BUSINESS LOAN AGREEMENT (ASSET BASED)
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.
Borrower: NACO INDUSTRIES, INC. Lender: ZIONS FIRST NATIONAL BANK
395 WEST 0000 XXXXX XXXXX XXXXXXXXXX XXXXXXX XXXXXX
XXXXX, XX 00000 000 XXXXX XXXX XXXXXX
XXXXX, XX 00000
THIS BUSINESS LOAN AGREEMENT (ASSET BASED) dated October 31, 2001, is made and
executed between NACO INDUSTRIES, INC. ("Borrower") and ZIONS FIRST NATIONAL
BANK ('Lender') on the following terms and conditions. Borrower has received
prior commercial loans from Lender or has applied to Lender for a commercial
loan or loans or other financial accommodations, including those which may be
described on any exhibit or schedule attached to this Agreement ("Loan').
Borrower understands and agrees that: (A) in granting, renewing, or extending
any Loan, Lender Is relying upon Borrower's representations, warranties, and
agreements as set forth in this Agreement, and (B) all such Loans shall be and
remain subject to the terms and conditions of this Agreement.
TERM. This Agreement shall be effective as of October 31, 2001, and shall
continue in full force and effect until such time as all of Borrower's Loans in
favor of Lender have been paid in full, including principal, interest, costs,
expenses, attorneys' fees, and other fees and charges, or until such time as the
parties may agree in writing to terminate this Agreement.
LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided the aggregate
amount of such Advances outstanding at any time does not exceed the Borrowing
Base. Within the foregoing limits, Borrower may borrow, partially or wholly
prepay, and reborrow under this Agreement as follows:
Conditions Precedent to Each Advance. Lender's obligation to make any
Advance to or for the account of Borrower under this Agreement is subject
to the following conditions precedent, with all documents, instruments,
opinions, reports, and other items required under this Agreement to be in
form and substance satisfactory to Lender:
(1) Lender shall have received evidence that this Agreement and all
Related Documents have been duly authorized, executed, and
delivered by Borrower to Lender.
(2) Lender shall have received such opinions of counsel,
supplemental opinions, and documents as Lender may request.
(3) The security interests in the Collateral shall have been duly
authorized, created, and perfected with first lien priority and
shall be in full force and effect.
(4) All guaranties required by Lender for the credit facility(ies)
shall have been executed by each Guarantor, delivered to Lender,
and be in full force and effect.
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(5) Lender, at its option and for its sole benefit, shall have
conducted an audit of Borrower's Accounts, Inventory, books,
records, and operations, and Lender shall be satisfied as to their
condition.
(6) Borrower shall have paid to Lender all fees, costs, and
expenses specified in this Agreement and the Related Documents as
are then due and payable.
(7) There shall not exist at the time of any Advance a condition
which would constitute an Event of Default under this Agreement,
and Borrower, shall have delivered to Lender the compliance
certificate called for in the paragraph below titled 'Compliance
Certificate."
Making Loan Advances. Advances under this credit facility, as well as
directions for payment from Borrower's accounts, may be requested orally
or in writing by authorized persons. Lender may, but need not, require
that all oral requests be confirmed in writing. Each Advance shall be
conclusively deemed to have been made at the request of and for the
benefit of Borrower (1) when credited to any deposit,, account of Borrower
maintained with Lender or (2) when advanced in accordance with the
instructions of an authorized person. Lender, at its option, may set a
cutoff time, after which all requests for Advances will be treated as
having been requested on the next succeeding Business Day.
Mandatory Loan Repayments. If at any time the aggregate principal amount
of the outstanding Advances shall exceed the applicable Borrowing Base,
Borrower, immediately upon written or oral notice from Lender, shall pay
to Lender an amount equal to the difference between the outstanding
principal balance of the Advances and the Borrowing Base. On the
Expiration Date, Borrower shall pay to Lender in full the aggregate unpaid
principal amount of all Advances then outstanding and all accrued unpaid
interest, together with all other, applicable fees, costs and charges, if
any, not yet paid.
Loan Account. Lender shall maintain on its books a record of account in
which Lender shall make entries for each Advance and such other debits and
credits as shall be appropriate in connection with the credit facility.
Lender shall provide Borrower with periodic statements of Borrower's
account, which statements shall be considered to be correct and
conclusively binding on Borrower unless Borrower notifies Lender to the
contrary within thirty (30) days after Borrower's receipt of any such
statement which Borrower deems to be incorrect.
COLLATERAL. To secure payment of the Primary Credit Facility and performance of
all other Loan, obligations and duties owed by Borrower to Lender, Borrower (and
others, if required) shall grant to Lender Security Interests in such property
and assets as Lender may require. Lender's Security Interests in the Collateral
shall be continuing liens and shall include the proceeds and products of the
Collateral, including without' limitation the proceeds of any insurance. With
respect to the Collateral, Borrower agrees and represents and warrants to
Lender:
Perfection of Security Interests. Borrower agrees to execute financing
statements and all documents perfecting Lender's Security Interest and to
take whatever other actions are requested by Lender to perfect and
continue Lender's Security Interests in the Collateral. Upo7 request of
Lender, Borrower will deliver to Lender any and all of the documents
evidencing or constituting the Collateral, and Borrower will, note
Lender's interest upon any and all chattel paper and instruments if not
delivered to Lender for possession by Lender Contemporaneous with the
execution of this Agreement, Borrower will execute one or more UCC
financing statements and any similar statements as may be required by
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applicable law, and Lender will file such financing statements and all
such similar statements in the appropriate location or locations. Borrower
hereby appoints Lender as its irrevocable attorney-in-fact for the purpose
of executing any documents necessary to perfect or to continue any
Security Interest. Lender may at any time, and without further
authorization from Borrower, file a carbon, photograph, facsimile, or
other reproduction of any financing statement for use as a financing
statement. Borrower will reimburse Lender for all expenses for the
perfection, termination, and the continuation of the perfection of
Lender's security interest in the Collateral. Borrower promptly will
notify Lender before any change in Borrower's name including any change to
the assumed business names of Borrower. Borrower also promptly will notify
Lender before any change in Borrower's Social Security Number or Employer
Identification Number. Borrower further agrees to notify Lender in writing
prior to any change in address or location of Borrower's
principal.governance office or should Borrower merge or consolidate with
any other entity.
Collateral Records. Borrower does now, and at all times hereafter shall,
keep correct and accurate records of the Collateral, all of which records
shall be available to Lender or Lender's representative upon demand for
inspection and copying at any reasonable time. With respect to the
Accounts, Borrower agrees to keep and maintain such records as Lender may
require, including without limitation information concerning Eligible
Accounts and Account balances and agings. Records related to Accounts
(Receivables) are or will be located at. With respect to the Inventory,
Borrower agrees to keep and maintain such records as Lender may require,
including without limitation information concerning Eligible Inventory and
records itemizing and describing the kind, type, quality, and quantity of
Inventory, Borrower's Inventory costs and selling prices, and the daily
withdrawals and additions to Inventory. Records related to Inventory are
or will be located at . The above is an accurate and complete list of all
locations at which Borrower keeps or maintains business records concerning
Borrower's collateral.
Collateral Schedules. Concurrently with the execution and delivery of this
Agreement, Borrower shall execute and deliver to Lender schedules of
Accounts and Inventory and schedules of Eligible Accounts and Eligible
Inventory in form and substance satisfactory to the Lender. Thereafter
supplemental schedules shall be delivered according to the following
schedule: With respect to Eligible Accounts, schedules shall be delivered
Every 30 days.
Representations and Warranties Concerning Accounts. With respect to the
Accounts, Borrower represents and warrants to Lender: (1) Each Account
represented by Borrower to be an Eligible Account for purposes of this
Agreement conforms to the requirements of the definition of an Eligible
Account; (2) All Account information listed on schedules delivered to
Lender will be true and correct, subject to immaterial variance; and (3)
Lender, its assigns, or agents shall have the right at any time and at
Borrower's expense to inspect, examine, and audit Borrower's records and
to confirm with Account Debtors the accuracy of such Accounts.
Representations and Warranties Concerning Inventory. With respect to the
Inventory, Borrower represents and warrants to Lender: (1) All Inventory
represented by Borrower to be Eligible Inventory for purposes of this
Agreement conforms to the requirements of the definition of Eligible
Inventory; (2) All Inventory values listed on schedules delivered to
Lender will be true and correct, subject to immaterial variance; (3) The
value of the Inventory will be determined on a consistent accounting
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basis; (4) Except as agreed to the contrary by Lender in writing, all
Eligible Inventory is now and at all times hereafter will be in Borrower's
physical possession and shall not be held by others on consignment, sale
on approval, or sale or return; (5) Except as reflected in the Inventory
schedules delivered to Lender, all Eligible Inventory is now and at all
times hereafter will be of good and merchantable quality, free from
defects; (6) Eligible Inventory is not now and will not at any time
hereafter be stored with a bailee, warehouseman, or similar party without
Lender's prior written consent, and, in such event, Borrower will
concurrently at the time of bailment cause any such bailee, warehouseman,
or similar party to issue and deliver to Lender, in form acceptable to
Lender, warehouse receipts in Lender name evidencing the storage of
Inventory; and (7) Lender, its assigns, or agents shall have the right at
any time and at Borrower's expense to inspect and examine the Inventory
and to check and test the same as to quality, quantity, value, and
condition.
Remittance Account. Borrower agrees that Lender may at any time require
Borrower to institute procedures whereby the payments and other proceeds
of the Accounts shall be paid by the Account Debtors under a remittance
account or lock box arrangement with Lender, or Lender's agent, or with
one or more financial institutions designated by Lender. Borrower further
agrees that, if no Event of Default exists under this Agreement, any and
all of such funds received under such a remittance account or lock box
arrangement shall, at Lender's sole election and discretion, either be (1)
paid or turned over to Borrower; (2) deposited into one or more accounts
for the benefit of Borrower (which deposit accounts shall be subject to a
security assignment in favor of Lender); (3) deposited into one or more
accounts for the joint benefit of Borrower and Lender (which deposit
accounts shall likewise be subject to a security assignment in favor of
Lender); (4) paid or turned over to Lender to be applied to the
Indebtedness in such order and priority as Lender may determine within its
sole discretion; or (5) any combination of the foregoing as Lender shall
determine from time to time. Borrower further agrees that, should one or
more Events of Default exist, any and all funds received under such a
remittance account or lock box arrangement shall be paid or turned over to
Lender to be applied to the Indebtedness, again in such order and priority
as Lender may determine within its sole discretion.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender's satisfaction of all of the conditions set forth in this
Agreement and in the Related
Documents.
Loan Documents. Borrower shall provide to Lender the following documents
for the Loan: fl) the Note; (2) Security Agreements granting to Lender
security interests in the Collateral; (3) financing statements and all
other documents perfecting Lender's Security Interests; (4) evidence of
insurance as required below; (5) guaranties; (6) together with all such
Related Documents as Lender may require for the Loan; all in form and
substance satisfactory to Lender and Lender's counsel.
Borrower's Authorization. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the
Related Documents. In addition, Borrower shall have provided such other
resolutions, authorizations, documents and instruments as Lender or its
counsel, may require.
Fees and Expenses Under This Agreement. Borrower shall have paid to Lender
all fees, costs, and expenses specified in this Agreement and the Related
Documents as are then due and payable.
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Representations and Warranties. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time of any Advance a
condition which would constitute an Event of Default under this Agreement
or under any Related Document.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation for profit which is, and at all
times shall be, duly organized, validly existing, and in good standing
under and by virtue of the laws of the State of Utah. Borrower is duly
authorized to transact business in all other states in which Borrower is
doing business, having obtained all necessary filings, governmental
licenses and approvals for each state in which Borrower is doing business.
Specifically, Borrower is, and at all times shall be, duly qualified as a
foreign corporation in all states in which the failure to so qualify would
have a material adverse effect on its business or financial condition.
Borrower has the full power and authority to own its properties and to
transact the business in which it is presently engaged or presently
proposes to engage. Borrower maintains an office at 000 XXXX 0000 XXXXX,
XXXXX, XX 00000. Unless Borrower has designated otherwise in writing, the
principal office is the office at which Borrower keeps its books and
records including its records concerning the Collateral. Borrower will
notify Lender prior to any change in the location of Borrower's state of
organization or any change in Borrower's name. Borrower shall do all
things necessary to preserve and to keep in full force and effect its
existence, rights and privileges, and shall comply with all regulations,
rules, ordinances, statutes, orders and decrees of any governmental or
quasi-governmental authority or court applicable to Borrower and
Borrower's business activities.
Assumed Business Names. Borrower has filed or recorded all documents or
filings required by law relating to all assumed business names used by
Borrower. Excluding the name of Borrower, the following is a complete list
of all assumed business names under which Borrower does business:
Borrower Assumed Business Name Filing Location Date
-------- --------------------- --------------- ----
NACO INDUSTRIES, INC. CALIFORNIA NACO INDUSTRIES, INC.
Authorization. Borrower's execution, delivery, and performance of this
Agreement and all the Related Documents have been duly authorized by all
necessary action by Borrower and do not conflict with, result in a
violation of, or constitute a default under (1) any provision of
Borrower's articles of incorporation or organization, or bylaws, or any
agreement or other instrument binding upon Borrower or (2) any law,
governmental regulation, court decree, or order applicable to Borrower or
to Borrower's properties.
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Financial Information. Each of Borrower's financial statements supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change
in Borrower's financial condition subsequent to the date of the most
recent financial statement supplied to Lender. Borrower has no material
contingent obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
Borrower is required to give under this Agreement when delivered will
constitute legal, valid, and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and
as accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Borrower's properties free and clear of all Security Interests, and has
not executed any security documents or financing statements relating to
such properties. All of Borrower's properties are titled in Borrower's
legal name, and Borrower has not used or filed a financing statement under
any other name for at least the last five (5) years.
Hazardous Substances. Except as disclosed to and acknowledged by Lender in
writing, Borrower represents and warrants that: (1) During the period of
Borrower's ownership of Borrower's Collateral, there has been no use,
generation, manufacture, storage, treatment, disposal, release or
threatened release of any Hazardous Substance by any person on, under,
about or from any of the Collateral. (2) Borrower has no knowledge of, or
reason to believe that there has been (a) any breach or violation of any
Environmental Laws; (b) any use, generation, manufacture, storage,
treatment, disposal, release or threatened release of any Hazardous
Substance on, under, about or from the Collateral by any prior owners or
occupants of any of the Collateral; or (c) any actual or threatened
litigation or claims of any kind by any person relating to such matters.
(3) Neither Borrower nor any tenant, contractor, agent or other authorized
user of any of the Collateral shall use, generate, manufacture, store,
treat, dispose of or release any Hazardous Substance on, under, about or
from any of the Collateral; and any such activity shall be conducted in
compliance with all applicable federal, state, and local laws,
regulations, and ordinances, including without limitation all
Environmental Laws. Borrower authorizes Lender and its agents to enter
upon the Collateral to make such inspections and tests as Lender may deem
appropriate to determine compliance of the Collateral with this section of
the Agreement. Any inspections or tests made by Lender shall be at
Borrower's expense and for Lender's purposes only and shall not be
construed to create any responsibility or liability on the part of Lender
to Borrower or to any other person. The representations and warranties
contained herein are based on Borrower's due diligence in investigating
the Collateral for hazardous waste and Hazardous Substances. Borrower
hereby (1) releases and waives any future claims against Lender for
indemnity or contribution in the event Borrower becomes liable for cleanup
or other costs under any such laws, and (2) agrees to indemnify and hold
harmless Lender against any and all claims, losses, liabilities, damages,
penalties, and expenses which Lender may directly or indirectly sustain or
suffer resulting from a breach of this section of the Agreement or as a
consequence of any use, generation, manufacture, storage, disposal,
release or threatened release of a hazardous waste or substance on the
Collateral. The provisions of this section of the Agreement, including the
obligation to indemnify, shall survive the payment of the Indebtedness and
the termination, expiration or satisfaction of this Agreement and shall
not be affected by Lender's acquisition of any interest in any of the
Collateral, whether by foreclosure or otherwise.
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Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all of Borrower's tax returns
and reports that are or were required to be filed, have been filed, and
all taxes, assessments and other governmental charges have been paid in
full, except those presently being or to be contested by Borrower in good
faith in the ordinary course of business and for which adequate reserves
have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements (if
any), and all Related Documents are binding upon the signers thereof, as
well as upon their successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long
as this Agreement remains in effect, Borrower will:
Notices of Claims and Litigation. Promptly inform Lender in writing of (1)
all material adverse changes in Borrower's financial condition, and (2)
all existing and all threatened litigation, claims, investigations,
administrative proceedings or similar actions affecting Borrower o, any
Guarantor which could materially affect the financial condition of
Borrower or the financial condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with GAAP,
applied on a consistent basis, and permit Lender to examine and audit
Borrower's books and records at all reasonable times.
Financial Statements. Furnish Lender with the following:
Annual Statements. As soon as available, but in no event later than
one-hundred-twenty (120) days after the end of each fiscal year.
Borrower's balance sheet and income statement for the year ended,
audited by a certified public accountant satisfactory to Lender.
Interim Statements. As soon as available, but in no event later than
45 days after the end of each fiscal quarter, Borrower's balance sheet
and profit and loss statement for the period ended, reviewed by a
certified public accountant satisfactory to Lender.
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Tax Returns. As soon as available, but in no event later than 7 days
after the applicable filing date for the tax reporting period ended.
Federal and other governmental tax returns, prepared by Borrower.
All financial reports required to be provided under this Agreement shall
be prepared in accordance with GAAP, applied on a consistent basis, and
certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and
statements, as Lender may request from time to time.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies acceptable to Lender. Borrower, upon request of
Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least ten (1 0) days prior written notice to Lender. Each insurance policy
also shall include an endorsement providing that coverage in favor of
Lender will not be impaired in any way by any act, omission or default of
Borrower or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest for the
Loans, Borrower will provide Lender with such lender's loss payable or
other endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (1) the
name of the insurer; (2) the risks insured; (3) the amount of the policy;
(4) the properties insured; (5) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (6) the expiration date of the policy. In addition, upon
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request of Lender (however not more often than annually), Borrower will
have an independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral.
The cost of such appraisal shall be paid by Borrower.
Guaranties. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, executed by the guarantor
named below, on Lender's forms, and in the amount and under the conditions
set forth in those guaranties.
Name of Guarantor Amount XXXXX X. XXXX $1,200,000.00
----------------- ------
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Uen3. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every kind
and nature, imposed upon Borrower or its properties, income, or profits,
prior to the date on which penalties would attach, and all lawful claims
that, if unpaid, might become a lien or charge upon any of Borrower's
properties, income, or profits.
Performance. Perform and comply, in a timely manner, with all terms,
conditions, and provisions set forth in this Agreement, in the Related
Documents, and in all other instruments and agreements between Borrower
and Lender. Borrower shall notify Lender immediately in writing of any
default in connection with any agreement.
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Operations. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner.
Environmental Studies. Promptly conduct and complete, at Borrower's
expense, all such investigations, studies, samplings and testings as may
be requested by Lender or any governmental authority relative to any
substance, or any waste or by-product of any substance defined as toxic or
a hazardous substance under applicable federal, state, or local law, rule,
regulation, order or directive, at or affecting any property or any
facility owned, leased or used by Borrower.
Compliance with Governmental Requirements. Comply with all laws,
ordinances, and regulations, now or hereafter in effect, of all
governmental authorities applicable to the conduct of Borrower's
properties, businesses and operations, and to the use or occupancy of the
Collateral, including without limitation, the Americans With Disabilities
Act. Borrower may contest in good faith any such law, ordinance, or
regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Borrower has notified Lender in writing
prior to doing so and so long as, in Lender's sole opinion, Lender's
interests in the Collateral are not jeopardized. Lender may require
Borrower to post adequate security or a surety bond, reasonably
satisfactory to Lender, to protect Lender's interest.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer
software programs for the generation of such records) in the possession of
a third party, Borrower, upon request of Lender, shall notify such party
to permit Lender free access to such records at all reasonable times and
to provide Lender with copies of any records it may request, all at
Borrower's expense.
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Compliance Certificates. Unless waived in writing by Lender, provide
Lender within thirty (30) days after the end of each month, with a
certificate executed by Borrower's chief financial officer, or other
officer or person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement are true and
correct as of the date of the certificate and further certifying that, as
of the date of the certificate, no Event of Default exists under this
Agreement.
Environmental Compliance and Reports. Borrower shall comply in all
respects with any and all Environmental Laws; not cause or permit to
exist, as a result of an intentional or unintentional action or omission
on Borrower's part or on the part of any third party, on property owned
and/or occupied by Borrower, any environmental activity where damage may
result to the environment, unless such environmental activity is pursuant
to and in compliance with the conditions of a permit issued by the
appropriate federal, state or local governmental authorities; shall
furnish to Lender promptly and in any event within thirty (30) days after
receipt thereof a copy of any notice, summons, lien, citation, directive,
letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or
omission on Borrower's part in connection with any environmental activity
whether or not there is damage to the environment and/or other natural
resources.
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, assignments,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure the
Loans and to perfect all Security Interests.
RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except federal, state or local income or franchise taxes
imposed on Lender), reserve requirements, capital adequacy requirements or other
obligations which would (A) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (B) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(C) reduce the rate of return on Lender's capital as a consequence of Lender's
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after Lender's written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrower's failure to discharge or pay when due any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Borrower. All such expenses will become a
part of the Indebtedness and, at Lender's option, will (A) be payable on demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
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Indebtedness and Lions. (1) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money,
including capital leases, (2) sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's assets
(except as allowed as Permitted Liens), or (3) sell with recourse any of
Borrower's accounts, except to Lender.
Continuity of Operations. (1) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(2) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, or (3) pay any
dividends on Borrower's stock (other than dividends payable in its stock),
provided, however that notwithstanding the foregoing, but only so long as
no Event of Default has occurred and is continuing or would result from
the payment of dividends, if Borrower is a 'Subchapter S Corporation" (as
defined in the Internal Revenue Code of 1986, as amended), Borrower may
pay cash dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income taxes and make
estimated income tax payments to satisfy their liabilities under federal
and state law which arise solely from their status as Shareholders of a
Subchapter S Corporation because of their ownership of shares of
Borrower's stock, or purchase or retire any of Borrower's outstanding
shares or alter or amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money
or assets, (2) purchase, create or acquire any interest in any other
enterprise or entity, or (3) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(A) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes
12
incompetent or becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse
change in Borrower's financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; or (D) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor's guaranty of the Loan or any other loan with Lender; or (El Lender in
good xxxxx xxxxx itself insecure, even though no Event of Default shall have
occurred.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone also and all accounts Borrower may open in the future.
However, this does not include any XXX or Xxxxx accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.
DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
Payment Default. Borrower fails to make any payment when due under the
Loan.
Other Defaults. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement between
Lender and Borrower.
Default in Favor of Third Parties. Borrower or any Grantor defaults under
any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or
person that may materially affect any of Borrower's or any Grantor's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of the
Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this
Agreement or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished or becomes false or
misleading at any time thereafter.
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Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected security interest or
lien) at any time and for any reason.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the Loan. This
includes a garnishment of any of Borrower's accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate reserve
or bond for the dispute.
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Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness. In the event of a
death, Lender, at its option, may, but shall not be required to, permit
the Guarantor's estate to assume unconditionally the obligations arising
under the guaranty in a manner satisfactory to Lender, and, in doing so,
cure any Event of Default.
Change in Ownership. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of
the Loan is impaired.
Insecurity. Lender in good faith believes itself insecure.
Right to Cure. If any default, other than a default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been given
a notice of a similar default within the preceding twelve (1 2) months, it
may be cured (and no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, after receiving written notice from Lender
demanding cure of such default: (1) cure the default within fifteen (1 5)
days; or (2) if the cure requires more than fifteen (1 5) days,
immediately initiate steps which Lender deems in Lender's sole discretion
to be sufficient to cure the default and thereafter continue and complete
all reasonable and necessary steps sufficient to produce compliance as
soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency' subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default and to exercise its rights and remedies.
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INVENTORY REPORTS. Borrower shall furnish Lender with a monthly Inventory report
within 30 days of the end of each period in form and content acceptable to
Lender.
ACCOUNTS PAYABLE AGING. Borrower shall furnish to Lender a monthly Accounts
Payable Aging report within 30 days of the end of each month in a form
acceptable to Lender.
AUTHORIZATION TO VERIFY ACCOUNTS RECEIVABLE. Borrower hereby authorizes Lender
to verity its accounts receivable through written and/or verbal verification
methods at the discretion of the Lender.
WAIVER OF CLAIMS. BORROWER (i) REPRESENTS THAT THEY HAVE NO DEFENSES TO OR
SETOFFS AGAINST ANY INDEBTEDNESS OR OTHER OBLIGATIONS OWING TO LENDER OR ITS
AFFILIATES (THE -OBLIGATIONS-), NOR CLAIMS AGAINST LENDER OR ITS AFFILIATES FOR
ANY MATTER WHATSOEVER, RELATED OR UNRELATED TO THE OBLIGATIONS, AND (ii) RELEASE
LENDER AND ITS AFFILIATES FROM ALL CLAIMS, CAUSES OF ACTION, AND COSTS, IN LAW
OR EQUITY, EXISTING AS OF THE DATE OF THIS AGREEMENT WHICH BORROWER HAS OR MAY
HAVE BY REASON OF ANY MATTER OF ANY CONCEIVABLE KIND OR CHARACTER WHATSOEVER,
RELATED OR UNRELATED TO THE OBLIGATIONS, INCLUDING THE SUBJECT MATTER OF THIS
AGREEMENT. THIS PROVISION SHALL NOT APPLY TO CLAIMS FOR PERFORMANCE OF EXPRESS
CONTRACTUAL OBLIGATIONS OWING TO BORROWER BY LENDER OR ITS AFFILIATES.
DEFINITION OF INDEBTEDNESS AND NOTE. 'Indebtedness" and 'Note" as referenced
herein are hereby deleted in their entirety and replaced with the following:
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Indebtedness. The word "Indebtedness' means and includes without limitation all
Loans, together with all other obligations, debts and liabilities of Borrower to
Lender, or any one or more of them, as well as all claims by Lender against
Borrower, or any one or more of them; whether now or hereafter existing,
voluntary or involuntary, due or not due, absolute or contingent, liquidated or
unliquidated; whether Borrower may be liable individually or jointly with
others; whether Borrower may be obligated as a guarantor, surety, or otherwise;
whether recovery upon such indebtedness may be or hereafter may become barred by
any statute of limitations; and whether such indebtedness may be or hereafter
may become otherwise unenforceable.
Note: The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note or
notes therefor.
BORROWING BASE CERTIFICATE. Borrower shall furnish to Lender a weekly Borrowing
Base Certificate, certified by an authorized officer/employee of Borrower,
within 5 days of the end of each week and with each advance request, in a form
acceptable to Lender unless Lender specifically requests otherwise in writing to
Borrower.
EARNINGS BEFORE INTEREST AND TAXES. Borrower shall maintain a ratio of earnings
calculated before interest, taxes, depreciation and amortization to current
portion of long term indebtedness plus total interest of not less than 1.80 to
1.00, measured quarterly, based on the current quarter and the immediately
preceding three (3) quarters.
DEBT TO EQUITY RATIO. Borrower shall maintain a ratio of total liabilities less
subordinated debt to total equity of not more than 2.50 TO 1.00.
ACCOUNTS RECEIVABLE AGING. Borrower shall furnish to Lender a monthly accounts
receivable aging report within 30 days of the end of each month in a form
acceptable to Lender.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
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Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. - No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed by
the party or parties sought to be charged or bound by the alteration or
amendment.
Arbitration Disclosures.
1. ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND SUBJECT TO ONLY
VERY LIMITED REVIEW BY A COURT.
2. IN ARBITRATION THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN
COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.
3. DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN COURT.
4. ARBITRATORS ARE NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL
REASONING IN THEIR AWARDS. THE RIGHT TO APPEAL OR SEEK MODIFICATION
OF ARBITRATORS' RULINGS IS VERY LIMITED.
5. A PANEL OF ARBITRATORS MIGHT INCLUDE AN ARBITRATOR WHO IS OR WAS
AFFILIATED WITH THE BANKING INDUSTRY.
6. ARBITRATION WILL APPLY TO ALL DISPUTES BETWEEN THE PARTIES, NOT JUST
THOSE CONCERNING THE AGREEMENT.
7. IF YOU HAVE QUESTIONS ABOUT ARBITRATION, CONSULT YOUR ATTORNEY OR
THE AMERICAN ARBITRATION ASSOCIATION.
(a) Any claim or controversy ('Dispute') between or among the parties and
their employees, agents, affiliates, and assigns, including, but not
limited to, Disputes arising out of or relating to this agreement, this
arbitration provision ("arbitration clause"), or any related agreements or
instruments relating hereto or delivered in connection herewith ('Related
Agreements'), and including, but not limited to, a Dispute based on or
arising from an alleged tort, shall at the request of any party be
resolved by binding arbitration in accordance with the applicable
arbitration rules of the American Arbitration Association (the
'Administrator'). The provisions of this arbitration clause shall survive
any termination, amendment, or expiration of this agreement or Related
Agreements. The provisions of this arbitration clause shall supersede any
prior arbitration agreement between or among the parties.
(b) The arbitration proceedings shall be conducted in a city mutually
agreed by the parties. Absent such an agreement, arbitration will be
conducted in Salt Lake City, Utah or such other place as may be determined
by the Administrator. The Administrator and the arbitrators shall have the
authority to the extent practicable to take any action to require the
arbitration proceeding to be completed and the arbitrators)' award issued
within 1 50 days of the filing of the Dispute with the Administrator. The
arbitrators) shall have the authority to impose sanctions on any party
that fails to comply with time periods imposed by the Administrator or the
arbitrators), including the sanction of summarily dismissing any Dispute
or defense with prejudice. The arbitrators) shall have the authority to
resolve any Dispute regarding the terms of this agreement, this
arbitration clause, or Related Agreements, including any claim or
controversy regarding the arbitrability of any Dispute. All limitations
periods applicable to any Dispute or defense, whether by statute or
agreement, shall apply to any arbitration proceeding hereunder and the
arbitrator(s) shall have the authority to decide whether any Dispute or
defense is barred by a limitations period and, if so, to summarily enter
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an award dismissing any Dispute or defense on that basis. The doctrines of
compulsory counterclaim, res judicata, and collateral estoppel shall apply
to any arbitration proceeding hereunder so that a party must state as a
counterclaim in the arbitration proceeding any claim or controversy which
arises out of the transaction or occurrence that is the subject matter of
the Dispute. The arbitrators) may in the arbitrators)' discretion and at
the request of any party: (1) consolidate in a single arbitration
proceeding any other claim arising out of the same transaction involving
another party to that transaction that is bound by an arbitration clause
with Lender, such as borrowers, guarantors, sureties, and owners of
collateral; and (2) consolidate or administer multiple arbitration claims
or controversies as a class action in accordance with Rule 23 of the
Federal Rules of Civil Procedure.
(c) The arbitrators) shall be selected in accordance with the rules of the
Administrator from panels maintained by the Administrator. A single
arbitrator shall have expertise in the subject matter of the Dispute.
Where three arbitrators conduct an arbitration proceeding, the Dispute
shall be decided by a majority vote of the three arbitrators, at least one
of whom must have expertise in the subject matter of the Dispute and at
least one of whom must be a practicing attorney. The arbitrators) shall
award to the prevailing party recovery of all costs and fees (including
attorneys' fees and costs, arbitration administration fees and costs, and
arbitrators)' fees). The arbitrators), either during the pendency of the
arbitration proceeding or as part of the arbitration award, also may grant
provisional or ancillary remedies including but not limited to an award of
injunctive relief, foreclosure, sequestration, attachment, replevin,
garnishment, or the appointment of a receiver.
(d) Judgement upon an arbitration award may be entered in any court having
jurisdiction, subject to the following limitation: the arbitration award
is binding upon the parties only if the amount does not exceed Four
Million Dollars ($4,000,000.00); if the award exceeds that limit, either
party may demand the right to a court trial. Such a demand must be filed
with the Administrator within thirty (30) days following the date of the
arbitration award; if such a demand is not made with that time period, the
amount of the arbitration award shall be binding. The computation of the
total amount of an arbitration award shall include amounts awarded for
attorneys' fees and costs, arbitration administration fees and costs, and
arbitrator(s)' fees.
(e) No provision of this arbitration clause, nor the exercise of any
rights hereunder, shall limit the right of any party to: (1) judicially or
non-judicially foreclose against any real or personal property collateral
or other security; (2) exercise self-help remedies, including but not
limited to repossession and setoff rights; or (3) obtain from a court
having jurisdiction thereover any provisional or ancillary remedies
including but not limited to injunctive relief, foreclosure,
sequestration, attachment, replevin, garnishment, or the appointment of a
receiver. Such rights can be exercised at any time, before or after
initiation of an arbitration proceeding, except to the extent such action
is contrary to the arbitration award. The exercise of such rights shall
not constitute a waiver of the right to submit any Dispute to arbitration,
and any claim or controversy related to the exercise of such rights shall
be a Dispute to be resolved under the provisions of this arbitration
clause. Any party may initiate arbitration with the Administrator. If any
party desires to arbitrate a Dispute asserted against such party in a
19
complaint, counterclaim, cross-claim, or third-party complaint thereto, or
in an answer or other reply to any such pleading, such party must make an
appropriate motion to the trial court seeking to compel arbitration, which
motion must be filed with the court within 45 days of service of the
pleading, or amendment thereto, setting forth such Dispute. If arbitration
is compelled after commencement of litigation of a Dispute, the party
obtaining an order compelling arbitration shall commence arbitration and
pay the Administrator's filing fees and costs within 45 days of entry of
such order. Failure to do so shall constitute an agreement to proceed with
litigation and waiver of the right to arbitrate. In any arbitration
commenced by a consumer regarding a consumer Dispute, Lender shall pay one
half of the Administrator's filing fee, up to $250.
(f) Notwithstanding the applicability of any other law to this agreement,
the arbitration clause, or Related Agreements between or among the
parties, the Federal Arbitration Act, 9 U.S.C. Section 1 et seq., shall
apply to the construction and interpretation of this arbitration clause.
If any provision of this arbitration clause should be determined to be
unenforceable, all other provisions of this arbitration clause shall
remain in full force and effect.
Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of
Lender's costs and expenses, including Lender's reasonable attorneys' fees
and Lender's legal expenses, incurred in connection with the enforcement
of this Agreement. Lender may hire or pay someone else to help enforce
this Agreement, and Borrower shall pay the costs and expenses of such
enforcement. Costs and expenses include Lender's reasonable attorneys'
fees and legal expenses whether or not Lender's salaried employee and
whether or not there is a lawsuit, including reasonable attorneys' fees
and legal expenses for bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Borrower also shall pay all court costs
and such additional fees as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loan to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any other
matter relating to the Loan, and Borrower hereby waives any rights to
privacy Borrower may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such participation
interests. Borrower also agrees that the purchasers of any such
participation interests will be considered as the absolute owners of such
interests in the Loan and will have all the rights granted under the
participation agreement or agreements governing the sale of such
participation interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or against any
20
purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce Borrower's obligation under
the Loan irrespective of the failure or insolvency of any holder of any
interest in the Loan. Borrower further agrees that the purchaser of any
such participation interests may enforce its interests irrespective of any
personal claims or defenses that Borrower may have against Lender.
Governing Law. This Agreement will be governed by, construed and enforced
in accordance with federal law and the laws of the State of Utah. This
Agreement has been accepted by Lender in the State of Utah.
Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender's
request to submit to the jurisdiction of the courts of Salt Lake County,
State of Utah.
No Waiver by Lender. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or constitute
a waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and Borrower, or between
Lender and any Grantor, shall constitute a waiver of any of Lender's
rights or of any of Borrower's or any Grantor's obligations as to any
future transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall
not constitute continuing consent to subsequent instances where such
consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
Notices. Unless otherwise provided by applicable law, any notice required
to be given under this Agreement or required by law shall be given in
writing, and shall be effective when actually delivered in accordance with
the law or with this Agreement, when actually received by telefacsimile
(unless otherwise required by law), when deposited with a nationally
recognized overnight courier, or, if mailed, when deposited in the United
States mail, as first class, certified or registered mail postage prepaid,
directed to the addresses shown near the beginning of this Agreement. Any
party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose of
the notice is to change the party's address. For notice purposes, Borrower
agrees to keep Lender informed at all times of Borrower's current address.
Unless otherwise provided by applicable law, if there is more than one
Borrower, any notice given by Lender to any Borrower is deemed to be
notice given to all Borrowers.
Severability. If a court of competent jurisdiction finds any provision of
this Agreement to be illegal, invalid, or unenforceable as to any
circumstance, that finding shall not make the offending provision illegal,
invalid, or unenforceable as to any other circumstance. If feasible, the
21
offending provision shall be considered modified so that it becomes legal,
valid and enforceable. If the offending provision cannot be so modified,
it shall be considered deleted from this Agreement. Unless otherwise
required by law, the illegality, invalidity, or unenforceability of any
provision of this Agreement shall not affect the legality, validity or
enforceability of any other provision of this Agreement.
Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word 'Borrower"
as used in this Agreement shall include all of Borrower's subsidiaries and
affiliates. Notwithstanding the foregoing however, under no circumstances
shall this Agreement be construed to require Lender to make any Loan or
other financial accommodation to any of Borrower's subsidiaries or
affiliates.
Successors and Assigns. All covenants and agreements contained by or on
behalf of Borrower shall bind Borrower's successors and assigns and shall
inure to the benefit of Lender and its successors and assigns. Borrower
shall not, however, have the right to assign Borrower's rights under this
Agreement or any interest therein, without the prior written consent of
Lender.
Survival of Representations and Warranties. Borrower understands and
agrees that in extending Loan Advances, Lender is relying on all
representations, warranties, and covenants made by Borrower in this
Agreement or in any certificate or other instrument delivered by Borrower
to Lender under this Agreement or the Related Documents. Borrower further
agrees that regardless of any investigation made by Lender, all such
representations, warranties and covenants will survive the extension of
Loan Advances and delivery to Lender of the Related Documents, shall be
continuing in nature, shall be deemed made and redated by Borrower at the
time each Loan Advance is made, and shall remain in full force and effect
until such time as Borrower's Indebtedness shall be paid in full, or until
this Agreement shall be terminated in the manner provided above, whichever
is the last to occur.
Time is of the Essence. Time is of the essence in the performance of this
Agreement.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. Accounting
words and terms not otherwise defined in this Agreement shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date of this Agreement:
Account. The word "Account' means a trade account, account receivable,
other receivable, or other right to payment for goods sold or services
rendered owing to Borrower (or to a third party grantor acceptable to
Lender).
Advance. The word 'Advance" means a disbursement of Loan funds made, or to
be made, to Borrower or on Borrower's behalf under the terms and
conditions of this Agreement.
Agreement. The word 'Agreement' means this Business Loan Agreement (Asset
Based), as this Business Loan Agreement (Asset Based) may be amended or
modified from time to time, together with all exhibits and schedules
attached to this Business Loan Agreement (Asset Based) from time to time.
22
Borrower. The word 'Borrower" means NACO INDUSTRIES, INC., and all other
persons and entities signing the Note in whatever capacity.
Borrowing Base. The words "Borrowing Base" mean , as determined by Lender
from time to time, the lesser of (1) $1,200,000.00 or (2) the sum of (a)
80.000% of the aggregate amount of Eligible Accounts, plus (b) 60.000% of
the aggregate amount of Eligible Inventory.
Business Day. The words 'Business Day" mean a day on which commercial
banks are open in the State of Utah.
Collateral. The word 'Collateral' means all property and assets granted as
collateral security for a Loan, whether real or personal property, whether
granted directly or indirectly, whether granted now or in the future, and
whether granted in the form of a security interest, mortgage, collateral
mortgage, deed of trust, assignment, pledge, crop pledge, chattel
mortgage, collateral chattel mortgage, chattel trust, factor's lien,
equipment trust, conditional sale, trust receipt, lien, charge, lien or
title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created
by law, contract, or otherwise. The word Collateral also includes without
limitation all collateral described in the Collateral section of this
Agreement.
Eligible Accounts. The words 'Eligible Accounts' mean at any time, all of
Borrower's Accounts which contain selling terms and conditions acceptable
to Lender. The net amount of any Eligible Account against which Borrower
may borrow shall exclude all returns, discounts, credits, and offsets of
any nature. Unless otherwise agreed to by Lender in writing, Eligible
Accounts do not include:
(1) Accounts with respect to which the Account Debtor is employee or agent
of Borrower.
(2) Accounts with respect to which the Account Debtor is a subsidiary of,
or affiliated with Borrower or its shareholders, officers, or directors.
(3) Accounts with respect to which goods are placed on consignment,
guaranteed sale, or other terms by reason of which the payment by the
Account Debtor may be conditional.
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(4) Accounts with respect to which the Account Debtor is not a resident of
the United States, except to the extent such Accounts are supported by
insurance, bonds or other assurances satisfactory to Lender.
(5) Accounts with respect to which Borrower is or may become liable to the
Account Debtor for goods sold or services rendered by the Account Debtor
to Borrower.
(6) Accounts which are subject to dispute, counterclaim, or setoff.
(7) Accounts with respect to which the goods have not been shipped or
delivered, or the services have not been rendered, to the Account Debtor.
(8) Accounts with respect to which Lender, in its sole discretion, deems
the creditworthiness or financial condition of the Account Debtor to be
unsatisfactory.
(9) Accounts of any Account Debtor who has filed or has had filed against
it a petition in bankruptcy or an application for relief under any
provision of any state or federal bankruptcy, insolvency, or
debtor-in-relief acts; or who has had appointed a trustee, custodian, or
receiver for the assets of such Account Debtor; or who has made an
assignment for the benefit of creditors or has become insolvent or fails
generally to pay its debts (including its payrolls) as such debts become
due.
(10) Accounts with respect to which the Account Debtor is the United
States government or any department or agency of the United States.
(11) That portion of the Accounts of any single Account Debtor which
exceeds 10.000% of all of Borrower's Accounts.
(12) Accounts which have not been paid in full within 60 days from due
date or 90 days from the invoice date. The entire balance of any Account
of any single Account Debtor will be ineligible whenever the portion of
the Account which has not been paid within 60 days from due date or 90
days from the invoice date is in excess of 20.00% of the total amount
outstanding on the Account. "That portion of Accounts that are not created
under the Borrower's 'Early Order Program' and that are unpaid 90 days or
more after the invoice date, and that portion of Accounts that are created
under the Borrower's 'Early Order Program" that are unpaid 30 days or more
after the stated due date.
(13) Canadian accounts with respect to which the account debtor is not a
resident of the following Canadian Provinces; British Columbia, Alberta,
Saskatchewan, Manitoba, and Ontario, except to the extent such accounts
are supported by insurance, bonds, or other assurances satisfactory to
Lender. Accounts which Lender in its sole discretion reasonably deems
ineligible.
Eligible Inventory. The words 'Eligible Inventory' mean at any time, all
of Borrower's Inventory as defined below except:
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(1) Inventory which is not owned by Borrower free and clear of all
security interests, liens, encumbrances, and claims of third parties.
(2) Inventory which Lender, in its sole discretion, deems to be obsolete,
unsalable, damaged, defective, or unfit for further processing.
(3) Work in progress
(4) Inventory which is not for direct resale including but not limited to
packaging, labeling, and manufacturing supplies. Inventory which is
prohibited from being sold by any federal, state, or local governmental
agency. Inventory which Lender in its sole discretion reasonably deems
ineligible.
Environmental Laws. The words "Environmental Laws" mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without
limitation the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
('CERCLA'), the Superfund Amendments and Reauthorization Act of 1986, Pub.
L. No. 99-499 ('XXXX'), the Hazardous Materials Transportation Act, 49
U.S.C. Section 1 80 1, et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal
laws, rules, or regulations adopted pursuant thereto.
Event of Default. The words 'Event of Default' mean any of the events of
default set forth in this Agreement in the default section of this
Agreement.
Expiration Date. The words 'Expiration Date' mean the date of termination
of Lender's commitment to lend under this Agreement.
GAAP. The word 'GAAP' means generally accepted accounting principles.
Grantor. The word 'Grantor" means each and all of the persons or entities
granting a Security Interest in any Collateral for the Loan, including
without limitation all Borrowers granting such a Security Interest.
Guarantor. The word 'Guarantor' means any guarantor, surety, or
accommodation party of any or all of the Loan.
Guaranty. The word 'Guaranty' means the guaranty from Guarantor to Lender,
including without limitation a guaranty of all or part of the Note.
25
Hazardous Substances. The words 'Hazardous Substances" mean materials
that, because of their quantity, concentration or physical, chemical or
infectious characteristics, may cause or pose a present or potential
hazard to human health or the environment when improperly used, treated,
stored, disposed of, generated, manufactured, transported or otherwise
handled. The words "Hazardous Substances' are used in their very broadest
sense and include without limitation any and all hazardous or toxic
substances, materials or waste as defined by or listed under the
Environmental Laws. The term "Hazardous Substances' also includes, without
limitation, petroleum and petroleum by-products or any fraction thereof
and asbestos.
Indebtedness. The word 'Indebtedness' means the indebtedness evidenced by
the Note or Related Documents, including all principal and interest
together with all other indebtedness and costs and expenses for which
Borrower is responsible under this Agreement or under any of the Related
Documents.
Inventory. The word 'Inventory' means all of Borrower's raw materials,
work in process, finished goods, merchandise, parts and supplies, of every
kind and description, and goods held for sale or lease or furnished under
contracts of service in which Borrower now has or hereafter acquires any
right, whether held by Borrower or others, and all documents of title,
warehouse receipts, bills of lading, and all other documents of every type
covering all or any part of the foregoing. Inventory includes inventory
temporarily out of Borrower's custody or possession and all returns on
Accounts.
Lender. The word 'Lender' means ZIONS FIRST NATIONAL BANK, its successors
and assigns.
Loan. The word 'Loan' means any and all loans and financial accommodations
from Lender to Borrower whether now or hereafter existing, and however
evidenced, including without limitation those loans and financial
accommodations described herein or described on any exhibit or schedule
attached to this Agreement from time to time.
Note. The word 'Note' means the Note executed by NACO INDUSTRIES, INC. in
the principal amount of $1,200,000.00 dated October 31, 2001, together
with all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the note or credit agreement.
Permitted Liens. The words 'Permitted Liens" mean (1) liens and security
interests securing Indebtedness owed by Borrower to Lender; (2) liens for
taxes, assessments, or similar charges either not yet due or being
contested in good faith; (3) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and securing obligations which are not yet delinquent;
(4) purchase money liens or purchase money security interests upon or in
any property acquired or held by Borrower in the ordinary course of
business to secure indebtedness outstanding on the date of this Agreement
or permitted to be incurred under the paragraph of this Agreement titled
'Indebtedness and Liens'; (5) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the
Lender in writing; and (6) those liens and security interests which in the
aggregate constitute an immaterial and insignificant monetary amount with
respect to the net value of Borrower's assets.
Primary Credit Facility. The words 'Primary Credit Facility' mean the
credit facility described in the Line of Credit section of this Agreement.
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Related Documents. The words 'Related Documents" mean all promissory
notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security
deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with
the Loan.
Security Agreement. The words 'Security Agreement' mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
Security Interest. The words 'Security Interest' mean, without limitation,
any and all types of collateral security, present and future, whether in
the form of a lien, charge, encumbrance, mortgage, deed of trust, security
deed, assignment, pledge, crop pledge, chattel mortgage, collateral
chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt, lien or title retention contract, lease
or consignment intended as a security device, or any other security or
lien interest whatsoever whether created by law, contract, or otherwise.
FINAL AGREEMENT. Borrower understands that this Agreement and the related loan
documents are the final expression of the agreement between Lender and Borrower
and may not be contradicted by evidence of any alleged oral agreement.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT (ASSET BASED) AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN
AGREEMENT (ASSET BASED) IS DATED OCTOBER 31, 2001.
BORROWER:
NACO INDUSTRIES, INC.
By: /s/ W. Xxxxxxx Xxxxxxx
----------------------
W. XXXXXXX XXXXXXX
President of NACO INDUSTRIES, INC.
LENDER:
ZIONS FIRST NATIONAL BANK
By:
----------------------
Authorized Signer
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