EXHIBIT 10.1
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LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT ("Agreement") is made and
entered into as of November 10, 2000 by and between Xxxxxxx
Manufacturing Co., Inc., a California corporation ("Borrower"), and UNION
BANK OF CALIFORNIA, N.A., a national banking association ("Bank"). This
Agreement amends and restates in its entirety that certain loan agreement
dated as of June 1, 1998 by and between Borrower and Bank, as amended.
SECTION 1. THE CREDIT
1.1 CREDIT FACILITIES
1.1.1 The Revolver-To-Term Loan. Bank will loan to Borrower an
amount not to exceed Thirteen Million Eight Hundred Thousand Dollars
($13,800,000 ) outstanding in the aggregate at any one time (the
"Revolver-To-Term Loan"). The proceeds of the Revolver-To-Term Loan shall
be used for Borrower's general working capital purposes. Borrower may
borrow, repay and reborrow all or part of the Revolver-To-Term Loan in
accordance with the terms of the Revolver-To-Term Note (defined below).
All borrowings of the Revolver-To-Term Loan must be made before November
1, 2001, at which time all unpaid principal under the Revolver-to-Term
Loan shall be converted to a fully amortizing loan to mature November 1,
2006. The Revolver-To-Term Loan shall be evidenced by Bank's standard
form of commercial promissory note (the "Revolver-To-Term Note"). Bank
shall enter each amount borrowed and repaid in Bank's records and such
entries shall be deemed correct. Omission of Bank to make any such
entries shall not discharge Borrower of its obligation to repay in full
with interest all amounts borrowed.
As of the date of this Agreement, the principal amount outstanding under
Borrower's Revolver-To-Term loan with Bank evidenced by the promissory
note dated June 1, 1998, as amended, ("Old Note") shall be deemed the
initial principal amount outstanding under the Revolver-To-Term Loan, and
the Old Note is hereby cancelled and superceded by the Revolver-To-Term
Note.
1.1.1.a The Standby L/C Sublimit. As a sublimit under the Revolver-
To-Term loan, Bank shall issue, for the account of Borrower, one or more
irrevocable standby letters of credit (individually, a "Standby L/C").
The aggregate amount available to be drawn under all Standby L/Cs and the
aggregate amount of unpaid reimbursement obligations under drawn Standby
L/Cs shall not exceed Four Million Dollars ($4,000,000) and shall reduce,
dollar for dollar, the maximum amount available under the Revolving Loan.
All Standby L/Cs shall be drawn on terms and conditions acceptable to
Bank and shall be governed by the terms of (and Borrower agrees to
execute) Bank's standard form of standby letter of credit application and
reimbursement agreement. No Standby L/C shall expire more than twelve
(12) months from the date of its issuance, and in no event later than
November 1, 2001. At Borrower's request, Bank will issue L/Cs on behalf
of Borrower's subsidiaries, including but not limited to: 1) Xxxxxxx
Strong-Tie Company, Inc.; 2) Xxxxxxx Dura-Vent Company, Inc.; and 3)
Xxxxxxx Strong-Tie, International Inc., so long as the Borrower executes
the Bank's standard form for L/C applications and reimbursement
agreement.
1.2 Terminology. The following words and phrases, whether used in their
singular or plural form, shall have the meanings set forth below:
"GAAP" means generally accepted accounting principles and practices
consistently applied. Accounting terms used in this Agreement but not
otherwise expressly defined have the meanings given them by GAAP.
"L/C" means the Commercial L/Cs or the Standby L/Cs, or both, as the
context may require.
"Lien" means any voluntary or involuntary security interest, mortgage,
pledge, claim, charge, encumbrance, title retention agreement, or third
party interest, covering all or any part of the property of Borrower or
any Guarantor.
"Loan" means all the credit facilities described above.
"Loan Documents" means this Agreement, the Note, and all other documents,
instruments and agreements required by Bank and executed in connection
with this Agreement, the Note, the Loans, and with all other credit
facilities from time to time made available to Borrower by Bank.
"Note" means all the promissory notes described above.
1.3 Prepayment. The Loan may be prepaid in full or in part but only in
accordance with the terms of the Note, and any such prepayment shall be
subject to any prepayment fee provided for therein. In the event of a
principal prepayment on any term indebtedness, the amount prepaid shall
be applied to the scheduled principal installments due in the reverse
order of their maturity on the Loan being prepaid.
1.4 Interest. The unpaid principal balance of the Loan shall bear
interest at the rate or rates provided in the Note.
1.5 Unused Fee. On the last calendar day of the third month following
the execution of this Agreement and on the last calendar day of each
three-month period thereafter, Borrower shall pay to Bank a fee of One
Eighth of One percent (0.125%) per year on the unused portion of the
Revolver-To-Term Loan for the preceding quarter, computed on the basis of
a 360 day year for actual days elapsed.
1.6 Standby Letter of Credit Fees. Borrower agrees to pay Bank Three
Quarters of One Percent (0.75%) per annum of the principal face sum of
all LCs.
1.7 Disbursement. Bank shall disburse the proceeds of the Loan as
provided in Bank's standard form Authorization(s) to Disburse executed by
Borrower.
SECTION 2. CONDITIONS PRECEDENT
Bank shall not be obligated to disburse all or any portion of the Loans
unless at or prior to the time of each such disbursement, the following
conditions have been fulfilled to Bank's satisfaction:
2.1 Compliance. Borrower shall have performed and complied with all
terms and conditions required by this Agreement to be performed or
complied with, and shall have executed and delivered to Bank the Note and
all other Loan Documents.
2.2 Guaranties. Xxxxxxx Strong-Tie Company, Inc., and Xxxxxxx Dura-Vent
Company, Inc. (individually a "Guarantor" and collectively "Guarantors")
shall have executed and delivered to Bank their respective continuing
guaranties in form and amount satisfactory to Bank.
2.3 Authorization to Obtain Credit. Borrower shall have provided Bank
with certified copies of resolutions duly adopted by Borrower's board of
directors and in form satisfactory to Bank, authorizing the execution,
delivery and performance of this Agreement and the other Loan Documents.
Such resolutions shall also designate the persons who are authorized to
act on Borrower's behalf in connection with this Agreement to do the
things required of Borrower pursuant to this Agreement.
2.4 Continuing Compliance. At the time any disbursement is to be made
and immediately thereafter, there shall not exist any Event of Default
(as hereinafter defined) or any event, condition, or act which with
notice or lapse of time, or both, would constitute an Event of Default.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
3.1 Business Activity. Borrower's principal business is manufacturer of
specialty connectors and venting systems for gas and wood burning
appliances.
3.2 Affiliates and Subsidiaries. Borrower's affiliates and subsidiaries
(those entities in which Borrower has either a controlling interest or a
twenty-five percent (25%) or more ownership interest) and their
addresses, and the names of the persons or entities owning five percent
(5%) or more of the equity interests in Borrower, are as provided on a
schedule delivered to Bank on or before the date of this Agreement.
3.3 Organization and Qualification. Borrower is duly organized and
existing under the laws of the state of its organization, is duly
qualified and in good standing in any jurisdiction where such
qualification is required, and has the power and authority to carry on
the business in which it is engaged and/or proposes to engage.
3.4 Power and Authorization. Borrower has the power and authority to
enter into this Agreement and to execute and deliver the Note and all
other Loan Documents. This Agreement and all things required by this
Agreement and the other Loan Documents have been duly authorized by all
requisite action of Borrower.
3.5 Authority to Borrow. The execution, delivery and performance of this
Agreement, the Note and all other Loan Documents are not in contravention
of any of the terms of any indenture, agreement or undertaking to which
Borrower is a party or by which it or any of its property is bound or
affected.
3.6 Compliance with Laws. Borrower is in compliance with all applicable
laws, rules, ordinances or regulations which materially affect the
operations or financial condition of Borrower.
3.7 Title. Except for assets which may have been disposed of in the
ordinary course of business, Borrower has good and marketable title to
all property reflected in its financial statements delivered to Bank and
to all property acquired by Borrower since the date of said financial
statements, free and clear of all Liens, except Liens specifically
referred to in said financial statements.
3.8 Financial Statements. Borrower's financial statements, including
both a balance sheet at June 30, 2000, together with supporting
schedules, and an income statement for the six (6) months ended June 30,
2000 , have heretofore been furnished to Bank, are true and complete, and
fairly represent Borrower's financial condition for the period covered
thereby. Since June 30, 2000, there has been no material adverse change
in Borrower's financial condition or operations.
3.9 Litigation. There is no litigation or proceeding pending or
threatened against Borrower or any of its property which is reasonably
likely to affect the financial condition, property or business of
Borrower in a materially adverse manner or result in liability in excess
of Borrower's insurance coverage.
3.10 ERISA. Borrower's defined benefit pension plans (as defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
meet, as of the date hereof, the minimum funding standards of Section 302
of ERISA, and no Reportable Event or Prohibited Transaction as defined in
ERISA has occurred with respect to any such plan.
3.11 Regulation U. No action has been taken or is currently planned by
Borrower, or any agent acting on its behalf, which would cause this
Agreement or the Note to violate Regulation U or any other regulation of
the Board of Governors of the Federal Reserve System, or to violate the
Securities and Exchange Act of 1934, in each case as in effect now or as
the same may hereafter be in effect. Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying
margin stock as one of its important activities and, except as may be
expressly agreed to and documented between Borrower and Bank, none of the
proceeds of the Loan will be used directly or indirectly for such
purpose.
3.12 No Event of Default. Borrower is not now in default in the payment
of any of its material obligations, and there exists no Event of Default,
and no condition, event or act which with notice or lapse of time, or
both, would constitute an Event of Default.
3.13 Continuing Representations and Warranties. The foregoing
representations and warranties shall be considered to have been made
again at and as of the date of each and every Loan disbursement and shall
be true and correct as of each such date.
SECTION 4. AFFIRMATIVE COVENANTS
Until all sums payable pursuant to this Agreement, the Note and the other
Loan Documents have been paid in full, unless Bank otherwise consents in
writing, Borrower agrees that:
4.1 Use of Proceeds. Borrower will use the proceeds of the Loan only as
provided in Section 1 above.
4.2 Payment of Obligations. Borrower will pay and discharge promptly all
taxes, assessments and other governmental charges and claims levied or
imposed upon it or its property, or any part thereof; provided, however,
that Borrower shall have the right in good faith to contest any such
taxes, assessments, charges or claims and, pending the outcome of such
contest, to delay or refuse payment thereof provided that adequately
funded reserves are established by it to pay and discharge any such
taxes, assessments, charges and claims.
4.3 Maintenance of Existence. Borrower will maintain and preserve its
existence, its assets, and all rights, franchises, licenses and other
authority necessary for the conduct of its business, and will maintain
and preserve its property, equipment and facilities in good order,
condition and repair. Bank may, at reasonable times, visit and inspect
any of Borrower's properties.
4.4 Records. Borrower will keep and maintain full and accurate accounts
and records of its operations in accordance with GAAP and will permit
Bank, at Borrower's expense, to have access thereto, to make examination
and photocopies thereof, and to make audits of Borrower's accounts and
records and Bank's collateral during regular business hours.
4.5 Information Furnished. Borrower will furnish to Bank:
(a) Within Sixty (60) days after the close of each fiscal quarter,
except for the final quarter of each fiscal year, its unaudited
balance sheet as of the close of such fiscal quarter, its
unaudited income and expense statement with year-to-date totals
and supportive schedules, and its statement of retained
earnings for that fiscal quarter, all prepared in accordance
with GAAP;
(b) Within One Hundred Twenty (120) days after the close of each
fiscal year, a copy of its statement of financial condition
including at least its balance sheet as of the close of such
fiscal year and its income and expense statement, and its
retained earnings statement for such fiscal year, examined and
prepared on an audited basis by independent certified public
accountants selected by Borrower and reasonably satisfactory to
Bank, in accordance with GAAP along with any management letter
provided by such accountants;
(c) Give Notice to Bank within Fifteen (15) days of any guaranty
issued obligating Borrower or Guarantors.
(d) Prompt written notice to Bank of any Event of Default or breach
under any of the terms or provisions of this Agreement or any
other Loan Document, any litigation which would have a
material adverse effect on Borrower's financial condition, and
any other matter which has resulted in, or is likely to result
in, a material adverse change in Borrower's financial condition
or operations;
(e) Prior written notice to Bank of any change in Borrower's
officers and other senior management, Borrower's name, and the
location of Borrower's assets, principal place of business or
chief executive office;
(f) Copies of any amendments to Borrower's loan documents with
Xxxxx Fargo Bank;
(g) Within fifteen (15) days after Borrower knows or has reason to
know that any Reportable Event or Prohibited Transaction (as
defined in ERISA) has occurred with respect to any defined
benefit pension plan of Borrower, a statement of an authorized
officer of Borrower describing such event or condition and the
action, if any, which Borrower proposes to take with respect
thereto;
(h) Give written notice at least Thirty (30) days prior to the
proposed closing date of any acquisition in excess of Eight
Million Dollars ($8,000,000), providing a description of the
business or assets to be acquired and the terms of the
acquisition; and
(i) Such other financial statements and information as Bank may
reasonably request from time to time.
4.6 Tangible Net Worth. Borrower will at all times maintain Tangible Net
Worth of not less than One Hundred Forty Five Million One Hundred and
Four Thousand Dollars ($145,104,000) increasing by Fifty percent (50%) of
Borrower's positive net profit after taxes, if any, for each fiscal
quarter ending on or after June 30, 2000. "Tangible Net Worth" means
Borrower's net worth increased by indebtedness subordinated to Bank in
form and substance satisfactory to Bank, and decreased by patents,
licenses, trademarks, trade names, goodwill and other similar intangible
assets, organizational expenses, security deposits, prepaid costs and
expenses and monies due from affiliates (including officers, shareholders
and directors).
4.7 Adjusted Total Liabilities to Tangible Net Worth. Borrower will at
all times maintain a ratio of Adjusted Total Liabilities to Tangible Net
Worth of not greater than 1.5:1.0. "Adjusted Total Liabilities" shall
mean total liabilities plus all guarantees and similar contingent
liabilities of Borrower and Guarantors.
4.8 Profit From Operations. Borrower will achieve net profit from
operations, as defined by generally accepted accounting principles, of
any positive amount for each fiscal year.
4.9 Cash Flow Ratio. Borrower will maintain a ratio of Cash Flow to Debt
Service of not less than 1.5:1.0 as of the close of each fiscal year.
"Cash Flow" means net profit after taxes to which interest, net of
capitalized interest, depreciation, amortization and other noncash
expenses are added for the twelve (12) month period immediately preceding
the date of calculation. "Debt Service" shall mean interest expenses plus
prior period current portion of long-term debt, including subordinated
debt payments.
4.10 Insurance. Borrower will keep all of its insurable property,
whether real, personal or mixed, insured by companies approved by Bank,
against fire and such other risks, and in such amounts as is customarily
obtained by companies conducting similar business with respect to like
properties.
4.11 Additional Requirements. Upon Bank's demand, Borrower will promptly
take such further action and execute all such additional documents and
instruments in connection with this Agreement and the other Loan
Documents as Bank in its reasonable discretion deems necessary, and
promptly supply Bank with such other information concerning its affairs
as Bank may request from time to time.
4.12 Litigation and Attorneys' Fees. Upon Bank's demand, Borrower will
promptly pay to Bank reasonable attorneys' fees, including the reasonable
estimate of the allocated costs and expenses of in-house legal counsel
and staff, and all costs and other expenses paid or incurred by Bank in
collecting, modifying or compromising the Loan or in enforcing or
exercising its rights or remedies created by, connected with or provided
for in this Agreement and the other Loan Documents. If any judicial
action, arbitration or other proceeding is commenced, only the prevailing
party shall be entitled to attorneys' fees and court costs.
4.13 Bank Expenses. Upon Bank's request, Borrower will pay or reimburse
Bank for all costs, expenses and fees incurred by Bank in preparing and
documenting this Agreement and the Loan, and all amendments and
modifications to any Loan Documents, including but not limited to all
filing and recording fees, costs of appraisals, insurance and attorneys'
fees, including the reasonable estimate of the allocated costs and
expenses of in-house legal counsel and staff.
SECTION 5. NEGATIVE COVENANTS
Until all sums payable pursuant to this Agreement, the Note and the other
Loan Documents have been paid in full, unless Bank otherwise consents in
writing, Borrower agrees that:
5.1 Liens. Borrower will not create, assume or suffer to exist any Lien
on any of its property, whether real, personal or mixed, now owned or
hereafter acquired, or upon the income or profits thereof, except (a)
Liens in favor of Bank, (b) Liens for taxes not delinquent and taxes and
other items being contested in good faith, (c) minor encumbrances and
easements on real property which do not affect its market value, (d)
existing Liens on Borrower's personal property, and (e) future purchase
money security interests encumbering only the personal property
purchased.
5.2 Other Indebtedness. Create, incur, assume or permit to exist any
indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except (a) the liabilities of Borrower to
Bank; (b) trade debt incurred by Borrower in the normal course of its
business; (c) the existing liabilities of Borrower disclosed to Bank on
its financial statement referenced in Section 3.8 hereof; (d)
indebtedness arising under existing real estate secured loans, provided
however that such indebtedness shall not exceed the lesser of (i) One
Hundred percent (100%) of the aggregate purchase price of such real
property as valued; or (ii) the aggregate appraised value of such real
estate collateral; (e) unsecured indebtedness of Borrower to Xxxxx Fargo
Bank in an aggregate amount not to exceed Nine Million and Two Hundred
Thousand Dollars ($9,200,000); and (f) unsecured indebtedness of
subsidiaries in an aggregate amount not to exceed Ten Million Dollars
($10,000,000).
5.3 Sale of Assets, Liquidation or Merger. Borrower will not liquidate,
dissolve or enter into any consolidation, merger, partnership or other
combination, or convey, sell or lease all or the greater part of its
assets or business, or purchase or lease all or the greater part of the
assets or business of another.
5.4 Loans, Advances and Guaranties. Borrower will not, except in the
ordinary course of business as currently conducted, make any loans or
advances, become a guarantor or surety, or pledge its credit or
properties; except for amounts not in excess of Twenty Five Million
Dollars ($25,000,000) in the aggregate.
5.5 Acquisition. Borrower will not make any acquisitions or acquire any
net assets, other than fixed or capital assets acquired in the normal
course of business, in excess of Twenty Million Dollars ($20,000,000) in
any fiscal year.
5.6 Payment of Dividends. Borrower will not declare or pay any
dividends, other than dividends payable solely in its own common stock,
or authorize or make any other distribution with respect to any of its
stock now or hereafter outstanding.
5.7 Redemption of Stock. Borrower will not redeem or retire any share
of its capital stock for value.
5.8 Affiliate Transactions. Borrower will not transfer any property to
any affiliate, except for value received in the normal course of business
and for an amount, including any management or service fee(s), as would
be conducted and charged with an unrelated or unaffiliated entity.
Borrower will not pay any management fee or fee for services to any
affiliate without Bank's prior written consent.
5.9 Lease Obligations. Borrower or Subsidiary will not incur new lease
obligations as lessee which would result in aggregate lease payments for
any fiscal year exceeding Fifteen Million Dollars ($15,000,000). Each
such lease shall be of equipment or real property needed by Borrower in
the ordinary course of its business.
5.10 Borrower will not amend, alter, supplement or otherwise modify the
terms of Guarantor's existing indebtedness to Xxxxx Fargo Bank, N.A.
5.11 Borrower will not transfer the proceeds of any loan or advance
hereunder, or any other asset of Borrower to any affiliate or Guarantor,
unless such transfer is evidenced by a valid and enforceable instrument
or statement or account.
SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the following events ("Events of Default") shall
terminate any obligation of Bank to make or continue the Loan and shall
automatically, unless otherwise provided under the Note, make all sums of
interest and principal and any other amounts owing under the Loan
immediately due and payable, without notice of default, presentment or
demand for payment, protest or notice of nonpayment or dishonor, or any
other notices or demands:
6.1 Borrower shall default in the due and punctual payment of the
principal of or the interest on the Note or on any amounts owing under
any of the Loan Documents;
6.2 Any default shall occur under the Note;
6.3 Borrower shall default in the due performance or observance of any
covenant or condition of the Loan Documents;
6.4 Any guaranty or subordination agreement required hereunder shall be
breached or becomes ineffective, or any Guarantor or subordinating
creditor shall die, disavow or attempt to revoke or terminate such
guaranty or subordination agreement; or
6.5 There shall be a change in ownership or control of ten percent (10%)
or more of the equity interests in Borrower or any Guarantor.
SECTION 7. GENERAL PROVISIONS
7.1 Additional Remedies. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in
addition to all rights, powers and remedies given to Bank by law against
Borrower or any other person or entity including but not limited to
Bank's rights of setoff and banker's lien.
7.2 Nonwaiver. Any forbearance or failure or delay by Bank in exercising
any right, power or remedy hereunder shall not be deemed a waiver thereof
and any single or partial exercise of any right, power or remedy shall
not preclude the further exercise thereof. No waiver shall be effective
unless it is in writing and signed by an officer of Bank.
7.3 Inurement. The benefits of this Agreement and the other Loan
Documents shall inure to the successors and assigns of Bank and the
permitted successors and assigns of Borrower, but any attempted
assignment by Borrower without Bank's prior written consent shall be null
and void.
7.4 Applicable Law. This Agreement and the other Loan Documents shall be
governed by and construed according to the laws of the State of
California.
7.5 Severability. Should any one or more provisions of this Agreement or
any other Loan Document be determined to be illegal or unenforceable, all
other provisions of such document shall nevertheless be effective.
7.6 Controlling Document. In the event of any inconsistency between the
terms of this Agreement and any other Loan Document, the terms of the
other Loan Document shall prevail.
7.7 Construction. The section and subsection headings herein are for
convenient reference only and shall not limit or otherwise affect the
interpretation of this Agreement.
7.8 Amendments. This Agreement may be amended only in writing signed by
all parties hereto.
7.9 Counterparts. Borrower and Bank may execute one or more counterparts
to this Agreement, each of which shall be deemed an original, but all
such counterparts when taken together, shall constitute one and the same
agreement.
7.10 Notices. Any notices or other communications provided for or
allowed hereunder shall be effective only when given by one of the
following methods and addressed to the parties at their respective
addresses and shall be considered to have been validly given (a) upon
delivery, if delivered personally, (b) upon receipt, if mailed, first
class postage prepaid, with the United States Postal Service, (c) on the
next business day, if sent by overnight courier service of recognized
standing, or (d) upon telephoned confirmation of receipt, if telecopied.
The addresses to which notices or demands are to be given may be changed
from time to time by notice delivered as provided above.
7.11 Integration Clause. Except for the other Loan Documents, this
Agreement constitutes the entire agreement between Bank and Borrower
regarding the Loan, and all prior oral or written communications between
Borrower and Bank shall be of no further effect or evidentiary value.
THIS AGREEMENT is executed on behalf of the parties by their duly
authorized representative(s) as of the date first above written.
Union Bank of California, N.A.
By:
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Address:
Two Walnut Creek Center
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxxxxx Manufacturing Co., Inc.
By: /s/XXXXXXX X. XXXXXXX
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Title: CFO
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By: /s/XXXXXX X XXXXXXXXX
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Title: PRESIDENT
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Address:
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Acknowledged by Guarantors:
Xxxxxxx Strong-Tie Company, Inc.
By: /s/XXXXXXX X. XXXXXXX
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Title: CFO
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By:
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Title:
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Xxxxxxx Dura-Vent Company, Inc.
By: /s/XXXXXXX X. XXXXXXX
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Title: CFO
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By:
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Title:
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COMMERCIAL PROMISSORY NOTE
$13,800,000.00 Effective as of November 10, 2000
Each signer of this Note ("Borrower") promises to pay to the order of
UNION BANK OF CALIFORNIA, N.A. ("Bank") at its East Bay Commercial
Banking office, or at such other place as Bank may designate in writing,
in lawful money of the United States of America, the principal sum of
THIRTEEN MILLION EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS
($13,800,000.00), or so much thereof as is disbursed under the Loan
Agreement defined below, together with interest on the balance of such
principal from time to time outstanding, at the per annum rate or rates
and at the times set forth below. From the date of this Note through
November 1, 2001, Borrower may borrow, repay and reborrow principal, each
advance in the minimum amount of FIFTY THOUSAND AND NO/100 DOLLARS
($50,000.00) and subject to all limitations, terms and conditions
contained herein and in any Loan Documents (as defined below) provided,
however, that the outstanding principal balance of this Note shall at no
time exceed the maximum principal amount stated above.
1. INTEREST PAYMENTS. Interest shall be payable on the first day of
each consecutive month beginning the first such date after the first
advance under this Note, and continuing through October 1, 2001, plus a
final instalment equal to the entire unpaid principal balance and all
accrued and unpaid interest on November 1, 2001.
Notwithstanding the foregoing, however, if on November 1, 2001, Borrower
is in compliance with all terms and conditions of this Note and any Loan
Documents and no Event of Default (as defined below) has occurred and is
continuing, Bank agrees to convert the then outstanding principal balance
of this Note ("Principal Balance") to a term loan. The term loan
evidenced by this Note shall bear interest at the per annum rate or rates
and at the times set forth below and shall be payable as follows. The
period from the date of this Note through November 1, 2001 is the
"Revolving Period", and if the term loan is made, the period December 1,
2001 through November 1, 2006 is the "Term Period".
Interest shall be payable on the first day of each consecutive month
beginning December 1, 2001, and continuing through October 1, 2006.
Principal shall be payable in fifty-nine (59) consecutive monthly
instalments each in an amount equal to 1/60th of the Principal
Balance, beginning December 1, 2001 and continuing on the first day
of each consecutive month through October 1, 2006, plus a sixtieth
(60th) and final instalment equal to the entire unpaid principal
balance and all accrued and unpaid interest on November 1, 2006.
(a) BASE INTEREST RATE. At Borrower's option, amounts outstanding
hereunder in increments of at least ONE HUNDRED FIFTY THOUSAND AND
NO/100 DOLLARS ($150,000.00) shall bear interest at a rate, based on
an index selected by Borrower, which rate shall be equal to Bank's
LIBOR Rate for the Interest Period selected by Borrower plus the
Applicable Margin, which rate plus the Applicable Margin is to be
quoted to Borrower by Bank upon Borrower's request on a Business
Day, and may only be accepted at the time quoted.
No Base Interest Rate may be changed, altered or otherwise modified
until the expiration of the Interest Period selected by Borrower.
The exercise of interest rate options by Borrower shall be as
recorded in Bank's records, which records shall be prima facie
evidence of the amount borrowed under either interest option and the
interest rate; provided, however, that failure of Bank to make any
such notation in its records shall not discharge Borrower from its
obligations to repay in full with interest all amounts borrowed. In
no event shall any Interest Period extend beyond the Maturity Date.
To select an Interest Period, Borrower may, from time to time with
respect to principal outstanding on which a Base Interest Rate is
not accruing, and on the expiration of any Interest Period with
respect to principal outstanding on which a Base Interest Rate has
been accruing, select an index offered by Bank for a Base Interest
Rate Loan and an Interest Period by telephoning an authorized
lending officer of Bank located at the banking office identified
below prior to 10:00 a.m., Pacific time, on any Business Day and
advising that officer of the selected index, the Interest Period and
the Origination Date selected.
Bank will confirm the Interest Period selected by Borrower promptly
after the selection is made. Failure to send such confirmation
shall not affect Bank's rights to collect interest at the rate
selected. If, on the date of the selection, the index is
unavailable for any reason, the selection shall be void. Bank
reserves the right to fund the principal from any source of funds
notwithstanding any Base Interest Rate selected by Borrower.
(b) VARIABLE INTEREST RATE. All principal outstanding hereunder
which is not bearing interest at a Base Interest Rate shall bear
interest at a rate per annum equal to the Reference Rate minus (i)
.50% during the Revolving Period and (ii) .375% during the Term
Period, which rate shall vary as and when the Reference Rate changes
("Variable Interest Rate"); provided, however, that the Variable
Interest Rate under this Note shall be at no time less than the
Adjusted Term Fed Funds Rate plus .50% per annum.
2. INTEREST RATE FOLLOWING DEFAULT. In the event of default, at the
option of Bank, and, to the extent permitted by law, interest shall
be payable on the outstanding principal under this Note at a per
annum rate equal to five percent (5%) in excess of the interest rate
specified in paragraph 1(b), above, calculated from the date of
default until all amounts payable under this Note are paid in full.
3. PREPAYMENT
(a) Amounts outstanding under this note bearing interest at a rate
based on the Reference Rate may be prepaid in whole or in part at
any time, without penalty or premium. Debtor may prepay amounts
outstanding under this note bearing interest at a Base Interest Rate
in whole or in part provided Debtor has given Bank not less than
five (5) Business Days prior written notice of Debtor's intention to
make such prepayment and pays to Bank prepayment fee due as a
result. The prepayment fee shall also be paid, if Bank, for any
other reason, including acceleration or foreclosure, receives all or
any portion of principal bearing interest at a Base Interest Rate
prior to its scheduled payment date. The prepayment fee shall be an
amount equal to the present value of the product of: (i) the
difference (but not less than zero) between (a) the Base Interest
Rate applicable to the principal amount which is being prepaid, and
(b) the return which Bank could obtain if it used the amount of such
prepayment of principal to purchase at bid price regularly quoted
securities issued by the United States having a maturity date most
closely coinciding with the relevant Base Rate Maturity Date and
such securities were held by Bank until the relevant Base Rate
Maturity Date ("Yield Rate"); (ii) a fraction, the numerator of
which is the number of days in the period between the date of
prepayment and the relevant Base Rate Maturity Date and the
denominator of which is 360; and (iii) the amount of the principal
so prepaid (except in the event that principal payments are required
and have been made as scheduled under the terms of the Base Interest
Rate Loan being prepaid, then an amount equal to the lesser of (A)
the amount prepaid or (B) 50% of the sum of (1) the amount prepaid
and (2) the amount of principal scheduled under the terms of the
Base Interest Rate Loan being prepaid to be outstanding at the
relevant Base Rate Maturity Date). Present value under this note
is determined by discounting the above product to present value
using the Yield Rate as the annual discount factor.
(b) In no event shall Bank be obligated to make any payment or
refund to Debtor, nor shall Debtor be entitled to any setoff or
other claim against Bank, should the return which Bank could obtain
under this prepayment formula exceed the interest that Bank would
have received if no prepayment had occurred. All prepayments shall
include payment of accrued interest on the principal amount so
prepaid and shall be applied to payment of interest before
application to principal. A determination by Bank as to the
prepayment fee amount, if any, shall be conclusive.
(c) Bank shall provide Debtor a statement of the amount payable on
account of prepayment. Debtor acknowledges that (i) Bank
establishes a Base Interest Rate upon the understanding that it
apply to the Base Interest Rate Loan for the entire Interest Period,
and (ii) Bank would not lend to Debtor without Debtor's express
agreement to pay Bank the prepayment fee described above.
initials MJH
_________________________ __________________________
4. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT. The occurrence of any
of the following shall constitute a default under this Note: (a) the
failure of Borrower to make any payment required under this Note when
due; (b) any breach, misrepresentation or other default by Borrower, any
guarantor, co-maker, endorser, or any person or entity other than
Borrower providing security or other support for this Note (each,
together with Borrower an "Obligor") under any agreement with Bank; or
any person shall fail to perform its obligations under the terms of any
promissory Note, contract or other obligation that is held by Bank as
collateral or support for the obligations evidenced by this Note; (c) the
insolvency of any Obligor or the failure of any Obligor generally to pay
such Obligor's debts as such debts become due; (d) the commencement as to
any Obligor of any voluntary or involuntary proceeding under any laws
relating to bankruptcy, insolvency, reorganization, arrangement, debt
adjustment or debtor relief; (e) the assignment by any Obligor for the
benefit of such Obligor's creditors; (f) the appointment, or commencement
of any proceeding for the appointment of a receiver, trustee, custodian
or similar official for, or a transfer of, all or substantially all of
any Obligor's property; (g) the commencement of any proceeding for the
dissolution or liquidation of any Obligor; (h) the termination of
existence or death of any Obligor; (i) the revocation or termination of
any document, instrument or writing given in connection with this Note;
(j) the failure of any Obligor to comply with any order, judgment,
injunction, decree, writ or demand of any court or other public
authority; (k) the filing or recording against any Obligor, or the
property of any Obligor, of any notice of levy, notice to withhold, or
other legal process for taxes; (l) the default by any Obligor on any
obligation concerning the borrowing of money; (m) the issuance against
any Obligor, or the property of any Obligor, of any writ of attachment,
execution, or other judicial lien; (n) Any employee benefit plan of any
Obligor ("Plan") subject to the Employee Retirement Income Security act
of 1974 ("ERISA") or any successor thereto shall be terminated pursuant
to ERISA, a trustee shall be appointed to administrator any Plan, the
Pension Benefit Guaranty Corporation shall institute proceedings to
terminate any Plan, or any Plan shall fail to satisfy the minimum funding
standard for such Plan for a plan year as established by the Internal
Revenue Code, as amended from time to time; or (o) Any governmental
authority shall take any action, or any other event shall occur, which,
in the judgment of Bank, might have a material adverse effect on the
financial condition or business of any Obligor. Upon the occurrence of
any such default, Bank, in its discretion, may (i) cease to advance funds
under this Note, (ii) may declare all obligations under this Note
immediately due and payable; or (iii) exercise any other right or remedy
available under contract or applicable law; provided however, upon the
occurrence of an event of default under subsections c, d, e, f, or g, all
principal and interest shall automatically become immediately due and
payable.
5. ADDITIONAL AGREEMENTS OF BORROWER. If any amounts owing under this
Note are not paid when due, Borrower promises to pay all costs and
expenses, including reasonable attorneys' fees, incurred by Bank in the
collection or enforcement of this Note. Borrower, for the maximum period
of time and the full extent permitted by law, (a) waives diligence,
presentment, demand, notice of nonpayment, protest, notice of protest,
and notice of every kind; and (b) waives the right to assert the defense
of any statute of limitations to any obligation under this Note. If this
Note is signed by more than one party, the term "Borrower" includes each
of the undersigned, whose liability shall be joint and several. The
receipt of any check or other item of payment by Bank, at its option,
shall not be considered a payment on account until such check or other
item of payment is honored Bank may delay the credit of such payment
based upon Bank's schedule of funds availability, and interest under this
Note shall accrue until the funds are deemed collected. In any action
brought under or arising out of this Note, Borrower hereby consents to
the jurisdiction of any competent court within the State of California
and consents to service of process by any means authorized by this
state's law. This Note shall be construed in accordance with and governed
by the laws of the State referred to in this Section. This Note hereby
incorporates any alternative dispute resolution agreement previously,
concurrently or hereafter executed between Borrower and Bank. The
benefits of this Note shall inure to the successors and assigns of Bank
and the permitted successors and assignees of Borrower, provided that
Borrower may not assign or transfer Borrower's obligations under this
Note without Bank's prior written consent.
Bank reserves the right to sell, assign or transfer its rights and duties
under this Note in whole or in part without notice to Borrower. In that
connection, Bank may disclose all documents and information which Bank
may have pertaining to this Note, any Obligor or any Obligor's business.
6. DEFINITIONS. As used herein, the following terms shall have the
meanings respectively set forth below: "Adjusted Term Fed Funds Rate"
means the rate determined by Bank to be the per annum rate at which Bank
can acquire term Federal funds deposits for a term corresponding to the
Interest Period applicable to the Bank's advance to Borrower, and for an
amount equal to the amount of principal covered by Borrower's Base
Interest Rate election, and adjusted to Bank's costs. "Applicable
Margin" means the following percent per annum for the following periods:
(a) During the Revolving Period, plus (i) one percent (1.0%) per annum
from the date of this Note to but excluding the date of any change in
such interest rate margin required by a change in the ratio of Debtor's
Adjusted Total Liabilities to Tangible Net Worth as provided for in this
definition of Applicable Margin: (ii) three-quarters of one percent
(.75%) per annum, effective on the first day of the month following the
month in which Bank receives a financial statement (required by the Loan
Agreement) from Debtor ("Financial Statement") demonstrating that the
ratio of Debtor's Adjusted Total Liabilities to Tangible Net Worth for
the fiscal quarter covered thereby was less than 0.50 to 1.00 (provided
that for the purposes of this definition of Applicable Margin, the term "
effective on the first day of the month following the month in which Bank
receives a Financial Statement" shall be deemed to be "effective on the
first day of the Interest Period following the Interest Period in which
Bank receives a Financial Statement" during such time as any outstanding
principal balance of this Note bears interest at a rate based on the
LIBOR Rate), (iii) seven-eighths percent (.875%) per annum, effective on
the first day of the month following the month in which Bank receives a
Financial Statement from Debtor demonstrating that the ratio of Debtor's
Adjusted Total Liabilities to Tangible Net Worth for the fiscal quarter
covered thereby was less than or equal to 1.00 to 1.00, but equal to or
greater than 0.50 to 1.00 and (iv) one percent (1.0%) per annum,
effective on the first day of the month following the month in which Bank
receives a Financial Statement from Debtor demonstrating that the ratio
of Debtor's Adjusted Total Liabilities to Tangible Net Worth for the
fiscal quarter covered thereby was greater than 1.00 to 1.00; (b) during
the Term Period, plus (i) one and one-eighth percent (1.125%) per annum
from the date of this Note to but excluding the date of any change in
such interest rate margin required by a change in the ratio of Debtor's
Adjusted Total Liabilities to Tangible Net Worth as provided for in this
definition of Applicable Margin: (ii) seven-eighths of one percent
(.875%) per annum, effective on the first day of the month following the
month in which Bank receives a Financial Statement from Debtor
demonstrating that the ratio of Debtor's Adjusted Total Liabilities to
Tangible Net Worth for the fiscal quarter covered thereby was less than
0.50 to 1.00, (iii) one percent (1.0%) per annum, effective on the first
day of the month following the month in which Bank receives a Financial
Statement from Debtor demonstrating that the ratio of Debtor's Adjusted
Total Liabilities to Tangible Net Worth for the fiscal quarter covered
thereby was less than or equal to 1.00 to 1.00, but equal to or greater
than 0.50 to 1.00 and (iv) one one-eighths percent (1.125%) per annum,
effective on the first day of the month following the month in which Bank
receives a Financial Statement from Debtor demonstrating that the ratio
of Debtor's Adjusted Total Liabilities to Tangible Net Worth for the
fiscal quarter covered thereby was greater than 1.00 to 1.00; provided,
however, that (x) if at any time there exists a default under this note
or the Loan Agreement, or any event has occurred which, with notice or
the lapse of time, or both, would become a default under this note or the
Loan Agreement, or (y) if Debtor fails to deliver any Financial Statement
to Bank within the required time period set forth in the Loan Agreement,
then the ratio of Debtor's Adjusted Total Liabilities to Tangible Net
Worth for the fiscal quarter covered thereby shall be deemed to be
greater than 1.00 to 1.00 until such default or unmatured default is
cured or otherwise waived by Bank or such Financial Statement is
delivered to Bank, as the case may be; and provided further, however,
that the Applicable Margin shall never be a negative number. "Base
Interest Rate" means a rate of interest based on the LIBOR Rate. "Base
Interest Rate Loan" means amounts outstanding under this note that bear
interest at a Base Interest Rate. "Base Rate Maturity Date" means the
last day of the Interest Period with respect to principal outstanding
under a Base Interest Rate Loan. "Business Day" means a day on which
Bank is open for business for the funding of corporate loans, and, with
respect to the rate of interest based on the LIBOR Rate, on which
dealings in U.S. dollar deposits outside of the United States may be
carried on by Bank. "Interest Period" means with respect to funds
bearing interest at a rate based on the LIBOR Rate, any calendar period
of one, two or three weeks or one, two, three, four, five, six, nine or
twelve months. In determining an Interest Period, a month means a period
that starts on one Business Day in a month and ends on and includes the
day preceding the numerically corresponding day in the next month. For
any month in which there is no such numerically corresponding day, then
as to that month, such day shall be deemed to be the last calendar day of
such month. Any Interest Period which would otherwise end on a non-
Business Day shall end on the next succeeding Business Day unless that is
the first day of a month, in which event such Interest Period shall end
on the next preceding Business Day. "LIBOR Rate" means a per annum rate
of interest (rounded upward, if necessary, to the nearest 1/100 of 1%) at
which dollar deposits, in immediately available funds and in lawful money
of the United States would be offered to Bank, outside of the United
States, for a term coinciding with the Interest Period selected by Debtor
and for an amount equal to the amount of principal covered by Debtor's
interest rate selection, plus Bank's costs, including the cost, if any,
of reserve requirements. "Loan Agreement" shall mean that certain Loan
Agreement dated as of November 10, 2000 by and between Debtor and
Bank, as at any time amended, supplemented or otherwise modified or
further restated. Capitalized terms not otherwise defined in this Note
shall have the meanings provided in the Loan Agreement. "Origination
Date" means the first day of each Interest Period. "Reference Rate"
means the rate announced by Bank from time to time at its corporate
headquarters as its Reference Rate. The Reference Rate is an index rate
determined by Bank from time to time as a means of pricing certain
extensions of credit and is neither directly tied to any external rate of
interest or index nor necessarily the lowest rate of interest charged by
Bank at any given time.
XXXXXXX MANUFACTURING CO., INC.,
a California corporation
By: /s/XXXXXXX X. XXXXXXX
--------------------------------
Title: CFO
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By: /s/XXXXXX X XXXXXXXXX
--------------------------------
Title: PRESIDENT
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