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CREDIT AGREEMENT Exhibit 10.3
THIS AGREEMENT is entered into as of January 30, 1997, by and between
GADZOOKS, INC., a Texas corporation ("Borrower"), and XXXXX FARGO BANK (TEXAS),
NATIONAL ASSOCIATION ("Bank").
RECITAL
Borrower has requested from Bank the credit accommodation described
below, and Bank has agreed to provide said credit accommodation to Borrower on
the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Bank and Borrower hereby agree as
follows:
ARTICLE I
THE CREDIT
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including June 5, 1998, not to exceed at any time the aggregate
principal amount of Ten Million Dollars ($10,000,000.00) ("Line of Credit"),
the proceeds of which shall be used to finance Borrower's working capital,
general corporate purposes and expansion plans. Borrower's obligation to repay
advances under the Line of Credit shall be evidenced by a promissory note
substantially in the form of Exhibit A attached hereto ("Line of Credit Note"),
all terms of which are incorporated herein by this reference.
(b) Limitation on Borrowings. Outstanding borrowings under the
Line of Credit, to a maximum of the principal amount set forth above, shall not
at any time exceed the product of Annual Traditional Cash Flow multiplied by
1.25. As used in this Agreement, the term "Annual Traditional Cash Flow" will
mean, as of any date of determination for the twelve months ended on such date,
the sum of the Company's net income, plus depreciation and amortization (each
determined in accordance with GAAP), minus any cash gains resulting for the
sale of assets of the Company outside of the normal course of the Company's
business, minus all non-cash gains.
(c) Letter of Credit Subfeature. As a subfeature under the Line
of Credit, Bank agrees from time to time during the term thereof to issue
multiple letters of credit for the account of Borrower (each, a "Letter of
Credit" and collectively, "Letters of Credit"); provided however, that the form
and substance of each Letter of Credit shall be subject to approval by Bank, in
its sole discretion; and provided further, that the aggregate
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undrawn amount of all outstanding Letters of Credit shall not at any time
exceed Ten Million Dollars ($10,000,000.00). Each Letter of Credit shall be
issued for a term not to exceed one hundred eighty (180)days, as designated by
Borrower; provided however, that no Letter of Credit shall have an expiration
date subsequent to May 2, 1998. The undrawn amount of all Letters of Credit
shall be reserved under the Line of Credit and shall not be available for
borrowings thereunder. 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 Bank in connection with the issuance thereof
(each, a "Letter of Credit Agreement" and collectively, "Letter of Credit
Agreements"). Each draft paid by Bank under a Letter of Credit shall be deemed
an advance under the Line of Credit and shall be repaid by Borrower in
accordance with the terms and conditions of this Agreement applicable to such
advances; provided however, that if advances under the Line of Credit are not
available, for any reason, at the time any draft is paid by Bank, then Borrower
shall immediately pay to Bank the full amount of such draft, together with
interest thereon from the date such amount is paid by Bank to the date such
amount is fully repaid by Borrower, at the rate of interest applicable to
advances under the Line of Credit. In such event Borrower agrees that Bank, in
its sole discretion, may debit any demand deposit account maintained by
Borrower with Bank for the amount of any such draft.
(d) Borrowing and Repayment. Borrower may from time to time
during the term of the Line of Credit borrow, partially or wholly repay its
outstanding borrowings, and reborrow, subject to all of the limitations, terms
and conditions contained herein or in the Line of Credit Note; provided
however, that the total outstanding borrowings under the Line of Credit shall
not at any time exceed the maximum principal amount available thereunder, as
set forth above.
SECTION 1.2. INTEREST/FEES.
(a) Interest. The outstanding principal balance of the Line Of
Credit shall bear interest at the rate of interest set forth in the Line of
Credit Note.
(b) Computation and Payment. Interest shall be computed on the
basis of a 360-day year, actual days elapsed, unless such calculation would
result in a usurious rate, in which case interest shall be computed on the
basis of a 365/366-day year, as the case may be, actual days elapsed. Interest
shall be payable at the times and place set forth in the Line of Credit Note.
(c) Loan Origination Fee. Borrower shall pay to Bank a
non-refundable loan origination fee for the Line of Credit equal to Fifteen
Thousand Dollars ($15,000.00), which fee shall be due and payable in full on
March 15, 1997.
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(d) Unused Commitment Fee. Borrower shall pay to Bank a fee equal
to one-half percent (.50%) per annum (computed on the basis of a 360-day year,
actual days elapsed) on the average daily unused amount of the Line of Credit,
which fee shall be calculated on a calendar quarter basis by Bank and shall be
due and payable by Borrower in arrears on the fifth day of each calendar
quarter.
(e) Letter of Credit Fees. Borrower shall pay to Bank fees upon
the issuance of each Letter of Credit, upon the payment or negotiation by Bank
of each draft under any Letter of Credit and upon the occurrence of any other
activity with respect to any Letter of Credit (including without limitation,
the transfer, amendment or cancellation of any Letter of Credit) determined in
accordance with Bank's standard fees and charges then in effect for such
activity.
SECTION 1.3. COLLECTION OF PAYMENTS. Borrower authorizes Bank to
collect all interest and fees due under the Line of Credit by charging
Borrower's demand deposit account number ____________ with Bank, or any other
demand deposit account maintained by Borrower with Bank, for the full amount
thereof. Should there be insufficient funds in any such demand deposit account
to pay all such sums when due, the full amount of such deficiency shall be
immediately due and payable by Borrower.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank,
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 Bank
subject to this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly
organized and existing and in good standing under the laws of the State of
Texas, and is qualified or licensed to do business (and is in good standing as
a foreign corporation, if applicable) in all jurisdictions in which the failure
to so qualify or to be so licensed could have a material adverse effect on
Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the Line
of Credit Note, and each other document, contract and instrument required
hereby or at any time hereafter delivered to Bank in connection herewith
(collectively, 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
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party which executes the same, enforceable in accordance with their respective
terms.
SECTION 2.3. 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 Articles
of Incorporation or By-Laws of Borrower, or result in any breach of or default
under any material contract, obligation, indenture or other instrument to which
Borrower is a party or by which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could reasonably be expected to have a material
adverse effect on the financial condition or operation of Borrower other than
those disclosed by Borrower to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial
statement of Borrower dated September 28, 1996, a true copy of which has been
delivered by Borrower to Bank prior to the date hereof, (a) presents fairly the
financial condition of Borrower, (b) discloses all liabilities of Borrower that
are required to be reflected or reserved against under generally accepted
accounting principles, whether liquidated or unliquidated, fixed or contingent,
and (c) 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, granted a security interest in
or otherwise encumbered any of its assets or properties except in favor of Bank
or as otherwise permitted by Bank in writing.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments of its income tax payable with respect to
any year.
SECTION 2.7. 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.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will
hereafter possess, all material permits, consents, approvals, franchises and
licenses required and rights to all trademarks, trade names, patents, and
fictitious names, if any, necessary to enable it to conduct the business in
which it is now engaged in compliance with applicable law.
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SECTION 2.9. ERISA. 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.
SECTION 2.10. 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.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by
Borrower to Bank 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.
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The
obligation of Bank to make the initial extension of credit contemplated by this
Agreement is subject to the fulfillment to Bank's satisfaction of all of the
following conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the
extension of credit by Bank shall be satisfactory to Bank's counsel.
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(b) Documentation. Bank shall have received, in form and
substance satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Line of Credit Note.
(ii) Corporate Borrowing Resolution.
(iii) Certificate of Incumbency.
(iv) Such other documents as Bank may require under any other
Section of this Agreement.
(c) Financial Condition. There shall have been no material
adverse change, as determined in good faith by Bank, in the financial condition
or business of Borrower, nor any material decline, as determined in good faith
by Bank, in the market value of any collateral required hereunder or a
substantial or material portion of the assets of Borrower.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The
obligation of Bank to make each extension of credit requested by Borrower
hereunder shall be subject to the fulfillment to Bank's satisfaction of each of
the following conditions:
(a) Compliance. The representations and warranties contained
herein and in 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 Bank 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. Bank shall have received all additional
documents which may be required in connection with such extension of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in
writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal,
interest, fees or other liabilities due under any of
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the Loan Documents at the times and place and in the manner specified therein.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and
records in accordance with generally accepted accounting principles
consistently applied, and permit any representative of Bank, at any reasonable
time, to inspect, audit and examine such books and records, to make copies of
the same, and to inspect the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the
following, in form and detail satisfactory to Bank:
(a) not later than 100 days after and as of the end of each fiscal
year, an audited financial statement of Borrower, prepared by a certified
public accountant, to include balance sheet, income statement, statement of
cash flow, source and application of funds statement, and Form 10-K;
(b) not later than 50 days after and as of the end of each fiscal
quarter, a Form 10-Q;
(c) not later than 30 days after and as of the end of each fiscal
month, a financial statement of Borrower, prepared by Borrower;
(d) not later than 10 days after Bank's request, an inventory
collateral report, and an aged listing of accounts receivable and accounts
payable and;
(e) not later than 30 days after and as of the end of each month,
a Borrowing Base Certificate;
(f) contemporaneously with each annual and quarterly financial
statement of Borrower required hereby, a certificate of the president or chief
financial officer of Borrower that said financial statements present fairly 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;
(g) from time to time such other information as Bank may
reasonably request.
SECTION 4.4. 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
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orders of any governmental authority applicable to Borrower and/or its
business.
SECTION 4.6. FACILITIES. Keep all 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 such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7. 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 Bank's satisfaction, for eventual payment
thereof in the event Borrower is obligated to make such payment.
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank
of any material litigation pending or threatened against Borrower.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's financial
condition as follows using generally accepted accounting principles
consistently applied and used consistently with prior practices (except to the
extent modified by the definitions herein):
(a) Current Ratio not at any time less than 2.0 to 1.0, with
"Current Ratio" defined as total current assets divided by total current
liabilities, with the Line of Credit being included as a current liability for
this purpose.
(b) Working Capital not at any time less than $15,000,000.00, with
"Working Capital" defined as total current assets minus total current
liabilities, with the Line of Credit being included as a current liability for
this purpose.
(c) Tangible Net Worth not less than $41,000,000.00 during the
period beginning the date hereof and ending February 1, 1997; and for the
fiscal year beginning February 2, 1997, and during each subsequent fiscal year
of the Borrower, not less than the sum of (i) the minimum Tangible Net Worth
that the Borrower was required to maintain by this covenant during the fiscal
year of the Borrower immediately preceding the year of determination, plus (ii)
seventy percent (70%) of the Borrower's net income after taxes during the
fiscal year of the Borrower immediately preceding the year of determination
(with net income after taxes being determined in accordance with generally
accepted accounting principles but before giving effect to the payment of any
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dividends); provided, that no reduction will be made to the amount of Tangible
Net Worth required to be maintained by the Borrower hereunder as a result of
the Borrower's net income after taxes being a negative number.
(d) Total Liabilities divided by Tangible Net Worth not at any
time greater than .75 to 1.0, with "Total Liabilities" defined as the aggregate
of current liabilities and non-current liabilities less subordinated debt
approved by the Bank, and with "Tangible Net Worth" as defined above.
(e) Net income after taxes not less than $1.00 on a trailing three
quarter basis, determined as of each fiscal quarter end.
(f) Maintain, on a rolling four quarter basis (i.e. as of the end
of each fiscal quarter for the four quarter period ended as of the end of each
quarter for which any determination is being made), a Fixed Charge Coverage of
not less than 1.35 to 1.0. For purposes of this financial covenant, "Fixed
Charge Coverage" means, as of any date of determination, (i) the sum of Annual
Traditional Cash flow, plus interest expense, plus rental expense, divided by
(ii) the sum of the Company's current portion of long-term debt, plus interest
expense, plus rental expense, plus any cash dividends paid by the Company.
(g) Maintain a ratio of (i) an amount equal to the sum of (A) the
face amount of all outstanding Documentary and Stand-by Letters of Credit, plus
(B) the indebtedness under the Revolving Note to; (ii) total inventory of
Company of not less than sixty-five percent (65%) throughout the term hereof.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than
five (5) days after the occurrence of each such event or matter) give written
notice to Bank 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 an Event of Default; (b) any change in
the name or the organizational structure of Borrower, or any material action,
claim, investigation, suit or proceeding pending or asserted by or before any
governmental authority, arbitrator, court or administrative agency; (c) 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; or (d)
any termination or cancellation of any insurance policy which Borrower is
required to maintain, or any uninsured or partially uninsured loss through
liability or property damage, or through fire, theft or any other cause
affecting Borrower's property.
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ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct
or contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit
extended hereunder except for the purposes stated in Article I hereof.
SECTION 5.2. [Intentionally Omitted].
SECTION 5.3. 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 (a) the liabilities of Borrower to Bank,
and(b) any other liabilities of Borrower existing as of, and disclosed to Bank
prior to, the date hereof, and (c) other liabilities not to exceed an aggregate
principal amount of $1,000,000.00.
SECTION 5.4. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge
into or consolidate with any other entity; make any substantial change in the
nature of Borrower's business as conducted as of the date hereof; nor sell,
lease, transfer or otherwise dispose of all or a substantial or material
portion of Borrower's assets except in the ordinary course of its business.
SECTION 5.5. 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 any
of the foregoing in favor of Bank.
SECTION 5.6. LOANS, ADVANCES, INVESTMENTS. Make any loans or
advances to or investments in any person or entity, except (a) any of the
foregoing existing as of, and disclosed to Bank prior to, the date hereof, and
(b) loans to officers not to exceed $150,000 in each individual instance, with
the aggregate of all loans to officers not to exceed $250,000 at any time.
SECTION 5.7. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit
to exist a security interest in, or lien upon, all or any portion of Borrower's
assets now owned or hereafter acquired, except (a) any of the foregoing in
favor of Bank or which is existing as of, and disclosed to Bank in writing
prior to, the
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date hereof; (b) liens, mortgages, encumbrances or security interests to secure
payment of the borrowings authorized hereunder and those permitted under
Section 5.6 herein; (c) pledges or deposits to secure obligations under
workmen's compensation laws or of similar legislation; (d) deposits to secure
public or statutory obligations; (e) statutory mechanics', carriers',
workmen's, repairmen's liens or other like items in the ordinary course of
business in respect to obligations which are not overdue or are being contested
in good faith; (f) liens, mortgages, encumbrances, or security interests
granted by the Borrower on equipment, furniture and/or fixtures in connection
with additional purchases of such equipment, furniture and/or fixtures not in
excess of $250,000 per fiscal year of the Borrower; and (g) statutory or
contractual landlords liens in respect of obligations which are not overdue or
being contested in good faith.
SECTION 5.8. PURCHASES. Borrower will agree not to incur any debt
resulting from the purchase of any Treasury Stock.
SECTION 5.9. NEGATIVE PLEDGE. Enter into any agreement whereby
Borrower or any subsidiary agrees not to mortgage, pledge, grant or permit to
exist a security interest in, or lien upon, all or any portion of Borrower's or
any subsidiaries' assets now owned or hereafter acquired, except any of the
foregoing in favor of Bank or which is existing as of and disclosed to Bank in
writing prior to the date hereof.
Section 5.10. ACQUISITIONS. Make any new acquisition with a
total consideration to be paid in excess of Ten Million Dollars
($10,000,000.00) without prior Bank consent.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement:
(a) Borrower 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 furnished to Bank 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 default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in
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subsections (a) and (b) above), and with respect to any such default which by
its nature can be cured, such default shall continue for a period of twenty
(20) days from its occurrence.
(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 has incurred
any debt or other liability to any person or entity, including Bank.
(e) The filing of a notice of judgment lien in excess of $100,000
against Borrower; or the recording of any abstract of judgment in excess of
$100,000 against Borrower in any county in which Borrower 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 assets of Borrower in
excess of $100,000; or the entry of a judgment in excess of $100,000 against
Borrower.
(f) Borrower 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 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 Borrower shall file an answer admitting the jurisdiction
of the court and the material allegations of any involuntary petition; or
Borrower shall be adjudicated a bankrupt, or an order for relief shall be
entered against Borrower 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.
(g) The dissolution or liquidation of Borrower; or Borrower, or
its directors, shall take action seeking to effect the dissolution or
liquidation of Borrower.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of
Default: (a) all principal and accrued and unpaid interest outstanding under
each of the Loan Documents, any term thereof to the contrary notwithstanding,
shall at Bank's option and without notice become immediately due and payable
without presentment,
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demand, or any notices of any kind, including without limitation notice of
nonperformance, notice of protest, protest, notice of dishonor, notice of
intention to accelerate or notice of acceleration, all of which are hereby
expressly waived by each Borrower; (b) the obligation, if any, of Bank to
extend any further credit under any of the Loan Documents shall immediately
cease and terminate; and (c) Bank 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 Bank 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 Bank may be exercised at any time by Bank 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.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of
Bank 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 Bank 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.
SECTION 7.2. 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: GADZOOKS, INC.
0000 Xxxxxx Xxxxxx Xxxx, Xxxxx 000X
Xxxxxx, Xxxxx 00000
BANK: XXXXX FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 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
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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.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall
pay to Bank 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 Bank's in-house counsel to the
extent permissible), expended or incurred by Bank in connection with (a) Bank's
continued administration of this Agreement and the other Loan Documents, and
the preparation of any amendments and waivers hereto and thereto, (b) the
enforcement of Bank's rights and/or the collection of any amounts which become
due to Bank under any of the Loan Documents, and (c) 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, whether incurred at the
trial or appellate level, in an arbitration proceeding or otherwise, and
including any of the foregoing incurred in connection with any bankruptcy
proceeding (including without limitation, any adversary proceeding, contested
matter or motion brought by Bank or any other person) relating to any Borrower
or any other person or entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be
binding upon 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 Bank's
prior written consent. Bank reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in,
Bank's rights and benefits under each of the Loan Documents. In connection
therewith, Bank may disclose all documents and information which Bank now has
or may hereafter acquire relating to any credit extended by Bank to Borrower,
Borrower or its business, or any collateral required hereunder.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the
other Loan Documents constitute the entire agreement between Borrower and Bank
with respect to any extension of credit by Bank 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.
SECTION 7.6. 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
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claim in connection with, this Agreement or any other of the Loan Documents to
which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every
provision of this Agreement and each other of the Loan Documents.
SECTION 7.8. 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.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when executed and delivered shall be
deemed to be an original, and all of which when taken together shall constitute
one and the same Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas.
SECTION 7.11. SAVINGS CLAUSE. It is the intention of the parties
to comply strictly with applicable usury laws. Accordingly, notwithstanding
any provision to the contrary in the Loan Documents, in no event shall any Loan
Documents require the payment or permit the payment, taking, reserving,
receiving, collection or charging of any sums constituting interest under
applicable laws that exceed the maximum amount permitted by such laws, as the
same may be amended or modified from time to time (the "Maximum Rate"). If any
such excess interest is called for, contracted for, charged, taken, reserved or
received in connection with any Loan Documents, or in any communication by
Lender or any other person to Borrower or any other person, or in the event
that all or part of the principal or interest hereof or thereof shall be
prepaid or accelerated, so that under any of such circumstances or under any
other circumstance whatsoever the amount of interest contracted for, charged,
taken, reserved or received on the amount of principal actually outstanding
from time to time under the Loan Documents shall exceed the Maximum Rate, then
in such event it is agreed that: (i) the provisions of this paragraph shall
govern and control; (ii) neither Borrower nor any other person or entity now or
hereafter liable for the payment of any Loan Documents shall be obligated to
pay the amount of such interest to the extent it is in excess of the Maximum
Rate; (iii) any such excess interest which is or has been received by Lender,
notwithstanding this paragraph, shall be credited against the then unpaid
principal balance hereof or thereof, or if any of the Loan Documents has been
or would be paid in full by such credit, refunded to Borrower; and (iv) the
provisions of each of the Loan Documents, and any other
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communication to Borrower, shall immediately be deemed reformed and such excess
interest reduced, without the necessity of executing any other document, to the
Maximum Rate. The right to accelerate the maturity of the Loan Documents does
not include the right to accelerate, collect or charge unearned interest, but
only such interest that has otherwise accrued as of the date of acceleration.
Without limiting the foregoing, all calculations of the rate of interest
contracted for, charged, taken, reserved or received in connection with any of
the Loan Documents which are made for the purpose of determining whether such
rate exceeds the Maximum Rate shall be made to the extent permitted by
applicable laws by amortizing, prorating, allocating and spreading during the
period of the full term of such Loan Documents, including all prior and
subsequent renewals and extensions hereof or thereof, all interest at any time
contracted for, charged, taken, reserved or received by Lender. The terms of
this paragraph shall be deemed to be incorporated into each of the other Loan
Documents.
To the extent that Article 5069-1.04 of the Texas Revised Civil
Statutes is relevant to Lender for the purpose of determining the Maximum Rate,
Bank hereby elects to determine the applicable rate ceiling under such Article
by the indicated (weekly) rate ceiling from time to time in effect, subject to
Lender's right subsequently to change such method in accordance with applicable
law, as the same may be amended or modified from time to time.
SECTION 7.12. RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon the occurrence
of an Event of Default, (a) Borrower hereby authorizes Bank, at any time and
from time to time, without notice, which is hereby expressly waived by each
Borrower, and whether or not Bank shall have declared any credit extended
hereunder to be due and payable in accordance with the terms hereof, to set off
against, and to appropriate and apply to the payment of, Borrower's obligations
and liabilities under the Loan Documents (whether matured or unmatured, fixed
or contingent, liquidated or unliquidated), any and all amounts owing by Bank
to Borrower (whether payable in U.S. dollars or any other currency, whether
matured or unmatured, and in the case of deposits, whether general or special
(except trust and escrow accounts), time or demand and however evidenced), and
(b) pending any such action, to the extent necessary, to hold such amounts as
collateral to secure such obligations and liabilities and to return as unpaid
for insufficient funds any and all checks and other items drawn against any
deposits so held as Bank, in its sole discretion, may elect. Borrower hereby
grants to Bank a security interest in all deposits and accounts maintained with
Bank and its affiliates to secure the payment of all obligations and
liabilities of Borrower to Bank under the Loan Documents.
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SECTION 7.13. BUSINESS PURPOSE. Borrower represents and warrants
that any credit extended hereunder is for a business, commercial, investment,
agricultural or other similar purpose and not primarily for a personal, family
or household use.
SECTION 7.14. 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. Section 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,
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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 hereunder.
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators
must be active members of the Texas State Bar 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 (i) 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, (ii) 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 (iii) 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 (A)
whether the findings of fact rendered by the arbitrators are supported by
substantial evidence, and (B) 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.
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(f) 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.
NOTICE: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS 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 RELATING TO THE INDEBTEDNESS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first written above.
XXXXX FARGO BANK (TEXAS),
GADZOOKS, INC. NATIONAL ASSOCIATION
FORMERLY FIRST INTERSTATE
BANK OF TEXAS, N.A.
By: /s/ Xxxxx X. Xxxxxxxxx By: /s/ Xxxxxxx X. X. Xxxx
--------------------------------- ---------------------------------
Xxxxx Xxxxxxxxx Xxxxxxx X. X. Xxxx
Chief Financial Officer Relationship Manager and
Vice President
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EXHIBIT A
XXXXX FARGO BANK REVOLVING LINE OF CREDIT NOTE
--------------------------------------------------------------------------------
$10,000,000.00 Dallas, Texas
January 30, 1997
FOR VALUE RECEIVED, the undersigned GADZOOKS, INC. ("Borrower")
promises to pay to the order of XXXXX FARGO BANK (TEXAS), NATIONAL ASSOCIATION
("Bank") at its office at North Texas RCBO, 0000 Xxxx, Xxxxx 000, Xxxxxx, XX
00000, or at such other place as the holder hereof may designate, in lawful
money of the United States of America and in immediately available funds, the
principal sum of $10,000,000.00, or so much thereof as may be advanced and be
outstanding, with interest thereon, to be computed on each advance from the
date of its disbursement as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth
after each, and any other term defined in this Note shall have the meaning set
forth at the place defined:
(a) "Business Day" means any day except a Saturday, Sunday or any
other day on which commercial banks in Texas are authorized or required by law
to close.
(b) "Fixed Rate Term" means a period commencing on a Business Day
and continuing for 1, 2 or 3 months, as designated by Borrower, during which
all or a portion of the outstanding principal balance of this Note bears
interest determined in relation to LIBOR; provided however, that no Fixed Rate
Term may be selected for a principal amount less than $100,000.00; and provided
further, that no Fixed Rate Term shall extend beyond the scheduled maturity
date hereof. If any Fixed Rate Term would end on a day which is not a Business
Day, then such Fixed Rate Term shall be extended to the next succeeding
Business Day.
(c) "LIBOR" means the rate per annum (rounded upward, if
necessary, to the nearest whole 1/8 of 1%) determined by dividing Base LIBOR by
a percentage equal to 100% less any LIBOR Reserve Percentage.
(i) "Base LIBOR" means the rate per annum for United
States dollar deposit quoted by Bank as the Inter-Bank Market Offered Rate,
with the understanding that such rate is quoted by Bank for the purpose of
calculating effective rates of interest for loans making reference thereto, on
the first day of a Fixed Rate Term for delivery of funds on said date for a
period of time approximately equal to the number of days in such Fixed Rate
Term and in an amount approximately equal to the principal amount to which such
Fixed Rate Term applies. Borrower understands and agrees that Bank may base
its quotation of the Inter-Bank Market Offered Rate upon such offers or other
market indicators of the
21
Inter-Bank Market as Bank in its discretion deems appropriate including, but
not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve
percentage prescribed by the Board of Governors of the Federal Reserve System
(or any successor) for "Eurocurrency Liabilities" (as defined in Regulation D
of the Federal Reserve Board, as amended), adjusted by Bank for expected
changes in such reserve percentage during the applicable Fixed Rate Term.
(d) "Prime Rate" means at any time the rate of interest most
recently announced within Bank at its principal office as its Prime Rate, with
the understanding that the Prime Rate is one of Bank's base rates and serves as
the basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may
designate.
INTEREST:
(a) Interest. The outstanding principal balance of this Note
shall bear interest (computed on the basis of a 360-day year, actual days
elapsed, unless such calculation would result in a usurious rate, in which case
interest shall be computed on the basis of a 365/366-day year, as the case may
be, actual days elapsed) at the lesser of (i) either (A) at a fluctuating rate
per annum equal to the Prime Rate in effect from time to time, or (B) at a
fixed rate per annum determined by Bank to be 1.95000% above LIBOR in effect on
the first day of the applicable Fixed Rate Term, or (ii) the Maximum Rate.
When interest is determined in relation to the Prime Rate, each change in the
rate of interest hereunder shall become effective on the date each Prime Rate
change is announced within Bank. With respect to each LIBOR selection option
selected hereunder, Bank is hereby authorized to note the data, principal
amount, interest rate and Fixed Rate Term applicable thereto and any payments
made thereon on Bank's books and records (either manually or by electronic
entry) and/or on any schedule attached to this Note, which notations shall be
prima facie evidence of the accuracy of the information noted.
(b) Selection of Interest Rate Options. At any time any portion
of this Note bears interest determined in relation to LIBOR, it may be
continued by Borrower at the end of the Fixed Rate Term applicable thereto so
that all or a portion thereof bears interest determined in relation to the
Prime Rate or to LIBOR for a new Fixed Rate Term designated by Borrower. At
any time any portion of this Note bears interest determined in relation to the
Prime Rate, Borrower may convert all or a portion
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thereof so that it bears interest determined in relation to LIBOR for a Fixed
Rate Term designated by Borrower. At such time as Borrower requests an advance
hereunder or wishes to select a LIBOR option for all or a portion of the
outstanding principal balance hereof, and at the end of each Fixed Rate Term,
Borrower shall give Bank notice specifying: (i) the interest rate option
selected by Borrower; (ii) the principal amount subject thereto; and (iii) for
each LIBOR selection, the length of the applicable Fixed Rate Term. Any such
notice may be given by telephone so long as, with respect to each LIBOR
selection, (A) Bank receives written confirmation from Borrower not later than
3 Business Days after such telephone notice is given, and (B) such notice is
given to Bank prior to 10:00 a.m., California time, on the first day of the
Fixed Rate Term. For each LIBOR option requested hereunder, Bank will quote
the applicable fixed rate to Borrower at approximately 10:00 a.m., California
time, on the first day of the Fixed Rate Term. If Borrower does not
immediately accept the rate quoted by Bank, any subsequent acceptance by
Borrower shall be subject to a redetermination by Bank of the applicable fixed
rate; provided however, that if Borrower fails to accept any such rate by 11:00
a.m., California time, on the Business Day such quotation is given, then the
quoted rate shall expire and Bank shall have no obligation to permit a LIBOR
option to be selected on such day. If no specific designation of interest is
made at the time any advance is requested hereunder or at the end of any Fixed
Rate Term, Borrower shall be deemed to have made a Prime Rate interest
selection for such advance or the principal amount to which such Fixed Rate
Term applied.
(c) Additional LIBOR Provisions.
(i) If Bank at any time shall determine that for any
reason adequate and reasonable means do not exist for ascertaining LIBOR, then
Bank shall promptly give notice thereof to Borrower. If such notice is given
and until such notice has been withdrawn by Bank, then (A) no new LIBOR option
may be selected by Borrower, and (B) any portion of the outstanding principal
balance hereof which bears interest determined in relation to LIBOR, subsequent
to the end of the Fixed Rate Term applicable thereto, shall bear interest
determined in relation to the Prime Rate.
(ii) If any law, treaty, rule, regulation or determination
of a court or governmental authority or any change therein or in the
interpretation or application thereof (each, a "Change in Law") shall make it
unlawful for Bank (A) to make LIBOR options available hereunder, or (B) to
maintain interest rates based on LIBOR, then in the former event, any
obligation of Bank to make available such unlawful LIBOR options shall
immediately be cancelled, and in the latter event, any such unlawful
LIBOR-based interest rates then outstanding shall be converted, at Bank's
option, so that interest on the portion of the outstanding principal balance
subject thereto is determined
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in relation to the Prime Rate; provided however, that if any such Change in Law
shall permit any LIBOR-based interest rates to remain in effect until the
expiration of the Fixed Rate Term applicable thereto, then such permitted
LIBOR-based interest rates shall continue in effect until the expiration of
such Fixed Rate Term. Upon the occurrence of any of the foregoing events,
Borrower shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any fines, fees, charges, penalties or other
costs incurred or payable by Bank as a result thereof and which are
attributable to any LIBOR options made available to Borrower hereunder, and any
reasonable allocation made by Bank among its operations shall be conclusive and
binding upon Borrower.
(iii) If any Change in Law or compliance by Bank with any
request or directive (whether or not having the force of law) from any central
bank or other governmental authority shall:
(A) subject Bank to any tax, duty or other charge with
respect to any LIBOR options, or change the basis of
taxation of payments to Bank of principal, interest,
fees or any other amount payable hereunder (except
for changes in the rate of tax on the overall net
income of Bank); or
(B) impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar
requirement against assets held by, deposits or other
liabilities in or for the account of, advances or
loans by, or any other acquisition of funds by any
office of Bank; or
(C) impose on Bank any other condition;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any LIBOR options hereunder and/or to reduce
any amount receivable by Bank in connection therewith, then in any such case,
Borrower shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any additional costs incurred by Bank and/or
reductions in amounts received by Bank which are attributable to such LIBOR
options. In determining which costs incurred by Bank and/or reductions in
amounts received by Bank are attributable to any LIBOR options made available
to Borrower hereunder, any reasonable allocation made by Bank among its
operations shall be conclusive and binding upon Borrower.
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(d) Payment of Interest. Interest accrued on this Note shall be
payable on the 2nd day of each March, June, September and December, commencing
March 2, 1997.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment. Borrower may from time to time
during the term of this Note borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions of this Note and of the Credit Agreement between Borrower and Bank
defined below; provided however, that the total outstanding borrowings under
this Note shall not at any time exceed the principal amount stated above. The
unpaid principal balance of this obligation at any time shall be the total
amounts advanced hereunder by the holder hereof less the amount of principal
payments made hereon by or for any Borrower, which balance may be endorsed
hereon from time to time by the holder. The outstanding principal balance of
this Note shall be due and payable in full on June 5, 1998.
(b) Advances. Advances hereunder, to the total amount of the
principal sum available hereunder, may be made by the holder at the oral or
written request of (i) XXXXXX XXXXXXXXXXX or XXXXX XXXXXXXXX or XXXX XXXXXX or
XXXXXX XXXXXXXXXXX, any one acting alone, who are authorized to request
advances and direct the disposition of any advances until written notice of the
revocation of such authority is received by the holder at the office designed
above. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by any Borrower.
(c) Application of Payments. Each payment made on this Note shall
be credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the
outstanding principal balance of this Note which bears interest determined in
relation to LIBOR, with such payments applied to the oldest Fixed Rate Term
first.
PREPAYMENT:
(a) Prime Rate. Borrower may prepay principal on any portion of
this Note which bears interest determined in relation to the Prime Rate at any
time, in any amount and without penalty.
(b) LIBOR. Borrower may prepay principal on any portion of this
Note which bears interest determined in relation to LIBOR at any time and in
the minimum amount of $10,000.00; provided however, that if the outstanding
principal balance of such portion of this Note is less than said amount, the
minimum prepayment amount shall be the entire outstanding principal
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balance thereof. In consideration of Bank providing this prepayment option to
Borrower, or if any such portion of this Note shall become due and payable at
any time prior to the last day of the Fixed Rate Term applicable thereto,
Borrower shall pay to Bank immediately upon demand a fee which is the sum of
the discounted monthly differences for each month from the month of prepayment
through the month in which such Fixed Rate Term matures, calculated as follows
for each such month:
(i) Determine the amount of interest which would have
accrued each month on the amount prepaid at the interest rate applicable to
such amount had it remained outstanding until the last day of the Fixed Rate
Term applicable thereto.
(ii) Subtract from the amount determined in (i) above the
amount of interest which would have accrued for the same month on the amount
prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect on
the date of prepayment for new loans made for such term and in a principal
amount equal to the amount prepaid.
(iii) If the result obtained in (ii) for any month is
greater than zero, discount that difference by LIBOR used in (ii) above.
Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of January 30, 1997, as amended from time to time (the "Credit Agreement").
Any default in the payment or performance of any obligation under this Note, or
any defined event of default under the Credit Agreement, shall constitute an
"Event of Default" under this Note.
MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default as
defined in the Credit Agreement, the holder of this Note, at the holder's
option, may declare all sums of principal and accrued and unpaid interest
outstanding hereunder to be immediately due and payable without presentment,
demand, or any notices of any kind, including without limitation notice of
nonperformance, notice of protest, protest, notice of dishonor, notice of
intention to accelerate or notice of acceleration, all
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of which are expressly waived by each Borrower, and the obligation, if any, of
the holder to extend any further credit hereunder shall immediately cease and
terminate. Each Borrower shall pay to the holder 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 the holder's in-house counsel to the extent permissible), expended or
incurred by the holder in connection with the enforcement of the holder's
rights and/or the collection of any amounts which become due to the holder
under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief, whether incurred at the trial or appellate level, in an arbitration
proceeding or otherwise, and including any of the foregoing incurred in
connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to any Borrower or any other person or entity.
(b) Obligations Joint and Several. Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower
shall be joint and several.
(c) Governing Law. this Note shall be governed by and construed
in accordance with the laws of the state of Texas.
(d) Savings Clause. It is the intention of the parties to comply
strictly with applicable usury laws. Accordingly, notwithstanding any
provision to the contrary in this Note, or in any contract, instrument or
document evidencing or securing the payment hereof or otherwise relating hereto
(each, a "Related Document"), in no event shall this Note or any Related
Document require the payment or permit the payment, taking, reserving,
receiving, collection or charging of any sums constituting interest under
applicable laws that exceed the maximum amount permitted by such laws, as the
same may be amended or modified from time to time (the "Maximum Rate"). If any
such excess interest is called for, contracted for, charged, taken, reserved or
received in connection with this Note or any Related Document, or in any
communication by Bank or any other person to Borrower or any other person, or
in the event that all or part of the principal or interest hereof or thereof
shall be prepaid or accelerated, so that under any of such circumstances or
under any other circumstance whatsoever the amount of interest contracted for,
charged, taken, reserved or received on the amount of principal actually
outstanding from time to time under this Note shall exceed the Maximum Rate,
then in such event it is agreed that: (i) the provisions of this paragraph
shall govern and control; (ii) neither Borrower nor any other person or entity
now or hereafter liable for the payment of this Note or any Related Document
shall be obligated to pay the amount of such interest to the extent it is in
excess of the Maximum Rate; (iii) any such
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excess interest which is or has been received by Bank, notwithstanding this
paragraph, shall be credited against the then unpaid principal balance hereof
or thereof, or if this Note or any Related Document has been or would be paid
in full by such credit, refunded to Borrower; and (iv) the provisions of this
Note and each Related Document, and any other communication to Borrower, shall
immediately be deemed reformed and such excess interest reduced, without the
necessity of executing any other document, to the Maximum Rate. The right to
accelerate the maturity of this Note and any Related Document does not include
the right to accelerate, collect or charge unearned interest, but only such
interest that has otherwise accrued as of the date of acceleration. Without
limiting the foregoing, all calculations of the rate of interest contracted
for, charged, taken, reserved or received in connection with this Note and any
Related Document which are made for the purpose of determining whether such
rate exceeds the Maximum Rate shall be made to the extent permitted by
applicable laws by amortizing, prorating, allocating and spreading during the
period of the full term of this Note or such Related Document, including all
prior and subsequent renewals and extensions hereof or thereof, all interest in
any time contracted for, taken, reserved or received. The terms of this
paragraph shall be deemed to be incorporated into each Related Document.
To the extent that Article 5069-1.04 of the Texas Revised Civil Statutes is
relevant to Bank for the purpose of determining the Maximum Rate, Bank hereby
elects to determine the applicable rate ceiling under such Article by the
indicated (weekly) rate ceiling from time to time in effect, subject to Bank's
right subsequently to change such method in accordance with applicable law, as
the same may be amended or modified from time to time.
(e) Right of Setoff; Deposit Accounts. Upon and after the
occurrence of an Event of Default, (i) Borrower hereby authorizes Bank, at any
time and from time to time, without notice, which is hereby expressly waived by
Borrower, and whether or not Bank shall have declared this Note to be due and
payable in accordance with the terms hereof, to set off against, and to
appropriate and apply to the payment of, Borrower's obligations and liabilities
under this Note (whether matured or unmatured, fixed or contingent, liquidated
or unliquidated), any and all amounts owing by Bank to Borrower (whether
payable in U.S. dollars or any other currency, whether matured or unmatured,
and in the case of deposits, whether general or special (except trust and
escrow accounts), time or demand and however evidenced), and (ii) pending any
such action, to the extent necessary, to hold such amounts as collateral to
secure such obligations and liabilities and to return as unpaid for
insufficient funds any and all checks and other items drawn against any
deposits so held as Bank, in its sole discretion, may elect. Borrower hereby
grants to Bank a security interest in all deposits and accounts maintained with
Bank and with any other financial institution to secure the
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payment of all obligations and liabilities of Borrower to Bank under this Note.
(f) Business Purpose. Borrower represents and warrants that all
loans evidenced by this Note are for a business, commercial, investment,
agricultural or other similar purposes and not primarily for a personal, family
or household use.
(g) Certain Tri-Party Accounts. Borrower and Bank agree that Tex.
Civ. Stat. Xxx. Art. 5089, ch. 15 (which regulates certain revolving credit
loan accounts and revolving tri-party accounts) shall not apply to any
revolving loan accounts created under this Note or maintained in connection
herewith.
NOTICE: THIS NOTE AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS
EVIDENCED HEREBY CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS 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 RELATING TO THIS NOTE AND THE
INDEBTEDNESS EVIDENCED HEREBY.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
GADZOOKS, INC.
By:
---------------------------
XXXXX XXXXXXXXX
CHIEF FINANCIAL OFFICER
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