AGREEMENT
THIS AGREEMENT is executed effective the 19th day of October, 2005,
between ▇▇▇▇▇▇▇ INDUSTRIES INC. (formerly EXCALIBUR INDUSTRIES, INC.), a
Delaware corporation ("Industries"), ▇▇▇▇▇▇▇ MACHINE WORKS, INC., a Texas
corporation ("Machine"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, an individual ("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇
▇▇▇▇▇▇▇, an individual ("▇▇▇▇▇▇▇"), ▇▇▇▇ ▇▇▇▇▇, an individual ("▇▇▇▇▇"), and
STILLWATER NATIONAL BANK AND TRUST COMPANY, a national banking association (the
"Lender"). ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇ are sometimes referred to herein as
"Gurantor" or "Guarantors."
R E C I T A L S:
WHEREAS Industries, Machine and/or ▇▇▇▇▇▇▇▇ are currently obligated to
the Bank the following principal amounts totaling approximately $13,808,398, as
follows:
As of
10/19/05
----------
SNB Note #5195802 1,100,000
SNB Note #5198301 3,500,000
SNB Note #5423900 212,811
SNB Note #5550600 550,000
SNB Note #5528400 500,000
SNB Note #5732800 2,450,000
SNB Note #5732700 (LOC) 791,861
SNB Note #5831900 1,100,000
Overdraft of DDA #6175206 1,574,356
TW Consulting Notes 2,710,183
TW Accrued Interest (est.) 1,000,000
----------
15,489,211
The above described principal indebtedness, together with all interest,
penalties and fees incurred in connection therewith, is referred to hereafter as
the "Prior Debt" and all loan agreements, notes, security agreements,
guaranties, mortgages and other documents executed in connection with the Prior
Debt are hereafter referred to as the "Prior Loan Documents."
WHEREAS Industries and Machine are indebted to the United States ex rel
Internal Revenue Service in an amount not exceeding $237,546.56 as of October
19, 2005, which debt is secured by a lien covering certain assets of Industries
and Machine (the "IRS Lien"); and
WHEREAS there presently exist certain defaults under the terms of the
Prior Loan Documents;
NOW, THEREFORE, in consideration of the mutual agreements between the
parties, it is agreed as follows:
1. RESTRUCTURE AND NEW LENDING. Pursuant to this Agreement, the parties agree to
a complete restructuring of the Prior Debt, together with additional lending
from the Lender, all to be effectuated through the issuance of amended and
restated instruments, new instruments and common stock. This Agreement together
with all notes, security agreements, mortgages, guaranties, securites and other
documents and instruments executed to effectuate this Agreement shall be
referred to hereafter as the "Restructure Documents."
2. CLOSING. Subject to all of the terms and conditions set forth in this
Agreement being satisfied, the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Lender's
counsel on such date, at such place and at such time (the "Closing Date") within
two (2) business days after the satisfaction or waiver of the last of the
conditions set forth in Sections 10 and 11 and hereof as shall be determined by
the mutual consent of the parties hereto.
3. ACQUISITION OF LEASES. [Deleted.]
4. CREDIT FACILITIES. In accordance with this Agreement, the Lender shall make
available to Industries, Machine, and ▇▇▇▇▇▇▇▇ certain credit facilities upon
the following terms:
4.1. Evidence of Indebtedness. The indebtedness under the credit
facilities will be evidenced as follows:
4.1.1. Amended & Restated Note. At Closing, Industries and
Machine will sign an amended and restated note in
form and substance and payable on the terms approved
by Lender (the "Amended and Restated Note") in the
amount of $5,633,053, plus any excess on the existing
line of credit, including deposit account overdrafts,
if any. The amended and restated note shall amend and
restated SNB Note Nos. 5195802, 5198301, 5423900,
5550600, 5528400, 5732800 and 5831900 and shall be
countersigned by the Lender to evidence that the
notes are being amended, restated, and superseded by
the Amended and Restated note. Interest only will be
paid monthly for three months following Closing.
Thereafter, Industries and Machine will make 27 equal
monthly payments in an amount sufficient to fully
amortize principal and interest on the Amended and
Restated Note over 120 months. The Amended and
Restated Note shall mature and become due 30 months
after closing, at which time, Industries and Machine
will make a balloon payment of the entire outstanding
principal balance together with all accrued interest
and other charges, if any. The following terms will
also apply:
a) Use of Proceeds. Proceeds of the Amended and
Restated Note will be applied as follows:
$303,000 will be advanced to the sellers of
certain machines ($83,000.00 will be paid to
▇▇▇▇▇▇▇ for the purchase of that certain
Daewoo Puma 300LC, Serial # P25L0324 and
$220,000.00 will be paid to Swift for the
purchase of that certain Mitsubishi 800
M-80C, Serial # CH4091); $100,000 will be
available to use for Industries' purchase of
the stock of Machine; the remainder will be
deemed to be applied to the Prior Debt.
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b) Collateral. The Amended and Restated Note
will be secured by a first priority security
interest covering all existing and future
assets of Industries and Machine, including
but not limited to, accounts receivable,
inventory, equipment, and intangibles.
c) Additional Terms. The Amended and Restated
Note will be cross collateralized and cross
defaulted with the Revolving Note (as
defined below) and the IRS Note (as defined
below).
4.1.2. IRS Note. As soon as reasonably possible after
Closing, Industries and Machine will sign a term note
in an amount equal to the settlement of the existing
IRS lien not to exceed $237,546.56 ("IRS Note").
Commencing 30 days after execution of the IRS Note,
Industries and Machine will make 48 equal monthly
payments in an amount sufficient to fully amortize
principal and interest on the IRS Note over 48
months. The IRS Note shall mature and become due 48
months after closing, at which time, Industries and
Machine will pay the entire outstanding principal
balance together with all accrued interest and other
charges, if any. The following terms shall also
apply:
a) Use of Proceeds. The proceeds of the IRS
Note shall be disbursed to the IRS to pay
the debt secured by the IRS tax lien.
b) Collateral. The IRS Note will be secured by
a first priority security interest in all
existing and future assets of Industries and
Machine, including but not limited to,
accounts receivable, inventory, equipment
and intangibles.
c) Additional Terms. The IRS Note will be cross
collateralized and cross defaulted with
Revolving Note and the Amended and Restated
Note.
d) Guarantors. ▇▇▇▇▇▇▇▇ will guarantee 50% of
the loan amount under the IRS Note, ▇▇▇▇▇▇▇
shall guarantee 50% of the loan amount under
the IRS Note, and ▇▇▇▇▇ shall guarantee 25%
of the loan amount under the IRS Note. As
the principal is reduced, the amount of the
guaranties will not decline.
e) Flemming, Shumate, and ▇▇▇▇▇ shall each be
referred to as a "Guarantor" and
collectively as the "Guarantors."
4.1.3. Revolving Line of Credit. At Closing, the Lender will
provide Industries and Machine a revolving line of
credit as follows:
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a) Note. Industries and Machine will execute
and deliver to the Lender a promissory note
of even date herewith in the principal face
amount of $1,000,000.00 (the "Revolving
Note"), which will be in form and substance
and payable on the terms approved by the
Lender. It is specifically agreed that the
aggregate of advances made during the term
of the Revolving Note may exceed the face
amount thereof, but the unpaid principal
balance due on the Revolving Note will not
exceed the lesser of (i) the Borrowing Base
(as defined below), or (ii) the face amount
of the Revolving Note.
b) Initial Balance. The initial balance of the
Revolving Note will be the balance of the
existing line of credit less the excess
transferred to the Amended and Restated
Note.
c) Advances. Advances under the Revolving Note
will be limited to the Borrowing Base. The
Borrowing Base shall be determined on a
monthly basis upon the submission to the
Lender of a signed monthly borrowing base
certificate" in form acceptable to the
Lender. Each monthly borrowing base
certificate will be supported by a current
accounts receivable aging, and such other
documentation that may reasonably be
required by the Lender to determine the
Borrowing Base. After determination of the
Borrowing Base for any given month,
Industries and Machine may obtain advances
by submitting an advance request in form
acceptable to the Lender.
d) Maturity. Notwithstanding anything herein to
the contrary, the Revolving Note will mature
and become fully due and payable 12 months
from the Closing Date.
e) Collateral. The Revolving Note will be
secured by a first priority security
interest in all existing and future assets
of Industries and Machine, including, but
not limited to, accounts receivable,
inventory, equipment, and intangibles.
f) Other Terms. The Revolving Note will be
cross collateralized and cross defaulted
with the Amended and Restated Note and the
IRS Note.
g) Repayment. The Revolving Note will be
payable in monthly installments of interest
only, with outstanding principal and
interest due upon maturity.
4.1.4. Convertible Note. At the Closing, Industries and
Machine will sign a convertible note in the amount of
$2,500,000 (the "Convertible Note"). Interest shall
accrue from the Closing Date until the earlier of (i)
conversion or (ii) 24 months, at which time the
accrued interest will be capitalized into principal.
Beginning at the end of the ninth quarter, Industries
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and Holdings will make quarterly interest payments.
The Convertible Note will mature on the earlier of
sixty months from the date of issuance of the
Convertible Note or the date on which the Convertible
Note is fully converted into Common Stock (as defined
below). All outstanding principal and interest will
be due at maturity.
a) Conversion. The principal and accrued
interest on the Convertible Note will be
convertible into shares ("Conversion
Shares") of common stock of Industries
("Common Stock") at a conversion rate of
$1.00 per share (on a post-reverse split
basis). The conversion price of the
Convertible Note will be subject to
proportional adjustment for stock splits,
stock dividends, recapitalizations, and the
like. The Convertible Note shall be
convertible at the option of the Lender into
Conversion Shares at the then applicable
conversion price.
b) Collateral. The Convertible Note will be
collateralized by all business assets of
Industries, including 100% of the issued and
outstanding capital stock of Machine.
c) Additional Terms. After twenty-four months,
Machine shall be obligated, to the extent
net income is available in a given quarter,
to declare a dividend sufficient to enable
its shareholder to meet the current
obligations under the Convertible Note. This
obligation of Machine is cumulative and
Machine shall be a party to the Convertible
Note for the sole purpose of binding itself
to these covenants but shall not otherwise
be an obligor under the Convertible Note.
d) Registration Rights.
1) Company Registration: The Lender
shall be entitled to "piggy-back"
registration rights on all
registrations of any other equity
securities of Industries, subject
to the right, however, of
Industries and its underwriters to
reduce the number of shares
proposed to be registered pro rata
in view of market conditions.
2) Expenses: Industries shall bear
registration expenses (exclusive of
underwriting discounts and
commissions) of all such piggy-back
registrations.
3) Term of Rights: The lesser of five
(5) years after the date of this
Agreement or date after which a
Lender may dispose of all of its
shares under Rule 144 within a
ninety (90) day period.
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4) Other Provisions: Other provisions
shall be contained in a
Registration Rights Agreement as
are reasonable, including cross
indemnification, the period of time
in which the Registration Statement
will be kept effective,
underwriting arrangements, transfer
rights and lock-up provisions.
4.1.5. ▇▇▇▇▇▇▇▇ Note. At Closing, ▇▇▇▇▇▇▇▇ will execute and
deliver to the Lender a promissory note in the amount
of $350,000 (the "▇▇▇▇▇▇▇▇ Note"), which shall mature
30 months after the Closing Date. All principal and
interest on the ▇▇▇▇▇▇▇▇ Note will be due at
maturity. The following terms shall also apply:
a) Use of Proceeds. The proceeds of the
▇▇▇▇▇▇▇▇ Note will be used to fund
▇▇▇▇▇▇▇▇'▇ $250,000 capital contribution to
Industries with the remainder applied to the
existing personal indebtedness of ▇▇▇▇▇▇▇▇
to the Lender.
b) Collateral. The ▇▇▇▇▇▇▇▇ Note will be
secured by all of ▇▇▇▇▇▇▇▇'▇ existing and
future equity and other interests in or
right to payment or property from Industries
or Machine, excluding ▇▇▇▇▇▇▇▇'▇ ordinary
compensation earned from Machine.
c) Other Terms. The Lender will release
▇▇▇▇▇▇▇▇ from the balance of his obligations
under the Prior Debt. As a part of such
release, the Lender will dismiss all
litigation, and release all judgments, if
any, against ▇▇▇▇▇▇▇▇ arising from his
guaranty of the Prior Debt.
4.2. Interest. Interest on each of the credit facilities will be
paid at the interest rate equal to the Prime Rate plus two
percent (2 %) per annum, adjusted on each day on which a
change in the Prime Rate occurs (the "Interest Rate"). "Prime
Rate" means the prime rate as published in the "Money Rates
Section" of the Wall Street Journal, which rate is not
necessarily the lowest rate of interest charged by the Lender.
All interest on the Amended and Restated Note will be
calculated for the actual number of days elapsed at a per diem
charge based on a year consisting of 360 days.
4.3. Notation of Advances. The Lender shall have the right (acting
at its sole discretion with or without the consent of
Industries and Machine) from time make notations of advances
by it to Industries and Machine and payments to it by
Industries and Machine on any liability ledger records
maintained by or for the Lender as to indebtedness of
Industries and Machine, and such ledger shall be presumed
correct until the contrary is established by Industries or
Machine. Upon demand by the Lender at any time or from time to
time, Industries or Machine will confirm and admit by signed
writing the exact amount of indebtedness for principal and
interest then outstanding under this Agreement. Any billing
statement or accounting rendered by or for the Lender shall be
conclusive and fully binding on Industries and Machine unless
specific written notice of exception is given to the Lender by
Industries and Machine within thirty (30) days thereafter.
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4.4. Authority to Request Advances. The Lender may make loans in
any amount and in any manner requested orally or in writing by
any officer or agent of Industries and Machine or by any
person reasonably believed by the Lender to be an officer or
agent of Industries and Machine. Loan proceeds may be
disbursed by deposit in any deposit account of Industries or
Machine, by an instrument payable to Industries or Machine.
4.5. Prepayment. Industries and Machine may prepay the credit
facilities at any time, without premium or penalty. Each
prepayment will be applied by the Lender first to the payment
of unpaid fees and expenses, then to accrued interest on the
Revolving Note and then to the payment of principal. If at any
time the aggregate outstanding principal balance of the debt
under the Revolving Note exceeds the amount then permitted
under the Borrowing Base, Industries and Machine shall
immediately, without notice or demand, make payment upon the
Revolving Note in an amount equal to the excess.
4.6. Lending Restrictions. Notwithstanding any other provision of
this Agreement or the other Restructure Documents, any advance
herein provided for will not be required to be made by the
Lender: (a) if after making such advance, the Lender would, as
determined in the sole discretion of the Lender, exercised in
good faith, be in violation of any regulatory requirements
imposed by any branch of government of the United States of
America or any state thereof; (b) if any event of Default (as
defined in Section 12 below) has occurred and has not been
cured by Industries and Machine or waived by the Lender; (c)
if, since the Closing Date and up to the date of the advance
request, any litigation or governmental proceeding has been
instituted against Industries, Machine, any Guarantor or any
of the Collateral (defined below), which, if decided
adversely, will, in the reasonable opinion of the Lender,
adversely affect to a material extent, the financial condition
or continued operation of Industries or Machine; or (d) if,
since the Closing Date and up to the date of the advance
request, any loss, destruction, liens, claims, or encumbrances
against any of the Collateral (other than those in favor of
the Lender) have occurred, been made or filed and have not
been removed or settled to the satisfaction of the Lender.
5. BORROWING BASE. "Borrowing Base" means, as of any given date, the sum of the
following: (1) eighty percent (80%), or at the Lender's sole discretion any
lesser percentage designated upon sixty (60) days notice, of Eligible Trade
Accounts Receivable, plus (2) fifty percent (50%) of the value of the inventory
with such inventory availability being limited to 50% of the borrowing base and
capped at $100,000, up to a maximum of One Million and No/100 Dollars
($1,000,000.00) and subject to the following:
5.1. "Trade Accounts Receivable" means, as of any given date, all
accounts receivable of Industries or Machine for goods sold
and delivered and services rendered by Industries or Machine
in the ordinary course of the business presently conducted by
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each of them and representing amounts then invoiced and due
and owing. A Trade Account Receivable shall be an "Eligible
Trade Account Receivable," and shall be included in the
Borrowing Base, only if and so long as it meets each and all
of the following requirements:
5.1.1. It is a valid, genuine and legally enforceable
obligation, subject to no defense, set off or
counter-claim, of the account debtor or other obligor
named herein or in the records of Industries or
Machine pertaining thereto, and that neither
Industries nor Machine has received from the account
debtor or other obligor any notification repudiating
such obligation or asserting that such obligation is
subject to any defense, set off or counterclaim; and
5.1.2. It is owned by Industries or Machine free and clear
of all interests, liens, attachments, encumbrances,
and security interests except the security interest
granted to the Lender pursuant to this Agreement; and
5.1.3. The account debtor or other obligor is located in the
United States; and
5.1.4. Not more than ninety (90) days have expired since the
date of invoice; or, if the Lender in its sole
discretion accepts as eligible a Trade Account
Receivable which is due on a date stated in the
invoice, not more than thirty (30) days have expired
since the date stated; and
5.1.5. Neither Industries nor Machine has received notice
from the Lender that the credit of the account debtor
is not satisfactory to the Lender for any reason; and
5.1.6. The account debtor is not an entity in which
Industries or Machine or any Guarantor has a
controlling interest; and
5.1.7. Eligible Trade Accounts Receivable shall not include
any account receivable of the same account debtor to
Industries, Machine, or any or the Guarantors in
excess of fifteen percent (15%) of the then Eligible
Trade Accounts Receivable calculated after ineligible
accounts; and
5.1.8. The entire receivable of one account debtor becomes
ineligible if more than ten percent (10%) of the
total due is over ninety (90) days past due, unless
the ten percent (10%) over ninety (90) days is
attributable to an isolated dispute over a specific
invoice.
5.2. The value of Inventory used in determining the Borrowing Base
shall equal the value of raw material plus the value of
finished product and shall not include the value of any work
in progress.
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6. COLLATERAL SECURITY. The performance of all covenants and agreements
contained in this Agreement and in the other documents executed or delivered as
a part of this transaction and the payment of the notes and all renewals,
amendments and modifications thereof shall be secured by the following, which
shall be delivered at the Closing:
6.1. Security Agreement. Industries and Machine will grant to the
Lender a security interest covering the following:
6.1.1. Accounts. All of Industries and Machine's accounts
and contracts receivable of any kind whether now
existing or hereafter arising (herein called the
"Accounts"); all chattel papers, documents and
instruments relating to the Accounts; and all rights
now or hereafter existing in and to all security
agreements, leases, and other contracts securing or
otherwise relating to any Accounts or any such
chattel papers, documents and instruments;
6.1.2. Furniture, Fixtures, and Equipment. All of Industries
and Machine's furniture, fixtures and equipment in
all of its forms whether now owned or hereafter
acquired and wherever located (herein called the
"Equipment"); all parts thereof and all accessions or
additions thereto, whether now owned or hereafter
acquired;
6.1.3. General Intangibles. All of Industries and Machine's
general intangibles of any kind whether now existing
or hereafter arising (herein called the "General
Intangibles"); all chattel papers, documents and
instruments relating to the General Intangibles; and
all rights now or hereafter existing in and to all
security agreements, leases, licenses, permits,
patents, distribution agreements and contracts
securing or otherwise relating to any General
Intangibles or any such chattel papers, documents and
instruments and all of Industries and Machine's lien
rights against other persons whether statutory,
contractual, or by common law with respect to the
leases, Inventory or other collateral described in
this Agreement;
6.1.4. Inventory. All of Industries and Machine's inventory
in all of its forms whether now owned or hereafter
acquired and wherever located (herein called the
"Inventory"), and all accessions or additions thereto
and products thereof, whether now owned or hereafter
acquired;
6.1.5. Other. Without in any way limiting or modifying the
foregoing in any respect, all of Industries and
Machine's goods, chattels, business records,
contracts, contract rights, advertising agreements,
tax refunds, documents of title, fixtures, insurance
policies and proceeds, patents, trademarks, service
marks, logos, trade names, copyrights and
applications therefor, licenses, licensing fees,
permits, approvals, consents, certificates, stock,
surveys, engineering reports, tools, landscaping,
machinery, furniture, furnishing, business machines,
appliances, vehicles, trailers, rolling stock,
deposits, security deposits, money, securities,
claims, demands, causes of action, refunds, rebates,
income and all other tangible and intangible real,
personal or mixed property whether now owned or
hereafter acquired;
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6.1.6. Additional Property. Any additional Property from
time to time delivered to or deposited with the
Lender as security pursuant to the terms of this
Agreement; and
6.1.7. Proceeds. All proceeds, products, additions to,
replacements of, substitutions for, and accessions of
any and all Property described above.
The property described in this section shall be referred to
hereafter as the "Collateral."
6.2. ▇▇▇▇▇▇▇▇ Security Agreement. ▇▇▇▇▇▇▇▇ will execute and deliver
to the Lender a security agreement covering all of ▇▇▇▇▇▇▇▇'▇
existing and future equity and other interests in or right to
payment or property from Industries or Machine, excluding
▇▇▇▇▇▇▇▇'▇ ordinary compensation earned from Machine.
6.3. Lockbox Agreement. The Lender and Industries and Machine agree
that (i) Lender will establish a lockbox account (the
"Lockbox") for the receipt of payments on account and accounts
receivable of Industries and Machine; (ii) Industries and
Machine will cooperate with Lender to assure that all account
debtors of Industries and Machine are notified to make
payments on account to the Lockbox; and (iii) without limiting
the requirement that all account debtors make payment only to
the Lockbox, any payments received directly by Industries or
Machine will be deposited before 11:00 a.m. the following
business day into the Lockbox. The Lockbox will be swept by
the Lender on a daily basis and the funds therein will be
applied to the principal balance on the Revolving Note,
provided however, that, on or about the 15th day of each
month, the funds swept from the lockbox will be applied first
to pay the outstanding interest on the Revolving Note and then
to principal balance.
7. GUARANTIES. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ will each provide a limited guaranty equal
to 50% of the dollar amount of the IRS Note. ▇▇▇▇▇ will provide a limited
guaranty equal to 25% of the IRS Note. These guaranties are cumulative in favor
of the Lender. As the principal is reduced, the amount of the guaranties will
not decline.
8. CONVERSION OF PORTION OF PRIOR DEBT. At the Closing, $2,368,000 of the Prior
Debt (the "Conversion Amount") will be converted into a number of shares (the
"Shares") of Common Stock equal to the quotient obtained by dividing the
Conversion Amount by $1.00 per share (the "Conversion Price").
8.1. Number of Shares. Industries and Machine represent and warrant
that, as of Closing, the Shares will constitute not less than
twenty percent (20%) of the issued and outstanding common
stock of Industries.
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8.2. No Adjustments. It is anticipated that Industries may combine,
by way of reverse stock split, the outstanding shares of
Common Stock into a smaller number of shares. It is hereby
understood that the Conversion Price set forth in Section 8
shall not be adjusted if Industries, at any time while this
Agreement is in effect, (a) shall pay a stock dividend or
otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent
securities payable in shares of Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of
shares, (c) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of the
Common Stock any shares of capital stock of Industries.
8.3. Taxes. The issuance of certificates for the Shares on
conversion of the Conversion Amount shall be made without
charge to the Lender for any documentary stamp or similar
taxes that may be payable in respect of the issue or delivery
of such certificate.
8.4. Registration Rights.
8.4.1. Definitions. As used in this Section 8.4, the
following terms shall have the following meanings:
a) Exchange Act: The Securities Exchange Act of
1934, as amended, and the rules and
regulations of the SEC promulgated
thereunder.
b) Losses: See Section 8.4.6 hereof.
c) Prospectus: The prospectus included in any
Registration Statement (including, without
limitation, a prospectus that discloses
information previously omitted from a
prospectus filed as part of an effective
registration statement in reliance upon
Securities Act Rule 430A), as amended or
supplemented by any prospectus supplement,
with respect to the terms of the offering of
any portion of the Registrable Securities
covered by such Registration Statement and
all other amendments and supplements to the
prospectus, including post-effective
amendments, and all material incorporated by
reference or deemed to be incorporated by
reference in such prospectus.
d) Registration Expenses: All reasonable
expenses incurred by Industries in complying
with Sections 8.4.3 and 8.4.4 hereof,
including, without limitation, all
registration and filing fees, printing
expenses, fees and disbursements of counsel
for Industries, accountants' expenses
(including, without limitation, any special
audits or "comfort" letters incidental to or
required by any such registration), any fees
or disbursements of underwriters customarily
paid by issuers or sellers of securities
(but excluding underwriting discounts and
commissions) and blue sky fees and expenses
in all states reasonably designated by the
holders of Registrable Securities.
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e) Registrable Securities: The Shares and any
Common Stock issued or issuable in respect
of the Shares pursuant to any stock split,
stock dividend, recapitalization, or similar
event.
f) Registration Statement: Any registration
statement of Industries which covers any of
the Registrable Securities pursuant to the
provisions of this Agreement, including the
Prospectus, amendments and supplements to
such registration statement, including
post-effective amendments, all exhibits and
all material incorporated by reference or
deemed to be incorporated by reference in
such registration statement.
g) Rule 144: Rule 144 under the Securities Act,
as such Rule may be amended from time to
time, or any similar rule or regulation
hereafter adopted by the SEC (excluding Rule
144A).
h) SEC: The Securities and Exchange Commission.
i) Securities Act: The Securities Act of 1933,
as amended, and the rules and regulations
promulgated by the SEC thereunder.
j) Underwritten registration or underwritten
offering: A registration in which securities
of Industries are sold to an underwriter for
reoffering to the public.
8.4.2. Securities Subject to the Registration Rights. The
securities entitled to the benefits of the
Registration Rights set forth in this Section 8.4 are
the Registrable Securities.
8.4.3. Registration Rights. If, at any time after the
Closing and expiring on the fifth anniversary of the
Closing, Industries proposes to register any of its
securities under the Securities Act (except for
registrations on Forms S-8 or S-4 or their
equivalent), it will give written notice by
registered mail, at least thirty (30) days prior to
the filing of each such Registration Statement, to
the Lender of its intention to do so. If the Lender
notifies Industries within twenty (20) days after
receipt of any such notice of its desire to include
any Registrable Securities in such proposed
Registration Statement, Industries shall afford the
Lender the opportunity to have any such Registrable
Securities registered under such Registration
Statement. These rights may be exercised at any time
on an unlimited number of occasions prior to the
fifty anniversary of the Closing Date, subject to the
terms and conditions set forth in this Section 8.4.
12
8.4.4. Holdback and Lock-Up Agreements.
a) Restrictions on Public Sale by the Lenders
of Registrable Securities. Each holder of
Registrable Securities whose Registrable
Securities are covered by a Registration
Statement filed pursuant to Section 8.4.3
hereof agrees, if requested by the managing
underwriters in an underwritten offering (to
the extent timely notified in writing by
Industries or the managing underwriters),
not to effect any public sale or
distribution of securities of Industries of
any class included in such Registration
Statement, including a sale pursuant to Rule
144 (except as part of such underwritten
offering), during the 10-day period prior
to, and the 180-day period beginning on, the
effective date of any underwritten offering
made pursuant to such Registration
Statement.
b) The foregoing provisions shall not apply to
any holder of Registrable Securities if such
holder is prevented by applicable statute or
regulation from entering into any such
agreement; provided, however, that any such
holder shall undertake in its request to
participate in any such underwritten
offering not to effect any public sale or
distribution of the class of Registrable
Securities covered by such Registration
Statement (except as part of such
underwritten offering) during such period
unless it has provided five (5) business
days prior written notice of such sale or
distribution to the managing underwriters.
8.4.5. Expenses and Procedures.
a) Expenses of Registration. All Registration
Expenses (exclusive of underwriting
discounts and commissions) shall be borne by
Industries. Each holder of Registrable
Securities shall bear all underwriting
discounts, selling commissions, sales
concessions and similar expenses applicable
to the sale of the Registrable Securities
sold by such holder.
b) Registration Procedures. Industries will
keep the holders of Registrable Securities
advised as to the initiation of
registration, qualification and compliance
and as to the completion thereof. At its
expense, Industries will furnish such number
of Prospectuses and other documents incident
thereto as the holders or underwriters from
time to time may reasonably request.
c) Information. Industries may require each
seller of Registrable Securities as to which
any registration is being effected to
furnish such information regarding the
distribution of such Registrable Securities
as Industries may from time to time
reasonably request and Industries may
exclude from such registration the
Registrable Securities of any seller who
unreasonably fails to furnish such
information after receiving such request.
13
d) Delay or Suspension. Notwithstanding
anything herein to the contrary, Industries
may, at any time, suspend the effectiveness
of any Registration Statement for a period
of up to 60 consecutive days or 90 days in
the aggregate in any calendar year, as
appropriate (a "Suspension Period"), by
giving notice to each holder of Registrable
Securities to be included in the
Registration Statement, if Industries shall
have determined, after consultation with its
counsel, that Industries is required to
disclose any material corporate development
which Industries determines could reasonably
be expected to have a material effect on
Industries. Each holder of Registrable
Securities agrees by acquisition of such
Registrable Securities that, upon receipt of
any notice from Industries of a Suspension
Period, such holder shall forthwith
discontinue disposition of such Registrable
Securities covered by such Registration
Statement or Prospectus until such holder
(i) is advised in writing by Industries that
the use of the applicable Prospectus may be
resumed, (ii) has received copies of a
supplemental or amended prospectus, if
applicable, and (iii) has received copies of
any additional or supplemental filings which
are incorporated or deemed to be
incorporated by reference in such
Prospectus. Industries shall prepare, file
and furnish to each holder of Registrable
Securities immediately upon the expiration
of any Suspension Period, appropriate
supplements or amendments, if applicable, to
the Prospectus and appropriate documents, if
applicable, incorporated by reference in the
Registration Statement. Industries agrees to
use its best efforts to cause any Suspension
Period to be terminated as promptly as
possible.
e) Blue Sky. Industries will, as expeditiously
as possible, use its best efforts to
register or qualify the Registrable
Securities covered by a Registration
Statement under the securities or blue sky
laws of such jurisdictions as Industries
deems appropriate or, in the case of an
underwritten public offering, the managing
underwriter shall reasonably request,
provided that Industries shall not be
required in connection therewith or as a
condition thereto to qualify to do business
in any jurisdiction where it is not so
qualified or to take any action which would
subject it to taxation or service of process
in any jurisdiction where it is not
otherwise subject to such taxation or
service of process.
f) Notification of Material Events. Industries
will, as expeditiously as possible,
immediately notify each holder of
Registrable Securities under a Registration
Statement, at any time when a prospectus
relating thereto is required to be delivered
14
under the Securities Act, of the happening
of any event as a result of which the
Prospectus contained in such Registration
Statement, as then in effect, includes an
untrue statement of a material fact or omits
to state any material fact required to be
stated therein or necessary to make the
statements therein not misleading in the
light of the circumstances then existing
and, as expeditiously as possible, amend or
supplement such Prospectus to eliminate the
untrue statement or the omission.
8.4.6. Indemnification.
a) Indemnification by Maker. Industries shall,
without limitation as to time, indemnify and
hold harmless, to the full extent permitted
by law, each holder of Registrable
Securities, its officers, directors, agents
and employees, each person who controls such
holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the
Exchange Act), and the officers, directors,
agents or employees of any such controlling
person, from and against all losses, claims,
damages, liabilities, costs (including,
without limitation, all reasonable
attorneys' fees) and expenses (collectively
"Losses"), as incurred, arising out of or
based upon any untrue statement or alleged
untrue statement of a material fact
contained in any Registration Statement,
Prospectus or preliminary prospectus or any
amendment or supplement thereto, or arising
out of or based upon any omission or alleged
omission of a material fact required to be
stated therein or necessary to make the
statements therein in light of the
circumstances under which they were made (in
the case of any Prospectus) not misleading,
except insofar as the same are based solely
upon information furnished to Industries by
such holder for use therein; provided,
however, that Industries shall not be liable
in any such case to the extent that any such
Loss arises out of or is based upon an
untrue statement or alleged untrue statement
or omission made in any preliminary
prospectus or Prospectus if (i) such holder
failed to send or deliver a copy of the
Prospectus or Prospectus supplement with or
prior to the delivery of written
confirmation of the sale of Registrable
Securities and (ii) the Prospectus or
Prospectus supplement would have corrected
such untrue statement or omission. If
requested, Industries shall also indemnify
underwriters, selling brokers, dealer
managers and similar securities industry
professionals participating in the
distribution, their officers, directors,
agents and employees and each person who
controls such persons (within the meaning of
Section 15 of the Securities Act or Section
20 of the Exchange Act) to the same extent
as provided above with respect to the
indemnification of the holders of
Registrable Securities.
15
b) Indemnification by Holder of Registrable
Securities. In connection with any
Registration Statement in which a holder of
Registrable Securities is participating,
such holder of Registrable Securities shall
furnish to Industries in writing such
information as Industries may reasonably
request for use in connection with any
Registration Statement or Prospectus. Such
holder hereby agrees to indemnify and hold
harmless, to the full extent permitted by
law, Industries, and its officers,
directors, agents and employees, each person
who controls Industries (within the meaning
of Section 15 of the Securities Act or
Section 20 of the Exchange Act), and the
officers, directors, agents or employees of
any such controlling person, from and
against all losses, as incurred, arising out
of or based upon any untrue statements or
alleged untrue statement of material fact
contained in any Registration Statement,
Prospectus or preliminary prospectus, or
arising out of or based upon any omission of
a material fact required to be stated
therein or necessary to make the statements
therein in light of the circumstances under
which they were made (in the case of any
Prospectus) not misleading, to the extent,
but only to the extent, that such untrue
statement or omission is contained in any
information so furnished in writing by such
holder to Industries for use in such
Registration Statement, Prospectus or
preliminary prospectus. Industries shall be
entitled to receive indemnities from
accountants, underwriters, selling brokers,
dealer managers and similar securities
industry professionals participating in the
distribution to the same extent as provided
above with respect to information so
furnished by such persons specifically for
inclusion in any Registration Statement,
Prospectus or preliminary prospectus,
provided, that the failure of Industries to
obtain any such indemnity shall not relieve
Industries of any of its obligations
hereunder. Notwithstanding any provision of
this Section 8.4.6 to the contrary, the
liability of a holder of Registrable
Securities under this Section 8.4.6 shall
not exceed the purchase price received by
such holder for the Registrable Securities
sold pursuant to a Registration Statement or
Prospectus.
c) Conduct of Indemnification Proceedings. If
any action or proceeding (including any
governmental investigation or inquiry) shall
be brought or any claim shall be asserted
against any person entitled to indemnity
hereunder (an "indemnified party"), such
indemnified party shall promptly notify the
party from which such indemnity is sought
(the "indemnifying party") in writing, and
the indemnifying party shall assume the
defense thereof, including the employment of
counsel reasonably satisfactory to the
indemnified party and the payment of all
fees and expenses incurred in connection
with the defense thereof. All such fees and
expenses (including any fees and expenses
incurred in connection with investigation or
preparing to defend such action or
proceeding) shall be paid to the indemnified
party, as incurred, within 20 days of
written notice thereof to the indemnifying
party; provided, however, that if, in
accordance with this Section 8.4.6, the
indemnifying party is not liable to the
indemnified party, such fees and expenses
shall be returned promptly to the
16
indemnifying party. Any such indemnified
party shall have the right to employ
separate counsel in any such action, claim
or proceeding and to participate in the
defense thereof, but the fees and expenses
of such counsel shall be the expense of such
indemnified party unless (a) the
indemnifying party has agreed to pay such
fees and expenses, (b) the indemnifying
party shall have failed promptly to assume
the defense of such action, claim or
proceeding and to employ counsel reasonably
satisfactory to the indemnified party in any
such action, claim or proceeding, or (c) the
named parties to any such action, claim or
proceeding (including any impleaded parties)
include both such indemnified party and the
indemnifying party, and such indemnified
party shall have been advised by counsel
that there may be one or more legal defenses
available to it which are different from or
additional to those available to the
indemnifying party (in which case, if such
indemnified party notifies the indemnifying
party in writing that it elects to employ
separate counsel at the expense of the
indemnifying party, the indemnifying party
shall not have the right to assume the
defense of such action, claim or proceeding
on behalf of such indemnified party, it
being understood, however, that the
indemnifying party shall not, in connection
with any one such action, claim or
proceeding or separate but substantially
similar or related actions, claims or
proceedings in the same jurisdiction arising
out of the same general allegations or
circumstances, be liable for the reasonable
fees and expenses of more than one separate
firm of attorneys (together with appropriate
local counsel) at any time for all such
indemnified parties, unless in the opinion
of counsel for such indemnified party a
conflict of interest may exist between such
indemnified party and any other of such
indemnified parties with respect to such
action, claim or proceeding, in which event
the indemnifying party shall be obligated to
pay the fees and expenses of such additional
counsel or counsels). No indemnifying party
will consent to entry of any judgment or
enter into any settlement which does not
include as an unconditional term thereof the
release of such indemnified party from all
liability in respect to such claim or
litigation without the written consent
(which consent will not be unreasonably
withheld) of the indemnified party. No
indemnified party shall consent to entry of
any judgment or enter into any settlement
without the written consent (which consent
will not be unreasonably withheld) of the
indemnifying party from which indemnify or
contribution is sought.
17
d) Contribution. If the indemnification
provided for in this Section 8.4.6 is
unavailable to an indemnified party under
Section 8.4.6(a) or 8.4.6(b) hereof (other
than by reason of exceptions provided in
those Sections) in respect of any Losses,
then each applicable indemnifying party in
lieu of indemnifying such indemnified party
shall contribute to the amount paid or
payable by such indemnified party as a
result of such Losses, in such proportion as
is appropriate to reflect the relative fault
of the indemnifying party and indemnified
party in connection with the actions,
statements or omissions which resulted in
such Losses as well as any other relevant
equitable considerations. The relative fault
of such indemnifying party and the
indemnified party shall be determined by
reference to, among other things, whether
any action in question, including any untrue
statement or alleged untrue statement of a
material fact or omission or alleged
omission of a material fact, has been taken
or made by, or relates to information
supplied by, such indemnifying party or
indemnified party, and the parties' relative
intent, knowledge, access to information and
opportunity to correct or prevent such
action, statement or omission. The amount
paid or payable by a party as a result of
any Losses shall be deemed to include,
subject to the limitations set forth in
Section 8.4.6(c), any legal or other fees or
expenses reasonably incurred by such party
in connection with any action, suit, claim,
investigation or proceeding.
e) The parties hereto agree that it would not
be just and equitable if contribution
pursuant to this Section 8.4.6 (d) were
determined by pro rata allocation or by any
other method of allocation that does not
take into account the equitable
considerations referred to in the
immediately preceding paragraph. No person
guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the
Securities Act) shall be entitled to
contribution from any person who was not
guilty of such fraudulent misrepresentation.
8.4.7. Rule 144. Industries shall file the reports required
to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by
the SEC thereunder, and will take such further action
as any holder of Registrable Securities may
reasonably request, all to the extent required from
time to time to enable such holder to sell
Registrable Securities without registration under the
Securities Act within the limitation of the exemption
provided by Rule 144 or Rule 144A. Upon the request
of any holder of Registrable Securities, Industries
shall deliver to such holder a written statement as
to whether Industries has complied with such
requirements. Notwithstanding the foregoing, nothing
in this Section 8.4.7 shall be deemed to require
Industries to register any of its securities under
any section of the Exchange Act.
18
8.4.8. Underwritten Registrations. No holder of Registrable
Securities may participate in any underwritten
registration hereunder unless such person (i) agrees
to sell such holder's Registrable Securities on the
basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve
such arrangements, and (ii) completes and executes
all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required
under the terms of such underwriting arrangements.
9. RELEASES. The parties agree that the following releases will be delivered at
the Closing of the transactions contemplated herein:
9.1. Companies. At the Closing, the Lender shall release
Industries, Holding, and Machine from their obligations for
payment of the Prior Debt except to the extent that the Prior
Debt is amended and restated and provision for payment is made
herein, in the Amended and Restated Note, the IRS Note, the
Revolving Note, or in the Convertible Note. As a part of such
release, the Lender will dismiss all litigation, and release
all judgments, if any, against Industries, Holding, and
Machine arising out of or relating to the Prior Debt. Unless
otherwise expressly amended pursuant to the Restructure
Documents, all other terms of the Prior Loan Documents shall
remain in effect.
9.2. ▇▇▇▇▇▇▇▇. At Closing, the Lender shall release ▇▇▇▇▇▇▇▇ from
his obligation for payment of the Prior Debt except to the
extent that the Prior Debt is amended and restated and
provision for payment is made herein, in the ▇▇▇▇▇▇▇▇ Note or
in ▇▇▇▇▇▇▇▇'▇ guaranty. As a part of such release, the Lender
will dismiss all litigation, and release all judgments, if
any, against ▇▇▇▇▇▇▇▇ arising from his guaranty of the Prior
Debt. Unless otherwise expressly amended pursuant to the
Restructure Documents, all other terms of the Prior Loan
Documents shall remain in effect.
9.3. Lender. At Closing, Industries, Machine, and ▇▇▇▇▇▇▇▇ shall
jointly and severally release the Lender from any and all
claims arising in connection with or relating to the Prior
Debt.
10. CONDITIONS OF LENDING. The obligation of the Lender to perform this
Agreement and to make the initial or any future advances under any of the notes
executed pursuant to the Agreement is subject to the continued performance by
Industries, Machine, Flemming, Shumate, and ▇▇▇▇▇ of the following conditions
precedent:
10.1. ▇▇▇▇▇▇▇▇ Capital Contribution. At Closing, ▇▇▇▇▇▇▇▇ will make
a capital contribution to Industries in the amount of
$250,000. Such capital contribution will be in the form of a
cash payment to the Lender, which shall be applied to the
Prior Debt.
19
10.2. Stockholder Approval. The existing stockholders of Industries
shall approve the terms of the recapitalization as provided
herein and the accompanying dilutions of existing outstanding
common stock.
10.3. Restructure Documents; Collateral. The Restructure Documents
and all other instruments and documents incidental to the
transactions contemplated hereby shall have been duly
executed, acknowledged (where appropriate), and delivered to
the Lender by Industries and Machine, all in form and
substance satisfactory to the Lender.
10.4. Settlement with IRS. [Intentionally omitted.]
10.5. Prohibitive Orders. No order, writ or injunction of any court
or administrative agency is in effect or is being sought
prohibiting the transactions contemplated by this Agreement or
the other Restructure Documents.
10.6. Authority. The Lender shall have received a certificate of
incorporation, certificate of good standing, a certified copy
of the bylaws and certified copies of corporate resolutions
and other documents reasonably required to authorize the
execution, delivery and performance of the Restructure
Documents by Industries and Machine, all in form and substance
satisfactory to the Lender.
10.7. Representations and Warranties . The representations and
warranties set forth in this Agreement shall be true and
correct on and as of Closing, the initial advance, and each
additional advance with the same effect as if such
representations and warranties had been made on and as of such
date and there shall have occurred.
10.8. Opinion of Counsel. The Lender shall have received an opinion
of counsel for Industries and Machine stating that, subject to
standard assumptions, qualifications, exceptions, and
limitations):
10.8.1. Organization and Existence. Industries and Machine
are corporations duly incorporated and validly
existing under the laws of their respective states of
incorporation. Industries and Machine have the
corporate power to execute, deliver and perform their
respective obligations under the Restructure
Documents and to own their respective properties and
to conduct their respective businesses in the manner
presently conducted, except where the failure to so
qualify would not have a material adverse effect on
Industries and Machine.
10.8.2. Power and Authority; Validity. Each of the
Restructure Documents has been duly authorized,
executed and delivered by Industries and Machine, and
if an action or proceeding was brought in a
California court to enforce any Transaction Document
20
and the court was to apply the laws of the State of
California to govern and interpret such Transaction
Document, the Transaction Document would constitute
the valid and binding obligation of Industries and
Machine, enforceable against it in accordance with
its terms;
10.8.3. No Violations. The execution and delivery by
Industries and Machine of the Restructure Documents
and the consummation by Industries and Machine of the
transactions contemplated thereby will not
contravene, breach or result in any default under the
certificate of incorporation or bylaws of Industries
and Machine or, to counsel's knowledge, under any
agreement or other legally binding instrument to
which Industries or Machine is a party, and, to
counsel's knowledge, will not result in the violation
by Industries and Machine of any statute, regulation
or law to which Industries and Machine are subject,
except in each case, for conflicts, breaches or
defaults which in the aggregate would not materially
hinder or impair the consummation of the transactions
contemplated by the Restructure Documents or have a
material adverse effect on the Lender.
10.8.4. Collateral. If an action or proceeding was brought to
enforce any security interest under the Restructure
Documents and the court was to apply the Model
Uniform Commercial Code to govern and interpret the
Restructure Documents, the Restructure Documents are
sufficient to create in favor of the Lender an
enforceable security interest in those items and
types of collateral described in the Restructure
Documents to the extent provided by the Model Uniform
Commercial Code.
10.9. No Default. There shall not exist any Event of Default under
this Agreement or any event which, with the giving of notice
or the lapse of time (or both) would become an Event of
Default thereunder; and
10.10. Deliveries. Industries and Machine shall have delivered the
following to the Lender:
10.10.1. Notes. The Amended and Restated Note, the Revolving
Note, and the Convertible Note;
10.10.2. Security Agreement. A security agreement duly
executed by Industries and Machine, in form and
substance satisfactory to the Lender, granting the
Lender a security interest in the Collateral;
10.10.3. Resolutions. Copies of resolutions of the board of
directors of Industries and Machine authorizing the
execution, delivery and performance of the
Restructure Documents by Industries and Machine;
21
10.10.4. Articles and Certificate. A copy of the articles of
incorporation of Industries and Machine and a
certificate of good standing as to Industries and
Machine issued by the secretary of state of the
appropriate state;
10.10.5. Schedules. All collateral schedules, financing
statements, security interest, subordination
agreements, releases and termination statements which
the Lender may request to assure the creation,
perfection and priority of the security interests
created by the security agreement;
10.10.6. Lock Box Agreement. Lock box agreement duly executed
by Industries and Machine in form and substance
satisfactory to the Lender, defining how payments of
accounts receivable are to be paid and accounted for;
10.10.7. Guaranties. Guaranty Agreements in form and substance
satisfactory to the Lender executed by each of the
Guarantors;
10.10.8. UCC Financing Statements. UCC financing statements
describing the collateral securing the repayment of
the indebtedness and UCC financing statements for
Industries and Machine;
10.10.9. Subscription Agreement. A subscription agreement for
the ▇▇▇▇▇▇▇▇ capital contribution referred to in
Section 10.1;
10.10.10. Bills of Sale. Bills of sale reflecting evidence
that Machine has acquired the equipment referred to
in Section 4.1.1.a);
10.10.11. Common Stock. The certificates representing the
Shares in definitive form and registered in the name
of the Lender.
10.10.12. Settlement and Release Agreements; Dismissals. One
or more settlement and release agreements, in form
and substance satisfactory to the Lender, releasing
such persons from any and all claims arising out of
or relating to the Prior Debt except as set forth
Article 9.
11. CONDITIONS OF CLOSING BY INDUSTRIES, MACHINE, FLEMMING, SHUMATE, AND ▇▇▇▇▇.
The obligations of Industries, Machine, Flemming, Shumate, and ▇▇▇▇▇ to perform
this Agreement and consummate the transactions contemplated hereby, is subject
to the performance by Lender of each of the following conditions precedent:
11.1. Stockholder Approval. The existing stockholders of Industries
shall approve the terms of the recapitalization as provided
herein and the accompanying dilutions of existing outstanding
common stock.
11.2. Restructure Documents. The Restructure Documents and all other
instruments and documents incidental to the transactions
contemplated hereby shall have been duly executed,
acknowledged (where appropriate), and delivered to by the
Lender, all in form and substance satisfactory to Industries.
22
11.3. Prohibitive Orders. No order, writ or injunction of any court
or administrative agency is in effect or is being sought
prohibiting the transactions contemplated by this Agreement or
the other Restructure Documents.
11.4. Deliveries. Industries and Machine shall have delivered the
following to the Lender:
11.4.1. Subscription Agreement. A subscription agreement for
the ▇▇▇▇▇▇▇▇ capital contribution referred to in
Section 10.1;
11.4.2. Bills of Sale. Bills of sale reflecting evidence that
Machine has acquired the equipment referred to in
Section 4.1.1.a);
11.4.3. Settlement and Release Agreements; Dismissals. One or
more settlement and release agreements and
dismissals, in form and substance satisfactory to
Industries, Machine and ▇▇▇▇▇▇▇▇ releasing such
persons from any and all claims arising out of or
relating to the Prior Debt except as set forth
herein, as set forth in Article 9.
12. REPRESENTATIONS AND WARRANTIES. To induce the Lender to enter into this
Agreement and to make advances to Industries and Machine pursuant hereto,
Industries, Machine jointly and severally represent and warrant to the Lender
that:
12.1. Existence and Power. Industries and Machine are and will
continue to be corporations duly formed and validly existing
in good standing under the laws of their respective states of
organization and are authorized and qualified to do business
in each state where, because of the nature of the activities
or assets, such qualification is required, except those states
where failure to so qualify will not have a material adverse
effect; Industries and Machine have adequate power, authority,
and legal right to own, operate and hold the Collateral;
Industries and Machine are or will be at the time of
acquisition, duly authorized, qualified and licensed under all
applicable laws, regulations, ordinances or orders of public
authorities to carry on their business in the operation and
ownership of the Collateral; Industries and Machine have
adequate authority, power and legal right to enter into,
execute, deliver and perform the terms of the Restructure
Documents, to borrow money and to give security for borrowings
as contemplated by the Restructure Documents and to consummate
the transactions contemplated thereby, and in doing so,
neither Industries nor Machine will violate any law or the
provisions of any articles, charter or bylaws or any other
agreement or instrument binding upon Industries, Machine or
the Collateral. The Restructure Documents, upon their
execution and delivery, will constitute valid, legal and
binding Indebtedness of Industries and Machine, enforceable in
accordance with their terms, subject only to applicable
bankruptcy, insolvency or similar laws generally affecting the
enforcement of creditor's rights.
23
12.2. No Usury. The transaction evidenced by this Agreement does not
violate any usury law or other law relating to the payment of
interest on loans.
12.3. Regulatory Compliance. The authorization, execution, delivery,
and performance of this Agreement and each and every
Restructure Document are not and will not be subject to the
jurisdiction, approval or consent of, or to any requirement of
registration with or notification to, any federal, state or
local regulatory body or administrative agency, other than the
filing of a preliminary and a definitive information statement
under Section 14 of the Securities Exchange Act of 1934, as
amended, and any notice filings under federal and state
securities laws;
12.4. Financial Statements. Financial statements furnished to the
Lender by Industries and Machine were prepared in accordance
with generally accepted accounting principles consistently
applied, except as expressly therein set forth. They present
fairly the financial condition of Industries and Machine as of
the dates thereof. The annual reports disclose fully all
liabilities of Industries and Machine whether or not
contingent, with respect to any pension plan. Since the date
of the most recent financial statement, there has been no
material adverse change in the financial condition of
Industries or Machine other than as disclosed to the Lender;
12.5. Liabilities. Neither Industries nor Machine has any material
liabilities, direct or contingent, except those to Lender and
those disclosed to the Lender;
12.6. Full Disclosure. Neither this Agreement, the other Restructure
Documents nor any statement or documents referred to herein or
delivered to the Lender by Industries and Machine, or any
other party on their behalf contains any untrue statement or
omits to state a material fact necessary to make the
statements herein or therein not misleading;
12.7. Litigation. Except as disclosed in writing to the Lender, to
the knowledge of Industries and/or Machine, there is no
action, suit proceeding or investigation pending, or
threatened against Industries or Machine which, if adversely
determined, would adversely affect Industries or Machine or
impair the ability of Industries or Machine to carry on their
businesses substantially as now conducted or contemplated or
result in any substantial liability not adequately covered by
insurance;
12.8. No Default. The making and performance by Industries and
Machine of this Agreement will not violate any provision or
constitute a default under any indenture, agreement, or
instrument to which Industries or Machine may be a party or by
which Industries, Machine or any of the Collateral is bound or
affected;
12.9. Ownership of Collateral. Industries and Machine have or will
acquire good and marketable title to the Collateral;
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12.10. No Encumbrances. All assets of Industries and Machine are free
and clear of all liens, security interests, and encumbrances,
except those specifically permitted by Lender;
12.11. Priority. When the financing statements delivered pursuant to
this Agreement are filed in the proper offices where
Industries and Machines are incorporated, the Lender will have
a valid and perfected first security interest in the
Collateral described in the Security Agreement, subject to no
prior security interest, assignment, lien or encumbrance
except interests, if any, specifically approved by the Lender
in writing;
12.12. Permits. Industries and Machine have, or will obtain, all
governmental and private permits, certificates, consents and
franchises which are material to the business, property,
assets, operations or condition, financial or otherwise, of
Industries and Machine to carry on their businesses as now
being conducted. All such governmental and private permits,
certificates, consents and franchises are, or will be, valid
and subsisting, and there is no existing violation thereof;
12.13. Taxes. Except as disclosed to the Lender, Industries and
Machine and the Guarantor have filed all foreign, federal,
state and local tax returns which are required to be filed and
have paid or made provisions for payment of all taxes which
have or may become due pursuant to said returns or pursuant to
any assessment. Neither Industries and Machine nor the
Guarantors know of any basis for the assessment of any
deficiency taxes;
12.14. Location of Business Records. Industries and Machine will give
the Lender written notice of each location of Industries or
Machine at which inventory and records of Industries or
Machine pertaining to Collateral are kept. Except as such
notice is given, all records of Industries and Machine
pertaining to the Collateral are and will continue to be kept
at Industries and Machine's addresses as they appear in this
Agreement, or at such other address as Industries and Machine
designate for such purpose in a written notice to the Lender.
12.15. ERISA. Each qualified retirement plan of Industries or Machine
presently conforms and is administered in a manner consistent
with the Employee Retirement Income Security Act of 1974.
12.16. Survival of Representations. All representations and
warranties made by Industries, Machine, or the Guarantors
herein will survive the Closing, and any investigation at any
time made by or on behalf of the Lender will not diminish the
Lender's right to rely thereon. All statements contained in
any certificate or other instrument delivered by or on behalf
of Industries, Machine or the Guarantors under or pursuant to
this Agreement or in connection with the transactions
contemplated hereby will constitute representations and
warranties made by Industries or Machine hereunder.
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13. AFFIRMATIVE COVENANTS. Until payment in full of the Indebtedness, Industries
and , Machine jointly and severally agree that, unless the Lender otherwise
consents in writing, Industries and Machine will perform or cause to be
performed the following agreements:
13.1. Performance of Obligations. Industries and Machine will
promptly and punctually perform all of the obligations
hereunder and under the Restructure Documents, and under all
other instruments executed or delivered pursuant thereto;
13.2. Maintenance of Collateral. Maintain their properly in good
working order and condition; make all needful and proper
repairs, replacements, additions and improvements thereto.
13.3. Equipment Appraisal Updates. Equipment appraisal update
inspections will be performed every six months.
13.4. Financial Reports and Condition. Industries and Machine will
furnish or cause to be furnished to the Lender, prepared in
accordance with generally accepted accounting principles, and
certified as to truth and accuracy by either the chief
executive officer or chief financial officer of Industries and
Machine, the following:
13.4.1. Weekly Borrowing Base Certificate. On a weekly basis,
Industries and Machine will provide a Weekly
Borrowing Base Certificate in a form acceptable to
the Lender for reporting purposes only. For the
purposes of determining credit availability, the
Borrowing Base is determined on a monthly basis as
provided above.
13.4.2. Projections. Industries and Machine will provide
detailed 2006 financial statement projections by
January 31, 2006, and for each year thereafter by
January 31st of the subject year.
13.4.3. Quarterly Financial Statements. Industries and
Machine will deliver quarterly financial statements
of at least compiled quality by the 45th day
following the end of each quarter.
13.4.4. Annual Financial Statements. Industries and Machine
will furnish to the Lender their audited annual
financial statement on or before April 15th of each
year.
13.4.5. Income Tax Returns. Industries and Machine will
furnish to the Lender copies of their respective
federal income tax returns and requests for an
extension of time in which to file within fifteen
(15) days after filing of same.
13.4.6. Monthly Financial Reports. Within fifteen (15) days
after the close of each month commencing with the
month ending October 31, 2005, Industries and Machine
and Guarantors will furnish to the Lender the
following Monthly internally prepared consolidating
financial statements of Industries and Machine
including the following:
26
a) Accounts Receivable Aging/Listings. A
current aging of accounts receivable of
Industries and Machine;
b) Inventory. A current listing of the
inventory of Industries and Machine;
c) Balance Sheet. A balance sheet which
demonstrates a "Liquidity Ratio" of 1.10 to
1.0. Industries and Machine will provide the
Lender with within forty-five (45) days
after the close of each of its fiscal year's
quarter information reasonably needed by the
Lender to determine the Liquidity Ratio. As
used herein, Liquidity Ratio shall be
defined as the ratio of Industries and
Machine's current assets to Industries and
Machine's current liabilities.
Notwithstanding anything herein to the
contrary, failure to obtain the stated
Liquidity Ratio shall not be an event of
default until March 31, 2006, and tested
quarterly thereafter.
d) Income Statement. Beginning March 31, 2007,
an income statement which demonstrates a
minimum debt coverage ratio of 1.00:1,
increasing by 5 basis points each quarter to
1.20 at September 30, 2006. Industries shall
thereafter maintain a debt coverage ratio of
1.20, tested quarterly.
e) Cash Flow Statements. A statement of changes
in cash and a cash flow statement of
Industries and Machine in form satisfactory
to the Lender.
13.5. Quarterly Field Audits. Industries and Machine will provide
quarterly field audits on or before the 15th day following the
end of the subject quarter with the next field audit to be
completed by January 15, 2006.
13.6. Other Information. At the Lender's request from time to time,
Industries and/or Machine will provide the Lender with such
other information as the Lender may reasonably request
regarding the business affairs or financial condition of
Industries and Machine, and Industries and Machine will
provide access to the Lender at all reasonable times to all
agreements, purchase and sale contracts, maintenance
agreements, and all other documents and information relating
to the Collateral.
13.7. Taxes. All taxes which hereafter become due and assessments,
governmental charges and levies which are hereafter imposed on
Industries and Machine or their respective assets, income and
profits will be paid prior to the date on which penalties
attach thereto; provided that Industries and Machine will not
be required to pay any such charge which is being contested in
good faith by proper proceedings as to which adequate reserves
have been established.
27
13.8. Tax on Indebtedness. Industries and Machine hereby agree to
pay any and all taxes which may be levied or assessed directly
or indirectly on the notes or any of the Restructure
Documents, or the debt secured thereby, without regard to any
law which may be hereafter enacted imposing payment of the
whole or any part thereof upon the Lender, its successors or
assigns; and, upon violation of this Agreement, or upon the
rendering by any court of competent jurisdiction of a decision
that such an agreement by Industries or Machine is legally
inoperative, or if the rate of said tax, when added to the
rate of interest provided for in the Note, shall exceed the
then legal rate of interest, then, and in any such event, the
debt hereby secured, without deduction, shall, at the option
of the Lender, become immediately due and payable, anything
contained in the Restructure Documents notwithstanding;
provided that Industries and Machine's obligation to pay such
taxes shall exclude United States franchise taxes and United
States taxes imposed on or measured by Lender's net income or
net receipts;
13.9. Access. Industries and Machine shall permit any officer,
employee, attorney, or accountant for the Lender or for any
participant designated by the Lender, to inspect the
Collateral or to review, make extracts from, or copy any and
all of its corporate and financial books, records and
properties of Industries and Machine at all times during
ordinary business hours.
13.10. Title; Pledge. Industries and Machine agree to grant to the
Lender first perfected security interests covering all or any
part of the Collateral. Industries and Machine will maintain
and defend good and marketable title to the Collateral free
and clear of all claims, liens or encumbrances except those in
favor of the Lender.
13.11. Qualification; Licenses. Industries and Machine will take such
actions or cause such actions to be taken as might be required
to maintain Industries and Machine's corporate existence and
all governmental and private permits, licenses and authorities
of Industries and Machine necessary or desirable to the
continuation of their businesses and will comply with all
statutes and governmental regulations.
13.12. Notices. Industries and Machine will promptly give written
notice to the Lender of: (a) any litigation commenced against
or affecting Industries or Machine, or the Collateral; (b) any
dispute which exists between Industries or Machine and any
governmental regulatory body or law enforcement authority
relating to any federal or state laws that could reasonably be
expected to have a material adverse effect on (i) the
financial condition or results of operations of Industries or
Machine, or (ii) the ability of Industries or Machine to
perform their obligations hereunder or under any other
Restructure Documents; (c) any event of Default; (d) any
change in the senior management of Industries or Machine
regardless of the reason for such change (i.e. action by
stockholders, board of directors, death or retirement); and
(e) any other matter which has resulted or could be expected
to result in a material adverse change in (i) the financial
condition or results of operations of Industries or Machine or
(ii) the ability of Industries or Machine to perform under
this Agreement or any of the Restructure Documents.
28
13.13. Additional Documents. At any time and from time to time, upon
written request of the Lender, Industries or Machine agree to
furnish any additional information and to execute any and all
additional documents, not inconsistent with the provisions of
this Agreement, which may be required by the Lender in
connection with or pursuant to any provision set forth in this
Agreement or the Restructure Documents;
13.14. Compliance with Applicable Law. Industries and Machine will
continuously comply with all applicable regulations, rules,
ordinances or orders of the United States of America, any
state, or any other jurisdiction, or of any agency of federal
state and local taxing authority or other agency which might
materially and adversely affect the business, operations or
financial condition of Industries or Machine;
13.15. Books and Records. Industries and Machine will keep and
maintain accurate books and records in accordance with sound
accounting practices consistently applied;
13.16. Insurance. Industries and Machine will maintain property,
liability, ▇▇▇▇▇▇▇'▇ compensation and other forms of insurance
in amounts reasonably designated at any time or from time to
time by the Lender;
13.17. Notice to Existing Account Debtors. Industries and Machine
shall provide notice in accordance with the Lockbox Agreement
to all existing account debtors;
13.18. Notice to New Account Debtors. Industries and Machine shall
insert language into all new contracts notifying the contract
party that Industries or Machine's right to payment under the
contract is pledged to the Lender and shall instruct the
account debtor to make such payments to the Lockbox; and
13.19. Operating Accounts. Industries and Machine will conduct their
banking business through accounts established or to be
established with the Lender for all accounts, cash and cash
equivalents.
14. NEGATIVE COVENANTS. Until payment in full of the Indebtedness, Industries
and Machine jointly and severally agree that unless the Lender otherwise
consents in writing, which consent shall not be unreasonably withheld, neither
Industries and Machine nor the Guarantors will perform or permit to be performed
any of the following acts:
14.1. Control. There shall be no change in the executive management
of Industries or Machine without the Bank's prior written
consent.
29
14.2. Use of Loan Proceeds. Neither Industries nor Machine shall
permit any funds advanced to Industries or Machine under this
Loan Agreement to be used for any purposes other than
financing the businesses of Industries and Machine;
14.3. Other Debt. Industries and Machine shall incur no additional
debt in excess of $50,000 without prior approval from the
Lender.
14.4. Insider Debt. Permit funds to be owing to Industries and
Machine by the directors or stockholders of Industries or
Machine, or members of their families, on account of any loan,
credit sale or other transaction or event;
14.5. Contingent Liabilities. Neither Industries nor Machine will
assume, guarantee, endorse or otherwise become contingently
liable for the indebtedness of any other person, firm or
corporation, except by the endorsement of negotiable
instruments for deposit or collection or other similar
transactions in the ordinary course of their business;
14.6. Senior Debt. Neither Industries nor Machine will take or
permit to be taken any action which would or might impair the
senior position of the Lender under the Restructure Documents;
14.7. Creation of Liens. Neither Industries nor Machine shall
create, assume or suffer to exist any mortgage, pledge, lien,
charge or encumbrance on any of the Collateral excluding only
encumbrances to the Lender contemplated by this Agreement,
except the security interests created by the Security
Agreement, liens for taxes or assessments not yet due or
contested in good faith by appropriate proceedings, security
interests approved by the Lender in writing, at its sole
discretion, and other liens, charges and encumbrances
incidental to the conduct of their business or the ownership
of their property which were not incurred in connection with
the borrowing of money or the purchase of property on credit
and which do not in the aggregate materially detract from the
value of their property or materially impair the use thereof
in their business;
14.8. Disposition of Collateral. Neither Industries nor Machine
shall sell, convey, assign, transfer or otherwise dispose of
any of the Collateral or any other assets of Industries or
Machine except for the use of inventory in the ordinary course
of business;
14.9. Liquidation or Merger. Neither Industries nor Machine shall
liquidate, dissolve, or enter into any consolidation, merger,
sale of substantially all of its assets, or other business
combination, and neither Industries nor Machine shall
discontinue or substantially alter the normal operation of
their respective businesses.
14.10. Distribution. Except as set forth in the Convertible Note,
neither Industries nor Machine shall: (a) declare or pay any
dividends, stock bonuses or any other distributions to any
stockholder or any other person; or (b) authorize or make any
other distribution to any stockholder, subsidiary, affiliate
or person of any of the assets or business of Industries or
Machine;
30
14.11. Stock Redemption. Neither Industries nor Machine shall
purchase, acquire, redeem, retire or call or make any
commitment to purchase, acquire, redeem, retire or call any of
the capital stock or other equity instruments of Industries,
except pursuant to an "employee benefit plan" as defined in
the Securities Act of 1933, as amended;
14.12. Excessive Compensation. Neither Industries nor Machine shall
pay excessive or unreasonable salaries, bonuses, fees,
commissions or other compensation;
14.13. Investments. Neither Industries nor Machine shall purchase
stock or securities of, extend credit to or make investments
in, become liable as surety for, or guarantee or endorse any
obligation of, any person, firm or corporation, except direct
obligations of the United States and commercial lender
deposits;
14.14. Margin Stock. Neither Industries nor Machine shall use any of
the proceeds received from the Lender for the purpose of
purchasing or carrying margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve
System;
14.15. Purchase of Property. Neither Industries nor Machine shall
acquire equipment valued in excess of $50,000 without prior
Lender approval. Acquisition includes every means of acquiring
new equipment including capital leases, true leases or any
other arrangement by which Industries and Machines undertake
to pay monthly obligations in excess of $1,500 related to such
equipment.
14.16. Default. Neither Industries nor Machine shall permit any
default or event of default to occur under any note, loan
agreement, lease, mortgage, contract for deed, security
agreement or other contractual obligation binding upon
Industries or Machine;
14.17. Other Agreements. Neither Industries nor Machine shall enter
into any agreement that limits or restricts the ability of
Industries or Machine to comply with the terms of the
Restructure Documents.
15. EVENTS OF DEFAULT. Unless consented to by the Lender, the occurrence of any
of the following events will constitute a "Default" under the Restructure
Documents:
15.1. Nonpayment of Note. Default in payment when due of any
interest or principal of any of the notes when and such
failure shall continue for five (5) calendar days.
15.2. Other Nonpayment. Default in payment when due of any other
indebtedness payable to the Lender under the terms of the
Restructure Documents and such failure shall continue for five
(5) calendar days;
15.3. Breach of Agreement. Default by Industries or Machine in the
performance or observance of any covenant contained in the
Restructure Documents or under the terms of any other
instrument delivered to the Lender in connection with any of
the Restructure Documents when such failure continues for a
period of ten (10) calendar days;
31
15.4. Representations and Warranties. Any representation, statement,
certificate, schedule or report made or furnished to the
Lender on behalf of Industries or Machine proves to be false
or erroneous in any material respect at the time of the making
thereof or any warranty ceases to be complied with in any
material respect;
15.5. Default on Substantial Obligations. Industries and Machine
shall fail to pay when due any substantial liability or
liabilities owed to persons other than the Lender; or the
maturity of any such liability or liabilities shall be
accelerated; or any breach, default or event of default shall
occur under any indenture, loan agreement, note or agreement
pertaining to any such liability, entitling a creditor or
representative of creditors of Industries or Machine, acting
with or without the consent or concurrence of other creditors
and with or without notice or a period of grace, to accelerate
the maturity of or demand payment of any such liability,
whether such breach, default or event of default is waived by
the creditor so entitled. "Substantial" for these purposes,
means in excess of Twenty-Five Thousand and No/100 Dollars
($25,000);
15.6. Insolvency. The making of an assignment for the benefit of the
creditors of Industries or Machine;
15.7. Bankruptcy. The institution of bankruptcy, reorganization,
liquidation or receivership proceedings by or against
Industries or Machine under the Bankruptcy Code, as amended,
or under any other laws, whether state or federal, for the
relief of Industries or Machine, now or hereafter existing;
15.8. Receivership. The appointment of a receiver or trustee for
Industries and Machine, the Guarantors or for any substantial
part of the Collateral, or the discontinuance of business or a
material adverse change in the nature of the business of
Industries or Machine or in the financial condition of
Industries or Machine;
15.9. Benefit Plan Insecurity. Any event or reportable event which
the Lender in good faith determines to constitute potential
grounds for the termination of any employee benefit plan or
other plan maintained for employees of Industries or Machine,
or for the appointment of a trustee to administer any such
plan, shall have occurred and be continuing thirty (30)
calendar days after written notice to such effect shall have
been given by the Lender to Industries or Machine; or any such
plan shall be terminated, or a trustee shall be appointed to
administer any such plan; or the Pension Benefit Guaranty
Corporation shall institute proceedings to terminate any such
plan or to appoint a trustee to administer any such plan;
15.10. Judgment. Entry by any court of a final judgment against
Industries or Machine or an attachment of any portion of the
Collateral;
32
15.11. Termination of Corporate Existence. The cessation by
Industries or Machine to be a validly existing corporation
under the laws of their respective states of organization; or
15.12. Failure of Liens. Failure of the Lender's security interests
covering the Collateral to constitute first and prior liens on
any of the Collateral.
16. REMEDIES. On the occurrence of an event of Default which has not been timely
cured, the Lender may terminate all Indebtedness of the Lender under the
Restructure Documents, including, without limitation, any obligation to make
advances under the Revolving Note, and may exercise any one or more of the
following options:
16.1. Termination of Lender Obligations. The Lender may terminate
the obligations of the Lender under this Agreement.
16.2. Acceleration. The Lender may declare the Indebtedness
evidenced to be immediately due and payable, and the same
shall thereupon be immediately due and payable, without notice
or presentment or other demand, and the Lender thereupon may
exercise and enforce all rights and remedies available to it
to collect the Indebtedness;
16.3. Selective Enforcement. In the event the Lender elects to
selectively and successively enforce the Lender's rights under
any one or more of the instruments securing payment of the
Indebtedness, such action will not be deemed a waiver or
discharge of any other lien or encumbrance securing payment of
the Indebtedness until such time as the Lender has been paid
in full all sums advanced by the Lender;
16.4. Waiver of Event of Default. The Lender may, by an instrument
in writing signed by the Lender, waive any event of Default
that has occurred and any of the consequences of such event of
Default; and in such event, the Lender, Industries and Machine
will be restored to their respective former positions, rights
and Indebtedness under the Restructure Documents. Any event of
Default so waived will, for all purposes of this Agreement, be
deemed to have been cured and not to be continuing, but no
such waiver will extend to any subsequent or other event of
Default or impair any consequence of such subsequent or other
event of Default. The rights and remedies of the Lender shall
be cumulative and the exercise or enforcement of any one right
or remedy shall neither be a condition to nor bar the exercise
and enforcement of any other;
16.5. Performance by Lender. In the event Industries or Machine fail
to cure any Default in the time provided by the Lender, the
Lender will at any time thereafter have the right (but not the
obligation) to pay any claim or lien (whether prior or
subordinate to liens held by the Lender) affecting the
Collateral and to take possession of the Collateral in such
manner as the Lender determines. Industries and Machine hereby
authorize the Lender to increase the indebtedness owing by
Industries and Machine to the Lender by the cost of satisfying
claims against the Collateral and the cost of repossession of
the Collateral and agree that the Restructure Documents will
evidence and secure payment of such costs whether or not the
total funds advanced exceed the face amount of the Restructure
Documents;
33
16.6. Cumulative Remedies. No failure on the part of the Lender to
exercise and no delay in exercising any right hereunder will
operate as a waiver thereof, nor will any single or partial
exercise by the Lender of any right hereunder preclude any
other or further right of exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative
and not alternative; and
16.7. Setoff. Regardless of the adequacy of any other Collateral
held by the Lender, any deposits or other sums credited by or
due from the Lender to Industries or Machine will at all times
constitute collateral security for all of the Indebtedness of
Industries and Machine and may be set off against any and all
liabilities, direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising, of
Industries or Machine to the Lender. The rights granted by
this paragraph will be in addition to the rights of the Lender
under any statutory lien.
17. MISCELLANEOUS. It is further agreed as follows:
17.1. Recitals. The recitals are hereby acknowledged by the parties
to be true and correct and are adopted and incorporated herein
as material terms of this Agreement.
17.2. Fees. In partial consideration of the extension of credit
contemplated under this Agreement, Industries and Machine
shall pay to the Lender origination fees in the amount of 0.5%
of the original principal balances of the Amended and Restated
Note, the IRS Note, the Revolving Note, and the Convertible
Note.
17.3. Hold Harmless. Each party hereby agrees to indemnify and hold
any other party to this Agreement harmless from all liability,
loss, damage or expense, including reasonable attorney's fees,
whether incurred under retainer, salary or otherwise, that
such party may incur in good faith in compliance with or the
enforcement of the terms of this Agreement or any of the
Restructure Documents.
17.4. Supersession. It is agreed and understood between Industries,
Machine, the Guarantors and the Lender that: (a) except to the
extent the Prior Loan Documents are amended hereby, at and
after the Closing, the Prior Loans will remain in full force
and effect; and (b) the execution of this Agreement will not
discharge, interrupt, impair, ▇▇▇▇▇ or otherwise modify the
priority or the validity of any lien or security interest
securing payment of the indebtedness evidenced by the Prior
Loan Documents.
17.5. Notices. All notices, requests and demands will be served by
first class or express mail, postage prepaid, or sent by
telex, telegram, telecopy or other similar form of rapid
transmission confirmed by mailing written confirmation at
substantially the same time as such rapid transmission, as
follows:
34
Industries,
Machine and
the Guarantors- ▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, CFO
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to- ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Spectrum Law Group, LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
The Lender- Stillwater National Bank and Trust
Company
▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice
President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to- ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as any party designates for such
purpose in a written notice to the other parties. Notices will
be deemed to have been given on the date notice is sent by
rapid transmission or three business days after notice is
placed in the mail, properly addressed, postage prepaid.
17.6. Construction. Nothing contained in this Agreement will be
construed to constitute the Lender as a joint venturer with
Industries or Machine or to constitute a partnership. The
descriptive headings of the paragraphs of this Agreement are
for convenience only and are not to be used in the
construction of the content of this Agreement. This Agreement
may be executed in multiple counterparts, each of which will
be an original instrument, but all of which will constitute
one agreement.
17.7. Venue. This Agreement and the documents issued hereunder are
executed and delivered as an incident to a lending transaction
negotiated and to be performed in Oklahoma City, Oklahoma
County, Oklahoma. The Restructure Documents are intended to
constitute a contract made under the laws of the State of
35
Oklahoma and to be construed in accordance with the internal
laws of said state. Industries, Machine, the Guarantors and
the Lender hereby waive all objections and consent to the
jurisdiction and venue of any state or federal court sitting
in Oklahoma County, Oklahoma.
17.8. Severability. In case any one or more of the provisions
contained in the Restructure Documents should be invalid,
illegal or unenforceable in any respect in any jurisdiction,
the validity, legality and enforceability of such provision or
provisions will not in any way be affected or impaired thereby
in any other jurisdiction; and the validity, legality and
enforceability of the remaining provisions contained herein
and therein will not in any way be affected or impaired
thereby.
17.9. No Oral Modification. This Agreement may not be amended,
altered, modified or changed verbally, but only by an
agreement in writing signed by the party against whom
enforcement of any amendment, waiver, change, modification or
discharge is sought.
17.10. Extension of Loan Term. It is understood that the Lender is
under no obligation to extend the term of this Agreement
beyond the maturity of any of the notes and that any such
extension will be made at the Lender's sole discretion. Any
such extension will be evidenced by the acceptance by the
Lender of a promissory note renewing and extending the time of
payment of any of the notes on terms acceptable to the Lender.
17.11. No Waiver. No advance of loan proceeds under any of the
Restructure Documents will constitute a waiver of any of the
representations, warranties, conditions or covenants of
Industries or Machine under the Restructure Documents. In the
event Industries or Machine are unable to satisfy any
warranty, condition or covenant contained in the Restructure
Documents, no advance of loan proceeds will preclude the
Lender from thereafter declaring such inability to be an event
of Default.
17.12. Exclusive Benefit. All provisions of the Restructure Documents
are for the sole and exclusive benefit of the Lender,
Industries, Machine, ▇▇▇▇▇▇▇▇, Shumate, Clark, and Stuart, and
no other person will have standing to require satisfaction of
the provisions thereof or be entitled to assume that advances
thereunder will not be made by the Lender in the absence of
strict compliance with the provisions of the Restructure
Documents. Any and all provisions of the Restructure Documents
may be waived by the Lender in whole or in part at any time
if, in the sole discretion of the Lender, it is advisable to
do so.
17.13. Application of Loan Proceeds. The Lender may apply the loan
proceeds under the notes to the satisfaction of any condition,
warranty or covenant of Industries and Machine under any of
the Restructure Documents, and any proceeds so applied will be
considered as a part of the loan proceeds advanced and will be
secured by the Restructure Documents.
36
17.14. Binding Effect. This Agreement will be binding on Industries,
Machine, the Guarantors and their successors and permitted
assigns and will inure to the benefit of the Lender and the
Lender's successors and assigns.
17.15. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be an original instrument,
but all of which will constitute one agreement. The parties to
this Agreement may rely upon original, fax, digital or scanned
signatures in the execution of this Agreement.
IN WITNESS WHEREOF, Industries, Machine, the Guarantors and
the Lender have duly executed this Agreement effective the date first above
written.
▇▇▇▇▇▇▇ INDUSTRIES, INC., (formerly
EXCALIBUR INDUSTRIES, INC.), a Delaware
corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
▇▇▇▇▇▇▇ MACHINE WORKS, INC.
a Texas corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, individually
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, individually
37
/s/ ▇▇▇▇ ▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇, individually
STILLWATER NATIONAL BANK AND TRUST
COMPANY, a national banking association
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Title: Vice President
---------------------------------
(the "Lender")
38