EXHIBIT 10(a)
[Execution]
CREDIT AGREEMENT
BY AND BETWEEN
COMERICA BANK ("BANK")
AND
PEERLESS MFG. CO. ("BORROWER")
DATED: OCTOBER 30, 2003
INDEX
Page
SECTION 1. DEFINITIONS..................................................................................... 1
1.1 Defined Terms.......................................................................... 1
1.2 Accounting Terms....................................................................... 1
1.3 Singular and Plural.................................................................... 1
SECTION 2. TERMS, CONDITIONS AND PROCEDURES FOR BORROWING.................................................. 1
SECTION 3. REPRESENTATIONS AND WARRANTIES.................................................................. 1
3.1 Authority.............................................................................. 2
3.2 Due Authorization...................................................................... 2
3.3 Title to Property...................................................................... 2
3.4 Encumbrances........................................................................... 2
3.5 Subsidiaries........................................................................... 2
3.6 Taxes.................................................................................. 2
3.7 No-Defaults............................................................................ 2
3.8 Enforceability of Agreement and Loan Documents......................................... 2
3.9 Non-contravention...................................................................... 2
3.10 Actions, Suits, Litigation or Proceedings.............................................. 3
3.11 Compliance with Laws................................................................... 3
3.12 Consents, Approvals and Filings, Etc. ................................................. 3
3.13 Contracts, Agreements and Leases....................................................... 3
3.14 ERISA.................................................................................. 3
3.15 No Investment Company.................................................................. 3
3.16 No Margin Stock........................................................................ 4
3.17 Environmental Representations.......................................................... 4
3.18 Accuracy of Information................................................................ 5
SECTION 4. AFFIRMATIVE COVENANTS........................................................................... 5
4.1 Preservation of Existence, Etc. ....................................................... 5
4.2 Keeping of Books....................................................................... 5
4.3 Reporting Requirements................................................................. 6
4.4 Financial Covenants.................................................................... 7
4.5 Inspections............................................................................ 7
4.6 Further Assurances; Financing Statements............................................... 7
4.7 Compliance with Leases................................................................. 8
4.8 Indemnification........................................................................ 8
4.9 Governmental and Other Approvals....................................................... 8
4.10 Insurance.............................................................................. 8
4.11 Compliance with ERISA.................................................................. 8
4.12 Environmental Covenants................................................................ 9
SECTION 5. NEGATIVE COVENANTS.............................................................................. 10
5.1 Capital Structure, Business Objects or Purpose......................................... 10
5.2 Mergers or Dispositions................................................................ 10
5.3 Guaranties............................................................................. 10
5.4 Debt................................................................................... 10
5.5 Encumbrances........................................................................... 11
5.6 Acquisitions........................................................................... 11
5.7 Investments............................................................................ 11
5.8 Transactions with Affiliates. ........................................................ 11
5.9 Defaults on Other Obligations.......................................................... 12
5.10 Pension Plans.......................................................................... 12
5.11 No Further Negative Pledges............................................................ 12
5.12 Accounts Receivable.................................................................... 12
5.13 No License Restrictions................................................................ 12
5.14 Sale of Assets......................................................................... 12
5.15 Distributions to Foreign Subsidiaries.................................................. 12
SECTION 6. EVENTS OF DEFAULT............................................................................... 12
6.1 Events of Default...................................................................... 12
6.2 Remedies Upon Event of Default......................................................... 14
6.3 Setoff................................................................................. 14
6.4 Waiver of Certain Laws................................................................. 15
6.5 Waiver of Defaults..................................................................... 15
6.6 Receiver............................................................................... 15
6.7 Application of Proceeds of Collateral.................................................. 15
SECTION 7. MISCELLANEOUS................................................................................... 15
7.1 Accounting Principles.................................................................. 15
7.2 Taxes and Fees......................................................................... 16
7.3 Governing Law.......................................................................... 16
7.4 Audits of Collateral; Fees............................................................. 16
7.5 Costs and Expenses..................................................................... 16
7.6 Notices................................................................................ 16
7.7 Further Action......................................................................... 17
7.8 Successors and Assigns; Participation.................................................. 17
7.9 Indulgence............................................................................. 17
7.10 Amendment and Waiver................................................................... 17
7.11 Severability........................................................................... 17
7.12 Headings and Construction of Terms..................................................... 17
7.13 Independence of Covenants.............................................................. 17
7.14 Reliance on and Survival of Various Provisions......................................... 17
7.15 Effective Upon Execution............................................................... 18
7.16 Complete Agreement; Conflicts.......................................................... 18
7.17 Exhibits and Addenda................................................................... 18
7.18 WAIVER OF JURY TRIAL................................................................... 18
7.19 ORAL AGREEMENTS INEFFECTIVE............................................................ 19
ADDENDA:
Defined Terms Addendum
Financial Covenants Addendum
Loan Terms, Conditions and Procedures Addendum
EXHIBITS:
Exhibit A - Form of Compliance Certificate
Exhibit B - Form of Request for Advance
SCHEDULES:
Schedule 3.5 Subsidiaries
Schedule 3.14 Employee Benefit Plans
Schedule 3.17 Environmental Disclosures
Schedule 5.4 Debt
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is made and delivered
effective as of October 30, 2003, by and between Peerless Mfg. Co., a Texas
corporation ("Borrower"), and COMERICA BANK ("Bank").
RECITALS
A. Borrower desires to obtain certain facilities from the Bank,
and the Bank is willing to provide such credit facilities to and in favor of
Borrower.
B. Such credit facilities are subject to the terms and conditions
set forth herein and in every other Loan Document.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, Borrower and Bank agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. The terms as used in this Agreement shall have
the meanings assigned to such terms in the Defined Terms Addendum.
1.2 Accounting Terms. All accounting terms not specifically
defined in this Agreement shall be determined and construed in accordance with
GAAP.
1.3 Singular and Plural. Where the context herein requires, the
singular number shall be deemed to include the plural, the masculine gender
shall include the feminine and neuter genders, and vice versa.
SECTION 2. TERMS, CONDITIONS AND PROCEDURES FOR BORROWING
Subject to the terms, conditions and procedures of this Agreement and
each other Loan Document including, but not limited to, the terms, conditions
and procedures set forth in the Defined Terms Addendum and Loan Terms,
Conditions and Procedures Addendum, Bank agrees to make credit available to the
Borrower on such dates and in such amounts as the Borrower shall request from
time to time or as may otherwise be agreed to by Borrower and Bank.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants, and such representations and
warranties shall be deemed to be continuing representations and warranties
during the entire life of this Agreement, and so long as Bank shall have any
commitment or obligation to make any Loans or issue any Letters of Credit
hereunder, and so long as any Indebtedness remains unpaid and outstanding under
any Loan Document, as follows:
3.1 Authority. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and is duly qualified and authorized to do business in each other
jurisdiction in which the character of its assets or the nature of its business
makes such qualification necessary.
3.2 Due Authorization. Each Loan Party has all requisite power and
authority to execute, deliver and perform its obligations under each Loan
Document to which it is a party or is otherwise bound, all of which have been
duly authorized by all necessary action, and are not in contravention of law or
the terms of any Loan Party's organizational or other governing documents.
3.3 Title to Property. Each Loan Party has good title to all
property and assets purported to be owned by it, including those assets
identified on the Financial Statements most recently delivered by Borrower to
Bank.
3.4 Encumbrances. To Borrower's knowledge, there are no security
interests or other Liens or encumbrances on, and no financing statements on file
with respect to, any of the property or assets of any Loan Party, except for
Permitted Encumbrances.
3.5 Subsidiaries. Borrower has no Subsidiaries, except as set
forth in Schedule 3.5 which Schedule sets forth the percentage of ownership of
Borrower in each such Subsidiary as of the date of this Agreement.
3.6 Taxes. To Borrower's knowledge, each Loan Party has filed, on
or before their respective due dates, all federal, state, local and foreign tax
returns which are required to be filed, or has obtained extensions for filing
such tax returns, and is not delinquent in filing such returns in accordance
with such extensions, and has paid all taxes which have become due pursuant to
those returns or pursuant to any assessments received by any such party, as the
case may be, to the extent such taxes have become due, except to the extent such
tax payments are being actively and diligently contested in good faith by
appropriate proceedings, and if reasonably requested by Bank, have been bonded
or reserved in an amount and manner satisfactory to Bank.
3.7 No-Defaults. To Borrower's knowledge, there exists no default
(or event which, with the giving of notice or passage of time, or both, would
result in a default) under the provisions of any instrument or agreement
evidencing, governing, securing or otherwise relating to any material Debt of
any Loan Party or pertaining to any of the Permitted Encumbrances.
3.8 Enforceability of Agreement and Loan Documents. Each Loan
Document has been duly executed and delivered by duly authorized officer(s) or
other representative(s) of each Loan Party, and constitutes the valid and
binding obligations of each Loan Party, enforceable in accordance with their
respective terms, except to the extent that enforcement thereof may be limited
by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights generally at the time in effect.
3.9 Non-contravention. The execution, delivery and performance by
each Loan Party of the Loan Documents to which such Loan Party is a party or
otherwise bound, are not in
2
contravention of the terms of any indenture, agreement or undertaking to which
any such Loan Party is a party or by which it is bound, except to the extent
that such terms have been waived or that failure to comply with any such terms
would not have a Material Adverse Effect.
3.10 Actions, Suits, Litigation or Proceedings. There are no
actions, suits, litigation or proceedings, at law or in equity, and no
proceedings before any arbitrator or by or before any Governmental Authority,
pending, or, to the knowledge of Borrower, threatened against or affecting any
Loan Party, which, if adversely determined, could materially impair the right of
any Loan Party to carry on its business substantially as now conducted or could
have a Material Adverse Effect. To Borrower's knowledge, no Loan Party is under
investigation by, or is operating under any restrictions imposed by, any
Governmental Authority.
3.11 Compliance with Laws. To Borrower's knowledge, each Loan Party
has complied with all Governmental Requirements, including, without limitation,
Environmental Laws, to the extent that failure to so comply could have a
Material Adverse Effect.
3.12 Consents, Approvals and Filings, Etc. To Borrower's knowledge,
except as have been previously obtained or as otherwise expressly provided in
this Agreement, no authorization, consent, approval, license, qualification or
formal exemption from, nor any filing, declaration or registration with, any
Governmental Authority and no material authorization, consent or approval from
any other Person, is required in connection with the execution, delivery and
performance by each Loan Party of any Loan Document to which it is a party. All
such authorizations, consents, approvals, licenses, qualifications, exemptions,
filings, declarations and registrations which have previously been obtained or
made, as the case may be, are in full force and effect and are not the subject
of any attack, or to the knowledge of Borrower, any threatened attack, in any
material respect, by appeal, direct proceeding or otherwise.
3.13 Contracts, Agreements and Leases. To Borrower's knowledge, no
Loan Party is in default (beyond any applicable period of grace or cure) in
complying with any provision of any material contract, agreement, indenture,
lease or instrument to which it is a party or by which it or any of its
properties or assets are bound, where such default would have a Material Adverse
Effect. To Borrower's knowledge, each such contract, commitment, undertaking,
agreement, indenture and instrument is in full force and effect and is valid and
legally binding.
3.14 ERISA. To Borrower's knowledge, except as shown on Schedule
3.14, no Loan Party maintains or contributes to any employee benefit plan
subject to Title IV of ERISA. Furthermore, no Loan Party has incurred any
accumulated funding deficiency within the meaning of ERISA or incurred any
liability to the PBGC in connection with any employee benefit plan established
or maintained by such Loan Party, and, to Borrower's knowledge, no reportable
event or prohibited transaction, as defined in ERISA, has occurred with respect
to such plans that involves a liability in excess of $25,000.
3.15 No Investment Company. No Loan Party is an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
nor is any Loan Party "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
3
3.16 No Margin Stock. No Loan Party is engaged principally, or as
one of its important activities, directly or indirectly, in the business of
extending credit for the purpose of purchasing or carrying margin stock, and
none of the proceeds of any of the Loans will be used, directly or indirectly,
to purchase or carry any margin stock or made available by any Loan Party in any
manner to any other Person to enable or assist such Person in purchasing or
carrying margin stock, or otherwise used or made available for any other purpose
which might violate the provisions of Regulations G, T, U, or X of the Board of
Governors of the Federal Reserve System. Terms for which meanings are provided
in Regulation U of said Board of Governors or any regulations substituted
therefor, as are from time to time in effect, are used in this Section with such
meanings, and these representations and warranties shall be immediately
effective.
3.17 Environmental Representations.
(a) No Loan Party has received any notice of any
violation of any Environmental Law(s); and no Loan
Party is a party to any litigation or administrative
proceeding, nor, so far as is known by Borrower, is
any litigation or administrative proceeding
threatened against any Loan Party which, in any case,
(i) asserts or alleges that any Loan Party violated
any Environmental Law(s), (ii) asserts or alleges
that any Loan Party is required to clean up, remove
or take any other remedial or response action due to
the disposal, depositing, discharge, leaking or other
release of any Hazardous Materials, or (iii) asserts
or alleges that any Loan Party is required to pay all
or a portion of any past, present or future clean-up,
removal or other remedial or response action which
arises out of or is related to the disposal,
depositing, discharge, leaking or other release of
any Hazardous Materials by any Loan Party, and which,
either singularly or in the aggregate, could
reasonably be expected to have a Material Adverse
Effect.
(b) To Borrower's knowledge, there are no conditions
existing currently which could subject any Loan Party
to damages, penalties, injunctive relief or clean-up
costs under any applicable Environmental Law(s), or
which require, or are likely to require, clean-up,
removal, remedial action or other response pursuant
to any applicable Environmental Law(s) by any Loan
Party, and which, in any case, either singularly or
in aggregate, could reasonably be expected to have a
Material Adverse Effect.
(c) No Loan Party is subject to any judgment, decree,
order or citation related to or arising out of any
applicable Environmental Law(s), which, either
singularly or in the aggregate, could reasonably be
expected to have a Material Adverse Effect; and, to
Borrower's knowledge, no Loan Party has been named or
listed as a potentially responsible party by any
Governmental Authority in any matter arising under
any applicable Environmental Law(s), except as
disclosed in Schedule 3.17, and, in the event that
any such matters are disclosed in said Schedule 3.17
they will not, either singularly or in the aggregate,
reasonably be expected to have a Material Adverse
Effect.
4
(d) To Borrower's knowledge, each Loan Party has all
permits, licenses and approvals required under
applicable Environmental Laws, where the failure to
so obtain or maintain any such permits, licenses or
approvals could reasonably be expected to have a
Material Adverse Effect.
3.18 Accuracy of Information. The Financial Statements previously
furnished to Bank have been prepared in accordance with GAAP and fairly present
the financial condition of Borrower and its Subsidiaries as such Financial
Statements purport to present, and the results of their respective operations as
of the dates and for the periods covered thereby; and since the date(s) of said
Financial Statements, there has been no material adverse change in the financial
condition of Borrower or any other consolidated Subsidiary covered by such
Financial Statements. No Loan Party, nor any such other consolidated Subsidiary
has any material contingent obligations, liabilities for taxes, long-term leases
or long-term commitments not disclosed by, or reserved against in, such
Financial Statements. Each Loan Party is solvent, able to pay its respective
debts as they mature, has capital sufficient to carry on its business and has
assets the fair market value of which exceed its liabilities, and Borrower will
not be rendered insolvent, under-capitalized or unable to pay debts generally as
they become due by the execution or performance of any Loan Document to which it
is a party or by which it is otherwise bound.
SECTION 4. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as Bank is committed to
make any Loan or issue any Letter of Credit under this Agreement, and until all
instruments and agreements evidencing any Loan which is payable on demand or
which conditions advances upon the Bank's discretion are fully discharged and
terminated, and thereafter, so long as any Indebtedness remains outstanding, it
will, and, as applicable, it will cause each Loan Party within its control or
under common control to:
4.1 Preservation of Existence, Etc. Preserve and maintain
Borrower's existence and preserve and maintain such of its rights, licenses, and
privileges as are material to the business and operations conducted by it;
qualify and remain qualified to do business in each jurisdiction in which such
qualification is material to its business and operations or ownership of its
properties, continue to conduct and operate its business substantially as
conducted and operated during the present and preceding calendar year; at all
times maintain, preserve and protect all of Borrower's franchises and trade
names and preserve all the remainder of its property 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.
4.2 Keeping of Books. Keep proper books of record and account in
which full and correct entries shall be made of all of its financial
transactions and its assets and businesses so as to permit the presentation of
financial statements (including, without limitation, those Financial Statements
to be delivered to Bank pursuant Section 4.3 hereof) prepared in accordance with
GAAP.
4.3 Reporting Requirements. Furnish to Bank, or cause to be
furnished to Bank, the following:
5
(a) as soon as possible, and in any event within five (5)
calendar days after becoming aware of the occurrence
or existence of each Default or Event of Default
hereunder or any material adverse change in the
consolidated financial condition of Borrower, a
written statement of the chief financial officer of
Borrower (or in his or her absence, a responsible
senior officer of Borrower), setting forth details of
such Default, Event of Default or change, and the
action which Borrower has taken, or has caused to be
taken, or proposes to take, or to cause to be taken,
with respect thereto;
(b) as soon as available, and in any event within ninety
(90) days after and as of the end of each fiscal year
of Borrower, audited consolidated Financial
Statements of Borrower for and as of such fiscal year
then ending, with comparative numbers for the
preceding fiscal year, and such other comments and
financial details as are usually included in similar
reports. Such audited Financial Statements shall be
prepared by Borrower in accordance with GAAP and
certified by independent certified public accountants
of recognized national standing selected by
Borrower's audit committee and shall contain
unqualified opinions as to the fairness of the
statements therein contained, except that the opinion
may be qualified as a "going concern" of the fiscal
year preceding the Revolving Credit Maturity Date due
to the non-extension of this Agreement.
(c) as soon as available, and in any event within (i)
thirty (30) days after and as of October 31, 2003,
and November 30, 2003, and (ii) forty-five (45) days
after and as of the end of each fiscal quarter
thereafter (excluding the last such reporting period
of each of Borrower's fiscal years, for which
reporting period Section 4.3(b) will control)
unaudited consolidated Financial Statements of
Borrower for and as of such reporting period then
ending and for and as of that portion of the fiscal
year then ending, with comparative numbers for the
same period of the preceding fiscal year, in each
case, certified by the chief financial officer of
Borrower as to consistency with prior financial
reports and accounting periods, accuracy and fairness
of presentation;
(d) as soon as available, and in any event within (i)
thirty (30) days after and as of October 31, 2003 and
November 30, 2003, and (ii) thereafter, (A)
forty-five (45) days after and as of the end of each
of Borrower's first three fiscal quarters of each
fiscal year, and (B) ninety (90) days after the end
of Borrower's last fiscal quarter of each fiscal
year, accounts receivable agings, backlog and
percentage complete reports, in form and detail
similar to those previously delivered to Bank,
(e) as soon as available, and in any event within thirty
(30) days after and as of the end of each Applicable
Calendar Month, accounts receivable agings, backlogs
and completion reports and such of the other Loan
Parties as may
6
be required by the Bank, in form and detail similar
to those previously delivered to Bank;
(f) as soon as available, and in any event within thirty
(30) days after and as of the end of each Applicable
Calendar Month, a listing of Eligible Inventory of
Borrower, in form and detail satisfactory to Bank,
such listing to identify the cost and location
thereof;
(g) as soon as available, and in any event within
forty-five (45) days after and as of the end of each
fiscal quarter, a Compliance Certificate, dated as of
the end of such fiscal quarter;
(h) as soon as available, and in any event within thirty
(30) days after and as of the end of each Applicable
Calendar Month, a Borrowing Base Certificate, dated
as of the end of such Applicable Calendar Month;
(i) as soon as available, and in any event within sixty
(60) days after and as of the end of each fiscal
year, consolidated annual financial projections of
Borrower for the immediately following fiscal year,
prepared on a quarter-by-quarter basis in form
similar to the form of such projections previously
delivered to Bank;
(j) promptly upon receipt thereof, copies of all
management letters and other substantive reports
submitted to any Loan Party by independent certified
public accountants in connection with any annual
audit of any such party, to the extent the disclosure
thereof is not prohibited by applicable securities
laws; and
(k) promptly, and in form and detail satisfactory to
Bank, such other information as Bank may reasonably
request from time to time.
4.4 Financial Covenants. Borrower will maintain, all financial
covenants set forth in the Financial Covenants Addendum.
4.5 Inspections. Permit Bank, or its representatives, at
reasonable times and intervals, at Borrower's cost and expense, to visit any
office of any Loan Party, discuss its financial matters with its officers,
employees and independent certified public accountants, and by this provision,
Borrower authorizes such officers, employees and accountants to discuss the
finances and affairs of Borrower and any of its consolidated Subsidiaries.
4.6 Further Assurances; Financing Statements. Furnish Bank, at
Borrower's expense, upon Bank's reasonable request and in form satisfactory to
Bank (and execute and deliver or cause to be executed and delivered), such
additional pledges, assignments, mortgages, lien instruments or other security
instruments, consents, acknowledgments, subordinations and financing statements
covering any or all of the Collateral pledged, assigned, mortgaged or encumbered
pursuant to any Loan Document, of every nature and description, whether now
owned or hereafter acquired by
7
Borrower or any other Person providing such Collateral, together with such other
documents or instruments as Bank may require to effectuate more fully the
purposes of any Loan Document.
4.7 Compliance with Leases. Comply with all terms and conditions
of any leases covering any premises or property (real or personal) wherein any
of the Collateral is or may be located, or covering any of the other material
personal or real property now or hereafter owned, leased or otherwise used by
any Loan Party in the conduct of its business, and any Governmental Requirement,
except where the failure to so comply could not cause a Material Adverse Effect.
4.8 Indemnification. Indemnify, defend and save Bank harmless from
any and all claims, losses, costs, damages, liabilities, obligations and
expenses (as used in this Section, collectively, the "Indemnified Matters"),
including, without limitation, reasonable attorneys' fees (whether inside or
outside counsel is used), incurred by Bank by reason of any Default or Event of
Default, in defending or protecting the Liens which secure or purport to secure
all or any portion of the Indebtedness, whether existing under any Loan Document
or otherwise or the priority thereof, or in enforcing the obligations of
Borrower or any other Person under or pursuant to any Loan Document, or in the
prosecution or defense of any action or proceeding concerning any matter growing
out of or connected with the Collateral or any Loan Document, INCLUDING ANY
CLAIMS, LOSSES, COSTS, DAMAGES, LIABILITIES, OBLIGATIONS, AND EXPENSES RESULTING
FROM BANK'S OWN NEGLIGENCE, except and to the extent but only to the extent
caused by Bank's gross negligence or willful misconduct. Upon Bank's receipt of
written notice of any such Indemnified Matter, Bank will provide to Borrower
notice, in writing accompanied by reasonable detail, of such Indemnified Matter,
but any failure by Bank to provide such notice to Borrower shall not impair or
otherwise affect the rights of Bank to be indemnified, defended and held
harmless under this Section.
4.9 Governmental and Other Approvals. Apply for, obtain and/or
maintain in effect, as applicable, all authorizations, consents, approvals,
licenses, qualifications, exemptions, filings, declarations and registrations
(whether with any court, governmental agency, regulatory authority, securities
exchange or otherwise) which are necessary in connection with the execution,
delivery and/or performance by any Loan Party of any Loan Document to which it
is a party.
4.10 Insurance. Maintain insurance coverage on its physical assets
and against other business risks in such amounts and of such types as are
customarily carried by companies similar in size and nature (including, without
limitation, loss of rent and/or business interruption insurance and boiler and
machinery insurance), and in the event of acquisition of additional property,
real or personal, or of the incurrence of additional risks of any nature,
increase such insurance coverage in such manner and to such extent as prudent
business judgment and present practice would dictate; and in the case of all
policies covering property subject to any Loan Document or property in which the
Bank shall have a Lien of any kind whatsoever, other than those policies
protecting against casualty liabilities to strangers, all such insurance
policies shall provide that the loss payable thereunder shall be payable to
Borrower (or other Person providing Collateral) and Bank, with mortgagee's
clauses in favor of and satisfactory to Bank for all such policies, and such
policies shall also provide that they may not be canceled or changed without
thirty (30) days' prior written notice to Bank. Upon the request of Bank, all of
said policies, or copies thereof, including all endorsements thereon and those
required hereunder, shall be deposited with Bank.
8
4.11 Compliance with ERISA. In the event that any Loan Party or any
of its Subsidiaries maintain(s) or establish(es) a Pension Plan subject to
ERISA, (a) comply in all material respects with all requirements imposed by
ERISA as presently in effect or hereafter promulgated, including, but not
limited to, the minimum funding requirements thereof; (b) promptly notify Bank
upon the occurrence of a "reportable event" or "prohibited transaction" within
the meaning of ERISA, or that the PBGC or any Loan Party has instituted or will
institute proceedings to terminate any Pension Plan, together with a copy of any
proposed notice of such event which may be required to be filed with the PBGC;
and (c) if requested by Bank, furnish to Bank (or cause the plan administrator
to furnish Bank) a copy of the annual return (including all schedules and
attachments) for each Pension Plan covered by ERISA, and filed with the Internal
Revenue Service by any Loan Party not later than thirty (30) days after such
report has been so filed.
4.12 Environmental Covenants.
(a) Comply with all applicable Environmental Laws, and
maintain all permits, licenses and approvals required
under applicable Environmental Laws, where the
failure to do so could have a Material Adverse
Effect.
(b) Promptly notify Bank, in writing, as soon as Borrower
becomes aware of any condition or circumstance which
makes any of the environmental representations or
warranties set forth in this Agreement incomplete,
incorrect or inaccurate in any material respect as of
any date; and promptly provide to Bank, immediately
upon receipt thereof, copies of any material
correspondence, notice, pleading, citation,
indictment, complaint, order, decree, or other
document from any source asserting or alleging a
violation of any Environmental Laws by any Loan
Party, or of any circumstance or condition which
requires or may require, a financial contribution by
any Loan Party, or a clean-up, removal, remedial
action or other response by or on behalf of any Loan
Party, under applicable Environmental Law(s), or
which seeks damages or civil, criminal or punitive
penalties from any Loan Party or any violation or
alleged violation of Environmental Law(s).
(c) Borrower hereby agrees to indemnify, defend and hold
Bank, and any of Bank's past, present and future
officers, directors, shareholders, employees,
representatives and consultants, harmless from any
and all claims, losses, damages, suits, penalties,
costs, liabilities, obligations and expenses (as used
in this Section, collectively, the "Indemnified
Matters") (including, without limitation, reasonable
legal expenses and attorneys' fees, whether inside or
outside counsel is used) incurred or arising out of
any claim, loss or damage of any property, injuries
to or death of any persons, contamination of or
adverse effects on the environment, or other
violation of any applicable Environmental Law(s), in
any case, caused by any Loan Party or in any way
related to any property owned or operated by any Loan
Party or due to any acts of any Loan Party or any of
its officers, directors, shareholders, employees,
consultants and/or representatives INCLUDING ANY
CLAIMS, LOSSES, DAMAGES, SUITS, PENALTIES, COSTS,
LIABILITIES,
9
OBLIGATIONS OR EXPENSES, RESULTING FROM BANK'S OWN
NEGLIGENCE; provided however, that the foregoing
indemnification shall not be applicable, and Borrower
shall not be liable for any such claims, losses,
damages, suits, penalties, costs, liabilities,
obligations or expenses, to the extent (but only to
the extent) the same arise or result from any gross
negligence or willful misconduct of Bank or any of
its agents or employees. Upon Bank's receipt of
written notice of any such Indemnified Matter, Bank
will provide to Borrower notice, in writing
accompanied by reasonable detail, of such Indemnified
Matter, but any failure by Bank to provide such
notice to Borrower shall not impair or otherwise
affect the rights of Bank or any of Bank's past,
present or future officers, directors, shareholders,
employees, representatives or consultants to be
indemnified, defended and held harmless under this
Section.
SECTION 5. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as Bank is committed to
make any Loan or issue any Letter of Credit under this Agreement and until all
instruments and agreements evidencing any Loan which is payable on demand or
which conditions advances upon the Bank's discretion are fully discharged and
terminated, and thereafter, so long as any Indebtedness remains outstanding, it
will not, and it will not allow any Loan Party within its control or under
common control to, without the prior written consent of the Bank, which consent,
with respect to the following Sections 5.1, 5.6 and 5.7, shall not be
unreasonably withheld:
5.1 Capital Structure, Business Objects or Purpose. Purchase,
acquire or redeem any of its equity ownership interests; provided that Borrower
may repurchase its common stock so long as the purchase price for all such stock
does not exceed $250,000 during any fiscal year, or enter into any
reorganization or recapitalization or reclassify its equity ownership interests,
or make any material change in its capital structure or general business objects
or purpose.
5.2 Mergers or Dispositions. Change its name, enter into any
merger or consolidation, whether or not the surviving entity thereunder, or
sell, lease, transfer, relocate or dispose of all, substantially all, or any
material part of its assets (whether in a single transaction or in a series of
transactions); provided that any Subsidiary of Borrower may be merged with
Borrower so long as Borrower is the surviving entity.
5.3 Guaranties. Guarantee, endorse, or otherwise become
secondarily liable for or upon the obligations or Debt of others (whether
directly or indirectly), except:
(a) guaranties in favor of and satisfactory to Bank;
(b) endorsements for deposit or collection in the
ordinary course of business;
(c) guaranties of Debt of Borrower's Subsidiaries in an
aggregate amount not to exceed $1,000,000; and
10
(d) guaranties of obligations to reimburse sureties with
respect to performance or warranty bonds; provided
that the Loan Parties' aggregate liability under such
guaranties and for Debt described in Section 5.4(d),
shall not exceed $5,000,000.
5.4 Debt. Become or remain obligated for any Debt except:
(a) Indebtedness and other Debt from time to time
outstanding and owing to Bank;
(b) Trade payables and other payables and accrued
liabilities arising in the ordinary course of
business and normally classified as current
liabilities under GAAP;
(c) Debt (including, without limitation, Capitalized
Lease Obligations) outstanding as of the date hereof
more particularly described in Schedule 5.4 attached
hereto and any refinancing thereof;
(d) Debt to reimburse sureties with respect to
performance or warranty bonds; provided that the Loan
Parties' aggregate liability for such Debt and the
guaranties described in Section 5.3(d), shall not
exceed $5,000,000;
(e) Debt arising under Hedging Contracts entered into
with respect to Indebtedness; and
(f) Other Debt in an aggregate amount not to exceed
$1,500,000.
5.5 Encumbrances. Create, incur, assume or suffer to exist any
Lien upon, or create, suffer or permit to exist any Lien upon any of its
property or assets, whether now owned or hereafter acquired, except for
Permitted Encumbrances.
5.6 Acquisitions. Purchase or otherwise acquire or become
obligated for the purchase of all or substantially all of the assets or business
interests of any Person or any shares of stock or other ownership interests of
any Person or otherwise purchase assets for which the aggregate purchase price
exceeds $2,000,000 in any fiscal year.
5.7 Investments. Make or allow to remain outstanding any
investment (whether such investment shall be of the character of investment in
shares of stock, evidences of indebtedness or other securities or otherwise) in,
or any loans, advances or extensions of credit to, any Person, other than:
(a) Borrower's current ownership interests in those
Subsidiaries of Borrower identified on Schedule 3.5
attached hereto; and
(b) any investment in direct obligations of the United
States of America or any agency thereof, or in
certificates of deposit issued by Bank, maintained
11
consistent with Borrower's or such Subsidiary's
business practices prior to the date hereof.
(c) any investment in repurchase obligations with a term
of not more than seven days for underlying securities
of the types described in clause (a) above entered
into with any national or state bank or trust company
which is organized under the Laws of the United
States of America or any state therein, which has
capital, surplus and undivided profits of at least
$500,000,000, and whose long term certificates of
deposit have an investment grade rating.
(d) any investment in corporate bonds which have an
investment grade rating.
5.8 Transactions with Affiliates. Enter into any transaction with
any of their stockholders, officers, employees, partners or any of their
Affiliates involving an aggregate amount in excess of $60,000 during any fiscal
year of Borrower, except subject to the terms hereof, transactions in the
ordinary course of business and on terms not less favorable than would be usual
and customary in similar transactions between Persons dealing at arm's length.
5.9 Defaults on Other Obligations. Fail to perform, observe or
comply duly with any covenant, agreement or other obligation to be performed,
observed or complied with by any Loan Party, subject to any grace periods
provided therein, which failure could have a Material Adverse Effect.
5.10 Pension Plans. Except in compliance with this Agreement, enter
into, maintain, or make contribution to, directly or indirectly, any Pension
Plan that is subject to ERISA.
5.11 No Further Negative Pledges. Enter into or become subject to
any agreement (other than this Agreement or the Loan Documents) (a) prohibiting
the guaranteeing by any Loan Party of any obligations, (b) prohibiting the
creation or assumption of any Lien upon the properties or assets of any Loan
Party, whether now owned or hereafter acquired or (c) requiring an obligation to
become secured (or further secured) if another obligation is secured or further
secured.
5.12 Accounts Receivable. Sell or assign any Eligible Account,
account receivable, note or trade acceptance, except to the Bank.
5.13 No License Restrictions. Permit any restriction in any license
or other agreement that restricts Borrower or any other Loan Party from granting
a Lien to Bank upon any of Borrower's or such other Loan Party's rights under
such license or agreement.
5.14 Sale of Assets. Sell or otherwise dispose of any of its assets
in an aggregate amount that exceeds $250,000 in any fiscal year.
12
5.15 Distributions to Foreign Subsidiaries. Make any direct or
indirect payment or distribution to any Subsidiary that is not organized under
the Laws of the United States or any political subdivision thereof, in an
aggregate amount that exceeds $500,000 in any fiscal year.
SECTION 6. EVENTS OF DEFAULT
6.1 Events of Default. The occurrence or existence of any of the
following conditions or events shall constitute an "Event of Default" hereunder:
(a) upon non-payment of any principal, interest or other
sums due under the terms of this Agreement or under
any Note(s), or under any other instrument or
evidence of Indebtedness, whether under this
Agreement, any Note(s), or otherwise, in any case,
when due in accordance with the terms hereof or as
otherwise specified therein; or if any Guarantor
shall fail to pay, when due, any indebtedness,
obligation or liability whatsoever of any such
Guarantor to Bank;
(b) (i) default in the observance or performance of any
of the conditions, covenants or agreements of
Borrower set forth in Section 4.3(a), Section 4.4, or
Sections 5.1 through 5.15 inclusive, and (ii) default
in the observance or performance of any other term or
condition set forth in this Agreement and not set
forth above in Section 6.1(b)(i) or in Section
6.1(a), and such default is not cured within 15 days
after the date on which Borrower first has knowledge
of the occurrence of such default;
(c) any representation or warranty made by any Loan Party
in any Loan Document shall be untrue or incorrect in
any material respect and is not cured within 15 days
after the date on which Borrower first has knowledge
that such representation or warranty has become
untrue or incorrect;
(d) any default or event of default, as the case may be,
in the observance or performance of any of the
conditions, covenants or agreements of any Loan Party
set forth in any Loan Document and continuation
thereof beyond any applicable period of grace or cure
provided with respect thereto;
(e) any default by any Loan Party, other than a
"default," the existence of which is being contested
by such Loan Party in good faith by appropriate
proceedings or actions, in the payment of any Debt
having a principal amount in excess of $100,000
(other than Debt owing to Bank), or in the observance
or performance of any conditions, covenants or
agreements related or given with respect thereto and,
in each such case, continuation thereof beyond any
applicable grace or cure period;
(f) the rendering of one or more judgments or decrees for
the payment of money, against any Loan Party, and
such judgment(s) or decree(s) shall remain
13
unvacated, unbonded or unstayed, by appeal or
otherwise, for a period of sixty (60) consecutive
days after the date of entry;
(g) a Change of Control occurs;
(h) the failure by any Loan Party, to meet the minimum
funding requirements under ERISA with respect to any
Pension Plan established or maintained by it; the
occurrence of any "reportable event," as defined in
ERISA, which could constitute grounds for termination
by the PBGC of any Pension Plan or for the
appointment by the appropriate United States District
Court of a trustee to administer such Pension Plan,
and such reportable event is not corrected and such
determination is not revoked within thirty (30) days
after notice thereof has been given to the plan
administrator or any Loan Party, as the case may be;
or the institution of any proceedings by the PBGC to
terminate any such Pension Plan or to appoint a
trustee by the appropriate United States District
Court to administer any such Pension Plan;
(i) if any Loan Party, becomes insolvent or generally
fails to pay, or admits in writing its inability to
pay, its debts as they mature, or applies for,
consents to, or acquiesces in the appointment of a
trustee, receiver, liquidator, conservator or other
custodian for any Loan Party, or a substantial part
of its property, or makes a general assignment for
the benefit of creditors; or in the absence of such
application, consent or acquiescence, a trustee,
receiver, liquidator, conservator or other custodian
is appointed for any Loan Party, or for a substantial
part of its property, and the same is not discharged
within sixty (60) days; or any bankruptcy,
reorganization, debt arrangement, or other
proceedings under any bankruptcy or insolvency law,
or any dissolution or liquidation proceeding, is
instituted by or against any Loan Party, and, if
instituted against any Loan Party, the same is
consented to or acquiesced in by any such Loan Party
or otherwise remains undismissed for sixty (60) days;
or any warrant of attachment is issued against any
substantial part of the property of any Loan Party,
which is not released within sixty (60) days of
service thereof;
(j) if any Loan Document shall be terminated, revoked, or
otherwise rendered void or unenforceable, in any
case, without Bank's prior written consent, other
than in accordance with the terms thereof; or
(k) Bank reasonably deems itself insecure believing that
the prospect of payment of any of the Indebtedness is
impaired or shall fear deterioration, removal or
waste of any of the Collateral.
6.2 Remedies Upon Event of Default. Upon the occurrence and at any
time during the existence or continuance of any Event of Default, but without
impairing or otherwise limiting the Bank's right to demand payment of all or any
portion of the Indebtedness which is payable on demand, at Bank's option, Bank
may give notice to Borrower declaring all or any portion of the
14
Indebtedness remaining unpaid and outstanding, whether under the Note or
otherwise, to be due and payable in full without presentation, demand, protest,
notice of dishonor, notice of intent to accelerate or notice of acceleration and
without other notice of any kind, except as provided in the Loan Documents, all
of which are hereby expressly waived, whereupon all such Indebtedness shall
immediately become due and payable. Furthermore, upon the occurrence of a
Default or Event of Default and at any time during the existence or continuance
of any Default or Event of Default, but without impairing or otherwise limiting
the right of Bank, if reserved under any Loan Document, to make or withhold
financial accommodations at its discretion, to the extent not yet disbursed, any
commitment by Bank to make any further loans to Borrower or issue any further
Letters of Credit for Borrower's account under this Agreement shall
automatically terminate; provided, should such Default or Event of Default be
cured to Bank's satisfaction, Bank may, but shall be under no obligation to,
reinstate any such commitment by written notice to Borrower. Notwithstanding the
foregoing, in the case of an Event of Default under Section 6.1(i), and
notwithstanding the lack of any notice, demand or declaration by Bank, the
entire Indebtedness remaining unpaid and outstanding shall become automatically
due and payable in full, and any commitment by Bank to make any further loans to
Borrower or issue any further Letters of Credit for Borrower's account shall be
automatically and immediately terminated, without any requirement of notice or
demand by Bank upon Borrower, each of which are hereby expressly waived by
Borrower. The foregoing rights and remedies are in addition to any other rights,
remedies and privileges Bank may otherwise have or which may be available to it,
whether under this Agreement, any other Loan Document, by law, or otherwise.
6.3 Setoff. In addition to any other rights or remedies of Bank
under any Loan Document, by law or otherwise, upon the occurrence and during the
continuance or existence of any Event of Default, Bank may, at any time and from
time to time, without notice to Borrower (any requirements for such notice being
expressly waived by Borrower), setoff and apply against any or all of the
Indebtedness (whether or not then due), any or all deposits (general or special,
time or demand, provisional or final) at any time held by Borrower and other
indebtedness at any time owing by Bank to or for the credit or for the account
of Borrower, and any property of Borrower, from time to time in possession or
control of Bank, irrespective of whether or not Bank shall have made any demand
hereunder or for payment of the Indebtedness and although such obligations may
be contingent or unmatured, and regardless of whether any Collateral then held
by Bank is adequate to cover the Indebtedness. The rights of Bank under this
Section are in addition to any other rights and remedies (including, without
limitation, other rights of setoff) which Bank may otherwise have. Borrower
hereby grants Bank a Lien on and security interest in all such deposits,
indebtedness and other property as additional collateral for the payment and
performance of the Indebtedness. Bank shall provide reasonable detail as to the
application of any funds that have been set off.
6.4 Waiver of Certain Laws. To the extent permitted by applicable
law, Borrower hereby agrees to waive, and does hereby absolutely and irrevocably
waive and relinquish, the benefit and advantage of any valuation, stay,
appraisement, extension or redemption laws now existing or which may hereafter
exist, which, but for this provision, might be applicable to any sale made under
the judgment, order or decree of any court, on any claim for interest on the
Note, or to any security interest or other Lien contemplated by or granted under
or in connection with this Agreement or the Indebtedness.
15
6.5 Waiver of Defaults. No Default or Event of Default shall be
waived by Bank except in a written instrument specifying the scope and terms of
such waiver and signed by an authorized officer of Bank, and such waiver and
shall be effective only for the specific time(s) and purpose(s) given. No single
or partial exercise of any right, power or privilege hereunder, nor any delay in
the exercise thereof, shall preclude other or further exercise of Bank's rights.
No waiver of any Default or Event of Default shall extend to any other or
further Default or Event of Default. No forbearance on the part of Bank in
enforcing any of Bank's rights or remedies under any Loan Document shall
constitute a waiver of any of its rights or remedies. Borrower expressly agrees
that this Section may not be waived or modified by Bank by course of
performance, estoppel or otherwise.
6.6 Receiver. Bank, in any action or suit to foreclose upon any of
the Collateral, shall be entitled, without notice or consent, and completely
without regard to the adequacy of any security for the Indebtedness, to the
appointment of a receiver of the business and premises in question, and of the
rents and profits derived therefrom. This appointment shall be in addition to
any other rights, relief or remedies afforded Bank. Such receiver, in addition
to any other rights to which he shall be entitled, shall be authorized to sell,
foreclose or complete foreclosure on Collateral for the benefit of Bank,
pursuant to provisions of applicable law.
6.7 Application of Proceeds of Collateral. Notwithstanding
anything to the contrary set forth in any Loan Document, after an Event of
Default, the proceeds of any of the Collateral, together with any offsets,
voluntary payments, and any other sums received or collected in respect of the
Indebtedness, may be applied in such order and manner as determined by Bank in
its sole and absolute discretion.
SECTION 7. MISCELLANEOUS
7.1 Accounting Principles. Except to the extent expressly stated
to the contrary herein, where the character or amount of any asset or liability
or item of income or expense is required to be determined, or any consolidation
or other accounting computation is required to be made for purposes of this
Agreement, it shall be done in accordance with GAAP, and all accounting terms
not specifically defined in this Agreement shall be construed in accordance with
GAAP.
7.2 Taxes and Fees. Unless otherwise prohibited by applicable law,
should any tax (other than a tax based upon the net income of Bank) or recording
or filing fee become payable in respect of any Loan Document, any of the
Collateral, any of the Indebtedness or any amendment, modification or supplement
hereof or thereof, Borrower agrees to pay such taxes (or reimburse Bank therefor
upon demand for reimbursement), together with any interest or penalties thereon,
and agrees to hold Bank harmless with respect thereto.
7.3 Governing Law. Each Loan Document shall be deemed to have been
delivered in the State of Texas, and shall be governed by and construed and
enforced in accordance with the laws of the State of Texas, except to the extent
that the Uniform Commercial Code, other personal property law or real property
law of another jurisdiction where Collateral is located is applicable, and
except to the extent expressed to the contrary in any Loan Document. Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law,
16
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
7.4 Audits of Collateral; Fees. Bank shall have the right from
time to time to audit Accounts and Inventory pledged by any Loan Party and other
Collateral, provided that such audits will be conducted no more than two (2)
times in any fiscal year unless an Event of Default has occurred. Borrower
agrees to reimburse Bank, on demand, for customary and reasonable fees and costs
incurred by Bank for such audits.
7.5 Costs and Expenses. Borrower shall pay Bank, on demand, all
costs and expenses, including, without limitation, reasonable attorneys' fees
and legal expenses (whether inside or outside counsel is used), incurred by Bank
in perfecting, revising, protecting or enforcing any of its rights or remedies
against any Loan Party or any Collateral, or otherwise incurred by Bank in
connection with any Default or Event of Default or the enforcement of the Loan
Documents or the Indebtedness. Bank shall provide reasonable detail regarding
such costs and expenses. Following Bank's demand upon Borrower for the payment
of any such costs and expenses, and until the same are paid in full, the unpaid
amount of such costs and expenses shall constitute Indebtedness and shall bear
interest at the Default Rate.
7.6 Notices. All notices and other communications provided for in
any Loan Document (unless otherwise expressly stipulated therein) or
contemplated thereby, given thereunder or required by law to be given, shall be
in writing (unless expressly provided to the contrary). If personally delivered,
such notices shall be effective when delivered, and in the case of mailing or
delivery by overnight courier, such notices shall be effective when placed in an
envelope and deposited at a post office or official depository under the
exclusive care and custody of the United States Postal Service or delivered to
an overnight courier, postage prepaid, in each case addressed to the parties as
set forth on the signature page of this Agreement, or to such other address as a
party shall have designated to the other in writing in accordance with this
Section. In the case of mailing, the mailing shall be by certified or first
class mail. The giving of at least ten (10) days' notice before Bank shall take
any action described in any notice shall conclusively be deemed reasonable for
all purposes; provided, that this shall not be deemed to require Bank to give
such ten (10) days' notice, or any notice, if not specifically required to do so
in this Agreement.
7.7 Further Action. Borrower, from time to time, upon written
request of Bank, will promptly make, execute, acknowledge and deliver, or cause
to be made, executed, acknowledged and delivered, all such further and
additional instruments, and promptly take all such further action as may be
reasonably required to carry out the intent and purpose of the Loan Documents,
and to provide for the Loans thereunder and payment of the Note, according to
the intent and purpose therein expressed.
7.8 Successors and Assigns; Participation. This Agreement shall be
binding upon and shall inure to the benefit of Borrower and Bank and their
respective successors and assigns. The foregoing shall not authorize any
assignment or transfer by Borrower of any of its respective rights, duties or
obligations hereunder, such assignments or transfers being expressly prohibited.
Bank, may assign its rights, duties and obligations hereunder, and will give to
Borrower five (5) Business Days' prior notice of such assignment; provided that
Bank shall not participate any of its rights, duties or
17
obligations hereunder so long as no Default or Event of Default has occurred and
is continuing. Bank is hereby authorized to disclose to any such assignee or
participant (or proposed assignee or participant) any financial or other
information in its knowledge or possession regarding any Loan Party or the
Indebtedness.
7.9 Indulgence. No delay or failure of Bank in exercising any
right, power or privilege hereunder or under any of the Loan Documents shall
affect such right, power or privilege, nor shall any single or partial exercise
thereof preclude any further exercise thereof, nor the exercise of any other
right, power or privilege available to Bank. The rights and remedies of Bank
hereunder are cumulative and are not exclusive of any rights or remedies of
Bank.
7.10 Amendment and Waiver. No amendment or waiver of any provision
of any Loan Document, nor consent to any departure by any Loan Party therefrom,
shall in any event be effective unless the same shall be in writing and signed
by Bank, and then such waiver or consent shall be effective only in the specific
instance(s) and for the specific time(s) and purpose(s) for which given.
7.11 Severability. In case any one or more of the obligations of
any Loan Party under any Loan Document shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining obligations of such Loan Party shall not in any way be affected or
impaired thereby, and such invalidity, illegally or unenforceability in one
jurisdiction shall not affect the validity, legality or enforceability of the
obligations of such Loan Party under any Loan Document in any other
jurisdiction.
7.12 Headings and Construction of Terms. The headings of the
various sub-Sections hereof are for convenience of reference only and shall in
no way modify or affect any of the terms or provisions hereof. Where the context
herein requires, the singular number shall include the plural, and any gender
shall include any other gender.
7.13 Independence of Covenants. Each covenant hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any such covenant, the fact that it would be permitted by an
exception to, or would be otherwise within the limitations of, another covenant
shall not avoid the occurrence of any Default or Event of Default.
7.14 Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations and warranties of any Loan Party made in
any Loan Document, or in any certificate, report, financial statement or other
document furnished by or on behalf of any Loan Party in connection with any Loan
Document, shall be deemed to have been relied upon by Bank, notwithstanding any
investigation heretofore or hereafter made by Bank or on Bank's behalf, and
those covenants and agreements of Borrower set forth in Sections 4.8 and 4.12
hereof (together with any other indemnities of Borrower contained elsewhere in
any Loan Document) shall survive the termination of this Agreement and the
repayment in full of the Indebtedness.
7.15 Effective Upon Execution. This Agreement shall become
effective upon the execution hereof by Bank and Borrower, and shall remain
effective until the Indebtedness under this Agreement and the Note and the
related Loan Documents shall have been repaid and discharged in
18
full and no commitment to extend any credit hereunder (whether optional or
obligatory) remains outstanding.
7.16 Complete Agreement; Conflicts. The Loan Documents contain the
entire agreement of the parties thereto, and none of the parties shall be bound
by anything not expressed in writing. In the event that and to the extent that
any of the terms, conditions or provisions of any of the other Loan Documents
are inconsistent with or in conflict with any of the terms, conditions or
provisions of this Agreement, the applicable terms, conditions and provisions of
this Agreement shall govern and control.
7.17 Exhibits and Addenda. The following Addenda, Exhibits and
Schedules are attached to this Agreement and are incorporated into this
Agreement by this reference and made a part hereof for all purposes:
Addenda:
Defined Terms Addendum
Financial Covenants Addendum
Loan Terms, Conditions and Procedures Addendum
Exhibits:
Exhibit A - Form of Compliance Certificate
Exhibit B - Form of Request for Advance
Schedules:
Schedule 3.5 Subsidiaries
Schedule 3.14 Employee Benefit Plans
Schedule 3.17 Environmental Disclosures
Schedule 5.4 Debt
7.18 WAIVER OF JURY TRIAL. BANK AND BORROWER EACH ACKNOWLEDGE THAT
THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED.
EACH OF THEM, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH
COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR
ARISING OUT OF ANY LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THE
LOAN DOCUMENTS OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTION OF EITHER OF THEM. THESE PROVISIONS SHALL NOT BE DEEMED TO
HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK OR BORROWER, EXCEPT BY
A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.
7.19 ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER
"LOAN AGREEMENTS" (AS DEFINED IN SECTION 26.02(A)(2) OF THE TEXAS BUSINESS &
COMMERCE CODE, AS AMENDED) REPRESENT THE FINAL AGREEMENT BETWEEN
19
THE PARTIES, AND THIS AGREEMENT AND THE OTHER WRITTEN LOAN AGREEMENTS MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF THE PAGE
LEFT BLANK INTENTIONALLY
SIGNATURE PAGE TO FOLLOW
20
WITNESS the due execution hereof as of the day and year first above
written.
COMERICA BANK PEERLESS MFG. CO.
By: /s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxxx, Xx.
----------------------------- --------------------------------
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx, Xx.
Vice President Chief Financial Officer
Address: 0000 Xxx Xxxxxx Address: 0000 Xxxxxx Xxxx Xxxx
Xxxxxx, Xxxxx 00000 Xxxxxx, Xxxxx 00000
X.X. Xxx 000000 Xxxx: Xxxxxxx X. Xxxxxx,
Xxxxxx, Xxxxx 00000-0000 Jr.
Attn: Xxxxxxx X. Xxxxxx Telefax No.: (000) 000-0000
Telefax No.: (000) 000-0000
21
DEFINED TERMS ADDENDUM
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the following respective meanings:
"ACCOUNT DEBTOR" shall mean the party who is obligated on or under any
Account.
"ACCOUNTS," "CHATTEL PAPER," "DOCUMENTS," "EQUIPMENT," "FIXTURES,"
"GENERAL INTANGIBLES," "GOODS," "INSTRUMENTS" AND "INVENTORY" shall have the
respective meanings assigned to them in the UCC on the date of this Agreement.
"ACCOUNTS RECEIVABLE" shall mean and include all Accounts, Chattel
Paper, General Intangibles, contract rights, deposit accounts, documents and
Instruments now owned or hereafter acquired by Borrower and, to the extent
applicable, any other Loan Party pledging or purporting to pledge the same as
security for all or any part of the Indebtedness.
"AFFILIATE" shall mean, when used with respect to any Person, any other
Person which, directly or indirectly, controls or is controlled by or is under
common control with such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"AFFILIATE RECEIVABLES" shall mean, as of any time of determination,
any amounts in respect of loans or advances owing to Borrower or another Loan
Party from any of its Subsidiaries or Affiliates or any officer, director or
shareholder of any Loan Party at such time.
"AGREEMENT" shall mean this Credit Agreement, including the Defined
Terms Addendum, the Financial Covenants Addendum and the Loan Terms, Conditions
and Procedures Addendum, together with all exhibits and schedules, as it may be
amended from time to time.
"APPLICABLE CALENDAR MONTH" shall mean any calendar month during which
the aggregate outstanding amount of all Loans and Letter of Credit Liabilities
equals or exceeds $8,000,000 at any time.
"APPLICABLE INTEREST RATE" shall mean, with respect to the Indebtedness
from time to time outstanding under any Note the rate or rates provided in such
Note as the Applicable Interest Rate.
"BORROWING BASE CERTIFICATE" shall mean a certificate describing the
Eligible Accounts and Eligible Inventory in a form acceptable to Bank.
"BORROWING BASE LIMITATION" shall mean the sum of:
DEFINED TERMS ADDENDUM
PAGE 1
(a) Seventy percent (70%) of Eligible Accounts minus the positive
difference between (i) xxxxxxxx in excess of cost and (ii) cost in excess of
xxxxxxxx; and
(b) Forty percent (40%) of Eligible Inventory.
"BUSINESS DAY" shall mean any day, other than a Saturday, Sunday or
holiday, on which the Bank is open to carry on all or substantially all of its
normal commercial lending business in Dallas, Texas.
"CAPITALIZED LEASE OBLIGATION" shall mean any Debt represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
"CHANGE OF CONTROL" shall mean that at any time one-third or more of
the directors of Borrower shall consist of Persons not nominated by Borrower's
Board of Directors (not including as Board nominees any directors which the
Board is obligated to nominate pursuant to shareholders agreements, voting trust
arrangements or similar arrangements).
"COLLATERAL" shall mean all Accounts Receivable, Inventory, and
Equipment of Borrower, and all other property, assets and rights in which a Lien
or other encumbrance in favor of or for the benefit of Bank is or has been
granted or arises or has arisen, or may hereafter be granted or arise, under or
in connection with any Loan Document, or otherwise, to secure the payment or
performance of the Indebtedness.
"COMPLIANCE CERTIFICATE" shall mean a certificate to be furnished by
Borrower to Bank, in the form of Exhibit A, certified by the chief financial
officer of Borrower in his capacity as a responsible officer of Borrower (or in
such officer's absence, another responsible officer of Borrower in his capacity
as a responsible officer of Borrower) pursuant to Section 4.3 of this Agreement,
certifying that, as of the date thereof, no Default or Event of Default shall
have occurred and be continuing, or if any Default or Event of Default shall
have occurred and be continuing, specifying in detail the nature and period of
existence thereof and any action taken or proposed to be taken by Borrower with
respect thereto, and also certifying as to Borrower's Debt to Tangible Net Worth
Ratio and as to whether Borrower is in compliance with the financial covenants
contained in the Financial Covenants Addendum to this Agreement (which
certificate shall set forth, in reasonable detail, the calculations and the
resultant ratios and financial tests determined thereunder).
"CONSOLIDATED" or "CONSOLIDATED" shall mean, when used with reference
to any financial term in this Agreement, the aggregate for two or more persons
of the amounts signified by such term for all such persons determined on a
consolidated basis in accordance with GAAP. Unless otherwise specified herein,
references to "consolidated" financial statements or data of the Borrower
includes consolidation with its Subsidiaries in accordance with GAAP.
"CURRENT RATIO" shall mean as of any applicable date of determination
thereof, the ratio of Borrower's current assets to Borrower's current
liabilities, calculated on a Consolidated basis.
DEFINED TERMS ADDENDUM
PAGE 2
"DEBT" shall mean, as of any applicable date of determination thereof,
all items of indebtedness, obligation or liability of a Person, whether matured
or unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several. In the case of Borrower, the term "Debt" shall
include, without limitation, the Indebtedness.
"DEBT TO TANGIBLE NET WORTH RATIO" shall mean, in respect of a Person
and as of any applicable date of determination thereof, the ratio of the GAAP
Debt of such Person to the Tangible Net Worth of such Person. With respect to
Borrower, the Debt to Tangible Net Worth Ratio shall be calculated on a
Consolidated basis.
"DEFAULT" shall mean, any condition or event which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default.
"DEFAULT RATE" shall mean, at any time of determination thereof with
respect to the applicable portion of the Indebtedness, a per annum rate of
interest equal to the sum of the contractual rate of interest which would apply
to such Indebtedness if the Default Rate was not then in effect plus three
percent (3%).
"DISBURSEMENT DATE" shall mean the date upon which Bank makes a Loan
under this Agreement.
"DISTRIBUTION" shall mean any dividend on or other distribution
(whether by reduction of capital or otherwise) with respect to any shares of
capital stock (or other ownership interests), except for dividends from a
Subsidiary of a Loan Party to another of its Subsidiaries.
"ELIGIBLE ACCOUNT" shall mean an Account (but shall not include
interest and service charges thereon) arising in the ordinary course of business
which meets each of the following requirements:
(a) it is not owing more than sixty (60) days after the date on
which payment of the original invoice or other writing
evidencing such Account is due;
(b) it arises from the sale or lease of goods and such goods have
been shipped or delivered to the Account Debtor under such
Account, or it arises from services rendered and such services
have been performed;
(c) it is evidenced by an invoice, dated not later than the date
of shipment or performance (either partial or complete),
rendered to such Account Debtor or some other evidence of
billing acceptable to Bank;
(d) it is not evidenced by any note, trade acceptance, draft or
other Instrument or by any Chattel Paper, unless such note or
other document or Instrument or Chattel Paper has previously
been endorsed and delivered by the relevant Loan Party to
Bank.
DEFINED TERMS ADDENDUM
PAGE 3
(e) it is a valid, legally enforceable obligation of the Account
Debtor thereunder, and is not subject to any offset,
counterclaim or other defense on the part of such Account
Debtor or to any claim on the part of such Account Debtor
denying liability thereunder in whole or in part; provided,
however, that any Account that is subject to offset may be an
Eligible Account to the extent it exceeds the amount of such
offset if it meets all of the other requirements of this
definition;
(f) it is not subject to any sale of accounts, any rights of
offset or Lien whatsoever other than to Bank;
(g) it is not owing by a Subsidiary or Affiliate of Borrower;
(h) it is not (i) owing by an Account Debtor that (A) does not
maintain its chief executive office in the United States of
America or Canada, or (B) is not organized under the laws of
the United States of America, or any state thereof or under
the laws of Canada or any province thereof, or (C) is the
government of any foreign country or sovereign state, or of
any state, province, municipality or other instrumentality
thereof, and (ii) supported by (A) one or more letters of
credit in an amount and of a tenor, and issued by a financial
institution, acceptable to Bank, or (B) insurance provided by
an insurer acceptable to Bank;
(i) is not an Account billed in advance, payable on delivery, for
consigned goods, for guaranteed sales, for unbilled sales,
payable at a future date in accordance with its terms or
insured by a surety company;
(j) it is not an Account owing by the United States of America or
any state or political subdivision thereof, or by any
department, agency, public body corporate or other
instrumentality of any of the foregoing, unless all necessary
steps are taken to comply with the Federal Assignment of
Claims Act of 1940, as amended, or with any comparable state
law, if applicable, and all other necessary steps are taken to
perfect Bank's security interest in such Account;
(k) it is not owing by an Account Debtor for which a Loan Party or
any of its Subsidiaries has received a notice of (i) the
dissolution, liquidation, termination of existence, insolvency
or business failure of the Account Debtor, (ii) the
appointment of a receiver for any material part of the
property of the Account Debtor, or (iii) an assignment for the
benefit of creditors, the filing of a petition in bankruptcy,
or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against the Account Debtor; and
(l) it is not owing by any Account Debtor whose obligations Bank,
acting in its reasonable discretion, shall have notified
Borrower prior to its inclusion on a Borrowing Base
Certificate, are not deemed to constitute Eligible Accounts.
DEFINED TERMS ADDENDUM
PAGE 4
An Account which is at any time an Eligible Account, but which subsequently
fails to meet any of the foregoing requirements, shall forthwith cease to be an
Eligible Account.
"ELIGIBLE INVENTORY" shall mean all of Borrower's Inventory which is in
good and merchantable condition, is not obsolete or discontinued, and which
would properly be classified as "raw materials" under GAAP, excluding (a)
Borrower's work in process, miscellaneous supplies such as hand tools and
packaging materials, consigned goods, Inventory located outside the United
States of America and goods in transit, (b) Inventory covered by or subject to a
seller's right to repurchase, or any consensual or nonconsensual Lien
(including, without limitation, purchase money security interests) other than in
favor of Bank, whether senior or junior to Bank's security interest and Liens,
and (c) Inventory that Bank, acting in its reasonable discretion, after having
notified Borrower, excludes as Eligible Inventory. Inventory which is at any
time Eligible Inventory, but which subsequently fails to meet any of the
foregoing requirements, shall forthwith cease to be Eligible Inventory. Eligible
Inventory shall be valued at the lesser of cost or market value in accordance
with GAAP.
"ENVIRONMENTAL LAW(S)" shall mean all laws, codes, ordinances, rules,
regulations, orders, decrees and directives issued by any federal, state, local,
foreign or other governmental or quasi governmental authority or body (or any
agency, instrumentality or political subdivision thereof) pertaining to
Hazardous Materials or otherwise intended to regulate or improve health, safety
or the environment, including, without limitation, any hazardous materials or
wastes, toxic substances, flammable, explosive or radioactive materials,
asbestos, and/or other similar materials; any so-called "superfund" or
"superlien" law, pertaining to Hazardous Materials on or about any of the
Collateral, or any other property at any time owned, leased or otherwise used by
any Loan Party, or any portion thereof, including, without limitation, those
relating to soil, surface, subsurface ground water conditions and the condition
of the ambient air; and any other federal, state, foreign or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning, any hazardous, toxic,
radioactive, flammable or dangerous waste, substance or material, as now or at
anytime hereafter in effect.
"EQUIPMENT" shall have the meaning assigned to such term in the UCC on
the date of this Agreement together with all of the following to the extent, if
any, the same are not included within such definition: all machinery, equipment,
furniture, furnishings, fixtures, and other tangible personal property (except
Inventory) including, without limitation, data processing hardware and software,
motor vehicles, aircraft, dies, tools, jigs, and office equipment, as well as
all of such types of property that are leased and all rights and interests with
respect thereto under such leases to the extent that any such lease does not
prohibit or require a consent to the creation of a Lien in favor of the Bank
(including, without limitation, options to purchase) together with all present
and future additions and accessions thereto, replacements therefor, component
and auxiliary parts and supplies used or to be used in connection therewith, and
all substitutes for any of the foregoing, and all manuals, drawings,
instructions, warranties and rights with respect thereto wherever any of the
foregoing is located to the extent that any of the foregoing are now owned or
hereafter acquired by the Borrower and to the extent that any other Loan Party
now or hereafter grants or purports to xxxxx x Xxxx upon all or any of the
foregoing as security for all or any portion of the Indebtedness.
DEFINED TERMS ADDENDUM
PAGE 5
"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 6.1 of this Agreement.
"FINANCIAL STATEMENTS" shall mean all balance sheets, income
statements, statements of operations, statements of changes in shareholders'
equity, statements of cash flow and reports and notes thereto of Borrower, all
presented on a consolidated basis, which are required to, have been, or may from
time to time hereafter, be furnished to Bank, for the purposes of, or in
connection with, this Agreement, the transactions contemplated hereby or any of
the Indebtedness.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"GAAP DEBT" shall mean all Debt that should be classified as a
liability on a consolidated balance sheet of Borrower in accordance with GAAP.
"GOOD FAITH" or "GOOD FAITH" shall have the meaning ascribed to the
term "good faith" in Article 1.201 (19) of the UCC on the date of this
Agreement.
"GOVERNMENTAL AUTHORITY" shall mean the United States, each state, each
county, each city, and each other political subdivision in which all or any
portion of the Collateral is located, and each other political subdivision,
agency, or instrumentality exercising jurisdiction over Bank, any Loan Party or
any Collateral.
"GOVERNMENTAL REQUIREMENTS" shall mean all laws, ordinances, rules, and
regulations of any Governmental Authority applicable to any Loan Party, any of
the Indebtedness or any Collateral.
"GUARANTOR(S)" shall mean, as the context dictates, any Person(s)
(other than the Borrower) who shall, at any time, guarantee or otherwise be or
become obligated for the repayment of all or any part of the Indebtedness,
including, without limitation, PMC Acquisition, Inc.
"HAZARDOUS MATERIAL" shall mean and include any hazardous, toxic or
dangerous waste, substance or material defined as such in, or for purposes of,
any Environmental Law(s).
"HEDGING CONTRACT" shall mean any agreement providing for options,
swaps, floors, caps, collars, forward sales or forward purchases involving
interest rates.
"INDEBTEDNESS" shall mean all loans, advances, indebtedness,
obligations and liabilities of any Loan Party to Bank under any Loan Document,
together with all other indebtedness, obligations and liabilities whatsoever of
Borrower to 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, voluntary or involuntary, known or
unknown, or originally payable to Bank or to a third party and subsequently
acquired by Bank including, without limitation, any: late
DEFINED TERMS ADDENDUM
PAGE 6
charges; loan fees or charges; overdraft indebtedness; costs incurred by Bank in
establishing, determining, continuing or defending the validity or priority of
any Lien or in pursuing any of its rights or remedies under any Loan Document or
in connection with any proceeding involving Bank as a result of any financial
accommodation to Borrower; debts, obligations and liabilities for which Borrower
would otherwise be liable to the Bank were it not for the invalidity or
enforceability of them by reason of any bankruptcy, insolvency or other law or
for any other reason; and reasonable costs and expenses of attorneys and
paralegals, whether any suit or other action is instituted, and to court costs
if suit or action is instituted, and whether any such fees, costs or expenses
are incurred at the trial court level or on appeal, in bankruptcy, in
administrative proceedings, in probate proceedings or otherwise; provided,
however, that the term Indebtedness shall not include any consumer loan to the
extent treatment of such loan as part of the Indebtedness would violate any
Governmental Requirement.
"INVENTORY" shall have the meaning assigned to such term in the UCC on
the date of this Agreement together with all goods, merchandise and other
personal property of Borrower and each other Loan Party which shall pledge or
purport to pledge the same as security for any of the Indebtedness, now owned or
hereafter produced, manufactured or acquired by any such Person, which are held
for sale or lease or are furnished under a contract of service or are raw
materials, work-in-process or materials used or consumed or to be used or
consumed in any such Person's business, and any other Inventory of any such
Person, as determined in accordance with GAAP.
"LETTER OF CREDIT" shall mean a letter of credit issued by the Bank for
the account of and/or upon the application of any Loan Party in accordance with
this Agreement, as such Letter of Credit may be amended, supplemented, extended
or confirmed from time to time.
"LETTER OF CREDIT LIABILITIES" shall mean, at any time and in respect
of all Letters of Credit, the sum of (a) the aggregate amount available to be
drawn under all such Letters of Credit plus (b) the aggregate unpaid amount of
all Reimbursement Obligations then due and payable in respect of previous
drawings under such Letters of Credit.
"LIEN" shall mean any valid and enforceable interest in any property,
whether real, personal or mixed, securing an indebtedness, obligation or
liability owed to or claimed by any Person other than the owner of such
property, whether such indebtedness is based on the common law or any statute or
contract and including, but not limited to, a security interest, pledge,
mortgage, assignment, conditional sale, trust receipt, lease, consignment or
bailment for security purposes.
"LOAN DOCUMENTS" shall mean collectively, this Agreement, the Note, any
reimbursement agreement or other documentation executed in connection with any
Letter of Credit, and any other documents, instruments or agreements evidencing,
governing, securing, guaranteeing or otherwise relating to or executed pursuant
to or in connection with any of the Indebtedness or any Loan Document (whether
executed and delivered prior to, concurrently with or subsequent to this
Agreement), as such documents may have been or may hereafter be amended from
time to time.
"LOAN PARTY" shall mean Borrower and each Guarantor.
DEFINED TERMS ADDENDUM
PAGE 7
"LOANS" shall mean, collectively, the Revolving Loans, and "LOAN" shall
mean any of them.
"MASTER REVOLVING NOTE" shall mean the Master Revolving Note of even
date herewith in the original principal amount of $12,500,000 made by Borrower
payable to the order of the Bank, as the same may be renewed, extended,
modified, increased or restated from time to time.
"MATERIAL ADVERSE EFFECT" shall mean (i) any act, event, condition or
circumstance which could materially and adversely affect the business,
operations, condition (financial or otherwise), performance or assets of
Borrower on a consolidated basis, the ability of Borrower to perform its
obligations under any Loan Document to which it is a party or by which it is
bound or the enforceability of any Loan Document, and (ii) with respect to
Sections 3.10, 3.11, 3.17 and 4.12, any act, event, condition or circumstance
which could materially and adversely affect the business, operations, condition
(financial or otherwise), performance or assets of any Loan Party, the ability
of any Loan Party to perform its obligations under any Loan Document to which it
is a party or by which it is bound or the enforceability of any Loan Document.
"MAXIMUM LEGAL RATE" shall mean the maximum rate of nonusurious
interest per annum permitted to be paid by Borrower or, if applicable, another
Loan Party or received by Bank with respect to the applicable portion of the
Indebtedness from time to time under applicable state or federal law as now or
as may be hereafter in effect, including, as to Chapter 303 of the Texas Finance
Code, but otherwise without limitation, that rate based upon the "weekly
ceiling" (as defined in the Texas Finance Code).
"NET INCOME" shall mean the net income of the Borrower on a
consolidated basis for any applicable period of determination, determined in
accordance with GAAP, but excluding, in any event:
(a) any material gains or losses on the sale or other disposition,
not in the ordinary course of business, of investments or
fixed or capital assets, and any taxes on the excluded gains
and any tax deductions or credits on account of any excluded
losses; and
(b) net earnings of any Person not consolidated with Borrower in
which Borrower has an ownership interest, unless such net
earnings shall have actually been received by Borrower in the
form of cash distributions.
"NOTE" shall mean the Master Revolving Note, and all notes given in
replacement and substitution thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
Person succeeding to the present powers and functions of the Pension Benefit
Guaranty Corporation.
"PENSION PLAN(S)" shall mean any and all employee benefit pension plans
of Borrower and/or any of its Subsidiaries in effect from time to time, as such
term is defined in ERISA.
DEFINED TERMS ADDENDUM
PAGE 8
"PERMITTED ENCUMBRANCES" shall mean:
(a) Liens in favor of the Bank;
(b) Liens for taxes, assessments or other governmental charges
which are not yet due and payable, incurred in the ordinary
course of business and for which no interest, late charge or
penalty is attaching or which are being contested in good
faith by appropriate proceedings and, if requested by Bank,
bonded in an amount and manner satisfactory to Bank;
(c) Liens, not delinquent, arising in the ordinary course of
business and 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
without violation of any Loan Document that are not yet due
and payable;
(e) encumbrances consisting of existing or future zoning
restrictions, existing recorded rights-of-way, existing
recorded easements, existing recorded private restrictions or
existing or future public restrictions on the use of real
property, none of which materially impairs the use of such
property 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 none of
which is prohibited by any other Loan Document;
(f) Liens arising in connection with Capitalized Lease Obligations
permitted under Section 5.4(d); and
(g) Liens on Accounts that are not Eligible Accounts.
"PERSON" or "PERSON" shall mean any individual, corporation,
partnership, joint venture, limited liability company, association, trust,
unincorporated association, joint stock company, government, municipality,
political subdivision or agency, or other entity.
"REIMBURSEMENT OBLIGATIONS" shall mean, at any time and in respect of
all Letters of Credit, the aggregate obligations any Loan Party, then
outstanding or which may thereafter arise, to reimburse the Bank for any amount
paid or incurred by the Bank in respect of any and all drawings under such
Letter of Credit, together with any and all other Indebtedness, obligations and
liabilities of any Loan Party to Bank related to such Letter of Credit arising
under this Agreement, any Letter of Credit application or any other Loan
Document, to the extent not repaid with the Revolving Loans advanced under this
Agreement.
DEFINED TERMS ADDENDUM
PAGE 9
"REQUEST FOR ADVANCE" shall mean an oral or written request or
authorization for an advance of Loan proceeds which if made in writing shall be
in the form annexed hereto as Exhibit B, or in such other form as is acceptable
to Bank.
"REVOLVING CREDIT MATURITY DATE" shall mean November 1, 2006 or such
earlier date on which the entire unpaid principal amount of al Revolving Loans
becomes due and payable whether by the lapse of time, demand for payment,
acceleration or otherwise; provided, however, if any such date is not a Business
Day, then the Revolving Credit Maturity Date shall be the next succeeding
Business Day.
"REVOLVING CREDIT MAXIMUM AMOUNT" shall mean (a) $8,000,000 if the sum
of the outstanding principal balance of all Revolving Loans plus the Letter of
Credit Liabilities is less than or equal to $8,000,000, or (b) the lesser of (i)
TWELVE MILLION FIVE HUNDRED THOUSAND DOLLARS ($12,500,000), or (ii) the
Borrowing Base Limitation if the sum of outstanding principal balance of all
Revolving Loans plus the Letter of Credit Liabilities exceeds $8,000,000.
"REVOLVING LOAN" shall mean an advance made, or to be made, under the
revolving credit loan facility to or for the credit of Borrower by the Bank
pursuant to the Loan Terms, Conditions and Procedures Addendum.
"SUBSIDIARY" shall mean as to any particular parent entity, any
corporation, partnership, limited liability company or other entity (whether now
existing or hereafter organized or acquired) in which more than fifty percent
(50%) of the outstanding equity ownership interests having voting rights as of
any applicable date of determination, shall be owned directly, or indirectly
through one or more Subsidiaries, by such parent entity.
"TANGIBLE NET WORTH" shall mean as of any applicable date of
determination, the consolidated shareholder's equity of Borrower, calculated in
accordance with GAAP, less any Affiliate Receivables, goodwill, and all other
assets normally classified as intangible assets under GAAP.
"TELEPHONE NOTICE AUTHORIZATION" shall mean an agreement in form
satisfactory to Bank authorizing telephonic and facsimile notices of borrowing
and establishing a codeword system of identification in connection therewith.
"UCC" shall mean the Uniform Commercial Code as adopted and in force in
the State of Texas, as amended.
DEFINED TERMS ADDENDUM
PAGE 10
FINANCIAL COVENANTS ADDENDUM
SECTION 1. FINANCIAL COVENANTS.
1.1 Tangible Net Worth. Maintain a Tangible Net Worth at all times
of not less than (a) from the dated of this Agreement through June 29, 2004,
$20,500,000 and (b) during each fiscal year thereafter, the sum of (i) the
minimum Tangible Net Worth required pursuant to this Section 1.1 for the
immediately preceding fiscal year, plus (ii) fifty percent (50%) multiplied by
the positive Net Income of Borrower for the immediately preceding fiscal year.
1.2 Current Ratio. Maintain in a Current Ratio at all times of not
less than 1.15 to 1.
FINANCIAL COVENANTS ADDENDUM
PAGE 1
LOAN TERMS, CONDITIONS AND PROCEDURES ADDENDUM
SECTION 1. REVOLVING CREDIT FACILITY
1.1 Revolving Credit Commitment. Subject to the terms and
conditions of the Loan Documents, the Bank agrees to make Revolving Loans to
Borrower at any time and from time to time from the effective date hereof until
(but not including) the Revolving Credit Maturity Date. The aggregate principal
amount of Revolving Loans at any time outstanding plus the Letter of Credit
LIABILITIES shall not exceed the Revolving Credit Maximum Amount. All of such
Revolving Loans shall be evidenced by the Master Revolving Note, under which
advances, repayments and re-advances may be made, subject to the terms and
conditions of the Loan Documents.
1.2 Repayment of and Interest on the Master Revolving Note. Each
Revolving Loan evidenced by the Master Revolving Note from time to time
outstanding hereunder shall, from and after the date of such Revolving Loan,
bear interest at a per annum rate equal to the Applicable Interest Rate until
the occurrence of an Event of Default and thereafter at the Default Rate and
shall be due and payable in accordance with the terms of the Master Revolving
Note. All unpaid principal, accrued and unpaid interest and other amounts owing
under the Master Revolving Note shall be due and payable on the Revolving Credit
Maturity Date.
1.3 Requests for Advances. Except as hereinafter provided,
Borrower may request a Revolving Loan by submitting to Bank a Request for
Advance by an authorized officer or other representative of Borrower, subject to
the following:
i. each such Request for Advance shall include, without
limitation, the proposed amount of such Revolving Loan and the
proposed Disbursement Date, which date must be a Business Day;
ii. each such Request for Advance shall be communicated to Bank by
2:00 p.m. (Dallas, Texas time) on the proposed Disbursement
Date;
iii. a Request for Advance, once communicated to Bank, shall not be
revocable by Borrower;
iv. each Request for Advance, once communicated to Bank, shall
constitute a representation, warranty and certification by Borrower as of the
date thereof that:
(1) both before and after the making of such Revolving
Loan, the obligations set forth in the Loan Documents
are and shall be valid, binding and enforceable
obligations of each Loan Party, as applicable;
(2) all terms and conditions precedent to the making of
such Revolving Loan have been satisfied, and shall
remain satisfied through the date of such Revolving
Loan;
LOAN TERMS, CONDITIONS AND PROCEDURES ADDENDUM
PAGE 1
(3) the making of such Revolving Loan will not cause the
aggregate outstanding principal amount of all
Revolving Loans plus the Letter of Credit Liabilities
to exceed the Revolving Credit Maximum Amount;
(4) no Default or Event of Default shall have occurred or
be in existence, and none will exist or arise upon
the making of such Revolving Loan;
(5) the representations and warranties contained in the
Loan Documents are true and correct in all material
respects and shall be true and correct in all
material respects as of the making of such Revolving
Loan; and
(6) the Request for Advance will not violate the terms or
conditions of any contract, indenture, agreement or
other borrowing of any Loan Party.
Bank may elect (but without any obligation to do so) to make a Revolving Loan
upon the telephonic or facsimile request of Borrower, provided that Borrower has
first executed and delivered to Bank a Telephone Notice Authorization. If any
such Revolving Loan based upon a telephonic or facsimile request is made by
Borrower, Bank may require Borrower to confirm said telephonic or facsimile
request in writing by delivering to Bank, on or before 2:00 p.m. (Dallas, Texas
time) on the next Business Day following the Disbursement Date of such Revolving
Loan, a duly executed written Request for Advance, and all other provisions of
this Section 1 shall be applicable with respect to such Revolving Loan. In
addition, Borrower may authorize the Bank to automatically make Revolving Loans
pursuant to such other written agreements as may be entered into by Bank and
Borrower
1.4 Prepayment. Borrower may prepay all or part of the outstanding
balance under the Master Revolving Note at any time, without premium, penalty or
prejudice to the right of Borrower to reborrow under the terms of this
Agreement, subject to the terms and conditions of the Loan Documents.
1.5 Revolving Credit Maximum Amount and Reduction of Indebtedness.
Notwithstanding anything contained in this Agreement to the contrary, the
aggregate principal amount of all Revolving Loans at any time outstanding plus
the Letter of Credit Liabilities shall not exceed the Revolving Credit Maximum
Amount. If said limitations are exceeded at anytime, Borrower shall immediately,
without demand by Bank, pay to Bank an amount not less than such excess, or, if
Bank, in its sole discretion, shall so agree, Borrower shall provide Bank cash
collateral in an amount not less than such excess, and Borrower hereby pledges
and grants to Bank a security interest in such cash collateral so provided to
Bank.
1.6 Use of Proceeds of Revolving Loans. The proceeds of Revolving
Loans shall be used to refinance existing revolving credit line indebtedness and
outstanding letters of credit and for other working capital needs of Borrower.
LOAN TERMS, CONDITIONS AND PROCEDURES ADDENDUM
PAGE 2
1.7 Non-Application of Chapter 346 of Texas Finance Code. The
provisions of Chapter 346 of the Texas Finance Code are specifically declared by
the parties not to be applicable to any of the Loan Documents or the
transactions contemplated thereby.
1.8 Unused Commitment Fee. Borrower shall pay to Bank an unused
commitment fee, calculated at a per annum rate, in an amount equal to the
product of (a) 0.125% per annum multiplied by (b) the amount by which
$12,500,000 exceeds the sum of (i) the outstanding principal balance of all
Revolving Loans plus (ii) the Letter of Credit Liabilities, plus (iii)
$2,500,000. Such fee shall be computed on a daily basis and shall be payable
quarterly in arrears as of the end of each of Borrower's fiscal quarters. Bank
shall invoice Borrower for such fees, which invoice shall be due and payable
within fifteen (15) days after receipt.
1.9 Letters of Credit.
i. Letters of Credit. Subject to the terms and conditions of this
Agreement and the other Loan Documents, the Bank shall, upon
request from Borrower from time to time prior to the Revolving
Credit Maturity Date, issue one or more Letters of Credit. The
Letter of Credit Liabilities shall not exceed $10,000,000; and
the sum of (i) the outstanding principal balance of all
Revolving Loans plus (ii) the Letter of Credit Liabilities
shall not exceed the Revolving Credit Maximum Amount. No
Letter of Credit shall have a stated expiration date later
than eighteen (18) months after the date of issuance thereof,
and in no event shall such stated expiration date be later
than twelve (12) months after the Revolving Credit Maturity
Date.
ii. Additional Provisions. The following additional provisions
shall apply to each Letter of Credit:
(1) Borrower shall give the Bank written notice
requesting each issuance of a Letter of Credit
hereunder not less than three (3) Business Days prior
to the requested issuance date and shall furnish such
additional information regarding such transaction as
Bank may request. The issuance by Bank of each Letter
of Credit shall, in addition to the conditions
precedent set forth elsewhere in this Agreement, be
subject to the conditions precedent that (A) such
Letter of Credit shall be in form and substance
satisfactory to Bank, (B) Borrower shall have
executed and delivered such applications and other
instruments and agreements relating to such Letter of
Credit as Bank shall have requested and are not
inconsistent with the terms of this Agreement, (C)
each of the statements in Section 1.3(d)(i), (ii),
(iv), (v) and (vi) of this Loan Terms, Conditions and
Procedures Addendum are true as of the date of
issuance of such Letter of Credit with respect to
issuance of such Letter of Credit (as opposed to
making a Revolving Loan), and the submission of an
application for issuance of a Letter of Credit shall
constitute a representation, warranty and
certification of Borrower to that effect, and (D) no
Letter of Credit may be issued if after giving effect
thereto, the sum of the aggregate outstanding
principal balance of all Revolving Loans plus the
Letter of Credit
LOAN TERMS, CONDITIONS AND PROCEDURES ADDENDUM
PAGE 3
Liabilities would exceed the Revolving Credit Maximum
Amount. With respect to the issuance or renewal of
each Letter of Credit, Borrower shall pay to Bank
such letter of credit fees and other expenses
customarily charged by Bank in connection with the
issuance or renewals of letters of credit.
(2) Borrower shall be irrevocably and unconditionally
obligated forthwith to reimburse Bank for any amount
paid by Bank upon any drawing under any Letter of
Credit, without presentment, demand, protest or other
formalities of any kind, all of which are hereby
waived. Unless Borrower shall elect to otherwise
satisfy such Reimbursement Obligation, such
reimbursement shall, subject to satisfaction of any
conditions provided herein for the making of
Revolving Loans and to the Revolving Credit Maximum
Amount, automatically be made by advancing to
Borrower a Revolving Loan in the amount of such
Reimbursement Obligation.
(3) Borrower shall pay to Bank a fee, calculated at a per
annum rate, for the issuance of each Letter of Credit
(the "Letter of Credit Fee"), which fee shall be
determined in accordance with the following schedule
based on Borrower's Debt to Tangible Net Worth Ratio:
LETTER OF
CREDIT FEE
DEBT TO TANGIBLE NET WORTH RATIO PER ANNUM
-------------------------------- ----------
Equal to or greater than 1.5:1 1.25%
Less than 1.5:1 and equal to or greater than 1:1 1.125%
Less than 1:1 1.00%
The Debt to Tangible Net Worth Ratio applicable to
any Letter of Credit for the purposes of calculating
the Letter of Credit Fee shall be the Debt to
Tangible Net Worth Ratio demonstrated on the most
recent Compliance Certificate or Financial Statements
received by Bank, or in the event the Bank does not
timely receive a Compliance Certificate and all
Financial Statements as required by Section 4.3 of
this Agreement or any other Loan Document, the Letter
of Credit Fee shall be 1.25%. The Letter of Credit
fee shall be due and payable quarterly in arrears as
of the end of each of Borrower's fiscal quarters.
Notwithstanding any of the foregoing, for any Letter
of Credit having a face amount of less than $25,000,
the Letter of Credit Fee shall be $150 per annum and
shall be due and payable in advance on the date of
the issuance of such Letter of Credit and on each
annual anniversary thereof.
iii. Indemnification; Release. Borrower hereby indemnifies and
agrees to defend and hold harmless Bank and its officers,
directors, employees, agents and representatives
LOAN TERMS, CONDITIONS AND PROCEDURES ADDENDUM
PAGE 4
from and against any and all claims and damages, losses,
liabilities, costs or expenses (as used in this Section,
collectively, the "Indemnified Matters") which any such
indemnified party may incur (or which may be claimed against
Bank or any such indemnified party by any person whatsoever),
REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE
NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES, in connection
with the execution and delivery of any Letter of Credit or
transfer of or payment or failure to pay under any Letter of
Credit; provided that Borrower shall not be required to
indemnify any party seeking indemnification for any claims,
damages, losses, liabilities, costs or expenses to the extent,
but only to the extent, caused by (i) the willful misconduct
or gross negligence of the party seeking indemnification, or
(ii) by the failure by the party seeking indemnification to
pay under any Letter of Credit after the presentation to it of
a request required to be paid under application law. Upon
Bank's receipt of written notice of any such Indemnified
Matter, Bank will provide to Borrower notice, in writing
accompanied by reasonable detail, of such Indemnified Matter,
but any failure by Bank to provide such notice to Borrower
shall not impair or otherwise affect the rights of Bank or its
officers, directors, employees, agents or representatives to
be indemnified, defended and held harmless under this Section.
SECTION 2. FUNDING LOANS, PAYMENTS, RECOVERIES AND COLLECTIONS
2.1 Funding Loans. Subject to the satisfaction of all conditions
precedent to the making and funding of any Loan set forth in any Loan Document,
including, without limitation, those conditions precedent set forth in Section 3
of this Addendum, Bank shall make the proceeds of any such Loan available to
Borrower by 5:00 p.m. (Dallas, Texas time) on the respective Disbursement Date
of such Loan, by depositing such proceeds into such account maintained by
Borrower with Bank as Borrower shall designate in writing or as otherwise agreed
to in writing by Borrower and Bank.
2.2 Bank's Books and Records. The amount and date of each Loan
hereunder, the amount from time to time outstanding under each Note, the
Applicable Interest Rate in respect of each Loan, and the amount and date of any
repayment hereunder or the Note, shall be noted on Bank's books and records,
which shall be conclusive evidence thereof, absent manifest error; provided,
however, any failure by Bank to make any such notation, or any error in any such
notation, shall not relieve Borrower of its obligations to pay to Bank all
amounts owing to Bank under or pursuant to the Loan Documents, in each case,
when due in accordance with the terms hereof or thereof.
2.3 Payments on Non-Business Day. In the event that any payment of
any principal, interest, fees or any other amounts payable by Borrower under or
pursuant to any Loan Document shall become due on any day which is not a
Business Day, such due date shall be extended to the next succeeding Business
Day, and, to the extent applicable, interest shall continue to accrue and be
payable at the Applicable Interest Rate(s) for and during any such extension.
2.4 Payment Procedures. Unless otherwise expressly provided in a
Loan Document, all sums payable by Borrower to Bank under or pursuant to any
Loan Document, whether principal,
LOAN TERMS, CONDITIONS AND PROCEDURES ADDENDUM
PAGE 5
interest, or otherwise, shall be paid, when due, directly to Bank at the office
of Bank identified on the signature page of this Agreement, or at such other
office of Bank as Bank may designate in writing to Borrower from time to time,
in immediately available United States funds, and without setoff, deduction or
counterclaim. Bank may, in its discretion, charge any and all deposit or other
accounts (including, without limitation, any account evidenced by a certificate
of deposit or time deposit) of Borrower maintained with Bank for all or any part
of any Indebtedness then due and payable; provided, however, that such
authorization shall not affect Borrower's obligations to pay all Indebtedness,
when due, whether or not any such account balances maintained by Borrower with
Bank are insufficient to pay any amounts then due.
2.5 Maximum Interest Rate. At no time shall any Applicable
Interest Rate or Default Rate under this Agreement or any Note, or otherwise in
respect of any Loan or any Indebtedness hereunder, exceed the Maximum Legal
Rate, giving due consideration to the execution of this Agreement and each Note.
In the event that any interest is charged or otherwise received by Bank in
excess of the Maximum Legal Rate, Borrower hereby acknowledges and agrees that
any such excess interest shall be the result of an accidental and bona fide
error, and any such excess shall be deemed to have been payments of principal,
and not of interest, and shall be applied, first, to reduce the principal
Indebtedness then outstanding, second, any remaining excess, if any, shall be
applied to reduce any other Indebtedness, and third, any remaining excess, if
any, shall be returned to Borrower. Notwithstanding the foregoing or anything to
the contrary contained in this Agreement or any other Loan Document, but subject
to all limitations contained in this paragraph, if at anytime any Applicable
Interest Rate or Default Rate or other rate of interest applicable to any
portion of the Indebtedness is computed on the basis of the Maximum Legal Rate,
any subsequent reduction in the Applicable Interest Rate, Default Rate or such
other rate of interest shall not reduce such interest rate thereafter payable
below the Maximum Legal Rate until the aggregate amount of interest accrued
equals the total amount of interest that would have accrued if interest had, at
all times, been computed solely on the basis of the Applicable Interest Rate,
Default Rate or such other interest rate. This paragraph shall control all
agreements between the Borrower and the Bank.
2.6 Receipt of Payments by Bank. Any payment by Borrower of any of
the Indebtedness made by mail will be deemed tendered and received by Bank only
upon actual receipt thereof by Bank at the address designated for such payment,
whether or not Bank has authorized payment by mail or in any other manner, and
such payment shall not be deemed to have been made in a timely manner unless
actually received by Bank on or before the date due for such payment, time being
of the essence. Borrower expressly assumes all risks of loss or liability
resulting from non-delivery or delay of delivery of any item of payment
transmitted by mail or in any other manner. Acceptance by Bank of any payment in
an amount less than the amount then due shall be deemed an acceptance on account
only, and any failure to pay the entire amount then due shall constitute and
continue to be an Event of Default hereunder. Bank shall be entitled to exercise
any and all rights and remedies conferred upon and otherwise available to Bank
under any Loan Document upon the occurrence and during the continuance of any
such Event of Default. Prior to the occurrence of any Default, Borrower shall
have the right to direct the application of any and all payments made to Bank
hereunder to the Indebtedness evidenced by the Note. Borrower waives the right
to direct the application of any and all payments received by Bank hereunder at
any time or times after the occurrence and during the continuance of any
Default. Borrower further agrees that after the
LOAN TERMS, CONDITIONS AND PROCEDURES ADDENDUM
PAGE 6
occurrence and during the continuance of any Default, or prior to the occurrence
of any Default if Borrower has failed to direct such application, Bank shall
have the continuing exclusive right to apply and to reapply any and all payments
received by Bank at any time or times, whether as voluntary payments, proceeds
from any Collateral, offsets, or otherwise, against the Indebtedness in such
order and in such manner as Bank may, in its sole discretion, deem advisable,
notwithstanding any entry by Bank upon any of its books and records. Borrower
hereby expressly agrees that, to the extent that Bank receives any payment or
benefit of or otherwise upon any of the Indebtedness, and such payment or
benefit, or any part thereof, is subsequently invalidated, declared to be
fraudulent or preferential, set aside, or required to be repaid to a trustee,
receiver, or any other Person under any bankruptcy act, state or federal law,
common law, equitable cause or otherwise, then to the extent of such payment or
benefit, the Indebtedness, or part thereof, intended to be satisfied shall be
revived and continued in full force and effect as if such payment or benefit had
not been made or received by Bank, and, further, any such repayment by Bank
shall be added to and be deemed to be additional Indebtedness.
2.7 Security. Payment and performance of the Indebtedness shall be
secured by Liens on all of the assets and properties of Borrower and of such
other Loan Parties as Bank may require from time to time and shall be guaranteed
by the Guarantors. If on or after the Revolving Credit Maturity Date, all
Indebtedness (excluding Indebtedness with respect to future drawings under
Letters of Credit) shall have been paid in full, and all Indebtedness with
respect to future drawings under Letters of Credit shall have been secured by
cash collateral or letters of credit in a manner acceptable to Bank, then Bank
shall release its Liens on the Collateral, other than such cash collateral.
SECTION 3. CONDITIONS PRECEDENT
3.1 Conditions Precedent to First Loan or First Letter of Credit.
The obligation of the Bank to issue the first Letter of Credit or to make the
first Revolving Loan under or pursuant to this Agreement shall be subject to the
following conditions precedent:
(i) Execution of this Agreement, Note and other Loan Documents.
Borrower shall have executed and delivered to Bank, or caused
to have been executed and delivered to Bank, this Agreement,
the Note and all other Loan Documents, and this Agreement
(including all addenda, schedules, exhibits, certificates,
opinions, financial statements and other documents to be
delivered pursuant hereto), such Note, and all other Loan
Documents, shall be in full force and effect and binding and
enforceable obligations of Borrower and, to the extent that it
is a party thereto or otherwise bound thereby, of each other
Person who may be a party thereto or bound thereby.
(ii) Authority Documents. Bank shall have received: (i) copies of
resolutions of the board of directors of each Loan Party
evidencing approval of the borrowing hereunder and the
transactions contemplated by the Loan Documents, and
authorizing the execution, delivery and performance by each
Loan Party of each Loan Document to which it is a party or by
which it is otherwise bound, which resolutions shall have been
certified by a duly authorized officer or other
representative, as
LOAN TERMS, CONDITIONS AND PROCEDURES ADDENDUM
PAGE 7
applicable, of each Loan Party as of the date of this
Agreement as being complete, accurate and in full force and
effect; (ii) incumbency certifications of a duly authorized
officer, partner or other representative, as applicable, of
each Loan Party, in each case, identifying those individuals
who are authorized to execute the Loan Documents for and on
behalf of such Loan Party, respectively, and to otherwise act
for and on behalf of such Loan Party; (iii) certified copies
of each of such Loan Party's articles of incorporation and
bylaws, and all amendments thereto; and (iv) certificates of
existence, good standing and authority to do business, as
applicable, certified within 30 days of the date of this
Agreement, from the state or other jurisdiction of each of
such Loan Party's organization.
(iii) Collateral Documents. As security and support for the payment
and performance of all Indebtedness of Borrower to Bank,
Borrower shall have furnished, executed and delivered to Bank,
or shall have caused to have been furnished, executed and
delivered to Bank, prior to or concurrently with the
Disbursement Date for the initial Loan hereunder, in form
satisfactory to Bank, the following documents, and Bank shall
have received proof that appropriate security agreements,
financing statements, collateral and other documents covering
the Collateral shall have been executed and delivered by the
appropriate Persons and recorded or filed in such
jurisdictions and such other steps shall have been taken as
necessary to perfect, subject only to Permitted Encumbrances,
the Liens granted thereby:
(1) a security agreement executed by Borrower covering
all of its assets, including all equity interests of
Borrower in all of its domestic Subsidiaries;
(2) Guaranty executed by the Guarantor;
(3) financing statements required or requested by Bank to
perfect all security interests to be conferred upon
Bank under the Loan Documents and to accord Bank a
perfected security position in the Collateral,
subject only to Permitted Encumbrances;
(4) such additional documents or certificates as may
reasonably be required by Bank and/or required under
the terms of any and every Loan Document; and
(5) such other documents or agreements of security and
appropriate assurances of validity, perfection and
priority of Lien as Bank may reasonably request.
(iv) Legal Opinion Letter. Borrower shall have furnished to Bank an
opinion of Borrower's legal counsel, dated as of the date of
this Agreement, and covering such matters as are required by
Bank and which is otherwise satisfactory in form and substance
to Bank.
(v) Licenses, Permits, Approvals, Etc. To the extent necessary and
applicable, Borrower shall have received any and all necessary
authorizations, approvals and consents from
LOAN TERMS, CONDITIONS AND PROCEDURES ADDENDUM
PAGE 8
all applicable Governmental Authorities in respect of the
borrowing by Borrower of the Loans hereunder, the Loan
Documents and the transactions contemplated by any Loan
Document; and Bank shall have also received copies of each
authorization, license, permit, consent, order or approval of,
or registration, declaration or filing with, any Governmental
Authority or any securities exchange or other Person obtained
or made by Borrower or any other Person in connection with the
transactions contemplated by the Loan Documents and which is
material to the financial condition of Borrower or such other
Person or the conduct of its business or the transactions
contemplated hereby or the Collateral.
(vi) UCC Lien Search. Bank shall have received UCC, tax lien and
judgment lien record and copy searches, disclosing no notice
of any Liens or encumbrances filed against any of the
Collateral, other than the Permitted Encumbrances.
(vii) Casualty Insurance. Borrower shall have furnished to Bank, or
cause to have been furnished to Bank, in form and content and
in amounts and with companies rated "A" or better by a
nationally recognized rating agency for insurance carriers,
casualty insurance policies, with loss payable clauses in
favor of Bank, relating to the assets and properties
(including, but not limited to, the Collateral) of Borrower
any applicable Loan Party.
(viii) Financial Statements and Audit. Borrower shall have furnished
to Bank, Borrower's audited annual Consolidated financial
statements for the fiscal year ended June 30, 2003, prepared
by Xxxxx Xxxxxxxx, and the field audit of Borrower shall have
been completed and the results thereof shall be satisfactory
to Bank.
(ix) Approval of Bank Counsel. All actions, proceedings,
instruments and documents required to carry out the borrowings
and transactions contemplated by this Agreement or any other
Loan Document or incidental thereto, and all other related
legal matters, shall have been satisfactory to and approved by
legal counsel for 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 requested.
(x) Compliance with Certain Documents and Agreements. Each Loan
Party shall have each performed and complied with all
agreements and conditions contained in the Loan Documents
applicable to it and which are then in effect.
(xi) Other Documents and Instruments. Bank shall have received such
other instruments and documents (not inconsistent with the
terms hereof) as Bank may request in connection with the
making of the Loans hereunder, and all such instruments and
documents shall be satisfactory in form and substance to Bank.
3.2 Conditions Precedent to Disbursement of All Loans and All
Letters of Credit. In addition to any other terms and conditions set forth in
this Agreement, including, without limitation, those set forth in Section 3.1
above, the obligation of Bank to make any Loan or to issue any Letter of Credit
under this Agreement, including, without limitation, the initial Loan hereunder,
shall be
LOAN TERMS, CONDITIONS AND PROCEDURES ADDENDUM
PAGE 9
further subject to the satisfaction of each of the following conditions
precedent on or before the Disbursement Date for such Loan:
(i) Execution and Delivery of Note. Borrower shall have executed
and delivered to Bank the applicable Note, with appropriate
insertions, to evidence such Loan and the Indebtedness of
Borrower in respect thereof.
(ii) Loan Documents Binding and Enforceable. All Loan Documents
shall be in full force and effect and binding and enforceable
obligations of each Loan Party.
(ii) Representations and Warranties. Each of the representations
and warranties of each Loan Party under any Loan Document
shall be true and correct in all material respects.
(iv) No Default or Material Adverse Effect. No Default or Event of
Default shall have occurred and be continuing; and no event
shall have occurred which could reasonably be expected to
cause a Material Adverse Effect.
LOAN TERMS, CONDITIONS AND PROCEDURES ADDENDUM
PAGE 10
EXHIBIT A
FORM COMPLIANCE CERTIFICATE
This Compliance Certificate is executed and delivered to Comerica Bank
("Bank") by Peerless Mfg. Co. ("Borrower"), this _________ day of
________________, 20__. All capitalized terms used but not defined herein, shall
have the meanings given to such terms in that certain Credit Agreement, dated as
of October 30, 2003 between Bank and Borrower (as renewed, extended, modified
and restated from time to time, the "Credit Agreement"). The undersigned hereby
certifies to Bank as follows:
(1) The undersigned is the duly elected, qualified and acting
______________________________ of Borrower and, as such, is authorized to make
and deliver this Certificate.
(2) The undersigned has reviewed the provisions of the Credit
Agreement and confirms that, as of the date hereof:
(a) the representations and warranties contained in
Section 3 of the Credit Agreement are true and correct in all material respects
on and as of the date hereof with the same force and effect as though made on
and as of the date hereof,
(b) no Default or Event of Default has occurred and is
continuing, and Borrower has complied with all of the terms, covenants and
conditions set forth in the Credit Agreement; and
(c) attached hereto as Schedule A is a report prepared by
the undersigned setting forth information and calculations that demonstrate (i)
compliance (or noncompliance) with each of the covenants set forth in the
Financial Covenants Addendum to the Credit Agreement, and (ii) Borrower's Debt
to Tangible Net Worth Ratio.
The foregoing certificate is given in my capacity as __________________________
of Borrower, and not in my individual capacity.
PEERLESS MFG. CO., a Texas corporation
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
FORM OF COMPLIANCE CERTIFICATE
EXHIBIT A
PAGE 1
SCHEDULE A TO COMPLIANCE CERTIFICATE
(i) Tangible Net Worth.
(i) Tangible Net $____________
Worth:
(ii) Financial Covenants $____________
Addendum presently
requires Tangible
Net Worth be not
less than:
Covenant Satisfied___________________
Covenant Not Satisfied_______________
Covenant Not Tested__________________
(ii) Current Ratio.
(i) Current assets: $____________
(ii) Current liabilities: $____________
(iii) Ratio of (i) current assets
to (ii) current liabilities
[(a) + (b)]: ____ to 1.0
(iv) Financial Covenants Addendum
presently requires maintenance
of a Current Ratio of not less
than: 1.15 to 1.0
Covenant Satisfied __________________
Covenant Not Satisfied ______________
Covenant Not Tested _________________
(iii) Debt to Tangible Net Worth Ratio.
(i) Consolidated Debt: $____________
(ii) Consolidated Tangible Net $____________
Worth:
FORM OF COMPLIANCE CERTIFICATE
EXHIBIT A
PAGE 2
(iii) Ratio of (i) Consolidated Debt
to (ii) Consolidated Tangible
Net Worth ____ to 1.0
FORM OF COMPLIANCE CERTIFICATE
EXHIBIT A
PAGE 3
EXHIBIT B
FORM OF REQUEST FOR ADVANCE
(REVOLVING LOAN)
The undersigned hereby requests COMERICA BANK ("Bank") to make a
Revolving Loan to the undersigned on , 20__, in the amount of
____________________ Dollars ($ ) under the Credit Agreement dated as of October
30, 2003 by and between the undersigned and Bank (herein called the "Credit
Agreement").
The undersigned represents, warrants and certifies that no Default or
Event of Default has occurred and is continuing under the Credit Agreement, and
none will exist upon the making of the Revolving Loan requested hereunder. The
undersigned further certifies that upon advancing the sum requested hereunder,
the aggregate principal amount outstanding under the Master Revolving Note plus
the Letter of Credit Liabilities will not exceed the Revolving Credit Maximum
Amount.
The undersigned hereby authorizes Bank to disburse the proceeds of the
Revolving Loan being requested by this Request for Advance by crediting the
account of the undersigned with Bank separately designated by the undersigned or
as the undersigned and Bank may otherwise agree.
Capitalized terms used but not otherwise defined herein shall have the
respective meanings given to them in the Credit Agreement.
Dated this _______ day of __________________, 20__.
PEERLESS MFG. CO., a Texas corporation
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
FORM OF REQUEST FOR ADVANCE
(REVOLVING LOAN)
EXHIBIT B
PAGE B-1
SCHEDULE 3.5
SUBSIDIARIES
SUBSIDIARIES
SCHEDULE 3.5
PAGE 1
SCHEDULE 3.14
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS
SCHEDULE 3.14
PAGE 1
SCHEDULE 3.17
ENVIRONMENTAL DISCLOSURES
None.
ENVIRONMENTAL DISCLOSURES
SCHEDULE 3.17
PAGE 1
SCHEDULE 5.4
DEBT
DEBT
SCHEDULE 5.4
PAGE 1
