EXHIBIT 10.1
LOAN AGREEMENT
This Loan Agreement (this "Agreement") is entered into as
of June 30, 1998 by and between Xxxxx Fargo Bank, National Association
("Lender") and Xxxxxxx International, Inc., a Delaware corporation
("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into
certain financing arrangements with Borrower pursuant to which Lender
may make loans and provide other financial accommodations to Borrower;
and
WHEREAS, Lender is willing to make such loans and provide
such financial accommodations on the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual conditions
and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Section 1 or
Article 9 of the Uniform Commercial Code shall have the meanings given
therein unless otherwise defined in this Agreement. Any accounting
term used herein unless otherwise defined or set forth in this
Agreement shall have the meanings customarily given to such term in
accordance with GAAP. For purposes of this Agreement, the following
terms shall have the respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of
Borrower to payment of or goods sold or leased for services rendered,
which are not evidenced by instruments or chattel paper, and whether or
not earned by performance.
1.2 " Affiliate" shall mean any Person controlling,
controlled by or under common control with any other Person. For
purposes of this definition, "control" (including "controlled by" and
"under common control with") means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership
of voting securities or otherwise.
1.3 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish
and revise in good faith reducing the amount of Revolving Loans and
Letters of Credit which would otherwise be available to Borrower under
the lending formula(s) provided for herein: (a) to reflect events,
conditions, contingencies or risks which, as determined by Lender in
good faith, do or may affect either (i) the Collateral or its value,
(ii) the assets, business or prospects of Borrower or any Obligor, or
(iii) the security interests and other rights of Lender in the
Collateral (including the enforceability, perfection and priority
thereof), or (b) to reflect Lender's good faith belief that any
collateral report or financial information furnished by or on behalf of
Borrower or any Obligor to Lender is or may have been incomplete,
inaccurate or misleading in any material respect, or (c) in respect of
any state of facts which Lender determines in good faith constitutes an
Event of Default or may, with notice or passage of time or both,
constitute an Event of Default.
1.4 "Xxxxxxx Facility" shall mean the land located at 0000
X. Xxxxxxx Xxxxxx, Xxxx Xxxxx, Xxxxx 00000, and all improvements
thereon.
1.5 "Business Day" shall mean any day, except Saturday, on
which Lender is open for the conduct of general banking business.
1.6 "Cash Collateral Account" shall have the meaning set
forth in Section 6.1 hereof.
1.7 "Collateral" shall mean all the property in which
Borrower or an Obligor grants or is required to grant to Lender a
security interest or lien, as described in Section 5 hereof.
1.8 "DTPA" shall mean the Texas Deceptive Trade Practices
Consumer Protection Act, Subchapter E of Chapter 17 of the Texas
Business and Commerce Code.
1.9 "Eligible Accounts" shall mean Accounts created by
Borrower which are and continue to be acceptable to Lender based on the
criteria set forth below. In general, Accounts shall be Eligible
Accounts if:
(a) such Accounts arise from the actual and bona fide
sale and delivery of goods by Borrower or rendition of services
by Borrower in the ordinary course of Borrower's business which
transactions are completed in accordance with the terms and provisions
contained in any documents related thereto;
(b) such Accounts are not unpaid more than ninety
(90) days after the date of the original invoice thereto;
(c) such Accounts comply with the terms and
conditions applicable thereto contained in the Security Agreement
executed in connection therewith;
(d) such Accounts do not arise from sales on
consignment, guaranteed sale, sale and return, sale on approval, or
other terms under which payment by the account debtor may be
conditional or contingent;
(e) the chief executive office of the account debtor
with respect to such Accounts is located in the United States of
America, or, at Lender's option, if: (i) the account debtor has
delivered to Borrower an irrevocable letter of credit issued or
confirmed by a bank satisfactory to Lender, sufficient to cover such
Account, in form and substance satisfactory to Lender and, if required
by Lender, the original of such letter of credit has been delivered to
Lender or Lender's agent and the issuer thereof notified of the
assignment of the proceeds of such letter of credit to Lender, or (ii)
such Account is subject to credit insurance payable to Lender issued by
an insurer and on terms and in an amount acceptable to Lender, or (iii)
the account debtor resides in a province of Canada which recognizes
Lender's perfection and enforcement rights as to Accounts by reason of
the filing of a UCC-1 in the state of Borrower's chief executive
office, or (iv) such Account is otherwise acceptable in all respects to
Lender (subject to such lending formula with respect thereto as Lender
may determine);
(f) such Accounts do not consist of progress
xxxxxxxx, xxxx and hold invoices or retainage invoices;
(g) the account debtor with respect to such Accounts
has not asserted a counterclaim, defense or dispute and does not have,
and does not engage in transactions which may give rise to, any right
of setoff against such Accounts;
(h) there are no facts, events or occurrences which
would impair the validity, enforceability or collectability of such
Accounts or reduce the amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority,
valid and perfected security interest of Lender and any goods giving
rise thereto are not, and were not at the time of the sale thereof,
subject to any liens except those permitted in this Agreement;
(j) neither the account debtor nor any officer,
employee or agent of the account debtor with respect to such Accounts
is an officer, employee or agent of or affiliated with Borrower
directly or indirectly by virtue of family membership, ownership,
control, management or otherwise;
(k) the account debtors with respect to such Accounts
are not any foreign government, the United States of America, any State
or any political subdivision, department, agency or instrumentality
thereof, unless, if the account debtor is the United States of America,
any State or any political subdivision, department, agency or
instrumentality thereof, upon Lender's request, the Federal Assignment
of Claims Act of 1940, as amended, or any similar State or local law,
if applicable, has been complied with in a manner satisfactory to
Lender;
(l) there are no proceedings or actions pending
against any account debtor with respect to such Accounts from such
account debtor which might result in any material adverse change in any
such account debtor's financial condition;
(m) such Accounts of a single account debtor or its
affiliates do not constitute more than twenty-five (25%) of all
otherwise Eligible Accounts (but the portion of the Accounts not in
excess of such percentage may be deemed Eligible Accounts) and such
other Accounts as Lender may approve in its sole discretion;
(n) such Accounts are not owed by any account debtor
who has Accounts unpaid more than ninety (90) days after the date of
the original invoice therefor and which constitute more than twenty-
five (25%) percent of the total Accounts from such account debtor;
(o) such Accounts are owed by account debtors whose
total indebtedness to Borrower does not exceed the credit limit with
respect to such account debtors as reasonably determined by Lender from
time to time (but the portion of the Accounts not in excess of such
credit limit may still be deemed Eligible Accounts); and
(p) such Accounts are owed by account debtors deemed
creditworthy at all times by Lender, as determined by Lender.
General criteria for Eligible Accounts may be established and revised
from time to time by Lender in good faith. Any Accounts which are not
Eligible Accounts shall nevertheless be part of the Collateral.
1.10 "Eligible Inventory" shall mean Inventory owned by
Borrower which is and remains acceptable to Lender for lending purposes
and is located at one of the addresses set forth in Schedule I to this
Agreement; provided however, that if any such location is owned by a
party other than Borrower, Lender shall have obtained from the owner
thereof an agreement relative to Lender's rights with respect to such
Inventory, in form and content satisfactory to Lender; and provided
further that in no event however shall Eligible Inventory include: (a)
work-in-process; (b) inventory subject to a security interest or lien
in favor of any person other than Lender, except those permitted in
this Agreement; and (c) inventory which is not subject to the first
priority, valid and perfected security interest of Lender. General
criteria for Eligible Inventory may be established and revised from
time to time by Lender in good faith. Any Inventory which is not
Eligible Inventory shall nevertheless be part of the Collateral.
1.11 "Equipment" shall mean all of Borrower's now owned
and hereafter acquired equipment, machinery, computers and computer
hardware and software (whether owned or licensed), vehicles, tools,
furniture, fixtures, all attachments, accessions and property now or
hereafter affixed thereto or used in connection therewith, and
substitutions and replacements thereof, wherever located.
1.12 "Event of Default" shall mean the occurrence or
existence of any event or condition described in Section 10.1 hereof.
1.13 "GAAP" shall mean generally accepted accounting
principles in the United States of America as in effect from time to
time as set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and the statements and pronouncements of the Financial
Accounting Standards Boards which are applicable to the circumstances
as of the date of determination consistently applied, except that, for
purposes of Section 8.10 hereof, GAAP shall be determined on the basis
of such principles in effect on the date hereof and consistent with
those used in the preparation of the audited financial statements
delivered to Lender prior to the date hereof.
1.14 "General Intangibles" shall mean general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade
names, applications for the foregoing, trade secrets, goodwill,
processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, choses in action and other claims and existing
and future leasehold interests in equipment).
1.15 "Hamilton Facility" shall mean the land located at
0000 Xxxxxxxxxx Xxxxx, Xxxxxxxx, Xxxx 00000, and all improvements
thereon.
1.16 "Guarantor" shall mean Xxxx Xxxxxxx, an individual.
1.17 "Indebtedness" shall mean any and all amounts owing or
to be owing by Borrower to Lender in connection with the Line of Credit
Note, this Agreement, and other liabilities of Borrower to Lender from
time to time existing, including without limitation guaranties of
indebtedness, letters of credit and obligations acquired from third
persons, whether in connection with this or other transactions, and all
amounts owing or to be owing by Borrower to any agent bank of Lender
pursuant to any Letter of Credit Agreement, overdraft agreement or
other agreement or financial accommodation.
1.18 "Information Certificate" shall mean the Information
Certificate of Borrower constituting Exhibit A hereto containing
material information with respect to Borrower, its business and assets
provided by or on behalf of Borrower to Lender in connection with the
preparation of this Agreement and the other Loan Documents and the
financing arrangements provided for herein.
1.19 "Inventory" shall mean all of Borrower's now owned and
hereafter existing or acquired raw materials, work in process, finished
goods and all other inventory of whatsoever kind or nature, wherever
located.
1.20 "Letters of Credit" shall mean commercial or standby
letters of credit issued by Lender from time to time under the Line of
Credit.
1.21 "Letter of Credit Agreement" shall have the meaning
set forth in Section 2.2 hereof.
1.22 "Letter of Credit Obligations" shall mean at any time,
the aggregate amount available to be drawn, plus amounts drawn and not
yet reimbursed, under Letters of Credit.
1.23 "Line of Credit" shall mean a revolving line of credit
under which Lender agrees to make Revolving Loans and issue Letters of
Credit, subject to the terms and conditions of this Agreement.
1.24 "Line of Credit Note" shall have the meaning set forth
in Section 2.1 hereof.
1.25 "Loan Documents" shall mean, collectively, this
Agreement and all notes, guarantees, security agreements, subordination
agreements, and other agreements, documents and instruments now or at
any time hereafter executed and/or delivered by Borrower or any Obligor
in connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.26 "Loans" shall mean the Line of Credit and the Term
Loan.
1.27 "Maximum Line Amount" shall mean the amount of
$7,500,000.
1.28 "Maximum Nonusurious Interest Rate" shall mean the
maximum nonusurious interest rate allowable under applicable United
States federal law and under the laws of the State of Texas as
presently in effect and, to the extent allowed by such laws, as such
laws may be amended from time to time to increase such rate.
1.29 "Net Amount of Eligible Accounts" shall mean the gross
amount of Eligible Accounts less (a) sales, excise or similar taxes
included in the amount thereof and (b) returns, discounts, claims,
credits and allowances of any nature at any time issued, owing,
granted, outstanding, available or claimed with respect thereto.
1.22 " Obligor" shall mean any guarantor, endorser,
acceptor, surety or other person liable on or with respect to the
Loans, or any of them, or who is the owner of any property which is
security for the Loans, or any of them, other than Borrower. If
Borrower is a partnership, each general partner is an Obligor.
1.30 "Person" shall mean any individual, corporation,
partnership, joint venture, association, joint stock company, trust,
trustee, unincorporated organization, government or any agency or
political subdivision thereof, or any other form of entity.
1.31 "Property" shall mean any interest in any kind of
property or asset, whether real, personal or mixed, or tangible or
intangible.
1.32 "Purchase Order UCC Financing Statement" shall mean a
UCC Financing Statement in standard form executed by Borrower in favor
of a customer and covering only specific component parts or equipment
constituting work-in-process owned by such customer, for which a
purchase order contract has been executed, and as to which the specific
parts or equipment at all times are segregated in Borrower's facility
as separate and apart from any inventory or equipment owned by
Borrower.
1.33 "Records" shall mean all of Borrower's present and
future books of account of every kind or nature, purchase and sale
agreements, invoices, ledger cards, bills of lading and other shipping
evidence, statements, correspondence, memoranda, credit files and other
data relating to the Collateral or any account debtor, together with
the tapes, disks, diskettes and other data and software storage media
and devices, file cabinets or containers in or on which the foregoing
are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.34 "Revolving Loans" shall mean advances made by Lender
to Borrower on a revolving basis under the Line of Credit, as set forth
in Section 2.1 hereof.
1.35 "Rights to Payment" shall mean all Accounts, General
Intangibles, contract rights, chattel paper, documents, instruments,
letters of credit, bankers acceptances and guaranties, and all present
and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, and
shall include without limitation, (a) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and
credit and other insurance related to the Collateral, (b) rights of
stoppage in transit, replevin, repossession, reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party, (c)
goods described in invoices, documents, contracts or instruments with
respect to, or otherwise representing or evidencing, Accounts or other
Collateral, including without limitation, returned, repossessed and
reclaimed goods, and (d) deposits by and property of account debtors or
other persons securing the obligations of account debtors, monies,
securities, credit balances, deposits, deposit accounts and other
property of Borrower now or hereafter held or received by or in transit
to Lender or any of its affiliates or at any other depository or other
institution from or for the account of Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise.
1.36 "SSMI Collateral" shall mean 100% of the ownership
interests in Societe Specialisee dans le Materiel d Imprimerie.
1.37 "Subordination Agreement" shall mean a Subordination
Agreement of even date herewith executed by and among Borrower, Lender
and Gurarantor.
1.38 "Subordinated Debt" shall mean the loans evidenced by
a $3,950,000 note of even date herewith from the Guarantor to Borrower.
1.39 "Subordinated Debt Liens" shall mean all liens and
security interests given to secure the Subordinated Debt.
1.40 "Subordinated Debt Documents" shall mean all
instruments or documents evidencing the Subordinated Debt or the
Subordinated Liens.
1.41 "Support Agreement" shall mean the a Support Agreement
of even date herewith executed by Guarantor and covering the Term Note.
1.42 "Tangible Net Worth" shall mean, at any time, the
aggregate of total stockholders equity plus subordinated debt less any
intangible assets.
1.43 "Term Loan" shall mean the term loan described in
Section 2.4 hereof.
1.44 "Term Note" shall have the meaning set forth in
Section 2.4 hereof.
1.45 "Value" shall mean, as determined by Lender in good
faith, with respect to Inventory, the lower of (a) cost computed on a
first-in-first-out basis in accordance with GAAP, or (b) market value.
1.46 "Walnut Facility" shall mean the land located at 000
Xxxxxx Xxxxxx, Xxxxxxxx, Xxxx, and all improvements thereon.
1.47 "Working Capital" shall mean, at any time, total
current assets less total current liabilities. Current liabilities
shall include the unpaid balance of the Line of Credit Note.
1.48 "Zerand Holdback" shall mean all rights, titles and
interests of Borrower in and to that certain Escrow Agreement ("Escrow
Agreement") dated April 27, 1998, by and among Valumaco Incorporated, a
Delaware corporation, Borrower and Banca Commerciale Intaliana, New
York Branch, as escrow agent, and the "Deposit" and the "Escrowed
Funds" thereunder (as defined therein), and all rights, titles and
interests of Borrower in and to that certain "earn out" provision
(Section 2.5) of that certain Sale and Purchase Agreement concerning
the Zerand Division of Xxxxxxx International, Inc., between Borrower
and Valumaco Incorporated, as buyer;
SECTION 2. CREDIT FACILITIES
2.1 Line of Credit
(a) Lending Formula. Subject to and upon the terms
and conditions contained herein, Lender agrees to make Revolving Loans
(pursuant to Section 2.1 hereof) and issue Letters of Credit (pursuant
to Section 2.2 hereof) under a line of credit (the "Line of Credit")
from time to time in amounts requested by Borrower up to an aggregate
outstanding principal amount equal to the lesser of: (i) the Maximum
Amount; or (ii) the sum of:
(A) eighty-five percent (85%) of the Net Amount
of Eligible Accounts; plus
(B) twenty-five percent (25%) of the Value of
Eligible Inventory, less
(C) any Availability Reserves.
(b) Reduction of Lending Formula. Lender may, in its
discretion, from time to time, upon not less than five (5) days prior
notice to Borrower, (i) reduce the lending formula with respect to
Eligible Accounts to the extent that Lender determines in good faith
that: (A) the dilution with respect to the Accounts for any period
(based on the ratio of (1) the aggregate amount of reductions in
Accounts other than as a result of payments in cash to (2) the
aggregate amount of total sales) has increased in any material respect
or may be reasonably anticipated to increase in any material respect
above historical levels, or (B) the general creditworthiness of account
debtors has declined, or (ii) reduce the lending formula with respect
to Eligible Inventory to the extent that Lender determines that: (A)
the number of days of the turnover of the Inventory for any period has
changed in any material respect, or (B) the liquidation value of the
Eligible Inventory, or any category thereof, has decreased, or (C) the
nature and quality of the Inventory has deteriorated. In determining
whether to reduce the lending formula(s), Lender may consider events,
conditions, contingencies or risks which are also considered in
determining Eligible Accounts, Eligible Inventory or in establishing
Availability Reserves.
(c) Overadvance. In the event that the outstanding
amount of any component of the Loans, or the aggregate amount of the
outstanding Loans and Letter of Credit Obligations, exceed the amounts
available under the lending formulas, the sublimits for Letters of
Credit set forth in Section 2.2 or the Maximum Line Amount, as
applicable, such event shall not limit, waive or otherwise affect any
rights of Lender in that circumstance or on any future occasions and
Borrower shall, upon demand by Lender, which may be made at any time or
from time to time, immediately repay to Lender the entire amount of any
such excess(es) for which payment is demanded.
(d) Line of Credit Note. Borrower's obligation to
repay Revolving Loans made under the Line of Credit shall be evidenced
by a promissory note executed by Borrower, substantially in the form of
Exhibit B hereto ("Line of Credit Note").
(e) Reduction of Maximum Line Amount. Borrower shall
have the right to reduce permanently the Maximum Line Amount in an
increment of $1,000,000 during the term of the Line of Credit to a
Maximum Line Amount no less than $3,500,000. Such right hereunder may
be exercised only once during the term of the Line of Credit. In order
to exercise such right, Borrower shall give Lender thirty (30) days
prior written notice of such intent to reduce the Maximum Line Amount,
and such reduction shall be effective on the first day of the first
calendar month following such thirty (30) days.
2.2 Letters of Credit.
(a) Issuance. Subject to, and upon the terms and
conditions contained herein, at the request of Borrower, Lender agrees
from time to time during the term of this Agreement to issue Letters of
Credit for the account of Borrower containing terms and conditions
acceptable to Lender, provided however that no Letter of Credit shall
have an expiration date beyond the maturity date of the Line of Credit
set forth in Section 11.1 hereof.
(b) Letter of Credit Sublimits. No Letters of Credit
shall be issued unless, on the date of the proposed issuance of any
Letter of Credit, the Revolving Loans available to Borrower (subject to
the Maximum Line Amount and Availability Reserves) are equal to 100% of
the face amount of such Letters of Credit. Except in Lender's
discretion, the amount of all Letter of Credit Obligations shall not at
any time exceed $2,000,000.
(c) Letter of Credit Agreement. Each Letter of
Credit shall be subject to the additional terms and conditions of the
Letter of Credit Agreement and related documents, if any, required by
Lender in connection with the issuance thereof (each, a "Letter of
Credit Agreement"). Each draft paid by Lender under a Letter of Credit
shall be deemed a Revolving Loan under the Line of Credit and shall be
repaid by Borrower in accordance with the terms and conditions of this
Agreement applicable to such Revolving Loans; provided however, that if
the Line of Credit is not available, for any reason whatsoever, at the
time any draft is paid by Lender, or if Revolving Loans are not
available under the Line of Credit at such time due to any limitation
on borrowings set forth herein, then the full amount of such draft
shall be immediately due and payable, together with interest thereon,
from the date such amount is paid by Lender to the date such amount is
fully repaid by Borrower, at the rate of interest applicable to
Revolving Loans. In such event, Borrower agrees that Lender, at
Lender's sole discretion, may debit Borrower's deposit account with
Lender for the amount of any such draft.
2.3 Availability Reserves. All Revolving Loans and
Letters of Credit otherwise available to Borrower pursuant to the
lending formula(s) or sublimits, and subject to the Maximum Amount and
other applicable limits hereunder shall be subject to Lender's
continuing right to establish and revise Availability Reserves.
2.4 Term Loan.
(a) Term Loan. Subject to the terms and conditions
of this Agreement, Lender hereby agrees to make a loan to Borrower in
the principal amount of $4,000,000 ("Term Loan"), the proceeds of which
shall be used to refinance outstanding indebtedness of Borrower to its
existing senior subordinated note holders. Borrower's obligation to
repay the Term Loan shall be evidenced by a promissory note
substantially in the form of Exhibit C attached hereto ("Term Note"),
all terms of which are incorporated herein by this reference. Lender's
commitment to grant the Term Loan shall terminate on the date of
execution of this Agreement.
(b) Repayment. The principal amount of the Term Loan
shall be repaid in accordance with the provisions of the Term Note.
(c) Prepayment. Borrower may prepay principal on the
Term Loan, at any time and from time to time, without premium or
penalty, solely in accordance with the provisions of the Term Note.
2.5 Guaranties. All Indebtedness of Borrower evidenced by
the Term Note to Lender pursuant to this Agreement shall be guaranteed
by Guarantor, and all Indebtedness evidenced by the Line of Credit Note
pursuant to this Agreement shall be supported by the Support Agreement,
each, as evidenced by and subject to the terms of guaranties or support
agreements in form and substance satisfactory to Lender.
2.6 Subordination of Debt. All obligations of Borrower to
Guarantor shall be subject to the terms of subordination agreements in
form and substance satisfactory to Lender.
SECTION 3. INTEREST AND FEES
3.1 Interest. The outstanding principal balance of
Revolving Loans and the Term Loan shall bear interest at the rate(s)
set forth in the Line of Credit Note and the Term Note, respectively.
3.2 Letter of Credit Fees. Borrower shall pay to Lender
fees upon the issuance or amendment of each Letter of Credit and upon
the payment by Lender of each draft under any Letter of Credit
determined in accordance with Lender's WellsCredit Division's standard
fees and charges in effect at the time any Letter of Credit is issued
or amended or any draft is paid, including:
(a) a per annum letter of credit fee equal to 1.75%
of the face amount of any standby Letter of Credit for each year such
Letter of Credit is stated to be outstanding, payable upon issuance of
such Letter of Credit; and
(b) a fee equal to 1.75% per annum on the average
daily amount available to be drawn during each month under outstanding
commercial Letters of Credit, which fee shall be due and payable in
arrears on the first day of each month.
3.3 Closing Fee. Borrower shall pay to Lender as a
closing fee the amount of $37,500 for the loan evidenced by the Line of
Credit and $40,000 for the loan evidenced by the Term Loan, which shall
be fully earned as of and payable on the date hereof.
3.4 Unused Line Fee. Borrower shall pay to Lender monthly
an unused line fee for the Line of Credit equal to a rate per annum of
three eighths of one percent (.375%) of the amount by which the Maximum
Line Amount exceeds the average daily principal balance of the
outstanding Revolving Loans and Letter of Credit Obligations during the
immediately preceding month (or part thereof) while this Agreement is
in effect and for so long thereafter as any of the Revolving Loans or
Letter of Credit Obligations are outstanding, which fee shall be
payable on the first day of each month in arrears.
3.5 Computation and Payment. Interest (and fees computed
on a per annum basis) shall be computed on the basis of a 360-day year,
actual days elapsed. Interest shall be payable at times and place set
forth in the Line of Credit Note and the Term Note.
SECTION 4. CONDITIONS PRECEDENT
4.1 Initial Credit. The obligation of Lender to initially
extend the credit contemplated by this Agreement is subject to
the fulfillment to Lender's satisfaction of all of the following
conditions:
(a) Approval of Lender Counsel. All legal matters
incidental to the extension of credit by Lender shall be satisfactory
to counsel of Lender.
(b) Documentation. Lender shall have received, in
form and substance satisfactory to Lender, each of the following, duly
executed:
(1) This Agreement;
(2) The Line of Credit Note;
(3) The Term Note;
(4) Corporate Borrowing Resolution;
(5) The Letter of Credit Agreement;
(6) UCC-1 Financing Statement(s);
(7) Security Agreement(s);
(8) Lock Box Agreement;
(9) All guaranties and support agreements
required hereby with such authorizations
as Lender shall require from each guarantor.
(10) All subordination agreements required hereby.
(11) Such other documents as Lender may require
under any other Section of this Agreement.
(c) Financial Condition. There shall have been no
material adverse change, as determined by Lender, in the financial
condition or business of Borrower or any Obligor, nor any material
decline, as determined by Lender, in the market value of any collateral
required hereunder or a substantial or material portion of the assets
of Borrower or any Obligor.
(d) Insurance. Borrower shall have delivered to
Lender evidence of insurance coverage on all Borrower's property, in
form, substance, amounts, covering risks and issued by companies
satisfactory to Lender, and where required by Lender, with loss payable
endorsements in favor of Lender including without limitation, policies
of fire and extended coverage insurance covering all real property
collateral required hereby, with replacement cost and mortgagee loss
payable endorsements, and such policies of insurance against specific
hazards affecting any such real property as may be required by
governmental regulation or Lender.
(e) Title Insurance. Lender shall have received a
standard form of Mortgagee Policy of Title Insurance, with such
endorsements as Lender may require, issued by a company and in form and
substance satisfactory to Lender, in such amount as Lender shall
require, insuring Lender's lien on the Xxxxxxx Facility in the amount
of $750,000, and insuring Lender's lien on the Walnut Facility in the
amount of $500,000, each to be of the priority set forth in Section 5
hereof, subject only to such exceptions as Lender shall approve in its
discretion, with all costs thereof to be paid by Borrower.
(f) Security Interests. Lender shall have received
evidence, in form and substance satisfactory to Lender, that Lender has
valid perfected and first priority security interests in and liens upon
the Collateral and any other property which is intended to be security
for the Loans or the liability of any Obligor in respect thereof,
subject only to the security interests and liens permitted herein or in
the other Loan Documents.
(g) Field Review. Lender shall have completed a
field review of the Records and such other information with respect to
the Collateral as Lender may require to determine the amount of
Revolving Loans available to Borrower, the results of which shall be
satisfactory to Lender.
(h) Other Documents. Lender shall have received, in
form and substance satisfactory to Lender, all consents, waivers,
acknowledgments and other agreements from third persons which Lender
may deem necessary or desirable in order to permit, protect and perfect
its security interests in and liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other
Loan Documents, including without limitation, acknowledgments by
lessors, mortgagees and warehousemen of Lender's security interests in
the Collateral, waivers by such persons of any security interests,
liens or other claims by such persons to the Collateral and agreements
permitting Lender access to, and the right to remain on, the premises
to exercise its rights and remedies and otherwise deal with the
Collateral.
(i) Opinion. Lender shall have received, in form and
substance satisfactory to Lender, such opinion letters of counsel to
Borrower with respect to the Loan Documents and such other matters as
Lender may request.
(j) Availability. Borrower shall have a minimum of
$500,000 of availability for Revolving Loans in addition to the amount
paid or to be paid to Borrower's prior lender to retire Borrower's line
of credit with such prior lender and bringing all other obligations to
a current status satisfactory to Lender.
(k) Senior Subordinated Debt. Borrower shall fully
paid the outstanding Senior Subordinated Debt contemporaneous with the
initial advance under the Line of Credit.
(l) New Subordinated Debt. Borrower shall have
received a $3,000,000 loan from Xxxx X. Xxxxxxx which shall be on
terms and conditions, including subordination to the Indebtedness,
satisfactory to Lender.
(m) Letter of Credit. Lender shall have received and
approved a true and correct copy of the letters of credit ("Xxxxxxxx
Letters of Credit") furnished by Cincinnati Industrial Auctioneers,
Inc. in connection with its acquistion of the Xxxxxxxx Facility, which
shall be partially assigned to Lender to the extent of $4,000,000.
4.2 Subsequent Credit. The obligation of Lender to make
each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Lender's satisfaction of each of the
following conditions:
(a) Compliance. The representations and warranties
contained herein and each of the other Loan Documents shall be true on
and as of the date of the signing of this Agreement and on the date of
each extension of credit by Lender pursuant hereto, with the same
effect as though such representations and warranties had been made on
and as of each such date, and on each such date, no Event of Default as
defined herein, and no condition, event or act which with the giving of
notice or the passage of time or both would constitute such an Event of
Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Lender shall have received all
additional documents which may be required in connection with such
extension of credit.
SECTION 5. GRANT OF SECURITY INTEREST
As security for all Indebtedness of Borrower to Lender
Borrower grants to Lender liens and security interests of first
priority in the following property and interests in property, whether
now owned or hereafter acquired or existing, and wherever located: all
Rights to Payment, Inventory, Equipment and Records, the Xxxxxxxx
Facility and the Xxxxxxx Property, and a lien and security interest of
second priority in the following property and interests in property,
whether now owned or hereafter acquired or existing, and wherever
located: the Walnut Facility,, the Zerand Holdback, and the SSMI
Collateral, and all products and proceeds of any of the foregoing, in
any form, including without limitation, insurance proceeds and all
claims against third parties for loss or damage to or destruction of
any or all of the foregoing.
All of the foregoing shall be evidenced by and subject to
the terms of such documents as Lender shall reasonably require, all in
form and substance satisfactory to Lender. Borrower shall reimburse
Lender, immediately upon demand, for all costs and expenses incurred by
Lender in connection with any of the foregoing security, including
without limitation filing and recording fees and costs of environmental
studies, appraisals, audits and title insurance.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Cash Collateral Account.
(a) Cash Collateral Account. Borrower shall, at
Borrower's expense and in the manner requested by Lender from time to
time, direct that remittances and all other collections and proceeds of
Accounts and other Collateral shall be deposited into a lock box
account maintained in Lender's name. In connection therewith, Borrower
shall execute such lockbox agreement as Lender shall require. Borrower
shall maintain with Lender, and Borrower hereby grants to Lender a
security interest in, a non-interest bearing deposit account over which
Borrower shall have no control ("Cash Collateral Account") and into
which the proceeds of all Borrower's Rights to Payment shall be
deposited immediately upon their receipt.
(b) Calculations. For purposes of calculating
interest on the Line of Credit, such payments or other funds received
will be applied (conditional upon final collection) as a principal
reduction on the Line of Credit two (2) Business Days following the
date of receipt by Lender's WellsCredit Division of the inter-branch
advice of deposit that such payments or other funds have been deposited
in the Cash Collateral Account. For purposes of calculating the amount
of the Revolving Loans available to Borrower such payments will be
applied (conditional upon final collection) to the Line of Credit on
the Business Day of receipt by the WellsCredit Division, if such
advices are received within sufficient time (in accordance with
Lender's usual and customary practices as in effect from time to time)
to credit Borrower's loan account on such day, and if not, then on the
next Business Day.
(c) Immediate Deposit. Borrower and all of its
affiliates, subsidiaries, shareholders, directors, employees or agents
shall, acting as trustee for Lender, receive, as the property of
Lender, any monies, checks, notes, drafts, or any other payment
relating to and/or proceeds of Accounts or other Collateral which come
into their possession or under their control and immediately upon
receipt thereof, shall deposit or cause the same to be deposited in the
Cash Collateral Account, or remit the same or cause the same to be
remitted, in kind, to Lender. In no event shall the same be commingled
with Borrower's own funds.
6.2 Statements. Lender shall render to Borrower each
month a statement setting forth the balance in Borrower's loan
account(s) maintained by Lender for Borrower pursuant to the provisions
of this Agreement, including principal, interest, fees, costs and
expenses. Each such statement shall be subject to subsequent
adjustment by Lender but shall, absent manifest errors or omissions, be
considered correct and deemed accepted by Borrower and conclusively
binding upon Borrower as an account stated except to the extent that
Lender receives a written notice from Borrower of any specific
exceptions of Borrower thereto within sixty (60) days after the date
such statement has been mailed by Lender. Until such time as Lender
shall have rendered to Borrower a written statement as provided above,
the balance in Borrower's loan account(s) shall be presumptive evidence
of the amounts due and owing to Lender by Borrower.
6.3 Payments. All amounts due under any of the Loan
Documents shall be payable to the Cash Collateral Account as provided
in Section 6.1 hereof or such other place as Lender may designate from
time to time. Lender may apply payments received or collected from
Borrower or for the account of Borrower (including, without limitation,
the monetary proceeds of collections or of realization upon any
Collateral) to such of the Loans, whether or not then due, in such
order and manner as Lender determines. At Lender's option, all
principal, interest, fees, costs, expenses and other charges provided
for in this Agreement or the other Loan Documents may be charged
directly to the loan account(s) of Borrower. Borrower shall make all
payments due Lender free and clear of, and without deduction or
withholding for or on account of, any setoff, counterclaim, defense,
duties, taxes, levies, imposts, fees, deductions, withholding,
restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of
Borrower's obligations to Lender under this Agreement, Lender is
required to surrender or return such payment or proceeds to any person
or entity for any reason, then the obligations intended to be satisfied
by such payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such payment or
proceeds had not been received by Lender. Borrower shall be liable to
pay to Lender, and does hereby indemnify and hold Lender harmless for
the amount of any payments or proceeds surrendered or returned. This
Section 6.3 shall remain effective notwithstanding any contrary action
which may be taken by Lender in reliance upon such payment or proceeds.
This Section 6.3 shall survive the payment of Borrower's obligations
under the Loan Documents and the termination of this Agreement.
6.4 Use of Proceeds. Borrower shall use the initial
proceeds of the Loans provided by Lender to Borrower hereunder only
for: (a) payments to each of the persons listed in the disbursement
order furnished by Borrower to Lender on or about the date hereof; and
(b) costs, expenses and fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the other
Financing Agreements. All other Loans made or Letters of Credit
provided by Lender to Borrower pursuant to the provisions hereof shall
be used by Borrower only for general operating, working capital and
other proper corporate purposes of Borrower not otherwise prohibited by
the terms of this Agreement. None of the proceeds will be used,
directly or indirectly, for the purpose of purchasing or carrying any
margin security or for the purposes of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any
margin security or for the any other purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System,
as amended.
SECTION 7. REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties
to Lender, which representations and warranties shall survive the
execution of this Agreement and shall continue in full force and effect
until the full and final payment, and satisfaction and discharge, of
all obligations of Borrower to Lender subject to this Agreement.
7.1 Legal Status. Borrower is a corporation duly
organized and existing and in good standing under the laws of the State
of Delaware, and is qualified or licensed to do business, and is in
good standing as a foreign corporation, if applicable, in all
jurisdictions in which such qualification or licensing is required or
in which the failure to so qualify or to be so licensed could have a
material adverse effect on Borrower.
7.2 Authorization and Validity. The Loan Documents have
been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and
binding agreements and obligations of Borrower or the party which
executes the same, enforceable in accordance with their respective
terms.
7.3 No Violation. The execution, delivery and performance
by Borrower of each of the Loan Documents do not violate any provision
of any law or regulation, or contravene any provision of the
Certificate of Incorporation or By-Laws of Borrower, or result in a
breach of or default under any contract, obligation, indenture or other
instrument to which Borrower is a party or by which Borrower may be
bound.
7.4 No Claims. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits
or proceedings before any governmental authority, arbitrator, court
or administrative agency which may adversely affect the financial
condition or operation of Borrower other than those disclosed by
Borrower to Lender in the Information Certificate.
7.5 Correctness of Financial Statement. The financial
statement of Borrower dated April 30, 1998, heretofore delivered by
Borrower to Lender presents fairly the financial condition of Borrower;
discloses all liabilities of Borrower that are required to be reflected
or reserved against under GAAP, whether liquidated or unliquidated,
fixed or contingent; and has been prepared in accordance with generally
accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in
the financial condition of Borrower, nor has Borrower mortgaged,
pledged or granted a security interest in or encumbered any of its
assets or properties except as disclosed by Borrower to Lender in
writing in the Information Certificate or as permitted by this
Agreement.
7.6 Income Tax Returns. Except as set forth in the
Information Certificate, Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to
any year.
7.7 No Subordination. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which
Borrower may be bound that requires the subordination in right of
payment of any of Borrower's obligations subject to this Agreement to
any other obligation of Borrower.
7.8 Permits, Franchises. Borrower possesses, and will
hereafter possess, all permits, memberships, franchises, contracts and
licenses required and rights to all trademarks, trade names, if any,
patents, and fictitious names necessary to enable it to conduct the
business in which it is now engaged in compliance with applicable law.
7.9 ERISA. Except to the extent described in Schedule 7.9
herein, Borrower is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower
has not violated any provision of any defined employee pension benefit
plan (as defined in ERISA) maintained or contributed to by Borrower
(each, a "Plan"); no Reportable Event as defined in ERISA has occurred
and is continuing with respect to any Plan initiated by Borrower;
Borrower has met its minimum funding requirements under ERISA with
respect to each Plan; and each Plan will be able to fulfill its benefit
obligations as they come due in accordance with the Plan documents and
under generally accepted accounting principles.
7.10 Other Obligations. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any
other material lease, commitment, contract, instrument or obligation.
7.11 Environmental Matters. Except as disclosed by
Borrower to Lender in writing prior to the date hereof, Borrower is in
compliance in all material respects with all applicable Federal or
state environmental, hazardous waste, health and safety statutes and
any rules or regulations adopted pursuant thereto, which govern or
affect any of Borrower's operations and/or properties, including
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and
Recovery Act of 1976, and the Federal Toxic Substances Control Act, as
any of the same may be amended, modified or supplemented from time to
time. None of the operations of Borrower is the subject of any Federal
or state investigation evaluating whether any remedial action involving
a material expenditure is needed to respond to a release of any toxic
or hazardous waste or substance into the environment. Borrower has no
material contingent liability in connection with any release of any
toxic or hazardous waste or substance into the environment.
7.12 Real Property Collateral. Except as disclosed by
Borrower to Lender in writing prior to the date hereof, with respect to
any real property Collateral required hereby:
(a) All taxes, governmental assessments, insurance
premiums, and water, sewer and municipal charges, and rents (if any)
which previously became due and owing in respect thereof have been paid
as of the date hereof.
(b) There are no mechanics' or similar liens or
claims which have been filed for work, labor or material (and no rights
are outstanding that under law could give rise to any such lien) which
affect all or any interest in any such real property and which are or
may be prior to or equal to the lien thereon in favor of Lender.
(c) There is no pending, or to the best of Borrower's
knowledge threatened, proceeding for the total or partial condemnation
of all or any portion of any such real property.
SECTION 8. AFFIRMATIVE COVENANTS
Borrower covenants that so long as Lender remains committed
to extend credit to Borrower pursuant to the terms of this Agreement
or any liabilities (whether direct or contingent, liquidated or
unliquidated) of Borrower to Lender under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of
Borrower subject hereto, Borrower shall:
8.1 Punctual Payments. Punctually pay all principal,
interest, fees or other liabilities due under any of the Loan Documents
at the times and place and in the manner specified therein, and
immediately upon demand by Bank, the amount by which the outstanding
principal balance of Revolving Loans and/or Letter of Credit
Obligations at any time exceeds any limitation applicable thereto.
8.2 Records and Premises. Maintain proper books and
records in which true and complete entries shall be made of all
dealings or transactions of or in relation to Collateral and the
business of Borrower in accordance with GAAP. From time to time as
requested by Lender, at the cost and expense of Borrower, allow Lender
or its designee complete access to all of Borrower's premises during
normal business hours and after notice to Borrower, or at any time and
without notice to Borrower if an Event of Default exists or has
occurred and is continuing, for the purposes of inspecting, verifying
and auditing the Collateral and all of Borrower's books and records,
including, without limitation, the Records, and promptly furnish to
Lender such copies of such books and records or extracts therefrom as
Lender may request, and allow Lender during normal business hours to
use such of Borrower's personnel, equipment, supplies and premises as
may be reasonably necessary for the foregoing, and if an Event of
Default exists or has occurred and is continuing, for the collection of
Accounts and realization of other Collateral.
8.3 Collateral Reporting. Borrower shall provide Lender
with the following documents in a form satisfactory to Lender:
(a) on a regular basis as required by Lender, a
schedule of Accounts, including without limitation, daily sales, credit
and adjustment journals and cash receipts;
(b) on or before the 5th day after and as of the end
of each week, (i) perpetual inventory reports, and (ii) inventory
reports by category;
(c) upon Lender's request, (i) copies of customer
statements and credit memos, remittance advices and reports, and copies
of deposit slips and bank statements, (ii) copies of shipping and
delivery documents, and (iii) copies of purchase orders, invoices and
delivery documents for Inventory and Equipment acquired by Borrower;
(d) on or before the 10th day after and as of the end
of each month (or more frequently as Lender may request), (i) agings of
accounts receivable, and (ii) agings of accounts payable;
(e) upon Lender's request, Borrower shall, at its
expense, no more than once in any twelve (12) month period, but at any
time or times as Lender may request on or after an Event of Default,
deliver or cause to be delivered to Lender written reports or
appraisals as to the Collateral in form, scope and methodology
acceptable to Lender and by an appraiser acceptable to Lender,
addressed to Lender or upon which Lender is expressly permitted to
rely; and
(f) such other reports as to the Collateral as Lender
shall request from time to time. If any of Borrower's records of the
Collateral are prepared or maintained by an accounting service,
contractor, shipper or other agent, Borrower hereby irrevocably
authorizes such service, contractor, shipper or agent to deliver such
records, reports, and related documents to Lender and to follow
Lender's instructions with respect to further services at any time that
an Event of Default exists or has occurred and is continuing.
8.4 Financial Statements. Provide to Lender all of the
following, in form and detail satisfactory to Lender:
(a) not later than ninety (90) days after and as of
the end of each fiscal year the audited consolidated balance sheets and
certified consolidating worksheets of Borrower and its subsidiaries as
at the end of such year and the audited consolidated operating
statements of Borrower and its subsidiaries as at the end of such year
(showing income, expenses and surplus), setting forth in each case in
comparative form figures for the previous fiscal year, all prepared
in accordance with generally accepted accounting principles and
accompanied by an opinion acceptable to Lender of an independent
certified public accountant acceptable to Lender; and within ten (10)
days after filing, but in no event later than each October 10, copies
of Borrower's filed Federal income tax returns for such year;
(b) not later than twenty (20) days after and as of
the end of each month, the consolidated and consolidating balance
sheets of Borrower and its subsidiaries as at the end of such month and
the consolidated and consolidating operating statements of Borrower and
its subsidiaries for such month (showing income, expenses and surplus
for such month and for the period from the beginning of the fiscal year
to the end of such month), all prepared in accordance with generally
accepted accounting principles, certified by the principal financial
officer of Borrower;
(c) not later than thirty (30) days after and as of
the end of each calendar year, a financial statement of each Obligor,
prepared in accordance with generally accepted accounting principles,
certified by each such Obligor, and within ten (10) days after filing,
but in no event later than each October 10, copies of each Obligor's
filed Federal income tax returns for such year;
(d) contemporaneously with each annual and monthly
financial statement of Borrower required hereby, a certificate of the
president or chief financial officer of Borrower that the financial
statements delivered pursuant thereto fairly present the financial
condition of the Borrower and that there exists no Event of Default nor
any condition, act or event which with the giving of notice or the
passage of time or both would constitute an Event of Default; and
(e) as soon as practicable and in any event by the
last day of each fiscal year of Borrower, a plan and financial forecast
for Borrower's next succeeding fiscal year including, without
limitation, (1) a forecasted balance sheet, statement of income and
statement of cash flows for such fiscal year, (2) forecasted balance
sheets, statements of income and statements of cash flows for each
fiscal month of such fiscal year; and as soon as practicable, all
material amendments, updates and revisions, if any, to the information
provided pursuant to this paragraph; and
(f) not later than five (5) days after filing
thereof, copies of all proxy statements, financial statements, reports,
and notices sent or made available generally by Borrower to its
security holders or to any holders of its debt and all regular,
periodic and special reports, and all registration statements filed
with the Securities and Exchange Commission or a governmental authority
that may be substituted therefor, or with any national securities
exchange; and
(g) from time to time such other information as
Lender may reasonably request, which may include, without limitation,
budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrower.
8.5 Compliance. Preserve and maintain all licenses,
permits, governmental approvals, rights, privileges and franchises
necessary for the conduct of its business; and comply with the
provisions of all documents pursuant to which Borrower is organized
and/or which govern Borrower's continued existence and with the
requirements of all laws, rules, regulations and orders of any
governmental authority applicable to Borrower or its business.
8.6 Insurance. Maintain and keep in force insurance of
the types and in amounts customarily carried in lines of business
similar to Borrower's, including but not limited to fire, extended
coverage, public liability, property damage and workers' compensation,
carried with companies and in amounts satisfactory to Lender, and
deliver to Lender from time to time at Lender's request schedules
setting forth all insurance then in effect. At its option, Lender may
apply any insurance proceeds received by Lender at any time to the cost
of repairs or replacement of Collateral and/or to payment of the
Borrower's Obligations to Lender under this Agreement, whether or not
then due, in any order and in such manner as Lender may determine or
hold such proceeds as cash collateral for such Obligations.
8.7 Facilities. Keep all Borrower's properties useful or
necessary to Borrower's business in good repair and condition, and from
time to time make necessary repairs, renewals and replacements thereto
so that Borrower's properties shall be fully and efficiently preserved
and maintained.
8.8 Taxes and Other Liabilities. Pay and discharge when
due any and all indebtedness, obligations, assessments and taxes, both
real or personal, including without limitation, Federal and state
income taxes and state and local property taxes and assessments, except
such (a) as Borrower may in good faith contest or as to which a bona
fide dispute may arise, and (b) for which Borrower has made provision,
to Lender's satisfaction, for eventual payment thereof in the event
Borrower is obligated to make such payment.
8.9 Litigation. Promptly give notice in writing to Lender
of any litigation pending or threatened in writing against Borrower
with a claim in excess of $50,000.
8.10 Financial Condition. Maintain Borrower's financial
condition as follows:
(a) Working Capital not at any time less
than $2,700,000.
(b) Tangible Net Worth not at any time less
than - $500,000.
(c) Capital expenditures, inclusive of
capitalized lease expenditures, not greater
than depreciation in any fiscal year.
8.11 Notice to Lender. Promptly (but in no event more than
five (5) days after the occurrence of each such event or matter) give
written notice to Lender in reasonable detail of: (a) the occurrence
of any Event of Default, or any condition, event or act which with the
giving of notice or the passage of time or both would constitute such
an Event of Default; (b) the occurrence and nature of any Reportable
Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; and (c) any termination or
cancellation of any insurance policy which Borrower is required to
maintain, or any loss through liability or property damage, or through
fire, theft or any other cause affecting Borrower's property. Provide
not less than thirty (30) days prior written notice to Lender of any
change in the name or the organizational structure of Borrower.
8.12 Further Assurances. At the request of Lender at any
time and from time to time, duly execute and deliver, or cause to be
duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be
necessary or proper to evidence, perfect, maintain and enforce the
security interests and the priority thereof in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement or
any of the other Loan Documents, at Borrower's expense. Lender may at
any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of
Revolving Loans and issuing Letters of Credit contained herein are
satisfied. In the event of such request by Lender, Lender may, at its
option, cease to make any further Revolving Loans or provide any
further Letters of Credit until Lender has received such certificate
and, in addition, Lender has determined that such conditions are
satisfied. Where permitted by law, Borrower hereby authorizes Lender
to execute and file one or more UCC financing statements signed only by
Lender.
8.13 Year 2000 Covenant. Borrower agrees to perform all
acts reasonably necessary to ensure that (a) Borrower and any business
in which Borrower holds a substantial interest, and (b) all customers,
suppliers and vendors that are material to Borrower's business, become
Year 2000 Compliant in a timely manner. Such acts shall include,
without limitation, performing a comprehensive review and assessment of
all of Borrower's systems and adopting a detailed plan, with itemized
budget, for the remediation, monitoring and testing of such systems.
As used herein, "Year 2000 Compliant" shall mean, in regard to any
entity, that all software, hardware, firmware, equipment, goods or
systems utilized by or material to the business operations or financial
condition of such entity, will properly perform date sensitive
functions before, during and after the year 2000. Borrower shall,
immediately upon request, provide to Bank such certifications or other
evidence of Borrower's compliance with the terms hereof as Bank may
from time to time require.
8.14 Xxxxxxxx Letters of Credit. Borrower agrees to draw
in full on the Xxxxxxxx Letters of Credit in the event Borrower is
entitled to make such draw under the terms thereof.
SECTION 9. NEGATIVE COVENANTS
Borrower further covenants that so long as Lender remains
committed to Borrower pursuant to the terms of this Agreement or any
liabilities (whether direct or contingent, liquidated or unliquidated)
of Borrower to Lender under any of the Loan Documents remain
outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower will not without the Lender's prior written
consent:
9.1 Other Indebtedness. Create, incur, assume or permit
to exist any indebtedness or liabilities resulting from borrowings,
loans or advances, whether secured or unsecured, matured or unmatured,
liquidated or unliquidated, joint or several, except the liabilities of
Borrower to Lender and any other liabilities of Borrower existing as
of, and disclosed to Lender prior to, the date hereof in the
Information Certificate. Notwithstanding the foregoing, Borrower may
finance Accounts which Lender excludes from Eligible Accounts with
Lender's consent, such consent not to be unreasonably withheld or
delayed, upon ten (10) days prior written notice to Lender, which
notice shall include a copy of the proposed financing, and the
underlying contract pertaining to such proposed financed Account.
9.2 Merger, Consolidation, Transfer of Assets. Merge into
or consolidate with any corporation or other entity; make any
substantial change in the conduct or nature of Borrower's business;
acquire all or substantially all of the assets of any corporation or
other entity; nor sell, lease, transfer or otherwise dispose of all or
a substantial or material part of its assets except in the ordinary
course of business and except for the sales of the Xxxxxxxx Facility,
the Walnut Facility, and the SSMI Collateral.
9.3 Guaranties. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments
for deposit or collection in the ordinary course of business),
accommodation endorser or otherwise for, nor pledge or hypothecate any
assets of Borrower as security for, any liabilities or obligations of
any other person or entity, except as disclosed in the Information
Certificate.
9.4 Loans, Advances, Investments. Make any loans or
advances to or investments in any Person.
9.5 Dividends, Distributions. Declare or pay any dividend
or distribution either in cash, stock or any other property on
Borrower's stock now or hereafter outstanding; nor redeem, retire,
repurchase or otherwise acquire any shares of any class of Borrower's
stock now or hereafter outstanding.
9.6 Pledge of Assets. Mortgage, pledge, grant or permit
to exist a security interest in, or lien upon, any of its assets of any
kind, now owned or hereafter acquired, except any of the foregoing in
favor of Lender, a security interest in favor of Guarantor covering
certain assets of Borrower as described in the Subordinated Debt
Documents, and except as set forth in the Information Certificate.
Notwithstanding the foregoing, Borrower may execute and deliver to
customers of Borrower a Purchase Order UCC Financing Statement with
Lender's consent, such consent not to be unreasonably withheld, upon
ten (10) days prior written notice to Lender, which notice shall
include a copy of the proposed Purchase Order UCC Financing Statement
and the underlying contract to such proposed Purchase Order UCC
Financing Statement.
9.7 New Collateral Location. Open any new location unless
Borrower (a) gives Lender thirty (30) days prior written notice of the
intended opening of any such new location, and (b) executes and
delivers, or causes to be executed and delivered, to Lender such
agreements, documents, and instruments as Lender may deem reasonably
necessary or desirable to protect its interests in the Collateral
at such location, including without limitation, UCC-1 financing
statements.
SECTION 10. EVENTS OF DEFAULT
10.1 Events of Default. The occurrence of any of the
following shall constitute an "Event of Default" under this Agreement:
(a) B o r rower shall fail to pay when due any
principal, interest, fees or other amounts payable under any of the
Loan Documents.
(b) Any financial statement or certificate (including
the Information Certificate) furnished to Lender in connection with, or
any representation or warranty made by Borrower or any other party
under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished
or made.
(c) Any other default in the performance of or
compliance with any obligation, agreement or other provision contained
in this Agreement.
(d) Any default in the payment or performance of any
obligation, or any defined event of default, under the terms of any
contract or instrument (other than any of the Loan Documents) pursuant
to which Borrower or any Obligor has incurred any debt or other
liability to any person or entity, including Lender, including the
Subordinated Debt Documents, and, if the debt or other liability is
owed to a party other than Lender, the amount thereof exceeds $50,000.
(e) Any default in the payment or performance of any
obligation, or any defined event of default, under any of the Loan
Documents other than this Agreement, and the expiration of any
applicable grace period thereunder.
(f) The filing of a notice of judgment lien against
Borrower or any Obligor; or the recording of any abstract of judgment
against Borrower or any Obligor in any county in which Borrower or such
Obligor has an interest in real property; or the service of a notice of
levy and/or of a writ of attachment or execution, or other like
process, against the assets of Borrower or any Obligor; or the entry of
a judgment against Borrower or any Obligor; and with respect to any of
the foregoing, the amount in dispute is in excess of $50,000.
(g) Borrower or any Obligor shall become insolvent,
or shall suffer or consent to or apply for the appointment of a
receiver, trustee, custodian or liquidator of itself or any of its
property, or shall generally fail to pay its debts as they become due,
or shall make a general assignment for the benefit of creditors;
Borrower or any Obligor shall file a voluntary petition in bankruptcy,
or seeking reorganization, in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy
Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time ("Bankruptcy Code"), or under any state or
federal law granting relief to debtors, whether now or hereafter in
effect; or any involuntary petition or proceeding pursuant to the
Bankruptcy Code or any other applicable state or federal law relating
to bankruptcy, reorganization or other relief for debtors is filed or
commenced against Borrower or any Obligor and the same is not dismissed
within thirty (30) days, or Borrower or any Obligor shall file an
answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition; or Borrower or any Obligor
shall be adjudicated a bankrupt, or an order for relief shall be
entered by any court of competent jurisdiction under the Bankruptcy
Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors.
(h) There shall exist or occur any event or condition
which Lender in good faith believes impairs, or is substantially likely
to impair, the prospect of payment or performance by Borrower of its
obligations under any of the Loan Documents.
(i) The death or incapacity of any guarantor
hereunder. The dissolution or liquidation of Borrower; or Borrower or
any such guarantor or any of their directors, stockholders or members,
shall take action seeking to effect the dissolution or liquidation of
Borrower.
(j) Any change in ownership during the term of this
Agreement of an aggregate of twenty-five percent (25%) or more (in a
single transaction or in a series of related transactions) of the
Series Preferred B Stock of Borrower.
(k) Any Obligor revokes or terminates (or attempts or
purports to revoke or terminate) its guarantee, endorsement or other
agreement in favor of Lender. Any creditor of Borrower which has
executed a subordination in favor of Lender revokes or terminates (or
attempts or purports to revoke or terminate) such subordination.
(l) The indictment or threatened indictment of
Borrower or any Obligor under any criminal statute, or commencement or
threatened commencement of criminal or civil proceedings against
Borrower or any Obligor, pursuant to which statute or proceedings the
penalties or remedies sought or available include forfeiture of any of
the property of Borrower or such Obligor.
(m) Any member of Borrower's Senior Management shall
cease, for any reason, to be employed by Borrower on a full-time basis.
Senior Management means Xxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxx.
(n) The sale, transfer, hypothecation, assignment or
encumbrance, whether voluntary, involuntary or by operation of law,
without Lender's prior written consent, of all or any part of or
interest in any real property Collateral required hereby, except as
permitted in this Agreement.
10.2 Remedies.
(a) Generally.If an Event of Default shall occur,
(a) any indebtedness of Borrower under any of the Loan Documents, any
term thereof to the contrary notwithstanding, shall at Lender's option
and without notice become immediately due and payable without
presentment, demand, protest or notice of dishonor, notice of default,
notice of intent to accelerate the maturity thereof, notice of
acceleration of the maturity thereof, or other notice of any kind, all
of which are hereby expressly waived by Borrower; (b) the obligation,
if any, of Lender to permit further borrowings hereunder shall
immediately cease and terminate; and (c) Lender shall have all rights,
powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to
any or all security for any credit accommodation from Lender subject
hereto and to exercise any or all of the rights of a beneficiary or
secured party pursuant to applicable law. All rights, powers and
remedies of Lender in connection with each of the Loan Documents may be
exercised at any time by Lender and from time to time after the
occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies
provided by law or equity.
(b) Notice and Cure. Notwithstanding the foregoing,
upon the occurrence of an Event of Default under Sections 10.1(b) or
10.1(c), or a breach of Section 8.10, if Borrower shall have provided
written notice of same to Lender, thereupon, Borrower shall have ten
(10) days from the date of such notice in which to cure same.
(c) Notice of Certain Conditions. Notwithstanding
the foregoing, upon the occurrence of an event described in Sections
10.1(h), (j), (k), (l), or (m), Borrower shall have two (2) Business
Days from the date of written notice from Lender in which to cure same
before such event constitutes an Event of Default; provided, Borrower
shall immediately notify Lender in writing of an event described in
Sections 10.1, (j), (k), (l), or (m), otherwise, Borrower shall not be
entitled to any cure period under this subsection.
10.3 Right of Setoff. Upon the occurrence of any Event of
Default, or if Borrower becomes insolvent, however evidenced, Lender
and any agent bank of Lender is hereby authorized at any time and from
time to time, without notice to Borrower (any such notice being
expressly waived by Borrower), to setoff and apply any and all deposits
(general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by Lender or any agent
bank of Lender to or for the credit or the account of Borrower against
any and all of the indebtedness of Borrower to Lender, irrespective of
whether or not Lender shall have made any demand under this Agreement
or the Line of Credit Note and although such obligations may be
unmatured. Lender agrees promptly to notify Borrower after any such
setoff and application, provided that the failure to give such notice
shall not affect the validity of such setoff and application. The
rights of Lender under this Section are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which
Lender may have. The rights contained in this section shall inure to
the benefit of any participant in any loans made hereunder.
SECTION 11. TERM OF AGREEMENT AND MISCELLANEOUS
11.1 Term.
(a) Maturity Date. This Agreement and the other Loan
Documents shall become effective as of the date set forth on the first
page hereof. This Agreement and the other Loan Documents (excluding
the Term Note) and shall continue in full force and effect for a term
ending on the date three (3) years from the date hereof. Upon the date
of termination of the Loan Documents, Borrower shall pay to Lender, in
full, all outstanding and unpaid obligations under this Agreement and
the other Loan Documents and shall furnish cash collateral to Lender in
such amounts as Lender determines are reasonably necessary to secure
Lender from loss, cost, damage or expense, including attorneys' fees
and legal expenses, in connection with any contingent obligations,
including issued and outstanding Letters of Credit and checks or other
payments provisionally credited to the obligations and/or as to which
Lender has not yet received final and indefeasible payment. Interest
shall be due until and including the next Business Day, if the amounts
so paid by Borrower to the bank account designated by Lender are
received in such bank account later than 12:00 noon, California time.
The Term Note shall be due and payable ninety (90) days from the date
hereof.
(b) Continuing Obligations. No termination of this
Agreement or the other Loan Documents shall relieve or discharge
Borrower of its respective duties, obligations and covenants under this
Agreement or the other Loan Documents until all Borrower's obligations
under this Agreement and the other Loan Documents have been fully and
finally discharged and paid, and Lender's continuing security interest
in the Collateral and the rights and remedies of Lender hereunder,
under the other Loan Documents and applicable law, shall remain in
effect until all such obligations have been fully and finally
discharged and paid.
(c) Early Termination Fee. If for any reason (other
than as set forth below in this Section, this Agreement is terminated
prior to the end of the then current term of this Agreement, in view of
the impracticality and extreme difficulty of ascertaining actual
damages and by mutual agreement of the parties as to a reasonable
calculation of Lender's lost profits as a result thereof, Borrower
agrees to pay to Lender, upon the effective date of such termination,
an early termination fee in the amount set forth below if such
termination is effective in the period indicated:
Amount Period
(i) 3.0% of Maximum Line Amount Date hereof to and
including first anniver-
sary date hereof.
(ii) 2.0% of Maximum Line Amount After first anniversary
date hereof to and in-
cluding second anniver-
sary date hereof.
(iii) 1.0% of Maximum Line Amount After second anniversary
date hereof to the and
including third anniver-
sary date hereof.
Such early termination fee shall be presumed to be the amount of
damages sustained by Lender as a result of such early termination and
Borrower agrees that it is reasonable under the circumstances currently
existing.
(d) No Early Termination Fee. No early termination
fee shall be payable if a group or division of Xxxxx Fargo Bank (other
than the WellsCredit Division or the workout group), or an affiliate of
Xxxxx Fargo Bank extends credit to Borrower, which credit refinances
and/or replaces in full the credit facilities granted under this
Agreement.
11.2 No Waiver. No delay, failure or discontinuance of
Lender in exercising any right, power or remedy under any of the Loan
Documents shall affect or operate as a waiver of such right, power or
remedy; nor shall any single or partial exercise of any such right,
power or remedy preclude, waive or otherwise affect any other or
further exercise thereof or the exercise of any other right, power or
remedy. Any waiver, permit, consent or approval of any kind by Lender
of any breach of or default under any of the Loan Documents must be in
writing and shall be effective only to the extent set forth in such
writing.
11.3 Notices. All notices, requests and demands which any
party is required or may desire to give to any other party under any
provision of this Agreement must be in writing delivered to each party
at the following address:
BORROWER:
XXXXXXX INTERNATIONAL, INC.
0000 Xxxxxxx Xxxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attn: Chairman of the Board
with a copy to:
XXXXXXX INTERNATIONAL, INC.
0000 Xxxxxxx Xxxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attn: Chief Accounting Officer
with a copy to:
XXXXXXX XXXXXX, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Xx.
LENDER: XXXXX FARGO BANK,
NATIONAL ASSOCIATION
Xx. Xxx Xxxxxx
Xxxxx Credit Division
000 X. Xxx Xxxxxx
Xxxxxxxx, XX 00000
or to such other address as any party may designate by written notice
to all other parties. Each such notice, request and demand shall be
deemed given or made as follows: (a) if sent by hand delivery, upon
delivery; (b) if sent by mail, upon the earlier of the date of receipt
or three (3) days after deposit in the U.S. mail, first class and
postage prepaid; and (c) if sent by telecopy, upon receipt.
11.4 Costs, Expenses and Attorneys' Fees. Borrower shall
pay to Lender immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys'
fees (to include outside counsel fees and all allocated costs of
Lender's in-house counsel), incurred by Lender in connection with
(a) the negotiation and preparation of this Agreement and each other of
the Loan Documents, Lender's continued administration hereof and
thereof, and the preparation of any amendments and waivers hereto and
thereto, (b) all out-of-pocket expenses and costs heretofore and from
time to time hereafter incurred by Lender during the course of periodic
field examinations of the Collateral and Borrower's operations, plus a
per diem charge for Lender's examiners in the field and office at
Lender's WellsCredit Division's rate in effect from time to time,
(c) the enforcement of Lender's rights and/or the collection of any
amounts which become due to Lender under any of the Loan Documents, and
(d) the prosecution or defense of any action in any way related to any
of the Loan Documents, including without limitation any action for
declaratory relief, and including any of the foregoing incurred in
connection with any bankruptcy proceeding relating to Borrower.
11.5 Successors, Assignment. This Agreement shall be
binding on and inure to the benefit of the heirs, executors,
administrators, legal representatives, successors and assigns of the
parties; provided however, that Borrower may not assign or transfer its
interest hereunder without the prior written consent of Lender. Lender
reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Lender's
rights and benefits under each of the Loan Documents. In connection
therewith, Lender may disclose all documents and information which
Lender now has or may hereafter acquire relating to any credit extended
by Lender to Borrower, Borrower or its business, any Obligor or the
business of any Obligor, or any Collateral required hereunder, subject
to compliance with applicable laws.
11.6 Entire Agreement, Amendment. This Agreement and each
other of the Loan Documents constitute the entire agreement between
Borrower and Lender with respect to any extension of credit by Lender
subject hereto and supersede all prior negotiations, communications,
discussions and correspondence concerning the subject matter hereof.
This Agreement may be amended or modified only by a written instrument
executed by each party hereto.
11.7 No Third Party Beneficiaries. This Agreement is made
and entered into for the sole protection and benefit of the parties
hereto and their respective permitted successors and assigns, and no
other person or entity shall be a third party beneficiary of, or have
any direct or indirect cause of action or claim in connection with,
this Agreement or any other of the Loan Documents to which it is not a
party.
11.8 Time. Time is of the essence of each and every
provision of this Agreement and each other of the Loan Documents.
11.9 Severability of Provisions. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or
any remaining provisions of this Agreement.
11.10 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas, except
to the extent that Lender has greater rights or remedies under Federal
law, whether as a national bank or otherwise, in which case such choice
of Texas law shall not be deemed to deprive Lender of such rights and
remedies as may be available under Federal law.
11.11 Renewal, Extension or Rearrangement. All provisions
of this Agreement relating to the Line of Credit Note or other
Indebtedness shall apply with equal force and effect to each and all
promissory notes hereinafter executed which in whole or in part
represent a renewal, extension, increase or rearrangement of any part
of the Indebtedness originally represented by the Line of Credit Note
or of any part of such other Indebtedness. Any provision of this
Agreement to be performed during the "term of this Agreement," "term
hereof" or similar language, shall include any extension period.
11.12 Waivers. No course of dealing on the part of Lender,
its officers, employees, consultants or agents, nor any failure or
delay by Lender with respect to exercising any right, power or
privilege of Lender under the Line of Credit Note, this Agreement or
any other Security Instrument shall operate as a waiver thereof, except
as otherwise provided in Section 8.02 hereof.
11.13 Cumulative Rights. Rights and remedies of Lender
under the Line of Credit Note, this Agreement and each other Security
Instrument shall be cumulative, and the exercise or partial exercise of
any such right or remedy shall not preclude the exercise of any other
right or remedy.
11.14 Interest. It is the intention of the parties hereto
to conform strictly to applicable usury laws now in force.
Accordingly, if the transactions contemplated hereby would be usurious
under applicable law, then, in that event, notwithstanding anything to
the contrary in the Line of Credit Note, this Agreement or in any other
Security Instrument or agreement entered into in connection with or as
security for the Line of Credit Note, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under
applicable law that is contracted for, charged or received under the
Line of Credit Note, this Agreement or under any of the other aforesaid
Loan Documents or agreements or otherwise in connection with the Line
of Credit Note shall under no circumstances exceed the maximum amount
of interest permitted by applicable law, and any excess shall be
credited on the Line of Credit Note by the holder thereof (or, if the
Line of Credit Note shall have been paid in full, refunded to
Borrower); (ii) determination of the rate of interest for determining
whether the loans hereunder are usurious shall be made by amortizing,
prorating, allocating and spreading, during the full stated term of
such loans, all interest at any time contracted for, charged or
received from Borrower in connection with such loans, and any excess
shall be canceled, credited or refunded as set forth in (i) herein; and
(iii) in the event that the maturity of the Line of Credit Note is
accelerated by reason of an election of the holder thereof resulting
from any Default or Event of Default under this Agreement or otherwise,
or in the event of any required or permitted prepayment, then such
consideration that constitutes interest may never include more than the
maximum amount permitted by applicable law, and excess interest, if
any, provided for in this Agreement or otherwise shall be canceled
automatically as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited on the Line of Credit Note (or, if
the Line of Credit Note shall have been paid in full, refunded to
Borrower).
11.15 Multiple Originals. This Agreement may be executed
in two (2) or more copies; each fully executed copy shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
11.16 Exhibits. All exhibits to this Agreement are
incorporated herein by this reference for all purposes. The exhibits
may be attached hereto, or bound together with or separately from this
Agreement, and such binding shall be effective to identify such
exhibits as if attached to this Agreement.
11.17 No Triparty Loan. Texas Revised Civil Statutes
Annotated, Title 79, chapter 15 (which regulates certain revolving loan
accounts and revolving triparty accounts) shall not apply to the loans
evidenced by this Agreement or the Line of Credit Note.
11.18 Applicable Rate Ceiling. Unless changed in accordance
with law, the applicable rate ceiling under Texas law shall be the
indicated (weekly) rate ceiling from time to time in effect as provided
in Texas Revised Civil Statutes Annotated, article 5069, chapter 1D, as
amended.
11.19 Performance and Venue. Venue for any action in
connection herewith shall be in Xxxxxx County, Texas.
11.20 Negotiation of Documents. This Agreement, the Line
of Credit Note and all other Loan Documents have been negotiated by the
parties at arm's length, each represented by its own counsel to the
extent desired, and the fact that the documents have been prepared by
Lender's counsel, after such negotiation, shall not be cause to
construe any of such documents against Lender.
11.21 Notices Received by Lender. Any instrument in
writing, telex, telegram, telecopy or cable received by Lender in
connection with any loan hereunder, which purports to be dispatched or
signed by or on behalf of Borrower, shall conclusively be deemed to
have been signed by such party, and Lender may rely thereon and shall
have no obligation, duty or responsibility to determine the validity or
genuineness thereof or authority of the Person or Persons executing or
dispatching the same.
11.22 Debtor-Creditor Relationship. None of the terms of
this Agreement or of any other document executed in conjunction
herewith or related hereto shall be deemed to give Lender the rights or
powers to exercise control over the business or affairs of Borrower.
The relationship between Borrower and Lender created by this Agreement
is only that of debtor-creditor.
11.23 Release of Liability. To the maximum extent
permitted by law from time to time in effect, Borrower hereby
knowingly, voluntarily and intentionally (and after it has consulted
with its own attorney) irrevocably and unconditionally agrees that no
claim may be made by Borrower against Lender or any of its affiliates,
participants, shareholders, directors, officers, employees, attorneys,
accountants, or agents or any of its or their successors and assigns,
for any actual, special, indirect, consequential or punitive damages in
respect of any breach or wrongful conduct (whether the claim is based
on contract, tort or statute) arising out of, or related to, the
transactions contemplated by any of this Agreement, the Line of Credit
Note, the Loan Documents or any other related documents, or any act,
omission, or event occurring in connection herewith or therewith. In
furtherance of the foregoing, Borrower hereby waives, releases and
agrees not to xxx upon any claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor,
and Borrower shall indemnify and hold harmless lender and its
affiliates, participants, shareholders, directors, officers, employees,
attorneys, accountants and agents and their successors and assigns of
and from any such claims. Upon the full payment of the Indebtedness,
and prior to Lender releasing any lien or security interest in Property
given to secure the Indebtedness, Borrower, shall (i) execute a release
agreement, in form and substance satisfactory to Lender, releasing
Lender and Lender's affiliates, participants, shareholders, directors,
officers, employees, agents and attorneys from any and all claims,
demands, actions, causes of action, costs, expenses and liabilities
whatsoever, known or unknown, at law or in equity, which Borrower may
have, as of the date of execution of such release or in the future,
against Lender and Lender's affiliates, participants, shareholders,
directors, officers, employees, agents and attorneys, arising out of or
in connection with this Agreement or any related documents, and (ii)
provide evidence satisfactory to Lender that all outstanding taxes,
including all sale, excise and similar taxes have been paid.
11.24 DTPA Waiver. Borrower acknowledges and agrees, on
Borrower's own behalf and on behalf of any permitted assigns and
successors hereafter, that the DTPA is not applicable to this
transaction. Accordingly, Borrower's rights and remedies with respect
to the transaction contemplated under this Agreement and with respect
to all acts or practices of Lender, past, present or future, in
connection with such transaction, shall be governed by legal principles
other than the DTPA. In furtherance thereof, Borrower agrees as
follows:
(a) Borrower represents that Borrower has the
knowledge and experience in financial and business matters that enable
Borrower to evaluate the merits and risks of the business transaction
that is the subject of this Agreement. Borrower also represents that
Borrower is not in a significantly disparate bargaining position in
relation to Lender. Borrower has negotiated the loan documents with
Lender at arm's length and have willingly entered into the loan
documents.
(b) Borrower represents that (i) Borrower has been
represented by Xxxxxxx Xxxxxx L L P. as legal counsel in the
transaction contemplated by this Agreement and (ii) such legal counsel
was not directly or indirectly identified, suggested or selected by
Lender or an agent of Lender.
(c) This Agreement relates to a transaction involving
total consideration by Borrower of more than $100,000.00 and does not
involve the Borrower's residence.
Borrower agrees, on Borrower's own behalf and on behalf of Borrower's
permitted assigns and successors, that all of the Borrower' rights
and remedies under the DTPA are WAIVED AND RELEASED, including
specifically, without limitation, all rights and remedies under the
DTPA resulting from or arising out of any and all acts or practices of
Lender in connection with this transaction, whether such acts or
practices occur before or after the execution of this Agreement.
In furtherance thereof, Borrower agrees that by signing this Agreement,
Borrower and any permitted assigns and successors are bound by the
following waiver:
Waiver of Consumer Rights. Borrower waives
its rights under the Deceptive Trade
Practices--Consumer Protection Act, Section
17.41 et seq., Business & Commerce Code, a
law that gives consumers special rights and
protection. After consultation with an
attorney of Borrower's own selection,
Borrower voluntarily consents to this waiver.
11.25 Arbitration.
(a) Arbitration. Upon the demand of any party, any
Dispute shall be resolved by binding arbitration (except as set forth
in (e) below) in accordance with the terms of this Agreement. A
"Dispute" shall mean any action, dispute, claim or controversy of any
kind, whether in contract or tort, statutory or common law, legal or
equitable, now existing or hereafter arising under or in connection
with, or in any way pertaining to, any of the Loan Documents, or any
past, present or future extensions of credit and other activities,
transactions or obligations of any kind related directly or indirectly
to any of the Loan Documents, including without limitation, any of the
foregoing arising in connection with the exercise of any self-help,
ancillary or other remedies pursuant to any of the Loan Documents. Any
party may by summary proceedings bring an action in court to compel
arbitration of a Dispute. Any party who fails or refuses to submit to
arbitration following a lawful demand by any other party shall bear all
costs and expenses incurred by such other party in compelling
arbitration of any Dispute.
(b) Governing Rules. Arbitration proceedings shall
be administered by the American Arbitration Association ("AAA") or such
other administrator as the parties shall mutually agree upon in
accordance with the AAA Commercial Arbitration Rules. All Disputes
submitted to arbitration shall be resolved in accordance with the
Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the
Loan Documents. The arbitration shall be conducted at a location in
Texas selected by the AAA or other administrator. If there is any
inconsistency between the terms hereof and any such rules, the terms
and procedures set forth herein shall control. All statutes of
limitation applicable to any Dispute shall apply to any arbitration
proceeding. All discovery activities shall be expressly limited to
matters directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered in any court
having jurisdiction; provided however, that nothing contained herein
shall be deemed to be a waiver by any party that is a bank of the
protections afforded to it under 12 U.S.C. [ARTICLE] 91 or any
similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and
Foreclosure. No provision hereof shall limit the right of any party to
exercise self-help remedies such as setoff, foreclosure against or sale
of any real or personal property collateral or security, or to obtain
provisional or ancillary remedies, including without limitation
injunctive relief, sequestration, attachment, garnishment or the
appointment of a receiver, from a court of competent jurisdiction
before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right
of any party to compel arbitration or reference hereunder.
(d) Arbitrator Qualifications and Powers; Awards.
Arbitrators must be active members of the Texas State Bar or retired
judges of the state or federal judiciary of Texas, with expertise in
the substantive laws applicable to the subject matter of the Dispute.
Arbitrators are empowered to resolve Disputes by summary rulings in
response to motions filed prior to the final arbitration hearing.
Arbitrators (i) shall resolve all Disputes in accordance with the
substantive law of the state of Texas, (ii) may grant any remedy or
relief that a court of the state of Texas could order or grant within
the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery
of all costs and fees, to impose sanctions and to take such other
actions as they deem necessary to the same extent a judge could
pursuant to the Federal Rules of Civil Procedure, the Texas Rules of
Civil Procedure or other applicable law. Any Dispute in which the
amount in controversy is $5,000,000 or less shall be decided by a
single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By
submission to a single arbitrator, each party expressly waives any
right or claim to recover more than $5,000,000. Any Dispute in which
the amount in controversy exceeds $5,000,000 shall be decided by
majority vote of a panel of three arbitrators; provided however, that
all three arbitrators must actively participate in all hearings and
deliberations.
(e) Judicial Review. Notwithstanding anything herein
to the contrary, in any arbitration in which the amount in controversy
exceeds $25,000,000, the arbitrators shall be required to make
specific, written findings of fact and conclusions of law. In such
arbitrations (A) the arbitrators shall not have the power to make any
award which is not supported by substantial evidence or which is based
on legal error, (B) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and
the conclusions of law are not erroneous under the substantive law of
the state of Texas, and (C) the parties shall have in addition to the
grounds referred to in the Federal Arbitration Act for vacating,
modifying or correcting an award the right to judicial review of (1)
whether the findings of fact rendered by the arbitrators are supported
by substantial evidence, and (2) whether the conclusions of law are
erroneous under the substantive law of the state of Texas. Judgment
confirming an award in such a proceeding may be entered only if a court
determines the award is supported by substantial evidence and not based
on legal error under the substantive law of the state of Texas.
(f) Real Property Collateral; Judicial Reference.
Notwithstanding anything herein to the contrary, no Dispute shall be
submitted to arbitration if the Dispute concerns indebtedness secured
directly or indirectly, in whole or in part, by any real property
unless (i) the holder of the mortgage, lien or security interest
specifically elects in writing to proceed with the arbitration, or (ii)
all parties to the arbitration waive any rights or benefits that might
accrue to them by virtue of the single action rule statute of Texas,
thereby agreeing that all indebtedness and obligations of the parties,
and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable.
(g) Miscellaneous. To the maximum extent practicable,
the AAA, the arbitrators and the parties shall take all action
required to conclude any arbitration proceeding within 180 days
of the filing of the Dispute with the AAA. No arbitrator or other
party to an arbitration proceeding may disclose the existence, content
or results thereof, except for disclosures of information by a party
required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review
rights set forth herein. If more than one agreement for arbitration
by or between the parties potentially applies to a Dispute, the
arbitration provision most directly related to the Loan Documents or
the subject matter of the Dispute shall control. This arbitration
provision shall survive termination, amendment or expiration of any of
the Loan Documents or any relationship between the parties.
11.26 Final Expression. THIS WRITTEN LOAN AGREEMENT, THE
NOTES AND THE SECURITY INSTRUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES 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 PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first written above.
LENDER:
XXXXX FARGO BANK, NATIONAL ASSOCIATION
By:
Xxxxx X. Xxxx, Vice President
BORROWER:
XXXXXXX INTERNATIONAL, INC.
By:
Xxxx X. Xxxxxxx
Chairman of the Board
and Chief Executive Officer
EXHIBIT "A"
Information Certificate
EXHIBIT "B"
Line of Credit Note
EXHIBIT "C"
Term Note
SCHEDULE I
Inventory
