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EXHIBIT 10.8
LOAN AGREEMENT
This Loan Agreement (the "Agreement") dated as of May 31, 1998, by and
between NationsBank, N.A., a national banking association (the "Bank ") and the
Borrower described below.
In consideration of the Loan or Loans described below and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, Bank and Borrower agree as follows:
1. DEFINITIONS AND REFERENCE TERMS. In addition to any other
terms defined herein, the following terms shall have the meaning set forth with
respect thereto:
A. BORROWER:
FileTek, Inc. (hereinafter when referred to alone, will be called the "Company"),
FileTek UK Limited
Xxxxxxx Xxxxxxxx Revocable Trust, (a "Trust")
Xxxxx Xxxxxxxx Revocable Trust, (a "Trust")
Xxxxxxx and Xxxxx Xxxxxxxx
B. BORROWER'S ADDRESS:
0000 Xxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
C. CURRENT ASSETS. Current Assets means the aggregate
amount of all of Borrower's assets which would, in accordance with GAAP,
properly be defined as current assets.
D. CURRENT LIABILITIES. Current Liabilities means the
aggregate amount of all current liabilities as determined in accordance with
GAAP, but in any event shall include all liabilities except those having a
maturity date which is more than one year from the date as of which such
computation is being made.
E. HAZARDOUS MATERIALS. Hazardous Materials include all
materials defined as hazardous materials or substances under any local,
state or federal environmental laws, rules or regulations, and petroleum,
petroleum products, oil and asbestos.
F. LOAN. Any loan described in Section 2 hereof and any
subsequent loan which states that it is subject to this Loan Agreement.
G. LOAN DOCUMENTS. Loan Documents means this Loan
Agreement and any and all promissory notes executed by Borrower in favor of
Bank and all other documents, instruments, guarantees, certificates and
agreements executed and/or delivered by Borrower, any guarantor or third
party in connection with any Loan.
H. TANGIBLE NET WORTH. Tangible Net Worth means the
amount by which total assets exceed total liabilities in accordance with
GAAP.
I. ACCOUNTING TERMS. All accounting terms not
specifically defined or specified herein shall have the meanings generally
attributed to such terms under generally accepted accounting principles
("GAAP"), as in effect from time to time, consistently applied, with respect
to the financial statements referenced in Section 3.H. hereof.
2. LOANS.
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A. LOAN. Bank hereby agrees to make (or has made) one
or more loans to Borrower. The obligation to repay the loans is evidenced by a
promissory note or notes of various dates (the promissory note or notes
together with any and all renewals, extensions or rearrangements thereof being
hereafter collectively referred to as the "Note") having a maturity date,
repayment terms and interest rate as set forth in the Note.
i . REVOLVING CREDIT FEATURE. The Loan provides
for a revolving line of credit (the "Line") under which Borrower may from time
to time, borrow, repay and re-borrow funds.
ii. USAGE FEE. Borrower will pay hereafter on
June 30, 1998 and on the last day of each quarter for the period from and
including the date the Line was established to and including the maturity date
of the Line, a usage fee at a rate per annum of 0.25% of the average daily
unused portion of the Line during such period.
iii. LETTER OF CREDIT SUBFEATURE. As a subfeature
under the Line, Bank may from time to time up to and including May 31, 1999,
issue letters of credit for the account of Borrower (each, a "Letter of Credit"
and collectively, "Letters of Credit"); provided, however, that the form and
substance of each Letter of Credit shall be subject to approval by Bank in its
sole discretion; and provided further that the aggregate undrawn amount of all
outstanding Letters of Credit shall not at any time exceed $400,000.00. Each
Letter of Credit shall be issued for a term not to exceed 360 days, as
designated by Borrower, provided, however, that no Letter of Credit shall have
an expiration date subsequent to May 31, 2000. The undrawn amount of all
Letters of Credit plus any and all amounts paid by Bank in connection with
drawings under any Letter of Credit for which the Bank has not been reimbursed
shall be reserved under the Line and shall not be available for advances
thereunder. Each draft paid by Bank under a Letter of Credit shall be deemed
an advance under the Line and shall be repaid in accordance with the terms of
the Line; provided however, that if the Line is not available for any reason
whatsoever, at the time any draft is paid by Bank, or if advances are not
available under the Line in such amount due to any limitation of borrowing set
forth herein, then the full amount of such drafts shall be immediately due and
payable, together with interest thereon, from the date such amount is paid by
Bank to the date such amount is fully repaid by Borrower, at that rate of
interest applicable to advances under the Line. In such event, Borrower agrees
that Bank, at Bank's sole discretion may debit Borrower's deposit account with
Bank for the amount of such draft.
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents
and warrants to Bank as follows:
A. GOOD STANDING. Borrower is a corporation, duly
organized, validly existing and in good standing under the laws of Delaware and
has the power and authority to own its property and to carry on its business in
each jurisdiction in which Borrower does business.
B. AUTHORITY AND COMPLIANCE. Borrower has full power
and authority to execute and deliver the Loan Documents and to incur and
perform the obligations provided for therein, all of which have been duly
authorized by all proper and necessary action of the appropriate governing body
of Borrower. No consent or approval of any public authority or other third
party is required as a condition to the validity of any Loan Document, and
Borrower is in compliance with all laws and regulatory requirements to which it
is subject.
C. BINDING AGREEMENT. This Agreement and the other Loan
Documents executed by Borrower constitute valid and legally binding obligations
of Borrower, enforceable in accordance with their terms.
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D. LITIGATION. There is no proceeding involving
Borrower pending or, to the knowledge of Borrower, threatened before any court
or governmental authority, agency or arbitration authority, except as disclosed
to Bank in writing and acknowledged by Bank prior to the date of this
Agreement.
E. NO CONFLICTING AGREEMENTS. There is no charter,
bylaw, stock provision, partnership agreement or other document pertaining to
the organization, power or authority of Borrower and no provision of any
existing agreement, mortgage, indenture or contract binding on Borrower or
affecting its property, which would conflict with or in any way prevent the
execution, delivery or carrying out of the terms of this Agreement and the
other Loan Documents.
F. OWNERSHIP OF ASSETS. Borrower has good title to its
assets, and its assets are free and clear of liens, except those granted to
Bank and as disclosed to Bank in writing prior to the date of this Agreement.
G. TAXES. All taxes and assessments due and payable by
Borrower have been paid or are being contested in good faith by appropriate
proceedings and the Borrower has filed all tax returns which it is required to
file.
H. FINANCIAL STATEMENTS. The financial statements of
Borrower heretofore delivered to Bank have been prepared in accordance with
GAAP applied on a consistent basis throughout the period involved and fairly
present Borrower's financial condition as of the date or dates thereof, and
there has been no material adverse change in Borrower's financial condition or
operations since December 31, 1997. All factual information furnished by
Borrower to Bank in connection with this Agreement and the other Loan Documents
is and will be accurate and complete on the date as of which such information
is delivered to Bank and is not and will not be incomplete by the omission of
any material fact necessary to make such information not misleading.
I. PLACE OF BUSINESS. Borrower's chief executive office is located at:
0000 Xxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
J. ENVIRONMENTAL. The conduct of Borrower's business
operations and the condition of Borrower's property does not and will not
violate any federal laws, rules or ordinances for environmental protection,
regulations of the Environmental Protection Agency, any applicable local or
state law, rule, regulation or rule of common law or any judicial
interpretation thereof relating primarily to the environment or Hazardous
Materials.
K. CONTINUATION OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made under this Agreement shall be deemed to be
made at and as of the date hereof and at and as of the date of any advance
under any Loan.
4. AFFIRMATIVE COVENANTS. Until full payment and performance of
all obligations of Borrower under the Loan Documents, Borrower will, unless
Bank consents otherwise in writing (and without limiting any requirement of any
other Loan Document):
A. FINANCIAL CONDITION. Maintain Borrower's financial
condition as follows, determined in accordance with GAAP applied on a
consistent basis throughout the period involved except to the extent modified
by the following definitions:
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i. Maintain a Fixed Charge Coverage Ratio defined as net income
plus depreciation and amortization, plus interest less capitalized
research and development costs, divided by interest plus current
maturities of long term debt (except that on subordinated debt),
tested quarterly, using a rolling four quarter basis, of not less than
1.25:1.0 for each quarter.
ii. Maintain a minimum of Tangible Capital Funds of $1,900,000.00,
tested quarterly. Tangible Capital Funds is defined as net worth plus
subordinated debt plus interest on the subordinated debt plus product
and software license revenues deferred in accordance with SOP 97-2,
less cost of sales deferred in accordance with SOP 97-2, less
capitalized software costs less intangibles.
B. FINANCIAL STATEMENTS AND OTHER INFORMATION. Maintain
a system of accounting satisfactory to Bank and in accordance with GAAP applied
on a consistent basis throughout the period involved, permit Bank's officers or
authorized representatives to visit and inspect Borrower's books of account and
other records at such reasonable times and as often as Bank may desire, and pay
the reasonable fees and disbursements of any accountants or other agents of
Bank selected by Bank for the foregoing purposes. Unless written notice of
another location is given to Bank, Borrower's books and records will be located
at Borrower's chief executive office set forth above. All financial statements
called for below shall be prepared in form and content acceptable to Bank and
by independent certified public accountants acceptable to Bank.
In addition, Borrower will:
i. Furnish to Bank audited financial statements of Borrower, along
with a covenant compliance certificate for each fiscal year of Borrower, within
125 days after the close of each such fiscal year.
ii. Furnish to Bank quarterly financial statements (including a
balance sheet and profit and loss statement) of Borrower, along with a covenant
compliance certificate for each quarter of each fiscal year of Borrower, within
45 days after the close of each such period.
iii. Furnish to Bank quarterly accounts receivable agings, inventory
and sales pipeline reports within 45 days of quarter end.
iv. Furnish to Bank personal financial statements of Xxxxxxx X. and
Xxxxx X. Xxxxxxxx within 125 days of fiscal year end.
v. Furnish to Bank personal tax returns of Xxxxxxx X. and Xxxxx X.
Xxxxxxxx within 30 days of filing.
vi. Furnish to Bank promptly such additional information, reports and
statements respecting the business operations and financial condition of
Borrower(s), from time to time, as Bank may reasonably request.
C. INSURANCE. Maintain insurance with responsible
insurance companies on such of its properties, in such amounts and against such
risks as is customarily maintained by similar businesses operating in the same
vicinity, specifically to include fire and extended coverage insurance covering
all assets, business interruption insurance, workers compensation insurance and
liability insurance, all to be with such companies and in such amounts as are
satisfactory to Bank and providing for at least 30 days prior notice to Bank
of any cancellation thereof. Satisfactory evidence of such insurance will be
supplied to Bank prior to funding under the Loan(s) and 30 days prior to each
policy renewal.
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D. EXISTENCE AND COMPLIANCE. Maintain its existence,
good standing and qualification to do business, where required and comply with
all laws, regulations and governmental requirements including, without
limitation, environmental laws applicable to it or to any of its property,
business operations and transactions.
E. ADVERSE CONDITIONS OR EVENTS. Promptly advise Bank
in writing of (i) any condition, event or act which comes to its attention that
would or might materially adversely affect Borrower's financial condition or
operations or Bank's rights under the Loan Documents, (ii) any litigation filed
by or against Borrower, (iii) any event that has occurred that would constitute
an event of default under any Loan Documents and (iv) any uninsured or
partially uninsured loss through fire, theft, liability or property damage in
excess of an aggregate of $500,000.00.
F. TAXES AND OTHER OBLIGATIONS. Pay all of its taxes,
assessments and other obligations, including, but not limited to taxes, costs
or other expenses arising out of this transaction, as the same become due and
payable, except to the extent the same are being contested in good faith by
appropriate proceedings in a diligent manner.
G. MAINTENANCE. Maintain all of its tangible property
in good condition and repair and make all necessary replacements thereof, and
preserve and maintain all licenses, trademarks, privileges, permits,
franchises, certificates and the like necessary for the operation of its
business.
H. ENVIRONMENTAL. Immediately advise Bank in writing
of (i) any and all enforcement, cleanup, remedial, removal, or other
governmental or regulatory actions instituted, completed or threatened pursuant
to any applicable federal, state, or local laws, ordinances or regulations
relating to any Hazardous Materials affecting Borrower's business operations;
and (ii) all claims made or threatened by any third party against Borrower
relating to damages, contribution, cost recovery, compensation, loss or injury
resulting from any Hazardous Materials. Borrower shall immediately notify Bank
of any remedial action taken by Borrower with respect to Borrower's business
operations. Borrower will not use or permit any other party to use any
Hazardous Materials at any of Borrower's places of business or at any other
property owned by Borrower except such materials as are incidental to
Borrower's normal course of business, maintenance and repairs and which are
handled in compliance with all applicable environmental laws. Borrower agrees
to permit Bank, its agents, contractors and employees to enter and inspect any
of Borrower's places of business or any other property of Borrower at any
reasonable times upon three (3) days prior notice for the purposes of
conducting an environmental investigation and audit (including taking physical
samples) to insure that Borrower is complying with this covenant and Borrower
shall reimburse Bank on demand for the costs of any such environmental
investigation and audit. Borrower shall provide Bank, its agents, contractors,
employees and representatives with access to and copies of any and all data and
documents relating to or dealing with any Hazardous Materials used, generated,
manufactured, stored or disposed of by Borrower's business operations within
five (5) days of the request therefore.
5. NEGATIVE COVENANTS. Until full payment and performance of all
obligations of Borrower under the Loan Documents, Borrower will not, without
the prior written consent of Bank (and without limiting any requirement of any
other Loan Documents):
A. TRANSFER OF ASSETS OR CONTROL. Sell, lease, assign
or otherwise dispose of or transfer any assets, except in the normal course of
its business, or enter into any merger or consolidation, or transfer control or
ownership of the Borrower or form or acquire any subsidiary.
B. LIENS. Grant, suffer or permit any contractual or
noncontractual lien on or security interest in its assets, except in favor of
Bank, or fail to promptly pay when due all lawful claims, whether for labor,
materials or otherwise. Purchase money security interests included in
Borrower's vendor
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agreements are permitted, provided the liens are not perfected by either public
filings or notice to the Bank.
C. EXTENSIONS OF CREDIT. Make or permit any subsidiary
to make, any loan or advance to any person or entity in excess of $100,000, or
purchase or otherwise acquire, or permit any subsidiary to purchase or
otherwise acquire, any capital stock, assets, obligations, or other securities
of, make any capital contribution to, or otherwise invest in or acquire any
interest in any entity, or participate as a partner or joint venturer with any
person or entity, except for the purchase of direct obligations of the United
States or any agency thereof with maturities of less than one year. Loans
resulting from the purchase of FileTek, Inc.'s stock are allowed, provided
such transactions are secured by the related FileTek, Inc. stock.
D. BORROWINGS. Create, incur, assume or become liable
in any manner for any indebtedness (for borrowed money, deferred payment for
the purchase of assets, lease payments, as surety or guarantor for the debt for
another, or otherwise) other than to Bank, except for normal trade debts
incurred in the ordinary course of Borrower's business, and except for existing
indebtedness disclosed to Bank in writing and acknowledged by Bank prior to the
date of this Agreement. Leases may be entered into so long as they are in the
normal course of business and for fair value.
E. DIVIDENDS AND SIMILAR EVENTS. In the case of the
Company and its subsidiaries, purchase, redeem or otherwise retire any shares
of its capital stock, voluntarily prepay, acquire or anticipate any sinking
fund requirement of any indebtedness, declare or pay any cash dividends or make
other distributions in respect of capital. Notwithstanding the foregoing, for
purposes of this covenant, the Company shall be entitled to repurchase, for
fair value, shares of its capital stock from employees who have terminated
their employment with the Company
F. CHARACTER OF BUSINESS. Change the general character
of business as conducted at the date hereof, or engage in any type of business
not reasonably related to its business as presently conducted.
G. MANAGEMENT CHANGE. Change the current ownership in a
manner that the Bank determines adversely affects its interest with respect to
the Note or control of the Borrower and its subsidiaries. The Borrower shall
retain management reasonably satisfactory to the Bank.
H. MERGER OR ACQUISITION. In the case of the Company
and its subsidiaries, enter into any merger or consolidation agreement to
acquire all or substantially all of the assets of any person or entity, or to
dissolve, merge or consolidate into any person or entity.
I. SUBSIDIARIES; INVESTMENTS. In the case of the
Company and its subsidiaries, create any subsidiaries or make any equity
investments or acquire any other interest in any corporation, association,
partnership, limited liability company, joint venture or other party or make
any advances to any such party. Notwithstanding the foregoing, for the purpose
of this covenant, the Company shall be allowed to make advances, loans or
equity investments to or in FileTek UK Limited.
J. SUBORDINATED DEBT PAYMENTS. Repay subordinated debt
in the event of a continuing default. Notwithstanding such an event of
default, principal and interest payments on subordinated debt is permitted.
6. DEFAULT. Borrower shall be in default under this Agreement
and under each of the other Loan Documents if it shall default in the payment
of any amounts due and owing under the Loan or should it fail to timely and
properly observe, keep or perform any term, covenant, agreement or condition in
any Loan Document or in any other loan agreement, promissory note, security
agreement, deed of trust,
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deed to secure debt, mortgage, assignment or other contract securing or
evidencing payment of any indebtedness of Borrower to Bank or any affiliate or
subsidiary of NationsBank Corporation.
7. REMEDIES UPON DEFAULT. If an event of default shall occur,
Bank shall have all rights, powers and remedies available under each of the
Loan Documents as well as all rights and remedies available at law or in
equity.
8. NOTICES. All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to the other party at the following
address:
Borrower:
FileTek, Inc., FileTek UK Limited
Xxxxxxx Xxxxxxxx Revocable Trust
Xxxxx Xxxxxxxx Revocable Trust
Xxxxxxx and Xxxxx Xxxxxxxx
Fax. No. (000) 000-0000
Bank:
NationsBank, N.A.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Fax No. (000) 000-0000
or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or
made as follows:
A. If sent by mail, upon the earlier of the date of
receipt or five (5) days after deposit in the U.S. Mail, first class postage
prepaid;
B. If sent by any other means , upon delivery.
9. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all costs and expenses,
including reasonable attorneys' fees (to include outside counsel fees and all
allocated costs of Bank's in-house counsel if permitted by applicable law),
incurred by Bank in connection with (a) negotiation and preparation of this
Agreement and each of the Loan Documents, and (b) all other costs and
attorneys' fees incurred by Bank for which Borrower is obligated to reimburse
Bank in accordance with the Terms of the Loan Documents.
10. MISCELLANEOUS. Borrower and Bank further covenant and agree
as follows, without limiting any requirement of any other Loan Document:
A. CUMULATIVE RIGHTS AND NO WAIVER. Each and every
right granted to Bank under any Loan Document, or allowed it by law or equity
shall be cumulative of each other and may be exercised in addition to any and
all other rights of Bank, and no delay in exercising any right shall operate as
a waiver thereof, nor shall any single or partial exercise by Bank of any right
preclude any other or future exercise thereof or the exercise of any other
right. Borrower expressly waives any presentment, demand, protest or other
notice of any kind, including but not limited to notice of intent to accelerate
and notice of acceleration. No notice to or demand on Borrower in any case
shall, of itself, entitle Borrower to any other or future notice or demand in
similar or other circumstances.
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B. APPLICABLE LAW. This Loan Agreement and the rights
and obligations of the parties hereunder shall be governed by and interpreted
in accordance with the laws of and applicable United States federal law.
C. AMENDMENT. No modification, consent, amendment or
waiver of any provision of this Loan Agreement, nor consent to any departure by
Borrower therefrom, shall be effective unless the same shall be in writing and
signed by an officer of Bank, and then shall be effective only in the specified
instance and for the purpose for which given. This Loan Agreement is binding
upon Borrower, its successors and assigns, and inures to the benefit of Bank,
its successors and assigns; however, no assignment or other transfer of
Borrower's rights or obligations hereunder shall be made or be effective
without Bank's prior written consent, nor shall it relieve Borrower of any
obligations hereunder. There is no third party beneficiary of this Loan
Agreement.
D. DOCUMENTS. All documents, certificates and other
items required under this Loan Agreement to be executed and/or delivered to
Bank shall be in form and content satisfactory to Bank and its counsel.
E. PARTIAL INVALIDITY. The unenforceability or
invalidity of any provision of this Loan Agreement shall not affect the
enforceability or validity of any other provision herein and the invalidity or
unenforceability of any provision of any Loan Document to any person or
circumstance shall not affect the enforceability or validity of such provision
as it may apply to other persons or circumstances.
F. INDEMNIFICATION. Notwithstanding anything to the
contrary contained in Section 10(G), Borrower shall indemnify, defend and hold
Bank and its successors and assigns harmless from and against any and all
claims, demands, suits, losses, damages, assessments, fines, penalties, costs
or other expenses (including reasonable attorneys' fees and court costs)
arising from or in any way related to any of the transactions contemplated
hereby, including but not limited to actual or threatened damage to the
environment, agency costs of investigation, personal injury or death, or
property damage, due to a release or alleged release of Hazardous Materials,
arising from Borrower's business operations, any other property owned by
Borrower or in the surface or ground water arising from Borrower's business
operations, or gaseous emissions arising from Borrower's business operations or
any other condition existing or arising from Borrower's business operations
resulting from the use or existence of Hazardous Materials, whether such claim
proves to be true or false. Borrower further agrees that its indemnity
obligations shall include, but are not limited to, liability for damages
resulting from the personal injury or death of an employee of the Borrower,
regardless of whether the Borrower has paid the employee under the workmen' s
compensation laws of any state or other similar federal or state legislation
for the protection of employees. The term "property damage" as used in this
paragraph includes, but is not limited to, damage to any real or personal
property of the Borrower, the Bank, and of any third parties. The Borrower's
obligations under this paragraph shall survive the repayment of the Loan and
any deed in lieu of foreclosure or foreclosure of any Deed to Secure Debt, Deed
of Trust, Security Agreement or Mortgage securing the Loan.
G. SURVIVABILITY. All covenants, agreements,
representations and warranties made herein or in the other Loan Documents shall
survive the making of the Loan and shall continue in full force and effect so
long as the Loan is outstanding or the obligation of the Bank to make any
advances under the Line shall not have expired.
11. NO ORAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed under seal by their duly authorized representatives as of the
date first above written.
WITNESS/ATTEST: BORROWER:
FileTek, Inc.
_________________________ By: /s/ Xxxxxxx X. Xxxxxxxx (Seal)
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Xxxxxxx X. Xxxxxxxx, Chief Executive Officer
FileTek UK Limited
_________________________ By: /s/ Xxxxxxx X. Xxxxxxxx (Seal)
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Xxxxxxx X. Xxxxxxxx, Director
Xxxxxxx X. Xxxxxxxx Revocable Trust
_________________________ By: /s/ Xxxxxxx X. Xxxxxxxx (Seal)
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Xxxxxxx X. Xxxxxxxx, Trustee
Xxxxx X. Xxxxxxxx Revocable Trust
_________________________ By: /s/ Xxxxx X. Xxxxxxxx (Seal)
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Xxxxx X. Xxxxxxxx, Trustee
_________________________ /s/ Xxxxxxx X. Xxxxxxxx (Seal)
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Xxxxxxx X. Xxxxxxxx, Individually
_________________________ /s/ Xxxxx X. Xxxxxxxx (Seal)
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Xxxxx X. Xxxxxxxx, Individually
BANK:
NationsBank, N.A
_________________________ By: /s/ Xxxxxxxxx X. Xxxxx (Seal)
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Xxxxxxxxx X. Xxxxx, Vice President
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