EXHIBIT 10.27
THIRD AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT
BETWEEN
COMERICA BANK f/k/a
COMERICA BANK-TEXAS
AND
TEXAS STERLING CONSTRUCTION, L.P.
DATED
DECEMBER 23, 2004
TABLE OF CONTENTS
SECTION 1. DEFINITIONS......................................................... 1
1.1. Defined Terms....................................................... 1
1.2. Accounting Terms.................................................... 9
1.3. Singular and plural................................................. 9
SECTION 2. COMMITMENT, INTEREST AND FEES....................................... 9
2.1. Commitment.......................................................... 9
2.2. Borrowing Procedures................................................ 9
2.3. Note................................................................ 10
2.4. Interest............................................................ 10
2.5. Renewals and Extensions............................................. 10
2.6. Maximum Rate........................................................ 11
2.7. Fees................................................................ 12
2.8. Basis of Computation................................................ 12
2.9. Prepayments......................................................... 13
2.10. Basis of Payments................................................... 13
2.11. Term Loans.......................................................... 13
SECTION 3. SECURITY............................................................ 13
SECTION 4. CONDITIONS PRECEDENT TO OBLIGATIONS OF BANK......................... 14
4.1. Conditions to First Disbursement.................................... 14
4.2. Conditions to All Disbursements..................................... 16
SECTION 5. WARRANTIES AND REPRESENTATIONS...................................... 17
5.1. Corporate Existence and Power....................................... 17
5.2. Authorization and Approvals......................................... 17
5.3. Valid and Binding Agreement......................................... 17
5.4. Actions, Suits or Proceedings....................................... 18
5.5. Subsidiaries........................................................ 18
5.6. No Liens, Pledges, Collateral Assignments or Security Interests..... 18
5.7. Accounting Principles............................................... 18
5.8. No Adverse Changes.................................................. 18
5.9. Conditions Precedent................................................ 18
5.10. Taxes............................................................... 18
5.11. Compliance with Laws................................................ 18
5.12. Indebtedness........................................................ 19
5.13. Material Agreements................................................. 19
5.14. Margin Stock........................................................ 19
5.15. Pension Funding..................................................... 19
5.16. Misrepresentation................................................... 19
5.17. Equipment........................................................... 19
5.18. Partnership Ownership............................................... 19
5.19. Names Under Which Borrower is Doing Business........................ 20
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SECTION 6. AFFIRMATIVE COVENANTS............................................... 20
6.1. Financial and Other Information..................................... 20
6.2. Insurance........................................................... 24
6.3. Taxes............................................................... 24
6.4. Maintain Corporation and Business................................... 25
6.5. Intentionally Deleted............................................... 25
6.6. Maintain Debt Ratio................................................. 25
6.7. Intentionally Deleted............................................... 25
6.8. Maintain Cash Flow Coverage Ratio................................... 25
6.9. ERISA............................................................... 25
6.10. Use of Loan Proceeds................................................ 26
6.11. Partnership Changes................................................. 26
SECTION 7. NEGATIVE COVENANTS.................................................. 26
7.1. Distributions or Dividends.......................................... 26
7.2. Stock Issuance...................................................... 26
7.3. Stock Acquisition................................................... 26
7.4. Liens and Encumbrances.............................................. 26
7.5. Indebtedness........................................................ 26
7.6. Extension of Credit................................................. 27
7.7. Guarantee Obligations............................................... 27
7.8. Property Transfer, Merger or Lease-Back............................. 27
7.9. Acquire Securities.................................................. 27
7.10. Pension Plans....................................................... 27
7.11. Misrepresentation................................................... 27
7.12. Margin Stock........................................................ 28
7.13. Compliance with Environmental Laws.................................. 28
7.14. Pledge of Receivables............................................... 28
7.15. Intentionally Deleted............................................... 28
7.16. Subordinated Debt-Put Shareholders.................................. 28
7.17. Intentionally Deleted............................................... 28
7.18. Intentionally Deleted............................................... 28
7.19. Notes Receivable from Shareholders.................................. 28
7.20. Non-ordinary Bonus.................................................. 28
7.21. Incur Negative Net Income for Consecutive Quarters.................. 28
SECTION 8. EVENTS OF DEFAULT - ENFORCEMENT - APPLICATION OF PROCEEDS........... 28
8.1. Events of Default................................................... 28
8.2. Acceleration of Indebtedness........................................ 30
8.3. Application of Proceeds............................................. 31
8.4. Cumulative Remedies................................................. 31
SECTION 9. MISCELLANEOUS....................................................... 31
9.1. Independent Rights.................................................. 31
9.2. Covenant Independence............................................... 31
9.3. Waivers and Amendments.............................................. 31
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9.4. GOVERNING LAW....................................................... 31
9.5. Survival of Warranties, Etc......................................... 32
9.6. Attorneys' Fees..................................................... 32
9.7. Payments on Saturdays, Etc.......................................... 32
9.8. Binding Effect...................................................... 32
9.9. Maintenance of Records.............................................. 32
9.10. Notices............................................................. 32
9.11. Counterparts........................................................ 32
9.12. Headings............................................................ 32
9.13. Capital Adequacy.................................................... 33
9.14. INDEMNIFICATION BY THE BORROWER..................................... 33
9.15. NO ORAL AGREEMENTS.................................................. 34
9.16. Gender.............................................................. 34
9.17. Intentionally Deleted............................................... 34
9.18. Cross Default; Cross Collateral..................................... 34
9.19. Severability of Provisions.......................................... 34
9.20. Assignment.......................................................... 34
9.21. Omnibus Name Change................................................. 34
9.22. Authorized Filings.................................................. 34
9.23. Assumption of Obligations........................................... 34
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THIRD AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT
THIS THIRD AMENDED AND RESTATED REVOLVING CREDIT LOAN AGREEMENT is made
and delivered as of the 23rd day of December, 2004, by and between TEXAS
STERLING CONSTRUCTION, L.P., a Texas limited partnership (the "Borrower"),
successor by entity conversion to Sterling Construction Company (d/b/a
Texas-Sterling Construction, Inc.), a Michigan corporation (the "PREDECESSOR"),
and COMERICA BANK f/k/a Comerica Bank-Texas (the "BANK") and amends and restates
that certain Second Amended and Restated Revolving Credit Loan Agreement between
the Borrower and the Bank dated as of September 23, 2002 (as amended by that
certain First Amendment to Second Amended and Restated Revolving Credit Loan
Agreement dated as of March 1, 2003, that certain Second Amendment to Second
Amended and Restated Revolving Credit Loan Agreement dated as of April 28, 2003,
and that certain Third Amendment to Second Amended and Restated Third Revolving
Credit Loan Agreement dated as of November 12, 2003) (the "PRIOR AGREEMENT").
WITNESSETH:
WHEREAS, the Bank has extended credit to the Borrower in the form
described in the Prior Agreement and the Bank has made such extensions of credit
to the Borrower upon the terms and conditions therein set forth;
WHEREAS, the Borrower desires to increase its revolving line of credit
with the Bank from $14,000,000.00 to $17,000,000.00;
WHEREAS, the Bank is willing to supply such financing to be used by the
Borrower for working capital, general corporate purposes, and to acquire
equipment subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, the Borrower and the Bank agree to amend and restate the Prior
Agreement as follows:
SECTION 1. DEFINITIONS.
1.1. Defined Terms. As used herein, the following terms shall have the
following respective meanings:
"EQUIPMENT," "FIXTURES," "GENERAL INTANGIBLES," "GOODS,"
"INSTRUMENTS" and "INVENTORY" shall have the meanings assigned to
them in the UCC in effect on the date of this Agreement.
"AGREEMENT" shall mean this Third Amended and Restated
Revolving Credit Loan Agreement, as same may be renewed, extended,
modified, supplemented, restated, amended, and/or rearranged.
"APPLICABLE MARGIN" shall mean that certain percentage
determined in accordance with Section 2.4 of this Agreement.
"APPRAISAL" shall mean, until January 21, 2003, that certain
appraisal dated November 23, 1999, prepared by Valuation Technology,
Inc., and covering the Borrower's Equipment prepared pursuant to
Section 6.1.12, and on or after January 21, 2003 (or such earlier
date if said appraisal is completed prior to January 21, 2003), that
certain appraisal of the Borrower's Equipment prepared pursuant to
Section 6.1.11.
"APPROVED MULTIPLE-ADVANCE LOAN" shall mean that certain
multiple-advance loan from Borrower to Sterling-Delaware which is
comprised of (i) a one-time initial advance, made on or about
December 23, 2004, in the maximum principal amount of $5,000,000.00
("Initial Advance"), and (ii) quarterly loan advances ("Quarterly
Advances") which are paid within thirty (30) days of the end of each
fiscal quarter and in the maximum amount of the Quarterly Advance
Amount; provided, however, that the Borrower shall not be entitled
to carry forward to any subsequent quarter any Excess loan advance
resulting from any previous quarter. For purposes hereof, "Excess"
shall mean the difference between the Quarterly Advance Amount and
the amount of the loan advance actually made by the Borrower to
Sterling-Delaware in any given quarter.
"ASSET PURCHASE AGREEMENT" shall mean that certain Asset
Purchase Agreement dated September 23, 2002, by and among Borrower,
▇▇▇▇▇▇ Industries, Inc., and Tracks of Texas, Inc.
"BANK" shall mean Comerica Bank f/k/a Comerica Bank-Texas, a
Texas banking association.
"BANKRUPTCY CODE" shall mean Title 11 of the United States
Code, as amended, or any successor act or code.
"BORROWER" shall mean Texas Sterling Construction, L.P., a
Texas limited partnership, formerly known as and successor by entity
conversion to Sterling Construction Company (d/b/a Texas Sterling
Construction, Inc.), a Michigan corporation.
"BORROWING BASE" shall mean the aggregate of (i) NINETY
PERCENT (90%) of the Forced Sale Value, as determined by the
Appraisal, for each item of Existing Major Equipment and which is to
be curtailed or reduced each month, on the last calendar day of each
calendar month, by ONE AND TWO-TENTHS PERCENT (1.2%) of the
Originally Established Value for each item of Existing Major
Equipment; (ii) EIGHTY PERCENT (80%) of the Cost of new or used
Major Equipment acquired after July 18, 2001, which is to be
scheduled on a spreadsheet to be attached to the Borrowing Base
Certificate, and which is to be curtailed or reduced each month, on
the last calendar day of each month, by ONE AND TWO-TENTHS PERCENT
(1.2%) of EIGHTY PERCENT (80%) of the Cost; and (iii) SEVENTY
PERCENT (70%) of the fair market value of new or used Major
Equipment hereinafter acquired from Insituform, which is to be
scheduled on a spreadsheet to be attached to the Borrowing Base
Certificate, and which is to be curtailed or reduced each
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month, on the last calendar day of each month, beginning on the last
day of October, 2002, by ONE AND TWO-TENTHS PERCENT (1.2%) of
SEVENTY PERCENT (70%) of the Cost.
"BORROWING BASE CERTIFICATE" shall mean a certificate in the
form of EXHIBIT A to this Agreement, completed in all appropriate
respects and executed by the President, Vice President or Treasurer
of the Borrower and setting forth the Borrower's computation of the
Borrowing Base as of the date of such certificate.
"BUSINESS DAY" shall mean a day on which the Bank is open to
carry on its normal commercial lending business.
"COLLATERAL" shall mean any property of the Borrower in the
possession of the Bank, the Stock, any amount in any deposit account
of the Borrower with the Bank and all of the Borrower's Equipment,
Fixtures, General Intangibles, Goods, and Instruments, wherever
located and whether now owned or hereafter acquired, together with
all replacements thereof, substitutions therefor and all proceeds
and products thereof.
"COMMITMENT AMOUNT" shall mean $17,000,000.00. The recital of
a Commitment Amount does not mean that the Bank shall be obligated
to advance such amount.
"CONTRACT RATE" shall mean, as of any date of determination,
the annual rate of interest which, pursuant to Section 2.4 of this
Agreement, would be applicable to the Note if the annual rate of
interest were determined without the Maximum Legal Rate limitation.
"COST" shall mean the purchase price and all other costs
related to the purchase of the Equipment which are eligible to be
capitalized under GAAP, including taxes, transportation, warranties,
set-up charges, instructions, license fees or other miscellaneous
amounts.
"CURRENT ASSETS" shall mean, as of any applicable date of
determination, all cash, non-affiliated customer receivables (which
are not subject to any dispute), and United States government
securities and any other assets classified as current assets under
GAAP of a Person.
"CURRENT LIABILITIES" shall mean, as of any applicable date of
determination, all liabilities of a Person that should be classified
as current in accordance with GAAP.
"DEBT" shall mean, as of any applicable date of determination,
all items of indebtedness, obligation or liability of a Person,
whether matured or unmatured, liquidated or unliquidated, direct or
indirect, absolute or contingent, joint or several, that should be
classified as liabilities in accordance with GAAP.
"DEBT RATIO" shall mean the ratio of Debt to Tangible Net
Worth.
"DEFAULT" shall mean a condition or event which, with the
giving of notice or the passage of time, or both, would become an
Event of Default.
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"DISBURSEMENT DATE" shall mean each date upon which the Bank
makes a loan to the Borrower under Section 2.1 of this Agreement.
"ENVIRONMENTAL LAWS" means any and all federal, state, and
local laws, regulations, and requirements pertaining to health,
safety, or the environment, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act, as amended, 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et
seq., the Occupational Safety and Health Act, as amended, 29 U.S.C.
Section 651 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et
seq., the Clean Water Act as amended, 33 U.S.C. Section 1251 et
seq., the Toxic Substances Control Act, as amended, 15 U.S.C.
Section 2601 et seq., and all similar laws, regulations, and
requirements of any governmental authority or agency having
jurisdiction over the Borrower or any of its properties or assets,
as such laws, regulations, and requirements may be amended or
supplemented from time to time.
"EQUIPMENT" shall mean equipment of the Borrower in which the
Bank has a validly perfected first lien security interest, which is
in then good working order, and is not damaged, and which is located
within the State of Texas.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, or any successor act or code.
"EURODOLLAR RATE" shall have the meaning ascribed to it in the
Note.
"EVENT OF DEFAULT" shall mean any of those conditions or
events listed in Section 8.1 of this Agreement.
"EXISTING MAJOR EQUIPMENT" shall mean those items of the
Borrower's equipment set forth on the Appraisal that were acquired
on or before July 18, 2001.
"FINANCIAL STATEMENTS" shall mean all those balance sheets,
earnings statements and other financial data (whether of
Sterling-Delaware, SHH, the Borrower, any Subsidiary, any guarantor
or otherwise) which have been furnished to the Bank for the purpose
of, or in connection with, this Agreement and the transactions
contemplated hereby.
"FINANCING STATEMENT" shall mean UCC financing statements
describing the Bank as secured party and the Borrower as debtor
covering the Collateral and otherwise in such form, for filing in
such jurisdictions and with such filing offices as the Bank shall
reasonably deem necessary or advisable.
"FORCED SALE VALUE" shall mean the forced sale value
established for each item of Existing Major Equipment.
"GAAP" shall mean, as of any applicable date of determination,
generally accepted accounting principles consistently applied.
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"GUARANTORS" shall mean, individually and collectively, SHH,
Sterling -- Delaware, and Sterling General, Inc.
"GUARANTY" shall mean a guaranty in the form of EXHIBIT B to
this Agreement pursuant to which the Guarantors unconditionally
guarantee to the Bank repayment of all of the Indebtedness.
"HAZARDOUS SUBSTANCE" means any substance, product, waste,
pollutant, material, chemical, contaminant, constituent, or other
material which is or becomes listed, regulated, or addressed under
any Environmental Law, including, without limitation, asbestos,
petroleum, and polychlorinated biphenyls.
"INDEBTEDNESS" shall mean all loans, advances and indebtedness
of the Borrower to the Bank under this Agreement and the Prior
Agreement, together with all other indebtedness, obligations and
liabilities whatsoever of the Borrower to the Bank, whether matured
or unmatured, liquidated or unliquidated, direct or indirect,
absolute or contingent, joint or several, due or to become due, now
existing or hereafter arising, including the Term Loans.
"INSITUFORM" shall mean, individually and collectively,
Insituform, Inc., a Texas corporation, ▇▇▇▇▇▇ Industries, Inc., a
Texas corporation, and Tracks of Texas, a Texas corporation.
"LOAN DOCUMENTS" shall mean the Prior Agreement, the Term
Notes, and all accompanying prior loan documents, this Agreement,
the agreements or instruments described or referred to in Section 4
hereof, and any and all other agreements or instruments heretofore,
now, or hereafter executed and delivered by the Borrower, any
Guarantor, any Pledgor, or any other Person (other than
participation or similar agreements between the Bank and any other
bank or creditor with respect to any Indebtedness pursuant to this
Agreement) in connection with, or as security for the payment or
performance of, the Prior Agreement, the Term Notes, the Note(s), or
this Agreement, as such agreements may be amended, renewed,
extended, modified, restated, rearranged, increased, and/or
supplemented from time to time.
"MAJOR EQUIPMENT" shall mean the items of Existing Major
Equipment and Equipment acquired after July 18, 2001, which the Bank
agrees to allow the Borrower to include in the Borrowing Base.
"MAXIMUM LEGAL RATE" shall have the meaning set forth in
Section 2.6 of this Agreement.
"NASCIT" shall mean the North Atlantic Smaller Companies
Investment Trust plc.
"NET BOOK VALUE" shall mean the book value established by the
Borrower's books and records subject to the Bank's review and
approval.
"NET CURRENT ASSETS" shall mean Current Assets less Current
Liabilities.
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"NET INCOME" shall mean with respect to any Person, such
Person's net income after the payment of all expenses, including all
taxes.
"NO DEFAULT CERTIFICATE" shall mean that certain certificate
delivered to Bank pursuant to and in accordance with Section 6.1.3
of this Agreement and in the form of the certificate attached hereto
as EXHIBIT J.
"NOTE" shall mean the promissory note conforming to Section
2.3 of this Agreement and in the form of EXHIBIT C to this
Agreement, and any and all renewals, extensions, rearrangements,
amendments, supplements, modifications, and/or increases thereof.
"NOTES RECEIVABLE FROM SHAREHOLDERS" shall mean any promissory
notes payable to the Borrower from its shareholders or other parties
having an ownership interest in the Borrower.
"ORIGINALLY ESTABLISHED VALUE" shall mean ninety percent (90%)
of the Forced Sale Value.
"OTHER MISCELLANEOUS EQUIPMENT" shall mean items of Equipment
owned by the Borrower which are not Existing Major Equipment and
which the Bank allows to be included in the Borrowing Base.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any person succeeding to the present powers and functions of the
Pension Benefit Guaranty Corporation.
"PERMITTED LIENS" shall mean:
(a) liens and encumbrances in favor of the Bank;
(b) liens for taxes, assessments or other governmental charges
incurred in the ordinary course of business and not yet past due or
being contested in good faith by appropriate proceedings and, if
requested by the Bank, bonded in a manner satisfactory to the Bank;
(c) liens not delinquent created by statute in connection with
worker's compensation, unemployment insurance, social security and
similar statutory obligations;
(d) liens of mechanics, materialmen, carriers, warehousemen or
other like statutory or common law liens securing obligations
incurred in good faith in the ordinary course of business that are
not yet due and payable;
(e) encumbrances consisting of zoning restrictions,
rights-of-way, easements or other restrictions on the use of real
property, none of which materially impairs the use of such property
by the Borrower or any Subsidiary in the operation of the business
for which it is used and none of which is violated in any material
respect by any existing or proposed structure or land use; and
6
(f) existing liens described in Schedule 5.6 attached hereto,
subject to such intercreditor agreements or subordination agreements
as the Bank shall require.
"PERSON" shall mean any individual, corporation, partnership,
joint venture, association, trust, unincorporated association, joint
stock company, government, municipality, political subdivision or
agency or other entity.
"PLEDGE AGREEMENT" shall mean that certain Supplemental
Security Agreement in the form of EXHIBIT E to this Agreement by
which Sterling -- Delaware pledges to the Bank a security interest
in the Stock.
"PLEDGOR" shall mean any Person who pledges, mortgages, grants
a lien in, assigns, or otherwise signs any document making its
assets serve as security for all or any portion of the Indebtedness.
"PRIME RATE" shall mean that annual rate of interest
designated by the Bank as its base rate and which is changed by the
Bank from time to time. The Prime Rate may not necessarily be the
lowest rate charged by the Bank on credit facilities such as this.
"PUT EXERCISE NOTES" shall mean those certain five-year
Promissory Notes dated December 22, 2004, executed by
Sterling-Delaware, and payable to the Put Shareholders and those
certain five-year Promissory Notes dated November 13, 2004, executed
by Sterling-Delaware, and payable to the Put Shareholders.
"PUT SHAREHOLDERS" shall mean ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ &
Co., Maarten ▇. ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
"QUARTERLY ADVANCE AMOUNT" shall mean $200,000.00.
"REVOLVING LOAN" or "LOAN" shall mean an advance made by the
Bank to the Borrower under Section 2.1 of this Agreement on a
Disbursement Date. Collectively, all such advances, and any and all
renewals, extensions, rearrangements, amendments, modifications,
and/or increases thereof, are referred to as "REVOLVING LOANS" or
"LOANS".
"SECURITY AGREEMENT" shall mean the Supplemental Security
Agreement in the form of EXHIBIT F to this Agreement pursuant to
which the Borrower grants to the Bank a security interest in its
Equipment, Fixtures and General Intangibles, wherever located and
whether now owned or hereafter acquired, together with all
replacements thereof, substitutions therefor and all proceeds and
products thereof.
"SHH" shall mean Sterling Houston Holdings, Inc., a Delaware
corporation, formerly Sterling Construction Company, a Delaware
corporation.
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"STERLING -- DELAWARE" shall mean Sterling Construction
Company, Inc., a Delaware corporation, formerly known as Oakhurst
Company, Inc., a Delaware corporation.
"STOCK" shall mean 100% of the common stock of SHH owned by
Sterling -- Delaware.
"SUBORDINATED DEBT" shall mean the subordinated indebtedness
of Sterling-Delaware to the Put Shareholders in the original
aggregate amount of $11,200,000.00.
"SUBSIDIARY" shall mean any corporation or other entity of
which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other
individuals performing similar functions are at the time owned,
directly or indirectly, by the Borrower (or any Guarantor or any
Pledgor) or by one or more subsidiaries or other entities owned or
controlled by the Borrower (or any Guarantor or any Pledgor) and/or
one or more of its subsidiaries.
"TANGIBLE NET WORTH" of any Person shall mean, as of any
applicable date of determination, the difference between (i) the
book value of all assets of such Person (other than Notes
Receivables from Shareholders, patents, patent rights, trademarks,
trade names, franchises, copyrights, licenses, goodwill, and similar
intangible assets) after all appropriate deductions (including,
without limitation, reserves for doubtful receivables, obsolescence,
depreciation and amortization), all as determined in accordance with
GAAP, and (ii) all Debt of such Person.
"TERM LOAN NO. 1" shall have the meaning as defined in Section
2.11.1, and any and all renewals, extensions, rearrangements,
amendments, modifications, and/or increases thereof.
"TERM LOAN NO. 2" shall have the meaning as defined in Section
2.11.2, and any and all renewals, extensions, rearrangements,
amendments, modifications, and/or increases thereof.
"TERM LOANS" shall mean, individually and collectively, Term
Loan No. 1 and Term Loan No. 2.
"TERM NOTES" shall mean those certain promissory notes
evidencing the indebtedness arising under the Term Loans.
"TERMINATION DATE" shall mean May 1, 2007.
"TOTAL LIABILITIES" shall mean all of the liabilities of any
Person and its subsidiaries on a consolidated basis as classified
according to GAAP.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of Texas and as amended from time to time.
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"UCC-3s" shall mean duly authorized assignments, amendments,
or termination statements (whichever the Bank shall require)
covering liens in the Collateral in favor of lenders other than the
Bank.
"WORKING CAPITAL" shall mean Current Assets less Current
Liabilities.
1.2. Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be construed in accordance with GAAP.
1.3. Singular and plural. Where the context herein requires, the singular
number shall be deemed to include the plural, and vice versa.
SECTION 2. COMMITMENT, INTEREST AND FEES.
2.1. Commitment. Subject to the terms and conditions of this Agreement,
the Bank agrees to make loans to the Borrower on a revolving basis of such
amount as the Borrower shall request pursuant to Section 2.2 of this Agreement
until the Termination Date, up to an aggregate principal amount outstanding at
any time not to exceed the lesser of (a) the Commitment Amount or (b) the
Borrowing Base, provided that each Disbursement Date under this Agreement must
be a Business Day, and the principal amount of each Revolving Loan made under
this Agreement shall be in the aggregate amount of $25,000.00 or an integral
multiple thereof.
2.2. Borrowing Procedures.
2.2.1 Notice. The Borrower shall give the Bank notice of the
Borrower's desire for a Revolving Loan by 2:00 p.m. (Houston, Texas time)
on the day of the requested advance. Such notice shall be by telephone
communication from an officer of the Borrower who has been given access by
the Borrower to a security code given to the Borrower by the Bank. Such
notice shall specify the proposed Disbursement Date and the principal
amount of the proposed advance for such Revolving Loan. A written
confirmation of each request shall be given by the Borrower to the Bank
within two (2) Business days after any oral advance request; written
confirmation shall be by confirmed facsimile transmission or by U.S. mail.
2.2.2 Bank Obligations. The Bank agrees to make the Revolving Loan
on the Disbursement Date as set forth in a notice to the Bank from the
Borrower conforming to the requirements of Section 2.2.1 by crediting the
Borrower's general deposit account with the Bank in the amount of such
Revolving Loan, provided, however, that the Bank shall not be so obligated
if:
(a) Any of the conditions precedent set forth in Section 4 of
this Agreement shall not have been satisfied or waived by the Bank
in accordance with Section 9.3 of this Agreement; or
(b) Such proposed Revolving Loan would cause the aggregate
unpaid principal amount of the Revolving Loans outstanding under
this Agreement to exceed the lesser of (i) the Commitment Amount or
(ii) the Borrowing Base on the Disbursement Date.
2.2.3 Intentionally Deleted.
9
2.2.4 Intentionally Deleted.
2.3. Note. The Revolving Loans shall be evidenced by the Note, executed by
the Borrower, dated the date of this Agreement, payable to the Bank on the
Termination Date (unless sooner accelerated pursuant to the terms of this
Agreement), and in the principal amount of the original Commitment Amount. The
date and amount of each Revolving Loan made by the Bank and of each repayment of
principal thereon received by the Bank shall be recorded by the Bank in its
records or, at the option of the Bank, on a schedule attached to the Note. The
aggregate unpaid principal amount so recorded by the Bank shall constitute the
best evidence of the principal amount owing and unpaid on the Note, provided,
however, that the failure by the Bank so to record any such amount or any error
in so recording any such amount (whether on the schedule attached to the Note or
otherwise) shall not limit or otherwise affect the obligations of the Borrower
under this Agreement or the Note to repay the principal amount of all the
Revolving Loans together with all interest accrued or accruing thereon.
2.4. Interest. Subject to the provisions of Section 2.6 below, the Note
shall bear interest on the outstanding principal balance from time to time
outstanding under the Note at a variable rate equal to the Prime Rate or the
Eurodollar Rate (as defined in the Note) plus, depending upon the Borrower's
Debt Ratio, calculated pursuant to Section 6.6 hereof, the following Applicable
Margin:
APPLICABLE EURODOLLAR APPLICABLE PRIME
RATE MARGIN RATE MARGIN DEBT RATIO
--------------------- ---------------- ----------------------------------
2.00% Zero Less than or equal to 1.65
2.50% .25% Greater than 1.65 and less than or
equal to 1.85
3.00% .50% Greater than 1.85
The above rate shall be established effective beginning on the first day
of the following calendar quarter based upon receipt of the financial
information necessary to determine the Debt Ratio for the preceding calendar
quarter, and shall remain in effect through the end of the following calendar
quarter until the Bank is in possession of the financial information necessary
to calculate the Debt Ratio for the next calendar quarter. The interest rates
called for above shall remain in effect until the maturity of the Note, whether
such maturity is by acceleration or otherwise, and after maturity, interest
shall accrue at a rate equal to six percent (6%) per annum plus the rate
otherwise prevailing hereunder, but not to exceed the Maximum Legal Rate, as
defined below. Interest shall be payable to the extent then accrued on the first
day of each calendar month, beginning March 1, 2005, until maturity (whether by
acceleration or otherwise) and from and after such maturity, on demand. The rate
of interest applicable to the Note shall change as and when the Bank's Prime
Rate changes.
2.5. Renewals and Extensions. Renewals and extensions, if any, of any Loan
shall he at the Bank's discretion and shall be evidenced by such documents and
instruments as the Bank may require in its sole discretion. The Bank shall not
be obligated to accommodate any renewals and extensions.
10
2.6. Maximum Rate. The following provisions shall control this Agreement
and the Note:
(a) No agreements, conditions, provision or stipulations
contained in this Agreement or in any other agreement between the
Borrower and the Bank, or the occurrence of an Event of Default, or
the exercise by the Bank of the right to accelerate the payment of
the maturity of principal and interest, or to exercise any option
whatsoever contained in this Agreement or any other agreement
between the Borrower and the Bank, or the arising of any contingency
whatsoever, shall entitle the Bank to collect, in any event,
interest exceeding the maximum rate of nonusurious interest allowed
from time to time by applicable state or federal laws as now or as
may hereinafter be in effect (the "MAXIMUM LEGAL RATE") and in no
event shall the Borrower be obligated to pay interest exceeding such
Maximum Legal Rate, and all agreements, conditions or stipulations,
if any, which may in any event or contingency whatsoever operate to
bind, obligate or compel the Borrower to pay a rate of interest
exceeding the Maximum Legal Rate shall be without binding force or
effect, at law or in equity, to the extent only of the excess of
interest over such Maximum Legal Rate (the "EXCESS"). In the event
any interest is charged in excess of the Maximum Legal Rate, the
Borrower acknowledges and stipulates that any such charge shall be
the result of an accidental and bona fide error, and such Excess
shall be, first, applied to reduce the principal of any obligations
due, and, second, returned to the Borrower, it being the intention
of the parties hereto not to enter at any time into an usurious or
otherwise illegal relationship. The parties hereto recognize that
with fluctuations in the prime commercial interest rate from time to
time announced by the Bank such an unintentional result could
inadvertently occur. By the execution of this Agreement, the
Borrower covenants that (a) the credit or return of any Excess shall
constitute the acceptance by the Borrower of such Excess, and (b)
the Borrower shall not seek or pursue any other remedy, legal or
equitable, against the Bank based, in whole or in part, upon the
charging or receiving of any interest in excess of the Maximum Legal
Rate. For the purpose of determining whether or not any Excess has
been contracted for, charged or received by the Bank, all interest
at any time contracted for, charged or received by the Bank in
connection with the Borrower's obligations shall be amortized,
prorated, allocated and spread in equal parts during the entire term
of this Agreement. If at any time the rate of interest payable
hereunder shall be computed on the basis of the Maximum Legal Rate,
any subsequent reduction in the Contract Rate shall not reduce such
interest thereafter payable hereunder below the amount computed on
the basis of the Maximum Legal Rate until the aggregate amount of
such interest accrued and payable under this Agreement equals the
total amount of interest which would have accrued if such interest
had been at all times computed solely on the basis of the Contract
Rate.
(b) Unless preempted by federal law, the rate of interest from
time to time in effect hereunder shall not exceed the "indicated
rate ceiling" from time to time in effect as provided in Chapter 303
of the Texas Finance Code.
(c) The provisions of this Section shall be deemed to be
incorporated into every document or communication relating to the
Indebtedness which sets
11
forth or prescribes any account, right or claim or alleged account,
right or claim of the Bank with respect to the Borrower (or any
other obligor in respect of the Indebtedness), whether or not any
provisions of this Section 2.6 is referred to therein. All such
documents and communications and all figures set forth therein
shall, for the sole purpose of computing the extent of the
obligations asserted by the Bank thereunder, be automatically
recomputed by the Borrower or any other obligor, and by any court
considering the same, to give effect to the adjustments or credits
required by this Section 2.6.
(d) If the applicable state or federal law is amended in the
future to allow a greater rate of interest to be charged under this
Agreement than is presently allowed by applicable state or federal
law, then the limitation of interest hereunder shall be increased to
the maximum rate of interest allowed by applicable state or federal
law, as amended, which increase shall be effective hereunder on the
effective date of such amendment, and all interest charges owing to
the Bank by reason thereof shall be payable upon demand.
(e) The provisions of Chapter 346 of the Texas Finance Code
are specifically declared by the parties hereto not to be applicable
to this Agreement or any other agreements executed in connection
herewith or therewith or to the transactions contemplated hereby or
thereby.
2.7. Fees.
2.7.1 Commitment Fee. The Borrower agrees to pay to the Bank a
commitment fee for the period from and including the date of this
Agreement to the Termination Date equal to one-quarter of one percent (1/4
of 1%) per annum on the average daily difference between the Commitment
Amount and the aggregate unpaid principal balance of the Revolving Loans.
Such commitment fee shall be payable on the first Business Day of April,
July, October and January, beginning April 1, 2005, and on the Termination
Date, for the periods ending on such dates.
2.7.2 Preparation Fees. Simultaneously with the execution of this
Agreement, the Borrower shall pay to the Bank the amount of the Bank's
expenses (including reasonable attorney's fees and disbursements) incurred
by the Bank in connection with the preparation of this Agreement and
related instruments.
2.7.3 Modification Fee. Prior to the execution hereof, the Borrower
has delivered to the Bank a $15,000.00 modification fee. Borrower
acknowledges that this fee has been delivered to the Bank in connection
with the Bank's expenditure of time and effort in reviewing financial
information concerning the Borrower and the Guarantors, and such fee may
be retained by the Bank whether the indebtedness described herein is
prepaid, whether as a result of acceleration or otherwise.
2.8. Basis of Computation. The amount of all interest and fees hereunder
shall be computed for the actual number of days elapsed on the basis of a year
consisting of 360 days.
12
2.9. Prepayments.
2.9.1 Mandatory Prepayments. The Borrower shall pay to the Bank the
amount, if any, by which the aggregate unpaid principal amount of all
Revolving Loans from time to time exceeds the Borrowing Base, together
with all interest accrued and unpaid on the amount of such excess, but
without other premium or penalty. Such prepayment shall be immediately due
and owing upon the occurrence of any such excess and, at the option of the
Bank, any mandatory prepayment made under this Section 2.9.1 will reduce
the Commitment Amount.
2.10. Basis of Payments. All sums payable by the Borrower to the Bank
under this agreement shall be paid directly to the Bank at its principal office
in immediately available funds, without set-off, deduction or counterclaim.
2.11. Term Loans.
2.11.1 The Bank has made the Borrower a Term Loan ("TERM LOAN NO.
1") as described in that certain note dated May 28, 1998 in the maximum
amount of $500,000.00 and which bears interest at a fixed rate of nine and
three-tenths percent (9.3%) per annum and attached hereto as EXHIBIT H.
The Term Loan is secured by, among other things, a first lien Deed of
Trust upon property described in part as that certain 7.225 acre tract
improved with a 5,913 square foot service center located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇. The advances under the Term Loan have been limited
to the lesser of eighty-three percent (83%) of the cost or appraised value
of the headquarters and distribution center described above.
2.11.2 The Bank has also made a term loan ("TERM LOAN NO. 2") to the
Borrower in the maximum amount of $1,100,000.00, as described in the note
attached hereto as EXHIBIT I. Term Loan No. 2 is secured by, among other
things, a second lien Deed of Trust on the property described in Section
2.11.1.
SECTION 3. SECURITY.
To secure full and timely performance of the Borrower's covenants set out
in this Agreement and to secure the repayment of the Note and all other
Indebtedness whatsoever of the Borrower to the Bank, the Borrower agrees to
grant and assign a lien upon and security interest in the Collateral pursuant to
the Security Agreement, the Pledge Agreement, the Financing Statement and other
instruments and agreements satisfactory to the Bank.
Borrower hereby acknowledges that notice of intent to terminate, by any
creditor who has entered into a subordination or intercreditor agreement, which
would result in such intercreditor agreement becoming partially or wholly
ineffective, shall represent, at the Bank's election, an unsatisfactory interest
in the Collateral.
The Bank shall release from all liens (and execute any UCC releases
reasonably requested by Borrower as to) any U.S. 59 Contract Equipment or Port
Contract Equipment returned by Borrower to Sellers as provided in the definition
of "Borrowing Base".
13
SECTION 4. CONDITIONS PRECEDENT TO OBLIGATIONS OF BANK.
4.1. Conditions to First Disbursement. The obligations of the Bank under
this Agreement are subject to the occurrence, prior to or on the Disbursement
Date first occurring, of each of the following conditions, any or all of which
may be waived in whole or in part by the Bank in writing:
4.1.1 Documents Executed and Filed. The Borrower shall have executed
(or caused to be executed) and delivered to the Bank and, as appropriate,
there shall have been filed with such filing offices as the Bank shall
deem appropriate, the following:
(a) the Note;
(b) this Agreement;
(c) the Security Agreement;
(d) the Pledge Agreement;
(e) the Financing Statement;
(f) the Guaranties;
(g) the UCC-3s;
(h) the Section 26.02 Notice; and
(i) the UCC-1s.
4.1.2 Certified Resolutions. The Borrower shall have furnished to
the Bank a copy of the unanimous consent of all of the partners of
Borrower's partnership authorizing the execution, delivery, and
performance of this Agreement, the borrowing hereunder, the Note and any
other documents contemplated by this Agreement, as applicable, which shall
have been certified by an authorized representative of the Borrower as of
the Disbursement Date first occurring.
4.1.3 Certified Resolutions. The Borrower shall have furnished to
the Bank a copy of resolutions of the Board of Directors of SHH, and any
Guarantor, or any Pledgor authorizing the execution, delivery and
performance of this Agreement, any guaranty agreement or pledge agreement
and any other documents contemplated by this Agreement, as applicable,
which shall have been certified by the Secretary or Assistant Secretary of
such party as of the Disbursement Date first occurring.
4.1.4 Certificate of Limited Partnership. The Borrower shall have
furnished to the Bank a copy of the Certificate of Limited Partnership,
including all amendments thereto, and all other charter documents of the
Borrower, all of which shall have been certified by the state agency
issuing the same as of a date reasonably near the Disbursement Date first
occurring.
4.1.5 Certified Articles. The Borrower shall have furnished to the
Bank a copy of the articles of incorporation, including all amendments
thereto, and all other charter
14
documents of SHH, and any Guarantor, or Pledgor, and all of which shall
have been certified by the state agency issuing the same as of a date
reasonably near the Disbursement Date first occurring.
4.1.6 Partnership Agreement. The Borrower shall have furnished to
the Bank a copy of the partnership agreement of the Borrower, which shall
have been certified by all the partners of the Borrower to be a true and
correct copy of the partnership agreement of the Borrower, and all
amendments and modifications thereof, as of the Disbursement Date first
occurring.
4.1.7 Certified Bylaws. The Borrower shall have furnished to the
Bank a copy of the Bylaws of SHH, any Guarantor, and any Pledgor, which
shall have been certified by the respective Secretary or Assistant
Secretary of such party as of the Disbursement Date first occurring.
4.1.8 Certificate of Good Standing. The Borrower shall have
furnished to the Bank a certificate of good standing with respect to SHH,
any Guarantor and any Pledgor, which shall have been certified by the
state agency issuing the same as of a date reasonably near the
Disbursement Date first occurring.
4.1.9 Certificate of Incumbency. The Borrower shall have furnished
to the Bank a certificate of the Secretary or Assistant Secretary of the
Borrower, SHH, any Guarantor, and any Pledgor, certified as of the
Disbursement Date first occurring, as to the incumbency and signatures of
the officers of such party signing this Agreement, the Note and any
documents contemplated or delivered under this Agreement, as applicable.
4.1.10 UCC Lien Search. The Bank shall have received UCC record and
copy searches, evidencing the appropriate filing and recording of the
Financing Statements and disclosing no notice of any liens or encumbrances
filed against any of the Collateral in any relevant jurisdiction other
than the Financing Statements and other than as those relating to the
Permitted Liens.
4.1.11 Hazard Insurance. The Borrower shall have furnished to the
Bank, in form and amounts and with companies satisfactory to the Bank,
evidence of hazard insurance policies naming the Bank as "mortgagee" or
"loss payee", and as an "additional insured", and relating to the assets
and properties (including, but not limited to, the Collateral) of the
Borrower. Such policies shall contain endorsements that they will not be
cancelled without 30 days prior written notice to the Bank.
4.1.12 Intentionally Deleted.
4.1.13 Approval of Bank Counsel. All actions, proceedings,
instruments and documents required to carry out the transactions
contemplated by this Agreement or incidental thereto and all other related
legal matters shall have been satisfactory to and approved by legal
counsel for the Bank, and said counsel shall have been furnished with such
certified copies of actions and proceedings and such other instruments and
documents as they shall have reasonably requested.
15
4.1.14 Other Information and Documentation. The Bank shall have
received such other information, certificates and executed documents as
they shall have reasonably requested.
4.1.15 Covenants. The Borrower hereby covenants and agrees that it
shall provide the Bank before the execution hereof, certified, true,
correct and complete copies of (i) the certificate of merger evidencing
the conversion of the Predecessor into the Borrower as certified by the
Secretary of State of the State of Texas, (ii) the partnership agreement
of the Borrower, together with all amendments thereto, (iii) the
Certificate of Limited Partnership, together with all amendments thereto,
and (iv) all other documents and agreements concerning the governance or
formation of the Borrower.
4.2. Conditions to All Disbursements. The obligation of the Bank to make
any Revolving Loan on any Disbursement Date, including, but not limited to, the
Disbursement Date first occurring, are subject to the occurrence, prior to or on
the Disbursement Date related to such Revolving Loan, of each of the following
conditions, any or all of which may be waived in whole or in part by the Bank in
writing. Additionally, the Bank's lien in the Collateral shall be, as it relates
to the Collateral, a first and superior lien subject only to the Permitted
Liens.
4.2.1 Certificate. The Bank shall have received a certificate,
executed by the President, Vice President or Treasurer of Sterling
General, Inc., in its capacity as the sole general partner of the
Borrower, certified as of such Disbursement Date, and confirming that, as
of such Disbursement Date:
(a) No Default or Event of Default has occurred and is
continuing; and
(b) The warranties and representations set forth in Section 5
of this Agreement are true and correct on and as of such
Disbursement Date.
4.2.2 Borrowing Base Certificate. The Bank shall have received from
the Borrower a Borrowing Base Certificate, certified as of such
Disbursement Date and confirming that, as of such Disbursement Date, the
aggregate unpaid principal amount of all Revolving Loans (including the
Revolving Loan to be made on such Disbursement Date) does not exceed the
lesser of the Commitment Amount or the Borrowing Base as in effect on such
Disbursement Date.
4.2.3 Bank Satisfaction. The Bank shall not know or have any
reasonable reason to believe that, as of such Disbursement Date:
(a) Any Default or Event of Default has occurred and is
continuing;
(b) Any warranty or representation set forth in Section 5 of
this Agreement shall not be true and correct; or
(c) Any provision of law, any order of any court or other
agency of government or any regulation, rule or interpretation
thereof shall have had any material adverse effect on the validity
or enforceability of this Agreement, the Note, the Security
Agreement, the Pledge Agreement, the Financing Statement, or the
Guaranties.
16
SECTION 5. WARRANTIES AND REPRESENTATIONS.
The Borrower represents and warrants to the Bank that:
5.1. Corporate Existence and Power. (a) The Borrower is a limited
partnership duly organized and validly existing under the laws of the State of
Texas, (b) each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the law of its state of incorporation, (c)
the Borrower and each of the Subsidiaries have the partnership or corporate
power and authority to own their respective properties and assets and to carry
out their respective business as now being conducted and are qualified to do
business and in good standing in every jurisdiction wherein such qualification
is necessary and (d) the Borrower has the partnership power and authority to
execute and perform this Agreement, to borrow money in accordance with its
terms, to execute and deliver the Note and other documents contemplated hereby,
to grant to the Bank liens and security interests in the Collateral as hereby
contemplated and to do any and all other things required of it hereunder.
5.2. Authorization and Approvals. The execution, delivery and performance
of this Agreement, the Pledge Agreement, the borrowing hereunder and the
execution and delivery of the Note, the Security Agreement, the Financing
Statement, and other documents contemplated hereby have been duly authorized by
all requisite partnership or corporate action, (a) do not require registration
with or consent or approval of, or other action by, any federal, state or other
governmental authority or regulatory body, or, if such registration, consent or
approval is required, the same has been obtained and disclosed in writing to the
Bank, (b) will not violate any provision of law, any order of any court or other
agency of government, the partnership agreement of the Borrower, any provision
of any indenture, agreement or other instrument to which the Borrower is a
party, or by which it or any of its properties or assets are bound, (c) will not
be in conflict with, result in a breach of or constitute (with or without notice
or passage of time) a default under any such indenture, agreement or other
instrument, and (d) will not result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the properties or
assets of the Borrower other than in favor of the Bank and as contemplated
hereby. The execution, delivery and performance of the Guaranties and other
contemplated thereby (e) do not require registration with or consent or approval
of, or other action by, any federal, state or other governmental authority or
regulatory body, or, if such registration, consent or approval is required, the
same has been obtained and disclosed in writing to the Bank, (f) will not
violate any provision of law, any order of any court or other agency of
government, any provision of any indenture, agreement or other instrument to
which either Guarantor is a party, or by which either or any of their properties
or assets are bound, (g) will not be in conflict with, result in a breach of or
constitute (with or without notice or passage of time) a default under any such
indenture, agreement or other instrument, and (h) will not result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of either Guarantor other than
in favor of the Bank and as contemplated hereby.
5.3. Valid and Binding Agreement. This Agreement is, and the Note, the
Security Agreement, the Pledge Agreement, the Financing Statement, and all Loan
Documents contemplated hereby will be, when delivered, valid and binding
obligations of the Borrower, and the Guaranties and all other documents
contemplated thereby and all other Loan Documents will be, when delivered, valid
and binding obligations of the respective Guarantor or Pledgor, as applicable,
in each case enforceable in accordance with their respective terms except that
17
enforcement may be subject to any applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally.
5.4. Actions, Suits or Proceedings. Except as disclosed on Schedule 5.4,
there are no actions, suits or proceedings, at law or in equity, and no
proceedings before any arbitrator or by or before any governmental commission,
board, bureau or other administrative agency, pending, or, to the best knowledge
of the Borrower, threatened against or affecting the Borrower, any of the
Subsidiaries, any Guarantor or any Pledgor, or any properties or rights of the
Borrower, any of the Subsidiaries, any Guarantor or any Pledgor, which, if
adversely determined, could materially impair the right of the Borrower or any
of the Subsidiaries to carry on business substantially as now conducted or could
have a material adverse effect upon the financial condition of the Borrower, any
of the Subsidiaries, any Guarantor, or any Pledgor.
5.5. Subsidiaries. The Borrower has no wholly or partially owned
Subsidiaries.
5.6. No Liens, Pledges, Collateral Assignments or Security Interests.
Except for Permitted Liens, none of the Borrower's or the Subsidiaries' assets
and properties, including the Collateral, is subject to any mortgage, pledge,
lien, security interest or other encumbrance of any kind or character.
5.7. Accounting Principles. The Financial Statements have been prepared in
accordance with GAAP and fully and fairly present the financial condition of
SHH, the Borrower and their Subsidiaries as of the dates, and the results of
their operations for the periods, for which the same are furnished to the Bank.
To the best of the Borrower's knowledge and belief, neither SHH nor the Borrower
has any material contingent obligations, liabilities for taxes, long-term leases
or unusual forward or long-term commitments not disclosed by, or reserved
against in, the Financial Statements.
5.8. No Adverse Changes. There has been no material adverse change in the
business, properties or condition (financial or otherwise) of SHH, any
Guarantor, the Borrower or any of their Subsidiaries since the date of the
latest of the Financial Statements, except as set forth on Schedule 5.8.
5.9. Conditions Precedent. As of each Disbursement Date, all appropriate
conditions precedent referred to in Section 4 hereof shall have been satisfied
(or waived in writing by the Bank).
5.10. Taxes. Except as otherwise previously disclosed in writing to the
Bank, the Borrower and the Subsidiaries have filed by the due date therefor all
federal, state and local tax returns and other reports they are required by law
to file and which are material to the conduct of their respective businesses,
have paid or caused to be paid all taxes, assessments and other governmental
charges that are shown to be due and payable under such returns, and have made
adequate provision for the payment of such taxes, assessments or other
governmental charges which have accrued but are not yet payable. Except as
otherwise previously disclosed in writing to the Bank, the Borrower has no
knowledge of any deficiency or assessment in a material amount in connection
with any taxes, assessments or other governmental charges not adequately
disclosed in the Financial Statements.
5.11. Compliance with Laws. Except as disclosed on Schedule 5.11, the
Borrower and the Subsidiaries have complied with all applicable laws, to the
extent that failure to comply
18
would materially interfere with the conduct of the business of the Borrower or
any of the Subsidiaries.
5.12. Indebtedness. Except as disclosed on Schedule 5.12, the Borrower and
the Subsidiaries have no indebtedness for money borrowed and no direct or
indirect obligations under any leases (whether or not required to be capitalized
under GAAP) or any agreements of guarantee or surety except for the endorsement
of negotiable instruments by the Borrower and the Subsidiaries in the ordinary
course of business for deposit or collection.
5.13. Material Agreements. Except as disclosed on Schedule 5.13 and other
than employment agreements of which the Bank has been given notice and
subcontracts and contracts necessary to the conduct of the Borrower's or any
Subsidiary's business in the ordinary course, the Borrower and the Subsidiaries
have no material leases, contracts or commitments of any kind (including,
without limitation, employment agreements, collective bargaining agreements,
powers of attorney, distribution contracts, patent or trademark licenses,
contracts for future purchase or delivery of goods or rendering of services,
bonus, pension and retirement plans, or accrued vacation pay, insurance and
welfare agreements); to the best knowledge of the Borrower, all parties to such
agreements (including the Borrower and the Subsidiaries) have complied with the
provisions of such leases, contracts or commitments; and to the best knowledge
of the Borrower, no party to such agreements (including the Borrower and the
Subsidiaries) is in default thereunder, nor has there occurred any event which
with notice or the passage of time, or both, would constitute such a default.
5.14. Margin Stock. Neither the Borrower nor any of the Subsidiaries is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, and no part of the proceeds of any loan hereunder will be used,
directly or indirectly, to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock or
for any other purpose which might violate the provisions of Regulation T, U or X
of the said Board of Governors. The Borrower does not own any margin stock.
5.15. Pension Funding. The Borrower has not incurred any material
accumulated funding deficiency within the meaning of ERISA and has not incurred
any material liability to the PBGC in connection with any employee benefit plan
established or maintained by the Borrower or any of the Subsidiaries and no
reportable event or prohibited transaction, as defined in ERISA, has occurred
with respect to such plans.
5.16. Misrepresentation. No warranty or representation by the Borrower
contained herein or in any certificate or other document furnished by the
Borrower pursuant hereto contains any untrue statement of material fact or omits
to state a material fact necessary to make such warranty or representation not
misleading in light of the circumstances under which it was made.
5.17. Equipment. Borrower warrants and represents that Bank has a first
lien security interest in all of the Equipment that makes up the Borrowing Base.
5.18. Partnership Ownership. Sterling General, Inc., owns a one percent
(1%) general partnership interest in the Borrower. SHH owns a ninety-nine
percent (99%) limited partnership
19
interest in the Borrower. Together, Sterling General, Inc. and SHH own, both
legally and beneficially, one hundred percent (100%) of all of the partnership
interests of the Borrower.
5.19. Names Under Which Borrower is Doing Business. Schedule 5.19 sets
forth as of the date hereof, a true and complete list of all of the names under
which Borrower is presently doing business, the names under which Borrower has
applied to do business, and the jurisdictions in which Borrower is using, or has
applied to use, such names.
SECTION 6. AFFIRMATIVE COVENANTS.
From the date hereof until the principal of and interest on the Note and
other Indebtedness is paid in full, the Borrower covenants and agrees that it
will:
6.1. Financial and Other Information.
6.1.1 Annual Financial Reports.
(a) Furnish to the Bank in form satisfactory to the Bank not
later than one hundred and twenty (120) days after the close of each
fiscal year of the Borrower, beginning with the Borrower's fiscal
year ending December 31, 2004, on a consolidated basis, a balance
sheet as at the close of each such fiscal year, statements of income
and statements of cash flows for each such fiscal year, and such
other notes and financial details as are usually included in similar
reports. Such reports shall be audited and prepared in accordance
with GAAP by independent certified public accountants of recognized
standing selected by the Borrower and acceptable to the Bank and
shall contain unqualified opinions as to the fairness of the
statements therein contained. Also, as soon as it is available, the
Borrower shall provide the Bank with a copy of its federal income
tax return.
(b) Cause to be furnished to the Bank in form satisfactory to
the Bank not later than one hundred and twenty (120) days after the
close of each fiscal year of SHH, beginning with SHH's first fiscal
year ending after the date hereof, on a consolidated basis, a
balance sheet for SHH as at the close of each such fiscal year,
statements of income and statements of cash flows for each such
fiscal year, and such other comments and financial details as are
usually included in similar reports. Such reports shall be audited
and prepared in accordance with GAAP by independent certified public
accountants of recognized standing selected by SHH and acceptable to
the Bank and shall contain unqualified opinions as to the fairness
of the statements therein contained. Also, as soon as it is
available, the Borrower shall cause SHH to provide the Bank with a
copy of its federal income tax return.
(c) Cause to be furnished to the Bank in form satisfactory to
the Bank not later than one hundred and twenty (120) days after the
close of each fiscal year of Sterling--Delaware, beginning with
Sterling--Delaware's first fiscal year ending after the date hereof,
on a consolidated basis, a balance sheet for Sterling--Delaware as
at the close of each such fiscal year, statements of income and
statements of cash flows for each such fiscal year, and such other
comments and financial details as are usually included in similar
reports. Such reports shall be audited and prepared in accordance
with GAAP by independent certified
20
public accountants of recognized standing selected by Sterling
Delaware and acceptable to the Bank and shall contain unqualified
opinions as to the fairness of the statements therein contained.
Also, as soon as it is available, the Borrower shall cause Sterling
Delaware to provide the Bank with a copy of its federal income tax
return.
(d) Sterling -- Delaware. To cause to be furnished to the
Bank, promptly upon the filing thereof, and in any event, within ten
(10) days after filing, copies of all registration statements (other
than the exhibits thereto and any registration statements on Form
S-8 or its equivalent), reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) and all other periodic reports, if any, which
Sterling Delaware shall file with the Securities and Exchange
Commission (or any Governmental Authority substituted therefor) or
any national securities exchange.
6.1.2 Quarterly Financial Statements.
(a) Furnish to the Bank not later than forty-five (45) days
after the close of each quarter of each fiscal year of the Borrower,
beginning with the quarter ending March 31, 2005, financial
statements containing the consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of each such period, consolidated
statements of income and statements of cash flows of the Borrower
and its Subsidiaries up to the end of such period. These statements
shall be prepared on substantially the same accounting basis as the
statements required in Section 6.1.1 of this Agreement and shall be
in such detail as the Bank may require, and the accuracy of the
statements shall be certified by the chief executive or financial
officer of the Borrower.
(b) Furnish to the Bank not later than forty-five (45) days
after the close of each quarter of each fiscal year of SHH,
beginning with the quarter ending March 31, 2005, financial
statements containing the consolidated and consolidating balance
sheet of SHH and its Subsidiaries as of the end of each such period,
consolidated statements of income and statements of cash flows of
SHH and its Subsidiaries up to the end of such period. These
statements shall be prepared on substantially the same accounting
basis as the statements required in Section 6.1.1 of this Agreement
and shall be in such detail as the Bank may require, and the
accuracy of the statements shall be certified by the chief executive
or financial officer of SHH.
(c) Furnish to the Bank not later than forty-five (45) days
after the close of each quarter of each fiscal year of Sterling--
Delaware, beginning with the quarter ending March 31, 2005,
financial statements containing the consolidated balance sheet of
Sterling--Delaware and its Subsidiaries as of the end of each such
period, consolidated and consolidating statements of income and
statements of cash flows of Sterling--Delaware and its Subsidiaries
up to the end of such period. These statements shall be prepared on
substantially the same accounting basis as the statements required
in Section 6.1.1 of this Agreement and shall be in such detail as
the Bank may require, and the accuracy of the statements
21
shall be certified by the chief executive or financial officer of
Sterling Delaware.
6.1.3 No Default Certificate. Together with each delivery of the
financial statements required by Sections 6.1.1 and 6.1.2 of this
Agreement, furnish to the Bank a certificate of its chief executive or
financial officer stating that no Event of Default or Default has
occurred, or if any such Event of Default or Default exists, stating the
nature thereof, the period of existence thereof and what action the
Borrower proposes to take with respect thereto. Such certificates shall
also demonstrate, by showing the applicable ratio or other calculation,
with such supporting information as the Bank requires, that
Sterling-Delaware is in compliance with Section 6.5 through and including
Section 6.8 and that Borrower is in compliance with Section 7.10 through
and including Section 7.14 hereof and shall be in the form of the
Certificate attached hereto as EXHIBIT J.
6.1.4 Listing of Payables. Furnish to the Bank quarterly by the
forty-fifth (45th) day of the end of each calendar quarter, beginning with
the calendar quarter ending March 31, 2005, a listing of payables as of
the end of that quarter of Borrower's accounts payable.
6.1.5 Quarterly Aging and Monthly Borrowing Base Certificate.
(a) Furnish to the Bank quarterly by the forty-fifth (45th)
day of the end of each fiscal quarter, beginning with the calendar
quarter ending March 31, 2005, (i) an aging as of the end of the
preceding quarter of the Borrower's accounts receivable and accounts
payable in a form satisfactory to the Bank and containing a schedule
showing the amounts, by category, thirty, sixty, and more than sixty
days past invoice date, and (ii) a report concerning the Borrower's
retainage receivables, by job, showing the amount owing and the date
the Borrower advised the owner that the Borrower had completed
performance of the job, which report shall also be in a form
satisfactory to the Bank.
(b) Additionally, the Borrower shall furnish to the Bank
monthly, and within forty-five (45) days of the end of each calendar
month, beginning with the month ending February 28, 2005, a
Borrowing Base Certificate confirming that the aggregate unpaid
principal amount of all Revolving Loans does not exceed the lesser
of the Commitment Amount or the Borrowing Base as then in effect
(or, if such is not the case, accompanied by a pre-payment of the
Note in accordance with Section 2.9.1 of this Agreement).
(c) Quarterly Report on Contracts in Progress. Within
forty-five (45) days of the end of each fiscal quarter, beginning
with the calendar quarter ending March 31, 2005, the Borrower shall
provide to the Bank, in such form as the Bank shall reasonably
request, a Contracts in Process Schedule containing a report on the
status of all of its Contracts in Process indicating the amounts
billed for that quarter, without any general overhead and
administrative costs allowance, together with a backlog report to
include the physical job locations, and in a form consistent with
that prepared for the prior quarter.
22
6.1.6 Joint Venture Accounting. Upon the request of the Bank, and
not later than one hundred and twenty (120) days after the close of such
fiscal year, a balance sheet as of the close of such fiscal year, and a
statement of income and a statement of cash flow for such fiscal year, and
such other comments and financial details as are usually included in a
financial statement for each joint venture which the Borrower is then a
part of and which has not yet been closed. Such reports shall be in such
form and detail as the Bank shall reasonably require.
6.1.7 Adverse Events. Promptly inform the Bank of the occurrence of
any Event of Default or Default, or of any occurrence which has or could
reasonably be expected to have a materially adverse effect upon the
Borrower's or any of the Guarantor's business, properties, financial
condition or ability to comply with its obligations hereunder or under any
other document executed in connection herewith.
6.1.8 Shareholder or Owner Reports. Promptly furnish to the Bank
upon becoming available a copy of all financial statements, reports,
notices, proxy statements and other communications sent by
Sterling-Delaware to its shareholders or other parties maintaining an
ownership interest, and all regular and periodic reports filed by the
Borrower with any securities exchange, the Securities and Exchange
Commission or any other state or federal agency.
6.1.9 Management Letters. Furnish to the Bank, promptly upon receipt
thereof, copies of all management letters and other reports of substance
submitted to the Borrower by independent certified public accountants in
connection with any annual or interim audit of the books of the Borrower.
6.1.10 Appraisals on all Collateral. Allow the Bank to conduct, at
least twice per year and as of such dates as the Bank shall designate, and
at the Bank's expense, an appraisal of the Borrower's Collateral, to be
performed by the Bank or such other party as the Bank shall designate, and
to be performed in such form and detail as the Bank shall reasonably
require. Nothing herein shall be deemed to limit or restrict the Bank's
right pursuant to the terms of the Security Agreement to inspect or
examine its Collateral pursuant to the terms thereof.
6.1.11 Appraisals on Equipment--Post-closing. Allow the Bank, at
the Borrower's expense, to conduct, receive, review and approve an
appraisal of the Borrower's Equipment (including, without limitation, the
Existing Major Equipment and excluding any Equipment purchased or received
from Insituform) within one hundred and twenty (120) days of the closing
of the Loan to determine the Forced Sale Value thereof, to be performed by
the Bank or such other party as the Bank shall designate, and to be
performed in such form and detail as the Bank shall reasonably require.
6.1.12 Annual Appraisals on Equipment. Allow the Bank to conduct,
once per year and as of such dates as the Bank shall designate, and at the
Borrower's expense, an appraisal of the Borrower's Equipment to determine
the Forced Sale Value, to be performed by the Bank or such other party as
the Bank shall designate, and to be performed in such form and detail as
the Bank shall reasonably require.
23
6.1.13 Inspection of Equipment. Allow representatives of the Bank to
visit and inspect any of the Equipment and Inventory at such reasonable
times during business hours and as often as may reasonably be desired and
with reasonable notice.
6.1.14 Insurance Certificates. To cause to be furnished to the Bank
evidence that the Borrower maintains adequate insurance covering the
Borrower's machinery and Equipment and Inventory to be in such form and
detail as the Bank shall reasonably require.
6.1.15 Other Information as Requested. Promptly furnish to the Bank
such other information regarding the operations, business affairs and
financial condition of the Borrower and the Subsidiaries as the Bank may
reasonably request from time to time and permit the Bank, its employees,
attorneys and agents, to inspect all of the books, records and properties
of the Borrower and the Subsidiaries at any reasonable time.
6.1.16 Confirmation of Curtailed Values of the Collateral. Furnish
evidence by March 31, 2005, satisfactory to the Bank, confirming that the
curtailed value of the Collateral is no less than the current Green Guide.
6.2. Insurance. Keep its insurable properties (including, but not limited
to, the Collateral) and the insurable properties of the Borrower's Subsidiaries
adequately insured and maintain (a) insurance against fire and other risks
customarily insured against by companies engaged in the same or a similar
business as that of the Borrower or its Subsidiaries, (b) necessary worker's
compensation insurance, (c) public liability and product liability insurance,
and (d) such other insurance as may be required by law or as may be reasonably
required in writing by the Bank, all of which such insurance shall be in such
amounts, containing such terms, in such form, for such purposes and written by
such companies as may be satisfactory to the Bank. All such insurance policies
shall contain a provision whereby they may not be canceled except upon thirty
(30) days' prior written notice to the Bank. The Borrower will deliver to the
Bank, at the Bank's request, evidence satisfactory to the Bank that such
insurance has been so procured and, with respect to casualty insurance, names
the Bank as "mortgagee" or "loss payee" and provides for payment to the Bank
even if the Borrower would not be entitled to receive payment of any proceeds.
If the Borrower fails to maintain satisfactory insurance as herein provided, the
Bank shall have the option (without any obligation) to do so, and the Borrower
agrees to repay the Bank, with interest at seven and one-half percent (7.5%) per
annum plus the Prime Rate (but in no event to exceed the Maximum Legal Rate),
all amounts so expended by the Bank. The Borrower hereby appoints the Bank as
the Borrower's attorney-in-fact, which appointment is coupled with an interest
and irrevocable, to endorse any check or draft payable to the Borrower in
connection with returned or unearned premiums on said insurance or the proceeds
of said insurance, and any amount so collected may be applied toward
satisfaction of the Indebtedness, provided, however, that the Bank shall not be
required hereunder so to act.
6.3. Taxes. Pay promptly and within the time that they can be paid without
interest or penalty all taxes, assessments and similar imposts and charges of
every kind and nature lawfully levied, assessed or imposed upon the Borrower,
its Subsidiaries and their respective property, except to the extent being
contested in good faith and, if requested by the Bank, bonded in a manner
satisfactory to the Bank. If the Borrower shall fail to pay such taxes and
assessments by their due date, then the Bank shall have the option (without any
obligation) to do so, and the
24
Borrower agrees to repay the Bank, with interest at seven and one-half percent
(7.5%) per annum plus the Prime Rate (but in no event to exceed the Maximum
Legal Rate), all amounts so expended by the Bank.
6.4. Maintain Corporation and Business. Do or cause to be done all things
necessary to preserve and keep in full force and effect the Borrower's and its
Subsidiaries' partnership or corporate existence, rights and franchises and
comply with all applicable laws; continue to conduct and operate their
respective businesses substantially as conducted and operated during the present
and preceding calendar year; at all times maintain, preserve and protect all
franchises and trade names and preserve all the remainder of their respective
property used or useful in the conduct of their respective business and keep the
same in good repair, working order and condition; and from time to time make, or
cause to be made, all needed and proper repairs, renewals, replacements,
betterments and improvements thereto so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
6.5. Intentionally Deleted.
6.6. Maintain Debt Ratio. From and after the date hereof, on a
consolidated basis, SHH shall maintain a ratio of Total Liabilities minus
Subordinated Debt to Tangible Net Worth plus Subordinated Debt of not more than
2.0 to 1.0.
6.7. Intentionally Deleted.
6.8. Maintain Cash Flow Coverage Ratio. On a consolidated basis, SHH shall
maintain a Cash Flow Coverage Ratio of not less than 1.25 to 1.0, verified
quarterly on a rolling four-quarter basis. For purposes hereof, "Cash Flow
Coverage Ratio" shall mean (i) Pre-tax income, plus depreciation, plus actual
interest expense, minus cash taxes paid (for the preceding twelve (12) months),
divided by (ii) the sum of the current maturities of all long-term debt plus
twenty-five percent (25%) of the average outstanding principal balance of the
Revolving Loan for the previous twelve (12) months (plus advances to
Sterling-Delaware for the preceding twelve months excluding the $5,000,000 one
time advance to various stockholders on December 23, 2004) plus interest expense
for the preceding twelve months. For purposes hereof, "current maturities of all
long-term debt" shall mean, at any given time, all principal and interest
payments required to be paid during the ensuing one year period from such given
time on all Debt (including Subordinated Debt) having a maturity of greater than
one year.
6.9. ERISA. (a) At all times meet and cause each of its Subsidiaries to
meet the minimum funding requirements of ERISA with respect to the Borrower's
and its Subsidiaries' employee benefit plans subject to ERISA; (b) promptly
after the Borrower knows or has reason to know (i) of the occurrence of any
event which would constitute a reportable event or prohibited transaction under
ERISA, or (ii) that the PBGC or the Borrower (or any of its Subsidiaries) has
instituted or will institute proceedings to terminate an employee pension plan,
deliver to the Bank a certificate of the chief financial officer of the Borrower
setting forth details as to such event or proceedings and the action which the
Borrower (or any such Subsidiary) proposes to take with respect thereto,
together with a copy of any notice of such event which may be required to be
filed with the PBGC; and (c) furnish to the Bank (or cause the plan
administrator to furnish the Bank) a copy of the annual return (including all
schedules and attachments) for each plan covered by ERISA, and filed with the
Internal Revenue Service by the
25
Borrower (or any such Subsidiary), not later than ten (10) days after such
report has been so filed.
6.10. Use of Loan Proceeds. Use the proceeds of the loan hereunder for the
purpose set forth in the recitals to this Agreement.
6.11. Partnership Changes. Borrower shall give Bank thirty (30) days prior
written notice of any proposed change in (i) the Borrower's name or (ii) the
name under which the Borrower is doing business if such name shall be a name
other than those set forth on Schedule 5.19 hereof, which notice shall set forth
the new name, and Borrower shall deliver to Bank a copy of the amendment to the
Borrower's partnership agreement providing for the name change promptly after it
is available.
SECTION 7. NEGATIVE COVENANTS.
From the date hereof until the principal of and interest on the Note and
other Indebtedness is paid in full, the Borrower covenants and agrees that it
will not, and will not permit any of its Subsidiaries to:
7.1. Distributions or Dividends. Declare, pay or make any distribution or
dividends with respect to any of the Borrower's assets (whether by reduction of
capital or otherwise), except that distributions or dividends permitted by
Section 7.6 from the Borrower to Sterling-Delaware or to the Borrower from any
Subsidiary of the Borrower, or any other entity in which the Borrower maintains
an ownership interest are permitted.
7.2. Stock Issuance. Issue any additional shares of its capital stock, or
any warrant, right or option relating thereto or any security convertible into
any of the foregoing.
7.3. Stock Acquisition. Purchase, redeem, retire or otherwise acquire any
of the shares of its capital stock, or make any commitment to do so.
7.4. Liens and Encumbrances. Create, incur, assume or suffer to exist any
mortgage, pledge, encumbrance, security interest, lien or charge of any kind
(including any charge upon property purchased or acquired under a conditional
sales or other title-retaining agreement or lease required to be capitalized
under GAAP) upon any of its property or assets, whether now owned or hereafter
acquired, other than Permitted Liens.
7.5. Indebtedness. Incur, create, assume or permit to exist any
indebtedness or liability on account of deposits or advances or any indebtedness
or liability for borrowed money, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, or any other
indebtedness whatsoever, except for (a) the Indebtedness, (b) indebtedness
subordinated to the prior payment in full of the Indebtedness upon terms and
conditions approved in writing by the Bank, (c) existing indebtedness to the
extent set forth on Schedule 5.12, (d) trade indebtedness incurred and paid in
the ordinary course of business, (e) contingent indebtedness to the extent
permitted by Section 7.7 of this Agreement, (f) indebtedness secured by
Permitted Liens, (g) obligations to the extent permitted by Section 7.10 of this
Agreement, and (h) the Master Equipment Sublease and Prime Leases (each as
defined in the Asset Purchase Agreement) and any renewals, extensions or
replacements of those defined subleases covering the Prime Lease Equipment
subject to such Prime Leases.
26
7.6. Extension of Credit. Make loans, advances or extensions of credit to
any Person, except for (i) sales on open account and otherwise in the ordinary
course of business, (ii) the Quarterly Advances, provided no Event of Default
then exists or would result therefrom, pursuant to the Approved Multiple-Advance
Loan, and (iii) the Approved Multiple-Advance Loan.
7.7. Guarantee Obligations. Guarantee or otherwise, directly or
indirectly, in any way be or become responsible for obligations of any other
Person, whether by agreement to purchase the indebtedness of any other Person,
agreement for the furnishing of funds to any other Person through the furnishing
of goods, supplies or services, by way of stock purchase, capital contribution,
advance or loan, for the purpose of paying or discharging (or causing the
payment or discharge of) the indebtedness of any other Person, or otherwise,
except for the endorsement of negotiable instruments by the Borrower or the
Subsidiaries in the ordinary course of business for deposit or collection.
7.8. Property Transfer, Merger or Lease-Back. (a) Sell, lease, transfer or
otherwise dispose of all or, except as to the sale of Inventory in the ordinary
course of business, any material part of its properties and assets (whether in
one transaction or in a series of transactions), (b) change its name,
consolidate with or merge into any other corporation, permit another corporation
to merge into it, acquire all or substantially all of the properties or assets
of any other Person, enter into any reorganization or recapitalization or
reclassify its capital stock, or (c) enter into any sale-leaseback transaction;
provided, however, that a Subsidiary wholly owned by the Borrower may be merged
into, or consolidated with, the Borrower or another Subsidiary wholly owned by
the Borrower, and such Subsidiary may sell, lease or transfer all or a
substantial part of its assets to the Borrower or another Subsidiary wholly
owned by the Borrower, and the Borrower or such Subsidiary may acquire all or
substantially all of the properties and assets of the Subsidiary so to be merged
into, or consolidated with, it or so to be sold, leased or transferred to it.
7.9. Acquire Securities. Purchase assets or stock in an aggregate amount
in excess of $100,000.00 from and after the date hereof, or purchase or hold
beneficially any stock or other securities of, or make any investment or acquire
any interest whatsoever in, any other Person except for the common stock of the
Subsidiaries owned by the Borrower on the date of this Agreement and except for
certificates of deposit with maturities of one year or less of United States
commercial banks with capital, surplus and undivided profits in excess of
$100,000,000 and direct obligations of the United States government maturing
within one year from the date of acquisition thereof.
7.10. Pension Plans. (a) Allow any fact, condition or event to occur or
exist with respect to an employee pension or profit sharing plan which might
constitute grounds for termination of any such plan or for the appointment by a
United States District Court of a trustee to administer any such plan, or (b)
permit any such plan to be the subject of termination proceedings (whether
voluntary or involuntary) from which termination proceedings there may result a
liability of the Borrower or any of its Subsidiaries to the PBGC which in the
opinion of the Bank, will have a materially adverse effect upon the operations,
business, property, assets, financial condition or credit of the Borrower.
7.11. Misrepresentation. Furnish the Bank with any certificate or other
document that contains any untrue statement of a material fact or omits to state
a material fact necessary to
27
make such certificate or document not misleading in light of the circumstances
under which it was furnished.
7.12. Margin Stock. Apply any of the proceeds of the Note to the purchase
or carrying of any "margin stock" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder.
7.13. Compliance with Environmental Laws. Borrower will not, and will not
allow any of its Subsidiaries to, (i) use (or permit any tenant to use) any of
its respective properties or assets for the handling, processing, storage,
transportation, or disposal of any Hazardous Substance except in all respects in
compliance with Environmental Laws, (ii) generate any Hazardous Substance except
in all respects in compliance with Environmental Laws, (iii) conduct any
activity which is likely to cause a release of any Hazardous Substance, or (iv)
otherwise conduct any activity or use any of its respective properties or assets
in any manner that is likely to violate any Environmental Law.
7.14. Pledge of Receivables. Borrower will not encumber or pledge any of
its right to receive payment, accounts receivable, jobs in progress or
retainage.
7.15. Intentionally Deleted.
7.16. Subordinated Debt-Put Shareholders. Schedule 7.16 reflects certain
debt payable by Sterling-Delaware to its shareholders. Such portion of the
Subordinated Debt is herein referred to as the "Subordinated Debt-Put
Shareholders"). Borrower may pay the funds to Sterling-Delaware to enable
quarterly payments of interest (at a rate not to exceed 12%) to be paid on the
Subordinated Debt from time to time, and principal payments resulting from the
Put exercise not to exceed the scheduled principal payments as they currently
exist as of the date hereof, in either case, so long as no Default or Event of
Default then exists or would result therefrom and after any such payment is
made. Such advances would be limited to no more than $11,500,000.00 in the
aggregate. Note that Quarterly Advances are also allowed for no more than
$200,000.00 per quarter as allowed pursuant to Section 7.6.
7.17. Intentionally Deleted.
7.18. Intentionally Deleted.
7.19. Notes Receivable from Shareholders. In no event may Notes Receivable
from Shareholders exceed $11,200,000.00 in the aggregate.
7.20. Non-ordinary Bonus. Grant of, or increase in, any bonus to officers
or employees other than in the ordinary course of business consistent with past
practice.
7.21. Incur Negative Net Income for Consecutive Quarters. The Borrower
shall not incur negative Net Income during any two (2) consecutive fiscal
quarters which, in the aggregate, exceeds $500,000.00, beginning with the fiscal
quarter ending March 31, 2005.
SECTION 8. EVENTS OF DEFAULT - ENFORCEMENT - APPLICATION OF PROCEEDS.
8.1. Events of Default. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
28
8.1.1 Failure to Pay Monies Due. If any principal of or interest on
the Note, any fees under Section 2.7 of this Agreement or any other
Indebtedness shall not be paid when due.
8.1.2 Misrepresentation. If any warranty or representation of the
Borrower, SHH, any Guarantor or any Pledgor, in connection with or
contained in this Agreement, or if any financial data or other information
now or hereafter furnished to the Bank by or on behalf of such party,
shall prove to be false or misleading in any material respect.
8.1.3 Noncompliance with Bank Agreement. If the Borrower, any
Pledgor, or any Guarantor shall fail to perform any of its obligations and
covenants under, or shall fail to comply with any of the provisions of,
this Agreement or any other agreement with the Bank to which it may be a
party, including, without limitation, any indebtedness owed by any Pledgor
or any Guarantor to the Bank.
8.1.4 Other Defaults. If the Borrower, any Subsidiary, or any
Guarantor shall default in the due payment of any of its indebtedness
(other than the Indebtedness) or in the observance or performance of any
term, covenant or condition in any agreement or instrument evidencing,
securing or relating to such indebtedness (other than nonpayment defaults
on the Subordinated Debt) and such default shall be continued for a period
sufficient to permit acceleration of the indebtedness, irrespective of
whether any such default shall be forgiven or waived by the holder
thereof.
8.1.5 Judgments. If there shall be rendered against the Borrower,
any Subsidiary, any Guarantor, or any Pledgor, one or more judgments or
decrees involving an aggregate liability of $100,000.00 or more, which has
or have become nonappealable and shall remain undischarged, unsatisfied by
insurance and unstayed for more than twenty (20) days, whether or not
consecutive; or of a writ of attachment or garnishment against the
property of the Borrower, any of the Subsidiaries, any Guarantor, or any
Pledgor shall be issued and levied in an action claiming $100,000.00 or
more and not released or appealed and bonded in a manner satisfactory to
the Bank.
8.1.6 Bankruptcy, Etc. If the Borrower or any Subsidiary or any
Guarantor shall not pay its debts as they mature or shall make a general
assignment for the benefit of creditors; or proceedings in bankruptcy, or
for reorganization or liquidation of the Borrower or any Subsidiary or any
Guarantor, under the Bankruptcy Code or under any other state or federal
law for the relief of debtors shall be commenced by the Borrower or any
Subsidiary or any Guarantor or shall be commenced against the Borrower or
any Subsidiary or any Guarantor and shall not be discharged within thirty
(30) days of commencement; or a receiver, trustee or custodian shall be
appointed for the Borrower or any Subsidiary or any Guarantor or for any
substantial portion of its respective properties or assets.
8.1.7 Change in Board of Directors or Management. Except that
Maarten ▇. ▇▇▇▇▇▇▇ may resign or be removed from the board of directors of
the Borrower, if (i) the entire board of directors of SHH and/or
Sterling-Delaware is not the same as described on Schedule 8.1.7, or (ii)
if ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ are no longer officers of
Sterling General, Inc. and SHH, whether by reason of death, resignation or
otherwise; and such change in board of directors or change in office
holder described in
29
clause (i) or (ii) above adversely impacts, in the sole judgment of the
Bank, upon the ability of the Borrower to carry on its business as
theretofore conducted.
8.1.8 Inadequate Funding or Termination of Employee/Benefit Plan(s).
If the Borrower (or any Subsidiary) shall fail to meet its minimum funding
requirements under ERISA with respect to any employee benefit plan
established or maintained by the Borrower (or any Subsidiary), or if any
such plan shall be the subject of termination proceedings (whether
voluntary or involuntary) and there shall result from such termination
proceedings a liability of the Borrower (or any Subsidiary) to the PBGC
which in the opinion of the Bank will have a materially adverse effect
upon the operations, business, property, assets, financial condition or
credit of the Borrower.
8.1.9 Occurrence of Certain Reportable Events. If there shall occur,
with respect to any pension plan maintained by the Borrower or any
Subsidiary, any reportable event (within the meaning of section 4043(b) of
ERISA) which the Bank shall determine in good faith constitutes a ground
for the termination of any such plan, and if such event continues for
thirty (30) days after the Bank gives written notice to the Borrower,
provided that termination of such plan or appointment of such trustee
would, in the opinion of the Bank, have a materially adverse effect upon
the operations, business, property, assets, financial condition or credit
of the Borrower.
8.1.10 Other Events. Should any other event occur which results in
the Bank being insecure about its right to be ultimately repaid in full
for the Indebtedness.
8.1.11 Business Suspension. If the Borrower, any Guarantor, or any
of their Subsidiaries shall voluntarily suspend the transaction of its
business; or if any Guarantor shall die.
8.1.12 Failure to provide Appraisal. Borrower shall fail to allow
the Bank to conduct an appraisal of the Equipment as required herein by
Section 6.1.11.
8.2. Acceleration of Indebtedness. Upon the occurrence of any of the
Events of Default described in Section 8.1.3 hereunder which is not cured by the
Borrower or waived by the Bank within thirty (30) days after the earlier of the
date of notice to the Borrower by the Bank of such Default or the date the Bank
is notified, or should have been notified, pursuant to the Borrower's obligation
under Section 6.1.7 of this Agreement, of such Default, or upon the occurrence
of any of the Events of Default described in Section 8.1.1, Section 8.1.2 or
Sections 8.1.4, 8.1.5, 8.1.7 through 8.1.10, all Indebtedness shall be due and
payable in full forthwith at the option of the Bank without presentation,
demand, protest, notice of intent to accelerate, notice of acceleration, notice
of dishonor, or other notice of any kind, all of which are hereby expressly
waived. Upon the occurrence of any Event of Default described in Section 8.1.6,
all commitments and other lending obligations, if any, of the Bank hereunder
shall immediately terminate, and the entire principal amount of all Indebtedness
then outstanding together with interest then accrued thereon shall become
immediately due and payable, all without written notice and without presentment,
demand, protest, notice of protest, notice of intent to accelerate, notice of
acceleration, or dishonor or any other notice of default of any kind, all of
which are hereby expressly waived by the Borrower. Unless all of the
Indebtedness is then fully paid, the Bank shall have and may exercise any one or
more of the rights and remedies for which provision is made for a secured party
under the UCC, under the Security Agreement or
30
under any other document contemplated hereby, including, without limitation, the
right to take possession and sell, lease or otherwise dispose of any or all of
the Collateral and to set-off against the Indebtedness any amount owing by the
Bank to the Borrower. The Borrower agrees, upon request of the Bank, to assemble
the Collateral and make it available to the Bank at any place designated by the
Bank which is reasonably convenient to the Bank and the Borrower.
8.3. Application of Proceeds. The proceeds of any sale or other
disposition of the Collateral authorized by this Agreement shall be applied by
the Bank, first upon all expenses authorized by the UCC and all reasonable
attorneys' fees and legal expenses incurred by the Bank; the balance of the
proceeds of such sale or other disposition shall be applied to the payment of
the Indebtedness, first to interest, then to principal; and the surplus, if any,
shall be paid over to the Borrower or to such other person or persons as may be
entitled thereto under applicable law. The Borrower shall remain liable for any
deficiency, which the Borrower shall pay to the Bank immediately upon demand.
8.4. Cumulative Remedies. The remedies provided for herein are cumulative
to the remedies for collection of the Indebtedness as provided by law or by any
mortgage, security agreement or other document contemplated hereby. Nothing
herein contained is intended, nor should it be construed, to preclude the Bank
from pursuing any other remedy for the recovery of any other sum to which the
Bank may be or become entitled for the breach of this Agreement by the Borrower.
SECTION 9. MISCELLANEOUS.
9.1. Independent Rights. No single or partial exercise of any right, power
or privilege hereunder, or any delay in the exercise thereof, shall preclude
other or further exercise of the rights of the parties to this Agreement.
9.2. Covenant Independence. Each covenant in this Agreement shall be
deemed to be independent of any other covenant, and an exception in one covenant
shall not create an exception in another covenant.
9.3. Waivers and Amendments. No forbearance on the part of the Bank in
enforcing any of its rights under this Agreement, nor any renewal, extension or
rearrangement of any payment or covenant to be made or performed by the Borrower
hereunder, shall constitute a waiver of any of the terms of this Agreement or of
any such right. No Default or Event of Default shall be waived by the Bank
except in writing signed and delivered by an officer of the Bank, and no waiver
of any Default or Event of Default shall operate as a waiver of any other
Default or Event of Default or of the same Default or Event of Default on a
future occasion. No other amendment, modification or waiver of, or consent with
respect to, any provision of this Agreement or the Note or other documents
contemplated hereby shall be effective unless the same shall be in writing and
signed and delivered by an officer of the Bank.
9.4. GOVERNING LAW. THIS AGREEMENT, AND EACH AND EVERY TERM AND PROVISION
HEREOF, SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE STATE OF
TEXAS. IF ANY PROVISION OF THIS AGREEMENT SHALL FOR ANY REASON BE HELD INVALID
OR UNENFORCEABLE, SUCH INVALIDITY OR UNENFORCEABILITY SHALL NOT AFFECT ANY OTHER
PROVISION HEREOF, BUT THIS AGREEMENT SHALL BE
31
CONSTRUED AS IF SUCH INVALID OR UNENFORCEABLE PROVISION HAD NEVER BEEN CONTAINED
HEREIN.
9.5. Survival of Warranties, Etc. All of the Borrower's covenants,
agreements, representations and warranties made in connection with this
Agreement and any document contemplated hereby shall survive the Borrowing and
the delivery of the Note hereunder and shall be deemed to have been relied upon
by the Bank, notwithstanding any investigation heretofore or hereafter made by
the Bank. All statements contained in any certificate or other document
delivered to the Bank at any time by or on behalf of the Borrower pursuant
hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by the Borrower in connection with
this Agreement.
9.6. Attorneys' Fees. The Borrower agrees that it will pay all reasonable
costs and expenses (including attorneys' fees) of the Bank in connection with
preparation of the Loan Documents and the enforcement of the Bank's rights and
remedies under this Agreement and the other Loan Documents, and in connection
with the preparation or making of any amendments, renewals, rearrangements,
increases, restatements, modifications, waivers and/or consents with respect to
this Agreement and whether this Agreement or any of the other Loan Documents
(whether now or in the future) are executed.
9.7. Payments on Saturdays, Etc. Whenever any payment to be made hereunder
or under the Note shall be stated to be due on a Saturday, Sunday or any other
day which is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension, if any, shall be included in computing
interest in connection with such payment.
9.8. Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors and
assigns; provided, however, the Borrower may not assign or transfer its rights
or obligations hereunder without the prior written consent of the Bank.
9.9. Maintenance of Records. The Borrower will keep all of its records
concerning the Collateral at its principal place of business. The Borrower will
give the Bank prompt written notice of any change in its principal place of
business, or in the location of said records.
9.10. Notices. All notices and communications provided for herein or in
any document contemplated hereby or required by law to be given shall be
effective when received or, in case of notices from the Bank to the Borrower,
upon sending by first class mail, postage prepaid, addressed as follows: (a) If
to the Borrower, to: Texas Sterling Construction, L.P., 20810 Fernbush, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, and (b) If to the Bank, to: ▇▇▇▇ ▇. ▇▇▇, Senior Vice President and
Chief Credit Officer, Comerica Bank - Texas, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, with a copy to ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attn:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President, or to such other address as a party shall have
designated to the other in writing. The giving of at least five (5) days' notice
before the Bank shall take any action described in any notice shall conclusively
be deemed reasonable for all purposes.
9.11. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures were upon the same
instrument.
9.12. Headings. Article and section headings in this Agreement are
included for the convenience of reference only and shall not constitute a part
of this Agreement for any purpose.
32
9.13. Capital Adequacy. If as a result of any regulatory change directly
or indirectly affecting the Bank or any of the Bank's affiliates there shall be
imposed, modified or deemed applicable any tax, reserve, special deposit,
minimum capital, capital ratio, or similar requirement against or with respect
to or measured by reference to loans made or to be made hereunder or
participations therein, and the result shall be to increase the cost to the Bank
or any of the Bank's affiliates of making or maintaining any loan hereunder or
to any other party maintaining any participation therein, or reduce any amount
receivable in respect of any such loan (which increase in cost, or reduction in
amount receivable, shall be the result of the Bank's or the Bank's affiliated
company's reasonable allocation among all affected customers of the aggregate of
such increase or reductions resulting from such event), then, within ten (10)
days after receipt by the Borrower of a certificate from the Bank containing the
information described below in this Section which shall be delivered to the
Borrower, the Borrower agrees from time to time to pay the Bank such additional
amounts as shall be sufficient to compensate the Bank or any of the Bank's
affiliates (for as long as such increased costs or reductions in amount
receivable exist) for such increased costs or reductions in amount receivable
which the Bank determines in the Bank's sole discretion are material. The
certificate requesting compensation under this Section 9.13 shall identify the
regulatory change which has occurred, the requirements which have been imposed,
modified or deemed applicable, the amount of such additional cost or reduction
in amount receivable and the way in which such amount has been calculated.
9.14. INDEMNIFICATION BY THE BORROWER. THE BORROWER HEREBY COVENANTS AND
AGREES TO INDEMNIFY, DEFEND AND HOLD HARMLESS THE BANK AND ITS OFFICERS,
DIRECTORS, EMPLOYEES, ATTORNEYS, AND AGENTS FROM AND AGAINST ANY AND ALL CLAIMS,
DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION, THE FEES
AND OUT-OF-POCKET EXPENSES OF COUNSEL) WHICH MAY BE INCURRED BY OR ASSERTED
AGAINST THE BANK OR ANY SUCH OTHER INDIVIDUAL OR ENTITY IN CONNECTION WITH:
(a) ANY INVESTIGATION, ACTION OR PROCEEDING ARISING OUT OF OR
IN ANY WAY RELATING TO THIS AGREEMENT, THE NOTE, OR ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS OR ANY COLLATERAL, OR
ANY ACT OR OMISSION RELATING TO ANY OF THE FOREGOING;
(b) ANY TAXES (OTHER THAN FEDERAL OR STATE INCOME TAXES),
LIABILITIES, CLAIMS OR DAMAGES RELATING TO THE COLLATERAL OR THE
BANK'S LIENS THEREON; OR
(c) THE CORRECTNESS, VALIDITY OR GENUINENESS OF ANY
INSTRUMENTS OR DOCUMENTS THAT MAY BE RELEASED OR ENDORSED TO
BORROWER BY THE BANK (WHICH SHALL AUTOMATICALLY BE DEEMED TO BE
WITHOUT RECOURSE TO THE BANK IN ANY EVENT), OR THE EXISTENCE,
CHARACTER, QUANTITY, QUALITY, CONDITION, VALUE OR DELIVERY OF ANY
GOODS PURPORTING TO BE REPRESENTED BY ANY SUCH DOCUMENTS.
33
9.15. NO ORAL AGREEMENTS. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN
DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENTS BETWEEN THE BANK AND THE
BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE BANK AND THE BORROWER.
9.16. Gender. Throughout this Agreement, the masculine shall include the
feminine and vice versa and the singular shall include the plural and vice
versa, unless the context of this Agreement indicates otherwise.
9.17. Intentionally Deleted.
9.18. Cross Default; Cross Collateral. The Borrower hereby agrees that (a)
all other agreements between Borrower and the Bank or any of its affiliates is
hereby amended so that a default under this Agreement is a default under all
other agreements and a default under any one of the other agreements is a
default under this Agreement, and (b) the collateral under this Agreement
secures the obligations now or hereafter outstanding under all other agreements
between Borrower and the Bank or any of its affiliates and the collateral
pledged under any other agreement with the Bank or any of its affiliates secures
the obligations under this Agreement.
9.19. Severability of Provisions. Any provision of this Agreement, the
Note or any other documents relating thereto that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement, such Note or such other documents or affecting the
validity or enforceability of such provision in any other jurisdiction.
9.20. Assignment. The Bank shall have the absolute and unrestricted right
to sell, assign, transfer, or grant participation in, all or any portion of the
loans and any Collateral, guaranties or other security relating thereto without
the consent of Borrower; provided, however, that no such action on the part of
the Bank shall have the effect of changing any of the Borrower's obligations
hereunder without the written consent of the Borrower.
9.21. Omnibus Name Change. Without any limitation on other provisions in
this Agreement, any reference to the Predecessor in any Loan Documents shall be
deemed to refer to the Borrower from and after the date hereof.
9.22. Authorized Filings. Borrower authorizes Bank to file all documents
of record including, without limitation, a Certificate of Fact and UCC-3
Amendments reflecting any name change of Borrower in all recording offices in
all jurisdictions where the Bank feels it is necessary or desirable to do so.
Borrower further authorizes the Bank to file any other financing statements,
assignments, continuations, and/or terminations on behalf of the Borrower, in
all such recording offices in all jurisdictions as the Bank deems necessary or
desirable in order to protect the liens granted hereby.
9.23. Assumption of Obligations.
(a) Assumption. From and after September 30, 2001, the
Borrower assumed and does hereby confirm all of the Indebtedness and
obligations of the Predecessor under the Loan Documents, including
the Prior Agreement, and
34
confirms and agrees to pay, perform, observe the terms of, satisfy
and discharge the liabilities, duties and Indebtedness arising under
the Loan Documents as though the Borrower was an original party to
such loan documents.
(b) Payments and Expenses. The Borrower hereby promises to pay
all amounts under the terms of the Loan Documents (together with all
interest invoiced by the Bank hereafter with respect to such
advances) in accordance with the terms of the Loan Documents. The
Borrower hereby confirms that, pursuant to this Agreement, the
Borrower will (i) pay all taxes and filing fees incurred with
respect to the Collateral or this Agreement and (ii) pay all legal
expenses incurred with respect to this Agreement.
(c) Obligations Unconditional. The Borrower agrees to pay all
amounts payable under the terms of the Loan Documents and to pay and
perform all other Indebtedness and obligations under the Loan
Documents. The Borrower represents and agrees that, as of the date
hereof, the Borrower's Indebtedness under the Loan Documents is not
subject to any suspensions, deferment, diminution, reduction,
recoupment, counterclaim, setoff or abatement.
(d) No Claims, Offsets or Defenses. The Borrower hereby
acknowledges and agrees that, as of the date hereof, it has no, and
there are no, claims or offsets against, or defenses or
counterclaims to, the terms and provisions of or the Indebtedness
created or evidenced by the Loan Documents.
(e) Further Actions. The Borrower represents and warrants that
it will promptly cause or has caused such actions or procedures to
be taken as are required or permitted by statute or regulation to
accomplish the conversion of the Predecessor into the Borrower.
(f) Financing Statements. The Borrower agrees to execute and
deliver, or cause to be executed and delivered, to Bank such
agreements, documents, and instruments as Bank may deem reasonably
necessary or desirable to protect its interests in the Collateral,
including UCC financing statements.
35
IN WITNESS WHEREOF, the Borrower and the Bank have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
written above.
NOTICE TO BORROWER - THIS AGREEMENT CONTAINS AN INDEMNITY PROVISION AT
SECTION 9.14.
BORROWER:
TEXAS STERLING CONSTRUCTION, L.P.,
a Texas limited partnership
By: STERLING GENERAL, INC.,
a Delaware corporation, its sole general
partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
----------------------------------
Title: Treasurer
---------------------------------
BANK:
COMERICA BANK f/k/a Comerica Bank-Texas
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇. Vice President