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EXHIBIT 10(O)
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FIRST AMENDED AND RESTATED
CREDIT AGREEMENT
between
CRAFTMADE INTERNATIONAL, INC.
as Borrower
and
NATIONSBANK OF TEXAS, N.A.
as Lender
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TABLE OF CONTENTS
PAGE
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ARTICLE 1 -- Definitions.................................................................. 1
Section 1.1 Definitions......................................................... 1
Section 1.2 Other Definitional Provisions....................................... 10
ARTICLE 2 -- Advances..................................................................... 10
Section 2.1 Advances............................................................ 10
Section 2.2 The Note............................................................ 11
Section 2.3 Repayment of Advances............................................... 11
Section 2.4 Interest............................................................ 11
Section 2.5 Requests for Advances............................................... 11
Section 2.6 Use of Proceeds..................................................... 12
Section 2.7 Commitment Fee; Reduction or Termination of Commitment.............. 12
ARTICLE 3 -- Payments, Conversions and Continuations...................................... 12
Section 3.1 Method of Payment................................................... 12
Section 3.2 Voluntary Prepayment................................................ 12
Section 3.3 Mandatory Prepayment................................................ 12
Section 3.4 Computation of Interest and Fees.................................... 13
Section 3.5 Conversions and Continuations....................................... 13
ARTICLE 4 -- Yield Protection and Illegality.............................................. 13
Section 4.1 Additional Costs.................................................... 13
Section 4.2 Limitation on Types of Advances..................................... 14
Section 4.3 Substitute Prime Rate Advances...................................... 14
Section 4.4 Compensation........................................................ 15
Section 4.5 Capital Adequacy.................................................... 15
ARTICLE 5 -- Conditions Precedent......................................................... 15
Section 5.1 Initial Advance..................................................... 15
Section 5.2 All Advances........................................................ 17
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ARTICLE 6 -- Representations and Warranties............................................... 18
Section 6.1 Corporate Existence................................................. 18
Section 6.2 Financial Statements................................................ 18
Section 6.3 Corporate Action; No Breach......................................... 18
Section 6.4 Operation of Business............................................... 18
Section 6.5 Litigation and Judgments............................................ 19
Section 6.6 Rights in Properties; Liens......................................... 19
Section 6.7 Enforceability...................................................... 19
Section 6.8 Approvals........................................................... 19
Section 6.9 Debt................................................................ 19
Section 6.10 Taxes............................................................... 19
Section 6.11 Use of Proceeds; Margin Securities.................................. 19
Section 6.12 ERISA............................................................... 20
Section 6.13 Disclosure.......................................................... 20
Section 6.14 Subsidiaries........................................................ 20
Section 6.15 Compliance with Laws and Agreements................................. 20
Section 6.16 Environmental Matters............................................... 20
Section 6.17 Current Locations................................................... 21
Section 6.18 Security Interest and Liens......................................... 21
Section 6.19 Corporate Name...................................................... 22
ARTICLE 7 -- Positive Covenants........................................................... 22
Section 7.1 Reporting Requirements.............................................. 22
Section 7.2 Maintenance of Existence; Conduct of Business....................... 24
Section 7.3 Maintenance of Properties........................................... 24
Section 7.4 Taxes and Claims.................................................... 24
Section 7.5 Insurance........................................................... 24
Section 7.6 Inspection Rights................................................... 24
Section 7.7 Keeping Books and Records........................................... 25
Section 7.8 Compliance with Laws................................................ 25
Section 7.9 Compliance with Agreements.......................................... 25
Section 7.10 Further Assurances.................................................. 25
Section 7.11 ERISA............................................................... 25
ARTICLE 8 -- Negative Covenants........................................................... 25
Section 8.1 Debt................................................................ 25
Section 8.2 Limitation on Liens................................................. 26
Section 8.3 Mergers, Acquisitions and Dissolutions.............................. 26
Section 8.4 Restricted Payments................................................. 26
Section 8.5 Loans and Investments............................................... 27
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Section 8.6 Transactions With Affiliates........................................ 27
Section 8.7 Disposition of Assets............................................... 27
Section 8.8 Prepayment of Debt.................................................. 27
Section 8.9 Nature of Business.................................................. 27
Section 8.10 Compliance with Environmental Laws.................................. 27
Section 8.11 Accounting.......................................................... 28
ARTICLE 9 -- Financial Covenants.......................................................... 28
Section 9.1 Current Ratio....................................................... 28
Section 9.2 Consolidated Tangible Net Worth..................................... 28
Section 9.3 Fixed Charge Coverage Ratio......................................... 28
Section 9.4 Leverage Ratio...................................................... 28
Section 9.5 Capital Expenditures................................................ 28
ARTICLE 10 -- Default..................................................................... 28
Section 10.1 Events of Default................................................... 28
Section 10.2 Remedies Upon Default............................................... 30
Section 10.3 Performance by Lender............................................... 30
Section 10.4 Setoff.............................................................. 31
ARTICLE 11 -- Miscellaneous............................................................... 31
Section 11.1 Expenses of Lender.................................................. 31
Section 11.2 Indemnification..................................................... 31
Section 11.3 Limitation of Liability............................................. 32
Section 11.4 Lender Not Fiduciary................................................ 32
Section 11.5 No Waiver; Cumulative Remedies...................................... 32
Section 11.6 Successors and Assigns.............................................. 32
Section 11.7 Survival............................................................ 32
Section 11.8 Entire Agreement; Amendment and Restatement of Texas Commerce
Bank -- Arlington, National Association Documents- Amendment........ 33
Section 11.9 Maximum Interest Rate............................................... 33
Section 11.10 Notices............................................................. 33
Section 11.11 Applicable Law; Venue; Service of Process........................... 34
Section 11.12 Counterparts........................................................ 34
Section 11.13 Severability........................................................ 34
Section 11.14 Headings............................................................ 34
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Section 11.15 Non-Application of Chapter 15 of Texas Credit Code.................. 34
Section 11.16 Participations...................................................... 34
Section 11.17 Waiver of Jury Trial................................................ 35
INDEX TO EXHIBITS......................................................................... 38
INDEX TO SCHEDULES........................................................................ 38
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FIRST AMENDED AND RESTATED
CREDIT AGREEMENT
THIS FIRST AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") is
dated as of January 11, 1993 and is between CRAFTMADE INTERNATIONAL, INC,
("Borrower"), a Delaware corporation, and NATIONSBANK OF TEXAS, N.A., a national
banking association ("Lender"). This Agreement also contains a Confirmation of
Guaranty executed by DUROCRAFT INTERNATIONAL, INC. ("Durocraft"), a Texas
corporation.
RECITALS:
A. Lender has previously made a loan to Borrower in the maximum principal
amount of $6,000,000.00, pursuant to a certain Credit Agreement (the "Original
Credit Agreement") between Borrower and Lender, dated January 11, 1993.
B. Borrower and Lender desire to modify such loan to provide for, among
other things, (1) the pledge to Lender by Borrower and Durocraft of all of the
outstanding stock in C/D/R Incorporated ("C/D/R"), a Delaware corporation, (2)
the guaranty by C/D/R to Lender of the payment and performance of all of
Borrower's obligations to Lender, and (3) the other modifications set out below
in this Agreement.
AGREEMENTS:
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree that this Agreement amends and
restates the Original Credit Agreement and shall be controlling over and
effective as if originally executed in place of the Original Credit Agreement,
except as specifically otherwise provided herein. The parties hereto further
agree as follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. As used in this Agreement, the following terms
have the following meanings:
"Accounts Receivable Aging Report" means a report, in form
satisfactory to Lender, showing all current accounts receivable of Borrower
and all other accounts receivable of Borrower aged in intervals of thirty,
sixty, ninety and ninety-one days or more past due.
"Additional Costs" has the meaning specified in SECTION 4.1.
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"Adjusted CD Rate" means, for any CD Advance for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) determined by Lender to be equal to the sum of (a) the CD Rate
for such CD Advance for such Interest Period divided by I minus the Reserve
Requirement for such CD Advance for such Interest Period plus (b) the
Assessment Rate in effect at the commencement of such Interest Period.
"Advance" means an advance of funds by Lender to Borrower pursuant to
ARTICLE 2.
"Advance Request Form" means a certificate, in substantially the form
of EXHIBIT "B" hereto, properly completed and signed by Borrower requesting
an Advance.
"Affiliate" means, as to any Person, any other Person (a) that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person; (b) that
directly or indirectly beneficially owns or holds five percent (5%) or more
of any class of voting stock of such Person; or (c) five percent (5%) or
more of the voting stock of which is directly or indirectly beneficially
owned or held by the Person in question. The term "control" means the
possession, directly or indirectly, of the power to direct or cause
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise; provided,
however, in no event shall Lender be deemed an Affiliate of Borrower or any
of its Subsidiaries.
"Applicable Rate" means (a) during the period that an Advance is a
Prime Rate Advance, the Prime Rate plus one-quarter of one percent (.25%)
and (b) during the period that an Advance is a CD Advance, the greater of
(i) the Adjusted CD Rate plus two and one-half of one percent (2.5%) or
(ii) the Prime Rate plus one-quarter of one percent (.25%) as the Prime
Rate is calculated as of the first day of the applicable Interest Period.
"Assessment Rate" means, at any time, the rate (rounded upwards, if
necessary, to the nearest 1/16 of 1%) then charged by the Federal Deposit
Insurance Corporation (or any successor) to Lender for deposit insurance
for Dollar time deposits with Lender as determined by Lender.
"Assignment of Life Insurance" means an Assignment of Life Insurance
Policy as Collateral duly executed by Borrower in favor of Lender,
substantially in the form of EXHIBIT "F" hereto, as the same may be
supplemented, amended or otherwise modified from time to time.
"Borrowing Base" means, at any particular time, an amount equal to the
sum of (a) eighty percent (80%) of Eligible Accounts, plus (b) fifty
percent (50%) of Eligible Inventory.
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"Borrowing Base Report" means a report, substantially in the form of
EXHIBIT "C" hereto, properly completed and executed by an authorized
officer of Borrower.
"Business Day" means any day on which commercial banks are not
authorized or required to close in Dallas, Texas.
"Capital Lease Obligation" means Debt represented by obligations under
any lease of real or personal property that is required to be capitalized
for financial reporting purposes in accordance with GAAP, and the amount of
such Debt shall be the capitalized amount of such obligations determined in
accordance with GAAP.
"CD Advances" means Advances the interest rates on which are either
determined with reference to the rates referred to in the definition of
"Adjusted CD Rate" in this SECTION 1.1 or are otherwise fixed for specified
periods of time.
"CD Rate" means, for any CD Advance for any interest Period therefor,
the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) determined by Lender on the first day of such Interest Period to be
offered on certificates of deposit having a term comparable to such
Interest Period and in an amount comparable to the principal amount of the
CD Advance to which such Interest Period relates.
"C/D/R" means C/D/R Incorporated, a Delaware corporation.
"C/D/R/ Guaranty" means the guaranty of C/D/R in favor of Lender in
substantially the form of EXHIBIT "I" hereto, as the same may be amended,
supplemented or otherwise modified from time to time.
"Change of Management" means the failure of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to
continue to perform his current or similar duties.
"Change of Ownership" means the ownership, legally and beneficially,
by any Person of fifty-one percent (51%) or more of the capital stock of
Borrower.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"Collateral" includes all of the collateral covered by the Security
Agreement, the Durocraft Security Agreement and the Pledge Agreement.
"Commitment" means the obligation of Lender to make Advances hereunder
in an aggregate principal amount at any time outstanding up to but not
exceeding Six Million Dollars ($6,000,000.00), as such amount may be
reduced pursuant to SECTION 2.7 or otherwise.
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"Consolidated Current Assets" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as current assets
on a consolidated balance sheet of Borrower and the Subsidiaries.
"Consolidated Current Liabilities" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as current
liabilities on a consolidated balance sheet of Borrower and the
Subsidiaries.
"Consolidated Liabilities" means, at any particular time, all amounts
which, in conformity with GAAP, would be included as liabilities on a
consolidated balance sheet of Borrower and the Subsidiaries.
"Consolidated Tangible Net Worth" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as stockholders'
equity on a consolidated balance sheet of Borrower and the Subsidiaries;
provided, however, there shall be excluded therefrom: (a) any amount at
which shares of capital stock of Borrower appear as an asset on Borrower's
balance sheet, (b) goodwill, including any amounts, however designated,
that represent the excess of the purchase price paid for assets or stock
over the value assigned thereto, (c) patents, trademarks, trade names, and
copyrights, (d) deferred expenses, (e) loans and advances to any
stockholder, director, officer, or employee of Borrower or any Subsidiary
or any Affiliate, and (f) all other assets which are properly classified as
intangible assets.
"Continue", "Continuation" and "Continued" shall refer to the
continuation pursuant to SECTION 3.5 of a CD Advance as a CD Advance from
one Interest Period to the next Interest Period.
"Convert", "Conversion" and "Converted" shall refer to a conversion
pursuant to SECTION 3.5 or ARTICLE 4 of one Type of Advance into another
Type of Advance.
"Current Ratio" means, at any particular time, the ratio of
Consolidated Current Assets to Consolidated Current Liabilities; provided,
however, that for purposes of calculating the Current Ratio, the amount of
the Consolidated Current Liabilities shall be deemed to include outstanding
Advances.
"Debt" means as to any Person at any time (without duplication): (a)
all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, notes, debentures, or other similar
instruments, (c) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable of
such Person arising in the ordinary course of business which are not past
due by more than ninety (90) days unless such trade accounts payable are
being contested in good faith by appropriate proceedings, (d) all
obligations of such Person under any lease which, in conformity with GAAP,
is required to be capitalized for balance sheet purposes, (e) all
obligations of such Person under guaranties, endorsements (other than for
collection or deposit in the ordinary course of business), assumptions or
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other contingent obligations, in respect of, or to purchase or otherwise
acquire, any obligation or indebtedness of any other Person, or any other
obligation, contingent or otherwise, of such Person directly or indirectly
protecting the holder of any obligation or indebtedness of any other Person
against loss (whether by partnership arrangements, agreements to keep-well,
to purchase assets, goods, securities, or services, to take-or-pay or
otherwise), (f) all obligations secured by a Lien existing on property
owned by such Person, whether or not the obligations secured thereby have
been assumed by such Person or are non-recourse to the credit of such
Person, (g) all reimbursement obligations of such Person (whether
contingent or otherwise) in respect of letters of credit, bankers'
acceptances, surety or other bonds and similar instruments and (h) all
liabilities of such Person in respect of unfunded vested benefits under any
Plan.
"Default Rate" means the Maximum Rate or, if no Maximum Rate exists,
the sum of the Prime Rate in effect from day to day plus four percent (4%).
"Dollars" and "$" mean lawful money of the United States of America.
"Durocraft" means Durocraft International, Inc., a Texas corporation.
"Durocraft Guaranty" means the guaranty of Durocraft in favor of
Lender, in substantially the form of EXHIBIT "E" hereto, as the same may be
amended, supplemented, or otherwise modified from time to time.
"Durocraft Security Agreement" means the Security Agreement of
Durocraft in favor of Lender in substantially the form of EXHIBIT "G"
hereto, as the same may be amended, supplemented or otherwise modified from
time to time.
"Eligible Accounts" means the aggregate of all accounts receivable of
Borrower that are acceptable to Lender in its sole discretion and satisfy
the following conditions: (a) have been outstanding less than sixty (60)
days past the due date thereof; (b) have arisen in the ordinary course of
business; (c) represent complete bona fide transactions which require no
further act under any circumstances on the part of Borrower to make such
accounts receivable payable by the account debtor; (d) the goods of sale
which gave rise to such accounts receivable have been shipped or delivered
to the account debtor on an absolute sale basis and not on consignment, a
sale or return basis, a guaranteed sale basis, a ▇▇▇▇ and hold basis, or on
the basis of any similar understanding; (e) the goods of sale which gave
rise to such accounts receivable were not, at the time of sale thereof,
subject to any Lien, except as permitted by SECTION 8.2; (f) are not
subject to any provision prohibiting assignment or requiring notice of or
consent to such assignment; (g) are subject to a perfected, first priority
security interest in favor of Lender and are not subject to any other Lien
except as permitted by SECTION 8.2; (h) are not subject to setoff,
counterclaim, defense, allowance, dispute, or adjustment other than normal
discounts for prompt payment, and the goods of sale which gave rise to such
accounts receivable have not been returned, rejected, repossessed, lost, or
damaged; (i) the account debtor is not insolvent or the subject of any
bankruptcy or insolvency proceeding and has not made an assignment for the
benefit of creditors, suspended normal business operations, dissolved,
liquidated, terminated its existence, ceased to pay its debts as they
become due, or suffered a receiver or trustee to be appointed for any of
its assets or
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affairs; (j) are not evidenced by chattel paper or an instrument of any
kind; (k) are owed by a Person or Persons that are citizens of or organized
under the laws of the United States or any State and are not owed by any
Person located outside of the United States of America; (1) if any accounts
receivable are owed by the United States of America or any department,
agency, or instrumentality thereof, the Federal Assignment of Claims Act
shall have been complied with; and (m) are not owed by an Affiliate of
Borrower. The amount of any Eligible Accounts owed by an account debtor to
Borrower shall be reduced by the amount of all "contra accounts" and other
obligations owed by Borrower to such account debtor.
"Eligible Inventory" means, at any time, all inventory of finished
goods and unassembled lamp parts then owned by (and in the possession or
under the control of) Borrower and held for sale or disposition in the
ordinary course of Borrower's business, in which Lender has a perfected,
first priority security interest, valued at the lower of actual cost or
fair market value. Eligible Inventory shall not include (a) inventory that
has been shipped or delivered to a customer on consignment, a sale or
return basis, or on the basis of any similar understanding, (b) inventory
with respect to which a claim exists disputing Borrower's title to or right
to possession of such inventory, (c) inventory that is not in good
condition or does not comply with any applicable laws, rules, or
regulations or the standards imposed by any governmental authority with
respect to its manufacture, use, or sale, and (d) inventory that Lender, in
its sole discretion, has determined to be unmarketable.
"Environmental Laws" means any and all federal, state, and local laws,
regulations, and requirements pertaining to health, safety, or the
environment, as such laws, regulations, and requirements may be amended or
supplemented from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published
interpretations thereunder.
"Event of Default" has the meaning specified in SECTION 10.1.
"Fixed Charge Coverage Ratio" means, with respect to Borrower and the
Subsidiaries on a consolidated basis for the most recently completed four
quarter period preceding the date of determination, a ratio of (a) Pretax
Income for such period plus interest expense for such period plus Operating
Lease expense for such period to (b) interest expense for such period plus
Operating Lease expense for such period.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or in
statements of the Financial Accounting Standards Board and/or their
respective successors and which are applicable in the circumstances as of
the date in question. Accounting principles are applied on a "consistent
basis" when the accounting principles observed in a current period are
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comparable in all material respects to those accounting principles applied
in a preceding period.
"Guaranty" means the Durocraft Guaranty and the C/D/R Guaranty,
individually and collectively.
"Guarantor" means Durocraft and C/D/R, jointly and severally.
"Hazardous Substance" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or addressed under any Environmental Law,
including, without limitation, asbestos, petroleum, and polychlorinated
biphenyls.
"Interest Period" means, with respect to any CD Advances, each period
commencing on the date such CD Advances are made or Converted from Prime
Rate Advances or, in the case of each subsequent, successive Interest
Period applicable to a CD Advance, the last day of the next preceding
Interest Period with respect to such Advance, and ending on the day 30, 60,
90 or 180 days thereafter, as Borrower may select as provided in SECTION
2.5 or 3.5 hereof. Notwithstanding the foregoing: (a) each Interest Period
which would otherwise end on a day which is not a Business Day shall end on
the next succeeding Business Day; (b) any Interest Period which would
otherwise extend beyond the Termination Date shall end on the Termination
Date; (c) no more than three (3) Interest Periods for CD Advances shall be
in effect at the same time; (d) no Interest Period shall have a duration of
less than thirty (30) days and, if the Interest Period for any CD Advances
would otherwise be a shorter period, such Advances shall not be available
hereunder; and (e) no Interest Period may extend beyond a principal
repayment date unless, after giving effect thereto, the aggregate principal
amount of the CD Advances having Interest Periods that end after such
principal payment date shall be equal to or less than the Advances to be
outstanding hereunder after such principal repayment date.
"Leverage Ratio" means, at any particular time, the ratio of Debt to
Consolidated Tangible Net Worth.
"Lien" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment, preference,
priority, or other encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or title retention agreement),
whether arising by contract, operation of law, or otherwise.
"Loan Documents" means this Agreement and all promissory notes,
security agreements, pledge agreements, deeds of trust, assignments,
letters of credit, applications for letters of credit, guaranties, and
other instruments, agreements and documentation executed and delivered
pursuant to or in connection with this Agreement, as such instruments,
agreements and documentation may be amended, modified, renewed, extended,
or supplemented from time to time.
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"Maximum Rate" means the maximum rate of nonusurious interest
permitted from day to day by applicable law, including as to Article
5069-1.04, Vernon's Texas Civil Statutes (and as the same may be
incorporated by reference in other Texas statutes), but otherwise without
limitation, that rate based upon the "indicated rate ceiling" and
calculated after taking into account any and all relevant fees, payments,
and other charges in respect of the Loan Documents which are deemed to be
interest under applicable law.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by Borrower or
any Subsidiary and which is covered by Title IV of ERISA.
"Net Income" means, for any period, the consolidated net income of
Borrower and the Subsidiaries for such period as determined in accordance
with GAAP.
"Note" means the promissory note of Borrower payable to the order of
Lender, in substantially the form of EXHIBIT "A" hereto, and all
extensions, renewals, and modifications thereof.
"Obligated Party" means any Guarantor or any other Person who is or
becomes party to any agreement that guarantees or secures payment and
performance of the Obligations or any part thereof.
"Obligations" means all obligations, indebtedness, and liabilities of
Borrower to Lender, now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several, including, without limitation, the
obligations, indebtedness, and liabilities of Borrower under this Agreement
and the other Loan Documents (including, without limitation, all of
Borrower's contingent reimbursement obligations in respect of letters of
credit), and all interest accruing thereon and all attorneys' fees and
other expenses incurred in the enforcement or collection thereof.
"Operating Lease" means any lease (other than a lease constituting a
Capital Lease Obligation) of real or personal property.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Person" means any individual, corporation, business trust,
association, company, partnership, joint venture, governmental authority,
or other entity.
"Plan" means any employee benefit or other plan established or
maintained by Borrower or any ERISA Affiliate and which is covered by Title
IV of ERISA.
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"Pledge Agreement" means the Pledge Agreement of Borrower and
Durocraft in favor of Lender in substantially the form of EXHIBIT "J"
hereto, as the same may be amended, supplemented or otherwise modified from
time to time.
"Potential Default" means any condition or event which, after notice
or lapse of time or both, would constitute an Event of Default.
"Pretax Income" means, for any period, Net Income for such period plus
(but only to the extent deducted in the determination of Net Income) tax
expense for such period.
"Prime Rate" means, at any time, the rate of interest per annum then
most recently established by Lender as its prime rate. The Prime Rate is a
reference rate set by Lender after taking into account such factors as it
may deem appropriate and does not necessarily represent the lowest or best
rate actually charged to any customer. The Prime Rate may not correspond
with future increases or decreases in interest rates charged by other
lenders or market rates in general and Under may make various commercial or
other loans at rates of interest having no relationship to such rate.
"Prime Rate Advance" means Advances that bear interest at rates based
upon the Prime Rate.
"Prohibited Transaction" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Code.
"Regulatory Change" means, with respect to Lender, any change after
the date of this Agreement in United States federal, state, or foreign laws
or regulations (including Regulation D) or the adoption or making after
such date of any interpretations, directives, or requests applying to a
class of banks including Lender of or under any United States federal or
state, or any foreign, laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time
to time.
"Reportable Event" means any of the events set forth in Section 4043
of ERISA.
"Reserve Requirement" means, for any CD Advance for any Interest
Period therefor, the average maximum rate at which reserves (including any
marginal, supplemental or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against non-personal Dollar time deposits in an amount of $100,000
or more. Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by
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such member banks by reason of any Regulatory Change against (a) any
category of liabilities which includes deposits by reference to which the
Adjusted CD Rate is to be determined or (b) any category of extensions of
credit or other assets which include CD Advances.
"RICO" means the Racketeer Influenced and Corrupt Organization Act of
1970, as amended from time to time.
"Security Agreement" means the Security Agreement of Borrower in favor
of Lender in substantially the form of EXHIBIT "D" hereto, as the same may
be amended, supplemented or otherwise modified from time to time.
"Subsidiary" means any corporation of which more than fifty percent
(50%) of the issued and outstanding securities having ordinary voting power
for the election of a majority of directors is owned or controlled,
directly or indirectly, by Borrower, by Borrower and one or more other
Subsidiaries, or by one or more other Subsidiaries.
"Termination Date" means 11:00 a.m. Dallas, Texas time on November 15,
1994, or such earlier date and time on which the Commitment terminates as
provided in this Agreement.
"Type" means any type of Advance (i.e., Prime Rate Advance or CD
Advance).
Section 1.2 Other Definitional Provisions. All definitions contained in
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof", "herein", and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Unless otherwise
specified, all Article and Section references pertain to this Agreement. All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP. Terms used herein that are defined in the Uniform
Commercial Code as adopted by the State of Texas, unless otherwise defined
herein, shall have the meanings specified in the Uniform Commercial Code as
adopted by the State of Texas.
ARTICLE 2
Advances
Section 2.1 Advances. Subject to the terms and conditions of this
Agreement, Lender agrees to make one or more Advances to Borrower from time to
time from the date hereof to and including the Termination Date, provided that
(a) the aggregate outstanding amount of all Advances shall not at any time
exceed the lesser of the Commitment or the Borrowing Base and (b) the
outstanding Advances supported only by the Eligible Inventory component of the
Borrowing Base shall not at any time exceed fifty percent (50%) of the aggregate
outstanding amount of all Advances. Subject to the foregoing limitations, and
the other terms and provisions of this Agreement, Borrower may borrow, repay,
and reborrow hereunder.
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Section 2.2 The Note. The obligation of Borrower to repay the Advances
shall be evidenced by the Note executed by Borrower, payable to the order of
Lender, in the principal amount of the Commitment as originally in effect and
dated the date hereof.
Section 2.3 Repayment of Advances. Borrower shall repay the unpaid
principal amount of all Advances outstanding under the Note on the Termination
Date.
Section 2.4 Interest. The unpaid principal amount of the Advances shall
bear interest prior to maturity at a varying rate per annum equal from day to
day to the lesser of (a) the Maximum Rate or (b) the Applicable Rate, each such
change in the rate of interest charged on the Advances to become effective,
without notice to Borrower, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the rate of interest specified in clause (b) preceding shall exceed
the Maximum Rate, thereby causing the interest on the Advances to be limited to
the Maximum Rate, then any subsequent reduction in the Applicable Rate shall not
reduce the rate of interest on the Advances below the Maximum Rate until such
time as the aggregate amount of interest accrued on the Advances equals the
aggregate amount of interest which would have accrued on the Advances if the
interest rate specified in clause (b) preceding had at all times been in effect.
Accrued and unpaid interest on the Advances shall be payable on the last
Business Day of each month, commencing on January 29, 1993, and on the
Termination Date. All past due principal and interest shall bear interest at the
Default Rate.
Section 2.5 Requests for Advances. Borrower shall give Lender notice by
means of an Advance Request Form of each requested Advance, at least three (3)
Business Days before the requested date of each CD Advance and by 12:00 p.m.
(Dallas, Texas time) on the requested date of each Prime Rate Advance
specifying: (a) the requested date of such Advance (which shall be a Business
Day), (b) the amount of such Advance, (c) the Type of the Advance and (d) in the
case of a CD Advance, the duration of the Interest Period for such Advance.
Lender at its option may accept telephonic requests for Advances, provided that
such acceptance shall not constitute a waiver of Lender's right to require
delivery of an Advance Request Form in connection with subsequent Advances. Any
telephonic request for an Advance by Borrower shall be promptly confirmed by
submission of a properly completed Advance Request Form to Lender. Each CD
Advance shall be in a minimum principal amount of One Hundred Thousand Dollars
($100,000.00) or an integral multiple thereof and each Prime Rate Advance shall
be in a minimum principal amount of Fifty Thousand Dollars ($50,000.00). The
aggregate amount of CD Advances having the same interest period shall be at
least equal to One Hundred Thousand Dollars ($100,000.00). All notices under
this Section shall be irrevocable and shall be given not later than 12:00 p.m.
(Dallas, Texas time) on the day specified above for such notice. Any Advance
Request Form requesting an Advance received after 12:00 p.m. (Dallas, Texas
time) on a Business Day shall be deemed to be received on the next succeeding
Business Day.
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Section 2.6 Use of Proceeds. The proceeds of Advances shall be used to
repay existing Debt to Texas Commerce Bank-Arlington, National Association and
for working capital support of accounts receivable and inventory of Borrower.
Section 2.7 Commitment Fee; Reduction or Termination of Commitment.
Borrower agrees to pay to Lender a commitment fee on the average daily unused
portion of the Commitment, from and including the date hereof to and including
the Termination Date, at the rate of one-quarter of one percent (.25%) per annum
payable in installments on the last Business Day of each calendar quarter,
commencing March 31, 1993, and on the Termination Date. Borrower shall have the
right at any time to terminate in whole or from time to time to irrevocably
reduce in part the Commitment upon at least three (3) Business Days prior
written notice to Lender specifying the effective date thereof, whether a
termination or reduction is being made, and the amount of any partial reduction;
provided, however, that each partial reduction shall be in the amount of Two
Hundred Fifty Thousand Dollars ($250,000.00) or an integral multiple thereof and
Borrower shall simultaneously prepay the amount by which the aggregate
outstanding amount of all Advances exceeds the Commitment (after giving effect
to such notice) plus accrued and unpaid interest on the principal amount so
prepaid. The Commitment may not be reinstated after it has been terminated or
reduced.
ARTICLE 3
Payments, Conversions and Continuations
Section 3.1 Method of Payment. All payments of principal, interest, and
other amounts to be made by Borrower under this Agreement, the Note, and the
other Loan Documents shall be made to Lender at its office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, without setoff, deduction, or counterclaim, in Dollars and
in immediately available funds. Borrower shall, at the time of making each such
payment, specify to Lender the sums payable by Borrower under this Agreement,
the Note, or other Loan Document to which such payment is to be applied (and in
the event Borrower fails to so specify, or if an Event of Default has occurred
and is continuing, Lender may apply such payment to the Obligations in such
order and manner as it may elect in its sole discretion). Whenever any payment
under this Agreement, the Note, or any other Loan Document shall be stated to be
due on a day that is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of the payment of interest and commitment fee, as
the case may be.
Section 3.2 Voluntary Prepayment. Borrower may prepay the Note in whole at
any time or from time to time in part without premium or penalty but with
accrued interest to the date of prepayment on the amount so prepaid, provided
that (a) CD Advances may be prepaid only on the last day of the Interest Period
for such Advances and (b) each partial prepayment shall be in the principal
amount of $25,000.00 or an integral multiple thereof.
Section 3.3 Mandatory Prepayment. If at any time (a) the aggregate amount
of outstanding Advances exceeds the lesser of the Commitment or the Borrowing
Base or (b) the
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outstanding Advances supported by the Eligible Inventory component of the
Borrowing Base exceeds fifty percent (50%) of the aggregate amount of
outstanding Advances, Borrower shall promptly prepay the amount of the excess
plus (x) accrued and unpaid interest on the amount so prepaid and (y) any
amounts for the compensation of funding losses of Lender pursuant to SECTION
4.4.
Section 3.4 Computation of Interest and Fees. Interest on the indebtedness
evidenced by the Note and all fees provided for herein shall be computed on the
basis of a year of 360 days and the actual number of days elapsed (including the
first day but excluding the last day) unless such calculation would result in a
usurious rate, in which case interest shall be calculated on the basis of a year
of 365 or 366 days, as the case may be.
Section 3.5 Conversions and Continuations. Borrower shall have the right
from time to time to Convert all or part of one Type of Advance into another
Type of Advance or to Continue all or part of any CD Advance by giving the
Lender written notice at least one (1) Business Day before Conversion into a
Prime Rate Advance and at least three (3) Business Days before Conversion into
or Continuation of a CD Advance, specifying: (a) the Conversion or Continuation
date, (b) the amount of the Advance to be Converted or Continued, (c) in the
case of Conversions, the Type of Advance to be Converted into and (d) in the
case of a Continuation of or Conversion into a CD Advance, the duration of the
Interest Period applicable thereto; provided that (i) CD Advances may only be
Converted on the last day of the Interest Period and (ii) except for Conversions
into Prime Rate Advances, no Conversions shall be made while an Event of Default
or Potential Default has occurred and is continuing. All notices given under
this Section shall be irrevocable and shall be given not later than 11:00 a.m.
(Dallas, Texas time) on the date which is not less than the number of Business
Days specified above for such notice. If Borrower shall fail to give Lender the
notice as specified above for Continuation or Conversion of a CD Advance prior
to the end of the Interest Period with respect thereto, such CD Advance shall
automatically be Converted into a Prime Rate Advance on the last day of the
Interest Period for such CD Advance.
ARTICLE 4
Yield Protection and Illegality
Section 4.1 Additional Costs. Borrower shall pay directly to Lender from
time to time such amounts as Lender may determine to be necessary to compensate
it for any costs incurred by Lender which Lender determines are attributable to
its making or maintaining of any CD Advances hereunder or its obligation to make
any of such CD Advances hereunder, or any reduction in any amount receivable by
Lender hereunder in respect of any such CD Advances or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change which:
(a) changes the basis of taxation of any amounts payable to Lender
under this Agreement or the Note in respect of any of such Advances (other
than taxes imposed on the overall net income of Lender for any of such
Advances);
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(b) imposes or modifies any reserve, special deposit, minimum capital,
capital ratio, or similar requirement relating to any extensions of credit
or other assets of, or any deposits with or other liabilities or
commitments of, Lender (including any of such Advances or any deposits
referred to in the definition of "CD Rate" in SECTION 1.1 hereof); or
(c) imposes any other condition affecting this Agreement or the Note
or any of such extensions of credit or liabilities or commitments.
Lender will notify Borrower of any event occurring after the date of this
Agreement which will entitle Lender to compensation pursuant to this SECTION 4.1
as promptly as practicable after it obtains knowledge thereof and determines to
request such compensation, and will designate a different lending office for the
Advances affected by such event if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the sole opinion of
Lender, violate any law, rule, or regulation or be in any way disadvantageous to
Lender. Lender will furnish Borrower with a certificate setting forth the basis
and the amount of each request of Lender for compensation under this section. If
Lender requests compensation from Borrower under this section, Borrower may, by
notice to Lender suspend the obligation of Lender to make additional CD Advances
until the Regulatory Change giving rise to such request ceases to be in effect
(in which case the provisions of SECTION 4.3 hereof shall be applicable).
Determinations and allocations by Lender for purposes of this section shall be
conclusive, provided that such determinations and allocations are made on a
reasonable basis.
Section 4.2 Limitation on Types of Advances. Anything herein to the
contrary notwithstanding, if with respect to any CD Advances for any Interest
Period therefor, Lender determines (which determination shall be conclusive)
that the relevant rates of interest referred to in the definition of "CD Rate"
in SECTION 1.1 hereof on the basis of which the rate of interest for CD Advances
for such Interest Period is to be determined do not accurately reflect the cost
to the Lender of making or maintaining CD Advances for such Interest Period,
then Lender shall give Borrower prompt notice thereof specifying the relevant
amounts or periods, and so long as such condition remains in effect, Lender
shall be under no obligation to make additional CD Advances or to Convert Prime
Rate Advances into CD Advances and Borrower shall, on the last day(s) of the
then current Interest Period(s) for the outstanding CD Advances, either prepay
such CD Advances or Convert such CD Advances into Prime Rate Advances in
accordance with the terms of this Agreement.
Section 4.3 Substitute Prime Rate Advances. If the obligation of Lender to
make CD Advances shall be suspended pursuant to SECTION 4.1 or 4.2 hereof, all
Advances which would be otherwise made by Lender as CD Advances shall be made
instead as Prime Rate Advances and all Advances which would otherwise be
Converted into CD Advances shall be Converted instead into (or shall remain as)
Prime Rate Advances and, to the extent that CD Advances are so made as (or
Converted into) Prime Rate Advances, all payments and prepayments of principal
which would otherwise be applied to Lender's CD Advances shall be applied
instead to its Prime Rate Advances.
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Section 4.4 Compensation. Borrower shall pay to Lender, upon the request of
Lender, such amount or amounts as shall be sufficient (in the reasonable opinion
of Lender) to compensate it for any loss, cost, or expense incurred by it as a
result of:
(a) Any payment, prepayment or Conversion of a CD Advance for any
reason (including, without limitation, the acceleration of outstanding
Advances pursuant to SECTION 10.2) on a date other than the last day of an
Interest Period for such CD Advance; or
(b) Any failure by Borrower for any reason (including, without
limitation, the failure of any conditions precedent specified in ARTICLE 5
to be satisfied) to borrow, Convert, or prepay a CD Advance on the date for
such borrowing, Conversion, or prepayment, specified in the relevant notice
of borrowing, prepayment, or Conversion under this Agreement.
Section 4.5 Capital Adequacy. If after the date hereof, Lender shall have
determined that the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Lender (or its parent) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on Lender's (or its parent's) capital as a consequence of its obligations
hereunder or the transactions contemplated hereby to a level below that which
Lender (or its parent) could have achieved but for such adoption, change or
compliance (taking into consideration Lender's policies with respect to capital
adequacy) by an amount deemed by Lender to be material, then from time to time,
within ten (10) Business Days after demand by Lender, Borrower shall pay to
Lender such additional amount or amounts as will compensate Lender (or its
parent) for such reduction. A certificate of Lender claiming compensation under
this Section and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive, provided that the determination thereof is made
on a reasonable basis. In determining such amount or amounts, Lender may use any
reasonable averaging and attribution methods.
ARTICLE 5
Conditions Precedent
Section 5.1 Initial Advance. The obligation of Lender to make any Advance
concurrently with or subsequent to the execution of this Agreement is subject to
the condition precedent that Lender shall have received on or before the day of
such Advance all of the following, each dated (unless otherwise indicated)
effective as of the date hereof, in form and substance satisfactory to Lender:
(a) Resolutions. Resolutions of the Board of Directors of Borrower and
each Guarantor certified by their respective Secretary or Assistant
Secretary which authorize
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the execution, delivery, and performance by Borrower and each Guarantor of
the Loan Documents to which Borrower or such Guarantor, as applicable, is
or is to be a party;
(b) Incumbency Certificate. A certificate of incumbency certified by
the respective Secretary or Assistant Secretary of Borrower and each
Guarantor certifying the names of the officers of Borrower and such
Guarantor authorized to sign each of the Loan Documents to which Borrower
or such Guarantor, as applicable, is or is to be a party (including the
certificates contemplated herein), together with specimen signatures of
such officers;
(c) Articles of Incorporation. The articles of incorporation of
Borrower and each Guarantor, each certified by the Secretary of State of
its respective state of incorporation and dated within ten (10) days prior
to the date of execution hereof;
(d) Bylaws. The bylaws of Borrower and each Guarantor certified by its
respective Secretary or Assistant Secretary;
(e) Governmental Certificates. Certificates of the appropriate
government officials of the state of incorporation of Borrower and each
Guarantor as to the existence and good standing of such Persons, together
with certificates of the appropriate government officials of the State of
Texas as to the qualification to do business as a foreign corporation and
good standing of Borrower and each Guarantor in the State of Texas, each
dated within ten (10) days prior to the date of execution hereof;
(f) Note. The Note executed by Borrower;
(g) Security Agreement. The Security Agreement executed by Borrower;
(h) Financing Statements and Assignments. Uniform Commercial Code
financing statements executed by Borrower or Guarantor, as applicable, and
covering such Collateral as Lender may request, and Uniform Commercial Code
terminations or assignments relating to the Liens identified on SCHEDULE 7
hereto;
(i) Guaranty. The Durocraft Guaranty executed by Durocraft, and the
C/D/R Guaranty executed by C/D/R;
(j) Durocraft Security Agreement. The Durocraft Security Agreement
executed by Durocraft;
(k) Assignment of Life Insurance. The Assignment of Life Insurance
duly executed by Borrower;
(l) Initial Borrowing Base Report. A Borrowing Base Report dated
December 30, 1992, properly completed and executed by an authorized officer
of Borrower reflecting the information required thereby as of November 30,
1992;
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(m) Assignment of Notes and Liens. An Assignment of Notes and Liens in
form and substance satisfactory to Lender, executed by Texas Commerce
Bank-Arlington, National Association, assigning to Lender the promissory
note, liens and security documentation between Borrower and Texas Commerce
Bank-Arlington, National Association;
(n) Landlord and Mortgagee Agreements. Landlord and mortgagee
subordinations or waivers executed by each landlord and mortgagee
identified on SCHEDULE 1 hereto;
(o) Insurance Policies. Summaries of all insurance policies required
by SECTION 7.5, together with loss payable endorsements in favor of Lender
with respect to all insurance policies covering Collateral;
(p) UCC Search. The results of Uniform Commercial Code searches
showing all financing statements and other documents or instruments on file
against Borrower or Guarantor in each applicable jurisdiction listed on
SCHEDULE 6 hereto, such searches to be as of a date no more than ten (10)
days prior to the date of execution hereof;
(q) Instruments, Documents and Chattel Paper. All Collateral
consisting of instruments, documents and chattel paper (except as otherwise
provided by the Security Agreement, the Durocraft Security Agreement, or
the Pledge Agreement) endorsed, if applicable, payable to the order of
Lender; and
(r) Attorneys' Fees and Expenses. Evidence that the costs and expenses
(including reasonable attorneys' fees) referred to in SECTION 11.1, to the
extent incurred, shall have been paid in full by Borrower.
Section 5.2 All Advances. The obligation of Lender to make any Advance
(including the initial Advance) is subject to the following additional
conditions precedent:
(a) Advance Request Form. Lender shall have received in accordance
with SECTION 2.5 an Advance Request Form dated the date of such Advance and
executed by an authorized officer of Borrower, all of the statements in
which shall be true and correct on and as of such date;
(b) No Default. No Event of Default or Potential Default shall have
occurred and be continuing; and
(c) Additional Documentation. Lender shall have received such
additional approvals, opinions, or documentation as Lender or its legal
counsel, Jenkens & ▇▇▇▇▇▇▇▇▇, P.C., may request.
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ARTICLE 6
Representations and Warranties
To induce Lender to enter into this Agreement, Borrower represents and
warrants to Lender that, as of the execution hereof:
Section 6.1 Corporate Existence. Borrower and each Subsidiary (a) is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation; (b) has all requisite corporate
power and authority to own its assets and carry on its business as now being or
as proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a material adverse effect
on its business, condition (financial or otherwise), operations, prospects, or
properties. Borrower has the corporate power and authority to execute, deliver,
and perform its obligations under this Agreement and the other Loan Documents to
which it is or may become a party.
Section 6.2 Financial Statements. Borrower has delivered to Lender audited
consolidated financial statements of Borrower and its Subsidiaries as at and for
the fiscal year ended June 30, 1992, and unaudited consolidated financial
statements of Borrower and its Subsidiaries for the three (3) month period ended
September 30, 1992. Such financial statements are true and correct, have been
prepared in accordance with GAAP, and fairly and accurately present, on a
consolidated basis, the financial condition of Borrower and its Subsidiaries as
of the respective dates indicated therein and the results of operations for the
respective periods indicated therein. Neither Borrower nor any of its
Subsidiaries has any material contingent liabilities, liabilities for taxes,
material forward or long-term commitments, or unrealized or anticipated losses
from any unfavorable commitments not reflected in such financial statements.
There has been no material adverse change in the business, condition (financial
or otherwise), operations, prospects, or properties of Borrower or any of its
Subsidiaries since the effective date of the most recent financial statements
referred to in this section.
Section 6.3 Corporate Action; No Breach. The execution, delivery, and
performance by Borrower of this Agreement and the other Loan Documents to which
Borrower is or may become a party have been duly authorized by all requisite
action on the part of Borrower and do not and will not violate or conflict with
the articles of incorporation or bylaws of Borrower or any law, rule, or
regulation or any order, writ, injunction, or decree of any court, governmental
authority, or arbitrator, and do not and will not conflict with, result in a
breach of, or constitute a default under, or result in the creation or
imposition of any Lien (except those Liens in favor of Lender) upon any of the
revenues or assets of Borrower or any Subsidiary pursuant to the provisions of
any indenture, mortgage, deed of trust, security agreement, franchise, permit,
license, or other instrument or agreement by which Borrower or any Subsidiary or
any of their respective properties is bound.
Section 6.4 Operation of Business. Borrower and each of its Subsidiaries
possess all licenses, permits, franchises, patents, copyrights, trademarks, and
tradenames, or rights thereto,
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to conduct their respective businesses substantially as now conducted and as
presently proposed to be conducted, and Borrower and each of its Subsidiaries
are not in violation of any valid rights of others with respect to any of the
forgoing.
Section 6.5 Litigation and Judgments. Except as disclosed on SCHEDULE 2
hereto, there is no action, suit, investigation, or proceeding before or by any
court, governmental authority, or arbitrator pending, or to the knowledge of
Borrower, threatened against or affecting Borrower or any Subsidiary, that
would, if adversely determined, have a material adverse effect on the business,
condition (financial or otherwise), operations, prospects, or properties of
Borrower or any Subsidiary or the ability of Borrower to pay and perform the
Obligations. There are no outstanding judgments against Borrower or any
Subsidiary.
Section 6.6 Rights in Properties, Liens. Borrower and each Subsidiary have
good and indefeasible title to or valid leasehold interests in their respective
properties and assets, real and personal, including the properties, assets, and
leasehold interests reflected in the financial statements described in SECTION
6.2, and none of the properties, assets, or leasehold interests of Borrower or
any Subsidiary is subject to any Lien, except as permitted by SECTION 8.2.
Section 6.7 Enforceability. This Agreement constitutes, and the other Loan
Documents to which Borrower is party, when delivered, shall constitute the
legal, valid, and binding obligations of Borrower, enforceable against Borrower
in accordance with their respective terms, except as limited by bankruptcy,
insolvency, or other laws of general application relating to the enforcement of
creditor's rights.
Section 6.8 Approvals. No authorization, approval, or consent of, and no
filing or registration with, any court, governmental authority, or third party
is or will be necessary for the execution, delivery, or performance by Borrower
of this Agreement and the other Loan Documents to which Borrower is or may
become a party or the validity or enforceability thereof.
Section 6.9 Debt. Borrower and its Subsidiaries have no Debt, except as
permitted by SECTION 8.1.
Section 6.10 Taxes. Borrower and each Subsidiary have filed all tax returns
(federal, state, and local) required to be filed, including all income,
franchise, employment, property, and sales taxes, and have paid all of their
respective liabilities for taxes, assessments, governmental charges, and other
levies that are due and payable, and Borrower knows of no pending investigation
of Borrower or any Subsidiary by any taxing authority or of any pending but
unassessed tax liability of Borrower or any Subsidiary.
Section 6.11 Use of Proceeds; Margin Securities. Neither Borrower nor any
Subsidiary is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulations G, T, U, or X of the Board of Governors
of the Federal Reserve System), and no part of the proceeds of any extension of
credit under this Agreement will be used to purchase or carry any
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such margin stock or to extend credit to others for the purpose of purchasing or
carrying margin stock.
Section 6.12 ERISA. Borrower and each Subsidiary have complied with all
applicable minimum funding requirements and all other applicable and material
requirements of ERISA and there are no existing conditions that would give rise
to liability thereunder. No Reportable Event has occurred in connection with
Plan that might constitute grounds for the termination thereof by the PBGC or
for the appointment by the appropriate United States District Court of a trustee
to administer such Plan.
Section 6.13 Disclosure. No statement, information, report, representation
or warranty made by Borrower in this Agreement or in any other Loan Document or
furnished to Lender in connection with this Agreement or any transaction
contemplated hereby contains any untrue statement of a material fact or omits to
state any material fact necessary to make the statements herein or therein not
misleading. There is no fact known to Borrower which has a material adverse
effect, or which might in the future have a material adverse effect, on the
business, condition (financial or otherwise), operations, prospects, or
properties of Borrower or any Subsidiary that has not been disclosed in writing
to Lender.
Section 6.14 Subsidiaries. Borrower has no Subsidiaries other than those
listed on SCHEDULE 4 hereto, and SCHEDULE 4 sets forth the jurisdiction of
incorporation of each Subsidiary and the percentage of Borrower's ownership of
the outstanding voting stock of each Subsidiary. All of the outstanding capital
stock of each Subsidiary has been validly issued, is fully paid, and is
nonassessable.
Section 6.15 Compliance with Laws and Agreements. Neither Borrower nor any
Subsidiary is in violation in any material respect of any law, rule, regulation,
order, or decree of any court, governmental authority, or arbitrator. Neither
Borrower nor any Subsidiary is in default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it is
a party.
Section 6.16 Environmental Matters.
(a) Borrower, each Subsidiary, and all of their respective properties,
assets, and operations are in full compliance with all Environmental Laws.
Borrower is not aware of, nor has Borrower received notice of, any past,
present, or future conditions, events, activities, practices, or incidents
which may interfere with or prevent the compliance or continued compliance
of Borrower and the Subsidiaries with all Environmental Laws.
(b) Borrower and each Subsidiary have obtained all permits, licenses,
and authorizations which are required under Environmental Laws.
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(c) No Hazardous Substances exist on about, or within or have been
used, generated, stored, transported, disposed of on, or released from any
of the properties or assets of Borrower or any Subsidiary. The use which
Borrower and the Subsidiaries make and intend to make of their respective
properties and assets will not result in the use, generation, storage,
transportation, accumulation, disposal, or release of any Hazardous
Substance on, in, or from any such properties or assets.
(d) There is no action, suit, proceeding, investigation, or inquiry
before any court, administrative agency, or other governmental authority
pending or, to the knowledge of Borrower, threatened against Borrower or
any Subsidiary relating in any way to any Environmental Law. Neither
Borrower nor any Subsidiary has (i) any liability for remedial action under
any Environmental Law, (ii) received any request for information by any
governmental authority with respect to the condition, use, or operation of
any of its properties or assets, or (iii) received any notice from any
governmental authority or other Person with respect to any violation of or
liability under any Environmental Law.
(e) No Lien arising under any Environmental Law has attached to any of
the properties or assets of Borrower or any of its Subsidiaries.
Section 6.17 Current Locations. The principal place of business and chief
executive office of the Borrower is located at the address for notices specified
below the Borrower's name on the signature pages hereto. SCHEDULE 1 attached
hereto sets forth all the locations where any of the Obligated Parties maintain
any books or records relating to any of the Collateral and all other locations
where any of the Obligated Parties has a place of business. No Obligated Party
does business in any location other than as set forth on SCHEDULE 1 and SCHEDULE
1 correctly identifies each address where any of the Obligated Parties'
inventory or equipment are located. SCHEDULE 1 correctly identifies the
landlords or mortgagees (other than Lender), if any, of each location identified
on SCHEDULE 1. SCHEDULE 1 sets forth the names and addresses of all Persons
other than the Obligated Parties who have possession of any of the Obligated
Parties' Collateral. None of the Collateral has been located in any location
within the past four months other than as set forth on SCHEDULE 1.
Section 6.18 Security Interest and Liens. The Security Agreement, the
Durocraft Security Agreement and the Pledge Agreement create in favor of Lender
valid and enforceable Liens on the Collateral described therein which secure the
payment and performance of the Obligations, including without limitation, all
future Advances pursuant to this Agreement and the Note and all extensions,
renewals and other modifications thereof. Upon the filing of Uniform Commercial
Code Financing Statements naming Borrower or Durocraft, as applicable, as debtor
and Lender as secured party in the applicable jurisdictions set forth in
SCHEDULE 6 hereto, and delivery to Lender of the Collateral covered by the
Pledge Agreement, and the release or assignment to Lender of the Liens described
on SCHEDULE 7 hereto, the Liens created by the Loan Documents shall constitute
perfected, first priority Liens upon the Collateral which shall be superior and
prior to the rights of all third Persons now existing or hereafter arising.
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Section 6.19 Corporate Name. The exact corporate name of Borrower as it
appears in its certificate of incorporation is set forth in the introduction to
this Agreement, and Borrower has not done business in any location under any
other name.
ARTICLE 7
Positive Covenants
Borrower covenants and agrees that, as long as the Obligations or any part
thereof are outstanding or Lender has any Commitment hereunder, Borrower will
perform and observe the following positive covenants, unless Lender shall
otherwise consent in writing:
Section 7.1 Reporting Requirements. Borrower will furnish to Lender:
(a) Annual Financial Statements. As soon as available, and in any
event within ninety (90) days after the end of each fiscal year of
Borrower, beginning with the fiscal year ending June 30, 1993, (i) a copy
of the annual audit report of Borrower and the Subsidiaries for such fiscal
year containing, on a consolidated basis, balance sheets, statements of
income, and statements of cash flows as at the end of such fiscal year and
for the twelve-month period then ended, in each case setting forth in
comparative form the figures for the preceding fiscal year, all in
reasonable detail and audited and certified by independent certified public
accountants of recognized standing acceptable to Lender, to the effect that
such report has been prepared in accordance with GAAP; and (ii) a
certificate of such independent certified public accountants to Lender (A)
stating that to their knowledge no Event of Default and no Potential
Default has occurred and is continuing, or if in their opinion an Event of
Default or Potential Default has occurred and is continuing, a statement as
to the nature thereof, and (B) confirming the calculations set forth in the
Covenant Compliance Certificate delivered simultaneously therewith;
(b) Monthly Financial Statements. As soon as available, and in any
event within thirty (30) days after the end of each month, a copy of an
unaudited financial report of Borrower and the Subsidiaries as of the end
of such month, and for the portion of the fiscal year then ended,
containing, on a consolidated and consolidating basis, balance sheets,
statements of income, and statements of cash flows, in each case setting
forth in comparative form the figures for the corresponding period of the
preceding fiscal year, all in reasonable detail certified by the chief
financial officer of Borrower to have been prepared in accordance with GAAP
and to fairly and accurately present (subject to year-end audit
adjustments) the financial condition and results of operations of Borrower
and the Subsidiaries, on a consolidated and consolidating basis, at the
date and for the periods indicated therein;
(c) Covenant Compliance Certificate. Concurrently with the delivery of
each of the financial statements referred to in SUBSECTIONS 7.1(a) and
7.1(b), a certificate of the chief executive officer or chief financial
officer of Borrower (i) stating that to the best
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of such officer's knowledge, no Event of Default and no Potential Default
has occurred and is continuing, or if an Event of Default or Potential
Default has occurred and is continuing, a statement as to the nature
thereof and the action which is proposed to be taken with respect thereto,
and (ii) showing in reasonable detail the calculations demonstrating
compliance with ARTICLE 9;
(d) Notice of Litigation. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any court or
governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting Borrower or any Subsidiary
which, if determined adversely to Borrower or such Subsidiary, could have a
material adverse effect on the business, condition (financial or
otherwise), operations, prospects, or properties of Borrower or such
Subsidiary;
(e) Notice of Default. As soon as possible and in any event within
five (5) days after the occurrence of each Event of Default and Potential
Default, a written notice setting forth the details of such Event of
Default or Potential Default and the action which Borrower has taken and
proposes to take with respect thereto;
(f) ERISA Reports. Promptly after the filing or receipt thereof,
copies of an reports, including annual reports, and notices which Borrower
or any Subsidiary files with or receives from the PBGC or the U.S.
Department of Labor under ERISA; and as soon as possible and in any event
within five (5) days after Borrower or any Subsidiary knows or has reason
to know that any Reportable Event or Prohibited Transaction has occurred
with respect to any Plan or that the PBGC or Borrower or any Subsidiary has
instituted or will institute proceedings under Title IV of ERISA to
terminate any Plan, a certificate of the chief financial officer of
Borrower setting forth the details as to such Reportable Event or
Prohibited Transaction or Plan termination and the action that Borrower
proposes to take with respect thereto;
(g) Notice of Environmental Law Violation. As soon as possible and in
any event within five (5) days after the occurrence thereof, written notice
of any violation of any Environmental Law that Borrower or any Subsidiary
reports or is required to report to any governmental authority;
(h) Notice of Material Adverse Effect. As soon as possible and in any
event within five (5) days after the occurrence thereof, written notice of
any matter that could have a material adverse effect on the business,
condition (financial or otherwise), operations, prospects, or properties of
Borrower or any Subsidiary;
(i) Borrowing Base Report and Accounts Receivable Aging Report. As
soon as available, and in any event within thirty (30) days after the end
of each calendar month, a Borrowing Base Report and an Accounts Receivable
Aging Report, each certified by the chief executive officer or chief
financial officer of Borrower;
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(j) Proxy Statements, Etc. As soon as available, one copy of each
financial statement, report, notice or proxy statement sent by Borrower or
any Subsidiary to its stockholders generally and one copy of each regular,
periodic or special report, registration statement, or prospectus filed by
Borrower or any Subsidiary with any securities exchange or the Securities
and Exchange Commission or any successor agency;
(k) Uninsured Liabilities. Promptly upon receipt of notice thereof,
written notice of any actual or potential uninsured liabilities of Borrower
or any Subsidiary in excess of One Hundred Thousand Dollars ($100,000.00);
and
(l) General Information. Promptly, such other information concerning
Borrower or any Subsidiary as Lender may from time to time reasonably
request.
Section 7.2 Maintenance of Existence; Conduct of Business. Borrower will
preserve and maintain, and will cause each Subsidiary to preserve and maintain,
its corporate existence and all of its leases, privileges, licenses, permits,
franchises, qualifications and rights that are necessary or desirable in the
ordinary conduct of its business, and conduct, and cause each Subsidiary to
conduct, its business as presently conducted in an orderly and efficient manner
in accordance with good business practices.
Section 7.3 Maintenance of Properties. Borrower will maintain, keep, and
preserve, and cause each Subsidiary to maintain, keep, and preserve, all of its
properties (tangible and intangible) necessary or useful in the proper conduct
of its business in good working order and condition.
Section 7.4 Taxes and Claims. Borrower will pay or discharge, and will
cause each Subsidiary to pay or discharge, at or before maturity or before
becoming delinquent (a) all taxes, levies, assessments, and governmental charges
imposed on it or its income or profits or any of its property, and (b) all
lawful claims for labor, material, and supplies, which, if unpaid, might become
a Lien upon any of its property; provided, however, that neither Borrower nor
any Subsidiary shall be required to pay or discharge any tax, levy, assessment,
or governmental charge which is being contested in good faith by appropriate
proceedings diligently pursued, and for which adequate reserves have been
established.
Section 7.5 Insurance. Borrower will maintain, and will cause each
Subsidiary to maintain, with financially sound and reputable insurance companies
worker's compensation insurance, liability insurance, and insurance on its
property, assets, and business at least in such amounts and against such risks
as are usually insured against by Persons engaged in similar businesses. Each
insurance policy covering Collateral shall name Lender as loss payee and provide
that such policy will not be canceled without thirty (30) days prior written
notice to Lender.
Section 7.6 Inspection Rights. At any reasonable time and from time to
time, Borrower will permit, and will cause each Subsidiary to permit,
representatives of Lender to examine and make copies of the books and records
of, and visit and inspect the properties of Borrower and
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any Subsidiary, and to discuss the business, operations, and financial condition
of Borrower and the Subsidiaries with their respective officers and employees
and with their independent certified public accountants.
Section 7.7 Keeping Books and Records. Borrower will maintain, and will
cause each Subsidiary to maintain, proper books of record and account in which
full, true, and correct entries in conformity with GAAP shall be made of all
dealings and transactions in relation to its business and activities.
Section 7.8 Compliance with Laws. Borrower will comply, and win cause each
Subsidiary to comply, in all material respects with all applicable laws, rules,
regulations, and orders of any court, governmental authority, or arbitrator.
Section 7.9 Compliance with Agreements. Borrower will comply, and will
cause each Subsidiary to comply, in all material respects with all contracts,
agreements, and instruments binding on it or affecting its properties or
business.
Section 7.10 Further Assurances. Borrower will execute and deliver, and
will cause each Subsidiary to execute and deliver, such further instruments as
may be requested by Lender to carry out the provisions and purposes of this
Agreement and the other Loan Documents and to preserve and perfect the Liens of
Lender in the Collateral.
Section 7.11 ERISA. Borrower will comply, and will cause each Subsidiary to
comply, with all minimum funding requirements, and all other material
requirements, of ERISA, if applicable, so as not to give rise to any liability
thereunder.
ARTICLE 8
Negative Covenants
Borrower covenants and agrees that, as long as the Obligations or any part
thereof are outstanding or Lender has any Commitment hereunder, Borrower will
perform and observe the following negative covenants, unless Lender shall
otherwise consent in writing:
Section 8.1 Debt. Borrower will not incur, create, assume, or permit to
exist, and will not permit any Subsidiary to incur, create, assume, or permit to
exist, any Debt, except:
(a) Debt to Lender;
(b) Existing Debt described on SCHEDULE 3 hereto; and
(c) Debt incurred to finance the purchase of property to be used in
the ordinary course of Borrower's business in an aggregate amount during
any one fiscal year not to exceed Two Hundred Fifty Thousand Dollars
($250,000.00).
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Section 8.2 Limitation on Liens. Borrower will not incur, create, assume,
or permit to exist, and will not permit any Subsidiary to incur, create, assume,
or permit to exist, any Lien upon any of its property, assets, or revenues,
whether now owned or hereafter acquired, except:
(a) Liens disclosed on SCHEDULE 5 hereto;
(b) Liens in favor of Lender;
(c) Encumbrances consisting of minor easements, zoning restrictions,
or other restrictions on the use of real property that do not (individually
or in the aggregate) materially affect the value of the assets encumbered
thereby or materially impair the ability of Borrower or the Subsidiaries to
use such assets in their respective businesses, and none of which is
violated in any material respect by existing or proposed structures or land
use;
(d) Liens for taxes, assessments, or other governmental charges which
are not delinquent or which are being contested in good faith and for which
adequate reserves have been established;
(e) Liens of mechanics, materialmen, warehousemen, carriers or other
similar statutory Liens securing obligations that are not yet due and are
incurred in the ordinary course of business;
(f) Liens resulting from good faith deposits to secure payments of
worker's compensation or other social security programs or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, or contracts (other than for payment of Debt) in the ordinary course
of business; and
(g) Liens created to secure purchase money Debt permitted by SECTION
8.1(c) provided that such Liens do not extend to or cover any property of
Borrower other than the property being acquired with the Debt permitted by
SECTION 8.1(c).
Section 8.3 Mergers, Acquisitions and Dissolutions. Borrower will not, and
will not permit any Subsidiary to, become a party to a merger or consolidation,
or purchase or otherwise acquire all or a substantial part of the assets of any
Person or any shares or other evidence of beneficial ownership of any Person, or
dissolve or liquidate.
Section 8.4 Restricted Payments. Borrower will not declare or pay any
dividends or make any other payment or distribution (in cash, property, or
obligations) on account of its capital stock, or redeem, purchase, retire, or
otherwise acquire any of its capital stock, or set apart any money for a sinking
or other analogous fund for any dividend or other distribution on its capital
stock or for any redemption, purchase, retirement, or other acquisition of any
of its capital stock, or grant or issue any capital stock or any warrant, right,
or option pertaining to its capital stock, or issue any security convertible
into capital stock, or permit any of its
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Subsidiaries to purchase or otherwise acquire any capital stock of Borrower or
another Subsidiary.
Section 8.5 Loans and Investments. Borrower will not make, and will not
permit any Subsidiary to make, any advance, loan, extension of credit, or
capital contribution to or investment in, or purchase, or permit any Subsidiary
to purchase, any stock, bonds, notes, debentures, or other securities of any
Person, except:
(a) readily marketable direct obligations of the United States of
America;
(b) fully insured certificates of deposit with maturities of one year
or less from the date of acquisition of Lender; and
(c) loans or advances to employees of Borrower in an aggregate amount
not to exceed $25,000;
Section 8.6 Transactions With Affiliates. Borrower will not enter into, and
will not permit any Subsidiary to enter into, any transaction, including,
without limitation, the purchase, sale, or exchange of property or the rendering
of any service, with any Affiliate of Borrower or such Subsidiary, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's or
such Subsidiary's business and upon fair and reasonable terms no less favorable
to Borrower or such Subsidiary than would be obtained in a comparable
arm's-length transaction with a Person not an Affiliate of Borrower or such
Subsidiary.
Section 8.7 Disposition of Assets. Borrower will not sell, lease, assign,
transfer, or otherwise dispose of any of its assets, or permit any Subsidiary to
do so with any of its assets, except (a) dispositions of inventory in the
ordinary course of business and (b) from the date of this Agreement until the
Termination Date, dispositions of assets (other than inventory) in the ordinary
course of business having an aggregate fair market value of $100,000 or less.
Section 8.8 Prepayment of Debt. Borrower will not prepay, and will not
permit any Subsidiary to prepay, any Debt, except the Obligations.
Section 8.9 Nature of Business. Borrower will not, and will not permit any
Subsidiary to, engage in any business other than the businesses in which they
are engaged as of the date hereof.
Section 8.10 Compliance with Environmental Laws. Borrower will not, and
will not permit any of its Subsidiaries to, (a) use (or permit any tenant to
use) any of their respective properties or assets for the handling, processing,
storage, transportation, or disposal of any Hazardous Substance, (b) generate
any Hazardous Substance, (c) conduct any activity which is likely to cause a
release or threatened release of any Hazardous Substance, or (d) otherwise
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conduct any activity or use any of their respective properties or assets in any
manner that is likely to violate any Environmental Law.
Section 8.11 Accounting. Borrower will not make, and will not permit any of
its Subsidiaries to make, any change in accounting treatment or reporting
practices, except as required by GAAP.
ARTICLE 9
Financial Covenants
Borrower covenants and agrees that, as long as the Obligations or any part
thereof are outstanding or Lender has any Commitment hereunder, Borrower will
observe and perform the following financial covenants, unless Lender shall
otherwise consent in writing:
Section 9.1 Current Ratio. Borrower will at all times maintain a Current
Ratio of not less than to 1.4 to 1.0.
Section 9.2 Consolidated Tangible Net Worth. Borrower will at all times
maintain Consolidated Tangible Net Worth in an amount not less than Four Million
Dollars ($4,000,000.00).
Section 9.3 Fixed Charge Coverage Ratio. Borrower will at all times
maintain a Fixed Charge Coverage Ratio of not less than 1.75 to 1.0.
Section 9.4 Leverage Ratio. Borrower will at all times maintain a Leverage
Ratio of not greater than 1.75 to 1.0.
Section 9.5 Capital Expenditures. Borrower will not permit the aggregate
capital expenditures of Borrower and the Subsidiaries to exceed Four Hundred
Thousand Dollars ($400,000.00) during any fiscal year.
ARTICLE 10
Default
Section 10.1 Events of Default. Each of the following shall be deemed an
"Event of Default":
(a) Borrower shall fail to pay when due the Obligations or any part
thereof.
(b) Any representation, warranty, certification or statement made or
deemed made by Borrower or any Obligated Party (or any of their respective
officers) in any Loan Document or in any certificate, report, notice, or
financial statement furnished at
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any time in connection with this Agreement shall be false, misleading, or
erroneous in any material respect when made or deemed to have been made.
(c) Borrower or any Obligated Party shall fail to perform, observe, or
comply with any covenant, agreement, or term contained in this Agreement or
any other Loan Document.
(d) Borrower, any Subsidiary, or any Obligated Party shall commence a
voluntary proceeding seeking liquidation, reorganization, or other relief
with respect to itself or its debts under any bankruptcy, insolvency, or
other similar law now or hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian, or other similar official of it
or a substantial part of its property or shall consent to any such relief
or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it or shall make a
general assignment for the benefit of creditors or shall generally fail to
pay its debts as they become due or shall take any corporate action to
authorize any of the foregoing.
(e) An involuntary proceeding shall be commenced against Borrower, any
Subsidiary, or any Obligated Party seeking liquidation, reorganization, or
other relief with respect to it or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official for it or a substantial part of its property, and such involuntary
proceeding shall remain undismissed and unstayed for a period of thirty
(30) days.
(f) Borrower, any Subsidiary, or any Obligated Party shall fail to
discharge within a period of thirty (30) days after the commencement
thereof any attachment, sequestration, or similar proceeding or proceedings
involving an aggregate amount in excess of Fifty Thousand Dollars
($50,000.00) against any of its assets or properties.
(g) Borrower, any Subsidiary, or any Obligated Party shall fail to
satisfy and discharge promptly any judgment or judgments against it for the
payment of money in an aggregate amount in excess of Fifty Thousand Dollars
($50,000.00).
(h) Borrower, any Subsidiary, or any Obligated Party shall fail to pay
when due any principal of or interest on any Debt (other than the
Obligations), or the maturity of any such Debt shall have been accelerated,
or any such Debt shall have been required to be prepaid prior to the stated
maturity thereof, or any event shall have occurred that permits (or, with
the giving of notice or lapse of time or both, would permit) any holder or
holders of such Debt or any Person acting on behalf of such holder or
holders to accelerate the maturity thereof or require any such prepayment.
(i) This Agreement or any other Loan Document shall cease to be in
full force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by Borrower, any
Subsidiary, any Obligated Party or any of
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their respective shareholders, or Borrower or any Obligated Party shall
deny that it has any further liability or obligation under any of the Loan
Documents, or any lien or security interest created by the Loan Documents
shall for any reason cease to be a valid, first priority perfected security
interest in and lien upon any of the Collateral purported to be covered
thereby.
(j) Any of the following events shall occur or exist with respect to
Borrower or any Subsidiary: (i) any Prohibited Transaction involving any
Plan; (ii) any Reportable Event with respect to any Plan; (iii) the filing
under Section 4041 of ERISA of a notice of intent to terminate any Plan or
the termination of any Plan; (iv) any event or circumstance that might
constitute grounds entitling the PBGC to institute proceedings under
Section 4042 of ERISA for the termination of, or for the appointment of a
trustee to administer, any Plan, or the institution by the PBGC of any such
proceedings; (v) complete or partial withdrawal under Section 4201 or 4204
of ERISA from a Multiemployer Plan or the reorganization, insolvency, or
termination of any Multiemployer Plan; and in each case above, such event
or condition, together with all other events or conditions, if any, have
subjected or could in the reasonable opinion of Lender subject Borrower to
any tax, penalty, or other liability to a Plan, a Multiemployer Plan, the
PBGC, or otherwise (or any combination thereof) which in the aggregate
exceed or could reasonably be expected to exceed Fifty Thousand Dollars
($50,000.00).
(k) The occurrence of a Change of Ownership or Change of Management.
(l) Borrower, any of its Subsidiaries, or any Obligated Party, or any
of their properties, revenues, or assets, shall become subject to an order
of forfeiture, seizure, or divestiture (whether under RICO or otherwise)
and the same shall not have been discharged within thirty (30) days from
the date of entry thereof.
Section 10.2 Remedies Upon Default. If any Event of Default shall occur,
Lender may without notice terminate its Commitment to make Advances and declare
the Obligations or any part thereof to be immediately due and payable, and the
same shall thereupon become immediately due and payable, without notice, demand,
presentment, notice of dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, protest, or other formalities of any
kind, all of which are hereby expressly waived by Borrower; provided, however,
that upon the occurrence of an Event of Default under SECTION 10.1(d) or Section
10.1(e), the Commitment of Lender to make Advances shall automatically
terminate, and the Obligations shall become immediately due and payable without
notice, demand, presentment, notice of dishonor, notice of acceleration, notice
of intent to accelerate, notice of intent to demand, protest, or other
formalities of any kind, all of which are hereby expressly waived by Borrower.
If any Event of Default shall occur, Lender may exercise all rights and remedies
available to it in law or in equity, under the Loan Documents, or otherwise.
Section 10.3 Performance by Lender. If Borrower shall fail to perform any
covenant, duty, or agreement contained in any of the Loan Documents, Lender may
perform or attempt to perform such covenant, duty, or agreement on behalf of
Borrower. In such event, Borrower
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shall, at the request of Lender, promptly pay any amount expended by Lender in
such performance or attempted performance to Lender, together with interest
thereon at the Default Rate from the date of such expenditure until paid.
Notwithstanding the foregoing, it is expressly agreed that Lender shall not have
any liability or responsibility for the performance of any obligation of
Borrower under this Agreement or any other Loan Document.
Section 10.4 Setoff. Lender shall have the right to set off and apply
against the Obligations in such manner as Lender may determine, at any time and
without notice to Borrower, any and all deposits (general or special, time or
demand, provisional or final) or other sums at any time credited by or owing
from Lender to Borrower whether or not the Obligations are then due. As further
security for the Obligations, Borrower hereby grants to Lender a security
interest in all money, instruments, and other property of Borrower now or
hereafter held by Lender, including, without limitation, property held in
safekeeping. In addition to Lender's right of setoff and as further security for
the Obligations, Borrower hereby grants to Lender a security interest in all
deposits (general or special, time or demand, provisional or final) and other
accounts of Borrower now or hereafter on deposit with or held by Lender and all
other sums at any time credited by or owing from Lender to Borrower. The rights
and remedies of Lender hereunder are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which Lender may have.
ARTICLE 11
Miscellaneous
Section 11.1 Expenses of Lender. Borrower hereby agrees to pay Lender on
demand: (a) all costs and expenses incurred by Lender in connection with the
preparation, negotiation, and execution of this Agreement and the other Loan
Documents and any and all amendments, modifications, renewals, extensions, and
supplements thereof and thereto, including, without limitation, the fees and
expenses of Lender's legal counsel, (b) all costs and expenses incurred by
Lender in connection with the enforcement of this Agreement or any other Loan
Document, including, without limitation, the fees and expenses of Lender's legal
counsel, and (c) all other costs and expenses incurred by Lender in connection
with this Agreement or any other Loan Document, including, without limitation,
all costs, expenses, taxes, assessments, filing fees, and other charges levied
by a governmental authority or otherwise payable in respect of this Agreement or
any other Loan Document or in obtaining any audit or appraisal in respect of the
Collateral.
Section 11.2 Indemnification. Borrower hereby indemnifies Lender and each
Affiliate thereof and their respective officers, directors, employees,
attorneys, and agents from, and holds each of them harmless against, any and all
losses, liabilities, claims, damages, penalties, judgments, disbursements,
costs, and expenses (including attorneys' fees) to which any of them may become
subject which directly or indirectly arise from or relate to (a) the
negotiation, execution, delivery, performance, administration, or enforcement of
any of the Loan Documents, (b) any of the transactions contemplated by the Loan
Documents, (c) any breach by Borrower of any representation, warranty, covenant,
or other agreement contained in any of the Loan
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Documents, (d) the presence, release, threatened release, disposal, removal, or
cleanup of any Hazardous Substance located on, about, within, or affecting any
of the properties or assets of Borrower or any Subsidiary or (e) any
investigation, litigation, or other proceeding, including, without limitation,
any threatened investigation, litigation, or other proceeding relating to any of
the foregoing. Without limiting any provision of this Agreement or of any other
Loan Document, it is the express intention of the parties hereto that each
Person to be indemnified under this Section shall be indemnified from and held
harmless against any and all losses, liabilities, claims, damages, penalties,
judgments, disbursements, costs, and expenses (including attorneys' fees)
arising out of or resulting from the sole or contributory negligence of the
Person to be indemnified.
Section 11.3 Limitation of Liability. Neither Lender nor any Affiliate,
officer, director, employee, attorney, or agent of Lender shall have any
liability with respect to, and Borrower hereby waives, releases, and agrees not
to ▇▇▇ any of them upon, any claim for any special, indirect, incidental, or
consequential damages suffered or incurred by Borrower in connection with,
arising out of, or in any way related to, this Agreement or any of the other
Loan Documents, or any of the transactions contemplated by this Agreement or any
of the other Loan Documents. Borrower hereby waives, releases, and agrees not to
▇▇▇ Lender or any of Lender's Affiliates, officers, directors, employees,
attorneys, or agents for punitive damages in respect of any claim in connection
with, arising out of, or in any way related to, this Agreement or any of the
other Loan Documents, or any of the transactions contemplated by this Agreement
or any of the other Loan Documents.
Section 11.4 Lender Not Fiduciary. The relationship between Borrower and
Lender is solely that of debtor and creditor, and Lender has no fiduciary or
other special relationship with Borrower, and no term or condition of any of the
Loan Documents shall be construed so as to deem the relationship between
Borrower and Lender to be other than that of debtor and creditor.
Section 11.5 No Waiver; Cumulative Remedies. No failure on the part of
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under this Agreement shall operate as
a waiver thereof, including without limitation Lender's forbearance with respect
to the default referred to in SECTION 8 of the Recitals above, nor shall any
single or partial exercise of any right, power, or privilege under this
Agreement preclude any other or further exercise thereof or the exercise of any
other right, power, or privilege. The rights and remedies provided for in this
Agreement and the other Loan Documents are cumulative and not exclusive of any
rights and remedies provided by law.
Section 11.6 Successors and Assigns. This Agreement is binding upon and
shall inure to the benefit of Lender and Borrower and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations under this Agreement without the prior written consent
of Lender. Any assignment in violation of this SECTION 11.6 shall be void.
Section 11.7 Survival. All representations and warranties made in this
Agreement or any other Loan Document or in any documentation, statement, or
certificate furnished in
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39
connection with this Agreement shall survive the execution and delivery of this
Agreement and the other Loan Documents, and no investigation by Lender or any
closing shall affect the representations and warranties or the right of Lender
to rely upon them. Without prejudice to the survival of any other obligation of
Borrower hereunder, the obligations of Borrower under ARTICLE 4 and SECTIONS
11.1 and 11.2 shall survive repayment of the Note and termination of the
Commitment.
Section 11.8 ENTIRE AGREEMENT; AMENDMENT AND RESTATEMENT OF TEXAS COMMERCE
BANK-ARLINGTON, NATIONAL ASSOCIATION DOCUMENTS; AMENDMENT. THIS AGREEMENT, THE
NOTE, AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
Without limiting the generality of the foregoing, this Agreement and the other
Loan Documents amend and restated in their entirety the documentation assigned
to Lender pursuant to the Assignment of Notes and Liens described in SECTION
5.1(m) hereof. The provisions of this Agreement and the other Loan Documents to
which Borrower is a party may be amended or waived only by an instrument in
writing signed by the parties hereto.
Section 11.9 Maximum Interest Rate. No provision of this Agreement or of
any other Loan Document shall require the payment or the collection of interest
in excess of the Maximum Rate. If any excess of interest in such respect is
hereby provided for, or shall be adjudicated to be so provided, in any Loan
Document or otherwise in connection with this loan transaction, the provisions
of this Section shall govern and prevail and neither Borrower nor the sureties,
guarantors, successors, or assigns of Borrower shall be obligated to pay the
excess amount of such interest or any other excess sum paid for the use,
forbearance, or detention of sums loaned pursuant hereto. In the event Lender
ever receives, collects, or applies as interest any such sum, such amount which
would be in excess of the maximum amount permitted by applicable law shall be
applied as a payment and reduction of the principal of the indebtedness
evidenced by the Note; and, if the principal of the Note has been paid in full,
any remaining excess shall forthwith be paid to Borrower. In determining whether
or not the interest paid or payable exceeds the Maximum Rate, Borrower and
Lender shall, to the extent permitted by applicable law, (a) characterize any
nonprincipal payment as an expense, fee, or premium rather than as interest, (b)
exclude voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the indebtedness evidenced
by the Note so that interest for the entire term does not exceed the Maximum
Rate.
Section 11.10 Notices. All notices and other communications provided for in
this Agreement and the other Loan Documents to which Borrower is a party shall
be given or made in writing and telecopied, mailed by certified mail return
receipt requested, or delivered to the
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First Amended and Restated Credit Agreement
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40
intended recipient at the "Address for Notices" specified below its name on the
signature pages hereof; or, as to any party at such other address as shall be
designated by such party in a notice to the other party given in accordance with
this Section. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopy, subject to telephone confirmation of receipt, or when personally
delivered or, in the case of a mailed notice, when duly deposited in the mails,
in each case given or addressed as aforesaid; provided, however, notices to
Lender pursuant to ARTICLE 2 and SECTION 3.5 shall not be effective until
received by Lender.
Section 11.11 Applicable Law; Venue; Service of Process. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas and the applicable laws of the United States of America. This Agreement
has been entered into in Dallas County, Texas, and it shall be performable for
all purposes in Dallas County, Texas. Any action or proceeding against Borrower
under or in connection with any of the Loan Documents may be brought in any
state or federal court in Dallas County, Texas. Borrower hereby irrevocably (a)
submits to the nonexclusive jurisdiction of such courts, and (b) waives any
objection it may now or hereafter have as to the venue of any such action or
proceeding brought in any such court or that any such court is an inconvenient
forum. Borrower agrees that service of process upon it may be made by certified
or registered mail, return receipt requested, at its address specified or
determined in accordance with the provisions of SECTION 11.10. Nothing herein or
in any of the other Loan Documents shall affect the right of Lender to serve
process in any other manner permitted by law or shall limit the right of Lender
to bring any action or proceeding against Borrower or with respect to any of its
property in courts in other jurisdictions. Any action or proceeding by Borrower
against Lender shall be brought only in a court located in Dallas County, Texas.
Section 11.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
Section 11.13 Severability. Any provision of this Agreement held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section 11.14 Headings. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 11.15 Non-Application of Chapter 15 of Texas Credit Code. The
provisions of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil
Statutes, Article 5069-15) are specifically declared by the parties hereto not
to be applicable to this Agreement or any of the other Loan Documents or to the
transactions contemplated hereby.
Section 11.16 Participations. Lender shall have the right at any time and
from time to time to grant participations in the Note and any other Loan
Documents. Each actual or proposed
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First Amended and Restated Credit Agreement
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41
participant shall be entitled to receive all information received by Lender
regarding the creditworthiness of Borrower, including, without limitation,
information required to be disclosed to a participant pursuant to Banking
Circular 181 (Rev., August 2, 1984), issued by the Comptroller of the Currency
(whether the actual or proposed participant is subject to the circular or not).
Section 11.17 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF LENDER IN
THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
BORROWER:
CRAFTMADE INTERNATIONAL, INC,
a Delaware corporation
By:
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
Address for Notices:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone
No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chief Financial Officer
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First Amended and Restated Credit Agreement
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42
LENDER:
NATIONSBANK OF TEXAS, N.A.
By:
--------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
P. 0. Box 831000
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone
No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President
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First Amended and Restated Credit Agreement
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43
CONFIRMATION OF GUARANTY
Durocraft hereby represents, warrants, covenants and agrees to and with
Lender that (1) Durocraft is aware of this Agreement and the transactions
contemplated herein (this Agreement and such transactions being hereinafter
collectively called the "Modification"), (2) Durocraft consents to the
Modification, (3) notwithstanding the Modification, the Durocraft Guaranty shall
be and remain a continuing, absolute, unconditional and irrevocable guaranty of
payment and performance of the Guaranteed Indebtedness, as defined in the
Durocraft Guaranty, binding and enforceable in accordance with the terms of such
guaranty, and such guaranty shall not be deemed to have been terminated,
impaired, modified or otherwise affected by the Modification, except that the
obligations guaranteed shall include the Obligations as defined herein in
addition to any other amounts included in the Guaranteed Indebtedness, and (4)
there are no claims, defenses, counterclaims or offsets to the liability of
Durocraft under the Durocraft Guaranty.
EXECUTED on March, 1993, to be effective as of January 11, 1993.
DUROCRAFT INTERNATIONAL, INC.,
a Texas corporation
By:
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Chief Executive Officer
Craftmade International, Inc.
First Amended and Restated Credit Agreement
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44
INDEX TO EXHIBITS
Exhibit Description of Exhibit
------- -------------------------------------------------------
"A" Note
"B" Advance Request Form
"C" Borrowing Base Report
"D" Security Agreement
"E" Guaranty
"F" Assignment of Life Insurance Policy
"G" Guarantor Security Agreement
"H" Covenant Compliance Certificate
INDEX TO SCHEDULES
Schedule Description of Exhibit
-------- ------------------------------------------------------
1 Locations of Collateral
2 Existing Litigation
3 Existing Debt
4 List of Subsidiaries
5 Existing Liens
6 UCC Filing Jurisdictions
7 Liens to be Released or Assigned
FOR ALL EXHIBITS EXCEPT EXHIBITS "I" AND "J" ATTACHED HERETO AND FOR ALL
SCHEDULES EXCEPT SCHEDULES 1, 3 AND 4 ATTACHED HERETO, PLEASE SEE THE ORIGINAL
CREDIT AGREEMENT.
Craftmade International, Inc.
First Amended and Restated Credit Agreement
45
EXHIBIT "I"
The C/D/R Guaranty
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First Amended and Restated Credit Agreement
46
EXHIBIT "J"
The Pledge Agreement
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SCHEDULE 1
TO
CREDIT AGREEMENT
Locations of Collateral
Except for any Collateral in the possession of Lender,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Also, an alternative address for C/D/R is,
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
SCHEDULE 1, Locations of Collateral -- Page 1
48
SCHEDULE 3
TO
CREDIT AGREEMENT
Existing Debt
1. Revolving Credit Note dated , 199 , in the maximum
amount of $ from Borrower to C/D/R, maturing ten years from the date
thereof, bearing interest at the rate of ten percent, executed pursuant to a
Loan Agreement dated October , 1992.
2. Agreement dated October 1, 1992, between Craftmade and C/D/R, providing
for certain royalties to be paid by Craftmade to C/D/R for the use of the
trademark and trade name, "Craftmade."
SCHEDULE 3, Existing Debt -- Page 1
49
SCHEDULE 4
TO
CREDIT AGREEMENT
List of Subsidiaries
JURISDICTION PERCENTAGE OF STOCK
NAME OF SUBSIDIARY OF INCORPORATION OWNED BY BORROWER
---- ---------------- -------------------
1. Durocraft International, Inc. Texas 100%
T.I.N. ▇▇-▇▇▇▇▇▇▇
2. C/D/R Incorporated Delaware 95%
T.I.N. ▇▇-▇▇▇▇▇▇▇
SCHEDULE 4, List of Subsidiaries -- Solo Page
50
GUARANTY AGREEMENT
(C/D/R)
WHEREAS NATIONSBANK OF TEXAS, N.A. ("Lender") has previously made a loan to
Craftmade International, Inc. ("Borrower"), a Delaware corporation, in the
maximum principal amount of $6,000,000.00, pursuant to that certain Credit
Agreement (the "Original Credit Agreement") between Borrower and Lender, dated
January 11, 1993; and
WHEREAS Borrower and Lender desire to modify such loan, and the
undersigned,C/D/R Incorporated ("Guarantor"), a Delaware corporation, the
address of which is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, desires to
facilitate such modification by providing this Guaranty Agreement (this
"Guaranty Agreement") in favor of Lender;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Guarantor hereby irrevocably and unconditionally
guarantees to Lender the full and prompt payment and performance of the
Guaranteed Indebtedness (as hereinafter defined), this Guaranty Agreement being
upon the following terms:
1. The term "Guaranteed Indebtedness" as used herein means all of the
"Obligations" as defined in the Credit Agreement. The term "Guaranteed
Indebtedness" shall include any and all post-petition interest and expenses
(including attorneys' fees) whether or not allowed trader any bankruptcy,
insolvency, or other similar law. The Original Credit Agreement, as extended,
modified or replaced from time to time, is referred to herein as the "Credit
Agreement." All initially capitalized terms not specifically otherwise deemed
herein shall have the meanings prescribed in the Credit Agreement.
2. This instrument shall be an absolute, continuing, irrevocable, and
unconditional guaranty of payment and performance, and not a guaranty of
collection, and Guarantor shall remain liable on its obligations hereunder until
the payment and performance in full of the Guaranteed Indebtedness. No setoff,
counterclaim, recoupment, reduction, or diminution of any obligation, or any
defense of any kind or nature which Borrower may have against Lender or any
other party, or which Guarantor may have against Borrower, Lender, or any other
party, shall be available to, or shall be asserted by, Guarantor against Lender
or any subsequent holder of the Guaranteed Indebtedness or any part thereof or
against payment of the Guaranteed Indebtedness or any part thereof.
3. The obligations of Guarantor hereunder shall be limited to an aggregate
amount equal to the largest amount that would not render Guarantor's obligations
hereunder subject to avoidance under Section 548 of the United States Bankruptcy
Code, as amended (or any successor statute), or to being set aside, avoided, or
annulled under any applicable state or federal law relating to fraudulent or
preferential transfers or obligations.
Craftmade International, Inc.
Guaranty Agreement (C/D/R)
51
4. If Guarantor becomes liable for any indebtedness owing by Borrower to
Lender by endorsement or otherwise, other than under this Guaranty Agreement,
such liability shall not be in any manner impaired or affected hereby, and the
rights of Lender hereunder shall be cumulative of any and all other rights that
Lender may ever have against Guarantor. The exercise by Lender of any right or
remedy hereunder or under any other instrument, or at law or in equity, shall
not preclude the concurrent or subsequent exercise of any other right or remedy.
5. In the event of default by Borrower in payment or performance of the
Guaranteed Indebtedness, or any part thereof, when such Guaranteed Indebtedness
becomes due, whether by its terms, by acceleration, or otherwise, Guarantor
shall promptly pay the amount due thereon to Lender without notice or demand in
lawful currency of the United States of America, and it shall not be necessary
for Lender, in order to enforce such payment by Guarantor, first to institute
suit or exhaust its remedies against Borrower or others liable on such
Guaranteed Indebtedness, or to enforce any rights against any collateral which
shall ever have been given to secure such Guaranteed Indebtedness.
6. Notwithstanding anything to the contrary contained in this Guaranty
Agreement, Guarantor hereby irrevocably waives any and all rights it may now or
hereafter have under any agreement or at law or in equity to assert any claim
against or seek subrogation, contribution, indemnification or any other form of
reimbursement from Borrower or any other party liable for payment of any or all
of the Guaranteed Indebtedness for any payment made by Guarantor under or in
connection with this Guaranty Agreement or otherwise.
7. This Guaranty Agreement shall continue to be effective, or be
automatically reinstated, as the case may be, if at any time payment, in whole
or in part, of any of the Guaranteed Indebtedness is rescinded or must otherwise
be restored or returned by Lender as a preference, fraudulent conveyance or
otherwise under any bankruptcy, insolvency or similar law, all as though such
payment had not been made; provided that in the event any Guaranteed
Indebtedness is rescinded or must be restored or returned, all costs and
expenses (including without limitation any legal fees and disbursements)
incurred by Lender in defending or enforcing such reinstatement shall be deemed
to be included as Guaranteed Indebtedness hereunder.
8. If acceleration of the time for payment of any amount payable by
Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject to
acceleration under the terms of the Guaranteed Indebtedness shall nonetheless be
payable by Guarantor hereunder forthwith on demand by Lender.
9. Guarantor hereby agrees that its obligations under this Guaranty
Agreement shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including, without
limitation, one or more of the following events, whether or not with notice to
or the consent of Guarantor: (a)the taking or accepting of collateral as
security for any or all of the Guaranteed Indebtedness or the release,
surrender,
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52
exchange, or subordination of any collateral now or hereafter securing any or
all of the Guaranteed Indebtedness; (b) any partial release of the liability of
Guarantor hereunder, or the full or partial release of any other guarantor from
liability for any or all of the Guaranteed Indebtedness; (c) any disability of
Borrower, or the dissolution, insolvency, or bankruptcy of Borrower, Guarantor,
or any other party at any time liable for the payment of any or all of the
Guaranteed Indebtedness; (d) any renewal, extension, modification, waiver,
amendment, or rearrangement of any or all of the Guaranteed Indebtedness or any
instrument, document, or agreement evidencing, securing, or otherwise relating
to any or all of the Guaranteed Indebtedness; (e) any adjustment, indulgence,
forbearance, waiver, or compromise that may be granted or given by Lender to
Borrower, Guarantor, or any other party ever liable for any or all of the
Guaranteed Indebtedness; (f) any neglect, delay, omission, failure, or refusal
of Lender to take or prosecute any action for the collection of any of the
Guaranteed Indebtedness or to foreclose or take or prosecute any action in
connection with any instrument, document, or agreement evidencing, securing, or
otherwise relating to any or all of the Guaranteed Indebtedness; (g) the
unenforceability or invalidity of any or all of the Guaranteed Indebtedness or
of any instrument, document, or agreement evidencing, securing, or otherwise
relating to any or all of the Guaranteed Indebtedness; (h) any payment by
Borrower or any other party to Lender is held to constitute a preference under
applicable bankruptcy or insolvency law or for any other reason Lender is
required to refund any payment or pay the amount thereof to someone else; (i)
the settlement or compromise of any of the Guaranteed Indebtedness; (j) the
non-perfection of any security interest or lien securing any or all of the
Guaranteed Indebtedness; (k) any impairment or release of any collateral
securing any or all of the Guaranteed Indebtedness; (1) the failure of Lender to
sell any collateral securing any or all of the Guaranteed Indebtedness in a
commercially reasonable manner or as otherwise required by law; (m) any change
in the corporate existence, structure, or ownership of Borrower; or (n) any
other circumstance which might otherwise constitute a defense available to, or
discharge of, Borrower or Guarantor.
10. Guarantor represents and warrants to Lender as follows:
(a) Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, and
Guarantor is qualified to do business in all jurisdictions in which the
nature of the business conducted by Guarantor makes such qualification
necessary and where failure to so qualify would have a material adverse
effect on the business, financial condition, or operations of Guarantor.
(b) Guarantor has the corporate power and authority and legal right to
execute, deliver, and perform its obligations under this Guaranty
Agreement, and this Guaranty Agreement constitutes the legal, valid, and
binding obligation of Guarantor, enforceable against Guarantor in
accordance with its respective terms, except as limited by bankruptcy,
insolvency, or other laws of general application relating to the
enforcement of creditor's fights.
(c) The execution, delivery, and performance by Guarantor of this
Guaranty Agreement have been duly authorized by all requisite action on the
part of Guarantor and
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Guaranty Agreement (C/D/R)
3
53
do not and will not violate or conflict with the articles of incorporation
or bylaws of Guarantor or any law, rule, or regulation or any order, writ,
injunction or decree of any court, governmental authority or agency, or
arbitrator and do not and will not conflict with, result in a breach of,
constitute a default under, or result in the imposition of any lien upon
any assets of Guarantor pursuant to the provisions of any indenture,
mortgage, deed of trust, security agreement, franchise, permit, license, or
other instrument or agreement by which Guarantor or its properties is
bound.
(d) No authorization, approval, or consent of, and no filing or
registration with, any court, governmental authority, or third party is
necessary for the execution, delivery or performance by Guarantor of this
Guaranty Agreement or the validity or enforceability hereof.
(e) The value of the consideration received and to be received by
Guarantor as a result of Borrower and Lender entering into the modification
of the Original Credit Agreement and Guarantor executing and delivering
this Guaranty Agreement is reasonably worth at least as much as the
liability and obligation of Guarantor hereunder, and such liability and
obligation and the modification of the Original Credit Agreement have
benefitted and may reasonably be expected to benefit Guarantor directly or
indirectly.
(f) Guarantor has, independently and without reliance upon Lender and
based upon such documents and information as Guarantor has deemed
appropriate, made its own analysis and decision to enter into this Guaranty
Agreement.
11. Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or Lender has any commitment
under the Credit Agreement:
(a) Guarantor will furnish promptly to Lender written notice of the
occurrence of any default under this Guaranty Agreement or any Event of
Default or Potential Default under the Credit Agreement of which Guarantor
has knowledge.
(b) Guarantor will promptly furnish to Lender any and all such
information, writings, and further assurances relating to Guarantor or this
Guaranty Agreement as Lender may from time to time request.
(c) Guarantor will from time to time obtain any and all
authorizations, licenses, consents, or approvals as may now or hereafter be
necessary or desirable under applicable laws or regulations or otherwise in
connection with the execution, delivery, and performance of this Guaranty
Agreement and will promptly furnish copies thereof to Lender.
(d) Guarantor will at all times own directly or indirectly and free
and clear of all liens or encumbrances whatsoever at least the same
percentage of voting shares of Borrower, if any, as Guarantor owns directly
or indirectly on the date hereof.
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54
12. Lender shall have the right to set off and apply against this Guaranty
Agreement or the Guaranteed Indebtedness or both, at any time and without notice
to Guarantor, any and all deposits (general or special, time or demand,
provisional or final) or other sums at any time credited by or owing from Lender
to Guarantor, whether or not the Guaranteed Indebtedness is then due and
irrespective of whether or not Lender shall have made any demand under this
Guaranty Agreement. As security for this Guaranty Agreement and the Guaranteed
Indebtedness, Guarantor hereby grants Lender a security interest in all money,
instruments, certificates of deposit, and other property of Guarantor now or
hereafter held by Lender, including without limitation, property held in
safekeeping. In addition to Lender's right of setoff and as further security for
this Guaranty Agreement and the Guaranteed Indebtedness, Guarantor hereby grants
Lender a security interest in all deposits (general or special, time or demand,
provisional or final) and all other accounts of Guarantor now or hereafter on
deposit with or held by Lender and all other sums at any time credited by or
owing from Lender to Guarantor. The rights and remedies of Lender hereunder are
in addition to other rights and remedies (including without limitation other
rights of setoff) which Lender may have.
13. For purposes of this Guaranty Agreement, the term "Subordinated
Indebtedness" means all indebtedness, liabilities, and obligations of Borrower
to Guarantor, whether such indebtedness, liabilities, and obligations now exist
or are hereafter incurred or arise, or whether the obligations of Borrower
thereon are direct, indirect, contingent, primary, secondary, several, joint and
several, or otherwise, and irrespective of whether such indebtedness,
liabilities, or obligations are evidenced by a note, contract, open account, or
otherwise, and irrespective of the person or persons in whose favor such
indebtedness, obligations, or liabilities at their inception have been, or may
hereafter be created, or the manner in which they have been or may hereafter be
acquired by Guarantor. With respect to the Subordinated Indebtedness, Guarantor
hereby agrees as follows:
(a) The Subordinated Indebtedness shall be subordinate and junior in
right of payment to the prior payment in full of all Guaranteed
Indebtedness, and Guarantor hereby assigns the Subordinated Indebtedness to
Lender as security for the Guaranteed Indebtedness. If any sums shall be
paid to Guarantor by Borrower or any other person or entity on account of
the Subordinated Indebtedness, such sums shall be held in trust by
Guarantor for the benefit of Lender and shall forthwith be paid to Lender
without affecting the liability of Guarantor under this Guaranty Agreement
and may be applied by Lender against the Guaranteed Indebtedness in such
order and manner as Lender may determine in its sole discretion. Upon the
request of Lender, Guarantor shall execute, deliver, and endorse to Lender
such documents and instruments as Lender may request to perfect, preserve,
and enforce its rights hereunder.
(b) Any and all liens, security interests, judgment liens, charges, or
other encumbrances upon Borrower's assets securing payment of any
Subordinated Indebtedness shall be and remain inferior and subordinate to
any and all liens, security interests, judgment liens, charges, or other
encumbrances upon Borrower's assets securing payment of the Guaranteed
Indebtedness or any part thereof, regardless of whether such encumbrances
in favor of Guarantor or Lender presently exist or are
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hereafter created or attached. Without the prior written consent of Lender,
Guarantor shall not (i) file suit against Borrower or exercise or enforce
any other creditor's right it may have against Borrower, or (ii) foreclose,
repossess, sequester, or otherwise take steps or institute any action or
proceedings (judicial or otherwise, including without limitation the
commencement of, or joinder in, any liquidation, bankruptcy, rearrangement,
debtor's relief or insolvency proceeding) to enforce any liens, security
interests, collateral rights, judgments or other encumbrances held by
Guarantor on assets of Borrower.
(c) In the event of any receivership, bankruptcy, reorganization,
rearrangement, debtor's relief, or other insolvency proceeding involving
Borrower as debtor, Lender shall have the right to prove and vote any claim
under the Subordinated Indebtedness and to receive directly from the
receiver, trustee or other court custodian all dividends, distributions,
and payments made in respect of the Subordinated Indebtedness. Lender may
apply any such dividends, distributions, and payments against the
Guaranteed Indebtedness in such order and manner as Lender may determine in
its sole discretion.
(d) All promissory notes, accounts receivable, ledgers, records, or
any other evidence of Subordinated Indebtedness shall contain a specific
written notice thereon that the indebtedness evidenced thereby is
subordinated under the terms of this Guaranty Agreement.
14. No amendment or waiver of any provision of this Guaranty Agreement or
consent to any departure by the Guarantor therefrom shall in any event be
effective unless the same shall be in writing and signed by Lender. No failure
on the part of Lender to exercise, and no delay in exercising, any right, power,
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, power, or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power, or
privilege. The remedies provided herein are cumulative and not exclusive of any
remedies provided by law.
15. Any acknowledgment or new promise, whether by payment of principal or
interest or otherwise and whether by Borrower or any others (including
Guarantor) with respect to any of the Guaranteed Indebtedness shall, if the
statute of limitations in favor of Guarantor against Lender shall have commenced
to run, toll the running of such statute of limitations and, if the period of
such statute of limitations shall have expired, prevent the operation of such
statute of limitations.
16. This Guaranty Agreement is for the benefit of Lender and its successors
and assigns, and in the event of an assignment of the Guaranteed Indebtedness,
or any part thereof, the rights and benefits hereunder, to the extent applicable
to the indebtedness so assigned, may be transferred with such indebtedness. This
Guaranty Agreement shall be binding not only on Guarantor but also on
Guarantor's successors and assigns.
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17. Guarantor recognizes that Lender is relying upon this Guaranty
Agreement and the undertakings of Guarantor hereunder in continuing to make
extensions of credit to Borrower under the Credit Agreement and further
recognizes that the execution and delivery of this Guaranty Agreement is a
material inducement to Lender in entering into the modification of the Original
Credit Agreement. Guarantor hereby acknowledges that there are no conditions to
the full effectiveness of this Guaranty Agreement.
18. This Guaranty Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
19. Guarantor shall pay on demand all reasonable attorneys' fees and all
other reasonable costs and expenses incurred by Lender in connection with the
administration, enforcement and collection of this Guaranty Agreement.
20. Guarantor hereby waives promptness, diligence, notice of any default
under the Guaranteed Indebtedness, demand of payment, notice of acceptance of
this Guaranty Agreement, presentment, notice of protest, notice of dishonor,
notice of the incurring by Borrower of additional indebtedness, notice of intent
to accelerate, notice of acceleration, and all other notices and demands with
respect to the Guaranteed Indebtedness and this Guaranty Agreement.
21. The Credit Agreement, and all of the terms thereof, are incorporated
herein by reference, the same as if stated verbatim herein, and Guarantor agrees
that Lender may exercise any and all rights granted to it under the Credit
Agreement and the other Loan Documents (as defined in the Credit Agreement)
without affecting the validity or enforceability of this Guaranty Agreement.
22. Guarantor hereby represents and warrants to Lender that Guarantor has
adequate means to obtain from Borrower on a continuing basis information
concerning the financial condition and assets of Borrower and that Guarantor is
not relying upon Lender to provide (and Lender shall have no duty to provide)
any such information to Guarantor either now or in the future.
23. THIS GUARANTY AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT OF
GUARANTOR AND LENDER WITH RESPECT TO GUARANTOR'S GUARANTY OF THE GUARANTEED
INDEBTEDNESS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF. THIS GUARANTY AGREEMENT IS INTENDED BY GUARANTOR AND
LENDER AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY
AGREEMENT, AND NO COURSE OF DEALING BETWEEN GUARANTOR AND LENDER, NO COURSE OF
PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY
NATURE SHALL BE USED TO CONTRADICT, VARY,
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SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY AGREEMENT. THERE ARE NO ORAL
AGREEMENTS BETWEEN GUARANTOR AND LENDER.
24. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, GUARANTOR HEREBY
IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS GUARANTY AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREIN OR THE ACTIONS OF LENDER IN THE NEGOTIATION, ADMINISTRATION,
OR ENFORCEMENT THEREOF.
EXECUTED as of the 11th day of January, 1993.
GUARANTOR:
C/D/R INCORPORATED,
a Delaware corporation
By:
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
Address:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President
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PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is dated as of January 11, 1993
and is by and between CRAFTMADE INTERNATIONAL, INC. ("Borrower"), a Delaware
corporation, and DUROCRAFT INTERNATIONAL, INC. ("Durocraft"), a Texas
corporation, both of whose address is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, and NATIONSBANK OF TEXAS, N.A. ("Secured Party"), whose address is ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
RECITALS:
A. Secured Party has previously made a loan to Borrower in the maximum
principal amount of $6,000,000.00, pursuant to that certain Credit Agreement
(the "Original Credit Agreement") between Borrower and Secured Party, dated
January 11, 1993.
B. Borrower and Secured Party desire to modify such loan to provide for,
among other things, the execution and delivery of this Agreement by Borrower and
Durocraft to Secured Party.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
AGREEMENTS:
The Original Credit Agreement, as extended, modified, or replaced from time
to time, is referred to herein as the "Credit Agreement." Except as otherwise
specified, "Pledgor" as used herein shall mean Borrower and Durocraft
collectively, individually, jointly and severally. All initially capitalized
terms not specifically otherwise defined herein shall have the meanings
prescribed in the Credit Agreement.
ARTICLE 1
Security Interest and Pledge
Section 1.1 Security Interest and Pledge. As collateral security for the
prompt payment in full when due of the Obligations (whether at stated maturity,
by acceleration, or otherwise) and present and future obligations of Pledgor
under this Agreement, Pledgor hereby pledges and grants to Secured Party a first
priority security interest in the following property (such property being
hereinafter sometimes called the "Collateral"):
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a. All of Pledgor's shares of capital stock in C/D/R/ Incorporated
(the "Corporation"), a Delaware corporation, now owned or hereafter
acquired, including, without limitation, the shares of common capital stock
of evidenced by certificate number ; and
b. All products, proceeds, revenues, distributions, dividends, stock
dividends, securities, and other property, rights, and interests that
Pledgor receives or is at any time entitled to receive on account of any
such stock.
ARTICLE 2
Representations and Warranties
Pledgor represents and warrants to Secured Party that:
Section 2.1 Title. Pledgor owns, and with respect to Collateral acquired
after the date hereof, Pledgor will own, legally and beneficially, the
Collateral free and clear of any Lien, security interest, pledge, claim, or
other encumbrance or any right or option on the part of any third Person to
purchase or otherwise acquire the Collateral or any part thereof, except for the
security interest granted hereunder. The Collateral is not subject to any
restriction on transfer or assignment except for compliance with applicable
federal and state securities laws and regulations promulgated thereunder.
Pledgor has the unrestricted right to pledge the Collateral as contemplated
hereby. All of the Collateral has been duly and validly issued and is fully paid
and nonassessable.
Section 2.2 Organization and Authority. Borrower and Durocraft each is a
corporation duly organized, validly existing, and in good standing under the
laws of its state of incorporation. Borrower and Durocraft each has the
corporate power and authority to execute, deliver, and perform its obligations
under this Agreement, and the execution, delivery, and performance of by
Borrower and Durocraft each of its obligations under this Agreement have been
duly authorized by all necessary corporate action and do not and will not
violate or conflict with the articles of incorporation or bylaws of Borrower or
Durocraft or any law, rule, or regulation or any order, writ, injunction, or
decree of any court, governmental authority, or arbitrator and do not and will
not conflict with, result in a breach of, or constitute a default under the
provisions of any indenture, mortgage, deed of trust, security agreement, or
other instrument or agreement binding on either Borrower or Durocraft or any
property of either of them.
Section 2.3 Principal Place of Business. The principal place of business
and chief executive office of Pledgor, and the office where Pledgor keeps its
books and records, is located at the address of Pledgor shown at the beginning
of this Agreement.
Section 2.4 Litigation. There is no litigation, investigation, or
governmental proceeding pending or threatened against either Borrower or
Durocraft or any property of either of them which if adversely determined would
have a material adverse
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effect on the Collateral or the financial condition, operations, or business of
Borrower or Durocraft.
Section 2.5 Percentage of Stock. The Collateral constitutes one hundred
percent (100%) of the issued and outstanding shares of capital stock in the
Corporation.
Section 2.6 First Priority Perfected Security Interest. This Agreement,
together with the delivery to Lender of the Collateral, creates in favor of
Secured Party a perfected, first priority security interest in the Collateral.
There are no conditions precedent to the effectiveness of this Agreement that
have not been fully and permanently satisfied.
Section 2.7 Holding Period. The Collateral has been beneficially owned by
Pledgor and the purchase price for the Collateral has been paid in full since
the Corporation came into existence on October 2, 1992. For purposes of this
provision, in calculating the period of Pledgor's fully paid beneficial
ownership, Pledgor is excluding the period, if any, that ▇▇▇▇▇▇▇ had a "short
position" in, or any put or other option to sell, any shares of the same class
of securities as the Collateral or any securities convertible into any such
shares.
ARTICLE 3
Affirmative and Negative Covenants
Pledgor covenants and agrees with Secured Party that:
Section 3.1 Delivery. Prior to or concurrently with the execution and
delivery of this Agreement, Pledgor shall deliver to Secured Party all
certificate(s) identified in SECTION 1.1(a) hereof, accompanied by undated stock
powers duly executed in blank.
Section 3.2 Encumbrances. Pledgor shall not create, permit, or suffer to
exist, and shall defend the Collateral against, any Lien, security interest, or
other encumbrance on the Collateral except the pledge and security interest of
Secured Party hereunder, and shall defend Pledgor's rights in the Collateral and
Secured Party's security interest in the Collateral against the claims of all
Persons.
Section 3.3 Sale of Collateral. Pledgor shall not sell, assign, or
otherwise dispose of the Collateral or any part thereof without the prior
written consent of Secured Party.
Section 3.4 Distributions. If Pledgor shall become entitled to receive or
shall receive any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in connection with
any reclassification, increase, or reduction of capital or
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issued in connection with any reorganization), option or rights, whether as an
addition to, in substitution of, or in exchange for any Collateral or otherwise,
Pledgor agrees to accept the same as Secured Party's agent and to hold the same
in trust for Secured Party, and to deliver the same forthwith to Secured Party
in the exact form received, with any appropriate endorsement of Pledgor and
appropriate undated stock powers duly executed in blank, to be held by Secured
Party as additional Collateral for the Obligations, subject to the terms hereof.
Any sums paid upon or in respect of the Collateral upon the liquidation or
dissolution of the issuer thereof shall be paid over to Secured Party to be held
by it as additional Collateral for the Obligations subject to the terms hereof;
and if any distribution of capital shall be made on or in respect of the
Collateral or any property shall be distributed upon or with respect to the
Collateral pursuant to any recapitalization or reclassification of the capital
of the issuer thereof or pursuant to any reorganization of the issuer thereof,
the property so distributed shall be delivered to Secured Party to be held by it
as additional Collateral for the Obligations, subject to the terms hereof. All
sums of money and property so paid or distributed in respect of the Collateral
that are received by Pledgor shall, until paid or delivered to Secured Party, be
held by Pledgor in trust as additional security for the Obligations.
Section 3.5 Further Assurances. At any time and from time to time, upon the
request of Secured Party, and at the sole expense of Pledgor, Pledgor shall
promptly execute and deliver all such further instruments and documents and take
such further actions as Secured Party may deem necessary or desirable to
preserve or perfect its security interest in the Collateral and carry out the
provisions and purposes of this Agreement, including without limitation the
execution and filing of such financing statements as Secured Party may require.
A carbon, photographic, or other reproduction of this Agreement or of any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement and may be filed as a financing statement.
Subject to the right of Pledgor to receive cash dividends under SECTION 4.03
hereof, in the event any Collateral is ever received by Pledgor, Pledgor shall
promptly transfer and deliver to Secured Party such Collateral so received by
Pledgor (together with any necessary endorsements in blank or undated stock
powers duly executed in blank), which Collateral shall thereafter be held by
Secured Party pursuant to the terms of this Agreement. Secured Party shall at
all times have the right to exchange any certificates representing Collateral
for certificates of smaller or larger denominations for any purpose consistent
with this Agreement.
Section 3.6 Inspection Rights. Pledgor shall permit Secured Party and its
representatives to examine, inspect, and copy Pledgor's books and records at any
reasonable time and as often as Secured Party may desire.
Section 3.7 Taxes. Pledgor agrees to pay or discharge prior to delinquency
all taxes, assessments, levies, and other governmental charges imposed on it or
its property, except Pledgor shall not be required to pay or discharge any tax,
assessment, levy, or other governmental charge if (i) the amount or validity
thereof is being contested by Pledgor in good faith by appropriate proceedings
diligently pursued, (ii) such proceedings do not involve any risk of sale,
forfeiture, or loss of the Collateral or any interest therein, and (iii)
adequate reserves therefor have been established in conformity with GAAP.
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Section 3.8 Notification. ▇▇▇▇▇▇▇ shall promptly notify Secured Party of
(i) any Lien, security interest, encumbrance, or claim made or threatened
against the Collateral, (ii) any material change in the Collateral, including,
without limitation, any material decrease in the value of the Collateral and
(iii) the occurrence or existence of any Event of Default or the occurrence or
existence of any condition or event that, with the giving of notice or lapse of
time or both, would be an Event of Default.
Section 3.9 Books and Records; Information. Pledgor shall keep accurate and
complete books and records of the Collateral and Pledgor's business and
financial condition in accordance with GAAP. Pledgor shall from time to time at
the request of Secured Party deliver to Secured Party such information regarding
the Collateral, the Corporation, and Pledgor as Secured Party may request.
Pledgor shall ▇▇▇▇ its books and records to reflect the security interest of
Secured Party under this Agreement.
Section 3.10 Compliance with Agreements. Pledgor shall comply in all
material respects with all agreements, contracts, and instruments binding on it
or affecting its properties or business.
Section 3.11 Compliance with Laws. Pledgor shall comply in all material
respects with all applicable laws, rules, regulations, and orders of any court,
governmental authority or arbitrator.
Section 3.12 Additional Securities. Pledgor shall not consent to or approve
the issuance of any additional shares of any class of capital stock of the
issuer of the Collateral, or any securities convertible into, or exchangeable
for, any such shares or any warrants, options, rights, or other commitments
entitling any Person to purchase or otherwise acquire any such shares.
Section 3.13 Provide Information. Pledgor shall fully cooperate, to the
extent requested by Secured Party, in the completion of any notice, form,
schedule, or other document filed by Secured Party on its own behalf or on
behalf of Pledgor, including without limitation any required notice or statement
of beneficial ownership or of the acquisition of beneficial ownership of equity
securities constituting part of the Collateral or any notice of proposed sale of
any such securities pursuant to Rule 144 as promulgated by the SEC under the
Securities Act of 1933, as amended. Without limiting the generality of the
foregoing, Pledgor shall furnish to Secured Party any and all information which
Secured Party may reasonably request for purposes of any such filing regarding
Pledgor, the Collateral, and any issuer of any of the Collateral, and ▇▇▇▇▇▇▇
shall disclose to Secured Party all material adverse information known by
Pledgor with respect to the operations of any issuer of any of the Collateral.
Section 3.14 Notification of Changes in Beneficial Ownership. Pledgor shall
promptly notify Secured Party of any sale of securities of the Corporation by
Pledgor or by any other Person and shall furnish promptly to Secured Party a
copy of any Form 144 filed in respect of any such sale. In addition, if Pledgor
or any other Person shall file with the SEC form or other document reporting any
change in the beneficial ownership of the stock of the Corporation, Pledgor
shall promptly furnish to Secured Party a copy of such form or document.
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Section 3.15 Restriction on Sales after Default. Pledgor shall not sell or
suffer or permit any Person to sell any shares of the same class of securities
as the Collateral at any time after any Event of Default or Potential Default
shall have occurred.
ARTICLE 4
Rights of Secured Party and Pledgor
Section 4.1 Power of Attorney. Pledgor hereby irrevocably constitutes and
appoints Secured Party and any officer or agent thereof as Pledgor's true and
lawful attorney-in-fact, coupled with an interest, with full power of
substitution and with full, irrevocable power and authority in the place and
stead and in the name of Pledgor or in its own name, from time to time in
Secured Party's discretion, to take any and all action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement and, without limiting the generality of the
foregoing, hereby gives Secured Party the power and right on behalf of Pledgor
and in its own name to do any of the following (subject to the rights of Pledgor
under SECTIONS 4.2 and 4.3 hereof), without notice to or the consent of Pledgor:
a. To demand, ▇▇▇ for, collect, or receive in the name of Pledgor or
in its own name, any money or property at any time payable or receivable on
account of or in exchange for any of the Collateral and, in connection
therewith, endorse checks, notes, drafts, acceptances, money orders, or any
other instruments for the payment of money under the Collateral;
b. To pay or discharge taxes, Liens, security interests, or other
encumbrances levied or placed on or threatened against the Collateral;
c. (i) To direct account debtors and any other parties liable for any
payment under any of the Collateral to make payment of any and all monies
due and to become due thereunder directly to Secured Party or as Secured
Party shall direct; (ii) to receive payment of and receipt for any and all
monies, claims, and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (iii) to sign and endorse any
drafts, assignments, proxies, stock powers, verifications, notices, and
other documents relating to the Collateral; (iv) to commence and prosecute
any suit, actions, or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any part thereof and to
enforce any other right in respect of any Collateral; (v) to defend any
suit, action, or proceeding brought against Pledgor with respect to any
Collateral; (vi) to settle, compromise, or adjust any suit, action, or
proceeding described above and, in connection therewith, to give such
discharges or releases as Secured Party may deem appropriate; (vii) to
exchange any of the Collateral for other property upon any merger,
consolidation, reorganization, recapitalization, or other readjustment of
the issuer thereof and, in connection therewith, deposit any of the
Collateral with any committee, depositary, transfer agent, registrar, or
other designated agency upon such terms as Secured Party may determine;
(viii) to add or release any guarantor, indorser, surety, or other party to
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any of the Collateral or the obligations; (ix) to renew, extend, or otherwise
change the terms and conditions of any of the Collateral or Obligations; (x) to
insure any of the Collateral; (xi) to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though Secured Party were the absolute owner thereof for all
purposes, and from time to time to do, at Secured Party's option and Pledgor's
expense, all acts and things which Secured Party deems necessary to protect,
preserve, or realize upon the Collateral and Secured Party's security interest
therein; and (xii) to complete, execute and file with the SEC one or more
notices of proposed sale of securities pursuant to Rule 144.
This power of attorney is a power coupled with an interest and shall be
irrevocable. Secured Party shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges, and options expressly or
implicitly granted to Secured Party in this Agreement and shall not be liable
for any failure to do so or any delay in doing so. Secured Party shall not be
liable for any act or omission or for any error of judgment or any mistake of
fact or law in its individual capacity or in its capacity as attorney-in-fact,
including without limitation any negligent acts or omissions by Secured Party,
except acts or omissions resulting from willful misconduct by Secured Party.
This power of attorney is conferred on Secured Party solely to protect,
preserve, and realize upon its security interest in the Collateral.
Section 4.2 Voting Rights. Unless and until an Event of Default shall have
occurred and be continuing, Pledgor shall be entitled to exercise any and all
voting rights pertaining to the Collateral or any part thereof for any purpose
not inconsistent with the terms of this Agreement or the Credit Agreement.
Secured Party shall execute and deliver to the Pledgor all such proxies and
other instruments as Pledgor may reasonably request for the purpose of enabling
Pledgor to exercise the voting rights which it is entitled to exercise pursuant
to this section.
Section 4.3 Dividends. Unless and until an Event of Default shall have
occurred and be continuing, Pledgor shall be entitled to receive and retain any
dividends on the Collateral paid in cash out of earned surplus to the extent and
only to the extent that such dividends are permitted by the Credit Agreement.
Section 4.4 Performance by Secured Party. If Pledgor fails to perform or
comply with any of its agreements contained herein, Secured Party itself may, at
its sole discretion, cause or attempt to cause performance or compliance with
such agreement and the expenses of Secured Party, together with interest thereon
at the maximum nonusurious per annum rate permitted by applicable law, shall be
payable by Pledgor to Secured Party on demand and shall constitute Obligations
secured by this Agreement. Notwithstanding the foregoing, it is expressly agreed
that Secured Party shall not have any liability or responsibility for the
performance of any obligation of Pledgor under this Agreement.
Section 4.5 Setoff; Property Held by Secured Party. Secured Party shall
have the right to set off and apply against the Obligations, at any time and
without notice to Pledgor, any and all deposits (general or special, time or
demand, provisional or final) or other sums at any time credited by or owing
from Secured Party to Pledgor whether or not the Obligations are then due. As
additional security for the Obligations, Pledgor hereby grants Secured Party a
security
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interest in all money, instruments, and other property of Pledgor now or
hereafter held by Secured Party, including, without limitation, property held in
safekeeping. In addition to Secured Party's right of setoff and as further
security for the Obligations, Pledgor hereby grants Secured Party a security
interest in all deposits (general or special, time or demand, provisional or
final) and other accounts of Pledgor now or hereafter maintained with Secured
Party and all other sums at any time credited by or owing from Secured Party to
Pledgor. The rights and remedies of Secured Party hereunder are in addition to
other rights and remedies (including without limitation other rights of setoff)
which Secured Party may have.
Section 4.6 Secured Party's Duty of Care. Other than the exercise of
reasonable care in the physical custody of the Collateral while held by Secured
Party hereunder, Secured Party shall have no responsibility for or obligation or
duty with respect to all or any part of the Collateral or any matter or
proceeding arising out of or relating thereto, including without limitation any
obligation or duty to collect any sums due in respect thereof or to protect or
preserve any rights against prior parties or any other rights pertaining
thereto, it being understood and agreed that Pledgor shall be responsible for
preservation of all rights in the Collateral. Without limiting the generality of
the foregoing, Secured Party shall be conclusively deemed to have exercised
reasonable care in the custody of the Collateral if Secured Party takes such
action, for purposes of preserving rights in the Collateral, as Pledgor may
reasonably request in writing, but no failure or omission or delay by Secured
Party in complying with any such request by Pledgor, and no refusal by Secured
Party to comply with any such request by Pledgor, shall be deemed to be a
failure to exercise reasonable care.
Section 4.7 Assignment by Secured Party. Secured Party may at any time and
from time to time assign the Obligations and the Collateral or any portion of
them, and the assignee shall be entitled to all of the rights and remedies of
Secured Party under this Agreement in relation thereto.
ARTICLE 5
Default
Section 5.1 Rights and Remedies. If any Event of Default shall occur,
Secured Party shall have the following rights and remedies:
a. In addition to all other rights and remedies granted to Secured
Party in this Agreement and in any other instrument or agreement securing,
evidencing, or relating to the Obligations, Secured Party shall have all of
the rights and remedies of a secured party under the Uniform Commercial
Code as adopted by the State of Texas. Without limiting the generality of
the foregoing, Secured Party may do any or all of the following: (i)
without demand or notice to Pledgor, collect, receive, or take possession
of the Collateral or any part thereof; (ii) sell or otherwise dispose of
the Collateral, or any part thereof, in one or more parcels at public or
private sale or sales, at Secured Party's offices or elsewhere, for cash,
on credit, or for future delivery; or (iii) bid and become a purchaser at
any sale free of any right or equity of redemption in ▇▇▇▇▇▇▇, which right
or equity is hereby expressly waived and released by
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Pledgor. Upon request by Secured Party, Pledgor shall assemble the
Collateral and make it available to Secured Party at any place designated
by Secured Party that is reasonably convenient to Pledgor and Secured
Party. Pledgor agrees that Secured Party shall not be obligated to give
more than five (5) days' written notice of the time and place of any public
sale or of the time after which any private sale may take place and that
such notice shall constitute reasonable notice of such matters. Secured
Party shall not be obligated to make any sale of the Collateral regardless
of notice of sale having been given. Secured Party may adjourn any public
or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. Pledgor shall be liable for
all expenses of retaking, holding, preparing for sale, or the like and all
attorneys' fees and other expenses incurred by Secured Party in connection
with the collection of the Obligations and the enforcement of Secured
Party's rights under this Agreement, all of which expenses and fees shall
constitute additional Obligations secured by this Agreement. Secured Party
may apply the Collateral against the Obligations in such order and manner
as Secured Party may elect in its sole discretion. Pledgor shall remain
liable for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay the Obligations. Pledgor waives all
rights of marshalling in respect of the Collateral and any and all other
collateral or security for the Obligations.
b. Secured Party may cause any or all of the Collateral held by it to
be transferred into the name of Secured Party or the name or names of
Secured Party's nominee or nominees.
c. Secured Party may collect or receive all money or property at any
time payable or receivable on account of or in exchange for any of the
Collateral, but shall be under no obligation to do so.
d. Secured Party shall have the right, but shall not be obligated, to
exercise or cause to be exercised all voting, consensual, and other powers
of ownership pertaining to the Collateral, and Pledgor shall deliver to
Secured Party, if requested by Secured Party, irrevocable proxies with
respect to the Collateral in form satisfactory to Secured Party.
e. Pledgor hereby acknowledges and confirms that Secured Party may be
unable to effect a public sale of any or all of the Collateral by reason of
certain prohibitions contained in the Securities Act of 1933, as amended,
and applicable state securities laws and may be compelled to resort to one
or more private sales thereof to a restricted group of purchasers who will
be obligated to agree, among other things, to acquire any shares of the
Collateral for their own respective accounts for investment and not with a
view to distribution or resale thereof. Pledgor further acknowledges and
confirms that any such private sale may result in prices or other terms
less favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall
be deemed to have been made in a commercially reasonable manner, and
Secured Party shall be under no obligation to take any steps in order to
permit the Collateral to be sold at a public sale. Secured Party shall be
under no obligation to delay a sale of any of the Collateral for any period
of time
Craftmade International, Inc.
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67
necessary to permit any issuer thereof to register such Collateral for
public sale under the Securities Act of 1933, as amended, or under
applicable state securities laws.
f. If Secured Party determines that it will sell all or part of the
Collateral pursuant to SECTION 5.1 hereof and if, in the opinion of Secured
Party it is necessary or advisable to have the Collateral, or that portion
thereof to be sold, registered under the Securities Act of 1933, as
amended, Pledgor will, at Pledgor's expense, cause each issuer of the
Collateral, or that portion thereof to be sold, to execute and deliver, and
cause the directors and officers of each such issuer to execute and deliver
all such instruments and documents and cause such issuer(s), directors, and
officers to do or cause to be done all such other acts and things as may be
necessary or, in Secured Party's opinion, advisable to register the
Collateral, or that portion thereof to be sold, under the Securities Act of
1933, as amended, and to cause the registration statement relating thereto
to become effective and to remain effective for a period of one year from
the date of the first public offering of the Collateral, or that portion
thereof to be sold, and to make all amendments thereto and to the related
prospectus that, in Secured Party's opinion, are necessary or advisable,
all in conformity with the requirements of the Securities Act of 1933, as
amended, and the rules and regulations of the SEC applicable thereto.
Pledgor agrees to cause each issuer of the Collateral, or that portion
thereof to be sold, to comply with Securities Act of 1933, as amended, and
the blue sky laws of any jurisdiction that Secured Party shall designate
and cause each such issuer to make available to its security holders, as
soon as practical, an earnings statement (which need not be audited) that
will satisfy the provisions of the Securities Act of 1933, as amended.
g. On any sale of the Collateral, Secured Party is hereby authorized
to comply with any limitation or restriction with which compliance is
necessary, in the view of Secured Party's counsel, in order to avoid any
violation of applicable law or in order to obtain any required approval of
the purchaser or purchasers by any applicable governmental authority.
ARTICLE 6
Miscellaneous
Section 6.1 Expenses; Indemnification. Pledgor agrees to pay on demand all
costs and expenses incurred by Secured Party in connection with the preparation,
negotiation, and execution of this Agreement and any and all amendments,
modifications, and supplements hereto. Pledgor agrees to pay and to hold Secured
Party harmless from and against all fees and all excise, sales, stamp, and other
taxes payable in connection with this Agreement or the transactions contemplated
hereby. Pledgor hereby indemnifies Secured Party and each affiliate thereof and
their respective officers, directors, employees, attorneys, and agents from and
holds each of them harmless against, any and all losses, liabilities, claims,
damages, penalties, judgments, costs, and expenses (including attorneys' fees)
to which any of them may become subject which directly or indirectly arise from
or relate to (i) the negotiation, execution, delivery, performance,
administration, or enforcement of this Agreement, (ii) any of the transactions
contemplated by this Agreement, (iii) any breach by Pledgor of any
representation, warranty, covenant, or other agreement contained in this
Agreement, or (iv) any investigation,
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68
litigation, or other proceeding, including without limitation any threatened
investigation, litigation, or other proceeding relating to any of the foregoing.
Without limiting any provision of this Agreement or any other instrument, or
agreement securing, evidencing, or relating to the Obligations or any part
thereof, it is the express intention of the parties hereto that each person or
entity to be indemnified under this section shall be indemnified from and held
harmless against any and all losses, liabilities, claims, damages, penalties,
judgments, costs, and expenses (including attorneys' fees) arising out of or
resulting from the sole or contributory negligence of the person or entity to be
indemnified.
Section 6.2 No Waiver; Cumulative Remedies. No failure on the part of
Secured Party to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power, or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege. The
rights and remedies provided for in this Agreement are cumulative and not
exclusive of any rights and remedies provided by law.
Section 6.3 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of Pledgor and Secured Party and their respective
heirs, successors, and assigns, except that Pledgor may not assign any of its
rights or obligations under this Agreement without the prior written consent of
Secured Party.
Section 6.4 AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT EMBODIES THE FINAL,
ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR
ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR
VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE
PARTIES HERETO. The provisions of this Agreement may be amended or waived only
by an instrument in writing signed by the parties hereto.
Section 6.5 Notices. All notices and other communications provided for in
this Agreement shall be given or made by telex, telegraph, telecopy, cable or in
writing and telexed, telecopied, telegraphed, cabled, mailed by certified mail
return receipt requested, or delivered to the intended recipient at the "Address
for Notices" specified below its name on the signature pages hereof; or as to
any party, at such other address as shall be designated by such party in a
notice to the other party given in accordance with this section. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telex or telecopy, subject to telephone
confirmation of receipt, or delivered to the telegraph or cable office, subject
to telephone confirmation of receipt, or when personally delivered or, in the
case of a mailed notice, when duly deposited in the mails, in each case given or
addressed as aforesaid.
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69
Section 6.6 Applicable Law; Venue; Service of Process. This Agreement shall
be governed by and construed in accordance with the laws of the State of Texas
and the applicable laws of the United States of America. This Agreement has been
entered into in Dallas County, Texas, and it shall be performable for all
purposes in Dallas County, Texas. Any action or proceeding against Pledgor under
or in connection with this Agreement or any other instrument or agreement
securing, evidencing, or relating to the Obligations or any part thereof may be
brought in any state or federal court in Dallas County, Texas. Pledgor hereby
irrevocably (i) submits to the nonexclusive jurisdiction of such courts and (ii)
waives any objection it may now or hereafter have as to the venue of any such
action or proceeding brought in such court or that such court is an inconvenient
forum. Pledgor agrees that service of process upon it may be made by certified
or registered mail, return receipt requested, at its address specified or
determined in accordance with the provisions of SECTION 6.5 of this Agreement.
Nothing in this Agreement or any other instrument or agreement securing,
evidencing, or relating to the Obligations or any part thereof shall affect the
right of Secured Party to serve process in any other manner permitted by law or
shall limit the right of Secured Party to bring any action or proceeding against
Pledgor or with respect to any of its property in courts in other jurisdictions.
Any action or proceeding by Pledgor against Secured Party shall be brought only
in a court located in Dallas County, Texas.
Section 6.7 Headings. The headings, captions, and arrangements used in this
Agreement are for convenience only and shall not affect the interpretation of
this Agreement.
Section 6.8 Survival. All representations and warranties made in this
Agreement shall survive the execution and delivery of this Agreement, and no
investigation by Secured Party shall affect the representations and warranties
of Pledgor herein or the right of Secured Party to rely upon them.
Section 6.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 6.10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 6.11 Construction. Pledgor and Secured Party acknowledge that each
of them has been afforded an opportunity to review this Agreement with legal
counsel of its own choice and that this Agreement shall be construed as if
jointly drafted by Pledgor and Secured Party.
Section 6.12 Obligations Absolute. The obligations of Pledgor under this
Agreement shall be absolute and unconditional and shall not be released,
discharged, reduced, or in any way impaired by any circumstance whatsoever,
including without limitation any amendment, modification, extension, or renewal
of this Agreement, the Obligations, or any document or
Craftmade International, Inc.
First Amended and Restated Credit Agreement
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70
instrument evidencing, securing, or otherwise relating to the Obligations, or
any release, subordination, or impairment of collateral, or any waiver, consent,
extension, indulgence, compromise, settlement, or other action or inaction in
respect of this Agreement, the Obligations, or any document or instrument
evidencing, securing, or otherwise relating to the Obligations, or any exercise
or failure to exercise any right, remedy, power, or privilege in respect of the
Obligations.
Section 6.13 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, PLEDGOR HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF SECURED PARTY IN THE
NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first written above.
PLEDGOR:
CRAFTMADE INTERNATIONAL, INC.
By:
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
DUROCRAFT INTERNATIONAL, INC.
By:
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
Address for Notices:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chief Financial Officer
Craftmade International, Inc.
First Amended and Restated Credit Agreement
13
71
SECURED PARTY:
NATIONSBANK OF TEXAS, N.A.
By:
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
P. O. Box 831000
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President
Craftmade International, Inc.
First Amended and Restated Credit Agreement
14
72
STOCK POWER
For full and adequate consideration received, DUROCRAFT INTERNATIONAL, INC.
("Seller"), a Texas corporation, hereby sells, assigns and transfers to
, ( ) shares of the common stock
of C/D/R Incorporated (the "Corporation"), a Delaware corporation, evidenced by
Certificate No. , now registered on the books of the Corporation in the
name of Seller. Seller hereby irrevocably constitutes and appoints
as Seller's attorney-in-fact coupled with an interest,
to transfer the aforesaid stock on the books of the Corporation.
DATED this day of March, 1993.
DUROCRAFT INTERNATIONAL, INC.
By:
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
STATE OF TEXAS )
)
COUNTY OF )
---------------- )
Before me, , a notary public, on this day
personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Executive Officer of Durocraft
International, Inc., a Texas corporation, known to me to be the person and
officer whose name is subscribed to the foregoing instrument, and acknowledged
to me that he executed the same on behalf of such corporation, in such capacity
and for the purposes and consideration therein expressed.
Given under my hand and seal of office this day of March, 1993.
(SEAL)
--------------------------------
Notary Public in and for
the State of Texas
My Commission Expires:
----------------------------------
Notary Public Printed or Typed Name
Craftmade International, Inc.
Pledge Agreement
73
STOCK POWER
For full and adequate consideration received, CRAFTMADE INTERNATIONAL, INC.
("Seller"), a Delaware corporation, hereby sells, assigns and transfers to
, ( ) shares of the common stock
of C/D/R Incorporated (the "Corporation"), a Delaware corporation, evidenced by
Certificate No. , now registered on the books of the Corporation in the
name of Seller. Seller hereby irrevocably constitutes and appoints
as Seller's attorney-in-fact coupled with an interest,
to transfer the aforesaid stock on the books of the Corporation.
DATED this day of March, 1993.
CRAFTMADE INTERNATIONAL, INC.
By:
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
STATE OF TEXAS )
)
COUNTY OF )
------------ )
Before me, , a notary public, on this day
personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Executive Officer of Craftmade
International, Inc., a Delaware corporation, known to me to be the person and
officer whose name is subscribed to the foregoing instrument, and acknowledged
to me that he executed the same on behalf of such corporation, in such capacity
and for the purposes and consideration therein expressed.
Given under my hand and seal of office this day of March, 1993.
(SEAL)
------------------------------------
Notary Public in and for
the State of Texas
My Commission Expires:
------------------------------------
Notary Public Printed or Typed Name
Craftmade International, Inc.
Pledge Agreement
74
CERTIFICATE OF CORPORATE OFFICERS
(Craftmade)
The undersigned hereby certifies that the undersigned is now, and at all
times mentioned herein has been, the duly elected, qualified, and acting
Secretary of CRAFTMADE INTERNATIONAL, INC. (the "Corporation"), a Delaware
corporation, and, as such officer, the undersigned has access to the records of
the Corporation, which records reflect that:
1. Resolutions. The Resolutions attached as EXHIBIT A hereto and
incorporated herein by reference constitute a true and correct copy of
resolutions which have been duly adopted by the board of directors of the
Corporation in compliance with, and not in contravention of, the articles of
incorporation and bylaws of the Corporation; none of such resolutions have been
repealed or modified in any respect, and all such resolutions are in full force
and effect as of the execution hereof.
2. Incumbency. The following named individuals are the duly elected,
qualified and acting officers of the Corporation, holding the offices set forth
opposite their respective names as of the date hereof, and the signatures set
opposite the respective names and titles of said officers are their true,
authentic signatures.
NAME TITLE SPECIMEN SIGNATURE
--------------------- ------------------------ -------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Chief Executive Officer
-------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Chief Financial Officer
-------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Secretary
-------------------------
3. Articles and Bylaws. The Articles of Incorporation and Bylaws of the
Corporation have not been repealed, terminated, amended, modified, supplemented
or replaced between January 11, 1993 and the execution hereof.
4. Shareholders. The shareholders of the Corporation and their respective
stock ownership positions have not changed between January 11, 1993 and the
execution hereof.
5. Corporate Standing, Taxes and Authority. The Corporation is a duly
organized and validly existing corporation in good standing under the laws of
the State of Delaware and is duly authorized and qualified to do business in the
State of Texas, and all taxes, assessments and franchise fees due of the
Corporation have been fully paid. The execution and delivery of the documents
described in the attached resolutions will not violate any provision of the
articles of incorporation and bylaws of the Corporation.
Craftmade International, Inc.
Certificate of Corporate Officers (Craftmade)
75
IN WITNESS WHEREOF, I have duly executed this Certificate to be effective
as of the 11th day of January, 1993.
SECRETARY:
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
I, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, hereby certify that I am now the duly elected,
qualified and acting President of the Corporation; that the person executing and
delivering the foregoing Certificate (herein so called) is the duly elected,
qualified and acting officer of the Corporation as indicated in the Certificate;
that the signature set forth above beside each person's name is each person's
correct signature; and that the certifications set forth above are true and
correct as of the date hereof.
PRESIDENT:
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
STATE OF TEXAS )
COUNTY OF )
------------ )
This instrument was acknowledged before me on March , 1993, by ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇.
(NOTARY STAMP)
------------------------------------
Notary Public, State of Texas
My Commission Expires:
------------------------------------
Printed Name
Craftmade International, Inc.
Certificate of Corporate Officers (Craftmade)
76
STATE OF TEXAS )
COUNTY OF )
--------------- )
This instrument was acknowledged before me on March , 1993, by ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇.
(NOTARY STAMP)
-----------------------------------
Notary Public, State of Texas
My Commission Expires:
-----------------------------------
Printed Name
Craftmade International, Inc.
Certificate of Corporate Officers (Craftmade)
77
EXHIBIT A
RESOLUTIONS
WHEREAS Craftmade International, Inc. (the "Corporation"), a Delaware
corporation, previously obtained a loan (the "Loan") from NationsBank of Texas,
N.A. ("Lender") in the maximum principal amount of Six Million and No/100
Dollars ($6,000,000.00);
WHEREAS it is proposed that the Corporation execute and deliver to Lender a
certain First Amended and Restated Credit Agreement (the "Restated Agreement")
modifying the Credit Agreement originally executed between the Corporation and
Lender with respect to the Loan and a certain Pledge Agreement pledging to
Lender all of the Stock of the Corporation in C/D/R Incorporated ("C/D/R"), a
Delaware corporation, together with any and all such other security agreements,
financing statements and other documents, instruments, agreements and further
assurances (collectively, the "Security Instruments") as may be necessary or
desirable to further secure the payment of the Loan and any other amounts
advanced by Lender to the Corporation;
WHEREAS the forms of the Restated Agreement, the Pledge Agreement and other
proposed Security Instruments to be executed by the Corporation have been
submitted and reviewed by the directors of the Corporation; and
WHEREAS the Board of Directors of the Corporation has determined that it is
in the best interest of the Corporation to obtain the modification of the Loan;
NOW, THEREFORE, IT IS RESOLVED that the execution and delivery of the
Restated Agreement, the Pledge Agreement and the other proposed Security
Instruments be, and is hereby, authorized and approved, and that the President
or any Vice President of the Corporation, each acting individually without
joinder of any other officer of the Corporation be, and each is hereby,
authorized, empowered and directed to execute for and on behalf and in the name
of the Corporation the Restated Agreement, the Pledge Agreement and all other
documents, instruments, agreements or further assurances, including without
limitation the Security Instruments, and any other writings necessary or
desirable to effect the modification of the Loan, with such changes in the
terms, conditions and provisions thereof as the officer executing the same
shall, in such officer's sole discretion, deem necessary or desirable and in the
best interest of the Corporation, such officer's signature being conclusive
evidence that such officer did so deem any such changes to be necessary or
desirable and in the best interest of the Corporation, and such officer's
signature shall be conclusive evidence of the Corporation's approval of the same
and of the binding effect of such writings on the Corporation; and
RESOLVED, FURTHER, that the President or any Vice President of the
Corporation, acting individually without joinder of any other officer of the
Corporation, be, and each is hereby, authorized, empowered and directed to
perform all acts and do all things which such officer, in such officer's sole
discretion, may deem necessary or desirable to effect the
Craftmade International, Inc.
Certificate of Corporate Officers (Craftmade)
78
modification of the Loan, with such modifications, amendments or further
guaranties, security agreements, financing statements, certificates and other
documents, instruments or agreements as such officer, in such officer's sole
discretion, may deem necessary or desirable and in the best interest of the
Corporation, such officer's taking of any such action for and on behalf and in
the name of the Corporation, or such officer's execution and delivery, for and
on behalf and in the name of the Corporation, of any such agreement, instrument
or document, to be conclusive evidence that such officer did so deem the same to
be necessary or desirable and in the best interest of the Corporation; and
RESOLVED, FURTHER, that the Secretary or any Assistant Secretary of the
Corporation be, and each is hereby, authorized, empowered and directed to
certify, seal and attest any documents which such officer may deem necessary or
appropriate to consummate the transactions contemplated by the Security
Instruments; but such certification, seal or attestation shall not be required
for the validity of the particular document; and
RESOLVED, FURTHER, that any and all transactions with Lender by any of the
officers, directors or representatives of the Corporation, for and on behalf and
in the name of the Corporation, prior to the adoption of the foregoing
resolutions, including without limitation the application for the modification
of the Loan and the negotiation of such modification and of the terms of the
Security Instruments, be, and are hereby, ratified, confirmed and approved in
all respects for all purposes; and
RESOLVED, FURTHER, that the foregoing powers and authorizations shall
continue in full force and effect until written notice of revocation has been
given to Lender and a receipt obtained therefor. All of the statements and
agreements contained herein are hereby reaffirmed and ratified as of the date of
execution and delivery hereof to Lender.
EXECUTED to be effective as of the 11th day of January, 1993, but actually
signed on March , 1993.
------------------------------------
Secretary
Craftmade International, Inc.
Certificate of Corporate Officers (Craftmade)
79
CERTIFICATE OF CORPORATE OFFICERS
(Durocraft)
The undersigned hereby certifies that the undersigned is now, and at all
times mentioned herein has been, the duly elected, qualified, and acting
Secretary of DUROCRAFT INTERNATIONAL, INC. (the "Corporation"), a Texas
corporation, and, as such officer, the undersigned has access to the records of
the Corporation, which records reflect that:
1. Resolutions. The Resolutions attached as EXHIBIT A hereto and
incorporated herein by reference constitute a true and correct copy of
resolutions which have been duly adopted by the board of directors of the
Corporation in compliance with, and not in contravention of, the articles of
incorporation and bylaws of the Corporation; none of such resolutions have been
repealed or modified in any respect, and all such resolutions are in full force
and effect as of the execution hereof.
2. Incumbency. The following named individuals are the duly elected,
qualified and acting officers of the Corporation, holding the offices set forth
opposite their respective names as of the date hereof, and the signatures set
opposite the respective names and titles of said officers are their true,
authentic signatures.
NAME TITLE SPECIMEN SIGNATURE
---------------------- ------------------------- ------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Chief Executive Officer
------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Chief Financial Officer
------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Secretary
------------------------
3. Articles and Bylaws. The Articles of Incorporation and Bylaws of the
Corporation have not been repealed, terminated, amended, modified, supplemented
or replaced between January 11, 1993 and the execution hereof.
4. Shareholders. The shareholders of the Corporation and their respective
stock ownership positions have not changed between January 11, 1993 and the
execution hereof.
5. Corporate Standing, Taxes and Authority. The Corporation is a duly
organized and validly existing corporation in good standing under the laws of
the State of Texas and is duly authorized and qualified to do business in the
State of Texas, and all taxes, assessments and franchise fees due of the
Corporation have been fully paid. The execution and delivery of the documents
described in the attached resolutions will not violate any provision of the
articles of incorporation and bylaws of the Corporation.
Craftmade International, Inc.
Certificate of Corporate Officers (Durocraft)
80
IN WITNESS WHEREOF, I have duly executed this Certificate to be effective
as of the 11th day of January, 1993.
SECRETARY:
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
I, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, hereby certify that I am now the duly elected,
qualified and acting President of the Corporation; that the person executing and
delivering the foregoing Certificate (herein so called) is the duly elected,
qualified and acting officer of the Corporation as indicated in the Certificate;
that the signature set forth above beside each person's name is each person's
correct signature; and that the certifications set forth above are true and
correct as of the date hereof.
PRESIDENT:
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
STATE OF TEXAS )
COUNTY OF )
----------------- )
This instrument was acknowledged before me on March , 1993, by ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇.
(NOTARY STAMP)
--------------------------------------
Notary Public, State of Texas
My Commission Expires:
--------------------------------------
Printed Name
Craftmade International, Inc.
Certificate of Corporate Officers (Durocraft)
81
STATE OF TEXAS )
COUNTY OF )
-------------- )
This instrument was acknowledged before me on March , 1993, by ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇.
(NOTARY STAMP)
------------------------------------
Notary Public, State of Texas
My Commission Expires:
------------------------------------
Printed Name
Craftmade International, Inc.
Certificate of Corporate Officers (Durocraft)
82
EXHIBIT A
RESOLUTIONS
WHEREAS Craftmade International, Inc. ("Borrower"), a Delaware corporation,
previously obtained a loan (the "Loan") from NationsBank of Texas, N.A.
("Lender") in the maximum principal amount of Six Million and No/100 Dollars
($6,000,000.00), and the payment and performance of the Loan and related
obligations were guaranteed by Durocraft International, Inc. (the "Corporation")
pursuant to a certain Guaranty Agreement executed and delivered to Lender by the
Corporation;
WHEREAS it is proposed that a First Amended and Restated Credit Agreement
be executed between Borrower and Lender in order to modify the Loan, and in
connection with such modification, it is further proposed that the Corporation
execute and deliver to Lender a certain Pledge Agreement pledging to Lender all
of the stock of the Corporation in C/D/R. Incorporated, a Delaware corporation,
and a certain Confirmation of Guaranty confirming that the original Guaranty
Agreement shall remain in full force and effect and shall not be terminated or
impaired by the modification of the Loan, together with any and all other
guaranties, security agreements, financing statements and other documents,
instruments, agreements and further assurances (collectively, the "Security
Instruments") as may be necessary or desirable to further secure the payment of
the Loan and any other amounts advanced by Lender to Borrower or the
Corporation;
WHEREAS the forms of the Pledge Agreement, the Confirmation of Guaranty and
other proposed Security Instruments to be executed by the Corporation have been
submitted and reviewed by the directors of the Corporation; and
WHEREAS the Board of Directors of the Corporation has determined that it is
in the best interest of the Corporation to facilitate the modification of the
Loan;
NOW, THEREFORE, IT IS RESOLVED that the execution and delivery of the
Pledge Agreement, the Confirmation of Guaranty and the other proposed Security
Instruments be, and is hereby, authorized and approved, and that the President
or any Vice President of the Corporation, each acting individually without
joinder of any other officer of the Corporation be, and each is hereby,
authorized, empowered and directed to execute for and on behalf and in the name
of the Corporation the Pledge Agreement, the Confirmation of Guaranty and all
other documents, instruments, agreements or further assurances, including
without limitation the Security Instruments, and any other writings necessary or
desirable to effect the modification of the Loan, with such changes in the
terms, conditions and provisions thereof as the officer executing the same
shall, in such officer's sole discretion, deem necessary or desirable and in the
best interest of the Corporation, such officer's signature being conclusive
evidence that such officer did so deem any such changes to be necessary or
desirable and in the best interest of the
Craftmade International, Inc.
Certificate of Corporate Officers (Durocraft)
83
Corporation, and such officer's signature shall be conclusive evidence of the
Corporation's approval of the same and of the binding effect of such writings on
the Corporation; and
RESOLVED, FURTHER, that the President or any Vice President of the
Corporation, acting individually without joinder of any other officer of the
Corporation, be, and each is hereby, authorized, empowered and directed to
perform all acts and do all things which such officer, in such officer's sole
discretion, may deem necessary or desirable to effect the modification of the
Loan, with such modifications, amendments or further guaranties, security
agreements, financing statements, certificates and other documents, instruments
or agreements as such officer, in such officer's sole discretion, may deem
necessary or desirable and in the best interest of the Corporation, such
officer's taking of any such action for and on behalf and in the name of the
Corporation, or such officer's execution and delivery, for and on behalf and in
the name of the Corporation, of any such agreement, instrument or document, to
be conclusive evidence that such officer did so deem the same to be necessary or
desirable and in the best interest of the Corporation; and
RESOLVED, FURTHER, that the Secretary or any Assistant Secretary of the
Corporation be, and each is hereby, authorized, empowered and directed to
certify, seal and attest any documents which such officer may deem necessary or
appropriate to consummate the transactions contemplated by the Security
Instruments; but such certification, seal or attestation shall not be required
for the validity of the particular document; and
RESOLVED, FURTHER, that any and all transactions with Lender by any of the
officers, directors or representatives of the Corporation, for and on behalf and
in the name of the Corporation, prior to the adoption of the foregoing
resolutions, including without limitation the application for the modification
of the Loan and the negotiation of such modification and of the terms of the
Security Instruments, be, and are hereby, ratified, confirmed and approved in
all respects for all purposes; and
RESOLVED, FURTHER, that the foregoing powers and authorizations shall
continue in full force and effect until written notice of revocation has been
given to Lender and a receipt obtained therefor. All of the statements and
agreements contained herein are hereby reaffirmed and ratified as of the date of
execution and delivery hereof to Lender.
EXECUTED to be effective as of the 11th day of January, 1993, but actually
signed on March , 1993.
------------------------------------
Secretary
Craftmade International, Inc.
Certificate of Corporate Officers (Durocraft)
84
CERTIFICATE OF CORPORATE OFFICERS
(C/D/R)
The undersigned hereby certifies that the undersigned is now, and at all
times mentioned herein has been, the duly elected, qualified, and acting
Secretary of C/D/R INCORPORATED (the "Corporation"), a Delaware corporation,
and, as such officer, the undersigned has access to the records of the
Corporation, which records reflect that:
1. Resolutions. The Resolutions attached as EXHIBIT A hereto and
incorporated herein by reference constitute a true and correct copy of
resolutions which have been duly adopted by the board of directors of the
Corporation in compliance with, and not in contravention of, the articles of
incorporation and bylaws of the Corporation; none of such resolutions have been
repealed or modified in any respect, and all such resolutions are in full force
and effect as of the execution hereof.
2. Incumbency. The following named individuals are the duly elected,
qualified and acting officers of the Corporation, holding the offices set forth
opposite their respective names as of the date hereof, and the signatures set
opposite the respective names and titles of said officers are their true,
authentic signatures.
NAME TITLE SPECIMEN SIGNATURE
--------------------- ----------- ----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ President
----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Secretary
----------------------------------
3. Articles and Bylaws. Attached hereto as EXHIBIT B is a true, correct and
complete copy of the bylaws of the Corporation.
4. Shareholders. All of the shareholders of the Corporation and their
respective stock ownership positions are as indicated on EXHIBIT C attached
hereto and incorporated herein by reference.
5. Corporate Standing, Taxes and Authority. The Corporation is a duly
organized and validly existing corporation in good standing under the laws of
the State of Delaware and is duly authorized and qualified to do business in the
State of Texas, and all taxes, assessments and franchise fees due of the
Corporation have been fully paid. The execution and delivery of the documents
described in the attached resolutions will not violate any provision of the
articles of incorporation and bylaws of the Corporation.
Craftmade International, Inc.
Certificate of Corporate Officers (C/D/R)
85
IN WITNESS WHEREOF, I have duly executed this Certificate to be effective
as of the 11th day of January, 1993.
SECRETARY:
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
I, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, hereby certify that I am now the duly elected,
qualified and acting President of the Corporation; that the person executing and
delivering the foregoing Certificate (herein so called) is the duly elected,
qualified and acting officer of the Corporation as indicated in the Certificate;
that the signature set forth above beside each person's name is each person's
correct signature; and that the certifications set forth above are true and
correct as of the date hereof.
PRESIDENT:
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
STATE OF DELAWARE )
COUNTY OF )
----------------- )
This instrument was acknowledged before me on March , 1993, by ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇.
(NOTARY STAMP) --------------------------------------------
Notary Public, State of Texas
My Commission Expires:
--------------------------------------------
Printed Name
Craftmade International, Inc.
Certificate of Corporate Officers (C/D/R)
86
STATE OF TEXAS )
COUNTY OF )
-------------- )
This instrument was acknowledged before me on March , 1993, by ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇.
(NOTARY STAMP) --------------------------------------------
Notary Public, State of Texas
My Commission Expires:
--------------------------------------------
Printed Name
Craftmade International, Inc.
Certificate of Corporate Officers (C/D/R)
87
EXHIBIT A
RESOLUTIONS
WHEREAS Craftmade International, Inc. ("Borrower"), a Delaware corporation,
previously obtained a loan (the "Loan") from NationsBank of Texas, N.A.
("Lender") in the maximum principal amount of Six Million and No/100 Dollars
($6,000,000.00);
WHEREAS it is proposed that a First Amended and Restated Credit Agreement
be executed between Borrower and Lender in order to modify the Loan, and in
connection with such modification, it is further proposed that C/D/R
Incorporated (the "Corporation"), a Delaware corporation, execute and deliver to
Lender a certain Guaranty Agreement guaranteeing the full payment and
performance of the Loan, together with any and all other guaranties, security
agreements, financing statements and other documents, instruments, agreements
and further assurances (collectively, the "Security Instruments") as may be
necessary or desirable to further secure the payment of the Loan and any other
amounts advanced by Lender to Borrower or the Corporation;
WHEREAS the forms of the Guaranty Agreement and other proposed Security
Instruments to be executed by the Corporation have been submitted and reviewed
by the directors of the Corporation; and
WHEREAS the Board of Directors of the Corporation has determined that it is
in the best interest of the Corporation to facilitate the modification of the
Loan;
NOW, THEREFORE, IT IS RESOLVED that the execution and delivery of the
Guaranty Agreement and the other proposed Security Instruments be, and is
hereby, authorized and approved, and that the President or any Vice President of
the Corporation, each acting individually without joinder of any other officer
of the Corporation be, and each is hereby, authorized, empowered and directed to
execute for and on behalf and in the name of the Corporation the Guaranty
Agreement and all other documents, instruments, agreements or further
assurances, including without limitation the Security Instruments, and any other
writings necessary or desirable to effect the modification of the Loan, with
such changes in the terms, conditions and provisions thereof as the officer
executing the same shall, in such officer's sole discretion, deem necessary or
desirable and in the best interest of the Corporation, such officer's signature
being conclusive evidence that such officer did so deem any such changes to be
necessary or desirable and in the best interest of the Corporation, and such
officer's signature shall be conclusive evidence of the Corporation's approval
of the same and of the binding effect of such writings on the Corporation; and
RESOLVED, FURTHER, that the President or any Vice President of the
Corporation, acting individually without joinder of any other officer of the
Corporation, be, and each is hereby, authorized, empowered and directed to
perform all acts and do all things which such
Craftmade International, Inc.
Certificate of Corporate Officers (C/D/R)
88
officer, in such officer's sole discretion, may deem necessary or desirable to
effect the modification of the Loan, with such modifications, amendments or
further guaranties, security agreements, financing statements, certificates and
other documents, instruments or agreements as such officer, in such officer's
sole discretion, may deem necessary or desirable and in the best interest of the
Corporation, such officer's taking of any such action for and on behalf and in
the name of the Corporation, or such officer's execution and delivery, for and
on behalf and in the name of the Corporation, of any such agreement, instrument
or document, to be conclusive evidence that such officer did so deem the same to
be necessary or desirable and in the best interest of the Corporation; and
RESOLVED, FURTHER, that the Secretary or any Assistant Secretary of the
Corporation be, and each is hereby, authorized, empowered and directed to
certify, seal and attest any documents which such officer may deem necessary or
appropriate to consummate the transactions contemplated by the Security
Instruments; but such certification, seal or attestation shall not be required
for the validity of the particular document; and
RESOLVED, FURTHER, that any and all transactions with Lender by any of the
officers, directors or representatives of the Corporation, for and on behalf and
in the name of the Corporation, prior to the adoption of the foregoing
resolutions, including without limitation the application for the modification
of the Loan and the negotiation of such modification and of the terms of the
Guaranty Agreement and other Security Instruments, be, and are hereby, ratified,
confirmed and approved in all respects for all purposes; and
RESOLVED, FURTHER, that the foregoing powers and authorizations shall
continue in full force and effect until written notice of revocation has been
given to Lender and a receipt obtained therefor. All of the statements and
agreements contained herein are hereby reaffirmed and ratified as of the date of
execution and delivery hereof to Lender.
EXECUTED to be effective as of the 11th day of January, 1993, but actually
signed on March, 1993.
Secretary
Craftmade International, Inc.
Certificate of Corporate Officers
(C/D/R)
89
EXHIBIT B
Bylaws
Craftmade International, Inc.
Certificate of Corporate Officers (C/D/R)
90
EXHIBIT C
Shareholders and Ownership Positions
Shareholder Percentage Ownership
------------------------------------------ --------------------
Craftmade International, Inc. 95%
Durocraft International. Inc. 5%
Craftmade International, Inc.
Certificate of Corporate Officers (C/D/R)
91
--------------------------------------------------------------------------------
CREDIT AGREEMENT
between
CRAFTMADE INTERNATIONAL, INC.
as Borrower
and
NATIONSBANK OF TEXAS, N.A.
as Lender
--------------------------------------------------------------------------------
92
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 -- Definitions.................................................................. 1
Section 1.1 Definitions........................................................... 1
Section 1.2 Other Definitional Provisions......................................... 9
ARTICLE 2 -- Advances..................................................................... 10
Section 2.1 Advances.............................................................. 10
Section 2.2 The Note.............................................................. 10
Section 2.3 Repayment of Advances................................................. 10
Section 2.4 Interest.............................................................. 10
Section 2.5 Requests for Advances................................................. 10
Section 2.6 Use of Proceeds....................................................... 11
Section 2.7 Commitment Fee; Reduction or Termination of Commitment................ 11
ARTICLE 3 -- Payments, Conversions and Continuations...................................... 11
Section 3.1 Method of Payment..................................................... 11
Section 3.2 Voluntary Prepayment.................................................. 12
Section 3.3 Mandatory Prepayment.................................................. 12
Section 3.4 Computation of Interest and Fees...................................... 12
Section 3.5 Conversions and Continuations......................................... 12
ARTICLE 4 -- Yield Protection and Illegality.............................................. 13
Section 4.1 Additional Costs...................................................... 13
Section 4.2 Limitation on Types of Advances....................................... 13
Section 4.3 Substitute Prime Rate Advances........................................ 14
Section 4.4 Compensation.......................................................... 14
Section 4.5 Capital Adequacy...................................................... 14
ARTICLE 5 -- Conditions Precedent......................................................... 15
Section 5.1 Initial Advance....................................................... 15
Section 5.2 All Advances.......................................................... 17
ARTICLE 6 -- Representations and Warranties............................................... 17
Section 6.1 Corporate Existence................................................... 17
Section 6.2 Financial Statements.................................................. 17
Section 6.3 Corporate Action; No Breach........................................... 18
i
93
Section 6.4 Operation of Business................................................. 18
Section 6.5 Litigation and Judgments.............................................. 18
Section 6.6 Rights in Properties; Liens........................................... 18
Section 6.7 Enforceability........................................................ 18
Section 6.8 Approvals............................................................. 18
Section 6.9 Debt.................................................................. 19
Section 6.10 Taxes................................................................. 19
Section 6.11 Use of Proceeds; Margin Securities.................................... 19
Section 6.12 ERISA................................................................. 19
Section 6.13 Disclosure............................................................ 19
Section 6.14 Subsidiaries.......................................................... 19
Section 6.15 Compliance with Laws.................................................. 19
Section 6.16 Environmental Matters................................................. 20
Section 6.17 Current Locations..................................................... 20
Section 6.18 Security Interest and Liens........................................... 21
Section 6.19 Corporate Name........................................................ 21
ARTICLE 7 -- Positive Covenants........................................................... 21
Section 7.1 Reporting Requirements................................................ 21
Section 7.2 Maintenance of Existence; Conduct of Business......................... 23
Section 7.3 Maintenance of Properties............................................. 23
Section 7.4 Taxes and Claims...................................................... 23
Section 7.5 Insurance............................................................. 24
Section 7.6 Inspection Rights..................................................... 24
Section 7.7 Keeping Books and Records............................................. 24
Section 7.8 Compliance with Laws.................................................. 24
Section 7.9 Compliance with Agreements............................................ 24
Section 7.10 Further Assurances.................................................... 24
Section 7.11 ERISA................................................................. 24
ARTICLE 8 -- Negative Covenants........................................................... 25
Section 8.1 Debt.................................................................. 25
Section 8.2 Limitation on Liens................................................... 25
Section 8.3 Mergers, Acquisitions and Dissolutions................................ 26
Section 8.4 Restricted Payments................................................... 26
Section 8.5 Loans and Investments................................................. 26
Section 8.6 Transactions With Affiliates.......................................... 26
Section 8.7 Disposition of Assets................................................. 26
Section 8.8 Prepayment of Debt.................................................... 27
Section 8.9 Nature of Business.................................................... 27
Section 8.10 Compliance with Environmental Laws.................................... 27
Section 8.11 Accounting............................................................ 27
ii
94
ARTICLE 9 -- Financial Covenants.......................................................... 27
Section 9.1 Current Ratio......................................................... 27
Section 9.2 Consolidated Tangible Net Worth....................................... 27
Section 9.3 Fixed Charge Coverage Ratio........................................... 27
Section 9.4 Leverage Ratio........................................................ 27
Section 9.5 Capital Expenditures.................................................. 27
ARTICLE 10 -- Default..................................................................... 28
Section 10.1 Events of Default..................................................... 28
Section 10.2 Remedies Upon Default................................................. 29
Section 10.3 Performance by Lender................................................. 30
Section 10.4 Setoff................................................................ 30
ARTICLE 11 -- Miscellaneous............................................................... 30
Section 11.1 Expenses of Lender.................................................... 30
Section 11.2 Indemnification....................................................... 31
Section 11.3 Limitation of Liability............................................... 31
Section 11.4 Lender Not Fiduciary.................................................. 31
Section 11.5 No Waiver; Cumulative Remedies........................................ 32
Section 11.6 Successors and Assigns................................................ 32
Section 11.7 Survival.............................................................. 32
Section 11.8 ENTIRE AGREEMENT; AGREEMENT AND RESTATEMENT OF TEXAS COMMERCE
BANK-ARLINGTON, N.A. DOCUMENTS; AMENDMENT............................. 32
Section 11.9 Maximum Interest Rate................................................. 32
Section 11.10 Notices............................................................... 33
Section 11.11 Applicable Law; Venue; Service of Process............................. 33
Section 11.12 Counterparts.......................................................... 34
Section 11.13 Severability.......................................................... 34
Section 11.14 Headings.............................................................. 34
Section 11.15 Non-Application of Chapter 15 of Texas Credit Code.................... 34
Section 11.16 Participations........................................................ 34
Section 11.17 WAIVER OF JURY TRIAL.................................................. 34
iii
95
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (the "Agreement"), dated as of December , 1992, is
between CRAFTMADE INTERNATIONAL, INC., a Delaware corporation ("Borrower"), and
NATIONSBANK OF TEXAS, N.A., a national banking association ("Lender").
RECITALS:
Borrower has requested Lender to extend credit to Borrower in the form of
revolving credit advances not to exceed an aggregate principal amount of Six
Million Dollars ($6,000,000.00) at any time outstanding. Lender is willing to
make such extensions of credit to Borrower upon the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. As used in this Agreement, the following terms
have the following meanings:
"Accounts Receivable Aging Report" means a report, in form
satisfactory to Lender, showing all current accounts receivable of Borrower
and all other accounts receivable of Borrower aged in intervals of thirty,
sixty, ninety and ninety-one days or more past due.
"Additional Costs" has the meaning specified in Section 4.1.
"Adjusted CD Rate" means, for any CD Advance for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) determined by Lender to be equal to the sum of (a) the CD Rate
for such CD Advance for such Interest Period divided by 1 minus the Reserve
Requirement for such CD Advance for such Interest Period plus (b)the
Assessment Rate in effect at the commencement of such Interest Period.
"Advance" means an advance of funds by Lender to Borrower pursuant to
Article 2.
"Advance Request Form" means a certificate, in substantially the form
of Exhibit "B" hereto, properly completed and signed by Borrower requesting
an Advance.
CREDIT AGREEMENT - Page 1
96
"Affiliate" means, as to any Person, any other Person (a) that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person; (b) that
directly or indirectly beneficially owns or holds five percent (5%) or more
of any class of voting stock of such Person; or (c) five percent (5%) or
more of the voting stock of which is directly or indirectly beneficially
owned or held by the Person in question. The term "control" means the
possession, directly or indirectly, of the power to direct or cause
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise; provided,
however, in no event shall Lender be deemed an Affiliate of Borrower or any
of its Subsidiaries.
"Applicable Rate" means (a) during the period that an Advance is a
Prime Rate Advance, the Prime Rate plus one-quarter of one percent (.25%)
and (b) during the period that an Advance is a CD Advance, the greater of
(i) the Adjusted CD Rate plus two and one-half of one percent (2.5%) or
(ii) the Prime Rate plus one-quarter of one percent (.25%) as the Prime
Rate is calculated as of the first day of the applicable Interest Period.
"Assessment Rate" means, at any time, the rate (rounded upwards, if
necessary, to the nearest 1/16 of 1%) then charged by the Federal Deposit
Insurance Corporation (or any successor) to Lender for deposit insurance
for Dollar time deposits with Lender as determined by Lender.
"Assignment of Life Insurance" means an Assignment of Life Insurance
Policy as Collateral duly executed by Borrower in favor of Lender,
substantially in the form of Exhibit "F" hereto, as the same may be
supplemented, amended or otherwise modified from time to time.
"Borrowing Base" means, at any particular time, an amount equal to the
sum of (a) eighty percent (80%) of Eligible Accounts, plus (b) fifty
percent (50%) of Eligible Inventory.
"Borrowing Base Report" means a report, substantially in the form of
Exhibit "C" hereto, properly completed and executed by an authorized
officer of Borrower.
"Business Day" means any day on which commercial banks are not
authorized or required to close in Dallas, Texas.
"Capital Lease Obligation" means Debt represented by obligations under
any lease of real or personal property that is required to be capitalized
for financial reporting purposes in accordance with GAAP, and the amount of
such Debt shall be the capitalized amount of such obligations determined in
accordance with GAAP.
CREDIT AGREEMENT - Page 2
97
"CD Advances" means Advances the interest rates on which are either
determined with reference to the rates referred to in the definition of
"Adjusted CD Rate" in this Section 1.1 or are otherwise fixed for specified
periods of time.
"CD Rate" means, for any CD Advance for any Interest Period therefor,
the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) determined by Lender on the first day of such Interest Period to be
offered on certificates of deposit having a term comparable to such
Interest Period and in an amount comparable to the principal amount of the
CD Advance to which such Interest Period relates.
"Change of Management" means the failure of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to
continue to perform his current or similar duties.
"Change of Ownership" means the ownership, legally and beneficially,
by any Person of fifty-one percent (51%) or more of the capital stock of
Borrower.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"Collateral" has the meaning specified in the Security Agreement and
the Guarantor Security Agreement.
"Commitment" means the obligation of Lender to make Advances hereunder
in an aggregate principal amount at any time outstanding up to but not
exceeding Six Million Dollars ($6,000,000.00), as such amount may be
reduced pursuant to Section 2.7 or otherwise.
"Consolidated Current Assets" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as current assets
on a consolidated balance sheet of Borrower and the Subsidiaries.
"Consolidated Current Liabilities" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as current
liabilities on a consolidated balance sheet of Borrower and the
Subsidiaries.
"Consolidated Liabilities" means, at any particular time, all amounts
which, in conformity with GAAP, would be included as liabilities on a
consolidated balance sheet of Borrower and the Subsidiaries.
"Consolidated Tangible Net Worth" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as stockholders'
equity on a consolidated balance sheet of Borrower and the Subsidiaries;
provided, however, there shall be excluded therefrom: (a) any amount at
which shares of capital stock of Borrower appear as an asset on Borrower's
balance sheet, (b) goodwill, including any amounts, however designated,
that represent the excess of the purchase price paid for assets or
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stock over the value assigned thereto, (c) patents, trademarks, trade
names, and copyrights, (d) deferred expenses, (e) loans and advances to any
stockholder, director, officer, or employee of Borrower or any Subsidiary
or any Affiliate, and (f) all other assets which are properly classified as
intangible assets.
"Continue", "Continuation" and "Continued" shall refer to the
continuation pursuant to Section 3.5 of a CD Advance as a CD Advance from
one Interest Period to the next Interest Period.
"Convert", "Conversion" and "Converted" shall refer to a conversion
pursuant to Section 3.5 or Article 4 of one Type of Advance into another
Type of Advance.
"Current Ratio" means, at any particular time, the ratio of
Consolidated Current Assets to Consolidated Current Liabilities.
"Debt" means as to any Person at any time (without duplication): (a)
all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, notes, debentures, or other similar
instruments, (c) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable of
such Person arising in the ordinary course of business which are not past
due by more than ninety (90) days unless such trade accounts payable are
being contested in good faith by appropriate proceedings, (d) all
obligations of such Person under any lease which, in conformity with GAAP,
is required to be capitalized for balance sheet purposes, (e) all
obligations of such Person under guaranties, endorsements (other than for
collection or deposit in the ordinary course of business), assumptions or
other contingent obligations, in respect of, or to purchase or otherwise
acquire, any obligation or indebtedness of any other Person, or any other
obligation, contingent or otherwise, of such Person directly or indirectly
protecting the holder of any obligation or indebtedness of any other Person
against loss (whether by partnership arrangements, agreements to keep-well,
to purchase assets, goods, securities, or services, to take-or-pay or
otherwise), (f) all obligations secured by a Lien existing on property
owned by such Person, whether or not the obligations secured thereby have
been assumed by such Person or are non-recourse to the credit of such
Person, (g) all reimbursement obligations of such Person (whether
contingent or otherwise) in respect of letters of credit, bankers'
acceptances, surety or other bonds and similar instruments and (h) all
liabilities of such Person in respect of unfunded vested benefits under any
Plan.
"Default Rate" means the Maximum Rate or, if no Maximum Rate exists,
the sum of the Prime Rate in effect from day to day plus four percent (4%).
"Dollars" and "$" mean lawful money of the United States of America.
"Eligible Accounts" means the aggregate of all accounts receivable of
Borrower that are acceptable to Lender in its sole discretion and satisfy
the following conditions: (a) have been outstanding less than sixty (60)
days past the due date thereof; (b) have
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arisen in the ordinary course of business; (c) represent complete bona fide
transactions which require no further act under any circumstances on the
part of Borrower to make such accounts receivable payable by the account
debtor; (d) the goods of sale which gave rise to such accounts receivable
have been shipped or delivered to the account debtor on an absolute sale
basis and not on consignment, a sale or return basis, a guaranteed sale
basis, a ▇▇▇▇ and hold basis, or on the basis of any similar understanding;
(e) the goods of sale which gave rise to such accounts receivable were not,
at the time of sale thereof, subject to any Lien, except as permitted by
Section 8.2; (f) are not subject to any provision prohibiting assignment or
requiring notice of or consent to such assignment; (g) are subject to a
perfected, first priority security interest in favor of Lender and are not
subject to any other Lien except as permitted by Section 8.2; (h) are not
subject to setoff, counterclaim, defense, allowance, dispute, or adjustment
other than normal discounts for prompt payment, and the goods of sale which
gave rise to such accounts receivable have not been returned, rejected,
repossessed, lost, or damaged; (i) the account debtor is not insolvent or
the subject of any bankruptcy or insolvency proceeding and has not made an
assignment for the benefit of creditors, suspended normal business
operations, dissolved, liquidated, terminated its existence, ceased to pay
its debts as they become due, or suffered a receiver or trustee to be
appointed for any of its assets or affairs; (j) are not evidenced by
chattel paper or an instrument of any kind; (k) are owed by a Person or
Persons that are citizens of or organized under the laws of the United
States or any State and are not owed by any Person located outside of the
United States of America; (l) if any accounts receivable are owed by the
United States of America or any department, agency, or instrumentality
thereof, the Federal Assignment of Claims Act shall have been complied
with; and (m) are not owed by an Affiliate of Borrower. The amount of any
Eligible Accounts owed by an account debtor to Borrower shall be reduced by
the amount of all "contra accounts" and other obligations owed by Borrower
to such account debtor.
"Eligible Inventory" means, at any time, all inventory of finished
goods and unassembled lamp parts then owned by (and in the possession or
under the control of) Borrower and held for sale or disposition in the
ordinary course of Borrower's business, in which Lender has a perfected,
first priority security interest, valued at the lower of actual cost or
fair market value. Eligible Inventory shall not include (a) inventory that
has been shipped or delivered to a customer on consignment, a sale or
return basis, or on the basis of any similar understanding, (b) inventory
with respect to which a claim exists disputing Borrower's title to or right
to possession of such inventory, (c) inventory that is not in good
condition or does not comply with any applicable laws, rules, or
regulations or the standards imposed by any governmental authority with
respect to its manufacture, use, or sale, and (d) inventory that Lender, in
its sole discretion, has determined to be unmarketable.
"Environmental Laws" means any and all federal, state, and local laws,
regulations, and requirements pertaining to health, safety, or the
environment, as such laws, regulations, and requirements may be amended or
supplemented from time to time.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published
interpretations thereunder.
"Event of Default" has the meaning specified in Section 10.1.
"Fixed Charge Coverage Ratio" means, with respect to Borrower and the
Subsidiaries on a consolidated basis for the most recently completed four
quarter period preceding the date of determination, a ratio of (a) Pretax
Income for such period plus interest expense for such period plus Operating
Lease expense for such period to (b) interest expense for such period plus
Operating Lease expense for such period.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or in
statements of the Financial Accounting Standards Board and/or their
respective successors and which are applicable in the circumstances as of
the date in question. Accounting principles are applied on a "consistent
basis" when the accounting principles observed in a current period are
comparable in all material respects to those accounting principles applied
in a preceding period.
"Guarantor" means Durocraft International, Inc., a Texas corporation.
"Guarantor Security Agreement" means the Security Agreement of
Guarantor in favor of Lender in substantially the form of Exhibit "G"
hereto, as the same may be amended, supplemented or otherwise modified from
time to time.
"Guaranty" means the guaranty of Guarantor in favor of Lender, in
substantially the form of Exhibit "E" hereto, as the same may be amended,
supplemented, or otherwise modified from time to time.
"Hazardous Substance" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or addressed under any Environmental Law,
including, without limitation, asbestos, petroleum, and polychlormated
biphenyls.
"Interest Period" means, with respect to any CD Advances, each period
commencing on the date such CD Advances are made or Converted from Prime
Rate Advances or, in the case of each subsequent, successive Interest
Period applicable to a CD Advance, the last day of the next preceding
Interest Period with respect to such Advance, and ending on the day 30, 60,
90 or 180 days thereafter, as Borrower may select as provided in Section
2.5 or 3.5 hereof. Notwithstanding the foregoing: (a) each Interest Period
which would otherwise end on a day which is not a Business Day shall end on
the next succeeding Business Day; (b) any Interest Period which would
otherwise extend beyond the Termination Date shall end on the Termination
Date; (c) no more than three (3) Interest Periods for CD Advances shall be
in effect at the same time; (d) no
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Interest Period shall have a duration of less than thirty (30) days and, if
the Interest Period for any CD Advances would otherwise be a shorter
period, such Advances shall not be available hereunder; and (e) no Interest
Period may extend beyond a principal repayment date unless, after giving
effect thereto, the aggregate principal amount of the CD Advances having
Interest Periods that end after such principal payment date shall be equal
to or less than the Advances to be outstanding hereunder after such
principal repayment date.
"Leverage Ratio" means, at any particular time, the ratio of Debt to
Consolidated Tangible Net Worth.
"Lien" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment, preference,
priority, or other encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or title retention agreement),
whether arising by contract, operation of law, or otherwise.
"Loan Documents" means this Agreement and all promissory notes,
security agreements, pledge agreements, deeds of trust, assignments,
letters of credit, applications for letters of credit, guaranties, and
other instruments, agreements and documentation executed and delivered
pursuant to or in connection with this Agreement, as such instruments,
agreements and documentation may be amended, modified, renewed, extended,
or supplemented from time to time.
"Maximum Rate" means the maximum rate of nonusurious interest
permitted from day to day by applicable law, including as to Article
5069-1.04, Vernon's Texas Civil Statutes (and as the same may be
incorporated by reference in other Texas statutes), but otherwise without
limitation, that rate based upon the "indicated rate ceiling" and
calculated after taking into account any and all relevant fees, payments,
and other charges in respect of the Loan Documents which are deemed to be
interest under applicable law.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by Borrower or
any Subsidiary and which is covered by Title IV of ERISA.
"Net Income" means, for any period, the consolidated net income of
Borrower and the Subsidiaries for such period as determined in accordance
with GAAP.
"Note" means the promissory note of Borrower payable to the order of
Lender, in substantially the form of Exhibit "A" hereto, and all
extensions, renewals, and modifications thereof.
"Obligated Party" means the Guarantor or any other Person who is or
becomes party to any agreement that guarantees or secures payment and
performance of the Obligations or any part thereof.
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"Obligations" means all obligations, indebtedness, and liabilities of
Borrower to Lender, now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several, including, without limitation, the
obligations, indebtedness, and liabilities of Borrower under this Agreement
and the other Loan Documents (including, without limitation, all of
Borrower's contingent reimbursement obligations in respect of letters of
credit), and all interest accruing thereon and all attorneys' fees and
other expenses incurred in the enforcement or collection thereof.
"Operating Lease" means any lease (other than a lease constituting a
Capital Lease Obligation) of real or personal property.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Person" means any individual, corporation, business trust,
association, company, partnership, joint venture, governmental authority,
or other entity.
"Plan" means any employee benefit or other plan established or
maintained by Borrower or any ERISA Affiliate and which is covered by Title
IV of ERISA.
"Potential Default" means any condition or event which, after notice
or lapse of time or both, would constitute an Event of Default.
"Pretax Income" means, for any period, Net Income for such period plus
(but only to the extent deducted in the determination of Net Income) tax
expense for such period.
"Prime Rate" means, at any time, the rate of interest per annum then
most recently established by Lender as its prime rate. The Prime Rate is a
reference rate set by Lender after taking into account such factors as it
may deem appropriate and does not necessarily represent the lowest or best
rate actually charged to any customer. The Prime Rate may not correspond
with future increases or decreases in interest rates charged by other
lenders or market rates in general and Lender may make various commercial
or other loans at rates of interest having no relationship to such rate.
"Prime Rate Advance" means Advances that bear interest at rates based
upon the Prime Rate.
"Prohibited Transaction" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Code.
"Regulatory Change" means, with respect to Lender, any change after
the date of this Agreement in United States federal, state, or foreign laws
or regulations (including Regulation D) or the adoption or making after
such date of any interpretations,
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directives, or requests applying to a class of banks including Lender of or
under any United States federal or state, or any foreign, laws or
regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time
to time.
"Reportable Event" means any of the events set forth in Section 4043
of ERISA.
"Reserve Requirement" means, for any CD Advance for any Interest
Period therefor, the average maximum rate at which reserves (including any
marginal, supplemental or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against non-personal Dollar time deposits in an amount of $100,000
or more. Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by
such member banks by reason of any Regulatory Change against (a) any
category of liabilities which includes deposits by reference to which the
Adjusted CD Rate is to be determined or (b) any category of extensions of
credit or other assets which include CD Advances.
"RICO" means the Racketeer Influenced and Corrupt Organization Act of
1970, as amended from time to time.
"Security Agreement" means the Security Agreement of Borrower in favor
of Lender in substantially the form of Exhibit "D" hereto, as the same may
be amended, supplemented or otherwise modified from time to time.
"Subsidiary" means any corporation of which more than fifty percent
(50%) of the issued and outstanding securities having ordinary voting power
for the election of a majority of directors is owned or controlled,
directly or indirectly, by Borrower, by Borrower and one or more other
Subsidiaries, or by one or more other Subsidiaries.
"Termination Date" means 11:00 a.m. Dallas, Texas time on November 15,
1994, or such earlier date and time on which the Commitment terminates as
provided in this Agreement.
"Type" means any type of Advance (i.e., Prime Rate Advance or CD
Advance).
Section 1.2 Other Definitional Provisions. All definitions contained in
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof", "herein", and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Unless otherwise
specified, all Article and Section references pertain to this Agreement. All
CREDIT AGREEMENT - Page 9
104
accounting terms not specifically defined herein shall be construed in
accordance with GAAP. Terms used herein that are defined in the Uniform
Commercial Code as adopted by the State of Texas, unless otherwise defined
herein, shall have the meanings specified in the Uniform Commercial Code as
adopted by the State of Texas.
ARTICLE 2
Advances
Section 2.1 Advances. Subject to the terms and conditions of this
Agreement, Lender agrees to make one or more Advances to Borrower from time to
time from the date hereof to and including the Termination Date, provided that
(a) the aggregate outstanding amount of all Advances shall not at any time
exceed the lesser of the Commitment or the Borrowing Base and (b) the
outstanding Advances supported only by the Eligible Inventory component of the
Borrowing Base shall not at any time exceed fifty percent (50%) of the aggregate
outstanding amount of all Advances. Subject to the foregoing limitations, and
the other terms and provisions of this Agreement, Borrower may borrow, repay,
and reborrow hereunder.
Section 2.2 The Note. The obligation of Borrower to repay the Advances
shall be evidenced by the Note executed by Borrower, payable to the order of
Lender, in the principal amount of the Commitment as originally in effect and
dated the date hereof.
Section 2.3 Repayment of Advances. Borrower shall repay the unpaid
principal amount of all Advances outstanding under the Note on the Termination
Date.
Section 2.4 Interest. The unpaid principal amount of the Advances shall
bear interest prior to maturity at a varying rate per annum equal from day to
day to the lesser of (a) the Maximum Rate or (b) the Applicable Rate, each such
change in the rate of interest charged on the Advances to become effective,
without notice to Borrower, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the rate of interest specified in clause (b) preceding shall exceed
the Maximum Rate, thereby causing the interest on the Advances to be Limited to
the Maximum Rate, then any subsequent reduction in the Applicable Rate shall not
reduce the rate of interest on the Advances below the Maximum Rate until such
time as the aggregate amount of interest accrued on the Advances equals the
aggregate amount of interest which would have accrued on the Advances if the
interest rate specified in clause (b) preceding had at all times been in effect.
Accrued and unpaid interest on the Advances shall be payable on the last
Business Day of each month, commencing on January 29, 1993, and on the
Termination Date. All past due principal and interest shall bear interest at the
Default Rate.
Section 2.5 Requests for Advances. Borrower shall give Lender notice by
means of an Advance Request Form of each requested Advance, at least three (3)
Business Days before the requested date of each CD Advance and by 12:00 p.m.
(Dallas, Texas time) on the requested date of each Prime Rate Advance
specifying: (a) the requested date of such Advance (which shall be a Business
Day), (b) the amount of such Advance, (c) the Type of the Advance and
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(d) in the case of a CD Advance, the duration of the Interest Period for such
Advance. Lender at its option may accept telephonic requests for Advances,
provided that such acceptance shall not constitute a waiver of Lender's right to
require delivery of an Advance Request Form in connection with subsequent
Advances. Any telephonic request for an Advance by Borrower shall be promptly
confirmed by submission of a properly completed Advance Request Form to Lender.
Each CD Advance shall be in a minimum principal amount of One Hundred Thousand
Dollars ($100,000.00) or an integral multiple thereof and each Prime Rate
Advance shall be in a minimum principal amount of Fifty Thousand Dollars
($50,000.00). The aggregate amount of CD Advances having the same interest
period shall be at least equal to One Hundred Thousand Dollars ($100,000.00).
All notices under this Section shall be irrevocable and shall be given not later
than 12:00 p.m. (Dallas, Texas time) on the day specified above for such notice.
Any Advance Request Form requesting an Advance received after 12:00 p.m.
(Dallas, Texas time) on a Business Day shall be deemed to be received on the
next succeeding Business Day.
Section 2.6 Use of Proceeds. The proceeds of Advances shall be used to
repay existing Debt to Texas Commerce Bank-Arlington, N.A. and for working
capital support of accounts receivable and inventory of Borrower.
Section 2.7 Commitment Fee; Reduction or Termination of Commitment.
Borrower agrees to pay to Lender a commitment fee on the average daily unused
portion of the Commitment, from and including the date hereof to and including
the Termination Date, at the rate of one-quarter of one percent (.25%) per annum
payable in installments on the last Business Day of each calendar quarter,
commencing March 31, 1993, and on the Termination Date. Borrower shall have the
right at any time to terminate in whole or from time to time to irrevocably
reduce in part the Commitment upon at least three (3) Business Days prior
written notice to Lender specifying the effective date thereof, whether a
termination or reduction is being made, and the amount of any partial reduction;
provided, however, that each partial reduction shall be in the amount of Two
Hundred Fifty Thousand Dollars ($250,000.00) or an integral multiple thereof and
Borrower shall simultaneously prepay the amount by which the aggregate
outstanding amount of all Advances exceeds the Commitment (after giving effect
to such notice) plus accrued and unpaid interest on the principal amount so
prepaid. The Commitment may not be reinstated after it has been terminated or
reduced.
ARTICLE 3
Payments, Conversions and Continuations
Section 3.1 Method of Payment. All payments of principal, interest, and
other amounts to be made by Borrower under this Agreement, the Note, and the
other Loan Documents shall be made to Lender at its office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, without setoff, deduction, or counterclaim, in Dollars and
in immediately available funds. Borrower shall, at the time of making each such
payment, specify to Lender the sums payable by Borrower under this Agreement,
the Note, or other Loan Document to which such payment is to be applied (and in
the event Borrower fails to so specify, or if an Event of Default has occurred
and is
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continuing, Lender may apply such payment to the Obligations in such order and
manner as it may elect in its sole discretion). Whenever any payment under this
Agreement, the Note, or any other Loan Document shall be stated to be due on a
day that is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of the payment of interest and commitment fee, as the case may be.
Section 3.2 Voluntary Prepayment. Borrower may prepay the Note in whole at
any time or from time to time in part without premium or penalty but with
accrued interest to the date of prepayment on the amount so prepaid, provided
that (a) CD Advances may be prepaid only on the last day of the Interest Period
for such Advances and (b) each partial prepayment shall be in the principal
amount of $25,000.00 or an integral multiple thereof.
Section 3.3 Mandatory Prepayment. If at any time (a) the aggregate amount
of outstanding Advances exceeds the lesser of the Commitment or the Borrowing
Base or (b) the outstanding Advances supported by the Eligible Inventory
component of the Borrowing Base exceeds fifty percent (50%) of the aggregate
amount of outstanding Advances, Borrower shall promptly prepay the amount of the
excess plus (x) accrued and unpaid interest on the amount so prepaid and (y) any
amounts for the compensation of funding losses of Lender pursuant to Section
4.4.
Section 3.4 Computation of Interest and Fees. Interest on the indebtedness
evidenced by the Note and all fees provided for herein shall be computed on the
basis of a year of 360 days and the actual number of days elapsed (including the
first day but excluding the last day) unless such calculation would result in a
usurious rate, in which case interest shall be calculated on the basis of a year
of 365 or 366 days, as the case may be.
Section 3.5 Conversions and Continuations. Borrower shall have the fight
from time to time to Convert all or part of one Type of Advance into another
Type of Advance or to Continue all or part of any CD Advance by giving the
Lender written notice at least one (1) Business Day before Conversion into a
Prime Rate Advance and at least three (3) Business Days before Conversion into
or Continuation of a CD Advance, specifying: (a) the Conversion or Continuation
date, (b) the amount of the Advance to be Converted or Continued, (c) in the
case of Conversions, the Type of Advance to be Converted into and (d) in the
case of a Continuation of or Conversion into a CD Advance, the duration of the
Interest Period applicable thereto; provided that (i) CD Advances may only be
Converted on the last day of the Interest Period and (ii) except for Conversions
into Prime Rate Advances, no Conversions shall be made while an Event of Default
or Potential Default has occurred and is continuing. All notices given under
this Section shall be irrevocable and shall be given not later than 11:00 a.m.
(Dallas, Texas time) on the date which is not less than the number of Business
Days specified above for such notice. If Borrower shall fail to give Lender the
notice as specified above for Continuation or Conversion of a CD Advance prior
to the end of the Interest Period with respect thereto, such CD Advance shall
automatically be Converted into a Prime Rate Advance on the last day of the
Interest Period for such CD Advance.
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ARTICLE 4
Yield Protection and Illegality
Section 4.1 Additional Costs. Borrower shall pay directly to Lender from
time to time such amounts as Lender may determine to be necessary to compensate
it for any costs incurred by Lender which Lender determines are attributable to
its making or maintaining of any CD Advances hereunder or its obligation to make
any of such CD Advances hereunder, or any reduction in any amount receivable by
Lender hereunder in respect of any such CD Advances or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change which:
(a) changes the basis of taxation of any amounts payable to Lender
under this Agreement or the Note in respect of any of such Advances (other
than taxes imposed on the overall net income of Lender for any of such
Advances);
(b) imposes or modifies any reserve, special deposit, minimum capital,
capital ratio, or similar requirement relating to any extensions of credit
or other assets of, or any deposits with or other liabilities or
commitments of, Lender (including any of such Advances or any deposits
referred to in the definition of "CD Rate" in Section 1.1 hereof); or
(c) imposes any other condition affecting this Agreement or the Note
or any of such extensions of credit or liabilities or commitments.
Lender will notify Borrower of any event occurring after the date of this
Agreement which will entitle Lender to compensation pursuant to this Section 4.1
as promptly as practicable after it obtains knowledge thereof and determines to
request such compensation, and will designate a different lending office for the
Advances affected by such event if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the sole opinion of
Lender, violate any law, rule, or regulation or be in any way disadvantageous to
Lender. Lender will furnish Borrower with a certificate setting forth the basis
and the amount of each request of Lender for compensation under this Section
4.1. If Lender requests compensation from Borrower under this Section 4.1,
Borrower may, by notice to Lender suspend the obligation of Lender to make
additional CD Advances until the Regulatory Change giving rise to such request
ceases to be in effect (in which case the provisions of Section 4.3 hereof shall
be applicable). Determinations and allocations by Lender for purposes of this
Section 4.1 shall be conclusive, provided that such determinations and
allocations are made on a reasonable basis.
Section 4.2 Limitation on Types of Advances. Anything herein to the
contrary notwithstanding, if with respect to any CD Advances for any Interest
Period therefor, Lender determines (which determination shall be conclusive)
that the relevant rates of interest referred to in the definition of "CD Rate"
in Section 1.1 hereof on the basis of which the rate of interest for CD Advances
for such Interest Period is to be determined do not accurately reflect the cost
to the Lender of making or maintaining CD Advances for such Interest Period,
then Lender shall
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give Borrower prompt notice thereof specifying the relevant amounts or periods,
and so long as such condition remains in effect, Lender shall be under no
obligation to make additional CD Advances or to Convert Prime Rate Advances into
CD Advances and Borrower shall, on the last day(s) of the then current Interest
Period(s) for the outstanding CD Advances, either prepay such CD Advances or
Convert such CD Advances into Prime Rate Advances in accordance with the terms
of this Agreement.
Section 4.3 Substitute Prime Rate Advances. If the obligation of Lender to
make CD Advances shall be suspended pursuant to Section 4.1 or 4.2 hereof, all
Advances which would be otherwise made by Lender as CD Advances shall be made
instead as Prime Rate Advances and all Advances which would otherwise be
Converted into CD Advances shall be Converted instead into (or shall remain as)
Prime Rate Advances and, to the extent that CD Advances are so made as (or
Converted into) Prime Rate Advances, payments and prepayments of principal which
would otherwise be applied to Lender's CD Advances shall be applied instead to
its Prime Rate Advances.
Section 4.4 Compensation. Borrower shall pay to Lender, upon the request of
Lender, such amount or amounts as shall be sufficient (in the reasonable opinion
of Lender) to compensate it for any loss, cost, or expense incurred by it as a
result of:
(a) Any payment, prepayment or Conversion of a CD Advance for any
reason (including, without limitation, the acceleration of outstanding
Advances pursuant to Section 10.2) on a date other than the last day of an
Interest Period for such CD Advance; or
(b) Any failure by Borrower for any reason (including, without
limitation, the failure of any conditions precedent specified in Article 5
to be satisfied) to borrow, Convert, or prepay a CD Advance on the date for
such borrowing, Conversion, or prepayment, specified in the relevant notice
of borrowing, prepayment, or Conversion under this Agreement.
Section 4.5 Capital Adequacy. If after the date hereof, Lender shall have
determined that the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Lender (or its parent) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on Lender's (or its parent's) capital as a consequence of its obligations
hereunder or the transactions contemplated hereby to a level below that which
Lender (or its parent) could have achieved but for such adoption, change or
compliance (taking into consideration Lender's policies with respect to capital
adequacy) by an amount deemed by Lender to be material, then from time to time,
within ten (10) Business Days after demand by Lender, Borrower shall pay to
Lender such additional amount or amounts as will compensate Lender (or its
parent) for such reduction. A certificate of Lender claiming compensation under
this Section and setting forth
CREDIT AGREEMENT - Page 14
109
the additional amount or amounts to be paid to it hereunder shall be conclusive,
provided that the determination thereof is made on a reasonable basis. In
determining such amount or amounts, Lender may use any reasonable averaging and
attribution methods.
ARTICLE 5
Conditions Precedent
Section 5.1 Initial Advance. The obligation of Lender to make the initial
Advance is subject to the condition precedent that Lender shall have received on
or before the day of such Advance all of the following, each dated (unless
otherwise indicated) the date hereof, in form and substance satisfactory to
Lender:
(a) Resolutions. Resolutions of the Board of Directors of Borrower and
Guarantor certified by their respective Secretary or Assistant Secretary
which authorize the execution, delivery, and performance by Borrower and
Guarantor of the Loan Documents to which Borrower or Guarantor, as
applicable, is or is to be a party;
(b) Incumbency Certificate. A certificate of incumbency certified by
the respective Secretary or Assistant Secretary of Borrower and Guarantor
certifying the names of the officers of Borrower and Guarantor authorized
to sign each of the Loan Documents to which Borrower or Guarantor, as
applicable, is or is to be a party (including the certificates contemplated
herein) together with specimen signatures of such officers;
(c) Articles of Incorporation. The articles of incorporation of
Borrower and Guarantor each certified by the Secretary of State of their
respective state of incorporation and dated within ten (10) days prior to
the date of the initial Advance;
(d) Bylaws. The bylaws of Borrower and Guarantor each certified by
their respective Secretary or Assistant Secretary;
(e) Governmental Certificates. Certificates of the appropriate
government officials of the state of incorporation of Borrower and
Guarantor as to the existence and good standing of such Persons, together
with certificates of the appropriate government officials of the State of
Texas as to the qualification to do business as a foreign corporation and
good standing of Borrower and Guarantor in the State of Texas, each dated
within ten (10) days prior to the date of the initial Advance;
(f) Note. The Note executed by Borrower;
(g) Security Agreement. The Security Agreement executed by Borrower;
(h) Financing Statements and Assignments. Uniform Commercial Code
financing statements executed by Borrower and Guarantor, as applicable, and
coveting
CREDIT AGREEMENT - Page 15
110
such Collateral as Lender may request and Uniform Commercial Code
terminations or assignments relating to the Liens identified on Schedule 7
hereto;
(i) Guaranty. The Guaranty executed by Guarantor;
(j) Guarantor Security Agreement. The Guarantor Security Agreement
executed by Guarantor;
(k) Assignment of Life Insurance. The Assignment of Life Insurance
duly executed by Borrower;
(l) Initial Borrowing Base Report. A Borrowing Base Report dated
December , 1992, properly completed and executed by an authorized officer
of Borrower reflecting the information required thereby as of
, 1992;
(m) Assignment of Notes and Liens. An Assignment of Notes and Liens in
form and substance satisfactory to Lender, executed by Texas Commerce Bank
Arlington, N.A., assigning to Lender the promissory note, liens and
security documentation between Borrower and Texas Commerce Bank-Arlington,
N.A.;
(n) Landlord and Mortgagee Agreements. Landlord and mortgagee
subordinations or waivers executed by each landlord and mortgagee
identified on Schedule 1 hereto;
(o) Insurance Policies. Summaries of all insurance policies required
by Section 7.5, together with loss payable endorsements in favor of Lender
with respect to all insurance policies covering Collateral;
(p) UCC Search. The results of a Uniform Commercial Code searches
showing all financing statements and other documents or instruments on file
against Borrower and Guarantor in each applicable jurisdiction listed on
Schedule 6 hereto, such searches to be as of a date no more than ten (10)
days prior to the date of the initial Advance;
(q) Instruments, Documents and Chattel Paper. All Collateral
consisting of instruments, documents and chattel paper (except as otherwise
provided by the Security Agreement or Guarantor Security Agreement)
endorsed, if applicable, payable to the order of Lender; and
(r) Attorneys' Fees and Expenses. Evidence that the costs and expenses
(including reasonable attorneys' fees) referred to in Section 11.1, to the
extent incurred, shall have been paid in full by Borrower.
Section 5.2 All Advances. The obligation of Lender to make any Advance
(including the initial Advance) is subject to the following additional
conditions precedent:
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111
(a) Advance Request Form. Lender shall have received in accordance
with Section 2.5 an Advance Request Form dated the date of such Advance and
executed by an authorized officer of Borrower, all of the statements in
which shall be true and correct on and as of such date;
(b) No Default. No Event of Default or Potential Default shall have
occurred and be continuing; and
(c) Additional Documentation. Lender shall have received such
additional approvals, opinions, or documentation as Lender or its legal
counsel, Jenkens & ▇▇▇▇▇▇▇▇▇, P.C., may request.
ARTICLE 6
Representations and Warranties
To induce Lender to enter into this Agreement, Borrower represents and
warrants to Lender that:
Section 6.1 Corporate Existence. Borrower and each Subsidiary (a) is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation; (b) has all requisite corporate
power and authority to own its assets and carry on its business as now being or
as proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a material adverse effect
on its business, condition (financial or otherwise), operations, prospects, or
properties. Borrower has the corporate power and authority to execute, deliver,
and perform its obligations under this Agreement and the other Loan Documents to
which it is or may become a party.
Section 6.2 Financial Statements. Borrower has delivered to Lender audited
consolidated financial statements of Borrower and its Subsidiaries as at and for
the fiscal year ended June 30, 1992, and unaudited consolidated financial
statements of Borrower and its Subsidiaries for the three (3) month period ended
September 30, 1992. Such financial statements are true and correct, have been
prepared in accordance with GAAP, and fairly and accurately present, on a
consolidated basis, the financial condition of Borrower and its Subsidiaries as
of the respective dates indicated therein and the results of operations for the
respective periods indicated therein. Neither Borrower nor any of its
Subsidiaries has any material contingent liabilities, liabilities for taxes,
material forward or long-term commitments, or unrealized or anticipated losses
from any unfavorable commitments not reflected in such financial statements.
There has been no material adverse change in the business, condition (financial
or otherwise), operations, prospects, or properties of Borrower or any of its
Subsidiaries since the effective date of the most recent financial statements
referred to in this Section.
Section 6.3 Corporate Action; No Breach. The execution, delivery, and
performance by Borrower of this Agreement and the other Loan Documents to which
Borrower is or may
CREDIT AGREEMENT - Page 17
112
become a party have been duly authorized by all requisite action on the part of
Borrower and do not and will not violate or conflict with the articles of
incorporation or bylaws of Borrower or any law, rule, or regulation or any
order, writ, injunction, or decree of any court, governmental authority, or
arbitrator, and do not and will not conflict with, result in a breach of, or
constitute a default under, or result in the creation or imposition of any Lien
(except those Liens in favor of Lender) upon any of the revenues or assets of
Borrower or any Subsidiary pursuant to the provisions of any indenture,
mortgage, deed of trust, security agreement, franchise, permit, license, or
other instrument or agreement by which Borrower or any Subsidiary or any of
their respective properties is bound.
Section 6.4 Operation of Business. Borrower and each of its Subsidiaries
possess all licenses, permits, franchises, patents, copyrights, trademarks, and
tradenames, or fights thereto, to conduct their respective businesses
substantially as now conducted and as presently proposed to be conducted, and
Borrower and each of its Subsidiaries are not in violation of any valid rights
of others with respect to any of the forgoing.
Section 6.5 Litigation and Judgments. Except as disclosed on Schedule 2
hereto, there is no action, suit, investigation, or proceeding before or by any
court, governmental authority, or arbitrator pending, or to the knowledge of
Borrower, threatened against or affecting Borrower or any Subsidiary, that
would, if adversely determined, have a material adverse effect on the business,
condition (financial or otherwise), operations, prospects, or properties of
Borrower or any Subsidiary or the ability of Borrower to pay and perform the
Obligations. There are no outstanding judgments against Borrower or any
Subsidiary.
Section 6.6 Rights in Properties; Liens. Borrower and each Subsidiary have
good and indefeasible title to or valid leasehold interests in their respective
properties and assets, real and personal, including the properties, assets, and
leasehold interests reflected in the financial statements described in Section
6.2, and none of the properties, assets, or leasehold interests of Borrower or
any Subsidiary is subject to any Lien, except as permitted by Section 8.2.
Section 6.7 Enforceability. This Agreement constitutes, and the other Loan
Documents to which Borrower is party, when delivered, shall constitute the
legal, valid, and binding obligations of Borrower, enforceable against Borrower
in accordance with their respective terms, except as limited by bankruptcy,
insolvency, or other laws of general application relating to the enforcement of
creditor's rights.
Section 6.8 Approvals. No authorization, approval, or consent of, and no
filing or registration with, any court, governmental authority, or third party
is or will be necessary for the execution, delivery, or performance by Borrower
of this Agreement and the other Loan Documents to which Borrower is or may
become a party or the validity or enforceability thereof.
Section 6.9 Debt. Borrower and its Subsidiaries have no Debt, except as
permitted by Section 8.1.
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Section 6.10 Taxes. Borrower and each Subsidiary have filed all tax returns
(federal, state, and local) required to be filed, including all income,
franchise, employment, property, and sales taxes, and have paid all of their
respective liabilities for taxes, assessments, governmental charges, and other
levies that are due and payable, and Borrower knows of no pending investigation
of Borrower or any Subsidiary by any taxing authority or of any pending but
unassessed tax liability of Borrower or any Subsidiary.
Section 6.11 Use of Proceeds; Margin Securities. Neither Borrower nor any
Subsidiary is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulations G, T, U, or X of the Board of Governors
of the Federal Reserve System), and no part of the proceeds of any extension of
credit under this Agreement will be used to purchase or carry any such margin
stock or to extend credit to others for the purpose of purchasing or carrying
margin stock.
Section 6.12 ERISA. Borrower and each Subsidiary have complied with all
applicable minimum funding requirements and all other applicable and material
requirements of ERISA and there are no existing conditions that would give rise
to liability thereunder. No Reportable Event has occurred in connection with
Plan that might constitute grounds for the termination thereof by the PBGC or
for the appointment by the appropriate United States District Court of a trustee
to administer such Plan.
Section 6.13 Disclosure. No statement, information, report, representation
or warranty made by Borrower in this Agreement or in any other Loan Document or
furnished to Lender in connection with this Agreement or any transaction
contemplated hereby contains any untrue statement of a material fact or omits to
state any material fact necessary to make the statements herein or therein not
misleading. There is no fact known to Borrower which has a material adverse
effect, or which might in the future have a material adverse effect, on the
business, condition (financial or otherwise), operations, prospects, or
properties of Borrower or any Subsidiary that has not been disclosed in writing
to Lender.
Section 6.14 Subsidiaries. Borrower has no Subsidiaries other than those
listed on Schedule 4 hereto, and Schedule 4 sets forth the jurisdiction of
incorporation of each Subsidiary and the percentage of Borrower's ownership of
the outstanding voting stock of each Subsidiary. All of the outstanding capital
stock of each Subsidiary has been validly issued, is fully paid, and is
nonassessable.
Section 6.15 Compliance with Laws and Agreements. Neither Borrower nor any
Subsidiary is in violation in any material respect of any law, rule, regulation,
order, or decree of any court, governmental authority, or arbitrator. Neither
Borrower nor any Subsidiary is in default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it is
a party.
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Section 6.16 Environmental Matters.
(a) Borrower, each Subsidiary, and all of their respective properties,
assets, and operations are in full compliance with all Environmental Laws.
Borrower is not aware of, nor has Borrower received notice of, any past,
present, or future conditions, events, activities, practices, or incidents
which may interfere with or prevent the compliance or continued compliance
of Borrower and the Subsidiaries with all Environmental Laws.
(b) Borrower and each Subsidiary have obtained all permits, licenses,
and authorizations which are required under Environmental Laws.
(c) No Hazardous Substances exist on, about, or within or have been
used, generated, stored, transported, disposed of on, or released from any
of the properties or assets of Borrower or any Subsidiary. The use which
Borrower and the Subsidiaries make and intend to make of their respective
properties and assets will not result in the use, generation, storage,
transportation, accumulation, disposal, or release of any Hazardous
Substance on, in, or from any such properties or assets.
(d) There is no action, suit, proceeding, investigation, or inquiry
before any court, administrative agency, or other governmental authority
pending or, to the knowledge of Borrower, threatened against Borrower or
any Subsidiary relating in any way to any Environmental Law. Neither
Borrower nor any Subsidiary has (i) any liability for remedial action under
any Environmental Law, (ii) received any request for information by any
governmental authority with respect to the condition, use, or operation of
any of its properties or assets, or (iii)received any notice from any
governmental authority or other Person with respect to any violation of or
liability under any Environmental Law.
(e) No Lien arising under any Environmental Law has attached to any of
the properties or assets of Borrower or any of its Subsidiaries.
Section 6.17 Current Locations. The principal place of business and chief
executive office of the Borrower is located at the address for notices specified
below the Borrower's name on the signature pages hereto. Schedule 1 attached
hereto sets forth all the locations where any of the Obligated Parties maintain
any books or records relating to any of the Collateral and all other locations
where any of the Obligated Parties has a place of business. No Obligated Party
does business in any location other than as set forth on Schedule 1 and Schedule
1 correctly identifies each address where any of the Obligated Parties'
inventory or equipment are located. Schedule 1 correctly identifies the
landlords or mortgagees (other than Lender), if any, of each location identified
on Schedule 1. Schedule 1 sets forth the names and addresses of all Persons
other than the Obligated Parties who have possession of any of the Obligated
Parties' Collateral. None of the Collateral has been located in any location
within the past four months other than as set forth on Schedule 1.
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Section 6.18 Security Interest and Liens. The Security Agreement and the
Guarantor Security Agreement create in favor of Lender valid and enforceable
Liens in the Collateral described therein which secure the payment and
performance of the Obligations, including without limitation, all future
Advances pursuant to this Agreement and the Note and all extensions, renewals
and other modifications thereof. Upon the filing of Uniform Commercial Code
Financing Statements naming Borrower or Guarantor, as applicable, as debtor and
Lender as secured party in the applicable jurisdictions set forth in Schedule 6
hereto, and the release or assignment to Lender of the Liens described on
Schedule 7 hereto, the Liens created by the Loan Documents shall constitute
perfected, first priority Liens upon the property described therein which shall
be superior and prior to the rights of all third Persons now existing or
hereafter arising.
Section 6.19 Corporate Name. The exact corporate name of the Borrower as it
appears in its certificate of incorporation is set forth in the introduction to
this Agreement and Borrower has not done business in any location under any
other name.
ARTICLE 7
Positive Covenants
Borrower covenants and agrees that, as long as the Obligations or any part
thereof are outstanding or Lender has any Commitment hereunder, Borrower will
perform and observe the following positive covenants, unless Lender shall
otherwise consent in writing:
Section 7.1 Reporting Requirements. Borrower will furnish to Lender:
(a) Annual Financial Statements. As soon as available, and in any
event within ninety (90) days after the end of each fiscal year of
Borrower, beginning with the fiscal year ending June 30, 1993, (i) a copy
of the annual audit report of Borrower and the Subsidiaries for such fiscal
year containing, on a consolidated basis, balance sheets, statements of
income, and statements of cash flows as at the end of such fiscal year and
for the 12-month period then ended, in each case setting forth in
comparative form the figures for the preceding fiscal year, all in
reasonable detail and audited and certified by independent certified public
accountants of recognized standing acceptable to Lender, to the effect that
such report has been prepared in accordance with GAAP; and (ii) a
certificate of such independent certified public accountants to Lender (A)
stating that to their knowledge no Event of Default and no Potential
Default has occurred and is continuing, or if in their opinion an Event of
Default or Potential Default has occurred and is continuing, a statement as
to the nature thereof, and (B) confirming the calculations set forth in the
Covenant Compliance Certificate delivered simultaneously therewith;
(b) Monthly Financial Statements. As soon as available, and in any
event within thirty (30) days after the end of each month, a copy of an
unaudited financial report of Borrower and the Subsidiaries as of the end
of such month, and for the portion
CREDIT AGREEMENT - Page 21
116
of the fiscal year then ended, containing, on a consolidated and
consolidating basis, balance sheets, statements of income, and statements
of cash flows, in each case setting forth in comparative form the figures
for the corresponding period of the preceding fiscal year, all in
reasonable detail certified by the chief financial officer of Borrower to
have been prepared in accordance with GAAP and to fairly and accurately
present (subject to year-end audit adjustments) the financial condition and
results of operations of Borrower and the Subsidiaries, on a consolidated
and consolidating basis, at the date and for the periods indicated therein;
(c) Covenant Compliance Certificate. Concurrently with the delivery of
each of the financial statements referred to in SUBSECTIONS 7.1(a) and
7.1(b), a certificate of the chief executive officer or chief financial
officer of Borrower (i) stating that to the best of such officer's
knowledge, no Event of Default and no Potential Default has occurred and is
continuing, or if an Event of Default or Potential Default has occurred and
is continuing, a statement as to the nature thereof and the action which is
proposed to be taken with respect thereto, and (ii) showing in reasonable
detail the calculations demonstrating compliance with Article 9;
(d) Notice of Litigation. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any court or
governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting Borrower or any Subsidiary
which, if determined adversely to Borrower or such Subsidiary, could have a
material adverse effect on the business, condition (financial or
otherwise), operations, prospects, or properties of Borrower or such
Subsidiary;
(e) Notice of Default. As soon as possible and in any event within
five (5) days after the occurrence of each Event of Default and Potential
Default, a written notice setting forth the details of such Event of
Default or Potential Default and the action which Borrower has taken and
proposes to take with respect thereto;
(f) ERISA Reports. Promptly after the filing or receipt thereof,
copies of all reports, including annual reports, and notices which Borrower
or any Subsidiary files with or receives from the PBGC or the U.S.
Department of Labor under ERISA; and as soon as possible and in any event
within five (5) days after Borrower or any Subsidiary knows or has reason
to know that any Reportable Event or Prohibited Transaction has occurred
with respect to any Plan or that the PBGC or Borrower or any Subsidiary has
instituted or will institute proceedings under Title IV of ERISA to
terminate any Plan, a certificate of the chief financial officer of
Borrower setting forth the details as to such Reportable Event or
Prohibited Transaction or Plan termination and the action that Borrower
proposes to take with respect thereto;
(g) Notice of Environmental Law Violation. As soon as possible and in
any event within five (5) days after the occurrence thereof, written notice
of any violation of any Environmental Law that Borrower or any Subsidiary
reports or is required to report to any governmental authority;
CREDIT AGREEMENT - Page 22
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(h) Notice of Material Adverse Effect. As soon as possible and in any
event within five (5) days after the occurrence thereof, written notice of
any matter that could have a material adverse effect on the business,
condition (financial or otherwise), operations, prospects, or properties of
Borrower or any Subsidiary;
(i) Borrowing Base Report and Accounts Receivable Aging Report. As
soon as available, and in any event within thirty (30) days after the end
of each calendar month, a Borrowing Base Report and an Accounts Receivable
Aging Report, each certified by the chief executive officer or chief
financial officer of Borrower;
(j) Proxy Statements, Etc. As soon as available, one copy of each
financial statement, report, notice or proxy statement sent by Borrower or
any Subsidiary to its stockholders generally and one copy of each regular,
periodic or special report, registration statement, or prospectus filed by
Borrower or any Subsidiary with any securities exchange or the Securities
and Exchange Commission or any successor agency;
(k) Uninsured Liabilities. Promptly upon receipt of notice thereof,
written notice of any actual or potential uninsured liabilities of Borrower
or any Subsidiary in excess of One Hundred Thousand Dollars ($100,000.00);
and
(l) General Information. Promptly, such other information concerning
Borrower or any Subsidiary as Lender may from time to time reasonably
request.
Section 7.2 Maintenance of Existence; Conduct of Business. Borrower will
preserve and maintain, and will cause each Subsidiary to preserve and maintain,
its corporate existence and all of its leases, privileges, licenses, permits,
franchises, qualifications and fights that are necessary or desirable in the
ordinary conduct of its business, and conduct, and cause each Subsidiary to
conduct, its business as presently conducted in an orderly and efficient manner
in accordance with good business practices.
Section 7.3 Maintenance of Properties. Borrower will maintain, keep, and
preserve, and cause each Subsidiary to maintain, keep, and preserve, all of its
properties (tangible and intangible) necessary or useful in the proper conduct
of its business in good working order and condition.
Section 7.4 Taxes and Claims. Borrower will pay or discharge, and will
cause each Subsidiary to pay or discharge, at or before maturity or before
becoming delinquent (a) all taxes, levies, assessments, and governmental charges
imposed on it or its income or profits or any of its property, and (b) all
lawful claims for labor, material, and supplies, which, if unpaid, might become
a Lien upon any of its property; provided, however, that neither Borrower nor
any Subsidiary shall be required to pay or discharge any tax, levy, assessment,
or governmental charge which is being contested in good faith by appropriate
proceedings diligently pursued, and for which adequate reserves have been
established.
CREDIT AGREEMENT -- Page 23
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Section 7.5 Insurance. Borrower will maintain, and will cause each
Subsidiary to maintain, with financially sound and reputable insurance companies
worker's compensation insurance, liability insurance, and insurance on its
property, assets, and business at least in such amounts and against such risks
as are usually insured against by Persons engaged in similar businesses. Each
insurance policy covering Collateral shall name Lender as loss payee and provide
that such policy will not be cancelled without thirty (30) days prior written
notice to Lender.
Section 7.6 Inspection Rights. At any reasonable time and from time to
time, Borrower will permit, and will cause each Subsidiary to permit,
representatives of Lender to examine and make copies of the books and records
of, and visit and inspect the properties of Borrower and any Subsidiary, and to
discuss the business, operations, and financial condition of Borrower and the
Subsidiaries with their respective officers and employees and with their
independent certified public accountants.
Section 7.7 Keeping Books and Records. Borrower will maintain, and will
cause each Subsidiary to maintain, proper books of record and account in which
full, true, and correct entries in conformity with GAAP shall be made of all
dealings and transactions in relation to its business and activities.
Section 7.8 Compliance with Laws. Borrower will comply, and will cause each
Subsidiary to comply, in all material respects with all applicable laws, rules,
regulations, and orders of any court, governmental authority, or arbitrator.
Section 7.9 Compliance with Agreements. Borrower will comply, and will
cause each Subsidiary to comply, in all material respects with all contracts,
agreements, and instruments binding on it or affecting its properties or
business.
Section 7.10 Further Assurances. Borrower will execute and deliver, and
will cause each Subsidiary to execute and deliver, such further instruments as
may be requested by Lender to carry out the provisions and purposes of this
Agreement and the other Loan Documents and to preserve and perfect the Liens of
Lender in the Collateral.
Section 7.11 ERISA. Borrower will comply, and will cause each Subsidiary to
comply, with all minimum funding requirements, and all other material
requirements, of ERISA, if applicable, so as not to give rise to any liability
thereunder.
ARTICLE 8
Negative Covenants
Borrower covenants and agrees that, as long as the Obligations or any part
thereof are outstanding or Lender has any Commitment hereunder, Borrower will
perform and observe the following negative covenants, unless Lender shall
otherwise consent in writing:
CREDIT AGREEMENT -- Page 24
119
Section 8.1 Debt. Borrower will not incur, create, assume, or permit to
exist, and will not permit any Subsidiary to incur, create, assume, or permit to
exist, any Debt, except:
(a) Debt to Lender;
(b) Existing Debt described on Schedule 3 hereto; and
(c) Debt incurred to finance the purchase of property to be used in
the ordinary course of Borrower's business in an aggregate amount during
any one fiscal year not to exceed Two Hundred Fifty Thousand Dollars
($250,000.00).
Section 8.2 Limitation on Liens. Borrower will not incur, create, assume,
or permit to exist, and will not permit any Subsidiary to incur, create, assume,
or permit to exist, any Lien upon any of its property, assets, or revenues,
whether now owned or hereafter acquired, except:
(a) Liens disclosed on Schedule 5 hereto;
(b) Liens in favor of Lender;
(c) Encumbrances consisting of minor easements, zoning restrictions,
or other restrictions on the use of real property that do not (individually
or in the aggregate) materially affect the value of the assets encumbered
thereby or materially impair the ability of Borrower or the Subsidiaries to
use such assets in their respective businesses, and none of which is
violated in any material respect by existing or proposed structures or land
use;
(d) Liens for taxes, assessments, or other governmental charges which
are not delinquent or which are being contested in good faith and for which
adequate reserves have been established;
(e) Liens of mechanics, materialmen, warehousemen, carriers or other
similar statutory Liens securing obligations that are not yet due and are
incurred in the ordinary course of business;
(f) Liens resulting from good faith deposits to secure payments of
worker's compensation or other social security programs or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, or contracts (other than for payment of Debt) in the ordinary course
of business; and
(g) Liens created to secure purchase money Debt permitted by Section
8.1(c) provided that such Liens do not extend to or cover any property of
Borrower other than the property being acquired with the Debt permitted by
Section 8.1(c).
Section 8.3 Mergers, Acquisitions and Dissolutions. Borrower will not, and
will not permit any Subsidiary to, become a party to a merger or consolidation,
or purchase or otherwise
CREDIT AGREEMENT -- Page 25
120
acquire all or a substantial part of the assets of any Person or any shares or
other evidence of beneficial ownership of any Person, or dissolve or liquidate.
Section 8.4 Restricted Payments. Borrower will not declare or pay any
dividends or make any other payment or distribution (in cash, property, or
obligations) on account of its capital stock, or redeem, purchase, retire, or
otherwise acquire any of its capital stock, or set apart any money for a sinking
or other analogous fund for any dividend or other distribution on its capital
stock or for any redemption, purchase, retirement, or other acquisition of any
of its capital stock, or grant or issue any capital stock or any warrant, fight,
or option pertaining to its capital stock, or issue any security convertible
into capital stock, or permit any of its Subsidiaries to purchase or otherwise
acquire any capital stock of Borrower or another Subsidiary.
Section 8.5 Loans and Investments. Borrower will not make, and will not
permit any Subsidiary to make, any advance, loan, extension of credit, or
capital contribution to or investment in, or purchase, or permit any Subsidiary
to purchase, any stock, bonds, notes, debentures, or other securities of any
Person, except:
(a) readily marketable direct obligations of the United States of
America; and
(b) fully insured certificates of deposit with maturities of one year
or less from the date of acquisition of Lender.
Section 8.6 Transactions With Affiliates. Borrower will not enter into, and
will not permit any Subsidiary to enter into, any transaction, including,
without limitation, the purchase, sale, or exchange of property or the rendering
of any service, with any Affiliate of Borrower or such Subsidiary, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's or
such Subsidiary's business and upon fair and reasonable terms no less favorable
to Borrower or such Subsidiary than would be obtained in a comparable
arm's-length transaction with a Person not an Affiliate of Borrower or such
Subsidiary.
Section 8.7 Disposition of Assets. Borrower will not sell, lease, assign,
transfer, or otherwise dispose of any of its assets, or permit any Subsidiary to
do so with any of its assets, except dispositions of inventory in the ordinary
course of business.
Section 8.8 Prepayment of Debt. Borrower will not prepay, and will not
permit any Subsidiary to prepay, any Debt, except the Obligations.
Section 8.9 Nature of Business. Borrower will not, and will not permit any
Subsidiary to, engage in any business other than the businesses in which they
are engaged as of the date hereof.
Section 8.10 Compliance with Environmental Laws. Borrower will not, and
will not permit any of its Subsidiaries to, (a) use (or permit any tenant to
use) any of their respective properties or assets for the handling, processing,
storage, transportation, or disposal of any
CREDIT AGREEMENT -- Page 26
121
Hazardous Substance, (b) generate any Hazardous Substance, (c) conduct any
activity which is likely to cause a release or threatened release of any
Hazardous Substance, or (d) otherwise conduct any activity or use any of their
respective properties or assets in any manner that is likely to violate any
Environmental Law.
Section 8.11 Accounting. Borrower will not make, and will not permit any of
its Subsidiaries to make, any change in accounting treatment or reporting
practices, except as required by GAAP.
ARTICLE 9
Financial Covenants
Borrower covenants and agrees that, as long as the Obligations or any part
thereof are outstanding or Lender has any Commitment hereunder, Borrower will
observe and perform the following financial covenants, unless Lender shall
otherwise consent in writing:
Section 9.1 Current Ratio. Borrower will at all times maintain a Current
Ratio of not less than to 1.4 to 1.0.
Section 9.2 Consolidated Tangible Net Worth. Borrower will at all times
maintain Consolidated Tangible Net Worth in an amount not less than Four Million
Dollars ($4,000,000.00).
Section 9.3 Fixed Charge Coverage Ratio. Borrower will at all times
maintain a Fixed Charge Coverage Ratio of not less than 1.75 to 1.0.
Section 9.4 Leverage Ratio. Borrower will at all times maintain a Leverage
Ratio of not greater than 1.75 to 1.0.
Section 9.5 Capital Expenditures. Borrower will not permit the aggregate
capital expenditures of Borrower and the Subsidiaries to exceed Four Hundred
Thousand Dollars ($400,000.00) during any fiscal year.
ARTICLE 10
Default
Section 10.1 Events of Default. Each of the following shall be deemed an
"Event of Default":
(a) Borrower shall fail to pay when due the Obligations or any part
thereof.
CREDIT AGREEMENT -- Page 27
122
(b) Any representation, warranty, certification or statement made or
deemed made by Borrower or any Obligated Party (or any of their respective
officers) in any Loan Document or-in any certificate, report, notice, or
financial statement furnished at any time in connection with this Agreement
shall be false, misleading, or erroneous in any material respect when made
or deemed to have been made.
(c) Borrower or any Obligated Party shall fail to perform, observe, or
comply with any covenant, agreement, or term contained in this Agreement or
any other Loan Document.
(d) Borrower, any Subsidiary, or any Obligated Party shall commence a
voluntary proceeding seeking liquidation, reorganization, or other relief
with respect to itself or its debts under any bankruptcy, insolvency, or
other similar law now or hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian, or other similar official of it
or a substantial part of its property or shall consent to any such relief
or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it or shall make a
general assignment for the benefit of creditors or shall generally fail to
pay its debts as they become due or shall take any corporate action to
authorize any of the foregoing.
(e) An involuntary proceeding shall be commenced against Borrower, any
Subsidiary, or any Obligated Party seeking liquidation, reorganization, or
other relief with respect to it or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official for it or a substantial part of its property, and such involuntary
proceeding shall remain undismissed and unstayed for a period of thirty
(30) days.
(f) Borrower, any Subsidiary, or any Obligated Party shall fail to
discharge within a period of thirty (30) days after the commencement
thereof any attachment, sequestration, or similar proceeding or proceedings
involving an aggregate amount in excess of Fifty Thousand Dollars
($50,000.00) against any of its assets or properties.
(g) Borrower, any Subsidiary, or any Obligated Party shall fail to
satisfy and discharge promptly any judgment or judgments against it for the
payment of money in an aggregate amount in excess of Fifty Thousand Dollars
($50,000.00).
(h) Borrower, any Subsidiary, or any Obligated Party shall fail to pay
when due any principal of or interest on any Debt (other than the
Obligations), or the maturity of any such Debt shall have been accelerated,
or any such Debt shall have been required to be prepaid prior to the stated
maturity thereof, or any event shall have occurred that permits (or, with
the giving of notice or lapse of time or both, would permit) any holder or
holders of such Debt or any Person acting on behalf of such holder or
holders to accelerate the maturity thereof or require any such prepayment.
CREDIT AGREEMENT -- Page 28
123
(i) This Agreement or any other Loan Document shall cease to be in
full force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by Borrower, any
Subsidiary, any Obligated Party or any of their respective shareholders, or
Borrower or any Obligated Party shall deny that it has any further
liability or obligation under any of the Loan Documents, or any lien or
security interest created by the Loan Documents shall for any reason cease
to be a valid, first priority perfected security interest in and lien upon
any of the Collateral purported to be covered thereby.
(j) Any of the following events shall occur or exist with respect to
Borrower or any Subsidiary: (i) any Prohibited Transaction involving any
Plan; (ii) any Reportable Event with respect to any Plan; (iii) the filing
under Section 4041 of ERISA of a notice of intent to terminate any Plan or
the termination of any Plan; (iv)any event or circumstance that might
constitute grounds entitling the PBGC to institute proceedings under
Section 4042 of ERISA for the termination of, or for the appointment of a
trustee to administer, any Plan, or the institution by the PBGC of any such
proceedings; (v) complete or partial withdrawal under Section 4201 or 4204
of ERISA from a Multiemployer Plan or the reorganization, insolvency, or
termination of any Multiemployer Plan; and in each case above, such event
or condition, together with all other events or conditions, if any, have
subjected or could in the reasonable opinion of Lender subject Borrower to
any tax, penalty, or other liability to a Plan, a Multiemployer Plan, the
PBGC, or otherwise (or any combination thereof) which in the aggregate
exceed or could reasonably be expected to exceed Fifty Thousand Dollars
($50,000.00).
(k) The occurrence of a Change of Ownership or Change of Management.
(1) Borrower, any of its Subsidiaries, or any Obligated Party, or any
of their properties, revenues, or assets, shall become subject to an order
of forfeiture, seizure, or divestiture (whether under RICO or otherwise)
and the same shall not have been discharged within thirty (30) days from
the date of entry thereof.
Section 10.2 Remedies Upon Default. If any Event of Default shall occur,
Lender may without notice terminate its Commitment to make Advances and declare
the Obligations or any part thereof to be immediately due and payable, and the
same shall thereupon become immediately due and payable, without notice, demand,
presentment, notice of dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, protest, or other formalities of any
kind, all of which are hereby expressly waived by Borrower; provided, however,
that upon the occurrence of an Event of Default under Section 10.1(d) or Section
10.1(e), the Commitment of Lender to make Advances shall automatically
terminate, and the Obligations shall become immediately due and payable without
notice, demand, presentment, notice of dishonor, notice of acceleration, notice
of intent to accelerate, notice of intent to demand, protest, or other
formalities of any kind, all of which are hereby expressly waived by Borrower.
If any Event of Default shall occur, Lender may exercise all rights and remedies
available to it in law or in equity, under the Loan Documents, or otherwise.
CREDIT AGREEMENT -- Page 29
124
Section 10.3 Performance by Lender. If Borrower shall fail to perform any
covenant, duty, or agreement contained in any of the Loan Documents, Lender may
perform or attempt to perform such covenant, duty, or agreement on behalf of
Borrower. In such event, Borrower shall, at the request of Lender, promptly pay
any amount expended by Lender in such performance or attempted performance to
Lender, together with interest thereon at the Default Rate from the date of such
expenditure until paid. Notwithstanding the foregoing, it is expressly agreed
that Lender shall not have any liability or responsibility for the performance
of any obligation of Borrower under this Agreement or any other Loan Document.
Section 10.4 Setoff. Lender shall have the right to set off and apply
against the Obligations in such manner as Lender may determine, at any time and
without notice to Borrower, any and all deposits (general or special, time or
demand, provisional or final) or other sums at any time credited by or owing
from Lender to Borrower whether or not the Obligations are then due. As further
security for the Obligations, Borrower hereby grants to Lender a security
interest in all money, instruments, and other property of Borrower now or
hereafter held by Lender, including, without limitation, property held in
safekeeping. In addition to Lender's right of setoff and as further security for
the Obligations, Borrower hereby grants to Lender a security interest in all
deposits (general or special, time or demand, provisional or final) and other
accounts of Borrower now or hereafter on deposit with or held by Lender and all
other sums at any time credited by or owing from Lender to Borrower. The rights
and remedies of Lender hereunder are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which Lender may have.
ARTICLE 11
Miscellaneous
Section 11.1 Expenses of Lender. Borrower hereby agrees to pay Lender on
demand: (a) all costs and expenses incurred by Lender in connection with the
preparation, negotiation, and execution of this Agreement and the other Loan
Documents and any and all amendments, modifications, renewals, extensions, and
supplements thereof and thereto, including, without limitation, the fees and
expenses of Lender's legal counsel (provided that the legal fees (exclusive of
related expenses) for which Borrower shall be responsible under this subsection
11.1(a) in connection with the preparation, negotiation and execution of this
Agreement and the other Loan Documents shall not exceed $5,000.00), (b) all
costs and expenses incurred by Lender in connection with the enforcement of this
Agreement or any other Loan Document, including, without limitation, the fees
and expenses of Lender's legal counsel, and (c) all other costs and expenses
incurred by Lender in connection with this Agreement or any other Loan Document,
including, without limitation, all costs, expenses, taxes, assessments, filing
fees, and other charges levied by a governmental authority or otherwise payable
in respect of this Agreement or any other Loan Document or in obtaining any
audit or appraisal in respect of the Collateral.
Section 11.2 Indemnification. Borrower hereby indemnifies Lender and each
Affiliate thereof and their respective officers, directors, employees,
attorneys, and agents from, and holds
CREDIT AGREEMENT -- Page 30
125
each of them harmless against, any and all losses, liabilities, claims, damages,
penalties, judgments, disbursements, costs, and expenses (including attorneys'
fees) to which any of them may become subject which directly or indirectly arise
from or relate to (a) the negotiation, execution, delivery, performance,
administration, or enforcement of any of the Loan Documents, (b) any of the
transactions contemplated by the Loan Documents, (c) any breach by Borrower of
any representation, warranty, covenant, or other agreement contained in any of
the Loan Documents, (d) the presence, release, threatened release, disposal,
removal, or cleanup of any Hazardous Substance located on, about, within, or
affecting any of the properties or assets of Borrower or any Subsidiary or (e)
any investigation, litigation, or other proceeding, including, without
limitation, any threatened investigation, litigation, or other proceeding
relating to any of the foregoing. Without limiting any provision of this
Agreement or of any other Loan Document, it is the express intention of the
parties hereto that each Person to be indemnified under this Section shall be
indemnified from and held harmless against any and all losses, liabilities,
claims, damages, penalties, judgments, disbursements, costs, and expenses
(including attorneys' fees) arising out of or resulting from the sole or
contributory negligence of the Person to be indemnified.
Section 11.3 Limitation of Liability. Neither Lender nor any Affiliate,
officer, director, employee, attorney, or agent of Lender shall have any
liability with respect to, and Borrower hereby waives, releases, and agrees not
to ▇▇▇ any of them upon, any claim for any special, indirect, incidental, or
consequential damages suffered or incurred by Borrower in connection with,
arising out of, or in any way related to, this Agreement or any of the other
Loan Documents, or any of the transactions contemplated by this Agreement or any
of the other Loan Documents. Borrower hereby waives, releases, and agrees not to
▇▇▇ Lender or any of Lender's Affiliates, officers, directors, employees,
attorneys, or agents for punitive damages in respect of any claim in connection
with, arising out of, or in any way related to, this Agreement or any of the
other Loan Documents, or any of the transactions contemplated by this Agreement
or any of the other Loan Documents.
Section 11.4 Lender Not Fiduciary. The relationship between Borrower and
Lender is solely that of debtor and creditor, and Lender has no fiduciary or
other special relationship with Borrower, and no term or condition of any of the
Loan Documents shall be construed so as to deem the relationship between
Borrower and Lender to be other than that of debtor and creditor.
Section 11.5 No Waiver; Cumulative Remedies. No failure on the part of
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power,
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege. The rights and remedies
provided for in this Agreement and the other Loan Documents are cumulative and
not exclusive of any rights and remedies provided by law.
Section 11.6 Successors and Assigns. This Agreement is binding upon and
shall inure to the benefit of Lender and Borrower and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations under this Agreement
CREDIT AGREEMENT -- Page 31
126
without the prior written consent of Lender. Any assignment in violation of this
Section 11.6 shall be void.
Section 11.7 Survival. All representations and warranties made in this
Agreement or any other Loan Document or in any documentation, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by Lender or any closing shall affect the representations and
warranties or the right of Lender to rely upon them. Without prejudice to the
survival of any other obligation of Borrower hereunder, the obligations of
Borrower under Article 4 and Sections 11.1 and 11.2 shall survive repayment of
the Note and termination of the Commitment.
Section 11.8 ENTIRE AGREEMENT; AMENDMENT AND RESTATEMENT OF TEXAS COMMERCE
BANK-ARLINGTON, N.A. DOCUMENTS; AMENDMENT. THIS AGREEMENT, THE NOTE, AND THE
OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG
THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. Without
limiting the generality of the foregoing, this Agreement and the other Loan
Documents amend and restated in their entirety the documentation assigned to
Lender pursuant to the Assignment of Notes and Liens described in Section 5.l(m)
hereof. The provisions of this Agreement and the other Loan Documents to which
Borrower is a party may be amended or waived only by an instrument in writing
signed by the parties hereto.
Section 11.9 Maximum Interest Rate. No provision of this Agreement or of
any other Loan Document shall require the payment or the collection of interest
in excess of the Maximum Rate. If any excess of interest in such respect is
hereby provided for, or shall be adjudicated to be so provided, in any Loan
Document or otherwise in connection with this loan transaction, the provisions
of this Section shall govern and prevail and neither Borrower nor the sureties,
guarantors, successors, or assigns of Borrower shall be obligated to pay the
excess amount of such interest or any other excess sum paid for the use,
forbearance, or detention of sums loaned pursuant hereto. In the event Lender
ever receives, collects, or applies as interest any such sum, such amount which
would be in excess of the maximum amount permitted by applicable law shall be
applied as a payment and reduction of the principal of the indebtedness
evidenced by the Note; and, if the principal of the Note has been paid in full,
any remaining excess shall forthwith be paid to Borrower. In determining whether
or not the interest paid or payable exceeds the Maximum Rate, Borrower and
Lender shall, to the extent permitted by applicable law, (a) characterize any
nonprincipal payment as an expense, fee, or premium rather than as interest, (b)
exclude voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire
CREDIT AGREEMENT - Page 32
127
contemplated term of the indebtedness evidenced by the Note so that interest for
the entire term does not exceed the Maximum Rate.
Section 11.10 Notices. All notices and other communications provided for in
this Agreement and the other Loan Documents to which Borrower is a party shall
be given or made in writing and telecopied, mailed by certified mail return
receipt requested, or delivered to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof; or, as to any
party at such other address as shall be designated by such party in a notice to
the other party given in accordance with this Section. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telecopy, subject to telephone confirmation of
receipt, or when personally delivered or, in the case of a mailed notice, when
duly deposited in the mails, in each case given or addressed as aforesaid;
provided, however, notices to Lender pursuant to Article 2 and Section 3.5 shall
not be effective until received by Lender.
Section 11.11 Applicable Law; Venue; Service of Process. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas and the applicable laws of the United States of America. This Agreement
has been entered into in Dallas County, Texas, and it shall be performable for
all purposes in Dallas County, Texas. Any action or proceeding against Borrower
under or in connection with any of the Loan Documents may be brought in any
state or federal court in Dallas County, Texas. Borrower hereby irrevocably (a)
submits to the nonexclusive jurisdiction of such courts, and (b) waives any
objection it may now or hereafter have as to the venue of any such action or
proceeding brought in any such court or that any such court is an inconvenient
forum. Borrower agrees that service of process upon it may be made by certified
or registered mail, return receipt requested, at its address specified or
determined in accordance with the provisions of Section 11.10. Nothing herein or
in any of the other Loan Documents shall affect the right of Lender to serve
process in any other manner permitted by law or shall limit the right of Lender
to bring any action or proceeding against Borrower or with respect to any of its
property in courts in other jurisdictions. Any action or proceeding by Borrower
against Lender shall be brought only in a court located in Dallas County, Texas.
Section 11.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
Section 11.13 Severability. Any provision of this Agreement held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section 11.14 Headings. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
CREDIT AGREEMENT - Page 33
128
Section 11.15 Non-Application of Chapter 15 of Texas Credit Code. The
provisions of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil
Statutes, Article 5069-15) are specifically declared by the parties hereto not
to be applicable to this Agreement or any of the other Loan Documents or to the
transactions contemplated hereby.
Section 11.16 Participations. Lender shall have the right at any time and
from time to time to grant participations in the Note and any other Loan
Documents. Each actual or proposed participant shall be entitled to receive all
information received by Lender regarding the credit worthiness of Borrower,
including, without limitation, information required to be disclosed to a
participant pursuant to Banking Circular 181 (Rev., August 2, 1984), issued by
the Comptroller of the Currency (whether the actual or proposed participant is
subject to the circular or not).
Section 11.17 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF LENDER IN
THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
BORROWER:
CRAFTMADE INTERNATIONAL, INC.
By:
----------------------------
Name:
---------------------
Title:
---------------------
Address for Notices:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.:
-----------------
Telephone No.:
-----------------
Attention:
-----------------
CREDIT AGREEMENT - Page 34
129
LENDER:
NATIONSBANK OF TEXAS, N.A.
By:
--------------------------
Name:
-------------------
Title:
-------------------
Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President
CREDIT AGREEMENT - Page 35
130
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT
------- ------------------------------------
"A" Note
"B" Advance Request Form
"C" Borrowing Base Report
"D" Security Agreement
"E" Guaranty
"F" Assignment of Life Insurance Policy
"G" Guarantor Security Agreement
"H" Covenant Compliance Certificate
INDEX TO SCHEDULES
SCHEDULE DESCRIPTION OF SCHEDULE
-------- ------------------------------------
1 Locations of Collateral
2 Existing Litigation
3 Existing Debt
4 List of Subsidiaries
5 Existing Liens
6 UCC Filing Jurisdictions
7 Liens to be Released or Assigned
CREDIT AGREEMENT - Page 36
131
SCHEDULE 1
TO
CREDIT AGREEMENT
Locations of Collateral
[TO BE PROVIDED BY BORROWER]
1. Borrower
2. Guarantor
SCHEDULE 1, Locations of Collateral - Page 1
132
SCHEDULE 2
TO
CREDIT AGREEMENT
Existing Litigation
[TO BE PROVIDED BY BORROWER]
SCHEDULE 2, Existing Litigation - Page 1
133
SCHEDULE 3
TO
CREDIT AGREEMENT
Existing Debt
[TO BE PROVIDED BY BORROWER]
SCHEDULE 3, Existing Debt - Page 1
134
SCHEDULE 4
TO
CREDIT AGREEMENT
List of Subsidiaries
[TO BE PROVIDED BY BORROWER]
NAME OF JURISDICTION OF PERCENTAGE OF STOCK
SUBSIDIARY INCORPORATION OWNED BY BORROWER
----------------------------------- --------------- -------------------
1. Durocraft International, Inc. Texas 100%
SCHEDULE 4, List of Subsidiaries - Solo Page
135
SCHEDULE 5
TO
CREDIT AGREEMENT
Existing Liens
[TO BE PROVIDED BY BORROWER]
SCHEDULE 5, Existing Liens - Page 1
136
SCHEDULE 6
TO
CREDIT AGREEMENT
UCC Filing Jurisdictions
[TO BE PROVIDED BY LENDER]
1. Borrower
Secretary of State of Texas
2. Guarantor
Secretary of State of Texas
SCHEDULE 6, UCC Filing Jurisdictions - Solo Page
137
SCHEDULE 7
TO
CREDIT AGREEMENT
Liens to be Released or Assigned
[TO BE PROVIDED BY LENDER]
SCHEDULE 7, Liens to be Released or Assigned - Page 1
138
FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment") is entered into effective as of the 13th day of December, 1993, by
and between CRAFTMADE INTERNATIONAL, INC., a Delaware corporation (the
"Borrower"), and NATIONSBANK OF TEXAS, N.A., a national banking association (the
"Lender").
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender entered into a First Amended and
Restated Credit Agreement dated as of January 11, 1993 (the "Credit Agreement"),
pursuant to which, among other things, the Lender agreed to make and maintain
certain revolving loans to the Borrower, upon the terms contained in the Credit
Agreement; and
WHEREAS, the Borrower has requested the Lender to modify the Credit
Agreement, and the Lender is willing to make such modifications under the terms
and provisions of this Amendment;
NOW, THEREFORE, for and in consideration of these premises and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Lender hereby agree as follows:
1. Terms. All capitalized terms defined in the Credit Agreement and not
otherwise defined herein shall have the same definitions when used herein as set
forth in the Credit Agreement.
2. Amendments to Credit Agreement.
2.1 Amendments to Section 1.1 of the Credit Agreement. The definition
of "Applicable Rate" contained in Section 1.1 of the Credit Agreement is
hereby amended and restated to read in its entirety as follows:
" 'Applicable Rate' means (a) during the period that an Advance is a
Prime Rate Advance, the Prime Rate and (b) during the period that an
Advance is a CD Advance, the greater of (i) the Adjusted CD Rate plus
two and one-quarter of one percent (2.25%) or (ii) the Prime Rate as the
Prime Rate is calculated as of the first day of the applicable Interest
Period."
2.2 Amendment to Section 2.7 of the Credit Agreement. Section 2.7 of
the Credit Agreement is hereby amended and restated to read in its entirety
as follows:
"Section 2.7 Reduction or Termination of Commitment. Borrower shall have
the right at any time to terminate in whole or from time to time to
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irrevocably reduce in part the Commitment upon at least three (3)
Business Days prior written notice to Lender specifying the effective
date thereof, whether a termination or reduction is being made, and the
amount of any partial reduction; provided, however, that each partial
reduction shall be in the amount of Two Hundred Fifty Thousand Dollars
($250,000.00) or an integral multiple thereof and Borrower shall
simultaneously prepay the amount by which the aggregate outstanding
amount of all Advances exceeds the Commitment (after giving effect to
such notice) plus accrued and unpaid interest on the principal amount so
prepaid. The Commitment may not be reinstated after it has been
terminated or reduced."
2.3 Amendment to Section 3.1 of the Credit Agreement. Section 3.1 of
the Credit Agreement is hereby amended and restated to read in its entirety
as follows:
"Section 3.1 Method of Payment. All payments of principal, interest, and
other amounts to be made by Borrower under this Agreement, the Note, and
the other Loan Documents shall be made to Lender at its office at ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, without setoff, deduction, or
counterclaim, in Dollars and in immediately available funds. Borrower
shall, at the time of making each such payment, specify to Lender the
sums payable by Borrower under this Agreement, the Note, or other Loan
Document to which such payment is to be applied (and in the event
Borrower fails to so specify, or if an Event of Default has occurred and
is continuing, Lender may apply such payment to the Obligations in such
order and manner as it may elect in its sole discretion). Whenever any
payment under this Agreement, the Note, or any other Loan Document shall
be stated to be due on a day that is not a Business Day, such payment
may be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of the payment of
interest."
3. Representations and Warranties. The representations and warranties of
the Borrower made in the Credit Agreement are true and correct as of the date
hereof as if made on the date hereof.
4. Costs. The Borrower agrees to pay all costs incurred in connection with
the negotiation, preparation, execution and consummation of this Amendment and
the transactions contemplated by this Amendment, including without limitation
the fees and expenses of the Lender's attorneys.
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140
5. Miscellaneous.
5.1 Headings. Section headings are for reference only, and shall not
affect the interpretation or meaning of any provision of this Amendment.
5.2 Effect of this Amendment. The Credit Agreement, as amended by this
Amendment, shall remain in full force and effect except that any reference
therein, or in any other Loan Document, referring to the Credit Agreement,
shall be deemed to refer to the Credit Agreement as amended by this
Amendment.
5.3 Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
5.4 Counterparts. This Amendment may be executed by the different
parties hereto on separate counterparts, each of which, when so executed,
shall be deemed an original but all such counterparts shall constitute but
one and the same Amendment.
5.5 NO ORAL AGREEMENTS. THE CREDIT AGREEMENT, AS AMENDED BY THIS
AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE ENTIRE
AGREEMENT BETWEEN THE PARTIES, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this Amendment
to be executed by their respective duly authorized officers as of the date first
above written.
CRAFTMADE INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
NATIONSBANK OF TEXAS, N.A.
By: /s/ ▇▇▇▇ POINTS
------------------------------
Name: ▇▇▇▇ Points
Title: Vice President
3
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SECOND AMENDMENT TO
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment") is entered into effective as of the 30th day of March, 1994, by and
between CRAFTMADE INTERNATIONAL, INC., a Delaware corporation (the "Borrower"),
and NATIONSBANK OF TEXAS, N.A., a national banking association (the "Lender").
W I T N E S S E T H :
WHEREAS, the Borrower and the Lender entered into a First Amended and
Restated Credit Agreement dated as of January 11, 1993 (the "Original Credit
Agreement"), pursuant to which, among other things, the Lender agreed to make
and maintain certain revolving loans to the Borrower, upon the terms contained
in the Original Credit Agreement; and
WHEREAS, the Borrower and the Lender entered into that certain First
Amendment to First Amended and Restated Credit Agreement dated as of December
13, 1993 (the "First Amendment"), modifying certain provisions of the Original
Credit Agreement (the Original Credit Agreement, as amended by the First
Amendment, is referred to hereinafter as the "Credit Agreement"); and
WHEREAS, the Borrower has requested the Lender to modify the Credit
Agreement further, and the Lender is willing to make such modifications under
the terms and provisions of this Amendment;
NOW, THEREFORE, for and in consideration of these premises and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Lender hereby agree as follows:
1. Terms. All capitalized terms defined in the Credit Agreement and not
otherwise defined herein shall have the same definitions when used herein as set
forth in the Credit Agreement.
2. Amendments to Credit Agreement.
2.1 Amendments to Section 8.4 of the Credit Agreement. Section 8.4 of
the Credit Agreement is hereby amended and restated to read in its entirety
as follows:
"Section 8.4 Restricted Payments. Borrower will not declare or pay any
dividends or make any other payment or distribution (in cash, property,
or obligations) on account of its capital stock, or redeem, purchase,
retire,
142
or otherwise acquire any of its capital stock, or set apart any money
for a sinking or other analogous fund for any dividend or other
distribution on its capital stock or for any redemption, purchase,
retirement, or other acquisition of any of its capital stock, or grant
or issue any capital stock or any warrant, right, or option pertaining
to its capital stock, or issue any security convertible into capital
stock, or permit any of its Subsidiaries to purchase or otherwise
acquire any capital stock of Borrower or another Subsidiary; provided,
however, that so long as no Potential Default or Event of Default
exists, Borrower may pay quarterly dividends on its capital stock, in an
amount not to exceed forty percent (40%) of Borrower's net profit before
taxes, as determined on a quarterly basis in accordance with GAAP (as
reflected in the monthly financial statements delivered by Borrower to
Lender in accordance with SECTION 7.1(b) of this Agreement and as
confirmed by the annual financial statements delivered by Borrower to
Lender in accordance with SECTION 7.1(a) of this Agreement), unless the
payment of any such dividend would create or result in the existence of
a Default or Potential Default."
3. Representations and Warranties. The representations and warranties of
the Borrower made in the Credit Agreement are true and correct as of the date
hereof as if made on the date hereof.
4. Costs. The Borrower agrees to pay all costs incurred in connection with
the negotiation, preparation, execution and consummation of this Amendment and
the transactions contemplated by this Amendment, including without limitation
the fees and expenses of the Lender's attorneys.
5. Miscellaneous.
5.1 Headings. Section headings are for reference only, and shall not
affect the interpretation or meaning of any provision of this Amendment.
5.2 Effect of this Amendment. The Credit Agreement, as amended by this
Amendment, shall remain in full force and effect except that any reference
therein, or in any other Loan Document, referring to the Credit Agreement,
shall be deemed to refer to the Credit Agreement as amended by this
Amendment.
5.3 Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
5.4 Counterparts. This Amendment may be executed by the different
parties hereto on separate counterparts, each of which, when so executed,
shall be deemed an original but all such counterparts shall constitute but
one and the same Amendment.
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143
5.5 NO ORAL AGREEMENTS. THE CREDIT AGREEMENT, AS AMENDED BY THIS
AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE ENTIRE
AGREEMENT BETWEEN THE PARTIES, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this Amendment
to be executed by their respective duly authorized officers as of the date first
above written.
CRAFTMADE INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
NATIONSBANK OF TEXAS, N.A.
By: /s/ ▇▇▇▇ POINTS
Name: ▇▇▇▇ Points
Title: President
3
144
THIRD AMENDMENT TO
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment") is entered into effective as of the 30th day of June, 1994, by and
between CRAFTMADE INTERNATIONAL, INC., a Delaware corporation (the "Borrower"),
and NATIONSBANK OF TEXAS, N.A., a national banking association (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender entered into a First Amended and
Restated Credit Agreement dated as of January 11, 1993 (the "Original Credit
Agreement"), pursuant to which, among other things, the Lender agreed to make
and maintain certain revolving loans to the Borrower, upon the terms contained
in the Original Credit Agreement; and
WHEREAS, the Borrower and the Lender entered into that certain First
Amendment to First Amended and Restated Credit Agreement dated as of December
13, 1993 (the "First Amendment"), modifying certain provisions of the Original
Credit Agreement; and
WHEREAS, the Borrower and the Lender entered into that certain Second
Amendment to First Amended and Restated Credit Agreement dated as of March 30,
1994 (the "Second Amendment"), modifying certain provisions of the Original
Credit Agreement (the Original Credit Agreement, as amended by the First
Amendment and the Second Amendment, is referred to hereinafter as the "Credit
Agreement"); and
WHEREAS, the Borrower has requested the Lender to modify the Credit
Agreement further, and the Lender is willing to make such modifications under
the terms and provisions of this Amendment;
NOW, THEREFORE, for and in consideration of these premises and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Lender hereby agree as follows:
1. Terms. All capitalized terms defined in the Credit Agreement and not
otherwise defined herein shall have the same definitions when used herein as set
forth in the Credit Agreement.
145
2. Amendments to Credit Agreement.
2.1 Amendment to Definition of "Commitment". The definition of
"Commitment" contained in Section 1.1 of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:
"Commitment" means the obligation of Lender to make Advances hereunder
in an aggregate principal amount at any time outstanding up to but not
exceeding Eight Million Dollars ($8,000,000), as such amount may be
reduced pursuant to Section 2.7 or otherwise.
2.2 Addition of Section 2.8 to the Credit Agreement. An new Section
2.8 is hereby added to the Credit Agreement to read in its entirety as
follows:
2.8 Letters of Credit. At the request of Borrower, and upon execution of
letter of credit documentation satisfactory to Lender (including,
without limitation, an Application and Agreement for Commercial Utter of
Credit [for documentary letters of credit] or Standby Letter of Credit
Application and Agreement [for standby letters of credit] for each such
letter of credit in the form attached hereto as Exhibit "I" (the
"Application"), Lender shall issue documentary or standby letters of
credit ("Letters of Credit") from time to time for the account of
Borrower for its benefit or the benefit of its Subsidiaries in a face
amount not exceeding in the aggregate at any time outstanding the lesser
of (a) $1,000,000.00 or (b) $8,000,000 minus the aggregate outstanding
principal balance of all Advances. The Commitment shall at all times be
reduced by the aggregate face amount of outstanding Letters of Credit.
The Letters of Credit shall be on terms mutually acceptable to Borrower
and Lender and no Letter of Credit shall have an expiration date later
than the Termination Date. Any amount paid by Lender on any Letter of
Credit which is not immediately reimbursed by Borrower shall be treated
as an Advance without the necessity for any request by Borrower.
Borrower shall pay to Lender, at the time of issuance of each Letter of
Credit, a fee equal to the greater of (a) one percent (1.0%) per annum
times the face amount of the Letter of Credit or (b) One Hundred Dollars
($100.00). In connection with the issuance of any Letters of Credit,
Borrower shall pay to Lender its standard fees and charges, including
the standard fees and charges provided for in the Application. The
obligations and indebtedness of Borrower to Lender under this Section
2.8, the Letters of Credit, and the Applications, shall be part of the
Obligations.
2.3 Addition of Exhibit "K" to Credit Agreement. A new Exhibit "K" is
hereby added to the Credit Agreement to read in its entirety as provided in
Exhibit "K" to this Amendment.
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146
3. Representations and Warranties. The representations and warranties of
the Borrower made in the Credit Agreement are true and correct as of the date
hereof as if made on the date hereof.
4. Conditions Precedent. The effectiveness of this Amendment is contingent
upon the satisfaction of the following conditions precedent:
4.1 Execution of New Note. Borrower shall have executed and delivered
to Lender a promissory note, evidencing the increased Commitment, in the
form attached hereto as Exhibit "A".
4.2 Corporate Certificates. Each of Borrower, Durocraft and C/D/R
shall have delivered to Lender a Corporate Certificate in form and
substance acceptable to Lender, certifying as to resolutions approving this
Amendment, the incumbency of their officers authorized to execute this
Amendment, their articles of incorporation, bylaws, existence, good
standing and such other matters as may be requested by Lender.
4.3 No Default. No Event of Default of Potential Default shall exist
under the Credit Agreement or would result from the execution of this
Agreement.
5. Costs. The Borrower agrees to pay all costs incurred in connection with
the negotiation, preparation, execution and consummation of this Amendment and
the transactions contemplated by this Amendment, including without limitation
the fees and expenses of the Lender's attorneys.
6. Miscellaneous.
6.1 Headings. Section headings are for reference only, and shall not
affect the interpretation or meaning of any provision of this Amendment.
6.2 Effect of this Amendment. The Credit Agreement, as amended by this
Amendment, and the Note, as amended and restated in the form attached
hereto as Exhibit "A", shall remain in full force and effect except that
any reference therein, or in any other Loan Document, referring to the
Credit Agreement or the Note, shall be deemed to refer to the Credit
Agreement as amended by this Amendment or the Note as amended and restated
in the form attached hereto as Exhibit "A".
6.3 Ratification of Loan Documents. Borrower hereby ratifies and
confirm that the Loan Documents (as modified hereby) continue to be valid,
binding and enforceable against Borrower and Guarantor and continue to
create a valid first priority pledge and assignment of, and continuing
security interest in, the Collateral as security for the Obligations. There
are no defenses, offsets or counterclaims to the performance by the
Borrower and Guarantor of their obligations under the Loan Documents.
3
147
6.4 Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
6.5 Counterparts. This Amendment may be executed by the different
parties hereto on separate counterparts, each of which, when so executed,
shall be deemed an original but all such counterparts shall constitute but
one and the same Amendment.
6.6 NO ORAL AGREEMENTS. THE CREDIT AGREEMENT, AS AMENDED BY THIS
AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE ENTIRE
AGREEMENT BETWEEN THE PARTIES, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this Amendment
to be executed by their respective duly authorized officers as of the date first
above written.
CRAFTMADE INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
NATIONSBANK OF TEXAS, N.A.
By: /s/ ▇▇▇▇ POINTS
Name: ▇▇▇▇ Points
Title: Vice President
4
148
CONSENT OF DUROCRAFT
Durocraft hereby represents, warrants, covenants and agrees to and with
Lender that (1) Durocraft is aware of this Amendment and the transactions
contemplated herein (this Amendment and such transactions being hereinafter
collectively called the "Modification"), (2) Durocraft consents to the
Modification, (3) notwithstanding the Modification, the Durocraft Guaranty shall
be and remain a continuing, absolute, unconditional and irrevocable guaranty of
payment and performance of the Guaranteed Indebtedness, as defined in the
Durocraft Guaranty, binding and enforceable in accordance with the terms of such
guaranty, and such guaranty shall not be deemed to have been terminated,
impaired, modified or otherwise affected by the Modification, except that the
obligations guaranteed shall include the Obligations as modified by the
Modification in addition to any other amounts included in the Guaranteed
Indebtedness, (4) notwithstanding the Modification, the Durocraft Security
Agreement continues to create a first priority pledge and assignment of, and
continuing security interest in, the collateral covered thereby and shall be and
remain valid, binding and enforceable in accordance with the terms of such
security agreement, and such security agreement shall not be deemed to have been
terminated, impaired, modified or otherwise affected by the Modification, except
that the obligations secured thereby shall include the Obligations as modified
by the Modification in addition to any other amounts included in the secured
obligations, and (5) there are no claims, defenses, counterclaims or offsets to
the liability of Durocraft under the Durocraft Guaranty or the Durocraft
Security Agreement.
EXECUTED effective as of June 30, 1994.
DUROCRAFT INTERNATIONAL, INC.,
a Texas corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
5
149
CONSENT OF C/D/R
C/D/R hereby represents, warrants, covenants and agrees to and with Lender
that (1) C/D/R is aware of this Amendment and the transactions contemplated
herein (this Amendment and such transactions being hereinafter collectively
called the "Modification"), (2) C/D/R consents to the Modification, (3)
notwithstanding the Modification, the C/D/R Guaranty shall be and remain a
continuing, absolute, unconditional and irrevocable guaranty of payment and
performance of the Guaranteed Indebtedness, as defined in the C/D/R Guaranty,
binding and enforceable in accordance with the terms of such guaranty, and such
guaranty shall not be deemed to have been terminated, impaired, modified or
otherwise affected by the Modification, except that the obligations guaranteed
shall include the Obligations as modified by the Modification in addition to any
other amounts included in the Guaranteed Indebtedness, and (4) there are no
claims, defenses, counterclaims or offsets to the liability of C/D/R under the
C/D/R Guaranty.
EXECUTED effective as of June 30, 1994.
C/D/R INCORPORATED,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President
6
150
Exhibit "A"
Form of Promissory Note
7
151
PROMISSORY NOTE
$8,000,000.00 Dallas, Texas June 30, 1994
FOR VALUE RECEIVED, the undersigned, CRAFTMADE INTERNATIONAL, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of
NATIONSBANK OF TEXAS, N.A., a national banking association at its offices at ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, in lawful money of the United
States of America, the principal sum of EIGHT MILLION DOLLARS ($8,000,000.00),
or so much thereof as may be advanced and outstanding hereunder, together with
interest on the outstanding principal balance as hereinafter described.
This Note is the Note provided for in that certain First Amended and
Restated Credit Agreement dated as of January 11, 1993, between Maker and Payee
(such Credit Agreement, as the same has been amended pursuant to that certain
First Amendment to First Amended and Restated Credit Agreement dated as of
December 13, 1993, that certain Second Amendment to First Amended and Restated
Credit Agreement dated as of March 30, 1994, and that certain Third Amendment to
First Amended and Restated Credit Agreement dated as of June 30, 1994, and as
the same may be further amended or otherwise modified, herein referred to as the
"Agreement"). Capitalized terms not otherwise defined herein shall have the same
meanings as set forth in the Agreement. Reference is hereby made to the
Agreement for provisions affecting this Note, including, without limitation,
provisions regarding the Maker's rights to borrow, repay and reborrow hereunder,
the limitation of interest charged hereunder, the Collateral securing this Note,
Potential Defaults and Events of Default and Payee's rights arising as a result
of the occurrence thereof. This Note is executed in increase, amendment and
restatement, but not in novation, discharge or satisfaction of the indebtedness
evidenced by, that certain Promissory Note in the maximum principal amount of
$6,000,000 dated as of January 11, 1993, made by Maker payable to the order of
Payee (the "Prior Note"). All amounts previously outstanding under the Prior
Note as of the date hereof, shall hereafter be due and payable in accordance
with the provisions of, and outstanding, under, this Note. The Prior Note
modified in its entirety and evidenced indebtedness previously evidenced by the
promissory note (or notes) executed by Maker and payable to the order of Texas
Commerce Bank - Arlington, National Association which has been assigned to Payee
pursuant to the Assignment of Notes and Liens described in Section 5.1 of the
Agreement.
Subject to the terms of the Agreement, the outstanding principal balance
hereunder shall bear interest prior to maturity at a varying rate per annum
which shall from day to day be equal to the lesser of (a) the Maximum Rate or
(b) the Applicable Rate, each such change in the rate of interest charged
hereunder to become effective, without notice to Maker, on the effective date of
each change in the Applicable Rate or the Maximum Rate, as the case may be;
provided, however, if at any time the rate of interest specified in clause (b)
preceding shall exceed the Maximum Rate, thereby causing the interest rate
hereon to be limited to the Maximum Rate, then any subsequent reduction in the
Applicable Rate shall not reduce the rate of interest hereon
PROMISSORY NOTE - Page 1
152
below the Maximum Rate until such time as the aggregate amount of interest
accrued hereon equals the aggregate amount of interest which would have accrued
hereon if the interest rate specified in clause (b) preceding had at all times
been in effect. All outstanding principal advanced under this Note shall be due
and payable on the Termination Date. Accrued and unpaid interest on this Note
shall be due and payable on the last Business Day of each month, commencing
January 29, 1993, and on the Termination Date. All past due principal and
interest shall bear interest at the Default Rate.
Interest on the indebtedness evidenced by this Note shall be computed on
the basis of a year of 360 days and the actual number of days elapsed (including
the first day but excluding the last day) unless such calculation would result
in a usurious rate, in which case interest shall be calculated on the basis of a
year of 365 or 366 days, as the case may be.
If the holder hereof expends any effort in any attempt to enforce payment
of all or any part or installment of any sum due the holder hereunder, or if
this Note is placed in the hands of an attorney for collection, or if it is
collected through any legal proceedings, Maker agrees to pay all costs, expenses
and fees incurred by the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the laws of
the State of Texas and the applicable laws of the United States of America. This
Note is performable in Dallas County, Texas.
Maker and each surety, guarantor, endorser and other party ever liable for
payment of any sums of money payable on this Note jointly and severally waive
notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other
formalities of any kind, and consent to all extensions without notice for any
period or periods of time and partial payments, before or after maturity, and
any impairment of any collateral securing this Note, all without prejudice to
the holder. The holder shall similarly have the right to deal in any way, at any
time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forbearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
Maker hereby authorizes the holder hereof to record in its records all
advances made to Maker hereunder and all payments made on account of the
principal thereof, which records shall be prima facie evidence as to the
outstanding principal amount of this Note; provided, however, any failure by the
holder hereof to make any such records shall not limit or otherwise affect the
obligations of Maker under the Agreement or this Note.
THIS WRITTEN AGREEMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS AS WRITTEN,
REPRESENTS THE FINAL AGREEMENT BETWEEN MAKER AND PAYEE AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF MAKER
PROMISSORY NOTE -- Page 2
153
AND PAYEE. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN MAKER AND PAYEE.
CRAFTMADE INTERNATIONAL, INC.
By:
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
PROMISSORY NOTE -- Page 3
154
Exhibit "K"
Form of Application
8
155
NationsBank Application and Agreement for
NationsBank of Texas, N.A. Commercial Letter of Credit
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------ Date:
("Bank") ----------------
The undersigned (hereinafter, whether one or more, called "Customer") hereby
requests Bank to issue an irrevocable Letter of Credit ("the Credit") in any of
the Bank's usual forms, or substantially in the form specified below, or
attached hereto, to be transmitted as follows by:
/ / Airmail / / Airmail with Brief Cable / / Full Cable / / Federal Express
NOTE: Authenticated cables may be transmitted by Bank to other banks only. Cable
charges and Federal Express charges are to be borne by Customer. A street
address is required if Federal Express is indicated.
--------------------------------------------------------------------------------
To Be Transmitted Through: (Name and address of advising bank)
For the Amount Of: (Name and address of
buyer)
or, if none is indicated, through any of Bank's correspondents
or direct to Beneficiary. (hereinafter called "Account Party" or
"Customer")
--------------------------------------------------------------------------------
In Favor Of: (Name and address of Beneficiary)
Up to the Aggregate Amount Of:
----------------------------------------
Expiring On:
(herein called "Beneficiary") (Latest date drafts are to be presented
to the Bank or to a negotiating bank)
--------------------------------------------------------------------------------
Available By Drafts At:_____________ (indicate tenor of draft, such as "right")
drawn on Bank or any of its correspondents, presented to the drawee or to a
negotiating bank on or before the above expiration date, for __________ % (100%
unless otherwise indicated) of total invoice amount, when accompanied by the
following documents ("Documents") as indicated by a ▇▇▇▇ in the box appearing
before each:
/ / Commercial invoice in ___________ originals and __________ copies.
/ / Full set of clean on board ocean ▇▇▇▇(s) of lading:
/ / Consigned to Account Party
/ / Consigned to
/ / Drawn to order of shipper and blank endorsed:
Marked freight: / / Collect / / Prepaid
Notify: / / Account Party / / and ______________________
/ / Copy of Air Waybill:
/ / Consigned to Account Party
/ / Consigned to ________________________________________________
Marked freight: / / Collect / / Prepaid
Notify: / / Account Party / / and
/ / Special Customer Invoice in ________ originals and ________ copies (Form
No. )
/ / Insurance policy or certificate covering _______________________ risks,
for _______ % of invoice amount, in one original and _________ copies
/ / Packing list in _______ originals and _______ copies
/ / Certificate of Origin / / Form A, in ___________ originals and _______
copies
Indicate additional documents and/or special instructions on overload.
Merchandise Description (to be stated exactly as follows on
commercial invoice):
(briefly describe goods, omitting details, and specify by date and/or number the
particular purchase order, pro forma invoice or other document to which the
invoice is to make reference)
Price basis and shipping terms are: ___________________________________________
(indicate basis, such as FAS or FOS named part of leading:
C & F or CIF name part of discharge; or other)
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▇▇▇▇ of Lading, Air Waybill or alternate transportation document is to indicate
shipment/dispatch/taking in charge from ________________________________________
to _____________________________________________________________________________
and is to be dated not later than ______________________________________________
Partial Shipment are:
/ / Permitted
/ / Prohibited
Transhipment is:
/ / Permitted
/ / Prohibited
/ / Permitted in ____________ (country) only
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Documents must be presented within ___________ days after the date of the ▇▇▇▇
of lading, air waybill or other transportation document.
All handling charges other than those of issuing Bank are for the account
of: / / Beneficiary / / Account Party.
For drafts on term basis, discount charges are for the account of:
/ / Beneficiary / / Account Party.
For Foreign -- Beneficial Customers Only:
Customer hereby irrevocably appoints __________ as Agent for Service of
Process (the "Process Agent"), with
an office on the date hereof at ________, ________, Texas, ______, United States
(home address) (city) (zip)
In consideration of the issuance by Bank of the Credit, Customer promises to pay
Bank, on demand, the following commission or charge, and any and all other
charges and expenses (including, but not limited to, attorneys' fees) which may
be paid or incurred by Bank in connection with the Credit. The commission or
charge herein shall be that customarily charged by Bank for undertaking to issue
letters of credit and/or accept drafts thereunder, as shown in the printed
schedule of charges currently in effect and a copy of which has been furnished
to Customer; provided, that if the blank at the end of this sentence is
completed by Bank, such commission or charge shall be ______________________ .
Customer's Demand Deposit Account Number to debit at time of funding: __________
.
156
In consideration of the issuance by Bank of the Credit, Customer agrees with
Bank as follows:
Section 1. Customer promises to pay to the order of Bank, on demand, an amount
equal to (i) the face amount of each draft drawn or purporting to be drawn under
the Credit in United States currency, and (ii) the equivalent in United States
currency of the face amount of each draft drawn or purporting to be drawn under
the Credit in a currency other than that of the United States, such equivalent
to be calculated on the basis of Bank's selling rate of exchange in effect (for
the date on which Bank pays such draft or reimburses any of its correspondents
which paid such draft) for cable transfers to the place where and in the
currency in which such draft is payable; provided, that with respect to each
draft referred to in the preceding clause (i) and (ii) which is a time draft, if
demand for payment thereof has not previously been made by Bank, as above
provided, Customer shall in any event, and without demand, make such payment to
Bank in accordance with the preceding provisions no later than one business day
prior to the maturity of such draft if it is payable at Bank's principal office,
or, if such draft is payable at another place, than no later than the date on
which funds for the payment of such draft would need to be transmitted by Bank
in order normally to arrive at the place of payment one day prior to the
maturity of such draft. Bank will notify Customer of the amount and maturity
date of each time draft under the Credit. Customer shall comply with any and all
governmental exchange regulations now or hereafter applicable to any foreign
exchange provided Bank pursuant to this Section 1, and shall indemnify and bold
Bank harmless from any failure so to comply. In addition, and without limiting
the generality of the foregoing, if any law, regulation or the interpretation
thereof by any court or administrative or governmental authority shall either
impose, modify or deem applicable any capital, reserve, insurance premium or
similar requirement against letters of credit issued by Bank and the result
thereof shall be to increase the cost to Bank of issuing or maintaining any
letter of credit, then, on demand by Bank, Customer further promises to pay to
Bank, from time to time, additional amounts which shall be sufficient to
compensate Bank for the portion of such increased costs allocable to the Credit.
A written advice(s) setting forth in reasonable detail such costs incurred by
Bank, submitted by Bank to Customer from time to time, shall be conclusive,
absent manifest error, as to the amount thereof.
Section 2. All sums payable by Customer to Bank under the provisions of Section
1 hereof shall bear interest on the unpaid balance thereof from the date when
due until paid at the maximum rate of interest then chargeable to Customer under
applicable law (provided, that if there is more than one Customer and there are
different maximum rates of interest applicable to them under such law, then the
lowest such maximum rate shall apply hereunder to all of them). In addition, if
this Agreement is placed in the hands of an attorney for collection, or if any
sums payable hereunder are sought to be collected by suit or through any other
judicial or administrative proceedings (including, but not limited to, probate
and bankruptcy proceedings), the Customer promises to pay to Bank, on demand, as
attorneys' fees, a sum equal to ten percent (10%) of the unpaid balance of all
sums then due hereunder.
Section 3. The term "Obligation", as used in this Agreement, shall mean: (i) all
sums at any time payable or which may become payable by Customer to Bank
hereunder (whether contingent or absolute), including the commission, charges
and expenses referred to on the first page hereof, the sums payable under
Section 5, and the interest and attorneys' fees provided for in Section 2; and
(ii) all other indebtedness, obligations and liabilities to Bank of each
Customer, whether now existing or hereafter arising, and regardless of whether
such indebtedness, obligations and liabilities be direct or indirect, primary or
secondary, joint, several, joint and several, fixed or contingent or originally
performable in favor of Bank or in favor of a party other than Bank. All sums
comprising the Obligation shall be payable at Bank's office as shown on the
first page of this Agreement, in United States currency, and in immediately
available funds.
Section 4. The goods described or referred to in any one or more of the
Documents, or with respect to which any one or more of the Documents is issued,
are hereinafter collectively call the "Goods". As security for the payment and
performance of the Obligation, Customer hereby grants to Bank a security
interest in and to the following, (whether or not the Documents, Goods and other
property be released to or upon the order of Customer under trust or bailee
receipt), hereinafter called "Collateral": (i) all shipping documents
(including, but not limited to, bills of lading and air waybills), warehouse
receipts and other documents relating to the Credit or to the shipment and
storage of the Goods, including all documents accompanying drafts drawn under
the Credit and all Documents described on the first page hereof; (ii) the Goods
and all other tangible personal property described in or covered by any of the
documents referred to in the preceding clause or which are in any way related to
any transactions contemplated hereunder or under the Credit; (iii) all accounts,
contract rights, instruments, chattel paper and general intangibles arising out
of, created with respect to, or in any way related to any of the foregoing; (iv)
all other property of each Customer now or at any time hereafter in the
possession of Bank or under its control, or in the possession or under the
control of any third party acting in its behalf; and (v) all proceeds of the
property referred to in the preceding clauses hereof, including, but not limited
to, insurance proceeds. All or any of such Collateral, and the proceeds thereof,
coming into Bank's possession, or that of any of Bank's correspondents, may be
held and disposed of by Bank as provided in Section 10 hereof, it being
understood that the receipt by Bank, or by any of Bank's correspondents, at any
time of other security of whatsoever nature, including cash, shall not be deemed
a waiver of any of Bank's rights or powers hereunder. Upon any transfer, sale,
delivery, surrender or endorsement of any ▇▇▇▇ of lading, warehouse receipt or
other document at any time held by Bank, or held for Bank's account by any of
its correspondents in reliance hereon, Customer will indemnify and hold Bank and
its correspondents harmless from and against each and every claim, demand,
action or suit which may arise by reason thereof. Customer hereby authorizes
Bank, at Bank's option, at any time and regardless of whether or not any
property then held by Bank as security hereunder is deemed by Bank to be
adequate, to apply toward payment of the Obligation any and all moneys of each
Customer, whether now or hereafter on deposit with Bank, or, in Bank's
discretion, to hold any such moneys (without any obligation to pay interest
thereon) as security for payment of the Obligation until the exact amount
thereof, if any, shall have been definitely ascertained by Bank. Bank's rights
and security interest hereunder shall continue unimpaired and Customer shall be
and remain obligated in accordance with the terms and provisions hereof
notwithstanding the release or substitution of any of the Collateral or of any
rights or interests therein, or any delay, extension of time, renewal,
compromise or other indulgence granted by Bank with respect to the Obligation.
Section 5. Customer represents and warrants that this Agreement has been duly
and validly executed and delivered by or on behalf of Customer and that shipment
of the Goods and all financial arrangements relating thereto will not violate
any United States Treasury Foreign Asset Control Regulations or any other laws,
rules or regulations of the United States or any other government having
jurisdiction over such shipment or financial arrangements.
Section 6. Customer covenants and agrees to (i) procure promptly any import,
export or other licenses required in connection with the import, export, or
shipping of the Goods, and, at Bank's request, promptly furnish it with copies
of such licenses; (ii) comply fully with any and all foreign and domestic
governmental laws, rules and regulations applicable to the shipment of the Goods
and any financial arrangements made with respect thereto, and, at Bank's
request, furnish Bank with evidence satisfactory to it of such compliance, (iii)
at all times keep the Goods covered by insurance satisfactory to Bank, issued by
insurers acceptable to Bank, and at Bank's request, assign to Bank the policies
or certificates evidencing such insurance, or, at Bank's option, make the loss
or adjustment, if any, payable to Bank, and furnish to Bank, if demanded,
evidence of acceptance by the insurers of such assignments; (iv) from time to
time promptly execute and deliver to Bank all such other security agreements,
assignments, certificates, supplemental writings and financing statements, and
do all other acts or things, as Bank may reasonably request in order more fully
to evidence and perfect the security interest, herein created; (v) punctually
and properly perform all of Customer's covenants and duties under any other
security agreement, deed of trust, collateral pledge agreement, or other
contract of any kind now or at any time hereafter existing as security for or in
connection with payment of the Obligation, or any part thereof; (vi) pay the
Obligation in accordance with the terms hereof and in accordance with the terms
of any promissory note or notes or other writings evidencing the Obligation, or
any part thereof; (vii) promptly furnish Bank with any information or writings
which Bank may reasonably request concerning the Collateral; (viii) allow Bank
to inspect all records of each Customer relating to the Collateral or to the
Obligation, and to make and take away copies of such records; (ix) promptly
notify Bank of any change in any fact or circumstance warranted or represented
by any Customer, whether in this Agreement or in any other writing furnished by
such party to Bank, in connection with the Collateral or the Obligation; (x)
promptly notify Bank of any claim, action or proceeding affecting title to the
Collateral, or any part thereof, or the security interest herein, and, at the
request of Bank, appear in and defend, at Customer's expense, any such action or
proceeding; and (xi) promptly, after being requested by Bank pay to Bank the
amount of all reasonable expenses, including reasonable attorneys' fees and
other legal expenses incurred by Bank in enforcing the security interest created
hereunder. Customer covenants and agrees that, without the prior written consent
of Bank, Customer will not; (xii) sell, assign or transfer any of Customer's
rights in the Collateral; or (xiii) create any other security interest in,
mortgage, or otherwise encumber, the Collateral, or any part thereof, or permit
the same to be or become subject to any lien, attachment, execution,
sequestration, other legal or equitable process, or any encumbrance of any kind
or character, except the security interest herein created. Should the
Collateral, or any part thereof, ever be in any manner converted by its issuer
or maker into another type of property or any money or other proceeds ever be
paid or delivered to any Customer as a result of such Customer's rights in the
Collateral, then, in any such event, all such property, money and other proceeds
shall become part of the Collateral, and such Customer covenants forthwith to
pay or deliver to Bank all of the same which is susceptible of delivery, and, at
the same time, if Bank deems it necessary and so requests, such Customer will
properly endorse or assign the same. With respect to any of such property of a
kind requiring an additional security agreement, financing statement or other
writing to perfect a security interest thereon in favor of Bank, Customer
forthwith will execute and deliver to Bank whatever the latter shall deem
necessary or proper for such purpose. Should any covenant, duty or agreement of
Customer fail to be performed in accordance with its terms hereunder, Bank may,
but shall never be obligated to, perform or attempt to perform such covenant,
duty or agreement on behalf of Customer, and any amount expended by Bank in such
performance or attempted performance shall become a part of the Obligation, and,
at the request of Bank, Customer agrees to pay such amount promptly to Bank.
Customer agrees to indemnify Bank against and hold it harmless from any and all
losses, costs, damages and expenses which Bank may ever suffer or incur by
reason of the failure of Customer to perform any of Customer's covenants
hereunder, or in the incorrectness of any representation or warranty made herein
by Customer.
Section 7. Except as may otherwise be expressly set forth in this Agreement or
as instructions may be given Bank by Customer in writing expressly to the
contrary with regard to, and prior to the opening of, the Credit: (i) Bank or
any of its correspondents may receive and accept as "bills of lading" any
documents issued or purporting to be issued by or on behalf of any carrier which
acknowledges receipt of any Goods for transportation, regardless of the specific
provisions of such documents; (ii) the date of each such document shall be
deemed to be the date of shipment of the property mentioned therein; (iii) any
such document issued by or on behalf of an ocean carrier may be received and
accepted by Bank or any of its correspondents as an "ocean ▇▇▇▇ of lading",
whether or not the entire transportation is by water; (iv) partial shipments of
the Goods or shipments in excess of the quantity called for in the Credit may be
made and Bank or any of its correspondents may honor drafts presented in
connection therewith in an amount not exceeding the amount of the Credit; (v) if
the Credit specifies shipment in installments within stated periods, and the
shipper fails to make one or more of such shipments, subsequent shipments may
nevertheless be made in their respective stated periods and Bank or any of its
correspondents may honor the drafts relating therein; (vi) Bank or any if its
correspondents may receive and accept as documents of insurance under the Credit
either documents purporting to be insurance policies or insurance certificates,
which in either case (unless otherwise specified in this Agreement) need not be
for an amount of insurance greater than the amount paid by Bank or any of its
correspondents with respect to the Credit; and (vii) Bank or any of its
correspondents may receive, accept or pay any drafts or other documents,
otherwise complying with the terms of the Credit and this Agreement, which may
be signed by, or issued to, the administrator or executor for the estate of, or
the trustee in bankruptcy of, or the receiver for any of the property of, the
party in whose name the Credit provides that any drafts or other documents
should be drawn or issued.
Section 8. Neither Bank nor any of its correspondents shall be responsible for:
(i) the use which may be made of the Credit or for any acts or omissions of the
beneficiary in connection therewith; (ii) the existence, character, quantity,
condition, packing, value or delivery of the Goods or any other property
purporting to be purchased to otherwise acquired in connection with the issuance
of the Credit; (iii) the validity, sufficiency or genuineness of any documents,
or of any endorsements thereon, even if such documents should in fact prove to
be in any or all respects invalid, insufficient, fraudulent or forged; (iv) the
time, place, manner or order in which any shipment is made; (v) any partial or
incomplete shipment, or the failure or omission to ship any or all of the Goods;
(vi) the character, adequacy, validity or genuineness of any insurance; (vii)
the solvency or responsibility of any insurer, or any other risk connected with
insurance; (viii) any deviation from instructions, delay, default or fraud by
any shipper or others in connection with the Goods or the shipping thereof or
the documents covered thereby; (ix) the solvency, responsibility or relationship
to the Goods of any party issuing any documents in connection with the Goods;
(x) any deviation from instructions, default or fraud by the shipper or any
others in connection with the Goods or the shipping thereof, the delay in
arrival, or failure
157
to arrive, of all of the Goods or documents relating thereto; (xi) the delay in
giving or failure to give, notice of arrival or any of the Goods; (xii) any
breach of contract by any Customer, or Beneficiary, or any shipper or consignee;
(xiii) the failure of any draft to bear any reference or adequate reference to
the Credit, or the failure of any documents to accompany any draft at
negotiation, or the failure of any person to surrender the Credit or send
forward documents apart from drafts as required by the terms of the Credit, each
of which provisions, if contained in the Credit itself, it is agreed may be
waived by Bank; (xiv) any errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, wireless or
otherwise, and whether or not they may be in cipher or code; (xv) any act,
error, neglect, default, omission, insolvency, or failure in business of any of
Bank's correspondents; (xvi) any failure or inability by Bank or its
correspondents to perform in accordance with the terms of the Credit by reason
of compliance with foreign laws, customs or regulations, or by reason of any
control or restrictions exercised by any de facto or de jure government or group
asserting or exercising governmental or paramount powers, or (xvii) and
description matter included in any invoice which is in addition to the
description herein required for such invoice. The happening of any one or more
of the contingencies referred to in the preceding sentence shall not affect,
impair or prevent the vesting of any Bank's rights or powers hereunder. Any
action, inaction or omission taken or suffered by Bank, or by any of its
correspondents, under or in connection with the Credits or the drafts, documents
or Goods relating thereto, if in good faith, and in conformity with such foreign
or domestic laws, customs or regulations as Bank or any of its correspondents
may deem to be applicable thereto, shall be binding upon Customer and shall not
place Bank or any of its correspondents under any resulting liability to
Customer.
Section 9. The term "Default", as used herein, means the occurrence of any of
the following events: (i) the failure of Customer to pay the Obligation or any
part thereof, as it becomes due in accordance with the terms hereof or any
promissory note or notes or other writings or agreements which evidence it or
when accelerated pursuant to any power to accelerate; or (ii) the failure of any
Customer punctually and properly to perform any covenant, agreement or condition
contained herein or in any other security agreement, mortgage, deed of trust,
assign or contract of any kind defining, securing or assuring payment of the
Obligation, or any part thereof; or (iii) the death, failure in business,
dissolution or termination of existence of any Customer, or (iv) the insolvency
of any Customer; or (v) the levy against the Collateral, or any part thereof, of
any execution, attachment, sequestration or other writ; or (vi) the appointment
of a receiver of any Customer or of the Collateral, or any part thereof; or
(vii) the filing, by way of petition or answer, of any petition or other
pleading seeking adjudication of any Customer as a bankrupt, or an adjustment of
such Customer's debts, or any other relief under any bankruptcy, reorganization,
debtor's relief or insolvency laws now or hereafter existing; (viii) or if any
funds or other property of Customer which may be in, or come into, Bank's
possession or control, or that of any third party acting in Bank's behalf,
should be attached or distrained or should be or become subject to any mandatory
order of court or other legal process; or (ix) in the event of any seizure,
vesting or intervention by or under authority of a Government by which the
management of Customer is displaced or its authority in the control of its
business is curtailed; or (x) when Bank believes that the prospect of payment of
any part of the Obligation or the performance by any Customer of any of such
Customer's covenants, agreements or other duties hereunder, is impaired; or (xi)
the receipt by Bank of information establishing that any representation or
warranty made by any Customer, whether made herein or in any other writing
delivered by such party to Bank in connection herewith, is false, misleading or
erroneous.
Section 10. Upon the occurrence of a Default, in addition of any and all other
rights and remedies which Bank may then have hereunder, or under the Uniform
Commercial Code of the State of Texas, or under any other applicable law, or
otherwise, Bank at its option may: (i) declare the entire unpaid balance of
principle of and all accrued interest on the Obligation immediately due and
payable, without notice, demand or presentment, which are hereby waived; (ii)
reduce its claim to judgment, foreclose or otherwise enforce its security
interest in all or any part of the Collateral by any available judicial
procedure; (iii) after notification, if any, provided for in Section 11 hereof,
sell or otherwise dispose of, at the office of Bank, or elsewhere, as chosen by
Bank, all or any part of the Collateral, and any such sale or other disposition
may be as a unit or in parcels by public or private proceedings, and by way of
one or more contracts (it being agreed that the sale of any part of the
Collateral shall not exhaust Bank's power of sale, but sales may be made from
time to time until all the Collateral has been sold or until the Obligation has
been paid in full), and at any such sale it shall not be necessary to exhibit
the Collateral; (iv) at its discretion, retain the Collateral in satisfaction of
the Obligation whenever the circumstances are such that Bank is entitled to do
so under applicable law; (v) apply by appropriate judicial proceedings for
appointment of a receiver for the Collateral, or any part thereof, and Customer
hereby consents to any such appointment; (vi) buy the Collateral at any public
sale; (vii) buy the Collateral at any private sale if the Collateral is a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations; and (viii) exercise any other
rights and remedies which it may have at law, or in equity, or otherwise,
including, but not limited to, the right to apply toward payment of the
Obligation, without notice to Customer, any sums which may then be held by Bank
for any Customer. Bank shall be entitled to apply the proceeds of any sale or
other disposition of the Collateral in the following order: first, to the
payment of all of its reasonable expenses, including attorneys' fees and other
legal expenses, incurred in holding and preparing the Collateral, or any part
thereof, for sale or other disposition, in arranging for any such sale or other
disposition, and in actually selling the same; and next, toward payment of the
balance of the Obligation is such order and manner as Bank, in its discretion,
may deem advisable. If the proceeds are not sufficient to pay the Obligation in
full, Customer shall remain liable for any deficiency.
Section 11. Reasonable notification of the time and place of any public sale of
the Collateral, or reasonable notification of the time after which any private
sale or other intended disposition of the Collateral is to be made, shall be
sent to Customer and to any other person entitled under applicable law to
notice; provided, that if the Collateral is perishable, or threatens to decline
speedily in value, or is of a type customarily sold on a recognized market, Bank
may sell or otherwise dispose of the Collateral without notification,
advertisement or other notice of any kind. It is agreed that notice sent or
given not less than 5 calendar days prior to the taking of the action to which
the notice relates is reasonable notification and notice of the purpose of this
section.
Section 12. Bank shall have the right at any time to execute and file this
Agreement as a financing statement, but the failure of Bank to do so shall not
impair the validity or enforceability of this Agreement.
Section 13. The Agreement shall become effective upon its receipt by Bank. The
validity construction and enforcement of this Agreement, and the delivery and
pledge of Collateral hereunder, shall be governed by the laws of the State of
Texas, United States of America, except to the extent any law, rule, or
regulation of the federal government of the United States of America may be
applicable, in which case such federal law, rule or regulation shall govern and
control.
Section 14. All rights and remedies of Bank hereunder are cumulative of each
other and of every other right or remedy which Bank may otherwise have at law or
in equity or under any other contract or other writing for the enforcement of
the security interest herein or the collection of the Obligation, and the
exercise of one or more rights or remedies shall not prejudice or impair the
concurrent or subsequent exercise of other rights or remedies. Without limiting
the scope of the foregoing, it is agreed that this Agreement shall be
supplemented by the provisions (to the extent that such provisions are
consistent with the provisions of this Agreement) of the Uniform Customs and
Practice for Documentary Credits, 1983 Revision, International Chamber of
Commerce Publication No. 400, and any subsequent revisions thereof approved by a
Congress of the International Chamber of Commerce and adhered to by Bank. Should
any Customer have heretofore executed or hereafter execute any other security
agreement in favor of Bank in which a security interest is created as security
for the debts of another or others, in respect of which such Customer may not be
personally liable, the security interest therein created and all other rights,
powers and privileges vested in Bank by the terms thereof shall exist
concurrently with the security interest created herein, and, in addition, all
property in which Bank holds a security interest under any such other security
agreement shall also be part of the Collateral hereunder, and all or any part of
the proceeds of the sale or other disposition of such property may, in the
discretion of Bank, be applied by it in accordance with the terms hereof, and of
such other security agreement, or agreements, or any of them.
Section 15. The rights, powers and interest held by Bank hereunder, together
with the Collateral, may be transferred and assigned by Bank, in whole or in
part, at such time and upon such terms as it may deem advisable. This Agreement
shall therefore inure to the benefit of, and be enforceable by Bank, its
successors, transferees and assigns.
Section 16. No waiver by Bank of any Default shall be effective unless in
writing and signed by an authorized officer of Bank, and no such waiver shall be
deemed to be a waiver of any other subsequent Default, or be deemed to be a
continuing waiver. No delay or omission by Bank in exercising any right or power
hereunder, or under any other writings executed by any Customer as security for
or in connection with the Obligation, shall impair any such right or power,
preclude other or further exercise thereof, or the exercise of any other right
or power of Bank hereunder or under such other writings.
Section 17. All instructions given by any Customer to Bank hereunder, and all
agreements made by any Customer with respect to the Credit and the disposition
of documents relating thereto, shall be fully binding on Account Party,
regardless of whether Account Party has received notice of such instructions or
agreements.
Section 18. If the Collateral declines in value, Customer, at Bank's request,
agrees to grant promptly to Bank, as security for payment of Obligation, a
security interest in additional property of a value and character satisfactory
to Bank, or to make such cash payments as Bank may require, for application on
the Obligation.
Section 19. Bank is hereby authorized, at its option and without any obligation
to do so, to transfer to or register in the name of any of its nominees all or
any part of the Collateral, and such action may be taken before or after the
maturity of any part of Obligation and without notice to Customer.
Section 20. If any Customer is a banking institution, such Customer hereby
appoints Bank as its agent to issue the Credit in accordance with the provisions
of this Agreement.
Section 21. Customer hereby agrees that the terms and provisions of this
Agreement shall be applicable to any amendment, modification or supplement
hereafter made to the Credit with the written consent of Customer and accepted
by Bank, with the same force and effect as if such amendment, modification or
supplement had been fully described herein.
Section 22. Customer agrees that its rights and obligations hereunder are not
assignable or transferable without the express prior written consent of Bank. In
the event such consent is given, this Agreement shall be binding not only upon
Customer, but also upon the heirs, executors, administrators, successors and
assigns of Customers. If this Agreement should be terminated or revoked by
operation of laws as to Customer, Customer shall indemnify and save Bank
harmless from any loss which may be suffered or incurred by Bank in acting
hereunder prior to the receipt by Bank, or its successors, transferees or
assigns, of notice in writing of such termination or revocation. If this
Agreement is executed by two or more parties as Customer, they shall be jointly
and severally liable hereunder, and the word "Customer" whenever used herein
shall be construed to refer to each of such parties separately, all in the same
manner and with the same effect as if each of them had signed separate
instruments; and in any such case, this Agreement shall not be revoked or
impaired as to any one or more of such parties by death of any of the others or
by the revocation or release of any obligations hereunder of any one or more of
such other parties.
Section 23. Customer hereby irrevocably submits to the jurisdiction of any Texas
State or Federal court sitting in the city where Bank's office is located over
any action or proceeding arising out of or relating to this Agreement, and
Customer hereby irrevocably agrees that all claims in respect to such action or
proceeding may be heard and determined in such Texas State or Federal court.
Customer hereby irrevocably waives, to the fullest extent it may effectively do
so, the defense of an inconvenient forum to the maintenance of such action or
proceeding. Customer hereby irrevocably appoints the Process Agent designated on
the first page hereof, as its agent to receive on behalf of Customer and its
property service of copies of the summons and complaint and any other process
which may be served in any such action or proceeding. Such service may be made
by mailing or delivering a copy of such process to Customer in care of the
Process Agent at the Process Agent's specified address, and the Customer hereby
irrevocably authorizes and directs the Process Agent to accept such service on
its behalf. As an alternative method of service, Customer also irrevocably
consents to the service of any and all process in any such action or proceeding
by
158
the mailing of copies of such process to Customer at its address specified on
the first page hereof. Customer agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing, however,
in this Section 23, shall affect the right of Bank to serve legal process in any
other matter permitted by law or affect the right of Bank to bring any action or
proceeding against Customer or its property in the courts of any other
jurisdictions. Moreover, to the extent that the Customer has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
and of execution, execution or otherwise) with respect to itself or its
property, Customer hereby irrevocably waives such immunity in respect of its
obligations under this Agreement.
Section 24. Customer hereby acknowledges that Bank's reputation and the
acceptability of its letters of credit in the domestic or international business
community will be damaged in the event Customer restrains Bank by court order or
any other means of paying, in good faith, upon proper demand under and in
compliance with the terms of the Credit, and Customer agrees to compensate Bank
for any and all damages suffered or incurred by Bank in connection with such
matters.
Section 25. Customer hereby acknowledges that the Credit will be deemed issued
upon delivery to Beneficiary, to Customer or to Account Party. In the event
Customer requests the Credit be delivered to Customer or to Account Party rather
than to Beneficiary, and Customer subsequently cancels the Credit, Customer
agrees to return the Credit to Bank together with Customer's written
certification that the Credit has never been delivered to Beneficiary. In the
event that Credit is delivered to Beneficiary pursuant to Customer's
instructions, no cancellation thereof by Customer shall be effective without
written consent of Beneficiary to Bank and return of the Credit to Bank.
Customer hereby agrees that in the event Bank becomes involved in any dispute,
claim, demand or litigation that comes as a result of Customer's cancellation of
the Credit as set forth above, it shall indemnify and save Bank harmless from
all loss, cost, damages, expenses and attorneys' fees suffered or incurred by
Bank as a result thereof.
Section 26. In the event Bank is restrained or enjoined from payment to the
Beneficiary under the Credit pursuant to any judicial, governmental, or
quasi-governmental proceeding, Customer agrees to: (i) reimburse Bank for all
costs and attorneys' fees incurred by Bank in connection with (a) such
proceeding and (b) actions or claims of Beneficiary against the Bank resulting
from or notwithstanding such restraint or injunction, and (ii) extend the period
during which Customer's Obligation shall remain in full force and effect for as
long a period of time as the expiration date of the Credit is extended by virtue
of such restraint or injunction.
USE THIS SPACE FOR ADDITIONAL DOCUMENTS/SPECIAL INSTRUCTIONS
The above terms, conditions and attached supplements referred to in this
Application are hereby jointly and severally agreed to by Customer, and the
obligations and liabilities of Customer hereunder shall be joint and several.
------------------------------- -----------------------------------
(Name of Company, or signature (Name of Company, or signature if
if Customer is an individual) Customer is an individual)
By By
----------------------------- --------------------------------
(Authorized Signature) (Authorized Signature)
------------------------------- ---------------------------------
(Title) (Title)
------------------------------- -----------------------------------
------------------------------- -----------------------------------
(Address) (Address)
------------------------------- -----------------------------------
(Telephone) (Telephone)
159
NATIONSBANK Standby Letter of Credit
NationsBank of Texas, N.A. Application and Agreement
----------------------------------------------------------------------------------------------------------------
NationsBank of Texas, N.A.
---------------------------------------------
---------------------------------------------
--------------------------------------------- Date ------------------------------------------------------
---------------------------------------------
(Herein called "Bank")
PLEASE LEAVE ON OUR BEHALF YOUR IRREVOCABLE LETTER OF CREDIT ("CREDIT") AND DELIVER VIA:
/ / Airmail / / Full Cable / / Airmail with Pre-Advice Cable / / Courier / /------------------------
----------------------------------------------------------------------------------------------------------------
To Be Transmitted Through For The Account of (Name and address of application)
(Name and address of advising bank, if any)
(If not advising bank indicated, through any of
Bank's correspondents or direct to Beneficiary (Herein called "Obligor")
-----------------------------------------------------------------------------------------------------------------
In Favor of (Name and address of Beneficiary) Aggregate Amount of Credit
U.S. $
------------------------------------------------------------
Expiration Date
(Herein called "Beneficiary") (Latest date drafts are to be presented at counters of Bank)
-----------------------------------------------------------------------------------------------------------------
Available by the Beneficiary's Draft(s) Drawn on Bank at Sight and Accompanied
by the Following:
------------------------------------------------------------------------------
Special Instructions
1. Partial drawings are / / allowed. / / prohibited.
2.
------------------------------------------------------------------------------
Fees and Terms of Reimbursement
1. Commission is ___% of the amount of the Credit of $ ____ / / per annum.
/ / flat fee.
2. Charge amounts due under this Agreement to Obligor's account # ____________
3. Maturity Date is the day Bank pays a draft under this Agreement or as
provided below.
4. Annual Rate of Interest is the highest rate Bank may lawfully charge or as
provided below.
------------------------------------------------------------------------------
For purposes of this Standby Letter of Credit Application and Agreement, the
terms have the meanings indicated in the boxes above and in the definitions
below. In consideration of Bank's issuing on behalf of Obligor a Letter of
Credit ("Credit") substantially conforming with this Standby Letter of Credit
Application and Agreement ("Agreement"), Obligor hereby agrees as follows:
1. REIMBURSEMENT AND OTHER PAYMENTS. On demand, or if prior demand is not made
on Maturity Date, Obligor promises to pay to the order of Bank at Bank's
address shown above an amount equal to (i) the face amount of each draft drawn
or purporting to be drawn under the Credit in United States currency, and (ii)
the equivalent in United States currency of the face amount of each draft drawn
or purporting to be drawn under the Credit in a currency other than that of the
United States, such equivalent to be calculated on the basis of Bank's selling
rate of exchange in effect (for the date on which Bank pays such draft or
reimburses any of correspondents which paid such draft) for cable transfers to
the place where and in the currency in which such draft is payable; in United
States currency (a) the amount of drafts drawn or purporting to be drawn under
the Credit and (b) interest on any such amount from the date paid by Bank until
the earlier of repayment by Obligor or maturity Date at the Annual Rate of
Interest calculated on the basis of a year of 360 days. Customer shall comply
with any and all governmental exchange regulations now or hereafter applicable
to any foreign exchange provided Bank pursuant to this Section 1, and shall
indemnify and hold Bank harmless from any failure so to comply. If for any cause
whatsoever, there exists at the time in question no rate of exchange generally
current at Bank for effective cable transfer of the sort above provided for,
Obligor agrees to pay Bank on demand an amount in United States dollars
equivalent to the actual cost of settlement of Bank's obligation to the payer of
the draft or acceptance or any holder thereof, as the case may be, and however
and whenever such settlement may be made by Bank, including interest on the
amount of dollars payable by Obligor from the date of payment of such draft or
acceptance to the date of Obligor's payment to Bank at rate customarily charged
by Bank in like circumstances. Obligor further promises to pay commission,
processing fees, and all costs and expenses incurred by Bank in connection with
the Credit. In addition, and without limiting the generality of the foregoing,
if any law, regulation or the interpretation thereof by any court or
administrative or governmental authority shall either impose, modify or deem
applicable any capital, reserve, insurance premium or similar requirement
against letters of credit issued by Bank and the result thereof shall be to
increase the cost to Bank of issuing or maintaining any letter of credit; then,
on demand by Bank. Obligor further promises to pay to Bank, from time to time,
additional amounts which shall be sufficient to compensate Bank for the portion
of such increased costs allocable to the Credit. A written advice(s) setting
forth in reasonable detail such costs incurred by Bank, submitted by Bank to
Obligor from time to time, shall be conclusive, absent manifest error, as to
the amount thereof.
Unpaid and past due amounts owed under the Agreement, including interest, shall
bear interest at the highest rate Bank may lawfully charge. The maximum lawful
interest rate determined under Texas law shall be the indicated rate ceiling as
specified in TEX.REV.CTV.STAT.▇▇▇., art 5069-1.04. If any other lawful rate
exceeds said indicated rate ceiling, then the higher rate shall apply. The
amount of interest payable shall in no event exceed the maximum amount Bank may
lawfully charge on the Agreement. If the Annual Rate of Interest is stated in
terms of Bank's Prime Rate, Prime Rate shall mean the Prime Interest Rate
charged by Bank as announced or published by Bank from time to time and may not
be the lowest interest rate charged by Bank. The Annual Rate of Interest shall
change with each change in the Prime Rate as of the date of any such change
without notice. In any contingency whatsoever, if Bank shall receive anything
of value deemed interest under applicable law, the excessive interest shall be
applied to the reduction of the unpaid amount which is due or refunded to
Obligor
160
2. ALTERNATIVES. Obligor promises to pay, in addition to all other amounts due
hereafter, all expenses incurred by Bank in connection with the Credit including
but not limited to reasonable attorney's fees and court costs. Reasonable
attorney's fees shall be ten percent (10%) of the unpaid amount due, including
interest, on the Agreement, unless either party shall plead and prove otherwise.
If Bank is enjoined or restrained from payment of the Credit or from other
action related to the Credit, Obligor also promises to pay reasonable attorney's
fees and court costs related to such injunction or restraint.
3. ADDITIONAL TERMS. Obligor agrees that: (a) if partial drawings are permitted
in the Agreement, Bank may honor the drafts without inquiry; (b) if Obligor
requests or consents to any extension of the maturity or time for negotiation or
presentation of drafts or documents, to any increase in the Aggregate Amount of
Credit, or to any other modification of the terms of the Credit, then the
Agreement shall be binding on Obligor as to such extension, increase, or other
modification; (c) Bank may accept or pay any draft dated on or before the
expiration of any time limit expressed in the Credit regardless of when drawn
and when or whether negotiated, provided the other required documents are dated
prior to the Expiration Date of the Credit; (d) if Obligor, at any time prior to
Expiration Date, shall pledge, assign, encumber or grant to any party other than
Bank any of its property or assets as collateral security for existing
indebtedness, Obligor shall grant Bank a perfected security interest in such
property or assets to the extent of the ratio that the Aggregate Amount of the
Credit bears to the amount of such indebtedness; and (e) if at any time and from
time to time Bank requires collateral (or additional collateral), Obligor will,
on demand, assign and deliver to Bank security for any and all obligations of
Obligor now or hereafter existing under this Agreement, collateral of a type and
value satisfactory to Bank or make such cash payment as Bank may require.
4. OTHER CONDITIONS. Obligor agrees that Bank shall not be responsible for (a)
the validity, sufficiency or genuineness of documents or of any endorsements
thereon even if such documents should in fact prove to be in any respect
invalid, insufficient, fraudulent or forged; (b) failure of any draft to bear
any reference or adequate reference to the Credit, or failure of documents to
accompany any draft at negotiation, or failure of any person to note the amount
of any draft on the reverse side of the Credit or to surrender or take up the
Credit or to send forward documents apart from drafts as required by the terms
of the Credit, each of which provisions, if contained in the Credit itself, it
is agreed may be waived by Bank; (c) errors, omissions, interruptions or delays
in transmission or delivery of any message by mail, cable, telegram, wireless or
otherwise, whether or not they be in cipher, or (d) errors in translation or
errors in interpretation of technical terms Bank shall not be responsible for
any act, error, neglect, default, omission, insolvency or failure in business of
any correspondent or for any consequences arising from causes beyond Bank's
control. Obligor further agrees that any action taken or omitted by Bank in
connection with the Credit, if done in good faith, shall be binding on Obligor
and shall not put Bank under any resulting liability to Obligor.
Bank shall not be liable for any failure by Bank or any one else to pay or
accept any draft under the Credit, or for any loss or damage resulting from any
declared or undeclared war, censorship, law, control or restriction rightfully
or wrongfully exercised by any de facto or de jure domestic or foreign
government or agency thereof, or from any other cause beyond Bank's control; and
Obligors agrees to indemnify and hold Bank harmless from any claim, loss,
liability or expense arising by reason thereof. If Obligor has included any
language describing events or conditions in this Agreement that would not be
possible for Bank to verify from the documents required to be presented under
the credit, we understand that Bank is in no position to make any verification
of such events or conditions and is therefore not responsible for verifying the
compliance with such requirements. Bank will make payment under the credit
provided all other conditions are met. Furthermore, if the term "Beneficiary"
includes any successor of the named Beneficiary by operation of law or
otherwise, Bank shall have no responsibility to determine that one who draws
under the credit and represents himself to be a successor to the named
Beneficiary is in fact a dully authorized successor.
5. EVENTS OF DEFAULT. If Obligor fails to pay, perform or discharge any
obligation set forth in the Agreement or in any other agreement delivered by the
Obligor Bank, or if Obligor is in default in any manner under the terms and
conditions of any other financial obligation, or upon the happening with respect
to Obligor, endorser or guarantor, of any of the following: the commencement of
any proceeding, suit, or action for reorganization, dissolution, liquidation,
suspension of Obligor's usual business; insolvency; the filing of a petition
under any of the provisions of the Bankruptcy Act or amendment thereto;
application for or appointment of a conservator, rehabilitator or receiver of
Obligor or Obligor's property; death; issuance of an injunction or a warrant of
attachment; entry of a judgment; making of any tax assessment by the United
States or any state; the calling of a meeting of creditors; appointment of a
committee of creditors or liquidating agent; offering a composition or extension
to creditors; execution of any assignment for benefit of creditors; making or
sending notice of an intended bulk sale; financial responsibility of any of them
shall become impaired or unsatisfactory to Bank, then in any of such events the
amount owed or that could be owed under the Agreement, although contingent or
not yet due, shall, without notice or demand, forthwith become and be
immediately due and payable, notwithstanding any time or credit otherwise
allowed thereunder, and Bank may at any time thereafter exercise its right of
offset against any amounts which it may then be obliged to pay to Obligor.
6. NOTICES AND WAIVERS. Any notice to or demand on Obligor shall be deemed
effective, if not first otherwise given or made, when forwarded by mail,
telegraph, cable, radio, telephone or otherwise to the last address or telephone
number of Obligor appearing in Bank's records with the same effect as if the
same were active, delivered to and received by Obligor in person. Bank shall not
by any act, delay, omission or otherwise be deemed to have waived any of its
rights or remedies hereunder, and no waiver whatever shall be valid unless in
writing, signed by Bank, and then only to the extent therein set forth. A waiver
by Bank of any rights remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which Bank would otherwise have on any
future occasion.
7. MISCELLANEOUS. No term or provision of the Agreement can be changed orally,
and no executory agreement shall be effective to modify or to discharge the
Agreement unless such executory agreement is in writing and signed by Bank. All
Bank's rights and remedies hereunder shall be cumulative and may be exercised
singly or concurrently.
8. PRESENTATION OF DOCUMENTS WITHOUT DRAFTS. If the Credit issued by Bank will
provide that the Credit will be available by presentation to Bank of the
document described in the Agreement, unaccompanied by drafts, Obligor agrees
that all references herein to drafts, documents relative to drafts, and the
presentation, acceptance for payment or payment of drafts shall refer to
documents presented for payment without drafts, the presentation and acceptance
thereof, and payment upon such presentation and that Obligor's obligations and
Bank's rights, privileges and remedies hereunder shall be the same as though
payments had been to upon presentation of drafts drawn under the Credit
accompanied by the said documents.
9. GOVERNING LAW. The Credit shall be subject to the Uniform Customs and
Practices for Documentary Credits, as published by the International Chamber of
Commerce, and as revised from time to time ("UCPDC"). The Agreement shall be
governed by the State of Texas.
10. RENEWAL PROVISION. In the case of Bank's issuance on behalf of Obligor of a
Credit which renews automatically, Obligor hereby agrees that in the event it
not want such Credit to be renewed, it will request Bank in writing not to renew
such Credit at least thirty (30) days prior to the notification period specified
in the Credit Obligor acknowledges that its failure to make a timely request for
the non-removal of such Credit may result in such Credit renewing automatically
and hereby agrees that in such event Obligor shall have no claim or cause of
action against Bank, or defense against payment under the Agreement, for Bank's
reason of such Credit.
11. OTHER PROVISIONS. If the Agreement is executed by two or more Obligors, it
shall be the joint and several agreement of such Obligors. The Agreement shall
Obligor and Obligor's heirs, executors, administrators, and successors; the
Agreement shall insure to the benefit of Bank's successors and assigns.
The unenforceability or invalidity, as determined by a court of competent
jurisdiction, of any provision of the Agreement shall not render unenforceable
or invade any other provision. The heading of sections herein are for
convenience only and are not to be construed as part of the text of the
Agreement.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN OBLIGOR AND BANK
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR CONTEMPORANEOUS SUBSEQUENT ORAL
AGREEMENTS BETWEEN OBLIGOR AND BANK. THERE ARE NO UNDERWRITTEN ORAL AGREEMENTS
BETWEEN OBLIGOR AND BANK.
_______________________________________________________ _______________________________________________________
(Name of Obligor, or signature if Obligor is individual) (Name of Obligor, or signature if Obligor is individual)
By:____________________________________________________ By:____________________________________________________
(Authorized Signature) (Authorized Signature)
_______________________________________________________ _______________________________________________________
(Title) (Title)
Describe Underlying Transaction (For Bank Use Only)
Account Officer Bank Counsel (When over $50,000):
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ TO
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment") is entered into effective as of the 15th day of November, 1994, by
and between CRAFTMADE INTERNATIONAL, INC., a Delaware corporation (the
"Borrower"), and NATIONSBANK OF TEXAS, N.A., a national banking association (the
"Lender").
WITNESSETH:
WHEREAS, the Borrower and the Lender entered into a First Amended and
Restated Credit Agreement dated as of January 11, 1993 (the "Original Credit
Agreement"), pursuant to which, among other things, the Lender agreed to make
and maintain certain revolving loans to the Borrower, upon the terms contained
in the Original Credit Agreement; and
WHEREAS, the Borrower and the Lender entered into that certain First
Amendment to First Amended and Restated Credit Agreement dated as of December
13, 1993 (the "First Amendment"), modifying certain provisions of the Original
Credit Agreement; and
WHEREAS, the Borrower and the Lender entered into that certain Second
Amendment to First Amended and Restated Credit Agreement dated as of March 30,
1994 (the "Second Amendment"), modifying certain provisions of the Original
Credit Agreement; and
WHEREAS, the Borrower and the Lender entered into that certain Third
Amendment to First Amended and Restated Credit Agreement dated as of June 30,
1994 (the "Third Amendment"), modifying certain provisions of the Original
Credit Agreement (the Original Credit Agreement, as amended by the First
Amendment, the Second Amendment and the Third Amendment, is referred to
hereinafter as the "Credit Agreement"); and
WHEREAS, the Borrower has requested the Lender to modify the Credit
Agreement further, and the Lender is willing to make such modifications under
the terms and provisions of this Amendment;
NOW, THEREFORE, for and in consideration of these premises and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Lender hereby agree as follows:
1. Terms. All capitalized terms defined in the Credit Agreement and not
otherwise defined herein shall have the same definitions when used herein as set
forth in the Credit Agreement.
162
2. Amendments to Credit Agreement.
2.1 Amendment to Definition of "Applicable Rate". The definition of
"Applicable Rate" contained in Section 1.1 of the Credit Agreement is
hereby amended and restated to read in its entirety as follows:
"Applicable Rate" means (a) during the period that an Advance is a
Prime Rate Advance, the Prime Rate, and (b) during the period that
an Advance is a Eurodollar Advance, the Eurodollar Rate plus one and
three-quarters of one percent (1.75%).
2.2 Amendment to Definition of "Commitment". The definition of
"Commitment" contained in Section 1.1 of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:
"Commitment" means the obligation of Lender to make Advances hereunder
in an aggregate principal amount at any time outstanding up to but not
exceeding Ten Million Dollars ($10,000,000), as such amount may be
reduced pursuant to SECTION 2.7 or otherwise.
2.3 Amendment to Definition of "Continue". The definition of
"Continue" contained in Section 1.1 of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:
"Continue", "Continuation" and "Continued" shall refer to the
continuation pursuant to SECTION 3.5 of a Eurodollar Advance as a
Eurodollar Advance from one Interest Period to the next Interest
Period.
2.4 Amendment to Definition of "Interest Period". The definition of
"Interest Period" contained in Section 1.1 of the Credit Agreement is
hereby amended and restated to read in its entirety as follows:
"Interest Period" means, with respect to any Eurodollar Advances, each
period commencing on the date such Eurodollar Advances are made or
Converted from Advances of another Type, or, in the case of each
subsequent, successive Interest Period applicable to a Eurodollar
Advance, the last day of the next preceding Interest Period with
respect to such Advance, and ending on the day 30, 60, 90 or 180 days
thereafter, as Borrower may select as provided in SECTION 2.5 or 3.5
hereof. Notwithstanding the foregoing: (a) each Interest Period which
would otherwise end on a day which is not a Eurodollar Business Day
shall end on the next succeeding Eurodollar Business Day; (b) any
Interest Period which would otherwise extend beyond the Termination
Date shall end on the Termination Date; (c) no more than three (3)
Interest Periods for Eurodollar Advances shall be in effect at the
same time; (d) no Interest
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163
Period shall have a duration of less than thirty (30) days and, if
the Interest Period for any Eurodollar Advances would otherwise be
a shorter period, such Advances shall not be available hereunder; and
(e) no Interest Period may extend beyond a principal repayment date
unless, after giving effect thereto, the aggregate principal amount
of the Eurodollar Advances having Interest Periods that end after
such principal payment date shall be equal to or less than the
Advances to be outstanding hereunder after such principal repayment
date.
2.5 Amendment to Definition of "Reserve Requirement". The definition
of "Reserve Requirement" contained in Section 1.1 of the Credit Agreement
is hereby amended and restated to read in its entirety as follows:
"Reserve Requirement" means, on any day, that percentage (expressed
as a decimal fraction) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System
(or any successor), for determining the maximum reserve requirements
(including, without limitation, basic, supplemental, marginal and
emergency reserves) applicable to "eurocurrency liabilities" as
currently defined in Regulation D or under any other then applicable
similar or successor regulation which prescribes reserve requirements
applicable to eurocurrency liabilities or eurocurrency findings. Each
determination by Lender of the Reserve Requirement shall be
conclusive in the absence of manifest error.
2.6 Amendment to Definition of "Termination Date". The definition of
"Termination Date" contained in Section 1.1 of the Credit Agreement is
hereby amended and restated to read in its entirety as follows:
"Termination Date" means 11:00 a.m. Dallas, Texas time on November 14,
1995, or such earlier date and time on which the Commitment terminates
as provided in this Agreement.
2.7 Amendment to Definition of "Type". The definition of "Type"
contained in Section 1.1 of the Credit Agreement is hereby amended and
restated to read in its entirety as follows:
"Type" means any type of Advance (i.e., Prime Rate Advance or
Eurodollar Advance).
2.8 Addition of Definitions to Credit Agreement. The following
definitions are hereby added to Section 1.1 of the Credit Agreement to read
in their entirety as follows:
"Eurodollar Advances" means Advances the interest rates on which are
determined with reference to the Eurodollar Rate
3
164
"Eurodollar Business Day" means a Business Day on which
dealings in United States Dollars are carried out in the London interbank
market.
"Eurodollar Rate" means, for any Eurodollar Advance for any Interest
Period therefore, a rate per annum equal to (a) the Interbank Offered
Rate, divided by (b) 1.00 minus the Reserve Requirement applicable to
Eurodollar Advances.
"Interbank Offered Rate" means, with respect to each Interest Period,
the rate of interest per annum at which deposits in immediately available
freely transferable funds in Dollars are offered by Lender (at
approximately 1:00 p.m. Dallas, Texas time, two (2) Eurodollar Business
Days prior to the first day of such Interest Period) to first class banks
in the London interbank market for delivery on the first day of such
Interest Period, such deposits being for a period of time equal or
comparable to such Interest Period and in an amount equal or comparable to
the principal amount of the Eurodollar Advance to which such Interest
Period relates. Each determination of the Interbank Offered Rate by Lender
shall be conclusive in the absence of manifest error.
2.9 Deletion of Definitions from Credit Agreement. The definitions of
Adjusted CD Rate", "Assessment Rate", "CD Advances", and "CD Rate" in Section
1.1 of the Credit Agreement are hereby deleted in their entirety.
2.10 Amendment to Section 2.5 of the Credit Agreement. Section 2.5 of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:
Section 2.5 Requests for Advances. Borrower shall give Lender notice by
means of an Advance Request Form of each requested Advance, at least three
(3) Eurodollar Business Days before the requested date of each Eurodollar
Advance, and by 12:00 p.m. (Dallas, Texas time) on the requested date of
each Prime Rate Advance specifying: (a) the requested date of such Advance
(which shall be a Business Day and, with respect to Eurodollar Advances, a
Eurodollar Business Day), (b) the amount of such Advance, (c) the Type of
the Advance and (d) in the case of a Eurodollar Advance, the duration of
the Interest Period for such Advance. Lender at its option may accept
telephonic requests for Advances, provided that such acceptance shall not
constitute a waiver of Lender's right to require delivery of an Advance
Request Form in connection with subsequent Advances. Any telephonic
request for an Advance by Borrower shall be promptly confirmed by
submission of a properly completed Advance Request Form to Lender. Each
Eurodollar Advance shall be in a minimum principal amount of One Hundred
Thousand Dollars ($100,000.00) or an integral multiple thereof and each
Prime Rate Advance shall be in a minimum principal amount of Fifty
Thousand Dollars ($50,000.00). The aggregate amount of Eurodollar Advances
having the same Interest Period shall be at least equal to One Hundred
Thousand Dollars ($100,000.00). All notices under this SECTION 2.5 shall
be irrevocable and shall be given not later than 12:00 p.m. (Dallas, Texas
time) on the day
4
165
specified above for such notice. Any Advance Request Form requesting an
Advance received after 12:00 p.m. (Dallas, Texas time) on a Business Day
shall be deemed to be received on the next succeeding Business Day.
2.11 Amendment to Section 3.2 of the Credit Agreement. Section 3.2 of
the Credit Agreement is hereby amended and restated to read in its entirety as
follows:
Section 3.2 Voluntary Prepayment. Borrower may prepay the Note in whole
at any time or from time to time in part without premium or penalty but
with accrued interest to the date of prepayment on the amount so
prepaid, provided that (a) Eurodollar Advances may be prepaid only on
the last day of the Interest Period for such Advances and (b) each
partial prepayment shall be in the principal amount of $25,000.00 or an
integral multiple thereof.
2.12 Amendment to Section 3.5 of the Credit Agreement. Section 3.5 of
the Credit Agreement is hereby amended and restated to read in its entirety
as follows:
Section 3.5 Conversions and Continuations. Borrower shall have the right
from time to time to Convert all or part of one Type of Advance into
another Type of Advance or to Continue all or part of any Eurodollar
Advance by giving the Lender written notice at least one (1) Eurodollar
Business Day before Conversion into a Prime Rate Advance and at least
three (3) Eurodollar Business Days before Conversion into or
Continuation of a Eurodollar Advance, specifying: (a) the Type of
Advance to be converted, (b) the Conversion or Continuation date, (b)
the amount of the Advance to be Converted or Continued, (c) in the case
of Conversions, the Type of Advance to be Converted into and (d) in the
case of a Continuation of or Conversion into a Eurodollar Advance, the
duration of the Interest Period applicable thereto; provided that (i)
Eurodollar Advances may only be Converted on the last day of the
Interest Period and (ii) except for Conversions into Prime Rate
Advances, no Conversions shall be made while an Event of Default or
Potential Default has occurred and is continuing. All notices given
under this SECTION 3.5 shall be irrevocable and shall be given not later
than 11:00 a.m. (Dallas, Texas time) on the date which is not less than
the number of Business Days or Eurodollar Business Days specified above
for such notice. If Borrower shall fail to give Lender the notice as
specified above for Continuation or Conversion of a Eurodollar Advance
prior to the end of the Interest Period with respect thereto, such
Eurodollar Advance shall automatically be Converted into a Prime Rate
Advance on the last day of the Interest Period for such Eurodollar
Advance.
2.13 Amendment to Section 4.1 of the Credit Agreement. Section 4.1 of
the Credit Agreement is hereby amended and restated to read in its entirety as
follows:
Section 4.1 Additional Costs. Borrower shall pay directly to Lender from
time to time such amounts as Lender may determine to be necessary to
compensate it
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for any costs incurred by Lender which Lender determines are
attributable to its making or maintaining of any Eurodollar Advances
hereunder or its obligation to make any of such Eurodollar Advances
hereunder, or any reduction in any amount receivable by Lender hereunder
in respect of any such Eurodollar Advance or such obligation (such
increases in costs and reductions in amounts receivable being herein
called "Additional Costs"), resulting from any Regulatory Change which:
(a) changes the basis of taxation of any amounts payable to Lender
under this Agreement or the Note in respect of any of such Advances
(other than taxes imposed on the overall net income of Lender for any of
such Advances);
(b) imposes or modifies any reserve, special deposit, minimum
capital, capital ratio, or similar requirement relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities or commitments of, Lender (including any of such Advances or
any deposits referred to in the definition of "Eurodollar Rate" in
SECTION 1.1 hereof);
(c) increases Lender's costs relating to Advances, the Commitment,
or any part thereof;
(d) reduces the yield or rate of return of Lender on Advances, the
Commitment, or any part thereof, to a level below that which Lender
could have achieved but for such Regulatory Change; or
(e) imposes any other condition affecting this Agreement or the
Note or any of such extensions of credit or liabilities or commitments.
Lender will notify Borrower of any event occurring after the date of
this Agreement which will entitle Lender to compensation pursuant to
this SECTION 4.1 as promptly as practicable after it obtains knowledge
thereof and determines to request such compensation, and will designate
a different lending office for the Advances affected by such event if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of Lender, violate any
law, rule, or regulation or be in any way disadvantageous to Lender.
Lender will furnish Borrower with a certificate setting forth the basis
and the amount of each request of Lender for compensation under this
section. If Lender requests compensation from Borrower under this
section, Borrower may, by notice to Lender suspend the obligation of
Lender to make additional Eurodollar Advances until the Regulatory
Change giving rise to such request ceases to be in effect (in which case
the provisions of SECTION 4.3 hereof shall be applicable).
Determinations and allocations by Lender for purposes of this section
shall be conclusive, provided that such determinations and allocations
are made on a reasonable basis.
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2.14 Amendment to Section 4.2 of the Credit Agreement. Section 4.2 of
the Credit Agreement is hereby amended and restated to read in its entirety
as follows:
Section 4.2 Limitation on Types of Advances. Anything herein to the
contrary notwithstanding, if with respect to any Eurodollar Advances for
any Interest Period therefor, Lender determines (which determination
shall be conclusive) that the relevant rates of interest referred to in
the definition of "Eurodollar Rate" in SECTION 1.1 hereof on the basis
of which the rate of interest for Eurodollar Advances for such Interest
Period is to be determined do not accurately reflect the cost to the
Lender of making or maintaining Eurodollar Advances for such Interest
Period, then Lender shall give Borrower prompt notice thereof specifying
the relevant amounts or periods, and so long as such condition remains
in effect, Lender shall be under no obligation to make additional
Eurodollar Advances or to Convert Prime Rate Advances into Eurodollar
Advances and Borrower shall, on the last day(s) of the then current
Interest Period(s) for the outstanding Eurodollar Advances either prepay
such Eurodollar Advances or Convert such Eurodollar Advances into Prime
Rate Advances in accordance with the terms of this Agreement.
2.15 Amendment to Section 4.3 of the Credit Agreement. Section 4.3 of
the Credit Agreement is hereby amended and restated to read in its entirety
as follows:
Section 4.3 Substitute Prime Rate Advances. If the obligation of Lender
to make Eurodollar Advances shall be suspended pursuant to SECTION 4.1
or 4.2 hereof, all Advances which would be otherwise made by Lender as
Eurodollar Advances shall be made instead as Prime Rate Advances and all
Advances which would otherwise be Converted into Eurodollar Advances
shall be Converted instead into (or shall remain as) Prime Rate Advances
and, to the extent that Eurodollar Advances are so made as (or Converted
into) Prime Rate Advances, all payments and prepayments of principal
which would otherwise be applied to Lender's Eurodollar Advances shall
be applied instead to its Prime Rate Advances.
2.16 Amendment to Section 4.4 of the Credit Agreement. Section 4.4 of
the Credit Agreement is hereby amended and restated to read in its entirety
as follows:
Section 4.4 Compensation. Borrower shall pay to Lender, upon the request
of Lender, such amount or amounts as shall be sufficient (in the
reasonable opinion of Lender) to compensate it for any loss, cost, or
expense incurred by it as a result of:
(a) Any payment, prepayment or Conversion of a Eurodollar Advance
for any reason (including, without limitation, the acceleration of
outstanding Advances pursuant to SECTION 10.2) on a date other than the
last day of an Interest Period for such Eurodollar Advance; or
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(b) Any failure by Borrower for any reason (including, without
limitation, the failure of any conditions precedent specified in ARTICLE
5 to be satisfied) to borrow, Convert, Continue, or prepay a Eurodollar
Advance on the date for such borrowing, Conversion, Continuation, or
prepayment, specified in the relevant notice of borrowing, prepayment,
Conversion, or Continuation under this Agreement.
2.17 Addition of Section 4.6 to the Credit Agreement. Effective as of
the date hereof, a new Section 4.6 is hereby added to the Credit Agreement
to read in its entirety as follows:
Section 4.6 Changes in Law Rendering Loan Unlawful. In the event that
(i) any change in applicable law, treaty or regulation or the
interpretation thereof (whether or not having the force of law) shall
make it unlawful or impossible for Lender to make or continue to
maintain all or any portion of a Eurodollar Advance contemplated
hereunder, or (ii) any central bank or other fiscal, monetary or other
authority having jurisdiction over Lender or all or any portion of a
Eurodollar Advance shall request Lender in writing to comply with
restrictions (whether or not having the force of law) which seek to
prohibit Lender from making or continuing to maintain such a Eurodollar
Advance, then Lender shall so notify Borrower, and Borrower shall, upon
demand by Lender, either, at the option of Borrower, prepay such
Eurodollar Advance or convert such Eurodollar Advance to a Prime Rate
Advance in accordance with SECTION 3.5 hereof, except that, subject to
the provisions of SECTION 4.4 hereof, such prepayment or conversion need
not be effected on the last day of the Interest Period applicable to the
Eurodollar Advance, and upon such demand or upon notice by Lender, the
obligation of Lender to make such Eurodollar Advance hereunder shall
terminate. Failure to prepay any such portion of a Eurodollar Advance
shall be deemed an election to convert to a Prime Rate Advance. Such
demand or notice shall be accompanied by a certificate of Lender
provided to Borrower as to the reasons why it is no longer feasible for
Lender to make or continue to maintain such Eurodollar Advance hereunder
and such certificate shall, in the absence of manifest error in
calculation, be conclusive and binding.
2.18 Amendment to Section 9.2 of the Credit Agreement. Section 9.2 of
the Credit Agreement is hereby amended and restated to read in its entirety
as follows:
9.2 Consolidated Tangible Net Worth. Borrower will at all times maintain
Consolidated Tangible Net Worth in an amount not less than Eight Million
Dollars ($8,000,000.00).
3. Representations and Warranties. The representations and warranties of
the Borrower made in the Credit Agreement are true and correct as of the date
hereof as if made on the date hereof.
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4. Conditions Precedent. The effectiveness of this Amendment is contingent
upon the satisfaction of the following conditions precedent:
4.1 Execution of New Note. Borrower shall have executed and delivered
to Lender a promissory note, evidencing the increased Commitment and the
extended Termination Date, in the form attached hereto as Exhibit "A".
4.2 Corporate Certificates. Each of Borrower, Durocraft and C/D/R
shall have delivered to Lender a Corporate Certificate in form and
substance acceptable to Lender, certifying as to resolutions approving this
Amendment, the incumbency of their officers authorized to execute this
Amendment, their articles of incorporation, bylaws, existence, good
standing and such other matters as may be requested by Lender.
4.3 No Default. No Event of Default of Potential Default shall exist
under the Credit Agreement or would result from the execution of this
Agreement.
5. Costs. The Borrower agrees to pay all costs incurred in connection with
the negotiation, preparation, execution and consummation of this Amendment and
the transactions contemplated by this Amendment, including without limitation
the fees and expenses of the Lender's attorneys.
6. Miscellaneous.
6.1 Headings. Section headings are for reference only, and shall not
affect the interpretation or meaning of any provision of this Amendment.
6.2 Effect of this Amendment. The Credit Agreement, as amended by this
Amendment, and the Note, as amended and restated in the form attached
hereto as Exhibit "A", shall remain in full force and effect except that
any reference therein, or in any other Loan Document, referring to the
Credit Agreement or the Note, shall be deemed to refer to the Credit
Agreement as amended by this Amendment or the Note as amended and restated
in the form attached hereto as Exhibit "A".
6.3 Ratification of Loan Documents. Borrower hereby ratified and
confirms that the Loan Documents (as modified hereby) continue to be valid,
binding and enforceable against Borrower and Guarantor and continue to
create a valid first priority pledge and assignment of, and continuing
security interest in, the Collateral as security for the Obligations. There
are no defenses, offsets or counterclaims to the performance by the
Borrower and Guarantor of their obligations under the Loan Documents.
6.4 Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
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6.5 Counterparts. This Amendment may be executed by the different
parties hereto on separate counterparts, each of which, when so executed,
shall be deemed an original but all such counterparts shall constitute but
one and the same Amendment.
6.6 NO ORAL AGREEMENTS. THE CREDIT AGREEMENT, AS AMENDED BY THIS
AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE ENTIRE
AGREEMENT BETWEEN THE PARTIES, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this Amendment
to be executed by their respective duly authorized officers as of the date first
above written.
CRAFTMADE INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
NATIONSBANK OF TEXAS, N.A.
By: /s/ ▇▇▇▇ POINTS
Name: ▇▇▇▇ Points
Title: Vice President
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CONSENT OF DUROCRAFT
Durocraft hereby represents, warrants, covenants and agrees to and with
Lender that (1) Durocraft is aware of this Amendment and the transactions
contemplated herein (this Amendment and such transactions being hereinafter
collectively called the "Modification"), (2) Durocraft consents to the
Modification, (3) notwithstanding the Modification, the Durocraft Guaranty shall
be and remain a continuing, absolute, unconditional and irrevocable guaranty of
payment and performance of the Guaranteed Indebtedness, as defined in the
Durocraft Guaranty, binding and enforceable in accordance with the terms of such
guaranty, and such guaranty shall not be deemed to have been terminated,
impaired, modified or otherwise affected by the Modification, except that the
obligations guaranteed shall include the Obligations as modified by the
Modification in addition to any other amounts included in the Guaranteed
Indebtedness, (4) notwithstanding the Modification, the Durocraft Security
Agreement continues to create a first priority pledge and assignment of, and
continuing security interest in, the collateral covered thereby and shall be and
remain valid, binding and enforceable in accordance with the terms of such
security agreement, and such security agreement shall not be deemed to have been
terminated, impaired, modified or otherwise affected by the Modification, except
that the obligations secured thereby shall include the Obligations as modified
by the Modification in addition to any other amounts included in the secured
obligations, and (5) there are no claims, defenses, counterclaims or offsets to
the liability of Durocraft under the Durocraft Guaranty or the Durocraft
Security Agreement.
EXECUTED effective as of November 15, 1994.
DUROCRAFT INTERNATIONAL, INC.,
a Texas corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
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CONSENT OF C/D/R
C/D/R hereby represents, warrants, covenants and agrees to and with Lender
that (1) C/D/R is aware of this Amendment and the transactions contemplated
herein (this Amendment and such transactions being hereinafter collectively
called the "Modification"), (2) C/D/R consents to the Modification, (3)
notwithstanding the Modification, the C/D/R Guaranty shall be and remain a
continuing, absolute, unconditional and irrevocable guaranty of payment and
performance of the Guaranteed Indebtedness, as defined in the C/D/R Guaranty,
binding and enforceable in accordance with the terms of such guaranty, and such
guaranty shall not be deemed to have been terminated, impaired, modified or
otherwise affected by the Modification, except that the obligations guaranteed
shall include the Obligations as modified by the Modification in addition to any
other amounts included in the Guaranteed Indebtedness, and (4) there are no
claims, defenses, counterclaims or offsets to the liability of C/D/R under the
C/D/R Guaranty.
EXECUTED effective as of November 15, 1994.
C/D/R INCORPORATED,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President
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Exhibit "A"
Form of Promissory Note
174
PROMISSORY NOTE
$10,000,000.00 Dallas, Texas November 15, 1994
FOR VALUE RECEIVED, the undersigned, CRAFTMADE INTERNATIONAL, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of
NATIONSBANK OF TEXAS, N.A., a national banking association ("Payee"), at its
offices at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, in lawful money
of the United States of America, the principal sum of TEN MILLION DOLLARS
($10,000,000.00), or so much thereof as may be advanced and outstanding
hereunder, together with interest on the outstanding principal balance as
hereinafter described.
This Note is the Note provided for in that certain First Amended and
Restated Credit Agreement dated as of January 11, 1993, between Maker and Payee
(such Credit Agreement, as the same has been amended pursuant to that certain
First Amendment to First Amended and Restated Credit Agreement dated as of
December 13, 1993, that certain Second Amendment to First Amended and Restated
Credit Agreement dated as of March 30, 1994, that certain Third Amendment to
First Amended and Restated Credit Agreement dated as of June 30, 1994, and that
certain Fourth Amendment to First Amended and Restated Credit Agreement dated as
of November 15, 1994, and as the same may be further amended or otherwise
modified, herein referred to as the "Agreement"). Capitalized terms not
otherwise defined herein shall have the same meanings as set forth in the
Agreement. Reference is hereby made to the Agreement for provisions affecting
this Note, including, without limitation, provisions regarding the Maker's
rights to borrow, repay and reborrow hereunder, the limitation of interest
charged hereunder, the Collateral securing this Note, Potential Defaults and
Events of Default and Payee's rights arising as a result of the occurrence
thereof. This Note is executed in renewal, extension, increase, amendment and
restatement, but not in novation, discharge or satisfaction of the indebtedness
evidenced by, that certain Promissory Note dated as of January 11, 1993, in the
maximum principal amount of $6,000,000, made by Maker payable to the order of
Payee, as amended, restated and increased pursuant to that certain Promissory
Note dated June 30, 1994, in the maximum principal amount of $8,000,000 made by
Maker payable to the order of Payee (collectively, the "Prior Note"). All
amounts previously outstanding under the Prior Note as of the date hereof, shall
hereafter be due and payable in accordance with the provisions of, and
outstanding, under, this Note. The Prior Note modified in its entirety and
evidenced indebtedness previously evidenced by the promissory note (or notes)
executed by Maker and payable to the order of Texas Commerce Bank -- Arlington,
National Association which has been assigned to Payee pursuant to the Assignment
of Notes and Liens described in Section 5.1 of the Agreement.
Subject to the terms of the Agreement, the outstanding principal balance
hereunder shall bear interest prior to maturity at a varying rate per annum
which shall from day to day be equal to the lesser of (a) the Maximum Rate or
(b) the Applicable Rate, each such change in the rate of interest charged
hereunder to become effective, without notice to Maker, on the effective date
PROMISSORY NOTE - Page 1
175
of each change in the Applicable Rate or the Maximum Rate, as the case may be;
provided, however, if at any time the rate of interest specified in clause (b)
preceding shall exceed the Maximum Rate, thereby causing the interest rate
hereon to be limited to the Maximum Rate, then any subsequent reduction in the
Applicable Rate shall not reduce the rate of interest hereon below the Maximum
Rate until such time as the aggregate amount of interest accrued hereon equals
the aggregate amount of interest which would have accrued hereon if the interest
rate specified in clause (b) preceding had at all times been in effect. All
outstanding principal advanced under this Note shall be due and payable on the
Termination Date. Accrued and unpaid interest on this Note shall be due and
payable on the last Business Day of each month, commencing November 30, 1994,
and on the Termination Date. All past due principal and interest shall bear
interest at the Default Rate.
Interest on the indebtedness evidenced by this Note shall be computed on
the basis of a year of 360 days and the actual number of days elapsed (including
the first day but excluding the last day) unless such calculation would result
in a usurious rate, in which case interest shall be calculated on the basis of a
year of 365 or 366 days, as the case may be.
If the holder hereof expends any effort in any attempt to enforce payment
of all or any part or installment of any sum due the holder hereunder, or if
this Note is placed in the hands of an attorney for collection, or if it is
collected through any legal proceedings, Maker agrees to pay all costs, expenses
and fees incurred by the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the laws of
the State of Texas and the applicable laws of the United States of America. This
Note is performable in Dallas County, Texas.
Maker and each surety, guarantor, endorser and other party ever liable for
payment of any sums of money payable on this Note jointly and severally waive
notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other
formalities of any kind, and consent to all extensions without notice for any
period or periods of time and partial payments, before or after maturity, and
any impairment of any collateral securing this Note, all without prejudice to
the holder. The holder shall similarly have the right to deal in any way, at any
time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forbearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
Maker hereby authorizes the holder hereof to record in its records all
advances made to Maker hereunder and all payments made on account of the
principal thereof, which records shall be prima facie evidence as to the
outstanding principal amount of this Note; provided, however, any failure by the
holder hereof to make any such records shall not limit or otherwise affect the
obligations of Maker under the Agreement or this Note.
PROMISSORY NOTE - Page 2
176
THIS WRITTEN AGREEMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS AS WRITTEN,
REPRESENTS THE FINAL AGREEMENT BETWEEN MAKER AND PAYEE AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF MAKER AND PAYEE. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN MAKER AND
PAYEE.
CRAFTMADE INTERNATIONAL, INC.
By:
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
PROMISSORY NOTE - Page 3