EXHIBIT 10.19
LOAN AND SECURITY AGREEMENT
BETWEEN
COMPASS BANK
as
Lender
and
▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇, INC.
as
Borrower
September _____, 1997
TABLE OF CONTENTS
SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Borrower's Representations and Warranties . . . . . . . . . 5
SECTION 3. Bank's Agreement to Make Loan . . . . . . . . . . . . . . . 7
SECTION 4. Inspection of Records; Further Assurance. . . . . . . . . . 8
SECTION 5. Security Interest of Bank in Collateral . . . . . . . . . . 9
SECTION 6. Collection of Accounts. . . . . . . . . . . . . . . . . . . 10
SECTION 7. Affirmative Covenants . . . . . . . . . . . . . . . . . . . 11
SECTION 8. Negative Covenants. . . . . . . . . . . . . . . . . . . . . 13
SECTION 9. Events of Default; Acceleration . . . . . . . . . . . . . . 15
SECTION 10. Power to Sell or Collect Collateral; Remedies Cumulative. . 17
SECTION 11. Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 12. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 13. Expenses, Proceeds of Collateral. . . . . . . . . . . . . . 19
SECTION 14. Duration; Extension . . . . . . . . . . . . . . . . . . . . 19
SECTION 15. General . . . . . . . . . . . . . . . . . . . . . . . . . . 19
EXHIBITS
--------
Exhibit A Offices and Other Locations of Borrower
Exhibit B Actions, Suits & Proceedings
Exhibit C Borrowing Base Certificate and Compliance Certificate
Exhibit D Schedule of Certain Indebtedness and Leases
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is executed this _____ day
of September, 1997, by and among ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇, INC., a Texas corporation
("Borrower") and COMPASS BANK, a Texas state chartered banking institution
("Bank"). Borrower has applied to Bank for a revolving line of credit not to
exceed an aggregate principal amount at any one time outstanding in the sum of
Three Million and No/100 Dollars ($3,000,000.00); Borrower has agreed that each
such extension of credit is to be secured by a security interest in all of the
Collateral (as hereinafter defined) now owned or hereafter acquired by Borrower
on the terms hereinafter set forth.
Bank is willing to extend credit under the Revolving Line to Borrower up to
aggregate amounts not in excess of the sums set forth above upon the security of
such Collateral on the terms and subject to the conditions hereinafter set
forth.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the premises, the credit to be extended
hereunder, the mutual agreements of the parties as set forth herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound hereby, agree as
follows:
SECTION 1. DEFINITIONS.
1.1 "ACCOUNT" and "ACCOUNT RECEIVABLE" shall include accounts, accounts
receivable, notes, notes receivable, rental agreements and other rights to
collect rent, contract rights, drafts, acceptances, instruments, chattel paper,
general intangibles, and other forms of obligation or rights to payment and
receivables, whether or not yet earned by performance, including state and
federal tax refunds.
1.2 "ACCOUNT DEBTOR" shall mean the party who is obligated oh or under
any Account or contract right.
1.3 "BORROWER'S LOAN ACCOUNT" shall mean the account on the books of
Bank with respect to Borrower in which Bank will separately record advances
under the Revolving Line and other advances made by Bank to Borrower pursuant to
this Agreement, payments received thereon and other appropriate debits and
credits as provided by this Agreement.
1.4 "COLLATERAL" shall mean any and all personal, real or intangible
property of Borrower in which Bank acquired, now has, or by this Agreement or
any other agreement acquires, or hereafter acquires a security interest or other
rights or interests as security for Borrower's Liabilities, including, without
limitation, Borrower's obligations under this Agreement and the Note.
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1.5 "CURRENT RATIO" shall be defined for Borrower as the ratio of (a)
current assets to (b) current liabilities, calculated in accordance with
generally accepted accounting principles consistently applied as of the date
hereof.
1.6 "DEBT TO TANGIBLE NET WORTH RATIO" shall be defined for Borrower as
the ratio of (a) Borrower's total debt and liabilities to (b) Borrower's
Tangible Net Worth, calculated in accordance with generally accepted accounting
principles consistently applied as of the date hereof
1.7 An "ELIGIBLE ACCOUNT" shall mean an Account which meets each of the
following requirements:
(a) it arises from the sale of goods or from services rendered, such
goods have been shipped or delivered to the Account Debtor under
such Account and such services have been fully performed and have
been accepted by the Account Debtor, and Borrower's full right to
payment for all sums due from such Account Debtor with respect to
such Account shall have been earned and then be due and payable;
(b) it is a valid and legally enforceable obligation of the Account
Debtor thereunder according to its express terms, and is not
subject to any offset, counterclaim, crossclaim, or other defense
on the part of such Account Debtor denying liability thereunder in
whole or in part;
(c) it is not subject to any mortgage, lien, security interest, or
similar adverse rights or interests whatsoever other than the
security interest in favor of Bank hereunder;
(d) it is evidenced by an invoice, dated not later than the date of
shipment (in the case of goods sold or leased) or the date of
performance (in the case of services rendered) and having payment
terms acceptable to Bank which required payment no later than
thirty (30) days following the invoice date, rendered to such
Account Debtor, and is not evidenced by an instrument or chattel
paper;
(e) it is not owing by an Account Debtor whose obligations Bank, acting
in its sole discretion, shall have notified Borrower is not deemed
to constitute an Eligible Account;
(f) it is not due from an affiliated corporation or entity, subsidiary
corporation or entity, parent corporation or entity, stockholder,
officer, or director or employee of Borrower or any such affiliate,
subsidiary, or parent corporation or entity; or any individual or
entity affiliated or related to any of the foregoing, whether by
blood, marriage, or otherwise;
(g) it does not constitute progress ▇▇▇▇▇▇▇▇, retainages, or deferred
payments under a contract not fully performed;
(h) it does not constitute, in whole or in part, interest or finance
charges on outstanding balances;
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(i) it is an Account with respect to which no return, repossession,
rejection, cancellation, or repudiation shall have occurred or have
been threatened;
(j) it is an Account with respect to which Borrower continues to be in
full conformity with the representations, warranties, and covenants
of Borrower made with respect thereto;
(k) it is not subject to any sales terms, trial terms, sales-or-return
terms, consignment terms, guaranteed sales performance or
warranties or representations relating to minimum sales volume,
C.O.D. terms, cash terms, or similar terms or conditions;
(l) it is not owed by an Account Debtor that is not an individual
residing in the United States or a corporation or partnership
organized and validly existing under the laws of a state within the
United States, unless payment is secured by a letter of credit
acceptable to Bank;
(m) it is not an Account subject, in whole or in part, to any "▇▇▇▇ and
hold", pre-billing or other similar arrangement pursuant to which
the invoice is delivered prior to the actual delivery of the sold
or leased goods or the performance of the services;
(n) it is not an Account with respect to which ninety (90) days or more
shall have passed since the invoice dates;
(o) it is not owed by any Account Debtor who or which has at any time
account balances with Borrower equaling or exceeding ten percent
(10%) of its total accounts receivable at such time unpaid after
ninety (90) days from invoice date;
(p) it is not an amount in excess of twenty-five percent (25%) of the
total of Borrower's Accounts, owed by an Account Debtor whose
account balance exceeds twenty-five percent (25%) of the total of
Borrower's Accounts; and
(q) it is not an Account billed with respect to software maintenance.
1.8 "FIXED CHARGE COVERAGE RATIO" shall be defined for Borrower as
earnings before taxes plus interest and lease expense divided by interest plus
lease expense.
1.9 "INDEX RATE" shall mean at any time the variable rate of interest
published in THE WALL STREET JOURNAL'S "Money Rates" table as the prime rate.
If multiple prime rates are quoted in the table, then the highest prime rate
will be Bank's Index Rate. In the event the prime rate is no longer published
in the "Money Rates" table, then Bank or any subsequent holder will choose a
substitute Index Rate which is based upon comparable information. The term
Index Rate is not intended nor shall it be implied to mean the lowest rate of
interest available to the most creditworthy borrower of Bank.
1.10 "INSOLVENCY" of Borrower or any other person or entity shall mean
that there shall have occurred with respect to that person or entity one or more
of the following events: death, dissolution, termination of existence,
liquidation, insolvency, business failure, appointment of a
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receiver, liquidator, fiscal agent, or trustee of any part of the property
of, assignment for the benefit of creditors by or against such person or
entity, or institution of any action or proceeding, with respect to such
person or entity under or pursuant to any insolvency laws relating to the
relief of debtors by or against any such person or entity, institution of
proceedings in bankruptcy or with respect to the readjustment of
indebtedness, reorganization, composition, or extension by or against such
person or entity (including, without limitation, under or pursuant to the
United States Bankruptcy Code, as amended, or under any similar law at any
time enacted).
1.11 "INVENTORY" shall mean all of Borrower's inventory (as defined in
the Uniform Commercial Code as enacted in the State of Texas, or in any other
applicable jurisdiction), wherever located, and other personal property now
owned or hereafter acquired by Borrower (or other entities, as applicable) which
are held for sale or lease, or are furnished or to be furnished under a contract
of service or are raw materials, work in process, or materials or supplies used
or to be used, or consumed or to be consumed, in Borrower's business, and all
shipping and packaging materials relating to any of the foregoing.
1.12 "LIABILITIES" shall mean any and all liabilities, obligations, and
indebtedness of Borrower to Bank of every kind and description, direct or
indirect, absolute or contingent, matured or unmatured, primary or secondary,
whether as principal obligor or guarantor, liquidated or unliquidated, due or to
become due, now existing or hereafter arising, and whether arising directly or
acquired from others, regardless of how such Liabilities arise or by what
agreement or instrument they may be evidenced or whether the foregoing
Liabilities include obligations to perform acts and refrain from taking actions
as well as obligations to pay money. Without limiting the foregoing,
Liabilities specifically include Borrower's obligations evidenced by the Note.
1.13 "NOTE" shall mean the Revolving Promissory Note signed this date by
Borrower in the principal amount of $3,000,000.00.
1.14 "PROCEEDS" shall mean all forms of payment received by or due to
Borrower from the collection of Accounts or sale, lease, exchange, collection,
or other disposition of Inventory or other property constituting Collateral
hereunder and any and all claims against any third party for loss or damage to
any Collateral, including insurance claims, and further, without limiting the
Generality of the foregoing, Proceeds shall include all Accounts, checks, cash,
money orders, drafts, chattel paper, instruments, notes, or other documents
evidencing payment obligations to Borrower for sale or exchange of Collateral.
1.15 "REVOLVING LINE" shall mean the revolving line of credit issued by
Bank in favor of Borrower evidenced by the Note.
1.16 "TANGIBLE NET WORTH" shall be defined for Borrower as:
(a) Borrower's Net Worth LESS
(b) any and all loans and other advances to affiliates, subsidiaries,
parent, employees, officers, stockholders, directors, or other
related entities', notes, notes receivable, accounts, accounts
receivable, inter-company receivables, and other amounts owing
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from affiliates, subsidiaries, parent, employees, officers,
stockholders, directors, or other related entities; treasury stock,
good will, trademarks, trade names, patents, and deferred charges;
covenants not to compete and any and all other intangible assets;
calculated in accordance with generally accepted accounting principles
consistently applied as of the date hereof
1.17 Any terms used to describe Bank's security interest hereunder not
specifically defined herein shall have the meaning and definition given those
terms under the Texas Business and Commerce Code as in effect from time to time.
SECTION 2. BORROWER'S REPRESENTATIONS AND WARRANTIES.
To induce Bank to enter into this Agreement, Borrower represents, warrants
and covenants as follows:
2.1 Borrower (a) is a duly organized corporation, which is validly
existing and in good standing under the laws of the State of Texas, (b) is duly
qualified and in good standing (and will remain so qualified and in good
standing) in every state in which it is doing business or in which the failure
so to qualify would or could have an adverse effect on its business or
properties or Bank, (c) has no subsidiaries, and (d) has all necessary corporate
power and authority to own its assets and conduct its business as now conducted
or presently proposed to be conducted.
2.2 The execution, delivery, and performance hereof and of all other
agreements or instruments contemplated hereby are within Borrower's corporate
powers, have been duly authorized, and are not in contravention of the law or
the terms of Borrower's articles of incorporation, bylaws, or other
incorporation papers. The execution, delivery, and performance hereof and of
all other agreements or instruments contemplated hereby are not in contravention
of any indenture, agreement, or undertaking to which Borrower is a party or by
which it or any of its properties is bound. This Agreement, the Note and all
other agreements and instruments executed by Borrower in connection herewith
have been validly executed and delivered by Borrower and constitute legal, valid
and binding obligations of Borrower enforceable against Borrower in accordance
with their respective terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws at the time in effect
affecting the rights of creditors generally.
2.3 Except for the security interest granted hereby or by any other
document executed in favor of Bank, Borrower is and, as to its Accounts and
Collateral arising or to be acquired after the date hereof, shall be the sole
and exclusive owner of such Accounts and each and every other item of Collateral
free from any lien, security interest, or encumbrance, and Borrower shall defend
its Accounts and each and every other item of Collateral and all Proceeds and
products thereof against all claims and demands of all persons at any time
claiming the same or any interest therein adverse to Bank.
2.4 At the time any Account becomes subject to a security interest in
favor of Bank, said Account shall be a good and valid Account representing an
undisputed, bona fide
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indebtedness incurred by the Account Debtor named therein, for merchandise
held subject to delivery instructions or theretofore shipped or delivered
pursuant to a contract of sale, or for services theretofore performed by
Borrower with or for said Account Debtor; there shall be no set-offs,
counterclaims, or disputes against any such Account except as indicated in
some written list, statement, or invoice furnished to Bank with reference
thereto; and Borrower shall be the lawful owner of all its Accounts and shall
have good right to subject the same to a security interest in favor of Bank.
No such Account shall be sold, assigned, or transferred to any person other
than Bank or in any way encumbered except to Bank, and Borrower shall defend
the same against the lawful claims and demands of all persons. If any
Account shall be in violation of any one or more of the warranties expressed
in this section, it shall not be deemed an Eligible Account for purposes of
this Agreement.
2.5 At the time Borrower pledges, sells, assigns, or transfers to Bank
any instrument, document of title, security, chattel paper, or other property,
or any interest therein, Borrower shall be the lawful owner thereof and shall
have good right to pledge, sell, assign, or transfer the same; none of such
property shall have been pledged, sold, assigned, or transferred to any person
other than Bank or in any way encumbered, and Borrower shall defend the same
against the lawful claims and demands of all persons.
2.6 Set forth on EXHIBIT A is a list of each location at which tangible
Collateral is kept, whether for storage, like purposes, or otherwise. Also set
forth on EXHIBIT A is a list of each office of Borrower at which records of
Borrower pertaining to Accounts are kept and of Borrower's chief executive
office.
2.7 Subject to any limitations stated therein or in connection
therewith, (a) all balance sheets, earnings statements, and other financial data
which have been or may hereafter be furnished to Bank to induce it to enter into
this Agreement, or otherwise furnished in connection herewith, do or shall
fairly represent the financial condition and results of operations of Borrower
(or other entity, as applicable), as of the dates and for the periods for which
the same are furnished, in accordance with generally accepted accounting
principles consistently applied, and (b) Bank all other information, reports,
and other papers and data furnished to Bank shall be accurate, as of the
relevant date, and correct in all material respects and complete insofar as
completeness may be necessary to give Bank a true and accurate knowledge of the
subject matter. Neither this Agreement, nor any document, certificate, or
statement furnished to Bank by or on behalf of Borrower pursuant to or in
connection with this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements contained
herein and therein not misleading. There is no fact known to Borrower that
materially and adversely affects, or will materially and adversely affect, the
assets, business, operations, or condition of Borrower that has not been
specifically set forth in this Agreement or otherwise disclosed by Borrower to
Bank in writing.
2.8 Except as specifically disclosed by Borrower to Bank, in EXHIBIT B,
there are no actions, suits, or proceedings pending or, to the knowledge of
Borrower, threatened against Borrower at law, or in equity, or by or before any
governmental department, commission, board, bureau, agency, or instrumentality,
or any arbitrator, that are not at least eighty percent (80%) covered by
insurance or which involve in the aggregate more than Twenty-Five Thousand
Dollars ($25,000.00).
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2.9 Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying "margin" stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System (12 C.F.R.
Part 221), as amended from time to time ("Regulation U"). No funds borrowed
pursuant to this Agreement shall be used for the purpose, whether immediate,
incidental, or ultimate, of purchasing or carrying within the meaning of
Regulation U, any "margin stock" as defined therein, unless exempt under
Regulation U.
2.10 Prior to the execution of this Agreement, Borrower is solvent,
having assets of a value that exceeds the amount of its liabilities. Taking
into consideration the considerable value of the Collateral securing the
Liabilities directly incurred by Borrower, and the satisfactory value of the
rights of subrogation and contribution that Borrower would enjoy in the event it
is required to satisfy the obligations hereunder, Borrower reasonably
anticipates that it will be able to meet its debts as they mature. Borrower has
adequate capital to conduct the business in which it is engaged. The acceptance
by Borrower of advances hereunder shall be deemed to be a representation and
warranty to Bank that Borrower is solvent at the time of such advance, and
otherwise that the representations and warranties of Borrower in this Agreement
are true and correct as if made again on the date of such advance.
SECTION 3. BANK'S AGREEMENT TO MAKE LOAN.
3.1 Subject to the terms and conditions of this Agreement, and so long
as no Event of Default or event which with notice or the passage of time would
constitute an Event of Default, as defined below or under any other document or
instrument executed in connection herewith shall have occurred or be continuing,
from the date hereof until July 1, 1998, or such future date to which the
expiration date of the Note may be extended (the "Termination Date"), Bank
agrees to extend to Borrower an open-end line of credit on the basis of seventy
percent (70%) of the value of Borrower's Eligible Accounts (such advance formula
being hereinafter referred to as the "Borrowing Base"); provided, however, that
in no event shall the aggregate sum of all advances made by Bank to Borrower
under its Revolving Line exceed Borrower's Line Limit (as defined below).
Within such Line Limit, Borrower may borrow, repay, and reborrow hereunder, from
the date of this Agreement until the Termination Date. The Line Limit for
Borrower shall be $3,000,000.00.
3.2 All borrowings under the Revolving Line shall be evidenced by the
Note and by entering such advances as debits to Borrower's Loan Account. Bank
also shall record in Borrower's Loan Account other charges, expenses, and items
properly chargeable to Borrower hereunder, all payments made by Borrower on
account of its indebtedness thereunder, and other appropriate debits and
credits. The debit balance of Borrower's Loan Account shall reflect the amount
of Borrower's indebtedness under its Revolving Line from time to time hereunder.
Notwithstanding the foregoing, no failure by Bank to properly reflect any
advance actually made or any such charge, expense, or item actually incurred in
any Borrower's Loan Account shall relieve Borrower from its obligations with
respect thereto. At least once each month, Bank shall render a statement of
account for Borrower's Loan Account. Each such statement shall be considered
correct and accepted by Borrower and conclusively binding upon Borrower except
to the extent that Bank receives a written notice of Borrower's exceptions
within thirty (30) days after such statement has been mailed by ordinary mail to
Borrower.
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3.3 If at any time the sum of the outstanding balance of any Borrower's
Loan Account exceeds the lesser of its (i) Borrowing Base or (ii) Line Limit,
then Borrower immediately shall remit to Bank good funds sufficient to eliminate
such excess. If a Borrower fails immediately to remit to Bank good funds
sufficient to eliminate such excess, Bank may, without notice to or demand on
Borrower, at Bank's option (in addition to and without waiving any and all other
rights and remedies of Bank) apply against such excess (x) any collections on
and Proceeds from Accounts Receivable forwarded to Bank and/or in Bank's
possession; (y) any other property of Borrower and the Proceeds thereof now or
hereafter held by Bank (whether for safekeeping, custody, pledge, transmission,
collection or otherwise); and (z) Borrower's' deposit balances (general or
special) and credits with Bank. Borrower shall repay to Bank on the Termination
Date the aggregate amount in Borrower's Loan Account at the close of business on
the Termination Date.
3.4 In the event that the availability of advances expires by the terms
of this Agreement, or by the terms of any agreement extending the expiration
date of this Agreement, Bank may, in its sole discretion, make requested
advances; however, it is expressly acknowledged and agreed that, in such event,
Bank shall have the right, in its sole discretion, to decline to make any
requested advance and may require payment in full of Borrower's Loan Account
without prior notice to Borrower and the making of any such advances shall not
be construed as a waiver of such right by Bank.
3.5 Borrower shall pay interest on the principal amount of the
Revolving Line from time to time at a per annum interest rate equal to the Index
Rate, but in no event shall the interest rate exceed the Highest Lawful Rate.
All payments of principal and interest that are past due shall, at the option of
Bank, bear interest at the lesser of a rate equal to the Index Rate or the
Highest Lawful Rate.
3.6 All funds borrowed under the Revolving Line shall be used for
working capital and general corporate purposes.
Nothing in this Section shall be deemed to extend the duration of the Loans
beyond the times noted in Section 14 hereof.
SECTION 4. INSPECTION OF RECORDS; FURTHER ASSURANCE.
4.1 Borrower shall at reasonable times and from time to time allow
Bank, by or through any of its officers, agents, employees, attorneys, or
accountants (i) to examine, inspect, or make extracts from Borrower's' books and
records; (ii) to analyze financial statements; (iii) to arrange for verification
of Accounts under reasonable procedures, directly with Account Debtors or by
other methods; and (iv) to inspect tangible property constituting Collateral
(all the foregoing collectively referred to as "Audits"). Audits by Bank, may
be at any time during normal business hours, without prior notice to Borrower.
The reasonable expense of such Audits shall be paid by Borrower.
4.2 Borrower shall do, make, execute and deliver all such additional
and further acts, things, deeds, assurances and instruments which Bank may
require more completely to vest in and assure to Bank its rights hereunder or in
any Collateral.
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4.3 Borrower shall pay an annual monitoring fee of $2,500.00 to Bank.
SECTION 5. SECURITY INTEREST OF BANK IN COLLATERAL.
5.1 As security for the payment and performance of all Liabilities,
Bank shall have and is hereby granted a continuing lien on, a security interest
in and a right of set-off against the following Collateral:
(a) all Accounts of Borrower, whether now or hereafter existing,
created, arising or acquired;
(b) all Inventory of Borrower, whether now or hereafter existing,
created, arising or acquired;
(c) all general intangibles of Borrower, whether now or hereafter
existing, created, arising, or acquired;
(d) all books and records now owned and hereafter acquired relating to
Collateral and all files, correspondence, computer programs, tapes,
disks and related data processing software owned Borrower or in
which Borrower has an interest that contains information concerning
or relating to Collateral or any item thereof; and
(e) all Proceeds and products of all of the foregoing, including,
without limitation, insurance proceeds.
No submission by Borrower to Bank of any schedule or other particular
identification of Collateral shall be necessary to vest in Bank a security
interest in each and every item of Collateral now existing or hereafter
acquired, but rather, such security interest shall vest in Bank immediately upon
the creation or acquisition of any item of Collateral, without the necessity for
any other or further action by Borrower or Bank.
5.2 To the extent applicable, the Texas Business and Commerce Code
governs the security interests provided for herein. In connection therewith,
Borrower shall take such steps and execute and deliver such financing statements
and other papers as Bank may from time to time request.
5.3 If, by reason of location of Collateral or otherwise, the creation,
validity, or perfection of security interests provided for herein are governed
by the law of a jurisdiction other than Texas, Borrower shall take such steps
and execute and deliver such papers as Bank may from time to time request to
comply with the Uniform Commercial Code, the Uniform Trust Receipts Act, the
Factors Lien Act, the Federal Food Security Act, or other laws of other states
or jurisdictions. Borrower hereby appoints and empowers Bank, or any employee
of Bank which Bank may designate for the purpose, as attorney-in-fact, to
execute on its behalf any financing statements which, in Bank's sole judgment,
are necessary to be filed in order to perfect or preserve the perfection of
Bank's security interests granted hereby.
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5.4 As additional security for the payment and performance of all
Liabilities, Borrower shall obtain and maintain or cause to be maintained, with
a financially sound and reputable insurer acceptable to Bank, such acceptance
not to be unreasonably withheld, life insurance with respect to the life of J.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ having a death benefit of at least $1,000,000.00 while any of the
Liabilities are outstanding and unpaid. Such life insurance policy shall
provide that such policy may not be cancelled, amended, or terminated unless at
least thirty (30) days prior written notice thereof has been given to Bank. In
addition, such insurance policy shall be assigned by Borrower to Bank to secure
the prompt payment, performance and observance in full of the Liabilities. All
insurance proceeds received by Bank under such policy shall be retained by Bank
for application to the payment of such portion of the Liabilities and in such
order as Bank may determine in its sole discretion with the balance, if any, to
be disbursed to Borrower. Borrower shall furnish Bank with an original or, at
Bank's option, a certificate of such insurance policy prior to and as a
condition to the receipt of any advance hereunder. Borrower shall deliver to
Bank each renewal policy or a certificate pertaining thereto at least fifteen
(15) days before the expiration date of such policy.
SECTION 6. COLLECTION OF ACCOUNTS.
6.1 (a) Until Borrower is notified by Bank to the contrary, Borrower
shall have the right to collect Accounts and deposit proceeds
received from Account Debtors into operating accounts of Borrower
maintained at Bank.
(b) If Bank at any time determines in good faith that the financial
condition of Borrower or its ability to repay the Liabilities has
materially changed to the detriment of Bank, then Bank may, at its
option, notify Borrower that it must immediately establish a
remittances account maintained by and in the name of Bank (the
"Remittances Account") for the deposit of each and every remittance
with respect to the Accounts, and in such event, Borrower shall
provide contemporaneously with each and every remittance with
respect to the Accounts and upon each deposit of funds to the
Remittances Account to Bank, a report reflecting the amount of all
such remittances, the Accounts and amounts thereof with respect to
which such remittances were made. Thereafter, Borrower shall
notify Bank of such collections as are received pursuant to the
provisions of Section 7.1 below and shall hold the proceeds
received from collections in trust for Bank without commingling the
same with other funds of Borrower and shall turn the same over to
Bank immediately upon receipt in the identical form received.
Proceeds so transmitted to Bank may be handled and administered in
and through remittance or special accounts; the maintenance of any
such accounts shall be solely for the convenience of Bank, and
Borrower shall not have any right, title, or interest in or to any
such accounts or in the amounts at any time appearing to the credit
thereof.
(c) Following an Event of Default or event which following notice or
the passage of time would constitute an Event of Default, Bank may
(without notice to or demand on Borrower, at Bank's option) apply
against the outstanding balance of Borrower's Loan Account from
time to time any collections on and Proceeds from Accounts
Receivable forwarded to Bank and/or in Bank's possession
(including,
10
without limitation, any such collections and Proceeds in any
lock-box, Remittances Account or any operating or other account
maintained by or for Borrower at Bank). Nothing herein shall be
deemed to diminish or limit any of Bank's rights or remedies under
applicable law or Section 3.3, Section 10, Section 11, or any other
Section of this Agreement or otherwise. If no Event of Default has
occurred or is continuing hereunder and if there is no excess
outstanding balance in Borrower's Loan Account required to be paid
by Borrower under Section 3.3 hereof, Bank may, at its option,
deposit any or all collections on and Proceeds from Accounts
Receivable in Bank's possession into Borrower's operating accounts
maintained and to be maintained at Bank. Bank shall not be required
to credit Borrower's Loan Account with the amount of any check or
other instrument constituting provisional payment until Bank has
received final payment thereof at its office in cash or solvent
credits accepted by Bank.
(d) Borrower shall, at the request of Bank, notify the Account Debtors
of the security interest of Bank in any Account and shall instruct
Account Debtors to remit payments directly to Bank, and Bank may
itself, at any time, so notify Account Debtors.
6.2 Borrower agrees that no court action or other legal proceeding or
garnishment, attachment, repossession of property, or any other attempt to
repossess any merchandise covered by an Account shall be attempted by Borrower
except by or under the direction of competent legal counsel. Borrower hereby
agrees to indemnify and hold Bank harmless from any loss or liability of any
kind or character which may be asserted against Bank by virtue of any suit
filed, process issued, or any repossession or attempted repossession done or
attempted by Borrower or by virtue of any other endeavors which Borrower may
make to collect any Accounts or repossess any such merchandise.
SECTION 7. AFFIRMATIVE COVENANTS.
Until all indebtedness of Borrower to Bank has been paid and all
Liabilities have been satisfied, Borrower shall furnish or cause to be furnished
to Bank:
7.1 (a) together with each request for an advance, or if not
previously furnished, within twenty (20) days following the end of
each calendar month, detailed reports in form acceptable to Bank of
all Accounts as of the last day of the immediately preceding
calendar month, and the period of time which has elapsed with
respect to such Accounts since the invoice date with respect
thereto;
(b) together with each request for an advance, or if not previously
furnished, within twenty (20) days following the end of each
calendar month, a Borrowing Base Certificate and Compliance
Certificate in the forms attach hereto as EXHIBIT C, as of the last
day of the immediately preceding calendar month signed by an
authorized officer of the applicable Borrower;
(c) if requested by Bank, monthly, within twenty (20) days following
the end of each calendar month, a report reflecting the amount of
all deposits to operating
11
accounts, Remittances Accounts, if applicable, and other accounts
of Borrower, together with the Accounts and amounts thereof with
respect to which deposits were made;
(d) monthly financial statements of Borrower, which may be internally
prepared, within twenty (20) days following the end of each
calendar month in each fiscal year, including a balance sheet as of
the close of such period, an income statement, and reconciliation
of surplus for such period, prepared and analyzed in accordance
with generally accepted accounting principles consistently applied
and attested to by an authorized officer of Borrower;
(e) audited annual financial statements of Borrower within one hundred
twenty (120) days following the end of each fiscal year, including
a balance sheet as of the close of such period, an income
statement, and reconciliation of surplus for such period, prepared
by an outside certified public accountant reasonably satisfactory
to Bank in accordance with generally accepted accounting principles
consistently applied;
(f) a copy of Borrower's federal income tax returns within thirty (30)
days following the filing thereof with the Internal Revenue
Service;
(g) such other documents, instruments, data, or information of any type
requested by Bank with respect to the Accounts, or other Collateral
or Borrower's operations or financial condition.
7.2 Borrower shall (a) maintain insurance in form, amount, and
substance acceptable to Bank including, without limitation, extended multi-peril
hazard, worker's compensation, and general liability insurance written by
companies reasonably acceptable to Bank upon all facets of its business,
including without limitation, the Collateral pledged to Bank, its property, and
its equipment, of such character and amounts as are usually maintained by
companies engaged in like business; (b) furnish to Bank, upon request, a
statement of the insurance coverage; (c) obtain other or additional insurance
promptly, upon request of Bank, to the extent that such insurance may be
available; and (d) cause Bank to be named as loss payee as to all property
constituting Collateral hereunder, pursuant to a loss payable endorsement in
form acceptable to Bank.
7.3 Borrower shall maintain with Bank its primary operating and
depository accounts ("Depository Accounts"), and Bank, at Bank's option, may
make all advances hereunder into Borrower's Depository Accounts, and Borrower
expressly agrees that Bank may, at Bank's option, debit against any such
Depository Accounts any and all sums, amounts, charges, and payments due under
or in connection with this Agreement and/or the Note.
7.4 Borrower does and shall at all times comply with all present and
future laws, ordinances, rules, and regulations (of any governmental authority
or entity) applicable to, governing or affecting Borrower, its operations, its
property, the Collateral, or any part of any of the foregoing, and shall
immediately notify Bank of any and all alleged or asserted violations of any
such law, ordinance, or regulation.
12
7.5 Borrower shall at the time of its first knowledge or notice
immediately notify Bank in writing of (i) the occurrence of any event or the
existence of any event, circumstance, or condition which constitutes or upon
notice or lapse of time would constitute an Event of Default under the terms of
this Agreement and (ii) any other information that may adversely affect in any
material manner the assets of Borrower including, but not limited to, the filing
of any lawsuit against or involving Borrower.
7.6 Borrower agrees to indemnify Bank, its officers, directors,
employees, agents and attorneys ("Indemnified Parties") and hold them harmless
against any and all claims, demands, causes of action, loss, damage,
liabilities, costs and expenses (including, without limitation, attorneys' fees
and court costs) asserted against or incurred by Indemnified Parties by reason
of, arising out of, or in connection with, any fact or circumstance relating to
the transactions made the subject of this Agreement or the Security Documents or
any of them. The above notwithstanding Borrower shall have no obligation to
indemnify or hold harmless Bank from claims resulting from the gross negligence
or intentional misconduct of Bank.
7.7 Borrower agrees to take all actions that Bank may request to
establish and maintain a valid security interest in the Accounts and each and
every other item of Collateral, free and clear of all other liens, claims,
charges, security interests, and encumbrances whatsoever. Borrower shall
promptly pay all taxes or charges levied on or with respect to the Collateral,
and will at all times keep the Accounts and each and every other item of
Collateral free and clear of all liens, claims, charges, security interests, and
encumbrances whatsoever, other than the security interest granted hereby or by
any other document executed in favor of Bank. If such taxes or other
assessments remain unpaid after the date fixed for the payment of same, or if
any lien, charge, claim, security interest, or encumbrance shall arise, or be
claimed or asserted with respect to the Accounts or any other item of
Collateral, Bank may, without notice to Borrower, pay such taxes, assessments,
charges, or claims, and take any and all other actions (including the payment of
money) deemed desirable by Bank to remove any such lien, charge, claim, security
interest, or encumbrance, and Borrower agrees that the amounts thereof shall be
charged to Borrower's Loan Account created hereby and shall bear interest at the
rate of interest then borne by Borrower's obligations under the Note. Not
withstanding the other provisions of this Section 7.7, nothing herein shall
require the payment or discharge of any such taxes or assessments so long as
Borrower (a) shall, in good faith, and at its own expense, contest the same or
the validity thereof by appropriate legal proceedings diligently pursued; and
(b) shall, at Bank's option, post a bond or provide other security deemed
equivalent by Bank to cover or secure payment of such taxes or assessments.
Nothing in this Section shall be deemed to extend the duration of the Loans
beyond the times noted in Section 14 hereof.
SECTION 8. NEGATIVE COVENANTS.
8.1 Borrower shall not create or permit the creation or continuance of
any lien, charge, encumbrance, or other interest upon any of its property,
except for liens (collectively, "Permitted Liens") (a) for taxes, assessments or
governmental charges not yet payable; (b) of landlords and vendors arising in
the ordinary course of business for sums not yet due; and (c) approved in
advance in writing by Bank or listed on EXHIBIT D attached hereto. Borrower
will not sell,
13
transfer, lease or otherwise dispose of, or suffer to exist any lien, charge,
claim, security interest, or encumbrance (except for those in favor of Bank)
with respect to any of the Collateral or any interest therein (or any of the
Proceeds thereof, whether money, checks, money orders, drafts, notes,
instruments, documents, chattel paper, Accounts, returns, or repossessions),
without Bank's prior written consent.
8.2 Without Bank's prior written consent, Borrower shall not borrow any
money, or otherwise become directly or indirectly obligated, other than for
trade credit in the ordinary course of business and the existing indebtedness
listed on EXHIBIT D attached hereto, and Borrower shall not guarantee, endorse,
or assume, either directly or indirectly, any indebtedness of any other
corporation, person, or entity.
8.3 Without Bank's prior written consent, Borrower shall not purchase
or acquire, directly or indirectly, any shares of stock, evidences of
indebtedness, or other securities of any person, corporation, or other entity.
Without Bank's prior written consent, Borrower shall not lend, make advances or
otherwise extend credit to any person or entity.
8.4 Borrower shall not liquidate, or discontinue or materially reduce
its normal operations with intention to liquidate, and shall not merge or
consolidate with or into any corporation, partnership, or other entity, or sell,
lease, transfer, or otherwise dispose of all or any substantial part of its
assets, or any of its Accounts. Borrower shall not cause, allow, or suffer to
occur a change in the ownership or management of Borrower or its business
without Bank's prior written consent. Borrower will not change its name or
identity without notifying Bank of such change in writing at least thirty (30)
days prior to the effective date of such change, and Borrower will take all
steps necessary prior to any such change to maintain at all times the priority
and validity of all liens and security interests contemplated by this Agreement,
and will execute and deliver to Bank all financing statement amendments
requested by Bank prior to such name change becoming effective.
8.5 Without Bank's prior written consent, Borrower shall not declare or
pay any dividends or bonuses (unless payable in shares of a Borrower) upon
its outstanding shares, and Borrower shall not redeem, purchase or in any
manner acquire any of such outstanding shares.
8.6 Borrower shall not change any office or other location set forth on
EXHIBIT A without Bank's written consent, and, prior to making such change,
Borrower agrees to execute any additional financing statements or other
documents or notices that Bank may require.
8.7 Borrower shall not cause, allow, or suffer to occur its Current
Ratio to be less than 1.35 to 1.0 at any time.
8.8 Borrower shall not cause, allow, or suffer to occur its Debt to
Tangible Net Worth Ratio to be greater than 2.25 to 1.0 at any time.
8.9 Borrower shall not cause, allow or suffer to occur its Tangible Net
Worth to be less than $6,500,000.00 at any time.
14
8.10 Borrower shall not cause, allow or suffer to occur its Tangible Net
Worth to increase by an amount less than $500,000.00 annually, calculated at the
end of each fiscal year of Borrower.
8.11 Borrower shall not cause, allow, or suffer to occur its Fixed
Charge Coverage Ratio to be less than 2.5 to 1.0 at any time.
8.12 Without Bank's prior written consent, Borrower shall not make in
any fiscal year capital expenditures or contracts for capital expenditures
together aggregating in excess of $500,000.00, except that Borrower can, without
Bank's prior written consent, purchase personal property.
Nothing in this Section shall be deemed to extend the duration of the Loans
beyond the times noted in Section 14 hereof.
SECTION 9. EVENTS OF DEFAULT; ACCELERATION.
9.1 Any or all of the liabilities of Borrower to Bank, including,
without limitation, the Note and the Liabilities, shall all be, at the option of
Bank and notwithstanding any time or credit allowed by any instrument evidencing
a Liability, immediately due and payable without notice or demand, and the
obligation of Bank to make advances hereunder shall immediately cease and
terminate upon the occurrence of any of the following, which shall be considered
Events of Default:
(a) default in the payment or performance, when due or payable, of any
Liability of Borrower, to Bank;
(b) except for any Event of Default described in another subsection of
this Section 9.1, failure by Borrower to perform any act or
obligation imposed hereby, or in any other agreement to which Bank
and Borrower are parties, or Borrower's' failure to abide by the
terms of this Agreement, or any other document or instrument
executed in connection herewith, or in any other agreement to which
Bank and Borrower are parties and such failure continues for thirty
(30) days following the giving of notice by Bank to Borrower;
(c) failure of Borrower to pay when due any taxes, including without
limitation federal income and FICA taxes and state and local sales
and property taxes, each with the appropriate taxing authorities
and as required by law;
(d) if any warranty or representation contained herein shall prove
false or misleading or if Borrower or any endorser, Guarantor, or
surety for any Liability of Borrower to Bank makes any other
misrepresentation to Bank for the purpose of obtaining credit or
any extension of credit;
(e) failure of Borrower or any endorser, Guarantor, or surety for any
Liability of Borrower to Bank, after request by Bank, to furnish
financial information or to permit the inspection of the books or
records or Collateral of Borrower or any
15
endorser, Guarantor, or surety for any Liability of Borrower to
Bank and such failure continues for thirty (30) days following the
giving of notice by Bank to Borrower;
(f) issuance of an injunction or attachment against property of
Borrower;
(g) calling of a meeting of creditors, appointment of a committee of
creditors or liquidation agents, or offering of a composition or
extension to creditors by, for or of Borrower or of any endorser,
Guarantor, or surety for any Liability of Borrower to Bank;
(h) bankruptcy or Insolvency of Borrower or of any of Borrower's'
shareholders, or of any endorser, Guarantor, or surety for any
Liability of Borrower to Bank;
(i) any change in the ownership or executive management of Borrower or
its business without the prior written consent of Bank;
(j) Borrower's failure to maintain any insurance required hereunder or
pay any premium on (i) any insurance policy assigned to Bank, or
(ii) any insurance covering any Collateral;
(k) fraud or misrepresentation by or on behalf of Borrower in its
transactions with Bank;
(l) violation of any affirmative or negative covenant recited in
Section 7 or Section 8 hereof or violation of or failure to abide
by any other provision of this Agreement;
(m) any default or event of default under the Note, Security Documents
or any other document or agreement executed in connection herewith,
or any other document or agreement to which Borrower and Bank are
parties;
(n) any endorser, Guarantor, or surety for any Liability terminates or
attempts to terminate a guaranty or other agreement with Bank,
whether or not such termination or attempted termination
constitutes a breach under such guaranty or other agreement;
(o) if a judgment against Borrower remains unpaid, unstayed, or
undismissed for a period of more than twenty (20) days;
(p) if Borrower discontinues doing business for any reason;
(q) if any event occurs that, under any agreement to which Borrower is
a party, grants the option to the holder of indebtedness of
Borrower to accelerate such indebtedness;
16
(r) if title to any of the stock or other interest in Borrower directly
or indirectly shall be transferred, pledged, or otherwise
encumbered;
(s) the death or incapacity of J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇; or
(t) the termination of employment of J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
9.2 Borrower agrees that all Liabilities, whether arising under this
Agreement or the Note or under any other agreement to which Bank and Borrower
are parties, shall become immediately due and payable upon failure by Borrower
to perform any act or obligation imposed under this Agreement or the Note or
under any other agreement to which Bank and Borrower are parties.
SECTION 10. POWER TO SELL OR COLLECT COLLATERAL; REMEDIES CUMULATIVE.
10.1 Upon the occurrence of any one or more of the above Events of
Default and at any time thereafter (such defaults not having been previously
cured), Bank shall have, in addition to all other rights and remedies, the
remedies of a secured party under the Texas Business and Commerce Code
(regardless of whether the Uniform Commercial Code has been enacted in the
jurisdiction where rights or remedies are asserted), including, without
limitation, the right to take possession of the Collateral, and for that purpose
Bank may, so far as Borrower can give authority therefor, enter upon any
premises on which the Collateral may be situated and remove the same therefrom
or take possession of same and store same on such premises pending disposition
under the terms of this Agreement or applicable law. Bank may require Borrower
to assemble the Collateral and make it available to Bank at a place designated
by Bank. Unless the Collateral is perishable or threatens to decline speedily
in value or is to a type customarily sold on a recognized market, Bank shall
give to Borrower at least five (5) days' written notice of the time and place of
any public sale of Collateral or of the time after which any private sale or any
other intended disposition is to be made, which time period shall be deemed for
all purposes to be commercially reasonable. Bank may, at any time in its
discretion. transfer any securities or other property constituting Collateral
into its own name or that of its nominee, and receive the income thereon and
hold the same as security for the Liabilities or apply it on principal or
interest due on Liabilities. Insofar as Collateral shall consist of Accounts,
insurance policies, instruments, chattel paper, choices in action, or the like,
Bank may demand, collect, receipt for, settle, compromise, adjust, ▇▇▇ for,
release, extend the time of payment, make allowances and adjustments, foreclose,
or realize upon Collateral as Bank may determine, whether or not Liabilities or
Collateral are then due, and for the purpose of realizing Bank's rights therein,
Bank is granted power of attorney to receive, open, and dispose of mail
addressed to Borrower and endorse notes, checks, drafts, money orders, documents
of title, or other evidences of payment, shipment, or storage or any form of
Collateral on behalf of and in the name of Borrower.
10.2 No right, power, or remedy conferred in this Agreement, the Note,
or any other agreement executed in connection herewith or any other document or
agreement to which Borrower and Bank are parties, or now or hereafter existing
at law, in equity, or admiralty, by statute or otherwise, shall be exclusive,
and each such right, power, or remedy, shall, to the full extent permitted by
law, be cumulative and in addition to every other such night, power, or remedy.
17
10.3 The sale by Bank of less than the whole of the Collateral shall not
exhaust the rights of Bank hereunder, and Bank is specifically empowered to make
successive sales hereunder until the whole of the Collateral shall be sold. If
the proceeds of any sale of less than the whole of the Collateral shall be less
than the aggregate of the Liabilities, this Agreement and the security interests
created hereby shall remain in full force and effect as to the unsold portion of
the Collateral just as though no sale had been made, provided, however, that
Borrower shall never have any right to require sale of less than the whole of
the Collateral but Bank shall have the right, at its sole election, to sell less
than the whole of the Collateral.
10.4 Bank may resort to any security given by this Agreement or to any
other security now existing or hereafter given to secure the payment of
Borrower's Liabilities, in whole or in part, and in such portions and in such
order as may seem best to Bank in its sole discretion, and any such action shall
not in any way be considered as a waiver of any of the rights, benefits, or
security interests evidenced by this Agreement.
10.5 Bank may, at all times, proceed directly against Borrower to
enforce payment of Borrower's Liabilities and shall not be required first to
enforce its rights in the Collateral or any other security granted to it. Bank
shall not be required to take any action of any kind to preserve, collect, or
protect it or Borrower's rights in the Collateral or any other security granted
to it.
SECTION 11. DEPOSITS.
Bank, any participant, and any other holder of all or any part of the
Liabilities are hereby given a continuing lien as additional security for all
Liabilities hereunder upon any and all moneys, securities, and other property of
Borrower, and the Proceeds thereof, now or hereafter held or received by or in
transit to Bank, such participant, or such holder from or for Borrower, whether
for safekeeping, custody, pledge, transmission, collection, or otherwise, and
also upon any and all deposit balances (general or special) and credits of
Borrower with. and any and all claims of Borrower against Bank, such
participant, or such holder at any time existing, and upon an event of default
hereunder, Bank, such participant, or such holder may apply or set off the same
against the Liabilities and indebtedness hereby secured, without notice and
without liability. Borrower agrees that any other person or entity purchasing a
participation from Bank may exercise all its rights of payment (including the
right of set-off) with respect to such participation as fully as if such person
or entity was the direct creditor of Borrower in the amount of such
participation.
SECTION 12. WAIVERS.
Borrower and each accommodation party, surety, endorser, or other person or
entity liable for the payment or collection of the Liabilities expressly waive
demand, presentment for payment, notice of protest, notice of intent to
accelerate, notice of acceleration, notice of acceptance of this Agreement, and
notice of loans made, credit extended, Collateral received or delivered, or
other action taken in reliance hereon and all other demands and notices of any
description. With respect both to the Liabilities and Collateral, Borrower
consents to any extension or postponement of the time of payment or any other
indulgence, to any substitution, exchange, or release of any or all of the
Collateral, to the addition or release of any party or person primarily or
secondarily
18
liable, to the acceptance of partial payments thereon and the settlement,
compromising, or adjusting of any thereof, all in such manner and at such
time or times as Bank may deem advisable. Bank shall have no duty as to the
collection or protection of any or all of the Collateral or any income
thereon, nor as to the preservation of any rights pertaining thereto beyond
the safe custody of Collateral without resorting or regard to other
collateral or sources of reimbursement for the Liabilities. Bank shall not
be deemed to have waived any of its rights upon or under any of the
Liabilities or Collateral unless such waiver be in writing and signed by
Bank. No course of dealing and no delay or omission on the part of Bank in
exercising any right shall operate as a waiver of such right or any other
right. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right on any further occasion. All rights and remedies of Bank
with respect to Liabilities or Collateral, whether evidenced hereby or by any
other instrument or paper, shall be cumulative and may be exercised singly or
concurrently.
SECTION 13. EXPENSES, PROCEEDS OF COLLATERAL.
Irrespective of whether the proceeds of the Note are disbursed, Borrower
shall pay all expenses, including, without limitation, reasonable legal
expenses, incurred by Bank from time to time in connection with the preparation,
administration, amendment, or modification of this Agreement, the Note, and
other documents executed in connection with the creation of the Loans and those
associated with the perfection and creation of the security interests granted
pursuant hereto. Borrower shall pay to Bank on demand any and all expenses and
costs of collection, including, without limitation, reasonable counsel fees,
incurred or paid by Bank in protecting or enforcing its rights upon or with
respect to any of the Liabilities or the Collateral. After deducting all of
said expenses, the residue of any proceeds of collection or sale of Liabilities
or Collateral shall be applied to the payment of principal or interest on
Liabilities in such order or preference as Bank may determine, proper allowance
for interest on Liabilities not then due being made, and any excess shall be
returned to Borrower, and Borrower shall remain liable for any deficiency.
SECTION 14. DURATION; EXTENSION.
The Revolving Line shall terminate on the Termination Date; however, the
parties recognize that they may wish to extend the expiration date by mutual
agreement. The termination or expiration of the Revolving Line shall in no way
affect any transactions entered into or rights created or obligations incurred
prior to such termination or expiration; rather, such rights and obligations
shall be fully operative until the same are fully disposed of, concluded, and/or
liquidated. Without limiting the generality of the foregoing, such termination
or expiration shall not release nor diminish any of Borrower's' obligations and
agreements hereunder until payment in full of all of the Liabilities under this
Agreement and all other sums and amounts payable under or pursuant to this
Agreement. This Agreement shall be a continuing agreement in every respect. No
modification or amendment of this Agreement or extension of the Termination Date
shall be effective unless placed in writing and duly executed by Bank and
Borrower.
SECTION 15. GENERAL.
15.1 All notices or other communications required or permitted to be
given pursuant to this Agreement shall be in writing and shall be considered as
properly given if mailed by first
19
class United States mail, postage prepaid, registered or certified with
return receipt requested, or by delivering same to the designated address of
the addressee stated herein by a third party commercial delivery service.
Notice given in any other manner shall be effective only if and when received
by addressee. For purposes of notice, the addresses of the parties shall be
as set below; provided, however, that either party shall have the right to
change its address for notice hereunder to any other location within the
continental United States by the giving of thirty (30) days' notice to the
other party in the manner set forth hereinabove.
IF TO BANK:
Compass Bank
▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇
IF TO BORROWER:
▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Mr. J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
15.2 If at any time or times by assignment or otherwise Bank transfers
any of the Liabilities (either separately or together with the Collateral
therefor), such transfer shall carry with it Bank's powers and rights under this
Agreement with respect to the Liabilities and Collateral transferred, and the
transferee shall become vested with said powers and rights whether or not they
are specifically referred to in the transfer. If and to the extent Bank retains
any other of the Liabilities or Collateral, Bank will continue to have the
rights and powers herein set forth with respect thereto.
15.3 This Agreement and all rights and obligations hereunder, including,
matters of constriction, validity, and performance, shall be governed by the
laws of the State of Texas, except that Tex. Rev. Civ. Stat. ▇▇▇. art.
5069-1.04, as amended, Ch. 15, which regulates certain revolving credit loan
accounts and revolving tri-party accounts, shall not apply to this Agreement,
the Note, the Revolving Line, or any transaction contemplated hereby. Unless
changed in accordance with law, the applicable rate under Texas law shall be the
indicated (weekly) rate ceiling from time to time in effect as provided in Tex.
Rev. Civ. Stat. ▇▇▇. art. 5069-1.04, as amended.
15.4 This Agreement is performable in Dallas County, Texas, and any
action brought for the enforcement or construction of any term of this Agreement
or any of the Note or other instruments executed in connection herewith shall be
brought in a court of appropriate jurisdiction in Dallas County, Texas.
15.5 It is the intention of Bank and Borrower to conform strictly to any
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under any applicable law, then, in that event, notwithstanding
anything to the contrary in this Agreement,
20
the Note, or any other agreement or instrument entered into in connection
with or as security for or guaranteeing this Agreement or the Note, it is
agreed as follows: (i) the aggregate of all consideration that constitutes
interest under applicable law that is contracted for, taken, reserved,
charged, or received by Bank under this Agreement, the Note, or under any
other agreement entered into in connection with or as security for or
guaranteeing this Agreement or the Note shall under no circumstances exceed
the Highest Lawful Rate (as defined below), and any excess shall be cancelled
automatically and, if theretofore paid, shall, at the option of Bank, be
credited by Bank on the principal amount of any indebtedness owed to Bank by
Borrower or refunded by Bank to Borrower, and (ii) in the event that the
maturity of the Note or any other of the Liabilities are accelerated or in
the event of any required or permitted prepayment, then such consideration
that constitutes interest under law applicable to Bank may never include more
than the Highest Lawful Rate and excess interest, if any, provided for in
this Agreement or the Note or otherwise shall be cancelled automatically as
of the date of such acceleration or prepayment and, if theretofore paid,
shall, at the option of Bank, be credited by Bank on the principal amount of
any indebtedness owed to Bank by Borrower or refunded by Bank to Borrower.
15.6 Notwithstanding anything herein to the contrary, in no event will
interest payable to Bank exceed the maximum amount permitted by the law
applicable to Bank (after taking into account all charges payable to Bank that
constitute interest under such applicable law), but if any amount referred to in
any of this Agreement, the Note, or any other agreement or instrument to which
Bank and Borrower are parties that would be payable to Bank but for the
applicability of usury or other laws limiting the consideration payable to Bank
is not paid to Bank as a result of the applicability of such laws, then interest
on the outstanding principal balance of the Liabilities payable to Bank shall,
to the extent permitted by law, accrue at the Highest Lawful Rate (after taking
into account all charges payable to Bank that constitute interest under
applicable law) until the total amount received by Bank equals the amount it
would have received had no such laws been applicable.
15.7 "HIGHEST LAWFUL RATE" means the maximum non-usurious interest rate
(computed on the basis of a year of 365 or 366 days, as applicable) that at any
time or from time to time may be contracted for, taken, reserved, charged or
received on amounts due to Bank, under laws applicable to Bank that are
presently in effect or, to the extent allowed by law, under such applicable laws
which allow a higher maximum non-usurious rate than applicable laws now allow.
15.8 This Agreement and the documents delivered hereunder or in
connection herewith contain the entire agreement between the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements relating to the subject matter hereof and thereof In the event of
actual conflict in the terms and provisions of this Agreement and any of such
documents or any other instrument or agreement executed in connection with this
Agreement or described or referred to in this Agreement, the terms and
provisions of this Agreement shall control. No modification, consent, amendment
or waiver or any provision of this Agreement, nor consent to any departure by
Borrower therefrom, shall be effective unless the same shall be in writing and
signed by Bank, and then shall be effectively only in the specific instance and
for the purpose for which given. This Agreement is binding upon Borrower, its
heirs, successors and assigns, and inures to the benefit of Bank, its successors
and assigns. All representations and warranties of Borrower herein, and all
covenants and agreements herein or in any document delivered
21
hereunder or in connection herewith that are not fully performed before the
effective date of this Agreement, shall survive such date.
15.9 Prior to the date of this Agreement, Bank and Borrower have entered
into one or more loan agreements ("Prior Loan Agreements") relating to one or
more extensions of credit including extensions of credit renewed and extended by
this Agreement and the Note and other extensions of credit which are not
evidenced by the Note. To the extent any term or provision of the Prior Loan
Agreements is in conflict with the terms and provisions of this Agreement, the
terms and provisions of this Agreement shall control and supersede all such
Prior Loan Agreements.
15.10 If at any time after the date hereof, and from time to time, Bank
determines that the adoption or modification of any applicable law, rule or
regulation regarding taxation, Bank's required levels of reserves, deposits,
insurance or capital (including any allocation of capital requirements or
conditions), or similar requirements, or any interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation, administration or compliance of Bank with any of such
requirements, has or would have the effect of (i) increasing Bank's costs
relating to the Loans, or (ii) reducing the yield or rate of return of Bank on
the Loans, to a level below that which Bank could have achieved but for the
adoption or modification of any such requirements, Borrower shall, within
fifteen (15) days of any request by Bank, pay to Bank such additional amounts as
(in Bank's sole judgment, after good faith and reasonable computation) will
compensate Bank for such increase in costs or reduction in yield or rate of
return of Bank; provided, however, that nothing herein contained shall be
construed or so operate as to require Borrower to pay any interest, fees, costs
or charges greater than is permitted by applicable law. No failure by Bank to
immediately demand payment of any additional amounts payable hereunder shall
constitute a waiver of Bank's right to demand payment of such amounts at any
subsequent time.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BORROWER:
▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇, INC.,
a Texas corporation
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Its: Chairman
----------------------------------
BANK:
COMPASS BANK
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
22
EXHIBIT A
Offices and Other Locations of the Borrower
1. Location(s) at which Collateral is kept:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
2. Location(s) at which records regarding Accounts are kept:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
3. Chief executive office:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
EXHIBIT B
Actions, Suits & Proceedings
EXHIBIT C
Borrowing Base Certificate and Compliance Certificate
EXHIBIT D
Schedule of Certain Indebtedness and Leases
1. Office Leases:
a. Office lease for 13,742 rentable sq. ft. located at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ at a base rent per month
of $21,467.67 by and between Trizec Colony Square, Inc. and
borrower dated November 20, 1991 as amended by First Amendment to
Lease Agreement dated September 9, 1993, Second Amendment to Lease
Agreement dated October 18, 1995 and 3rd Amendment of Office Lease
dated April 18, 1997 and terminating March 1, 1998.
b. Office lease for 20,639 rentable sq. ft. located at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ at a base rent per month
of $30,528.52 by and between Trizec Colony Square, Inc. and
borrower dated August 6, 1997, commencing March 1, 1998 and
terminating February 28, 2003.
c. Office lease for 21,157 rentable sq. ft. located at ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ at a base rent per
month of $19,307.86 through May 31, 1998 that increases to
$20,560.11 on June 1, 1998 by and between Crescent Real Estate
Funding II, L.P. and borrower dated December 8, 1993 as amended by
First Amendment to Office Building Lease, Second Amendment to
Office Building Lease dated May 31, 1995, Third Amendment to Office
Building Lease dated August 14, 1995, and Fourth Amendment to
Office Building Lease dated July 1, 1996 and terminating May 31,
1999.
2. Existing Indebtedness:
a. Term note in the amount of $22,100 payable in consecutive equal
monthly payments of $454.75 through June 17, 2002 that is secured
by certain equipment (copier machine) as collateral for SunTrust
Bank Atlanta, Attn: ▇▇▇▇ ▇▇▇▇▇▇ - 151, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇.