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EXHIBIT 10.1
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of March 19, 1998, by
and among Coyote Sports, Inc., a Nevada corporation whose principal executive
offices are located at 0000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 (the
"Borrower"), Xxx X. Xxxxxxxxxxx, the Chief Executive Officer and a director of
the Borrower ("Xxxxxxxxxxx"), Xxxxx X. Xxxxxx, the President and a director
of the Borrower ("Xxxxxx" and, jointly with Xxxxxxxxxxx, the "Shareholders"),
and Paragon Coyote Texas Ltd., a Texas limited partnership whose principal
executive offices are located at 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxx
Xxxxx, Xxxxx 00000 (the "Lender").
In consideration of the mutual covenants and agreements herein
contained and of the loan hereinafter referred to, the Borrower, the
Shareholders and the Lender hereby agree as follows:
ARTICLE 1
GENERAL TERMS
Section 1.01 Certain Definitions. As used in this Agreement, the
following terms shall have the meanings respectively ascribed to them below
unless the context clearly requires otherwise:
"Action" shall mean any claim, demand, action, suit,
proceeding, hearing or investigation, either at law or in equity, or
before any Governmental Authority, now pending, threatened or
proposed.
"Agreement" shall mean this Loan Agreement, as the same may
from time to time be amended or supplemented.
"Balance Sheet" shall mean the audited consolidated balance
sheet of the Borrower and its Subsidiaries for the Borrower's fiscal
year ended December 31, 1996.
"Business Day" shall mean any day other than a Saturday,
Sunday or day on which commercial banks are authorized or required to
be closed under the laws of the State of Colorado.
"CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act, as amended.
"Code" shall mean the United States Internal Revenue Code of
1986, as amended.
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"Collateral Shares" shall mean the Xxxxxxxxxxx Collateral
Shares and the Xxxxxx Collateral Shares.
"Commission" shall mean the United States Securities and
Exchange Commission.
"Common Stock" shall mean the Borrower's common stock, par
value $0.001 per share.
"Consideration Shares" shall mean the Initial Consideration
Shares and the Contingent Issuance Shares.
"Contingent Issuance Shares" shall mean all of the shares of
the Common Stock contingently issuable to the Borrower after the
Closing on the terms and conditions set forth herein as part of an
origination fee in connection with the Loan.
"Contract" shall mean any contract, agreement, understanding,
arrangement, document or instrument to which the Borrower or any
Subsidiary is a party or by which the Borrower or any Subsidiary or
any of their respective Properties is or may be bound or affected.
"Damages" shall mean any and all liabilities, obligations,
losses, damages (including without limitation consequential and
punitive damages) and costs and expenses (including without limitation
interest, court costs, expert witness fees, attorneys fees and the
cost and expenses of investigating and asserting any of the foregoing
or of enforcing an indemnity).
"EEOC" shall mean the United States Equal Employment
Opportunity Commission.
"Environmental Laws" shall mean any and all applicable
Governmental Requirements relating to pollution or protection of the
environment, including without limitation Governmental Requirements
relating to emissions, discharges, generation, storage, releases or
threatened releases of Waste into the environment (including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Waste including, without limitation, the Clean Water
Act, the Clean Air Act, the Resource Conservation and Recovery Act,
the Toxic Substances Control Act and CERCLA, and their respective
foreign, state and local counterparts.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
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"Event of Default" shall mean the occurrence of any of the
events specified in Section 6.01 hereof, provided that any requirement
for notice or lapse of time or any other condition precedent has been
satisfied.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Expenses" shall include, without limitation, any and all
court costs, attorneys' fees (including, without limitation, for
trial, appellate or other proceedings), fees of auditors and
accountants and investigation and pre-litigation expenses that the
Lender may incur, directly or indirectly, together with interest at
the post-maturity rate specified in the Note on each such amount from
the date of written demand or request by the Lender for reimbursement
until the date of reimbursement to the Lender.
"Financial Statements" shall mean the audited consolidated
annual financial statements of the Borrower and its Subsidiaries for
the Borrower's fiscal year ended December 31, 1996, and the unaudited
consolidated interim financial statements of the Borrower and its
Subsidiaries for the Borrower's fiscal quarter ended September 30,
1997 (including all related schedules and notes thereto) that are
included within the Borrower's Form 10-QSB for the fiscal quarter
ended September 30, 1997 filed with the Commission.
"GAAP" shall mean United States generally-accepted accounting
principles.
"Governmental Authority" shall mean any domestic or foreign
federal, state, county, regional, municipal or other government,
department, commission, board, court, agency or tribunal, and any
instrumentality of any of the foregoing.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction,
Permit, standard, specification or other directive or requirement
(including, without limitation, any of the foregoing that relate to
environmental standards or controls, energy regulations and
occupational, safety and health standards or controls) of any
Governmental Authority that exercises jurisdiction over the Borrower
or any of its Property or of any Subsidiary or any of such
Subsidiary's Property.
"Guaranty" shall mean each and every guaranty instrument or
agreement executed and delivered to the Lender by any Person to secure
any Indebtedness.
"Indebtedness" shall, mean any and all amounts, liabilities
and obligations owing or to be owing by the Borrower to the Lender in
connection with this Agreement, the Note and any Security Instruments
(together with any and all renewals, extensions, amendments and
restatements of all or part of any of the above), whether principal,
interest or otherwise, and all other amounts, liabilities and
obligations of the Borrower to the Lender from time to time existing,
whether in connection with this or any other transaction.
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"Initial Consideration Shares" shall mean such number of
validly-issued, fully-paid and nonassessable shares of Common Stock
that have not been registered under the Securities Act issued to the
Borrower at the Closing as are equal to (a) $1,000,000 divided by (b)
the per-share Common Stock closing price as quoted on the NASDAQ Small
Cap market system on the last trading day immediately preceding the
date of the Closing.
"Insurance Policies" shall mean all policies of fire,
liability, product liability, workers compensation, health and other
forms of insurance presently in effect with respect to the business
and Properties of the Borrower and its Subsidiaries.
"Lender Shares" shall mean the Collateral Shares in the hands
of the Lender following foreclosure, the Initial Consideration Shares
and the Contingent Issuance Shares.
"Lien" shall mean any security agreement, financing statement
filed with an appropriate Governmental Authority, conditional sale or
other title retention agreement, mortgage, lien, security interest,
claim, pledge, power (including without limitation a power of
attorney), license, equity, community or other marital property
interest, option, assessment, levy, easement, covenant, reservation,
right of reentry, possibility of reverter, encroachment, restriction,
right-of-way, exception, limitation, charge or encumbrance, lease,
consignment or bailment given for security purposes, preemptive right
(whether contractual or statutory), right of first refusal, adverse
interest, constructive trust or other trust, claim, attachment,
exception to or defect in title or other ownership interest of any
kind.
"Loan" shall mean the $6,000,000 loan made by the Lender to
the Borrower pursuant to this Agreement and the Note.
"Material Adverse Effect" shall mean any material and adverse
effect on (i) the Property, liabilities, financial condition,
business, operations, affairs or circumstances of the Borrower or any
Subsidiary individually (or of the Borrower and its Subsidiaries on a
consolidated basis) from those reflected in the Financial Statements
or from the facts represented or warranted in this Agreement or in any
Security Instrument, or (ii) the ability of the Borrower or any
Subsidiary individually (or of the Borrower and its Subsidiaries on a
consolidated basis) to carry out its business as at the date of this
Agreement or as proposed at the date of this Agreement to be conducted
or to perform its obligations under and in accordance with this
Agreement or any Other Transaction Document in full and on a timely
basis.
"Note" shall mean the promissory note evidencing the Loan made
by the Borrower in favor of the Lender in form and substance
satisfactory to the Lender, together with any and all renewals,
extensions, increases or rearrangements thereof.
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"Other Transaction Documents" shall mean the Note, the
Security Instruments and the Registration Rights Agreement.
"Permits" shall mean any and all permits, licenses,
franchises, certificates, authorizations, approvals and consents
issued or granted by any Governmental Authority, and any and all
certifications and qualifications issued or granted by any trade or
industry organization or association.
"Permitted Liens" shall mean: (i) Liens for taxes, assessments
or other governmental charges or levies not yet due and payable or
that are being diligently contested in good faith by appropriate
action by or on behalf of the Borrower or any Subsidiary and for which
adequate reserves have been established and (ii) Liens in existence on
the date hereof of which the Lender has been fully informed and (iii)
Liens in favor of the Lender or otherwise specifically permitted or
contemplated by this Agreement or by any Other Transaction Document.
"Person" shall mean any individual, corporation, partnership,
limited partnership, limited liability company, joint venture, joint
stock company, association, trust, unincorporated organization, or
federal, state or local government (domestic or foreign) or any agency
or political subdivision thereof, or any other form of entity.
"Personal Property" shall mean all personal Property owned or
leased (as lessee) by the Borrower and its Subsidiaries.
"Plan" shall mean any plan subject to Title IV of ERISA and
maintained by the Borrower or any Subsidiary, or any such plan to
which the Borrower or any Subsidiary is required to contribute on
behalf of its employees.
"Potential Default" shall mean the occurrence of any of the
events specified in Section 6.01 hereof, whether or not any
requirement for notice or lapse of time or other condition precedent
has been satisfied.
"Xxxxxx" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Xxxxxx Collateral Shares" shall mean the 1,170,000 shares of
the Common Stock owned of record and beneficially by Xxxxxx that are
pledged to the Lender as collateral for the Loan pursuant to the
Xxxxxx Security Agreement.
"Xxxxxx Security Agreement" shall mean the security agreement
in form and substance satisfactory to the Lender entered into between
the Lender as secured party and Xxxxxx as debtor.
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"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, tangible or intangible.
"Real Property" shall mean all real Property owned or leased
(as lessee) by the Borrower and its Subsidiaries.
"Registration Rights Agreement" shall mean that certain
registration rights agreement of even date herewith by and among,
inter alia, the Lender and the Borrower that provides registration
rights for the Lender Shares under federal and state securities laws.
"Repurchase Rights" shall have the meaning set forth in
Section 2.05.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Security Instruments" shall mean collectively (a) the
Xxxxxxxxxxx Security Agreement, the irrevocable stock power pertaining
to the Xxxxxxxxxxx Collateral Shares and all financing statements
executed in connection therewith, (b) the Xxxxxx Security Agreement,
the irrevocable stock power pertaining to the Xxxxxx Collateral Shares
and all financing statements executed in connection therewith and (c)
any and all other agreements or instruments now or hereafter executed
and delivered by the Borrower or by any other Person in connection
with, or as security for the payment or performance of, any
Indebtedness (including, without limitation, the Indebtedness
represented by the Note and any and all financing, continuation and
termination statements related thereto), as such agreements and
instruments may be amended from time to time.
"Stock Rights" shall mean any and all rights, plans, options,
warrants or agreements for the purchase or acquisition (whether or not
contingent) of any capital stock or any other form of equity interest.
"Xxxxxxxxxxx" shall have the meaning set forth in the
introductory paragraph of this Agreement.
"Xxxxxxxxxxx Collateral Shares" shall mean the 1,430,000
shares of the Common Stock owned of record and beneficially by
Xxxxxxxxxxx that are pledged to the Lender as collateral for the Loan
pursuant to the Xxxxxxxxxxx Security Agreement.
"Xxxxxxxxxxx Security Agreement" shall mean the security
agreement in form and substance satisfactory to the Lender entered
into between the Lender as secured party and Xxxxxxxxxxx as debtor.
"Subsidiary" shall mean any Person of which issued and
outstanding securities representing more than fifty percent (50%) of
the aggregate voting power for the ordinary
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election of directors (or others with analogous power and authority)
is owned or controlled, directly or indirectly, by the Borrower.
"Taxes" shall mean and include any and all income, ad valorem,
excise, profits, franchise, occupation, Property, payroll, sales, use,
gross receipts, value added and other taxes, levies and assessments
(including any and all interest and penalties) imposed by any
Governmental Authority, whether or not disputed.
"Trade Rights" shall mean and include: (i) all trademark
rights, business identifiers, trade dress, service marks, trade names
and brand names, all registrations thereof and applications therefor
and all goodwill associated with the foregoing; (ii) all copyrights,
copyright registrations and copyright applications, and all other
rights associated with the foregoing and the underlying works of
authorship; (iii.) all patents and patent applications, and all
international proprietary rights associated therewith; (iv) all
contracts or agreements granting any right, title, license or
privilege under the intellectual property rights of any third party;
(v) all inventions, mask works and mask work registrations, know-how,
discoveries, improvements, designs, trade secrets, shop and royalty
rights, employee covenants and agreements respecting intellectual
property and non-competition and all other types of intellectual
property; and (vi) all claims for infringement or breach of any of the
foregoing.
"Unifiber" shall mean Unifiber Corporation, a California
corporation.
"Unifiber Purchase Agreement" shall mean that certain Stock
Purchase Agreement dated as of February 3, 1998 by and among, inter
alia, the Borrower and Unifiber.
"Unifiber Shareholder Agreement" shall mean that certain
Shareholder Agreement, the form of which is set forth as Exhibit 2.1
to the Unifiber Purchase Agreement.
"Waste" shall mean any and all pollutants, contaminants,
chemicals or industrial, toxic, hazardous or petroleum or
petroleum-based substances or wastes.
Section 1.02 Accounting Principles. Any and all determinations of
the character or amount of any asset or liability or item of income or expense
required to be determined or any consolidation or other accounting computation
required to be made under this Agreement shall be made in accordance with GAAP
applied on a basis consistent with the Financial Statements, except to the
extent that such principles are inconsistent with the requirements of this
Agreement. All determinations of financial amounts on the consolidated basis
of the Borrower and its Subsidiaries shall make due allowance for any minority
stock interest in such Subsidiaries.
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ARTICLE 2
TERMS OF LOAN
Section 2.01 Lender's Agreement to Make Loan. Subject to the
terms and conditions and relying materially on each and every representation
and warranty of the Borrower, Xxxxxxxxxxx and Xxxxxx contained in this
Agreement, the Lender agrees to make, on the date hereof, the Loan, which shall
be evidenced by the Borrower's issuance, execution and delivery of the Note.
Section 2.02 Payment Procedures. All of the Borrower's payments
and prepayments under the Note or this Agreement shall be made to the Lender at
its principal executive offices in immediately available funds before 5:00
p.m., Fort Worth, Texas time. Any payment that the Lender may receive and
accept after such time shall be considered for all purposes (including, to the
extent permitted by law, the calculation of interest) as having been made on
the Lender's next-following Business Day. If the date for any Loan payment or
prepayment hereunder falls on a day that is not a Business Day, then for all
purposes of the Note and this Agreement the same shall be deemed to have fallen
on the next-following Business Day, and such extension of time shall in such
case be included in the calculation of interest.
Section 2.03 Loan Prepayment at Lender's Option. At the Lender's
option (but, in the case of an underwritten offering, subject to the approval
of the Borrower's lead underwriter, which approval the Borrower shall use its
best efforts to obtain), the Borrower shall be required to prepay the Loan to
the extent of any cash proceeds that the Borrower receives from any sale of
Borrower securities.
Section 2.04 Collateral for the Loan. The Loan shall be secured
by a perfected first-priority security interest in the Collateral Shares.
Section 2.05 Borrower's Assignment of Certain Rights. In payment
of an origination fee to the Lender with respect to the Loan, the Borrower
hereby unconditionally and irrevocably assigns to the Lender the Borrower's
rights under Section 3 of the Shareholder Agreement (the "Repurchase Rights")
effective upon the closing under the Unifiber Purchase Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement, the Borrower,
Xxxxxxxxxxx and Xxxxxx jointly and severally represent and warrant to the
Lender (with each such representation and warranty's being conclusively and
independently deemed material and relied upon by the Lender irrespective of
whether such materiality and/or reliance actually exists) as follows:
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Section 3.01 Corporate Existence. The Borrower is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada and is duly qualified to transact business as a foreign
corporation in all domestic and foreign jurisdictions (including, without
limitation, the State of Colorado) in which the Property owned or leased, or
the business transacted by, it makes such qualification necessary or desirable.
Each Subsidiary is a corporation or limited liability company, as the case may
be, duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and is duly qualified to transact business as a
foreign corporation or limited liability company, as the case may be, in all
domestic and foreign jurisdictions in which the Property owned or leased, or
the business transacted by, it makes such qualification necessary or desirable.
Section 3.02 Corporate Power and Authorization. The Borrower is
duly authorized and empowered to create and issue the Note, to execute, deliver
and perform its obligations under this Agreement, and to execute, deliver and
perform its obligations under the Other Transaction Documents to which it is a
party. All corporate action on the Borrower's part necessary for the due
creation and issuance of the Note and for the due execution, delivery and
performance of this Agreement and of the Other Transaction Documents to which
it is a party has been duly and effectively taken.
Section 3.03 Binding Obligations. This Agreement, the Note and
the Other Transaction Documents to which the Borrower is a party constitute
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms. This Agreement and each Other
Transaction Document to which a Shareholder is a party constitutes its valid
and binding obligations, enforceable against it in accordance with its terms.
Section 3.04 No Violations. The Borrower's execution, delivery
and performance of the Note, this Agreement and the Other Transaction Documents
to which the Borrower is a party does not violate, and is not inconsistent
with, any provisions of its articles of incorporation, bylaws or any Contract
or Governmental Requirement to which the Borrower is subject, or result in the
creation or imposition of, or obligation to create, any Lien upon any Property
of the Borrower, other than any Lien permitted by this Agreement or by any
Other Transaction Document. Each Shareholder's execution, delivery and
performance of the Other Transaction Documents to which it is a party does not
violate, and is not inconsistent with, any provision of any Contract or
Governmental Requirement to which it is subject, or result in the creation or
imposition of, or obligation to create, any Lien upon any Property of such
Shareholder, other than any Lien permitted by this Agreement or by any Other
Transaction Document.
Section 3.05 No Required Consents or Approvals. The Borrower's
execution, delivery and performance of the Note, this Agreement and the Other
Transaction Documents to which it is a party does not require the consent or
approval of any other Person. Each Shareholder's execution, delivery and
performance of this Agreement and the Other Transaction Documents to which it
is a party does not require the consent or approval of any other Person.
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Section 3.06 Capitalization.
(a) The Borrower's issued and outstanding capital stock
consists solely of the capital stock set forth in Schedule 3.06
hereto. The Borrower has not issued, or agreed to issue, any Shares
or any securities convertible into, or exchangeable with, Shares or
entered into, issued or granted, or agreed to enter into, issue or
grant, any Stock Rights other than as set forth in such Schedule 3.06.
All of the Borrower's issued and outstanding capital stock (including
but not limited to the Collateral Shares) was duly authorized and
validly issued and is fully-paid and nonassessable. All of the
Borrower's issuances of its capital stock and Stock Rights were made
in compliance with all applicable laws and with all NASDAQ rules and
regulations.
(b) Except as to Sierra Materials LLC and ICE*USA, LLC, of
which the Borrower owns beneficially and of record 80% of the issued
and outstanding equity interests, respectively, and as to Pentiumatics
Sdn.Bhd, of which the Borrower owns beneficially and of record 77% of
the issued and outstanding equity interests, the Borrower owns,
directly or indirectly, 100% of the issued and outstanding equity
interests of all of the Subsidiaries. All of the equity interests of
each Subsidiary was duly authorized and validly issued and is
fully-paid and nonassessable. No Subsidiary has issued, or agreed to
issue, any equity interests (including without limitation shares of
capital stock) or any securities convertible into, or exchangeable
with, such equity interests or entered into, issued or granted, or
agreed to enter into, issue or grant, any Stock Rights.
Section 3.07 Financial Statements. The Financial Statements have
been delivered to the Lender, have been prepared in accordance with GAAP,
consistently applied on a basis consistent with past practice, and fully and
accurately present the financial condition and changes in financial position of
the Borrower and its Subsidiaries as at the date or dates and for the period or
periods therein stated, subject only to typical year-end audit adjustments.
Neither the Borrower nor any Subsidiary has made any investment in, advance to
or guarantee of the obligations of any Person except those the material details
of which are disclosed in the Financial Statements.
Section 3.08 No Undisclosed Liabilities. Except for liabilities
incurred in the ordinary course of business that could not have a Material
Adverse Effect, neither the Borrower nor any Subsidiary has any liabilities,
direct or contingent, except those the material details of which are set forth
in the Financial Statements or in Exhibit 4.5 to the Unifiber Purchase
Agreement. No unusual or unduly burdensome restriction, restraint or hazard
exists relating to the business or Property of the Borrower or any Subsidiary.
Section 3.09 Absence of Certain Changes. Since the date of the
Balance Sheet, no event has occurred with respect to the Property, operations,
business, condition (financial or otherwise) or prospects of the Borrower or
any Subsidiary that could have a Material Adverse Effect.
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Section 3.10 No Litigation. There are no Actions, and there are
no circumstances that could form the basis for any such Action, involving the
Borrower or any Subsidiary or either Shareholder, or any Property of any of
them.
Section 3.11 Taxes.
(a) Provision for Taxes. The provision made for Taxes on
the Balance Sheet is sufficient for the payment of all Taxes at the
date thereof and for all years and periods prior thereto. Since the
date of the Balance Sheet, neither the Borrower nor any Subsidiary has
incurred any Taxes other than Taxes incurred in the ordinary course of
business consistent in type and amount with past practice and
experience.
(b) Tax Returns Filed. No Tax returns of the Borrower or
of any Subsidiary have been audited by the United States Internal
Revenue Service or any other Governmental Authority, and neither the
Borrower nor any Subsidiary has received any notice from any
Governmental Authority of any underpayment or deficiency of Taxes that
has not been paid in full or any objection to any Tax return or report
that has not been cured. There are no outstanding agreements or
waivers extending the statutory period of limitations applicable to
any such Tax return or report.
(c) Other Tax Matters. Since January 1, 1993, neither
the Borrower nor any Subsidiary has (i) filed any consent or agreement
under Section 341(f) of the Code, (ii) applied for any Tax ruling,
(iii) entered into a closing agreement with any Governmental
Authority, (iv) filed an election under Code Sections 338(g) or
338(h)(10) (nor has any deemed election under Code Section 338(e)
occurred), (v) made any payments, or been a party to an agreement
(including this Agreement) that could obligate it to make payments
that will not be deductible because of Code Section 280G or (f) been a
party to any Tax allocation agreement or Tax sharing agreement. The
Borrower is not a "United States real property holding company" within
the meaning of Code Section 897.
Section 3.12 Title to and Condition of Property.
(a) Personal Property. Each of the Borrower and each
Subsidiary has good and marketable title to all of its Personal
Property free and clear of all Liens other than Permitted Liens.
Neither the Borrower nor any Subsidiary leases (as lessor) any
personal Property. The Borrower and each Subsidiary owns or leases
(as lessee) all personal Property used to carry on its business.
(b) Condition of Personal Property. The Personal
Property of the Borrower and of each Subsidiary is in good operating
condition and repair, normal wear and tear excepted, free from any
material defect, has been maintained consistent with the standards
generally followed in the industry and is sufficient as of the date
hereof to carry on the business of the Borrower or such Subsidiary, as
the case may be.
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(c) Real Property. The Borrower and each Subsidiary has
good and marketable title to all of its Real Property free and clear
of all Liens other than Permitted Liens. Neither the Borrower nor any
Subsidiary leases (as lessor) any real Property. The Borrower and
each Subsidiary owns or leases (as lessee) all real Property used to
carry on its business.
(d) Condition of Real Property. All Real Property is in
good operating condition and repair, normal wear and tear excepted,
free from any material defect, has been maintained consistent with the
standards generally followed in the industry and is sufficient to
carry on the business of the Borrower or such Subsidiary, as the case
may be. All buildings, plants and other structures and improvements
in, on or under the Real Property ("Improvements") are in good
condition and repair and have no structural defects or defects
affecting plumbing, electrical, sewerage or heating, ventilating or
air conditioning systems, normal wear and tear excepted.
(e) Governmental Requirements pertaining to Real
Property. There are now in full force and effect duly issued
certificates of occupancy permitting the Real Property and
Improvements to be legally used and occupied as the same are now used
and occupied. All of the Real Property has permanent rights of access
to dedicated public highways or roads. No fact or condition exists
that could prohibit or adversely affect the ordinary rights of access
to and from the Real Property from and to the existing highways and
roads and there is no pending or overtly threatened restriction or
denial, by any Governmental Authority or otherwise, with respect to
such ingress and egress. There is not (i) any claim of adverse
possession or prescriptive rights involving any of the Real Property,
(ii) any Improvement that encroaches on or over the boundaries of
neighboring or adjacent real property or (iii) any building, plant or
other structure or improvement of any other party that encroaches on
or over the boundaries of any of such Real Property. None of the Real
Property is located in a flood plain, flood hazard area, wetland or
lakeshore erosion area within the meaning of any Governmental
Requirement. No public improvements have been commenced, planned or
proposed that could result in special assessments against or otherwise
materially adversely affect any Real Property. No portion of any of
the Real Property (other than a marl hole at the United Kingdom
facility of a Subsidiary) has been used by the Borrower or any
Subsidiary or by any other Person as a landfill or for storage or
disposal of hazardous or toxic materials. There is no (i) planned or
proposed increase in assessed valuations of any Real Property or
Improvement, (ii) Governmental Requirement that requires repair,
alteration or correction of any existing condition affecting any Real
Property or Improvement or any condition or defect that could give
rise to a Governmental Requirement in such regard, (iii) underground
storage tanks, or any structural, mechanical, or other defects of
material significance affecting any Real Property or Improvement
(including, without limitation, inadequacy for normal use of
mechanical systems or disposal or water systems at or serving the Real
Property), or (iv) work that has been done or labor or materials that
has or have been furnished to any Real Property during the period of
six (6) months immediately preceding the date of this Agreement for
which liens could be filed against any of the Real Property or
Improvements.
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(f) No Condemnation or Expropriation. No portion of the
Personal Property or the Real Property of the Company or any
Subsidiary is subject to any order to be sold or is being condemned,
expropriated or otherwise taken by any Governmental Authority with or
without payment of compensation therefor, nor has any such
condemnation, expropriation or taking been proposed.
Section 3.13 Contracts. No party is in default, nor has any event
or circumstance occurred that, with the passage of time or the giving of notice
or both would constitute a default, under any Contract. Neither the Borrower
nor any Subsidiary has guaranteed the payment or performance of any Person or
agreed to indemnify, act as a surety or otherwise be contingently or
secondarily liable for the obligations of any Person other than the Borrower or
a Subsidiary. Neither the Borrower nor any Subsidiary is a party to or is
bound by any Contract requiring it to assign any interest in any trade secret
or proprietary information, or prohibiting or restricting it from competing in
any business or geographical area or soliciting customers or otherwise
restricting it from carrying on its business anywhere in the world.
Section 3.14 Casualties; Taking of Property. Since the date of
the Balance Sheet, neither the business nor the Property of the Borrower or any
Subsidiary have been materially and adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike or other
labor disturbance, embargo, requisition or taking of Property or cancellation
of contracts, permits or concessions by any domestic or foreign government or
any agency thereof, riot, activities of armed forces or acts of God or of any
public enemy.
Section 3.15 Compliance with Governmental Requirements. Neither
the Borrower nor any Subsidiary is in violation of any Governmental Requirement
or has failed to meet any Governmental Requirement necessary to or desirable in
connection with the ownership of any of its Property or the conduct of its
business.
Section 3.16 Employment Benefit Plans.
(a) Disclosure. True and correct copies of all pension,
thrift, savings, profit sharing, retirement, incentive bonus or other
bonus, medical, dental, life, accident insurance, benefit, employee
welfare, disability, group insurance, stock purchase, stock option,
stock appreciation, stock bonus, executive or deferred compensation,
hospitalization and other similar fringe or employee benefit plans,
programs and arrangements, and any employment or consulting contracts,
"golden parachutes," collective bargaining agreements, severance
agreements or plans, vacation and sick leave plans, programs,
arrangements and policies, including, without limitation, all
"employee benefit plans" (as defined in Section 3(3) of ERISA), all
employee manuals, and all written or binding oral statements of
policies, practices or understandings relating to employment (each an
"Employee Plans/Agreement"), that are provided to, for the benefit of,
or relate
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to, any persons ("Employees") employed by Borrower and its
Subsidiaries, including all amendments thereto, have heretofore been
provided to the Lender. Each of the Employee Plans/Agreements is one
or more of the following: an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA), a "defined benefit plan" (as
defined in Section 414 of the Code), an "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA), and/or as a plan intended
to be qualified under Section 401 of the Code. No Employee
Plan/Agreement is a "multiemployer plan" (as defined in Section 4001
of ERISA), and neither Borrower nor any Subsidiary has ever
contributed nor been obligated to contribute to any such multiemployer
plan.
(b) Terminations. Proceedings and Penalties. With
respect to each employee benefit plan (including, without limitation,
the Employee Plans/Agreements) that is subject to the provisions of
Title IV of ERISA ("Plan") and with respect to which the Borrower or
any Subsidiary or any of their respective Properties may, directly or
indirectly, be subject to any liability, contingent or otherwise, or
the imposition of any Lien (whether by reason of the complete or
partial termination of any such Plan, the funded status of any such
Plan, any "complete withdrawal" (as defined in Section 4203 of ERISA)
or "partial withdrawal" (as defined in Section 4205 of ERISA) by any
person from any such Plan, or otherwise):
(i) no such Plan has been terminated so as to
subject, directly or indirectly, any Property of the Borrower
or of any Subsidiary to any liability, contingent or
otherwise, or the imposition of any lien under Title IV of
ERISA;
(ii) no proceeding has been initiated or
threatened by any person (including the Pension Benefit
Guaranty Corporation ("PBGC")) to terminate any such Plan;
(iii) no condition or event exists or is
anticipated that could subject, directly or indirectly, any
Property of the Borrower or any Subsidiary to any liability,
contingent or otherwise, or the imposition of any Lien under
Title IV of ERISA, whether to the PBGC or to any other person
or otherwise on account of the termination of any such Plan;
(iv) if any such Plan were to be terminated as of
the date hereof, no Property of the Borrower or of any
Subsidiary would be subject, directly or indirectly, to any
liability, contingent or otherwise, or the imposition of any
Lien under Title IV of ERISA;
(v) no "reportable event" (as defined in Section
4043 of ERISA) has occurred with respect to any such Plan;
(vi) no such Plan that is subject to Section 302
of ERISA or to Code Section 412 has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and
Code Section 412, respectively), whether or not waived; and
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(vii) no such Plan is a multiemployer plan or a
plan described in Section 4064 of ERISA.
(c) Prohibited Transactions. There have been no
"prohibited transactions" within the meaning of Sections 406 or 407 of
ERISA or Code Section 4975 for which a statutory or administrative
exemption does not exist with respect to any Employee Plan/Agreement,
and no event or omission has occurred in connection with which the
Borrower or any Subsidiary or any of their respective Properties or
any Employee Plan/Agreement, directly or indirectly, could be subject
to any liability under ERISA, the Code or any other Governmental
Requirement applicable to any Employee Plan/Agreement, or under any
agreement, instrument, law or order pursuant to or under which the
Borrower or any Subsidiary has agreed to indemnify or is required to
indemnify any person against liability incurred under any such
Governmental Requirement.
(d) Full Funding. The funds available under each
Employee Plan/Agreement that is intended to be a funded plan exceed
the amounts required to be paid, or that would be required to be paid
if such Employee Plan/Agreement were terminated, on account of rights
vested or accrued as of the date hereof (using the actuarial methods
and assumptions then used by the actuaries of the Borrower or of a
Subsidiary, as the case may be, in connection with the funding of such
Employee Plan/Agreement).
(e) Payments and Compliance. With respect to each
Employee Plan/Agreement, (i) all payments due from the Borrower or a
Subsidiary, as the case may be, to date have been made and all amounts
properly accrued to date as liabilities that have not been paid have
been properly recorded on the books of the Borrower or such
Subsidiary, as the case may be, and are reflected in the Balance
Sheet; (ii) Borrower and each Subsidiary has complied with, and each
such Employee Plan/Agreement conforms in form and operation to, all
applicable Governmental Requirements, including but not limited to
ERISA and the Code, in all respects and all reports and information
relating to such Employee Plan/Agreement required to be filed with any
Governmental Authority have been timely filed; (iii) all reports and
information relating to each such Employee Plan/Agreement required to
be disclosed or provided to participants or their beneficiaries have
been timely disclosed or provided; (iv) each such Employee
Plan/Agreement that is intended to qualify under Section 401 of the
Code has received a favorable determination letter from the Internal
Revenue Service with respect to such qualification, its related trust
has been determined to be exempt from taxation under Section 501(a) of
the Code and nothing has occurred since the date of such letter that
has or could adversely affect such qualification or exemption; (iv)
there are no Actions (other than routine claims for benefits) pending
or threatened with respect to such Employee Plan/Agreement or against
the Property of such Employee Plan/Agreement; and (v) no Employee
Plan/Agreement is a plan that is established and maintained outside
the United States primarily for the benefit of individuals
substantially all of whom are nonresident aliens.
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(f) Post-Retirement Benefits. No Employee Plan/Agreement
provides benefits, including, without limitation, death or medical
benefits (whether or not insured) with respect to current or former
employees of the Borrower or its Subsidiaries beyond their retirement
or other termination of service other than (i) coverage mandated by
applicable law, (ii) death or retirement benefits under any Employee
Plan/Agreement that is an employee pension benefit plan, (iii)
deferred compensation benefits accrued as liabilities on the books and
records of Borrower (including the Balance Sheet) or its Subsidiaries,
(iv) disability benefits under any Employee Plan/ Agreement that is an
employee welfare benefit plan that have been fully provided for by
insurance or otherwise or (v) benefits in the nature of severance pay.
(g) No Triggering of Obligations. The consummation of the
transactions contemplated by this Agreement will not (i) entitle any
current or former employee of the Borrower or any Subsidiary to
severance pay, unemployment compensation or any other payment, (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee or former employee or (iii)
result in any prohibited transaction described in Section 406 of ERISA
or Section 4975 of the Code for which an exemption is not available.
(h) Delivery of Documents. There has been delivered to
the Lender, with respect to each Employee Plan/Agreement:
(i) a copy of the annual report, if required
under ERISA, with respect to each such Employee Plan/Agreement
for the last two years;
(ii) a copy of the summary plan description,
together with each summary of material modifications, required
under ERISA with respect to such Employee Plan/Agreement, all
material employee communications relating to such Employee
Plan/Agreement, and, unless the Employee Plan/Agreement is
embodied entirely in an insurance policy to which the Borrower
or a Subsidiary is a party, a true and complete copy of such
Employee Plan/Agreement;
(iii) if the Employee Plan/Agreement is funded
through a trust or any third-party funding vehicle (other than
an insurance policy), a copy of the trust or other funding
agreement and the latest financial statements thereof; and
(iv) the most recent determination letter received
from the Internal Revenue Service with respect to each
Employee Plan/Agreement that is intended to be a "qualified
plan" under Section 401 of the Code.
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With respect to each Employee Plan/Agreement for which an annual
report has been filed and delivered to Buyer pursuant to clause (i)
hereof, no material adverse change has occurred with respect to the
matters covered by the latest such annual report since the date
thereof.
(i) Future Commitments. Neither the Borrower nor any
Subsidiary has announced any plan or legally- binding commitment to
create any additional Employee Plans/Agreements or to amend or modify
any existing Employee Plan/Agreement.
Section 3.17 Securities Law and SRO Requirements.
(a) The Borrower has timely filed with the Commission all
reports and information required by the Exchange Act. None of the
filings that the Borrower has made with the Commission (whether
pursuant to the Securities Act, the Exchange Act or otherwise)
contained or contains any misstatement of a material fact or omitted
or omits to state a material fact necessary to make the statements
contained therein not misleading in light of the circumstances under
which they were made.
(b) The Borrower is, and has at all times since the
listing of its Common Stock on the NASDAQ Small Cap market system
been, in compliance with all of the rules and regulations of the
National Association of Securities Dealers, Inc. and with the terms
and conditions of the Borrower's listing agreement.
Section 3.18 Trade Rights. The Borrower has disclosed to the
Lender all Trade Rights in which the Borrower or any Subsidiary has any
interest. All Trade Rights owned and registered by the Borrower or any
Subsidiary have been properly registered, all pending registrations and
applications by the Borrower and its Subsidiaries have been properly made and
filed and all annuity, maintenance, renewal and other fees relating to
registrations or applications are current. Neither the Borrower nor any
Subsidiary requires any Trade Rights that it does not already have in order to
conduct its business as currently conducted. Neither the Borrower nor any
Subsidiary is infringing or has infringed any Trade Rights of another in the
operation of its business, nor is any other person infringing any Trade Rights
of the Borrower or any Subsidiary. Neither the Borrower nor any Subsidiary has
granted any license or made any assignment of any of its Trade Rights, nor does
the Borrower or any Subsidiary pay any royalties or other consideration for the
right to use any Trade Rights of others. All Trade Rights of the Borrower and
its Subsidiaries are enforceable and there are no equitable defenses to
enforcement based on any act or omission of the Borrower or any Subsidiary.
The consummation of the transactions contemplated hereby will not impair any
Trade Rights of the Borrower or any Subsidiary.
Section 3.19 Permits. The Borrower and each Subsidiary has all
Permits necessary or desirable for the conduct of the business (as presently
conducted). All such Permits are in full force and effect, and there are no
present conditions or events that could result in the revocation or nonrenewal
of any such Permit. The Borrower and each Subsidiary is and has been in
compliance with all such Permits.
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Section 3.20 Labor Matters. Within the last five years, neither
the Borrower nor any Subsidiary has experienced any union or syndicate
organization attempts, any work stoppage due to labor disagreements or any
other material labor disputes in connection with its business. The Borrower
and each Subsidiary is in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice. Within the
last five years, there has been no overt or threatened unfair labor practice
charge or complaint against the Borrower or any Subsidiary and there is no
basis for any such charge or complaint. There is no labor strike, material
labor dispute, request for representation, slowdown or stoppage pending or
threatened against or affecting the Borrower or any Subsidiary nor any
secondary boycott with respect to any products of the Borrower or any
Subsidiary. No question concerning union representation or collective
bargaining has been raised or is threatened respecting the employees of the
Borrower or of any Subsidiary. No grievance that might have a Material Adverse
Effect on the Borrower or any Subsidiary, individually or in the aggregate, nor
any arbitration proceeding arising out of or under union or syndicate
collective bargaining agreements, is pending or threatened. Within the last
five years, there have been no overt or threatened administrative charges or
court complaints against the Borrower or any Subsidiary concerning alleged
employment discrimination or other employment related matters before the EEOC
or any other Government Authority.
Section 3.21 Accounts Receivable. All accounts receivable of the
Borrower and of each Subsidiary reflected on the Balance Sheet, and as incurred
since the date thereof represent arm's length sales actually made in the
ordinary course of business, and are collectible (net of the reserve recorded
in the Balance Sheet for doubtful accounts) in the ordinary course of business.
Section 3.22 Inventory. All inventory of the Borrower and each
Subsidiary consists of a quality and quantity useable and salable in the
ordinary course of business and is valued in accordance with GAAP at the lower
of cost (on a FIFO basis) or market.
Section 3.23 Insurance. All Insurance Policies are valid,
outstanding and enforceable policies. No notice of cancellation or termination
has been received with respect to any such Insurance Policy, and there has been
no act or omission that could result in cancellation of any such Insurance
Policy prior to its scheduled expiration date. There is no claim by the
Borrower or any Subsidiary pending under any Insurance Policy as to which
coverage has been denied or disputed by the underwriters thereof. Neither the
Borrower nor any Subsidiary has received any written notice that it has not
provided to the Lender from or on behalf of any issuer of any Insurance Policy
that insurance rates therefor will hereafter be substantially increased (except
to the extent that insurance rates may be increased for all similarly situated
risks) or that there will hereafter be a cancellation or an increase in a
deductible (or an increase in premiums in order to maintain an existing
deductible) or nonrenewal of any such policy. The Insurance Policies are
sufficient to enable the Borrower and its Subsidiaries to comply with the
requirements of all contracts to which any of them is a party.
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Section 3.24 Environmental Matters. The Borrower and each
Subsidiary is in compliance with all limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in applicable Environmental Laws or contained in any regulations,
code, plan, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder. There is no Action
against the Borrower or any Subsidiary relating to any Environmental Laws or
any order issued, entered, promulgated or approved thereunder. There are no
past or present events, conditions, circumstances, activities, practices,
incidents, actions, omissions or plans that could interfere with or prevent the
compliance and continued compliance by the Borrower and its Subsidiaries with
any Environmental Laws or with any order issued, entered, promulgated or
approved thereunder, or that could give rise to any liability, including,
without limitation, liability under CERCLA or under any other Environmental
Laws, or otherwise form the basis of any Action or notice of violation based on
or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge, release
or threatened release into the environment, of any Waste.
Section 3.25 Ownership of Collateral Shares.
(a) Xxxxxxxxxxx is the sole record and beneficial owner of the
Xxxxxxxxxxx Collateral Shares, which he owns free and clear of any and all
Liens. Upon delivery of the Xxxxxxxxxxx Collateral Shares to the Lender at the
Closing, the Lender will take possession of, and will have a perfected
first-priority security interest in, the Xxxxxxxxxxx Collateral Shares free and
clear of any and all Liens other than Liens in favor of the Lender as
contemplated hereby.
(b) Xxxxxx is the sole record and beneficial owner of the Xxxxxx
Collateral Shares, which he owns free and clear of any and all Liens. Upon
delivery of the Xxxxxx Collateral Shares to the Lender at the Closing, the
Lender will take possession of, and will have a perfected first-priority
security interest in, the Xxxxxx Collateral Shares free and clear of any and
all Liens other than Liens in favor of the Lender as contemplated hereby.
Section 3.26 Value of Repurchase Rights. The aggregate value of
the Repurchase Rights is no greater than $60,000.
Section 3.27 Product Warranties and Product Liability. Except as
stated in the written policies of the Borrower or its Subsidiaries with respect
to credits, returns and allowances and the standard warranty or warranties for
sales of Products or as existing under any Governmental Requirement, there are
no warranties, commitments or obligations of the Borrower or any Subsidiary
with respect to the granting of credits or the return or replacement of
Products. None of the Products has been the subject of any recall campaign by
the Borrower or any Subsidiary and no facts or conditions exist that could
result in such a recall campaign. Neither the Borrower nor any Subsidiary has
introduced into commerce any "adulterated" or "misbranded" product (as those
terms are defined in the Food, Drug and Cosmetic Act of 1938, as amended). The
Borrower and each Subsidiary follows manufacturing processes and practices that
are sufficient to prevent the
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introduction of "adulterated" products into commerce. The Products have been
formulated and manufactured so as to, and do, meet and comply with all
applicable Government Requirements. All Products have met all Governmental
Requirements necessary or desirable to allow their sale and intended use.
Section 3.28 Unifiber Purchase Agreement. All of the
representations and warranties of all parties to the Unifiber Purchase
Agreement are true and correct in all respects.
Section 3.29 Benefit of the Loan to the Shareholders.
(a) Xxxxxxxxxxx acknowledges and agrees that, inasmuch as he is the
Chief Executive Officer, a director and a significant shareholder of the
Borrower, the Loan will benefit him at least to the extent of the value of the
Xxxxxxxxxxx Collateral Shares.
(b) Xxxxxx acknowledges and agrees that, inasmuch as he is the
President, a director and a significant shareholder of the Borrower, the Loan
will benefit him at least to the extent of the value of the Xxxxxx Collateral
Shares.
Section 3.30 Brokers. All negotiations relative to the Loan and
to the other transactions contemplated hereby have been carried on without the
involvement of any Person as the result of any act of the Borrower or either
Shareholder that would give rise to any claim against the Lender for any
brokerage commission, finders fee, or other like payments, other than Xxxxxx
Brothers, whose fees and commissions are and shall remain the Borrower's sole
responsibility.
Section 3.31 No Material Misstatements or Omissions. No
information that the Borrower or either Shareholder has furnished, directly or
indirectly, to the Lender in any form in connection with the negotiation of
this Agreement or the transactions contemplated hereby contained or contains
any misstatement of a material fact or omitted or omits to state a material
fact necessary to make the statements contained therein not misleading in light
of the circumstances under which they were made.
Section 3.32 No Usury. Without limiting the generality of any
other representation or warranty set forth herein or in any Other Transaction
Document, the Loan is not usurious under the laws of the State of Colorado
(including without limitation Colorado Revised Statutes Section 5-12-103).
ARTICLE 4
AFFIRMATIVE COVENANTS
The Borrower and the Shareholders, as the case may be, shall at all
times comply with the covenants contained in this Article 4:
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Section 4.01 Financial Statements and Reports. The Borrower shall
promptly furnish to the Lender from time to time such information regarding the
business and affairs and financial condition of the Borrower and its
Subsidiaries as the Lender may reasonably request, and shall also furnish to
the Lender the following:
(a) Annual Reports. Promptly after becoming available
and in any event within 140 days after the close of each fiscal year
of the Borrower (or such shorter period of time within which the
Borrower must file such information with the Commission), the audited
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as at the end of such year, the audited consolidated and
consolidating statements of profit and loss of the Borrower and its
Subsidiaries for such year and the audited consolidated and
consolidating statements of reconciliation of capital accounts of the
Borrower and its Subsidiaries for such year, setting forth in each
case in comparative form the corresponding figures for the preceding
fiscal year, accompanied by the related report of the Borrower's
independent public accountants, which report shall be to the effect
that such statements have been prepared in accordance with GAAP
consistently applied throughout the period indicated except to the
extent stated therein; and
(b) Quarterly Reports. Promptly after becoming available
and in any event within 60 (or such shorter period of time within
which the Borrower must file such information with the Commission)
days after the end of each of the first three quarterly periods in
each fiscal year of the Borrower, the consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries as at the end of
such period, the consolidated and consolidating statements of profit
and loss of the Borrower and its Subsidiaries for such quarter and for
the period from the beginning of the fiscal year to the close of such
quarter, and the consolidated and consolidating statements of
reconciliation of capital accounts of the Borrower and its
Subsidiaries for such quarter and for the period from the beginning of
the fiscal year to the close of such quarter, setting forth in each
case in comparative form the corresponding figures for the
corresponding period of the immediately-preceding fiscal year,
certified by the principal financial officer of the Borrower to have
been prepared in accordance with GAAP consistently applied throughout
the period indicated except to the extent stated therein, subject to
typical changes resulting from year-end adjustments; and
(c) Audit Reports. Promptly upon receipt thereof, one
copy of each other report submitted to the Borrower or any Subsidiary
by independent accountants in connection with any annual, interim or
special audit made by them of the books of the Borrower or any
Subsidiary.
(d) Commission and Other Reports. Promptly upon their
becoming available, one copy of each financial statement, report,
notice or proxy statement sent by the Borrower to stockholders
generally, and of each regular or periodic report and any registration
statement, prospectus or written communication (other than transmittal
letters) in respect thereof filed by the Borrower with, or received by
the Borrower in connection therewith
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from, any securities exchange (including without limitation the NASDAQ
Small Cap market system) or the Commission.
Section 4.02 Certificates of Compliance. Concurrently with the
furnishing of the annual and quarterly financial statements pursuant to
Subsections 4.01(a) and (b) hereof, the Borrower shall furnish or cause to be
furnished to the Lender a certificate in form and substance satisfactory to the
Lender signed by the principal financial officer of the Borrower stating (i)
that the Borrower has fulfilled its obligations under this Agreement, the Note
and the Security Instruments; and (ii) that all representations made herein and
therein continue to be true and correct (or specifying the nature of any
change), or, if any Potential Default shall have occurred and be continuing,
specifying such Potential Default and the nature and status thereof; and (iii)
containing or accompanied by such financial or other details, information and
material as the Lender reasonably may request to evidence such compliance.
Section 4.03 Taxes and Liens. The Borrower shall pay and
discharge promptly all Taxes imposed upon the Borrower or any Subsidiary or
upon the income or any Property of the Borrower or any Subsidiary as well as
all claims of any kind (including claims for labor, materials, supplies and
rent) that, if unpaid, might become a Lien upon any or all of the Property of
the Borrower or any Subsidiary; provided, however, that neither the Borrower
nor any Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim if the amount, applicability or validity thereof shall currently
be contested in good faith by appropriate proceedings diligently conducted by
or on behalf of the Borrower or its Subsidiary, and if the Borrower or its
Subsidiary shall have set up reserves therefor adequate under GAAP.
Section 4.04 Maintenance of Rights and Property. The Borrower
shall and shall cause each Subsidiary to (a) maintain its corporate existence,
rights and franchises; (b) observe and comply with all Governmental
Requirements (other than any Governmental Requirement the violation of which,
either individually or in the aggregate, would not have a Material Adverse
Effect); and (c) maintain its Property in good operating condition at all times
and make all repairs, replacements, additions, betterments and improvements to
its Property as are necessary or appropriate to enable the Borrower and each
Subsidiary to conduct their respective businesses properly and efficiently at
all times.
Section 4.05 Insurance. In the case of any fire, accident or
other casualty causing loss or damage to any Property of the Borrower or a
Subsidiary, the proceeds of such policies shall be used (a) to repair or
replace the damaged Property or (b) to prepay the Indebtedness.
Section 4.06 Accounts and Records. The Borrower shall keep, and
shall cause each Subsidiary to keep, books of record and account in which full,
true and correct entries shall be made of all dealings or transactions in
relation to their respective business and activities, in accordance with GAAP,
consistently applied except for changes in accounting principles or practices
with which the Borrower's independent public accountants concur.
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Section 4.07 Right of Inspection.
(a) The Borrower shall permit any officer, employee or agent of
the Lender to visit and inspect any of the Borrower's Property, to examine the
Borrower's books of record and accounts and to take copies and extracts
therefrom, and to discuss the Borrower's affairs, finances and accounts with
the Borrower's officers, accountants and auditors, all at such times and places
as the Lender reasonably may require.
(b) The Borrower shall cause each Subsidiary to permit any
officer, employee or agent of the Lender to visit and inspect any of such
Subsidiary's Property, to examine such Subsidiary's books of record and
accounts and to take copies and extracts therefrom, and to discuss such
Subsidiary's affairs, finances and accounts with such Subsidiary's officers,
accountants and auditors, all at such times and places as the Lender reasonably
may require.
Section 4.08 Notice of Certain Events. The Borrower shall notify
the Lender promptly if the Borrower learns of the occurrence of:
(a) any event that constitutes a Potential Default, and
shall in such case provide with the notice a detailed statement by a
responsible officer of the Borrower of the steps being taken to cure
the effect of such Potential Default; or
(b) the receipt of any notice from, or the taking of any
other action by, the holder of any promissory note, debenture or other
evidence of indebtedness of the Borrower or any Subsidiary or of any
security (as defined in the Securities Act) of the Borrower or any
Subsidiary with respect to a claimed default, and shall in such case
provide with the notice a detailed statement by a responsible officer
of the Borrower specifying the notice given or other action taken by
such holder and the nature of the claimed default and what action the
Borrower or its Subsidiary is taking or proposes to take with respect
thereto; or
(c) any legal, judicial or regulatory proceedings
affecting the Borrower or any Subsidiary or any of their respective
Property in which the amount involved is material and is not covered
by insurance or that, if adversely determined, could have a Material
Adverse Effect; or
(d) any pending or threatened dispute between the
Borrower or any Subsidiary and any governmental or regulatory body or
any other Person that, if adversely determined, could have a Material
Adverse Effect.
Section 4.09 ERISA Information and Compliance. The Borrower shall
promptly furnish to the Lender (a), if the Lender requests, copies of each
annual and other report with respect to each Plan or any trust created
thereunder promptly after the filing thereof with the United States Secretary
of Labor or the Pension Benefit Guaranty Corporation and (b), immediately upon
becoming aware of the occurrence of any "reportable event," as such term is
defined in Section
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4043 of ERISA, or of any "prohibited transaction," as such term is defined in
Section 4975 of the Code, in connection with any Plan or any trust created
thereunder, a written notice signed by the President or the principal financial
officer of the Borrower specifying the nature thereof, what action the Borrower
or any of its Subsidiaries is taking or proposes to take with respect thereto
and, when known, any action taken by the Internal Revenue Service with respect
thereto. The Borrower shall fund, or shall cause its Subsidiaries to fund, all
current service pension liabilities as they are incurred under the provisions
of all Plans from time to time in effect for the benefit of employees of the
Borrower or any of its Subsidiaries, and comply with all applicable provisions
of ERISA.
Section 4.10 Use of Proceeds. The proceeds of the Note shall be
applied by the Borrower only for the following purposes and in the following
order:
(a) to fund the Unifiber acquisition pursuant to the
Unifiber Purchase Agreement;
(b) to pay the Borrower's indebtedness as set forth in
Schedule 4.11 hereto; and
(c) for working capital and other general corporate
purposes.
Section 4.11 NASDAQ Small Cap Exchange Listing. The Borrower
shall ensure at all times that:
(a) the Lender Shares are listed on the NASDAQ Small Cap
market system or other national securities exchange;
(b) the Borrower is not in default of its listing
agreement with NASDAQ; and
(c) trading in the Common Stock is not suspended for any
reason.
Section 4.12 Subsidiary Dividends. In the event that the Borrower
has insufficient funds available to pay all amounts then due and payable under
the Note, the Borrower shall cause one or more Subsidiaries to declare and pay
to the Borrower out of the funds legally available therefor dividends in an
aggregate amount to enable the Borrower to pay such amounts in full.
Section 4.13. First Anniversary Reset. In the event that, on the
first anniversary of the Closing, any principal of the Loan remains unpaid and
the aggregate value of the Initial Consideration Shares (the "Aggregate First
Anniversary Reset Value"), based on the per-share closing price of the Common
Stock on the last trading day immediately preceding the first anniversary of
the Closing as quoted on the NASDAQ Small Cap market system (the "Per-Share
First Anniversary Reset Value"), is less than $1,000,000, then the Borrower
promptly shall deliver to the Lender, at the Borrower's option, either (a) an
amount in cash equal to (i) $1,000,000 less (ii) the Aggregate First
Anniversary Reset Value (the "Aggregate First Anniversary Reset Value
Difference") or (b), free of any and all encumbrances (other than restrictions
on transfer imposed
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by applicable securities laws), such number of shares validly-issued,
fully-paid and nonassessable shares of Common Stock as are equal to (i) the
Aggregate First Anniversary Reset Value Difference divided by (ii) the
Per-Share First Anniversary Reset Value.
Section 4.14. Maturity Date Reset. In the event that, on the
Maturity Date, the aggregate value of the Initial Consideration Shares (the
"Aggregate Maturity Date Reset Value"), based on the per-share closing price of
the Common Stock on the last trading day immediately preceding the Maturity
Date as quoted on the NASDAQ Small Cap market system (the "Per-Share Maturity
Date Reset Value"), is less than $1,000,000, then the Borrower promptly shall
deliver to the Lender, at the Borrower's option, either (a) an amount in cash
equal to (i) $1,000,000 less (ii) the Aggregate Maturity Date Reset Value less
(iii) (A), if the Lender received a cash payment pursuant to Section 4.13, the
amount of such cash payment or (B), if the Lender received additional shares of
Common Stock pursuant to Section 4.13, an amount equal to (I) the number of
such additional shares that were issued to the Lender pursuant to Section 4.13
multiplied by (II) the Per-Share Maturity Date Reset Value (the "Aggregate
Maturity Date Reset Value Difference"), or (b), free of any and all
encumbrances (other than restrictions on transfer imposed by applicable
securities laws), such number of shares validly-issued, fully-paid and
nonassessable shares of Common Stock as are equal to (i) the Aggregate Maturity
Date Reset Value Difference divided by (ii) the Per-Share Maturity Date Reset
Value. Notwithstanding anything in this Section 4.14 to the contrary, any
Aggregate Maturity Date Reset Value Difference less than zero shall be deemed
to be zero.
Section 4.15. Prepayment Reset. In the event that the Loan is
prepaid in full prior to the Maturity Date and the aggregate value of the
Initial Consideration Shares on the date of such prepayment (the "Aggregate
Prepayment Date Reset Value"), based on the per-share closing price of the
Common Stock on the last trading day immediately preceding the date of such
prepayment as quoted on the NASDAQ Small Cap market system (the "Per-Share
Prepayment Date Reset Value"), is less than $1,000,000, then the Borrower
promptly shall deliver to the Lender, at the Borrower's option, either (a) an
amount in cash equal to (i) $1,000,000 less (ii) the Aggregate Prepayment Date
Reset Value less (iii) (A), if the Lender received a cash payment pursuant to
Section 4.13, the amount of such cash payment or (B), if the Lender received
additional shares of Common Stock pursuant to Section 4.13, an amount equal to
(I) the number of such additional shares that were issued to the Lender
pursuant to Section 4.13 multiplied by (II) the Per-Share Prepayment Date Reset
Value (the "Aggregate Prepayment Date Reset Value Difference"), or (b), free of
any and all encumbrances (other than restrictions on transfer imposed by
applicable securities laws), such number of shares validly-issued, fully-paid
and nonassessable shares of Common Stock as are equal to (i) the Aggregate
Prepayment Date Reset Value Difference divided by (ii) the Per-Share Prepayment
Date Reset Value. Notwithstanding anything in this Section 4.15 to the
contrary, any Aggregate Prepayment Date Reset Value Difference less than zero
shall be deemed to be zero.
Section 4.16 Voting of Collateral Shares. While any part of the
Loan remains outstanding, each of Xxxxxxxxxxx and Xxxxxx shall vote all of his
Collateral Shares in favor of the election of (and against the removal of, if
applicable) a Lender-designated nominee as a Borrower director.
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Section 4.17 Indemnification. From and after the Closing, each of
the Borrower, Xxxxxxxxxxx and Xxxxxx, jointly and severally, shall indemnify
and hold harmless in full the Lender from and against any and all Damages
arising in connection with the untruth of any representation or warranty set
forth in Article 3 hereof or with the failure of any of them to comply with the
covenants set forth in this Article 4 or in Article 5 hereof.
Section 4.18 Proceeds of Securities Offerings. At the Lender's
option (but, in the case of an underwritten offering, subject to the approval
of the Borrower's lead underwriter, which approval the Borrower shall use its
best efforts to obtain), the Borrower shall prepay the Loan to the extent of
any cash proceeds that the Borrower receives from any sale of securities of the
Borrower.
Section 4.19 Voting of Collateral Shares. Each of Xxxxxxxxxxx and
Xxxxxx, by his execution of this Agreement, hereby grants to the Lender the
exclusive right, and hereby makes, constitutes and appoints the Lender, with
full power of substitution in the premises, his true and lawful
attorney-in-fact and agent, for him and in his name, place and xxxxx, to vote
any and all of the Xxxxxxxxxxx Collateral Shares and the Xxxxxx Collateral
Shares, respectively, on any and all matters that may properly be put to a vote
of the Borrower's shareholders, and to execute any and all written consents to
the same effect, and to do all such other acts and things that the Lender may
deem necessary or appropriate in such regard, in the event that (a) an Event of
Default shall have occurred and be continuing and (b) the Lender shall have
chosen not to exercise its rights under the Security Instruments to foreclose
on the Collateral Shares (each a "Power of Attorney"). Each Power of Attorney
shall be deemed irrevocable and coupled with an interest for so long as any
part of the Indebtedness remains outstanding and shall not be adversely
affected by the incapacity of the grantor thereof. The Borrower agrees that
the provisions of this Section 4.19 are not inconsistent with Section 2.12 of
the Borrower's Bylaws and acknowledges the Lender's exclusive right to vote the
Collateral Shares in accordance with the provisions of this Section 4.19.
ARTICLE 5
NEGATIVE COVENANTS
The Borrower shall at all times comply with the covenants contained in
this Article 5 so long as any part of the Indebtedness remains outstanding:
Section 5.01 Indebtedness.
(a) Without the Lender's prior express written consent in
each instance, the Borrower shall not, and shall not permit any
Subsidiary to, incur, create, assume or suffer
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to exist any indebtedness or obligation for payment of money
(including obligations for the payment of rentals) other than (i) the
Indebtedness and (ii) any such indebtedness or obligation outstanding
on the date hereof of which the Borrower has fully informed the
Lender.
(b) The Borrower shall not, and shall not permit any
Subsidiary to, guarantee or in any way to be or become liable in
respect of, or to be responsible for, any indebtedness or obligation
of any other Person in any way other than in the ordinary course of
business.
Section 5.02 Liens. The Borrower shall not, and shall not permit
any Subsidiary to, incur, create, assume or suffer to exist any Lien on any of
its Property (now held or hereafter acquired) other than (a) Liens securing the
payment of any Indebtedness, (b) Permitted Liens and (c) Liens outstanding on
the date hereof of which the Borrower has fully informed the Lender.
Section 5.03 Investments, Loans and Advances. The Borrower shall
not, and shall not permit any Subsidiary to, make or permit to remain
outstanding any loans or advances to or investments in any Person other than in
the ordinary course of business.
Section 5.04 Grants of Stock Rights, Dividends, Distributions and
Redemptions. Without the Lender's prior written consent, the Borrower shall
not grant any Stock Rights that, together with all Stock Rights previously
granted, would represent the right to acquire more than fifteen percent (15%)
of the Company's common equity on a fully-diluted basis. The Borrower shall
not declare or pay any dividend or distribution, or purchase, redeem, retire or
otherwise acquire for value any of its capital stock now or hereafter
outstanding, return any capital to its stockholders, or make any distribution
of its assets to its stockholders as such, or permit any of its Subsidiaries to
purchase or otherwise acquire for value any capital stock of the Borrower.
Section 5.05 Fundamental Transactions. Without the Lender's prior
written consent, the Borrower shall not merge or consolidate with, or sell,
assign, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all, substantially all or an integral portion of its
Property (whether now owned or hereafter acquired) to, any Person, or permit
any Subsidiary to do so, except that any Subsidiary may merge into or
consolidate with or transfer Property to any other Subsidiary and any
Subsidiary may merge into or transfer Property to the Borrower; provided,
however, that, in each case, immediately thereafter and giving effect thereto,
no event shall occur and be continuing that constitutes a Potential Default or
an Event of Default and that, in the case of any such merger or consolidation
to which the Borrower is a party, the Borrower is the surviving corporation.
Section 5.06 Sales and Leasebacks. The Borrower shall not, and
shall not permit any subsidiary to, enter into any arrangement, directly or
indirectly, with any Person whereby the Borrower or any Subsidiary shall sell
or transfer any Property, whether now owned or hereafter acquired, and whereby
the Borrower or any Subsidiary shall then or thereafter rent or lease as lessee
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such Property or any part thereof or other Property which the Borrower or any
Subsidiary intends to use for substantially the same purpose or purposes as the
Property sold or transferred.
Section 5.07 ERISA Compliance. The Borrower shall not at any time
permit any Plan maintained by it or any Subsidiary to:
(a) engage in any "prohibited transaction," as such term
is defined in Section 4975 of the Code, as amended;
(b) incur any "accumulated funding deficiency," as such
term is defined in Section 302 of ERISA; or
(c) terminate any such Plan in a manner that could result
in the imposition of a Lien on the Property of the Borrower or any
Subsidiary pursuant to Section 4068 of ERISA.
Section 5.08 Nature of Business. The Borrower shall not, and
shall not permit any Subsidiary to, materially change the character of its
business as carried on at the date hereof.
Section 5.09 Margin Stock. Neither the Borrower nor any
Subsidiary shall take any action that might cause the Note, this Agreement or
any of the Security Instruments to violate Regulation U of the Board of
Governors of the United States Federal Reserve System (12 C.F.R. Part 221) (the
"Federal Reserve Board") or any other regulation of the Federal Reserve Board
or to violate Section 7 of the Exchange Act or any rule or regulation
thereunder, in each case as now in effect or as the same may hereinafter be in
effect.
Section 5.10 NASDAQ Small Cap Exchange Listing. The Borrower
shall not de-list, or allow the de-listing of, the Common Stock from the NASDAQ
Small Cap market system (unless such de-listing occurs at a time when such
Shares are listed on another nationally-recognized United States securities
exchange), and shall ensure that the Lender Shares are listed thereon at the
earliest possible time.
ARTICLE 6
EVENTS OF DEFAULT
Section 6.01 Events. Any of the following events shall be
considered an "Event of Default:"
(a) the Borrower fails to pay when due any installment of
principal or interest on the Note or other Indebtedness; or
(b) any of the Borrower's representations or warranties
set forth herein, in the
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Note or in any Other Transaction Document to which it is a party, or
any of the representations or warranties of either Shareholder set
forth herein or in any Other Transaction Document to which it is a
party, proves to have been incorrect as of the date hereof or thereof;
or
(c) the Borrower fails duly, timely and fully to perform
or observe any of its covenants or agreements or to perform its
obligations set forth in any Other Transaction Document or in the
following Sections of this Agreement: 4.04(a); 4.07; 4.08; 4.09(b);
4.10; 4.11; 4.13; 4.14; 4.15; 4.16; 4.17; 4.18; 4.19; 5.01; 5.04;
5.05; 5.06; 5.07; 5.08; 5.09; and 5.10; or
(d) the Borrower fails duly, timely and fully to perform
or observe any of its covenants or agreements or to perform its
obligations set forth in this Agreement (other than any such
covenants, agreements and obligations set forth in clause (c) above),
and such failure continues unremedied for a period of 10 days after
the earlier of (i) the Lender's notice thereof to the Borrower and
(ii) such failure otherwise becomes known to the Borrower; or
(e) the Borrower in good xxxxx xxxxx itself insecure with
respect to the Note or any other Indebtedness; or
(f) an involuntary case or other proceeding is commenced
against the Borrower or either Shareholder that seeks liquidation,
reorganization or other relief with respect to it or its debts or
other liabilities under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its Property, and such involuntary case
or other proceeding shall remain undismissed or unstayed for a period
of 30 days; or an order for relief against the Borrower or either
Shareholder shall be entered in any such case under the Federal
Bankruptcy Code; or
(g) the Borrower or either Shareholder commences a
voluntary case or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts or other
liabilities under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its Property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to, or shall admit in writing its inability to, pay its
debts generally as they become due, or shall take any corporate action
to authorize or effect any of the foregoing; or
(h) the Borrower or any Subsidiary discontinues or
materially alters its usual business; or
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(i) the Borrower fails to make any payment due on any
other indebtedness or obligation for the payment of money; or any
event shall occur or any condition shall exist in respect of any such
indebtedness or obligation, or under any agreement or instrument under
or by which any such indebtedness or obligation is created, evidenced
or secured, the effect of which, with notice, lapse of time, or both,
is to cause or to permit any holder of such indebtedness or obligation
to cause such indebtedness or obligation, or a portion thereof, to
become due prior to its stated maturity or prior to its regularly
scheduled dates of payment; or
(j) the Borrower shall fail within 10 days to pay, bond
or otherwise discharge any judgment or order for the payment of money
in excess of $25,000 that is not otherwise being satisfied in
accordance with its terms or is not stayed on appeal; or
(k) any Subsidiary takes, suffers or permits to exist as
to such Subsidiary any of the events or conditions referred to in
Subsections 6.01(f), (g), (h), (i) or (j) hereof; or
(l) any Security Instrument shall for any reason, except
to the extent permitted by the terms thereof, cease to be in full
force and effect and valid, binding enforceable in accordance with its
terms, or cease to create a valid and perfected Lien of the priority
required thereby on any of the collateral purported to be covered
thereby, or the Borrower or either Shareholder shall so state in
writing; or
(m) any party defaults under the Unifiber Purchase
Agreement; or
(n) the Borrower or any Subsidiary shall default (or an
event or condition shall occur that, with notice or the passage of
time or both would constitute a default) under any Contract; or
(o) the Lender ceases at any time to have at least one
person that it has designated serving on the Borrower's Board of
Directors (each a "Lender-designated Director"); or
(p) the Borrower increases the size of its Board of
Directors without the consent of each Lender-designated Director.
Section 6.02 Remedies. Upon the occurrence of any Event of
Default described in Subsection 6.01(f) or (g), hereof, or in Subsection
6.01(k) to the extent that such Subsection refers to Subsection 6.01(f) or (g)
hereof, the obligations, if any, of the Lender hereunder shall immediately
terminate, and the entire amount of all Indebtedness then outstanding shall
become automatically and immediately due and payable, all without written
notice and without presentment, demand, protest, notice of protest or dishonor,
notice of intention to accelerate, notice of acceleration or any other notice
of default of any kind, all of which are hereby expressly waived by the
Borrower. Upon the occurrence and at any time during the continuance of any
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other Event of Default, by written notice to the Borrower the Lender may (i)
declare all Indebtedness to be immediately due and payable without presentment,
demand, protest, notice of protest or dishonor, notice of intention to
accelerate or other notice of default of any kind, all of which are hereby
expressly waived by the Borrower, and/or (ii) terminate the obligations, if
any, of the Lender hereunder unless and until the Lender shall reinstate same
in writing and /or (iii) exercise its right under Section 4.19 hereof to vote
the Collateral Shares. Notwithstanding anything in this Agreement to the
contrary, however, the facts and circumstances existing as of the date hereof
with respect to Borrower's default under its royalty agreement with Expedition
Trading Co., L. C. shall constitute a Potential Default, but shall not
constitute an Event of Default, for a period of six (6) months following the
Closing (unless extended by the Lender in its sole discretion), after which
time the special grace period set forth in this sentence shall be of no further
force or effect.
Section 6.03 Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, or if the Borrower becomes insolvent,
however evidenced, the Lender is hereby authorized at any time and from time to
time, without notice to the Borrower (any such notice being expressly waived by
the Borrower), to set-off and apply any and all moneys at any time held and
other indebtedness at any time owing by the Lender to the Borrower against any
and all of the Indebtedness of the Borrower, irrespective of whether or not the
Lender shall have made any demand under this Agreement or the Note and although
such obligations may be unmatured. The Lender agrees promptly to notify the
Borrower after any such setoff and application, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of the Lender under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) that the
Lender may have.
ARTICLE 7
LOAN CLOSING AND CONDITIONS PRECEDENT
The obligation of the Lender to make the Loan is subject to the
conditions precedent stated in this Article 7 wherein each document to be
delivered to the Lender shall be in form and substance satisfactory to it.
Section 7.01 Closing. The closing of the Loan (the "Closing")
shall take place contemporaneously with the execution of this Agreement.
Section 7.02 Conditions Precedent to the Loan. As conditions
precedent to Lender's making of the Loan, the following shall occur prior to or
at the Closing:
(a) the Borrower shall have duly and validly issued,
executed and delivered the Note to the Lender;
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(b) the Borrower shall have delivered the Initial
Consideration Shares to the Lender free of any and all Liens and
restrictive legends (other than restrictions on transfer imposed by
applicable securities laws and restrictive legends making reference
thereto).
(c) the Borrower shall have effected the appointment or
election of one Lender-designated person to the Borrower's Board of
Directors;
(d) the Borrower shall have made the following additional
deliveries to the Lender:
(i) certificates of existence and good standing of the
Borrower in the State of Nevada, and certificates of
qualification as a foreign corporation and good standing in
the State of Colorado;
(ii) a certificate of the Borrower's Secretary certifying
(A) the Borrower's charter and bylaws, (B) duly adopted
resolutions of the Borrower's board of directors in form and
substance satisfactory to the Lender with respect to the
authorization of this Agreement, the Note and the Other
Transaction Documents to which the Borrower is a party and (C)
specimen signatures of the duly authorized officers of the
Borrower executing this Agreement or any Other Transaction
Document on the Borrower's behalf;
(iii) a legal opinion of counsel to the Borrower and the
Shareholders addressed to the Lender in form and substance
satisfactory to the Lender;
(iv) duly-executed originals (in such number as the Lender
reasonably shall request) of the Registration Rights
Agreement; and
(v) duly-executed originals (in such number as the Lender
reasonably shall request) of written evidence satisfactory in
form and substance to the Lender that the Borrower and the
Shareholder (as such term is defined in the Unifiber
Shareholder Agreement) have agreed that no approval by the
Borrower's Board of Directors pursuant to Section 3(a)(2) of
the Unifiber Shareholder Agreement shall be required upon the
Lender's purchase, if any, of the Shares (as such term is
defined in the Unifiber Shareholder Agreement) subsequent to
such assignment; and
(vi) such other documents and things as the Lender
reasonably shall request.
(e) Xxxxxxxxxxx shall have delivered one or more
certificates representing the Xxxxxxxxxxx Collateral Shares free of
any and all Liens and restrictive legends (other than restrictions on
transfer imposed by applicable securities laws and restrictive legends
making reference thereto), together with one or more irrevocable stock
power duly endorsed in blank;
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(f) Xxxxxxxxxxx shall have delivered to the Lender (in
such number as the Lender reasonably shall request) UCC-1 financing
statements relating to the Xxxxxxxxxxx Security Agreement and the
pledge of the Xxxxxxxxxxx Collateral Shares;
(g) Xxxxxxxxxxx and the Borrower shall have delivered to
each other duly-executed originals (in such number as the Lender
reasonably shall request) of the Xxxxxxxxxxx Security Agreement;
(h) Xxxxxx shall have delivered one or more certificates
representing the Xxxxxx Collateral Shares free of any and all Liens
and restrictive legends (other than restrictions on transfer imposed
by applicable securities laws and restrictive legends making reference
thereto), together with one or more irrevocable stock power duly
endorsed in blank;
(i) Xxxxxx shall have delivered to the Lender (in such
number as the Lender reasonably shall request) UCC-1 financing
statements relating to the Xxxxxx Security Agreement and the pledge of
the Xxxxxx Collateral Shares; and
(j) Xxxxxx and the Borrower shall have delivered to each
other duly-executed originals (in such number as the Lender reasonably
shall request) of the Xxxxxx Security Agreement.
Section 7.03 Closing Deliveries of the Lender. At the Closing and
following the satisfaction or waiver of the conditions precedent set forth in
Section 7.02, the Lender shall deliver the proceeds of the Loan by wire
transfer to such account as the Borrower reasonably shall request in writing at
least two (2) days prior to the Closing.
Section 7.04 Subsequent Delivery. Notwithstanding anything to the
contrary in this Article 7, the parties acknowledge and agree that, due to the
necessity of having the Closing occur at the earliest possible time, the
Borrower will not be able to satisfy the condition precedent to the Closing set
forth in Section 7.02(b) with regard to the delivery of the Initial
Consideration Shares prior to or at the Closing. In consideration of the
Lender's willingness to close the Loan without such satisfaction, the Borrower
covenants and agrees that the Borrower shall satisfy such condition precedent
set forth in Section 7.02(b) as soon as possible following the Closing, but in
any event no later than ten (10) days thereafter.
ARTICLE 8
MISCELLANEOUS
Section 8.01 Proof of Indebtedness. The Lender's records shall be
prima facie proof as to:
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(a) the amount of principal, interest or other amounts under the
Loan owing at any time;
(b) the existence of any default in the payment of any amounts
under the Note; and
(c) whether any demand for payment under the Note has been made.
Section 8.02 Time of Essence. Time shall be of the essence of
each and every provision hereof and of the Note.
Section 8.03 Notices. Any notice required or permitted to be
given under or in connection with this Agreement, the Security Instruments or
the Note shall (except as may otherwise be expressly required therein) be in
writing and shall be delivered (a) by certified mail, return receipt requested,
(b) by overnight delivery service, (c) by facsimile transmission, confirmed
telephonically or (d) personally to an executive officer of the receiving
party. All such communications shall be mailed, sent or delivered as follows:
If to the Borrower:
Coyote Sports, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxx XX 00000
Attention: Chief Executive Officer
Telephone: 303/000-0000
Facsimile: 303/417-1700
With a copy (which shall not constitute notice) to:
Xxxxxxx X. Xxxxxx, Esq.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx XX 00000
Telephone: 303/000-0000
Facsimile: 303/447-0556
If to the Lender:
Paragon Coyote Texas Ltd.
c/o Xxxx Xxxxxx
000 Xxxx Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxxx XX 00000
Telephone: 817/000-0000
Facsimile: 817/810-0089
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With a copy (which shall not constitute notice) to:
Xxxxx X. Xxxxxx, Esq.
Xxxxxxxx & Xxxxxx L.L.P.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxx XX 00000
Telephone: 817/000-0000
Facsimile: 817/332-3381
If to Xxxxxxxxxxx:
Xxx X. Xxxxxxxxxxx, Chief Executive Officer
Coyote Sports, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxx XX 00000
Telephone: 303/000-0000
Facsimile: 303/417-1700
If to Xxxxxx:
Xxxxx X. Xxxxxx, President
Coyote Sports, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxx XX 00000
Telephone: 303/000-0000
Facsimile: 303/417-1700
Any communication delivered in accordance with this Section shall be deemed
received (a), if delivered by certified mail, return receipt requested, on the
date of delivery indicated on the return receipt, (b), if delivered by
overnight delivery service, on the following Business Day, (c), if delivered by
facsimile transmission, on the date that the transmission is confirmed
telephonically or (d), if personally to an executive officer of the receiving
party, on the date of such delivery.
Section 8.04 Amendments and Waivers. This Agreement may not be
modified, amended or terminated orally and no waiver of compliance with any
provision or condition hereof and no consent provided for herein shall be
effective unless evidenced by an instrument in writing duly executed by the
party hereto sought to be charged with such waiver or consent. No course of
dealing on the part of the Lender, its officers, employees, consultants or
agents, nor any failure or delay by the Lender with respect to exercising any
right, power or privilege of the Lender under this Agreement, the Note or any
Security Instrument shall operate as a waiver thereof. No waiver of any term
or provision hereof shall be construed as a further or continuing waiver of
such term or provision or any other term or provision.
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Section 8.05 Severability. If any provision of this Agreement or
the application thereof to any Person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law
as long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party.
Section 8.06 Survival. All covenants and agreements of any party
to this Agreement set forth herein, in the Note or in any other Other
Transaction Document not fully performed before the Closing, and all
representations and warranties made by any party to this Agreement pursuant
hereto, to the Note or to any Other Transaction Document, shall survive the
Closing and shall never terminate.
Section 8.07 Successors and Assigns. All of the Borrower's
covenants and agreements set forth in this Agreement, the Note and the Security
Instruments shall bind its successors and assigns and shall inure to the
benefit of the Lender and its successors and assigns; provided, however, that
the Borrower may not assign its rights or obligations under this Agreement or
any interest herein, without in each instance the Lender's prior written
consent.
Section 8.08 Renewal, Extension or Rearrangement. All provisions
of this Agreement and of the Security Instruments relating to the Note or other
Indebtedness shall apply with equal force and effect to each and all promissory
notes hereafter executed that represent, in whole or in part, a renewal,
extension for any period, increase or rearrangement of any part of the
Indebtedness originally represented by the Note or of any part of such other
Indebtedness.
Section 8.09 Cumulative Rights. The Lender's rights and remedies
under this Agreement, the Note and each Security Instrument shall be
cumulative, and the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
Section 8.10 Further Assurances. At the Borrower's sole cost and
expense, each of the Lender, the Borrower and each Subsidiary covenants and
agrees to execute any and all such further documents and instruments and to do
such further things as the Lender in its sole discretion may deem necessary or
appropriate to implement fully and carry out the intent of this Agreement, the
Note and the Other Transaction Documents.
Section 8.11 Governing Law. This Agreement and the Note are
contracts made under, and shall be construed in accordance with and governed
by, the laws of the State of Colorado (exclusive of any such laws that pertain
to conflicts of laws).
Section 8.12 Entire Agreement. This Agreement, the Note and the
Other Transaction Documents embody the entire agreement and understanding
between the Lender and the Borrower with respect to the subject matter hereof
and thereof and supersede all prior agreements and understandings between such
parties in such regard.
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Section 8.13 Schedules and Exhibits. The schedules and exhibits
attached to this Agreement are incorporated herein and shall be considered a
part of this Agreement for the purposes stated herein, except that in the event
of any conflict between any of the provisions of such schedules and exhibits
and the provisions of the text of this Agreement, the provisions of the text of
this Agreement shall prevail.
Section 8.14 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be an original and all of which taken
together shall constitute one and the same instrument. Signatures exchanged by
facsimile transmission shall be deemed to constitute original,
manually-executed signatures and shall be fully binding.
Section 8.15 Headings. Headings of the Articles and Sections of
this Agreement are for the convenience of the parties only, and shall be given
no substantive or interpretive effect whatsoever.
Section 8.16 Usury Savings Clause. The Borrower and the Lender
intend to conform strictly to applicable usury laws. Therefore, the total
amount of interest (as defined under applicable law) contracted for, charged or
collected with respect to the Loan shall never exceed the Highest Lawful Rate
(as defined in the Note). In the event that the Lender is found to have
contracted for, charged or received any interest on the Loan in excess of the
Highest Lawful Rate, such occurrence shall be deemed a mistake and the Lender
shall automatically reform the contract or charge to conform to applicable law.
In the event that the Lender is found to have received any interest on the Loan
in excess of the Highest Lawful Rate, the Lender shall either refund such
excess interest to the Borrower or credit the excess interest to the unpaid
principal amount of the Loan. All amounts found to constitute interest on the
Loan will be spread throughout the full term of the Loan in determining whether
the interest contracted for, charged or received thereon exceeds the Highest
Lawful Rate.
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IN WITNESS WHEREOF, the parties hereto have entered into this Loan
Agreement as of the date first above written.
BORROWER: COYOTE SPORTS, INC.,
a Nevada corporation
By: /s/ Xxxxx X. Xxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxx
----------------------------------------
Title: President
---------------------------------------
LENDER: PARAGON COYOTE TEXAS LTD.,
a Texas limited partnership
By: Paragon Management Group, Inc.,
a Texas corporation, General Partner
By: /s/ Xxxx Xxxxxx
----------------------------------
Xxxx Xxxxxx, President
SHAREHOLDERS:
/s/ Xxx X. Xxxxxxxxxxx
---------------------------------------------
XXX X. XXXXXXXXXXX
/s/ Xxxxx X. Xxxxxx
---------------------------------------------
XXXXX X. XXXXXX
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Schedule 3.06
Capitalization
as of March 19, 1998
4,073,000 issued and outstanding shares of Common Stock
250,000 warrants to purchase an aggregate of 125,000 shares of Common Stock
1,000,000 shares authorized pursuant to the 1997 Stock Option Plan. 565,500
stock options granted under the 1997 Plan to purchase an aggregate of 565,500
shares of Common Stock
1,000,000 shares authorized pursuant to the 1998 Stock Option Plan. No stock
options granted to date.
105,000 warrants to purchase an aggregate of 105,000 shares of Common Stock
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Schedule 4.11
Indebtedness to be Paid with the Proceeds of the Loan
The amount of $6,000,000 will be wired to the Harrigan, Ruff, Sloardellati and
Xxxxx, Attorney Client Trust Fund for disbursement and release of the following
liabilities:
Tennent Trust $3,000,000.00
Zurco, Inc. - principal and interest 2,054,667.21
Xxxxx de Oro Bank - principal and 201,928.77
interest
Xxxxxx and Xxxxx Xxxxxxx - 128,228.96
principal and interest
Xxxxxxxx Wertheim & Co. 300,000.00
Tennent Trust 115,000.00
Coyote Sports, Inc. 200,175.06