) the applicable account debtor is not an Affiliate of
the Borrower or any Subsidiary; (l) the account debtor must be located in the
United States, except for Receivables insured or backed by credit insurance or a
letter of credit in form and substance reasonably acceptable to the Lender in
all respects; (m) the Receivable complies with all material Legal Requirements
(including without limitation, all usury laws, fair credit reporting and billing
laws, fair debt collection practices and rules, and regulations relating to
truth in lending and other similar matters); (n) the Receivable is in full force
and effect and constitutes a legal, valid and binding obligation of the
applicable account debtor enforceable in accordance with the terms thereof; (o)
the Receivable is denominated in and provides for payment by the applicable
account debtor in U.S. dollars; (p) the Receivable has not been and is not
required to be charged or written off as uncollectible in accordance with GAAP;
(q) if the Receivable is owing by an account debtor for which the Borrower must
have filed a "Notice of Business Activities Report" or similar report in a state
or states where failure to comply with such filing of notice precludes bringing
suit against the applicable account debtor, the Borrower must have filed such
requisite activities report or other similar report and otherwise be in
compliance with such Legal Requirement to the extent necessary to allow the
Borrower to bring suit against the applicable account debtor in the applicable
state or states; and (r) the Lender is satisfied in its reasonable discretion
with the credit standing of the applicable account debtor in relation to the
amount of credit extended.
ENVIRONMENTAL CLAIM shall mean any third party (including any Governmental
Authority) action, lawsuit, claim or proceeding (including claims or proceedings
at common law) which seeks to impose or alleges any liability for (i) noise;
(ii) preservation, protection, conservation, pollution, contamination of, or
releases or threatened releases of, Hazardous Substances into the air, surface
water, ground water or land or the clean-up, abatement, removal, remediation or
monitoring of such pollution, contamination or Hazardous Substances; (iii)
generation, recycling, reclamation,
7
handling, treatment, storage, disposal or transportation of Hazardous Substances
(as defined under the Resource Conservation and Recovery Act and its
regulations, as amended from time to time); (iv) exposure to Hazardous
Substances; (v) the safety or health of employees or other Persons in connection
with any of the activities specified in any other subclause of this definition;
or (vi) the manufacture, processing, distribution in commerce, presence or use
of Hazardous Substances. An "ENVIRONMENTAL CLAIM" includes a common law action,
as well as a proceeding to issue, modify or terminate an Environmental Permit,
or to adopt or amend a regulation, to the extent that such a proceeding attempts
to redress violations of the applicable permit, license, or regulation as
alleged by any Governmental Authority.
ENVIRONMENTAL LIABILITIES shall mean all liabilities arising from any
Environmental Claim, Environmental Permit or Requirement of Environmental Law
under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise, including: remedial, removal,
response, abatement, restoration (including natural resources), investigative,
or monitoring liabilities, personal injury and damage to property, natural
resources or injuries to persons, and any other related costs, expenses, losses,
damages, penalties, fines, liabilities and obligations, and all costs and
expenses necessary to cause the issuance, reissuance or renewal of any
Environmental Permit including attorney's fees and court costs. ENVIRONMENTAL
LIABILITY shall mean any one of them.
ENVIRONMENTAL PERMIT shall mean any permit, license, approval or other
authorization under any applicable law, regulation and other requirement of the
United States or of any state, municipality or other subdivision thereof
relating to pollution or protection of health or the environment, including
laws, regulations or other requirements relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, Hazardous
Substances or toxic materials or wastes into ambient air, surface water, ground
water or land, or otherwise relating to the manufacture, processing,
distribution, recycling, presence, use, treatment, storage, disposal, transport,
or handling of wastes, pollutants, contaminants or Hazardous Substances.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules, regulations, rulings and
interpretations adopted by the Internal Revenue Service or the Department of
Labor thereunder.
ERISA AFFILIATE shall mean any trade or business (whether or not
incorporated) which together with the Borrower or any Subsidiary of the Borrower
would be treated as a single employer under the provisions of Title I or Title
IV of ERISA.
EVENT OF DEFAULT shall mean any of the events specified in SECTION 8.1
hereof or otherwise specified as a Default in any other Loan Document, provided
there has been satisfied any requirement in connection with any such event for
the giving of notice or the lapse of time, or both, and DEFAULT shall mean any
of such events, whether or not any such requirement for the giving of notice, or
the lapse of time, or both, has been satisfied.
EXCESS INTEREST AMOUNT shall have the meaning attributed to such term in
SECTION 2.11 hereof.
8
FEDERAL FUNDS EFFECTIVE RATE shall mean, for any day, a rate per annum
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for the day of such
transactions received by the Lender from three Federal funds brokers of
recognized standing selected by it.
GAAP shall mean, as to a particular Person, those principles and practices
(a) which are recognized as generally accepted accounting principles by the
Financial Accounting Standards Board or any successor organization, (b) which
are applied for all periods after the date hereof in a manner consistent with
the manner in which such principles and practices were applied to the most
recent audited financial statements of the relevant Person furnished to the
Lender, and (c) which are consistently applied for all periods after the date
hereof so as to reflect properly the financial condition, and results of
operations and changes in financial position, of such Person. If any changes in
accounting principles from those used in preparation of the financial statements
periodically required to be delivered to the Lender by the terms of this
Agreement are hereafter occasioned by promulgation of rules, regulations,
pronouncements or opinions by or other required by the Financial Accounting
Standards Board or any successor or organization, and any of such changes
results in a change of the method of calculation of, or affect the results of
such calculation of, any financial covenant or financial standard or term found
herein, then the parties hereto agree to continue to calculate financial
covenants, standards and terms hereunder in accordance with GAAP as in existence
on the Closing Date.
GOVERNMENTAL AUTHORITY shall mean any foreign governmental authority, the
United States of America, any state of the United States and any political
subdivision of any of the foregoing, and any agency, instrumentality,
department, commission, board, bureau, central bank, authority, court or other
tribunal, in each case whether executive, legislative, judicial, regulatory or
administrative, having jurisdiction over the Lender, the Borrower, any
Subsidiary of the Borrower, or their respective Property.
GRANTOR shall mean any Grantor, Assignor, Pledgor or Debtor, as such terms
are defined in any of the Security Documents.
GUARANTORS shall mean each and every Person executing a Guaranty from time
to time.
GUARANTY shall mean each and every guaranty of the Obligations from time
to time executed and delivered to the Lender by any Guarantor, as amended,
supplemented, modified, joined in pursuant to a Joinder Agreement and restated
from time to time.
HAZARDOUS SUBSTANCE shall mean any hazardous or toxic waste, substance or
product or material defined or regulated from time to time by any applicable
law, rule, regulation or order described in the definition of "Requirements of
Environmental Law," including solid waste (as defined under RCRA or its
regulations, as amended from time to time), petroleum and any fraction thereof,
any radioactive materials and waste.
9
HIGHEST LAWFUL RATE shall mean the maximum nonusurious rate of interest
permitted to be charged by the Lender under applicable laws (if any) of the
United States or any state from time to time in effect.
INDEBTEDNESS shall mean, as to any Person, without duplication: (a) all
indebtedness (including principal, interest, fees and charges) of such Person
for borrowed money; (b) any other indebtedness which is evidenced by a bond,
debenture or similar instrument; (c) all Capital Lease Obligations of such
Person; (d) all obligations of such Person for the deferred purchase price of
Property or services (except current trade accounts payable arising in the
ordinary course of business); (e) all obligations of such Person in respect of
outstanding letters of credit, acceptances and similar obligations created for
the account of such Person; (f) all indebtedness, liabilities, and obligations
secured by any Lien on any Property owned by such Person even though such Person
has not assumed or has not otherwise become liable for the payment of any such
indebtedness, liabilities or obligations secured by such Lien; (g) net
liabilities of such Person under interest rate cap agreements, interest rate
swap agreements, foreign currency exchange agreements and other hedging
agreements or arrangements (calculated on a basis satisfactory to the Lender and
in accordance with accepted practice); and (h) all other indebtedness,
liabilities and obligations of such Person which are required to be included or
listed in the liabilities section of such Person's balance sheet according to
GAAP; provided, that such term shall not mean or include any Indebtedness in
respect of which monies sufficient to pay and discharge the same in full (either
on the expressed date of maturity thereof or on such earlier date as such
Indebtedness may be duly called for redemption and payment) shall be deposited
with a depository, agency or trustee acceptable to the Lender in trust for the
payment thereof.
INITIAL PUBLIC OFFERING shall mean the first firm commitment underwritten
public offering of common stock to the general public under the Securities Act
of 1933 which results in the common stock of Borrower being listed and publicly
traded in the NASDAQ national market, American Stock Exchange or New York Stock
Exchange.
INTEREST COVERAGE RATIO shall mean, as of any date that the Interest
Coverage Ratio is calculated, the ratio of (a) the remainder of (i) EBITDA of
the Borrower, minus (ii) Capital Expenditures of the Borrower, to (b) cash
Interest Expense, for the four (4) most recent consecutive fiscal quarters of
the Borrower ending on or immediately prior to the date of determination of the
Interest Coverage Ratio.
INTEREST EXPENSE shall mean, with respect to any Person for any period,
the interest expense of such Person during such period determined in accordance
with GAAP, consistently applied, and shall in any event include, without
limitation, (a) the amortization of debt discounts, (b) the amortization of all
fees payable in connection with the incurrence of Indebtedness to the extent
included in interest expense, (c) the portion of any Capital Lease Obligation
allocable to interest expense, (d) all fixed and calculable dividend payments on
preferred stock, and (e) payments of interest expense in kind.
INTEREST OPTION shall have the meaning given to such term in SECTION
2.8(A) hereof.
10
INTEREST PAYMENT DATES shall mean (a) the first Business Day of each
calendar month prior to the Maturity Date, commencing on July 1, 1997, and (b)
the Maturity Date. In addition to the Interest Payment Dates described in the
preceding sentence, an Interest Payment Date for all LIBOR Borrowings shall be
the last day of the Interest Period applicable thereto.
INTEREST PERIOD shall mean, as to any LIBOR Borrowing, the period
commencing on the date of such LIBOR Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is one (1), two (2), three (3) or six (6) months
thereafter, as the Borrower may elect in accordance herewith; provided, however,
that (a) if an Interest Period would end on a day that is not a Business Day,
such Interest Period shall be extended to the next succeeding Business Day
unless, with respect to LIBOR Borrowings, such next succeeding Business Day
would fall in the next calendar month, in which case such Interest Period shall
end on the next preceding Business Day, (b) no Interest Period shall end later
than the Maturity Date, and (c) interest shall accrue from and including the
first day of an Interest Period to, but excluding, the last day of such Interest
Period.
INTEREST RESERVES shall mean an amount equal to all accrued and unpaid
interest on the Loans and other Obligations.
INVESTMENT shall mean the purchase or other acquisition of any securities
or Indebtedness of, or the making of any loan, advance, transfer of Property or
capital contribution to, any Person.
JOINDER AGREEMENT shall mean any agreement, in Proper Form, executed by a
Subsidiary of the Borrower from time to time in accordance with SECTION 6.10
hereof, pursuant to which such Subsidiary joins in the execution and delivery of
a Guaranty.
LEGAL REQUIREMENT shall mean any law, statute, ordinance, decree,
requirement, order, judgment, rule, regulation (or interpretation of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority.
LENDER shall have the meaning assigned to such terms in the preamble of
this Agreement.
LETTERS OF CREDIT shall mean all standby letters of credit and documentary
sight letters of credit issued by the Lender for the account of the Borrower
pursuant to the terms set forth in this Agreement.
LETTER OF CREDIT ADVANCES shall mean all sums which may from time to time
be paid by the Lender pursuant to any and all of the Letters of Credit, together
with all other sums, fees, reimbursements or other obligations which may be due
to the Lender pursuant to any of the Letters of Credit.
LETTER OF CREDIT EXPOSURE AMOUNT shall mean at any time the sum of (i) the
aggregate undrawn amount of all Letters of Credit outstanding at such time plus
(ii) the aggregate amount
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of all Letter of Credit Advances for which the Lender has not been reimbursed
and which remain unpaid at such time.
LIBOR BORROWING shall mean, as of any date, that portion of the principal
balance of the Loans bearing interest at the Adjusted LIBOR Rate as of such
date.
LIBOR LENDING OFFICE shall mean the office of Lender specified as its
"LIBOR Lending Office" opposite or below its name on the signature pages hereof,
or (if no such office is specified, its Domestic Lending Office), or such other
office of Lender as Lender may from time to time specify in writing to the
Borrower.
LIBOR RATE shall mean, with respect to any LIBOR Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to the rate at which dollar deposits approximately
equal in principal amount to the Lender's portion of such LIBOR Borrowing and
for a maturity equal to the applicable Interest Period are offered in
immediately available funds to the London branch of the Lender by leading
lenders in the London interbank market for Eurodollars at approximately 11:00
a.m., London time, two (2) Business Days prior to the first day of such Interest
Period.
LIEN shall mean, with respect to any asset of any Person, (a) any
mortgage, pledge, charge, encumbrance, security interest, collateral assignment
or other lien or restriction of any kind on such asset, whether based on common
law, constitutional provision, statute or contract, (b) the interest of any
vendor or a lessor under any conditional sale agreement, title retention
agreement or capital lease relating to such asset, (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities, or (d) any other right of or arrangement with any
creditor to have such creditor's claim satisfied out of such assets, or the
proceeds therefrom, prior to the general creditors of such Person owning such
assets.
LOAN DOCUMENTS shall mean this Agreement, the Note, the Applications, the
Security Documents, the Guaranties, the Joinder Agreements, the Letters of
Credit, all instruments, certificates and agreements now or hereafter executed
or delivered to the Lender pursuant to any of the foregoing, and all amendments,
modifications, renewals, extensions, increases and rearrangements of, and
substitutions for, any of the foregoing.
LOANS shall mean the Loans made pursuant to SECTION 2.1 hereof. LOAN shall
mean any one of the Loans.
LOCKBOX AGREEMENT shall collectively mean one or more lockbox agreements,
in Proper Form, to be executed and delivered to the by the Borrower and each of
its Subsidiaries required by the Lender, together with all modifications and/or
replacements thereof which are approved in writing by the Lender. As of the
Closing Date, the Borrower has previously executed and delivered to the Lender a
Lockbox Agreement in substantially the form attached hereto as EXHIBIT B.
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MATERIAL ADVERSE EFFECT shall mean a material adverse effect on (a) the
business, assets, operations, financial or other condition of the Borrower and
its Subsidiaries, taken as a whole, (b) the ability of the Borrower and the
Guarantors, taken as a whole, or the Borrower individually, to perform or pay
the Obligations in accordance with the terms hereof or of any other Loan
Document, or (c) the Lender's Lien on any material portion of the Collateral or
the priority of such Lien.
MATURITY DATE shall mean the earlier of (a) May 31, 1999, (b) any date
that the Commitment is terminated in full by the Borrower pursuant to SECTION
2.4 hereof, and (c) any date the Maturity Date is accelerated by the Lender
pursuant to SECTION 8.1 hereof.
MONTHLY UNAUDITED FINANCIAL STATEMENTS shall mean the unaudited
Consolidated and consolidating financial statements of a Person, which
Statements shall include (a) a balance sheet as of the end of the respective
fiscal month, (b) an income statement for such respective fiscal month, and for
the fiscal year to date, subject to normal year-end adjustments, all setting
forth in comparative form the corresponding figures for the corresponding period
of the preceding fiscal year, and (c) a statement of cash flows for the fiscal
year to date, subject to normal year-end adjustments, setting forth in
comparative form the corresponding figures for the corresponding period of the
preceding fiscal year, all prepared in accordance with GAAP and certified as
true and correct by a Responsible Officer of such Person. The Monthly Unaudited
Financial Statements for the Borrower and its Subsidiaries shall be prepared on
a Consolidated and consolidating basis in accordance with GAAP.
NET AMOUNT OF ELIGIBLE RECEIVABLES shall mean and include at any time,
without duplication, the gross amount of Eligible Receivables at such time LESS
(a) unpaid sales, excise, or similar taxes owed by the Borrower or any of its
subsidiaries, and (b) returns, discounts, claims, credits and allowance of any
nature at any time issued, owing, granted, outstanding, available or claimed.
NET INCOME shall mean gross revenues and other proper income credits for
such Person, less all proper expenses and other income charges for such Person,
including taxes on income, all determined in accordance with GAAP; provided,
that there shall not be included in such revenues any extraordinary or
nonrecurring items, as determined in accordance with GAAP.
NOTE shall mean the promissory note, substantially in the form of EXHIBIT
A attached hereto, of the Borrower evidencing the Loans, payable to the order of
the Lender in the amount of Lender's Commitment, and all renewals, extensions,
modifications, rearrangements and replacements thereof and substitutions
therefor.
OBLIGATIONS shall mean, without duplication, all obligations, liabilities
and Indebtedness of the Borrower and the Guarantors with respect to the Security
Documents and other Loan Documents, including without limitation, (a) the
principal of and interest on the Loans and (b) the payment or performance of all
other obligations, liabilities and Indebtedness of the Borrower or the
Guarantors to the Lender hereunder, under the Note, under the Letters of Credit,
under the
13
Applications or under any one or more of the other Loan Documents, including all
fees, costs, expenses and indemnity obligations hereunder and thereunder.
OFFICER'S CERTIFICATE shall mean a certificate substantially in the form
of EXHIBIT C attached hereto.
ORGANIZATIONAL DOCUMENTS shall mean, with respect to a corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, the partnership agreement
establishing such partnership; with respect to a joint venture, the joint
venture agreement establishing such joint venture, and with respect to a trust,
the instrument establishing such trust; in each case including any and all
modifications thereof as of the date of the Loan Document referring to such
Organizational Document and any and all future modifications thereof which are
consented to by the Lender.
PARENT shall mean American Medical Technologies, Inc., d/b/a AMT
Industries, Inc., a Delaware corporation.
PARTIES shall mean all Persons other than the Lender executing any Loan
Document.
PAST DUE RATE shall mean, on any day, the lesser of (a) the sum of (i) the
Alternate Base Rate, PLUS (ii) one percent (1%) or (b) the Highest Lawful Rate,
if any, applicable to the Lender on such day.
PBGC shall mean the Pension Benefit Guaranty Corporation.
PERMITTED AFFILIATE TRANSACTIONS shall mean
(a) full-time employment agreements and incentive compensation programs
with employees on commercially reasonable terms;
(b) officer, director or employee loans for work related expenditures;
(c) advances to directors, officers or employees of the Borrower and/or
its Subsidiaries to provide for the payment of reasonable expenses incurred by
such Persons in the performance of such Persons' responsibilities to the
Borrower; and
(d) indemnities provided on behalf of officers, directors or employees of
the Borrower and/or in its Subsidiaries as determined in good faith by the
Borrower's Board of Directors or senior management.
PERMITTED DISPOSITIONS shall mean the following dispositions of assets:
(a) sales of inventory and other assets in the ordinary course of business
and for fair and adequate consideration;
14
(b) dispositions of damaged, worn-out or obsolete Property, or Property
which is no longer necessary for the proper conduct of any Person's business;
(c) the abandonment of any assets or Properties which are no longer useful
for the proper conduct of business and cannot (after good faith efforts to sell
the same) be sold;
(d) the liquidation of Permitted Investment Securities;
(e) transfers of Property from the Borrower to its domestic Subsidiaries
(whether presently existing or hereafter created in accordance with the other
provisions of this Agreement) or from one Subsidiary of the Borrower to another
domestic Subsidiary of the Borrower, provided, that if the entity to whom such
transfer or disposition is made is not the Borrower or is not yet a Guarantor,
simultaneously with such transfer, such entity executes and delivers to Lender a
Joinder Agreement, together with all of the requested Security Documents, as
required at such time by the Lender, appropriately completed;
(f) sale/leaseback transactions permitted pursuant to SECTION 7.15 hereof;
and
(g) leases to any Person of real Property of the Borrower, PROVIDED that
the terms (including lease term and rent) of such leases are commercially
reasonable.
PERMITTED INVESTMENTS shall mean
(a) the endorsement of negotiable instruments for deposit or collection in
the ordinary course of business;
(b) Investments in Permitted Investments Securities;
(c) Investments representing Stock or obligations issued to the Borrower
or its Subsidiaries in settlement of claims against any other Person by reason
of a composition or readjustment of debt or a reorganization of any debtor of
the Borrower and/or its Subsidiaries;
(d) Investments made as a result of the receipt of non-cash consideration
from a Permitted Disposition;
(e) to the extent that any manufacturing and licensing agreements
constitute Investments, any such arrangements entered into in the ordinary
course of business; and
(f) any Stock owned and held by the Borrower or any of its Subsidiaries in
(1) any wholly-owned, domestic Subsidiary of the Borrower created by the
Borrower for purposes of receiving one or more transfers of Property from the
Borrower or any of its other Subsidiaries pursuant to the terms of clause (e) of
the "Permitted Dispositions" definition set forth above or (2) any other
wholly-owned Subsidiary of the Borrower created or acquired with the prior
written consent of the Lender after the Closing Date; and
15
PERMITTED INVESTMENT SECURITIES shall mean: (1) readily marketable, direct
obligations of the United States of America or any agency or wholly owned
corporation thereof which are backed by the full faith and credit of the United
States, (2) certificates of deposit or other short-term direct obligations of
(i) the Lender, or (ii) any other financial institutions having capital and
surplus in excess of $5,000,000,000, and (3) other Investments mutually agreed
to in writing by the Borrower and the Lender; PROVIDED, that in each case
described in clauses (1) and (2), such obligation shall mature not more than one
(1) year from the acquisition thereof.
PERSON shall mean any individual, corporation, business trust,
unincorporated organization or association, partnership, joint venture,
Governmental Authority or any other form of entity.
PLAN shall mean any plan subject to Title IV of ERISA and maintained for
employees of the Borrower or of any member of a "controlled group of
corporations," as such term is defined in the Code, of which the Borrower, any
of its Subsidiaries or any ERISA Affiliate it may acquire from time to time is a
part, or any such plan to which the Borrower, any of its Subsidiaries or any
ERISA Affiliate is required to contribute on behalf of its employees.
PRIME RATE shall mean the rate of interest per annum publicly announced
from time to time by The Chase Manhattan Bank, or its successor financial
institution, at its principal office in New York City as its prime rate in
effect at such time. Without notice to the Borrower or any other Person, the
Prime Rate shall change automatically from time to time as and in the amount by
which said prime rate shall fluctuate, with each such change to be effective as
of the date of each change in such prime rate. THE PRIME RATE IS A REFERENCE
RATE AND DOES NOT NECESSARILY REPRESENT THE LOWEST OR BEST RATE ACTUALLY CHARGED
BY THE CHASE MANHATTAN BANK OR SUCH SUCCESSOR FINANCIAL INSTITUTION TO ANY OF
ITS CUSTOMERS. THE CHASE MANHATTAN BANK OR SUCH SUCCESSOR FINANCIAL INSTITUTION
MAY MAKE COMMERCIAL LOANS OR OTHER LOANS AT RATES OF INTEREST AT, ABOVE AND
BELOW THE PRIME RATE.
PRINCIPAL OFFICE shall mean the principal office in Dallas, Texas of the
Lender, or at such other place as the Lender may from time to time by notice to
the Borrower designate.
PROPER FORM shall mean in form and substance reasonably satisfactory to
the Lender.
PROPERTY shall mean any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible.
QUARTERLY UNAUDITED FINANCIAL STATEMENTS shall mean the unaudited
Consolidated and consolidating financial statements of a Person, which
Statements shall include (a) a balance sheet as of the end of the respective
fiscal quarter, (b) an income statement for such respective fiscal quarter, and
for the fiscal year to date, subject to normal year-end adjustments, all setting
forth in comparative form the corresponding figures for the corresponding period
of the preceding fiscal year, and (c) a statement of cash flows for the fiscal
year to date, subject to normal year-end adjustments, setting forth in
comparative form the corresponding figures for the corresponding period of the
preceding fiscal year, all prepared in accordance with GAAP and certified as
true
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and correct by a Responsible Officer of such Person. The Quarterly Unaudited
Financial Statements for the Parent shall be prepared on a Consolidated and
consolidating basis in accordance with GAAP.
RATE SELECTION DATE shall mean that Business Day which is (a) in the case
of the Alternate Base Rate Borrowings, the date of such borrowing, or (b) in the
case of LIBOR Borrowings, the date two (2) Business Days preceding the first day
of any proposed Interest Period.
RATE SELECTION NOTICE shall have the meaning ascribed to such term in
SECTION 2.8(B)(1) hereof.
RECEIVABLES shall mean and include all of the accounts, instruments,
documents, chattel paper and general intangibles of the Borrower or any of its
Subsidiaries, whether secured or unsecured, whether now existing or hereafter
created or arising, and whether or not specifically assigned to the Lender.
REFINANCING INDEBTEDNESS shall mean any Indebtedness of the Borrower or
its Subsidiaries issued in exchange for, or the net proceeds of which are used
to extend, refinance, renew, replace, defease or refund other Indebtedness of
such Person, PROVIDED, that (a) the principal amount of such Refinancing
Indebtedness does not exceed the then outstanding principal amount of the
Indebtedness so extended, refinanced, renewed, replace, defeased or refunded
(plus the amount of reasonable expenses and any premium or penalty paid in
connection with such extension, refinancing, renewal, replacement, defeasance or
refund in accordance with the terms of the documents governing the original
issuance of such Indebtedness); (b) the interest rates, maturities, amortization
schedules, covenants, defaults, remedies, subordination provisions (with respect
to any Subordinated Indebtedness), collateral security provisions (or absence
thereof) and other terms of such Refinancing Indebtedness are in each case the
same or more favorable to the Borrower and/or its Subsidiaries as those in the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded;
and (c) no Default or Event of Default has occurred and is continuing or would
result from the issuance or origination of such Refinancing Indebtedness.
REGULATION D shall mean Regulation D of the Board of Governors of the
Federal Reserve System from time to time in effect and shall include any
successor or other regulation relating to reserve requirements applicable to
member lenders of the Federal Reserve System.
REGULATORY CHANGE shall mean any change on or after the date of this
Agreement in any Legal Requirement (including Regulation D) or the adoption or
making on or after such date of any interpretation, directive or request
applying to a class of lenders including Lender under any Legal Requirement
(whether or not having the force of law) by any Governmental Authority charged
with the interpretation or administration thereof.
REPORTABLE EVENT shall mean a Reportable Event as defined in Section
4043(b) of ERISA.
REQUEST FOR EXTENSION OF CREDIT shall mean a written request for extension
of credit substantially in the form of EXHIBIT D attached hereto.
17
REQUIREMENTS OF ENVIRONMENTAL LAW shall mean all requirements imposed by
any law (including The Resource Conservation and Recovery Act, The Comprehensive
Environmental Response, Compensation, and Liability Act, the Clean Water Act,
the Clean Air Act, and any state analogues of any of the foregoing), rule,
regulation, or order of any Governmental Authority now or hereafter in effect
which relate to (i) noise; (ii) pollution, protection or cleanup of the air,
surface water, ground water or land; (iii) solid, liquid or gaseous waste or
Hazard Substance generation, recycling, reclamation, release, threatened
release, treatment, storage, disposal or transportation; (iv) exposure of
Persons or property to Hazardous Substances; (v) the safety or health of
employees or other Persons; or (vi) the manufacture, presence, processing,
distribution in commerce, use, discharge, releases, threatened releases,
emissions or storage of Hazardous Substances into the environment. REQUIREMENT
OF ENVIRONMENTAL LAW shall mean any one of them.
RESPONSIBLE OFFICER shall mean, with respect to any Person, any president
or vice president, or the Financial Officer or controller of such Person.
SECURITY AGREEMENTS shall mean (a) the Security Agreement (Personal
Property) of even effective date herewith, between the Borrower and the Lender,
covering all Receivables, inventory and all other related tangible and
intangible personal Property of the Borrower more particularly described
therein, (b) any and all other security agreements, pledge agreements,
collateral assignments or other similar documents now or hereafter executed in
favor of the Lender as security for the payment or performance of any and or all
of the Obligations, and (c) any amendment, modification, restatement or
supplement of all or any of the above-described agreements and assignments.
SECURITY DOCUMENTS shall mean the Security Agreements, the Guaranties, all
related financing statements and any and all other agreements, mortgages, deeds
of trust, chattel mortgages, security agreements, pledges, guaranties,
assignments of income, assignments of contract rights, assignments or pledges of
stock or partnership interests, standby agreements, subordination agreements,
undertakings and other instruments and financing statements now or hereafter
executed and delivered in connection with, or as security for, the payment and
performance of the Obligations, as any of them may from time to time be amended,
modified, restated or supplemented.
STATUTORY RESERVES shall mean (a) WITH RESPECT TO THE ADJUSTED LIBOR RATE,
a fraction (expressed as a decimal), the numerator of which is the number one
and the denominator of which is the number one minus the aggregate of the
maximum reserve percentage (including without limitation, any marginal, special,
emergency or supplemental reserves) expressed as a decimal, established by the
Board of Governors of the Federal Reserve System of the United States and any
other banking authority to which Lender is subject with respect to the Adjusted
LIBOR Rate for Eurocurrency Liabilities (as defined in Regulation D), including
without limitation, those reserve percentages imposed under Regulation D, and
(b) WITH RESPECT TO THE BASE CD RATE, a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentage (including,
18
without limitation, any marginal, special, emergency or supplemental reserves)
expressed as a decimal, established by the Board of Governors of the Federal
Reserve System of the United States or any banking authority to which Lender is
subject with respect to the Base CD Rate for new negotiable nonpersonal time
deposits in U.S. dollars of over $100,000 with maturities approximately equal to
three months. Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any applicable reserve percentage. For
purposes hereof, LIBOR Borrowings shall be deemed to constitute Eurocurrency
Liabilities (as defined in Regulation D) and as such, shall be deemed to be
subject to such reserve requirements of Regulation D without benefit of or
credit for proration, exceptions or offsets which may be available from time to
time to Lender under Regulation D.
STOCK shall mean as to a Business Entity, all capital stock or other
indicia of equity rights issued by such Business Entity from time to time.
SUBORDINATED INDEBTEDNESS shall mean, with respect to the Borrower or any
Guarantor, Indebtedness subordinated in right of payment to the Borrower's or
such Guarantor's monetary Obligations on terms satisfactory to and approved in
writing by the Lender.
SUBSIDIARY shall mean, as to a particular parent Business Entity, any
Business Entity of which more than fifty percent (50%) of the Stock issued by
such Business Entity is at the time directly or indirectly owned by such parent
Business Entity or by one or more of its Affiliates.
TANGIBLE NET WORTH shall mean, as to any Person at any time, without
duplication, (a) the sum of such Person's capital stock, additional paid in
capital, capital in excess of par or stated value of shares of its capital
stock, retained earnings and any other amount which, in accordance with GAAP,
constitutes stockholders' equity, LESS (b) treasury stock, LESS (c) the amount
of any write-up subsequent to the effective date of this Agreement in the value
of any asset above the cost or depreciated costs thereof to such Person, LESS
(d) the book value of all assets which would be treated as intangibles under
GAAP, including without limitation, good will, trademarks, trade names, patents,
copyrights and licenses.
THREE-MONTH SECONDARY CD RATE shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day shall not be a Business Day, the next preceding
Business Day) by the Board of Governors of the Federal Reserve System of the
United States through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of such
Board of Governors, be published in Federal Reserve Statistical Release
H.15(519) during the week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of major
money center banks in New York City received at approximately 10:00 a.m. on such
day (or, if such day shall not be a Business Day, on the next preceding Business
Day) by the Lender from three New York City negotiable certificate of deposit
dealers of recognized standing selected by the Lender.
19
UNUSED COMMITMENT shall mean the daily difference of Lender's Commitment
on such day less the Current Sum applicable to Lender on such day.
1.2 ACCOUNTING TERMS AND DETERMINATIONS. Except where specifically
otherwise provided:
(a) the symbol "$" and the word "dollars" shall mean lawful money of the
United States of America;
(b) any accounting term not otherwise defined shall have the meaning
ascribed to it under GAAP;
(c) unless otherwise expressly provided, any accounting concept and all
financial covenants shall be determined on a Consolidated basis, and financial
measurements shall be computed without duplication;
(d) wherever the term "including" or any of its correlatives appears in
the Loan Documents, it shall be read as if it were written "including (by way of
example and without limiting the generality of the subject or concept referred
to);"
(e) wherever the word "herein" or "hereof" is used in any Loan Document,
it is a reference to that entire Loan Document and not just to the subdivision
of it in which the word is used;
(f) references in any Loan Document to Section numbers are references to
the Sections of such Loan Document;
(g) references in any Loan Document to Exhibits, Schedules, Annexes and
Appendices are to the Exhibits, Schedules, Annexes and Appendices to such Loan
Document, they shall be deemed incorporated into such Loan Document by
reference;
(h) any term defined in the Loan Documents which refers to a particular
agreement, instrument or document shall also mean, refer to and include all
modifications, amendments, supplements, restatements, renewals, extensions and
substitutions of the same; PROVIDED that nothing in this subsection shall be
construed to authorize any such modification, amendment, supplement,
restatement, renewal, extension or substitution except as may be permitted by
other provisions of the Loan Documents;
(i) all times of day used in the Loan Documents mean local time in Dallas,
Texas; and
(j) defined terms may be used in the singular or plural, as the context
requires.
20
2. LOANS; LETTERS OF CREDIT; NOTE; PAYMENTS; PREPAYMENTS; INTEREST RATES.
2.1 COMMITMENTS. Subject to the terms and conditions hereof, Lender agrees
to make Loans to the Borrower from time to time on and after the Closing Date
until, but not including, the Maturity Date, in an aggregate principal amount at
any one time outstanding (including Lender's Letter of Credit Exposure Amount at
such time) up to, but not exceeding Lender's Commitment. Notwithstanding the
foregoing, the aggregate principal amount of the Loans outstanding at any time
shall not exceed (a) the lesser of (i) the Commitment and (ii) the applicable
Borrowing Base at such time less (b) the Letter of Credit Exposure Amount at
such time. Subject to the conditions herein, any such Loan repaid prior to the
Maturity Date may be reborrowed as an additional Loan by the Borrower pursuant
to the terms of this Agreement.
2.2 LOANS.
(a) Subject to SECTIONS 4.1 and 4.2 hereof, (i) all Loans shall be
advanced in accordance with the Lender's Commitment; and (ii) the initial Loans
shall be made on the Closing Date by the Lender against delivery of the Note.
(b) When requesting a Loan hereunder, the Borrower shall give the
Lender notice of a request for a Loan in accordance with SECTION 4.1(A) hereof.
(c) Except as otherwise provided or specified in Section 2.2(f)
below, Lender shall make its Loans available on the proposed dates thereof by,
as soon as practicable, but in no event later than 5:00 p.m. on such date,
crediting the amount to a general deposit account designated and maintained by
the Borrower with the Lender at the Principal Office.
(d) Each Loan made by the Lender on any date shall be in an amount
greater than $10,000; PROVIDED, HOWEVER, that the LIBOR Borrowings made on any
date shall be in a minimum aggregate principal amount of $500,000, with any
increases over such minimal amount being in integral aggregate multiples of
$100,000.
(e) When and if the daily collection and application procedures for
Receivables are implemented and are continuing in accordance with the provisions
of SECTION 6.15(B) hereof, the Lender shall render to the Borrower each month a
statement of the Borrower's account of all transactions which shall be deemed to
be correct and accepted by and be binding upon the Borrower unless the Lender
receives a written statement of the Borrower's exceptions to such account
statement within thirty (30) days after such statement was rendered to the
Borrower.
2.3 COMMITMENT AND OTHER FEES.
(a) In consideration of Lender's Commitment, the Borrower agrees to
pay to the Lender a commitment fee ("COMMITMENT FEE") (computed on the basis of
the actual number of days elapsed in a year composed of 360 days, subject to the
terms of SECTION 9.6 hereof) in an amount equal to the product of (A) one
quarter of one percent (0.25%) times (B) Lender's Unused Commitment. The
Commitment Fee shall be due and payable in arrears (i) on the first
21
Business Day of each December, March, June and September prior to the Maturity
Date, commencing September 1, 1997, and (ii) on the Maturity Date, with each
Commitment Fee to commence to accrue as of the date hereof and to be effective
as to any reduction in the Commitment as of the date of any such decrease, and
each Commitment Fee shall cease to accrue (except with respect to interest at
the Past Due Rate on any unpaid portion thereof) on the Maturity Date. All past
due Commitment Fees shall bear interest at the Past Due Rate and shall be
payable upon demand by the Lender.
(b) When and if the daily collection and application procedures for
Receivables are implemented and are continuing in accordance with the provisions
of SECTION 6.15(B) hereof, the Borrower hereby agrees to pay to the Lender an
administration fee in the amount of $10,000 per annum, payable in advance in
semi-annual installments of $5,000, commencing on any date such daily collection
procedures are implemented, and thereafter semi-annually on the same Business
Day of each subsequent six-month period in which such daily collection
procedures are continuing; provided, however, prior to the implementation of
such collection procedures, Borrower hereby agrees to pay Lender an
administration fee in the amount of $5,000 per annum, payable in advance with
the first payment being due and payable on the Closing Date (such amount having
been paid) and annually thereafter, on each anniversary of the Closing Date.
2.4 TERMINATION AND REDUCTIONS OF COMMITMENTS.
(a) Upon at least five (5) Business Days' prior irrevocable written
notice to the Lender, the Borrower may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the Commitment;
PROVIDED, HOWEVER, that the Commitment shall not be reduced at any time to an
amount not less than the aggregate of Lender's Current Sum outstanding at such
time. Each partial reduction of the Commitment shall be in a minimum of $500,000
or an integral multiple of $100,000 in excess thereof.
(b) Simultaneously with any termination or reduction, in whole or in
part, of Commitment pursuant to SECTION 2.4(A) above, the Borrower hereby agrees
to pay to Lender, (i) the Commitment Fee due and owing through and including
date of such termination or reduction on the amount of the Commitment of Lender
so terminated or reduced and (ii) unless such termination or reduction is
accomplished with the proceeds of an Initial Public Offering, a prepayment fee
equal to one percent (1.00%) of the Commitment of Lender so terminated or
reduced if such termination or reduction occurs on or before the first
anniversary of the Closing Date. After the first anniversary date of the Closing
Date, the Commitment may be terminated or reduced, in whole or in part, without
any prepayment fee, penalty or other similar charge.
(c) To effect the payment of any and all Commitment Fees and all
other Obligations outstanding and owing hereunder or under any other Loan
Documents, subject to the provisions of SECTIONS 2.1 AND 4.1 hereof, the Lender
may, but shall not be obligated to, make a Loan if (i) such Loan is to be made
prior to the Maturity Date, (ii) the Availability would be equal to or greater
than zero after giving effect to such Loan, and (iii) no Default or Event of
Default shall have occurred which is then continuing. The inability of the
Lender to cause the payment of any such Commitment Fees or other Obligations in
accordance with the preceding sentence shall
22
not in any way whatsoever affect the Borrower's and Guarantors' obligation to
otherwise pay such amounts in accordance with the applicable terms hereof or of
any other Loan Documents.
2.5 MANDATORY AND VOLUNTARY PREPAYMENTS.
(a) If the Current Sum applicable to Lender at any time exceeds
Lender's Commitment, the Lender shall notify the Borrower of the deficiency
(such notice being permitted to be given orally and need not be in writing) and
the Borrower shall immediately make a prepayment on Lender's Note or otherwise
reimburse Lender for Letter of Credit Advances or cause one or more Letters of
Credit to be canceled and surrendered in an amount sufficient to reduce Lender's
Current Sum to an amount no greater than Lender's Commitment. Any prepayments
required by this subparagraph (a) shall be applied to outstanding Alternate Base
Rate Borrowings up to the full amount thereof before such prepayments are
applied to outstanding LIBOR Borrowings (together with any Consequential Loss
resulting from such prepayment).
(b) The Borrower shall make prepayments of the Loans from time to
time so that the Availability equals or exceeds zero at all times. Specifically,
if the Availability at any time is less than zero, the Lender shall notify the
Borrower of the deficiency (such notice being permitted to be given orally and
need not be in writing) and the Borrower shall immediately make a prepayment on
the Note or otherwise reimburse the Lender for Letter of Credit Advances or
cause one or more Letters of Credit to be canceled and surrendered in an amount
sufficient to cause the Availability to be at least equal to zero. Any
prepayments required by this subparagraph (b) shall be applied to outstanding
Alternate Base Rate Borrowings up to the full amount thereof before such
prepayments are applied to outstanding LIBOR Borrowings (together with any
Consequential Loss resulting from such prepayment).
(c) In addition to the mandatory prepayments required by SECTIONS
2.5(A) and above, the Borrower shall have the right, at its option and subject
to the requirements of SECTION 2.4, to prepay any of the Loans in whole at any
time or in part from time to time, without premium or penalty, except as
otherwise provided in SECTION 2.4, this SECTION 2.5 or subsections (a), (b) or
(c) of SECTION 2.9 hereof. Each prepayment under this subsection shall applied
to the prepayment of the aggregate unpaid principal amount of the Note.
Prepayments under this subparagraph (c) shall be subject to the following
additional conditions:
(1) In giving notice of prepayment as hereinafter provided,
the Borrower shall specify, for the purpose of paragraphs (2) and (3)
immediately following, the manner of application of such prepayment as
between Alternate Base Rate Borrowings and LIBOR Borrowings; PROVIDED,
that in no event shall any LIBOR Borrowing be partially prepaid.
(2) Prepayments applied to any LIBOR Rate Borrowing may be
made on any Business Day, PROVIDED, that (i) the Borrower shall have given
the Lender at least five (5) Business Days' prior irrevocable written or
telecopied notice of such prepayment, specifying the principal amount of
the LIBOR Borrowing to be prepaid, the particular LIBOR Borrowing to which
such prepayment is to be applied and the prepayment date;
23
and (ii) if such prepayment is made on any day other than the last day of
the Interest Period corresponding to the LIBOR Borrowing to be prepaid,
the Borrower shall pay directly to the Lender, on the last day of such
Interest Period, the Consequential Loss as a result of such prepayment.
(3) Prepayments applied to any Alternate Base Rate Borrowing
may be made on any Business Day, provided that the Borrower shall have
given the Lender prior irrevocable written notice or notice by telephone
(which is to be promptly confirmed in writing) of such prepayment on the
Business Day of such prepayment, specifying the principal amount of the
Alternate Base Rate Borrowing to be prepaid.
(d) Notice of any prepayment having been given, the principal amount
specified in such notice, together with (in the case of any prepayment of a
LIBOR Borrowing) interest thereon to the date of prepayment, shall be due and
payable on such prepayment date.
2.6 NOTE; PAYMENTS.
(a) All Loans made by Lender to the Borrower shall be evidenced by a
single Note dated as of the Closing Date, delivered and payable to Lender in a
principal amount equal to Lender's Commitment as of the Closing Date.
(b) The outstanding principal balance of each and every Loan, as
evidenced by the Note, shall mature and be fully due and payable on the Maturity
Date.
(c) Subject to SECTION 9.6 hereof, the Borrower hereby agrees to pay
accrued interest on the unpaid principal balance of the Loans on the Interest
Payment Dates, commencing the first of such dates to occur after the date
hereof. After the Maturity Date, accrued and unpaid interest on the Loans shall
be payable on demand.
(d) To effect payment of accrued interest owing on the Loans as of
the Interest Payment Dates, subject to the provisions of SECTIONS 2.1 AND 4.1
hereof, the Lender may, but shall not be obligated to, make a Loan to pay in
full the amount of accrued interest owing and payable on the Loans as of the
respective Interest Payment Date if (i) such Loan is to be made prior to the
Maturity Date, (ii) the Availability would be equal to or greater than zero
after giving effect to such Loan, and (iii) no Default or Event of Default shall
have occurred which is then continuing. The inability of the Lender to cause a
payment of any accrued interest owing on the Loans on any Interest Payment Date
as of the respective due date thereof in accordance with the preceding sentence
shall not in any way whatsoever effect the Borrower's obligation to otherwise
pay such amounts in accordance with the applicable terms hereof or any other
Loan Documents.
2.7 APPLICATION OF PAYMENTS AND PREPAYMENTS.
(a) Except as otherwise provided in SECTIONS 2.5(A) and (B) hereof,
prepayments on the Note shall be applied to payment of the aggregate unpaid
principal amounts
24
of the Note, with the balance of any such prepayments, if any, being applied to
accrued interest. Payments of accrued interest on the Note in accordance with
SECTION 2.6(C) hereof shall be applied to the aggregate accrued interest then
outstanding under the Note, while payment by the Borrower of the aggregate
principal amount outstanding under the Note on the Maturity Date shall be
applied to principal.
(b) All sums payable by the Borrower to the Lender hereunder or
pursuant to the Note shall be payable in United States dollars in immediately
available funds not later than 12:00 noon on the date such payment or prepayment
is due and shall be made without set-off, counterclaim or deduction of any kind.
Any such payment or prepayment received and accepted by the Lender after 12:00
noon shall be considered for all purposes (including the payment of interest, to
the extent permitted by law) as having been made on the next succeeding Business
Day. All such payments or prepayments shall be made at the Principal Office. If
any payment or prepayment becomes due and payable on a day which is not a
Business Day, then the date for the payment thereof shall be extended to the
next succeeding Business Day and interest shall be payable thereon at the then
applicable rate per annum during such extension
2.8 INTEREST RATES FOR LOANS.
(a) Subject to SECTION 9.6 hereof, the Note shall bear interest on
their respective outstanding principal balances at the Alternate Base Rate;
PROVIDED, that (1) all past due principal and interest shall bear interest at
the Past Due Rate, which shall be payable on demand, and (2) subject to the
provisions hereof, the Borrower shall have the option of having all or any
portion of the principal balances from time to time outstanding under the Note
bear interest until their respective maturities at a rate per annum equal to the
Adjusted LIBOR Rate (together with the Alternate Base Rate, individually herein
called an "INTEREST OPTION" and collectively called "INTEREST OPTIONS"). The
records of the Lender with respect to Interest Options, Interest Periods and the
amounts of Loans to which they are applicable shall be binding and conclusive,
absent manifest error. Interest on the Loans shall be calculated at the
Alternate Base Rate, except where it is expressly provided pursuant to this
Agreement that the Adjusted LIBOR Rate is to apply.
(b) The Borrower shall have the right to designate or convert its
Interest Options in accordance with the provisions hereof. PROVIDED no Default
or Event of Default has occurred and is continuing and subject to the provisions
of the last sentence of SUBSECTION 2.8(A) hereinabove and of SECTION 2.9 hereof,
the Borrower may elect to have the Adjusted LIBOR Rate apply or continue to
apply to all or any portion of the principal balances of the Note. Each change
in Interest Options shall be a conversion of the rate of interest applicable to
the specified portion of the Loans, but such conversion alone shall not change
the outstanding principal balance of the Note. The Interest Options shall be
designated or converted in the manner provided below:
(1) The Borrower shall give the Lender notice by telephone,
promptly confirmed by written notice (the "RATE SELECTION NOTICE")
substantially in the form of EXHIBIT E hereto. Each such telephone and
written notice shall specify the amount and type of borrowings which are
the subject of the designation, if any; the amount and type of
25
borrowings into which such borrowings are to be converted or for which an
Interest Option is designated; the proposed date for the designation or
conversion (which, in the case of conversion of LIBOR Borrowings, except
as provided in SECTION 2.9 hereof, shall be the last day of the Interest
Period applicable thereto) and the Interest Period or Periods, if any,
selected by the Borrower. Such notice by telephone shall be irrevocable
and shall be given to the Lender no later than the applicable Rate
Selection Date. If (x) a new Loan is to be a LIBOR Borrowing, (y) an
existing LIBOR Borrowing is maturing at the time that a new Loan is being
requested and the Borrower is electing to have such existing portion of
the outstanding principal balance of the Note going forward bear interest
at the same Interest Option and for the same Interest Period as the new
Loan, or (z) a portion of an Alternate Rate Borrowing is to be converted
so as to bear interest at the same Interest Option and for the same
Interest Period as the new Loan, then the Rate Selection Notice shall be
included in the Request for Extension of Credit applicable to the new
Loan, which shall be given to the Lender no later than the applicable Rate
Selection Date.
(2) No more than three (3) LIBOR Borrowings and corresponding
Interest Periods shall be outstanding at any one time. Each LIBOR
Borrowing shall be in a minimum aggregate principal amount of at least
$500,000, with any increases over such minimum amount being in integral
aggregate multiples of $100,000.
(3) Principal included in any borrowing shall not be included
in any other borrowing which exists at the same time.
(4) Each designation or conversion shall occur on a Business
Day.
(5) Except as provided in SECTION 2.9 hereof, no LIBOR
Borrowing shall be converted on any day other than the last day of the
applicable Interest Period.
(c) All interest and fees (including the Commitment Fee) will be
computed on the basis of a year of 360 days and actual days elapsed (including
the first day but excluding the last day) occurring in the period for which
payable, unless the effect of so computing shall be to cause the rate of
interest to exceed the Highest Lawful Rate.
2.9 SPECIAL PROVISIONS APPLICABLE TO LIBOR BORROWINGS.
(a) If, after the date of this Agreement, the adoption of any
applicable Legal Requirement or any change in any applicable Legal Requirement
or in the interpretation or administration thereof by any Governmental Authority
or compliance by the Lender with any request or directive (whether or not having
the force of law) of any Governmental Authority shall at any time make it
unlawful or impossible for Lender to permit the establishment of or to maintain
any LIBOR Borrowing, the commitment of the Lender to establish or maintain the
Adjusted LIBOR Rate affected by such adoption or change shall forthwith be
canceled and the Borrower shall forthwith, upon demand by the Lender to the
Borrower, (1) convert the Adjusted LIBOR Rate with respect to which such demand
was made to the Alternate Base Rate; (2) pay all accrued and unpaid interest to
date on the amount so converted; and (3) pay any amounts
26
required to compensate the Lender for any additional cost or expense which the
Lender may incur as a result of such adoption of or change in such Legal
Requirement or in the interpretation or administration thereof and any
Consequential Loss which the Lender may incur as a result of such conversion to
the Alternate Base Rate. If, when the Lender so notifies the Borrower, the
Borrower has given a Rate Selection Notice specifying one or more borrowings of
the type with respect to which such demand was made but the selected Interest
Period or Interest Periods has not yet begun, such Rate Selection Notice shall
be deemed to be of no force and effect, as if never made, and the balance of the
Loans specified in such Rate Selection Notice shall bear interest at the
Alternate Base Rate until a different available Interest Option shall be
designated in accordance herewith.
(b) If the adoption of any applicable Legal Requirement or any
change in any applicable Legal Requirement or in the interpretation or
administration thereof by any Governmental Authority or compliance by the Lender
with any request or directive (whether or not having the force of law) from any
Governmental Authority shall at any time as a result of any portion of the
principal balance of the Note being maintained on the basis of the Adjusted
LIBOR Rate:
(1) subject Lender (or make it apparent that Lender is
subject) to any tax (including any United States interest equalization
tax), levy, impost, duty, charge, fee (collectively, "TAXES"), or any
deduction or withholding for any Taxes on or from the payment due under
any LIBOR Borrowing or other amounts due hereunder, other than income and
franchise taxes of the United States and its political subdivisions; or
(2) change the basis of taxation of payments due from the
Borrower to the Lender under any LIBOR Borrowing (otherwise than by a
change in the rate of taxation of the overall net income of the Lender);
or
(3) impose, modify, increase or deem applicable any reserve
requirement (excluding that portion of any reserve requirement included in
the calculation of the Statutory Reserves, special deposit requirement or
similar requirement (including state law requirements and Regulation D))
imposed, modified, increased or deemed applicable by any Governmental
Authority against assets held by the Lender, or against deposits or
accounts in or for the account of the Lender, or against loans made by the
Lender, or against any other funds, obligations or other Property owned or
held by the Lender; or
(4) impose on the Lender any other condition regarding any
LIBOR Borrowing;
and the result of any of the foregoing is to increase the cost to Lender of
agreeing to make or of making, renewing or maintaining such borrowing on the
basis of the Adjusted LIBOR Rate, or reduce the amount of principal or interest
received by Lender, then, upon demand by the Lender, the Borrower shall pay to
the Lender, from time to time as specified by the Lender, additional amounts
which shall compensate Lender for such increased cost or reduced amount. The
Lender
27
will promptly notify the Borrower in writing of any event, upon becoming
actually aware of it, which will entitle Lender to additional amounts pursuant
to this paragraph. The Lender's determination of the amount of any such
increased cost, increased reserve requirement or reduced amount shall be
conclusive and binding, absent manifest error, provided that the calculation
thereof is set forth in reasonable detail in such notice.
The Borrower shall have the right, if it receives from the Lender any
notice referred to in the preceding paragraph, upon three (3) Business Days'
notice to the Lender, either (i) to repay in full (but not in part) any
borrowing with respect to which such notice was given, together with any accrued
interest thereon, or (ii) to convert the Adjusted LIBOR Rate in effect with
respect to such borrowing to the Alternate Base Rate; PROVIDED, that any such
repayment or conversion shall be accompanied by payment of (x) the amount
required to compensate the appropriate Lender for the increased cost or reduced
amount referred to in the preceding paragraph; (y) all accrued and unpaid
interest to date on the amount so repaid or converted, and (z) any Consequential
Loss which may be incurred as a result of such repayment or conversion.
(c) If for any reason with respect to any Interest Period the Lender
shall have determined (which determination shall be conclusive and binding upon
the Borrower) that: (1) the Lender is unable through its customary general
practices to determine a rate at which the Lender is offered deposits in United
States dollars by prime banks in the London interbank market, in the appropriate
amount for the appropriate period, or by reason of circumstances affecting the
London interbank market, generally, the Lender is not being offered deposits for
the applicable Interest Period and in an amount equal to the amount requested by
the Borrower, or (2) the Adjusted LIBOR Rate will not reflect the actual cost to
Lender of making and maintaining any LIBOR Borrowing hereunder for any proposed
Interest Period, then the Lender shall give the Borrower notice thereof and
thereupon, (A) any Rate Selection Notice previously given by the Borrower
designating an Adjusted LIBOR Rate which has not commenced as of the date of
such notice from the Lender shall be deemed for all purposes hereof to be of no
force and effect, as if never given, and (B) until the Lender shall notify the
Borrower that the circumstances giving rise to such notice from the Lender no
longer exist, each Rate Selection Notice requesting an Adjusted LIBOR Rate shall
be deemed a request for an Alternate Base Rate Borrowing, and each outstanding
LIBOR Borrowing then in effect shall be converted, without any notice to or from
the Borrower, upon the termination of the Interest Period then in effect, to an
Alternate Base Rate Borrowing.
(D) THE BORROWER HEREBY AGREES TO INDEMNIFY THE LENDER AGAINST AND
HOLD LENDER HARMLESS FROM ANY LOSS OR EXPENSE WHICH IT MAY INCUR OR SUSTAIN AS A
CONSEQUENCE OF ANY UNTIMELY PAYMENT (MANDATORY OR OPTIONAL) OR DEFAULT BY THE
BORROWER IN THE PAYMENT OF ANY PRINCIPAL AMOUNT OF OR INTEREST ON THE NOTE, OR
ANY FAILURE BY THE BORROWER TO CONVERT OR TO BORROW ANY LIBOR BORROWING ON THE
DATE SPECIFIED BY THE BORROWER, IN EACH CASE INCLUDING ANY INTEREST PAYABLE BY
LENDER TO THE LENDERS OF THE FUNDS OBTAINED BY IT IN ORDER TO MAKE OR MAINTAIN
ANY LIBOR BORROWING (OR ANY PORTION THEREOF), AND, TO THE EXTENT NOT COVERED
ABOVE, ANY CONSEQUENTIAL LOSS. THIS AGREEMENT SHALL SURVIVE THE PAYMENT OF THE
NOTE. A CERTIFICATE AS TO ANY ADDITIONAL AMOUNTS PAYABLE TO THE LENDER PURSUANT
TO THIS PARAGRAPH SUBMITTED BY THE LENDER TO THE BORROWER SHALL BE
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CONCLUSIVE AND BINDING UPON THE BORROWER, ABSENT MANIFEST ERROR, PROVIDED THE
CALCULATION THEREOF IS SET FORTH IN REASONABLE DETAIL IN SUCH NOTICE.
(e) If the Borrower requests quotes of the Adjusted LIBOR Rate for
different Interest Periods being considered for election by the Borrower, the
Lender will use reasonable efforts to provide such quotes to the Borrower
promptly. However, all such quotes provided shall be representative only and
shall not be binding on the Lender, nor shall they be determinative, directly or
indirectly, of any Adjusted LIBOR Rate or any component of any rate, nor will
the Borrower's failure to receive or the Lender's failure to provide any
requested quote or quotes either (1) excuse or extend the time for performance
of an obligation of the Borrower or for the exercise of any right, option or
election of the Borrower or (2) impose any duty or liability on the Lender. If
the Borrower requests a list of the Business Days in any calendar month, the
Lender will use reasonable efforts to provide such list promptly. However, any
such list provided shall be understood to identify only those days which the
Lender believes in good faith at the time such list is prepared will be the
Business Days for such month. The Lender shall not have any liability for any
failure to provide, delay in providing, error or mistake in or omission from,
any such quote or list.
(f) If Lender has a LIBOR Lending Office which differs from its
Domestic Lending Office, all Loans advanced by Lender's LIBOR Lending Office
shall be deemed to have been made by Lender and the obligation of the Borrower
to repay such Loans shall nevertheless be to Lender and shall be deemed held by
Lender, to the extent of such portions of the Loan, for the account of Lender's
LIBOR Lending Office.
(g) Notwithstanding any provision of this Agreement to the contrary,
Lender shall be entitled to fund and maintain its funding of all or any part of
the Loans hereunder in any manner it sees fit, it being understood, however,
that for the purposes of this Agreement, all determinations hereunder shall be
made as if Lender had actually funded and maintained its portion of each LIBOR
Borrowing during each Interest Period for the Loans through the purchase of
deposits having a maturity corresponding to such Interest Period and bearing an
interest rate equal to the LIBOR Rate for such Interest Period.
(h) The Borrower's obligation to pay increased costs and
Consequential Loss with regard to each LIBOR Borrowing as specified in this
SECTION 2.9 hereof shall survive termination of this Agreement.
2.10 LETTERS OF CREDIT.
(a) Subject to the terms and conditions contained herein, the
Borrower shall have the right to utilize a portion of the Commitment from time
to time prior to the Maturity Date to obtain from the Lender one or more Letters
of Credit for the account of the Borrower in such amounts and in favor of such
beneficiaries as the Borrower from time to time shall request; provided, that in
no event shall the Lender have any obligation to issue any Letter of Credit if
(i) the face amount of such Letter of Credit, plus the Letter of Credit Exposure
Amount at such time would exceed $500,000, (ii) the face amount of such Letter
of Credit, plus the aggregate of
29
Lender's Current Sum at such time, would exceed the lesser of (1) the Commitment
or (2) the Availability, (iii) such Letter of Credit would have an expiry date
beyond the earlier to occur of (1) one month prior to the scheduled Maturity
Date, (2) 90 days after the issuance date of such Letter of Credit if such
Letter of Credit is a documentary sight Letter of Credit or (3) 365 days after
the issuance date of such Letter of Credit if such Letter of Credit is a standby
Letter of Credit, (iv) such Letter of Credit is not in a form and does not
contain terms satisfactory to the Lender in its sole and absolute discretion,
(v) the Borrower have not executed and delivered such Applications and other
instruments and agreements relating to such Letter of Credit as the Lender shall
have requested, or (vi) an event has occurred and is continuing which
constitutes a Default or Event of Default.
(b) If requesting the issuance of any Letter of Credit, the Borrower
shall give at least three (3) Business Days' prior written notice to the Lender,
at its Domestic Lending Office, which written notice shall be the requisite
Application for a Letter of Credit on the Lender's customary form.
(c) The Borrower promises to pay to the order of the Lender the
amount of all Letter of Credit Advances. To effect repayment of any such Letter
of Credit Advance, the Lender shall automatically satisfy such Letter of Credit
Advance (subject to the terms and conditions of SECTIONS 2.1 AND 4.1 hereof) by
making a Loan if (i) such Letter of Credit Advance is (and such Loan is to be)
made prior to the Maturity Date, (ii) the Availability would be equal to or
greater than zero after giving effect to such Loan and (iii) no Default or Event
of Default shall have occurred which is then continuing. If Lender does not make
a Loan to satisfy such Letter of Credit Advance, each such letter of Credit
Advance shall be considered for all purposes as a demand obligation owing by the
Borrower to the Lender, and each Letter of Credit Advance shall bear interest
from the date thereof at the Past Due Rate, without notice of presentment,
demand, protest or other formalities of any kind (said past due interest on such
Letter of Credit Advance being payable on demand). The failure of the Lender to
affect repayment of any such Letter of Credit Advance in accordance with the
preceding sentences shall not in any way whatsoever affect the Borrower's
obligation to pay each Letter of Credit Advance on demand and to pay interest at
the Past Due Rate on the amount of unreimbursed Letter of Credit Advance. All
rights, powers, benefits and privileges of this Agreement with respect to the
Note, all security therefor (including the Collateral) and guaranties thereof
(including the Guaranties) and all restrictions, provisions for repayment or
acceleration and all other covenants, warranties, representations and agreements
of the Borrower contained in this Agreement with respect to the Note shall apply
to such Letter of Credit Advances.
(d) In consideration of the issuance of each Letter of Credit
pursuant to the provisions of this SECTION 2.10, the Borrower agrees to pay
(subject to SECTION 9.6 hereof) to the Lender a letter of credit fee (computed
on the basis of the actual number of days elapsed in a year composed of 360
days) in an amount equal to, (i) with respect to each documentary letter of
credit, the product of (a) the Applicable Margin in effect for LIBOR Borrowings
for the applicable period TIMES (b) the undrawn upon
30
amount of the applicable Letter of Credit, and (ii) with respect to each standby
letter of credit, the product of (a) the Applicable Margin in effect for LIBOR
Borrowings for the applicable period PLUS 200 basis points TIMES (b) the undrawn
upon amount of the applicable Letter of Credit, with each letter of credit fee
to commence to accrue as of the date of issuance of such Letter of Credit and to
be effective as to any reductions in the undrawn amount of such Letter of Credit
as of the date of any such reduction (whether resulting from payments thereunder
by the Lender, by agreement of the beneficiary thereunder or automatically by
the terms of such Letter of Credit), and each letter of credit fee shall cease
to accrue (except with respect to interest at the Past Due Rate on any unpaid
portion thereof) on the date that such Letter of Credit expires, is returned to
the Lender undrafted upon by the beneficiary thereof or is fully paid by the
Lender. Said letter of credit fees shall be payable in arrears to the Lender at
its Principal Office in immediately available funds (i) on the first Business
Day of each calendar month that such Letter of Credit remains open, and (ii) on
the date that such Letter of Credit expires, is returned to the Lender undrafted
upon by the beneficiary thereof or is fully paid by the Lender. All past due
letter of credit fees shall bear interest at the Past Due Rate and shall be
payable upon demand by the Lender. The Borrower also hereby agrees to pay to the
Lender any and all other issuance, amendment, negotiation, and other normal and
customary fees which are charged by the Lender in connection with the issuance
or negotiation of any of Letter of Credit and the presentation or payment of any
draw under any such Letter of Credit, with all of such amounts being due and
payable to the Lender upon demand.
(e) The obligations of the Borrower under this Agreement in respect
of the Letters of Credit and all Letter of Credit Advances are absolute,
unconditional and irrevocable, shall be paid strictly in accordance with the
terms of this Agreement, under all circumstances whatsoever, including the
following circumstances:
(1) any lack of validity or enforceability of this Agreement,
any Letter of Credit or any Loan Document;
(2) any amendment or waiver of default under or any consent to
departure from the terms of this Agreement or any Letter of Credit without
the express prior written consent of the Lender;
(3) the existence of any claim, set-off, defense or other
right which any beneficiary or any transferee of any Letter of Credit (or
any entities for whom any such beneficiary or any such transferee may be
acting), or any Person (other than the Lender) may have, whether in
connection with this Agreement, the Letters of Credit, the transactions
contemplated hereby or any unrelated transaction;
(4) any statement, draft, certificate, or any other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect whatsoever; provided that the Lender
will examine each document presented under each Letter of Credit to
ascertain that such document appears on its face to comply with the terms
thereof; and
(5) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing.
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In the event that any restriction or limitation is imposed upon or
determined or held to be applicable to the Lender or the Borrower by,
under or pursuant to any Legal Requirement now or hereafter in effect or
by reason of any interpretation thereof by any Governmental Authority,
which in the respective sole judgment of the Lender would prevent Lender
from legally incurring liability under a Letter of Credit issued or
proposed to be issued hereunder, then the Lender shall give prompt written
notice thereof to the Borrower, whereupon the Lender shall have no
obligation to issue any additional Letters of Credit then or at any time
thereafter. In addition, if as a result of any Regulatory Change which
imposes, modifies or deems applicable (x) any tax, reserve, special
deposit or similar requirement against any Letters of Credit issued or
participated to by Lender, (y) any fee, expense or assessment against the
Letters of Credit issued by the Lender for deposit insurance, or (z) any
other charge, expense or condition which increases the actual cost to the
Lender of issuing or maintaining such Letters of Credit, or reduces any
amount receivable by the Lender hereunder in respect of any Letter of
Credit or any participation therein (which increase in cost, or reduction
in amount receivable, shall be the result of the Lender's reasonable
allocation of the aggregate of such increases or reductions resulting from
such event), then the Borrower (subject to SECTION 9.6 hereof) shall pay
to the Lender, upon demand and from time to time, amounts sufficient to
compensate such Person for each such increase from the effective date of
such increase to the date of demand therefor. Each such demand shall be
accompanied by a certificate setting forth in reasonable detail the
calculation of the amount then being demanded in accordance with the
preceding sentence and each such certificate shall be conclusive absent
manifest error.
(F) THE BORROWER HEREBY INDEMNIFIES AND HOLDS HARMLESS LENDER FROM
AND AGAINST ANY AND ALL CLAIMS AND DAMAGES, LOSSES, LIABILITIES, COSTS OR
EXPENSES WHICH LENDER MAY INCUR (OR WHICH MAY BE CLAIMED AGAINST LENDER BY ANY
PERSON WHATSOEVER) IN CONNECTION WITH THE EXECUTION AND DELIVERY OR TRANSFER OF
OR PAYMENT OR FAILURE TO PAY UNDER ANY LETTER OF CREDIT; PROVIDED, THAT THE
BORROWER SHALL NOT BE REQUIRED TO INDEMNIFY LENDER FOR ANY CLAIMS, DAMAGES,
LOSSES, LIABILITIES, COSTS OR EXPENSES TO THE EXTENT, BUT ONLY TO THE EXTENT,
CAUSED BY (I) THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF THE PARTY SEEKING
INDEMNIFICATION OR (II) LENDER'S FAILURE TO PAY UNDER ANY LETTER OF CREDIT AFTER
THE PRESENTATION TO IT OF A REQUEST REQUIRED TO BE PAID UNDER APPLICABLE LAW.
NOTHING IN THIS SECTION 2.10(F) IS INTENDED TO LIMIT THE OBLIGATIONS OF THE
BORROWER UNDER ANY OTHER PROVISION OF THIS AGREEMENT.
2.11 RECAPTURE. If on any Interest Payment Date the Lender does not
receive payment in full of interest computed at the Alternate Base Rate and/or
the Adjusted LIBOR Rate, as applicable (computed without regard to any
limitation by the Highest Lawful Rate) because the sum of the Alternate Base
Rate and/or the Adjusted LIBOR Rate, as applicable (so computed) exceeds or has
exceeded the Highest Lawful Rate applicable to Lender, the Borrower shall pay to
32
the Lender, in addition to interest otherwise required, on each Interest Payment
Date thereafter, the Excess Interest Amount (calculated as of each such
subsequent Interest Payment Date); PROVIDED that in no event shall the Borrower
be required to pay, for any computation period, interest at a rate exceeding the
Highest Lawful Rate applicable to Lender during such period. As used herein, the
term "EXCESS INTEREST AMOUNT" shall mean, on any day, the amount by which (a)
the amount of all interest which would have accrued prior to such day on the
outstanding principal of the Note (had the Alternate Base Rate and/or the
Adjusted LIBOR Rate, as applicable, at all times been in effect without
limitation by the Highest Lawful Rate applicable to Lender) exceeds (b) the
aggregate amount of interest actually paid to the Lender on the Note on or prior
to such day.
2.12 USE OF PROCEEDS. The proceeds of the Loans will be used to (i)
refinance the existing Indebtedness of Borrower to Frost Capital, and (ii)
finance general working capital needs of Borrower.
3. COLLATERAL.
3.1 SECURITY DOCUMENTS. The Loans and all other Obligations shall be
secured by Collateral described in the Security Documents and are entitled to
the benefits thereof. The Borrower shall duly execute and deliver the Security
Documents, all consents of third parties necessary to permit the effective
granting of the Liens created thereby, financing statements pursuant to the
Uniform Commercial Code and other documents, all in Proper Form, as may be
reasonably required by the Lender to grant to the Lender a
valid, perfected and enforceable first priority Lien on and security interest in
the Collateral (subject only to the Liens permitted under SECTION 7.2 hereof).
3.2 FILING AND RECORDING. The Borrower shall, at its sole cost and
expense, cause all financing statements and other Security Documents pursuant to
this Agreement to be duly recorded and/or filed or otherwise perfected in all
places necessary, in the opinion of the Lender, and take such other actions as
the Lender may reasonably request, in order to perfect and protect the Liens of
the Lender in the Collateral. The Borrower, to the extent permitted by law,
hereby authorizes the Lender to file any financing statement in respect of any
Lien created pursuant to the Security Documents which may at any time be
required or which, in the opinion of the Lender, may at any time be desirable,
although the same may have been executed only by the Lender or, at the option of
the Lender, to sign such financing statement on behalf of the Borrower and file
the same, and the Borrower hereby irrevocably designates the Lender, its agent,
representatives and designees as its agent and attorney-in-fact for this
purpose. In the event that any re-recording or refiling thereof (or the filing
of any statements of continuation or assignment of any financing statement) is
reasonably required to protect and preserve such Lien, the Borrower shall, at
the Borrower's cost and expense, cause the same to be recorded and/or refiled at
the time and in the manner reasonably requested by the Lender.
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4. CONDITIONS.
4.1 ALL LOANS. The obligation of Lender to make any Loan and the
obligation of the Lender to issue any Letter of Credit is subject to the
accuracy of all representations and warranties of the Borrower on the date of
such Loan or issuance of such Letter of Credit, to the performance by the
Borrower of its obligations under the Loan Documents and to the satisfaction of
the following further conditions:
(a) the Lender shall have received the following, all of which shall
be duly executed and in Proper Form: (1) in the case of a Loan, other than a
Loan for the purposes described in Sections 2.6(d) and 2.10(d),
(i) by no later than 12:00 noon on the applicable Rate
Selection Date, telephonic notice from the
Borrower of the proposed date and amount of such
Loan, and
(ii) no later than 1:00 p.m. on the applicable Rate
Selection Date, a Request for Extension of Credit,
signed by a Responsible Officer of the Borrower.
or, IN THE CASE OF ISSUANCE OF A LETTER OF CREDIT, a completed Application (as
may be required by the Lender) signed by a Responsible Officer of the Borrower
by 12:00 noon three (3) Business Days prior to the proposed date of issuance of
such Letter of Credit and payment of the first letter of credit fee as and by
the time required in SECTION 2.10 of this Agreement, along with, IN EACH CASE,
such financial information as the Lender may reasonably require to substantiate
compliance with all financial covenants contained herein by the Borrower; and
(2) such other Applications, certificates and other documents as the Lender may
reasonably require;
(b) Availability must be in excess of or equal to zero; after giving
effect to the requested Loan(s) or Letter(s) of Credit;
(c) all representations and warranties of the Borrower and any other
Person set forth in this Agreement and in any other Loan Document shall be true
and correct in all material respects with the same effect as though made on and
as of such date, except for (1) those representations and warranties which
relate only to the Closing Date or (2) such changes in the representations and
warranties otherwise permitted by the terms of this Agreement;
(d) the Borrower (and each Guarantor, if applicable) shall be in
compliance with all the terms and provisions contained in this Agreement or in
any other Loan Document which are to be observed or performed by the Borrower
(or such Guarantor, if applicable);
(e) prior to the making of such Loan or the issuance of such Letter
of Credit, there shall have occurred no Material Adverse Effect in the assets,
liabilities, financial condition, business or affairs of the Borrower or any of
its Subsidiaries since the date hereof;
34
(f) no Default or Event of Default shall have occurred and be
continuing;
(g) if requested by the Lender, it shall have received a certificate
executed by the Financial Officer or other Responsible Officer of the Borrower
as to the compliance with subparagraphs (b) through (f) above;
(h) the making of such Loan or the issuance of such Letter of
Credit, shall not be prohibited by, or subject the Lender to, any penalty or
onerous condition under any Legal Requirement; and
(i) the Borrower shall have paid all legal fees and expenses of the
type described in SECTION 9.9 hereof through the date of such Loan or the
issuance of such Letter of Credit.
4.2 FIRST LOAN. In addition to the matters described in SECTION 4.1
hereof, the obligation of Lender to make the initial Loan or the obligation of
the Lender to issue the first Letter of Credit is subject to the receipt by the
Lender of each of the following, in Proper Form:
(a) the Note, executed by the Borrower;
(b) the Security Documents executed by the Borrower;
(c) a certificate executed by the Secretary or Assistant Secretary
of the Borrower dated as of the date thereof, substantially in the form attached
hereto as EXHIBIT F;
(d) certified copies of the Organizational Documents of the
Borrower;
(e) a certificate from the Secretary of State or other appropriate
public official of the State of Texas as to the continued existence of the
Borrower in the State of Texas;
(f) a certificate from the Office of the Comptroller or other
appropriate public official of the State of Texas as to the good standing of the
Borrower in the State of Texas;
(g) certificates from the appropriate public officials of those
jurisdictions where the nature of the Borrower's business makes it necessary or
desirable to be qualified to do business as a foreign corporation, as to the
existence, good standing and qualification as a foreign corporation (as may be
appropriate) of the Borrower in such jurisdictions;
(h) the most recent schedule and aging of Receivables of the
Borrower (dated within thirty (30) days of the Closing Date), as well as a
current Borrowing Base Compliance Certificate executed by a Responsible Officer
of the Borrower in the form attached hereto as EXHIBIT G;
(i) a copy of the field examination, including a takeover field
examination, of the Borrower's books and records and the results of such field
examination;
35
(j) evidence that the Borrower has $700,000 or more of Availability,
after giving effect to the Loans occurring and the Letters of Credit issued on
the Closing Date;
(k) a legal opinion from counsel for the Borrower (said counsel to
be reasonably acceptable to Lender), dated as of the Closing Date, addressed to
the Lender and acceptable in all respects to the Lender in its sole and absolute
discretion;
(l) certificates of insurance satisfactory to the Lender in all
respects evidencing the existence of all insurance required to be maintained by
the Borrower pursuant to the terms of this Agreement and the Security Documents;
(m) the Borrower and the Lender shall have entered into the Lockbox
Agreements;
(n) copies of all major customer and supplier contracts with respect
to the Borrower;
(o) copies of all employment agreements, management fee agreements
and tax sharing agreements;
(p) copies of all lease and warehouse agreements entered into by
Borrower;
(q) waivers or subordinations of any and all landlord and
warehousemen liens (whether statutory or contractual) held by any owner, or
warehousemen, of each real Property leased by the Borrower or where Borrower's
Property is warehoused;
(r) copies of all loan agreements, notes and other documentation
evidencing any Indebtedness of the Borrower;
(s) evidence satisfactory to the Lender that there has been no
material adverse change in the business, assets, operations, or financial
condition of the Borrower since April 30, 1997;
(t) an executed disbursement authorization letter from the Borrower
to the Lender with respect to the disbursement of the proceeds of the Loans and
the issuance of the Letters of Credit, if any, to be made or issued on the
Closing Date;
(u) all other Loan Documents and any other instruments or documents
consistent with the terms of this Agreement and relating to the transactions
contemplated hereby as the Lender may reasonably request, executed by the
Borrower or any other Person required by the Lender, including without
limitation, the Lockbox Agreements;
and subject to the further conditions that, at the time of the initial Loan, (1)
the ownership, corporate structure, solvency and capitalization of the Borrower
shall be reasonably satisfactory
36
to the Lender in all respects; (2) the Lender shall have had the opportunity, if
they elect, to examine the books of account and other records and files of the
Borrower and to make copies hereof, and to conduct a preclosing audit which
shall include, without limitation, verification of Eligible Receivables,
verification of satisfactory status of customer and supplier accounts, payment
of payrolls taxes and accounts payable and formulation of an opening Borrowing
Base as of the Closing Date (with the results of such examination and audits to
have been satisfactory to the Lender in all respects); (3) all such actions as
the Lender shall reasonably require to perfect the Liens created pursuant to the
Security Documents shall have been taken, including without limitation, the
delivery to the Lender of all Property with respect to which possession is
necessary for the purpose of perfecting such Liens, and with respect to
Collateral covered by the Security Agreements, the filing of appropriately
completed and duly executed Uniform Commercial Code financing statements; (4)
the Lender shall also have received evidence reasonably satisfactory to it that
the Liens created by the Security Documents constitute first priority Liens
(except for any Liens expressly provided for in SECTION 7.2 below); (5) the
Borrower shall have paid all fees owing to the Lender by the Borrower under this
Agreement, including without limitation, legal fees and expenses described in
SECTION 9.09 or otherwise and (6) all other legal matters incident to the
transactions herein contemplated shall be reasonably satisfactory to counsel for
the Lender.
5. REPRESENTATIONS AND WARRANTIES.
To induce the Lender to enter into this Agreement, the Borrower represents
and warrants to the Lender, as of the date hereof and as of the date any Loan is
made hereunder or any Letter of Credit is issued hereunder, as follows:
5.1 ORGANIZATION; CAPITALIZATION. The Borrower is duly organized, validly
existing and in good standing under the laws of the state of its incorporation;
has all power and authority to own its Property and assets and to conduct its
business as presently conducted; and is duly qualified to do business and in
good standing in each and every state in the United States of America where its
business requires such qualification. The authorized capital stock of the
Borrower consists of (i) 100,000 shares of common stock, $0.01 par value, of
which 90,100 are issued and outstanding and owned beneficially and of record by
Parent, and (ii) 50,000 shares of 5% cumulative preferred stock, $100 par value,
of which no shares are issued and outstanding.
5.2 FINANCIAL STATEMENTS.
(a) The financial statements of the Borrower delivered to the Lender
in connection with this Agreement, including without limitation, the financial
statements of the Borrower dated as of September 30, 1996 and April 30, 1997,
fairly present, in accordance with GAAP, the financial condition and the results
of operations of the Borrower as of the dates and for the periods indicated. No
Material Adverse Effect has occurred since the dates of such financial
statements.
(b) The Borrower has heretofore furnished to the Lender, for each
quarter from the projected Closing Date through the first anniversary of the
Closing Date and for the 1998 fiscal year, projected income statements, balance
sheets and cash flows of the Borrower,
37
together with one or more schedules demonstrating prospective compliance with
all financial covenants contained in this Agreement, such projections disclosing
all assumptions made by the Borrower in formulating such projections. The
projections are based upon estimates and assumptions, all of which are
reasonable in light of the conditions which existed as of the time the
projections were made, have been prepared on the basis of the assumptions stated
therein and reflect as of the Closing Date a reasonable estimate of the Borrower
as to the results of operations and other information projected therein.
5.3 ENFORCEABLE OBLIGATIONS; AUTHORIZATION. The Loan Documents are legal,
valid and binding obligations of the Borrower, enforceable in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency and
other similar laws affecting creditors rights generally and by general equitable
principles. The execution, delivery and performance of the Loan Documents have
all been duly authorized by all necessary corporate, and if necessary
shareholder, action; are within the power and authority of the Borrower; do not
and will not contravene or violate any Legal Requirement or the Organizational
Documents of the Borrower; do not and will not result in the creation of any
Lien upon any Property of the Borrower except as expressly contemplated therein.
All necessary approvals of any Governmental Authority and all other requisite
permits, registrations and consents for that performance have been obtained for
the delivery and performance of the Loan Documents.
5.4 OTHER DEBT. The Borrower is not in default in the payment of any other
Indebtedness or under any agreement, mortgage, deed of trust, security agreement
or lease to which it is a party, the result of which has, or is reasonably
likely to have, a Material Adverse Effect.
5.5 LITIGATION. Except as set forth on SCHEDULE 5.5 attached hereto, there
is no litigation or administrative proceeding pending or, to the knowledge of
the Borrower, threatened against, nor any outstanding judgment, order or decree
affecting, the Borrower or any Subsidiary of the Borrower before or by any
Governmental Authority or arbitral body which individually or in the aggregate
have, or are reasonably likely to have, a Material Adverse Effect. Neither the
Borrower, nor any Subsidiary thereof, is in default with respect to any
judgment, writ, rule, regulation, order or decree of any Governmental Authority.
5.6 TAXES. Except as otherwise permitted pursuant to the terms of SECTION
6.2 hereof, the Borrower has filed all federal, state, local or foreign tax
returns required to have been filed and paid all taxes shown thereon to be due,
except those for which extensions have been obtained if adequate reserves with
respect thereto are maintained in accordance with GAAP. No federal income tax
returns of the Borrower have been audited by the Internal Revenue Service, and
the Borrower has not, as of the Closing Date, requested or been granted any
extension of time to file any Federal, state, local or foreign tax return. The
Borrower is not a party to, and does not have any obligation under, any tax
sharing arrangement.
5.7 NO MATERIAL MISSTATEMENTS. No information, report, financial
statement, exhibit or schedule prepared or furnished by or on behalf of the
Borrower to the Lender in connection with this Agreement or any other Loan
Documents knowingly contains any material misstatement of
38
fact or knowingly omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
5.8 SUBSIDIARIES. As of the date hereof, the Borrower has no Subsidiaries
or any other material minority ownership interests in any other Person.
5.9 REPRESENTATIONS BY OTHERS. All representations and warranties made by
or on behalf of the Borrower in any Loan Document shall constitute
representations and warranties of the Borrower hereunder.
5.10 PERMITS, LICENSES, ETC. The Borrower possesses all material permits,
licenses, patents, patent rights, trademarks, trademark rights, trade names,
trade name rights and copyrights which are required to conduct its business.
5.11 ERISA. No Reportable Event has occurred with respect to any Plan.
Each Plan complies in all material respects with all applicable provisions of
ERISA, and the Borrower or each ERISA Affiliate have filed all reports required
by ERISA and the Code to be filed with respect to each Plan. The Borrower does
not have any knowledge of any event which could reasonably be expected to result
in a liability of the Borrower or any ERISA Affiliate to the PBGC other than for
applicable premiums. No accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not waived, exists with
respect to any Plan. No event has occurred and no condition exists that could
reasonably be expected to constitute grounds for a Plan to be terminated under
circumstances which would cause the Lien provided under Section 4068 of ERISA to
attach to any Property of the Borrower or any ERISA Affiliate. No event has
occurred and no condition exists that could reasonably be expected to cause the
Lien provided under Section 302 of ERISA or Section 412 of the Code to attach to
any Property of the Borrower or any ERISA Affiliate.
5.12 TITLE TO PROPERTIES; POSSESSION UNDER LEASES.
(a) The Borrower has good and marketable title to, or a valid
leasehold interest in, all of its Property and assets shown on the most recent
balance sheets of the Borrower referred to in SECTION 5.2 hereof and all assets
and Property acquired since the date of such balance sheets, except for such
Property disposed of in accordance with the terms hereof or no longer used or
useful in the conduct of its business or as has been disposed of in the ordinary
course of business, and except for minor defects in title that do not interfere
with the ability of the Borrower or any of its Subsidiaries to conduct its
business as now conducted. All such assets and Property are free and clear of
all Liens other than those permitted by SECTION 7.2 hereof.
(b) The Borrower has complied in all material respects with all
obligations under all leases to which it is a party and under which it is in
occupancy, except where noncompliance does not effect the Borrower's use or
occupancy thereof, and all such leases are in full force and effect, and the
Borrower enjoys peaceful and undisturbed possession under all such leases.
SCHEDULE 5.12 attached hereto sets forth each of such leases of real Property in
existence as of the Closing Date, and the Borrower has provided the Lender with
complete and correct
39
copies of all of such leases of real Property in effect as of the Closing Date
where Collateral is located.
5.13 ASSUMED NAMES. The Borrower is not currently conducting its business
under assumed name or names, except as set forth on SCHEDULE 5.13 attached
hereto or as disclosed in writing to the Lender within a reasonable time before
the Borrower commences to conduct business under the applicable assumed name or
names.
5.14 INVESTMENT COMPANY ACT. The Borrowers is not an investment company
within the meaning of the Investment Company Act of 1940, as amended, or,
directly or indirectly, controlled by or acting on behalf of any Person which is
an investment company, within the meaning of said Act.
5.15 PUBLIC UTILITY HOLDING COMPANY ACT. The Borrower is not a "public
utility company," or an "affiliate" or a "subsidiary company" of a "public
utility company," or a "holding company," or a "subsidiary company" of a
"registered holding company," or an "affiliate" of a "registered holding
company" or of a "subsidiary company" of a "registered holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended
("PUHCA"). To the best of the Borrower's knowledge, the Borrower is not an
affiliate" or a "subsidiary company" of an unregistered, non-exempt "holding
company as such terms are defined in PUHCA.
5.16 INDEBTEDNESS AGREEMENTS. SCHEDULE 5.16 attached hereto is a complete
and correct list of (i) all credit agreements for borrowed money, indentures and
capitalized leases and all Property subject to any Lien securing such
Indebtedness or lease obligation, (ii) each letter of credit and guaranty, (iii)
all other material instruments in effect as of the date hereof providing for,
evidencing, securing or otherwise relating to any Indebtedness for borrowed
money of the Borrower (other than the Indebtedness hereunder), and (iv) all
obligations of the Borrower to issuers of appeal bonds issued for account of the
Borrower. The Borrower shall, upon request by the Lender, deliver to the Lender
a complete and correct copy of all such credit agreements, indentures,
capitalized leases, letters of credit, guarantees and other instruments or
leases described in SCHEDULE 5.16 or arising after the date hereof, including
any modifications or supplements thereto, as in effect on the date hereof.
5.17 ENVIRONMENTAL MATTERS. Except as is described on SCHEDULE 5.17
attached hereto, no activity of the Borrower requires any Environmental Permit
which has not been obtained and which is not now in full force and effect. The
Borrower is in compliance with all limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Requirement of Environmental Law or Environmental
Permit. The Borrower (and, to the knowledge of the Borrower, each of the prior
owners or operators and predecessors in interest with respect to any of its
Property) (i) has obtained and maintained in effect all Environmental Permits,
(ii) along with its Property has been (except as disclosed in the lease of the
premises known as ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as in effect on the Closing Date, and as
to which, to the knowledge of Borrower, proper remediation has occurred pursuant
to the terms of such lease) and is in compliance with all applicable
Requirements of Environmental
40
Law and Environmental Permits, (iii) along with its Property is not subject to
any (A) Environmental Claims or (B) Environmental Liabilities, in either case
direct or contingent, and whether known or unknown, arising from or based upon
any act, omission, event, condition or circumstance occurring or existing on or
prior to the date hereof, and (iv) has not received individually or collectively
any notice of any violation or alleged violation of any Requirements of
Environmental Law or Environmental Permit or any Environmental Claim in
connection with its Property. The present and future liability (including any
Environmental Liability and any other damage to Persons or Property), if any, of
the Borrower and with respect to the Property of the Borrower which is
reasonably expected to arise in connection with Requirements of Environmental
Law, Environmental Permits and other environmental matters will not have a
Material Adverse Effect.
5.18 NO CHANGE IN CREDIT CRITERIA OR COLLECTION POLICIES. There has been
no material adverse change in credit criteria or collection policies concerning
Receivables of the Borrower since June 1, 1991.
5.19 SOLVENCY.
(a) The fair salable value of the assets of the Borrower is not less
than the amount that will be required to be paid on or in respect of the
probable liability on the existing debts and other liabilities (including
contingent liabilities) of the Borrower, as they become absolute and mature.
(b) The assets of the Borrower do not constitute unreasonably small
capital for the Borrower to carry out its business as now conducted and as
proposed to be conducted including the capital needs of the Borrower, taking
into account the particular capital requirements of the business conducted by
the Borrower and projected capital requirements and capital availability
thereof.
(c) The Borrower does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and amounts of
cash to be received by the Borrower, and of amounts to be payable on or in
respect of debt of the Borrower). The cash flow of the Borrower, after taking
into account all anticipated uses of the cash of the Borrower, should at all
times be sufficient to pay all such amounts on or in respect of debt of the
Borrower when such amounts are required to be paid.
(d) The Borrower does not believe that final judgments against it in
actions for money damages presently pending, if any, will be rendered at a time
when, or in an amount such that, it will be unable to satisfy any such judgments
promptly in accordance with their terms (taking into account the maximum
reasonable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered). The cash flow of the
Borrower, after taking into account all other anticipated uses of the cash of
the Borrower (including the payments on or in respect of debt referred to in
subparagraph (c) of this SECTION 5.19), should at all times be sufficient to pay
all such judgments promptly in accordance with their terms.
41
5.20 STATUS OF RECEIVABLES AND OTHER COLLATERAL. The Borrower
represents and warrants that (a) it is and shall be the sole owner, free and
clear of all Liens except in favor of the Lender or otherwise permitted under
SECTION 7.2 hereunder, of and fully authorized to sell, transfer, pledge and/or
grant a security interest in each and every item of all Collateral owned by it;
(b) each Eligible Receivable is and shall be a good and valid account
representing an undisputed bona fide indebtedness incurred or an amount
indisputably owed by the account debtor therein named, for a fixed sum as set
forth in the invoice relating thereto with respect to an absolute sale and
delivery upon the specified terms of goods sold by the Borrower, or work, labor
and/or services theretofore rendered by the Borrower; (c) no Eligible Receivable
is or shall be subject to any defense, offset, counterclaim, discount or
allowance (as of the time of its creation) except as may be stated in the
invoice relating thereto or discounts and allowances as may be customary in the
Borrower's business; (d) none of the transactions underlying or giving rise to
any Eligible Receivable shall violate any applicable state or federal laws or
regulations, and all documents relating to any Receivable shall be legally
sufficient under such laws or regulations and shall be legally enforceable in
accordance with their terms, subject, as to enforceability, to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creators' rights generally; (e) to the best of the Borrower's
knowledge, each account debtor, guarantor or endorser with respect to any
Eligible Receivable is solvent and able to pay all Receivables on which it is
obligated in full when due; (f) all documents and agreements relating to
Eligible Receivables shall be true and correct and in all respects what they
purport to be; (g) to the best of the Borrower's knowledge, all signatures and
endorsements that appear on all documents and agreements relating to Eligible
Receivables shall be genuine and all signatories and endorsers with respect
thereto shall have full capacity to contract; (h) it shall maintain books and
records pertaining to the Collateral owned by it in detail, form and scope as
the Lender shall reasonably require; (i) the Borrower will immediately notify
the Lender if any Receivables arise out of contracts with the United States or
any department, agency or instrumentality thereof, and will, upon request from
the Lender, execute any instruments and take any steps required by the Lender in
order that all monies due or to become due under any such contract shall be
assigned to the Lender and notice thereof given under the Federal Assignment of
Claims Act; (j) it will, immediately upon learning thereof, report to the Lender
any material loss or destruction of, or substantial damage to, any of the
Collateral, and any other matters adversely affecting the value, enforceability
or collectability of any of the Collateral; (k) if any amount payable under or
in connection with any Receivable is evidenced by a promissory note or other
instrument, as such terms are defined in the Uniform Commercial Code, such
promissory note or instrument shall be immediately pledged, endorsed, assigned
and delivered to the Lender as additional collateral; (l) it shall not redate
any invoice or sale or make sales on extended dating beyond that customary in
the industry; and (m) it shall not be entitled to pledge the Lender's credit on
any purchases or for any purpose whatsoever.
6. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees with the Lender that prior to the
termination of this Agreement, it will do, cause each of its Subsidiaries, if
any, to do, and if necessary cause to be done, each and all of the following:
42
6.1 BUSINESSES AND PROPERTIES. At all times: (a) do or cause to be done
all things necessary to obtain, preserve, renew and keep in full force and
effect the rights, licenses, permits, franchises, patents, copyrights,
trademarks and trade names material to the conduct of its businesses; (b)
maintain and operate such businesses in the same general manner in which are
they are presently conducted and operated; (c) comply with all Legal
Requirements applicable to the operation of such businesses whether now in
effect or hereafter enacted (including without limitation, all Legal
Requirements relating to public and employee health and safety and all
Environmental Laws) and with any and all other Legal Requirements; and (d)
maintain, preserve and protect all Property material to the conduct of such
businesses and keep such Property in good repair, working order and condition,
and from time to time make, or cause to be made, all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order
that the business carried on in connection therewith may be properly conducted
at all times.
6.2 TAXES. Pay and discharge promptly when due all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
in respect of its Property before the same shall become delinquent or in
default, as well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, and in excess of $10,000 with respect to claims for
labor, material and supplies or in excess of $10,000 with respect to claims for
taxes, assessments and governmental charges or levies, might give rise to Liens
upon such properties or any part thereof (except as otherwise permitted by
SECTION 7.2 hereof), unless being diligently contested in good faith by
appropriate proceedings and as to which adequate reserves in an amount not less
than the aggregate amount secured by such Liens have been established in
accordance with GAAP; PROVIDED, HOWEVER, that such contested amounts giving rise
to such Liens shall be immediately paid upon commencement of any procedure or
proceeding to foreclose any of such Liens unless the same shall be validly
stayed by a court of competent jurisdiction or a surety bond, which is
satisfactory in all respects to the Lender, is delivered to the Lender in an
amount no less than such contested amounts.
6.3 FINANCIAL STATEMENTS AND INFORMATION. Furnish to the Lender three (3)
copies of each of the following: (a) as soon as available and in any event
within ninety (90) days after the end of each fiscal year of the Borrower or the
Parent, as the case may be, Annual Audited Financial Statements of the Parent,
Borrower and their Subsidiaries; (b) as soon as available and in any event
within thirty (30) days after the end of each fiscal month of the Borrower,
Monthly Unaudited Financial Statements of the Borrower and its Subsidiaries; (c)
as soon as available and in any event within forty-five (45) days after the end
of each fiscal quarter of the Parent, Quarterly Unaudited Financial Statements
of the Parent; (d) concurrently with the financial statements of Borrower
provided for in SUBSECTIONS 6.3(A) and 6.3(B) hereof, (1) an Officer's
Certificate, signed by a Responsible Officer of the Borrower, and (2) a written
certificate in Proper Form, identifying each Subsidiary which is otherwise
required by the provisions of SECTION 6.10 hereof to become a Guarantor at the
request of the Lender, but which has not yet done so as of the date of such
certificate, and providing an explanation of the reasons why each such
Subsidiary is not a Guarantor, signed by a Responsible Officer of the Borrower;
(e) as soon as available and in any event within five (5) days after the date of
issuance thereof, a management letter prepared by the
43
independent public accountants who reported on the financial statements provided
for in Subsection 6.3(a) above with respect to the internal audit and financial
controls of the Parent, Borrower and either of their Subsidiaries; (f) as soon
as available and in any event within fifteen (15) days after the end of each
month, account receivable agings and reconciliations, accounts payable agings
and reconciliations, monthly sales report, monthly inventory summary and all
other schedules, computations and other information, in reasonable detail, as
may be required or requested by the Lender, all certified by a Responsible
Officer of the Borrower; (g) as soon as available and in any event on the Monday
after the end of each week, a Borrowing Base Compliance Certificate, signed by a
Responsible Officer of the Borrower in the form attached hereto as EXHIBIT G;
(h) as soon as available and in any event within thirty (30) days subsequent to
the commencement of each fiscal year of the Borrower, management-prepared
Consolidated financial projections of the Borrower and its Subsidiaries for the
immediately following fiscal year (setting forth such projections on both an
annual basis and on a monthly basis), such projections to be in such format and
detail as reasonably requested by the Lender; (i) promptly after the same become
publicly available, copies of such financial information, registration
statements, annual, periodic and other reports, and such proxy statements and
other information, if any, as shall be filed by the Parent with the Securities
and Exchange Commission pursuant to the requirements of the Securities Act of
1993 or the Securities Exchange Act of 1934 or submitted to any shareholders of
the Parent or any Subsidiary thereof, including without limitation, all 10-Q and
10-K Reports; and (j) such other information relating to the financial
condition, operations and business affairs of the Borrower or any of its
Subsidiaries as from time to time may be reasonably requested by the Lender.
6.4 INSPECTION. Upon reasonable notice (which may be telephonic notice),
at all reasonable times and as often as the Lender may request, permit any
authorized representative designated by the Lender to visit and inspect the
Properties and financial records of the Borrower and its Subsidiaries and to
make extracts from such financial records at the Lender's expense, and permit
any authorized representative designated by the Lender to discuss the affairs,
finances and condition of the Borrower and its Subsidiaries with the appropriate
Financial Officer and such other officers as the Borrower shall deem appropriate
and the Borrower's independent public accountants, as applicable. The Lender
agrees that it shall schedule any meeting with any such independent public
accountant through the Borrower, and a Responsible Officer of the Borrower shall
have the right to be present at any such meeting. At the Borrower's expense, the
Lender shall have the right to examine, as often as it may request (but
initially scheduled for three (3) times in each fiscal year of the Borrower
prior to a Default or Event of Default) the existence and condition of the
Receivables, books and records of the Borrower and its Subsidiaries and to
review their compliance with the terms and conditions of this Agreement and the
other Loan Documents, subject to governmental confidentiality requirements. When
and if the daily collection and application procedures for Receivables are
implemented and continuing in accordance with SECTION 6.15(B) hereof, the Lender
shall also have the right to verify with any and all customers of the Borrower
and any of its Subsidiaries the existence and condition of the Receivables, as
often as the Lender may require, without prior notice to or consent of the
Borrower or any of its Subsidiaries.
44
6.5 FURTHER ASSURANCES. Promptly execute and deliver any and all other and
further instruments which may be requested by the Lender to (a) cure any defect,
error or omission in the execution and delivery of any Loan Document and (b)
grant, preserve, protect and perfect the first priority Liens created by the
Security Documents in the Collateral.
6.6 BOOKS AND RECORDS. Maintain financial records and books in accordance
with accepted financial practice in the Borrower's industry and GAAP.
6.7 INSURANCE.
(a) Keep its insurable Properties adequately insured at all times by
financially sound and reputable insurers.
(b) Maintain such other insurance, to such extent and against such
risks, including fire and other risks insured against by extended coverage,
employee liability and business interruption, as is customary with companies
similarly situated and in the same or similar businesses, PROVIDED, HOWEVER,
that such insurance shall insure the Property of the Borrower against all risk
of physical damage, including without limitation, loss by fire, explosion,
theft, fraud and such other casualties as may be reasonably satisfactory to the
Lender, but in no event at any time in an amount less than the replacement value
of the Collateral.
(c) Maintain in full force and effect worker's compensation coverage
and public liability insurance against claims for personal injury or death or
property damage occurring upon, in, about or in connection with its operations
and with the use of any Properties owned, occupied or controlled by the Borrower
or any of its Subsidiaries, in such amounts as is customary with companies
similarly situated and in the same or similar businesses.
(d) Maintain such other insurance as may be required by law or as
may be reasonably requested by the Lender for purposes of assuring compliance
with this SECTION 6.7. All insurance covering tangible personal Property subject
to a Lien in favor of the Lender granted pursuant to the Security Documents
shall provide that, in the case of each separate loss, the full amount of
insurance proceeds shall be payable to the Lender and shall further provide for
at least thirty (30) days' prior written notice to the Lender of the
cancellation or substantial modification thereof.
6.8 ERISA. At all times: (a) make contributions to each Plan in a timely
manner and in an amount sufficient to comply with the minimum funding standards
requirements of ERISA; (b) immediately upon acquiring knowledge of (i) any
Reportable Event in connection with any Plan for which no administrative or
statutory exemption exists or (ii) any "prohibited transaction," as such term is
defined in Section 4975 of the Code, in connection with any Plan, furnish the
Lender a statement executed by a Responsible Officer of the Borrower or such
Subsidiary setting forth the details thereof and the action which the Borrower
or any such Subsidiary proposes to take with respect thereto and, when known,
any action taken by the Internal Revenue Service with respect thereto; (c)
notify the Lender promptly upon receipt by the Borrower or any Subsidiary
thereof of any notice of the institution of any proceedings or other actions
which may
45
result in the termination of any Plan by the PBGC and furnish the Lender with
copies of such notice; (d) pay when due, or within any applicable grace period
allowed by the PBGC, all required premium payments to the PBGC; (e) furnish the
Lender with copies of the annual report for each Plan filed with the Internal
Revenue Service not later than ten (10) days after the Lender requests such
report; (f) furnish the Lender with copies of any request for waiver of the
funding standards or extension of the amortization periods required by Sections
303 and 304 of ERISA or Section 412 of the Code promptly after the request is
submitted to the Secretary of the Treasury, the Department of Labor or the
Internal Revenue Service, as the case may be; and (g) pay when due all
installment contributions required under Section 302 of ERISA or Section 412 of
the code or within ten (10) days of a failure to make any such required
contributions when due furnish the Lender with written notice of such failure.
6.9 USE OF PROCEEDS. Subject to the terms and conditions contained herein,
(a) use the proceeds of the Loans for (a) financing ongoing working capital
needs of the Borrower and its Subsidiaries not otherwise prohibited herein
and/or (b) payment of the Obligations, as provided in this Agreement; PROVIDED,
that no proceeds of any Loan shall be used (a) for the purpose of purchasing or
carrying directly or indirectly any margin stock as defined in Regulation U
("REG U") of the Board of Governors of the Federal Reserve System, (b) for the
purpose of reducing or retiring any Indebtedness which was originally incurred
to purchase or carry any such margin stock, (c) for any other purpose which
would cause such Loan to be a "purpose credit" within the meaning of Reg U and
(d) for any purpose which would constitute a violation of Reg U or of
Regulations G, T or X of the Board of Governors of the Federal Reserve System or
any successor regulation of any thereof or of any other rule, statute or
regulation governing margin stock from time to time.
6.10 GUARANTORS; JOINDER AGREEMENTS. Promptly inform the Lender of the
creation or acquisition of any Subsidiary of the Borrower after the Closing Date
and, if required by the Lender, promptly cause any such Subsidiary created after
the Closing Date (except as provided for below) to become a Guarantor by
execution and delivery to the Lender a Guaranty or a Joinder Agreement (if a
Joinder Agreement is requested by the Lender in lieu of a Guaranty) and execute
and deliver to the Lender any applicable Security Documents required by the
Lender, together with such related certificates, legal opinions and documents as
the Lender may reasonably require.
6.11 NOTICE OF EVENTS. Notify the Lender immediately upon acquiring
knowledge of the occurrence of, or if the Borrower or any of its Subsidiaries
causes or intends to cause, as the case may be: (a) the institution of any
lawsuit, administrative proceeding or investigation affecting the Borrower or
any of its Subsidiaries, including without limitation, any audit by the Internal
Revenue Service, (b) any development or change in the business or affairs of the
Borrower or any of its Subsidiaries which is reasonably likely to have a
Material Adverse Effect; (c) any Event of Default or any Default, together with
a detailed statement by a Responsible Officer on behalf of the Borrower of the
steps being taken to cure the effect of such Event of Default or Default; (d)
the occurrence of a default or event of default by the Borrower or any of its
Subsidiaries under any agreement or series of related agreements to which it is
a party; (e) any violation by, or investigation of, the Borrower or any of its
Subsidiaries in connection with any actual or alleged
46
violation of any Legal Requirement imposed by the Environmental Agency which is
reasonably likely to have a Material Adverse Effect; and (f) any material change
in the accuracy of the representations and warranties of the Borrower or any of
any of its Subsidiaries in this Agreement or any other Loan Document.
6.12 ENVIRONMENTAL MATTERS. Without limiting the generality of SECTION
6.1(C) hereof, (a) comply in all material respects with all limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Requirement of
Environmental Law or Environmental Permit; (b) obtain and maintain in effect all
Environmental Permits; and (c) keep its Property free of any Environmental
Claims or Environmental Liabilities.
6.13 END OF FISCAL YEAR. Cause each of its fiscal years to end on
September 30.
6.14 PAY OBLIGATIONS AND PERFORM OTHER COVENANTS. Make full and timely
payment of the Obligations, whether now existing or hereafter arising, duly
comply with all of the terms and covenants contained in this Agreement and in
each of the other Loan Documents at all times and places and in the manner set
forth therein, and except for the filing of continuation statements and the
making of other filings by the Lender as secured party or assignee, at all times
take all actions necessary to maintain the Liens and security interests provided
for under or pursuant to this Agreement and the Security Documents as valid
perfected first priority Liens on the Collateral intended to be covered thereby
(subject only to other Liens expressly permitted by SECTION 7.2 hereof) and
supply all information to the Lender necessary for such maintenance.
6.15 COLLECTION OF RECEIVABLES; APPLICATION OF LOCKBOX AGREEMENT PROCEEDS.
(a) At the Borrower's own cost and expense, arrange for remittances
on all Receivables to be made directly to lockbox(es) designated by the Lender
under the terms of the Lockbox Agreements or in such other manner as the Lender
may direct. Prior to the implementation of the procedures discussed in SECTION
6.15(B) below, the proceeds of all Receivables collected through such
lockbox(es) shall not be required to be remitted to the Lender for application
to the Loans and for other disbursements approved by the Lender as set forth in
SECTION 6.15(B) below, but instead shall be available for unrestricted use by
the Borrower by deposit of such proceeds into one or more operating accounts
maintained by the Borrower with the Lender.
(b) If at any time, either (i) a Default or Event of Default shall
occur and be continuing or (ii) Availability shall be less than $50,000 for more
than five (5) consecutive Business Days after the Lender has notified the
Borrower in writing that Availability has fallen below $50,000 for any reason,
all remittances on all Receivables processed through lockbox(es) in accordance
with SECTION 6.15(A) above shall at all times thereafter be promptly deposited
47
in one or more accounts designated by the Lender, subject to withdrawal by the
Lender only, as hereinafter provided. In connection therewith, the Lender is
irrevocably authorized, in accordance with the terms of the implementation and
processing instructions for the applicable Lockbox Agreement(s), to cause all
such remittances on all Receivables to be promptly deposited in such account or
accounts designated by the Lender. All remittances and payments that are
deposited in accordance with the foregoing will be immediately applied by the
Lender to reduce the outstanding balance of the Loans, subject to the continued
accrual of interest on the Loan balances to which such remittances and payments
are applied for one (1) Business Day (or two (2) Business Days in the case of
remittances and payments received after 12:00 noon) and in any event subject to
final collection in cash of the item deposited.
(c) As long as the procedures implemented under SECTION 6.15(B)
above are in effect and are continuing, the Borrower shall cause all payments,
if any, received by the Borrower or any of its Subsidiaries on account of
Receivables which are not forwarded directly to the above-described lockbox(es)
(whether in the form of cash, checks, notes, drafts, bills of exchanges, money
orders or otherwise) to be promptly deposited in precisely the form received
(but with any endorsements of the Borrower or the applicable Subsidiary
necessary for deposit or collection) in the account or accounts designated by
the Lender in accordance with the provisions of SECTION 6.15(B) above.
(d) In addition to the financial reporting requirements set forth in
SECTION 6.3 hereof, as long as the daily collection procedure implemented by the
provisions of SECTION 6.15(B) above is in effect, the Borrower shall furnish to
the Lender on each Business Day a copy of a Receivables report setting forth the
sales, collections and credits for the Borrower and its Subsidiaries for the
preceding Business Day prior to the date of such Receivables report.
(e) If and when the daily collection procedures discussed in SECTION
6.15(B) above are implemented in accordance with the provisions thereof, such
daily collection procedures shall thereafter continue to be in effect until the
end of the fiscal quarter of the Borrower during which all existing Defaults and
Events of Default, if applicable, shall have been cured to the satisfaction of
the Lender and Availability shall have increased to an amount equal to or
greater than $50,000, if applicable.
6.16 ADDITIONAL RECEIVABLES DOCUMENTATION. In addition to the Receivables
information delivered pursuant to the other provisions of this Agreement,
furnish such further schedules and/or information as the Lender may reasonably
require relating to the Receivables (including without limitation, sales
invoices if the same are required by the Lender), and the Borrower shall notify
the Lender of any non-compliance in respect of the representations and
warranties contained in SECTION 5.21 hereof. The items to be provided under this
SECTION 6.16 are to be in Proper Form and are to be executed and delivered to
the Lender from time to time solely for its convenience in maintaining records
of the Collateral. The Borrower's failure to give any of such items to the
Lender shall not affect, terminate, modify or otherwise limit the Lender's Lien
or security interest in the Collateral.
7. NEGATIVE COVENANTS.
The Borrower covenants and agrees with the Lender that prior to the
termination of this Agreement, the Borrower will not, and will not suffer or
permit any of its Subsidiaries, if any, to, do any of the following:
48
7.1 INDEBTEDNESS. Except as otherwise permitted hereby, create, incur,
suffer or permit to exist, or assume or guarantee, directly or indirectly, or
become or remain liable with respect to any Indebtedness, whether direct,
indirect, absolute, contingent or otherwise, except the following:
(a) Indebtedness to the Lender pursuant hereto;
(b) Indebtedness secured by Liens permitted by SECTION 7.2 hereof;
(c) Purchase money Indebtedness incurred to finance the Borrower's
purchase of equipment used for the Borrower's or any of its Subsidiaries'
operations, not to exceed $100,000 in the aggregate at any time during the
period of time from the Closing Date through the Maturity Date;
(d) Subordinated Indebtedness and Indebtedness due Parent in an
aggregate principal amount at any time outstanding not to exceed $100,000;
(e) other liabilities existing on the date of this Agreement and set
forth on SCHEDULE 5.16 attached hereto;
(f) current accounts payable and unsecured current liabilities, not
the result of borrowings, to vendors, suppliers and persons providing services,
for expenditures on ordinary trade terms for goods and services normally
required by the Borrower or any of its Subsidiaries in the ordinary course of
its business;
(g) current and deferred taxes and other assessments and
governmental charges (to the extent permitted by any of the other provisions of
this Agreement); and
(h) Refinancing Indebtedness.
7.2 LIENS. Except as otherwise permitted hereby, create or suffer to exist
any Lien upon any of its Property (including without limitation, real property
assets) now owned or hereafter acquired, or acquire any Property upon any
conditional sale or other title retention device or arrangement or any purchase
money security agreement; PROVIDED, HOWEVER, that the Borrower and its
Subsidiaries (or any of them) may create or suffer to exist:
(a) Liens in effect on the date hereof and which are described on
SCHEDULE 7.2 attached hereto, PROVIDED, that the Property covered thereby does
not increase in quantity and such Liens may not be renewed and extended except
as permitted by SECTION 7.2(L) below;
(b) Liens in favor of the Lender;
(c) Liens incurred and pledges and deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance, old-age pensions,
49
social security and other similar laws (not including any lien described in
Section 412(m) of the Code);
(d) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and vendors' liens and other similar liens, incurred
in good faith in the ordinary course of business and securing obligations which
are not overdue for a period of more than fifteen (15) days or which are being
contested in good faith by appropriate proceedings as to which the Borrower or
any of its Subsidiaries, as the case may be, shall, to the extent required by
GAAP, consistently applied, have set aside on its books adequate reserves;
(e) Liens securing the payment of taxes, assessments and
governmental charges or levies, that are not delinquent or are being diligently
contested in good faith by appropriate proceedings and as to which adequate
reserves have been established in accordance with GAAP; PROVIDED, HOWEVER, that
in no event shall the aggregate amount of taxes, assessments and governmental
charges or levies which are being contested at any time exceed $50,000 and that
in no event shall the aggregate amount of such reserves be less than the
aggregate amount secured by such Liens;
(f) Zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of property
or minor irregularities of title (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred, created, assumed
or permitted to exist and arising by, through or under a landlord or owner of
the leased property, with or without consent of the lessee) which do not in the
aggregate materially detract from the value of such property or assets or
materially impair the use thereof in the operation of its business;
(g) Liens securing the performance of utility services, bids,
tenders, leases, contracts (other than for the repayment of borrowed money),
statutory obligations, surety customs and appeal bonds and other obligations of
like nature, incurred as an incident to and in the ordinary course of business;
(h) Purchase money Liens securing the Indebtedness permitted by
SECTION 7.1(C) above, PROVIDED, that as a result of the creation of any such
Lien, (i) no Default or Event of Default shall have occurred, (ii) the principal
amount of such Lien does not exceed 100% of the purchase price of the asset
acquired with such permitted Indebtedness plus accrued interest on such
Indebtedness plus protective advances made by the holder of such permitted
Indebtedness, and (iii) such Lien shall not apply to any other Property other
than the asset acquired with such purchase money Indebtedness;
(i) Any attachment or judgment Lien, unless the judgment it secures
shall not, within thirty (30) days after the entry thereof, have been discharged
or execution thereof stayed pending appeal, or shall not have been discharged
within thirty (30) days after the expiration of any such stay;
50
(j) Liens arising by operation of law under Article 2 of the Code in
favor of unpaid sellers or prepaying buyers of goods relating to amounts that
are not past due in accordance with their respective terms of sale;
(k) Statutory or contractual Liens of landlords;
(l) Liens securing any Refinancing Indebtedness or other renewals,
replacement, reinstatements or refinancings (but not increases) of any
obligation secured by any of the Liens described in this definition;
(m) Liens on Property of a Person existing at the time such Person
is acquired by, merged into or consolidated with the Borrower or any of its
Subsidiaries in accordance with the terms hereof, PROVIDED that such Liens were
in existence prior to the contemplation of such acquisition, merger or
consolidation and do not extend to any assets other than those of the Person so
merged into, consolidated with or acquired by the Borrower or such Subsidiary;
and
(n) To the extent the contractual relationships described in clauses
(g) and (h) of the definition of "Permitted Dispositions" constitute Liens, any
such Liens.
PROVIDED, HOWEVER, that notwithstanding anything contained above in this SECTION
7.2 to the contrary, if any of the permitted Liens are of the type that are
being contested in good faith by appropriate proceedings as to the Borrower or
any of its Subsidiaries, the Indebtedness giving such contested Lien(s) must be
immediately paid upon commencement of any foreclosure process or proceeding with
respect to such Lien(s) unless the same shall be effectively stayed or a surety
bond with respect thereto (which is satisfactory in all respects to the Lender),
is posted.
7.3 CONTINGENT LIABILITIES. Except as otherwise permitted hereby, create,
incur, suffer or permit to exist, directly or indirectly, any Contingent
Obligations, except for Contingent Obligations incurred for the benefit of any
Subsidiary of the Borrower, if the primary obligation of such Subsidiary is
otherwise permitted by any other provisions of this Agreement.
7.4 MERGERS, CONSOLIDATIONS AND DISPOSITIONS AND ACQUISITIONS OF ASSETS.
Except as otherwise permitted hereby, in any single transaction or series of
related transactions, directly or indirectly:
(a) Wind up its affairs, terminate, liquidate or dissolve;
(b) Except as permitted by SECTION 7.4(E) and in connection with
Permitted Investments, be a party to any merger or consolidation;
(c) Except in connection with Permitted Dispositions, sell, convey,
lease, transfer or otherwise dispose of all or any portion of the assets of the
Borrower and/or its Subsidiaries, or agree to take any such action;
51
(d) Sell, assign, pledge, transfer or otherwise dispose of, or in
any way part with control of, any Stock of any of its Subsidiaries or any
Indebtedness or obligations of any character of any of its Subsidiaries, or
permit any such Subsidiary to do so with respect to any Stock of any other
Subsidiary or any Indebtedness or obligations of any character of the Borrower
or any of its Subsidiaries, or permit any of its Subsidiaries to issue any
additional Stock other than to the Borrower;
(e) Without the prior written consent of the Lender, purchase or
otherwise acquire, directly or indirectly, in a single transaction or a series
of related transactions, all or a substantial portion of the assets of any
Person or any shares of Stock of, or similar interest in, any Person; PROVIDED,
however that:
(1) any Subsidiary of the Borrower may merge or consolidate
with the Borrower or any other domestic Subsidiary of the Borrower, PROVIDED
that if one or more of the entities so merging or consolidation was a Guarantor,
if the surviving entity is not the Borrower or is not yet a Guarantor, such
surviving entity shall simultaneously with such merger, execute and deliver to
the Lender a Joinder Agreement, together with all requested Security Documents,
as required at such time by the Lender, appropriately completed; and
(2) any transfer of assets otherwise permitted by clause (e)
of the definition of "Permitted Dispositions" may occur; or
(f) Permit any Person other than Parent to own or control, directly
or indirectly, any capital stock of Borrower except pursuant to an Initial
Public Offering.
7.5 NATURE OF BUSINESS. Materially change the nature of its business or
enter into any business which is substantially different from the business in
which it is engaged as of the Closing Date.
7.6 TRANSACTIONS WITH RELATED PARTIES.
(a) Except for (i) Permitted Affiliate Transactions, (ii)
transactions, contracts or agreements existing on the date of this Agreement and
which are set forth on SCHEDULE 7.6 attached hereto, provided that, the
management fee payable to Parent shall in no event exceed $250,000 annually,
(iii) transactions, contracts or agreements otherwise permitted hereby, and (iv)
any renewals and extensions of such existing transactions, contracts or
agreements, so long as such renewals and extensions are upon terms and
conditions substantially identical to the terms and conditions set forth in the
existing transactions, contracts and agreements (or otherwise no less favorable
to the Borrower and the Guarantors, as applicable): (A) enter into any other
transaction, contract or agreement of any kind with any Affiliate, officer or
director of the Borrower or any of its Subsidiaries, unless such transaction,
contract or agreement is made upon terms and conditions not less favorable to
such Person than those which could have been obtained from wholly independent
and unrelated sources; and (B) the Borrower will not permit the compensation
paid by the Borrower or any of its Subsidiaries to any officer, stockholder,
director,
52
partner or proprietor of the Borrower or any of its Subsidiaries to be
excessive, based on the reasonable determination of the Borrower's compensation
committee, taking into consideration the financial circumstances of the Borrower
or the applicable Subsidiary and the position and qualifications of such Person.
(b) Permit any officer or director of the Borrower or any of its
Subsidiaries to acquire or otherwise usurp any corporate opportunity rightfully
belonging to the Borrower or such Subsidiary in any manner which would
constitute a breach of such officer's or director's duty of loyalty to the
Borrower or such Subsidiary.
7.7 INVESTMENTS; LOANS. Except as otherwise permitted hereby, make,
directly or indirectly, any loan or advance to or have any Investment in any
Person, or make any commitment to make such loan, advance or Investment, except:
(a) Stock of any Subsidiary created or acquired after the Closing
Date in accordance with the other provisions of this Agreement or with the prior
written consent of the Lender; and
(b) Permitted Investments.
7.8 ERISA COMPLIANCE.
(a) At any time engage in any "prohibited transaction" as defined in
ERISA; or permit any Plan to be terminated in a manner which could result in the
imposition of a Lien on any Property of the Borrower or any of its Subsidiaries
pursuant to ERISA.
(b) Engage in any transaction in connection with which the Borrower
or any Subsidiary thereof could be subject to either a material civil penalty
assessed pursuant to the provisions of Section 502 of ERISA or a tax imposed
under the provisions of Section 4975 of the Code.
(c) Terminate any Plan in a "distress termination" under Section
4041 of ERISA, or take any other action which could result in a liability of the
Borrower or any Subsidiary thereof to the PBGC.
(d) Fail to make payment when due of all amounts which, under the
provisions of any Plan, the Borrower or any Subsidiary thereof is required to
pay as contributions thereto, or, with respect to any Plan, permit to exist any
"accumulated funding deficiency" (within the meaning of Section 302 of ERISA and
Section 412 of the Code), whether or not waived, with respect thereto.
(e) Adopt an amendment to any Plan requiring the provision of
security under Section 307 of ERISA or Section 401(a)(29) of the Code.
7.9 CREDIT EXTENSIONS. Extend credit other than (a) normal and prudent
extensions of credit to customers for goods and services in the ordinary course
of business and (b) loans otherwise permitted by the provisions of SECTION 7.7
above.
7.10 CHANGE IN ACCOUNTING METHOD. Make or permit any change in accounting
method or financial reporting practices except as may be required by GAAP, as in
effect from time to time.
7.11 INTEREST COVERAGE RATIO. Permit the Interest Coverage Ratio of the
Borrower (expressly excluding Parent, its Subsidiaries and Borrower's
Subsidiaries) to be less than 3.00 to 1.00. The Interest Coverage Ratio will be
measured as of the last day of each month for the period consisting of the
immediately preceding twelve (12) months.
7.12 TANGIBLE NET WORTH. Permit the Tangible Net Worth of the Borrower
(expressly excluding Parent, its Subsidiaries and Borrower's Subsidiaries) to be
less than (i) $3,653,000 as of the Closing Date and at all times thereafter
through and including September 30, 1997, and (ii) thereafter, at all times, an
amount equal to the minimum Tangible Net Worth requirement for the preceding
fiscal year end PLUS seventy-five percent (75%) of net income of the Borrower
for the preceding fiscal year.
7.13 CAPITAL EXPENDITURES. Make, directly or indirectly, Capital
Expenditures other than such expenditures which do not exceed $500,000 in any
fiscal year.
7.14 SALES OF RECEIVABLES. Sell, assign, discount, transfer or otherwise
dispose of any Receivables, promissory notes, drafts or trade acceptances or
other rights to receive payment held by it, with or without recourse.
7.15 SALE AND LEASE-BACK TRANSACTIONS. Enter into any arrangement,
directly or indirectly, with any Person whereby the Borrower or any of its
Subsidiaries shall sell or transfer any Property, real or personal, which is
used or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such Property or other Property which the Borrower or
such Subsidiary intends to use for substantially the same purpose or purposes as
the Property being sold or transferred.
7.16 CHANGE OF NAME OR PLACE OF BUSINESS. Permit the Borrower or any of
its Subsidiaries to change its address, name, location of its chief executive
office or principal place of business or the place it keeps its books and
records, unless the Borrower has (a) notified the Lender of such change in
writing at least thirty (30) days before the effective date of such change, (b)
taken such action, reasonably satisfactory to the Lender, to have caused the
Liens against all Collateral in favor of the Lender to be at all times fully
perfected and in full force and effect and (c) delivered such certificates of
Governmental Authorities as the Lender may reasonably require substantiating
such name change.
7.17 AVAILABILITY. Allow Availability to be less than zero at any time.
54
8. EVENTS OF DEFAULT AND REMEDIES.
8.1 EVENTS OF DEFAULT. If any of the following events shall occur and be
continuing, then the Lender may, by written notice (or facsimile notice promptly
confirmed in writing) to the Borrower, take any or all of the following actions
at the same or different times: (1) accelerate the Maturity Date and declare the
Note, all Letter of Credit Advances, the Commitment Fees and all other
Obligations then outstanding to be, and thereupon the Note, said Letter of
Credit Advances, the Commitment Fees and all other Obligations shall forthwith
become, immediately due and payable, without further notice of any kind, notice
of acceleration or of intention to accelerate, presentment and demand or
protest, or other notice of any kind all of which are hereby expressly WAIVED by
the Borrower; (2) terminate all or any portion of the Commitments and any
obligation to issue any additional Letters of Credit; (3) demand that the
Borrower and the Guarantors provide the Lender, and the Borrower and the
Guarantors jointly and severally agree upon such demand to provide, cash
collateral in an amount equal to the aggregate Letter of Credit Exposure Amount
then outstanding, on terms and pursuant to documents in agreement and
satisfactory in all respects to the Lender; and (4) exercise any and all other
rights pursuant to the Loan Documents:
(a) The Borrower shall fail to pay or prepay any principal of or
interest on the Note, any Application, the Commitment Fees or any other
Obligation hereunder as and when due and payable, whether at the due date
thereof (by acceleration, lapse of time or otherwise) or at any date fixed for
prepayment thereof in accordance with the other provisions of this Agreement; or
(b) The Borrower or any of its Subsidiaries (i) shall fail to pay at
maturity, or within any applicable period of grace, any Indebtedness, or the
equivalent thereof (excluding Indebtedness outstanding hereunder and accounts
payable created in the ordinary course of business), in excess of $50,000 in
principal amount unless such payment is being contested in good faith (by
appropriate proceedings) and adequate reserves have been provided therefor, or
(ii) shall default in any other manner with respect to any Indebtedness, or the
equivalent thereof (excluding Indebtedness outstanding hereunder), in excess of
$50,000 in principal amount if the effect of any such default or event of
default shall be to accelerate or to permit the holder of any such Indebtedness
or equivalent obligation, at its option, to accelerate the maturity of such
Indebtedness or equivalent obligations prior to the stated maturity thereof,
(iii) shall fail to observe or perform any term, covenant or agreement contained
in any agreement or obligation, other than any Loan Document, by which it or any
of its Subsidiaries is bound, or (iv) is in default under or in violation of any
Legal Requirement, or
(c) Any representation or warranty made or deemed made in connection
with any Loan Document shall prove to have been incorrect, false or misleading
in any material respect when made or deemed to have been made; or
(d) Default shall occur in the punctual and complete performance or
observance of any covenant, condition or agreement to be observed or performed
on the part of the Borrower or any of its Subsidiaries pursuant to the terms of
any provision of this Agreement
55
or any other Loan Document; provided, however, Borrower shall have fifteen (15)
days from the date of default to cure any default under SECTIONS 6.1, 6.5, 6.6,
6.7, 6.8 and 6.13 hereof.
(e) Final judgment or judgments (or any decree or decrees for the
payment of any fine or any penalty) for the payment of an uninsured money award
in excess of $50,000 in the aggregate shall be rendered against the Borrower or
any of its Subsidiaries and the same shall remain undischarged for a period of
thirty (30) days during which execution shall not be effectively stayed or
bonded; or
(f) The Borrower or any of its Subsidiaries shall claim, or any
court shall find or rule, that the Lender does not have a valid Lien on any
portion of the Collateral which may now or hereafter have been provided to
secure the Obligations hereunder; or
(g) Any order shall be entered in any proceeding against the
Borrower or any Subsidiaries decreeing the dissolution, liquidation or split-up
thereof, and such order shall remain effect for thirty (30) days; or
(h) The Borrower or any shall have concealed, removed, or permitted
to be concealed or removed, any part of its Property, with intent to hinder,
delay or defraud its creditors or any of them, or made or suffered a transfer of
any of its Property which may be fraudulent under any bankruptcy, fraudulent
conveyance or similar law; or shall have made any transfer of its Property to or
for the benefit of a creditor at a time when other creditors similarly situated
have not been paid; or
(i) A change shall occur in the financial condition, business
affairs or otherwise of the Borrower or any of its Subsidiaries, or in the value
of the Collateral given as security for the Obligations hereunder, which would
or does have a Material Adverse Effect; or
(j) Any of the following shall occur: (1) a Reportable Event shall
have occurred with respect to a Plan; (2) the filing by the Borrower, any ERISA
Affiliate, or an administrator of any Plan of a notice of intent to terminate
such Plan in a "distressed termination" under the provisions of Section 4041 of
ERISA; (3) the receipt of notice by the Borrower, any ERISA Affiliate or an
administrator of a Plan that the PBGC has instituted proceedings to terminate
(or appoint a trustee to administer) such a Plan; (4) any other event or
condition exists which might, in the opinion of the Lender, constitute grounds
under the provisions of Section 4042 of ERISA for the termination of or the
appointment of a trustee to administer any Plan by the PBGC; (5) a Plan shall
fail to maintain a minimum funding standard required by Section 412 of the Code
for any plan year or a waiver of standard is sought or granted under the
provisions of Section 412(d) of the Code; (6) the Borrower or any ERISA
Affiliate has incurred, or is likely to incur, a liability under the provisions
of Section 4062, 4063, 4064 or 4201 of ERISA; (7) the Borrower or any ERISA
Affiliate fails to pay the full amount of an installment required under Section
412(m) of the Code; or (8) the occurrence of any other event or condition with
respect to any Plan which would constitute an event of default or default under
any other agreement entered into by the Borrower or any ERISA Affiliate; or
56
(k) One or more notices of Liens arising from unpaid federal, state
or local taxes exceeding $25,000 in the aggregate shall be filed against any of
the Properties or assets of the Borrower or any of its Subsidiaries, PROVIDED,
HOWEVER, that a reserve against the Borrowing Base will be established in an
amount equal to the amount of any and all federal, state or local taxes less
than such $25,000 aggregate threshold which are claimed to be owing under any
such notices of Liens; or
(l) This Agreement, the Note, any of the Security Documents or any
other Loan Documents shall for any reason cease to be, or shall be asserted by
the Borrower or the Guarantor, not to be, a legal, valid and binding obligation
of the Borrower or such Guarantors, as applicable, enforceable in accordance
with its terms, or the Lien purported to be created by any of the Security
Documents shall for any reason cease to be, or be asserted by the Borrower or
any Guarantor, as applicable not to be, a valid, first priority perfected Lien
against any Collateral (except to the extent otherwise permitted under this
Agreement or any of the Security Documents); or
(m) The Borrower or any of its Subsidiaries which is a party to any
of the Lockbox Agreements fails to perform and/or cause to be performed and
observed, all covenants, provisions and conditions to be performed, discharged
and observed by the Borrower or any such Subsidiary under the terms of the
Lockbox Agreements.
In addition, if any of the following events shall occur, then the Note, the
Letter of Credit Advances, the Commitment Fees and all other Obligations then
outstanding and payable hereunder shall automatically, without demand,
presentment, protest, notice of intent to accelerate, notice of acceleration or
other notice to any Person of any kind, all of which are hereby expressly WAIVED
by the Borrower, become immediately due and payable and all Commitments and
further obligation to issue any additional Letters of Credit shall be
immediately and automatically terminated:
(n) The Borrower or any of its Subsidiaries shall make a general
assignment for the benefit of creditors or shall petition or apply to any
tribunal for the appointment of a trustee, custodian, receiver or liquidator of
all or any substantial part of its business, estate or assets or shall commence
any proceeding under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect; or
(o) Any such petition or application shall be filed or any such
proceeding shall be commenced against the Borrower or any of its Subsidiaries
and the Borrower or such Subsidiary by any act or omission shall indicate
approval thereof, consent thereto or acquiescence therein, or an order shall be
entered appointing a trustee, custodian, receiver or liquidator of all or any
substantial part of the assets of the Borrower or any of its Subsidiaries or
granting relief to the Borrower or any of its Subsidiaries or approving the
petition in any such proceeding, and such order shall remain in effect for more
than thirty (30) days; or
57
(p) The Borrower or any of its Subsidiaries shall admit in writing
its inability to pay its debts as they become due or fail generally to pay its
debts as they become due or suffer any writ of attachment or execution or any
similar process to be issued or levied against it or any substantial part of its
Property which is not released, stayed, bonded or vacated within ten (10) days
after its issue or levy.
8.2 REMEDIES CUMULATIVE. No remedy, right or power conferred upon the
Lender is intended to be exclusive of any other remedy, right or power given
hereunder or now or hereafter existing at law, in equity, or otherwise, and all
such remedies, rights and powers shall be cumulative.
9. MISCELLANEOUS.
9.1 NO WAIVER. No waiver of any Default or Event of Default shall be
deemed to be a waiver of any other Default or Event of Default. No failure to
exercise and no delay on the part of the Lender in exercising any right or power
under any Loan Document or at law or in equity shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
the abandonment or discontinuance of steps to enforce any such right or power,
preclude any further or other exercise thereof or the exercise of any other
right or power. No course of dealing between the Borrower and the Lender shall
operate as a waiver of any right or power of the Lender. Subject to the
provisions of SECTION 9.11 hereof, no amendment, modification or waiver of any
provision of this Agreement or any other Loan Document, nor any consent to any
departure therefrom, shall be effective unless the same is in writing and signed
by the Person against whom it is sought to be enforced, and then it shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Borrower or any other Person shall entitle the
Borrower or any other Person to any other or further notice or demand in similar
or other circumstances.
9.2 NOTICES. All notices under the Loan Documents shall be in writing and
either (i) delivered against receipt therefor, (ii) mailed by registered or
certified mail, return receipt requested, or (iii) sent by telex, telecopy
(promptly confirmed by mail, except for any notice pursuant to SECTION
4.1(A)(II) hereof which need not be confirmed by mail) or telegram, in each case
to the intended recipient at the "Address for Notices" specified below its name
on the signature pages hereof. The Borrower or Parent may change its address for
purposes hereof by providing written notice of such address change to the Lender
in accordance with the provisions of this SECTION 9.2, with any such change in
address only being effective ten (10) Business Days after such change of address
has been deemed given in accordance with the provisions hereof. Notices shall be
deemed to have been given (whether actually received or not) when delivered (or,
if mailed, on the next Business Day); however, the notices required or permitted
by SECTIONS 2.2(B) and 4.1(A) hereof shall be effective only when actually
received by the Lender.
9.3 GOVERNING LAW. UNLESS OTHERWISE SPECIFIED THEREIN, EACH LOAN DOCUMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS (OTHER THAN THE
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CONFLICTS OF LAWS PRINCIPLES THEREOF) AND THE UNITED STATES OF AMERICA.
9.4 SURVIVAL; PARTIES BOUND. All representations, warranties, covenants
and agreements made by or on behalf of the Borrower in connection herewith shall
survive the execution and delivery of the Loan Documents, shall not be affected
by any investigation made by any Person, and shall bind the Borrower and its
successors, trustees, receivers and assigns and inure to the benefit of the
successors and assigns of the Lender, provided that the undertaking of the
Lender hereunder to make Loans to the Borrower and to issue Letters of Credit
for the account of the Borrower shall not inure to the benefit of any successor
or assign of the Borrower. The term of this Agreement shall be until the final
maturity of the Note and the payment of all amounts due under the Loan
Documents.
9.5 COUNTERPARTS. This Agreement may be executed in several identical
counterparts, and by the parties hereto on separate counterparts, and each
counterpart, when so executed and delivered, shall constitute an original
instrument, and all such separate counterparts shall constitute but one and the
same instrument.
9.6 LIMITATION OF INTEREST. The Borrower and the Lender intend to strictly
comply with all applicable laws, including applicable usury laws, if any.
Accordingly, the provisions of this SECTION 9.6 shall govern and control over
every other provision of this Agreement or any other Loan Document which
conflicts or is inconsistent with this Section, even if such provision declares
that it controls. As used in this Section, the term "interest" includes the
aggregate of all charges, fees, benefits or other compensation which constitute
interest under applicable law, provided that, to the maximum extent permitted by
applicable law, (a) any nonprincipal payment shall be characterized as an
expense or as compensation for something other than the use, forbearance or
detention of money and not as interest, and (b) all interest at any time
contracted for, reserved, charged or received shall be amortized, prorated,
allocated and spread, in equal parts during the full term of the Loans and the
Commitments. In no event shall the Borrower or any other Person be obligated to
pay, or the Lender have any right or privilege to reserve, receive or retain,
(Y) any interest in excess of the maximum amount of nonusurious interest
permitted under the laws of the United States or of any state, if any, which are
applicable to the Lender, or (Z) total interest in excess of the amount which
the Lender could lawfully have contracted for, reserved, received, retained or
charged had the interest been calculated for the full term of the Loans at the
Highest Lawful Rate, if any, applicable to the Lender. On each day, if any, that
the sum of the Alternate Base Rate or the Adjusted LIBOR Rate, as applicable,
and the Applicable Margin, or any other applicable rate called for under any
other Loan Document exceeds the Highest Lawful Rate, if any, applicable to
Lender, the rate at which interest shall accrue for the applicable type of
borrowing owing to Lender shall automatically be fixed by operation of this
sentence at the Highest Lawful Rate applicable to Lender for that day, and shall
remain fixed at the Highest Lawful Rate applicable to Lender for each day
thereafter until the total amount of interest accrued and owing to Lender equals
the total amount of interest which would have accrued on such borrowing owing to
Lender if there were no such ceiling rate as is imposed by this sentence.
Thereafter, interest shall accrue at the Alternate Base Rate plus the Applicable
Margin, the Adjusted LIBOR Rate plus the Applicable Margin or such other
applicable rate,
59
respectively, unless and until the sum of the Alternate Base Rate and the
Applicable Margin, the sum of the Adjusted LIBOR Rate and the Applicable Margin
or such other applicable rate (whichever is applicable to the situation) again
exceeds the Highest Lawful Rate applicable to Lender when the provisions of the
immediately preceding since shall again automatically operate to limit the
interest accrual rate. The daily interest rates to be used in calculating
interest at the Highest Lawful Rate for Lender shall be determined by dividing
the applicable Highest Lawful Rate, if any, for Lender per annum by the number
of days in the calendar year for which such calculation is being made. None of
the terms and provisions contained in this Agreement or in any other Loan
Document which directly or indirectly relate to interest shall ever be construed
without reference to this SECTION 9.6, or be construed to create a contract to
pay Lender for the use, forbearance or detention of money at an interest rate in
excess of the Highest Lawful Rate applicable to Lender. If the term of any Loans
or the Note is shortened by reason of acceleration of maturity as a result of
any Default or Event of Default or by any other cause, or by reason of any
required or permitted prepayment, and if for that (or any other) reason the
Lender at any time is owed or receives (and/or has received) interest in excess
of interest calculated at the Highest Lawful Rate applicable to the Lender, then
and in any such event all of any such excess interest owed to or received by the
Lender shall be canceled automatically as of the date of such acceleration,
prepayment or other event which produces the excess, and, if such excess
interest has been paid to the Lender, it shall be credited PRO TANTO against the
then-outstanding principal balance of the Borrower's obligations to the Lender,
effective as of the date or dates when the event occurs which causes it to be
excess interest, until such excess is exhausted or all of such principal has
been fully paid and satisfied, whichever occurs first, and any remaining balance
of such excess shall be promptly refunded to its payor. To the extent the Laws
of the State of Texas are applicable for purposes of determining the "Highest
Lawful Rate," such term shall mean the "indicated rate ceiling" from time to
time in effect under Article 1.04, Title 79, Revised Civil Statutes of Texas, as
amended, or, if permitted by applicable Law and effective upon the giving of the
notices required by such Article 1.04 (or effective upon any other date
otherwise specified by applicable Law), the "monthly ceiling," the "quarterly
ceiling," or "annualized ceiling" from time to time in effect under such Article
1.04, whichever that Lender shall elect to substitute for the "indicated rate
ceiling," and vice versa, each such substitution to have the effect provided in
such Article 1.04; and Lender shall be entitled to make such election from time
to time and one or more times and, without notice to Borrower, to leave any such
substitute rate in effect for subsequent periods in accordance with subsection
(h)(1) of such Article 1.04. Pursuant to Article 15.10(b) of Chapter 15,
Subtitle 79, Revised Civil Statutes of Texas, 1925, as amended, Borrower agrees
that such Chapter 15 (which regulates certain revolving credit loan accounts and
revolving tri-party accounts) shall not govern or in any manner apply to the
Obligations.
9.7 SURVIVAL. The obligations of the Borrower under SECTIONS 2.3, 2.4(B),
2.9, 2.10(F), 9.9, 9.10 and 9.17 hereof shall survive the repayment of the
Loans, the termination of the Commitments and the cancellation or expiration of
the Letters of Credit.
9.8 CAPTIONS. The headings and captions appearing in the Loan Documents
have been included solely for convenience and shall not be considered in
construing the Loan Documents.
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9.9 EXPENSES, ETC. Whether or not any Loan is ever made or any Letter of
Credit ever issued, the Borrower agrees to pay or reimburse on demand the Lender
for paying: (a) the reasonable fees and expenses of ▇▇▇▇▇▇ & ▇▇▇▇, L.L.P.,
counsel to the Lender or any other legal counsel engaged by the Lender, in
connection with (i) the preparation, execution and delivery of this Agreement
(including the exhibits and schedules hereto) and the Loan Documents and the
making of the Loans and the issuance of Letters of Credit hereunder, and (ii)
any modification, supplement or waiver of any of the terms of this Agreement,
the Letters of Credit or any other Loan Document; (b) all reasonable and
documented costs and expenses (including reasonable and documented attorneys
fees) of the Lender in connection with the enforcement of this Agreement, the
Letters of Credit or any other Loan Document; (c) all transfer, stamp,
documentary or other similar taxes, assessments or charges levied by any
governmental or revenue authority in respect of this Agreement, any Letter of
Credit or any other Loan Document or any other document referred to herein or
therein; (d) all costs, expenses, taxes, assessments and other charges incurred
in connection with any filing, registration, recording or perfection of any
security interest contemplated by this Agreement, any other Loan Document or any
document referred to herein or therein, and the cost of title insurance; and (e)
reasonable and documented expenses of due diligence incurred prior to or as of
the Closing Date.
9.10 INDEMNIFICATION. THE BORROWER AGREES TO INDEMNIFY THE LENDER AND EACH
AFFILIATE THEREOF AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL
OR AGENTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES,
LIABILITIES (INCLUDING ENVIRONMENTAL LIABILITIES), CLAIMS (INCLUDING
ENVIRONMENTAL CLAIMS) OR DAMAGES TO WHICH ANY OF THEM MAY BECOME SUBJECT,
INSOFAR AS SUCH LOSSES, LIABILITIES, CLAIMS OR DAMAGES ARISE OUT OF OR RESULT
FROM ANY (A) ACTUAL OR PROPOSED USE BY THE BORROWER OF THE PROCEEDS OF ANY
EXTENSION OF CREDIT (WHETHER A LOAN OR A LETTER OF CREDIT) BY LENDER HEREUNDER,
(B) BREACH BY THE BORROWER OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, (C)
VIOLATION BY THE BORROWER OR ANY OF ITS SUBSIDIARIES OF ANY LAW, RULE,
REGULATION OR ORDER INCLUDING ANY REQUIREMENTS OF ENVIRONMENTAL LAW, (D) LIENS
OR SECURITY INTERESTS GRANTED ON ANY PROPERTY PURSUANT TO OR UNDER THE LOAN
DOCUMENTS, TO THE EXTENT RESULTING FROM ANY HAZARDOUS SUBSTANCE LOCATED IN, ON
OR UNDER ANY SUCH PROPERTY, (E) OWNERSHIP BY THE LENDER OF ANY PROPERTY
FOLLOWING FORECLOSURE UNDER THE LOAN DOCUMENTS, TO THE EXTENT SUCH LOSSES,
LIABILITIES, CLAIMS OR DAMAGES ARISE OUT OF OR RESULT FROM ANY HAZARDOUS
SUBSTANCE, LOCATED IN, ON OR UNDER SUCH PROPERTY PRIOR TO OR AT THE TIME OF SUCH
FORECLOSURE, INCLUDING LOSSES, LIABILITIES, CLAIMS OR DAMAGES WHICH ARE IMPOSED
UPON PERSONS UNDER LAWS RELATING TO OR REGULATING HAZARDOUS SUBSTANCES, SOLELY
BY VIRTUE OF OWNERSHIP, (F) LENDER BEING DEEMED AN OPERATOR OF ANY SUCH PROPERTY
BY A COURT OR OTHER REGULATORY OR ADMINISTRATIVE AGENCY OR TRIBUNAL OR OTHER
THIRD PARTY, TO THE EXTENT SUCH LOSSES, LIABILITIES, CLAIMS OR DAMAGES ARISE OUT
OF OR RESULT FROM ANY HAZARDOUS SUBSTANCE, PETROLEUM, PETROLEUM PRODUCT OR
PETROLEUM WASTE LOCATED IN ON OR UNDER SUCH PROPERTY AT OR PRIOR TO THE TIME OF
ANY FORECLOSURE THEREON UNDER THE LOAN DOCUMENT, OR (G) INVESTIGATION,
LITIGATION OR OTHER PROCEEDING (INCLUDING ANY THREATENED INVESTIGATION OR
PROCEEDING) RELATING TO ANY OF THE FOREGOING, AND THE BORROWER AGREES TO
REIMBURSE THE LENDER, AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, COUNSEL AND AGENTS, UPON DEMAND FOR ANY EXPENSES (INCLUDING
LEGAL FEES) INCURRED IN CONNECTION WITH ANY SUCH INVESTIGATION OR PROCEEDING,
AND WHETHER ANY SUCH LOSS, LIABILITY, CLAIM
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OR DAMAGE RESULTS FROM THE NEGLIGENCE OF ANY SUCH INDEMNIFIED PERSON; BUT
EXCLUDING ANY SUCH LOSSES, LIABILITIES, CLAIMS, DAMAGES OR EXPENSES INCURRED BY
A PERSON OR ANY AFFILIATE THEREOF OR THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, COUNSEL OR AGENTS BY REASON OF (I) THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH PERSON, AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE OR AGENT OR
(II) OWNERSHIP OR OPERATION OF ANY PROPERTY BY THE LENDER FOLLOWING FORECLOSURE
UNDER THE LOAN DOCUMENTS IF SUCH LOSSES, LIABILITIES, ETC. ARE ATTRIBUTABLE
SOLELY TO THE POST-FORECLOSURE ACTIONS OF THE LENDER.
9.11 AMENDMENTS, WAIVERS, ETC. No amendment, modification or waiver of any
provision of this Agreement, the Note or any other Loan Document, nor any
consent to any departure by the Borrower therefrom, shall in any event be
effective unless the same shall be or consented to by the Lender and the
Borrower, and each such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
9.12 SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower and the Lender and their respective successors and permitted
assigns. The Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of the Lender.
(b) Lender may assign to one or more Persons all or a portion of its
interests, rights and obligations under this Agreement or may sell
participations to any Person in all or part of any Loan, or all or part of the
Note, the Letter of Credit Exposure Amount or Commitments.
(c) Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this SECTION 9.12, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Borrower furnished to Lender by or on behalf of the
Borrower; PROVIDED, HOWEVER, that as a condition to any such disclosure of
information relating to the Borrower, Lender shall require such proposed
assignee or participant to agree in writing to keep confidential all information
with respect to the Borrower furnished to it by Lender in connection with any
proposed assignment or participation (other than information generally available
to the public or otherwise available to the Lender on a non-confidential basis).
(d) Notwithstanding anything herein to the contrary, Lender may
pledge and assign all or any portion of its rights and interests under the Loan
Documents to any Federal Reserve Bank.
9.13 ENTIRE AGREEMENT. This Agreement and the other Loan Documents embody
the entire agreement and understanding among the Borrower and the Lender
relating to the subject matter hereof and supersedes all prior proposals,
agreements and understandings relating to the subject matter hereof. Any
conflict between the provisions of this Agreement and the provisions of any
other Loan Documents shall be governed by the provisions of this Agreement. The
Borrower certifies that it is relying on no representation, warranty, covenant
or agreement except for those set forth in this Agreement and the other Loan
Documents of even date herewith.
9.14 SEVERABILITY. If any provision of any Loan Documents shall be
invalid, illegal or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions shall not be
affected or impaired thereby.
9.15 DISCLOSURES. Every reference in the Loan Documents to disclosures of
the Borrower to the Lender in writing, to the extent that such references refer
to disclosures at or prior to the execution of this Agreement, shall be deemed
strictly to refer only to written disclosures delivered to the Lender in an
orderly manner prior to or concurrently with the execution hereof.
9.16 INTENTIONALLY LEFT BLANK.
9.17 TAXES.
(a) As used in this SECTION 9.17, the following terms shall have the
following meanings:
(i) "INDEMNIFIABLE TAX" means any Tax, but excluding, in any
case any Tax that (a) would not be imposed in respect of a payment to
Lender under this Agreement, under the Note or under any of the other Loan
Documents except for a present or former connection between the
jurisdiction of the Governmental Authority imposing such Tax and Lender
(or a shareholder or other Person with an interest in Lender), including a
connection arising from Lender's (or shareholder of Lender or such other
Person) being or having been citizen or resident of such jurisdiction, or
being or having been organized, present or engaged in a trade or business
in such jurisdiction, or having or having had a permanent establishment or
fixed place of business in such jurisdiction, but excluding a connection
arising solely from Lender having executed, delivered, performed its
obligations or received a payment under, or enforced, this Agreement, the
Note or any other Loan Documents, or (b) is imposed under United States
federal income tax law or any state income tax law.
(ii) "TAX" means any present or future tax, levy, impost,
duty, charge assessment or fee of any nature (including interest thereon
and penalties and additions thereto) that is imposed by any Governmental
Authority in respect of a payment to Lender under this Agreement, under
the Note or under any of the other Loan Documents.
(b) If the Borrower is required by any Applicable Legal Requirement
to make any deduction or withholding for or on account of any payment to be made
by it under this Agreement, under the Note or under any other Loan Documents,
then the Borrower shall (i) promptly notify the Lender that is entitled to such
payment of such requirement to so deduct or withhold such Tax, (ii) pay to the
relevant authorities the full amount required to be so deducted
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or withheld, (iii) promptly forward to Lender an official receipt (or certified
copies thereof), or other documentation reasonably acceptable to Lender holder,
evidencing such payment to such Governmental Authorities and (iv) if such Tax is
an Indemnifiable Tax, pay, to the extent permitted by law, to Lender, in
addition to whatever net amount of such payment is paid to Lender, such
additional amount as is necessary to ensure that the total amount actually
received by Lender (free and clear of Indemnifiable Tax) will equal the full
amount of the payment Lender would have received had no such deduction or
withholding been required. If the Borrower pays any additional amount to Lender
pursuant to the preceding sentence and Lender shall receive a refund of an
Indemnifiable Tax with respect to which, in the good faith opinion of Lender,
such payment was made, Lender shall pay to the Borrower the amount of such
refund promptly upon receipt thereof.
(c) In the event that any Governmental Authority notifies the
Borrower that it has improperly failed to withhold or deduct any Tax from a
payment received by Lender under this Agreement, under the Note or under any
other Loan Document, the Borrower agrees to timely and fully pay such Tax to
such Governmental Authority and Lender shall, upon receipt of written notice of
such payment, immediately pay to the Borrower, an amount necessary in order that
the amount of such payment to the Borrower after payment of all Taxes with
respect to such payment, shall equal the amount that the Borrower paid to such
Governmental Authority pursuant to this CLAUSE (C).
(d) Lender shall, upon request by the borrower, take requested
measures to mitigate the amount of Indemnifiable Tax required to be deducted or
withheld from any payment made by the Borrower under this Agreement, under the
Note or under any other Loan Documents if such measures can, in the sole and
absolute opinion of Lender, be taken without Lender suffering any economic,
legal, regulatory or other disadvantage (provided, however, that Lender shall
not be required to designate a funding office that is not located in the United
States of America).
(e) Notwithstanding the foregoing, in no event shall the amount
payable under this SECTION 9.17 (to the extent, if any, constituting interest
under applicable laws) together with all amounts constituting interest under
applicable laws and payable in connection with this Agreement or the Note,
exceed the Highest Lawful Rate or the maximum amount of interest permitted to be
charged by applicable laws.
9.18 WAIVER OF CLAIMS. THE BORROWER HEREBY WAIVES AND RELEASES THE LENDER
FROM ANY AND ALL CLAIMS OR CAUSES OF ACTION WHICH THE BORROWER MAY OWN, HOLD OR
CLAIM IN RESPECT OF ANY OF THEM AS OF THE DATE HEREOF.
9.19 RIGHT OF SETOFF. Upon the occurrence and during the continuation of
any Event of Default, the Lender is hereby authorized at any time and from time
to time, without notice to the Borrower or any of the Guarantors (any such
notice being expressly waived by the Borrower and by the Guarantors by their
execution of a Guaranty or a Joinder Agreement), to setoff and apply any and all
deposits (general or special, time or demand, provisional or final, whether or
not such setoff results in any loss of interest or other penalty, and including
without limitation all
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certificates of deposit) at any time held, and any other funds or property at
any time held, and other Indebtedness at any time owing by Lender to or for the
credit or the account of the Borrower or any such Guarantor against any and all
of the Indebtedness arising in connection with this Agreement irrespective of
whether or not Lender will have made any demand under this Agreement, the Note
or any other Loan Document. The Borrower and each of the Guarantors (by their
execution of a Guaranty or a Joinder Agreement) also hereby grants to the Lender
a security interest in and hereby transfers, assigns, sets over, and conveys to
the Lender, as security for payment of all Loans and Letter of Credit Exposure
Amount, all such deposits, funds or property of the Borrower or any such
Guarantor or Indebtedness of Lender to the Borrower or any such Guarantor.
Should the right of Lender to realize funds in any manner set forth hereinabove
be challenged and any application of such funds be reversed, whether by court
order or otherwise, the Lender shall make restitution or refund to the Borrower
or such Guarantor, as applicable. Lender agrees to promptly notify the Borrower
after any such setoff and application, provided that the failure to give such
notice will not affect the validity of such setoff and application. The rights
of the Lender under this Section are in addition to other rights and remedies
(including without limitation other rights of setoff) which the Lender may have.
9.20 WAIVER OF RIGHT TO JURY TRIAL. EXCEPT AS PROHIBITED BY APPLICABLE
LAW, EACH PARTY HERETO HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT, THE NOTES, ANY OF THE OTHER LOAN DOCUMENTS OR
ANY TRANSACTIONS EVIDENCED THEREBY.
9.21 ADDITIONAL PROVISIONS REGARDING COLLECTION OF RECEIVABLES; CONTROL OF
INVENTORY AND OTHER COLLATERAL.
(a) So long as the procedures discussed in SECTION 6.15(B) hereof
have been implemented and are continuing, the Borrower hereby constitutes the
Lender or the Lender's designee as the Borrower's attorney-in-fact with power to
endorse the Borrower's name upon any notes, acceptances, checks, drafts, money
orders or other evidence of payment of any Receivables or any other Collateral
that may come into its possession; to sign or endorse the Borrower's name on any
invoice, ▇▇▇▇ of lading or other title or ownership documents relating to any
Receivables or inventory, drafts against any customers of the Borrower,
assignments and verifications of Receivables and notices to customers of the
Borrower; to send verifications of Receivables; to notify the U.S. Postal
Service authorities to change the address for delivery of mail addressed to the
Borrower to such address as the Lender may designate at any time after the
occurrence of any Event of Default which is continuing and to do all other acts
and things necessary to carry out this Agreement. All acts of said attorney or
designee are hereby ratified and approved by the Borrower, and said attorneys or
designee shall not be liable for any acts of omission or commission, for any
error of judgment or for any mistake of fact or law, provided that the Lender or
its designee shall not be relieved of liability to the extent it is determined
by a final judicial decision that its act, error or mistake constituted gross
negligence or willful misconduct. The power of attorney granted under this
subparagraph is coupled with an interest and is irrevocable until all of the
Obligations are paid in full and this Agreement and the Commitment is
terminated.
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(b) The Lender, without notice to or consent of the Borrower, at any
time after the occurrence and during the continuation of an Event of Default;
(i) may ▇▇▇ upon or otherwise collect, extend the time of payment of, or
compromise or settle for cash, credit or otherwise upon any terms, any of the
Receivables or any instruments or insurance applicable thereto and/or release
any account debtor thereon; (ii) is authorized and empowered to accept or direct
shipments of inventory and accept the return of the goods represented by any of
the Receivables; and (iii) shall have the right to receive, endorse, assign
and/or deliver in its name or the name of the Borrower any and all checks,
drafts and other instruments for the payment of money relating to the
Receivables, and the Borrower hereby waives notice of presentment, protest and
non-payment of any instrument so endorsed.
(c) Nothing herein contained shall be construed to constitute the
Borrower as agent of the Lender for any purpose whatsoever, and the Lender shall
not be responsible or liable for any shortage, discrepancy, damage, loss or
destruction of any part of the Collateral wherever the same may be located and
regardless of the cause thereof (except to the extent it is determined by a
final judicial decision that the Lender's act or omission constituted gross
negligence of willful conduct). The Lender shall not, under any circumstances or
in any event whatsoever, have any liability for any error or omission or delay
of any kind occurring in the settlement, collection or payment of any of the
Receivables or any instrument received in payment thereof or for any damage
resulting therefrom (except to the extent it is determined by a final judicial
decision that the Lender's error, omission or delay constituted gross negligence
or willful misconduct). The Lender does not, by anything herein or in any
assignment or otherwise, assume any of the Borrower's obligations under any
contract or agreement assigned to the Lender, and the Lender shall not be
responsible in any way for the performance by the Borrower of any of the terms
and conditions thereof.
(d) Upon the occurrence and during the continuation of any Event of
Default: (i) if any of the Receivables includes a charge for any tax payable to
any governmental tax authority, the Lender is hereby authorized (but in no event
obligated) in its discretion to pay the amount thereof to the proper taxing
authority for the account of the Borrower and to charge the Borrower's account
therefor; and (ii) the Borrower shall notify the Lender if any Receivables
include any tax due to any such taxing authority and, in the absence of such
notice, the Lender shall have the right to retain the full proceeds of such
Receivables and shall not be liable for any taxes that may be due from the
Borrower by reason of the sale and delivery creating such Receivables.
(e) Upon the occurrence and continuation of any Event of Default,
the Lender may at any time and from time to time employ and maintain in the
premises of the Borrower a custodian selected by the Lender who shall have full
authority to do all acts necessary to protect the Lender's interests and to
report to the Lender thereon. The Borrower hereby agrees to cooperate with any
such custodian and to do so whatever the Lender may reasonably request to
preserve the Collateral. All costs and expenses incurred by the Lender by reason
of the employment of the custodian shall be charged to the Borrower's account
and added to the Obligations.
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9.22 JOINT AND SEVERAL OBLIGATIONS. Notwithstanding anything to the
contrary contained herein or in any other Loan Documents, the Borrower and the
Guarantors are jointly and severally responsible for their respective
agreements, covenants, representations, warranties and obligations contained and
set forth in this Agreement or in any other Loan Document to which they are a
party.
9.23 VENUE; SERVICE OF PROCESS. BORROWER, FOR ITSELF, ITS SUCCESSORS AND
ASSIGNS, HEREBY (A) IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS OF THE STATE OF TEXAS AND AGREES AND CONSENTS THAT
SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING ARISING OUT OF OR
IN CONNECTION WITH THE LOAN DOCUMENTS AND THE OBLIGATION BY SERVICE OF PROCESS
AS PROVIDED BY TEXAS LAW, (B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THE LOAN
DOCUMENTS AND THE OBLIGATION BROUGHT IN DISTRICT COURTS OF DALLAS COUNTY, TEXAS,
OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS,
DALLAS DIVISION, (C) IRREVOCABLY WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (D) AGREES TO
DESIGNATE AND MAINTAIN AN AGENT FOR SERVICE OF PROCESS IN HOUSTON, TEXAS, IN
CONNECTION WITH ANY SUCH LITIGATION AND TO DELIVER TO LENDER EVIDENCE THEREOF,
(E) IF SERVICE OF PROCESS UPON THE REGISTERED AGENT IS UNSUCCESSFUL AFTER ONE
GOOD FAITH ATTEMPT, IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE MAILING OF COPIES
THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, TO SUCH
BORROWER AT ITS ADDRESS SET FORTH HEREIN, AND (F) IRREVOCABLY AGREES THAT ANY
LEGAL PROCEEDING AGAINST LENDER ARISING OUT OF OR IN CONNECTION WITH THE LOAN
DOCUMENTS ON THE OBLIGATION SHALL BE BROUGHT IN THE DISTRICT COURTS OF DALLAS
COUNTY, TEXAS, OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT
OF TEXAS, DALLAS DIVISION. NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER IN ANY
JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY APPLICABLE LAW.
9.24 NO OTHER AGREEMENTS. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
TIDEL ENGINEERING, INC.
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
ADDRESS FOR NOTICES:
Borrower:
Tidel Engineering, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Parent:
AMT Industries, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking
association, as a Lender
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
ADDRESS FOR NOTICES:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. D. ▇▇▇▇▇ ▇▇▇▇▇▇
DOMESTIC LENDING OFFICE:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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