CREDIT AGREEMENT
(Borrowing Base)
This Credit Agreement (as amended, modified and supplemented
from time to time, "Agreement") by and between ARROW-MAGNOLIA
INTERNATIONAL, INC. ("Borrower") and TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, a national banking association ("Bank") is
dated and effective as of August 5, 1994 (the "Effective Date').
REVOLVING CREDIT NOTE 1.1 Subject to the terms and conditions
hereof, the 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 $1,250,000.00 (the "Commitment"), Borrower having the
right to borrow, repay and reborrow. The Bank and the Borrower
agree that Chapter 15 of the Texas Credit Code shall not app1y
to this Agreement, the Note or any Loan. The Loans shall be
evidenced by, and shall bear Interest and be payable as provided
in, the note of the Borrower of even date herewith (together
with any and all renewals. extensions, modifications and
replacements thereof and substitutions therefor, the "Note").
Loans shall be for the purpose of providing short term financing
for accounts receivable and inventory.
BORROWING BASE REPORT 1.2 Within 10 days after the end of every
month the Borrower shall furnish the Bank a Borrowing Base
Report substantially in the form of Exhibit A. Unless
specifically waived in writing by the Bank, each Borrowing Base
Report shall be accompanied by accounts receivable agings.
BORROWING BASE 1.3 The Borrowing Base shall be the Amount
Available for Borrowing on each Borrowing Base Report, subject
to verification by the Bank. The calculation of the Borrowing
Base shall utilize the eligibility criteria, borrowing base
factors and dollar ceilings for various components specified in
the attached Exhibit A, incorporated herein by references.
REQUIRED PAYDOWNS 1.4 If the unpaid amount or of the Loans at
any time exceeds the Borrowing base then in effect, the Borrower
shall make a paydown on the Note in an amount sufficient to
reduce the unpaid balance of the Note to an amount no greater
that the Borrowing Base. Such Paydown shall be accompanied by
all accrued and unpaid interest at on the amount prepaid.
LOAN DOCUMENTS 1.5 The Loans and all other obligations and
indebtedness or the Borrower to the Bank are entitled to the
benefit of the Loan Documents.
PAST DUE AMOUNTS 1.6 Each amount due to the Bank in
connection with the Loan Documents shall bear interest from its
due date until paid at the Past Due Rate (as defined in the
Note).
2. CONDITIONS PRECEDENT
ALL LOANS 1.1 The obligation of the Bank to make any Loan is
subject to satisfaction of the following conditions precedent:
(a) the Bank shall have received the following, all of which
shall be duly executed and in proper form: (1) a Borrowing Base
Report within the time provided by Section 1.2 of this
Agreement; and (2) such other documents as the Bank may
reasonably require; (3) no Event of Default shall have occurred
and be continuing: and (c) the making or the Loan shall not be
prohibited by, or subject the Bank to any penalty or onerous
condition under any Legal Requirement. 'Business Day' means a
day when the main office of the Bank in open for the conduct of
commercial lending business.
FIRST LOAN 2.2 In addition to the matters described in the
preceding section, the obligation, if airy, of the Bank to make
the first Loan is subject to the receipt by the Bank of all of
the Loan Documentation specified on Annex 1, all of which shall
be in proper Form.
3. RFPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and to make the
Loans, the Borrower represents and warrants:
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 or desirable.
Borrower does not have any subsidiaries.
FINANCIAL STATEMENTS 3.2 All financial statements delivered to
the Bank are complete and correct and fairly present in
accordance with generally accepted accounting principles,
consistently applied ("GAAP"), the financial condition and the
result a operation, 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 contravene or violate any Legal
Requirements or the Organizational Documents of the parties; and
do not and will not result in the breach of, or constitute a
default under, any agreement or instrument by which the Parties
or any of their respective Property may he bound or affected.
COMPLIANCE 3.4 Borrower and each Subsidiary of Borrower have
filed all applicable tax returns and paid all taxes shown
thereon and all tax statements received by Borrower to be due,
except those for which extensions have been obtained and those
which are being contested in good faith. 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 practice. 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. All consents,
permissions and registrations of or will any Governmental
Authority or other Person required in connection with the
execution, delivery and performance of the Loan Documents have
been obtained.
LITIGATION 3.5 Except at heretofore declared to the 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 any Governmental Authority.
Neither Borrower nor any Subsidiary of Borrower is in default
with respect to any judgment, order or decree of 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 an 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
possess all permits, licenses, patents, trademarks, and
copyrights required to conduct its business. All easements and
rights-of-way and other rights necessary to the operation of the
Property of the Borrower have been obtained and are in full
force and effect.
REGULATION U 3.7 None of the proceeds of any Loan or Note will
be used for the purpose of purchasing or carrying, directly or
indirectly, any Margin stock or for any other purpose which
would make this credit a "purpose credit" within the meaning of
Regulation U of the Board of Governors of the Federal Reserv
System.
ENVIRONMENT 3.8 Neither Borrower nor any Subsidiary of Borrower
has generated, handled, used, stored or disposed of any
hazardous or toxic waste or substance, on or off its premises
(whether or not owned by it), other than in accordance with
applicable Legal Requirements. Neither Borrower nor any
Subsidiary of Borrower has any material contingent liability
with respect to non-compliance with environmental or hazardous
waste laws or has received any notice that it or any of its
Property or operations is not in compliance with, or that any
Governmental Authority is investigating its compliance with any
environmental or hazardous waste law.
STATEMENTS BY OTHERS 3.9 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 shall constitute the
representations and warranties or the Borrower hereunder.
4. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees with, the Bank that prior to
the termination of this Agreement Borrower will do, and if
necessary cause to be done, and cause its Subsidiaries to do,
each and all or the following:
CORPORATE FUNDAMENTALS 4.1 At all times: (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 therefore; (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 in
respect of the conduct of its business and the ownership of its
Property; and (e) cause its Property to be protected, maintained
and kept in good repair 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 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 the Bank, and furnish the Bank
satisfactory evidence thereof promptly upon request. These
insurance provisions are cumulative of the insurance provisions
of the other loan Documents. The Bank shall be named as a
beneficiary of such insurance as its interest may appear and the
Borrower shall provide the Bank with copies of the policies of
insurance and a certificate of the insurer that insurance
required by this section may not be canceled, reduced or
affected in any manner without 30 days' prior written notice to
the Bank.
FINANCIAL INFORMATION 4.3 Furnish in the Bank one copy of each
of the following: (i) for Borrower and guarantors who are not
individuals: (a) as soon as available and in any event within 90
days after the end of each fiscal year of Borrower or such
guarantor, such Borrower's or guarantor's annual financial
statements, prepared in conformity with GAAP and accompanied by
a report and opinion of independent certified public accountants
satisfactory to the Bank together with a Compliance Certificate
substantially in the form of Exhibit B; (b) as soon as available
and in any event within 30 days after the end of each calendar
month the financial statements of Borrower or guarantor for such
period , and for the year to date, prepared in conformity with
GAAP accompanied by comparisons and workpapers to establish
compliance or noncompliance with the financial covenants set
forth in Section 5.3 and further accompanied by a Compliance
Certificate substantially in the form Exhibit B; (c) copies of
special audits, studies, reports and analyses prepared for the
management of Borrower by outside parties; and (d) 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; (ii) for individual guarantors, no later than 15
days after request therefor by the Bank, and no later than
January 31 of each year, the personal financial statements of
such guarantor, together with cash flow information in form and
containing such information and detail as is satisfactory to
the Bank; and (iii) for both Borrower and all guarantors, such
other information relating to the financial condition and
affairs of the Borrower or guarantors and their Subsidiaries as
from time to time may be requested by the Bank in its
discretion.
MATTERS REQUIRING NOTICE 4.4 Notify the 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)
the occurrence of any material adverse change in the assets,
liabilities, financial condition, business or affairs of
Borrower; (c) the occurrence of any Event of Default; or (d) any
reportable event or any prohibited transaction in connection
with any employee benefit plan.
INSPECTION 4.5 Permit the Bank and its affiliates to inspect and
photograph its Property, to examine its files, books and records
and make and take away copies thereof and to discuss its affairs
with its officers and accountants, all at such times and aid
intervals and to such extent as the Bank may reasonably desire.
ASSURANCES 4.6 Promptly execute and deliver any and all other
and further agreements, documents, instruments, and other
writings which may be requested by the Bank to cure any defect
in the execution and delivery of any loan Documents or more
fully to describe particular aspects of the agreements set forth
in the Loan Documents or intended to be set forth.
CERTAIN CHANGES 4.7 Notify the 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.
5. NEGATIVE COVENANTS.
The Borrower covenants and agrees with the Bank that prior to
the termination of this Agreement Borrower will not and no
Subsidiary of Borrower will:
INDEBTEDNESS 5.1 Create, incur, suffer or permit to exist, or
assume or guarantee, directly or indirectly, or become or remain
liable with respect to any indebtedness, contingent or
otherwise, except
(a) Indebtedness to the Bank, or secured by Liens permitted by
this Agreement, or otherwise approved in writing by the Bank,
and all renewals and extensions (but not increases) thereof; and
(b) current amounts 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.
FINANCIAL COVENANTS 5.2 Fail to comply with the requirements set
forth below. Unless otherwise provided herein, all such amounts
and ratios shall be calculated: (a) on the basis of GAAP, and
(b) on a consolidated basis. Compliance with the requirements
set forth below shall be determined as of the dates or the
financial statements to be provided to the Bank, and Borrower
shall deliver schedules reflecting the calculation of such
amounts and ratios concurrently with each set of financial
statements.
Unless otherwise defined herein or within the Agreement, all
accounting terms shall have the meaning assigned to them by
generally accepted accounting principles.
1. Debt to Tangible Net Worth Ratio. Maintain a total
Indebtedness to Tangible Net Worth ratio no greater than the
ratio shown below during the corresponding period indicated
below
Period Maximum Debt to Tangible Net Worth Ratio
At all times 2.50 to 1.0
2. Fixed Charge Ratio. Have a ratio of net income plus
depreciation and amortization divided by current maturities of
long term debt plus current maturities of capital leases,
capital expenditures and cash dividends for the preceding 4
quarters ending on each date during a period indicated below of
at least the corresponding ratio shown below:
Period Maximum Fixed Charge Ratio
Quarterly at the
end of each fiscal 1.25 to 1.0
quarter
The list of financial covenants above does not exhaust the
financial concepts which may be important or useful in any
analysis of the financial condition of the Borrower.
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; or (d) sell, convey or lease all or any
substantial part of its assets, except for sale of Inventory in
the ordinary course of business.
NATURE OF BUSINESS; MANAGEMENT 5.5 Change the nature of its
business or enter into any business which is substantially
different from the business in which is primarily engaged, or
permit any substantial Change in its management.
AFFILIATE TRANSACTIONS 5.6 Enter into any transaction or
agreement with any officer, director of or holder of any
outstanding capital stock of stock of Borrower (or any member of
the family of any such Person, or any Person controlling,
controlled by or under common control with Borrower) unless the
same is upon terms substantially similar to those obtainable
from wholly unrelated sources.
SUBSIDIARIES 5.7 Form, create or acquire any Subsidiary.
6. EVENTS OF DEFAULT AND REMEDIES.
EVENTS OF DEFAULT 6.1 If any of the following events ('Events of
Default") shall occur, then the Bank may do any or all of the
following, (1) declare the Note to be, and thereupon the Note
shall forthwith become, immediately due and payable, together
with all accrued and unpaid interest thereon and all commitment
fees and all other obligations and indebtedness of the Borrower
under the Loan Documents, without notice of acceleration or
intention to accelerate, presentment and demand or protest, all
of which are hereby expressly waived; (2) without notice to
Borrower, terminate the Commitment and accelerate the
Termination Date; (3) set off, in any order, against the
indebtedness of the Borrower under the Loan Documents any debt
owing by the Bank to Borrower, including, but not limited to,
any deposit account, which right is hereby granted by Borrower
to the Bank; and (4) exercise any and all other rights pursuant
to the Loan Documents, at law, in equity or otherwise:
(a) Borrower shall fail to pay any principal of or interest on
the Note or any other obligation under any Loan Documents as and
when due: (b) Borrower or any Subsidiary of Borrower shall fail
to pay at maturity or within any applicable period of grace, any
principal of or interest on any other borrowed money obligation
or shall fail to observe or perform any term, covenant or
agreement contained in any agreement or obligation by which it
is bound including but not limited to that one certain term loan
in the amount of $495,000.00 dated of even date with this
Agreement and having a maturity date of June 1, 1999 and made
payable to the order of the Bank and executed by the Borrower;
or (c) Any representation or warranty made in connection with
any Loan Document shall prove to have been incorrect, false or
misleading; (d) Default shall occur in the punctual and
complete performance of any covenant of any of the Parties
contained in any Loan Document; (e)The occurrence of Event of
Default under any Loan Document; or (f) Final judgment for the
payment of money shall be rendered against Borrower or any
Subsidiary of Borrower and the same shall remain undercharged
for a period 30 days during which execution shall not be
effectively stayed; (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 or
attachment thereof or thereon; or the loss, theft, substantial
damage, or destruction of any substantial portion of such
Property; or (h) Any order shall be 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) Borrower or any
Subsidiary of Borrower shall make 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 Borrower or any subsidiary of
Borrower and such Borrower 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 or Borrower or any Subsidiary of
Borrower or granting relief to Borrower 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
Borrower 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 10 days after
its issue or levy; or (j) Borrower or any Subsidiary of Borrower
shall have concealed, removed, or permitted to be concealed or
removed, any part of its Property, with intent to hinder, delay
or defraud its creditors or any of them, or made or suffered a
transfer of any of its Property which may be fraudulent under
any bankruptcy, fraudulent conveyance or similar law; or shall
have made 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 shall occur
in the assets, liabilities, financial condition, business or
affairs of Borrower or any Subsidiary of Borrower.
WAIVER OF DEFICIENCY STATUTE PROTECTIONS/FAIR MARKET VALUE FOR
CALCULATING DEFICIENCIES. 6.2 In the event the Note is secured
by an interest in real property ('Real Property"), and such
interest is foreclosed upon pursuant to a judicial or
nonjudicial foreclosure sale, Borrower agrees as follows:
Notwithstanding the provisions of Sections 51.003, 51.004, and
51.005 ff the Texas Property Code (as the same may be amended
from time to time), and to the extent permitted by law, Borrower
agrees that Bank shall be entitled to seek a deficiency judgment
from Borrower and any other party obligated on the Note or a
guaranty of the Note equal to the difference between the amount
owing on the Note and the amount for which the Real Property was
sold pursuant to judicial or nonjudicial foreclosure sale.
Borrower expressly recognizes that this section constitutes a
waiver of the above-cited provisions of the Texas Property Code
which would otherwise permit Borrower and other persons against
whom recovery of deficiencies is sought or guarantors
independently (even absent initiation of deficiency proceedings
against them) to present competent evidence of the fair market
value of the Real Property as of the date of the foreclosure
sale and offset against any deficiency the amount by which the
foreclosure sale price is determined to be less than such fair
value. Borrower further recognizes and agrees that this waiver
creates an irrebutable presumption that the foreclosure sale
price is equal to the fair market value of the Real Property for
purposes of calculating deficiencies owed by Borrower,
guarantors, and others against whom recovery or a deficiency is
sought.
Alternatively, In the event this waiver is determined by a court
of competent jurisdiction to be unenforceable, the following
shall be the basis for the finder or fact's determination of the
fair market value of the Real Property as or the date of the
foreclosure sale in proceedings governed by sections 51.003,
51.004 and 51.005 of the Texas Property Code (as amended from
time to time):
(a) The Real Property shall be valued in an 'as is' condition at
of the date or the foreclosure sale, without any assumption or
expectation that the Real Property will be repaired or improved
in any manner before a resale of the Reel Property after
foreclosure; (b) The valuation shall be based upon an assumption
that the foreclosure purchaser desires a prompt resale of the
Real Property for cash promptly (but no later than twelve months
following) the foreclosure sale; (e) All reasonable closing
costs customarily borne by the seller in a commercial real
estate transaction should be deducted from the gross fair market
value of the Real Property, including, without limitation,
brokerage commissions, title insurance, a survey of the Real
Property, tax prorations, attorney 's fees, and marketing costs;
(d) The gross fair market value of the Real Property shall be
further discounted to account for any estimated holding cost,
associated with maintaining the Real Property pending sale,
including, without limitation, utilities expense, property
management fees, taxes and assessments(to the extent not
accounted for in (c) above), and other maintenance expenses; (e)
Any expert opinion testimony given or considered in connection
with a determination of the fair market value of the Real
Property must be given by persons having at least five years
experience in appraising property similar to the Real Property
and who have conducted and prepared a complete written appraisal
of the Real Property taking into consideration the factors set
forth above.
REMEDIES CUMULATIVE 6.1 No remedy, right or power of the Bank
is intended to be exclusive of any other remedy, right or power
now or hereafter arising by contract, at law, in equity, or
otherwise, and all such rights, rights and powers shall be
cumulative. Nothing herein shall imply any obligation of
Borrower to maintain any deposit with the Bank.
7. MISCELLANEOUS
NO WAIVER 7.1 No waiver of any Default shall be deemed to be a
waiver of any other Default. No failure to exercise or delay in
exercising any right or power under any Loan Document shall
operate as 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. No amendment, modification or waiver of any Loan
Document shall be effective unless the same it 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 under the Loan Documents shall be in
writing and either delivered against receipt therefore, 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 the 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 (a) UNLESS OTHERWISE SPECIFIED
HEREIN, EACH LOAN DOCUMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OP THE STATE OF TEXAS AND AS
APPLICABLE, THE UNITED STATES OF AMERICA. To the maximum extent
not prohibited by law, any controversy or claim arising out of
or relating to the Loan or any Loan Document or any transaction
provided for therein, 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 or any party to the Loan or Loan Documents (either
before or after the commencement of judicial proceedings), be
settled by mandatory and binding arbitration pursuant to Title 9
of the United States Code and in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the
'AAA'). If Title 9 of the United States Code is inapplicable to
any such claim or controversy for any reason, such arbitration
shall be conducted pursuant to the Texas General Arbitration Act
and in accordance with the Commercial Arbitration Rules of the
AAA. In any such 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
principal office of the Bank is located in Texas, 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
is over $1 million. All arbitrators shall be selected by the
process of appointment from a panel, pursuant to Section 13 of
the AAA Commercial Arbitration Rules. Any award rendered in any
such arbitration proceeding shall 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 such controversy or
claim, such action shall 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 of that or any
other claim or controversy, and the court shall, upon motion of
any party to the proceeding, direct that such controversy or
claim be arbitrated in accordance with this Section.
(c) No provision of, or exercise of any rights under, this
Section shall limit or impair the right of any party to any of
the Loan Documents before, during or after any arbitration
proceeding to: (i) exercise self-help remedies such at setoff or
repossession: (ii) foreclose (judicially or otherwise) any lien
on or security interest in any real or personal property
Collateral; or (iii) obtain emergency relief from a court of
competent jurisdiction to prevent the dissipation, damage,
destruction, transfer, hypothecation, pledging or concealment of
assets or of Collateral securing any indebtedness, obligation or
guaranty referenced in the Loan Documents. Such emergency relief
may be in the nature of, but is not limited to: pre-judgment
attachment, garnishments, sequestrations, appointments of
receivers, or other emergency injunctive relief to preserve the
status quo.
(d) To the extent arbitration is prohibited by law or in the
event of judicial proceedings for whatever reason, Borrower
hereby irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of
or relating to the Loan or the Loan Documents brought in the
district courts of the County in Texas in which the principal
office of the Bank is located, or in United States District
Court for the District of Texas in which the Bank's principal
office is located, (collectively, the "Courts"), or any claim
that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum. Borrower hereby
irrevocably agrees that any judicial proceeding against the Bank
arising out of or in connection with the Loan Documents shall be
brought In the Courts. Nothing contained herein, however, shall
be construed as a waiver of Borrower's or the Bank's right to
compel arbitration of disputes pursuant to subparagraphs (a) and
(b) above.
SURVIVAL; PARTIES BOUND 7.4 All representations, warranties,
covenants and agreements made by or on behalf of Borrower in
connection with the Loan Documents shall survive the execution
and delivery of the Loan Documents; shall not be affected by any
investigation made by any Person, and shall bind Borrower and
the heirs, devisees, executors, administrators, personal
representatives, successors, trustees, receivers and assigns of
Borrower and inure to the benefit of the successors and assigns
of the Bank; provided that the undertaking of the Bank to make
Loans to the Borrower shall not inure to the benefit of any
successor or assign of Borrower. Except as otherwise provided
herein, the term of this Agreement shall be until final maturity
of the Note and the full and final payment of all amounts due
under the Loan Documents.
DOCUMENTARY MATTERS 7.5 This Agreement may be executed in
several identical counterparts, and by the parties hereto on
separate counterparts, and each counterpart, when so executed
and delivered, shall constitute an original instrument, and all
such separate counterparts shall constitute but one and the same
instrument. The headings and captions appearing in the Loan
Documents have been included solely for convenience and shall
not be considered in construing the Loan Documents. The Loan
Documents embody the entire agreement between the Borrower and
the Bank and supersede all prior proposals, agreements and
understandings. If any provisions of any Loan Document shall be
invalid, illegal or unenforceable in any respect under any
applicable law, the validity, legality and enforceability of the
remaining provisions shall not be affected or impaired thereby.
EXPENSES 7.6 Any provision to the contrary notwithstanding, and
whether or not the transactions contemplated by this Agreement
shall be consummated, the Borrower agrees to pay on demand all
out-of-pocket expenses (including, without limitation, the fees
and expenses of counsel for the Bank) in connection with the
negotiation, preparation, execution, filing, recording,
modification, supplementing and waiver of the Loan Documents
executed after the Effective Date of this Agreement and the
making, servicing and collection or the Loans. The obligations
of the Borrower under this and the following section shall
survive the termination of the Agreement.
INDEMNIFICATION 7.7 The Borrower agrees to indemnify, defend and
hold 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 the Bank may become subject
arising out or based upon the Loan Documents or any Loan,
including that resulting from the Bank's own negligence, except
and to the extent caused by the gross negligence or willful
misconduct of the Bank.
NATURE OF OBLIGATIONS 7.8 If more than one Borrower executes
this Agreement, all of the representations, warranties,
covenants and agreements of the Borrower shall be joint and
several obligations of the Borrower.
CONSOLIDATION 7.9 If Borrower has a Subsidiary, all financial
statements for Borrower shall be prepared on both consolidated
and consolidating bases and all financial accounts and ratios
with respect to Borrower shall be computed on a consolidated
basis.
USURY NOT INTENDED 7.10 It is the intent of Borrower and of the
Bank in the execution and performance or this Agreement and any
other Loan Document to contract in strict compliance with the
usury laws of the State of Texas and as applicable, the United
States of America. Borrower and Bank agree that none of the
terms and provisions contained in this Agreement or any other
Loan Document shall ever be construed to create a contract to
pay for the use, forbearance or detention of money with interest
at a rate in excess of the maximum nonusurious rate of interest
permitted to be charged by applicable Federal or Texas law
(whichever shall permit the higher lawful rate) from to time in
effect ("Highest Lawful Rate"). At all times, if any, that
Chapter One or the Texas Credit Code shall establish the Highest
Lawful Rate, the Highest Lawful Rate shall be the "indicated
rate ceiling" as defined in that Chapter. The provisions of
this paragraph shall control over all other provisions of this
Agreement and all other Loan Documents which may be in apparent
conflict herewith. In the event Bank shall collect moneys which
are deemed to constitute interest in excess of the legal rate,
such moneys shall be immediately returned to the payor thereof
(or, at the option of Bank, credited as last the unpaid
principal on the Note) upon such determination.
RIGHT OF OFFSET 7.11 (a) At any time, upon notice to Bank,
Borrower shall be entitled to offset, dollar for dollar (subject
in any applicable penalty for early withdrawal), any and all
funds Borrower maintains at Bank in the name or Borrower which
have not been previously pledged to a party other than Bank (the
"Bank Accounts") against Indebtedness to Bank, including unpaid
principal and interest. The Bank Accounts shall in such
circumstances be applied against the Indebtedness to Bank in
such order as Borrower elects or, if no such election is made,
in such order as Bank or the entity applying such Bank Accounts
elects. Borrower and Bank intend that Borrower shall be
entitled to the full benefit of applicable deposit insurance
with respect to any funds remaining on deposit after such
setoff.
(b) In furtherance of thee right set out in subsection (a) of
this section, Bank agrees to provide Borrower not less than 30
days notice prior to assigning or participating Borrower's
Indebtedness to Bank, in whole or in part, to a third party.
(c) Bank represents and warrants that the terms of this
Agreement have been approved by all necessary action on the part
of the Bank. The agreements contained in subsections (a) and (b)
of this section shall be included in the Note.
8. DEFINITIONS Unless the context otherwise requires,
capitalized terms used in Loan Documents have these meanings:
Authorized Documents shall mean certificates of authority to
transact business, Certificates or 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.
Cash Flow shall mean net income (after interest and tax expense)
plus amortization of intangibles and depreciation.
Collateral shall mean all Property, tangible or intangible,
real, personal or mixed, now or hereafter subject to the
Security Documents, or intended so to be.
Corporation shall mean corporations, partnerships, joint
ventures, joint stock associations, business trusts and other
business entities.
Governmental Authority shall mean 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 the Bank or Borrower,
any Subsidiary of Borrower or any guarantor of any Indebtedness
hereunder or their respective Property.
Indebtedness shall mean and include (a) all items which in
accordance with GAAP would be included on the liability side of
a balance sheet on the date as of which Indebtedness is to be
determined (excluding capital stock, surplus, surplus reserves
and deferred credits); (b) all guaranties, endorsements and
other contingent obligations in respect of, or any obligations
to purchase or otherwise acquire, Indebtedness of others, and
(c) all Indebtedness secured by any Lien existing on any
interest of the Person with respect to which indebtedness is
being determined in Property owned subject to such Lien whether
or not the Indebtedness secured thereby shall have been assumed.
Legal Requirement shall mean 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 shall mean this Agreement, the Note, 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.
Organizational Documents shall mean, with respect to a
corporation, the certificate of incorporation, articles of
incorporation and bylaws of such corporation; with respect to a
partnership, joint venture, or trust, the agreement or
instrument establishing such entity; in each case including any
and all modifications 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 the
Bank.
Parties mean all Persons other than the Bank executing any Loan
Document.
Person shall mean any individual, Corporation, trust,
unincorporated organization, Governmental Authority or any other
form of entity.
Proper Form shall mean in form and substance satisfactory to the
Bank.
Property shall mean any mi real interest in any kind of property
or asset, whether real, personal or mixed, tangible or
intangible.
Subsidiary shall mean, 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.
Tangible Net Worth shall mean as at any date: (1) the aggregate
amount at which all assets of Borrower would be shown on a
balance sheet at such date after deducting Capitalized research
and development costs, capitalized interest, debt discount and
expense, goodwill, patents, trademarks, copyrights, franchises,
licenses and such other assets as are properly classified as
"intangible assets" less; (2) the aggregate amount of all
indebtedness, liabilities (including tax and other proper
accruals) and reserves of Borrower.
Termination Date shall mean the earlier of: (a) May 1, 1996; or
(b) the date specified by the Bank pursuant to Section 6.1
hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date set forth above.
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.
BORROWER: ARROW-MAGNOLIA INTERNATIONAL, INC.
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: President
Address:
BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: SVP
Address:
EXHIBITS:
A Borrowing Base Report
B Request for Loan
C Compliance Certificate
ANNEXES:
I Loan Documents
II Real Property Description
ANNEX I
Loan Documents
'Loan Documents' includes, but is not limited to, the following:
1. Agreement
2. Note
3. Assignment covering:
Life Insurance
Deposit Account
Other (specify)
4. Borrowing Base Report
5. Security Agreements, in Proper Form, Covering
Accounts and general intangibles
Equipment
Inventory
Securities
Certificate of deposit or deposit account
Partnership interest
Rights under contract
Other (specify)
6. Deed of Trust covering the real property described on Annex
II, attached hereto.
7. Title Insurance Policy
8. Financing Statements
9. Guaranty by: Xxxxxx Xxxxxx, Xxxx Xxxxxx, Xxxx Xxxxxx
('guarantors')
10. Other (specify)
11. Opinion of Borrower's Counsel
12. Certified Copies of Organizational and Authority Documents
13. Insurance policies and certificates
14. Subordination Agreement covering: debt to:
lien of:
15. Financial Statements of: Borrower and Guarantors.
16. UCC search
17. Regulation U statement
ANNEX II
REAL PROPERTY DESCRIPTION
Being all 0f Lots 2 and 3, in Block 11/6606 of Richland
Industrial Park, Installment No. 1, an Addition to the City of
Dallas, Texas, according to the map thereof recorded in Volume
51, Page 29, of the Map Records, Dallas County, Texas, save and
except portion of Lot 2 being more particularly described as
follows:
Beginning at a point in the South right-of-way line of Xxxxxx
Xxxx, (a 60 foot R.O.W.), same being the Northwest corner of Lot
2;
Thence South 89 deg. 54 min. 56 sec. East, 146.67 feet along the
South line of Xxxxxx xxxx to a 1/2 inch iron rod found for
corner;
Thence South 00 deg. 05 min. 05 sec. West, along a line parallel
with and 146.67 feet East of the West line of Lot 2, 233 feet to
a 1/2 inch iron rod found for corner;
Thence North 89 deg. 54 min. 56 sec. West, along a line parallel
with the South right-of-way line of Xxxxxx Xxxx, 146.67 feet to
a 1/2 inch iron rod found for corner in the East boundary line
of Lot 1;
Thence North 00 deg. O5 min. 04 sec. East, along the Base Line
of Lot I and West Line of Lot 2, 233 feet to the place of
beginning.
EXHIBIT A
Accounts and Inventory
Borrowing Base Report for Period Beginning: _____________ and
Ending _____________ ("Current Period")
Agreement dated as of August 1994 (the "Agreement") by and
between Arrow-Magnolia International, Inc, and
Texas Commerce Bank National Association
Line
1. Total Accounts as of the end of the Current Period
Intangible Accounts as of the end of the Current Period:
2. That portion (e.g., Invoice) of all of the Accounts of any
Account Debtor where the Account is more than 90 days from
invoice date
3. All of the Accounts, not already included in Line 2, of any
Account Debtor if 20% of the dollar amount of all of the
Accounts of such Account Debtor are more than 90 days from
invoice date
4. That portion of all the Accounts of any Account Debtor which
exceeds 10% of the dollar amount of the total of all
Accounts for all Account Debtors for the Current Period
(Line 1)
5. Intercompany and Affiliate Accounts
6. Other Ineligible Accounts
7. Total Ineligible Accounts for the Current Period
(Add Lines 2 through 9)
8. Total Eligible Accounts for the Current Period
(Line 1 - Line 10)
9. Multiplied by: Accounts Advance Factor
10. Equals: Accounts Component of Borrowing Base
11. Total Inventory as of the end of the Current Period
Ineligible Inventory as of the end of the Current Period:
12. Other Ineligible:
13. Total Ineligible Inventory as of the end of the
Current Period (Line 12)
14. Total Eligible Inventory as of the end of the
Current Period (Line 11 - Line 13)
15. Multiplied by: Inventory Advance Factor
16. Equals: Inventory Component of Borrowing Base
(Not to exceed the lesser of 50% of the total Borrowing Base
(Line 17) OR $625,000.00)
17. Total Borrowing Base as of the end of the Current
Period (Line 10 + Line 16) not to exceed $1,250,000.00
18. Less: Aggregate principal amount outstanding under
the Note as of the end of the Current Period
19. Equals: Amount Available for Borrowing subject to the terms
of the Note, if positive; or amount due to be repaid, if
negative
Toe terms 'Accounts" and "Inventory" shall have the respective
meanings 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 or: (a) market value; and (b) cost. The
terms "Other Ineligible Accounts" shall mean all such Accounts
of the Borrower that are not subject to a first and prior lien
and security interest in favor or the Bank and those Accounts of
Borrower as shall be deemed from time to time to be, in the sole
judgment of the Bank, ineligible for purposes of determining the
Borrowing Base. "Other Ineligible Inventory" shall mean that
Inventory of the Borrower that is not subject to a first and
prior lien and security interest in favor of the Bank and that
Inventory of the Borrower as shall be deemed from time to time
to be in the sole judgment of the Bank, ineligible for purposes
of determining the Borrowing Base. All other terms not defined
herein have the respective meanings as set forth in the
Agreement.
The undersigned hereby certifies that the above information and
computations, are true and correct and not misleading as of the
date hereof, and that no Default or Event of Default has
occurred and is continuing under the Agreement.
Borrower: ARROW-MAGNOLIA INTERNATIONAL, INC.
By:
Name:
Title:
Address:
Date:
EXHIBIT B
Compliance Certificate
ARROW-MAGNOUA INTERNATIONAL, INC.
FOR THE PERIOD ENDING._________________________
The undersigned officer of Arrow-Magnolia International, Inc.,
does hereby certify that the following covenants and financial
tests, as defined in that certain (Credit Agreement) (the
"Agreement") dated June 29, 1994 executed by ________________ ,
and delivered to Texas Commerce Bank National Association (the
"Bank") are as follows:
1. Financial Statements and Reports
Annual CPA audited FYE financial statements 90 days after the
end of each fiscal year of Borrower together with a
Compliance Certificate
Monthly unaudited financial statements within 30 day of each
month end together with a compliance certificate.
Monthly Borrowing Base Report and A/R aging, within 30 days
of each month end.
Annual personal financial statement including cash flow
information of the guarantors Xxxxxx Xxxxxx, Xxxx Xxxxxx,
Xxxx Xxxxxx.
2. Indebtedness/TNW
Maximum of 2.50 to 1.00 allowed at all times.
As of the month ending
$ ____________ /____= _____
Indebtedness TNW Ratio
3. Fixed Charge Ratio (to be calculated at each quarter end on a
rolling 4 quarter basis).
Minimum of 1.25 to 1.00 required at end of each calculated
period.
Previous Previous
Current Quarter 3 Quarters Total
Net Income
Plus: Depreciation
Amortization
Total Available Cash Flow
Current Maturities of
Long Tern Debt
Current maturities of
Capital Leases
Capital Expenditures
Cash Dividends
Total Debt Service
S ______________ / $_________= ___________
Total Available Total Debt Ratio
Cash Flow (a) Service (b)
THE ABOVE SUMMARY REPRESENTS ONLY A SMALL PORTION OP THE
COVENANTS AND AGREEMENTS CONTAINED IN THE AGREEMENT AND DOES NOT
IN ANY WAY RESTRICT OR MODIFY THE TERMS AND CONDITIONS OF THE
AGREEMENT. IN CASE OF CONFLICT BETWEEN THIS EXHIBIT AND THE
AGREEMENT, THE AGREEMENT SHALL CONTROL.
The undersigned hereby certifies that the above information and
computations are true and correct and not misleading as of the
date hereof, and that no Default or Event of Default has
occurred and is continuing.
Executed this day of 19
COMPANY NAME:
SIGNATURE:
NAMS:
TITLE:
ADDRESS:
