Imperial Bank
Member FDIC
000 Xxxxxxx Xxxxxxx
Xxx Xxxx, XX 00000
July 21, 1997
Subject: Credit Terms and Conditions ("Agreement")
Borrower: USFG/DHRG LP No. 2, Inc.
Gentlemen:
To induce you to make loans to the undersigned (herein called "Borrower"), and
in consideration of any loan or loans you, in your sole discretion, may make to
Borrower, Borrower warrants and agrees as follows:
A. Borrower represents and warrants that:
1. Existence and Rights.
Borrower is a Texas corporation.
Borrower is duly organized and existing and in good standing under the laws of
the State of Texas and is authorized and in good standing to do business in the
State of Texas. Borrower has powers and adequate authority, rights and
franchises to own its property and to carry on its business as now conducted,
and is duly qualified and in good standing in each State in which the character
of the properties owned by it therein or the conduct of its business makes such
qualification necessary, and Borrower has the power and adequate authority to
make and carry out this Agreement. Borrower has no investment in any other
business entity.
2. Agreement Authorized. The execution, delivery and performance of this
Agreement are duly authorized and do not require the consent or approval of any
governmental body or other regulatory authority; are not in contravention of or
in conflict with any law or regulation or any term or provision of Borrower's
articles of incorporation, by-laws, or Articles of Association, as the case may
be, and this Agreement is the valid, binding and legally enforceable obligation
of Borrower in accordance with its terms.
3. No Conflict. The execution, delivery and performance of this Agreement
are not in contravention of or in conflict with any agreement, indenture or
undertaking to which Borrower is a party or by which it or any of its property
may be bound or affected, and do not cause any lien, charge or other encumbrance
to be created or imposed upon any such property by reason thereof, other than
what has been disclosed in writing.
4. Litigation. There is no litigation or other proceeding pending or
threatened against or affecting Borrower, and Borrower is not in default with
respect to any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority, other than what has been disclosed in
writing.
5. Financial Condition. The balance sheet of Borrower as of December 96,
and the related profit and loss statement for the 12 months ended on that date,
a copy of which has heretofore been delivered to you by Borrower, and all other
statements and data submitted in writing by Borrower to you in connection with
this request for credit are true and correct, and said balance sheet and profit
and loss statement truly present the financial condition of Borrower as of the
date thereof and the results of the operations of Borrower for the period
covered thereby, and have been prepared in accordance with generally accepted
accounting principles on a basis consistently maintained. Since such date there
have been no materially adverse changes in the financial condition or business
of Borrower. Borrower has no knowledge of any liabilities, contingent or
otherwise, at such date not reflected in said balance sheet, and Borrower has
not entered into any special commitments or substantial contracts which are not
reflected in said balance sheet, other than in the ordinary and normal course of
its business, which may have a materially adverse effect upon its financial
condition, operations or business as now conducted.
6. Title to Assets. Borrower has good title to its assets, and the same are
not subject to any liens or encumbrances other than those permitted by Section
C.3 hereof.
7. Tax Status. Borrower has no liability for any delinquent state, local or
federal taxes, and if Borrower has contracted with any government agency,
Borrower has no liability for renegotiation of profits.
8. Trademarks, Patents. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.
9. Regulation U. The proceeds of this loan shall not be used to purchase or
carry margin stock (as defined with Regulation U of the Board of Governors of
the Federal Reserve system).
CORPDAL:92302.1 28722-00003
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B. Borrower agrees that so long as it is indebted to you, it will, unless you
shall otherwise consent in writing:
1. Rights and Facilities. Maintain and preserve all rights, franchises and
other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair, conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
2. Insurance. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses.
3. Taxes and Other Liabilities. Pay and discharge, before the same become
delinquent and before penalties accrue thereon, all taxes, assessments and
governmental charges upon or against it or any of its properties, and all its
other liabilities at any time existing, except to the extent and so long as: (a)
The same are being contested in good faith and by appropriate proceedings in
such manners as not to cause any materially adverse effect upon its financial
condition or the loss of any right of redemption from any sale thereunder, and
(b) it shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting practice) deemed by it adequate with
respect thereto.
4. Records and Reports. Maintain a standard and modern system of accounting
in accordance with generally accepted accounting principles on a basis
consistently maintained; permit your representatives to have access to, and to
examine its properties, books and records at all reasonable times; and furnish
you:
(a) As soon as available, and in any event within 25 days after the close of
each month of each fiscal year of Borrower, commencing with the month next
ending, a balance sheet, profit and loss statement and reconciliation of
Borrower's capital accounts as of the close of such period and covering
operations for the portion of Borrower's fiscal year ending on the last day of
such period, all in reasonable detail and stating in comparative form the
figures for the corresponding date and period in the previous fiscal year,
prepared in accordance with generally accepted accounting principles on a basis
consistently maintained by Borrower and certified by an appropriate officer of
Borrower, subject, however, to year-end audit adjustments;
(b) As soon as available, and in any event within 45 days after the close of
each fiscal year of Borrower, a report of annual statements of Company as of the
close of and for such fiscal year, all in reasonable detail and stating in
comparative form the figures as of the close of and for the previous fiscal
year, with the unqualified opinion of accountants satisfactory to you.
(c) Within 25 days after the close of each month of each fiscal year of
Borrower, a certificate by chief financial officer or partner of Borrower,
stating that Borrower has performed and observed each and every covenant
contained in this Letter of Inducement to be performed by it and that no event
has occurred and no condition then exists which constitutes an event of default
hereunder or would constitute such an event of default upon the lapse of time or
upon the giving of notice and the lapse of time specified herein, or, if any
such event has occurred or any such condition exists, specifying the nature
thereof.
(d) Promptly after the receipt thereof by Borrower, copies of any detailed audit
reports submitted to Borrower by independent accountants in connection with each
annual or interim audit of the accounts of Borrower made by such accountants;
(e) Promptly after the same are available, copies of all such proxy statements,
financial statements and reports as Borrower shall send to its stockholders, if
any, and copies of all reports which Borrower may file with the Securities and
Exchange Commission or any governmental authority at any time substitutes
therefor; and
(f) Such other information relating to the affairs of Borrower as you reasonably
may request from time to time.
(g) Notice of Default. Promptly notify the Bank in writing of the occurrence of
any event of default hereunder or any event which upon notice and lapse of time
would be an event of default.
CORPDAL:92302.1 28722-00003
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C. Borrower agrees that so long as it is indebted to you, it will not, without
your written consent:
1. Type of Business; Management. Make any substantial change in the
character of its business; or make any change in its executive management.
2. Outside Indebtedness. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys other than loans from you except obligations
now existing as shown in financial statement dated December 96, excluding those
being refinanced by your bank; or sell or transfer, either with or without
recourse, any accounts or notes receivable or any moneys due to become due.
3. Liens and Encumbrances. Create, incur, or assume any mortgage, pledge
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
liens for taxes not delinquent and liens in your favor.
4. Loans, Investments, Secondary Liabilities. Make any loans or advances to
any person or other entity other than in the ordinary and normal course of its
business as now conducted or make any investment in securities other than United
States Government Treasuries or Agencies, Imperial Bank sponsored paper, or the
Monarch Money Market Funds; or guarantee or otherwise become liable upon the
obligation of any person or other entity, except by endorsement of negotiable
instruments for deposit or collection in the ordinary and normal course of its
business.
5. Acquisition or Sale of Business; Merger or Consolidation. Purchase or
otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings therefor,
or sell any assets except in the ordinary and normal course of its business as
now conducted; or sell, lease, assign, or transfer any substantial part of its
business or fixed assets, or any property or other assets necessary for the
continuance of its business as now conducted including without limitation the
selling of any property or other asset accompanied by the leasing back of the
same. Bank's consent to such matters will not be unreasonably withheld.
6. Dividends, Stock Payments. If a corporation, declare or pay any dividend
(other than dividends payable in common stock of Borrower) or make any other
distribution on any of its capital stock now outstanding or hereafter issued or
purchase, redeem or retire any of such stock.
D. The occurrence of any one of the following events of default shall, at your
option, terminate your commitment to lend and make all sums of principal
and interest then remaining unpaid on all Borrower's indebtedness to you
immediately due and payable, all without demand, presentment or notice, all
of which are hereby expressly waived. It shall not be an event of default
hereunder for obligor's failure to perform any monetary or non-monetary
covenant until thereafter that Bank has provided obligor with written
notice and thirty (30) days thereafter in which to in good faith cure such
default.
1. Failure to Pay. Failure to pay any installment of principal or of
interest on any interest of Borrower to you.
2. Breach of Covenant. Failure of Borrower to perform any other term or
condition of this Agreement or any other agreement or document executed by
Borrower in favor of Bank binding upon Borrower.
3. Breach of Warranty. Any of Borrower's representations or warranties made
herein or any statement or certificate at any time given in writing pursuant
hereto or in connection herewith shall be false or misleading in any material
respect.
4. Insolvency; Receiver or Trustee. Borrower shall become insolvent; or
admit its inability to pay its debts as they mature; or make an assignment for
the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
5. Judgments, Attachments. Any money judgment, writ or warrant of
attachment, or similar process shall be entered or filed against Borrower or any
of its assets and shall remain unvacated unbonded or unstayed for a period of 10
days or in any event later than five days prior to the date of any proposed sale
thereunder.
6. Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall be consented to.
CORPDAL:92302.1 28722-00003
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E. Miscellaneous Provisions.
1. Failure or Indulgence Not Waiver. No failure or delay on the part of
your Bank or any holder of Notes issued hereunder, in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this agreement or any note issued in
connection with a loan that your Bank may make hereunder, are cumulative to, and
not exclusive of, any rights or remedies otherwise available.
2. Commitment Letter, Prior Credit Terms and Conditions Superseded,
Collateral. The Commitment Letter dated July 21, 1997 is attached hereto and
incorporated herein by this reference for additional terms. In the event of a
conflict between this Agreement and the Letter, the terms in the Letter shall
take precedence. This Agreement with the attached commitment letter shall
supersede that Credit Terms and Conditions dated July 9, 1997. The $1,750,000
commitment extended to Borrower on July 9, 1997 shall also be subject to the
terms of this Agreement and the attached commitment letter. The Borrower agrees
that all collateral in which the Borrower has granted the Bank a security
interest shall secure all obligations of Borrower to Bank.
USFG/DHRG LP No. 2, Inc.
By
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(Authorized Signature)
By
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(Print Name)
By
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(Title)
CORPDAL:92302.1 28722-00003
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