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EXHIBIT 10.8
LOAN AGREEMENT
BY AND BETWEEN
THE CYNARA COMPANY
("Borrower")
and
BANK ONE, TEXAS, N.A.
("Lender")
Dated as of the 8th day of October, 1997
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LOAN AGREEMENT
TABLE OF CONTENTS
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Section 1. General Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Certain Definitions; Use of Defined Terms;
Accounting Terms; Singular or Plural . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.4 Revolving Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.5 Repayment Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.5 Prepayment/ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.6 Authorized Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.4 Investments, Loans, Advances and Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.5 Liabilities and Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.6 Titles and Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.8 [Intentionally Omitted]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.10 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.11 Pension Reform Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.12 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.13 Margin Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.14 Patents, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.15 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.16 Credit Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.17 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.18 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.1 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2 Taxes and Other Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.3 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.5 Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.6 Reimbursement of Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.8 Certificate of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.10 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.11 Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.12 Payments from Account Debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1 Guarantees and Debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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4.2 Dividends and Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.3 Investments, Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.4 Mergers, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.5 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.6 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.7 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.8 Basic Line of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.9 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.10 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.11 Operating Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5. Events of Default and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.1 Counsel to Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2 Required Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.3 Other Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.4 Material Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5 Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.1 Survival of Various Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.4 Renewals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.5 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.7 Non-Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.8 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.9 Payment on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.11 Controlling Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.12 Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.13 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.14 Set Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.15 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.16 Change of Ownership or Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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CAPTION PAGE
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Exhibits
"1.3" Form of Term Note
"1.4.1" Borrowing Application
"1.4.2" Form of Revolving Note
"2.5" Liabilities and Litigation
"3.8" Certificate of Compliance
"3.11" Borrowing Base Report
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LOAN AGREEMENT
THIS LOAN AGREEMENT made and entered into as of the 8th day of
October, 1997, by and between The Cynara Company, a Delaware corporation, with
offices and place of business at 0000 Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx
00000 (hereinafter called "Borrower") and Bank One, Texas, N.A., a national
banking corporation, with offices at 000 Xxxxxx, Xxxxxxx, Xxxxx 00000
(hereinafter called "Lender"). 22
AGREEMENT
WHEREAS, Borrower has agreed to borrow, and Lender has agreed to make
available, a loan of up to $13,000,000 as more fully described below,
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, Borrower and Lender agree as follows
intending to be legally bound hereby:
Section 1. General Terms
1.1 Indebtedness. Upon the terms and conditions hereinafter set
forth, the Lender agrees to lend to Borrower and/or issue letters of credit for
the account of Borrower in an aggregate of up to $13,000,000.00, outstanding at
any time as evidenced by a Term Loan in an amount of up to $7,000,000 and a
Revolving Facility to be extended to the Borrower by the Lender in an amount up
to $6,000,000.00, as more specifically described in Section 1.3(a) hereof and
the Letter of Credit Facility as more specifically described in Section 1.4(b)
hereof.
1.2 Certain Definitions; Use of Defined Terms; Accounting Terms;
Singular or Plural. (a) As used herein:
(1) "Affiliate" shall mean any Person who is an
"affiliate" within the meaning of the regulations promulgated pursuant
to the Securities Act of 1933, as such regulations are amended from
time to time.
(2) "Agreement" shall mean this Loan Agreement as it may
be amended or supplemented from time to time.
(3) "Authorized Officer" shall mean the chairman,
president, chief executive officer or chief financial officer of the
Borrower or any other individual designated as an Authorized Officer
by the Board of Directors of Borrower.
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(4) "Base Rate" shall mean the variable rate of interest
announced by Lender from time to time as its base rate of interest
and, without notice to the Borrower or any other person, such rate of
interest shall change as and when changes in that base rate of
interest are announced. The Base Rate is set by Lender as a general
reference rate of interest, taking into account such factors as Lender
may deem appropriate, it being understood that many of the Lender's
commercial or other loans are priced in relation to such rate, that it
is not necessarily the lowest or best rate of interest actually
charged on any loan, and that Lender may make various commercial or
other loans at rates of interest having no relationship to the Base
Rate. If at any time the "Base Rate" of Lender is no longer
available, the owner of the Notes ("Owner") will designate as "Base
Rate" a different variable rate of interest announced by a national
banking association of Owner's choice.
(5) "Borrowing Base" shall mean the sum of (i) eighty
percent (80%) of Eligible Accounts plus (ii) one hundred percent
(100%) of Liquid Collateral plus (iii) fifty percent (50%) of
Inventory.
(6) "Borrowing Base Report" shall mean the report in the
form attached as Exhibit "3.11".
(7) "Business Day" shall mean any weekday on which Lender
is open for business.
(8) "Capital Assets" shall mean tangible property, real
or personal, with a useful life of greater than one (1) year.
(9) "Capital Expenditures" shall mean the cost paid for
the acquisition of Capital Assets.
(10) "Cash Flow" shall mean the sum of the Borrower's net
income plus non-cash charges, less distributions or dividends paid and
non-cash income for the immediately preceding four quarters.
(11) "Cash Flow Coverage Ratio" shall mean the ratio of
Cash Flow to Debt Service, calculated on a quarterly basis.
(12) "Certificate of Compliance" shall mean the
certificate described in Section 3.8 of this Agreement.
(13) "Closing Date" means the date of the satisfaction of
all the closing conditions contained in the Agreement for the Term
Loan.
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(14) "Collateral" shall mean the property described in
Section 3.10 of this Agreement, securing payment of the Indebtedness
and performance of the obligations of the Borrower under this
Agreement and the Security Instruments.
(15) "Commitment" means $13,000,000.
(16) "Commitment Fee" means a fee payable by Borrower to
Lender on the average daily unused portion of the Credit Facility(use
shall include the face amount of Credits and the principal amount of
Loans outstanding) from the Closing Date to the end of the Credit
Facility Commitment Period provided that the unused portion of the
Term Loan after December 31, 1997 shall not be included, at the rate
of one half of one percent (1/2%) per annum based on a 365 or 366 day
year as applicable and the actual number of days elapsed.
(17) "Credit" means any irrevocable standby letter of
credit issued by Lender for Borrower's account which shall have an
expiry date of not later than 5:00 p.m. Houston, Texas time on the LOC
Expiration Date, and shall be in the form acceptable to Lender.
(18) "Credit Facility" shall mean the credit facility
described in Sections 1.3 and 1.4, including the Revolving Facility
and the Letter of Credit Facility.
(19) "Credit Facility Commitment Period" means the period
from the Closing Date until the earlier to occur of (i) a Default, or
(ii) the second anniversary of the Closing Date, provided that the
Credit Facility Commitment Period may be extended for additional
one-year periods at the discretion of the Lender.
(20) "Credit Fee" means one percent (1%) per annum on the
face amount of each Credit; provided, however, that the minimum fee
per Credit shall not be less than $500.00; provided, further, that all
Credit Fees shall be due and payable at the time of the issuance of
each Credit and shall be fully earned and non- refundable when paid.
(21) "Current Ratio" shall mean current assets divided by
current liabilities.
(22) "Debt" shall mean with respect to any Person all
items of indebtedness, obligation or liability, whether matured or
unmatured, liquidated or unliquidated, direct or contingent, joint or
several, including, but without limitation:
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(a) All indebtedness guaranteed, directly or
indirectly, in any manner, or endorsed (other than for
collection or deposit in the ordinary course of business) or
discounted with recourse;
(b) All indebtedness in effect guaranteed,
directly or indirectly, through agreements, contingent or
otherwise: (1) to purchase such indebtedness; or (2) to
purchase, sell or lease (as lessee) property, products,
materials or supplies or to purchase or sell services,
primarily for the purpose of enabling the debtor to make
payment of such indebtedness or to assure the owner of the
indebtedness against loss; or (3) to supply funds to or in any
other manner invest in the debtor;
(c) All indebtedness secured by (or for which the
holder of such indebtedness has an existing right, contingent
or otherwise, to be secured by) any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance
upon property owned or acquired subject to such mortgage, deed
of trust, pledge, lien, security interest, charge or
encumbrance, whether or not the liabilities secured thereby
have been assumed; and
(d) All indebtedness incurred as the lessee of
goods or services under leases that, in accordance with
generally accepted accounting principles, should be reflected
on the lessee's balance sheet.
(23) "Debt Service" means the aggregate of principal
payments payable hereunder over the subsequent four quarters.
(24) "Default" shall mean an event which with the giving
of notice, the lapse of time, or both, constitutes an Event of
Default.
(25) "Defined Benefit Pension Plans," "Pension Benefit
Guaranty Corporation," "Reportable Event," and "Prohibited
Transaction" shall have the same respective meanings as are given to
those terms in ERISA.
(26) "Dow" means Dow Chemical Company.
(27) "EBITDA" means the sum of (i) net income, (ii)
non-cash expenses and (iii) interest expense, less non-cash income and
distributions or dividends paid, for the previous four quarters.
(28) "Eligible Accounts" shall mean the aggregate of all
of Borrower's accounts receivable acceptable to Lender in Lender's
reasonable discretion, which (i) are due and payable
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within thirty (30) days; (ii) have been outstanding less than
ninety(90) days past the original date of invoice; (iii) have arisen
from Borrower's sale of goods in which Borrower had sole ownership
where such goods have been shipped or delivered to the account debtor;
(iv) represent complete bona fide transactions which require no
further act under any circumstances on Borrower's part to make such
accounts receivable payable by the account debtor; (v) the goods the
sale of which gave rise to such accounts receivable were shipped or
delivered to the account debtor on an absolute sale basis and not on
consignment, a sale or return basis, or on the basis of any similar
understanding; (vi) the goods of sale giving rise to such accounts
receivable were not, at the time of sale thereof, subject to any lien,
except the security interest in favor of Lender created by the
Security Instruments; (vii) are not subject to any provision
prohibiting assignment or requiring notice of or consent to such
assignment; (viii) are subject to a perfected, first priority security
interest in favor of Lender; (ix) are not subject to setoff,
counterclaim, defense, allowance, dispute or adjustment other than
normal discounts for prompt payment and the goods of sale which gave
rise to accounts receivable have not been returned, rejected,
repossessed, lost or damaged; (x) have arisen in the ordinary course
of Borrower's business and for which no notice of bankruptcy,
insolvency or financial difficulty of the account debtor shall have
been received by Borrower or Lender; (xi) are not evidenced by chattel
paper or an instrument of any kind; (xii) are owed by the United
States or any department, agency or instrumentality thereof if the
provisions of the Federal Assignment of Claims Act have been
satisfied; and (xiii) are not owed by any of Borrower's Affiliates.
No account receivable owed by an account debtor to Borrower shall be
included as an Eligible Account if more than twenty percent (20%) of
the balances then outstanding on accounts receivable owed by such
account debtor and its affiliates to Borrower have remained unpaid for
more than ninety (90) days, unless the Lender consents to the
inclusion of such receivables as an Eligible Receivable, which consent
shall not be unreasonably withheld.
(29) "ERISA" means the Employee Retirement Income Security
Act of 1974, as the same may be amended from time to time.
(30) "Event of Default" shall mean any event specified in
Section 5 of this Agreement provided that any requirement for the
giving of notice, the lapse of time, or the happening of any
condition, event or act has been satisfied.
(31) "Facility Fee" shall mean a fee in the amount of
three-quarters of one percent (3/4%) of the Commitment; one-half
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of this fee has been advanced to Lender and one-half is payable upon
execution of this Agreement.
(32) "Financial Statements" shall mean the audit report,
annual financial statements, and interim statements described or
referred to in Section 3.1 of this Agreement.
(33) "Funded Debt" means the principal amounts outstanding
hereunder.
(34) "Indebtedness" shall mean all sums owed or to be owed
by the Borrower to Lender whether principal or interest, including
principal and interest on the Notes, reimbursement of advances
pursuant to any Credit, and reimbursement of monies advanced by Lender
pursuant to Section 3.6 hereof.
(35) "Investment" shall mean an equity investment
resulting in the ownership of fifty percent (50%) or less of the
securities of a corporation having ordinary voting power for election
of directors or resulting in the ownership of any partnership
interest.
(36) "Inventory" shall mean the cost to Borrower of all
goods held for sale or lease, owned by Borrower at any time in
question, whether in the possession of the Borrower, a bailee or any
other Person, and includes (i) the costs of raw materials up to
$1,000,000, (ii) the costs of finished goods, and (iii) the costs of
project-related work-in-process in excess of xxxxxxxx.
(37) "Letter of Credit Facility" shall mean the Letter of
Credit facility described in Section 1.4(b).
(38) "Letter of Credit Request" means, as applicable,
either (i) a standby letter of credit application in the form
prescribed by Lender, with all the blanks appropriately completed, and
showing Borrower as the account party, or (ii) if Borrower has
executed and delivered to Lender a Master Letter of Credit Agreement
(whether prior to, contemporaneously with, or after the date of this
Agreement), a standby letter of credit request or application in the
form prescribed in such Master Letter of Credit Agreement with all the
blanks appropriately completed and showing Borrower as the account
party, as any of the same may be amended or modified from time to
time.
(39) "Leverage Ratio" means the ratio of the principal
amount outstanding hereunder to EBITDA, calculated on a quarterly
basis.
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(40) "Liquid Collateral" means all certificates of deposit
issued by the Lender, owned by Borrower and in which the Lender has a
first perfected security interest.
(41) "Loan" shall mean the Term Loan and any advance
pursuant to the Revolving Facility.
(42) "LOC Expiration Date" means the date which is six
months after the end of the Credit Facility Commitment Period.
(43) "Notes" shall mean the promissory note or notes
delivered to Lender by Borrower pursuant to this Agreement, including,
but not limited to, the Term Note and the Revolving Note.
(44) "Obligation" means all present and future
obligations, duties, and liabilities, now or hereafter owed to Lender
by Borrower, arising from or pursuant to the Notes, this Agreement or
any of the Security Instruments, together with all interest accruing
thereon and costs, expenses, and attorneys' fees incurred in the
enforcement thereof or collection of amounts due thereunder.
(45) "Permitted Encumbrances" shall mean the encumbrances
and liens allowed pursuant to Section 4.5.
(46) "Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture, court, government or political
subdivision or agency thereof.
(47) "Prior Financial Statements" shall mean the unaudited
balance sheet of Borrower as of June 30, 1997, which has been
delivered to Lender.
(48) "Revolving Facility" shall mean the line of credit
pursuant to Section 1.4.
(49) "Revolving Facility Maturity Date" shall mean the
date that is the second anniversary of the Closing Date.
(50) "Revolving Note" shall mean the promissory note of
the Borrower in the original principal amount of $6,000,000.00 issued
pursuant to Section 1.4 of this Agreement in the form attached as
Exhibit "1.4" to this Agreement.
(51) "Security Agreement" shall mean the security
agreement or agreements of the Borrower granting Lender a security
interest in the Collateral described in Section 3.10.
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(52) "Security Instruments" shall mean the instruments
described or referred to in Section 3.10 of this Agreement, including
but not limited to the Security Agreement and any and all instruments
now or hereafter executed in connection with or as security for the
Notes.
(53) "Tangible Net Worth" shall mean the sum of (i) par
value of capital stock, (ii) capital in excess of par value, and (iii)
retained earnings less (a) all intangible assets such as good will and
patent rights and (b) all promissory notes or accounts receivable due
from Affiliates other than transactions arising in the ordinary course
of business on an arm's length basis.
(54) "Term Loan" shall mean the loan made available to
Borrower under Section 1.3 hereof.
(55) "Term Note" shall mean the promissory note of
Borrower substantially in the form of Exhibit 1.3, attached hereto, in
respect of the Term Loan.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any Notes, certificate, report, or other document made or
delivered pursuant to this Agreement, unless specifically required otherwise.
All accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles.
(c) Terms in the singular shall include the plural and those in
the plural shall include the singular unless the context shall otherwise
require.
1.3 Term Loan. (a) The Lender, during the period from the date of
this Agreement until December 31, 1997, subject to the terms and conditions of
this Agreement, and subject to the condition that at the time of each borrowing
hereunder no Default or Event of Default has occurred and is then continuing to
occur and that the representations and warranties given by the Borrower in
Section 2 as of the date of this Agreement shall remain true and correct in all
respects agrees to make loans to Borrower up to but not in excess of an
aggregate principal amount outstanding at any time of $7,000,000.00, upon
receipt from Borrower on or before 10:00 a.m. Houston time on the prior
Business Day of written applications for loans hereunder in the form attached
as Exhibit "1.3.1". Each advance shall be in an amount of not less than
$50,000. The initial advance shall be in an amount sufficient to refinance all
outstanding amounts due and owing by Borrower to Banc One Capital Partners.
(b) Interest on the Term Loan shall accrue at the Base Rate plus one
percent (1%) per annum.
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1.4 Revolving Credit Facility. The Lender, subject to the terms
and conditions of this Agreement, and subject to the condition that at the time
of each borrowing and/or Credit issuance hereunder no Default or Event of
Default has occurred and is then continuing to occur and that the
representations and warranties given by the Borrower in Section 2 as of the
date of this Agreement shall remain true and correct in all material respects:
(a) agrees to make loans to Borrower during the
Credit Facility Commitment Period pursuant to a Revolving
Facility up to but not in excess of an aggregate principal
amount outstanding at any time of the lesser of the Borrowing
Base and $6,000,000.00, upon receipt from Borrower on or
before 10:00 a.m. Houston time on the prior Business Day of
written applications for loans hereunder in the form attached
as Exhibit "1.4.1". Each advance shall be in an amount of not
less than $50,000.
(b) (1) agrees to open one or more Credits
during the Credit Facility Commitment Period for Borrower's
account. Borrower shall submit to Lender a Letter of Credit
Request with respect to each Credit to be opened by Lender, in
accordance with the terms hereof and the other letter of
credit agreements in effect, if any. Lender at its option may
accept telecopy requests for the issuance of Credits, provided
that such acceptance shall not constitute a waiver of Lender's
right to require delivery of a written Letter of Credit
Request in connection with the issuance of a Credit. If
Lender receives a request for a Credit issuance under the
Credit Facility satisfying the conditions thereof prior to
10:00 a.m. Houston, Texas time on a Business Day, Lender shall
use its best efforts to issue such Credit prior to 5:00 p.m.
Houston, Texas time on such day, otherwise Lender shall use
its best efforts to issue such Credit before 5:00 p.m. on the
following Business Day (provided that the other conditions of
the Credit Facility have been satisfied). No credit shall be
issued with a termination date that is after the LOC
Expiration Date, except for credits that are fully secured by
Liquid Collateral, which credits shall not be outstanding for
more than thirty-six (36) months. Borrower will be required
to pay to Lender a Credit Fee for the issuance of each credit.
Each Credit shall be on substantially the terms as Borrower
may request and such Letter of Credit Request must be in the
form and substance satisfactory to Lender. The sum of the
outstanding face amount of all Credits when added to the sum
of the outstanding Revolving Loans shall not exceed the lesser
of the Borrowing Base or $6,000,000.00.
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(2) Additional Agreements Regarding Credits:
(i) Prior to the earlier to occur
of the occurrence of a Default or the end of the
Credit Facility Commitment Period, if Borrower does
not provide Lender with funds, in the amount and on
the date necessary to settle Lender's obligations
under any draft drawn or demand made under a Credit,
Lender shall make, and Borrower shall accept, a Loan
under the Credit Facility in the amount necessary to
settle Lender's obligations under any draft or demand
made under such Credit to the extent Borrower does
not otherwise provide such funds, such Loan to be
made as of the date of such settlement of the Credit.
Borrower's obligations and indebtedness to Lender
pursuant to such Loans shall be evidenced by the
Notes, this Agreement, the Letter of Credit Requests
and the other letter of credit agreements relating to
the subject Credit. Anything herein to the contrary
notwithstanding, in no event shall any Loan be made
under the Credit Facility which, together with the
outstanding principal amount thereof, would exceed
the positive difference, if any, between (1) the
lesser of the Borrowing Base or $6,000,000.00 less
(2) the aggregate principal amount of the outstanding
Credits. Borrower shall pay any such excess to
Lender on demand.
(ii) At the earlier to occur of a
Default or the end of the Credit Facility Commitment
Period, and if a Credit is outstanding, Borrower
agrees (1) to deposit with Lender an amount equal to
the aggregate undrawn amount of all Credits, and (2)
to reimburse Lender by paying to Lender in
immediately available funds (which amounts Lender may
draw from any funds held by Lender) at Lender's
principal office in Houston, Texas, upon its demand,
the amount necessary to settle Lender's obligations
under any draft drawn or demand made under a Credit
issued by Lender which has not been paid by the
proceeds of Loans made pursuant to the immediately
preceding paragraph hereof. Borrower's obligations
and indebtedness to Lender pursuant to such draws or
demands made on any Credit shall be evidenced by this
Agreement, the Letter of Credit Requests and the
other letter of credit agreements relating to the
subject Credit. After the expiry date of a Credit,
Lender shall return the unused portion of the cash
collateral securing such Credit to Borrower.
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(iii) Borrower agrees that (1) Lender
shall not be responsible or liable for, and
Borrower's obligation to reimburse Lender for any
payment made by Lender under such Credit shall not be
affected by (x) the validity, enforceability or
genuineness of any Notes or other document (or such
endorsement) if such is proven to be invalid,
unenforceable, fraudulent or forged, except in the
event of the Lender's gross negligence or willful
misconduct, or (y) any dispute between Borrower and
the beneficiary under such Credit, and (2) any action
taken or omitted to be taken by Lender in connection
with such Credit, if taken in good faith and with
reasonable care, shall be binding upon Borrower and
shall not create any liability for Lender to
Borrower.
(iv) In case of any conflict between
the terms of any Letter of Credit Request or other
letter of credit agreement and the terms of this
Agreement, the terms of this Agreement shall control.
Such additional provisions of each Letter of Credit
Request and other letter of credit agreement shall be
cumulative and in addition to the terms of this
Agreement.
(v) Neither Lender nor any of
Lender's correspondents shall be responsible for:
(1) the failure of any draft to bear any reference or
adequate reference to any Credit, or the failure of
any Person to surrender or to take up any Credit or
the failure of any Person to note the amount of any
instrument on any Credit, (2) errors, omissions,
interruptions, or delays in transmission or delivery
of any messages, in person, by mail, cable,
telegraph, wireless or otherwise whether or not they
may be in cipher, (3) any use which may be made of
any Credit or any acts or omissions of beneficiary
thereof in connection therewith, or (4) the validity,
sufficiency, or genuineness of documents, or any
endorsement(s) thereon, even if such document should
in fact prove to be in any and all respects invalid,
insufficient, fraudulent or forged, except in the
event of the Lender's gross negligence or willful
misconduct. Lender shall not be responsible for any
act, error, neglect, default, omission, insolvency,
or failure in business of any of its correspondents
(including without limitation negligent acts and
omissions, but expressly excluding gross negligence
and willful misconduct), and the happening of any one
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or more of the contingencies referred to in this
sentence or the preceding sentence shall not affect,
impair, or prevent the vesting of any of Lender's
rights or powers under the Notes, this Agreement and
the Security Instruments. Lender and/or any of its
correspondents may receive, accept, or pay as
complying with the terms of any Credit, any drafts or
other documents, otherwise in order, which may be
signed by, or issued to, the administrator or
executor of, or the trustee in bankruptcy of, or the
receiver for any of the property of, the party in
whose name any Credit provides that any drafts or any
other documents should be drawn or issued. It is
hereby further agreed that any action, inaction, or
omission taken or suffered by Lender, or by any of
its correspondents, under or in connection with any
Credit or any drafts or documents referenced therein,
if in good faith and in conformity with such foreign
or domestic laws and customs or other regulations as
Lender or any of Lender's correspondents may deem to
be applicable thereto, shall be binding upon Borrower
and shall not place Lender or any of Lender's
correspondents under any resulting liability to
Borrower.
(c) The Borrower's obligation to repay the
Revolving Facility shall be evidenced by a promissory note of
the Borrower in substantially the form attached as Exhibit
"1.4.2" hereto, payable to the order of Lender. The Revolving
Note shall bear interest at the Base Rate per annum not to
exceed the maximum non-usurious interest rate permitted by
applicable law with the balance of principal plus accrued and
unpaid interest due and payable on or before the Revolving
Facility Maturity Date.
(d) Borrower may, at any time, upon giving written
notice to Lender, reduce the maximum amount of Loans and/or
Credits Borrower has the right to request hereunder.
Effective upon Lender's receipt of such notice and as of such
date, the maximum amount of Loans and/or Credits Borrower has
a right to obtain shall be so reduced and Borrower's
obligation to pay the Commitment Fee shall be calculated based
upon the reduced amount after the effective date of such
notice.
1.5 Repayment Schedule. Borrower hereby agrees to pay, and
authorizes and directs Lender to collect:
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(a) Credit Fees (at the time of the issuance of a
Credit), the Facility Fee upon execution of this Agreement,
and the Commitment Fee (on the last day of each December,
March, June, and September, commencing December 31, 1997);
(b) the amount of any drawing under a Credit not
otherwise reimbursed to Lender by advance under the Notes on
the earlier of the LOC Expiration Date by Lender by debit to
Borrower's Operating Account No. 1820763017 at Lender or any
other of Borrower's accounts at Lender;
(c) accrued interest on the Term Loan shall be
payable quarterly commencing December 31, 1997;
(d) the principal of the Term Loan in twenty
(20) consecutive quarterly installments of $325,000 each,
commencing March 31, 1998, provided that all outstanding
principal of and interest on the Term Loan shall be due and
payable on or before December 31, 2002; and
(e) advances under the Revolving Note (on the
maturity of the Revolving Note), and accrued interest on the
advances under the Revolving Note (quarterly on the last day
of each quarter and on maturity of the Revolving Note);
provided, that all advances under the Revolving Note to
reimburse Lender for draws under any Credit shall be due and
payable in full on the maturity of the Revolving Note;
provided further, that all outstanding principal, together
with accrued and unpaid interest, shall be due and payable in
full on or before the second anniversary of the Closing Date.
1.6 Prepayment/Mandatory Prepayment. The Borrower shall have the
right to prepay without premium at any time any amount owing on the Notes.
1.7 Authorized Officer. Lender is authorized to rely on the
instructions of the Authorized Officer as to all matters related to this
Agreement and the transactions contemplated hereby.
Section 2. Representations and Warranties
The Borrower represents and warrants to the Lender that:
2.1 Corporate Existence. The Borrower is a corporation duly
organized, legally existing and in good standing under the laws of the
jurisdiction in which it is incorporated and duly qualified as a foreign
corporation in all jurisdictions wherein the property owned or the business
transacted by it makes such qualification necessary, except where the failure
to be so qualified could have a material adverse effect on Borrower's basic
line of business.
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2.2 Corporate Authority. The Borrower is duly authorized and
empowered to create and issue the Notes, and to execute and deliver this
Agreement. The Borrower is duly authorized and empowered to execute and
deliver the Security Instruments to which it is a party, and all other
instruments referred to or mentioned herein to which Borrower is a party, and
all corporate action requisite for the due creation, issuance and delivery of
the Notes and the due execution and delivery of this Agreement and the Security
Instruments has been duly and effectively taken. This Agreement, the Notes,
and the Security Instruments to which the Borrower is a party when executed and
delivered will be valid and binding obligations of the Borrower enforceable in
accordance with their terms (subject to any applicable bankruptcy, insolvency
or other laws generally affecting the enforcement of creditors' rights). This
Agreement, the Notes, and the Security Instruments do not violate any
provisions of the Borrower's corporate charter or bylaws, or any material
provision of any contract, agreement, law or regulation to which the Borrower
is subject, and the same do not require the consent or approval of any
regulatory authority or governmental body of the United States or any state
where the failure to obtain such consent would have a material adverse effect
on the Borrower.
2.3 Financial Condition. The Prior Financial Statement which has
been delivered to Lender fairly presents the financial position of the Borrower
at such date.
2.4 Investments, Loans, Advances and Guarantees. As of the date
hereof the Borrower has not made Investments in, loans or advances to or
guarantees of the obligations of any Person which exceed, in the aggregate,
$100,000.
2.5 Liabilities and Litigation. Except as set forth on Exhibit
2.5, as of the date hereof the Borrower has no liabilities and no litigation,
legal or administrative proceedings, investigation or other action is pending
or to the Borrower's knowledge threatened against or affecting the Borrower
which is not fully covered by insurance subject to deductible not greater than
$50,000.00 or which may adversely affect in a material respect the business or
the assets of the Borrower or the Borrower's ability to carry on their business
as now conducted, except for liabilities incurred in the ordinary course of
business. No unusual or unduly burdensome restriction, restraint or hazard
exists by contract, law, governmental regulation or otherwise of which Borrower
has knowledge that would prevent or materially restrict Borrower's operations
as they are currently conducted.
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2.6 Titles and Encumbrances. The Borrower has good title to its
properties and assets, free and clear of all mortgages, liens and encumbrances,
except those referred to in Section 4.5 hereof.
2.7 No Default. No Default, or Event of Default exists under this
Agreement and the Borrower is not in default in any respect under any material
contract, agreement or instrument to which Borrower is a party or by which
Borrower or any of its property may be bound, and Borrower is not aware of any
default under any contract, agreement or instrument, which Default, Event of
Default, default or breach could have a material adverse effect on the ability
of the Borrower to perform its obligations under the Notes, this Agreement, or
any of the Security Instruments to which they are a party or on its ability to
conduct their business as now conducted.
2.8 [INTENTIONALLY OMITTED]
2.9 Taxes. As of the date hereof the Borrower has filed all tax
returns required to be filed (or extensions have been granted) before
delinquency, and all Federal and state income taxes that are due and payable by
Borrower have been paid or otherwise satisfied before delinquency.
2.10 Compliance. As of the date hereof the Borrower has complied
in all material respects with all valid and applicable statutes, rules and
regulations of each jurisdiction to which each may be subject.
2.11 Pension Reform Act. In the event that ERISA may be applicable
to any Defined Benefit Pension Plan of the Borrower, no Reportable Event or
Prohibited Transaction exists which would constitute grounds for the
termination of any such Defined Benefit Pension Plan by the Pension Benefit
Guaranty Corporation or for the appointment by the appropriate United States
district court of a trustee to administer any such Defined Benefit Pension
Plan.
2.12 Environmental Laws. To Borrower's knowledge, and except as
would not have a material adverse effect on the operations or financial
condition of Borrower or on Borrower's ability to perform and pay its
obligations hereunder and under the Security Instruments:
(a) Borrower and all of its properties, assets, and
operations are in compliance in all material respects with all
Environmental Laws (as hereinafter defined).
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(b) Borrower is not aware of, nor has Borrower received
notice of, any past, present, or future conditions, events,
activities, practices, or incidents which may interfere with or
prevent the compliance or continued compliance of Borrower with the
Environmental Laws.
(c) Borrower has not (i) permitted violation of any
Environmental Laws with respect to any Hazardous Substances (as
hereinafter defined), wastes or materials which exist on, about, or
within or are used, generated, stored, transported, disposed of on, or
released or (ii) permitted actions which would cause the incurrence of
response costs or costs of corrective action on the part of Borrower
as defined by the Environmental Laws.
(d) The use which Borrower makes and intends to make of
its properties and assets will not result in violation of any
Environmental Laws in the use, generation, storage, transportation,
accumulation, disposal, or release of any Hazardous Substance, wastes
or materials on, in, or from any such properties or assets.
(e) There is no action, suit, proceeding, investigation,
or inquiry before any court, administrative agency or other
governmental authority pending or, to the knowledge of Borrower,
threatened against Borrower relating in any way to any Environmental
Law.
(f) Borrower (i) has no liability for remedial or
corrective action or response costs under any Environmental Law, (ii)
has not received any request for information by any governmental
authority with respect to the condition, use, or operation of any of
its properties or assets, and (iii) has not received any notice from
any governmental authority or other person with respect to any
violation of or liability under any Environmental Law.
(g) Borrower has obtained and complied with, and is in
compliance with, all terms and conditions of all permits, licenses and
other authorizations that may be required pursuant to Environmental
Laws for the occupation of the properties of the Borrower and the
operation of the business of the Borrower.
"Environmental Laws" means any and all federal, state, local and
foreign environmental laws, regulations, and ordinances applicable to Borrower
or Borrower's operations, including without
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limitation the Resource Conservation and Recovery Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Superfund Amendment and Reauthorization Act of 1986, as amended,
the Federal Water Pollution Control Act and the Oil Pollution Act. "Hazardous
Substances" shall mean any item defined as hazardous under the Environmental
Laws.
2.13 Margin Securities. The Borrower does not own any "margin
security" or "margin stock" as defined in Regulations G, U or X of the Board of
Governors of the Federal Reserve System (12 C.F.R. Parts 207, 221 and 224,
respectively).
2.14 Patents, etc. Except as previously disclosed to the Lender in
writing, the Borrower has all patents, patent rights or licenses, trademarks,
trademark rights, trade names, trade name rights, copyrights, permits and
franchises which are required in order for it to conduct its business as now
conducted without known conflict with the rights of others. The Borrower is
not aware of any fact or condition which might cause any of such foregoing not
to be renewed in due course.
2.15 Full Disclosure. Neither this Agreement nor any certificate
or written statement or any other factual data furnished by the Borrower or any
of its officers in writing in connection with the negotiation of this Agreement
or the transactions contemplated hereby contains any statement of a material
fact which is untrue in any material respect or omits a material fact known to
the Borrower to be necessary to make the statements contained herein or
therein, taken as a whole, not misleading in any material respect. There is no
fact known to the Borrower which the Borrower has failed to disclose to Lender
in writing which could adversely affect the business, operations, assets,
prospects or condition, financial or otherwise, of the Borrower.
2.16 Credit Agreements. Borrower has no agreements in effect
providing for or relating to extensions of credit in respect of which Borrower
is or may become directly or contingently obligated, and has not signed any
security agreement that is currently outstanding except as disclosed in writing
to Lender contemporaneously with the execution and delivery of this Agreement.
2.17 Investment Company Act. Borrower is not an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
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2.18 Public Utility Holding Company Act. Borrower is not a
"holding company" or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 3. Affirmative Covenants
Until the Indebtedness of the Borrower to the Lender has been paid or
while the Lender has a commitment to the Borrower hereunder:
3.1 Reporting Requirements. The Borrower will promptly furnish to
the Lender from time to time the following information regarding the business
affairs and financial condition of the Borrower.
(a) as soon as possible and in any event within five (5)
Business Days after obtaining knowledge of the occurrence of each
Default or Event of Default, the statement of an Authorized Officer
setting forth details of such Default or Event of Default and the
action which the Borrower proposes to take with respect thereto;
(b) as soon as available and in any event within one
hundred twenty (120) days after the end of each fiscal year, annual
audited financial statements of the Borrower, including the balance
sheet of the Borrower as at the end of such year and the statements of
income, shareholders' equity and cash flow of the Borrower for such
year, together with comparative figures for the preceding fiscal year,
if applicable, the statements certified, without qualification, by
independent certified public accountants acceptable to the Lender;
(c) as soon as available, and in any event, within thirty
(30) days after the last day of each month unaudited financial
statements of the Borrower, including the balance sheet of the
Borrower, as of the end of each such month, and the consolidating
statements of income, shareholders' equity and cash flow of the
Borrower for such month, certified by an Authorized Officer;
(d) as soon as available, and in any event, within thirty
(30) days following the last day of each month, the Borrowing Base
Report, to include aging reports of accounts receivable;
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(e) as soon as available, and in any event within thirty
(30) days following the end of each fiscal quarter, and within one
hundred twenty (120) days after the end of each fiscal year, the
certificate described in Section 3.8 of this Agreement; and
(f) such other information the Lender may reasonably
request from time to time at reasonable intervals under the then
applicable circumstances.
The Financial Statements and other reports shall fairly present the
financial position and results of operations of the Borrower and, if
applicable, in accordance with generally accepted accounting principles,
consistently applied.
The Borrower grants to the Lender the right upon three (3) Business
Days' prior notice to send the Lender's own representatives and/or employees
during normal business hours to inspect, copy, and/or audit the books of the
Borrower, the reasonable cost of which shall be paid by Borrower.
3.2 Taxes and Other Liens. The Borrower will pay all taxes,
assessments, governmental charges, claims for labor, supplies, rent and other
obligations which if unpaid, might become a lien against the property of the
Borrower provided the Borrower shall have the right to contest the foregoing by
appropriate proceedings diligently pursued.
3.3 Maintenance. Borrower will maintain its current basic
operations without change in line of business, its corporate existence, remain
in or become a corporation in good standing in each jurisdiction in which it is
required to be qualified, maintain all patents, trademarks, franchises and
licenses necessary in its business, and comply in all material respects with
all valid and applicable statutes, rules and regulations including without
limitation the Fair Labor Standard Act and all Environmental Laws, and it will
maintain or cause to be maintained its properties in condition sufficient to
continue its operations as presently conducted.
3.4 Further Assurances. Borrower will promptly at Lender's
request cure any defects in the execution and delivery of this Agreement, the
Notes, the Security Instruments and any other instrument or instruments
referred to or mentioned herein. Borrower will promptly, and in any event
within ten (10) days of Lender's request, execute and deliver to Lender upon
request all security agreements, financing statements, certificates of title,
deeds of trust, mortgages or any other instrument required to
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accomplish covenants and agreements of Borrower under this Agreement and the
Security Instruments.
3.5 Performance of Obligations. Borrower will pay the Notes
according to the reading, tenor and effect thereof and will do and perform
every act and discharge all of the obligations provided to be performed and
discharged by it under this Agreement, the Notes, the Security Instruments and
any and all of the instruments referred to or mentioned herein to which it is a
party at the time or times and in the manner therein and herein specified
subject to the other provisions hereof. The Borrower will perform all
obligations, pursuant to the terms of each indenture, agreement, contract, and
other instrument by which the Borrower or its properties is bound.
3.6 Reimbursement of Costs and Expenses. The Borrower will pay
the reasonable fees and expenses of counsel for the Lender in connection with
this Agreement and all transactions pursuant hereto, within thirty (30) days of
delivery to Borrower of each statement for such fees and expenses. The
Borrower will, upon request by Lender, within ten (10) days from said request,
reimburse the Lender for all amounts expended, advanced or incurred by the
Lender to satisfy any obligation of the Borrower under this Agreement, or to
protect the properties, assets or business of the Borrower, including without
limitation wages paid to insure compliance with the Fair Labor Standards Act,
amounts incurred to collect the Notes or to enforce the rights of the Lender
under this Agreement or any other instrument referred to or mentioned herein or
executed or to be executed in connection herewith, which amounts will include
all court costs, attorneys' fees, fees of auditors and accountants, and
investigation expenses reasonably incurred by the Lender in connection with any
such matters, and any and all amounts expended by Lender after the occurrence
of a Default or an Event of Default and during the continuation thereof as a
result of the provisions of all Environmental Laws, together with interest at
the rate of three percent (3%) over the Base Rate per annum, not to exceed the
maximum non-usurious interest rate permitted by applicable law, on each such
amount from the date that the same is due and payable to the Lender until the
date it is repaid to the Lender. All amounts advanced in connection herewith
shall be secured by the Collateral more fully described in Section 3.10.
Except for expenses advanced by Lender after (i) occurrence of an Event of
Default, (ii) to maintain insurance or (iii) to protect and preserve the
Collateral, Lender shall provide Borrower not less than five (5) days prior
notice of any advance hereunder.
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3.7 Insurance. The Borrower will maintain with financially sound
and reputable insurers, insurance with respect to its properties and business
against such liabilities, casualties, risks and contingencies and in such types
and amounts as is customary in the case of corporations engaged in the same or
similar businesses and similarly situated. Not less than annually, either
concurrently with delivery of the audited financial statements or promptly
after renewal of the applicable policy, or upon the reasonable written request
of Lender, the Borrower will furnish Lender a summary of the insurance coverage
of the Borrower showing compliance herewith and in form and substance
reasonably satisfactory to Lender and if requested will furnish Lender copies
of the applicable policies. Borrower will cause any and all insurance
policies, if any, insuring the Collateral, or any part thereof, to name Lender
as loss payee thereunder as its interest may appear and contain a provision
requiring at least thirty (30) days prior notice of cancellation to Lender. As
soon as possible, and in any event, within ten (10) days, Borrower will notify
Lender of the cancellation of any insurance coverage, whether or not Lender is
a loss payee under the affected policy.
3.8 Certificate of Compliance. Within thirty (30) days after the
end of each month, and within one hundred and twenty (120) days after the end
of each fiscal year there shall be furnished to the Lender a certificate in the
form attached as Exhibit "3.8" signed by an authorized officer of the Borrower
(1) stating that a review of the activities of the Borrower during such year
has been made under his supervision with a view to determining whether the
Borrower has kept, observed, performed and fulfilled all of its obligations
under this Agreement, the Notes, and Security Instruments, (2) containing
calculations to verify compliance and/or non-compliance with financial
covenants hereunder, and (3) stating that to the best knowledge and belief of
such officer of Borrower the Borrower has kept, observed, performed and
fulfilled each and every covenant and condition contained in the Notes, this
Agreement and the Security Instruments and to the best knowledge and belief of
such officer of Borrower is not at the time in default in the observance,
performance or fulfillment of any such covenants and conditions or if the
Borrower shall be in default, specifying any such default, the nature and
status thereof, and what action, if any, has been taken to remedy the default
or defaults; provided, however, that the information required by subsection (1)
above shall be required for the annual certificate only.
3.9 Litigation. As soon as possible and in any event, within ten
(10) Business Days of a president or chief financial officer of Borrower
obtaining knowledge thereof, Borrower shall give written
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notice to Lender of commencement of litigation (other than litigation being
defended by an insurance carrier without reservation as to coverage claiming
amounts within said coverage) in which the Borrower is reasonably expected to
have liability in excess of $100,000.00 and of all proceedings before any
governmental or regulatory agency affecting Borrower in which an adverse
decision is reasonably expected to involve amounts in excess of $200,000.00.
3.10 Security. The Indebtedness and Obligations of the Borrower
under this Agreement and the Security Instruments shall be secured by the
following:
(a) all Borrower's accounts, accounts receivable,
documents, instruments, chattel paper, and general intangibles,
whether now owned or hereafter acquired, and all products and proceeds
thereof;
(b) all Borrower's inventory, fixtures and equipment,
whether now owned or hereafter acquired, and all products and proceeds
thereof;
(c) without limiting any of the foregoing, all of
Borrower's customer lists, books, records, business records, computer
programs, computer software, database information, computer tapes and
discs, contracts of insurance, letters of credit, advices of credit,
confirmations of letters of credit, acceptances, drafts, warehouse
receipts, guaranties, deposit accounts at or with Lender, warranties,
and indemnities, whether now owned or hereafter acquired;
(d) any of the following issued by or held in the
possession of Lender: any deposit, deposit account, money market
account, cash management account, demand deposit account, savings
account, security, certificate of deposit, cash, cash equivalent, or
other sum at any time credited by or due (including without limitation
any funds on deposit) from any depository or other person or entity to
Borrower, certificated and uncertificated securities, whether now
owned or hereinafter acquired, and all and any and all proceeds and
products thereof; and
(e) all products and proceeds of (a) through (d) above.
3.11 Borrowing Base. The aggregate indebtedness pursuant to the
Revolving Facility and the amount of outstanding Credits shall not exceed the
Borrowing Base as reported in the Borrowing Base
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Report. In accordance with Section 3.1(d), Borrower shall provide the Lender a
calculation of the Borrowing Base on the Borrowing Base Report. In the event
the aggregate unpaid principal balance of Loans plus the outstanding Credits
exceeds the Borrowing Base calculated as described above as reported in the
Borrowing Base Report, the Borrower will immediately, but in any event no later
than the close of business on the same Business Day as the Borrowing Base
Report is delivered to Lender, reduce the indebtedness under the Revolving
Facility until the amount owed is less than the amount permitted pursuant to
the Borrowing Base.
3.12 Payments from Account Debtors. Borrower agrees to direct
payments from its account debtors into its operating account No. 1820763017 at
Lender via wire transfer or such other manner approved by Lender.
Section 4. Negative Covenants
In the absence of a written consent from Lender (in the manner
hereinafter provided), so long as any part of the Indebtedness shall remain
unpaid or the Lender has a commitment to the Borrower hereunder:
4.1 Guarantees and Debts. The Borrower will not guarantee any
contract or obligation of any other Person or incur, create, permit to exist,
assume or guarantee or in any manner become or be liable in respect of any
Debt, except that the foregoing restrictions shall not apply to:
(a) the Notes, Credits, and other obligations or
liabilities pursuant to this Agreement or the Security Instruments;
(b) indebtedness on open account in connection with
normal trade obligations in the ordinary course of business and
obligations incurred in connection with the purchase and sale of
Inventory in the ordinary course of business;
(c) lease obligations and general and administrative
expenses;
(d) liabilities of the Borrower for any unpaid taxes not
yet due or being diligently contested in good faith by appropriate
proceedings and subject to the creation of appropriate reserves under
generally accepted accounting principles and upon stay of levy and
execution thereon;
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(e) obligations of the Borrower pursuant to contracts
entered into in the ordinary course of business, except for
indebtedness for borrowed money;
(f) insurance premiums to the extent they are not
delinquent; and
(g) other indebtedness pursuant to which no principal
payments nor the establishment of any sinking fund is required prior
to the maturity of the Term Loan.
Notwithstanding the foregoing exceptions (a) - (g), the Borrower shall not
enter into any agreement or contract with face value in excess of $3,000,000,
without the Lender's prior written consent, which shall not be unreasonably
withheld.
4.2 Dividends and Redemption. The Borrower will not declare or
pay dividends or make any other distribution on account of, or purchase,
acquire, redeem or retire any stock of the Borrower other than (1) dividends to
shareholders in respect of the tax liabilities of such shareholders resulting
from the operations of the Borrower and (2) retirement of outstanding common
stock of the Borrower upon conversion to other common or preferred stock of the
Borrower, whether now or hereafter outstanding, if after giving effect to such
dividend, the Borrower shall not be in compliance with Section 4.7 hereof;
provided that in no event shall such distribution or dividend exceed fifty
percent (50%) of the Borrower's net income for the applicable period.
4.3 Investments, Loans and Advances. The Borrower will not make
Investments in or loans or advances to any Person, except (1) expense and
salary advances made to employees of the Borrower or in the ordinary course of
business, and (2) temporary cash investments approved by Lender, except that
Lender shall review proposed investments in or creation of joint ventures of
the Borrower and shall not unreasonably withhold its consent to such joint
ventures.
4.4 Mergers, etc. The Borrower will not (a) merge or consolidate
with any corporation,(b) create any subsidiaries, (c) acquire all or
substantially all the assets of any other entity, nor (d) create or
participate in any partnerships or joint ventures, except that Lender shall
review proposed investments in or creation of joint ventures of the Borrower
and shall not unreasonably withhold its consent to such joint ventures. The
Borrower will not liquidate or dissolve.
4.5 Encumbrances. The Borrower will not create, incur, assume or
permit to exist any mortgage, pledge, lien or encumbrance on any of its
properties or assets (now owned or hereafter
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acquired), nor acquire or agree to acquire property or assets under any
conditional sale agreement or title retention contract, except that the
foregoing restrictions shall not apply to:
(a) liens of vendors, carriers, warehousemen, mechanics,
laborers and materialmen arising by law in the ordinary course of
business for sums not yet due or which are being diligently contested
in good faith;
(b) liens for taxes not yet due or which are being
diligently contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with or to secure
workmen's compensation, unemployment insurance, pensions or other
employee benefits;
(d) liens required by this Agreement or any of the
Security Instruments;
(e) statutory liens and easements or other servitudes
arising in the ordinary course of business and minor irregularities of
title which do not materially impair the ownership or use of the
property subject thereto for the purposes for which such property is
owned and held by the Borrower or limit or restrict Lender's remedies
hereunder;
(f) liens incurred in the ordinary course of business,
not on any of the collateral, to secure performance of tenders,
statutory obligations, leases and contracts (other than for borrowed
money) entered into in the ordinary course of business or to secure
obligations on appeal bonds; and
(g) judgments in existence less than 30 days after the
entry thereof or with respect to which execution has been properly
stayed.
As to the liens and encumbrances permitted pursuant to paragraphs (a)
and (b) above, Borrower's right to contest diligently in good faith by
appropriate proceedings is conditioned upon the Borrower setting up appropriate
reserves under generally accepted accounting principles and upon stay of levy
and execution thereon.
4.6 Sale of Assets. The Borrower will not sell, transfer or
otherwise dispose of all or substantially all of its assets. The Borrower will
not enter into any arrangement directly or indirectly with any person, firm, or
corporation whereby the Borrower would
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sell or transfer any property, whether now owned or hereafter acquired, and
then or thereafter lease as lessee such property or any part thereof or any
other property which the Borrower would use for substantially the same purpose
or purposes as the property sold or transferred.
4.7 Financial Covenants. The Borrower will not at any time
permit:
(a) its Current Ratio to be less than 1.1 to 1.0;
(b) its Tangible Net Worth to be less than $2,500,000
plus fifty percent (50%) of Borrower's net income (excluding any
deductions for net losses);
(c) its Leverage Ratio to be greater than 3.25 to 1.0
through December 31, 1998, and 2.0 to 1.0 thereafter; and
(d) its Cash Flow Coverage Ratio of not less than 1.25
to 1.0.
All terms not expressly defined shall be defined in accordance with
generally accepted accounting principles. All determinations under
this Agreement shall be made in accordance with generally accepted
accounting principles consistently applied, on a consolidated basis,
except where expressly provided to the contrary. All references to a
preceding period shall mean the period ending as of the end of the
month, quarter or fiscal year for which the applicable report is
delivered. All references to a period immediately following shall
mean the period beginning on the first day of the month, quarter or
fiscal year following the end of the period for which the applicable
report is delivered.
4.8 Basic Line of Business. Borrower will not change its basic
line of business from gas membrane separation services, gas membrane plant
manufacturing and related businesses.
4.9 Transactions with Affiliates. Borrower will not enter into
transactions with an Affiliate which is not on an arms-length basis comparable
to the terms which would apply to a transaction with a bona-fide third party.
4.10 Capital Expenditures. Borrower will not make any capital
expenditures, acquisitions or other investments except in the ordinary course
of business. During any twelve month period,
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Borrower will not make capital expenditures in excess of $250,000, except for
expenditures of up to $1,200,000 for the membrane manufacturing and drying plant
before June 30, 1998.
4.11 Operating Leases. The Borrower shall not enter into any
operating leases except (a) operating leases in existence on the Closing Date
and (b) operating leases in which lease payments do not exceed $75,000 per year
in the aggregate.
Section 5. Events of Default and Remedies
5.1 Events of Default. Any of the following events which shall
occur and be continuing shall be considered an Event of Default as that term is
used herein:
(a) Borrower does not pay any installment of interest on
the Notes, a payment of fees owed to Lender, or any installment of
principal of the Notes or a reimbursement under any Credit within
three (3) Business Days of the due date; provided, however, that any
default rate of interest provided herein shall immediately accrue on
such amounts, notwithstanding the foregoing grace period;
(b) Borrower does not pay at the scheduled maturity
(after expiration of any applicable grace period) or when due whether
by acceleration or otherwise all or any part of, any Debt of the
Borrower to any other person or entity which exceeds, in the
aggregate, $50,000;
(c) The Borrower shall fail or refuse for a period of
thirty (30) days to furnish to the Lender any information, data,
certificate, or other document required by this Agreement;
(d) The Borrower does not comply with or fails in the
performance of any covenant contained in Section 3 of this Agreement
(other than delivery of information which shall be governed by Section
5.1(c) hereof) or any of the Security Instruments to be kept or
performed by the Borrower and, except for the failure to make payments
hereunder, such failure continues for thirty (30) days;
(e) The Borrower does not comply with or fails in the
performance of any covenant contained in Section 4.7 of this Agreement
to be kept or performed by the Borrower and fails to
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cure such default within thirty (30) days of the occurrence thereof;
(f) The Borrower does not comply with or fails in the
performance of any covenant contained in Section 4 of this Agreement
(other than Section 4.7) to be kept or performed by the Borrower and,
except for the failure to make payments hereunder, such failure
continues for thirty (30) days;
(g) Any representation or warranty made by the Borrower
herein or in any of the Security Instruments proves to have been
untrue in any material respect, or any representation, statement
(including financial statements), certificate or data furnished or
prepared and made available by the Borrower to Lender hereunder proves
to have been untrue in any material respect, as of the date as of
which the facts therein set forth were stated or certified;
(h) The Borrower shall discontinue business, or shall (i)
make a general assignment for the benefit of creditors, or (ii) apply
for or consent to the appointment of a receiver, a trustee or
liquidator of itself or of all or a substantial part of its assets, or
(iii) be adjudicated a bankrupt or insolvent, or (iv) file a voluntary
petition in bankruptcy or file a petition or answer seeking
reorganization or an arrangement with creditors or seeking to take
advantage of any other law (whether federal or state) relating to
relief of debtors, or admit (by answer, by default or otherwise) the
material allegations of a petition filed against it in any bankruptcy,
reorganization, arrangement, insolvency or other proceedings (whether
federal or state) relating to relief of debtors, or (v) suffer or
permit to continue unstayed and in effect for sixty (60) consecutive
days any judgment, decree or order, entered by a court of competent
jurisdiction, which approves a petition seeking reorganization of the
Borrower or appoints a receiver, trustee or liquidator of the Borrower
or of all or a substantial part of its assets, or (vi) take or omit to
take any action for the purpose or with the result of effecting or
permitting any of the foregoing.
5.2 Remedies. Upon the happening of an Event of Default specified
in Section 5.1(g), immediately and without notice, and upon the happening of
any other Default or Event of Default specified in Section 5.1, at the option
of the Lender, without notice to Borrower, Lender may declare any commitment
hereunder cancelled and cease advances thereunder, and/or upon the happening of
an Event of Default specified in Section 5.1(g), immediately and
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without notice, and otherwise, at the option of the Lender, upon notice to
Borrower, Lender may declare the entire aggregate principal amount of the Notes
then outstanding and the interest accrued thereon immediately due and payable
without further notice and without presentment, demand, protest, notice of
protest or other notice of default or dishonor of any kind, all of which are
hereby expressly waived by the Borrower.
Section 6. Closing
The closing of the loans and the commencement of advances pursuant to
the Revolving Facility contemplated hereby shall be subject to the satisfaction
of the following conditions:
6.1 Counsel to Lender. All legal matters incident to the
transactions herein contemplated shall be satisfactory to Gardere Xxxxx Xxxxxx
& Xxxxx, L.L.P., counsel to the Lender.
6.2 Required Documents. The Lender shall have received executed
copies of the following closing documentation:
(a) This Agreement;
(b) The Term Note;
(c) The Revolving Note;
(d) The Security Agreement;
(e) The Notice of Final Agreement;
(f) An opinion of counsel satisfactory to Lender;
(g) An appraisal from an independent appraiser acceptable
to Lender, appraising the value of Borrower's fixed
assets at $9,000,000 or greater; and
(h) Such other documentation as Lender may require.
6.3 Other Conditions. Other conditions and/or documentation have
been completed and/or executed in a manner satisfactory to Lender in its
reasonable discretion.
6.4 Material Adverse Changes. No event has occurred that could
reasonably be expected to have a material adverse effect on Borrower's
business, operations or property, Borrower's ability to perform its obligations
under this Agreement, the Notes or any of the Security Instruments, or the
validity or enforceability of this Agreement, the Notes or any of the Security
Instruments or Lender's remedies and rights hereunder or thereunder.
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6.5 Other Indebtedness. Evidence of payment of Borrower's
indebtedness to Dow, which shall be in form and substance satisfactory to
Lender.
Section 7. Miscellaneous
7.1 Survival of Various Matters. All representations and
warranties of the Borrower herein shall be deemed remade as of the date of any
borrowing hereunder (except to the extent such representation and warranty
expressly provides it is as of the date hereof), and all covenants and
agreements herein not fully performed before the date of this Agreement, shall
survive such date.
7.2 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and may be
personally served or sent by telex, telecopier, mail or the express mail
service of the United States Postal Service, Federal Express or other
equivalent overnight or expedited delivery service and (i) if given by personal
service, telex (confirmed by telephone) or telecopier (confirmed by telephone),
it shall be deemed to have been given upon receipt, (ii) if sent by telex or
telecopier without telephone confirmation, it shall be deemed to have been
given twenty-four (24) hours after being given, (iii) if sent by mail, it shall
be deemed to have been given upon receipt and (iv) if sent by Federal Express,
the Express Mail Service of the United States Postal Service or other
equivalent overnight or expedited delivery service, it shall be deemed given
twenty-four (24) hours after delivery to such overnight or expedited delivery
service, delivery charges prepaid and properly addressed to Borrower or Lender,
as the case may be. For purposes hereof, the address of Borrower and Lender
shall be as follows:
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Borrower:
The Cynara Company
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxx
Fax No. (000) 000-0000
with copies to:
Heller, Hickox, Dimeling, Xxxxxxxxx & Park
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx,, Xxxxxxxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxx, Xx.
Fax No. (000) 000-0000
and
Xxxx Xxxxx Xxxx & XxXxxx
One Liberty Place, 25th Floor
Philadelphia, Pennsylvania 19103
Attention: Xxxx X. Xxxxxx, Esquire
Fax No. (000) 000-0000
Lender:
Bank One, Texas, N.A.
000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxxxx
Fax No.: (000) 000-0000
Except that all reports required by Section 3.1 hereof shall
be delivered to:
Bank One, Texas, N.A.
000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Monitoring Unit
Fax No.: (000) 000-0000
with a copy to:
Gardere Xxxxx Xxxxxx & Xxxxx, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxxxxx
Fax No.: (000) 000-0000
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Any party may, by proper written notice hereunder to the other parties, change
the address to which notices shall thereafter be sent to it.
7.3 Successors and Assigns. All covenants and agreements herein
contained by or on behalf of the Borrower shall bind its successors and assigns
and shall inure to the benefit of the Lender and its successors and assigns and
all covenants and agreements herein contained by or on behalf of the Lender
shall bind the Lender and its successors and assigns.
7.4 Renewals. All provisions of this Agreement relating to the
Notes shall apply with equal force and effect to each and all promissory notes
hereafter executed which in whole or in part represent a renewal, extension or
rearrangement of any part of the Indebtedness originally represented by the
Notes.
7.5 No Waiver. No course of dealing on the part of the Lender or
its officers or employees, or any failure or delay by the Lender with respect
to exercising any right, power or privilege of the Lender under this Agreement,
the Notes, or Security Instruments, shall operate as a waiver thereof. The
rights and remedies of the Lender under this Agreement, the Notes, and the
Security Instruments shall be cumulative and the exercise or partial exercise
of any such right or remedy shall not preclude the exercise of any other right
or remedy.
7.6 Governing Law. This Agreement and the Notes which may be
issued hereunder shall be deemed to be contracts made under and shall be
construed in accordance with and governed by the laws of the State of Texas.
7.7 Non-Subordination. The Notes shall never be in a position
subordinate to any indebtedness owing to any other creditor of the Borrower,
except to the extent that such other creditor may hold a lien or liens on
specific assets of the Borrower pursuant to the terms hereof or with the
knowledge and written consent of the Lender.
7.8 Exhibits. The Exhibits attached to this Agreement are
incorporated herein for all purposes, and shall be considered a part of this
Agreement. Those exhibits are: Term Note - Exhibit "1.3"; Borrowing
Application - Exhibit "1.4.1"; Revolving Note - Exhibit "1.4.2"; Adverse Change
- Exhibit "2.3"; Liabilities and Litigation - Exhibit "2.5"; Certificate of
Compliance - Exhibit "3.8"; and Borrowing Base Report - Exhibit "3.11".
7.9 Payment on Non-Business Days. Whenever (i) any payment to be
made hereunder or under the Notes or (ii) any certificate, report or financial
statement is due on a day that is a Saturday, Sunday or banking holiday under
the laws of the State of Texas, such payment shall be made on the next
succeeding day which is not a Saturday, Sunday or banking holiday under the
laws of the State
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of Texas and such extension of time shall be included in the computation of
interest due with such payment.
7.10 Severability. In the event any one or more of the provisions
contained in this Agreement, the Notes, or the Security Instruments, or in any
other instrument referred to herein or executed in connection with or as
security for the Notes shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, the Notes, or the
Security Instruments, or any other instrument referred to herein or executed in
connection with or as security for the Notes. Furthermore, in lieu of such
invalid, illegal or unenforceable provision, there shall automatically be added
a provision as similar in terms to such invalid, illegal or unenforceable
provision as may be possible and as may be valid, legal and enforceable.
7.11 Controlling Document. Should a direct conflict exist between
the specific terms of the Notes, this Agreement or any of the Security
Instruments, the Notes shall control over this Agreement and the Security
Instruments, and this Agreement shall control over the Security Instruments and
the exhibits attached to this Agreement.
7.12 Savings Clause. Nothing contained in this Agreement or in the
Notes or in any other agreement or undertaking relating hereto shall be
construed to obligate Borrower, under any circumstances whatsoever, to pay
interest in excess of the maximum rate that Borrower may pay pursuant to Texas
law and in regard to which Borrower would be prohibited from successfully
raising the claim or defense of usury (the "Maximum Rate"). In the event that
any sums received from Borrower are at any time under applicable law deemed or
held to provide a rate of interest in excess of the Maximum Rate, the effective
rate of interest on the loans hereunder shall be deemed reduced to and shall be
the Maximum Rate and the Borrower and all sureties, endorsers and guarantors
shall accept as their sole remedy under such circumstances either the return of
any sums of interest which may have been collected and which produced a rate in
excess of the Maximum Rate, or the application of those sums as a credit
against the unpaid principal amount of the loan, whichever remedy may be
elected by Lender. In addition, in the event that the Notes are prepaid or the
maturity of the Notes is accelerated by reason of election by Lender hereunder,
then all unearned interest shall either be cancelled or, if theretofore paid,
shall either be returned to Borrower or credited on the unpaid principal amount
due under the Notes, whichever action may be elected by Lender.
7.13 Investment. Lender represents that it is the present
intention of Lender to acquire the Notes for its own account for the purpose of
investment and not with a view to the distribution or sale thereof, subject,
nevertheless, to the necessity that
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Lender remain in control at all times of the disposition of property held by it
for its own account; it being understood that the foregoing representation
shall not affect the character of the loans pursuant to this Agreement as
commercial lending transactions, and that Lender may grant a participation
interest in the Notes in the ordinary course of business. In the absence of
the exercise by Lender of any remedy set forth in Section 5.2, Lender shall
obtain Borrower's prior written consent to the assignment of Lender's
obligations hereunder.
7.14 Set Off. Upon the occurrence and during the continuance of
any Default or Event of Default, the Lender is hereby authorized at any time
and from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Lender to or for the credit or the
account of the Borrower against any and all of the Indebtedness, irrespective
of whether or not the Lender shall have made any demand under this Agreement
and although such obligations may be unmatured. The Lender agrees promptly to
notify the Borrower after any such set off and application made by the Lender,
provided that the failure to give such notice shall not affect the validity of
such set off and application. The rights of the Lender under this Section are
in addition to other rights and remedies (including, without limitation, other
rights of set off) which the Lender may have.
7.15 INDEMNIFICATION. BORROWER AGREES TO INDEMNIFY AND HOLD LENDER
AND ITS OFFICERS, EMPLOYEES, DIRECTORS AND AGENTS HARMLESS AGAINST ALL THIRD
PARTY CLAIMS, DAMAGES, LIABILITIES AND EXPENSES WHICH MAY BE ASSERTED AGAINST
LENDER IN CONNECTION WITH OR ARISING OUT OF ANY THIRD PARTY INVESTIGATION,
LITIGATION OR PROCEEDING RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OTHER THAN CLAIMS ARISING FROM LENDER'S BAD FAITH, GROSS
NEGLIGENCE OR WILFUL MISCONDUCT.
7.16 Change of Ownership or Control. If at any time while any
Notes shall be outstanding or the Lender has a commitment hereunder (a) any of
Xxxxxx X. Xxxxxxx, Xxxxx Xxxxx, Xxxxxxx X. Xxxxxx or Xxxxxx X. Xxxxxx, Xx.
ceases to be a shareholder of Borrower or (b) the current shareholders of
Borrower cease to have the ability to elect a majority of the directors of the
Borrower, a "Change of Ownership or Control" shall be deemed to have occurred.
The Borrower shall promptly, but in any event within ten (10) days give written
notice to Lender upon obtaining knowledge of an event which is or would
constitute the occurrence of a Change of Ownership or Control. Lender shall,
upon the happening of a Change of Ownership or Control, have the privilege of
declaring the Notes to be due and payable on a date not earlier than ten (10)
days from the date of the exercise of said privilege. The Notes then
outstanding shall
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thereupon become due and payable on the date specified in the notice sent to
the Borrower by Lender including the principal amount thereof plus accrued
interest thereon to the accelerated maturity date and any amounts owed by
Borrower to Lender pursuant to this Agreement or the Security Instruments.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed in multiple counterparts, each of which is an original
instrument for all purposes, all as of the day and year first above written.
THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENTS BETWEEN THE
BORROWER AND THE LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE BORROWER AND THE LENDER.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE LENDER AND THE BORROWER.
THE CYNARA COMPANY
By: /s/ XXXXXXX X. XXXXXX
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer
BANK ONE, TEXAS, N.A.
By: /s/ XXXX XXXX
----------------------------
Name: Xxxx Xxxx
Title: Vice President
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EXHIBIT "1.3"
TERM NOTE
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EXHIBIT "1.4.1"
LOAN APPLICATION
, 19
------------------- ---
TO:
----------------------------------------------
FROM:
----------------------------------------------
1. Reference is made to that certain Loan Agreement, dated as of
__________, 1997 (the "Agreement"), between The Cynara Company as Borrower, and
Bank One, Texas, N.A. as Lender. All terms defined in such Agreement shall
have the same meaning herein.
2. Please be advised that during normal banking hours on
___________, 19___, Borrower shall borrow from Lender the aggregate principal
sum of $____________ which, when borrowed, will cause the total outstanding
principal amount of indebtedness pursuant to the Revolving Facility plus
outstanding Letters of Credit to be $______________.
3. Borrower has not acquired knowledge of any event which would
make any representation or warranty set forth in Section 2 of the Agreement
untrue in any material respect except as such may have been superseded by
information previously furnished to Lender, representations relating expressly
to a given date and as follows:
4. No Event of Default exists, and no event has occurred which
with the lapse of time or notice or both could become an Event of Default.
Very truly yours,
----------------------------------------
42
Exhibit "1.4.2"
REVOLVING NOTE
43
EXHIBIT "2.5"
LIABILITIES AND LITIGATION
NONE
44
EXHIBIT "3.8"
CERTIFICATE OF COMPLIANCE
In accordance with Section 3.8 of the Loan Agreement ("Loan
Agreement") dated __________, 1997, between Bank One, Texas, N.A. ("Lender")
and The Cynara Company, a Delaware corporation ("Borrower"), I,
__________________________________, _____________________ of the Borrower do
hereby certify that the following is true and correct as of ______________,
19____.
1. To the best of my knowledge and belief, that the Borrower is
not in default under the Loan Agreement, the Notes, and the Security
Instruments.
2. That the Borrower's financial condition for the month ending
__________________ is as follows:
FINANCIAL REQUIRED RATIO/ ACTUAL RATIO/
COVENANT AMOUNT AMOUNT
--------- --------------- -------------
Current Ratio 1.1 to 1.0 or less
Tangible Net Worth $2,500,000 or previous
year's no. + 50% of
net income
Leverage Ratio No more than 3.0 to 1.0
Cash Flow Coverage Ratio Not less than 1.25 to 1.0
Collateral Location:
The foregoing terms are used as defined in the Amended and Restated Loan
Agreement.
----------------------------------------
(Signature of Certifying Officer)
45
EXHIBIT "3.11"
BORROWING BASE REPORT
FORM OF
BORROWING BASE CERTIFICATE
NO. ____________________ Dated ____________, 19_______
In accordance with the loan agreement ("Agreement") dated __________,
1997 between Bank One, Texas, N.A. ("Lender") and The Cynara Company
("Borrower"), I, ____________________________ of the Borrower hereby certify
and warrant that the following schedule accurately states Borrower's Liquid
Collateral, Eligible Accounts Receivables and Inventory and Borrower's
borrowing base as of the date hereof:
A. Eligible Accounts
-----------------
1. Prior Months Eligible Accounts Receivable: ______________
2. Borrowing Base Component (A(1) x 80%): ______________
B. Inventory
---------
1. Cost of raw materials ______________
2. Lesser of 1. And $1,000,000 ______________
3. Costs of finished goods ______________
4. Project costs in excess of xxxxxxxx ______________
5. Sum of B(2), (3) and (4) ______________
6. Borrowing Base Component (B(5) x 50%): ______________
C. Borrowing Base Calculation
--------------------------
1. Total Liquid Collateral (at 100% Advance Rate): ______________
2. Borrowing Base (Sum of A(2), B(2) and C(1): ______________
D. Availability
------------
1. Credit Facility Commitment: ______________
2. Borrowing Base (C(2) above): ______________
3. Lesser of D(1) and D(2): ______________
4. Total Credits Outstanding: ______________
5. Total Loans Outstanding: ______________
6. Total Outstandings: ______________
7. Availability D(3)-D(6): ______________
The Undersigned further certifies and covenants that there has been no
material adverse change in the financial condition of Borrower from that shown
by the financial statements furnished to Lender and to the best of his
knowledge that no default under the Agreement is existing on the date of this
certificate, and that the foregoing report is true and correct as of the date,
and that the items mentioned herein constitute collateral in accordance with
the terms of the Agreement.
----------------------------------------
Signature of Certifying Officer
Title:
----------------------------------
