Exhibit 10.1
AGREEMENT
THIS AGREEMENT is executed effective the 19th day of October, 2005,
between XXXXXXX INDUSTRIES INC. (formerly EXCALIBUR INDUSTRIES, INC.), a
Delaware corporation ("Industries"), XXXXXXX MACHINE WORKS, INC., a Texas
corporation ("Machine"), XXXXXXX XXXXXXXX, an individual ("Xxxxxxxx"), XXXXX
XXXXXXX, an individual ("Xxxxxxx"), XXXX XXXXX, an individual ("Xxxxx"), and
STILLWATER NATIONAL BANK AND TRUST COMPANY, a national banking association (the
"Lender"). Xxxxxxxx, Xxxxxxx and Xxxxx are sometimes referred to herein as
"Gurantor" or "Guarantors."
R E C I T A L S:
WHEREAS Industries, Machine and/or Xxxxxxxx are currently obligated to
the Bank the following principal amounts totaling approximately $13,808,398, as
follows:
SNB Note #5195802 1,100,000
SNB Note #5198301 3,500,000
SNB Note #5423900 212,811
SNB Note #5550600 550,000
SNB Note #5528400 500,000
SNB Note #5732800 2,450,000
SNB Note #5732700 (LOC) 791,861
SNB Note #5831900 1,100,000
Overdraft of DDA #6175206 1,574,356
TW Consulting Notes 2,710,183
TW Accrued Interest (est.) 1,000,000
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15,489,211
The above described principal indebtedness, together with all interest,
penalties and fees incurred in connection therewith, is referred to hereafter as
the "Prior Debt" and all loan agreements, notes, security agreements,
guaranties, mortgages and other documents executed in connection with the Prior
Debt are hereafter referred to as the "Prior Loan Documents."
WHEREAS Industries and Machine are indebted to the United States ex rel
Internal Revenue Service in an amount not exceeding $237,546.56 as of October
19, 2005, which debt is secured by a lien covering certain assets of Industries
and Machine (the "IRS Lien"); and
WHEREAS there presently exist certain defaults under the terms of the
Prior Loan Documents;
NOW, THEREFORE, in consideration of the mutual agreements between the
parties, it is agreed as follows:
1. RESTRUCTURE AND NEW LENDING. Pursuant to this Agreement, the parties agree to
a complete restructuring of the Prior Debt, together with additional lending
from the Lender, all to be effectuated through the issuance of amended and
restated instruments, new instruments and common stock. This Agreement together
with all notes, security agreements, mortgages, guaranties, securites and other
documents and instruments executed to effectuate this Agreement shall be
referred to hereafter as the "Restructure Documents."
2. CLOSING. Subject to all of the terms and conditions set forth in this
Agreement being satisfied, the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Lender's
counsel on such date, at such place and at such time (the "Closing Date") within
two (2) business days after the satisfaction or waiver of the last of the
conditions set forth in Sections 10 and 11 and hereof as shall be determined by
the mutual consent of the parties hereto.
3. ACQUISITION OF LEASES. [Deleted.]
4. CREDIT FACILITIES. In accordance with this Agreement, the Lender shall make
available to Industries, Machine, and Xxxxxxxx certain credit facilities upon
the following terms:
4.1. Evidence of Indebtedness. The indebtedness under the credit
facilities will be evidenced as follows:
4.1.1. Amended & Restated Note. At Closing, Industries and Machine
will sign an amended and restated note in form and
substance and payable on the terms approved by Lender (the
"Amended and Restated Note") in the amount of $2,500,000,
plus any excess on the existing line of credit, including
deposit account overdrafts, if any. The amended and
restated note shall amend and restated SNB Note Nos.
5195802, 5198301, 5423900, 5550600, 5528400, 5732800 and
5831900 and shall be countersigned by the Lender to
evidence that the notes are being amended, restated, and
superseded by the Amended and Restated note. Interest only
will be paid monthly for three months following Closing.
Thereafter, Industries and Machine will make 27 equal
monthly payments in an amount sufficient to fully amortize
principal and interest on the Amended and Restated Note
over 120 months. The Amended and Restated Note shall mature
and become due 30 months after closing, at which time,
Industries and Machine will make a balloon payment of the
entire outstanding principal balance together with all
accrued interest and other charges, if any. The following
terms will also apply:
a) Use of Proceeds. Proceeds of the Amended and
Restated Note will be applied as follows: $303,000
will be advanced to the sellers of certain machines
($83,000.00 will be paid to Xxxxxxx for the purchase
of that certain Daewoo Puma 300LC, Serial # P25L0324
and $220,000.00 will be paid to Swift for the
purchase of that certain Mitsubishi 800 M-80C,
Serial # CH4091); $100,000 will be available to use
for Industries' purchase of the stock of Machine;
$2,962,000.00 will be deemed to be applied to the
Prior Debt.
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b) Collateral. The Amended and Restated Note will be
secured by a first priority security interest
covering all existing and future assets of
Industries and Machine, including but not limited
to, accounts receivable, inventory, equipment, and
intangibles.
c) Additional Terms. The Amended and Restated Note will
be cross collateralized and cross defaulted with the
Revolving Note (as defined below) and the IRS Note
(as defined below).
4.1.2. IRS Note. As soon as reasonably possible after Closing,
Industries and Machine will sign a term note in an amount
equal to the settlement of the existing IRS lien not to
exceed $237,546.56 ("IRS Note"). Commencing 30 days after
execution of the IRS Note, Industries and Machine will make
48 equal monthly payments in an amount sufficient to fully
amortize principal and interest on the IRS Note over 48
months. The IRS Note shall mature and become due 48 months
after closing, at which time, Industries and Machine will
pay the entire outstanding principal balance together with
all accrued interest and other charges, if any. The
following terms shall also apply:
a) Use of Proceeds. The proceeds of the IRS Note shall
be disbursed to the IRS to pay the debt secured by
the IRS tax lien.
b) Collateral. The IRS Note will be secured by a first
priority security interest in all existing and
future assets of Industries and Machine, including
but not limited to, accounts receivable, inventory,
equipment and intangibles.
c) Additional Terms. The IRS Note will be cross
collateralized and cross defaulted with Revolving
Note and the Amended and Restated Note.
d) Guarantors. Xxxxxxxx will guarantee 50% of the loan
amount under the IRS Note, Xxxxxxx shall guarantee
50% of the loan amount under the IRS Note, and Xxxxx
shall guarantee 25% of the loan amount under the IRS
Note. As the principal is reduced, the amount of the
guaranties will not decline.
e) Flemming, Shumate, and Xxxxx shall each be referred
to as a "Guarantor" and collectively as the
"Guarantors."
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4.1.3. Revolving Line of Credit. At Closing, the Lender will
provide Industries and Machine a revolving line of credit
as follows:
a) Note. Industries and Machine will execute and
deliver to the Lender a promissory note of even date
herewith in the principal face amount of
$1,000,000.00 (the "Revolving Note"), which will be
in form and substance and payable on the terms
approved by the Lender. It is specifically agreed
that the aggregate of advances made during the term
of the Revolving Note may exceed the face amount
thereof, but the unpaid principal balance due on the
Revolving Note will not exceed the lesser of (i) the
Borrowing Base (as defined below), or (ii) the face
amount of the Revolving Note.
b) Initial Balance. The initial balance of the
Revolving Note will be the balance of the existing
line of credit less the excess transferred to the
Amended and Restated Note.
c) Advances. Advances under the Revolving Note will be
limited to the Borrowing Base. The Borrowing Base
shall be determined on a monthly basis upon the
submission to the Lender of a signed monthly
borrowing base certificate" in form acceptable to
the Lender. Each monthly borrowing base certificate
will be supported by a current accounts receivable
aging, and such other documentation that may
reasonably be required by the Lender to determine
the Borrowing Base. After determination of the
Borrowing Base for any given month, Industries and
Machine may obtain advances by submitting an advance
request in form acceptable to the Lender.
d) Maturity. Notwithstanding anything herein to the
contrary, the Revolving Note will mature and become
fully due and payable 12 months from the Closing
Date.
e) Collateral. The Revolving Note will be secured by a
first priority security interest in all existing and
future assets of Industries and Machine, including,
but not limited to, accounts receivable, inventory,
equipment, and intangibles.
f) Other Terms. The Revolving Note will be cross
collateralized and cross defaulted with the Amended
and Restated Note and the IRS Note.
g) Repayment. The Revolving Note will be payable in
monthly installments of interest only, with
outstanding principal and interest due upon
maturity.
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4.1.4. Convertible Note. At the Closing, Industries and Machine
will sign a convertible note in the amount of $2,500,000
(the "Convertible Note"). Interest shall accrue from the
Closing Date until the earlier of (i) conversion or (ii) 24
months, at which time the accrued interest will be
capitalized into principal. Beginning at the end of the
ninth quarter, Industries and Holdings will make quarterly
interest payments. The Convertible Note will mature on the
earlier of sixty months from the date of issuance of the
Convertible Note or the date on which the Convertible Note
is fully converted into Common Stock (as defined below).
All outstanding principal and interest will be due at
maturity.
a) Conversion. The principal and accrued interest on
the Convertible Note will be convertible into shares
("Conversion Shares") of common stock of Industries
("Common Stock") at a conversion rate of $1.00 per
share (on a post-reverse split basis). The
conversion price of the Convertible Note will be
subject to proportional adjustment for stock splits,
stock dividends, recapitalizations, and the like.
The Convertible Note shall be convertible at the
option of the Lender into Conversion Shares at the
then applicable conversion price.
b) Collateral. The Convertible Note will be
collateralized by all business assets of Industries,
including 100% of the issued and outstanding capital
stock of Machine.
c) Additional Terms. After twenty-four months, Machine
shall be obligated, to the extent net income is
available in a given quarter, to declare a dividend
sufficient to enable its shareholder to meet the
current obligations under the Convertible Note. This
obligation of Machine is cumulative and Machine
shall be a party to the Convertible Note for the
sole purpose of binding itself to these covenants
but shall not otherwise be an obligor under the
Convertible Note.
d) Registration Rights.
1) Company Registration: The Lender shall be
entitled to "piggy-back" registration rights
on all registrations of any other equity
securities of Industries, subject to the
right, however, of Industries and its
underwriters to reduce the number of shares
proposed to be registered pro rata in view of
market conditions.
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2) Expenses: Industries shall bear registration
expenses (exclusive of underwriting discounts
and commissions) of all such piggy-back
registrations.
3) Term of Rights: The lesser of five (5) years
after the date of this Agreement or date
after which a Lender may dispose of all of
its shares under Rule 144 within a ninety
(90) day period.
4) Other Provisions: Other provisions shall be
contained in a Registration Rights Agreement
as are reasonable, including cross
indemnification, the period of time in which
the Registration Statement will be kept
effective, underwriting arrangements,
transfer rights and lock-up provisions.
4.1.5. Xxxxxxxx Note. At Closing, Xxxxxxxx will execute and
deliver to the Lender a promissory note in the amount of
$350,000 (the "Xxxxxxxx Note"), which shall mature 30
months after the Closing Date. All principal and interest
on the Xxxxxxxx Note will be due at maturity. The following
terms shall also apply:
a) Use of Proceeds. The proceeds of the Xxxxxxxx Note
will be used to fund Xxxxxxxx'x $250,000 capital
contribution to Industries with the remainder
applied to the existing personal indebtedness of
Xxxxxxxx to the Lender.
b) Collateral. The Xxxxxxxx Note will be secured by all
of Xxxxxxxx'x existing and future equity and other
interests in or right to payment or property from
Industries or Machine, excluding Xxxxxxxx'x ordinary
compensation earned from Machine.
c) Other Terms. The Lender will release Xxxxxxxx from
the balance of his obligations under the Prior Debt.
As a part of such release, the Lender will dismiss
all litigation, and release all judgments, if any,
against Xxxxxxxx arising from his guaranty of the
Prior Debt.
4.2. Interest. Interest on each of the credit facilities will be paid
at the interest rate equal to the Prime Rate plus two percent (2
%) per annum, adjusted on each day on which a change in the Prime
Rate occurs (the "Interest Rate"). "Prime Rate" means the prime
rate as published in the "Money Rates Section" of the Wall Street
Journal, which rate is not necessarily the lowest rate of interest
charged by the Lender. All interest on the Amended and Restated
Note will be calculated for the actual number of days elapsed at a
per diem charge based on a year consisting of 360 days.
4.3. Notation of Advances. The Lender shall have the right (acting at
its sole discretion with or without the consent of Industries and
Machine) from time make notations of advances by it to Industries
and Machine and payments to it by Industries and Machine on any
liability ledger records maintained by or for the Lender as to
indebtedness of Industries and Machine, and such ledger shall be
presumed correct until the contrary is established by Industries
or Machine. Upon demand by the Lender at any time or from time to
time, Industries or Machine will confirm and admit by signed
writing the exact amount of indebtedness for principal and
interest then outstanding under this Agreement. Any billing
statement or accounting rendered by or for the Lender shall be
conclusive and fully binding on Industries and Machine unless
specific written notice of exception is given to the Lender by
Industries and Machine within thirty (30) days thereafter.
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4.4. Authority to Request Advances. The Lender may make loans in any
amount and in any manner requested orally or in writing by any
officer or agent of Industries and Machine or by any person
reasonably believed by the Lender to be an officer or agent of
Industries and Machine. Loan proceeds may be disbursed by deposit
in any deposit account of Industries or Machine, by an instrument
payable to Industries or Machine.
4.5. Prepayment. Industries and Machine may prepay the credit
facilities at any time, without premium or penalty. Each
prepayment will be applied by the Lender first to the payment of
unpaid fees and expenses, then to accrued interest on the
Revolving Note and then to the payment of principal. If at any
time the aggregate outstanding principal balance of the debt under
the Revolving Note exceeds the amount then permitted under the
Borrowing Base, Industries and Machine shall immediately, without
notice or demand, make payment upon the Revolving Note in an
amount equal to the excess.
4.6. Lending Restrictions. Notwithstanding any other provision of this
Agreement or the other Restructure Documents, any advance herein
provided for will not be required to be made by the Lender: (a) if
after making such advance, the Lender would, as determined in the
sole discretion of the Lender, exercised in good faith, be in
violation of any regulatory requirements imposed by any branch of
government of the United States of America or any state thereof;
(b) if any event of Default (as defined in Section 12 below) has
occurred and has not been cured by Industries and Machine or
waived by the Lender; (c) if, since the Closing Date and up to the
date of the advance request, any litigation or governmental
proceeding has been instituted against Industries, Machine, any
Guarantor or any of the Collateral (defined below), which, if
decided adversely, will, in the reasonable opinion of the Lender,
adversely affect to a material extent, the financial condition or
continued operation of Industries or Machine; or (d) if, since the
Closing Date and up to the date of the advance request, any loss,
destruction, liens, claims, or encumbrances against any of the
Collateral (other than those in favor of the Lender) have
occurred, been made or filed and have not been removed or settled
to the satisfaction of the Lender.
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5. BORROWING BASE. "Borrowing Base" means, as of any given date, the sum of the
following: (1) eighty percent (80%), or at the Lender's sole discretion any
lesser percentage designated upon sixty (60) days notice, of Eligible Trade
Accounts Receivable, plus (2) fifty percent (50%) of the value of the inventory
with such inventory availability being limited to 50% of the borrowing base and
capped at $100,000, up to a maximum of One Million and No/100 Dollars
($1,000,000.00) and subject to the following:
5.1. "Trade Accounts Receivable" means, as of any given date, all
accounts receivable of Industries or Machine for goods sold and
delivered and services rendered by Industries or Machine in the
ordinary course of the business presently conducted by each of
them and representing amounts then invoiced and due and owing. A
Trade Account Receivable shall be an "Eligible Trade Account
Receivable," and shall be included in the Borrowing Base, only if
and so long as it meets each and all of the following
requirements:
5.1.1. It is a valid, genuine and legally enforceable obligation,
subject to no defense, set off or counter-claim, of the
account debtor or other obligor named herein or in the
records of Industries or Machine pertaining thereto, and
that neither Industries nor Machine has received from the
account debtor or other obligor any notification
repudiating such obligation or asserting that such
obligation is subject to any defense, set off or
counterclaim; and
5.1.2. It is owned by Industries or Machine free and clear of all
interests, liens, attachments, encumbrances, and security
interests except the security interest granted to the
Lender pursuant to this Agreement; and
5.1.3. The account debtor or other obligor is located in the
United States; and
5.1.4. Not more than ninety (90) days have expired since the date
of invoice; or, if the Lender in its sole discretion
accepts as eligible a Trade Account Receivable which is due
on a date stated in the invoice, not more than thirty (30)
days have expired since the date stated; and
5.1.5. Neither Industries nor Machine has received notice from the
Lender that the credit of the account debtor is not
satisfactory to the Lender for any reason; and
5.1.6. The account debtor is not an entity in which Industries or
Machine or any Guarantor has a controlling interest; and
5.1.7. Eligible Trade Accounts Receivable shall not include any
account receivable of the same account debtor to
Industries, Machine, or any or the Guarantors in excess of
fifteen percent (15%) of the then Eligible Trade Accounts
Receivable calculated after ineligible accounts; and
5.1.8. The entire receivable of one account debtor becomes
ineligible if more than ten percent (10%) of the total due
is over ninety (90) days past due, unless the ten percent
(10%) over ninety (90) days is attributable to an isolated
dispute over a specific invoice.
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5.2. The value of Inventory used in determining the Borrowing Base
shall equal the value of raw material plus the value of finished
product and shall not include the value of any work in progress.
6. COLLATERAL SECURITY. The performance of all covenants and agreements
contained in this Agreement and in the other documents executed or delivered as
a part of this transaction and the payment of the notes and all renewals,
amendments and modifications thereof shall be secured by the following, which
shall be delivered at the Closing:
6.1. Security Agreement. Industries and Machine will grant to the
Lender a security interest covering the following:
6.1.1. Accounts. All of Industries and Machine's accounts and
contracts receivable of any kind whether now existing or
hereafter arising (herein called the "Accounts"); all
chattel papers, documents and instruments relating to the
Accounts; and all rights now or hereafter existing in and
to all security agreements, leases, and other contracts
securing or otherwise relating to any Accounts or any such
chattel papers, documents and instruments;
6.1.2. Furniture, Fixtures, and Equipment. All of Industries and
Machine's furniture, fixtures and equipment in all of its
forms whether now owned or hereafter acquired and wherever
located (herein called the "Equipment"); all parts thereof
and all accessions or additions thereto, whether now owned
or hereafter acquired;
6.1.3. General Intangibles. All of Industries and Machine's
general intangibles of any kind whether now existing or
hereafter arising (herein called the "General
Intangibles"); all chattel papers, documents and
instruments relating to the General Intangibles; and all
rights now or hereafter existing in and to all security
agreements, leases, licenses, permits, patents,
distribution agreements and contracts securing or otherwise
relating to any General Intangibles or any such chattel
papers, documents and instruments and all of Industries and
Machine's lien rights against other persons whether
statutory, contractual, or by common law with respect to
the leases, Inventory or other collateral described in this
Agreement;
6.1.4. Inventory. All of Industries and Machine's inventory in all
of its forms whether now owned or hereafter acquired and
wherever located (herein called the "Inventory"), and all
accessions or additions thereto and products thereof,
whether now owned or hereafter acquired;
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6.1.5. Other. Without in any way limiting or modifying the
foregoing in any respect, all of Industries and Machine's
goods, chattels, business records, contracts, contract
rights, advertising agreements, tax refunds, documents of
title, fixtures, insurance policies and proceeds, patents,
trademarks, service marks, logos, trade names, copyrights
and applications therefor, licenses, licensing fees,
permits, approvals, consents, certificates, stock, surveys,
engineering reports, tools, landscaping, machinery,
furniture, furnishing, business machines, appliances,
vehicles, trailers, rolling stock, deposits, security
deposits, money, securities, claims, demands, causes of
action, refunds, rebates, income and all other tangible and
intangible real, personal or mixed property whether now
owned or hereafter acquired;
6.1.6. Additional Property. Any additional Property from time to
time delivered to or deposited with the Lender as security
pursuant to the terms of this Agreement; and
6.1.7. Proceeds. All proceeds, products, additions to,
replacements of, substitutions for, and accessions of any
and all Property described above.
The property described in this section shall be referred to
hereafter as the "Collateral."
6.2. Xxxxxxxx Security Agreement. Xxxxxxxx will execute and deliver to
the Lender a security agreement covering all of Xxxxxxxx'x
existing and future equity and other interests in or right to
payment or property from Industries or Machine, excluding
Xxxxxxxx'x ordinary compensation earned from Machine.
6.3. Lockbox Agreement. The Lender and Industries and Machine agree
that (i) Lender will establish a lockbox account (the "Lockbox")
for the receipt of payments on account and accounts receivable of
Industries and Machine; (ii) Industries and Machine will cooperate
with Lender to assure that all account debtors of Industries and
Machine are notified to make payments on account to the Lockbox;
and (iii) without limiting the requirement that all account
debtors make payment only to the Lockbox, any payments received
directly by Industries or Machine will be deposited before 11:00
a.m. the following business day into the Lockbox. The Lockbox will
be swept by the Lender on a daily basis and the funds therein will
be applied to the principal balance on the Revolving Note,
provided however, that, on or about the 15th day of each month,
the funds swept from the lockbox will be applied first to pay the
outstanding interest on the Revolving Note and then to principal
balance.
7. GUARANTIES. Xxxxxxxx and Xxxxxxx will each provide a limited guaranty equal
to 50% of the dollar amount of the IRS Note. Xxxxx will provide a limited
guaranty equal to 25% of the IRS Note. These guaranties are cumulative in favor
of the Lender. As the principal is reduced, the amount of the guaranties will
not decline.
8. CONVERSION OF PORTION OF PRIOR DEBT. At the Closing, $2,368,000 of the Prior
Debt (the "Conversion Amount") will be converted into a number of shares (the
"Shares") of Common Stock equal to the quotient obtained by dividing the
Conversion Amount by $1.00 per share (the "Conversion Price").
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8.1. Number of Shares. Industries and Machine represent and warrant
that, as of Closing, the Shares will constitute not less than
twenty percent (20%) of the issued and outstanding common stock of
Industries.
8.2. No Adjustments. It is anticipated that Industries may combine, by
way of reverse stock split, the outstanding shares of Common Stock
into a smaller number of shares. It is hereby understood that the
Conversion Price set forth in Section 8 shall not be adjusted if
Industries, at any time while this Agreement is in effect, (a)
shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock,
(b) subdivide outstanding shares of Common Stock into a larger
number of shares, (c) combine (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of the Common
Stock any shares of capital stock of Industries.
8.3. Taxes. The issuance of certificates for the Shares on conversion
of the Conversion Amount shall be made without charge to the
Lender for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificate.
8.4. Registration Rights.
8.4.1. Definitions. As used in this Section 8.4, the following
terms shall have the following meanings:
a) Exchange Act: The Securities Exchange Act of 1934,
as amended, and the rules and regulations of the SEC
promulgated thereunder.
b) Losses: See Section 8.4.6 hereof.
c) Prospectus: The prospectus included in any
Registration Statement (including, without
limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part
of an effective registration statement in reliance
upon Securities Act Rule 430A), as amended or
supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion
of the Registrable Securities covered by such
Registration Statement and all other amendments and
supplements to the prospectus, including
post-effective amendments, and all material
incorporated by reference or deemed to be
incorporated by reference in such prospectus.
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d) Registration Expenses: All reasonable expenses
incurred by Industries in complying with Sections
8.4.3 and 8.4.4 hereof, including, without
limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel
for Industries, accountants' expenses (including,
without limitation, any special audits or "comfort"
letters incidental to or required by any such
registration), any fees or disbursements of
underwriters customarily paid by issuers or sellers
of securities (but excluding underwriting discounts
and commissions) and blue sky fees and expenses in
all states reasonably designated by the holders of
Registrable Securities.
e) Registrable Securities: The Shares and any Common
Stock issued or issuable in respect of the Shares
pursuant to any stock split, stock dividend,
recapitalization, or similar event.
f) Registration Statement: Any registration statement
of Industries which covers any of the Registrable
Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and
supplements to such registration statement,
including post-effective amendments, all exhibits
and all material incorporated by reference or deemed
to be incorporated by reference in such registration
statement.
g) Rule 144: Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the
SEC (excluding Rule 144A).
h) SEC: The Securities and Exchange Commission.
i) Securities Act: The Securities Act of 1933, as
amended, and the rules and regulations promulgated
by the SEC thereunder.
j) Underwritten registration or underwritten offering:
A registration in which securities of Industries are
sold to an underwriter for reoffering to the public.
8.4.2. Securities Subject to the Registration Rights. The
securities entitled to the benefits of the Registration
Rights set forth in this Section 8.4 are the Registrable
Securities.
8.4.3. Registration Rights. If, at any time after the Closing and
expiring on the fifth anniversary of the Closing,
Industries proposes to register any of its securities under
the Securities Act (except for registrations on Forms S-8
or S-4 or their equivalent), it will give written notice by
registered mail, at least thirty (30) days prior to the
filing of each such Registration Statement, to the Lender
of its intention to do so. If the Lender notifies
Industries within twenty (20) days after receipt of any
such notice of its desire to include any Registrable
Securities in such proposed Registration Statement,
Industries shall afford the Lender the opportunity to have
any such Registrable Securities registered under such
Registration Statement. These rights may be exercised at
any time on an unlimited number of occasions prior to the
fifty anniversary of the Closing Date, subject to the terms
and conditions set forth in this Section 8.4.
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8.4.4. Holdback and Lock-Up Agreements.
a) Restrictions on Public Sale by the Lenders of
Registrable Securities. Each holder of Registrable
Securities whose Registrable Securities are covered
by a Registration Statement filed pursuant to
Section 8.4.3 hereof agrees, if requested by the
managing underwriters in an underwritten offering
(to the extent timely notified in writing by
Industries or the managing underwriters), not to
effect any public sale or distribution of securities
of Industries of any class included in such
Registration Statement, including a sale pursuant to
Rule 144 (except as part of such underwritten
offering), during the 10-day period prior to, and
the 180-day period beginning on, the effective date
of any underwritten offering made pursuant to such
Registration Statement.
b) The foregoing provisions shall not apply to any
holder of Registrable Securities if such holder is
prevented by applicable statute or regulation from
entering into any such agreement; provided, however,
that any such holder shall undertake in its request
to participate in any such underwritten offering not
to effect any public sale or distribution of the
class of Registrable Securities covered by such
Registration Statement (except as part of such
underwritten offering) during such period unless it
has provided five (5) business days prior written
notice of such sale or distribution to the managing
underwriters.
8.4.5. Expenses and Procedures.
a) Expenses of Registration. All Registration Expenses
(exclusive of underwriting discounts and
commissions) shall be borne by Industries. Each
holder of Registrable Securities shall bear all
underwriting discounts, selling commissions, sales
concessions and similar expenses applicable to the
sale of the Registrable Securities sold by such
holder.
b) Registration Procedures. Industries will keep the
holders of Registrable Securities advised as to the
initiation of registration, qualification and
compliance and as to the completion thereof. At its
expense, Industries will furnish such number of
Prospectuses and other documents incident thereto as
the holders or underwriters from time to time may
reasonably request.
13
c) Information. Industries may require each seller of
Registrable Securities as to which any registration
is being effected to furnish such information
regarding the distribution of such Registrable
Securities as Industries may from time to time
reasonably request and Industries may exclude from
such registration the Registrable Securities of any
seller who unreasonably fails to furnish such
information after receiving such request.
d) Delay or Suspension. Notwithstanding anything herein
to the contrary, Industries may, at any time,
suspend the effectiveness of any Registration
Statement for a period of up to 60 consecutive days
or 90 days in the aggregate in any calendar year, as
appropriate (a "Suspension Period"), by giving
notice to each holder of Registrable Securities to
be included in the Registration Statement, if
Industries shall have determined, after consultation
with its counsel, that Industries is required to
disclose any material corporate development which
Industries determines could reasonably be expected
to have a material effect on Industries. Each holder
of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of
any notice from Industries of a Suspension Period,
such holder shall forthwith discontinue disposition
of such Registrable Securities covered by such
Registration Statement or Prospectus until such
holder (i) is advised in writing by Industries that
the use of the applicable Prospectus may be resumed,
(ii) has received copies of a supplemental or
amended prospectus, if applicable, and (iii) has
received copies of any additional or supplemental
filings which are incorporated or deemed to be
incorporated by reference in such Prospectus.
Industries shall prepare, file and furnish to each
holder of Registrable Securities immediately upon
the expiration of any Suspension Period, appropriate
supplements or amendments, if applicable, to the
Prospectus and appropriate documents, if applicable,
incorporated by reference in the Registration
Statement. Industries agrees to use its best efforts
to cause any Suspension Period to be terminated as
promptly as possible.
e) Blue Sky. Industries will, as expeditiously as
possible, use its best efforts to register or
qualify the Registrable Securities covered by a
Registration Statement under the securities or blue
sky laws of such jurisdictions as Industries deems
appropriate or, in the case of an underwritten
public offering, the managing underwriter shall
reasonably request, provided that Industries shall
not be required in connection therewith or as a
condition thereto to qualify to do business in any
jurisdiction where it is not so qualified or to take
any action which would subject it to taxation or
service of process in any jurisdiction where it is
not otherwise subject to such taxation or service of
process.
14
f) Notification of Material Events. Industries will, as
expeditiously as possible, immediately notify each
holder of Registrable Securities under a
Registration Statement, at any time when a
prospectus relating thereto is required to be
delivered under the Securities Act, of the happening
of any event as a result of which the Prospectus
contained in such Registration Statement, as then in
effect, includes an untrue statement of a material
fact or omits to state any material fact required to
be stated therein or necessary to make the
statements therein not misleading in the light of
the circumstances then existing and, as
expeditiously as possible, amend or supplement such
Prospectus to eliminate the untrue statement or the
omission.
8.4.6. Indemnification.
a) Indemnification by Maker. Industries shall, without
limitation as to time, indemnify and hold harmless,
to the full extent permitted by law, each holder of
Registrable Securities, its officers, directors,
agents and employees, each person who controls such
holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act),
and the officers, directors, agents or employees of
any such controlling person, from and against all
losses, claims, damages, liabilities, costs
(including, without limitation, all reasonable
attorneys' fees) and expenses (collectively
"Losses"), as incurred, arising out of or based upon
any untrue statement or alleged untrue statement of
a material fact contained in any Registration
Statement, Prospectus or preliminary prospectus or
any amendment or supplement thereto, or arising out
of or based upon any omission or alleged omission of
a material fact required to be stated therein or
necessary to make the statements therein in light of
the circumstances under which they were made (in the
case of any Prospectus) not misleading, except
insofar as the same are based solely upon
information furnished to Industries by such holder
for use therein; provided, however, that Industries
shall not be liable in any such case to the extent
that any such Loss arises out of or is based upon an
untrue statement or alleged untrue statement or
omission made in any preliminary prospectus or
Prospectus if (i) such holder failed to send or
deliver a copy of the Prospectus or Prospectus
supplement with or prior to the delivery of written
confirmation of the sale of Registrable Securities
and (ii) the Prospectus or Prospectus supplement
would have corrected such untrue statement or
omission. If requested, Industries shall also
indemnify underwriters, selling brokers, dealer
managers and similar securities industry
professionals participating in the distribution,
their officers, directors, agents and employees and
each person who controls such persons (within the
meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) to the same extent
as provided above with respect to the
indemnification of the holders of Registrable
Securities.
15
b) Indemnification by Holder of Registrable Securities.
In connection with any Registration Statement in
which a holder of Registrable Securities is
participating, such holder of Registrable Securities
shall furnish to Industries in writing such
information as Industries may reasonably request for
use in connection with any Registration Statement or
Prospectus. Such holder hereby agrees to indemnify
and hold harmless, to the full extent permitted by
law, Industries, and its officers, directors, agents
and employees, each person who controls Industries
(within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act), and the
officers, directors, agents or employees of any such
controlling person, from and against all losses, as
incurred, arising out of or based upon any untrue
statements or alleged untrue statement of material
fact contained in any Registration Statement,
Prospectus or preliminary prospectus, or arising out
of or based upon any omission of a material fact
required to be stated therein or necessary to make
the statements therein in light of the circumstances
under which they were made (in the case of any
Prospectus) not misleading, to the extent, but only
to the extent, that such untrue statement or
omission is contained in any information so
furnished in writing by such holder to Industries
for use in such Registration Statement, Prospectus
or preliminary prospectus. Industries shall be
entitled to receive indemnities from accountants,
underwriters, selling brokers, dealer managers and
similar securities industry professionals
participating in the distribution to the same extent
as provided above with respect to information so
furnished by such persons specifically for inclusion
in any Registration Statement, Prospectus or
preliminary prospectus, provided, that the failure
of Industries to obtain any such indemnity shall not
relieve Industries of any of its obligations
hereunder. Notwithstanding any provision of this
Section 8.4.6 to the contrary, the liability of a
holder of Registrable Securities under this Section
8.4.6 shall not exceed the purchase price received
by such holder for the Registrable Securities sold
pursuant to a Registration Statement or Prospectus.
16
c) Conduct of Indemnification Proceedings. If any
action or proceeding (including any governmental
investigation or inquiry) shall be brought or any
claim shall be asserted against any person entitled
to indemnity hereunder (an "indemnified party"),
such indemnified party shall promptly notify the
party from which such indemnity is sought (the
"indemnifying party") in writing, and the
indemnifying party shall assume the defense thereof,
including the employment of counsel reasonably
satisfactory to the indemnified party and the
payment of all fees and expenses incurred in
connection with the defense thereof. All such fees
and expenses (including any fees and expenses
incurred in connection with investigation or
preparing to defend such action or proceeding) shall
be paid to the indemnified party, as incurred,
within 20 days of written notice thereof to the
indemnifying party; provided, however, that if, in
accordance with this Section 8.4.6, the indemnifying
party is not liable to the indemnified party, such
fees and expenses shall be returned promptly to the
indemnifying party. Any such indemnified party shall
have the right to employ separate counsel in any
such action, claim or proceeding and to participate
in the defense thereof, but the fees and expenses of
such counsel shall be the expense of such
indemnified party unless (a) the indemnifying party
has agreed to pay such fees and expenses, (b) the
indemnifying party shall have failed promptly to
assume the defense of such action, claim or
proceeding and to employ counsel reasonably
satisfactory to the indemnified party in any such
action, claim or proceeding, or (c) the named
parties to any such action, claim or proceeding
(including any impleaded parties) include both such
indemnified party and the indemnifying party, and
such indemnified party shall have been advised by
counsel that there may be one or more legal defenses
available to it which are different from or
additional to those available to the indemnifying
party (in which case, if such indemnified party
notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of
the indemnifying party, the indemnifying party shall
not have the right to assume the defense of such
action, claim or proceeding on behalf of such
indemnified party, it being understood, however,
that the indemnifying party shall not, in connection
with any one such action, claim or proceeding or
separate but substantially similar or related
actions, claims or proceedings in the same
jurisdiction arising out of the same general
allegations or circumstances, be liable for the
reasonable fees and expenses of more than one
separate firm of attorneys (together with
appropriate local counsel) at any time for all such
indemnified parties, unless in the opinion of
counsel for such indemnified party a conflict of
interest may exist between such indemnified party
and any other of such indemnified parties with
respect to such action, claim or proceeding, in
which event the indemnifying party shall be
obligated to pay the fees and expenses of such
additional counsel or counsels). No indemnifying
party will consent to entry of any judgment or enter
into any settlement which does not include as an
unconditional term thereof the release of such
indemnified party from all liability in respect to
such claim or litigation without the written consent
(which consent will not be unreasonably withheld) of
the indemnified party. No indemnified party shall
consent to entry of any judgment or enter into any
settlement without the written consent (which
consent will not be unreasonably withheld) of the
indemnifying party from which indemnify or
contribution is sought.
17
d) Contribution. If the indemnification provided for in
this Section 8.4.6 is unavailable to an indemnified
party under Section 8.4.6(a) or 8.4.6(b) hereof
(other than by reason of exceptions provided in
those Sections) in respect of any Losses, then each
applicable indemnifying party in lieu of
indemnifying such indemnified party shall contribute
to the amount paid or payable by such indemnified
party as a result of such Losses, in such proportion
as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in
connection with the actions, statements or omissions
which resulted in such Losses as well as any other
relevant equitable considerations. The relative
fault of such indemnifying party and the indemnified
party shall be determined by reference to, among
other things, whether any action in question,
including any untrue statement or alleged untrue
statement of a material fact or omission or alleged
omission of a material fact, has been taken or made
by, or relates to information supplied by, such
indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to
information and opportunity to correct or prevent
such action, statement or omission. The amount paid
or payable by a party as a result of any Losses
shall be deemed to include, subject to the
limitations set forth in Section 8.4.6(c), any legal
or other fees or expenses reasonably incurred by
such party in connection with any action, suit,
claim, investigation or proceeding.
e) The parties hereto agree that it would not be just
and equitable if contribution pursuant to this
Section 8.4.6 (d) were determined by pro rata
allocation or by any other method of allocation that
does not take into account the equitable
considerations referred to in the immediately
preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of
such fraudulent misrepresentation.
18
8.4.7. Rule 144. Industries shall file the reports required to be
filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC
thereunder, and will take such further action as any holder
of Registrable Securities may reasonably request, all to
the extent required from time to time to enable such holder
to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemption
provided by Rule 144 or Rule 144A. Upon the request of any
holder of Registrable Securities, Industries shall deliver
to such holder a written statement as to whether Industries
has complied with such requirements. Notwithstanding the
foregoing, nothing in this Section 8.4.7 shall be deemed to
require Industries to register any of its securities under
any section of the Exchange Act.
8.4.8. Underwritten Registrations. No holder of Registrable
Securities may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such
holder's Registrable Securities on the basis provided in
any underwriting arrangements approved by the persons
entitled hereunder to approve such arrangements, and (ii)
completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other
documents required under the terms of such underwriting
arrangements.
9. RELEASES. The parties agree that the following releases will be delivered at
the Closing of the transactions contemplated herein:
9.1. Companies. At the Closing, the Lender shall release Industries,
Holding, and Machine from their obligations for payment of the
Prior Debt except to the extent that the Prior Debt is amended and
restated and provision for payment is made herein, in the Amended
and Restated Note, the IRS Note, the Revolving Note, or in the
Convertible Note. As a part of such release, the Lender will
dismiss all litigation, and release all judgments, if any, against
Industries, Holding, and Machine arising out of or relating to the
Prior Debt. Unless otherwise expressly amended pursuant to the
Restructure Documents, all other terms of the Prior Loan Documents
shall remain in effect.
9.2. Xxxxxxxx. At Closing, the Lender shall release Xxxxxxxx from his
obligation for payment of the Prior Debt except to the extent that
the Prior Debt is amended and restated and provision for payment
is made herein, in the Xxxxxxxx Note or in Xxxxxxxx'x guaranty. As
a part of such release, the Lender will dismiss all litigation,
and release all judgments, if any, against Xxxxxxxx arising from
his guaranty of the Prior Debt. Unless otherwise expressly amended
pursuant to the Restructure Documents, all other terms of the
Prior Loan Documents shall remain in effect.
9.3. Lender. At Closing, Industries, Machine, and Xxxxxxxx shall
jointly and severally release the Lender from any and all claims
arising in connection with or relating to the Prior Debt.
19
10. CONDITIONS OF LENDING. The obligation of the Lender to perform this
Agreement and to make the initial or any future advances under any of the notes
executed pursuant to the Agreement is subject to the continued performance by
Industries, Machine, Flemming, Shumate, and Xxxxx of the following conditions
precedent:
10.1. Xxxxxxxx Capital Contribution. At Closing, Xxxxxxxx will make a
capital contribution to Industries in the amount of $250,000. Such
capital contribution will be in the form of a cash payment to the
Lender, which shall be applied to the Prior Debt.
10.2. Stockholder Approval. The existing stockholders of Industries
shall approve the terms of the recapitalization as provided herein
and the accompanying dilutions of existing outstanding common
stock.
10.3. Restructure Documents; Collateral. The Restructure Documents and
all other instruments and documents incidental to the transactions
contemplated hereby shall have been duly executed, acknowledged
(where appropriate), and delivered to the Lender by Industries and
Machine, all in form and substance satisfactory to the Lender.
10.4. Settlement with IRS. [Intentionally omitted.]
10.5. Prohibitive Orders. No order, writ or injunction of any court or
administrative agency is in effect or is being sought prohibiting
the transactions contemplated by this Agreement or the other
Restructure Documents.
10.6. Authority. The Lender shall have received a certificate of
incorporation, certificate of good standing, a certified copy of
the bylaws and certified copies of corporate resolutions and other
documents reasonably required to authorize the execution, delivery
and performance of the Restructure Documents by Industries and
Machine, all in form and substance satisfactory to the Lender.
10.7. Representations and Warranties . The representations and
warranties set forth in this Agreement shall be true and correct
on and as of Closing, the initial advance, and each additional
advance with the same effect as if such representations and
warranties had been made on and as of such date and there shall
have occurred.
10.8. Opinion of Counsel. The Lender shall have received an opinion of
counsel for Industries and Machine stating that, subject to
standard assumptions, qualifications, exceptions, and
limitations):
10.8.1. Organization and Existence. Industries and Machine are
corporations duly incorporated and validly existing under
the laws of their respective states of incorporation.
Industries and Machine have the corporate power to
execute, deliver and perform their respective obligations
under the Restructure Documents and to own their
respective properties and to conduct their respective
businesses in the manner presently conducted, except where
the failure to so qualify would not have a material
adverse effect on Industries and Machine.
20
10.8.2. Power and Authority; Validity. Each of the Restructure
Documents has been duly authorized, executed and delivered
by Industries and Machine, and if an action or proceeding
was brought in a California court to enforce any
Transaction Document and the court was to apply the laws
of the State of California to govern and interpret such
Transaction Document, the Transaction Document would
constitute the valid and binding obligation of Industries
and Machine, enforceable against it in accordance with its
terms;
10.8.3. No Violations. The execution and delivery by Industries
and Machine of the Restructure Documents and the
consummation by Industries and Machine of the transactions
contemplated thereby will not contravene, breach or result
in any default under the certificate of incorporation or
bylaws of Industries and Machine or, to counsel's
knowledge, under any agreement or other legally binding
instrument to which Industries or Machine is a party, and,
to counsel's knowledge, will not result in the violation
by Industries and Machine of any statute, regulation or
law to which Industries and Machine are subject, except in
each case, for conflicts, breaches or defaults which in
the aggregate would not materially hinder or impair the
consummation of the transactions contemplated by the
Restructure Documents or have a material adverse effect on
the Lender.
10.8.4. Collateral. If an action or proceeding was brought to
enforce any security interest under the Restructure
Documents and the court was to apply the Model Uniform
Commercial Code to govern and interpret the Restructure
Documents, the Restructure Documents are sufficient to
create in favor of the Lender an enforceable security
interest in those items and types of collateral described
in the Restructure Documents to the extent provided by the
Model Uniform Commercial Code.
10.9. No Default. There shall not exist any Event of Default under this
Agreement or any event which, with the giving of notice or the
lapse of time (or both) would become an Event of Default
thereunder; and
10.10. Deliveries. Industries and Machine shall have delivered the
following to the Lender:
10.10.1. Notes. The Amended and Restated Note, the Revolving
Note, and the Convertible Note;
10.10.2. Security Agreement. A security agreement duly executed
by Industries and Machine, in form and substance
satisfactory to the Lender, granting the Lender a
security interest in the Collateral;
21
10.10.3. Resolutions. Copies of resolutions of the board of
directors of Industries and Machine authorizing the
execution, delivery and performance of the Restructure
Documents by Industries and Machine;
10.10.4. Articles and Certificate. A copy of the articles of
incorporation of Industries and Machine and a
certificate of good standing as to Industries and
Machine issued by the secretary of state of the
appropriate state;
10.10.5. Schedules. All collateral schedules, financing
statements, security interest, subordination agreements,
releases and termination statements which the Lender may
request to assure the creation, perfection and priority
of the security interests created by the security
agreement;
10.10.6. Lock Box Agreement. Lock box agreement duly executed by
Industries and Machine in form and substance
satisfactory to the Lender, defining how payments of
accounts receivable are to be paid and accounted for;
10.10.7. Guaranties. Guaranty Agreements in form and substance
satisfactory to the Lender executed by each of the
Guarantors;
10.10.8. UCC Financing Statements. UCC financing statements
describing the collateral securing the repayment of the
indebtedness and UCC financing statements for Industries
and Machine;
10.10.9. Subscription Agreement. A subscription agreement for the
Xxxxxxxx capital contribution referred to in Section
10.1;
10.10.10. Bills of Sale. Bills of sale reflecting evidence that
Machine has acquired the equipment referred to in
Section 4.1.1.a;
10.10.11. Common Stock. The certificates representing the Shares
in definitive form and registered in the name of the
Lender.
10.10.12. Settlement and Release Agreements; Dismissals. One or
more settlement and release agreements, in form and
substance satisfactory to the Lender, releasing such
persons from any and all claims arising out of or
relating to the Prior Debt except as set forth Article
9.
11. CONDITIONS OF CLOSING BY INDUSTRIES, MACHINE, FLEMMING, SHUMATE, AND XXXXX.
The obligations of Industries, Machine, Flemming, Shumate, and Xxxxx to perform
this Agreement and consummate the transactions contemplated hereby, is subject
to the performance by Lender of each of the following conditions precedent:
11.1. Stockholder Approval. The existing stockholders of Industries
shall approve the terms of the recapitalization as provided herein
and the accompanying dilutions of existing outstanding common
stock.
22
11.2. Restructure Documents. The Restructure Documents and all other
instruments and documents incidental to the transactions
contemplated hereby shall have been duly executed, acknowledged
(where appropriate), and delivered to by the Lender, all in form
and substance satisfactory to Industries.
11.3. Prohibitive Orders. No order, writ or injunction of any court or
administrative agency is in effect or is being sought prohibiting
the transactions contemplated by this Agreement or the other
Restructure Documents.
11.4. Deliveries. Industries and Machine shall have delivered the
following to the Lender:
11.4.1. Subscription Agreement. A subscription agreement for the
Xxxxxxxx capital contribution referred to in Section
10.1;
11.4.2. Bills of Sale. Bills of sale reflecting evidence that
Machine has acquired the equipment referred to in
Section 4.1.1.a;
11.4.3. Settlement and Release Agreements; Dismissals. One or
more settlement and release agreements and dismissals,
in form and substance satisfactory to Industries,
Machine and Xxxxxxxx releasing such persons from any and
all claims arising out of or relating to the Prior Debt
except as set forth herein, as set forth in Article 9.
12. REPRESENTATIONS AND WARRANTIES. To induce the Lender to enter into this
Agreement and to make advances to Industries and Machine pursuant hereto,
Industries, Machine jointly and severally represent and warrant to the Lender
that:
12.1. Existence and Power. Industries and Machine are and will continue
to be corporations duly formed and validly existing in good
standing under the laws of their respective states of organization
and are authorized and qualified to do business in each state
where, because of the nature of the activities or assets, such
qualification is required, except those states where failure to so
qualify will not have a material adverse effect; Industries and
Machine have adequate power, authority, and legal right to own,
operate and hold the Collateral; Industries and Machine are or
will be at the time of acquisition, duly authorized, qualified and
licensed under all applicable laws, regulations, ordinances or
orders of public authorities to carry on their business in the
operation and ownership of the Collateral; Industries and Machine
have adequate authority, power and legal right to enter into,
execute, deliver and perform the terms of the Restructure
Documents, to borrow money and to give security for borrowings as
contemplated by the Restructure Documents and to consummate the
transactions contemplated thereby, and in doing so, neither
Industries nor Machine will violate any law or the provisions of
any articles, charter or bylaws or any other agreement or
instrument binding upon Industries, Machine or the Collateral. The
Restructure Documents, upon their execution and delivery, will
constitute valid, legal and binding Indebtedness of Industries and
Machine, enforceable in accordance with their terms, subject only
to applicable bankruptcy, insolvency or similar laws generally
affecting the enforcement of creditor's rights.
23
12.2. No Usury. The transaction evidenced by this Agreement does not
violate any usury law or other law relating to the payment of
interest on loans.
12.3. Regulatory Compliance. The authorization, execution, delivery, and
performance of this Agreement and each and every Restructure
Document are not and will not be subject to the jurisdiction,
approval or consent of, or to any requirement of registration with
or notification to, any federal, state or local regulatory body or
administrative agency, other than the filing of a preliminary and
a definitive information statement under Section 14 of the
Securities Exchange Act of 1934, as amended, and any notice
filings under federal and state securities laws;
12.4. Financial Statements. Financial statements furnished to the Lender
by Industries and Machine were prepared in accordance with
generally accepted accounting principles consistently applied,
except as expressly therein set forth. They present fairly the
financial condition of Industries and Machine as of the dates
thereof. The annual reports disclose fully all liabilities of
Industries and Machine whether or not contingent, with respect to
any pension plan. Since the date of the most recent financial
statement, there has been no material adverse change in the
financial condition of Industries or Machine other than as
disclosed to the Lender;
12.5. Liabilities. Neither Industries nor Machine has any material
liabilities, direct or contingent, except those to Lender and
those disclosed to the Lender;
12.6. Full Disclosure. Neither this Agreement, the other Restructure
Documents nor any statement or documents referred to herein or
delivered to the Lender by Industries and Machine, or any other
party on their behalf contains any untrue statement or omits to
state a material fact necessary to make the statements herein or
therein not misleading;
12.7. Litigation. Except as disclosed in writing to the Lender, to the
knowledge of Industries and/or Machine, there is no action, suit
proceeding or investigation pending, or threatened against
Industries or Machine which, if adversely determined, would
adversely affect Industries or Machine or impair the ability of
Industries or Machine to carry on their businesses substantially
as now conducted or contemplated or result in any substantial
liability not adequately covered by insurance;
12.8. No Default. The making and performance by Industries and Machine
of this Agreement will not violate any provision or constitute a
default under any indenture, agreement, or instrument to which
Industries or Machine may be a party or by which Industries,
Machine or any of the Collateral is bound or affected;
24
12.9. Ownership of Collateral. Industries and Machine have or will
acquire good and marketable title to the Collateral;
12.10. No Encumbrances. All assets of Industries and Machine are free and
clear of all liens, security interests, and encumbrances, except
those specifically permitted by Lender;
12.11. Priority. When the financing statements delivered pursuant to this
Agreement are filed in the proper offices where Industries and
Machines are incorporated, the Lender will have a valid and
perfected first security interest in the Collateral described in
the Security Agreement, subject to no prior security interest,
assignment, lien or encumbrance except interests, if any,
specifically approved by the Lender in writing;
12.12. Permits. Industries and Machine have, or will obtain, all
governmental and private permits, certificates, consents and
franchises which are material to the business, property, assets,
operations or condition, financial or otherwise, of Industries and
Machine to carry on their businesses as now being conducted. All
such governmental and private permits, certificates, consents and
franchises are, or will be, valid and subsisting, and there is no
existing violation thereof;
12.13. Taxes. Except as disclosed to the Lender, Industries and Machine
and the Guarantor have filed all foreign, federal, state and local
tax returns which are required to be filed and have paid or made
provisions for payment of all taxes which have or may become due
pursuant to said returns or pursuant to any assessment. Neither
Industries and Machine nor the Guarantors know of any basis for
the assessment of any deficiency taxes;
12.14. Location of Business Records. Industries and Machine will give the
Lender written notice of each location of Industries or Machine at
which inventory and records of Industries or Machine pertaining to
Collateral are kept. Except as such notice is given, all records
of Industries and Machine pertaining to the Collateral are and
will continue to be kept at Industries and Machine's addresses as
they appear in this Agreement, or at such other address as
Industries and Machine designate for such purpose in a written
notice to the Lender.
12.15. ERISA. Each qualified retirement plan of Industries or Machine
presently conforms and is administered in a manner consistent with
the Employee Retirement Income Security Act of 1974.
12.16. Survival of Representations. All representations and warranties
made by Industries, Machine, or the Guarantors herein will survive
the Closing, and any investigation at any time made by or on
behalf of the Lender will not diminish the Lender's right to rely
thereon. All statements contained in any certificate or other
instrument delivered by or on behalf of Industries, Machine or the
Guarantors under or pursuant to this Agreement or in connection
with the transactions contemplated hereby will constitute
representations and warranties made by Industries or Machine
hereunder.
25
13. AFFIRMATIVE COVENANTS. Until payment in full of the Indebtedness, Industries
and , Machine jointly and severally agree that, unless the Lender otherwise
consents in writing, Industries and Machine will perform or cause to be
performed the following agreements:
13.1. Performance of Obligations. Industries and Machine will promptly
and punctually perform all of the obligations hereunder and under
the Restructure Documents, and under all other instruments
executed or delivered pursuant thereto;
13.2. Maintenance of Collateral. Maintain their properly in good working
order and condition; make all needful and proper repairs,
replacements, additions and improvements thereto.
13.3. Equipment Appraisal Updates. Equipment appraisal update
inspections will be performed every six months.
13.4. Financial Reports and Condition. Industries and Machine will
furnish or cause to be furnished to the Lender, prepared in
accordance with generally accepted accounting principles, and
certified as to truth and accuracy by either the chief executive
officer or chief financial officer of Industries and Machine, the
following:
13.4.1. Weekly Borrowing Base Certificate. On a weekly basis,
Industries and Machine will provide a Weekly Borrowing
Base Certificate in a form acceptable to the Lender for
reporting purposes only. For the purposes of determining
credit availability, the Borrowing Base is determined on
a monthly basis as provided above.
13.4.2. Projections. Industries and Machine will provide
detailed 2006 financial statement projections by January
31, 2006, and for each year thereafter by January 31st
of the subject year.
13.4.3. Quarterly Financial Statements. Industries and Machine
will deliver quarterly financial statements of at least
compiled quality by the 45th day following the end of
each quarter. 13.4.4. Annual Financial Statements.
Industries and Machine will furnish to the Lender their
audited annual financial statement on or before April
15th of each year.
13.4.5. Income Tax Returns. Industries and Machine will furnish
to the Lender copies of their respective federal income
tax returns and requests for an extension of time in
which to file within fifteen (15) days after filing of
same.
26
13.4.6. Monthly Financial Reports. Within fifteen (15) days
after the close of each month commencing with the month
ending October 31, 2005, Industries and Machine and
Guarantors will furnish to the Lender the following
Monthly internally prepared consolidating financial
statements of Industries and Machine including the
following:
a) Accounts Receivable Aging/Listings. A current
aging of accounts receivable of Industries and
Machine;
b) Inventory. A current listing of the inventory of
Industries and Machine;
c) Balance Sheet. A balance sheet which
demonstrates a "Liquidity Ratio" of 1.10 to 1.0.
Industries and Machine will provide the Lender
with within forty-five (45) days after the close
of each of its fiscal year's quarter information
reasonably needed by the Lender to determine the
Liquidity Ratio. As used herein, Liquidity Ratio
shall be defined as the ratio of Industries and
Machine's current assets to Industries and
Machine's current liabilities. Notwithstanding
anything herein to the contrary, failure to
obtain the stated Liquidity Ratio shall not be
an event of default until March 31, 2006, and
tested quarterly thereafter.
d) Income Statement. Beginning March 31, 2006, an
income statement which demonstrates a minimum
debt coverage ratio of 1.00:1, increasing by 5
basis points each quarter to 1.20 at March 31,
2007. Industries shall thereafter maintain a
debt coverage ratio of 1.20, tested quarterly.
e) Cash Flow Statements. A statement of changes in
cash and a cash flow statement of Industries and
Machine in form satisfactory to the Lender.
13.5. Quarterly Field Audits. Industries and Machine will provide
quarterly field audits on or before the 15th day following the end
of the subject quarter with the next field audit to be completed
by January 15, 2006.
13.6. Other Information. At the Lender's request from time to time,
Industries and/or Machine will provide the Lender with such other
information as the Lender may reasonably request regarding the
business affairs or financial condition of Industries and Machine,
and Industries and Machine will provide access to the Lender at
all reasonable times to all agreements, purchase and sale
contracts, maintenance agreements, and all other documents and
information relating to the Collateral.
13.7. Taxes. All taxes which hereafter become due and assessments,
governmental charges and levies which are hereafter imposed on
Industries and Machine or their respective assets, income and
profits will be paid prior to the date on which penalties attach
thereto; provided that Industries and Machine will not be required
to pay any such charge which is being contested in good faith by
proper proceedings as to which adequate reserves have been
established.
27
13.8. Tax on Indebtedness. Industries and Machine hereby agree to pay
any and all taxes which may be levied or assessed directly or
indirectly on the notes or any of the Restructure Documents, or
the debt secured thereby, without regard to any law which may be
hereafter enacted imposing payment of the whole or any part
thereof upon the Lender, its successors or assigns; and, upon
violation of this Agreement, or upon the rendering by any court of
competent jurisdiction of a decision that such an agreement by
Industries or Machine is legally inoperative, or if the rate of
said tax, when added to the rate of interest provided for in the
Note, shall exceed the then legal rate of interest, then, and in
any such event, the debt hereby secured, without deduction, shall,
at the option of the Lender, become immediately due and payable,
anything contained in the Restructure Documents notwithstanding;
provided that Industries and Machine's obligation to pay such
taxes shall exclude United States franchise taxes and United
States taxes imposed on or measured by Lender's net income or net
receipts;
13.9. Access. Industries and Machine shall permit any officer, employee,
attorney, or accountant for the Lender or for any participant
designated by the Lender, to inspect the Collateral or to review,
make extracts from, or copy any and all of its corporate and
financial books, records and properties of Industries and Machine
at all times during ordinary business hours.
13.10. Title; Pledge. Industries and Machine agree to grant to the Lender
first perfected security interests covering all or any part of the
Collateral. Industries and Machine will maintain and defend good
and marketable title to the Collateral free and clear of all
claims, liens or encumbrances except those in favor of the Lender.
13.11. Qualification; Licenses. Industries and Machine will take such
actions or cause such actions to be taken as might be required to
maintain Industries and Machine's corporate existence and all
governmental and private permits, licenses and authorities of
Industries and Machine necessary or desirable to the continuation
of their businesses and will comply with all statutes and
governmental regulations.
13.12. Notices. Industries and Machine will promptly give written notice
to the Lender of: (a) any litigation commenced against or
affecting Industries or Machine, or the Collateral; (b) any
dispute which exists between Industries or Machine and any
governmental regulatory body or law enforcement authority relating
to any federal or state laws that could reasonably be expected to
have a material adverse effect on (i) the financial condition or
results of operations of Industries or Machine, or (ii) the
ability of Industries or Machine to perform their obligations
hereunder or under any other Restructure Documents; (c) any event
of Default; (d) any change in the senior management of Industries
or Machine regardless of the reason for such change (i.e. action
by stockholders, board of directors, death or retirement); and (e)
any other matter which has resulted or could be expected to result
in a material adverse change in (i) the financial condition or
results of operations of Industries or Machine or (ii) the ability
of Industries or Machine to perform under this Agreement or any of
the Restructure Documents.
28
13.13. Additional Documents. At any time and from time to time, upon
written request of the Lender, Industries or Machine agree to
furnish any additional information and to execute any and all
additional documents, not inconsistent with the provisions of this
Agreement, which may be required by the Lender in connection with
or pursuant to any provision set forth in this Agreement or the
Restructure Documents;
13.14. Compliance with Applicable Law. Industries and Machine will
continuously comply with all applicable regulations, rules,
ordinances or orders of the United States of America, any state,
or any other jurisdiction, or of any agency of federal state and
local taxing authority or other agency which might materially and
adversely affect the business, operations or financial condition
of Industries or Machine;
13.15. Books and Records. Industries and Machine will keep and maintain
accurate books and records in accordance with sound accounting
practices consistently applied;
13.16. Insurance. Industries and Machine will maintain property,
liability, xxxxxxx'x compensation and other forms of insurance in
amounts reasonably designated at any time or from time to time by
the Lender;
13.17. Notice to Existing Account Debtors. Industries and Machine shall
provide notice in accordance with the Lockbox Agreement to all
existing account debtors;
13.18. Notice to New Account Debtors. Industries and Machine shall insert
language into all new contracts notifying the contract party that
Industries or Machine's right to payment under the contract is
pledged to the Lender and shall instruct the account debtor to
make such payments to the Lockbox; and
13.19. Operating Accounts. Industries and Machine will conduct their
banking business through accounts established or to be established
with the Lender for all accounts, cash and cash equivalents.
14. NEGATIVE COVENANTS. Until payment in full of the Indebtedness, Industries
and Machine jointly and severally agree that unless the Lender otherwise
consents in writing, which consent shall not be unreasonably withheld, neither
Industries and Machine nor the Guarantors will perform or permit to be performed
any of the following acts:
14.1. Control. There shall be no change in the executive management of
Industries or Machine without the Bank's prior written consent.
29
14.2. Use of Loan Proceeds. Neither Industries nor Machine shall permit
any funds advanced to Industries or Machine under this Loan
Agreement to be used for any purposes other than financing the
businesses of Industries and Machine;
14.3. Other Debt. Industries and Machine shall incur no additional debt
in excess of $50,000 without prior approval from the Lender.
14.4. Insider Debt. Permit funds to be owing to Industries and Machine
by the directors or stockholders of Industries or Machine, or
members of their families, on account of any loan, credit sale or
other transaction or event;
14.5. Contingent Liabilities. Neither Industries nor Machine will
assume, guarantee, endorse or otherwise become contingently liable
for the indebtedness of any other person, firm or corporation,
except by the endorsement of negotiable instruments for deposit or
collection or other similar transactions in the ordinary course of
their business;
14.6. Senior Debt. Neither Industries nor Machine will take or permit to
be taken any action which would or might impair the senior
position of the Lender under the Restructure Documents;
14.7. Creation of Liens. Neither Industries nor Machine shall create,
assume or suffer to exist any mortgage, pledge, lien, charge or
encumbrance on any of the Collateral excluding only encumbrances
to the Lender contemplated by this Agreement, except the security
interests created by the Security Agreement, liens for taxes or
assessments not yet due or contested in good faith by appropriate
proceedings, security interests approved by the Lender in writing,
at its sole discretion, and other liens, charges and encumbrances
incidental to the conduct of their business or the ownership of
their property which were not incurred in connection with the
borrowing of money or the purchase of property on credit and which
do not in the aggregate materially detract from the value of their
property or materially impair the use thereof in their business;
14.8. Disposition of Collateral. Neither Industries nor Machine shall
sell, convey, assign, transfer or otherwise dispose of any of the
Collateral or any other assets of Industries or Machine except for
the use of inventory in the ordinary course of business;
14.9. Liquidation or Merger. Neither Industries nor Machine shall
liquidate, dissolve, or enter into any consolidation, merger, sale
of substantially all of its assets, or other business combination,
and neither Industries nor Machine shall discontinue or
substantially alter the normal operation of their respective
businesses.
14.10. Distribution. Except as set forth in the Convertible Note, neither
Industries nor Machine shall: (a) declare or pay any dividends,
stock bonuses or any other distributions to any stockholder or any
other person; or (b) authorize or make any other distribution to
any stockholder, subsidiary, affiliate or person of any of the
assets or business of Industries or Machine;
30
14.11. Stock Redemption. Neither Industries nor Machine shall purchase,
acquire, redeem, retire or call or make any commitment to
purchase, acquire, redeem, retire or call any of the capital stock
or other equity instruments of Industries, except pursuant to an
"employee benefit plan" as defined in the Securities Act of 1933,
as amended;
14.12. Excessive Compensation. Neither Industries nor Machine shall pay
excessive or unreasonable salaries, bonuses, fees, commissions or
other compensation;
14.13. Investments. Neither Industries nor Machine shall purchase stock
or securities of, extend credit to or make investments in, become
liable as surety for, or guarantee or endorse any obligation of,
any person, firm or corporation, except direct obligations of the
United States and commercial lender deposits;
14.14. Margin Stock. Neither Industries nor Machine shall use any of the
proceeds received from the Lender for the purpose of purchasing or
carrying margin stock within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System;
14.15. Purchase of Property. Neither Industries nor Machine shall acquire
equipment valued in excess of $50,000 without prior Lender
approval. Acquisition includes every means of acquiring new
equipment including capital leases, true leases or any other
arrangement by which Industries and Machines undertake to pay
monthly obligations in excess of $1,500 related to such equipment.
14.16. Default. Neither Industries nor Machine shall permit any default
or event of default to occur under any note, loan agreement,
lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon Industries or Machine;
14.17. Other Agreements. Neither Industries nor Machine shall enter into
any agreement that limits or restricts the ability of Industries
or Machine to comply with the terms of the Restructure Documents.
15. EVENTS OF DEFAULT. Unless consented to by the Lender, the occurrence of any
of the following events will constitute a "Default" under the Restructure
Documents:
15.1. Nonpayment of Note. Default in payment when due of any interest or
principal of any of the notes when and such failure shall continue
for five (5) calendar days.
15.2. Other Nonpayment. Default in payment when due of any other
indebtedness payable to the Lender under the terms of the
Restructure Documents and such failure shall continue for five (5)
calendar days;
15.3. Breach of Agreement. Default by Industries or Machine in the
performance or observance of any covenant contained in the
Restructure Documents or under the terms of any other instrument
delivered to the Lender in connection with any of the Restructure
Documents when such failure continues for a period of ten (10)
calendar days;
31
15.4. Representations and Warranties. Any representation, statement,
certificate, schedule or report made or furnished to the Lender on
behalf of Industries or Machine proves to be false or erroneous in
any material respect at the time of the making thereof or any
warranty ceases to be complied with in any material respect;
15.5. Default on Substantial Obligations. Industries and Machine shall
fail to pay when due any substantial liability or liabilities owed
to persons other than the Lender; or the maturity of any such
liability or liabilities shall be accelerated; or any breach,
default or event of default shall occur under any indenture, loan
agreement, note or agreement pertaining to any such liability,
entitling a creditor or representative of creditors of Industries
or Machine, acting with or without the consent or concurrence of
other creditors and with or without notice or a period of grace,
to accelerate the maturity of or demand payment of any such
liability, whether such breach, default or event of default is
waived by the creditor so entitled. "Substantial" for these
purposes, means in excess of Twenty-Five Thousand and No/100
Dollars ($25,000);
15.6. Insolvency. The making of an assignment for the benefit of the
creditors of Industries or Machine;
15.7. Bankruptcy. The institution of bankruptcy, reorganization,
liquidation or receivership proceedings by or against Industries
or Machine under the Bankruptcy Code, as amended, or under any
other laws, whether state or federal, for the relief of Industries
or Machine, now or hereafter existing;
15.8. Receivership. The appointment of a receiver or trustee for
Industries and Machine, the Guarantors or for any substantial part
of the Collateral, or the discontinuance of business or a material
adverse change in the nature of the business of Industries or
Machine or in the financial condition of Industries or Machine;
15.9. Benefit Plan Insecurity. Any event or reportable event which the
Lender in good faith determines to constitute potential grounds
for the termination of any employee benefit plan or other plan
maintained for employees of Industries or Machine, or for the
appointment of a trustee to administer any such plan, shall have
occurred and be continuing thirty (30) calendar days after written
notice to such effect shall have been given by the Lender to
Industries or Machine; or any such plan shall be terminated, or a
trustee shall be appointed to administer any such plan; or the
Pension Benefit Guaranty Corporation shall institute proceedings
to terminate any such plan or to appoint a trustee to administer
any such plan;
15.10. Judgment. Entry by any court of a final judgment against
Industries or Machine or an attachment of any portion of the
Collateral;
32
15.11. Termination of Corporate Existence. The cessation by Industries or
Machine to be a validly existing corporation under the laws of
their respective states of organization; or
15.12. Failure of Liens. Failure of the Lender's security interests
covering the Collateral to constitute first and prior liens on any
of the Collateral.
16. REMEDIES. On the occurrence of an event of Default which has not been timely
cured, the Lender may terminate all Indebtedness of the Lender under the
Restructure Documents, including, without limitation, any obligation to make
advances under the Revolving Note, and may exercise any one or more of the
following options:
16.1. Termination of Lender Obligations. The Lender may terminate the
obligations of the Lender under this Agreement.
16.2. Acceleration. The Lender may declare the Indebtedness evidenced to
be immediately due and payable, and the same shall thereupon be
immediately due and payable, without notice or presentment or
other demand, and the Lender thereupon may exercise and enforce
all rights and remedies available to it to collect the
Indebtedness;
16.3. Selective Enforcement. In the event the Lender elects to
selectively and successively enforce the Lender's rights under any
one or more of the instruments securing payment of the
Indebtedness, such action will not be deemed a waiver or discharge
of any other lien or encumbrance securing payment of the
Indebtedness until such time as the Lender has been paid in full
all sums advanced by the Lender;
16.4. Waiver of Event of Default. The Lender may, by an instrument in
writing signed by the Lender, waive any event of Default that has
occurred and any of the consequences of such event of Default; and
in such event, the Lender, Industries and Machine will be restored
to their respective former positions, rights and Indebtedness
under the Restructure Documents. Any event of Default so waived
will, for all purposes of this Agreement, be deemed to have been
cured and not to be continuing, but no such waiver will extend to
any subsequent or other event of Default or impair any consequence
of such subsequent or other event of Default. The rights and
remedies of the Lender shall be cumulative and the exercise or
enforcement of any one right or remedy shall neither be a
condition to nor bar the exercise and enforcement of any other;
16.5. Performance by Lender. In the event Industries or Machine fail to
cure any Default in the time provided by the Lender, the Lender
will at any time thereafter have the right (but not the
obligation) to pay any claim or lien (whether prior or subordinate
to liens held by the Lender) affecting the Collateral and to take
possession of the Collateral in such manner as the Lender
determines. Industries and Machine hereby authorize the Lender to
increase the indebtedness owing by Industries and Machine to the
Lender by the cost of satisfying claims against the Collateral and
the cost of repossession of the Collateral and agree that the
Restructure Documents will evidence and secure payment of such
costs whether or not the total funds advanced exceed the face
amount of the Restructure Documents;
33
16.6. Cumulative Remedies. No failure on the part of the Lender to
exercise and no delay in exercising any right hereunder will
operate as a waiver thereof, nor will any single or partial
exercise by the Lender of any right hereunder preclude any other
or further right of exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not
alternative; and
16.7. Setoff. Regardless of the adequacy of any other Collateral held by
the Lender, any deposits or other sums credited by or due from the
Lender to Industries or Machine will at all times constitute
collateral security for all of the Indebtedness of Industries and
Machine and may be set off against any and all liabilities, direct
or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, of Industries or Machine to the
Lender. The rights granted by this paragraph will be in addition
to the rights of the Lender under any statutory lien.
17. MISCELLANEOUS. It is further agreed as follows:
17.1. Recitals. The recitals are hereby acknowledged by the parties to
be true and correct and are adopted and incorporated herein as
material terms of this Agreement.
17.2. Fees. In partial consideration of the extension of credit
contemplated under this Agreement, Industries and Machine shall
pay to the Lender origination fees in the amount of 0.5% of the
original principal balances of the Amended and Restated Note, the
IRS Note, the Revolving Note, and the Convertible Note.
17.3. Hold Harmless. Each party hereby agrees to indemnify and hold any
other party to this Agreement harmless from all liability, loss,
damage or expense, including reasonable attorney's fees, whether
incurred under retainer, salary or otherwise, that such party may
incur in good faith in compliance with or the enforcement of the
terms of this Agreement or any of the Restructure Documents.
17.4. Supersession. It is agreed and understood between Industries,
Machine, the Guarantors and the Lender that: (a) except to the
extent the Prior Loan Documents are amended hereby, at and after
the Closing, the Prior Loans will remain in full force and effect;
and (b) the execution of this Agreement will not discharge,
interrupt, impair, xxxxx or otherwise modify the priority or the
validity of any lien or security interest securing payment of the
indebtedness evidenced by the Prior Loan Documents.
17.5. Notices. All notices, requests and demands will be served by first
class or express mail, postage prepaid, or sent by telex,
telegram, telecopy or other similar form of rapid transmission
confirmed by mailing written confirmation at substantially the
same time as such rapid transmission, as follows:
34
Industries,
Machine and
the Guarantors- 00000 XX 0000
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx, CFO
Fax: (000) 000-0000
With a copy to- Xxxx X. Xxxxxxxx
Spectrum Law Group, LLP
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Fax: (000) 000-0000
The Lender - Stillwater National Bank and Trust Company
0000 X. Xxxxx
Xxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Executive Vice President
Fax: (000) 000-0000
With a copy to - Xxxxx X. Xxxxx
Xxxxxx & Xxxxxxx, P.C.
000 X. Xxxxxxxx
0000 Xxx Xxxxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
or at such other address as any party designates for such purpose
in a written notice to the other parties. Notices will be deemed
to have been given on the date notice is sent by rapid
transmission or three business days after notice is placed in the
mail, properly addressed, postage prepaid.
17.6. Construction. Nothing contained in this Agreement will be
construed to constitute the Lender as a joint venturer with
Industries or Machine or to constitute a partnership. The
descriptive headings of the paragraphs of this Agreement are for
convenience only and are not to be used in the construction of the
content of this Agreement. This Agreement may be executed in
multiple counterparts, each of which will be an original
instrument, but all of which will constitute one agreement.
17.7. Venue. This Agreement and the documents issued hereunder are
executed and delivered as an incident to a lending transaction
negotiated and to be performed in Oklahoma City, Oklahoma County,
Oklahoma. The Restructure Documents are intended to constitute a
contract made under the laws of the State of Oklahoma and to be
construed in accordance with the internal laws of said state.
Industries, Machine, the Guarantors and the Lender hereby waive
all objections and consent to the jurisdiction and venue of any
state or federal court sitting in Oklahoma County, Oklahoma.
35
17.8. Severability. In case any one or more of the provisions contained
in the Restructure Documents should be invalid, illegal or
unenforceable in any respect in any jurisdiction, the validity,
legality and enforceability of such provision or provisions will
not in any way be affected or impaired thereby in any other
jurisdiction; and the validity, legality and enforceability of the
remaining provisions contained herein and therein will not in any
way be affected or impaired thereby.
17.9. No Oral Modification. This Agreement may not be amended, altered,
modified or changed verbally, but only by an agreement in writing
signed by the party against whom enforcement of any amendment,
waiver, change, modification or discharge is sought.
17.10. Extension of Loan Term. It is understood that the Lender is under
no obligation to extend the term of this Agreement beyond the
maturity of any of the notes and that any such extension will be
made at the Lender's sole discretion. Any such extension will be
evidenced by the acceptance by the Lender of a promissory note
renewing and extending the time of payment of any of the notes on
terms acceptable to the Lender.
17.11. No Waiver. No advance of loan proceeds under any of the
Restructure Documents will constitute a waiver of any of the
representations, warranties, conditions or covenants of Industries
or Machine under the Restructure Documents. In the event
Industries or Machine are unable to satisfy any warranty,
condition or covenant contained in the Restructure Documents, no
advance of loan proceeds will preclude the Lender from thereafter
declaring such inability to be an event of Default.
17.12. Exclusive Benefit. All provisions of the Restructure Documents are
for the sole and exclusive benefit of the Lender, Industries,
Machine, Xxxxxxxx, Shumate, Clark, and Stuart, and no other person
will have standing to require satisfaction of the provisions
thereof or be entitled to assume that advances thereunder will not
be made by the Lender in the absence of strict compliance with the
provisions of the Restructure Documents. Any and all provisions of
the Restructure Documents may be waived by the Lender in whole or
in part at any time if, in the sole discretion of the Lender, it
is advisable to do so.
17.13. Application of Loan Proceeds. The Lender may apply the loan
proceeds under the notes to the satisfaction of any condition,
warranty or covenant of Industries and Machine under any of the
Restructure Documents, and any proceeds so applied will be
considered as a part of the loan proceeds advanced and will be
secured by the Restructure Documents.
36
17.14. Binding Effect. This Agreement will be binding on Industries,
Machine, the Guarantors and their successors and permitted assigns
and will inure to the benefit of the Lender and the Lender's
successors and assigns.
17.15. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be an original instrument, but
all of which will constitute one agreement. The parties to this
Agreement may rely upon original, fax, digital or scanned
signatures in the execution of this Agreement.
IN WITNESS WHEREOF, Industries, Machine, the Guarantors and the Lender
have duly executed this Agreement effective the date first above written.
XXXXXXX INDUSTRIES, INC.,
(formerly EXCALIBUR INDUSTRIES, INC.),
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
XXXXXXX MACHINE WORKS, INC.
a Texas corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
/s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------------
XXXXXXX XXXXXXXX, individually
/s/ Xxxxx Xxxxxxx
--------------------------------------------
XXXXX XXXXXXX, individually
/s/ Xxxx Xxxxx
--------------------------------------------
XXXX XXXXX, individually
STILLWATER NATIONAL BANK AND TRUST COMPANY,
a national banking association
By: /s/ Xxxxxxx Xxxxxxx
-----------------------------------------
Name: Xxxxxxx Xxxxxxx
---------------------------------------
Title: Vice President
--------------------------------------
(the "Lender")
38
