LOAN AGREEMENT
August 15, 1998
Xxxxxxxx Construction Company
X.X. Xxx 00000
Xxxxxx, Xxxxx 00000
Gentlemen:
This Loan Agreement (the "Loan Agreement") will serve to set forth the
terms of the financing transactions by and between Xxxxxxxx Construction Company
(Borrower"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION ("Bank"):
1. Credit Facilities. Subject to the terms and conditions set forth in
this Loan Agreement and the other agreements, instruments and documents
evidencing, securing, governing, guaranteeing and/or pertaining to the Loans, as
hereinafter defined (collectively, together with the Loan Agreement, referred to
hereinafter as the "Loan Documents"), Bank hereby agrees to provide to Borrower
the credit facility or facilities described in the paragraphs below (whether one
or more, the "Credit Facilities"):
Borrowing Base Line of Credit. Subject to the terms and
conditions set forth herein, Bank agrees to lend to Borrower, on
a revolving basis from time to time during the period commencing
on the date hereof and continuing through and including 11:00
a.m. (Central time) on August 15, 1999 (the "Borrowing Base
Termination Date"), such amounts as Borrower may request
hereunder; provided, however, the total principal amount
outstanding at any time shall not exceed the lesser of (i) an
amount equal to the Borrowing Base (as such term is defined and
determined in accordance with Addendum I attached hereto), or
(ii) $2,000,000.00 (the "Borrowing Base Line of Credit"). If at
any time the aggregate principal amount outstanding under the
Borrowing Base Line of Credit shall exceed an amount equal to
the Borrowing Base, Borrower agrees to immediately repay to Bank
such excess amount, plus all accrued but unpaid interest
thereon. Subject to the terms and conditions hereof, Borrower
may borrow, repay and reborrow hereunder. The sums advanced
under the Borrowing Base Line of Credit shall be used for
accounts receivable support up to $1,600,000, and issuance of
letters of credit up to $400,000.
All advances under the Credit Facilities shall be collectively called the
"Loans". Bank reserves the right to require Borrower to give Bank not less than
one (1) business day prior notice of each requested advance under the Credit
Facilities, specifying (i) the aggregate amount of such requested advance, (ii)
the requested date of such advance, and (iii) the purpose for such advance, with
such advances to be requested in a form satisfactory to Bank.
2. Promissory Notes. The Loans shall be evidenced by one or more
promissory notes (whether one or more, together with any renewals, extensions
and increases thereof, the "Notes") duly executed by Borrower and payable to the
order of Bank, in form and substance acceptable to Bank. Interest on the Notes
shall accrue at the rate set forth therein. The principal of and interest on the
Notes shall be due and payable in accordance with the terms and conditions set
forth in the Notes and in this Loan Agreement.
3. Collateral. As collateral and security for the indebtedness evidenced
by the Notes and any and all other indebtedness or obligations from time to time
owing by Borrower to Bank (the "Indebtedness"), Borrower shall grant, and hereby
grants, to Bank, its successors and assigns, a first and prior lien and security
interest in and to the property described below, together with any and all
PRODUCTS AND PROCEEDS thereof (the "Collateral"):
All of Borrower's present and future accounts, chattel paper,
contract rights and general intangibles.
All of Borrower's present and future inventory.
All of Borrower's present and future equipment, fixtures,
furniture and furnishings.
Borrower agrees to execute such security agreements, assignments, deeds of trust
and other agreements and documents as Bank shall deem appropriate and otherwise
require from time to time to more fully create and perfect Bank's lien and
security interests in the Collateral.
4. Guarantors. As a condition precedent to the Bank's obligation to make
the Loans to Borrower, Borrower agrees to cause all of the following individuals
and/or entities (whether one or more, the "Guarantors") to each execute and
deliver to Bank contemporaneously herewith a guaranty agreement, in form and
substance satisfactory to Bank:
Names of Guarantors
Xxx Xxxxxxxx
5. Representations and Warranties. Borrower hereby represents and
warrants, and upon each request for an advance under the Credit Facilities
further represents and warrants, to Bank as follows:
(a) Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas and all other states
where it is doing business, and has all requisite power and authority to
execute and deliver the Loan Documents; and
(b) The execution, delivery, and performance of this Loan Agreement and
all of the other Loan Documents by Borrower have been duly authorized by
all necessary action by Borrower, and constitute legal, valid and
binding obligations of Borrower, enforceable in accordance with their
respective terms, except as limited by bankruptcy, insolvency or similar
laws of general application relating to the enforcement of creditors'
rights and except to the extent specific remedies may generally be
limited by equitable principles; and
(c) The execution, delivery and performance of this Loan Agreement and
the other Loan Documents, and the consummation of the transactions
contemplated hereby and thereby, do not (i) conflict with, result in a
violation of, or constitute a default under (A) any provision of its
articles or certificate of incorporation or bylaws, if Borrower is a
corporation, or its partnership agreement, if Borrower is a partnership,
or any agreement or other instrument binding upon Borrower, or (B) any
law, governmental regulation, court decree or order applicable to
Borrower, or (ii) require the consent, approval or authorization of any
third party; and
(d) Each financial statement of Borrower supplied to the Bank truly
discloses and fairly presents Borrower's financial condition as of the
date of each such statement; and
(e) There has been no material adverse change in such financial
condition or results of operations of Borrower subsequent to the date of
the most recent financial statement supplied to the Bank; and
(f) There are no actions, suits or proceedings, pending or, to the
knowledge of Borrower, threatened against or affecting Borrower or the
properties of Borrower, before any court or governmental department,
commission or board, which, if determined adversely to Borrower, would
have a material adverse effect on the financial condition, properties,
or operations of Borrower; and
(g) Borrower has filed all federal, state and local tax reports and
returns required by any law or regulation to be filed by it and has
either duly paid all taxes, duties and charges indicated due on the
basis of such returns and reports, or made adequate provision for the
payment thereof, and the assessment of any material amount of additional
taxes in excess of those paid and reported is not reasonably expected.
6. Conditions Precedent to Advances. Bank's obligation to make any
advance under this Loan Agreement and the other Loan Documents shall be subject
to the conditions precedent that, as of the date of such advance and after
giving effect thereto (i) all representations and warranties made to Bank by
Borrower and the Guarantors in this Loan Agreement and the other Loan Documents
shall be true and correct, as of and as if made on such date, (ii) no material
adverse change in the financial condition of Borrower since the effective date
of the most recent financial statements furnished to Bank by Borrower shall have
occurred and be continuing, (iii) no event has occurred and is continuing, or
would result from the requested advance, which with notice or lapse of time, or
both, would constitute an Event of Default (as hereinafter defined), and (iv)
Bank's receipt of all Loan Documents appropriately executed by Borrower and all
other proper parties.
7. Affirmative Covenants. Until (i) the Notes and all other obligations
and liabilities of Borrower under this Loan Agreement and the other Loan
Documents are fully paid and satisfied, and (ii) the Bank has no further
commitment to lend hereunder, Borrower agrees and covenants that it will, unless
Bank shall otherwise consent in writing:
(a) Promptly inform Bank of (i) any and all material adverse changes in
Borrower's financial condition, (ii) all litigation and claims affecting
Borrower which could materially affect the financial condition of
Borrower, and (iii) the incurrence by Borrower of any liabilities not
permitted under this Loan Agreement; and
(b) Maintain its books and records in accordance with generally accepted
accounting principles; and
(c) Permit Bank to visit its properties and installations and to
examine, audit and make and take away copies or reproductions of
Borrower's books and records, at all reasonable times; and
(d) Furnish Bank with such additional information and statements, lists
of assets and liabilities, tax returns, and other reports with respect
to Borrower's financial condition and business operations as Bank may
request from time to time; and
(e) Conduct its business in an orderly and efficient manner consistent
with good business practices, and perform and comply with all statutes,
rules, regulations and/or ordinances imposed by any governmental unit
upon Borrower its businesses, operations and properties (including
without limitation, all applicable environmental statutes, rules,
regulations and ordinances); and
(f) Pay and discharge when due all of its indebtedness and obligations,
including without limitation, all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon
Borrower or its properties, income, or profits, prior to the date on
which penalties would attach, and all lawful claims that, if unpaid,
might become a lien or charge upon any of Borrower's properties, income,
or profits; provided, however, Borrower will not be required to pay and
discharge any such assessment, tax, charge, xxxx, xxxx or claim so long
as (i) the legality of the same shall be contested in good faith by
appropriate judicial, administrative or other legal proceedings, and
(ii) Borrower shall have established on its books adequate reserves with
respect to such contested assessment, tax, charge, xxxx, xxxx or claim
in accordance with generally accepted accounting principles,
consistently applied; and
(g) Maintain insurance, including but not limited to, fire insurance,
comprehensive property damage, public liability, worker's compensation,
and other insurance deemed necessary or otherwise required by Bank; and
(h) Maintain the financial ratios and covenants set forth on Addendum II
attached hereto.
8. Negative Covenants. Until (i) the Notes and all other obligations and
liabilities of Borrower under this Loan Agreement and the other Loan Documents
are fully paid and satisfied, and (ii) the Bank has no further commitment to
lend hereunder, Borrower will not, without the prior written consent of Bank:
(a) Make any material change in the nature of its business as
carried on as of the date hereof; or
(b) Liquidate, merge or consolidate with or into any other entity;or
(c) Permit the sale or other transfer of any of the ownership
interest in Borrower; or
(d) Permit the change in management of Borrower.
9. Reporting Requirements. Until (i) the Notes and all other obligations
and liabilities of Borrower under this Loan Agreement and the other Loan
Documents are fully paid and satisfied, and (ii) the Bank has no further
commitment to lend hereunder, Borrower will, unless Bank shall otherwise consent
in writing, furnish to Bank;
(a) As soon as available, and in any event within the respective time
periods noted below, the financial statements noted below, all in form
and detail satisfactory to Bank:
(1) Interim financial statements (balance sheet, income statement and cash
flow statements) of Borrower within 60 days after the end of each quarter of
each fiscal year of Borrower;
(2) Annual audited financial statements (balance sheet,
income statement and cash flow statements) of Borrower
within 120 days after end of each fiscal year of
Borrower;
(3) Annual financial statements (balance sheet, cash flow
statement and statement of contingent liabilities) of
each Guarantor within 90 days after the end of each
calendar year;
(b) The additional reports and information required by the provisions
below, all in form and detail satisfactory to Bank:
(1) A borrowing base report within 30 days after the end of
each month of each fiscal year;
(2) An accounts receivable aging report within 30 days after
the end of each month of each fiscal year;
(3) A compliance certificate within 60 days after the end of
each quarter of each fiscal year;
(c) Promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court or any governmental department,
commission or board affecting Borrower or any of its properties; and
(d) Such other information respecting the business, properties or
condition or the operations, financial or otherwise, of Borrower as Bank
may from time to time reasonably request.
10. Events of Default. Each of the following shall constitute an "Event
of Default" under this Loan Agreement:
(a) The failure, refusal or neglect of Borrower to pay when due any
part of the principal of, or interest on, the Notes or any
other Indebtedness; or
(b) The failure of Borrower or any Guarantor to timely and properly
observe, keep or perform any covenant, agreement, warranty or condition
required herein or in any of the other Loan Documents; or
(c) The occurrence of an event of default under any of the other
Loan Documents; or
(d) Any representation contained herein or in any of the other Loan
Documents made by Borrower or any Guarantor is false or misleading in
any material respect; or
(e) If Borrower or any Guarantor: (i) becomes insolvent, or makes a
transfer in fraud of creditors, or makes an assignment for the benefit
of creditors, or admits in writing its inability to pay its debts as
they become due; (ii) generally is not paying its debts as such debts
become due; (iii) has a receiver or custodian appointed for, or take
possession of, all or substantially all of the assets of such party or
any collateral that secures this Note, either in a proceeding brought by
such party or in a proceeding brought against such party and such
appointment is not discharged or such possession is not terminated
within sixty (60) days after the effective date thereof or such party
consents to or acquiesces in such appointment or possession; (iv) files
a petition for relief under the United States Bankruptcy Code or any
other present or future federal or state insolvency, bankruptcy or
similar laws (all of the foregoing hereinafter collectively called
"Applicable Bankruptcy Law") or an involuntary petition for relief is
filed against such party under any Applicable Bankruptcy Law and such
involuntary petition is not dismissed within sixty (60) days after the
filing thereof, or an order for relief naming such party is entered
under any Applicable Bankruptcy Law, or any composition, rearrangement,
extension, reorganization or other relief of debtors now or hereafter
existing is requested or consented to by such party; (v) fails to have
discharged within a period of sixty (60) days any attachment,
sequestration or similar writ levied upon any property of such party; or
(vi) fails to pay within thirty (30) days any final money judgment
against such party.
Nothing contained in this Loan Agreement shall be construed to limit the events
of default enumerated in any of the other Loan Documents and all such events of
default shall be cumulative.
11. Remedies. Upon the occurrence of any one or more of the foregoing
Events of Default, (a) the entire unpaid balance of principal of the Notes,
together with all accrued but unpaid interest thereon, and all other
Indebtedness shall, at the option of Bank, become immediately due and payable
without further notice, demand, presentation, notice of dishonor, notice of
intent to accelerate, notice of acceleration, protest or notice of protest of
any kind, all of which are expressly waived by Borrower, and (b) Bank may, at
its option, cease further advances under any of the Notes; provided, however,
concurrently and automatically with the occurrence of an Event of Default under
subparagraph (e) in the immediately preceding paragraph (i) further advances
under the Notes shall cease, and (ii) the Notes and all other Indebtedness
shall, without any action by Bank, become due and payable, without further
notice, demand, presentation, notice of dishonor, notice of acceleration, notice
of intent to accelerate, protest or notice of protest of any kind, all of which
are expressly waived by Borrower. All rights and remedies of Bank set forth in
this Loan Agreement and in any of the other Loan Documents may also be exercised
by Bank, at its option to be exercised in its sole discretion, upon the
occurrence of an Event of Default.
12. Rights Cumulative. All rights of Bank under the terms of this Loan
Agreement shall be cumulative of, and in addition to, the rights of Bank under
any and all other agreements between Borrower and Bank (including, but not
limited to, the other Loan Documents), and not in substitution or diminution of
any rights now or hereafter held by Bank under the terms of any other agreement.
13. Waiver and Agreement. Neither the failure nor any delay on the part
of Bank to exercise any right, power or privilege herein or under any of the
other Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. No
waiver of any provision in this Loan Agreement or in any of the other Loan
Documents and no departure by Borrower therefrom shall be effective unless the
same shall be in writing and signed by Bank, and then shall be effective only in
the specific instance and for the purpose for which given and to the extent
specified in such writing. No modification or amendment to this Loan Agreement
or to any of the other Loan Documents shall be valid or effective unless the
same is signed by the party against whom it is sought to be enforced.
14. Benefits. This Loan Agreement shall be binding upon and inure to the
benefit of Bank and Borrower, and their respective successors and assigns,
provided, however, that Borrower may not, without the prior written consent of
Bank, assign any rights, powers, duties or obligations under this Loan Agreement
or any of the other Loan Documents.
15. Notices. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and given by (i) personal delivery, (ii) expedited delivery service with proof
of delivery, or (iii) United States mail, postage prepaid, registered or
certified mail, return receipt requested, sent to the intended addressee at the
address set forth on the signature page hereof and shall be deemed to have been
received either, in the case of expedited delivery service, as of the date of
first attempted delivery at the address and in the manner provided herein, or in
the case of mail, upon deposit in a depository receptacle under the care and
custody of the United States Postal Service. Either party shall have the right
to change its address for notice hereunder to any other location within the
continental United States by notice to the other party of such new address at
least thirty (30) days prior to the effective date of such new address.
16. Construction. This Loan Agreement and the other Loan Documents have
been executed and delivered in the State of Texas, shall be governed by and
construed in accordance with the laws of the State of Texas, and shall be
performable by the parties hereto in the county in Texas where the Bank's
address set forth on the signature page hereof is located.
17. Invalid Provisions. If any provision of this Loan Agreement or any
of the other Loan Documents is held to be illegal, invalid or unenforceable
under present or future laws, such provision shall be fully severable and the
remaining provisions of this Loan Agreement or any of the other Loan Documents
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance.
18. Expenses. Borrower shall pay all costs and expenses (including,
without limitation, reasonable attorneys' fees) in connection with (i) any
action required in the course of administration of the indebtedness and
obligations evidenced by the Loan Documents, and (ii) any action in the
enforcement of Bank's rights upon the occurrence of Event of Default.
19. Participation of the Loans. Borrower agrees that Bank may, at its
option, sell interests in the Loans and its rights under this Loan Agreement to
a financial institution or institutions and, in connection with each such sale,
Bank may disclose any financial and other information available to Bank
concerning Borrower to each perspective purchaser.
20. Entire Agreement. This Loan Agreement (together with the other Loan
Documents) contains the entire agreement among the parties regarding the subject
matter hereof and supersedes all prior written and oral agreements and
understandings among the parties hereto regarding same.
If the foregoing correctly sets forth our mutual agreement, please so
acknowledge by signing and returning this Loan Agreement to the undersigned.
Very truly yours,
BANK ONE, TEXAS, N.A.
By:/s/ Xxx Xxxxxx
Xxx Xxxxxx
Vice President
Bank's Address:
0000 X. 00xx Xx.
Xxxxxx, Xxxxx 00000
ACCEPTED THIS 15th day of August, 1998
BORROWER:
Xxxxxxxx Construction Company
By:/s/ Xxx Xxxxxxxx
Xxx Xxxxxxxx
President
Borrower's Address:
X.X. Xxx 00000
Xxxxxx, Xxxxx 00000
ADDENDUM TO LOAN AGREEMENT
ADDENDUM I
TO
LOAN AGREEMENT
As used in the Loan Agreement, the term "Borrowing Base" shall have the
meaning set forth below:
an amount equal to 80% of the Borrower's Eligible Accounts.
As used herein, the term "Eligible Accounts" shall mean at any time, an
amount equal to the aggregate net invoice or ledger amount owing on all trade
accounts receivable of Borrower for goods sold or leased or services rendered in
the ordinary course of business, in which the Bank has a perfected, first
priority lien, after deducting (without duplication): (i) each such account that
is unpaid 60 days or more after the original invoice date thereof, (ii) the
amount of all discounts, allowances, rebates, credits and adjustments to such
accounts (iii) the amount of all contra accounts, setoffs, defenses or
counterclaims asserted by or available to the account debtors, (iv) all accounts
with respect to which goods are placed on consignment or subject to a guaranteed
sale or other terms by reason of which payment by the account debtor may be
conditional, (v) the amount billed for or representing retainage, if any, until
all prerequisites to the immediate payment of retainage have been satisfied,
(vi) all accounts owing by account debtors for which there has been instituted a
proceeding in bankruptcy or reorganization under the United States Bankruptcy
Code or other law, whether state or federal, now or hereafter existing for
relief of debtors, (vii) all accounts owing by Affiliates of Borrower, (viii)
all accounts in which the account debtor is the United States or any department,
agency or instrumentality of the United States, except to the extent an
acknowledgment of assignment to Bank of such account in compliance with the
Federal Assignment of Claims Act and other applicable laws has been received by
Bank, (ix) all accounts due Borrower by any account debtor whose principal place
of business is located outside the United States of America and its territories,
(x) all accounts subject to any provision prohibiting assignment or requiring
notice of or consent to such assignment, (xi) any progress xxxxxxxx or partial
xxxxxxxx, (xii) the amount of any letters of credit issued up to $400,000,
(xiii) that portion of all account balances owing by any single account debtor
which exceeds 25% of the aggregate of all accounts otherwise deemed eligible
hereunder which are owing to Borrower by all account debtors, and (xiv) any
other accounts deemed unacceptable by Bank in its sole and absolute discretion;
provided, however, if more than 10% of the then balance owing by any single
account debtor does not qualify as an Eligible Account under the foregoing
provisions, then the aggregate amount of all accounts owing by such account
debtor shall be excluded from Eligible Accounts.
ADDENDUM II
TO
LOAN AGREEMENT
Unless otherwise specified, all accounting and financial terms and
covenants set forth below are to be determined according to generally accepted
accounting principles, consistently applied. Borrower agrees to maintain the
financial covenants and ratios set forth below:
Financial Covenants
Net Worth
! Borrower will maintain, at all times, its Tangible Net Worth
at not less than $2,250,000.
! Borrower will maintain, at all times, a ratio of (a) total
liabilities, to (b) Tangible Net Worth of not greater than 2.0
to 1.0.
As used herein, "Tangible Net Worth" means, as of any date, the
total shareholders' equity (including capital stock, additional
paid-in-capital and retained earnings after deducting treasury stock)
which would appear on a balance sheet of Borrower, less the aggregate
book value of intangible assets shown on such balance sheet, plus any
subordinated debt as of such date.
Liquidity
! Borrower will maintain, at all times, a ratio of (a) current
assets, to (b) current liabilities of not less than 1.2 to 1.0.
! Borrower will maintain, at all times, a ratio of (a) quick
assets, to (b) current liabilities of not less than .5 to 1.0.
Quick assets shall mean all cash or cash equivalents and current
accounts receivable of Borrower.
Debt Service
! Borrower will maintain, as of the last day of each fiscal
quarter, a ratio of (a) net income, plus depreciation,
amortization and other non-cash expenses, plus interest expense
for the 12 month period ending with such fiscal quarter, to (b)
current maturities of long-term debt, plus interest expense,
plus dividends and treasury stock purchases for such 12 month
period, of not less than 1.1 to 1.0.
Xxxxxxxx Construction Company
Borrowing Base Certificate
The following is based on the company's accounts receivable aging as of the
day of ---------
, 199 .
------------------------------- ----
Total Accounts Receivable
Less: Receivables over 60
days from invoice date
Any account with more
than 10% over 60 days
Amount in excess of 25% of total
receivables of any one account
Letters of credit issued
under line of credit
Retainage, progress xxxxxxxx,
or partial xxxxxxxx
Total Eligible Receivables
X 80%
Total Borrowing Base Availability
Less: Amounts currently outstanding
Remaining availability (or Required Paydown)
I certify that this Borrowing Base Certificate is true and accurate.
Xxxxxxxx Construction Company
By:
Xxxxxxxx Construction Company
Compliance Certificate
This certifies that Xxxxxxxx Construction Company is/is not in compliance with
all covenants as of the day of , 199 .
Minimum tangible net worth Covenant $2,250,000
Actual
Maximum debt/tangible net worth Covenant 2.0:1
Actual
Minimum current ratio Covenant 1.20:1
Actual
Minimum quick ratio Covenant .50:1
Actual
Minimum debt service coCovenant 1.10X
Actual
Xxxxxxxx Construction Company
By:
--------
1Defined as: (Net income + non-cash expenses + interest expense) divided by
(current maturities of long term debt + interest expense + dividends and
treasury stock purchases). This will be tested quarterly based on a rolling four
quarter basis.
