EXHIBIT 10.31
AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT
BETWEEN
COMERICA BANK-TEXAS
AND
STERLING CONSTRUCTION COMPANY,
DATED
JULY ___, 2001
TABLE OF CONTENTS
SECTION 1. DEFINITIONS ......................................................... 1
1.1. Defined Terms .................................................... 1
1.2. Accounting Terms ................................................. 7
1.3. Singular and plural .............................................. 8
SECTION 2. COMMITMENT, INTEREST AND FEES ....................................... 8
2.1. Commitment ....................................................... 8
2.2. Borrowing Procedures ............................................. 8
2.3. Note ............................................................. 9
2.4. Interest ......................................................... 9
2.5. Renewals and Extensions .......................................... 10
2.6. Maximum Rate ..................................................... 10
2.7. Fees ............................................................. 11
2.8. Basis of Computation ............................................. 12
2.9. Prepayments ...................................................... 12
2.10. Basis of Payments ............................................... 12
2.11. Term Loans ...................................................... 12
SECTION 3. SECURITY ............................................................ 12
SECTION 4. CONDITIONS PRECEDENT TO OBLIGATIONS OF BANK ......................... 13
4.1. Conditions to First Disbursement ................................. 13
4.2. Conditions to All Disbursements .................................. 14
SECTION 5. WARRANTIES AND REPRESENTATIONS ...................................... 15
5.1. Corporate Existence and Power .................................... 15
5.2. Authorization and Approvals ...................................... 16
5.3. Valid and Binding Agreement ...................................... 16
5.4. Actions, Suits or Proceedings .................................... 16
5.5. Subsidiaries ..................................................... 16
5.6. No Liens, Pledges, Collateral Assignments or Security Interests .. 17
5.7. Accounting Principles ............................................ 17
5.8. No Adverse Changes ............................................... 17
5.9. Conditions Precedent ............................................. 17
5.10. Taxes ........................................................... 17
5.11. Compliance with Laws ............................................ 17
5.12. Indebtedness .................................................... 17
5.13. Material Agreements ............................................. 17
5.14. Margin Stock .................................................... 18
5.15. Pension Funding ................................................. 18
5.16. Misrepresentation ............................................... 18
5.17. Equipment ....................................................... 18
5.18. Parent Ownership ................................................ 18
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SECTION 6. AFFIRMATIVE COVENANTS ............................................... 18
6.1. Financial and Other Information .................................. 18
6.2. Insurance ........................................................ 22
6.3. Taxes ............................................................ 22
6.4. Maintain Corporation and Business ................................ 22
6.5. Maintain Tangible Net Worth ...................................... 23
6.6. Maintain Debt Ratio .............................................. 23
6.7. Maintain Current Ratio ........................................... 23
6.8. Maintain Cash Flow Coverage Ratio ................................ 23
6.9. ERISA ............................................................ 23
6.10. Use of Loan Proceeds ............................................ 24
SECTION 7. NEGATIVE COVENANTS .................................................. 24
7.1. Dividends ........................................................ 24
7.2. Stock Issuance ................................................... 24
7.3. Stock Acquisition ................................................ 24
7.4. Liens and Encumbrances ........................................... 24
7.5. Indebtedness ..................................................... 24
7.6. Extension of Credit .............................................. 24
7.7. Guarantee Obligations ............................................ 24
7.8. Property Transfer, Merger or Lease-Back .......................... 25
7.9. Acquire Securities ............................................... 25
7.10. Pension Plans ................................................... 25
7.11. Misrepresentation ............................................... 25
7.12. Margin Stock .................................................... 25
7.13. Compliance with Environmental Laws .............................. 26
7.14. Pledge of Receivables ........................................... 26
7.15. Subordinated Debt ............................................... 26
7.16. Subordinated Debt-Employee Selling Shareholders ................. 26
7.17. Subordinated Debt-NASCIT ........................................ 26
7.18. Notes Receivable from Shareholders .............................. 27
7.19. Non-ordinary Bonus .............................................. 27
SECTION 8. EVENTS OF DEFAULT - ENFORCEMENT - APPLICATION OF PROCEEDS ........... 27
8.1. Events of Default ................................................ 27
8.2. Acceleration of Indebtedness ..................................... 29
8.3. Application of Proceeds .......................................... 29
8.4. Cumulative Remedies .............................................. 29
SECTION 9. MISCELLANEOUS ....................................................... 30
9.1. Independent Rights ............................................... 30
9.2. Covenant Independence ............................................ 30
9.3. Waivers and Amendments ........................................... 30
9.4. GOVERNING LAW .................................................... 30
9.5. Survival of Warranties, Etc ...................................... 30
9.6. Attorneys' Fees .................................................. 30
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9.7. Payments on Saturdays, Etc ....................................... 30
9.8. Binding Effect ................................................... 31
9.9. Maintenance of Records ........................................... 31
9.10. Notices ......................................................... 31
9.11. Counterparts .................................................... 31
9.12. Headings ........................................................ 31
9.13. Capital Adequacy ................................................ 31
9.14. INDEMNIFICATION BY THE BORROWER ................................. 32
9.15. NO ORAL AGREEMENTS .............................................. 32
9.16. Gender .......................................................... 32
9.17. Intentionally Deleted ........................................... 32
9.18. Cross Default; Cross Collateral ................................. 32
9.19. Severability of Provisions ...................................... 33
9.20. Assignment ...................................................... 33
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AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT
THIS AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT is made and
delivered as of the ____ day of July, 2001, by and between STERLING CONSTRUCTION
COMPANY d/b/a
Texas-Sterling Construction, Inc., a Michigan corporation (the
"BORROWER"), and COMERICA BANK-
TEXAS, a
Texas banking association (the "BANK").
WITNESSETH:
WHEREAS, the Borrower desires to borrow up to $14,600,000.00 from the Bank from
time to time to finance working capital and equipment; and
WHEREAS, the Bank is willing to supply such financing subject to the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises herein
contained, the Borrower and the Bank agree as follows:
SECTION 1. DEFINITIONS.
1.1. Defined Terms. As used herein, the following terms shall have the following
respective meanings:
"EQUIPMENT," "FIXTURES;" "GENERAL INTANGIBLES,"
"GOODS," "INSTRUMENTS " and "Inventory" shall have the
meanings assigned to them in the UCC in effect on the date of
this Agreement.
"AGREEMENT" shall mean this Amended and Restated
Revolving Credit Loan Agreement, as same may be renewed,
extended, modified, supplemented, restated, amended, and/or
rearranged.
"APPRAISAL" shall mean that certain appraisal dated
November 23, 1999, prepared by Valuation Technology, Inc., and
covering the Borrower's Equipment prepared pursuant to Section
6.1.11.
"BANK" shall mean Comerica Bank-
Texas, a
Texas
banking association.
"BANKRUPTCY CODE" shall mean Title 11 of the United
States Code, as amended, or any successor act or code.
"BORROWER" shall mean Sterling Construction Company,
a Michigan corporation.
"BORROWING BASE" shall mean the aggregate of (i)
NINETY PERCENT (90%) of the Forced Sale Value, as determined
by the Appraisal, for each item of Existing Major Equipment
and which is to be curtailed or reduced each month, on the
last calendar day of each calendar month, by ONE AND
TWO-TENTHS
PERCENT (1.2%) of the Originally Established Value for each
item of Existing Major Equipment; (ii) the lesser of FORTY
PERCENT (40%) of the Net Book Value for Other Miscellaneous
Equipment, as of the end of each calendar month as used in the
Borrowing Base calculation or FOUR HUNDRED THOUSAND AND NO/100
DOLLARS ($400,000.00), which amount shall also be curtailed or
be reduced each month by ONE AND TWO-TENTHS PERCENT (1.2%) of
the Net Book Value for Other Miscellaneous Equipment; and
(iii) EIGHTY PERCENT (80%) of the Cost of new or used Major
Equipment hereinafter acquired, which is to be scheduled on a
spreadsheet to be attached to the Borrowing Base, and which is
to be curtailed or reduced each month, on the last calendar
day of each month, by ONE AND TWO-TENTHS PERCENT (1.2%) of the
Originally Established Value of EIGHTY PERCENT (80%) of Cost.
"BORROWING BASE CERTIFICATE" shall mean a
certificate in the form of EXHIBIT A to this Agreement,
completed in all appropriate respects and executed by the
President, Vice President or Treasurer of the Borrower and
setting forth the Borrower's computation of the Borrowing Base
as of the date of such certificate.
"BUSINESS DAY" shall mean a day on which the Bank is
open to carry on its normal commercial lending business.
"COLLATERAL" shall mean any property of the Borrower
in the possession of the Bank, the Stock, any amount in any
deposit account of the Borrower with the Bank and all of the
Borrower's Equipment, Fixtures, General Intangibles, Goods,
and Instruments, wherever located and whether now owned or
hereafter acquired, together with all replacements thereof,
substitutions therefor and all proceeds and products thereof.
"COMMITMENT AMOUNT" shall mean $13,000,000.00,
reducing $500,000.00 per quarter beginning September 30, 2001,
to a minimum amount of $10,000,000.00. The recital of a
Commitment Amount does not mean that the Bank shall be
obligated to advance such amount.
"CONTRACT RATE" shall mean, as of any date of
determination, the annual rate of interest which, pursuant to
Section 2.4 of this Agreement, would be applicable to the Note
if the annual rate of interest were determined without the
Maximum Legal Rate limitation.
"COST" shall mean the purchase price and all other
costs related to the purchase of the Equipment which are
eligible to be capitalized under GAAP, including taxes,
transportation, warranties, set-up charges, instructions,
license fees or other miscellaneous amounts.
"CURRENT ASSETS" shall mean, as of any applicable
date of determination, all cash, non-affiliated customer
receivables (which are not subject to any dispute), and United
States government securities and any other assets classified
as current assets under GAAP of a Person.
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"CURRENT LIABILITIES" shall mean, as of any
applicable date of determination, all liabilities of a Person
that should be classified as current in accordance with GAAP.
"DEBT" shall mean, as of any applicable date of
determination, all items of indebtedness, obligation or
liability of a Person, whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as
liabilities in accordance with GAAP.
"DEBT RATIO" shall mean the ratio of Debt to Tangible
Net Worth.
"DEFAULT" shall mean a condition or event which, with
the giving of notice or the passage of time, or both, would
become an Event of Default.
"DISBURSEMENT DATE" shall mean each date upon which
the Bank makes a loan to the Borrower under Section 2.1 of
this Agreement.
"EMPLOYEE SELLING STOCKHOLDERS " means Xxxxx X.
Xxxxxxx, Xxxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxx, Xx., Xxxxx X.
Xxxxxxxxxx, Xxxxxxx Xxxxxxx, Xxxxx X. Xxxxxxx, Xxxxxx X.
Xxxxxx, Xx., Xxxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxx, Xxxxx X.
Xxxxx, and Xxxx X. Xxxxxxxx.
"ENVIRONMENTAL LAWS " means any and all federal,
state, and local laws, regulations, and requirements
pertaining to health, safety, or the environment, including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. Section
9601 et seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq., the Occupational
Safety and Health Act, as amended, 29 U.S.C. Section 651 et
seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the
Clean Water Act as amended, 33 U.S.C. Section 1251 et seq.,
the Toxic Substances Control Act, as amended, 15 U.S.C.
Section 2601 et seq., and all similar laws, regulations, and
requirements of any governmental authority or agency having
jurisdiction over the Borrower or any of its properties or
assets, as such laws, regulations, and requirements may be
amended or supplemented from time to time.
"EQUIPMENT" shall mean Equipment of the Borrower in
which the Bank has a validly perfected first lien security
interest, which is in then good working order, and is not
damaged, and which is located within the State of
Texas.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, or any successor act or
code.
"EVENT OF DEFAULT" shall mean any of those conditions
or events listed in Section 8.1 of this Agreement.
"EXISTING MAJOR EQUIPMENT" shall mean those items of
the Borrower's equipment set forth on the Appraisal.
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"FINANCIAL STATEMENTS" shall mean all those balance
sheets, earnings statements and other financial data (whether
of the Parent, the Borrower, any Subsidiary, any guarantor or
otherwise) which have been furnished to the Bank for the
purpose of, or in connection with, this Agreement and the
transactions contemplated hereby.
"FINANCING STATEMENT" shall mean UCC financing
statements describing the Bank as secured party and the
Borrower or Oakhurst as debtor covering the Collateral and
otherwise in such form, for filing in such jurisdictions and
with such filing offices as the Bank shall reasonably deem
necessary or advisable.
"FORCED SALE VALUE" shall mean the forced sale value
established for each item of Existing Major Equipment.
"GAAP" shall mean, as of any applicable date of
determination, generally accepted accounting principles
consistently applied.
"GUARANTORS" shall mean Parent and Oakhurst.
"GUARANTY" shall mean a guaranty in the form of
EXHIBIT B to this Agreement pursuant to which the Guarantors
unconditionally guarantee to the Bank repayment of all of the
Indebtedness.
"HAZARDOUS SUBSTANCE" means any substance, product,
waste, pollutant, material, chemical, contaminant,
constituent, or other material which is or becomes listed,
regulated, or addressed under any Environmental Law,
including, without limitation, asbestos, petroleum, and
polychlorinated biphenyls.
"INDEBTEDNESS" shall mean all loans, advances and
indebtedness of the Borrower to the Bank under this Agreement,
together with all other indebtedness, obligations and
liabilities whatsoever of the Borrower to the Bank, whether
matured or unmatured, liquidated or unliquidated, direct or
indirect, absolute or contingent, joint or several, due or to
become due, now existing or hereafter arising, including the
Term Loans.
"MAJOR EQUIPMENT" shall mean the items of Existing
Major Equipment and hereinafter acquired Equipment which the
Bank agrees to allow the Borrower to include in the Borrowing
Base.
"MAXIMUM LEGAL RATE" shall have the meaning set forth
in Section 2.6 of this Agreement.
"NASCIT" shall mean the North Atlantic Smaller
Companies Investment Trust plc.
"NET BOOK VALUE" shall mean the book value
established by the Borrower's books and records subject to the
Bank's review and approval.
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"NET CURRENT ASSETS" shall mean Current Assets less
Current Liabilities.
"NET INCOME" shall mean the Parent's net income
after the payment of all expenses, including all taxes.
"NOTE" shall mean the promissory note conforming to
Section 2.3 of this Agreement and in the form of EXHIBIT C to
this Agreement, and any and all renewals, extensions,
rearrangements, amendments, modifications, and/or increases
thereof.
"NOTES RECEIVABLE FROM SHAREHOLDERS" shall mean any
promissory notes payable to the Borrower from its
shareholders.
"OAKHURST" shall mean Oakhurst Company, Inc., a
Delaware corporation.
"ORIGINALLY ESTABLISHED VALUE" shall mean ninety
percent (90%) of the Forced Sale Value.
"OTHER MISCELLANEOUS EQUIPMENT" shall mean items of
Equipment owned by the Borrower which are not Existing Major
Equipment and which the Bank allows to be included in the
Borrowing Base.
"PARENT" shall mean Sterling Construction Company, a
Delaware corporation.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation or any person succeeding to the present powers and
functions of the Pension Benefit Guaranty Corporation.
"PERMITTED LIENS" shall mean:
(a) liens and encumbrances in favor of the Bank;
(b) liens for taxes, assessments or other
governmental charges incurred in the ordinary course of
business and not yet past due or being contested in good faith
by appropriate proceedings and, if requested by the Bank,
bonded in a manner satisfactory to the Bank;
(c) liens not delinquent created by statute in
connection with worker's compensation, unemployment insurance,
social security and similar statutory obligations;
(d) liens of mechanics, materialmen, carriers,
warehousemen or other like statutory or common law liens
securing obligations incurred in good faith in the ordinary
course of business that are not yet due and payable;
(e) encumbrances consisting of zoning restrictions,
rights-of-way, easements or other restrictions on the use of
real property, none of which
5
materially impairs the use of such property by the Borrower or any
Subsidiary in the operation of the business for which it is used and
none of which is violated in any material respect by any existing or
proposed structure or land use; and
(f) existing liens described in Schedule 5.6 attached hereto,
subject to such intercreditor agreements or subordination agreements as
the Bank shall require.
"PERSON" shall mean any individual, corporation, partnership,
joint venture, association, trust, unincorporated association, joint
stock company, government, municipality, political subdivision or
agency or other entity.
"PLEDGE AGREEMENT" shall mean that certain Pledge Agreement in
the form of EXHIBIT E to this Agreement pursuant to which Oakhurst
pledges to the Bank a security interest in the Stock.
"PRIME RATE" shall mean that annual rate of interest
designated by the Bank as its base rate and which is changed by the
Bank from time to time. The Prime Rate may not necessarily be the
lowest rate charged by the Bank on credit facilities such as this.
"REVOLVING LOAN" or "LOAN" shall mean an advance made by the
Bank to the Borrower under Section 2.1 of this Agreement on a
Disbursement Date. Collectively, all such advances, and any and all
renewals, extensions, rearrangements, amendments, modifications, and/or
increases thereof, are referred to as "REVOLVING LOANS " or "LOANS".
"SECURITY AGREEMENT" shall mean the security agreement in the
form of EXHIBIT F to this Agreement pursuant to which the Borrower
grants to the Bank a security interest in its Equipment, Fixtures and
General Intangibles, wherever located and whether now owned or
hereafter acquired, together with all replacements thereof,
substitutions therefor and all proceeds and products thereof.
"STOCK" shall mean 80.1% of the common stock of Parent owned
by Oakhurst.
"SUBORDINATED DEBT" shall mean the subordinated indebtedness
of:
(i) Parent to the Employee Selling Stockholders in
the original aggregate amount of $6,000,000.00;
(ii) Parent to NASCIT in the original principal
amount of $1,500,000.00; and
(iii) Borrower to Xxxxx X. Xxxxxxx in the original
principal amount of $1,200,000.00; to Xxxxxxx X.
Xxxxxxx in the original
6
principal amount of $120,000.00 and to Xxxxxx X.
Xxxxxx, Xx. in the original principal amount of
$120,000.00.
"SUBSIDIARY" shall mean any corporation or other entity of
which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other
individuals performing similar functions are at the time owned,
directly or indirectly, by the Borrower (or any Guarantor) or by one or
more subsidiaries or other entities owned or controlled by the Borrower
(or any Guarantor) and/or one or more of its subsidiaries.
"TANGIBLE NET WORTH" of any Person shall mean, as of any
applicable date of determination, the difference between (i) the book
value of all assets of such Person (other than Notes Receivables from
Shareholders, Parent, and Oakhurst, patents, patent rights, trademarks,
trade names, franchises, copyrights, licenses, goodwill, and similar
intangible assets) after all appropriate deductions (including, without
limitation, reserves for doubtful receivables, obsolescence,
depreciation and amortization), all as determined in accordance with
GAAP, and (ii) all Debt of such Person.
"TERM LOAN NO. 1" shall have the meaning as defined in Section
2.11.1, and any and all renewals, extensions, rearrangements,
amendments, modifications, and/or increases thereof.
"TERM LOAN NO. 2" shall have the meaning as defined in Section
2.11.2, and any and all renewals, extensions, rearrangements,
amendments, modifications, and/or increases thereof.
"TERM LOANS" shall mean, individually and collectively, Term
Loan No. 1 and Term Loan No. 2.
"TERMINATION DATE" shall mean March 1, 2004.
"TOTAL LIABILITIES" shall mean all of the liabilities of the
Parent and its Subsidiaries on a consolidated basis as classified
according to GAAP.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of
Texas and as amended from time to time.
"UCC-3S" shall mean duly authorized and executed assignments
or termination statements (whichever the Bank shall require) covering
liens in the Collateral in favor of lenders other than the Bank.
"WORKING CAPITAL" shall mean Current Assets less Current
Liabilities.
1.2. Accounting Terms. All accounting terms not specifically defined in this
Agreement shall be construed in accordance with GAAP.
7
1.3. Singular and plural. Where the context herein requires, the singular number
shall be deemed to include the plural, and vice versa.
SECTION 2. COMMITMENT, INTEREST AND FEES.
2.1. Commitment. Subject to the terms and conditions of this Agreement,
the Bank agrees to make loans to the Borrower on a revolving basis of such
amount as the Borrower shall request pursuant to Section 2.2 of this Agreement
until the Termination Date, up to an aggregate principal amount outstanding at
any time not to exceed the lesser of (a) the Commitment Amount or (b) the
Borrowing Base, provided that each Disbursement Date under this Agreement must
be a Business Day, and the principal amount of each Revolving Loan made under
this Agreement shall be in the aggregate amount of $25,000.00 or an integral
multiple thereof.
2.2. Borrowing Procedures.
2.2.1 Notice. The Borrower shall give the Bank notice of the
Borrower's desire for a Revolving Loan by 2:00 p.m. (Houston,
Texas
time) on the day of the requested advance. Such notice shall be by
telephone communication from an officer of the Borrower who has been
given access by the Borrower to a security code given to the Borrower
by the Bank. Such notice shall specify the proposed Disbursement Date
and the principal amount of the proposed advance for such Revolving
Loan. A written confirmation of each request shall be given by the
Borrower to the Bank within two (2) Business days after any oral
advance request; written confirmation shall be by confirmed facsimile
transmission or by U.S. mail.
2.2.2 Bank Obligations. The Bank agrees to make the Revolving
Loan on the Disbursement Date as set forth in a notice to the Bank from
the Borrower conforming to the requirements of Section 2.2.1 by
crediting the Borrower's general deposit account with the Bank in the
amount of such Revolving Loan, provided, however, that the Bank shall
not be so obligated if:
(a) Any of the conditions precedent set forth in
Section 4 of this Agreement shall not have been satisfied or
waived by the Bank in accordance with Section 9.3 of this
Agreement; or
(b) Such proposed Revolving Loan would cause the
aggregate unpaid principal amount of the Revolving Loans
outstanding under this Agreement to exceed the lesser of (i)
the Commitment Amount or (ii) the Borrowing Base on the
Disbursement Date.
2.2.3 Initial Advance. The initial advance shall not exceed
ninety percent (90%) of the Forced Sale Value of the Existing Major
Equipment subject to initial Borrowing Base plus the lesser of (i)
forty percent (40%) of the Net Book Value of Other Miscellaneous
Equipment and (ii) Four Hundred Thousand and no/100 Dollars
($400,000.00).
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2.2.4 Subsequent Advances. Subsequent advances shall not
exceed eighty percent (80%) of the Cost of new or used Equipment
hereinafter acquired by the Borrower and subject to availability as
calculated by the Borrowing Base and a first perfected security
interest in favor of the Bank. Each such advance request shall be
accompanied by a xxxx of sale and such other information as the Bank
shall reasonably request evidencing the Cost of the Equipment.
2.3. Note. The Revolving Loans shall be evidenced by the Note, executed
by the Borrower, dated the date of this Agreement, payable to the Bank on the
Termination Date (unless sooner accelerated pursuant to the terms of this
Agreement), and in the principal amount of the original Commitment Amount. The
date and amount of each Revolving Loan made by the Bank and of each repayment of
principal thereon received by the Bank shall be recorded by the Bank in its
records or, at the option of the Bank, on a schedule attached to the Note. The
aggregate unpaid principal amount so recorded by the Bank shall constitute the
best evidence of the principal amount owing and unpaid on the Note, provided,
however, that the failure by the Bank so to record any such amount or any error
in so recording any such amount (whether on the schedule attached to the Note or
otherwise) shall not limit or otherwise affect the obligations of the Borrower
under this Agreement or the Note to repay the principal amount of all the
Revolving Loans together with all interest accrued or accruing thereon.
2.4. Interest. Subject to the provisions of Section 2.6 below, the Note
shall bear interest on the outstanding principal balance from time to time
outstanding under the Note at a variable rate equal to the Prime Rate plus,
depending upon the Borrower's Debt Ratio, calculated pursuant to Section 6.6
hereof, the following additional percentage:
RATE DEBT RATIO
Prime Rate plus Zero Less than or equal to 1.65
Prime Rate plus .25% Greater than 1.65, and less than or equal
to 1.85
Prime Rate plus .50% Greater than 1.85
The above rate shall be established effective beginning on the first
day of the following calendar quarter based upon receipt of the financial
information necessary to determine the Debt Ratio for the preceding calendar
quarter, and shall remain in effect through the end of the following calendar
quarter until the Bank is in possession of the financial information necessary
to calculate the Debt Ratio for the next calendar quarter. The interest rates
called for above shall remain in effect until the maturity of the Note, whether
such maturity is by acceleration or otherwise, and after maturity, interest
shall accrue at a rate equal to six percent (6%) per annum plus the rate
otherwise prevailing hereunder, but not to exceed the Maximum Legal Rate, as
defined below. Interest shall be payable to the extent then accrued on the first
day of each calendar month, beginning August 1, 2001, until maturity (whether by
acceleration or otherwise) and from and after such maturity, on demand. The rate
of interest applicable to the Note shall change as and when the Bank's Prime
Rate changes.
9
2.5. Renewals and Extensions. Renewals and extensions, if any, of any
Loan shall he at the Bank's discretion and shall be evidenced by such documents
and instruments as the Bank may require in its sole discretion. The Bank shall
not be obligated to accommodate any renewals and extensions.
2.6. Maximum Rate. The following provisions shall control this
Agreement and the Note:
(a) No agreements, conditions, provision or
stipulations contained in this Agreement or in any other
agreement between the Borrower and the Bank, or the occurrence
of an Event of Default, or the exercise by the Bank of the
right to accelerate the payment of the maturity of principal
and interest, or to exercise any option whatsoever contained
in this Agreement or any other agreement between the Borrower
and the Bank, or the arising of any contingency whatsoever,
shall entitle the Bank to collect, in any event, interest
exceeding the maximum rate of nonusurious interest allowed
from time to time by applicable state or federal laws as now
or as may hereinafter be in effect (the "MAXIMUM LEGAL RATE")
and in no event shall the Borrower be obligated to pay
interest exceeding such Maximum Legal Rate, and all
agreements, conditions or stipulations, if any, which may in
any event or contingency whatsoever operate to bind, obligate
or compel the Borrower to pay a rate of interest exceeding the
Maximum Legal Rate shall be without binding force or effect,
at law or in equity, to the extent only of the excess of
interest over such Maximum Legal Rate (the "EXCESS"). In the
event any interest is charged in excess of the Maximum Legal
Rate, the Borrower acknowledges and stipulates that any such
charge shall be the result of an accidental and bona fide
error, and such Excess shall be, first, applied to reduce the
principal of any obligations due, and, second, returned to the
Borrower, it being the intention of the parties hereto not to
enter at any time into an usurious or otherwise illegal
relationship. The parties hereto recognize that with
fluctuations in the prime commercial interest rate from time
to time announced by the Bank such an unintentional result
could inadvertently occur. By the execution of this Agreement,
the Borrower covenants that (a) the credit or return of any
Excess shall constitute the acceptance by the Borrower of such
Excess, and (b) the Borrower shall not seek or pursue any
other remedy, legal or equitable, against the Bank based, in
whole or in part, upon the charging or receiving of any
interest in excess of the Maximum Legal Rate. For the purpose
of determining whether or not any Excess has been contracted
for, charged or received by the Bank, all interest at any time
contracted for, charged or received by the Bank in connection
with the Borrower's obligations shall be amortized, prorated,
allocated and spread in equal parts during the entire term of
this Agreement. If at any time the rate of interest payable
hereunder shall be computed on the basis of the Maximum Legal
Rate, any subsequent reduction in the Contract Rate shall not
reduce such interest thereafter payable hereunder below the
amount computed on the basis of the Maximum Legal Rate until
the aggregate amount of such interest accrued and payable
under this Agreement equals the total amount of interest which
would
10
have accrued if such interest had been at all times computed
solely on the basis of the Contract Rate.
(b) Unless preempted by federal law, the rate of
interest from time to time in effect hereunder shall not
exceed the "indicated rate ceiling" from time to time in
effect as provided in Section 303 of the
Texas Finance Code.
(c) The provisions of this Section shall be deemed to
be incorporated into every document or communication relating
to the Indebtedness which sets forth or prescribes any
account, right or claim or alleged account, right or claim of
the Bank with respect to the Borrower (or any other obligor in
respect of the Indebtedness), whether or not any provisions of
this Section 2.6 is referred to therein. All such documents
and communications and all figures set forth therein shall,
for the sole purpose of computing the extent of the
obligations asserted by the Bank thereunder, be automatically
recomputed by the Borrower or any other obligor, and by any
court considering the same, to give effect to the adjustments
or credits required by this Section 2.6.
(d) If the applicable state or federal law is amended
in the future to allow a greater rate of interest to be
charged under this Agreement than is presently allowed by
applicable state or federal law, then the limitation of
interest hereunder shall be increased to the maximum rate of
interest allowed by applicable state or federal law, as
amended, which increase shall be effective hereunder on the
effective date of such amendment, and all interest charges
owing to the Bank by reason thereof shall be payable upon
demand.
(e) The provisions of Chapter 346 of the Texas
Finance Code are specifically declared by the parties hereto
not to be applicable to this Agreement or any other agreements
executed in connection herewith or therewith or to the
transactions contemplated hereby or thereby.
2.7. Fees.
2.7.1 Commitment Fee. The Borrower agrees to pay to the Bank a
commitment fee for the period from and including the date of this
Agreement to the Termination Date equal to one-quarter of one percent
(1/4 of 1%) per annum on the average daily difference between the
Commitment Amount and the aggregate unpaid principal balance of the
Revolving Loans. Such commitment fee shall be payable on the first
Business Day of April, July, October and January, beginning October 1,
2001, and on the Termination Date, for the periods ending on such
dates.
2.7.2 Preparation Fees. Simultaneously with the execution of
this Agreement, the Borrower shall pay to the Bank the amount of the
Bank's expenses (including reasonable attorney's fees and
disbursements) incurred by the Bank in connection with the preparation
of this Agreement and related instruments.
11
2.7.3 Facility Fee. Prior to the execution hereof, the
Borrower has delivered to the Bank a $75,000.00 facility fee. Borrower
acknowledges that this fee has been delivered to the Bank in connection
with the Bank's expenditure of time and effort in reviewing financial
information concerning the Borrower and the Guarantors, and such fee
may be retained by the Bank whether the indebtedness described herein
is prepaid, whether as a result of acceleration or otherwise.
Simultaneously with the execution of this Agreement, the Borrower shall
pay to the Bank an additional $50,000 facility fee.
2.8. Basis of Computation. The amount of all interest and fees
hereunder shall be computed for the actual number of days elapsed on the basis
of a year consisting of 360 days.
2.9. Prepayments.
2.9.1 Mandatory Prepayments. The Borrower shall pay to the
Bank the amount, if any, by which the aggregate unpaid principal amount
of all Revolving Loans from time to time exceeds the Borrowing Base,
together with all interest accrued and unpaid on the amount of such
excess, but without other premium or penalty. Such prepayment shall be
immediately due and owing upon the occurrence of any such excess and,
at the option of the Bank, any mandatory prepayment made under this
Section 2.9.1 will reduce the Commitment Amount.
2.10. Basis of Payments. All sums payable by the Borrower to the Bank
under this agreement shall be paid directly to the Bank at its principal office
in immediately available funds, without set-off, deduction or counterclaim.
2.11. Term Loans.
2.11.1 The Bank has made the Borrower a Term Loan ("TERM LOAN
NO. 1") as described in that certain note dated May 28, 1998 in the
maximum amount of $500,000.00 and which bears interest at a fixed rate
of nine and three-tenths percent (9.3%) per annum and attached hereto
as EXHIBIT H. The Term Loan is secured by, among other things, a first
lien Deed of Trust upon property described in part as that certain
7.225 acre tract improved with a 5,913 square foot service center
located at 00000 Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxx. The advances under the
Term Loan have been limited to the lesser of eighty-three percent (83%)
of the cost or appraised value of the headquarters and distribution
center described above.
2.11.2 The Bank has also made a term loan ("TERM LOAN NO. 2")
to the Borrower in the maximum amount of $1,100,000.00, as described in
the note attached hereto as EXHIBIT I. Term Loan No. 2 is secured by,
among other things, a second lien Deed of Trust on the property
described in Section 2.11.1.
SECTION 3. SECURITY.
To secure full and timely performance of the Borrower's covenants set
out in this Agreement and to secure the repayment of the Note and all other
Indebtedness whatsoever of the Borrower to the Bank, the Borrower agrees to
grant and assign a lien upon and security interest
12
in the Collateral pursuant to the Security Agreement, the Pledge Agreement, the
Financing Statement and other instruments and agreements satisfactory to the
Bank.
Borrower hereby acknowledges that notice of intent to terminate, by any
creditor who has entered into a subordination or intercreditor agreement, which
would result in such intercreditor agreement becoming partially or wholly
ineffective, shall represent, at the Bank's election, an unsatisfactory interest
in the Collateral.
SECTION 4. CONDITIONS PRECEDENT TO OBLIGATIONS OF BANK.
4.1. Conditions to First Disbursement. The obligations of the Bank
under this Agreement are subject to the occurrence, prior to or on the
Disbursement Date first occurring, of each of the following conditions, any or
all of which may be waived in whole or in part by the Bank in writing:
4.1.1 Documents Executed and Filed. The Borrower shall have
executed (or caused to be executed) and delivered to the Bank and, as
appropriate, there shall have been filed with such filing offices as
the Bank shall deem appropriate, the following:
(a) The Note;
(b) The Security Agreement;
(c) The Pledge Agreement;
(d) The Financing Statement;
(e) The Guaranties;
(f) The UCC-3s; and
(g) The Third Lien Deed of Trust covering the
property described in Section 2.11.1.
4.1.2 Certified Resolutions. The Borrower shall have furnished
to the Bank a copy of resolutions of the Board of Directors of the
Borrower, Parent and Oakhurst authorizing the execution, delivery and
performance of this Agreement, the borrowing hereunder, the Note and
any other documents contemplated by this Agreement, as applicable,
which shall have been certified by the Secretary or Assistant Secretary
of such party as of the Disbursement Date first occurring.
4.1.3 Certified Articles. The Borrower shall have furnished to
the Bank a copy of the articles of incorporation, including all
amendments thereto, and all other charter documents of the Borrower,
Parent and Oakhurst, all of which shall have been certified by the
state agency issuing the same as of a date reasonably near the
Disbursement Date first occurring.
13
4.1.4 Certified Bylaws. The Borrower shall have furnished to
the Bank a copy of the Bylaws of the Borrower, Parent and Oakhurst,
which shall have been certified by the Secretary or Assistant Secretary
of the Borrower as of the Disbursement Date first occurring.
4.1.5 Certificate of Good Standing. The Borrower shall have
furnished to the Bank a certificate of good standing with respect to
the Borrower, Parent and Oakhurst, which shall have been certified by
the state agency issuing the same as of a date reasonably near the
Disbursement Date first occurring.
4.1.6 Certificate of Incumbency. The Borrower shall have
furnished to the Bank a certificate of the Secretary or Assistant
Secretary of the Borrower, Parent and Oakhurst, certified as of the
Disbursement Date first occurring, as to the incumbency and signatures
of the officers of such party signing this Agreement, the Note and any
documents contemplated or delivered under this Agreement, as
applicable.
4.1.7 UCC Lien Search. The Bank shall have received UCC record
and copy searches, evidencing the appropriate filing and recording of
the Financing Statements and disclosing no notice of any liens or
encumbrances filed against any of the Collateral in any relevant
jurisdiction other than the Financing Statements and other than as
those relating to the Permitted Liens.
4.1.8 Hazard Insurance. The Borrower shall have furnished to
the Bank, in form and amounts and with companies satisfactory to the
Bank, evidence of hazard insurance policies naming the Bank as
"mortgagee", or "loss payee", and as an "additional insured", and
relating to the assets and properties (including, but not limited to,
the Collateral) of the Borrower. Such policies shall contain
endorsements that they will not be cancelled without 30 days prior
written notice to the Bank.
4.1.9 Intentionally Omitted.
4.1.10 Approval of Bank Counsel. All actions, proceedings,
instruments and documents required to carry out the transactions
contemplated by this Agreement or incidental thereto and all other
related legal matters shall have been satisfactory to and approved by
legal counsel for the Bank, and said counsel shall have been furnished
with such certified copies of actions and proceedings and such other
instruments and documents as they shall have reasonably requested.
4.1.11 Other Information and Documentation. The Bank shall
have received such other information, certificates and executed
documents as they shall have reasonably requested.
4.2. Conditions to All Disbursements. The obligation of the Bank to
make any Revolving Loan on any Disbursement Date, including, but not limited to,
the Disbursement Date first occurring, are subject to the occurrence, prior to
or on the Disbursement Date related to such Revolving Loan, of each of the
following conditions, any or all of which may be waived in
14
whole or in part by the Bank in writing. Additionally, the Bank's lien in the
Collateral shall be, as it relates to the Collateral, a first and superior lien
subject only to the Permitted Liens.
4.2.1 Certificate. The Bank shall have received a certificate,
executed by the President, Vice President or Treasurer of the Borrower,
certified as of such Disbursement Date, and confirming that, as of such
Disbursement Date:
(a) No Default or Event of Default has occurred and
is continuing; and
(b) The warranties and representations set forth in
Section 5 of this Agreement are true and correct on and as of
such Disbursement Date.
4.2.2 Borrowing Base Certificate. The Bank shall have received
from the Borrower a Borrowing Base Certificate, certified as of such
Disbursement Date and confirming that, as of such Disbursement Date,
the aggregate unpaid principal amount of all Revolving Loans (including
the Revolving Loan to be made on such Disbursement Date) does not
exceed the lesser of the Commitment Amount or the Borrowing Base as in
effect on such Disbursement Date.
4.2.3 Bank Satisfaction. The Bank shall not know or have any
reasonable reason to believe that, as of such Disbursement Date:
(a) Any Default or Event of Default has occurred and
is continuing;
(b) Any warranty or representation set forth in
Section 5 of this Agreement shall not be true and correct; or
(c) Any provision of law, any order of any court or
other agency of government or any regulation, rule or
interpretation thereof shall have had any material adverse
effect on the validity or enforceability of this Agreement,
the Note, the Security Agreement, the Financing Statement, or
the Guaranties.
SECTION 5. WARRANTIES AND REPRESENTATIONS.
The Borrower represents and warrants to the Bank that:
5.1. Corporate Existence and Power. (a) The Borrower is a corporation
duly organized validly existing and in good standing under the laws of the State
of Michigan, (b) each of the Subsidiaries is a corporation duly organized,
validly existing and in good standing under the law of its state of
incorporation, (c) the Borrower and each of the Subsidiaries have the corporate
power and authority to own their respective properties and assets and to carry
out their respective business as now being conducted and are qualified to do
business and in good standing in every jurisdiction wherein such qualification
is necessary and (d) the Borrower has the corporate power and authority to
execute and perform this Agreement, to borrow money in accordance with its
terms, to execute and deliver the Note and other documents contemplated hereby,
to grant to the Bank liens and security interests in the Collateral as hereby
contemplated and to do any and all other things required of it hereunder.
15
5.2. Authorization and Approvals. The execution, delivery and
performance of this Agreement, the Pledge Agreement, the borrowing hereunder and
the execution and delivery of the Note, the Security Agreement, the Financing
Statement, and other documents contemplated hereby have been duly authorized by
all requisite corporate action, (a) do not require registration with or consent
or approval of, or other action by, any federal, state or other governmental
authority or regulatory body, or, if such registration, consent or approval is
required, the same has been obtained and disclosed in writing to the Bank, (b)
will not violate any provision of law, any order of any court or other agency of
government, the articles of incorporation or bylaws of the Borrower, any
provision of any indenture, agreement or other instrument to which the Borrower
is a party, or by which it or any of its properties or assets are bound, (c)
will not be in conflict with, result in a breach of or constitute (with or
without notice or passage of time) a default under any such indenture, agreement
or other instrument, and (d) will not result in the creation or imposition of
any lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Borrower other than in favor of the Bank and as
contemplated hereby. The execution, delivery and performance of the Guaranties
and other contemplated thereby (e) do not require registration with or consent
or approval of, or other action by, any federal, state or other governmental
authority or regulatory body, or, if such registration, consent or approval is
required, the same has been obtained and disclosed in writing to the Bank, (f)
will not violate any provision of law, any order of any court or other agency of
government, any provision of any indenture, agreement or other instrument to
which either Guarantor is a party, or by which either or any of their properties
or assets are bound, (g) will not be in conflict with, result in a breach of or
constitute (with or without notice or passage of time) a default under any such
indenture, agreement or other instrument, and (h) will not result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of either Guarantor other than
in favor of the Bank and as contemplated hereby.
5.3. Valid and Binding Agreement. This Agreement is, and the Note, the
Security Agreement, the Pledge Agreement, the Financing Statement, and all other
documents contemplated hereby will be, when delivered, valid and binding
obligations of the Borrower, and the Guaranties and all other documents
contemplated thereby will be valid and binding obligations of the Guarantors, in
each case enforceable in accordance with their respective terms except that
enforcement may be subject to any applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally.
5.4. Actions, Suits or Proceedings. Except as disclosed on Schedule
5.4, there are no actions, suits or proceedings, at law or in equity, and no
proceedings before any arbitrator or by or before any governmental commission,
board, bureau or other administrative agency, pending, or, to the best knowledge
of the Borrower, threatened against or affecting the Borrower or any of the
Subsidiaries or any Guarantor, or any properties or rights of the Borrower or
any of the Subsidiaries or any Guarantor, which, if adversely determined, could
materially impair the right of the Borrower or any of the Subsidiaries to carry
on business substantially as now conducted or could have a material adverse
effect upon the financial condition of the Borrower or any of the Subsidiaries
or any Guarantor.
5.5. Subsidiaries. The Borrower has no wholly or partially owned
Subsidiaries.
16
5.6. No Liens, Pledges, Collateral Assignments or Security Interests.
Except for Permitted Liens, none of the Borrower's or the Subsidiaries' assets
and properties, including the Collateral, is subject to any mortgage, pledge,
lien, security interest or other encumbrance of any kind or character.
5.7. Accounting Principles. The Financial Statements have been prepared
in accordance with GAAP and fully and fairly present the financial condition of
the Parent, the Borrower and their Subsidiaries as of the dates, and the results
of their operations for the periods, for which the same are furnished to the
Bank. To the best of the Borrower's knowledge and belief, neither the Parent nor
the Borrower has any material contingent obligations, liabilities for taxes,
long-term leases or unusual forward or long-term commitments not disclosed by,
or reserved against in, the Financial Statements.
5.8. No Adverse Changes. There has been no material adverse change in
the business, properties or condition (financial or otherwise) of the Parent,
the Borrower or any of their Subsidiaries since the date of the latest of the
Financial Statements.
5.9. Conditions Precedent. As of each Disbursement Date, all
appropriate conditions precedent referred to in Section 4 hereof shall have been
satisfied (or waived in writing by the Bank).
5.10. Taxes. The Borrower and the Subsidiaries have filed by the due
date therefor all federal, state and local tax returns and other reports they
are required by law to file and which are material to the conduct of their
respective businesses, have paid or caused to be paid all taxes, assessments and
other governmental charges that are shown to be due and payable under such
returns, and have made adequate provision for the payment of such taxes,
assessments or other governmental charges which have accrued but are not yet
payable. The Borrower has no knowledge of any deficiency or assessment in a
material amount in connection with any taxes, assessments or other governmental
charges not adequately disclosed in the Financial Statements.
5.11. Compliance with Laws. Except as disclosed on Schedule 5.11, the
Borrower and the Subsidiaries have complied with all applicable laws, to the
extent that failure to comply would materially interfere with the conduct of the
business of the Borrower or any of the Subsidiaries.
5.12. Indebtedness. Except as disclosed on Schedule 5.12, the Borrower
and the Subsidiaries have no indebtedness for money borrowed and no direct or
indirect obligations under any leases (whether or not required to be capitalized
under GAAP) or any agreements of guarantee or surety except for the endorsement
of negotiable instruments by the Borrower and the Subsidiaries in the ordinary
course of business for deposit or collection.
5.13. Material Agreements. Other than subcontracts and contracts for
material in the ordinary course of business, the Borrower and the Subsidiaries
have no material leases, contracts or commitments of any kind (including,
without limitation, employment agreements, collective bargaining agreements,
powers of attorney, distribution contracts, patent or trademark licenses,
contracts for future purchase or delivery of goods or rendering of services,
bonus, pension and retirement plans, or accrued vacation pay, insurance and
welfare agreements); to the best
17
knowledge of the Borrower, all parties to such agreements (including the
Borrower and the Subsidiaries) have complied with the provisions of such leases,
contracts or commitments; and to the best knowledge of the Borrower, no party to
such agreements (including the Borrower and the Subsidiaries) is in default
thereunder, nor has there occurred any event which with notice or the passage of
time, or both, would constitute such a default.
5.14. Margin Stock. Neither the Borrower nor any of the Subsidiaries is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, and no part of the proceeds of any loan hereunder will be used,
directly or indirectly, to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock or
for any other purpose which might violate the provisions of Regulation T, U or X
of the said Board of Governors. The Borrower does not own any margin stock.
5.15. Pension Funding. The Borrower has not incurred any material
accumulated funding deficiency within the meaning of ERISA and has not incurred
any material liability to the PBGC in connection with any employee benefit plan
established or maintained by the Borrower or any of the Subsidiaries and no
reportable event or prohibited transaction, as defined in ERISA, has occurred
with respect to such plans.
5.16. Misrepresentation. No warranty or representation by the Borrower
contained herein or in any certificate or other document furnished by the
Borrower pursuant hereto contains any untrue statement of material fact or omits
to state a material fact necessary to make such warranty or representation not
misleading in light of the circumstances under which it was made.
5.17. Equipment. Borrower warrants and represents that Bank has a first
lien security interest in all of the Equipment that make up the Borrowing Base.
5.18. Parent Ownership. The Parent owns one hundred percent (100%) of
the stock of all kinds and classes of the Borrower.
SECTION 6. AFFIRMATIVE COVENANTS.
From the date hereof until the principal of and interest on the Note and other
Indebtedness is paid in full, the Borrower covenants and agrees that it will:
6.1. Financial and Other Information.
6.1.1 Annual Financial Reports.
(a) Furnish to the Bank in form satisfactory to the
Bank not later than one hundred and twenty (120) days after
the close of each fiscal year of the Borrower, beginning with
the Borrower's fiscal year ending September 30, 2001, on a
consolidated and consolidating basis, a balance sheet as at
the close of each such fiscal year, statements of income and
statements of cash flows for each such fiscal year, and such
other notes and financial details as are usually included in
18
similar reports. Such reports shall be prepared in accordance
with GAAP by independent certified public accountants of
recognized standing selected by the Borrower and acceptable to
the Bank and shall contain unqualified opinions as to the
fairness of the statements therein contained. Also, as soon as
it is available, the Borrower shall provide the Bank with a
copy of its federal income tax return.
(b) Cause to be furnished to the Bank in form
satisfactory to the Bank not later than one hundred and twenty
(120) days after the close of each fiscal year of the Parent,
beginning with the Parent's first fiscal year ending after the
date hereof, on a consolidated and consolidating basis, a
balance sheet for Parent as at the close of each such fiscal
year, statements of income and statements of cash flows for
each such fiscal year, and such other comments and financial
details as are usually included in similar reports. Such
reports shall be prepared in accordance with GAAP by
independent certified public accountants of recognized
standing selected by the Parent and acceptable to the Bank and
shall contain unqualified opinions as to the fairness of the
statements therein contained. Also, as soon as it is
available, the Borrower shall cause Parent to provide the Bank
with a copy of its federal income tax return.
(c) Oakhurst and Steel City Products SEC Reports. To
cause to be furnished to the Bank, promptly upon the filing
thereof, and in any event, within ten (10) days after filing,
copies of all registration statements (other than the exhibits
thereto and any registration statements on Form S-8 or its
equivalent), reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) and all other periodic reports, if any, which
Oakhurst or Steel City Products shall file with the Securities
and Exchange Commission (or any Governmental Authority
substituted therefor) or any national securities exchange.
6.1.2 Quarterly Financial Statements.
(a) Furnish to the Bank not later than forty-five
(45) days after the close of each quarter of each fiscal year
of the Parent, beginning with the quarter ending June 30,
2001, financial statements containing the consolidated and
consolidating balance sheet of the Parent and its Subsidiaries
as of the end of each such period, consolidated and
consolidating statements of income and statements of cash
flows of the Parent and its Subsidiaries up to the end of such
period. These statements shall be prepared on substantially
the same accounting basis as the statements required in
Section 6.1.1 of this Agreement and shall be in such detail as
the Bank may require, and the accuracy of the statements shall
be certified by the chief executive or financial officer of
the Parent.
(b) Oakhurst and Steel City Products SEC Reports. To
cause to be furnished to the Bank, promptly upon the filing
thereof, and in any event, within ten (10) days after filing,
copies of all registration statements (other than the exhibits
thereto and any registration statements on Form S-8 or its
equivalent), reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) and all other periodic reports, if any, which
Oakhurst or Steel City Products shall file with the Securities
19
and Exchange Commission (or any Governmental Authority
substituted therefor) or any national securities exchange.
6.1.3 No Default Certificate. Together with each delivery of
the financial statements required by Sections 6.1.1 and 6.1.2 of this
Agreement, furnish to the Bank a certificate of its chief executive or
financial officer stating that no Event of Default or Default has
occurred, or if any such Event of Default or Default exists, stating
the nature thereof, the period of existence thereof and what action the
Borrower proposes to take with respect thereto. Such certificates shall
also demonstrate, by showing the applicable ratio or other calculation,
with such supporting information as the Bank requires, that the Parent
is in compliance with Section 6.5 through and including Section 6.8 and
that Borrower is in compliance with Section 7.10 through and including
Section 7.14 hereof and shall be in the form of the Certificate
attached hereto as EXHIBIT J.
6.1.4 Listing of Payables. Furnish to the Bank quarterly by
the thirtieth (30th) day of the end of each calendar quarter a listing
of payables as of the end of that quarter of Borrower's accounts
payable.
6.1.5 Quarterly Aging and Monthly Borrowing Base Certificate.
(a) Furnish to the Bank quarterly by the thirtieth
(30th) day of the end of each fiscal quarter (i) an aging as
of the end of the preceding quarter of the Borrower's accounts
receivable and accounts payable in a form satisfactory to the
Bank and containing a schedule showing the amounts, by
category, thirty, sixty, and more than sixty days past invoice
date, and (ii) a report concerning the Borrower's retainage
receivables, by job, showing the amount owing and the date the
Borrower advised the owner that the Borrower had completed
performance of the job, which report shall also be in a form
satisfactory to the Bank.
(b) Additionally, the Borrower shall furnish to the
Bank monthly, and within thirty (30) days of the end of each
calendar month, a Borrowing Base Certificate confirming that
the aggregate unpaid principal amount of all Revolving Loans
does not exceed the lesser of the Commitment Amount or the
Borrowing Base as then in effect (or, if such is not the case,
accompanied by a pre-payment of the Note in accordance with
Section 2.9.1 of this Agreement ).
(c) Quarterly Report on Jobs in Progress. Within
thirty (30) days of the end of each fiscal quarter, the
Borrower shall provide to the Bank, in such form as the Bank
shall reasonably request, a report on the status of all of its
jobs indicating the amounts billed for that quarter, without
any general overhead and administrative costs allowance,
together with a backlog report to include the physical job
locations, and in a form consistent with that prepared for the
prior quarter.
6.1.6 Joint Venture Accounting. Upon the request of the Bank,
and not later than one hundred and twenty (120) days after the close of
such fiscal year, a balance sheet as of the close of such fiscal year,
and a statement of income and a statement of
20
cash flow for such fiscal year, and such other comments and financial
details as are usually included in a financial statement for each joint
venture which the Borrower is then a part of and which has not yet been
closed. Such reports shall be in such form and detail as the Bank shall
reasonably require.
6.1.7 Adverse Events. Promptly inform the Bank of the
occurrence of any Event of Default or Default, or of any occurrence
which has or could reasonably be expected to have a materially adverse
effect upon the Borrower's or any of the Guarantor's business,
properties, financial condition or ability to comply with its
obligations hereunder or under any other document executed in
connection herewith.
6.1.8 Shareholder Reports. Promptly furnish to the Bank upon
becoming available a copy of all financial statements, reports,
notices, proxy statements and other communications sent by the Borrower
to its shareholders, and all regular and periodic reports filed by the
Borrower with any securities exchange, the Securities and Exchange
Commission or any other state or federal agency.
6.1.9 Management Letters. Furnish to the Bank, promptly upon
receipt thereof, copies of all management letters and other reports of
substance submitted to the Borrower by independent certified public
accountants in connection with any annual or interim audit of the books
of the Borrower.
6.1.10 Appraisals on all Collateral. Allow the Bank to
conduct, at least twice per year and as of such dates as the Bank shall
designate, and at the Bank's expense, an appraisal of the Borrower's
Collateral, to be performed by the Bank or such other party as the Bank
shall designate, and to be performed in such form and detail as the
Bank shall reasonably require. Nothing herein shall be deemed to limit
or restrict the Bank's right pursuant to the terms of the Security
Agreement to inspect or examine its Collateral pursuant to the terms
thereof.
6.1.11 Appraisals on Equipment. Allow the Bank to conduct,
once per year and as of such dates as the Bank shall designate, and at
the Borrower's expense, an appraisal of the Borrower's Equipment to
determine the Forced Sale Value, to be performed by the Bank or such
other party as the Bank shall designate, and to be performed in such
form and detail as the Bank shall reasonably require.
6.1.12 Inspection of Equipment. Allow representatives of the
Bank to visit and inspect any of the Equipment and Inventory at such
reasonable times during business hours and as often as may reasonably
be desired and with reasonable notice.
6.1.13 Insurance Certificates. To cause to be furnished to the
Bank evidence that the Borrower maintains adequate insurance covering
the Borrower's machinery and Equipment and Inventory to be in such form
and detail as the Bank shall reasonably require.
6.1.14 Other Information as Requested. Promptly furnish to the
Bank such other information regarding the operations, business affairs
and financial condition of the
21
Borrower and the Subsidiaries as the Bank may reasonably request from
time to time and permit the Bank, its employees, attorneys and agents,
to inspect all of the books, records and properties of the Borrower and
the Subsidiaries at any reasonable time.
6.2. Insurance. Keep its insurable properties (including, but not
limited to, the Collateral) and the insurable properties of the Borrower's
Subsidiaries adequately insured and maintain (a) insurance against fire and
other risks customarily insured against by companies engaged in the same or a
similar business as that of the Borrower or its Subsidiaries, (b) necessary
worker's compensation insurance, (c) public liability and product liability
insurance, and (d) such other insurance as may be required by law or as may be
reasonably required in writing by the Bank, all of which such insurance shall be
in such amounts, containing such terms, in such form, for such purposes and
written by such companies as may be satisfactory to the Bank. All such insurance
policies shall contain a provision whereby they may not be canceled except upon
thirty (30) days' prior written notice to the Bank. The Borrower will deliver to
the Bank, at the Bank's request, evidence satisfactory to the Bank that such
insurance has been so procured and, with respect to casualty insurance, names
the Bank as "mortgagee" or "loss payee" and provides for payment to the Bank
even if the Borrower would not be entitled to receive payment of any proceeds.
If the Borrower fails to maintain satisfactory insurance as herein provided, the
Bank shall have the option to do so, and the Borrower agrees to repay the Bank,
with interest at seven and one-half percent (7.5%) per annum plus the Prime Rate
(but in no event to exceed the Maximum Legal Rate), all amounts so expended by
the Bank. The Borrower hereby appoints the Bank as the Borrower's
attorney-in-fact, which appointment is coupled with an interest and irrevocable,
to endorse any check or draft payable to the Borrower in connection with
returned or unearned premiums on said insurance or the proceeds of said
insurance, and any amount so collected may be applied toward satisfaction of the
Indebtedness, provided, however, that the Bank shall not be required hereunder
so to act.
6.3. Taxes. Pay promptly and within the time that they can be paid
without interest or penalty all taxes, assessments and similar imposts and
charges of every kind and nature lawfully levied, assessed or imposed upon the
Borrower, its Subsidiaries and their respective property, except to the extent
being contested in good faith and, if requested by the Bank, bonded in a manner
satisfactory to the Bank. If the Borrower shall fail to pay such taxes and
assessments by their due date, then the Bank shall have the option to do so, and
the Borrower agrees to repay the Bank, with interest at seven and one-half
percent (7.5%) per annum plus the Prime Rate (but in no event to exceed the
Maximum Legal Rate), all amounts so expended by the Bank.
6.4. Maintain Corporation and Business. Do or cause to be done all
things necessary to preserve and keep in full force and effect the Borrower's
and its Subsidiaries' corporate existence, rights and franchises and comply with
all applicable laws; continue to conduct and operate their respective businesses
substantially as conducted and operated during the present and preceding
calendar year; at all times maintain, preserve and protect all franchises and
trade names and preserve all the remainder of their respective property used or
useful in the conduct of their respective business and keep the same in good
repair, working order and condition; and from time to time make, or cause to be
made, all needed and proper repairs, renewals, replacements, betterments and
improvements thereto so that the business carried on in connection therewith may
be properly and advantageously conducted at all times.
22
6.5. Maintain Tangible Net Worth. On a pro forma consolidated statement
basis, as of March 31, 2001, and June 30, 2001, Parent shall have a Tangible Net
Worth plus Subordinated Debt of not less than $13,500,000.00. For the quarter
ending September 30, 2001, on a consolidated statement basis, the Parent shall
maintain Tangible Net Worth plus Subordinated Debt of not less than
$13,500,000.00, plus one hundred percent (100%) of the Net Income of the Parent
from March 31, 2001, through September 30, 2001, minus Subordinated Debt repaid
during the period from June 1, 2001, through September 30, 2001, under Sections
7.15-7.17. Compliance with this requirement shall be tested at the end of each
fiscal quarter of the Parent. For the quarter ending December 31, 2001, and each
quarter ending March 31, June 30, and December 31 thereafter, on a consolidated
basis, the Parent shall maintain Tangible Net Worth plus Subordinated Debt of
not less than what was required at the end of the previous quarter, minus
Subordinated Debt repaid during the quarter being tested, under Sections
7.15-7.17. For the quarter that ends each fiscal year beginning with the quarter
ending September 30, 2002, Parent shall have Tangible Net Worth as it existed on
the last day of the previous quarter plus 100% of Net Income of the then current
fiscal year minus Subordinated Debt repaid during such previous quarter of such
fiscal year. The Parent represents, warrants, and agrees that the Parent's
fiscal year ends on September 30th of each year, and that Parent will not
change such fiscal year without the prior written consent of the Bank.
6.6. Maintain Debt Ratio. From and after the date hereof, on a
consolidated basis, the Parent shall maintain a ratio of Total Liabilities to
Tangible Net Worth plus Subordinated Debt of not more than 2.5 to 1.0.
6.7. Maintain Current Ratio. On a consolidated basis, the Parent shall
maintain the ratio of Current Assets to Current Liabilities of not less than
1.15 to 1.0.
6.8. Maintain Cash Flow Coverage Ratio. On a consolidated basis, the
Parent shall maintain a Cash Flow Coverage Ratio of not less than 1.20 to 1.0,
verified quarterly on a rolling four-quarter basis. For purposes hereof, "Cash
Flow Coverage Ratio" shall mean (i) Net Income, plus depreciation divided by
(ii) the sum of the current maturities of all long-term debt plus twenty-five
percent (25%) of the average outstanding principal balance of the Revolving Loan
for the previous twelve (12) months. For purposes hereof, "current maturities of
all long-term debt" shall mean, at any given time, all principal and interest
payments required to be paid during the ensuing one year period from such given
time on all Debt (including Subordinated Debt) having a maturity of greater than
one year.
6.9. ERISA. (a) At all times meet and cause each of its Subsidiaries to
meet the minimum funding requirements of ERISA with respect to the Borrower's
and its Subsidiaries' employee benefit plans subject to ERISA; (b) promptly
after the Borrower knows or has reason to know (i) of the occurrence of any
event which would constitute a reportable event or prohibited transaction under
ERISA, or (ii) that the PBGC or the Borrower (or any of its Subsidiaries) has
instituted or will institute proceedings to terminate an employee pension plan,
deliver to the Bank a certificate of the chief financial officer of the Borrower
setting forth details as to such event or proceedings and the action which the
Borrower (or any such Subsidiary) proposes to take with respect thereto,
together with a copy of any notice of such event which may be required to be
filed with the PBGC; and (c) furnish to the Bank (or cause the plan
23
administrator to furnish the Bank) a copy of the annual return (including all
schedules and attachments) for each plan covered by ERISA, and filed with the
Internal Revenue Service by the Borrower (or any such Subsidiary), not later
than ten (10) days after such report has been so filed.
6.10. Use of Loan Proceeds. Use the proceeds of the loan hereunder for
the purpose set forth in the recitals to this Agreement.
SECTION 7. NEGATIVE COVENANTS.
From the date hereof until the principal of and interest on the Note
and other Indebtedness is paid in full, the Borrower covenants and agrees that
it will not, and will not permit any of its Subsidiaries to:
7.1. Dividends. Declare or pay any dividend (other than dividends
payable solely in shares of its capital stock) on, or make any other
distribution with respect to (whether by reduction of capital or otherwise), any
shares of its capital stock, except that dividends from any Subsidiary of the
Borrower to the Borrower are permitted.
7.2. Stock Issuance. Issue any additional shares of its capital stock,
or any warrant, right or option relating thereto or any security convertible
into any of the foregoing.
7.3. Stock Acquisition. Purchase, redeem, retire or otherwise acquire
any of the shares of its capital stock, or make any commitment to do so.
7.4. Liens and Encumbrances. Create, incur, assume or suffer to exist
any mortgage, pledge, encumbrance, security interest, lien or charge of any kind
(including any charge upon property purchased or acquired under a conditional
sales or other title-retaining agreement or lease required to be capitalized
under GAAP) upon any of its property or assets, whether now owned or hereafter
acquired, other than Permitted Liens.
7.5. Indebtedness. Incur, create, assume or permit to exist any
indebtedness or liability on account of deposits or advances or any indebtedness
or liability for borrowed money, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, or any other
indebtedness whatsoever, except for (a) the Indebtedness, (b) indebtedness
subordinated to the prior payment in full of the Indebtedness upon terms and
conditions approved in writing by the Bank, (c) existing indebtedness to the
extent set forth on Schedule 5.12, (d) trade indebtedness incurred and paid in
the ordinary course of business, (e) contingent indebtedness to the extent
permitted by Section 7.7 of this Agreement, (f) indebtedness secured by
Permitted Liens, and (g) obligations to the extent permitted by Section 7.10 of
this Agreement.
7.6. Extension of Credit. Make loans, advances or extensions of credit
to any Person, except for sales on open account and otherwise in the ordinary
course of business.
7.7. Guarantee Obligations. Guarantee or otherwise, directly or
indirectly, in any way be or become responsible for obligations of any other
Person, whether by agreement to purchase
24
the indebtedness of any other Person, agreement for the furnishing of funds to
any other Person through the furnishing of goods, supplies or services, by way
of stock purchase, capital contribution, advance or loan, for the purpose of
paying or discharging (or causing the payment or discharge of) the indebtedness
of any other Person, or otherwise, except for the endorsement of negotiable
instruments by the Borrower or the Subsidiaries in the ordinary course of
business for deposit or collection.
7.8. Property Transfer, Merger or Lease-Back. (a) Sell, lease, transfer
or otherwise dispose of all or, except as to the sale of Inventory in the
ordinary course of business, any material part of its properties and assets
(whether in one transaction or in a series of transactions), (b) change its
name, consolidate with or merge into any other corporation, permit another
corporation to merge into it, acquire all or substantially all of the properties
or assets of any other Person, enter into any reorganization or recapitalization
or reclassify its capital stock, or (c) enter into any sale-leaseback
transaction; provided, however, that a Subsidiary wholly owned by the Borrower
may be merged into, or consolidated with, the Borrower or another Subsidiary
wholly owned by the Borrower, and such Subsidiary may sell, lease or transfer
all or a substantial part of its assets to the Borrower or another Subsidiary
wholly owned by the Borrower, and the Borrower or such Subsidiary may acquire
all or substantially all of the properties and assets of the Subsidiary so to be
merged into, or consolidated with, it or so to be sold, leased or transferred to
it.
7.9. Acquire Securities. Purchase or hold beneficially any stock or
other securities of, or make any investment or acquire any interest whatsoever
in, any other Person except for the common stock of the Subsidiaries owned by
the Borrower on the date of this Agreement and except for certificates of
deposit with maturities of one year or less of United States commercial banks
with capital, surplus and undivided profits in excess of $100,000,000 and direct
obligations of the United States government maturing within one year from the
date of acquisition thereof.
7.10. Pension Plans. (a) Allow any fact, condition or event to occur or
exist with respect to an employee pension or profit sharing plan which might
constitute grounds for termination of any such plan or for the appointment by a
United States District Court of a trustee to administer any such plan, or (b)
permit any such plan to be the subject of termination proceedings (whether
voluntary or involuntary) from which termination proceedings there may result a
liability of the Borrower or any of its Subsidiaries to the PBGC which in the
opinion of the Bank, will have a materially adverse effect upon the operations,
business, property, assets, financial condition or credit of the Borrower.
7.11. Misrepresentation. Furnish the Bank with any certificate or other
document that contains any untrue statement of a material fact or omits to state
a material fact necessary to make such certificate or document not misleading in
light of the circumstances under which it was furnished.
7.12. Margin Stock. Apply any of the proceeds of the Note to the
purchase or carrying of any "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder.
25
7.13. Compliance with Environmental Laws. Borrower will not, and will
not allow any of its Subsidiaries to, (i) use (or permit any tenant to use) any
of its respective properties or assets for the handling, processing, storage,
transportation, or disposal of any Hazardous Substance except in all respects in
compliance with Environmental Laws, (ii) generate any Hazardous Substance except
in all respects in compliance with Environmental Laws, (iii) conduct any
activity which is likely to cause a release of any Hazardous Substance, or (iv)
otherwise conduct any activity or use any of its respective properties or assets
in any manner that is likely to violate any Environmental Law.
7.14. Pledge of Receivables. Borrower will not encumber or pledge any
of its right to receive payment, accounts receivable, jobs in progress or
retainage.
7.15. Subordinated Debt. Schedule 7.15 reflects certain debt payable by
the Borrower to its management. Such portion of the Subordinated Debt is herein
referred to as the "Subordinated Debt-Initial Investors"). Quarterly payments of
interest (at a rate not to exceed 12%) may be paid on the Subordinated
Debt-Initial Investors, from time to time, so long as no Default or Event of
Default then exists or would result therefrom. Additionally, so long as no
Default or Event of Default then exists or would result therefrom, annual
principal payments on the Subordinated Debt-Initial Investors may be made in the
following manner: $240,000.00 per annum to Xxxxx X. Xxxxxxx and $24,000.00 per
annum each to Xxxxxx X. Xxxxxx, Xx. and Xxxxxxx X. Xxxxxxx.
7.16. Subordinated Debt-Employee Selling Shareholders. Schedule 7.16
reflects certain debt payable by the Parent to its shareholders other than
Oakhurst. Such portion of the Subordinated Debt is herein referred to as the
"Subordinated Debt-Employee Selling Shareholders"). Borrower may pay the funds
to the Parent to enable quarterly payments of interest (at a rate not to exceed
12%) to be paid on the Subordinated Debt- Employee Selling Shareholders from
time to time, so long as no Default or Event of Default then exists or would
result therefrom and after any such payment is made, the Borrowing Base
availability is equal to, or greater than, $2,000,000.00 and no account payable
of Borrower is more than sixty (60) days past due (except for bona fide disputes
being contested in good faith for which adequate reserves have been established
in accordance with GAAP). Additionally, so long as no Default or Event of
Default then exists or would result therefrom and after any such payment is
made, the Borrowing Base availability is equal to, or greater than,
$2,000,000.00 and no account payable of Borrower is more than sixty (60) days
past due (except for bona fide disputes being contested in good faith for which
adequate reserves have been established in accordance with GAAP), principal
payments on the Subordinated Debt-Employee Selling Shareholders in the amount of
$500,000 may be made quarterly.
7.17. Subordinated Debt-NASCIT. Schedule 7.17 reflects certain debt
payable by the Parent to North Atlantic Smaller Companies Investment Trust plc
("NASCIT"). Such portion of the Subordinated Debt is herein referred to as the
"Subordinated Debt-NASCIT". Borrower may pay the funds to the Parent to enable
quarterly payments of interest (at a rate not to exceed 12%) to be paid on the
Subordinated Debt-NASCIT, from time to time, so long as no Default or Event of
Default then exists or would result therefrom and after any such payment is
made, the Borrowing Base availability is equal to, or greater than,
$2,000,000.00 and no account payable of
26
Borrower is more than sixty (60) days past due (except for bona fide disputes
being contested in good faith for which adequate reserves have been established
in accordance with GAAP). Additionally, so long as no Default or Event of
Default then exists or would result therefrom and after any such payment is
made, the Borrowing Base availability is equal to, or greater than,
$2,000,000.00 and no account payable of Borrower is more than sixty (60) days
past due (except for bona fide disputes being contested in good faith for which
adequate reserves have been established in accordance with GAAP), principal
payments on the Subordinated Debt-NASCIT not to exceed $750,000 may be made on
September 30, 2001, and December 31, 2001.
7.18. Notes Receivable from Shareholders. In no event may Notes
Receivable from Shareholders exceed $865,000.00 in the aggregate.
7.19. Non-ordinary Bonus. Grant of, or increase in, any bonus to
officers or employees other than in the ordinary course of business consistent
with past practice.
SECTION 8. EVENTS OF DEFAULT - ENFORCEMENT - APPLICATION OF PROCEEDS.
8.1. Events of Default. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
8.1.1 Failure to Pay Monies Due. If any principal of or
interest on the Note, any fees under Section 2.7 of this Agreement or
any other Indebtedness shall not be paid when due.
8.1.2 Misrepresentation. If any warranty or representation of
the Borrower or the Parent in connection with or contained in this
Agreement, or if any financial data or other information now or
hereafter furnished to the Bank by or on behalf of the Borrower or the
Parent, shall prove to be false or misleading in any material respect.
8.1.3 Noncompliance with Bank Agreement. If the Borrower or
any Guarantor shall fail to perform any of its obligations and
covenants under, or shall fail to comply with any of the provisions of,
this Agreement or any other agreement with the Bank to which it may be
a party, including, without limitation, any indebtedness owed by any
Guarantor to the Bank.
8.1.4 Other Defaults. If the Borrower or any Subsidiary or any
Guarantor shall default in the due payment of any of its indebtedness
(other than the Indebtedness) or in the observance or performance of
any term, covenant or condition in any agreement or instrument
evidencing, securing or relating to such indebtedness and such default
shall be continued for a period sufficient to permit acceleration of
the indebtedness, irrespective of whether any such default shall be
forgiven or waived by the holder thereof.
8.1.5 Judgments. If there shall be rendered against the
Borrower, any Subsidiary or any Guarantor, one or more judgments or
decrees involving an aggregate liability of $100,000.00 or more, which
has or have become nonappealable and shall remain undischarged,
unsatisfied by insurance and unstayed for more than twenty (20) days,
whether or not consecutive; or of a writ of attachment or garnishment
against the
27
property of the Borrower or any of the Subsidiaries or any Guarantor
shall be issued and levied in an action claiming $100,000.00 or more
and not released or appealed and bonded in a manner satisfactory to the
Bank.
8.1.6 Bankruptcy, Etc. If the Borrower or any Subsidiary or
any Guarantor shall not pay its debts as they mature or shall make a
general assignment for the benefit of creditors; or proceedings in
bankruptcy, or for reorganization or liquidation of the Borrower or any
Subsidiary or any Guarantor, under the Bankruptcy Code or under any
other state or federal law for the relief of debtors shall be commenced
by the Borrower or any Subsidiary or any Guarantor or shall be
commenced against the Borrower or any Subsidiary or any Guarantor and
shall not be discharged within thirty (30) days of commencement; or a
receiver, trustee or custodian shall be appointed for the Borrower or
any Subsidiary or any Guarantor or for any substantial portion of its
respective properties or assets.
8.1.7 Change in Board of Directors or Management. Except that
Maarten X. Xxxxxxx may resign or be removed from the board of directors
of the Borrower, if (i) the entire board of directors of Borrower,
Parent or Oakhurst is not the same as described on Schedule 8.1.7, or
(ii) if Xxxxxx X. Xxxxxx, Xx. and Xxxxxxx X. Xxxxxxx are no longer
officers of the Borrower, whether by reason of death, resignation or
otherwise; and such change in board of directors or change in office
holder described in clause (i) or (ii) above adversely impacts, in the
sole judgment of the Bank, upon the ability of the Borrower to carry on
its business as theretofore conducted.
8.1.8 Inadequate Funding or Termination of Employee/Benefit
Plan(s). If the Borrower (or any Subsidiary) shall fail to meet its
minimum funding requirements under ERISA with respect to any employee
benefit plan established or maintained by the Borrower (or any
Subsidiary), or if any such plan shall be the subject of termination
proceedings (whether voluntary or involuntary) and there shall result
from such termination proceedings a liability of the Borrower (or any
Subsidiary) to the PBGC which in the opinion of the Bank will have a
materially adverse effect upon the operations, business, property,
assets, financial condition or credit of the Borrower.
8.1.9 Occurrence of Certain Reportable Events. If there shall
occur, with respect to any pension plan maintained by the Borrower or
any Subsidiary, any reportable event (within the meaning of section
4043(b) of ERISA) which the Bank shall determine in good faith
constitutes a ground for the termination of any such plan, and if such
event continues for thirty (30) days after the Bank gives written
notice to the Borrower, provided that termination of such plan or
appointment of such trustee would, in the opinion of the Bank, have a
materially adverse effect upon the operations, business, property,
assets, financial condition or credit of the Borrower.
8.1.10 Other Events. Should any other event occur which
results in the Bank being insecure about its right to be ultimately
repaid in full for the Indebtedness.
28
8.1.11 Business Suspension. If the Borrower, any Guarantor, or
any of their Subsidiaries shall voluntarily suspend the transaction of
its business; or if any Guarantor shall die.
8.2. Acceleration of Indebtedness. Upon the occurrence of any of the
Events of Default described in Section 8.1.3 hereunder which is not cured by the
Borrower or waived by the Bank within thirty (30) days after the earlier of the
date of notice to the Borrower by the Bank of such Default or the date the Bank
is notified, or should have been notified, pursuant to the Borrower's obligation
under Section 6.1.7 of this Agreement, of such Default, or upon the occurrence
of any of the Events of Default described in Section 8.1.1, Section 8.1.2 or
Sections 8.1.4, 8.1.5, 8.1.7 through 8.1.10, all Indebtedness shall be due and
payable in full forthwith at the option of the Bank without presentation,
demand, protest, notice of intent to accelerate, notice of acceleration, notice
of dishonor, or other notice of any kind, all of which are hereby expressly
waived. Upon the occurrence of any Event of Default described in Section 8.1.6,
all commitments and other lending obligations, if any, of the Bank hereunder
shall immediately terminate, and the entire principal amount of all Indebtedness
then outstanding together with interest then accrued thereon shall become
immediately due and payable, all without written notice and without presentment,
demand, protest, notice of protest, notice of intent to accelerate, notice of
acceleration, or dishonor or any other notice of default of any kind, all of
which are hereby expressly waived by the Borrower. Unless all of the
Indebtedness is then fully paid, the Bank shall have and may exercise any one or
more of the rights and remedies for which provision is made for a secured party
under the UCC, under the Security Agreement or under any other document
contemplated hereby, including, without limitation, the right to take possession
and sell, lease or otherwise dispose of any or all of the Collateral and to
set-off against the Indebtedness any amount owing by the Bank to the Borrower.
The Borrower agrees, upon request of the Bank, to assemble the Collateral and
make it available to the Bank at any place designated by the Bank which is
reasonably convenient to the Bank and the Borrower.
8.3. Application of Proceeds. The proceeds of any sale or other
disposition of the Collateral authorized by this Agreement shall be applied by
the Bank, first upon all expenses authorized by the UCC and all reasonable
attorneys' fees and legal expenses incurred by the Bank; the balance of the
proceeds of such sale or other disposition shall be applied to the payment of
the Indebtedness, first to interest, then to principal; and the surplus, if any,
shall be paid over to the Borrower or to such other person or persons as may be
entitled thereto under applicable law. The Borrower shall remain liable for any
deficiency, which the Borrower shall pay to the Bank immediately upon demand.
8.4. Cumulative Remedies. The remedies provided for herein are
cumulative to the remedies for collection of the Indebtedness as provided by law
or by any mortgage, security agreement or other document contemplated hereby.
Nothing herein contained is intended, nor should it be construed, to preclude
the Bank from pursuing any other remedy for the recovery of any other sum to
which the Bank may be or become entitled for the breach of this Agreement by the
Borrower.
29
SECTION 9. MISCELLANEOUS.
9.1. Independent Rights. No single or partial exercise of any right,
power or privilege hereunder, or any delay in the exercise thereof, shall
preclude other or further exercise of the rights of the parties to this
Agreement.
9.2. Covenant Independence. Each covenant in this Agreement shall be
deemed to be independent of any other covenant, and an exception in one covenant
shall not create an exception in another covenant.
9.3. Waivers and Amendments. No forbearance on the part of the Bank in
enforcing any of its rights under this Agreement, nor any renewal, extension or
rearrangement of any payment or covenant to be made or performed by the Borrower
hereunder, shall constitute a waiver of any of the terms of this Agreement or of
any such right. No Default or Event of Default shall be waived by the Bank
except in writing signed and delivered by an officer of the Bank, and no waiver
of any Default or Event of Default shall operate as a waiver of any other
Default or Event of Default or of the same Default or Event of Default on a
future occasion. No other amendment, modification or waiver of, or consent with
respect to, any provision of this Agreement or the Note or other documents
contemplated hereby shall be effective unless the same shall be in writing and
signed and delivered by an officer of the Bank.
9.4. GOVERNING LAW. THIS AGREEMENT, AND EACH AND EVERY TERM AND
PROVISION HEREOF, SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE
STATE OF TEXAS. IF ANY PROVISION OF THIS AGREEMENT SHALL FOR ANY REASON BE HELD
INVALID OR UNENFORCEABLE, SUCH INVALIDITY OR UNENFORCEABILITY SHALL NOT AFFECT
ANY OTHER PROVISION HEREOF, BUT THIS AGREEMENT SHALL BE CONSTRUED AS IF SUCH
INVALID OR UNENFORCEABLE PROVISION HAD NEVER BEEN CONTAINED HEREIN.
9.5. Survival of Warranties, Etc. All of the Borrower's covenants,
agreements, representations and warranties made in connection with this
Agreement and any document contemplated hereby shall survive the Borrowing and
the delivery of the Note hereunder and shall be deemed to have been relied upon
by the Bank, notwithstanding any investigation heretofore or hereafter made by
the Bank. All statements contained in any certificate or other document
delivered to the Bank at any time by or on behalf of the Borrower pursuant
hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by the Borrower in connection with
this Agreement.
9.6. Attorneys' Fees. The Borrower agrees that it will pay all
reasonable costs and expenses of the Bank in connection with the enforcement of
the Bank's rights and remedies under this Agreement and in connection with the
preparation or making of any amendments, modifications, waivers or consents with
respect to this Agreement.
9.7. Payments on Saturdays, Etc. Whenever any payment to be made
hereunder or under the Note shall be stated to be due on a Saturday, Sunday or
any other day which is not a
30
Business Day, such payment may be made on the next succeeding Business Day, and
such extension, if any, shall be included in computing interest in connection
with such payment.
9.8. Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors and
assigns; provided, however, the Borrower may not assign or transfer its rights
or obligations hereunder without the prior written consent of the Bank.
9.9. Maintenance of Records. The Borrower will keep all of its records
concerning the Collateral at its principal place of business. The Borrower will
give the Bank prompt written notice of any change in its principal place of
business, or in the location of said records.
9.10. Notices. All notices and communications provided for herein or in
any document contemplated hereby or required by law to be given shall be
effective when received or, in case of notices from the Bank to the Borrower,
upon sending by first class mail, postage prepaid, addressed as follows: (a) If
to the Borrower, to: Texas-Sterling Construction Company, 20810 Fernbush,
Xxxxxxx, Xxxxx 00000, and (b) If to the Bank, to: Xxxx X. Xxx, Senior Vice
President and Chief Credit Officer, Comerica Bank-Texas, 0000 Xxx Xxxxxx,
Xxxxxx, Xxxxx 00000, with a copy to Xxxx Xxxxxx Xxx 0000, Xxxxxxx, Xxxxx
00000-0000, Attn: Xxxxx X. XxXxxx, Vice President, or to such other address as a
party shall have designated to the other in writing. The giving of at least five
(5) days' notice before the Bank shall take any action described in any notice
shall conclusively be deemed reasonable for all purposes.
9.11. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures were upon the same
instrument.
9.12. Headings. Article and section headings in this Agreement are
included for the convenience of reference only and shall not constitute a part
of this Agreement for any purpose.
9.13. Capital Adequacy. If as a result of any regulatory change
directly or indirectly affecting the Bank or any of the Bank's affiliates there
shall be imposed, modified or deemed applicable any tax, reserve, special
deposit, minimum capital, capital ratio, or similar requirement against or with
respect to or measured by reference to loans made or to be made hereunder or
participations therein, and the result shall be to increase the cost to the Bank
or any of the Bank's affiliates of making or maintaining any loan hereunder or
to any other party maintaining any participation therein, or reduce any amount
receivable in respect of any such loan (which increase in cost, or reduction in
amount receivable, shall be the result of the Bank's or the Bank's affiliated
company's reasonable allocation among all affected customers of the aggregate of
such increase or reductions resulting from such event), then, within ten (10)
days after receipt by the Borrower of a certificate from the Bank containing the
information described below in this Section which shall be delivered to the
Borrower, the Borrower agrees from time to time to pay the Bank such additional
amounts as shall be sufficient to compensate the Bank or any of the Bank's
affiliates (for as long as such increased costs or reductions in amount
receivable exist) for such increased costs or reductions in amount receivable
which the Bank determines in the Bank's sole discretion are material. The
certificate requesting compensation under this Section 9.13 shall identify the
regulatory change which has occurred, the requirements
31
which have been imposed, modified or deemed applicable, the amount of such
additional cost or reduction in amount receivable and the way in which such
amount has been calculated.
9.14. INDEMNIFICATION BY THE BORROWER. THE BORROWER HEREBY COVENANTS
AND AGREES TO INDEMNIFY, DEFEND AND HOLD HARMLESS THE BANK AND ITS OFFICERS,
DIRECTORS, EMPLOYEES, ATTORNEYS, AND AGENTS FROM AND AGAINST ANY AND ALL CLAIMS,
DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION, THE FEES
AND OUT-OF-POCKET EXPENSES OF COUNSEL) WHICH MAY BE INCURRED BY OR ASSERTED
AGAINST THE BANK OR ANY SUCH OTHER INDIVIDUAL OR ENTITY IN CONNECTION WITH:
(a) ANY INVESTIGATION, ACTION OR PROCEEDING ARISING
OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT, THE NOTE, OR
ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS OR ANY
COLLATERAL, OR ANY ACT OR OMISSION RELATING TO ANY OF THE
FOREGOING;
(b) ANY TAXES (OTHER THAN FEDERAL OR STATE INCOME
TAXES), LIABILITIES, CLAIMS OR DAMAGES RELATING TO THE
COLLATERAL OR THE BANK'S LIENS THEREON; OR
(c) THE CORRECTNESS, VALIDITY OR GENUINENESS OF ANY
INSTRUMENTS OR DOCUMENTS THAT MAY BE RELEASED OR ENDORSED TO
BORROWER BY THE BANK (WHICH SHALL AUTOMATICALLY BE DEEMED TO
BE WITHOUT RECOURSE TO THE BANK IN ANY EVENT), OR THE
EXISTENCE, CHARACTER, QUANTITY, QUALITY, CONDITION, VALUE. OR
DELIVERY OF ANY GOODS PURPORTING TO BE REPRESENTED BY ANY SUCH
DOCUMENTS.
9.15. NO ORAL AGREEMENTS. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN
DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENTS BETWEEN THE BANK AND THE
BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE BANK AND THE BORROWER.
9.16. Gender. Throughout this Agreement, the masculine shall include
the feminine and vice versa and the singular shall include the plural and vice
versa, unless the context of this Agreement indicates otherwise.
9.17. Intentionally Deleted.
9.18. Cross Default; Cross Collateral. The Borrower hereby agrees that
(a) all other agreements between Borrower and the Bank or any of its affiliates
is hereby amended so that a
32
default under this Agreement is a default under all other agreements and a
default under any one of the other agreements is a default under this Agreement,
and (b) the collateral under this Agreement secures the obligations now or
hereafter outstanding under all other agreements between Borrower and the Bank
or any of its affiliates and the collateral pledged under any other agreement
with the Bank or any of its affiliates secures the obligations under this
Agreement.
9.19. Severability of Provisions. Any provision of this Agreement, the
Note or any other documents relating thereto that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement, such Note or such other documents or affecting the
validity or enforceability of such provision in any other jurisdiction.
9.20. Assignment. The Bank shall have the absolute and unrestricted
right to sell, assign, transfer, or grant participation in, all or any portion
of the loans and any Collateral, guaranties or other security relating thereto
without the consent of Borrower; provided, however, that no such action on the
part of the Bank shall have the effect of changing any of the Borrower's
obligations hereunder without the written consent of the Borrower.
33
IN WITNESS WHEREOF, the Borrower and the Bank have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
NOTICE TO BORROWER - THIS AGREEMENT CONTAINS AN INDEMNITY PROVISION AT SECTION
9.14.
BORROWER:
STERLING CONSTRUCTION COMPANY,
a Michigan corporation
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxx
---------------------------------
Title: President
---------------------------------
BANK:
COMERICA BANK-TEXAS, a Texas banking
association
By: /s/ Xxxx Xxxxxxxxx
---------------------------------
Name: Xxxx Xxxxxxxxx
---------------------------------
Title: Vice President
---------------------------------
SIGNATURE PAGE AMENDED AND RESTATED
LOAN AGREEMENT
