EXHIBIT 10.1
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made and entered into this
10th day of November 2004, by and between VPGI Corp., a Texas corporation
(the "Borrower") and Trident Growth Fund, LP, a Delaware limited partnership
(the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower has requested that Lender make a loan to Borrower
of up to $700,000 (the "Loan"); and
WHEREAS, Lender has agreed to make the Loan available to Borrower upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, it is agreed as follows:
SECTION 1. Definitions. All of the terms defined in this Agreement
shall have such defined meanings when used in the other Loan Documents (as
hereinafter defined) and any certificates, reports or other documents or
instruments issued under or delivered pursuant to this Agreement unless the
context shall require otherwise. For purposes of this Agreement, the
following terms shall have the following meanings:
1.1 "Affiliate" shall mean an entity that is a member of a "controlled
group of corporations" (within the meaning of Section 414(b) of the Internal
Revenue Code), an "affiliated service group" (within the meaning of Section
414(m) of the Internal Revenue Code), or a group of trades or business under
common control (within the meaning of Section 414(c) of the Internal Revenue
Code) that also includes the Borrower as a member.
1.2 "Agreement" shall include this Agreement as amended, modified or
supplemented from time to time.
1.3 "Authorized Officer" shall mean the Chief Executive Officer or the
President of the Borrower or such other person designated in writing to the
Lender, who is authorized to act on behalf of the Borrower hereunder.
1.4 "Business Day" means a day upon which banks are open for the
transaction of business of the nature required by this Agreement in Texas.
1.5 "Capital Expenditure": means any payment made directly or
indirectly for the purpose of acquiring or constructing fixed assets, real
property or equipment which in accordance with GAAP would be added as a
debit to the fixed asset account of the Person making such expenditure,
including, without limitation, amounts paid or payable under any conditional
sale or other title retention agreement or under any lease or other periodic
payment arrangement which is of such a nature that payment obligations of
the lessee or obligor thereunder would be required by GAAP to be capitalized
and shown as liabilities on the balance sheet of such lessee or obligor.
1.6 "Cash Flow" means an amount equal to (i) the Borrower' Consolidated
EBITDA, minus (ii) the Borrower's Consolidated non-financed Capital
Expenditures.
1.7 "Capital Lease" means any lease of property (real, personal or
mixed) which, in accordance with GAAP, should be capitalized on the lessee's
balance sheet or for which the amount of the asset and liability thereunder
as if so capitalized should be disclosed in a note to such balance sheet.
1.8 "Change of Control" means (a) a Change of Ownership; (b) during any
period of twelve consecutive calendar months, individuals who at the
beginning of such period constituted the board of directors of the Borrower
(together with any new directors whose election by the board of directors of
the Borrower or whose nomination for election by the shareholders of
Borrower was approved by a vote of at least two-thirds of the directors then
still in office who either were directors at the beginning of such period or
whose elections or nomination for election was previously so approved) cease
for any reason other than death or disability to constitute a majority of
the directors then in office.
1.9 "Change of Ownership" means any person or group of persons (other
than the Lender and/or the shareholders of the Borrower on the Closing Date)
shall have acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended) of forty percent (40%) or more (computed
on a fully diluted basis) of the issued and outstanding shares of capital
stock of Borrower having the right to vote for the election of directors of
Borrower under ordinary circumstances.
1.10 "Closing Date" means the date first set forth above.
1.11 "Committed Amount" means the principal amount of up to $700,000
which Lender has agreed to lend to Borrower as evidenced by the Convertible
Note.
1.12 "Common Stock" shall have the meaning as defined in Section 3.3.
1.13 DELETED.
1.14 "Consolidated EBITDA" means, for any Person for any period:
(i) the consolidated net income of such Person and its
Consolidated Subsidiaries for such period (after Income Taxes) calculated in
accordance with GAAP, but excluding:
(a) any gain arising from the sale of capital assets,
(b) any gain arising from any write-up of assets,
(c) earnings of any other Person, substantially all of the
assets of which have been acquired by such Person or its
Consolidated Subsidiaries in any manner, to the extent
that such earnings were realized by such other Person
prior to the date of such acquisition.
(d) earnings of any Person in which the Person or its
Consolidated Subsidiaries has an ownership interest
(other than wholly owned Subsidiaries of such Person ),
unless such earnings have actually been received by the
Person or its Consolidated Subsidiaries in the form of
cash distributions,
(e) earnings of any Person to which assets of the Person or
its Consolidated Subsidiaries shall have been sold,
transferred or disposed of, or into which the Person
shall have merged, to the extent that such earnings
arise prior to the date of such transaction,
(f) any gain arising from the acquisition of any securities
of such Person or any of its Consolidated Subsidiaries,
and
(g) any extraordinary gain realized by such Person or any of
its Consolidated Subsidiaries during such period.
(ii) plus the following, but only in each case to the extent
incurred by the Borrower and its Consolidated Subsidiaries during such
period and deducted in the calculation above for such period,
(a) all income and franchise taxes,
(b) all Interest Expense,
(c) all depreciation expense, and
(d) all amortization expense.
1.15 "Consolidated Subsidiary" or "Consolidated Subsidiaries" means, for
any Person, any Subsidiary or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial
statements as of such date in accordance with GAAP.
1.16 "Current Assets" means, at any particular time, all amounts which,
in conformity with GAAP, would be included as current assets on a
consolidated balance sheet of the Borrower and its Subsidiaries; provided
however, there shall be excluded therefrom (a) all prepaid expenses of every
type and nature, (b) all amounts due from partners, officers, stockholders
or other Affiliates, and all loans due from employees, and (c) all deferred
charges.
1.17 "Current Liabilities" means, at any particular time, all amounts
(including deferred taxes) which, in conformity with GAAP, would be included
as current liabilities on a consolidated balance sheet of the Borrower and
its Subsidiaries.
1.18 "Current Ratio" means the ratio of Current Assets to Current
Liabilities.
1.19 "Debt" means, with respect to any Person on any date of
determination (without duplication), (i) all obligations for borrowed money,
(ii) all obligations evidenced by bonds, debentures, notes or similar
instruments, (iii) all obligations to pay the deferred purchase price of
property or services except trade accounts payable arising in the ordinary
course of business which are paid when due in accordance with
ordinary-course payment terms, (iv) all obligations arising under acceptance
facilities or facilities for the discount or sale of accounts receivable,
(v) all direct or contingent obligations in respect of letters of credit,
(vi) lease obligations (other than lease obligations with respect to
operating leases) that have been (or under GAAP should be) capitalized for
financial reporting purposes, (vii) liabilities secured (or for which the
holder of any obligations or liabilities has an existing right, contingent
or otherwise, to be so secured) by any Lien existing on property owned or
acquired by that Person and (viii) all guaranties, endorsements and other
contingent obligations for liabilities or obligations or the maintenance of
financial condition of others, including obligations to repurchase or
purchase properties or to maintain or cause to maintain any financial
condition.
1.20 "Default" or "Event of Default" means the occurrence of all or any
of the events specified in Section 7 and/or set forth in the Convertible
Note (as defined below).
1.21 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.22 "GAAP" mean generally accepted accounting principles.
1.23 "Indebtedness" means with respect to any Person, all indebtedness
of such Person for borrowed money, all indebtedness of such Person for the
acquisition of property other than purchases of products and merchandise in
the ordinary course of business, indebtedness secured by a lien, pledge or
other encumbrance on the property of such Person whether or not such
indebtedness is assumed, all liability of such Person by way of endorsements
(other than for collection or deposit in the ordinary course of business);
all guarantees of Indebtedness of any other Person by such Person (including
any agreement, contingent or otherwise, to purchase any obligation
representing such Indebtedness or property constituting security therefor,
or to advance or supply funds for such purpose or to maintain working
capital or other balance sheet or income statement condition, or any other
arrangement in substance effecting any of the foregoing); all leases and
other items which in accordance with Generally Accepted Accounting
Principles are classified as liabilities on a balance sheet.
1.24 "Interest Expense" means, with respect to any Person and for any
period (without duplication), all interest on that Person's Debt, whether
paid in cash or accrued as a liability and payable in cash during any
subsequent period (including, without limitation, the interest component of
Capital Leases), as determined by GAAP.
1.25 "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
1.26 "Liabilities" mean all liabilities, obligations and indebtedness of
any and every kind and nature (including, without limitation, lease
obligations, accrued interest, charges, expenses, attorneys' fees and other
sums) chargeable to the Borrower and made to or for the benefit of the
Borrower, whether arising under this Agreement or arising under the Note or
any of the Loan Documents of the Borrower, whether heretofore, now or
hereafter owing, arising, due or payable from Borrower to the Lender and
however evidenced, credited, incurred, acquired or owing, whether primary,
secondary, direct, contingent, fixed, or otherwise, including obligation of
performance.
1.27 "Liens" shall have the meaning set forth in Section 3.9.
1.28 "Loan Amount" means the principal amount of up to $700,000 which
Lender has agreed to lend Borrower at Lender's sole option.
1.29 "Loan Documents" means this Agreement, the Convertible Note, the
Pledge Agreement, the Warrant, the Security Agreements, the Royalty
Agreement, and all documents, instruments, certificates, reports and all
other written matters whether heretofore, now, or hereafter executed by or
on behalf of the Borrower or any Subsidiary and/or delivered to Lender in
connection herewith or in connection with any prior transactions involving a
Subsidiary and Lender, or which is otherwise contemplated hereby.
1.30 "Convertible Note" or "Note" means one or more Secured Promissory
Notes, to be executed by the Borrower in favor of the Lender, substantially
in the form of Exhibit 1 attached hereto.
1.31 "Material Adverse Effect" shall have the meaning set forth in
Section 3.1.
1.32 "Net Income" or "Net Loss" means, with respect to any Person for
any period, the net income or net loss of such Person determined in
accordance with GAAP, after payment of income Taxes but excluding any
extraordinary or non-recurring items.
1.33 "Obligation" shall mean the principal amount of the Loan, plus
twelve percent (12%) interest per annum paid monthly (subject to adjustment)
together with such costs and reimbursements as may be due under the Loan
Agreement and the Note.
1.34 "Pledge Agreement", if any, means the pledge agreement of
approximate even date herewith executed by Xxxxxxx X. Xxxxxx, individually
and on behalf of Xxxxxx Company, Inc. in favor of the Lender.
1.35 Intentionally Deleted.
1.36 "Registrable Securities" shall mean (i) the Common Stock issued
upon conversion of the Convertible Note, (ii) any Common Stock issued upon
the exercise of the Warrant; (iii) any Common Stock issued upon conversion
of any and all Series L Preferred Stock of the Borrower held by Lender; (iv)
any Common Stock acquired via any other right or other security which is
issued in conjunction with this transaction; and (v) any Common Stock held
or acquired by Lender as a result of (a) any stock dividend; (b) any other
distribution with respect to or in exchange for, or in replacement of Common
Stock or other capital stock of the Borrower; (c) stock split; or (d) in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
1.37 "Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated organization, association,
joint venture or a government or agency or political subdivision thereof.
1.38 "Royalty Agreement" means that certain Royalty Agreement of
approximate even date herewith executed by Borrower and Venture Pacific
Group, Inc. in favor of Lender.
1.39 "SBA" means the Small Business Administration of the United States
of America.
1.40 "Securities Act" means the Securities Act of 1933, as amended, or
any successor federal law then in force, together with all rules and
regulations promulgated thereunder.
1.41 "Security Agreement" means that certain Security Agreement of
approximate even date herewith executed by the Borrower in favor of the
Lender as well as any Security Agreement required by Lender to be executed
by any Subsidiary of Borrower.
1.42 "Subsidiary" means any corporation or limited liability company of
which at least a 50% of the outstanding securities having ordinary voting
powers for the election of Board of Directors (or similar governing body)
are at the time owned by Borrower. As used herein, the term "Borrower"
shall be deemed to include all of Borrower's Subsidiaries, if any.
1.43 "Termination Date" means the earlier of: (a) November 10, 2005;
(b) the date of the occurrence and continuance of an Event of Default (as
hereinafter defined); (c) the date of repayment of the Loan Amount plus
accrued interest; (d) the date of the closing of a secondary public offering
by the Borrower and/or its shareholders; or (e) the date of the Change of
Control of the Borrower.
1.44 "Warrant", means that certain warrant or warrants of approximate
even date herewith executed by the Borrower in favor of the Lender.
Borrower and Lender agree that the value of the Warrant as of the date
hereof is less than $1,000.
SECTION 2. Loan.
2.1 Loan Amount. Subject to the terms and conditions of this Agreement,
the Lender agrees to loan to the Borrower up to $700,000 pursuant to the
terms of the Convertible Note and the other Loan Documents upon the
execution of this Agreement. The Loan Amount shall be payable in two
traunches (via check or wire transfer) following receipt by Lender of all
Loan Documents duly executed by Borrower and all necessary third parties and
Subsidiaries, the first payment to be made on the date hereof in the amount
of $125,000 provided all conditions precedent set forth in Section 4 are met
(other than subsections (j), (k), (o), and (q)) , and the second in the
amount of $575,000 to be payable on November 15, 2004, provided that the
conditions precedent set forth in subsections (j), (k), (o), and (q) of
Section 4 herein are wholly satisfied in the sole discretion of the Lender.
Nothing set forth herein shall prohibit the Borrower from making prepayments
without penalty at any time and from time to time (subject to the prior
exercise of existing conversion rights). All provisions of the Convertible
Note are incorporated herein by reference. Any conflicts between the
Convertible Note and this Loan Agreement shall be resolved by reference to
the Convertible Note. Upon execution of this Agreement, contemporaneous
with the funding of the Loan, Borrower shall promptly pay to the order of
the Lender a commitment fee in the amount of 1.0% and an origination fee of
4.0% of the Committed Amount.
2.2 Payments of Interest and Principal. Interest on the Loan Amount
shall accrue at the rate of fourteen percent (14%) per annum from the date
funds are paid by Lender, and shall be payable monthly via wire transfer.
Unless earlier repaid in accordance with payment provisions set forth in the
Note, Borrower shall pay to Lender on the Termination Date the entire
outstanding principal amount of the Convertible Note, via wire transfer,
together with accrued interest thereon and any fees then owed.
2.3 Use of Proceeds. The proceeds of the Loan shall be used by the
Borrower in accordance with the provisions of Schedule 2.3 hereof.
2.4 Conversion. Terms found in the Convertible Note.
SECTION 3. Representations and Warranties. In order to induce the
Lender to enter into this Agreement and to make the Loan available, the
Borrower represents and warrants to the Lender as of the Closing Date (which
representations and warranties shall survive the delivery of the documents
mentioned herein, and the termination of this Agreement) as follows:
3.1 Organization.
(a) The Borrower and each Subsidiary, if any, is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its respective formation, has the power to own its
respective properties and to carry on its respective businesses as now being
conducted and is duly qualified to do business in every jurisdiction in the
United States of America for which the failure to so qualify would have a
material impact on the financial condition, operations, business or
prospects of the Borrower ("Material Adverse Effect").
(b) Schedule 3.1 sets forth true and complete copies of the
Certificate of Incorporation and Bylaws, as in effect on the date hereof, of
the Borrower and all other corporate formation and governing documents of
each of the Subsidiaries. Except as set forth in Schedule 3.1(b), the
Borrower does not own or control, directly or indirectly, any equity
interest in any corporation, company, limited liability company,
association, partnership, limited partnership, joint venture or other
entity.
3.2 Power and Authority. The Borrower is duly authorized under all
applicable provisions of law, its Certificate of Incorporation, and its
Bylaws to execute, deliver and perform this Agreement, the Convertible Note
and the other Loan Documents to which it is a party, and all other action on
the part of the Borrower required for the lawful execution, delivery and
performance thereof have been duly taken. This Agreement and the other Loan
Documents, if any, upon the due execution and delivery thereof, are valid
and enforceable instruments, obligations or agreements of the parties, in
accordance with their respective terms, except as to enforcement of
creditors rights generally. Neither the execution of this Agreement and the
Loan Documents, nor the fulfillment of or compliance with their provisions
and terms, conflicts with, or has or will result in a breach of the terms,
conditions or provisions of, or constitute a violation of or default under:
(a) any applicable law, regulation, order, writ or decree; or (b) any
agreement or instrument to which the Borrower is a party, or create any
lien, charge or encumbrance upon any of the property or assets of any of
them pursuant to the terms of any agreement or instrument to which any of
them is a party or by which any of them are bound except those in favor of
the Lender expressly created hereunder.
3.3 Capitalization. As of the date hereof, the total number of
authorized shares of common stock, $.001 par value per share, of the
Borrower (the "Common Stock") is 80,000,000 of which 5,242,120 shares are
issued and outstanding and the total number of authorized shares of
preferred stock of the Borrower (the "Preferred Stock") is 1,000,000 shares,
of which 30,218 shares are issued and outstanding. The outstanding
capitalization of the Borrower as of the date hereof is set forth in
Schedule 3.3 annexed hereto. Except as otherwise disclosed in Schedule 3.3,
there are no warrants, options or preemptive rights authorized or
outstanding with respect to any of the Borrower's capital stock. The
Borrower shall not issue any derivative securities without the express
written consent of the Lender.
3.4 Stock Ownership. The stockholders, which are reflected on Schedule
3.3, are holders of all of the issued and outstanding Common and Preferred
Stock and, except as contemplated by the Loan Documents and Schedule 3.3,
there are no commitments, agreements or undertakings with respect to the
issuance of any equity or debt securities of the Borrower.
3.5 Material Liabilities. The sole outstanding material liabilities of
the Borrower are set forth on Schedule 3.5.
3.6 Proceeds of Convertible Note. The Borrower shall use the proceeds
of the Convertible Note solely for those purposes set forth on Schedule 2.3
hereof.
3.7 Registration Rights. Except as set forth in Schedule 3.7, there are
no registration rights agreements with respect to any of the Borrower's
capital stock.
3.8 Material Agreements. Except for those agreements set forth on
Schedule 3.8 hereof, there are no other material agreements to which the
Borrower is a party.
3.9 Title to Assets. Except as set forth in Schedule 3.9, the Borrower
has good and marketable title to all of its properties and assets, all of
which are free and clear of any and all liens, mortgages, pledges,
encumbrances or charges of any kind or nature whatsoever (collectively,
"Liens").
3.10 Litigation. There are no pending or threatened actions or
proceedings before any court, any state, provincial or federal regulatory
body, or any self-regulatory organization arbitrator or governmental or
administrative body or agency which would have a Material Adverse Effect or
in any way materially affect or call into question the power and authority
of the Borrower to enter into or perform this Agreement and the Loan
Documents.
3.11 Taxes. The Borrower has filed all income tax returns (if any)
required to be filed by it and all taxes due thereon have been paid, and no
controversy in respect of additional income taxes, municipal, state or
federal, of the Borrower is pending or threatened.
3.12 Agreements or Restrictions Affecting the Borrower. The Borrower is
not a party to or otherwise bound by any contract or agreement or subject to
any restrictions which would have Material Adverse Effect or restricts the
Borrower's ability to enter into this Agreement or any of the other of the
Loan Documents or the Borrower's ability to effect the transactions
contemplated therein and herein.
3.13 Governmental Approval. No approval of any federal, state,
municipal or other local governmental authorities is necessary to carry out
the terms of this Agreement and the Loan Documents, and no consents or
approvals are required in the making or performance of this Agreement and
the Loan Documents.
3.14 Board of Directors. Intentionally Deleted.
3.15 No Untrue Statements. None of this Agreement or the Loan Documents
nor any other agreements, reports, schedules, certificates or instruments
heretofore or simultaneously with the execution of this Agreement delivered
to Lender, contains any misrepresentation or untrue statement of fact or
omits to state any fact necessary to make any of such agreements, reports,
schedules, certificates or instruments not misleading.
3.16 Employee Benefit Plans.
(a) Borrower has disclosed to Lender in writing prior to the execution
of the Agreement and has listed on Schedule 3.16 all Borrower Benefit Plans.
For purposes of this Agreement, "Borrower Benefit Plans" means all pension,
retirement, profit-sharing, deferred compensation, stock option, employee
stock ownership, severance pay, vacation, bonus, or other incentive plan,
all other written employee agreements or programs, all medical, vision,
dental, or other health plans, all life insurance plans, and all other
employee benefit plans or fringe benefit plans, including, without
limitation, "employee benefit plans" as that term is defined in Section 3(3)
of ERISA maintained by, sponsored in whole or in part by, or contributed to
by, the Borrower or any of its Affiliates for the benefit of managers,
members, employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which managers, members,
employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate. Any of the
Borrower Benefit Plans which is an "employee welfare benefit plan," as that
term is defined in Section 3(l) of ERISA, or an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to
herein as a "Borrower ERISA Plan." Any Borrower ERISA Plan which is also a
"defined benefit plan" (as defined in Section 414(j) of the Internal Revenue
Code or Section 3(35) of ERISA) is referred to herein as a "Borrower Pension
Plan." Neither Borrower nor any Affiliate has an "obligation to contribute"
(as defined in ERISA Section 4212) to a "multiemployer plan" (as defined in
ERISA Sections 4001(a)(3) and 3(37)(A)). Each "employee pension benefit
plan," as defined in Section 3(2) of ERISA, ever maintained by the Borrower
or any Affiliate that was intended to qualify under Section 401(a) of the
Internal Revenue Code and with respect to which any Affiliate has any
liability, is disclosed as such in Schedule 3.16.
(b) Intentionally Deleted.
(c) All Borrower Benefit Plans are in material compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other
applicable laws, the breach or violation of which is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on the
Borrower. Each Borrower ERISA Plan currently maintained by Borrower which is
intended to be qualified under Section 401(a) of the Internal Revenue Code
has received a favorable determination letter from the Internal Revenue
Service, and Borrower is not aware of any circumstances which will or could
reasonably result in revocation of any such favorable determination letter.
Each trust created under any Borrower ERISA Plan, which is an "employee
pension benefit plan" as defined in Section 3(2) of ERISA, has been
determined to be exempt from tax under Section 501(a) of the Internal
Revenue Code and Borrower is not aware of any circumstance which will or
could reasonably result in revocation of such exemption. With respect to
each Borrower Benefit Plan to the best knowledge of Borrower, no event has
occurred which will or could reasonably give rise to a loss of any intended
tax consequences under the Internal Revenue Code or to any tax under Section
511 of the Internal Revenue Code that is reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect on Borrower. There is no
material pending or, to the best knowledge of the Borrower, threatened
litigation relating to any Borrower ERISA Plan.
(d) No Affiliate has engaged in a transaction with respect to any
Borrower Benefit Plan that, assuming the taxable period of such transaction
expired as of the date of this Agreement, would subject any Affiliate to a
material tax or penalty imposed by either Section 4975 of the Internal
Revenue Code or Section 502(i) of ERISA in amounts which are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on Borrower. Neither Borrower nor, to the best of Borrower's knowledge, any
administrator or fiduciary of any Borrower Benefit Plan (or any agent of any
of the foregoing) has engaged in any transaction, or acted or failed to act
in any manner which could subject Borrower to any direct or indirect
liability (by indemnity or otherwise) for breach of any fiduciary,
co-fiduciary, or other duty under ERISA, where such liability, individually
or in the aggregate, is reasonably likely to have a Material Adverse Effect
on the Borrower. To its best knowledge, no oral or written representation or
communication with respect to any aspect of the Borrower Benefit Plans has
been made to employees of the Borrower or any Affiliate which is not in
accordance with the written or otherwise preexisting terms and provisions of
such plans, where any liability with respect to such representation or
disclosure is reasonably likely to have a Material Adverse Effect on
Borrower.
(e) Since the date of the most recent actuarial valuation, there has
been (i) no material change in the financial position or funded status of
any Borrower Pension Plan, (ii) no change in the actuarial assumptions with
respect to any Borrower Pension Plan, and (iii) no increase in benefits
under any Borrower Pension Plan as a result of plan amendments or changes in
applicable Law, any of which is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Borrower. No Borrower Pension
Plan has an "accumulated funding deficiency" within the meaning of Section
412 of the Internal Revenue Code or Section 302 of ERISA. All contributions
with respect to a Borrower Pension Plan have or will be timely made and
there is no lien or expected to be a lien under Internal Revenue Code
Section 412(n) or ERISA Section 302(f) or tax under Internal Revenue Code
Section 4971. Neither the Borrower nor any Affiliate has provided, or is
required to provide, security to a Borrower Pension Plan pursuant to Section
401(a)(29) of the Internal Revenue Code. All premiums required to be paid
under ERISA Section 4006 have been timely paid by Borrower, except to the
extent any failure would not have a Material Adverse Effect on Borrower.
(f) No liability under Title IV of ERISA has been or is expected to be
incurred by the Borrower or any Affiliate with respect to any defined
benefit plan currently or formerly maintained by any of them that has not
been satisfied in full (other than liability for Pension Benefit Guaranty
Corporation premiums, which have been paid when due), except to the extent
any failure would not have a Material Adverse Effect on Borrower.
(g) The Borrower and any Affiliate have no obligations for retiree
health and retiree life benefits under any of the Borrower Benefit Plans
other than with respect to benefit coverage mandated by applicable Law.
(h) Except as disclosed in Schedule 3.16(h), neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will, by themselves, (1) result in any payment
(including, without limitation, severance, unemployment compensation, golden
parachute, or otherwise) becoming due to any manager, director or any
employee of the Borrower or Affiliate under any Borrower Benefit Plan or
otherwise, (2) increase any benefits otherwise payable under any Borrower
Benefit Plan, or (3) result in any acceleration of the time of payment or
vesting of any such benefit.
(i) Except as set forth in the Schedule 3.16(i), Borrower does not
maintain or otherwise pay for life insurance policies (other than group term
life policies on employees) with respect to any manager, director, officer
or employee. Schedule 3.16(i) lists each such insurance policy and includes
a copy of each agreement with a party other than the insurer with respect to
the payment, funding or assignment of such policy. To the best of Borrower's
knowledge, neither Borrower nor any Borrower Pension Plan or Borrower
Benefit Plan owns any individual or group insurance policies issued by an
insurer which has been found to be insolvent or is in rehabilitation
pursuant to a state proceeding.
SECTION 4. Conditions Precedent to Making Loan.
Subject to Section 2.1, the Lender shall not be obligated to make the
Loan until all of the following conditions have been satisfied by proper
evidence, execution and/or delivery to the Lender of the following items,
all in form, and substance reasonably satisfactory to the Lender:
(a) The Convertible Note;
(b) This Agreement;
(c) SBA forms 480, 652, and 1031;
(d) The Warrant;
(e) The Security Agreement and UCC-1 for the Borrower and all parties
thereto;
(f) The Pledge Agreement;
(g) The Royalty Agreement;
(h) Subordination Agreements from each of the holders of outstanding
debt of Borrower;
(i) Unanimous consent of the Board of Directors of the Borrower and
all Subsidiaries, certified by the Secretary of the Borrower as
of the Closing Date, approving or otherwise ratifying the
transactions contemplated by this Agreement, and approving the
form of this Agreement and the Loan Documents, and authorizing
execution, delivery, and performance thereof;
(j) Specimen signatures of the officer of the Borrower and Subsidiary
executing this Agreement and the Loan Documents, and the officer
authorized to borrow under the Loan Documents, certified by the
Secretary of the Borrower or Subsidiary;
(k) A copy of the Articles of Incorporation, certified by an official
of the Borrower's jurisdiction of formation or incorporation and
further certified by the Secretary of Borrower not to have been
altered or amended since certification by such official; a
Certificate of Good Standing dated within 30 days of the date
first written above from the Secretary of State of the Borrower's
jurisdiction; and a copy of the Bylaws of the Borrower, certified
as true and correct by the Secretary of the Borrower;
(l) Such other instruments, documents or items as the Lender may
reasonably request;
(m) No Event of Default shall have occurred and be continuing under
this Agreement, the Convertible Note or any other Loan Document,
nor shall the Borrower be in default under any other document or
agreement to which it is a party or by which it or any of its
properties or assets are bound;
(n) Payment of the origination and commitment fees referenced in
Section 2.1 hereof.
(o) Certificate of Designation of the Series L Preferred Stock, in
such form and containing such terms and provisions as approved by
the Lender in its sole discretion, has been filed with and
approved by the Secretary of State of Texas;
(p) With respect to the Lender's prior loan to Venture Pacific Group,
Inc., an affiliate of Borrower's, the purchase of that certain
$1.3 million convertible note given to Lender by Venture Pacific
Group, Inc. or the purchase of the shares of Venture Pacific
Group, Inc.'s common stock such note was convertible into, for
175 shares of Series L Preferred Stock of the Borrower having a
preference of $10,000 per share;
(q) The Borrower has purchased all shares of outstanding capital stock
of Venture Pacific Group, Inc., and Lender has received Unanimous
Consent of the Board of Directors of the Borrower and Unanimous
Consent of the Board and sufficient consents or approvals from the
Shareholders of Venture Pacific Group, Inc. approving such
purchase and sale; and
(r) The Borrower has reissued all of Lender's outstanding warrants,
exercisable into an aggregate of 331,250 shares of Borrower's
Common Stock, to Lender and its affiliates and/or related parties,
as the case may be, each with an exercise price revised to $.001
per share.
SECTION 5. Affirmative Covenants. The Borrower covenants that, so long
as any portion of the Liabilities remains unpaid and unless the Lender
otherwise consents in writing, it will:
5.1 Taxes and Liens. Promptly pay, or cause to be paid, all taxes,
assessments and other governmental charges which may lawfully be levied or
assessed upon the income or profits of the Borrower, or upon any property,
real, personal or mixed, belonging to the Borrower, or upon any part
thereof, and also any lawful claims for labor, material and supplies which
if unpaid, might become a Lien or charge against any such property;
provided, however, the Borrower shall not be required to pay any such tax,
assessment, charge, levy or claim so long as the validity thereof shall be
actively contested in good faith by proper proceedings; but provided further
that any such tax, assessment, charge, levy or claim shall be paid or bonded
in a manner satisfactory to the Lender upon the commencement of proceedings
to foreclose any Lien securing the same.
5.2 Business and Existence. Do or cause to be done all things necessary
to preserve and to keep in full force and effect any licenses necessary to
the business of the Borrower, its corporate existence and rights of its
franchises, trade names, trademarks, and permits which are reasonably
necessary for the continuance of its business; and continue to engage
principally in the business currently operated by the Borrower.
5.3 Insurance and Properties. Keep its business and properties insured
at all times with responsible insurance companies and carry such types and
amounts of insurance as are required by all federal, state and local
governments in the areas which Borrower does business and as are usually
carried by entities engaged in the same or similar business similarly
situated. In addition, Borrower shall maintain in full force and effect
policies of liability insurance in amounts at least equal to that currently
in effect.
5.4 Maintain Property and Assets. Maintain its property and assets in
good order and repair and, from time to time, make all needed and proper
repairs, renewals, replacements, additions and improvements thereto, so that
the business carried on may be properly and advantageously conducted at all
times in accordance with prudent business management, and maintain annually
adequate reserves for maintenance thereof.
5.5 True Books. Keep true books of record and account in which full,
true and correct entries will be made of all of its dealings and
transactions, and set aside on its books such reserves as may be required by
GAAP, consistently applied, with respect to all taxes, assessments, charges,
levies and claims referred to in Section 5.1 hereof, and with respect to its
business in general, and include such reserves in interim as well as
year-end financial statements.
5.6 Pay Indebtedness to Lender and Perform Other Covenants. (a) Make
full and timely payment of the principal of and interest on the Convertible
Note and all other indebtedness of the Borrower to the Lender, whether now
existing or hereafter arising, including the payment of all fees incurred in
connection therewith; and (b) duly comply with all terms and covenants
contained in this Agreement, the Convertible Note, the other Loan Documents
and any other instruments and documents given to the Lender pursuant to this
Agreement.
5.7 Right of Inspection. Permit any person designated by the Lender, at
the Lender's expense, to visit and inspect any of the properties, books and
financial reports of the Borrower, all at such reasonable times upon forty-
eight (48) hours prior notice to Borrower, and as often as the Lender may
reasonably request, provided the Lender does not unreasonably interfere with
the daily operations of the Borrower.
5.8 Observance of Laws. Conform to and duly observe all laws,
regulations and other valid requirements of any regulatory authority with
respect to the conduct of its business.
5.9 Borrower's Knowledge of Default. Upon an officer or director of the
Borrower obtaining knowledge of, or threat of, an Event of Default
hereunder, cause such officer to promptly, within no more than ten (10)
business days, deliver to the Lender notice thereof specifying the nature
thereof, the period of existence thereof, and what action the Borrower has
taken and/or proposes to take with respect thereto.
5.10 Notice of Proceedings. Upon an officer or director of the Borrower
obtaining knowledge of any material litigation, dispute or proceedings being
instituted or threatened against the Borrower, or any attachment, levy,
execution or other process being instituted against any assets of the
Borrower, cause such officer to promptly, within no more than ten (10)
business days, give the Lender written notice of such litigation, dispute,
proceeding, levy, execution or other process.
5.11 Payment of Lender's Expenses. If at any time or times hereafter,
Lender employs counsel in connection with the execution and consummation of
the transactions contemplated by this Agreement or to commence, defend or
intervene, file a petition, complaint, answer, motion or other pleading, or
to take any action in or with respect to any suit or proceeding (bankruptcy
or otherwise) relating to this Agreement or any other Loan Document, or any
other agreement, guaranty, Convertible Note, instrument or document
heretofore, now or at any time or times hereafter executed by Borrower and
delivered to Lender, or to enforce any rights of Lender hereunder whether
before or after the occurrence of any Event of Default, or to collect any of
the Liabilities, then in any of such events, all of the reasonable
attorneys' fees arising from such services, and any expenses, costs and
charges relating thereto, shall be part of the Liabilities, payable on
demand.
5.12 Lender's Representative. Borrower hereby grants to a
representative of the Lender the right to attend and observe all Meetings of
the Borrower's Board of Directors held during the period commencing on the
Closing Date and for so long as any Liabilities are due and owing to Lender,
provided that said designee is reasonably acceptable to the Board of
Directors of the Borrower. The Borrower shall cause such designee to
receive written notice of all meetings of Borrower's Board of Directors as
if such designee was a member of Borrower's Board of Directors. Borrower and
Lender agree that the initial selected designee will be Xxxxx Xxxx. Lender's
designee shall be reimbursed for all related reasonable and customary out of
pocket expenses. Notwithstanding the foregoing, Borrower shall have the
right to exclude such designee from such meetings for discussions of non-
public information.
5.13 Financial Reporting. The Borrower shall provide to Lender audited
annual financial statements, audited by mutually agreed upon independent
certified public accounting firm. Said financial statements shall be
prepared in accordance with GAAP, consistently applied, and shall be
delivered to Lender within ninety (90) days after the close of the
Borrower's fiscal year. The report of the auditor that accompanies the
financial statements shall not contain any qualifications or limitations,
such auditor to be a mutually agreeable accounting firm. The Borrower's
fiscal year ends on June 30, and shall not be changed without the prior
written consent of the Lender. The Borrower shall provide to Lender
unaudited monthly financial statements (including month to date and year to
date actual to prior periods) and a report in the form of Exhibit 2, both
presented in accordance with GAAP, consistently applied, and shall be
delivered to Lender within twenty-five (25) days after the close of the
Borrower's month. If such financials are not delivered by such twenty-fifth
day, the Borrower shall pay a late fee of $500 per day until they are
received by Lender. Borrower shall also deliver any other reports reasonably
requested by Lender.
5.14 Financial Covenants. As of the date hereof and until the
Termination Date, the Borrower must maintain the following ratios:
(a) Cash Interest Coverage. a Consolidated EBITDA ratio, based on any
of the Borrower's quarterly financial statements (as determined on the last
day of each fiscal quarter for the immediately preceding quarter), of 2.0 or
greater. The Consolidated EBITDA ratio is defined as Consolidated EBITDA
divided by Interest Expense (Consolidated EBITDA / Interest Expense).
(b) Cash Flow Coverage Ratio. The ratio of (a) the Borrower's Cash
Flow to (b) the sum of (i) the Borrower's consolidated Interest Expense plus
(ii) the Borrower's scheduled payments of principal (including the principal
component of Capital Leases) to be paid during the 12 months following any
date of determination shall at all times exceed (1) 1.5 to 1.0. Compliance
with the ratio will be tested as of the last day of each month, with Cash
Flow and Interest Expense being calculated for the twelve months then ended.
(c) Current Ratio. The Borrower will at all times maintain a Current
Ratio of not less than 1.5 to 1.0. The Current Ratio shall be calculated
and tested quarterly as of the last day of each fiscal quarter of the
Borrower.
(d) Actual versus Budget. The Borrower shall on a quarterly basis
achieve 75 percent of its budgeted revenue and income. Budget numbers shall
be those delivered to Lender contemporaneously herewith and then on an
annual calendar basis.
5.15 Certificate of Covenant Compliance Within 30 days of the last day
of each March, June, September and December, the Borrow will issue a
Certificate of Covenant Compliance, executed by either the Chief Executive
Officer or Chief Financial Officer in the form of Schedule 5.16 attached
hereto. If the Borrower is not in compliance with the covenants specified
in Sections 5 and 6 herein, the Borrower will modify the Certificate of
Covenant Compliance by stating the exception and providing a detailed
explanation of the non-compliance
SECTION 6. Negative Covenants. The Borrower covenants and agrees that,
so long as any portion of the Liabilities remains unpaid and unless the
Lender otherwise gives its prior written consent, it will not, directly or
indirectly:
6.1 Mortgages, Liens, Etc. Incur, create, assume or permit to exist,
any Lien (other than the liens set forth in Schedule 3.9), mortgage, pledge,
security interest, encumbrance, lien or charge of any kind, including liens
arising under conditional sales or other title retention agreements upon any
of its assets or properties of any character other than in the ordinary
course of business, without the prior written consent of the Lender.
6.2 Capital Expenditures. Make or become committed to make, directly or
indirectly, any capital expenditures (including written limitation,
capitalized leases) amounting to in excess of $50,000 in the aggregate,
without the prior written consent of the Lender.
6.3 Loans and Investments. Lend or advance money, credit or property to
any Person, or invest in (by capital contribution or otherwise), or purchase
or repurchase the stock or indebtedness or assets or properties of any
Person, or agree to do any of the foregoing, other than in the ordinary
course of business, without the prior written consent of the Lender.
6.4 Guarantees. Assume, endorse or otherwise become or remain liable in
connection with the obligations (including accounts payable) of any other
Person, other than in the ordinary course of business.
6.5 Sale of Assets, Dissolution, Etc. Transfer, sell, assign, lease or
otherwise dispose of any of its properties or assets, or any assets or
properties necessary or desirable for the proper conduct of its business, or
transfer, sell, assign or otherwise dispose of any of its accounts, or
contract rights to any Person, or change the nature of its business,
wind-up, liquidate or dissolve, or agree to any of the foregoing, other than
in the ordinary course of business, without the prior written consent of the
Lender.
6.6 Acquisition of Assets. Permit the purchase, acquisition or lease of
assets of any Person or Persons, other than in the ordinary course of
business, without the prior written consent of Lender.
6.7 Compensation. The Borrower must not increase the compensation of
any of its officers or consultants making more than $100,000 per year, hire
any relative of any officer, director or shareholder of the Borrower, or pay
a bonus to any such person.
6.8 Indebtedness. Incur, create, assume or permit to exist, any
indebtedness or obligation or enter into or extend or amend any material
agreement or lease in excess of $100,000, other than in the ordinary course
of business without the prior written consent of Lender.
6.9 Subsidiaries. Establish or form a partially or wholly owned
subsidiary.
6.10 No Further Issuance of Securities. Other than as contemplated
herein or in the Loan Documents and other than with respect to the exercise
or conversion of previously outstanding options, warrants, and like
derivative securities, the Borrower hereby expressly agrees not to create,
issue or permit the issuance of any additional securities of the Borrower or
of any of its Subsidiaries, if any, or any rights, options or warrants to
acquire any such securities, without the prior written consent of the
Lender.
SECTION 7. Events of Default.
7.1 Defaults. Each of the following shall constitute an event of
default (an "Event of Default") hereunder: (a) the failure to pay when due
any principal or interest hereunder or under the Convertible Note; (b) any
other violation by the Borrower of any recital, funding condition,
representation, warranty, covenant or agreement contained in this Agreement
or in any of the Loan Documents; or any violation by the Borrower of any
recital, funding condition, representation, warranty, covenant or agreement
contained in any other document or agreement to which the Borrower and the
Lender are parties; (c) any change in the majority of the Board of Directors
or of the management or in the control of the Borrower which is not
contemplated in Section 5.12 herein or previously approved by the advance
written consent of the Lender; (d) execution of any agreement, letter,
memorandum of understanding or similar document relating to the transfer,
disposition or sale of all or substantially all of the assets of the
Borrower to anyone without the approval of the Lender; (e) an assignment for
the benefit of creditors by the Borrower; (f) an application for the
appointment of a receiver or liquidator for the Borrower or any of its
material assets; (g) an issuance of an attachment or the entry of a judgment
against the Borrower in excess of $50,000; (h) a default by the Borrower
with respect to any other indebtedness in excess of $50,000 due to the
Lender; (i) the making or sending of a notice of intended bulk sale by the
Borrower; (l) the issuance of a determination by a court of competent
jurisdiction that one or more Loan Documents or one or more material
provisions of any Loan Document is unenforceable, or the issuance of an
injunction against the enforcement of any such Loan Document or material
provision; (m) upon the reasonable determination by the Lender that there
has been a Material Adverse Effect; and (n) the occurrence of an Activity
Event of Default (as defined in Section 8.6 herein). Notwithstanding the
foregoing, other than with respect to a "payment" default, Borrower shall
have thirty (30) days following an Event of Default to cure such Default to
the satisfaction of Lender; provided, however, that nothing contained herein
shall obligate Lender to provide notice to Borrower of the occurrence of an
Event of Default, and accordingly, the thirty (30) day cure period granted
herein shall not be predicated on Borrower's receipt of any notice of
default. Said cure period shall begin on the earliest date that an Event of
Default is deemed to have occurred, the determination of which to be in
Lender's sole and absolute discretion. Upon the occurrence of any of the
foregoing Events of Default, the Convertible Note and the Loan will be
considered to be in default and the entire unpaid principal sum hereof,
together with accrued interest, will at the option of the holder thereof
become immediately due and payable in full. Upon the occurrence of an Event
of Default, the Borrower agrees to pay reasonable collection costs and
expenses, including reasonable attorneys' fees and interest (cash only, not
stock) at the lesser of: (i) 21% per annum (cash only, not stock) or (ii)
the maximum rate allowed under applicable law, from the date of the default
at the maximum rate permitted by law computed on the unpaid principal
balance.
SECTION 8. SBIC Provisions. The Borrower acknowledges that the Lender
is a small business investment company licensed by the United States Small
Business Administration, and makes the following representations, warranties
and covenants to Lender:
8.1 Small Business Concern. The Borrower represents and warrants to the
Lender that the Borrower, taken together with its "affiliates" (as that term
is defined in 13 C.F.R. S121.103), is a "Small Business Concern" within the
meaning of 15 U.S.C. S662(5), that is Section 103(5) of the Small Business
Investment Act of 1958, as amended (the "SBIC Act"), and the regulations
thereunder, including 13 C.F.R. S107, and meets the applicable size
eligibility criteria set forth in 13 C.F.R. S121.301(c)(1) or the industry
standard covering the industry in which the Borrower is primarily engaged as
set forth in 13 C.F.R. S121.301(c)(2). Neither the Borrower nor any of its
subsidiaries presently engages in any activities for which a small business
investment company is prohibited from providing funds by the SBIC Act,
including 13 C.F.R. S107.
8.2 Small Business Administration Documentation. On or before the
Closing Date, Lender shall have received SBA Form 480 (Size Status
Declaration) and SBA Form 652 (Assurance of Compliance) which have been
completed and executed by the Borrower, and SBA Form 1031 (Portfolio Finance
Report), Parts A and B of which have been completed by the Borrower (the
"SBA Documents").
8.3 Inspection. The Borrower will permit the Lender or its
representatives, at Borrower's expense, and examiners of the SBA to visit
and inspect the properties and assets of the Borrower, to examine its books
of account and records, and to discuss the Borrower's affairs, finances and
accounts with the Borrower's officers, senior management and accountants,
all at such reasonable times as may be requested by the Lender or SBA.
8.4 Informational Covenant. Within sixty (60) days after the end of the
fiscal year of the Borrower, the Borrower will furnish or cause to be
furnished to Lender information required by the SBA concerning the economic
impact of the Lender's investment, for (or as of the end of ) each fiscal
year, including but not limited to, board minutes, information concerning
full-time equivalent employees; Federal, state and local income taxes paid;
gross revenue; source of revenue growth; after-tax profit and loss; and
Federal, state and local income tax withholding. Such information shall be
forwarded by Borrower on a form provided by the Lender. The Borrower also
will furnish or cause to be furnished to the Lender such other information
regarding the business, affairs and condition of the Borrower as the Lender
may from time to time reasonably request.
8.5 Use of Proceeds. The Borrower certifies that it will use the
proceeds from the Loan for the purposes and in the amounts set forth on
Schedule 2.3. The Borrower will deliver to the Lender from time to time
promptly following the Lender's request, a written report, certified as
correct by an officer, verifying the purposes and amounts for which proceeds
from the Loan have been disbursed. The Borrower will supply to the Lender
such additional information and documents as the Lender reasonably requests
with respect to its use of proceeds, and will permit the Lender to have
access to any and all Borrower records and information and personnel as the
Lender deems necessary to verify how such proceeds have been or are being
used, and to assure that the proceeds have been used for the purposes
specified on Schedule 2.3.
8.6 Activities and Proceeds.
(a) Neither the Borrower nor any of its Affiliates (as defined in
above) will engage in any activities or use directly or indirectly the
proceeds from the Loan for any purpose for which a small business investment
company is prohibited from providing funds by the SBIC Act, including 13
C.F.R. S107.
(b) Without obtaining the prior written approval of the Lender, the
Borrower will not change within one (1) year of the Closing Date the
Borrower's business activity from that described on Schedule 8.6 to a
business activity which a small business investment company is prohibited
from providing funds by the SBIC Act. The Borrower agrees that any such
changes in its business activity without such prior written consent of the
Lender will constitute a material breach of the obligations of the Borrower
under this Agreement and the Loan Documents (an "Activity Event of
Default").
SECTION 9. Miscellaneous.
9.1 Registration Rights.
(a) Piggyback Registrations. If at any time after the date hereof,
the Borrower shall file a registration statement relating to any of its
securities, it will notify the Lender in writing and, upon the Lender's
request, will include the offer and sale of Registrable Securities in such
registration statement. In the event that the Borrower fails to include the
Registrable Securities in a piggy back statement as required herein, the
Borrower shall give notice demanding a registration, and within 105 days
after the notice the Borrower shall prepare and file a registration
statement with the SEC with respect to such Registrable Securities. If the
Borrower fails to file within said time period, then, at the option of
Lender, for each full calendar month that the Registrable Securities are not
fully registered, Borrower shall issue to Lender 0.1 % of its common shares
then outstanding computed on a fully diluted basis per day until the shares
are registered.
(b) Demand Registrations.
(i) Requests for Registration. At any time after the Closing
Date, Lender (or any lawful transferee thereof) may, in accordance herewith,
request registration under the Securities Act of all or any portion of its
Registrable Securities on Form S-1 or any similar long-form registration (a
"Long-Form Registrations"), or on Form S-2 or S-3 (including pursuant to
Rule 415 under the Securities Act) or any similar short-form registration
(each, a "Short-Form Registration"), if available. All registrations
requested pursuant to this Section 9.1(b) are referred to herein as "Demand
Registrations." Each request for a Demand Registration shall specify the
approximate number of Registrable Securities requested to be registered and
the anticipated per share price range for such offering.
(ii) Long-Form Registrations. Lender shall be entitled to request
one Long-Form Registration. A registration shall not count as one of the
permitted Long-Form Registrations until it has become effective. If Lender
is unable to register and sell at least 90% of the Registrable Securities it
has requested to be included in the first Long-Form Registration requested
by it, it shall be entitled to a second Long-Form Registration, provided
that such second Long-Form Registration may not be requested within six
months of the effectiveness of the most recent Long-Form Registration
requested by it. All Long-Form Registrations shall be underwritten
registrations.
(iii) Short-Form Registrations. In addition to the Long-Form
Registrations, Lender shall be entitled to request an unlimited number of
Short-Form Registrations; provided that the aggregate gross proceeds to be
received by the Lender or other securities exercising their "piggyback"
rights granted by the Borrower either herein or elsewhere in any such
requested Short-Form Registration must exceed $1,000,000. Demand
Registrations shall be Short-Form Registrations whenever the Borrower is
permitted to use any applicable short form. The Borrower shall use its best
efforts to make Short-Form Registrations on Form S-3 available for the sale
of the Registrable Securities. If the Company, pursuant to the request of
Lender, is qualified to and has filed with the SEC a registration statement
under the Securities Act on Form S-3 pursuant to Rule 415 under the
Securities Act (the "Required Registration"), then the Borrower shall use
its best efforts to cause the Required Registration to be declared effective
under the Securities Act as soon as practicable after filing, and, once
effective, the Borrower shall cause such Required Registration to remain
effective for a period ending on the earlier of (i) the date on which all
Registrable Securities have been sold pursuant to the Required Registration,
or (ii) the date as of which the Lender is able to sell all of the
Registrable Securities then held by it within a ninety-day period in
compliance with Rule 144 under the Securities Act.
(iii) Priority on Demand Registrations. The Borrower shall not
include in any Demand Registration any securities which are not Registrable
Securities without the prior written consent of the Lender, such consent not
to be unreasonably withheld. If a Demand Registration is an underwritten
offering and the managing underwriters advise the Borrower in writing that,
in their opinion, the number of Registrable Securities and, if permitted
hereunder, other securities requested to be included in such offering
exceeds the number of securities, which can be sold in an orderly manner in
such offering within a price range acceptable to Lender, then the Borrower
shall include in such registration, prior to the inclusion of any securities
which are not Registrable Securities, (i) first, the Registrable Securities
requested to be included in such registration by the Lender, and (ii)
second, the other securities requested to be included in such registration.
(iv) Restrictions on Demand Registrations. The Company shall not
be obligated to effect any Demand Registration within 120 days after the
effective date of a previous Demand Registration or a previous registration
in which the Lender was given piggyback rights pursuant to Section 9.1(a)
and in which the reduction, if any, in the number of Registrable Securities
requested to be included therein was not greater than 25%. The Borrower may
postpone for up to 180 days the filing or the effectiveness of a
registration statement for a Demand Registration if the Borrower, in good
faith, concludes that such Demand Registration would reasonably be expected
to have a Material Adverse Effect generally, and specifically with respect
to any proposal or plan by the Borrower or any of its Subsidiaries to
acquire financing, engage in any acquisition of assets (other than in the
ordinary course of business), or engage in any merger, consolidation, tender
offer, reorganization, or similar transaction; provided that, in such event,
the Lender shall be entitled to withdraw such request and the Borrower shall
pay all Registration Expenses in connection with such registration. The
Borrower may delay a Demand Registration hereunder only once in any calendar
year.
(v) Selection of Underwriters. The Borrower shall have the right
to select the investment banker(s) and manager(s) to administer any offering
required herein, subject to the consent of Lender, which consent shall not
be unreasonably withheld.
(c) Whenever required to include Registrable Securities in any
registration or to effect the registration of any Registrable Securities
pursuant to this Agreement, the Borrower shall, as expeditiously as
reasonably possible prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its absolute best lawful
efforts to cause such registration statement to become effective, and use
its absolute best efforts to keep such registration statement effective
until all such Registrable Securities have been distributed or sold. In
addition, the Borrower shall use its best lawful efforts to register and
qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Lender, provided that the Borrower shall not be
required in connection therewith or as a condition thereto to qualify as a
broker-dealer in any states or jurisdictions or to do business or to file a
general consent to service of process in any of such states or
jurisdictions.
(d) All expenses, other than underwriting discounts and commissions
incurred in connection the registrations contemplated herein, including,
without limitation, all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Borrower, and the reasonable fees and disbursements of one counsel for the
selling Lender, shall be borne by the Borrower.
(e) Subject to the terms and conditions of this Agreement and the
Convertible Notes, the right to cause the Borrower to register Registrable
Securities pursuant to this Agreement may be assigned by Lender to any
transferee or assignee of such securities; provided that said transferee or
assignee is a transferee or assignee of at least five percent (5%) of the
Registrable Securities.
9.2 Computation of Interest and Payment and Prepayment of Principal.
Interest on the Convertible Note shall be computed on the basis of a year of
365 days and paid monthly. If any principal amount under the Convertible
Note becomes due and payable on other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day and interest
on such principal shall be payable at the then applicable rate during such
extension period.
9.3 Waiver of Default. The Lender may, by written notice to the
Borrower, at any time and from time to time, waive any default in the
performance or observance of any condition, covenant or other term hereof or
any Event of Default which shall have occurred hereunder and its
consequences. Any such waiver shall be for such period and subject to such
conditions as shall be specified in any such notice. In the case of any
such waiver, the Borrower and the Lender shall be restored to their former
position and rights hereunder and under the other Loan Documents, and any
Event of Default so waived shall be deemed to be cured and not continuing;
but no such waiver shall extend to any subsequent or other Event of Default,
or impair any right consequent thereon.
9.4 Amendments and Waivers. The Lender and the Borrower may, subject to
the provisions of this section, from time to time, enter into written
agreements supplemental hereto for the purpose of adding any provisions to
this Agreement or the other Loan Documents or changing or waiving in any
manner the rights or requirements of the Lender or of the Borrower
hereunder. Any such written supplemental agreement or waiver shall be
binding upon the Borrower and Lender.
9.5 Notices. Except in cases where it is expressly herein provided that
such notice, request or demand is not effective until received by the party
to whom it is addressed, all notices, requests and demands to or upon the
respective parties hereto under this Agreement and all other Loan Documents
shall be deemed to have been given or made when deposited in the mail,
postage prepaid by registered or certified mail, return receipt requested,
addressed as follows or to such other address as may be hereafter designated
in writing by the respective parties.
The Borrower: VPGI Corp.
X.X. Xxx 000000
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
The Lender: Trident Growth Fund, LP
000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx St. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
9.6 No Waiver; Cumulative Remedies. No waiver of any provision hereof
shall be deemed to operate as a waiver of any other provision hereof. In
the event that the Borrower shall be deemed to have waived any provision
hereof at any time, such waiver shall not be deemed to have extended to any
other provision hereof at the time such waiver was deemed to have occurred
or at any other time. No failure to exercise and no delay in exercising, on
the part of Lender, any right, power or privilege hereunder, shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The rights and
remedies herein and in the other Loan Documents provided are cumulative and
not exclusive of any rights or remedies provided by law.
9.7 Survival of Agreements. All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Agreement and the other Loan Documents and the making and renewal of loans
hereunder and the termination of this Agreement and the other Loan
Documents.
9.8 Governing Law. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the
laws of the State of Texas without regard to its conflicts of law doctrine.
Each of the parties hereto irrevocably consents to the jurisdiction of the
federal and state courts located in Dallas County, the State of Texas.
9.9 Enforceability of Agreement. Should any one or more of the
provisions of this Agreement be determined to be illegal or unenforceable as
to one or more of the parties, all other provisions nevertheless shall
remain effective and binding on the parties hereto, up to the full amount
permitted by law.
9.10 Usury Savings Clause. Notwithstanding any other provision herein,
in the event that the aggregate interest rate charged under the Loan
Documents, including all charges or fees in connection therewith deemed in
the nature of interest, exceeds the maximum legal rate, then the Lender
shall have the right to make such adjustments as are necessary to reduce the
aggregate interest rate to the maximum legal rate. The Borrower waives any
right to prior notice of such adjustment and further agrees that such
adjustment may be made by the Lender subsequent to notification from the
Borrower that the aggregate interest charged exceeds the maximum legal rate.
There are no unwritten oral agreement between Borrower and Lender.
9.11 Execution of Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument.
9.12 Stamp or Other Taxes. The Borrower agrees to pay any and all
documentary, intangible stamp or excise taxes now or hereafter payable in
respect to this Agreement and the other Loan Documents or any modification
thereof, and shall hold the Lender harmless with respect thereto. The
Borrower further agrees that Lender may deduct from any account of the
Borrower the amount of any such documentary or intangible stamp or tax
payable, the decision of the Lender as to the amount thereof to be
conclusive, absent manifest error.
9.13 Intentionally deleted
9.14 Fees and Expenses. The Borrower shall reimburse the Lender for all
past and future fees and expenses (including but not limited to the
origination and commitment fee, reasonable out-of-pocket costs, legal
expenses (up to $15,000 as detailed above), offering fees, advisory and
consulting fees, travel and communication expenses, and reproduction costs)
incurred in connection with the Loan. ("Fees and Expenses"). Fees and
Expenses incurred through the Closing Date by the Borrower will be netted
against the initial proceeds received under this Agreement. Fees and
Expenses incurred after the Closing Date shall be paid by the Borrower
within 30 days of receipt from Lender of an invoice itemizing such Fees and
Expenses. Fees and Expenses incurred hereof to an affiliate of the Lender
shall be included with the Borrower's Liabilities.
9.15 Assignability. This Agreement shall inure to the benefit and be
binding upon the parties hereto and their respective successors and
permitted assigns. This Agreement and the Convertible Note will not be
assignable, in whole or in part, by the Borrower, without the prior written
consent of the Lender. This Agreement may be assigned or transferred, in
whole or in part, by the Lender upon written notice to the Borrower. A
change in control of either party shall be deemed to be an assignment. Any
purported assignment effected without such consent shall be null and void.
9.16 Complete Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes all agreements,
representations, warranties, statements, promises and understanding, whether
oral or written, with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this Loan
Agreement to be duly executed by their duly authorized officers, all as of
the day and year first above written.
TRIDENT GROWTH FUND, LP
By: TRIDENT MANAGEMENT, LLC, its
GENERAL PARTNER
By: /s/ Xxxxx Xxxx
-----------------------------
Xxxxx Xxxx, Authorized Member
VPGI CORP.
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------
Xxxxxxx X. Xxxxxx
Chief Executive Officer
