UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2000
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____ to _____.
COMMISSION FILE NUMBER: 001-23407
SURREY, INC.
(Exact name of registrant as specified in its charter)
Texas 74-2138564
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13110 Trails End Road
Leander, Texas 78641
(Address of principal executive offices)
(512) 267-7172
(Registrant's telephone number, including area code)
Check whether the registrant: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes _X_ No ___
On May 11, 2000, the registrant had 2,472,727 outstanding shares of
common stock, no par value.
Transitional Small Business Disclosure Format (check one);
Yes ___ No _X_
<PAGE>
SURREY, INC.
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheet as of March 31, 2000 and December 31, 1999
Statements of Operations for the Quarter and Three Months Ended
March 31, 2000 and March 31, 1999
Statements of Cash Flows for the Quarter and Three Months
Ended March 31, 2000 and March 31, 1999
Notes to Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II - OTHER INFORMATION
SIGNATURES
EXHIBITS
-2-
<PAGE>
PART I: ITEM 1. FINANCIAL STATEMENTS
SURREY, INC
BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6 $ 0
Accounts receivable, net of allowances for doubtful
accounts of $57 and $116 in 2000 and 1999,
respectively 2,196 4,091
Inventories 2,657 2,838
Prepaid expenses and other current assets 218 23
Deferred income taxes 143 143
Income taxes receivable 32 40
-------- --------
Total current assets 5,252 7,135
Property and equipment, net 4,217 4,237
Deferred income taxes 253 113
-------- --------
$ 9,722 $ 11,485
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdrafts $ 0 $ 450
Trade accounts payable 963 1,724
Accrued expenses 202 312
Current maturities of long-term debt 431 418
Current maturities of capital lease obligations 204 204
-------- --------
Total current liabilities 1,800 3,108
Long-term debt, less current maturities 4,651 4,732
Capital lease obligations, less current maturities 163 196
Commitments and contingencies 0 0
Shareholders' equity:
Common stock; no par value: 10,000 shares
authorized, 2,473 shares issued and outstanding 4,099 4,099
Common stock warrants: 737 authorized, 675
issued and outstanding (64) (64)
Accumulated deficit $ (1,055) $ (714)
-------- --------
Total shareholders' equity 3,108 3,449
-------- --------
$ 9,722 $ 11,485
======== ========
</TABLE>
SEE ACCOMPANYING NOTES
-3-
<PAGE>
SURREY, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net sales $ 3,350 $ 3,332
Cost of sales 2,717 2,762
------- -------
Gross profit 633 570
Operating expenses:
Sales and marketing 215 284
General and administrative 773 539
------- -------
Total operating expenses 988 823
Loss from operations (355) (253)
Other income (expense):
Interest expense (118) (112)
Other income 0 0
------- -------
Loss before income taxes (473) (365)
Benefit for income taxes (132) (111)
------- -------
Net loss $ (341) $ (254)
======= =======
Loss per share - basic and diluted $ (0.14) $ (0.10)
======= =======
Weighted average shares outstanding:
Basic and diluted 2,473 2,473
======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
-4-
<PAGE>
SURREY, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (341) $ (254)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 102 87
Changes in operating assets and liabilities:
Accounts receivable 1,895 (722)
Inventories 181 (130)
Prepaid expenses and other current assets (195) 86
Trade accounts payable (762) 471
Accrued expenses (124) (50)
Income taxes receivable/payable (132) (112)
------- -------
Net cash provided by (used in) operating
activities 624 (624)
INVESTING ACTIVITIES
Acquisition of property and equipment (514) (487)
FINANCING ACTIVITIES
Proceeds from issuance of notes payable 0 800
Proceeds from issuance of long-term debt 0 311
Payment of long-term debt (54) (34)
Proceeds from capital lease obligations 0 7
Principal payments on capital lease obligations (50) (50)
------- -------
Net cash provided (used in) financing activities $ (104) $ 1,034
------- -------
Net increase (decrease) in cash 6 (77)
Cash and cash equivalents, beginning of period 0 77
------- -------
Cash and cash equivalents, end of period $ 6 $ 0
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 118 $ 112
Income taxes 0 0
Acquisition of property and equipment
under capital leases $ 86 $ 7
</TABLE>
SEE ACCOMPANYING NOTES.
-5-
<PAGE>
SURREY, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three- month periods ended March 31,
2000 and 1999 are not necessarily indicative of the results that may be expected
for the year ended December 31, 2000. For further information, refer to the
financial statements and footnotes thereto included in the Surrey, Inc. annual
report on Form 10-KSB for the year ended December 31, 1999.
2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share data):
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------
2000 1999
-------- --------
<S> <C> <C>
Numerator:
Net income (loss) $ (341) $ (254)
Numerator for basic and diluted earnings (loss) per share -
income (loss) available to common stockholders $ (341) $ (254)
======== ========
Denominator:
Denominator for basic earnings (loss) per share - weighted -
average shares 2,473 2,473
-------- --------
Denominator for diluted earnings (loss) per share - adjusted
weighted - average shares and assumed conversions 2,473 2,473
======== ========
Basic earnings (loss) per share $ (0.14) $ (0.10)
======== ========
Diluted earnings (loss) per share $ (0.14) $ (0.10)
</TABLE>
-6-
<PAGE>
Options to purchase 415,000 shares of common stock at $1.53 to $1.68 were issued
in April 2000. Options to purchase 317,500 shares of common stock at $4.00 to
$4.40 per share; warrants to purchase 675,000 shares of common stock at $4.80
per share; and a warrant to purchase 62,500 Units (consisting of two shares of
common stock and one redeemable common stock purchase warrant) at $9.75 per Unit
were outstanding during 2000 and 1999 but were not included in the computation
of diluted earnings per share because the exercise prices were greater than the
average market price of the common shares; therefor, the effect would be
antidilutive.
3. CONTINGENCIES
The Company is involved in certain claims arising in the normal course of
business. An estimate of the possible loss resulting from these matters cannot
be made; however, the Company believes that the ultimate resolution of these
matters will not have a material adverse effect on its financial position or
results of operations.
-7-
<PAGE>
PART I: ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
- --------------------------------------------------------------------------
The following discussion and analysis provides information that
management believes is relevant to an assessment and understanding of the
Company's level of operation and financial condition. This discussion should be
read with the financial statements appearing in Part I, Item 1 of this report.
RESULTS OF OPERATIONS
NET SALES. Net sales for the Company reflect total sales less cash
discounts and estimated returns. Net sales for first quarter increased slightly
to $3,350,000 for the three months ended March 2000 from $3,332,000 for the
three months ended March 1999, an increase of 0.5%. This result is primarily
attributable to the following factors: the Company had a broader customer base
entering first quarter 2000 as compared with the customer base entering first
quarter 1999 and such customer base has remained fairly unchanged; regular sales
to existing customers remained strong during first quarter 2000; orders from
Bath and Body Works ("BBW") during first quarter 2000 were significantly lower
due to the fact that in first and second quarters of 1999 BBW placed its opening
order shipments (initial shipment of products to stock stores shelves), which
orders are not repeated; and in first and second quarters of 1999 the Company
had two additional special orders (the Minnetonka Brands "Star Wars" soap
project and a special order from Wal-Mart). For second quarter 2000, the Company
currently expects its customer base and its regular order sales to be similar to
second quarter 1999. However, due to the factors mentioned above (particularly
the lack of an opening order from BBW in 2000 and the lack of any special
project orders in 2000), the Company currently expects second quarter sales to
be significantly lower than sales in second quarter 1999.
GROSS PROFIT. Gross profit increased slightly for the three months
ended March 2000 to $633,000 from $570,000 for the comparable three month period
in 1999. Gross profit margin for the same period increased from 17.1% in 1999 to
18.8% in 2000. This increase in gross profit margin is primarily attributed to
significant cost savings in production labor. Specifically, temporary workers
were replaced by full-time production staff. This resulted in a 25% reduction in
production labor costs for the first quarter of 2000 over the comparable period
in 1999.
OPERATING EXPENSES. Operating expenses in the first three months of
2000 increased by 20.0%: $988,000 (or 29.4% of net sales) in 2000 as compared to
$828,000 (or 24.9% of net sales) for the comparable period in 1999.
Sales and marketing expenses decreased from $284,000 (or 8.6% of net
sales) in 1999 to $215,000 (or 6.4% of net sales) in 2000, due mainly to a
decrease in the costs for advertising and promotion.
General and administrative expenses increased from $544,000 (or 16.3%
of net sales) for first quarter 1999 to $773,000 (or 23.0% of net sales) for
first quarter 2000, primarily due to increased salaries and the payment of
approximately $90,000 in bonuses in March 2000.
INTEREST EXPENSE. Interest expense of $118,000 (3.5% of net sales) in
March 2000 remained comparable to $112,000 (3.4% of net sales) in March 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flow from
operations, bank borrowings, and lease financing.
-8-
<PAGE>
Effective April 2000, the Company amended its Loan Agreement with Chase
Bank of Texas, National Association ("Lender"). Under the amended Loan
Agreement, the Company currently has three outstanding term loans and a
revolving line of credit to be used for working capital purposes. The Company
has (a) a construction/term loan in the original principal amount of $2,300,000
("Term Loan") with a final maturity in April 2005, of which approximately $2.1
was outstanding at March 31, 2000; (b) a term loan, in the original principal
amount of $400,000 ("Second Term Loan") with a maturity of February 2004, of
which approximately $355,000 was outstanding at March 31, 2000; and (c) a term
loan, in the original principal amount of $1,000,000, which is being transferred
from amounts previously outstanding at March 31, 2000 under the Company's
Revolving Note ("Third Term Loan"), with a maturity of April 2003. The proceeds
of these terms loans were used to repay outstanding debt, to finance the
Company's 1998 and 1999 expansion of the plant and facilities, and for working
capital.
The Company's current revolving line ("Revolving Note") with the Lender
is based, under the amended Loan Agreement, on eligible accounts and eligible
inventory and has a final maturity of May 8, 2001. Amounts currently available
under the Revolving Note include the lesser of (A) 80% of Eligible Accounts (as
defined), plus on any date between April 1, 2000 and July 31, 2000 or between
January 1, 2001 and May 8, 2001, the lesser of (x), 50% of current inventory
balance and (x) $1.2 million, or (B) $3,000,000. As of April 30, 2000, the
Company had $1,500,000 outstanding under the Revolving Note and $450,000 in
excess borrowing capacity.
Under the current Loan Agreement, (a) interest on each of the Second
and Third Term Loans and the Revolving Note will float at the Lender's Prime
Rate plus 1%, and (b) interest on the Term Loan will be fixed at 8.50%.
The Company and the Lender have amended the financial covenants under
the Loan Agreement on several occasions to provide for reduced financial
covenants. Currently, the Loan Agreement contains (among other requirements) the
following covenants which are tested quarterly. The Company must maintain:
(a) a current ratio of not less than 1.25 to 1.00 as of the end of
each calendar quarter after June 30, 1999;
(b) a debt to tangible net worth ratio not greater than 2.25 to 1.00
as of the end of each calendar quarter after June 30, 1999; and
(c) a debt service coverage ratio, beginning with quarter ending
March 31, 2000, of not less than 1.20 to 1.00, with the numerator
of the debt service coverage ratio being calculated on a rolling
four quarters basis, tested for compliance as of the end of each
calendar quarter.
At March 31, 2000, the Company was in compliance with each of the above
required tests.
Interest on each of the term loans and the Revolving Note is payable
monthly. Under the Loan Agreement, the Company is required to pay down the
Revolving Note and maintain a zero balance for 30 consecutive days once prior to
its maturity in April 2001. Principal and interest on the term loans is payable
in monthly installments, which aggregate approximately $43,700 per month,
increasing to approximately $46,200 per month after April 2001.
The Loan Agreement also limits indebtedness by the Company, restricts
borrowing under certain equipment leases to $2,000,000, restricts the Company
from making or incurring capital expenditures exceeding $2,000,000 in any 12
month period, restricts indebtedness in connection with acquisition of equipment
to $200,000 and limits sales of assets. The Loan Agreement also restricts the
Company from
-9-
<PAGE>
making any dividends or distributions on its capital stock unless net income
equals or exceeds $2,000,000, repurchasing or redeeming any capital stock (other
than pursuant to the terms of the Company's Warrants, provided no default would
occur under the bank loans), paying any bonus or other non-salary compensation,
replacing its President or Chief Financial Officer, or entering into certain
related party transactions without prior written consent of Lender.
The Company leases certain pieces of its manufacturing equipment
pursuant to capital leases. The capital leases currently in effect have maturity
dates ranging from dates during 2000 to 2003. Such leases provide that if no
event of default exists thereunder the Company may purchase the equipment
subject to the lease at the expiration of the lease or may renew the lease.
The Company has a lease line of credit with Key Corporate Capital, Inc.
(due in 2005) which provides for a $1,562,000 leasing line of credit. The
Company drew the entire amount under this line of credit in 1998. The Chief
Executive Officer of the Company has personally guaranteed this lease line of
credit. Payments under this line are approximately $288,400 per year or $24,000
per month.
The Company also has two three year capital lease lines of credit,
originally with Winthrop Resources, Inc., the aggregate amount of approximately
$777,000. The Company has fully utilized these lines of credit. Payments under
these two lines of credit total approximately $300,000 per year or $25,000 per
month.
The Company also has a three year capital lease line of credit,
originally entered into in March 1999 with Amembal Capital Corporation, in the
total amount of approximately $416,000. Payments under this line of credit are
approximately $70,900 per year or $5,900 per month.
During first quarter 2000, the Company entered into a new three-year
$250,000 operating lease with Softech Financial to provide for the complete
replacement and upgrade of the Company's computer system. As of March 31, 2000,
approximately $200,000 had been drawn under this line. The line is expected to
be fully drawn by third quarter 2000 when the system upgrade is expected to be
completed. Payments under this line of credit are approximately $96,000 per year
or $8,000 per month.
Currently, the Company is negotiating an additional seven-year $200,000
operating lease line of credit to provide financing for the Company's new candle
line. The development of this new line has been financed to date out of
operating funds, which are expected to be replaced by the proceeds of this line
of credit during second quarter 2000. Payments under this line of credit are
expected to be approximately $30,000 per year or $2,500 per month.
The Company believes that cash expected to be provided by future
operations and its current bank loans and financing leases will be sufficient to
meet its working capital and anticipated capital expenditure requirements during
2000. However, the Company may need to seek additional working capital financing
if net sales increase more than currently anticipated.
The Company experiences seasonal fluctuations in operating results,
with sales and revenues generally higher during the third and fourth calendar
quarters, reflecting primarily orders for the holiday retail season. Orders
shipped in the third and fourth quarters generally account for approximately 60%
of the Company's total net sales for the year.
FORWARD LOOKING INFORMATION
Statements contained in this report regarding the Company's future
operations, including its growth strategy, future performance and results, its
ability to meet its working capital and capital
-10-
<PAGE>
expenditure needs, increased sales, anticipated liquidity, and any reduction in
expenses as a percentage of net sales, are forward-looking and therefore are
subject to certain risks and uncertainties.
Any forward-looking information regarding the operations of the Company
will be affected by the continued receipt of large orders from the Company's
significant customers, including Bath & Body Works, the Company's ability to
effectively manage its costs of operation, its ability to continue to increase
its marketing and sales efforts in order to take advantage of its increased
production facilities, and the continued availability of all of the Company's
current and anticipated lines of credit.
Any forward looking information regarding an increase in the Company's
gross profit margin also will be affected by the Company's ability to implement
its strategy of increasing sales and its customer base, focusing on the sales of
higher margin products, and the Company's ability to efficiently utilize its
expanded facilities and effectively manage its labor costs. There can be no
assurance that the Company will be successful in efficiently managing its growth
in order to maximize potential production and contain costs.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is, from time to time, involved in legal proceedings
arising in the normal course of its business. No such current proceeding is
expected to result in any material loss to the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
The Company's Annual Meeting was held May 2, 2000 during second fiscal
quarter. At that meeting the shareholders re-elected the current five
directors, approved an amendment to the 1997 Long-Term Incentive Plan,
adopted the 2000 Long-Term Incentive Plan, and approved Grant Thornton
as auditors.
ITEM 5. OTHER INFORMATION - None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10.19 - Sixth Amendment of Loan Agreement, effective April
8, 2000, between the Company and Chase Bank of
Texas, National Association, as lender ("Lender").
Exhibit 10.20 - April 8, 2000 Note ($3,000,000.00) to Lender
Exhibit 10.21 - April 8, 2000 Note ($1,000,000.00) to Lender
-11-
<PAGE>
Exhibit 10.22 - Modification Agreement with Lender ($2,300,000.00
Note)
Exhibit 10.23 - Modification Agreement with Lender ($400,000.00
Note)
Exhibit 27 - Financial Data Schedule.
(b) The Company filed no Reports on Form 8-K during the reporting
period.
-12-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SURREY, INC.
(Registrant)
Date: May 12, 2000 By: /s/ Martin van der Hagen
--------------------------------------
Martin van der Hagen
President
By: /s/ Mark van der Hagen
--------------------------------------
Mark van der Hagen
Chief Financial Officer
-13-
EXHIBIT 10.19
SIXTH AMENDMENT OF LOAN AGREEMENT
THIS SIXTH AMENDMENT OF LOAN AGREEMENT ("Amendment") is made and
entered into effective as of April 8, 2000, by and between SURREY, INC.,
("Borrower"), a Texas corporation, and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
("Lender"), a national banking association.
RECITALS:
- --------
On or about April 8, 1998, Borrower and Lender entered into a Loan
Agreement providing for loans to be made to the Borrower for the purposes
provided for therein. Such Loan Agreement has previously been amended pursuant
to a First Amendment of Loan Agreement dated effective May 14, 1998, by a Second
Amendment of Loan Agreement dated effective January 25, 1999, by a Third
Amendment of Loan Agreement dated effective March 31, 1999, by a Fourth
Amendment of Loan Agreement dated effective June 17, 1999, and by a Fifth
Amendment of Loan Agreement dated effective June 30, 1999. Such Loan Agreement,
as amended, is herein called the "Original Agreement".
The Borrower and the Lender now desire to further amend the Original
Agreement in certain respects as hereinafter provided, all as more particularly
set forth herein.
AGREEMENTS:
- ----------
For and in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
(1) The following new definitions of "Eligible Raw Materials
Inventory", "Term Loan" and "Term Note" are hereby added to the definitions
contained in Paragraph 1 of the Original Agreement:
Eligible Raw Materials Inventory shall mean all of Borrower's
raw materials Inventory which is in good and merchantable condition, is
not obsolete or discontinued, and which would properly be classified as
"raw materials" under GAAP, excluding (a) any such Inventory which is
work in process, finished goods or miscellaneous supplies such as hand
tools and packaging materials, (b) any such Inventory which is covered
by or subject to a seller's right to repurchase, or any consensual or
nonconsensual Lien (including, without limitation, purchase money
security interests) other than in favor of Lender, whether senior or
junior to Lender's security interest and Liens and (c) any such
Inventory that Lender, acting in its sole discretion, excludes as
Eligible Raw Materials Inventory. Inventory which is at any time
Eligible Raw Materials Inventory, but which subsequently fails to meet
any of the foregoing requirements, shall forthwith cease to be Eligible
Raw Materials Inventory. Eligible Raw Materials Inventory shall be
valued at the lesser of cost or market value in accordance with GAAP.
Term Loan shall mean the Loan described in Paragraph 3.A.
hereof.
<PAGE>
Term Note shall mean the promissory note of Borrower described
in Paragraph 3.A. hereof, and any and all renewals, extensions,
modifications, rearrangements and replacements thereof and any and all
substitutions therefor.
(2) The following definitions of "Borrowing Base", "Maturity Date",
"Note" and "Revolving Commitment" currently contained in Paragraph 1 of the
Original Agreement are hereby amended and restated to hereafter be and read as
follows:
Borrowing Base shall mean, as at any date, the amount of the
Borrowing Base shown on the Borrowing Base Certificate then most
recently delivered pursuant to Paragraph 10(b) hereof, determined by
the following calculation:
80% of the Eligible Accounts of Borrower at said date which
are owed by account debtors, plus
if said date is on any date between April 1, 2000 and July 31,
2000 or any date between January 1, 2001 and May 8, 2001, the
lesser of (A) 50% of the Eligible Raw Materials Inventory of
Borrower as of said date and (B) $1,200,000.00.
Notwithstanding anything to the contrary set forth in the immediately
preceding sentence, Lender reserves the right to adjust downward to a
level acceptable to Lender in its sole discretion the eighty percent
(80%) advance rate set forth above if Borrower's average dilution
percentage for all Accounts exceeds five percent (5%). In the absence
of a current Borrowing Base Certificate, Lender shall determine the
Borrowing Base from time to time in its discretion, taking into account
all information available to it, and the Borrowing Base from time to
time so determined shall be the Borrowing Base for all purposes of this
Agreement until a current Borrowing Base Certificate, in Proper Form,
is furnished to and accepted by Lender.
Maturity Date shall mean the maturity of the Revolving Note,
which is currently May 8, 2001, as the same may hereafter be
accelerated pursuant to the provisions of any of the Credit Documents.
Note shall mean the Revolving Note, the Advance/Term Note and
the Term Note, together with any and all renewals, extensions,
modifications, rearrangements and/or replacements of any thereof.
Revolving Commitment shall mean the obligation of Lender under
this Agreement to make Revolving Loans and incur Letter of Credit
Liabilities in an aggregate principal amount at any one time
outstanding up to (but not exceeding) $3,000,000.00.
(3) The fifth (5th) sentence of Paragraph 2(a) of the Original
Agreement is hereby amended and restated in its entirety to hereafter be and
read as follows:
<PAGE>
"The Revolving Loans shall be evidenced by the Revolving Note
dated April 8, 2000 executed by Borrower, payable to the order of
Lender in the original principal amount of $3,000,000.00."
(4) There is hereby added four (4) new sentences at the end of
Paragraph 2(a) of the Original Agreement, which shall be and read as follows:
"Borrower shall pay to Lender a commitment fee for the period
from April 8, 2000 to and including the Termination Date at a rate per
annum equal to .25%, payable in arrears. Such commitment fees shall be
computed (on the basis of the actual number of days elapsed in a year
composed of 360 days) on each day and shall be based on the excess of
(x) the aggregate amount of the Revolving Commitment for such day over
(y) the sum of (i) the unpaid principal balance of the Revolving Note
on such day plus (ii) the aggregate Letter of Credit Liabilities for
such day. Accrued and unpaid commitment fees shall be payable on the
eighth (8th) day of each July, October, January, and April prior to the
Maturity Date and on the Maturity Date. All past due fees shall bear
interest at the Past Due Rate."
(5) Paragraph 2(e) of the Original Agreement, which was incorrectly
identified as Paragraph 2(c) in the Third Amendment of Loan Agreement described
in the "Recitals" section above, is hereby deleted. From and after the effective
date, Borrower will not be required to reduce the Revolving Note to a zero
balance at any time prior to the Maturity Date.
(6) Paragraph 3 of the Original Agreement is hereby amended and
restated in its entirety to hereafter be and read as follows:
"3. Advance/Term Loans. Prior to April 8, 2000, Lender has
made advances under the Advance/Term Note dated April 8, 1998 in the
face principal amount of $2,300,000.00, executed by the Borrower,
payable to the order of the Lender (the "$2,300,000.00 Advance/Term
Note"), and under the Advance/Term Loan dated January 25, 1999 in the
face principal amount of $400,000.00, executed by the Borrower, payable
to the order of the Lender (the "$400,000.00 Advance/Term Note"). No
amounts remain to be advanced under the $2,300,000.00 Advance/Term Note
or the $400,000.00 Advance/Term Note. The $2,300,000.00 Advance/Term
Note and the $400,000.00 Advance/Term Note are herein collectively
called the "Advance/Term Note". Both parties hereto agree that, except
to the extent overridden by the applicable Construction Loan Agreement,
the terms and conditions of this Agreement shall govern the
Advance/Term Loans until payment in full of the amounts outstanding
thereunder."
(7) There is hereby added a new Paragraph 3.A. to the Original
Agreement, which shall be and read as follows:
"3.A. Term Loan. Lender agrees, subject to all of the terms
and conditions of this Agreement (including Paragraph 8 hereof), on or
before April 28, 2000, to make the Term Loan to the Borrower in an
aggregate principal amount of no more than $1,000,000.00 which amount
shall be applied to the outstanding principal balance of the
<PAGE>
Revolving Note on the date of such advance. The Term Loan shall be
evidenced by the Term Note dated effective April 8, 2000 executed by
Borrower, payable to the order of Lender, in the original principal
amount of $1,000,000.00. Amounts repaid under the Term Loan may not be
reborrowed."
(8) The Original Agreement is hereby amended to provide that from and
after April 8, 2000, Borrower shall no longer be entitled to have the Notes
accrue interest at the LIBOR Rate or otherwise be entitled to the benefits of
Paragraph 4 of the Original Agreement. Instead, from and after April 8, 2000,
the Notes shall accrue interest and be due and payable as provided in the Notes.
(9) Paragraph 10(b)(2) of the Original Agreement is hereby amended and
restated in its entirety to hereafter be and read as follows:
"(2) as soon as available and in any event within 35 days
after the end of each month (including the last month of each fiscal
year), Monthly Financial Statements of Borrower;"
(10) Paragraph 10(b)(4) of the Original Agreement is hereby amended and
restated in its entirety to hereafter be and read as follows:
"(4) within 35 days after the end of each calendar month, a
Borrowing Base Certificate as at the last day of such calendar month,
together with such related supporting information as Lender may
reasonably request;"
(11) Paragraph 10(b)(5) of the Original Agreement is hereby amended and
restated in its entirety to hereafter be and read as follows:
"(5) on or before 45 days after the end of each calendar
quarter (i) a listing and aging of the Accounts of Borrower (with
agings from the date of invoice as opposed to days past-due) as of the
end of such calendar quarter, (ii) an aging of accounts payable of
Borrower as of the end of such calendar quarter, and (iii) a listing
and summary of the Inventory of Borrower, including without limitation
the Eligible Raw Materials Inventory, as of the end of such calendar
quarter, each prepared in reasonable detail and containing such related
information as Lender may reasonably request"
(12) Exhibit B to the Original Agreement is hereby amended and restated
in its entirety to hereafter be in the form of Exhibit A attached hereto and
incorporated herein for all purposes.
(13) Borrower represents and warrants that the representations and
warranties contained in Paragraph 9 of the Original Agreement and in the other
Loan Documents are true and correct in all material respects on and as of the
date thereof as though made on and as of such date. The Borrower hereby
certifies that no event has occurred and is continuing which constitutes an
Event of Default under the Original Agreement or any of the other Loan Documents
or which upon the giving of notice of the lapse of time or both would constitute
such
<PAGE>
an Event of Default, except for such Events of Default which have been waived in
writing by the Lender in connection with the execution of this Amendment.
(14) The Borrower hereby ratifies and confirms that the Security
Agreement and the Deed of Trust executed by the Borrower are in full force and
effect, and since the Security Agreement and the Deed of Trust secure any and
all indebtedness of the Borrower to the Lender now or hereafter outstanding,
each secures all amounts outstanding under the Original Agreement, as amended
hereby, including without limitation, all amounts outstanding under the
Revolving Loan, the Advance/Term Loan and the Term Loan.
(15) Except as expressly amended hereby, the Original Agreement and the
other Loan Documents shall remain in full force and effect. The Original
Agreement, as hereby amended, and all rights and powers created thereby or
thereunder and under the other Loan Documents are in all respects ratified and
confirmed and remain in full force and effect.
(16) Terms used herein which are defined in the Original Agreement or
in the other Loan Documents shall have the meanings therein ascribed to them.
The term "Loan Agreement" or "Credit Agreement" as used in the Original
Agreement, the other Loan Documents or any other instrument, document or writing
furnished to the Lender by the Borrower, when referring to the Original
Agreement, shall mean the Original Agreement as hereby amended.
(17) This Amendment (a) shall be binding upon the Borrower and the
Lender and their respective successors and assigns (provided, however, that the
Borrower shall not assign his rights hereunder without the prior written consent
of the Lender); (b) may be modified or amended only by a writing signed by each
party; (C) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OR THE
STATE OF TEXAS AND THE UNITED STATES OF AMERICA; (d) may be executed in several
counterparts, and by the parties hereto on separate counterparts, constitute an
original agreement, and all such separate counterparts shall constitute but one
and the same agreement; and (e) embodies the entire agreement and understanding
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, consents and understandings relating to such subject matter
(18) BORROWER HEREBY RELEASES, DISCHARGES AND ACQUITS FOREVER LENDER
AND ITS OFFICERS, DIRECTORS, AGENTS, EMPLOYEES AND COUNSEL FROM ANY AND ALL
CLAIMS EXISTING AS OF THE DATE HEREOF. AS USED HEREIN, THE TERM "CLAIM" MEANS
ANY AND ALL LIABILITIES, CLAIMS, JUDGMENTS, DEFICIENCIES, INTEREST, LIENS, COSTS
OR EXPENSES (INCLUDING BUT NOT LIMITED TO COURT COSTS, PENALTIES, ATTORNEYS'
FEES AND DISBURSEMENTS, AND AMOUNTS PAID IN SETTLEMENT) OF ANY KIND AND
CHARACTER WHATSOEVER, INCLUDING BUT NOT LIMITED TO CLAIMS FOR USURY, BREACH OF
CONTRACT, AND NEGLIGENT MISREPRESENTATION, IN EACH CASE WHETHER NOW KNOWN OR
UNKNOWN, SUSPECTED OR UNSUSPECTED, ASSERTED OR UNASSERTED OR PRIMARY OR
CONTINGENT, AND WHETHER ARISING OUT OF WRITTEN DOCUMENTS, UNWRITTEN UNDERTAKINGS
OR COURSE OF CONDUCT.
<PAGE>
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02
THIS AMENDMENT, THE ORIGINAL AGREEMENT AND ALL OTHER LOAN DOCUMENTS
EXECUTED BY ANY OF THE PARTIES TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT
WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the day and year first above written.
SURREY, INC.
a Texas corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
"Borrower"
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
"Lender"
Attach:
Exhibit A - Borrowing Base Certificate (Exhibit B to the Original Agreement)
<PAGE>
EXHIBIT A TO SIXTH AMENDMENT OF LOAN AGREEMENT
CONSTITUTING EXHIBIT B TO THE LOAN AGREEMENT
BORROWING BASE CERTIFICATE
Borrowing Base Report for Period Beginning: _________and Ending _________
("Current Period") Loan Agreement (as amended, the "Agreement") dated as of
April 8, 1998 by and between Surrey, Inc. and Chase Bank of Texas,
National Association
The undersigned hereby certifies that he or she is the _________________________
of Surrey, Inc., and that as such is authorized to execute this Borrowing Base
Certificate on behalf of Surrey, Inc. pursuant to the Agreement. On behalf of
the Borrower, the undersigned further certifies, represents and warrants that
the following components of the Borrowing Base and the calculation of the
Borrowing Base and amount available for borrowing, if any, are true and correct
(each capitalized term used herein having the same meaning given to it in the
Agreement unless otherwise specified herein):
Line 1. Total Accounts as of the end of the Current Period (based on
the lesser of each such Account as reflected in Borrower's
aging of Accounts and Borrower's general ledger) $________
2. Ineligible Accounts as of the end of the Current Period
(a) Accounts more than 90 days from invoice date: $________
(b) Other Accounts which are not Current Accounts
Receivable $________
(c) Foreign Accounts (unless insured or backed by credit
insurance or a letter of credit in form and
substance reasonably acceptable to Lender in all
respects): $________
(d) Government Accounts $________
(e) Accounts subject to a Lien, other than the Lien of
the Security Documents $________
(f) Accounts owed by any Subsidiary, employee, officer,
agent, director, stockholder, partner, trustee or
other owner of equity rights of Borrower or any
Affiliate of any such Person $________
(g) All of the Accounts of an account debtor(s) where
more than 20% of the total dollar amount of all
Accounts of the account debtor are unpaid more than
90 days from invoice date $________
(h) That portion of Accounts of an account debtor (other
than Wal-Mart Stores, Inc. and any of its Affiliates
and Bath & Body Works and any of its Affiliates) in
excess of 10% of the total dollar amount of the
total Accounts for the Current Period (Line 1) $________
(i) That portion of Accounts, in the aggregate, of
Wal-Mart Stores, Inc. and its Affiliates in excess
of 25% of the total dollar amount of the total
Accounts for the Current Period (Line 1) $________
(j) That portion of Accounts, in the aggregate, of Bath
& Body Works and its Affiliates in excess of 35% of
the total dollar amount of the total Accounts for
the Current Period (Line 1) $________
<PAGE>
(k) Other ineligible Accounts under the Agreement $________
3. Total ineligible Accounts for the Current Period (add lines
2(a) through 2(k)) $________
4. Total Eligible Accounts (line 1 minus line 3) $________
5. Multiplied by current advance rate ________%
6. Equals total Eligible Accounts component of Borrowing Base as
of the end of the Current Period $________
7. Total Inventory as of the end of the Current Period $________
8. Ineligible Inventory as of the end of the Current Period
(a) Work-in-process $________
(b) Finished goods $________
(c) Obsolete or discontinued $________
(d) Other Inventory which is not raw materials $________
(e) Other ineligible Raw Materials Inventory under the
Agreement $________
9. Total ineligible Inventory for the Current Period (add lines
8(a) through 8(e)) $________
10. Total Eligible Raw Materials Inventory for the Current Period
(line 7 minus line 9) $________
11. Multiplied by current advance rate ________%
12. Equals, maximum Eligible Raw Materials Inventory component of
Borrowing Base $________
13. Lesser of (i) line 12 and (ii) $1,200,000, equals total
Eligible Raw Materials Inventory component of Borrowing Base
as of the end of the Current Period; provided, that if last
day of the Current Period is not between April 1, 2000 and
July 31, 2000 or between January 1, 2001 and May 8, 2001,
this amount is 0. $________
14. Total Borrowing Base as of the end of the Current Period (add
lines 6 and 13) $________
15. Revolving Commitment as of the date hereof $________
16. Lesser of Borrowing Base (line 14) or Revolving Commitment
(line 15) $________
17. Minus the aggregate outstanding amount of the Revolving
Loans as of the date hereof $________
18. Minus the aggregate face amount of all outstanding Letters of
Credit as of the date hereof $________
19. Equals the amount available for borrowing subject to the
Agreement, if positive, or amount to be repaid, if negative $________
<PAGE>
To the extent of any conflict between the components of the Borrowing Base as
set forth on this exhibit and the provisions of the Agreement, the Agreement
shall control.
The undersigned hereby certifies that the above information and computations are
true and correct and not misleading as of the date hereof, that no Default or
Event of Default has occurred and is continuing under the Agreement and that the
Borrower is in compliance with all the financial covenants set out in the
Agreement.
Very truly yours,
Print Name:
------------------------------
of
--------------------------------------
Surrey, Inc.
EXHIBIT 10.20
NOTE
Austin, Texas
$3,000,000.00 April 8, 2000
FOR VALUE RECEIVED, SURREY, INC., a Texas corporation, promises to pay
to the order of CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, a national banking
association, at its banking house in the City of Austin, Travis County, Texas
(or such other place as the holder hereof may hereafter designate in writing),
in immediately available funds and in lawful money of the United States of
America, the principal sum of THREE MILLION DOLLARS ($3,000,000.00) (or the
unpaid balance of all principal advanced against this note, if that amount is
less), together with interest as follows: (a) interest on the unpaid principal
balance of this note from time to time outstanding at the Stated Rate and
interest on all past due amounts, both principal and accrued interest, from the
respective due dates thereof until paid at the Past Due Rate and (b) the
Additional Interest; provided, that for the full term of this note the interest
rate produced by the aggregate of all sums paid or agreed to be paid to the
holder of this note for the use, forbearance or detention of the debt evidenced
hereby (including, but not limited to, all interest on this note at the Stated
Rate and the Past Due Rate plus the Additional Interest) shall not exceed the
Ceiling Rate.
1. Definitions. Unless otherwise defined herein, capitalized terms used
in this note shall have the same meaning in this note as in the Loan Agreement
(hereafter defined). As used in this note, the following terms shall have the
respective meanings indicated:
(a) "Additional Interest" means the aggregate of (i) all
amounts paid by Maker to the holder of this note pursuant to the provisions of
Paragraph 2(a) of the Loan Agreement and (ii) all other amounts accrued or paid
pursuant to this note or any of the other Credit Documents (other than interest
on this note at the Stated Rate) which, under applicable laws, are or may be
deemed to constitute interest on the indebtedness evidenced by this note.
(b) "Business Day" means a day when Payee is open for all of
its commercial lending activities.
(c) "Ceiling Rate" means, on any day, the maximum nonusurious
rate of interest permitted for that day by whichever of applicable federal or
Texas laws permits the higher interest rate, stated as a rate per annum. On each
day, if any, that applicable Texas law establishes the Ceiling Rate, the Ceiling
Rate shall be the "weekly ceiling" (as defined in Chapter 1D of Title 79,
Revised Civil Statutes, 1925 -- "Chapter 1D" -- and ss.303 of the Texas Finance
INITIALLED FOR
IDENTIFICATION:______
Page 1 of 8 Pages
<PAGE>
Code -- "Texas Finance Code" -- as amended) for that day. Payee may from time to
time, as to current and future balances, implement any other ceiling under
Chapter 1D and the Texas Finance Code by notice to Maker, if and to the extent
permitted by Chapter 1D and the Texas Finance Code. Without notice to Maker or
any other person or entity, the Ceiling Rate shall automatically fluctuate
upward and downward as and in the amount by which such maximum nonusurious rate
of interest permitted by applicable law fluctuates.
(d) "Credit Documents" means any and all papers now or
hereafter governing, evidencing, guaranteeing or securing or otherwise relating
to all or any part of the indebtedness evidenced by this note, including without
limitation this note.
(e) "Debt" means the indebtedness evidenced by this note and
the indebtedness to Payee incurred or evidenced by the Credit Documents.
(f) "Loan Agreement" means the Loan Agreement dated April 8,
1998 between Maker and Payee, as the same may have been or may be amended,
supplemented, restated or replaced from time to time.
(g) "Maker" means Surrey, Inc., a Texas corporation.
(h) "Maturity Date" means the maturity of this note, May 8,
2001, as the same may hereafter be accelerated pursuant to the provisions of
this note or any of the other Credit Documents.
(i) "Past Due Rate" means, on any day, a rate per annum equal
to the Ceiling Rate for that day, or only if applicable law imposes no maximum
nonusurious rate of interest for that day, then the Past Due Rate for that day
shall be a rate per annum equal to the Stated Rate plus three percent (3%).
(j) "Payee" means Chase Bank of Texas, National Association, a
national banking association, and any other holder or holders of this note from
time to time and, upon acquisition of this note by any holder or holders other
than the named payee, effective as of the time of such acquisition, the term
"Payee" shall mean all of the then holders of this note, to the exclusion of all
prior holders not then retaining or reserving an interest in this note, to the
end that all the rights, powers, remedies, liens, benefits and privileges
accruing and to accrue hereunder to Payee, as such term is used herein, shall
inure to the benefit of and be owned and held by the holder or holders of this
note from time to time, whether such holder acquires this note through
succession to or assignment from a prior Payee.
INITIALLED FOR
IDENTIFICATION:______
Page 2 of 8 Pages
<PAGE>
(k) "Prime Rate" means, on any day, the rate determined by
Payee as being its "prime rate" for that day. Without notice to Maker or any
other person or entity, the Prime Rate shall automatically fluctuate upward and
downward as and in the amount by which said prime rate fluctuates, with each
change to be effective as of the date of each change in said prime rate. THE
PRIME RATE IS A REFERENCE RATE AND DOES NOT NECESSARILY REPRESENT THE LOWEST OR
BEST RATE OR A FAVORED RATE, AND PAYEE DISCLAIMS ANY STATEMENT, REPRESENTATION
OR WARRANTY TO THE CONTRARY. PAYEE MAY MAKE COMMERCIAL LOANS OR OTHER LOANS AT
RATES OF INTEREST AT, ABOVE OR BELOW THE PRIME RATE.
(l) "Stated Rate" means, on any day, a rate per annum equal to
the Prime Rate for that day plus one percent (1.00%); provided, that if on any
day the Prime Rate for that day plus one percent (1.00%) would exceed the
Ceiling Rate for that day, the Stated Rate shall be fixed at the Ceiling Rate on
that day and on each day thereafter until the total amount of interest accrued
at the Stated Rate (as so fixed) on the unpaid principal balance of this note
plus the Additional Interest equals the total amount of interest which would
have accrued if there had been no Ceiling Rate. If this note matures (or is
prepaid) before such equality is achieved, then, in addition to the unpaid
principal and accrued interest then owing pursuant to the other provisions of
this note, Maker promises to pay on demand to the order of the holder of this
note interest in an amount equal to the excess (if any) of (a) the lesser of (i)
the total interest which would have accrued on this note if the Stated Rate had
been defined as equal to the Ceiling Rate from time to time in effect and (ii)
the total interest which would have accrued on this note if the Stated Rate were
not so prohibited from exceeding the Ceiling Rate, over (b) the total interest
actually accrued hereon to such maturity (or prepayment) date. Without notice to
Maker or any other person or entity, the Stated Rate shall automatically
fluctuate upward and downward in accordance with the provisions of this
Subparagraph.
2. Loan Agreement; Advances; Security. This note has been issued
pursuant to the terms of the Loan Agreement, and is the Revolving Note referred
to in the Loan Agreement. Advances against this note by Payee or other holder
hereof shall be governed by the terms and provisions of the Loan Agreement.
Reference is hereby made to the Loan Agreement for all purposes. Payee is
entitled to the benefits of and security provided for in the Loan Agreement.
Such security includes, among other security, the Deed of Trust covering and
affecting certain property situated in Travis County, Texas, more fully
described therein, and the Security Agreements. The unpaid principal balance of
this note at any time shall be the total of all amounts lent or advanced against
this note less the amount of all payments or permitted prepayments made on this
note and by or for the account of Maker. All loans and advances and all payments
and permitted prepayments made hereon may be endorsed by the holder of this note
on a schedule which may be attached hereto (and thereby made a part hereof for
all purposes) or
INITIALLED FOR
IDENTIFICATION:______
Page 3 of 8 Pages
<PAGE>
otherwise recorded in the holder's records; provided, that any failure to make
notation of (a) any advance shall not cancel, limit or otherwise affect Maker's
obligations or any holder's rights with respect to that advance, or (b) any
payment or permitted prepayment of principal shall not cancel, limit or
otherwise affect Maker's entitlement to credit for that payment as of the date
received by the holder.
3. Computation of Interest. Interest on the amount of each advance
against this note shall be computed on the amount of that advance and from the
date it is made. Interest at the Stated Rate shall be computed for the actual
number of days elapsed in a year consisting of 360 days, unless the Ceiling Rate
would thereby be exceeded, in which event, to the extent necessary to avoid
exceeding the Ceiling Rate, interest at the Stated Rate shall be computed on the
basis of the actual number of days elapsed in the applicable calendar year in
which accrued.
4. Mandatory Payments of Principal and Interest.
(a) Accrued and unpaid interest on the unpaid principal
balance of this note shall be due and payable (i) on May 8, 2000, (ii) on the
eighth (8th) day of each succeeding calendar month thereafter prior to the
Maturity Date and (iii) on the Maturity Date.
(b) The principal of this note shall be due and payable on the
Maturity Date.
(c) All payments hereon made pursuant to this Paragraph shall
be applied first to accrued interest, the balance to principal.
(d) If any payment provided for in this note shall become due
on a day other than a Business Day, such payment may be made on the next
succeeding Business Day (unless the result of such extension of time would be to
extend the date for such payment into another calendar month or beyond the
Maturity Date, and in either such event such payment shall be made on the
Business Day immediately preceding the day on which such payment would otherwise
have been due), and such extension of time shall in such case be included in the
computation of interest on this note.
5. No Usury Intended; Spreading. Notwithstanding any provision to the
contrary contained in this note or any of the other Credit Documents, it is
expressly provided that in no case or event shall the aggregate of (i) all
interest on the unpaid balance of this note, accrued or paid from the date
hereof and (ii) the aggregate of any other amounts accrued or paid pursuant to
this note or any of the other Credit Documents, which under applicable laws are
or may be deemed to constitute interest upon the indebtedness evidenced by this
note from the date hereof, ever exceed the Ceiling Rate. In this connection,
Maker and Payee stipulate and agree that it is
INITIALLED FOR
IDENTIFICATION:______
Page 4 of 8 Pages
<PAGE>
their common and overriding intent to contract in strict compliance with
applicable usury laws. In furtherance thereof, none of the terms of this note or
any of the other Credit Documents shall ever be construed to create a contract
to pay, as consideration for the use, forbearance or detention of money,
interest at a rate in excess of the Ceiling Rate. Maker or other parties now or
hereafter becoming liable for payment of the indebtedness evidenced by this note
shall never be liable for interest in excess of the Ceiling Rate. If, for any
reason whatever, the interest paid or received on this note during its full term
produces a rate which exceeds the Ceiling Rate, the holder of this note shall
credit against the principal of this note (or, if such indebtedness shall have
been paid in full, shall refund to the payor of such interest) such portion of
said interest as shall be necessary to cause the interest paid on this note to
produce a rate equal to the Ceiling Rate. All sums paid or agreed to be paid to
the holder of this note for the use, forbearance or detention of the
indebtedness evidenced hereby shall, to the extent permitted by applicable law,
be amortized, prorated, allocated and spread in equal parts throughout the full
term of this note, so that the interest rate is uniform throughout the full term
of this note. The provisions of this Paragraph shall control all agreements,
whether now or hereafter existing and whether written or oral, between Maker and
Payee.
6. Default. If any default, event of default or similar event (however
denominated) occurs under any Credit Document, then that shall automatically
constitute default under this note, and unless Payee declares the default fully
cured to Payee's satisfaction with any applicable grace period (if any) agreed
to in writing by Payee, then the obligation (if any) of Payee to make further
advances against this note shall cease and terminate and the owner or holder
hereof may, at its, his or her option, exercise any or all rights, powers and
remedies afforded under any Credit Document and by law, including the right to
declare the unpaid balance of principal and accrued interest on this note at
once mature and payable.
7. No Waiver by Payee. No delay or omission of Payee or any other
holder hereof to exercise any power, right or remedy accruing to Payee or any
other holder hereof shall impair any such power, right or remedy or shall be
construed to be a waiver of the right to exercise any such power, right or
remedy. Payee's right to accelerate this note for any late payment or Maker's
failure to timely fulfill its other obligations hereunder or under the other
Credit Documents shall not be waived or deemed waived by Payee by Payee's having
accepted a late payment or late payments in the past or Payee otherwise not
accelerating this note or exercising other remedies for Maker's failure to
timely perform its obligations hereunder or under the other Credit Documents.
Payee shall not be obligated or be deemed obligated to notify Maker that it is
requiring Maker to strictly comply with the terms and provisions of this note
and the other Credit Documents before accelerating this note and exercising its
other remedies hereunder or under the other Credit Documents because of Maker's
failure to timely perform its obligations under this note and the other Credit
Documents.
INITIALLED FOR
IDENTIFICATION:______
Page 5 of 8 Pages
<PAGE>
8. Costs and Attorneys' Fees. If any holder of this note retains an
attorney in connection with any default or to collect, enforce or defend this
note or any of the Credit Documents in any lawsuit or in any probate,
reorganization, bankruptcy or other proceeding, or if Maker sues any holder in
connection with this note or any of the Credit Documents and does not prevail,
then Maker agrees to pay to each such holder, in addition to principal and
interest, all reasonable costs and expenses incurred by such holder in trying to
collect this note or in any such suit or proceeding, including reasonable
attorneys' fees. Any amount to be paid under this Paragraph by Maker to Payee
shall be a demand obligation owing by Maker to Payee and shall bear interest
from the date of demand until paid at the Past Due Rate.
9. Waivers by Maker and Others. Except to the extent, if any, that
notice of default is expressly required herein or in any of the other Credit
Documents, Maker and any and all co-makers, endorsers, guarantors and sureties
severally waive notice (including, but not limited to, notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and
the filing of suit for the purpose of fixing liability and consent that the time
of payment hereof may be extended and re-extended from time to time without
notice to any of them. Each such person agrees that his, her or its liability on
or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect or
to maintain perfection of any lien against or security interest in any such
security or the partial or complete unenforceability of any guaranty or other
surety obligation, in each case in whole or in part, with or without notice and
before or after maturity.
10. Paragraph Headings. Paragraph headings appearing in this note are
for convenient reference only and shall not be used to interpret or limit the
meaning of any provision of this note.
11. Venue; Choice of Law. This note is performable in Travis County,
Texas, which shall be a proper place of venue for suit on or in respect of this
note. Maker hereby irrevocably agrees that any legal proceeding in respect of
this note shall be brought in the district courts of Travis County, Texas, or in
the United States District Court for the Western District of Texas, Austin
Division (collectively, the "Specified Courts"). Maker hereby irrevocably
submits to the nonexclusive jurisdiction of the state and federal courts of the
State of Texas. Maker hereby irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this note or any
of the Credit Documents brought in any Specified Court, and hereby further
irrevocably waives any claims that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum. Maker further
irrevocably consents to the service of
INITIALLED FOR
IDENTIFICATION:______
Page 6 of 8 Pages
<PAGE>
process out of any of the Specified Courts in any such suit, action or
proceeding by the mailing of copies thereof by certified mail, return receipt
requested, postage prepaid, to Maker. Nothing herein shall affect the right of
Payee to commence legal proceedings or otherwise proceed against Maker in any
jurisdiction or to serve process in any manner permitted by applicable law.
Maker agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS AND THE
UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT.
12. Successors and Assigns. This note and all the covenants and
agreements contained herein shall be binding upon, and shall inure to the
benefit of, the respective legal representatives, heirs, successors and assigns
of Maker and Payee.
13. Records of Payments. The records of Payee shall be prima facie
evidence of the amounts owing on this note.
14. Severability. If any provision of this note is held to be illegal,
invalid or unenforceable under present or future laws, the legality, validity
and enforceability of the remaining provisions of this note shall not be
affected thereby, and this note shall be liberally construed so as to carry out
the intent of the parties to it. Each waiver in this note is subject to the
overriding and controlling rule that it shall be effective only if and to the
extent that (a) it is not prohibited by applicable law and (b) applicable law
neither provides for nor allows any material sanctions to be imposed against
Payee for having bargained for and obtained it.
15. Sale and Assignment. Payee reserves the right, exercisable in its
sole discretion and without notice to Maker or any other person, to sell
participations or assign its interest, or both, in all or any part of this note
or any loan evidenced by this note.
16. Prepayment. Maker may prepay this note, in whole or in part, at any
time without penalty or fee. All prepayments hereon shall be applied first to
any applicable prepayment charge, if any, next to accrued interest and the
balance to principal.
17. Revolving Loan. Subject to the terms and provisions of the Loan
Agreement, Maker may use all or any part of the credit provided to be evidenced
by this note at any time before the Maturity Date. Maker may borrow, repay and
reborrow hereunder, and except as set forth in the Loan Agreement, there is no
limitation on the number of advances made hereunder so long as the total unpaid
principal amount at any time outstanding hereunder does not exceed the lesser of
(a) the Borrowing Base or (b) the Revolving Commitment. Pursuant to Section
INITIALLED FOR
IDENTIFICATION:______
Page 7 of 8 Pages
<PAGE>
346.003 of the Texas Finance Code, as amended, Maker and Payee expressly agree
that Chapter 346 of the Texas Finance Code shall not apply to this note or to
any loan evidenced by this note and that neither this note nor any such loan
shall be governed by or subject to the provisions of Chapter 346 in any manner
whatsoever.
18. Business Loans. Maker warrants and represents to Payee and all
other holders of this note that all loans evidenced by this note are and will be
for business, commercial, investment or other similar purpose and not primarily
for personal, family, household or agricultural use, as such terms are used in
Chapter 1D of Title 79, Texas Revised Civil Statutes 1925, as amended.
19. Entire Agreement. This note and the other Credit Documents embody
the entire agreement and understanding between Payee and Maker and other parties
with respect to their subject matter and supersede all prior conflicting or
inconsistent agreements, consents and understandings relating to such subject
matter. Maker acknowledges and agrees that there is no oral agreement between
Maker and Payee which has not been incorporated in this note and the other
Credit Documents.
20. Renewal. To the extent of the unpaid principal balance thereof,
this note is given, in part, in renewal, extension and rearrangement, and not in
extinguishment, of the unpaid principal balance of that certain promissory note
dated June 17, 1999, in the original principal amount of Two Million Five
Hundred Thousand Dollars ($2,500,000.00) executed by Maker payable to the order
of Payee. All liens, assignments and security interests securing the payment of
said promissory note (including without limitation the Deed of Trust and the
Security Agreement) are hereby ratified, confirmed, brought forward, renewed,
extended and rearranged, as security for the payment of this note, in addition
to and cumulative of all other security for this note.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02
THIS NOTE AND ALL OTHER CREDIT DOCUMENTS EXECUTED BY ANY OF THE PARTIES
SUBSTANTIALLY CONCURRENTLY HEREWITH TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT
WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SURREY, INC., a Texas corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
INITIALLED FOR
IDENTIFICATION:______
Page 8 of 8 Pages
EXHIBIT 10.21
NOTE
Austin, Texas
$1,000,000.00 April 8, 2000
FOR VALUE RECEIVED, SURREY, INC., a Texas corporation, promises to pay
to the order of CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, a national banking
association, at its banking house in the City of Austin, Travis County, Texas
(or such other place as the holder hereof may hereafter designate in writing),
in immediately available funds and in lawful money of the United States of
America, the principal sum of ONE MILLION DOLLARS ($1,000,000.00) (or the unpaid
balance of all principal advanced against this note, if that amount is less),
together with interest on the unpaid principal balance of this note from time to
time outstanding at the Stated Rate and interest on all past due amounts, both
principal and accrued interest, from the respective due dates thereof until paid
at the Past Due Rate; provided, that for the full term of this note the interest
rate produced by the aggregate of all sums paid or agreed to be paid to the
holder of this note for the use, forbearance or detention of the debt evidenced
hereby (including, but not limited to, all interest on this note at the Stated
Rate and the Past Due Rate) shall not exceed the Ceiling Rate.
1. Definitions. Unless otherwise defined herein, capitalized terms used
in this note shall have the same meaning in this note as in the Loan Agreement
(hereafter defined). As used in this note, the following terms shall have the
respective meanings indicated:
(a) "Business Day" means a day when Payee is open for all of
its commercial lending activities.
(b) "Ceiling Rate" means, on any day, the maximum nonusurious
rate of interest permitted for that day by whichever of applicable federal or
Texas laws permits the higher interest rate, stated as a rate per annum. On each
day, if any, that applicable Texas law establishes the Ceiling Rate, the Ceiling
Rate shall be the "weekly ceiling" (as defined in Chapter 1D of Title 79,
Revised Civil Statutes, 1925 -- "Chapter 1D" -- and ss.303 of the Texas Finance
Code -- "Texas Finance Code" -- as amended) for that day. Payee may from time to
time, as to current and future balances, implement any other ceiling under
Chapter 1D and the Texas Finance Code by notice to Maker, if and to the extent
permitted by Chapter 1D and the Texas Finance Code. Without notice to Maker or
any other person or entity, the Ceiling Rate shall automatically fluctuate
upward and downward as and in the amount by which such maximum nonusurious rate
of interest permitted by applicable law fluctuates.
Page 1 of 9
INITIALLED FOR
IDENTIFICATION:______
<PAGE>
(c) "Credit Documents" means any and all papers now or
hereafter governing, evidencing, guaranteeing or securing or otherwise relating
to all or any part of the indebtedness evidenced by this note, including without
limitation this note.
(d) "Debt" means the indebtedness evidenced by this note and
the indebtedness to Payee incurred or evidenced by the Credit Documents.
(e) "Loan Agreement" means the Loan Agreement dated April 8,
1998 between Maker and Payee, as the same may have been or may be amended,
supplemented, restated or replaced from time to time.
(f) "Maker" means Surrey, Inc., a Texas corporation.
(g) "Maturity Date" means the maturity of this note, April 8,
2003, as the same may hereafter be accelerated pursuant to the provisions of
this note or any of the other Credit Documents.
(h) "Past Due Rate" means, on any day, a rate per annum equal
to the Ceiling Rate for that day, or only if applicable law imposes no maximum
nonusurious rate of interest for that day, then the Past Due Rate for that day
shall be a rate per annum equal to the Stated Rate plus three percent (3%).
(i) "Payee" means Chase Bank of Texas, National Association, a
national banking association, and any other holder or holders of this note from
time to time and, upon acquisition of this note by any holder or holders other
than the named payee, effective as of the time of such acquisition, the term
"Payee" shall mean all of the then holders of this note, to the exclusion of all
prior holders not then retaining or reserving an interest in this note, to the
end that all the rights, powers, remedies, liens, benefits and privileges
accruing and to accrue hereunder to Payee, as such term is used herein, shall
inure to the benefit of and be owned and held by the holder or holders of this
note from time to time, whether such holder acquires this note through
succession to or assignment from a prior Payee.
(j) "Prime Rate" means, on any day, the rate determined by
Payee as being its "prime rate" for that day. Without notice to Maker or any
other person or entity, the Prime Rate shall automatically fluctuate upward and
downward as and in the amount by which said prime rate fluctuates, with each
change to be effective as of the date of each change in said prime rate. THE
PRIME RATE IS A REFERENCE RATE AND DOES NOT NECESSARILY REPRESENT THE LOWEST OR
BEST RATE OR A FAVORED RATE, AND PAYEE DISCLAIMS ANY STATEMENT, REPRESENTATION
OR WARRANTY TO THE
Page 2 of 9
INITIALLED FOR
IDENTIFICATION:______
<PAGE>
CONTRARY. PAYEE MAY MAKE COMMERCIAL LOANS OR OTHER LOANS AT RATES OF INTEREST
AT, ABOVE OR BELOW THE PRIME RATE.
(k) "Stated Rate" means, on any day, a rate per annum equal to
the Prime Rate for that day plus one percent (1.00%); provided, that if on any
day the Prime Rate for that day plus one percent (1.00%) would exceed the
Ceiling Rate for that day, the Stated Rate shall be fixed at the Ceiling Rate on
that day and on each day thereafter until the total amount of interest accrued
at the Stated Rate (as so fixed) on the unpaid principal balance of this note
plus the Additional Interest equals the total amount of interest which would
have accrued if there had been no Ceiling Rate. If this note matures (or is
prepaid) before such equality is achieved, then, in addition to the unpaid
principal and accrued interest then owing pursuant to the other provisions of
this note, Maker promises to pay on demand to the order of the holder of this
note interest in an amount equal to the excess (if any) of (a) the lesser of (i)
the total interest which would have accrued on this note if the Stated Rate had
been defined as equal to the Ceiling Rate from time to time in effect and (ii)
the total interest which would have accrued on this note if the Stated Rate were
not so prohibited from exceeding the Ceiling Rate, over (b) the total interest
actually accrued hereon to such maturity (or prepayment) date. Without notice to
Maker or any other person or entity, the Stated Rate shall automatically
fluctuate upward and downward in accordance with the provisions of this
Subparagraph.
2. Loan Agreement; Advances; Security. This note has been issued
pursuant to the terms of the Loan Agreement, and is the Term Note referred to in
the Loan Agreement. The advance against this note by Payee or other holder
hereof shall be governed by the terms and provisions of the Loan Agreement.
Reference is hereby made to the Loan Agreement for all purposes. Payee is
entitled to the benefits of and security provided for in the Loan Agreement.
Such security includes, among other security, the Deed of Trust covering and
affecting certain property situated in Travis County, Texas, more fully
described therein, and the Security Agreements. The unpaid principal balance of
this note at any time shall be the total of all amounts lent or advanced against
this note less the amount of all payments or permitted prepayments made on this
note and by or for the account of Maker. The proceeds evidenced by this note
represent a one-time advance to be made by Payee and applied to the indebtedness
of Maker to Payee under the Revolving Note. Amounts repaid under this note may
not be reborrowed.
3. Computation of Interest. Interest on the amount of each advance
against this note shall be computed on the amount of that advance and from the
date it is made. Interest at the Stated Rate shall be computed for the actual
number of days elapsed in a year consisting of 360 days, unless the Ceiling Rate
would thereby be exceeded, in which event, to the extent necessary to avoid
exceeding the Ceiling Rate, interest at the Stated Rate shall be computed on the
basis of the actual number of days elapsed in the applicable calendar year in
which accrued.
Page 3 of 9
INITIALLED FOR
IDENTIFICATION:______
<PAGE>
4. Mandatory Payments of Principal and Interest.
(a) Accrued and unpaid interest on the unpaid principal
balance of this note shall be due and payable (i) on May 8, 2000, (ii) on the
eighth (8th) day of each succeeding calendar month prior to the Maturity Date
and (iii) on the Maturity Date.
(b) The principal of this note shall be due and payable in
monthly installments of Twenty-Seven Thousand Seven Hundred Seventy-Seven and
78/100 Dollars ($27,777.78) each. The first installment shall be due and payable
on May 8, 2000, and a like installment shall be due and payable on the eighth
(8th) day of each succeeding calendar month thereafter until this note shall
have been fully paid and satisfied; provided, that on the Maturity Date, the
entire unpaid principal balance of this note shall be finally due and payable.
(c) All payments hereon made pursuant to this Paragraph shall
be applied first to accrued interest, the balance to principal.
(d) If any payment provided for in this note shall become due
on a day other than a Business Day, such payment may be made on the next
succeeding Business Day (unless the result of such extension of time would be to
extend the date for such payment into another calendar month or beyond the
Maturity Date, and in either such event such payment shall be made on the
Business Day immediately preceding the day on which such payment would otherwise
have been due), and such extension of time shall in such case be included in the
computation of interest on this note.
5. No Usury Intended; Spreading. Notwithstanding any provision to the
contrary contained in this note or any of the other Credit Documents, it is
expressly provided that in no case or event shall the aggregate of (i) all
interest on the unpaid balance of this note, accrued or paid from the date
hereof and (ii) the aggregate of any other amounts accrued or paid pursuant to
this note or any of the other Credit Documents, which under applicable laws are
or may be deemed to constitute interest upon the indebtedness evidenced by this
note from the date hereof, ever exceed the Ceiling Rate. In this connection,
Maker and Payee stipulate and agree that it is their common and overriding
intent to contract in strict compliance with applicable usury laws. In
furtherance thereof, none of the terms of this note or any of the other Credit
Documents shall ever be construed to create a contract to pay, as consideration
for the use, forbearance or detention of money, interest at a rate in excess of
the Ceiling Rate. Maker or other parties now or hereafter becoming liable for
payment of the indebtedness evidenced by this note shall never be liable for
interest in excess of the Ceiling Rate. If, for any reason whatever, the
interest paid or received on this note during its full term produces a rate
which exceeds the Ceiling Rate, the holder of this note shall credit against the
principal of this note (or, if such indebtedness shall
Page 4 of 9
INITIALLED FOR
IDENTIFICATION:______
<PAGE>
have been paid in full, shall refund to the payor of such interest) such portion
of said interest as shall be necessary to cause the interest paid on this note
to produce a rate equal to the Ceiling Rate. All sums paid or agreed to be paid
to the holder of this note for the use, forbearance or detention of the
indebtedness evidenced hereby shall, to the extent permitted by applicable law,
be amortized, prorated, allocated and spread in equal parts throughout the full
term of this note, so that the interest rate is uniform throughout the full term
of this note. The provisions of this Paragraph shall control all agreements,
whether now or hereafter existing and whether written or oral, between Maker and
Payee.
6. Default. If any default, event of default or similar event (however
denominated) occurs under any Credit Document, then that shall automatically
constitute default under this note, and unless Payee declares the default fully
cured to Payee's satisfaction with any applicable grace period (if any) agreed
to in writing by Payee, then the obligation (if any) of Payee to make further
advances against this note shall cease and terminate and the owner or holder
hereof may, at its, his or her option, exercise any or all rights, powers and
remedies afforded under any Credit Document and by law, including the right to
declare the unpaid balance of principal and accrued interest on this note at
once mature and payable.
7. No Waiver by Payee. No delay or omission of Payee or any other
holder hereof to exercise any power, right or remedy accruing to Payee or any
other holder hereof shall impair any such power, right or remedy or shall be
construed to be a waiver of the right to exercise any such power, right or
remedy. Payee's right to accelerate this note for any late payment or Maker's
failure to timely fulfill its other obligations hereunder or under the other
Credit Documents shall not be waived or deemed waived by Payee by Payee's having
accepted a late payment or late payments in the past or Payee otherwise not
accelerating this note or exercising other remedies for Maker's failure to
timely perform its obligations hereunder or under the other Credit Documents.
Payee shall not be obligated or be deemed obligated to notify Maker that it is
requiring Maker to strictly comply with the terms and provisions of this note
and the other Credit Documents before accelerating this note and exercising its
other remedies hereunder or under the other Credit Documents because of Maker's
failure to timely perform its obligations under this note and the other Credit
Documents.
8. Costs and Attorneys' Fees. If any holder of this note retains an
attorney in connection with any default or to collect, enforce or defend this
note or any of the Credit Documents in any lawsuit or in any probate,
reorganization, bankruptcy or other proceeding, or if Maker sues any holder in
connection with this note or any of the Credit Documents and does not prevail,
then Maker agrees to pay to each such holder, in addition to principal and
interest, all reasonable costs and expenses incurred by such holder in trying to
collect this note or in any such suit or proceeding, including reasonable
attorneys' fees. Any amount to be paid under this
Page 5 of 9
INITIALLED FOR
IDENTIFICATION:______
<PAGE>
Paragraph by Maker to Payee shall be a demand obligation owing by Maker to Payee
and shall bear interest from the date of demand until paid at the Past Due Rate.
9. Waivers by Maker and Others. Except to the extent, if any, that
notice of default is expressly required herein or in any of the other Credit
Documents, Maker and any and all co-makers, endorsers, guarantors and sureties
severally waive notice (including, but not limited to, notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and
the filing of suit for the purpose of fixing liability and consent that the time
of payment hereof may be extended and re-extended from time to time without
notice to any of them. Each such person agrees that his, her or its liability on
or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect or
to maintain perfection of any lien against or security interest in any such
security or the partial or complete unenforceability of any guaranty or other
surety obligation, in each case in whole or in part, with or without notice and
before or after maturity.
10. Paragraph Headings. Paragraph headings appearing in this note are
for convenient reference only and shall not be used to interpret or limit the
meaning of any provision of this note.
11. Venue; Choice of Law. This note is performable in Travis County,
Texas, which shall be a proper place of venue for suit on or in respect of this
note. Maker hereby irrevocably agrees that any legal proceeding in respect of
this note shall be brought in the district courts of Travis County, Texas, or in
the United States District Court for the Western District of Texas, Austin
Division (collectively, the "Specified Courts"). Maker hereby irrevocably
submits to the nonexclusive jurisdiction of the state and federal courts of the
State of Texas. Maker hereby irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this note or any
of the Credit Documents brought in any Specified Court, and hereby further
irrevocably waives any claims that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum. Maker further
irrevocably consents to the service of process out of any of the Specified
Courts in any such suit, action or proceeding by the mailing of copies thereof
by certified mail, return receipt requested, postage prepaid, to Maker. Nothing
herein shall affect the right of Payee to commence legal proceedings or
otherwise proceed against Maker in any jurisdiction or to serve process in any
manner permitted by applicable law. Maker agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE
LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN
EFFECT.
Page 6 of 9
INITIALLED FOR
IDENTIFICATION:______
<PAGE>
12. Successors and Assigns. This note and all the covenants and
agreements contained herein shall be binding upon, and shall inure to the
benefit of, the respective legal representatives, heirs, successors and assigns
of Maker and Payee.
13. Records of Payments. The records of Payee shall be prima facie
evidence of the amounts owing on this note.
14. Severability. If any provision of this note is held to be illegal,
invalid or unenforceable under present or future laws, the legality, validity
and enforceability of the remaining provisions of this note shall not be
affected thereby, and this note shall be liberally construed so as to carry out
the intent of the parties to it. Each waiver in this note is subject to the
overriding and controlling rule that it shall be effective only if and to the
extent that (a) it is not prohibited by applicable law and (b) applicable law
neither provides for nor allows any material sanctions to be imposed against
Payee for having bargained for and obtained it.
15. Sale and Assignment. Payee reserves the right, exercisable in its
sole discretion and without notice to Maker or any other person, to sell
participations or assign its interest, or both, in all or any part of this note
or any loan evidenced by this note.
16. Prepayment. Maker may prepay this note, in whole or in part, at any
time without penalty or fee. All prepayments hereon shall be applied first to
any applicable prepayment charge, if any, next to accrued interest and the
balance to principal.
18. Business Loans. Maker warrants and represents to Payee and all
other holders of this note that all loans evidenced by this note are and will be
for business, commercial, investment or other similar purpose and not primarily
for personal, family, household or agricultural use, as such terms are used in
Chapter 1D of Title 79, Texas Revised Civil Statutes 1925, as amended.
19. Entire Agreement. This note and the other Credit Documents embody
the entire agreement and understanding between Payee and Maker and other parties
with respect to their subject matter and supersede all prior conflicting or
inconsistent agreements, consents and understandings relating to such subject
matter. Maker acknowledges and agrees that there is no oral agreement between
Maker and Payee which has not been incorporated in this note and the other
Credit Documents.
20. Renewal. To the extent of the face principal balance thereof, this
note is given, in part, in renewal, extension and rearrangement, and not in
extinguishment, of the unpaid principal balance of that certain promissory note
dated June 17, 1999, in the original principal amount of
Page 7 of 9
INITIALLED FOR
IDENTIFICATION:______
<PAGE>
Two Million Five Hundred Thousand Dollars ($2,500,000.00) executed by Maker
payable to the order of Payee. All liens, assignments and security interests
securing the payment of said promissory note (including without limitation the
Deed of Trust and the Security Agreement) are hereby ratified, confirmed,
brought forward, renewed, extended and rearranged, as security for the payment
of this note, in addition to and cumulative of all other security for this note.
[SIGNATURE ON FOLLOWING PAGE]
Page 8 of 9
INITIALLED FOR
IDENTIFICATION:______
<PAGE>
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02
THIS NOTE AND ALL OTHER CREDIT DOCUMENTS EXECUTED BY ANY OF THE PARTIES
SUBSTANTIALLY CONCURRENTLY HEREWITH TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT
WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SURREY, INC., a Texas corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Page 9 of 9
INITIALLED FOR
IDENTIFICATION:______
EXHIBIT 10.22
MODIFICATION AGREEMENT
($2,300,000.00 NOTE)
THIS MODIFICATION AGREEMENT (this "Agreement") is dated effective as of
April 8, 2000. The parties hereto are SURREY, INC. ("Borrower"), a Texas
corporation, whose address is 13110 Trails End Road, Leander, Texas 78641, and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION ("Lender"), a national banking
association, whose address is 700 Lavaca, Austin, Texas 78701, Attention:
Manager, Commercial Lending Division.
RECITALS:
Borrower executed and delivered to Lender a promissory note dated April
8, 1998 (which, as it may have been renewed, extended or rearranged, is herein
called the "Note"), in the original principal sum of Two Million Three Hundred
Thousand Dollars ($2,300,000.00) bearing interest on the unpaid balance thereof
at the rate or rates therein stated, with a final stated maturity thereof of
April 8, 2005.
The Note was issued pursuant to that certain Loan Agreement dated April
8, 1998 (which, as it may have been amended, supplemented or restated, is herein
called the "Loan Agreement") between Borrower and Lender and pursuant to that
certain Construction Loan Agreement dated April 8, 1998 (which as it may have
been amended, supplemented or restated, is herein called the "Construction Loan
Agreement") between Borrower and Lender. Lender is entitled to the benefits of
the Loan Agreement and the Construction Loan Agreement and the security provided
for in each including, among other security, a Deed of Trust, Absolute
Assignment of Rents, Security Agreement and Financing Statement (the "Deed of
Trust") dated April 8, 1998 from Borrower to David L. Mendez, Trustee for the
benefit of Lender, recorded in Volume 13159, Page 1726 of the Real Property
Records of Travis County, Texas, to which instrument reference is here made for
description of the collateral for the Note and for all other purposes. The
property covered and affected by such instrument is herein called the
"Property". The liens, security interests and assignments of the Deed of Trust
and of all other documents and instruments now or hereafter governing,
evidencing, guaranteeing or securing or otherwise relating to payment of all or
any part of the indebtedness evidenced by the Note (collectively, the "Credit
Documents") are hereinafter collectively called the "Liens".
Borrower and Lender now agree to make certain changes to the Note and
to ratify the Liens and confirm that they continue to secure the Note, as
modified hereby, all as set forth in the succeeding provisions of this Agreement
(which shall control over any conflicting or inconsistent recitals above).
1
<PAGE>
AGREEMENTS:
In consideration of the premises and the mutual agreements herein set
forth, Borrower and Lender hereby agree as follows:
1. CERTAIN DEFINITIONS. The following words and terms shall, unless the
context otherwise requires, have the meanings provided below:
(a) "CEILING RATE" means, on any day, the maximum nonusurious
rate of interest permitted for that day by whichever of applicable federal or
Texas laws permits the higher interest rate, stated as a rate per annum. On each
day, if any, that applicable Texas law establishes the Ceiling Rate, the Ceiling
Rate shall be the "weekly ceiling" (as defined in ss. 303 of thE Texas Finance
Code -- "Texas Finance Code" -- as amended) for that day. Lender may from time
to time, as to current and future balances, implement any other ceiling
permitted under the Texas Finance Code by notice to Borrower, if and to the
extent permitted by, the Texas Finance Code. Without notice to Borrower or any
other person or entity, the Ceiling Rate shall automatically fluctuate upward
and downward as and in the amount by which such maximum nonusurious rate of
interest permitted by applicable law fluctuates.
(b) "MATURITY DATE" means the maturity of the Note, April 8,
2005, as the same may hereafter be accelerated pursuant to the provisions of the
Note or any of the other Credit Documents.
(c) "PAST DUE RATE" means, on any day, a rate per annum equal
to the Ceiling Rate for that day, or only if applicable law imposes no maximum
nonusurious rate of interest for that day, then the Past Due Rate for that day
shall be a rate per annum equal to eighteen percent (18%) per annum.
(d) "PRIME RATE" means, on any day, the rate determined by
Lender as being its prime rate for that day. Without notice to Borrower or any
other person or entity, the Prime Rate shall automatically fluctuate upward and
downward as and in the amount by which said prime rate fluctuates, with each
change to be effective as of the date of each change in said prime rate. THE
PRIME RATE IS A REFERENCE RATE AND DOES NOT NECESSARILY REPRESENT THE LOWEST OR
BEST RATE ACTUALLY CHARGED TO ANY CUSTOMER, AND LENDER DISCLAIMS ANY STATEMENT,
REPRESENTATION OR WARRANTY TO THE CONTRARY. LENDER MAY MAKE COMMERCIAL LOANS OR
OTHER LOANS AT RATES OF INTEREST AT, ABOVE OR BELOW THE PRIME RATE.
(e) "STATED RATE" means, on any day, a rate per annum equal to
the Prime Rate for that day plus one percent (1%); provided, that if on any day
the Prime Rate for that day plus one percent (1%) shall exceed the Ceiling Rate
for that day, the Stated Rate shall be fixed at the Ceiling Rate on that day and
on each day thereafter until the total amount of interest accrued
2
<PAGE>
at the Stated Rate on the unpaid balance of the Note equals the total amount of
interest which would have accrued if there had been no Ceiling Rate. If the Note
matures (or is prepaid) before such equality is achieved, then, in addition to
the unpaid principal and accrued interest then owing pursuant to the other
provisions of the Note, Borrower promises to pay on demand to the order of the
holder of the Note interest in an amount equal to the excess (if any) of (a) the
lesser of (i) the total interest which would have accrued on the Note if the
Stated Rate had been defined as equal to the Ceiling Rate from time to time in
effect and (ii) the total interest which would have accrued on the Note if the
Stated Rate were not so prohibited from exceeding the Ceiling Rate, over (b) the
total interest actually accrued on the Note to such maturity (or prepayment)
date. Without notice to Borrower or any other person or entity, the Stated Rate
shall automatically fluctuate upward and downward in accordance with the
provisions of this Subparagraph.
2. BALANCE. The present advanced and unpaid principal balance of the
Note is Two Million One Hundred Fifty-Six Thousand Two Hundred Forty-Nine and
65/100 Dollars ($2,156,249.65). No amounts remain unadvanced against the Note
and Lender shall have no obligation to make any further advances under the Note.
3. INTEREST RATE. The unpaid principal balance of the Note from time to
time outstanding shall bear interest from the effective date hereof at the
Stated Rate and all past due amounts, both principal and accrued interest, shall
bear interest from the respective due dates thereof until paid at the Past Due
Rate; provided, that for the full term of the Note the interest rate produced by
the aggregate of all sums paid or agreed to be paid to the holder of the Note
for the use, forbearance or detention of the debt evidenced thereby (including
all interest on the Note at the Stated Rate) shall not exceed the Ceiling Rate.
Interest on the amount of each advance against the Note shall be computed for
the actual number of days elapsed in a year consisting of 360 days, unless the
Ceiling Rate would thereby be exceeded, in which event, to the extent necessary
to avoid exceeding the Ceiling Rate, interest shall be computed on the basis of
the actual number of days elapsed in the applicable calendar year in which
accrued.
4. PAYMENT SCHEDULE.
(a) Accrued and unpaid interest on the unpaid principal
balance of the Note shall be due and payable (i) on May 8, 2000, (ii) on the
eighth (8th) day of each succeeding calendar month thereafter before the
Maturity Date, and (iii) on the Maturity Date.
(b) The principal of the Note shall be due and payable in
monthly installments in the amount described below. The first installment shall
be due and payable on May 8, 2000, and a like installment shall be due and
payable on the eighth (8th) day of each succeeding calendar month thereafter
until the Note shall have been fully paid and satisfied; provided, that on the
Maturity Date, the entire unpaid principal balance of the Note and all accrued
and unpaid interest on the unpaid principal balance of the Note shall be finally
due and payable. The amount
3
<PAGE>
of the required monthly principal installment shall be $9,583.33 for each
monthly payment due prior to or on April 8, 2001, and shall thereafter be
$12,777.78.
5. APPLICATION OF PAYMENTS. All payments shall be applied first to
accrued interest and the balance to principal. All prepayments shall be applied
first to accrued interest and the balance to the remaining principal
installments in inverse order of their maturity.
6. PREPAYMENT. Borrower may at any time pay all or any part of the Note
without the payment of any premium or fee.
7. EXPENSES. In addition to and cumulative of the other provisions of
the Credit Documents, to the extent not prohibited by applicable law, Borrower
will pay all costs and expenses and reimburse Lender for any and all
expenditures of every character incurred or expended in connection with the
preparation, negotiation, documentation, closing, renewal, revision,
modification, increase, review or restructuring of this Agreement or any loan or
credit facility secured by any of the Liens. Any amount to be paid under this
Paragraph by Borrower to Lender shall be a demand obligation owing by Borrower
to Lender and shall bear interest from the date of expenditure at the Past Due
Rate.
8. NO USURY INTENDED; SPREADING. Notwithstanding any provision to the
contrary contained in the Note or any of the other Credit Documents, it is
expressly provided that in no case or event shall the aggregate of (i) all
interest on the unpaid balance of the Note, accrued or paid from the date hereof
and (ii) the aggregate of any other amounts accrued or paid pursuant to the Note
or any of the other Credit Documents, which under applicable laws are or may be
deemed to constitute interest upon the indebtedness evidenced by the Note ever
exceed the Ceiling Rate. In this connection, Borrower and Lender expressly
stipulate and agree that it is their common and overriding intent to contract in
strict compliance with the applicable usury laws. In furtherance thereof, none
of the terms of the Note or any of the other Credit Documents shall ever be
construed to create a contract to pay, as consideration for the use, forbearance
or detention of money, interest at a rate in excess of the Ceiling Rate.
Borrower or other parties now or hereafter becoming liable for payment of the
indebtedness evidenced by the Note shall never be liable for interest in excess
of the Ceiling Rate. If, for any reason whatever, the interest paid or received
on the Note during its full term produces a rate which exceeds the Ceiling Rate,
the holder of the Note shall credit against the principal of the Note (or, if
such indebtedness shall have been paid in full, shall refund to the payor of
such interest) such portion of said interest as shall be necessary to cause the
interest paid on the Note to produce a rate equal to the Ceiling Rate. All sums
paid or agreed to be paid to the holder of the Note for the use, forbearance or
detention of the indebtedness evidenced thereby shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread in equal parts
throughout the full term of the Note, so that the interest rate is uniform
throughout the full term of the Note. The provisions of this paragraph shall
control all agreements, whether now or hereafter existing and whether written or
oral, between Borrower and Lender.
4
<PAGE>
9. BUSINESS LOANS. Borrower warrants and represents to Lender and all
other holders of the Note that all loans evidenced by the Note are and will be
for business, commercial, investment or other similar purpose and not primarily
for personal, family, household or agricultural use, as such terms are used in
the Texas Finance Code.
10. SALE AND ASSIGNMENT. Lender reserves the right, exercisable in its
sole discretion and without notice to Borrower or any other person, to sell
participations or assign its interest, or both, in all or any part of the Note
or any loan evidenced by the Note.
11. LIEN CONTINUATION; MISCELLANEOUS. The Liens are hereby ratified and
confirmed as continuing to secure the payment of the Note, as modified hereby.
Nothing herein shall in any manner diminish, impair or extinguish the Note, any
of the other Credit Documents or the Liens. The Liens are not waived. To the
extent of any conflict between the Note or any of the other Credit Documents (or
any earlier modification of any of them) and this Agreement, this Agreement
shall control. Except as hereby expressly modified, all terms of the Note and
the other Credit Documents (as any of them may have been previously modified by
any written agreement) remain in full force and effect. If more than one person
or entity execute this Agreement as "Borrower", each shall be jointly and
severally liable for the obligations of Borrower hereunder. This Agreement (a)
shall bind and benefit Borrower and, except as herein expressly limited, Lender
and their respective heirs, beneficiaries, administrators, executors, receivers,
trustees, successors and assigns (provided, that Borrower shall not assign its
rights hereunder without the prior written consent of Lender); (b) may be
modified or amended only by a writing signed by each party; (c) SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF
TEXAS AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT; (d) may be
executed in several counterparts, and by the parties hereto in separate
counterparts, and each counterpart, when executed and delivered, shall
constitute an original agreement enforceable against all who signed it without
production of or accounting for any other counterpart, and all separate
counterparts shall constitute the same agreement and (e) embodies the entire
agreement and understanding between the parties with respect to modifications of
instruments provided for herein and supersedes all prior conflicting or
inconsistent agreements, consents and understandings relating to such subject
matter. Borrower acknowledges and agrees that there are no oral agreements
between Borrower and Lender which have not been incorporated in this Agreement.
If any provision of this Agreement should be determined by any court of
competent jurisdiction to be illegal, invalid or unenforceable under present or
future laws, the legality, validity and enforceability of the remaining
provisions of this Agreement shall not be affected thereby. Each waiver in this
Agreement is subject to the overriding and controlling rule that it shall be
effective only if and to the extent that (a) it is not prohibited by applicable
law and (b) applicable law neither provides for nor allows any material
sanctions to be imposed against Lender for having bargained for and obtained it.
Wherever the term "including" or a similar term is used in this Agreement, it
shall be read as if it were "including by way of example only and without in any
way limiting the generality of the clause or concept referred to." Any exhibits,
appendices and annexes described in this Agreement as being attached to it are
hereby
5
<PAGE>
incorporated into it. The headings in this Agreement shall be accorded no
significance in interpreting it.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02
THIS AGREEMENT AND ALL OTHER CREDIT DOCUMENTS EXECUTED BY ANY OF THE PARTIES
BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF, TOGETHER
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
EXECUTED effective as of the date first set forth above.
SURREY, INC. a Texas corporation
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
"Borrower"
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
"Lender"
6
<PAGE>
THE STATE OF TEXAS ss.
ss.
COUNTY OF TRAVIS ss.
This instrument was acknowledged before me on the ______ day of
April, 2000, by ___________________, __________________ of Surrey, Inc., a
Texas corporation, on behalf of said corporation.
-----------------------------------------
Notary Public, State of Texas
THE STATE OF TEXAS ss.
ss.
COUNTY OF TRAVIS ss.
BEFORE ME, the undersigned Notary Public, on this day personally
appeared ________________________, known to me to be the person and officer
whose name is subscribed to the foregoing instrument and acknowledged to me that
the same was the act of the said Chase Bank of Texas, National Association, a
national banking association, and that (s)he executed the same as the act and
deed of such association for the purposes and consideration therein expressed
and in the capacity therein stated.
GIVEN under my hand and seal of office this ______ day of April,
2000.
-----------------------------------------
Notary Public, State of Texas
7
<PAGE>
AFTER RECORDING, RETURN TO:
- --------------------------
Joe Swynnerton
Chase Bank of Texas, N.A.
700 Lavaca
Austin, Texas 78701
8
EXHIBIT 10.23
MODIFICATION AGREEMENT
($400,000.00 NOTE)
THIS MODIFICATION AGREEMENT (this "Agreement") is dated effective as of
April 8, 2000. The parties hereto are SURREY, INC. ("Borrower"), a Texas
corporation, whose address is 13110 Trails End Road, Leander, Texas 78641, and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION ("Lender"), a national banking
association, whose address is 700 Lavaca, Austin, Texas 78701, Attention:
Manager, Commercial Lending Division.
RECITALS:
Borrower executed and delivered to Lender a promissory note dated
January 25, 1999 (which, as it may have been renewed, extended or rearranged, is
herein called the "Note"), in the original principal sum of Four Hundred
Thousand Dollars ($400,000.00) bearing interest on the unpaid balance thereof at
the rate or rates therein stated, with a final stated maturity thereof of
February 8, 2004.
The Note was issued pursuant to that certain Loan Agreement dated April
8, 1998 (which, as it may have been amended, supplemented or restated, is herein
called the "Loan Agreement") between Borrower and Lender and pursuant to that
certain Construction Loan Agreement dated January 25, 1999 (which as it may have
been amended, supplemented or restated, is herein called the "Construction Loan
Agreement") between Borrower and Lender. Lender is entitled to the benefits of
the Loan Agreement and the Construction Loan Agreement and the security provided
for in each including, among other security, a Deed of Trust, Absolute
Assignment of Rents, Security Agreement and Financing Statement (the "Deed of
Trust") dated January 25, 1999 from Borrower to David L. Mendez, Trustee for the
benefit of Lender, recorded in Volume 13357, Page 2831 of the Real Property
Records of Travis County, Texas, to which instrument reference is here made for
description of the collateral for the Note and for all other purposes. The
property covered and affected by such instrument is herein called the
"Property". The liens, security interests and assignments of the Deed of Trust
and of all other documents and instruments now or hereafter governing,
evidencing, guaranteeing or securing or otherwise relating to payment of all or
any part of the indebtedness evidenced by the Note (collectively, the "Credit
Documents") are hereinafter collectively called the "Liens".
Borrower and Lender now agree to make certain changes to the Note and
to ratify the Liens and confirm that they continue to secure the Note, as
modified hereby, all as set forth in the succeeding provisions of this Agreement
(which shall control over any conflicting or inconsistent recitals above).
1
<PAGE>
AGREEMENTS:
In consideration of the premises and the mutual agreements herein set
forth, Borrower and Lender hereby agree as follows:
1. CERTAIN DEFINITIONS. The following words and terms shall, unless the
context otherwise requires, have the meanings provided below:
(a) "CEILING RATE" means, on any day, the maximum nonusurious
rate of interest permitted for that day by whichever of applicable federal or
Texas laws permits the higher interest rate, stated as a rate per annum. On each
day, if any, that applicable Texas law establishes the Ceiling Rate, the Ceiling
Rate shall be the "weekly ceiling" (as defined in ss. 303 of thE Texas Finance
Code -- "Texas Finance Code" -- as amended) for that day. Lender may from time
to time, as to current and future balances, implement any other ceiling
permitted under the Texas Finance Code by notice to Borrower, if and to the
extent permitted by, the Texas Finance Code. Without notice to Borrower or any
other person or entity, the Ceiling Rate shall automatically fluctuate upward
and downward as and in the amount by which such maximum nonusurious rate of
interest permitted by applicable law fluctuates.
(b) "MATURITY DATE" means the maturity of the Note, February
8, 2004, as the same may hereafter be accelerated pursuant to the provisions of
the Note or any of the other Credit Documents.
(c) "PAST DUE RATE" means, on any day, a rate per annum equal
to the Ceiling Rate for that day, or only if applicable law imposes no maximum
nonusurious rate of interest for that day, then the Past Due Rate for that day
shall be a rate per annum equal to eighteen percent (18%) per annum.
(d) "PRIME RATE" means, on any day, the rate determined by
Lender as being its prime rate for that day. Without notice to Borrower or any
other person or entity, the Prime Rate shall automatically fluctuate upward and
downward as and in the amount by which said prime rate fluctuates, with each
change to be effective as of the date of each change in said prime rate. THE
PRIME RATE IS A REFERENCE RATE AND DOES NOT NECESSARILY REPRESENT THE LOWEST OR
BEST RATE ACTUALLY CHARGED TO ANY CUSTOMER, AND LENDER DISCLAIMS ANY STATEMENT,
REPRESENTATION OR WARRANTY TO THE CONTRARY. LENDER MAY MAKE COMMERCIAL LOANS OR
OTHER LOANS AT RATES OF INTEREST AT, ABOVE OR BELOW THE PRIME RATE.
(e) "STATED RATE" means, on any day, a rate per annum equal to
the Prime Rate for that day plus one percent (1%); provided, that if on any day
the Prime Rate for that day plus one percent (1%) shall exceed the Ceiling Rate
for that day, the Stated Rate shall be fixed at the Ceiling Rate on that day and
on each day thereafter until the total amount of interest accrued at the Stated
Rate on the unpaid balance of the Note equals the total amount of interest which
2
<PAGE>
would have accrued if there had been no Ceiling Rate. If the Note matures (or is
prepaid) before such equality is achieved, then, in addition to the unpaid
principal and accrued interest then owing pursuant to the other provisions of
the Note, Borrower promises to pay on demand to the order of the holder of the
Note interest in an amount equal to the excess (if any) of (a) the lesser of (i)
the total interest which would have accrued on the Note if the Stated Rate had
been defined as equal to the Ceiling Rate from time to time in effect and (ii)
the total interest which would have accrued on the Note if the Stated Rate were
not so prohibited from exceeding the Ceiling Rate, over (b) the total interest
actually accrued on the Note to such maturity (or prepayment) date. Without
notice to Borrower or any other person or entity, the Stated Rate shall
automatically fluctuate upward and downward in accordance with the provisions of
this Subparagraph.
2. BALANCE. The present advanced and unpaid principal balance of the
Note is Three Hundred Forty-One Thousand Five Hundred Forty-One and 21/100
Dollars ($341,541.21). No amounts remain unadvanced against the Note and Lender
shall have no obligation to make any further advances under the Note.
3. INTEREST RATE. The unpaid principal balance of the Note from time to
time outstanding shall bear interest from the effective date hereof at the
Stated Rate and all past due amounts, both principal and accrued interest, shall
bear interest from the respective due dates thereof until paid at the Past Due
Rate; provided, that for the full term of the Note the interest rate produced by
the aggregate of all sums paid or agreed to be paid to the holder of the Note
for the use, forbearance or detention of the debt evidenced thereby (including
all interest on the Note at the Stated Rate) shall not exceed the Ceiling Rate.
Interest on the amount of each advance against the Note shall be computed for
the actual number of days elapsed in a year consisting of 360 days, unless the
Ceiling Rate would thereby be exceeded, in which event, to the extent necessary
to avoid exceeding the Ceiling Rate, interest shall be computed on the basis of
the actual number of days elapsed in the applicable calendar year in which
accrued.
4. PAYMENT SCHEDULE.
(a) Accrued and unpaid interest on the unpaid principal
balance of the Note shall be due and payable (i) on May 8, 2000, (ii) on the
eighth (8th) day of each succeeding calendar month thereafter before the
Maturity Date, and (iii) on the Maturity Date.
(b) The principal of the Note shall be due and payable in
monthly installments in the amount of $7,266.83. The first installment shall be
due and payable on May 8, 2000, and a like installment shall be due and payable
on the eighth (8th) day of each succeeding calendar month thereafter until the
Note shall have been fully paid and satisfied; provided, that on the Maturity
Date, the entire unpaid principal balance of the Note and all accrued and unpaid
interest on the unpaid principal balance of the Note shall be finally due and
payable.
3
<PAGE>
5. APPLICATION OF PAYMENTS. All payments shall be applied first to
accrued interest and the balance to principal. All prepayments shall be applied
first to accrued interest and the balance to the remaining principal
installments in inverse order of their maturity.
6. PREPAYMENT. Borrower may at any time pay all or any part of the Note
without the payment of any premium or fee.
7. EXPENSES. In addition to and cumulative of the other provisions of
the Credit Documents, to the extent not prohibited by applicable law, Borrower
will pay all costs and expenses and reimburse Lender for any and all
expenditures of every character incurred or expended in connection with the
preparation, negotiation, documentation, closing, renewal, revision,
modification, increase, review or restructuring of this Agreement or any loan or
credit facility secured by any of the Liens. Any amount to be paid under this
Paragraph by Borrower to Lender shall be a demand obligation owing by Borrower
to Lender and shall bear interest from the date of expenditure at the Past Due
Rate.
8. NO USURY INTENDED; SPREADING. Notwithstanding any provision to the
contrary contained in the Note or any of the other Credit Documents, it is
expressly provided that in no case or event shall the aggregate of (i) all
interest on the unpaid balance of the Note, accrued or paid from the date hereof
and (ii) the aggregate of any other amounts accrued or paid pursuant to the Note
or any of the other Credit Documents, which under applicable laws are or may be
deemed to constitute interest upon the indebtedness evidenced by the Note ever
exceed the Ceiling Rate. In this connection, Borrower and Lender expressly
stipulate and agree that it is their common and overriding intent to contract in
strict compliance with the applicable usury laws. In furtherance thereof, none
of the terms of the Note or any of the other Credit Documents shall ever be
construed to create a contract to pay, as consideration for the use, forbearance
or detention of money, interest at a rate in excess of the Ceiling Rate.
Borrower or other parties now or hereafter becoming liable for payment of the
indebtedness evidenced by the Note shall never be liable for interest in excess
of the Ceiling Rate. If, for any reason whatever, the interest paid or received
on the Note during its full term produces a rate which exceeds the Ceiling Rate,
the holder of the Note shall credit against the principal of the Note (or, if
such indebtedness shall have been paid in full, shall refund to the payor of
such interest) such portion of said interest as shall be necessary to cause the
interest paid on the Note to produce a rate equal to the Ceiling Rate. All sums
paid or agreed to be paid to the holder of the Note for the use, forbearance or
detention of the indebtedness evidenced thereby shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread in equal parts
throughout the full term of the Note, so that the interest rate is uniform
throughout the full term of the Note. The provisions of this paragraph shall
control all agreements, whether now or hereafter existing and whether written or
oral, between Borrower and Lender.
9. BUSINESS LOANS. Borrower warrants and represents to Lender and all
other holders of the Note that all loans evidenced by the Note are and will be
for business, commercial,
4
<PAGE>
investment or other similar purpose and not primarily for personal, family,
household or agricultural use, as such terms are used in the Texas Finance Code.
10. SALE AND ASSIGNMENT. Lender reserves the right, exercisable in its
sole discretion and without notice to Borrower or any other person, to sell
participations or assign its interest, or both, in all or any part of the Note
or any loan evidenced by the Note.
11. LIEN CONTINUATION; MISCELLANEOUS. The Liens are hereby ratified and
confirmed as continuing to secure the payment of the Note, as modified hereby.
Nothing herein shall in any manner diminish, impair or extinguish the Note, any
of the other Credit Documents or the Liens. The Liens are not waived. To the
extent of any conflict between the Note or any of the other Credit Documents (or
any earlier modification of any of them) and this Agreement, this Agreement
shall control. Except as hereby expressly modified, all terms of the Note and
the other Credit Documents (as any of them may have been previously modified by
any written agreement) remain in full force and effect. If more than one person
or entity execute this Agreement as "Borrower", each shall be jointly and
severally liable for the obligations of Borrower hereunder. This Agreement (a)
shall bind and benefit Borrower and, except as herein expressly limited, Lender
and their respective heirs, beneficiaries, administrators, executors, receivers,
trustees, successors and assigns (provided, that Borrower shall not assign its
rights hereunder without the prior written consent of Lender); (b) may be
modified or amended only by a writing signed by each party; (c) SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF
TEXAS AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT; (d) may be
executed in several counterparts, and by the parties hereto in separate
counterparts, and each counterpart, when executed and delivered, shall
constitute an original agreement enforceable against all who signed it without
production of or accounting for any other counterpart, and all separate
counterparts shall constitute the same agreement and (e) embodies the entire
agreement and understanding between the parties with respect to modifications of
instruments provided for herein and supersedes all prior conflicting or
inconsistent agreements, consents and understandings relating to such subject
matter. Borrower acknowledges and agrees that there are no oral agreements
between Borrower and Lender which have not been incorporated in this Agreement.
If any provision of this Agreement should be determined by any court of
competent jurisdiction to be illegal, invalid or unenforceable under present or
future laws, the legality, validity and enforceability of the remaining
provisions of this Agreement shall not be affected thereby. Each waiver in this
Agreement is subject to the overriding and controlling rule that it shall be
effective only if and to the extent that (a) it is not prohibited by applicable
law and (b) applicable law neither provides for nor allows any material
sanctions to be imposed against Lender for having bargained for and obtained it.
Wherever the term "including" or a similar term is used in this Agreement, it
shall be read as if it were "including by way of example only and without in any
way limiting the generality of the clause or concept referred to." Any exhibits,
appendices and annexes described in this Agreement as being attached to it are
hereby incorporated into it. The headings in this Agreement shall be accorded no
significance in interpreting it.
5
<PAGE>
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02
THIS AGREEMENT AND ALL OTHER CREDIT DOCUMENTS EXECUTED BY ANY OF THE PARTIES
BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF, TOGETHER
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
EXECUTED effective as of the date first set forth above.
SURREY, INC. a Texas corporation
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
"Borrower"
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
"Lender"
6
<PAGE>
THE STATE OF TEXAS ss.
ss.
COUNTY OF TRAVIS ss.
This instrument was acknowledged before me on the ________ day of
April, 2000, by ___________________, __________________ of Surrey, Inc., a
Texas corporation, on behalf of said corporation.
-----------------------------------------
Notary Public, State of Texas
THE STATE OF TEXAS ss.
ss.
COUNTY OF TRAVIS ss.
BEFORE ME, the undersigned Notary Public, on this day personally
appeared ________________________, known to me to be the person and officer
whose name is subscribed to the foregoing instrument and acknowledged to me that
the same was the act of the said Chase Bank of Texas, National Association, a
national banking association, and that (s)he executed the same as the act and
deed of such association for the purposes and consideration therein expressed
and in the capacity therein stated.
GIVEN under my hand and seal of office this ________ day of April,
2000.
-----------------------------------------
Notary Public, State of Texas
7
<PAGE>
AFTER RECORDING, RETURN TO:
- --------------------------
Joe Swynnerton
Chase Bank of Texas, N.A.
700 Lavaca
Austin, Texas 78701
8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 6
<SECURITIES> 0
<RECEIVABLES> 2,253
<ALLOWANCES> (57)
<INVENTORY> 2,657
<CURRENT-ASSETS> 5,252
<PP&E> 6,127
<DEPRECIATION> 2,191
<TOTAL-ASSETS> 9,722
<CURRENT-LIABILITIES> 1,800
<BONDS> 4,814
0
0
<COMMON> 4,099
<OTHER-SE> (991)
<TOTAL-LIABILITY-AND-EQUITY> 9,722
<SALES> 3,350
<TOTAL-REVENUES> 3,350
<CGS> 2,717
<TOTAL-COSTS> 3,705
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 57
<INTEREST-EXPENSE> 118
<INCOME-PRETAX> (473)
<INCOME-TAX> (132)
<INCOME-CONTINUING> (341)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (341)
<EPS-BASIC> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
