EXHIBIT 10.24
AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT
(BORROWING BASE)
THIS AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT (as amended, restated and
supplemented from time to time, this "AGREEMENT") by and between 1ST TECH
CORPORATION (1st "Tech"), a Delaware corporation, DARKHORSE SYSTEMS,
INCORPORATED ("Darkhorse"), a Delaware corporation and TANISYS TECHNOLOGY,
INC. ("Tanisys"), a Wyoming corporation (jointly and severally, "Borrowers"
and each a "Borrower"); and THE CHASE MANHATTAN BANK, a New York state bank,
("BANK", including Bank's predecessor by merger Chemical Bank, a New York
state bank) is executed as of February 21, 1997 ("Effective Date").
PRELIMINARY STATEMENT. 1st Tech, Darkhorse, Tanisys and Bank entered into a
Credit Agreement dated May 20, 1996 (as amended, "Prior Agreement"), and have
agreed to amend and restate it in its entirety to, among other things,
provide that Tanisys will be an additional Borrower; to provide for certain
reductions in the amount of the Commitment and the advance rate on the
Borrowing Base; to provide for waiver of certain financial covenant defaults;
and to change a financial covenant. The parties therefore agree as follows:
1. THE LOANS.
REVOLVING CREDIT NOTE 1.1.A Subject to the terms and conditions hereof, Bank
agrees to make loans ("Loan" or " Loans") to any Borrower from time to time
before the Termination Date, not to exceed at any one time outstanding the
lesser of the Borrowing Base or the Maximum Amount ("Commitment"). Borrowers
may borrow, repay and reborrow upon a Loan Request in Proper Form submitted
by either Borrower. Loans may only be used to finance accounts receivable
and inventory from Borrowers' regular business operations. Chapter 15 of the
Texas Credit Code will not apply to this Agreement, the Note or any Loan.
The Loans will be evidenced by, and will bear interest and be payable as
provided in, Borrowers' promissory note dated the Effective Date (together
with any and all renewals, extensions, modifications and replacements thereof
and substitutions therefor, "Note"), given to replace and modify the
$6,000,000.00 Revolving Credit Note executed by 1st Tech and Darkhorse
executed and delivered to Bank as of the Prior Agreement Effective Date
("Prior Note"). "TERMINATION DATE" means the earlier of (a) June 30, 1998;
or (b) the date specified by Bank pursuant to SECTION 6.1 hereof
MAXIMUM AMOUNT OF COMMITMENT 1.1.B The "Maximum Amount" of the Commitment
shall be the amount determined as follows: (a) on the Effective Date the
Maximum Amount is $6,000,000.00; and (b) at the close of business Friday,
February 21, 1997, and at the close of business each Friday thereafter, the
Maximum Amount shall be reduced by $250,000.00 below the value of the Maximum
Amount immediately preceding such weekly reduction, UNTIL (c) the Maximum
Amount shall have been reduced to $4,000,000.00, whereupon it shall not
reduce further.
LETTERS OF CREDIT 1.1.C Bank in its sole absolute discretion may issue
sight draft commercial and/or standby letters of credit up to the day before
the Termination Date for the account of Borrowers and in favor of such Person
or Persons as may be designated by either Borrower upon an application
substantially in the form of Bank's then current application and agreement
therefor or other application acceptable to Bank ("APPLICATION"), duly
completed and executed by either Borrower in Proper Form not less than two
(2) Business Day(s) prior to the date on which the letter of credit is to be
issued. "LETTER OF CREDIT" means any Letter of Credit issued by Bank upon an
Application of Borrowers. No Letter of Credit shall have an expiry DATE
later than a date 3 months from the Termination Date. Letters of Credit may
be commercial or standby. "L/C OBLIGATIONS" means the sum of (a) the face
amount of all outstanding Letters of Credit less any drawings that have been
paid by Borrowers either with a Loan or other means acceptable to Bank and
(b) any other amounts owing to Bank under the Applications not already
included in (a). Borrowers will pay a fee in an amount equal to the greater
of: (a) (i) for commercial L/Cs, one percent (1.0%) per quarter or fraction
thereof on the face amount of the Letter of Credit and (ii) for Standby L/Cs,
three percent (3.0%) per annum or fraction thereof on the face amount of the
Letter of Credit; and (b) Bank's minimum fee in effect on the issue date of
the Letter of Credit. The fee shall be paid to the Bank at its main offices
to the attention of the Manager, Documentary Services Division prior to the
issuance of the Letter of Credit. Bank may at any time, but is not required
to, make a Loan without prior notice to Borrowers to pay any drawing under a
Letter of Credit and to pay any L/C Obligation. Letters of Credit shall be
for the purpose of financing trade credit extended to either Borrower in its
regular course of business. L/C Obligations shall never exceed $2,000,000.00
("LETTER OF CREDIT SUBLIMIT").
BORROWING BASE 1.2:
(a) The BORROWING BASE on each Business Day is the "Total Availability
on Accounts Receivable and Inventory" calculated in accordance with the
Borrowing Base Certificate in Exhibit A, the "Accounts Receivable Loan
Administration Procedures" ("Procedures") delivered by Bank to Borrower and
incorporated herein by reference as if fully set forth, BUT PROVIDED, HOWEVER
THAT to the extent that any provision of this Agreement and the Procedures
shall be in conflict, the provisions of this Agreement shall be controlling.
The Borrowing Base shall include only Accounts receivable of Borrower. No
inventory shall be included in the Borrowing Base. (b) The calculations,
definitions and other criteria set out in Exhibit A shall be subject to the
following definitions and adjustments:
(i) The Advance Rate (the amount by which Net Eligible Receivables is
multiplied in the Borrowing Base Certificate) shall be determined
as follows: (a) on the Effective Date the Advance Rate is 80%; and
(b) at the close of business Friday, February 21, 1997, and at the
close of business each Friday thereafter, the Advance Rate shall be
reduced by 1% below the value of the Advance Rate immediately
preceding such weekly reduction (e.g., to 79% on February 21, 1997),
UNTIL (c) the Advance Rate shall have been reduced to 75%, whereupon
it shall be reduced 1% per month until it reaches 70%.
(ii) "Other" ineligible Accounts means all Accounts not subject to
Bank's first and prior lien and security interest and such assets
deemed form time to time to be, in the sole judgment of the Bank,
ineligible for purposes of determining the Borrowing Base; Memo A/R
and Evaluation A/R shall be Ineligible Accounts. "'Memo' and
'Evaluation' A/R" shall include all Accounts of the type typically
referred to as such by Borrower prior to the Effective Date, and any
accounts which do not represent payments finally earned or which
result from a sale subject to product evaluation by the buyer.
Outstanding Loans, interest and fees counted against Total
Availability on Accounts Receivable and Inventory shall use Bank's
standard estimation provided by Bank to Borrower.
(iii) In addition to the periodic reductions in the Accounts Advance
Factor set out in Exhibit A, each Accounts Advance Factor may be
increased or decreased by the Bank at any time and from time to time
upon written notice to Borrower, in the reasonable exercise of Bank's
sole underwriting discretion. Without limiting the generality of the
foregoing, Bank shall be deemed to have exercised reasonable
discretion if it reduces the Accounts Advance Factor in reasonable
proportion to increased dilution of Accounts which Bank believes
exceeds 5% of the amount existing at the Effective Date of the
Agreement.
REQUIRED PAYMENT 1.3 If the unpaid amount of the Loans and L/C Obligations
on any Business Day exceeds the Commitment on such day (including any such
excess resulting from scheduled reductions in the Maximum Amount and/or the
Advance Rate), Borrowers shall make a payment on the Note in an amount
sufficient to reduce the total unpaid principal balance of the Note to an
amount no greater than the Commitment, such payment due and payable on the
date such excess occurs, to accompany timely delivery of Borrowers' monthly
Borrowing Base Report or Daily Collateral Certificate, as the case may be.
If the balance on the Note is zero and the amount of L/C Obligations still
exceeds the Commitment, Borrowers will promptly deliver cash collateral to
Bank in an amount sufficient to eliminate such excess.
FACILITY FEES 1.4 Borrowers shall continue to pay an Administration Fee of
$50,000 per annum payable in installments which began on the Prior Agreement
Effective Date of this Agreement and continuing on the first date of each
third month thereafter. Borrowers authorize Bank in its discretion and
without prior notice to advance against the Commitment and Note to pay these
fees when due.
PAST DUE AMOUNTS I.5 Each amount due to Bank in connection with the Loan
Documents will bear interest from its due date until paid at the Highest
Lawful Rate unless the applicable Loan Document provides otherwise.
Page 1 of 7 Pages
RATIFICATION AND CONFIRMATION OF SECURITY INTERESTS 1.6 Each Borrower
confirms and ratifies each of the liens, security interests and other
interests granted in each and all security agreements executed in connection
with, related to, or securing the Prior Note and Prior Agreement ("Prior
Obligations") as extending to and securing the Note, the Loans, Applications
and L/C Obligations, including, but not limited to, each of those interests
and liens described in the following listed Security Agreements. The terms
"secured indebtedness", "indebtedness secured hereby" and any similar
reference in any Security Agreement include, but are not limited to, each and
all indebtedness of all character and kind related to or evidenced by the
Note, each Loan, Application and L/C Obligation or related to any other Loan
Document. "Security Agreements" includes the General Security Agreements
executed and delivered, respectively, by 1st Tech and Darkhorse dated May 20,
1996; the Security Agreement -Pledge of Certificate of Deposit and Assignment
of Deposit Accounts executed and delivered by 1st Tech dated May 20, 1996;
the Third Party Security Agreement - Pledge executed and delivered by ▇▇▇▇
▇▇▇▇▇▇▇▇▇ dated May 20, 1996; and the Third Party Security Agreement --
Accounts And General Intangibles executed and delivered by Tanisys dated
December 17, 1996. Borrowers acknowledge that the Prior Agreement and
certain of the Loan Documents executed in connection with the Prior Agreement
were executed for Bank by an officer of Bank's affiliate Texas Commerce Bank
National Association in accordance with Bank's instructions, and Bank and
each Borrower hereby ratifies and confirms the Prior Agreement (subject to
the amendment and restatement herein as of the Effective Date) and each of
the other Loan Documents so executed.
LIMITED WAIVER -- PRIOR AGREEMENT COVENANTS 1.7 Borrowers have reported that
their tangible net worth and ratio of adjusted EBITDA to interest expense for
the period ending December 31, 1996 were each below the levels agreed to be
maintained in the Prior Agreement, and have requested that such defaults be
waived. Bank has agreed to waive the foregoing prior period defaults, for the
specific instances described for those prior periods only, subject to the
terms of this waiver provision. This waiver is subject to the conditions and
understandings that: (i) no other waivers are promised by the Bank; (ii) Bank
understands the requested waivers to address all defaults as to covenants,
representations and warranties known to Borrowers as of the Date of this
Agreement, Borrower having represented that in all other respects no event of
default has occurred and is continuing under the Prior Agreement or under
this Agreement as of its execution; (iii) Borrower will not in any way rely
upon the any future waiver of any default; and (iv) any future delay or
election not to exercise rights by the Bank shall not be deemed any waiver of
rights. Bank's rights in the event of a default are set out in this
Agreement, the Note and the other Loan Documents. This provision is the only
evidence of Bank's waiver.
2. CONDITIONS PRECEDENT.
ALL LOANS AND L/C OBLIGATIONS 2.1 Bank is not obligated to make any Loan
unless: (a) Bank has received the following, duly executed and in Proper
Form: (1) a Request for Loan substantially in the form of the sample letter
set out in Exhibit A not later than 11 am Central Time on the date (which
shall be a Business Day) of the proposed Loan, or an Application for Letter
of Credit as provided in section 1.1C, as the case may be; provided however,
Bank may accept and act upon verbal advance requests received from a
Borrower's representative reasonably believed by Bank to be authorized to
make such requests, each such request to be confirmed in writing in Proper
Form; (2) a Borrowing Base Report within the time required by this Agreement;
and (3) such other documents as Bank reasonably may require; (b) no Event of
Default exists; and (c) the making of the Loan is not prohibited by, or
subjects Bank to any penalty or onerous condition under any Legal Requirement.
FIRST LOAN 2.2 In addition to the matters described in the preceding
section, Bank will not be obligated to make the first Loan unless Bank has
received all of the Loan Documents specified on ANNEX I in Proper Form.
3. REPRESENTATIONS AND WARRANTIES. To induce Bank to enter into this
Agreement and to make Loans and create L/C Obligations, each Borrower
represents and warrants as of the Effective Date, the date of each request
for a Loan, and each presentation by any Borrower of any financial
information, report, notice and certificate hereunder, that each of the
following statements is and shall remain true and correct throughout the term
of this Agreement:
ORGANIZATION AND STATUS 3.1 Each Borrower and Subsidiary of each Borrower is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; has all power and authority to conduct its
business as presently conducted, and is duly qualified to do business and in
good standing in each jurisdiction in which the nature of the business
conducted by it makes such qualification desirable. No Borrower has any
Subsidiary other than those listed on ANNEX II and each Subsidiary is owned
as set forth on ANNEX 11. If any Borrower is subject to the Texas Revised
Partnership Act ("TRPA"), Borrower agrees that Bank is not required to comply
with Section 3.05(d) of TRPA and agrees that Bank may proceed directly
against one or more partners or their property without first seeking
satisfaction from partnership property.
FINANCIAL STATEMENTS 3.2 All financial statements delivered to Bank are
complete and correct and fairly present, in accordance with generally
accepted accounting principles, consistently applied ("GAAP") (or the other
accounting basis specified herein, if expressly provided for in this
Agreement), financial condition and results of operations as at the dates and
for the periods indicated, on consolidated and consolidating bases. If this
Agreement provides for audited, reviewed or compiled financial statements,
such service shall have been provided by an independent certified public
accountant acceptable to Bank, and if audited statements are provided such
statements shall be certified with an unqualified opinion in accordance with
generally accepted auditing standards ("GAAS"). No material adverse change
has occurred in the assets, liabilities, financial condition, business or
affairs of any Borrower or any Subsidiary of any Borrower since the dates of
such financial statements. No Borrower or Subsidiary of any Borrower is
subject to any instrument or agreement materially and adversely affecting its
financial condition, business or affairs.
ENFORCEABILITY 3.3 The Loan Documents are legal, valid and binding
obligations of the Parties enforceable in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency and other similar
laws affecting creditors' rights generally. The execution, delivery and
performance of the Loan Documents have all been duly authorized by all
necessary action; are within the power and authority of the Parties, do not
and will not violate any Legal Requirement, the Organizational Documents of
the Parties or any agreement or instrument binding or affecting the Parties
or any of their respective Property.
COMPLIANCE 3.4 Each Borrower and each Subsidiary of each Borrower has filed
all applicable tax returns and paid all taxes shown thereon to be due, except
those for which extensions have been obtained and those which are being
contested in good faith and for which adequate reserves have been
established. Each Borrower and each Subsidiary of each Borrower is in
compliance with all applicable Legal Requirements and manages and operates
(and will continue to manage and operate) its business in accordance with
good industry practices. No Borrower or Subsidiary of any Borrower is in
default in the payment of any other indebtedness or under any agreement to
which it is a party. The Parties have obtained all consents of and
registered with all Governmental Authorities or other Persons required to
execute, deliver and perform the Loan Documents.
LITIGATION 3.5 Except as previously disclosed to Bank in writing, there is
no litigation or administrative proceeding pending or, to the knowledge of
any Borrower, threatened against, nor any outstanding judgment, order or
decree affecting any Borrower or Subsidiary of any Borrower before or by any
Governmental Authority.
TITLE AND RIGHTS 3.6 Each Borrower and Subsidiary of each Borrower has good
and marketable title to its Property, free and clear of any Lien except for
Liens permitted by this Agreement and the other Loan Documents. Except as
otherwise expressly stated in the Loan Documents or permitted by this
Agreement, the Liens of the Loan Documents will constitute valid and
perfected first and prior Liens on the Property described therein, subject to
no other Liens whatsoever. Each Borrower and Subsidiary of each Borrower
possesses all permits, licenses, patents, trademarks and copyrights required
to conduct its business. All easements, rights-of-way and other rights
necessary to maintain and operate each Borrower's Property have been obtained
and are in full force and effect.
REGULATION U; BUSINESS PURPOSE 3.7 None of the proceeds of any Loan will be
used to purchase or carry, directly or indirectly, any margin stock or for
any other purpose which would make this credit a "purpose credit" within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System. All Loans will be used for business, commercial, investment or other
similar purpose and not primarily for personal, family, or household use or
primarily for agricultural purposes as such terms are used in Chapter One of
the Texas Credit Code.
Page 2 of 7 Pages
ENVIRONMENT 3.8 Each Borrower and Subsidiary of each Borrower have complied
with applicable Legal Requirements in each instance in which any of them have
generated, handled, used, stored or disposed of any hazardous or toxic waste
or substance, on or off its premises (whether or not owned by any of them).
No Borrower or Subsidiary of any Borrower has any material contingent
liability for non-compliance with environmental or hazardous waste laws. No
Borrower or Subsidiary of any Borrower has received any notice that it or any
of its Properly or operations does not comply with, or that any Governmental
Authority is investigating its compliance with, any environmental or
hazardous waste laws.
INVESTMENT COMPANY ACT/PUBLIC UTILITY HOLDING COMPANY ACT 3.9 No Borrower or
Subsidiary of any Borrower is an "investment company" within the meaning of
the Investment Company Act of 1940 or a "holding company" or an "affiliate"
of a "holding company" or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
STATEMENTS BY OTHERS 3.10 All statements made by or on behalf of any
Borrower, Subsidiary of any Borrower or any other Party in connection with
any Loan Document constitute the joint and several representations and
warranties of all Borrowers hereunder.
NOTICE OF ACCOUNT DEBTORS 3.11 Borrower has sent to each Account Debtor
written instructions in the form previously delivered and approved by Bank,
to remit all payments and remittances in respect to the Accounts directly to
the Lockbox.
4. AFFIRMATIVE COVENANTS. Each Borrower agrees to do, and if necessary
cause to be done, and cause its Subsidiaries to do, each of the following:
CORPORATE FUNDAMENTALS 4.1 (a) Pay when due all taxes and governmental
charges of every kind, including without limitation those upon franchises,
income, profits or Property, unless and only to the extent that the same
shall be contested in good faith and adequate reserves have been established
therefor; (b) Renew and keep in full force and effect all licenses, permits
and franchises; (c) Do all things necessary to preserve corporate existence
and qualifications and rights in all jurisdictions where such qualification
is necessary or desirable; (d) Comply with all applicable Legal Requirements;
and (e) Protect, maintain and keep in good repair its Property and make all
replacements and additions to Property as may be reasonably necessary to
conduct business properly and efficiently.
INSURANCE 4.2 Maintain insurance with such reputable financially sound
insurers, on such Property and personnel, in such amounts and against such
risks as is customary with similar Persons or as may be reasonably required
by Bank, and furnish Bank satisfactory evidence thereof promptly upon
request. These insurance provisions are cumulative of the insurance
provisions of the other Loan Documents. Bank will be named as a beneficiary,
loss payee or additional insured of such insurance as its interest may appear
and Borrowers will provide Bank with copies of the policies of insurance and
a certificate of the insurer that the insurance required by this section may
not be canceled, reduced or affected in any manner without 30 days' prior
written notice to Bank.
FINANCIAL INFOrMATION/BORROWING BASE REPORT 4.3 Each Borrower will furnish
to Bank in Proper Form: (a) the scheduled financial information, reports and
certificates set out in EXHIBIT B, within the times agreed to therein and
certified by the president or chief financial officer of the reporting
entity; (b) promptly after such request is submitted to the appropriate
Governmental Authority, any request for waiver of funding standards or
extension of amortization periods with respect to any employee benefit plan;
(c) copies of special audits, studies, reports and analyses prepared for the
management of such Borrower by outside parties and (d) such other information
relating to the financial condition and affairs of any Borrower and
guarantors and their Subsidiaries as Bank may request from time to time in
its discretion.
MATTERS REQUIRING NOTICE 4.4 Notify Bank immediately, upon acquiring
knowledge of (a) the institution or threatened institution of any lawsuit or
administrative proceeding which, if adversely determined, might adversely
affect any Borrower; (b) any material adverse change in the assets,
liabilities, financial condition, business or affairs of any Borrower; (c)
any Event of Default; or (d) any reportable event or any prohibited
transaction in connection with any employee benefit plan.
INSPECTION 4.5 Permit Bank and its affiliates to inspect and photograph its
Properly, to examine and copy its files, books and records, and to discuss
its affairs with its officers and accountants, at such times and intervals
and to such extent as Bank reasonably desires.
ASSURANCES 4.6 Promptly execute and deliver any and all further agreements,
documents, instruments, and other writings that Bank may request to cure any
defect in the execution and delivery of any Loan Document or more fully to
describe particular aspects of the agreements set forth or intended to be set
forth in the Loan Documents.
CERTAIN CHANGES 4.7 Notify Bank at least 30 days prior to the date that any
of the Parties changes its name or the location of its chief executive office
or principal place of business or the place where it keeps its books and
records or the location of any of the Collateral.
EXHIBIT B 4.8 Comply with each of the other affirmative covenants set forth
in EXHIBIT B.
LANDLORD'S RESERVE 4.9 Maintain an investment deposit account with Bank in
an amount equal to no less than 4 times the amount of the monthly rental for
each location of Borrower for which Bank does not have a Landlord's waiver in
proper form ("Landlord's Reserve"). The investment time deposit shall not be
pledged to any person and Bank shall have the right to use such amounts to
pay any rent owed by Borrower.
LOCKBOX PROCESSING AGREEMENT/COLLECTION ACCOUNT 4.10 A. (i) Establish a
deposit account maintained by Texas Commerce styled "_____ [name of Borrower]
_______ Borrowing Base Accounts Receivable" ("Collection Account") at such
Borrower's sole expense into which all revenues, money checks and income,
howsoever evidenced, received by such Borrower and its subsidiaries will be
deposited; (ii) Execute and deliver a lockbox processing agreement (which may
take the form of an addendum to the Texas Commerce Treasury Management
Services Agreement) between such Borrower, Bank and Texas Commerce ("Lockbox
Processing Agreement") in Proper Form, provided however that should there be
a conflict between the terms of this Agreement and the Lockbox Processing
Agreement or the Terrns and Conditions of the Collection Account, the terms
of this Agreement shall govern; (iii) Deliver, or cause to be delivered,
directly to the Bank for deposit to the Collection Account, all revenues,
monies, checks, drafts income and proceeds of Accounts received by such
Borrower or by others on behalf of such Borrower with such collections on the
Accounts accompanied by sufficient information to identify the invoice to
which such collections relate; (iv) Cause each Account Debtor to make all
payments due to such Borrower by check payable to such Borrower and to mail
or deliver the checks to the Lockbox, for deposit to the Collection Account;
(v) Take all action as Bank may request to permit Bank to have continuous
domain and control over the Lockbox and Collection Account. B. COLLECTION
ACCOUNT: Bank shall have full right and authority at any time to notify and
direct any Account Debtor to deliver all payments directly to Bank for
deposit into the Collection Account. Bank shall have the sole right to make
withdrawals from, and to administer the Collection Account. Any collections
on account of any Accounts received directly by such Borrower or any
subsidiary of such Borrower shall be received in trust for the benefit of
Bank, segregated from other funds of such Borrower and paid over to Bank in
same form as received with any endorsement to be held in the Collection
Account. Bank shall be entitled to daily apply all collected deposits in the
Collection Account first to the principal amount of the Loans then to
interest on the Loans then to fees and expenses and other amounts owing to
Bank and any excess after such application shall be maintained in the
Collection Account. C. POWER OF ATTORNEY. Each Borrower hereby appoints Bank
as such Borrower's attorney-in-fact and grants Bank full right and authority:
(a) at all times during the term of this Agreement, to supply any necessary
endorsement signature of any Borrower on checks, drafts and any other form of
payment received, including endorsing such Borrower's name thereon as
appropriate and to forward such items for collection in normal course and
deposit the proceeds thereof, and on any invoice or ▇▇▇▇ of lading related to
any Collateral, (b) after the occurrence of an Event of Default which is
continuing, to notify the U.S. Postal Service and any other person to change
address for delivery of any Borrower's mail to such address as may be
designated by Bank; and (c) to do all such other acts and things in the name
of Borrower reasonably necessary or convenient to assuring Bank the full
benefit of the provisions of this section 4.10. This power of attorney is
irrevocable, shall survive the dissolution or liquidation of such Borrower,
and is deemed coupled with an interest. This power of attorney shall
terminate only at such time as all Obligations have been paid in full.
Termination of the power of attorney shall not affect the validity of any
acts performed by the Bank pursuant to the power of attorney prior to
termination. This power of attorney evidences rights which are cumulative
with all other rights granted in all other Loan Documents, and is entitled in
all respects to the indemnity appearing in section 7.8. ▇. ▇▇▇▇▇ OF
Page 3 of 7 Pages
SECURITY INTEREST. Each Borrower assigns and pledges to Bank, and grants to
Bank a security interest in, all of such Borrower's right, title and interest
in and to the Collection Account, and all certificates and instruments, if
any, from time to time representing or evidencing the Collection Account; and
all proceeds of any and all of the foregoing. E. OPERATING ACCOUNTS. Each
Borrower shall maintain all of its operating accounts with Bank or Texas
Commerce, except accounts with balances never exceeding $25,000.00 at
locations not served by either such bank.
5. NEGATIVE COVENANTS. Except as expressly permitted on Exhibit B, no
Borrower or Subsidiary of Borrower will:
INDEBTEDNESS 5.1 Create, incur, or permit to exist, or assume or guarantee,
directly or indirectly, or become or remain liable with respect to, any
Indebtedness, contingent or otherwise unless there is a permitted amount set
forth in EXHIBIT B, EXCEPT: (a) Indebtedness to Bank, or secured by Liens
permitted by this Agreement, or otherwise approved in writing by Bank, and
renewals and extensions (but not increases) thereof; and (b) current accounts
payable and unsecured current liabilities, not the result of borrowing, to
vendors, suppliers and Persons providing services, for expenditures for goods
and services normally required by it in the ordinary course of business and
on ordinary trade terms.
LIENS 5.2 Create or permit to exist any Lien upon any of its Property now
owned or hereafter acquired, or acquire any Property upon any conditional
sale or other title retention device or arrangement or any purchase money
security agreement; or in any manner directly or indirectly sell, assign,
pledge or otherwise transfer any of its accounts or other Property, EXCEPT:
(a) Liens, not for borrowed money, arising in the ordinary course of
business, (b) Liens for taxes not delinquent or being contested in good faith
by appropriate proceedings; (c) Liens in effect on the date hereof and
disclosed to Bank in writing, so long as neither the indebtedness secured
thereby nor the Properly covered thereby increases, and (d) Liens in favor of
Bank, or otherwise approved in writing by Bank. Notwithstanding anything to
the contrary herein, no Borrower or Subsidiary of Borrower will permit any
Lien on any inventory that secures the Loans and L/C Obligations unless Bank
shall provide Borrower with Bank's prior written consent.
FINANCIAL AND OTHER COVENANTS 5.3 Fail to comply with the required financial
covenants and other covenants described, and calculated as set forth, in
EXHIBIT B, Unless otherwise provided on EXHIBIT B, all such amounts and
ratios will be calculated: (a) on the basis of GAAP; and (b) on a
consolidated basis. Compliance with the requirements of EXHIBIT B will be
determined as of the dates of the financial statements to be provided to Bank.
CORPORATE CHANGES 5.4 In any single transaction or series of transactions,
directly or indirectly: (a) liquidate or dissolve; (b) be a party to any
merger or consolidation; (c) sell or dispose of any interest in any
Subsidiary, or permit any Subsidiary to issue any additional equity other
than to a Borrower; (d) sell, convey or lease all or any substantial part of
its assets, EXCEPT for sale of inventory in the ordinary course of business;
or (e) permit any change in ownership of any Borrower.
RESTRICTED PAYMENTS 5.5 At any time: (a) redeem, retire or otherwise
acquire, directly or indirectly, any shares of its capital stock or other
equity interest; (b) declare or pay any dividend (EXCEPT stock dividends and
dividends paid to another Borrower); or (c) make any other distribution or
contribution of any Property or cash or obligation to owners of an equity
interest in their capacity as such.
NATURE OF BUSINESS; MANAGEMENT 5.6 Change the nature of its business or
enter into any business which is substantially different from the business in
which it is presently engaged, or permit any material change in its
management.
AFFILIATE TRANSACTIONS 5.7 Enter into any transaction or agreement with any
Affiliate except upon terms substantially similar to those obtainable from
wholly unrelated sources.
SUBSIDIARIES 5.8 Form, create or acquire any Subsidiary.
LOANS AND INVESTMENTS 5.9 Make any advance, loan, extension of credit, or
capital contribution to or investment in, or purchase, any stock, bonds,
notes, debentures, or other securities of, any Person, except: (a) readily
marketable direct obligations of the United States of America or any agency
thereof with maturities of one year or less from the date of acquisition; (b)
fully insured certificates of deposit with maturities of one year or less
from the date of acquisition issued by any commercial bank operating in the
United States of America having capital and surplus in excess of
$50,000,000.00; and (c) commercial paper of a domestic issuer if at the time
of purchase such paper is rated in one of the two highest rating categories
of Standard and Poor's Corporation or ▇▇▇▇▇'▇ Investors Service.
CHANGE IN LOCKBOX 5.10 Instruct or otherwise permit any Account Debtor to
remit payments to any account, lockbox or other location other than the
Lockbox.
6. EVENTS OF DEFAULT AND REMEDIES. EVENTS OF DEFAULT 6.1 Each of the
following is an "EVENT OF DEFAULT":
(a) Any Obligor fails to pay any principal of or interest on any Note or any
other obligation under any Loan Document as and when due; or
(b) Any Obligor or any Subsidiary of any Borrower fails to pay at maturity,
or within any applicable period of grace, any principal of or interest on any
other borrowed money obligation or fails to observe or perform any term,
covenant or agreement contained in any agreement or obligation by which it is
bound; or
(c) Any representation or warranty made in connection with any Loan Document
was incorrect, false or misleading when made; or
(d) Any Obligor violates any covenant contained in any Loan Document; or
(e) An event of default occurs under any other Loan Document; or
(f) Final judgment for the payment of money is rendered against Obligor or
any Subsidiary of any Borrower and remains undischarged for a period of 30
days during which execution is not effectively stayed; or
(g) The sale, encumbrance or abandonment (except as otherwise expressly
permitted by this Agreement) of any of the Collateral or the making of any
levy, seizure, garnishment, sequestration or attachment thereof or thereon;
or the loss, theft, substantial damage, or destruction of any material
portion of such Property; or
(h) Any order is entered in any proceeding against any Borrower or any
Subsidiary of any Borrower decreeing the dissolution, liquidation or split-up
thereof, and such order shall remain in effect for 30 days; or
(i) Any Obligor or any subsidiary of any Borrower makes a general assignment
for the benefit of creditors or shall petition or apply to any tribunal for
the appointment of a trustee, custodian, receiver or liquidator of all or any
substantial part of its business, estate or assets or shall commence any
proceeding under any bankruptcy, insolvency, dissolution or liquidation law
of any jurisdiction, whether now or hereafter in effect; or any such petition
or application shall be filed or any such proceeding shall be commenced
against any Obligor or any subsidiary of any Borrower and the Obligor or such
subsidiary by any act or omission shall indicate approval thereof, consent
thereto or acquiescence therein, or an order shall be entered appointing a
trustee, custodian, receiver or liquidator of all or any substantial part of
the assets of any Obligor or any subsidiary of any Borrower or granting
relief to any Obligor or any subsidiary of any Borrower or approving the
petition in any such proceeding, and such order shall remain in effect for
more than 30 days; or any Obligor or any subsidiary of any Borrower shall
fail generally to pay its debts as they become due or suffer any writ of
attachment or execution or any similar process to be issued or levied against
it or any substantial part of its property which is not released, stayed,
bonded or vacated within 30 days after its issue or levy; or
(j) Any Obligor or any Subsidiary of any Borrower conceals or removes any
part of its Property, with intent to hinder, delay or defraud any of its
creditors, makes or permits a transfer of any of its Property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar law; or
makes 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
(k) A material adverse change occurs in the assets, liabilities, financial
condition, business or affairs of any Obligor or any Subsidiary of Borrower;
or
(l) Any change occurs in the ownership of Borrower; or
(m) Any individual Obligor dies or any Obligor that is not an individual
dissolves.
If any Event of Default occurs, then Bank may do any or all of the following:
(1) declare the Obligations to be immediately due and payable without notice
of acceleration or of intention to accelerate, presentment and demand or
protest, all of which are hereby expressly waived; (2) without notice to any
Obligor, terminate the Commitment and accelerate the Termination Date; (3)
set off, in any order, against the indebtedness of any Borrower under
Page 4 of 7 Pages
the Loan Documents any debt owing by Bank to any Borrower (whether such debt
is owed individually or jointly), including, but not limited to, any deposit
account, which right is hereby granted by each Borrower to Bank; and (4)
exercise any and all other rights pursuant to the Loan Documents, at law, in
equity or otherwise.
REMEDIES CUMULATIVE 6.2 No remedy, right or power of Bank is exclusive of
any other remedy, right or power now or hereafter existing by contract, at
law, in equity, or otherwise, and all remedies, rights and powers are
cumulative.
7. MISCELLANEOUS.
NO WAIVER 7.1 No waiver of any default or Event of Default will be a waiver
of any other default or Event of Default. No failure to exercise or delay in
exercising any right or power under any Loan Document will be a waiver
thereof, nor shall any single or partial exercise of any such right or power
preclude any further or other exercise thereof or the exercise of any other
right or power. The making of any Loan during either the existence of any
default or Event of Default, or subsequent to the occurrence of an Event of
Default will not be a waiver of any such default or Event of Default. No
amendment, modification or waiver of any Loan Document will be effective
unless the same is in writing and signed by the Person against whom such
amendment, modification or waiver is sought to be enforced. No notice to or
demand on any Person shall entitle any Person to any other or further notice
or demand in similar or other circumstances.
NOTICES 7.2 All notices required under the Loan Documents shall be in
writing and either delivered against receipt therefor, or mailed by
registered or certified mail, return receipt requested, in each case
addressed to the address shown on the signature page hereof or to such other
address as a party may designate. Except for the notices required by SECTION
2.1, which shall be given only upon actual receipt by Bank, notices shall be
deemed to have been given (whether actually received or not) when delivered
(or, if mailed, on the next Business Day).
GOVERNING LAW AND JURISDICTION 7.3 (a) THIS AGREEMENT AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW
YORK (WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES); PROVIDED THAT THE BANK
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR
OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWERS AND THE BANK CONSENTS,
FOR ITSELF AND IN RESPECT OF ITS PROPERTY TO THE NON-EXCLUSIVE JURISDICTION
OF WHOSE COURTS. EACH OF THE BORROWERS AND THE BANK IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH BORROWER
HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS THE PRENTICE HALL
CORPORATION SYSTEM, INC., WITH OFFICES ON THE DATE HEREOF AT ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ AS ITS DESIGNEE, APPOINTEE AND AGENT TO
RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF AND IN RESPECT OF ITS
PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND
DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY
REASON SUCH DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT
AS SUCH, EACH BORROWER AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND
AGENT IN NEW YORK ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION
SATISFACTORY TO THE BANK. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH
BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS
ADDRESS SET FORTH IN THE LOAN DOCUMENTS, SUCH SERVICE TO BECOME EFFECTIVE TEN
DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE BANK
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE ANY
PROCEEDINGS OR OTHERWISE PROCEED AGAINST EACH BORROWER IN ANY OTHER
JURISDICTION. EACH BORROWER AND THE BANK EACH WAIVE PERSONAL SERVICE OF ANY
SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY NEW YORK LAW.
WAIVER OF JURY TRIAL 7.4 EACH BORROWER AND THE BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING
OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY
OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH BORROWER
AND THE BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED
BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES
FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY
OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SURVIVAL; PARTIES BOUND; TERM OF AGREEMENT 7.5 (a) All representations,
warranties, covenants and agreements made by or on behalf of each Borrower in
connection with the Loan Documents will survive the execution and delivery of
the Loan Documents; will not be affected by any investigation made by any
Person, and will bind Borrower and the successors, trustees, receivers and
assigns of each Borrower and will benefit the successors and assigns of Bank;
PROVIDED that Bank's agreement to make Loans to Borrowers will not inure to
the benefit of any successor or assign of any Borrower. Except as otherwise
provided herein, the term of this Agreement will be until the later of the
final maturity of the Note and the full and final payment of all Obligations
and all amounts due under the Loan Documents. (b) Borrowers shall be
entitled to terminate the Commitment by written notice to Bank, which notice
shall become effective as to the accrual of fees payable hereunder upon the
happening of the latest of (i) 30 days after Bank's receipt of such notice;
and (ii) repayment in full of all amounts outstanding under the Note and
otherwise under the Agreement.
DOCUMENTARY MATTERS 7.6 This Agreement may be executed in several identical
counterparts, on separate counterparts; each counterpart will constitute an
original instrument, and all separate counterparts will constitute but one
and the same instrument. The headings and captions in the Loan Documents have
been included solely for convenience and should not be considered in
construing the Loan Documents. If any provision of any Loan Document is
invalid, illegal or unenforceable in any respect under any applicable law,
the remaining provisions will remain effective. The Loans and L/C
Obligations and all other obligations and indebtedness of Borrower to Bank
are entitled to the benefit of the Loan Documents.
EXPENSES AND FEES 7.7 Any provision to the contrary notwithstanding, and
whether or not the transactions contemplated by this Agreement are
consummated, Borrowers agree to pay on demand all out-of-pocket expenses
(including, without limitation, the fees and expenses of counsel for Bank) in
connection with the negotiation, preparation, execution, filing, recording,
modification, supplementing and waiver of the Loan Documents and the making,
servicing and collection of the Loans and L/C Obligations. Borrower agrees to
pay Bank's standard (i) Documentation Preparation and Processing Fee for
preparation, negotiation and handling of this Agreement; (ii) lockbox
processing fees as provided for in the separate agreement therefor; (iii)
account maintenance fees for the Collection Account; (iv) any expenses of
collection or other expenses incurred by Bank in connection with the
maintenance of the Collection Account, shall be reimbursed by Borrowers to
Bank at customary fee rates charged by the Bank for the services. In
consideration of Bank's services of collecting the Accounts hereunder and
monitoring and examining the Borrowing Base, Borrowers agree to pay Bank the
Administration Fee provided for in Section 1.4. Bank may obtain
reimbursement by causing other depository accounts of either Borrower at Bank
to be charged from time to time therefor. The obligations of Borrowers under
this and the following section will survive the termination of this Agreement
but the accrual of periodic fees accrued during the existence of the
Commitment shall be subject to the termination provisions in Section 7.4.
Page 5 of 7 Pages
Each Borrower authorizes Bank in its discretion and without prior notice to
advance against the Commitment and Note to pay any or all such fees, expenses
and other such Obligations when due.
INDEMNIFICATION 7.8 EACH BORROWER AGREES TO INDEMNIFY, DEFEND AND HOLD BANK
HARMLESS FROM AND AGAINST ANY AND ALL LOSS, LIABILITY, OBLIGATION, DAMAGE,
PENALTY, JUDGMENT, CLAIM, DEFICIENCY AND EXPENSE (INCLUDING INTEREST,
PENALTIES, ATTORNEYS' TEES AND AMOUNTS PAID IN SETTLEMENT) TO WHICH BANK MAY
BECOME SUBJECT ARISING OUT OF OR BASED UPON THE LOAN DOCUMENTS, ANY LOAN, OR
THE RECEIPT, HANDLING, PAYMENT AND APPLICATION OF THE MONIES RECEIVED IN
CONNECTION WITH THE COLLECTION ACCOUNT, INCLUDING THAT RESULTING FROM BANK'S
OWN NEGLIGENCE, EXCEPT AND TO THE EXTENT CAUSED BY BANK'S GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT.
USURY NOT INTENDED 7.9 Borrowers and Bank intend to conform strictly to
applicable usury laws. Therefore, the total amount of interest (as defined
under applicable law) contracted for, charged or collected under this
Agreement or any other Loan Document will never exceed the Highest Lawful
Rate. If Bank contracts for, charges or receives any excess interest, it
will be deemed a mistake. Bank will automatically reform the Loan Document
or charge to conform to applicable law, and if excess interest has been
received, Bank will either refund the excess to Borrowers or credit the
excess on any unpaid principal amount of the Note or any other Loan Document.
All amounts constituting interest will be spread throughout the full term of
the Loan Document or applicable Note in determining whether interest exceeds
lawful amounts.
RIGHTS OF BORROWER AND BANK 7.10 Bank has not exercised any control, and
Bank shall not exercise any control, over Borrowers in the determination of
which of Borrowers' creditors Borrower will pay or which payments any
Borrower will make in the ordinary course of any Borrower's business. Each
Borrower, alone, shall exercise such judgment and determination. Nothing
contained herein, however, shall, in any manner, affect, limit or impair the
rights or remedies of Bank under this Agreement or any other Loan Documents
as otherwise provided by applicable law, whether with regard to realization
on the Collateral, rights of set off, compensation or otherwise.
PARTICIPATION; SETOFF 7.11 Borrowers and Bank acknowledge and agree that
Bank, in Bank's sole discretion, may assign its interest or sell
partcipation(s)) in the Loans and Note to third parties, including without
limitation Texas Commerce, without consent of or notice to Borrowers.
Borrowers and Bank agree that each such participant shall be treated, to the
extent of its pro rata interest in Borrowers' indebtedness, as if it were a
party thereto, and shall be accorded and is hereby granted the right of
setoff against any deposits, credit balances, or other funds of each Borrower
which are or may be in its possession (without regard to maturity, tenor or
other elements of otherwise mutual indebtedness).
NO COURSE OF DEALING 7.9 NO COURSE OF DEALING BY ANY BORROWER WITH BANK, NO
COURSE OF PERFORMANCE AND NO TRADE PRACTICES OR OTHER EXTRINSIC EVIDENCE OF
ANY NATURE MAY BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF
THIS AGREEMENT.
8. DEFINITIONS. Unless He context otherwise requires, capitalized terms
used in Loan Documents and not defined elsewhere shall have the meanings
provided by GAAP, except as follows:
ACCOUNTS shall have the meaning assigned
to it in the Uniform Commercial Code applicable to this Agreement.
AFFILIATE means, as to any Person, any other Person (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, such Person; (b) that directly or indirectly
beneficially owns or holds five percent (5%) or more of any class of voting
stock of such Person; or (c) five percent (5%) or more of the voting stock of
which is directly or indirectly beneficially owned or held by the Person in
question. The term "control" means to possess, directly or indirectly, the
power to direct the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise. Bank is not under
any circumstances to be deemed an Affiliate of any Borrower or any of its
Subsidiaries.
AUTHORITY DOCUMENTS means certificates of authority to transact business,
certificates of good standing, borrowing resolutions (with secretary's
certificate), secretary's certificates of incumbency, and other documents
which empower and enable any Borrower or its representatives to enter into
agreements evidenced by Loan Documents or evidence such authority.
ACCOUNTS means all accounts as such term is defined in the Uniform Commercial
Code.
ACCOUNT DEBTOR means any person in any way obligated on or in connection with
any Account.
BUSINESS DAY means a day when the main office of Bank is open for the conduct
of commercial lending business.
COLLATERAL means all Property, tangible or intangible, real, personal or
mixed, now or hereafter subject to Security Documents, or intended so to be.
CORPORATION means corporations, partnerships, limited liability companies,
joint ventures, joint stock associations, associations, banks, business
trusts and other business entities.
GOVERNMENT ACCOUNTS means receivables owed by the U.S. government or by the
government of any state, county, municipality, or other political subdivision
as to which Bank's security interest or ability to obtain direct payment of
the proceeds is governed by any federal or state statutory requirements other
than those of the Uniform Commercial Code, including, without limitation, the
Federal Assignment of Claims Act of 1940, as amended.
GOVERNMENTAL AUTHORITY means any foreign governmental authority, the United
States of America, any state of the United States and any political
subdivision of any of the foregoing, and any agency, department, commission,
board, bureau, court or other tribunal having jurisdiction over Bank or any
Obligor, or any Subsidiary of any Borrower or their respective Property.
HIGHEST LAWFUL RATE means the maximum nonusurious rate of interest permitted
to be charged by applicable Federal or state law (whichever permits the
higher lawful rate) from time to time in effect. If (notwithstanding the
election of the parties as to choice of law herein) Chapter One of the Texas
Credit Code establishes the Highest Lawful Rate, the Highest Lawful Rate is
the "indicated rate ceiling" as defined in that Chapter.
INDEBTEDNESS means and include (a) all items which in accordance with GAAP
would be included on the liability side of a balance sheet on the date as of
which Indebtedness is to be determined (excluding capital stock, surplus,
surplus reserves and deferred credits), (b) all guaranties, endorsements and
other contingent obligations in respect of, or any obligations to purchase or
otherwise acquire, Indebtedness of others, and (c) all Indebtedness secured
by any Lien existing on any interest of the Person with respect to which
indebtedness is being determined, in Property owned subject to such Lien,
whether or not the Indebtedness secured thereby has been assumed.
INVENTORY shall have the meaning assigned to it in the Uniform Commercial
Code applicable to this Agreement.
LEGAL REQUIREMENT means any law, ordinance, decree, requirement, order,
judgment, rule, regulation (or interpretation of any of the foregoing) of,
and the terms of any license or permit issued by, any Governmental Authority.
LIEN shall mean any mortgage, pledge, charge, encumbrance, security interest,
collateral assignment or other lien or restriction of any kind, whether based
on common law, constitutional provision, statute or contract.
LOAN DOCUMENTS means this Agreement, the agreements, the Notes, Applications,
documents, instruments and other writings contemplated by this Agreement or
listed on Annex I, all other assignments, deeds, guaranties, pledges,
instruments, certificates and agreements now or hereafter executed or
delivered to the Bank pursuant to any of the foregoing, and all amendments,
modifications, renewals, extensions, increases and rearrangements of, and
substitutions for, any of the foregoing.
LOCKBOX means the postal lockbox(s) maintained by Texas Commerce Bank
National Association (Lockbox #_____ and #_____) into which Borrowers directs
Account Debtors to make payment and remittance in respect to Accounts.
OBLIGATIONS means all principal, interest and other amounts which are or
become owing under this Agreement, the Note, any Application or any other
Loan Document. OBLIGOR means each Borrower and any guarantor, surety,
co-signer, general partner or other person who may now or hereafter be
obligated to pay all or any part of the Obligations.
ORGANIZATIONAL DOCUMENTS means, with respect to a corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a limited liability company, the articles of
organization, regulations and other documents establishing such entity, with
respect to a partnership, joint venture, or trust, the agreement, certificate
or instrument establishing such entity; in each case including all
modifications and supplements thereof as of the date of the Loan Document
referring to such Organizational Document and any and all future
modifications thereof which are consented to by Bank.
PARTIES means all Persons other than Bank executing any Loan Document.
PERSON means any individual, Corporation, trust, unincorporated organization,
Governmental Authority or any other form of entity.
Page 6 of 7 Pages
PROPER FORM means in form and substance satisfactory to the Bank.
PROPERTY means any interest in any kind of property or asset, whether real,
personal or mixed, tangible or intangible.
SECURITY DOCUMENTS means those Security Agreements listed on ANNEX I and all
supplements, modifications, amendment, extensions thereof and all other
agreements hereafter executed and delivered to Bank to secure the Loans and
L/C Obligations.
SUBORDINATED DEBT means any Indebtedness subordinated to Indebtedness due
Bank pursuant to a written subordination agreement in Proper Form by and
among Bank, subordinated creditor and the relevant Borrower which at a
minimum must prohibit: (a) any action by subordinated creditor which will
result in an occurrence of an Event of Default or default under this
Agreement, the subordination agreement or the subordinated Indebtedness; and
(b) upon the happening of any Event of Default or default under any Loan
Document, the subordination agreement, or any instrument evidencing the
subordinated Indebtedness (i) any payment of principal and interest on the
subordinated Indebtedness; (ii) any act to compel payment of principal or
interest on subordinated Indebtedness; and (iii) any action to realize upon
any Property securing the subordinated Indebtedness.
SUBSIDIARY means, as to a particular parent Corporation, any Corporation of
which 50% or more of the indicia of equity rights is at the time directly or
indirectly owned by such parent Corporation or by one or more Persons
controlled by, controlling or under common control with such parent
Corporation.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN BANK AND
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF BANK AND THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN BANK AND THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
BORROWER: 1ST TECH CORPORATION
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman and CEO
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
BORROWER: DARKHORSE SYSTEMS, INCORPORATED
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman and CEO
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
BORROWER: TANISYS TECHNOLOGY, INC.
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman and CEO
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
BANK: THE CHASE MANHATTAN BANK
By: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇., ▇▇, ▇▇▇ ▇▇▇▇
EXHIBITS:
A ACCOUNTS RECEIVABLE LOAN ADMINISTRATION PROCEDURES
B RPORTING REQUIREMENTS, FINANCIAL COVENANTS
C LOCKBOX PROCESSING AGREEMENT
ANNEXES:
I LOAN DOCUMENTS
11 SUBSIDIARIES
Page 7 of 7 Pages
EXHIBIT A
[INSERT ACCOUNTS RECEIVABLE LOAN ADMINISTRATION PROCEDURES
INCORPORATED BY REFERENCE]
******NOTE*******
BORROWING BASE IS WHERE REDUCING ADVANCE RATE
SHOULD BE INDICATED
ANNEX I
Loan Documents
"Loan Documents" includes, but is not limited to, the following:
1. Agreement
2 Note
3. Lockbox Processing Agreement (in file)
4. Pledge of 50% of Guarantor's stock held by ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ after merger
(in file)
6. Borrowing Base Report; Daily Collateral Certificate Compliance Certificate
7. For each Borrower in Proper Form: General Security Agreement (all
accounts and general intangibles; inventory and equipment); Deposit account
(Collection Account)
8. Financing Statements
9. Certified Copies of Organizational and Authority Documents
(including without limitation all documents, agreements, certificates
and legal opinions requested by Bank in connection with transactions
described in the Preliminary Statement)
10. Insurance policies and certificates (including account credit
insurance for accounts covered under Old 1st Tech Facility)
11. Financial Statements of Borrower and Guarantor
12. UCC search
Loan Documents - ANNEX I Page 1 of 1
ANNEX II
Subsidiaries
IF NONE AS OF THE EFFECTIVE DATE, CHECK NONE
Subsidiary Name and Sub of which State Where
Address % Owned Borrower Incorporated
------------------- ------------ -------- ------------
ANNEX II Page 1 of 1
EXHIBIT B: 1ST TECH CORPORATION, DARKHORSE SYSTEMS,
INCORPORATED, TANISYS TECHNOLOGY, INC.
REPORTING REQUIREMENTS, FINANCIAL COVENANTS AND
COMPLIANCE CERTIFICATE FOR CURRENT REPORTING PERIOD ENDING
__________ ,199__ ("END DATE")
A. REPORTING PERIOD. Borrowers will provide this Exhibit completed in
Proper Form with each financial statement delivered under the Agreement.
THIS REPORT IS FOR THE / / MONTH / / FISCAL YEAR
("REPORTING PERIOD") ENDING _________, 199__ ("END
DATE")
A. FINANCIAL REPORTING. The following financial information will be
provided within the times indicated
WHO WHEN DUE WHAT COMPLIANCE
CIRCLE:
EACH BORROWER
GAAP financial statements (balance
sheet, income and cash flow
statements) audited (with unqualified
opinion) by independent CPAs
satisfactory to Bank, with
Compliance Certificate
(ii) Within 20 days of each month
End Date including FYE month
Unaudited monthly and YTD financial
statements with Compliance
Certificate Yes No
(iii) Within 15 days of each month
End Date including FYE month
Borrowing Base Report with A/R
aging and listing, inventory report,
and A/P listing (refer to Exhibit A) Yes No
(iv) Each Business Day Daily Collateral Certificate (refer Yes No
to Exhibit A)
(v) Within 90 days of the end
of each FYE and mid FY quarter end 2 year forward projections of Yes No
Borrowers' and Guarantor's balance
sheet, income statement and cash flow
statement, by quarter, prepared on
same basis as projections provided to
Lenders prior to execution of this
Agreement
TANISYS (vi) Within 10 days of filing All Forms 10-K, 10-Q and 8-K Yes No
C. FINANCIAL COVENANTS. Borrowers and Guarantor will comply with the Compliance
following financial covenants, applying GAAP, the definitions in ▇▇▇▇▇▇▇ ▇, (▇▇▇▇▇▇)
and THE CALCULATIONS AND ADJUSTMENTS FROM THE ACTUAL REPORTED COLUMN BELOW
(fiscal periods refer to Borrower's fiscal periods).
REQUIRED. Each applies at all times and is ACTUAL REPORTED. For current
reported as indicated: Reporting Period or as of the
End Date, as appropriate:
1. Borrowers on a consolidated basis shall maintain Stockholders' Equity $________ Yes No
Tangible Net Worth as adjusted of at least $4,000,000.00. Minus: Goodwill $________
Other Intangible Assets $________
Loans/Advances to
Equity holders $________
Loans to Affiliates $________
Plus: Subordinated Debt $________
= Tangible Net Worth as adjusted $________
2. Borrowers shall have a combined ratio of
EBDITA (Adjusted) to_ interest expense of at Net income for prior 3 months $________ Yes No
least 1.25: 1.00, as of the end of each month. Plus: Tax Expense $_______
Interest Expense $_______
Depreciation/Amortization $_______
Minus: Capital expenditures $________
Nonrecurring Items $_________
Equals: EBDITA (adjusted )
$______________ $_______________ = _____
EBDITA(Adjusted) Interest Expense Ratio
3. No more than $150,000 total Indebtedness
(including all funded and trade debt) TO 1ST TECH AND
DARKHORSE from Guarantor shall be outstanding at any
time. *
Indebtedness to 1st Yes No
Tech: $________
Indebtedness to
Darkhorse: $________
Total: $________
THE ABOVE SUMMARY REPRESENTS SOME OF THE COVENANTS AND AGREEMENTS CONTAINED IN THE AGREEMENT AND DOES NOT IN ANY WAY RESTRICT OR
MODIFY THE TERMS AND CONDITIONS OF THE AGREEMENT. IN CASE OF CONFLICT BETWEEN THIS EXHIBIT AND THE AGREEMENT, THE AGREEMENT SHALL
CONTROL. The undersigned hereby certifies that the above information and computations are true and correct and not misleading as
of the date hereof, and that since the date of the Borrower's most recent Compliance Certificate (if any):
/ / No default or Event of Default has occurred under the Agreement during
the current Reporting Period, or been discovered from a prior period, and not reported.
/ / A default or Event of Default (as described below) has occurred during
the current Reporting Period or has been discovered from a prior period and is being
reported for the first time and: / / was cured on _______________ / / was
waived by Bank in writing on ___________
/ / is continuing.
Description of Event of Default:____________________________________________________
Executed _______________, 19___:
BORROWER: 1ST TECH CORPORATION
BY:
-------------------------------
NAME:
-----------------------------
TITLE:
----------------------------
BORROWER: TANISYS TECHNOLOGY, INC.
BY:
-------------------------------
NAME:
-----------------------------
TITLE:
----------------------------
BORROWER: DARKHORSE SYSTEMS, INCORPORATED
BY:
-------------------------------
NAME:
-----------------------------
TITLE:
----------------------------
EXHIBIT B Page 1 of 1
BORROWING BASE
Borrowing Base shall mean as at any date the applicable Advance Rate times
the net amount of Eligible A/R assigned by the borrowers.
Total A/R $____________
less Ineligible $ ___________
Eligible A/R $ ___________
Advance Rate % $ ___________
Borrowing Base $ ___________
The Advance Rate will be
79% to Feb. 28 1997
78% March 7, 1997
77% March 14, 1997
76% March 21, 1997
75% April 21, 1997
74% May 21, 1997
73% April 21, 1997
72% June 21. 1997
71% April 21, 1997
70% Thereafter
