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FIRST AMENDED AND RESTATED REVOLVING
CREDIT AND TERM LOAN AGREEMENT
BY AND BETWEEN
XXXXXXXXX SIGN COMPANY
AND
COMERICA BANK-TEXAS
AS OF
OCTOBER 31, 1996
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FIRST AMENDED AND RESTATED REVOLVING
CREDIT AND TERM LOAN AGREEMENT
This FIRST AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT
(this "AGREEMENT"), dated as of October 31, 1996, is between XXXXXXXXX SIGN
COMPANY, a Texas corporation ("BORROWER"), and COMERICA BANK-TEXAS, a Texas
banking association ("LENDER").
RECITALS:
The Borrower has requested that the Lender modify and increase certain
existing credit facilities so as to extend credit to the Borrower in the form of
(i) revolving credit advances in an aggregate principal amount not to exceed
$17,000,000.00, and (ii) one term loan advance in an aggregate principal amount
not to exceed $6,000,000.
The Lender has agreed, upon the terms and conditions hereinafter set forth,
to extend such credit to the Borrower, to be secured by, among other things, a
Deed of Trust on the Real Property and a Security Agreement covering the
Collateral (as such terms are hereinafter defined). Certain security documents
have been previously executed and delivered.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the Borrower and the Lender hereby agree as follows:
SECTION 1. DEFINITIONS
1.1. DEFINITIONS. As used in this Agreement, the following terms shall
have the respective meanings indicated below:
"ACCOUNTS" shall have the meaning given such term in the UCC.
"ADJUSTED LIBOR RATE" shall mean, for any LIBOR Advance for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) as reasonably determined by the
Lender to be equal to the LIBOR Rate for such LIBOR Advance for such
Interest Period divided by 1 minus the Reserve Requirement for such LIBOR
Advance for such Interest Period.
"ADVANCE" shall mean a Loan or an advance of funds by the Lender to
the Borrower pursuant to this Agreement.
"ADVANCE REQUEST FORM" shall mean a certificate, in substantially
the form approved by the Lender, properly completed and signed by the
Borrower requesting an Advance.
CREDIT AGREEMENT - Page 1
"AGREEMENT" shall mean this First Amended and Restated Revolving
Credit and Term Loan Agreement, which shall supersede in all respects that
certain Revolving Credit and Term Loan Agreement dated as of July 31, 1991,
as amended prior to this date.
"APPLICABLE RATE" shall mean: (a) as it relates to the Revolving
Credit Note, the Applicable Revolving Credit Note Rate; and (b) as it
relates to the Term Note, the Applicable Term Note Rate.
"APPLICABLE REVOLVING CREDIT NOTE RATE" shall mean: (a) during the
period that an Advance is a Prime Rate Advance, the Prime Rate plus
one-quarter of one percent (0.25%); and (b) during the period that an
Advance is a LIBOR Advance or a Cost of Funds Advance, the Adjusted LIBOR
Rate or the Cost of Funds Rate, as the case may be, plus two and three
quarters percent (2.75%).
"APPLICABLE TERM NOTE RATE" shall mean: (a) during the period that
an Advance is a Prime Rate Advance, the Prime Rate, plus one and one-eighth
percent (1.125%); and (b) during the period that an Advance is a LIBOR
Advance or a Cost of Funds Advance, the Adjusted LIBOR Rate or the Cost of
Funds Rate, as the case may be, plus three and five hundred seventy-five
one-thousandths percent (3.575%).
"ASSESSMENT RATE" shall mean, at any time, the rate (rounded
upwards, if necessary, to the nearest 1/100 of 1%) then charged by the
Federal Deposit Insurance Corporation (or any successor) to the Lender for
deposit insurance for Dollar time deposits with the Lender at its principal
office in Dallas, Texas as reasonably determined by the Lender.
"AUTHORIZED OFFICER" shall mean each officer of the Borrower who has
been authorized by the Borrower to request Loans hereunder and who has been
furnished by the Borrower with the Security Code. The Borrower shall
provide the Lender with a list of Authorized Officers.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code, as
amended, or any successor act or code.
"BORROWER" shall mean Xxxxxxxxx Sign Company, a Texas corporation.
"BORROWING BASE" shall mean, at any particular time and as
determined on the basis of information furnished in the most recent
Borrowing Base Certificate, an amount equal to the sum of (a) eighty-five
percent (85%) of the aggregate principal balance of the Borrower's Eligible
Accounts, plus (b) the lesser of Eight Million Five Hundred Thousand
Dollars ($8,500,000.00) or fifty percent (50%) of the Borrower's Eligible
Inventory.
"BORROWING BASE CERTIFICATE" shall mean a certificate in a form
reasonably acceptable to the Lender, completed in all material respects and
executed by an authorized
CREDIT AGREEMENT - Page 2
officer or other designee of the Borrower and setting forth Borrower's
computation of the Borrowing Base as of the date of such certificate and
such other information as may reasonably be requested by the Lender from
time to time.
"BUSINESS DAY" shall mean each day on which the Lender is open to
carry on its normal commercial lending business.
"CASH FLOW" shall mean, as of any date of determination and as
determined in accordance with GAAP, the sum of (i) the consolidated net
income of the Borrower for the preceding four calendar quarters, PLUS
(ii) the consolidated depreciation, amortization and deferred taxes of the
Borrower for such period, and PLUS (iii) the following one-time expenses
(net of Federal, state and local income taxes) relating to the
Recapitalization: (A) the fulfillment of net contractual commitments to
senior officers of the Company, (B) a refinancing fee to Xxxxx X. Xxxxxxxx,
and (C) attorney and accountant fees, collectively, "(A)" through "(C)"
preceding are herein referred to as the "One Time Expenses."
"CASH FLOW COVERAGE RATIO" shall mean, as of any date of
determination, the Borrower's Cash Flow for the previous four calendar
quarters divided by scheduled payments of principal made on all Senior
Indebtedness for the same period.
"COLLATERAL" shall mean all of Borrower's Accounts, Chattel Paper,
Documents, Equipment, General Intangibles, Goods, Instruments and Inventory
(including all spare parts and all attachments and accessions related to
any Inventory or Goods), wherever located and whether now owned or
hereafter acquired, together with all replacements thereof, substitutions
therefor and all proceeds and products thereof, the Real Property, and any
securities pledged under any Pledge Agreement.
"COMMITMENTS" shall mean the Term Loan Commitment and the Revolving
Credit Commitment; "COMMITMENT" shall mean any one of the Commitments.
"COMMON STOCK" shall mean the common stock, par value $0.01 per
share, of the Borrower.
"COMPLIANCE CERTIFICATE" shall mean a certificate in the form
approved by the Lender, completed and signed by the chairman, president or
a senior financial officer of the Borrower or other officer designated by
Borrower.
"CONTINUE," "CONTINUATION" and "CONTINUED" shall refer to the
continuation pursuant to Section 4.3 of a LIBOR Advance as a LIBOR Advance
from one Interest Period to the next Interest Period.
"CONTRACT RATE" shall mean, as of any date of determination, the
Applicable Revolving Credit Note Rate or Applicable Term Note Rate.
CREDIT AGREEMENT - Page 3
"CONVERT," "CONVERSION" and "CONVERTED" shall refer to a conversion
pursuant to Section 4.3 of one Type of Advance into another Type of
Advance.
"COST OF FUNDS ADVANCES" shall mean Advances the interest rates on
which are determined on the basis of the rates referred to in the
definition of "Cost of Funds Rate" in this Section 1.1.
"COST OF FUNDS RATE" shall mean the annual rate of interest
determined by the Lender in its reasonable discretion establishes at the
time of any Cost of Funds Rate Advance to be the cost to Lender of
obtaining time deposits of a one-year maturity or more, as requested by the
Borrower. The Lender will advise the Borrower of each determination of the
Cost of Funds Rate before the time of any such Advance.
"DEBT" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether matured
or unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as balance sheet
liabilities in accordance with GAAP.
"DEED OF TRUST" shall mean, collectively, the deeds of trust
previously executed and/or to be executed by Borrower in favor of the
Lender covering certain Real Property located in Xxxxxxxx County, Texas and
Cherokee County, Texas.
"DEFAULT" shall mean a condition or event which, with the giving of
notice or the passage of time, or both, would result in an Event of
Default.
"DEFAULT RATE" shall mean the lesser of the Maximum Legal Rate or
the sum of the Prime Rate in effect from day to day plus two percent (2%).
"DEFERRED DIVIDEND PAYABLE TO MANAGEMENT" shall mean the deferred
portion of the Special Dividend declared by the Borrower and to be paid to
certain members of management as a part of the Recapitalization.
"EBITDA" shall mean, as of any applicable date of determination and
as determined in accordance with GAAP, net income (plus the One Time
Expenses) for the previous four calendar quarters, plus (i) interest
expense, tax expense, depreciation and amortization expenses for the same
period, excluding (ii) any gain or loss for the same period arising from
the sale of capital assets.
"ELIGIBLE ACCOUNTS" shall mean those Accounts of the Borrower for
which each of the warranties set forth in Section 8.17 of this Agreement
shall be true (as of any applicable date of determination) and which has
been represented to be an "ELIGIBLE ACCOUNT" on a Borrowing Base
Certificate.
"ELIGIBLE INVENTORY" shall mean that inventory of the Borrower for
which each of the warranties set forth in Section 8.15 of this Agreement
shall be true (as of any
CREDIT AGREEMENT - Page 4
applicable date of determination) and which has been represented by the
Borrower to be an item of "ELIGIBLE INVENTORY" on a Borrowing Base
Certificate.
"ENVIRONMENTAL LAWS" shall mean any and all federal, state, and
local laws, regulations, and requirements pertaining to the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. 9601 ET SEQ.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 ET SEQ. ("RCRA"), the Occupational Safety and Health Act, as
amended, 29 U.S.C. 651 ET SEQ., the Clean Air Act, 42 U.S.C. 7401 ET SEQ.,
the Clean Water Act as amended, 33 U.S.C. 1251 ET SEQ., the Toxic
Substances Control Act, as amended, 15 U.S.C. ET SEQ., and all similar
laws, regulations, and requirements of any governmental authority or agency
having jurisdiction over Borrower or any of its properties or assets, as
such laws, regulations, and requirements may be amended or supplemented
from time to time.
"EQUIPMENT" shall mean all of the Borrower's now owned and hereafter
acquired machinery, equipment, furniture, furnishings, and other tangible
personal property (except fixtures and Inventory), including, without
limitation, data processing hardware and software, motor vehicles,
aircraft, dies, tools, jigs, and office equipment, as well as all of such
types of property leased by the Borrower and all of the Borrower's rights
and interests with respect thereto under such leases to the extent that any
such lease does not prohibit or require a consent to the creation of a Lien
in favor of the Lender (including, without limitation, options to
purchase); together with all present and future additions and accessions
thereto, replacements therefor, component and auxiliary parts and supplies
used or to be used in connection therewith, and all substitutes for any of
the foregoing, and all manuals, drawings, instructions, warranties and
rights with respect thereto wherever any of the foregoing is located.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor act or code.
"EVENT OF DEFAULT" shall mean any of those conditions or events
listed in Section 11.1 of this Agreement.
"FINANCIAL STATEMENTS" shall mean all those balance sheets, earnings
statements and other financial data which have been furnished or will be
furnished to the Lender for the purpose of, or in connection with, this
Agreement and the transactions contemplated hereby.
"FINANCING STATEMENTS" shall mean UCC financing statements
describing the Lender as secured party and the Borrower as debtor, covering
the Collateral and otherwise in such form, for filing in such jurisdictions
and with such filing offices as the Lender shall reasonably deem necessary
in order to perfect its security interest.
CREDIT AGREEMENT - Page 5
"FIXED CHARGES" shall mean, as of any date of determination, the
aggregate principal amount of Indebtedness scheduled to be paid by the
Borrower during the immediately preceding four calendar quarters, PLUS
capital expenditures, for the same period, PLUS (without duplication)
payments actually paid by the Borrower on Subordinated Debt during the same
period, PLUS payments actually paid by the Borrower with respect to the
Deferred Dividend Payable to Management for the same period.
"FIXED CHARGE COVERAGE RATIO" shall mean, as of any date of
determination, an amount equal to the ratio resulting as the quotient of
the Borrower's Cash Flow divided by Fixed Charges.
"GAAP" shall mean, as of any applicable date of determination,
generally accepted accounting principles consistently applied, as in effect
on the date hereof except as otherwise agreed by the Borrower and the
Lender.
"HAZARDOUS SUBSTANCE" shall mean any substance, product, waste,
pollutant, material, chemical, contaminant, constituent, or other material
which is or becomes regulated under any Environmental Law, including,
without limitation, asbestos, petroleum, and polychlorinated biphenyls.
"INDEBTEDNESS" shall mean (i) all indebtedness for borrowed money or
for the deferred purchase price of property or services (including without
limitation, reimbursement and all other obligations with respect to surety
bonds, letters of credit and bankers' acceptances, whether or not matured),
(ii) all obligations evidenced by notes, bonds, debentures or similar
instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to
property acquired, (iv) all capitalized leases and (v) the Senior
Indebtedness; provided, however, the Deferred Dividend Payable To
Management shall not constitute "Indebtedness."
"INTEREST PERIOD" shall mean:
(a) With respect to Prime Rate Advances, each period
commencing on the date such Advances are made or Converted from
LIBOR Advances or Cost of Funds Rate Advances and ending on the date
of payment or Conversion of such Advances.
(b) With respect to any LIBOR Advances, each period
commencing on the date such Advances are made or Converted from
Prime Rate Advances or, in the case of each subsequent, successive
Interest Period applicable to a LIBOR Advance, the last day of the
next preceding Interest Period with respect to such Advance, and
ending on the numerically corresponding day in the first, second,
third, fourth, fifth, sixth, ninth or twelfth calendar month
thereafter, as the Borrower may select as provided in this Agreement
hereof, except that each such Interest Period which commences on the
last Business Day of a calendar month (or on any day for which there
is no
CREDIT AGREEMENT - Page 6
numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month.
Notwithstanding the foregoing: (a) each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, in the case of an Interest Period for LIBOR
Advances if such succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); (b) any Interest
Period which would otherwise extend beyond the Termination Date shall end
on the Termination Date; (c) no more than five (5) Interest Periods shall
be in effect at the same time for any Term Loan or for any Revolving Loan;
(d) no Interest Period for any LIBOR Advances shall have a duration of less
than one (1) month; and (e) no Interest Period may extend beyond a
principal repayment date unless, after giving effect thereto, the aggregate
principal amount of the LIBOR Advances having Interest Periods that end
after such principal payment date shall be equal to or less than the
Advances to be outstanding hereunder after such principal repayment date.
"INVENTORY" shall mean all of the Borrower's now owned and hereafter
acquired inventory, goods, and merchandise, wherever located, to be
furnished under any contract of service or held for sale or lease, all raw
materials, work-in-process, finished goods, returned and repossessed goods,
and materials, and supplies of a nature or description which are or might
be used or consumed in the Borrower's business or used in connection with
the manufacture, packing, shipping, advertising, selling or finishing of
such inventory, goods, merchandise and such other personal property, and
all documents of title or other documents representing them, and all
proceeds thereof (including, but not limited to, all proceeds of insurance
with respect thereto, including the proceeds of any casualty insurance);
and any lists, information and records prepared or kept in relation to the
foregoing. Without limitation, the term "Inventory" shall include all
spare parts and all attachments and accessions relating to any property or
goods which comprises "Inventory" under this definition.
"LENDER" shall mean Comerica Bank-Texas, a Texas banking
association.
"LIBOR ADVANCES" shall mean Advances the interest rates on which are
determined on the basis of the rates referred to in the definition of
"Adjusted LIBOR Rate" in this Section 1.1.
"LIBOR RATE" shall mean, for any LIBOR Advance for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) quoted by the Lender at approximately 2:00 P.M. Dallas
time (or as soon thereafter as practicable) on the same day of such
Interest period for the offering by the Lender to leading banks in the
London interbank market of Dollar deposits in immediately available funds
having a term comparable to such Interest Period and in an amount
comparable to the principal amount of the LIBOR Advance to which such
Interest Period relates.
CREDIT AGREEMENT - Page 7
"LOAN" shall mean a loan or Advance of funds by the Lender pursuant
to this Agreement.
"LOAN DOCUMENTS" shall mean this Agreement and all promissory notes,
security agreements, deeds of trust, assignments, letters of credit,
guaranties and other instruments, documents, and agreements executed in
connection with this Agreement, as such instruments, documents and
agreements may be amended, modified, renewed, extended or supplemented from
time to time. "LOAN DOCUMENT" shall mean any one of the Loan Documents.
"MAXIMUM LEGAL RATE" shall have the meaning specified in Section 4.5
of this Agreement.
"NOTES" shall mean the Term Note and the Revolving Credit Note.
"NOTE" shall mean any one of the Notes.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
Person succeeding to the present powers and functions of the Pension
Benefit Guaranty Corporation.
"PERMITTED LIENS" shall mean:
(a) Liens and encumbrances in favor of the Lender;
(b) Liens for taxes, assessments or other governmental
charges incurred in the ordinary course of business and not yet past
due or being contested in good faith by appropriate proceedings and
for which adequate reserves have been established as reflected by
the balance sheet of the Borrower at the time thereof;
(c) Liens of mechanics, materialmen, carriers, warehousemen
or other like statutory or common law liens securing obligations
incurred in good faith in the ordinary course of business that are
not yet due and payable;
(d) Encumbrances consisting of zoning restrictions,
rights-of-way, easements or other restrictions on the use of real
property, none of which materially impairs the use of such property
by the Borrower or any Subsidiary in the operation of the business
for which it is used and none of which is violated in any material
respect by any existing or proposed structure or land use;
(g) The contracts, agreements, leases, burdens,
encumbrances, and other matters described on or otherwise disclosed
in Exhibit A to the Deed of Trust; and
CREDIT AGREEMENT - Page 8
(h) Existing liens described as a part of Schedule 8.6
attached hereto.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, trust, unincorporated association, joint stock
company, government, municipality, political subdivision or agency or other
entity.
"PRIME RATE" shall mean that annual rate of interest reasonably
designated by the Lender as its prime rate and which is changed by the
Lender from time to time. The Prime Rate may not necessarily be the lowest
rate charged by the Lender.
"PRIME RATE ADVANCES" shall mean Advances that bear interest at
rates based upon the Prime Rate.
"REAL PROPERTY" shall mean those parcels of real property, together
with the fixtures thereto, described in the Deed of Trust and in the new
deed of trust required by SECTION 7.11 herein.
"RECAPITALIZATION" shall mean the following: (i) the incurrence of
the Senior Indebtedness contemplated hereby, (ii) the borrowings under the
Subordinated Credit Agreement, (iii) the repayment of the Company's
existing Senior Indebtedness to the Lender, (iv) the fulfillment of net
contractual commitments to senior officers of the Company, (v) the payment
of costs incurred in connection with clauses (i)-(iv) of this sentence,
(vi) the declaration of the Special Dividend and the related Deferred
Dividend Payable To Management and (vii) the recapitalization of the
outstanding Common Stock.
"REGULATION D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as the same may be amended or supplemented from
time to time.
"REGULATORY CHANGE" shall mean, with respect to the Lender, any
change after the date of this Agreement in United States federal or state,
or foreign laws or regulations (including Regulation D) or the adoption or
making after such date of any interpretations, directives, or requests
applying to a class of banks including the Lender of or under any United
States federal or state, or any foreign, laws or regulations (whether or
not having the force of law) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
"RESERVE REQUIREMENT" shall mean, for any LIBOR Advance for any
Interest Period therefor, the average maximum rate at which reserves
(including any marginal, supplemental or emergency reserves) are required
to be maintained during such Interest Period under Regulation D by member
banks of the Federal Reserve System in New York City with deposits
exceeding one billion Dollars against "Eurocurrency Liabilities" as such
term is used in Regulation D. Without limiting the effect of the
foregoing, the Reserve Requirement shall include any other reserves
required to be maintained by such member banks by reason of any Regulatory
Change against (a) any category of liabilities which
CREDIT AGREEMENT - Page 9
includes deposits by reference to which the Adjusted LIBOR Rate is to be
determined or (b) any category of extensions of credit or other assets
which include LIBOR Advances.
"REVOLVING CREDIT COMMITMENT" shall mean the obligation of the
Lender to make Revolving Credit Loans to the Borrower in an aggregate
principal amount at any time outstanding up to but not to exceed the lesser
of (a) Seventeen Million Dollars ($17,000,000), or (b) the Borrowing Base.
"REVOLVING CREDIT LOAN" shall mean any Advance of funds made by the
Lender to the Borrower pursuant to Section 2.
"REVOLVING CREDIT NOTE" shall mean the promissory note of the
Borrower payable to the order of the Lender, in substantially the form of
Exhibit "D" hereto, and all extensions, renewals and modifications thereof
and substitutions therefor.
"SECURITY AGREEMENT" shall mean collectively, security agreements
previously executed in favor of the Lender pursuant to which the Borrower
grants to the Lender a security interest in all of Borrower's Accounts,
Chattel Paper, Documents, General Intangibles, Equipment, Instruments and
Inventory, wherever located and whether now owned or hereafter acquired,
together with all replacements thereof, substitutions therefor and all
proceeds and products thereof.
"SECURITY CODE" shall mean a code furnished by the Lender to the
Borrower, pursuant to Section 4.2 hereof, which an Authorized Officer of
the Borrower must deliver to the Lender upon making a telephonic Loan
request.
"SENIOR INDEBTEDNESS" shall mean all loans, advances and
indebtedness of the Borrower to the Lender under this Agreement, together
with all other indebtedness, obligations and liabilities whatsoever of the
Borrower to the Lender, whether matured or unmatured, liquidated or
unliquidated, direct or indirect, absolute or contingent, joint or several,
due or to become due, now existing or hereafter arising.
"SENIOR INDEBTEDNESS RATIO" shall mean, at any particular time, the
ratio resulting as the quotient of (a) Senior Indebtedness divided by (b)
the Borrower's EBITDA for the immediately preceding four calendar quarters.
"SPECIAL DIVIDEND" shall mean the special dividend declared by the
board of directors of the Borrower in the amount of up to $19,700,000
payable to the Borrower's shareholders.
"SUBORDINATED CREDIT AGREEMENT" shall mean that certain Subordinated
Credit Agreement, dated as of October 31, 1996, between the Borrower and
Bank of America Illinois.
CREDIT AGREEMENT - Page 10
"SUBORDINATED DEBT" shall mean all Debt, the payment of which (and
the security for) has been subordinated in writing in a manner satisfactory
to the Lender.
"SUBSIDIARIES" shall mean any entity of which more than fifty
percent (50%) of the outstanding voting securities shall, as of any
applicable date of determination, be owned directly, or indirectly through
one or more intermediaries, by the Borrower.
"TANGIBLE NET WORTH" shall mean, as of any applicable date of
determination, the excess of (i) the book value of all assets of Borrower
and the Subsidiaries (other than patents, patent rights, trademarks, trade
names, franchises, copyrights, goodwill, and similar intangible assets)
after all appropriate deductions (including, without limitation, reserves
for doubtful receivables, obsolescence, depreciation and amortization), all
as determined on a consolidated basis in accordance with GAAP, less (ii)
all Debt (excluding the Deferred Dividend Payable to Management), plus
(iii) all Subordinated Debt of the Borrower and its Subsidiaries which, in
accordance with GAAP, would be required to be presented on their
consolidated balance sheet at such date.
"TERMINATION DATE" shall mean July 31, 1999.
"TERM LOAN" shall mean each Advance of funds made by the Lender to
the Borrower pursuant to Section 3.
"TERM LOAN COMMITMENT" shall mean the obligation of the Lender to
make the Term Loan to the Borrower in an aggregate principal amount at any
time outstanding up to but not to exceed Six Million Dollars
($6,000,000.00).
"TERM NOTE" shall mean the promissory note of Borrower payable to
the order of the Lender, in substantially the form of Exhibit "E" hereto,
and all extensions, renewals and modifications thereof and substitutions
therefor.
"TOTAL COMMITMENT AMOUNT" shall mean, at any particular time, the
amount which is the sum of the Revolving Credit Commitment and the Term
Loan Commitment, each as then in effect.
"TYPE" shall mean any type of Advance (i.e., Prime Rate Advance or
LIBOR Advance).
"UCC" shall mean the Uniform Commercial Code as in effect in the
State of Texas and as amended from time to time.
"UNUSED FACILITY FEE" shall mean on an annualized basis, a fee equal
to one-quarter percent (0.25%) of the difference, if any, between
$17,000,000.00 and the daily outstanding principal balance of the Revolving
Credit Note for each calendar quarter. Such fee shall be payable within
ten (10) Business Days after presentment of each such computation thereof
by the Lender.
CREDIT AGREEMENT - Page 11
1.2. ACCOUNTING TERMS. All accounting terms not specifically defined in
this Agreement shall be construed in accordance with GAAP. All accounting terms
and calculations herein with respect to the Borrower and the Subsidiaries shall
be made after elimination of all inter-company accounts and transactions among
them.
1.3. SINGULAR AND PLURAL. Where the context herein requires, the
singular number shall be deemed to include the plural, and vice versa.
SECTION 2. REVOLVING CREDIT LOANS
2.1. REVOLVING CREDIT COMMITMENT. Subject to the terms and conditions of
this Agreement, the Lender hereby agrees to make one or more Revolving Credit
Loans to the Borrower from time to time from the date hereof to and including
the Termination Date in an aggregate principal amount at any time outstanding up
to but not exceeding the amount of the Revolving Credit Commitment as then in
effect; PROVIDED, HOWEVER that the Lender shall not be obligated to make any
Revolving Credit Loan which would cause the principal balance of all outstanding
Revolving Credit Loans to exceed the amount which is the lesser of (i) the
Borrowing Base, or (ii) the Revolving Credit Commitment. Subject to the
limitations and the other terms and provisions of this Agreement, the Borrower
may from time to time borrow, repay and reborrow hereunder the amount of the
Revolving Credit Commitment by means of Prime Rate Advances and LIBOR Advances;
PROVIDED THAT the Lender shall not have an obligation to make any Revolving
Credit Loan on a day which is not a Business Day.
2.2. REVOLVING CREDIT NOTE. The obligation of the Borrower to repay the
Revolving Credit Loans and interest thereon shall be evidenced by the Revolving
Credit Note executed by the Borrower, payable to the order of the Lender in the
principal amount of the Revolving Credit Commitment as originally in effect and
dated of even date herewith. The Revolving Credit Note shall in any event,
subject to prior acceleration, be payable in full on the Termination Date.
2.3. REPAYMENT OF REVOLVING CREDIT LOANS. The Borrower shall repay the
unpaid principal amount of all Revolving Credit Loans on the Termination Date.
Interest on the Revolving Credit Loans shall be payable in accordance with
Section 4.1.
2.4. USE OF PROCEEDS. Proceeds of the Revolving Credit Loans shall be
used by the Borrower for working capital and general corporate purposes, to
refinance the existing revolving credit facility which has been provided by the
Lender, and to assist in the financing of the Recapitalization.
SECTION 3. TERM LOAN AND DEED OF TRUST LOAN
3.1. TERM COMMITMENT. Subject to the terms and conditions of this
Agreement, the Lender hereby agrees to make the Term Loan to the Borrower on the
date hereof in the principal amount of the Term Loan Commitment. The Term Loan
Commitment shall terminate upon the making of the Term Loan.
CREDIT AGREEMENT - Page 12
3.2. TERM NOTE. The obligation of the Borrower to repay the Term Loan
and interest thereon shall be evidenced by the Term Note executed by the
Borrower, payable to the order of the Lender in the principal amount of such
Term Loan dated the date hereof.
3.3. REPAYMENT OF TERM LOAN. Unless sooner accelerated pursuant to the
terms of the Term Note (and subject to the call provisions set forth in the Term
Note), the Borrower shall repay the principal indebtedness evidenced by the Term
Note in consecutive monthly principal installments, plus accrued interest
thereon as follows:
(a) Commencing January 1, 1997, and continuing on the same day of
each month through June 1, 1997, the Borrower shall pay principal
installments of $79,000 each, plus all accrued and unpaid interest;
(b) Commencing July 1, 1997, and continuing on the same day of
each month until December 1, 1997, the Borrower shall pay principal
installments of $116,000 each, plus all accrued and unpaid interest;
(c) Commencing January 1, 1998, and on the same day of each
successive month thereafter through September 1, 2004, the Borrower shall
pay principal installments of $137,000 each, plus all accrued and unpaid
interest;
(d) Notwithstanding that portion of the foregoing payment
schedule set forth in subparagraph "(c)" above, whenever the outstanding
principal balance of the Term Note is equal to or less than $2,000,000, the
Borrower shall (commencing on the first day of the month next following the
month in which the principal balance of the Term Note becomes equal to or
less than $2,000,000) pay on the Term Note equal monthly principal payments
of $33,333.33 each, plus all accrued and unpaid interest.
Interest on the Term Loan shall be computed in accordance with Section 4.
A final installment of all outstanding principal PLUS accrued interest shall be
due and payable at maturity, whether by acceleration, or otherwise.
3.4. USE OF PROCEEDS. Proceeds of the Term Loan shall be used by
Borrower to refinance certain indebtedness currently owed by Borrower to Lender
and to assist in the financing of the Recapitalization.
SECTION 4. GENERAL - ALL LOANS
4.1. INTEREST. The unpaid principal amount of the Advances shall bear
interest prior to maturity at a varying rate per annum equal from day to day to
the lesser of (a) the Maximum Rate, or (b) as the case may be, the Applicable
Revolving Credit Note Rate or Applicable Term Note Rate. If at any time the
Applicable Revolving Credit Note Rate or Applicable Term Note Rate for any
Advance shall exceed the Maximum Legal Rate, thereby causing the interest
accruing on such Advance to be limited to the Maximum Legal Rate, then any
subsequent reduction in the Applicable Revolving Credit Note Rate or Applicable
Term Note Rate for such
CREDIT AGREEMENT - Page 13
Advance shall not reduce the rate of interest on such Advance below the
Maximum Legal Rate until the aggregate amount of interest accrued on such
Advance equals the aggregate amount of interest which would have accrued on
such Advance if the Applicable Revolving Credit Note Rate or Applicable Term
Note Rate had at all times been in effect. Accrued and unpaid interest on
the Advances shall be due and payable as follows:
(a) in the case of all Revolving Credit Note Advances, on the
first day of each month commencing December 1, 1996 and continuing on the
same day of each successive month thereafter up to and including the
Termination Date; and
(b) for the Term Note Advance on the same dates as payments of
principal are due, pursuant to Section 3.3 hereof, or until maturity
whether by acceleration or otherwise (whichever first occurs).
Notwithstanding the foregoing, any outstanding principal of any Advance and (to
the fullest extent permitted by law) any other amount payable by the Borrower
under this Agreement or any other Loan Document that is not paid in full when
due (whether at stated maturity, by acceleration, or otherwise) shall bear
interest at the Default Rate for the period from and including the due date
thereof to but excluding the date the same is paid in full. Interest payable at
the Default Rate shall be payable from time to time on demand.
4.2. BORROWING PROCEDURE. The Borrower shall give the Lender notice by
means of an Advance Request Form of each requested Advance on the same day of
each LIBOR Advance or Cost of Funds Advance, no later than the date of any
requested Prime Rate Advance, in each case specifying: (a) the requested date of
such Advance (which shall be a Business Day), (b) the amount of such Advance,
(c) the Type of the Advance, and (d) in the case of a LIBOR Advance or Cost of
Funds Advance, the duration of the Interest Period for such Advance. The Lender
at its option may accept telephonic Advance requests by an Authorized Officer.
A telephonic request for an Advance by the Borrower shall be promptly confirmed
in writing if so requested by the Lender. Each LIBOR or Cost of Funds Advance
shall be in a minimum principal amount of $1,000,000. Subject to the terms and
conditions of this Agreement, each Advance shall be made available to the
Borrower by depositing the same, in immediately available funds, in an account
of the Borrower maintained with the Lender at the principal office designated by
the Borrower. All notices under this Section shall be irrevocable and shall be
given not later than 2:00 P.M. Dallas, Texas time on the day which is not less
than the number of Business Days specified above for such notice.
4.3. CONVERSIONS AND CONTINUATIONS. The Borrower shall have the right
from time to time to Convert all or part of one Type of Advance outstanding
under any Note into another Type of Advance or to Continue all or part of any
LIBOR Advance or Cost of Funds Advance by giving the Lender telephonic notice
(confirmed in writing, if so requested by the Lender) no later than 2:00 P.M.
(Dallas time) on the day of Conversion or Continuation of a LIBOR Advance or
Cost of Funds Advance, specifying: (a) the Conversion or Continuation date, (b)
the amount of the Advance to be Converted or Continued, (c) in the case of
Conversions, the Type of Advance to be Converted into, and (d) in the case of a
Continuation of or Conversion into a
CREDIT AGREEMENT - Page 14
LIBOR Advance or Cost of Funds Advance, the duration of the Interest Period
applicable thereto; provided, that (a) LIBOR Advances or Cost of Funds
Advance may only be Converted on the last day of the Interest Period, and (b)
except for Conversions to Prime Rate Advances, no Conversions shall be made
while an Event of Default has occurred and is continuing. If the Borrower
shall fail to give the Lender the notice as specified above for Continuation
or Conversion of a LIBOR Advance or Cost of Funds Advance prior to the end of
the Interest Period with respect thereto, such LIBOR Advance or Cost of Funds
Advance shall automatically be Converted into a Prime Rate Advance on the
last day of the Interest Period for such LIBOR Advance or Cost of Funds
Advance.
4.4. PAYMENT. All payments of principal, interest, and other amounts to
be paid by the Borrower under this Agreement or any other Loan Document shall be
paid to the Lender at the address set forth herein for the delivery of notices
to the Lender, in immediately available funds, without setoff or counterclaims,
at or before 2:00 p.m. Dallas, Texas time on the date on which such payment
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day). The Borrower
shall, at the time of making each such payment, specify to the Lender the sums
payable by the Borrower under this Agreement and the other Loan Documents to
which such payment is to be applied (and in the event the Borrower fails to so
specify, or if an Event of Default has occurred and is continuing, the Lender
may apply such payment to the Senior Indebtedness in such order and manner as it
may elect in its sole discretion). Whenever any payment under this Agreement or
any other Loan Document shall be stated to be due on a day that is not a
Business Day, such payment shall be deemed due on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of the payment of interest.
4.5. MAXIMUM LEGAL RATE. The following provisions shall control this
Agreement and each Note:
(a) No agreements, conditions, provision or stipulations
contained in this Agreement or in any other Loan Document, or the
occurrence of an Event of Default, or the exercise by the Lender of the
right to accelerate the payment or the maturity of principal and interest
on any Note, or to exercise any option whatsoever contained in this
Agreement or any other Loan Document, or the arising of any contingency
whatsoever, shall entitle the Lender to collect, in any event, interest
exceeding the maximum rate of nonusurious interest allowed from time to
time by applicable state or federal laws as now or as may hereinafter be in
effect (the "MAXIMUM LEGAL RATE") and in no event shall the Borrower be
obligated to pay interest exceeding such Maximum Legal Rate, and all
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel the Borrower to
pay a rate of interest exceeding the Maximum Legal Rate shall be without
binding force or effect, at law or in equity, to the extent only of the
excess of interest over such Maximum Legal Rate. In the event any interest
is charged in excess of the Maximum Legal Rate (the "EXCESS"), the Borrower
acknowledges and stipulates that any such charge shall be the result of an
accidental and bona fide error, and such Excess shall be, first, applied to
reduce the principal of any obligations due, and, second, returned to the
Borrower, it being the
CREDIT AGREEMENT - Page 15
intention of the parties hereto not to enter at any time into an
usurious or otherwise illegal relationship. The parties hereto
recognize that with fluctuations in the Contract Rate from time to time
announced by the Lender such an unintentional result could
inadvertently occur. By the execution of this Agreement, the Borrower
covenants that (a) the credit or return of any Excess shall constitute
the acceptance by the Borrower of such Excess, and (b) the Borrower
shall not seek or pursue any other remedy, legal or equitable, against
the Lender based, in whole or in part, upon the charging or receiving
of any interest in excess of the Maximum Legal Rate. For the purpose
of determining whether or not any Excess has been contracted for,
charged or received by the Lender, all interest at any time contracted
for, charged or received by the Lender in connection with the
Borrower's obligations shall be amortized, prorated, allocated and
spread during the entire term of this Agreement. If at any time the
rate of interest payable hereunder shall be computed on the basis of
the Maximum Legal Rate, any subsequent reduction in the Contract Rate
shall not reduce such interest thereafter payable hereunder below the
amount computed on the basis of the Maximum Legal Rate until the
aggregate amount of such interest accrued and payable under this
Agreement equals the total amount of interest which would have accrued
if such interest had been at all times computed solely on the basis of
the Contract Rate.
(b) Unless preempted by federal law, the rate of interest from
time to time in effect hereunder shall not exceed the "indicated rate
ceiling" from time to time in effect under Chapter 1 of the Texas Credit
Code (Vernon's Texas Civil Statutes), Section (a)(1), Article 5069-1.04, as
amended.
(c) The provisions of this Section shall be deemed to be
incorporated into every document or communication relating to the Senior
Indebtedness which sets forth or prescribes any account, right or claims or
alleged account, right or claim of the Lender with respect to the Borrower
(or any other obligor in respect of the Senior Indebtedness), whether or
not any provision of this Section is referred to therein. All such
documents and communications and all figures set forth therein shall, for
the sole purpose of computing the extent of the obligations asserted by the
Lender thereunder, be automatically recomputed by the Borrower or any other
obligor, and by any court considering the same, to give effect to the
adjustments or credits required by this Section.
(d) If the applicable state or federal law is amended in the
future to allow a greater rate of interest to be charged under this
Agreement than is presently allowed by applicable state or federal law,
then the limitation of interest hereunder shall be increased to the maximum
rate of interest allowed by applicable state or federal law, as amended,
which increase shall be effective hereunder on the effective date of such
amendment, and all interest charges owing to the Lender by reason thereof
shall be payable upon demand.
(e) The provisions of Chapter 15 of the Texas Credit Code
(Vernon's Texas Civil Statutes), Article 5069-15, as amended, are
specifically declared by the parties hereto not to be applicable to this
Agreement or any other Loan Document or to the transactions contemplated
hereby or thereby.
CREDIT AGREEMENT - Page 16
4.6. BASIS OF COMPUTATION. Subject to Section 4.5 hereof, the amount of
all interest payable hereunder shall be computed for the actual number of days
elapsed on the basis of a year consisting of 360 days.
4.7. PREPAYMENTS.
4.7.1. MANDATORY PREPAYMENTS. The Borrower shall, within one
(1) day after notice thereof from the Lender, pay to the Lender as a
payment on the Revolving Credit Note the amount, if any, by which the
principal balance of the Revolving Credit Note outstanding from time to
time exceeds the Borrowing Base, together with all interest accrued and
unpaid on the amount of such excess.
4.7.2. OPTIONAL PREPAYMENTS. The Borrower may, at any time,
prepay the Advances in whole at any time or from time to time in part
without premium or penalty but with accrued interest to the date of
prepayment on the amount so prepaid, provided that compensation under
Section 5 hereof shall be due if LIBOR Advances or Cost of Funds Advances
are prepaid prior to the last day of the Interest Period for such Advances.
4.8. UPON TERMINATION. The Lender, at its sole discretion, may upon
thirty (30) days prior written notice to the Borrower declare any or all of the
Term Note due and payable in full at any time after the Termination Date or
(without prior notice) at any time upon or after an acceleration of the
Revolving Credit Note.
SECTION 5. YIELD PROTECTION AND ILLEGALITY
5.1. ADDITIONAL COSTS.
(a) The Borrower shall pay to the Lender from time to time such
amounts as the Lender may reasonably determine to be necessary to
compensate it for any costs incurred by the Lender which the Lender
determines are attributable to its making or maintaining of any LIBOR
Advances or Cost of Funds Advances hereunder or its obligation to make any
of such Advances hereunder, or any reduction in any amount receivable by
the Lender hereunder in respect of any such Advances or such obligation
(such increases in costs and reductions in amounts receivable being herein
called "ADDITIONAL COSTS"), resulting from any generally applicable
Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to
the Lender under this Agreement or the Note in respect of any of
such Advances (other than taxes imposed on the overall net income of
the Lender or its lending office for any of such Advances by the
jurisdiction in which the Lender has its principal office or such
lending office);
(ii) imposes or modifies any reserve, special deposit,
minimum capital, capital ratio, or similar requirement relating to
any extensions of credit or other assets of, or any deposits with or
other liabilities or commitments of,
CREDIT AGREEMENT - Page 17
the Lender (including any of such Advances or any deposits referred
to in the definition of "LIBOR Rate" in Section 1.1 hereof); or
(iii) imposes any other condition affecting this Agreement or
such Advances or any of such extensions of credit or liabilities or
commitments.
The Lender will notify the Borrower of any event occurring after the date
of this Agreement which will entitle the Lender to compensation pursuant to
this Section as promptly as practicable after it obtains knowledge thereof
and determines to request such compensation. The Lender will furnish the
Borrower with a certificate setting forth the basis and the amount of each
request of the Lender for compensation under this Section. If the Lender
requests compensation from the Borrower under this Section, the Borrower
may, by notice to the Lender suspend the obligation of the Lender to make
or Continue making, or Convert Advances into, Advances of the Type with
respect to which such compensation is requested until the Regulatory Change
giving rise to such request ceases to be in effect (in which case the
provisions of Section 5 hereof shall be applicable).
(b) Without limiting the effect of the foregoing provisions of
this Section, in the event that, by reason of any generally applicable
Regulatory Change, the Lender either (a) incurs Additional Costs based on
or measured by the excess above a specified level of the amount of a
category of deposits or other liabilities of the Lender which includes
deposits by reference to which the interest rate on LIBOR Advances or Cost
of Funds Advances is determined as provided in this Agreement or a category
of extensions of credit or other assets of the Lender which includes LIBOR
Advances or Cost of Funds Advances, or (b) becomes subject to restrictions
on the amount of such a category of liabilities or assets which it may
hold, then, if the Lender so elects by notice to the Borrower the
obligation of the Lender to make or Continue making, or Convert Advances
into, Advances of such Type hereunder shall be suspended until such
Regulatory Change ceases to be in effect (in which case the provisions of
Section 5 hereof shall be applicable).
(c) Determinations and allocations by the Lender for purposes of
this Section of the effect of any generally applicable Regulatory Change on
its costs of maintaining its obligations to make Advances or of making or
maintaining Advances or on amounts receivable by it in respect of Advances,
and of the additional amounts required to compensate the Lender in respect
of any Additional Costs, shall be conclusive, provided that such
determinations and allocations are made on a reasonable basis.
(d) The Lender will not seek the benefits of this Section 5.1
unless it is, at the time of any attempts to collect amounts under this
Section 5.1 from the Borrower, applying similar reimbursement standards to
other borrowers of the Lender who have loans with similar pricing options.
CREDIT AGREEMENT - Page 18
5.2. LIMITATION ON TYPES OF ADVANCES. Anything herein to the contrary
notwithstanding, if with respect to any LIBOR Advances or Cost of Funds Advances
for any Interest Period therefor:
(a) The Lender reasonably determines (which determination shall
be conclusive) that quotations of interest rates for the relevant deposits
referred to in the definition of "LIBOR Rate" in Section 1.1 hereof are not
being provided in the relative amounts or for the relative maturities for
purposes of determining the rate of interest for such Advances as provided
in this Agreement; or
(b) The Lender determines (which determination shall be
conclusive) that the relevant rates of interest referred to in the
definition of "LIBOR Rate" in Section 1.1 hereof on the basis of which the
rate of interest for such Advances for such Interest Period is to be
determined do not accurately reflect the cost to the Lender of making or
maintaining such Advances for such Interest Period;
then the Lender shall give the Borrower prompt notice thereof specifying the
relevant Type of Advances and the relevant amounts or periods, and so long as
such condition remains in effect, the Lender shall be under no obligation to
make additional Advances of such Type or to Convert Advances of any other Type
into Advances of such Type and the Borrower shall, on the last day(s) of the
then current Interest Period(s) for the outstanding Advances of the affected
Type, either prepay such Advances or Convert such Advances into another Type of
Advance in accordance with the terms of this Agreement.
5.3. ILLEGALITY. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for the Lender to (a) honor its obligation
to make LIBOR Advances hereunder or (b) maintain LIBOR Advances hereunder, then
the Lender shall promptly notify the Borrower thereof and the Lender's
obligation to make or maintain LIBOR Advances and to Convert other types of
Advances into LIBOR Advances hereunder shall be suspended until such time as the
Lender may again make and maintain LIBOR Advances (in which case the provisions
of Section 5.4 hereof shall be applicable).
5.4. SUBSTITUTE PRIME RATE ADVANCES. If the obligation of the Lender to
make a LIBOR Advance or a Cost of Funds Advance shall be suspended pursuant to
Section 5.1, 5.2 or 5.3 hereof (Advances of such Type being herein called
"AFFECTED ADVANCES" and such Type being herein called the "AFFECTED TYPE"), all
Advances which would be otherwise made by the Lender as Advances of the Affected
Type shall be made instead as Prime Rate Advances and all Advances which would
otherwise be Converted into Advances of the Affected Type shall be converted
instead into (or shall remain as) Prime Rate Advances (and, if an event referred
to in Section 5.1, 5.2 or 5.3 hereof has occurred and the Lender so requests by
notice to the Borrower, all Affected Advances of the Lender then outstanding
shall be automatically Converted into Prime Rate Advances on the date specified
by the Lender in such notice) and, to the extent that Affected Advances are so
made as (or Converted into) Prime Rate Advances, all payments and prepayments of
principal which would otherwise be applied to the Lender's Affected Advances
shall be applied instead to its Prime Rate Advances.
CREDIT AGREEMENT - Page 19
5.5. COMPENSATION. The Borrower shall pay to the Lender, upon the
request of the Lender, such amount or amounts as shall be sufficient (in the
reasonable opinion of the Lender) to compensate it for any loss, cost, or
expense incurred by it as a result of:
(a) Any payment, prepayment or conversion of a LIBOR Advance or
Cost of Funds Advance for any reason (including, without limitation, the
acceleration of outstanding Advances pursuant to this Agreement) on a date
other than the last day of an Interest Period for such Advance; or
(b) Any failure by the Borrower for any reason (including,
without limitation, the failure of any conditions precedent specified in
this Agreement to be satisfied) to borrow, Convert, or prepay a LIBOR
Advance or Cost of Funds Advances on the date for such borrowing,
Conversion, or prepayment, specified in the relevant notice of borrowing,
prepayment, or Conversion under this Agreement.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which otherwise would have accrued on the principal amount so paid or Converted
or not borrowed for the period from the date of such payment, Conversion, or
failure to borrow to the last day of the Interest Period for such Advance (or,
in the case of a failure to borrow, the Interest Period for such Advance which
would have commenced on the date specified for such borrowing) at the applicable
rate of interest for such Advance provided for herein, less the applicable
margin, over (ii) the interest component of the amount the Lender would have bid
in the London interbank market (if such Advance is a LIBOR Advance) for Dollar
deposits of leading banks and amounts comparable to such principal amount and
with maturities comparable to such period.
SECTION 6. SECURITY
6.1. COLLATERAL. To secure the full and timely performance of the
Borrower's covenants set out in this Agreement and the other Loan Documents and
to secure the repayment of each of the Notes and all other Senior Indebtedness
whatsoever of the Borrower to the Lender, the Borrower agrees to grant and
assign a lien upon and security interest in the Collateral pursuant to the
Security Agreement, the Financing Statements and other instruments and
agreements required by and satisfactory to the Lender.
6.2. SETOFF. If an Event of Default shall have occurred and be
continuing, the Lender shall have the right to set off and apply against any
Senior Indebtedness then due in such manner as the Lender may determine, at any
time and without notice to the Borrower, any and all deposits (general or
special, time or demand, provisional or final) or other sums at any time
credited by or owing from the Lender to the Borrower. As further security for
the Senior Indebtedness, the Borrower hereby grants to the Lender a security
interest in all money, instruments, and other property of the Borrower now or
hereafter held by the Lender, including, without limitation, property held in
safekeeping. In addition to the Lender's right of setoff and as further
security for the Senior Indebtedness, the Borrower hereby grants to the Lender a
security interest in all deposits (general or special, time or demand,
provisional or final) and other
CREDIT AGREEMENT - Page 20
accounts of the Borrower now or hereafter on deposit with or held by the
Lender and all other sums at any time credited by or owing from the Lender to
the Borrower. The rights and remedies of the Lender hereunder are in
addition to other rights and remedies (including, without limitation, other
rights or setoff) which the Lender may have.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF LENDER
7.1. CONDITIONS TO FIRST LOAN. The obligations of the Lender under this
Agreement are subject to the occurrence, prior to or on the date of the initial
Loan hereunder, of each of the following conditions, any or all of which may be
waived in whole or in part by the Lender in writing:
7.1.1. DOCUMENTS EXECUTED AND FILED. The Borrower shall have
executed (or caused to be executed) and delivered to the Lender and, as
appropriate, there shall have been signed for filing with such filing
offices as the Lender shall deem appropriate, the following:
(a) The Revolving Credit Note;
(b) The Term Note; and
(c) A deed of trust in a form substantially the same as the
Deed of Trust which has already been executed by the Borrower,
covering the Real Property and securing all Senior Indebtedness.
7.1.2. CERTIFIED RESOLUTIONS. The Borrower shall have
furnished to the Lender a copy of resolutions of the Board of Directors of
the Borrower authorizing the execution, delivery and performance of this
Agreement, the borrowings hereunder, the Notes and all other Loan
Documents, which shall have been certified by the Secretary or Assistant
Secretary of the Borrower as of the date hereof.
7.1.3. CERTIFICATE OF GOOD STANDING. The Borrower shall have
furnished to the Lender a certificate of good standing of Borrower, which
shall have been certified by the state agency issuing the same as of a date
reasonably near the date hereof.
7.1.4. CERTIFICATE OF INCUMBENCY. The Borrower shall have
furnished to the Lender a certificate of the Secretary or Assistant
Secretary of each of the Borrower, certified as of the date hereof, as to
the incumbency and signatures of such officers signing this Agreement, the
Notes and the other Loan Documents.
7.1.5. PAYMENT OF FEES. Evidence that all costs and expenses
(including reasonable attorneys' fees) incurred by the Lender and known to
date in connection with the preparation of this Agreement and the other
Loan Documents shall have been paid in full by the Borrower.
CREDIT AGREEMENT - Page 21
7.1.6. APPROVAL OF LENDER COUNSEL. All actions, proceedings,
instruments and documents required to carry out the transactions
contemplated by this Agreement or incidental thereto and all other related
legal matters shall have been satisfactory to and approved by legal counsel
for the Lender, and said counsel shall have been furnished with such
certified copies of actions and proceedings and such other instruments and
documents as they shall have reasonably requested.
7.1.7. OTHER INFORMATION AND DOCUMENTATION. The Lender shall
have received such other information, certificates and executed documents
as it shall have reasonably requested.
7.2. CONDITIONS TO ALL LOANS. The obligation of the Lender to make any
Loan (including any initial Advance) is subject to the occurrence, prior to or
on the requested date of each such Loan, of each of the following conditions,
any or all of which may be waived in whole or in part by the Lender in writing:
7.2.1. LOAN REQUEST. The Lender shall have received a written
Advance Request Form, executed by the appropriate officer of the Borrower
and timely delivered as required by this Agreement.
7.2.2. NO DEFAULT. As of such date:
(a) No Default or Event of Default shall have then occurred
and be continuing; and
(b) Each warranty or representation referenced in
Section 8.16 of this Agreement shall be true and correct.
SECTION 8. WARRANTIES AND REPRESENTATIONS
The Borrower represents and warrants to the Lender:
8.1. CORPORATE EXISTENCE AND POWER. (a) The Borrower (i) is a
corporation duly organized, validly existing and in good standing under the laws
of its state of organization, (ii) has the corporate power and authority to own
its properties and assets and to carry out its business as now being conducted
and is qualified to do business and in good standing in every jurisdiction
wherein such qualification is necessary except where the failure to be so
qualified would not result in a material adverse effect on the business or
financial condition of the Borrower and (iii) has the corporate power and
authority to execute and perform this Agreement, to borrow money in accordance
with its terms, to execute and deliver each of the Notes and the other Loan
Documents to be executed by it and to grant to the Lender liens and security
interest in the Collateral as hereby contemplated and to do any and all other
things required of it hereunder.
CREDIT AGREEMENT - Page 22
8.2. AUTHORIZATION AND APPROVALS. As to the Borrower, the execution,
delivery and performance of this Agreement, the borrowing hereunder and the
execution and delivery of each of the other Loan Documents contemplated hereby
(a) have been duly authorized by all requisite corporate action, (b) do not
require registration with or consent or approval of, or other action by, any
federal, state or other governmental authority or regulatory body, or, if such
registration, consent or approval is required, the same has been obtained and
disclosed in writing to the Lender, (c) will not violate any provision of law,
any order of any court or other agency of government, the articles of
incorporation or bylaws of the Borrower, any provision of any indenture,
agreement or other instrument to which the Borrower is a party, or by which it
or any of its properties or assets are bound except where such violation would
not result in a material adverse effect on the business or financial condition
of the Borrower, (d) will not be in conflict with, result in a breach of or
constitute (with or without notice or passage of time) a default under any
indenture, agreement or other instrument except where such conflict, breach or
default would not result in a material adverse effect on the business or
financial condition of the Borrower, and (e) will not result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of its properties or assets other than in favor of the Lender and as
contemplated hereby.
8.3. VALID AND BINDING AGREEMENT. This Agreement is, and each of the
other Loan Documents will be, when delivered, valid and binding obligations of
the Borrower, in each case enforceable in accordance with their respective terms
except as limited by insolvency, bankruptcy or similar laws and equitable
principles affecting the enforcement of creditors' rights generally.
8.4. ACTIONS, SUITS OR PROCEEDINGS. Except as disclosed on Schedule 8.4
or otherwise disclosed in writing to the Lender, there are no actions, suits or
proceedings, at law or in equity, and no proceedings before any arbitrator or by
or before any governmental commission, board, bureau or other administrative
agency, pending, or, to the best knowledge of the Borrower, threatened against
or affecting the Borrower, or any properties or rights of the Borrower, which,
if adversely determined, would materially impair the right of the Borrower to
carry on business substantially as now conducted or could have a material
adverse effect upon the financial condition of the Borrower.
8.5. NO LIENS, PLEDGES, MORTGAGES OR SECURITY INTERESTS. Except for
Permitted Liens, none of the Borrower's assets and properties, including the
Collateral and the Real Property, is subject to any mortgage, pledge, lien,
security interest or other encumbrance of any kind or character.
8.6. ACCOUNTING PRINCIPLES. The Financial Statements have been prepared
on a consolidated basis in accordance with GAAP and fairly present the financial
condition of the Borrower as of the dates, and the results of its operations for
the periods, for which the same are furnished to the Lender. To the best of
Borrower's knowledge and belief, the Borrower has no material contingent
obligations, liabilities for taxes, long-term leases or unusual forward or
long-term commitments not disclosed by, or reserved against in, the Financial
Statements or otherwise disclosed in writing to the Lender.
CREDIT AGREEMENT - Page 23
8.7. NO ADVERSE CHANGES. There has been no material adverse change in
the business, properties or condition (financial or otherwise) of the Borrower
since the date of the latest of the Financial Statements or otherwise disclosed
in writing to the Lender.
8.8. CONDITIONS PRECEDENT. As of the date of each Loan hereunder, all
appropriate conditions precedent referred to in this Agreement shall have been
satisfied (or waived in writing by the Lender).
8.9. TAXES. The Borrower has filed (or in the case of any consolidated,
unitary or combined return, the Borrower has been included in a return filed) by
the extended due date therefor all federal, state and local tax returns and
other reports required by law to be filed and which are material to the conduct
of its business, has paid or caused to be paid all material taxes, assessments
and other governmental charges that are shown to be due and payable by Borrower
under such returns, and has made adequate provision for the payment of such
taxes, assessments or other governmental charges which have accrued but are not
yet payable. The Borrower has no knowledge of any asserted deficiency or
assessment in a material amount in connection with any taxes, assessments or
other governmental charges not adequately disclosed in the Financial Statements
or otherwise disclosed in writing to the Lender.
8.10. COMPLIANCE WITH LAWS. The Borrower has complied with all applicable
laws, to the extent that failure to comply would materially interfere with the
conduct of its respective business.
8.11. INDEBTEDNESS; MATERIAL AGREEMENTS.
(a) Except as disclosed on Schedule 8.11, the Borrower has no
Indebtedness.
(b) To the best knowledge of the Borrower, it has complied with
the provisions of all material contracts or commitments; and to the best
knowledge of Borrower, no party to such agreements is in default
thereunder, nor has there occurred any event which with notice or the
passage of time, or both, would constitute such a default.
8.12. MARGIN STOCK. The Borrower is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying any "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System, and no part of the
proceeds of any Loan hereunder will be used, directly or indirectly, to purchase
or carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock or for any other purpose which might
violate the provisions of Regulation G, T, U or X of the said Board of
Governors. The Borrower does not own any margin stock.
8.13. PENSION FUNDING. The Borrower has not incurred any material
accumulated funding deficiency within the meaning of ERISA or any material
liability to the PBGC in connection with any employee benefit plan established
or maintained by the Borrower and no
CREDIT AGREEMENT - Page 24
presently existing reportable event or presently existing prohibited
transaction, as defined in ERISA, has occurred with respect to such plans
which would result in a material adverse effect on the business or financial
condition of Borrower.
8.14. MISREPRESENTATION. To the best knowledge of the officer signing the
same, after reasonable inquiry, no warranty or representation by the Borrower
contained herein or in any certificate or other document furnished by the
Borrower contemporaneously herewith contains any untrue statement of material
fact or omits to state a material fact necessary to make such warranty or
representation not misleading in light of the circumstances under which it was
made.
8.15. ELIGIBLE INVENTORY. As to each item of Inventory represented by the
Borrower to be "Eligible Inventory" on a Borrowing Base Certificate, as of the
date of each such Borrowing Base Certificate:
(a) Such item of Inventory is of good and merchantable quality
and is usable or salable by Borrower in the ordinary course of its
business, and is not obsolete (except that as to work in process, such item
need not meet the Standard of "merchantable").
(b) The Borrower has granted to the Lender a perfected security
interest in such item of Inventory (as an item of the Collateral) prior in
right to all other Persons (other than Permitted Liens), and such item of
Inventory has not been sold, transferred or otherwise assigned by the
Borrower, to any Person, other than the Lender and other than sales in the
ordinary course of business occurring after the date of such Borrowing Base
Certificate.
(c) Such item of Inventory is located within the United States at
locations identified in the Security Agreement.
8.16. LOANS AND REPRESENTATIONS. As of the date of each Advance Request,
the Borrower, unless otherwise disclosed to the Lender in writing, shall be
deemed to represent and warrant to the Lender, as an inducement to having the
Lender make the requested Loan, that as of the date of such Loan request (a) the
representations and warranties contained in Sections 8.1, 8.4, 8.7, 8.15 and
8.17 of this Agreement are true and correct in all material respects, (b) the
requirements of Section 7.2.2 have been complied with and (c) the Lender will
have a first priority security interest and lien on the Collateral covered by
the invoice or xxxx of sale (or similar document), if any, to which the Loan
request relates.
8.17. ELIGIBLE ACCOUNTS. As to each Account represented by the Borrower
to be an "Eligible Account" on a Borrowing Base Certificate, as of the date of
each such Borrowing Base Certificate:
(a) Such Account arose in the ordinary course of the business of
the Borrower out of either (i) a bona fide sale of Inventory by the
Borrower, in accordance with the terms of the Contract under which the
Account arose, or (ii) services performed
CREDIT AGREEMENT - Page 25
by the Borrower under an enforceable contract, and in such case such
services have in fact been performed for the appropriate account debtor
in accordance with such contract.
(b) Unless otherwise approved in writing by the Lender on a
case-by-case basis, such Account represents a legally valid and enforceable
claim which is due and owing to the Borrower by such account debtor in at
least such amount as is represented by the Borrower to the Bank on such
Borrowing Base Certificate, such Account is due and payable not more than
thirty (30) days from the delivery of the related Inventory, or the
performance of the related services, giving rise to such Account and,
unless the Bank otherwise allows, such Account has not been due for more
than ninety (90) days (from the date of invoice).
(c) To Borrower's knowledge, the unpaid balance of such Account
as represented by the Borrower to the Lender on such Borrowing Base
Certificate is not subject to any defense, counterclaim, set-off, credit,
allowance or adjustment by the account debtor because of returned, inferior
or damaged Inventory or services, or for any other valid reason, except for
customary discounts allowed by Borrower in the ordinary course of business
for prompt payment or as otherwise indicated by credit memos disclosed in
such Borrowing Base Certificate, and there is no agreement between
Borrower, the related account debtor and any other person for any rebate,
discount, concession or release of liability, in whole or in part.
(d) To Borrower's knowledge, the transactions leading to the
creation of such Account comply with all applicable state and federal laws
and regulations.
(e) The Borrower has granted to the Bank a perfected security
interest in such Account (as an item of the Collateral) prior in right to
all other persons (other than Permitted Liens), and such Account has not
been sold, transferred or otherwise assigned by the Borrower to any Person,
other than the Bank.
(f) Such Account is not represented by any note, trade
acceptance, draft or other negotiable instrument or by any chattel paper,
except any such as constitute an item of Collateral on or prior to such
Account's inclusion on such Borrowing Base Certificate.
(g) The Borrower has not received, with respect to such Account,
any actual notice of the death of the related account debtor, nor of the
dissolution, liquidation, termination of existence, insolvency, business
failure, appointment of a receiver for any part of the property of,
assignment for the benefit of creditors by, or the filing of a petition in
bankruptcy or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against, such account debtor.
CREDIT AGREEMENT - Page 26
(h) The account debtor on such Account is not:
(i) an affiliate of the Borrower,
(ii) the United States of America or any department, agency
or instrumentality thereof (to the extent the same exceeds $5,000
for any single invoice) unless the grant of a security interest
therein has been made to the Lender in compliance with applicable
federal assignment of claims laws and regulations,
(iii) a citizen or resident of any jurisdiction other than
one of the United States (unless covered by satisfactory letter of
credit, foreign receivable insurance, or otherwise acceptable to the
Lender), or
(iv) an account debtor whom the Bank has, in the reasonable
exercise of such Bank's sole reasonable discretion, determined to be
(based on such factors relating to such account debtor as the Bank
deems appropriate) an ineligible account debtor and as to which the
Bank has notified the Borrower, PROVIDED, HOWEVER, that any such
notice shall not apply retroactively as to any particular Account if
such Account was included on a prior Borrowing Base Certificate by
the Borrower prior to the giving of such notice by the Bank and
which otherwise complied with each and every other requirement under
this Agreement for the denomination of such Account as an "Eligible
Account."
SECTION 9. AFFIRMATIVE COVENANTS
From the date hereof until the Senior Indebtedness is paid in full, the
Borrower covenants and agrees that it will:
9.1. FINANCIAL AND OTHER INFORMATION.
9.1.1. ANNUAL FINANCIAL REPORTS. Furnish to the Lender in
form satisfactory to the Lender not later than ninety (90) days after the
close of each fiscal year of Borrower, beginning with the fiscal year
ending December 31, 1996, on a consolidated and consolidating basis, a
balance sheet as at the close of each such fiscal year, statements of
income and statements of cash flow for each such fiscal year of Borrower
and the Subsidiaries, and such other comments and financial details as are
usually included in similar reports. Such consolidated reports shall be
audited in accordance with GAAP by independent certified public accountants
of recognized standing selected by Borrower and reasonably acceptable to
the Lender and shall contain unqualified opinions as to the fairness of the
statements therein contained.
9.1.2. MONTHLY FINANCIAL STATEMENTS. Furnish to the Lender
not later than thirty (30) days after the close of each month, beginning
with reports for the month ending November 30, 1996, financial statements
containing the consolidated and
CREDIT AGREEMENT - Page 27
consolidating balance sheet of Borrower as of the end of each month,
consolidated and consolidating statements of income of Borrower up to
the end of each month. These statements shall be prepared on
substantially the same accounting basis as the statements required in
Section 9.1.1 of this Agreement and shall be in such detail as the
Lender may reasonably require, and the accuracy of the statements
(subject to year-end adjustments) shall be certified by the chief
executive or financial officer of Borrower.
9.1.3. BORROWING BASE CERTIFICATE AND OTHER MONTHLY REPORTS.
Furnish to the Lender monthly (i) by the 20th day of each month a Borrowing
Base Certificate for the last day of the prior month, on behalf of the
Borrower, confirming that the outstanding principal balance of the
Revolving Credit Note does not exceed the lesser of the Revolving Credit
Commitment Amount or the Borrowing Base, as then in effect (or, if such is
not the case, accompanied by a mandatory prepayment in accordance with this
Agreement), and (ii) by the 20th day of each month, a detailed listing of
the Borrower's Inventory and Accounts aging (in such detail as the Lender
may require) for the immediately preceding month.
9.1.4. QUARTERLY COMPLIANCE CERTIFICATE. Furnish to the
Lender not later than the 30th day of the month following the end of each
calendar quarter (beginning with the quarter ending December 31, 1996) a
Compliance Certificate dated as of the end of the month immediately prior
to the due date for such Compliance Certificate.
9.1.5. ADVERSE EVENTS. Promptly inform the Lender of the
occurrence of any Event of Default or Default, or of any occurrence which
has or would reasonably be expected to have a materially adverse effect
upon the Borrower's business, properties, financial condition or ability to
comply with their respective obligations hereunder.
9.1.6. PUBLIC FILINGS. Furnish to the Lender, promptly, upon
filing the same, all securities agency filings, both state and federal.
9.1.7. OTHER INFORMATION AS REQUESTED. Promptly furnish to
the Lender such other information regarding the operations, business
affairs and financial condition of the Borrower as the Lender may
reasonably request from time to time and permit the Lender, its employees,
attorneys and agents, to inspect all of the books, records and properties
of the Borrower during normal business hours, except that upon any Event of
Default, the Lender may perform such actions at any reasonable time.
9.2. INSURANCE. Keep its insurable properties (including, but not
limited to, the Collateral and the Real Property) adequately insured and
maintain (a) insurance against fire and other risks customarily insured against
by companies engaged in the same or a similar business to that of the Borrower,
(b) necessary worker's compensation insurance, (c) public liability and product
liability insurance, and (d) such other insurance as may be required by law or
as may be reasonably required in writing by the Lender, all of which insurance
shall be in such amounts, containing such terms, in such form, for such purposes
and written by such companies as may be satisfactory to the Lender in the
reasonable exercise of its judgment. All such policies shall
CREDIT AGREEMENT - Page 28
contain a provision whereby they may not be canceled except upon thirty days'
prior written notice to the Lender. The Borrower will deliver to the Lender,
at the Lender's request, evidence satisfactory to the Lender that such
insurance has been so procured and, with respect to casualty insurance
covering the Collateral, names the Lender as "mortgagee". If the Borrower
fails to maintain satisfactory insurance as herein provided, the Lender shall
have the option to do so, and the Borrower agrees to repay the Lender, with
interest at three percent (3%) per annum plus the Prime Rate, all amounts so
expended by the Lender.
9.3. TAXES. Pay within the time that they can be paid without interest
or penalty all taxes, assessments and similar imposts and charges of every kind
and nature lawfully levied, assessed or imposed upon it and its property, except
to the extent being contested in good faith and for which adequate reserves have
been established on the balance sheet of the Borrower. If the Borrower shall
fail to pay or contest such taxes and assessments by their due date, the Lender
shall have the option to do so, and the Borrower agrees to repay the Lender,
with interest at three percent (3%) per annum plus the Prime Rate, all amounts
so expended by the Lender.
9.4. MAINTAIN LEGAL EXISTENCE AND BUSINESS. Do or cause to be done all
things necessary to preserve and keep in full force and effect their legal
existence, rights and franchise and comply, in all material respects, with all
applicable laws; continue to conduct and operate its business substantially as
conducted and operated during the present and preceding calendar year.
9.5. TANGIBLE NET WORTH. Maintain Tangible Net Worth (plus Subordinated
Debt) in an amount not less than the following amounts at the end of each
calendar quarter during each of the following respective periods:
PERIODS AMOUNT
------- ------
(a) From the date of this Agreement $1,250,000
through September 30, 1997
(b) From December 31, 1997 through $3,000,000
September 30, 1998
(c) From December 31, 1998, and at all $5,000,000
times thereafter
CREDIT AGREEMENT - Page 29
9.6. SENIOR INDEBTEDNESS RATIO. Maintain as of the end of each calendar
quarter a Senior Indebtedness Ratio of not more than the following respective
ratios:
PERIODS MAXIMUM RATIOS
------- --------------
(a) From the date of this Agreement 3.75:1.0
through March 31, 1997
(b) June 30, 1997 through 3.50:1.0
September 30, 1997
(c) From December 31, 1997 3.25:1.0
through September 30, 1998
(d) At December 31, 1998 and at all 3.0:1.0
times thereafter
9.7. CASH FLOW COVERAGE RATIO. Maintain as of the end of each calendar
quarter a Cash Flow Coverage Ratio of not less than the following respective
ratios:
PERIODS MINIMUM RATIOS
------- --------------
(a) From the date of this Agreement 1.75:1.0
and at all times thereafter
9.8. FIXED CHARGE COVERAGE RATIO. Maintain as of the end of each
calendar quarter a Fixed Charge Coverage Ratio (computed on the basis of the
previous twelve-month period) of not less than 1.0:1.0.
9.9. ERISA. (a) Subject to the exceptions set forth in Section 11.1.7,
at all times meet the minimum funding requirements of ERISA with respect to the
Borrower's employee benefit plans subject to such minimum funding requirements;
(b) promptly after the Borrower knows or has reason to know (i) of the
occurrence of any event, which would constitute a reportable event or prohibited
transaction under ERISA that would result in a material adverse effect on the
business or financial condition of the Borrower, or (ii) that the PBGC or the
Borrower has instituted or will institute proceedings to terminate an employee
pension plan, deliver to the Lender a certificate of the chief financial officer
of the Borrower setting forth details as to such event or proceedings and the
action which the Borrower proposes to take with respect thereto, together with a
copy of any notice of such event which may be required to be filed with the
PBGC; and (c) a copy of the annual return (including all schedules and
attachments) for each plan covered by ERISA, and filed with the Internal Revenue
Service by the Borrower, not later than ten (10) days after receipt of a written
request from the Lender for such report.
CREDIT AGREEMENT - Page 30
9.10. USE OF LOAN PROCEEDS. Use the proceeds of the Loans hereunder for
the purposes set forth herein.
9.11. UNUSED FACILITY FEE. Pay the Unused Facility Fee when due.
SECTION 10. NEGATIVE COVENANTS
From the date hereof until the Senior Indebtedness is paid in full, the
Borrower covenants and agrees it will not:
10.1. DIVIDENDS. Except for (a) the Special Dividend and
(b) distributions to a shareholder made when no Event of Default exists or would
exist giving effect to any such distribution), declare or pay any dividend
(other than dividends payable solely in shares of its capital stock) on, or make
any other distribution with respect to (whether by reduction of capital or
otherwise), any shares of its capital stock.
10.2. STOCK ACQUISITION. Purchase, redeem, retire or otherwise acquire
any of the shares of its capital stock, or make any commitment to do so.
10.3. LIENS AND ENCUMBRANCES. Create, incur, assume or suffer to exist
any mortgage, pledge, encumbrance, security interest, lien or charge of any kind
(including any charge upon property purchased or acquired under a conditional
sales or other title-retaining agreement or lease required to be capitalized
under GAAP) upon any of its property or assets, whether now owned or hereafter
acquired, other than Permitted Liens.
10.4. INDEBTEDNESS. Incur, create, assume or permit to exist any
Indebtedness, except for (a) the Senior Indebtedness, (b) indebtedness
subordinated to the prior payment in full of the Senior Indebtedness upon terms
and conditions approved in writing by the Lender, (c) existing indebtedness to
the extent set forth on schedules to this Agreement, (d) indebtedness secured by
Permitted Liens, and (e) capitalized lease obligations in excess of $200,000 in
the aggregate at any time.
10.5. EXTENSION OF CREDIT. Make loans, advances or extensions of credit
to any Person other than loans and advances to employees which in the aggregate
do not exceed $50,000 at any time.
10.6. GUARANTEE OBLIGATIONS. Guarantee or otherwise, directly or
indirectly, in any way be or become responsible for obligations of any other
Person, whether by agreement to purchase the indebtedness of any other Person,
agreement for the furnishing of funds to any other Person through the furnishing
of goods, supplies or services, by way of stock purchase, capital contribution,
advance or loan, for the purpose of paying or discharging (or causing the
payment or discharge of) the indebtedness of any other Person, or otherwise,
except for the endorsement of negotiable instruments by the Borrower in the
ordinary course of business for deposit or collection.
CREDIT AGREEMENT - Page 31
10.7. SUBORDINATE INDEBTEDNESS. Subordinate any indebtedness due to it
from a Person to indebtedness of other creditors of such Person.
10.8. PROPERTY TRANSFER, MERGER OR LEASE-BACK. (a) Sell, lease, transfer
or otherwise dispose of all or, except as to the sale of Inventory or unneeded
Equipment in the ordinary course of business, any material part of its
properties and assets (whether in one transaction or in a series of
transactions), (b) change its name, consolidate with or merge into any other
corporation, permit another corporation to merge into it, acquire all or
substantially all the properties or assets of any other Person, enter into any
reorganization or recapitalization or reclassify its capital stock, or (c) enter
into any sale-leaseback transaction, provided that Borrower and its Subsidiaries
may make transfers of assets among themselves so long as the liens and security
interests of the Lender in the Collateral at all times remain perfected and in
full force and effect.
10.9. ACQUIRE SECURITIES. Purchase or hold beneficially any stock or
other securities of, or make any investment or acquire any interest whatsoever
in, any other Person except for investments:
(a) in commercial paper, maturing within 270 days after
acquisition thereof, which has the highest or second highest credit rating
given by either Standard & Poor's Corporation or Xxxxx'x Investors Service,
Inc.;
(b) in obligations, maturing within 12 months after acquisition
thereof, issued or unconditionally guaranteed by the United States of
America or an instrumentality or agency thereof and entitled to the full
faith and credit of the United States of America;
(c) in demand deposits, and time deposits (including certificates
of deposit) maturing within 12 months from the date of deposit thereof,
with any office of the Lender, any of the Lender's affiliates, or any
national or state bank or trust company which is organized under the laws
of the United States of America or any state therein and which has capital,
surplus and undivided profits of at least $100,000,000; and
(d) in repurchase obligations of any bank or trust company
described in the above subsection (c) which relate to the repurchase of
obligations described in the above subsection (b).
10.10. PENSION PLANS. (a) Allow any fact, condition or event to
occur or exist with respect to an employee pension plan which would constitute
grounds for termination by the PBGC of any such plan or for the appointment by a
United States District Court of a trustee to administer any such plan, or
(b) permit any such plan to be the subject of termination proceedings (whether
voluntary or involuntary) from which termination proceedings there results a
liability of the Borrower to the PBGC which will have a materially adverse
effect upon the operations, business, property, assets, financial condition or
credit of the Borrower.
CREDIT AGREEMENT - Page 32
10.11. MARGIN STOCK. Apply any of the proceeds of the Notes to the
purchase or carrying of any "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder.
10.12. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will not
(i) use (and will use commercially reasonable efforts to prevent any tenant from
using) any of its real property for the handling, processing, storage,
transportation, or disposal of any Hazardous Substance except in all respects in
compliance with Environmental Laws, (ii) generate (as such term is defined in
RCRA) any Hazardous Substance except in all respects in compliance with
Environmental Laws, (iii) conduct any activity which causes a release (as such
term is defined in CERCLA) of any Hazardous Substance in violation of
Environmental Law, or (iv) otherwise conduct any activity or use any of its real
property or assets in any manner that violates any Environmental Law except
that, in each of cases (i)-(iv) above, in such a manner as would not result in a
material adverse effect on the business or financial condition of the Borrower.
10.13. SUBORDINATED CREDIT PAYMENTS. Make any payments of principal
to the subordinated lender under the Subordinated Credit Agreement until the
Term Note principal balance is less than or equal to $2,000,000.
SECTION 11. EVENTS OF DEFAULT - ENFORCEMENT - APPLICATION OF PROCEEDS
11.1. EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
11.1.1. FAILURE TO PAY MONIES DUE. If any principal of or
interest on any of the Senior Indebtedness shall not be paid within one
Business Day after becoming due.
11.1.2. MISREPRESENTATION. If any warranty or representation
of the Borrower in connection with or contained in this Agreement, or if
any financial data or other information now or hereafter furnished to the
Lender by or on behalf of the Borrower, shall prove to be false or
misleading in any material respect.
11.1.3. NONCOMPLIANCE WITH LENDER AGREEMENT. If the Borrower
shall fail to perform any of its obligations and covenants under, or shall
fail to comply with any of the provisions of, this Agreement or any other
Loan Document or any other agreement with the Lender to which it may be a
party, and such failure is not remedied within thirty (30) days after the
Lender gives written notice thereof to the Borrower.
11.1.4. OTHER DEFAULTS.
(a) If the Borrower shall default in the due payment of any
of its Senior Indebtedness (other than under the Loan Documents) or
in the observance or performance of any term, covenant or condition
in any agreement or instrument evidencing, securing or relating to
such Senior Indebtedness, and
CREDIT AGREEMENT - Page 33
such default shall be continued for a period sufficient to permit
acceleration thereof;
(b) If the Borrower shall default under the Deed of Trust
or in the due payment of any of its Debt (other than the Senior
Indebtedness) or in the observance or performance of any term,
covenant or condition in any agreement or instrument evidencing,
securing or relating to such Debt, and such default shall be
continued for a period sufficient to permit acceleration of the
indebtedness; or
(c) If the Borrower should default under the Subordinated
Credit Agreement.
11.1.5. JUDGMENTS. If there shall be rendered against the
Borrower, one or more judgments or decrees involving an aggregate liability
of $100,000 or more, which has or have become final and nonappealable and
shall remain undischarged, unsatisfied by insurance and unstayed for more
than 30 days; or of a writ of attachment or garnishment against the
property of the Borrower shall be issued and levied in an action claiming
$100,000 or more, and within the time allowed under applicable law is
neither released nor stayed nor appealed and bonded in a manner
satisfactory to the Lender.
11.1.6. BUSINESS SUSPENSION, BANKRUPTCY, ETC. If the Borrower
shall voluntarily suspend transaction of its business for a period in
excess of five (5) Business Days (unless covered by business interruption
insurance); or if the Borrower generally shall not pay its debts as they
become due, subject to applicable grace periods, or shall make a general
assignment for the benefit of creditors; or proceedings in bankruptcy, or
for reorganization or liquidation of the Borrower, under the Bankruptcy
Code or under any other state or federal law for the relief of debtors
shall be commenced by the Borrower or shall be commenced against the
Borrower and shall not be discharged within sixty (60) days of
commencement; or a receiver, trustee or custodian shall be appointed for
the Borrower or for any substantial portion of its respective properties or
assets.
11.1.7. INADEQUATE FUNDING OR TERMINATION OF EMPLOYEE/BENEFIT
PLAN(S). If the Borrower shall fail by $50,000 or more to meets its
minimum funding requirements under ERISA (after giving effect to any valid
waiver of such requirements) with respect to any employee benefit plan
established or maintained by the Borrower, or if any such plan shall be the
subject of termination proceedings (whether voluntary or involuntary) and
there shall result from such termination proceedings a liability of the
Borrower (or any subsidiary) to the PBGC of $50,000 or more.
11.1.8. OCCURRENCE OF CERTAIN REPORTABLE EVENTS. If there
shall occur, with respect to any pension plan maintained by the Borrower,
any reportable event (within the meaning of section 4043(b) of ERISA) which
the Lender shall determine in good faith constitutes a ground for the
termination by the PBGC of any such plan, and if such event continues for
60 days after the Lender gives written notice to the Borrower, provided
that
CREDIT AGREEMENT - Page 34
termination of such plan or appointment of such trustee would, in the
opinion of the Lender, have a materially adverse effect upon the
operations, business, property, assets, financial condition or credit of
the Borrower.
11.2. ACCELERATION OF SENIOR INDEBTEDNESS. Upon the occurrence of any of
the Events of Default described in Section 11.1, all Senior Indebtedness may be
declared due and payable in full forthwith at the option of the Lender without
presentation, demand, protest, notice of dishonor or other notice of any kind,
all of which are hereby expressly waived. Unless all of the Senior Indebtedness
is then fully paid, the Lender shall have and may exercise any one or more of
the rights and remedies for which provision is made for a secured party under
the UCC, under the Security Agreement, the Deed of Trust or under any other
document contemplated hereby, including, without limitation, the right to take
possession and sell, lease or otherwise dispose of any or all of the Collateral
and to setoff against the Senior Indebtedness any amount owing by the Lender to
the Borrower. The Borrower agrees, upon request of the Lender, to assemble the
Collateral and make it available to the Lender at any place designated by the
Lender which is reasonably convenient to the Lender and the Borrower.
11.3. APPLICATION OF PROCEEDS. The proceeds of any sale or other
disposition of the Collateral authorized by this Agreement shall be applied by
the Lender, first upon all expenses authorized by the UCC and all reasonable
attorneys' fees and legal expenses incurred by the Lender; the balance of the
proceeds of such sale or other disposition shall be applied in the payment of
the Senior Indebtedness, first to interest, then to principal; and the surplus,
if any, shall be paid over to the Borrower or to such other Person or Persons as
may be entitled thereto under applicable law. The Borrower shall remain liable
for any deficiency, which the Borrower shall pay to the Lender immediately upon
demand.
11.4. CUMULATIVE REMEDIES. The remedies provided for herein are
cumulative to the remedies for collection of the Senior Indebtedness as provided
by law or by any mortgage, security agreement or other document contemplated
hereby. Nothing herein contained is intended, nor should it be construed, to
preclude the Lender from pursuing any other remedy for the recovery of any other
sum to which the Lender may be or become entitled for the breach of this
Agreement by the Borrower.
SECTION 12. MISCELLANEOUS
12.1. INDEPENDENT RIGHTS. No single or partial exercise of any right,
power or privilege hereunder, or any delay in the exercise thereof, shall
preclude other or further exercise of the rights of the parties to this
Agreement.
12.2. COVENANT INDEPENDENCE. Each covenant in this Agreement shall be
deemed to be independent of any other covenant, and an exception in one covenant
shall not create an exception in another covenant.
12.3. WAIVERS AND AMENDMENTS. No forbearance on the part of the Lender in
enforcing any of its rights under this Agreement, nor any renewal, extension or
rearrangement
CREDIT AGREEMENT - Page 35
of any payment or covenant to be made or performed by the Borrower
hereunder, shall constitute a waiver of any of the terms of this Agreement or of
any such right. No Default or Event of Default shall be waived by the Lender
except in writing signed and delivered by an officer of the Lender, and no
waiver of any Default or Event of Default shall operate as a waiver of any other
Default or Event of Default or of the same Default or Event of Default on a
future occasion. No other amendment, modification or waiver of, or consent with
respect to, any provision of this Agreement or the Note or other documents
contemplated hereby shall be effective unless the same shall be in writing and
signed and delivered by an officer of the Lender.
12.4. GOVERNING LAW. THIS AGREEMENT, AND EACH AND EVERY TERM AND
PROVISION HEREOF, SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE
STATE OF TEXAS. IF ANY PROVISIONS OF THIS AGREEMENT SHALL FOR ANY REASON BE
HELD INVALID OR UNENFORCEABLE, SUCH INVALIDITY OR UNENFORCEABILITY SHALL NOT
AFFECT ANY OTHER PROVISION HEREOF, BUT THIS AGREEMENT SHALL BE CONSTRUED AS IF
SUCH INVALID OR UNENFORCEABLE PROVISION HAD NEVER BEEN CONTAINED HEREIN.
12.5. SURVIVAL OF WARRANTIES, ETC. All of the Borrower's covenants,
agreements, representations and warranties made in connection with this
Agreement and any document contemplated hereby shall survive the making of
Advances and the delivery of the Notes hereunder and shall be deemed to have
been relied upon by the Lender, notwithstanding any investigation heretofore or
hereafter made by the Lender. All statements contained in any certificate or
other document delivered to the Lender at any time by or on behalf of the
Borrower pursuant hereto or in connection with the transactions contemplated
hereby shall constitute representations and warranties by the Borrower in
connection with this Agreement.
12.6. ATTORNEYS' FEES. The Borrower agrees that it will pay all
reasonable costs and expenses of the Lender in connection with the enforcement
of the Lender's rights and remedies under this Agreement and in connection with
the preparation or making of any amendments, modifications, waivers or consents
with respect to this Agreement.
12.7. PAYMENTS ON SATURDAYS, ETC. Whenever any payment to be made
hereunder or under the Notes shall be stated to be due on a Saturday, Sunday or
any other day which is not a Business Day, such payment shall be due on the next
succeeding Business Day, and such extension, if any, shall be included in
computing interest in connection with such payment.
12.8. BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors and
assigns; provided, however, the Borrower may not assign or transfer any rights
or obligations hereunder without the prior written consent of the Lender.
12.9. MAINTENANCE OF RECORDS. The Borrower will keep all of its
respective records concerning the Collateral and the Equipment at its principal
place of business. The Borrower will
CREDIT AGREEMENT - Page 36
give the Lender prompt written notice of any change in its respective
principal place of business, or in the location of said records.
12.10. NOTICES. All notices and communications provided for herein
or in any document contemplated hereby or required by law to be given shall be
effective when received or, upon sending by registered or certified mail,
postage prepaid, addressed as follows: (a) If to the Borrower, to: Xxxxxxx X.
Xxxxxxx, Chief Financial Officer, 0000 Xxx. 00 Xxxx, Xxxxx, Xxxxx 00000, and
(b) If to the Lender, to: 0000 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx
00000, Attention: Xxxxx Xxxxx, or to such other address as a party shall have
designated to the other in writing.
12.11. COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures were upon the same
instrument.
12.12. HEADINGS. Article and section headings in this Agreement are
included for the convenience of reference only and shall not constitute a part
of this Agreement for any purpose.
12.13. INDEMNIFICATION. THE BORROWER HEREBY COVENANTS AND AGREES TO
INDEMNIFY, DEFEND AND HOLD HARMLESS THE LENDER AND ITS OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS ("INDEMNIFIED PERSONS") FROM AND AGAINST ANY AND ALL
CLAIMS, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION,
THE FEES AND OUT-OF-POCKET EXPENSES OF COUNSEL) WHICH MAY BE INCURRED BY OR
ASSERTED AGAINST THE LENDER OR ANY SUCH OTHER INDIVIDUAL OR ENTITY IN CONNECTION
WITH:
(a) ANY INVESTIGATION, ACTION OR PROCEEDING ARISING OUT OF OR IN
ANY WAY RELATING TO THIS AGREEMENT, THE NOTES, OR ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE LOANS OR ANY COLLATERAL, OR ANY ACT OR OMISSION
RELATING TO ANY OF THE FOREGOING;
(b) ANY TAXES (OTHER THAN FEDERAL OR STATE INCOME TAXES),
LIABILITIES, CLAIMS OR DAMAGES RELATING TO THE COLLATERAL OR THE LENDER'S
LIENS THEREON; OR
(c) THE CORRECTNESS, VALIDITY OR GENUINENESS OF ANY INSTRUMENTS
OR DOCUMENTS THAT MAY BE RELEASED OR ENDORSED TO BORROWER BY THE LENDER
(WHICH SHALL AUTOMATICALLY BE DEEMED TO BE WITHOUT RECOURSE TO THE LENDER
IN ANY EVENT), OR THE EXISTENCE, CHARACTER, QUANTITY, QUALITY, CONDITION,
VALUE OR DELIVERY OF ANY GOODS PURPORTING TO BE REPRESENTED BY ANY SUCH
DOCUMENTS.
CREDIT AGREEMENT - Page 37
NOTWITHSTANDING THE FOREGOING, THE BORROWER SHALL NOT BE REQUIRED TO INDEMNIFY
ANY SUCH INDEMNIFIED PERSON FROM OR AGAINST ANY PORTION OF SUCH CLAIMS, DAMAGES,
LIABILITIES OR EXPENSES ARISING OUT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH INDEMNIFIED PERSON.
12.14. NO ORAL AGREEMENTS. THIS AGREEMENT, TOGETHER WITH THE OTHER
LOAN DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENTS BETWEEN THE LENDER AND
THE BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE LENDER AND THE BORROWER.
12.15. GENDER. Throughout this Agreement, the masculine shall
include the feminine and vice versa and the singular shall include the plural
and vice versa, unless the context of this Agreement indicates otherwise.
12.16. CROSS COLLATERAL. The Borrower hereby agrees that the
Collateral under this Agreement secures the obligations now or hereafter
outstanding under all other agreements between Borrower and the Lender or any of
their affiliates and the collateral pledged under any other agreement with the
Lender or any of its affiliates secures the obligations under this Agreement.
12.17. SEVERABILITY OF PROVISIONS. Any provision of this Agreement,
the Notes or any other documents relating thereto that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement, such Notes or such other documents or
affecting the validity or enforceability of such provision in any other
jurisdiction.
12.18. ASSIGNMENT. The Lender shall have the absolute and
unrestricted right to sell, assign, transfer, or grant participation in, all or
any portion of the Loans and any Collateral, guaranties or other security
relating thereto without the consent of the Borrower to any federal or state
agency, or to any bank affiliate of the Bank, or, with the Borrower's consent
(which shall not be unreasonably withheld and shall not be required during the
existence of an Event of Default), to any commercial bank or to any other
financial institution or holding company of any of the foregoing; provided,
however, no such action on the part of the Lender shall have the effect of
changing any of the Borrower's obligations hereunder without the respective
written consent or the Borrower.
12.19. WAIVER OF JURY TRIAL. The Borrower and the Lender hereby
irrevocably waive the right to trial by jury with respect to any and all actions
or proceedings at any time in which Borrower and Lender are parties arising out
of this Agreement.
CREDIT AGREEMENT - Page 38
12.20. SURVIVAL OF AGREEMENT. Notwithstanding anything to the
contrary contained in this Agreement, the provisions of this Agreement shall
remain in full force and effect until such time as all Senior Indebtedness is
paid in full.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
written above.
BORROWER:
XXXXXXXXX SIGN COMPANY
By: /s/ XXXXXXX XXXXXXX
---------------------------------
Name: Xxxxxxx Xxxxxxx
---------------------------
Title: VP, CFO
---------------------------
LENDER:
COMERICA BANK-TEXAS
By: /s/ XXXXX XXXXX
---------------------------------
Name: Xxxxx Xxxxx
---------------------------
Title: AVP
---------------------------
CREDIT AGREEMENT - Page 39
SCHEDULE OF EXHIBITS
Exhibit A Revolving Credit Note
Exhibit B Term Note
LIST OF SCHEDULES
Schedule 8.4 Actions, Suits or Proceedings
Schedule 8.6 Liens
Schedule 8.12 Debt
Exhibit "A"
to
Credit Agreement
REVOLVING CREDIT NOTE
Exhibit "B"
to
Credit Agreement
TERM NOTE
SCHEDULE 8.4
ACTIONS, SUITS, PROCEEDINGS
No material pending litigation or proceedings.
SCHEDULE 8.6
LIENS
NONE
SCHEDULE 8.12
DEBT
As reflected on 2-29-96 Financial Statements
