1
EXHIBIT 10.11
CREDIT AGREEMENT
(BORROWING BASE)
THIS CREDIT AGREEMENT (as amended, restated and supplemented from time to time,
this "AGREEMENT") by and between XXXXXXX.XXX, formerly known as Newwatch
Company, Inc., a Delaware corporation ("BORROWER") and CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION ("BANK") is dated as of August 9, 1999 (the "EFFECTIVE
DATE").
1. THE LOANS.
REVOLVING CREDIT NOTE 1.1 Subject to the terms and conditions hereof, Bank
agrees to make loans ("LOAN" or "LOANS") to Borrower from time to time before
the Termination Date, not to exceed at any one time outstanding the lesser of
the Borrowing Base or $5,000,000.00 (the "COMMITMENT"). Borrower has the right
to borrow, repay and reborrow. The Loans may only be used to finance Borrower's
working capital needs. Chapter 346 of the Texas Finance Code (which governs
certain revolving loan accounts) will not apply to this Agreement, the Note or
any Loan. The Loans will be evidenced by, and will bear interest and be
payable as provided in, the promissory note of Borrower dated the Effective
Date (together with any and all renewals, extensions, modifications and
replacements thereof and substitutions therefor, the "NOTE"). "TERMINATION
DATE" means the earlier of: (a) August 8, 2000; or (b) the date specified by
Bank pursuant to Section 6.1 hereof.
BORROWING BASE 1.2 The "BORROWING BASE" will be the amount shown as the
BORROWING BASE on the most recent Borrowing Base Report, subject to
verification by Bank and determination by Bank at any time and calculated using
the eligibility criteria, borrowing base factors, dollar ceilings for various
components and any deductions specified in the attached EXHIBIT A, incorporated
herein by reference.
REQUIRED PAYMENT 1.3 If the unpaid amount of the Loans at any time exceeds
the Borrowing Base then in effect, Borrower must make a payment on the Note in
an amount sufficient to reduce the unpaid principal balance of the Note to an
amount no greater than the Borrowing Base. Such payment shall be accompanied
by any prepayment charge required by the Note and shall be due concurrently
with the Borrowing Base Report.
COMMITMENT FEE 1.4 Borrower will pay a commitment fee (computed on the basis
of the actual number of days elapsed in a year comprised of 360 days) of 1/3 of
1% per annum on the daily average difference between the Commitment and the
principal balance of the Note, during each calendar quarter from the date
hereof to the Termination Date. The Commitment fee is due and payable in
arrears for the preceding calendar quarter on the first day of the subsequent
calendar quarter, commencing on January 9, 2000.
PAST DUE AMOUNTS 1.5 Each amount due to Bank in connection with the Loan
Documents will bear interest from its due date until paid at the Highest Lawful
Rate unless the applicable Loan Document provides otherwise.
2. CONDITIONS PRECEDENT.
ALL LOANS 2.1 Bank is not obligated to make any Loan unless: (a) Bank has
received the following, duly executed and in Proper Form: (1) a Request for
Loan, substantially in the form of EXHIBIT B, not later than one (1) Business
Day before the date (which shall also be a Business Day) of the proposed Loan;
provided however, Bank may accept and act upon verbal advance requests received
from Borrower's representative reasonably believed by Bank to be authorized to
make such requests; (2) a Borrowing Base Report within the time required by
this Agreement; (3) a Guaranty of the Obligations in Proper Form duly executed
by each Subsidiary of Borrower in existence at the time of such Loan (each a
"Guarantor" and collectively, "Guarantors"); and (4) such other documents as
Bank reasonably may require; (b) no Event of Default exists; (c) the making of
the Loan is not prohibited by, or subjects Bank to any penalty or onerous
condition under any Legal Requirement; and (d) after making the Loan requested,
the ratio of Indebtedness outstanding under the Note to Liquid Assets shall not
exceed the limitations set forth in Section 4.9 hereof
FIRST LOAN 2.2 In addition to the matters described in the preceding section,
Bank will not be obligated to make the first Loan unless: (a) Bank has received
all of the Loan Documents specified on Annex I in Proper Form; (b) Borrower
shall have received proceeds in an amount of at least $30,000,000.00 from an
equity offering, resulting in an equity structure in Proper Form; (c) certified
public accountants satisfactory to Bank shall have performed a financial audit
of Borrower and shall have issued an unqualified opinion in Proper Form; and (d)
Borrower shall have an adjusted Tangible Net Worth as calculated in accordance
with Paragraph C.1 on EXHIBIT C hereto in an amount of not less than
$30,000,000.00.
3. REPRESENTATIONS AND WARRANTIES. To induce Bank to enter into this
Agreement and to make the Loans, Borrower represents and warrants as of the
Effective Date and the date of each request for a Loan that each of the
following statements is and shall remain true and correct throughout the term
of this Agreement:
ORGANIZATION AND STATUS 3.1 Borrower and each Subsidiary of Borrower is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; has all power and authority to conduct its
business as presently conducted, and is duly qualified to do business and in
good standing in each jurisdiction in which the nature of the business
conducted by it makes such qualification desirable. Borrower has no Subsidiary
other than those listed on Annex II and each Subsidiary is owned by Borrower in
the percentage set forth on Annex II. If Borrower is subject to the Texas
Revised Partnership Act ("TRPA"), Borrower agrees that Bank is not required to
comply with Section 3.05(d) of TRPA and agrees that Bank may proceed directly
against one or more partners or their property without first seeking
satisfaction from partnership property.
FINANCIAL STATEMENTS 3.2 All financial statements delivered to Bank are
complete and correct and fairly present, in accordance with generally accepted
accounting principles, consistently applied ("GAAP"), the financial condition
and the results of operations of Borrower and each Subsidiary of Borrower as at
the dates and for the periods indicated. No material adverse change has
occurred in the assets, liabilities, financial condition, business or affairs
of Borrower or any Subsidiary of Borrower since the dates of such financial
statements. Neither Borrower nor any Subsidiary of Borrower is subject to any
instrument or agreement materially and adversely affecting its financial
condition, business or affairs.
ENFORCEABILITY 3.3 The Loan Documents are legal, valid and binding
obligations of the Parties enforceable in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency and other similar
laws affecting creditors' rights generally. The execution, delivery and
performance of the Loan Documents have all been duly authorized by all
necessary action; are within the power and authority of the Parties; do not and
will not violate any Legal Requirement, the Organizational Documents of the
Parties or any agreement or instrument binding or affecting the Parties or any
of their respective Property.
COMPLIANCE 3.4 Borrower and each Subsidiary of Borrower has filed all
applicable tax returns and paid all taxes shown thereon to be due, except those
for which extensions have been obtained and those which are being contested in
good faith and for which adequate reserves have been established. Borrower and
each Subsidiary of Borrower is in compliance with all applicable Legal
Requirements and manages and operates (and will continue to manage and operate)
its business in accordance with good industry practices. Neither Borrower nor
any Subsidiary of Borrower is in default in the payment of any other
indebtedness or under any agreement to which it is a party. The Parties have
obtained all consents of and registered with all Governmental Authorities or
other Persons required to execute, deliver and perform the Loan Documents.
LITIGATION 3.5 Except as previously disclosed to Bank in writing, there is no
litigation or administrative proceeding pending or, to the knowledge of
Borrower, threatened against, nor any outstanding judgment, order or decree
affecting Borrower or any Subsidiary of Borrower before or by any Governmental
Authority.
TITLE AND RIGHTS 3.6 Borrower and each Subsidiary of Borrower has good and
marketable title to its Property, free and clear of any Lien except for Liens
permitted by this Agreement and the other Loan Documents. Except as otherwise
expressly stated in the Loan Documents or permitted by this Agreement, the
Liens of the Loan Documents will constitute valid and perfected first and prior
Liens on the Property described therein, subject to no other Liens whatsoever.
Borrower and each Subsidiary of Borrower possesses all permits, licenses,
patents, trademarks and copyrights required to conduct its business. All
easements, rights-of-way and other rights necessary to maintain and operate
Borrower's Property have been obtained and are in full force and effect.
REGULATION U; BUSINESS PURPOSE 3.7 None of the proceeds of any Loan will be
used to purchase or carry, directly or indirectly, any margin stock or for any
other purpose which would make this credit a "purpose credit" within the
meaning of Regulation U of the Board of Governors of the
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Credit Agreement (With Borrowing Base) August 9, 1999
Xxxxxxx.xxx
Federal Reserve System. All Loans will be used for business, commercial,
investment or other similar purpose and not primarily for personal, family, or
household use or primarily for agricultural purposes as such terms are used in
Chapter 303 of the Texas Finance Code or any successor statute.
ENVIRONMENT 3.8 Borrower and each Subsidiary of Borrower have complied with
applicable Legal Requirements in each instance in which any of them have
generated, handled, used, stored or disposed of any hazardous or toxic waste or
substance, on or off its premises (whether or not owned by any of them).
Neither Borrower nor any Subsidiary of Borrower has any material contingent
liability for non-compliance with environmental or hazardous waste laws.
Neither Borrower nor any Subsidiary of Borrower has received any notice that it
or any of its Property or operations does not comply with, or that any
Governmental Authority is investigating its compliance with, any environmental
or hazardous waste laws.
INVESTMENT COMPANY ACT/PUBLIC UTILITY HOLDING COMPANY ACT 3.9 Neither
Borrower nor any Subsidiary of Borrower is an "investment company" within the
meaning of the Investment Company Act of 1940 or a "holding company" or an
"affiliate" of a "holding company" or a "public utility" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
STATEMENTS BY OTHERS 3.10 All statements made by or on behalf of Borrower,
any Subsidiary of Borrower or any other of the Parties in connection with any
Loan Document constitute the joint and several representations and warranties
of Borrower hereunder.
YEAR 2000 3.11 Any reprogramming required to permit the proper functioning,
in and following the year 2000, of (i) Borrower's and Guarantors' computer
systems and (ii) equipment containing embedded microchips (including systems
and equipment supplied by others or with which Borrower's or Guarantors'
systems interface) and the testing of all such systems and equipment, as so
reprogrammed, have been completed. The cost to Borrower and Guarantors of such
reprogramming and testing and of the reasonably foreseeable consequences of
year 2000 to Borrower and Guarantors (including, without limitation,
reprogramming errors and the failure of others' systems or equipment) will not
result in any Event of Default or have a material adverse effect on Borrower or
Guarantors.
4. AFFIRMATIVE COVENANTS. Borrower agrees to do, and if necessary cause to be
done, and cause its Subsidiaries to do, each of the following:
CORPORATE FUNDAMENTALS 4.1 (a) Pay when due all taxes and governmental
charges of every kind upon it or against its income, profits or Property,
unless and only to the extent that the same shall be contested in good faith
and adequate reserves have been established therefor; (b) Renew and keep in
full force and effect all of its licenses, permits and franchises; (c) Do all
things necessary to preserve its corporate existence and its qualifications and
rights in all jurisdictions where such qualification is necessary or desirable;
(d) Comply with all applicable Legal Requirements; and (e) Protect, maintain
and keep in good repair its Property and make all replacements and additions to
its Property as may be reasonably necessary to conduct its business properly
and efficiently.
INSURANCE 4.2 Maintain insurance with such reputable financially sound
insurers, on such of its Property and personnel, in such amounts and against
such risks as is customary with similar Persons or as may be reasonably
required by Bank, and furnish Bank satisfactory evidence thereof promptly upon
request. Without limiting the generality of the preceding sentence, Borrower
shall at all times maintain business interruption insurance with such insurers,
in such amounts and subject to such terms as are satisfactory to Bank and
deliver to Bank satisfactory evidence thereof. These insurance provisions are
cumulative of the insurance provisions of the other Loan Documents. Bank must
be named as a beneficiary, loss payee or additional insured of such insurance
as its interest may appear and Borrower must provide Bank with copies of the
policies of insurance and a certificate of the insurer that the insurance
required by this section may not be canceled, reduced or affected in any manner
without 30 days' prior written notice to Bank.
FINANCIAL INFORMATION/BORROWING BASE REPORT 4.3 Furnish to Bank in Proper
Form (i) the financial statements prepared in conformity with GAAP on
consolidated and consolidating bases and the other information described in,
and within the times required by, Exhibit C, Reporting Requirements, Financial
Covenants and Compliance Certificate attached hereto and incorporated herein by
reference; (ii) the Borrowing Base Report substantially in the form of, and
within the time required by, Exhibit A along with the other information
required by Exhibit A to be submitted; (iii) within the time required by
Exhibit C, Exhibit C signed and certified by the chief financial officer or
president of Borrower; (iv) promptly after such request is submitted to the
appropriate Governmental Authority, any request for waiver of funding standards
or extension of amortization periods with respect to any employee benefit plan;
(v) copies of special audits, studies, reports and analyses prepared for the
management of Borrower by outside parties and (vi) such other information
relating to the financial condition and affairs of the Borrower and Guarantors
and their Subsidiaries as Bank may request from time to time in its discretion.
MATTERS REQUIRING NOTICE 4.4 Notify Bank immediately, upon acquiring
knowledge of (a) the institution or threatened institution of any lawsuit or
administrative proceeding which, if adversely determined, might adversely
affect Borrower; (b) any material adverse change in the assets, liabilities,
financial condition, business or affairs of Borrower; (c) any Event of Default;
or (d) any reportable event or any prohibited transaction in connection with
any employee benefit plan.
INSPECTION/AUDIT 4.5 Permit Bank and its affiliates to inspect and photograph
its Property, to examine and copy its files, books and records, and to discuss
its affairs with its officers and accountants, at such times and intervals and
to such extent as Bank reasonably desires. Without limiting the generality of
the foregoing, if at any time the Indebtedness outstanding under the Note
equals or exceeds $2,500,000.00, Borrower shall permit Bank or any of its
Subsidiaries or Affiliates to review the inventory, accounting procedures, and
inventory management and information systems, of Borrower and its Subsidiaries
at Borrower's expense.
ASSURANCES 4.6 Promptly execute and deliver any and all further agreements,
documents, instruments, and other writings that Bank may request to cure any
defect in the execution and delivery of any Loan Document or more fully to
describe particular aspects of the agreements set forth or intended to be set
forth in the Loan Documents.
CERTAIN CHANGES 4.7 Notify Bank at least 30 days prior to the date that any
of the Parties changes its name or the location of its chief executive office
or principal place of business or the place where it keeps its books and
records or the location of any of the Collateral.
EXHIBIT C 4.8 Comply with each of the other affirmative covenants set forth
in EXHIBIT C.
LIQUIDITY MAINTENANCE 4.9 Maintain a ratio of Indebtedness outstanding under
the Note to Liquid Assets at all times no greater than 1.00 to 1.00, except for
the month of November, 1999 when such ratio shall not exceed 2.25 to 1.00 and
the month of December, 1999 when such ratio shall not exceed 1.50 to 1.00. As
used in this Section 4.9, the term "LIQUID ASSETS" shall mean unencumbered
liquid assets in the form of cash, certificates of deposit, time and savings
accounts (and if any of the foregoing are maintained with a financial
institution other than Bank, then fully insured by the FDIC and not subject to
any offset by the financial institution), treasury bills or other readily
marketable securities held in Borrower's sole name and acceptable to Bank,
available to Borrower at all times. The value of the Liquid Assets shall be
the market value of such assets, as such value is determined by Bank ("MARKET
VALUE"). Bank may determine the Market Value of the Liquid Assets by any
reasonable method, which determination shall be conclusive absent manifest
error. Using published figures in The Wall Street Journal is agreed to be
reasonable. In the event the Market Value of the Liquid Assets ever causes the
above-described ratio to exceed the limitations of this Section 4.9, then
Borrower shall immediately notify Bank and within ten (10) days, Borrower shall
cause additional Liquid Assets to be maintained pursuant to the terms of this
Agreement. Bank shall have no obligation to make any Loans if the ratio of
Indebtedness outstanding under the Note exceeds the limitations of this Section
4.9.
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GUARANTEES 4.10 Furnish Bank with a Guaranty of the Obligations in Proper
Form duly executed by each Subsidiary of Borrower now or hereafter existing.
5. NEGATIVE COVENANTS. The Borrower will not, and no Subsidiary of Borrower
will:
INDEBTEDNESS 5.1 Create, incur, or permit to exist, or assume or guarantee,
directly or indirectly, or become or remain liable with respect to, any
Indebtedness, contingent or otherwise unless there is a permitted amount set
forth in Exhibit C, except: (a) Indebtedness to Bank, or secured by Liens
permitted by this Agreement, or otherwise approved in writing by Bank, and
renewals and extensions (but not increases) thereof; (b) current accounts
payable and unsecured current liabilities, not the result of borrowing, to
vendors, suppliers and Persons providing services, for expenditures for goods
and services normally required by it in the ordinary course of business and on
ordinary trade terms; and (c) Indebtedness of Borrower and all its
Subsidiaries, incurred entirely to finance or refinance the purchase price of
Property of Borrower or such Subsidiary which is secured by a Lien on such
Property in a cumulative amount not to exceed $100,000.00 during the period
from the Effective Date to and including the Termination Date.
LIENS 5.2 Create or permit to exist any Lien upon any of its Property now
owned or hereafter acquired, or acquire any Property upon any conditional sale
or other title retention device or arrangement or any purchase money security
agreement; or in any manner directly or indirectly sell, assign, pledge or
otherwise transfer any of its accounts or other Property, except: (a) Liens,
not for borrowed money, arising in the ordinary course of business; (b) Liens
for taxes not delinquent or being contested in good faith by appropriate
proceedings; (c) Liens in effect on the date hereof and disclosed to Bank in
writing, so long as neither the indebtedness secured thereby nor the Property
covered thereby increases; (d) Liens in favor of Bank, or otherwise approved in
writing by Bank; and (e) Liens securing the Indebtedness permitted by Section
5.1(c) hereof and placed on Property, contemporaneously with the purchase
thereof, by Borrower or any Subsidiary to secure all or a portion of the
purchase price thereof; provided that such Lien shall not extend to any other
Property of the Borrower or any Subsidiary. Notwithstanding anything to the
contrary herein, Borrower will not, and no Subsidiary of Borrower will permit
any Lien on any inventory that secures the Loans unless Bank shall provide
Borrower with Bank's prior written consent.
FINANCIAL AND OTHER COVENANTS 5.3 Fail to comply with the required financial
covenants and other covenants described, and calculated as set forth, in
Exhibit C. Unless otherwise provided on Exhibit C, all such amounts and ratios
will be calculated: (a) on the basis of GAAP; and (b) on a consolidated basis.
Compliance with the requirements of Exhibit C will be determined as of the
dates of the financial statements to be provided to Bank.
CORPORATE CHANGES 5.4 In any single transaction or series of transactions,
directly or indirectly: (a) liquidate or dissolve; (b) be a party to any merger
or consolidation; (c) sell or dispose of any interest in any of its
Subsidiaries, or permit any of its Subsidiaries to issue any additional equity
other than to Borrower; (d) sell, convey or lease all or any substantial part
of its assets, except for sale of inventory in the ordinary course of business;
or (e) permit any change in ownership of Borrower except as permitted by
Section 5.9.
RESTRICTED PAYMENTS 5.5 Unless otherwise permitted on Exhibit C, at any time:
(a) redeem, retire or otherwise acquire, directly or indirectly, any shares of
its capital stock or other equity interest; (b) declare or pay any dividend
(except stock dividends and dividends paid to Borrower); or (c) make any other
distribution or contribution of any Property or cash or obligation to owners of
an equity interest or to a Subsidiary in their capacity as such.
NATURE OF BUSINESS; MANAGEMENT 5.6 Change the nature of its business or enter
into any business which is substantially different from the business in which
it is presently engaged, or cease to have Xxxxxx Xxxx and Xxxxx Xxxxxxxx
actively involved in its management.
AFFILIATE TRANSACTIONS 5.7 Enter into any transaction or agreement with any
Affiliate except upon terms substantially similar to those obtainable from
wholly unrelated sources.
SUBSIDIARIES 5.8 Form, create or acquire any Subsidiary without the prior
written consent of Bank.
LOANS AND INVESTMENTS 5.9 Unless otherwise provided on Exhibit C, make any
advance, loan, extension of credit, or capital contribution to or investment
in, or purchase, any stock, bonds, notes, debentures, or other securities of,
any Person, except: (a) readily marketable direct obligations of the United
States of America or any agency thereof with maturities of one year or less
from the date of acquisition; (b) fully insured certificates of deposit with
maturities of one year or less from the date of acquisition issued by any
commercial bank operating in the United States of America having capital and
surplus in excess of $50,000,000.00; and (c) commercial paper of a domestic
issuer if at the time of purchase such paper is rated in one of the two highest
rating categories of Standard and Poor's Corporation or Xxxxx'x Investors
Service. Notwithstanding the foregoing, Borrower may acquire an equity
interest in any Person; provided that the consideration paid is either through
the issuance of additional capital stock of the Borrower or the payment of cash
not to exceed a cumulative amount of $500,000.00 during the period from the
Effective Date to and including the Termination Date; provided no Event of
Default or event which with the giving of notice, the passage of time or both
would constitute an Event of Default (a "DEFAULT") has occurred or is imminent.
CAPITAL EXPENDITURES 5.10 Make or incur non-financed capital expenditures in
a cumulative amount in excess of $900,000.00 during the period from the
Effective Date to and including the Termination Date.
6. EVENTS OF DEFAULT AND REMEDIES.
EVENTS OF DEFAULT 6.1 Each of the following is an "EVENT OF DEFAULT":
(a) Any Obligor fails to pay any principal of or interest on the Note or any
other obligation under any Loan Document as and when due; or
(b) Any Obligor or any Subsidiary of Borrower fails to pay at maturity, or
within any applicable period of grace, any principal of or interest on any
other borrowed money obligation or fails to observe or perform any term,
covenant or agreement contained in any agreement or obligation by which it is
bound; or
(c) Any representation or warranty made in connection with any Loan Document
was incorrect, false or misleading when made; or
(d) Any Obligor violates any covenant contained in any Loan Document; or
(e) An event of default occurs under any other Loan Document; or
(f) Final judgment for the payment of money is rendered against Obligor or any
Subsidiary of Borrower and remains undischarged for a period of 30 days during
which execution is not effectively stayed; or
(g) The sale, encumbrance or abandonment (except as otherwise expressly
permitted by this Agreement) of any of the Collateral or the making of any
levy, seizure, garnishment, sequestration or attachment thereof or thereon; or
the loss, theft, substantial damage, or destruction of any material portion of
such Property; or
(h) Any order is entered in any proceeding against Borrower or any Subsidiary
of Borrower decreeing the dissolution, liquidation or split-up thereof, and
such order shall remain in effect for 30 days; or
(i) Any Obligor or any subsidiary of Borrower makes a general assignment for
the benefit of creditors or shall petition or apply to any tribunal for the
appointment of a trustee, custodian, receiver or liquidator of all or any
substantial part of its business, estate or assets or shall commence any
proceeding under any bankruptcy, insolvency, dissolution or liquidation law of
any jurisdiction, whether now or hereafter in effect; or any such petition or
application shall be filed or any such proceeding shall be commenced against
any Obligor or any subsidiary of Borrower and the Obligor or such subsidiary by
any act or omission shall indicate approval thereof, consent thereto or
acquiescence therein, or an order shall be entered appointing a trustee,
custodian, receiver or liquidator of all or any substantial part of the assets
of any Obligor or any subsidiary of Borrower or granting relief to any Obligor
or any subsidiary of Borrower or approving the petition in any such proceeding,
and such order shall remain in effect for more than 30 days; or any Obligor or
any subsidiary of Borrower shall fail generally to pay its debts as they become
due or suffer any writ of attachment or execution or any similar process to be
issued or levied against it or any substantial part of its property which is
not released, stayed, bonded or vacated within 30 days after its issue or levy;
or
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(j) Any Obligor or any Subsidiary of Borrower conceals or removes any part of
its Property, with intent to hinder, delay or defraud any of its creditors,
makes or permits a transfer of any of its Property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law; or makes any
transfer of its Property to or for the benefit of a creditor at a time when
other creditors similarly situated have not been paid; or
(k) A material adverse change occurs in the assets, liabilities, financial
condition, business or affairs of any Obligor or any Subsidiary of Borrower; or
(l) Any change occurs in the ownership of Borrower except as permitted by
Section 5.9; or
(m) Any individual Obligor dies or any Obligor that is not an individual
dissolves.
IF ANY EVENT OF DEFAULT OCCURS, then Bank may do any or all of the following:
(1) declare the Obligations to be immediately due and payable without notice of
acceleration or of intention to accelerate, presentment and demand or protest,
all of which are hereby expressly waived; (2) without notice to any Obligor,
terminate the Commitment and accelerate the Termination Date; (3) set off, in
any order, against the indebtedness of Borrower under the Loan Documents any
debt owing by Bank to Borrower (whether such debt is owed individually or
jointly), including, but not limited to, any deposit account, which right is
hereby granted by Borrower to Bank; and (4) exercise any and all other rights
pursuant to the Loan Documents, at law, in equity or otherwise.
REMEDIES CUMULATIVE 6.2 No remedy, right or power of Bank is exclusive of any
other remedy, right or power now or hereafter existing by contract, at law, in
equity, or otherwise, and all remedies, rights and powers are cumulative.
7. MISCELLANEOUS.
NO WAIVER 7.1 No waiver of any default or Event of Default will be a waiver
of any other default or Event of Default. No failure to exercise or delay in
exercising any right or power under any Loan Document will be a waiver thereof,
nor shall any single or partial exercise of any such right or power preclude
any further or other exercise thereof or the exercise of any other right or
power. The making of any Loan during either the existence of any default or
Event of Default, or subsequent to the occurrence of an Event of Default will
not be a waiver of any such default or Event of Default. No amendment,
modification or waiver of any Loan Document will be effective unless the same
is in writing and signed by the Person against whom such amendment,
modification or waiver is sought to be enforced. No notice to or demand on any
Person shall entitle any Person to any other or further notice or demand in
similar or other circumstances.
NOTICES 7.2 All notices required under the Loan Documents shall be in writing
and either delivered against receipt therefor, or mailed by registered or
certified mail, return receipt requested, in each case addressed to the address
shown on the signature page hereof or to such other address as a party may
designate. Except for the notices required by Section 2.1, which shall be
given only upon actual receipt by Bank, notices shall be deemed to have been
given (whether actually received or not) when delivered (or, if mailed, on the
next Business Day).
GOVERNING LAW/ARBITRATION 7.3 (a) UNLESS OTHERWISE SPECIFIED THEREIN, EACH
LOAN DOCUMENT IS GOVERNED BY TEXAS LAWS AND THE APPLICABLE LAWS OF THE UNITED
STATES OF AMERICA. To the maximum extent permitted by law, any controversy or
claim arising out of or relating to the Loans or any Loan Document, including
but not limited to any claim based on or arising from an alleged tort or an
alleged breach of any agreement contained in any of the Loan Documents, shall,
at the request of any party to the Loan or Loan Documents (either before or
after the commencement of judicial proceedings), be settled by mandatory and
binding arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA Rules") and pursuant to Title 9 of
the United States Code, or if Title 9 does not apply, the Texas General
Arbitration Act. In any arbitration proceeding: (i) all statutes of
limitations which would otherwise be applicable shall apply; and (ii) the
proceeding shall be conducted in the city in which the office of Bank
originating the Loans is located, by a single arbitrator if the amount in
controversy is $1 million or less, or by a panel of three arbitrators if the
amount in controversy (including but not limited to all charges, principal,
interest fees and expenses) is over $1 million. Arbitrators are empowered to
resolve any controversy by summary rulings substantially similar to summary
judgments and motions to dismiss. Arbitrators may order discovery conducted in
accordance with the Federal Rules of Civil Procedures. All arbitrators will be
selected by the process of appointment from a panel, pursuant to the AAA Rules.
Any award rendered in the arbitration proceeding will be final and binding, and
judgment upon any such award may be entered in any court having jurisdiction.
(b) If any party to the Loan or Loan Documents files a proceeding in any court
to resolve any controversy or claim, such action will not constitute a waiver
of the right of such party or a bar to the right of any other party to seek
arbitration under the provisions of this Section or that of any other claim or
controversy, and the court shall, upon motion of any party to the proceeding,
direct that the controversy or claim be arbitrated in accordance with this
Section.
(c) No provision of, or the exercise of any rights under, this Section shall
limit or impair the right of any party to the Loan Documents before, during or
after any arbitration proceeding to: (i) exercise self-help remedies including
but not limited to setoff or repossession; (ii) foreclose any Lien on or
security interest in any Collateral; or (iii) obtain relief from a court of
competent jurisdiction to prevent the dissipation, damage, destruction,
transfer, hypothecation, pledging or concealment of assets or Collateral
including, but not limited to attachments, garnishments, sequestrations,
appointments of receivers, injunctions or other relief to preserve the status
quo.
(d) To the maximum extent permitted by applicable law and the AAA Rules,
neither Bank nor any Obligor or any Affiliate, officer, director, employee,
attorney, or agent of either shall have any liability with respect to, and Bank
and each Obligor waives, releases, and agrees not to xxx any of them upon, any
claim for any special, indirect, incidental and consequential damages suffered
or incurred by such Person in connection with, arising out of, or in any way
related to, this Agreement or any of the other Loan Documents. Each of Bank
and each Obligor waives, releases, and agrees not to xxx each other or any of
their Affiliates, officers, directors, employees, attorneys, or agents for
punitive damages in respect of any claim in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan Documents, or
any of the transactions contemplated by this Agreement or any of the other Loan
Documents. Nothing contained herein, however, shall be construed as a waiver
of any Obligor's or the Bank's right to compel arbitration of disputes pursuant
to subparagraphs (a) and (b), above.
(e) Nothing herein shall be considered a waiver of the right or protections
afforded Bank by 12 U.S.C. 91, Texas Banking Code Art. 342-609 or any similar
statute.
(f) Each party agrees that any other party may proceed against any other liable
Person, jointly or severally, or against one or more of them, less than all,
without impairing rights against any other liable Persons. A party shall not
be required to join the principal Obligor or any other liable Persons (e.g.,
sureties or guarantors) in any proceeding against any Person. A party may
release or settle with one or more liable Persons as the party deems fit
without releasing or impairing right to proceed against any Persons not so
released.
SURVIVAL; PARTIES BOUND; TERM OF AGREEMENT 7.4 All representations,
warranties, covenants and agreements made by or on behalf of Borrower in
connection with the Loan Documents will survive the execution and delivery of
the Loan Documents; will not be affected by any investigation made by any
Person, and will bind Borrower and the successors, trustees, receivers and
assigns of Borrower and will benefit the successors and assigns of the Bank;
provided that Bank's agreement to make Loans to Borrower will not inure to the
benefit of any successor or assign of Borrower. Except as otherwise provided
herein, the term of this Agreement will be until the later of the final
maturity of the Note and the full and final payment of all Obligations and all
amounts due under the Loan Documents.
DOCUMENTARY MATTERS 7.5 This Agreement may be executed in several identical
counterparts, on separate counterparts; each counterpart will constitute an
original instrument, and all separate counterparts will constitute but one and
the same instrument. The headings and captions in the Loan Documents have been
included solely for convenience and should not be considered in construing the
Loan Documents. If any provision of any Loan Document is invalid, illegal or
unenforceable in any respect under any applicable law, the remaining provisions
will remain effective. The Loans and all other obligations and indebtedness of
Borrower to Bank are entitled to the benefit of the Loan Documents.
EXPENSES 7.6 Any provision to the contrary notwithstanding, and whether or
not the transactions contemplated by this Agreement are consummated, Borrower
agrees to pay on demand all out-of-pocket expenses (including, without
limitation, the fees and expenses of counsel for Bank) in connection with the
negotiation, preparation, execution, filing, recording, modification,
supplementing and waiver of the Loan Documents and the making, servicing and
collection of the Loans. Borrower agrees to pay Bank's standard Documentation
Preparation and Processing Fee for preparation, negotiation and handling of
this Agreement. The obligations of the Borrower under this and the following
section will survive the termination of this Agreement.
Page 4 of 6 Pages
5
Credit Agreement (With Borrowing Base) August 9, 1999
Xxxxxxx.xxx
INDEMNIFICATION 7.7 BORROWER AGREES TO INDEMNIFY, DEFEND AND HOLD BANK
HARMLESS FROM AND AGAINST ANY AND ALL LOSS, LIABILITY, OBLIGATION, DAMAGE,
PENALTY, JUDGMENT, CLAIM, DEFICIENCY AND EXPENSE (INCLUDING INTEREST,
PENALTIES, ATTORNEYS' FEES AND AMOUNTS PAID IN SETTLEMENT) TO WHICH BANK MAY
BECOME SUBJECT ARISING OUT OF OR BASED UPON THE LOAN DOCUMENTS, OR ANY LOAN,
INCLUDING THAT RESULTING FROM BANK'S OWN NEGLIGENCE, EXCEPT AND TO THE EXTENT
CAUSED BY BANK'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
NATURE OF OBLIGATIONS 7.8 If more than one Borrower executes this Agreement,
all of the representations, warranties, covenants and agreements of Borrower
shall be joint and several obligations of all Borrowers.
USURY NOT INTENDED 7.9 Borrower and Bank intend to conform strictly to
applicable usury laws. Therefore, the total amount of interest (as defined
under applicable law) contracted for, charged or collected under this Agreement
or any other Loan Document will never exceed the Highest Lawful Rate. If Bank
contracts for, charges or receives any excess interest, it will be deemed a
mistake. Bank will automatically reform the Loan Document or charge to conform
to applicable law, and if excess interest has been received, Bank will either
refund the excess to Borrower or credit the excess on any unpaid principal
amount of the Note or any other Loan Document. All amounts constituting
interest will be spread throughout the full term of the Loan Document or
applicable Note in determining whether interest exceeds lawful amounts.
NO COURSE OF DEALING 7.10 NO COURSE OF DEALING BY BORROWER WITH BANK, NO
COURSE OF PERFORMANCE AND NO TRADE PRACTICES OR OTHER EXTRINSIC EVIDENCE OF ANY
NATURE MAY BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS
AGREEMENT.
8. DEFINITIONS.
Unless the context otherwise requires, capitalized terms used in Loan Documents
and not defined elsewhere shall have the meanings provided by GAAP, except as
follows:
AFFILIATE means, as to any Person, any other Person (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, such Person; (b) that directly or indirectly
beneficially owns or holds five percent (5%) or more of any class of voting
stock of such Person; or (c) five percent (5%) or more of the voting stock of
which is directly or indirectly beneficially owned or held by the Person in
question. The term "control" means to possess, directly or indirectly, the
power to direct the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise. Bank is not under
any circumstances to be deemed an Affiliate of Borrower or any of its
Subsidiaries.
AUTHORITY DOCUMENTS means certificates of authority to transact business,
certificates of good standing, borrowing resolutions (with secretary's
certificate), secretary's certificates of incumbency, and other documents which
empower and enable Borrower or its representatives to enter into agreements
evidenced by Loan Documents or evidence such authority.
BUSINESS DAY means a day when the main office of Bank is open for the conduct
of commercial lending business.
COLLATERAL means all Property, tangible or intangible, real, personal or mixed,
now or hereafter subject to Security Documents, or intended so to be.
CORPORATION means corporations, partnerships, limited liability companies,
joint ventures, joint stock associations, associations, banks, business trusts
and other business entities.
GOVERNMENT ACCOUNTS means receivables owed by the U.S. government or by the
government of any state, county, municipality, or other political subdivision
as to which Bank's security interest or ability to obtain direct payment of the
proceeds is governed by any federal or state statutory requirements other than
those of the Uniform Commercial Code, including, without limitation, the
Federal Assignment of Claims Act of 1940, as amended.
GOVERNMENTAL AUTHORITY means any foreign governmental authority, the United
States of America, any state of the United States and any political subdivision
of any of the foregoing, and any agency, department, commission, board, bureau,
court or other tribunal having jurisdiction over Bank or any Obligor, or any
Subsidiary of Borrower or their respective Property.
HIGHEST LAWFUL RATE means the maximum nonusurious rate of interest permitted to
be charged by applicable Federal or Texas law (whichever permits the higher
lawful rate) from time to time in effect. To the extent that Texas law
determines the Highest Lawful Rate, the Highest Lawful Rate is the weekly rate
ceiling as defined in Chapter 1D of the Texas Credit Title, Article 5069-1D.001
et seq., Title 79 of the Texas Revised Civil Statutes, as amended.
INDEBTEDNESS means and includes (a) all items which in accordance with GAAP
would be included on the liability side of a balance sheet on the date as of
which Indebtedness is to be determined (excluding capital stock, surplus,
surplus reserves and deferred credits); (b) all guaranties, endorsements and
other contingent obligations in respect of, or any obligations to purchase or
otherwise acquire, Indebtedness of others, and (c) all Indebtedness secured by
any Lien existing on any interest of the Person with respect to which
indebtedness is being determined, in Property owned subject to such Lien,
whether or not the Indebtedness secured thereby has been assumed.
LEGAL REQUIREMENT means any law, ordinance, decree, requirement, order,
judgment, rule, regulation (or interpretation of any of the foregoing) of, and
the terms of any license or permit issued by, any Governmental Authority.
LIEN shall mean any mortgage, pledge, charge, encumbrance, security interest,
collateral assignment or other lien or restriction of any kind, whether based
on common law, constitutional provision, statute or contract.
LOAN DOCUMENTS means this Agreement, the agreements, documents, instruments and
other writings contemplated by this Agreement or listed on Annex I, all other
assignments, deeds, guaranties, pledges, instruments, certificates and
agreements now or hereafter executed or delivered to the Bank pursuant to any
of the foregoing, and all amendments, modifications, renewals, extensions,
increases and rearrangements of, and substitutions for, any of the foregoing.
OBLIGATIONS means all principal, interest and other amounts which are or become
owing under this Agreement, the Note or any other Loan Document.
OBLIGOR means each Borrower and any guarantor, surety, co-signer, general
partner or other person who may now or hereafter be obligated to pay all or any
part of the Obligations.
ORGANIZATIONAL DOCUMENTS means, with respect to a corporation, the certificate
of incorporation, articles of incorporation and bylaws of such corporation;
with respect to a limited liability company, the articles of organization,
regulations and other documents establishing such entity, with respect to a
partnership, joint venture, or trust, the agreement, certificate or instrument
establishing such entity; in each case including all modifications and
supplements thereof as of the date of the Loan Document referring to such
Organizational Document and any and all future modifications thereof which are
consented to by Bank.
PARTIES means all Persons other than Bank executing any Loan Document.
PERSON means any individual, Corporation, trust, unincorporated organization,
Governmental Authority or any other form of entity.
PROPER FORM means in form and substance satisfactory to the Bank.
PROPERTY means any interest in any kind of property or asset, whether real,
personal or mixed, tangible or intangible.
SECURITY DOCUMENTS means those Security Agreements listed on Annex I and all
supplements, modifications, amendment, extensions thereof and all other
agreements hereafter executed and delivered to Bank to secure the Loans.
SUBORDINATED DEBT means any Indebtedness subordinated to Indebtedness due Bank
pursuant to a written subordination agreement in Proper Form by and among Bank,
subordinated creditor and Borrower which at a minimum must prohibit: (a) any
action by subordinated creditor which will result in an occurrence of an Event
of Default or default under this Agreement, the subordination agreement or the
subordinated Indebtedness; and (b) upon the happening of any Event of Default
or default under any Loan Document, the subordination agreement, or any
instrument evidencing the subordinated Indebtedness (i) any payment of
principal and interest on the subordinated Indebtedness; (ii) any act to compel
payment of principal or interest on subordinated Indebtedness; and (iii) any
action to realize upon any Property securing the subordinated Indebtedness.
SUBSIDIARY means, as to a particular parent Corporation, any Corporation of
which 50% or more of the indicia of equity rights is at the time directly or
indirectly owned by such parent Corporation or by one or more Persons
controlled by, controlling or under common control with such parent
Corporation.
Page 5 of 6 Pages
6
Credit Agreement (With Borrowing Base) August 9, 1999
Xxxxxxx.xxx
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN BANK AND THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF BANK AND THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN BANK AND THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
BORROWER: XXXXXXX.XXX
By: /s/ Xxxxx X. Xxx
--------------------------------------------------------------
Name: Xxxxx X. Xxx
------------------------------------------------------------
Title: CFO
-----------------------------------------------------------
Address: 0000 Xxxxxxx Xxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000
---------------------------------------------------------
BANK: CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------------------------------
Name: Xxxxxxx X. Xxxxx
------------------------------------------------------------
Title: Vice President
-----------------------------------------------------------
Address: 000 Xxxxxx Xxxxxx, 0xx Xxxxx Xxxxx, Xxxxxxx, Xxxxx 00000
---------------------------------------------------------
EXHIBITS: ANNEXES:
A Borrowing Base Report I Loan Documents
B Request for Loan II Subsidiaries
C Reporting Requirements, Financial Covenants,
and Compliance Certificate
Page 6 of 6 Pages
7
EXHIBIT A
BORROWING BASE REPORT
INVENTORY
BORROWING BASE REPORT FOR PERIOD BEGINNING:___________________ AND ENDING ______________________ ("CURRENT PERIOD")
REQUIRED BY THE CREDIT AGREEMENT DATED THE EFFECTIVE DATE (AS AMENDED, RESTATED, AND SUPPLEMENTED FROM TIME TO TIME, THE
"AGREEMENT") BY AND BETWEEN XXXXXXX.XXX AND CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
-----------------------------------------------------------------------------------------------------------------------
THE BORROWING BASE REPORT MUST BE SUBMITTED TO BANK WITHIN 15 DAYS OF THE LAST DAY OF EACH CALENDAR MONTH AND WITH EACH
REQUEST FOR A LOAN. BORROWER MUST PROVIDE THE FOLLOWING ALONG WITH THE BORROWING BASE REPORT: MONTHLY INVENTORY LISTING
AND SUMMARY.
-----------------------------------------------------------------------------------------------------------------------
Line 1. Total Inventory as of the end of the Current Period $
INELIGIBLE INVENTORY AS OF THE END OF THE CURRENT PERIOD: -------------
2. Offsite (without landlord's waiver) or out of territory locations $
--------------
3. Private label $
--------------
4. Obsolete $
--------------
5. Returned/damaged $
--------------
6. Consigned/unowned $
--------------
7. Subject to Purchase Money Security Interest $
--------------
8. Slow moving (older than 120 days) $
--------------
9. Inventory classified as long term assets $
--------------
10. Used $
--------------
11. Remanufactured $
--------------
12. In transit $
--------------
13. Material and supplies $
--------------
14. Other Ineligible Inventory $
--------------
15. Total Ineligible Inventory as of the end of the
Current Period (Lines 2+3+4+5+6+7+8+9+10+11+
12+13+14) $
--------------
16. Total Eligible Inventory as of the end of the
Current Period (Line 1 - Line 15) $
-------------
17. Multiplied by: Inventory Advance Factor 50%
18. Equals: Total BORROWING BASE (not to exceed $5,000,000.00) as of
the end of the Current Period $
-------------
19. Less: Aggregate principal amount outstanding under
the Note as of the end of the Current Period $
-------------
20. Equals: Amount available for borrowing subject to the terms of
the Agreement, if positive; or amount due, if negative $
-------------
The term "INVENTORY" has the meaning as set forth in the Texas Business and Commerce Code in effect as of the date of
the Agreement. Inventory shall be valued at the lesser of: (a) market value; and (b) cost. "OTHER INELIGIBLE INVENTORY"
means that Inventory of Borrower that is not subject to a first and prior Lien in favor of Bank, that Inventory that is
subject to any Lien not in favor of Bank and that Inventory of Borrower as shall be deemed from time to time to be in
the sole judgment of Bank, ineligible for purposes of determining the Borrowing Base. All other terms not defined
herein shall have the respective meanings as in the Agreement.
Borrower certifies that the above information and computations are true, correct, complete and not misleading as of the
date hereof.
Borrower: XXXXXXX.XXX
By:____________________________________________________________________________________________________________________
Name:__________________________________________________________________________________________________________________
Title:__________________________________________________ Date:______________________________________________________
Address:_______________________________________________________________________________________________________________
EXHIBIT A Page 1 of 1
8
EXHIBIT B
REQUEST FOR LOAN
LETTERHEAD OF BORROWER
Chase Bank of Texas, National Association
000 Xxxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Vice President
Re: Request for Loan under Agreement
Ladies and Gentlemen:
This letter confirms our oral or telephonic request of _______________
__________, 19____, for a Loan in accordance with that certain Credit Agreement
(as amended, restated and supplemented from time to time, the "AGREEMENT")
dated as of the Effective Date between you and us. Any term defined in the
Agreement and used in this letter has the same meaning as in the Agreement.
The proposed Loan is to be in the amount of $_______________ and is to
be made on ____________________, 19____ , which is a Business Day at least
_______ Business Days after the date of this letter. The proceeds of the
proposed Loan should be (check one:) [ ] deposited into account number_________
with the Bank [ ] ___________________________________________________________.
The undersigned hereby certifies that:
(1) The representations and warranties made by the Borrower or by
any other Person in the Agreement and the other Loan Documents
are true and correct on and as of this date as though made on
this date.
(2) The proposed Loan complies with all applicable provisions of
the Agreement.
(3) No Event of Default has occurred and is continuing.
(4) A Borrowing Base Report is attached.
Sincerely,
XXXXXXX.XXX
By:____________________________________
Name:__________________________________
Title:_________________________________
EXHIBIT B Page 1 of 1
9
ANNEX I
LOAN DOCUMENTS
"Loan Documents" includes, but is not limited to, the following:
1. Agreement
2. Note
3. Guaranty of Ashford Buying Company and all other Subsidiaries of
Borrower, now or hereafter existing
4. Borrowing Base Report
5. Compliance Certificate
6. Security Agreements, in Proper Form, covering:
Accounts and general intangibles
Inventory
7. Financing Statements
8. Other (specify): Landlord Waivers
9. Certified Copies of Organizational and Authority Documents of Borrower
and Guarantors
10. Insurance policies and certificates (including, business interruption
insurance)
11. Financial Statements of: Borrower and Guarantors
12. UCC search
Loan Documents - ANNES I Page 1 of 1
10
ANNEX II
SUBSIDIARIES
IF NONE AS OF THE EFFECTIVE DATE, CHECK [ ] NONE
Subsidiary Name State Where
and Address Incorporated % Owned
--------------- ------------ ---------
Ashford Buying Company
Delaware
--------------------- ---------
---------------------
---------------------
ANNEX II Page 1 of 1
11
EXHIBIT C to Agreement between
Xxxxxxx.xxx ("Borrower") and Chase Bank of Texas, National Association ("Bank")
dated the Effective Date as same may be amended, restated and supplemented in
writing.
REPORTING REQUIREMENTS, FINANCIAL COVENANTS AND
COMPLIANCE CERTIFICATE FOR CURRENT REPORTING PERIOD ENDING ________________,
199__ ("END DATE")
A. REPORTING PERIOD. THIS EXHIBIT WILL BE IN PROPER FORM AND SUBMITTED WITHIN 15 DAYS OF THE END OF EACH CALENDAR
MONTH INCLUDING THE LAST REPORTING PERIOD OF THE FISCAL YEAR AND WITH THE FISCAL YEAR END FINANCIAL STATEMENT.
BORROWER'S FISCAL YEAR ENDS ON March 31, 2000.
====================================================================================================================================
B. Financial Reporting. Borrower will provide the following financial information within the times indicated: Compliance
Certificate
====================================================================================================================================
WHO WHEN DUE WHAT (Circle)
------------------------------------------------------------------------------------------------------------------------------------
BORROWER (i) Within 90 days of fiscal year Annual financial statements Yes No
end prepared on a consolidating and
consolidated basis (balance
sheet, income statement, cash
flow statement) and audited
(with unqualified opinion) by
independent certified public
accountants satisfactory to
Bank, accompanied by Compliance
Certificate
--------------------------------------------------------------------------------------------
(ii) Within 15 days of each Unaudited interim financial Yes No
Reporting Period End Date, statements accompanied by
including final period of fiscal Compliance Certificate
year
--------------------------------------------------------------------------------------------
(iii) Within 15 days of each month Borrowing Base Report (Exhibit Yes No
end A), along with inventory listing
and inventory summary.
====================================================================================================================================
====================================================================================================================================
C. FINANCIAL COVENANTS. Borrower will comply with the COMPLIANCE CERTIFICATE
following financial covenants, defined in accordance
with GAAP and the definitions in Section 8, and
incorporating the calculation adjustments indicated on
the Compliance Certificate:
------------------------------------------------------------------------------------------------------------------------------------
REQUIRED ACTUAL REPORTED
-------- --------------- Compliance
Except as specified otherwise, each covenant will be For Current Reporting Period/as of the End Date (Circle)
maintained at all times and reported for each
Reporting Period or as of each Reporting Period End Yes No
Date, as appropriate:
------------------------------------------------------------------------------------------------------------------------------------
1. Maintain a Tangible Net Worth as adjusted, for the Stockholders' Equity $_______
fiscal quarter indicated below equalto or greater Minus: Goodwill $_______
than the sum of (a) an amount at least equal to 25% of Other Intangible Assets $_______
Borrower's Budgeted Tangible Net Worth indicated Loans to Affiliates $_______
below, (b) 50% of net income for such fiscal quarter Plus: Subordinated Debt
and (c) the proceeds of any equity offering received to Shareholders $_______
in such fiscal quarter:
= Actual Tangible Net Worth as adjusted $_______
Fiscal Quarter Ending Date Budgeted TNW
-------------------------- ------------ 25% of Budgeted Tangible Net Worth $_______
6/30/99 $29,336,045.00 + 50% of net income for fiscal quarter $_______
9/30/99 $22,278,945.00 + Proceeds of equity offering $_______
= Required Tangible Net Worth $_______
12/31/99 $15,417,321.00
Actual Tangible Net Worth greater than
3/31/00 $9,770,084.00 Required Tangible Net Worth Yes No
------------------------------------------------------------------------------------------------------------------------------------
2. Maintain a ratio of Indebtedness under the Note to Indebtedness under Note $_______ Yes No
Liquid Assets of no greater than 1.00 to 1:00, with Liquid Assets $_______
the exception of the month of November 1999 when the
ratio shall be no greater than 2.25 to 1:00 and the Ratio ________
month of December 1999 when the ratio shall be no
greater than 1.50 to 1:00 (Section 4.9)
====================================================================================================================================
EXHIBIT C Page 1 of 2 Pages
12
====================================================================================================================================
D. Other Required Covenants to be maintained and to be certified. COMPLIANCE CERTIFICATE
====================================================================================================================================
REQUIRED ACTUAL REPORTED COMPLIANCE
-------- --------------- (CIRCLE)
------------------------------------------------------------------------------------------------------------------------------------
(i) Capital expenditures not to exceed a cumulative $_______________________ Yes No
amount of $900,000.00 during the period from the
Effective Date to and including the Termination Date
(Section 5.10).
------------------------------------------------------------------------------------------------------------------------------------
(ii) Maintain business interruption insurance with Yes No
such insurers, in such amounts and subject to such
terms satisfactory to Bank (Section 4.2).
------------------------------------------------------------------------------------------------------------------------------------
(iii) No Liens or other Indebtedness except as $________________________ Yes No
permitted by Sections 5.1 and 5.2 respectively.
------------------------------------------------------------------------------------------------------------------------------------
(iv) No change in ownership, except as permitted under Yes No
Section 5.9. (Section 5.4).
------------------------------------------------------------------------------------------------------------------------------------
(v) Xxxxxx Xxxx and Xxxxx Xxxxxxxx to remain actively Yes No
involved in Borrower's management. (Section 5.6).
------------------------------------------------------------------------------------------------------------------------------------
(vi) No change in nature of business (Section 5.6). Yes No
------------------------------------------------------------------------------------------------------------------------------------
(vii) No equity acquisitions except where Yes No
consideration is paid through issuance of Borrower's $_________________________
capital stock or the payment of cash in a cumulative
amount not to exceed $500,000.00 during the period
from the Effective Date to and including the
Termination Date; provided no Default or Event of
Default has occurred or is imminent. (Section 5.9).
====================================================================================================================================
THE ABOVE SUMMARY REPRESENTS SOME OF THE COVENANTS AND AGREEMENTS CONTAINED IN THE AGREEMENT AND DOES NOT IN ANY WAY
RESTRICT OR MODIFY THE TERMS AND CONDITIONS OF THE AGREEMENT. IN CASE OF CONFLICT BETWEEN THIS EXHIBIT C AND THE
AGREEMENT, THE AGREEMENT SHALL CONTROL.
The undersigned hereby certifies that the above information and computations are true and correct and not misleading as
of the date hereof, and that since the date of the Borrower's most recent Compliance Certificate (if any):
[ ] No default or Event of Default has occurred under the Agreement during the current Reporting Period, or
been discovered from a prior period, and not reported.
[ ] A default or Event of Default (as described below) has occurred during the current Reporting Period or
has been discovered from a prior period and is being reported for the first time and:
[ ] was cured on ___________________________________ .
[ ] was waived by Bank in writing on ________________________________.
[ ] is continuing.
Description of Event of Default: ___________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
Executed this ________ day of ______, 19__ .
BORROWER: XXXXXXX.XXX
SIGNATURE:__________________________________________________________________________________________________________________________
NAME:_______________________________________________________________________________________________________________________________
TITLE: (Chief Financial Officer or President)
-------------------------------------------------------------------------------------------------------------------
ADDRESS:____________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________
EXHIBIT C Page 2 of 2 Pages
13
REVOLVING CREDIT NOTE
(this "Note")
FOR VALUE RECEIVED, ON OR BEFORE the Termination Date, XXXXXXX.XXX ("Borrower," jointly and severally if more than
one), promises to pay to the order of Chase Bank of Texas, National Association ("Bank") at its office at 000 Xxxx
Xxxxxx, Xxxxxxx, Xxxxxx Xxxxxx, Xxxxx 00000-0000, or at such other location as Bank may designate, in immediately
available funds and lawful money of the United States of America, the sum of FIVE MILLION AND NO/100THS UNITED STATES
DOLLARS (U.S. $5,000,000.00) or the aggregate unpaid amount of all advances hereunder, whichever is lesser, plus
interest on the unpaid principal balance outstanding from time to time at a rate per annum equal to the lesser of (i)
the Prime Rate (as hereinafter defined) from time to time in effect (the "Stated Rate") or (ii) the Highest Lawful Rate.
If the Stated Rate at any time exceeds the Highest Lawful Rate, the actual rate of interest to accrue on the unpaid
principal amount of this Note will be limited to the Highest Lawful Rate, but any subsequent reductions in the Stated
Rate due to reductions in the Prime Rate will not reduce the interest rate payable upon the unpaid principal amount of
this Note below the Highest Lawful Rate until the total amount of interest accrued on this Note equals the amount of
interest which would have accrued if the Stated Rate had at all times been in effect. "Prime Rate" means the rate
determined from time to time by Bank as its prime rate. The Prime Rate shall change automatically from time to time
without notice to Borrower or any other person. THE PRIME RATE IS A REFERENCE RATE AND MAY NOT BE BANK'S LOWEST RATE.
This Note is the Revolving Credit Note described in Section 1.1 of the Credit Agreement (Borrowing Base) between
Borrower and Bank dated as of July 14, 1999 (as amended, restated and supplemented from time to time, the "Agreement")
and sometimes referred to therein as the Note. Capitalized terms used in this Note have the meanings used in the
Agreement.
Accrued and unpaid interest shall be due and payable quarterly, beginning on October 14, 1999, and continuing on the
fourteenth day of the first month of each three month period thereafter and at Termination Date when all unpaid
principal and accrued and unpaid interest shall be finally due and payable. Borrower must make the payments required by
Sections 1.3 and 1.4 of the Agreement.
Interest shall be computed on the basis of the actual number of days elapsed and a year comprised of 360 days,
unless such calculation would result in a usurious interest rate, in which case interest will be calculated on the basis
of a 365 or 366 day year, as applicable.
All past-due principal and, to the extent permitted by applicable law, interest on this Note, shall, at Bank's
option, bear interest at the Highest Lawful Rate, or if applicable law shall not provide for a maximum nonusurious rate
of interest, at a rate per annum equal to eighteen percent (18%).
The unpaid principal balance of this Note at any time shall be the total amounts advanced by Bank, less the amount
of all payments of principal. Absent manifest error, the records of Bank shall be conclusive as to amounts owed.
Subject to the terms and conditions of the Agreement, Borrower may use all or any part of the credit provided for herein
at any time before the Termination Date.
Time is of the essence. Borrower may at any time pay the full amount or any part of this Note without the payment
of any premium or fee. At Bank's sole option, all payments may be applied to accrued interest, to principal, or to
both.
If any Event of Default occurs, then Bank may exercise any and all rights and remedies under the Loan Documents, at
law, in equity or otherwise.
Each and all Obligors severally waive notice, demand, presentment for payment, notice of nonpayment, notice of
intent to accelerate, notice of acceleration, protest, notice of protest, and the filing of suit and diligence in
collecting this Note and all other demands and notices, and consent and agree that their liabilities and obligations
shall not be released or discharged by any or all of the following, whether with or without notice to them or any of
them, and whether before or after the stated maturity hereof: (i) extensions of the time of payment; (ii) renewals;
(iii) acceptances of partial payments; (iv) releases or substitutions of any collateral or any Obligor; and (v) failure,
if any, to perfect or maintain perfection of any security interest in any collateral. Each Obligor agrees that
acceptance of any partial payment shall not constitute a waiver.
Bank and any subsequent owner or holder hereof reserves the right, in its sole discretion, without notice to
Borrower, to sell participations or assign its interest or both, in all or any part of this Note. For purposes of this
Note, any assignee or subsequent holder of this Note will be considered the "Bank," and each successor to Borrower will
be considered the "Borrower."
IN WITNESS WHEREOF, Borrower has executed this Note effective as July 14, 1999
BORROWER: ASHFORD. COM
By:_________________________________________________________________________________________________________________________________
Typed Name:_________________________________________________________________________________________________________________________
Title:______________________________________________________________________________________________________________________________
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FOR BANK USE ONLY: ACCOUNT #0040430348 NOTE #_______________________
At time of booking _________________________ Administrator: Xxxx X. Xxxxxxx Attorney: Xxxxx Xxxxxx
Agreement Effective Date: July 14, 1999
Maximum Amount: $5,000,000.00
Stated Termination Date: July 13, 2000
All subsequent Amendments, if any, should be attached to the original Note.
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