EXHIBIT 10.15
BANK OF AMERICA
BUSINESS LOAD AGREEMENT
(RECEIVABLES AND INVENTORY)
This Agreement dates as of February 24, 1997 is between Bank of America Texas,
N.A. (the "Bank") and American Packing and Gasket Company (the "Borrower").
1. DEFINITIONS In addition to the terms which are defined elsewhere in this
Agreement, the following terms have the meanings indicated for the purposes of
the Agreement.
1.1 "Borrowing Base" means the lesser of:
(a) Three Million and no/100 Dollars ($3,000,000.00); or
(b) the sum of
(i) 80% of the balance due on Acceptable Receivables; and
(ii) 55% of the value of Acceptable Inventory Consisting of raw materials
and finished goods.
In determining the value of Acceptable Inventory to be included in the Borrowing
Base, the Bank will use the lowest of (i) the Borrower's cost, (ii) the
Borrower's estimated market value, substantiated by evidence satisfactory to
Bank in its reasonable discretion.
1.2 "ACCEPTABLE RECEIVABLE" means an account receivable which satisfies the
following requirements:
(a) The account has resulted from the sale of goods or the performance of
services by the Borrower in the ordinary course of the Borrower's
business.
(b) There are no conditions which must be satisfied before the Borrower is
entitled to receive payment of the account. Accounts arising from COD
sales, consignments or guaranteed sales are not acceptable.
(c) The debtor upon the account does not claim any defense to payment and has
not asserted any counterclaims or offsets against the Borrower.
(d) The account represents a genuine obligation of the debtor for goods sold
and accepted by the debtor, or for services performed for and accepted by
the debtor.
(e) The Borrower has sent an invoice to the debtor in the amount of the
account.
(f) The account is owned by the Borrower free of any title defects or any
liens or interests of others except the security interest in favor of the
Bank.
(g) The debtor on the account is not any of the following:
(i) an employee, affiliate, parent or subsidiary of the Borrower, or an
entity which has common officers or directors with the Borrower.
(ii) the U.S. government or any agency or department of the U.S.
government unless the Bank agrees in writing to accept the
obligation and the Borrower complies with the procedures in the
Federal Assignment of Claims Act of 1940 with respect to the
obligation.
(iii) any state, county, city, town or municipality.
(iv) any person or entity located in a foreign country.
(v) any person or entity to whom the Borrower is obligated for goods
purchased by the Borrower or for services performed for the
Borrower. This will not exclude accounts upon which any such debtor
is obligated to the extent that the accounts exceed the amount of
the Borrower's obligation to such debtor.
(h) The account is not in default. An account will be considered in default if
any of the following occurs:
(i) The account is not paid within the 90-day period starting on its
invoice date;
(ii) The debtor obligated upon the account suspends business, makes a
general assignment for the benefit of creditors, or fails to pay its
debts generally as they come due; or
(iii) Any petition is filed by or against the debtor obligated on the
account under any bankruptcy law or any other law or laws for the
relief of debtors.
(i) The account, when added to all other accounts that are obligations of the
same debtor, does not cause that debtor's total obligations to the
Borrower that are included in Acceptable Receivables to exceed 15% of the
balance due on all Acceptable Receivables
(j) The account is not the obligation of a debtor who is in default (as
defined above) on 20% or more of the accounts upon which such debtor is
obligated.
(k) The account does not arise from the sale of goods which remain in the
Borrower's possession or under the Borrower's control.
(l) The account is not evidenced by a promissory note or chattel paper. (m)
(m) The account is otherwise reasonably acceptable to the Bank.
1.3 "ACCEPTABLE INVENTORY" means raw materials and finished goods inventory
which satisfies the following requirements:
(a) The inventory is owned by the Borrower free of any title defects or any
liens or interests of others except the security interest in favor of the
Bank.
(b) The inventory is permanently located at locations which the Borrower has
disclosed to the Bank and which are reasonably acceptable to the Bank. If
the inventory is covered by a negotiable document of title (such as a
warehouse receipt) that document must be delivered to the Bank.
(c) The inventory is held for sale in the ordinary course of the borrower's
business and is of good and merchantable quality. Inventory which is
obsolete, unsalable, damaged, defective or discontinued or which has been
returned by the buyer, is not acceptable. Display items, work-in-process
and shipping materials are not acceptable.
(d) The inventory is not placed on consignment.
(e) The inventory is otherwise reasonably acceptable to the Bank.
2. FACILITY NO. 1 LINE OF CREDIT AMOUNT AND TERMS
2.1 LINE OF CREDIT AMOUNT. During the availability period described below, the
Bank will provide a line of credit to the Borrower. The amount of the line of
credit (the "Facility No. 1 Commitment") is equal to the amount of the Borrowing
Base. This is a revolving line of credit with a within line facility for letters
of credit. During the availability period, the Borrower may repay principal
amounts and reborrow them. Each advance must be for at least Twenty Five
Thousand and no/100 Dollars ($25,000.00), or for the amount of the remaining
available line of credit, if less.
The Borrower agrees not to permit the outstanding principal balance of the line
of credit plus the undrawn amounts of any outstanding letters of credit, plus
amounts drawn on letters of credit and not yet reimbursed, to exceed the
Facility No. 1 Commitment.
2.2 AVAILABILITY PERIOD. (a) The line of credit is available between the date of
this Agreement and March 31, 1998 (the "Expiration Date") unless an Event of
Default has occurred and is continuing. (b) At any time and from time to time,
the Borrower may terminate in whole or reduce in part the Facility No. 1
Commitment, provided that any such partial reduction shall be in an aggregate
amount not less that $25,000 or integral multiples thereof. The amount of any
such termination or reduction may not thereafter be reinstated.
2.3 INTEREST RATE. The interest rate is the lesser of (a) the maximum lawful
rate of interest permitted under applicable usury laws, now or hereafter enacted
(the "Maximum Rate"), or (b) the rate (the "Basic Rate") that is equal to the
Bank's Reference Rate.
Notwithstanding the foregoing, if at any time the Basic Rate shall exceed the
Maximum Rate and thereafter the Basic Rate shall become less than the Maximum
Rate, the Rate of interest payable shall be the Maximum Rate until the Bank
shall have received the amount of interest it otherwise would have received if
the interest payable had not been limited by the Maximum Rate during the period
of time the Basic Rate exceeded the Maximum Rate.
The Reference Rate is the rate of interest publicly announced from time to time
by the Bank in Irving, Texas, as its Reference Rate. The Reference Rate is set
by the Bank based on various factors, including its costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans. The Bank may price loans to its customers at, above, or
below the Reference Rate. Any change in the Reference Rate will take effect at
the opening of business on the day specified in the public announcement of a
change in the Reference Rate.
2.4 CONDITIONS TO EACH EXTENSION OF CREDIT. Before each extension of credit
under the line of credit, including the first, the Borrower will deliver the
following to the Bank if requested by the Bank:
(a) a borrowing certificate, in form and detail reasonably satisfactory to the
Bank, setting forth the Acceptable Receivables and the Acceptable
Inventory on which the requested extension of credit is to be based.
2.5 REPAYMENT TERMS.
(a) The Borrower will pay interest on February 28, 1997 and on the last day of
each month thereafter until payment in full of any principal outstanding under
this line of credit. (b) The Borrower will repay in full all principal and
accrued unpaid interest or other charges outstanding under this line of credit
no later than the Expiration Date.
2.6 LETTERS OF CREDIT. This line of credit may be used for financing commercial
letters of credit with a maximum maturity not to extend more than 90 days beyond
the Expiration Date. Each commercial letter of credit will require drafts
payable at sight.
This line of credit may be used for financing standby letters of credit with a
maximum maturity of the Expiration Date but not to extend more than 90 days
beyond the Expiration Date. The aggregate undrawn face amount of all letters of
credit outstanding at any one time plus amounts drawn on letters of credit and
not yet reimbursed may not exceed One Million and no/100 Dollars
($1,000,000.00).
The Borrower agrees: (a) any sum drawn under a letter of credit may, at the
option of the Bank, be added to the principal amount outstanding under this
Agreement. The amount will bear interest and be due as described elsewhere in
this Agreement; (b) if an Event of Default has occurred, to immediately deposit
with the Bank an amount equal to the aggregate undrawn face amount of all
outstanding letters of credit plus amounts drawn on letters of credit and not
yet reimbursed which undrawn portion of such amount shall promptly be refunded
if such Event of Default shall no longer be continuing; (c) the issuance of any
letter of credit and any amendment to a letter of credit is subject to the
Bank's written approval and each letter of credit and amendment must be in form
and content satisfactory to the Bank and in favor of a beneficiary acceptable to
the Bank; (d) to sign the Bank's form Application and Agreement for Commercial
Letter of Credit or Application and Agreement for Standby Letter of Credit, in
the forms attached hereto as Exhibits A1 and A2, in connection with each letter
of credit issued hereunder; provided, however, that the terms of this Agreement
shall govern in the event that there is any inconsistency between the terms of
such application and any of the terms and conditions hereof; (e) to pay any
customary issuance and/or other fees that the Bank notifies the Borrower will be
charged for issuing and processing letters of credit for the Borrower; (f) to
allow the Bank to automatically charge its checking account for applicable fees,
discounts, and other charges; and (g) to pay the Bank a non-refundable fee equal
to 1.00% per annum of the outstanding undrawn amount of each outstanding undrawn
standby letter of credit, payable annually in advance, calculated on the basics
of the outstanding undrawn face amount outstanding on the day the fee is
calculated.
3. FACILITY NO.2: TERM LOAN AMOUNT AND TERMS
3.1 LOAN AMOUNT. The Bank agrees to provide a term loan to the Borrower in the
amount of Four Hundred Twenty Five Thousand and no/100 Dollars ($425,000.00)
(the "Facility No. 2 Commitment").
3.2 AVAILABILITY PERIOD. The loan is available in one disbursement from the Bank
between the date of this Agreement and February 28, 1997, unless an Event of
Default or other event which with notice or lapse of time or both would be an
Event of Default shall have occurred and be continuing.
3.3 INTEREST RATE. Unless the Borrower elects an optional interest rate as
described below, the interest rate is the lesser of (a) the maximum lawful rate
of interest permitted under applicable usury laws, now or hereafter enacted (the
"Maximum Rate"), or (b) the rate (the "Basic Rate") that is equal to the Bank's
Reference Rate.
Notwithstanding the foregoing, if at any time the Basic Rate shall exceed the
Maximum Rate and thereafter the Basic Rate shall become less than the Maximum
Rate, the Rate of interest payable shall be the Maximum Rate until the Bank
shall have received the amount of interest it otherwise would have received if
the interest payable had not been limited by the Maximum Rate during the period
of time the Basic Rate exceeded the Maximum Rate.
3.4 REPAYMENT TERMS.
(a) The Borrower will pay all accrued but unpaid interest on March 31, 1997 and
on the last day of each quarter thereafter and upon payment in full of the
principal of the loan. (b) The Borrower will repay principal in 8 successive
quarterly installments of Forty Seven Thousand Two Hundred Twenty Two and no/100
Dollars ($47,222.000) each, starting March 31, 1997, and in one final
installment on March 31, 1999 in the amount of the remaining principal balance
plus all accrued unpaid interest. (c) The Borrower may prepay the loan in full
or in part at any time. Prepayments of portions of the loan bearing interest at
Bank's Reference Rate may be made without penalty or premium. The prepayment
will be applied to the most remote installment of principal due under this
Agreement.
3.5 OPTIONAL INTEREST RATES. Instead of the interest rate based on the Bank's
Reference Rate, the Borrower may elect to have all or portions of the loan bear
interest at the rate(s) described below during an interest period agreed to by
the Bank and the Borrower; provided, however, that the Borrower shall not have
the option or right to elect to have all or any portion of the loan bear
interest at the rate(s) described below when such rate(s) exceeds the Maximum
Rate. Each interest rate is a rate per year. Interest will be paid on the last
day of each interest period, and on the last day of each month during the
interest period. At the end of any interest period, the interest rate will
revert to the rate based on the Reference Rate, unless the Borrower has
designated another optional interest rate for the portion.
3.6 LONG TERM RATE. The Borrower may elect to have all or portions of the
principal balance of the loan bear interest at the rate equal to the lesser of
(a) the Maximum Rate, or (b) the Long Term Rate, subject to the following
requirements:
(a) The interest period during which the Long Term Rate will be in effect will
be one year or more.
(b) The "Long Term Rate" means the fixed interest rate the Bank and the
Borrowers agree will apply to the portion during the applicable interest period.
(c) Each Long Term Rate portion will be for an amount not less than One Hundred
Thousand Dollars ($100,000). (d) Any portion of the principal balance of the
loan already bearing interest at the Long Term Rate will not be converted to a
different rate during its interest period.
(e) The Borrowers may prepay the Long Term Rate portion in whole or in part. The
Borrowers will give the Bank irrevocable written notice of the Borrowers'
intention to make the prepayment, specifying the date and amount of the
prepayment. The notice must be received by the Bank at least 5 banking days in
advance of the prepayment. All prepayments of principal on the Long Term Rate
portion will be applied on the most remote principal installment or installments
then unpaid. (f) Each prepayment of a Long Term Rate portion, whether voluntary,
by reason of acceleration or otherwise, will be accompanied by payment of all
accrued interest on the amount of the prepayment and the prepayment fee
described below.
(g) The prepayment fee will be the sum of fees calculated separately for each
Prepaid Installment, as follows: (i) The Bank will first determine the amount of
interest which would have accrued each month for the Prepaid Installment had it
remained outstanding until the applicable Original Payment Date, using the Long
Term Rate; (ii) The Bank will then subtract from each monthly interest amount
determined in (i), above, the amount of interest which would accrue for that
Prepaid Installment if it were reinvested from the date of prepayment through
the Original Payment Date, using the following rate: (A) If the Original Payment
Date is more than 5 years after the date of prepayment: the Treasury Rate plus
one-quarter of one percentage point; (B) If the Original Payment Date is 5 years
or less after the date of prepayment: the Money Market Rate. (iii) If (i) minus
(ii) for the Prepaid Installment is greater than zero, the Bank will discount
the monthly differences to the date of prepayment by the rate used in (ii)
above. The sum of the discounted monthly differences is the prepayment fee for
that Prepaid Installment.
(h) The following definitions will apply to the calculation of the prepayment
fee:
"Money Market" means the domestic certificate of deposit market, the eurodollar
deposit market or other appropriate money market selected by the Bank.
"Money Market Rate" means the fixed interest rate per annum which the Bank
determines could be obtained by reinvesting a specified Prepaid Installment in
the Money Market from the date of prepayment through the Original Payment Date.
"Original Payment Dates" mean the dates on which principal of the Long Term Rate
portion would have been paid if there had been no prepayment. If a portion of
the principal would have
been paid later than the end of the interest period in effect at the time of
prepayment, then the Original Payment Date for that portion will be the last day
of the interest period.
"Prepaid Installment" means the amount of the prepaid principal of the Long Term
Rate portion which would have been paid on a single Original Payment Date.
"Treasury Rate" means the interest yield for U.S. Government Treasury Securities
which the Bank determines could be obtained by reinvesting a specified Prepaid
Installment in such securities from the date of prepayment through the Original
Payment Date.
(i) The Bank may adjust the Treasury Rate and Money Market Rate to reflect the
compounding, accrual basis, or other costs of the Long Term Rate portion. Each
of the rates is the Bank's estimate only and the Bank is under no obligation to
actually reinvest any prepayment. The rates will be based on information from
either the Tellurite or Reuters information services, The Wall Street Journal,
or other information sources the Bank deems appropriate.
(j) If at any time during any applicable interest period the Long Term Rate
shall exceed the Maximum Rate and thereafter the Long Term Rate shall become
less that the Maximum Rate, the rate of interest payable shall be the Maximum
Rate until the Bank shall have received the amount of interest it otherwise
would have received if the interest payable had not been limited by the Maximum
Rate during the period of time the Long Term Rate exceeded the Maximum Rate.
4. FEES AND EXPENSES
4.1 UNUSED COMMITMENT FEE. The Borrower agrees to pay the Bank a fee on any
difference between the Facility No. 1 Commitment and the amount of credit it
actually uses, determined by the weighted average loan balance maintained during
the specified period. The fee will be calculated at 3/8% per year on the last
day of each year, starting on February 14, 1997 and continuing through the
Expiration Date.
4.2 REIMBURSEMENT COST. (a) The Borrower agrees to immediately repay the Bank
for expenses that include, but are not limited to, filing, recording and search
fees, appraisal fees, title report fees. (b) The Borrower agrees to reimburse
the Bank for any expenses it incurs in the preparation of this Agreement and any
agreement or instrument required by this Agreement. Expenses include, but are
not limited to, reasonable attorneys' fees. (c) The Borrower agrees to reimburse
the Bank for the cost of periodic audits and appraisals of the real or personal
property collateral securing this Agreement, at such intervals as the Bank may
reasonably require but not to exceed annual except if an Event of Default has
occurred and is continuing. The audits and appraisals may be performed by
employees of the Bank or by independent appraisers.
4.3 NO EXCESS FEES. Notwithstanding anything to the contrary in this Section 4,
in no event shall any sum payable under this Section 4 (to the extent, if any,
constituting interest under any applicable laws), together with all amounts
constituting interest under applicable laws and payable in connection with the
credit evidenced hereby, exceed the Maximum Rate or the
maximum amount of interest permitted to be charged, taken, reserved, received or
contracted for under applicable usury laws.
5. COLLATERAL
5.1 PERSONAL PROPERTY. The Borrower's obligations to the Bank under this
Agreement will be secured by personal property the Borrower now owns or will own
in the future as listed below. The collateral is further defined in certain
security agreement(s) executed by the Borrower.
(a) Equipment.
(b) Inventory.
(c) Receivables.
6. DISBURSEMENTS, PAYMENTS AND COSTS
6.1 INTEREST CALCULATION. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 365-day year and
the actual number of days elapsed.
6.2 DEFAULT RATE. Upon the occurrence and during the continuation of any Event
of Default under this Agreement, advances under this Agreement will at the
option of the Bank bear interest at the lesser of (a) the Maximum Rate and (b) a
rate per annum which is 2.00 percentage points higher than the rate of interest
otherwise provided under this Agreement. This will not constitute a waiver of
any default.
7. CONDITIONS The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit to the
Borrower under this Agreement.
7.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance by the
Borrower of this Agreement and any instrument or agreement required under this
Agreement have been duly authorized.
7.2 SECURITY AGREEMENTS. Signed original security agreements, assignments,
financing statements and fixture filings (together with collateral in which the
Bank requires a possessor security interest), which the Bank requires.
7.3 EVIDENCE OF PRIORITY. Evidence that security interests and liens in favor of
the Bank are valid, enforceable, and prior to all others' rights and interest,
except those the Bank consents to in writing.
7.4 INSURANCE. Evidence of insurance coverage, as required in the "Covenants"
section of this Agreement.
7.5 GOOD STANDING. Certificates of good standing for the Borrower from its state
of incorporation and from any other state in which the Borrower is required to
qualify to conduct its business.
8. REPRESENTATION AND WARRANTIES When the Borrower signs this Agreement the
Borrower makes the following representations and warranties. Each request for an
extension of credit constitutes a renewed representation. (a) The Borrower is a
corporation duly formed and existing under the laws of the state where
organized. (b) This Agreement, and any instrument or agreement required
hereunder, are within the Borrower's powers, have been duly authorized, and do
not conflict with any of its organizational papers. (c) This Agreement is a
legal, valid and binding agreement of the Borrower, enforceable against the
Borrower in accordance with its terms and any instrument or agreement required
hereunder, when executed and delivered, will be similarly legal, valid, binding,
and enforceable. (d) In each state in which the Borrower is required to be
licensed or qualified, it is properly licensed or qualified, in good standing,
and, where required, in compliance with assumed name statutes, except where the
failure to be so licensed or qualified or to comply with such statutes would not
have a material adverse effect on the Borrower's business, financial condition,
or ability to repay the Loan. (e) This Agreement does not conflict in any
material respect with any law, agreement concerning or obligating Borrower for
more than Ten Thousand and no/100 Dollars ($10,000.00), or obligation by which
the Borrower is bound. (f) All financial and other information that has been or
will be supplied to the Bank is: (i) sufficiently complete to give the Bank
accurate knowledge of the Borrower's (and any guarantor's) financial condition.
(ii) in form and content reasonably required by the Bank, and (iii) in
compliance with all government regulations that apply. (g) There is no lawsuit,
tax claim or other dispute pending or threatened against the Borrower, which, if
lost, would impair in any material respect the Borrower's financial condition or
ability to repay the loan, except as have been disclosed in writing to the Bank.
(h) All collateral required in this Agreement is owned by the grantor of the
security interest free of any title defects and any liens or interest of others,
except those which have been approved by the Bank in writing or are permitted in
Section 9.9 of this Agreement or in the Security Agreement. (i) The Borrower
possess all permits, memberships, franchises, contracts and licenses required
and all trademark rights, trade name rights, patent rights and assumed name
rights necessary to enable it to conduct the business in which it is now engaged
(such will not be considered "necessary to enable Borrower to conduct its
business", if the failure to obtain same would not materially adversely affect
Borrower's, business financial condition, or ability to repay the Loan). (j)
There is no event which is, or with notice or lapse of time or both would be, an
Event of Default under this Agreement. (k) All inventory which is included in
the Borrowing Base is of good and merchantable quality and free from defects.
(l) The Borrower is in full compliance with all applicable requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); provided
that such will only be considered out of compliance if the failure to comply
could reasonably be expected to materially adversely effect Borrower's business,
financial condition, or ability to repay the Loan. (m) The Borrower's place of
business (or, if the Borrower has more than one place of business, its chief
executive office) is located at the address listed under the Borrower's
signature on this Agreement.
9. COVENANTS The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:
9.1 USE OF PROCEEDS. To use the proceeds of the credit only for:
Facility No. 1: the support of working capital and general corporate purposes.
Facility No. 2: the refinance of an existing term loan.
9.2 FINANCIAL INFORMATION. To provide the following financial information and
statements and such additional information as reasonably requested by the Bank
from time to time, all in form and detail acceptable to the Bank.
(a) Within 120 days of the Borrower's fiscal year end, the Borrower's annual
financial statements. These financial statements must be audited by a
Certified Public Accountant ("CPA") reasonably acceptable to the Bank.
(b) Within 120 days of the Borrower's fiscal year end, ▇▇▇▇▇▇ International,
Incr.'s annual financial statements. These financial statements must be
audited by a Certified Public Accountant ("CPA") reasonably acceptable to
the Bank. They shall be prepared on a consolidated basis.
(c) Within 60 days of the period's end, the Borrower's quarterly financial
statements and compliance certificate. These financial statements may be
Borrower prepared.
(d) A borrowing certificate setting forth the respective amounts of Acceptable
Receivables and Acceptable Inventory as of the last day of each month
within thirty (30) days after month end.
(e) Statements showing an aging of the Borrower's Receivables within thirty
(30) days after the end of each month.
(f) Promptly upon the Bank's request, such other statements, lists of property
and accounts, budgets, forecasts or reports as to the Borrower and as to
each guarantor of the Borrower's obligations to the Bank as the Bank may
reasonably request.
9.3 CURRENT RATIO. To maintain a ratio of current assets liabilities of at least
1.50:1.0, measured quarterly.
For purposes of this calculation, principal outstanding under Facility No. 1
shall be included as a current liability.
9.4 TANGIBLE NET WORTH. To maintain tangible net worth equal to at least Four
Million Five Hundred Thousand and no/100 Dollars ($4,500,000.00), measured
quarterly.
"Tangible net worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamoritized debt discount and expense, deferred research and
development costs, deferred marketing expenses,
and other like intangibles) less total liabilities, including but not limited to
accrued and deferred income taxes, and any reserves against assets.
9.5 TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO. To maintain a ratio of Total
Liabilities to Tangible Net Worth not exceeding 1.25:1.0, measured quarterly.
"Total Liabilities" means the sum of current liabilities plus long term
liabilities.
9.6 FIXED CHARGE COVERAGE RATIO. To maintain a Fixed Charge Coverage of at
Least 1.25:1.0.
"Fixed Charge Coverage Ratio" means the ratio of earnings before interest,
taxes, depreciation and amortization to the sum of total cash taxes, interest
expense, scheduled debt payments, and Fifty thousand and no/100 Dollars
($50,000.00) for capital expenditures (provided that this shall not be a limit
on the amount of capital expenditures that may be made by Borrower). This ratio
will be calculated at the end of each fiscal quarter, using the results of that
quarter and each of the 3 immediately preceding quarters.
9.7 PROFITABILITY. To maintain a positive net income after taxes and
extraordinary items for each fiscal year end accounting year.
9.8 OTHER DEBTS. Not to have outstanding or incur any direct or contingent debts
(other than those to the Bank), or become liable for the debts of others without
the Bank's written consent. This does not prohibit:
(a) Acquiring good, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debt secured by liens permitted in Section 9.9.
(e) Additional debts for the acquisition of product lines which do not exceed
a total principal amount of Three Hundred Thousand an no/100 Dollars
($300,000.00) outstanding at any one time.
(f) Additional debts for the financing the payment of insurance premiums which
do not exceed a total principal amount of One Hundred Fifty Thousand and
no/100 Dollars ($150,000.00) outstanding at any one time.
9.9 OTHER LIENS. Not to create, assume, or allow any security interest or lien
(including judicial liens) on property the Borrower now or later owns, except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due or remaining payable up to 120 days without
any penalty or that are being contested in good faith.
(c) Liens imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens, and other similar liens arising in the
ordinary course of business securing obligations which are not overdue for
a period of more than 30 days.
(d) Other liens arising in the ordinary course of business which are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not materially detract from the value of
its property or its assets or materially impair the use thereof in the
operation of its business, including any landlord's liens.
(e) Liens for taxes, assessment or other governmental charges which are not
yet due or which are being actively contested in good faith by appropriate
proceedings.
(f) Liens arising from material adverse legal judgments (including liens in
connection with appeal bonds) not in excess of $200,000 (after taking
insurance coverage into account).
(g) Additional liens which secure obligations in a total principal amount not
exceeding Four Hundred Fifty Thousand no/100 Dollars ($450,000.00).
9.10 NOTICES TO BANK. Notify the Bank in writing not later than five (5)
business days after the earlier of when Borrower obtains actual knowledge or
receives written notice thereof of: (a) any lawsuit over Two Hundred Thousand
and no/100 Dollars ($200,000.00) against the Borrower. (b) any material dispute
between the Borrower and any government authority. (c) any failure to comply
with this Agreement. (d) any change in the Borrower's name, legal structure,
place of business, or chief executive office if the Borrower has more than one
place of business.
9.11 BOOKS AND RECORDS. To maintain adequate books and records.
9.12 AUDITS. To allow the Bank and its agents to inspect Borrower's properties
and to make available to the Bank and its agents for examination, audit, and
copying, books and records of the Borrower, in each case at any reasonable time.
If any of the Borrower's properties, books or records are in the possession of
any third party (other than legal counsel) the Borrower authorizes such third
party (other than legal counsel) to permit the Bank or its agents to have access
to and perform inspections or audits of such books or records and to respond to
the Bank's requests for information concerning such properties, books and
records; provided that, the Bank shall have given notice to the Borrower a
reasonable time prior to such an inspection, audit or request for information
and, if a representative of the Borrower is available, shall permit a
representative of the Borrower, at the Borrower's option, to be present at the
time of such inspection, audit or response to request for information.
9.13 COMPLIANCE WITH LAWS. To comply with the laws, (including any assumed name
statute), regulations, and orders of any government body with authority over the
Borrower's business. The Borrower shall comply at all times with all applicable
requirements of ERISA. Borrower will only be considered out of compliance
hereunder if the failure to comply could reasonably be expected to materially
adversely effect Borrower's business, financial condition, or ability to repay
the Loan.
9.14 PRESERVATION OF RIGHTS. To maintain and preserve all rights, privileges,
and franchises the Borrower has. Borrower will only be considered out of
compliance hereunder if the failure to Maintain or preserve same could
reasonably be expected to materially adversely effect Borrower's business,
financial condition, or ability to repay the Loan.
9.15 MAINTENANCE OF PROPERTIES. To make any necessary repairs, renewals, or
replacements to keep Borrower's properties that are, in the Borrower's sound
business judgment, necessary for the conduct of Borrower's business, in good
working condition.
9.16 PERFECTION OF LIENS. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.
9.17 COOPERATION. To take any action reasonably requested by the Bank to carry
out the intent of this Agreement.
9.18 INSURANCE. (a) INSURANCE COVERING COLLATERAL. To maintain all risk property
damage insurance policies covering the tangible property comprising the
collateral and any insurance usual for Borrower's business. Each insurance
policy must be in an amount reasonably acceptable to the Bank. The insurance
must be issued by an insurance company reasonably acceptable to the Bank (b)
GENERAL BUSINESS INSURANCE. To maintain insurance reasonably satisfactory to the
Bank as to amount, nature and carrier covering property damage (including loss
of use and occupancy) to any of the Borrower's properties, public liability
insurance including coverage for contractual liability, product liability and
workers' compensation, and any other insurance which is usual for the Borrower's
business. (c) EVIDENCE OF INSURANCE. Upon the request of the Bank, to deliver to
the Bank a cop of each insurance policy or, if permitted by the Bank, a
certificate of insurance listing all insurance in force.
9.19 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written consent:
(a) engage in any business activities substantially different from the
Borrower's present business; (b) liquidate or dissolve the Borrower's business;
(c) enter into any consolidation, merger, pool, joint venture, syndicate, or
other combination; (d) acquire or purchase a business or its assets except that
Borrower may purchase assets of one or more businesses not exceeding Three
Hundred Thousand and no/100 Dollars ($300,000.00) in the aggregate for any
fiscal year without Bank's prior written consent; or (e) sell or otherwise
dispose of any assets for less than fair market value or enter into any sale and
leaseback agreement covering any of its fixed or capital assets.
10. DEFAULT If any of the following events (each an "Event of Default") occurs,
the Bank may do one or more of the following: (i) declare the Borrower in
default, (ii)stop making any additional credit available to the Borrower, (ii)
exercise any and all rights and remedies as may be available to the Bank under
the terms of any collateral documents, security instruments, debt instruments or
any other document or instrument executed in connection herewith or in any way
related hereto, (iv) exercise any and all rights and remedies as may be
available to the Bank at law or in equity, and (v) declare the entire debt
created and evidenced hereby to be immediately due and payable in full,
whereupon the entire unpaid principal indebtedness evidenced hereby, and all
unpaid interest thereon, shall at once mature and become due and payable without
presentment, demand, protest, grace or notice of any kind (including, without
limitation, notice of intent to accelerate, notice of acceleration or notice of
protest), all of which are hereby severally waived by the Borrower. If a
bankruptcy petition is filed with respect to the Borrower, the entire debt
outstanding under this Agreement will automatically become due immediately.
10.1 FAILURE TO PAY. The Borrower fails to make a payment under this Agreement
with 3 days after the date when due.
10.2 NON-COMPLIANCE. The Borrower fails to perform any obligation after Borrower
obtains actual knowledge hereof or receives written notice thereof from the Bank
under: (a) this Agreement and such failure continues for 20 days, (b) any other
agreement made in connection with this loan and such failure continues for 20
days, or (c) any other material agreement the Borrower has with the Bank or any
affiliate of the Bank and such failure continues past any grace or cure period
provided for in such agreement.
10.3 CROSS-DEFAULT. Any default occurs under any agreement in connection with
any credit in excess of Fifty Thousand and no/100 Dollars ($50,000.00) the
Borrower has obtained from anyone else or which the Borrower has guaranteed and
such failure continues after the lapse of any applicable grace or cure period.
10.4 LIEN PRIORITY. The Bank fails to have an enforceable first lien (except for
any liens permitted hereunder and prior liens to which the Bank has consented in
writing) on or security interest in any property given as security for this
loan.
10.5 FALSE INFORMATION. The Borrower has given the Bank materially false or
misleading information or representations that were materially false or
misleading at the time given or made. Borrower will only be considered to have
given materially false or misleading information or representations if same
could reasonably be expected to materially adversely effect Borrower's business,
financial condition, or ability to repay the Loan.
10.6 BANKRUPTCY. The Borrower files a bankruptcy petition, bankruptcy petition
is filed against the Borrower and such involuntary petition is not dismissed
within 60 days after such filing, or the Borrower makes a general assignment for
the benefit of creditors.
10.7 RECEIVERS. A receiver or similar official is appointed for the Borrower's
business, or the business is terminated.
10.8 JUDGMENTS. Any judgments or arbitration awards are entered against the
Borrower which shall not have been dismissed, discharge, stayed pending appeal
or bonded within 60 days after entry, or the Borrower enters into any settlement
agreements with respect to any litigation or arbitration, in an aggregate amount
of Two Hundred Thousand and no/100 Dollars ($200,000.00) or more in excess of
any insurance coverage.
10.9 GOVERNMENT ACTION. Any government authority takes action with respect to
the Borrower that the Bank reasonably believes materially adversely affects the
Borrower's financial condition or ability to repay.
Notwithstanding anything above to the contrary, a default under the Application
and Agreement for Standby Letter of Credit under Section 8(b), 8(c), 8(d), 8(e),
or 8(f) of that Agreement shall not constitute a cross-default under this
Agreement (unless the event giving rise to such default would independently
cause an Event of Default under the terms of this Section 10).
11. ENFORCING THIS AGREEMENT; MISCELLANEOUS
11.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
11.2 GOVERNING LAW. THIS AGREEMENT IS GOVERNED BY TEXAS LAW.
11.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and the
Bank's successors and assignees. The Borrower agrees that it may not assign this
Agreement without the Bank's prior written consent. The Bank may sell
participations in or assign this loan, and may exchange financial information
about the Borrower with actual potential participants or assignees who have
agreed to be bound by the provision of Section 11.15. If the loan is assigned,
the purchaser will have the right of set-off against the Borrower.
11.4 ARBITRATION. (a) This paragraph concerns the resolution of any
controversies or claims between the Borrower and the Bank, including but not
limited to those that arise from: (i) this Agreement (including any renewals,
extensions or modifications of this Agreement); (ii) any document, agreement or
procedure related to or delivered in connection with this Agreement; (iii) any
violation of this Agreement; or (iv) any claims for damages resulting form any
business conducted between the Borrower and the Bank, including claims for
injury to persons, property or business interests (torts). (b) At the request of
the Borrower of the Bank, any such controversies or claims will be settled by
arbitration in accordance with the United States Arbitration Act. THE UNITED
STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS AGREEMENT PROVIDES THAT IS
GOVERNED BY TEXAS LAW. (c) Arbitration proceedings will be administered by the
American Arbitration Association and will be subject to its commercial rules of
arbitration. (d) For purposes of the application of the statute of limitations,
the filing of an arbitration pursuant to this paragraph is the equivalent of the
filing of a lawsuit, and any claim or controversy which may be arbitrated under
this paragraph is subject to any applicable statues of limitations. The
arbitrators will have the authority to decide whether any such claim or
controversy is barred by the statue of limitations and, if so, to dismiss the
arbitration on that basis. (e) If there is a dispute as to whether an issue is
arbitratable, the arbitrators will have the authority to resolve any such
dispute. (f) The decision that results from an arbitration proceeding may be
submitted to an authorized court of law to be confirmed and enforced. (g) This
provision does not limit the right of the Borrower or the Bank to: (i) exercise
self-help remedies such as setoff, (ii) foreclose against or sell any real or
personal property collateral; or (iii) act in a court of law before, during or
after the arbitration proceeding to obtain: (A) an interim remedy; and/or (B)
additional or supplementary remedies. (h) The pursuit of a successful action for
interim, additional or supplementary remedies, or the filing of a court action,
does not constitute a waiver of the right of the Borrower or the Bank, including
the suing party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit.
11.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not enforceable,
the rest of the Agreement may be enforced. The Bank retains all rights, even if
it makes a loan after default. If
the Bank waives a default, it may enforce a later default. Any consent or waiver
under this Agreement must be in writing.
11.6 COSTS. If the Bank incurs any expenses in connection with administering or
enforcing this Agreement, or if the Bank takes Collection action under this
Agreement, it is entitled to costs and reasonable attorneys' fees, including any
allocated costs of in-house counsel.
11.7 ATTORNEYS' FEES. In the event of a lawsuit or arbitration proceeding, the
prevailing party is entitled to recover costs and reasonable attorneys' fees
(including any allocated costs of in-house counsel) incurred in connection with
the lawsuit or arbitration proceeding, as determined by the court or arbitrator.
11.8 DESTRUCTION OF BORROWER'S DOCUMENTS. The Bank will not be obligated to
return any schedules, invoices, statements, budgets, forecasts, reports or other
papers delivered by the Borrower, other than original documents which the
Borrower is legally required to retain. The Bank will destroy or otherwise
dispose of such materials at such time as the Bank, in its discretion, deems
appropriate.
11.9 RETURNED MERCHANDISE. Until the Bank exercises its rights to collect the
accounts receivable as provided under any security agreement required under this
Agreement, the Borrower may continue its present policies for returned
merchandise and adjustments. Credit adjustments with respect to returned
merchandise shall be made immediately upon receipt of the merchandise by the
Borrower or upon other disposition of the merchandise by the debtor in according
with Borrower's instructions. If a credit adjustment is made with respect to any
Acceptable Receivable, the amount of such adjustment shall not longer be
included in the amount of such Acceptable Receivable in computing the Borrowing
Base.
11.10 VERIFICATION OF RECEIVABLES. The Bank may in the Event of Default, either
orally or in writing, request confirmation from any debtor of the current amount
and status of the accounts receivable upon which such debtor is obligated. At
any other time, the Bank may reasonably request confirmation from any other
debtor of the current amount and status of accounts receivable using a third
party acceptable to the Bank, at cost to the Borrower.
11.11 INDEMNIFICATION. The Borrower agrees to indemnify the Bank against, and
hold the Bank harmless from, all claims, actions, losses, costs and expenses
(including attorneys' fees and allocated costs for in-house counsel) incurred by
the Bank and arising from any contention whether well-founded or otherwise, that
there has been a failure to comply with any law regulating the Borrower's sales
or leases to or performance of services for debtors obligated upon the
Borrower's accounts receivable and disclosure in connection therewith. This
indemnity will survive repayment of the Borrower's obligations to the Bank and
termination of this Agreement.
11.12 NOTICES. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses, or by
telecopy to the telecopier number on the signature page of this Agreement, or to
such other addresses as the Bank and the Borrower
may specify from time to time in writing. In the event of telecopier use,
original notices to follow by personal delivery or first class mail.
11.13 USURY LAWS. It is the intention of the parties hereto to comply with
applicable usury laws; accordingly, it is agreed that notwithstanding any
contrary provision herein or in any note or other agreement or commitment
between Borrower and Bank, whether written or oral, expressed or implied, Bank
shall never be entitled to charge, receive, or collect, nor shall amounts
received by Bank be credited so that Bank shall be paid, as interest a sum
greater than interest at the Maximum Rate. It is the intention of the parties
that this Agreement, and all notes and other instruments evidencing or securing
the payment of the indebtedness outstanding hereunder, or executed or delivered
in connection herewith, shall comply with applicable law. If Bank ever contracts
for, charges, receives or collects anything of value which is deemed to be
interest under applicable law, and if the occurrence of any circumstance or
contingency, whether acceleration of maturity, prepayment, delay in advancing
proceeds, or other event, should cause such interest to exceed the maximum
lawful amount, any amount which exceeds interest at the Maximum Rate shall be
applied to the reduction of the unpaid principal balance outstanding hereudner
or any other indebtedness owned to Bank by Borrower, and if all such
indebtedness is paid in full, any remaining excess shall be paid to Borrower. In
determining whether the interest hereon exceeds interest at the Maximum Rate,
the total amount of interest shall be spread throughout the entire term of such
indebtedness until its payment in full. To the extent the TEX. REV. CIV. STAT.
▇▇▇. art 5069-1.04, as amended (the "Act"), is relevant to the Bank for the
purposes of determining the Maximum Rate, the parties elect to determine the
Maximum Rate under the Act pursuant to the "indicate rate ceiling" from time to
time in effect, as referred to and defined in article 1.04(a)(1) of the Act;
subject, however, to any right the Bank may have subsequently under applicable
law, to change the method of determining the Maximum Rate.
11.14 WAIVERS; RELEASE; ENFORCEMENT. The Borrower and all guarantors of the
indebtedness evidenced by this Agreement severally waive diligence in collecting
and bringing suit against any party, and agree (a) to all extensions and partial
payments, with or without notice, before or after maturity, (b) to any
substitution, exchange or release of any security now or hereafter given for
such indebtedness, and (c) that it shall not be necessary for the Bank, in order
to enforce payment of such indebtedness, to first institute or exhaust the
Bank's remedies against the Borrower or any other party liable therefore or
against any security for such indebtedness.
11.15 CONFIDENTIALITY. The Bank agrees to take reasonable precautions and
exercise due care to maintain the confidentiality of all non-0public
confidential information provided in connection with this Agreement or any
document executed in connection herewith and agrees that it shall not use any
such information for any purpose or in any manner other than pursuant to the
terms contemplated by this Agreement. The bank may disclose such information (i)
to BankAmerica Corporation affiliates and other related entities, (ii) at the
request of any Bank regulatory authority or in connection with an examination of
the Bank by any such authority, (iii) pursuant to subpoena or other court
process, (iv) when required to do so in accordance with the provisions of any
applicable law or regulation, (v) at the express direction of any agency of any
State of the United States or at any other jurisdiction in which the Bank
conducts its business, (vi) to its independent auditors and other professional
advisors that have a reasonable need or basis for access thereto and provided
that such persons agree to be bound by the terms of this SECTION 11.15 and (vii)
to the extent reasonably required in connection with any proceeding to enforce
its rights hereunder; provided, however, the Bank shall instruct such
independent auditors or other professional advisors to keep such information
confidential in accordance with the terms of this SECTION
11.15; provided further, that in the event of any disclosure of non-public
information pursuant to any of clauses (ii), (iii), (iv) and (vi) above, the
Bank shall make a good faith attempt, to the extent practicable, to notify
Borrower of any such disclosure of non-public information at least three (3)
Business Days prior to disclosing such information, and in any event shall
notify Borrower of such disclosure as soon as practicable.
11.16 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE INSTRUMENTS AND
DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORARNEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Agreement is executed as of the date stated at the top of the first page.
Bank of America Texas, N.A. American Packing and Gasket
Company
By: ____________________________ By: ________________________
Name: ▇▇▇ ▇. ▇▇▇▇, Vice President ▇▇▇▇▇ ▇▇▇▇▇▇▇, Chairman
Telecopy No: _________________ Telecopy No:________________
Address where notices to the Bank Address where notices to the
Borrower are to be sent: are to be sent:
Bank of America Texas, N.A. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Commercial Loan Services ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇