EXHIBIT 10.22.2
===============================================================================
RESTATED CREDIT AGREEMENT
between
XXXXXXX XXXXXX FINANCIAL SERVICES, INC.
and
BANK ONE, TEXAS, N.A.
January 22, 1998
$20,000,000
===============================================================================
TABLE OF CONTENTS
Page
ARTICLE I - GENERAL TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Definitional Provisions. . . . . . . . . . . . . . . . . . 9
Section 1.3 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . 10
Section 1.4 Calculations and Determinations. . . . . . . . . . . . . . . . . 10
ARTICLE II - AMOUNT AND TERMS OF ADVANCES. . . . . . . . . . . . . . . . . . . . . 10
Section 2.1 Commitment and Advances. . . . . . . . . . . . . . . . . . . . . 10
Section 2.2 Promissory Note; Optional Prepayments. . . . . . . . . . . . . . 11
Section 2.3 Notice and Manner of Obtaining Borrowings. . . . . . . . . . . . 11
Section 2.4 Warehouse Custodian Fee. . . . . . . . . . . . . . . . . . . . . 11
Section 2.5 Mandatory Repayments . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.6 Business Days. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.7 Payment Procedure. . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III - COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.1 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.2 Borrowing Request; Delivery of Consumer Notes to Custodian . . . 12
Section 3.3 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.4 Redemption of Collateral . . . . . . . . . . . . . . . . . . . . 13
Section 3.5 Correction of Consumer Notes . . . . . . . . . . . . . . . . . . 14
Section 3.6 Release of Collateral. . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IV - CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.1 Initial Borrowing. . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.2 All Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V - REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 17
Section 5.1 Organization and Good Standing . . . . . . . . . . . . . . . . . 17
Section 5.2 Authorization and Power. . . . . . . . . . . . . . . . . . . . . 18
Section 5.3 No Conflicts or Consents . . . . . . . . . . . . . . . . . . . . 18
Section 5.4 Enforceable Obligations. . . . . . . . . . . . . . . . . . . . . 18
Section 5.5 Priority of Liens. . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.6 No Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.7 Financial Condition of Borrower. . . . . . . . . . . . . . . . . 18
Section 5.8 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.9 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.10 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
i
Section 5.12 Principal Office, etc. . . . . . . . . . . . . . . . . . . . . . 19
Section 5.13 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . . 19
Section 5.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.15 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.16 Permits, Patents, Trademarks, etc. . . . . . . . . . . . . . . . 20
Section 5.17 Status Under Certain Federal Statutes. . . . . . . . . . . . . . 20
Section 5.18 Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.19 Pollution Control. . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.20 No Approvals Required. . . . . . . . . . . . . . . . . . . . . . 20
Section 5.21 Survival of Representations. . . . . . . . . . . . . . . . . . . 21
Section 5.22 Individual Consumer Notes. . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI - AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.1 Taxes and Other Liens. . . . . . . . . . . . . . . . . . . . . . 22
Section 6.2 Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.3 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.4 Reimbursement of Expenses. . . . . . . . . . . . . . . . . . . . 23
Section 6.5 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.6 Accounts and Records . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.7 Right of Inspection. . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.8 Notice of Certain Events . . . . . . . . . . . . . . . . . . . . 24
Section 6.9 Use of Proceeds; Margin Stock. . . . . . . . . . . . . . . . . . 24
Section 6.10 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.11 Compliance with Loan Documents . . . . . . . . . . . . . . . . . 25
Section 6.12 Operations and Properties. . . . . . . . . . . . . . . . . . . . 25
Section 6.13 Financial Statements and Reports . . . . . . . . . . . . . . . . 25
ARTICLE VII - NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.1 No Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.2 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . 27
Section 7.3 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.4 Liquidations and Dispositions of Substantial Assets. . . . . . . 27
Section 7.5 Loans, Advances, and Investments . . . . . . . . . . . . . . . . 27
Section 7.6 Actions with Respect to Collateral . . . . . . . . . . . . . . . 28
Section 7.7 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.8 Minimum Liquidity. . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.9 Total Liabilities to Borrower's Consolidated Tangible Net
Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.10 Restrictions on Dividends and Payments of Subordinated Debt. . . 29
Section 7.11 Transactions with Affiliates . . . . . . . . . . . . . . . . . . 29
Section 7.12 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.13 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.14 Change of Principal Office . . . . . . . . . . . . . . . . . . . 29
Section 7.15 Fiscal Year, Method of Accounting. . . . . . . . . . . . . . . . 29
ii
ARTICLE VIII - EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.1 Nature of Event . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.2 Default Remedies. . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE IX - CONCERNING BANK ONE . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.2 Limitation of Liability . . . . . . . . . . . . . . . . . . . . 34
ARTICLE X - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 10.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 10.2 Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.3 Invalidity. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.4 Survival of Agreements. . . . . . . . . . . . . . . . . . . . . 35
Section 10.5 Renewal, Extension or Rearrangement . . . . . . . . . . . . . . 35
Section 10.6 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.7 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.8 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 10.9 Limitation on Interest. . . . . . . . . . . . . . . . . . . . . 36
Section 10.10 Bank Accounts; Offset . . . . . . . . . . . . . . . . . . . . . 37
Section 10.11 Assignments and Participations. . . . . . . . . . . . . . . . . 37
Section 10.12 Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 10.13 Titles of Articles, Sections and Subsections. . . . . . . . . . 37
Section 10.14 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.15 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.16 Termination; Limited Survival . . . . . . . . . . . . . . . . . 38
Section 10.17 Joint and Several Liability . . . . . . . . . . . . . . . . . . 38
Section 10.18 Restatement . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.19 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . 38
EXHIBITS
Exhibit A - Form of Promissory Note
Exhibit B - Form of Borrowing Request
Exhibit C-1 - Form of Officer's Certificate of Borrower
Exhibit C-2 - Form of Officer's Certificate of Guarantor
Exhibit D - Form of Collateral Release Request
Exhibit E - Form of Bailee Letter
Exhibit F - Form of Borrowing Base Report
Exhibit G - Form of Trust Receipt
Exhibit H - (Intentionally Omitted)
Exhibit I - Underwriting Guidelines
Exhibit J - (Intentionally Omitted)
iii
Exhibit K - (Intentionally Omitted)
Exhibt L - Warehouse Custodian Fees
iv
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and entered into as of January 22, 1998,
between XXXXXXX XXXXXX FINANCIAL SERVICES, INC., a Texas corporation
("BORROWER"), and BANK ONE, TEXAS, N.A. ("BANK ONE").
The parties hereto hereby agree as follows:
ARTICLE I
GENERAL TERMS
Section 1.1 CERTAIN DEFINITIONS. As used in this Agreement, the
following terms have the following meanings:
"ADJUSTED BASE RATE" means the per annum rate of interest one-and
three-eights percent (1.375%) below the Base Rate. If the Base Rate changes
after the date hereof, the Adjusted Base Rate shall automatically increase or
decrease, as the case may be, without notice to Borrower.
"ADVANCE" shall mean a disbursement by Bank One of any sum or sums lent
by Bank One to Borrower hereunder.
"AFFILIATE" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person.
"AGREEMENT" shall mean this Credit Agreement, as the same may from time
to time be amended, modified, supplemented or restated.
"APPROVED INVESTOR" means the Trustee under the Asset Securitization
Facility and any other investor approved in writing by Bank One as an
Approved Investor.
"ASSET SECURITIZATION FACILITY" means a facility approved by Bank One
which provides for the sale by Borrower of the Consumer Notes to a trustee,
acting for certain investors.
"BAILEE LETTER" means a bailee letter from Bank One to an Approved
Investor in the form of "Exhibit "E".
"BANK ONE" shall have the meaning assigned to such term in the preamble
hereof.
1
"BASE RATE" shall mean the base commercial rate of interest as announced
from time to time by Bank One (which may not be the lowest, best, or most
favorable rate of interest which Bank One may charge on loans to its
customers).
"BORROWER" shall have the meaning assigned to such term in the preamble
hereof.
"BORROWER'S CONSOLIDATED DEBT" means all Consolidated liabilities and
similar balance sheet items of Borrower.
"BORROWER'S CONSOLIDATED TANGIBLE NET WORTH" means the remainder of all
Consolidated assets of Borrower, other than intangible assets (including
without limitation as intangible assets such assets as patents, copyrights,
licenses, franchises, goodwill, trade names, trade secrets and leases other
than oil, gas or mineral leases or leases required to be capitalized under
GAAP and any residual interests of Borrower under the Asset Securitization
Facility, MINUS Borrower's Consolidated Debt (other than Subordinated Debt).
"BORROWING" shall mean a borrowing consisting of an Advance by Bank One
pursuant to a Borrowing Request.
"BORROWING BASE" means at any date, the Collateral Value calculated as
of such date.
"BORROWING BASE REPORT" means a report prepared by Borrower in the form
of Exhibit F.
"BORROWING DATE" with respect to a particular Borrowing shall mean the
Business Day identified by Borrower as the day on which it requests that such
Borrowing be made, such day shall be identified in the related Borrowing
Request.
"BORROWING REQUEST" shall mean a request, in the form of EXHIBIT "B",
for a Borrowing pursuant to ARTICLE II.
"BUSINESS DAY" shall mean any day other than Saturdays, Sundays and
other days on which commercial banks are authorized or required by law to
close in the State of Texas.
"CAPITAL LEASE" shall mean any lease of Property if the then present
value of the minimum rental commitment thereunder should, in accordance with
GAAP, be capitalized on a balance sheet of the lessee.
"CASH EQUIVALENTS" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof which mature within 90 days from the date of
acquisition, and (ii) time deposits and certificates of deposit, which mature
within 90 days from the date of acquisition, of Bank One or any other
domestic commercial bank having capital and surplus in excess of
$200,000,000, which has, or the holding
2
company of which has, a commercial paper rating of at least the second
highest credit rating given by either Standard & Poors Corporation or Xxxxx'x
Investors Service, Inc.
"CHANGE OF CONTROL" means the acquisition by any Person, or group of
Persons acting together, of a direct or indirect interest in more than
forty-nine percent (49%) of the voting power of the voting stock of Borrower,
by way of merger or consolidation or otherwise.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COLLATERAL" shall have the meaning given it in the Security Agreement.
"COLLATERAL RELEASE REQUEST" shall mean a request, in the form of
EXHIBIT "D", that Bank One release its Lien in and upon certain Collateral
pursuant to SECTION 3.6.
"COLLATERAL VALUE" shall mean, with respect to each Eligible Consumer
Note, an amount equal to eighty-five percent (85%) of the lesser of (i) if
Borrower funded the loan made pursuant to the Consumer Note, the original
principal amount of such Consumer Note or (ii) if Borrower acquired such
Consumer Note after the initial funding, the purchase price for such Consumer
Note (less expenses) MINUS, in each case, the amount of principal paid under
such Consumer Note and delivered to Bank One for application to the payment
of the Consumer Note.
"COMMITMENT" shall mean the obligation of Bank One to make Advances to
Borrower pursuant to SECTION 2.1 hereof in an aggregate amount not to exceed
at any one time $20,000,000.
"CONSOLIDATED" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to
a Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"CONSUMER NOTE" shall mean the note, installment sales contract, or
other evidence of indebtedness evidencing the indebtedness of an Obligor
under a home improvement loan together with the rights and obligations of a
holder thereof and payments thereon and proceeds therefrom.
"DEBTOR LAWS" shall mean all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization
or similar laws from time to time in effect affecting the rights of creditors
generally.
"DEFAULT" shall mean any of the events specified in SECTION 8.1 hereof,
whether or not any requirement for notice or lapse or time or any other
condition has been satisfied.
3
"DIVIDENDS", in respect of any corporation, shall mean:
(i) Cash distributions or any other distributions on, or in
respect of, any class of equity security of such corporation, except for
distributions made solely in shares of securities of the same class; and
(ii) Any and all funds, cash or other payments made in respect of
the redemption, repurchase or acquisition of such securities.
"ELIGIBLE CONSUMER NOTES" shall mean all Consumer Notes (i) which are
made payable to the order of Borrower or have been endorsed (without
restriction or limitation) payable to the order of Borrower,(ii) which are
valid and enforceable in accordance with their respective terms,(iii) in
which Bank One has been granted and continues to hold a perfected
first-priority security interest,(iv) which are in a form that has been
prepared by Bankers Systems or otherwise approved by Bank One,(v) which, are
eligible for purchase under an Asset Securitization Facility and by any of
The Money Store, The Associates or another purchaser acceptable to Lender,
and conform in all respects with all the requirements for purchase of such
Consumer Notes thereunder or thereby, and (vi) as to which the
representations and warranties set forth in Section 5.22 are true and correct
without any limitation as to Borrower's knowledge thereof; PROVIDED, HOWEVER,
that any Consumer Note (vii) pledged by Borrower under the Security Agreement
for a period in excess of the Warehousing Period or (viii) which has been out
of Bank One's possession under a Bailee Letter for twenty-one (21) or more
days, or (ix) which has been out of Bank One's possession under a Trust
Receipt for fifteen (15) or more days, or (x) which is in default more than
60 days; or (xi) which was not originated in accordance with the Underwriting
Guidelines or (xii) which was originated fraudulently or (xiii) the Obligor
of which has instituted a proceeding in bankruptcy or reorganization under
Debtor Laws, or (xiv) is no longer eligible for purchase under the Asset
Securitization Facility or ceases to conform in all respects with all
requirements for purchase thereunder, SHALL NOT BE AN ELIGIBLE CONSUMER NOTE.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, together with the regulations from time to time
promulgated with respect thereto.
"ERISA AFFILIATE" shall mean all members of the group of corporations
and trades or businesses (whether or not incorporated) which, together with
Borrower, are treated as a single employer under Section 414 of the Code.
"ERISA PLAN" shall mean any pension benefit plan subject to Title IV of
ERISA or Section 412 of the Code maintained or contributed to by Borrower or
any ERISA Affiliate with respect to which Borrower has a fixed or contingent
liability.
4
"EVENT OF DEFAULT" shall mean any of the events specified in SECTION 8.1
hereof, provided that any requirement in connection with such event for the
giving of notice or the lapse of time, or the happening of any further
condition, event or act has been satisfied.
"FISCAL QUARTER" means the period of three months ending January 31,
April 30, July 31 and October 31 of each year.
"FISCAL YEAR" means the one-year period ending October 31 of each year.
"FUNDING ACCOUNT" shall mean the non-interest bearing demand checking
account established by Borrower with Bank One to be used for the deposit of
proceeds of Advances and the funding of Consumer Notes by Borrower.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor) and which, in the case of
Borrower and Guarantor and its consolidated subsidiaries, are applied for all
periods after the date hereof in a manner consistent with the manner in which
such principles and practices were applied to the financing statements
described in Section 5.7. If any change in any accounting principle or
practice is required by the Financial Accounting Standards Board (or any such
successor) in order for such principle or practice to continue as a generally
accepted accounting principle or practice, all reports and financial
statements required hereunder with respect to Borrower or Guarantor, or with
respect to Borrower or Guarantor and their Consolidated subsidiaries may be
prepared in accordance with such change, but all calculations and
determinations to be made hereunder may be made in accordance with such
change only after notice of such change is given to Bank One and Bank One
agrees to such change insofar as it affects the accounting of Borrower,
Guarantor or of Guarantor and its Consolidated subsidiaries.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
agency, department, state or other political subdivision thereof and any
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"GOVERNMENTAL REQUIREMENT" shall mean any law, statute, code, ordinance,
order, rule, regulation, judgment, decree, injunction, franchise, permit,
certificate, license, authorization or other direction or requirement
(including, without limitation, any of the foregoing which relate to
environmental standards or controls, energy regulations and occupational,
safety and health standards or controls) of any arbitrator, court or other
Governmental Authority, which exercises jurisdiction over any Related Person
or any of its Property.
"GUARANTOR" means Xxxxxxx Xxxxxx Building Products, Inc., a Georgia
corporation.
5
"GUARANTY" shall mean the Guaranty dated as of December 3, 1996,
executed by Guarantor, as the same may from time to time be further
supplemented, amended or restated.
"GUARANTY OBLIGATION" of any Person shall mean any contract, agreement
or understanding of such Person pursuant to which such Person guarantees, or
in effect guarantees, any Indebtedness, lease, dividends or other obligations
(the "PRIMARY OBLIGATIONS") or any other Person (the "PRIMARY OBLIGOR") in
any manner, whether directly or indirectly, contingently or absolutely, in
whole or in part, including without limitation agreements:
(i) to purchase such Primary Obligation or any property
constituting direct or indirect security therefor;
(ii) to advance or supply funds (A) for the purchase or payment of
any such Primary Obligation, or (B) to maintain working capital or other
balance sheet conditions of the Primary Obligor or otherwise to maintain
the net worth or solvency of the Primary Obligor;
(iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such Primary Obligation of the ability
of the Primary Obligor to make payment of such Primary Obligation; or
(iv) otherwise to assure or hold harmless the owner of any such
Primary Obligation against loss in respect thereof;
PROVIDED, THAT "GUARANTY OBLIGATION" shall not include endorsements that
are made in the ordinary course of business of negotiable instruments or
documents for deposit or collection. The amount of any Guaranty Obligation
shall be deemed to be the maximum amount for which the guarantor may be
liable pursuant to the agreement that governs such Guaranty Obligation,
unless such maximum amount is not stated or determinable, in which case the
amount of such obligation shall be the maximum reasonably anticipated
liability thereon, as determined by such guarantor in good faith.
"INDEBTEDNESS" of any Person at a particular date shall mean the sum
(without duplication) at such date of (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services or
which is evidenced by a note, bond, debenture, or similar instrument, (ii) all
obligations of such Person under any Capital Lease, (iii) all obligations of
such Person in respect of letters of credit, acceptances, or similar
obligations issued or created for the account of such Person, (iv) all
Guaranty Obligations of such Person, and (v) all liabilities secured by any
Lien on any property owned by such Person, whether or not such Person has
assumed or otherwise become liable for the payment thereof, and (vi) any
liability of such Person or any Affiliate thereof in respect of unfunded
vested benefits under an ERISA Plan.
6
"LATE PAYMENT RATE": at the time in question, four percent (4.0%) per
annum plus the Base Rate then in effect.
"LIEN" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (whether statutory or otherwise), or
preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing, and
the filing of any financing statement under the uniform commercial code or
comparable law of any jurisdiction in respect of any of the foregoing).
"LOAN" shall mean at any time the aggregate principal amount of all
Advances made and outstanding hereunder.
"LOAN DOCUMENT" shall mean any, and "LOAN DOCUMENTS" shall mean all, of
this Agreement, the Note, the Security Instruments, the Guaranty and any and
all other agreements or instruments now or hereafter executed and delivered
by Borrower or any other Person in connection with, or as security for the
payment or performance of any or all of the Obligations, as any of such may
be renewed, amended or supplemented from time to time.
"MATERIAL ADVERSE EFFECT" shall mean any material adverse effect on (i)
the validity or enforceability of this Agreement, the Note or any other Loan
Document, (ii) the business, operations, total Property or financial condition
of any Related Person, (iii) the collateral under any Security Instrument; or
(iv) the ability of Borrower to fulfill its obligations under this Agreement,
the Note, or any other Loan Document to which it is a party.
"MATURITY DATE" means May 1, 1998.
"MAXIMUM RATE" has the meaning given it in the Note.
"NET INCOME" of any Person shall mean, for the period ending on a
particular date, the net income (after taxes) of such Person which would
appear on statements of income and cash flows of such Person for such period
prepared in accordance with GAAP.
"NOTE" shall mean the promissory note delivered by Borrower to Bank One
pursuant to SECTION 2.2 in the form attached hereto as EXHIBIT "A", and all
renewals, modifications and extensions thereof.
"OBLIGATIONS" shall mean all present and future Indebtedness,
obligations, and liabilities of Borrower to Bank One, and all renewals and
extensions thereof, or any part thereof, arising pursuant to this Agreement
or any other Loan Document, and all interest accrued thereon, and reasonable
attorneys' fees and other costs incurred in the drafting, negotiation,
enforcement or
7
collection thereof, regardless of whether such indebtedness, obligations, and
liabilities are direct, indirect, fixed contingent, joint, several or joint
and several.
"OBLIGOR" shall mean the obligor on a Consumer Note.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Governmental Authority succeeding to any of its functions.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization, Governmental Authority, or any other form of entity.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"REGULATION U" shall mean Regulation U issued by the Board of Governors
of the Federal Reserve System as in effect from time to time.
"REGULATION X" shall mean Regulation X issued by the Board of Governors
of the Federal Reserve System as in effect from time to time.
"RELATED PERSONS" shall mean Borrower and any Subsidiary of Borrower.
"REPORTABLE EVENT" shall mean (1) a reportable event described in
Sections 4043(b)(5) or (6) of ERISA or the regulations promulgated
thereunder, or (2) any other reportable event described in Section 4043(b) of
ERISA or the regulations promulgated thereunder other than a reportable event
not subject to the provision for 30-day notice to the PBGC pursuant to a
waiver by the PBGC under Section 4043(a) of ERISA.
"REQUIREMENT OF LAW" as to any Person shall mean the charter and by-laws
or other organizational or governing documents of such Person, and any law,
statute, code, ordinance, order, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or other
determination, direction or requirement (including, without limitation, any
of the foregoing which relate to environmental standards or controls, energy
regulations and occupational, safety and health standards or controls) of any
arbitrator, court or other Governmental Authority, in each case applicable to
or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
8
"SECURITY AGREEMENT" shall mean the Security Agreement dated as of
December 3, 1996, between Borrower and Bank One, as the same may from time to
time be further supplemented, amended or restated.
"SECURITY INSTRUMENTS" shall mean (i) the Security Agreement, and (ii)
such other executed documents as are or may be necessary to grant to Bank One
a perfected first, prior and continuing security interest in and to all the
collateral described in ARTICLE III hereof, and any and all other agreements
or instruments now or hereafter executed and delivered by Borrower in
connection with, or as security for the payment or performance of, all or any
of the Obligations, including Borrower's obligations under the Note and this
Agreement, as such agreements may be amended, modified or supplemented from
time to time.
"SETTLEMENT ACCOUNT" shall mean the non-interest bearing demand checking
account established by Borrower with Bank One to be used for the proceeds
from the sale of the Consumer Notes and the payment of the Obligations.
"SUBMISSION LIST" shall mean a list in the form of Schedule I to the
form of the Borrowing Request.
"SUBORDINATED DEBT" shall mean unsecured Indebtedness of Borrower in an
original principal amount not to exceed $6,000,000 which is issued on terms
acceptable to Bank One and which is subordinated to Bank One on terms
acceptable to Bank One, in each case in Bank One's sole discretion.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate
entity, enterprise or organization which is directly or indirectly (through
one or more intermediaries) controlled by or owned fifty percent or more by
such Person.
"TERMINATION DATE" shall mean the earlier of (i) the Maturity Date or
(ii) the day on which the Note first becomes due and payable in full."
"TERMINATION EVENT" shall mean (1) the occurrence with respect to any
ERISA Plan of a Reportable Event, (2) the withdrawal of the Borrower or any
ERISA Affiliate from a plan during a plan year in which it was a "substantial
employer", as defined in Section 4001(a)(2) of ERISA, (3) the distribution to
affected parties of a notice of intent to terminate any ERISA Plan or the
treatment of any ERISA Plan amendment as a termination under Section 4041 of
ERISA, (4) the institution of proceedings to terminate any ERISA Plan by the
PBGC under Section 4042 of ERISA, or (5) any other event or condition which
might constitute grounds under Section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any ERISA Plan.
9
"TOTAL LIABILITIES" of any Person shall mean, as of any date, all
amounts which would be included as liabilities on a balance sheet of such
Person as of such date prepared in accordance with GAAP.
"TRUST RECEIPT" shall mean an agreement in the form of Exhibit G signed
by Borrower and delivered to Bank One.
"UCC" shall mean the Uniform Commercial Code as adopted in the State of
Texas, TEX. BUS. & COM. CODE XXX. Section 1.101 ET SEQ. (Xxxxxx 1994), as the
same may hereafter be amended.
"UNDERWRITING GUIDELINES" means the underwriting guidelines established
by Borrower (and approved by Bank One), a copy of which is attached as
Exhibit I.
"WAREHOUSE CUSTODIAN FEE" shall mean the fee set out in SECTION 2.4
hereof.
"WAREHOUSING PERIOD" shall mean:
(a) with respect to any Consumer Note originated prior to November 1,
1997, a period of 270 days following the date of the first funding thereunder
and
(b) with respect to any Consumer Note originated after to November 1,
1997, a period of 120 days following the date of the first funding thereunder.
Section 1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the above-defined meanings when used in this Agreement,
the Note or any other Loan Document, certificate, report or other document
made or delivered pursuant hereto.
(b) Each term defined in the singular form in SECTION 1.1 shall mean
the plural thereof when the plural form of such term is used in this
Agreement, the Note or any other Loan Document, certificate, report or other
document made or delivered pursuant hereto, and each term defined in the
plural form in SECTION 1.1 shall mean the singular thereof when the singular
form of such term is used herein or therein.
(c) The words "hereof," "herein," "hereunder" and similar terms when
used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and section, subsection, schedule
and exhibit references herein are references to sections, subsections,
schedules and exhibits to this Agreement unless otherwise specified.
(d) Unless the context otherwise requires or unless otherwise provided
herein the terms defined in this Agreement which refer to a particular
agreement, instrument or document
10
also refer to and include all renewals, extensions, modifications, amendments
and restatements of such agreement, instrument or document, provided that
nothing contained in this section shall be construed to authorize any such
renewal, extension, modification, amendment or restatement.
(e) As used herein, in the Note or in any other Loan Document,
certificate, report or other document made or delivered pursuant hereto,
accounting terms relating to any Person and not specifically defined in this
Agreement or therein shall have the respective meanings given to them under
GAAP.
Section 1.3 EXHIBITS AND SCHEDULES. All Exhibits and Schedules
attached to this Agreement are a part hereof for all purposes.
Section 1.4 CALCULATIONS AND DETERMINATIONS. All calculations under
the Loan Documents of interest and of fees shall be made on the basis of
actual days elapsed (including the first day but excluding the last) and a
year of 360 days. Unless otherwise expressly provided herein or unless Bank
One otherwise consents all financial statements and reports furnished to Bank
One hereunder shall be prepared and all financial computations and
determinations pursuant hereto shall be made in accordance with GAAP.
ARTICLE II
AMOUNT AND TERMS OF ADVANCES
Section 2.1 COMMITMENT AND ADVANCES. Subject to the terms and
conditions contained in this Agreement, Bank One agrees to make Advances to
Borrower on a revolving credit basis from time to time on any Business Day
from the date of this Agreement through the Termination Date. Each Borrowing
under this SECTION 2.1 shall be in an aggregate amount of not less than
$100,000. The aggregate principal amount of all Advances at any time
outstanding shall not exceed the lesser of (i) the aggregate Collateral Value
of all Consumer Notes, or (ii) $20,000,000. Prior to the Termination Date,
Borrower may, at its option, from time to time, request Advances, prepay the
Loan in whole or in part, and reborrow amounts so paid, all in accordance
with the terms and conditions hereof.
Section 2.2 PROMISSORY NOTE; OPTIONAL PREPAYMENTS. The Advances made
by Bank One pursuant to this ARTICLE II shall be evidenced by the Note. The
Note shall be payable and bear interest as set forth therein. Borrower may
from time to time, without premium or penalty, prepay the Note, in whole or
in part.
Section 2.3 NOTICE AND MANNER OF OBTAINING BORROWINGS. Borrower shall
give Bank One a notice of each request for a Borrowing pursuant to a
Borrowing Request in accordance with the provisions of SECTION 4.2 hereof.
After Bank One's receipt of such request and upon fulfillment
11
of the applicable conditions set forth in ARTICLE IV, Bank One will make the
Advance requested by crediting the Funding Account with a like amount of
immediately available funds.
Section 2.4 WAREHOUSE CUSTODIAN FEE. Borrower will pay to Bank One
warehouse custodian fees in the amounts set forth on Exhibit L for each
Consumer Note delivered to Bank One pursuant to Section 3.2. Such warehouse
custodian fees for each month shall be payable on the first day of the next
calendar month.
Section 2.5 MANDATORY REPAYMENTS.
(a) If at any time the Loan exceeds the aggregate Collateral Value,
Borrower shall within one (1) Business Day after receipt of written notice
thereof from Bank One, repay the amount of such excess to Bank One or (ii)
deliver to Bank One additional Eligible Consumer Notes as Collateral in an
amount sufficient to cause the Collateral Value of all Eligible Consumer
Notes (determined at the time of delivery of such additional Collateral to
Bank One) to equal or exceed the Loan.
(b) all payments of principal on the Consumer Notes that are part of
the Collateral shall be delivered to Bank One through a lock box (as
described in the Security Agreement) and applied to the prepayment of the
Loan.
Section 2.6 BUSINESS DAYS. If the date for any payment hereunder falls
on a day which is not a Business Day, then for all purposes of the Note and
this Agreement the same shall be deemed to have fallen on the next following
Business Day, and such extension of time shall in such case be included in
the computation of payments of fees and interest.
Section 2.7 PAYMENT PROCEDURE. All payments of interest on the Note,
all payments of principal, including any principal payment made with proceeds
of Collateral, and fees hereunder shall be made directly to Bank One in
federal or other immediately available funds before 1:00 p.m. (Dallas time)
on the respective dates when due via wire transfer to the Funding Account.
All payments received by Bank One shall be applied FIRST to all costs,
expenses, fees and reasonable attorneys' fees incurred by, and custodian or
other fees due to, Bank One arising out of or in connection with this
Agreement, the Note or the other Loan Documents, including without
limitation, all costs, expenses, fees and reasonable attorneys' fees arising
out of or in connection with the negotiation, preparation and enforcement of
such documents; SECOND, to the payment of interest then due and payable
under the Note; and LAST, to the principal of the Note. Bank One shall
promptly notify Borrower of the application of any payment to anything other
than the principal of or interest on the Note.
ARTICLE III
COLLATERAL
12
Section 3.1 COLLATERAL. To secure the payment of the Obligations and
the performance by Borrower of its obligations hereunder and under the other
Loan Documents, Borrower (a) shall grant (and does hereby grant) to Bank One
a first and prior security interest in and to the Collateral and (b) shall
execute all documents and instruments, and perform all other acts reasonably
deemed necessary by Bank One, to perfect the security interest of Bank One in
and to such Collateral.
Section 3.2 BORROWING REQUEST; DELIVERY OF CONSUMER NOTES TO CUSTODIAN.
Each Borrowing Request shall be accompanied by a Submission List and shall be
delivered to Bank One at:
0000 Xxxxxxx, Xxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
FAX: (000) 000-0000
Each Borrowing Request delivered to Bank One shall be accompanied by a
Submission List and the following items with respect to any Consumer Notes
thereby offered as security:
(a) the original of each Consumer Note, endorsed in blank (without
restriction or limitation);
(b) an original executed Assignment in blank for each Consumer
Note, in recordable form, and otherwise in form satisfactory to Bank One;
and
(c) a completion certificate in a form agreed upon by Borrower and
Bank One, signed by the Obligor on such Consumer Note and a copy of the
approval for purchase thereof by The Money Store, The Associates or another
purchaser acceptable to Lender; and
(d) a copy of an interim assignment if Borrower did not originate
such Consumer Note.
Section 3.3 POWER OF ATTORNEY. Borrower hereby irrevocably appoints
Bank One its attorney in fact, with full power of substitution, for and on
behalf and in the name of Borrower, which power of attorney shall become
effective upon the occurrence and remain effective during the continuance of
an Event of Default, to (i) endorse and deliver to any Person any check,
instrument or other paper coming into Bank One's possession and representing
payment made in respect of any Consumer Note delivered to and held by Bank
One hereunder as Collateral or in respect of any other collateral; (ii)
prepare, complete, execute, deliver and record any assignment to Bank One or
to any other Person of any Consumer Note delivered to and held by Bank One
hereunder as Collateral; (iii) endorse and deliver any Consumer Note delivered
to and held by Bank One hereunder as Collateral and do every other thing
necessary or desirable to effect transfer of all or any part of the
Collateral to Bank One or to any other Person; (iv) take all
13
necessary and appropriate action with respect to all Obligations and the
Collateral to be delivered to Bank One or held by Borrower in trust for Bank
One; (v) commence, prosecute, settle, discontinue, defend, or otherwise
dispose of any claim relating to any part of the Collateral; and (vi) sign
Borrower's name wherever appropriate to effect the performance of this
Agreement. This section shall be liberally, not restrictively, construed so
as to give the greatest latitude to Bank One's power, as Borrower's
attorney-in-fact, to collect, sell, and deliver any of the Collateral and all
other documents relating thereto. The powers and authorities herein
conferred on Bank One may be exercised by Bank One through any Person who, at
the time of the execution of a particular instrument, is an authorized
officer of Bank One. The power of attorney conferred by this SECTION 3.3 is
granted for a valuable consideration and is coupled with an interest and
irrevocable so long as the Obligations, or any part thereof, shall remain
unpaid or the Commitment is outstanding. All Persons dealing with Bank One,
or any officer thereof acting pursuant hereto shall be fully protected in
treating the powers and authorities conferred by this SECTION 3.3 as existing
and continuing in full force and effect until advised by Bank One that the
Obligations have been fully and finally paid and satisfied and the Commitment
has been terminated.
Section 3.4 REDEMPTION OF COLLATERAL.
(a) GENERALLY. So long as no Default or Event of Default shall be in
existence, Borrower may obtain the release of the security interest in favor
of Bank One in all or any part of the Collateral at any time, and from time
to time, by paying to Bank One, as a repayment hereunder, the Collateral
Value of the Collateral to be so released (such amount to be determined as of
the date of such release).
(b) REDEMPTION PURSUANT TO SALE. Borrower may from time to time
request that Bank One permit the sale of Collateral to an Approved Investor.
Upon the receipt by Bank One of such a request from Borrower, and so long as
no Default or Event of Default shall be in existence;
(i) Bank One shall deliver to the Approved Investor, under a
Bailee Letter, the Consumer Notes being sold which are held by Bank One
pursuant to SECTION 3.2 hereof, with the release of the security interest
in favor of Bank One in such items being conditioned upon timely payment to
Bank One of the amount described in SUBSECTION 3.4(b)(ii); and
(ii) Within a period of time acceptable to Bank One, but in no
event more than twenty-one (21) days after the delivery by Bank One to such
Approved Investor of the Consumer Notes described in SUBSECTION 3.4(b)(i),
Borrower shall pay, or cause to be paid, to Bank One as a repayment
hereunder an amount equal to the Collateral Value of the Consumer Notes
(such Collateral Value being determined as of the date of such redemption);
PROVIDED, that at no time shall more than $500,000 of Consumer Notes (such
value being determined as of the date of such redemption) be in transit to
or from or
14
in the possession of any Approved Investor at any time, except in the case
of a sale to the trustee for an Asset Securitization Facility.
(c) CONTINUATION OF LIEN. The security interest in favor of Bank One
in all Consumer Notes transmitted pursuant to SUBSECTION 3.4(b) shall
continue in effect until such time as Bank One shall have received payment in
full of the amount described in SUBSECTION 3.4(b)(ii).
(d) APPLICATION OF PROCEEDS; NO DUTY. Subject to the next sentence of
this SUBSECTION 3.4(d), Bank One shall not be under any duty at any time to
credit Borrower for any amounts due from any Approved Investor in respect of
any purchase of any Consumer Notes contemplated under SUBSECTION 3.4(b)
above, until Bank One has actually received immediately available funds. Any
funds so received will be treated as payments under and processed and applied
in accordance with SECTION 2.7. Bank One shall not be under any duty at any
time to collect any amounts or otherwise enforce any obligations due from an
Approved Investor in respect of any such purchase.
Section 3.5 CORRECTION OF CONSUMER NOTES. Borrower may from time to
time request that Bank One release a Consumer Note (the "Released Note") that
constitutes Collateral so that such Consumer Note may be replaced by a
corrected Consumer Note (the "Correction Note"). Upon receipt by Bank One of
such a request from Borrower, and so long as no Default or Event of Default
shall be in existence, Bank One shall deliver to Borrower, under a Trust
Receipt, the Released Note to be corrected, with the release of the Lien in
favor of Bank One being conditioned upon the receipt by Bank One of a
Correction Note acceptable to it; PROVIDED, that (i) at no time shall more
than $250,000 of Released Notes (such value being determined by the
Collateral Value assigned to such Collateral when it is delivered to Bank One
by Borrower hereunder) be released and not have been replaced with Correction
Notes hereunder, (ii) until such time as the Correction Note shall have been
delivered to Bank One, the Collateral Value attributed to the Released Note
shall be the lesser of (x) the Collateral Value attributed to such Released
Note without giving effect to this proviso and (y) 100% of the principal
balance of the Correction Note and (iii) notwithstanding the preceding clause
(ii), unless the Correction Note is delivered to Bank One endorsed in blank
(without restriction or limitation) within fifteen (15) days of the release
by the Bank of the Released Note, the Collateral Value attributed to both the
Released Note and the Correction Note shall be zero.
Section 3.6 RELEASE OF COLLATERAL. So long as no Default or Event of
Default shall be in existence, Borrower may obtain the release of the
security interest in favor of Bank One in Consumer Notes constituting all or
any part of the Collateral at any time, and from time to time, PROVIDED that
the aggregate Collateral Value of the Consumer Notes (after giving effect to
the contemplated release) is greater than or equal to the Loan. Upon receipt
of a properly executed Collateral Release Request and provided that the other
conditions hereof are satisfied, Bank One shall (i) hold as custodian for
Borrower the Consumer Notes with respect to which Borrower has requested that
Bank One release its Lien and (ii) deliver same to such Person and for such
purpose, including Bank One for delivery as Collateral hereunder, as Borrower
may direct in
15
writing; PROVIDED, that (a) Bank One shall not be required to hold any
Consumer Note or any document related thereto for the benefit of any Person
other than Borrower under the provisions of this SECTION 3.6, (b) the only
duty that Bank One shall have with respect to any Consumer Note held by Bank
One pursuant to this SECTION 3.6 shall be to exercise the same diligence in
the care thereof which Bank One exercises in the care of its own property,
(c) Bank One shall be fully protected in relying on any delivery instructions
from Borrower in which Borrower purports to be entitled to direct delivery of
the items identified therein, and (d) Borrower shall reimburse Bank One for
all expenses incurred in connection with the delivery of any item held by it
under this SECTION 3.6. Without in any way limiting the proviso set forth in
the preceding sentence, Bank One shall have no duty to collect any amount
which may be due on or in respect of any Consumer Note held by it pursuant to
this SECTION 3.6, to notify Borrower of any amount which may be due in
connection therewith, nor to take any other action with respect thereto
except to deliver such Consumer Note to such Person as Borrower may direct.
ARTICLE IV
CONDITIONS PRECEDENT
The obligation of Bank One to make Advances hereunder is subject to
fulfillment of the conditions precedent stated in this ARTICLE IV.
Section 4.1 INITIAL BORROWING. The obligation of Bank One to make its
initial Advance hereunder shall be subject to, in addition to the conditions
precedent specified in SECTION 4.2 hereof, delivery to Bank One of the
following (each of the following documents being duly executed and delivered
and in form and substance satisfactory to Bank One, and, with the exception
of the Note, each in a sufficient number of originals that Bank One and its
counsel may both have an executed original of each document):
(a) an executed counterpart of this Agreement and of all
instruments, certificates and opinions referred to in this ARTICLE IV not
theretofore delivered (except the Borrowing Request which is to be
delivered at the time provided in SUBSECTION 4.2(a) hereof);
(b) the Note;
(c) a Confirmation of Security Agreement in a form satisfactory to
Bank One;
(d) a First Amendment to Guaranty, in a form satisfactory to Bank
One;
(e) the Underwriting Guidelines of Borrower, approved by Bank One
in its sole discretion;
16
(f) a certificate of the Secretary or Assistant Secretary of
Borrower setting forth (i) resolutions of Borrower's board of directors
authorizing the execution, delivery, and performance by Borrower of the
Note, this Agreement and any Security Instruments provided herein and
identifying the officers of Borrower authorized to sign such instruments,
and (ii) specimen signatures of the officers so authorized;
(g) a copy, certified as true by the Secretary or Assistant
Secretary of Borrower, of the articles or certificate of incorporation and
the bylaws of Borrower, together with all amendments thereto;
(h) a certificate of the existence and good standing of Borrower
in its state of incorporation;
(i) a certificate of the Secretary or Assistant Secretary of
Guarantor setting forth (i) resolutions of Guarantor's board of directors
authorizing the execution, delivery, and performance by Guarantor of the
Guaranty and any other Loan Documents provided herein and identifying the
officers of Guarantor authorized to sign such instruments, and (ii)
specimen signatures of the officers so authorized;
(j) a copy, certified as true by the Secretary or Assistant
Secretary of Guarantor, of the articles or certificate of incorporation and
the bylaws of Guarantor, together with all amendments thereto;
(k) a certificate of the existence and good standing of Guarantor
in its state of incorporation;
(l) a favorable written opinion from Borrower's General Counsel as
to such matters incident to the transactions herein contemplated as Bank
One may reasonably request; and
(m) such other documents as Bank One may reasonably request at any
time at or prior to the Borrowing Date of the initial Borrowing hereunder.
Section 4.2 ALL BORROWINGS. The obligation of Bank One to make any
Advance to fund any Borrowing pursuant to this Agreement (including the
first) is subject to the following further conditions precedent:
(a) prior to 10:30 a.m. (Dallas time) on the Borrowing Date,
Borrower shall deliver to Bank One a Borrowing Request executed by Borrower
and accompanied by the items required by SECTION 3.2 hereof;
(b) all Consumer Notes in which Borrower has granted a Lien to
Bank One shall have been physically delivered to the possession of Bank One
or a bailee acceptable
17
to Bank One to the extent that such possession is necessary or appropriate
for the purpose of perfecting the Lien of Bank One in such collateral and
Bank One has received evidence of its filed or perfected lien and security
interest;
(c) the representations and warranties of each Related Person
contained in this Agreement or any Security Instrument (other than those
representations and warranties which are by their terms limited to the date
of the agreement in which they are initially made) shall be true and
correct in all material respects on and as of the date of such Advance;
(d) no Default or Event of Default shall have occurred and be
continuing and no change or event which constitutes a Material Adverse
Effect shall have occurred as of the date of such Advance;
(e) the Funding Account shall be established and in existence;
(f) the making of such Advance shall not be prohibited by any
Governmental Requirement;
(g) Bank One shall have received evidence of insurance covering
Borrower's business assets, in amounts and in form and substance
satisfactory to Bank;
(h) Bank One shall have received such other documents and opinions
of counsel, including such documents as may be necessary or desirable to
perfect or maintain the priority of any Lien granted or intended to be
granted hereunder or otherwise and including favorable written opinions of
counsel with respect thereto, as Bank One may reasonably request; and
(i) Borrower shall have paid the expenses of Bank One's counsel
for its work in connection with the transactions contemplated by the
Agreement.
Delivery to Bank One of a Borrowing Request shall be deemed to constitute a
representation and warranty by Borrower on the date thereof and on the
Borrowing Date, if any, set forth therein as to the facts specified in
Subsections (c) and (d) of this SECTION 4.2.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
18
Section 5.1 ORGANIZATION AND GOOD STANDING. Each Related Person (a) is
a corporation duly incorporated and existing in good standing under the laws
of the jurisdiction of its incorporation, (b) is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which its failure to
be so qualified could have a Material Adverse Effect, (c) has the corporate
power and authority to own its properties and assets and to transact the
business in which it is engaged and is or will be qualified in those states
wherein it proposes to transact business in the future and (d) is in
compliance with all Requirements of Law except to the extent that the failure
to comply therewith could not, in the aggregate, have a Material Adverse
Effect.
Section 5.2 AUTHORIZATION AND POWER. Each Related Person has the
corporate power and requisite authority to execute, deliver and perform the
Loan Documents to which it is a party; each Related Person is duly
authorized to and has taken all corporate action necessary to authorize it
to, execute, deliver and perform the Loan Documents to which it is a party
and is and will continue to be duly authorized to perform such Loan Documents.
Section 5.3 NO CONFLICTS OR CONSENTS. Neither the execution and
delivery by any Related Person of the Loan Documents to which it is a party,
nor the consummation of any of the transactions herein or therein
contemplated, nor compliance with the terms and provisions hereof or with the
terms and provisions thereof, will (a) materially contravene or conflict with
any terms or provisions of the charter or bylaws of any Related Person, any
Requirement of Law to which any Related Person is subject, or any indenture,
mortgage, deed of trust, or other agreement or instrument to which any
Related Person is a party or by which any Related Person may be bound, or to
which the Property of any Related Person may be subject, or (b) result in the
creation or imposition of any Lien, other than the Lien of the Security
Agreement, on the Property of any Related Person. All actions, approvals,
consents, waivers, exemptions, variances, franchises, orders, permits,
authorizations, rights and licenses required to be taken, given or obtained,
as the case may be, from any Governmental Authority that are necessary in
connection with the transactions contemplated by the Loan Documents have been
obtained.
Section 5.4 ENFORCEABLE OBLIGATIONS. This Agreement, the Note and the
other Loan Documents to which any Related Person is a party are the legal,
valid and binding obligations of such Related Person, enforceable in
accordance with their respective terms, except as limited by Debtor Laws.
Section 5.5 PRIORITY OF LIENS. Upon delivery to Bank One of each
Borrowing Request, Bank One shall have valid, enforceable, perfected, first
priority Liens and security interests in each Consumer Note identified
therein and thereafter or concurrently delivered to Bank One.
Section 5.6 NO LIENS. Borrower has good and indefeasible title to the
Collateral free and clear of all Liens and other adverse claims of any
nature, other than Liens in the Collateral in favor of Bank One.
19
Section 5.7 FINANCIAL CONDITION OF BORROWER. Borrower has delivered to
Bank One copies of the annual audited Consolidated balance sheets of
Guarantor as of October 31, 1997 and the related Consolidated statements of
income, stockholders' equity and cash flows of Guarantor for the periods
ended on such date; such financial statement fairly presents the Consolidated
financial condition of Guarantor as of such date and the results of
operations of Guarantor for the period ended on such date and have been
prepared in accordance with GAAP, subject to normal year-end adjustments; as
of October 31, 1997, there were no obligations, liabilities or Indebtedness
(including material contingent and indirect liabilities and obligations or
unusual forward or long-term commitments) of Borrower which are not reflected
in such financial statements and no change which constitutes a Material
Adverse Effect has occurred in the financial condition or business of
Borrower since the date of such financial statements.
Section 5.8 FULL DISCLOSURE. There is no material fact that Borrower
has not disclosed to Bank One which could adversely affect the properties,
business, prospects or condition (financial or otherwise) of Borrower, or
could adversely affect the Collateral. To the best knowledge of Borrower,
neither the financial statements referred to in SECTION 5.7 hereof, nor any
Borrowing Request, officer's certificate or statement delivered by Borrower
to Bank One in connection with this Agreement, contains any untrue statement
of material fact.
Section 5.9 NO DEFAULT. No Related Person is in default under any loan
agreement, mortgage, security agreement or other material agreement or
obligation to which it is a party or by which any of its Property is bound.
Section 5.10 NO LITIGATION. There are no material actions, suits or
legal, equitable, arbitration or administrative proceedings pending, or to
the knowledge of Borrower threatened, against any Related Person, the adverse
determination of which could constitute a Material Adverse Effect.
Section 5.11 TAXES. All tax returns required to be filed by each
Related Person in any jurisdiction have been filed and all taxes,
assessments, fees and other governmental charges upon each Related Person or
upon any of its properties, income or franchises have been paid prior to the
time that such taxes could give rise to a Lien thereon, unless protested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been established on the books of such Related
Person. No Related Person has any knowledge of any proposed tax assessment
against any Related Person.
Section 5.12 PRINCIPAL OFFICE, ETC. The principal office, chief
executive office and principal place of business of each Related Person is at
the address set forth in Section 10.1.
Section 5.13 COMPLIANCE WITH ERISA. No Related Person nor any ERISA
Affiliate of any Related Person currently maintains, contributes to, is
required to contribute to or has any liability, whether absolute or
contingent, with respect to an ERISA Plan. With respect to all
20
other employee benefit plans maintained or contributed to by each Related
Person, each Related Person is in material compliance with ERISA.
Section 5.14 SUBSIDIARIES. As of the date hereof, Borrower does not
have any Subsidiary or own any stock in any other corporation or association.
Section 5.15 INDEBTEDNESS. No Related Person has any Indebtedness
outstanding other than the Indebtedness permitted by SECTION 7.2.
Section 5.16 PERMITS, PATENTS, TRADEMARKS, ETC.
(a) Each Related Person has all permits and licenses necessary for the
operation of its business, except to the extent that failure to obtain any
such permit or license could not have a Material Adverse Effect on such
Related Person.
(b) Each Related Person owns or possesses (or is licensed or otherwise
has the necessary right to use) all patents, trademarks, service marks, trade
names and copyrights, technology, know-how and processes, and all rights with
respect to the foregoing, which are necessary for the operation of its
business, without any known material conflict with the rights of others. The
consummation of the transactions contemplated hereby will not alter or impair
in any material respect any of such rights of each Related Person.
Section 5.17 STATUS UNDER CERTAIN FEDERAL STATUTES. No Related Person
is (a) a "holding company" or a "subsidiary company" of a "holding company"
or an "affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company", as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended, (b) a "public utility", as such term is
defined in the Federal Power Act, as amended, (c) an "investment company", or
a company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1949, as amended or (d) a "rail carrier", or a
"person controlled by or affiliated with a rail carrier", within the meaning
of Title 49, U.S.C., and each Related Person is not a "carrier" to which 49
U.S.C. Section 11301(b)(1) is applicable.
Section 5.18 SECURITIES ACT. No Related Person has issued any
unregistered securities in violation of the registration requirements of the
Securities Act of 1933, as amended, or of any other Requirement of Law, and
is not violating any rule, regulation, or requirement under the Securities
Act of 1933, as amended, or the Securities and Exchange Act of 1934, as
amended. No Related Person is required to qualify an indenture under the
Trust Indenture Act of 1939, as amended, in connection with its execution and
delivery of the Note.
Section 5.19 POLLUTION CONTROL. Each Related Person is in compliance
with, and to the best of each Related Person's knowledge after due inquiry,
each Related Person has, at all times since its incorporation, been in
compliance with, all Requirements of Law relating to pollution
21
control (a) in the United States and the State of Texas and (b) in each other
jurisdiction where it is presently doing business.
Section 5.20 NO APPROVALS REQUIRED. Other than consents and approvals
previously obtained and actions previously taken, neither the execution and
delivery of this Agreement, the Note and the other Loan Documents to which
any Related Person is a party, nor the consummation of any of the
transactions contemplated hereby or thereby requires the consent or approval
of, the giving of notice to, or the registration, recording or filing by any
Related Person of any document with, or the taking of any other action in
respect of, any Governmental Authority which has jurisdiction over each
Related Person or any of its Property.
Section 5.21 SURVIVAL OF REPRESENTATIONS. All representations and
warranties by Borrower herein shall survive delivery of the Note and the
making of the Advances, and any investigation at any time made by or on
behalf of Bank One shall not diminish the right of Bank One to rely thereon.
Section 5.22 INDIVIDUAL CONSUMER NOTES. Borrower hereby represents
that with respect to each Consumer Note that is part of the Collateral:
(a) The terms of each Consumer Note have not been impaired,
waived, altered or modified in any respect, except by written instruments
delivered to Bank One and no provision of any Consumer Note has been
"xxxxxx out" or erased unless such modification has been initialed by each
of the parties to the Consumer Note. No instrument of waiver, alteration
or modification has been executed, and no obligor on a Consumer Note has
been released, in whole or in part, except in connection with an assumption
agreement, a copy of which assumption agreement has been delivered to Bank
One;
(b) No Consumer Note is subject to any set-off, counterclaim or
defense, including the defense of usury, nor will the operation of any of
the terms of any Consumer Note or the exercise of any right thereunder,
render such Consumer Note unenforceable, in whole or in part, or subject to
any right of rescission, set-off, counterclaim or defense, including the
defense of usury, and to the best knowledge of Borrower, no such right of
rescission, set-off, counterclaim or defense has been asserted in any
proceeding or was asserted in any state or federal bankruptcy or insolvency
proceeding at the time the Consumer Note was originated;
(c) Any and all Requirements of Law applicable to each Consumer
Note have been complied with including, without limitation, all consumer
laws, usury, truth-in-lending, consumer credit protection, equal credit
opportunity or disclosure laws applicable to each Consumer Note;
22
(d) Borrower has not waived the performance by the Obligor of any
action, if the Obligor's failure to perform such action would cause the
Consumer Note to be in default;
(e) Each Consumer Note is genuine and each is the legal, valid and
binding obligation of the obligor thereof, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting creditors'
rights in general and by general principles of equity;
(f) To the best knowledge of Borrower, all parties to each
Consumer Note had legal capacity at the time to execute and deliver such
Consumer Note, and such Consumer Note has been duly and properly executed
by such parties;
(g) Borrower has good and marketable title to each Consumer Note,
was the sole owner thereof and had full right to pledge the Consumer Note
to Bank One free and clear of any other encumbrance, equity, lien, pledge,
charge, claim or security interest;
(h) To the best knowledge of Borrower, there is no default,
breach, violation or event of acceleration existing under any Consumer Note
and there is no event which, with the passage of time or with notice and/or
the expiration of any grace or cure period, would constitute a default,
breach, violation or event of acceleration and no such default, breach,
violation or event of acceleration has been waived;
(i) Each Consumer Note originated by Borrower or a third party is
underwritten by Borrower in accordance with Borrower's then current
underwriting guidelines and all applicable regulatory requirements.
(j) All improvements to be made to each Obligor Property with the
proceeds of the Consumer Note have been completed and a certificate for
such Consumer Note executed by the related Obligor wherein such Obligor
states that the related contractor or seller of the home improvement has
completed to such Obligor's satisfaction the improvements for which the
Consumer Note was obtained has been delivered to Borrower;
(k) The origination practices of Borrower, and to the best
knowledge of Borrower, the origination practices used by third party
originators, with respect to the Consumer Notes and the collection
practices used by the Borrower with respect to each Consumer Note have been
in all material respects legal, proper, prudent and customary in the home
improvement loan origination and servicing business; and
(l) Each Consumer Note originated by Borrower, and to the best
knowledge of Borrower, each Consumer Note originated by a third party, was
originated in
23
compliance with all applicable laws and no fraud or misrepresentation was
committed by any Person in connection therewith.
ARTICLE VI
AFFIRMATIVE COVENANTS
Each Related Person shall at all times comply with the covenants
contained in this ARTICLE VI, from the date hereof and for so long as any
part of the Obligations or the Commitment is outstanding.
Section 6.1 TAXES AND OTHER LIENS. Each Related Person shall pay and
discharge promptly all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or upon any of its Property as well as all
claims of any kind (including claims for labor, materials, supplies and rent)
which, if unpaid, might become a Lien upon any or all of its Property;
provided, however, Borrower shall not be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate proceedings
diligently conducted by or on behalf of Borrower and if Borrower shall have
set up reserves therefor adequate under GAAP.
Section 6.2 MAINTENANCE. Each Related Person shall (i) maintain its
corporate existence, rights and franchises; (ii) observe and comply in all
material respects with all Governmental Requirements, and (iii) maintain its
Properties (and any Properties leased by or consigned to it or held under
title retention or conditional sales contracts) in good and workable
condition at all times and make all repairs, replacements, additions and
improvements to its Properties as are necessary and proper so that the
business carried on in connection therewith may be conducted properly and
efficiently at all times.
Section 6.3 FURTHER ASSURANCES. Borrower shall, within three (3)
Business Days (or in the case of Consumer Notes, such longer period as
provided under SECTION 3.5 of this Agreement) after the request of Bank One,
cure any defects in the execution and delivery of the Note, this Agreement or
any other Loan Document and each Related Person shall, at its expense,
promptly execute and deliver to Bank One upon request all such other and
further documents, agreements and instruments in compliance with or
accomplishment of the covenants and agreements of each Related Person in this
Agreement and in the other Loan Documents or to further evidence and more
fully describe the collateral intended as security for the Note, or to
correct any omissions in this Agreement or the other Loan Documents, or more
fully to state the security for the obligations set out herein or in any of
the other Loan Documents, or to make any recordings, to file any notices, or
obtain any consents.
Section 6.4 REIMBURSEMENT OF EXPENSES. Borrower shall pay (i) all
reasonable legal fees (including, without limitation, allocated costs for
in-house legal service) incurred by Bank One in
24
connection with the preparation, negotiation or execution of this Agreement,
the Note and the other Loan Documents and any amendments, consents or waivers
executed in connection therewith, (ii) all fees, charges or taxes for the
recording or filing of the Security Instruments, (iii) all out-of-pocket
expenses of Bank One in connection with the administration of this Agreement,
the Note and the other Loan Documents, including courier expenses incurred in
connection with the Collateral, and (iv) all amounts expended, advanced or
incurred by Bank One to satisfy any obligation of Borrower under this
Agreement or any of the other Loan Documents or to collect the Note, or to
enforce the rights of Bank One under this Agreement or any of the other Loan
Documents, which amounts shall include all court costs, reasonable attorneys'
fees (including, without limitation, for trial, appeal or other proceedings),
fees of auditors and accountants, and investigation expenses reasonably
incurred by Bank One in connection with any such matters, together with
interest at the post-maturity rate specified in the Note on each item
specified in clause (i) through (iv) from thirty (30) days after the date of
written demand or request for reimbursement until the date of reimbursement.
Section 6.5 INSURANCE. Each Related Person shall maintain with
financially sound and reputable insurers, insurance with respect to its
Properties and business against such liabilities, casualties, risks and
contingencies and in such types and amounts as is customary in the case of
Persons engaged in the same or similar businesses and similarly situated,
including, without limitation, a fidelity bond or bonds with financially
sound and reputable insurers with such coverage and in such amounts as is
customary in the case of Persons engaged in the same or similar businesses
and similarly situated. Upon request of Bank One, each Related Person shall
furnish or cause to be furnished to Bank One from time to time a summary of
the insurance coverage of each Related Person in form and substance
satisfactory to Bank One and if requested shall furnish Bank One copies of
the applicable policies.
Section 6.6 ACCOUNTS AND RECORDS. Each Related Person shall keep books
of record and account in which full, true and correct entries will be made of
all dealings or transactions in relation to its business and activities, in
accordance with GAAP.
Section 6.7 RIGHT OF INSPECTION. Each Related Person shall permit
authorized representatives of Bank One to discuss the business, operations,
assets and financial condition of such Related Person with their officers and
employees, and to visit and inspect any of the Properties of each Related
Person, all at such reasonable times and as often as Bank One may request.
Each Related Person will provide its accountants with a copy of this
Agreement promptly after the execution hereof and will instruct its
accountants to answer candidly any and all questions that the officers of
Bank One or any authorized representatives of Bank One may address to them in
reference to the financial condition or affairs of any Related Person as
those conditions or affairs relate to this Agreement. Each Related Person
may have its representatives in attendance at any meetings between the
officers or other representatives of Bank One and such Related Person's
accountants held in accordance with this authorization.
25
Section 6.8 NOTICE OF CERTAIN EVENTS. Borrower shall promptly notify
Bank One upon (i) the receipt of any notice from, or the taking of any other
action by, the holder of any promissory note, debenture or other evidence of
Indebtedness of any Related Person with respect to a claimed default,
together with a detailed statement by a responsible officer of Borrower
specifying the notice given or other action taken by such holder and the
nature of the claimed default and what action Borrower is taking or proposes
to take with respect thereto; (ii) the commencement of, or any determination
in, any legal, judicial or regulatory proceedings which, if adversely
determined, could have a Material Adverse Effect; (iii) any change in senior
management of Borrower; (iv) any material adverse change in the business,
operations, prospects or financial condition of any Related Person,
including, without limitation, the insolvency of any Related Person, (v) any
event or condition which, if adversely determined, could have a Material
Adverse Effect or (vi) the occurrence of any Termination Event.
Section 6.9 USE OF PROCEEDS; MARGIN STOCK. The proceeds of the Advances
shall be used by Borrower solely for the funding of Consumer Notes in the
ordinary course of Borrower's business. None of such proceeds shall be used for
the purpose of purchasing or carrying any "margin stock" as defined in
Regulation U, or for the purpose of reducing or retiring any Indebtedness which
was originally incurred to purchase or carry margin stock or for any other
purpose which might constitute this transaction a "purpose credit" within the
meaning of such Regulation U. Neither Borrower nor any Person acting on behalf
of Borrower shall take any action in violation of Regulation U or Regulation X
or shall violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereafter be in effect.
Section 6.10 NOTICE OF DEFAULT. Borrower shall furnish to Bank One
immediately upon becoming aware of the existence of any Default or Event of
Default, a written notice specifying the nature and period of existence thereof
and the action which Borrower is taking or proposes to take with respect
thereto.
Section 6.11 COMPLIANCE WITH LOAN DOCUMENTS. Each Related Person shall
promptly comply with any and all covenants and provisions of this Agreement the
Note and the other Loan Documents.
Section 6.12 OPERATIONS AND PROPERTIES. Each Related Person shall comply
in all material respects with all Government Requirements applicable to it, and
in accordance with customary industry standards in managing and operating its
business. Borrower shall strictly comply with the Underwriting Guidelines.
Section 6.13 FINANCIAL STATEMENTS AND REPORTS. The Related Persons shall
at all times maintain full and accurate books of account and records. The
Related Persons shall maintain a standard system of accounting and Borrower
shall furnish to Bank One the following, all in form and detail reasonably
satisfactory to Bank One:
26
(a) Promptly after becoming available, and in any event within
ninety (90) days after the close of each Fiscal Year, the Consolidated and
consolidating balance sheets of Guarantor as of the end of such Fiscal
Year, and the related Consolidated and consolidating statements of income,
stockholders' equity and cash flows of Guarantor for such Fiscal Year,
setting forth in each case in comparative form the corresponding figures
for the preceding Fiscal Year, accompanied by the related report of
independent certified public accountants of national standing acceptable to
Bank One which report shall be to the effect that such statements have been
prepared in accordance with GAAP applied on a basis consistent with prior
periods except for such changes in such principles with which the
independent public accountants shall have concurred;
(b) Promptly after becoming available, and in any event within
ninety (90) days after the close of each Fiscal Year, the Consolidated and
consolidating balance sheets of Borrower as of the end of such Fiscal Year,
and the related Consolidated and consolidating statements of income,
stockholders' equity and cash flows of Borrower for such Fiscal Year,
setting forth in each case in comparative form the corresponding figures
for the preceding Fiscal Year, accompanied by the related report of
independent certified public accountants of national standing acceptable to
Bank One which report shall be to the effect that such statements have been
prepared in accordance with GAAP applied on a basis consistent with prior
periods except for such changes in such principles with which the
independent public accountants shall have concurred;
(c) Promptly after becoming available, and in any event within
thirty (30) days after the end of each fiscal quarter, including the fourth
Fiscal Quarter in each Fiscal Year, Consolidated and consolidating balance
sheets of Guarantor as of the end of such quarter and the related
Consolidated and consolidating statements of income, stockholders' equity
and cash flows of Guarantor for such quarter and the period from the first
day of the then current Fiscal Year through the end of such quarter,
certified by the chief financial officer or other executive officer of
Guarantor to have been prepared in accordance with GAAP applied on a basis
consistent with prior periods, subject to normal year-end adjustments;
(d) Promptly after becoming available, and in any event within
thirty (30) days after the end of each month, including the twelfth month
in each Fiscal Year, balance sheets of Borrower as of the end of such month
and the related statements of income, stockholders' equity and cash flows
of Borrower for such month and the period from the first day of the then
current Fiscal Year through the end of such month, certified by the chief
financial officer or other executive officer of Borrower to have been
prepared in accordance with GAAP applied on a basis consistent with prior
periods, subject to normal year-end adjustments;
27
(e) Promptly upon receipt thereof, a copy of each other report
submitted to Guarantor by independent accountants in connection with any
annual, interim or special audit of the books of Borrower or Guarantor;
(f) Promptly and in any event within thirty (30) days after the
end of each calendar month, a certificate executed by the president or
chief financial officer of Borrower, setting forth all of Borrower's
warehouse borrowings;
(g) Promptly and in any event within thirty (30) days after the
end of each Fiscal Quarter in each Fiscal Year (except the last), and
within fifteen (15) days after the completion of each year-end audit by
Borrower's independent public accountants, a completed Officer's
Certificate in the form of Exhibit "C" hereto, executed by the president,
chief financial officer or other executive officer of Guarantor and
Borrower.
(h) Promptly and in any event within thirty (30) days after the
end of each month, a management report regarding Borrower's servicing and
delinquency, including delinquency status of Consumer Notes, total
principal amount, number of Consumer Notes, default experience, geographic
concentration, weighted average coupon, weighted average maturity, weighted
average servicing fee, in each case in form and detail as required by Bank
One, prepared as of the end of such month and for the Fiscal Year to date;
(i) As soon as available, and in any event within 30 days after
the end of each month, a Borrowing Base Report, appropriately completed
with all attachments and in the form of Exhibit F attached hereto; and
(j) Such other information concerning the business, properties or
financial condition of the Related Persons as Bank One may reasonably
request.
ARTICLE VII
NEGATIVE COVENANTS
Each Related Person shall at all times comply with the covenants contained
in this ARTICLE VII, from the date hereof and for so long as any part of the
Obligations or the Commitment is outstanding:
Section 7.1 NO MERGER. No Related Person shall merge or consolidate with
or into any Person, except that any Subsidiary (except Borrower) of Guarantor
may merge or consolidate with Guarantor as long as Guarantor is the surviving
business entity. No Related Person shall acquire by purchase or otherwise all
or substantially all of the assets (except to the extent that
28
such assets consist solely of Consumer Notes and rights to service Consumer
Notes) or capital stock of any Person.
Section 7.2 LIMITATION ON INDEBTEDNESS. No Related Person shall incur,
create, contract, assume, have outstanding, guarantee or otherwise be or become,
directly or indirectly, liable in respect of any Indebtedness except for the
following:
(a) the Obligations;
(b) the Subordinated Debt;
(c) unsecured Indebtedness for working capital advances, owed by
Borrower to Guarantor; and
(d) lease financing or purchase money financing for equipment
which is secured by the equipment so leased or purchased.
Section 7.3 BUSINESS. No Related Person shall, directly or indirectly,
engage in any business which differs materially from that currently engaged in
by such Related Person.
Section 7.4 LIQUIDATIONS AND DISPOSITIONS OF SUBSTANTIAL ASSETS. No
Related Person shall dissolve or liquidate or sell, transfer, lease or otherwise
dispose of any material portion of its property or assets or business; PROVIDED
HOWEVER, that subject to SECTION 3.4(b) hereof, nothing in this SECTION 7.4
shall be construed to prohibit such Related Person from selling Consumer Notes
in the ordinary course of its business.
Section 7.5 LOANS, ADVANCES, AND INVESTMENTS. No Related Person shall
make any loan (other than Consumer Notes), advance, or capital contribution to,
or investment in (including any investment in any Subsidiary, joint venture or
partnership), or purchase or otherwise acquire any of the capital stock,
securities, or evidences of indebtedness of, any Person (collectively,
"INVESTMENT"), or otherwise acquire any interest in, or control of, another
Person, except for the following:
(a) Cash Equivalents;
(b) Any acquisition of securities or evidences of indebtedness of
others when acquired by each Related Person in settlement of accounts
receivable or other debts arising in the ordinary course of its business,
so long as the aggregate amount of any such securities or evidences of
indebtedness is not material to the business or condition (financial or
otherwise) of each Related Person;
(c) Consumer Notes acquired in the ordinary course of each Related
Person's business; and
29
(d) Investments in its wholly-owned Subsidiaries in an aggregate
amount not to exceed $100,000 at any time; provided that such Subsidiary
shall have executed and delivered to Bank One a guaranty of all of the
Obligations in form and substance acceptable to Bank One, in its sole
discretion.
Section 7.6 ACTIONS WITH RESPECT TO COLLATERAL. Borrower shall not:
(a) Compromise, extend, release, or adjust payments on any
Collateral;
(b) Agree to the amendment or termination of the Asset
Securitization Facility, if such amendment, termination or substitution may
reasonably be expected (as determined by Bank One in its sole discretion)
to have a Material Adverse Effect;
(c) Transfer, sell, assign, or deliver any Collateral pledged to
Bank One to any Person other than Bank One, except pursuant to the Asset
Securitization Facility or pursuant to SECTION 3.4; or
(d) Grant, create, incur, permit or suffer to exist any Lien upon
any Collateral except for Liens granted to Bank One to secure the Consumer
Notes and Obligations.
Section 7.7 TANGIBLE NET WORTH. As of the last day of each Fiscal
Quarter, Borrower's Consolidated Tangible Net Worth shall not be less than
$2,500,000.
Section 7.8 MINIMUM LIQUIDITY. Borrower at all times shall maintain cash
and/or Cash Equivalents in an amount of not less than $500,000. For purposes of
calculating this covenant, "cash and/or Cash Equivalents" shall include the
difference, at the time of calculation, in the aggregate Collateral Value of
all Eligible Consumer Notes and the aggregate Advances then outstanding.
Section 7.9 TOTAL LIABILITIES TO BORROWER'S CONSOLIDATED TANGIBLE NET
WORTH. The ratio of Borrower's Consolidated Total Liabilities to Borrower's
Consolidated Tangible Net Worth shall not be more than 7.0 to 1.0, as of the
last day of any calendar month.
Section 7.10 RESTRICTIONS ON DIVIDENDS AND PAYMENTS OF SUBORDINATED DEBT.
No Related Person shall directly or indirectly declare or make, or incur any
liability to make, any Dividend. Without Bank One's prior written consent,
which consent shall not be unreasonably withheld, no Related Person shall make
any payment on the Subordinated Debt prior to the stated maturity thereof;
provided that the Related Persons may pay interest on the Subordinated Debt
without Bank One's consent so long as no Default or Event of Default shall have
occurred and be continuing.
Section 7.11 TRANSACTIONS WITH AFFILIATES. No Related Person shall enter
into any transactions including, without limitation, any purchase, sale, lease
or exchange of property or
30
the rendering of any service, with any Affiliate other than another Related
Person unless such transactions are otherwise permitted under this Agreement,
are in the ordinary course of each Related Person's business and are upon
fair and reasonable terms no less favorable to such Related Person than it
would obtain in a comparable arm's length transaction with a Person not an
Affiliate.
Section 7.12 LIENS. No Related Person shall grant, create, incur, assume,
permit or suffer to exist any Lien, upon any of its Property, including without
limitation any and all of each Related Person's Consumer Notes, and the proceeds
from any thereof, other than (i) Liens which secure payment of the Obligations,
and (ii) to the extent not otherwise prohibited hereunder, Liens which secure
payment of the Indebtedness described in Section 7.2(b) on property other than
Collateral.
Section 7.13 ERISA PLANS. No Related Person shall adopt or agree to
maintain or contribute to any ERISA Plan without the prior written consent of
Bank One which consent shall not be unreasonably withheld. Each Related Person
shall promptly notify Bank One in writing in the event an ERISA Affiliate adopts
an ERISA Plan.
Section 7.14 CHANGE OF PRINCIPAL OFFICE. No Related Person shall move its
principal office, executive office or principal place of business from the
address set forth in SECTION 10.1 without prior written notice to Bank One.
Section 7.15 FISCAL YEAR, METHOD OF ACCOUNTING. No Related Person shall
change its Fiscal Year or make any material change in its method of accounting
without prior written notice to Bank One.
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1 NATURE OF EVENT. An Event of Default shall exist if any one
or more of the following occurs:
(a) Borrower fails to make any payment of principal or interest on
the Note, or payment of any fee, expense or other amount due hereunder,
under the Note or under any other Loan Document, on or before the date such
payment is due;
(b) Guarantor fails to make any payment of any Obligation owing by
Guarantor under the Guaranty on or before the date such payment in due;
31
(c) Default is made in the due observance or performance by any
Related Person of any covenant set forth in ARTICLE VII or by Guarantor of
any covenant set forth in the Guaranty;
(d) Default is made in the due observance or performance by any
Related Person of any of the other covenants or agreements contained in
this Agreement and such default continues for a period of thirty (30) days
after Bank One gives Borrower notice thereof;
(e) Any Related Person defaults in the due observance or
performance or any of the covenants or agreements contained in any other
Loan Document to which it is a party, and (unless such default otherwise
constitutes a Default pursuant to other provisions of this SECTION 8.1)
such default continues unremedied beyond the expiration of any applicable
grace period which may be expressly allowed under such other Loan Document;
(f) Any material statement, warranty or representation by or on
behalf of any Related Person contained in this Agreement, the Note or any
other Loan Document to which it is a party, or in any Borrowing Request,
officer's certificate or other writing furnished in connection with this
Agreement, proves to have been incorrect or misleading in any material
respect as of the date made or deemed made;
(g) any Related Person fails to make when due or within any
applicable grace period any payment on any Indebtedness other than the
Obligations with an unpaid principal balance of over $100,000; or any event
or condition occurs under any provision contained in any agreement under
which such obligation is governed, evidenced or secured (or any other
material breach or default under such obligation or agreement occurs) if
the effect thereof is to cause or permit the holder or trustee of such
obligation to cause such obligation to become due prior to its stated
maturity; or any such obligation becomes due (other than by regularly
scheduled payments) prior to its stated maturity; or any of the foregoing
occurs with respect to any one or more items of Indebtedness of any Related
Person with unpaid principal balances exceeding, in the aggregate,
$100,000;
(h) Any Related Person or Guarantor:
(i) suffers the entry against it of a judgment, decree or
order for relief by a court of competent jurisdiction in an
involuntary proceeding commenced under any applicable bankruptcy,
insolvency or other similar law of any jurisdiction now or hereafter
in effect, including the federal Bankruptcy Code, as from time to time
amended, or has any such proceeding commenced against it which remains
undismissed for a period of sixty days; or
32
(ii) commences a voluntary case under any applicable
bankruptcy, insolvency or similar law now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended;
or applies for or consents to the entry of an order for relief in an
involuntary case under any such law; or makes a general assignment for
the benefit of creditors; or fails generally to pay (or admits in
writing its inability to pay) its debts as such debts become due; or
takes corporate or other action to authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets or of any
part of the Collateral in a proceeding brought against or initiated by
it, and such appointment or taking possession is neither made
ineffective nor discharged within sixty days after the making thereof,
or such appointment or taking possession is at any time consented to,
requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for
the payment of money in excess of $100,000 with respect to Borrower or
$1,000,000 with respect to Guarantor (not covered by insurance
satisfactory to Bank One in its discretion), unless the same is
discharged within thirty days after the date of entry thereof or an
appeal or appropriate proceeding for review thereof is taken within
such period and a stay of execution pending such appeal is obtained;
or
(v) suffers a writ or warrant of attachment or any similar
process to be issued by any court against all or any substantial part
of its assets or any part of the Collateral, and such writ or warrant
of attachment or any similar process is not stayed or released within
thirty days after the entry or levy thereof or after any stay is
vacated or set aside;
(i) This Agreement, the Note or any other Loan Document shall for
any reason cease to be in full force and effect, or be declared null and
void or unenforceable in whole or in part as the result of any action
initiated by any Person other than Bank One; or the validity or
enforceability of any such document shall be challenged or denied by any
Person other than Bank One;
(j) Any default or event of default shall occur with respect to
the payment of any Indebtedness of a Related Person or Guarantor to Bank
One (other than the Obligations);
(k) Either (i) any "accumulated funding deficiency" (as defined in
Section 412(a) of the Code in excess of $25,000 exists with respect to any
ERISA Plan, whether or not waived by the Secretary of the Treasury or his
delegate, or (ii) any Termination Event occurs with respect to any ERISA
Plan and the then current value of such ERISA
33
Plan's benefits guaranteed under Title IV of ERISA exceeds the then current
value of such ERISA Plan's assets available for the payment of such
benefits by more than $10,000 (or in the case of a Termination Event
involving the withdrawal of a substantial employer, the withdrawing
employer's proportionate share of such excess exceeds such amount) or
(iii)each Related Person or any ERISA Affiliate withdraws from a
multiemployer plan resulting in liability under Title IV of ERISA of an
amount in excess of $10,000;
(l) a Change of Control occurs; or
(m) any Indebtedness of Guarantor under that certain Credit
Agreement dated April 18, 1996, among Guarantor, NationsBank of Texas,
N.A., as Agent, and certain financial institutions is accelerated.
Section 8.2 DEFAULT REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, Bank One may declare its Commitment to be
terminated and/or declare the entire principal and all interest accrued on the
Note to be, and the Note, together with all Obligations, shall thereupon become,
forthwith due and payable, without any presentment, demand, protest, notice of
protest and nonpayment, notice of acceleration or of intent to accelerate or
other notice of any kind, all of which hereby are expressly waived.
Notwithstanding the foregoing, if an Event of Default specified in
SUBSECTIONS 8.1(h)(i), (ii) OR (iii) above occurs with respect to Borrower, the
Commitment shall automatically and immediately terminate and the Note and all
other Obligations shall become automatically and immediately due and payable,
both as to principal and interest, without any action by Bank One and without
presentment, demand, protest, notice of protest and nonpayment, notice of
acceleration or of intent to accelerate, or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in any Note to
the contrary notwithstanding.
ARTICLE IX
CONCERNING BANK ONE
Section 9.1 INDEMNIFICATION.
(a) Borrower agrees to indemnify Bank One and each director, officer,
agent, attorney, employee, representative and Affiliate of Bank One (each an
"Indemnified Party"), upon demand, from and against any and all liabilities,
obligations, claims, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements (including reasonable fees of attorneys,
accountants, experts and advisors) of any kind or nature whatsoever (in this
Section 9.1 collectively called "liabilities and costs") which to any extent (in
whole or in part) may be imposed on, incurred by, or asserted against any
Indemnified Party growing out of, resulting from or in any other way associated
with any of the Collateral, the Loan Documents and the transactions and events
(including the enforcement or defense thereof) at any time associated
34
therewith or contemplated therein. THE FOREGOING INDEMNIFICATION SHALL APPLY
WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT
CAUSED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY,
OR ARE CAUSED, IN WHOLE OR PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND
BY SUCH INDEMNIFIED PARTY, PROVIDED ONLY THAT SUCH INDEMNIFIED PARTY SHALL BE
NOT ENTITLED UNDER THIS SECTION TO RECEIVE INDEMNIFICATION FOR THAT PORTION,
IF ANY, OF ANY LIABILITIES AND COSTS WHICH IS PROXIMATELY CAUSED BY ITS OWN
INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. If any Person (including
each Related Person or any of its Affiliates) ever alleges such gross
negligence or willful misconduct by an Indemnified Party, the indemnification
provided for in this section shall nonetheless be paid upon demand, subject
to later adjustment or reimbursement, until such time as a court of competent
jurisdiction enters a final judgment as to the extent and effect of the
alleged gross negligence or willful misconduct.
(b) Promptly after receipt by an Indemnified Party of notice of any claim,
action or proceeding with respect to which an Indemnified Party is entitled to
indemnification hereunder, such Indemnified Party will notify Borrower of such
claim or the commencement of such action or proceeding, provided that the
failure of an Indemnified Party to give notice as provided herein shall not
relieve each Related Person of its obligations under this SECTION 9.1 with
respect to such Indemnified Party, except to the extent that each Related Person
is actually prejudiced by such action or proceeding, and will employ counsel
reasonably satisfactory to the Indemnified Party and will pay the reasonable
fees and expenses of such counsel. Notwithstanding the preceding sentence, the
Indemnified Party will be entitled, at the expense of each Related Person, to
employ counsel separate from counsel for each Related Person and for any other
party in such action if the Indemnified Party reasonably determines that a
conflict of interest or other reasonable basis exists which makes representation
by counsel chosen by each Related Person not advisable, PROVIDED that each
Related Person shall not be obligated to pay for the reasonable fees and
expenses of more than one counsel for all Indemnified Parties in respect of a
particular controversy. In the event an Indemnified Party appears as a witness
in any action or proceeding brought against each Related Person (or any of its
officers, directors, agents or employees) in which an Indemnified Party is not
named as a defendant, each Related Person agrees to reimburse such Indemnified
Party for all expenses incurred by it (including reasonable fees and expenses of
counsel) in connection with its appearing as a witness.
Section 9.2 LIMITATION OF LIABILITY. Neither Bank One nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement.
THE FOREGOING EXCULPATION SHALL APPLY TO ANY NEGLIGENT ACT OR OMISSION OF ANY
KIND BY ANY SUCH PERSON OR ANY ACT BY SUCH PERSON FOR WHICH STRICT LIABILITY IS
IMPOSED, PROVIDED THAT SUCH PERSON SHALL BE LIABLE FOR ITS OWN INDIVIDUAL GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
35
ARTICLE X
MISCELLANEOUS
Section 10.1 NOTICES. Any notice or request required or permitted to
be given under or in connection with this Agreement, the Note or the other
Loan Documents (except as may otherwise be expressly required therein) shall
be in writing and shall be mailed by first class or express mail, postage
prepaid, or sent by telex, telegram, telecopy or other similar form of rapid
transmission, confirmed by mailing (by first class or express mail, postage
prepaid) written confirmation at substantially the same time as such rapid
transmission, or personally delivered to an officer of the receiving party.
All such communications shall be mailed, sent or delivered to the parties
hereto at their respective addresses as follows:
Borrower: XXXXXXX XXXXXX FINANCIAL SERVICES, INC.
00000 Xxxxx Xx.
Xxxxxx, Xxxxx 00000
Attention: X. Xxxxx XxXxxxx
FAX: (000) 000-0000
Telephone: (000) 000-0000
Bank One: BANK ONE, TEXAS, N.A.
0000 Xxxx Xxxxxx, Xxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: Corporate Lending
FAX: (000) 000-0000
Telephone: (000) 000-0000
or at such other addresses or to such individual's or department's attention
as any party may have furnished the other party in writing. Any
communication so addressed and mailed shall be deemed to be given (i) if sent
by mail, on the fifth day after such communication is deposited in the mail,
(ii) if sent by telecopy or other rapid transmission, when such communication
is transmitted to the appropriate number and the appropriate receipt is
received or otherwise acknowledged, and (iii) if sent by hand delivery or
overnight courier, when left at the address of the addressee addressed as
provided above, except that notices and requests given pursuant to SUBSECTION
3.4(b), Borrowing Requests, Collateral Release Requests, and communications
related thereto shall not be effective until actually received by Bank One or
Borrower, as the case may be; and any notice so sent by rapid transmission
shall be deemed to be given when receipt of such transmission is
acknowledged, and any communication so delivered in person shall be deemed to
be given when receipted for by, or actually received by, an authorized
officer of Borrower or Bank One, as the case may be.
36
Section 10.2 AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement, the Security Instruments, the Note, or any other Loan
Document, nor consent to any departure by any Related Person from the terms
thereof, shall in any event be effective unless the same shall be in writing
and signed by Bank One, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
Section 10.3 INVALIDITY. In the event that any one or more of the
provisions contained in the Note, this Agreement or any other Loan Document
shall, for any reason, be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of such document.
Section 10.4 SURVIVAL OF AGREEMENTS. All covenants and agreements
herein and in any other Loan Document not fully performed before the date
hereof or the date thereof, and all representations and warranties herein or
therein, shall survive until payment in full of the Obligations and
termination of the Commitment.
Section 10.5 RENEWAL, EXTENSION OR REARRANGEMENT. All provisions of
this Agreement and of the other Loan Documents shall apply with equal force
and effect to each and all promissory notes hereafter executed which in whole
or in part represent a renewal, extension for any period, increase or
rearrangement of any part of the Obligations originally represented by the
Note or of any part of such other Obligations.
Section 10.6 WAIVERS. No course of dealing on the part of Bank One, or
any of its officers, employees, consultants or agents, nor any failure or
delay by Bank One with respect to exercising any right, power or privilege of
Bank One under the Note, this Agreement or any other Loan Document shall
operate as a waiver thereof, except as otherwise provided in SECTION 10.2
hereof.
Section 10.7 CUMULATIVE RIGHTS. The rights and remedies of Bank One
under the Note, this Agreement, and any other Loan Document shall be
cumulative, and the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
Section 10.8 CONSTRUCTION. THIS AGREEMENT, THE NOTE AND EACH OTHER
LOAN DOCUMENT IS A CONTRACT MADE UNDER AND SHALL BE CONSTRUED, INTERPRETED
AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE UNITED STATES
OF AMERICA AND THE STATE OF TEXAS. TEX. REV. CIV. STAT. XXX. ART. 0000, XX.
15 (WHICH REGULATES CERTAIN REVOLVING LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE NOTE.
Section 10.9 LIMITATION ON INTEREST. Bank One, each Related Person and
any other parties to the Loan Documents intend to contract in strict
compliance with applicable usury law from time to time in effect. In
furtherance thereof such Persons stipulate and agree that none of
37
the terms and provisions contained in the Loan Documents shall ever be
construed to create a contract to pay, for the use, forbearance or detention
of money, interest in excess of the maximum amount of interest permitted to
be charged by applicable law from time to time in effect. Neither each
Related Person nor any present or future guarantors, endorsers, or other
Persons hereafter becoming liable for payment of any Obligation shall ever be
liable for unearned interest thereon or shall ever be required to pay
interest thereon in excess of the maximum amount that may be lawfully charged
under applicable law from time to time in effect, and the provisions of this
section shall control over all other provisions of the Loan Documents which
may be in conflict or apparent conflict herewith. Bank One expressly
disavows any intention to charge or collect excessive unearned interest or
finance charges in the event the maturity of any Obligation is accelerated.
If (a) the maturity of any Obligation is accelerated for any reason, (b) any
Obligation is prepaid and as a result any amounts held to constitute interest
are determined to be in excess of the legal maximum, or (c) Bank One or any
other holder of any or all of the Obligations shall otherwise collect moneys
which are determined to constitute interest which would otherwise increase
the interest on any or all of the Obligations to an amount in excess of that
permitted to be charged by applicable law then in effect, then all such sums
determined to constitute interest in excess of such legal limit shall,
without penalty, be promptly applied to reduce the then outstanding principal
of the related Obligations or, at Bank One's or such holder's option,
promptly returned to each Related Person or the other payor thereof upon such
determination. In determining whether or not the interest paid or payable,
under any specific circumstance, exceeds the maximum amount permitted under
applicable law, Bank One and each Related Person (and any other payors
thereof) shall to the greatest extent permitted under applicable law,(i)
characterize any non-principal payment as an expense, fee or premium rather
than as interest,(ii) exclude voluntary prepayments and the effects thereof,
and (iii) amortize, prorate, allocate, and spread the total amount of
interest throughout the entire contemplated term of the instruments
evidencing the Obligations in accordance with the amounts outstanding from
time to time thereunder and the maximum legal rate of interest from time to
time in effect under applicable law in order to lawfully charge the maximum
amount of interest permitted under applicable law. In the event applicable
law provides for an interest ceiling under Section 303 of the Texas Finance
Code (the "Texas Finance Code") and Chapter 1D of Title 79,
Tex.Rev.Civ.Stats. 1925 ("Chapter 1D") as amended, respectively for that day,
the ceiling shall be the "indicated rate ceiling" or "weekly ceiling" as
defined in the Texas Finance Code and Chapter 1D.
Section 10.10 BANK ACCOUNTS; OFFSET. To secure the repayment of the
Obligations each Related Person hereby grants to Bank One and to each
financial institution which hereafter acquires a participation or other
interest in the Loan or Note (in this section called a "Participant") a
security interest, a lien, and a right of offset, each of which shall be in
addition to all other interests, liens, and rights of Bank One or Participant
at common law, under the Loan Documents, or otherwise, and each of which
shall be upon and against (a) any and all moneys, securities or other
property (and the proceeds therefrom) of any Related Person now or hereafter
held or received by or in transit to Bank One or Participant from or for the
account any Related Person, whether for safekeeping, custody pledge,
transmission, collection or otherwise, (b) any and all deposits (general or
special, time or demand, provisional or final) of any Related Person
38
with Bank One or Participant, and (c) any other credits and claims of any
Related Person at any time existing against Bank One or Participant,
including claims under certificates of deposit. Upon the occurrence and
during the continuance of any Event of Default, each of Bank One and
Participants is hereby authorized to foreclose upon, offset, appropriate, and
apply, at any time and from time to time, without notice to Borrower, any and
all items hereinabove referred to against the Obligations then due and
payable.
Section 10.11 ASSIGNMENTS AND PARTICIPATIONS. All covenants and
agreements by or on behalf of each Related Person in the Note, this
Agreement, or any other Loan Document shall bind such Related Person's
successors, and assigns and shall inure to the benefit of Bank One and its
successors and assigns. Each Related Person shall not, however, have the
right to assign its rights under this Agreement or any interest herein,
without the prior written consent of Bank One. In the event that Bank One
sells participations in the Note or other Obligations of each Related Person
incurred or to be incurred pursuant to this Agreement to other lenders, each
of such other lenders shall have the rights of offset against such
Obligations and similar rights or Liens to the same extent as may be
available to Bank One. If Bank One assigns any of its rights hereunder, it
shall promptly give notice thereof to each Related Person; provided, however,
that failure to give such notice shall not render Bank One liable to each
Related Person and shall not affect each Related Person's Obligations or the
rights and remedies of Bank One hereunder. Bank One may disclose information
(including, without limitation, information identified to it in writing as
confidential information) regarding each Related Person, the Affiliates of
each Related Person, and the transactions contemplated by this Agreement, to
participants and prospective participants, in the Obligations; provided, that
Bank One shall not make any such confidential information available to any
such participant or prospective participant without first securing from such
Person a written agreement to maintain all such confidential information in
confidence.
Section 10.12 EXHIBITS. The exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for the
purposes stated herein, except that in the event of any conflict between any
of the provisions of such exhibits and the provisions of this Agreement, the
provisions of this Agreement shall prevail.
Section 10.13 TITLES OF ARTICLES, SECTIONS AND SUBSECTIONS. All titles
or headings to articles, sections, subsections or other divisions of this
Agreement or the exhibits hereto are only for the convenience of the parties
and shall not be construed to have any effect or meaning with respect to the
other content of such articles, sections, subsections or other divisions,
such other content being controlling as to the agreement between the parties
hereto.
Section 10.14 COUNTERPARTS. This Agreement may be executed in
counterparts, and it shall not be necessary that the signatures of both of
the parties hereto be contained on any one counterpart hereof; each
counterpart shall be deemed an original, but all counterparts together shall
constitute one and the same instrument.
39
Section 10.15 ENTIRE AGREEMENT. THE NOTE, THIS AGREEMENT, AND THE
OTHER LOAN DOCUMENTS EXECUTED AND DELIVERED AS OF EVEN DATE HEREWITH
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND THERETO AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
Section 10.16 TERMINATION; LIMITED SURVIVAL. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
notice delivered to Bank One to terminate this Agreement. Upon receipt by
Bank One of such a notice, if no Obligations are then owing, this Agreement
(including but not limited to the power of attorney granted under Section 3.3
hereof) and all other Loan Documents shall thereupon be terminated and the
parties thereto released from all prospective obligations thereunder.
Notwithstanding the foregoing or anything herein to the contrary, any waivers
or admissions made by any Person in any Loan Documents, any Obligations, and
any obligations which any Person may have to indemnify or compensate Bank One
shall survive any termination of this Agreement or any other Loan Document.
At the request and expense of Borrower, Bank One shall prepare and execute
all necessary instruments to reflect and effect such termination of the Loan
Documents.
Section 10.17 JOINT AND SEVERAL LIABILITY. All Obligations which are
incurred by two or more Related Persons shall be their joint and several
obligations and liabilities.
Section 10.18 RESTATEMENT This Agreement amends and restates in its
entirety the Credit Agreement (as renewed, extended, amended and/or modified)
dated as of December 3, 1996 as amended by that Letter Agreement dated as of
December 9, 1996 and that First Amendment to Credit Agreement dated as of
December 3, 1997.
Section 10.19 ARBITRATION. Bank and Borrower agree that upon the
written demand of either party, whether made before or after the institution
of any legal proceedings, but prior to the rendering of any judgment in that
proceeding, all disputes, claims and controversies between them, whether
individual, joint or class in nature, arising from the Note, or any Loan
Documents or otherwise, including without limitation contract disputes and
tort claims, shall be resolved by binding arbitration pursuant to the
Commercial Rules of the American Arbitration Association. Any arbitration
proceeding held pursuant to this arbitration provision shall be conducted in
the city nearest the Borrower's address having an AAA regional office, or at
any other place selected by mutual agreement of the parties. No act to take
or dispose of any Collateral shall constitute a waiver of this Section 10.18
or be prohibited by this Section. These provisions shall not limit the right
of either party during any dispute, claim or controversy to seek, use, and
employ ancillary, or preliminary rights and/or remedies, judicial or
otherwise, for the purposes of realizing upon, preserving, protecting,
foreclosing upon or proceeding under forcible entry or detainer for
possession of, any real or personal property, and any such action shall not
be deemed an election of remedies. Such remedies include,
40
without limitation, obtaining injunctive relief or a temporary restraining
order, invoking a power of sale under any deed of trust or mortgage,
obtaining a writ of attachment or imposition of a receivership, or exercising
any rights relating to personal property, including taking or disposing of
such property with or without judicial process pursuant to Article 9 of the
Uniform Commercial Code. Any disputes, claims or controversies concerning
the lawfulness or reasonableness of any act, or exercise of any right or
remedy concerning any Collateral, including any claim to rescind, reform, or
otherwise modify any agreement relating to the Collateral, shall also be
arbitrated; provided, however that no arbitrator shall have the right or the
power to enjoin or restrain any act of either party. Judgment upon any award
rendered by any arbitrator may be entered in any court having jurisdiction.
Nothing herein shall preclude either party from seeking equitable relief from
a court of competent jurisdiction. The statute of limitations, estoppel,
waiver, laches and similar doctrines which would otherwise be applicable in
an action brought by a party shall be applicable in any arbitration
proceeding, and the commencement of an arbitration proceeding shall be deemed
the commencement of any action for these purposes. The Federal Arbitration
Act. (Title 9 of the United States Code) shall apply to the construction,
interpretation, and enforcement of this arbitration provision.
11 JURY WAIVER. BORROWER (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY,
KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) BETWEEN OR AMONG BORROWER AND BANK ARISING OUT OF OR IN ANY WAY
RELATED TO THIS DOCUMENT, THE CREDIT AGREEMENT, OR ANY OTHER LOAN DOCUMENT.
THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TO PROVIDE THE CREDIT
FACILITIES DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
41
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
BORROWER: XXXXXXX XXXXXX FINANCIAL SERVICES, INC.
By:
---------------------------------------------
Name:
Title:
BANK ONE: BANK ONE, TEXAS, N.A.
By:
---------------------------------------------
Name:
Title:
42
