1
EXHIBIT 10.12
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made effective as of the 29th day of
May, 1997, by and between FLEET CAPITAL CORPORATION ("Lender"), a Rhode Island
corporation with an office at 2711 North ▇▇▇▇▇▇▇, Suite 2100, LB 21, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, and PELICAN STATE SUPPLY COMPANY, INC., a Nevada corporation
("Borrower"), with offices at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇.
SECTION 1. GENERAL DEFINITIONS
1.1. Defined Terms. When used herein, the following terms shall have
the following meanings (terms defined in the singular to have the same meaning
when used in the plural and vice versa):
Accounts - all accounts, contract rights, chattel paper, instruments and
documents, whether now owned or hereafter created or acquired by Borrower or in
which Borrower now has or hereafter acquires any interest.
Account Debtor - any Person who is or may become obligated under or on
account of an Account.
Adjusted Net Earnings From Operations - with respect to any fiscal
period, means the consolidated (in accordance with GAAP) net earnings (or loss)
of Parent and its Subsidiaries after provision for income taxes for such fiscal
period of Parent, all as reflected on the consolidated financial statement of
Parent and its Subsidiaries supplied to Lender pursuant to Section 9.1(J)
hereof, but excluding: (a) any gain or loss arising from the sale of capital
assets; (b) any gain arising from any write-up of assets; (c) earnings of any
Subsidiary accrued prior to the date it became a Subsidiary; (d) earnings of
any corporation, substantially all the assets of which have been acquired in
any manner by Parent or a Subsidiary of Parent, realized by such corporation
prior to the date of such acquisition; (e) net earnings of any business entity
(other than a Subsidiary) in which Parent or a Subsidiary of Parent has an
ownership interest unless such net earnings shall have actually been received
by Parent or such Subsidiary of Parent in the form of cash distributions; (f)
any portion of the net earnings of any Subsidiary which for any reason is
unavailable for payment of dividends to Parent or a Subsidiary of Parent; (g)
the earnings of any Person to which any assets of Parent or a Subsidiary of
Parent shall have been sold, transferred or disposed of, or into which Parent
or a Subsidiary of Parent shall have merged, or been a party to any
consolidation or other form of reorganization, prior to the date of such
transaction; (h) any gain arising from the acquisition of any Securities of
Parent or a Subsidiary of Parent; and (i) any gain arising from extraordinary
or non-recurring items.
Adjusted Tangible Assets - all assets except: (a) deferred assets,
other than prepaid insurance and prepaid taxes; (b) patents, copyrights,
trademarks, trade names, non-compete agreements, franchises and other similar
intangibles; (c) good will; (d) Restricted Investments; (e) unamortized debt
discount and expense; (f) assets located and notes and receivables due from
LOAN AND SECURITY AGREEMENT - Page 1
2
obligors outside of the United States of America; and (g) Accounts, notes and
other receivables due from Affiliates or employees.
Adjusted Tangible Net Worth - at any date means a sum equal to: (a) the
net book value (after deducting related depreciation, obsolescence,
amortization, valuation, and other proper reserves) at which the Adjusted
Tangible Assets of a Person would be shown on a balance sheet at such date in
accordance with GAAP, less (b) the amount at which such Person's liabilities
(other than capital stock and surplus) would be shown on such balance sheet in
accordance with GAAP, plus (c) Subordinated Debt.
Affiliate - a Person (other than a Subsidiary): (a) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, Borrower; (b) which beneficially owns or holds 5%
or more of any class of the voting Securities of Borrower; or (c) 5% or more of
the voting Securities (or in the case of a Person which is not a corporation,
5% or more of the equity interest) of which is beneficially owned or held by
Borrower or a Subsidiary of Borrower. For purposes hereof, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting Securities, by contract or otherwise.
Agreement- this Loan and Security Agreement, as amended, modified,
supplemented or restated from time to time.
Agreement and Plan of Reorganization - that certain Agreement and Plan
of Reorganization made and entered into effective as of May ___, 1997, by and
among ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Borrower, Parent and Pelican State Supply Company, a
Louisiana corporation.
American MRO - American MRO, Inc., a Nevada corporation.
Applicable Annual Rate - as defined in Section 3.1(A) of this Agreement.
Availability - The amount of money which Borrower is entitled to borrow
from time to time as Revolving Credit Loans, such amount being the difference
derived when the sum of the principal amount of Revolving Credit Loans then
outstanding (including any amounts which Lender may have paid for the account
of Borrower pursuant to any of the Loan Documents and which have not been
reimbursed by Borrower) and the undrawn amount of all LC Guaranties then
outstanding is subtracted from the Borrowing Base. If the amount outstanding
is equal to or greater than the Borrowing Base, Availability is 0.
Average Daily Availability - the amount obtained by adding the
Availability at the end of each day during the period in question and by
dividing such sum by the number of days in such period.
LOAN AND SECURITY AGREEMENT - Page 2
3
Average Monthly Loan Balance - the amount obtained by adding the unpaid
balance of Revolving Credit Loans owing by Borrower to Lender at the end of
each day for each day during the month in question and by dividing such sum by
the number of days in such month.
Bank - Fleet National Bank, and its successors or assigns.
Base Rate - the rate of interest announced or quoted by Bank from time
to time as its prime rate for commercial loans, whether or not such rate is the
lowest rate charged by Bank to its most preferred borrowers; and, if the prime
rate for commercial loans is discontinued by Bank as a standard, a comparable
reference rate designated by Bank as a substitute therefor shall be the Base
Rate.
Bayou - Bayou Pumps, Inc., a Texas corporation.
Borrower - Pelican State Supply Company, Inc., a Nevada corporation.
Borrowing Base - as at any date of determination thereof, an amount
equal to the lesser of:
(a) an amount equal to: (i) Three Million Dollars
($3,000,000); minus (ii) an amount equal to the sum of (A) the face
amount of all LC Guaranties and Letters of Credit issued by Lender or
Affiliates of Lender and outstanding at such date, and (B) any amounts
which Lender may be obligated to pay in the future for the account of
Borrower pursuant to this Agreement, the Other Agreements or otherwise;
or
(b) an amount equal to:
(i) 85% of the net amount of Eligible Accounts
outstanding at such date (as determined by Lender in its
sole discretion);
PLUS
(ii) the lesser of (A) One Million Two Hundred
Fifty Thousand Dollars ($1,250,000) or (B) the sum of (x)
50% of the value of Eligible Inventory (as determined by
Lender in its sole discretion) at such date consisting of
finished goods, calculated on the basis of the lower of
cost or fair market value (as determined by Lender in its
sole discretion) with the cost of finished goods
calculated on a first-in, first-out basis, and (y) the
lesser of (I) $250,000 or (II) 25% of the value of
Eligible Slow-Moving Inventory (as determined by Lender in
its sole discretion) at such date consisting of finished
goods, calculated on the basis of the lower of cost or
fair market value (as determined by Lender in its sole
discretion) with the cost of finished goods calculated on
a first-in, first-out basis;
MINUS (subtract from the sum of clauses (i) and (ii)
above)
LOAN AND SECURITY AGREEMENT - Page 3
4
(iii) an amount equal to the sum of (A) the face
amount of all LC Guaranties and Letters of Credit issued
by Lender or Affiliates of Lender and outstanding at such
date and (B) any amounts which Lender may be obligated to
pay in the future for the account of Borrower pursuant to
this Agreement, the Other Agreements or otherwise.
For purposes hereof, the net amount of Eligible Accounts at any time
shall be the face amount of such Eligible Accounts less any and all returns,
rebates, discounts, (which may, at Lender's option, be calculated on shortest
terms), credits, allowances or sales, excise or withholding taxes of any nature
at any time issued, owing, claimed by Account Debtors, granted, outstanding or
payable in connection with such Accounts at such time.
Business Day - a day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of Texas or is a day on which banking
institutions in such state are closed.
Capital Expenditures - expenditures made and liabilities incurred for
the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the direct or indirect acquisition of such assets by way of
increased product or service charges, offset items or otherwise and the
principal portion of payments with respect to capitalized lease obligations.
Cash Flow - with respect to any fiscal period, means the Adjusted Net
Earnings From Operations of Parent and its Subsidiaries for such period, plus
non-cash charges of Parent and its Subsidiaries in respect to depreciation and
amortization for such period minus Capital Expenditures made by Parent and its
Subsidiaries during such period, minus scheduled principal payments on
Indebtedness of Parent and its Subsidiaries for such period, minus
Distributions made on the capital stock of Parent and its Subsidiaries during
such period, all of the above being determined on a consolidated basis in
accordance with GAAP.
Closing Date - the date on which all of the conditions precedent in
Section 10 are satisfied and the initial Loan is made hereunder.
Code - the Uniform Commercial Code as adopted and in force in the State
of Texas, as from time to time in effect.
Collateral - all of the Property and interests in Property described in
Section 4 hereof, and all other Property and interests in Property that now or
hereafter secure the payment and performance of any of the Obligations.
Commitment - Three Million Dollars ($3,000,000.00).
Current Assets - at any date means the amount at which all of the
current assets of a Person would be properly classified as current assets on a
balance sheet at such date in
LOAN AND SECURITY AGREEMENT - Page 4
5
accordance with GAAP except that amounts due from Affiliates and investments in
Affiliates shall be excluded there from.
Current Liabilities - at any date means the amount at which all of the
current liabilities of a Person would be properly classified as current
liabilities on a balance sheet at such date in accordance with GAAP excluding
the Loans and current maturities of any long-term indebtedness.
Default - an event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, become an Event of Default.
Default Rate - as defined in Section 3.1(A) of this Agreement.
Distribution - in respect of any corporation means and_includes: (a)
the payment of any dividends or other distributions on capital stock of the
corporation (except distributions in such stock) and (b) the redemption or
acquisition of Securities unless made contemporaneously from the net proceeds
of the sale of Securities.
Dominion Account - a special account of Borrower established by Borrower
pursuant to this Agreement at a bank selected by Borrower, but acceptable to
Lender, in its sole discretion, and over which Lender shall have sole and
exclusive access and control for withdrawal purposes.
Eligible Account - an Account arising in the ordinary course of
Borrower's business from the sale of goods or rendition or services which
Lender, in its credit judgment, deems to be an Eligible Account. Without
limiting the generality of the foregoing, no Account shall be an Eligible
Account if:
(a) it arises out of a sale made by Borrower to a Subsidiary
or an Affiliate of Borrower or to a Person controlled by an Affiliate of
Borrower; or
(b) it is unpaid for more than 60 days after the original due
date shown on the invoice; or
(c) it is due or unpaid more than 90 days after the original
invoice date; or
(d) 20% or more of the Accounts from the Account Debtor are
not deemed Eligible Accounts hereunder; or
(e) the total unpaid Accounts of the Account Debtor exceed 25%
of the net amount of all Accounts, to the extent of such excess; or
(f) any covenant, representation or warranty contained in this
Agreement with respect to such Account has been breached; or
LOAN AND SECURITY AGREEMENT - Page 5
6
(g) the Account Debtor is also Borrower's creditor or
supplier, or the Account Debtor has disputed liability with respect to
such Account, or the Account Debtor has made any claim with respect to
any other Account due from such Account Debtor to Borrower, or the
Account otherwise is or may become subject to any right of setoff by the
Account Debtor; or
(h) the Account Debtor has commenced a voluntary case under
the federal bankruptcy laws, as now constituted or hereafter amended, or
made an assignment for the benefit of creditors, or a decree or order
for relief has been entered by a court having jurisdiction in the
premises in respect of the Account Debtor in an involuntary case under
the federal bankruptcy laws, as now constituted or hereafter amended, or
if the Account Debtor has ceased to be Solvent or consented to or
suffered a receiver, trustee, liquidator or custodian to be appointed
for it or for all or a significant portion of its assets or affairs; or
(i) it arises from a sale to an Account Debtor outside the
United States; or
(j) it arises from a sale to the Account Debtor on a ▇▇▇▇-and-
hold, guaranteed sale, sale-or-return, sale-on-approval, consignment or
any other repurchase or return basis; or
(k) Lender in good faith believes that collection of such
Account is insecure or that payment thereof is doubtful or will be
delayed by reason of the Account Debtor's financial condition; or
(l) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof; or
(m) the Account Debtor is located in the State of New Jersey,
Indiana, West Virginia or Minnesota, or any other state imposing similar
conditions on the right of a creditor to collect accounts, unless
Borrower has either qualified to transact business in such state as a
foreign corporation or filed a Notice of Business Activities Report or
other required report with the appropriate officials in those states for
the then current year; or
(n) the Account is subject to a Lien other than a Permitted
Lien; or
(o) the goods giving rise to such Account have not been
delivered to and accepted by the Account Debtor or the services giving
rise to such Account have not been performed by Borrower and accepted by
the Account Debtor or the Account otherwise does not represent a final
sale; or
(p) the total unpaid Accounts of the Account Debtor exceed a
credit limit determined by Lender, to the extent such Account exceeds
such limit; or
LOAN AND SECURITY AGREEMENT - Page 6
7
(q) the Account is evidenced by chattel paper or an instrument
of any kind, or has been reduced to judgment; or
(r) Borrower has made any agreement with the Account Debtor
for any deduction therefrom, except for discounts or allowances which
are made in the ordinary course of business for prompt payment and which
discounts or allowances are reflected in the calculation of the face
value of each invoice related to such Account; or
(s) Borrower has made an agreement with the Account Debtor to
extend the time of payment thereof; or
(t) the Account arises from a retail sale of goods to a Person
who is purchasing same primarily for personal, family or household
purposes.
Eligible Inventory - such Inventory of Borrower which Lender, in its
credit judgment, deems to be Eligible Inventory. Without limiting the
generality of the foregoing, no Inventory shall be Eligible Inventory unless,
in Lender's credit judgment, it
(a) is finished goods,
(b) is in good, new and saleable condition,
(c) is not obsolete or unmerchantable,
(d) has been owned by Borrower for not more than twelve
months,
(e) meets all standards imposed by any governmental agency or
authority,
(f) conforms in all respects to the warranties and
representations set forth in Section 6.1 hereof,
(g) is at all times subject to Lender's duly perfected, first
priority security interest and no other Lien except a Permitted Lien,
(h) is situated at a location in compliance with Section 4.3
hereof and is not in transit, and
(i) it is not Slow-Moving Inventory.
Eligible Slow-Moving Inventory - such Slow-Moving Inventory of Borrower
which Lender, in its credit judgment, deems to be Eligible Slow-Moving
Inventory. Without limiting the generality of the foregoing, no Inventory
shall be Eligible Slow-Moving Inventory unless, in Lender's credit judgment, it
(a) is finished goods,
LOAN AND SECURITY AGREEMENT - Page 7
8
(b) is in good, new and saleable condition,
(c) is not obsolete or unmerchantable,
(d) has been owned by Borrower for not more than twelve
months,
(e) meets all standards imposed by any governmental agency or
authority,
(f) conforms in all respects to the warranties and
representations set forth in Section 6.1 hereof,
(g) is at all times subject to Lender's duly perfected, first
priority security interest and no other Lien except a Permitted Lien,
(h) is situated at a location in compliance with Section 4.3
hereof and is not in transit, and
(i) it is not Eligible Inventory.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters.
Equipment - all machinery, apparatus, equipment, fittings, furniture,
fixtures, motor vehicles and other tangible personal Property (other than
Inventory) of every kind and description used in Borrower's operations or owned
by Borrower or in which Borrower has an interest, whether now owned or
hereafter acquired and wherever located, and all parts, accessories and special
tools and all increases and accessions thereto and substitutions and
replacements therefor.
ERISA - the Employee Retirement Income Security Act of 1974, and all
rules and regulations from time to time promulgated thereunder.
Eurodollar Base Rate - with respect to a Eurodollar Loan for the
relevant Eurodollar Interest Period, a rate per annum equal to the quotient of
the following: (a) the rate at which deposits in U.S. dollars in immediately
available funds are offered by Lender or Bank to first-class banks in the
London interbank market at approximately 11:00 a.m. (London time) two (2)
Business Days prior to the first day of such Eurodollar Interest Period, in the
approximate amount of the Eurodollar Loan and having a maturity approximately
equal to the Eurodollar Interest Period divided by (b) the difference of 1.00
minus the Eurodollar Reserve Requirement.
Eurodollar Borrowing Notice - as defined in Section 3.7(A) of this
Agreement.
LOAN AND SECURITY AGREEMENT - Page 8
9
Eurodollar Interest Period - with respect to a Eurodollar Loan, a period
of one (1), two (2), three (3) or six (6) months commencing on a Business Day
selected by Borrower pursuant to this Agreement. Such Eurodollar Interest
Period shall end on (but exclude) the day which corresponds numerically to such
date one (1), two (2), three (3) or six (6) months thereafter, provided,
however, that if there is no such numerically corresponding day in such first
(1st), second (2nd), third (3rd) or sixth (6th) succeeding month, such
Eurodollar Interest Period shall end on the last Business Day of such first
(1st), second (2nd), third (3rd) or sixth (6th) succeeding month. If a
Eurodollar Interest Period would otherwise end on a day which is not a Business
Day, such Eurodollar Interest Period shall end on the next succeeding Business
Day, provided, however, that if said next succeeding Business Day falls in a
new month, such Eurodollar Interest Period shall end on the immediately
preceding Business Day.
Eurodollar Loan - a Revolving Credit Loan which bears interest at a
Eurodollar Base Rate.
Eurodollar Reserve Requirement - on any day, means that percentage
(expressed as a decimal fraction) which is in effect on such day, as provided
by the Board of Governors of the Federal Reserve System (or any successor
governmental body) applied for determining the maximum reserve requirements
(including, without limitation, basic, supplemental, marginal and emergency
reserves) under Regulation D with respect to "eurocurrency liabilities" as
currently defined in Regulation D, or under any similar or successor regulation
with respect to eurocurrency liabilities or eurocurrency funding. Each
determination by Lender of the Eurodollar Reserve Requirement shall, in the
absence of manifest error, be conclusive and binding.
Excess - as defined in Section 3.1(C) of this Agreement.
Event of Default - as defined in Section 11.1 of this Agreement.
GAAP - generally accepted accounting principles in the United States of
America in effect from time to time.
General Intangibles - all general intangibles of Borrower, whether now
owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, deposit accounts, inventions, designs, patents, patent applications,
trademarks, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, tax refund claims, computer programs, all
claims under guaranties, security interests or other security held by or
granted to Borrower to secure payment of any of the Accounts by an Account
Debtor, all rights to indemnification and all other intangible property of
every kind and nature (other than Accounts).
Guarantors - Parent, Sepco, Bayou Pumps, American MRO, and any other
Person who may hereafter guarantee payment or performance of the whole or any
part of the Obligations.
LOAN AND SECURITY AGREEMENT - Page 9
10
Guaranty Agreements - the Continuing Guaranty Agreements which are to be
executed by Guarantors in form and substance satisfactory to Lender.
Indebtedness - as applied to a Person means, without duplication (i) all
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person as
at the date as of which Indebtedness is to be determined, including, without
limitation, capitalized lease obligations, (ii) all obligations of other
Persons which such Person has guaranteed and (iii) in the case of Borrower
(without duplication), the Obligations.
Inventory - all of Borrower's inventory, whether now owned or hereafter
acquired, and wherever located, including, but not limited to, all goods
intended for sale or lease by Borrower, or for display or demonstration; all
work in process; all raw materials and other materials and supplies of every
nature and description used or which might be used in connection with the
manufacture, printing, packing, shipping, advertising, selling, leasing or
furnishing of such goods or otherwise used or consumed in Borrower's business;
and all documents evidencing and General Intangibles relating to any of the
foregoing.
LC Guaranty - a guaranty executed by Lender at Borrower's request in
favor of a Person who has issued a Letter of Credit.
Letter of Credit - a letter of credit at any time issued for the account
of Borrower.
Leverage Ratio - at any date means the ratio of the Indebtedness of
Borrower to Adjusted Tangible Net Worth of Borrower.
Lien - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract, and including, but not limited
to, the security interest, security title or lien arising from a security
agreement, mortgage, deed of trust, deed to secure debt, encumbrance, pledge,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes.
Loan Account - the loan account established on the books of Lender
pursuant to Section 2.3 of this Agreement.
Loan Documents - this Agreement and the Other Agreements.
Loans - all loans and advances made by Lender pursuant to this
Agreement, including, without limitation, all Revolving Credit Loans.
Maximum Legal Rate - as defined in Section 3.1(B) of this Agreement.
Obligations - all Loans and all other advances, debts, liabilities,
obligations, covenants and duties owing, arising, due or payable from Borrower
to Lender of any kind or nature, present or future, whether or not evidenced by
any note, guaranty or other instrument, whether arising
LOAN AND SECURITY AGREEMENT - Page 10
11
under this Agreement or any of the Other Agreements or otherwise, whether
direct or indirect (including those acquired by assignment), absolute or
contingent, primary or secondary, due or to become due, now existing or
hereafter arising and however acquired. The term includes, without limitation,
the reimbursement obligations of Borrower under Section 2.4 of this Agreement
and all other interest, charges, expenses, fees, attorney's fees and any other
sums chargeable to Borrower under this Agreement or any of the Other
Agreements.
Original Term - as defined in Section 3.3(A) of this Agreement.
Other Agreements - any and all agreements, instruments and documents
heretofore, now or hereafter executed by Borrower or Guarantors, as the case
may be, and delivered to Lender in respect to the transactions contemplated by
this Agreement, including, without limitation, the Term Note, the Shareholder
Pledge Agreement, and the Guaranty Agreements.
Overadvance - as defined in Section 2.1 of this Agreement.
Parent - DXP Enterprises, Inc., a Texas corporation.
Participating Lender - each Person who shall be granted the right by
Lender to participate in any of the Loans described in this Agreement and who
shall have entered into a participation agreement in form and substance
satisfactory to Lender.
Permitted Liens - any Lien of a kind specified in [subparagraphs (i)
through (vii)] of Section 9.2(E) of this Agreement.
Person - an individual, partnership, corporation, joint stock company,
trust or unincorporated organization, or a government or agency or political
subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for
employees of Borrower that is covered by Title IV of ERISA.
Prohibited Transaction - any transaction set forth in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986.
Projections - Borrower's forecasted (a) balance sheets, (b) profit and
loss statements, and (c) cash flow statements, all prepared on a consistent
basis with Borrower's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
Property - any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
Purchase Money Lien - a Lien upon fixed assets granted by Borrower to
secure Indebtedness incurred by Borrower to purchase such fixed assets.
LOAN AND SECURITY AGREEMENT - Page 11
12
Renewal Terms - as defined in Section 3.3(A) of this Agreement.
Reportable Event - any of the events set forth in Section 4043(b) of
ERISA.
Restricted Investment - any investment in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or other
obligation or Security, or by loan, advance or capital contribution, or
otherwise, or in any Property except the following: (a) investments in one or
more Subsidiaries of Borrower; (b) Property to be used in the ordinary course
of business; (c) Current Assets arising from the sale of goods and services in
the ordinary course of business of Borrower; (d) investments in direct
obligations of the United States of America, or any agency thereof or
obligations guaranteed by the United States of America, provided that such
obligations mature within one year from the date of acquisition thereof; (e)
investments in certificates of deposit maturing within one year from the date
of acquisition issued by a bank or trust company organized under the laws of
the United States or any state thereof having capital surplus and undivided
profits aggregating at least $100,000,000; and (f) investments in commercial
paper given the highest rating by a national credit rating agency and maturing
not more than 270 days from the date of creation thereof.
Revolving Credit Loan - a Loan made by Lender as provided in Section 2.1
of this Agreement.
Schedule of Accounts - as defined in Section 5.2 of this Agreement.
Security - shall have the same meaning as in Section 2(l) of the
Securities Act of 1933, as amended.
Sepco - Sepco Industries, Inc., a Texas corporation.
Sepco Loan Agreement - that certain Second Amended and Restated Loan and
Security Agreement, dated as of April 1, 1994, executed by Lender and Sepco, as
renewed, extended, modified and restated from time to time.
Shareholder Pledge Agreement - the Pledge Agreement to be executed by
Parent, in form and substance acceptable to Lender, by which Parent grants to
Lender a first priority security interest in and to all of the common stock of
Borrower.
Slow-Moving Inventory - at any date stock Inventory of Borrower as to
which there is a greater than twelve-month supply, i.e., the value (calculated
on the basis of the lower of cost or fair market value, as determined by
Lender) of such Inventory in the possession or under the control of Borrower is
greater than the dollar amount of such Inventory sold by Borrower during the
twelve-month period preceding such date.
Solvent - as to any Person, such Person (a) owns Property whose fair
saleable value is greater than the amount required to pay all of such Person's
Indebtedness (including contingent debts), (b) is able to pay all of its
Indebtedness as such Indebtedness matures, and (c) has capital
LOAN AND SECURITY AGREEMENT - Page 12
13
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
Subordinated Debt - Indebtedness of Borrower to whose existence Lender
has consented in writing and that is subordinated to the Obligations pursuant
to a written agreement acceptable to Lender in all respects as to both form and
substance.
Subsidiary - any corporation of which a Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the voting
Securities at the time of determination.
Transaction - the transaction described in the Agreement and Plan of
Reorganization whereby pursuant to the Transaction Documents Borrower acquires
all of the capital stock of Pelican State Supply Company, a Louisiana
corporation, and Pelican State Supply Company, a Louisiana corporation, merges
into Borrower, with Borrower being the surviving corporation.
Transaction Documents - the Agreement and Plan of Reorganization and all
other documents and instruments to be executed or delivered in connection with
the Transaction.
Working Capital - at any date means Current Assets minus Current
Liabilities.
1.2. Accounting and Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP
consistent with that applied in preparation of the financial statements
referred to in Section 9.1(J), and all financial data pursuant to the Agreement
shall be prepared in accordance with such principles. All other terms
contained in this Agreement shall have, when the context so indicates, the
meanings provided for by the Code to the extent the same are used or defined
therein.
1.3. Certain Matters of Construction. The terms "herein", "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular section, paragraph or subdivision. Any pronoun
used shall be deemed to cover all genders. The section titles, table of
contents and list of exhibits appear as a matter of convenience only and shall
not affect the interpretation of this Agreement. All references to statutes
and related regulations shall include any amendments of same and any successor
statutes and regulations. All references to any instruments or agreements,
including, without limitation, references to this Agreement or any of the Other
Agreements, shall include any and all modifications or amendments thereto and
any and all extensions or renewals thereof.
SECTION 2. CREDIT FACILITY
2.1. Revolving Credit Loans. Subject to the terms and conditions of
this Agreement, Lender agrees to make Revolving Credit Loans to Borrower from
time to time, in amounts determined by Lender in its sole discretion, up to a
maximum principal amount at any time outstanding equal to the Borrowing Base at
such time. If the unpaid balance of the Revolving Credit Loans should exceed
the Borrowing Base or any other limitation set forth in this Agreement, such
Revolving Credit Loans shall nevertheless constitute Obligations that are
LOAN AND SECURITY AGREEMENT - Page 13
14
secured by the Collateral and entitled to all benefits thereof. Insofar as
Borrower may request and Lender may be willing in its sole and absolute
discretion to make Revolving Credit Loans to Borrower at a time when the unpaid
balance of Revolving Credit Loans exceeds, or would exceed with the making of
any such Revolving Credit Loan, the Borrowing Base (any such Loan or Loans
being herein referred to individually as an "Overadvance" and collectively as
"Overadvances"), Lender shall enter such Overadvances as debits in the Loan
Account. All Overadvances shall be payable ON DEMAND, shall be secured by the
Collateral and shall bear interest as provided herein for Revolving Credit
Loans generally. The Revolving Credit Loans shall be used solely for the
satisfaction of existing Indebtedness of Borrower to and for Borrower's general
operating capital needs to the extent not inconsistent with the provisions of
this Agreement.
A request for a Revolving Credit Loan shall be made or shall be deemed
to be made, in the following manner: (i) Borrower may give Lender notice of
its intention to borrow, in which notice Borrower shall specify the amount of
the proposed borrowing and the proposed borrowing date (which notice shall be
in the form of a Eurodollar Borrowing Notice pursuant to Section 3.7(A) hereof
if Borrower intends to borrow a Eurodollar Loan); (ii) the becoming due of any
amount required to be paid under this Agreement as interest shall be deemed
irrevocably to be a request for a Revolving Credit Loan on the due date in the
amount required to pay such interest; (iii) the becoming due of any amount
required to be paid under this Agreement as principal shall be deemed
irrevocably to be a request for a Revolving Credit Loan on the due date for the
amount required to pay such principal; (iv) any payment made by Lender pursuant
to a Letter of Credit or LC Guaranty which is not immediately reimbursed by
Borrower shall be deemed irrevocably to be a request for a Revolving Credit
Loan on the date of such payment by Lender; and (v) the becoming due of any
other Obligations shall be deemed irrevocably to be a request for a Revolving
Credit Loan on the due date in the amount then so due.
2.2. All Loans to Constitute One Obligation. All Loans shall
constitute one general obligation of Borrower, and shall be secured by Lender's
security interest in and Lien upon all of the Collateral, and by all other
security interests and Liens heretofore, now or at any time or times hereafter
granted by Borrower to Lender.
2.3. Loan Account. Lender shall enter all Loans as debits to the Loan
Account and shall also record in the Loan Account all payments made by Borrower
on any Obligations and all proceeds of Collateral which are finally paid to
Lender, and may record therein, in accordance with customary accounting
practice, all charges and expenses properly chargeable to Borrower and any
other Obligation.
2.4 Reimbursement Obligations. If Lender shall pay any amount under
a Letter of Credit or LC Guaranty, then Borrower shall automatically become
obligated to immediately reimburse such amount to Lender, together with
interest from and after the date Lender makes such payment under such Letter of
Credit or LC Guaranty until payment in full to Lender by Borrower of Borrower's
reimbursement obligation which shall accrue at the applicable per annum rate of
interest then applicable for Revolving Credit Loans.
LOAN AND SECURITY AGREEMENT - Page 14
15
SECTION 3. INTEREST, FEES, TERM AND REPAYMENT
3.1. Interest and Charges.
(A) Interest shall accrue on the principal amount of the
Revolving Credit Loans outstanding at the end of each day at the following
rates per annum (individually called, as applicable, an "Applicable Annual
Rate"): (i) Eurodollar Loans shall bear interest at a rate per annum equal to
2.00% above the Eurodollar Base Rate for the Eurodollar Interest Period
applicable thereto and (ii) all other Revolving Credit Loans shall bear
interest at a rate per annum equal to .50% above the Base Rate. Revolving
Credit Loans shall bear interest at a rate per annum equal to .50% above the
Base Rate unless the Borrower provides a Eurodollar Borrowing Notice to the
Lender in accordance with Section 3.7(A) irrevocably electing that all or a
portion of the Revolving Credit Loans are to bear interest at a Eurodollar Base
Rate. Each Revolving Credit Loan that is not a Eurodollar Loan shall be
increased or decreased, as the case may be, by an amount equal to any increase
or decrease in the Base Rate, with such adjustments to be effective as of the
opening of business on the day that any such change in the Base Rate becomes
effective. The Base Rate in effect on the date hereof shall be the Base Rate
effective as of the opening of business on the date hereof, but if this
Agreement is executed on a day that is not a Business Day, the Base Rate in
effect on the date hereof shall be the Base Rate effective as of the opening of
business on the last Business Day immediately preceding the date hereof.
Interest shall be calculated on a daily basis (computed on the actual number of
days elapsed over a year of 360 days), commencing on the date hereof, and shall
be payable monthly, in arrears, on the first day of each month; provided,
however, that interest at the Maximum Legal Rate shall be computed on the
actual number of days elapsed over a year of 365 or 366 days, as the case may
be. Upon and after the occurrence of an Event of Default, and during the
continuation thereof, the principal amount of the Obligations shall bear
interest at the lesser of (i) the Maximum Legal Rate or (ii) a fluctuating rate
per annum, calculated daily (computed on the actual days elapsed over a year of
360 days), equal to 4.0% above the Applicable Annual Rate or other applicable
rate of interest (the "Default Rate").
(B) Notwithstanding the foregoing or any other provision in
this Agreement, (i) if at any time the amount of interest computed on the basis
of the Applicable Annual Rate or the Default Rate would exceed the amount of
such interest computed upon the basis of the maximum rate of interest permitted
by applicable state or federal law in effect from time to time hereafter (the
"Maximum Legal Rate"), the interest payable under this Agreement shall be
computed upon the basis of the Maximum Legal Rate, but any subsequent reduction
in the Applicable Annual Rate or Default Rate, as applicable, shall not reduce
such interest thereafter payable hereunder below the amount computed on the
basis of the Maximum Legal Rate until the aggregate amount of such interest
accrued and payable under this Agreement equals the total amount of interest
which would have accrued if such interest had been at all times computed solely
on the basis of the Applicable Annual Rate or Default Rate, as applicable; and
(ii) unless preempted by federal law, the Applicable Annual Rate or Default
Rate, as applicable, from time to time in effect hereunder may not exceed the
"indicated ceiling rate" from time to time in effect under Tex. Rev. Civ. Stat.
▇▇▇. art 5069-1.04(c) (▇▇▇▇▇▇ 1987).
LOAN AND SECURITY AGREEMENT - Page 15
16
(C) No agreements, conditions, provisions or stipulations
contained in this Agreement or any other instrument, document or agreement
between Borrower and Lender or default of Borrower, or the exercise by Lender
of the right to accelerate the payment of the maturity of principal and
interest, or to exercise any option whatsoever contained in this Agreement or
any other agreement between Borrower and Lender, or the arising of any
contingency whatsoever, shall entitle Lender to contract for, charge, or
receive, in any event, interest exceeding the Maximum Legal Rate. In no event
shall Borrower be obligated to pay interest exceeding such Maximum Legal Rate
and all agreements, conditions or stipulations, if any, which may in any event
or contingency whatsoever operate to bind, obligate or compel Borrower to pay a
rate of interest exceeding the Maximum Legal Rate, shall be without binding
force or effect, at law or in equity, to the extent only of the excess of
interest over such Maximum Legal Rate. In the event any interest is contracted
for, charged or received in excess of the Maximum Legal Rate ("Excess"),
Borrower acknowledges and stipulates that any such contract, charge, or receipt
shall be the result of an accident and bona fide error, and that any Excess
received by Lender shall be applied, first, to reduce the principal then unpaid
hereunder; second, to reduce the other Obligations; and third, returned to
Borrower, it being the intention of the parties hereto not to enter at any time
into a usurious or otherwise illegal relationship. Borrower recognizes that,
with fluctuations in the Base Rate, the Eurodollar Base Rate and the Maximum
Legal Rate, such a result could inadvertently occur. By the execution of this
Agreement, Borrower covenants that (i) the credit or return of any Excess shall
constitute the acceptance by Borrower of such Excess, and (ii) Borrower shall
not seek or pursue any other remedy, legal or equitable, against Lender, based
in whole or in part upon contracting for, charging or receiving of any interest
in excess of the maximum authorized by applicable law. For the purpose of
determining whether or not any Excess has been contracted for, charged or
received by Lender, all interest at any time contracted for, charged or
received by Lender in connection with this Agreement shall be amortized,
prorated, allocated and spread in equal parts during the entire term of this
Agreement.
(D) The provisions of Section 3.1(C) shall be deemed to be
incorporated into every document or communication relating to the Obligations
which sets forth or prescribes any account, right or claim or alleged account,
right or claim of Lender with respect to Borrower (or any other obligor in
respect of Obligations), whether or not any provision of Section 3.1 is
referred to therein. All such documents and communications and all figures set
forth therein shall, for the sole purpose of computing the extent of the
Obligations and obligations of the Borrower (or other obligor) asserted by
Lender thereunder, be automatically recomputed by Borrower or obligor, and by
any court considering the same, to give effect to the adjustments or credits
required by Section 3.1(C).
(E) If the applicable state or federal law is amended in the
future to allow a greater rate of interest to be charged under this Agreement
or the Other Agreements than is presently allowed by applicable state or
federal law, then the limitation of interest hereunder shall be increased to
the maximum rate of interest allowed by applicable state or federal law as
amended, which increase shall be effective hereunder on the effective date of
such amendment, and all interest charges owing to Lender by reason thereof
shall be payable upon demand.
LOAN AND SECURITY AGREEMENT - Page 16
17
(F) For the purpose of computing interest hereunder, all items
of payment received by Lender shall be deemed applied by Lender on account of
the Obligations (subject to final payment of such items) one (1) Business Day
after receipt by Lender of such items in Lender's account located in Chicago,
Illinois, and Lender shall be deemed to have received such items of payment on
the date specified in Section 3.5 hereof.
3.2. Unused Facility Fee. From the date hereof, Borrower agrees to
pay to Lender a quarterly unused facility fee, equal to one-quarter percent
(0.25%) per annum of the average daily unused portion of the Commitment,
payable quarterly in arrears, the first payment being due on July l, 1997 and
continuing on the first day of each July, October, January and April thereafter
during the term of this Agreement and upon the termination hereof.
3.3. Term of Agreement; Termination.
(A) Subject to Lender's right to cease making Loans to
Borrower at any time upon or after the occurrence of a default or an Event of
Default, the provisions of this Agreement shall be in effect for a period from
the date hereof, through and including January 2, 1999 (the "Original Term").
Upon written request by Borrower, Lender may, in its sole and absolute
discretion, renew this Agreement for any number of successive one year periods
thereafter (a "Renewal Term"), but Lender shall have no obligation to do so.
(B) Upon at least 90 days prior written notice to Lender,
Borrower may, at its option, terminate this Agreement; provided, however, no
such termination shall be effective until Borrower has paid all of the
Obligations in immediately available funds. It is understood that Borrower may
elect to terminate this Agreement in its entirety only; no section or lending
facility may be terminated singly.
(C) In addition to and not in limitation of any other
provision of this Agreement, the parties hereto agree that this Agreement shall
also be deemed terminated upon the effective date of the termination of the
Sepco Loan Agreement.
(D) At the effective date of any termination of this
Agreement, Borrower shall pay to Lender (in addition to the then outstanding
principal, accrued interest and other charges owing under this Agreement and
any of the Other Agreements), as liquidated damages for the loss of the bargain
and not as a penalty, an amount equal to 0.5% of the highest of the Average
Monthly Loan Balances outstanding pursuant to Section 2.1 during the twelve
month period ending on the date of termination if termination occurs at any
time prior to January 2, 1999 or during any Renewal Term thereafter. If
termination occurs on the last day of the Original Term or the last day of any
Renewal Term, no termination charge shall be payable.
(E) All of the Obligations shall be forthwith due and payable
upon any termination of this Agreement. Except as otherwise expressly provided
in this Agreement or any of the Other Agreements, no termination or
cancellation (regardless of cause or procedure) of this Agreement or any of the
Other Agreements shall in any way affect or impair the rights, powers or
privileges of Lender or the obligations or liabilities of Borrower in any way
relating to (i) any
LOAN AND SECURITY AGREEMENT - Page 17
18
transaction or event occurring prior to such termination or cancellation or
(ii) any of the undertakings, agreements, covenants, warranties or
representations of Borrower contained in this Agreement or any of the Other
Agreements. All such undertakings, agreements, covenants, warranties and
representations of Borrower shall survive such termination or cancellation,
and, notwithstanding such termination or cancellation, Lender shall retain its
Liens in the Collateral and all of its rights and remedies under this Agreement
and the Other Agreements until Borrower has paid the Obligations to Lender, in
full, in immediately available funds.
3.4. Payments. Except where evidenced by notes or other instruments
issued or made by Borrower to Lender specifically containing payment provisions
which are in conflict with this Section 3.4 (in which event the conflicting
provisions of said notes or other instruments shall govern and control), the
Obligations shall be payable as follows:
(A) Principal payable on account of Revolving Credit Loans
made by Lender to Borrower, shall be payable by Borrower to Lender immediately
upon the earliest of (i) the receipt by Lender or Borrower of any proceeds of
any of the Collateral, to the extent of said proceeds, (ii) the occurrence of
an Event of Default in consequence of which Lender elects to accelerate the
maturity and payment of the Obligations, or (iii) termination of this
Agreement; provided, however, that if the principal balance of Revolving Credit
Loans outstanding at any time shall exceed the Borrowing Base at such time,
Borrower shall, on demand, repay the Revolving Credit Loans in an amount
sufficient to reduce the aggregate unpaid principal amount of such Revolving
Credit Loans by an amount equal to such excess.
(B) Interest accrued on the Obligations shall be due on the
earliest of (i) the first day of each month (for the immediately preceding
month), computed through the last calendar day of the preceding month, (ii) the
occurrence of an Event of Default in consequence of which Lender elects to
accelerate the maturity and payment of the Obligations, or (iii) termination of
this Agreement; provided, however, that Borrower hereby irrevocably authorizes
Lender, in Lender's sole discretion, to advance to Borrower, and to charge to
the Loan Account hereunder as a Revolving Credit Loan, a sum sufficient each
month to pay all interest accrued on the Obligations during the immediately
preceding month, and to pay all costs, fees and expenses at any time owed by
Borrower to Lender hereunder.
(C) The balance of the Obligations requiring the payment of
money, if any, shall be payable by Borrower to Lender as and when provided in
this Agreement or the Other Agreements, or on demand, whichever is earlier.
3.5. Application of Payments and Collections. All items of payment
received by Lender by 12:00 noon, Dallas, Texas time, on any Business Day,
shall be deemed received on that Business Day. All items of payment received
after 12:00 noon, Dallas, Texas time, on any Business Day, shall be deemed
received on the following Business Day. Borrower irrevocably waives the right
to direct the application of any and all payments and collections at any time
or times hereafter received by Lender from or on behalf of Borrower, and
Borrower does hereby irrevocably agree that Lender shall have the continuing
exclusive right to apply and reapply any and all such payments and collections
received at any time or times hereafter by Lender or its
LOAN AND SECURITY AGREEMENT - Page 18
19
agent against the Obligations, in such manner as Lender may deem advisable,
notwithstanding any entry by Lender upon any of its books and records. If as
the result of collections of Accounts as authorized by Section 5.4 hereof a
credit balance exists in the Loan Account, such credit balance shall not accrue
interest in favor of Borrower, but shall be available to Borrower at any time
or times for so long as no Default or Event of Default exists; provided,
however, Lender may offset such credit against the Obligations upon or after
the occurrence of any Event of Default.
3.6. Statements of Account. Lender will account to Borrower monthly
with a statement of Loans, charges and payments made pursuant to this
Agreement, and such account rendered by Lender shall be deemed final, binding
and conclusive upon Borrower unless Lender is notified by Borrower in writing
to the contrary within 30 days of the date each account is mailed to Borrower.
Such notice shall only be deemed an objection to those items specifically
objected to therein.
3.7. Additional Provisions Regarding Eurodollar Loans.
(A) Manner of Borrowing a Eurodollar Loan. Borrower shall
give Lender notice of its intention to borrow a Eurodollar Loan in the form of
Exhibit A attached hereto (a "Eurodollar Borrowing Notice"), in which notice
Borrower shall specify (x) the aggregate amount of such Eurodollar Loan, (y)
the requested date of such Eurodollar Loan, and (z) the Eurodollar Interest
Period applicable thereto. Borrower shall give Lender the Eurodollar Borrowing
Notice at least two (2) Business Days prior to the requested date of the
Eurodollar Loan. With respect to such Eurodollar Loans, (i) each Eurodollar
Loan shall be in an integral multiple of $1,000,000, (ii) no more than four (4)
Eurodollar Interest Periods may be in existence at any one time, and (iii)
Borrower may not request a Eurodollar Loan if there exists a Default or Event
of Default. The Borrower shall select Eurodollar Interest Periods with respect
to Eurodollar Loans so that no Eurodollar Interest Period expires after the end
of the Original Term, or if extended pursuant to Section 3.3(A), any Renewal
Term. An outstanding Revolving Credit Loan may be converted to a Eurodollar
Loan at any time subject to the provisions of this Section 3.7.
(B) Interest on Eurodollar Loans. Each Eurodollar Loan shall
bear interest from and including the first day of the Eurodollar Interest
Period applicable thereto (but not including the last day of such Eurodollar
Interest Period) at the interest rate determined as applicable to such
Eurodollar Loan, but interest on such Eurodollar Loan shall be payable as
provided in Section 3.4. If at the end of a Eurodollar Interest Period for an
outstanding Eurodollar Loan, Borrower has failed to deliver to Lender a new
Eurodollar Borrowing Notice with respect to such Eurodollar Loan or to pay such
Eurodollar Loan, then such Eurodollar Loan shall be converted to a Revolving
Credit Loan bearing interest at a rate, and subject to all other terms and
conditions of this Agreement, applicable to Revolving Credit Loans not
constituting Eurodollar Loans on and after the last day of such Eurodollar
Interest Period until paid or until the effective date of a new Eurodollar
Borrowing Notice with respect thereto.
LOAN AND SECURITY AGREEMENT - Page 19
20
(C) Availability of Eurodollar Loans. If Lender determines
that maintenance of any of its Eurodollar Loans would violate any applicable
law, rule, regulation or directive, whether or not having the force of law,
Lender shall suspend the availability of Eurodollar Loans and require any
Eurodollar Loans outstanding to be repaid (provided, that, without in any way
impairing Borrower's obligations under Section 3.7(D) and Section 3.7(E), to
the extent that Borrower is entitled to request a Revolving Credit Loan bearing
interest at the Base Rate, Borrower may request such a Revolving Credit Loan in
order to repay the Eurodollar Loans); or if Lender determines that (x) deposits
of a type or maturity appropriate to match fund Eurodollar Loans are not
available or (y) the Eurodollar Base Rate does not accurately reflect the cost
of making a Eurodollar Loan, then Lender shall suspend the availability of
Eurodollar Loans after the date of any such determination.
(D) Funding Indemnification. If any payment of a Eurodollar
Loan occurs on a date which is not the last day of the applicable Eurodollar
Interest Period, whether because of acceleration, prepayment or otherwise, or a
Eurodollar Loan is not made on the date specified by Borrower because Borrower
has not satisfied the conditions precedent to such Eurodollar Loan contained in
this Agreement or has otherwise breached the terms of this Agreement, Borrower
will indemnify Lender for any loss or cost incurred by it resulting therefrom,
including without limitation any loss or cost in liquidating or employing
deposits acquired to fund or maintain the Eurodollar Loan.
(E) Lender Statements: Survival of Indemnity. Within sixty
(60) days of the date upon which Lender suspends the availability of Eurodollar
Loans under Section 3.7(C) hereof or learns of any loss or cost for which
Borrower has indemnified Lender under Section 3.7(D) hereof, Lender shall
deliver a written statement as to the amount due under Section 3.7(C) or (D).
Such written statement shall set forth in reasonable detail the calculations
and basis therefor upon which Lender determined such amount and shall be final,
conclusive and binding on Borrower in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a
Eurodollar Loan shall be calculated as though the Lender funded its Eurodollar
Loan through the purchase of a deposit of the type and maturity corresponding
to the deposit used as a reference in determining the Eurodollar Base Rate
applicable to such Eurodollar Loan whether in fact that is the case or not.
Unless otherwise provided herein, the amount specified in the written statement
shall be payable on demand after receipt by Borrower of the written statement.
3.8. Yield Protection. If either (i) the adoption of any applicable
law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by Lender with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency shall subject Lender to any tax (including without limitation any United
States interest equalization or similar tax, however named), duty or other
charge with respect to any Eurodollar Loan or Lender's obligation to compute
interest on the principal balance of any Eurodollar Loan at a rate based upon
the Eurodollar Base Rate, or shall change the basis of taxation of payments to
Lender of the principal of or interest on any Eurodollar Loan or any other
amounts due under this Agreement in
LOAN AND SECURITY AGREEMENT - Page 20
21
respect of any Eurodollar Loan or Lender's obligation to compute the interest
on the principal balance of any Eurodollar Loan at a rate based upon the
Eurodollar Base Rate, or (ii) any governmental authority, central bank or other
comparable authority shall at any time impose, modify or deem applicable any
reserve (including, without limitation, any imposed by the Board of Governors
of the Federal Reserve System), special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, Lender,
or shall impose on Lender (or its eurodollar lending office) or any relevant
interbank eurodollar market any other condition affecting any Eurodollar Loan
or Lender's obligation to compute the interest on the principal balance of any
Eurodollar Loan at a rate based upon the Eurodollar Base Rate; and the result
of any of the foregoing is to increase the cost to Lender of maintaining any
Eurodollar Loans, or to reduce the amount of any sum received or receivable by
Lender under this Agreement by an amount deemed by Lender to be material, then
upon demand by Lender, Borrower shall pay to Lender such additional amount or
amounts as will compensate Lender for such increased cost or reduction. Lender
will promptly notify Borrower of any event of which it has knowledge, occurring
after the date hereof, which will entitle Lender to compensation pursuant to
this Section 3.8. A certificate of Lender claiming compensation under this
Section 3.8 and setting forth the additional amount or amounts to be paid to
Lender hereunder shall be conclusive in the absence of manifest error.
3.9 Closing Fee. Borrower agrees to pay to Lender on the date of
execution of this Agreement, a closing fee equal to $10,000, which fee shall be
deemed fully earned and non-refundable as of the date of execution of this
Agreement.
SECTION 4. COLLATERAL: GENERAL TERMS
4.1. Security Interest in Collateral. To secure the prompt payment
and performance to Lender of the Obligations, Borrower hereby grants to Lender
a continuing security interest in and Lien upon all of the Property and
interests in Property of Borrower, whether now owned or existing or hereafter
created, acquired or arising and wheresoever located including, without
limitation, the following:
(A) Accounts;
(B) Inventory;
(C) Equipment;
(D) General Intangibles;
(E) All investment property (as defined in Section 9.115 of
the Code);
(F) All real Property;
(G) all monies and other Property of any kind, now or at any
time or times hereafter, in the possession or under the control of Lender or a
bailee of Lender;
LOAN AND SECURITY AGREEMENT - Page 21
22
(H) all accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (A), (B), (C), (D), (E), (F) and (G)
above, including, without limitation, Proceeds of and unearned premiums with
respect to insurance Policies insuring any of the Collateral; and
(I) all books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other computer
materials and records) of Borrower pertaining to any of (A), (B), (C), (D),
(E), (F), (G) or (H) above.
4.2. Lien Perfection. Borrower agrees to execute the UCC-l financing
statements provided for by the Code or otherwise together with any and all
other instruments, assignments or documents and shall take such other action as
may be reasonably required to perfect or to continue the perfection of Lender's
security interest in the Collateral as a first priority Lien subject to
Permitted Liens only. Unless prohibited by applicable law, Borrower hereby
authorizes Lender to execute and file any such financing statement on
Borrower's behalf. The parties agree that a carbon, Photographic or other
reproduction of this Agreement shall be sufficient as a financing statement and
may be filed in any appropriate office in lieu thereof.
4.3. Location of Collateral. All Collateral, other than Inventory in
transit, will at all times be kept by Borrower at one or more of the business
locations set forth in Exhibit B and shall not, without the prior written
approval of Lender, be moved therefrom except, prior to an Event of Default,
for sales of Inventory in the ordinary course of business and dispositions of
Equipment that are authorized by Section 7.2 hereof.
4.4. Insurance of Collateral. Borrower agrees to maintain and pay for
insurance upon all Collateral wherever located, in storage or in transit in
vehicles, including goods evidenced by documents, covering casualty, hazard,
public liability and such other risks and in such amounts and with such
insurance companies as shall be reasonably satisfactory to Lender to insure
Lender's interest in the Collateral. Borrower shall deliver the originals of
such policies to Lender with satisfactory endorsements naming Lender as loss
payee and as mortgagee pursuant to a standard mortgagee clause. Each policy of
insurance or endorsement shall contain a clause requiring the insurer to give
not less than 30 days prior written notice to Lender in the event of
cancellation of the policy for any reason whatsoever and a clause that the
interest of Lender shall not be impaired or invalidated by any act or neglect
of Borrower or owner of the Property nor by the occupation of the premises for
purposes more hazardous than are permitted by said policy. If Borrower fails
to provide and pay for such insurance, Lender may, at Borrower's expense,
procure the same, but shall not be required to do so. Borrower agrees to
deliver to Lender, promptly as rendered, true copies of all reports made in any
reporting forms to insurance companies.
4.5. Protection of Collateral. All insurance expenses and all
expenses of protecting, storing, warehousing, insuring, handling, maintaining
and shipping the Collateral, any and all taxes imposed by any governmental
authority on any Collateral or in respect of the sale thereof shall be borne
and paid by Borrower. If Borrower fails to promptly pay any portion thereof
when
LOAN AND SECURITY AGREEMENT - Page 22
23
due, Lender may, at its option, but shall not be required to, pay the same and
charge the Loan Account therefor. Borrower agrees to reimburse Lender promptly
therefor with interest accruing thereon daily at the Default Rate. All sums so
paid or incurred by Lender for any of the foregoing and all reasonable costs
and expenses (including reasonable attorneys' fees, legal expenses, and court
costs) which Lender may incur in enforcing or protecting its Lien on or rights
and interest in the Collateral or any of its rights or remedies, together with
interest at the Default Rate, shall be considered Obligations hereunder secured
by all Collateral. Lender shall not be liable or responsible in any way for
the safekeeping of any Collateral or for any loss or damage thereto (except for
reasonable care in the custody thereof while any Collateral is in Lender's
actual possession) or for any diminution in the value thereof, or for any act
or default of any warehouseman, carrier, forwarding agency, or other person
whomsoever, but the same shall be at Borrower's sole risk.
SECTION 5. PROVISIONS RELATING TO ACCOUNTS
5.1. Representations, Warranties and Covenants. With respect to all
Accounts, Borrower represents and warrants to Lender that Lender may rely, in
determining which Accounts are Eligible Accounts, on all statements and
representations made by Borrower with respect to any Account or Accounts, and,
unless otherwise indicated in writing to Lender, that with respect to each
Account: it is genuine and in all respects what it purports to be, and it is
not evidenced by a judgment; it arises out of a completed, bona fide sale and
delivery of goods or rendition of services by Borrower in the ordinary course
of its business and in accordance with the terms and conditions of all purchase
orders, contracts or other documents relating thereto and forming a part of the
contract between Borrower and the Account Debtor; it is for a liquidated amount
maturing as stated in the duplicate invoice covering such sale or rendition of
services; such Account, and Lender's security interest therein, is not, and
will not be in the future, subject to any offset, Lien, deduction, defense,
dispute, counterclaim or any other adverse condition except for disputes
resulting in returned goods where the amount in controversy is deemed by Lender
to be immaterial, and each such Account is absolutely owing to Borrower and is
not contingent in any respect or for any reason; Borrower has made no agreement
with any Account Debtor thereunder for any deduction therefrom, except
discounts or allowances which are granted by Borrower in the ordinary course of
its business for prompt payment and which are reflected in the calculation of
the net amount of each respective invoice related thereto; there are no facts,
events or occurrences which in any way impair the validity or enforceability
thereof or tend to reduce the amount payable thereunder from the face amount of
the invoice and statements delivered to Lender with respect thereto; to the
best of Borrower's knowledge, the Account Debtor thereunder is Solvent and, at
the time any contract or other document giving rise to the Account was
executed, such Account Debtor had the capacity to contract; and Borrower has no
knowledge of any fact or circumstance which would impair the validity or
collectibility of such Account.
5.2. Assignments, Records and Schedules of Accounts. If requested to
do so by Lender, Borrower shall execute and deliver to Lender formal written
assignments of all of its Accounts weekly (or, if requested by Lender, daily),
together with copies of invoices or invoice registers related thereto.
Borrower shall keep accurate and complete records of its Accounts and
LOAN AND SECURITY AGREEMENT - Page 23
24
all payments and collections thereon and shall submit to Lender on a daily
basis a sales and collections report for the preceding day, in form
satisfactory to Lender. On or before the fifteenth day of each month from and
after the date hereof, Borrower shall deliver to Lender, in form satisfactory
to Lender, a detailed aged trial balance of all Accounts existing as of the
last day of the preceding month, specifying the names, addresses, face value,
dates of invoices and due dates for each Account Debtor obligated on an Account
so listed ("Schedule of Accounts"), and, upon Lender's request therefor, copies
of proof of delivery and the original copy of all documents, including, without
limitation, repayment histories and present status reports relating to the
Accounts so scheduled and such other matters and information relating to the
status of then existing Accounts as Lender shall reasonably request. If any
amounts due and owing in excess of $25,000 are in dispute between Borrower and
any Account Debtor, Borrower shall provide Lender with written notice thereof
at the time of submission of the next Schedule of Accounts, explaining in
detail the reason for the dispute, all claims related thereto and the amount in
controversy.
5.3. Administration of Accounts. Upon the granting of any discounts,
allowances or credits by Borrower that are not shown on the face of the invoice
for the Account involved, Borrower shall promptly report such discounts,
allowances or credits, as the case may be, to Lender and in no event later than
the time of its submission to Lender of the next Schedule of Accounts as
provided in Section 5.2. If an Account includes a charge for any tax payable
to any governmental taxing authority, Lender is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing authority for the
account of Borrower and to charge the Loan Account therefor. Whether or not a
Default or an Event of Default has occurred, Lender shall have the right, at
any time or times hereafter, in the name of Lender, any designee of Lender or
Borrower, to verify the validity, amount or any other matter relating to any
Accounts by mail, telephone, telegraph or otherwise. Borrower shall cooperate
fully with Lender in an effort to facilitate and promptly conclude any such
verification process.
5.4. Collection of Accounts. To expedite collection, Borrower shall
endeavor in the first instance to make collection of its Accounts for Lender.
All remittances received by Borrower on account of Accounts shall be held as
Lender's property by Borrower as trustee of an express trust for Lender's
benefit and Borrower shall immediately deposit same in the Dominion Account.
After the occurrence of an Event of Default, Lender shall have the right to
notify Account Debtors that Accounts have been assigned to Lender and to
collect Accounts directly in its own name and to charge the collection costs
and expenses, including reasonable attorneys' fees, to Borrower. Lender has no
duty to protect, insure, collect or realize upon the Accounts or preserve
rights in them.
SECTION 6. PROVISIONS RELATING TO INVENTORY
6.1. Representations, Warranties and Covenants. With respect to
Inventory, Borrower represents and warrants to Lender that Lender may rely, in
determining which items of Inventory constitute Eligible Inventory, on all
statements and representations made by Borrower with respect to any Inventory
and that: All Inventory is presently and will continue to be located at
Borrower's places of business listed on Exhibit B and will not be removed
therefrom except as
LOAN AND SECURITY AGREEMENT - Page 24
25
authorized by Section 4.3 of this Agreement; no Inventory is now, nor shall any
Inventory at any time or times hereafter be, stored with a bailee, warehouseman
or similar party without Lender's prior written consent; no Inventory is or
will be consigned to any Person without Lender's prior written consent; and no
Inventory is or will be produced in violation of the Fair Labor Standards Act.
6.2. Inventory Reports. Borrower agrees to furnish Lender with
Inventory reports at such times as Lender may request, but at least once each
month. Such reports shall be in form and detail satisfactory to Lender.
Borrower shall conduct a physical inventory no less frequently than annually
and shall provide to Lender a report based on each such physical inventory
promptly thereafter, together with such supporting information as Lender shall
in its discretion request.
6.3. Returns of Inventory. If at any time or times hereafter any
Account Debtor returns any Inventory to Borrower the shipment of which
generated an Account on which such Account Debtor is obligated in excess of
$20,000, Borrower shall notify Lender of the same immediately, specifying the
reason for such return and the location and condition of the returned
Inventory.
SECTION 7. PROVISIONS RELATING TO EQUIPMENT
7.1. Representations, Warranties and Covenants. With respect to the
Equipment, Borrower represents, warrants and covenants to and with Lender that
the Equipment is in good operating condition and repair, and all necessary
replacements of and repairs thereto shall be made so that the value and
operating efficiency of the Equipment shall be maintained and preserved,
reasonable wear and tear excepted. Borrower will not permit any of the
Equipment to become affixed to any real Property leased to Borrower so that an
interest arises therein under the real estate laws of the applicable
jurisdiction unless the landlord of such real Property has executed a landlord
waiver or leasehold mortgage in favor of Lender, and Borrower will not permit
any of the Equipment to become an accession to any personal Property other than
Equipment subject to first priority Liens in favor of Lender or subject to
Permitted Liens. Immediately on request therefor by Lender, Borrower shall
deliver to Lender any and all evidence of ownership, if any, of any of the
Equipment (including, without limitation, certificates of title and
applications for title). Borrower shall maintain accurate records itemizing
and describing the kind, type, quality, quantity and value of its Equipment and
all dispositions made in accordance with Section 7.2 hereof, and shall furnish
Lender with a current schedule containing the foregoing information on at least
an annual basis and more often if requested by Lender.
7.2. Dispositions of Equipment. Borrower will not sell, lease or
otherwise dispose of or transfer any of the Equipment or any part thereof
without the prior written consent of Lender; provided, however, that the
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists, to (A) dispositions of Equipment which, in the aggregate during
any consecutive twelve-month period, has a fair market value or book value,
whichever is less, of $50,000 or less, provided that all proceeds thereof are
turned over to Lender, or (B) replacements
LOAN AND SECURITY AGREEMENT - Page 25
26
of Equipment that is substantially worn, damaged or obsolete with Equipment of
like kind, function and value, provided that the replacement Equipment shall be
acquired prior to or concurrently with any disposition of the Equipment that is
to be replaced, the replacement Equipment shall be free and clear of Liens
other than Permitted Liens, Borrower shall give Lender at least five days prior
written notice of such disposition and Borrower shall turn over to Lender all
proceeds realized from any such disposition.
SECTION 8. REPRESENTATIONS AND WARRANTIES
8.1. General Representations and Warranties. To induce Lender to
enter into this Agreement and to make advances hereunder, Borrower warrants,
represents and covenants to Lender as follows:
(A) Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada; has duly qualified
and is authorized to do business and is in good standing as a foreign
corporation in all states and jurisdictions where the character of its
Properties or the nature of its activities make such qualification necessary,
including, without limitation, the State of Louisiana and the State of Texas;
and has not been known as or used any corporate, fictitious or trade names in
the past seven years except as disclosed on Exhibit C attached hereto and made
a part hereof.
(B) Borrower has the right and power and is duly authorized to
enter into, deliver and perform this Agreement and each of the Other Agreements
to which it is a party, and this Agreement is, and each of the Other Agreements
when delivered under this Agreement will be, a legal, valid and binding
obligation of Borrower enforceable against it in accordance with their
respective terms.
(C) Borrower is not engaged principally, or as one of its
important activities, in the business of purchasing or carrying "margin stock"
(within the meaning of Regulation G or U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Loans to Borrower
will be used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin stock, or be used
for any purpose which violates or is inconsistent with the provisions of
Regulations G, T, U or X of said Board of Governors.
(D) Borrower has, and is in good standing with respect to, all
governmental consents, approvals, authorizations, permits, certificates,
inspections, and franchises which materially affect its ability to conduct its
business as heretofore or proposed to be conducted by it and to own or lease
and operate its Properties as now owned or leased by it.
(E) Borrower owns or possesses all the patents, trademarks,
service marks, trade names, copyrights and licenses necessary for the present
and planned future conduct of its business without any known conflict with the
rights of others.
LOAN AND SECURITY AGREEMENT - Page 26
27
(F) Except as set forth on Exhibit D attached hereto and made
a part hereof, there are no actions, suits, proceedings or investigations
pending, or to the knowledge of Borrower, threatened, against or affecting
Borrower or any of its Properties in any court or before any governmental
authority or arbitration board or tribunal, and no action, suit, proceeding or
investigation shown on Exhibit D involves the possibility of materially and
adversely affecting the Properties or condition (financial or otherwise) of
Borrower or the ability of Borrower to perform this Agreement.
(G) Borrower has good, indefeasible and marketable title to
and fee simple ownership of, or valid and subsisting leasehold interests in,
all of its real Property, and good title to all of its other Property, in each
case, free and clear of all Liens except Permitted Liens.
(H) The balance sheet of Borrower and such other Persons
described therein as of March 31, 1997, and the related statements of income,
for the periods ended on such dates, have been prepared, to the best of
Borrower's knowledge, in accordance with GAAP (except for changes in
application in which Borrower's independent certified public accountants
concur), and present fairly the financial positions of Borrower at such dates
and the results of Borrower's operations for such periods. Since March 31,
1997, there has been no material change in the condition, financial or
otherwise, of Borrower and such other Persons as shown on the balance sheet as
of such date and no change in the aggregate value of Equipment and real
Property owned by Borrower or such other Persons, except changes in the
ordinary course of business, none of which individually or in the aggregate has
been materially adverse. The fiscal year of Borrower for accounting purposes
ends on [September 30] of each year.
(I) There is no fact which Borrower has failed to disclose to
Lender in writing which materially affects adversely or, so far as Borrower can
now foresee, will materially affect adversely the Properties, business,
prospects, profits, or condition (financial or otherwise) of Borrower or the
ability of Borrower to perform this Agreement.
(J) Borrower has not received any notice to the effect that it
is not in full compliance with any of the requirements of ERISA and the
regulations promulgated thereunder. No fact or situation that could result in
a material adverse change in the financial condition of Borrower (including,
but not limited to, any Reportable Event or Prohibited Transaction) exists in
connection with any Plan. Borrower has no withdrawal liability in connection
with a Multi-Employer Plan.
(K) Borrower has filed all federal, state and local tax
returns and other reports it is required by law to file and has paid, or made
provision for the payment of, all taxes, assessments, fees and other
governmental charges that are due and payable.
(L) Borrower has duly complied with, and its Properties,
business operations and leaseholds are in compliance in all material respects
with, the provisions of all federal, state and local laws, rules and
regulations applicable to Borrower, its Properties or the conduct of its
business.
LOAN AND SECURITY AGREEMENT - Page 27
28
(M) No Default or Event of Default will exist or result from
the execution and delivery of this Agreement or Borrower's performance
hereunder.
(N) There are no claims for brokerage commissions, finder's
fees or investment banking fees in connection with the transactions
contemplated by this Agreement.
8.2. Reaffirmation and Survival of Representations. Each request for
a Loan made by Borrower pursuant to this Agreement or any of the Other
Agreements shall constitute (A) an automatic representation and warranty by
Borrower to Lender that there does not then exist any Default or Event of
Default, and (B) a reaffirmation as of the date of said request of all of the
representations and warranties of Borrower contained in this Agreement and the
Other Agreements are true in all material respects, except for any changes in
the nature of Borrower's business or operations that would render the
information contained in any exhibit hereto either materially inaccurate or
materially incomplete, so long as Lender has consented to such changes or such
changes are expressly permitted by this Agreement. Borrower covenants,
warrants and represents to Lender that all representations and warranties of
Borrower contained in this Agreement or any of the Other Agreements shall be
true at the time of Borrower's execution of this Agreement and the Other
Agreements, and shall survive the execution, delivery and acceptance thereof by
Lender and the parties thereto and the closing of the transactions described
therein or related thereto.
SECTION 9. COVENANTS AND CONTINUING AGREEMENTS
9.1. Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
(A) Pay and discharge all taxes, assessments and governmental
charges upon it, its income and Properties as and when such taxes, assessments
and charges are due and payable, except and to the extent only that such taxes,
assessments and charges are being actively contested in good faith and by
appropriate proceedings, Borrower maintains adequate reserves on its books
there for and the nonpayment of such taxes does not result in a Lien upon any
Properties or Borrower other than a Permitted Lien. Borrower shall also pay
and discharge any lawful claims which, if unpaid, might become a Lien against
any of Borrower's Properties except for Permitted Liens.
(B) File all federal, state and local tax returns and other
reports Borrower is required by law to file and maintain adequate reserves for
the payment of all taxes, assessments, governmental charges, and levies imposed
upon it, its income, or its profits, or upon any Property belonging to it.
(C) Pay to Lender, on demand, any and all fees, costs or
expenses which Lender pays to a bank or other similar institution (including,
without limitation, any reasonable fees paid by Lender to any Participating
Lender) arising out of or in connection with (i) the forwarding to Borrower or
any other Person on behalf of Borrower, by Lender of proceeds of
LOAN AND SECURITY AGREEMENT - Page 28
29
loans made by Lender to Borrower pursuant to this Agreement and (ii) the
depositing for collection, by Lender, of any check or item of payment received
or delivered to Lender on account of the Obligations.
(D) Preserve and maintain its separate corporate existence and
all rights, privileges, and franchises in connection therewith, and maintain
its qualification and good standing in all states in which such qualification
is necessary.
(E) Maintain its Properties in good condition and make all
necessary renewals, repairs, replacements, additions and improvements thereto.
(F) Comply with all laws, ordinances, governmental rules and
regulations to which it is subject, and obtain and keep in force any and all
licenses, permits, franchises, or other governmental authorizations necessary
to the ownership of its Properties or to the conduct of its business, which
violation or failure to obtain might materially and adversely affect the
Properties or condition (financial or otherwise) of Borrower.
(G) (i) At all times make prompt payment of contributions
required to meet the minimum funding standards set forth in ERISA with respect
to each Plan; (ii) promptly after the filing thereof, furnish to Lender copies
of any annual report required to be filed pursuant to ERISA in connection with
each Plan and any other employee benefit plan of it and its Affiliates subject
to said Section; (iii) notify Lender as soon as practicable of any Reportable
Event and of any additional act or condition arising in connection with any
Plan which Borrower believes might constitute grounds for the termination
thereof by the Pension Benefit Guaranty Corporation or for the appointment by
the appropriate United States district court of a trustee to administer the
Plan; and (iv) furnish to Lender, promptly upon Lender's request therefor, such
additional information concerning any Plan or any other such employee benefit
plan as may be reasonably requested.
(H) Keep adequate records and books of account with respect to
its business activities in which proper entries are made in accordance with
GAAP (to the best of Borrower's knowledge) reflecting all its financial
transactions.
(I) Permit representatives of Lender, from time to time, as
often as may be reasonably requested, but only during normal business hours, to
visit and inspect the Properties of Borrower, inspect and make extracts from
its books and records, and discuss with its officers, its employees and its
independent accountants, Borrower's business, assets, liabilities, financial
condition, business prospects and results of operations.
(J) Cause to be prepared and furnished to Lender the following
(all to be kept and prepared in accordance with GAAP applied on a consistent
basis, unless Parent's certified public accountants concur in any change
therein and such change is disclosed to Lender and are consistent with GAAP):
(i) as soon as possible, but not later than 90 days after the close of each
fiscal year of Parent, unqualified audited consolidated financial statements of
Parent and its Subsidiaries (including Borrower) as of the end of such year,
certified as to the statements by a
LOAN AND SECURITY AGREEMENT - Page 29
30
firm of independent certified public accountants of recognized standing
selected by Parent but acceptable to Lender (except for a qualification for a
change in accounting principles with which such accounting firm concurs) and
unaudited consolidated and consolidating financial statements of Parent and its
Subsidiaries (including Borrower), certified by the principal financial officer
of Parent as prepared in accordance with GAAP to the best of his knowledge and
fairly presenting the financial position and results of operations of Parent
and its Subsidiaries (including Borrower) for such year; and (ii) as soon as
possible, but not later than 30 days after the end of each month hereafter,
unaudited interim consolidated and consolidating financial statements of Parent
and its Subsidiaries (including Borrower) as of the end of such month and of
the portion of Parent's fiscal year then elapsed, certified by the principal
financial officer of Parent as prepared in accordance with GAAP to the best of
his knowledge, and fairly presenting the financial position and results of
operations of Parent and its Subsidiaries (including Borrower) for such month
and period, subject only to changes from audit and year-end adjustments, and
except that such statements need not contain notes. Concurrently with the
delivery of the financial statements described in clause (i) of this Section
9.1(J), Borrower shall forward to Lender a copy of the accountants' letter to
Parent's or Borrower's (as the case may be) management that is prepared in
connection with such financial statements and also shall cause to be prepared
and furnish to Lender a certificate of the aforesaid certified public
accountants certifying to Lender that, based upon their examination of the
financial statements of Parent and its Subsidiaries (including Borrower)
performed in connection with their examination of said financial statements,
they are not aware of any Default or Event of Default, or, if they are aware of
such Default or Event of Default, specifying the nature thereof. Concurrently
with the delivery of the financial statements described in clauses (i) and (ii)
of this Section 9.1(J), Borrower shall cause to be prepared and furnished to
Lender a certificate from the chief financial officer of Borrower certifying to
Lender that to the best of his knowledge, Borrower has kept, observed,
performed and fulfilled each and every covenant, obligation and agreement
binding upon Borrower in this Agreement and the Other Agreements and that no
Default or Event of Default has occurred, or, if such Default or Event of
Default has occurred, specifying the nature thereof.
(K) At Lender's request, promptly execute or cause to be
executed and deliver to Lender any and all documents, instruments and
agreements reasonably deemed necessary by Lender to perfect or to continue the
perfection of Lender's Liens as first priority Liens subject only to Permitted
Liens, to facilitate collection of the Collateral or otherwise to give effect
to or carry out the terms or intent of this Agreement or any of the Other
Agreements.
(L) Within 30 days after the end of each month, or more
frequently if requested by Lender, cause the chief financial officer of
Borrower to prepare and deliver to Lender a Compliance Certificate in the form
of Exhibit E attached hereto, with appropriate insertions.
(M) As soon as available, and in any event no later than 60
days after the end of each fiscal year of Borrower, deliver to Lender
Projections of Borrower for the forthcoming three fiscal years, year by year,
and the forthcoming fiscal year, month by month.
LOAN AND SECURITY AGREEMENT - Page 30
31
9.2. Negative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless Lender has first consented thereto in writing, it will
not:
(A) Merge or consolidate, or permit any Subsidiary to merge or
consolidate, with any Person; nor acquire all or any substantial part of the
Properties or capital stock of any Person; nor permit Parent to acquire all or
any substantial part of the Properties or capital stock of any Person.
(B) Make any loans or other advances of money (other than for
salary, travel advances, advances against commissions and other similar
advances in the ordinary course of business) to any Person in excess of an
aggregate $25,000 outstanding at any time for all such loans.
(C) Enter into any transaction with any Affiliate or
stockholder, except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and reasonable terms which
are fully disclosed to Lender and are no less favorable to Borrower than would
obtain in a comparable arm's length transaction with a Person not an Affiliate
or stockholder of Borrower.
(D) Guarantee, assume, endorse or otherwise, in any way,
become directly or contingently liable with respect to the Indebtedness of any
Person except by endorsement of instruments or items of payment for deposit or
collection and except for Indebtedness of an Affiliate to Lender.
(E) Create or suffer to exist any Lien upon any of its
Property, income or profits, whether now owned or hereafter acquired, except:
(i) Liens at any time granted in favor of Lender; (ii) Liens for taxes
(excluding any Lien imposed pursuant to any of the provisions of ERISA) not yet
due or being contested as permitted by Section 9.1(A) hereof, but only if in
Lender's judgment such Lien does not affect adversely Lender's rights or the
priority of Lender's Lien in the Collateral; (iii) Liens securing the claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords and other
like Persons for labor, materials, supplies or rentals incurred in the ordinary
course of Borrower's business, but only if the payment thereof is not at the
time required and only if such Liens are junior to the Liens in favor of
Lender; (iv) Liens resulting from deposits made in the ordinary course of
business in connection with workmen's compensation, unemployment insurance,
social security and other like laws; (v) attachment, judgment and other similar
non-tax Liens arising in connection with court proceedings, but only if and for
so long as the execution or other enforcement of such Liens is and continues to
be effectively stayed and bonded on appeal in a manner satisfactory to Lender
for the full amount thereof, the validity and amount of the claims secured
thereby are being actively contested in good faith and by appropriate lawful
proceedings and such Liens do not, in the aggregate, materially detract from
the value of the Property of Borrower or materially impair the use thereof in
the operation of Borrower's business; (vi) reservations, exceptions, easements,
rights of way, and other similar encumbrances affecting real Property, provided
that, in Lender's judgment, they do not in the aggregate materially detract
from the value of said Properties or materially interfere
LOAN AND SECURITY AGREEMENT - Page 31
32
with their use in the ordinary conduct of Borrower's business and, if said real
Property constitutes Collateral, Lender has consented thereto; and (vii) such
other Liens as Lender may hereafter approve in writing.
(F) Make any payment of any part or all of any Subordinated
Debt in violation of the subordination agreement relating to such Subordinated
Debt or voluntarily prepay any Subordinated Debt; or enter into any agreement
(oral or written) which could in any way be construed to amend, modify, alter
or terminate any one or more instruments or agreements evidencing or relating
to any Subordinated Debt.
(G) Declare or make any Distributions.
(H) Hereafter create any Subsidiary or divest itself of any
material assets by transferring them to any Subsidiary to whose existence
Lender has consented.
(I) Make Capital Expenditures (including, without limitation,
by way of capitalized leases) which, in the aggregate, exceed $50,000 during
any fiscal year of Borrower.
(J) Transfer its principal place of business or chief
executive office, or open new manufacturing plants, or transfer existing
manufacturing plants, or maintain warehouses or records with respect to
Accounts or Inventory, to or at any locations other than those at which the
same are presently kept or maintained, as set forth on Exhibit B hereto, except
upon at least 60 days prior written notice to Lender and after the delivery to
Lender of financing statements, if required by Lender, in form satisfactory to
Lender to perfect or continue the perfection of Lender's Lien and security
interest hereunder.
(K) Enter into any new business or make any material change in
any of Borrower's business objectives, purposes and operations.
(L) Sell, lease or otherwise dispose of any of its Properties,
including any disposition of Property as part of a sale and leaseback
transaction, to or in favor of any Person, except (i) sales of Inventory in the
ordinary course of Borrower's business for so long as no Event of Default
exists hereunder, (ii) a transfer of Property to Borrower by a Subsidiary of
Borrower or (iii) dispositions expressly authorized by this Agreement.
(M) Use any corporate name (other than its own) or any
fictitious name, tradestyle or "d/b/a" except for names disclosed in writing to
Lender on or before the Closing Date.
(N) Permit the total annual compensation (including, without
limitation, salaries, fees, bonuses, commissions and other payments, whether
direct or indirect, in money, or otherwise but specifically excluding
compensation from existing employee incentive agreements) of its officers,
shareholders and directors to exceed during any fiscal year of Borrower 110% of
the amount paid during the preceding fiscal year.
LOAN AND SECURITY AGREEMENT - Page 32
33
(O) Own, purchase or acquire (or enter into any contract to
purchase or acquire) any "margin security" as defined by any regulation of the
Federal Reserve Board as now in effect or as the same may hereafter be in
effect unless, prior to any such purchase or acquisition or entering into any
such contract, Lender shall have received an opinion of counsel satisfactory to
Lender to the effect that such purchase or acquisition will not cause this
Agreement to violate Regulations G, T, U, or X or any other regulation of the
Federal Reserve Board then in effect.
(P) Make or have any Restricted Investment.
(Q) Change its fiscal year or permit any Subsidiary of
Borrower to have a fiscal year different from that of Borrower.
(R) Create, assume or suffer to exist any indebtedness for
borrowed money or issue or sell any obligation of Borrower (whether absolutely,
concurrently or otherwise), excluding only (i) the Obligations; (ii) accounts
payable and accrued liabilities arising in the ordinary course of Borrower's
business; (iii) indebtedness incurred for the payment of Capital Expenditures
permitted by this Agreement; (iv) existing indebtedness of Borrower which shall
have been approved in writing by Lender, and which shall be set forth on
Exhibit F attached hereto and made a part hereof (and to the extent set forth
on Exhibit F, such indebtedness is approved by Lender); and (v) such other
indebtedness as Lender may hereafter approve in writing.
9.3. Specific Financial Covenants. During the term of this Agreement,
and thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, Parent and
its Subsidiaries shall:
(A) Maintain positive consolidated Cash Flow, measured on a
rolling three-month basis at the end of each calendar month, for the three-
month period that ends as of the end of each calendar month, from and including
the calendar month ending May 31, 1997. Cash Flow during any such period will
be determined on a consolidated basis according to GAAP.
(B) Maintain consolidated positive Cash Flow, measured on an
annual basis at the end of each fiscal year of Parent, for the twelve-month
period that ends as of the end of such fiscal year of Parent, from and
including the fiscal year of Parent ending December 31, 1997. Cash Flow during
any such fiscal year will be determined on a consolidated basis in accordance
with GAAP.
(C) Maintain at all times a ratio of (i) the aggregate
consolidated Indebtedness of Parent and its Subsidiaries to (ii) the
consolidated Adjusted Tangible Net Worth of Parent and its Subsidiaries of not
more than 5.0 to 1.0. Indebtedness and Adjusted Tangible Net Worth will be
determined on a consolidated basis in accordance with GAAP.
(D) Maintain at all times a ratio of consolidated Current
Assets of Parent and its Subsidiaries to consolidated Current Liabilities of
Parent and its Subsidiaries of not less than
LOAN AND SECURITY AGREEMENT - Page 33
34
2.0 to 1.0. Current Assets and Current Liabilities will be determined on a
consolidated basis in accordance with GAAP.
SECTION 10. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the
Other Agreements, and without affecting in any manner the rights of Lender
under the other sections of this Agreement, it is understood and agreed that
Lender will not make any Loan under Section 2 of this Agreement unless and
until each of the following conditions has been and continues to be satisfied,
all in form and substance satisfactory to Lender and its counsel:
10.1. Documentation. Lender shall have received the following
documents, each in form and substance satisfactory to Lender and its counsel:
(A) certified copies of Borrower's casualty insurance
policies, together with endorsements naming Lender as loss payee and as
mortgagee pursuant to a standard mortgagee clause, and certified copies of
Borrower's liability insurance policies, together with endorsements naming
Lender as a co-insured;
(B) copies of all filing receipts or acknowledgments issued by
any governmental authority to evidence any filing or recordation necessary to
perfect the Liens of Lender in the Collateral and evidence that such Liens
constitute valid and perfected security interests and Liens, having the Lien
priority specified in Section 4.2 hereof;
(C) landlord or warehouseman agreements with respect to all
premises leased by Borrower;
(D) a copy of the Articles or Certificate of Incorporation of
Borrower, and all amendments thereto, certified within 15 days before the
closing by the Secretary of State or other appropriate official of its
jurisdiction of incorporation;
(E) a copy of the bylaws of Borrower, and all amendments
thereto, certified as of the closing date by the Secretary of the Borrower;
(F) good standing certificates for Borrower, issued within 15
days before the closing by the Secretary of State or other appropriate official
of Borrower's jurisdiction of incorporation and each jurisdiction where the
conduct of Borrower's business activities or the ownership of its Properties
necessitates qualification;
(G) a closing certificate signed by the chief executive
officer and chief financial officer of Borrower dated as of the date hereof,
stating that (i) the representations and warranties set forth in Section 8
hereof are true and correct on and as of such date, (ii) Borrower is on such
date in compliance with all the terms and provisions set forth in this
Agreement and (iii) on such date no Default or Event of Default has occurred or
is continuing;
LOAN AND SECURITY AGREEMENT - Page 34
35
(H) Guaranty Agreements from each Guarantor, for the benefit
of Lender;
(I) Shareholder Pledge Agreement from Parent, for the benefit
of Lender, together with original stock certificates evidencing 100% of the
issued and outstanding capital stock of Borrower, together with original stock
powers duly executed in blank by Parent;
(J) the Other Agreements duly executed and delivered by
Borrower and/or the Guarantors, as appropriate;
(K) the written opinion of ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., counsel to
Borrower and Guarantors, regarding Borrower, Guarantors, the Loan Documents and
the transactions contemplated by this Agreement and the Other Agreements;
(L) Guaranty agreements in form and substance satisfactory to
Lender, whereby Borrower unconditionally guarantees payment of all Indebtedness
of Sepco and/or Bayou Pumps and/or American MRO to Lender;
(M) a letter from counsel to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and Pelican
State Supply Company, a Louisiana corporation, authorizing Lender to rely on
such counsel's written opinion to Parent and Borrower;
(N) a collateral assignment of the Agreement and Plan of
Reorganization, in form and substance satisfactory to Lender, whereby Borrower
and Parent collaterally assign to Lender all of the right, title and interest
of Borrower and Parent in the Agreement and Plan of Reorganization, duly
executed by Borrower and Parent, and consented to by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
Pelican State Supply Company, a Louisiana corporation;
(O) Lender shall have received evidence satisfactory to it
that each of the conditions precedent set forth in the Agreement and Plan of
Reorganization has been satisfied and that the transaction has been concluded
in accordance with the terms of the Agreement and Plan of Reorganization and
the other Transaction Documents; and
(P) such other documents, instruments and agreements as Lender
shall reasonably request in connection with the transaction contemplated
hereby.
10.2. Other Conditions. The following conditions have been and shall
continue to be satisfied:
(A) no Default or Event of Default shall exist;
(B) each of the conditions precedent set forth in the Other
Agreements shall have been satisfied;
(C) since March 31, 1997, there shall not have occurred any
material adverse change in the business, financial condition or results of
operations of Borrower, or the existence
LOAN AND SECURITY AGREEMENT - Page 35
36
or value of any Collateral, or any event, condition or state of facts which
would reasonably be expected materially and adversely to affect the business,
financial condition or results of operations of Borrower;
(D) no action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any
court, governmental agency or legislative body to enjoin, restrain or prohibit,
or to obtain damages in respect of, or which is related to or arises out of
this Agreement or the consummation of the transactions contemplated hereby or
which, in Lender's judgment, would make it inadvisable to consummate the
transactions contemplated by this Agreement or any of the Other Agreements;
(E) Lender shall have received such certificates and documents
reflecting the Solvency of Borrower, after giving effect to the transactions
contemplated by this Agreement, as Lender shall find acceptable;
(F) Lender shall have determined that immediately after Lender
has made the initial Loans contemplated hereof, and paid (or made provisions
for payment of ) all closing costs incurred in connection with the transactions
contemplated hereby, Availability shall not be less than $250,000; and
(G) Borrower shall have paid to Lender, in immediately
available funds, the closing fee set forth in Section 3.9 hereof, which closing
fee is non-refundable and shall be deemed fully earned as of the date of
execution of this Agreement.
SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
11.1. Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(A) Borrower shall fail to pay any of the Obligations on the
due date thereof (whether due at stated maturity, on demand, upon acceleration
or otherwise);
(B) any warranty, representation, or other statement made or
furnished to Lender by or on behalf of Borrower or Guarantor or in any
instrument, certificate or financial statement furnished in compliance with or
in reference to this Agreement or any of the Other Agreements proves to have
been false or misleading in any material respect when made or furnished;
(C) Borrower shall fail or neglect to perform, keep or observe
(i) any covenant contained in this Agreement (other than a covenant a default
in the performance or observance of which is dealt with specifically in clause
(ii) hereof or elsewhere in this Section 11.1) and the breach of such covenant
is not cured to Lender's satisfaction within 15 days after the sooner to occur
of Borrower's receipt of notice of such breach from Lender or the date on which
such failure or neglect becomes known to any officer of Borrower or (ii) shall
fail or neglect to
LOAN AND SECURITY AGREEMENT - Page 36
37
perform, keep or observe any covenant contained in Sections 4.2, 4.3, 4.4, 5.2,
5.4, 7.2, 9.1(A), 9.1(E), 9.1(F), 9.1(I), 9.1(J), 9.1(K), 9.2 or 9.3;
(D) any event of default shall occur under, or Borrower shall
default in the performance or observance of any term, covenant, condition or
agreement contained in, any of the Other Agreements and such default shall
continue beyond any applicable period of grace;
(E) there shall occur any default or event of default on the
part of Borrower under any agreement, document or instrument to which Borrower
is a party or by which Borrower or any of its Property is bound, creating or
relating to any Indebtedness (other than the Obligations) if the payment or
maturity of such Indebtedness is accelerated in consequence of such event of
default or demand for payment of such Indebtedness is made;
(F) any material loss, theft, damage or destruction not
materially covered by insurance (as required by this Agreement and subject to
such deductibles as Lender shall have agreed to in writing), or sale, lease or
encumbrance of any of the Collateral or the making of any levy, seizure, or
attachment thereof or thereon except in all cases as may be specifically
permitted by other provisions of this Agreement;
(G) there shall occur any material adverse change in the
financial condition or business prospects of Borrower or any Guarantor;
(H) Borrower or any Guarantor shall cease to be Solvent or
shall suffer the appointment of a receiver, trustee, custodian or similar
fiduciary, or shall make an assignment for the benefit of creditors, or any
petition for an order for relief shall be filed by or against Borrower or any
Guarantor under the Bankruptcy Code (if against Borrower or any Guarantor, the
continuation of such proceeding for more than 30 days), or Borrower or any
Guarantor shall make any offer of settlement, extension or composition to their
respective unsecured creditors generally;
(I) a Reportable Event shall occur which Lender shall
determine in good faith constitutes grounds for the termination by the Pension
Benefit Guaranty Corporation of any Plan or for the appointment by the
appropriate United States district court of a trustee for any Plan, or if any
Plan shall be terminated or any such trustee shall be requested or appointed;
(J) any Guarantor shall revoke or attempt to revoke the
Guaranty Agreement signed by such Guarantor, or shall repudiate such
Guarantor's liability thereunder or shall be in default under the terms
thereof;
(K) any money judgment, writ or attachment or similar process
is entered or filed against Borrower or any of its Property and results in the
creation or imposition of any Lien that is not a Permitted Lien;
LOAN AND SECURITY AGREEMENT - Page 37
38
(L) Borrower shall incur, assume or suffer to exist any
Indebtedness, whether direct or contingent, other than Indebtedness listed on
Exhibit F hereto and other Indebtedness (exclusive of trade payables) up to an
aggregate of $100,000 at any time outstanding;
(M) Lender shall in good ▇▇▇▇▇ ▇▇▇▇ itself insecure;
(N) The occurrence of an "Event of Default", as such term is
defined in the Sepco Loan Agreement;
(O) The termination or cancellation of Borrower's integrated
distributor contract with Exxon Corporation;
(P) Borrower and/or Sepco ceases to be a Subsidiary of Parent;
or
(Q) Pelican State Supply Company, a Louisiana corporation, has
failed by the close of business on the date of the initial funding hereunder to
merge into Borrower (with Borrower being the surviving entity).
11.2. Acceleration of the Obligations. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligations payable on
demand in accordance with Section 3.4 hereof, upon and at any time after the
occurrence of an Event of Default, all or any portion of the Obligations due or
to become due from Borrower to Lender (whether under this Agreement, any Other
Agreement or otherwise) shall, at Lender's option, become at once due and
payable without presentment, demand, protest, notice of dishonor, notice of
default, notice of intent to accelerate, notice of acceleration, or any other
notice whatsoever, and Borrower shall forthwith pay to Lender, in addition to
any and all sums and charges due, the entire principal of and interest accrued
on the Obligations.
11.3. Remedies. Upon and after the occurrence of an Event of Default,
Lender shall have and may exercise from time to time the following rights and
remedies:
(A) All of the rights and remedies of a secured party under
the Code or under other applicable law, and all other legal and equitable
rights to which Lender may be entitled, all of which rights and remedies shall
be cumulative, and none of which shall be exclusive, and shall be in addition
to any other rights or remedies contained in this Agreement or any of the Other
Agreements.
(B) The right to take immediate possession of the Collateral,
and (i) to require Borrower to assemble the Collateral, at Borrower's expense,
and make it available to Lender at a place designated by Lender which is
reasonably convenient to both parties, and (ii) to enter any of the premises of
Borrower or wherever any of the Collateral shall be located, and to keep and
store the same on said premises until sold (and if said premises be the
Property of Borrower, Borrower agrees not to charge Lender for storage
thereof).
LOAN AND SECURITY AGREEMENT - Page 38
39
(C) The right to sell or otherwise dispose of all or any
Inventory or Equipment in its then condition, or after any further
manufacturing or processing thereof, at public or private sale or sales, with
such notice as may be required by law, in lots or in bulk, for cash or on
credit, all as Lender, in its discretion, may deem advisable. Borrower agrees
that fifteen days written notice to Borrower of any public or private sale or
other disposition of such Collateral shall be reasonable notice thereof, and
such sale shall be at such locations as Lender may designate in said notice.
Lender shall have the right to conduct such sales on Borrower's premises,
without charge therefor, and such sales may be adjourned from time to time in
accordance with applicable law. Lender shall have the right to sell, lease or
otherwise dispose of such Collateral, or any part thereof, for cash, credit or
any combination thereof, and Lender may purchase all or any part of such
Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set-off the amount of such price
against the Obligations.
(D) Lender is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, tradenames, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral and Borrower's rights under all licenses
and all franchise agreements shall inure to Lender's benefit.
(E) The proceeds realized from the sale of any Collateral may
be applied, after allowing two Business Days for collection, first to the
costs, expenses and reasonable attorneys' fees incurred by Lender in collecting
the Obligations, in enforcing Lender's rights under the Loan Documents and in
collecting, retaking, completing, protecting, removing, storing, advertising
for sale, selling and delivering any of the Collateral; secondly, to interest
due upon any of the Obligations; and thirdly, to the principal of the
Obligations. If any deficiency shall arise, Borrower shall remain liable to
Lender therefor.
11.4. Remedies Cumulative; No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the Other Agreements, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule given to Lender or contained in any other agreement between
Lender and Borrower, heretofore, concurrently, or hereafter entered into, shall
be deemed cumulative to and not in derogation or substitution of any of the
terms, covenants, conditions, or agreements of Borrower herein contained. The
failure or delay of Lender to exercise or enforce any rights, Liens, powers or
remedies hereunder or under any of the aforesaid agreements or other documents
or security or Collateral shall not operate as a waiver of such Liens, rights,
powers and remedies, but all such Liens, rights, powers, and remedies shall
continue in full force and effect until all Loans and all other Obligations
owing or to become owing from Borrower to Lender shall have been fully
satisfied, and all Liens, rights, powers, and remedies herein provided for are
cumulative and none are exclusive.
SECTION 12. MISCELLANEOUS
12.1. Power of Attorney. Borrower hereby irrevocably designates, makes,
constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful
LOAN AND SECURITY AGREEMENT - Page 39
40
attorney (and agent-in-fact) and Lender, or Lender's agent, may, without notice
to Borrower and in either Borrower's or Lender's name, but at the reasonable
cost and expense of Borrower:
(A) At such time or times hereafter as Lender or said agent
may determine, endorse Borrower's name on any checks, notes, acceptances,
drafts, money orders or any other evidence of payment or proceeds of the
Collateral which come into the possession of Lender or under Lender's control;
and
(B) At such time or times upon or after the occurrence of an
Event of Default as Lender or its agent may determine: (i) demand and enforce
payment of the Accounts by legal proceedings or otherwise and exercise
generally all of Borrower's rights and remedies with respect to the collection
of the Accounts; (ii) settle, adjust, compromise, discharge or release any of
the Accounts or other Collateral or any legal proceedings brought to collect
any of the Accounts or other Collateral; (iii) prepare, file and sign
Borrower's name to a proof of claim in bankruptcy or similar document against
any Account Debtor or to any notice of lien, assignment or satisfaction of lien
or similar document in connection with any of the Collateral; (iv) receive and
open all mail addressed to Borrower and to notify postal authorities to change
the address for delivery thereof to such address as Lender may designate; (v)
endorse the name of Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Lender on
account of the Obligations; (vi) endorse the name of Borrower upon any chattel
paper, document, instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of lading or similar
document or agreement relating to the Accounts, Inventory and any other
Collateral; (vii) use Borrower's stationery and sign the name of Borrower to
verifications of the Accounts and notices thereof to Account Debtors; (viii)
make and adjust claims under policies of insurance; and (ix) do all other acts
and things necessary, in Lender's reasonable determination, to fulfill
Borrower's obligations under this Agreement.
12.2. Indemnity. Borrower hereby agrees to indemnify Lender and hold
Lender harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Lender as the result of Borrower's
failure to observe, perform or discharge Borrower's duties hereunder. Without
limiting the generality of the foregoing, this indemnity shall extend to any
claims asserted against Lender by any Person under any Environmental Laws or
similar laws by reason of Borrower's or any other Person's failure to comply
with laws applicable to solid or hazardous waste materials or other toxic
substances, but this indemnity shall specifically exclude liability for breach
of any Environmental Laws caused solely and directly by Lender.
Notwithstanding any contrary provision in this Agreement, the obligation of
Borrower under this Section 12.2 shall survive the payment in full of the
Obligations and the termination of Lender's obligation to make Revolving Credit
Loans.
12.3. Modification of Agreement. This Agreement and the Other
Agreements may not be modified, altered or amended, except by an agreement in
writing signed by Borrower and Lender.
12.4 Reimbursement of Expenses. If, at any time or times prior or
subsequent to the date hereof, regardless of whether or not an Event of Default
then exists or any of the
LOAN AND SECURITY AGREEMENT - Page 40
41
transactions contemplated hereunder are concluded, Lender employs counsel for
advice or other representation, or incurs legal expenses or other costs or out-
of-pocket expenses in connection with: (A) the negotiation and preparation of
this Agreement or any of the Other Agreements, any amendment of or modification
of this Agreement or any of the Other Agreements; (B) the reasonable
administration of this Agreement or any of the Other Agreements and the
transactions contemplated hereby and thereby; (C) any litigation, contest,
dispute, suit, proceeding or action (whether instituted by Lender, Borrower or
any other Person) in any way relating to the Collateral, this Agreement or any
of the Other Agreements or Borrower's affairs (other than litigation in which
Borrower is the prevailing party and in which Lender is adverse to Borrower);
(D) any attempt to enforce any rights of Lender against Borrower or any other
Person which may be obligated to Lender by virtue of this Agreement or any of
the Other Agreements, including, without limitation, the Account Debtors (other
than litigation in which Borrower is the prevailing party and in which Lender
is adverse to Borrower); or (E) any attempt to inspect, verify, protect,
preserve, restore, collect, sell, liquidate or otherwise dispose of or realize
upon the Collateral; then, in any such event, the reasonable attorneys' fees
arising from such services and all expenses, costs, charges and other fees of
such counsel or of Lender or relating to any of the events or actions described
in this Section shall be payable, on demand, by Borrower to Lender and shall be
additional Obligations hereunder secured by the Collateral. Additionally, if
any taxes (excluding taxes imposed upon or measured by the net income of
Lender) shall be payable on account of the execution or delivery of this
Agreement, or the execution, delivery, issuance or recording of any of the
Other Agreements, or the creation of any of the Obligations hereunder, by
reason of any existing or hereafter enacted federal or state statute, Borrower
will pay all such taxes, including, but not limited to, any interest and
penalties thereon, and will indemnify and hold Lender harmless from and against
liability in connection therewith. Borrower shall have no obligation to pay
the legal expenses or other costs incurred by a Participating Lender or by
Lender in connection with any sale or attempted sale of any interest herein to
a Participating Lender.
12.5. Indulgences Not Waivers. Lender's failure, at any time or times
hereafter, to require strict performance by Borrower of any provision of this
Agreement shall not waive, affect or diminish any right of Lender thereafter to
demand strict compliance and performance therewith. Any suspension or waiver
by Lender of an Event of Default by Borrower under this Agreement or any of the
Other Agreements shall not suspend, waive or affect any other Event of Default
by Borrower under this Agreement or any of the Other Agreements, whether the
same is prior or subsequent thereto and whether of the same or of a different
type. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the Other
Agreements and no Event of Default by Borrower under this Agreement or any of
the Other Agreements shall be deemed to have been suspended or waived by
Lender, unless such suspension or waiver is by an instrument in writing
specifying such suspension or waiver and is signed by a duly authorized
representative of Lender and directed to Borrower.
12.6. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
LOAN AND SECURITY AGREEMENT - Page 41
42
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
12.7. Successors and Assigns; Participations by Lender. This Agreement
and the Other Agreements shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and Lender; provided, however, that Borrower
may not sell, assign or transfer any interest in this Agreement or any of the
Other Agreements, or any portion thereof, including, without limitation,
Borrower's rights, title, interests, remedies, powers and duties hereunder or
thereunder. Any purported assignment by Borrower in violation of this Section
12.7 shall be void, without Lender's prior written consent. Borrower hereby
consents to Lender's participation, sale, assignment, transfer or of the
disposition, at any time or times hereafter, of this Agreement, any of the
Other Agreements, or any other Obligations, or of any portion hereof or
thereof, including, without limitation, Lender's rights, title, interests,
remedies, powers, and duties hereunder or thereunder. In the case of an
assignment, the assignee shall have, to the extent of such assignment, the same
rights, benefits and obligations as it would have if it were the original
"Lender" hereunder and Lender shall be relieved of all obligations hereunder
upon any such assignment. In the case of a participation, each Participating
Lender shall be entitled to receive all information received by Lender
regarding the credit-worthiness of Borrower, including, without limitation,
information required to be disclosed to a participant pursuant to Banking
Circular 181 (Rev., August 2, 1984), issued by the Comptroller of the Currency
(whether such Participating Lender is subject to the circular or not).
12.8. Cumulative Effect; Conflict of Terms. The provisions of the
Other Agreements are hereby made cumulative with the provisions of this
Agreement. Except as otherwise provided in Section 3.4 of this Agreement and
except as otherwise provided in any of the Other Agreements by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the Other Agreements, the provision contained in this
Agreement shall govern and control.
12.9. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which counterparts taken together shall constitute
but one and the same instrument.
12.10. Notice. Except as otherwise provided herein, all notices,
requests and demands to or upon a party hereto shall be in writing and shall be
sent by certified or registered mail, return receipt requested, personal
delivery against receipt, or by telegraph or telex and, unless otherwise
expressly provided herein, shall be deemed to have been validly served, given
or delivered when delivered against receipt or three Business Days after
deposit in the mail, postage prepaid, or, in the case of telegraphic notice,
when delivered to the telegraph company, or, in the case of telex notice, when
sent, answer-back received, addressed as follows:
LOAN AND SECURITY AGREEMENT - Page 42
43
(A) If to Lender: Fleet Capital Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Administration Manager
w/ a copy to: ▇▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
(B) If to Borrower: Pelican State Supply Company, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
w/ a copy to: ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
or to such other address as each party may designate for itself by like notice
given in accordance with this Section 12.10; provided, however, that any
notice, request or demand to or upon Lender pursuant to Section 3.3 shall not
be effective until received by Lender. Any written notice that is not sent in
conformity with the provisions hereof shall nevertheless be effective on the
date such notice is actually received by the noticed party.
12.11. Lender's Consent. Whenever Lender's consent is required to be
obtained under this Agreement or any of the Other Agreements as a condition to
any action, inaction, condition or event, Lender shall be authorized to give or
withhold such consent in its sole and absolute discretion (unless otherwise
expressly provided herein) and to condition its consent upon the giving of
additional collateral security for the Obligations, the payment of money or any
other matter.
12.12. Demand Obligations. Nothing in this Agreement shall affect or
abrogate the demand nature of any portion of the Obligations expressly made
payable on demand by this Agreement or by any instrument evidencing or securing
same, and the occurrence of an Event of Default shall not be a prerequisite for
Lender's requiring payment of such Obligations.
12.13. Time of Essence. Time is of the essence of this Agreement and
the Other Agreements.
12.14. Entire Agreement. This Agreement and the Other Agreements,
together with all other instruments, agreements and certificates executed by
the parties in connection therewith or
LOAN AND SECURITY AGREEMENT - Page 43
44
with reference thereto, embody the entire understanding and agreement between
the parties hereto and thereto with respect to the subject matter hereof and
thereof and supersede all prior agreements, understandings and inducements,
whether express or implied, oral or written.
12.15. Interpretation. No provision of this Agreement or any of the
other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured,
drafted or dictated such provision.
12.16. Nonapplicability of Article 5069-15.01 et seq. Borrower and
Lender hereby agree that, except for Section 15.10(b) thereof, the provisions
of Tex. Rev. Civ. Stat. ▇▇▇. art. 5069-15.01 et seq. (▇▇▇▇▇▇ 1987) (regulating
certain revolving credit loans and revolving tri-party accounts) shall not
apply to this Agreement or any of the Other Agreements.
12.17. No Preservation or Marshaling. Borrower agrees that Lender has
no obligation to preserve rights to the Collateral against prior parties or to
marshal any Collateral for the benefit of any Person.
12.18. GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
DALLAS, TEXAS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS; PROVIDED, HOWEVER, THAT IF ANY OF THE
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN TEXAS, THE LAWS OF
SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE
OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF LENDER'S OTHER
REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF TEXAS. AS
PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT
OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER OR LENDER,
BORROWER HEREBY CONSENTS AND AGREES THAT THE DISTRICT COURT OF DALLAS COUNTY,
TEXAS, OR, AT LENDER'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION, SHALL HAVE EXCLUSIVE JURISDICTION
TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER
PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER
HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
LOAN AND SECURITY AGREEMENT - Page 44
45
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE, AT THE ELECTION OF LENDER, BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN
THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR FIVE DAYS AFTER DEPOSIT IN THE
U.S. MAILS, PROPER POSTAGE PREPAID; PROVIDED THAT LENDER SHALL ALSO SEND, BY
TELECOPY, TO BORROWER A COPY OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS (AN
AFFIDAVIT OF AN OFFICER, EMPLOYEE OR AGENT OF LENDER STATING THAT SUCH TELECOPY
WAS SENT TO BORROWER SHALL BE PRESUMPTIVELY CORRECT IN ALL RESPECTS). NOTHING
IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF LENDER TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE
ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE
TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER
APPROPRIATE FORUM OR JURISDICTION.
12.19. WAIVERS BY BORROWER. BORROWER WAIVES (A) THE RIGHT TO TRIAL BY
JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN
DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (B) PRESENTMENT, DEMAND AND
PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON-PAYMENT, INTENT TO
ACCELERATE, ACCELERATION, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION
OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS,
DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER
ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS
WHATEVER LENDER MAY DO IN THIS REGARD; (C) NOTICE PRIOR TO TAKING POSSESSION OR
CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY
ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF LENDER'S REMEDIES; (D)
THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS; (E) ANY RIGHT
BORROWER MAY HAVE UPON PAYMENT IN FULL OF THE OBLIGATIONS TO REQUIRE LENDER TO
TERMINATE ITS SECURITY INTEREST IN THE COLLATERAL OR IN ANY OTHER PROPERTY OF
BORROWER UNTIL TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH ITS TERMS AND
THE EXECUTION BY BORROWER, AND BY ANY PERSON WHOSE LOANS TO BORROWER IS USED IN
WHOLE OR IN PART TO SATISFY THE OBLIGATIONS, OF AN AGREEMENT INDEMNIFYING
LENDER FROM ANY LOSS OR DAMAGE LENDER MAY INCUR AS THE RESULT OF DISHONORED
CHECKS OR OTHER ITEMS OF PAYMENT RECEIVED BY LENDER FROM BORROWER OR ANY
ACCOUNT DEBTOR AND APPLIED TO THE OBLIGATIONS; AND (F) NOTICE OF ACCEPTANCE
HEREOF. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL
INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING
UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER
WARRANTS AND REPRESENTS THAT IT HAS
LOAN AND SECURITY AGREEMENT - Page 45
46
REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
12.20. SPECIAL LOUISIANA PROVISIONS. Insofar as the validity or
perfection of the security interest hereunder or the remedies hereunder are
governed by the laws of the State of Louisiana, Borrower agrees as follows:
(i) For purposes of Louisiana executory process, Borrower
acknowledges the Obligations secured hereby, whether now existing or to
arise hereafter, and confesses judgment thereon if not paid when due.
Upon the occurrence of an Event of Default and at any time thereafter so
long as the same shall be continuing, and in addition to all of the
rights and remedies granted the Lender hereunder, it shall be lawful for
and Borrower hereby authorizes Lender without making a demand or putting
Borrower in default, a putting in default being expressly waived, to
cause all and singular the Collateral to be seized and sold after due
process of law, Borrower waiving the benefit of any and all laws or
parts of laws relative to appraisement of property seized and sold under
executory process or other legal process, and consenting that the
Collateral be sold without appraisement, either in its entirety or in
lots or parcels, as Lender may determine, to the highest bidder for cash
or on such other terms as the plaintiff in such proceedings may direct.
In addition, Lender shall have all of the-rights and remedies available
to it under this Agreement or under the Louisiana Commercial Laws
(Louisiana Revised Statutes, Title 10), then in effect (La. R.S. 10:9-
101 et seq.).
(ii) Borrower hereby waives:
(a) the benefit of appraisement provided for in Articles
2332, 2336, 2723 and 2724 of the Louisiana Code of Civil
Procedure and all other laws conferring the same;
(b) the demand and three (3) days notice of demand as provided
in Articles 2639 and 2721 of the Louisiana Code of Civil
Procedure;
(c) the notice of seizure provided by Articles 2293 and 2721
of the Louisiana Code of Civil Procedure; and
(d) the three (3) day delay provided for in Articles 2331 and
2722 of the Louisiana Code of Civil Procedure.
(iii) Borrower expressly authorizes and agrees that Lender shall
have the right to appoint a keeper of the Collateral pursuant to the
terms and provision of La. R.S. 9:5136.
LOAN AND SECURITY AGREEMENT - Page 46
47
12.21 ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER
AGREEMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THE SAME MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
12.22 WAIVER OF CONSUMER RIGHTS. BORROWER HEREBY WAIVES ITS RIGHTS
UNDER THE TEXAS DECEPTIVE TRADE PRACTICES--CONSUMER PROTECTION ACT SECTION
17.41 ET. SEQ. TEXAS BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS
SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF
BORROWER'S OWN SELECTION, BORROWER VOLUNTARILY CONSENTS TO THIS WAIVER.
BORROWER EXPRESSLY WARRANTS AND REPRESENTS THAT BORROWER (i) IS NOT IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO LENDER, AND (ii) HAS
BEEN REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.
LOAN AND SECURITY AGREEMENT - Page 47
48
IN WITNESS WHEREOF, this Agreement has been duly executed in Dallas,
Texas, on the day and year specified at the beginning hereof.
"BORROWER"
PELICAN STATE SUPPLY COMPANY,
INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------
Name:
-----------------------
Title: Sr. VP Finance
-----------------------
"LENDER"
FLEET CAPITAL CORPORATION
By: /s/ H. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------
Name: H. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------
Title: VP
-----------------------
LOAN AND SECURITY AGREEMENT - Page 48
49
EXHIBIT A
FORM OF EURODOLLAR BORROWING NOTICE
____________, 199__
Fleet Capital Corporation
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Administration Manager -- Pelican State Supply Company, Inc.
Ladies and Gentlemen:
Reference is made to that certain Loan and Security Agreement, dated as
of May 29, 1997, by and between Pelican State Supply Company, Inc. and Fleet
Capital Corporation ("Lender") (as amended from time to time, the "Loan
Agreement"). Unless otherwise defined herein, all capitalized terms shall have
the meaning ascribed to them in the Loan Agreement.
The undersigned is an authorized officer of Pelican State Supply
Company, Inc. and is authorized to make and deliver this request pursuant to
the Loan Agreement on behalf of Pelican State Supply Company, Inc. (hereinafter
referred to as the "Borrower").
In connection with the foregoing and pursuant to the terms and
provisions of the Loan Agreement, the undersigned hereby certifies that:
(i) No Default or Event of Default currently exists under the Loan
Agreement.
(ii) Attached hereto as Schedule 1 is a true, correct and complete
request for advance under the Loan Agreement or other transaction related
thereto and Borrower hereby requests that Lender initiate the transactions
described therein.
PELICAN STATE SUPPLY COMPANY, INC.
By:
_________________________
Name:
_______________________
Title:
______________________
LOAN AND SECURITY AGREEMENT
Exhibit A - Page 1
50
Schedule 1
Request for Interest Rate Option
Please use this correspondence as an official request on behalf of
Borrower to initiate the following transaction(s):
ADVANCES
Advance $________ at the Eurodollar Base Rate of ____% plus 2.00% for a period
of [1][2][3][6] months until maturity at __________________.
________ credit this advance to account number _______ at ________.
________ use this advance to designate $________ of the [Term Loan]
[Revolving Credit Loans] as Loans that bear interest based
upon the Eurodollar Base Rate.
READVANCES
Readvance to pay the principal amount currently outstanding under the
Eurodollar Loan which matures on ________ in the amount of $________ by
initiating a readvance of $________ at the Eurodollar Base Rate of ____% plus
2.00% for a period of [1][2][3][6] months until maturity on ________________.
PAYDOWNS
________ Payoff the Eurodollar Loan in the amount of $________ which
matures on _____________.
Proceeds to initiate this paydown may be obtained by debiting Borrower's
account number ________ at ____________.
LOAN AND SECURITY AGREEMENT
Exhibit A - Page 2
51
EXHIBIT B
BUSINESS LOCATIONS
1. Borrower currently has the following business locations, and no others:
Chief Executive Office: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Other Locations: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
2. Borrower maintains its books and records relating to Accounts and
General Intangibles at: ▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
3. Borrower has had no office, place of business or agent for process
located in any county other than as set forth above, except: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
4. Each Subsidiary currently has the following business locations, and no
others:
Chief Executive Office:
N/A
Other Locations:
5. Each Subsidiary maintains its books and records relating to Accounts and
General Intangibles at:
N/A
6. Each Subsidiary has had no office, place of business or agent for
process located in any county other than as set forth above, except:
N/A
LOAN AND SECURITY AGREEMENT
Exhibit B - Page 1
52
7. The following bailees, warehouseman, similar parties and consignees hold
inventory of Borrower or one of its Subsidiaries:
N/A
Name and Address Nature of
of Party Relationship Amount of Inventory Owner of Inventory
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
LOAN AND SECURITY AGREEMENT
Exhibit B - Page 2
53
EXHIBIT C
CORPORATE NAMES
1. Borrower's correct corporate name, as registered with the Secretary of
State of the State of Nevada, is:
Pelican State Supply Company, Inc.
2. In the conduct of its business, Borrower has used the following names:
Same as above
3. Each Subsidiaries' correct corporate name, as registered with the
Secretary of State of the State of its incorporation, is:
N/A
4. In the conduct of its business, each Subsidiary has used the following
names:
N/A
LOAN AND SECURITY AGREEMENT
Exhibit C - Page 1
54
EXHIBIT D
LITIGATION
1. Actions, suits, proceedings and investigations pending against Borrower
or any Subsidiary:
N/A
Jurisdiction or
Title of Action Nature of Action Complaining Parties Tribunal
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
2. The only threatened actions, suits, proceedings or investigations of
which Borrower or any Subsidiary is aware are as follows:
None
LOAN AND SECURITY AGREEMENT
Exhibit D- Page 1
55
EXHIBIT E
COMPLIANCE CERTIFICATE
[Letterhead of Borrower]
__________________, 19__
Fleet Capital Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ 21
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
The undersigned, the chief financial officer of Pelican State Supply
Company, Inc., a Nevada corporation ("Borrower"), gives this certificate to
Fleet Capital Corporation ("Lender") in accordance with the requirements of
Section 9.1.(J) of that certain Loan and Security Agreement dated as of May 29,
1997, by and between Borrower and Lender ("Loan Agreement"). Capitalized terms
used in this Certificate, unless otherwise defined herein, shall have the
meanings ascribed to them in the Loan Agreement.
1. Based upon my review of the Consolidated and consolidating
balance sheets and statements of income of DXP Enterprises, Inc. and its
Subsidiaries for the [fiscal year] [quarterly period] [month] ending
__________________, 19__, ("Calculation Date")copies of which are attached
hereto, I hereby certify that:
(a) Consolidated Cash Flow for the three-month period ending
on the Calculation Date is $_________;
[(b) Consolidated Cash Flow for the twelve-month period ending
on the Calculation Date is $____________;]
(c) The Consolidated Current Assets to Consolidated Current
Liabilities Ratio as of the Calculation Date is ____ to 1;
(d) The Consolidated Indebtedness to Consolidated Adjusted
Tangible Net Worth Ratio is ____ to 1; and
LOAN AND SECURITY AGREEMENT
Exhibit E- Page 1
56
(e) Capital Expenditures during the period and for the fiscal
year to date total $__________ and $__________,
respectively.
2. No Default exists on the date hereof, other than: _______________
[if none, so state]; and
3. No Event of Default exists on the date hereof, other than _______
[if none, so state].
Very truly yours,
______________________________
Chief Financial Officer
LOAN AND SECURITY AGREEMENT
Exhibit E - Page 2
57
EXHIBIT F
PERMITTED INDEBTEDNESS
Holder of Indebtedness Description of Indebtedness Maturity Date
-------------------------- ---------------------------- ------------------
-------------------------- ---------------------------- ------------------
-------------------------- ---------------------------- ------------------
-------------------------- ---------------------------- ------------------
LOAN AND SECURITY AGREEMENT
Exhibit F - Page 1