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EXHIBIT 10(h)
Loan Agreement
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As of August 31, 2001
Between
BORROWER LENDER
PEERLESS MFG. CO. BANK OF AMERICA, N.A.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
In consideration of the creation of the revolving facility described
below and the mutual covenants and agreements contained herein, and intending to
be legally bound hereby, Lender and Borrower agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINITIONS. In addition to any other terms defined herein,
the following terms shall have the meaning set forth with respect thereto:
"ACCEPTABLE SWAP AGREEMENTS" means any SWAP Agreement having terms
satisfactory to Lender entered into with Persons as are satisfactory to Lender.
"ACT": See Section 15.
"AGREEMENT" means this Loan Agreement and all subsequent modifications
and amendments hereto.
"APPLICABLE MARGIN" means the interest margin over the Eurodollar Rate
or the Prime Rate, as the case may be, based upon the Fixed Charge Coverage
Ratio for the period of four consecutive fiscal quarters of Borrower most
recently ended on or before the date of determination:
APPLICABLE APPLICABLE
MARGIN MARGIN
FIXED CHARGE COVERAGE RATIO EURODOLLAR RATE PRIME RATE
--------------------------- --------------- ----------
▇▇▇▇▇ ▇ 2.65% .25%
At least 1.25 to 1.0 but less than 1.50 to 1.0
▇▇▇▇▇ ▇ 2.325% 0.00%
At least 1.50 to 1.0 but less than 1.75 to 1.0
▇▇▇▇▇ ▇ 2.00% -.25%
At least 1.75 to 1.0 but less than 2.5 to 1.0
Level 4 1.75% -.375%
At least 2.50 to 1.0
LOAN AGREEMENT - Page 1
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For purposes of the foregoing, (a) the Fixed Charge Coverage Ratio shall be
determined as of the end of each fiscal quarter of Borrower's fiscal year based
upon Borrower's financial statements delivered pursuant to Section 7.1 hereof,
and (b) each change in the Applicable Margin resulting from a change in the
Fixed Charge Coverage Ratio shall be effective during the period from and
including the third day after the date of delivery to Lender of such financial
statements indicating such change and ending on the date immediately preceding
the effective date of the next change; provided that the interest rate for all
Eurodollar Loans and Prime Rate Loans shall be the Default Rate (i) at any time
that an Event of Default has occurred and is continuing, or (ii) if Borrower
fails to deliver the financial statements required to be delivered by it
pursuant to the terms of Section 7.1 hereof, during the period from the
expiration of the time for delivery thereof until such financial statements are
delivered. Until Lender receives the first financial statements which are due
for the quarter ending 9/30/01, the Applicable Margin will be that as is set
forth in Level 3 above.
"BUSINESS DAY" means the normal banking hours during any day (other
than Saturdays or Sundays or legal holidays) that banks are legally open for
business in Dallas,
Texas.
"CLAIM": See Section 15.
"CLOSING DATE": See Section 5.
"COMMITMENT" means the obligation of Lender, subject to the terms and
conditions of this Agreement, to make Loans which shall not exceed $10,000,000
at any one time outstanding.
"CONTESTED IN GOOD FAITH" means, as to any payment, tax, assessment,
charge, levy, lien, encumbrance or claim, contesting the amount, applicability
or validity thereof in good faith by appropriate proceedings or other
appropriate actions promptly initiated and diligently conducted in a manner
satisfactory to Lender, provided (a) a deposit of funds or other security
satisfactory to Lender in the full amount of such contested payment, tax,
assessment, charge, levy, lien, encumbrance or claim has been provided for in a
manner satisfactory to Lender, and (b) the enforcement of the contested payment,
tax, assessment, charge, levy, lien, encumbrance or claim is stayed in a manner
satisfactory to Lender pending the resolution of such contest.
"DEFAULT RATE" means the lesser of (a) a rate equal to four percent
(4%) above the higher of the Eurodollar Rate plus the Applicable Margin set
forth in ▇▇▇▇▇ ▇ of the definition of Applicable Margin or the Prime Rate plus
the Applicable Margin set forth in ▇▇▇▇▇ ▇ of the definition of Applicable
Margin, as the case may be, at the time of the calculation of the Default Rate,
or (b) the Maximum Rate.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder, as in effect as of the date
hereof and any subsequent provisions which are amendatory thereof, supplemental
thereto or substituted therefor. In addition, the terms "Commonly Controlled
Entity," "Multiemployer Plan," "PBGC," "Plan," "Prohibited Transaction," and
"Reportable Event" have the same meanings as provided therefor in ERISA.
"EUROCURRENCY RESERVE REQUIREMENT" means, at any time, the maximum rate
at which reserves (including, without limitation, any marginal, special,
supplemental or emergency reserves) are required to be maintained under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) by member banks of the Federal Reserve System
against
LOAN AGREEMENT - Page 2
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"Eurocurrency liabilities" (as such term is used in Regulation D). Without
limiting the effect of the foregoing, the Eurocurrency Reserve Requirement shall
reflect any other reserves required to be maintained by such member banks with
respect to (i) any category of liabilities which includes deposits by reference
to which the Eurodollar Rate is to be determined, or (ii) any category of
extensions of credit or other assets which include Eurodollar Loans. The
Eurodollar Rate shall be adjusted automatically on and as of the effective date
of any change in the Eurocurrency Reserve Requirement.
"EURODOLLAR BUSINESS DAY" means a Business Day on which dealings in
U.S. Dollar deposits are carried on in the Eurodollar market.
"EURODOLLAR INTEREST PERIOD" means, with respect to any Eurodollar
Loan:
A. initially, the period commencing on the date such
Eurodollar Loan is made and ending on the numerically corresponding day
in the calendar month that is one month, two months, three months or
six months thereafter, as selected by Borrower, and
B. thereafter, each period commencing on the day following the
last day of the next preceding Interest Period applicable to such
Eurodollar Loan and ending one month, two months, three months or six
months thereafter, as selected by Borrower;
provided, however, that (A) if any Eurodollar Interest Period would otherwise
expire on a day that is not a Eurodollar Business Day, such Interest Period
shall expire on the next succeeding Eurodollar Business Day, and (B) any
Eurodollar Interest Period that commences on the last Eurodollar Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the last calendar month of such Eurodollar Interest Period) shall end on
the last Eurodollar Business Day of the last calendar month of such Eurodollar
Interest Period, and (C) any Eurodollar Interest Period that would otherwise
expire after the Maturity Date shall end on the Maturity Date.
"EURODOLLAR LOAN" means any Loan that bears interest at the Eurodollar
Rate plus the Applicable Margin.
"EURODOLLAR RATE" means, with respect to each Eurodollar Loan, a rate
per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) determined
by Lender as follows:
London Interbank Offered Rate
------------------------------------
1 - Eurocurrency Reserve Requirement
"EVENT OF DEFAULT": See Section 11.
"FUNDING DATE": See Section 6.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes approved by
Borrower's independent public accountant) with the most recent financial
statements of Borrower delivered to Lender.
"GUARANTY AGREEMENT": See Section 4.3.
"HAZARDOUS MATERIALS" include all materials defined as hazardous
materials or substances under any local, state or federal environmental laws,
rules or regulations, and petroleum, petroleum products, oil and asbestos.
LOAN AGREEMENT - Page 3
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"INCREMENTAL PORTION" means any amount which is $100,000 or amounts in
excess thereof in integral multiples of $100,000.
"INTEREST PERIOD" means any Prime Rate Interest Period or Eurodollar
Interest Period, as is applicable.
"LETTER OF CREDIT": See Section 2.6.
"LETTER OF CREDIT LIABILITIES": See Section 2.6.
"LOAN DOCUMENTS" means this Agreement, the Note, the Security
Agreement, the Deeds of Trust, the UCC-1 financing statements, the Guaranty
Agreement, the Officer's Certificate, the Notice of Final Agreement, and all
other documents, instruments, guarantees, security agreements, deeds of trust,
pledge agreements, certificates and agreements executed and/or delivered by
Borrower, or any guarantor or third party in connection with any Loan, together
with all renewals, extensions, modifications and amendments from time to time
made of any such documents.
"LOANS": See Section 2.1.
"LONDON INTERBANK OFFERED RATE" means the average per annum interest
rate at which U.S. dollar deposits would be offered for the applicable interest
period by major banks in the London inter-bank market, as shown on the Telerate
Page 3750 (or any successor page) at approximately 11:00 a.m. London time two
(2) London Banking Days before the commencement of the interest period. If such
rate does not appear on the Telerate Page 3750 (or any successor page), the rate
for that interest period will be determined by such alternate method as
reasonably selected by Lender. A "London Banking Day" is a day on which Lender's
London Banking Center is open for business and dealing in offshore dollars.
"MATERIAL ADVERSE EFFECT" means a set of circumstances or events any
one of which (i) has or could have a material and adverse effect upon the
validity or enforceability of or could result in a Potential Default or Event of
Default under any of the Loan Documents, (ii) is material and adverse to the
condition (financial or otherwise), business, assets, prospects, or operations
of Borrower, (iii) could materially and adversely impair the ability of Borrower
to fulfill its obligations under any of the Loan Documents, or (iv) could
materially and adversely impair the value of any collateral from time to time
securing the Obligations or the ability of Lender to realize thereon.
"MATURITY DATE" means October 31, 2003.
"MAXIMUM RATE" means the higher of the maximum interest rate allowed by
applicable United States or
Texas law as amended from time to time and in effect
on the date for which a determination of interest accrued hereunder is made. The
determination of the maximum rate permitted by applicable
Texas law shall be
made pursuant to the weekly ceiling as determined pursuant to Chapter 303 of the
Texas Finance Code, but Lender reserves the right to implement from time to time
any other rate ceiling permitted by such law.
"NOTE" means that certain promissory note made by Borrower payable to
the order of Lender in the original principal sum of $10,000,000 dated as of
August 31, 2001, and all renewals, extensions, modifications and amendments
thereto, and substitutions therefor.
"NOTICE OF FINAL AGREEMENT": See Section 5.4.
"OBLIGATIONS" means the obligations of Borrower:
LOAN AGREEMENT - Page 4
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(a) to pay all indebtedness arising out of this Agreement, any
future advances under this Agreement, and all renewals, extensions or
amendments of such indebtedness or any part thereof or any such future
advances;
(b) to pay the principal of and interest on the Note in
accordance with the terms thereof, and all renewals, extensions,
modifications and amendments of such Note or any part thereof, and any
future advances made pursuant thereto;
(c) to repay to Lender all amounts advanced by Lender
hereunder or under the other Loan Documents on behalf of Borrower,
including, without limitation, advances for principal or interest
payments to prior secured parties, mortgagees, or lienors, or for
taxes, levies, insurance, rent, repairs to or maintenance or storage of
any of the collateral;
(d) to pay any and all other indebtedness of Borrower to
Lender of every kind, nature and description, direct or indirect,
primary or secondary, secured or unsecured (including overdrafts),
joint or several, absolute or contingent, due or to become due, now
existing or hereafter arising, regardless of how it may be evidenced,
including without limitation all future advances, whether or not
presently contemplated by the parties hereto;
(e) to pay any and all indebtedness of Borrower to Lender
arising out of any SWAP Agreement which Borrower may have with Lender,
or with any affiliate of Lender;
(f) to the extent permitted by law, to pay a delinquency
charge in an amount not to exceed four percent (4%) of any payment that
is more than fifteen (15) days late;
(g) to perform fully all of the terms and provisions of each
of the instruments constituting the Loan Documents; and
(h) to reimburse Lender, on demand, for all of Lender's
expenses and costs, which Borrower is obligated to pay pursuant to the
terms of the Loan Documents.
"PERMITTED INVESTMENTS" mean (i) cash, (ii) evidences of indebtedness
maturing not more than one year after the date of issue, issued or guaranteed by
the Government of the United States of America, or agencies thereof, (iii) bonds
issued by a corporation with a rating of P-1 according to ▇▇▇▇▇'▇ Investors
Services, Inc., A-1 according to Standard and Poor's Corporation, or F-1
according to Fitch Investors Service, Inc., which are unrestricted and freely
traded on a national securities exchange, (iv) securities freely traded on the
New York Stock Exchange, AMEX , or the NASDAQ Market System issued by companies
having a market capitalization greater than $500,000,000, (v) certificates of
deposit issued by Lender, (vi) readily marketable commercial paper rated "A-1"
by Standard & Poor's Corporation (or similar rating by any similar organization
which rates commercial paper), (vii) readily marketable direct obligations of
any state of the United States of America or any political subdivision of any
such state given on the date of such investment a credit rating of at least AA
by Standard & Poor's Corporation due within one year from the acquisition
thereof, (viii) repurchase agreements with respect to the investments referred
to in the preceding clauses with any bank or trust company organized under the
laws of the United States of America or any state thereof and having combined
capital, surplus and undivided profits of not less than $500,000,000 (as of the
date of its most recent financial statements) and having deposits that have
received one of the two highest ratings obtainable from Standard & Poor's
Corporation, (ix) eurodollar time accounts or eurodollar certificates of deposit
each with banker's acceptances of any bank or trust company organized under the
laws of the United States of America or any state thereof having combined
capital, surplus and undivided profits of not less than $500,000,000 (as of the
date of its most recent financial statements) and having deposits that have
received one of the two
LOAN AGREEMENT - Page 5
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highest ratings obtainable from Standard & Poor's Corporation, (x) investments
in subsidiaries not to exceed $3,000,000 in the aggregate at any time, and (xi)
such other investments as may be approved by Lender.
"PERMITTED LIENS" means (i) the liens and security interests evidenced
by the Loan Documents, (ii) statutory liens for taxes which are not yet
delinquent, (iii) mechanics' and materialman's liens, with respect to
obligations which are not past due, (iv) other liens and security interests, in
favor of Lender, (v) liens previously disclosed to Lender in writing, (vi) liens
arising under "capital leases" under GAAP which are permitted by Section 8.4
hereof, (vii) purchase-money mortgages, liens or security interests on any
property hereafter acquired or the assumption of any mortgage, lien or security
interest on property existing at the time of such acquisition (and not created
in contemplation of such acquisition), or any mortgage, lien or security
interest incurred in connection with any conditional sale or other title
retention agreement, (viii) any extension, renewal or replacement (or successive
extensions, renewals or replacements) in whole or in part, of any lien referred
to in the immediately preceding clauses hereof, provided however (1) that the
lien shall be limited to all or part of the property securing the lien extended,
renewed or replaced (plus improvements thereon), and (2) that the indebtedness
secured thereby is not increased, (ix) liens previously disclosed to Lender in
writing, and (x) minor defects and irregularities of title which neither (1) are
liens or security which secure other indebtedness or obligations, nor (2)
materially impair the value of such asset or the use thereof for the purposes
for which such asset is held.
"PERSON" means a corporation, an association, a joint venture, an
organization, a business, an individual or a government or political subdivision
thereof or any governmental agency.
"PLAN" means, at any time, any employee benefit plan which is covered
by ERISA and in respect of which Borrower or any Commonly Controlled Entity is
(or, if such plan were terminated at such time, would under ERISA be deemed to
be) an "employer" as defined in ERISA.
"POTENTIAL DEFAULT" means any condition, event or act, which with the
giving of notice or the lapse of time, or both, will constitute an Event of
Default hereunder.
"PRIME RATE" means the rate of interest publicly announced from time to
time by the Lender as its Prime Rate (the "Index"). The Prime Rate is set by the
Lender based on various factors, including the Lender's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans. The Lender may price loans to its
customers at, above, or below the Prime Rate. Any change in the Prime Rate shall
take effect at the opening of business on the day specified in the public
announcement of a change in the Lender's Prime Rate. The Index is not
necessarily the lowest rate charged by Lender on its loans and is set by Lender
in its sole discretion. If the Index becomes unavailable during the term of this
loan, Lender may designate a substitute index after notifying Borrower. Lender
will tell Borrower the current Index rate upon Borrower's request.
PRIME RATE INTEREST PERIOD" means, with respect to any Prime Rate Loan,
the period ending on the last day of each month; provided, however, that (i) if
any Prime Rate Interest Period would end on a day that is not a Business Day,
such Interest Period shall end on the next succeeding Business Day, and (ii) if
any Prime Rate Interest Period would otherwise end after the Maturity Date, such
Interest Period shall end on the Maturity Date.
"PRIME RATE LOAN" means any Loan that bears interest at the Prime Rate
plus the Applicable Margin.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System as amended or supplemented from time to time.
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"PRINCIPAL DEBT": See Section 2.1.
"SWAP AGREEMENT" means any interest rate or currency swap, commodity
swap, equity swap rate cap, rate floor, rate collar, forward agreement, or other
exchange or rate protection arrangement, or any similar transaction or any
option with respect to any such transaction.
1.2 TERMS GENERALLY. All other terms contained in this Agreement,
unless the context indicates otherwise, have the same meanings as provided for
by the Uniform Commercial Code as adopted in
Texas to the extent the same are
used or defined therein. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation." The word "will" shall be construed to have the same
meaning and effect as the word "shall." Unless the context requires otherwise
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or
other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), and (b) the words "herein", "hereof" and "hereunder" and
words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof.
1.3 ACCOUNTING TERMS. Unless specified elsewhere herein, all accounting
terms used herein shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements to be delivered hereunder shall be
prepared in accordance with GAAP.
SECTION 2. REVOLVING CREDIT FACILITY
2.1 THE LOAN. Lender agrees, subject to the terms and conditions
hereof, to lend Borrower at any time and from time to time on or before the
Maturity Date sums (each herein called a "Loan" and collectively the "Loans")
which may be repaid and reborrowed pursuant to the terms hereof and which shall
not exceed at any one time outstanding the amount of the Commitment. The
obligation of Borrower to repay the aggregate principal balance of all Loans
hereunder outstanding at any one time (the "Principal Debt") shall be evidenced
by the Note which (a) shall be payable on or before the Maturity Date for the
amount of $10,000,000, or the Principal Debt then outstanding, whichever is
less, (b) bear interest from the date thereof until paid in the manner provided
in Section 3 hereof, (c) be entitled to the benefits of this Agreement in the
security provided for herein, and (d) be in such form as is acceptable to
Lender.
2.2 USE OF PROCEEDS. The proceeds of Loans may be used solely to
refinance existing indebtedness and for general corporate purposes.
2.3 BORROWING PROCEDURE. Whenever Borrower desires a Loan hereunder,
Borrower shall give Lender written notice in a form which is acceptable to
Lender specifying (a) the date (which shall be a Business Day in the case of a
Prime Rate Loan or a Eurodollar Business Day in a case of a Eurodollar Loan) of
the proposed borrowing, (b) the amount to be borrowed, (c) the portion of the
borrowing constituting a Prime Rate Loan and/or a Eurodollar Loan (which may
only be in Incremental Portions), and (d) if any portion of the proposed
borrowing constitutes a Eurodollar Loan, the initial Eurodollar Interest Period
selected by Borrower (one month, two months, three months or six months). Such
notice shall be given by 10:00 a.m. (Dallas,
Texas time) on the date of the
proposed borrowing in the case of a Prime Rate Loan, and by 10:00 a.m. (Dallas,
Texas time) two (2) Business Days prior to the date of the proposed borrowing in
the case of a Eurodollar Loan. The notice may be given telephonically by
Borrower to Lender, but upon giving such telephonic notice Borrower shall
immediately thereafter
LOAN AGREEMENT - Page 7
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provide Lender with the written notice described above. All notices given under
this Section shall be irrevocable. Not later than 12:00 noon (Dallas,
Texas
time) on the date of the proposed borrowing and upon fulfillment of all other
conditions required by this Agreement, Lender will make such Loan available to
Borrower by crediting the amount thereof to Borrower's account with Lender or
otherwise disbursing it as Borrower may request in writing. No Loans may be made
on or after noon on the day before the Maturity Date.
2.4 AMORTIZATION. Interest on the unpaid principal balance of the Note
shall be due and payable as provided in Sections 3.2 and 3.3 hereof. The
Principal Debt then outstanding, plus accrued but unpaid interest then
outstanding, plus accrued but unpaid interest to the date of payment, shall be
due and payable on the Maturity Date. Lender is authorized to debit Borrower's
operating account on the date payment is due for all Obligations, including
without limitation, all payments of principal and interest due under the Note.
2.5 UNUSED COMMITMENT FEE. Borrower agrees to pay Lender an unused
commitment fee for the period commencing with the date of this Agreement to the
Maturity Date, computed at the rate of one quarter of one percent (0.25%) per
annum on the average daily unused portion of the Commitment. The phrase "unused
portion of the Commitment" as used in the preceding sentence means the
difference between (a) $10,000,000, and (b) the sum of the Principal Debt plus
Letter of Credit Liabilities then existing. The commitment fee shall be payable
quarterly in arrears.
2.6 LETTER OF CREDIT SUBFEATURE. As a subfeature under the revolving
credit facility created by this Agreement, Lender may from time to time up to
and including seven days prior to the Maturity Date, issue Letters of Credit for
the account of Borrower (each a "Letter of Credit" and collectively, the
"Letters of Credit"); provided however that (a) the form and substance of each
Letter of Credit shall be subject to approval by Lender in its sole discretion,
and (b) the aggregate undrawn amount of all outstanding Letters of Credit shall
not at any time exceed $10,000,000. No Letter of Credit shall have an expiration
date subsequent to the Maturity Date. The undrawn amount of all Letters of
Credit plus any and all amounts paid by Lender in connection with drawings under
any Letter of Credit for which Lender has not been reimbursed (collectively, the
"Letter of Credit Liabilities") shall be reserved under the revolving credit
facility and shall not be available for Loans thereunder. Each draft paid by
Lender under a Letter of Credit shall be deemed a Loan and shall be repaid in
accordance with the terms of this Agreement; provided however, that if a Loan is
not available for any reason whatsoever at the time any draft is paid by Lender,
or, if Loans are not then available in such amount due to any limitation on
borrowing set forth in this Agreement, then the full amount of such draft shall
immediately be due and payable, together with interest thereon, from the date
such amount is paid by Lender to the date such amount is fully repaid by
Borrower, at the rate of interest applicable to Loans under the Note. In such
event, Borrower agrees that Lender, at Lender's sole discretion, may debit
Borrower's deposit account with Lender for the amount of such draft.
2.7 TERMINATION AND REDUCTION OF COMMITMENT. Borrower may at anytime,
or from time to time, reduce the Commitment, provided that (i) each partial
reduction of the Commitment shall be in an amount that is an integral multiple
of $50,000 and not less than $1,000,000, and (ii) Borrower shall not terminate
or reduce the Commitment if, after giving effect to any concurrent prepayment of
Loans in accordance with Section 3.7, the sum of Letter of Credit Liabilities
would exceed the Commitment.
Borrower shall notify Lender of any election to terminate or reduce the
Commitment at least three (3) Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Any termination or reduction of the Commitment shall be permanent. Any
termination or reduction of the Commitment shall be accompanied by payment of
the unused commitment fee due on that portion of the Commitment reduced or
terminated as per Section 2.5 hereof. There shall
LOAN AGREEMENT - Page 8
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be no separate termination penalty. However no termination or reduction of the
Commitment shall result in the waiver or otherwise excuse Borrower's payment of
any other Obligations due hereunder.
SECTION 3. INTEREST RATE OPTIONS
3.1 RATES OF INTEREST. The interest rate options available to Borrower
hereunder shall be for Prime Rate Loans and for Eurodollar Loans. No more than
five (5) different Eurodollar Loans may be outstanding at any one time.
3.2 PRIME RATE LOANS. Borrower agrees to pay interest (calculated on
the basis of the actual days elapsed in a year consisting of 360 days) with
respect to the unpaid principal amount of each Prime Rate Loan at a varying rate
per annum equal to the lesser of (i) the Maximum Rate of (ii) the Prime Rate
plus the Applicable Margin. The interest in respect of each Prime Rate Loan
shall be payable on the last day of each Prime Rate Interest Period.
3.3 EURODOLLAR LOANS. Borrower agrees to pay interest (calculated on
the basis of actual days elapsed in a year consisting of 360 days) with respect
to the unpaid principal amount of each Eurodollar Loan at a rate per annum equal
to the lesser of (i) the Maximum Rate or (ii) the Eurodollar Rate applicable to
such Eurodollar Loan plus the Applicable Margin. Subject to the provisions of
this Agreement as to prepayment, interest with respect to each Eurodollar Loan
shall be payable on the last day of each Eurodollar Interest Period. Subject to
the provisions of this Agreement as to prepayment, the principal of each
Eurodollar Loan shall be paid or renewed on the last day of each applicable
Eurodollar Interest Period or shall automatically be converted to a Prime Rate
Loan on the last day of such Eurodollar Interest Period as hereinafter provided.
If no Event of Default exists and Borrower desires to renew such Eurodollar Loan
and the amount thereof is at least an Incremental Portion, Borrower shall
deliver the notice required in Section 2.3 hereof and designate whether the
Eurodollar Interest Period to commence on the expiration date of the prior
Eurodollar Interest Period shall be a one month, two month, three month, or six
month period. If Lender has not received timely permissible notice of
designation of such Eurodollar Interest Period as herein provided, Borrower
shall be deemed to have elected to convert such maturing Eurodollar Loan to a
Prime Rate Loan.
3.4 INTEREST RATE DETERMINATION. Lender shall determine each interest
rate applicable hereunder and shall give prompt notice to Borrower of each rate
of Interest so determined.
3.5 CONVERSION OPTION: PRIME RATE LOANS TO EURODOLLAR LOANS. Borrower
may convert its Prime Rate Loans to Eurodollar Loans by giving Lender
irrevocable written notice of such election at least two (2) Eurodollar Business
Days prior to the proposed conversion date. The notice of conversion to a
Eurodollar Loan shall include (1) the amount of the Prime Rate Loan to be
converted (which must be converted in Incremental Portions), and (2) the
duration of the Eurodollar Interest Period selected (one month, two months,
three months, or six months). If no Event of Default exists hereunder, such
conversion shall be made on the requested conversion date or, if such requested
conversion date is not a Eurodollar Business Day, on the next succeeding
Eurodollar Business Day, but if an Event of Default exists hereunder, no
conversion may occur.
3.6 CONVERSION OPTION: EURODOLLAR LOANS TO PRIME RATE LOANS. Borrower
may convert all or any part of its Eurodollar Loans to Prime Rate Loans by
giving Lender irrevocable written notice of such election prior to 10 a.m.
(Dallas,
Texas time) on the conversion date, if such conversion date is the last
day of a Eurodollar Interest Period with respect thereto, or at least two (2)
Eurodollar Business Days prior written notice if the conversion date is a day
other than the last day of the Eurodollar Interest Period with respect thereto.
Such conversion shall be made on the requested conversion date or, if such
LOAN AGREEMENT - Page 9
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requested conversion date is not a Business Day, on the next succeeding Business
Day. A conversion of a Eurodollar Loan to a Prime Rate Loan on a day which is
prior to the last day of the Eurodollar Interest Period for the Eurodollar Loan
in question shall constitute a prepayment which may require the payment of the
breakage fee described in Section 6 of Schedule I attached hereto. All
conversion notices given hereunder shall be irrevocable.
3.7 PREPAYMENT OF LOANS. Borrower may at any time and from time to time
prepay any Prime Rate Loan, in whole or in part without premium or penalty.
Borrower may at any time and from time to time prepay any Eurodollar Loan in
whole or in part, without premium or penalty except as provided in Section 6 of
Schedule I, provided that Borrower first complies with the conditions
hereinafter set forth. Borrower shall give Lender at least two (2) Eurodollar
Business Days prior written notice of (i) its intent to prepay a Eurodollar
Loan, (ii) the amount of principal which will be prepaid, and (iii) the date on
which the prepayment will be made. Each prepayment of principal of a Eurodollar
Loan shall be in a minimum amount of $500,000 (or the aggregate principal amount
outstanding, if less) plus accrued interest thereon to the date of prepayment.
Borrower may also be required to pay Lender the breakage fee described in
Section 6 of Schedule I attached hereto because such payment is made on a date
which is prior to the last day of the applicable Eurodollar Interest Period.
3.8 SCHEDULE I. Reference is made to Schedule I attached hereto for
special provisions relating to Eurodollar Loans.
SECTION 4. COLLATERAL
4.1 PERSONAL PROPERTY OF BORROWER. The payment and performance of the
Note and all of the other Obligations hereunder and under the Loan Documents
shall be secured by a first and superior lien (except for Permitted Liens)
against all personal property of Borrower pursuant to the terms of one or more
security agreements (each, as amended from time to time, a "Security
Agreement"), which shall be in form and substance satisfactory to Lender.
4.2 REAL ESTATE OF BORROWER. The payment and performance of the Note
and of all of the other Obligations hereunder and under the Loan Documents shall
be secured by a first lien against the following real property of Borrower: (a)
34.0839 acres of land located in ▇▇▇▇▇, ▇▇▇▇▇▇ County,
Texas, (b) property known
as ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, (c) property known as ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇, (d) property known as ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, and (e) property
known as ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, all pursuant to one or more deeds of trust
(each, as amended from time to time, being a "Deed of Trust"), which shall be in
form and substance satisfactory to Lender. The Deed of Trust shall contain,
among other things, a partial release provision releasing the lien against any
particular property if it is sold pursuant to terms acceptable to Lender and the
net purchase price is applied to the payment of the Obligations, all as further
provided in the Deed of Trust, provided the net purchase price for the
properties described in clauses (a) and (b) of the immediately preceding
sentence need not be paid to Lender if these properties are sold within one year
of the date hereof.
4.3 SUBSIDIARY GUARANTY. The payment and performance of the Note and
all of the other Obligations hereunder and under the Loan Documents shall be
unconditionally guaranteed by PMC Acquisition, Inc., a subsidiary of Borrower,
pursuant to the terms of a guaranty agreement (as amended from time to time, the
"Guaranty Agreement"), which shall be in form and substance satisfactory to
Lender.
LOAN AGREEMENT - Page 10
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SECTION 5. CONDITIONS PRECEDENT TO CLOSING
The closing of the transactions contemplated by this Agreement shall
take place on or before August 31, 2001, as the parties shall agree (the
"Closing Date"). The obligations of Lender as set forth herein are subject to
the satisfaction (in the opinion of Lender), unless waived in writing by Lender,
of each of the following conditions. In the event that Borrower fails to satisfy
any of the conditions precedent to the closing specified below and Lender
nevertheless elects to close as an accommodation to Borrower (there being no
obligation or agreement that Lender will do so), such condition(s) shall not be
deemed waived and Borrower shall have thirty (30) days from the Closing Date to
comply with such condition(s) to the satisfaction of Lender. Borrower's failure
to satisfy such condition(s) precedent to the satisfaction of Lender within such
thirty (30) day period shall constitute an Event of Default hereunder.
5.1 EFFECTIVENESS OF LOAN DOCUMENTS. Each of the Loan Documents shall
be in full force and effect.
5.2 LEGAL OPINION. There shall have been delivered a favorable opinion
of counsel for Borrower and PMC Acquisition, Inc. covering such matters incident
to the Loan as Lender may reasonably request.
5.3 DOCUMENTATION AND PROCEEDINGS. Borrower shall have delivered
resolutions of its board of directors authorizing its execution, delivery and
performance of the Loan Documents to which it is a party.
5.4 NOTICE OF FINAL AGREEMENT. Borrower shall have executed a notice in
compliance with the provisions of Section 26.02 of the Texas Business and
Commerce Code (the "Notice of Final Agreement").
5.5 REPRESENTATIONS AND WARRANTIES. All representations and warranties
contained herein or in the documents referred to herein or otherwise made in
writing in connection herewith or therewith shall be true and correct with the
same force and effect as though such representations and warranties have been
made on and as of this date.
5.6 EXPENSES. Borrower shall have paid all reasonable expenses of
Lender in connection with the preparation of the Loan Documents and the making
of the Loan, including but not limited to, the fees and expenses of counsel for
Lender.
SECTION 6. CONDITIONS PRECEDENT TO LOANS
The obligation of Lender to make Loans to Borrower is subject, at the
time of the funding of each such Loan (the "Funding Date"), to the satisfaction
(in the opinion of Lender), unless waived in writing by Lender, of each of the
following conditions:
6.1 BORROWING REQUEST. Borrower shall have delivered to Lender, within
the time frame specified in Section 2.1 hereof, a Borrowing Request
appropriately completed in compliance herewith.
6.2 AVAILABILITY OF COMMITMENT. The then Principal Debt plus the then
Letter of Credit Liabilities plus the amount of the requested Loan shall be
equal to or less than the Commitment.
6.3 EXPENSES. Borrower shall have paid all reasonable expenses of
Lender in connection with the making of the Loan.
LOAN AGREEMENT - Page 11
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6.4 REPRESENTATIONS AND WARRANTIES. All representations and warranties
contained herein and in the Loan Documents shall be true and correct in all
material respects as though such representations and warranties have been made
on and as of the Funding Date, except to the extent that such representations
and warranties relate specifically to another date.
6.5 NO DEFAULT. There shall exist no Event of Default or Potential
Default hereunder.
6.6 CHANGE IN CONDITION. No change in the condition (financial or
otherwise), business, assets, operations, or affairs of Borrower has occurred
which has had or could possibly have a Material Adverse Effect.
SECTION 7. AFFIRMATIVE COVENANTS
Until full payment and performance of all Obligations of Borrower under
the Loan Documents, Borrower will, unless Lender consents otherwise in writing
(and without limiting any requirement of any other Loan Document):
7.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. Deliver or cause to be
delivered to Lender:
A. ANNUAL FINANCIAL STATEMENTS. Within one hundred twenty
(120) days of Borrower's fiscal year end, Borrower's annual financial
statements. These financial statements must be audited (with an
unqualified opinion) by a certified public accountant acceptable to
Lender. The statements shall be prepared on a consolidated and
consolidating basis.
B. QUARTERLY FINANCIAL STATEMENTS. Within sixty (60) days of
the period's end (including the last period in each fiscal year),
Borrower's quarterly financial statements, certified and dated by an
authorized financial officer of Borrower. These financial statements
may be Borrower prepared. The statements shall be prepared on a
consolidated basis.
C. MANAGEMENT LETTER. Promptly, upon sending or receipt,
copies of any management letters and correspondence relating to
management letters, sent or received by Borrower to or from Borrower's
auditor, or, if no management letter is prepared, a letter from such
auditor stating that no deficiencies were noted that would otherwise be
addressed in a management letter.
D. SEC FILINGS. Copies of Borrower's Form 10-K Annual Report,
Form 10-Q Quarterly Report and Form 8-K Current Report within fifteen
(15) days after the date of filing with the Securities and Exchange
Commission.
E. COMPLIANCE CERTIFICATE. Within the period(s) provided in
7.1A and B above, a Compliance Certificate of Borrower in the form of
Exhibit A attached hereto signed by an authorized financial officer of
Borrower setting forth (i) the information and computations (in
sufficient detail) to establish that Borrower is in compliance with all
financial covenants at the end of the period covered by the financial
statements then being furnished and (ii) whether there existed as of
the date of such financial statements and whether there exists as of
the date of the certificate, any Event of Default under this Agreement
and, if any such Event of Default exists, specifying the nature thereof
and the action Borrower is taking and proposes to take with respect
thereto.
LOAN AGREEMENT - Page 12
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F. ADDITIONAL INFORMATION. Such additional information,
reports and statements with respect to the business operations and
financial condition of Borrower as Lender may reasonably request from
time to time.
7.2 ADVERSE CONDITIONS OR EVENTS. Promptly advise Lender in writing of
(i) any condition, event or act which comes to its attention that would or might
materially adversely affect Borrower's financial condition or operations, the
collateral from time to time securing the Loan, or Lender's rights under the
Loan Documents, (ii) any litigation filed by or against Borrower in which the
amount in controversy exceeds $100,000, (iii) the occurrence of any Event of
Default, or of any Potential Default, or the failure of Borrower to observe any
of its undertakings hereunder or under any of the other Loan Documents, (iv) any
uninsured or partially uninsured loss through fire, theft, liability or property
damage in excess of an aggregate of $100,000, (v) any other event which has or
can reasonably be expected to have a Material Adverse Effect (including without
limitation, the termination of any material labor contract, any material labor
dispute, or any strike, lockout, walkout, or other dispute to which it is a
party or which affects or may affect any of its property), (vi) any actual,
proposed or threatened testing or other investigation by any governmental
authority or other Person concerning the environmental condition of, or relating
to, any real property or the release of any Hazardous Materials by or from,
affecting or related to any real property (except such releases as are made in
accordance with applicable environmental laws), and (vii) any circumstances that
constitute grounds entitling the PBGC to institute proceedings to terminate a
Plan subject to ERISA, and the receipt of any notice to Borrower or any Commonly
Controlled Entity that the PBGC intends to terminate a Plan, and the receipt of
notice concerning the imposition of withdrawal liability in excess of $5,000
with respect to Borrower or any Commonly Controlled Entity.
7.3 TAXES AND OTHER OBLIGATIONS. Pay all of Borrower's taxes,
assessments and other obligations, including, but not limited to taxes and
assessments and lawful claims which, if unpaid, might by law become a lien
against the assets of Borrower, as the same become due and payable, except to
the extent the same are being Contested in Good Faith.
7.4 INSURANCE. Keep its properties of an insurable nature insured at
all times against such risks and to the extent that like properties are
customarily insured by other companies engaged in the same or similar businesses
similarly situated, maintain insurance of the types and in the coverage amounts
and with reasonable deductibles as are usual and customary. Such insurance
policies shall (1) provide that Lender shall receive prompt notice of any claims
filed thereunder; (2) include a standard mortgagee clause in favor of Lender
with loss payable for all claims in excess of $10,000 to Lender; and (3) provide
that no adverse alteration or cancellation thereof shall be effective as against
Lender until thirty (30) days after written notice of such alteration or
cancellation is given to Lender. Borrower shall deliver to Lender certificates
of insurance coverage within thirty (30) days following the Closing Date and
thereafter as and when requested by Lender.
7.5 COMPLIANCE WITH LAWS. Comply with all applicable laws (including
environmental laws), rules, regulations and orders of any governmental
authority, a breach of which (when considered alone or when aggregated with the
effect of other breaches) could have a Material Adverse Effect.
7.6 COMPLIANCE WITH MATERIAL AGREEMENTS. Comply in all respects with
all existing and future agreements, indentures, mortgages, or documents which
are binding upon it or affect any of its properties or business, a breach of
which (when considered alone or when aggregated with the effect of other
breaches) could have a Material Adverse Effect.
7.7 MAINTENANCE OF RECORDS. Keep at all times books and records of
account in accordance with GAAP in which full, true and correct entries will be
made of all dealings or transactions in relation
LOAN AGREEMENT - Page 13
14
to the business and affairs of Borrower, and Borrower will provide adequate
protection against loss or damage to such books of record and account.
7.8 INSPECTION OF BOOKS AND RECORDS. Allow any representative of Lender
to visit and inspect its properties, to examine its books of record and account
and to discuss its affairs, finances and accounts with any of its officers,
directors, employees and agents, all at such reasonable times and as often as
Lender may request.
7.9 EXISTENCE AND QUALIFICATION. Preserve and maintain its existence
and good standing in Texas and in each other jurisdiction in which qualification
is required and where failure so to qualify could have a Material Adverse
Effect.
7.10 FURTHER ASSURANCES. Make, execute or endorse, acknowledge and
deliver or file or cause the same to be done, all such vouchers, invoices,
notices, certifications and additional agreements, undertakings, conveyances,
deeds of trust, mortgages, assignments, financing statements or other
assurances, and take any and all such other action as Lender may from time to
time deem necessary or appropriate in connection with this Agreement or any of
the other Loan Documents (i) to cure any defects in the creation of the Loan
Documents, or (ii) to evidence further or more fully describe, perfect or
realize on the collateral intended as security, or (iii) to correct any
omissions in the Loan Documents, or (iv) to state more fully the security for
the Obligations, or (v) to perfect, protect or preserve any liens pursuant to
any of the Loan Documents, or (vi) for better assuring and confirming unto
Lender all or any part of the security for any of the Obligations.
SECTION 8. NEGATIVE COVENANTS
Until full payment and performance of all Obligations of Borrower under
the Loan Documents, Borrower will not, without the prior written consent of
Lender (and without limiting any requirement of any other Loan Documents):
8.1 NEGATIVE PLEDGE. Grant, suffer or permit, any contractual or
noncontractual lien on or security interest in its assets, except for Permitted
Liens.
8.2 MERGER, ETC. Enter into any merger or consolidation.
8.3 EXTENSIONS OF CREDIT. Make any loan or advance to any individual,
partnership, corporation or other entity without consent of Lender, except (a)
loans and intercompany adjustments between Borrower and its subsidiaries
occurring in the ordinary course of business, and (b) advances (not to exceed
$50,000 in the aggregate at any time outstanding) made to employees of Borrower
for the payment by them of items for which an expense report or voucher will be
filed and which items will constitute ordinary and necessary business expenses
of Borrower.
8.4 BORROWINGS. Create, incur, assume or become liable in any manner
for any indebtedness (for borrowed money, deferred payment for the purchase of
assets, lease payments, as surety or guarantor for the debt for another, or
otherwise) other than to Lender, except for (a) normal trade debts incurred in
the ordinary course of Borrower's business; (b) existing indebtedness disclosed
to Lender in writing and acknowledged by Lender prior to the date of this
Agreement; (c) leases of personal property which are not "capital leases" under
GAAP and for which the lessor's remedy for a breach by the lessee thereunder is
limited to recovery of the item leased; (d) guaranties by Borrower of
indebtedness of its subsidiary, PMC Acquisition, Inc., previously given in favor
of the Development Corporation of Abilene, Inc. and in favor of Lender; (e)
leases of personal property which are "capital leases" under GAAP provided that
the
LOAN AGREEMENT - Page 14
15
aggregate principal amount of such capital lease obligations shall not at any
time exceed $250,000; and (f) indebtedness secured by purchase-money liens and
security interests which shall not exceed $500,000 in the aggregate at any time
outstanding.
8.5 DIVIDENDS AND DISTRIBUTIONS. Pay any dividends or distributions to
its shareholders in cash or with stock, if an Event of Default has occurred and
is continuing or will result therefrom.
8.6 TRANSFER OF ASSETS. Convey, assign, transfer, sell, lease or
otherwise dispose of, or transfer any assets in excess of $100,000 in the
aggregate in each fiscal year, except (a) in the normal course of its business,
and (b) in accordance with the partial release provisions of the Deed of Trust.
8.7 PRINCIPAL DEBT NOT TO EXCEED COMMITMENT. Permit at any time the
Principal Debt plus the Letter of Credit Liabilities to exceed the Commitment.
8.8 INVESTMENTS. Invest in (by capital contribution or otherwise), or
acquire or purchase or make any commitment to purchase the obligations or stock
of, any entity, except for Permitted Investments.
8.9 CHANGE OF CONTROL OF BORROWER. Permit the change of control of
Borrower. "Change of control" as used in the preceding sentence means (a) the
acquisition of more than fifty percent (50%) of the outstanding voting stock of
Borrower by any Person or group of Persons acting in concert, or (b) the
acquisition of more than twenty percent (20%) of the outstanding voting stock of
Borrower by any Person or group of Persons acting in concert if at any time
following such acquisition of twenty percent (20%) or more of Borrower's
outstanding voting stock more than fifty percent (50%) of the Persons serving on
the board of directors of Borrower are Persons proposed directly or indirectly
by the Persons or group of Persons acting in concert who have acquired such
twenty percent (20%) or more of Borrower's outstanding voting stock.
8.10 CHANGE IN NATURE OF BUSINESS. Conduct any business other than, or
make any material change in the nature of, its business as carried on as of the
date hereof.
8.11 ARM'S LENGTH TRANSACTIONS. Enter into a transaction with any
affiliate, except a transaction upon terms that are not less favorable to it
than would be obtained in a transaction negotiated at arm's length with an
unrelated third party.
8.12 SWAP AGREEMENTS. Enter into any SWAP Agreement other than
Acceptable SWAP Agreements, or cause or permit any SWAP Agreement now existing
or hereafter entered into to be amended, modified, terminated or liquidated.
8.13 SUBSIDIARIES. Form or acquire any subsidiaries, except for
subsidiaries formed or acquired to the extent permitted by the definition of
Permitted Investments.
8.14 EXCEPTIONS. Take any action which is permitted by any covenant
contained in this Agreement if such action is in breach of any other covenant
contained in this Agreement.
SECTION 9. FINANCIAL COVENANTS
9.1 CURRENT RATIO. Borrower will not permit, at any fiscal quarter end,
the ratio of its current assets to current liabilities to be less than 1.15 to
1.0. Current assets mean those assets treated as current assets determined on a
consolidated basis in accordance with GAAP. Current liabilities mean all
LOAN AGREEMENT - Page 15
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liabilities treated as current liabilities determined on a consolidated basis in
accordance with GAAP, including indebtedness evidenced by the Note, regardless
of maturity.
9.2 DEBT TO WORTH RATIO. Borrower shall maintain on a consolidated
basis a ratio of Total Liabilities (excluding the non-current portion of
Subordinated Liabilities) to Tangible Net Worth not exceeding 2.25 to 1.0 as of
the end of each fiscal quarter. "TOTAL LIABILITIES" means the sum of current
liabilities plus long term liabilities. "TANGIBLE NET WORTH" means the value of
Borrower's total assets (including leaseholds and leasehold improvements and
reserves against assets but excluding goodwill, patents, trademarks, trade
names, organization expense, unamortized debt discount and expense, capitalized
or deferred research and development costs, deferred marketing expenses, and
other like intangibles, and monies due from affiliates, officers, directors,
employees, shareholders, members or managers of Borrower) less total
liabilities, including but not limited to accrued and deferred income taxes, but
excluding the non-current portion of Subordinated Liabilities. "SUBORDINATED
LIABILITIES" means liabilities subordinated to Borrower's obligations to Lender
in a manner acceptable to Lender in its sole discretion.
9.3 FIXED CHARGE COVERAGE RATIO. Borrower shall maintain on a
consolidated basis a Fixed Charge Coverage Ratio of not less than 1.25 to 1.0.
This ratio will be calculated at the end of each reporting period for which
Lender requires financial statements from Borrower, using the results of the
twelve-month period ending with that reporting period, except that current
maturities of long-term debt shall be the aggregate amount of all regularly
scheduled payments determined in accordance with GAAP actually scheduled to be
paid within the next twelve (12) months from such date. "FIXED CHARGE COVERAGE
RATIO" means the ratio of EBITA to Fixed Charges. "EBITDA" means net income,
less income or plus loss from discontinued operations and extraordinary items,
plus income taxes, plus interest expense, plus depreciation, depletion,
amortization and other non-cash charges. "FIXED CHARGES" means current
maturities of long-term debt, interest expense (both expensed and capitalized
including the interest component in respect of capitalized lease obligations),
plus current maturities of capital leases, plus the aggregate amount of federal,
state and local income taxes, plus the aggregate amount of rent and lease
expenses.
9.4 PROFITABILITY. Borrower shall not incur on a consolidated basis (a)
a net loss in any three consecutive quarterly accounting periods, or (b) a net
loss in excess of $750,000 before taxes and extraordinary items over a period of
any three consecutive quarterly accounting periods (by way of example, a
$500,000 loss as of 03/31, a $10,000 profit as of 06/30 and a $300,000 loss as
of 09/30 would be a loss in excess of $750,000 over a period of three
consecutive calendar quarters in violation of clause (b) of this Section 9.4).
SECTION 10. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
10.1 NO LIENS. Borrower has good and defensible title to all of its
assets, and none of such assets are subject to any security interest, mortgage,
deed of trust, pledge, lien, title retention document or encumbrance of any
character, except for Permitted Liens.
10.2 FINANCIAL STATEMENTS. The financial statements of Borrower as of
March 31, 2001 and those for periods ending after March 31, 2001, have been
prepared in accordance with generally accepted accounting principles on a
consistent basis throughout the period involved and fairly present Borrower's
financial condition as of the date or dates thereof, and there have been no
material adverse changes in Borrower's financial condition or operation since
the date or dates thereof.
LOAN AGREEMENT - Page 16
17
10.3 GOOD STANDING. Borrower is a corporation, duly organized, validly
existing and in good standing under the laws of Texas and has the power and
authority to own its property and to carry on its business in Texas and in each
other jurisdiction in which Borrower does business and in which the failure to
be so qualified would (when considered alone or when aggregated with the effect
of failure to qualify in all other jurisdictions) have a Material Adverse
Effect.
10.4 AUTHORITY AND COMPLIANCE. Borrower has full power and authority to
execute, deliver and perform the Loan Documents and to incur and perform the
obligations provided for therein. No consent or approval of any public authority
or other third party is required as a condition to the validity or performance
of any Loan Document, and Borrower is in compliance with all laws and regulatory
requirements to which it is subject.
10.5 BINDING AGREEMENTS. This Agreement and the other Loan Documents
executed by Borrower constitute valid and legally binding obligations of
Borrower, enforceable in accordance with their terms.
10.6 LITIGATION. There is no proceeding involving Borrower pending or,
to the knowledge of Borrower, threatened before any court or governmental
authority, agency or arbitration authority, where the amount in controversy
exceeds $100,000, except as disclosed to Lender in writing and acknowledged by
Lender prior to the date of this Agreement.
10.7 NO CONFLICTING AGREEMENTS. There is no charter, bylaw, stock
provision, partnership agreement or other document pertaining to the power or
authority of Borrower and no provision of any existing agreement, mortgage,
indenture or contract binding on Borrower or affecting any property of Borrower,
which would conflict with or in any way prevent the execution, delivery or
carrying out of the terms of this Agreement and the other Loan Documents.
10.8 TAXES. All taxes and assessments due and payable by Borrower have
been paid or are being Contested in Good Faith. Borrower has filed all tax
returns which it is required to file.
10.9 NO DEFAULT. No Event of Default or Potential Default not
previously disclosed to Lender in writing has occurred and is continuing.
10.10 ADVERSE CIRCUMSTANCES. Neither the business nor any property of
Borrower is presently affected by any fire, explosion, accident, strike,
lockout, or other dispute, embargo, act of God, act of public enemy, or similar
event or circumstance nor has any other event or circumstance relating to its
business or affairs occurred which has had or may reasonably be expected to have
a Material Adverse Effect.
10.11 ACCURACY OF INFORMATION. To the best of Borrower's knowledge, all
factual information furnished to Lender in connection with this Agreement and
the other Loan Documents is and will be accurate and complete on the date as of
which such information is delivered to Lender and is not and will not be
incomplete by the omission of any material fact necessary to make such
information not misleading.
10.12 ERISA. Borrower is in compliance in all material respects with
all applicable provisions of ERISA except where failure to so comply would not
result in a Material Adverse Effect. Neither a Reportable Event nor a Prohibited
Transaction has occurred and is continuing with respect to any Plan; no notice
of intent to terminate a Plan has been filed, nor has any Plan been terminated;
neither Borrower nor any Commonly Controlled Entity has completely or partially
withdrawn from a Multiemployer Plan; and
LOAN AGREEMENT - Page 17
18
Borrower and each Commonly Controlled Entity have met their minimum funding
requirements under ERISA with respect to all of their Plans.
10.13 ENVIRONMENTAL. The conduct of Borrower's business operations and
the condition of Borrower's property does not and will not violate any federal
laws, rules or ordinances for environmental protection, or regulations of the
Environmental Protection Agency, or any applicable local or state law, rule,
regulation or rule of common law, or any judicial interpretation thereof
relating primarily to the environment or Hazardous Materials, the violation of
which could have a Material Adverse Effect.
10.14 CONTINUATION OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made under this Agreement shall be deemed to be
made at and as of the date hereof and at and as of the date of any future Loan
and in all instances shall be true and correct, except to the extent that such
representations and warranties relate specifically to another date.
SECTION 11. DEFAULT
Any of the following shall constitute events of default (each an "Event
of Default"):
11.1 NONPAYMENT. (a) Borrower shall default in the due and punctual
payment of any principal or interest of the Note when due and payable, whether
at maturity or otherwise, or (b) Borrower shall default in the due and punctual
payment of any of the other Obligations when due and payable.
11.2 REPRESENTATIONS AND WARRANTIES. Any representation, warranty or
statement made by Borrower herein or otherwise in writing in connection herewith
or in connection with any of the other Loan Documents and the agreements
referred to herein or therein or in any financial statement, certificate or
statement signed by any officer or employee of Borrower and furnished pursuant
to any provision of the Loan Documents shall be breached, or shall be materially
false, incorrect or incomplete when made.
11.3 DEFAULT IN COVENANTS UNDER AGREEMENT. (a) Borrower shall default
in the due performance or observance by it of any term, covenant or agreement
set forth in Section 7.2 or in Sections 8.1 through 8.14 hereof or in Sections
9.1 through 9.4 hereof; or, (b) Borrower shall default in the due performance or
observance of any term, covenant or agreement contained in this Agreement other
than those specified in clause (a) immediately preceding (and other than those
described in Sections 11.1 and 11.2 hereof), and such default continues
unremedied for a period of thirty (30) days after notice thereof from Lender or
Lender is notified of such default or should have been so notified pursuant to
the provisions of Section 7.2 hereof, whichever is earlier.
11.4 DEFAULT IN OTHER LOAN DOCUMENTS. Borrower shall default in the due
performance of or observance by it of any term, covenant or agreement on its
part to be performed pursuant to the terms of any of the other Loan Documents
and the default shall continue unremedied beyond any grace or cure period
therein provided.
11.5 DEFAULT IN OTHER DEBT. An event of default shall occur under the
provisions of any instrument (other than the Loan Documents) evidencing
indebtedness of Borrower for the payment of borrowed money or of any agreement
relating thereto of an amount in excess of $100,000, the effect of which is to
permit the holder or holders of such instrument to cause the indebtedness
evidenced by such instrument to become due and payable prior to its stated
maturity (whether or not the holder actually exercises such option).
LOAN AGREEMENT - Page 18
19
11.6 VALIDITY OF LOAN DOCUMENTS. Any of the Loan Documents shall cease
to be a legal, valid and binding agreement enforceable against any party
executing the same in accordance with the respective terms thereof, or shall in
any way be terminated, or become or be declared ineffective or inoperative, or
shall in any way whatsoever cease to give or provide the respective rights,
remedies, powers and privileges intended to be created thereby.
11.7 BANKRUPTCY. Borrower shall suspend or discontinue its business
operations, or shall generally fail to pay its debts as they mature, or shall
file a petition commencing a voluntary case concerning Borrower under any
chapter of the United States Bankruptcy Code; or any involuntary case shall be
commenced against Borrower under the United States Bankruptcy Code; or Borrower
shall become insolvent (howsoever such insolvency may be evidenced).
11.8 JUDGMENTS AND DECREES. Borrower shall suffer a final judgment for
the payment of money in excess of $100,000 and shall not discharge the same
within a period of thirty (30) days unless, pending further proceedings,
execution has not been commenced, or, if commenced, has been effectively stayed.
Any order, judgment or decree shall be entered in any proceeding against
Borrower decreeing the dissolution or split up of such entity and such order
shall remain undischarged or unstayed for a period in excess of thirty (30)
days.
11.9 SWAP DEFAULT. An event occurs under or pursuant to any SWAP
Agreement between Borrower and Lender which gives Lender the right or option to
terminate the SWAP Agreement.
11.10 ERISA. Any of the following events shall occur or exist with
respect to Borrower and any Commonly Controlled Entity under ERISA and the
regulations promulgated thereunder:
(a) any Reportable Event shall occur;
(b) complete or partial withdrawal from any Multiemployer Plan
shall take place;
(c) any Prohibited Transaction shall occur;
(d) a notice of intent to terminate a Plan shall be filed, or
a Plan shall be terminated; or
(e) circumstances shall exist which constitute grounds
entitling the PBGC to institute proceedings to terminate a Plan, or the
PBGC shall institute such proceedings;
and in each case above, such event or condition, together with all other events
or conditions, if any, could subject Borrower to any tax, penalty or other
liability which in the aggregate may exceed $5,000.
SECTION 12. REMEDIES
Upon the occurrence of an Event of Default described in Section 11.7
hereof, the entire principal of and accrued interest on the Note shall forthwith
be due and payable without demand, presentment for payment, notice of
nonpayment, protest, notice of protest, notice of intent to accelerate, notice
of acceleration and all other notices and further actions of any kind, all of
which are hereby expressly waived by Borrower. In the event that any other Event
of Default shall occur and be continuing, Lender may, without demand or notice
of its election, terminate its obligation to make further Loans hereunder
LOAN AGREEMENT - Page 19
20
and/or declare the entire unpaid balance of the Note and all other indebtedness
of Borrower to Lender, or any part thereof, immediately due and payable,
whereupon the principal of and accrued interest on such Note and other
indebtedness shall be forthwith due and payable without demand, presentment for
payment, notice of nonpayment, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and all other notices and further actions of
any kind, all of which are hereby expressly waived by Borrower. Upon the
occurrence and during the continuance of any Event of Default, Lender may (a)
exercise any and all rights under or pursuant to any of the Loan Documents, and
(b) exercise any and all rights afforded to Lender by the laws of the State of
Texas or any other applicable jurisdiction or in equity or otherwise, as Lender
may deem appropriate, and (c) terminate the Commitment.
SECTION 13. COSTS, EXPENSES AND ATTORNEYS' FEES
Borrower shall pay to Lender immediately upon demand the full amount of
all costs and expenses, including reasonable attorneys' fees, incurred by Lender
in connection with (a) the syndication, negotiation, preparation and delivery of
this Agreement and each of the Loan Documents, and all other costs and
attorneys' fees incurred by Lender for which Borrower is obligated to pay in
accordance with the terms of the Loan Documents, and (b) any modifications of or
consents or waivers under or amendments to or interpretations of this Agreement,
the Note, or the other Loan Documents. Borrower further agrees to pay on demand
all costs and expenses of Lender, if any (including without limitation
reasonable attorneys' fees and expenses and the cost of internal counsel), in
connection with the enforcement (whether through negotiations, arbitration
proceedings, legal proceedings or otherwise) of the Loan Documents. Borrower
further agrees to indemnify Lender and its employees and agents, from and hold
them harmless against any and all losses, liabilities, claims, damages or
expenses which any of them suffers or incurs as a result of Lender's entering
into this Agreement and the Loan Documents, or the consummation of the
transactions contemplated by this Agreement and the Loan Documents, or the use
or contemplated use of the proceeds of the Loan, or due to a release or alleged
release of Hazardous Materials, including, without limitation, the fees and
disbursements of counsel incurred in connection with any litigation, arbitration
or other proceeding arising out of or by reason of any of the aforesaid. IT IS
THE INTENTION OF THE PARTIES THAT THE FOREGOING INDEMNITIES SHALL APPLY TO
LOSSES, LIABILITIES, CLAIMS, DAMAGES OR EXPENSES WHICH IN WHOLE OR IN PART ARE
CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF AN INDEMNIFIED PARTY. No such
indemnified party, however, shall be entitled to be indemnified for its or his
own gross negligence or willful misconduct. In the case of an investigation,
litigation or other proceeding to which the indemnity in this Section applies,
such indemnities shall be effective whether or not such investigation,
litigation or proceeding is brought by Borrower, its directors, shareholders or
creditors, or by an indemnified party and whether or not the transactions hereby
are consummated. Borrower shall defend any claim for which an indemnified party
is entitled to seek indemnity pursuant to the preceding sentence, and the
indemnified party shall cooperate with the defense. The indemnified party may
have separate counsel, and Borrower will pay the expenses and reasonable fees of
such separate counsel if either counsel for Borrower or counsel for the
indemnified party shall advise the indemnified party that the interests of both
Borrower and the indemnified party with respect to such claim are or with
reasonable certainty will become adverse. The agreements and obligations of
Borrower contained in this Section shall survive payment in full of the
Obligations.
SECTION 14. MISCELLANEOUS
Borrower and Lender further covenant and agree as follows, without
limiting any requirement of any other Loan Document:
LOAN AGREEMENT - Page 20
21
14.1 NOTICES. All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing (including telegraphic, telex and facsimile
transmission) delivered to the other party at the addresses set forth on the
first page of this Agreement or to such other address as any party may designate
by written notice to the other party. Each such notice, request and demand shall
be deemed given or made (whether actually received or not) (a) if sent by mail,
upon the earlier of the date of receipt or five (5) days after deposit in the
U.S. Mail, first class postage prepaid, and (b) if sent by any other means, upon
delivery. Unless otherwise changed by notice given pursuant to this Section, the
facsimile transmission number for Borrower shall be (▇▇▇) ▇▇▇-▇▇▇▇, and the
facsimile transmission number for Lender shall be (▇▇▇) ▇▇▇-▇▇▇▇.
14.2 CUMULATIVE RIGHTS AND NO WAIVER. Each and every right granted to
Lender under any Loan Document, or allowed it by law or equity shall be
cumulative of each other and may be exercised in addition to any and all other
rights of Lender, and no delay in exercising any right shall operate as a waiver
thereof, nor shall any single or partial exercise by Lender of any right
preclude any other or future exercise thereof or the exercise of any other
right. Borrower expressly waives any presentment, demand, protest or other
notice of any kind, including but not limited to notice of intent to accelerate
and notice of acceleration. No notice to or demand on Borrower in any case
shall, of itself, entitle Borrower to any other or future notice or demand in
similar or other circumstances.
14.3 CHOICE OF LAW AND VENUE. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS (BUT NOT THE RULES GOVERNING CONFLICTS
OF LAWS) OF THE STATE OF TEXAS AND SHALL BE PERFORMABLE IN DALLAS COUNTY, TEXAS.
14.4 AMENDMENT. No modification or amendment of any provision of this
Agreement shall be effective unless the same shall be in writing and signed by
Lender and Borrower. No consent or waiver of any provision of this Agreement,
nor consent to any departure by Borrower therefrom, shall be effective unless
the same shall be in writing and signed by an officer of Lender, and then shall
be effective only in the specified instance and for the purpose for which given.
This Agreement is binding upon Borrower, its successors and assigns, and inures
to the benefit of Lender, its successors and assigns; however, no assignment or
other transfer of Borrower's rights or obligations hereunder shall be made or be
effective without Lender's prior written consent, nor shall it relieve Borrower
of any obligations hereunder. There is no third party beneficiary of this
Agreement.
14.5 DOCUMENTS. All documents, certificates and other items required
under this Agreement to be executed and/or delivered to Lender shall be in form
and content satisfactory to Lender and its counsel.
14.6 PARTIAL INVALIDITY. The unenforceability or invalidity of any
provision of this Agreement shall not affect the enforceability or validity of
any other provision herein and the invalidity or unenforceability of any
provision of any Loan Document to any Person or circumstance shall not affect
the enforceability or validity of such provision as it may apply to other
Persons or circumstances.
14.7 SURVIVABILITY. All covenants, agreements, representations and
warranties made herein or in the other Loan Documents shall survive the making
of the initial Loan and shall continue in full force and effect so long as the
Obligations are outstanding or the Commitment has not expired.
14.8 WAIVER FEE. If Lender, at its discretion, agrees to waive or amend
any terms of this Agreement, Borrower will, at Lender's option, pay Lender a fee
for each waiver or amendment in an amount advised by Lender at the time Borrower
requests the waiver or amendment. Nothing in this
LOAN AGREEMENT - Page 21
22
Section shall imply that Lender is obligated to agree to any waiver or amendment
requested by Borrower. Lender may impose additional requirements as a condition
to any waiver or amendment.
14.9 FEE FOR LATE FINANCIAL STATEMENTS. If any of the financial
information required by this Agreement is not provided to Lender within the time
limits provided in this Agreement, Borrower will, at Lender's option, pay Lender
a late fee in an amount set by Lender. The imposition and payment of a late fee
shall not constitute a waiver of Lender's rights with respect to the default.
14.10 ENVIRONMENTAL. Borrower will comply in all material respects with
all environmental, health, and safety laws and regulations applicable to it, the
failure to comply with which could have a Material Adverse Effect. Borrower
shall immediately notify Lender of any remedial action taken by Borrower under
environmental laws with respect to Borrower's business operations. Borrower will
not use or permit any other party to use any Hazardous Materials at any of
Borrower's places of business or at any other property owned by Borrower except
such materials as are incidental to Borrower's normal course of business,
maintenance and repairs and which are handled in compliance with all applicable
environmental laws. Borrower agrees to permit Lender, its agents, contractors
and employees to enter and inspect any of Borrower's places of business or any
other property of Borrower at any reasonable times upon three (3) days prior
notice for the purposes of conducting an environmental investigation and audit
(including taking physical samples) to insure that Borrower is complying with
this covenant and Borrower shall reimburse Lender on demand for the costs of any
such environmental investigation and audit. Borrower shall provide Lender, its
agents, contractors, employees and representatives with access to and copies of
any and all data and documents relating to or dealing with any Hazardous
Materials used, generated, manufactured, stored or disposed of by Borrower's
business operations within five (5) days of the request therefore.
14.11 COMMUNICATIONS VIA INTERNET. Borrower hereby authorizes Lender
and its counsel to communicate and transfer documents and other information
(including without limitation, confidential information) concerning this
transaction or Borrower or the business affairs of Borrower via the Internet or
other electronic communication without regard to the lack of security of such
communications.
14.12 AGREEMENT CONTROLLING. In the event of a conflict between the
terms and provisions of this Agreement and the terms and provisions of any of
the other Loan Documents, the terms and provisions of this Agreement shall
control. This Agreement replaces and supersedes in its entirety that certain
commitment letter between the parties dated as of August 6, 2001.
SECTION 15. ARBITRATION AND WAIVER OF JURY TRIAL
This Section concerns the resolution of any controversies or claims
between Borrower and Lender, whether arising in contract, tort or by statute,
including but not limited to controversies or claims that arise out of or relate
to this Agreement any document related to this Agreement, including without
limitation, the Loan Documents (collectively a "Claim"). At the request of
Borrower or Lender, any Claim shall be resolved by binding arbitration in
accordance with the Federal Arbitration Act (Title 9, U. S. Code) (the "Act").
The Act will apply even though this Agreement provides that it is governed by
the law of a specified state.
15.1 RULES AND PROCEDURES. Arbitration proceedings will be determined
in accordance with the Act, the applicable rules and procedures for the
arbitration of disputes of JAMS or any successor
LOAN AGREEMENT - Page 22
23
thereof ("JAMS"), and the terms of this Section 15. In the event of any
inconsistency, the terms of this Section 15 shall control.
15.2 ADMINISTRATION. The arbitration shall be administered by JAMS and
conducted in Dallas, Texas. All Claims shall be determined by one arbitrator;
however, if Claims exceed $5,000,000, upon the request of any party, the Claims
shall be decided by three arbitrators. All arbitration hearings shall commence
within 90 days of the demand for arbitration and close within 90 days of
commencement and the award of the arbitrator(s) shall be issued within 30 days
of the close of the hearing. However, the arbitrator(s), upon a showing of good
cause, may extend the commencement of the hearing for up to an additional 60
days. The arbitrator(s) shall provide a concise written statement of reasons for
the award. The arbitration award may be submitted to any court having
jurisdiction to be confirmed and enforced.
15.3 POWER AND AUTHORITY OF ARBITRATOR(S) GENERALLY. The arbitrator(s)
will have the authority to decide whether any Claim is barred by the statute of
limitations and, if so, to dismiss the arbitration on that basis. For purposes
of the application of the statute of limitations, the service on JAMS under
applicable JAMS rules of a notice of Claim is the equivalent of the filing of a
lawsuit. Any dispute concerning this arbitration provision or whether a Claim is
arbitrable shall be determined by the arbitrator(s). The arbitrator(s) shall
have the power to award legal fees pursuant to the terms of this Agreement.
15.4 SELF-HELP REMEDIES. This Section does not limit the right of
Borrower or Lender to: (i) exercise self-help remedies, such as but not limited
to, setoff; (ii) initiate judicial or nonjudicial foreclosure against any real
or personal property collateral; (iii) exercise any judicial or power of sale
rights, or (iv) act in a court of law to obtain an interim remedy, such as but
not limited to, injunctive relief, writ of possession or appointment of a
receiver, or additional or supplementary remedies.
15.5 SUIT NOT WAIVER. The filing of a court action is not intended to
constitute a waiver of the right of Borrower or Lender, including the suing
party, thereafter to require submittal of the Claim to arbitration.
15.6 WAIVER OF JURY TRIAL. BY AGREEING TO BINDING ARBITRATION, THE
PARTIES IRREVOCABLY AND VOLUNTARILY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY CLAIM. FURTHERMORE, WITHOUT INTENDING IN ANY WAY TO LIMIT
THIS AGREEMENT TO ARBITRATE, TO THE EXTENT ANY CLAIM IS NOT ARBITRATED, THE
PARTIES IRREVOCABLY AND VOLUNTARILY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF SUCH CLAIM. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
PARTIES ENTERING INTO THIS AGREEMENT.
SECTION 16. NOTICE OF FINAL AGREEMENT
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES 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 PARTIES.
LOAN AGREEMENT - Page 23
24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
PEERLESS MFG. CO.
By /s/
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial
Officer
BANK OF AMERICA, N.A.
By /s/
-------------------------------------
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President
LIST OF EXHIBITS
A....................... .....Compliance Certificate................Section 7.1E
LOAN AGREEMENT - Page 24
25
SCHEDULE I
SPECIAL PROVISIONS RELATING TO EURODOLLAR LOANS
The following provisions shall apply to all Eurodollar Loans under this
Agreement.
1. INCREASED COST AND REDUCED RETURN. (a) If, after the date hereof,
the adoption of any applicable law, rule, or regulation, or any change in any
applicable law, rule, or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or
compliance by Lender with any request or directive (whether or not having the
force of law) of any such governmental authority, central bank, or comparable
agency:
(i) shall subject Lender to any tax, duty, or other charge
with respect to any Eurodollar Loan, the Note, or Lender's obligation
to make Eurodollar Loans, or change the basis of taxation of any
amounts payable to Lender under this Agreement or the Note in respect
of any Eurodollar Loan (other than taxes imposed on the overall net
income of Lender by the jurisdiction in which Lender has its principal
office or its applicable lending office);
(ii) shall impose, modify, or deem applicable any reserve,
special deposit, assessment, or similar requirement (other than the
Eurocurrencies Reserve Requirement utilized in the determination of the
Eurodollar Rate) relating to any extensions of credit or other assets
of, or any deposits with or other liabilities or commitments of,
Lender, including the commitment of Lender hereunder; or
(iii) shall impose on Lender or on the London interbank market
any other condition affecting this Agreement or the Note or any of such
extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to Lender of
making, converting into, continuing, or maintaining any Eurodollar Loan or to
reduce any sum received or receivable by Lender under this Agreement or the Note
with respect to any Eurodollar Loan, then Borrower shall pay to Lender on demand
such amount or amounts as will compensate Lender for such increased cost or
reduction. If Lender requests compensation by Borrower under this Section 1,
Borrower may, by notice to Lender, suspend the obligation of Lender to make or
continue Eurodollar Loans or to convert Prime Rate Loans into Eurodollar Loans
until the event or condition giving rise to such request ceases to be in effect
(in which case the provisions of Section 4 shall be applicable); provided that
such suspension shall not affect the right of Lender to receive the compensation
so requested.
(b) If, after the date hereof, Lender shall have determined that the
adoption of any applicable law, rule, or regulation regarding capital adequacy
or any change therein or in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank, or comparable agency, has or would have
the effect of reducing the rate of return on the capital of Lender or any
corporation controlling Lender as a consequence of Lender's obligations
hereunder to a level below that which Lender or corporation could have achieved
but for such adoption, change, request, or directive (taking into consideration
its policies with respect to capital adequacy), then from time to time upon
demand the Borrower shall pay to Lender such additional amount or amounts as
will compensate Lender for such reduction.
SCHEDULE 1 - Page 1
26
(c) Lender shall promptly notify Borrower of any event of which it has
knowledge, occurring after the date hereof, which will entitle Lender to
compensation pursuant to this Section and will designate a different applicable
lending office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of Lender, be otherwise
disadvantageous to it. Lender shall furnish to Borrower a statement setting
forth the additional amount or amounts to be paid to it hereunder which shall be
conclusive in the absence of manifest error. In determining such amount, Lender
may use any reasonable averaging and attribution methods.
(d) The obligations of Borrower under this Section 1 shall survive
termination of this Agreement and payment in full of the Note for a period of
two (2) years thereafter.
2. LIMITATION ON EURODOLLAR LOANS. If on or prior to the first day of
any Eurodollar Interest Period for any Eurodollar Loan:
(i) Lender determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Eurodollar Interest Period; or
(ii) Lender determines (which determination shall be
conclusive) that the Eurodollar Rate will not adequately and fairly
reflect the cost to the Lenders of funding Eurodollar Loans for such
Eurodollar Interest Period;
then Lender shall give Borrower prompt notice thereof specifying the relevant
amounts or periods as is applicable, and so long as such condition remains in
effect, Lender shall be under no obligation to make additional Eurodollar Loans,
continue Eurodollar Loans, or to convert Prime Rate Loans into Eurodollar Loans,
and Borrower shall, on the last day(s) of the then current Eurodollar Interest
Period(s) for the outstanding Eurodollar Loans, either prepay such Eurodollar
Loans or convert such Eurodollar Loans into Prime Rate Loans in accordance with
the terms of this Agreement.
3. ILLEGALITY. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for Lender to maintain, or fund Eurodollar
Loans hereunder, then Lender shall, promptly notify Borrower thereof and
Lender's obligation to make or continue Eurodollar Loans and to convert Prime
Rate Loans into Eurodollar Loans shall be suspended until such time as Lender
may again make, maintain, and fund Eurodollar Loans ('in which case the
provisions of Section 4 shall be applicable).
4. TREATMENT OF AFFECTED LOANS. If the obligation of Lender to make
Eurodollar Loans or to continue Eurodollar Loans or to convert Prime Rate Loans
into Eurodollar Loans shall be suspended pursuant to Section 1 or Section 3
hereof (the "Affected Loans"), the Affected Loans shall be automatically
converted into Prime Rate Loans on the last day(s) of the then current
Eurodollar Interest Period(s) for Affected Loans (or, in the case of a
conversion required by Section 3 hereof, on such earlier date as Lender may
specify to Borrower) and, unless and until Lender gives notice as provided below
that the circumstances specified in Section 1 or Section 3 hereof that gave rise
to such conversion no longer exist:
(i) to the extent that the Affected Loans have been so
converted, all payments and prepayments of principal that would
otherwise be applied to the Affected Loans shall be applied instead to
Prime Rate Loans; and
(ii) all loans that would otherwise be made or continued by
Lender as Eurodollar Loans shall be made or continued instead as Prime
Rate Loans, and all loans of Lender that would
SCHEDULE 1 - Page 2
27
otherwise be converted into Eurodollar Loans shall be converted instead
into (or shall remain as) Prime Rate Loans.
5. TAXES. (a) Any and all payments by Borrower to or for the account of
Lender hereunder or under any other Loan Document shall be made free and clear
of and without deduction for any and all present or future taxes, duties,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of Lender taxes imposed on its income,
and franchise taxes imposed on it, by the jurisdiction under the laws of which
Lender (or its applicable lending office) is organized or any political
subdivision thereof (all such non-excluded taxes, duties, levies, imposts,
deductions, charges, withholdings, and liabilities being hereinafter referred to
as "Taxes"). If Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable under this Agreement or any other Loan Document to
Lender (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 5) Lender receives an amount equal to the sum it
would have received had no such deductions been made, (ii) Borrower shall make
such deductions, (iii) Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law, and (iv) Borrower shall furnish to Lender the original or a certified copy
of a receipt evidencing payment thereof
(b) In addition, Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or charges or
similar levies which arise from any payment made under this Agreement or any
other Loan Document or from the execution or delivery of, or otherwise with
respect to, this Agreement or any other Loan Document (hereinafter referred to
as "Other Taxes").
(c) Borrower agrees to indemnify Lender for the full amount of Taxes
and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed
or asserted by any jurisdiction on amounts payable under this Section 5) paid by
Lender and any liability (including penalties, interest, and expenses) arising
therefrom or with respect thereto.
(d) If the Borrower is required to pay additional amounts to or for the
account of Lender pursuant to this Section 5, then Lender will agree to use
reasonable efforts to change the jurisdiction of its applicable lending office
so as to eliminate or reduce any such additional payment which may thereafter
accrue if such change, in the judgment of Lender, is not otherwise
disadvantageous to Lender.
(e) Within thirty (30) days after the date of any payment of Taxes,
Borrower shall furnish to Lender the original or a certified copy of a receipt
evidencing such payment.
(f) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 5 shall survive the termination of the Commitment and the payment
in full of the Note for a period of two (2) years thereafter.
6. COMPENSATION. Upon the request of Lender, Borrower shall pay to
Lender such amount or amounts as shall be sufficient (in the reasonable opinion
of Lender) to compensate it for any loss, cost, or expense (including loss of
anticipated profits) incurred by it as a result of:
(i) any payment, prepayment, or conversion of a Eurodollar
Loan for any reason (including, without limitation, the acceleration of
the Obligations pursuant to Section 11 of the Agreement) on a date
other than the last day of the Eurodollar Interest Period for such
Eurodollar Loan; or
SCHEDULE 1 - Page 3
28
(ii) any failure by Borrower for any reason (including,
without limitation, the failure of any condition precedent specified in
Section 6 of the Agreement to be satisfied) to borrow, convert,
continue, or prepay a Eurodollar Loan on the date for such borrowing,
conversion, continuation, or prepayment specified in the relevant
notice of borrowing, prepayment, continuation, or conversion under this
Agreement.
Without prejudice to the survival of any other agreement of Borrower
hereunder, the agreements and obligations of Borrower contained in this Section
6 shall survive the payment in full of the Note for a period of two (2) years
thereafter.
SCHEDULE 1 - Page 4
29
EXHIBIT A
COMPLIANCE CERTIFICATE
This Compliance Certificate (the "Certificate") is delivered pursuant
to the Loan Agreement dated as of August 31, 2001 (together with all amendments
and modifications, if any, from time to time made thereto, the "Loan
Agreement"), between PEERLESS MFG. CO. (the "Borrower") and BANK OF AMERICA,
N.A. ("Lender"). Unless otherwise defined, terms used herein (including the
exhibits hereto) have the meanings provided in the Loan Agreement.
The undersigned, being the duly elected, qualified and acting
______________ of the Borrower, on behalf of the Borrower and solely in his or
her capacity as an officer of the Borrower, hereby certifies and warrants that:
He or she is the _____________ of the Borrower and that, as such, he or
she is authorized to execute this Certificate on behalf of the Borrower.
As of ________________, 200___:
1. No Defaults. Borrower was not in default of any of the provisions of
the Loan Agreement during the period to which this Certificate relates.
2. Current Ratio. Borrower's ratio of its current assets to current
liabilities was _______ to 1.0.
3. Debt to Worth Ratio. Borrower's consolidated Debt to Worth Ratio was
to 1.0 as computed on Debt to Worth Ratio Exhibit attached hereto.
4. Fixed Charge Coverage Ratio. Borrower's consolidated Debt Service
Coverage Ratio was __________ to 1.0 as computed on Fixed Charge Coverage Ratio
Exhibit attached hereto.
5. Profitability. Borrower is in compliance with the provisions of
Section 9.4 hereof.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
certificate, this ______ day of ______________, 20____.
-----------------------------
Name:
------------------------
Title:
-----------------------
30
CURRENT RATIO EXHIBIT
Period ending __________, 200__.
CURRENT RATIO (ON A CONSOLIDATED BASIS)
1. (A) = GAAP current assets $
----------------
2. GAAP current liabilities $
----------------
+ Outstanding Principal Debt $
----------------
(A) Add preceding two lines $
----------------
CURRENT LIABILITIES TO CURRENT ASSETS = 1(A) / 2(A) TO 1.0
-----------------
Required current ratio Not less than 1.15 to 1.0
31
DEBT TO WORTH RATIO EXHIBIT
Period ending __________, 200__.
DEBT TO WORTH RATIO (ON A CONSOLIDATED BASIS)
1. Total Liabilities:
current liabilities $
----------------
+ long term liabilities (including, but not limited to,
accrued and deferred income taxes) $
----------------
MINUS the non-current portion of liabilities subordinated to
the Borrower's obligations to Lender $( )
----------------
(A) = Total Liabilities $
----------------
2. Tangible Net Worth:
value of Borrower's total assets (including leaseholds,
leasehold improvements and reserves against assets, but
EXCLUDING all intangible assets as defined below*) $
----------------
LESS
Total Liabilities (see calculation 1(A) above) $( )
---------------
3. (A) Tangible Net Worth $
---------------
DEBT TO WORTH RATIO = 1(A) / 3(A) TO 1.0
----------------
Required Debt to Worth Ratio Not more than 2.25 to 1.0
* The sum of goodwill, patents, trademarks, trade names, organization expense,
unamortized debt discount and expense, capitalized or deferred research and
development costs, deferred marketing expenses, and other like intangibles, and
monies due from affiliates, officers, directors, employees, shareholders,
members or managers of Borrower.
32
FIXED CHARGE COVERAGE RATIO EXHIBIT
12 Month Period ending __________, 200__.
DEBT SERVICE COVERAGE RATIO (ON A CONSOLIDATED BASIS)
1. EBITDA:
net income $
-----------------
[LESS income] [or PLUS loss] from discontinued
operations and extraordinary items $( )
-----------------
+ income tax $
-----------------
+ interest expense $
-----------------
+ depreciation $
-----------------
+ depletion $
-----------------
+ amortization $
-----------------
+ other non-cash charges $
-----------------
(A) = EBITDA $
-----------------
2. Fixed Charges:
Current portion of long term debt (aggregate amount
of scheduled debt service during period of 12 months
beginning on the date of the current financial statements
above) $
-----------------
+ current portion of capitalized lease obligations $
-----------------
+ interest expense on all obligations $
-----------------
plus aggregate amount of federal, state and
local income taxes $
----------------
plus aggregate amount of dividends $
----------------
(A) = Total Fixed Charges $
----------------
FIXED CHARGE COVERAGE RATIO = 1(A) / 2(A) to 1.0
-----------------
Required ratio is: Not less than 1.25 to 1.0
33
REVOLVING NOTE
$10,000,000 DALLAS, TEXAS As of August 31, 2001
FOR VALUE RECEIVED, PEERLESS MFG. CO. , a Texas corporation having its principal
place of business at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, referred to
herein as the "Borrower," promises to pay to the order of BANK OF AMERICA, N.A.,
a national banking association and referred to herein as the "Lender," the
principal sum of Ten Million and No/100 Dollar ($10,000,000) or, if less, all
such sums as may have been advanced and be outstanding hereunder, together with
interest on the unpaid principal balance as set forth below. All sums hereunder
are payable to the Lender at its principal office in Dallas, Dallas County,
Texas.
1. DEFINITIONS. Unless the context hereof otherwise requires or provides, the
terms used herein have the same meanings as defined in that certain Loan
Agreement between the Borrower and the Lender of even date herewith, as the same
has been or may be amended or supplemented from time to time (the "Agreement").
2. INTEREST RATE. The unpaid principal balance from time to time outstanding
from the date hereof until maturity (whether by acceleration or otherwise) shall
bear interest as provided in the Agreement
3. PAYMENT OF INTEREST AND PRINCIPAL. The principal and all accrued interest on
this Note shall be due and payable in accordance with the provisions of the
Agreement. The principal and interest due hereunder shall be evidenced by the
Lender's records which, absent manifest error, shall be conclusive evidence of
the computation of principal and interest balances owed by the Borrower to the
Lender. If not sooner paid as provided in the Agreement, the aggregate amount of
all sums advanced and outstanding hereunder, together with all accrued, unpaid
interest thereon, shall be due and payable in full on the Maturity Date. All
past-due payments of principal and interest under this Note shall bear interest
at the Maximum Rate from maturity until paid.
4. DEFAULT. Upon the occurrence of an Event of Default described in Section 11.7
of the Agreement, the entire principal of and accrued interest on this Note
shall forthwith be due and payable without demand, presentment for payment,
notice of nonpayment, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and all other notices and further actions of
any kind, all of which are hereby expressly waived by the Borrower. If any other
Event of Default occurs and is continuing, the holder of this Note may, without
demand or notice of its election declare the entire unpaid balance of this Note,
or any part thereof, immediately due and payable, whereupon the principal of and
accrued interest on such Note shall be forthwith due and payable without demand,
presentment for payment, notice of nonpayment, protest, notice of protest,
notice of intent to accelerate, notice of acceleration and all other notices and
further actions of any kind (except as provided in the Agreement), all of which
are hereby expressly waived by the Borrower.
5. AUTO DEBIT. The Borrower has elected to authorize the Lender to effect
payment of sums due under this Note by means of debiting the Borrower's account
number 1252079666. This authorization shall not affect the obligation of the
Borrower to pay such sums when due, without notice, if there are insufficient
funds in such account to make such payment in full on the due date thereof, or
if the Lender fails to debit the account.
6. WAIVER. Each surety, endorser, guarantor and any other party now or hereafter
liable for the payment of this Note in whole or in part ("Surety") and the
Borrower hereby severally (a) waive grace, demand, presentment for payment,
notice of nonpayment, protest, notice of protest, non-payment or dishonor,
notice of intent to accelerate, notice of acceleration and all other notices
(except as provided in
Page 1
34
the Agreement), filing of suit and diligence in collecting this Note or
enforcing any other security with respect to same, (b) agree to any
substitution, surrender, subordination, waiver, modification, change, exchange
or the release of any security or release of the liability of any parties
primarily or secondarily liable hereon, (c) agree that the Lender is not
required first to institute suit or exhaust its remedies hereon against the
Borrower, any Surety or others liable or to become liable hereon or to enforce
its rights against them or any security with respect to same or to join any of
them in any suit against any others of them, and (d) consent to any extension or
postponement of time of payment of this Note and to any other indulgence with
respect hereto without notice thereof to any of them. No failure or delay on the
part of the Lender in exercising any right, power or privilege hereunder shall
operate as a waiver thereof.
7. ATTORNEYS' FEES. If this Note is not paid at maturity, regardless of how such
maturity may be brought about, or is collected or attempted to be collected
through the initiation or prosecution of any suit or through any probate,
bankruptcy or any other judicial proceedings, or through any arbitration
proceeding, or is placed in the hands of an attorney for collection, the
Borrower shall pay, in addition to all other amounts owing hereunder, all actual
expenses of collection, all court costs and reasonable attorney's fees incurred
by the holder hereof.
8. LIMITATION ON AGREEMENTS. All agreements between the Borrower and the Lender,
whether now existing or hereafter arising, are hereby limited so that in no
event shall the amount paid, or agreed to be paid to or charged or demanded by
the Lender for the use, forbearance, or detention of money or for the payment or
performance of any covenant or obligation contained herein or in any other
document evidencing, securing or pertaining to this Note, exceed the Maximum
Rate. If any circumstance otherwise would cause the amount paid, charged or
demanded to exceed the Maximum Rate, the amount paid or agreed to be paid to or
charged or demanded by the Lender shall be reduced to the Maximum Rate, and if
the Lender ever receives interest which otherwise would exceed the Maximum Rate,
such amount which would be excessive interest shall be applied to the reduction
of the principal of this Note and not to the payment of interest, or if such
excessive interest otherwise would exceed the unpaid balance of principal of
this Note such excess shall be applied first to other indebtedness of the
Borrower to the Lender, and the balance, if any, shall be refunded to the
Borrower. In determining whether the interest paid, agreed to be paid, charged
or demanded hereunder exceeds the highest amount permitted by applicable law,
all sums paid or agreed to be paid to or charged or demanded by the Lender for
the use, forbearance or detention of the indebtedness of the Borrower to the
Lender shall, to the extent permitted by applicable law, (i) be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
until payment in full so that the actual rate of interest on account of such
indebtedness is uniform throughout such term, (ii) be characterized as a fee,
expense or other charge other than interest, and (iii) exclude any voluntary
prepayments and the effects thereof. The terms and provisions of this Section
shall control and supersede every other provision of all agreements between the
Lender and the Borrower in conflict herewith.
9. GOVERNING LAW AND VENUE. This Note and the rights and obligations of
the parties hereunder shall be governed by the laws of the United States of
America and by the laws of the State of Texas, and is performable in Dallas
County, Texas. Chapter 346 of the Texas Finance Code does not apply to this
Note.
10. BUSINESS DAY. If any action is required or permitted to be taken
hereunder on a Sunday, legal holiday or other day on which banking institutions
in the State of Texas are authorized or required to close, such action shall be
taken on the next succeeding day which is a business day, and, to the extent
applicable, interest on the unpaid principal balance shall continue to accrue at
the applicable rate.
11. AGREEMENT. This Note is the Note referred to in the Agreement, and
is entitled to the benefits thereof and the security as provided for therein.
Reference is made to the Agreement and the Loan Documents for (a) a statement of
the rights and obligations of the Borrower, including the right to
Page 2
35
terminate the Commitment without penalty, (b) a description of the nature and
extent of the security and the rights of the parties with respect to such
security, (c) a statement of the terms and conditions under which the due date
of this Note may be accelerated, and (d) a description of the Borrower's
prepayment rights.
12. ARBITRATION AND WAIVER OF JURY TRIAL.
(a) This Section concerns the resolution of any controversies or claims
between the Borrower and the Lender, whether arising in contract, tort or by
statute, including but not limited to controversies or claims that arise out of
or relate to: (i) this Note (including any renewals, extensions or
modifications); or (ii) any document related to this Note; (collectively a
"Claim").
(b) At the request of the Borrower or the Lender, any Claim shall be
resolved by binding arbitration in accordance with the Federal Arbitration Act
(Title 9, U.S. Code) (the "Act"). The Act will apply even though this Note
provides that it is governed by the law of a specified state.
(c) Arbitration proceedings will be determined in accordance with the
Act, the applicable rules and procedures for the arbitration of disputes of JAMS
or any successor thereof ("JAMS"), and the terms of this Section. In the event
of any inconsistency, the terms of this Section shall control.
(d) The arbitration shall be administered by JAMS and conducted in
Dallas, Texas. All Claims shall be determined by one arbitrator; however, if
Claims exceed $5,000,000, upon the request of any party, the Claims shall be
decided by three arbitrators. All arbitration hearings shall commence within 90
days of the demand for arbitration and close within 90 days of commencement and
the award of the arbitrator(s) shall be issued within 30 days of the close of
the hearing. However, the arbitrator(s), upon a showing of good cause, may
extend the commencement of the hearing for up to an additional 60 days. The
arbitrator(s) shall provide a concise written statement of reasons for the
award. The arbitration award may be submitted to any court having jurisdiction
to be confirmed and enforced.
(e) The arbitrator(s) will have the authority to decide whether any
Claim is barred by the statute of limitations and, if so, to dismiss the
arbitration on that basis. For purposes of the application of the statute of
limitations, the service on JAMS under applicable JAMS rules of a notice of
Claim is the equivalent of the filing of a lawsuit. Any dispute concerning this
arbitration provision or whether a Claim is arbitrable shall be determined by
the arbitrator(s). The arbitrator(s) shall have the power to award legal fees
pursuant to the terms of this Note.
(f) This Section does not limit the right of the Borrower or the Lender
to: (i) exercise self-help remedies, such as but not limited to, setoff; (ii)
initiate judicial or nonjudicial foreclosure against any real or personal
property collateral; (iii) exercise any judicial or power of sale rights, or
(iv) act in a court of law to obtain an interim remedy, such as but not limited
to, injunctive relief, writ of possession or appointment of a receiver, or
additional or supplementary remedies.
(g) The filing of a court action is not intended to constitute a waiver
of the right of the Borrower or the Lender, including the suing party,
thereafter to require submittal of the Claim to arbitration.
(h) BY AGREEING TO BINDING ARBITRATION, THE BORROWER IRREVOCABLY AND
VOLUNTARILY WAIVES ANY RIGHT THE BORROWER MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY CLAIM. FURTHERMORE, WITHOUT INTENDING IN ANY WAY TO LIMIT THIS AGREEMENT
TO ARBITRATE, TO THE EXTENT ANY CLAIM IS NOT ARBITRATED, THE BORROWER
IRREVOCABLY AND VOLUNTARILY
Page 3
36
WAIVES ANY RIGHT THE BORROWER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF SUCH
CLAIM. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THE
AGREEMENT.
IN WITNESS WHEREOF, the Borrower has executed this Note as of the date
and year first above written.
PEERLESS MFG. CO.
By /s/
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Financial Officer
Page 4
37
SECURITY AGREEMENT
This Security Agreement (the "SECURITY AGREEMENT") is entered
into as of the 31st day of August 2001, by PEERLESS MFG. CO., a Texas
corporation having its principal place of business in ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("DEBTOR"), in favor of BANK OF AMERICA, N.A., a national
banking association ("SECURED Party").
RECITALS
WHEREAS, at the time of execution of this Security Agreement, Secured
Party has committed to loan Debtor $10,000,000.00, pursuant to the provisions of
a Loan Agreement dated as of the 31st day of August 2001, between Debtor and
Secured Party (the "AGREEMENT"); and
WHEREAS, to induce Secured Party to make the loans provided
for in the Agreement, Debtor has agreed to grant a security interest in certain
collateral as hereinafter described as security for repayment of such loan;
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Debtor and Secured Party hereby agree as follows:
TERMS. Terms defined in the Agreement have the same meanings
when used herein unless otherwise defined herein or the context hereof otherwise
requires. In addition to any other terms defined herein, the following terms
shall have the meanings set forth below. Terms not defined herein or in the
Agreement which are defined in the Texas Uniform Commercial Code, as in effect
on the date hereof (the "UCC"), have the meanings specified in the UCC, and the
definitions specified in Article 9 of the UCC control in the case of any
conflicting definitions in the UCC. The singular number includes the plural and
vice versa. Captions of Sections do not limit the terms of such Sections.
"ACCOUNTS" means all of Debtor's now owned or existing or
hereafter acquired or arising accounts and includes all of Debtor's rights to
payment arising out of the transfer of rights in Debtor's tangible or intangible
personal property, and all supporting obligations.
"ACCOUNT DEBTOR" means each person who is obligated on, under,
or with respect to any Payment Rights Collateral.
"CERTIFICATED SECURITIES" means all of Debtor's now owned or
existing or hereafter acquired or arising certificated securities.
"CHATTEL PAPER" means all of Debtor's now owned or existing or
hereafter acquired or arising, tangible and intangible chattel paper.
"COLLATERAL" means all of the following wherever located: (a)
Accounts, (b) Chattel Paper, (c) Deposit Accounts, (d) Documents, (e) Equipment,
(f) General Intangibles, (g) Instruments, (h) Inventory, (i) Investment
Property, (j) Letter of Credit Rights, (k) all dividends, distributions, and
income attributable to proceeds, products, additions to, substitutions,
replacements and supporting obligations for, model conversions, and accessions
of, any and all Collateral; "proceeds" includes, without limitation, all
proceeds of any insurance (including any surrender value therefor, any right to
return, or unearned premiums), causes and rights of action, remedies,
privileges, settlements, judicial and arbitration judgments and awards,
indemnities, liens, warranties, or guaranties payable from time to time with
respect to or security for any of the Collateral, and (l) all ledgers, files,
writings, records, data bases, plans, drawings, and information relating to any
of the foregoing.
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38
"DEPOSIT ACCOUNTS" means all of Debtor's now owned or existing
or hereafter acquired or arising deposit accounts.
"DOCUMENTS" means all of Debtor's now owned or existing or
hereafter acquired or arising documents.
"EQUIPMENT" means all of Debtor's now owned or existing or
hereafter acquired or arising equipment and fixtures of every description used
or useful in the conduct of Debtor's business, and all accessories, accessions,
additions, attachments, substitutions, replacements, improvements, parts, and
other property now or hereafter affixed thereto or used in connection therewith.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.0
hereof.
"GENERAL INTANGIBLES" means all of Debtor's now owned or
existing or hereafter acquired or arising general intangibles (including all
payment intangibles) and in any event includes all rights to tax refunds, all
copyrights, patents, trademarks, trade secrets, service marks, formulae,
blueprints, technology, trade dress, logotypes, rights arising out of leases,
licenses, and contracts which are not accounts, chattel paper, or instruments
(including, without limitation, dividends and rights to payment arising out of
partnership agreements and management contracts), computer software, options,
warranties, service contracts, program services, rights to refund,
reimbursement, indemnification, and subrogation, goodwill, licenses, royalties,
franchises, customer lists, reversions from any retirement plan or arrangement,
and all other choses in action and causes of action.
"INSTRUMENTS" means all of Debtor's now owned or existing or
hereafter acquired or arising instruments, including all of Debtor's promissory
notes.
"INTANGIBLE COLLATERAL" means all Collateral other than
Equipment and Inventory.
"INVENTORY" means all of Debtor's now owned or existing or
hereafter acquired or arising goods, merchandise, and other personal property
furnished under any contract of service or intended for sale or lease, including
all raw materials, work in process, finished goods and materials and supplies,
of any kind, nature, or description, that are used or consumed by Debtor's
business, or are or might be used in connection with the manufacture, packing,
shipping, advertising, selling, or finishing of such goods, merchandise, and
other personal property, all goods consigned by or to Debtor, all goods
previously constituting Equipment which are at any time in question being held
for sale or lease in the ordinary course of Debtor's business, and all returned
or repossessed goods now or at any time or times hereafter in the possession or
under the control of Debtor.
"INVESTMENT PROPERTY" means all of Debtor's now owned or
existing or hereafter acquired or arising investment property, including without
limitation or in addition, all financial assets and all the following:
(a) all the capital stock, partnership interests, membership interests
and other ownership interests issued by, and all other ownership interest in,
all subsidiaries of Debtor (that are not Foreign Subsidiaries, as defined below)
now owned or hereafter created or acquired and owned by the Debtor, including
without limitation, the capital stock or other ownership interests described on
Exhibit 1.1.
(b) sixty-six and two thirds percent (66 2/3%) of all the capital
stock, partnership interests, membership interests or other ownership interests
of each subsidiary of Debtor organized outside of the United States of America
(the "FOREIGN SUBSIDIARIES"), now owned or hereafter created or acquired and
owned by Debtor, including without limitation those specifically described on
Exhibit 1.2 hereto; and
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39
(c) all the commodity accounts and security accounts described on
Exhibit 3.7.
"LETTER OF CREDIT RIGHTS" means all of Debtor's now owned or existing
or hereafter acquired or arising rights to payment and performance under any
letter of credit.
"LIEN" means any mortgage, deed of trust, pledge, security interest,
lien, conditional sale or other title retention agreement, or any financing
statement or any distraint, writ of attachment, writ of garnishment, writ of
sequestration, or similar writ or any other encumbrance of any nature
whatsoever, whether voluntary or not.
"PAYMENT RIGHTS COLLATERAL" means all Collateral consisting of General
Intangibles which constitute payment intangibles, Accounts, and Chattel Paper.
"PERMITTED LIENS" means (a) the liens and security interests evidenced
by the Loan Documents, (b) statutory liens for taxes which are not yet
delinquent, (c) mechanics' and materialman's liens, with respect to obligations
which are not past due, (d) other liens and security interests, in favor of
Lender, (e) liens described on Exhibit 1.3, (f) liens arising under "capital
leases" under GAAP which are permitted by Section 8.4 of the Loan Agreement, (g)
purchase-money mortgages, liens or security interests on any property hereafter
acquired or the assumption of any mortgage, lien or security interest on
property existing at the time of such acquisition (and not created in
contemplation of such acquisition), or any mortgage, lien or security interest
incurred in connection with any conditional sale or other title retention
agreement, (h) any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part, of any lien referred to in the
immediately preceding clauses hereof, provided however (1) that the lien shall
be limited to all or part of the property securing the lien extended, renewed or
replaced (plus improvements thereon), and (2) that the indebtedness secured
thereby is not increased, (i) minor defects and irregularities of title which
neither (1) are liens or security which secure other indebtedness or
obligations, nor (2) materially impair the value of such asset or the use
thereof for the purposes for which such asset is held.
"SECURITY AGREEMENT" means this Security Agreement and all amendment
hereof or supplements hereto.
"SECURITY INTEREST" means the security interest granted by Debtor to
the Secured Party under this Security Agreement.
"SOLVENT" when used with respect to any person means that the fair
value of the property of such person is on the date of determination, greater
than the total amount of the liabilities (including contingent liabilities) of
such person as of such date and that, as of such date, such person is able to
pay all indebtedness of such person as such indebtedness matures.
SECURITY.
Security Interest. As security for the payment or
performance, as the case may be, in full of the Obligations, Debtor hereby
bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates
and transfers to Secured Party, its successors and assigns, and hereby grants to
Secured Party, its successors and assigns, a security interest in all of
Debtor's right, title and interest in, to and under the Collateral.
Debtor to Remain Liable. Debtor shall remain liable
under and shall preserve the liability of all other parties to each agreement
constituting part of the Collateral and shall perform all of its obligations
thereunder. The exercise by Secured Party of any of its rights hereunder shall
not release Debtor from any duties under any agreement. Secured Party has no
obligation or liability with respect to
Page 3
40
any of the Collateral under any agreement by reason or arising out of the
assignment thereof to Secured Party or the granting to Secured Party of a
security interest therein or the receipt by Secured Party of any payment
relating to any such agreement.
REPRESENTATIONS. Debtor makes the following representations to
Secured Party:
Enforceability. Debtor has all requisite authority to
execute, deliver, and perform its duties under, and has duly authorized,
executed, and delivered, this Security Agreement; and this Security Agreement is
enforceable against Debtor in accordance with its terms. The execution,
delivery, and performance hereof by Debtor do not violate, and do not require
any authorization, notice, or filing under, any agreement, judgment, injunction,
decree, determination, award, rule, regulation, order, or writ of any person,
entity, court, or governmental agency or authority. This Security Agreement
creates in favor of Secured Party an enforceable security interest; and the
Security Interests in the Collateral constitute, or upon necessary or
appropriate filings will constitute, perfected security interests therein free
of all other Liens other than Permitted Liens.
No Proceeding. There is no pending or threatened
claim or proceeding which if determined adversely to Debtor would materially and
adversely affect any aspect of Debtor's business or the Collateral, except as
disclosed to Secured Party in writing and acknowledged by Secured Party prior to
the date of this Security Agreement.
Financial Condition of Debtor. Debtor is Solvent. All
financial or credit statements or information of or relating to Debtor delivered
to or relied upon by Secured Party in connection with this Security Agreement
are true, correct, complete, and valid and accurately reflect Debtor's financial
condition as of the date thereof
Title to Collateral and Related Matters.
Debtor has rights in or power to transfer
the Collateral and its title to the Collateral free of any dispute,
counterclaim, or defense.
Each obligation constituting Payment Rights
Collateral is a valid and enforceable obligation representing an undisputed debt
owing by the Account Debtor to Debtor for a fixed sum as set forth in an invoice
or other document or instrument representing the same. No Payment Rights
Collateral is subject to any defense, right of offset, counterclaim or
adjustment.
Exhibit 3.4(c) lists all trade names by
which Debtor is now known or has been previously known.
None of the Collateral is an accession to
goods other than goods constituting part of the Collateral.
Instruments in Payment of Intangible Collateral.
Debtor has not received any note, trade acceptance, draft, or other instrument
with respect to or in payment of any Payment Rights Collateral, except checks
received in the ordinary course of business.
Address and Place of Business. Attached as Exhibit
3.6 is a complete and correct description of all real property owned by Debtor.
None of the property listed on Exhibit 3.6 is mortgaged except to Secured Party.
The chief executive office of Debtor is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇. All of Debtor's records or copies thereof pertaining to the Collateral
and the proceeds thereof are now maintained at its chief executive office.
Within the past four (4) months, Debtor has not changed the location of its
chief executive office or where it keeps its records concerning the Collateral.
Debtor has no places of business other than the locations listed on Exhibit 3.6.
None of the Equipment or Inventory has, within the four (4) months preceding the
date of this Security Agreement, been located at any place other than the
addresses specified in the preceding sentence, except for in-transit Inventory,
Inventory held at customer locations for assembly in the ordinary course of
business, and Equipment held by third parties for repair from time to time in
the ordinary course of business. No person or entity other
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41
than Debtor and Secured Party has possession of any of the Collateral, except
for Inventory, which in the ordinary course of Debtor's business, is located at
the premises of the Debtor's customers for purposes of its assembly; provided
that no such Inventory is located at a customer's site for more than four months
before title transfers to the customer and the customer pays the purchase price
therefor.
Deposit, Commodity and Securities Accounts. Exhibit
3.7 correctly identifies all deposit, commodity and securities accounts owned by
Debtor and the institutions holding such accounts. No party other than Debtor
has control over any Investment Property or such accounts.
Name and Organization of Debtor. Debtor's exact legal
name and the jurisdiction under which Debtor is organized are as set forth in
the first paragraph of this Security Agreement. Debtor has not changed its name
within the five (5) years immediately preceding the date of this Security
Agreement, and Debtor conducts no business under any other name, whether or not
registered as an assumed name, except as specified in Exhibit 3.4(c). Exhibit
3.4(c) sets forth an accurate list of all names of all predecessor companies of
Debtor including the names of any entities it acquired (by stock purchase, asset
purchase, merger or otherwise) and the chief place of business, chief executive
office, and jurisdiction of organization of each such predecessor company. For
purposes of the foregoing, a "predecessor company" shall mean, with respect to
Debtor, any party whose assets or equity interests are acquired by Debtor or who
was merged with or into Debtor within the last five years prior to the date
hereof.
Delivery of Collateral. Except as provided by Section
4.12, Debtor has delivered to Secured Party all Collateral the possession of
which is necessary to perfect the security interest of Secured Party therein.
Intellectual Property. All intellectual property of
the Debtor that is registered with or for which an application for registration
has been filed with any governmental authority is identified on Exhibit 3.10,
and such information is true, correct and complete as of the date hereof.
Continuation of Representations and Warranties. All
representations and warranties made under this Security Agreement shall be
deemed to be made at and as of the date hereof and at and as of the date of any
future Loan and in all instances shall be true and correct, except to the extent
that such representations and warranties relate specifically to another date and
provided that Debtor may at any time and from time to time update the Schedules
hereto so as to cause such Schedules to be true and correct as of the date of
any future Loan.
COVENANTS. Debtor covenants as follows:
In General. Debtor will (a) maintain good and
marketable title to all Collateral free of any Lien (other than Permitted
Liens), dispute, counterclaim, or defense; (b) perform fully and promptly all
agreements contained herein and in all other Loan Documents; (c) conduct all
business efficiently and without voluntary interruption; (d) preserve all
material rights, privileges, and franchises held or used in its business; (e) at
its cost and expense, defend any action which may affect the Security Interest
or Debtor's title to the Collateral; and (f) cooperate with Secured Party so
that Secured Party is allowed to obtain a control agreement in form and
substance satisfactory to Secured Party with respect to Collateral which
consists of deposit accounts, investment property, letter of credit rights, or
electronic chattel paper.
Notices. Debtor promptly will notify Secured Party of
(a) any material adverse change in Debtor's financial condition or any change
which materially adversely affects any of the Collateral or the Security
Interest; (b) any claim, action, or proceeding which could materially and
adversely affect the value of, or Debtor's title to, any of the Collateral, or
the effectiveness of the Security Interest; and (c) the occurrence of any Event
of Default.
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Processing, Sale, Collections, Etc.
Debtor will use Equipment constituting
Collateral solely in the conduct of Debtor's business, will keep all tangible
Collateral in good order and repair, will use commercially reasonable efforts
not to waste any part of the Collateral, will not destroy any part of the
Collateral, and will not use any of the Collateral in violation of any statute
or ordinance.
Until notice from Secured Party to the
contrary, given at any time after the occurrence and during the continuance of
any Event of Default, Debtor (i) may, in the ordinary course of its business, at
its own expense, sell, lease, or furnish under contracts of service any of the
Inventory (but no such sale or use shall limit or impair the Security Interest
in any proceeds thereof); (ii) will, at its own expense, endeavor to collect,
when due, all amounts due with respect to any of the Intangible Collateral, and
take such action with respect to such collection as Secured Party may reasonably
request or, in the absence of such request, as Debtor may deem advisable; and
(iii) may grant in the ordinary course of business, to any person obligated on
any of the Intangible Collateral, any rebate, refund, or allowance to which such
person may be lawfully entitled, and accept, in connection therewith, the return
of goods, the sale or lease of which shall have given rise to such Intangible
Collateral.
Except as permitted by Section 4.3(b),
4.3(d) or 4.12 hereof or by Section 8.6 of the Loan Agreement, Secured Party
does not authorize Debtor to, and Debtor will not sell, lease, assign, license,
transfer, or otherwise dispose of or in any manner alter, modify, manufacture,
process, or assemble the Collateral or any part thereof. If Debtor with or
without the consent of Secured Party disposes of a substantial part of the
Collateral, Debtor will notify Secured Party of such disposition.
Any Equipment constituting Collateral
necessary for the operation of Debtor's business which is worn out, destroyed,
or damaged beyond repair may be disposed of but will promptly be replaced by
Equipment, free of any Lien except for Permitted Liens, which has a value or
utility at least equal as of the date of replacement to the value or utility of
the replaced Equipment as of the date hereof.
Except as contemplated by Section 4.3(b),
4.3(d) and 4.12, so long as Debtor holds any proceeds of the Collateral, Debtor
will hold same separate and apart from any other property of Debtor and in trust
for Secured Party and shall not commingle the proceeds of Collateral with any of
Debtor's funds or property.
Debtor will place a legend on all Chattel
Paper constituting part of the Collateral that Secured Party has a security
interest in such Chattel Paper.
Change of Name or Location; Third Parties in
Possession. Debtor will not change its state of organization, name, or form of
organization or conduct any of its business under any name except its legal name
or those identified on Exhibit 3.4(c) without the prior, written consent of
Secured Party, which consent is conditioned on Debtor's delivery of all
documents necessary or desirable to preserve the Security Interest. Debtor will
not establish a new location for its jurisdiction of organization, chief
executive office or for maintaining its books and records nor the location of
any Collateral (other than Inventory held at customer locations) until it has
given to Secured Party not less than thirty (30) days' prior written notice of
its intention to do so which identifies such new location and provides such
other information and documents in connection therewith as Secured Party may
request. Debtor shall not permit any third party (including any warehouseman,
bailee, agent, consignee, or processor but excluding customers) to hold any
Collateral, except as contemplated by Section 3.6 or unless Debtor shall: (i)
notify such third party of the security interests created hereby; (ii) instruct
such party to hold all such Collateral for Secured Party's account subject to
Secured Party's instructions; and (iii) take all other actions Secured Party
reasonably deems necessary to perfect and protect its and the Debtor's interests
in such Collateral pursuant to the requirements of the UCC of the applicable
jurisdiction where the warehouseman, bailee, consignee, agent, processor or
other third party is located (including the filing of a financing statement in
the proper jurisdiction naming the applicable third party as debtor and the
Debtor as secured party and notifying the third party's secured lenders of the
Debtor's
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interest in such Collateral before the third party receives possession of the
Collateral in question). If an Event of Default occurs and Secured Party
requests, Debtor shall take the actions specified in clauses (i) through (iii)
of the foregoing sentence with respect to Inventory in possession of its
customers.
Records. Debtor will maintain a complete and accurate
set of books and records containing up-to-date posting of all Debtor's
transactions. Debtor will keep proper books and records with respect to the
Collateral and will upon request ▇▇▇▇ or otherwise make entries with respect to
such books and records to reflect the Security Interest.
Reports. Debtor will furnish Secured Party with such
information with respect to the Collateral as Secured Party may request. Debtor
will deliver to Secured Party on a periodic basis as Secured Party determines, a
report describing the kind, location, and quantity of Inventory and a report in
form satisfactory to Secured Party accurately showing and describing the Payment
Rights Collateral and including, among other information, the aging of each item
of Payment Rights Collateral. Debtor will deliver to Secured Party, together
with each such report, duplicate invoices, shipping receipts, and such other
evidence of shipment or delivery of the goods or performance of the services or
the performance of such other act or acts giving rise to such Payment Rights
Collateral as Secured Party may, from time to time, require. Upon Secured
Party's request, if Debtor grants to any Account Debtor a credit, or if Debtor
receives back any goods which Debtor had delivered to an Account Debtor, Debtor
will forthwith give notice to Secured Party, in writing, of the issuance of such
credit or the return of such goods. Debtor will promptly advise Secured Party of
the existence of any dispute with respect to any Intangible Collateral.
INDEMNITY. DEBTOR INDEMNIFIES AND AGREES TO HOLD
SECURED PARTY AND SECURED PARTY'S OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AND
AGENTS (EACH AN "INDEMNIFIED PARTY" AND COLLECTIVELY THE "INDEMNIFIED PARTIES")
HARMLESS FROM AND AGAINST ANY LOSS, CLAIM, DEMAND, OR EXPENSE (INCLUDING
ATTORNEYS' FEES) (INDIVIDUALLY, A "CLAIM") ARISING BY REASON, OR IN ANY MANNER
RELATED TO, THIS SECURITY AGREEMENT OR THE COLLATERAL OR THE FAILURE OF DEBTOR
TO COMPLY WITH ANY STATE OR FEDERAL STATUTE, RULE, REGULATION, ORDER, OR DECREE
INCLUDING, WITH RESPECT TO EACH INDEMNIFIED PARTY, ALL CLAIMS ARISING BY REASON
OF THE NEGLIGENCE OF SUCH, OR ANY OTHER, INDEMNIFIED PARTY BUT EXCLUDING, WITH
RESPECT TO ANY INDEMNIFIED PARTY ANY CLAIM ARISING BY REASON OF THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY. The applicable
indemnified party shall control the defense of any Claim, but Debtor will pay
the cost thereof. This indemnity is in addition to and not in any manner in
limitation of the other indemnification provisions of the other Loan Documents.
Taxes. Debtor will pay all taxes and assessments on
the Collateral or on its use or operation prior to the time such taxes become
past due, except such as are being contested in good faith by appropriate
proceedings and with reserves which are adequate in the opinion of Secured
Party.
Mortgagees' and Landlords' Waivers. At Secured
Party's request, Debtor will cause each mortgagee of all real estate owned by
Debtor and each landlord of all premises leased by Debtor to execute and deliver
to Secured Party instruments, in form and substance satisfactory to Secured
Party, by which such mortgagee or landlord waives or subordinates all of its
rights, if any, to all of the Collateral.
Insurance. Debtor will keep the Collateral insured at
all times against such risks and to the extent that like properties are
customarily insured by other companies engaged in the same or similar businesses
similarly situated, maintain insurance of the types and in the coverage amounts
and with reasonable deductibles as are usual and customary. Such insurance
policies shall (1) provide that Secured Party shall receive prompt notice of any
claims filed thereunder; (2) include a standard mortgagee clause in favor of
Secured Party with loss payable for all claims in excess of $10,000 to Secured
Party; and (3) provide that no adverse alteration or cancellation thereof shall
be effective as
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against Secured Party until thirty (30) days after written notice of such
alteration or cancellation is given to Secured Party. Debtor shall deliver to
Secured Party certificates of insurance coverage within thirty (30) days
following the date hereof and thereafter as and when requested by Lender.
Operations. Debtor will at all times comply in all
material respects with all applicable law, the non-compliance with which could
have a materially adverse effect on Debtor or the Collateral.
Further Assurances; Exceptions to Delivery. Debtor
authorizes Secured Party to file a financing statement describing the
Collateral. Debtor will at its own expense take all action as Secured Party may
at any time request to protect, assure or enforce Secured Party's interests,
rights and remedies created by, provided in or emanating from this Security
Agreement. Debtor will (a) immediately deliver to Secured Party, in due form for
transfer (endorsed in blank or accompanied by duly executed, undated,
appropriate blank stock or bond powers) all Certificated Securities, Chattel
Paper, Instruments, Documents, and writings evidencing General Intangibles which
are interests in or obligations of the issuer of such writings constituting part
of the Collateral; (b) at Secured Party's request, cause the Security Interest
to be duly noted on any certificate of title issuable with respect to any of the
Collateral and forthwith deliver to Secured Party each such certificate of
title; and (c) execute and deliver to Secured Party, in due form for filing or
recording (and pay the cost of filing or recording the same in all public
offices deemed necessary or advisable by Secured Party) such assignments
(including assignments of life insurance), security agreements, mortgages, deeds
of trust, pledge agreements, consents, waivers, financing statements (and
amendments thereof), stock or bond powers, and other documents, and do such
other acts and things, all as may from time to time in the opinion of Secured
Party be necessary or desirable to establish and maintain a valid perfected
first priority security interest in the Collateral free of all Liens other than
Permitted Liens. Notwithstanding the foregoing or anything else herein to the
contrary, prior to Secured Party's written notice to the contrary, Debtor may:
(i) retain for collection in the ordinary course of business checks representing
Proceeds of Accounts received in the ordinary course of business; (ii) retain
any letters of credit received in the ordinary course of business; (iii) retain
and utilize in the ordinary course of business all dividends and interest paid
in respect to any Investment Property; and (iv) retain any Documents received
and further negotiated in the ordinary course of business. If Secured Party
requests at any time, Debtor shall take such action as Secured Party may require
to (a) deliver all letters of credit and Documents pledged as Collateral
hereunder to Secured Party and (b) instruct all Account Debtors and all other
parties making payments on or in respect of any Collateral (including without
limitation, any Investment Property) to make payment thereon to Secured Party in
accordance with Section 5.5.
Accessions and Fixtures. Debtor will not permit any
of the Collateral to become an accession to goods other than goods constituting
the Collateral. If any of the Collateral is to be attached to real property that
is not listed on Exhibit 3.6, Debtor will give the Secured Party written notice
of (a) the legal description of the real property to which such Collateral is to
be attached, and (b) the name of the record owner thereof.
Warehouse Receipts Non-Negotiable. Debtor agrees that
if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued in respect of any portion of the Collateral, such warehouse receipt or
receipt in the nature thereof shall not be "negotiable" (as such term is used in
Section 7.104 of the UCC) unless such warehouse receipt or receipt in the nature
thereof is delivered to Secured Party.
Voting Rights; Distributions, Etc. So long as no
Event of Default shall have occurred and be continuing, Debtor shall be entitled
to exercise any and all voting and other consensual rights (including, without
limitation, the right to give consents, waivers and notifications) pertaining to
any of Investment Property; provided, however, that no vote shall be cast or
consent, waiver or
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ratification given or action taken without the prior written consent of Secured
Party which would be inconsistent with or violate any provision of this Security
Agreement or any other Loan Document.
Transfers and Other Liens; Additional Investments.
Except as permitted by the terms of this Security Agreement or any other Loan
Document, the Debtor agrees that it will (i) not permit any issuer of any of the
Collateral to issue any shares of stock, or any other equity, partnership,
membership or other ownership interest, any notes or other securities or
instruments in addition to or in substitution for any of the Collateral, and
(ii) pledge hereunder, immediately upon its acquisition thereof, any and all
such shares of stock or other equity, partnership, membership and other
ownership interests, notes or instruments.
Intellectual Property Covenants. If, before the
Obligations are paid in full, Debtor obtains any new intellectual property or
rights thereto or becomes entitled to the benefit of any intellectual property,
Debtor shall give to Secured Party prompt written notice thereof, and, at
Secured Party's request, shall execute and deliver, in form and substance
satisfactory to Secured Party , a security agreement describing any such new
intellectual property for filing with the applicable governmental authorities.
Debtor shall: (a) prosecute diligently any copyright, patent, or trademark
application at any time pending which is necessary for the conduct of Debtor's
business; (b) make application on all new copyrights, patents and trademarks as
reasonably deemed appropriate by Debtor; (c) preserve and maintain all rights in
the intellectual property that are necessary for the conduct of Debtor's
business; and (d) upon and after the occurrence and during the continuance of an
Event of Default, use its reasonable efforts to obtain any consents, waivers or
agreements necessary to enable Secured Party to exercise its remedies with
respect to the intellectual property. Debtor shall not abandon any pending
copyright, patent or trademark application, or copyright, patent, trademark or
any other intellectual property which is necessary for the conduct of Debtor's
business without the prior written consent of Secured Party.
Deposit, Commodity and Security Accounts. Debtor
shall not open any new deposit, commodity or security account or otherwise
utilize any such account other than the accounts identified on Exhibit 3.7
unless Debtor shall have given Secured Party thirty (30) days prior written
notice thereof and shall have taken all action deemed necessary or desirable by
Secured Party to cause its Security Interest therein to be perfected. Prior to
the occurrence and continuance of an Event of Default, Debtor may make purchases
and sales of Investment Property (that does not constitute equity interests in
its subsidiaries) in accordance with the restrictions on investment set out in
the Loan Documents. After the occurrence and during the continuance of an Event
of Default, Debtor shall not be authorized to make purchases and sales of the
Investment Property. Debtor will not give any party control over any Investment
Property. At Secured Party's request, Debtor will take all action required by
Secured Party to give Secured Party control over the accounts described in
Exhibit 3.7, including without limitation, the execution and delivery among
Debtor, Secured Party and the institutions identified on Exhibit 3.7 of control
agreements in form and substance satisfactory to Secured Party.
Commercial Tort Claims. The Debtor will grant to
Secured Party a security interest in any commercial tort claim that arises after
the date hereof that relates to or arises out of the Collateral or the conduct
of the Debtor's business in relation thereto.
SECURED PARTY'S RIGHTS. Secured Party has the following rights
without regard to the occurrence of an Event of Default:
Information. At any reasonable time and from time to
time, Secured Party or any of its representatives may at Debtor's expense to the
extent permitted by applicable law inspect the Collateral and examine, audit,
inspect, verify, and make copies of and abstracts from the books and records,
and visit the properties of Debtor, discuss the affairs, finances, and accounts
of Debtor with any of its officers or directors and discuss the affairs,
finances, and accounts of Debtor with its independent public accountants; and
Debtor will permit such accountants to disclose to Secured Party all financial
statements and other information they may have with respect to Debtor.
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Delivery of Collateral. Secured Party may at any time
demand and Debtor shall deliver to Secured Party possession or control of any of
the Collateral.
Performance by Secured Party. Secured Party may, but
is not obligated to, perform or attempt to perform any agreement of Debtor
contained herein if Debtor is failing to do so. If any material part of the
Collateral becomes the subject of any proceeding and Debtor fails to defend
fully such proceeding and to protect Debtor's and Secured Party's rights in such
Collateral in good faith, Secured Party may, at Secured Party's option but at
Debtor's cost, elect to defend and control the defense of such litigation or
other proceeding, and may (a) select and retain counsel, (b) determine whether
settlement shall be offered or accepted, and (c) determine and negotiate all
settlement terms.
Preservation. Debtor has the risk of loss of the
Collateral. Secured Party's duty with respect to any Collateral in the
possession of Secured Party is solely to use reasonable care in the custody and
preservation of the Collateral. Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if it takes such action for that purpose as Debtor may request in
writing, but failure by Secured Party to comply with any such request shall not
of itself be deemed a failure to exercise such reasonable care. SECURED PARTY IS
NOT RESPONSIBLE FOR, NOR ARE THE OBLIGATIONS (OR DEBTOR'S LIABILITY WITH RESPECT
THERETO) SUBJECT TO SETOFF OR REDUCTION BY REASON OF, ANY SHORTAGE, DISCREPANCY,
DAMAGE, LOSS, OR DESTRUCTION IN OR TO THE COLLATERAL nor, in any event, any
depreciation in the value of the Collateral. Secured Party is not required to
fulfill any of the obligations of Debtor with respect to any of the Collateral,
or to make any payment, or to make any inquiry as to the nature or sufficiency
of any payment received by it or the sufficiency of any performance of any party
under any of the Collateral, or to present or file any claim, or to take any
action to enforce any performance or the payment of any amounts which have been
assigned to it, in which it has been granted a security interest, or to which it
may be entitled at any time. Secured Party has no duty to maintain in force, to
prevent lapse or impairment of, or to exercise any rights with respect to any of
the Collateral or any insurance thereon, or to exercise any rights, options or
privileges respecting any of the Collateral or to take any steps necessary to
preserve rights against prior or other parties or to enforce collection of the
Collateral or any part thereof by legal proceedings or otherwise. The duties of
Secured Party are to account to Debtor for Collateral actually received by
Secured Party and to receive collections, remittances and payments on such
Collateral as and when made and received by Secured Party and hold same as
Collateral or apply same to the Obligations pursuant to the terms hereof.
Regarding Intangible Collateral. Secured Party may at
any time without prior notice to Debtor and without the necessity of foreclosing
thereon, notify any person liable in respect of any Payment Rights Collateral to
make payment directly to Secured Party and receive such payments and otherwise
enforce Debtor's rights against Account Debtors. All payments so received will
be applied as specified herein. Upon request of Secured Party, at any time,
Debtor will so notify the Account Debtors and will indicate on all ▇▇▇▇▇▇▇▇ to
Account Debtors that all monies due thereon are payable to Secured Party.
Secured Party has the right to verify the Payment Rights Collateral or any
portion thereof in the name of Debtor, in the name of Secured Party, or
otherwise. Except as specifically permitted in this Security Agreement, Debtor
will not agree to any modification of the terms of any Payment Rights Collateral
without the prior written consent of Secured Party. If any Intangible Collateral
evidences a security interest of Debtor in any property, Debtor will take all
steps necessary to perfect such security interest. After an Account Debtor has
been notified of the assignment of the Collateral to Secured Party, Debtor shall
not release, compromise, or adjust any Payment Rights Collateral, or any
guaranty, security, or lien therefor, or grant any discounts, allowances, or
credits thereon, or bring any suit to enforce payment thereof. Secured Party is
not liable for any error, omission, or delay occurring in the settlement,
collection, or payment of or enforcement of rights with respect to any Payment
Rights Collateral or of any instrument received in full or part payment thereof
or in dealing with any lien, security, or guaranty of or any other contractual
undertaking related to any Payment Rights Collateral. Secured Party may require
Debtor to deposit in a bank account in a bank of Secured Party's choice over
which Secured Party alone
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shall have the authority to make withdrawals, or deliver to Secured Party all
checks, drafts, money, or other cash proceeds of the Collateral, immediately
upon receipt thereof and in form received (except for any necessary endorsement
or assignment to permit a collection). Secured Party may hold the funds in said
account as additional Collateral or may, at Secured Party's discretion, apply
same to the Obligations. Secured Party may attempt to collect from any party
liable in respect of any Payment Rights Collateral, by suit or otherwise, any
sums due thereon and otherwise to enforce Debtor's rights with respect thereto,
and may surrender, release, or exchange any Collateral therefor and extend,
renew, or compromise any sums payable in connection therewith, but Secured Party
is in any event entitled to charge back against Debtor any uncollected Payment
Rights Collateral.
DEFAULT. Debtor is in default under this Security Agreement
upon the happening of any of the following events or conditions (each an "EVENT
OF DEFAULT"): (a) the occurrence of an Event of Default as that term is defined
in the Agreement; (b) (i) Debtor shall default in the due performance or
observance by it of any term, covenant or agreement set forth in Section 4.2,
4.3(c) or 4.4; or, (ii) Debtor shall default in the due performance or
observance of any term, covenant or agreement contained in this Security
Agreement other than those specified in clause (i) immediately preceding, and
such default continues unremedied for a period of thirty (30) days after notice
thereof from Secured Party or Secured Party is notified of such default or
should have been so notified pursuant to the provisions of Section 4.2,
whichever is earlier; (c) the sale, assignment, distribution, transfer or
granting of a Lien on any of the Collateral to or in favor of any party other
than Secured Party, unless otherwise expressly permitted by this Security
Agreement or in writing by Secured Party; (d) the entry of a judgment or levy
against any part of the Collateral or any execution, attachment, sequestration,
distraint warrant or other like or similar writ is issued with respect to any of
the Collateral; (e) the title of Debtor to any substantial part of the
Collateral becomes the subject of litigation which would or might, in Secured
Party's opinion, upon final determination result in substantial impairment or
loss of the security provided by this Security Agreement and upon notice by
Secured Party to Debtor such litigation is not dismissed within 30 days of such
notice; (f) the loss, theft, substantial damage to or destruction of any
material portion of the Collateral; or (g) the determination by Secured Party
that the results of any field examination of the books and records of Debtor or
the Collateral or other property of Debtor conducted by Secured Party pursuant
to the provisions of the Loan Documents are not acceptable to Secured Party.
Debtor agrees that any Event of Default hereunder shall, notwithstanding the
terms of the Loan Documents, create an Event of Default under each Loan
Document.
REMEDIES. Upon the occurrence of an Event of Default, and at
any time thereafter, if any Event of Default is continuing, Secured Party has
the following rights and remedies to the full extent permitted by applicable
law:
Acceleration. Secured Party may declare the
Obligations secured hereby, or any part thereof, immediately due and payable,
whereupon same shall be due and payable without demand, presentment for payment,
notice of non-payment, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and all other notices or without further
action of any kind, all of which are hereby expressly waived by Debtor; and
Secured Party may proceed to enforce payment of same and exercise all of the
rights and remedies provided by the UCC as well as all other rights and remedies
possessed by Secured Party under this Security Agreement, any other Loan
Document or otherwise.
Removal and Possession. Secured Party may require
Debtor to assemble the Collateral and make it available to Secured Party at any
place designated by Secured Party which is reasonably convenient to both
parties. Secured Party is entitled to immediate possession of all books and
records pertaining to any of the Collateral. Secured Party may leave the
Collateral on Debtor's or any other party's premises but under Secured Party's
control or may remove the Collateral from the premises of Debtor or from
wherever located, and, for purposes of removal and possession, Secured Party or
its representatives may enter any premises of Debtor without legal process and
thereafter hold or store same, and Debtor waives and releases Secured Party from
all claims in connection therewith or arising
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therefrom, and Secured Party may maintain at Debtor's expense on Debtor's
premises a custodian who may exercise Secured Party's rights to protect the
Collateral.
Sale of Collateral.
Secured Party may sell the Collateral, in
one or more sales or parcels, at such price as Secured Party deems adequate and
for cash or on credit or for future delivery, without assumption of any credit
risk, any portion of the Collateral, at any broker's board or at public or
private sale, without demand of performance or notice of intention to sell. The
purchaser of any Collateral sold shall thereafter hold the same free from any
claim or right, including any equity of redemption, of Debtor. Secured Party may
make any such sale subject to any limitation or restriction, including but not
limited to a limitation in the method of offering the Collateral or in the
number or identity of prospective bidders, which Secured Party may believe to be
necessary to comply with any requirement of applicable law or in order to obtain
any required approval of the purchase or the purchaser by any governmental
authority or officer. No such limitation or restriction shall cause such sale
not to be considered a commercially reasonable sale, nor shall Secured Party be
liable or accountable to Debtor, nor shall the Obligations be subject to any
reduction, by reason of the fact that the proceeds of a sale subject to any such
limitation or restriction are less than otherwise might have been obtained.
Without notice to or consent by Debtor, Secured Party may exercise all rights as
the insured, beneficiary, or owner of any insurance policy and may surrender
same and receive the surrender value thereof or sell same pursuant to the terms
thereof.
Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Secured Party will give Debtor commercially reasonable notice
of the time and place of any public sale thereof or of the time after which any
private sale or any other intended disposition thereof is to be made. The
requirements of commercially reasonable notice are met if such notice is given
in accordance with Section 10.1 at least ten (10) days before the time of the
sale or disposition. Expenses of retaking, holding, preparing for sale, selling,
leasing or the like shall include Secured Party's attorneys' fees and legal
expenses, and all such expenses shall be borne by Debtor. Public or private
sales, for cash or on credit, to a wholesaler or retailer or investor, or use of
Collateral of the types subject to this Security Agreement, or public auction,
are commercially reasonable since differences in the sales prices generally
realized in the different kinds of sales are ordinarily offset by the
differences in the costs and the credit risks of such sales.
At any sale Secured Party may sell any part
of the Collateral without warranty of any kind and may specifically disclaim any
warranty of title or the like, and none of the foregoing will be considered to
make the sale not commercially reasonable.
Debtor waives all rights of marshaling,
valuation and appraisal in respect of the Collateral.
Secured Party may cause any or all of the
Collateral held by it to be transferred into the name of Secured Party or the
name or names of Secured Party's nominee or nominees.
Secured Party may exercise any and all
rights and remedies of the Debtor under or in respect of the Collateral,
including, without limitation, any and all rights of the Debtor to demand or
otherwise require payment of any amount under, or performance of any provision
of, any of the Collateral and any and all voting rights and corporate powers in
respect of the Collateral. Debtor shall execute and deliver (or cause to be
executed and delivered) to Secured Party all such proxies and other instruments
as Secured Party may reasonably request for the purpose of enabling Secured
Party to exercise the voting and other rights which it is entitled to exercise
pursuant to this clause (f) and to receive the dividends, interest and other
distributions which it is entitled to receive hereunder.
For purposes of enabling Secured Party to
exercise its rights and remedies under this Section 7.3 and enabling Secured
Party and its successors and assigns to enjoy the full benefits of the
Collateral in each case as Secured Party shall be entitled to exercise its
rights and
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remedies under this Section 7.3, the Debtor hereby grants to Secured Party an
irrevocable, nonexclusive license (exercisable without payment of royalty or
other compensation to Debtor) to use, assign, license or sublicense any of the
intellectual property, including in such license reasonable access to all media
in which any of the licensed items may be recorded or stored and all computer
programs used for the completion or printout thereof and further including in
such license such rights of quality control and inspection as are reasonably
necessary to prevent the trademarks included in such license from claims of
invalidation. This license shall also inure to the benefit of all successors,
assigns and transferees of Secured Party.
Other Rights.
Secured Party may exercise all other rights
it may have under any of the other agreements between Debtor and Secured Party
or under applicable law. Secured Party is entitled to the appointment of a
receiver to take possession of all or any portion of the Collateral and to
exercise any such powers as the court confers upon the receiver.
Secured Party may accept all or part of the
Collateral in full or, if Debtor so agrees in writing, partial satisfaction of
the Obligations.
Exercise of Rights. Secured Party may exercise its
rights with respect to the Collateral in such manner and in such order as
Secured Party determines, and Secured Party is not required to license, sell, or
dispose of any part of the Collateral or to collect, or attempt to collect, any
sum payable by reason of the Collateral before Secured Party may collect the
Obligations, nor is Secured Party obligated to attempt to collect the
Obligations before licensing, selling, or disposing of any part of the
Collateral. Secured Party may, without foreclosing thereon, license, collect and
otherwise enforce all amounts owing on the Collateral or any proceeds or
otherwise enforce all of Debtor's or Secured Party's rights in any of the
Collateral. Neither Debtor nor any other party liable in respect of the
Obligations may direct the application of any proceeds received by Secured
Party, and Secured Party may apply any such proceeds as herein provided.
Proceeds of Sale.
All proceeds of sale or other disposition or
collection of the Collateral (whether before or after default), at Secured
Party's discretion and to the extent permitted by applicable law, shall be
applied first to all costs and expenses of sale or other disposition or
collection, including attorneys' fees, and expenses for holding, preparing for
sale, and selling the property; second, in whatever order Secured Party elects,
to payment or collateralization of the Obligations; third, to the settling of
any other Liens or claims against the Collateral. Any cash held by Secured Party
as Collateral and all cash proceeds received by Secured Party in respect of any
sale of, collection from or other realization upon all or any part of the
Collateral may, in the discretion of Secured Party, be held by Secured Party as
collateral for, and then or at any time thereafter applied in whole or in part
by Secured Party against, the Obligations. If the Obligations are fully
satisfied and there are no other claims to any surplus, Debtor is entitled to
any surplus of the Collateral or the proceeds received therefrom, but Debtor
remains liable for any deficiency.
If Secured Party sells any of the Collateral
on credit, Debtor is entitled to credit on the Obligations for those payments
actually made by the purchaser received by Secured Party and applied to the debt
of the purchaser for such purchase.
ATTORNEY-IN-FACT. DEBTOR APPOINTS SECURED PARTY AS
DEBTOR'S ATTORNEY-IN-FACT (WITHOUT REQUIRING IT TO ACT AS SUCH) WITH FULL POWER
OF SUBSTITUTION TO DO ANY ACT WHICH DEBTOR IS OBLIGATED BY THIS SECURITY
AGREEMENT TO DO AND TO TAKE ANY AND ALL ACTIONS AND TO EXECUTE ANY AND ALL
DOCUMENTATION WHICH SECURED PARTY AT ANY TIME AND FROM TIME TO TIME
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DEEMS NECESSARY OR DESIRABLE TO ACCOMPLISH THE PURPOSES OF THIS SECURITY
AGREEMENT, INCLUDING, WITHOUT LIMITATION, (a) to receive cash and to receive and
to endorse the name of Debtor on all checks, drafts, money orders, or other
instruments for the payment of monies that are payable to Debtor and constitute
collections of the Collateral, (b) to execute in the name of Debtor schedules,
assignments, documents, financing statements, amendments of financing
statements, and other papers deemed necessary or appropriate by Secured Party to
perfect, preserve, or enforce the Security Interest, (c) to exercise all rights
of Debtor in the Collateral, (d) to make withdrawals from and to close deposit
accounts and other accounts with any financial institution into which proceeds
may have been deposited and to apply funds so withdrawn as provided herein, (e)
to receive, open, and read mail addressed to Debtor, (f) to prepare, adjust,
execute, deliver, and receive payment under insurance claims and to collect and
receive payment of and endorse any instrument in payment of loss or return
premiums on any other insurance refund or return and to apply such amounts as
received by Secured Party, at Secured Party's sole option, toward repayment of
the Obligations or replacement of the Collateral, and (g) to sell, transfer,
pledge, convey, make any agreement with respect to or otherwise deal with any of
the Collateral as fully and completely as though Secured Party were the absolute
owner thereof for all purposes, and to do, at Secured Party's option and the
Debtor's expense, at any time, or from time to time, all acts and things which
Secured Party deems necessary to protect, preserve, maintain, or realize upon
the Collateral and Secured Party's Security Interest therein. THE POWER OF
ATTORNEY HEREIN CONFERRED IS GRANTED FOR VALUABLE CONSIDERATION, IS COUPLED WITH
AN INTEREST, AND IS IRREVOCABLE SO LONG AS ANY PART OF THE OBLIGATIONS IS
UNPAID. THIS POWER OF ATTORNEY IS CONFERRED ON SECURED PARTY SOLELY TO PROTECT,
PRESERVE, MAINTAIN AND REALIZE UPON ITS SECURITY INTEREST IN THE COLLATERAL.
RIGHT OF SETOFF. Upon the occurrence of an Event of Default or
any condition, event, or act which, with the giving of notice or lapse of time,
or both, would constitute such an Event of Default, Secured Party is authorized
at any time and from time to time, without notice to Debtor or to any other
person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by Secured Party to or for the credit or
the account of Debtor against and on account of the Obligations, any other
liabilities of Debtor to Secured Party under this Security Agreement or any
other agreement between Debtor and Secured Party, including, without limiting
the generality of the foregoing, all claims of any nature or description,
whether or not Secured Party has made any demand hereunder and although said
liabilities or claims, or any of them, are contingent or unmatured and whether
or not other security held by Secured Party is considered by Secured Party to be
adequate.
MISCELLANEOUS.
10.1 Notice. All notices, requests or demands which any party
is required or may desire to give to any other party under any provisions of
this Security Agreement must be in writing (including telegraphic, telex and
facsimile transmission) delivered to the other party at the addresses set forth
below or to such other address as any party may designate by written notice to
the other party:
(a) If to Secured Party:
Bank of America, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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(b) If to Debtor:
Peerless Mfg. Co.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Each such notice, request or demand shall be deemed given or made (whether
actually received or not) (a) if sent by mail, upon the earlier of the date of
receipt or five (5) days after deposit in the U.S. Mail, first class postage
prepaid, and (b) if sent by any other means, upon delivery. Unless otherwise
changed by notice given pursuant to this Section, the facsimile transmission
numbers for Secured Party and Debtor are those set forth above.
10.2 Assignment of Collateral. Secured Party may assign,
transfer, or deliver to any transferee of any of the Obligations any or all of
the rights of Secured Party in the Collateral, and thereafter Secured Party
shall be fully discharged from all responsibility with respect to the Collateral
so assigned, transferred, or delivered. Such transferee shall be vested with all
the powers and rights of Secured Party hereunder with respect to such
Collateral, but Secured Party shall retain all rights and powers hereby given
with respect to any of the Collateral not so assigned or transferred.
10.3 Alteration, Etc. No waiver, amendment, modification, or
alteration of any provision of this Security Agreement (individually, an
"ALTERATION"), nor consent to any departure by Debtor from the terms hereof, or
from the terms of any other document, is effective unless such is in writing and
signed by Secured Party; and any such Alteration is effective only for the
specific purpose and in the specific instance given. No waiver by Secured Party
of any Event of Default shall be deemed to be a waiver of any other or
subsequent Event of Default; nor shall such waiver be deemed to be a continuing
waiver. No delay of Secured Party in exercising any right shall be deemed to be
a waiver thereof, nor shall one exercise of any right affect or impair the
exercise of any other right. Time is of the essence in Debtor's performance
hereof.
10.4 Expenses. To the extent permitted by applicable law
Debtor promptly will pay, upon demand, any out-of-pocket expenses incurred by
Secured Party in connection herewith, including all costs, expenses, taxes,
assessments, insurance premiums, repairs (including repairs to realty or other
property to which any Collateral may have been attached), court costs,
attorneys' fees, rent, storage costs, and expenses of sales incurred in
connection with the administration of this Security Agreement, the enforcement
of the rights of Secured Party hereunder, whether incurred before or after the
occurrence of an Event of Default or incurred in connection with the perfection,
preservation, or defense of the Security Interest, or the custody, protection,
collection, repossession, enforcement or sale or the Collateral. All such
expenses shall become part of the Obligations and shall bear interest at the
highest lawful rate from the date paid or incurred by Secured Party until paid
by Debtor.
10.5 Parties Bound. The rights of Secured Party hereunder
inure to the benefit of its successors and assigns. The terms of this Security
Agreement bind the successors and assigns of the parties hereto, but Debtor may
not assign any of its rights or obligations hereunder without the prior written
consent of Secured Party. All representations, warranties, and covenants of
Debtor survive the execution and delivery hereof. All indemnities and expense
reimbursement obligations by Debtor in favor of the Indemnified Parties survive
termination or release of this Security Agreement. This Security Agreement
constitutes a continuing agreement, and applies to all future transactions,
whether or not contemplated at the date hereof, and all renewals, modifications,
and extensions thereof.
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10.6 Remedies Cumulative, Etc. All rights and remedies of
Secured Party hereunder are cumulative of each other and of every other right or
remedy which Secured Party may otherwise have at law or in equity or under any
other document for the enforcement of the Security Interest or the enforcement
of any duties of Debtor or any other party liable in respect of the Obligations.
The exercise by Secured Party of one or more rights or remedies shall not
prejudice or impair the concurrent or subsequent exercise of other rights or
remedies.
10.7 Copy as Financing Statement. A carbon, photographic, or
other reproduction of this Security Agreement or a financing statement
describing the Collateral is sufficient as a financing statement.
10.8 Severability. If any portion of the Obligations or if any
provision of this Security Agreement is held to be invalid or unenforceable for
any reason, such holding shall not affect any other portion of the Obligations
or any other provision contained herein or contained in any other agreement
between Debtor and Secured Party, and the same shall continue in full force and
effect according to their terms.
10.9 Applicable Law. This Security Agreement and each issue
related hereto, including the validity and enforceability hereof, shall be
governed and construed according to and determined under the laws of the State
of Texas and is performable in Dallas County, Texas
10.10 ENTIRE AGREEMENT. THIS SECURITY AGREEMENT TOGETHER WITH
THE OTHER LOAN DOCUMENTS EMBODIES THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ALL PRIOR AGREEMENTS AND
UNDERSTANDINGS RELATING TO THE SUBJECT MATTER HEREOF. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS AMONG THE PARTIES HERETO.
10.11 Usury Savings Clause. The parties hereto intend to
conform strictly to the usury laws applicable to the transactions giving rise to
the Obligations. Accordingly, (a) the aggregate of all consideration which
constitutes interest under controlling applicable law that is contracted for,
charged, or received under the Obligations or otherwise in connection with the
Obligations shall never exceed the maximum amount allowed by such applicable
law, and any excess shall be credited by Secured Party on the principal amount
of the Obligations (or, to the extent that the principal amount of the
Obligations has been or would thereby be paid in full, refunded by Secured Party
to Debtor); and (b) if the maturity of the Obligations is accelerated or if
there is any required or permitted prepayment, such consideration that
constitutes interest under controlling applicable law may never include more
than the maximum amount allowed by such applicable law, and excess interest, if
any, shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by Secured Party on the
principal amount of the Obligations(with any amount in excess of the Obligations
to be refunded by Secured Party to Debtor).
10.12 Reinstatement. If any payment received by Secured Party
is or must be rescinded or returned, the Obligations shall, to the extent that
such payment is or must be rescinded or returned, be deemed to have continued in
existence, notwithstanding such payment, and the Security Interest shall
continue to be effective or be reinstated.
10.13 Conflicts. If any item of Collateral hereunder also
constitutes Collateral granted to Secured Party under any other Loan Document
executed by Debtor, in the event of any conflict between the provisions under
this Security Agreement and those under such other Loan Document, the provision
or provisions selected by Secured Party shall control with respect to such
Collateral.
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10.14 ARBITRATION. DEBTOR AGREES THAT ANY CONTROVERSY OR CLAIM
BETWEEN OR AMONG THE PARTIES HERETO SHALL BE DETERMINED BY BINDING ARBITRATION
IN ACCORDANCE WITH THE ARBITRATION PROVISIONS OF THE OTHER LOAN DOCUMENTS.
10.15 Waiver of Bond. In the event Secured Party seeks to take
possession of any or all of the Collateral by judicial process, Debtor hereby
irrevocably waives any bonds and any surety or security relating thereto that
may be required by applicable law as an incident to such possession, and waives
any demand for possession prior to the commencement of any such suit or action.
10.16 Refinancing. The proceeds of the loan evidenced by the
Note will be used to refinance (a) that certain Promissory Note dated January
31, 2001 in the original principal amount of $5,500,000, executed by Debtor and
payable to the order of Secured Party (the "BANK OF AMERICA NOTE"), and (b) that
certain Fourth Amended and Restated Promissory Note dated January 31, 2001, in
the original principal amount of $5,500,000, executed by Debtor and payable to
the order of The Chase Manhattan Bank (the "CHASE NOTE") (the Bank of America
Note and the Chase Note being referred to collectively as the "PRIOR NOTE"). The
Note is given in substitution for and in renewal and extension but not
extinguishment of the Prior Note. The Prior Note is secured by (i) a Security
Agreement dated November 30, 2001, executed by Debtor to Bank of America, N.A.,
as collateral agent for itself and for The Chase Manhattan Bank, and covering
the Collateral, (ii) a financing statement filed with the Texas Secretary of
State under File No. 00-639183, (iii) a financing statement filed with the
Minnesota Secretary of State under File No. 2296393, and (iv) a financing
statement filed with the Wisconsin Secretary of State under File No. 02017428
(collectively, the "PRIOR SECURITY AGREEMENT") (the Prior Note and the Prior
Security Agreement being referred to herein as the "PRIOR LIEN INSTRUMENTS").
Debtor acknowledges and agrees that Debtor is legally obligated and primarily
liable regarding the Prior Lien Instruments and that such Prior Lien Instruments
are valid and subsisting liens and security interests in and to the Collateral.
The liens and security interests of the Prior Lien Instruments are hereby
ratified, renewed, extended and carried forward by this Security Agreement in
full force and effect as security for the Obligations, regardless of whether
same are released of record, with Secured Party being fully subrogated and
entitled to all of the liens, security interests, rights, powers and equities of
the Prior Lien Instruments. The liens and security interests created by this
Security Agreement shall relate back to and be effective as of the effective
date of the Prior Lien Instruments. Nothing herein shall be construed to impair
or discharge the Prior Lien Instruments. To the extent that the terms of the
Prior Lien Instruments may conflict with or be inconsistent with this Security
Agreement, the terms of this Security Agreement shall control.
EXECUTED as of the day, month and year first above written.
PEERLESS MFG. CO.
By: /s/
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Financial Officer
BANK OF AMERICA, N.A.
By /s/
----------------------------------
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President
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DEED OF TRUST (WITH SECURITY AGREEMENT,
ASSIGNMENT OF RENTS AND LEASES AND FINANCING STATEMENT)
(This Document Serves as a Fixture Filing under Section 9.502 of the Texas
Business and Commerce Code.)
Grantor's Organizational Identification Number is 88586-00.
THIS DEED OF TRUST (WITH SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND
LEASES AND FINANCING STATEMENT) (this "DEED OF TRUST") dated as of August 31,
2001, is executed and delivered by Grantor (as defined herein) for good and
valuable consideration, the receipt, sufficiency and adequacy of which are
hereby acknowledged by Grantor.
CERTAIN DEFINITIONS
In addition to other terms defined herein, each of the following terms
shall have the meaning assigned to it:
"BENEFICIARY": Bank of America, N.A., whose address for
purposes of notice is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
"GRANTOR": Peerless Mfg. Co., a Texas corporation, whose
address for purposes of notice is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
"LOAN AGREEMENT": The Loan Agreement of even date herewith
between Grantor and Beneficiary, contemplating a loan in the amount of
$10,000,000, which is incorporated herein by reference for all purposes, and as
modified and amended from time to time. Capitalized terms used in this Deed of
Trust and not otherwise defined shall have the meaning given them in the Loan
Agreement.
"MATURITY DATE": October 31, 2003.
"NOTE": Revolving Note of even date herewith made by Grantor
payable to the order of Beneficiary in the principal face amount of $10,000,000,
bearing interest as therein provided, containing a provision for the payment of
a reasonable additional amount as attorneys' fees, and finally maturing on the
Maturity Date, and all extensions, modifications, increases and renewals thereof
made from time to time, and future advances made pursuant thereto.
"TRUSTEE": PRLAP, Inc., a corporation, or any successor or
substitute appointed and designated as herein provided from time to time acting
hereunder.
(b) Any term used or defined in the Texas Business and Commerce Code,
as in effect from time to time, and not defined in this Deed of Trust has the
meaning given to the term in the Texas Business and Commerce Code, as in effect
from time to time, when used in this Deed of Trust.
GRANTING CLAUSES
Grantor does hereby GRANT, BARGAIN, SELL, CONVEY, TRANSFER, ASSIGN and
SET OVER to Trustee the following: (a) the real estate (the "LAND" described in
Exhibit A attached hereto and incorporated herein by reference, and (i) all
buildings, structures, and other improvements now or
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55
hereafter situated or to be situated on the Land (the "IMPROVEMENTS"); and (ii)
all right, title and interest of Grantor in and to (1) all streets, roads,
alleys, easements, rights-of-way, licenses, rights of ingress and egress,
vehicle parking rights and public places, existing or proposed, abutting,
adjacent, used in connection with or pertaining to the Land or the Improvements;
(2) any strips or gores between or among the Land and abutting or adjacent
properties; and (3) all water and water rights, timber, crops and mineral
interests on or pertaining to the Land (the Land, Improvements and other rights,
titles and interests referred to in this clause (a) sometimes collectively
called the "Premises"); (b) all fixtures, equipment, systems, machinery,
furniture, furnishings, appliances, inventory, goods, building and construction
materials, supplies, and articles of personal property, of every kind and
character, now owned or hereafter acquired by Grantor which are now or hereafter
attached to or situated in, on or about the Land or the Improvements, or used in
or useful to the complete and proper planning, development, use, occupancy or
operation thereof, or acquired (whether delivered to the Land or stored
elsewhere) for use or installation in or on the Land or the Improvements, and
all renewals and replacements of, substitutions for and additions to the
foregoing (the properties referred to in this clause (b) sometimes collectively
called the "ACCESSORIES"; (c) all (i) of Grantor's assignable rights in and to
all plans and specifications for the Improvements, and any and all changes
thereto; (ii) Grantor's rights, but not liability for any breach by Grantor,
under all insurance policies, architectural, engineering, construction,
management, leasing, and other contracts, including any property management
agreement (when signed) and any post-closing rights under the contract or
contracts pursuant to which Grantor acquired the Land, and general intangibles
(including but not limited to trademarks, trade names and symbols) related to
the Premises or the Accessories or the design, construction, use or operation
thereof; (iii) deposits (including Grantor's rights in tenants' security
deposits, deposits with respect to utility services to the Premises, and any
deposits or reserves under any Loan Instrument for insurance or otherwise),
money, accounts, instruments, documents, notes and chattel paper arising from or
by virtue of any transactions related to the Premises or the Accessories
together with any and all tax and/or insurance escrow accounts and/or reserve
accounts required under the provisions of any of the Loan Instruments; (iv)
permits, licenses, franchises, certificates, certificates of occupancy,
development rights, commitments and rights for utilities, ▇▇▇▇▇, septic systems
and other rights and privileges obtained in connection with the Premises or the
Accessories; (v) leases, rents, royalties, bonuses, issues, profits, revenues
and other benefits of the Premises and the Accessories; (vi) oil, gas and other
hydrocarbons and other minerals produced from or allocated to the Land and all
products processed or obtained therefrom, and the proceeds thereof; (vii)
engineering, accounting, title, legal, and other technical or business data
concerning the Mortgaged Property (as defined below) which are in the possession
of Grantor or in which Grantor can otherwise grant a security interest; and
(viii) development fees, sales commissions and leasing commissions; and (d) all
(i) proceeds of or arising from the properties, rights, titles and interests
referred to above in this Article 2, including but not limited to proceeds of
any sale, lease or other disposition thereof, proceeds of each policy of
insurance relating thereto (including premium refunds), proceeds of the taking
thereof or of any rights appurtenant thereto, including change of grade of
streets, curb cuts or other rights of access, by eminent domain or transfer in
lieu thereof for public or quasi-public use under any Law, and proceeds arising
out of any damage thereto; and (ii) other interests of every kind and character
which Grantor now has or hereafter acquires in, to or for the benefit of the
properties, rights, titles and interests referred to above in this Article 2 and
all property used or useful in connection therewith, including but not limited
to rights of ingress and egress and remainders, reversions and reversionary
rights or interests; and if the estate of Grantor in any of the property
referred to above in this Article 2 is a leasehold estate (the "LEASEHOLD
ESTATE"), this conveyance shall include, and the lien created hereby shall
encumber and extend to, all other or additional title, estates, interests or
rights which are now owned or may hereafter be acquired by Grantor in or to the
property demised under the lease creating the leasehold estate. The above
described property is collectively referred to herein as the "MORTGAGED
PROPERTY."
TO HAVE AND TO HOLD the Mortgaged Property, together with the rights,
privileges and appurtenances thereto belonging, unto the Trustee and his
substitutes or successors, forever, and Grantor
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56
hereby binds itself and its successors and assigns to warrant and forever defend
the Mortgaged Property unto the Trustee, his substitutes or successors and
assigns, against the claim or claims of all persons claiming or to claim the
same or any part thereof.
INDEBTEDNESS
This Deed of Trust is given to secure the following (collectively, the
"INDEBTEDNESS"):
DEED OF TRUST. Payment of all sums advanced by Beneficiary to
or for the benefit of Grantor contemplated hereby and performance of all
obligations and covenants herein contained.
OBLIGATIONS. Payment and performance of the Obligations (as
defined in the Loan Agreement).
ASSIGNMENT OF RENTS AND LEASES
ASSIGNMENT OF RENTS, PROFITS, ETC. All of the Rents (as
hereinafter defined) derived from the Mortgaged Property or arising from the use
or enjoyment of any portion thereof or from any lease or agreement pertaining
thereto, are hereby absolutely and unconditionally assigned to Beneficiary, to
be applied by Beneficiary in payment of the Indebtedness. "RENTS" means all of
the rents, revenue, income, profits and proceeds derived and to be derived from
the Mortgaged Property or arising from the use or enjoyment of any portion
thereof or from any Lease (as hereinafter defined), including but not limited to
liquidated damages following default under any such Lease, or payments
applicable to a termination of a Lease, all proceeds payable under any policy of
insurance covering loss of rents resulting from damage to any part of the
Mortgaged Property, all rights that Grantor may have against any tenant under
any Lease or any subtenants or occupants of any part of the Mortgaged Property,
all of Grantor's rights to recover monetary amounts from any tenant in
bankruptcy including, without limitation, rights of recovery for use and
occupancy and damage claims arising out of Lease defaults, including rejections,
under any applicable debtor relief law, together with any sums of money that may
now or at any time hereafter be or become due and payable to Grantor by virtue
of any and all royalties, overriding royalties, bonuses, delay rentals and any
other amount of any kind or character arising under any and all present and all
future oil, gas, mineral and mining leases covering the Mortgaged Property or
any part thereof, and all proceeds and other amounts paid or owing to Grantor
under or pursuant to any and all contracts, and bonds relating to the
construction or renovation of the Mortgaged Property. Notwithstanding any
provision of this Deed of Trust or any other Loan Instrument which might be
construed to the contrary, the assignment in this Section is an absolute
assignment and not merely a security interest; however, Beneficiary's rights as
to the assignment shall be exercised only upon the occurrence of an Event of
Default (as hereinafter defined). Prior to an Event of Default, Grantor shall
have a license to collect and receive all Rents as trustee for the benefit of
Beneficiary and Grantor, and Grantor shall apply the funds so collected first to
the payment of the Indebtedness in such manner as Beneficiary elects and
thereafter to the account of Grantor. Upon the occurrence of an Event of
Default, such license in favor of Grantor shall automatically and immediately
terminate without any action or notice, or the necessity thereof, by Beneficiary
or any other party, and Beneficiary shall be entitled to immediate possession of
all Rents regardless of the value of the security for the Indebtedness and
regardless of whether Beneficiary has initiated any action to take possession of
any portion of the Mortgaged Property.
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ASSIGNMENT OF LEASES. Grantor hereby assigns to Beneficiary
all of Grantor's rights, but none of its obligations, under all Leases (as
hereinafter defined). "LEASE" and "LEASES" means each and all existing or future
leases, subleases (to the extent of Grantor's rights thereunder) or other
agreements under the terms of which any person has or acquires any right to
occupy or use any part of or interest in the Mortgaged Property, and each and
all existing or future guaranties of payment or performance thereunder, and all
extensions, renewals, modifications, supplements and replacements of each such
lease, sublease, agreement or guaranty upon any part of the Mortgaged Property.
Grantor hereby further assigns to Beneficiary all guaranties of tenants'
performance under the Leases. Prior to an Event of Default, Grantor shall have
the right, without joinder of Beneficiary, to enforce the Leases, unless
Beneficiary directs otherwise.
WARRANTIES CONCERNING LEASES AND RENTS. Grantor represents and
warrants that:
Grantor has good title to the Leases and Rents hereby assigned
and authority to assign them, and no other person or entity has any right, title
or interest therein;
all existing Leases are valid, unmodified and in full force
and effect, except as indicated herein, and no material default exists
thereunder;
unless otherwise provided herein, no Rents have been or will
be assigned, mortgaged or pledged;
no Rents have been or will be anticipated, waived, released,
discounted, set off or compromised; and
except as indicated in the Leases, Grantor has not received
any funds or deposits from any tenant for which credit has not already been made
on account of accrued Rents.
GRANTOR'S COVENANTS OF PERFORMANCE. Grantor covenants to:
perform all of its material obligations under the Leases and
give prompt notice to Beneficiary of any failure to do so;
give immediate notice to Beneficiary of any notice Grantor
receives from any tenant or subtenant under any Leases, specifying any claimed
default by any party under such Leases, excluding, however, notices of default
under residential leases;
enforce the tenants' obligations under the Leases unless in
Grantor's good faith, prudent business judgment, it would not be in the best
interest of the Mortgaged Property to do so;
defend, at Grantor's expense, any proceeding pertaining to the
Leases, including, if Beneficiary so requests, any such proceeding to which
Beneficiary is a party; and
neither create nor permit any encumbrance upon its interest as
lessor of the Leases, except this Deed of Trust and any other encumbrances
permitted by this Deed of Trust.
PRIOR APPROVAL FOR ACTIONS AFFECTING LEASES. Grantor shall
not, without the prior written consent of Beneficiary:
receive or collect Rents more than one month in advance,
except security deposits obtained in advance in the ordinary course of business;
or
encumber or assign future Rents.
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SETTLEMENT FOR TERMINATION. Grantor agrees that no settlement
for damages for termination of any of the Leases under the Federal Bankruptcy
Code, or under any other federal, state, or local statute, shall be made without
the prior written consent of Beneficiary, and any check in payment of such
damages shall be made payable to both Grantor and Beneficiary. Grantor hereby
assigns any such payment to Beneficiary, to be applied to the Indebtedness as
Beneficiary may elect, and agrees to endorse any check for such payment to the
order of Beneficiary.
MORTGAGEE IN POSSESSION. Beneficiary's acceptance of this
assignment shall not, prior to entry upon and taking possession of the Mortgaged
Property by Beneficiary, be deemed to constitute Beneficiary a "mortgagee in
possession," nor obligate Beneficiary to appear in or defend any proceeding
relating to any of the Leases or to the Mortgaged Property, take any action
hereunder, expend any money, incur any expenses, or perform any obligation or
liability under the Leases, or assume any obligation for any deposits delivered
to Grantor by any lessee and not delivered to Beneficiary. Beneficiary shall not
be liable for any injury or damage to person or property in or about the
Mortgaged Property. Beneficiary neither has nor assumes any obligations as
lessor or landlord with respect to any Lease.
APPOINTMENT OF ATTORNEY. Grantor hereby appoints Beneficiary
its attorney-in-fact, coupled with an interest empowering Beneficiary to
subordinate any Leases to this Deed of Trust.
INDEMNIFICATION, HOLD HARMLESS. Grantor hereby indemnifies and
holds Beneficiary harmless from all liability, damage or expense incurred by
Beneficiary from any claims under the Leases, including, without limitation. any
claims by Grantor with respect to Rents paid directly to Beneficiary after an
Event of Default and claims by tenants for security deposits or for rental
Payments more than one (1) month in advance and not delivered to Beneficiary.
All amounts indemnified against hereunder, including attorneys' fees and
expenses, if paid by Beneficiary shall bear interest at the Default Rate (as
defined in the Loan Agreement) and shall be payable by Grantor immediately
without demand and shall be secured hereby.
RECORDS. Upon request by Beneficiary, Grantor shall deliver to
Beneficiary executed originals of all Leases and copies of all records relating
thereto.
MERGER. There shall be no merger of the leasehold estates,
created by the Leases, with the fee estate of the Land without the prior written
consent of Beneficiary.
RIGHT TO RELY. Grantor hereby authorizes and directs the
tenants under the Leases to pay Rents to Beneficiary upon written demand by
Beneficiary, without further consent of Grantor and regardless of whether
Beneficiary has taken possession of any other portion of the Mortgaged Property,
and the tenants may rely upon any written statement delivered by Beneficiary to
the tenants. Any such payment to Beneficiary shall constitute payment to Grantor
under the Leases, and Grantor hereby appoints Beneficiary as Grantor's lawful
attorney-in-fact for giving, and is hereby empowered to give, acquittances to
any tenants for such Payments to Beneficiary after an Event of Default.
RENTS. It is the intention of Beneficiary and Grantor that the
assignment effectuated by this Deed of Trust with respect to the Rents shall be
a direct and currently effective assignment and shall not constitute merely the
granting of a lien, security interest or pledge for the purpose of securing the
Indebtedness. In the event that a court of competent jurisdiction determines
that, notwithstanding such expressed intent of the parties, Beneficiary's
interest in the Rents constitutes a lien on or security interest in or pledge of
the Rents, it is agreed and understood that the forwarding of a notice to
Grantor after the occurrence of an Event of Default, advising Grantor of the
revocation of Grantor's license to collect such
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Rents, shall be sufficient action by Beneficiary to (i) perfect such lien on or
security interest in or pledge of the Rents, (ii) take possession thereof and
(iii) entitle Beneficiary to immediate and direct payment of the Rents, for
application as provided in this Deed of Trust, all without the necessity of any
further action by Beneficiary, including, without limitation, any action to
obtain possession of the Land, Improvements or any other portion of the
Mortgaged Property.
UNILATERAL SUBORDINATION AND MERGER, APPROVAL OF LEASES. There
shall be no merger of the leasehold estates created by the Leases with the fee
estate of the Mortgaged Property without the prior written consent of
Beneficiary. Beneficiary may at any time and from time to time by specific
written instrument intended for the purpose, unilaterally subordinate the lien
of this Deed of Trust to any Lease, without joinder or consent of, or notice to,
Grantor, any tenant or any other person, and notice is hereby given to each
tenant under a Lease of such right to subordinate. No such subordination shall
constitute a subordination to any lien or other encumbrance, whenever arising,
or improve the right of any junior lienholder. Nothing herein shall be construed
as subordinating this Deed of Trust to any Lease.
SECURITY AGREEMENT AND FINANCING STATEMENT
SECURITY INTEREST. This Deed of Trust shall be a security
agreement between Grantor, as the debtor, and Beneficiary, as the secured party,
covering the Mortgaged Property constituting personal property or fixtures
governed by the Texas Business and Commerce Code (hereinafter called the
"CODE"), and for the purpose of further securing payment and performance of the
Indebtedness, Grantor grants to Beneficiary a security interest and lien in all
rights, titles and interests now owned or hereafter acquired by Grantor in the
portion of the Mortgaged Property constituting personal property or fixtures
governed by the Code (the "COLLATERAL"). In addition to Beneficiary's other
rights hereunder, Beneficiary shall have all rights of a secured party under the
Code. Grantor shall execute and deliver to Beneficiary all financing statements
that may be required by Beneficiary to establish and maintain the validity and
priority of Beneficiary's security interest in the Collateral, and Grantor shall
bear all costs thereof, including all Code searches reasonably required by
Beneficiary.
NOTICE OF CHANGES. Grantor shall give advance notice in
writing to Beneficiary of any proposed change in Grantor's name, identity,
jurisdiction of organization, or structure and shall execute and deliver to
Beneficiary, prior to or concurrently with the occurrence of any such change,
all additional financing statements that Beneficiary may require to establish
and maintain the validity and priority of Beneficiary's security interest with
respect to any of the Mortgaged Property described or referred to herein.
FIXTURES. This Deed of Trust shall be effective as a financing
statement filed as a fixture filing with respect to all items of the Collateral
described herein that are or are to become fixtures related to the Land, and
this Deed of Trust shall be effective as such from the date of its filing for
record in the real estate records of the county in which the Collateral is
situated. Information concerning the security interest created by this
instrument may be obtained from Beneficiary, as secured party, at the address of
Beneficiary stated in Section 1.1. The exact legal name, type of organization,
jurisdiction of organization, and mailing address of the Grantor, as debtor, are
as stated in Section 1.2, and the organizational identification number of the
Grantor is as stated above the introductory paragraph of this Deed of Trust.
Grantor does have an interest of record in the Land, and the names of any
additional record owners of the Land are listed on Exhibit A. Proceeds and
products of the portion of the Collateral constituting fixtures are also
covered.
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REPRODUCTIONS. A carbon, photostatic or other reproduction of
this Deed of Trust shall be sufficient as a financing statement. Beneficiary
shall have the right at any time to file a manually executed counterpart or a
carbon, photostatic or other reproduction of this Deed of Trust as a financing
statement in either the central or local UCC records of any jurisdiction wherein
the Collateral is situated, but the failure of Beneficiary to do so shall not
impair (a) the effectiveness of this Deed of Trust as a fixture filing as
permitted by Section 9.502(c) of the Code, or (b) the validity and
enforceability of this Deed of Trust in any respect whatsoever.
REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS OF GRANTOR
Grantor does hereby covenant, warrant and represent to and agree with
Beneficiary as follows:
PAYMENT AND PERFORMANCE. Grantor shall make all payments on
the Indebtedness when due and shall punctually and properly perform all of
Grantor's covenants, obligations and liabilities under the Loan Instruments.
TITLE TO MORTGAGED PROPERTY AND LIEN OF THIS DEED OF TRUST.
Grantor has good and indefeasible title to the Land and the Improvements, and
good and marketable title to the Personal Property, free and clear of any liens,
charges, encumbrances security interests, and adverse claims whatsoever, except
(a) permitted encumbrances set forth on Exhibit B hereto, which are permitted
encumbrances only to the extent the same are valid and subsisting and affect the
Mortgaged Property, (b) the liens and security interests evidenced by this Deed
of Trust, (c) statutory liens for ad valorem taxes and standby fees on the
Mortgaged Property which are not yet delinquent, and (d) other liens and
security interests (if any) in favor of Beneficiary (the matters described in
the foregoing clauses (a)-(d) being herein called the "PERMITTED ENCUMBRANCES").
Grantor, and Grantor's successors and assigns, will warrant and forever defend
title to the Mortgaged Property, subject as aforesaid, to Trustee and his
successors or substitutes and assigns, against the claims and demands of all
persons claiming or to claim the same or any part thereof. Grantor will
punctually pay, perform, observe and keep all covenants, obligations and
conditions in or pursuant to any Permitted Encumbrance and will not modify or
permit modification of any Permitted Encumbrance without the prior written
consent of Beneficiary. Inclusion of any matter as a Permitted Encumbrance does
not constitute approval or waiver by Beneficiary of any existing or future
violation or other breach thereof by Grantor, by the Mortgaged Property or
otherwise. No part of the Mortgaged Property constitutes all or any part of the
business or residential homestead of Grantor. If any right or interest of
Beneficiary in the Mortgaged Property or any part thereof shall be endangered or
questioned or shall be attacked directly or indirectly, Trustee and Beneficiary,
or either of them (whether or not named as parties to legal proceedings with
respect thereto), are hereby authorized and empowered to take such steps as in
their discretion may be proper for the defense of any such legal proceedings or
the protection of such right or interest of Beneficiary, including but not
limited to the employment of independent counsel, the prosecution or defense of
litigation, and the compromise or discharge of adverse claims. All expenditures
so made of every kind and character shall be a demand obligation (which
obligation Grantor hereby promises to pay) owing by Grantor to Beneficiary or
Trustee (as the case may be), and the party (Beneficiary or Trustee, as the case
may be) making such expenditures shall be subrogated to all rights of the person
receiving such payment.
STATUS OF GRANTOR, SUITS AND CLAIMS, LOAN INSTRUMENTS. If
Grantor is a corporation, partnership, or other legal entity, Grantor is and
will continue to be (a) duly organized, validly existing and in good standing
under the laws of its state of organization, (b) authorized to do business in,
and in good standing in, each state in which the Mortgaged Property is located,
and (c) possessed of all requisite
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power and authority to carry on its business and to own and operate the
Mortgaged Property. Each Loan Instrument executed by Grantor has been duly
authorized, executed and delivered by Grantor, and the obligations thereunder
and the performance thereof by Grantor in accordance with their terms are and
will continue to be within Grantor's power and authority (without the necessity
of joinder or consent of any other person), are not and will not be in
contravention of any legal requirement to which Grantor or the Mortgaged
Property is subject, and do not and will not result in the creation of any
encumbrance against any assets or properties of Grantor, or any other person
liable, directly or indirectly, for any of the secured indebtedness, except as
expressly contemplated by the Loan Instruments. There is no suit, action, claim,
investigation, inquiry, proceeding or demand pending (or, to Grantor's
knowledge, threatened) which affects the Mortgaged Property (including, without
limitation, any which challenges or otherwise pertains to Grantor's title to the
Mortgaged Property) or the validity, enforceability or priority of any of the
Loan Instruments. There is no judicial or administrative action, suit or
proceeding pending (or, to Grantor's knowledge, threatened) against Grantor, or
against any other person liable directly or indirectly for the secured
indebtedness, except as has been disclosed in writing to Beneficiary in
connection with the loan evidenced by the Note. The Loan Instruments constitute
legal, valid and binding obligations of Grantor (and of each guarantor, if any)
enforceable in accordance with their terms, except as the enforceability thereof
may be limited by debtor relief laws and except as the availability of certain
remedies may be limited by general principles of equity. Grantor is not a
"foreign person" within the meaning of the Internal Revenue Code of 1986, as
amended, Sections 1445 and 7701 (i.e. Grantor is not a non-resident alien,
foreign corporation, foreign partnership, foreign trust or foreign estate as
those terms are defined therein and in any regulations promulgated thereunder).
Grantor will not cause or permit any change to be made in its name, identity, or
corporate or partnership structure, or jurisdiction of organization, unless
Grantor shall have notified Beneficiary of such change prior to the effective
date of such change, and shall have first taken all action required by
Beneficiary for the purpose of further perfecting or protecting the lien and
security interest of Beneficiary in the Mortgaged Property. Grantor's principal
place of business and chief executive office, and the place where Grantor keeps
its books and records concerning the Mortgaged Property, has for the preceding
four months been and will continue to be (unless Grantor notifies Beneficiary of
any change in writing prior to the date of such change) the address of Grantor
set forth in Section 1.2.
EXISTENCE OF GRANTOR. Grantor shall preserve and keep in full
force and effect its existence, rights, franchises, and trade names.
INSURANCE. Grantor shall keep the Mortgaged Property insured
at all times against such risks and to the extent that like properties are
customarily insured by other companies engaged in the same or similar businesses
similarly situated, maintain insurance of the types and in the coverage amounts
and with reasonable deductibles as are usual and customary. Such insurance
policies shall (1) provide that Beneficiary shall receive prompt notice of any
claims filed thereunder; (2) include a standard mortgagee clause in favor of
Beneficiary with loss payable for all claims in excess of $10,000 to
Beneficiary; and (3) provide that no adverse alteration or cancellation thereof
shall be effective as against Beneficiary until thirty (30) days after written
notice of such alteration or cancellation is given to Beneficiary. Grantor shall
deliver to Beneficiary certificates of insurance coverage within thirty (30)
days following the Closing Date and thereafter as and when requested by
Beneficiary. Grantor shall pay all premiums on policies required hereunder as
they become due and payable and promptly deliver to Beneficiary evidence
satisfactory to Beneficiary of the timely payment thereof. If any loss occurs at
any time when Grantor has failed to perform Grantor's covenants and agreements
in this paragraph, Beneficiary shall nevertheless be entitled to the benefit of
all insurance covering the loss and held by or for Grantor, to the same extent
as if it had been made payable to Beneficiary. Upon any foreclosure hereof or
transfer of title to the Mortgaged Property in extinguishment of the whole or
any part of the Indebtedness, all of Grantor's right, title and interest in and
to the insurance policies referred to in this Section (including unearned
premiums) and all proceeds payable thereunder shall thereupon vest in the
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purchaser at foreclosure or other such transferee, to the extent permissible
under such policies. Beneficiary shall have the right (but not the obligation)
to make proof of loss for, settle and adjust any claim under, and receive the
proceeds of, all insurance for loss of or damage to the Mortgaged Property, and
the expenses incurred by Beneficiary in the adjustment and collection of
insurance proceeds shall be a part of the Indebtedness and shall be due and
payable to Beneficiary on demand. Beneficiary shall not be, under any
circumstances, liable or responsible for failure to collect or exercise
diligence in the collection of any of such proceeds or for the obtaining,
maintaining or adequacy of any insurance or for failure to see to the proper
application of any amount paid over to Grantor. Any such proceeds received by
Beneficiary shall, after deduction therefrom of all reasonable expenses actually
incurred by Beneficiary, including attorneys' fees, at Beneficiary's option be
(1) released to Grantor, or (2) applied (upon compliance with such terms and
conditions as may be required by Beneficiary) to repair or restoration, either
partly or entirely, of the Mortgaged Property so damaged, or (3) applied to the
payment of the Indebtedness in such order and manner as Beneficiary, in its sole
discretion, may elect, whether or not due. In any event, the unpaid portion of
the Indebtedness shall remain in full force and effect and the payment thereof
shall not be excused. Grantor shall at all times comply with the requirements of
the insurance policies required hereunder and of the issuers of such policies
and of any board of fire underwriters or similar body as applicable to or
affecting the Mortgaged Property.
TAXES AND ASSESSMENTS. Grantor shall pay all taxes and
assessments against or affecting the Mortgaged Property as the same become due
and payable (except those being contested in Good Faith, as defined in the Loan
Agreement), and, upon request by Beneficiary, Grantor shall deliver to
Beneficiary such evidence of the payment thereof as Beneficiary may require,
and, if Grantor fails to do so, Beneficiary may pay them, together with all
costs and penalties thereon, at Grantor's expense.
RESERVE FOR INSURANCE, TAXES AND ASSESSMENTS. Upon request of
Beneficiary, Grantor will deposit with Beneficiary a sum equal to ad valorem
taxes, assessments and charges (which charges for the purpose of this paragraph
shall include without limitation any recurring charge which could result in a
lien against the Mortgaged Property) against the Mortgaged Property for the
current year and the premiums for such policies of insurance for the current
year, all as estimated by Beneficiary and prorated to the end of the calendar
month following the month during which Beneficiary's request is made, and
thereafter will deposit with Beneficiary, on the first day of each month,
sufficient funds (as estimated from time to time by Beneficiary) to permit
Beneficiary to pay at least fifteen (15) days prior to the due date thereof, the
next maturing ad valorem taxes, assessments and charges and premiums for such
policies of insurance. Beneficiary shall have the right to rely upon tax
information furnished by applicable taxing authorities in the payment of such
taxes or assessments and shall have no obligation to make any protest of any
such taxes or assessments. Any excess over the amounts required for such
purposes shall be held by Beneficiary for future use, applied to any
Indebtedness or refunded to Grantor, at Beneficiary's option, and any deficiency
in such funds so deposited shall be made up by Grantor upon demand of
Beneficiary. All such funds so deposited shall bear no interest, may be mingled
with the general funds of Beneficiary and shall be applied by Beneficiary toward
the payment of such taxes, assessments, charges and premiums when statements
therefor are presented to Beneficiary by Grantor (which statements shall be
presented by Grantor to Beneficiary a reasonable time before the applicable
amount is due); provided, however, that, if a default shall have occurred
hereunder, such funds may at Beneficiary's option be applied to the payment of
the Indebtedness in the order determined by Beneficiary in its sole discretion,
and that Beneficiary may (but shall have no obligation) at any time, in its
discretion, apply all or any part of such funds toward the payment of any such
taxes, assessments, charges or premiums which are past due, together with any
penalties or late charges with respect thereto. The conveyance or transfer of
Grantor's interest in the Mortgaged Property for any reason (including without
limitation the foreclosure of a subordinate lien or security interest or a
transfer by operation of law) shall constitute an assignment or transfer of
Grantor's interest in and rights to such funds held by Beneficiary under this
paragraph but subject to the rights of Beneficiary hereunder.
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CONDEMNATION. Grantor shall notify Beneficiary immediately of
any threatened or pending proceeding for condemnation affecting the Mortgaged
Property or arising out of damage to the Mortgaged Property, and Grantor shall,
at Grantor's expense, diligently prosecute any such proceedings. Beneficiary
shall have the right (but not the obligation) to participate in any such
proceeding and to be represented by counsel of its own choice. Beneficiary shall
be entitled to receive all sums which may be awarded or become payable to
Grantor for the condemnation of the Mortgaged Property, or any part thereof, for
public or quasi-public use, or by virtue of private sale in lieu thereof, and
any sums which may be awarded or become payable to Grantor for injury or damage
to the Mortgaged Property. Grantor shall, promptly upon request of Beneficiary,
execute such additional assignments and other documents as may be necessary from
time to time to permit such participation and to enable Beneficiary to collect
and receipt for any such sums. All such sums are hereby assigned to Beneficiary,
and shall, after deduction therefrom of all reasonable expenses actually
incurred by Beneficiary, including attorneys' fees, at Beneficiary's option be
(a) released to Grantor, or (b) applied (upon compliance with such terms and
conditions as may be required by Beneficiary) to repair or restoration of the
Mortgaged Property so affected, or (c) applied to the payment of the
Indebtedness in such order and manner as Beneficiary, in its sole discretion,
may elect, whether or not due. In any event the unpaid portion of the
Indebtedness shall remain in full force and effect and the payment thereof shall
not be excused. Beneficiary shall not be, under any circumstances, liable or
responsible for failure to collect or to exercise diligence in the collection of
any such sum or for failure to see to the proper application of any amount paid
over to Grantor. Beneficiary is hereby authorized, in the name of Grantor, to
execute and deliver valid acquittances for, and to appeal from, any such award,
judgment or decree. All costs and expenses (including but not limited to
attorneys' fees) incurred by Beneficiary in connection with any condemnation
shall be a demand obligation owing by Grantor (which Grantor hereby promises to
pay) to Beneficiary pursuant to this Deed of Trust.
TAXES ON NOTE OR DEED OF TRUST. Grantor will promptly pay all
income, franchise and other taxes owing by Grantor and any stamp taxes or other
taxes (unless such payment by Grantor is prohibited by law) which may be
required to be paid with respect to the Note, this Deed of Trust or any other
instrument evidencing or securing any of the secured indebtedness. In the event
of the enactment after this date of any law of any governmental entity
applicable to Beneficiary, the Note, the Mortgaged Property or this Deed of
Trust deducting from the value of property for the purpose of taxation any lien
or security interest thereon, or imposing upon Beneficiary the payment of the
whole or any part of the taxes or assessments or charges or liens herein
required to be paid by Grantor, or changing in any way the laws relating to the
taxation of deeds of trust or mortgages or security agreements or debts secured
by deeds of trust or mortgages or security agreements or the interest of the
mortgagee or secured party in the property covered thereby, or the manner of
collection of such taxes, so as to affect this Deed of Trust or the indebtedness
secured hereby or Beneficiary, then, and in any such event, Grantor, upon demand
by Beneficiary, shall pay such taxes, assessments, charges or liens, or
reimburse Beneficiary therefor; provided, however, that if in the opinion of
counsel for Beneficiary (a) it might be unlawful to require Grantor to make such
payment or (b) the making of such payment might result in the imposition of
interest beyond the maximum amount permitted by law, then and in such event,
Beneficiary may elect, by notice in writing given to Grantor, to declare all of
the indebtedness secured hereby to be and become due and payable sixty (60) days
from the giving of such notice.
STATEMENT BY GRANTOR. Grantor shall at any time and from time
to time furnish within seven (7) days of request by Beneficiary a written
statement in such form as may be required by Beneficiary stating that (a) the
Note, this Deed of Trust and the other Loan Instruments are valid and binding
obligations of Grantor, enforceable against Grantor in accordance with their
terms; (b) the unpaid principal balance of the Note; (c) the date to which
interest on the Note is paid; (d) the Note, this Deed of Trust and the other
Loan Instruments have not been released, subordinated or modified; and (e) there
are no offsets or defenses against the enforcement of the Note, this Deed of
Trust or any other Loan
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Instrument. If any of the foregoing statements are untrue, Grantor shall,
alternatively, specify the reasons therefor.
MAINTENANCE, REPAIR AND RESTORATION. Grantor will keep the
Mortgaged Property in first class order, repair, operating condition and
appearance, causing all necessary repairs, renewals, replacements, additions and
improvements to be promptly made, and will not allow any of the Mortgaged
Property to be misused, abused or wasted or to deteriorate. Notwithstanding the
foregoing, Grantor will not, without the prior written consent of Beneficiary,
(a) remove from the Mortgaged Property any fixtures or personal property covered
by this Deed of Trust except such as is replaced by Grantor by an article of
equal suitability and value, owned by Grantor, free and clear of any lien or
security interest (except that created by this Deed of Trust), or (b) make any
structural alteration to the Mortgaged Property or any other alteration thereto
which impairs the value thereof. If any act or occurrence of any kind or nature
(including any condemnation or any casualty for which insurance was not obtained
or obtainable) shall result in damage to or loss or destruction of the Mortgaged
Property, Grantor shall give prompt notice thereof to Beneficiary and Grantor
shall promptly, at Grantor's sole cost and expense and regardless of whether
insurance or condemnation proceeds (if any) shall be available or sufficient for
the purpose, commence and continue diligently to completion to restore, repair,
replace and rebuild the Mortgaged Property as nearly as possible to its value,
condition and character immediately prior to the damage, loss or destruction.
NO OTHER LIENS. Grantor will not, without the prior written
consent of Beneficiary, create, place or permit to be created or placed, or
through any act or failure to act, acquiesce in the placing of, or allow to
remain, any deed of trust, mortgage, voluntary or involuntary lien, whether
statutory, constitutional or contractual, security interest, encumbrance or
charge, or conditional sale or other title retention document, against or
covering the Mortgaged Property, or any part thereof, other than the Permitted
Encumbrances, regardless of whether the same are expressly or otherwise
subordinate to the lien or security interest created in this Deed of Trust, and
should any of the foregoing become attached hereafter in any manner to any part
of the Mortgaged Property without the prior written consent of Beneficiary,
Grantor will cause the same to be promptly discharged and released. If
Beneficiary consents to the voluntary grant by Grantor of any lien, security
interest, or other encumbrance (hereinafter called "SUBORDINATE MORTGAGE")
covering any of the Mortgaged Property or if the foregoing prohibition is
determined by a court of competent jurisdiction to be unenforceable as to a
Subordinate Mortgage, any such Subordinate Mortgage shall contain express
covenants to the effect that: (1) the Subordinate Mortgage is unconditionally
subordinate to this Deed of Trust and all Leases (hereinafter defined); (2) if
any action (whether judicial or pursuant to a power of sale) shall be instituted
to foreclose or otherwise enforce the Subordinate Mortgage, no tenant of any of
the Leases (as defined above) shall be named as a party defendant, and no action
shall be taken that would terminate any occupancy or tenancy without the prior
written consent of Beneficiary; (3) Rents (as defined above), if collected by or
for the holder of the Subordinate Mortgage, shall be applied first to the
payment of the Indebtedness then due and expenses incurred in the ownership,
operation and maintenance of the Mortgaged Property in such order as Beneficiary
may determine, prior to being applied to any indebtedness by the Subordinate
Mortgage; (4) written notice of default under the Subordinate Mortgage and
written notice of the commencement of any action (whether judicial or pursuant
to a power of sale) to foreclose or otherwise enforce the Subordinate Mortgage
or to seek the appointment of a receiver for all or any part of the Mortgaged
Property shall be given to Beneficiary with or immediately after the occurrence
of any such default or commencement; and (5) neither the holder of the
Subordinate Mortgage, nor any purchaser at foreclosure thereunder, nor anyone
claiming by, through or under any of them shall succeed to any of Grantor's
rights hereunder without the prior written consent of Beneficiary.
OPERATION OF MORTGAGED PROPERLY. Grantor will operate the
Mortgaged Property in a good and workmanlike manner and in accordance with all
legal requirements and will pay all fees or
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charges of any kind in connection therewith. Grantor will keep the Mortgaged
Property occupied so as not to impair the insurance carried thereon. Grantor
will not use or occupy or conduct any activity on, or allow the use or occupancy
of or the conduct of any activity on, the Mortgaged Property in any manner which
violates any legal requirement or which constitutes a public or private nuisance
or which makes void, voidable or cancelable, or increases the premium of, any
insurance then in force with respect thereto. Grantor will not initiate or
permit any zoning reclassification of the Mortgaged Property or seek any
variance under existing zoning ordinances applicable to the Mortgaged Property
or use or permit the use of the Mortgaged Property in such a manner which would
result in such use becoming a nonconforming use under applicable zoning
ordinances or other legal requirement. Grantor will not impose any easement,
restrictive covenant or encumbrance upon the Mortgaged Property, execute or file
any subdivision plat or condominium declaration affecting the Mortgaged Property
or consent to the annexation of the Mortgaged Property to any municipality,
without the prior written consent of Beneficiary. Grantor will not do or suffer
to be done any act whereby the value of any part of the Mortgaged Property may
be lessened. Grantor will preserve, protect, renew, extend and retain all
material rights and privileges granted for or applicable to the Mortgaged
Property. Without the prior written consent of Beneficiary, there shall be no
drilling or exploration for or extraction, removal or production of any mineral,
hydrocarbon, gas, natural element, compound or substance (including sand and
gravel) from the surface or subsurface of the Land regardless of the depth
thereof or the method of mining or extraction thereof. Grantor will cause all
debts and liabilities of any character (including without limitation all debts
and liabilities for labor, material and equipment and all debts and charges for
utilities servicing the Mortgaged Property) incurred in the construction,
maintenance, operation and development of the Mortgaged Property to be promptly
paid.
FINANCIAL MATTERS. Grantor is solvent after giving effect to
all borrowings contemplated by the Loan Instruments and no proceeding under any
debtor relief law is pending (or, to Grantor's knowledge, threatened) by or
against Grantor, or any affiliate of Grantor, as a debtor. All reports,
statements, plans, budgets, applications, agreements and other data and
information heretofore furnished or hereafter to be furnished by or on behalf of
Grantor to Beneficiary in connection with the loan or loans evidenced by the
Loan Instruments (including, without limitation, all financial statements and
financial information) are and will be true, correct and complete in all
material respects as of their respective dates and do not and will not omit to
state any fact or circumstance necessary to make the statements contained
therein not misleading. No material adverse change has occurred since the dates
of such reports, statements and other data in the financial condition of Grantor
or, to Grantor's knowledge, of any tenant under any lease described therein.
INTENTIONALLY DELETED.
COMPLIANCE WITH LAWS. The Mortgaged Property and the use,
operation and maintenance thereof and all activities thereon do and shall at all
times comply in all material respects with all applicable legal requirements.
The Mortgaged Property is not, and shall not be, dependent on any other property
or premises or any interest therein other than the Mortgaged Property to fulfill
any requirement of any legal requirement. Grantor shall not, by act or omission,
permit any building or other improvement not subject to the lien of this Deed of
Trust to rely on the Mortgaged Property or any interest therein to fulfill any
requirement of any legal requirement. No part of the Mortgaged Property
constitutes a nonconforming use under any zoning law or similar law or
ordinance. Grantor has obtained and shall preserve in force all requisite
zoning, utility, building, health and operating permits from the governmental
authorities having jurisdiction over the Mortgaged Property. If Grantor receives
a notice or claim from any person that the Mortgaged Property, or any use,
activity, operation or maintenance thereof or thereon, is not in compliance with
any legal requirement, Grantor will promptly furnish a copy of such notice or
claim to Beneficiary. Grantor has received no notice and has no knowledge of any
such noncompliance.
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INCOME, EXPENSE AND FINANCIAL STATEMENTS. Grantor will keep
accurate books and records in accordance with sound accounting principles in
which full, true and correct entries shall be promptly made with respect to the
Mortgaged Property and the operation thereof, and will permit all such books and
records to be inspected and copied, and the Mortgaged Property to be inspected
and photographed, by Beneficiary and its representatives during normal business
hours and at any other reasonable times. Any inspection or audit of the
Mortgaged Property or the books and records of Grantor, or the procuring of
documents and financial and other information, by or on behalf of Beneficiary
shall be for Beneficiary's protection only, and shall not constitute any
assumption of responsibility to Grantor or anyone else with regard to the
condition, construction, maintenance or operation of the Mortgaged Property nor
Beneficiary's approval of any certification given to Beneficiary nor relieve
Grantor of any of Grantor's obligations.
INDEMNIFICATION.
Grantor will indemnify and hold harmless Beneficiary and
Trustee from and against, and reimburse them on demand for, any and all
Indemnified Matters (defined below). For purposes of this Section 6.18, the
terms "BENEFICIARY" and "TRUSTEE" shall include the directors, officers,
partners, employees and agents of Trustee and Beneficiary, respectively, and any
persons owned or controlled by, owning or controlling, or under common control
or affiliated with Beneficiary or Trustee, respectively. WITHOUT LIMITATION, THE
FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO
MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED
TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE OR STRICT LIABILITY OF SUCH
(AND/OR ANY OTHER) INDEMNIFIED PERSON. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY
TO A PARTICULAR INDEMNIFIED PERSON TO THE EXTENT THAT THE SUBJECT OF THE
INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THAT INDEMNIFIED PERSON. Any amount to be paid under this Section
6.18 by Grantor to Beneficiary and/or Trustee shall be a demand obligation owing
by Grantor (which Grantor hereby promises to pay) to Beneficiary and/or Trustee
pursuant to this Deed of Trust. Nothing in this paragraph, elsewhere in this
Deed of Trust or in any other Loan Instrument shall limit or impair any rights
or remedies of Beneficiary and/or Trustee (including without limitation any
rights of contribution or indemnification) against Grantor or any other person
under any other provision of this Deed of Trust, any other Loan Instrument, any
other agreement or any applicable legal requirement.
In the event that Beneficiary becomes aware of or receives
notice of an Indemnified Matter, Beneficiary shall promptly notify Grantor in
writing of such Indemnified Matter and the information relating thereto then
available to Beneficiary. Upon receipt of notice, Grantor shall have the
exclusive right to assume the defense, remediation or settlement of any
Indemnified Matter. In the event that an Indemnified Matter is covered by
insurance maintained by Grantor, Grantor shall have the right to allow Grantor's
insurer to assume the defense of an Indemnified Matter. In the event Grantor or
Grantor's insurer assumes the defense or settlement of an Indemnified Matter, it
may settle such matter, without the consent of Beneficiary, on such terms as
Grantor determines in its sole discretion. Beneficiary shall cooperate with
Grantor and make available to Grantor all information, books and records
available to Beneficiary in connection with any Indemnified Matter.
As used herein, the term "INDEMNIFIED MATTERS" means any and
all claims, demands, liabilities (including strict liability), losses, damages
(including consequential damages), causes of action, judgments, penalties, costs
and expenses (including without limitation, reasonable fees and expenses of
attorneys and other professional consultants and experts, and of the
investigation and defense of any claim, whether or not such claim is ultimately
withdrawn or defeated, and the settlement of any claim or judgment including all
value paid or given in settlement) of every kind, known or unknown, foreseeable
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or unforeseeable, which may be imposed upon, asserted against or incurred or
paid by Beneficiary and/or Trustee at any time and from time to time, whenever
imposed, asserted or incurred, because of, resulting from, in connection with,
or arising out of any transaction, act, omission, event or circumstance in any
way connected with the Mortgaged Property or with this Deed of Trust or any
other Loan Instrument, including but not limited to any bodily injury or death
or property damage occurring in or upon or in the vicinity of the Mortgaged
Property through any cause whatsoever at any time on or before the Release Date
(as hereinafter defined), any act performed or omitted to be performed hereunder
or under any other Loan Instrument, any breach by Grantor of any representation,
warranty, covenant, agreement or condition contained in this Deed of Trust or in
any other Loan Instrument, any Default as defined herein, any claim under or
with respect to any Lease and any Environmental Matter (defined below). As used
herein, the term "ENVIRONMENTAL MATTER" means: (a) the presence of any Hazardous
Substance on, in, under, above or about the Mortgaged Property, or the migration
or release or threatened migration or release of any Hazardous Substance on, to,
from or through the Mortgaged Property, on or at any time before the Release
Date; or (b) any act, omission, event or circumstance existing or occurring in
connection with the handling, treatment, containment, removal, storage,
decontamination, clean-up, transport or disposal of any Hazardous Substance
which is at any time on or before the Release Date present on, in, under, above
or about the Mortgaged Property; or (c) any violation on or before the Release
Date, of any Environmental Requirement in effect on or before the Release Date,
regardless of whether any act, omission, event or circumstance giving rise to
the violation constituted a violation at the time of the occurrence or inception
of such act, omission, event or circumstance; or (d) any Environmental Claim, or
the filing or imposition of any environmental lien against the Mortgaged
Property, because of, resulting from, in connection with, or arising out of any
of the matters referred to in clauses (a) through (c) preceding; and regardless
of whether any of the matters referred to in the foregoing clauses (a) through
(d) was caused by Grantor or Grantor's tenant or any subtenant, or a prior owner
of the Mortgaged Property or its tenant or any subtenant, or any third party.
Without limitation of the definition of Indemnified Matters herein, Grantor's
indemnification obligations regarding any Environmental Matter shall include
injury or damage to any person, property or natural resource occurring upon or
off of the Mortgaged Property (including but not limited to the cost of
demolition and rebuilding of any improvements on real property), the preparation
of any feasibility studies or reports and the performance of any cleanup,
remediation, removal, response, abatement, containment, closure, restoration,
monitoring or similar work required by any Environmental Requirement or
necessary to have the full use and benefit of the Mortgaged Property as
contemplated by the Loan Instruments (including, without limitation, any of the
same in connection with any foreclosure or transfer in lieu thereof), and all
liability to pay or indemnify any person for costs in connection with any of the
foregoing. The term "RELEASE DATE" as used herein means the earlier of the
following two dates: (i) the date on which the Indebtedness secured hereby has
been paid and performed in full and this Deed of Trust has been released, or
(ii) the date on which the lien of this Deed of Trust is fully and finally
foreclosed or a conveyance by deed in lieu of such foreclosure is fully and
finally effective, and possession of the Mortgaged Property has been given to
the purchaser or grantee free of occupancy and claims to occupancy by Grantor
and Grantor's heirs, devisees, representatives, successors and assigns;
provided, that if such payment, performance, release, foreclosure or conveyance
is challenged, in bankruptcy proceedings or otherwise, the Release Date shall be
deemed not to have occurred until such challenge is rejected, dismissed or
withdrawn with prejudice. The indemnities in this Section 6.18 shall not
terminate upon the Release Date or upon the release, foreclosure or other
termination of this Deed of Trust but will survive the Release Date, foreclosure
of this Deed of Trust or conveyance in lieu of foreclosure, the repayment of the
secured indebtedness, the discharge and release of this Deed of Trust and the
other Loan Instruments, any bankruptcy or other debtor relief proceeding, and
any other event whatsoever.
TRADE NAMES. At the request of Beneficiary, Grantor shall
execute a certificate in form satisfactory to Beneficiary listing the trade
names under which Grantor intends to operate the Mortgaged Property, and
representing and warranting that Grantor does business under no other trade name
with
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respect to the Mortgaged Property. Grantor shall immediately notify Beneficiary
in writing of any change in said trade names, and shall, upon request of
Beneficiary, execute any additional financing statements and other certificates
required to reflect the change in trade names and shall execute and file any
assumed name certificate required by applicable laws.
FURTHER ASSURANCES. Grantor will, promptly on request of
Beneficiary, (a) correct any defect, error or omission which may be discovered
in the contents, execution or acknowledgment of this Deed of Trust or any other
Loan Instrument; (b) execute, acknowledge, deliver, procure and record and/or
file such further documents (including, without limitation, further deeds of
trust, security agreements, financing statements, continuation statements, and
assignments of rents or leases) and do such further acts as may be necessary,
desirable or proper to carry out more effectively the purposes of this Deed of
Trust and the other Loan Instruments, to more fully identify and subject to the
liens and security interests hereof any property intended to be covered hereby
(including specifically, but without limitation, any renewals, additions,
substitutions, replacements, or appurtenances to the Mortgaged Property) or as
deemed advisable by Beneficiary to protect the lien or the security interest
hereunder against the rights or interests of third persons; and (c) provide such
certificates, documents, reports, information, affidavits and other instruments
and do such further acts as may be necessary, desirable or proper in the
reasonable determination of Beneficiary to enable Beneficiary to comply with the
requirements or requests of any agency having jurisdiction over Beneficiary or
any examiners of such agencies with respect to the indebtedness secured hereby,
Grantor or the Mortgaged Property. Grantor shall pay all costs connected with
any of the foregoing, which shall be a demand obligation owing by Grantor (which
Grantor hereby promises to pay) to Beneficiary pursuant to this Deed of Trust.
FEES AND EXPENSES. Without limitation of any other provision
of this Deed of Trust or of any other Loan Instrument and to the extent not
prohibited by applicable law, Grantor will pay, and will reimburse to
Beneficiary and/or Trustee on demand to the extent paid by Beneficiary and/or
Trustee: (a) all appraisal fees, filing and recording fees, taxes, brokerage
fees and commissions, abstract fees, title search or examination fees, title
policy and endorsement premiums and fees, uniform commercial code search fees,
escrow fees, reasonable attorneys' fees, architect fees, construction consultant
fees, environmental inspection fees, survey fees, and all other out-of-pocket
costs and expenses of every character incurred by Grantor or Beneficiary and/or
Trustee in connection with the preparation of the Loan Instruments, the
evaluation, closing and funding of the loan evidenced by the Loan Instruments,
and any and all amendments and supplements to this Deed of Trust, the Note or
any other Loan Instruments or any approval, consent, waiver, release or other
matter requested or required hereunder or thereunder, or otherwise attributable
or chargeable to Grantor as owner of the Mortgaged Property; and (b) all costs
and expenses, including reasonable attorneys' fees and expenses, incurred or
expended in connection with the exercise of any right or remedy, or the
enforcement of any obligation of Grantor, hereunder or under any other Loan
Instrument.
RECORDING AND FILING. Grantor shall cause the Loan Instruments
and all amendments, supplements and extensions thereto and substitutions
therefor to be recorded, filed, rerecorded and refiled in such manner and in
such places as Beneficiary shall reasonably request, and shall pay all such
recording, filing, rerecording and refiling fees, title insurance premiums, and
other charges.
PAYMENT OF DEBTS. Grantor shall promptly pay when due all
obligations regarding the ownership and operation of the Mortgaged Property
except any such obligations which are being Contested in Good Faith (as that
term is defined in the Loan Agreement).
MODIFICATION BY SUBSEQUENT OWNERS. Each Grantor agrees that it
shall be bound by any modification of this Deed of Trust or any of the other
Loan Instruments made by Beneficiary and any subsequent owner of the Mortgaged
Property, with or without notice to such Grantor, and no such
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modifications shall impair the obligations of such Grantor under this Deed of
Trust or any other Loan Instrument. Nothing in this Section shall be construed
as permitting any transfer of the Mortgaged Property which would constitute an
Event of Default under other provisions of this Deed of Trust.
NOTIFICATION OF DEFAULT. Grantor shall notify Beneficiary
immediately if it becomes aware of the occurrence of any Event of Default or any
fact, condition or event that only with the giving of notice or passage of time,
or both, could become an Event of Default (a "POTENTIAL DEFAULT"), or the
failure of Grantor or any guarantor to observe any of its or his undertakings
under any of the Loan Instruments.
BUSINESS PURPOSES. The loan evidenced by the Note is solely
for the purpose of carrying on or acquiring a business of Grantor, and is not
for personal, family household, or agricultural purposes.
HAZARDOUS MATERIALS
DEFINITIONS. For the purposes of this Deed of Trust, Grantor,
Beneficiary and Trustee agree that, unless the context otherwise specified or
requires, the following terms shall have the meaning herein specified:
"HAZARDOUS MATERIALS" shall mean (a) any "hazardous waste" or
"regulated substance" as defined by the Resource Conservation and Recovery Act
of 1976 (42 U.S.C.A. Section 6901, ET SEQ. (West 1983 & Supp. 1993)), and
regulations promulgated thereunder, both as amended from time to time; (b) any
"hazardous substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C.A. Section 9601, ET SEQ. (West
1983 & Supp. 1993)) ("CERCLA"), and regulations promulgated thereunder, both as
amended from time to time; (c) any "toxic substance" as defined by the Toxic
Substances Control Act (15 U.S.C.A. Section 2601, ET SEQ. (West 1983 & Supp.
1993)), and regulations promulgated thereunder, both as amended from time to
time; (d) any "waste" as defined by the Texas Water Quality Control Act (Tex.
Water Code ▇▇▇. Sections 26.01-225 (▇▇▇▇▇▇ 1988)), and regulations promulgated
thereunder, both as amended from time to time; (e) any "solid waste" as defined
by the Texas Solid Waste Disposal Act (Tex. Health & Safety Code ▇▇▇. Section
361.001, ET SEQ. (▇▇▇▇▇▇ 1992)), and regulations promulgated thereunder, both as
amended from time to time; (f) any "air contaminant" as defined by the Texas
Clean Air Act (Tex. Health & Safety Code ▇▇▇., Section 82.001, ET SEQ. (▇▇▇▇▇▇
1992)), and regulations promulgated thereunder, both as amended from time to
time; (g) any "hazardous substance" as defined by the Texas Hazardous Substances
Spill Prevention and Control Act (Tex. Water Code ▇▇▇. Sections 26.261-268
(▇▇▇▇▇▇ 1988)), and regulations promulgated thereunder, both as amended from
time to time; (h) any "toxic chemical" as defined by the Texas Toxic Chemical
Release Reporting Act (Tex. Health & Safety Code ▇▇▇. Section 370.001, ET SEQ.
(▇▇▇▇▇▇ 1992)), and regulations promulgated thereunder, both as amended from
time to time; (i) any "regulated asbestos-containing material" as defined in the
National Emission Standard for Asbestos (40 C.F.R. Section 61.140, ET SEQ.
(1992)); (j) polychlorinated biphenyls ("PCBs") as defined in 40 C.F.R. Part 761
(1992); (k) underground storage tanks, whether active, inactive, empty, filled
or partially filled with any substance, (1) any substance the presence of which
on the Mortgaged Property is prohibited by any Governmental Requirements; and
(in) any other substance which by any Governmental Requirements requires special
handling or notification of any federal, state or local governmental entity in
its collection, storage, transportation, treatment, processing, management or
disposal.
"HAZARDOUS MATERIALS CONTAMINATION" shall mean the
contamination (whether presently existing or hereafter occurring) of the
Improvements, facilities, soil, surface water, groundwater, air or other
elements on or of the Mortgaged Property by Hazardous Materials, or the
contamination of the
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buildings, facilities, soil, surface water, groundwater, air or other elements
on or of any other property as a result of Hazardous Materials at any time
(whether before or after the date of this Deed of Trust) emanating from the
Mortgaged Property.
"GOVERNMENTAL REQUIREMENTS" shall mean any and all of the
following that may now or hereafter be applicable to Grantor or the Mortgaged
Property: (i) judicial decisions, statutes, rulings, rules, regulations,
permits, certificates or ordinances of any and all governmental or quasi
governmental entities of any nature whatsoever, whether federal, state, county,
district, city or otherwise, and whether now or hereafter in existence
("GOVERNMENTAL AUTHORITY"); (ii) restrictions of record; and (iii) any other
governmental directive or requirement of any nature.
GRANTOR'S WARRANTIES. Grantor hereby represents and warrants
that:
No Hazardous Materials are now located on the Mortgaged
Property, and neither Grantor nor, to Grantor's knowledge, any other person has
ever caused or permitted any Hazardous Materials to be placed, held, located or
disposed of on, under or at the Mortgaged Property or any part thereof,
No part of the Mortgaged Property is being used or, to the
knowledge of Grantor, has been used at any previous time for the disposal,
storage, treatment, processing or other handling of Hazardous Materials, nor is
any part of the Mortgaged Property affected by any Hazardous Materials
Contamination;
To the best of the Grantor's knowledge and belief, no property
adjoining the Mortgaged Property is being used, or has ever been used at any
previous time for the disposal, storage, treatment, processing or other handling
of Hazardous Materials nor is any other property adjoining the Mortgaged
Property affected by Hazardous Materials Contamination; and
No investigation, administrative order, consent order and
agreement, litigation or settlement with respect to Hazardous Materials or
Hazardous Materials Contamination is proposed, threatened, anticipated or in
existence with respect to the Mortgaged Property. The Mortgaged Property is not
currently on, and to Grantor's knowledge, after diligent investigation and
inquiry, has never been on, any federal or state "Superfund" or "Superlien"
list.
Grantor has undertaken all appropriate inquiry into the
previous ownership and uses of the Mortgaged Property consistent with good
commercial or customary practice in an effort to minimize liability associated
with Hazardous Materials or Hazardous Materials Contamination.
GRANTOR'S COVENANTS. Grantor agrees to (a) give notice to
Beneficiary immediately upon Grantor's acquiring knowledge of the presence of
any Hazardous Materials on the Mortgaged Property or of any Hazardous Materials
Contamination with a full description thereof; (b) promptly comply with any
Governmental Requirements requiring the removal, treatment, mitigation or
disposal of such Hazardous Materials or Hazardous Materials Contamination and
provide Beneficiary with satisfactory evidence of such compliance; and (c)
provide Beneficiary, within thirty (30) days after demand by Beneficiary, with a
bond, letter of credit or similar financial assurance evidencing to
Beneficiary's satisfaction that the necessary funds are available to pay the
cost of removing, treating, mitigating and disposing of such Hazardous Materials
or Hazardous Materials Contamination and discharging any assessments which may
be established on the Mortgaged Property as a result thereof.
SITE ASSESSMENTS. Beneficiary (by its officers, employees and
agents) at any time and from time to time, either prior to or after the
occurrence of an Event of Default, may contract for the services of persons (the
"SITE REVIEWERS") to perform environmental site assessments ("SITE
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ASSESSMENTS") on the Mortgaged Property for the purpose of determining whether
there exists on the Mortgaged Property any environmental condition which could
reasonably be expected to result in any liability, cost or expense to the owner,
occupier or operator of such Mortgaged Property arising under any state, federal
or local law, rule or regulation relating to Hazardous Materials. The Site
Assessments may be performed at any time or times, upon reasonable notice, and
under reasonable conditions established by Grantor which do not impede the
performance of the Site Assessments. The Site Reviewers are hereby authorized to
enter upon the Mortgaged Property for such purposes. The Site Reviewers are
further authorized to perform both above and below the ground testing for
environmental damage or the presence of Hazardous Materials on the Mortgaged
Property and such other tests on the Mortgaged Property as may be necessary to
conduct the Site Assessments in the reasonable opinion of the Site Reviewers.
Grantor will supply to the Site Reviewers such historical and operational
information regarding the Mortgaged Property as may be reasonably requested by
the Site Reviewers to facilitate the Site Assessments and will make available
for meetings with the Site Reviewers appropriate personnel having knowledge of
such matters. On request, Beneficiary shall make the results of such Site
Assessments fully available to Grantor, which (prior to an Event of Default) may
at its election participate under reasonable procedures in the direction of such
Site Assessments and the description of tasks of the Site Reviewers. The cost of
performing such Site Assessments shall be paid by Grantor upon demand of
Beneficiary and any such obligations shall be Indebtedness secured by this Deed
of Trust. Beneficiary's right to require such Site Assessment shall be for the
sole purpose of protecting Beneficiary's security for the repayment of the
Indebtedness and shall not under any circumstances be construed as granting the
right to participate or constitute participation by the Beneficiary in the
management of the Mortgaged Property or the business conducted thereon.
BENEFICIARY'S RIGHT TO REMOVE HAZARDOUS MATERIALS. Beneficiary
shall have the right but not the obligation, prior or subsequent to an Event of
Default, without in any way limiting Beneficiary's other rights and remedies
under this Deed of Trust, to enter onto the Mortgaged Property or to take such
other actions as it deems necessary or advisable to clean up, remove, resolve or
minimize the impact of, or otherwise deal with, any Hazardous Materials or
Hazardous Materials Contamination on the Mortgaged Property following receipt of
any notice from any person or entity asserting the existence of any Hazardous
Materials or Hazardous Materials Contamination pertaining to the Mortgaged
Property or any part thereof which, if true, could result in an order, suit,
imposition of a lien on the Mortgaged Property, or other action and/or which, in
Beneficiary's sole opinion, could jeopardize Beneficiary's security under this
Deed of Trust. All costs and expenses paid or incurred by Beneficiary in the
exercise of any such rights shall be Indebtedness secured by this Deed of Trust
and shall be payable by Grantor upon demand. Beneficiary's right to require such
removal of Hazardous Materials shall be for the sole purpose of protecting
Beneficiary's security for the repayment of the Indebtedness and shall not under
any circumstances be construed as granting the right to participate or
constitute participation in the management of the Mortgaged Property or the
business conducted thereon.
SURVIVAL. The provisions of Article 7 shall survive the
release, foreclosure or other enforcement of this Deed of Trust.
EVENTS OF DEFAULT
The occurrence of any one of the following shall be a default hereunder
("EVENT OF DEFAULT"):
DEFAULT UNDER LOAN AGREEMENT. The occurrence of an Event of
Default as that term is defined in the Loan Agreement.
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NONPERFORMANCE OF COVENANTS. (a) Grantor shall default in the
due performance or observance by it of any term, covenant or agreement on its
part to be performed or observed pursuant to Sections 6.1, 6.12 or 6.25, or (b)
Grantor shall default in the due performance or observance by it of any term,
covenant or agreement on its part to be performed or observed pursuant to any
provision of this Deed of Trust other than those specified in clause (a)
immediately preceding and such default continues unremedied for a period of
thirty (30) days after notice thereof from Beneficiary or Beneficiary is
notified of such default or should have been so notified pursuant to the
provisions of Section 6.25 hereof, whichever is earlier.
TRANSFER OF THE MORTGAGED PROPERTY. Title to all or any part
of the Mortgaged Property (other than obsolete or worn personal property
replaced by adequate substitutes of equal or greater value than the replaced
items when new) shall become vested in any party other than Grantor, whether by
operation of law or otherwise; provided, however that Grantor's sale of Tract 1
described on Exhibit A, the Improvements thereon and the Accessories pertaining
thereto (collectively, "TRACT 1") or Tract 2 described on Exhibit A, the
Improvements thereon and the Accessories pertaining thereto (collectively,
"TRACT 2"), or of both Tract 1 and Tract 2, shall not constitute an Event of
Default as long as the closing of such sale or sales occurs prior to September
1, 2002. Beneficiary may, in its sole discretion, waive this Event of Default,
but it shall have no obligation to do so, and any waiver may be conditioned upon
such one or more of the following which Beneficiary may require: the grantee's
integrity, reputation, character, creditworthiness and management ability being
satisfactory to Beneficiary in its sole judgment, and grantee executing, prior
to such sale or transfer, a written assumption agreement containing such terms
as Beneficiary may require, a principal paydown on the Note, an increase in the
rate of interest payable under the Note, a transfer fee, and any other
modification of the Loan Instruments which Beneficiary may require.
GRANT OF EASEMENT, ETC. Without the prior written consent of
Beneficiary, Grantor grants any easement or dedication, files any plat,
condominium declaration, or restriction, or otherwise encumbers the Mortgaged
Property, unless such action is expressly permitted by the Loan Instruments or
does not affect the Mortgaged Property.
ABANDONMENT. Grantor or the owner of the Mortgaged Property
(if other than Grantor) abandons any of the Mortgaged Property.
DETERIORATION. Beneficiary reasonably determines that the
condition of the Mortgaged Property has deteriorated.
FORECLOSURE OF OTHER LIENS. The holder of any lien, security
interest or assignment on the Mortgaged Property institutes foreclosure or other
proceedings for the enforcement of its remedies thereunder.
REMEDIES
EXERCISE OF SPECIFIC REMEDIES. If an Event of Default shall
occur, Beneficiary may exercise any one or more of the following remedies,
without notice (unless notice is required by applicable statute):
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ACCELERATION. Upon the occurrence of an Event of Default
described in Section 11.7 of the Loan Agreement, the entire principal of and
accrued interest of the Indebtedness shall forthwith be due and payable without
demand, presentment for payment, notice of nonpayment, protest, notice of
protest, notice of intent to accelerate, notice of acceleration and all other
notices of further actions of any kind, all of which are hereby expressly waived
by Grantor. In the event that any other Event of Default shall occur and be
continuing, Beneficiary may declare the Indebtedness immediately due and
payable, whereupon all of the Indebtedness shall be forthwith due and payable
without demand, presentment for payment, notice of nonpayment, protest, notice
of protest, notice of intent to accelerate, notice of acceleration and all other
notices or further actions of any kind, all of which are hereby expressly waived
by Grantor. Grantor hereby waives notice of intent to accelerate and notice of
acceleration.
ENFORCEMENT OF ASSIGNMENT OF RENTS AND LEASES. Prior or
subsequent to taking possession of any portion of the Mortgaged Property or
taking any action with respect to such possession, Beneficiary may:
collect and/or ▇▇▇ for the Rents in Beneficiary's own
name, give receipts and releases therefor, and after deducting all
expenses of collection, including attorneys' fees and expenses, apply
the net proceeds thereof to any Indebtedness as Beneficiary may elect;
make, modify, enforce, cancel, terminate or accept
surrender of any Leases, evict tenants, adjust the Rents, maintain,
decorate, refurbish, repair, clean, and make space ready for renting,
and otherwise do anything Beneficiary deems advisable in connection
with the Mortgaged Property;
apply the Rents so collected to the operation and
management of the Mortgaged Property, including the payment of
management, brokerage and attorneys' fees and expenses, and/or to the
Indebtedness; and
require Grantor to transfer all security deposits and
records thereof to Beneficiary together with all original counterparts
of the Leases.
FORECLOSURE. Beneficiary may require the Trustee to sell all
or part of the Mortgaged Property, at public auction, to the highest bidder, for
cash, at the county courthouse of the county in Texas in which the Mortgaged
Property or any part thereof is situated, or if the Mortgaged Property is
located in more than one county such sale may be made at the courthouse in any
county in which the Mortgaged Property is situated. The sale shall take place at
such area of the courthouse as shall be properly designated from time to time by
the commissioners court (or, if not so designated by the commissioners court, at
such other area in the courthouse as may be provided in the notice of sale
hereinafter described) of the specified county, between the hours of 10:00
o'clock a.m. and 4: 00 o'clock p.m. (the commencement of such sale to occur
within three hours following the time designated in the hereinafter-described
notice of sale as the earliest time at which such sale shall occur, if required
by applicable law) on the first Tuesday of any month, after giving notice of the
time, place and terms of said sale (including the earliest time at which such
sale shall occur) and of the property to be sold in the manner hereinafter
described. Notice of a sale of all or part of the Mortgaged Property by the
Trustee shall be given by posting written notice thereof at the courthouse door
(or other area in the courthouse as may be designated for such public notices)
of the county in which the sale is to be made, and by filing a copy of the
notice in the office of the county clerk of the county in which the sale is to
be made, at least twenty-one (21) days preceding the date of the sale, and if
the property to be sold is in more than one county a notice shall be posted at
the courthouse door (or other area in the courthouse as may be designated for
such public notices) and filed with the county clerk of each county in which the
property to be sold is situated. In addition, Beneficiary shall, at least
twenty-one (21) days preceding the date of sale, serve written notice
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of the proposed sale by certified mail on Grantor and each debtor obligated to
pay the Indebtedness secured hereby according to the records of Beneficiary.
Service of such notice shall be completed upon deposit of the notice, enclosed
in a postpaid wrapper, properly addressed to such debtor at the most recent
address as shown by the records of Beneficiary, in a post office or official
depository under the care and custody of the United States Postal Service. The
affidavit of any person having knowledge of the facts to the effect that such
service was completed shall be prima facie evidence of the fact of service. Any
notice that is required or permitted to be given to Grantor may be addressed to
Grantor at Grantor's address as stated above. Any notice that is to be given by
certified mail to any other debtor may, if no address for such other debtor is
shown by the records of Beneficiary, be addressed to such other debtor at the
address of Grantor as is shown by the records of Beneficiary. Notwithstanding
the foregoing provisions of this paragraph, notice of such sale given in
accordance with the requirements of the applicable laws of the State of Texas in
effect at the time of such sale shall constitute sufficient notice of such sale.
Trustee may sell all or any portion of the Mortgaged Property, together or in
lots or parcels, and may execute and deliver to the purchaser or purchasers of
such property good and sufficient deeds of conveyance of fee simple title with
covenants of general warranty made on behalf of Grantor. In no event shall
Trustee be required to exhibit, present or display at any such sale any of the
personality described herein to be sold at such sale. Trustee making such sale
shall receive the proceeds thereof and shall apply the same as follows: (i)
first, he shall pay the reasonable expenses of Trustee and a reasonable
Trustee's fee or commission; (ii) second, he shall pay, so far as may be
possible, the Indebtedness, discharging first that portion of the Indebtedness
arising under the covenants or agreements herein contained and not evidenced by
the Note; (iii) third, he shall pay the residue, if any, to the persons legally
entitled thereto. Payment of the purchase price to Trustee shall satisfy the
obligation of the purchaser at such sale therefor, and such purchaser shall not
be responsible for the application thereof. The sale or sales by Trustee of less
than the whole of the Mortgaged Property shall not exhaust the power of sale
herein granted, and Trustee is specifically empowered to make successive sale or
sales under such power until the whole of the Mortgaged Property shall be sold;
and if the proceeds of such sale or sales of less than the whole of the
Mortgaged Property shall be less than the aggregate of the Indebtedness and the
expenses thereof, this Deed of Trust and the lien, security interest and
assignment hereof shall remain in full force and effect as to the unsold portion
of the Mortgaged Property just as though no sale or sales had been made;
provided, however, that Grantor shall never have any right to require the sale
or sales of less than the whole of the Mortgaged Property, but Beneficiary shall
have the right, at its sole election, to request Trustee to sell less than the
whole of the Mortgaged Property. If default is made hereunder, the holder of the
Indebtedness or any part thereof on which the payment is delinquent shall have
the option to proceed with foreclosure in satisfaction of such item either
through judicial proceedings or by directing Trustee to proceed as if under a
full foreclosure, conducting the sale as herein provided without declaring the
entire Indebtedness due, and if sale is made because of default of an
installment, or a part of an installment, such sale may be made subject to the
unmatured part of the Indebtedness; and it is agreed that such sale, if so made,
shall not in any manner affect the unmatured part of the Indebtedness, but as to
such unmatured part this Deed of Trust shall remain in full force and effect as
though no sale had been made under the provisions of this paragraph. Several
sales may be made hereunder without exhausting the right of sale for any
unmatured part of the Indebtedness. At any such sale (1) Grantor hereby agrees,
in its behalf and in behalf of its heirs, executors, administrators, successors,
personal representatives and assigns, that any and all recitals made in any deed
of conveyance given by Trustee with respect to the identity of Beneficiary, the
occurrence or existence of any default, the acceleration of the maturity of any
of the Indebtedness, the request to sell, the notice of sale, the giving of
notice to all debtors legally entitled thereto, the time, place, terms, and
manner of sale, and receipt, distribution and application of the money realized
therefrom, or the due and proper appointment of a substitute Trustee, and,
without being limited by the foregoing, with respect to any other act or thing
having been duly done by Beneficiary or by Trustee hereunder, shall be taken by
all courts of law and equity as prima facie evidence that the statements or
recitals state facts and are without further question to be so accepted, and
Grantor hereby ratifies and confirms every act that Trustee or any substitute
Trustee hereunder may lawfully do in the premises by virtue hereof, and (2) the
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purchaser may disaffirm any easement granted, or rental, lease or other contract
made in violation of any provision of this Deed of Trust, and may take immediate
possession of the Mortgaged Property free from, and despite the terms of, such
grant of easement and rental or lease contract. Beneficiary may bid and become
the purchaser of all or any part of the Mortgaged Property at any trustee's or
foreclosure sale hereunder, and the amount of Beneficiary's successful bid may
be credited on the Indebtedness.
UNIFORM COMMERCIAL CODE. Without limitation of Beneficiary's
rights of enforcement with respect to the Collateral or any part thereof in
accordance with the procedures for foreclosure of real estate, Beneficiary may
exercise its rights of enforcement with respect to the Collateral or any part
thereof under the Code as amended (or under the Uniform Commercial Code in force
in any other state to the extent the same is applicable law) and in conjunction
with, in addition to or in substitution for those rights and remedies: (1)
Beneficiary may enter upon Grantor's premises to take possession of, assemble
and collect the Collateral or, to the extent and for those items of the
Collateral permitted under applicable law, to render it unusable; (2)
Beneficiary may require Grantor to assemble the Collateral and make it available
at a place Beneficiary designates which is mutually convenient to allow
Beneficiary to take possession or dispose of the Collateral; (3) written notice
mailed to Grantor as provided herein at least ten (10) days prior to the date of
public sale of the Collateral or prior to the date after which private sale of
the Collateral will be made shall constitute reasonable notice; (4) any sale
made pursuant to the provisions of this paragraph shall be deemed to have been a
public sale conducted in a commercially reasonable manner if held
contemporaneously with and upon the same notice as required for the sale of the
Mortgaged Property under power of sale as provided in paragraph (c) above in
this Section 9. 1; (5) in the event of a foreclosure sale, whether made by
Trustee under the terms hereof, or under judgment of a court, the Collateral and
the other Mortgaged Property may, at the option of Beneficiary, be sold as a
whole; (6) it shall not be necessary that Beneficiary take possession of the
Collateral or any part thereof prior to the time that any sale pursuant to the
provisions of this Section is conducted and it shall not be necessary that the
Collateral or any part thereof be present at the location of such sale; (7) with
respect to application of proceeds of disposition of the Collateral, the costs
and expenses incident to disposition shall include the reasonable expenses of
retaking, holding, preparing for sale or lease, selling, leasing and the like
and the reasonable attorneys' fees and legal expenses incurred by Beneficiary;
(8) any and all statements of fact or other recitals made in any ▇▇▇▇ of sale or
assignment or other instrument evidencing any foreclosure sale hereunder as to
nonpayment of the secured indebtedness or as to the occurrence of any default,
or as to Beneficiary having declared all of such indebtedness to be due and
payable, or as to notice of time, place and terms of sale and of the properties
to be sold having been duly given, or as to any other act or thing having been
duly done by Beneficiary, shall be taken as prima facie evidence of the truth of
the facts so stated and recited; and (9) Beneficiary may appoint or delegate any
one or more persons as agent to perform any act or acts necessary or incident to
any sale held by Beneficiary, including the sending of notices and the conduct
of the sale, but in the name and on behalf of Beneficiary.
LAWSUITS. Beneficiary may proceed by a suit or suits in equity
or at law, whether for the specific performance of any covenant or agreement
herein contained or in aid of the execution of any power herein granted, or for
any foreclosure hereunder or for the sale of the Mortgaged Property under the
judgment or decree of any court or courts of competent jurisdiction.
ENTRY ON MORTGAGED PROPERTY. Upon occurrence of an Event of
Default hereunder, Beneficiary may enter into and upon and take possession of
all or any part of the Mortgaged Property, and may exclude Grantor, and all
persons claiming under Grantor, and its or their agents or servants, wholly or
partly therefrom; and, holding the same, Beneficiary may use, administer,
manage, operate, and control the Mortgaged Property and may exercise all rights
and powers of Grantor in the name, place and stead of Grantor, or otherwise, as
the Beneficiary shall deem best; and in the exercise of any of the foregoing
rights and powers Beneficiary shall not be liable to Grantor for any loss or
damage thereby sustained unless due solely to the willful misconduct or gross
negligence of Beneficiary.
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TRUSTEE OR RECEIVER. Beneficiary may make application to a
court of competent jurisdiction, as a matter of strict right and without notice
to Grantor or regard to the adequacy of the Mortgaged Property for the repayment
of the Indebtedness, for appointment of a receiver of the Mortgaged Property,
and Grantor does hereby irrevocably consent to such appointment. Any such
receiver shall have all the usual powers and duties of receivers in similar
cases, including the full power to rent, maintain and otherwise operate the
Mortgaged Property upon such terms as may be approved by the court, and shall
apply the Rents in accordance with the provisions of Section 4.1 hereof.
TERMINATION OF COMMITMENT TO LEND. Beneficiary may terminate
any commitment or obligation to lend or disburse funds under any Loan
Instrument.
TENANCY AT WILL. In the event of a trustee's sale hereunder
and if at the time of such sale Grantor or any other party occupies the portion
of the Mortgaged Property so sold or any part thereof, such occupant shall
immediately become the tenant of the purchaser at such sale, which tenancy shall
be a tenancy from day to day, terminable at the will of either tenant or
landlord, at a reasonable rental per day based upon the value of the portion of
the Mortgaged Property so occupied, such rental to be due and payable daily to
the purchaser. An action of forcible detainer shall lie if the tenant holds over
after a demand in writing for possession of such Mortgaged Property.
SUBSTITUTE TRUSTEE. If, for any reason, Beneficiary prefers to
appoint a substitute Trustee hereunder, Beneficiary may, from time to time, by
written instrument, appoint one or more substitute Trustees, who shall succeed
to all the estate, rights, powers, and duties of the original Trustee named
herein. Such appointment may be executed by anyone acting in a representative
capacity, and such appointment shall be conclusively presumed to have been
executed with appropriate authority.
INDEMNIFICATION OF TRUSTEE. Except for gross negligence or
willful misconduct, Trustee shall not be liable for any act or omission or error
of judgment. Trustee may rely on any document believed by him in good faith to
be genuine. All money received by Trustee shall, until used or applied as herein
provided, be held in trust, but need not be segregated (except to the extent
required by law), and Trustee shall not be liable for interest thereon. Grantor
hereby indemnifies Trustee against all liability and expenses that he may incur
in the performance of his duties hereunder. WITHOUT LIMITATION, THE FOREGOING
INDEMNITY SHALL APPLY WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE
CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE
NEGLIGENCE OR STRICT LIABILITY OF TRUSTEE. HOWEVER, SUCH INDEMNITY SHALL NOT
APPLY TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR
ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF TRUSTEE.
BENEFICIARY'S RIGHT TO PERFORM. Upon Grantor's failure to make
a payment or perform an act required by the Loan Instruments, then at any time
thereafter, and without notice to or demand upon Grantor and without waiving or
releasing any other right, remedy or recourse, Beneficiary may (but shall not be
obligated to) make such payment or perform such act for the account of and at
the expense of Grantor, and shall have the right to enter upon the Mortgaged
Property for such purpose and to take all such action as it may deem necessary
or appropriate.
REIMBURSEMENT OF EXPENDITURE. If Beneficiary shall expend any
money chargeable to Grantor or subject to reimbursement by Grantor under the
terms of the Loan Instruments, Grantor shall repay the same to Beneficiary
immediately at the place where the Note is payable, together with interest
thereon at the Default Rate (as defined in the Loan Agreement) from and after
the date of each such expenditure by Beneficiary until paid by Grantor.
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OTHER RIGHTS. Beneficiary may exercise any and all other
rights, remedies and recourses granted under the Loan Instruments now or
hereafter existing in equity or at law for the protection and preservation of
the Mortgaged Property.
REMEDIES CUMULATIVE, CONCURRENT AND NONEXCLUSIVE. Beneficiary
shall have all rights, remedies and recourses granted in the Loan Instruments
and available at law or equity (including, without limitation, those granted by
the Code and applicable to the Mortgaged Property, or any portion thereof), and
same (a) shall be cumulative and concurrent, (b) may be pursued separately,
successively or concurrently against Grantor or others obligated for the
Indebtedness, or any part thereof or against any one or more of them, or against
the Mortgaged Property, at the sole discretion of Beneficiary, (c) may be
exercised as often as occasion therefor shall arise, it being agreed by Grantor
that the exercise of or failure to exercise any of same shall in no event be
construed as a waiver or release thereof or of any other right, remedy or
recourse, and (d) are intended to be, and shall be, nonexclusive.
RIGHTS AND REMEDIES OF SURETIES. Grantor waives any right or
remedy which Grantor may have or be able to assert pursuant to Chapter 34 of the
Business and Commerce Code of the State of Texas pertaining to the rights and
remedies of sureties.
MISCELLANEOUS
COLLECTION. If the Indebtedness shall be collected by legal
proceedings, whether through a probate or bankruptcy court or otherwise, or
shall be placed in the hands of an attorney for collection after an Event of
Default or maturity, Grantor agrees to pay the attorneys' and collection fees
and expenses as set forth in the Note, and such fees and expenses shall be a
part of the Indebtedness.
CHANGE IN OWNERSHIP. If the ownership (legal or beneficial) of
the Mortgaged Property or any part thereof becomes vested in a person other than
Grantor, or in the event of a change of any ownership of Grantor legal or
beneficial), Beneficiary may, without notice to Grantor, deal with such
successor or successors in interest with reference to this Deed of Trust and to
the Indebtedness in the same manner as with Grantor without in any way vitiating
or discharging Grantor's liability hereunder or upon the Indebtedness. No sale
of the Mortgaged Property, and no forbearance on the part of Beneficiary, and no
extension of the time for the payment of the Indebtedness, shall operate to
release or affect the original liability of Grantor.
RELEASE OF LIEN. If Grantor shall perform each of the
covenants and agreements herein contained, then this conveyance shall become
null and void and shall be released at Grantor's written request and expense;
otherwise, it shall remain in full force and effect. No release or modification
of this conveyance, or of the lien, security interest or assignment created and
evidenced hereby, shall be valid unless executed by Beneficiary.
PARTIAL RELEASE OF LIEN, EXTENSION, ETC. Any part of the
Mortgaged Property may be released by Beneficiary without affecting the lien,
security interest and assignment hereof against the remainder. The lien,
security interest and other rights granted hereby shall not affect or be
affected by any other security taken for the Indebtedness. The taking of
additional security, or the extension or renewal of the Indebtedness or any part
thereof, shall not release or impair the lien, security interest and other
rights granted hereby, or affect the liability of any endorser or guarantor or
improve the right of any permitted junior lienholder; and this Deed of Trust, as
well as any instrument given to secure any renewal or extension of the
Indebtedness, or any part thereof, shall be and remain a first and prior lien,
except as otherwise provided herein, on all of the Mortgaged Property not
expressly released until the Indebtedness
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is paid. As to each of Tract 1 and Tract 2, if Grantor closes the sale of such
tract prior to September 1, 2002, and provided that no Event of Default or
Potential Default has occurred and is continuing, Beneficiary will release its
lien under this Deed of Trust against such tract and all Improvements thereon
and all Accessories pertaining thereto in accordance with the following
procedure:
(a) As to the tract for which a release is requested, Grantor shall
make a written request to Beneficiary for the release of Beneficiary's lien
under this Deed of Trust which shall include (i) the legal description of the
tract, and (ii) the date Grantor is requesting that the release be made.
(b) Upon Beneficiary's receipt of the request for the release,
Beneficiary shall execute and deliver to the title company closing the sale a
release in the form of Exhibit C for such tract with instructions to record such
release upon (i) Grantor's payment to Beneficiary of the reasonable expenses of
Beneficiary incurred in connection with the release request and the preparation
of the release including, without limitation, reasonable attorneys' fees, and
(ii) the closing of the sale provided that the sale closes prior to September 1,
2002.
As to each of the other tracts described on Exhibit A (and as to Tract 1 and
Tract 2 if not sold prior to September 1, 2002), Beneficiary will release its
lien under this Deed of Trust against such tract and all Improvements thereon
and Accessories pertaining thereto upon compliance by Grantor to the
satisfaction of Beneficiary (in the opinion of Beneficiary), unless waived in
writing by Beneficiary, of each of the following conditions:
(a) As to each tract for which a release is requested, Grantor shall
make a written request to Beneficiary for the release of Beneficiary's lien
under this Deed of Trust, which request shall include (i) the legal description
of the tract, (ii) the date Grantor is requesting that the release be made,
(iii) the purchase price to be paid for the tract, and (iv) a deposit of the
reasonable costs and expenses of Beneficiary associated with the release request
(including reasonable legal fees) in an amount acceptable to Beneficiary.
(b) The release of Beneficiary's lien under this Deed of Trust as to
any particular tract shall be subject to the following requirements: (i) the
terms of the sale shall be reasonably acceptable to Beneficiary; (ii)
Beneficiary shall have approved the preliminary closing statement prepared by
the title company closing the sale of the tract; provided, however, that if
there is any material change from the preliminary closing statement to the final
closing statement, the final closing statement shall be submitted to and
approved by Beneficiary; and (iii) provision shall have been made for net
purchase price payable at the closing of the sale of the tract to be paid to
Beneficiary. Grantor shall provide to Beneficiary such evidence as Beneficiary
may require to establish the satisfaction of these requirements.
(c) As to each tract to be released, upon (i) Beneficiary's receipt of
the request for the release, (ii) compliance by Grantor with all of the
conditions precedent for the release herein specified, (iii) Beneficiary's
receipt of the net purchase price payable at the closing of the sale of the
tract, (iv) Beneficiary's receipt of a certification by the title company
closing the sale of the amount of the purchase price being paid for the tract
and the net purchase price payable at the closing, and (v) Grantor's payment to
Beneficiary of the reasonable expenses of Beneficiary incurred in connection
with the release request and the preparation of the release including, without
limitation, reasonable attorneys' fees, Beneficiary shall execute and deliver to
the title company closing the sale for recording a release for such tract in the
form of Exhibit C.
(d) Grantor shall not be entitled to a release as to any tract during
any period where an Event of Default or Potential Default hereunder has occurred
and is continuing.
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NO IMPAIRMENT OF SECURITY. The lien, security interest and
other security rights of Beneficiary hereunder or under any other Loan
Instrument shall not be impaired by any indulgence, moratorium or release
granted by Beneficiary including, but not limited to, any renewal, extension or
modification which Beneficiary may grant with respect to any secured
indebtedness, or any surrender, compromise, release, renewal, extension,
exchange or substitution which Beneficiary may grant in respect of the Mortgaged
Property, or any part thereof or any interest therein, or any release or
indulgence granted to any endorser, guarantor or surety of any secured
indebtedness. The taking of additional security by Beneficiary shall not release
or impair the lien, security interest or other security rights of Beneficiary
hereunder or affect the liability of Grantor or of any endorser, guarantor or
surety, or improve the right of any junior lienholder in the Mortgaged Property
(without implying hereby Beneficiary's consent to any junior lien).
ACTS NOT CONSTITUTING WAIVER BY BENEFICIARY. Beneficiary may
waive any default without waiving any other prior or subsequent default.
Beneficiary may remedy any default without waiving the default remedied. Neither
failure by Beneficiary to exercise, nor delay by Beneficiary in exercising, nor
discontinuance of the exercise of any right, power or remedy (including but not
limited to the right to accelerate the maturity of the secured indebtedness or
any part thereof) upon or after any default shall be construed as a waiver of
such default or as a waiver of the right to exercise any such right, power or
remedy at a later date. No single or partial exercise by Beneficiary of any
right, power or remedy hereunder shall exhaust the same or shall preclude any
other or further exercise thereof, and every such right, power or remedy
hereunder may be exercised at any time and from time to time. No modification or
waiver of any provision hereof nor consent to any departure by Grantor therefrom
shall in any event be effective unless the same shall be in writing and signed
by Beneficiary and then such waiver or consent shall be effective only in the
specific instance, for the purpose for which given and to the extent therein
specified. No notice to nor demand on Grantor in any case shall of itself
entitle Grantor to any other or further notice or demand in similar or other
circumstances. Remittances in payment of any part of the of the Indebtedness
other than in the required amount in immediately available U.S. funds shall not,
regardless of any receipt or credit issued therefor, constitute payment until
the required amount is actually received by Beneficiary in immediately available
U.S. funds and shall be made and accepted subject to the condition that any
check or draft may be handled for collection in accordance with the practice of
the collecting bank or banks. Acceptance by Beneficiary of any payment in an
amount less than the amount then due on any of the Indebtedness shall be deemed
an acceptance on account only and shall not in any way excuse the existence of a
default hereunder.
WAIVER OF MARSHALLING AND CERTAIN RIGHTS. To the extent that
Grantor may lawfully do so, Grantor hereby expressly waives any right pertaining
to the marshalling of assets, the exemption of homestead, the administration of
estates of decedents, or other matter to defeat, reduce or affect the right of
Beneficiary to sell the Mortgaged Property for the collection of the
Indebtedness (without any prior or different resort for collection), or the
right of Beneficiary to the payment of the Indebtedness out of the proceeds of
sale of the Mortgaged Property in preference to every other person and claimant.
SUBROGATION. To the extent that proceeds of the Indebtedness
are used to pay any outstanding lien, charge or encumbrance affecting the
Mortgaged Property, such proceeds have been advanced by Beneficiary at Grantor's
request, and Beneficiary shall be subrogated to all rights, interests and liens
owned or held by any owner or holder of such outstanding liens, charges and
encumbrances, irrespective of whether such liens, charges or encumbrances are
released of record; provided, however, that the terms and provisions hereof
shall govern the rights and remedies of Beneficiary and shall supersede the
terms, provisions, rights, and remedies under the lien or liens to which
Beneficiary is subrogated hereunder.
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NO WAIVER. No waiver of any Event of Default or any other
default on the part of Grantor or breach of any of the provisions of this Deed
of Trust or of any other instrument executed in connection with the Indebtedness
shall be considered a waiver of any other or subsequent default or breach, and
no delay or omission in exercising or enforcing the rights and powers herein
granted shall be construed as a waiver of such rights and powers, and likewise
no exercise or enforcement of any rights or powers hereunder shall be held to
exhaust such rights and powers, and every such right and power may be exercised
from time to time. Acceptance by Beneficiary of partial payments shall not
constitute a waiver of the default by failure to make full payments.
LIMITATION ON INTEREST. All agreements between Grantor and
Beneficiary, whether now existing or hereafter arising and whether written or
oral, are hereby limited so that in no contingency, whether by reason of
acceleration of the maturity of any of the Indebtedness or otherwise, shall the
interest contracted for, charged or received by Beneficiary exceed the maximum
amount permissible under applicable law. If from any circumstance whatsoever,
interest would otherwise be payable to Beneficiary in excess of the maximum
lawful amount, the interest payable to Beneficiary shall be reduced to the
maximum amount permitted under applicable law; and if from any circumstance
Beneficiary shall ever receive anything of value deemed interest by applicable
law in excess of the maximum lawful amount, an amount equal to any excessive
interest shall be applied to the reduction of the principal balance of the
Indebtedness and not to the payment of interest or, if such excessive interest
exceeds the unpaid balance of principal of the Indebtedness, such excess shall
be refunded to Grantor. All interest paid or agreed to be paid to Beneficiary
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full period until payment in full of the
principal of the Indebtedness (including the period of any renewal or extension
thereof) so that the interest thereon for such full period shall not exceed the
maximum amount permitted by applicable law. This paragraph shall control all
agreements between Grantor and Beneficiary.
SUCCESSORS AND ASSIGNS; USE OF TERMS. The covenants herein
contained shall bind, and the benefits and advantages shall inure to, the
respective heirs, executors, administrators, personal representatives,
successors, and assigns of the parties hereto. Whenever used, the singular
number shall include the plural and the plural the singular, and the use of any
gender shall be applicable to all genders. The term "Grantor" shall include in
their individual capacities and jointly all parties hereinabove named a Grantor.
The term "Beneficiary" shall include any lawful owner, holder, pledgee, or
assignee of any of the Indebtedness. The duties, covenants, conditions,
obligations, and warranties of Grantor in this Deed of Trust shall be joint and
several obligations of Grantor and each Grantor, if more than one, and each
Grantor's heirs, executors, administrators, personal representatives, successors
and assigns. Each party who executes this Deed of Trust and each subsequent
owner of the Mortgaged Property, or any part thereof (other than Beneficiary),
covenants and agrees that it will perform, or cause to be performed, each term
and covenant of this Deed of Trust.
BENEFICIARY'S CONSENT. In any instance hereunder where
Beneficiary's approval or consent is required or the exercise of Beneficiary's
judgment is required, the granting or denial of such approval or consent and the
exercise of such judgment shall be within the sole discretion of Beneficiary
free from any limitation or requirement of reasonableness, and Beneficiary shall
not, for any reason or to any extent, be required to grant such approval or
consent or exercise such judgment in any particular manner regardless of the
reasonableness of either the request or Beneficiary's judgment.
SEVERABILITY. If any provision of this Deed of Trust is held
to be illegal, invalid, or unenforceable under present or future laws effective
while this Deed of Trust is in effect, the legality, validity and enforceability
of the remaining provisions of this Deed of Trust shall not be affected thereby,
and in lieu of each such illegal, invalid or unenforceable provision there shall
be added automatically as a part of this Deed of Trust a provision that is
legal, valid and enforceable and as similar in terms to such
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illegal, invalid or unenforceable provision as may be possible. If any of the
Indebtedness shall be unsecured, the unsecured portion of the Indebtedness shall
be completely paid prior to the payment of the Loan Instrument portion of such
Indebtedness, and all payments made on account of the Indebtedness shall be
considered to have been paid on and applied first to the complete payment of the
unsecured portion of the Indebtedness.
MODIFICATION OR TERMINATION. The Loan Instruments may only be
modified or terminated by a written instrument or instruments executed by the
party against which enforcement of the modification or termination is asserted.
Any alleged modification or termination that is not so documented shall not be
effective as to any party.
NO PARTNERSHIP. Nothing contained in the Loan Instruments is
intended to create any partnership, joint venture or association between Grantor
and Beneficiary, or in any way make Beneficiary a co-principal with Grantor with
reference to the Mortgaged Property, and any inferences to the contrary are
hereby expressly negated.
HEADINGS. The article, paragraph and subparagraph headings
hereof are inserted for convenience of reference only and shall not alter,
define, or be used in construing the text of such articles, paragraphs or
subparagraphs.
CONSTRUCTION DEED OF TRUST. This Deed of Trust constitutes a
"construction mortgage" as defined in Section 9.334(h) of the Code to the extent
that it secures an obligation incurred for the construction of the Improvements,
including the acquisition cost of the Land.
APPLICABLE TO PRIOR LIENS. If this Deed of Trust is or becomes
subordinate to any other liens, security interests, assignments of leases or
rents or any other encumbrances (collectively, the "PRIOR LIENS") affecting any
of the Mortgaged Property (all documents creating the Prior Liens and evidencing
and governing the indebtedness secured thereby being collectively called the
"PRIOR LIEN DOCUMENTS"), in addition to the provisions of Section 6.12, the
provisions of this Section 10.18 shall apply. Grantor shall not enter into any
renewal, extension, modification, increase or refinancing of any of the Prior
Lien Documents or the indebtedness secured thereby without the prior written
consent of Beneficiary. Grantor shall pay when due all indebtedness evidenced
and secured by the Prior Lien Documents and shall timely perform all other
obligations of the Grantor under the Prior Lien Documents. Beneficiary may, but
shall not be obligated to, pay any such indebtedness or perform any such
obligations for the account of Grantor, and any sum so expended shall be part of
the Indebtedness secured hereby. Grantor shall pay to Beneficiary all amounts so
expended by Beneficiary with interest on such amounts from the date expended at
the rate set forth in the Loan Instruments, but not in excess of the highest
rate permitted by applicable law. Any default under any of the Prior Lien
Documents shall constitute an Event of Default hereunder. If Beneficiary should
cure any such default under any of the Prior Lien Documents, the curing thereof
by Beneficiary shall not constitute a cure of the default under this Deed of
Trust. Grantor shall send to Beneficiary a copy of each notice of default or
notice of acceleration or other notice received by Grantor from the holder of
any of the Prior Lien Documents within one (1) business day after receipt
thereof by Grantor. Notwithstanding the foregoing, Beneficiary does not consent
to any Prior Lien unless otherwise expressly permitted in this Deed of Trust.
ABSENCE OF OBLIGATIONS OF BENEFICIARY WITH RESPECT TO
MORTGAGED PROPERTY. Notwithstanding anything in this Deed of Trust to the
contrary, including, without limitation, the definition of "Mortgaged Property"
and/or the provisions of Article 4 hereof, (a) to the extent permitted by
applicable law, the Mortgaged Property is comprised of Grantor's rights, title
and interests therein but not its obligations, duties or liabilities pertaining
thereto, (b) Beneficiary neither assumes nor shall have any obligations, duties
or liabilities in connection with any portion of the items described in
connection
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with the definition of "Mortgaged Property" herein, either prior to or after
obtaining title to such Mortgaged Property, whether by foreclosure sale, the
granting of a deed in lieu of foreclosure or otherwise, and (c) Beneficiary may,
at any time prior to or after the acquisition of title to any portion of the
Mortgaged Property as above described, advise any party in writing as to the
extent of Beneficiary's interest therein and/or expressly disaffirm in writing
any rights, interests, obligations, duties and/or liabilities with respect to
such Mortgaged Property or matters related thereto. Without limiting the
generality of the foregoing, it is understood and agreed that Beneficiary shall
have no obligations, duties or liabilities prior to or after acquisition of
title to any portion of the Mortgaged Property, as lessee under any lease or
purchaser or seller under any contract or option unless Beneficiary elects
otherwise by written notification.
NOTICES. Except as otherwise provided in subparagraph (c) of
Section 9.1 of this Deed of Trust, all notices demands, requests, approvals and
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been given when presented personally or deposited in a
regularly maintained mail receptacle of the United States Postal Service,
postage prepaid, registered or certified, return receipt requested, addressed to
Grantor at its address set forth in the first paragraph of this Deed of Trust or
to Beneficiary at its address set forth in Article 1 hereof, or such other
address as Grantor or Beneficiary may from time to time designate by written
notice to the other as herein required.
FORUM. Grantor hereby irrevocably submits generally and
unconditionally for itself and in respect of its property to the non-exclusive
jurisdiction of any Texas state court, or any United States federal court,
sitting in the county in which the secured indebtedness is payable, and to the
non-exclusive jurisdiction of any state or United States federal court sitting
in the state in which any of the Mortgaged Property is located, over any suit,
action or proceeding arising out of or relating to this Deed of Trust or the
secured indebtedness. Grantor hereby agrees and consents that, in addition to
any methods of service of process provided for under applicable law, all service
of process in any such suit, action or proceeding in any Texas state court, or
any United States federal court, sitting in the county in which the secured
indebtedness is payable may be made by certified or registered mail, return
receipt requested, directed to Grantor at its address stated in this Deed of
Trust, or at a subsequent address of Grantor of which Beneficiary received
actual notice from Grantor in accordance with this Deed of Trust, and service so
made shall be complete five (5) days after the same shall have been so mailed.
APPLICATION OF PAYMENTS TO CERTAIN INDEBTEDNESS. If any part
of the Indebtedness cannot be lawfully secured by this Deed of Trust or if any
part of the Mortgaged Property cannot be lawfully subject to the lien and
security interest hereof to the full extent of such indebtedness, then all
payments made shall be applied on the Indebtedness first in discharge of that
portion thereof which is not secured by this Deed of Trust.
GENDER; TITLES; CONSTRUCTION. Within this Deed of Trust, words
of any gender shall be held and construed to include any other gender, and words
in the singular number shall be held and construed to include the plural, unless
the context otherwise requires. Titles appearing at the beginning of any
subdivisions hereof are for convenience only, do not constitute any part of such
subdivisions, and shall be disregarded in construing the language contained in
such subdivisions. The use of the words "herein," "hereof," "hereunder" and
other similar compounds of the word "here" shall refer to this entire Deed of
Trust and not to any particular Article, Section, paragraph or provision. The
term "person" and words importing persons as used in this Deed of Trust shall
include firms, associations, partnerships (including limited partnerships),
joint ventures, trusts, corporations and other legal entities, including public
or governmental bodies, agencies or instrumentalities, as well as natural
persons.
REPORTING COMPLIANCE. Grantor agrees to comply with any and
all reporting requirements applicable to the transaction evidenced by the Loan
Instruments and secured by this Deed of
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Trust which are set forth in any law, statute, ordinance, rule, regulation,
order or determination of any governmental authority, including but not limited
to The International Investment Survey Act of 1976, The Agricultural Foreign
Investment Disclosure Act of 1978, The Foreign Investment in Real Property Tax
Act of 1980 and the Tax Reform Act of 1984 and further agrees upon request of
Beneficiary to furnish Beneficiary with evidence of such compliance.
GRANTOR. Unless the context clearly indicates otherwise, as
used in this Deed of Trust, "Grantor" means the grantors named in Article 1
hereof or any of them. The obligations of Grantor hereunder shall be joint and
several. If any Grantor, or any signatory who signs on behalf of any Grantor, is
a corporation, partnership or other legal entity, Grantor and any such
signatory, and the person or persons signing for it, represent and warrant to
Beneficiary that this instrument is executed, acknowledged and delivered by
Grantor's duly authorized representatives. If Grantor is an individual, no power
of attorney granted by Grantor herein shall terminate on Grantor's disability.
EXECUTION. This Deed of Trust has been executed in several
counterparts, all of which are identical, and all of which counterparts together
shall constitute one and the same instrument. The date or dates reflected in the
acknowledgments hereto indicate the date or dates of actual execution of this
Deed of Trust, but such execution is as of the date shown on the first page
hereof, and for purposes of identification and reference the date of this Deed
of Trust shall be deemed to be the date reflected on the first page hereof.
Grantor will cause this Deed of Trust and all amendments and supplements thereto
and substitutions therefor and all financing statements and continuation
statements relating thereto to be recorded, filed, re-recorded and refiled in
such manner and in such places as Trustee or Beneficiary shall reasonably
request and will pay all such recording, filing, re-recording and refiling
taxes, fees and other charges.
APPLICABLE LAW. THIS DEED OF TRUST, AND ITS VALIDITY,
ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED BY TEXAS LAW (WITHOUT REGARD
TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL LAW.
ARBITRATION AND WAIVER OF JURY TRIAL. This Section concerns the
resolution of any controversies or claims between Grantor and Beneficiary,
whether arising in contract, tort or by statute, including but not limited to
controversies or claims that arise out of or relate to this Deed of Trust any
document related to this Deed of Trust, including without limitation, the Loan
Documents (collectively a "CLAIM"). At the request of Grantor or Beneficiary,
any Claim shall be resolved by binding arbitration in accordance with the
Federal Arbitration Act (Title 9, U.S. Code) (the "ACT"). The Act will apply
even though this Deed of Trust provides that it is governed by the law of a
specified state.
(a) Rules and Procedures. Arbitration proceedings will be determined in
accordance with the Act, the applicable rules and procedures for the arbitration
of disputes of JAMS or any successor thereof ("JAMS"), and the terms of this
Section. In the event of any inconsistency, the terms of this Section shall
control.
(b) Administration. The arbitration shall be administered by JAMS and
conducted in Dallas, Texas. All Claims shall be determined by one arbitrator;
however, if Claims exceed $5,000,000, upon the request of any party, the Claims
shall be decided by three arbitrators. All arbitration hearings shall commence
within 90 days of the demand for arbitration and close within 90 days of
commencement and the award of the arbitrator(s) shall be issued within 30 days
of the close of the hearing. However, the arbitrator(s), upon a showing of good
cause, may extend the commencement of the hearing for up to an additional 60
days. The arbitrator(s) shall provide a concise written statement of reasons for
the award. The arbitration award may be submitted to any court having
jurisdiction to be confirmed and enforced.
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(c) Power and Authority of Arbitrator(s) Generally. The arbitrator(s)
will have the authority to decide whether any Claim is barred by the statute of
limitations and, if so, to dismiss the arbitration on that basis. For purposes
of the application of the statute of limitations, the service on JAMS under
applicable JAMS rules of a notice of Claim is the equivalent of the filing of a
lawsuit. Any dispute concerning this arbitration provision or whether a Claim is
arbitrable shall be determined by the arbitrator(s). The arbitrator(s) shall
have the power to award legal fees pursuant to the terms of this Deed of Trust.
(d) Self-Help Remedies. This Section does not limit the right of
Grantor or Beneficiary to: (i) exercise self-help remedies, such as but not
limited to, setoff-, (ii) initiate judicial or nonjudicial foreclosure against
any real or personal property collateral; (iii) exercise any judicial or power
of sale rights, or (iv) act in a court of law to obtain an interim remedy, such
as but not limited to, injunctive relief, writ of possession or appointment of a
receiver, or additional or supplementary remedies.
(e) Suit Not Waiver. The filing of a court action is not intended to
constitute a waiver of the right of Grantor or Beneficiary, including the suing
party, thereafter to require submittal of the Claim to arbitration.
(f) WAIVER OF JURY TRIAL. BY AGREEING TO BINDING ARBITRATION, THE
PARTIES IRREVOCABLY AND VOLUNTARILY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY CLAIM. FURTHERMORE, WITHOUT INTENDING IN ANY WAY TO LIMIT
THIS DEED OF TRUST TO ARBITRATE, TO THE EXTENT ANY CLAIM IS NOT ARBITRATED, THE
PARTIES IRREVOCABLY AND VOLUNTARILY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF SUCH CLAIM. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
PARTIES ENTERING INTO THIS DEED OF TRUST.
ENTIRE AGREEMENT. The Loan Instruments constitute the entire
understanding and agreement between Grantor and Beneficiary with respect to the
transactions arising in connection with the indebtedness secured hereby and
supersede all prior written or oral understandings and agreements between
Grantor and Beneficiary with respect to the matters addressed in the Loan
Instruments. Grantor hereby acknowledges that, except as incorporated in writing
in the Loan Instruments, there are not, and were not, and no persons are or were
authorized by Beneficiary to make, any representations, understandings,
stipulations, agreements or promises, oral or written, with respect to the
matters addressed in the Loan Instruments.
10.30 Refinancing. The proceeds of the loan evidenced by the Note will
be used to refinance (a) that certain Promissory Note dated January 31, 2001 in
the original principal amount of $5,500,000, executed by Grantor and payable to
the order of Beneficiary (the "BANK OF AMERICA NOTE"), and (b) that certain
Fourth Amended and Restated Promissory Note dated January 31, 2001, in the
original principal amount of $5,500,000, executed by Grantor and payable to the
order of The Chase Manhattan Bank (the "CHASE NOTE") (the Bank of America Note
and the Chase Note being referred to collectively as the "PRIOR NOTE"). The Note
is given in substitution for and in renewal and extension but not extinguishment
of the Prior Note. The Prior Note is secured by (x) a Deed of Trust (with
Security Agreement, Assignment of Leases and Rents and Financing Statement)
dated November 30, 2001 to PRLAP, Inc., Trustee, recorded in Volume 4811, Page
75, Real Property Records, Collin County, Texas, (y) a Deed of Trust (with
Security Agreement, Assignment of Leases and Rents and Financing Statement)
dated November 30, 2001 to PRLAP, Inc., Trustee, recorded in Volume 238, Page
913, Real Property Records, Dallas County, Texas, and (z) a Deed of Trust (with
Security Agreement, Assignment of Leases and Rents and Financing Statement)
dated November 30, 2001 to PRLAP, Inc., Trustee, recorded in Volume 4732, Page
65, Real Property Records, ▇▇▇▇▇▇ County, Texas (collectively, the "PRIOR DEED
OF TRUST") (the Prior Note and the Prior Deed of Trust being referred to herein
as the "PRIOR LIEN INSTRU-
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MENTS"). Grantor acknowledges and agrees that Grantor is legally obligated and
primarily liable regarding the Prior Lien Instruments and that such Prior Lien
Instruments are valid and subsisting liens and security interests in and to the
Property. To the extent that any such Prior Lien Instrument related to work on
or improvements to the Property, Grantor represents and warrants that such work
has been fully completed and accepted by Grantor and was begun after the
applicable Prior Lien Instruments were executed, and recorded. The liens and
security interests of the Prior Lien Instruments are hereby ratified, renewed,
extended and carried forward by this Deed of Trust in full force and effect as
security for the Secured Indebtedness, regardless of whether same are released
of record, with Beneficiary being fully subrogated and entitled to all of the
liens, security interests, rights, powers and equities of the Prior Lien
Instruments. The liens and security interests created by this Deed of Trust
shall relate back to and be effective as of the effective date of the Prior Lien
Instruments. A foreclosure under this Deed of Trust shall operate as a
foreclosure under the Prior Lien Instruments. Nothing herein shall be construed
to impair or discharge the Prior Lien Instruments. To the extent that the terms
of the Prior Lien Instruments may conflict with or be inconsistent with this
Deed of Trust, the terms of this Deed of Trust shall control.
THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES 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 PARTIES.
EXECUTED on the date(s) of the acknowledgment(s) below, to be effective
as of the date first set forth above.
PEERLESS MFG. CO.
By: /s/
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial Officer
STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged before me on September ___, 2001, by
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial Officer of Peerless Mfg. Co., a Texas
corporation, on behalf of said corporation.
------------------------------------
Notary Public, State of Texas
AFTER RECORDING RETURN TO:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ & Price, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
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