Exhibit 10-1
LOAN AND SECURITY AGREEMENT
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THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made as of March 27,
2007, between ENVIROCLEAN MANAGEMENT SERVICES, INC., a Texas corporation
("Borrower"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. ("Guarantor", whether
one or more), and PARK CITIES BANK ("Lender").
PRELIMINARY STATEMENTS
A. Borrower has requested a $1,500,000.00 revolving line of credit loan for
working capital purposes, and Lender has agreed to extend such credit subject to
the terms and provisions hereof.
B. As an inducement for Lender to extend the loan to Borrower, Borrower
shall grant a first priority security interest in and to the hereinafter
described Collateral, and Borrower shall execute and deliver the Deed of Trust
in favor of Lender, granting a first and superior lien upon certain real
property owned by Borrower and located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇.
C. As a further inducement for Lender to extend the loan to Borrower, each
Guarantor has agreed to unconditionally guarantee all debt owed by Borrower to
Lender at any time.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower, Lender and each
Guarantor hereby agree as follows:
ARTICLE I
DEFINITIONS AND REFERENCES
The following definitions shall apply to the following terms wherever used
in the Loan Documents (as hereinafter defined), except where the terms are
expressly defined otherwise or where the context clearly requires otherwise:
"Account Debtor" means any Person or Persons purchasing or engaging to
purchase products and/or services from Borrower and any other Person who by
contract or other arrangement has independently agreed to pay for products or
services sold by Borrower to any Person or Persons.
"Advance" means any advance of funds by Lender to or on behalf of Borrower
under the Note.
"Advance Date" means the date on which an Advance is made hereunder.
"Advance Request" means a request to Lender for an Advance made by
submitting by mail or telecopy a writing substantially in the form of Exhibit A
attached hereto, signed by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, or any other corporate officer of
Borrower authorized in writing; and Borrower hereby irrevocably agrees that any
such officer may make an Advance Request hereunder, and that unless and until
Lender has received written notice of the termination of the authority of any
such officer, Lender may fully rely thereon, and Borrower shall be obligated
thereunder.
"Affiliate" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person, including but not
limited to any parent, subsidiary, joint venture or partnership of such Person
and any other entity or corporation at least fifteen percent (15%) of the voting
shares or interests of which are owned directly or indirectly by such Person in
the aggregate. Affiliate shall also mean any Guarantor or any shareholder of
Borrower, or any member of the immediate family, or any trust, partnership or
other entity which is beneficially owned by any Guarantor or shareholder or
member or members of the immediate family of any Guarantor or shareholder.
"Agreement" means this Loan and Security Agreement, with any and all
exhibits and schedules attached hereto and all written and executed amendments,
supplements and modifications hereof.
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"Borrower" means Borrower or its successors and assigns.
"Borrowing Base" means the Borrowing Base from time to time applicable to
the Loan and shall be the amount, as of the date of determination, equal to the
sum of (a) EIGHTY-FIVE PERCENT (85%) of the appraised value of the improved real
property encumbered by the Deed of Trust, per an appraisal in a form and
prepared by an appraiser acceptable to Lender; PLUS (b) SEVENTY-FIVE PERCENT
(75%) of ELIGIBLE RECEIVABLES.
"Borrowing Base Certificate" means the Certificate attached hereto as
Exhibit B.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Dallas, Texas.
"Capital Expenditure" means any capital expenditure of Borrower, as
determined in accordance with GAAP, including, but not limited to, the purchase
of vehicles, real estate, buildings, leasehold interests, computers, data
processing equipment, telephone equipment, fax machines and copiers.
"Closing Date" means the date referred to in the preamble of this
Agreement, which shall be the effective date of this Agreement.
"Collateral" has the meaning set forth in Section 6.1.
"Compensation" means the entire amount of salaries, wages or other
compensation paid on a calendar year basis including, but not limited to,
overtime payments and commissions before reductions on account of any
withholding, such as income taxes and social security taxes, and also including
management fees, consulting fees, non-business related expenses, bonuses,
redemptions, dividends or other distributions on equity securities, vehicle,
clothing or other allowances, insurance premiums, retirement benefits and
contributions to pension or profit sharing plans and any other perquisites of
employment or ownership but excluding reasonable expense account allowances.
"Debt" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, excluding unearned or deferred revenues, whether
primary or secondary, direct or indirect, absolute or contingent.
"Deed of Trust" means that certain Deed of Trust (With Security Agreement
and Assignment of Rents) executed by Borrower creating a first lien upon certain
real property located in Dallas County, Texas, as more particularly described
therein, as collateral for the Loan.
"Eligible Receivables" means all bona fide Receivables owed by Account
Debtors to Borrower, less (i) each Receivable with an account balance of less
than $2,000.00, less (ii) all Receivables outstanding for more than ninety (90)
days from the due date, less (iii) all Receivables owed by any Account Debtor if
FIFTEEN PERCENT (15%) or more of such Account Debtor's account is outstanding
for more than ninety (90) days from due date, less (iv) with respect to any
Account Debtor whose aggregate outstanding account balance exceeds TWENTY-FIVE
PERCENT (25%) of the aggregate Receivables of Borrower, that portion of said
Account Debtor's balance that exceeds TWENTY-FIVE PERCENT (25%) of the aggregate
Receivables of Borrower, less (v) Receivables from any Affiliate of Borrower,
less (vi) any Receivable from any federal or state political or governmental
authority, agency, department or other division, less (vii) any Receivable
arising out of a pre-billing or progress billing arrangement and any Receivable
not due and payable in its entirety or with regard to which Borrower has not
fully performed all of Borrower's duties under and in connection with the
transaction to which the Receivable, or any part thereof, relates, less (viii)
any lienable Receivable for which an indemnity bond has been issued, less (ix)
all contra accounts or Receivables owed by any Account Debtor from whom Borrower
purchases products or services on terms, and less (x) all Receivables owed by
any Account Debtor whose principal business office is located outside the United
States.
"Event of Default" has the meaning set forth in Section 7.1.
"Fiscal Year" means any twelve-month period ending on and including
December 31st.
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"Formation Documents" means, with respect to Borrower, Articles of
Incorporation or a Certificate of Formation and Bylaws; and all amendments
thereto, if any.
"GAAP" means those 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 or in statements of the
Financial Accounting Standards Board and/or their successors which are
applicable in the circumstances as of the date in question, and the requisite
that such principles be applied on a consistent basis means that the accounting
principles observed in a current period are comparable in all material respects
to those applied in a preceding period.
"Guaranty(ies)" means the Guaranty Agreements, as may be amended from time
to time, executed by each Guarantor in connection herewith.
"Initial Financial Statements" means the financial statements of Borrower
or Guarantor dated no earlier than three (3) months prior to the date hereof,
copies of which have been delivered to Lender.
"Indebtedness" means the sum of all Debt from time to time owing by
Borrower and/or any Guarantor to Lender under or pursuant to any of the Loan
Documents, together with any Letter of Credit Liabilities.
"Intangible Assets" means all intangible assets (as defined by GAAP from
time to time), including goodwill, trademarks, patents, copyrights,
organizational expenses and similar intangible items, and expressly including
loans, advances and investments to or in Affiliates, employees or officers of
Borrower or any Guarantor.
"Inventory" means all raw materials, work-in-progress and finished goods
inventory of Borrower, including, without limitation, all goods manufactured,
processed or purchased for resale by Borrower.
"Law or Laws" means statute(s), law(s), ordinance(s), regulation(s),
order(s), writ(s), injunction(s) or decree(s) of any political or governmental
body or Tribunal (federal, state, county, municipal, foreign, or domestic or
otherwise) having competent jurisdiction.
"Lender" means PARK CITIES BANK, or its successors or assigns.
"Liabilities" means, at any particular time, all Debt which, in conformity
with GAAP, would be included as liabilities on a balance sheet of a Person.
"Lien" means, with respect to any property or assets, any right or interest
therein of a creditor to secure Debt owed to it or any other arrangement with
such creditor which provides for the payment of such Debt out of such property
or assets or which allows it to have such Debt satisfied out of such property or
assets prior to the general creditors of any owner thereof, including without
limitation, any lien, mortgage, security interest, pledge, deposit, production
payment, rights of a vendor under any title retention or conditional sale
agreement or lease substantially equivalent thereto, or any other charge or
encumbrance, whether arising by Law or agreement or otherwise, but excluding any
right of offset which arises without agreement in the ordinary course of
business.
"Loan" means the revolving line of credit loan made by Lender to Borrower
pursuant to Article II and evidenced by the Note.
"Loan Commitment" means $1,500,000.00.
"Loan Documents" means this Agreement, the Note, the Deed of Trust, the
Guaranties, and each other document evidencing and securing the Indebtedness
under the Loan, and all other agreements, certificates, legal opinions and other
documents, instruments and writings (other than term sheets, commitment letters,
or similar documents used in the negotiation hereof) heretofore or hereafter
delivered in connection herewith or therewith.
"Maturity Date" shall have the meaning set forth in the Note.
"Monthly Payment Date" means each monthly payment or installment due date
as set forth in the Note.
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"Note" means that certain Revolving Note evidencing the Loan executed as of
the Closing Date by Borrower payable to Lender as modified or extended from time
to time in writing, and any promissory note issued in exchange or replacement
therefor.
"Person" means any one and "Persons" means more than one individual,
corporation, partnership, association, joint stock company, trust or trustee
thereof, estate or executor thereof, unincorporated organization or joint
venture, court or governmental unit or any agency or subdivision thereof, or any
other legally recognizable entity.
"Potential Event of Default" means any event or condition which with notice
or the lapse of time or both would give rise to an Event of Default.
"Receivables" means all of Borrower's accounts, receivables or right to
receive any payment or commission from any Account Debtor.
"Subordinated Debt" means all of the Debt of Borrower which Debt (and
all Liens securing such Debt) has been subordinated to the Loan by written
subordination agreement in form and substance acceptable to Lender.
"Subsidiaries" means any entity owned in whole or in part or otherwise
controlled by Borrower.
"Tangible Net Worth" shall mean (a) a Person's total assets as reflected on
the financial statements furnished to Lender, excluding (i) all Intangible
Assets, (ii) all Receivables from officers, employees or other Affiliates, and
(iii) investments in any Affiliate, less (b) the total amount of such Person's
Debt.
"Tribunal" means any agency, board, business, commission, court,
department, instrumentality or tribunal of any political or government authority
having competent legislative, judicial or arbitral jurisdiction.
"Working Capital" means, at any given time, the amount by which current
assets exceeds current liabilities.
ARTICLE II
THE LOAN
2.1 Maximum Principal Debt. Pursuant to this Article II and subject to the
terms and conditions of this Agreement, Lender agrees to make Advances to
Borrower under the Note from time to time in an aggregate amount not to
exceed, at any one time outstanding, the amount (the "Maximum
Availability") that is (i) the lesser of (a) the Borrowing Base and (b) the
Loan Commitment. Subject to the Maximum Availability, and the other terms
and provisions of this Agreement, Borrower may borrow, repay, and reborrow
amounts hereunder.
2.2 Note. The Loan made by Lender pursuant to this Article II shall be
evidenced by the Note. Lender is hereby authorized to record the date and
amount of each Advance made pursuant to this Article II by Lender and the
date and amount of each payment or prepayment of principal thereof in
Lender's records. Any such recordation shall constitute prima facie
evidence of the accuracy of the information as recorded; provided, however,
the failure to make any such recordation shall not affect the obligations
of Borrower hereunder or under the Note.
2.3 Borrowing Procedure. By no later than 10:00 a.m. Central time one (1)
Business Day prior to a proposed Advance, Borrower shall submit to Lender
an Advance Request. Upon fulfillment of the applicable conditions set forth
herein, including Article V, Lender shall transfer immediately available
funds in the amount of the Advance into an account at Lender established by
Borrower by no later than Lender's close of business on the Advance Date.
2.4 Use of Proceeds. The proceeds of the Loan shall be used only to supplement
cash flow for general corporate needs, including providing working capital
to Borrower for the purpose of financing Borrower's operations, production
and for marketing and sales efforts, and costs related to the expansion of
Borrower's business operations, and the acquisition of the assets of
businesses engaged in businesses the same as, similar to or complementary
to Borrower's business operations. Borrower warrants that it shall not use
the proceeds of the Loan for any other purposes or in connection with the
operation of any other business.
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2.5 Term. The obligation of Lender to make Advances pursuant to this Article II
shall terminate at Lender's close of business in Dallas, Texas, on the
Maturity Date.
2.6 Voluntary Prepayment. At its option on any Business Day, Borrower may
prepay to Lender the principal balance of the Loan in whole or in part
without penalty or premium.
2.7 Mandatory Prepayments.
(a) In the event Borrower sells, transfers, assigns or otherwise disposes
of all or any portion of the Collateral, other than in the ordinary
course of business, Borrower shall pay immediately to Lender the
proceeds of any such sale, transfer or assignment as a prepayment of
principal of the Loan.
(b) If, at any date of determination, the Loan balance exceeds the Maximum
Availability, then Borrower shall immediately pay to Lender an amount
sufficient to reduce the Indebtedness outstanding under the Loan such
that Borrower is in compliance with Section 2.1.
2.8 Direct Disbursement by Lender. Lender shall have the right in Lender's
sole discretion, subject to the limitations set forth in Section 2.1
hereof, on behalf of and without notice to Borrower, to make and use
Advances to pay Lender for any amounts due Lender pursuant to this
Agreement or otherwise, including, without limitation, principal and
interest on the Note or on any other Debt owed by Borrower to Lender
and any expenses incurred by Lender and payable by Borrower under this
Agreement.
2.9 Origination Fee. Borrower shall pay to Lender a non-refundable
origination fee of one percent (1.0%) of the Loan Commitment, upon
execution of this Agreement to compensate Lender for reserving funds
with which to make Loan Advances on the Loan and for administrative
costs in reviewing, underwriting and processing the Loan.
ARTICLE III
CONDITIONS TO ADVANCES AND LETTERS OF CREDIT
3.1. Closing Conditions. The obligation of Lender to make the initial Advance
under the Note is conditioned upon prior satisfaction of all requirements
set forth in this Article III and upon the prior receipt by Lender of the
documentation set forth in this Section 5.1 (all of which shall be
satisfactory to Lender in its sole discretion):
(a) Formation Documents. Copies of the Formation Documents for Borrower
accompanied by a certificate of the appropriate secretary or other
officer, dated as of the Closing Date, to the effect that such copy is
correct and complete;
(b) Existence and Good Standing. A certificate or certificates of the
Secretary of State, Comptroller or other appropriate officer of the
state of incorporation or formation of Borrower, bearing a date not
more than thirty (30) days prior to the Closing Date, to the effect
that each such party is duly organized and existing and in good
standing under the laws of the state of incorporation or formation;
(c) Incumbency. A certificate of incumbency naming all officers of
Borrower who will be authorized to execute or attest any of the Loan
Documents on behalf of Borrower, executed by the secretary or other
officer of Borrower, together with specimen signatures, dated as of
the Closing Date;
(d) Resolutions. Copies of resolutions of the Board of Directors of
Borrower, satisfactory to Lender, approving and authorizing the
execution of this Agreement and such of the Loan Documents to which
Borrower is a party and authorizing the performance of the obligations
of Borrower contemplated in this Agreement and in such other Loan
Documents, accompanied by a certificate of the Secretary or other
officer, dated as of the Closing Date, that such copies are complete
and correct copies of resolutions duly adopted at a meeting duly held,
that such resolutions have not been amended, modified or revoked in
any respect and are in full force and effect as of the Closing Date,
and further certifying as to such other matters as may be required by
Lender;
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(e) Other Certificates. Certificates of Borrower's good standing and
qualification to do business, issued by appropriate officials in any
state in which Borrower owns property subject to the Loan Documents;
(f) Insurance. Evidence of endorsements or riders in favor of Lender for
all insurance policies maintained by Borrower in accordance with the
requirements set forth in Articles IV and V, together with loss payee
endorsements from such insurance companies with respect to insurance
in favor of Lender which provide that (i) the policy will remain in
force for the benefit of Lender for at least thirty (30) days after
Lender receives written notice of cancellation of same, (ii) the
insurance carrier will not reduce or cancel the policy at the request
of the insured or amend or endorse or delete it without at least
thirty (30) days prior written notice being received by Lender, and
(iii) the insurance cannot be invalidated as to Lender by any act or
neglect of the insured;
(g) Note. The Note;
(h) Financing Statements, Etc. All financing statements or amendments to
financing statements, mortgages, deeds of trust and all other
documents or instruments requested by Lender to evidence the Liens
granted by Borrower pursuant to the Loan Documents, duly executed and
recorded in the appropriate governmental office;
(i) Field Audit. If required by Lender, completion of a field audit with
results acceptable to Lender;
(j) Guaranties. A Guaranty from each Guarantor;
(k) Releases. Duly executed UCC-3 termination statements or similar
documents with respect to Liens other than in favor of Lender on the
Collateral;
(l) Deed of Trust. The Deed of Trust, together with a prepaid mortgagee
title policy in favor of Lender in the amount of Loan, containing no
exceptions other than those approved by Lender, and together with a
current survey of the real property encumbered by the Deed of Trust,
certified in favor of Lender, and otherwise in a form acceptable to
Lender;
(m) Approval of Initial Financial Statements and Other Due Diligence.
Lender shall have received and approved (i) the Initial Financial
Statements, and (ii) all submissions, reports, appraisals,
environmental studies and other "due diligence" as required by Lender;
(n) Landlord Subordination. Landlord subordination agreements executed by
each of Borrower's landlords with respect to each location of Borrower
where Inventory is or may be stored, warehoused or maintained;
(o) Other Documents. Any and all other documents or certificates
reasonably requested by Lender in connection with the execution of
this Agreement, including without limitation an opinion of counsel for
Borrower and each Guarantor, in form and substance reasonably
acceptable to Lender; and
(p) Certain Payments. Borrower shall have paid Lender the Origination Fee
and reimbursed Lender for all reasonable expenses incurred by Lender
in connection with the preparation of the Loan Documents, including,
but not limited to, the reasonable fees and expenses of counsel for
Lender.
3.2. Conditions to Each Advance under the Loan. In addition to the conditions
precedent stated elsewhere herein, Lender shall not be obligated to make an
Advance, unless:
(a) Advance Request. In accordance and by the time specified in Article
II, Borrower shall have delivered an Advance Request, duly executed,
containing the certifications and other supporting documentation
required herein;
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(b) Business Day. The Advance Date is a Business Day;
(c) Representations. The representations and warranties made by Borrower
in any Loan Document are true and correct in all material respects at
and as if made as of the Advance Date;
(d) Formation Documents. Lender shall have received current copies of the
items required to be delivered by Section 3.1(a) hereof if there has
been any amendment to or revision of any of such items;
(e) No Default. On the Advance Date, no Event of Default, or Potential
Event of Default, has occurred and is continuing or would be caused by
the requested Advance;
(f) Availability of Commitment. Lender shall have received a Borrowing
Base Certificate which is current as of the last day of the
immediately preceding calendar month and the sum of (i) the principal
balance of the outstanding Advances made by Lender under the Loan, and
(ii) the amount of the requested Advance does not exceed the Maximum
Availability.
(g) Compliance with Provisions. Borrower shall have performed and complied
in all material respects with all agreements and conditions required
to be performed or complied with by it herein or in any of the Loan
Documents at or prior to the time of the Advance
(h) Necessary Approvals. All necessary authorizations and approvals by or
from any governmental agency or other third party to the transactions
contemplated by this Agreement required of Borrower shall have been
duly obtained and shall be in full force and effect on the Advance
Date;
(i) Additional Evidence. If requested by Lender, Borrower shall have
delivered to Lender a certificate reasonably satisfactory to Lender
certifying any of the matters set forth in this Agreement which are
necessary to enable Borrower to qualify for the Advance;
(j) Use of Proceeds. The proceeds of such Advance shall be used for the
purposes set forth in Section 2.4; and
(k) Legal Limitation. Lender shall be permitted to make the Advance under
applicable Law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Borrower and each Guarantor represent and warrant, as of the date hereof,
the following:
4.1. Corporate Existence, Qualification and Capacity. Borrower is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas. Borrower is duly qualified to transact business as a
foreign entity and are in good standing in every jurisdiction where they
are doing business. Each of the Borrower have all requisite power,
authority, licenses and permits material to the ownership and operation of
their respective properties and to the carrying on of their respective
business. Borrower has all requisite corporate power and authority to
borrow under or guaranty (as applicable), to execute and deliver, and to
perform under, the Loan Documents to which they are a party.
4.2. No Conflict. The execution and delivery of, and performance under, the Loan
Documents by Borrower and each Guarantor (a) do not violate any applicable
law, (b) are not in contravention of the terms of Borrower's or each
corporate Guarantor's articles of incorporation or bylaws, or the terms of
any credit or loan agreement, indenture, lease, franchise, marketing
agreement, license, mortgage or deed of trust, or other material agreement,
undertaking or arrangement (written or oral) to which Borrower or any
Guarantor are a party or by which they (or their assets) may be bound, and
(c) will not give rise to the creation of any Lien upon any assets of
Borrower or any Guarantor.
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4.3. Consent. No authorization, approval, consent, or notice under the
provisions of the articles of incorporation or bylaws of Borrower or any
corporate Guarantor or under any other relevant agreement, undertaking, or
arrangement or applicable law or by any additional Tribunal or Person is
required with respect to the execution and delivery of this Agreement or
the other Loan Documents or with respect to the performance of any covenant
or agreement contained herein or therein.
4.4. Enforceability of Loan Documents; Due Authorization. Borrower and each
corporate Guarantor have taken all requisite corporate action to authorize
the (a) execution and delivery of the Loan Documents to which it is a
party, (b) consummation of all transactions contemplated thereby, and (c)
performance and discharge of its obligations thereunder. This Agreement and
each other Loan Document to be executed and delivered by Borrower and each
Guarantor as contemplated herein, when executed and delivered by all
parties thereto, will constitute the valid, legal and binding obligation of
Borrower and each Guarantor, enforceable against Borrower and each
Guarantor in accordance with their terms.
4.5. Properties; No Liens. Borrower and each Guarantor has good, marketable and
insurable fee simple title to all of its owned real properties, good and
marketable leasehold title to all of its leased real properties and good
and marketable title to all of its personal property, and no such real,
leasehold or personal properties are subject to any Liens other than Liens
in favor of Lender.
4.6. Financial Condition. The Initial Financial Statements were prepared in
accordance with GAAP, consistently applied, and fairly present the
financial condition and results of operations of Borrower and each
Guarantor, on the dates or for the periods indicated therein, and since the
delivery of the Initial Financial Statements, there has been no material
adverse change in the assets, liabilities, condition (financial or
otherwise) or business operations of Borrower or any Guarantor.
4.7. Full Disclosure. Neither this Agreement nor any other document, certificate
or written statement furnished to Lender by or on behalf of Borrower or any
Guarantor in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary in order to
make the statements contained herein or therein not misleading. There is no
fact peculiar to Borrower or any Guarantor which materially adversely
affects or is likely to materially adversely affect the business, condition
or operations (financial or otherwise) of Borrower or such Guarantor which
has not been set forth in this Agreement or in other documents,
certificates and written statements furnished to Lender by or on behalf of
Borrower or any Guarantor.
4.8. No Defaults Under Documents. Neither Borrower nor any Guarantor is in
default or in violation (nor has any event or condition occurred which,
with notice or lapse of time or both, would constitute a default or
violation) under the Loan Documents, under any charter document or
indenture, or under any credit or loan agreement, indenture, lease,
franchise, marketing agreement, license, mortgage, deed of trust, or any
other material agreement, undertaking or arrangement (written or oral) to
which it is a party or under which it or any of its assets may be bound.
4.9. Existing Litigation/Liabilities. There are no material actions, suits or
proceedings pending, or, to the best knowledge of Borrower and each
Guarantor, threatened against or affecting the assets of Borrower and/or
any Guarantor or the consummation of the transactions contemplated hereby,
at law or in equity or before or by any governmental authority or
instrumentality or before any arbitrator of any kind and, to the best
knowledge of Borrower and each Guarantor, there is no valid basis for any
such action, proceeding or investigation. Neither Borrower nor any
Guarantor is subject to any judgment, order, writ, injunction or decree of
any court or governmental agency. There is not a reasonable likelihood of
an adverse determination of any pending proceeding which would,
individually or in the aggregate, have a material adverse effect on the
business operations or financial condition of Borrower or any Guarantor.
Neither Borrower nor any Guarantor is a party to, or bound by, any contract
or agreement or subject to any charter or other corporate restriction
having a material adverse effect on the financial condition or business
operations of Borrower or such Guarantor.
4.10. Taxes. All tax returns of Borrower and each Guarantor required by law to
be filed have been filed and all taxes imposed upon Borrower and each
Guarantor or their respective properties, which are due and payable, have
been paid.
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4.11. Compliance with Laws. Neither Borrower nor any Guarantor is in violation
of any laws, rules, regulations, orders, and decrees applicable to Borrower
or such Guarantor.
4.12. Subsidiaries or Affiliates. Borrower has no Subsidiaries or Affiliates,
except MedSolutions, Inc.
4.13. Insurance. Borrower maintains insurance (a) of such types, including
without limitation comprehensive general liability insurance, casualty
insurance and, if applicable, products liability insurance, as is usually
carried by corporations of established reputation engaged in the same or
similar businesses and similarly situated with financially sound,
responsible and reputable insurance companies or associations (or, as to
workers compensation or similar insurance, with an insurance fund or by
self-insurance authorized by the jurisdiction in which its operations are
carried on) and (b) in such amounts (and with co-insurance and deductibles)
as such insurance is usually carried by corporations of established
reputation engaged in the same or similar businesses and similarly
situated, but in any event, in amounts not less than required by Lender, in
its sole discretion, with provisions naming Lender as additional insured or
loss payee, as applicable, as determined by Lender in its sole discretion.
4.14. Receivables. Each Receivable reflects a contractual arrangement with an
Account Debtor which has been accepted by the Account Debtor, without
dispute, offset, defense or counterclaim, and Borrower is in possession of
the purchase order, invoice or contract which is the basis of each
Receivable, as well as documents and receipts evidencing delivery of all
Inventory and/or the complete provision of the purchased service.
4.15. Consignment. No Inventory is held by Borrower pursuant to consignment,
sale or return, sale on approval or similar arrangements.
4.16. Priority of Security Interest. Lender will have valid and perfected first
priority security interests in the Collateral described in the Loan
Documents, subject to no other Lien, when the financing statements are
signed by Borrower and filed in the appropriate governmental offices or the
certificates of title reflecting Lender's Liens are filed in the
appropriate public office. No financing statement is on file in any public
office with respect to the Collateral other than financing statements
covering the Liens created by the Loan Documents.
4.17. Capital Structure. All authorized, issued and outstanding shares of the
capital stock of Borrower and the ownership of such shares are duly
authorized, validly issued and fully paid and have not been issued in
violation of any preemptive or similar rights. Borrower does not have
outstanding any securities convertible into or exchangeable for its capital
stock, nor any rights to subscribe for or to purchase, any options for the
purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character
relating to, its capital stock or securities convertible into or
exchangeable for its capital stock.
4.18. Names and Places of Business. Borrower has not, during the preceding five
years, had, been known by or used any other corporate, trade or fictitious
name. All Inventory and all other Collateral is located at the locations
set forth on Schedule 4.18 attached hereto. The chief executive office and
principal place of business of Borrower is (and for the preceding five
years has been) set forth on Schedule 4.18 attached hereto.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1 Affirmative Covenants. Borrower and each Guarantor, as applicable, warrant,
covenant, and agree that until the full and final payment of the
Indebtedness and the termination of this Agreement, it will do the
following:
(a) Books, Financial Statements and Reports. At all times maintain full
and accurate books of account and records. Borrower and each Guarantor
will, on an individual or consolidated basis, as required by Lender,
maintain a standard and consistent system of accounting and will
furnish to Lender the statements and reports set forth on Exhibit C
attached hereto and made a part hereof:
(b) Audits/Inspections. On and after the Closing Date, permit
representatives appointed by Lender, including independent
accountants, agents, attorneys, appraisers and any other persons, to
visit and inspect Borrower's property, including its books of account,
other books and records, and any facilities or other business assets,
and to make extra copies therefrom and photocopies and photographs
thereof, and to write down and record any information such
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representatives obtain, and Borrower shall permit Lender or its
representatives to investigate and verify the accuracy of the
information furnished to Lender in connection with the Loan Documents
and to discuss all such matters with its officers, employees and
representatives.
(c) Notice of Material Events and Change of Address. Promptly notify
Lender of (i) any material adverse change in Borrower's financial
condition, (ii) the occurrence of any Event of Default or Potential
Event of Default, (iii) the acceleration of the maturity of any Debt
owed by Borrower or of any default by Borrower under any indenture,
mortgage, agreement, contract or other instrument to which it is a
party or by which its properties are bound, (iv) any material adverse
claim asserted against Borrower or with respect to Borrower's
properties, (v) the filing of any suit or proceeding against Borrower,
(vi) notice from any Tribunal, the substance of which might have a
material adverse effect on the financial condition or business
operations of Borrower, or (vii) any material change in its accounting
practices or procedures. Borrower will also notify Lender in writing
at least twenty (20) Business Days prior to the date that Borrower
changes its name or its jurisdiction of incorporation or formation
(but without implying Borrower's right to do so) or the location of
its chief executive office or principal place of business or the place
where it keeps its books and records concerning the Collateral,
furnishing with such notice any necessary financing statement
amendments or requesting Lender and its counsel to prepare the same.
(d) Maintenance of Properties. Maintain, preserve, protect, and keep all
property used or useful in the conduct of its business in good
condition and in compliance with all applicable Laws and from time to
time make all repairs, renewals and replacements needed to enable the
business and operations carried on in connection therewith to be
promptly and advantageously conducted at all times.
(e) Maintenance of Existence and Qualifications. Maintain and preserve its
corporate existence and not change its jurisdiction of incorporation,
reorganize, merge, or consolidate with any other person and maintain
and preserve its rights and franchises in full force and effect and
qualification to do business as a foreign corporation in all states or
jurisdictions where required by applicable Law.
(f) Payment of Trade Debt, Taxes, Etc. (i) Timely file all required tax
returns, (ii) timely pay all taxes, assessments, and other government
charges or levies imposed upon it or upon its income, profits or
property, (iii) pay all Debt owed by it on ordinary trade terms to
vendors, suppliers and other Persons providing goods and services used
by it in the ordinary course of its business, (iv) pay and discharge
when due all other Debt now or hereafter owed by it, and (v) maintain
appropriate accruals and reserves for all of the foregoing Debt in
accordance with GAAP.
(g) Insurance. Keep adequately insured, by financially sound and reputable
insurers, the Collateral and all other property of a character usually
insured by similar Persons engaged in the same or similar businesses
and otherwise comply with the provisions of the Loan Documents
pertaining to insurance. Maintain adequate insurance against its
liability for injury to Persons or property, which insurance shall be
by financially sound and reputable insurers. Borrower shall have all
of its insurance policies on the Collateral name Lender as loss-payee
and shall have the insurance company provide Lender with such evidence
of insurance as Lender requests.
(h) Payment of Expenses. Whether or not the transactions contemplated by
this Agreement are consummated, promptly (and in any event, within
three (3) days after any invoice or other statement or notice) pay all
reasonable costs and expenses incurred by or on behalf of Lender
(including attorneys' fees) in connection with (i) the negotiation,
preparation, execution and delivery of the Loan Documents, and any and
all consents, waivers or other documents or instruments relating
thereto, (ii) the filing, recording, refiling and re-recording of any
Loan Documents and any other documents or instruments or further
assurances required to be filed or recorded or refiled or re-recorded
by the terms of any Loan Document, (iii) the borrowings hereunder and
other action reasonably required in the course of administration
hereof, including, but not limited to, all reasonable out-of-pocket
expenses incurred in connection with audits and inspections, (iv) the
defense or enforcement of the Loan Documents, and (v) the defense or
enforcement of the Loan Documents and the amendment, restructuring or
"workout" of any of the Loan Documents.
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(i) Compliance with Agreements and Law. Perform all material obligations
it is required to perform under the terms of each indenture, mortgage,
deed of trust, security agreement, lease, franchise, agreement,
contract or other instrument or obligation to which it is a party or
by which it or any of its properties is bound and conduct its
business, and affairs in compliance with all Laws, regulations, and
orders applicable thereto.
(j) Fiscal Year. Maintain a fiscal year which ends on December 31st of
each year.
(k) Character of Business. Continue to engage in substantially the same
type of business engaged in as of the Closing Date.
(l) Litigation. Give prompt written notice to Lender of any material
proceeding, claim or dispute that is not fully covered by insurance,
any material labor dispute resulting in or threatening to result in a
strike against it, or any proposal by any public authority respecting
a condemnation or taking of any material portion of any material
property or other asset (but only when such proposal becomes known to
Borrower), and take or cause to be taken all such steps as are
necessary or appropriate to defend, negotiate or respond to such
proceedings, disputes or proposals.
(m) Collateral Security. (a) Ensure that all Liens granted in favor of
Lender hereunder shall be valid, enforceable, perfected and first
priority Liens; (b) perform all such acts and execute all such
documents as Lender may reasonably request in order to enable Lender
to report, file and record every instrument that Lender may deem
necessary in order to perfect and maintain the Liens granted to Lender
in the Collateral, and otherwise do all things necessary to perfect,
and maintain as perfected, first priority Liens with respect to all
Liens of Lender now existing or hereafter granted in the Collateral;
and (c) immediately notify Lender in writing of any damage to or
material adverse occurrence concerning the Collateral or the moving of
Collateral to any place where it is not currently located.
(n) Authorizations and Approvals. Obtain, at its own expense, all such
licenses, authorizations, consents, permits and approvals as may be
required to enable it to comply with its obligations hereunder and
under the other Loan Documents.
(o) Protection of Business Records. Borrower hereby agrees to take all
necessary protective actions in order to prevent destruction of its
business records, including but not limited to: (i) if Borrower
maintains its business records or back-up business records on a manual
system, then such records shall be kept, keeping all of same in a fire
proof cabinet, and (ii) if its records are computerized or in
electronic form, then Borrower agrees to create a tape or diskette
"back-up" of the computerized information on a regular and prudent
basis, and (a) maintain a complete and accurate duplicate copy of such
tape or diskette back-up at a secure off-site, fire-proof or other
central location, and (b) upon Lender's request, provide Lender with a
complete and accurate duplicate copy of its tapes or diskettes
containing information current through the end of the calendar month.
(p) Environmental Duties. (a) comply in all material respects with all
environmental, health, and safety laws and regulations applicable to
it, the failure to comply with which could have a material adverse
effect; (b) give notices to Lender immediately upon acquiring
knowledge of the presence of any hazardous materials contamination at
its place or places of business with a full description thereof; (c)
promptly notify Lender of the threat or commencement of any proceeding
alleging a material violation of any environmental, health or safety
laws or regulations; and (d) promptly comply with any governmental
requirements requiring the renewal, treatment, mitigation or disposal
of such hazardous materials or hazardous materials contamination and
provide Lender with satisfactory evidence of such compliance.
(q) Primary Depository. Borrower shall establish and maintain its primary
bank depository relationship with Lender.
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(r) Additional Information; Further Assurances. Upon the request of
Lender, provide to Lender such additional information or reports as
Lender may reasonably request and take such actions or care necessary
to comply with the terms of the Loan Documents.
5.2. Negative Covenants. Borrower warrants, covenants and agrees on its own
behalf that until the full and final payment of the Indebtedness and the
termination of this Agreement, Borrower will not do the following without
the prior written consent of Lender:
(a) Limitations on Liens. Create, assume or permit to exist any Lien,
including, without limitation, any purchase money security interest,
upon any of the properties or assets which it now owns or hereafter
acquires, except (i) Liens at any time existing in favor of Lender,
(ii) Liens securing the Subordinated Debt, if any, as approved by
Lender, (iii) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of such
Borrower in conformity with GAAP, and (iv) carriers', warehousemen's,
lessors', mechanics', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business which are not overdue for a
period of more than sixty (60) days or which are being contested in
good faith by appropriate proceedings; provided that adequate reserves
with respect thereto are maintained on the books of such Borrower in
conformity with GAAP.
(b) Limit on Indebtedness. Incur or assume any Debt other than the
Indebtedness and other than trade payables incurred in the ordinary
course of business, without prior Lender consent. Any Debt, other than
Debt to Lender, shall be subordinated to Lender, and Borrower may not
make any payments on other Debt (other than trade accounts payable as
incurred) without Lender's prior written consent.
(c) Limitation on Sales of Collateral. Sell, transfer, lease, exchange,
alienate or dispose of any Collateral or any material interest
therein, including without limitation, any sale or pledge of
Receivables or Inventory, except in the ordinary course of business,
without Lender's prior written consent. Any such sale, transfer,
lease, exchange or disposition shall subject Borrower to the mandatory
prepayment of principal set forth in Section 2.7.
(d) Limitation on Investments and New Businesses. (i) Make any expenditure
or commitment or incur any obligation or enter into or engage in any
transaction except in the ordinary course of business, including, but
not limited to, the opening of any new business location or the
incurrence of any expense not specifically related to the day to day
operation of the business of Borrower, or (ii) engage directly or
indirectly in any business or conduct any operations except in
connection with or incidental to its present business and operations.
(e) Other Guaranties. Be or become liable with respect to any guaranty
(including without limitation any agreement, instrument or arrangement
in which the economic effect is substantially equivalent to a
guaranty).
(f) Dividends. Directly or indirectly declare or pay any dividends or make
any other distribution upon any shares of its capital stock of any
class, or purchase, redeem or otherwise acquire or retire or make any
provisions for redemption, acquisition or retirement of any shares of
its capital stock of any class or warrants or options to purchase any
such shares; provided, however, that if Borrower is a sub-chapter "S"
corporation, as defined by the Internal Revenue Code of 1986, as
amended, Borrower may pay quarterly distributions, without Lender's
prior written consent, in an amount not to exceed the quarterly
estimated federal income tax liabilities of the shareholders of
Borrower incurred in connection with their ownership of Borrower; in
which case, Borrower shall promptly furnish to Lender, within thirty
(30) days of payment, written notice and evidence of payment of any
federal income tax payments made from such distributions.
(g) Capital Leases. Directly or indirectly incur, assume, guaranty or have
outstanding any capitalized lease obligations other than those
existing on the Closing Date.
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(h) Loans or Extensions of Credit. Directly or indirectly loan, invest in,
or extend credit to any Person, including any officer, director or
shareholder of Borrower.
(i) Issuance of Securities. Authorize or issue any shares of capital stock
other than common stock and preferred stock currently outstanding, or
issue shares of common stock or preferred stock or convertible
indebtedness, options, warrants, or other securities evidencing or
representing a right to purchase or receive common stock or preferred
stock.
(j) Transactions; No Affiliate Receivables. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of
property, the making of lease payments or the rendering of any
service, with any Affiliate; nor shall Borrower enter into any such
transaction with any Person (including Borrower's Affiliates) except
in the ordinary course of, and pursuant to the reasonable requirements
of business and upon fair and reasonable terms no less favorable than
would be obtained in a comparable arm's-length transaction with any
other Person.
(k) Negative Pledge of Assets. Pledge, mortgage, hypothecate or ▇▇▇▇▇ ▇
▇▇▇▇ or security interest in, or permit or suffer the creation or
existence of any pledge, mortgage, hypothecation, lien or security
interest in or encumbrance on, any of the assets of Borrower.
(l) Merger, Consolidation, Liquidation, Acquisition, Reorganization. Merge
or consolidate its business with any other Person, liquidate its
business or acquire any assets or capital stock of another Person,
change its name, or reorganize or reconstitute as a different type of
entity or as an entity governed by the laws of a different
jurisdiction.
(m) Sales or Transfer of Assets. Sell, transfer or otherwise dispose of
its assets (except that Borrower may sell Inventory in the ordinary
course of business and may sell or dispose of individual items of
furniture, fixture and equipment in the ordinary course of business so
long as such items are replaced).
(n) Change in Accounting Methods. Change its method of accounting
including, without limitation, its method of depreciation and
accounting for Receivables, except as required by GAAP or by the
pronouncements of the Financial Accounting Standards Board and
promptly reported to Lender.
(o) Change of Ownership or Control. Permit any change in the ownership or
control of Borrower, or permit the sale, transfer or conveyance of any
shares or other interest in Borrower.
(p) Change of Management. Permit any change in the senior executive
management of Borrower.
(q) Tax Consolidation. File any consolidated income tax return with any
Person or Persons.
(r) Other Agreements. Enter into any material agreement or arrangement
that would be violated or breached by the performance of its
obligations hereunder or under any of the Loan Documents.
(s) No Amendments. Amend its Formation Documents without the prior written
consent of Lender, which will not be unreasonably withheld if such
amendment does not materially and adversely affect such party's
ability to perform its duties and obligations hereunder or under any
of the Loan Documents.
(t) Third Party Compensation. Permit the payment of any Compensation to
any officer, director, shareholder or Affiliate of Borrower in excess
of the fair market value of such service.
(u) Modification of Existing Agreements. Amend, modify, or otherwise
change in any respect any material agreement, instrument, or
arrangement (written or oral) by which Borrower, or any of its assets,
are bound.
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(v) ERISA. Become subject to Title IV of the Employee Retirement Income
Security Act of 1974, as amended, or the minimum funding requirements
of the Employee Retirement Income Security Act of 1974, as amended, or
the Internal Revenue Code of 1986, as amended.
ARTICLE VI
SECURITY AGREEMENT
6.1. Grant of Security Interest. As collateral security for the payment and
performance of the Indebtedness and any and all other liabilities of
Borrower to Lender, direct or contingent, of any nature whatsoever,
including both purchase money and non-purchase money transactions (and
specifically including the Loan), Borrower hereby grants to Lender a
continuing security interest in all personal property of Borrower (the
"Collateral"), wherever located and whether such property is now owned or
existing or is owned, acquired, or arises hereafter, including, without
limitation, acquisition by contract or by operation of law, including but
not limited to the following: Accounts, Commercial Tort Claims, Chattel
Paper, Deposit Accounts, Documents, Equipment, Farm Products, Fixtures,
General Intangibles, Goods, Instruments, Inventory, Investment Property,
Letter-of-Credit Rights and all Supporting Obligations and Proceeds (unless
otherwise defined herein, capitalized terms used in this Section 6.1 shall
have the meanings given to them in the Uniform Commercial Code as adopted
in the State of Texas).
6.2. Power of Attorney. Borrower hereby designates and appoints Lender and each
of Lender's designees or agents as attorney-in-fact of Borrower,
irrevocably and with power of substitution, with authority to take any or
all of the following actions upon the occurrence and during the continuance
of an Event of Default: (i) with respect to Receivables, audit, verify,
demand, collect, receive, settle, compromise, adjust and give discharges
and releases, all as Lender may determine, (ii) commence and prosecute any
actions in any court for the purposes of collecting or realizing upon any
Collateral and enforcing any other rights in respect thereof, (iii) defend,
settle or compromise any action brought and, in connection therewith, give
such discharge or release as Lender may deem appropriate, (iv) receive,
open and dispose of mail addressed to Borrower and endorse checks, notes,
drafts, acceptances, money orders, bills of lading, warehouse receipts or
other instruments or documents evidencing payment, shipment or storage of
the goods giving rise to any Collateral on behalf of and in the name of
Borrower, or securing, or relating to the Collateral, (v) sell, assign,
transfer, make any agreement in respect of, or otherwise deal with or
exercise rights in respect of, any Collateral or the goods or services
which have given rise thereto, as fully and completely as though Lender
were the absolute owner thereof for all purposes, (vi) adjust and settle
claims under any insurance policy related thereto, and (vii) enter on the
premises of Borrower in order to exercise any of its rights and remedies.
6.3. No Duty of Lender. Lender shall have no duty as to the collection or
protection of the Collateral nor as to the preservation of any rights
pertaining thereto. Borrower hereby releases Lender from any claims, causes
of action and demands at any time arising out of the Collateral and its use
and/or any actions taken by Lender with respect thereto, and Borrower
hereby agrees to indemnify Lender and to hold Lender harmless from any and
all such claims, causes of action and demands.
6.4. Collection of Receivables. Lender reserves the right, either prior to or
following the occurrence of an Event of Default, to notify the Account
Debtors of the Liens provided for in this Agreement and direct such Account
Debtors to pay Receivables directly to Lender or to a lockbox address
controlled by Lender. Upon request, Borrower shall join Lender in providing
such notification to the Account Debtors and shall execute Lender's then
current form of lockbox agreement. Prior to Lender exercising its right to
collect the Receivables pursuant to this Section 6.4, Borrower shall
collect with diligence its respective Receivables. Lender shall
additionally have the right from time to time prior to or following the
occurrence of an Event of Default, to contact Account Debtors for the
purpose of confirming Receivables.
6.5. Perfection and Protection of Liens. Borrower hereby irrevocably authorizes
Lender to file (and will upon Lender's request execute and deliver to
Lender) any financing statements, continuation statements, extension
agreements and other documents, properly completed and executed (and
acknowledged when required) by Borrower in form and substance satisfactory
to Lender, for the purpose of perfecting, confirming, or protecting
Lender's Liens and other rights in the Collateral.
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6.6. Notice of Assignment. All Receivables, chattel paper, leases, instruments,
documents and other agreements entered into by Borrower and constituting
Collateral or shall contain (by way of stamp or other means satisfactory to
Lender) the following language: "COLLATERALLY ASSIGNED TO PARK CITIES
BANK".
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
7.1. Nature of Event. An Event of Default shall exist if any of the following
occurs and is continuing:
(a) Principal and Interest. Borrower fails to make any payment or
mandatory prepayment of principal and/or interest on the Note when due
and payable, and such failure remains unremedied five (5) days
following written notice from Lender;
(b) Loan Documents. Borrower or any Guarantor (each an "Obligated Person")
fails to perform or to observe any covenant or agreement contained
herein or in any of the Loan Documents, other than the payment of
principal and/or interest referred to in Section 7.1(a) above, and
such failure remains unremedied ten (10) days following written notice
from Lender;
(c) Other Agreements. Any Obligated Person fails to duly observe, perform
or comply with any agreement with any Person or any term or condition
of any instrument and such failure is not remedied within the cure
period, if any, provided therein;
(d) Representations and Warranties. Any representation or warranty
previously, presently or hereafter made by or on behalf of any
Obligated Person in connection with any Loan Document is incorrect,
false or misleading in any respect when made or deemed to be made;
(e) Receivership. A receiver, custodian, liquidator or trustee of any
Obligated Person, or any of its assets is applied for by court order;
an order for relief under any bankruptcy or insolvency Laws is sought
after the filing of a petition by or against any Obligated Person; any
of its assets are subject to an action seeking to replevy, sequester,
garnish, attach or levy against such; or a petition to reorganize or
rehabilitate any Obligated Person under any bankruptcy, reorganization
or insolvency Laws is filed against any Obligated Person;
(f) Reorganization. Any Obligated Person requests reorganization,
arrangement, composition, readjustment, dissolution, rehabilitation,
liquidation or similar relief under any provision of any present or
future Law or consents to the filing of any petition against it under
such Law;
(g) Assignment for Benefit of Creditors. Any Obligated Person (i) makes a
general assignment for the benefit of its creditors, (ii) admits in
writing its inability to pay its debts generally as they become due,
(iii) generally fails to pay its debts as they become due, (iv)
consents to the appointment of a receiver, trustee or liquidator of
all or any part of its assets, or (v) otherwise commits any similar
act;
(h) Judgments. Any judgment, writ or warrant of attachment or any similar
process is entered or filed against any Obligated Person or any of its
assets and remains unpaid, unvacated, unbonded or unstayed for thirty
(30) days or for at least ten (10) days prior to the date on which
such assets may be lawfully sold to satisfy such judgment, writ or
warrant;
(i) Garnishment. A writ of garnishment is issued against Lender with
respect to any accounts or property held or controlled by Lender with
respect to any Obligated Person;
(j) Enforceability of Loan Documents. Any of the Loan Documents shall, in
whole or in part, (i) cease to be legal, valid, binding agreements
enforceable against any Person executing the same, (ii) in any way be
terminated or become or be declared ineffective or inoperative by any
Tribunal, or (iii) in any way cease to give or provide the respective
Liens, rights, titles, interest, remedies, powers or privileges
intended to be created thereby;
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(k) Other Indebtedness. Any Obligated Party shall default, beyond any
applicable notice and cure or grace period, upon any Indebtedness
owing to Lender;
(l) Matters Affecting Guarantors. The death of any Guarantor who is a
natural person or the merger or dissolution of any corporate
Guarantor;
(m) Termination of Any Guaranty. Any Guarantor notifies Lender that he is
terminating his liability under a Guaranty;
(n) Insecurity. Lender, in good faith, shall deem itself insecure; or
(o) Material Adverse Change. Borrower or any Guarantor suffers a material
adverse change in its business or financial condition.
Notwithstanding any other provision relating to notices and opportunities
to remedy defaults contained in this Agreement, if a Potential Event of Default
exists because of a willful breach by Borrower of any representation, warranty
or covenant contained in this Agreement or in any of the other Loan Documents
and if such Potential Event of Default would adversely affect the rights of
Lender in relation to other creditors of Borrower prior to expiration of the
cure period for such Potential Event of Default, then Lender may exercise the
remedies set forth in Section 7.2 without giving such notice and opportunity to
remedy such event or condition.
7.2. Default Remedies. Upon and after an Event of Default, Lender shall have and
may exercise the following rights and remedies, which individual remedies
shall not be exclusive and which individual remedies shall be cumulative
and in addition to each and every other remedy set forth herein and in the
Loan Documents and the other agreements and documents executed in
connection with the transactions contemplated hereby:
(a) The right to (i) accelerate the entire outstanding principal balance
together with all accrued but unpaid interest on the Indebtedness
(specifically including the Note) and all other sums due and payable
by Borrower to Lender without demand, presentment, notice of dishonor,
notice of intent to demand or accelerate payment, diligence in
collection, grace, notice and protest or legal process of any kind,
all of which Borrower hereby expressly waives, (ii) terminate its
commitment to lend hereunder, and (iii) immediately, without any
period of grace, enforce payment of the Indebtedness by exercising any
and all of the rights granted herein.
(b) Lender may, at its option, without notice or demand, take immediate
possession of the Collateral, and for that purpose Lender may, so far
as Borrower can give authority therefor, enter upon any premises on
which any of the Collateral is situated and remove the same therefrom
or remain on such premises and in possession of such Collateral for
purposes of conducting a sale or enforcing the rights of Lender under
this Agreement. Borrower will, upon demand, make the Collateral
available to Lender at a place and time designated by Lender. Lender
may collect and receive all income and proceeds in respect to the
Collateral and may apply the Collateral and any and all income and
proceeds in respect of the Collateral to the payment of all
obligations of Borrower to Lender.
(c) Lender may sell, lease or otherwise dispose of the Collateral (or any
portion thereof) at a public or private sale or sales, with or without
express or implied warranties (including without limitation the
warranty of merchantability), in lots or in bulk, for cash or on
credit, with or without having the Collateral at the place of sale,
and upon terms and in such manner as Lender may determine in
accordance with applicable Law, and Lender may purchase any Collateral
at any such sale to the extent permitted by applicable law, including
the Uniform Commercial Code. The requirement of reasonable notice to
Borrower of the time and place of any public sale of the Collateral or
of the time after which any private sale either by Lender or at its
option, through a broker, or any other intended disposition thereof is
to be made, shall be met if such notice is mailed, postage prepaid, to
Borrower at the address of Borrower designated herein at least ten
(10) days before the date of any public sale or at least ten (10) days
before the time after which any private sale or other disposition is
to be made. Lender shall not be obligated to make any sale of the
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Collateral regardless of notice of sale having been given. Lender 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. Upon any such sale or sales the Collateral so purchased
shall be held by the purchaser absolutely free from any claims or
rights of whatsoever kind or nature, including any equity of
redemption and any similar rights, all such equity of redemption and
any similar rights being hereby expressly waived and released by
Borrower. In the event any consent, approval or authorization of any
governmental agency will be necessary to effectuate any such sale or
sales, Borrower shall execute all such applications or other
instruments as may be required.
(d) Prior to any disposition of Collateral pursuant to this Agreement,
Lender may, at its option, cause any of the Collateral to be repaired
or reconditioned in such manner and to such extent as to make it
saleable, and any reasonable sums expended therefor by Lender shall be
repaid by Borrower and become part of the Indebtedness.
(e) In addition to the remedies provided for herein or otherwise available
to Lender, Lender is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use
in any name, trade secrets, trade styles, trade names, trademarks and
advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in advertising for sale and selling any
Collateral, and Borrower's rights under all licenses and franchise
agreements shall inure to Lender's benefit.
(f) The right (without implying Lender did not have this right prior to an
occurrence of an Event of Default) to contact Account Debtors of
Borrower and demand that payment on any Receivables be made directly
to Lender.
(g) The right to appoint or seek appointment of a receiver, custodian or
trustee of Borrower or any of its assets pursuant to court order and
Borrower hereby consents to such appointment and will not oppose
Lender's efforts to obtain the same.
(h) Any and all rights and remedies afforded by the Laws of any applicable
jurisdiction, the Loan Documents or as otherwise afforded by any Laws
or equity including the right of a secured party under the Uniform
Commercial Code in the applicable jurisdiction.
(i) The right to use and/or operate the Collateral wherever it may be
located, including, without limitation, as permitted under the Uniform
Commercial Code as enacted in all applicable jurisdictions.
(j) Any rights of setoff that Lender may have under applicable Law against
each and every account and other property, Collateral or other asset
of Borrower or any Guarantor in the possession or under the control of
Lender.
7.3. Application of Proceeds. All amounts realized by Lender with respect to the
Indebtedness, including amounts prepaid or realized with respect to the
sale, lease or other disposition of the Collateral under or by virtue of
the Loan Documents, including any sums which may be held by Lender, or the
proceeds of any thereof, shall be applied (i) first, to the payment of the
costs and expenses owing under any of the Loan Documents, including
reasonable compensation to Lender and Lender's agents and attorneys, of all
expenses, liabilities and advances made or furnished or incurred by or on
behalf of Lender under this Agreement or any Loan Document or any amendment
to, restructuring or "workout" of same, (ii) second, to the payment of any
other sums due to Lender, or any successors or assigns thereof, pursuant to
the terms of any Loan Document, except for principal of and accrued and
unpaid interest on the Note, (iii) third, to the payment of accrued and
unpaid interest on the outstanding principal of the Note, in such order and
manner as Lender may determine, in its sole discretion, (iv) fourth, to the
payment of the outstanding principal of the Note (as applicable) in such
order and manner as Lender may determine, in its sole discretion, (v)
fifth, to the establishment of a reserve held by Lender equal to the
aggregate Letter of Credit Liabilities, and (vi) sixth, the surplus, if
any, to Borrower, or to whomever shall be lawfully entitled to receive the
same, as a court of competent jurisdiction may direct. If any deficiency
shall arise, Borrower and Guarantor jointly and severally, shall remain
liable to Lender.
7.4. Performance by Lender. Should any covenant, duty or agreement of Borrower
fail to be performed in accordance with the terms of the Loan Documents,
Lender may, at its option, perform or attempt to perform or enforce such
covenant, duty or agreement on behalf of Borrower. All amounts expended in
connection therewith, together with interest from the date incurred, shall
become a part of the Indebtedness. Notwithstanding the foregoing, it is
17
expressly understood that Lender does not assume any liability or
responsibility for the performance of any duties of Borrower hereunder or
under any of the other Loan Documents or other control over the management
and affairs of Borrower.
7.5. Cumulative Rights. All rights and remedies available to Lender hereunder
and under the other Loan Documents shall be cumulative of and in addition
to all other rights and remedies granted to Lender at Law or in equity,
whether or not the Indebtedness (or any portion thereof) is due and payable
and whether or not Lender has instituted any suit for collection,
foreclosure or any other action in connection with the Loan Documents.
7.6. General Indemnity. Borrower promises to indemnify Lender, upon demand, from
and against any and all liabilities, obligations, claims, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against Lender or any of its directors, officers or employees or
agents (including, accountants, attorneys and other professionals hired by
Lender) (whether or not caused by any negligent act or omission of any kind
by Lender) growing out of or resulting from the Loan Documents and the
transactions and events at any time associated therewith (including without
limitation the enforcement of the Loan Documents and the defense of
Lender's actions and inactions in connection with the Loan).
7.7. Environmental Indemnity by Borrower and Guarantor. Borrower and Guarantor
hereby jointly and severally indemnify and agree to hold Lender, its
directors, officers, and employees (collectively the "Indemnitee") harmless
from and against any and all liabilities, losses, judgments, damages, costs
and expenses, (including, without limitation, reasonable attorneys' fees
and fees of environmental consultants) (collectively, "Environmental
Costs") arising in any manner in connection with:
(a) The presence of any substance, gas or material which is regulated
under environmental Laws ("Hazardous Material"), or underground or
above-ground storage tanks or ▇▇▇▇▇ (an "Environmental Condition") in
existence at any property (the "Controlled Property") now or formerly
owned, leased, or operated by Borrower or any Guarantor; the
occurrence, at any time during or prior to the ownership, tenancy, or
operation of the Controlled Property by Borrower or any Guarantor, of
the storage, emission, discharge, disposal or release of any Hazardous
Material (an "Environmental Activity"); or any failure of Borrower or
any Guarantor or any third party to comply with all applicable Laws
(environmental or otherwise) relating to the Controlled Property;
(b) The transportation to, disposal at, or migration onto or into adjacent
property or any off-site location of any Hazardous Materials from any
Controlled Property as a result of Environmental Activity or an
Environmental Condition that occurred or existed during or prior to
the use of the Controlled Property by Borrower or any Guarantor,
whether or not the transportation or disposal was conducted in full
compliance with all applicable Laws (environmental or otherwise); and
(c) Any claim, demand or cause of action, or any action or other
proceeding, including any investigation, inquiry, order, hearing,
action by or before any Tribunal, whether meritorious or not, brought
or asserted against any Indemnitee which is alleged to or directly or
indirectly relates to, arises from or is based on any of the matters
described in clauses (a) and (b) of this Section 7.7.
The obligations of this Section 7.7 shall include the obligation to defend
Indemnitee against any claim or demand for Environmental Costs, the obligation
to pay and discharge any Environmental Costs imposed on Indemnitee, and the
obligation to reimburse Indemnitee for any Environmental Costs incurred or
suffered by Indemnitee, provided in each instance that the claim for
Environmental Costs arises in connection with a matter for which Indemnitee is
entitled to indemnification under this Agreement. The scope of this
indemnification shall also include indemnification against Environmental Costs
whether or not they are caused in whole or in part by the negligence of
Indemnitee. This Section 7.7 shall survive the full payment of the debt, any
foreclosure(s) on the Collateral, and the termination of this Agreement.
18
7.8. Borrower's Remedies. No action, suit or proceeding may be initiated or
commenced by Borrower or any Guarantor against Lender under the terms of
this Agreement or by reason of any conduct or omission in any way related
to this Agreement unless Lender receives written notice from Borrower or
such Guarantor specifically setting forth the claim of Borrower or
Guarantor within thirty (30) days after Borrower or Guarantor discover or
should have discovered the event or occurrence which Borrower or Guarantor
assert gave rise to such claim. Moreover, in any event, Lender shall never
be liable to Borrower or any Guarantor for consequential or exemplary
damages, whatever the nature of the alleged breach by Lender of the
obligations of Lender hereunder.
ARTICLE VIII
MISCELLANEOUS
8.1. Waiver and Amendment. No failure or delay by Lender in exercising any
right, power or remedy under any of the Loan Documents shall operate as a
waiver thereof or of any other right, power or remedy, nor shall any single
or partial exercise by Lender of any such right, power or remedy preclude
any other or further exercise thereof or of any other right, power or
remedy. No waiver of any provision of any Loan Document and no consent to
any departure therefrom shall ever be effective unless it is in writing and
signed by Lender, and then such waiver or consent shall be effective only
in the specific instances and for the purposes for which given and to the
extent specified in such writing. No notice to or demand on Borrower shall
entitle Borrower to any other or further notice or demand in similar or
other circumstances. No modification, amendment or supplement to this
Agreement or the other Loan Documents shall be valid or effective unless
the same is in writing and signed by the party against whom it is sought to
be enforced. The acceptance by Lender at any time and from time to time of
a partial payment of the Indebtedness shall not be deemed to be a waiver of
any Event of Default then existing. No waiver by Lender of any Event of
Default shall be deemed to be a waiver of any other then existing or
subsequent Event of Default.
8.2 Survival of Agreements. All of the various representations, warranties,
covenants and agreements in the Loan Documents shall survive the execution
and delivery of this Agreement and the other Loan Documents and the
performance hereof and thereof, including without limitation the making or
granting of the security interests and the delivery of the Note and the
other Loan Documents, and shall further survive until all of the
Indebtedness is paid in full to Lender and all of Lender's obligations to
Borrower are terminated.
8.3. Relief in Bankruptcy. Borrower hereby agrees that, in consideration of the
recitals and mutual covenants contained herein, and for other good and
valuable consideration, in the event Borrower shall (i) file with any
bankruptcy court of competent jurisdiction or be the subject of any
petition under Title 11 of the U.S. Code, as amended, (ii) be the subject
of any order for relief issued under such Title 11 of the U.S. Code, as
amended, (iii) file or be the subject of any petition seeking any
reorganization, rearrangement, composition, adjustment, liquidation,
dissolution, or similar relief under any present or future state act or law
relating to bankruptcy, insolvency or other relief for debtors, (iv) have
sought or consented to or acquiesced to any appointment of any trustee,
receiver, conservator, or liquidator, or (v) be the subject of any order,
judgment or decree entered by any court of competent jurisdiction approving
a petition filed against such part for any reorganization, rearrangement,
composition, adjustment, liquidation, dissolution, or similar relief under
any present or future federal or state act of law relating to bankruptcy,
insolvency or relief for debtors, Lender shall thereupon be entitled to
relief from the automatic stay imposed by Section 362 of Title 11 of the
U.S. Code, as amended, or otherwise, on or against the exercise of the
rights and remedies otherwise available to Lender as provided herein, in
the Loan Documents, any other document or instrument executed in connection
herewith or therewith, and as otherwise provided by applicable state and
federal law.
8.4. No Obligation Beyond Maturity. Borrower agrees and acknowledges that on the
Maturity Date, Lender shall have no obligation to renew, extend, modify or
rearrange the Note, and shall have the right to require all amounts due and
owing under the Loan to be paid in full upon the maturity thereof.
8.5. Notices. Except as otherwise provided herein, all notices, requests,
consents, demands and other communications required or permitted under any
Loan Document shall be in writing and, unless otherwise specifically
provided in such Loan Document, shall be deemed sufficiently given or
furnished if delivered by personal delivery, by telecopy, by expedited
delivery service with proof of delivery, or by registered or certified
United States mail, first class postage prepaid, at the addresses specified
below (unless changed by similar notice in writing given by the particular
19
Person whose address is to be changed). Borrower hereby acknowledges that
any notice or communication delivered as herein provided shall be effective
notice upon Borrower, and Borrower hereby assumes the responsibility of
coordinating the distribution of such notice to any particular
representative, director, officer, or employee of Borrower. Any such notice
or communication shall be deemed to have been given either at the time of
personal delivery or, in the case of delivery service, or mail, as of the
date of first attempted delivery at the address and in the manner provided
herein, or in the case of telecopy, upon receipt.
Borrower's address:
ENVIROCLEAN MANAGEMENT SERVICES, INC.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Lender's address:
PARK CITIES BANK
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
8.6. Successors and Assigns. The Loan Documents shall be binding and shall inure
to the benefit of the parties thereto and their respective successors and
assigns; provided, however, that Borrower may not assign or transfer any of
its rights or delegate any of its duties or obligations under any Loan
Document without the prior written consent of Lender.
8.7. Governing Law/Venue. THE LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND
INSTRUMENTS MADE UNDER THE LAWS OF THE STATE OF TEXAS, THE LOCATION OF
LENDER'S PRINCIPAL PLACE OF BUSINESS, AND SHALL BE CONSTRUED AND ANY AND
ALL CLAIMS, DEMANDS, OR ACTIONS IN ANY WAY RELATING THERETO OR INVOLVING
ANY DISPUTE BETWEEN ANY OF THE PARTIES TO THIS AGREEMENT, WHETHER ARISING
IN CONTRACT OR TORT, AT LAW, IN EQUITY OR STATUTORILY, SHALL BE ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE LAWS
OF THE UNITED STATES OF AMERICA, EXCEPT WITH RESPECT TO SPECIFIC LIENS, OR
THE PERFECTION THEREOF, EVIDENCED BY LOAN DOCUMENTS COVERING REAL OR
PERSONAL PROPERTY WHICH BY THE LAWS APPLICABLE THERETO ARE REQUIRED TO BE
CONSTRUED UNDER THE LAWS OF ANOTHER JURISDICTION. BORROWER HEREBY
IRREVOCABLY SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS OF THE STATE OF TEXAS AND AGREES AND CONSENTS THAT
SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO
THE LOAN DOCUMENTS OR THE INDEBTEDNESS BY ANY MEANS ALLOWED UNDER TEXAS OR
FEDERAL LAW. VENUE FOR ANY LEGAL PROCEEDING SHALL BE DALLAS COUNTY, TEXAS,
PROVIDED, THAT LENDER MAY CHOOSE ANY VENUE IN ANY STATE WHICH IT DEEMS
APPROPRIATE IN THE EXERCISE OF ITS SOLE DISCRETION.
8.8. Severability. If any term or provision of any Loan Document shall be
determined to be illegal or unenforceable, all other terms and provisions
of the Loan Documents shall nevertheless remain effective and shall be
enforced to the fullest extent permitted by applicable law.
8.9. Counterparts. This Agreement may be separately executed in any number of
counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to constitute one and the same
Agreement.
8.10. Headings. The headings, captions, table of contents and arrangements used
in this Agreement or the other Loan Documents are, unless specified
otherwise, for convenience only and shall not be deemed to limit, amplify
or modify the terms of this Agreement or the other Loan Documents.
20
8.11. Number and Gender of Words. Whenever the singular number is used, the same
shall include the plural where appropriate, and words of any gender shall
include each other gender where appropriate.
8.12. Legal Counsel. BORROWER ACKNOWLEDGES THAT IT HAS HAD THE OPPORTUNITY TO BE
REPRESENTED BY INDEPENDENT LEGAL COUNSEL IN CONNECTION WITH ALL MATTERS
CONCERNING THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO THE NEGOTIATION,
ACCEPTANCE AND EXECUTION OF THE AGREEMENT; THAT IT HAS RELIED UPON OR HAD
THE OPPORTUNITY TO RELY UPON THE ADVICE OF ITS INDEPENDENT LEGAL COUNSEL IN
AGREEING TO THE TERMS AND CONDITIONS HEREIN AND IN EXECUTING THIS
AGREEMENT; THAT IT HAS READ, REVIEWED AND UNDERSTOOD THE LOAN DOCUMENTS AND
THAT THE OBLIGATIONS THEREUNDER REPRESENT VALID AND BINDING OBLIGATIONS OF
BORROWER; AND THAT IT HAS FREELY AND VOLUNTARILY ENTERED INTO THIS
AGREEMENT AS THE PRODUCT OF ARM'S LENGTH NEGOTIATIONS.
8.13. Entirety; Written Loan Agreement. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES. THE EXECUTION AND DELIVERY OF THIS AGREEMENT IS NOT INTENDED
TO BE AND IS NOT A NOVATION OR RELEASE OF THE EXISTING INDEBTEDNESS
OUTSTANDING FROM BORROWER TO LENDER NOR A NOVATION OR RELEASE OF THE
COLLATERAL SECURING SUCH INDEBTEDNESS OR ANY GUARANTY SUPPORTING SUCH
INDEBTEDNESS.
8.14 Fees. The fees described in this Agreement represent compensation for
services rendered and to be rendered separate and apart from the lending of
money or the provision of credit and do not constitute compensation for the
use, detention or forbearance of money. The obligation of Borrower to pay
each fee described herein shall be in addition to, and not in lieu of, the
obligation of Borrower to pay interest, other fees described herein and
expenses otherwise described in this Agreement. Fees shall be payable when
due in immediately available funds. All fees shall (a) be non-refundable
when due, (b) to the fullest extent permitted by applicable Law, bear
interest, if not paid when due, at the Maximum Lawful Rate (as defined in
the Note) and (c) be secured by all of the Collateral.
8.15 Participation. Lender may, from time to time and without notice to
Borrower, sell or offer to sell all or part of the Loan evidenced by the
Note, or interests therein, to one or more assignees or participants and is
hereby authorized to disseminate and disclose any information (whether or
not confidential or proprietary in nature) Lender now has or may hereafter
obtain pertaining to Borrower, any Guarantor, the Collateral or otherwise
relating to the Note (including, without limitation, any credit information
regarding Borrower, any Guarantor, or any of their principals), to (i) any
assignee or participant or any prospective assignee or prospective
participant, (ii) any of Lender's affiliates, (iii) any regulatory body
having jurisdiction over Lender or the Indebtedness evidenced by the Note,
and (iv) to any other parties as may be necessary or appropriate in
Lender's reasonable judgment. Borrower shall execute, acknowledge and
deliver any and all instruments reasonably requested by Lender in
connection therewith and, to the extent specified in any of the documents
evidencing any such assignment or participation, such assignee(s) and
participant(s) shall have the rights and benefits with respect to the Note
and the other Loan Documents as such assignee(s) and participant(s) had
been Lender hereunder.
8.16. Arbitration. Lender, Borrower and each Guarantor agree that all disputes,
claims and controversies between them, whether individual, joint, or class
in nature, arising from this Agreement or otherwise, including without
limitation contract and tort disputes, shall be arbitrated pursuant to the
Rules of the American Arbitration Association, upon request of either
party. No action by Lender to exercise its rights and remedies under this
Agreement or collect, realize upon or dispose of the Collateral shall
constitute a waiver of this arbitration agreement or be prohibited by this
arbitration agreement. Specifically, and without limiting the generality of
the foregoing, nothing herein prevents or precludes Lender from exercising
any creditor's rights in any bankruptcy or insolvency proceeding, obtaining
injunctive relief or a temporary restraining order; invoking a power of
sale under any deed of trust or mortgage; obtaining a writ of attachment or
imposition of a receiver; or exercising any rights relating to personal
property, including taking or disposing of such property which constitutes
Collateral with or without judicial process in accordance herewith or
pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims,
or controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right, concerning the lawfulness or reasonableness of any
21
act, or exercise of any right, concerning any Collateral, including any
claim to rescind, reform, or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated, provided however that no arbitrator
shall have the right or the power to enjoin or restrain any act of any
party, nor shall any arbitrator have the right to award any party punitive,
exemplary or consequential damages. Judgment upon any award rendered by any
arbitrator may be entered in any court having jurisdiction. Nothing in this
agreement shall preclude any party from seeking equitable relief from a
court of competent jurisdiction. The statue of limitations, estoppel,
waiver, laches, and similar doctrines which would otherwise be applicable
in an action brought by a party shall be applicable in any arbitration
proceeding, and the commencement of an arbitration proceeding shall be
deemed the commencement of an action for these purposes. The Federal
Arbitration Act shall apply to the construction, interpretation, and
enforcement of this arbitration provision.
REMAINDER OF PAGE LEFT BLANK - SIGNATURE PAGE FOLLOWS
22
EXECUTED effective as of the day and year first written above.
BORROWER:
---------
ENVIROCLEAN MANAGEMENT SERVICES, INC.,
a Texas corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
LENDER:
PARK CITIES BANK
By: /s/ Authorized Bank Officer
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
GUARANTOR:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
23
LIST OF SCHEDULES AND EXHIBITS
Schedule 4.18 Location of Collateral
Exhibit A Request for Advance
Exhibit B Borrowing Base Certificate
Exhibit C Financial Reporting
24
EXHIBIT C
---------
FINANCIAL REPORTING
(i) Annual Financial Statements of Borrower. As soon as available, and in any
event within ninety (90) days after the end of each Fiscal Year, complete
financial statements of Borrower together with all notes thereto, prepared
in accordance with sound accounting principles consistent with the
financial statements furnished by such reporting party in connection with
the application for the Loan and which fairly reflect the financial
condition of such reporting party, and certified as true and correct by the
chief financial officer of such reporting party. These financial statements
shall contain a balance sheet as of the end of such Fiscal Year and
statements of earnings, and of changes in stockholders' equity for such
Fiscal Year, each setting forth in comparative form, to the extent
possible, the corresponding figures for the preceding Fiscal Year, and
shall be compiled by an independent certified public accountant.
(ii) Annual Financial Statements of Guarantors. As soon as available, and in any
event, within ninety (90) days after each calendar year end, furnished to
Lender, complete financial statements of each Guarantor, currently dated,
together with all notes thereto, prepared in accordance with sound
accounting principles consistent with the financial statements furnished by
such Guarantor in connection with the application for the Loan and which
fairly reflect the financial condition of Guarantor, certified as true and
correct by such Guarantor. Each financial statement shall contain a balance
sheet as of such date and statements of income, of cash flow and of
contingent liabilities and such other information as may be reasonably
requested by Lender.
(iii) Monthly Borrowing Base Certificate. In addition to the delivery of the
Borrowing Base Certificate as provided in Section 3.2(f), as soon as
available, and in any event within thirty (30) days after the end of each
calendar month, deliver to Lender a duly executed and completed Borrowing
Base Certificate dated as of the last day of the preceding calendar month.
If the Borrowing Base Certificate indicates that the Indebtedness under the
Loan exceeds the maximum allowed to be borrowed pursuant to the terms of
this Agreement, Borrower shall deliver to Lender an amount sufficient to
reduce the Indebtedness under the Loan such that Borrower is in compliance
with the terms of the Agreement at such time as Borrower delivers the
Borrowing Base Certificate to Lender.
(iv) Monthly Statement of Receivables. As soon as available and in any event
within thirty (30) days after the end of each calendar month, a Statement
of Receivables for Borrower with an aging analysis and listing the
aggregate remaining balance of each such Receivable, and the name of the
Account Debtor thereon, certified as true and correct, and dated as of the
last day of the calendar month just ended. Borrower warrants and represents
that each Receivable described in the Statement of Receivables shall
represent a bona fide obligation of the Account Debtor.
(v) Monthly Statement of Payables. As soon as available and in any event within
thirty (30) days after the end of each calendar month, a Statement of
Payables for Borrower with an aging analysis and listing the outstanding
payables of Borrower and the name and address of the payee, and dated as of
the last day of the preceding calendar quarter and certified as true and
correct.
(vi) Monthly Financials. As soon as available and in any event within thirty
(30) days after the end of each calendar month, (i) internally prepared
monthly financial statements of Borrower, together with all notes thereto,
prepared in accordance with sound accounting principles consistent with the
financial statements furnished by Borrower in connection with the
application for the Loan and which fairly reflect the financial condition
of Borrower, certified as true and correct by the chief financial officer
of the reporting party, which financial statements shall contain a balance
sheet as of the end of such calendar month, income statement for such
calendar month, and updated projections for the balance of the Fiscal Year.
25
(vii) Collateral Location Reports. Upon the request of Lender, a Statement of
Inventory by model and quantity and the address where each item of
Inventory is located and showing the cost and the depreciated value of such
Inventory.
(viii) Tax Returns. On or before thirty (30) days following the filing thereof
(but in no event later than November 15 of the year following the year to
which such return relates), a complete and accurate copy of the federal
income tax returns for Borrower and each Guarantor, together with all
schedules and amendments thereto, as filed with the Internal Revenue
Service, certified as true and correct.
(ix) Other Information. On and after the Closing Date, furnish to Lender (i) any
information which Lender may from time to time reasonably request
concerning any covenant, provision or condition of the Loan Documents or
any matter in connection with the Collateral or Borrower's businesses and
operations, and (ii) all evidence which Lender may from time to time
reasonably request as to the accuracy and validity of or compliance with
all representations, warranties and covenants made by Borrower in the Loan
Documents, the satisfaction of all conditions contained therein, and all
other matters pertaining thereto.
26