Exhibit 10.1
SECOND AMENDED AND RESTATED REVOLVING
CREDIT AND TERM LOAN AGREEMENT
BY AND BETWEEN
XXXXXXXXX SIGN COMPANY
AND
COMERICA BANK-TEXAS
AS OF
SEPTEMBER 30, 1998
SECOND AMENDED AND RESTATED REVOLVING
CREDIT AND TERM LOAN AGREEMENT
This SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT
(this "AGREEMENT"), dated as of September 30, 1998, is between XXXXXXXXX SIGN
COMPANY, a Texas corporation ("BORROWER"), and COMERICA BANK-TEXAS, a Texas
banking association ("LENDER").
RECITALS:
The Borrower has requested that the Lender modify and increase certain
existing credit facilities so as to extend credit to the Borrower in the form of
(i) revolving credit advances in an aggregate principal amount not to exceed
$17,000,000.00, and (ii) certain term loan advances in an aggregate principal
amount not to exceed $6,500,000.
The Lender has agreed, upon the terms and conditions hereinafter set
forth, to extend such credit to the Borrower, to continue to be secured by,
among other things, a Deed of Trust on the Real Property and a Security
Agreement covering the Collateral (as such terms are hereinafter defined).
Certain security documents have been previously executed and delivered.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the Borrower and the Lender hereby agree as follows:
SECTION 1. DEFINITIONS
1.1. DEFINITIONS. As used in this Agreement, the following terms shall
have the respective meanings indicated below:
"ACCOUNTS" shall have the meaning given such term in the UCC.
"ADJUSTED LIBOR RATE" shall mean, for any LIBOR Advance for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) as reasonably determined by the
Lender to be equal to the LIBOR Rate for such LIBOR Advance for such
Interest Period divided by 1 minus the Reserve Requirement for such LIBOR
Advance for such Interest Period.
"ADVANCE" shall mean a Loan or an advance of funds by the Lender
to the Borrower pursuant to this Agreement.
"ADVANCE REQUEST FORM" shall mean a certificate, in substantially
the form approved by the Lender, properly completed and signed by the
Borrower requesting an Advance.
"AGREEMENT" shall mean this Second Amended and Restated Revolving
Credit
CREDIT AGREEMENT - Page 2
and Term Loan Agreement, which shall supersede in all respects that
certain First Amended and Restated Revolving Credit and Term Loan
Agreement dated as of October 31, 1996, as amended prior to this date.
"APPLICABLE RATE" shall mean: (a) as it relates to the Revolving
Credit Note, the Applicable Revolving Credit Note Rate; and (b) as it
relates to the Term Notes, the Applicable Term Note Rate for each
respective Term Note.
"APPLICABLE REVOLVING CREDIT NOTE RATE" shall mean: (a) during
the period that an Advance is a Prime Rate Advance, the Prime Rate plus
one-quarter of one percent (0.25%); and (b) during the period that an
Advance is a LIBOR Advance, the Adjusted LIBOR Rate, plus two and three
quarters percent (2.75%).
"APPLICABLE TERM NOTE RATE" shall mean: (a) during the period that
an Advance is a Prime Rate Advance, the Prime Rate, plus one-quarter of
one percent (0.25%); and (b) during the period that an Advance is a LIBOR
Advance, the Adjusted LIBOR Rate plus two and three quarters percent
(2.75%); PROVIDED, HOWEVER, as to Prime Rate Advances under Term Note C,
the rate shall be the Prime Rate plus one and one-half of one percent
(1.50%), and as to LIBOR Advances under Term Note C, the rate shall be
the Adjusted LIBOR Rate plus four percent (4.0%).
"ASSESSMENT RATE" shall mean, at any time, the rate (rounded
upwards, if necessary, to the nearest 1/100 of 1%) then charged by the
Federal Deposit Insurance Corporation (or any successor) to the Lender
for deposit insurance for Dollar time deposits with the Lender at its
principal office in Dallas, Texas as reasonably determined by the Lender.
"AUTHORIZED OFFICER" shall mean each officer of the Borrower who
has been authorized by the Borrower to request Loans hereunder and who
has been furnished by the Borrower with the Security Code. The Borrower
shall provide the Lender with a list of Authorized Officers.
"AVAILABLE CASH FLOW" shall mean as to the Borrower, as of any
date of determination and as determined in accordance with GAAP, the sum
of (i) the consolidated net income attributable to holders of common
stock of the Borrower for the preceding six months, PLUS (ii) the
depreciation and amortization for such period, (iii) plus any deferred
tax credits, or minus any deferred tax debits, realized in determining
net income for such period, MINUS (iv) all regularly scheduled (i.e.,
excluding the Cash Flow Sweep Payment) payments of principal on all Term
Notes for the same six-month period.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code,
as
CREDIT AGREEMENT - Page 3
amended, or any successor act or code.
"BORROWER" shall mean Xxxxxxxxx Sign Company, a Texas corporation.
"BORROWING BASE" shall mean, at any particular time and as
determined on the basis of information furnished in the most recent
Borrowing Base Certificate, an amount equal to the sum of (a) eighty-five
percent (85%) of the aggregate principal balance of the Borrower's
Eligible Accounts, plus (b) the lesser of Nine Million Dollars
($9,000,000.00) or fifty-five percent (55%) of the Borrower's Eligible
Inventory.
"BORROWING BASE CERTIFICATE" shall mean a certificate in a form
reasonably acceptable to the Lender, completed in all material respects
and executed by an authorized officer or other designee of the Borrower
and setting forth Borrower's computation of the Borrowing Base as of the
date of such certificate and such other information as may reasonably be
requested by the Lender from time to time.
"BUSINESS DAY" shall mean each day on which the Lender is open to
carry on its normal commercial lending business.
"CASH FLOW" shall mean, as of any date of determination and as
determined in accordance with GAAP, the sum of (i) the consolidated net
income attributable to holders of common stock of the Borrower for the
preceding twelve month period, PLUS (ii) the consolidated depreciation
and amortization for such period, and (iii) minus any deferred taxes, or
plus any tax refunds, of the Borrower for such period.
"CASH FLOW COVERAGE RATIO" shall mean, as of any date of
determination, the Borrower's Cash Flow for the previous twelve months
divided by regularly scheduled payments (i.e., exclusive of any
prepayments) of principal made on all Senior Indebtedness for the same
period.
"CASH FLOW SWEEP PAYMENT" shall have the meaning given such term
in Section 3.3(c) of this Agreement.
"COLLATERAL" shall mean all of Borrower's Accounts, Chattel Paper,
Documents, Equipment, General Intangibles, Goods, Instruments and
Inventory (including all spare parts and all attachments and accessions
related to any Inventory or Goods), wherever located and whether now
owned or hereafter acquired, together with all replacements thereof,
substitutions therefor and all proceeds and products thereof, the Real
Property, and any securities pledged under any pledge agreement.
"CHATTEL PAPER," "DOCUMENTS," "GENERAL INTANGIBLES," "GOODS" and
"INSTRUMENTS" shall have the meanings given such terms in the UCC.
"COMMITMENTS" shall mean the Term Loan Commitment and the
Revolving Credit Commitment; "COMMITMENT" shall mean any one of the
Commitments.
CREDIT AGREEMENT - Page 4
"COMMON STOCK" shall mean the common stock, par value $0.01 per
share, of the Borrower.
"COMPLIANCE CERTIFICATE" shall mean a certificate in the form
approved by the Lender, completed and signed by the chairman, president
or a senior financial officer of the Borrower or other officer designated
by Borrower.
"CONTINUE," "CONTINUATION" and "CONTINUED" shall refer to the
continuation pursuant to Section 4.3 of a LIBOR Advance as a LIBOR
Advance from one Interest Period to the next Interest Period.
"CONTRACT RATE" shall mean, as of any date of determination, the
Applicable Revolving Credit Note Rate or Applicable Term Note Rate.
"CONVERT," "CONVERSION" and "CONVERTED" shall refer to a
conversion pursuant to Section 4.3 of one Type of Advance into another
Type of Advance.
"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
balance sheet liabilities in accordance with GAAP.
"DEED OF TRUST" shall mean, collectively, the deeds of trust
previously executed and/or to be executed by Borrower in favor of the
Lender covering certain Real Property located in Xxxxxxxx County, Texas
and Cherokee County, Texas, as modified from time to time.
"DEFAULT" shall mean a condition or event which, with the giving
of notice or the passage of time, or both, would result in an Event of
Default.
"DEFAULT RATE" shall mean the lesser of the Maximum Legal Rate or
the sum of the Contract Rate in effect from day to day plus two percent
(2%).
"EBITDA" shall mean, as of any applicable date of determination
and as determined in accordance with GAAP, net income for the previous
twelve months, plus (i) interest expense, tax expense, depreciation and
amortization expenses for the same period, excluding (ii) any gain or
loss for the same period arising from the sale of capital assets.
"ELIGIBLE ACCOUNTS" shall mean those Accounts of the Borrower for
which each of the warranties set forth in Section 8.17 of this Agreement
shall be true (as of any
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applicable date of determination) and which has been represented to be
an "ELIGIBLE ACCOUNT" on a Borrowing Base Certificate.
"ELIGIBLE INVENTORY" shall mean that inventory of the Borrower for
which each of the warranties set forth in Section 8.15 of this Agreement
shall be true (as of any applicable date of determination) and which has
been represented by the Borrower to be an item of "ELIGIBLE INVENTORY" on
a Borrowing Base Certificate.
"ENVIRONMENTAL LAWS" shall mean any and all federal, state, and
local laws, regulations, and requirements pertaining to the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. 9601 ET SEQ.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 ET SEQ. ("RCRA"), the Occupational Safety and Health Act, as
amended, 29 U.S.C. 651 ET SEQ., the Clean Air Act, 42 U.S.C. 7401 ET
SEQ., the Clean Water Act as amended, 33 U.S.C. 1251 ET SEQ., the Toxic
Substances Control Act, as amended, 15 U.S.C. ET SEQ., and all similar
laws, regulations, and requirements of any governmental authority or
agency having jurisdiction over 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 all of the Borrower's now owned and
hereafter acquired machinery, equipment, furniture, furnishings, and
other tangible personal property (except fixtures and Inventory),
including, without limitation, data processing hardware and software,
motor vehicles, aircraft, dies, tools, jigs, and office equipment, as
well as all of such types of property leased by the Borrower and all of
the Borrower's rights and interests with respect thereto under such
leases to the extent that any such lease does not prohibit or require a
consent to the creation of a Lien in favor of the Lender (including,
without limitation, options to purchase); together with all present and
future additions and accessions thereto, replacements therefor, component
and auxiliary parts and supplies used or to be used in connection
therewith, and all substitutes for any of the foregoing, and all manuals,
drawings, instructions, warranties and rights with respect thereto
wherever any of the foregoing is located.
"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 11.1 of this Agreement.
"FINANCIAL STATEMENTS" shall mean all those balance sheets,
earnings statements and other financial data which have been furnished or
will be furnished to the Lender for the purpose of, or in connection
with, this Agreement and the transactions contemplated hereby.
CREDIT AGREEMENT - Page 6
"FINANCING STATEMENTS" shall mean UCC financing statements
describing the Lender as secured party and the Borrower as debtor,
covering the Collateral and otherwise in such form, for filing in such
jurisdictions and with such filing offices as the Lender shall reasonably
deem necessary in order to perfect its security interest.
"FIXED CHARGES" shall mean, as of any date of determination, the
aggregate principal amount of Indebtedness scheduled to be paid by the
Borrower during the immediately preceding twelve months, PLUS capital
expenditures not financed with proceeds of Term Note B, for the same
period, PLUS (without duplication) payments actually paid by the Borrower
on Subordinated Debt during the same period.
"FIXED CHARGE COVERAGE RATIO" shall mean, as of any date of
determination, an amount equal to the ratio resulting as the quotient of
the Borrower's Cash Flow divided by Fixed Charges.
"GAAP" shall mean, as of any applicable date of determination,
generally accepted accounting principles consistently applied, as in
effect on the date hereof except as otherwise agreed by the Borrower and
the Lender.
"HAZARDOUS SUBSTANCE" shall mean any substance, product, waste,
pollutant, material, chemical, contaminant, constituent, or other
material which is or becomes regulated under any Environmental Law,
including, without limitation, asbestos, petroleum, and polychlorinated
biphenyls.
"INDEBTEDNESS" shall mean (i) all indebtedness for borrowed money
or for the deferred purchase price of property or services (including
without limitation, reimbursement and all other obligations with respect
to surety bonds, letters of credit and bankers' acceptances, whether or
not matured), (ii) all obligations evidenced by notes, bonds, debentures
or similar instruments, (iii) all indebtedness created or arising under
any conditional sale or other title retention agreement with respect to
property acquired, (iv) all capitalized leases and (v) the Senior
Indebtedness.
"INTEREST PERIOD" shall mean:
(a) With respect to Prime Rate Advances, each period
commencing on the date such Advances are made or Converted from
LIBOR Advances and ending on the date of payment or Conversion of
such Advances.
(b) With respect to any LIBOR Advances, each period
commencing on the date such Advances are made or Converted from
Prime Rate Advances or, in the case of each subsequent, successive
Interest Period applicable to a LIBOR Advance, the last day of the
next preceding Interest Period with respect to such Advance, and
ending on the numerically
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corresponding day in the first, second, third, fourth, fifth,
sixth, ninth or twelfth calendar month thereafter, as the Borrower
may select as provided in this Agreement hereof, except that each
such Interest Period which commences on the last Business Day of
a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent
calendar month.
Notwithstanding the foregoing: (a) each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, in the case of an Interest Period for LIBOR
Advances if such succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); (b) any Interest
Period which would otherwise extend beyond the Termination Date shall end
on the Termination Date; (c) no more than five (5) Interest Periods shall
be in effect at the same time for any Term Loan or for any Revolving
Loan; (d) no Interest Period for any LIBOR Advances shall have a duration
of less than one (1) month; and (e) no Interest Period may extend beyond
a principal repayment date unless, after giving effect thereto, the
aggregate principal amount of the LIBOR Advances having Interest Periods
that end after such principal payment date shall be equal to or less than
the Advances to be outstanding hereunder after such principal repayment
date.
"INVENTORY" shall mean all of the Borrower's now owned and
hereafter acquired inventory, goods, and merchandise, wherever located,
to be furnished under any contract of service or held for sale or lease,
all raw materials, work-in-process, finished goods, returned and
repossessed goods, and materials, and supplies of a nature or description
which are or might be used or consumed in the Borrower's business or used
in connection with the manufacture, packing, shipping, advertising,
selling or finishing of such inventory, goods, merchandise and such other
personal property, and all documents of title or other documents
representing them, and all proceeds thereof (including, but not limited
to, all proceeds of insurance with respect thereto, including the
proceeds of any casualty insurance); and any lists, information and
records prepared or kept in relation to the foregoing. Without
limitation, the term "Inventory" shall include all spare parts and all
attachments and accessions relating to any property or goods which
comprises "Inventory" under this definition.
"INVESTMENT DOCUMENTS" means, collectively, as may be amended,
restated or supplemented from time to time, the Senior Subordinated Note,
Preferred Stock and Warrant Purchase Agreement, dated as of September 30,
1998, by and among the Borrower and Continental Illinois Venture
Corporation, MIG Partners VIII and the other persons identified on the
signature pages thereto (the "PURCHASE AGREEMENT"), and the documents and
agreements delivered in connection therewith, including the Stockholders
Agreement, the Registration Agreement, the Stock Option Purchase
Agreements, the Warrants, the Certificate of Designation, Series A
Preferred, the Certificate of Designation, Series B Preferred and the
Certificate of Designation, Series C Preferred, in each case, as defined
in the Purchase Agreement, together with all schedules and exhibits
CREDIT AGREEMENT - Page 8
thereto.
"LENDER" shall mean Comerica Bank-Texas, a Texas banking
association.
"LIBOR ADVANCES" shall mean Advances the interest rates on which
are determined on the basis of the rates referred to in the definition of
"Adjusted LIBOR Rate" in this Section 1.1.
"LIBOR RATE" shall mean, for any LIBOR Advance for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) quoted by the Lender at approximately 2:00 P.M.
Dallas time (or as soon thereafter as practicable) on the same day of
such Interest Period for the offering by the Lender to leading banks in
the London interbank market of Dollar deposits in immediately available
funds having a term comparable to such Interest Period and in an amount
comparable to the principal amount of the LIBOR Advance to which such
Interest Period relates.
"LOAN" shall mean a loan or Advance of funds by the Lender
pursuant to this Agreement.
"LOAN DOCUMENTS" shall mean this Agreement and all promissory
notes, security agreements, deeds of trust, assignments, letters of
credit, guaranties and other instruments, documents, and agreements
executed in connection with this Agreement, as such instruments,
documents and agreements may be amended, modified, renewed, extended or
supplemented from time to time. "LOAN DOCUMENT" shall mean any one of
the Loan Documents.
"MAXIMUM LEGAL RATE" shall have the meaning specified in
Section 4.5 of this Agreement.
"NOTES" shall mean the Term Notes and the Revolving Credit Note.
"NOTE" shall mean any one of the Notes.
"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 Lender;
(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 for which adequate reserves have been established
as reflected by the balance sheet of the Borrower
CREDIT AGREEMENT - Page 9
at the time thereof;
(c) 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;
(d) Encumbrances consisting of zoning restrictions,
rights-of-way, easements or other restrictions on the use of real
property, none of which 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;
(g) The contracts, agreements, leases, burdens,
encumbrances, and other matters described on or otherwise
disclosed in Exhibit A to the Deed of Trust; and
(h) Existing liens described as a part of Schedule 8.5
attached hereto.
"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.
"PRIME RATE" shall mean that annual rate of interest reasonably
designated by the Lender as its prime rate and which is changed by the
Lender from time to time. The Prime Rate may not necessarily be the
lowest rate charged by the Lender.
"PRIME RATE ADVANCES" shall mean Advances that bear interest at
rates based upon the Prime Rate.
"REAL PROPERTY" shall mean those parcels of real property,
together with the fixtures thereto, described in the Deed of Trust.
"REGULATION D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System as the same may be amended or supplemented
from time to time.
"REGULATORY CHANGE" shall mean, with respect to the Lender, any
change after the date of this Agreement in United States federal or
state, or foreign laws or regulations (including Regulation D) or the
adoption or making after such date of any interpretations, directives, or
requests applying to a class of banks including the Lender of or under
any United States federal or state, or any foreign, laws or regulations
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the
CREDIT AGREEMENT - Page 10
interpretation or administration thereof.
"RESERVE REQUIREMENT" shall mean, for any LIBOR Advance for any
Interest Period therefor, the average maximum rate at which reserves
(including any marginal, supplemental or emergency reserves) are required
to be maintained during such Interest Period under Regulation D by member
banks of the Federal Reserve System in New York City with deposits
exceeding one billion Dollars against "Eurocurrency Liabilities" as such
term is used in Regulation D. Without limiting the effect of the
foregoing, the Reserve Requirement shall include any other reserves
required to be maintained by such member banks by reason of any
Regulatory Change against (a) any category of liabilities which includes
deposits by reference to which the Adjusted LIBOR Rate is to be
determined or (b) any category of extensions of credit or other assets
which include LIBOR Advances.
"REVOLVING CREDIT COMMITMENT" shall mean the obligation of the
Lender to make Revolving Credit Loans to the Borrower in an aggregate
principal amount at any time outstanding up to but not to exceed the
lesser of (a) Seventeen Million Dollars ($17,000,000), or (b) the
Borrowing Base.
"REVOLVING CREDIT LOAN" shall mean any Advance of funds made by
the Lender to the Borrower pursuant to Section 2.
"REVOLVING CREDIT NOTE" shall mean the promissory note of the
Borrower payable to the order of the Lender, in substantially the form of
Exhibit "A" hereto, and all extensions, renewals and modifications
thereof and substitutions therefor.
"SECURITY AGREEMENT" shall mean collectively, security agreements
previously executed in favor of the Lender pursuant to which the Borrower
grants to the Lender a security interest in all of Borrower's Accounts,
Chattel Paper, Documents, General Intangibles, Equipment, Instruments and
Inventory, wherever located and whether now owned or hereafter acquired,
together with all replacements thereof, substitutions therefor and all
proceeds and products thereof.
"SECURITY CODE" shall mean a code furnished by the Lender to the
Borrower, pursuant to Section 4.2 hereof, which an Authorized Officer of
the Borrower must deliver to the Lender upon making a telephonic Loan
request.
"SENIOR INDEBTEDNESS" shall mean all loans, advances and
indebtedness of the Borrower to the Lender under this Agreement, together
with all other indebtedness, obligations and liabilities whatsoever of
the Borrower to the Lender, 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.
"SENIOR INDEBTEDNESS RATIO" shall mean, at any particular time,
the ratio resulting as the quotient of (a) Senior Indebtedness divided by
(b) the Borrower's
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EBITDA for the immediately preceding twelve months.
"SUBORDINATED DEBT" shall mean all debt owed pursuant to the
Investment Documents, the payment of which (and the security, if any,
for) has been subordinated to the Indebtedness.
"SUBSIDIARIES" shall mean any entity of which more than fifty
percent (50%) of the outstanding voting securities shall, as of any
applicable date of determination, be owned directly, or indirectly
through one or more intermediaries, by the Borrower.
"TANGIBLE NET WORTH" shall mean, as of any applicable date of
determination, the excess of (i) the book value of all assets of Borrower
and the Subsidiaries (other than patents, patent rights, trademarks,
trade names, franchises, copyrights, goodwill, and similar intangible
assets) after all appropriate deductions (including, without limitation,
reserves for doubtful receivables, obsolescence, depreciation and
amortization), all as determined on a consolidated basis in accordance
with GAAP, less (ii) all Debt, plus (iii) all Subordinated Debt of the
Borrower and its Subsidiaries which, in accordance with GAAP, would be
required to be presented on their consolidated balance sheet at such
date.
"TERMINATION DATE" shall mean September 30, 2001.
"TERM LOAN" shall mean each Advance of funds made by the Lender to
the Borrower pursuant to Section 3.
"TERM LOAN COMMITMENT" shall mean the obligation of the Lender to
make the Term Loans to the Borrower pursuant to Section 3.
"TERM NOTE A" shall mean the $2,000,000 promissory note of
Borrower payable to the order of the Lender, in the form of EXHIBIT "B"
hereto, and all extensions, renewals and modifications thereof and
substitutions therefor.
"TERM NOTE B" shall mean, collectively, all promissory notes in
the form of EXHIBIT "C" hereto (and all extensions, renewals and
modifications thereof and substitutions therefor) which are executed from
time to time by Borrower, payable to the order of the Lender, and which
in aggregate principal face amount do not exceed $1,000,000.
"TERM NOTE C" shall mean the $3,500,000 promissory note of
Borrower payable to the order of Lender, in the form of EXHIBIT "D"
hereto, and all extensions, renewals and modifications thereof and
substitutions therefor.
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"TERM NOTES" shall mean, collectively, Term Note A, Term Note B
and Term Note C.
"TOTAL COMMITMENT AMOUNT" shall mean, at any particular time, the
amount which is the sum of the Revolving Credit Commitment and the Term
Loan Commitment, each as then in effect.
"TYPE" shall mean any type of Advance (i.e., Prime Rate Advance or
LIBOR Advance).
"UCC" shall mean the Uniform Commercial Code as in effect in the
State of Texas and as amended from time to time.
"UNUSED FACILITY FEE" shall mean on an annualized basis, a fee
equal to one-quarter percent (0.25%) of the difference, if any, between
$17,000,000.00 and the daily outstanding principal balance of the
Revolving Credit Note for each calendar quarter. Such fee shall be
payable within fifteen (15) days after the end of each calendar quarter
occurring after October 1, 1998.
1.2. ACCOUNTING TERMS. All accounting terms not specifically defined
in this Agreement shall be construed in accordance with GAAP. All accounting
terms and calculations herein with respect to the Borrower and the Subsidiaries
shall be made after elimination of all inter-company accounts and transactions
among them.
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. REVOLVING CREDIT LOANS
2.1. REVOLVING CREDIT COMMITMENT. Subject to the terms and conditions
of this Agreement, the Lender hereby agrees to make one or more Revolving Credit
Loans to the Borrower from time to time from the date hereof to and including
the Termination Date in an aggregate principal amount at any time outstanding up
to but not exceeding the amount of the Revolving Credit Commitment as then in
effect; PROVIDED, HOWEVER that the Lender shall not be obligated to make any
Revolving Credit Loan which would cause the principal balance of all outstanding
Revolving Credit Loans to exceed the amount which is the lesser of (i) the
Borrowing Base, or (ii) the Revolving Credit Commitment. Subject to the
limitations and the other terms and provisions of this Agreement, the Borrower
may from time to time borrow, repay and reborrow hereunder the amount of the
Revolving Credit Commitment by means of Prime Rate Advances and LIBOR Advances;
PROVIDED THAT the Lender shall not have an obligation to make any Revolving
Credit Loan on a day which is not a Business Day.
2.2. REVOLVING CREDIT NOTE. The obligation of the Borrower to repay
the Revolving Credit Loans and interest thereon shall be evidenced by the
Revolving Credit Note executed by the Borrower, payable to the order of the
Lender in the principal amount of the Revolving Credit
CREDIT AGREEMENT - Page 13
Commitment as originally in effect and dated of even date herewith. The
Revolving Credit Note shall in any event, subject to prior acceleration, be
payable in full on the Termination Date.
2.3. REPAYMENT OF REVOLVING CREDIT LOANS. The Borrower shall repay the
unpaid principal amount of all Revolving Credit Loans on the Termination Date.
Interest on the Revolving Credit Loans shall be payable in accordance with
Section 4.1.
2.4. USE OF PROCEEDS. Proceeds of the Revolving Credit Loans shall be
used by the Borrower for working capital and general corporate purposes, to
refinance the existing revolving credit facility which has been provided by the
Lender, and to assist in the financing of the Recapitalization.
SECTION 3. TERM LOAN AND DEED OF TRUST LOAN
3.1. TERM COMMITMENT. Subject to the terms and conditions of this
Agreement, the Lender hereby agrees to make the Term Loan to the Borrower on the
date hereof in the principal amount of the Term Loan Commitment. Each component
of the Term Loan Commitment shall terminate as set forth below.
3.2. TERM NOTES. The obligation of the Borrower to repay the Term Loan
and interest thereon shall be evidenced by the Term Notes executed by the
Borrower, payable to the order of the Lender in the principal amount of each
respective Term Note.
3.3. ADVANCES AND REPAYMENT OF TERM LOANS. Unless sooner accelerated
or called pursuant to the terms of any of the Term Notes, the Borrower shall
repay the principal indebtedness evidenced by each of the Term Notes as follows:
(a) TERM NOTE A. Term Note A is already fully funded because
it represents, in part, the present unpaid principal balance of existing
indebtedness owed by the Borrower to Lender as recited in Term Note A.
Unless sooner accelerated or otherwise due as provided herein or in Term
Note A, the unpaid principal balance of Term Note A shall be repaid in
84 monthly installments, the first 83 of which shall be in the amount of
$23,750.00 each, commencing November 1, 1998 and continuing on the same
day of each successive month thereafter until and including September
1,2005; on October 1, 2005, the 84th and final principal payment shall
be due and payable in an amount equal to the greater of $28,750 or
the unpaid principal balance of Term Note A.;
(b) TERM NOTE B. Term Note B Advances may only be used for
the purchase of new machinery or equipment and will only be made
available to the Borrower through the Termination Date. Each requested
Advance must be accompanied by the invoice for the machinery or equipment
to be purchased or financed with the proceeds of such Advance. The
Lender may refuse to advance for taxes, freight or discounts not taken
with regard to such purchases. Each promissory note executed as a Term
Note B note shall be due and payable in 60 equal monthly installments,
commencing on the first day of the month next following the month
of Advance for
CREDIT AGREEMENT - Page 14
funding that respective note, and continuing on the same day of each
successive month thereafter for 59 additional months;
(c) TERM NOTE C. Term Note C shall be funded by a single
Advance on the date of this Agreement. Unless sooner accelerated or
otherwise due as provided herein or in Term Note C, the unpaid principal
balance of Term Note C shall be repaid in 48 monthly installments, the
first 47 of which shall be in the amount of $73,500 each, commencing
November 1, 1998 and continuing on the same day of each successive month
thereafter up to and including September 1, 2002; on October 1, 2002,
the 48th and final principal payment shall be due and payable in an
amount equal to the greater of $45,500 or the unpaid principal balance of
Term Note C.
Commencing on May 15, 1999 and thereafter on each November 15 and
May 15 (such dates referred to as "SWEEP DATES"), the Borrower shall make
a principal payment under Term Note C (herein referred to as the "CASH
FLOW SWEEP PAYMENT") in an amount equal to the lesser of: (i) 50% of the
Available Cash Flow for the six-month period ending on September 30 (in
the case of the November 15 Sweep Date) and for the six-month period
ending on March 31 (in the case of the May 15 Sweep Date) or (ii) the
remaining unpaid principal balance of Term Note C payments in inverse
order of maturity. No prepayment premium shall be payable with respect
to any of the preceding required prepayments so made by the Borrower.
Notwithstanding any payment provisions above, the entire unpaid principal
balance of all Term Notes shall be due and payable in full at the
earliest to occur of (i) on the date the Revolving Credit Note becomes
due and payable, whether by acceleration or otherwise, (ii) when
accelerated by its terms or by the terms of this Agreement or any other
loan documents, or (iii) on the scheduled last payment date, whichever
occurs first.
Interest on each of the Term Notes shall be computed and paid in
accordance with Section 4. A final installment of all outstanding principal
PLUS accrued interest shall be due and payable at maturity, whether by
acceleration, or otherwise.
3.4. USE OF PROCEEDS. Proceeds of Term Note B shall be used by the
Borrower to purchase new machinery and equipment and proceeds of Term Note C
shall be used by the Borrower to partially refinance existing term indebtedness
to the Lender and to partially refinance certain indebtedness currently owed to
subordinated lenders.
SECTION 4. GENERAL - ALL LOANS
4.1. INTEREST. The unpaid principal amount of the Advances shall bear
interest prior to maturity at a varying rate per annum equal from day to day to
the lesser of (a) the Maximum Rate, or (b) as the case may be, the Applicable
Revolving Credit Note Rate or Applicable Term Note Rate. If at any time the
Applicable Revolving Credit Note Rate or Applicable Term Note
CREDIT AGREEMENT - Page 15
Rate for any Advance shall exceed the Maximum Legal Rate, thereby causing the
interest accruing on such Advance to be limited to the Maximum Legal Rate,
then any subsequent reduction in the Applicable Revolving Credit Note Rate or
Applicable Term Note Rate for such Advance shall not reduce the rate of
interest on such Advance below the Maximum Legal Rate until the aggregate
amount of interest accrued on such Advance equals the aggregate amount of
interest which would have accrued on such Advance if the Applicable Revolving
Credit Note Rate or Applicable Term Note Rate had at all times been in
effect. Accrued and unpaid interest on the Advances shall be due and payable
as follows:
(a) in the case of all Revolving Credit Note Advances, on the
first day of each month commencing October 1, 1998 and continuing on the
same day of each successive month thereafter up to and including
maturity, whether by acceleration or otherwise (whichever first occurs);
and
(b) for each of the Term Notes, on October 1, 1998 and,
thereafter, on the same dates as payments of principal are due, pursuant
to Section 3.3 hereof, and at maturity whether by acceleration or
otherwise (whichever first occurs).
Notwithstanding the foregoing, any outstanding principal of any Advance and (to
the fullest extent permitted by law) any other amount payable by the Borrower
under this Agreement or any other Loan Document that is not paid in full when
due (whether at stated maturity, by acceleration, or otherwise) shall bear
interest at the Default Rate for the period from and including the due date
thereof to but excluding the date the same is paid in full. Interest payable at
the Default Rate shall be payable from time to time on demand.
4.2. BORROWING PROCEDURE. The Borrower shall give the Lender notice by
means of an Advance Request Form of each requested Advance on the same day of
each LIBOR Advance, and no later than the date of any requested Prime Rate
Advance, in each case specifying: (a) the requested date of such Advance (which
shall be a Business Day), (b) the amount of such Advance, (c) the Type of the
Advance, and (d) in the case of a LIBOR Advance, the duration of the Interest
Period for such Advance. The Lender at its option may accept telephonic Advance
requests by an Authorized Officer. A telephonic request for an Advance by the
Borrower shall be promptly confirmed in writing if so requested by the Lender.
Each LIBOR Advance shall be in a minimum principal amount of $1,000,000.
Subject to the terms and conditions of this Agreement, each Advance shall be
made available to the Borrower by depositing the same, in immediately available
funds, in an account of the Borrower maintained with the Lender at the principal
office designated by the Borrower. All notices under this Section shall be
irrevocable and shall be given not later than 2:00 P.M. Dallas, Texas time on
the day which is not less than the number of Business Days specified above for
such notice.
4.3. CONVERSIONS AND CONTINUATIONS. The Borrower shall have the right
from time to time to Convert all or part of one Type of Advance outstanding
under any Note into another Type of Advance or to Continue all or part of any
LIBOR Advance by giving the Lender telephonic notice (confirmed in writing, if
so requested by the Lender) no later than 2:00 P.M. (Dallas time) on the day of
Conversion or Continuation of a LIBOR Advance, specifying: (a) the Conversion
CREDIT AGREEMENT - Page 16
or Continuation date, (b) the amount of the Advance to be Converted or
Continued, (c) in the case of Conversions, the Type of Advance to be
Converted into, and (d) in the case of a Continuation of or Conversion into a
LIBOR Advance, the duration of the Interest Period applicable thereto;
provided, that (a) LIBOR Advances may only be Converted on the last day of
the Interest Period, and (b) except for Conversions to Prime Rate Advances,
no Conversions shall be made while an Event of Default has occurred and is
continuing. If the Borrower shall fail to give the Lender the notice as
specified above for Continuation or Conversion of a LIBOR Advance prior to
the end of the Interest Period with respect thereto, such LIBOR Advance shall
automatically be Converted into a Prime Rate Advance on the last day of the
Interest Period for such LIBOR Advance.
4.4. PAYMENT. All payments of principal, interest, and other amounts
to be paid by the Borrower under this Agreement or any other Loan Document shall
be paid to the Lender at the address set forth herein for the delivery of
notices to the Lender, in immediately available funds, without setoff or
counterclaims, at or before 2:00 p.m. Dallas, Texas time on the date on which
such payment shall become due (each such payment made after such time on such
due date to be deemed to have been made on the next succeeding Business Day).
The Borrower shall, at the time of making each such payment, specify to the
Lender the sums payable by the Borrower under this Agreement and the other Loan
Documents to which such payment is to be applied (and in the event the Borrower
fails to so specify, or if an Event of Default has occurred and is continuing,
the Lender may apply such payment to the Senior Indebtedness in such order and
manner as it may elect in its sole discretion). Whenever any payment under this
Agreement or any other Loan Document shall be stated to be due on a day that is
not a Business Day, such payment shall be deemed due on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of the payment of interest.
4.5. MAXIMUM LEGAL RATE. The following provisions shall control this
Agreement and each Note:
(a) No agreements, conditions, provision or stipulations
contained in this Agreement or in any other Loan Document, or the
occurrence of an Event of Default, or the exercise by the Lender of the
right to accelerate the payment or the maturity of principal and interest
on any Note, or to exercise any option whatsoever contained in this
Agreement or any other Loan Document, or the arising of any contingency
whatsoever, shall entitle the Lender 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. In the event any
interest is charged in excess of the Maximum Legal Rate (the "EXCESS"),
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
CREDIT AGREEMENT - Page 17
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 Contract Rate
from time to time announced by the Lender 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 Lender 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
Lender, all interest at any time contracted for, charged or received
by the Lender in connection with the Borrower's obligations shall be
amortized, prorated, allocated and spread 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 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 "applicable weekly
ceiling" from time to time in effect under Chapter 1 of the Texas Credit
Title (Vernon's Texas Civil Statutes), Article 5069-1D.001, as amended.
(c) The provisions of this Section shall be deemed to be
incorporated into every document or communication relating to the
Senior Indebtedness which sets forth or prescribes any account, right
or claims or alleged account, right or claim of the Lender with
respect to the Borrower (or any other obligor in respect of the
Senior Indebtedness), whether or not any provision of this Section 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 Lender 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.
(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 Lender by reason thereof shall be payable upon
demand.
(e) The provisions of Chapter 346 of the Texas Finance Code
(Vernon's
CREDIT AGREEMENT - Page 18
Texas Code Annotated), as amended, are specifically declared by the
parties hereto not to be applicable to this Agreement or any other
Loan Document or to the transactions contemplated hereby or thereby.
4.6. BASIS OF COMPUTATION. Subject to Section 4.5 hereof, the
amount of all interest payable hereunder shall be computed for the actual
number of days elapsed on the basis of a year consisting of 360 days.
4.7. PREPAYMENTS.
4.7.1. MANDATORY PREPAYMENTS. The Borrower shall, within one (1)
day after notice thereof from the Lender, pay to the Lender as a payment
on the Revolving Credit Note the amount, if any, by which the principal
balance of the Revolving Credit Note outstanding from time to time
exceeds the Borrowing Base, together with all interest accrued and unpaid
on the amount of such excess.
4.7.2. OPTIONAL PREPAYMENTS. The Borrower may, at any time,
prepay the Advances in whole at any time or from time to time in part
without premium or penalty but with accrued interest to the date of
prepayment on the amount so prepaid, provided that compensation under
Section 5 hereof shall be due if LIBOR Advances are prepaid prior to the
last day of the Interest Period for such Advances.
4.8. UPON TERMINATION. The Lender, at its sole discretion, may upon
thirty (30) days prior written notice to the Borrower declare any or all of
the Term Notes due and payable in full at any time after the Termination Date
or (without prior notice) at any time upon or after an acceleration of the
Revolving Credit Note.
SECTION 5. YIELD PROTECTION AND ILLEGALITY
5.1. ADDITIONAL COSTS.
(a) The Borrower shall pay to the Lender from time to time
such amounts as the Lender may reasonably determine to be necessary
to compensate it for any costs incurred by the Lender which the
Lender determines are attributable to its making or maintaining of
any LIBOR Advances hereunder or its obligation to make any of such
Advances hereunder, or any reduction in any amount receivable by the
Lender hereunder in respect of any such Advances or such obligation
(such increases in costs and reductions in amounts receivable being
herein called "ADDITIONAL COSTS"), resulting from any generally
applicable Regulatory Change which:
(i) changes the basis of taxation of any amounts
payable to the Lender under this Agreement or the Note in respect
of any of such Advances (other than taxes imposed on the overall
net income of the Lender or its lending office for any of such
Advances by the jurisdiction in which the Lender has its principal
office or such lending office);
CREDIT AGREEMENT - Page 19
(ii) imposes or modifies any reserve, special deposit,
minimum capital, capital ratio, or similar requirement relating to
any extensions of credit or other assets of, or any deposits with
or other liabilities or commitments of, the Lender (including any
of such Advances or any deposits referred to in the definition of
"LIBOR Rate" in Section 1.1 hereof); or
(iii) imposes any other condition affecting this Agreement
or such Advances or any of such extensions of credit or
liabilities or commitments.
The Lender will notify the Borrower of any event occurring after the date
of this Agreement which will entitle the Lender to compensation pursuant
to this Section as promptly as practicable after it obtains knowledge
thereof and determines to request such compensation. The Lender will
furnish the Borrower with a certificate setting forth the basis and the
amount of each request of the Lender for compensation under this Section.
If the Lender requests compensation from the Borrower under this Section,
the Borrower may, by notice to the Lender suspend the obligation of the
Lender to make or Continue making, or Convert Advances into, Advances of
the Type with respect to which such compensation is requested until the
Regulatory Change giving rise to such request ceases to be in effect (in
which case the provisions of Section 5 hereof shall be applicable).
(b) Without limiting the effect of the foregoing provisions
of this Section, in the event that, by reason of any generally
applicable Regulatory Change, the Lender either (a) incurs Additional
Costs based on or measured by the excess above a specified level of
the amount of a category of deposits or other liabilities of the
Lender which includes deposits by reference to which the interest
rate on LIBOR Advances is determined as provided in this Agreement or
a category of extensions of credit or other assets of the Lender
which includes LIBOR Advances, or (b) becomes subject to restrictions
on the amount of such a category of liabilities or assets which it
may hold, then, if the Lender so elects by notice to the Borrower the
obligation of the Lender to make or Continue making, or Convert
Advances into, Advances of such Type hereunder shall be suspended
until such Regulatory Change ceases to be in effect (in which case
the provisions of Section 5 hereof shall be applicable).
(c) Determinations and allocations by the Lender for
purposes of this Section of the effect of any generally applicable
Regulatory Change on its costs of maintaining its obligations to make
Advances or of making or maintaining Advances or on amounts
receivable by it in respect of Advances, and of the additional
amounts required to compensate the Lender in respect of any
Additional Costs, shall be conclusive, provided that such
determinations and allocations are made on a reasonable basis.
(d) The Lender will not seek the benefits of this Section
5.1 unless it is, at the time of any attempts to collect amounts
under this Section 5.1 from the Borrower, applying similar
reimbursement standards to other borrowers of the Lender who have
CREDIT AGREEMENT - Page 20
loans with similar pricing options.
5.2. LIMITATION ON TYPES OF ADVANCES. Anything herein to
the contrary notwithstanding, if with respect to any LIBOR Advances
for any Interest Period therefor:
(a) The Lender reasonably determines (which determination
shall be conclusive) that quotations of interest rates for the relevant
deposits referred to in the definition of "LIBOR Rate" in Section 1.1
hereof are not being provided in the relative amounts or for the relative
maturities for purposes of determining the rate of interest for such
Advances as provided in this Agreement; or
(b) The Lender determines (which determination shall be
conclusive) that the relevant rates of interest referred to in the
definition of "LIBOR Rate" in Section 1.1 hereof on the basis of which
the rate of interest for such Advances for such Interest Period is to
be determined do not accurately reflect the cost to the Lender of making
or maintaining such Advances for such Interest Period;
then the Lender shall give the Borrower prompt notice thereof specifying the
relevant Type of Advances and the relevant amounts or periods, and so long as
such condition remains in effect, the Lender shall be under no obligation to
make additional Advances of such Type or to Convert Advances of any other
Type into Advances of such Type and the Borrower shall, on the last day(s) of
the then current Interest Period(s) for the outstanding Advances of the
affected Type, either prepay such Advances or Convert such Advances into
another Type of Advance in accordance with the terms of this Agreement.
5.3. ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for the Lender to (a) honor
its obligation to make LIBOR Advances hereunder or (b) maintain LIBOR
Advances hereunder, then the Lender shall promptly notify the Borrower
thereof and the Lender's obligation to make or maintain LIBOR Advances and to
Convert other types of Advances into LIBOR Advances hereunder shall be
suspended until such time as the Lender may again make and maintain LIBOR
Advances (in which case the provisions of Section 5.4 hereof shall be
applicable).
5.4. SUBSTITUTE PRIME RATE ADVANCES. If the obligation of the
Lender to make a LIBOR Advance shall be suspended pursuant to Section 5.1,
5.2 or 5.3 hereof (Advances of such Type being herein called "AFFECTED
ADVANCES" and such Type being herein called the "AFFECTED TYPE"), all
Advances which would be otherwise made by the Lender as Advances of the
Affected Type shall be made instead as Prime Rate Advances and all Advances
which would otherwise be Converted into Advances of the Affected Type shall
be converted instead into (or shall remain as) Prime Rate Advances (and, if
an event referred to in Section 5.1, 5.2 or 5.3 hereof has occurred and the
Lender so requests by notice to the Borrower, all Affected Advances of the
Lender then outstanding shall be automatically Converted into Prime Rate
Advances on the date specified by the Lender in such notice) and, to the
extent that Affected Advances are so made as (or Converted into) Prime Rate
Advances, all payments and prepayments of principal which would otherwise be
applied to the Lender's Affected Advances shall be applied instead to its
CREDIT AGREEMENT - Page 21
Prime Rate Advances.
5.5. COMPENSATION. The Borrower shall pay to the Lender, upon the
request of the Lender, such amount or amounts as shall be sufficient (in the
reasonable opinion of the Lender) to compensate it for any loss, cost, or
expense incurred by it as a result of:
(a) Any payment, prepayment or conversion of a LIBOR Advance
for any reason (including, without limitation, the acceleration of
outstanding Advances pursuant to this Agreement) on a date other than
the last day of an Interest Period for such Advance; or
(b) Any failure by the Borrower for any reason (including,
without limitation, the failure of any conditions precedent specified in
this Agreement to be satisfied) to borrow, Convert, or prepay a LIBOR
Advance on the date for such borrowing, Conversion, or prepayment,
specified in the relevant notice of borrowing, prepayment, or Conversion
under this Agreement.
Without limiting the effect of the preceding sentence, such compensation
shall include an amount equal to the excess, if any, of (i) the amount of
interest which otherwise would have accrued on the principal amount so paid
or Converted or not borrowed for the period from the date of such payment,
Conversion, or failure to borrow to the last day of the Interest Period for
such Advance (or, in the case of a failure to borrow, the Interest Period for
such Advance which would have commenced on the date specified for such
borrowing) at the applicable rate of interest for such Advance provided for
herein, less the applicable margin, over (ii) the interest component of the
amount the Lender would have bid in the London interbank market (if such
Advance is a LIBOR Advance) for Dollar deposits of leading banks and amounts
comparable to such principal amount and with maturities comparable to such
period.
SECTION 6. SECURITY
6.1. COLLATERAL. To secure the full and timely performance of the
Borrower's covenants set out in this Agreement and the other Loan Documents
and to secure the repayment of each of the Notes and all other Senior
Indebtedness whatsoever of the Borrower to the Lender, the Borrower agrees to
grant and assign a lien upon and security interest in the Collateral pursuant
to the Security Agreement, the Financing Statements and other instruments and
agreements required by and satisfactory to the Lender.
6.2. SETOFF. If an Event of Default shall have occurred and be
continuing, the Lender shall have the right to set off and apply against any
Senior Indebtedness then due in such manner as the Lender may determine, at
any time and without notice to the Borrower, any and all deposits (general or
special, time or demand, provisional or final) or other sums at any time
credited by or owing from the Lender to the Borrower. As further security
for the Senior Indebtedness, the Borrower hereby grants to the Lender a
security interest in all money, instruments, and other property of the
Borrower now or hereafter held by the Lender, including, without limitation,
property held in safekeeping. In addition to the Lender's right of setoff
and as
CREDIT AGREEMENT - Page 22
further security for the Senior Indebtedness, the Borrower hereby grants to
the Lender a security interest in all deposits (general or special, time or
demand, provisional or final) and other accounts of the Borrower now or
hereafter on deposit with or held by the Lender and all other sums at any
time credited by or owing from the Lender to the Borrower. The rights and
remedies of the Lender hereunder are in addition to other rights and remedies
(including, without limitation, other rights or setoff) which the Lender may
have.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF LENDER
7.1. CONDITIONS TO FIRST LOAN. The obligations of the Lender under
this Agreement are subject to the occurrence, prior to or on the date of the
initial Loan hereunder, of each of the following conditions, any or all of
which may be waived in whole or in part by the Lender in writing:
7.1.1. DOCUMENTS EXECUTED AND FILED. The Borrower shall have
executed (or caused to be executed) and delivered to the Lender and, as
appropriate, there shall have been signed for filing with such filing
offices as the Lender shall deem appropriate, the following:
(a) The Revolving Credit Note;
(b) The Term Notes; and
(c) A Modification to the Deed of Trust in a form
acceptable to the Lender.
7.1.2. CERTIFIED RESOLUTIONS. The Borrower shall have furnished
to the Lender a copy of resolutions of the Board of Directors of the
Borrower authorizing the execution, delivery and performance of this
Agreement, the borrowings hereunder, the Notes and all other Loan
Documents, which shall have been certified by the Secretary or Assistant
Secretary of the Borrower as of the date hereof.
7.1.3. CERTIFICATE OF GOOD STANDING. The Borrower shall have
furnished to the Lender a certificate of good standing of Borrower, which
shall have been certified by the state agency issuing the same as of a
date reasonably near the date hereof.
7.1.4. CERTIFICATE OF INCUMBENCY. The Borrower shall have
furnished to the Lender a certificate of the Secretary or Assistant
Secretary of each of the Borrower, certified as of the date hereof, as to
the incumbency and signatures of such officers signing this Agreement,
the Notes and the other Loan Documents.
7.1.5. PAYMENT OF FEES. Evidence that all costs and expenses
(including reasonable attorneys' fees) incurred by the Lender and known
to date in connection with the preparation of this Agreement and the
other Loan Documents shall have been paid in
CREDIT AGREEMENT - Page 23
full by the Borrower.
7.1.6. APPROVAL OF LENDER 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 Lender, 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.
7.1.7. OTHER INFORMATION AND DOCUMENTATION. The Lender shall have
received such other information, certificates and executed documents as
it shall have reasonably requested.
7.2. CONDITIONS TO ALL LOANS. The obligation of the Lender to make
any Loan (including any initial Advance) is subject to the occurrence, prior
to or on the requested date of each such Loan, of each of the following
conditions, any or all of which may be waived in whole or in part by the
Lender in writing:
7.2.1. LOAN REQUEST. The Lender shall have received a written
Advance Request Form (accompanied by supporting invoices in the case of
Term Note B Advances), executed by the appropriate officer of the
Borrower and timely delivered as required by this Agreement.
7.2.2. NO DEFAULT. As of such date:
(a) No Default or Event of Default shall have then
occurred and be continuing; and
(b) Each warranty or representation referenced in
Section 8.16 of this Agreement shall be true and correct.
7.2.3. INVESTMENT DOCUMENTS FUNDING. The Borrower shall have
received at least $9,250,000 in good funds from consummation of the note
purchase transactions contemplated by the Investment Documents and all
Investment Documents shall have been executed and delivered by all
parties thereto.
SECTION 8. WARRANTIES AND REPRESENTATIONS
The Borrower represents and warrants to the Lender:
8.1. CORPORATE EXISTENCE AND POWER. (a) The Borrower (i) is a
corporation duly organized, validly existing and in good standing under the
laws of its state of organization, (ii) has the corporate power and authority
to own its properties and assets and to carry out its business as now being
conducted and is qualified to do business and in good standing in every
jurisdiction wherein such qualification is necessary except where the failure
to be so qualified
CREDIT AGREEMENT - Page 24
would not result in a material adverse effect on the business or financial
condition of the Borrower and (iii) has the corporate power and authority to
execute and perform this Agreement, to borrow money in accordance with its
terms, to execute and deliver each of the Notes and the other Loan Documents
to be executed by it and to grant to the Lender liens and security interest
in the Collateral as hereby contemplated and to do any and all other things
required of it hereunder.
8.2. AUTHORIZATION AND APPROVALS. As to the Borrower, the
execution, delivery and performance of this Agreement, the borrowing
hereunder and the execution and delivery of each of the other Loan Documents
contemplated hereby (a) have been duly authorized by all requisite corporate
action, (b) 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 Lender, (c) 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 except where such violation would not result in a material adverse
effect on the business or financial condition of the Borrower, (d) 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 indenture, agreement or other
instrument except where such conflict, breach or default would not result in
a material adverse effect on the business or financial condition of the
Borrower, and (e) will not result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of its properties or
assets other than in favor of the Lender and as contemplated hereby.
8.3. VALID AND BINDING AGREEMENT. This Agreement is, and each of
the other Loan Documents will be, when delivered, valid and binding
obligations of the Borrower, in each case enforceable in accordance with
their respective terms except as limited by insolvency, bankruptcy or similar
laws and equitable principles affecting the enforcement of creditors' rights
generally.
8.4. ACTIONS, SUITS OR PROCEEDINGS. Except as disclosed on Schedule
8.4 or otherwise disclosed in writing to the Lender, 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 properties or
rights of the Borrower, which, if adversely determined, would materially
impair the right of the Borrower to carry on business substantially as now
conducted or could have a material adverse effect upon the financial
condition of the Borrower.
8.5. NO LIENS, PLEDGES, MORTGAGES OR SECURITY INTERESTS. Except for
Permitted Liens, none of the Borrower's assets and properties, including the
Collateral and the Real Property, is subject to any mortgage, pledge, lien,
security interest or other encumbrance of any kind or
CREDIT AGREEMENT - Page 25
character.
8.6. ACCOUNTING PRINCIPLES. The Financial Statements have been
prepared on a consolidated basis in accordance with GAAP and fairly present
the financial condition of the Borrower as of the dates, and the results of
its operations for the periods, for which the same are furnished to the
Lender. To the best of Borrower's knowledge and belief, the Borrower has no
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 or otherwise disclosed in writing to the
Lender.
8.7. NO ADVERSE CHANGES. There has been no material adverse change
in the business, properties or condition (financial or otherwise) of the
Borrower since the date of the latest of the Financial Statements or
otherwise disclosed in writing to the Lender.
8.8. CONDITIONS PRECEDENT. As of the date of each Loan hereunder,
all appropriate conditions precedent referred to in this Agreement shall have
been satisfied (or waived in writing by the Lender).
8.9. TAXES. The Borrower has filed (or in the case of any
consolidated, unitary or combined return, the Borrower has been included in a
return filed) by the extended due date therefor all federal, state and local
tax returns and other reports required by law to be filed and which are
material to the conduct of its business, has paid or caused to be paid all
material taxes, assessments and other governmental charges that are shown to
be due and payable by Borrower under such returns, and has 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 asserted deficiency or assessment in a material amount in
connection with any taxes, assessments or other governmental charges not
adequately disclosed in the Financial Statements or otherwise disclosed in
writing to the Lender.
8.10. COMPLIANCE WITH LAWS. The Borrower has complied with all
applicable laws, to the extent that failure to comply would materially
interfere with the conduct of its respective business.
8.11. INDEBTEDNESS; MATERIAL AGREEMENTS.
(a) Except as disclosed on Schedule 8.11, the Borrower has no
Indebtedness.
(b) To the best knowledge of the Borrower, it has complied
with the provisions of all material contracts or commitments; and to the
best knowledge of Borrower, no party to such agreements 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.
8.12. MARGIN STOCK. The Borrower is not engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying
CREDIT AGREEMENT - Page 26
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 G, T, U or X of the said Board of Governors. The
Borrower does not own any margin stock.
8.13. PENSION FUNDING. The Borrower has not incurred any material
accumulated funding deficiency within the meaning of ERISA or any material
liability to the PBGC in connection with any employee benefit plan
established or maintained by the Borrower and no presently existing
reportable event or presently existing prohibited transaction, as defined in
ERISA, has occurred with respect to such plans which would result in a
material adverse effect on the business or financial condition of Borrower.
8.14. MISREPRESENTATION. To the best knowledge of the officer
signing the same, after reasonable inquiry, no warranty or representation by
the Borrower contained herein or in any certificate or other document
furnished by the Borrower contemporaneously herewith 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.
8.15. ELIGIBLE INVENTORY. As to each item of Inventory represented
by the Borrower to be "Eligible Inventory" on a Borrowing Base Certificate,
as of the date of each such Borrowing Base Certificate:
(a) Such item of Inventory is of good and merchantable quality
and is usable or salable by Borrower in the ordinary course of its
business, and is not obsolete (except that as to work in process, such
item need not meet the Standard of "merchantable").
(b) The Borrower has granted to the Lender a perfected security
interest in such item of Inventory (as an item of the Collateral) prior
in right to all other Persons (other than Permitted Liens), and such item
of Inventory has not been sold, transferred or otherwise assigned by the
Borrower, to any Person, other than the Lender and other than sales in
the ordinary course of business occurring after the date of such
Borrowing Base Certificate.
(c) Such item of Inventory is located within the United States
at locations identified in the Security Agreement.
8.16. LOANS AND REPRESENTATIONS. As of the date of each Advance
Request, the Borrower, unless otherwise disclosed to the Lender in writing,
shall be deemed to represent and warrant to the Lender, as an inducement to
having the Lender make the requested Loan, that as of the date of such Loan
request (a) the representations and warranties contained in Sections 8.1,
8.4, 8.7, 8.15 and 8.17 of this Agreement are true and correct in all
material respects, (b) the requirements of Section 7.2.2 have been complied
with and (c) the Lender will have a first
CREDIT AGREEMENT - Page 27
priority security interest and lien on the Collateral covered by the invoice
or xxxx of sale (or similar document), if any, to which the Loan request
relates.
8.17. ELIGIBLE ACCOUNTS. As to each Account represented by the
Borrower to be an "Eligible Account" on a Borrowing Base Certificate, as of
the date of each such Borrowing Base Certificate:
(a) Such Account arose in the ordinary course of the
business of the Borrower out of either (i) a bona fide sale of
Inventory by the Borrower, in accordance with the terms of the
Contract under which the Account arose, or (ii) services performed by
the Borrower under an enforceable contract, and in such case such
services have in fact been performed for the appropriate account
debtor in accordance with such contract.
(b) Unless otherwise approved in writing by the Lender on a
case-by-case basis, such Account represents a legally valid and
enforceable claim which is due and owing to the Borrower by such
account debtor in at least such amount as is represented by the
Borrower to the Bank on such Borrowing Base Certificate, such Account
is due and payable not more than thirty (30) days from the delivery
of the related Inventory, or the performance of the related services,
giving rise to such Account and, unless the Bank otherwise allows,
such Account has not been due for more than ninety (90) days (from
the date of invoice).
(c) To Borrower's knowledge, the unpaid balance of such
Account as represented by the Borrower to the Lender on such
Borrowing Base Certificate is not subject to any defense,
counterclaim, set-off, credit, allowance or adjustment by the account
debtor because of returned, inferior or damaged Inventory or
services, or for any other valid reason, except for customary
discounts allowed by Borrower in the ordinary course of business for
prompt payment or as otherwise indicated by credit memos disclosed in
such Borrowing Base Certificate, and there is no agreement between
Borrower, the related account debtor and any other person for any
rebate, discount, concession or release of liability, in whole or in
part.
(d) To Borrower's knowledge, the transactions leading to
the creation of such Account comply with all applicable state and
federal laws and regulations.
(e) The Borrower has granted to the Bank a perfected
security interest in such Account (as an item of the Collateral)
prior in right to all other persons (other than Permitted Liens), and
such Account has not been sold, transferred or otherwise assigned by
the Borrower to any Person, other than the Bank.
(f) Such Account is not represented by any note, trade
acceptance, draft or other negotiable instrument or by any chattel
paper, except any such as constitute an item of Collateral on or
prior to such Account's inclusion on such Borrowing Base
CREDIT AGREEMENT - Page 28
Certificate.
(g) The Borrower has not received, with respect to such
Account, any actual notice of the death of the related account
debtor, nor of the dissolution, liquidation, termination of
existence, insolvency, business failure, appointment of a receiver
for any part of the property of, assignment for the benefit of
creditors by, or the filing of a petition in bankruptcy or the
commencement of any proceeding under any bankruptcy or insolvency
laws by or against, such account debtor.
(h) The account debtor on such Account is not:
(i) an affiliate of the Borrower,
(ii) the United States of America or any department,
agency or instrumentality thereof (to the extent the same exceeds
$5,000 for any single invoice) unless the grant of a security
interest therein has been made to the Lender in compliance with
applicable federal assignment of claims laws and regulations,
(iii) a citizen or resident of any jurisdiction other than
one of the United States (unless covered by satisfactory letter of
credit, foreign receivable insurance, or otherwise acceptable to
the Lender), or
(iv) an account debtor whom the Bank has, in the
reasonable exercise of such Bank's sole reasonable discretion,
determined to be (based on such factors relating to such account
debtor as the Bank deems appropriate) an ineligible account debtor
and as to which the Bank has notified the Borrower, PROVIDED,
HOWEVER, that any such notice shall not apply retroactively as to
any particular Account if such Account was included on a prior
Borrowing Base Certificate by the Borrower prior to the giving of
such notice by the Bank and which otherwise complied with each and
every other requirement under this Agreement for the denomination
of such Account as an "Eligible Account."
SECTION 9. AFFIRMATIVE COVENANTS
From the date hereof until the Senior Indebtedness is paid in full,
the Borrower covenants and agrees that it will:
9.1. FINANCIAL AND OTHER INFORMATION.
9.1.1. ANNUAL FINANCIAL REPORTS. Furnish to the Lender in form
satisfactory to the Lender not later than ninety (90) days after the
close of each fiscal year of Borrower, beginning with the fiscal year
ending December 31, 1998, 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 flow for each such fiscal year of Borrower
and the
CREDIT AGREEMENT - Page 29
Subsidiaries, and such other comments and financial details as are
usually included in similar reports. Such consolidated reports shall
be audited in accordance with GAAP by independent certified public
accountants of recognized standing selected by Borrower and reasonably
acceptable to the Lender and shall contain unqualified opinions as to the
fairness of the statements therein contained.
9.1.2. MONTHLY FINANCIAL STATEMENTS. Furnish to the Lender not
later than thirty (30) days after the close of each month, beginning with
reports for the month ending September 30, 1998, financial statements
containing the consolidated and consolidating balance sheet of Borrower
as of the end of each month, consolidated and consolidating statements of
income of Borrower up to the end of each month. These statements shall
be prepared on substantially the same accounting basis as the statements
required in Section 9.1.1 of this Agreement and shall be in such detail
as the Lender may reasonably require, and the accuracy of the statements
(subject to year-end adjustments) shall be certified by the chief
executive or financial officer of Borrower.
9.1.3. BORROWING BASE CERTIFICATE AND OTHER MONTHLY REPORTS.
Furnish to the Lender monthly (i) by the 30th day of each month a
Borrowing Base Certificate for the last day of the prior month, on behalf
of the Borrower, confirming that the outstanding principal balance of the
Revolving Credit Note does not exceed the lesser of the Revolving Credit
Commitment Amount or the Borrowing Base, as then in effect (or, if such
is not the case, accompanied by a mandatory prepayment in accordance with
this Agreement), and (ii) by the 20th day of each month, a detailed
listing of the Borrower's Inventory and Accounts aging (in such detail as
the Lender may require) for the immediately preceding month.
9.1.4. QUARTERLY COMPLIANCE CERTIFICATE. Furnish to the Lender
not later than the 30th day of the month following the end of each
calendar quarter (beginning with the quarter ending September 30, 1998) a
Compliance Certificate dated as of the end of the month immediately prior
to the due date for such Compliance Certificate.
9.1.5. ADVERSE EVENTS. Promptly inform the Lender of the
occurrence of any Event of Default or Default, or of any occurrence which
has or would reasonably be expected to have a materially adverse effect
upon the Borrower's business, properties, financial condition or ability
to comply with their respective obligations hereunder.
9.1.6. PUBLIC FILINGS. Furnish to the Lender, promptly, upon
filing the same, all securities agency filings, both state and federal.
9.1.7. OTHER INFORMATION AS REQUESTED. Promptly furnish to the
Lender such other information regarding the operations, business affairs
and financial condition of the Borrower as the Lender may reasonably
request from time to time and permit the Lender, its employees, attorneys
and agents, to inspect all of the books, records and properties of the
Borrower during normal business hours, except that upon any Event of
Default, the Lender may perform such actions at any reasonable time.
CREDIT AGREEMENT - Page 30
9.2. INSURANCE. Keep its insurable properties (including, but not
limited to, the Collateral and the Real Property) adequately insured and
maintain (a) insurance against fire and other risks customarily insured
against by companies engaged in the same or a similar business to that of the
Borrower, (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 Lender,
all of which 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 Lender in the reasonable exercise of its judgment. All
such policies shall contain a provision whereby they may not be canceled
except upon thirty days' prior written notice to the Lender. The Borrower
will deliver to the Lender, at the Lender's request, evidence satisfactory to
the Lender that such insurance has been so procured and, with respect to
casualty insurance covering the Collateral, names the Lender as "mortgagee".
If the Borrower fails to maintain satisfactory insurance as herein provided,
the Lender shall have the option to do so, and the Borrower agrees to repay
the Lender, with interest at three percent (3%) per annum plus the Prime
Rate, all amounts so expended by the Lender.
9.3. TAXES. Pay 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 it and its
property, except to the extent being contested in good faith and for which
adequate reserves have been established on the balance sheet of the Borrower.
If the Borrower shall fail to pay or contest such taxes and assessments by
their due date, the Lender shall have the option to do so, and the Borrower
agrees to repay the Lender, with interest at three percent (3%) per annum
plus the Prime Rate, all amounts so expended by the Lender.
9.4. MAINTAIN LEGAL EXISTENCE AND BUSINESS. Do or cause to be done
all things necessary to preserve and keep in full force and effect their
legal existence, rights and franchise and comply, in all material respects,
with all applicable laws; continue to conduct and operate its business
substantially as conducted and operated during the present and preceding
calendar year.
9.5. TANGIBLE NET WORTH. Maintain Tangible Net Worth (plus
Subordinated Debt) in an amount not less than the following amounts at the
end of each calendar month during each of the following respective periods:
Periods Amount
------- ------
(a) From the date of this Agreement $1,000,000
through Xxxxx 00, 0000
(x) From April 1, 1999 through $1,250,000
September 30, 1999
(c) From October 1, 1999, through $2,000,000
CREDIT AGREEMENT - Page 00
Xxxxxxxx 00, 0000
(x) From January 1, 2000, and at $2,000,000, plus 75% of
all times thereafter net income after
January 1, 2000,
as computed in accordance
with GAAP, with no allowances
for net losses
9.6. SENIOR INDEBTEDNESS RATIO. Maintain as of the end of each
calendar month a Senior Indebtedness Ratio of not more than the following
respective ratios:
Periods Maximum Ratios
------- --------------
(a) From the date of this Agreement 4.25:1.0
through December 30, 1999
(b) December 31, 1999 through 4.00:1.0
December 30, 2000
(c) At December 31, 2000, and at all 3.5:1.0
times thereafter
9.7. CASH FLOW COVERAGE RATIO. Maintain as of the end of each
calendar month a Cash Flow Coverage Ratio of not less than the following
respective ratios:
Periods Minimum Ratios
------- --------------
(a) From the date of this Agreement 1.3:1.0
through Xxxxx 00, 0000
(x) From April 1, 1999, and at all 1.5:1.0
times thereafter
9.8. FIXED CHARGE COVERAGE RATIO. Maintain as of the end of each
calendar month a Fixed Charge Coverage Ratio (computed on the basis of the
previous twelve-month period) of not less than 1.0:1.0.
9.9. ERISA. (a) Subject to the exceptions set forth in Section
11.1.7, at all times meet the minimum funding requirements of ERISA with
respect to the Borrower's employee benefit plans subject to such minimum
funding requirements; (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 that would result in a material
adverse effect on the business or financial condition of the Borrower, or
(ii) that the PBGC or the Borrower has instituted or will institute
proceedings to terminate an employee pension plan,
CREDIT AGREEMENT - Page 32
deliver to the Lender 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 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) 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, not later than ten (10) days after receipt
of a written request from the Lender for such report.
9.10. USE OF LOAN PROCEEDS. Use the proceeds of the Loans hereunder for
the purposes set forth herein.
9.11. UNUSED FACILITY FEE. Pay the Unused Facility Fee when due.
9.12. YEAR 2000 COMPLIANCE. On or prior to June 30, 1999 (the
"COMPLIANCE DATE"), (i) Borrower and its Subsidiaries shall have taken all
actions necessary to ensure that Borrower and any business in which Borrower
holds a substantial interest become Year 2000 Compliant in a timely manner, and
(ii) Borrower and its Subsidiaries shall use reasonable efforts to see that all
customers, suppliers and vendors that are material to Borrower's business,
become Year 2000 Compliant in a timely manner. Such acts shall include, without
limitation, performing a comprehensive review and assessment of all of
Borrower's systems and adopting a detailed plan, with itemized budget, for the
remediation, monitoring and testing of such systems. As used in this paragraph,
"Year 2000 Compliant" shall mean, in regard to any entity, that all software,
hardware, firmware, equipment, fixtures, goods or systems utilized by or
material to the business operations or financial condition of such entity, will
properly perform date sensitive functions before, during and after the year
2000. Borrower shall, immediately upon request, provide to the Lender such
certifications or other evidence of Borrower's compliance with the terms of this
paragraph as Bank may from time to time require.
SECTION 10. NEGATIVE COVENANTS
From the date hereof until the Senior Indebtedness is paid in full (other
than indebtedness for continuing indemnity obligations), and except as to
transactions contemplated by and provided for in the Investment Documents, the
Borrower covenants and agrees it will not:
10.1. DIVIDENDS. Except for distributions to a shareholder made when no
Event of Default exists or would exist giving effect to any such distribution),
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.
10.2. STOCK ACQUISITION. Purchase, redeem, retire or otherwise acquire
any of the
CREDIT AGREEMENT - Page 33
shares of its capital stock, or make any commitment to do so.
10.3. 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.
10.4. INDEBTEDNESS. Incur, create, assume or permit to exist any
Indebtedness, except for (a) the Senior Indebtedness, (b) indebtedness
subordinated to the prior payment in full of the Senior Indebtedness upon terms
and conditions approved in writing by the Lender, (c) existing indebtedness to
the extent set forth on schedules to this Agreement, (d) indebtedness secured by
Permitted Liens, and (e) capitalized lease obligations in excess of $200,000 in
the aggregate at any time.
10.5. EXTENSION OF CREDIT. Make loans, advances or extensions of credit
to any Person other than loans and advances to employees which in the aggregate
do not exceed $50,000 at any time.
10.6. 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 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 in the
ordinary course of business for deposit or collection.
10.7. SUBORDINATE INDEBTEDNESS. Subordinate any indebtedness due to it
from a Person to indebtedness of other creditors of such Person.
10.8. PROPERTY TRANSFER, MERGER OR LEASE-BACK. (a) Sell, lease,
transfer or otherwise dispose of all or, except as to the sale of Inventory or
unneeded Equipment 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 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 that Borrower and its Subsidiaries
may make transfers of assets among themselves so long as the liens and security
interests of the Lender in the Collateral at all times remain perfected and in
full force and effect.
10.9. 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 investments:
CREDIT AGREEMENT - Page 34
(a) in commercial paper, maturing within 270 days after
acquisition thereof, which has the highest or second highest credit
rating given by either Standard & Poor's Corporation or Xxxxx'x
Investors Service, Inc.;
(b) in obligations, maturing within 12 months after acquisition
thereof, issued or unconditionally guaranteed by the United States of
America or an instrumentality or agency thereof and entitled to the full
faith and credit of the United States of America;
(c) in demand deposits, and time deposits (including
certificates of deposit) maturing within 12 months from the date of
deposit thereof, with any office of the Lender, any of the Lender's
affiliates, or any national or state bank or trust company which is
organized under the laws of the United States of America or any state
therein and which has capital, surplus and undivided profits of at
least $100,000,000; and
(d) in repurchase obligations of any bank or trust company
described in the above subsection (c) which relate to the repurchase
of obligations described in the above subsection (b).
10.10. PENSION PLANS. (a) Allow any fact, condition or event to occur or
exist with respect to an employee pension plan which would constitute grounds
for termination by the PBGC 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 results a liability of the
Borrower to the PBGC which will have a materially adverse effect upon the
operations, business, property, assets, financial condition or credit of the
Borrower.
10.11. MARGIN STOCK. Apply any of the proceeds of the Notes 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.
10.12. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will not (i) use
(and will use commercially reasonable efforts to prevent any tenant from using)
any of its real property for the handling, processing, storage, transportation,
or disposal of any Hazardous Substance except in all respects in compliance with
Environmental Laws, (ii) generate (as such term is defined in RCRA) any
Hazardous Substance except in all respects in compliance with Environmental
Laws, (iii) conduct any activity which causes a release (as such term is defined
in CERCLA) of any Hazardous Substance in violation of Environmental Law, or
(iv) otherwise conduct any activity or use any of its real property or assets in
any manner that violates any Environmental Law except that, in each of cases
(i)-(iv) above, in such a manner as would not result in a material adverse
effect on the business or financial condition of the Borrower.
10.13. SUBORDINATED CREDIT PAYMENTS. Make any payments of principal to
the
CREDIT AGREEMENT - Page 35
subordinated lender under the Subordinated Credit Agreement, redeem any
preferred stock, or create any stock-redemption sinking fund until all
principal and interest for Term Note C is paid in full.
SECTION 11. EVENTS OF DEFAULT - ENFORCEMENT - APPLICATION OF PROCEEDS
11.1. EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
11.1.1. FAILURE TO PAY MONIES DUE. If any principal of or
interest on any of the Senior Indebtedness shall not be paid within one
Business Day after becoming due.
11.1.2. MISREPRESENTATION. If any warranty or representation
of the Borrower in connection with or contained in this Agreement, or
if any financial data or other information now or hereafter furnished
to the Lender by or on behalf of the Borrower, shall prove to be false
or misleading in any material respect.
11.1.3. NONCOMPLIANCE WITH LENDER AGREEMENT. If the Borrower
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 Loan Document or any other agreement with the Lender to which
it may be a party, and such failure is not remedied within thirty (30)
days after the Lender gives written notice thereof to the Borrower.
11.1.4. OTHER DEFAULTS.
(a) If the Borrower shall default in the due payment
of any of its Senior Indebtedness (other than under the Loan
Documents) or in the observance or performance of any term,
covenant or condition in any agreement or instrument evidencing,
securing or relating to such Senior Indebtedness, and such default
shall be continued for a period sufficient to permit acceleration
thereof;
(b) If the Borrower shall default under the Deed of
Trust or in the due payment of any of its Debt (other than the
Senior Indebtedness) or in the observance or performance of any
term, covenant or condition in any agreement or instrument
evidencing, securing or relating to such Debt, and such default
shall be continued for a period sufficient to permit acceleration
of the indebtedness; or
(c) If the Borrower should default under the
Subordinated Credit Agreement or any documents related thereto.
11.1.5. JUDGMENTS. If there shall be rendered against the
Borrower, one or more judgments or decrees involving an aggregate
liability of $100,000 or more, which
CREDIT AGREEMENT - Page 36
has or have become final and nonappealable and shall remain undischarged,
unsatisfied by insurance and unstayed for more than 30 days; or of a
writ of attachment or garnishment against the property of the Borrower
shall be issued and levied in an action claiming $100,000 or more, and
within the time allowed under applicable law is neither released nor
stayed nor appealed and bonded in a manner satisfactory to the Lender.
11.1.6. BUSINESS SUSPENSION, BANKRUPTCY, ETC. If the
Borrower shall voluntarily suspend transaction of its business for a
period in excess of five (5) Business Days (unless covered by business
interruption insurance); or if the Borrower generally shall not pay its
debts as they become due, subject to applicable grace periods, or shall
make a general assignment for the benefit of creditors; or proceedings in
bankruptcy, or for reorganization or liquidation of the Borrower, under
the Bankruptcy Code or under any other state or federal law for the
relief of debtors shall be commenced by the Borrower or shall be
commenced against the Borrower and shall not be discharged within sixty
(60) days of commencement; or a receiver, trustee or custodian shall be
appointed for the Borrower or for any substantial portion of its
respective properties or assets.
11.1.7. INADEQUATE FUNDING OR TERMINATION OF EMPLOYEE/BENEFIT
PLAN(S). If the Borrower shall fail by $50,000 or more to meets its
minimum funding requirements under ERISA (after giving effect to any
valid waiver of such requirements) with respect to any employee benefit
plan established or maintained by the Borrower, 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 of $50,000
or more.
11.1.8. OCCURRENCE OF CERTAIN REPORTABLE EVENTS. If there
shall occur, with respect to any pension plan maintained by the Borrower,
any reportable event (within the meaning of section 4043(b) of ERISA)
which the Lender shall determine in good faith constitutes a ground for
the termination by the PBGC of any such plan, and if such event continues
for 60 days after the Lender gives written notice to the Borrower,
provided that termination of such plan or appointment of such trustee
would, in the opinion of the Lender, have a materially adverse effect
upon the operations, business, property, assets, financial condition or
credit of the Borrower.
11.2. ACCELERATION OF SENIOR INDEBTEDNESS. Upon the occurrence of any
of the Events of Default described in Section 11.1, all Senior Indebtedness may
be declared due and payable in full forthwith at the option of the Lender
without presentation, demand, protest, notice of dishonor or other notice of any
kind, all of which are hereby expressly waived. Unless all of the Senior
Indebtedness is then fully paid, the Lender 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, the Deed of Trust 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 setoff against the Senior Indebtedness any amount owing by the
Lender to the Borrower. The Borrower agrees, upon request of the Lender, to
assemble the Collateral and make it available to the Lender at any place
designated by the Lender which is
CREDIT AGREEMENT - Page 37
reasonably convenient to the Lender and the Borrower.
11.3. APPLICATION OF PROCEEDS. The proceeds of any sale or other
disposition of the Collateral authorized by this Agreement shall be applied by
the Lender, first upon all expenses authorized by the UCC and all reasonable
attorneys' fees and legal expenses incurred by the Lender; the balance of the
proceeds of such sale or other disposition shall be applied in the payment of
the Senior 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 Lender immediately upon
demand.
11.4. CUMULATIVE REMEDIES. The remedies provided for herein are
cumulative to the remedies for collection of the Senior 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 Lender from pursuing any other remedy for the recovery of any other
sum to which the Lender may be or become entitled for the breach of this
Agreement by the Borrower.
SECTION 12. MISCELLANEOUS
12.1. 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.
12.2. 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.
12.3. WAIVERS AND AMENDMENTS. No forbearance on the part of the Lender
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 Lender except in writing signed and delivered by an officer of the
Lender, 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 Lender.
12.4. 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 PROVISIONS OF THIS AGREEMENT SHALL FOR ANY REASON BE
HELD INVALID OR
CREDIT AGREEMENT - Page 38
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.
12.5. 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 making of
Advances and the delivery of the Notes hereunder and shall be deemed to have
been relied upon by the Lender, notwithstanding any investigation heretofore or
hereafter made by the Lender. All statements contained in any certificate or
other document delivered to the Lender 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.
12.6. ATTORNEYS' FEES. The Borrower agrees that it will pay all
reasonable costs and expenses of the Lender in connection with the enforcement
of the Lender'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.
12.7. PAYMENTS ON SATURDAYS, ETC. Whenever any payment to be made
hereunder or under the Notes shall be stated to be due on a Saturday, Sunday or
any other day which is not a Business Day, such payment shall be due on the next
succeeding Business Day, and such extension, if any, shall be included in
computing interest in connection with such payment.
12.8. 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 any rights
or obligations hereunder without the prior written consent of the Lender.
12.9. MAINTENANCE OF RECORDS. The Borrower will keep all of its
respective records concerning the Collateral and the Equipment at its principal
place of business. The Borrower will give the Lender prompt written notice of
any change in its respective principal place of business, or in the location of
said records.
12.10. 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, upon sending by registered or certified mail,
postage prepaid, addressed as follows: (a) If to the Borrower, to: Xxxxxxx X.
Xxxxxxx, Chief Financial Officer, 0000 Xxx. 00 Xxxx, Xxxxx, Xxxxx 00000, and
(b) If to the Lender, to: 0000 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx
00000, Attention: Xxxxx Xxxxx, or to such other address as a party shall have
designated to the other in writing.
12.11. COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures were upon the same
instrument.
12.12. HEADINGS. Article and section headings in this Agreement are
included for the
CREDIT AGREEMENT - Page 39
convenience of reference only and shall not constitute a part of this
Agreement for any purpose.
12.13. INDEMNIFICATION. THE BORROWER HEREBY COVENANTS AND AGREES TO
INDEMNIFY, DEFEND AND HOLD HARMLESS THE LENDER AND ITS OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS ("INDEMNIFIED PERSONS") 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 LENDER 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 NOTES, 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 LENDER'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 LENDER
(WHICH SHALL AUTOMATICALLY BE DEEMED TO BE WITHOUT RECOURSE TO THE LENDER
IN ANY EVENT), OR THE EXISTENCE, CHARACTER, QUANTITY, QUALITY, CONDITION,
VALUE OR DELIVERY OF ANY GOODS PURPORTING TO BE REPRESENTED BY ANY SUCH
DOCUMENTS.
NOTWITHSTANDING THE FOREGOING, THE BORROWER SHALL NOT BE REQUIRED TO INDEMNIFY
ANY SUCH INDEMNIFIED PERSON FROM OR AGAINST ANY PORTION OF SUCH CLAIMS, DAMAGES,
LIABILITIES OR EXPENSES ARISING OUT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH INDEMNIFIED PERSON.
12.14. NO ORAL AGREEMENTS. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN
DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENTS BETWEEN THE LENDER 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 LENDER AND THE BORROWER.
12.15. 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
CREDIT AGREEMENT - Page 40
Agreement indicates otherwise.
12.16. CROSS COLLATERAL. The Borrower hereby agrees that the Collateral
under this Agreement secures the obligations now or hereafter outstanding under
all other agreements between Borrower and the Lender or any of their affiliates
and the collateral pledged under any other agreement with the Lender or any of
its affiliates secures the obligations under this Agreement.
12.17. SEVERABILITY OF PROVISIONS. Any provision of this Agreement, the
Notes 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 Notes or such other documents or
affecting the validity or enforceability of such provision in any other
jurisdiction.
12.18. ASSIGNMENT. The Lender 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 the Borrower to any federal or state agency, or to any
bank affiliate of the Bank, or, with the Borrower's consent (which shall not be
unreasonably withheld and shall not be required during the existence of an Event
of Default), to any commercial bank or to any other financial institution or
holding company of any of the foregoing; provided, however, no such action on
the part of the Lender shall have the effect of changing any of the Borrower's
obligations hereunder without the respective written consent or the Borrower.
12.19. WAIVER OF JURY TRIAL. The Borrower and the Lender hereby
irrevocably waive the right to trial by jury with respect to any and all actions
or proceedings at any time in which Borrower and Lender are parties arising out
of this Agreement.
12.20. SURVIVAL OF AGREEMENT. Notwithstanding anything to the contrary
contained in this Agreement, the provisions of this Agreement shall remain in
full force and effect until such time as all Senior Indebtedness is paid in
full.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first written above.
BORROWER:
XXXXXXXXX SIGN COMPANY
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------
Xxxxxxx X. Xxxxxxx
Vice President/CFO
CREDIT AGREEMENT - Page 41
LENDER:
COMERICA BANK-TEXAS
By: /s/ Xxxxx Xxxxx
---------------
Xxxxx Xxxxx
Vice President
CREDIT AGREEMENT - Page 42
