BANK ONE.
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LOAN AGREEMENT
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▇▇▇▇▇▇▇▇▇▇ Corporation
13800 Senlac
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Gentlemen:
This Loan Agreement (the "LOAN AGREEMENT") will serve to set forth the
terms of the financing transactions by and between INTERPHASE CORPORATION
("BORROWER"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION ("BANK"):
1. CREDIT Facilities. Subject to the terms and conditions set
forth in this Loan Agreement and the other agreements, instruments and
documents evidencing, securing, governing, guaranteeing and/or pertaining to
the Loans, as hereinafter defined (collectively, together with the Loan
Agreement, referred to hereinafter as the "LOAN DOCUMENTS"), Bank hereby
agrees to provide to Borrower the credit facility or facilities herein below
(whether one or more, the "CREDIT FACILITIES"):
(a) LINE OF CREDIT. Subject to the terms and conditions set forth
herein, Bank agrees to lend to Borrower, on a revolving basis from time to
time during the period commencing on the date hereof and continuing through
the maturity date of the promissory note evidencing this Credit Facility
from time to time, such amounts as Borrower may request hereunder (the
"LINE OF CREDIT"); PROVIDED, HOWEVER, the total principal amount
outstanding at any time shall not exceed (1) the lesser of (i) an amount
equal to the Borrowing Base (as such term is defined herein below), or (ii)
$5,000,000.00 (the "COMMITTED Sum"), less (2) the amount of the outstanding
Letter of Credit Liabilities (as defined below). If at any time the sum of
the aggregate principal amount outstanding under the Line of Credit, plus
the amount of the outstanding Letter of Credit Liabilities shall exceed an
amount equal to the Borrowing Base, Borrower agrees to promptly repay to
Bank such excess amount, plus all accrued but unpaid interest thereon.
Subject to the terms and conditions hereof, Borrower may borrow, repay and
re-borrow hereunder. The sums advanced under the Line of Credit shall be
used for short-term working capital needs and acquisitions of other
entities.
LOAN AGREEMENT - Page 1
As used in this Loan Agreement, the term "BORROWING BASE" shall mean an
amount equal to 80% of the Borrower's Eligible Accounts (as hereinafter
defined), @us 90% of the Borrower's Eligible Securities (as hereinafter
defined), LESS the aggregate principal amount outstanding under the
Acquisition Facility.
As used herein, the term "ELIGIBLE Accounts" shall mean at any time, an
amount equal to the aggregate net invoice or ledger amount owing on all
trade accounts receivable of Borrower for goods sold or leased or services
rendered in the ordinary course of business, in which the Bank has a
perfected, first priority lien, after deducting (without duplication): (i)
each such account that is unpaid 91 days or more after the original invoice
date thereof, (ii) the amount of all discounts, allowances, rebates,
credits and adjustments to such accounts (iii) the amount of all contra
accounts, setoffs, defenses or counterclaims asserted by or available to
the account debtors, (iv) all accounts with respect to which goods are
placed on consignment or subject to a guaranteed sale or other terms by
reason of which payment by the account debtor may be conditional, (v) all
accounts with respect to which Borrower has furnished a payment and/or
performance bond and that portion of any accounts for or representing
retainage, if any, until all prerequisites to the immediate payment of
retainage have been satisfied, (vi) all accounts owing by account debtors
for which there has been instituted a proceeding in bankruptcy or
reorganization under the United States Bankruptcy Code or other law,
whether state or federal, now or hereafter existing for relief of debtors,
(vii) all accounts owing by any affiliates of Borrower, (viii) all accounts
in which the account debtor is the United States or any department, agency
or instrumentality of the United States, except to the extent an
acknowledgment of assignment to Bank of such account in compliance with the
Federal Assignment of Claims Act and other applicable laws has been
received by Bank, (ix) all accounts due Borrower by any account debtor
whose principal place of business is located outside the United States of
America and its territories unless such account is supported by an
irrevocable letter of credit in form and substance satisfactory to Bank
issued by a domestic commercial bank acceptable to Bank or supported by
export insurance acceptable to Bank, (x) all accounts subject to any
provision prohibiting assignment or requiring notice of or consent to such
assignment (unless such consent or notice is provided to Bank in a form
reasonably satisfactory to Bank), and (xi) that portion of all account
balances owing by any single account debtor which exceeds 25% of the
aggregate of all accounts otherwise deemed eligible hereunder which are
owing to Borrower by all account debtors; provided, however, if more than
10% of the then balance owing by any single account debtor does not qualify
as an Eligible Account under the foregoing provisions, then the aggregate
amount of all accounts owing by such account debtor shall be excluded from
Eligible Accounts.
As used herein, the term "ELIGIBLE SECURITIES" shall mean as of any date,
the Market Value of all securities in the Account (as defined below) which
are U.S. treasury securities, U.S. governmental agency securities,
corporate bonds rated AA or better and any Banc One Securities Corporation
money market funds. The term "MARKET
LOAN AGREEMENT - Page 2
VALUE" shall mean the current fair market value of the securities in the
Account quoted to Bank by its most readily available source
(b) ACQUISITION FACILITY. Subject to the terms and conditions set
forth herein, Bank agrees to lend to Borrower, on a non-revolving basis
from time to time during the period commencing on the date hereof and
continuing through the first year anniversary of this Loan Agreement, an
aggregate amount not to exceed $8,500,000.00 in a single loan or in
multiple loans, as may be requested by Borrower (the "ACQUISITION
FACILITY"); provided, HOWEVER, the total principal outstanding at any time
shall not exceed (1) the lesser of (i) an amount equal to the Acquisition
Borrowing Base (as such term is hereinafter defined below), or (ii)
$8,500,000.00, less (2) the amount of the outstanding Letter of Credit
Liabilities (as defined below). If at any time the sum of the aggregate
principal outstanding under the Acquisition Facility plus the amount of the
Letter of Credit Liabilities shall exceed an amount equal to the
Acquisition Borrowing Base, Borrower agrees to promptly repay to Bank such
excess amount, plus all accrued but unpaid interest thereon. Borrower
shall not be allowed to re-borrow under the Acquisition Facility after a
repayment. All sums advanced under the Acquisition Facility shall be used
to provide funds for permanent working capital needs and corporate
acquisitions. Prior to or contemporaneously with each loan under the
Acquisition Facility, Borrower agrees to execute a promissory note
("ACQUISITION NOTE") payable by Borrower to order of Bank in the stated
principal amount equal to such loan, in form and substance acceptable to
Bank. Interest on each Acquisition Note shall accrue at the lower of the
maximum rate allowed by law or the Contract Rate. The term "CONTRACT
Rate", as used herein, shall mean either (i) a fluctuating rate of interest
(the "FLUCTUATING RATE") established by Bank from time to time as its Base
Rate of interest (which may not be the lowest, best or most favorable rate
of interest which Bank may charge on loans to its customers), or (ii) a
fixed rate of interest (the "FIXED RATE") quoted by Bank to Borrower at the
time of the request for the subject loan. The Borrower has the option to
select either the Floating Rate or Fixed Rate for each loan under the
Acquisition Facility; provided, however, in the event Borrower initially
selects the Floating Rate for an Acquisition Note, on the first year
anniversary of such Acquisition Note the Borrower may notify the Bank of
its desire to have a fixed rate for the remaining term of the Acquisition
Note. Any such fixed rate would be equal to the rate quoted to Borrower by
Bank at such time. During the first one hundred twenty (120) days of each
Acquisition Note, interest shall be due and payable quarterly. Each
Acquisition Note shall have equal quarterly payments of principal, plus
accrued but unpaid interest, such payments to commence on the fifth month
anniversary of each Acquisition Note and continue every three months
thereafter during the term of such note. The amount of each quarterly
principal payment shall be based on fully amortizing each Acquisition Note
with twenty equal quarterly payments; provided, however, each Acquisition
Note shall mature on April 30, 1998. As used in this Loan Agreement, the
term "ACQUISITION BORROWING Base" shall mean
LOAN AGREEMENT - Page 3
an amount equal to 80% of Borrower's Eligible Accounts, and 90% of
Borrower's Eligible Securities LESS the aggregate principal amount
outstanding under the Line of Credit.
(c) EQUIPMENT FACILITY. Subject to the terms and conditions set
forth herein, Bank agrees to lend to Borrower, on a non-revolving basis
from time to time during the period commencing on the date hereof and
continuing through the first year anniversary of this Loan Agreement, an
aggregate amount not to exceed $2,500,000.00 in a single loan or in
multiple loans, as may be requested by Borrower (the "EQUIPMENT FACILITY").
Borrower shall not be allowed to re-borrow under the Equipment Facility
after a repayment. All sums advanced under the Equipment Facility shall be
used to provide funds for equipment purchases. Prior to or
contemporaneously with each loan under the Equipment Facility, Borrower
agrees to execute a promissory note ("EQUIPMENT NOTE") payable by Borrower
to order of Bank in the stated principal amount equal to such loan, in form
and substance acceptable to Bank. Interest on each Equipment Note shall
accrue at the lower of the maximum rate allowed by law or the Contract
Rate. The Borrower has the option to select either the Floating Rate or
Fixed Rate for each loan under the Equipment Facility; provided, however,
in the event Borrower initially selects the Floating Rate for an Equipment
Note, on the first year anniversary of such Equipment Note the Borrower may
notify the Bank of its desire to have a fixed rate for the remaining term
of the Equipment Note. Any such fixed rate would be the rate quoted to
Borrower by Bank at such time. During the first one hundred twenty (120).
days of each Equipment Note, interest shall be due and payable quarterly.
Each Equipment Note shall have equal quarterly payments of principal, plus
accrued but unpaid interest, such payments to commence on the fifth month
anniversary of each Equipment Note and continue every three months
thereafter during the term of such note. The amount of each quarterly
principal payment shall be based on fully amortizing each Equipment Note
with twenty equal quarterly payments; provided, however, each Equipment
Note shall mature on April 30, 1999.
All advances and loans under the Credit Facilities shall be collectively called
the "Loans". Bank reserves the right to require Borrower to give Bank not less
than-one (1) business day prior notice of each requested advance under the
Credit Facilities, specifying (i) the aggregate amount of such requested
advance, (ii) the requested date of such advance, and (iii) the purpose for such
advance, with such advances to be requested in a form satisfactory to Bank.
2. PROMISSORY NOTES. The Loans shall be evidenced by one or more
promissory notes (whether one or more, together with any renewals, extensions
and increases thereof, the "Notes") duly executed by Borrower and payable to the
order of Bank, in form and substance acceptable to Bank. Interest on the Notes
shall accrue at the rate set forth therein. The principal of and interest on
the Notes shall be due and payable in accordance with the terms and conditions
set forth in the Notes and in this Loan Agreement.
LOAN AGREEMENT - Page 4
3. LETTERS OF CREDIT.
(a) ISSUANCE OF LETTERS OF Credit. Subject to the terms and
conditions of this Loan Agreement, Bank agrees to issue one or more letters
of credit (collectively, the "LETTERS OF Credit") for the account of
Borrower from time to time from the date hereof to and including the
maturity date of the Note evidencing the Line of Credit; provided however,
that the Bank's outstanding commitments under all outstanding Letters of
Credit (the "LETTER OF CREDIT LIABILITIES ") shall not at any time exceed
the lesser of $500,000.00 or an amount equal to the Available Funds. As
used herein, the "AVAILABLE Funds" shall be equal to an amount which is the
lesser of (i)- an amount equal to the Committed Sum, or (ii) an amount
equal to the Borrowing Base, LESS the aggregate principal amount
outstanding under the Line of Credit. All Letters of Credit shall have an
expiration date of on or prior to the 120th day after the maturity date of
the Note evidencing the Line of Credit, must support a transaction that is
entered into in the ordinary course of business, must otherwise be
satisfactory in form and substance to Bank, and shall be issued pursuant to
such documents and instruments, including, without limitation, Bank's
standard application and agreement for issuance of letters of credit, as
then in effect ("LETTER OF CREDIT A1212lication") as Bank may require. No
Letter of Credit shall require any payment by Bank to the beneficiary
thereunder pursuant to a drawing prior to the third business day following
presentment of a draft and any related documents to Bank. Each Letter of
Credit shall be issued on at least three (3) business days prior notice
from Borrower to Bank.
(b) REPAYMENT. Each payment by Bank pursuant to a drawing under a
Letter of Credit must be repaid to Bank promptly by Borrower in accordance
with the terms of the subject Letter of C.-edit Application.
(c) Fee. Borrower shall pay to Bank a letter of credit fee payable
on the date each Letter of Credit is issued in an amount equal to one and
six tenths percent (1.6%) per annum of the stated amount of such Letter of
Credit, for the stated term of such Letter of Credit, based on a 360 day
year and the actual number of days elapsed.
4. COLLATERAL. As collateral and security for the indebtedness evidenced
by the Notes and any and all other indebtedness or obligations from time to time
owing by Borrower to Bank, Borrower shall grant, and hereby grants, to Bank, its
successors and assigns, a first and prior lien and security interest in and to
the property described herein below, together with any and all PRODUCTS AND
PROCEEDS thereof (the "COLLATERAL"):
(a) All present and future accounts, chattel paper and general
intangibles (including any right to payment for goods sold or services
rendered arising out of the sale or delivery of personal property or work
done or labor performed by Borrower), now or hereafter owned, held, or
acquired by Borrower, together with any and all
LOAN AGREEMENT - Page 5
books of account, customer lists and other records relating in any way to
the foregoing.
(b) All present and hereafter acquired inventory (including without
limitation, all raw materials, work in process and finished goods) held,
possessed, owned, held on consignment, or held for sale, lease, return or
to be furnished under contracts of service, in whole or in part, by
Borrower wherever located.
(c) All equipment of whatsoever kind and character now or hereafter
possessed, held, acquired, leased or owned by Borrower and used or usable
in Borrower's business, together with all replacements, accessories,-
additions, substitutions and accessions to all of the foregoing.
(d) Account No. 8334002410 in the name of Borrower and maintained
with Banc One Investment Advisors Corporation, and all securities, cash and
other property now or hereafter contained in such account (the "Account").
The term "Collateral" shall also include all records and data relating to any of
the foregoing (including, without limitation, any computer software on which
such records and data may be located). Borrower agrees to execute such security
agreements, assignments, deeds of trust and other agreements and documents as
Bank shall deem appropriate and otherwise require from time to time to more
fully create and perfect Bank's lien and security interests in the Collateral.
5. REPRESENTATIONS AND Warranties. Borrower hereby represents and
warrants, and upon each request for an advance under the Credit Facilities
further represents and warrants, to Bank as follows:
(a) EXISTENCE. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and
all other states where it is doing business, and has all requisite power
and authority to execute and deliver the Loan Documents.
(b) BINDING OBLIGATIONS. The execution, delivery, and performance of
this Loan Agreement and all of the other Loan Documents by Borrower have
been duly authorized by all necessary action by Borrower, and constitute
legal, valid and binding obligations of Borrower, enforceable in accordance
with their respective terms, except as limited by bankruptcy, insolvency or
similar laws of general application relating to the enforcement of
creditors' rights and except to the extent specific remedies may generally
be limited by equitable principles.
(c) NO CONSENT. The execution, delivery and performance of this Loan
Agreement and the other Loan Documents, and the consummation of the
transactions contemplated hereby and thereby, do not (i) conflict with,
result in a violation of, or constitute a default under (A) any provision
of its Articles of
LOAN AGREEMENT - Page 6
Incorporation or Bylaws, or any agreement or other instrument binding upon
Borrower, or (B) any law, governmental regulation, court decree or order
applicable to Borrower, or (ii) require the consent, approval or
authorization of any third party.
(d) FINANCIAL Condition. Each financial statement of Borrower
supplied to Bank truly discloses and fairly presents Borrower's financial
condition as of the date of each such statement. There has been no
material adverse change in such financial condition or results of
operations of Borrower subsequent to the date of the most recent financial
statement supplied to Bank.
(e) LITIGATION. Except as previously disclosed to Bank, there are no
actions, suits or proceedings, pending or, to the knowledge of Borrower,
threatened against or affecting Borrower or the properties of Borrower,
before any court or governmental department, commission or board, which, if
determined adversely to Borrower, would have a material adverse effect on
the financial condition, properties, or operations of Borrower.
(f) TAXES-, GOVERNMENTAL CHARGES. Borrower has filed all federal,
state and local tax reports and returns required by any law or regulation
to be filed by it and has either duly paid all taxes, duties and charges
indicated due on the basis of such returns and reports, or made adequate
provision for the payment thereof, and the assessment of any material
amount of additional taxes in excess of those paid and reported is not
reasonably expected.
6. CONDITIONS PRECEDENT TO ADVANCES. Bank's obligation to make any
advance or issue any Letter of Credit under this Loan Agreement and the other
Loan Documents shall be subject to the conditions precedent that, as of the date
of such advance and after giving effect thereto (i) all representations and
warranties made to Bank in this Loan Agreement and the other Loan Documents
shall be true and correct in all material respects, as of and as if made on such
date, (ii) no material adverse change in the financial condition of Borrower
since the effective date of the most recent financial statements furnished to
Bank by Borrower shall have occur-red and be continuing, (iii) no event has
occurred and is continuing, or would result from the requested advance, which
with notice or lapse of time, or both, would constitute an Event of Default (as
hereinafter defined), and (iv) Bank's receipt of all Loan Documents
appropriately executed by Borrower and all other proper parties.
7. AFFIRMATIVE COVENANTS. Until (i) the Notes and all other obligations
and liabilities of Borrower under this Loan Agreement and the other Loan
Documents are fully paid and satisfied, and (ii) Bank has no further commitment
to lend or issue Letters of Credit hereunder, Borrower agrees and covenants that
it will, unless Bank shall otherwise consent in writing:
(a) ACCOUNTS AND RECORDS. Maintain its books and records in
accordance with generally accepted accounting principles.
LOAN AGREEMENT - Page 7
(b) RIGHT OF INSPECTION. Permit Bank to visit its properties and
installations and to examine, audit and make and take away copies or
reproductions of Borrower's books and records, at all reasonable times upon
one (1) business days prior notice.
(c) RIGHT TO ADDITIONAL INFORMATION. Furnish Bank with such
additional information and statements, lists of assets and liabilities, tax
returns, and other reports with respect to Borrower's financial condition
and business operations as Bank may reasonably request from time to time.
(d) COMPLIANCE WITH LAWS. Conduct its business in an orderly and
efficient manner consistent with good business practices, and perform and
comply with all statutes, rules, regulations and/or ordinances imposed by
any governmental unit upon Borrower, its businesses, operations and
properties (including without limitation, all applicable environmental
statutes, rules, regulations and ordinances).
(e) TAXES. Pay and discharge when due all of its indebtedness and
obligations, including without limitation, all assessments, taxes,
governmental charges, levies and liens, of every kind and nature, imposed
upon Borrower or its properties, income, or profits, prior to the date on
which penalties would attach, and all lawful claims that, if unpaid, might
become a lien or charge upon any of Borrower's properties, income, or
profits; provided, however, Borrower will not be required to pay and
discharge any such assessment, tax, charge, levy, hen or claim so long as
(i) the legality of the same shall be contested in good faith by
appropriate judicial, administrative or other legal proceedings, and (ii)
Borrower shall have established on its books adequate reserves with respect
to such contested assessment, tax, charge, ▇▇▇▇, ▇▇▇▇ or claim in
accordance with generally accepted accounting principles, consistently
applied.
(f) INSURANCE. Maintain insurance, including but not limited to,
fire insurance, comprehensive property damage, public liability, worker's
compensation, business interruption and other insurance deemed necessary or
otherwise required by Bank.
(g) NOTICE OF INDEBTEDNESS. Promptly inform Bank of the creation,
incurrence or assumption by Borrower of any actual or contingent
liabilities not permitted under this Loan Agreement.
(h) NOTICE OF LITIGATION. Promptly after the commencement thereof,
notify Bank of all actions, suits and proceedings before any court or any
governmental department, commission or board affecting Borrower or any of
its properties.
(i) NOTICE OF MATERIAL ADVERSE CHANGE. Promptly inform Bank of (i)
any and all material adverse changes in Borrower's financial condition, and
(ii) all claims made against Borrower which could materially affect the
financial condition of Borrower.
LOAN AGREEMENT - Page 8
ADDITIONAL DOCUMENTATION. Execute and deliver, or cause to be executed and
delivered, any and all other agreements, instruments or documents which Bank may
reasonably request in order to give effect to the transactions contemplated
under this Loan Agreement and the other Loan Documents.
8. NEGATIVE Covenants. Until (i) the Notes and all other obligations and
liabilities of Borrower under this Loan Agreement and the other Loan Documents
are fully paid and satisfied, and (ii) Bank has no further commitment to lend or
issue Letters of Credit hereunder, Borrower will not, without the prior written
consent of Bank:
(a) NATURE OF Business. Make any material change in the nature of
its business as carried on as of the date hereof.
(b) LIQUIDATIONS, MERGERS, CONSOLIDATIONS. Liquidate, merge or
consolidate with or into any other entity, unless Borrower is the surviving
entity subject to the terms of Subparagraph 8(h) below.
(c) SALE OF ASSETS. Sell, transfer or otherwise dispose of any of
its assets or properties, other than in the ordinary course of business.
(d) Liens. Create or incur any lien or encumbrance on any of its
assets, other than (i) liens and security interests securing indebtedness
owing to Bank, (ii) liens for taxes, assessments or similar charges either
(1) not yet due or (2) being contested in good faith by appropriate
proceedings and for which Borrower has established adequate reserves, (iii)
liens and security interest existing as of the date hereof which have been
disclosed to and approved by the Bank in writing and (iv) liens which
secure purchase money indebtedness in an amount not to exceed the aggregate
amount of $250,000.00.
(e) INDEBTEDNESS. Create, incur or assume any indebtedness for
borrowed money or issue or assume any other note, debenture, bond or other
evidences of indebtedness, or guarantee any such indebtedness or such
evidences of indebtedness of others, other than (i) borrowings from Bank,
(ii) borrowings outstanding on the date hereof and disclosed in writing to
Bank, (iii) borrowings created after the date hereof which are subordinate
to the borrowings from Bank and (iv) purchase money indebtedness in an
amount not to exceed the aggregate amount of $250,000.00.
(f) Loans. Make any loans to any person or entity in excess of
$250,000 in the aggregate; and provided, Borrower shall be permitted to
make extensions of trade credit in the ordinary course of business.
(g) TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property
or the rendering of any service, with any Affiliate (as hereinafter
defined) of Borrower, except in the ordinary course of and pursuant to the
reasonable requirements of Borrower's business and
LOAN AGREEMENT - Page 9
upon fair and reasonable terms no less favorable to Borrower than would be
obtained in a comparable arm's-length transaction with a person or entity
not an Affiliate of Borrower. As used herein, the term "Affiliate" means
any individual or entity directly or indirectly controlling, controlled by,
or under common control with, another individual or entity.
(h) ACQUISITIONS. Invest in, or purchase, create, form or acquire
any interest in, any other entity; provided, however, (1) Borrower may
acquire an entity with an acquisition price of less than $5,000,000.00
without Bank's prior written approval as long as the earnings before
interest, taxes, depreciation and amortization (as determined in accordance
with generally accepted accounting principles) of the acquired entity
during its then most recent annual reporting period and during its then
most recent interim reporting period is for each period more than $0, and
(2) Borrower may acquire an entity with an acquisition price of greater
than $5,000,000.00 but less than $10,000,000.00 without the Bank's prior
written consent if (i) the Market Value of Borrower's Eligible Securities
at such time is equal to or greater than all of the outstanding
indebtedness owing to Bank (including the outstanding Letter of Credit
Liabilities) at such time, and (ii) the earnings before interest, taxes,
depreciation and amortization (determined in accordance with generally
accepted accounting principles) of the acquired entity during its then most
recent annual reporting period and du-ring its then most recent interim
reporting period is for each period more than $0.
9. FINANCIAL COVENANTS. Until (i) the Notes and all other obligations
and liabilities of Borrower under this Loan Agreement and the other Loan
Documents are fully paid and satisfied, and (ii) Bank has no further commitment
to lend or issue Letters Of Credit hereunder, Borrower will, unless Bank shall
otherwise consent in writing, maintain the following financial covenants:
(a) TANGIBLE NET Worth. Borrower will maintain its Tangible Net
Worth at not less than $ 23,500,000 at the end of each fiscal quarter
during fiscal year 1996. At the end of 'each fiscal quarter during each
fiscal year thereafter, Borrower's Tangible Net Worth shall equal or exceed
the minimum Tangible Net Worth required to be maintained by Borrower during
the immediately prior fiscal year, @us 70% of the after tax net income of
Borrower in the immediately prior fiscal year as stated on Borrower's
annual, audited financial statements.
(b) LIABILITIES TANGIBLE NET WORTH. Borrower will maintain, at all
times, a ratio of (a) total liabilities (excluding any Subordinated Debt,
as hereinafter defined), to (b) Tangible Net Worth of not greater than 1.0
to 1.0.
(c) DEBT SERVICE. Borrower will maintain, as of the last day of each
fiscal quarter, a ratio of (a) net income after taxes less capital
expenditures un-funded with financing from Bank PLUS depreciation,
amortization and other non-cash expenses for the 12 month period ending
with such fiscal quarter to (b) current maturities of
LOAN AGREEMENT - Page 10
long-term debt and long-term leases for such 12 month period, of not less
than 1.0 to 1.0.
(d) INTEREST COVERAGE. Borrower will maintain, as of the end of each
fiscal quarter, a ratio of (a) earnings before interest and taxes
(excluding interest income) for the 12 month period ending with such fiscal
quarter, to (b) interest expense for such 12 month period, of not less than
1.0 to I.O.
(e) QUICK RATIO. Borrower will maintain, at all times, a ratio of
(a) Borrower's current assets, less inventory, to (b) current liabilities,
in excess of 1.0 to 1.0.
As used herein, the term "TANGIBLE NET Worth" means, as of any date, Borrower's
total assets excluding all intangible assets, less total liabilities excluding
any Subordinated Debt. As used herein, the term "SUBORDINATED DEBT" means any
indebtedness owing by Borrower which has been subordinated by written agreement
to all indebtedness now or hereafter owing by Borrower to Lender, such agreement
to be in form and substance acceptable to Lender. Unless otherwise specified,
all accounting and financial terms and covenants set forth above are to be
determined according to generally accepted accounting principles, consistently
applied.
10. REPORTING Requirements. Until (i) the Notes and all other obligations
and liabilities of Borrower under this Loan Agreement and the other Loan
Documents are fully paid and satisfied, and (ii) Bank has no further commitment
to lend or issue Letters of Credit hereunder, Borrower will, unless Bank shall
otherwise consent in writing, furnish to Bank:
(a) INTERIM FINANCIAL STATEMENTS. As soon as available, and in any
event within forty-five (45) days after the end of each quarter of each
fiscal year of Borrower, a balance sheet and income statement of Borrower
as of the end of such fiscal quarter, all in form and substance and in
reasonable detail satisfactory to Bank and duly certified (subject to year-
end review adjustments) by the President and/or Chief Financial Officer of
Borrower (i) as being true and correct in all material aspects to the best
of his or her knowledge and (ii) as having been prepared in accordance with
generally accepted accounting principles, consistently applied.
(b) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any
event within one hundred twenty (120) days after the end of each fiscal
year of Borrower, a balance sheet and income statement of Borrower as of
the end of such fiscal year, in each case audited by independent public
accountants of recognized standing acceptable to Bank.
(c) COMPLIANCE CERTIFICATE. A certificate signed by President or
Chief Financial Officer of Borrower, within forty-five (45) days after the
end of the first three quarters of each fiscal year and within one hundred
twenty (120) days of the
LOAN AGREEMENT - Page 11
end of the fourth quarter of each fiscal year, stating that Borrower is in
full compliance with all of its obligations under this Loan Agreement and
all other Loan Documents and is not in default of any term or provisions
hereof or thereof, and demonstrating compliance with all financial ratios
and covenants set forth in this Loan Agreement.
(d) BORROWING BASE REPORT. A borrowing base report signed by the
President or Chief Financial Officer of Borrower, within forty-five (45)
days after the end of each quarter of each fiscal year, in form and detail
satisfactory to Bank.
11. EVENTS OF DEFAULT. Each of the following shall constitute an "Event
of Default" under this Loan Agreement:
(a) The failure, refusal or neglect of Borrower to pay within five
(5) days of when due any part of the principal of, or interest on, the
Notes or any other indebtedness or obligations owing to Bank by Borrower
from time to time.
(b) The failure of Borrower or any Obligated Party (as defined below)
to timely and properly observe, keep or perform any covenant, agreement,
warranty or condition required herein or in any of the other Loan Documents
and such failure continues for a period of thirty (30) days after receipt
of written notice thereof from Bank to Borrower.
(c) Subject to any applicable notice and cure period, the occurrence
of an event of default under any of the other Loan Documents or under any
other agreement now existing or hereafter arising between Bank and
Borrower.
(d) Any representation contained herein or in any of the other Loan
Documents made by Borrower or any Obligated Party is false or misleading in
any material respect.
(e) The occurrence of any event which permits the acceleration of the
maturity of any indebtedness in excess of $100,000 owing by Borrower to any
third party under any agreement or understanding.
(f) If Borrower or any Obligated Party: (i) becomes insolvent, or makes a
transfer in fraud of creditors, or makes an assignment for the benefit of
creditors, or admits in writing its inability to pay its debts as they
become due; (ii) generally is not paying its debts as such debts become
due; (iii) has a receiver, trustee or custodian appointed for, or take
possession of, all or substantially all of the assets of such party, either
in a proceeding brought by such party or in a proceeding brought against
such party and such appointment is not discharged or such possession is not
terminated within (60) days after the effective date thereof or such party
consents to or acquiesces in such appointment or possession; (iv) files a
petition for relief under the United States Bankruptcy Code or any other
present or future federal or state
LOAN AGREEMENT - Page 12
insolvency, bankruptcy or similar laws (all of the foregoing hereinafter
collectively called "APPLICABLE BANKRUPTCY LAW") or an involuntary petition
for relief is filed against such party under any Applicable Bankruptcy Law
and such involuntary petition is not dismissed within (60) days after the
filing thereof, or an order for relief naming such party is entered under
any Applicable Bankruptcy Law, or any composition, rearrangement,
extension, reorganization or other relief of debtors now or hereafter
existing is requested or consented to by such party; (v) fails to have
discharged within a period of forty-five (45) days any attachment,
sequestration or similar writ levied upon any property of such party; or
(vi) fails to pay within thirty (30) days any final money judgment against
such party.
(g) If Borrower or any Obligated Party is an entity, the liquidation,
dissolution, merger or consolidation of any such entity, unless Borrower is
the surviving entity or, if Borrower or any Obligated Party is an
individual, the death or legal incapacity of any such individual.
(h) The entry of any judgment against Borrower or the issuance or
entry of any attachment or other lien against any of the property of
Borrower for an amount in excess of $1,000,000.00, if undischarged,
unbonded or undismissed within forty-five (45) days after such entry.
Nothing contained in this Loan Agreement shall be construed to limit the events
of default enumerated in any of the other Loan Documents and all such events of
default shall be cumulative. The term "OBLIGATED PARTY ", as used herein, shall
mean any party other than Borrower who secures, guarantees and/or is otherwise
obligated to pay all or any portion of the indebtedness evidenced by the Notes.
12. REMEDIES. Upon the occurrence and continuance of any one or more of
the foregoing Events of Default, (a) the entire unpaid balance of principal of
the Notes, together with all accrued but unpaid interest thereon, and all other
indebtedness owing to Bank by Borrower at such time shall, at the option of
Bank, become immediately due and payable without further notice, demand,
presentation, notice of dishonor, notice of intent to accelerate, notice of
acceleration, protest or notice of protest of any kind, all of which are
expressly waived by Borrower, and (b) Bank may, at its option, cease further
advances under any of the Notes and cease issuing any additional Letters of
Credit; PROVIDED, HOWEVER, concurrently and automatically with the occurrence of
an Event of Default under SUBPARAGRAPH (f) in the immediately preceding
paragraph (i) further advances under the Notes and the issuance of additional
Letters of Credit shall cease, and (ii) the Notes and all other indebtedness
owing to Bank by Borrower at such time shall, without any action by Bank, become
due and payable, without further notice, demand, presentation, notice of
dishonor, notice of acceleration, notice of intent to accelerate, protest or
notice of protest of any kind, all of which are expressly waived by Borrower.
All rights and remedies of Bank set forth in this Loan Agreement and in any of
the other Loan Documents may also be exercised by Bank, at its option to be
exercised in its sole discretion, upon the occurrence of an Event of Default.
LOAN AGREEMENT - Page 13
13. RIGHTS Cumulative. All rights of Bank under the terms of this Loan
Agreement shall be cumulative of, and in addition to, the rights of Bank under
any and all other agreements between Borrower and Bank (including, but not
limited to, the other Loan Documents), and not in substitution or diminution of
any rights now or hereafter held by Bank under the terms of any other agreement.
14. WAIVER AND Agreement. Neither the failure nor any delay on the part
of Bank to exercise any right, power or privilege herein or under any of the
other Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. No
waiver of any provision in this Loan Agreement or in any of the other Loan
Documents and no departure by Borrower therefrom shall be effective unless the
same shall be in writing and signed by Bank, and then shall be effective only in
the specific instance and for the purpose for which given and to the extent
specified in such writing. No modification or amendment to this Loan Agreement
or to any of the other Loan Documents shall be valid or effective unless the
same is signed by the party against whom it is sought to be enforced.
15. BENEFITS. This Loan Agreement shall be binding upon and inure to the
benefit of Bank and Borrower, and their respective successors and assigns,
provided, however, that Borrower may not, without the prior written consent of
Bank, assign any rights, powers, duties or obligations under this Loan Agreement
or any of the other Loan Documents.
16. NOTICES. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Loan Agreement shall be in
writing and given by (i) personal delivery, (ii) expedited delivery service with
proof of delivery, or (iii) United States mail, postage prepaid, registered or
certified mail, return receipt requested, sent to the intended addressee at the
address set forth on the signature page hereof and shall be deemed to have been
received either, in the case of personal delivery, as of the time of personal
delivery, in the case of expedited delivery service, as of the date of first
attempted delivery at the address and in the manner provided herein, or in the
case of mail, two Business Days after deposited in a depository receptacle under
the care and custody of the United States Postal Service. Either party shall
have the right to change its address for notice hereunder to any other location
within the continental United States by notice to the other party of such new
address at least thirty (30) days prior to the effective date of such new
address.
17. CONSTRUCTION. This Loan Agreement and the other Loan Documents have
been executed and delivered in the State of Texas, shall be governed by and
construed in accordance with the laws of the State of Texas, and shall be
performable by the parties hereto in the county in Texas where the Bank's
address set forth on the signature page hereof is located.
LOAN AGREEMENT - Page 14
18. INVALID Provisions. If any provision of this Loan Agreement or any of
the other Loan Documents is held to be illegal, invalid or unenforceable under
present or future laws, such provision shall be fully severable and the
remaining provisions of this Loan Agreement or any of the other Loan Documents
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance.
19. EXPENSES. Borrower shall pay all costs and expenses (including,
without limitation, reasonable attorneys' fees) in connection with (i) any
action required in the course of administration of the indebtedness and
obligations evidenced by the Loan Documents, and (ii) any action in the
enforcement of Bank's rights upon the occurrence and continuance of an Event of
Default.
20. PARTICIPATION OF THE Loans. Borrower agrees that Bank may, at its
option, sell interests in the Loans and its rights under this Loan Agreement to
a financial institution or institutions and, in connection with each such sale,
Bank may disclose any financial and other information available to Bank
concerning Borrower to each perspective purchaser.
21. ENTIRE AGREEMENT. This Loan Agreement (together with the other Loan
Documents) contains the entire agreement among the parties regarding the subject
matter hereof and supersedes all prior written and oral agreements and
understandings among the parties hereto regarding same.
22. CONFLICTS. In the event any term or provision hereof is inconsistent
with or conflicts with any provision of the other Loan Documents, the terms and
provisions contained in this Loan Agreement shall be controlling.
23. COUNTERPARTS.' This Loan Agreement may be separately executed in any
number of counterparts, each of which shall be an original, but all of which,
taken together, shall be deemed to constitute one and the same instrument.
24. FEES. In consideration of the financial accommodations granted by
Bank to Borrower under the Acquisition Facility, Borrower agrees to pay to Bank
a fee equal to $21,250.00, which shall be paid to Bank contemporaneously with
the execution hereof In consideration of the financial accommodations granted by
Bank to Borrower under the Line of Credit, Borrower agrees to pay Bank (i) a fee
equal to $12,500.00, such fee to be paid to Bank contemporaneously with the
execution hereof, and (ii) a fee (the "Unused Fee") per annum (based on a year
of 360 days) equal to three-eighths percent (3/8%) of the average daily
un-borrowed amount under the Line of Credit below an amount equal to the
Committed Sum, less the outstanding Letter of Credit Liabilities. The Unused
Fee shall be payable quarterly in arrears on the last day of each March, June,
September and December during the term of the Line of Credit; provided, however,
the Unused Fee shall not begin to accrue or be due until after the earlier of
(i) December 31, 1996, or (ii) the first advance or loan requested by Borrower
under the Line of Credit or the Acquisition Facility. Borrower acknowledges
that the Unused Fee is required to be paid and is in consideration
LOAN AGREEMENT - Page 15
of Bank taking appropriate action to ensure that all funds that Bank may advance
under the Line of Credit are available to Borrower when Borrower request same.
If the foregoing correctly sets forth our mutual agreement, please so
acknowledge by signing and returning this Loan Agreement to the undersigned.
Very truly yours,
BANK ONE, TEXAS, NA.
Bank's Address:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Middle Market Lending
Group
ACCEPTED as of the date first
written above.
BORROWER: Borrower's Address:
13800 Senlac
INTERPHASE CO ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
/s/ R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------
R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Chairman, Chief Executive Officer and President
LOAN AGREEMENT - Page 16