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EXHIBIT 6.14
LOAN AGREEMENT
BETWEEN
COMERICA BANK-TEXAS
AND
NEUTRAL POSTURE ERGONOMICS, INC.
DATED
AS OF
DECEMBER 30, 1996
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TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS . . . . . . . . . . . 1
Section 1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Accounting Terms . . . . . . . . . . . . . . . . . . 6
Section 1.3. Singular and Plural . . . . . . . . . . . . . . . . . 6
ARTICLE 2. COMMITMENT, INTEREST AND FEES. . . . . . . 6
Section 2.1. Commitment . . . . . . . . . . . . . . . . . . . . . 6
Section 2.2. Borrowing Procedures . . . . . . . . . . . . . . . . 7
Section 2.3. Revolving Credit Note . . . . . . . . . . . . . . . . 7
Section 2.4. Interest . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.5. Renewals and Extensions . . . . . . . . . . . . . . . 8
Section 2.6. Maximum Rate. . . . . . . . . . . . . . . . . . . . . 8
Section 2.7. Fees . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.8. Basis of Computation . . . . . . . . . . . . . . . . 10
Section 2.9. Prepayments . . . . . . . . . . . . . . . . . . . . . 10
Section 2.10. Term Loan . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.11. Basis of Payments . . . . . . . . . . . . . . . . . . 11
ARTICLE 3. SECURITY . . . . . . . . . . . . 11
ARTICLE 4. CONDITIONS PRECEDENT TO OBLIGATIONS OF BANK . . . 11
Section 4.1. Conditions to First Disbursement . . . . . . . . . . 11
Section 4.2. Conditions to All Disbursements . . . . . . . . . . . 13
ARTICLE 5. WARRANTIES AND REPRESENTATIONS . . . . . . 14
Section 5.1. Corporate Existence and Power . . . . . . . . . . . . 14
Section 5.2. Authorization and Approvals . . . . . . . . . . . . . 14
Section 5.3. Valid and Binding Agreement . . . . . . . . . . . . . 15
Section 5.4. Actions, Suits or Proceedings . . . . . . . . . . . . 15
Section 5.5. Subsidiaries . . . . . . . . . . . . . . . . . . . . 15
Section 5.6. No Liens, Pledges, Mortgages or Security Interests . 15
Section 5.7. Accounting Principles . . . . . . . . . . . . . . . . 15
Section 5.8. No Adverse Changes . . . . . . . . . . . . . . . . . 16
Section 5.9. Conditions Precedent . . . . . . . . . . . . . . . . 16
Section 5.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.11. Compliance with Laws . . . . . . . . . . . . . . . . 16
Section 5.12. Indebtedness . . . . . . . . . . . . . . . . . . . . 16
Section 5.13. Material Agreements . . . . . . . . . . . . . . . . . 16
Section 5.14. Margin Stock . . . . . . . . . . . . . . . . . . . . 16
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TABLE OF CONTENTS
(Continued)
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Section 5.15. Pension Funding . . . . . . . . . . . . . . . . . . . 17
Section 5.16. Misrepresentation . . . . . . . . . . . . . . . . . . 17
Section 5.17. Eligible Accounts . . . . . . . . . . . . . . . . . . 17
ARTICLE 6. AFFIRMATIVE COVENANTS . . . . . . . . . 19
Section 6.1. Financial and Other Information. . . . . . . . . . . 19
Section 6.2. Insurance . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.3. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.4. Maintain Corporation and Business . . . . . . . . . . 21
Section 6.5. Tangible Net Worth Step Up Requirement . . . . . . . 22
Section 6.6. Maintain Debt Ratio . . . . . . . . . . . . . . . . . 22
Section 6.7. Maintain Working Capital . . . . . . . . . . . . . . 22
Section 6.8. Maintain Fixed Charge Coverage . . . . . . . . . . . 22
Section 6.9. ERISA . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.10. Use of Loan Proceeds . . . . . . . . . . . . . . . . 22
ARTICLE 7. NEGATIVE COVENANTS . . . . . . . . . 23
Section 7.1. Dividends . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.2. Stock Issuance . . . . . . . . . . . . . . . . . . . 23
Section 7.3. Stock Acquisition . . . . . . . . . . . . . . . . . . 23
Section 7.4. Liens and Encumbrances . . . . . . . . . . . . . . . 23
Section 7.5. Indebtedness . . . . . . . . . . . . . . . . . . . . 23
Section 7.6. Extension of Credit . . . . . . . . . . . . . . . . . 24
Section 7.7. Guarantee Obligations . . . . . . . . . . . . . . . . 24
Section 7.8. Subordinate Indebtedness . . . . . . . . . . . . . . 24
Section 7.9. Property Transfer, Merger or Lease-Back . . . . . . . 24
Section 7.10. Acquire Securities . . . . . . . . . . . . . . . . . 24
Section 7.11. Pension Plans . . . . . . . . . . . . . . . . . . . . 24
Section 7.12. Misrepresentation . . . . . . . . . . . . . . . . . . 25
Section 7.13. Margin Stock . . . . . . . . . . . . . . . . . . . . 25
Section 7.14. Compliance with Environmental Laws . . . . . . . . . 25
Section 7.15. Capital Expenditures . . . . . . . . . . . . . . . . 25
Section 7.16. Bonus or Dividend for Taxes . . . . . . . . . . . . . 25
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TABLE OF CONTENTS
(Continued)
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ARTICLE 8. EVENTS OF DEFAULT - ENFORCEMENT -
APPLICATION OF PROCEEDS . . . . . . . . . . . 25
Section 8.1. Events of Default . . . . . . . . . . . . . . . . . . 25
Section 8.2. Acceleration of Indebtedness . . . . . . . . . . . . 27
Section 8.3. Application of Proceeds . . . . . . . . . . . . . . . 27
Section 8.4. Cumulative Remedies . . . . . . . . . . . . . . . . . 28
ARTICLE 9. MISCELLANEOUS. . . . . . . . . . . 28
Section 9.1. Independent Rights . . . . . . . . . . . . . . . . . 28
Section 9.2. Covenant Independence . . . . . . . . . . . . . . . . 28
Section 9.3. Waivers and Amendments . . . . . . . . . . . . . . . 28
Section 9.4. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . 28
Section 9.5. Survival of Warranties, Etc . . . . . . . . . . . . . 29
Section 9.6. Attorneys' Fees . . . . . . . . . . . . . . . . . . . 29
Section 9.7. Payments on Saturdays, Etc . . . . . . . . . . . . . 29
Section 9.8. Binding Effect . . . . . . . . . . . . . . . . . . . 29
Section 9.9. Maintenance of Records . . . . . . . . . . . . . . . 29
Section 9.10. Notices . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.11. Counterparts . . . . . . . . . . . . . . . . . . . . 30
Section 9.12. Headings . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.13. Capital Adequacy . . . . . . . . . . . . . . . . . . 30
Section 9.14. Indemnification by the Borrower . . . . . . . . . . . 31
Section 9.15. NO ORAL AGREEMENTS . . . . . . . . . . . . . . . . . 31
Section 9.16. Gender . . . . . . . . . . . . . . . . . . . . . . . 31
Section 9.17. Joint Borrowers . . . . . . . . . . . . . . . . . . . 31
Section 9.18. Cross Default; Cross Collateral . . . . . . . . . . . 31
Section 9.19. Assignment . . . . . . . . . . . . . . . . . . . . . 32
SECTION 9.20. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . 32
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LOAN AGREEMENT
THIS LOAN AGREEMENT is made and delivered as of this 30th day of
December, 1996, by and between NEUTRAL POSTURE ERGONOMICS, INC., a Texas
corporation, and COMERICA BANK-TEXAS, a Texas banking association.
WITNESSETH:
WHEREAS, the Borrower desires to borrow up to TWO MILLION DOLLARS
($2,000,000.00) from the Bank in the form of a revolving credit facility to
repay its indebtedness to Fidelity Funding and for the working capital needs of
the Borrower; and
WHEREAS, the Borrower also desires to borrow up to FIVE HUNDRED THOUSAND
DOLLARS ($500,000.00) from the Bank in the form of term loans for the purpose
of acquiring additional machinery and equipment; and
WHEREAS, the Bank is willing to supply such financing subject to the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, the Borrower and the Bank agree as follows:
ARTICLE 1. DEFINITIONS
Section 1.1. Defined Terms. As used herein, the following terms shall
have the following respective meanings:
"ACCOUNTS," "CHATTEL PAPER," "DOCUMENTS," "EQUIPMENT," "FIXTURES,"
"GENERAL INTANGIBLES," "GOODS," "INSTRUMENTS" and "INVENTORY" shall have the
meanings assigned to them in the UCC on the date of this Agreement.
"ADJUSTED NET INCOME" shall mean, for any period (as computed in
accordance with GAAP) net income, plus depreciation and amortization expense.
"AGREEMENT" shall mean this Loan Agreement.
"BANK" shall mean Comerica Bank-Texas, a Texas banking association.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code, as
amended, or any successor act or code.
"BASE RATE" shall mean that annual rate of interest designated by the
Bank as its prime rate and which is changed by the Bank from time to time. The
Base Rate may not necessarily be the lowest rate charged by the Bank.
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"BORROWER" shall mean Neutral Posture Ergonomics, Inc., a Texas
corporation.
"BORROWING BASE" shall mean EIGHTY percent (80%) of the aggregate
outstanding principal balance of the Borrower's Eligible Accounts but in no
event in excess of the Commitment Amount.
"BORROWING BASE CERTIFICATE" shall mean a certificate in the form of
Exhibit "B" to this Agreement, completed in all appropriate respects and
executed by the chief executive or chief financial officer of the Borrower and
setting forth Borrower's computation of the Borrowing Base as of the date of
such certificate.
"BUSINESS DAY" shall mean a day on which the Bank is open to carry on
its normal commercial lending business.
"COLLATERAL" shall mean any property of the Borrower in the possession
of the Bank, any amount in any deposit account of the Borrower with the Bank
and all of Borrower's, Chattel Paper, Documents, Equipment, Fixtures, General
Intangibles, Goods, Instruments and Inventory, wherever located and whether now
owned or hereafter acquired, together with all replacements thereof,
substitutions therefor and all proceeds and products thereof.
"COMMITMENT AMOUNT" shall mean $2,000,000.00.
"CONTRACT RATE" shall mean, as of any date of determination, the annual
rate of interest which, pursuant to Section 2.4 of this Agreement would be
applicable to the Notes if the annual rate of interest were determined without
the Maximum Legal Rate limitation.
"CURRENT ASSETS" shall mean, as of any applicable date of determination,
all cash, nonaffiliated customer receivables, United States government
securities, inventories and other assets of the Borrower that should be
classified as current in accordance with GAAP.
"CURRENT LIABILITIES" shall mean, as of any applicable date of
determination, all liabilities of the Borrower that should be classified as
current in accordance with GAAP, plus all amounts outstanding under the
Revolving Credit Note.
"DEBT" shall mean, as of any applicable date of determination, all items
of indebtedness, obligation or liability of the Borrower, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP.
"DEFAULT" shall mean a condition or event which, with the giving of
notice or the passage of time, or both, would become an Event of Default.
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"DISBURSEMENT DATE" shall mean each date upon which the Bank makes a
loan to the Borrower and/or Subsidiaries under Section 2.1 of this Agreement.
"ELIGIBLE ACCOUNTS" shall mean those Accounts of the Borrower for which
each of the warranties set forth in Section 5.17 of this Agreement shall be
true (as of any applicable date of determination) and which has been
represented by the Borrower to be an "ELIGIBLE ACCOUNT" on the Borrowing Base
Certificate.
"ENVIRONMENTAL LAWS" means any and all federal, state, and local laws,
regulations, and requirements pertaining to health, safety, or the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq., the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq., the
Occupational Safety and Health Act, as amended, 29 U.S.C. 651 et seq., the
Clean Air Act, 42 U.S.C. 7401 et seq., the Clean Water Act as amended, 33
U.S.C. 1251 et seq., the Toxic Substances Control Act, as amended, 15 U.S.C.
2601 et seq., and all similar laws, regulations, and requirements of any
governmental authority or agency having jurisdiction over Borrower or any of
its properties or assets, as such laws, regulations, and requirements may be
amended or supplemented from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, or any successor act or code.
"EVENT OF DEFAULT" shall mean any of those conditions or events listed
in Section 8.1 of this Agreement.
"FINANCIAL STATEMENTS" shall mean all those balance sheets, earnings
statements and other financial data (whether of the Borrower, any Subsidiary,
any guarantor or otherwise) which have been furnished to the Bank for the
purpose of, or in connection with, this Agreement and the transactions
contemplated hereby.
"FINANCING STATEMENTS" shall mean UCC financing statements describing
the Bank as secured party and the Borrower as debtor covering the Collateral
and otherwise in such form, for filing in such jurisdictions and with such
filing offices as the Bank shall reasonably deem necessary or advisable.
"GAAP" shall mean, as of any applicable date of determination, generally
accepted accounting principles consistently applied.
"GUARANTOR" shall mean Xxxxxxx X. Xxxxxxx and Xxxx X. Xxxxxxxxx.
"GUARANTY" shall mean a guaranty in the form of Exhibit "C" to this
Agreement pursuant to which the Guarantor unconditionally guarantees to the
Bank repayment of all of the Indebtedness.
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"HARD COST" shall mean the purchase price of any equipment or molds but
shall not include taxes, set-up or transportation charges, warranty costs or
similar charges.
"HAZARDOUS SUBSTANCE" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or addressed under any Environmental Law, including,
without limitation, asbestos, petroleum, and polychlorinated biphenyls.
"INDEBTEDNESS" shall mean all loans, advances and indebtedness of the
Borrower to the Bank under this Agreement, together with all other
indebtedness, obligations and liabilities whatsoever of the Borrower and/or
Subsidiaries to the Bank, whether matured or unmatured, liquidated or
unliquidated, direct or indirect, absolute or contingent, joint or several, due
or to become due, now existing or hereafter arising.
"INVENTORY" means all of the Borrower's now owned and hereafter acquired
inventory, goods, merchandise, and other personal property, wherever located,
to be furnished under any contract of service or held for sale or lease, all
raw materials, work-in-process, finished goods, returned and repossessed goods,
and materials and supplies of any kind, nature or description which are or
might be used or consumed in the Borrower's business or used in connection with
the manufacture, packing, shipping, advertising, selling or finishing of such
inventory goods, merchandise and such other personal property, and all
documents of title or other documents representing them, and all proceeds
thereof (including, but not limited to, all proceeds of insurance with respect
thereto, including the proceeds of any casualty insurance); and any lists,
information and records prepared or kept in relation to the foregoing.
"LIEN AND FINANCING STATEMENT TRANSFERS" shall mean those certain UCC-3
assignments covering certain financing statements of record with the Secretary
of State of the State of Texas and/or the County Clerk of Brazos County, all to
be executed by Fidelity Funding to be in form and substance satisfactory to the
Bank.
"LOCK BOX AGREEMENT" shall mean that certain lock box agreement of even
date herewith by and between the Borrower and/or Subsidiaries and the Bank by
which the Borrower and/or Subsidiaries agree to direct their customers to make
payment on accounts to the post office box described in the lock box agreement.
Such lock box agreement shall further provide for the manner and method of
handling checks and items which are deposited therein.
"MAXIMUM LEGAL RATE" shall have the meaning set forth in Section 2 of
this Agreement.
"NET CURRENT ASSETS" shall mean Current Assets less Current Liabilities.
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"NOTES" shall mean collectively (i) the Revolving Credit Note conforming
to Section 2.3 of this Agreement and in the form of Exhibit "A-1" to this
Agreement; and (ii) the Term Note(s) (herein so called) conforming to Section
2.10 of this Agreement and in the form of Exhibit "A-2" for a loan to purchase
equipment or Exhibit "A-3" for a loan to purchase a mold.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any person
succeeding to the present powers and functions of the Pension Benefit Guaranty
Corporation.
"PERMITTED LIENS" shall mean:
(a) Liens and encumbrances in favor of the Bank;
(b) Liens for taxes, assessments or other governmental charges
incurred in the ordinary course of business and not yet past due or being
contested in good faith by appropriate proceedings and, in the event they are
being contested, and if requested by the Bank, bonded in a manner satisfactory
to the Bank;
(c) Liens not delinquent created by statute in connection with
worker's compensation, unemployment insurance, social security and similar
statutory obligations;
(d) Liens of mechanics, materialmen, carriers, warehousemen or other
like statutory or common law liens securing obligations incurred in good faith
in the ordinary course of business that are not yet due and payable;
(e) Encumbrances consisting of zoning restrictions, rights-of-way,
easements or other restrictions on the use of real property, none of which
materially impairs the use of such property by the Borrower or any Subsidiary
in the operation of the business for which it is used and none of which is
violated in any material respect by any existing or proposed structure or land
use; and
(f) Purchase money lien securing indebtedness authorized pursuant to
Section 7.5(g) hereof.
(g) Existing liens described in Schedule 5.6 attached hereto.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, trust, unincorporated association, joint stock company,
government, municipality, political subdivision or agency or other entity.
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"REVOLVING LOAN OR LOAN" shall mean an advance made by the Bank to the
Borrower under Section 2.1 of this Agreement on a Disbursement Date.
Collectively, all such advances are referred to as "REVOLVING LOANS" or
"LOANS".
"SECURITY AGREEMENTS" shall mean security agreements in the forms of
Exhibits "D-1" and "D-2" to this Agreement pursuant to which the Borrower
grants to the Bank a security interest in the Accounts, Chattel Paper,
Documents, Equipment, Fixtures, General Intangibles, Goods, Instruments and
Inventory, wherever located and whether now owned or hereafter acquired,
together with all replacements thereof, substitutions therefor and all proceeds
and products thereof.
"SUBSIDIARIES" shall mean any corporation of which more than FIFTY
percent (50%) of the outstanding voting securities shall, as of any applicable
date of determination, be owned directly, or indirectly through one or more
intermediaries, by the Borrower.
"TANGIBLE NET WORTH" shall mean, as of any applicable date of
determination, the excess of (i) the book value of all assets of a person
(other than patents, patent rights, trademarks, trade names, franchises,
copyrights, licenses, goodwill, and similar intangible assets) after all
appropriate deductions (including, without limitation, reserves for doubtful
receivables, obsolescence, depreciation and amortization), all as determined in
accordance with GAAP, less (ii) all Debt of the Borrower.
"TERM LOAN" shall mean an advance made by the Bank to the Borrower under
Section 2.10 hereof.
"TERMINATION DATE" shall mean January ___, 1999.
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of Texas and as amended from time to time.
Section 1.2. Accounting Terms. All accounting terms not specifically
defined in this Agreement shall be construed in accordance with GAAP.
Section 1.3. Singular and Plural. Where the context herein requires,
the singular number shall be deemed to include the plural, and vice versa.
ARTICLE 2. COMMITMENT, INTEREST AND FEES.
Section 2.1. Commitment. Subject to the terms and conditions of this
Agreement, the Bank agrees to make loans to the Borrower on a revolving basis
of such amount as the Borrower shall request pursuant to Section 2.2 of this
Agreement at any time from the date of this Agreement until the Termination
Date, up to an aggregate principal amount outstanding at any
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time not to exceed the lesser of (a) the Commitment Amount or (b) the Borrowing
Base, provided that each Disbursement Date under this Agreement must be a
Business Day.
Section 2.2. Borrowing Procedures.
2.2.1 Notice. The Borrower shall give the Bank notice of the
Borrower's desire for a Revolving Loan by 1:00 p.m. (Houston, Texas time) on
the day of the requested advance. Such notice shall be by telephone
communication from an officer of the Borrower who has been given access to the
Borrower to a security code given to the Borrower by the Bank. Such notice
shall specify the proposed Disbursement Date and the principal amount of the
proposed advance for such Revolving Loan. A written confirmation of each
request shall be given by the Borrower to the Bank within two (2) Business days
after any oral advance request; written confirmation shall be by confirmed
facsimile transmission or by U.S. mail.
2.2.2 Bank Obligations. The Bank agrees to make the Revolving Loan on
the Disbursement Date as set forth in a notice to the Bank from the Borrower
conforming to the requirements of Section 2.2.1 by crediting the Borrower's
general deposit account with the Bank in the amount of such Revolving Loan,
provided, however, that the Bank shall not be so obligated if:
(a) Any of the conditions precedent set forth in Section 4 of this
Agreement shall not have been satisfied or waived by the Bank in accordance
with Section 9.3 of this Agreement; or
(b) Such proposed Revolving Loan would cause the aggregate unpaid
principal amount of the Revolving Loans outstanding under this Agreement to
exceed the lesser of (i) the Commitment Amount or (ii) the Borrowing Base on
the Disbursement Date.
Section 2.3. Revolving Credit Note. The Revolving Loans shall be
evidenced by the Revolving Credit Note, executed by the Borrower, dated the
date of this Agreement, payable to the Bank on the Termination Date (unless
sooner accelerated pursuant to the term of this Agreement), and in the
principal amount of the original Commitment Amount. The date and amount of
each Revolving Loan made by the Bank and of each repayment of principal thereon
received by the Bank shall be recorded by the Bank in its records or, at the
option of the Bank, on a schedule attached to the Revolving Credit Note. The
aggregate unpaid principal amount so recorded by the Bank shall constitute the
best evidence of the principal amount owing and unpaid on the Revolving Credit
Note, provided, however, that the failure by the Bank so to record any such
amount or any error in so recording any such amount (whether on the schedule
attached to the Revolving Credit Note or otherwise) shall not limit or
otherwise affect the obligations of the Borrower under this Agreement or the
Revolving Credit Note to repay the principal amount of all the Revolving Loans
together with all interest accrued or accruing thereon.
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Section 2.4. Interest. Subject to the provisions of Section 2.6 below,
the Revolving Credit Note shall bear interest on the outstanding principal
balance from time to time outstanding under the Revolving Credit Note at a rate
equal to the lesser of (a) one-half of one percent (.50%) per annum plus the
Base Rate of the Bank until maturity, whether by acceleration or otherwise, (b)
the Maximum Legal Rate, as defined below. Interest shall be payable to the
extent then accrued on the first day of each calendar month, beginning March 1,
1997, until maturity (whether by acceleration or otherwise) and from and after
such maturity, on demand. The rate of interest applicable to the Revolving
Credit Note shall change as and when the Bank's Base Rate changes.
Section 2.5. Renewals and Extensions. Renewals and extensions, if any,
of any Loan shall be at the Bank's discretion and shall be evidenced by such
documents and instruments as the Bank may require in its sole discretion. The
Bank shall not be obligated to accommodate any renewals and extensions.
Section 2.6. Maximum Rate. The following provisions shall control this
Agreement and the Revolving Credit Note:
(a) No agreements, conditions, provision or stipulations contained in
this Agreement or in any other agreement between the Borrower and the Bank, or
the occurrence of an Event of Default, or the exercise by the Bank of any right
it may have to accelerate the payment of the maturity of principal and
interest, or to exercise any option whatsoever contained in this Agreement or
any other agreement between the Borrower and the Bank, or the arising of any
contingency whatsoever, shall entitle the Bank to collect, in any event,
interest exceeding the maximum rate of non-usurious interest allowed from time
to time by applicable state or federal laws as now or as may hereinafter be in
effect (the "Maximum Legal Rate") and in no event shall the Borrower be
obligated to pay interest exceeding such Maximum Legal Rate, and all
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel the Borrower to pay
a rate of interest exceeding the Maximum Legal Rate shall be without binding
force or effect, at law or in equity, to the extent only of the excess of
interest over such Maximum Legal Rate. In the event any interest is charged in
excess of the Maximum Legal Rate (the "Excess"), the Borrower acknowledges and
stipulates that any such charge shall be the result of an accidental and bona
fide error, and such Excess shall be, returned to the Borrower, it being the
intention of the parties hereto not to enter at any time into an usurious or
otherwise illegal relationship. The parties hereto recognize that with
fluctuations in the Base Rate from time to time announced by the Bank such an
unintentional result could inadvertently occur. By the execution of this
Agreement, the Borrower covenants that (a) the credit or return of any Excess
shall constitute the acceptance by the Borrower of such Excess, and (b) the
Borrower shall not seek or pursue any other remedy, legal or equitable, against
the Bank based, in whole or in part, upon the charging or receiving of any
interest in excess of the Maximum Legal Rate. For the purpose of determining
whether or not any Excess has been contracted for, charged or received by the
Bank, all interest at any time
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contracted for, charged or received by the Bank in connection with the
Borrower's obligations shall be amortized, prorated, allocated and spread in
equal parts during the entire term of this Agreement. If at any time the rate
of interest payable hereunder shall be computed on the basis of the Maximum
Legal Rate, any subsequent reduction in the Contract Rate shall not reduce such
interest thereafter payable hereunder below the amount computed on the basis of
the Maximum Legal Rate until the aggregate amount of such interest accrued and
payable under this Agreement equals the total amount of interest which would
have accrued if such interest had been at all times computed solely on the
basis of the Contract Rate, provided, however, in no event shall the Contract
Rate ever exceed the Maximum Legal Rate.
(b) Unless preempted by federal law, the rate of interest from time
to time in effect hereunder shall not exceed the greater of eighteen (18%)
percent per annum or the "INDICATED RATE CEILING" from time to time in effect
under Chapter 1 of the Texas Credit Code (Vernon's Texas Civil Statutes),
Section (a)(1), Article 5069-1.04, as amended.
(c) The provisions of this Section shall be deemed to be incorporated
into every document or communication relating to the Indebtedness which sets
forth or prescribes any account, right or claims or alleged account, right or
claim of the Bank with respect to the Borrower (or any other obligor in respect
of the Indebtedness), whether or not any provisions of this Section is referred
to therein. All such documents and communications and all figures set forth
therein shall, for the sole purpose of computing the extent of the obligations
asserted by the Bank thereunder, be automatically recomputed by the Borrower or
any other obligor, and by any court considering the same, to give effect to the
adjustments or credits required by this Section.
(d) If the applicable state or federal law is amended in the future
to allow a greater rate of interest to be charged under this Agreement than is
presently allowed by applicable state or federal law, then the limitation of
interest hereunder shall be increased to the maximum rate of interest allowed
by applicable state or federal law, as amended, which increase shall be
effective hereunder on the effective date of such amendment, and all interest
charges owing to the Bank by reason thereof shall be payable upon demand.
(e) The provisions of Chapter 15 of the Texas Credit Code (Vernon's
Texas Civil Statutes), Article 5069-15, as amended, are specifically declared
by the parties hereto not to be applicable to this Agreement or any of the
other agreements executed in connection herewith or therewith or to the
transactions contemplated hereby or thereby.
Section 2.7. Fees.
2.7.1 Commitment Fee. The Borrower agrees to pay to the Bank a
commitment fee for the period from and including the date of this Agreement to
the Termination Date equal to one quarter of one percent (.25%) per annum on
the average daily difference between the Commitment Amount and the aggregate
unpaid principal balance of the
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Revolving Loans. Such commitment fee shall be payable on the last Business Day
of March, June, September and December, beginning March, 1997, and on the
Termination Date, for the periods ending on such dates, or any portion thereof
this Agreement is in effect.
2.7.2 Preparation Fees. Simultaneously with the execution of this
Agreement, the Borrower shall pay to the Bank the amount of the Bank's expenses
(including attorney's fees and disbursements) incurred by the Bank in
connection with the preparation of this Agreement and related instruments.
Section 2.8. Basis of Computation. The amount of all interest and fees
hereunder shall be computed for the actual number of days elapsed on the basis
of a year consisting of 360 days.
Section 2.9. Prepayments.
2.9.1 Mandatory Prepayments. The Borrower shall pay to the Bank the
amount, if any, by which the aggregate unpaid principal amount of all Revolving
Loans from time to time exceeds the Borrowing Base, together with all interest
accrued and unpaid on the amount of such excess, but without other premium or
penalty. Such prepayment shall be immediately due and owing upon the
occurrence of any such excess and, at the option of the Bank, any mandatory
prepayment made under this Section 2.9.1 will reduce the Commitment Amount.
2.9.2 Optional Prepayment. The Borrower may prepay either the
Revolving Credit Note or the Term Note at any time and without the payment of
any penalty or premium; however, at the Bank's option, all voluntary prepayment
of the Term Note shall be applied to future installments due thereon in the
inverse order of their maturity.
Section 2.10. Term Loan. If all of the conditions set forth in Section
4, together with the following conditions, have been met, then the Bank agrees
to make advances of credit to the Borrower in the form of Term Loans of up to
an aggregate of FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00), each
Term Loan representing the purchase of equipment shall be evidenced by a
separate promissory note fully amortizing the principal advanced over a five
(5) year period and each Term Loan evidencing the purchase of a mold shall be
evidenced by a separate promissory note fully amortizing the principal advanced
over a two (2) year period.
2.10.1 Conditions to Term Loan Advances. Advances under the Term Loan
Credit Facility shall be available for the purpose of acquiring new equipment
or molds and can be made in one or more advances so long as the aggregate
amount of advances made to the Borrower for the purchase of new equipment does
not exceed FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00). Each Term
Loan shall accrue interest at the same floating rate charged on the Revolving
Credit Note. Each advance shall be subject to the Bank's prior receipt from
the Borrower of the following:
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(a) A xxxx of sale covering the new equipment or molds
to be acquired;
(b) Proof of insurance coverage on the same showing the
Bank as loss payee and the mortgagee;
(c) Proof of receipt, installation and that the
equipment is operating pursuant to manufacturer's specifications;
(d) A signed financing statement to be in form and
substance satisfactory to the Bank and describing the equipment;
and
(e) A signed promissory note in the form of the note
attached hereto as Exhibit A-2, in the case of an advance to
purchase equipment, and to be in the amount not in excess of 90%
of the Hard Cost of the new equipment (which note shall be
repayable in not more than sixty (60) substantially equal monthly
installments of principal plus interest) or in the form of the
note attached hereto as Exhibit A-3, in the case of an advance to
purchase a mold, and to be in an amount not in excess of 70% of
the Hard Cost of the molds (which note shall be repayable in not
more than twenty-four (24) substantially equal monthly
installments of principal plus interest).
Section 2.11. Basis of Payments. All sums payable by the Borrower to
the Bank under this Agreement shall be paid directly to the Bank at its
principal office in immediately available funds, without setoff, deduction or
counterclaim.
ARTICLE 3. SECURITY.
To secure full and timely performance of the Borrower's covenants set
out in this Agreement and to secure the repayment of the Notes and all other
Indebtedness whatsoever of the Borrower to the Bank, the Borrower and/or
Subsidiaries agree to grant and assign liens upon and security interests in the
Collateral pursuant to the Security Agreements, the Financing Statements, and
other instruments and agreements satisfactory to the Bank.
ARTICLE 4. CONDITIONS PRECEDENT TO OBLIGATIONS OF BANK.
Section 4.1. Conditions to First Disbursement. The obligations of the
Bank under this Agreement are subject to the occurrence, prior to or on the
Disbursement Date first occurring, of each of the following conditions, any or
all of which may be waived in whole or in part by the Bank in writing:
4.1.1 Documents Executed and Filed. The Borrower shall have executed
(or caused to be executed) and delivered to the Bank and, as appropriate, there
shall have been filed with such filing offices as the Bank shall deem
appropriate, the following:
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(a) The Note or Notes;
(b) The Security Agreements;
(c) The Financing Statements;
(d) The Guaranty;
(e) The Lien and Financing Statement Transfers; and
(f) The Lockbox Agreement.
4.1.2 Certified Resolutions. The Borrower shall have furnished to the
Bank a copy of resolutions of the Board of Directors of the Borrower
authorizing the execution, delivery and performance of this Agreement, the
borrowing hereunder, the Notes and any other documents contemplated by this
Agreement, which shall have been certified by the Secretary or Assistant
Secretary of the Borrower as of the Disbursement Date first occurring.
4.1.3 Certified Articles. The Borrower shall have furnished to the
Bank a copy of the Articles of Incorporation, including all amendments thereto,
and all other charter documents of the Borrower, all of which shall have been
certified by the state agency issuing the same as of a date reasonably near the
Disbursement Date first occurring.
4.1.4 Certified Bylaws. The Borrower shall have furnished to the Bank
a copy of the Bylaws of the Borrower, which shall have been certified by the
Secretary or Assistant Secretary of the Borrower as of the Disbursement Date
first occurring.
4.1.5 Certificate of Good Standing. The Borrower shall have furnished
to the Bank a certificate of good standing with respect to the Borrower, which
shall have been certified by the state agency issuing the same as of a date
reasonably near the Disbursement Date first occurring.
4.1.6 Certificate of Incumbency. The Borrower shall have furnished to
the Bank a certificate of the Secretary or Assistant Secretary of the Borrower
certified as of the Disbursement Date first occurring, as to the incumbency and
signatures of the officers of the Borrower signing this Agreement, the Notes
and any documents contemplated or delivered under this Agreement.
4.1.7 Opinion of Borrower's Counsel. The Borrower shall have furnished
to the Bank the favorable written opinion of Xxxxxx & Xxxxxx, counsel to the
Borrower, dated as of the Disbursement Date first occurring and in the form of
Exhibit "E" to this Agreement.
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4.1.8 UCC Lien Search. The Bank shall have received UCC record and
copy searches, evidencing the appropriate filing and recording of the Financing
Statements and disclosing no notice of any liens or encumbrances filed against
any of the Collateral in any relevant jurisdiction other than the Financing
Statements and other than as relate to Permitted Liens.
4.1.9 Hazard Insurance. The Borrower shall have furnished to the Bank,
in form and amounts and with companies satisfactory to the Bank, evidence of
hazard insurance policies naming the Bank as "mortgagee", and "loss payee" (to
the extent doing so is not prohibited under the terms of any lease which the
Debtor is a party to) and relating to the assets and properties (including, but
not limited to, the Collateral) of the Borrower and/or Subsidiaries.
4.1.10 Payment of Debt. The Bank shall have been furnished with
evidence satisfactory to it that all indebtedness of the Borrower to Fidelity
Funding has been paid in full and all corresponding liens terminated or
transferred to the Bank.
4.1.11 Approval of Bank Counsel. All actions, proceedings, instruments
and documents required to carry out the transactions contemplated by this
Agreement or incidental thereto and all other related legal matters shall have
been satisfactory to and approved by legal counsel for the Bank, and said
counsel shall have been furnished with such certified copies of actions and
proceedings and such other instruments and documents as they shall have
reasonably requested.
4.1.12 Other Information and Documentation. The Bank shall have
received such other information, certificates and executed documents as they
shall have reasonably requested.
Section 4.2. Conditions to All Disbursements. The obligation of the
Bank to make any Revolving Loan or Term Loan on any Disbursement Date,
including, but not limited to, the Disbursement Date first occurring, are
subject to the occurrence, prior to or on the Disbursement Date related to such
Revolving Loan or Term Loan, of each of the following conditions, any or all of
which may be waived in whole or in part by the Bank in writing:
4.2.1 Certificate. The Bank shall have received a certificate,
executed by the chief executive or chief financial officer of the Borrower,
certified as of such Disbursement Date, and confirming that, as of such
Disbursement Date:
(a) No Default or Event of Default has occurred and is
continuing; and
(b) The warranties and representations set forth in Section 5
of this Agreement are true and correct on and as of such Disbursement
Date.
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4.2.2 Bank Satisfaction. The Bank shall not know or have any
reasonable reason to believe that, as of such Disbursement Date:
(a) Any Default or Event of Default has occurred and is
continuing;
(b) Any warranty or representation set forth in Section 5 of
this Agreement shall not be true and correct; or
(c) Any provision of law, any order of any court or other
agency of government or any regulation, rule or interpretation thereof
shall have had any material adverse effect on the validity or
enforceability of this Agreement, the Notes, the Security Agreement, the
Financing Statements, the Guaranty or the Subordination Agreement.
ARTICLE 5. WARRANTIES AND REPRESENTATIONS.
The Borrower represents and warrants to the Bank that:
Section 5.1. Corporate Existence and Power. (a) The Borrower is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas, (b) the Borrower has the corporate power and
authority to own their respective properties and assets and to carry out their
respective business as now being conducted and are qualified to do business and
in good standing in every jurisdiction wherein such qualification is necessary
and (c) the Borrower has the corporate power and authority to execute and
perform this Agreement, to borrow money in accordance with its terms, to
execute and deliver the Notes and other documents contemplated hereby, to grant
to the Bank liens and security interest in the Collateral as hereby
contemplated and to do any and all other things required of it hereunder.
Section 5.2. Authorization and Approvals. The execution, delivery and
performance of this Agreement, the borrowing hereunder and the execution and
delivery of the Notes, the Security Agreements, the Financing Statements, and
other documents contemplated hereby have been duly authorized by all requisite
corporate action, (a) do not require registration with or consent or approval
of, or other action by, any federal, state or other governmental authority or
regulatory body, or, if such registration, consent or approval is required, the
same has been obtained and disclosed in writing to the Bank, (b) will not
violate any provision of law, any order of any court or other agency of
government, the Articles of Incorporation or Bylaws of the Borrower, any
provision of any indenture, agreement or other instrument to which the Borrower
is a party, or by which it or any of its properties or assets are bound, (c)
will not be in conflict with, result in a breach of or constitute (with or
without notice or passage of time) a default under any such indenture,
agreement or other instrument, and (d) will not result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Borrower other than in favor of the Bank and
as contemplated hereby. The execution, delivery and performance of the
Guaranty, and other documents contemplated thereby (e) do not require
registration with or consent or approval of, or other action by, any
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federal, state or other governmental authority or regulatory body, or, if such
registration, consent or approval is required, the same has been obtained and
disclosed in writing to the Bank, (f) will not violate any provision of law,
any order of any court or other agency of government, any provision of any
indenture, agreement or other instrument to which Guarantor is a party, or by
which either or any of their properties or assets are bound, (g) will not be in
conflict with, result in a breach of or constitute without notice or passage of
time) a default under any such indenture, agreement or other instrument, and
(h) will not result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the properties of the
Guarantor other than in favor of the Bank and as contemplated hereby.
Section 5.3. Valid and Binding Agreement. This Agreement is, and the
Notes, the Security Agreements, the Financing Statements, and all other
documents contemplated hereby will be, when delivered, valid and binding
obligations of the Borrower and/or Subsidiaries, and the Guaranty, and all
other documents contemplated thereby will be valid and binding obligations of
the Guarantor and/or owner of the life insurance policy, in each case
enforceable in accordance with their respective terms except as similar laws
and equitable principles affecting the enforcement of creditors' rights
generally.
Section 5.4. Actions, Suits or Proceedings. Except as disclosed on
Schedule 5.4, there are no actions, suits or proceedings, at law or in equity,
and no proceedings before any arbitrator or by or before any governmental
commission, board, bureau or other administrative agency, pending, or, to the
best knowledge of the Borrower, threatened against or affecting the Borrower,
any Subsidiary or Guarantor, or any properties or rights of the Borrower or any
of the Subsidiaries or Guarantor, which, if adversely determined, could
materially impair the right of the Borrower or any of the Subsidiaries to carry
on business substantially as now conducted or could have a material adverse
effect upon the financial condition of the Borrower, any Subsidiary or
Guarantor.
Section 5.5. Subsidiaries. Borrower has no subsidiaries.
Section 5.6. No Liens, Pledges, Mortgages or Security Interests. Except
for Permitted Liens, none of the Borrower's or the Subsidiaries' assets and
properties, including the Collateral, is subject to any mortgage, pledge, lien,
security interest or other encumbrance of any kind or character.
Section 5.7. Accounting Principles. The Financial Statements have been
prepared in accordance with GAAP and fully and fairly present the financial
condition of the Borrower and the Subsidiaries as of the dates, and the results
of their operations for the periods, for which the same are furnished to the
Bank. To the best of Borrower's knowledge and belief, the Borrower has no
material contingent obligations, liabilities for taxes, long-term leases or
unusual forward or long-term commitments not disclosed by, or reserved against
in, the Financial Statements.
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Section 5.8. No Adverse Changes. There has been no material adverse
change in the business, properties or condition (financial or otherwise) of the
Borrower or any of the Subsidiaries since the date of the latest of the
Financial Statements.
Section 5.9. Conditions Precedent. As of each Disbursement Date, all
appropriate conditions precedent referred to in Section 4 hereof shall have
been satisfied (or waived in writing by the Bank).
Section 5.10. Taxes. The Borrower and the Subsidiaries have filed by
the due date therefor all federal, state and local tax returns and other
reports they are required by law to file and which are material to the conduct
of their respective businesses, have paid or caused to be paid all taxes,
assessments and other governmental charges that are shown to be due and payable
under such returns, and have made adequate provision for the payment of such
taxes, assessments or other governmental charges which have accrued but are not
yet payable. The Borrower has no knowledge of any deficiency or assessment in
a material amount in connection with any taxes, assessments or other
governmental charges not adequately disclosed in the Financial Statements.
Section 5.11. Compliance with Laws. Except as disclosed on Schedule
5.11, the Borrower and the Subsidiaries have complied with all applicable laws,
to the extent that failure to comply would materially interfere with the
conduct of the business of the Borrower or any of the Subsidiaries.
Section 5.12. Indebtedness. Except as disclosed on Schedule 5.12, the
Borrower and the Subsidiaries have no indebtedness for money borrowed and no
direct or indirect obligations under any leases (whether or not required to be
capitalized under GAAP) or any agreements of guarantee or surety except for the
endorsement of negotiable instruments by the Borrower and the Subsidiaries in
the ordinary course of business for deposit or collection.
Section 5.13. Material Agreements. Except as disclosed on Schedule
5.13, the Borrower and the Subsidiaries have no material leases, contracts or
commitments of any kind (including, without limitation, employment agreements,
collective bargaining agreements, powers of attorney, distribution contracts,
patent or trademark licenses, contracts for future purchase or delivery of
goods or rendering of services, bonus, pension and retirement plans, or accrued
vacation pay, insurance and welfare agreements); to the best knowledge of
Borrower, all parties to such agreements (including the Borrower and the
Subsidiaries) have complied with the provisions of such leases, contracts or
commitments; and to the best knowledge of Borrower, no party to such agreements
(including the Borrower and the Subsidiaries) is in default thereunder, nor has
there occurred any event which with notice or the passage of time, or both,
would constitute such a default.
Section 5.14. Margin Stock. Neither the Borrower nor any of the
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying any
"margin stock" within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System, and no part of the proceeds of any loan
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hereunder will be used, directly or indirectly, to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock or for any other purpose which might violate the provisions of
Regulation G, T, U or X of the said Board of Governors. The Borrower does not
own any margin stock.
Section 5.15. Pension Funding. The Borrower has not incurred any
material accumulated funding deficiency within the meaning of ERISA and has not
incurred any material liability to the PBGC in connection with any employee
benefit plan established or maintained by the Borrower or any of the
Subsidiaries and no reportable event or prohibited transaction, as defined in
ERISA, has occurred with respect to such plans.
Section 5.16. Misrepresentation. No warranty or representation by the
Borrower contained herein or in any certificate or other document furnished by
the Borrower pursuant hereto contains any untrue statement of material fact or
omits to state a material fact necessary to make such warranty or
representation not misleading in light of the circumstances under which it was
made.
Section 5.17. Eligible Accounts. As to each Account represented by the
Borrower to be an "Eligible Account" on a Borrowing Base Certificate, as of the
date of each such Borrowing Base Certificate:
(a) Such Account arose in the ordinary course of the business
of Borrower out of either (i) a bona fide sale of Inventory by the
Borrower, and in such case such Inventory has in fact been shipped to,
and accepted and retained by, the appropriate account debtor or the sale
has otherwise been consummated in accordance with such order, or (ii)
services performed by the Borrower, under an enforceable contract, and
in such case such services have in fact been performed for the
appropriate account debtor in accordance with such contract.
(b) Such Account represents a legally valid and enforceable
claim which is due and owing to the Borrower, by such account debtor and
for such amount as is represented by the Borrower, to the Bank on such
Borrowing Base Certificate, such Account is due and payable not more
than thirty (30) days from the delivery of the related Inventory, or the
performance of the related services, giving rise to such Account and
such Account has not been due for more than ninety (90) days (from the
date of invoice).
(c) The unpaid balance of such Account is as represented by
the Borrower, and not subject to any defense, counterclaim, setoff,
credit, allowance or adjustment by the account debtor because of
returned, inferior or damaged Inventory or services, or for any other
reason, except for customary discounts allowed by Borrower, in the
ordinary course of business for prompt payment, and there is no
agreement between Borrower, the related account debtor and any other
person for any rebate, discount, concession or release of liability, in
whole or in part.
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(d) The transactions leading to the creation of such Account
comply with all applicable state and federal laws and regulations.
(e) The Borrower has granted to the Bank a perfected security
interest in such Account (as an item of the Collateral) prior in right
to all other persons (other than Permitted Liens), and such Account has
not been sold, transferred or otherwise assigned by the Borrower, to any
person, other than the Bank.
(f) Such Account is not represented by any note, trade
acceptance, draft or other negotiable instrument or by any chattel
paper, except any such as have been endorsed and delivered by the
Borrower, to the Bank on or prior to such Account's inclusion on such
Borrowing Base Certificate.
(g) The Borrower has not received, with respect to such
Account, any notice of the death of the related account debtor or any
partner thereof, nor of the dissolution, liquidation, termination of
existence, insolvency, business failure, appointment of a receiver for
any part of the property of, assignment for the benefit of creditors by,
or the filing of a petition in bankruptcy or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against, such
account debtor.
(h) The account debtor on such Account is not:
(i) an affiliate of the Borrower,
(ii) the United States of America or any department,
agency or instrumentality thereof,
(iii) a citizen or resident of any jurisdiction other
than one of the United States (unless such Foreign Account is
subject to a guaranty of payment in the form of a letter of
credit issued by a Bank which is acceptable to the Bank) or
(iv) an account debtor whom the Bank has, in the
exercise of such Bank's sole discretion, determined to be (based
on such factors as the Bank deems appropriate) an ineligible
account debtor and as to which the Bank has notified the
Borrower, provided, however, that any such notice shall not apply
as to any Account of such account debtor which has been included
on a Borrowing Base Certificate by the Borrower prior to the
giving of such notice by the Bank and which meets each and every
other requirement under this Agreement for the denomination of
such Account as an "Eligible Account."
NOTWITHSTANDING the foregoing, the Borrower may include in Eligible
Accounts, provided the Account is otherwise eligible hereunder, up to
$100,000.00 of Accounts where the account debtor is the United States of
America or any department, agency or instrumentality thereof.
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(i) Such Account is not payable by an account debtor for whom
Twenty-Five percent (25%) or more of the total amount then owed to the
Borrower and/or its Subsidiaries by that account debtor is ninety (90)
days or more from invoice date.
ARTICLE 6. AFFIRMATIVE COVENANTS.
From the date hereof until the principal of and interest on the Notes
and other Indebtedness is paid in full, the Borrower covenants and agrees that
it will:
Section 6.1. Financial and Other Information.
6.1.1 Annual Financial Reports. Furnish to the Bank in form
satisfactory to the Bank not later than one hundred and fifty (150) days
after the close of the 1996 fiscal year ending December 31, 1996 and not
later than one hundred and twenty (120) days after the close of each
fiscal year of the Borrower, beginning with the Borrower's fiscal year
ending December 31, 1997, on a consolidated and consolidating basis, a
balance sheet as at the close of each such fiscal year, statements of
income and statements of cash flows for each such fiscal year, and such
other comments and financial details as are usually included in similar
reports. Such reports shall be prepared in accordance with GAAP by
independent certified public accountants of recognized standing selected
by the Borrower and acceptable to the Bank and shall contain unqualified
opinions as to the fairness of the statements therein contained.
6.1.2 Monthly Financial Statements. Furnish to the Bank not
later than thirty (30) days after the close of each month of each fiscal
year of the Borrower, beginning with November 30, 1996, financial
statements containing the consolidated and consolidating balance sheet
of the Borrower and the Subsidiaries as of the end of each such period,
consolidated and consolidating statements of income and statements of
cash flows of the Borrower and the Subsidiaries up to the end of such
period. These statements shall be prepared on substantially the same
accounting basis as the statements required in Section 6.1.1 of this
Agreement and shall be in such detail as the Bank may require, and the
accuracy of the statements shall be certified by the chief executive or
financial officer of the Borrower.
6.1.3 No Default Certificate. Together with each delivery of
the financial statements required by Sections 6.1.1 and 6.1.2 of this
Agreement, furnish to the Bank a certificate of its chief executive or
financial officer stating that no Event of Default or Default has
occurred, or if any such Event of Default or Default exists, stating the
nature thereof, the period of existence thereof and what action the
Borrower proposes to take with respect thereto. Such certificate shall
also demonstrate, by showing the applicable ratio or other calculation,
with such supporting information as the Bank requires, that the Borrower
is in compliance with Section 6.5 through and including Section 6.8.
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6.1.4 Aging and Backlog Reports. Furnish to the Bank monthly by
the twentieth (20th) of the succeeding month an aging as of the end of
the preceding month of Borrower's and Subsidiaries' (i) Accounts and
(ii) accounts payable together with Inventory listings and backlog
reports in forms satisfactory to the Bank.
6.1.5 Borrowing Base Certificate. Furnish to the Bank not later
than twenty (20) after the close of each month, a Borrowing Base
Certificate confirming that the aggregate unpaid principal amount of all
Revolving Loans does not exceed the lesser of the Commitment Amount or
the Borrowing Base as then in effect (or, if such is not the case,
accompanied by a prepayment of the Revolving Credit Note in accordance
with Section 2.8.2 of this Agreement). Such reports shall be delivered
to the Bank no later than twenty (20) days after the date thereof but
shall only be due if there are funds outstanding on the Revolving Credit
Note.
6.1.6 Adverse Events. Promptly inform the Bank of the
occurrence of any Event of Default or Default, or of any occurrence
which has or could reasonably be expected to have a materially adverse
effect upon the Borrower's business, properties, financial condition or
ability to comply with its obligations hereunder.
6.1.7 Shareholder Reports. Promptly furnish to the Bank upon
becoming available a copy of all financial statements, reports, notices,
proxy statements and other communications sent by the Borrower to its
stockholders, and all regular and periodic reports filed by the Borrower
with any securities exchange, the Securities and Exchange Commission or
any other state or federal agency.
6.1.8 Management Letters. Furnish to the Bank, promptly upon
receipt thereof, copies of all management letters and other reports of
substance submitted to the Borrower by independent certified public
accountants in connection with any annual or interim audit of the books
of the Borrower.
6.1.9 Accounts Receivable Audit. Allow the Bank to conduct, at
least once per year, and as of such dates as the Bank shall designate,
an audit and verification of the Borrower's and/or Subsidiaries'
Accounts, to be performed by the Bank or such other party as the Bank
shall designate, and to be performed in such form and detail as the Bank
shall reasonably require.
6.1.10 Financial Statements of Guarantors. To cause to be
furnished to the Bank annually, and no later than one hundred twenty
(120) days after the end of each calendar year, the annual financial
statement of each Guarantor, which statements shall be in such form and
detail as the Bank shall reasonably request, and to contain a listing of
assets and liabilities and a summary of cash uses and sources, together
with a copy, as soon as it is filed, of each Guarantor's annual federal
income tax return.
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6.1.11 Other Information as Requested. Promptly furnish to the
Bank such other information regarding the operations, business affairs
and financial condition of the Borrower and the Subsidiaries as the Bank
may reasonably request from time to time and permit the Bank, its
employees, attorneys and agents, to inspect all of the books, records
and properties of the Borrower and the Subsidiaries at any reasonable
time during normal business hours.
Section 6.2. Insurance. Keep its insurable properties (including, but
not limited to, the Collateral) and the insurable properties of the
Subsidiaries adequately insured and maintain (a) insurance against fire and
other risks customarily insured against by companies engaged in the same or a
similar business to that of the Borrower or the Subsidiaries, (b) necessary
worker's compensation insurance, (c) public liability and product liability
insurance, and (d) such other insurance as may be required by law or as may be
reasonably required in writing by the Bank, all of which insurance shall be in
such amounts, containing such terms, in such form, for such purposes and
written by such companies as may be satisfactory to the Bank. All such
policies shall contain a provision whereby they may not be canceled except upon
thirty days' prior written notice to the Bank. The Borrower will deliver to
the Bank, at the Bank's request, evidence satisfactory to the Bank that such
insurance has been so procured and, with respect to casualty insurance, names
the Bank as "mortgagee" and "loss payee" (to the extent doing so is not
prohibited under the terms of any lease which the Debtor is a party to) and
provides for payment to the Bank even if the Borrower would not be entitled to
receive payment of any proceeds. If the Borrower fails to maintain
satisfactory insurance as herein provided, the Bank shall have the option to do
so, and the Borrower agrees to repay the Bank, with interest at five percent
(5%) per annum plus the Base Rate, all amounts so expended by the Bank. The
Borrower hereby appoints the Bank as Borrower's attorney-in-fact, which
appointment is coupled with an interest and irrevocable, to endorse any check
or draft payable to the Borrower in connection with returned or unearned
premiums on said insurance or the proceeds of said insurance, and any amount so
collected may be applied toward satisfaction of the Indebtedness, provided,
however, that the Bank shall not be required hereunder so to act.
Section 6.3. Taxes. Pay promptly and within the time that they can be
paid without interest or penalty all taxes, assessments and similar imposts and
charges of every kind and nature lawfully levied, assessed or imposed upon the
Borrower, the Subsidiaries and their respective property, except to the extent
being contested in good faith and, if requested by the Bank, bonded in a manner
satisfactory to the Bank. If the Borrower shall fail to pay such taxes and
assessments by their due date, the Bank shall have the option to do so, and the
Borrower agrees to repay the Bank, with interest at five percent (5%) per annum
plus the Base Rate, all amounts so expended by the Bank.
Section 6.4. Maintain Corporation and Business. Do or cause to be done
all things necessary to preserve and keep in full force and effect the
Borrower's and the Subsidiaries' corporate existence, rights and franchises and
comply with all applicable laws; continue to conduct and operate their
respective businesses substantially as conducted and operated during the
present and preceding calendar year; at all times maintain, preserve and
protect all franchises
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and trade names and preserve all the remainder of their respective property
used or useful in the conduct of their respective business and keep the same in
good repair, working order and condition; and from time to time make, or cause
to be made, all needed and proper repairs, renewals, replacements, betterments
and improvements thereto so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
Section 6.5. Tangible Net Worth Step Up Requirement. The Borrower
shall increase its Tangible Net Worth by not less than $150,000.00 per fiscal
year.
Section 6.6. Maintain Debt Ratio. The Borrower shall maintain the
ratio of Debt to Tangible Net Worth of not more than 2.75 to 1.0.
Section 6.7. Maintain Working Capital. The Borrower shall maintain
minimum Working Capital of $200,000.00. For purposes hereof, "Working Capital"
shall mean the sum of all cash, plus accounts receivable (less accounts
receivable more than ninety days old and less any accounts for which there is a
dispute concerning payment) plus inventory (less any obsolete inventory) less
all Current Liabilities.
Section 6.8. Maintain Fixed Charge Coverage. The Borrower shall
maintain a Fixed Charge Coverage ratio of not less than 1.10 to 1.0 to be
calculated quarterly on a rolling quarterly basis.
For purposes hereof, "Fixed Charge Coverage" shall mean the sum of net income
plus depreciation, plus amortization plus interest expense, divided by the sum
of current maturities of long-term debt (the Revolving Credit Note being
considered short-term debt for purposes hereof) plus current maturities of
capital leases, plus interest expense plus non-financed capital expenditures.
Section 6.9. ERISA. (a) At all times meet and cause each of the
Subsidiaries to meet the minimum funding requirements of ERISA with respect to
the Borrower's and the Subsidiaries' employee benefit plans subject to ERISA;
(b) promptly after the Borrower knows (i) of the occurrence of any event, which
would constitute a reportable event or prohibited transaction under ERISA, or
(ii) that the PBGC or the Borrower (or any Subsidiary) has instituted or will
institute proceedings to terminate an employee pension plan, deliver to the
Bank a certificate of the chief financial officer of the Borrower setting forth
details as to such event or proceedings and the action which the Borrower (or
such Subsidiary) proposes to take with respect thereto, together with a copy of
any notice of such event which may be required to be filed with the PBGC; and
(c) furnish to the Bank (or cause the plan administrator to furnish the Bank) a
copy of the annual return (including all schedules and attachments) for each
plan covered by ERISA, and filed with the Internal Revenue Service by the
Borrower (or any Subsidiary), not later than ten (10) days after such report
has been so filed.
Section 6.10. Use of Loan Proceeds. Use the proceeds of the loan
hereunder for the purpose set forth in the recitals to this Agreement.
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ARTICLE 7. NEGATIVE COVENANTS.
From the date hereof until the principal of and interest on the Notes
and other Indebtedness is paid in full, the Borrower covenants and agrees that
it will not, and will not permit any Subsidiary to:
Section 7.1. Dividends. Declare or pay any dividend (other than
dividends payable solely in shares of its capital stock) on, or make any other
distribution with respect to (whether by reduction of capital or otherwise),
any shares of its capital stock, except that dividends from any Subsidiary to
the Borrower are permitted.
Section 7.2. Stock Issuance. Issue any additional shares of its
capital stock, or any warrant, right or option relating thereto or any security
convertible into any of the foregoing.
NOTWITHSTANDING the foregoing, the Borrower may issue (i) currently
authorized but unissued shares and/or (ii) stock options, and allow those
options to be exercised, so long as, after taking into account the purchase of
any currently authorized but unissued shares and/or the exercise of any stock
options, at all times Xxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxxx and Xxxx X.
Xxxxxxxxx collectively own and control the voting rights to FIFTY-ONE percent
(51%) or more, both before and after the issuance of any currently authorized
but unissued shares and/or the exercise of any such options, of the voting
stock of the Borrower.
Section 7.3. Stock Acquisition. Purchase, redeem, retire or otherwise
acquire any of the shares of its capital stock, or make any commitment to do
so.
Section 7.4. Liens and Encumbrances. Create, incur, assume or suffer
to exist any mortgage, pledge, encumbrance, security interest, lien or charge
of any kind (including any charge upon property purchased or acquired under a
conditional sales or other title-retaining agreement or lease required to be
capitalized under GAAP) upon any of its property or assets, whether now owned
or hereafter acquired, other than Permitted Liens.
Section 7.5. Indebtedness. Incur, create, assume or permit to exist
any indebtedness or liability on account of deposits or advances or any
indebtedness or liability for borrowed money, or any other indebtedness or
liability evidenced by notes, bonds, debentures or similar obligations, or any
other indebtedness whatsoever, except for (a) the Indebtedness, (b)
indebtedness subordinated to the prior payment in full of the Indebtedness upon
terms and conditions approved in writing by the Bank, (c) existing indebtedness
to the extent set forth on Schedule 5.12, (d) trade indebtedness incurred and
paid in the ordinary course of business, (e) contingent indebtedness to the
extent permitted by Section 7.7 of this Agreement, (f) indebtedness secured by
Permitted Liens, (g) purchase money indebtedness, not to exceed ONE HUNDRED
FIFTY THOUSAND AND NO/100 Dollars ($150,000.00) each fiscal year, where used to
acquire equipment, and (h) obligations to the extent permitted by Section 7.11
of this Agreement.
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Section 7.6. Extension of Credit. Make loans, advances or extensions
of credit to any person, except for sales on open account and otherwise in the
ordinary course of business.
Section 7.7. Guarantee Obligations. Guarantee or otherwise, directly
or indirectly, in any way be or become responsible for obligations of any other
person, whether by agreement to purchase the indebtedness of any other person,
agreement for the furnishing of funds to any other person through the
furnishing of goods, supplies or services, by way of stock purchase, capital
contribution, advance or loan, for the purpose of paying or discharging (or
causing the payment or discharge of) the indebtedness of any other person, or
otherwise, except for the endorsement of negotiable instruments by the Borrower
or the Subsidiaries in the ordinary course of business for deposit or
collection.
Section 7.8. Subordinate Indebtedness. Subordinate any indebtedness
due to it from a person to indebtedness of other creditors of such person.
Section 7.9. Property Transfer, Merger or Lease-Back. (a) Sell, lease,
transfer or otherwise dispose of all or, except as to the sale of Inventory in
the ordinary course of business, any material part of its properties and assets
(whether in one transaction or in a series of transactions), (b) change its
name, consolidate with or merge into any other corporation, permit another
corporation to merge into it, acquire all or substantially all the properties
or assets of any other person, enter into any reorganization or
recapitalization or reclassify its capital stock (NOTWITHSTANDING the
foregoing, should the Borrower desire to acquire a business in substantially
the same line of business that the Borrower is currently in, and further
provided that such acquisition shall not otherwise result in an Event of
Default hereunder, nor impose upon the Borrower or its management, any undue
financial or managerial constraints or burdens, the Bank shall not unreasonably
withhold or delay its approval of any written request, containing such
information as the Bank shall reasonably require to make its decision, of the
acquisition by the Borrower of any such business), or (c) enter into any
sale-leaseback transaction; provided, however, that a Subsidiary wholly owned
by the Borrower may be merged into, or consolidated with, the Borrower or
another Subsidiary wholly owned by the Borrower, and such Subsidiary may sell,
lease or transfer all or a substantial part of its assets to the Borrower or
another Subsidiary wholly owned by the Borrower, and the Borrower or such
Subsidiary may acquire all or substantially all of the properties and assets of
the Subsidiary so to be merged into, or consolidated with, it or so to be sold,
leased or transferred to it.
Section 7.10. Acquire Securities. Purchase or hold beneficially any
stock or other securities of, or make any investment or acquire any interest
whatsoever in, any other person except for certificates of deposit with
maturities of one year or less of United States commercial banks with capital,
surplus and undivided profits in excess of $100,000,000 and direct obligations
of the United States Government maturing within one year from the date of
acquisition thereof.
Section 7.11. Pension Plans. (a) Allow any fact, condition or event to
occur or exist with respect to an employee pension or profit sharing plan which
might constitute grounds for termination of any such plan or for the
appointment by a United States District Court of a trustee
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to administer any such plan, or (b) permit any such plan to be the subject of
termination proceedings (whether voluntary or involuntary) from which
termination proceedings there may result a liability of the Borrower or any of
the Subsidiaries to the PBGC which in the opinion of the Bank, will have a
materially adverse effect upon the operations, business, property, assets,
financial condition or credit of the Borrower.
Section 7.12. Misrepresentation. Furnish the Bank with any certificate
or other document that contains any untrue statement of a material fact or
omits to state a material fact necessary to make such certificate or document
not misleading in light of the circumstances under which it was furnished.
Section 7.13. Margin Stock. Apply any of the proceeds of the Notes to
the purchase of carrying of any "margin stock" within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder.
Section 7.14. Compliance with Environmental Laws. Borrower will not,
and will not allow any Subsidiary to, (i) use (or permit any tenant to use) any
of its respective properties or assets for the handling, processing, storage,
transportation, or disposal of any Hazardous Substance except in all respects
in compliance with Environmental Laws, (ii) generate any Hazardous Substance
except in all respects in compliance with Environmental Laws, (iii) conduct any
activity which is likely to cause a release of any Hazardous Substance, or (iv)
otherwise conduct any activity or use any of its respective properties or
assets in any manner that is likely to violate any Environmental Law.
Section 7.15. Capital Expenditures. Acquire or expend money for, or
commit itself to acquire or expend money for by lease, purchase or otherwise,
fixed assets in excess of $500,000.00 per fiscal year.
Section 7.16. Bonus or Dividend for Taxes. The Borrower is a Subchapter
S Corporation for federal income tax purposes. Annually, the Borrower may pay
a bonus or dividend to the Guarantors in cash sufficient to pay the federal
income taxes attributable to the net income of the Borrower attributed to the
Guarantors under the provisions of Subchapter S.
ARTICLE 8. EVENTS OF DEFAULT - ENFORCEMENT -
APPLICATION OF PROCEEDS.
Section 8.1. Events of Default. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
8.1.1 Failure to Pay Monies Due. If any principal of or
interest on the Notes, any fees under Section 2.7 of this Agreement or
any other Indebtedness shall not be paid when due.
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8.1.2 Misrepresentation. If any warranty or representation of
the borrower in connection with or contained in this Agreement, or if
any financial data or other information now or hereafter furnished to
the Bank by or on behalf of the Borrower, shall prove to be false or
misleading in any material respect.
8.1.3 Noncompliance with Bank Agreement. If the Borrower or the
Guarantor shall fail to perform any of its obligations and covenants
under, or shall fail to comply with any of the provisions of, this
Agreement or any other agreement with the Bank to which it may be a
party, including, without limitation, any indebtedness owed by Guarantor
to the Bank.
8.1.4 Other Defaults. If the Borrower or any Subsidiary or
Guarantor shall default in the due payment of any of its indebtedness
(other than the Indebtedness) or in the observance or performance of any
term, covenant or condition in any agreement or instrument evidencing,
securing or relating to such indebtedness and such default shall be
continued for a period sufficient to permit acceleration of the
indebtedness, irrespective of whether any such default shall be forgiven
or waived by the holder thereof.
8.1.5 Judgments. If there shall be rendered against the
Borrower or any Subsidiary or the Guarantor, one or more judgments or
decrees involving an aggregate liability of $20,000.00 or more, which
has or have become nonappealable and shall remain undischarged,
unsatisfied by insurance and unstayed for more than 45 days, whether or
not consecutive; or of a writ of attachment or garnishment against the
property of the Borrower or any of the Subsidiaries or the Guarantor
shall be issued and levied in an action claiming $20,000.00 or more and
not released or appealed and bonded in a manner satisfactory to the
Bank.
8.1.6 Business Suspension, Bankruptcy, Etc. If the Borrower or
any Subsidiary shall voluntarily suspend transaction of its business; or
if the Guarantor shall die; or if the Borrower or any Subsidiary or the
Guarantor shall not pay its debts as they mature or shall make a general
assignment for the benefit of creditors; or proceedings in bankruptcy,
or for reorganization or liquidation of the Borrower or any Subsidiary
or the Guarantor, under the Bankruptcy Code or under any other state or
federal law for the relief of debtors shall be commenced by the Borrower
or any Subsidiary or the Guarantor or shall be commenced against the
Borrower or any Subsidiary or the Guarantor and shall not be discharged
within thirty (30) days of commencement; or a receiver, trustee or
custodian shall be appointed for the Borrower or any Subsidiary or the
Guarantor or for any substantial portion of its respective properties or
assets.
8.1.7 Change of Control or Management. If the Borrower or a
controlling portion of its voting stock or a substantial portion of its
assets comes under the practical, beneficial or effective control of one
or more persons other than Xxxxxxx X. Xxxxxxx, Xxxx X. Xxxxxxxxx or
Xxxxx X. Xxxxxxxx whether by reason of death, merger, consolidation,
sale or purchase of assets or stock or otherwise; or if any TWO (2) of
the
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following are no longer active in the day-to-day management of the
Borrower: Xxxxxxx X. Xxxxxxx, Xxxx X. Xxxxxxxxx or Xxxxx X. Xxxxxxxx,
and if any such change of control adversely impacts, in the sole
judgment of the Bank, upon the ability of the Borrower to carry on its
business as theretofore conducted.
8.1.8 Inadequate Funding or Termination of Employee/Benefit
Plan(s). If the Borrower (or any Subsidiary) shall fail to meet its
minimum funding requirements under ERISA with respect to any employee
benefit plan established or maintained by the Borrower (or any
Subsidiary), or if any such plan shall be, for a period of sixty (60)
days after they commence, the subject of termination proceedings
(whether voluntary or involuntary) or there shall result from such
termination proceedings a liability of Borrower (or any subsidiary) to
the PBGC which in the opinion of the Bank will have a materially adverse
effect upon the operations, business, property, assets, financial
condition or credit of the Borrower.
8.1.9 Occurrence of Certain Reportable Events. If there shall
occur, with respect to any pension plan maintained by the Borrower or
any Subsidiary, any reportable event (within the meaning of section
4043(b) of ERISA) which the Bank shall determine in good faith
constitutes a ground for the termination of any such plan, and if such
event continues for thirty (30) days after the Bank gives written notice
to the Borrower, provided that termination of such plan or appointment
of such trustee would, in the opinion of the Bank, have a materially
adverse effect upon the operations, business, property, assets,
financial condition or credit of the Borrower.
Section 8.2. Acceleration of Indebtedness. Upon the occurrence of any
of the Events of Default described in Section 8.1.3 hereunder which is not
cured by the Borrower or waived by the Bank within 30 days after the earlier of
the date of notice to the Borrower by the Bank of such Default or the date the
Bank is notified, or should have been notified, pursuant to Borrower's
obligation under Section 6.1.5 of this Agreement, of such Default, or upon the
occurrence of any of the Events of Default described in Section 8.1.1, Section
8.1.2 or Sections 8.1.4 through 8.1.9, all Indebtedness shall be due and
payable in full forthwith at the option of the Bank without presentation,
demand, protest, notice of dishonor or other notice of any kind, all of which
are hereby expressly waived. Unless all of the Indebtedness is then fully paid,
the Bank shall have and may exercise any one or more of the rights and remedies
for which provision is made for a secured party under UCC, under the Security
Agreements, or under any other document contemplated hereby, including, without
limitation, the right to take possession and sell, lease or otherwise dispose
of any or all of the Collateral and to setoff against the Indebtedness any
amount owing by the Bank to the Borrower. The Borrower agrees, upon request of
the Bank, to assemble the Collateral and make it available to the Bank at any
place designated by the Bank which is reasonably convenient to the Bank and the
Borrower.
Section 8.3. Application of Proceeds. The proceeds of any sale or
other disposition of the Collateral authorized by this Agreement shall be
applied by the Bank, first upon all expenses authorized by the Uniform
Commercial Code and all reasonable attorneys' fees and legal
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expenses incurred by the Bank; the balance of the proceeds of such sale or
other disposition shall be applied in the payment of the Indebtedness, first to
interest, then to principal; and the surplus, if any, shall be paid over to the
Borrower or to such other person or persons as may be entitled thereto under
applicable law. The Borrower shall remain liable for any deficiency, which the
Borrower shall pay to the Bank immediately upon demand.
Section 8.4. Cumulative Remedies. The remedies provided for herein are
cumulative to the remedies for collection of the Indebtedness as provided by
law or by any mortgage, security agreement or other document contemplated
hereby. Nothing herein contained is intended, nor should it be construed, to
preclude the Bank from pursuing any other remedy for the recovery of any other
sum to which the Bank may be or become entitled for the breach of this
Agreement by the Borrower.
ARTICLE 9. MISCELLANEOUS.
Section 9.1. Independent Rights. No single or partial exercise of any
right, power or privilege hereunder, or any delay in the exercise thereof,
shall preclude other or further exercise of the rights of the parties to this
Agreement.
Section 9.2. Covenant Independence. Each covenant in this Agreement
shall be deemed to be independent of any other covenant, and an exception in
one covenant shall not create an exception in another covenant.
Section 9.3. Waivers and Amendments. No forbearance on the part of the
Bank in enforcing any of its rights under this Agreement, nor any renewal,
extension or rearrangement of any payment or covenant to be made or performed
by the Borrower hereunder, shall constitute a waiver of any of the terms of
this Agreement or of any such right. No Default or Event of Default shall be
waived by the Bank except in writing signed and delivered by an officer of the
Bank, and no waiver of any Default or Event of Default shall operate as a
waiver of any other Default or Event of Default or of the same Default or Event
of Default on a future occasion. No other amendment, modification or waiver
of, or consent with respect to, any provision of this Agreement or the Notes or
other documents contemplated hereby shall be effective unless the same shall be
in writing and signed and delivered by an officer of the Bank.
Section 9.4. GOVERNING LAW. THIS AGREEMENT, AND EACH AND EVERY TERM
AND PROVISION HEREOF, SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF
THE STATE OF TEXAS. IF ANY PROVISIONS OF THIS AGREEMENT SHALL FOR ANY REASON
BE HELD INVALID OR UNENFORCEABLE, SUCH INVALIDITY OR UNENFORCEABILITY SHALL NOT
AFFECT ANY OTHER PROVISION HEREOF, BUT THIS AGREEMENT SHALL BE CONSTRUED AS IF
SUCH INVALID OR UNENFORCEABLE PROVISION HAD NEVER BEEN CONTAINED HEREIN.
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Section 9.5. Survival of Warranties, Etc. All of the Borrower's
covenants, agreements, representations and warranties made in connection with
this Agreement and any document contemplated hereby shall survive the borrowing
and the delivery of the Notes hereunder and shall be deemed to have been relied
upon by the Bank, notwithstanding any investigation heretofore or hereafter
made by the Bank. All statements contained in any certificate or other
document delivered to the Bank at any time by or on behalf of the Borrower
pursuant hereto or in connection with the transactions contemplated hereby
shall constitute representations and warranties by the Borrower in connection
with this Agreement.
Section 9.6. Attorneys' Fees. The Borrower agrees that it will pay all
reasonable costs and expenses of the Bank in connection with the enforcement of
the Bank's rights and remedies under this Agreement and in connection with the
preparation or making of any amendments, modifications, waivers or consents
with respect to this Agreement.
Section 9.7. Payments on Saturdays, Etc. Whenever any payment to be
made hereunder or under the Notes shall be stated to be due on a Saturday,
Sunday or any other day which is not a Business Day, such payment may be made
on the next succeeding Business Day, and such extension, if any, shall be
included in computing interest in connection with such payment.
Section 9.8. Binding Effect. This Agreement shall inure to the benefit
of and shall be binding upon the parties hereto and their respective successors
and assigns; provided, however, the Borrower may not assign or transfer its
rights or obligations hereunder without the prior written consent of the Bank.
Section 9.9. Maintenance of Records. The Borrower will keep all of its
records concerning the Collateral at its principal place of business. The
Borrower will give the Bank prompt written notice of any change in its
principal place of business, or in the location of said records.
Section 9.10. Notices. All notices and communications provided for
herein or in any document contemplated hereby or required by law to be given
shall be effective when received or, in the case of notices from the Bank to
the Borrower, if notice is given by mail three (3) days after the deposit
thereof, postage prepaid, and return receipt requested, by first United States
class mail, addressed as follows:
To Borrower: Neutral Posture Ergonomics, Inc.
0000 Xxxxx Xxxxx Xxxxxx
Xxxxx, Xxxxx 00000
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To the Bank: Comerica Bank-Texas
P.O. Box 6502828
Mail Code 6627
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxx X. Xxx
Senior Vice President
With a copy to: Comerica Bank-Texas
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxx X. Xxxxxxxx
Vice President
(or to such other address as a party shall have designated to the other in
writing.) The giving of at least five (5) days' notice before the Bank shall
take any action described in any notice shall conclusively be deemed reasonable
for all purposes.
Section 9.11. Counterparts. This Agreement may be signed in any number
of counterparts with the same effect as if the signatures were upon the same
instrument.
Section 9.12. Headings. Article and section headings in this Agreement
are included for the convenience of reference only and shall not constitute a
part of this Agreement for any purpose.
Section 9.13. Capital Adequacy. If as a result of any regulatory change
directly or indirectly affecting the Bank or any of the Bank's affiliates there
shall be imposed, modified or deemed applicable any tax, reserve, special
deposit, minimum capital, capital ratio, or similar requirement against or with
respect to or measured by reference to loans made or to be made hereunder or
participations therein, and the result shall be to increase the cost to the
Bank or any of the Bank's affiliates of making or maintaining any loan
hereunder or to any other party maintaining any participation therein, or
reduce any amount receivable in respect of any such loan (which increase in
cost, or reduction in amount receivable, shall be the result of the Bank's or
the Bank's affiliated company's reasonable allocation among all affected
customers of the aggregate of such increases or reductions resulting from such
event), then, within ten (10) days after receipt by the Borrower of a
certificate from the Bank containing the information described in this Section
below which shall be delivered to the Borrower, the Borrower agrees from time
to time to pay the Bank such additional amounts as shall be sufficient to
compensate the Bank or any of the Bank's affiliates (for as long as such
increased costs or reductions in amount receivable exist) for such increased
costs or reductions in amount receivable which the Bank determines in the
Bank's sole discretion are material. The certificate requesting compensation
under this Section shall identify the regulatory change which has occurred, the
requirements which have been imposed, modified or deemed applicable, the amount
of such additional cost or reduction in amount receivable and the way in which
such amount has been calculated.
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Section 9.14. Indemnification by the Borrower. The Borrower hereby
covenants and agrees to indemnify, defend and hold harmless the Bank and its
officers, directors, employees and agents from and against any and all claims,
damages, liabilities, costs and expenses (including without limitation, the
fees and out-of-pocket expenses of counsel) which may be incurred by or
asserted against the Bank or any such other individual or entity in connection
with:
(a) any investigation, action or proceeding arising out of or
in any way relating to this Agreement, the Notes, or any other documents
or agreements relating to the loans or any collateral, or any act or
omission relating to any of the foregoing other than an act or omission
constituting wilful misconduct by the Bank and/or its officers,
directors, employees or agents;
(b) any taxes (other than federal or state income taxes),
liabilities, claims or damages relating to the Collateral or the Bank's
liens thereon; or
(c) the correctness, validity or genuineness of any
instruments or documents that may be released or endorsed to Borrower by
the Bank (which shall automatically be deemed to be without recourse to
the Bank in any event), or the existence, character, quantity, quality,
condition, value or delivery of any goods purporting to be represented
by any such documents.
Section 9.15. NO ORAL AGREEMENTS. THIS AGREEMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENTS BETWEEN THE
BANK AND THE BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE BANK AND THE BORROWER.
Section 9.16. Gender. Throughout this Agreement, the masculine shall
include the feminine and vice versa and the singular shall include the plural
and vice versa, unless the context of this Agreement indicates otherwise.
Section 9.17. Joint Borrowers. If more than one party executes this
Agreement as Borrower, then for the purpose of this Agreement the term Borrower
shall mean each such party and each such party shall be jointly and severally
liable as Borrower for the Obligations as defined herein without regard to
which party receives the proceeds of any of the Loans. Each such party hereby
acknowledges that it expects to derive economic advantage from each of the
Loans.
Section 9.18. Cross Default; Cross Collateral. The Borrower hereby
agrees that (a) all other agreements between Borrower and the Bank or any of
its affiliates is hereby amended so that a default under this Agreement is a
default under all other agreements and a default under any one of the other
agreements is a default under this Agreement, and (b) the collateral under
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this Agreement secures the obligations now or hereafter outstanding under all
other agreements between Borrower and the Bank or any of its affiliates and the
collateral pledged under any other agreement with the Bank or any of its
affiliates secures the obligations under this Agreement.
Section 9.19. Assignment. The Bank shall have the absolute and
unrestricted right to sell, assign, transfer, or grant participation in, all or
any portion of the loans and any collateral, guaranties or other security
relating thereto without the consent of Borrower; provided, however, no such
action on the part of the Bank shall have the effect of changing any of the
Borrower's obligations hereunder without the written consent of the Borrower.
SECTION 9.20. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMISSIBLE
BY APPLICABLE LAW, THE BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL
RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTER-CLAIM (WHETHER
BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF
THE LOAN DOCUMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF THE
BANK IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT HEREOF.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
written above.
THIS AGREEMENT HAS AN INDEMNITY PROVISION AT SECTION 9.14.
NEUTRAL POSTURE ERGONOMICS, INC.,
a Texas corporation
By: /s/ XXXXX X. XXXXXXXX
--------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President
COMERICA BANK-TEXAS
By: /s/ XXXX X. XXXXXXXX
--------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Vice President
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