REVOLVING LINE OF CREDIT LOAN
AND SECURITY AGREEMENT
BY AND BETWEEN
▇▇▇▇▇ GOLF, LTD.,
A TEXAS LIMITED PARTNERSHIP
AS BORROWER
AND
LEGACY BANK OF TEXAS
AS LENDER
JUNE 30, 2000
REVOLVING LINE OF CREDIT: $5,000,000
TABLE OF CONTENTS
PAGE
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ARTICLE 1
DEFINITIONS AND REFERENCES 1
ARTICLE 2
THE REVOLVING LOAN 5
Section 2.1 MAXIMUM PRINCIPAL DEBT. 5
Section 2.2 REVOLVING NOTE 5
Section 2.3 INTEREST RATE 5
Section 2.4 BORROWING PROCEDURE 5
Section 2.5 USE OF PROCEEDS 5
Section 2.6 TERM 5
Section 2.7 VOLUNTARY PREPAYMENT 5
Section 2.8 MANDATORY PREPAYMENTS 5
Section 2.9 DIRECT DISBURSEMENT BY LENDER 5
Section 2.10 LETTERS OF CREDIT 6
ARTICLE 3
INTENTIONALLY OMITTED 6
ARTICLE 4
INTENTIONALLY OMITTED 6
ARTICLE 5
INTEREST 6
Section 5.1 COMPUTATION OF INTEREST 6
Section 5.2 MAXIMUM INTEREST 6
Section 5.3 INTEREST RATE APPLICABLE TO REVOLVING LOAN 7
Section 5.4 INTEREST AFTER DEFAULT 7
ARTICLE 6
PAYMENT 7
Section 6.1 PAYMENT 7
Section 6.2 PLACE OF PAYMENT 7
Section 6.3 PAYMENT DUE ON NON-BUSINESS DAYS 7
Section 6.4 PRINCIPAL AND INTEREST PAYMENTS ON REVOLVING LOAN. 7
ARTICLE 7
CONDITIONS 7
Section 7.1 CLOSING CONDITIONS 7
Section 7.2 CONDITIONS TO EACH ADVANCE. 8
ARTICLE 8.
REPRESENTATIONS AND WARRANTIES 9
Section 8.1 EXISTENCE AND CAPACITY 9
Section 8.2 NO CONFLICT 9
Section 8.3 CONSENT 9
Section 8.4 ENFORCEABILITY OF LOAN DOCUMENTS; DUE AUTHORIZATION 9
Section 8.5 PROPERTIES; NO LIENS 9
Section 8.6 FINANCIAL CONDITION 10
Section 8.7 FULL DISCLOSURE 10
Section 8.8 NO DEFAULTS UNDER DOCUMENTS 10
Section 8.9 EXISTING LITIGATION/LIABILITIES 10
Section 8.10 TAXES 10
Section 8.11 COMPLIANCE WITH LAWS 10
Section 8.12 SUBSIDIARIES 10
Section 8.13 INSURANCE 10
Section 8.14 RECEIVABLES 10
Section 8.15 PRIORITY OF SECURITY INTEREST 10
Section 8.16 EQUITY STRUCTURE 11
Section 8.17 NAMES, PLACES OF BUSINESS, LOCATION OR COLLATERAL 11
ARTICLE 9
COVENANTS OF BORROWER 11
Section 9.1 AFFIRMATIVE COVENANTS 11
Section 9.2 NEGATIVE COVENANTS 14
Section 9.3 SPECIAL FINANCIAL REQUIREMENTS 16
ARTICLE 10
SECURITY AGREEMENT 16
Section 10.1 GRANT OF SECURITY INTEREST 16
Section 10.2 POWER OF ATTORNEY 16
Section 10.3 NO DUTY OF LENDER 17
Section 10.4 COLLECTION OF RECEIVABLES 17
Section 10.5 PERFECTION AND PROTECTION OF LIENS 17
ARTICLE 11
EVENTS OF DEFAULT AND REMEDIES 17
Section 11.1 NATURE OF EVENT 17
Section 11.2 DEFAULT REMEDIES 18
Section 11.3 APPLICATION OF PROCEEDS 19
Section 11.4 PERFORMANCE BY LENDER 20
Section 11.5 CUMULATIVE RIGHTS 20
Section 11.6 GENERAL INDEMNITY 20
Section 11.7 BORROWER'S REMEDIES 20
ARTICLE 12
MISCELLANEOUS 20
Section 12.1 WAIVER AND AMENDMENT 20
Section 12.2 SURVIVAL OF AGREEMENTS 20
Section 12.3 RELIEF IN BANKRUPTCY 21
Section 12.4 NO OBLIGATION BEYOND MATURITY 21
Section 12.5 NOTICES 21
Section 12.6 SUCCESSORS AND ASSIGNS 21
Section 12.7 GOVERNING LAW/VENUE 21
Section 12.8 SEVERABILITY 22
Section 12.9 COUNTERPARTS 22
Section 12.10 HEADINGS 22
Section 12.11 NUMBER AND GENDER OF WORDS 22
Section 12.12 LEGAL COUNSEL 22
Section 12.13. ENTIRETY; WRITTEN LOAN AGREEMENT 22
EXHIBITS
A Form of Borrowing Base Certificate (Revolving Loan)
B Form of Request for Advance (Revolving Loan)
C Organizational Structure
SCHEDULES
8.9 Existing Litigation
8.17 Location of Collateral and Chief Executive Office of Borrower
REVOLVING LINE OF CREDIT LOAN AND SECURITY AGREEMENT
THIS REVOLVING LINE OF CREDIT LOAN AND SECURITY AGREEMENT (this
"Agreement") is made as of the 30th day of June, 2000, between ▇▇▇▇▇ GOLF, LTD.,
a Texas limited partnership ("Borrower"), and LEGACY BANK OF TEXAS ("Lender").
WHEREAS, Borrower has requested that Lender extend to Borrower a
$5,000,000.00 revolving line of credit loan for working capital purposes, and
Lender has agreed to extend such credit subject to the terms and provisions
hereof; and
WHEREAS, this Agreement will supersede any and all prior agreements
between the parties hereto and the agreements contained herein represent an
arms-length transaction between Borrower and Lender.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender hereby agree
as follows:
ARTICLE 1.
DEFINITIONS AND REFERENCES
The following definitions shall apply to the following terms wherever
used in the Loan Documents (as hereinafter defined), except where the terms are
expressly defined otherwise or where the context clearly requires otherwise:
"ACCOUNT DEBTOR" means any Person or Persons purchasing or engaging to
purchase products and/or services from any Borrower and any other Person who by
contract or other arrangement has independently agreed to pay for proceeds sold
by any Borrower to any Person or Persons.
"ADVANCE" means an Advance of funds by Lender to, or on behalf of,
Borrower under the Revolving Note.
"ADVANCE DATE" means the date on which an Advance is made hereunder.
"ADVANCE REQUEST" means a request for an Advance made to Lender by ▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇ or ▇.▇. ▇▇▇▇▇, or any other corporate officer of
Borrower authorized in writing by Borrower; and Borrower hereby irrevocably
agrees that any such officer of Borrower may make an Advance Request hereunder,
and that unless and until Lender has received written notice of the termination
of the authority of any such officer, that Lender may fully rely thereon, and
that Borrower shall be obligated thereunder.
"AFFILIATE" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person, including but not
limited to any parent, subsidiary, joint venture or partnership of such Person
and any other entity or corporation at least fifteen percent (15%) of the voting
shares or interests of which are owned directly or indirectly by such Person in
the aggregate. Affiliate shall also mean any Guarantor or any shareholder of
Borrower, or any member of the immediate family, or any trust, partnership or
other entity which is beneficially owned by any Guarantor or shareholder or
member or members of the immediate family of any Guarantor or shareholder.
"AGREEMENT" means this Revolving Line of Credit Loan and Security
Agreement, with any and all exhibits and schedules attached hereto and all
written and executed amendments, supplements and modifications hereof.
"BASE RATE" means the annual interest rate identified as the "Prime
Rate" in the Money Rates column published each day in the Wall Street Journal
[and defined therein as the base rate on corporate loans posted by at least
seventy-five percent (75%) of the nations thirty (30) largest banks]. Upon
thirty (30) days notice to Borrower, Lender may change the publication or
institution upon which the Base Rate is established, and if the Wall Street
Journal should cease publishing such rate, then Lender may refer to another
similar source that
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 1
identifies the base rate on corporate loans at large U.S. money center
commercial banks. Borrower acknowledges that the Base Rate is a reference
rate and does not necessarily represent the lowest or best rate charged to
any customer by Lender, and that the Base Rate may not necessarily correspond
with future increases or decreases in interest rates charged by Lender or
other lenders or market interest rates in general.
"BORROWER" means ▇▇▇▇▇ Golf, Ltd., a Texas limited partnership, and its
successors and assigns.
"BORROWING BASE" means the Borrowing Base from time to time applicable
to the Revolving Loan and shall be the amount, as of the date of determination,
equal to the SUM of (i) seventy percent (70.0%) of Eligible Receivables, PLUS
(ii) the LESSER of (a) fifty percent (50.0%) of Eligible Inventory, or (b)
$1,000,000.00, LESS one-hundred percent (100%) of the aggregate face amount of
all outstanding letters of credit issued by or guaranteed by Lender for Borrower
hereunder as provided in SECTION 2.10 hereof.
"BORROWING BASE CERTIFICATE" means the Certificate attached hereto as
EXHIBIT "A".
"BUSINESS DAY" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Plano, Texas.
"CAPITAL EXPENDITURES" means all of Borrower's capital expenditures,
including, but not limited to, the purchase of vehicles, real estate, buildings,
leasehold interests, computers, data processing equipment, telephone equipment,
fax machines and copiers, as determined in accordance with generally accepted
accounting principles consistently applied.
"CLOSING DATE" means the date referred to in the preamble of this
Agreement, which shall be the effective date of this Agreement.
"COLLATERAL" means all property of any kind which is subject to a Lien
in favor of Lender.
"COMPENSATION" means the entire amount of salaries and wages paid on a
calendar year basis including, but not limited to, overtime payments and
commissions before reductions on account of any withholding, such as income
taxes and social security taxes, and also including management fees, consulting
fees, non-business related expenses, bonuses, redemptions, dividends or other
distributions on equity securities, vehicle, clothing or other allowances,
insurance premiums, retirement benefits and contributions to pension or profit
sharing plans and any other perquisites of employment or ownership but excluding
reasonable expense account allowances.
"CURRENT ASSETS" shall mean cash or other assets of a Person that are
reasonably expected to be realized in cash or sold during a normal operating
cycle of the Person or within one (1) year, whichever is longer, as reflected on
the financial statements of the Person and as adjusted as determined by Lender,
in its sole discretion.
"CURRENT DEBT" shall mean all scheduled payments of principal or
interest on any Debt or capitalized leases during any given period.
"CURRENT LIABILITIES" shall mean obligations of a Person that are due
during a normal operating cycle of the Person or within one (1) year, whichever
is longer, as reflected on the financial statements of the Person and as
adjusted as determined by Lender, in its sole discretion.
"DEBT" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, excluding unearned or deferred revenues, whether
primary or secondary, direct or indirect, absolute or contingent.
"DEFAULT RATE" means the Highest Lawful Rate.
"EBITDA" shall mean net income of Borrower as reflected on the
Borrower's financial statements before reductions for interest expense, income
tax liability, depreciation and amortization.
"ELIGIBLE INVENTORY" means all finished goods inventory of Borrower
valued on a cost basis as reflected in Borrower's financial statements,
including, without limitation, all goods manufactured, processed or purchased
for resale by Borrower and which is located at Borrower's principal place of
business or other locations controlled by Borrower and specifically approved in
writing by Lender, and which satisfies such criteria as Lender shall
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 2
determine from time to time, in its sole discretion, excluding however, raw
materials, obsolete inventory, work-in-process, inventory in which any third
party claims a security interest (but without implying the Lender's consent
to the grant by the Borrower of any security interest in favor of any third
party), and defective or nonfunctional inventory.
"ELIGIBLE RECEIVABLES" means all bona fide Receivables owed by Account
Debtors to Borrower (i) less all Receivables outstanding for more than ninety
(90) days from date of invoicing, (ii) less all Receivables owed by any Account
Debtor if any Receivable from such Account Debtor is outstanding for more than
ninety (90) days from date of invoicing, (iii) less all Receivables owed by any
Account Debtor from whom Borrower purchases products or services on terms, (iv)
less all Receivables owed by any Account Debtor whose principal business office
is located outside the United States, and (v) which satisfy such other criteria
as Lender shall determine from time to time, in its sole discretion.
"EVENT OF DEFAULT" has the meaning given it in Section 11.1.
"FISCAL YEAR" means a twelve-month period ending on and including
December 31 of any year.
"GAAP" means those generally accepted accounting principles, applied on
a consistent basis, as set forth in Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants or in statements of
the Financial Accounting Standards Board and/or their successors which are
applicable in the circumstances as of the date in question, and the requisite
that such principles be applied on a consistent basis means that the accounting
principles observed in a current period are comparable in all material respects
to those applied in a preceding period.
"GUARANTOR" means any guarantor, if any, guaranteeing payment of all or
any portion of the Indebtedness or the performance of Borrower's obligations
under the Loan Documents.
"HIGHEST LAWFUL RATE" means the maximum nonusurious interest rate, if
any, that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the Revolving Loan under the Laws of the United
States and the Laws of such states as may be applicable thereto which are
presently in effect or, to the extent allowed by Law under such applicable Laws
of the United States and the Laws of such states, which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate than
applicable Laws now allow.
"INITIAL FINANCIAL STATEMENTS" means the financial statements of
Borrower which have been delivered to Lender in connection with, and for
purposes of inducing Lender to approve, the Revolving Loan.
"INDEBTEDNESS" means the sum of all Debt from time to time owing by
Borrower to Lender under or pursuant to any of the Loan Documents, including,
without limitation, indebtedness owed under the Revolving Loan.
"INTANGIBLE ASSETS" means all intangible assets (as defined by GAAP
from time to time), including goodwill, trademarks, patents, copyrights,
organizational expenses and similar intangible items, and expressly including
loans, advances and investments to or in Affiliates, employees or officers of
Borrower or any Guarantor.
"INVENTORY" means all finished goods inventory of Borrower, including,
without limitation, all goods manufactured, processed or purchased for resale by
Borrower.
"LAW OR LAWS" means statute(s), law(s), ordinance(s), regulation(s),
order(s), writ(s), injunction(s) or decree(s) of any political or governmental
body or Tribunal (federal, state, county, municipal, foreign, or domestic or
otherwise) having competent jurisdiction.
"LENDER" means Legacy Bank of Texas, or any successor thereto or
assignee thereof.
"LIEN" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Debt owed to it or any other
arrangement with such creditor which provides for the payment of such Debt out
of such property or assets or which allows it to have such Debt satisfied out of
such property or assets prior to the
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 3
general creditors of any owner thereof, including without limitation, any
lien, mortgage, security interest, pledge, deposit, production payment,
rights of a vendor under any title retention or conditional sale agreement or
lease substantially equivalent thereto, or any other charge or encumbrance,
whether arising by Law or agreement or otherwise, but excluding any right of
offset which arises without agreement in the ordinary course of business.
"LIQUID ASSETS" means Borrower's cash, certificates of deposit, short
and long term marketable securities and bonds, as reflected on the financial
statements of Borrower.
"LOAN DOCUMENTS" means this Agreement, the Revolving Note, and each
other document evidencing and securing the Indebtedness under the Revolving
Loan, and all other agreements, certificates, legal opinions and other
documents, instruments and writings (other than term sheets, commitment letters,
or similar documents used in the negotiation hereof) heretofore or hereafter
delivered in connection herewith or therewith.
"MONTHLY PAYMENT DATE" means the first (1st) day of each calendar month
during the term of this Agreement.
"MATURITY DATE" means, July 1, 2001, unless the Revolving Loan is
accelerated or terminated prior to such date pursuant to the terms of this
Agreement.
"OWNER'S EQUITY" means the sum of amount of Preferred Stock, Common
Stock, Additional Paid-in Capital, Common Stock Subscriptions, Deferred
Compensation, Accumulated Other Comprehensive Income, Retained Earnings and
Treasury Stock as so designated and set forth in Borrower's financial
statements.
"PERSON" means an individual, corporation, partnership, association,
joint stock company, trust or trustee thereof, estate or executor thereof,
unincorporated organization or joint venture, court or governmental unit or any
agency or subdivision thereof, or any other legally recognizable entity.
"POTENTIAL EVENT OF DEFAULT" means any event or condition which with
notice or the lapse of time or both would give rise to an Event of Default.
"RECEIVABLES" means, as reflected in Borrower's financial statements,
all of Borrower's accounts, receivables or right to receive any payment or
commission from any Account Debtor, including, but not limited to, payments
arising out of or related to the wholesale or retail sale of goods manufactured
or sold by Borrower.
"REVOLVING LOAN" means the loan made by Lender pursuant to Article 2
and evidenced by the Revolving Note.
"REVOLVING LOAN COMMITMENT" means $5,000,000.00.
"REVOLVING NOTE" means the promissory note evidencing the Revolving
Loan executed as of the Closing Date by Borrower payable to Lender, as modified
or extended from time to time in writing, and any promissory note issued in
exchange or replacement therefor.
"SEC" means the Securities and Exchange Commission.
"SUBORDINATED INDEBTEDNESS" means all of the indebtedness of Borrower
to any shareholder or affiliate of Borrower or any affiliate thereof, all of
which indebtedness (and all liens and security interests securing such
indebtedness) has been subordinated to the Revolving Loan by written
subordination agreement in form and substance acceptable to Lender.
"SUBSIDIARIES" means any entity owned in whole or in part or otherwise
controlled by Borrower, including the Subsidiaries identified in SECTION 8.12
hereof and any Subsidiary hereafter existing.
"TANGIBLE NET WORTH" shall mean (a) Borrower's total assets as
reflected on the financial statements furnished to Lender, excluding (i) all
Intangible Assets, and (ii) all Receivables from officers, employees or other
affiliates of Borrower or Guarantor, and (iii) investments in any Affiliate,
less (b) the total amount of Borrower's Debt.
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 4
"TRIBUNAL" means any agency, board, business, commission, court,
department, instrumentality or tribunal of any political or government authority
having competent legislative, judicial or arbitral jurisdiction.
ARTICLE 2.
THE REVOLVING LOAN
Section 2.1. MAXIMUM PRINCIPAL DEBT. Subject to the terms and
conditions of this Agreement, Lender agrees to make Advances under the Revolving
Note, pursuant to this Article 2, to Borrower from time to time in an aggregate
amount not to exceed, at any one time outstanding, the lesser of (a) the
Borrowing Base and (b) the Revolving Loan Commitment. Within the limits of the
Borrowing Base and the Revolving Loan Commitment, Borrower may borrow, repay and
reborrow amounts borrowed under the Revolving Note.
Section 2.2. REVOLVING NOTE. The Revolving Loan made by Lender pursuant
to this Article 2 shall be evidenced by the Revolving Note. Lender is hereby
authorized to record the date and amount of each Advance made pursuant to this
Article 2 by Lender and the date and amount of each payment or prepayment of
principal thereof in Lender's records. Any such recordation shall constitute
PRIMA FACIA evidence of the accuracy of the information as recorded; provided,
however, the failure to make any such recordation shall not affect the
obligations of Borrower hereunder or under the Revolving Note.
Section 2.3. INTEREST RATE. All Advances pursuant to this Article 2
shall accrue interest at a rate of interest as set forth in Section 5.3 hereof.
Section 2.4. BORROWING PROCEDURE. By no later than 11:00 a.m. Dallas,
Texas time one (1) Business Day prior to a proposed Advance Date, Borrower shall
submit to Lender an Advance Request substantially in the form of EXHIBIT "B"
attached hereto. Upon fulfillment of the applicable conditions set forth herein,
including Article 7, Lender shall transfer immediately available funds in the
amount of the Advance into an account at Lender established by Borrower by no
later than Lender's close of business on the Advance Date. Notwithstanding the
foregoing, Borrower shall not be allowed to submit an Advance Request more than
three (3) times in any calendar week.
Section 2.5. USE OF PROCEEDS. The proceeds of the Revolving Loan shall
be used only to supplement cash flow for general corporate needs, including
providing working capital to Borrower for the purpose of financing Borrower's
operations, production and acquisition of Borrower's inventory, and for
Borrower's marketing and sales efforts, and for the issuance of Letters of
Credit as set forth in SECTION 2.10 below. Borrower warrants that it shall not
use the proceeds of the Revolving Loan for any other purposes or in connection
with the operation of any other business.
Section 2.6. TERM. The obligation of Lender to make Advances pursuant
to this Article 2 shall terminate at Lender's close of business in Dallas, Texas
on the Maturity Date. On the Maturity Date, the outstanding principal balance of
the Revolving Note, together with accrued but unpaid interest thereon and all
other sums owing under this Agreement, shall be due and payable.
Section 2.7. VOLUNTARY PREPAYMENT. At its option on any Business Day,
Borrower may prepay to Lender the principal balance of the Revolving Loan in
whole or in part without penalty or premium.
Section 2.8. MANDATORY PREPAYMENTS.
(a) In the event the Borrower sells, transfers, assigns or
otherwise disposes of all or any portion of the Collateral, other than
in the ordinary course of business, Borrower shall pay immediately to
Lender the proceeds of any such sale, transfer or assignment as a
prepayment of principal of the Revolving Loan.
(b) If, at any date of determination, the Indebtedness
outstanding under the Revolving Loan exceeds the maximum allowed to be
borrowed pursuant to Section 2.1, then Borrower shall immediately pay
to Lender an amount sufficient to reduce the Indebtedness outstanding
under the Revolving Loan such that Borrower is in compliance with
Section 2.1.
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 5
Section 2.9. DIRECT DISBURSEMENT BY LENDER. Lender shall have the right
in Lender's sole discretion, subject to the limitations set forth in Section 2.1
hereof, on behalf of and without notice to Borrower, to make and use Advances to
pay Lender for any amounts due Lender pursuant to this Agreement or otherwise,
including, without limitation, principal, interest and any expenses of Borrower
to Lender payable under this Agreement.
Section 2.10. LETTERS OF CREDIT. Upon application by Borrower
reasonably acceptable to and approved by Lender and Borrower's execution of
documents and instruments as reasonably required by Lender, Lender shall issue
or guarantee, from time to time, letters of credit hereunder on behalf of
Borrower upon such terms reasonably acceptable to Lender. Lender's issuance or
guarantee of letters of credit hereunder shall be subject to availability under
the Borrowing Base as indicated in the most recent Borrowing Base Certificate.
At the time of issuance, Borrower shall pay to Lender a fee equal to any and all
fees charged by third-party lenders related to the issuance of letters of credit
by such third-party lenders.
ARTICLE 3.
INTENTIONALLY OMITTED
ARTICLE 4.
INTENTIONALLY OMITTED
ARTICLE 5.
INTEREST
Section 5.1. COMPUTATION OF INTEREST. Subject to the provisions of
Section 5.2, all interest payable hereunder shall be computed for the actual
number of days elapsed during any period for which interest is calculated on the
basis of a year consisting of three hundred sixty (360) days. Any statements or
invoices sent by Lender to Borrower and setting forth the amount of interest
payable by Borrower hereunder shall be deemed conclusive as to the interest
actually payable hereunder unless contested in writing to Lender by Borrower
within twenty (20) days from the date of such statement or invoice.
If a rate of interest applicable to the Revolving Loan at any time
would exceed the Highest Lawful Rate but for the limitation contained in Section
5.2, then the actual rate of interest to accrue on the unpaid principal amount
shall be limited to the Highest Lawful Rate, but any subsequent reductions in
such applicable rate shall not reduce the interest rate payable upon the unpaid
amount thereof below the Highest Lawful Rate until such time as the total amount
of interest accrued on the unpaid principal amount of the Revolving Loan equals
the amount of interest that would have accrued if such applicable rate had at
all times been in effect.
Section 5.2. MAXIMUM INTEREST. It is the intention of the parties
hereto to conform strictly to the usury Laws in force that apply to this
transaction. Accordingly, all agreements among the parties hereto (including,
without limitation, the Loan Documents), whether previously existing, now
existing or hereafter arising and whether written or oral, are hereby limited so
that in no contingency, whether by reason of acceleration of the maturity of the
Revolving Loan or otherwise, shall the interest (and all other sums that are
deemed to be interest) contracted for, charged or received by Lender with
respect to the Revolving Loan exceed the Highest Lawful Rate. If, from any
circumstance whatsoever, interest under any agreement between Borrower and
Lender including, without limitation, under the Revolving Loan would otherwise
be payable in excess of the Highest Lawful Rate, and if from any circumstance
Lender shall ever receive anything of value deemed interest by applicable Law in
excess of the Highest Lawful Rate, then Lender's receipt of such excess interest
shall be deemed a mistake and the same shall, so long as no Event of Default
shall be continuing, at the option of Borrower, either be repaid to Borrower or
credited to the unpaid principal; provided, however, that if an Event of Default
shall have occurred and be continuing, and Lender shall receive excess interest
during such period, then Lender shall have the option of either crediting such
excess amount to principal or refunding such excess amount to Borrower. If
either of the Revolving Loan is prepaid or the maturity of the Revolving Loan is
accelerated by reason of an election of Lender, then unearned interest, if any,
shall be canceled and, if theretofore paid, shall either be refunded to Borrower
or credited on the Revolving Loan as applicable, and as the Lender elects. All
interest paid or agreed to be paid to Lender shall, to the extent allowed by
applicable Law, be amortized,
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 6
prorated, allocated, and spread throughout the full period of Borrower's
credit relationship with Lender until payment in full of the principal
(including the period of any renewal or extension) so that the interest for
such full period shall not exceed the Highest Lawful Rate. Notwithstanding
that the parties hereto in good ▇▇▇▇▇ ▇▇▇▇ each and every fee provided by
this Agreement to be a bona fide fee for services rendered and to be rendered
separate and apart from the lending of money or the provision of credit, if
any such fee is ever determined by a Tribunal or by Lender to constitute
interest, then the treatment of such fee for usury purposes shall be
controlled by the provisions of this Section 5.2.
Section 5.3. INTEREST RATE APPLICABLE TO REVOLVING LOAN. Subject to
Section 5.2 above, all Advances under the Revolving Note and the entire
outstanding principal balance of the Revolving Loan shall accrue interest at a
floating rate equal to the Base Rate.
Section 5.4. INTEREST AFTER DEFAULT. Subject to Section 5.2 above, past
due principal, interest, fees, expenses and other sums due Lender from Borrower
shall accrue interest at the Default Rate until paid.
ARTICLE 6.
PAYMENT
Section 6.1. PAYMENT. All payments and prepayments of principal,
interest and other charges or fees hereunder shall be made in lawful currency of
the United States of America in immediately available funds, without setoff,
counterclaim or deduction of any kind. Funds received later than 2:00 p.m.
Dallas, Texas time shall be deemed to have been received by Lender on the next
following Business Day. Notwithstanding the foregoing, all items of payment,
solely for the purpose of determination of a Potential Event of Default or an
Event of Default, shall be deemed received upon actual receipt by Lender unless
the same is subsequently dishonored for any reason.
Section 6.2. PLACE OF PAYMENT. All payments and prepayments of
principal, interest and other charges hereunder to Lender shall be made at the
banking offices of Lender at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or at
such other location as Lender shall direct.
Section 6.3. PAYMENT DUE ON NON-BUSINESS DAYS. If any payment of
principal or interest on the Revolving Note, or if any other payment or fee
provided for in the Loan Documents, falls due on a day other than a Business
Day, then such due date will be extended to the next succeeding Business Day,
unless otherwise required by the provisions of this Agreement, and interest will
accrue through the actual date of such payment and be payable by Borrower in
respect of any such extension of principal.
Section 6.4. PRINCIPAL AND INTEREST PAYMENTS ON REVOLVING LOAN. Accrued
interest shall be due and payable on or before each Monthly Payment Date. All
accrued interest and the entire outstanding principal balance of the Revolving
Note shall be due and payable on the Maturity Date. Mandatory prepayments of
principal shall be due and payable on the Revolving Loan as set forth in this
Agreement.
ARTICLE 7.
CONDITIONS
Section 7.1. CLOSING CONDITIONS. The obligation of Lender to enter into
this Agreement is conditioned upon prior satisfaction of all requirements set
forth in this Article 7 and upon the prior receipt by Lender of the
documentation set forth in this Section 7.1 (all of which shall be satisfactory
to Lender in its sole discretion):
(a) CERTIFICATE OF LIMITED PARTNERSHIP; LIMITED PARTNERSHIP
AGREEMENT. Copies of the Certificate of Limited Partnership and Limited
Partnership Agreement, and all amendments thereto of Borrower to be
accompanied by a certificate of the appropriate corporate secretary,
dated as of the Closing Date, to the effect that each such copy is
correct and complete;
(b) EXISTENCE AND GOOD STANDING. A certificate or certificates
of the Secretary of State, Comptroller or other appropriate officer of
the state of incorporation or formation of Borrower bearing a
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 7
date not more than thirty (30) days prior to the Closing Date, to
the effect that Borrower is duly organized and existing under the
laws of the State of Texas, and duly qualified to do business and in
good standing under the laws of all jurisdictions in which the
nature of its business makes such qualification necessary.
(c) INCUMBENCY. A certificate of incumbency naming all
officers of Borrower who will be authorized to execute or attest any of
the Loan Documents on behalf of Borrower executed by the Secretary of
Borrower, together with specimen signatures, dated as of the Closing
Date;
(d) RESOLUTIONS. Copies of resolutions of Borrower's partners
and the Board of Directors of Borrower's general partner satisfactory
to Lender, approving the execution of this Agreement and such of the
Loan Documents to which Borrower is a party and authorizing the
performance of the obligations of Borrower contemplated in this
Agreement and in such other Loan Documents, accompanied by a
certificate of the Secretary, dated as of the Closing Date, that such
copies are complete and correct copies of resolutions duly adopted at a
meeting of the Board of Directors, and that such resolutions have not
been amended, modified or revoked in any respect, and are in full force
and effect as of the Closing Date;
(e) INSURANCE. Evidence of endorsements or riders in favor of
Lender for all insurance policies covering the Collateral maintained by
Borrower in accordance with the requirements set forth in Article 9,
together with loss payee endorsements from such insurance companies
with respect to insurance in favor of Lender which provide that (i) the
policy will remain in force for the benefit of Lender for at least
thirty (30) days after Lender receives written notice of cancellation
of same; (ii) the insurance carrier will not reduce or cancel the
policy at the request of the insured or amend or endorse or delete it
without at least thirty (30) days prior written notice being received
by Lender; and (iii) the insurance cannot be invalidated as to Lender
by any act or neglect of the insured;
(f) REVOLVING NOTE. The Revolving Note;
(g) FINANCING STATEMENTS, ETC. All financing statements (and
terminations or amendments to any existing financing statements),
mortgages, deeds of trust and all other documents or instruments
requested by Lender to evidence the Liens granted by Borrower pursuant
to the Loan Documents, duly executed by the Borrower and recorded in
the appropriate governmental office; and
(h) OTHER DOCUMENTS. Any and all other documents or
certificates reasonably requested by Lender in connection with the
execution of this Agreement.
Section 7.2. CONDITIONS TO EACH ADVANCE. In addition to the conditions
precedent stated elsewhere herein, Lender shall not be obligated to make an
Advance unless:
(a) ADVANCE REQUEST. By the time specified in Section
2.4, Borrower shall have delivered an Advance Request, duly executed,
for such Advance, containing the certifications required herein;
(b) BUSINESS DAY. The Advance Date is a Business Day;
(c) REPRESENTATIONS. The representations and warranties made
by Borrower in any Loan Document are true and correct in all material
respects at and as if made as of the Advance Date;
(d) UPDATED INCORPORATION AND FORMATION DOCUMENTS. Lender
shall have received current copies of the items required to be
delivered by Section 7.1(a) hereof if there has been any amendment to
or revision of any of such items;
(e) NO DEFAULT. On the Advance Date, no Event of Default, or
Potential Event of Default, has occurred and is continuing or would be
caused by the requested Advance.
(f) AVAILABILITY OF COMMITMENT. Lender shall have received a
Borrowing Base Certificate which is current as of the last day of the
immediately preceding calendar month and which shows that the sum of
(i) the principal balance of the outstanding Advances made by Lender
under the Revolving Loan
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 8
and (ii) the amount of the requested Advance is equal to or less
than the lesser of (y) the Revolving Loan Commitment or (z) the
Borrowing Base.
(g) COMPLIANCE WITH PROVISIONS. Borrower shall have performed
and complied in all material respects with all agreements and
conditions required to be performed or complied with by it herein or in
any of the Loan Documents at or prior to the time of the Advance;
(h) NECESSARY APPROVALS. All necessary authorizations and
approvals by or from any governmental agency or other third party to
the transactions contemplated by this Agreement required of Borrower
shall have been duly obtained and shall be in full force and effect on
the Advance Date;
(i) ADDITIONAL EVIDENCE. If requested by Lender, Borrower
shall have delivered to Lender a certificate reasonably satisfactory to
Lender certifying any of the matters set forth in this Agreement which
are necessary to enable Borrower to qualify for the Advance;
(j) USE OF PROCEEDS. The proceeds of such Advance shall be
used for the purposes set forth in Section 2.5; and
(k) LEGAL LIMITATION. Lender shall be permitted to make the
Advance by applicable law.
ARTICLE 8.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants, as of the date hereof, the
following:
Section 8.1. EXISTENCE AND CAPACITY. Borrower is duly organized,
validly existing and in good standing under the laws of the State of Texas, and
duly qualified to conduct business and in good standing under the laws of all
jurisdictions in which the nature of its business makes such qualification
necessary. Borrower's general partner is duly organized, validly existing and in
good standing under the laws of the State of Delaware, and duly qualified to
conduct business and in good standing under the laws of all jurisdictions in
which the nature of its business makes such qualification necessary. Borrower
has all requisite power, authority, licenses and permits material to the
ownership and operation of its partnership and to the carrying on of its
business. Borrower and Borrower's general partner have all requisite power and
authority to borrow under, to execute and deliver, and to perform under, the
Loan Documents to which it is a party.
Section 8.2. NO CONFLICT. The execution and delivery of, and
performance under, the Loan Documents by Borrower (a) does not violate any
applicable law; (b) is not in contravention of the terms of Borrower's
partnership agreement, or the terms of any credit or loan agreement, indenture,
lease, franchise, marketing agreement, license, mortgage or deed of trust, or
other material agreement, undertaking or arrangement (written or oral) to which
Borrower is a party or by which it (or its assets) may be bound; and (c) will
not give rise to the creation of any Lien upon any of the assets of Borrower
other than the Liens in favor of Lender.
Section 8.3. CONSENT. No authorization, approval, consent, or notice
under the provisions of Borrower's partnership agreement or under any other
relevant agreement, undertaking, or arrangement or applicable law or by any
additional Tribunal or Person is required with respect to the execution and
delivery of this Agreement, the Revolving Note or the other Loan Documents or
with respect to the performance of any covenant or agreement contained herein or
therein.
Section 8.4. ENFORCEABILITY OF LOAN DOCUMENTS; DUE AUTHORIZATION.
Borrower and Borrower's general partner have taken all requisite corporate
action to authorize the (a) execution and delivery of the Loan Documents to
which it is a party, (b) consummation of all transactions contemplated thereby,
and (c) performance and discharge of its obligations thereunder. This Agreement,
the Revolving Note, and each other Loan Document to be executed and delivered by
Borrower as contemplated herein, when executed and delivered by all parties
thereto, will constitute the valid, legal and binding obligation of Borrower,
enforceable against Borrower in accordance with their terms.
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 9
Section 8.5. PROPERTIES; NO LIENS. Borrower has good and marketable
title to all of its personal property and no personal property is subject to any
Liens, other than Liens in favor of Lender and subordinate liens securing the
Subordinated Indebtedness, if any.
Section 8.6. FINANCIAL CONDITION. The Initial Financial Statements were
prepared in accordance with GAAP, consistently applied, and fairly present the
financial condition of Borrower and the results of Borrower's operations on the
dates or for the periods indicated therein, and since the delivery of the
Initial Financial Statements, there has been no material adverse change in the
assets, liabilities or condition (financial or otherwise) of Borrower.
Section 8.7. FULL DISCLOSURE. Neither this Agreement nor any other
document, certificate or written statement furnished to Lender by or on behalf
of Borrower in connection herewith contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading. There is no fact peculiar
to Borrower which materially adversely affects or is likely to materially
adversely affect the business, condition or operations (financial or otherwise)
of Borrower which has not been set forth in this Agreement or in other
documents, certificates and written statements furnished to Lender by or on
behalf of Borrower prior to the date hereof in connection with the transactions
contemplated hereby including, without limitation, any contingent or direct
liabilities or unrealized or anticipated losses of Borrower.
Section 8.8. NO DEFAULTS UNDER DOCUMENTS. Borrower is not in default or
in violation (nor has any event or condition occurred which, with notice or
lapse of time or both, would constitute a default or violation) under the Loan
Documents, under any charter document or indenture, or under any credit or loan
agreement, indenture, lease, franchise, marketing agreement, license, mortgage,
deed of trust, or any other material agreement, undertaking or arrangement
(written or oral) to which it is a party or under which it or any of its assets
may be bound.
Section 8.9. EXISTING LITIGATION/LIABILITIES. Except as disclosed on
Schedule 8.9 attached hereto, there are no material actions, suits or
proceedings pending, or, to the best knowledge of Borrower, threatened against
or affecting the assets of Borrower or the consummation of the transactions
contemplated hereby, at law or in equity or before or by any governmental
authority or instrumentality or before any arbitrator of any kind and, to the
best knowledge of Borrower, there is no valid basis for any such action,
proceeding or investigation. Borrower is not subject to any judgment, order,
writ, injunction or decree of any court or governmental agency. There is not a
reasonable likelihood of an adverse determination of any pending proceeding
which would, individually or in the aggregate, have a material adverse effect on
the business operations or financial condition of Borrower. Borrower is not a
party to, or bound by, any contract or agreement or subject to any charter or
other corporate restriction having a material adverse effect on the financial
condition or business operations of Borrower.
Section 8.10. TAXES. All tax returns of Borrower required by law to be
filed have been filed and all taxes imposed upon Borrower or its properties,
which are due and payable, have been paid.
Section 8.11. COMPLIANCE WITH LAWS. Borrower is not in violation of
any laws, rules, regulations, orders, and decrees applicable to the Borrower.
Section 8.12. SUBSIDIARIES. Borrower's only Subsidiaries are: ▇▇▇▇▇
Golf, U.K.,, Ltd. and ▇▇▇▇▇ Golf Japan, Inc.
Section 8.13. INSURANCE. Borrower maintains insurance (a) of such types
as is usually carried by corporations or entities of established reputation
engaged in the same or similar businesses and similarly situated with
financially sound, responsible and reputable insurance companies or associations
(or, as to workers compensation or similar insurance, with an insurance fund or
by self-insurance authorized by the jurisdiction in which its operations are
carried on) and (b) in such amounts (and with co-insurance and deductibles) as
such insurance is usually carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated.
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 10
Section 8.14. RECEIVABLES. Each Receivable reflects a bona fide
contractual arrangement with an Account Debtor which has been accepted by the
Account Debtor, without dispute, offset, defense or counterclaim, and Borrower
is in possession of the contracts, invoices or purchase orders which are the
basis of each Receivable, as well as documents and receipts evidencing the
products sold in connection with each Receivable.
Section 8.15. PRIORITY OF SECURITY INTEREST. Lender will have valid and
perfected first priority security interests in the Collateral described in the
Loan Documents, subject to no other Lien, when the financing statements are
signed by Borrower and filed in the appropriate governmental offices. No
financing statement is on file in any public office with respect to the
Collateral other than financing statements in favor of Lender or assigned to
Lender and covering the Liens created by the Loan Documents and financing
statements (to be filed subsequent to the financing statements covering the
Liens created by the Loan Documents) covering the Subordinated Indebtedness, if
any.
Section 8.16. EQUITY STRUCTURE. Borrower is a limited partnership with
one percent (1%) of its partnership interest being owned by its sole general
partner, ▇▇▇▇▇ Golf GP Corp., and with ninety-nine percent (99%) being owned by
its sole limited partner, ▇▇▇▇▇ Golf Holding Corp.
Section 8.17. NAMES, PLACES OF BUSINESS, LOCATION OR COLLATERAL.
Borrower has not, during the preceding five years, had, been known by or used
any corporate, trade or fictitious name which has not been disclosed to Lender.
All Collateral is located at the locations set forth on Schedule 8.17 attached
hereto. The chief executive office and principal place of business of Borrower
is (and for the preceding two (2) years has been) set forth on Schedule 8.17
attached hereto.
Section 8.18. OWNERSHIP OF COLLATERAL. Borrower is part of a group of
related and affiliated entities (the "Consolidated Group") as shown on Exhibit
"C" (the "Organizational Chart"). The Collateral is owned by and is held in the
name of the Borrower, and will continue to be owned by and held in the name of
the Borrower; and the Collateral is not owned by or in the name of any of the
related or affilitated entities shown on the Organizational Chart. As of April
30, 2000, the accounts receivable (except foreign receivables) owned by the
Borrower and aged less than 90 days were approximately $16,736,718.00, and the
finished goods inventory owned by the Borrower were approximately $6,386,000.00.
Borrower shall continue to own the Collateral and generate the Receivables in
the name of Borrower and shall not change the manner of conducting business or
allocation of business among the entities of the Consolidated Group so as to
reallocate a significant portion of the Collateral or the generation of
Receivables to any other entity.
ARTICLE 9.
COVENANTS OF BORROWER
Section 9.1 AFFIRMATIVE COVENANTS. Borrower covenants and agrees that
until the full and final payment of the Indebtedness and the termination of this
Agreement that it will do the following:
(a) BOOKS, FINANCIAL STATEMENTS AND REPORTS. At all times
maintain full and accurate books of account and records. Borrower will,
on an individual or consolidated basis, as required by Lender, maintain
a standard and consistent system of accounting and will furnish the
following statements and reports to Lender at Borrower's expense:
(i) ANNUAL FINANCIAL STATEMENTS. Within 120 days following the
end of each calendar year, complete and consolidated annual
financial statements of Consolidated Group, prepared in
accordance with GAAP and audited by a national independent
accounting firm acceptable to Lender, and as soon as
available, and in any event within thirty (30) days of the
filing thereof, Consolidated Group's Form 10K as filed with
the SEC for such year. Consolidated Group's financial
statements shall include a Balance Sheet, and Statements of
Operations, of cash flows, and of changes in stockholders'
equity, for such Fiscal Year.
(ii) QUARTERLY FINANCIAL STATEMENTS. Within 60 days following
the end of each quarter other than the end of the calendar
year, complete and consolidated quarterly financial
statements, including a Balance Sheet and Statement of
Operations and Cash Flows, of Consolidated Group, prepared in
accordance with GAAP and reviewed by a national independent
accounting firm
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 11
acceptable to Lender, and as soon as available, and in any
event within thirty (30) days of the filing thereof,
Consolidated Group's Form 10Q as filed with the SEC for
such quarter.
(iii) BORROWING BASE CERTIFICATE. In addition to the delivery
of the Borrowing Base Certificate as provided in Section 7.2f,
Borrower shall, as soon as available, and in any event within
thirty (30) days after the end of each calendar month, deliver
to Lender a duly executed and completed Borrowing Base
Certificate dated as of the last day of the preceding calendar
month. If the Borrowing Base Certificate indicates that the
Indebtedness under the Revolving Loan exceeds the maximum
allowed to be borrowed pursuant to the terms of this
Agreement, Borrower shall deliver to Lender an amount
sufficient to reduce the Indebtedness under the Revolving Loan
such that Consolidated Group is in compliance with the terms
of this Agreement at such time as the Borrower delivers the
Borrowing Base Certificate to Lender.
(iv) STATEMENT OF RECEIVABLES. As soon as available and in any
event within thirty (30) days after the end of each calendar
month, a Statement of Receivables for Borrower with an aging
analysis and listing the aggregate remaining balance of such
Receivables, the payment history thereon and the name and
address of the Account Debtor thereon, certified as true and
correct, and dated as of the last day of the preceding
calendar month. Borrower warrants and represents that each
Receivable shall represent a bona fide obligation of the
Account Debtor.
(v) CERTIFICATE OF COMPLIANCE. As soon as available and in any
event within thirty (30) days after the end of each calendar
month, a Certificate of Compliance, duly executed by Borrower,
certifying that Borrower is in full compliance with each of
the covenants set forth herein and that there is no Event of
Default and no Potential Event of Default has occurred.
(vi) TAX RETURNS. On or before thirty (30) days following the
filing thereof, a complete and accurate copy of tax returns
for Borrower, or if consolidated, the Consolidated Group
together with all schedules and amendments thereto, as filed
with the Internal Revenue Service.
(vii) SUMMARY SCHEDULES OF INVENTORY. As soon as available and
in any event within thirty (30) days after the end of each
calendar quarter, deliver to Lender Summary Schedules of
Inventory containing such detail and information and in such
form as may be reasonably required by Lender.
(viii) OTHER INFORMATION. On and after the Closing Date,
furnish to Lender (i) any information which Lender may from
time to time reasonably request concerning any covenant,
provision or condition of the Loan Documents or any matter in
connection with the Collateral or the Borrower's businesses
and operations and (ii) all evidence which Lender may from
time to time reasonably request as to the accuracy and
validity of or compliance with all representations, warranties
and covenants made by Borrower in the Loan Documents, the
satisfaction of all conditions contained therein, and all
other matters pertaining thereto.
(b) AUDITS/INSPECTIONS. After an Event of Default or Potential
Event of Default, or at any time during which Borrower's inventory of
finished goods is less than $2,000,000.00 on a cost basis as reflected
in Borrower's financial statements and as indicated in the Borrowing
Base Certificate provided under SECTION 9.1(a)(iii) or any other report
provided under SECTION 9.1, permit representatives appointed by Lender,
including independent accountants, agents, attorneys, appraisers and
any other persons, to visit and inspect Borrower's business office,
including its books of account, other books and records, and any
facilities or other business assets, and to make extra copies therefrom
and photocopies and photographs thereof, and to write down and record
any information such representatives obtain, and Borrower shall permit
Lender or its representatives to investigate and verify the accuracy of
the information furnished to Lender in connection with the Loan
Documents and to discuss all such matters with its officers, employees
and representatives; provided, that Lender agrees to exercise good
faith efforts (i) to treat and cause its representatives to treat all
such information as confidential, (ii) to not disclose such information
except as is customary or required in the ordinary course of Lender's
lending business or as otherwise required by law, and (iii) to not use
the information for any purpose other than the underwriting,
administration or enforcement of Lender's rights with respect to the
Revolving Loan (or any modification thereof). Borrower shall reimburse
Lender upon demand for the reasonable charges
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 12
and expenses of such independent parties. Funding of Revolving Loan
is subject to an acceptable Field Audit Report, based on Lender's
sole judgment.
(c) NOTICE OF MATERIAL EVENTS AND CHANGE OF ADDRESS. Promptly
notify Lender of (i) any material adverse change in Borrower's
financial condition, (ii) the occurrence of any Event of Default or
Potential Event of Default, (iii) the acceleration of the maturity of
any Debt owed by Borrower or of any default by Borrower under any
indenture, mortgage, agreement, contract or other instrument to which
it is a party or by which its properties are bound, (iv) any material
adverse claim asserted against Borrower or with respect to Borrower's
properties, (v) the filing of any suit or proceeding against Borrower,
(vi) notice from any Tribunal, the substance of which might have a
material adverse effect on the financial condition or business
operations of Borrower, or (vii) any material change in its accounting
practices or procedures. Borrower will also notify Lender in writing at
least twenty (20) Business Days prior to the date that Borrower changes
its name or the location of its chief executive office or principal
place of business or the place where it keeps its books and records
concerning the Collateral, furnishing with such notice any necessary
financing statement amendments or requesting Lender and its counsel to
prepare the same.
(d) MAINTENANCE OF PROPERTIES. Maintain, preserve, protect,
and keep all property used or useful in the conduct of its business in
good condition and in compliance with all applicable Laws and from time
to time make all repairs, renewals and replacements needed to enable
the business and operations carried on in connection therewith to be
promptly and advantageously conducted at all times.
(e) MAINTENANCE OF EXISTENCE AND QUALIFICATIONS. Maintain and
preserve its corporate existence in full force and effect and qualify
to do business as a foreign corporation in all states or jurisdictions
where required by applicable Law.
(f) PAYMENT OF TRADE DEBT, TAXES, ETC. (i) Timely file all
required tax returns; (ii) timely pay all taxes, assessments, and other
government charges or levies imposed upon it or upon its income,
profits or property; (iii) pay all Debt owed by it on ordinary trade
terms to vendors, suppliers and other Persons providing goods and
services used by it in the ordinary course of its business; (iv) pay
and discharge when due all other Debt now or hereafter owed by it; and
(v) maintain appropriate accruals and reserves for all of the foregoing
Debt in accordance with GAAP.
(g) INSURANCE. Keep adequately insured, by financially sound
and reputable insurers, the Collateral and all other property of a
character usually insured by similar Persons engaged in the same or
similar businesses; and otherwise comply with the provisions of the
Loan Documents pertaining to insurance, and provide Lender with
evidence of such insurance on an annual basis and at upon at other
times upon the reasonable request of Lender. Borrower shall maintain
adequate insurance against its liability for injury to Persons or
property, which insurance shall be by financially sound and reputable
insurers. With respect to Inventory, Borrower shall maintain insurance
in an amount not less than the amount of the Borrowing Base based upon
Inventory, which coverage shall acknowledge Lender as the "loss payee"
and shall have the insurance company provide Lender with such evidence
of such insurance as Lender requests.
(h) PAYMENT OF EXPENSES. Promptly (and in any event, within
three (3) days after any invoice or other statement or notice) pay all
reasonable costs and expenses incurred by or on behalf of Lender in
connection with (i) the negotiation, preparation, execution and
delivery of the Loan Documents (not to exceed $5,000.00 with respect to
attorney's fees for the initial preparation of Loan Documents), and any
and all consents, waivers or other documents or instruments relating
thereto, (ii) the filing, recording, refiling and re-recording of any
Loan Documents and any other documents or instruments or further
assurances required to be filed or recorded or refiled or re-recorded
by the terms of any Loan Document, (iii) the borrowings hereunder and
other action reasonably required in the course of administration
hereof, including, but not limited to, all reasonable out-of-pocket
expenses incurred in connection with audits and inspections, (iv) the
defense or enforcement of the Loan Documents, and (v) the defense or
enforcement of the Loan Documents and the amendment, restructuring or
"workout" of any of the Loan Documents.
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 13
(i) COMPLIANCE WITH AGREEMENTS AND LAW. Perform all material
obligations it is required to perform under the terms of each
indenture, mortgage, deed of trust, security agreement, lease,
franchise, agreement, contract or other instrument or obligation to
which it is a party or by which it or any of its properties is bound
and conduct its business, and affairs in compliance with all Laws,
regulations, and orders applicable thereto.
(j) FISCAL YEAR. Maintain a fiscal year which ends on December
31st of each year.
(k) CHARACTER OF BUSINESS. Continue to engage in the same type
of business engaged in as of the Closing Date and not change the nature
of its business or enter into any business which is substantially
different from the business engaged in as of the Closing Date.
(l) LITIGATION. Give prompt written notice to Lender of any
material proceeding, claim or dispute that is not fully covered by
insurance, any material change or development in the litigation or
claims disclosed on Schedule 8.9, any material labor dispute resulting
in or threatening to result in a strike against it, or any proposal by
any public authority respecting a condemnation or taking of any
material portion of any material property or other asset (but only when
such proposal becomes known to Borrower), and take or cause to be taken
all such steps as are necessary or appropriate to defend, negotiate or
respond to such proceedings, disputes or proposals.
(m) COLLATERAL SECURITY. (a) Ensure that all Liens granted in
favor of the Lender hereunder shall be valid, enforceable, perfected
and first priority Liens; (b) perform all such acts and execute all
such documents as Lender may reasonably request in order to enable
Lender to report, file and record every instrument that Lender may deem
necessary in order to perfect and maintain the Liens granted to Lender
in the Collateral, and otherwise do all things necessary to perfect,
and maintain as perfected, first priority Liens with respect to all
Liens of the Lender now existing or hereafter granted in the
Collateral; and (c) immediately notify the Lender in writing of any
damage to or material adverse occurrence concerning the Collateral or
the moving of Collateral to any place where it is not currently located
other than in the ordinary course of business in connection with the
sale of Inventory.
(n) AUTHORIZATIONS AND APPROVALS. Obtain, at its own expense,
all such licenses, authorizations, consents, permits and approvals as
may be required to enable it to comply with its obligations hereunder
and under the other Loan Documents.
(o) PROTECTION OF BUSINESS RECORDS. Take all necessary
protective actions in order to prevent destruction of Borrower's
business records, including but not limited to: (i) if Borrower
maintains its business records or back up business records on a manual
system, then such records shall be kept in a fire proof cabinet; and
(ii) if its records are computerized, then Borrower agrees to create a
tape or diskette "back-up" of the computerized information, and (a)
maintain a complete and accurate duplicate copy of such tape or
diskette "back-up" at a secure central location, (b) upon Lender's
request, provide Lender with a complete and accurate duplicate copy of
its tapes or diskettes containing information current through the end
of the calendar month, and (c) take all necessary actions to ensure
that Borrower's computer systems are "Y2K" compliant.
(p) ADDITIONAL INFORMATION; FURTHER ASSURANCES. Upon the
request of Lender, provide to Lender such additional information or
reports as Lender may reasonably request and take such actions or care
necessary to comply with the terms of the Loan Documents.
Section 9.2. NEGATIVE COVENANTS. Borrower warrants, covenants and
agrees that until the full and final payment of the Indebtedness and the
termination of this Agreement, Borrower will not do the following without the
prior written consent of Lender:
(a) LIMITATIONS ON LIENS. (i) create, assume or permit to
exist any Lien, including, without limitation, any purchase money
security interest, upon any of the properties or assets which it now
owns or hereafter acquires, except (A) Liens at any time existing in
favor of Lender, and (B) liens securing the Subordinated Indebtedness,
if any; or (ii) permit any Subsidiary to create, assume or permit to
exist any Lien, including, without limitation, any purchase money
security interest, upon any of the properties or assets which it now
owns or hereafter acquires.
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 14
(b) LIMIT ON INDEBTEDNESS. Allow Borrower to incur or assume
any Debt other than the Indebtedness and other than trade payables
incurred in the ordinary course of business, without prior Lender
consent.
(c) LIMITATION ON SALES OF COLLATERAL. Sell, transfer, lease,
exchange, alienate or dispose of any Collateral or any material
interest therein, including without limitation, any sale or pledge of
Receivables or Inventory, except in the ordinary course of business.
Any such sale, transfer, lease, exchange or disposition shall subject
the Borrower to the mandatory prepayment of principal set forth in
Section 2.8.
(d) OTHER GUARANTIES. Be or become liable with respect to any
guaranty (including without limitation any agreement, instrument or
arrangement in which the economic effect is substantially equivalent to
a guaranty).
(e) INTENTIONALLY OMITTED.
(f) LOANS OR EXTENSIONS OF CREDIT. Directly or indirectly
loan, invest in, or extend credit to any Person, including any officer,
director or shareholder of Borrower.
(g) ISSUANCE OF SECURITIES. Authorize or issue any shares of
capital stock other than common stock and preferred stock currently
outstanding, or issue shares of common stock or preferred stock or
convertible indebtedness, options, warrants, or other securities
evidencing or representing a right to purchase or receive common stock
or preferred stock.
(h) INTENTIONALLY OMITTED.
(i) TRANSACTIONS. Enter into any transaction, including,
without limitation, the purchase, sale or exchange of property, the
making of lease payments or the rendering of any service, with any
Person except in the ordinary course of, and pursuant to the reasonable
requirements of, business and upon fair and reasonable terms no less
favorable than would be obtained in a comparable arm's-length
transaction with any other Person.
(j) NEGATIVE PLEDGE OF ASSETS. Pledge, mortgage, hypothecate
or ▇▇▇▇▇ ▇ ▇▇▇▇ or security interest in, or permit or suffer the
creation or existence of any pledge, mortgage, hypothecation, lien or
security interest in or encumbrance on, any of its Inventory or
Receivables, other than as permitted by Section 9.2(a).
(k) MERGER, CONSOLIDATION, LIQUIDATION AND ACQUISITION. Merge
or consolidate its business with any other Person, liquidate its
business or acquire any assets or capital stock of another Person.
(l) SALES OR TRANSFER OF ASSETS. Sell, transfer or otherwise
dispose of its assets (except that Borrower may sell Inventory in the
ordinary course of business and may sell or dispose of individual items
of furniture, fixture and equipment in the ordinary course of
business).
(m) CHANGE IN ACCOUNTING METHODS. Change its method of
accounting including, without limitation, its method of depreciation
and accounting for Receivables, except as required by GAAP or by the
pronouncements of the Financial Accounting Standards Board and promptly
reported to Lender.
(n) CHANGE OF CONTROL. Permit any change in the ownership or
control of Borrower, or sell, transfer or convey any shares or other
interest in Borrower to individuals other than to Affiliates, without
prior Lender consent.
(o) CHANGE OF MANAGEMENT. Permit any change in the management
position of ▇. ▇. ▇▇▇▇▇ without the prior written consent of Lender,
which consent shall not be unreasonably withheld.
(p) TAX CONSOLIDATION. Except as routinely filed prior to the
Closing Date, file any consolidated income tax return with any Person
or Persons.
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 15
(q) OTHER AGREEMENTS. Enter into any material agreement or
arrangement that would be violated or breached by the performance of
its obligations hereunder or under any of the Loan Documents.
(r) NO AMENDMENTS. Amend its certificate of limited
partnership or limited partnership agreement without the prior written
consent of Lender, which will not be unreasonably withheld if such
amendment does not materially and adversely affect such party's ability
to perform its duties and obligations hereunder or under any of the
Loan Documents.
(s) THIRD PARTY COMPENSATION. Permit the payment of any
Compensation to any officer, director, shareholder or Affiliate of
Borrower in excess of the fair market value of such service.
Section 9.3. SPECIAL FINANCIAL REQUIREMENTS. Borrower warrants,
covenants and agrees that until the full and final payment of the Indebtedness
and the termination of this Agreement, Borrower will not do the following
without the prior written consent of Lender:
(a) MINIMUM OWNER'S EQUITY. Permit Owner's Equity of the
Consolidated Group to be less than $50,000,000.00 at any time during
the term of this Agreement.
(b) MINIMUM LIQUID ASSETS. Permit the Liquid Assets of the
Consolidated Group to be less than $10,000,000.00 at any time during
the term of this Agreement.
ARTICLE 10.
SECURITY AGREEMENT
Section 10.1. GRANT OF SECURITY INTEREST. As collateral security for
the payment and performance of the Indebtedness and any and all other
liabilities of Borrower to Lender, direct or contingent, of any nature
whatsoever, including both purchase money and non-purchase money transactions
(and specifically including the Revolving Loan), Borrower hereby grants to
Lender a continuing security interest in all of the following personal property
of Borrower (collectively, the "Collateral"):
(a) all of the following property of Borrower, wherever located and
whether such property is now owned or existing or is owned, acquired,
or arises hereafter, including, without limitation, acquisition by
contract or by operation of law (all terms used in herein which are
defined in the Uniform Commercial Code shall have the meanings given to
such terms in the Uniform Commercial Code):
(i) all accounts receivable or other receivables of Borrower,
being all of Borrower's right to payment for goods sold,
leased or rented or for services rendered by Borrower; and all
installment sales contracts and other contract rights,
instruments, chattel paper, documents and general intangibles
of Borrower representing or pertaining to any account
receivable of Borrower; and (ii) all finished-goods inventory
of Borrower, being all finished goods inventory, new or used,
of whatever kind or nature, and all returns, repossessions,
exchanges, substitutions and replacements thereto or thereof;
and
(b) all additions, substitutions, replacements, accessions and products
of the property described in subparagraph (a); and
(c) all proceeds (whether in the form of cash, instruments, chattel
paper, general intangibles, accounts or otherwise) of the property
described in subparagraphs (a) and (b); and
(d) all files, records (including electronic data) and books of
Borrower relating to the property described in subparagraphs (a), (b)
and (c).
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 16
Section 10.2. POWER OF ATTORNEY. Borrower hereby designates and
appoints Lender and each of its designees or agents as attorney-in-fact of
Borrower, irrevocably and with power of substitution, with authority to take any
or all of the following actions UPON THE OCCURRENCE AND DURING THE CONTINUANCE
OF AN EVENT OF DEFAULT: (i) with respect to the Collateral, demand, collect,
receive, settle, compromise, adjust and give discharges and releases, all as
Lender may determine; (ii) with respect to the Collateral, commence and
prosecute any actions in any court for the purposes of collecting any Receivable
and enforcing any other rights in respect thereof; (iii) with respect to the
Collateral, defend, settle or compromise any action brought and, in connection
therewith, give such discharge or release as Lender may deem appropriate; (iv)
with respect to the Collateral, receive, open and dispose of mail addressed to
Borrower and endorse checks, notes, drafts, acceptances, money orders, bills of
lading, warehouse receipts or other instruments or documents evidencing payment,
shipment or storage of the goods giving rise to Receivables, or securing, or
relating to the Collateral; (v) with respect to the Collateral, sell, assign,
transfer, make any agreement in respect of, or otherwise deal with or exercise
rights in respect of, any Collateral or the goods or services which have given
rise thereto, as fully and completely as though Lender were the absolute owner
thereof for all purposes; (vi) adjust and settle claims under any insurance
policy related to any Collateral; and (vii) enter on the premises of Borrower in
order to exercise any of its rights and remedies hereunder.
Section 10.3. NO DUTY OF LENDER. Lender shall have no duty as to the
collection or protection of the Collateral nor as to the preservation of any
rights pertaining thereto. Borrower hereby releases Lender from any claims,
causes of action and demands at any time arising out of the Collateral and its
use and/or any actions taken by Lender with respect thereto, and Borrower hereby
agrees to indemnify Lender and to hold Lender harmless from any and all such
claims, causes of action and demands (other than the negligence or criminal acts
of Lender).
Section 10.4. COLLECTION OF RECEIVABLES. Prior to the Lender exercising
its right to collect the Receivables pursuant to this Section 10.4, Borrower
shall collect with diligence its respective Receivables. After the occurrence
of, and during the continuation of an Event of Default, Borrower shall, at the
request of Lender, notify the Account Debtors of the Liens provided for in this
Agreement and direct such Account Debtors to pay Receivables directly to Lender.
Lender itself may, at any time after the occurrence of and during the
continuation of an Event of Default, so notify the Account Debtors.
Section 10.5. PERFECTION AND PROTECTION OF LIENS. Borrower will, from
time to time, deliver to Lender any financing statements, continuation
statements, extension agreements and other documents, properly completed and
executed (and acknowledged when required) by Borrower in form and substance
satisfactory to Lender, for the purpose of perfecting, confirming, or protecting
Lender's Liens and other rights in the Collateral.
ARTICLE 11.
EVENTS OF DEFAULT AND REMEDIES
Section 11.1. NATURE OF EVENT. An Event of Default shall exist if any
of the following occurs and is continuing:
(a) PRINCIPAL AND INTEREST. Borrower fails to make any payment
or prepayment of principal and/or interest on the Revolving Note when
due and payable, and such failure remains uncured for five (5) Business
Days following written notice thereof;
(b) LOAN DOCUMENTS. Borrower or any Guarantor (each an
"Obligated Person") fails to perform or to observe any covenant or
agreement contained herein or in any of the Loan Documents, other than
the payment of principal and/or interest referred to in Section 11.1(a)
above, and such failure remains unremedied ten (10) Business Days after
written notice thereof being given by Lender to Borrower;
(c) OTHER AGREEMENTS. Any Obligated Person fails to duly
observe, perform or comply with any agreement with any Person or any
term or condition of any instrument and such failure is not remedied
within ten (10) Business Days after written notice thereof given by
Lender to Borrower;
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 17
(d) REPRESENTATIONS AND WARRANTIES. Any representation or
warranty previously, presently or hereafter made by or on behalf of any
Obligated Person in connection with any Loan Document is materially
incorrect, false or misleading in any respect when made or deemed to be
made;
(e) RECEIVERSHIP. A receiver, custodian, liquidator or trustee
of any Obligated Person, or any of its assets is applied for by court
order; an order for relief under any bankruptcy or insolvency Laws is
sought after the filing of a petition by or against any Obligated
Person; any of its assets are subject to an action seeking to replevy,
sequester, garnish, attach or levy against such; or a petition to
reorganize or rehabilitate any Obligated Person under any bankruptcy,
reorganization or insolvency Laws is filed against any Obligated
Person;
(f) REORGANIZATION. Any Obligated Person requests
reorganization, arrangement, composition, readjustment, dissolution,
rehabilitation, liquidation or similar relief under any provision of
any present or future Law or consents to the filing of any petition
against it under such Law;
(g) ASSIGNMENT FOR BENEFIT OF CREDITORS. Any Obligated Person
(i) makes a general assignment for the benefit of its creditors, (ii)
admits in writing its inability to pay its debts generally as they
become due, (iii) generally fails to pay its debts as they become due,
(iv) consents to the appointment of a receiver, trustee or liquidator
of all or any part of its assets, or (v) otherwise commits any similar
act;
(h) JUDGMENTS. Any judgment, writ or warrant of attachment or
any similar process is entered or filed against any Obligated Person or
any of its assets and remains unpaid, unvacated, unbonded or unstayed
for thirty (30) days or for at least ten (10) days prior to the date on
which such assets may be lawfully sold to satisfy such judgment, writ
or warrant;
(i) ENFORCEABILITY OF LOAN DOCUMENTS. Any of the Loan
Documents shall, in whole or in part, (i) cease to be legal, valid,
binding agreements enforceable against any Person executing the same,
(ii) in any way be terminated or become or be declared ineffective or
inoperative by any Tribunal, or (iii) in any way cease to give or
provide the respective Liens, rights, titles, interest, remedies,
powers or privileges intended to be created thereby; or
(j) MATTERS AFFECTING GUARANTORS. The death of any Guarantor
who is a natural person or the merger or dissolution of any corporate
Guarantor.
Notwithstanding any other provision relating to notices and
opportunities to remedy defaults contained in this Agreement, if a Potential
Event of Default exists because of a willful breach by Borrower of any
representation, warranty or covenant contained in this Agreement or in any of
the other Loan Documents and if such Potential Event of Default would adversely
affect the rights of Lender in relation to other creditors of Borrower prior to
expiration of the cure period for such Potential Event of Default, then Lender
may exercise the remedies set forth in Section 11.2 without giving such notice
and opportunity to remedy such event or condition.
Section 11.2. DEFAULT REMEDIES. Upon and after an Event of Default,
Lender shall have and may exercise the following rights and remedies, which
individual remedies shall not be exclusive and which individual remedies shall
be cumulative and in addition to each and every other remedy set forth herein
and in the Loan Documents and the other agreements and documents executed in
connection with the transactions contemplated hereby:
(a) The right to (i) accelerate the entire outstanding
principal balance together with all accrued but unpaid interest on the
Indebtedness (specifically including the Revolving Note and all other
sums due and payable by Borrower to Lender without demand, presentment,
notice of dishonor, notice of intent to demand or accelerate payment,
diligence in collection, grace, notice and protest or legal process of
any kind, all of which Borrower hereby expressly waives, (ii) terminate
its commitment to lend hereunder, and (iii) immediately, without any
period of grace, enforce payment of the Indebtedness by exercising any
and all of the rights granted herein.
(b) Lender may, at its option, without notice or demand, take
immediate possession of the Collateral, and for that purpose Lender
may, so far as Borrower can give authority therefor, enter upon
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 18
any premises on which any of the Collateral is situated and remove
the same therefrom or remain on such premises and in possession of
such Collateral for purposes of conducting a sale or enforcing the
rights of Lender under this Agreement. Borrower will, upon demand,
make the Collateral available to Lender at a place and time
designated by Lender which is reasonably convenient to Lender and
Borrower. Lender may collect and receive all income and proceeds in
respect to the Collateral and may apply the Collateral and any and
all income and proceeds in respect of the Collateral to the payment
of all obligations of Borrower to Lender.
(c) Lender may sell, lease or otherwise dispose of the
Collateral (or any portion thereof) at a public or private sale or
sales, in lots or in bulk, for cash or on credit, with or without
having the Collateral at the place of sale, and upon terms and in such
manner as Lender may determine in accordance with applicable Law, and
Lender may purchase any Collateral at any such sale to the extent
permitted by applicable law. The requirement of reasonable notice to
Borrower of the time and place of any public sale of the Collateral or
of the time after which any private sale either by Lender or at its
option, through a broker, or any other intended disposition thereof is
to be made, shall be met if such notice is mailed, postage prepaid, to
Borrower at the address of Borrower designated herein at least ten (10)
days before the date of any public sale or at least ten (10) days
before the time after which any private sale or other disposition is to
be made. Lender shall not be obligated to make any sale of the
Collateral regardless of notice of sale having been given. Lender may
adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
Upon any such sale or sales the Collateral so purchased shall be held
by the purchaser absolutely free from any claims or rights of
whatsoever kind or nature, including any equity of redemption and any
similar rights, all such equity of redemption and any similar rights
being hereby expressly waived and released by Borrower. In the event
any consent, approval or authorization of any governmental agency will
be necessary to effectuate any such sale or sales, Borrower shall
execute all such applications or other instruments as may be required.
(d) Prior to any disposition of Collateral pursuant to this
Agreement, Lender may, at its option, cause any of the Collateral to be
repaired or reconditioned in such manner and to such extent as to make
it saleable, and any reasonable sums expended therefor by Lender shall
be repaid by Borrower and become part of the Indebtedness.
(e) In addition to the remedies provided for herein or
otherwise available to Lender, Lender is hereby granted a license or
other right to use, without charge, Borrower's labels, patents,
copyrights, rights of use in any name, trade secrets, trade styles,
trade names, trademarks and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in advertising for
sale and selling any Collateral, and Borrower's rights under all
licenses and franchise agreements shall inure to Lender's benefit.
(f) The right to contact Account Debtors of Borrower and
demand that payment on any Receivables be made directly to Lender.
(g) The right to appoint or seek appointment of a receiver,
custodian or trustee of each Borrower or any of its assets pursuant to
court order.
(h) Any and all rights and remedies afforded by the Laws of
any applicable jurisdiction, the Loan Documents or as otherwise
afforded by any Laws or equity including the right of a secured party
under the Uniform Commercial Code in the applicable jurisdiction.
(i) Any rights of setoff that Lender may have under applicable
Law against each and every account and other property, Collateral or
other asset of Borrower in the possession or under the control of
Lender.
(j) Require that all Receivables, instruments, documents and
other agreements entered into by Borrower and covering any of the use
of proceeds of Collateral shall contain (by way of stamp or other means
satisfactory to Lender) the following language: "COLLATERALLY ASSIGNED
TO LEGACY BANK OF TEXAS".
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 19
Section 11.3. APPLICATION OF PROCEEDS. All amounts realized by Lender
with respect to the Indebtedness, including amounts realized with respect to the
sale of the Collateral under or by virtue of the Loan Documents, including any
sums which may be held by Lender, or the proceeds of any thereof, shall be
applied (i) first, to the payment of the costs and expenses owing under any of
the Loan Documents, including reasonable compensation to Lender's agents and
attorneys, of all expenses, liabilities and advances made or furnished or
incurred by or on behalf of Lender under this Agreement or any Loan Document or
any amendment to, restructuring or "workout" of same; (ii) second, to the
payment of any other sums due to Lender, or any successors or assigns thereof,
pursuant to the terms of any Loan Document, except for principal of and accrued
and unpaid interest on the Revolving Note; (iii) third, to the payment of
accrued and unpaid interest on the outstanding principal of the Revolving Note,
in such order and manner as Lender may determine, in its sole discretion; (iv)
fourth, to the payment of the outstanding principal of the Revolving Note in
such order and manner as Lender may determine, in its sole discretion; and (v)
fifth, the surplus, if any, to Borrower, or to whomever shall be lawfully
entitled to receive the same, as a court of competent jurisdiction may direct.
If any deficiency shall arise, Borrower shall remain liable to Lender.
Section 11.4. PERFORMANCE BY LENDER. Should any covenant, duty or
agreement of Borrower fail to be performed in accordance with the terms of the
Loan Documents, Lender may, at its option, perform or attempt to perform or
enforce such covenant, duty or agreement on behalf of Borrower. All amounts
expended in connection therewith, together with interest from the date incurred,
shall become a part of the Indebtedness. Notwithstanding the foregoing, it is
expressly understood that Lender does not assume any liability or responsibility
for the performance of any duties of Borrower hereunder or under any of the
other Loan Documents or other control over the management and affairs of
Borrower.
Section 11.5. CUMULATIVE RIGHTS. All rights and remedies available to
Lender hereunder and under the other Loan Documents shall be cumulative of and
in addition to all other rights and remedies granted to Lender at Law or in
equity, whether or not the Indebtedness (or any portion thereof) is due and
payable and whether or not Lender has instituted any suit for collection,
foreclosure or any other action in connection with the Loan Documents.
Section 11.6. GENERAL INDEMNITY. Borrower promises to indemnify Lender,
upon demand, from and against any and all liabilities, obligations, claims,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against Lender or any of its directors, officers or employees or
agents (including, accountants, attorneys and other professionals hired by
Lender) (except where caused by the negligence or criminal act of Lender)
growing out of or resulting from the Loan Documents and the transactions and
events at any time associated therewith (including without limitation the
enforcement of the Loan Documents and the defense of Lender's actions and
inactions in connection with the Revolving Loan).
Section 11.7. BORROWER'S REMEDIES. No action, suit or proceeding may be
initiated or commenced by Borrower against Lender under the terms of this
Agreement or by reason of any conduct or omission in any way related to this
Agreement unless Lender receives written notice from Borrower specifically
setting forth the claim of Borrower and Lender has been provided not less than
thirty (30) days to satisfy the demands of Borrower or specified in such notice.
Moreover, in any event, Lender shall never be liable to Borrower for
consequential or exemplary damages, whatever the nature of the alleged breach by
the Lender of the obligations of Lender hereunder.
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 20
ARTICLE 12.
MISCELLANEOUS
Section 12.1. WAIVER AND AMENDMENT. No failure or delay by Lender in
exercising any right, power or remedy under any of the Loan Documents shall
operate as a waiver thereof or of any other right, power or remedy, nor shall
any single or partial exercise by Lender of any such right, power or remedy
preclude any other or further exercise thereof or of any other right, power or
remedy. No waiver of any provision of any Loan Document and no consent to any
departure therefrom shall ever be effective unless it is in writing and signed
by Lender, and then such waiver or consent shall be effective only in the
specific instances and for the purposes for which given and to the extent
specified in such writing. No notice to or demand on Borrower shall entitle
Borrower to any other or further notice or demand in similar or other
circumstances. No modification, amendment or supplement to this Agreement or the
other Loan Documents shall be valid or effective unless the same is in writing
and signed by the party against whom it is sought to be enforced. The acceptance
by Lender at any time and from time to time of a partial payment of the
Indebtedness shall not be deemed to be a waiver of any Event of Default then
existing. No waiver by Lender of any Event of Default shall be deemed to be a
waiver of any other then existing or subsequent Event of Default.
Section 12.2 SURVIVAL OF AGREEMENTS. All of the various
representations, warranties, covenants and agreements in the Loan Documents
shall survive the execution and delivery of this Agreement and the other Loan
Documents and the performance hereof and thereof, including without limitation
the making or granting of the security interests and the delivery of the
Revolving Note and the other Loan Documents, and shall further survive until all
of the Indebtedness is paid in full to Lender and all of Lender's obligations to
Borrower are terminated.
Section 12.3. RELIEF IN BANKRUPTCY. Borrower hereby agrees that, in
consideration of the recitals and mutual covenants contained herein, and for
other good and valuable consideration, in the event Borrower (or any of them)
shall (i) file with any bankruptcy court of competent jurisdiction or be the
subject of any petition under Title 11 of the U.S. Code, as amended, (ii) be the
subject of any order for relief issued under such Title 11 of the U.S. Code, as
amended, (iii) file or be the subject of any petition seeking any reorganization
rearrangement, composition, adjustment, liquidation, dissolution, or similar
relief under any present or future state act or law relating to bankruptcy,
insolvency or other relief for debtors, (iv) have sought or consented to or
acquiesced to any appointment of any trustee, receiver, conservator, or
liquidator, (v) be the subject of any order, judgment or decree entered by any
court of competent jurisdiction approving a petition filed against such part for
any reorganization, rearrangement, composition, adjustment, liquidation,
dissolution, or similar relief under any present or future federal or state act
of law relating to bankruptcy, insolvency or relief for debtors, LENDER SHALL
THEREUPON BE ENTITLED TO RELIEF FROM THE AUTOMATIC STAY IMPOSED BY SECTION 362
OF TITLE 11 OF THE U.S. CODE, AS AMENDED, or otherwise, on or against the
exercise of the rights and remedies otherwise available to Lender as provided
herein, in the Loan Documents, any other document or instrument executed in
connection herewith or therewith, and as otherwise provided by applicable state
and federal law.
Section 12.4. NO OBLIGATION BEYOND MATURITY. Borrower agrees and
acknowledges that upon the Maturity Date, Lender shall have no obligation to
renew, extend, modify or rearrange the Revolving Note, and shall have the right
to require all amounts due and owing under the Revolving Loan to be paid in full
upon the maturity thereof.
Section 12.5. NOTICES. Except as otherwise provided herein, all
notices, requests, consents, demands and other communications required or
permitted under any Loan Document shall be in writing and, unless otherwise
specifically provided in such Loan Document, shall be deemed sufficiently given
or furnished if delivered by personal delivery, by expedited delivery service
with proof of delivery, or by registered or certified United States mail, first
class postage prepaid, at the addresses specified below (unless changed by
similar notice in writing given by the particular Person whose address is to be
changed). Borrower hereby acknowledges that any notice or communication
delivered as herein provided shall be effective notice upon Borrower, and
Borrower hereby assumes the responsibility of coordinating the distribution of
such notice to Borrower. Any such notice or communication shall be deemed to
have been given either at the time of personal delivery or, in the case of
delivery service, as of the date of first attempted delivery at the address and
in the manner provided herein, or in the case of mail, as of the date deposited
in a regularly maintained depository of the United States Postal Service in the
continental United States properly addressed and with proper postage.
BORROWER'S ADDRESS:
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 21
▇▇▇▇▇ Golf, Ltd.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇. ▇▇▇▇▇, President
LENDER'S ADDRESS:
Legacy Bank of Texas
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Section 12.6. SUCCESSORS AND ASSIGNS. The Loan Documents shall be
binding and shall inure to the benefit of the parties thereto and their
respective successors and assigns; provided, however, that Borrower may not
assign or transfer any of its rights or delegate any of its duties or
obligations under any Loan Document without the prior written consent of Lender.
SECTION 12.7. GOVERNING LAW/VENUE. THE LOAN DOCUMENTS SHALL BE DEEMED
CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS OF THE STATE OF TEXAS, THE
LOCATION OF THE LENDER'S PRINCIPAL PLACE OF BUSINESS, AND SHALL BE CONSTRUED AND
ANY AND ALL CLAIMS, DEMANDS, OR ACTIONS IN ANY WAY RELATING THERETO OR INVOLVING
ANY DISPUTE BETWEEN ANY OF THE PARTIES TO THIS AGREEMENT, WHETHER ARISING IN
CONTRACT OR TORT, AT LAW, IN EQUITY OR STATUTORILY, SHALL BE ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF
THE UNITED STATES OF AMERICA. BORROWER HEREBY IRREVOCABLY SUBMITS ITSELF TO THE
NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF TEXAS
AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL
PROCEEDING RELATING TO THE LOAN DOCUMENTS OR THE INDEBTEDNESS BY ANY MEANS
ALLOWED UNDER TEXAS OR FEDERAL LAW. VENUE FOR ANY LEGAL PROCEEDING SHALL BE
COLLIN COUNTY, TEXAS.
Section 12.8. SEVERABILITY. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable, all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.
Section 12.9. COUNTERPARTS. This Agreement may be separately executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
Section 12.10. HEADINGS. The headings, captions, table of contents and
arrangements used in this Agreement or the other Loan Documents are, unless
specified otherwise, for convenience only and shall not be deemed to limit,
amplify or modify the terms of this Agreement or the other Loan Documents.
Section 12.11. NUMBER AND GENDER OF WORDS. Whenever the singular number
is used, the same shall include the plural where appropriate, and words of any
gender shall include each other gender where appropriate.
SECTION 12.12. LEGAL COUNSEL. BORROWER ACKNOWLEDGES THAT IT HAS HAD THE
OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL IN CONNECTION WITH
ALL MATTERS CONCERNING THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO THE
NEGOTIATION, ACCEPTANCE AND EXECUTION OF THE AGREEMENT; THAT EACH HAS RELIED
UPON OR HAD THE OPPORTUNITY TO RELY UPON THE ADVICE OF ITS INDEPENDENT LEGAL
COUNSEL IN AGREEING TO THE TERMS AND CONDITIONS HEREIN AND IN EXECUTING THIS
AGREEMENT; THAT EACH HAS READ, REVIEWED AND UNDERSTOOD THE LOAN DOCUMENTS AND
THAT THE OBLIGATIONS THEREUNDER REPRESENT VALID AND BINDING OBLIGATIONS OF THE
BORROWER; AND THAT EACH HAS FREELY AND VOLUNTARILY ENTERED INTO THIS AGREEMENT
AS THE PRODUCT OF ARM'S LENGTH NEGOTIATIONS.
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 22
SECTION 12.13. ENTIRETY; WRITTEN LOAN AGREEMENT. THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. THE EXECUTION AND DELIVERY OF THIS AGREEMENT IS NOT INTENDED TO BE AND
IS NOT A NOVATION OR RELEASE OF THE EXISTING INDEBTEDNESS OUTSTANDING FROM
BORROWER TO LENDER NOR A NOVATION OR RELEASE OF THE COLLATERAL SECURING SUCH
INDEBTEDNESS OR ANY GUARANTY SUPPORTING SUCH INDEBTEDNESS.
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
BORROWER: ▇▇▇▇▇ GOLF, LTD.,
a Texas limited partnership
By: ▇▇▇▇▇ GOLF GP CORP.,
a Delaware corporation
its general partner
By: /s/ ▇. ▇. ▇▇▇▇▇
--------------------------
▇. ▇. ▇▇▇▇▇, President
LENDER: LEGACY BANK OF TEXAS
By:
Name: /s/ ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
THE STATE OF TEXAS )
)
COUNTY OF ____________ )
This instrument was acknowledged before me on June 30, 2000, by ▇.
▇. ▇▇▇▇▇, President of ▇▇▇▇▇ Golf GP Corp., a Delaware corporation, General
Partner of ▇▇▇▇▇ Golf, Ltd., a Texas limited partnership, on behalf of said
partnership.
Notary Public in and for the State of Texas
My Commission Expires:
3-6-01 /s/ ▇▇▇ ▇▇▇▇
--------------------
THE STATE OF TEXAS )
)
COUNTY OF ____________ )
This instrument was acknowledged before me on June 30, 2000, by
▇▇▇▇▇ ▇▇▇▇▇, Vice President of Legacy Bank of Texas, on behalf of said
association.
Notary Public in and for the State of Texas
My Commission Expires:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------
REVOLVING LOAN AND SECURITY AGREEMENT - PAGE 23
