1
EXHIBIT 6.1
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "AGREEMENT ") is made and entered
into as of the 12 day of March, 1998, by and between TOTAL BUILDING SYSTEMS,
INC., A TEXAS CORPORATION (THE "BORROWER"), and COMPASS BANK, a Texas state
banking association ("Lender").
WITNESSETH:
In consideration of the mutual covenants and agreements herein
contained, Lender and Borrower agree as follows:
SECTION I
DEFINITIONS
1.1 Definitions. In addition to the defined terms set forth
elsewhere herein, the following terms shall have the meanings set forth below:
"ACCOUNTS", "FIXTURES", "GENERAL INTANGIBLES", "INSTRUMENTS", AND
"INVENTORY" shall have the same respective meanings as are assigned
these terms under the Uniform Commercial Code, as adopted in Texas.
"ACCOUNT DEBTOR " shall mean the party who is obligated on or under any
Account,
"AFFILIATE" shall mean (a) a corporation the majority of whose
outstanding shares are owned (individually or collectively) by (i)
Borrower, (ii) any Person identified in this paragraph, (iii) any
Subsidiary of Borrower or any Person identified in this paragraph, or
(iv) any Subsidiary of Borrower's parent corporation, (b) any joint
venture in which Borrower or any Person identified in this paragraph is
a joint venturer, (c) any general or limited partnership in which
Borrower or any Person identified in this paragraph is a general
partner, (d) any shareholder who owns more than ten percent (10%) of
the outstanding common stock of Borrower or any other Person identified
in this Paragraph, (e) any employee, officer or director of Borrower or
any other Person identified in this Paragraph, and (f) any blood
relation of any living Person identified in this Paragraph.
"BORROWER" AND "LENDER" shall mean the parties identified above.
"BORROWING BASE " shall mean an amount equal to 80% of the sum of the
Eligible Accounts.
"BORROWING BASE AND COMPLIANCE CERTIFICATE" shall mean that certain
report in the form of Exhibit "A" attached hereto and made a part
hereof for all purposes.
2
"BUSINESS DAY" shall mean a day (other than Saturday or Sunday) when
Lender is open for conducting all of its customary commercial banking
activities.
"CAPITAL EXPENDITURES" shall mean the aggregate amount of expenditures,
determined without duplication of amounts, made by Borrower during the
12 month period preceding the date of calculation for the acquisition
of any fixed assets or any replacements thereof, substitutions therefor
or additions thereto, which have a useful life of more than 12 months,
including assets acquired by Borrower during such period with respect
to Capitalized Lease Obligations; provided, however, that there may be
deducted in determining Capital Expenditures for purposes of this
Agreement: (a) the aggregate cash proceeds, net of sales expense,
received by Borrower during such period in connection with the sale by
Borrower of any fixed assets that are contemporaneously or within 120
days after such sale replaced with fixed assets serving a similar
function; and (b) in case of any damage or casualty to any fixed assets
of Borrower, insurance proceeds received by Borrower during such period
which are used to finance or refinance the cost of repairing or
replacing those fixed assets.
"CAPITALIZED LEASE OBLIGATIONS" shall mean any indebtedness represented
by obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP, and the amount of
such indebtedness shall be the capitalized amount of such obligations
determined in accordance with GAAP.
"CHAPTER ID" means Chapter ID of Title 79, Texas Rev. Civ. Stats. 1925,
as amended.
"COMMITMENT FEE" means a fee in the amount of one-half of one percent
(0.5%) of the face amount of the Revolving Note payable by the Borrower
to the Lender at the time of execution of this Agreement in
consideration of Lender's commitment to make advances under the
Revolving Note.
"CURRENT RATIO" shall mean the current assets (less prepaid expenses)
of Borrower divided by current liabilities of Borrower, all as
determined in accordance with GAAP.
"DEBT" shall mean (a) all items of indebtedness or liability (other
than capital, surplus, deferred credits and reserves, as such) which in
accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet as of the date as of
which indebtedness is to be determined, (b) indebtedness or other
liabilities secured by any mortgage, security agreement, pledge, or
lien existing on or encumbering property owned by Borrower, whether or
not the indebtedness or other liabilities secured thereby shall have
been assumed by Borrower, and (c) all indebtedness of any Person (i)
which Borrower has directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of
business), discounted with recourse, agreed (contingently
3
or otherwise) to purchase or repurchase or otherwise acquire, (ii) in
respect of which Borrower has agreed to supply or advance funds
(whether by way of loan, purchase of securities or capital
contribution, through a commitment to pay for property or services
regardless of the nondelivery of such property or the nonfurnishing of
such services or otherwise), or (iii) in respect of which Borrower has
otherwise become directly or indirectly liable, contingently or
otherwise, whether now existing or hereafter arising.
"DEBT COVERAGE RATIO" shall mean Borrower's Net Income plus Interest
Expense plus depreciation and amortization expense, determined in
accordance with GAAP, divided by Borrower's current maturities of long
term Debt, determined in accordance with GAAP, plus Interest Expense,
all for the twelve (12) month period ending with such month.
"DEBT SERVICE" shall mean the sum of (a) all principal payments of
Borrower scheduled to become due and owing during the 12-month period
beginning on the date of determination, plus (b) interest expense
calculated on a pro forma basis for the 12-month period beginning on
the date of determination assuming, for purposes of such calculation,
that (i) all principal payments of Borrower scheduled to become due and
owing during such 12-month period shall be paid in full on the
respective due dates thereof, (ii) the principal amount outstanding on
the date of determination will remain constant during such 12-month
period (except for the effect of scheduled principal payments), and
(iii) the applicable interest rate for such calculation with regard to
such indebtedness shall remain constant throughout such 12-month period
(except for the effect of scheduled changes in interest rates) and be
equal to the weighted average interest rate on all outstanding
indebtedness as of the date of determination, plus (c) all regularly
scheduled rental and lease payments to become due and owing during the
12-month period beginning on the date of determination.
"DEBT TO TANGIBLE NET WORTH RATIO" shall mean the total Debt of
Borrower as determined in accordance with GAAP divided by Borrower's
Tangible Net Worth,
"EBITDA" shall mean for any period, on a consolidated basis, the sum
of (i) the income (or deficit) of Borrower and its Subsidiaries before
provision for income taxes for such period, plus (ii) Interest Expense
for such period, plus (iii) all amounts in respect of depreciation and
amortization of the Borrower for such period, all as determined in
accordance with GAAP.
"ELIGIBLE ACCOUNTS" shall mean an Account which meets each of the
following requirements:
(a) it arises in the ordinary course of Borrower's
business from the sale or lease of goods or from services
rendered, such goods have been shipped or delivered to the
Account Debtor under such Account and such services have
been fully performed and have been accepted by the Account
Debtor, and
3
4
Borrower's full right to payment for all sums due from
such Account Debtor with respect to such Account shall
have been earned and then be due and payable;
(b) it is a valid and legally enforceable obligation of
the Account hereunder according to its express terms, and
no offset, counterclaim, cross claim, or other defense
denying liability thereunder in whole or in part has been
asserted or alleged by such Account Debtor or is otherwise
available to such Account Debtor;
(c) it is not subject to any mortgage, lien, security
interest, or similar adverse rights or interests
whatsoever other than the security interest in favor of
Lender hereunder;
(d) it is evidenced by an invoice, dated not later than
the date of performance, requiring payment not later than
thirty (30) days from the invoice date, rendered to such
Account Debtor, and is not evidenced by an instrument or
chattel paper;
(e) it is not owing by an Account Debtor whose obligations
Lender shall have notified Borrower are not deemed by
Lender based upon a credit or other business decision by
Lender, to constitute an Eligible Account for purposes of
this Agreement;
(f) it is not due from an Affiliate or any individual or
entity affiliated or related to any Affiliate, whether by
blood, marriage, or otherwise;
(g) it does not constitute progress xxxxxxxx, retainages,
or deferred payments under a contract not fully performed;
(h) it does not constitute, in whole or in part, interest
or finance charges on outstanding balances;
(i) except for returns to Borrower in the ordinary course
of Borrower's business, it is an Account with respect to
which no return, repossession, rejection, cancellation, or
repudiation shall have occurred or have been threatened;
(j) it is an Account with respect to which Borrower
continues to be in full conformity with the
representations, warranties, and covenants of Borrower
made with respect thereto;
4
5
(k) it is not subject to any trial terms, sales-or-return
terms, consignment terms, guaranteed sales performance or
minimum sales warranties or representations, C.O.D. terms,
cash terms, or similar terms or conditions;
(l) it is owed by an Account Debtor whose principal place
of business is not in the United States of America, unless
(x) the sale is insured, on letter of credit, guaranty, or
acceptance terms, in each case acceptable to Lender, or
(y) the sale is otherwise approved by Lender in writing;
(m) it is not an Account subject, in whole or in part, to
any "xxxx and hold" or similar arrangement pursuant to
which the invoice is delivered prior to the actual
delivery of the sold or leased goods or the performance of
the services;
(n) It is not an Account with respect to which ninety (90)
days or more shall have passed since the relevant invoice
date;
(o) it is not owed by any Account Debtor who or which has
at any time account balances with Borrower equaling or
exceeding ten percent (10%) of such Account Debtor's total
accounts receivable due to Borrower at such time un paid
after ninety (90) days from invoice date;
(p) it is not an Account in which the Account Debtor is
the United States of America or any department, agency, or
instrumentality thereof, unless Borrower, assigns its
right to payment of such Account to Lender, in form and
substance satisfactory to Lender, and so as to comply with
all applicable requirements of law;
(q) it is not an Account arising in connection with
reimbursement from medicaid or medicare;
(r) it is not an Account of which Borrower has made any
agreement with the Account Debtor for any deduction
therefrom, to the extent of the deduction;
(s) it is not an Account which Borrower has made an
agreement with the Account Debtor to extend the time of
payment of such specific Account;
(t) it is not an Account as to which all consents,
licenses, approvals, or authorizations of, or
registrations or declarations
5
6
with, any governmental authority required to be obtained,
effected, or given in connection with the execution,
delivery, and performance thereof by each party obligated
thereunder have not been duly obtained, effected, or
given, are not in full force and effect, or subject the
scope of such Accounts to any materially adverse
limitation, either specific or general in nature; and
(u) it is not an Account as to which Borrower or any other
party to such Account is in default or is likely to become
in default in the performance or observance of any of the
terms thereof
(v) it is not an Account which Lender has otherwise
determined to be unsatisfactory
"ENVIRONMENTAL COMPLAINT" shall mean any written or oral complaint,
order, directive, claim, citation, notice of environmental report or
investigation, or other notice by any Governmental Authority or any
other Person with respect to (a) air emissions, (b) spills, releases,
or discharges to soils, any improvements located thereon, surface
water, groundwater, or the sewer, septic, waste treatment, storage, or
disposal systems servicing any Property of Borrower, (c) solid or
liquid waste disposal, (d) the use, generation, storage,
transportation, or disposal of any Hazardous Substance, or (e) other
environmental, health, or safety matters affecting any Property of
Borrower or the business conducted thereon.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EVENT OF DEFAULT" shall mean any of the events specified in Section 7
of this Agreement.
"FINANCIAL STATEMENTS" shall mean the financial statements of Borrower,
which have been delivered to Lender in connection with Borrower's
application to Lender for the loan to be made by Lender pursuant to
this Agreement.
"FIXED CHARGE COVERAGE RATIO" shall mean the sum of (i) EBITDA plus
(ii) current maturities of long term Debt of the Borrower, plus (iii)
current maturities of Capitalized Lease Obligations divided by the sum
of (i) current maturities of long Term Debt of the Borrower, plus (ii)
current maturities of Capitalized Lease Obligations of the Borrower,
plus (Iii) Interest Expense, all as determined in accordance with GAAP.
"GAAP" shall mean generally accepted accounting principles established
by the Financial Accounting Standards Board or the American Institute
of Certified Public
6
7
Accountants and in effect in the United States from time to time,
applied on a basis consistent with that of the preceding fiscal year of
Borrower, reflecting only such changes in accounting principles or
practice with which the independent public accountants of Borrower
concur.
"GOVERNMENTAL AUTHORITY" shall mean any nation, country, commonwealth,
territory, government, state, county, parish, municipality, agency, or
other political subdivision and any entity exercising executive,
legislative, judicial, regulatory, or administrative functions of or
pertaining to government, including, without limitation, any state
agencies and Persons responsible in whole or in part for environmental
matters in the states in which Borrower is located or otherwise
conducting its business activities and the United States Environmental
Protection Agency.
"GUARANTY" shall mean the Guaranty Agreement executed on even date
herewith by the Guarantor.
"GUARANTOR" shall mean Xxxxxxx X. XxXxxxx.
"HAZARDOUS SUBSTANCES" shall mean flammables, explosives, radon,
radioactive materials, hazardous wastes, asbestos, urea formaldehyde
foam insulation, or any material containing asbestos, polychlorinated
biphenyls (PCBs), toxic substances or related materials, petroleum,
petroleum products, methane, associated oil or natural gas exploration,
production, and development wastes, or any "hazardous substances,"
"hazardous materials", "hazardous wastes," "toxic substances," or
related materials, as defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the
Superfund Amendments and Reauthorization Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and
Recovery Act, as amended, the Toxic Substances Control Act, as amended,
or any other law or regulation now or hereafter enacted or promulgated
by any Governmental Authority.
"INDEX RATE" shall mean a fluctuating interest rate per annum, computed
on the basis of a year of 360 days, for the actual number of days
elapsed, which rate per annum. shall at all times be equal to the
"prime rate" published in the "Money Rates" table in The Wall Street
Journal from time to time, and if multiple prime rates are published,
the highest such rate; provided, however, that in the event The Wall
Street Journal is no longer published or no longer publishes the prime
rate in its "Money Rates" table, Bank shall choose a substitute Index
Rate that is based upon comparable information. Such rate is only one
of the reference rates or indexes used by Bank from time to time.
"INTELLECTUAL PROPERTY" shall mean patents, patent applications,
trademarks, tradenames, copyrights, technology, know-how, and
processes.
7
8
"INTEREST EXPENSE" shall mean, for any period, on a consolidated basis,
the interest charges paid or accrued during such period by the Borrower
(including without limitation imputed interest on Capitalized Lease
Obligations) on the Obligations for such period, determined in
accordance with GAAP.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Security
Instruments, the Guaranty and such other instruments, documents, and
agreements evidencing, securing, or pertaining to the loans which have
heretofore been or hereafter are from time to time executed and
delivered to Lender by Borrower or any other Person pursuant to this
Agreement.
"MATERIAL ADVERSE CHANGE" shall mean any act, circumstance, or event
(including, without limitation, any announcement of action) which (a)
causes a Default or Event of Default, (b) otherwise could reasonably be
expected to be material and adverse to the financial condition or
operations of Borrower, or (c) in any manner could reasonably be
expected to materially and adversely affect the validity or
enforceability of any Loan Document.
"MAXIMUM RATE" means, on any day, the maximum nonusurious rate of
interest permitted for that day by whichever of applicable federal or
Texas laws permits the higher interest rate, stated as a rate per
annum. On each day, if any, that Chapter 1D establishes the Maximum
Rate, the Maximum Rate shall be the "weekly rate ceiling" (as defined
in Section 303 of the Texas Finance Code) for that day. Lender may from
time to time, as to current and future balances, implement any other
ceiling under Texas Finance Code or Chapter 1D by notice to Borrower,
if and to the extent permitted by Texas Finance Code or Chapter 1D.
Without notice to Borrower or any other person or entity, the Maximum
Rate shall automatically fluctuate upward and downward as and in the
amount by which such maximum nonusurious rate of interest permitted by
applicable law fluctuates.
"NET INCOME" shall mean gross revenues and other proper income credits,
less all proper income charges (including taxes), all determined in
accordance with GAAP; provided, that there shall not be included in
such revenues (1) any income representing the excess of equity in any
Subsidiary at the date of acquisition over the investment in such
Subsidiary, (ii) any interests in the undistributed earnings of any
Person which is not a Subsidiary, (iii) any earnings of any Affiliate
for any period prior to the date such Subsidiary was acquired, (iv) any
gains resulting from the write-up of assets, (v) any proceeds of any
life insurance policy, or (vi) any gain, which is classified as
"extraordinary" in accordance with GAAP; and provided further, that
capital gains may be included in revenues only to the extent of capital
losses.
"NET WORTH" shall mean (a) total assets, as would be reflected on a
combined and consolidated balance sheet of Borrower, prepared in
accordance with GAAP, minus
8
9
(b) total liabilities, as would be reflected on a combined and
consolidated balance sheet of Borrower, prepared in accordance with
GAAP.
"OBLIGATIONS" shall mean all indebtedness, obligations, and liabilities
of Borrower to Lender of every nature and description, now or hereafter
existing or arising, whether such indebtedness is direct or indirect,
primary or secondary, fixed or contingent or arises out of or is
evidenced by a promissory note, deed of trust, security agreement, open
account, overdraft, endorsement, surety agreement, guaranties, or
otherwise, including, without limitation, all such obligations,
liabilities, and indebtedness of Borrower to Lender under or in
connection with the Loan Documents. Obligations shall include all
renewals, extensions and rearrangements of any of the above described
obligations and indebtedness.
"OSHA" shall mean the Occupational Safety and Health Act and all rules
and regulations from time to time promulgated thereunder and all
amendments thereof and thereto.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision
thereof, or any other form of entity.
"PLAN" shall mean an employee benefit plan of the Borrower or any
subsidiary subject to ERISA.
"PROPERTY" shall mean all Eligible Accounts and Inventory of Borrower.
"RELEASE OF HAZARDOUS SUBSTANCES" shall mean any emission, spill,
release, leak, disposal, or discharge, except in accordance with a
valid permit, license, certificate, or approval of the relevant
Governmental Authority, of any Hazardous Substance into or upon (a) the
air, (b) soils or any improvements located thereon, (c) surface water
or groundwater, or (d) the sewer or septic system, or the waste
treatment, storage, or disposal system servicing any Property of
Borrower.
"REPORTABLE EVENT" shall mean a reportable event as defined by ERISA.
"REVOLVING NOTE" shall mean that certain promissory note of Borrower
dated of even date herewith, in the maximum principal sum of
$1,000,000.00, payable to the order of Lender, and any and all
renewals, replacements, restatements, modifications, extensions,
increases, and rearrangements thereof.
"REQUIREMENT OF LAW" shall mean, as to any Person, the certificate or
articles of incorporation or association and by-laws or other
organizational or governing documents of such Person, and any
applicable law, treaty, ordinance, order, judgment, rule, decree,
regulation, or determination of an arbitrator, court, or other
Governmental Authority, including, without limitation, rules, decrees,
judgments, regulations, orders, and requirements for permits, licenses,
registrations, approvals,
9
10
or authorizations (and any authoritative interpretation of any of the
foregoing), in each case as such now exist or may be hereafter amended
and are applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"SECURITY AGREEMENT" shall mean the Security Agreement of even date
herewith, by and between Borrower and Lender, covering and granting a
security interest in, among other things, Borrower's Inventory, General
Intangibles, and Accounts.
"SECURITY INSTRUMENTS" shall mean the Security Agreement and any and
all other heretofore and hereafter existing security and other
agreements which create or xxxxx x xxxx or security interest as
security for the Revolving Note or other Obligations.
"SUBSCRIPTION RECEIVABLE" shall mean a commitment from an investor to
purchase capital stock of the Borrower.
"SUBSIDIARY" shall mean, as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having
such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such
corporation are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person,
"SUBORDINATED INDEBTEDNESS" shall mean any Debt of Borrower expressly
contained in the instruments evidencing such Debt or in other
instruments or agreements related thereto such, subordination
provisions being substantially to the effect that the holder of such
debt agrees that the Debt evidenced by such instrument or such other
agreements shall at all times and in all respects be subordinate and
junior in right of payment to indebtedness referred to therein.
"TANGIBLE NET WORTH" shall mean Borrower's Net Worth less (a) all
intangible assets including receivables due from officers, affiliates,
subsidiaries and related entities determined in accordance with GAAP,
less (b) the Subscription Receivable.
"TERMINATION DATE" shall mean the earlier to occur of (a) May 1, 1999,
or (b) the date on which an Event of Default shall occur.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with such
principles. In the event that changes in GAAP shall be mandated by the Financial
Accounting Standards Board and/or the American Institute of Certified Public
Accountants or any similar accounting body of comparable standing, or shall be
recommended by Borrower's certified public accountants, to the extent that such
changes would modify such accounting terms or the interpretation or computation
thereof as contemplated by this Agreement at the time of execution hereof, then
in such event, such changes shall be followed in defining such accounting terms
only after Lender and Borrower amend this
10
11
Agreement to reflect the original intent of such terms in light of such changes,
and such terms shall continue to be applied and interpreted without such change
until such agreement.
1.3 Other Terms. All other terms contained in this Agreement
shall have, when the context so indicates, the meanings provided for in the
Texas Uniform Commercial Code to the extent the same are used or defined
therein.
1.4 References. References in this Agreement to Section or
Exhibit numbers shall be to Sections and Exhibits of this Agreement, unless
expressly stated to the contrary. References in this Agreement to "hereby,"
"herein," "hereinabove," "hereinafter," "hereinbelow ..... hereof," and
"hereunder" shall be to this Agreement in its entirety and not only to the
particular Section or Exhibit in which such reference appears.
1.5 Sections. This Agreement, for convenience only, has been
divided into Sections; and it is understood that the rights and other legal
relations of the parties hereto shall be determined from this instrument as an
entirety and without regard to the aforesaid division into Sections and without
regard to headings prefixed to such Sections.
1.6 Number and Gender. Whenever the context requires, reference
herein made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions of
terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
1.7 Incorporation of Exhibits. The Exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
1.8 Certain Other Matters of Construction. All references to
statutes and related regulations shall include any amendments of same and any
successor statutes and regulations. All references to any instruments or
agreements, including, without limitation, references to any of the Loan
Documents, shall include any and all modifications or amendments thereto and any
and all extensions or renewals thereof.
SECTION 2
THE COMMITMENT
2.1 Revolving Loan. Subject to the full, complete, and timely
satisfaction by Borrower of each of the conditions precedent described in
Section 6.1 and 6.2, and relying on the representations and warranties of
Borrower hereinafter set forth, Lender agrees to make revolving loans to
Borrower pursuant to which Borrower may borrow, repay, and reborrow under the
terms of this Agreement on or after the date hereof and prior to the Termination
Date, amounts not exceeding the lesser of (i) the Borrowing Base or (ii)
$1,000,000.00, which revolving loans shall be evidenced by the issuance,
execution, and delivery of the Revolving Note.
11
12
2.2 Additional Payments. Without limiting any other terms or
requirement of this Agreement, if, at any time, for any reason, the outstanding
principal balance under the Revolving Note exceeds the Borrowing Base, Borrower
shall, on demand by Lender, pay the amount of such excess for application
towards reduction of the outstanding balance of the Revolving Note plus the
amount of interest accrued on such excess to the date of payment.
2.3 Payments. All payments made by Borrower under this
Agreement, the Revolving Note, or the other Loan Documents shall be in-federal
or other immediately available funds, not later than 2:00 p.m., Houston time, on
the date that such payment is required to be made, at the banking quarters of
Lender located at 00 Xxxxxxxx Xxxxx, X.X. Xxx 0000, Xxxxxxx, Xxxxx 00000-0000.
If the date for any payment due under the Loan Documents falls on a day which is
not a Business Day, such payment date shall be deemed to have fallen on the next
following Business Day.
2.4 Purpose. The proceeds of this Revolving Note shall be used
by the Borrower only for working capital support.
2.5 Borrowing Base. The Borrowing Base shall be determined
monthly on the basis of information supplied by Borrower in the Borrowing Base
and Compliance Certificate in accordance with the terms of Section 5.1 (c)(ii)
of this Agreement. In the event that, at any time after receiving the Borrowing
Base and Compliance Certificate, Lender determines from the Borrowing Base and
Compliance Certificate and such other information available to Lender, that the
actual Borrowing Base is different from the Borrowing Base shown by Borrower on
the Borrowing Base and Compliance Certificate, Lender shall notify Borrower of
its determination and the Borrowing Base so communicated to Borrower shall
become effective upon such notification and shall remain in effect until the
next subsequent determination of the Borrowing Base. Unless and until such a
notification is communicated by Lender to Borrower, the Borrowing Base
determined by Borrower in the Borrowing Base and Compliance Certificate shall be
the effective Borrowing Base.
2.6 Borrowing Procedure for Revolving Note. Subject to the
terms and provisions of Sections 2.1 and 2.2 of this Agreement, Borrower shall
give Lender notice, in a form acceptable to Lender, of each request for an
advance under the Revolving Note. Each such notice shall specify the proposed
date of the advance (which shall be on a Business Day). Lender, at its option,
may accept telephonic requests for advances, provided that such acceptance shall
not constitute a waiver of the Lender's right to delivery of a written notice in
connection with subsequent advances. On the date specified for each advance
hereunder, subject to the terms and conditions of this Agreement (including,
without limitation, that no Event of Default has occurred and is then existing
and that no representation or warranty set forth in this Agreement is then false
or untrue), Lender will make such advances available to Borrower by depositing
the same, in immediately available funds, in an account of Borrower (designated
by the Borrower) maintained with Lender at the principal office of Lender in
Houston, Texas, or by such other means as is acceptable to Lender and Borrower.
2.7 Assignment of Accounts. As additional security for the
payment
12
13
and/or performance of the Obligations, Borrower hereby transfers, assigns and
pledges to Lender and/or grants to Lender a security interest in all funds of
Borrower now or hereafter or from time to time on deposit with Lender, with such
interest of Lender to be retransferred, reassigned, and/or released by Lender,
as the case may be, at the expense of Borrower upon payment in full and/or
complete performance by Borrower of all Obligations. All remedies as secured
party or assignee of such funds shall be exercisable by Lender upon the
occurrence and during the continuance of any Event of Default, regardless of
whether the exercise of any such remedy would result in any penalty or loss of
interest or profit with respect to any withdrawal of funds deposited in a time
deposit account prior to the maturity thereof. Furthermore, Borrower hereby
grants to Lender the right, exercisable at such time as any Obligation shall
mature, whether by acceleration of maturity or otherwise, of offset of banker's
lien against all funds of Borrower now or hereafter or from time to time on
deposit with Lender, regardless of whether the exercise of any such remedy would
result in any penalty or loss of interest or profit with respect to any
withdrawal of funds deposited in a time deposit account prior to the maturity
thereof. Unless an Event of Default shall have occurred and shall be continuing,
Borrower shall have the unfettered right to use any of such funds as Borrower
deems appropriate in the operation of Borrower's business.
2.8 Monitoring. Lender reserves the right to institute an
asset based monitoring program at any time prior to the Termination Date.
Borrower acknowledges that Lender has prior to the date hereof disclosed to
Borrower the manner in which such an asset based monitoring program shall
operate, and Borrower agrees to fully cooperate with Lender in the event such a
program is implemented.
2.9 Prepayment. Except as otherwise provided for in the
Revolving Note, the Revolving Note may be prepaid in whole or in part, without
premium or penalty.
SECTION 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties. Borrower represents and
warrants to Lender (which representations and warranties are made in addition to
the warranties and representations made in the Security Instruments and will
survive the delivery of the Revolving Note) that:
(a) Borrower is a Texas corporation, duly organized, validly
existing and in good standing under the laws of the State of Texas, and
has full power and authority to consummate the transactions
contemplated in this Agreement. Borrower has the power to own its
properties and carry on its business as it is now being conducted, and
is duly authorized to do business and is in good standing in the State
of Texas and in every other jurisdiction where qualification is
necessary. Borrower is duly authorized and empowered to create, issue,
execute, and deliver the Loan Documents, and all action on its part
requisite for the due creation, issuance, and delivery of the Loan
Documents has been duly and effective taken. The Loan Documents do not
violate any provision of Borrower's corporate charter or bylaws,
13
14
or any contract, agreement, law or regulation to which Borrower is
subject, and do not require the consent or approval of any Government
Authority. Borrower has obtained all permits, license, and consents
required for each entity to conduct their respective businesses;
(b) Borrower is not in default in the performance,
observance, or fulfillment of any of the obligations, covenants, or
conditions contained in any agreement or instrument to which it is a
party, or in default under or in violation of any law, order,
regulation or demand of any Governmental Authority, which default or
violation might have consequences which would materially and adversely
affect the business or properties of Borrower;
(c) The Financial Statements are complete and correct, have
been prepared in accordance with GAAP, and fully and accurately reflect
the financial condition and results of the operations of Borrower as of
the date and for the period stated. No material adverse change has
occurred in the condition, financial or otherwise, of Borrower since
the date of the Financial Statements;
(d) Borrower has not made investments in, advances to, or
guaranties of the obligations of any Person, except as disclosed by the
Financial Statements;
(e) Except for liabilities as previously disclosed to Lender
in the Financial Statements and other liabilities incurred since that
date in the normal course of business, Borrower does not have any
liabilities, direct or contingent. There is no litigation,
administrative proceeding, investigation, or other action of any nature
pending or, to the knowledge of Borrower, threatened against Borrower
before any court or administrative agency which involves the
possibility of any judgment or liability which may materially and
adversely affect the business or the assets of Borrower or the right of
Borrower to carry on business as now conducted. No unusual or unduly
burdensome restriction, restraint or hazard exists by contract, law,
governmental regulation or otherwise relative to the business or assets
of Borrower;
(f) Borrower has good and indefeasible title to its assets
pledged by it pursuant to the Security Instruments, free and clear of
all security interests, liens and encumbrances, except for (i) liens or
security interests on such assets previously disclosed to and approved
by Lender in writing; and (ii) restrictions, rights, easements, and
minor irregularities in title which do not materially (x) interfere
with the occupation of Borrower and the use and enjoyment by Borrower
of such assets in the normal course of Borrower's business as presently
conducted or (y) impair the value thereof for such business;
(g) Borrower has filed all tax returns required to be filed
and has paid all taxes shown thereon to be due, including interest and
penalties, or due pursuant to any assessment received by Borrower,
except such taxes, if any, under contest in good faith and for which
adequate reserves have been provided. The charges,
14
15
accruals and reserves on the books of Borrower for any taxes or other
governmental charges are, in the opinion of Borrower, adequate.
Borrower has paid all franchise and other taxes which are now due;
(h) No Reportable Event has occurred with respect to any Plan.
Borrower has not incurred any material accumulated unfunded deficiency
within the meaning of ERISA, nor has Borrower incurred any material
liability to the Pension Benefit Guaranty Corporation established under
ERISA (or any successor thereto under ERISA) in connection with any
Plan;
(i) The principal place of business and chief executive office
of Borrower and the place where Borrower keeps its books and records is
located at the address of Borrower set forth in Section 9.7 of this
Agreement;
(j) Borrower is not engaged principally, or as one of its
important activities, in the business of extending or obtaining credit
for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, U, or X of the Board of Governors of the
Federal Reserve System). No part of the proceeds of any extension of
credit under this Agreement will be used to purchase or carry any such
margin stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock. No transaction
contemplated by the Loan Documents is in violation of any regulations
promulgated by the Board of Governors of the Federal Reserve System,
including, without limitation, Regulations G, T, U, or X;
(k) Borrower and its business operations, and leaseholds are
in compliance in all material respects with, the provisions of all
Governmental Authority, including, without limitation, OSHA, laws
relating to Hazardous Substances, the Securities Act of 1933, the
Securities Exchange Act of 1934, the Fair Labor Standards Act, laws
relating to income, unemployment, payroll or social security taxes and
Plans under ERISA, the Flood Disaster Protection Act of 1973, the
Consumer Credit Protection Act, the Federal Trade Commission Act, the
Social Security Act (including, without limitation, requirements
relating to illegal Medicare or Medicaid remuneration, and laws of the
State of Texas pertaining to the same subject matter), statutes
creating and governing the Bureau of Alcohol, Tobacco and Firearms, and
any and all state statutes or pronouncements addressing, or related to,
subjects the same as or comparable to those covered by such enumerated
federal statutes, and there have been no citations, notices, or orders
of noncompliance issued to Borrower or any of its Subsidiaries under
any such law, rule, regulation, or other Requirement of Law. Borrower
possesses, and is in good standing with respect thereto, all
governmental consents, licenses, approvals, certificates, inspections,
registrations, permits, and other authorizations necessary to enable
them to carry on its business in all material respects as now
conducted; all such governmental consents, licenses, approvals,
certificates, inspections, registrations, permits, and other
authorizations are in full force and effect; and Borrower has no reason
to believe that it will be unable to obtain the renewal of any such
governmental consents, licenses, approvals, certificates, inspections,
registrations, permits, and other authorizations;
15
16
(l) No information, exhibit, or report prepared by or at the
direction or with the supervision of Borrower and furnished to Lender
in connection with the negotiation and preparation of this Agreement or
any Loan Document contains any material misstatements of fact or omits
a material fact necessary to make the statements contained therein not
misleading as of the date made or deemed made. There is no fact which
Borrower has failed to disclose to Lender in writing which materially
affects adversely or, so far as Borrower can now foresee, will
materially affect adversely the business, prospects, profits, or
condition (financial or otherwise) of Borrower or the ability of
Borrower to perform this Agreement;
(m) Borrower has no Subsidiaries, and except as otherwise
disclosed to Lender in writing prior to the date hereof, Borrower is
not a partner or participant in any partnership or joint venture;
(n) Borrower is now and, after giving effect to initial
advances to be made hereunder, at all times will be, solvent and will
be adequately capitalized to pay its debts as they become due;
(o) Borrower is not a party to any collective bargaining
agreement, and to the best of Borrower's knowledge and belief, there
are no material grievances, disputes, or controversies among Borrower
with any union or any other organization of any of their employees, or
threats of strikes, work stoppages, or any asserted pending demands for
collective bargaining by any union or organization;
(p) Borrower owns or is licensed to use all Intellectual
Property necessary to conduct all business material to its condition
(financial or otherwise), business, or operations as such business is
currently conducted. Except as disclosed to Lender or its counsel in
writing, to the best of Borrower's knowledge and belief, no claim has
been asserted or is pending by any Person with the respect to the use
of any such Intellectual Property or challenging or questioning the
validity or effectiveness of any such Intellectual Property; and
Borrower knows of no valid basis for any such claim. To the best of
Borrower's knowledge nd belief, the use of such Intellectual Property
by Borrower does not infringe on the rights of any Person. Except as
disclosed by Borrower to Lender in writing, no Intellectual Property or
other property of Borrower has been registered (or is otherwise
patented, copyrighted, licensed, or trademarked), or is subject to any
patent, copyright, license, or trademark, under and with respect to any
federal laws or any other Government Authority;
(q) As of the date hereof, no event has occurred and no
condition exists which would, upon the execution and delivery of this
Agreement or Borrower's or any other Person's performance hereunder,
constitute a Default or an Event of Default;
(r) There exists no actual or, to Borrower's knowledge,
threatened termination, cancellation, or limitation of, or any
modification or change in, the
16
17
business relationship between Borrower with any customer or any group
of customers whose purchases individually or in the aggregate are
material to the business of Borrower, or with any material supplier,
and, to the knowledge of Borrower, there exists no present condition or
state of facts or circumstances which would materially affect adversely
Borrower or prevent Borrower from conducting such business after the
consummation of the transaction contemplated by this Agreement in
substantially the same manner in which it has heretofore been
conducted;
(s) Except in compliance with the laws of all applicable
Governmental Authority, no Hazardous Substances have been generated,
transported, and/or disposed of by Borrower, at a site which was, at
the time of such generation, transportation and/or disposal, or has
since become, a Superfund Site. For purposes of this subsection,
"SUPERFUND SITE" shall mean those sites listed on the Environmental
Protection Agency National Priority List and eligible for remedial
action or any comparable state registries or list in any state of the
United States;
(t) Except in accordance with the laws of all Governmental
Authority or the terms of a valid permit, license, certificate, or
approval of the Governmental Authority, no Release of Hazardous
Substances has been made by Borrower, from, affecting, or related to
any Plower of Borrower, any Plower leased by Borrower, or any property
on which Borrower is conducting any of its business operations;
(u) No Environmental Complaint has been received by Borrower;
and
(v) Each request for an advance under the Revolving Note by
Borrower to Lender pursuant to this Agreement or any of the other Loan
Documents constitutes (i) an automatic representation and warranty by
Borrower to Lender that there does not then exist any Default or Event
of Default and (ii) a reaffirmation as of the date of said request that
all of the representations and warranties of Borrower contained in this
Agreement and the other Loan Documents are true in all material
respects except for any changes in the nature of Borrower's business or
operations that would render the information contained in any exhibit
attached hereto either inaccurate or incomplete, so long as Lender has
consented to such changes in writing or such changes are expressly
permitted by this Agreement.
SECTION 4
AFFIRMATIVE COVENANTS
4.1 Covenants of Borrower. In addition to the covenants
agreements of Borrower made elsewhere in this Agreement, Borrower
covenants and agrees, unless Lender shall otherwise consent in writing,
that Borrower shall:
(a) Do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence, rights, and franchises;
continue to conduct, operate, and manage its business substantially as
its business has been conducted, managed and
17
18
operated in the past; and at all times maintain, preserve and protect
its assets used or useful in the conduct of its business, keep the same
in good repair, working order and condition, and make, or cause to be
made, all needful or proper repairs, replacements and improvements
thereto so that Borrower's business may be properly and advantageously
conducted at all times;
(b) (i) Comply with all applicable statutes and government
regulations, (ii) remain licensed with all applicable state and federal
regulatory and other agencies; (iii) pay and discharge promptly all
taxes, assessments and governmental charges or levies imposed on it,
the collateral described in any Security Instrument or any part
thereof, its income and profits, and any of its property, real,
personal or mixed, or any part thereof, before the same shall be in
default; and (iv) pay all lawful claims for labor, materials, supplies,
or other claims, which, if unpaid, might become a lien or charge upon
such property or any part thereof,
(c) Promptly furnish to Lender such information regarding the
business affairs, financial condition, assets, liabilities, operations,
and transactions of Borrower as Lender may reasonably request, and,
without limiting the foregoing, furnish to Lender the following:
(i) As soon as available, and in any event within 30
days from the end of each calendar month, an
unaudited company prepared financial statement
showing the financial condition of Borrower at
the end of such month and the results of
operations during such month, which financial
statement shall include, but shall not be
limited to, a balance sheet, income statement,
and such other matters as Lender may reasonably
request;
(ii) as soon as available, and in any event within 30
days from the end of each calendar month, a
Borrowing Base and Compliance Certificate for
such month, together with a schedule of all
related calculations and a summary of income
information (each in form satisfactory to
Lender) signed and certified by a duly
authorized officer of Borrower;
(iii) Within 30 days from the end of each calendar
month a listing and aging, signed and certified
by a duly authorized officer of Borrower, of the
Accounts and accounts receivable of Borrower
through the preceding month and such other
information as Lender may reasonably request;
(iv) Within 30 days from the end of each fiscal
quarter
18
19
of the Borrower, a listing and aging, signed and
certified by a duly authorized officer of
Borrower, of the accounts payable of Borrower
through the end of the preceding month and such
other information as Lender may reasonably
request;
(v) As soon as available, and in any event within
120 days from the end of Borrower's fiscal year
beginning with the December 31, 1998 statement,
an annual audited financial statement prepared
and reviewed by an independent certified public
accounting firm acceptable to Lender showing the
financial condition of Borrower at the close of
its fiscal year and the results of operation
during such fiscal year, which financial
statement shall be materially complete and
correct and shall include, but shall not be
limited to, an operating statement, a balance
sheet, a reconciliation of equity amounts, a
source and application of funds report, and such
other matters as Lender may request;
(vi) As soon as available, and in any event within 30
days of the date filed, a copy of the federal
income tax return of Total Building Systems,
Inc., certified by a duly authorized officer as
being true and correct;
(vii) As soon as available, and in any event within 30
days of the date filed, a copy of the federal
income tax return of Xxxxxxx X. XxXxxxx.
(vii) On or before January 31st of each year, a
financial statement form Xxxxxxx X. XxXxxxx
including therein a statement of cash flow and
balance sheet.
(6) Prior to the time any Property described in or covered by
any Security Instrument is copyrighted, licensed, patented, or
trademarked by Borrower or any Affiliate, pursuant to any duly filed
registration or otherwise, or is subjected to any registered copyright,
license, patent, or trademark by Borrower or other Affiliate, notify
Lender thereof and take (or cause to be taken) all actions necessary to
preserve the perfection and first priority of Lender's security
interest in and to such Property;
(e) Promptly inform Lender of any litigation filed against
Borrower, or of any other actual or potential liability;
(f) At the written request of Lender, promptly deliver to
Lender, in form and
19
20
substance satisfactory to Lender, UCC-1 financing statements, for
filing, at Borrower's sole cost and expense with the Texas Secretary of
State, or any other location required by Lender covering any specific
Inventory purchased with advances under the Revolving Note;
(g) Promptly cure any defects in the execution and delivery of
the Loan Documents and immediately execute and deliver to Lender all
such other and further instruments as may be required by Lender from
time to time in order to satisfy or comply with the covenants and
agreements of Borrower made in this Agreement;
(h) Pay the Revolving Note and other Obligations according to
the readug tenor and effect thereof, as may be renewed or modified from
time to time, and do and perform every act and discharge all of the
obligations provided to be performed and discharged under the Loan
Documents at the time or times and in the manner therein and herein
specified;
(i) Promptly reimburse Lender upon request for all reasonable
amounts expended, advanced, or incurred by Lender (i) to satisfy any
obligation of Borrower under this Agreement, (ii) to protect the assets
or business of Borrower, (iii) to collect the Revolving Note, or any
other amounts advanced under this Agreement or otherwise, or (iv) to
enforce the rights of Lender under the Loan Documents, which amounts
will include, without limitation, all court costs, reasonable
attorneys' fees, and fees of auditors, accountants, and investigators
incurred by Lender in connection with any such matters, together with
interest at the Maximum Rate on each such amount from the date of
notification to Borrower that the same was expended, advanced or
incurred by Lender until the date it is repaid to Lender;
(j) Continue to maintain insurance with respect to its assets
and business against such liabilities, casualties, risks, and
contingencies (including, without limitation, insurance for worker's
compensation and fire) in such types and amounts as is normal and
customary for carrying on Borrower's business and as is satisfactory to
Lender and allow no material change which would decrease coverage to be
made in the foregoing without the prior approval of Lender. On the date
hereof, at the close of Borrower's fiscal year, and at any other time
Lender may request, Borrower will furnish Lender a summary of such
insurance and, if requested, will furnish Lender copies of the
applicable policies. The proceeds of any such policies insuring
physical loss or damage shall be used either to repair the damaged
property, replace lost property, or prepay the outstanding balances of
the Revolving Note as directed by Lender;
(k) Lender may apply the proceeds advanced on the Revolving
Note to the satisfaction of any of the Obligations, and the proceeds so
applied shall be part of the Obligations;
(l) Qualify as a foreign corporation in all other
Jurisdictions wherein the property now
20
21
or hereafter owned by Borrower or the business now or hereafter
transacted by Borrower makes such qualifications necessary; and
(m) Furnish to Lender (i) as soon as possible, and in any
event within 30 days after Borrower or a duly appointed administrator
of a Plan knows or has reason to know that any Reportable Event with
respect to any Plan has occurred, a statement of the chief financial
officer of Borrower setting forth details as to such Reportable Event
and the action which Borrower proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event given to
the Pension Benefit Guaranty Corporation or a statement that said
notice will be filed with the annual report to the United States
Department of Labor with respect to such Plan, if such filing has been
authorized, and (ii) promptly after receipt thereof, a copy of any
notice Borrower may receive from the United States Department of Labor,
the Internal Revenue Service or the Pension Benefit Guaranty to any
Reportable Event.
(n) In addition to, and without in any way limiting, the other
requirements in this Agreement to provide certain notices to Lender,
deliver to Lender, promptly upon any officer of Borrower having
knowledge of the occurrence of any of the following events or
circumstances, a written statement with respect thereto, signed by the
chief financial officer of Borrower, or other authorized representative
of Borrower designated from time to time pursuant to written
designation by Borrower delivered to Lender, advising Lender of the
occurrence of such event or circumstance and the steps, if any, being
taken by Borrower with respect thereto:
(i) any Default or Event of Default;
(ii) any litigation or proceeding involving Borrower as a
defendant or in which any property of Borrower is subject,
directly or indirectly, to a claim and in which the amount
involved is $50,000.00 or more and which is not covered by
insurance;
(iii) portable Event or imminently expected Reportable Event
with respect to any Plan;
(iv) any labor dispute to which Borrower may become a party,
any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which
any of them is a party or by which they are bound, in each
case where the same could reasonably be expected to cause a
Material Adverse Change.
(v) any change in the number, nature, and holder of
outstanding stock of Borrower; and
21
22
(vi) any other event or occasion which could reasonably be
expected to have a Material Adverse Change;
(o) INDEMNIFY AND HOLD LENDER AND ALL OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS, ATTORNEYS-IN-FACT AND AFFILIATES OF
LENDER (EACH SUCH PERSON AN "INDEMNITEE") HARMLESS FROM ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGEMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR
NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, REASONABLE
ATTORNEYS' FEES AND DISBURSEMENTS) INCURRED BY OR ASSERTED AGAINST ANY
INDEMNITEE ARISING OUT OF, IN ANY WAY CONNECTED WITH, OR AS A RESULT OF
(i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, (ii) THE PERFORMANCE BY THE PARTIES TO THE LOAN DOCUMENTS OF
THEIR RESPECTIVE OBLIGATIONS THEREUNDER OR THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED THEREBY, OR (iii) THE ENFORCEMENT OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION,
ANY MATTER ARISING BY REASON OF ANY DEFENSE, SET-OFF, COUNTERCLAIM,
RECOUPMENT OR REDUCTION OF LIABILITY WHATSOEVER OF THE OBLIGOR UNDER
ANY CONTRACT, AGREEMENT, INTEREST OR OBLIGATION WHICH GIVES RISE TO ANY
ACCOUNT CONSTITUTING PART OF THE COLLATERAL FOR THE OBLIGATIONS, AS THE
RESULT OF A BREACH BY BORROWER OF ANY OBLIGATION THEREUNDER OR OF ANY
OTHER AGREEMENT, INDEBTEDNESS OR LIABILITY AT ANY TIME OWING TO OR IN
FAVOR OF ANY SUCH OBLIGOR FROM BORROWER, SUCH OBLIGATIONS OF BORROWER
BEING ENFORCEABLE AGAINST AND ONLY AGAINST BORROWER AND NOT AGAINST
LENDER (ALL THE FOREGOING IN THIS SECTION, COLLECTIVELY, THE
"INDEMNIFIED LIABILITIES"), INCLUDING, WITHOUT LIMITATION, INDEMNIFIED
LIABILITIES ARISING FROM THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF
ANY INDEMNITEE; PROVIDED THAT BORROWER SHALL HAVE NO OBLIGATION UNDER
THIS SECTION TO ANY INDEMNITEE WITH RESPECT TO INDEMNIFIED LIABILITIES
THAT ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND
NON-APPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR FROM THE BREACH BY SUCH
INDEMNITEE OF ITS
22
23
OBLIGATIONS UNDER ANY LOAN DOCUMENT. THE OBLIGATIONS OF BORROWER UNDER
THIS SECTION SHALL SURVIVE THE SATISFACTION OF ALL OBLIGATIONS, THE
TERMINATION OF THIS AGREEMENT, AND THE NONASSUMPTION OF THIS AGREEMENT
IN A CASE COMMENCED UNDER TITLE II OF THE UNITED STATES CODE OR OTHER
SIMILAR LAW OF THE UNITED STATES, THE STATE OF TEXAS OR ANY OTHER
JURISDICTION AND BE BINDING UPON BORROWER AND ANY TRUSTEE, RECEIVER OR
LIQUIDATOR OF BORROWER APPOINTED IN ANY SUCH CASE.
SECTION 5
NEGATIVE COVENANTS
5.1 Negative Covenants. Borrower covenants and agrees, unless
Lender shall otherwise consent in writing, that Borrower will not, either
directly or indirectly:
(a) Incur, create, assume, or permit to exist any Debt except:
(i) the Obligations;
(ii) all existing loans and borrowings by Borrower as
reflected in the Financial Statements;
(iii) liabilities, direct or contingent, of Borrower to
the extent that such liabilities existed on the date of
this Agreement and continue to exist and are reflected in
the Financial Statements or have been disclosed to and
approved by Lender in writing prior to the date of this
Agreement;
(iv) endorsements of negotiable instruments for collection
or deposit in the ordinary course of business;
(v) obligations from time to time incurred in the ordinary
course of business, other than for borrowed money; and
(vi) taxes, assessments, or other government charges which
are not yet due or which are being contested in good faith
by appropriate action promptly initiated and diligently
conducted if a reserve shall have been made therefor as
required by GAAP.
(b) Declare or pay, in the aggregate, any dividends, payments,
transfers, advances, loans, or other distributions to its stockholders;
23
24
(c) Make or permit to remain outstanding any loans or advances
to or investments in any Person, including, without limitation, to any
Affiliate, except that the foregoing restrictions shall not apply to the
following:
(i) loans, advances, or investments the material details
of which have been set forth in the Financial
Statements, or which have been otherwise disclosed
to and approved by Lender in writing prior to the
date of this Agreement;
(ii) certificates of deposit of banks or savings and loan
associations insured by an agency of the United
States; and
(iii) securities issued and/or guaranteed by the United
States of America, the State of Texas, any other
state of the United States, or any agency, unit,
instrumentality or subdivision thereof,
(d) (i) Consolidate with or merge into any other corporation,
(ii) permit any other corporation to merge into Borrower, or (iii)
acquire all or any substantial part of the assets of any other
corporation;
(e) (i) Create, incur, assume, or permit to exist any mortgage,
pledge, security interest, lien, or encumbrance on any of its assets
(now owned or hereafter acquired), except as specifically disclosed in
the Financial Statements, (ii) acquire or agree to acquire assets under
any conditional sale agreement or title retention contract, or (iii)
sell and leaseback any assets, except that the foregoing restrictions
shall not apply to:
(1) liens for taxes, assessments and other governmental
charges not yet due;
(2) liens of vendors, carriers, warehousemen, landlords,
mechanics, laborers, and materialmen arising by law in
the ordinary course of business for sums not yet due or
being contested in good faith if reserve shall have been
made therefor as required by GAAP;
(3) pledges or deposits in connection with or to secure
worker's compensation, unemployment insurance, pensions
or other employee benefits;
(4) mortgages, pledges, security interests, liens,
encumbrances, or title retention contracts existing as of
the date of this
24
25
agreement and disclosed to and approved by Lender in
writing before the date hereof-, and
(5) liens and/or security interests required by this
Agreement;
(f) Make any material change in the ownership of Borrower;
(g) Make any change in the senior management of Borrower;
(h) Sell, lease, transfer, convey, or otherwise dispose (except
in the ordinary course of business) of all or any material part of its
assets;
(i) Sell, discount, or otherwise transfer or dispose of any
Accounts, accounts receivable, or other obligations owing to Borrower,
with or without recourse, except for the purpose of collection in the
ordinary course of business;
(j) Engage in any business to any extent other than the
business which Borrower is presently engaged, without the prior written
approval of Lender;
(k) Materially change accounting practices, methods, or
standards or the reporting format for any information furnished Lender
under the terms and provisions of this Agreement without the prior
written consent of Lender, which accounting practices shall conform with
GAAP throughout the term of this Agreement;
(l) Permit Borrower's Tangible Net Worth to be less than (i)
$1,000,000.00 prior to any advance hereunder and at any time thereafter,
and (ii) $1,500,000.00 at each fiscal year ending at December 31, 1998
and thereafter;
(m) Permit at any time the Debt to Tangible Net Worth Ratio of
Borrower to be more than the ratio of 3 to 1;
(n) Permit at any time the Current Ratio of Borrower to be less
than the ratio of 1 to 1;
(o) Permit the proceeds of the Revolving Note to be used for
any purpose other than the purpose set forth in Section 2.4 of this
Agreement;
(p) Permit Borrower's Fixed Charge Coverage Ratio, as of the
end of each fiscal quarter of Borrower, based upon the immediately
preceding four fiscal quarters, to be less than 1.25 to 1;
(q) Enter into any transaction with an Affiliate, including,
without limitation, the purchase, sale, or exchange of property of
Borrower or the rendering of any service, unless the transaction is in
the ordinary course of and
25
26
pursuant to the reasonable requirements of Borrower's business and upon
fair and reasonable terms no less favorable to Borrower than would be
obtained in a comparable arm's length transaction with a Person not an
Affiliate;
(r) Enter into any transaction which materially and adversely
affects or may materially and adversely affect any of the collateral
securing the Obligations or Borrower's ability to repay the Obligations
or permit or agree to any material extension, compromise, or settlement
or make any material change or modification of any kind or nature with
respect to any Account, including any of the terms relating thereto,
other than discounts and allowances in the ordinary course of business;
SECTION 6
CONDITIONS PRECEDENT
6.1 Conditions Precedent to Initial Advance. The obligation of
Lender to make its initial advance hereunder is subject to the full and complete
satisfaction of each of the following conditions precedent:
(a) Lender shall have received, and have approved, each of the
following:
(i) each of the Loan Documents, in properly
executed form;
(ii) any certificates of incorporation, articles
of incorporation, and bylaws or partner's
agreement, articles of organization of
Borrower, together with any and all
modifications thereof as of the date hereof,
(iii) all Certificates of Authority, Certificates
of Good Standing (or any such other evidence
that Borrower is in good standing in the
State of Texas and in all other states in
which Borrower is currently doing business),
Certificates of Existence, borrowing
resolutions (with secretary's certificate),
Secretary's Certificates of Incumbency, and
all other documents required by Lender to
evidence Borrower and its representatives
are empowered and duly authorized to enter
into the agreements evidenced by the Loan
Documents;
(iv) if required by Lender, Borrowing Base and
compliance Certificate dated as of the date
of this Agreement;
26
27
(v) if and to the extent required by Lender,
landlord's waivers for all locations leased
by Borrower at which Borrower's Inventory is
located;
(vi) if required by Lender, an opinion of counsel
for Borrower, which provides, among other
things, that (1) the Loan Documents have
been duly authorized and executed, (2) the
Loan Documents are enforceable in accordance
with their terms, and (3) Borrower has all
permits, licenses, and consents required for
it to conduct its business;
(vii) copies of all insurance policies required by
this Agreement; and
(vii) the execution of the Guaranty Agreement by
the Guarantor
(ix) results of a search of the UCC records of
the Texas Secretary of State and such other
states as are required by Lender, from a
source acceptable to Lender, reflecting no
security interests and liens against any
collateral covered by the Security
Instruments as to which perfection is
accomplished by the filing of a financing
statement in favor of Lender;
(b) No Material Adverse Change shall have occurred;
(c) The representations and warranties contained in Section 5
shall, except as affected by the transactions contemplated by this
Agreement, be true and unbreached;
(d) No Event of Default shall have occurred;
(e) All other applicable requirements of this Agreement and
the other Loan Documents shall have been fully and completely
satisfied; and
(f) As security for the payment of the Revolving Note and the
payment and performance of the Obligations, Lender shall have received,
in addition to the items set forth elsewhere in this Section, all other
instruments reasonably required by Lender to give Lender a first and
prior perfected security interest and lien in and to the collateral
covered by the Security Instruments.
(g) Borrower shall have paid the Commitment Fee to the Lender.
27
28
6.2 Conditions Precedent to Future Advances. The obligations of
the Lender under this Agreement to make any advances after the date of this
Agreement under Section 2.1, in accordance with the terms and provisions of
Section 2 of this Agreement, are subject to the full and complete satisfaction
of each of the following conditions precedent as of the date of such advance or
payment:
(a) Each of the conditions set forth in Section 6.1 shall be
fully and completely satisfied as of the date of such advance
(including, without limitation, any such condition which has been
waived, in whole or in part, in connection with any prior advance);
(b) The representations and warranties set forth in Section 5
of this Agreement shall be true and correct as of the date of the
making of such advance or payment with the effect as though the
representation or warranty had been made as of the date of such
advance;
(c) No Event of Default shall have occurred and be
continuing, or will result from the making of such advance; and
(d) All requirements for making such advances or payments as
provided hereunder in accordance with the terms and provisions of
Section 3 of this Agreement, shall have been fully and completely
satisfied.
SECTION 7
EVENTS OF DEFAULT
7.1 Events of Default. Each of the following shall constitute
an Event of Default under this Agreement:
(a) The failure to pay when due any fee or payment under this
Agreement, the Revolving Note, any of the other Obligations, or any of
the other Loan Documents;
(b) A default by Borrower or any other party in the due
observance or performance of any of their respective covenants and
other obligations under this Agreement and the other Loan Documents;
(c) Any representation or warranty made by Borrower or its
representatives in any of the Loan Documents proves to have been untrue
in any material respect or any representation, statement (including
Financial Statements), certificate or data furnished or made to the
Lender as an inducement for Lender agreeing to enter in to this
Agreement, or in accordance with the terms of this Agreement, proves to
have been untrue in any material respect as of the date the facts
therein set forth were stated or certified;
(d) A default by Borrower (as principal or guarantor or other
surety) in the payment or performance of any bond, debenture, note or
other evidence of
28
29
indebtedness, or under any credit agreement, loan agreement, indenture,
promissory note, or similar agreement or instrument executed in
connection with any of the foregoing, which is not fully cured within
any applicable notice or grace period;
(e) Borrower shall (1) apply for or consent to the appointment
of a receiver, trustee or liquidator of it or him or all or a
substantial part of its or his assets, (11) file a voluntary petition
commencing a bankruptcy or other insolvency proceeding, (iii) make a
general assignment for the benefit of creditors, (iv) be unable, or
admit in writing its inability, to pay its debts generally as they
become due, or (v) file an answer admitting the material allegations of
a petition filed against it in a bankruptcy or other insolvency
proceeding;
(f) An order, judgment, or decree shall be entered against
Borrower by any court of competent jurisdiction or by any other duly
authorized authority, on the petition of )a creditor or otherwise,
granting relief in a bankruptcy or other insolvency proceeding or
approving a petition seeking reorganization or an arrangement of its
debts or appointing a receiver, trustee conservator, custodian or
liquidator of it or all or any substantial part of its assets and such
order, judgment or decree shall not be dismissed or stayed within 90
days-,
(g) The levy against any significant portion of the property
of Borrower or any execution, garnishment, attachment, sequestration,
or other writ or similar proceeding which is not permanently dismissed
or discharged within 90 days after the levy;
(h) A final and non-appealable order, judgment or decree shall
be entered against Borrower for money damages and such order, judgment,
or decree shall not be dismissed or stayed within 90 days;
(i) Any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Internal
Revenue Code) involving any Plan; any "accumulated funding deficiency"
(as defined in Section 302 of ERISA), whether or not waived, shall
exist with respect to any Plan for which an excise tax is due or would
be due in the absence of a waiver; a Reportable Event shall occur with
respect to, or proceedings shall commence to have a trustee appointed,
or a trustee shall be appointed, to administer or to terminate, any
Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Lender,
likely to result in the termination of such Plan for purposes of Title
IV of ERISA; any Single Employer Plan shall terminate for purposes of
Title TV of ERISA; the Borrower or any Affiliate shall incur, or in the
reasonable opinion of the Lender, be likely to incur any liability in
connection with a withdrawal from, or the insolvency or reorganization
of, a multiemployer plan; or any other event or condition shall occur
or exist with respect to a Plan and the result of such events or
conditions referred to in this subsection 0) could subject the Borrower
or any Affiliate to any
29
30
tax (other than an excise tax under Section 4980 of the Internal
Revenue Code), penalty or other liabilities which taken in the
aggregate would have an adverse effect on Borrower and any such
circumstance shall exist for in excess of 90 days;
(j) Cessation of a substantial part of the business of
Borrower for a period which causes a Material Adverse Change; or
Borrower shall suffer the loss or revocation of any license or permit
now held or hereafter acquired by Borrower which is necessary to the
continued lawful operation of its particular business; or Borrower
shall be enjoined, restrained, or in any way prevented by court,
governmental, or administrative order from conducting all or any
material part of its respective business affairs;
(k) Borrower or any Affiliate shall challenge or contest in
any action, suit, or proceeding the validity or enforceability of this
Agreement or any of the other Loan Documents, the legality or
enforceability of any of the Obligations or the perfection or priority
of any lien or security interests granted to Lender;
(l) Any charges are filed or any other action or proceeding is
instituted by any governmental authority against Borrower under the
Racketeering Influence and Corrupt Organizations Statute (18 U.S.C.
Section 1961 -et seq.) or any other federal, state, or other law, the
result of which could be the forfeiture or transfer of any property of
Borrower which is subject to a lien granted in the Security Instruments
in favor of the Lender, without (i) satisfaction or provision for
satisfaction of such lien, or (ii) such forfeiture or transfer of such
property being expressly made subject to such lien;
(m) Borrower shall have (i) concealed, removed or diverted, or
permitted to be concealed, removed or diverted, any part of their
respective property, with intent to hinder, delay or defraud their
respective creditors or any of them; (ii) made or suffered a transfer
of any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; (iii) made any transfer of its
property to or for the benefit of a creditor at a time when other
creditors similarly situated have not been paid; or (iv) shall have
suffered or permitted, while insolvent, any creditor to obtain a lien
upon any of their respective property through legal proceedings or
otherwise which is not vacated within 90 days from the date thereof
(n) The liens and/or security interests granted in any
Security Instrument shall not constitute a first and prior lien and/or
security interest upon the collateral described therein, except as
otherwise disclosed to and agreed by Lender in writing; or
(o) The Guarantor suffers or permits to exist any of the
events or conditions referred to in Subsections 7.1 (e), (f), (g), (h),
(i), 0), (k), (l), or (m) hereof, or if any provision of any Guaranty
Agreement related thereto shall for any
30
31
reason cease to be valid and binding on such Guarantor, or if such
Guarantor shall so state in writing.
SECTION 8
RIGHTS AND REMEDIES OF LENDER
8.1 Acceleration. Upon the occurrence of any Event of Default,
Lender, at its option and without any notice of intent to accelerate, notice of
acceleration, or other notice or demand, may declare the entire principal amount
of the Revolving Note then outstanding and the interest accrued thereon
immediately due and payable, and the said entire principal, interest and all
other amounts owing thereunder shall thereupon become immediately due and
payable without presentment, demand, protest, notice of protest or other notice
of default or dishonor of any kind, all of which are hereby expressly waived by
Borrower.
8.2 Additional Rights. Upon the occurrence of any Event of
Default, Lender shall have, in addition to the rights and remedies given it in
the Loan Documents, all of the rights and remedies allowed by applicable
ordinances, statutes, rules, regulations, orders, injunctions, writs or decrees
of any governmental or political subdivision or agency thereof, or any court or
similar entity established by any such subdivision or agency.
8.3 Termination of Obligations. Upon the occurrence of any
Default, any obligation of Lender under this Agreement (including, without
limitation, the obligation to make advances under Section 2.1 and Section 2.7)
shall immediately and automatically cease and terminate unless and until Lender
shall reinstate the same in writing.
SECTION 9
MISCELLANEOUS
9.1 Other Advances. Borrower and Lender acknowledge and agree
that in the future, Borrower may apply for and Lender may agree to fund
additional loans to Borrow ' er. Borrower and Lender agree that all existing and
hereafter created loans and other advances from Lender, or any of its
predecessors or successors in interest, to Borrower, whether or not such loans
are particularly described in this Agreement, as may be amended from time to
time, shall constitute Obligations for purposes of this Agreement and shall be
subject to the terms, provisions, covenants, and agreements set forth in this
Agreement.
9.2 No Duty or Special Relationship . Borrower acknowledges
that Lender has no duty of good faith to Borrower, and acknowledges that no
fiduciary, trust or other special relationship exists between Lender and
Borrower.
9.3 Other Remedies Not Required. Borrower may be required to
pay the Revolving Note in full without the assistance of any other party, or any
collateral or security for the Revolving Note. Lender shall not be required to
mitigate damages, file suit, or take any action to foreclose, proceed against or
exhaust any collateral or security in order to enforce payment of the Revolving
Note.
31
32
9.4 LENDER NOT IN CONTROL. BORROWER AGREES AND ACKNOWLEDGES
THAT ALL OF THE COVENANTS AND AGREEMENTS PROVIDED FOR AND MADE BY BORROWER IN
THIS AGREEMENT AND IN THE OTHER LOAN DOCUMENTS ARE THE RESULT OF EXTENSIVE AND
ARMS-LENGTH NEGOTIATIONS BETWEEN BORROWER AND LENDER. LENDER'S RIGHTS AND
REMEDIES PROVIDED FOR IN THIS AGREEMENT AND IN THE OTHER LOAN DOCUMENTS ARE
INTENDED TO PROVIDE LENDER WITH A RIGHT TO OVERSEE BORROWER'S ACTIVITIES AS THEY
RELATE TO THE LOAN TRANSACTIONS PROVIDED FOR IN THIS AGREEMENT, WHICH RIGHT IS
BASED ON LENDER'S VESTED INTEREST IN BORROWER'S ABILITY TO PAY THE REVOLVING
NOTE AND THE OTHER NOTES AND PERFORM THE OTHER OBLIGATIONS. NONE OF THE
COVENANTS OR OTHER PROVISIONS CONTAINED IN THIS AGREEMENT SHALL, OR SHALL BE
DEEMED TO, GIVE LENDER THE RIGHT OR POWER TO EXERCISE CONTROL OVER, OR OTHERWISE
IMPAIR, THE DAY-TO-DAY AFFAIRS, OPERATIONS, AND MANAGEMENT OF BORROWER; PROVIDED
THAT IF LENDER BECOMES THE OWNER OF ANY STOCK OF ANY ENTITY, WHICH ENTITY OWNS
AN INTEREST IN BORROWER, WHETHER THROUGH FORECLOSURE OR OTHERWISE, LENDER
THEREAFTER SHALL BE ENTITLED TO EXERCISE SUCH LEGAL RIGHTS AS IT MAY HAVE BY
BEING A SHAREHOLDER OF SUCH ENTITY.
9.5 No Partnership. Nothing herein is intended, nor shall it be
deemed or construed as, to create a partnership, joint venture, or common
interest in profits or income between Borrower and Lender, or to make Lender in
any way responsible for the debts or losses of Borrower or with respect to any
of the property described in the Security Instruments. Borrower and Lender
disclaim any sharing of liabilities, losses, costs or expenses.
9.6 Representations and Warranties. All representations and
warranties of Borrower herein, and all covenants and agreements made by Borrower
herein before the effective date of this Agreement, shall survive such date.
9.7 Notice . All notices, demands, requests, and communications
permitted or required under this Agreement shall be in writing, may be
personally served or sent by telex (confirmed by telephone), telecopier
(confirmed by telephone), U.S. mail or any express mail service, and shall be
effective upon receipt, such receipt being deemed to occur 48 hours after its
deposit in the U.S. mail, postage prepaid or 24 hours after its transmission by
telex, telecopier or express mail service, as the case may be, addressed to the
individuals and addresses indicated below:
(a) If to Borrower:
TOTAL BUILDING SYSTEMS, INC.
0000 XXXXX XXXXXXX XXXXXXX
XXXXXXX, XXXXX 00000-0000
(b) If to Lender:
Compass Bank
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx
32
33
Any party may, by proper written notice to the other party, change the
individuals or addresses to which such notices shall thereafter be sent.
9.8 Binding Effect. All covenants and agreements of Borrower
under this Agreement shall bind the successors and assigns of Borrower and shall
inure to the benefit of Lender and its successors and assigns. The rights of
Borrower under this Agreement are not assignable.
9.9 Renewal of Indebtedness. All provisions of this Agreement
relating to the Revolving Note shall apply with equal force and effect to each
and all promissory notes hereafter executed which in whole or in part represent
a renewal, extension or rearrangement of any part of the indebtedness originally
represented by the Revolving Note, or either of them, provided that nothing
herein shall constitute a commitment or offer by Lender to such a renewal,
extension or rearrangement.
9.10 No Waiver. No course of dealing on the part of Lender, its
officers or employees, nor any failure or delay by Lender with respect to
exercising any of its rights, remedies, powers or privileges under the Loan
Documents shall operate as a waiver thereof. No indulgence by Lender, or waiver
of compliance with any of the terms, covenants or provisions of the Loan
Documents, shall be construed as a waiver of Lender's right to subsequently
require strict performance by Borrower of the Loan Documents. The rights and
remedies of Lender under the Loan Documents shall be cumulative and the exercise
or partial exercise of any such rights or remedies shall not preclude the
exercise of any other rights or remedies.
9.11 APPLICABLE LAW. EXCEPT AS OTHERWISE PROVIDED IN THE LOAN
DOCUMENTS, THE LOAN DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS MADE UNDER, AND
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY, THE LAWS OF THE STATE OF
TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA APPLICABLE TO TRANSACTIONS
WITHIN THE STATE OF TEXAS.
9.12 Amendment. Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
9.13 Future Advances. No advance under the Revolving Note shall
constitute a waiver of any of the conditions of Lender's obligation to make
further advances nor, in the event Borrower is unable to satisfy any such
condition, shall any such waiver have the effect of precluding Lender from
thereafter declaring such inability to be a Default.
33
34
9.14 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR
RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY
OR THE ACTIONS OF THE LENDER IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT
THEREOF.
9.15 Arbitration.
(a) Any controversy or claim arising out of or relating to the
Agreement or any agreements or instruments relating hereto or
delivered in connection herewith, including but limited to a
claim based on or arising from an alleged tort, shall at the
request of any party be determined by arbitration in
accordance with the rules of the American Arbitration
Association. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.
The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall
not constitute a waiver of the right of any party, including
the plaintiff, to submit the controversy or claim to
arbitration if any other party contest such action for
judicial relief,
(b) Demand for arbitration shall be filed in writing with the
other party to the Agreement and with the American Arbitration
Association. A demand for arbitration shall be made within a
reasonable time after the claim, dispute, or other matter in
question has arisen. In no event shall the demand for
arbitration be made after the date when institution of legal
or equitable proceedings based on such claim, dispute, or
other matter in question would be barred by the applicable
statute of limitations;
(c) Unless the, parties agree otherwise, the discovery rights
and procedures provided by the Federal Rule of Civil Procedure
shall be available and enforceable within the arbitration
proceeding;
(d) In any claim, dispute, or other matter in question
submitted to arbitration as provided herein, the locale of the
arbitration shall be Xxxxxx County, Texas; and
(e) This agreement to arbitrate shall be specifically
enforceable by either party under the prevailing arbitration
law. Any award rendered by arbitrator shall be final and
enforceable by any party to the arbitration, and judgment may
be rendered upon it and in accordance with applicable law in
any court having jurisdiction thereof.
9.16 Severability. In the event any provision contained in any
of the Loan Documents shall, for any reason, be held invalid, illegal or
unenforceable in any respect, such provision shall be severed from the
applicable Loan Document, and such invalidity, illegality or unenforceability
shall not affect any other provision of the applicable Loan Document.
34
35
9.17 Lender's Discretion. All matters hereunder that require
Lender's discretion, (including, without limitation, whether Borrower has
satisfied any condition precedent), Lender shall use its sole and reasonable
discretion, except as otherwise provided for herein. Further, Lender may in its
sole and reasonable discretion waive any of its rights with respect to a
particular Event of Default. All documents, agreements, instruments,
certificates, statements, and other items delivered to Lender pursuant to this
Agreement and the other Loan Documents shall be in form and substance
satisfactory to Lender in its sole discretion.
9.18 Entire Agreement. This Agreement and the documents
referred to herein embody the entire agreement with respect to the respective
rights, obligations, and liabilities of the Parties and supersedes all prior
agreements and understandings, if any, relating to the subject matter hereof.
Any conflicts or inconsistencies between the terms and provisions of this
Agreement and the terms and provisions of any of the other Loan Documents shall
be governed and controlled by this Agreement. This Agreement may be amended only
by an instrument in writing executed by the party to be bound thereby, and may
be supplemented only by documents delivered in accordance with the express terms
hereof. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE
PARTIES.
9.19 Captions. The captions, headings, and arrangements used in
this Agreement are for convenience only and do not in any way affect, limit,
amplify, or modify the terms and provisions hereof.
9.20 Counterparts. This Agreement may be executed in two or
more counterparts, and it shall not be necessary that any one counterparts be
executed by all of the parties hereto. Each fully or partially executed
counterpart shall be deemed an original, but all such counterparts taken
together shall constitute but one and the same instrument.
9.21 Controlling Agreement. Borrower and Lender intend to
conform strictly to the applicable usury laws. All agreements between Lender and
Borrower (or any other party liable with respect to any indebtedness under this
Agreement and the other Loan Documents) are hereby limited by the provisions of
this section which shall override and control all such agreements, whether now
existing or hereafter arising and whether written or oral. In no way, nor in any
event or contingency (including but not limited to prepayment, default, demand
for payment, or acceleration of the maturity of any obligation), shall the
interest contracted for, charged, or received under the Revolving Note or
otherwise exceed the Maximum Rate. If, from any possible construction of any
document, interest would otherwise be payable to Lender in excess of the Maximum
Rate, any such construction shall be subject to the provisions of this section
and such document shall be automatically reformed and the interest payable to
Lender shall be automatically
35
36
reduced to the Maximum Rate, without the necessity of execution of any amendment
or new document. If Lender shall ever receive anything of value which is
characterized as interest under applicable law and which would apart from this
provision be in excess of the Maximum Rate, an amount equal to the amount which
would have been excessive interest shall at the option of Lender, be refunded to
Borrower or applied to the reduction of the principal amount owing hereunder in
the inverse order of its maturity and not to the payment of interest. The right
to accelerate maturity of the Revolving Note or any other indebtedness does not
include the right to accelerate any interest which has not otherwise accrued on
the date of such acceleration and Lender does not intend to charge or receive
any unearned interest in the event of acceleration. All interest paid or agreed
to be paid to Lender shall, to the extend permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full stated term
(including any renewal or extension) of such indebtedness so that the amount of
interest on account of such indebtedness does not exceed the Maximum Rate.
9.22 Business Loans. Borrower warrants and represents to
Lender, and to all other holders of any debt evidenced by the Notes, that the
loan, whether one or more, evidenced by the Notes is and shall be for business,
commercial, investment or other similar purpose and not primarily for personal,
family, household or agricultural use, as such terms are used in Chapter One of
the Texas Credit Code.
[Execution Page to Follow]
36
37
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
TOTAL BUILDING SYSTEMS, INC., a
Texas corporation
By: /s/ Xxxxxxx X. XxXxxxx
Xxxxxxx X. XxXxxxx
President
COMPASS BANK
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx,
Senior Vice President
