BANK OF TEXAS, N.A., a national banking association -and- LIGHTING SCIENCE GROUP CORPORATION, a Delaware corporation LOAN AGREEMENT Dated: As of June 29, 2006
____________________________________________________________________________
BANK
OF TEXAS, N.A.,
a
national banking association
-and-
LIGHTING
SCIENCE GROUP CORPORATION,
a
Delaware corporation
Dated:
As
of June 29, 2006
D-1450133.v2
____________________________________________________________________________Article
One Certain Definitions
1.1 Definitions
1.2 Accounting
Matters
1.3 Headings
1.4 Number
and Gender of Words
1.5 Articles,
Sections and Exhibits
Article
Two Commitment to Lend, Terms of Payment
2.1 Revolving
Loan
2.2 Revolving
Note
2.3 Revolving
Loan Borrowing Procedure
2.4 Payments
2.5 Prepayments.
2.6 Purpose
of Loans
2.7 Sale
of
Participations
2.8 Order
of
Application
2.9 Commitment
Fee
2.10 Lockbox
and Account Collections
2.11 Letters
of Credit
Article
Three Collateral
3.1 Security
Interests
Article
Four Conditions Precedent to Lending
4.1 Initial
Extension of Credit
4.2 Conditions
for Each Subsequent Advance
Article
Five Representations and Warranties
5.1 Existence
5.2 Authorization
5.3 Properties;
Permitted Liens
5.4 Compliance
with Laws and Documents
5.5 Litigation
5.6 Taxes
5.7 Enforceability
of Loan Documents
5.8 Financial
Statements
5.9 Regulation
U
5.10 Subsidiaries
5.11 Other
Debt
5.12 Regulatory
Acts
5.13 Environmental
Matters
5.14 General
Article
Six Certain Affirmative Covenants
6.1 Reporting
Requirements
6.2 Insurance
6.3 Payment
of Debts
6.4 Taxes
6.5 Expenses
of Bank
6.6 Maintenance
of Entity Existence, Assets and Business; Continuance of Present
Business
6.7 Books
and
Records
6.8 Compliance
with Applicable Laws and with Contracts
6.9 Comply
with Agreement
6.10 Notice
of
Event of Default, Suits, and Material Adverse Effect
6.11 Information
and Inspection
6.12 Depository
Relationship
6.13 Additional
Information
Article
Seven Certain Negative Covenants
7.1 Debt
7.2 Contingent
Liabilities
7.3 Limitation
on Liens
7.4 Mergers,
Etc
7.5 Restricted
Payments
7.6 Loans
and
Investments
7.7 Transactions
With Affiliates
7.8 Sale
and
Leaseback and Disposition of Assets
7.9 Nature
of
Business
7.10 Environmental
Protection
7.11 No
Negative Pledge
7.12 Judgments
Article
Eight Financial Covenants
8.1 Bookings
Article
Nine Events of Default
9.1 Payment
of Indebtedness
9.2 Misrepresentation
9.3 Covenants
9.4 Voluntary
Debtor Relief
9.5 Involuntary
Proceedings
9.6 Attachment
9.7 Other
Obligations
9.8 Dissolution
9.9 Other
Agreements with Bank
9.10 Cash
Collateral
9.11 Defaults
on Other Debt or Agreements
9.12 Voluntary
Debtor Relief
9.13 Involuntary
Proceedings
9.14 Right
to
Cure Events of Default under Sections 9.10, 9.12 and 9.13
9.15 Financial
Covenant
Article
Ten Certain Rights and Remedies of Bank
10.1 Rights
Upon Event of Default
10.2 Setoff
10.3 Performance
by Bank
10.4 Diminution
in Collateral Value
10.5 Bank
Not
In Control
10.6 Waivers
10.7 Cumulative
Rights
10.8 INDEMNIFICATION
OF BANK
10.9 Limitation
of Liability
Article
Eleven Miscellaneous
11.1 Headings
11.2 Notices
11.3 Form
and
Number of Documents
11.4 Survival
11.5 GOVERNING
LAW; PLACE OF PERFORMANCE
11.6 Maximum
Interest
11.7 Ceiling
Election
11.8 Invalid
Provisions
11.9 Amendments
11.10 Multiple
Counterparts; Facsimiles
11.11 Parties
Bound
11.12 Bank’s
Consent or Approval
11.13 Loan
Agreement Governs
11.14 WAIVER
OF
JURY TRIAL
11.15 ENTIRE
AGREEMENT
LIST
OF SCHEDULES AND EXHIBITS
EXHIBIT
A - Compliance
Certificate
SCHEDULE
ONE -
Conditions
Precedent
SCHEDULE
TWO - Disclosure
Schedule
This
Loan
Agreement (“Agreement”)
is
made and entered into as of June 29, 2006, by and between BANK OF TEXAS, N.A.,
a
national banking association (“Bank”)
and
LIGHTING SCIENCE GROUP CORPORATION, a Delaware corporation (“Borrower”).
RECITALS:
A. Borrower
has requested that Bank extend credit to Borrower as described in this
Agreement. Bank is willing to make such credit available to Borrower upon and
subject to the provisions, terms and conditions hereinafter set
forth.
B. Subject
to and upon the terms and conditions of this Agreement, Bank has agreed to
lend
to Borrower the amounts herein described for the purposes set forth
below.
AGREEMENT:
NOW,
THEREFORE, in consideration of the premises, the covenants, representations,
warranties and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties hereto hereby covenant and agree as follows:
Article
One
Certain
Definitions
1.1 Definitions.
As used
in this Agreement, all exhibits and schedules hereto and in any note,
certificate, report or other Loan Documents made or delivered pursuant to this
Agreement, the following terms will have the meanings given such terms in
Article
One.
“Accounts”
has
the
meaning set forth for such term in the Security Agreement.
“Advance”
means
any disbursement of an amount or amounts to be loaned by Bank to Borrower
hereunder (including any advance made by Bank to cover any drawings under any
Letter of Credit) or the reborrowing of amounts previously loaned
hereunder.
“Affiliate”
means,
as to any Person, any other Person (a) that directly or indirectly, through
one
or more intermediaries, controls or is controlled by, or is under common control
with, such Person, (b) that directly or indirectly beneficially owns or holds
ten percent (10%) or more of any class of voting stock of such Person, or (c)
ten percent (10%) or more of the voting stock of which is directly or indirectly
beneficially owned or held by the Person in question. The term “control”
means
the possession, directly or indirectly, of the power to direct or cause
direction of the management and policies of a Person, whether through the
ownership of voting securities, by control, or otherwise; provided, however,
in
no event shall Bank be deemed an Affiliate of Borrower.
“Agreement”
means
this Loan Agreement, as the same may, from time to time, be amended,
supplemented, or replaced.
“Approved
Purposes”
mean
general working capital needs, corporate expenses and repayment of certain
existing Debt of the Borrower.
“Article”
and
“Articles”
have
the meanings set forth in Section
1.5.
“Bank”
means
Bank of Texas, N.A. and its successors and assigns.
“Bookings”
means
the sum of: (i) gross amounts ordered by customers of Borrower (including
Affiliates) as evidenced by bona fide written purchase orders from third parties
in any calendar quarter and (ii) with respect to Shared Savings Programs
(including those with Affiliates, made on an arm’s length basis), the forecast
capital asset value expected to be recorded by the Borrower during such calendar
quarter as evidenced by bona fide written purchase orders from third
parties.
“Borrower”
means
the Person identified as such in the introductory paragraph hereof, and its
successors and assigns.
“Borrowing
Base”
means,
at any time, an amount equal to the sum of (a) the amount of the Loan guaranteed
in form and substance satisfactory to Bank, plus (b) the amount of cash
Collateral subject to the control Bank in form and substance satisfactory to
Bank.
“Borrowing
Limit”
means
the lesser of the Borrowing Base or the Committed Sum (after deducting all
outstanding Letter of Credit Liabilities, if any).
“Business
Day”
means
a
day other than a Saturday, Sunday or a day on which commercial banks in Dallas,
Texas are authorized to be closed. Unless otherwise provided, the term “days”
means calendar days.
“Capital
Lease Obligation”
means
the amount of Debt under a lease of property by a Person that would be shown
as
a liability on a balance sheet of such Person prepared for financial reporting
purposes in accordance with GAAP.
“Closing
Date”
means
June 29, 2006.
“Code”
means
the Uniform Commercial Code of the State of Texas or other applicable
jurisdiction as it may be amended from time to time.
“Collateral”
means
all property (regardless of owner), which secures, either directly or
indirectly, the Indebtedness and the Obligations.
“Commitment”
means
the obligation of Bank to make the Revolving Loan in an amount not to exceed
in
the aggregate the Borrowing Limit in effect from time to time.
“Committed
Sum”
means
$2,000,000.00.
“Compliance
Certificate”
means
a
certificate, substantially in the form of Exhibit
A
attached
hereto, prepared by and executed by the chief financial officer (or other
authorized representative acceptable to Bank) of Borrower.
“Current
Financial Statements”
means
the financial statements of Borrower most recently submitted to Bank and dated
March 31, 2006.
“Debt”
means
as to any Person at any time (without duplication), (a) all obligations of
such
Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, notes, debentures, or other similar instruments, (c) all obligations
of
such Person to pay the deferred purchase price of property or services, except
trade accounts payable of such Person arising in the ordinary course of
business, and further excepting any deferred executive compensation (not to
exceed, in the aggregate, $100,000.00), (d) all Capital Lease Obligations of
such Person, (e) all debt or other obligations of others guaranteed by such
Person; (f) all obligations secured by a Lien existing on property owned by
such
Person, whether or not the obligations secured thereby have been assumed by
such
Person or are non-recourse to the credit of such Person; (g) any other
obligation for borrowed money or other financial accommodations which in
accordance with GAAP would be shown as a liability on the balance sheet of
such
Person, (h) any repurchase obligation or liability of a Person with respect
to
accounts, chattel paper or notes receivable sold by such Person; (i) any
liability under a safe and leaseback transaction that is not a Capital Lease
Obligation, and (j) all reimbursement obligations of such Person (whether
contingent or otherwise) in respect of letters of credit, bankers’ acceptances,
surety or other bonds and similar instruments.
“Debtor
Relief Laws”
means
the Bankruptcy Code of the United States and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, insolvency,
reorganization, or similar debtor relief Laws affecting the rights of creditors
generally from time to time in effect.
“Environmental
Laws”
means
any and all federal, state, and local laws, regulations, judicial decisions,
orders, decrees, plans, rules, permits, licenses, and other governmental
restrictions and requirements pertaining to health, safety, or the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et
seq.,
the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901, et
seq.,
the
Occupational Safety and Health Act, 29 U.S.C. § 651, et
seq.,
the
Clean Air Act, 42 U.S.C. § 7401 et
seq.,
the
Clean Water Act, 33 U.S.C. § 1251, et
seq.,
and the
Toxic Substances Control Act, 15 U.S.C. § 2601, et
seq.,
as the
same may be amended or supplemented from time to time.
“Environmental
Liabilities”
means,
as to any Person, all liabilities, obligations, responsibilities, Remedial
Actions, losses, damages, punitive damages, consequential damages, treble
damages, costs, and expenses (including, without limitation, all reasonable
fees, disbursements and expenses of counsel, expert and consulting fees and
costs of investigation and feasibility studies), fines, penalties, sanctions,
and interest incurred as a result of any claim or demand, by any Person, whether
based in contract, tort, implied or express warranty, strict liability, criminal
or civil statute, including any Environmental Law, permit, order or agreement
with any Governmental Authority or other Person, arising from environmental,
health or safety conditions or the Release or threatened Release of a Hazardous
Material into the environment, resulting from the past, present, or future
operations of such Person or its Affiliates.
“Event
of Default”
has
the
meaning set forth in Article
Nine
and in
any other provision hereof using the term.
“Existing
Environmental Matters”
has
the
meaning set forth in Section
5.13.
“Existing
Litigation”
has
the
meaning set forth in Section
5.5.
“GAAP”
means
generally accepted accounting principles, applied on a consistent basis, set
forth in Opinions of the Accounting Principles Board of the American Institute
of Certified Public Accountants and/or in statements of the Financial Accounting
Standards Board which are applicable in the circumstances as of the date in
question; and the requisite that such principles be applied on a consistent
basis means that the accounting principles observed in a current period are
comparable in all material respects to those applied in a preceding period,
except to the extent that a deviation therefrom is expressly permitted by this
Agreement.
“Guarantor”
means
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Iroquois Funds, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and any other Person
who from time to time guarantees all or any part of the Indebtedness and
Obligations or otherwise enters into an agreement in favor of Bank in connection
therewith.
“Guaranty
Agreement”
means
an agreement executed by Guarantor in favor of Bank, as may be amended from
time
to time.
“Hazardous
Material”
means
any substance, product, waste, pollutant, material, chemical, contaminant,
constituent, or other material which is or becomes listed, regulated, or
addressed under any Environmental Law, including, without limitation, asbestos,
petroleum, and polychlorinated biphenyls.
“Inchoate
Lien”
means
any Tax Lien for Taxes not yet due and payable and any mechanic’s Lien and
materialman’s Lien for services or materials for which payment is not yet
due.
“Indebtedness”
means
all present and future indebtedness, obligations, and liabilities, including
all
direct and contingent obligations arising under letters of credit, banker’s
acceptances, bank guaranties and similar instruments, net obligations under
any
swap contract, overdrafts, Automated Clearing House obligations, and all other
financial accommodations which could be considered a liability under GAAP,
and
all renewals, extensions, and modifications thereof, or any part thereof, now
or
hereafter owed to Bank by Borrower, and all interest accruing thereon and costs,
expenses, and reasonable attorneys’ fees incurred in the enforcement or
collection thereof, regardless of whether such indebtedness, obligation, and
liabilities are direct, indirect, fixed, contingent, liquidated, unliquidated,
joint, several, joint and several, or arising pursuant to any of the Loan
Documents and all renewals and extensions thereof, or any part thereof, and
all
present and future amendments thereto.
“Inventory”
means
all of Borrower’s inventory of every nature and description, including all
goods, merchandise, raw materials, goods in process and finished goods now
owned
or hereafter acquired and held for sale or lease or furnished or to be furnished
under contracts for service or used or consumed in Borrower’s businesses and all
additions and accessions thereto and contracts with respect thereto and all
documents of title evidencing or representing any part thereof, and all products
and proceeds thereof, including insurance proceeds payable by reason of loss
or
damage to Borrower’s inventory.
“Laws”
means
all statutes, laws, ordinances, regulations, orders, writs, injunctions, or
decrees of the United States, any city or municipality, state, commonwealth,
nation, country, territory, possession, or any Tribunal.
“Leases”
means
those certain lease agreements between the owners of the real property on which
any part of Borrower’s business is operated, as landlord, and Borrower, as
tenant, pertaining to the lease of such real property.
“Letter
of Credit”
means
any letter of credit issued by Bank for the account of or at the direction
of
Borrower pursuant to Article Two of this Agreement.
“Letter
of Credit Liabilities”
means,
at any time, the aggregate face amounts of all outstanding Letters of Credit,
plus any amounts drawn under any Letters of Credit for which Bank has not been
fully reimbursed by Borrower (unless Bank, in its sole discretion, has cleared
the drawn amount by means of an Advance under the Revolving Note, in which
case
the drawn amount would not constitute a Letter of Credit
Liability).
“Liabilities”
means,
at any particular time, all amounts which in conformity with GAAP, would be
included, on a consolidated basis, as liabilities on a balance sheet of a
Person.
“Lien”
means
any lien, security interest, Tax lien, mechanic’s lien, materialman’s lien, or
other encumbrance, whether arising by contract or under Law.
“Litigation”
means
any proceeding, claim, lawsuit, and/or investigation conducted or threatened
by
or before any Tribunal, including, but not limited to, proceedings, claims,
lawsuits, and/or investigations under or pursuant to any environmental,
occupational safety and health, antitrust, unfair competition, securities,
Tax,
or other Law, or under or pursuant to any agreement, document, or
instrument.
“Loan
Documents”
mean
this Agreement, the Note, the Security Agreement, any subordination agreement
executed in connection with Subordinated Debt and any and all other agreements,
documents, and instruments executed and delivered pursuant to the terms of
this
Agreement, and any future amendments hereto, or restatements hereof, or pursuant
to the terms of any of the other loan documents, together with any and all
renewals, extensions, and restatements of, and amendments and modifications
to,
any such agreements, documents, and instruments.
“Loans”
mean
the Revolving Loan.
“Material
Adverse Effect”
means
any set of circumstances or event which (a) could reasonably be expected to
have
any adverse effect whatsoever upon the validity, performance, or enforceability
of any Loan Document, (b) is or could reasonably be expected to become material
and adverse to the financial condition, properties, or business operations
of
the Person in question, (c) could reasonably be expected to impair the ability
of the Person in question to fulfill its obligations under the terms and
conditions of the Loan Documents, or (d) could reasonably be expected to cause
an Event of Default.
“Maximum
Rate”
means
the maximum non-usurious rate of interest (or, if the context so requires,
an
amount calculated at such rate) which Bank is allowed to contract for, charge,
take, reserve, or receive in this transaction under applicable federal or state
(whichever is higher) Law from time to time in effect after taking into account,
to the extent required by applicable federal or state (whichever is higher)
Law
from time to time in effect, any and all relevant payments or charges under
the
Loan Documents.
“Note”
means
the Revolving Note and any other note or notes entered into by Borrower in
favor
of Bank.
“Obligated
Party”
means
any Person (other than Borrower) who is or becomes party to any agreement that
guarantees or secures payment and performance of the Indebtedness and/or
Obligations or any part thereof.
“Obligations”
means
any and all of the covenants, conditions, warranties, representations and other
obligations (other than to repay the Indebtedness) made or undertaken by
Borrower or any Obligated Party to Bank as set forth in the Loan
Documents.
“Organizational
Documents”
means
(a) in the case of a corporation, its articles or certificate of incorporation
and bylaws, (b) in the case of a general partnership, its partnership agreement,
(c) in the case of a limited partnership, its certificate of limited partnership
and partnership agreement, (d) in the case of a limited liability company,
its
articles of organization and operating agreement or regulations, and (e) in
the
case of any other entity, its organizational and governance documents and
agreements.
“Permitted
Businesses”
mean,
with respect to Borrower, those businesses in which Borrower was engaged as
of
the Closing Date and any other business reasonably related thereto.
“Permitted
Liens”
means
all (a) Inchoate Liens, (b) Liens created by or pursuant to the Loan Documents
in favor of Bank, and all renewals and extensions of the foregoing, (c)
encumbrances consisting of minor easements, zoning restrictions, or other
restrictions on the use of real property that do not (individually or in the
aggregate) materially affect the value of the assets encumbered thereby or
materially impair the ability of Borrower to use such assets in their respective
businesses, and none of which is violated in any material respect by existing
or
proposed structures or land use, (d) Liens for taxes, assessments, or other
governmental charges which are being contested in good faith and for which
adequate reserves have been established, (e) Liens resulting from good faith
deposits to secure payments of workmen’s compensation or other social security
programs or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, or contracts (other than for payment of Debt) made
in
the ordinary course of business, (f) Liens arising in connection with
Subordinated Debt, and (g) purchase money liens or purchase money security
interests not to exceed, in the aggregate, $250,000.00.
“Person”
means
any individual, firm, corporation, association, partnership, joint venture,
trust, other entity, or a Tribunal.
“Release”
means,
as to any Person, any release, spill, emissions, leaking, pumping, injection,
deposit, disposal, disbursement, leaching, or migration of Hazardous Materials
into the indoor or outdoor environment or into or out of property owned by
such
Person, including, without limitation, the movement of Hazardous Materials
through or in the air, soil, surface water, ground water, or
property.
“Remedial
Action”
means
all actions required to (a) clean up, remove, treat, or otherwise address
Hazardous Materials in the indoor or outdoor environment, (b) prevent the
Release or threat of Release or minimize the further Release of Hazardous
Materials so that they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment, or (c) perform
pre-remedial studies and investigations and post-remedial monitoring and
care.
“Revolving
Loan”
has
the
meanings set forth in Section
2.1.
“Revolving
Note”
means
the promissory note, dated the Closing Date, in the original principal amount
of
$2,000,000.00, executed by Borrower and payable to the order of Bank, in form
and substance satisfactory to Bank, and all amendments, extensions, renewals,
replacements, increases, and modifications thereof.
“Revolving
Principal Balance”
means
the aggregate unpaid principal balance of the Revolving Note at the time in
question.
“Rights”
mean
any remedies, powers, and privileges exercisable by Bank under the Loan
Documents, at Law, equity, or otherwise.
“Section”
and
“Sections”
have
the meanings set forth in Section
1.5.
“Security
Agreement”
means
the Pledge and Security Agreement dated the Closing Date, executed by Borrower
in favor of Bank, in form and substance satisfactory to Bank, as the same may
be
amended, restated, supplemented or modified from time to time.
“Subordinated
Debt”
means
all Debt of Borrower whether now existing or hereafter incurred which is
subordinate in right of payment to the Indebtedness, pursuant to a written
agreement in form and substance satisfactory to Bank.
“Subsection”
and
“Subsections”
have
the meanings set forth in Section
1.5.
“Subsidiary(ies)”
means
any entity more than twenty percent (20%) of whose ownership interest now or
hereafter is owned directly or indirectly by Borrower or any Subsidiary or
may
be voted by Borrower or any Subsidiary.
“Taxes”
means
all taxes (including withholding), assessments, fees, levies, imposts, duties,
deductions, withholdings, or other charges of any nature whatsoever from time
to
time or at any time imposed by any Laws or by any Tribunal, excluding state
and
local sales and use taxes.
“Tribunal”
means
any state, commonwealth, federal, foreign, territorial, or other court or
governmental department, commission, board, bureau, agency, or
instrumentality.
“Tribunal
Proceedings”
has
the
meaning set forth in Section
5.4.
“Unpaid
Judgments”
has
the
meaning set forth in Section
5.5.
1.2 Accounting
Matters.
Any
accounting term used in this Agreement or the other Loan Documents shall have,
unless otherwise specifically provided therein, the meaning customarily given
such term in accordance with GAAP, and all financial computations thereunder
shall be computed, unless otherwise specifically provided therein, in accordance
with GAAP consistently applied. That certain items or computations are
explicitly modified by the phrase “in accordance with GAAP” shall in no way be
construed to limit the foregoing.
1.3 Headings.
The
headings, captions, and arrangements used in any of the Loan Documents are,
unless specified otherwise, for convenience only and shall not be deemed to
limit, amplify, or modify the terms of the Loan Documents no to affect the
meaning thereof.
1.4 Number
and Gender of Words.
Whenever herein the singular number is used, the same shall include the plural
where appropriate, and words of any gender shall include each other gender
where
appropriate. Reference herein of Borrower shall mean, jointly and severally,
each Person comprising same.
1.5 Articles,
Sections and Exhibits.
All
references herein to “Articles”,
“Sections”
and
“Subsections”
are,
unless specified otherwise, references to articles, sections and subsections
of
this Agreement. All references herein to an “Exhibit”
or
“Schedule”
are
references to exhibits or schedules attached hereto, all of which are made
a
part hereof for all purposes, the same as if set forth herein verbatim, it
being
understood that if any exhibit or schedule attached hereto, which is to be
executed and delivered, contains blanks, the same shall be completed correctly
and in accordance with the terms and provisions contained and as contemplated
herein prior to or at the time of the execution and delivery thereof. The words
“herein,”
“hereof,”
“hereunder”
and
other similar compounds of the word “here”
when
used in this Agreement shall refer to the entire Agreement and not to any
particular provision or section.
Article
Two
Commitment
to Lend, Terms of Payment
2.1 Revolving
Loan.
Subject
to and upon the terms, covenants, and conditions of this Agreement, Bank agrees
to make one or more Advances (hereinafter called the “Revolving
Loan”)
to
Borrower for Approved Purposes in an aggregate principal amount at any one
time
outstanding up to but not exceeding the Borrowing Limit. Within the limit of
the
Borrowing Limit in effect from time to time, Borrower may borrow, repay, and
reborrow at any time and from time to time from the Closing Date to the earlier
of (a) the maturity of the Revolving Note, or (b) the termination of Bank’s
Commitment hereunder. If, by virtue of payments made on the Revolving Note,
the
principal amount owed on the Revolving Note during its term reaches zero at
any
point, Borrower agrees that all of the Collateral and all of the Loan Documents
shall remain in full force and effect to secure any Advances made thereafter,
and Bank shall be fully entitled to rely on all of the Collateral and all of
the
Loan Documents unless an appropriate release of all or any part of the
Collateral or all or any part of the Loan Documents has been executed by Bank.
The Revolving Principal Balance may not exceed the Borrowing Limit at any
time.
2.2 Revolving
Note.
The
Revolving Loan shall be evidenced by, and be repayable in accordance with the
Revolving Note.
2.3 Revolving
Loan Borrowing Procedure.
Borrower shall give Bank notice of each Revolving Loan by means of a written
request containing the information required by Bank and delivered (by hand
or by
mechanically confirmed facsimile) to Bank no later than 10:00 a.m. (Dallas,
Texas time) on the day on which the Revolving Loan is desired to be funded.
Bank, at its option, may accept telephonic requests for such Advances, provided
that such acceptance shall not constitute a waiver of Bank’s right to require
delivery of a written request in connection with subsequent Revolving Loan.
Any
telephonic request for a Revolving Loan by Borrower shall be promptly confirmed
by submission of a properly completed written request to Bank, but failure
to
deliver a written request shall not be a defense to payment of a Revolving
Loan.
Bank shall have no liability to Borrower for any loss or damage suffered by
Borrower as a result of Bank’s honoring of any requests, execution of any
instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically, by facsimile or electronically, and
purporting to have been sent to Bank by Borrower and Bank shall have no duty
to
verify the origin of any such communication or the identity or authority of
the
Person sending it. Subject to the terms and conditions of this Agreement, each
Revolving Loan shall be made available to Borrower by depositing the same,
in
immediately available funds, in an account of Borrower designated by Borrower
maintained with Bank. To automate the Revolving Loan notification process,
Borrower shall enter into a “Credit Sweep” facility or “loan manager” in
connection with the Commitment and Borrower’s deposit accounts maintained with
Bank.
2.4 Payments.
Borrower authorizes Bank to auto debit the amount of any scheduled payment
under
the Revolving Note when due from any deposit account or other account of
Borrower with Bank.
2.5 Prepayments.
(a) Voluntary
Prepayments.
The
Borrower may prepay all or any portion of the Note to the extent and in the
manner provided for therein.
(b) Mandatory
Prepayment.
The
Borrower must immediately
upon written notice of DEMAND pay
the
amount by which at any time the unpaid principal balance of the Revolving Loan
exceeds the Borrowing Limit; provided, that if
such
excess is directly caused by a default of one or more Guarantors under a
Guaranty Agreement or other Loan Document and the amount of such excess is
less
than $350,000.00, Borrower shall have thirty (30) days from the date of such
notice to pay such excess amount or cause the replacement of the defaulting
Guarantor with another Guarantor subject to documents and terms satisfactory
to
Bank.
2.6 Purpose
of Loans.
Borrower represents that the proceeds of the Revolving Loan will be used only
for Approved Purposes.
2.7 Sale
of Participations.
Bank
may, from time to time, sell or offer to sell the Indebtedness, or interests
therein, to one or more participants and Bank is hereby authorized to
disseminate and disclose any information (whether or not confidential or
proprietary in nature) Bank now has or may hereafter obtain pertaining to
Borrower, the Indebtedness or the Loan Documents (including, without limitation,
any credit or other information regarding Borrower, any of its principals,
or
any other person or entity liable, directly or indirectly, for any part of
the
Loan, to (a) any participant or prospective participant, (b) any regulatory
body
having jurisdiction over Bank or the Indebtedness, and (c) any other persons
or
entities as may be necessary or appropriate in Bank’s reasonable judgment);
provided, that, so long as no Event of Default has occurred, Bank shall be
required to obtain the prior written consent of Borrower prior to entering
into
any such participation. Following the occurrence of an Event of Default, Bank,
as a courtesy to Borrower, will endeavor to notify Borrower of any participants
or prospective participants, to which Bank disseminates any of the information
described above.
2.8 Order
of Application.
Except
as otherwise provided in the Loan Documents or otherwise agreed by Bank, all
payments and prepayments of the Indebtedness, including proceeds from the
exercise of any Rights under the Loan Documents or proceeds of any of the
Collateral, shall be applied to the Indebtedness in the following order, any
instructions from Borrower to the contrary notwithstanding: (a) to the expenses
for which Bank shall not have been reimbursed under the Loan Documents, and
then
to all indemnified amounts due under the Loan Documents; (b) to fees then owed
Bank hereunder; (c) to accrued interest on the portion of the Indebtedness
being
paid or prepaid; (d) to the portion of the principal being paid or prepaid;
(e)
to the remaining accrued interest on the Indebtedness; (f) to the remaining
principal; and (g) to the remaining Indebtedness. All amounts remaining after
the foregoing application of funds shall be paid to Borrower.
2.9 Commitment
Fee.
Borrower
shall pay to Bank a Commitment Fee of $25,000.00 on the date hereof. Such fee,
as of the date of this Agreement, is fully earned and
non-refundable.
2.10 Lockbox
and Account Collections.
Borrower will maintain under such written agreements as Bank requires, as
security for the Indebtedness, a depository account with the Bank (“Depository
Account”)
and,
upon request of Bank following an Event of Default, a lockbox (“Lockbox”).
Upon
the request of Bank following the occurrence of an Event of Default, Borrower
will advise all of its account debtors to direct their payments to the Lockbox,
at the address established by the Lockbox arrangements; all payments received
into the Lockbox will be deposited into the Depository Account; and all payments
from account debtors of Borrower not otherwise delivered to the Lockbox will
be
deposited directly into the Depository Account, and Bank is authorized to
transfer to the Depository Account any funds which are account debtor payments
but which have been deposited into any other depository account of Borrower
at
Bank. Upon the occurrence of an Event of Default, Borrower agrees that Bank
will
have all right, title and interest in and to all items and funds from time
to
time in the Depository Account. Checks received into the Depository Account
will
not be considered good funds until Bank has effected final settlement with
respect thereto. After an Event of Default has occurred, Bank is authorized
to
apply any and all funds in the Depository Account at any time, and from time
to
time, to the Indebtedness (to the extent then due and payable) in any order
Bank
may elect.
2.11 Letters
of Credit.
Subject
to the terms and conditions of this Agreement and other Loan Documents, Bank
may, in its reasonable discretion, issue one or more Letters of Credit for
the
account of Borrower from time to time. No Letter of Credit shall have an
expiration date less than thirty (30) days before the Maturity Date of the
Revolving Note unless Borrower provides cash Collateral satisfactory to Bank
to
secure any such Letter of Credit. Each Letter of Credit (i) must be satisfactory
in form and substance to Bank, (ii) will be subject to the payment of such
Letter of Credit fees as Bank may require, and (iii) shall be issued pursuant
to
such conditions, documents and instruments agreed to and/or executed by Borrower
as Bank may require in its sole discretion. Each payment by Bank pursuant to
a
drawing under a Letter of Credit is due and payable ON DEMAND, and at the sole
option of Bank, can be charged by Bank as a Revolving Loan by Bank to Borrower
under the Revolving Note and this Agreement as of the day and time such payment
is made by Bank and in the amount of such payment.
Article
Three
Collateral
3.1 Security
Interests.
In
order to secure payment and performance of the Indebtedness and Obligations,
Borrower has granted to Bank a security interest in the Collateral by executing
and delivering to Bank the Security Agreement. Borrower further agrees to
execute and deliver to Bank from time to time such other security agreements,
deeds of trust and similar documents covering the Collateral and further
authorizes Bank to prepare and file such Financing Statements as Bank may
reasonably require to perfect and maintain its perfected interest in the
Collateral.
Article
Four
Conditions
Precedent to Lending
4.1 Initial
Extension of Credit.
The
obligation of Bank to make the initial Advance under any Note or issue the
initial Letter of Credit is subject to the condition precedent that Bank shall
have received on or before the day of such Advance or Letter of Credit all
of
the following, each dated (unless otherwise indicated) the Closing Date, in
form
and substance satisfactory to Bank:
(a) Resolutions.
Resolutions of the Board of Directors (or other governing body) of Borrower
certified by the Secretary (or other custodian of records) of Borrower which
authorize the execution, delivery, and performance by Borrower of this Agreement
and the other Loan Documents to which Borrower is or is to be a
party;
(b) Incumbency
Certificate.
A
certificate of incumbency certified by an authorized officer or representative
certifying the names of the individuals or other Persons authorized to sign
this
Agreement and the other Loan Documents to which Borrower is or is to be a party
on behalf of Borrower together with specimen signatures of such
Persons;
(c) Organizational
Documents.
The
Organizational Documents for Borrower;
(d) Governmental
Certificates.
Certificates of the appropriate government officials of the state of
incorporation or organization of Borrower as to the existence and good standing
of Borrower, each dated within ten (10) days prior to the date of the initial
Advance or Letter of Credit;
(e) Note.
The
Revolving Note executed by Borrower;
(f) Security
Documents and Guaranty Agreement.
The
Loan Documents which create a Lien in and on the Collateral in favor of Bank
executed by the owner of the Collateral and one or more Guaranty Agreements
in
form and substance satisfactory to Bank executed by the Guarantors;
(g) Insurance
Matters.
Copies
of insurance certificates describing all insurance policies required by the
Agreement and the other Documents, together with loss payable and lender
endorsements in favor of Bank with respect to all insurance policies covering
Collateral;
(h) Fees.
Intentionally left blank;
(i) No
Adverse Change.
No
Material Adverse Effect shall have occurred with respect to the financial
condition or operations of Borrower or any predecessor entity or assets to
be
acquired by Borrower;
(j) Legal
Opinion.
Intentionally left blank;
(k) Subordination
Agreement.
One or
more subordination agreements in connection with the Subordinated Debt;
and
(l) Additional
Items.
The
additional items set forth on Schedule One, if any, and such additional
approvals, opinions, or documents as Bank may reasonably request.
4.2 Conditions
for Each Subsequent Advance.
In
addition to the conditions precedent stated elsewhere herein, Bank shall not
be
obligated to make any Advance or issue any Letter of Credit unless:
(a) Representations
and Warranties.
The
representations and warranties made in Article Five of this Agreement are true
and correct in all material respects at and as of the time the Advance is to
be
made, and the request for an Advance shall constitute the representation and
warranty by Borrower that such representations and warranties are true and
correct in all material respects at such time.
(b) No
Event of Default.
On the
date of, and upon receipt of, the Advance, no Event of Default, and no event
which, with the lapse of time or notice or both, could reasonably be expected
to
become an Event of Default, shall have occurred and be continuing.
(c) Advance
Request.
Bank
has received a request for an Advance in the form required by Bank, as well
as
such other documents, opinions, certificates, agreements, instruments and
evidences as Bank may reasonably request.
(d) Additional
Documentation.
Bank
shall have received such additional approvals, opinions, or documents as Bank
may reasonably request.
Article
Five
Representations
and Warranties
Borrower,
except as set forth on Schedule Two, represents and warrants to Bank as
follows:
5.1 Existence.
Borrower is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware, and is duly qualified to transaction
business as a foreign corporation in each jurisdiction where the nature and
extent of its business and property requires the same.
5.2 Authorization.
Borrower possesses all requisite corporate authority, power, licenses, permits,
and franchises to conduct its business and execute, deliver, and comply with
the
terms of the Loan Documents. The execution and delivery of this Agreement,
the
consummation of the transactions herein contemplated and compliance with the
terms and provisions hereof, the making of the Loans, and the execution,
issuance, and delivery of the Loan Documents have been duly authorized and
approved by all necessary corporate action on the part of Borrower. No consent
or approval of any Tribunal is required in order for Borrower to legally
execute, deliver, and comply with the terms of the Loan Documents.
5.3 Properties;
Permitted Liens.
Borrower has good and marketable title to all of its properties and assets,
subject to no Liens except the Permitted Liens. All material leases under which
Borrower is lessee are in full force and effect, and Borrower is not in default
thereunder.
5.4 Compliance
with Laws and Documents.
Borrower is not, nor will the execution, delivery, and performance of and
compliance with the terms of the Loan Documents cause Borrower to be, in
violation of any Laws or in default (nor has any event occurred which, with
notice or lapse of time or both, could constitute such a default) under any
contract in any respect which could have a Material Adverse Effect. During
the
past five (5) years, there have been no proceedings, claims, or (to Borrower’s
knowledge) investigations against or involving Borrower by any Tribunal,
including under or pursuant to any environmental, occupational safety and
health, antitrust, unfair competition, securities, or other Laws which could
have a Material Adverse Effect, except those described on Schedule
Two
attached
hereto (the “Tribunal
Proceedings”).
5.5 Litigation.
Except
for Litigation in which Borrower is exclusively a plaintiff without a
counterclaim, crossclaim, or similar action asserted against Borrower and except
as set forth on Schedule
Two
attached
hereto (the “Existing
Litigation”),
Borrower is not involved in, nor is Borrower aware of the threat of, any
Litigation which could have a Material Adverse Effect, and there are no
outstanding or unpaid judgments against Borrower (the “Unpaid
Judgments”).
5.6 Taxes.
All
federal, state, foreign, and other Tax returns of Borrower required to be filed
have been filed, all federal, state, foreign, and other Taxes imposed upon
Borrower which are due and payable have been paid, and no material amounts
of
Taxes not reflected on such returns are payable by Borrower, other than Taxes
being contested in good faith by appropriate legal proceedings.
5.7 Enforceability
of Loan Documents.
All
Loan Documents when duly executed and delivered by Borrower will constitute
legal, valid, and binding obligations of Borrower enforceable in accordance
with
their terms subject to Debtor Relief Laws and except that the availability
of
equitable remedies may be limited.
5.8 Financial
Statements.
All
financial statements of Borrower hereafter to be delivered to Bank shall be
prepared in accordance with GAAP (subject to the absence of notes for interim
financial statements), and do and shall, in all material respects, fairly
represent the financial condition of Borrower as of the date of each such
financial statement (subject to reasonable year end adjustments for interim
financial statements). There are and shall be no material liabilities, direct
or
indirect, fixed or contingent, as of the date of each such financial statement
which are not reflected therein or in the notes thereto and, since the date
of
the Current Financial Statements, there has been no material adverse change
in
the business, condition (financial or otherwise), operations, prospects, or
properties of the Borrower.
5.9 Regulation
U.
The
proceeds of the Advances are not and will not be used directly or indirectly
for
the purpose of purchasing or carrying, or for the purpose of extending credit
to
others for the purpose of purchasing or carrying, any “margin stock” as that
term is defined in Regulation U of the Board of Governors of the Federal Reserve
System.
5.10 Subsidiaries.
Borrower has no Subsidiaries as of the date of this Agreement except those
described on Schedule Two.
5.11 Other
Debt.
Except
Subordinated Debt and as otherwise recorded in the financial statements of
Borrower delivered to Bank, Borrower is not directly, indirectly, or
contingently obligated with respect to any Debt as of the Closing Date. To
the
best of Borrower’s knowledge and belief, Borrower is not in default in the
payment of the principal of or interest on any Debt.
5.12 Regulatory
Acts.
Borrower is not an “investment company” within the meaning of the Investment
Company Act of 1940, as amended, or is subject to regulation under the Public
Utility Holding Act of 1935, the Federal Power Act, the Interstate Commerce
Act,
or any other Law (other than Regulation X of the Board of Governors of the
Federal Reserve System) which regulates the incurring by Borrower of debt,
including, but not limited to, Laws regulating common or contract carriers
or
the sale of electricity, gas, steam, water, or other public utility serves.
All
Inventory of Borrower has been and will hereafter be produced in compliance
with
all applicable Laws.
5.13 Environmental
Matters.
Except
as fully described and set forth in Schedule
Two
attached
hereto (the “Existing
Environmental Matters”),
to
the best knowledge of Borrower after due inquiry:
(a) Borrower
and all of its properties, assets, and operations are, in all material respects,
in full compliance with all Environmental Laws. Borrower is not aware of nor
has
Borrower received written notice of any past, present, or future conditions,
events, activities, practices or incidents which may interfere with or prevent
the compliance or continue compliance of Borrower and the Subsidiaries with
all
Environmental Laws;
(b) Borrower
has obtained all permits, licenses, and authorizations that are required under
applicable Environmental Laws, and all such permits are in good standing and
Borrower is in compliance with all of the terms and conditions of such
permits;
(c) No
Hazardous Materials exist on, about, or within or have been used, generated,
stored, transported, disposed of on, or Released from any of the properties
or
assets of Borrower except in such quantities and in such manner as materially
complies with Environmental Laws. The use which Borrower makes and intends
to
make of its properties and assets will not result in the use, generation,
storage, transportation, accumulation, disposal, or Release of any Hazardous
Material on, in, or from any of their properties or assets except in material
compliance with Environmental Laws;
(d) Neither
Borrower nor any of its currently or previously owned or leased properties
or
operations is subject to any outstanding or threatened order from or agreement
with any Tribunal or other Person or subject to any judicial or docketed
administrative proceeding with respect to (i) failure to comply with
Environmental Laws, (ii) Remedial Action, or (iii) any Environmental Liabilities
arising from a Release or threatened Release;
(e) There
are
no conditions or circumstances associated with the currently or previously
owned
or leased properties or operations of Borrower that could reasonably be expected
to give rise to any Environmental Liabilities;
(f) Borrower
has not filed or failed to file any notice required under applicable
Environmental Law reporting a Release; and
(g) No
Lien
arising under any Environmental Law has attached to any property or revenues
of
Borrower.
5.14 General.
There
is no significant material fact or condition relating to the financial condition
and business of Borrower, or the Collateral which has not been related in
writing to Bank, and all writings heretofore or hereafter exhibited, made,
or
delivered to Bank by or on behalf of Borrower are and will be genuine and in
all
respects what they purport and appear to be.
Article
Six
Certain
Affirmative Covenants
So
long
as Bank is committed to make Advances hereunder, and thereafter until payment
and performance in full of the Indebtedness and Obligations, Borrower covenants
and agrees that:
6.1 Reporting
Requirements.
Borrower shall provide, or cause to be provided, to Bank:
(a) Annual
Financial Statements.
Within
one hundred twenty (120) days after the last day of each fiscal year of
Borrower, beginning with the fiscal year that ends December 31, 2006,
consolidated financial statements audited by a certified public accountant
reasonably acceptable to Bank showing the financial position and results of
operations of Borrower and its Subsidiaries as of, and for the year ended on,
such last day, as filed or to be filed with the Securities and Exchange
Commission, together with the certificate of the chief financial officer of
Borrower that all of such financial statements present fairly, in all material
respects, the financial position of Borrower and its Subsidiaries as of the
last
day of such fiscal year and the results of the operations and the cash flow
of
Borrower and its Subsidiaries for the fiscal year then ended in conformity
with
GAAP.
(b) Quarterly
Financial Statements.
Within
forty-five (45) days after the last day of each fiscal quarter of Borrower,
beginning with the month ending June 30, 2006, financial statements showing
the
financial position and results of operations of Borrower and its Subsidiaries
as
of, and for the quarter ended on, such last day, as filed or to be filed with
the Securities and Exchange Commission, together with the certificate of the
chief financial officer of Borrower that all of such financial statements
present fairly, in all material respects, the financial position of Borrower
and
its Subsidiaries as of the last day of such month and the results of the
operations and the cash flow of Borrower and its Subsidiaries for the month
then
ended in conformity with GAAP.
(c) Compliance
Certificate.
Within
forty-five (45) days after the end of each calendar quarter, a certificate
of
the chief financial officer of Borrower in the form of Exhibit
A
attached
hereto or in such other form as Bank may reasonably require (i) stating that
to
the best of such Person’s knowledge, no Event of Default has occurred and is
continuing, or if an Event of Default has occurred and is continuing, a
statement as to the nature thereof and the action which is proposed to be taken
with respect thereto and (ii) showing in reasonable detail the calculations
demonstrating compliance with Article Eight.
(d) Periodic
Reports.
Promptly after their preparation, Borrower shall provide to Bank copies of
any
and all proxy statements, financial statements, and reports which Borrower
sends
to its shareholders, and copies of any and all periodic and special reports
and
registration statements which Borrower files with the Securities and Exchange
Commission.
6.2 Insurance.
Borrower will maintain insurance with financially sound and reputable insurance
companies in such amounts and covering such risks as is usually carried by
corporations engaged in similar businesses and owning similar properties in
the
same general areas in which Borrower and the Subsidiaries operate, provided
that
in any event Borrower will maintain workmen’s compensation insurance, property
insurance (including, without limitation, coverage of Inventory), comprehensive
general liability insurance, products liability insurance, and business
interruption insurance reasonably satisfactory to Bank. Each insurance policy
covering Collateral shall name Bank as loss payee and shall provide that such
policy will not be canceled or reduced without thirty (30) days prior written
notice to Bank. Borrower shall maintain such other insurance on the Collateral
for the benefit of Bank as Bank shall from time to time request, and furnish
to
Bank upon the request of Bank from time to time the originals of all policies
of
insurance on the Collateral and certificates with respect to such
insurance.
6.3 Payment
of Debts.
Borrower will pay or cause to be paid all of its Debt prior to the date on
which
penalties attach thereto (except to the extent and so long as the payment
thereof is being properly contested in good faith by appropriate proceedings
and
adequate reserves have been established therefor).
6.4 Taxes.
Borrower will promptly pay or cause to be paid when due any and all Taxes due
by
Borrower, including, without limitation, all taxes, duties, fees, levies and
other charges of whatsoever nature which have been or may be imposed by any
government or by any department, agency, state, other political subdivision
or
taxing authority thereof or therein; provided that Borrower shall not be
required to pay and discharge any such Taxes or charges so long as the validity
thereof shall be contested in good faith by appropriate proceedings and Borrower
shall set aside on its books adequate reserves with respect thereto and shall
pay any such Taxes or charge before the property subject thereto shall be sold
to satisfy any lien which has attached as security therefor.
6.5 Expenses
of Bank.
Borrower will reimburse Bank for all reasonable out-of-pocket costs, fees,
and
expenses incident to the Loan Documents or any transactions contemplated
thereby, including, without limitation, all recording fees, all recording taxes,
and the reasonable fees and disbursements of special counsel for Bank for
negotiation and preparation of the Loan Documents, preparation and review of
other documents, and providing of other legal services, from time to time,
in
connection herewith up through the Closing Date, and thereafter for services
(a)
in connection with any subsequent Advance, (b) in connection with or in
anticipation of an Event of Default or otherwise in the enforcement of the
Loan
Documents, (c) in connection with any amendment or waiver to any of the Loan
Documents, or (d) in connection with any request or action initiated by
Borrower, all of which shall be and become a part of the
Indebtedness.
6.6 Maintenance
of Entity Existence, Assets and Business; Continuance of Present
Business.
Borrower will preserve and maintain its existence and all of its leases,
licenses, permits, franchises, qualifications, and rights that are necessary
or
desirable in the ordinary conduct of its business. Borrower will conduct its
business in an orderly and efficient manner in accordance with good business
practices. Borrower will keep or cause to be kept all of Borrower’s assets which
are useful and necessary in their respective businesses in good repair, working
order and condition, normal wear and tear excepted, and will make or cause
to be
made all necessary repairs, renewals and replacements as may be reasonably
required. Borrower will carry on and conduct its business in substantially
the
same fields as such business is now and has heretofore been carried
on.
6.7 Books
and Records.
Borrower will maintain proper books of record and account in which full, true,
and correct entries in conformity with GAAP shall be made of all dealings and
transactions in relation to its business and activities.
6.8 Compliance
with Applicable Laws and with Contracts.
Borrower will comply with the requirements of all applicable material Laws,
rules, regulations and orders of any governmental authority, except where
contested in good faith and by proper proceedings. Borrower will comply in
all
material respects with all agreements, contracts, and instruments binding on
it
or affecting its properties or business.
6.9 Comply
with Agreement.
Borrower will fully comply with the terms, provisions and conditions of this
Agreement and of all documents executed pursuant hereto.
6.10 Notice
of Event of Default, Suits, and Material Adverse Effect.
Upon
discovery, Borrower will promptly notify Bank of any breach of or default under
any Loan Document, or of the filing of any claim, action, suit or proceeding
before any Tribunal agency against Borrower in which an adverse decision could
have a Material Adverse Effect upon Borrower and advise Bank from time to time
of the status thereof.
6.11 Information
and Inspection.
Borrower will furnish to Bank as soon as available such information as may
be
pertinent to any provision of this Agreement or to Borrower’s business which
Bank may reasonably request. Borrower shall permit an authorized representative
of Bank to discuss the affairs, finances, and accounts of Borrower with the
officers of Borrower and, upon reasonable notice, visit at reasonable times
any
of the properties of Borrower.
6.12 Depository
Relationship.
To
induce Bank to establish the interest rates provided for in the Note and if
and
to the extent permitted by applicable laws, Borrower will establish, within
thirty (30) days of the date hereof, a depository and treasury management
relationship with the Bank and thereafter use and maintain Bank as its principal
depository bank with a full depository relationship, including for the
maintenance of business, cash management, operating and administrative deposit
accounts. In addition, Borrower shall open and maintain a “Credit Sweep”
facility.
6.13 Additional
Information.
Borrower will promptly furnish, or cause to be furnished, to Bank such other
information, not otherwise required herein, respecting the business affairs,
assets and liabilities of Borrower, the Subsidiaries and the Collateral as
Bank
shall from time to time reasonably request.
Article
Seven
Certain
Negative Covenants
So
long
as Bank is committed to make Advances hereunder, and thereafter until payment
and performance in full of the Indebtedness and Obligations, Borrower covenants
and agrees that, without the prior written consent of Bank:
7.1 Debt.
Borrower will not incur, create, assume, or permit to exist, any Debt,
except:
(a) Debt
to
Bank;
(b) Debt
which exists on the Closing Date which has been disclosed to Bank in writing
prior to the Closing Date;
(c) Subordinated
Debt; and
(d) purchase
money indebtedness not to exceed, in the aggregate, $250,000.00.
7.2 Contingent
Liabilities.
Borrower will not assume, guarantee, endorse, contingently agree to purchase
or
otherwise become liable upon the obligation of any Person (other than Borrower)
except by the endorsement of negotiable instruments for deposit or collection
or
similar transactions in the ordinary course of business.
7.3 Limitation
on Liens.
Borrower will not incur, create, assume, or permit to exist any Lien upon any
of
its property, assets, or revenues, whether now owned or hereafter acquired,
except the Permitted Liens.
7.4 Mergers,
Etc.
Without
the prior written consent of Bank, not to be unreasonably withheld, Borrower
will not become a party to a merger, consolidation, reorganization or
recapitalization, or purchase or otherwise acquire all or any part of the assets
of any Person or any shares, or other evidence of beneficial ownership of any
Person, or wind-up, dissolve, or liquidate.
7.5 Restricted
Payments.
Borrower will not declare or pay any dividends or make any other payment or
distribution (in cash, property, or obligations) on account of its equity
interests, or redeem, purchase, retire, or otherwise acquire any of its equity
interests, or set apart any money for a sinking or other analogous fund for
any
dividend or other distribution on its equity interests or for any redemption,
purchase, retirement, or other acquisition of any of its equity interests;
provided that, Borrower may declare or pay dividends and make other payments
and
distributions on account of its equity interests upon written notice to Bank
in
an amount not to exceed, in the aggregate, $500,000.00, and Borrower may make
distributions in connection with its current PIPE (Private Investment in a
Public Entity) offering upon prior or contemporaneous notice to Bank accompanied
by any notice received by Borrower with regard to such distribution, if any
(Borrower acknowledges that if such distribution is made in connection with a
default by Borrower under the PIPE offering documents, such default shall
constitute an Event of Default hereunder pursuant to Section 9.11).
7.6 Loans
and Investments.
Without
prior or contemporaneous written notice to Bank, Borrower will not make any
advance, loan, extension of credit, or capital contribution to or investment
in,
or purchase, any stock, bonds, notes, debentures, or other securities of, any
Person, except:
(a) readily
marketable direct obligations of the United States of America or any agency
thereof with maturities of one year or less from the date of
acquisition;
(b) fully
insured depository accounts maintained at a commercial bank operating in the
United States of America having capital and surplus in excess of $50,000,000.00;
and
(c) those
existing on the date hereof and listed on Schedule Two.
7.7 Transactions
With Affiliates.
Without
prior or contemporaneous written notice to Bank, Borrower will not enter into
any transaction, including, without limitation, the purchase, sale, or exchange
of property or the rendering of any service, with any Affiliate of Borrower,
except in the ordinary course of and pursuant to the reasonable requirements
of
Borrower’s business and upon fair and reasonable terms no less favorable to
Borrower than would be obtained in a comparable arm’s-length transaction with a
Person not an Affiliate of Borrower.
7.8 Sale
and Leaseback and Disposition of Assets.
Borrower will not (a) enter into, and will not permit any Subsidiary to enter
into, any arrangement with any Person pursuant to which it leases from such
Person real or personal property that has been or is to be sold or transferred,
directly or indirectly, by it to such Person or (b) sell, lease, assign,
transfer, or otherwise dispose of any of its assets, except (i) dispositions
of
Inventory in the ordinary course of business or (ii) dispositions, for fair
value, of worn-out and obsolete equipment not necessary to the conduct of its
business; provided that Borrower may otherwise enter into such transactions
so
long as the total aggregate amount of such transactions involving tangible
assets do not exceed $250,000.00, and provided further that Borrower may license
its Intellectual Property rights so long as Borrower maintains 100% of the
unrestricted ownership rights to such Intellectual Property.
7.9 Nature
of Business.
Borrower will not engage in any business other than the businesses in which
it
is engaged as of the Closing Date and business reasonably relating thereto
and
will
not purchase, lease or otherwise acquire assets not related to its
business.
7.10 Environmental
Protection.
Borrower will not (a) use (or permit any tenant to use) any of its respective
properties or assets for the handling, processing, storage, transportation,
or
disposal of any Hazardous Material, (b) generate any Hazardous Material, (c)
conduct any activity that is likely to cause a Release or threatened Release
of
any Hazardous Material, or (d) otherwise conduct any activity or use any of
its
respective properties or assets in any manner that is likely to violate any
Environmental Law or create any Environmental Liabilities for which Borrower
would be responsible.
7.11 No
Negative Pledge.
Borrower will not enter into or permit to exist any arrangement or agreement,
other than pursuant to this Agreement or any Loan Document, which directly
or
indirectly prohibits Borrower from creating or incurring a Lien on any of its
assets.
7.12 Judgments.
Borrower will not allow any judgment for the payment of money in excess of
$250,000.00 rendered against it to remain undischarged or unsuperseded for
a
period of thirty (30) days during which execution shall not be effectively
stayed.
Article
Eight
Financial
Covenants
Borrower
covenants and agrees that, as long as the Indebtedness or any part thereof
is
outstanding or Bank is under any obligation to make additional Advances under
this Agreement, Borrower will, at all times, observe and perform the following
financial covenants:
8.1 Bookings.
Borrower’s Bookings, as
of and
for the three (3) months ending on the last day of each June, September,
December and March, commencing with the three (3) months ending December 31,
2006, shall equal or exceed $1,000,000.00.
Article
Nine
Events
of Default
The
term
“Event
of Default”
as
used
herein shall mean the occurrence of any one or more of the following events
(subject to all applicable grace and cure periods):
9.1 Payment
of Indebtedness.
The
failure of Borrower to punctually pay the Indebtedness, or any part thereof,
within five (5) days of the date the same shall become due in accordance with
the terms of the Loan Documents, including, without limitation, the failure
or
refusal of Borrower to punctually pay the principal of or the interest on any
Loan.
9.2 Misrepresentation.
Any
statement, representation, or warranty heretofore or hereafter made by Borrower
or any Obligated Party in the Loan Documents or in any writing, or any statement
or representation made in any certificate, report, or opinion delivered to
Bank
pursuant to the Loan Documents, is false, calculated to mislead, misleading,
or
erroneous in any material respect at the time made.
9.3 Covenants.
The
failure or refusal of Borrower or any Obligated Party to properly perform,
observe, and comply with any covenant or agreement contained in any of the
Loan
Documents (other than covenants to pay the Indebtedness and the financial
covenant contained in Section 8.1 above), and such failure or refusal continues
until the earlier to occur of either (a) thirty (30) days after an officer
or
responsible employee of the Borrower becomes aware of such failure or refusal
or
(b) thirty (30) days after Bank has given Borrower written notice
thereof.
9.4 Voluntary
Debtor Relief.
Borrower shall (a) execute an assignment for the benefit of creditors, or (b)
become or be adjudicated as bankrupt or insolvent, or (c) admit in writing
its
inability to pay its debts generally as they become due, or (d) apply for or
consent to the appointment of a conservator, receiver, trustee, or liquidator
of
it or all or a substantial part of its assets, or (e) file a voluntary petition
seeking reorganization or an arrangement with creditors or to take advantage
or
seek any other relief under any Debtor Relief Law now or hereafter existing,
or
(f) file an answer admitting the material allegations of or consenting to,
or
default in, a petition filed against it in any liquidation, conservatorship,
bankruptcy, reorganization, rearrangement, debtor’s relief, or other insolvency
proceedings, or (g) institute or voluntarily be or become a party to any other
judicial proceedings intended to effect a discharge of its debts, in whole
or in
part, or a postponement of the maturity or the collection thereof, or a
suspension of any of the Rights or powers of Bank granted in any of the Loan
Documents.
9.5 Involuntary
Proceedings.
Borrower shall involuntarily (a) have an order, judgment, or decree entered
against it by any Tribunal pursuant to any Debtor Relief Law that could suspend
or otherwise affect any of the Rights granted to Bank in any of the Loan
Documents, and such order, judgment, or decree is not permanently stayed,
vacated, or reversed within sixty (60) days after the entry thereof, or (b)
have
a petition filed against it or any of its property seeking the benefit or
benefits provided for by any Debtor Relief Law that would suspend or otherwise
affect any of the Rights granted to Bank in any of the Loan Documents, and
such
petition is not discharged within sixty (60) days after the filing
thereof.
9.6 Attachment.
The
failure to have discharged within a period of thirty (30) days after the
commencement thereof any attachment, sequestration, or similar proceedings
against any of the material assets of Borrower.
9.7 Other
Obligations.
Borrower shall default in the due and punctual payment of the principal of
or
the interest on any Debt having an aggregate unpaid principal balance
outstanding (whether or not then due and payable) of $10,000.00 or more, secured
or unsecured, or in the due performance or observance of any covenant or
condition of any indenture or other agreement executed in connection therewith,
and such default shall have continued beyond any period of grace or cure
provided with respect thereto.
9.8 Dissolution.
The
dissolution of Borrower for any reason whatsoever.
9.9 Other
Agreements with Bank.
A
default or event of default shall occur and be continuing after the expiration
of any applicable grace, notice, and cure periods under any other written
agreement (which is not a Loan Document) between Bank and Borrower.
9.10 Cash
Collateral.
The
failure by any Guarantor who enters into a Liquidity Maintenance and Control
Agreement with Bank to maintain on deposit with, and subject to the control
of,
Bank the amount set forth therein to secure such Guarantor’s obligations under
any Guaranty Agreement executed by such Guarantor in favor of Bank, or any
default by Guarantor under any Guaranty Agreement or Liquidity Maintenance
Agreement.
9.11 Defaults
on Other Debt or Agreements.
Borrower fails to perform or comply with any covenant, agreement or other
obligation to be performed, observed or complied with by Borrower for the
benefit of a Person other than Bank (including, without limitation, under the
terms of the Borrower’s current PIPE offering), subject to any grace and/or cure
periods provided therein, which failure could reasonably be expected to have
a
Material Adverse Effect on the business, operations, condition (financial or
otherwise), or assets of Borrower, the ability of Borrower to perform its
Obligations under any Loan Document to which it is a party or by which it is
bound or the enforceability of any Loan Document.
9.12 Voluntary
Debtor Relief.
Any
Obligated Party shall (a) execute an assignment for the benefit of creditors,
or
(b) become or be adjudicated as bankrupt or insolvent, or (c) admit in writing
its inability to pay its debts generally as they become due, or (d) apply for
or
consent to the appointment of a conservator, receiver, trustee, or liquidator
of
it or all or a substantial part of its assets, or (e) file a voluntary petition
seeking reorganization or an arrangement with creditors or to take advantage
or
seek any other relief under any Debtor Relief Law now or hereafter existing,
or
(f) file an answer admitting the material allegations of or consenting to,
or
default in, a petition filed against it in any liquidation, conservatorship,
bankruptcy, reorganization, rearrangement, debtor’s relief, or other insolvency
proceedings, or (g) institute or voluntarily be or become a party to any other
judicial proceedings intended to effect a discharge of its debts, in whole
or in
part, or a postponement of the maturity or the collection thereof, or a
suspension of any of the Rights or powers of Bank granted in any of the Loan
Documents.
9.13 Involuntary
Proceedings.
Any
Obligated Party shall involuntarily (a) have an order, judgment, or decree
entered against it by any Tribunal pursuant to any Debtor Relief Law that could
suspend or otherwise affect any of the Rights granted to Bank in any of the
Loan
Documents, and such order, judgment, or decree is not permanently stayed,
vacated, or reversed within sixty (60) days after the entry thereof, or (b)
have
a petition filed against it or any of its property seeking the benefit or
benefits provided for by any Debtor Relief Law that would suspend or otherwise
affect any of the Rights granted to Bank in any of the Loan Documents, and
such
petition is not discharged within sixty (60) days after the filing
thereof.
9.14 Right
to Cure Events of Default under Sections 9.10, 9.12 and
9.13.
Notwithstanding
the provisions of Sections 9.10, 9.12 and 9.13 above, upon the occurrence of
an
event thereunder in connection with one or more Guarantors who have, in the
aggregate, guaranteed less than $350,000.00 of the Indebtedness, such occurrence
shall not be deemed to be an Event of Default if, within thirty (30) days,
Borrower
(a) causes the replacement of the defaulting Guarantor with another Guarantor
subject to documents and terms satisfactory to Bank or (b) makes a principal
payment to Bank in an amount equal to the amount of Indebtedness guaranteed
by
the defaulting Guarantor, to the extent such principal amount is
then-outstanding.
9.15 Financial
Covenant.
The
failure or refusal of Borrower to properly perform, observe, and comply with
the
covenant set forth in Section 8.1 above, and such failure continues for a period
of forty-five (45) days from the end of the applicable calendar
quarter.
Article
Ten
Certain
Rights and Remedies of Bank
10.1 Rights
Upon Event of Default.
If any
Event of Default shall occur and be continuing, Bank may without notice
terminate the Commitment and declare the Indebtedness or any part thereof to
be
immediately due and payable, and the same shall thereupon become immediately
due
and payable, without notice, demand, presentment, notice of dishonor, notice
of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest, or other formalities of any kind, all of which are hereby expressly
waived by Borrower; provided, however, that upon the occurrence of an Event
of
Default under Section
9.4
or
Section
9.5,
the
Commitment shall automatically terminate, and the Indebtedness shall become
immediately due and payable without notice, demand, presentment, notice of
dishonor, notice of acceleration, notice of intent to accelerate, notice of
intent to demand, protest, or other formalities of any kind, all of which are
hereby expressly waived by the Borrower. If any Event of Default shall occur
and
be continuing, Bank may exercise all rights and remedies available to it in
law
or in equity, under the Loan Documents, or otherwise.
10.2 Setoff.
At any
time an Event of Default exists, Bank shall be entitled to exercise the Rights
of setoff and/or banker’s lien against the interest of Borrower in and to each
and every account and other property of Borrower which are in the possession
of
Bank to the extent of the full amount of the Indebtedness.
10.3 Performance
by Bank.
Should
any covenant, duty, or agreement of Borrower fail to be performed in accordance
with the terms of the Loan Documents, Bank may, at its option, perform or
attempt to perform, such covenant, duty, or agreement on behalf of Borrower.
In
such event, or if Bank expends any sum pursuant to the exercise of any Right
provided herein, Borrower shall, at the request of Bank, promptly pay to Bank
any amount expended by Bank in such performance or attempted performance,
together with interest thereon at the Maximum Rate from the date of such
expenditure by Bank until paid. Notwithstanding the foregoing, it is expressly
understood that Bank does not assume any liability or responsibility for the
performance of any duties of Borrower hereunder or in connection with all or
any
part of the Collateral.
10.4 Diminution
in Collateral Value.
Bank
does not assume, and shall never have, any liability or responsibility for
any
loss or diminution in the value of all or any part of the
Collateral.
10.5 Bank
Not In Control.
None of
the covenants or other provisions contained in this Agreement shall, or shall
be
deemed to, give Bank the Right to exercise control over the affairs and/or
management of Borrower, the power of Bank being limited to the Right to exercise
the remedies provided in the other Sections of this Article; provided that,
if
Bank becomes the owner of any ownership interest of any Person, whether through
foreclosure or otherwise, Bank shall be entitled to exercise such legal Rights
as it may have by virtue of being an owner of such Person.
10.6 Waivers.
The
acceptance of Bank at any time and from time to time of part payment on the
Indebtedness shall not be deemed to be a waiver of any Event of Default then
existing. No waiver by Bank of any Event of Default shall be deemed to be a
waiver of any other then-existing or subsequent Event of Default. No waiver
by
Bank of any of its Rights hereunder, in the other Loan Documents, or otherwise
shall be considered a waiver of any other or subsequent Right of Bank. No delay
or omission by Bank in exercising any Right under the Loan Documents shall
impair such Right or be construed as a waiver thereof or any acquiescence
therein, nor shall any single or partial exercise of any such Right preclude
other or further exercise thereof, or the exercise of any other Right under
the
Loan Documents or otherwise.
10.7 Cumulative
Rights.
All
Rights available to Bank under the Loan Documents shall be cumulative of and
in
addition to all other Rights granted to Bank at Law or in equity, whether or
not
the Obligations be due and payable and whether or not Bank shall have instituted
any suit for collection, foreclosure, or other action under or in connection
with the Loan Documents.
10.8 INDEMNIFICATION
OF BANK.
BORROWER SHALL INDEMNIFY BANK AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AND AGENTS FROM, AND HOLD EACH OF
THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES,
PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING REASONABLE
ATTORNEYS’ FEES) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR
INDIRECTLY ARISE FROM OR RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY,
PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B)
ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH
BY
BORROWER OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED
IN ANY OF THE LOAN DOCUMENTS, (D) THE PRESENCE, RELEASE, THREATENED RELEASE,
DISPOSAL, REMOVAL, OR CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON, ABOUT,
WITHIN OR AFFECTING ANY OF THE PROPERTIES OR ASSETS OF THE BORROWER OR ANY
SUBSIDIARY, (E) THE USE OR PROPOSED USE OF ANY LETTER OF CREDIT, (F) ANY AND
ALL
TAXES, LEVIES, DEDUCTIONS, AND CHARGES IMPOSED ON BANK OR ANY OF BANK’S
CORRESPONDENTS IN RESPECT OF ANY LETTER OF CREDIT, OR (G) ANY INVESTIGATION,
LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED
INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, RELATING TO ANY OF THE
FOREGOING. WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR OF ANY OTHER
LOAN
DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON
TO
BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND HELD HARMLESS
AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,
DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES)
ARISING OUT OF OR RESULTING FROM THE SOLE CONTRIBUTORY OR ORDINARY NEGLIGENCE
OF
SUCH PERSON; PROVIDED,
HOWEVER,
THE
INDEMNITIES PROVIDED IN THIS SECTION
10.8
DO NOT
EXTEND TO LOSSES, LIABILITIES, CLAIMS, OR DAMAGES CAUSED BY BANK’S GROSS
NEGLIGENCE OR MISCONDUCT.
10.9 Limitation
of Liability.
Neither
Bank nor any Affiliate, officer, director, employee, attorney, or agent of
Bank
shall have any liability with respect to, and Borrower hereby waives, releases,
and agrees not to ▇▇▇ any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by the Borrower in
connection with, arising out of, or in any way related to, this Agreement or
any
of the other Loan Documents, or any of the transactions contemplated by this
Agreement or any of the other Loan Documents. Borrower hereby waives, releases,
and agrees not to ▇▇▇ Bank or any of Bank’s Affiliates, officers, directors,
employees, attorneys, or agents for punitive damages in respect of any claim
in
connection with, arising out of, or in any way related to, this Agreement or
any
of the other Loan Documents, or any of the transactions contemplated by this
Agreement or any of the other Loan Documents.
Article
Eleven
Miscellaneous
11.1 Headings.
The
headings, captions, and arrangements used in any of the Loan Documents are,
unless specified otherwise, for convenience only and shall not be deemed to
limit, amplify, or modify the terms of the Loan Documents, nor affect the
meaning thereof.
11.2 Notices.
Unless
otherwise expressly provided herein, all notices and other communications
provided for hereunder shall be in writing (including by facsimile transmission)
and mailed, faxed, or delivered, to the address or facsimile number to the
address specified for notices on the signature page below, or to such other
address as shall be designated by such party in a notice to the other parties.
All such other notices and other communications shall be deemed to have been
given or made upon the earliest to occur of (a) actual receipt by the intended
recipient or (b) (i) if delivered by hand or courier, when signed for by the
designated recipient; (ii) if delivered by mail, four business days after
deposit in the mail, postage prepaid; and (iii) if delivered by facsimile when
sent and receipt has been confirmed by telephone. Electronic mail and internet
websites may be used only to distribute only routine communications, such as
financial statements and other information, and to distribute Loan Documents
for
execution by the parties thereto, and may not be used for any other
purpose.
11.3 Form
and Number of Documents.
Each
agreement, document, instrument, or other writing to be furnished to Bank under
any provision of this Agreement must be in form and substance and in such number
of counterparts as may be satisfactory to Bank and its counsel.
11.4 Survival.
All
covenants, agreements, undertakings, representations, and warranties made in
any
of the Loan Documents shall survive all closings under the Loan Documents and
shall continue in full force and effect so long as any part of the Indebtedness
remain and, except as otherwise indicated, shall not be affected by any
investigation made by any party. Notwithstanding anything contained herein
to
the contrary, the covenants, agreements, undertakings, representations, and
warranties made in Section
6.5
and
Section
10.8
shall
survive the expiration or termination of this Agreement, regardless of the
means
of such expiration or termination.
11.5 GOVERNING
LAW; PLACE OF PERFORMANCE.
THE
LOAN DOCUMENTS ARE BEING EXECUTED AND DELIVERED, AND ARE INTENDED TO BE
PERFORMED, IN THE STATE OF TEXAS, AND THE LAWS OF SUCH STATE AND OF THE UNITED
STATES SHALL GOVERN THE RIGHTS AND DUTIES OF THE PARTIES HERETO AND THE
VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION OF THE LOAN DOCUMENTS,
EXCEPT TO THE EXTENT OTHERWISE SPECIFIED IN ANY OF THE LOAN DOCUMENTS. THIS
AGREEMENT, ALL OF THE OTHER LOAN DOCUMENTS, AND ALL OF THE OBLIGATIONS OF
BORROWER UNDER ANY OF THE LOAN DOCUMENTS ARE PERFORMABLE IN DALLAS COUNTY,
TEXAS. VENUE OF ANY LITIGATION INVOLVING THIS AGREEMENT OR ANY LOAN DOCUMENT
SHALL BE MAINTAINED IN AN APPROPRIATE STATE OR FEDERAL COURT LOCATED IN DALLAS
COUNTY, TEXAS, TO THE EXCLUSION OF ALL OTHER VENUES.
11.6 Maximum
Interest.
It is
expressly stipulated and agreed to be the intent of Borrower and Bank at all
times to comply strictly with the applicable Texas law governing the maximum
rate or amount of interest payable on the indebtedness evidenced by any Note
or
any Loan Document, and the Related Indebtedness (or applicable United States
federal law to the extent that it permits Bank to contract for, charge, take,
reserve or receive a greater amount of interest than under Texas law). If the
applicable law is ever judicially interpreted so as to render usurious any
amount (a) contracted for, charged, taken, reserved or received pursuant to
any
Note, any of the other Loan Documents or any other communication or writing
by
or between Borrower and Bank related to the transaction or transactions that
are
the subject matter of the Loan Documents, (b) contracted for, charged, taken,
reserved or received by reason of Bank’s exercise of the option to accelerate
the maturity of any Note and/or any and all indebtedness paid or payable by
Borrower to Bank pursuant to any Loan Document other than any Note (such other
indebtedness being referred to in this Section as the “Related
Indebtedness”),
or
(c) Borrower will have paid or Bank will have received by reason of any
voluntary prepayment by Borrower of any Note, then it is Borrower’s and Bank’s
express intent that all amounts charged in excess of the Maximum Rate shall
be
automatically canceled, ab
initio,
and all
amounts in excess of the Maximum Rate theretofore collected by Bank shall be
credited on the principal balance of any Note and (or, if any Note has been
or
would thereby be paid in full, refunded to Borrower), and the provisions of
any
Note and the other Loan Documents shall immediately be deemed reformed and
the
amounts thereafter collectible hereunder and thereunder reduced, without the
necessity of the execution of any new document, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder and thereunder; provided,
however,
if any
Note has been paid in full before the end of the stated term of any such Note,
then Borrower and Bank agree that Bank shall, with reasonable promptness after
Bank discovers or is advised by Borrower that interest was received in an amount
in excess of the Maximum Rate, either refund such excess interest to Borrower
and/or credit such excess interest against such Note and/or any Related
Indebtedness then owing by Borrower to Bank. Borrower hereby agrees that as
a
condition precedent to any claim seeking usury penalties against Bank, Borrower
will provide written notice to Bank, advising Bank in reasonable detail of
the
nature and amount of the violation, and Bank shall have sixty (60) days after
receipt of such notice in which to correct such usury violation, if any, by
either refunding such excess interest to Borrower or crediting such excess
interest against the Note to which the alleged violation relates and/or the
Related Indebtedness then owing by Borrower to Bank. All sums contracted for,
charged, taken, reserved or received by Bank for the use, forbearance or
detention of any debt evidenced by any Note and/or the Related Indebtedness
shall, to the extent permitted by applicable law, be amortized or spread, using
the actuarial method, throughout the stated term of such Note and/or the Related
Indebtedness (including any and all renewal and extension periods) until payment
in full so that the rate or amount of interest on account of any Note and/or
the
Related Indebtedness does not exceed the Maximum Rate from time to time in
effect and applicable to such Note and/or the Related Indebtedness for so long
as debt is outstanding. In no event shall the provisions of Chapter 346 of
the
Texas Finance Code (which regulates certain revolving credit loan accounts
and
revolving triparty accounts) apply to any Note and/or any of the Related
Indebtedness. Notwithstanding anything to the contrary contained herein or
in
any of the other Loan Documents, it is not the intention of Bank to accelerate
the maturity of any interest that has not accrued at the time of such
acceleration or to collect unearned interest at the time of such
acceleration.
11.7 Ceiling
Election.
To the
extent that Bank is relying on Chapter 303 of the Texas Finance Code to
determine the Maximum Rate payable on any such Note and/or any other portion
of
the Indebtedness, Bank will utilize the weekly ceiling from time to time in
effect as provided in such Chapter 303, as amended. To the extent federal law
permits Bank to contract for, charge, take, receive or reserve a greater amount
of interest than under Texas law, Bank will rely on federal law instead of
such
Chapter 303 for the purpose of determining the Maximum Rate. Additionally,
to
the extent permitted by applicable law now or hereafter in effect, Bank may,
at
its option and from time to time, utilize any other method of establishing
the
Maximum Rate under such Chapter 303 or under other applicable law by giving
notice, if required, to Borrower as provided by applicable law now or hereafter
in effect.
11.8 Invalid
Provisions.
If any
provision of any of the Loan Documents is held to be illegal, invalid, or
unenforceable under present or future Laws effective during the term thereof,
such provision shall be fully severable, the appropriate Loan Document shall
be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part thereof; and the remaining provisions thereof shall
remain in full force and effect and shall not be effected by the illegal,
invalid, or unenforceable provision or by its severance therefrom. Furthermore,
in lieu of such illegal, invalid, or unenforceable provision, there shall be
added automatically as a part of such Loan Document a provision as similar
in
terms to such illegal, invalid, or unenforceable provision as may be possible
and be legal, valid, and enforceable.
11.9 Amendments.
This
Agreement may be amended only by an instrument in writing executed jointly
by
Borrower and Bank and supplemented only by documents delivered or to be
delivered in accordance with the express terms hereof.
11.10 Multiple
Counterparts; Facsimiles.
This
Agreement has been executed in a number of identical counterparts, each of
which
constitutes an original and all of which constitute, collectively, one
agreement; but in making proof of this Agreement, it shall not be necessary
to
produce or account for more than one such counterpart. Delivery
of an executed counterpart of this Agreement by facsimile shall be equally
as
effective as delivery of an executed original counterpart and shall constitute
a
covenant to deliver an executed original counterpart, but the failure to do
so
shall not affect the validity, enforceability and binding effect of this
Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.
11.11 Parties
Bound.
This
Agreement shall be binding upon and inure to the benefit of Borrower, Bank
and
their respective successors and assigns; provided that Borrower may not, without
the prior written consent of Bank, assign any of its Rights, duties, or
obligations hereunder. No term or provision of this Agreement shall inure to
the
benefit of any Person other than Borrower and Bank and their respective
successors and assigns; consequently, no Person other than Borrower and Bank
and
their respective successors and assigns, shall be entitled to rely upon, or
to
raise as a defense, in any manner whatsoever, the failure of Borrower or Bank
to
perform, observe, or comply with any such term or provision.
11.12 Bank’s
Consent or Approval.
Except
where otherwise expressly provided in the Loan Documents, in any instance where
the approval, satisfaction, consent or the exercise of judgment of Bank is
required, the granting or denial of such approval, satisfaction or consent
and
the exercise of such judgment shall be (a) within the sole discretion of Bank,
and (b) deemed to have been given only by a specific writing intended for the
purpose and executed by Bank. Each provision for consent, approval,
satisfaction, inspection, review, or verification by Bank is for Bank’s own
purposes and benefit only.
11.13 Loan
Agreement Governs.
In the
event of any conflict between the terms of this Agreement and any terms of
any
other Loan Document, the terms of the Loan Document selected by Bank shall
govern. All of the Loan Documents are by this reference incorporated into this
Agreement.
11.14 WAIVER
OF JURY TRIAL.
TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER HEREBY IRREVOCABLY AND
EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT
OF OR
RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY
OR THE ACTIONS OF BANK IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT
THEREOF.
11.15 ENTIRE
AGREEMENT.
THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS CONTAIN THE FINAL, ENTIRE AGREEMENT
BETWEEN THE PARTIES HERETO RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF
AND
ALL PRIOR AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATIVE HERETO AND THERETO
WHICH
ARE NOT CONTAINED HEREIN OR THEREIN ARE SUPERSEDED AND TERMINATED HEREBY, AND
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY NOT BE CONTRADICTED OR VARIED
BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES
HERETO.
[Remainder
of page intentionally left blank.]
IN
WITNESS WHEREOF, the parties, intending to be legally bound hereby, have duly
executed this Agreement as of the day and year first written above.
BANK:
BANK
OF
TEXAS, N.A.,
a
national banking association
By:
/s/Authorized
Signatory
Name:
Title:
Address
for Notices:
Bank
of
Texas, N.A.
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇
▇▇▇▇▇▇, Assistant Vice President
Fax
No.: (▇▇▇)
▇▇▇-▇▇▇▇
Telephone
No.: (▇▇▇)
▇▇▇-▇▇▇▇
e-mail: ▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇▇.▇▇▇
BORROWER:
LIGHTING
SCIENCE GROUP CORPORATION,
a
Delaware corporation
By:
/s/▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
Name:
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
Title:
Chief
Financial Officer
Address
for Notices:
Lighting
Science Group Corporation
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇
▇▇▇▇▇▇▇▇
Fax
No.: (▇▇▇)
▇▇▇-▇▇▇▇
Telephone
No.: (▇▇▇)
▇▇▇-▇▇▇▇
email: ▇▇▇▇▇.▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
EXHIBIT
A
COMPLIANCE
CERTIFICATE
FOR
QUARTER ENDED __________________________ (THE “SUBJECT
QUARTER”)
BANK: BANK
OF
TEXAS, N.A.
BORROWER: LIGHTING
SCIENCE GROUP CORPORATION
This
Certificate is delivered under the Loan Agreement (the “Agreement”)
dated
as of June 29, 2006, between Borrower and Bank as such may have been amended,
supplemented or replaced. Capitalized terms used in this Certificate shall,
unless otherwise indicated, have the meanings set forth in the Agreement. On
behalf of Borrower, the undersigned certifies to Bank on the date hereof that
(a) no default or Event of Default has occurred and is continuing, (b) all
representations and warranties of Borrower contained in the Agreement and in
the
other Loan Documents are true and correct in all material respects, and (c)
the
information set forth below hereto is true and correct as of the last day of
the
Subject Quarter:
DESCRIPTION
OF COVENANT CALCULATION
AS OF:_______________
(1) Bookings
(Section 8.1 of Agreement) $___________________
(to
equal
or exceed $1,000,000.00)
In
compliance ____ ____
yes no
LIGHTING
SCIENCE GROUP CORPORATION
By:
Name:
Title:
SCHEDULE
ONE
ADDITIONAL
CONDITIONS PRECEDENT
1. Receipt
by Bank of legal fees and expenses associated with documenting the
transaction.
SCHEDULE
TWO
DISCLOSURE
SCHEDULE