1
EXHIBIT 10.1
===============================================================================
CREDIT AND SECURITY AGREEMENT
BY AND BETWEEN
SOUTHERN FLOW COMPANIES, INC.
AND
XXXXX FARGO BUSINESS CREDIT, INC.
------------------------------------------------------------------------------
SEPTEMBER 24, 2001
===============================================================================
2
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.............................................................................................1
Section 1.1 Definitions....................................................................................1
Section 1.2 Other Definitional Terms; Rules of Interpretation..............................................9
ARTICLE II AMOUNT AND TERMS OF THE CREDIT FACILITY................................................................9
Section 2.1 Advances.......................................................................................9
Section 2.2 Procedures for Requesting Advances............................................................10
Section 2.3 Increased Costs; Capital Adequacy.............................................................10
Section 2.4 Inventory Appraisals..........................................................................11
Section 2.5 Interest; Minimum Interest Charge; Default Interest; Participations;
Clearance Days; Usury.... ....................................................................11
Section 2.6 Fees..........................................................................................13
Section 2.7 Time for Interest Payments; Payment on Non-Banking Days; Computation of Interest and Fees.....14
Section 2.8 Collateral Account; Application of Payments; Lockbox..........................................14
Section 2.9 Voluntary Prepayment; Reduction of the Maximum Line; Termination
of the Credit Facility by the Borrower .......................................................15
Section 2.10 Mandatory Prepayment..........................................................................15
Section 2.11 Advances to Pay Obligations...................................................................15
Section 2.12 Use of Proceeds...............................................................................15
Section 2.13 Liability Records.............................................................................15
Section 2.13 Liability Records.............................................................................16
ARTICLE III SECURITY INTEREST; OCCUPANCY; SETOFF.................................................................16
Section 3.1 Grant of Security Interest....................................................................16
Section 3.2 Notification of Account Debtors and Other Obligors............................................16
Section 3.3 Assignment of Insurance.......................................................................17
Section 3.4 Occupancy.....................................................................................17
Section 3.5 License.......................................................................................18
Section 3.6 Financing Statement...........................................................................18
Section 3.7 Setoff........................................................................................18
Section 3.8 Collateral....................................................................................18
ARTICLE IV CONDITIONS OF LENDING.................................................................................20
Section 4.1 Conditions Precedent to the Initial Advance...................................................20
Section 4.2 Conditions Precedent to All Advances..........................................................22
i
3
ARTICLE V REPRESENTATIONS AND WARRANTIES.........................................................................22
Section 5.1 Existence and Power; Name; Chief Executive Office; Inventory and
Equipment Locations; Federal Employer Identification Number...................................22
Section 5.2 Capitalization................................................................................22
Section 5.3 Authorization of Borrowing; No Conflict as to Law or Agreements...............................23
Section 5.4 Legal Agreements..............................................................................23
Section 5.5 Subsidiaries..................................................................................23
Section 5.6 Financial Condition; No Adverse Change........................................................23
Section 5.7 Litigation....................................................................................23
Section 5.8 Regulation U..................................................................................23
Section 5.9 Taxes.........................................................................................24
Section 5.10 Titles and Liens..............................................................................24
Section 5.11 Plans.........................................................................................24
Section 5.12 Default.......................................................................................24
Section 5.13 Environmental Matters.........................................................................24
Section 5.14 Submissions to Lender.........................................................................25
Section 5.15 Financing Statements..........................................................................25
Section 5.17 Rights to Payment.............................................................................25
Section 5.18 Financial Solvency............................................................................26
ARTICLE VI COVENANTS.............................................................................................26
Section 6.1 Reporting Requirements........................................................................26
Section 6.2 Financial Covenants...........................................................................30
Section 6.3 Permitted Liens; Financing Statements.........................................................30
Section 6.4 Indebtedness..................................................................................31
Section 6.5 Guaranties....................................................................................31
Section 6.6 Investments and Subsidiaries..................................................................32
Section 6.7 Dividends and Distributions...................................................................32
Section 6.8 Books and Records; Inspection and Examination.................................................32
Section 6.9 Account Verification..........................................................................33
Section 6.10 Compliance with Laws..........................................................................33
Section 6.11 Payment of Taxes and Other Claims.............................................................33
Section 6.12 Maintenance of Properties.....................................................................33
Section 6.13 Insurance.....................................................................................34
Section 6.14 Preservation of Existence.....................................................................34
Section 6.15 Delivery of Instruments, etc..................................................................34
Section 6.16 Sale or Transfer of Assets; Suspension of Business Operations.................................34
Section 6.17 Consolidation and Merger; Asset Acquisitions..................................................34
Section 6.18 Sale and Leaseback............................................................................35
Section 6.19 Restrictions on Nature of Business............................................................35
Section 6.20 Accounting....................................................................................35
Section 6.21 Discounts, etc................................................................................35
Section 6.22 Plans.........................................................................................35
ii
4
Section 6.23 Place of Business; Name.......................................................................35
Section 6.24 Constituent Documents; S Corporation Status...................................................35
Section 6.25 Performance by the Lender.....................................................................35
Section 6.26 Advances to Corporate Guarantors..............................................................36
ARTICLE VII EVENTS OF DEFAULT, RIGHTS AND REMEDIES...............................................................36
Section 7.1 Events of Default.............................................................................36
Section 7.2 Rights and Remedies...........................................................................39
Section 7.3 Certain Notices...............................................................................39
ARTICLE VIII MISCELLANEOUS.......................................................................................40
Section 8.1 No Waiver; Cumulative Remedies; Compliance with Laws..........................................40
Section 8.2 Amendments, Etc...............................................................................40
Section 8.3 Addresses for Notices; Requests for Accounting................................................40
Section 8.4 Further Documents.............................................................................40
Section 8.5 Costs and Expenses............................................................................41
Section 8.6 Indemnity.....................................................................................41
Section 8.7 Participants..................................................................................42
Section 8.8 Execution in Counterparts; Telefacsimile Execution............................................42
Section 8.9 Retention of Borrower's Records...............................................................42
Section 8.10 Binding Effect; Assignment; Complete Agreement; Exchanging Information.......................42
Section 8.11 Severability of Provisions....................................................................42
Section 8.12 Headings......................................................................................42
Section 8.13 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial......................................42
iii
5
CREDIT AND SECURITY AGREEMENT
Dated as of September 24, 2001
SOUTHERN FLOW COMPANIES, INC., a Delaware corporation (the "Borrower"), and
XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"),
hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.1 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided, the following terms shall have the meanings
assigned to them in this Section or in the Section referenced after such term:
"Accounts" means all of the Borrower's accounts, as such term
is defined in the UCC, including each and every right of the Borrower
to the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a
rendering of services, out of a loan, out of the overpayment of taxes
or other liabilities, or otherwise arises under any contract or
agreement, whether such right to payment is created, generated or
earned by the Borrower or by some other Person who subsequently
transfers such Person's interest to the Borrower, whether such right to
payment is or is not already earned by performance, and howsoever such
right to payment may be evidenced, together with all other rights and
interests (including all Liens) which the Borrower may at any time have
by law or agreement against any account debtor or other obligor
obligated to make any such payment or against any property of such
account debtor or other obligor; all including but not limited to all
present and future accounts, contract rights, loans and obligations
receivable, chattel papers, bonds, notes and other debt instruments,
tax refunds and rights to payment in the nature of general intangibles.
"Advance" has the meaning given in Section 2.1.
"Affiliate" or "Affiliates" means each Corporate Guarantor and
any other Person controlled by, controlling or under common control
with the Borrower or Parent, including any Subsidiary of the Borrower
or Parent. For purposes of this definition, "control," when used with
respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement.
"Availability" means the difference between (i) the Borrowing
Base and (ii) the outstanding principal balance of the Note.
6
"Banking Day" means a day on which the Federal Reserve Bank of
New York is open for business.
"Base Rate" means the rate of interest per annum publicly
announced from time to time by Xxxxx Fargo Bank National Association at
its principal office in San Francisco as its "prime rate", with the
understanding that the "prime rate" is one of Xxxxx Fargo's base rates
(not necessarily the lowest of such rates) and serves as the basis upon
which effective rates of interest are calculated for loans making
reference thereto.
"Borrowing Base" means at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's sole
discretion, the sum of:
(i) 85% of Eligible Accounts, plus
(ii) the lesser of (A) 20% of Eligible Inventory or (B)
$200,000.
"Capital Expenditures" means for a period, any expenditure of
money during such period for the lease, purchase or other acquisition
of any capital asset, or for the lease of any other asset whether
payable currently or in the future.
"Collateral" means all of the Borrower's and Corporate
Guarantor's Accounts, chattel paper, deposit accounts, documents,
Equipment, General Intangibles, goods, instruments, Inventory,
Investment Property, letter-of-credit rights, letters of credit, and
all sums on deposit in any Collateral Account; together with (i) all
substitutions and replacements for and products of any of the
foregoing; (ii) in the case of all goods, all accessions; (iii) all
accessories, attachments, parts, equipment and repairs now or hereafter
attached or affixed to or used in connection with any goods; (iv) all
warehouse receipts, bills of lading and other documents of title now or
hereafter covering such goods; (v) all collateral subject to the Lien
of any Security Document; (vi) any money, or other assets of the
Borrower that now or hereafter come into the possession, custody, or
control of the Lender; and (vii) proceeds of, and supporting
obligations with respect to, any and all of the foregoing.
"Collateral Account" has the meaning set forth in the
Collateral Account Agreement.
"Collateral Account Agreement" means the Collateral Account
and Control Agreement by and among Borrower and Lender.
"Commitment" means the Lender's commitment to make Advances to
the Borrower pursuant to Article II.
2
7
"Constituent Documents" means with respect to any Person, as
applicable, such Person's certificate of incorporation, articles of
incorporation, by-laws, certificate of formation, articles of
organization, limited liability company agreement, management
agreement, operating agreement, shareholder agreement, partnership
agreement or similar document or agreement governing such Person's
existence, organization or management or concerning disposition of
ownership interests of such Person or voting rights among such Person's
owners.
"Corporate Guarantor Security Agreement" means each Security
Agreement between Lender and each Corporate Guarantor, each dated as of
the date hereof, and any other security agreement entered into after
the date hereof between Lender and any Corporate Guarantor.
"Corporate Guarantors" means each of Parent; Metretek,
Incorporated, a Florida corporation; and PowerSecure, Inc., a Delaware
corporation; together with any other entity that becomes a beneficiary
of any advance from the Borrower pursuant to Section 6.26 and enters
into a Corporate Guaranty and a Corporate Guarantor Security Agreement
in form and substance satisfactory to Lender; provided, however, that
as used herein, the term Corporate Guarantor shall not include any
Person, including any of the foregoing Persons, after such time as such
Person's Corporate Guaranty and Corporate Guarantor Security Agreement
shall have been terminated in accordance with the terms hereof and
thereof.
"Corporate Guaranty" means each Corporate Guaranty in favor of
Lender from each Corporate Guarantor, each dated as of the date hereof,
and any other guaranty entered into after the date hereof by any
Corporate Guarantor in favor of Lender.
"Credit Facility" means the credit facility being made
available to the Borrower by the Lender under Article II.
"Dallas Premises" means the real estate owned by Borrower
located at 0000 Xxxxxxxxxxxx, Xxxxxx, Xxxxx and the attendant buildings
and fixtures located thereon.
"Default" means an event that, with giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the
first day of any month during which a Default or Event of Default has
occurred and ending on the date the Lender notifies the Borrower in
writing that such Default or Event of Default has been cured or waived.
"Default Rate" means an annual interest rate equal to three
percent (3%) over the Floating Rate, which interest rate shall change
when and as the Floating Rate changes.
"Director" means a director if the Borrower is a corporation,
a governor if the Borrower is a limited liability company, or a partner
if the Borrower is a partnership.
"ERISA" means the Employee Retirement Income Security Act of
1974.
3
8
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is a member of a group which includes the Borrower
and which is treated as a single employer under Section 414 of the IRC.
"Eligible Accounts" means all unpaid Accounts of the Borrower
arising from the sale or lease of goods or the performance of services,
net of any credits, but excluding any such Accounts having any of the
following characteristics:
(i) That portion of Accounts unpaid 90 days or more after
the invoice date;
(ii) That portion of Accounts that is (a) disputed or (b)
subject to a claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the final
delivery of goods or rendition of services, as
applicable, by the Borrower to the customer,
including progress xxxxxxxx, and that portion of
Accounts for which an invoice has not been sent to
the applicable account debtor;
(iv) That portion of Accounts owed by account debtors
located in the states of New Jersey, Minnesota,
Indiana, or West Virginia (or any other state that
requires a creditor to file a business activity
report or similar document in order to bring suit or
otherwise enforce its remedies against such account
debtor in the courts or through any judicial process
of such state), unless the Borrower has qualified to
do business in such state, or has filed a notice of
business activities report with the applicable
division of taxation, the department of revenue, or
with such other state offices, as appropriate, for
the then-current year, or is exempt from such filing
requirement;
(v) Accounts constituting (i) proceeds of copyrightable
material unless such copyrightable material shall
have been registered with the United States Copyright
Office, or (ii) proceeds of patentable inventions
unless such patentable inventions have been
registered with the United States Patent and
Trademark Office;
(vi) Accounts owed by any unit of government, whether
foreign or domestic (provided, however, that there
shall be included in Eligible Accounts that portion
of Accounts owed by such units of government for
which the Borrower has provided evidence satisfactory
to the Lender that (A) the Lender has a first
priority perfected security interest and (B) such
Accounts may be enforced by the Lender directly
against such unit of government under all applicable
laws);
(vii) Accounts owed by an account debtor located outside
the United States (excluding Canada) which are not
(A) backed by a bank letter of credit naming the
Lender as beneficiary or assigned to the Lender, in
the Lender's possession or control, and with respect
to which a control agreement concerning the
letter-of-credit rights is in effect, and acceptable
to the Lender in all respects, in its sole
discretion, or (B) covered by a
4
9
foreign receivables insurance policy acceptable to
the Lender in its sole discretion;
(viii) Accounts owed by an account debtor that is insolvent,
is the subject of bankruptcy proceedings or has gone
out of business;
(ix) Accounts owed by an Owner, Subsidiary, Affiliate,
Officer or employee of the Borrower;
(x) Accounts not subject to a duly perfected security
interest in the Lender's favor or which are subject
to any Lien in favor of any Person other than the
Lender;
(xi) That portion of Accounts that has been restructured,
extended, amended or modified;
(xii) That portion of Accounts that constitutes
advertising, finance charges, service charges or
sales or excise taxes;
(xiii) Accounts owed by an account debtor, regardless of
whether otherwise eligible, if 10% or more of the
total amount due under Accounts from such debtor is
ineligible under clauses (i), (ii)(a) or (xi) above;
(xiv) That portion of Accounts owing from a single account
debtor that exceeds 15% of total Eligible Accounts at
any time; and
(xv) Accounts, or portions thereof, otherwise deemed
ineligible by the Lender in its sole discretion.
"Eligible Inventory" means all Inventory of the Borrower
constituting parts and finished goods and located at Borrower's
headquarters in Lafayette, Louisiana used in the installation, testing,
calibration and maintenance of flow measurement equipment, at the lower
of cost or market value as determined in accordance with GAAP; but
excluding any Inventory having any of the following characteristics:
(i) Inventory that is: in-transit; located at any
warehouse, job site or other premises not approved by
the Lender in writing; located outside of the states,
or localities, as applicable, in which the Lender has
filed financing statements to perfect a first
priority security interest in such Inventory; covered
by any negotiable or non-negotiable warehouse
receipt, xxxx of lading or other document of title;
on consignment from any Person; on consignment to any
Person or subject to any bailment unless such
consignee or bailee has executed an agreement with
the Lender;
(ii) Supplies, packaging or sample Inventory;
(iii) Work-in-process Inventory;
5
10
(iv) Inventory that is damaged, obsolete, slow moving or
not currently saleable in the normal course of the
Borrower's operations;
(v) Inventory that the Borrower has returned, has
attempted to return, is in the process of returning
or intends to return to the vendor thereof;
(vi) Inventory that is perishable or live;
(vii) Inventory manufactured by the Borrower pursuant to a
license unless the applicable licensor has agreed in
writing to permit the Lender to exercise its rights
and remedies against such Inventory;
(viii) Inventory that is subject to a Lien in favor of any
Person other than the Lender; and
(ix) Inventory otherwise deemed ineligible by the Lender
in its sole discretion.
"Environmental Law" means any federal, state, local or other
governmental statute, regulation, law or ordinance dealing with the
protection of human health and the environment.
"Equipment" means all of the Borrower's equipment, as such
term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment, shop equipment,
office and record keeping equipment, parts, tools, supplies, and
including specifically the goods described in any equipment schedule or
list herewith or hereafter furnished to the Lender by the Borrower.
"Event of Default" has the meaning specified in Section 7.1.
"Financial Covenants" means the covenants set forth in Section
6.2.
"Floating Rate" means an annual interest rate equal to the sum
of the Base Rate plus one percent (1%), which interest rate shall
change when and as the Base Rate changes.
"Funding Date" has the meaning given in Section 2.1.
"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the
financial statements described in Section 5.6.
"General Intangibles" means all of the Borrower's general
intangibles, as such term is defined in the UCC, whether now owned or
hereafter acquired, including all present and future Intellectual
Property Rights, customer or supplier lists and contracts, manuals,
operating instructions, permits, franchises, the right to use the
Borrower's name, and the goodwill of the Borrower's business.
6
11
"Guarantor(s)" means all Corporate Guarantors and any other
Person now or hereafter guaranteeing the Obligations, but only so long
as any applicable guaranteeing document by such Guarantor is in effect.
"Hazardous Substances" means pollutants, contaminants,
hazardous substances, hazardous wastes, petroleum and fractions
thereof, and all other chemicals, wastes, substances and materials
listed in, regulated by or identified in any Environmental Law.
"IRC" means the Internal Revenue Code of 1986.
"Intellectual Property Rights" means all actual or prospective
rights of the Borrower arising in connection with any intellectual
property or other proprietary rights, including all rights arising in
connection with copyrights, patents, service marks, trade dress, trade
secrets, trademarks, trade names or mask works.
"Inventory" means all of the Borrower's inventory, as such
term is defined in the UCC, whether now owned or hereafter acquired,
whether consisting of whole goods, spare parts or components, supplies
or materials, whether acquired, held or furnished for sale, for lease
or under service contracts or for manufacture or processing, and
wherever located.
"Investment Property" means all of the Borrower's investment
property, as such term is defined in the UCC, whether now owned or
hereafter acquired, including but not limited to all securities,
security entitlements, securities accounts, commodity contracts,
commodity accounts, stocks, bonds, mutual fund shares, money market
shares and U.S. Government securities.
"Lien" means any security interest, mortgage, deed of trust,
pledge, lien, charge, encumbrance, title retention agreement or
analogous instrument or device, including the interest of each lessor
under any capitalized lease and the interest of any bondsman under any
payment or performance bond, in, of or on any assets or properties of a
Person, whether now owned or hereafter acquired and whether arising by
agreement or operation of law.
"Loan Documents" means this Agreement, the Note and the
Security Documents.
"Maturity Date" means September 30, 2004.
"Maximum Line" means $2,000,000.00 unless said amount is
reduced pursuant to Section 2.9, in which event it means such lower
amount.
"Minimum Interest Charge" has the meaning given in Section
2.5(b).
"Net Income" means fiscal year-to-date net income from
continuing operations excluding extraordinary gains, as determined in
accordance with GAAP.
"Note" means the Borrower's promissory note, payable to the
order of the Lender in substantially the form of Exhibit A hereto.
7
12
"Obligations" means the Note and each and every other debt,
liability and obligation of every type and description which the
Borrower may now or at any time hereafter owe to the Lender, whether
such debt, liability or obligation now exists or is hereafter created
or incurred, whether it arises in a transaction involving the Lender
alone or in a transaction involving other creditors of the Borrower,
and whether it is direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole,
joint, several or joint and several, and including all indebtedness of
the Borrower arising under any Credit Document or guaranty between the
Borrower and the Lender, whether now in effect or hereafter entered
into.
"Officer" means with respect to the Borrower, an officer if
the Borrower is a corporation, a manager if the Borrower is a limited
liability company, or a partner if the Borrower is a partnership.
"Owner" means with respect to the Borrower, each Person having
legal or beneficial title to an ownership interest in the Borrower or a
right to acquire such an interest.
"Parent" means Metretek Technologies, Inc., a Delaware
corporation.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) maintained for employees of the Borrower or any ERISA
Affiliate and covered by Title IV of ERISA.
"Permitted Lien" has the meaning given in Section 6.3(a).
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) maintained for employees of the Borrower or any ERISA
Affiliate.
"Premises" means all premises where the Borrower or Parent
conducts its business and has any rights of possession, including the
premises legally described in Exhibit C attached hereto.
"Reportable Event" means a reportable event (as defined in
Section 4043 of ERISA), other than an event for which the 30-day notice
requirement under ERISA has been waived in regulations issued by the
Pension Benefit Guaranty Corporation.
"Security Documents" means this Agreement, the Collateral
Account Agreement, the Corporate Guaranties, the Corporate Guarantor
Security Agreements, and any other document delivered to the Lender
from time to time to secure the Obligations.
"Security Interest" has the meaning given in Section 3.1.
8
13
"Subsidiary" means any corporation of which more than 50% of
the outstanding shares of capital stock having general voting power
under ordinary circumstances to elect a majority of the board of
Directors of such corporation, irrespective of whether or not at the
time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency, is at the
time directly or indirectly owned by the Borrower, by the Borrower and
one or more other Subsidiaries, or by one or more other Subsidiaries.
"Tangible Book Net Worth" has the meaning set forth in Section
6.2(a).
"Termination Date" means the earliest of (i) the Maturity
Date, (ii) the date the Borrower terminates the Credit Facility, or
(iii) the date the Lender demands payment of the Obligations after an
Event of Default pursuant to Section 7.2.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 8.13 as the state whose laws
shall govern this Agreement, or in any other state whose laws are held
to govern this Agreement or any portion hereof.
Section 1.2 OTHER DEFINITIONAL TERMS; RULES OF INTERPRETATION. The
words "hereof", "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All accounting terms not otherwise
defined herein have the meanings assigned to them in accordance with GAAP. All
terms defined in the UCC and not otherwise defined herein have the meanings
assigned to them in the UCC. References to Articles, Sections, subsections,
Exhibits, Schedules and the like, are to Articles, Sections and subsections of,
or Exhibits or Schedules attached to, this Agreement unless otherwise expressly
provided. The words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation". Unless the context in which it is
used herein otherwise clearly requires, the word "or" has the inclusive meaning
represented by the phrase "and/or". Defined terms include in the singular number
the plural and in the plural number the singular. Reference to any agreement
(including the Loan Documents), document or instrument means such agreement,
document or instrument as amended or modified and in effect from time to time in
accordance with the terms thereof (and, if applicable, in accordance with the
terms hereof and the other Loan Documents), except where otherwise explicitly
provided, and reference to any promissory note includes any promissory note
which is an extension or renewal thereof or a substitute or replacement
therefore. Reference to any law, rule, regulation, order, decree, requirement,
policy, guideline, directive or interpretation means as amended, modified,
codified, replaced or reenacted, in whole or in part, and in effect on the
determination date, including rules and regulations promulgated thereunder.
ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY
---------------------------------------
Section 2.1 ADVANCES. The Lender agrees, on the terms and subject to
the conditions herein set forth, to make advances to the Borrower from time to
time from the date all of the conditions set forth in Section 4.1 are satisfied
(the "Funding Date") to the Termination Date (the "Advances"). The Lender shall
have no obligation to make an Advance to the extent the amount of the requested
Advance exceeds Availability. The Borrower's obligation to pay the Advances
9
14
shall be evidenced by the Note and shall be secured by the Collateral. Within
the limits set forth in this Section 2.1, the Borrower may borrow, prepay
pursuant to Section 2.9 and reborrow.
Section 2.2 PROCEDURES FOR REQUESTING ADVANCES. The Borrower shall
comply with the following procedures in requesting Advances:
(a) TIME FOR REQUESTS. The Borrower shall request each Advance not
later than 11:00 a.m., (Denver time) on the Banking Day which
is the date the Advance is to be made. Each such request shall
be effective upon receipt by the Lender, shall be in writing
or by telephone or telecopy transmission, to be confirmed in
writing by the Borrower if so requested by the Lender, shall
be by (i) an Officer of the Borrower; or (ii) a person
designated as the Borrower's agent by an Officer of the
Borrower in a writing delivered to the Lender; or (iii) a
person whom the Lender reasonably believes to be an Officer of
the Borrower or such a designated agent. The Borrower shall
repay all Advances even if the Lender does not receive such
confirmation and even if the person requesting an Advance was
not in fact authorized to do so. Any request for an Advance,
whether written or telephonic, shall be deemed to be a
representation by the Borrower that the conditions set forth
in Section 4.2 have been satisfied as of the time of the
request.
(b) DISBURSEMENT. Upon fulfillment of the applicable conditions
set forth in Article IV, the Lender shall disburse the
proceeds of the requested Advance by crediting the same to the
Borrower's demand deposit account maintained with Bank One,
ABA#000000000, Acct. #000-0000-000, unless the Lender and the
Borrower shall agree in writing to another manner of
disbursement.
Section 2.3 INCREASED COSTS; CAPITAL ADEQUACY.
If the Lender determines at any time that its Return has been reduced
as a result of any Rule Change, such Lender may so notify the Borrower and
require the Borrower, beginning fifteen (15) days after such notice, to pay it
the amount necessary to restore its Return to what it would have been had there
been no Rule Change. For purposes of this Section 2.3:
(i) "Capital Adequacy Rule" means any law, rule,
regulation, guideline, directive, requirement or
request regarding capital adequacy, or the
interpretation or administration thereof by any
governmental or regulatory authority, central bank or
comparable agency, whether or not having the force of
law, that applies to any Related Lender, including
rules requiring financial institutions to maintain
total capital in amounts based upon percentages of
outstanding loans, binding loan commitments and
letters of credit.
10
15
(ii) "Related Lender" includes (but is not limited to) the
Lender, any parent of the Lender, any assignee of any
interest of the Lender hereunder and any participant
in the Credit Facility.
(iii) "Return", for any period, means the percentage
determined by dividing (i) the sum of interest and
ongoing fees earned by the Lender under this
Agreement during such period, by (ii) the average
capital such Lender is required to maintain during
such period as a result of its being a party to this
Agreement, as determined by such Lender based upon
its total capital requirements and a reasonable
attribution formula that takes account of the Capital
Adequacy Rules, then in effect, costs of issuing or
maintaining any Advance and amounts received or
receivable under this Agreement or the Notes with
respect to any Advance. Return may be calculated for
each calendar quarter and for the shorter period
between the end of a calendar quarter and the date of
termination in whole of this Agreement.
(iv) "Rule Change" means any change in any Capital
Adequacy Rule occurring after the date of this
Agreement, or any change in the interpretation or
administration thereof by any governmental or
regulatory authority, but the term does not include
any changes that at the Funding Date are scheduled to
take place under the existing Capital Adequacy Rules,
or any increases in the capital that the Lender is
required to maintain to the extent that the increases
are required due to a regulatory authority's
assessment of that Lender's financial condition.
The initial notice sent by the Lender shall
be sent as promptly as practicable after such Lender
learns that its Return has been reduced, shall
include a demand for payment of the amount necessary
to restore such Lender's Return for the quarter in
which the notice is sent, and shall state in
reasonable detail the cause for the reduction in its
Return and its calculation of the amount of such
reduction. Thereafter, such Lender may send a new
notice during each calendar quarter setting forth the
calculation of the reduced Return for that quarter
and including a demand for payment of the amount
necessary to return its Return for that quarter. The
Lender's calculation in any such notice shall be
conclusive and binding absent demonstrable error.
Section 2.4 INVENTORY APPRAISALS. The Lender may from time to time, but
not more frequently than once per calendar year unless a Default has occurred
and is continuing, obtain at the Borrower's expense an appraisal of Inventory by
an appraiser acceptable to the Lender in its sole discretion.
Section 2.5 INTEREST; MINIMUM INTEREST CHARGE; DEFAULT INTEREST;
PARTICIPATIONS; CLEARANCE DAYS; USURY.
11
16
(a) INTEREST. Except as set forth in Subsections (c) and (f), the
outstanding principal balance of the Note shall bear interest
at the Floating Rate.
(b) MINIMUM INTEREST CHARGE. Notwithstanding the interest payable
pursuant to Subsection (a), the Borrower shall pay to the
Lender interest of not less than $22,500 per calendar quarter
(the "Minimum Interest Charge") during the term of this
Agreement, and the Borrower shall pay any deficiency between
the Minimum Interest Charge and the amount of interest
otherwise calculated under Subsection (a) on the first day of
the following calendar quarter and on the Termination Date.
The Minimum Interest Charge for each period of less than a
full calendar quarter shall be prorated for the number of days
during such quarter that this Agreement is in effect.
(c) DEFAULT INTEREST RATE. At any time during any Default Period,
in the Lender's sole discretion and without waiving any of its
other rights and remedies, the principal of the Advances
outstanding from time to time shall bear interest at the
Default Rate, effective for any periods designated by the
Lender from time to time during that Default Period.
(d) CLEARANCE DAYS. Notwithstanding Section 2.8(b)(ii), interest
at the interest rate applicable under this Section 2.5 shall
accrue on the amount of all payments (even if in the form of
immediately available federal funds) for one (1) day for
clearance.
(e) PARTICIPATIONS. If any Person shall acquire a participation in
the Advances under this Agreement, the Borrower shall be
obligated to the Lender to pay the full amount of all interest
calculated under Section 2.5(a), along with all other fees,
charges and other amounts due under this Agreement, regardless
if such Person elects to accept interest with respect to its
participation at a lower rate than the Floating Rate, or
otherwise elects to accept less than its pro rata share of
such fees, charges and other amounts due under this Agreement.
(f) USURY. In any event no rate change shall be put into effect
which would result in a rate greater than the highest rate
permitted by law. Notwithstanding anything to the contrary
contained in any Loan Document, all agreements which either
now are or which shall become agreements between the Borrower
and the Lender are hereby limited so that in no contingency or
event whatsoever shall the total liability for payments in the
nature of interest, additional interest and other charges
exceed the applicable limits imposed by any applicable usury
laws. If any payments in the nature of interest, additional
interest and other charges made under any Loan Document are
held to be in excess of the limits imposed by any applicable
usury laws, it is agreed that any such amount held to be in
excess shall be considered payment of principal hereunder, and
the indebtedness evidenced hereby shall be reduced by such
amount so that the total liability for payments in the nature
of interest, additional interest and other charges shall not
exceed the applicable limits imposed by any applicable usury
laws, in compliance with the desires of the Borrower and the
Lender. This provision shall never be superseded or waived and
shall control every other provision of the Loan Documents and
all agreements between the Borrower and the Lender, or their
successors and assigns.
12
17
Section 2.6 FEES.
(a) ORIGINATION FEE. The Borrower shall pay the Lender a fully
earned and non-refundable origination fee of one percent
(1.0%) of the Maximum Line ($20,000), due and payable upon the
execution of this Agreement. The Lender has received $15,000
toward payment of this fee and the fees, costs and expenses
described in Sections 2.6(b) and 8.5.
(b) AUDIT FEES. The Borrower shall pay the Lender, on demand,
audit fees in connection with any audits or inspections
conducted by the Lender of any Collateral or the Borrower's
operations or business at the rates established from time to
time by the Lender as its audit fees (which fees are currently
$87.50 per hour per auditor), together with all actual
out-of-pocket costs and expenses incurred in conducting any
such audit or inspection.
(c) TERMINATION AND LINE REDUCTION FEES. If the Credit Facility is
terminated (i) by the Lender during a Default Period that
begins before the Maturity Date, or (ii) by the Borrower as of
a date other than the Maturity Date, or if the Borrower
reduces the Maximum Line, then in each case the Borrower shall
pay to the Lender a fee in an amount equal to a percentage of
the Maximum Line (or the reduction of the Maximum Line, as the
case may be) as follows: (A) two percent (2%) if the
termination or reduction occurs on or before the first
anniversary of the Funding Date; and (B) one percent (1%) if
the termination or reduction occurs after the first
anniversary of the Funding Date.
(d) WAIVER OF TERMINATION FEES. The Borrower will not be required
to pay the termination fees otherwise due under subsection (c)
if (i) such termination is made because of refinancing of the
Credit Facility with Lender or an Affiliate of the Lender, or
(ii) the Credit Facility is refinanced within 90 days after a
request by the Lender for compensation under Section 2.3.
(e) UNUSED LINE FEE. For the purposes of this Section 2.6(e),
"Unused Amount" means the Maximum Line reduced by outstanding
Advances. The Borrower agrees to pay to the Lender an unused
line fee at the rate of one-quarter of one percent (.25%) per
annum on the average daily Unused Amount from the date of this
Agreement to and including the Termination Date, due and
payable monthly in arrears on the first day of the month and
on the Termination Date.
(f) ANNUAL FACILITY FEE. Borrower hereby agrees to pay to the
Lender an annual facility fee of one-quarter of one percent
(.25%) of the Maximum Line, due and payable on an annual basis
on each anniversary of the date hereof.
13
18
(g) OTHER FEES. The Lender may from time to time charge additional
fees for Advances made in excess of the Borrowing Base, for
late delivery of reports, in lieu of imposing interest at the
Default Rate, and (during a Default Period) for other reasons.
Section 2.7 TIME FOR INTEREST PAYMENTS; PAYMENT ON NON-BANKING DAYS;
COMPUTATION OF INTEREST AND FEES.
(a) TIME FOR INTEREST PAYMENTS. Interest shall be due and payable
in arrears on the last day of each month and on the
Termination Date.
(b) PAYMENT ON NON-BANKING DAYS. Whenever any payment to be made
hereunder shall be stated to be due on a day which is not a
Banking Day, such payment may be made on the next succeeding
Banking Day, and such extension of time shall in such case be
included in the computation of interest on the Advances or the
fees hereunder, as the case may be.
(c) COMPUTATION OF INTEREST AND FEES. Interest accruing on the
outstanding principal balance of the Advances and fees
hereunder outstanding from time to time shall be computed on
the basis of actual number of days elapsed in a year of 360
days.
Section 2.8 COLLATERAL ACCOUNT; APPLICATION OF PAYMENTS; LOCKBOX.
(a) COLLATERAL ACCOUNT.
(i) When the Borrower receives any payments on Accounts
or other cash proceeds, the Borrower shall deposit
such payments into the Collateral Account. Until so
deposited, the Borrower shall hold all such payments
in trust for and as the property of the Lender and
shall not commingle such payments with any of its
other funds or property. Amounts deposited in the
Collateral Account shall not bear interest. All
deposits in the Collateral Account shall constitute
proceeds of Borrower's Collateral and shall not
constitute payment of the Obligations.
(ii) All items deposited in the Collateral Account shall
be subject to final payment. If any such item is
returned uncollected, the Borrower will immediately
pay the Lender, or, for items deposited in the
Collateral Account, the bank maintaining such
account, the amount of that item, or such bank at its
discretion may charge any uncollected item to the
Borrower's commercial account or other account. The
Borrower shall be liable as an endorser on all items
deposited in the Collateral Account, whether or not
in fact endorsed by the Borrower.
(b) APPLICATION OF PAYMENTS.
(i) The Lender or Borrower may, from time to time after
allowing two Banking Days for the collection of
uncollected funds, apply deposited funds in the
Collateral Account to the payment of the Obligations,
in any order or manner of application satisfactory to
Lender, by transferring such
14
19
funds to Lender's general account maintained with
Xxxxx Fargo Bank, N.A., ABA No. 000000000, Account
No. 635-5010053. Except as provided in the preceding
sentence, amounts deposited in the Collateral Account
shall not be subject to withdrawal by the Borrower,
except after full payment and discharge of all
Obligations.
(ii) All payments to the Lender shall be made in
immediately available funds and shall be applied to
the Obligations upon receipt by the Lender. Funds
received from the Collateral Account shall be deemed
to be immediately available.
(c) LOCKBOX. After the occurrence of any Default, upon request of the
Lender, Borrower shall enter into a lockbox arrangement with Lender in
accordance with Lender's customary procedures and documentation, in a
manner acceptable to the Lender.
Section 2.9 VOLUNTARY PREPAYMENT; REDUCTION OF THE MAXIMUM LINE;
TERMINATION OF THE CREDIT FACILITY BY THE BORROWER. Except as otherwise provided
herein, the Borrower may prepay the Advances in whole at any time or from time
to time in part. The Borrower may terminate the Credit Facility or reduce the
Maximum Line at any time if it (i) gives the Lender at least 30 days' prior
written notice and (ii) pays the Lender termination or Maximum Line reduction
fees in accordance with Section 2.6(c). Any reduction in the Maximum Line must
be in an amount of not less than $100,000 or an integral multiple thereof. If
the Borrower reduces the Maximum Line to zero, all Obligations shall be
immediately due and payable. Subject to termination of the Credit Facility and
payment and performance of all Obligations, the Lender shall, at the Borrower's
expense, release or terminate the Security Interest and the Security Documents
to which the Borrower is entitled by law.
Section 2.10 MANDATORY PREPAYMENT. Without notice or demand, if the sum
of the outstanding principal balance of the Advances shall at any time exceed
the Borrowing Base, the Borrower shall immediately prepay the Advances to the
extent necessary to eliminate such excess. Any payment received by the Lender
under this Section 2.10 or under Section 2.9 may be applied to the Obligations,
in such order and in such amounts as the Lender, in its discretion, may from
time to time determine.
Section 2.11 ADVANCES TO PAY OBLIGATIONS. Notwithstanding anything in
Section 2.1, the Lender may, in its discretion at any time or from time to time,
without the Borrower's request and even if the conditions set forth in Section
4.2 would not be satisfied, make a Advance in an amount equal to the portion of
the Obligations from time to time due and payable.
Section 2.12 USE OF PROCEEDS. The Borrower shall use the proceeds of
Advances for ordinary working capital purposes, to refinance existing loans from
National Bank of Canada and to provide advances to Corporate Guarantors in
accordance with Section 6.26.
Section 2.13 LIABILITY RECORDS. The Lender may maintain from time to
time, at its discretion, records as to the Obligations. All entries made on any
such record shall be presumed correct until the Borrower establishes the
contrary. Upon the Lender's demand, the Borrower will admit and certify in
writing the exact principal balance of the Obligations that the Borrower then
asserts to be outstanding. Any billing statement or accounting rendered by the
Lender shall
15
20
be conclusive and fully binding on the Borrower unless the Borrower gives the
Lender specific written notice of exception within 30 days after receipt.
Section 2.14 TERMINATION OF CORPORATE GUARANTOR DOCUMENTS. In the event
that any Corporate Guarantor (the "Withdrawing Corporate Guarantor") proposes to
enter into a transaction providing for either (i) debt or equity financing that
would permit such Withdrawing Corporate Guarantor to operate without utilizing
any proceeds from intercompany transfers of advances or any portion thereof
under the Credit Facility, or (ii) the sale of all or substantially all of its
assets or voting stock, then the Lender agrees, subject to the conditions set
forth below, that it shall, not later than 30 calendar days after receipt of
written notice from such Withdrawing Corporate Guarantor of such proposed
transaction, (a) release such Withdrawing Corporate Guarantor from all
obligations relating to such Withdrawing Corporate Guarantor under all Corporate
Guaranties and the Corporate Guarantor Security Agreements pertaining to such
Withdrawing Corporate Guarantor (including but not limited to the termination of
such Withdrawing Corporate Guarantor's guaranty and security interest granted to
Lender thereunder), and (b) terminate all other covenants and agreements of, on
or relating to Withdrawing Corporate Guarantor under this Agreement, the
Corporate Guaranty, the Corporate Guarantor Security Agreement or any other
agreement or instrument entered into in connection with the Credit Facility by
such Withdrawing Corporate Guarantor, other than any provision thereof that
expressly survives termination thereof (collectively, the "Withdrawing Corporate
Guarantor Documents"); provided, however, that the foregoing obligations of
Lender shall only become effective if the following two conditions are fully
satisfied and the Chief Financial Officer of the Borrower and of such
Withdrawing Corporate Guarantor shall have provided a certification to Lender to
such effect: (1) such Withdrawing Corporate Guarantor has repaid all advances
which have been made by the Borrower to such Withdrawing Corporate Guarantor,
and (2) no Default or Event of Default has occurred and is continuing under this
Agreement or any Withdrawing Corporate Guarantor Document or would occur as a
result of such transaction or transactions. In fulfilling its obligations under
this Section 2.14, the Lender agrees to promptly (and in no event more than 30
calendar days after all above conditions are satisfied) furnish to such
Withdrawing Corporate Guarantor duly executed and properly completed termination
statements in proper form for filing as reasonably requested by such Withdrawing
Corporate Guarantor to terminate the applicable security interests under such
Withdrawing Corporate Guarantor Documents, and to take all other actions as
reasonably requested by the Borrower or such Withdrawing Corporate Guarantor to
effectuate the release and termination contemplated by this Section 2.14.
ARTICLE III
SECURITY INTEREST; OCCUPANCY; SETOFF
------------------------------------
Section 3.1 GRANT OF SECURITY INTEREST. The Borrower hereby pledges,
assigns and grants to the Lender a lien and security interest (collectively
referred to as the "Security Interest") in the Collateral, as security for the
payment and performance of the Obligations. Upon request by the Lender, the
Borrower will grant the Lender a security interest in all commercial tort claims
it may have against any Person.
Section 3.2 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER OBLIGORS. The
Lender may at any time (whether or not a Default Period then exists) notify any
account debtor or other Person obligated to pay the amount due that such right
to payment has been assigned or transferred to the
16
21
Lender for security and shall be paid directly to the Lender. The Borrower will
join in giving such notice if the Lender so requests. At any time after the
Borrower or the Lender gives such notice to an account debtor or other obligor,
the Lender may, but need not, in the Lender's name or in the Borrower's name,
(a) demand, xxx for, collect or receive any money or property at any time
payable or receivable on account of, or securing, any such right to payment, or
grant any extension to, make any compromise or settlement with or otherwise
agree to waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as the
Borrower's agent and attorney-in-fact, notify the United States Postal Service
to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and dispose of the Borrower's mail, applying all Collateral as permitted
under this Agreement and holding all other mail for the Borrower's account or
forwarding such mail to the Borrower's last known address.
Section 3.3 ASSIGNMENT OF INSURANCE. As additional security for the
payment and performance of the Obligations, the Borrower hereby assigns to the
Lender any and all monies (including proceeds of insurance and refunds of
unearned premiums) due or to become due under, and all other rights of the
Borrower with respect to, any and all policies of insurance now or at any time
hereafter covering the Collateral or any evidence thereof or any business
records or valuable papers pertaining thereto, and the Borrower hereby directs
the issuer of any such policy to pay all such monies directly to the Lender. At
any time, whether or not a Default Period then exists, the Lender may (but need
not), in the Lender's name or in the Borrower's name, execute and deliver proof
of claim, receive all such monies, endorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim against the issuer of any such policy.
Section 3.4 OCCUPANCY.
(a) The Borrower hereby irrevocably grants to the Lender the right
to take exclusive possession of the Premises at any time
during a Default Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or
otherwise dispose of goods that are Collateral and for other
purposes that the Lender may in good xxxxx xxxx to be related
or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and
discharge of all Obligations and termination of the Credit
Facility, and (ii) final sale or disposition of all goods
constituting Collateral and delivery of all such goods to
purchasers.
(d) The Lender shall not be obligated to pay or account for any
rent or other compensation for the possession, occupancy or
use of any of the Premises; provided, however, that if the
Lender does pay or account for any rent or other compensation
for the possession, occupancy or use of any of the Premises,
the Borrower shall reimburse the Lender promptly for the full
amount thereof. In addition, the Borrower will pay, or
reimburse the Lender for, all taxes, fees, duties, imposts,
charges and expenses at any time incurred by or imposed upon
the
17
22
Lender by reason of the execution, delivery, existence,
recordation, performance or enforcement of this Agreement or
the provisions of this Section 3.4.
Section 3.5 LICENSE. Without limiting the generality of any other
Security Document, the Borrower hereby grants to the Lender a non-exclusive,
worldwide and royalty-free license to use or otherwise exploit all Intellectual
Property Rights of the Borrower for the purpose of: (a) completing the
manufacture of any in-process materials during any Default Period so that such
materials become saleable Inventory, all in accordance with the same quality
standards previously adopted by the Borrower for its own manufacturing and
subject to the Borrower's reasonable exercise of quality control; and (b)
selling, leasing or otherwise disposing of any or all Collateral during any
Default Period.
Section 3.6 FINANCING STATEMENT. The Borrower authorizes the Lender to
file from time to time where permitted by law, such financing statements against
collateral described as "all personal property" as the Lender deems necessary or
useful to perfect the Security Interest. A carbon, photographic or other
reproduction of this Agreement or of any financing statements (whether or not
signed by the Borrower) is sufficient as a financing statement and may be filed
as a financing statement in any state to perfect the security interests granted
hereby. For this purpose (until changed by notice as provided in Section 8.3),
the following information is set forth:
Name and address of Debtor:
Southern Flow Companies, Inc.
000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Federal Employer Identification No. 00-0000000
Name and address of Secured Party:
Xxxxx Fargo Business Credit, Inc.
MAC C7300-300
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000
Federal Employer Identification No. 00-0000000
Section 3.7 SETOFF. The Lender may at any time or from time to time
after a Default or an Event of Default has occurred and is continuing, at its
sole discretion and without demand and without notice to anyone, setoff any
liability owed to the Borrower by the Lender, whether or not due, against any
Obligation, whether or not due. In addition, each other Person holding a
participating interest in any Obligations shall have the right to appropriate or
setoff any deposit or other liability then owed by such Person to the Borrower,
whether or not due, and apply the same to the payment of said participating
interest, as fully as if such Person had lent directly to the Borrower the
amount of such participating interest.
Section 3.8 COLLATERAL. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
18
23
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application. The Lender has no obligation to clean-up or otherwise prepare the
Collateral for sale. The Borrower waives any right it may have to require the
Lender to pursue any third person for any of the Obligations.
19
24
ARTICLE IV
CONDITIONS OF LENDING
---------------------
Section 4.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE. The Lender's
obligation to make the initial Advance hereunder shall be subject to the
condition precedent that the Lender shall have received all of the following,
each in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Note, properly executed by the Borrower.
(c) A true and correct copy of any and all leases pursuant to
which the Borrower leases any Premises in Lafayette,
Louisiana, plus a true and correct copy of all the leases
pursuant to which Parent will replace its Premises located at
000 00xx Xxxxxx, Xxxxxx, Xxxxxxxx, together with a landlord's
disclaimer and consent with respect to each such lease.
(d) The Collateral Account Agreement, properly executed by the
Borrower and Bank One.
(e) Control agreements, properly executed by the Borrower and each
bank at which the Borrower maintains deposit accounts
including the Collateral Account.
(f) Current searches of appropriate filing offices showing that
(i) no Liens have been filed and remain in effect against the
Borrower or any Corporate Guarantor except Permitted Liens or
Liens held by Persons who have agreed in writing that upon
receipt of proceeds of the initial Advances, they will
satisfy, release or terminate such Liens in a manner
satisfactory to the Lender, and (ii) the Lender has duly filed
all financing statements necessary to perfect the Security
Interest, to the extent the Security Interest is capable of
being perfected by filing.
(g) A certificate of the Borrower's (and each Corporate
Guarantor's) Secretary or Assistant Secretary certifying that
attached to such certificate are (i) the resolutions of the
Borrower's (and each Corporate Guarantor's) Directors and, if
required, Owners, authorizing the execution, delivery and
performance of the Loan Documents, (ii) true, correct and
complete copies of the Borrower's (and each Corporate
Guarantor's) Constituent Documents, and (iii) examples of the
signatures of the Borrower's (and each Corporate Guarantor's)
Officers or agents authorized to execute and deliver the Loan
Documents and other instruments, agreements and certificates,
including Advance requests, on the Borrower's (and each
Corporate Guarantor's) behalf.
(h) A current certificate issued by the Secretary of State of
Delaware, certifying that the Borrower is in compliance with
all applicable organizational requirements of the State of
Delaware, together with a current certificate issued by the
Secretary of State of the jurisdiction of incorporation of
each Corporate Guarantor, certifying that such Corporate
Guarantor is in compliance with all applicable organizational
requirements of such State.
20
25
(i) Evidence that the Borrower is duly licensed or qualified to
transact business in all jurisdictions where the character of
the property owned or leased or the nature of the business
transacted by it makes such licensing or qualification
necessary.
(j) A support agreement in favor of the Lender, properly executed
by each of W. Xxxxxxx Xxxxxx and A. Xxxxxxx Xxxxxxx.
(k) An opinion of counsel to the Borrower and each Corporate
Guarantor, addressed to the Lender.
(l) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable
endorsement in the Lender's favor and with all liability
insurance naming the Lender as an additional insured.
(m) A separate guaranty, properly executed by each Corporate
Guarantor, pursuant to which each Corporate Guarantor
unconditionally guarantees the full and prompt payment of all
Obligations.
(n) A separate security agreement from each Corporate Guarantor,
pursuant to which each Corporate Guarantor grants a security
interest in all of its assets to Lender as security for the
Obligations.
21
26
(o) Payment of the fees and commissions due under Section 2.6
through the date of the initial Advance and expenses incurred
by the Lender through such date and required to be paid by the
Borrower under Section 8.5, including all legal expenses
incurred through the date of this Agreement.
(p) Evidence that after making the initial Advance, satisfying all
obligations owed to National Bank of Canada, satisfying all
trade payables older than 30 days from due date, book
overdrafts and closing costs, Availability shall be not less
than $300,000.00.
(q) Such other documents as the Lender in its sole discretion may
require.
Section 4.2 CONDITIONS PRECEDENT TO ALL ADVANCES . The Lender's
obligation to make each Advance shall be subject to the further conditions
precedent that:
(a) the representations and warranties or Borrower and each
Guarantor contained in Article V and in each Loan Document are
correct in all material respects on and as of the date of such
Advance as though made on and as of such date, except to the
extent that such representations and warranties relate solely
to an earlier date; and
(b) no event has occurred and is continuing, or would result from
such Advance, which constitutes a material adverse change in
the financial condition of Borrower or Parent since the most
recent financial statements delivered to Lender or which
constitutes a Default or an Event of Default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants to the Lender as follows:
Section 5.1 EXISTENCE AND POWER; NAME; CHIEF EXECUTIVE OFFICE;
INVENTORY AND EQUIPMENT LOCATIONS; FEDERAL EMPLOYER IDENTIFICATION NUMBER. The
Borrower is, and for the past five years was, a corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly licensed or qualified to transact business in all jurisdictions
where the character of the property owned or leased or the nature of the
business transacted by it makes such licensing or qualification necessary. The
Borrower has all requisite power and authority to conduct its business, to own
its properties and to execute and deliver, and to perform all of its obligations
under, the Loan Documents. During its existence, the Borrower has done business
solely under the names set forth in Schedule 5.1 and all of the Borrower's
records relating to its business or the Collateral are kept at that location.
The Borrower's chief executive office and principal place of business is, and
for the past five years was, located at the address set forth in Schedule 5.1.
All Inventory and Equipment is, and for the past five years was, located at that
location or at one of the other locations listed in Schedule 5.1. The Borrower's
federal employer identification number is correctly set forth in Section 3.6.
Section 5.2 CAPITALIZATION. Schedule 5.2 constitutes a correct
and complete list of all ownership interests in the Borrower and rights to
acquire ownership interests in the Borrower including the record holder, number
of interests and percentage interests on a fully diluted basis.
22
27
Section 5.3 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR
AGREEMENTS. The execution, delivery and performance by the Borrower of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the Borrower's Owners; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including Regulation T, U or X of
the Board of Governors of the Federal Reserve System) or of any order, writ,
injunction or decree presently in effect having applicability to the Borrower or
of the Borrower's Constituent Documents; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which the Borrower is a party
or by which it or its properties may be bound or affected; or (v) result in, or
require, the creation or imposition of any Lien (other than the Security
Interest) upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower.
Section 5.4 LEGAL AGREEMENTS. This Agreement constitutes and, upon due
execution by the Borrower, the other Loan Documents will constitute the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms.
Section 5.5 SUBSIDIARIES. Except as set forth in Schedule 5.5 hereto,
the Borrower has no Subsidiaries.
Section 5.6 FINANCIAL CONDITION; NO ADVERSE CHANGE. The Borrower has
furnished to the Lender its audited financial statements for its fiscal year
ended December 31, 2000 and unaudited financial statements for the
fiscal-year-to-date period ended August 30, 2001, and, subject to year end
adjustments in the unaudited financial statements, those statements fairly
present the Borrower's financial condition on the dates thereof and the results
of its operations and cash flows for the periods then ended and were prepared in
accordance with generally accepted accounting principles. For purposes of this
Agreement, the Lender agrees that the audited consolidated financial statements
of Parent and its Subsidiaries, including Borrower, and the consolidating
financial statements of Borrower included therein, shall constitute the
"audited" financial statements of Borrower hereunder. Since the date of the most
recent financial statements, there has been no material adverse change in the
Borrower's business, properties or condition (financial or otherwise).
Section 5.7 LITIGATION. There are no actions, suits or proceedings
pending or, to the Borrower's knowledge, threatened against or affecting the
Borrower or any of its Affiliates or the properties of the Borrower or any of
its Affiliates before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to the Borrower or any of its Affiliates, would have a material
adverse effect on the financial condition, properties or operations of the
Borrower or any of its Affiliates, except as set forth in Schedule 5.7.
Section 5.8 REGULATION U. The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any
23
28
Advance will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock.
Section 5.9 TAXES. The Borrower and its Affiliates have paid or caused
to be paid to the proper authorities when due all federal, state and local taxes
required to be withheld by each of them, except to the extent of any taxes that
are being contested in good faith by appropriate proceedings and for which
proper reserves have been made in accordance with GAAP. Except as set forth in
the foregoing proviso, the Borrower and its Affiliates have filed all federal,
state and local tax returns which to the knowledge of the Officers of the
Borrower or any Affiliate, as the case may be, are required to be filed, and the
Borrower and its Affiliates have paid or caused to be paid to the respective
taxing authorities all taxes as shown on said returns or on any assessment
received by any of them to the extent such taxes have become due.
Section 5.10 TITLES AND LIENS. The Borrower has good and absolute title
to all Collateral free and clear of all Liens other than Permitted Liens. No
financing statement naming the Borrower as debtor is on file in any office
except to perfect only Permitted Liens.
Section 5.11 PLANS. Except as disclosed to the Lender in writing prior
to the date hereof, neither the Borrower nor any ERISA Affiliate (i) maintains
or has maintained any Pension Plan, (ii) contributes or has contributed to any
Multiemployer Plan or (iii) provides or has provided post-retirement medical or
insurance benefits with respect to employees or former employees (other than
benefits required under Section 601 of ERISA, Section 4980B of the IRC or
applicable state law). Neither the Borrower nor any ERISA Affiliate has received
any notice or has any knowledge to the effect that it is not in full compliance
with any of the requirements of ERISA, the IRC or applicable state law with
respect to any Plan. No Reportable Event exists in connection with any Pension
Plan. Each Plan which is intended to qualify under the IRC is so qualified, and
no fact or circumstance exists which may have an adverse effect on the Plan's
tax-qualified status. Neither the Borrower nor any ERISA Affiliate has (i) any
accumulated funding deficiency (as defined in Section 302 of ERISA and Section
412 of the IRC) under any Plan, whether or not waived, (ii) any liability under
Section 4201 or 4243 of ERISA for any withdrawal, partial withdrawal,
reorganization or other event under any Multiemployer Plan or (iii) any
liability or knowledge of any facts or circumstances which could result in any
liability to the Pension Benefit Guaranty Corporation, the Internal Revenue
Service, the Department of Labor or any participant in connection with any Plan
(other than routine claims for benefits under the Plan).
Section 5.12 DEFAULT. The Borrower is in compliance with all provisions
of all agreements, instruments, decrees and orders to which it is a party or by
which it or its property is bound or affected, the breach or default of which
could have a material adverse effect on the Borrower's financial condition,
properties or operations.
Section 5.13 ENVIRONMENTAL MATTERS.
(a) To the Borrower's best knowledge, there are not present in, on
or under the Premises any Hazardous Substances in such form or
quantity as to create any material liability or obligation for
either the Borrower or the Lender under common law of any
jurisdiction or under any Environmental Law, and no Hazardous
Substances have ever been stored, buried, spilled, leaked,
discharged,
24
29
emitted or released in, on or under the Premises in such a way
as to create any such material liability.
(b) To the Borrower's best knowledge, the Borrower has not
disposed of Hazardous Substances in such a manner as to create
any material liability under any Environmental Law.
(c) There are not and there never have been any requests, claims,
notices, investigations, demands, administrative proceedings,
hearings or litigation, relating in any way to the Premises or
the Borrower, alleging material liability under, violation of,
or noncompliance with any Environmental Law or any license,
permit or other authorization issued pursuant thereto. To the
Borrower's best knowledge, no such matter is threatened or
impending.
(d) To the Borrower's best knowledge, the Borrower's businesses
are and have in the past always been conducted in accordance
with all Environmental Laws and all licenses, permits and
other authorizations required pursuant to any Environmental
Law and necessary for the lawful and efficient operation of
such businesses are in the Borrower's possession and are in
full force and effect. No permit required under any
Environmental Law is scheduled to expire within 12 months and
there is no threat that any such permit will be withdrawn,
terminated, limited or materially changed.
(e) To the Borrower's best knowledge, the Premises are not and
never have been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation and
Liability Information System or any similar federal, state or
local list, schedule, log, inventory or database.
(f) The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other
documents describing or relating in any way to the Premises or
Borrower's businesses.
Section 5.14 SUBMISSIONS TO LENDER. All financial and other information
provided to the Lender by or on behalf of the Borrower in connection with the
Borrower's request for the credit facilities contemplated hereby is (i) true and
correct in all material respects, (ii) does not omit any material fact necessary
to make such information not misleading and, (iii) as to projections, valuations
or proforma financial statements, present a good faith opinion as to such
projections, valuations and proforma condition and results.
Section 5.15 FINANCING STATEMENTS. The Borrower and each Corporate
Guarantor has authorized the filing of financing statements sufficient when
filed to perfect the Security Interest and the other security interests created
by the Security Documents. When such financing statements are filed in the
offices noted therein, the Lender will have a valid and perfected security
interest in all Collateral which is capable of being perfected by filing
financing statements. None of the Collateral is or will become a fixture on real
estate, unless a sufficient fixture filing is in effect with respect thereto.
Section 5.16 RIGHTS TO PAYMENT. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral is (or, in the case of all
25
30
future Collateral, will be when arising or issued) the valid, genuine and
legally enforceable obligation, subject to no defense, setoff or counterclaim,
of the account debtor or other obligor named therein or in the Borrower's
records pertaining thereto as being obligated to pay such obligation.
Section 5.17 FINANCIAL SOLVENCY. Both before and after giving effect to
the transactions contemplated in the Loan Documents, none of the Borrower or its
Affiliates:
(a) was or will be insolvent, as that term is used and defined in
Section 101(32) of the United States Bankruptcy Code and
Section 2 of the Uniform Fraudulent Transfer Act;
(b) has unreasonably small capital or is engaged or about to
engage in a business or a transaction for which any remaining
assets of the Borrower or such Affiliate are unreasonably
small;
(c) by executing, delivering or performing its obligations under
the Loan Documents or other documents to which it is a party
or by taking any action with respect thereto, intends to, nor
believes that it will, incur debts beyond its ability to pay
them as they mature;
(d) by executing, delivering or performing its obligations under
the Loan Documents or other documents to which it is a party
or by taking any action with respect thereto, intends to
hinder, delay or defraud either its present or future
creditors; and
(e) at this time contemplates filing a petition in bankruptcy or
for an arrangement or reorganization or similar proceeding
under any law any jurisdiction, nor, to the best knowledge of
the Borrower, is the subject of any actual, pending or
threatened bankruptcy, insolvency or similar proceedings under
any law of any jurisdiction.
ARTICLE VI
COVENANTS
---------
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 REPORTING REQUIREMENTS. The Borrower will deliver, or cause
to be delivered, to the Lender each of the following, which shall be in form and
detail acceptable to the Lender:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any
event within 90 days after the end of each fiscal year of the
Borrower, audited consolidated and consolidating financial
statements of Metretek Technologies, Inc. and its Subsidiaries
with the unqualified opinion of independent certified public
accountants selected by the Borrower and acceptable to the
Lender, which annual
26
31
financial statements shall include the Parent's (on a
consolidated basis) and Borrower's balance sheet as at the end
of such fiscal year and the related statements of the Parent's
(on a consolidated basis) and Borrower's operations,
stockholders' equity and cash flows for the fiscal year then
ended, all in reasonable detail and prepared in accordance
with GAAP, together with (i) copies of all management letters
prepared by such accountants; and (ii) a certificate of the
Borrower's chief financial officer stating that such financial
statements have been prepared in accordance with GAAP and
whether or not such officer has knowledge of the occurrence of
any Default or Event of Default and, if so, stating in
reasonable detail the facts with respect thereto.
(b) MONTHLY FINANCIAL STATEMENTS. (A) As soon as available and in
any event within 20 days after the end of each month, the
Borrower will deliver to the Lender an unaudited/internal
balance sheet and statements of operations of the Borrower as
at the end of and for such month and for the year to date
period then ended, prepared, if the Lender so requests, on a
consolidating and consolidated basis to include any
Subsidiaries of Borrower, in reasonable detail and stating in
comparative form the figures for the corresponding date and
periods in the previous year, all prepared in accordance with
GAAP, subject to year-end audit adjustments; and accompanied
by a certificate of the Borrower's chief financial Officer,
substantially in the form of Exhibit B hereto stating (i) that
such financial statements have been prepared in accordance
with GAAP, subject to year-end audit adjustments, (ii) whether
or not such officer has knowledge of the occurrence of any
Default or Event of Default not theretofore reported and
remedied and, if so, stating in reasonable detail the facts
with respect thereto, and (iii) all relevant facts in
reasonable detail to evidence, and the computations as to,
whether or not the Borrower is in compliance with the
Financial Covenants.
(B) As soon as available and in any event within 30 days after
the end of each month, the Borrower will cause to be delivered to the
Lender unaudited consolidated internal statements of income of the
Parent as at the end of and for such month and for the year to date
period then ended, to include any Affiliates, in reasonable detail and
stating in comparative form the figures for the corresponding date and
periods in the previous year, all prepared in accordance with GAAP,
subject to year-end audit adjustments.
(C) As soon as available and in any event within 30 days after
the end of each quarter, the Borrower will deliver to the Lender
unaudited consolidated and consolidating statements of operation of the
Parent as at the end of and for such month and for the year-to-date
period then ended, to include any Affiliates, in reasonable detail and
stating in comparative form the figures for the corresponding date and
periods in the previous year, all prepared in accordance with GAAP,
subject to year-end audit adjustments.
27
32
(c) COLLATERAL REPORTS. Within 15 days after the end of each month
or more frequently if the Lender so requires, the Borrower
will deliver to the Lender agings of the Borrower's accounts
receivable and its accounts payable, an inventory
certification report, and a calculation of the Borrower's
Eligible Accounts and Eligible Inventory as at the end of such
month or shorter time period.
(d) PROJECTIONS. At least 30 days before the beginning of each
fiscal year of the Borrower, the Borrower will deliver to the
Lender the projected balance sheets and income statements for
each quarter of such year, each in reasonable detail,
representing (i) the Borrower's good faith projections and
certified by the Borrower's chief financial Officer as being
the most accurate projections available and identical to the
projections used by the Borrower for internal planning
purposes, and (ii) the Parent's good faith projections
(consolidated and consolidating) and certified by the Parent's
chief financial Officer as being the most accurate projections
available and identical to the projections used by the Parent
for internal planning purposes, in each case (x) together with
a statement of underlying assumptions and such supporting
schedules and information as the Lender may in its discretion
require, and (y) based upon plans, intentions, goals,
strategies, beliefs and expectations of management as of that
time and the best information then available to management.
(e) LITIGATION. Immediately after the commencement thereof, the
Borrower will deliver to the Lender notice in writing of all
litigation and of all proceedings before any governmental or
regulatory agency affecting the Borrower or any Corporate
Guarantor (i) of the type described in Section 5.13(c) or (ii)
which seek a monetary recovery against the Borrower or any
Corporate Guarantor in excess of $50,000.
(f) DEFAULTS. As promptly as practicable (but in any event not
later than five business days) after an Officer of the
Borrower obtains knowledge of the occurrence of any Default or
Event of Default, the Borrower will deliver to the Lender
notice of such occurrence, together with a detailed statement
by a responsible Officer of the Borrower of the steps being
taken by the Borrower to cure the effect thereof.
(g) PLANS. As soon as possible, and in any event within 30 days
after the Borrower knows or has reason to know that any
Reportable Event with respect to any Pension Plan has
occurred, the Borrower will deliver to the Lender a statement
of the Borrower's chief financial Officer setting forth
details as to such Reportable Event and the action which the
Borrower proposes to take with respect thereto, together with
a copy of the notice of such Reportable Event to the Pension
Benefit Guaranty Corporation. As soon as possible, and in any
event within 10 days after the Borrower fails to make any
quarterly contribution required with respect to any Pension
Plan under Section 412(m) of the IRC, the Borrower will
deliver to the Lender a statement of the Borrower's chief
financial Officer setting forth details as to such failure and
the action which the Borrower proposes to take with respect
thereto, together with a copy of any notice of such failure
required to be provided to the Pension Benefit Guaranty
Corporation. As soon as possible, and in any event with 10
days after the Borrower knows or has reason to know that it
has or
28
33
is reasonably expected to have any liability under Section
4201 or 4243 of ERISA for any withdrawal, partial withdrawal,
reorganization or other event under any Multiemployer Plan,
the Borrower will deliver to the Lender a statement of the
Borrower's chief financial Officer setting forth details as to
such liability and the action which Borrower proposes to take
with respect thereto.
(h) DISPUTES. Promptly upon knowledge thereof, the Borrower will
deliver to the Lender notice of (i) any disputes or claims by
the Borrower's customers exceeding $25,000 individually or
$125,000 in the aggregate during any fiscal year; and (ii)
credit memos (not disclosed pursuant to Section 6.1(o)
hereof).
(i) OFFICERS AND DIRECTORS. Promptly upon knowledge thereof, the
Borrower will deliver to the Lender notice any change in the
persons constituting the Borrower's Officers and Directors.
(j) COLLATERAL. Promptly upon knowledge thereof, the Borrower will
deliver to the Lender notice of any loss of or material damage
to any Collateral or of any substantial adverse change in any
Collateral or the prospect of payment thereof.
(k) COMMERCIAL TORT CLAIMS. Promptly upon knowledge thereof, the
Borrower will deliver to the Lender notice of any commercial
tort claims it intends to or does bring against any Person,
including the name and address of each defendant, a summary of
the facts, an estimate of the Borrower's damages, copies of
any complaint or demand letter submitted by the Borrower, and
such other information as the Lender may request.
(l) REPORTS TO OWNERS. Promptly upon their distribution, the
Borrower will cause the Parent to deliver to the Lender copies
of all financial statements, reports and proxy statements
which the Parent shall have sent to its Owners.
(m) SEC FILINGS. Promptly after the sending or filing thereof, the
Borrower will deliver to the Lender copies of all regular and
periodic reports which the Parent shall file with the
Securities and Exchange Commission or any national securities
exchange.
(n) VIOLATIONS OF LAW. Promptly upon knowledge thereof, the
Borrower will deliver to the Lender notice of the Borrower's
violation of any law, rule or regulation, the non-compliance
with which could materially and adversely affect the
Borrower's business or its financial condition.
(o) COLLECTIONS, SALES, CREDIT MEMOS, ETC. Borrower shall provide
daily reporting of collections (supported by Borrower's cash
receipts journal) and at least weekly reporting of sales
(supported by Borrower's sales journal), credit memos, and an
accounts receivable aging (summary page only), together with a
Borrowing Base reconciliation report.
(p) OTHER REPORTS. From time to time, with reasonable promptness,
the Borrower will deliver to the Lender any and all
receivables schedules, collection reports, deposit records,
equipment schedules, copies of invoices to account debtors,
29
34
shipment documents and delivery RECEIPTS for goods sold, and
such other material, reports, records or information as the
Lender may request.
Section 6.2 FINANCIAL COVENANTS.
(a) MINIMUM TANGIBLE BOOK NET WORTH. The Borrower will maintain,
during each period described below, its Tangible Book Net
Worth, determined as at the end of each month, at an amount
greater than $650,000. "Tangible Book Net Worth" means the
aggregate of the common and preferred stockholders' equity in
the Borrower LESS intangibles and LESS total intercompany
indebtedness owing from Corporate Guarantors to Borrower, all
determined in accordance with GAAP.
(b) MINIMUM PROFITABILITY. The Borrower will achieve, during each
period described below, Net Income, determined at the end of
each quarter, greater than the amount set forth opposite such
period:
Period Minimum Net Income
9 mos. ending 9/30/01 $750,000
12 mos. ending 12/31/01 $1,000,000
3 mos. ending 3/31/02 $200,000
6 mos. ending 6/30/02 $400,000
9 mos. ending 9/30/02 $600,000
12 mos. ending 12/31/02 $800,000
(c) CAPITAL EXPENDITURES. The Borrower will not incur or contract
to incur Capital Expenditures of more than (i) $200,000 in the
aggregate during the fiscal year ending December 31, 2001 or
(ii) $200,000 in the aggregate during the fiscal year ending
December 31, 2002.
Section 6.3 PERMITTED LIENS; FINANCING STATEMENTS.
(a) The Borrower will not create, incur or suffer to exist any
Lien upon or of any of its assets, now owned or hereafter
acquired, to secure any indebtedness; EXCLUDING, HOWEVER, from
the operation of the foregoing, the following (collectively,
"Permitted Liens"):
(i) covenants, restrictions, rights, easements and minor
irregularities in title which do not materially
interfere with the Borrower's business or operations
as presently conducted;
(ii) Liens in existence on the date hereof and listed in
Schedule 6.3 hereto, securing indebtedness for
borrowed money permitted under Section 6.4;
(iii) the Security Interest and Liens created by the
Security Documents;
30
35
(iv) purchase money Liens relating to the acquisition or
lease of vehicles, machinery and equipment of the
Borrower not exceeding the lesser of cost or fair
market value thereof, in the ordinary course of
business, and so long as no Default Period is then in
existence and none would exist immediately after such
acquisition;
(v) liens for taxes, assessments, or other governmental
charges which are not delinquent or which are being
contested in good faith and for which adequate
reserves have been established in accordance with
GAAP;
(vi) liens of mechanics, materialmen, warehousemen,
carriers or other similar statutory liens securing
obligations that are not yet due and are incurred in
the ordinary course of business; and
(vii) the Dallas Premises.
(b) Borrower will not amend any financing statements in favor of
the Lender except as permitted by law.
Section 6.4 INDEBTEDNESS. The Borrower will not incur, create, assume
or permit to exist any indebtedness or liability on account of deposits or
advances or any indebtedness for borrowed money or letters of credit issued on
the Borrower's behalf, or any other indebtedness or liability evidenced by
notes, bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in existence on the date hereof
and listed in Schedule 6.4 hereto;
(c) indebtedness relating to Permitted Liens;
(d) indebtedness arising from the lease of vehicles and equipment,
all in the ordinary course of business, the obligations under
which ARE NOT required to be classified as "liabilities" on
Borrower's balance sheet in accordance with GAAP; and
(e) indebtedness arising out of capital leases, the obligations
under which ARE required to be classified as "liabilities" on
Borrower's balance sheet in accordance with GAAP, to the
extent permitted pursuant to Section 6.2(c).
Section 6.5 GUARANTIES. The Borrower will not assume, guarantee,
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except:
31
36
(a) the endorsement of negotiable instruments by the Borrower for
deposit or collection or similar transactions in the ordinary
course of business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other
Persons, in existence on the date hereof and listed in
Schedule 6.4 hereto.
Section 6.6 INVESTMENTS AND SUBSIDIARIES. The Borrower will not
purchase or hold beneficially any stock or other securities or evidences of
indebtedness of, make or permit to exist any loans or advances to, or make any
investment or acquire any interest whatsoever in, any other Person, including
any partnership or joint venture, except:
(a) investments in direct obligations of the United States of
America or any agency or instrumentality thereof whose
obligations constitute full faith and credit obligations of
the United States of America having a maturity of one year or
less, commercial paper issued by U.S. corporations rated "A-1"
or "A-2" by Standard & Poors Corporation or "P-1" or "P-2" by
Xxxxx'x Investors Service or certificates of deposit or
bankers' acceptances having a maturity of one year or less
issued by members of the Federal Reserve System having
deposits in excess of $100,000,000 (which certificates of
deposit or bankers' acceptances are fully insured by the
Federal Deposit Insurance Corporation);
(b) travel advances or loans to the Borrower's Officers and
employees not exceeding at any one time an aggregate of
$20,000;
(c) loans from Borrower to Corporate Guarantors permitted by
Section 6.26; and
(d) current investments in the Subsidiaries in existence on the
date hereof and listed in Schedule 5.5 hereto.
Section 6.7 DIVIDENDS AND DISTRIBUTIONS. The Borrower will not declare
or pay any dividends (other than dividends payable solely in stock of the
Borrower) on any class of its stock or make any payment on account of the
purchase, redemption or other retirement of any shares of such stock or make any
distribution in respect thereof, either directly or indirectly.
Section 6.8 BOOKS AND RECORDS; INSPECTION AND EXAMINATION. The Borrower
will keep accurate books of record and account for itself pertaining to the
Collateral and pertaining to the Borrower's business and financial condition and
such other matters as the Lender may from time to time request in which true and
complete entries will be made in accordance with GAAP and, upon the Lender's
request, will permit any officer, employee, attorney or accountant for the
Lender to audit, review, make extracts from or copy any and all company and
financial books and records of the Borrower at all times during ordinary
business hours, to send and discuss with account debtors and other obligors
requests for verification of amounts owed to the Borrower, and to discuss the
Borrower's affairs with any of its Directors, Officers, employees or agents. The
Borrower hereby irrevocably authorizes all accountants and third parties to
disclose and deliver to Lender, at the Borrower's expense, all financial
information, books and records, work papers, management reports and other
information in their possession regarding the Borrower. The Borrower will permit
the Lender, or its employees, accountants, attorneys or agents, to
32
37
examine and inspect any Collateral or any other property of the Borrower at any
time upon reasonable notice during ordinary business hours.
Section 6.9 ACCOUNT VERIFICATION. The Lender may at any time and from
time to time send or require the Borrower to send requests for verification of
accounts or notices of assignment to account debtors and other obligors. The
Lender may also at any time and from time to time telephone account debtors and
other obligors to verify accounts.
Section 6.10 COMPLIANCE WITH LAWS.
(a) The Borrower will (i) comply with the requirements of
applicable laws and regulations, the non-compliance with which
would materially and adversely affect its business or its
financial condition and (ii) use and keep the Collateral, and
require that others use and keep the Collateral, only for
lawful purposes, without violation of any federal, state or
local law, statute or ordinance.
(b) Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply with all applicable
Environmental Laws and obtain and comply with all permits,
licenses and similar approvals required by any Environmental
Laws, and will not generate, use, transport, treat, store or
dispose of any Hazardous Substances in such a manner as to
create any material liability or obligation under the common
law of any jurisdiction or any Environmental Law.
Section 6.11 PAYMENT OF TAXES AND OTHER CLAIMS. The Borrower will pay
or discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it (including the Collateral) or upon or against the creation,
perfection or continuance of the Security Interest, prior to the date on which
penalties attach thereto, (b) all federal, state and local taxes required to be
withheld by it, and (c) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon any properties of the
Borrower; provided, that the Borrower shall not be required to pay any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which proper reserves
have been made.
Section 6.12 MAINTENANCE OF PROPERTIES.
(a) The Borrower will keep and maintain the Collateral and all of
its other properties necessary or useful in its business in
good condition, repair and working order (normal wear and tear
excepted) and will from time to time replace or repair any
worn, defective or broken parts; provided, however, that
nothing in this Section 6.12 shall prevent the Borrower from
discontinuing the operation and maintenance of any of its
properties if such discontinuance is, in the Borrower's
judgment, desirable in the conduct of the Borrower's business
and not disadvantageous in any material respect to the Lender.
The Borrower will take all commercially reasonable steps
necessary to protect and maintain its Intellectual Property
Rights.
(b) The Borrower will defend the Collateral against all Liens,
claims or demands of all Persons (other than the Lender)
claiming the Collateral or any interest therein.
33
38
The Borrower will keep all Collateral free and clear of all
Liens except Permitted Liens. The Borrower will take all
commercially reasonable steps necessary to prosecute any
Person Infringing its Intellectual Property Rights and to
defend itself against any Person accusing it of Infringing any
Person's Intellectual Property Rights.
Section 6.13 INSURANCE. The Borrower will obtain and at all times
maintain insurance with insurers believed by the Borrower to be responsible and
reputable, in such amounts and against such risks as may from time to time be
required by the Lender, but in all events in such amounts and against such risks
as is usually carried by companies engaged in similar business and owning
similar properties in the same general areas in which the Borrower operates.
Without limiting the generality of the foregoing, the Borrower will at all times
keep all tangible Collateral insured against risks of fire (including so-called
extended coverage), theft, and such other risks and in such amounts as the
Lender may reasonably request, with any loss payable to the Lender to the extent
of its interest, and all policies of such insurance shall contain a lender's
loss payable endorsement for the Lender's benefit. All policies of liability
insurance required hereunder shall name the Lender as an additional insured.
Section 6.14 PRESERVATION OF EXISTENCE. The Borrower will preserve and
maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall conduct
its business in an orderly, efficient and regular manner.
Section 6.15 DELIVERY OF INSTRUMENTS, ETC. Upon request by the Lender,
the Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel paper constituting Collateral, duly endorsed or assigned
by the Borrower.
Section 6.16 SALE OR TRANSFER OF ASSETS; SUSPENSION OF BUSINESS
OPERATIONS. The Borrower will not sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and the sale of the Dallas
Premises and will not liquidate, dissolve or suspend business operations. The
Borrower will not transfer any part of its ownership interest in any
Intellectual Property Rights and will not permit any agreement under which it
has licensed Intellectual Property Rights to lapse, except that the Borrower may
transfer such rights or permit such agreements to lapse if it shall have
reasonably determined that the applicable Intellectual Property Rights are no
longer useful in its business. If the Borrower transfers any Intellectual
Property Rights for value, the Borrower will pay over the proceeds to the Lender
for application to the Obligations. The Borrower will not license any other
Person to use any of the Borrower's Intellectual Property Rights, except that
the Borrower may grant licenses in the ordinary course of its business in
connection with sales of Inventory or provision of services to its customers.
The Borrower will not in any manner transfer any property without prior or
present receipt of full and adequate consideration.
Section 6.17 CONSOLIDATION AND MERGER; ASSET ACQUISITIONS. The Borrower
will not consolidate with or merge into any Person, or permit any other Person
to merge into it, or acquire (in a transaction analogous in purpose or effect to
a consolidation or merger) all or substantially all the assets of any other
Person.
34
39
Section 6.18 SALE AND LEASEBACK. The Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Borrower intends to use for
substantially the same purpose or purposes as the property being sold or
transferred; provided, however, that the foregoing restriction shall not apply
with respect to the Dallas Premises.
Section 6.19 RESTRICTIONS ON NATURE OF BUSINESS. The Borrower will not
engage in any line of business materially different from that presently engaged
in by the Borrower and will not purchase, lease or otherwise acquire assets not
related to its business.
Section 6.20 ACCOUNTING. The Borrower will not adopt any material
change in accounting principles other than as required by GAAP. The Borrower
will not adopt, permit or consent to any change in its fiscal year.
Section 6.21 DISCOUNTS, ETC. Borrower will not grant any discount,
credit or allowance to any customer of the Borrower greater than 2% 10 net 30 or
accept any return of goods sold. The Borrower will not at any time modify,
amend, subordinate, cancel or terminate the obligation of any account debtor or
other obligor of the Borrower.
Section 6.22 PLANS. Unless disclosed to the Lender pursuant to
Section 5.12, neither the Borrower nor any ERISA Affiliate will (i) adopt,
create, assume or become a party to any Pension Plan, (ii) incur any obligation
to contribute to any Multiemployer Plan, (iii) incur any obligation to provide
post-retirement medical or insurance benefits with respect to employees or
former employees (other than benefits required by law) or (iv) amend any Plan in
a manner that would materially increase its funding obligations.
Section 6.23 PLACE OF BUSINESS; NAME. The Borrower will not
transfer its chief executive office or principal place of business, or move,
relocate, close or sell any business location (except that Borrower may close or
sell its Dallas Premises). The Borrower will not permit any tangible Collateral
or any records pertaining to the Collateral to be located in any state or area
in which, in the event of such location, a financing statement covering such
Collateral would be required to be, but has not in fact been, filed in order to
perfect the Security Interest. The Borrower will not change its name or
jurisdiction of organization.
Section 6.24 CONSTITUENT DOCUMENTS; S CORPORATION STATUS. The Borrower
will not amend its Constituent Documents. The Borrower will not become an S
Corporation.
Section 6.25 PERFORMANCE BY THE LENDER. If the Borrower at any
time fails to perform or observe any of the foregoing covenants contained in
this Article VI or elsewhere herein, and if such failure shall continue for a
period of ten calendar days after the Lender gives the Borrower written notice
thereof (or in the case of the agreements contained in Sections 6.11 and 6.13,
immediately upon the occurrence of such failure, without notice or lapse of
time), the Lender may, but need not, perform or observe such covenant on behalf
and in the name, place and stead of the Borrower (or, at the Lender's option, in
the Lender's name) and may, but need not, take any and all other actions which
the Lender may reasonably deem necessary to cure or correct such failure
(including the payment of taxes, the satisfaction of Liens, the performance of
obligations owed to account debtors or other obligors, the procurement and
maintenance of
35
40
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrower shall
thereupon pay to the Lender on demand the amount of all monies expended and all
costs and expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with or as a result of the performance or
observance of such agreements or the taking of such action by the Lender,
together with interest thereon from the date expended or incurred at the Default
Rate. To facilitate the Lender's performance or observance of such covenants of
the Borrower, the Borrower hereby irrevocably appoints the Lender, or the
Lender's delegate, acting alone, as the Borrower's attorney in fact (which
appointment is coupled with an interest) with the right (but not the duty) from
time to time to create, prepare, complete, execute, deliver, endorse or file in
the name and on behalf of the Borrower any and all instruments, documents,
assignments, security agreements, financing statements, applications for
insurance and other agreements and writings required to be obtained, executed,
delivered or endorsed by the Borrower under this Section 6.25.
Section 6.26 ADVANCES TO CORPORATE GUARANTORS. Total intercompany
indebtedness owing from all Corporate Guarantors to Borrower determined at the
end of each month may not exceed the greater of: (a) the Borrowing Base on such
date less $150,000, or (b) cumulative Net Income from January 1, 2001 until such
date.
Section 6.27 COLORADO LEASE. Borrower agrees that if it or any of
its Affiliates is party to a lease agreement relating to the Premises located at
000 00xx Xxxxxx, Xxxxxx, Xxxxxxxx after December 31, 2001, it will enter into a
Landlord's Disclaimer and Consent with respect thereto in form and substance
satisfactory to Lender in its sole discretion. If at any time after the date
hereof Borrower or any of its Affiliates is party to a lease agreement relating
to any other real property located in the State of Colorado, and such real
property constitutes Premises, it will enter into a Landlord's Disclaimer and
Consent with respect thereto in form and substance satisfactory to Lender in its
sole discretion.
ARTICLE VII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
--------------------------------------
Section 7.1 .EVENTS OF DEFAULT. "Event of Default", wherever used
herein, means any one of the following events:
(a) Default in the payment of any Obligations when they become due
and payable;
(b) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in this Agreement;
(c) Any ownership interest in the Borrower shall be sold,
transferred, or become subject to a Lien (other than a Lien in
favor of Lender or a Permitted Lien);
(d) Any Financial Covenant shall become inapplicable due to the
lapse of time and the failure to amend any such covenant to
cover future periods;
(e) Either (i) the Borrower or any Guarantor shall be or become
insolvent, or admit in writing its or his inability to pay its
or his debts as they mature, or make an assignment for the
benefit of creditors; (ii) or the Borrower or any Guarantor
shall
36
41
apply for or consent to the appointment of any receiver,
trustee, or similar officer for it or him or for all or any
substantial part of its or his property; or (iii) such
receiver, trustee or similar officer shall be appointed
without the application or consent of the Borrower or such
Guarantor, which appointment is not revoked within 30 days
after such appointment; or (iv) the Borrower or any Guarantor
shall institute (by petition, application, answer, consent or
otherwise) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or
similar proceeding relating to it or him under the laws of any
jurisdiction; or (v) any such proceeding shall be instituted
(by petition, application or otherwise) against the Borrower
or any such Guarantor, and any such proceeding remains
undismissed and unstayed for a period of 30 days after the
commencement thereof; or (vi) any judgment, writ, warrant of
attachment or execution or similar process shall be issued or
levied against a substantial part of the property of the
Borrower or any Guarantor which remains unsatisfied or
undischarged and in effect for a period of 30 days after such
issuance of levy without a stay of enforcement or execution;
(f) Either (i) a petition shall be filed against the Borrower or
any Guarantor under the United States Bankruptcy Code naming
the Borrower or such Guarantor as debtor if such petition has
not been dismissed within 30 days of the filing of such
petition against such Person, or (ii) a petition shall be
filed by the Borrower or any Guarantor under the United States
Bankruptcy Code naming the Borrower or such Guarantor as
debtor;
(g) Any representation or warranty made by the Borrower in this
Agreement, by any Guarantor in any guaranty delivered to the
Lender, or by the Borrower (or any of its Officers) or any
Guarantor in any agreement, certificate, instrument or
financial statement or other statement contemplated by or made
or delivered pursuant to or in connection with this Agreement
or any such guaranty shall prove to have been incorrect in any
material respect when deemed to be effective;
(h) The rendering against the Borrower or a Corporate Guarantor of
an arbitration award, final judgment, decree or order for the
payment of money in excess of $50,000 and the continuance of
such arbitration award, judgment, decree or order unsatisfied
and in effect for a period of 30 days without a stay of
execution;
(i) A default under any bond, debenture, note or other evidence of
material indebtedness of the Borrower or a Corporate Guarantor
owed to any Person other than the Lender, or under any
indenture or other instrument under which any such evidence of
indebtedness has been issued or by which it is governed, or
under any material lease or other contract, and the expiration
of the applicable period of grace or cure period, if any,
specified in, or otherwise agreed by all parties to, such
evidence of indebtedness, indenture, other instrument, lease
or contract; provided that to the extent Borrower or any
Corporate Guarantor is contesting any amount owed to Scient
Corporation in respect of any note payable to Scient
Corporation, non-payment of such contested amount shall not be
an Event of Default hereunder
37
42
so long as such contest continues in good faith or to the
extent that such contest is adjudicated in favor of Borrower
or such Corporate Guarantor;
(j) Any Reportable Event, which the Lender determines in good
faith might constitute grounds for the termination of any
Pension Plan or for the appointment by the appropriate United
States District Court of a trustee to administer any Pension
Plan, shall have occurred and be continuing 30 days after
written notice to such effect shall have been given to the
Borrower by the Lender; or a trustee shall have been appointed
by an appropriate United States District Court to administer
any Pension Plan; or the Pension Benefit Guaranty Corporation
shall have instituted proceedings to terminate any Pension
Plan or to appoint a trustee to administer any Pension Plan;
or the Borrower or any ERISA Affiliate shall have filed for a
distress termination of any Pension Plan under Title IV of
ERISA; or the Borrower or any ERISA Affiliate shall have
failed to make any quarterly contribution required with
respect to any Pension Plan under Section 412(m) of the IRC,
which the Lender determines in good faith may by itself, or in
combination with any such failures that the Lender may
determine are likely to occur in the future, result in the
imposition of a Lien on the Borrower's assets in favor of the
Pension Plan; or any withdrawal, partial withdrawal,
reorganization or other event occurs with respect to a
Multiemployer Plan which results or could reasonably be
expected to result in a material liability of the Borrower to
the Multiemployer Plan under Title IV of ERISA.
(k) An event of default shall occur under any Security Document;
(l) The Borrower or a Corporate Guarantor shall liquidate,
dissolve, terminate or suspend its business operations or
otherwise fail to operate its business in the ordinary course,
or sell or attempt to sell all or substantially all of its
assets, without the Lender's prior written consent;
(m) Default in the payment of any amount owed by the Borrower or a
Corporate Guarantor to the Lender other than any indebtedness
arising hereunder;
(n) Any Guarantor or Person signing a support agreement in favor
of the Lender shall repudiate, purport to revoke or fail to
perform any of its or his material obligations under its or
his guaranty or support agreement in favor of the Lender, any
individual Guarantor shall die or any other Guarantor shall
cease to exist;
(o) Any event or circumstance with respect to the Borrower shall
occur such that the Lender shall believe in good faith that
the prospect of payment of all or any part of the Obligations
or the performance by the Borrower under the Loan Documents is
materially impaired or any material adverse change in the
business or financial condition of the Borrower shall occur;
or
(p) Any breach, default or event of default by or attributable to
any Affiliate under any agreement between such Affiliate and
the Lender shall occur.
38
43
Section 7.2 .RIGHTS AND REMEDIES. During any Default Period, the
Lender may exercise any or all of the following rights and remedies:
(a) the Lender may, by notice to the Borrower, declare the
Commitment to be terminated, whereupon the same shall
forthwith terminate;
(b) the Lender may, by notice to the Borrower, declare the
Obligations to be forthwith due and payable, whereupon all
Obligations shall become and be forthwith due and payable,
without presentment, notice of dishonor, protest or further
notice of any kind, all of which the Borrower hereby expressly
waives;
(c) the Lender may, without notice to the Borrower and without
further action, apply any and all money owing by the Lender to
the Borrower to the payment of the Obligations;
(d) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the
UCC, including the right to take possession of Collateral, or
any evidence thereof, proceeding without judicial process or
by judicial process (without a prior hearing or notice
thereof, which the Borrower hereby expressly waives) and the
right to sell, lease or otherwise dispose of any or all of the
Collateral (with or without giving any warranties as to the
Collateral, title to the Collateral or similar warranties),
and, in connection therewith, the Borrower will on demand
assemble the Collateral and make it available to the Lender at
a place to be designated by the Lender which is reasonably
convenient to both parties;
(e) the Lender may exercise and enforce its rights and remedies
under the Loan Documents; and
(f) the Lender may exercise any other rights and remedies
available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (e) or (f) of Section 7.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind. If the Lender sells any of the Collateral on credit, the
Obligations will be reduced only to the extent of payments actually received. If
the purchaser fails to pay for the Collateral, the Lender may resell the
Collateral and shall apply any proceeds actually received to the Obligations.
Section 7.3 .CERTAIN NOTICES. If notice to the Borrower of any
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 8.3) at least ten
calendar days before the date of intended disposition or other action.
39
44
ARTICLE VIII
MISCELLANEOUS
-------------
Section 8.1 NO WAIVER; CUMULATIVE REMEDIES; COMPLIANCE WITH LAWS.
No failure or delay by the Lender in exercising any right, power or remedy under
the Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under the Loan Documents. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law. The Lender may
comply with any applicable state or federal law requirements in connection with
a disposition of the Collateral and such compliance will not be considered
adversely to affect the commercial reasonableness of any sale of the Collateral.
Section 8.2 AMENDMENTS, ETC. No amendment, modification,
termination or waiver of any provision of any Loan Document or consent to any
departure by the Borrower therefrom or any release of a Security Interest shall
be effective unless the same shall be in writing and signed by the Lender, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any other or further notice or demand
in similar or other circumstances.
Section 8.3 ADDRESSES FOR NOTICES; REQUESTS FOR ACCOUNTING.
Except as otherwise expressly provided herein, all notices, requests, demands
and other communications provided for under the Loan Documents shall be in
writing and shall be (a) personally delivered, (b) sent by first class United
States mail, (c) sent by overnight courier of national reputation, or (d)
transmitted by telecopy, in each case addressed or telecopied to the party to
whom notice is being given at its address or telecopier number as set forth
below next to its signature or, as to each party, at such other address or
telecopier number as may hereafter be designated by such party in a written
notice to the other party complying as to delivery with the terms of this
Section. All such notices, requests, demands and other communications shall be
deemed to have been given on (a) the date received if personally delivered, (b)
when deposited in the mail if delivered by mail, (c) the date sent if sent by
overnight courier, or (d) the date of transmission if delivered by telecopy,
except that notices or requests to the Lender pursuant to any of the provisions
of Article II shall not be effective until received by the Lender. All requests
under Section 9-210 of the UCC (i) shall be made in a writing signed by a person
authorized under Section 2.2(b), (ii) shall be personally delivered, sent by
registered or certified mail, return receipt requested, or by overnight courier
of national reputation (iii) shall be deemed to be sent when received by the
Lender and (iv) shall otherwise comply with the requirements of Section 9-210.
The Borrower requests that the Lender respond to all such requests which on
their face appear to come from an authorized individual and releases the Lender
from any liability for so responding. The Borrower shall pay Lender the maximum
amount allowed by law for responding to such requests.
Section 8.4 FURTHER DOCUMENTS. The Borrower will from time to
time execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements, control
agreements and other agreements and writings that the Lender may reasonably
request in order to secure, protect, perfect or enforce the Security Interest or
the Lender's rights under the Loan Documents (but any failure to request or
assure that the
40
45
Borrower executes, delivers or endorses any such item shall not affect or impair
the validity, sufficiency or enforceability of the Loan Documents and the
Security Interest, regardless of whether any such item was or was not executed,
delivered or endorsed in a similar context or on a prior occasion).
Section 8.5 COSTS AND EXPENSES. The Borrower shall pay on demand
all costs and expenses, including reasonable attorneys' fees, incurred by the
Lender in connection with the Obligations, this Agreement, the Loan Documents
and any other document or agreement related hereto or thereto, and the
transactions contemplated hereby, including all such costs, expenses and fees
incurred in connection with the negotiation, preparation, execution, amendment,
administration, performance, collection and enforcement of the Obligations and
all such documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest.
Section 8.6 INDEMNITY. In addition to the payment of expenses
pursuant to Section 8.5, the Borrower shall indemnify, defend and hold harmless
the Lender, and any of its participants, parent corporations, subsidiary
corporations, affiliated corporations, successor corporations, and all present
and future officers, directors, employees, attorneys and agents of the foregoing
(the "Indemnitees") from and against any of the following (collectively,
"Indemnified Liabilities"):
(a) any and all transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by reason of the
execution and delivery of the Loan Documents or the making of
the Advances;
(b) any claims, loss or damage to which any Indemnitee may be
subjected if any representation or warranty contained in
Section 5.13 proves to be incorrect in any respect or as a
result of any violation of the covenant contained in Section
6.10(b); and
(c) any and all other liabilities, losses, damages, penalties,
judgments, suits, claims, costs and expenses of any kind or
nature whatsoever (including the reasonable fees and
disbursements of counsel) in connection with the foregoing and
any other investigative, administrative or judicial
proceedings, whether or not such Indemnitee shall be
designated a party thereto, which may be imposed on, incurred
by or asserted against any such Indemnitee, in any manner
related to or arising out of or in connection with the making
of the Advances and the Loan Documents or the use or intended
use of the proceeds of the Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 8.6 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder.
41
46
Section 8.7 PARTICIPANTS. The Lender and its participants, if
any, are not partners or joint venturers, and the Lender shall not have any
liability or responsibility for any obligation, act or omission of any of its
participants. All rights and powers specifically conferred upon the Lender may
be transferred or delegated to any of the Lender's participants, successors or
assigns.
Section 8.8 EXECUTION IN COUNTERPARTS; TELEFACSIMILE EXECUTION.
This Agreement and other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same instrument. Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
Section 8.9 RETENTION OF BORROWER'S RECORDS. The Lender shall
have no obligation to maintain any electronic records or any documents,
schedules, invoices, agings, or other papers delivered to the Lender by the
Borrower or in connection with the Loan Documents for more than four months
after receipt by the Lender.
Section 8.10 BINDING EFFECT; ASSIGNMENT; COMPLETE AGREEMENT;
EXCHANGING INFORMATION. The Loan Documents shall be binding upon and inure to
the benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
This Agreement shall also bind all Persons who become a party to this Agreement
as a borrower. This Agreement, together with the Loan Documents, comprises the
complete and integrated agreement of the parties on the subject matter hereof
and supersedes all prior agreements, written or oral, on the subject matter
hereof. The Lender shall have the right to share information regarding the
Borrower and its Affiliates with the Lender's participants, accountants, lawyers
and other advisors, Xxxxx Fargo & Company, and all direct and indirect
subsidiaries and Affiliates of Xxxxx Fargo & Company for the purpose of
administering this Agreement and the Loan Documents or enforcing its rights
hereunder and thereunder.
Section 8.11 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 8.12 HEADINGS. Article, Section and subsection headings in
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
Section 8.13 GOVERNING LAW; JURISDICTION, VENUE; WAIVER OF JURY
TRIAL. The Loan Documents shall be governed by and construed in accordance with
the substantive laws (other than conflict laws) of the State of Colorado. The
parties hereto hereby (i) consent to the personal jurisdiction of the state and
federal courts located in the State of Colorado in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient, (iii) agree that any litigation initiated by the
Lender or the Borrower in connection with this Agreement or the other Loan
Documents may be venued in either the State or Federal courts located in the
City and County of Denver, Colorado; and (iv) agree that a final
42
47
judgment in any such suit, action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
ON OR PERTAINING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
43
48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
Southern Flow Companies, Inc SOUTHERN FLOW COMPANIES, INC. a
000 Xxxxxxxx Xxxxxxxxx Xxxxxxxx Corporation
Xxxxxxxxx, Xxxxxxxxx 00000
Telecopier: 000-000-0000
Attention: Xxxx Xxxxxxx, Chief Financial By: /s/ A. Xxxxxxx Xxxxxxx
Officer ------------------------------
e-mail: xxxxxx@xxx.xxx A. Xxxxxxx Xxxxxxx
Chief Financial Officer
Xxxxx Fargo Business Credit , Inc. XXXXX FARGO BUSINESS CREDIT, INC.
MAC C7300-300
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000 By: /s/ Xxxxxxx X. Xxxxxxxxx
Telecopier: 000-000-0000 ------------------------------
Attention: Xxxx Xxx, Vice President Xxxxxxx X. Xxxxxxxxx
e-mail: xxxx.x.xxx@xxxxxxxxxx.xxx Vice President
44
49
TABLE OF EXHIBITS AND SCHEDULES
Exhibit A Form of Note
Exhibit B Compliance Certificate
Exhibit C Premises
Schedule 5.1 Trade Names, Chief Executive Office,
Principal Place of Business, and Locations
of Collateral
Schedule 5.2 Capitalization and Organizational Chart
Schedule 5.5 Subsidiaries
Schedule 5.7 Litigation
Schedule 6.3 Permitted Liens
Schedule 6.4 Permitted Indebtedness and Guaranties
50
Exhibit A to Credit and Security Agreement
NOTE
$2,000,000.00 Denver, Colorado
_____________, 2001
For value received, the undersigned, SOUTHERN FLOW COMPANIES, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay on the Termination Date
under the Credit Agreement (defined below), to the order of XXXXX FARGO BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender"), at its main office in
Minneapolis, Minnesota, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Two Million Dollars
($2,000,000.00) or, if less, the aggregate unpaid principal amount of all
Advances made by the Lender to the Borrower under the Credit Agreement (defined
below) together with interest on the principal amount hereunder remaining unpaid
from time to time, computed on the basis of the actual number of days elapsed
and a 360-day year, from the date hereof until this Note is fully paid at the
rate from time to time in effect under the Credit and Security Agreement of even
date herewith (the "Credit Agreement") by and between the Lender and the
Borrower. The principal hereof and interest accruing thereon shall be due and
payable as provided in the Credit Agreement. This Note may be prepaid only in
accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement, which
provides, among other things, for acceleration hereof. This Note is the Note
referred to in the Credit Agreement. This Note is secured, among other things,
pursuant to the Credit Agreement and the Security Documents as therein defined,
and may now or hereafter be secured by one or more other security agreements,
mortgages, deeds of trust, assignments or other instruments or agreements.
The Borrower shall pay all costs of collection, including reasonable attorneys'
fees and legal expenses if this Note is not paid when due, whether or not legal
proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest are
expressly waived.
SOUTHERN FLOW COMPANIES, INC., a
Delaware corporation
By _________________________________
A. Xxxxxxx Xxxxxxx
Its Chief Financial Officer
