SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[ x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended July 31, 1996
OR
[ ] 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: 0-1363
MRL, Inc.
(Exact name of registrant as specified in its charter)
Missouri 43-0614403
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
287 N. Lindbergh Blvd.
Suite 206
St. Louis, Missouri 63141
(Address of principal (Zip Code)
executive offices)
(314) 432-7222
(Registrant's telephone number, including area code)
____________________________________________________________________________
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has 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 ___
Title of class of Common Stock Number of Shares outstanding
as of this report date
Common Stock, par value
$.10 per share 2,785,694
<PAGE>
PART I
FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
July 31 and January 31, 1996
July 31 January 31
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ (20,000) $ 66,000
Accounts receivable, net 715,000 555,000
Inventories (Note B) 945,000 809,000
Prepaid expenses and
other current assets 63,000 49,000
----------- ------------
Total Current Assets 1,703,000 1,479,000
Property, plant and equipment, net 250,000 266,000
Other assets 20,000 28,000
Deferred income taxes (Note D) 86,000 --
----------- ------------
$ 2,059,000 $ 1,773,000
=========== ============
Liabilities and Shareholders'
Equity (Deficit)
Current Liabilities:
Current maturities of long term
debt and capital lease
obligations $ 700,000 $ 472,000
Accounts payable 809,000 581,000
Accrued expenses 273,000 252,000
Accrued payroll and payroll taxes 129,000 107,000
----------- -----------
Total current liabilities 1,911,000 1,412,000
Long-Term Obligations:
Long-term debt and capital lease
obligations 1,478,000 1,307,000
Less current maturities of
long-term obligations (700,000) (472,000)
----------- -----------
778,000 835,000
Shareholders' Equity (Deficit):
Common stock 279,000 279,000
Additional paid-in capital 1,351,000 1,351,000
Deficit (2,063,000) (1,907,000)
----------- -----------
(433,000) (277,000)
Less treasury stock (197,000) (197,000)
----------- -----------
(630,000) (474,000)
----------- -----------
$ 2,059,000 $ 1,773,000
=========== ===========
UNAUDITED
CONDENSED STATEMENTS OF OPERATIONS
For The Three and Six Months Ended July 31, 1996 and 1995
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
7/31/96 7/31/95 7/31/96 7/31/95
<S> <C> <C> <C> <C>
Net sales $1,523,000 $1,150,000 $2,587,000 $2,398,000
Cost of goods sold 1,198,000 896,000 1,989,000 1,880,000
---------- ---------- ---------- ----------
Gross profit 325,000 254,000 598,000 518,000
Selling and administrative expenses 369,000 411,000 733,000 866,000
---------- ---------- ---------- ----------
Operating income (loss) (44,000) (157,000) (135,000) (348,000)
Other income (expenses)
Interest expense (62,000) (43,000) (108,000) (83,000)
----------- ----------- ----------- ----------
Income (loss) from continuing
operations before income taxes (106,000) (200,000) (243,000) (431,000)
Income taxes (benefit)(Note D) (37,000) 107,000 (86,000) 33,000
----------- ----------- ----------- ----------
Income (loss) from continuing
operations (69,000) (307,000) (157,000) (464,000)
Discontinued operations
Gain (loss) from operations of
discontinued segment, net of
taxes -- (4,000) -- 25,000
----------- ----------- ----------- ----------
Net income (loss) $ (69,000) $ (311,000) $ (157,000) $ (439,000)
=========== =========== =========== ===========
Earnings (loss) per common
share: (Note E)
Continuing operations $ (.03) $ (.12) $ (.06) $ (.17)
Discontinued operations -- -- -- .01
----------- ----------- ---------- ------------
Net income (loss) $ (.03) $ (.12) $ (.06) $ (.16)
=========== =========== ========== ============
</TABLE>
UNAUDITED
CONDENSED STATEMENTS OF CASH FLOWS
For The Six Months Ended July 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash flow from operating activities:
Net income (loss) $(157,000) $(439,000)
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 51,000 62,000
Provision for bad debts 6,000 2,000
(Gain) on sale of assets -- (29,000)
Common stock issuance -- 22,000
Changes in assets and liabilities:
Increase in accounts payable 228,000 350,000
(Increase) decrease in accounts receivable (165,000) 1,000
(Increase) in inventories (136,000) (52,000)
(Increase) decrease in deferred income taxes (86,000) 31,000
Increase in accrued expenses 43,000 22,000
(Increase) decrease in other, net (6,000) 36,000
---------- --------
Net cash (used in) provided by operating activities (222,000) 6,000
Cash flows from investing activities:
Capital expenditures (35,000) (5,000)
Proceeds from disposal of fixed assets -- 7,000
Collections on notes receivable -- 279,000
---------- --------
Net cash provided by investing activities (35,000) 281,000
Cash flows from financing activities:
Proceeds from line of credit 235,000 107,000
Payments on long-term obligations (64,000) (305,000)
Net cash provided by (used in) financing activities 171,000 (198,000)
Net (decrease) increase in cash and cash equivalents (86,000) 89,000
Cash and cash equivalents at beginning of year 66,000 47,000
__________ ________
Cash and cash equivalents at July 31 $ (20,000) $ 136,000
========== ==========
Supplemental cash flow information:
Interest paid $ 82,000 $ 71,000
=========== ==========
Income taxes paid $ -- $ --
=========== ==========
Schedule of noncash financing and investing activities:
Credit sale of property, plant and equipment $ -- $ 338,000
=========== ==========
</TABLE>
MRL, Inc.
UNAUDITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note A -
In the opinion of the Company, the accompanying unaudited condensed
financial statements contain all adjustments necessary to present fairly the
Company's results of operations and changes in financial position for the
three month and six month periods ended July 31, 1996 and 1995. All
significant intercompany accounts and transactions are eliminated in
consolidation.
The unaudited condensed statement of operations for the six month period
ended July 31, 1995 has been restated to conform to the presentation of the
statement of operations for the year ended January 31, 1996.
Note B -
The composition of inventory for the periods ended July 31, 1996 and January
31, 1996 is as follows:
7/31/96 1/31/96
Finished goods $ 51,000 $ 126,000
Work in process 78,000 54,000
Raw materials and supplies 816,000 629,000
---------- ----------
Total inventory $ 945,000 $ 809,000
========== ==========
Note C -
On March 28, 1995, the Company sold its remaining property in Albuquerque,
New Mexico for $375,000. Of the total price, 10% was paid in cash and the
balance was paid by delivery of a New Mexico Real Estate Contract. During
the six month period ended July 31, 1995, the Company experienced a $29,000
gain from the sale and recorded a Note Receivable of $338,000.
Note D -
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
No. 109") issued in February 1992. The Company adopted "SFAS No. 109" as of
February 1, 1993.
Total income tax expense (benefit) for the three and six month periods ended
July 31, 1996 and 1995 was allocated as follows:
1996 1995
Three Months Ended July 31:
Income from
Continuing Operations $ (37,000) $ 107,000
Discontinued Operations -- (2,000)
--------- _________
$(37,000) $ 105,000
Six Months Ended July 31:
Income from
Continuing Operations $ (86,000) $ 33,000
Discontinued Operations -- (2,000)
--------- ---------
$ (86,000) $ 31,000
========= =========
Income tax expense (benefit) attributed to income from continuing
operations consists of:
Current Deferred Total
Three Months Ended July 31, 1996:
U.S. Federal $ -- $ (34,000) $ (34,000)
State and Local -- (3,000) (3,000)
-------- --------- ---------
$ -- $ (37,000) $ (37,000)
======== ========== ==========
Three Months Ended July 31, 1995:
U.S. Federal $ -- $ 98,000 $ 98,000
State and Local -- 9,000 9,000
-------- ---------- ----------
$ -- $ 107,000 $ 107,000
======== ========= =========
Six Months Ended July 31, 1996:
U.S. Federal $ -- $ (80,000) $ (80,000)
State and Local -- (6,000) (6,000)
-------- ---------- ----------
$ -- $ (86,000) $ (86,000)
======== ========== ==========
Six Months Ended July 31, 1995:
U.S. Federal $ -- $ 30,000 $ 30,000
State and Local -- 3,000 3,000
-------- ---------- ----------
$ -- $ 33,000 $ 33,000
======== ========= =========
The provision for (reduction in) income taxes differs from the amount of
income tax determined by applying the applicable U.S. statutory federal
income tax rate to income from continuing operations before income taxes as
a result of the following differences:
Three Months Ended Six Months Ended
7/31/96 7/31/95 7/31/96 7/31/95
Computed statutory
tax $(34,000) $(71,000) $(80,000) $(139,000)
Increase (reduction)
in income taxes
resulting from:
State income taxes,
net of federal income
tax benefit (3,000) (6,000) (6,000) (12,000)
Alternative minimum
tax provision -- -- -- --
Change in the beginning
of the period balance of
the valuation allowance
for deferred tax assets -- 182,000 -- 182,000
--------- -------- --------- --------
Income taxes $(37,000) $105,000 $(86,000) $ 31,000
========= ======== ========= ========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at July 31, 1996 and January 31, 1996
are presented below.
7/31/96 1/31/96
Net operating loss carryforward $1,756,000 $1,629,000
Plant and equipment, principally due
to difference in depreciation 15,000 62,000
Inventories, principally due to
additional costs inventoried for
tax purposes pursuant to the Tax
reform Act of 1986 17,000 14,000
Accrued vacation pay 12,000 11,000
Provision for loss on asset sale and
lawsuit settlement 59,000 59,000
Accounts receivable, principally due
to allowance for doubtful accounts 6,000 4,000
Alternative minimum tax carryforwards 5,000 5,000
---------- ----------
Total gross deferred tax assets 1,870,000 1,784,000
Less valuation allowance 1,784,000 1,784,000
---------- ----------
Net deferred tax assets $ 86,000 $ --
========== ==========
At July 31, 1996, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $4,933,000 which are available
to offset future federal taxable income, if any, for periods ending from
fiscal 2004 through fiscal 2010. In addition, the Company had alternative
minimum tax credit carryforwards of approximately $5,000 which are available
to reduce future federal regular income taxes, if any, over an indefinite
period.
Note F -
Loss per share is computed using the weighted average number of shares of
common stock outstanding of 2,685,694 and 2,663,042 for the three months
ended July 31, 1996 and 1995, respectively, and 2,685,694 and 2,663,042 for
the six months ended July 31, 1996 and 1995, respectively.
MRL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
On May 13, 1996, the Company entered into a $800,000 asset based lending
agreement with Concord Growth Corporation ("Concord") to replace an existing
$400,000 factoring agreement with Concord. The new loan agreement expires
on June 13, 1997 and is renewable for successive six month periods. The
loan is secured by all accounts receivable and inventory of the Company. As
of July 31, 1996, the principal amount of loans outstanding under the
agreement was $581,000. As of September 11, 1996, the Company had
additional borrowing capacity permitted under the loan agreement of
approximately $32,000, based on the collateral borrowing base as defined in
the agreement.
Accounts payable increased $228,000 from January 31, 1996 to July 31, 1996.
The increase was related to an inventory increase of $136,000 and an
increase in accounts receivable of $160,000 during the same period
reflecting increased sales levels in the quarter ending July 31, 1996.
The Company plans to continue to closely manage inventory and accounts
receivable to maintain sufficient working capital to operate at anticipated
sales levels. At the present time, days outstanding with respect to
accounts receivable have been reduced compared to levels experienced during
the first quarter of fiscal 1997.
Results of Operations
Sales increased 32% for the three month period and increased 8% for the six
month period ended July 31, 1996, when compared to the same periods in
fiscal 1996. Changes in sales by operating group, are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31, 1996 July 31, 1996
Net % Change Net % Change
Increase Over Increase Over
(Decrease) Prior Year (Decrease) Prior Year
<S> <C> <C> <C> <C>
Utility Products $ 432,000 63% $ 254,000 16%
Precision Metals (59,000) (13%) (65,000) (8%)
---------- ----------
Net Total $ 373,000 $ 189,000
========== ==========
</TABLE>
The increase in sales for the Utility Products Group in the first two
quarters of fiscal 1997 compared with the same periods in the prior year is
a result of increased demand by this group's customers. The Company
believes sales for the balance of fiscal 1997 should compare favorably to
the sales of $1,548,000 experienced during the last two quarters of fiscal
1996, based on the current backlog of orders and spending plans of its
customers.
The Precision Metals Group experienced an decrease in sales for the three
month and six month periods ended July 31, 1996 compared with the same
periods in the prior year, primarily due to reduced order levels from
several customers. The Company anticipates a growth in sales from the
Precision Metals Group for the balance of fiscal 1997 based on current
backlog levels, including orders from new customers.
Selling and administrative expenses for the three month and six month
periods ended July 31, 1996 were $42,000 and $133,000 less than the
comparable periods in the prior year, primarily as a result of the Company's
cost reduction and restructuring efforts.
Interest expense for the three month and six month periods ended July 31,
1996 was $62,000 and $108,000 respectively. These amounts reflect a $19,000
and $25,000 increase when compared to the same periods in fiscal 1996
respectively. The increases were due to higher interest rates on borrowings
in the fiscal 1997 periods.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
No. 109") issued in February 1992. For the three month period ended July
31, 1996, the Company recorded $37,000 of income tax benefit compared to
$105,000 of income tax expense in the same period in fiscal 1996. For the
six month period ended July 31, 1996, the Company recorded $86,000 in income
tax benefit compared to $33,000 income tax expense for the same period in
fiscal 1996. For the three month and six month periods ended July 31, 1995
discontinued operations contained a $2,000 benefit for income taxes. The
valuation allowance for deferred income taxes was increased by $182,000
during the three month period ended July 31, 1995. The fiscal 1995 income
tax expense amounts were recorded as reductions to the deferred income tax
asset and did not require a cash payment.
For the three months ended July 31, 1996, the Company experienced a $69,000
net loss compared to a net loss of $311,000 for the same period in the prior
year. For the six months ended July 31, 1996, the net loss was $157,000
compared to net loss of $439,000 for the same period in the prior year. The
fiscal 1996 periods were adversely affected by the adjustment to the
valuation allowance for deferred income taxes. The six month period ended
July 31, 1995 contained the gain from the real estate sale recorded in
discontinued operations.
In December 1994, a customer of the Company filed a breach of contract
lawsuit against the Company due to paint imperfections on units supplied by
the Company in fiscal 1994. The Company brought suit in Illinois against
its insurance carrier seeking to be defended and indemnified by the carrier
against this suit. In April, 1996, the Company requested dismissal without
prejudice of the petition against the carrier with the intentions of
refiling the suit in Missouri. Negotiations to reach a settlement
acceptable to all parties are continuing.
In July 1996, the Company was notified of a product liability claim related
to a product manufactured by a division of the Company in 1981. The
Division was sold in 1982. The Company has notified the appropriate
insurance carrier and believes it has coverage under its product liability
insurance policy for any potential liability. See Item 1 of Part II of this
Report for additional information.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
In July 1996, the Company was informed that a lawsuit had been
filed in Superior Court of New Jersey, Law Division - Middlesex County
(Andrisani vs. Foley Lift Company, et al) in which a product liability claim
had been made related to a product manufactured in 1981 by a division of the
Company. The division was sold in 1982. Under the agreement of sale the
Company agreed to be responsible for claims arising out of products
manufactured by the Company prior to the date of sale of the division. The
Company has notified the appropriate insurance carrier and believes that it
has coverage under its products liability insurance policy for any potential
liability.
Item 3. Defaults Upon Senior Securities
None
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index on Page 16.
(b) There were no Reports on Form 8-K filed during the quarter ended
July 31, 1996.
MRL, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MRL, Inc.
Date: September 13, 1996 By: /s/ Larry J. Stallings
Larry J. Stallings
President, Chief Executive
Officer, and Chief Financial
Officer
MRL, Inc.
EXHIBIT INDEX
Exhibit
Number Description
10(q) Asset Based Lending Loan Agreement dated
May 13, 1996 with Concord Growth Corporation,
filed herewith
10(r) First Amendment to Loan Agreement dated
May 20, 1996 with Concord Growth Corporation,
filed herewith
10(s) Secured Promissory Note dated May 13, 1996,
payable to Concord Growth Corporation, filed
herewith
10(t) Security Agreement dated May 13, 1996, in
favor of Concord Growth Corporation, filed
herewith
11 Computation of Weighted Average Number
of Shares, filed herewith
27 Financial Data Schedule
(filed in EDGAR version only)
Exhibit 10(q)
LOAN AGREEMENT
This Loan Agreement (the "Agreement") is entered into as of May 13, 1996,
between MRL, Inc., a corporation ("Borrower"), with its chief executive
office and principal place of business located at the address set forth
below Borrower's signature line, and Concord Growth Corporation ("Lender"),
concerning loans and other credit accommodations to be made by Lender to
Borrower.
Capitalized terms used in this Agreement shall have the meanings assigned to
them in Section 8.11, Definitions, or in such other Section of this
Agreement as is identified in Section 8.11.
This Agreement amends, restates, and supersedes that certain Factoring
Agreement dated November 14, 1995, by and among Concord Growth Corporation,
as Buyer and MRL, Inc., as Seller, as amended from time to time.
1. LOANS AND OTHER CREDIT ACCOMMODATIONS
1.1. Loans. Subject to the terms and conditions in this Agreement,
Lender shall make revolving loans to Borrower from time to time against
Eligible Accounts (each, an "Advance") up to a maximum aggregate amount
outstanding at any time not to exceed the lesser of (a) eighty percent (80%)
(the "Advance Rate") of the aggregate amount of all Eligible Accounts, or
(b) Eight Hundred Thousand Dollars ($800,000) (the "Maximum Credit").
Except as otherwise provided in this Agreement, Advances may be borrowed,
repaid and reborrowed.
In the event the aggregate outstanding Advances shall at any time
exceed the foregoing limitation, Borrower shall immediately repay the
Advances in the amount of such excess.
1.2. Eligible Accounts. "Eligible Accounts" are accounts which are
and remain acceptable to Lender as Collateral for lending purposes. General
criteria for Eligible Accounts are set forth below but may be revised from
time to time by Lender, in its sole judgment, upon notice to Borrower;
provided, that Lender may, in its sole discretion, make exceptions to any of
the general criteria described below on a case by case basis without
implying changes to such criteria:
(a) such account was created in the ordinary course of
Borrower's business;
(b) such account is represented by an invoice in form
acceptable to Lender,
(c) the invoice that is delivered by Borrower to the account
debtor with respect to such account instructs the account debtor to make
payment directly to the Lockbox;
(d) Borrower has delivered to Lender such original documents as
Lender may have requested pursuant to Section 3.2 in connection with such
account and, if requested by Lender, Lender shall have received from the
account debtor a verification of such account, satisfactory to Lender;
(e) the amount of such account represented by the invoice is
absolutely owing to Borrower [except for any discounts for prompt payment
provided by Borrower to account debtors in the normal course of Borrower's
business which are approved in advance by Lender];
(f) the goods giving rise to such account were not at the time
of the sale subject to any liens except those permitted in the Security
Agreement;
(g) such account is not evidenced by chattel paper or an
instrument of any kind;
(h) such account is due not more than thirty (30) days from the
date of the invoice;
(i) such account arises from a bona fide completed sale of
goods or performance of services, which goods and services have been
delivered to, or performed for, and in either case accepted by, the account
debtor;
(j) such account does not arise from the delivery of any
toolings, samples, trial merchandise, promotional or demonstration material;
(k) such account does not arise from a sale to an individual
acting with respect to his or her own personal, family or household
consumption;
(l) such account does not arise from progress billings (i.e.,
billings representing a percentage of the amount due upon completion or
achievement of a contractual milestone but where failure to complete or
deliver the remaining work or goods may constitute an off set, defense or
counterclaim to payment);
(m) such account does not arise from a retention (i.e., a
percentage of the amount payable to Borrower pursuant to the contract which
is withheld by the account debtor until a time after completion) nor is such
account subject to holdbacks for retention;
(n) such account does not arise from a bill and hold sale
(i.e., a sale in which the account debtor has been invoiced without either
delivery or acceptance of the goods or services or transfer of title of the
goods, even when the goods are held and the invoices are issued at the
account debtor's request);
(o) such account does not arise from a sale on consignment,
"sale or return" or "sale on approval" (i.e., sales in which title purports
not to pass or has not passed to the account debtor until payment, resale,
acceptance or otherwise);
(p) such account does not arise from a guaranteed sale (i.e., a
sale in which the account debtor reserves the right to return any unsold
goods even if title purports to pass to the account debtor);
(q) such account does not arise on terms under which payment
may be conditional or contingent in any way;
(r) there are no contra relationships (i.e., a situation in
which the Borrower owes the account debtor money), setoffs, deductions,
allowances, counterclaims or disputes existing with respect to such account
and there are no other facts existing or threatened which would impair or
delay the collectibility of all or any portion thereof;
(s) neither the account debtor nor any officer or employee of
the account debtor is an officer, employee or agent of or is affiliated with
Borrower, directly or indirectly;
(t) the account debtor is neither the United States nor any
State, subdivision, municipality, department or agency of the United States,
unless there has been compliance with the Federal Assignment of Claims Act
or any similar State or local law, if applicable;
(u) the account debtor's chief executive office and principal
place of business are located in the United States;
(v) the account debtor is not the subject of any bankruptcy or
insolvency proceeding of any kind;
(w) such account is owed by an account debtor deemed
creditworthy at all times by Lender;
(x) there are no facts existing or threatened which might result
in any adverse change in the account debtor's financial condition;
(y) such account has not remained unpaid for more than ninety
(90) days after the original invoice date;
(z) such account is not owed by an account debtor who is or
whose affiliates are past due upon other accounts owed to Borrower
comprising more than twenty-five percent (25%) of the accounts of such
account debtor or Rv affiliates owed to Borrower,
(aa) such account is owed by an account debtor whose total
indebtedness to Borrower does not exceed the amount of any customer credit
limit as established, and changed, from time to time by Lender on notice to
Borrower (accounts excluded from Eligible Accounts solely by reason of this
subsection (aa) shall nevertheless be considered Eligible Accounts in an
amount not to exceed the customer credit limits);
(bb) the aggregate amount of all accounts owed by the account
debtor and/or such account debtor's affiliates does not exceed twenty
percent (2,Q.1 . ) of the aggregate amount of all otherwise Eligible
Accounts (accounts excluded from Eligible Accounts solely by reason of this
subsection (bb) shall nevertheless be considered Eligible Accounts in an
amount not to exceed twenty percent (2.Q-I) of the aggregate face amount of
all otherwise Eligible Accounts).
1.3. Accommodations. Lender may, in its sole discretion, provide
additional loans or financial accommodations (the "Accommodations") to
Borrower. Such Accommodations, if made, shall be evidenced by, and
repayable in accordance with, one or more secured promissory notes in form
and substance acceptable to Lender (each, an "Accommodation Note"), and
shall constitute Obligations under this Agreement.
1.4. Inventory Loans. In the event Lender has agreed or hereafter
agrees to provide loans to Borrower against any inventory of Borrower, such
loans shall be upon the terms and conditions set forth in an Inventory Rider
signed by Borrower and Lender (the "Inventory Rider") and shall constitute
Obligations under this Agreement. Any such inventory loans shall not, when
added to the outstanding Advances exceed the Maximum Credit.
1.5. Reserves. Lender shall have the right to establish reserves
against the amount of the Advances available under Section 1.1 to the extent
necessary, in Lender's credit judgment, to ensure payment of the Obligations
(the "Reserves"). Lender may, at its option, implement Reserves by either
(i) designating as ineligible a sufficient amount of accounts that would
otherwise be Eligible Accounts so as to reduce Borrower's availability by
the amount of the intended Reserve, (ii) changing the Advance Rate set forth
in Section 1.1, [or (iii) establishing a cash collateral account in Lender's
name to hold collections as Lender's cash collateral].
2. INTEREST AND FEES
2.1. Facility Fee. Borrower shall pay Lender on the date hereof, and
on each renewal date, a facility fee (the "Facility Fee") in the amount of
one percent (1%) of the Maximum Credit, which fee is fully earned and
non-refundable as of the date each such payment is due.
2.2. Interest. Borrower shall pay interest to Lender on the
outstanding Advances under this Agreement at a floating rate per annum equal
to the Prime Rate plus eight percent (Prime + 8 %) (the "Interest Rate"),
which interest shall be payable and calculated as hereinafter set forth.
Borrower shall pay such interest to Lender on the first day of each month in
an amount equal to (a) the quotient obtained by dividing the sum of the
daily unpaid Advances outstanding on each day during the immediately
preceding month by the actual number of days in such month (the "Average
Daily Balance"), multiplied by (b) the quotient obtained by dividing the
Interest Rate by 360, multiplied by (c) the actual number of days in the
immediately preceding month. The Interest Rate shall increase or decrease
monthly, on the first day of each month, by the amount of any increase or
decrease in the Prime Rate. For purposes of this Agreement, the "Prime
Rate" is the prime rate of interest publicly listed by the Western Edition
of the Wall Street Journal on the first day of each month or, if the first
day of such month is not a business day, on the last business day of the
immediately preceding month. In the event the prime commercial interest
rate listed by the Wall Street Journal is a range, the highest rate in the
range shall be the "Prime Rate".
2.3. Default Rate. Upon and after either (a) notification to Borrower
of the occurrence of an Event of Default, or (b) termination of this
Agreement, until the date that all Obligations are indefeasibly paid and
satisfied in full, interest shall accrue on all Obligations at a rate equal
to the sum of the Interest Rate otherwise payable to Lender plus twelve
percent (12%).
2.4. Administrative Fee. Borrower shall pay Lender on the first day
of each month an administrative fee (the "Administrative Fee") in an amount
equal to (a) the Average Daily Balance for the immediately preceding month,
multiplied by (b) three quarters of one percent (0.75%).
2.5. Monthly Minimum Fee. Lender would not have entered into this
Agreement and agreed to provide Borrower with the financing hereunder unless
Borrower guaranteed Lender that the sum of the interest as set forth in
Section 2.2, in any Inventory Rider and in any Accommodation Note, and the
administrative fees set forth in Section 2.4, in any Inventory Rider and in
any Accommodation Note, paid to Lender in each month would be at least seven
thousand five hundred Dollars ($7,500)(the "Monthly Minimum Fee"). In the
event the aggregate amount of such interest and administrative fees payable
on the first day of any month is less than the Monthly Minimum Fee, then
Borrower shall pay to Lender on the first day of such month the Monthly
Minimum Fee in satisfaction of the interest and administrative fees payable
during such month.
2.6. Early Termination Fee. In the event either (a) Borrower
terminates this Agreement prior to the end of any Term, (b) Lender
terminates this Agreement with respect to further Advances, inventory loans
and other Accommodations upon and after the occurrence of any Event of
Default, or (c) this Agreement automatically terminates upon the occurrence
of an Event of Default under Sections 6.1 (i) or 0) as set forth in Section
6.2, in view of the impracticality and extreme difficulty of ascertaining
actual damages and by mutual agreement of the parties as to a reasonable
calculation of Lender's lost profits, in addition to all other Obligations,
Borrower shall pay to Lender, upon the effective date of any such
termination, an early termination fee equal to the Minimum Monthly Fee
multiplied by the number of months remaining in the then-current Term (the
"Early Termination Fee"). Any partial month remaining in such Term shall
constitute a full month for the purpose of calculating the Early Termination
Fee.
2.7. Audit Fees. Lender or its designee may conduct quarterly
examinations of the Collateral and Borrower's operations, unless an Event of
Default has occurred and is continuing, in which event the number of audits
conducted will be in Lender's reasonable discretion. Borrower shall pay
Lender audit fees not to exceed Five Hundred Seventy Five Dollars ($575) per
day plus expenses per audit. Audit fees shall be payable upon demand by
Lender.
2.8. Maximum Lawful Rate. In no event shall charges constituting
interest under this Agreement exceed the highest rate permitted under
applicable law. In the event that a court of competent jurisdiction makes a
final determination that Lender has received interest under this Agreement
in excess of the maximum lawful rate, then such excess shall be deemed a
payment of principal and applied against the principal under this Agreement,
and the interest payable under this Agreement shall be deemed amended to the
amount payable under the maximum lawful rate.
2.9. Calculations Based on 360 Day Year. Interest and any other
amounts payable by Borrower to Lender based on a per annum rate shall be
calculated on the basis of actual number of days elapsed over a 360-day
year.
2.10. Charges to Loan Account. At Lender's option, all principal,
interest, fees, costs, expenses and other charges provided for in this
Agreement, or in any other Loan Documents may be charged to any loan account
of Borrower maintained by Lender either by (a) deducting such amounts from
any Advance requested by Borrower and made by Lender, or (b) treating such
amounts as additional Advances.
3. ADMINISTRATION AND COLLECTION
3.1. Delivery of Invoices. Borrower shall deliver a copy of each
invoice to Lender as such invoice is generated and delivered to an account
debtor or at least once per week in a batch. Borrower's granting of
credits, discounts, allowances, deductions, return authorizations or the
like with respect to any account will be promptly reported to Lender in
writing.
3.2. Delivery of Evidence of Shipment and Other Account Information.
Borrower shall deliver to Lender proof of rendition of services, shipment,
and delivery of goods at the same time Borrower delivers the invoices to
Lender with respect to such services or goods pursuant to Section 3.1.
Borrower shall deliver to Lender such other agreements and documents
relating to the accounts or other Collateral, including assignments to
Lender, at such times as Lender may request and in the manner specified by
Lender.
3.3. Lockbox: Collection of Collateral. Borrower shall instruct each
account debtor to make all payments owed to Borrower in Borrower's name or
properly registered trade name as set forth in the Security Agreement
directly to the following lockbox: MRL, Inc., Dept. 890089, Dallas, TX
75389-0089 (the "Lockbox"). Borrower shall include on each invoice
delivered to an account debtor a notice of assignment to Lender to make all
payments directly to the Lockbox. Such instructions shall not be changed
without Lender's prior written consent. Payments on all Borrower's accounts
and all other proceeds of Collateral shall be made directly to the Lockbox,
whether or not Lender is providing financing for such account. All payments
received in the Lockbox by 10:00 a.m. on any business day shall be deposited
in an account designated by and acceptable to Lender on the same day and
credited to Borrower's loan account as set forth in Section 3.5. At
Lender's request, all invoices and statements sent to any account debtor,
other obligor or bailee, shall state that the accounts and such other
Collateral have been assigned to Lender and are payable directly and only to
Lender. Upon demand by Lender, Borrower shall reimburse Lender for the
costs incurred by Lender in establishing and maintaining the Lockbox.
3.4. Payment in Kind; Delivery to Lender. Notwithstanding Borrower's
instructions to account debtors and other persons, in the event Borrower
receives any payments on accounts or other proceeds of Collateral, Borrower
will hold such payments in trust and safekeeping for Lender and immediately
turn over to Lender the identical check or other form of payment received by
Borrower with any necessary endorsement or assignment.
3.5. Crediting of Payments. All Obligations shall be payable at
Lender's office set forth below, at Lender's bank as identified to Borrower,
or at such other place as Lender may expressly designate from time to time.
For purposes of determining availability under this Agreement, payments on
financed accounts and other payments with respect to the Collateral and
Obligations will be credited to the loan account of Borrower upon the date
of Lender's receipt of advice from Lender's bank that such payments have
been credited to Lender's account or in the case of payments received
directly in kind by Lender, upon the date of Lender's deposit thereof at
Lender's bank, subject in either case to final payment and collection.
Solely for the purpose of calculating interest and fees under this
Agreement, including interest and fees under any Inventory Rider and any
Accommodation Note, payments on financed accounts and other payments with
respect to Collateral and Obligations shall be deemed received by Lender
three (3) business days after the date of Lender's receipt of advice from
Lender's bank that such payments have been credited to Lender's account or
in the case of payments received directly in kind by Lender, three (3)
business days after the date of Lender's deposit thereof at Lender's bank,
subject in either case to final payment and collection.
3.6. Intentionally omitted.
3.7. Account Verification. Lender may at any time, but without any
duty to do so, whether or not an Event of Default has occurred, and without
notice to or assent of Borrower, in Lender's own name, pseudonymously, or by
Rv designee: (a) request any account debtor, other obligor or bailed by
telephone or in writing for verification of accounts and other Collateral;
(b) notify any account debtor that the accounts and other Collateral that
includes a monetary obligation have been assigned to Lender by Borrower and
that payment thereof is to be made directly to Lender; and (c) demand,
collect or enforce payment of any accounts or such other Collateral. Upon
Lender's request, Borrower shall assist Lender in connection with any
request, notification or demand hereunder.
3.8. Loan Account. Lender shall render to Borrower monthly a loan
account statement. Each statement shall be considered correct and binding
upon Borrower as an account stated, except to the extent that Lender
receives, within thirty (30) days after the mailing of such statement,
written notice from Borrower of any specific exceptions by Borrower to that
statement.
4. INTENTIONALLY OMITTED.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
Borrower hereby represents, warrants and covenants to Lender the
following, the truth and accuracy of which, and compliance with which, shall
be continuing conditions to making any Advances, inventory and other loans
and Accommodations by Lender to Borrower:
5.1. Account Representations and Warranties. Each account submitted
to Lender meets each of the eligibility requirements in Section 1.2, except
as either (a) disclosed in writing to Lender at the time Borrower submits
such account to Lender, or (b) is evident on the invoice representing such
account. Each account, including Eligible and non-Eligible Accounts, (i) is
a bona fide account, (ii) represents indebtedness owed to Borrower, and
(iii) is in all respects what it purports to be. All statements made and
all unpaid balances and other information appearing in the invoices,
agreements, proofs of rendition of services and delivery of goods and other
documentation relating to the accounts, and all confirmatory assignments,
schedules, statements of account and books and records with respect thereto,
are true and correct and in all respects what they purport to be.
5.2. Use of Proceeds: Single Loan. Borrower shall use the proceeds
of Advances and other loans or Accommodations made by Lender to Borrower for
legal and proper business purposes, and not for any personal, family, or
household purposes. All Advances and other loans and Accommodations shall
constitute one general Obligation and shall be secured by Lender's security
interest in all of the Collateral.
5.3. Compliance with Laws: Payment of Taxes. Borrower is and at all
times will continue to be in compliance with the requirements of all
material laws, rules, regulations and orders of any governmental authority
relating to its business, including those relating to taxes (including
payment and withholding of payroll taxes, employer and employee
contributions and similar items), securities, employee retirement and
welfare benefits, employee health and safety, labor and environmental
matters, and all material agreements or other instruments binding on
Borrower or its property. Borrower shall pay all taxes, assessments and
governmental charges against Borrower or any Collateral prior to the date on
which penalties are imposed or liens attach with respect thereto, unless the
same are being contested in good faith and, at Lender's option, Reserves are
established for the amount contested and penalties which may accrue thereon.
5.4. Delivery of Agings and Financial Information. Borrower shall
keep and maintain its books and records in accordance with generally
accepted accounting principles, consistently applied. Borrower shall, at
its sole expense, deliver to Lender (a) on or before the thirtieth (30th)
day of each month, true and complete monthly agings of its accounts
receivable and accounts and notes payable, and monthly inventory reports and
bank statements, and (b) on or before the thirtieth (30th) day of each
month, true and correct month, internally prepared interim financial
statements. Annually, Borrower shall, at its sole expense, deliver to
Lender true and correct (a) financial statements of Borrower prepared
according to generally accepted accounting principles, as soon as available,
but in no event later than ninety (90) days after the end of Borrower's
fiscal year, and (b) tax returns within ten (10) days after such tax returns
are filed with the appropriate taxing authorities. Lender may require that
annual financial statements be prepared and certified by an independent
certified public accountant acceptable to Lender. Borrower shall also cause
each person or entity that is or becomes a guarantor to deliver to Lender
year end financial statements of such guarantor within forty five (45) days
after the end of each such period. All of the information required above
shall be in such form, and together with such other information with respect
to the business of Borrower or any guarantor, as Lender may request.
5.5. No Sale of Collateral, Merger or Acquisition of Interest.
Borrower shall not, directly or indirectly, without the prior written
consent of Lender: (a) sell, lease, transfer, assign, or otherwise dispose
of any part of the Collateral or any material portion of its other assets
other than sales of inventory to buyers in the ordinary course of business;
(b) consolidate with or merge with or into any other entity; or (c) form or
acquire any interest in any corporation or other entity.
5.6. No Loans, Dividends, Transactions With Affiliates. Borrower
shall not, directly or indirectly, without the prior written consent of
Lender (a) lend money or property to, guarantee, pay or assume indebtedness
of, or invest in (by capital contribution or otherwise), any person,
corporation or other entity (including any officer, director, employee,
shareholder or affiliate of Borrower); lb) declare or pay any dividends on,
redeem, or otherwise make any distributions on account of, any shares of any
class of stock or other equity interest of Borrower now or hereafter
outstanding; or (c) enter into any sale, lease or other transaction with any
officer, director, employee, shareholder or affiliate of Borrower on terms
that are less favorable to Borrower than those which might be obtained at
the time from persons who are not an officer, director, employee,
shareholder or affiliate of Borrower.
5.7. Replacement of Off !cars and General Partners. If Borrower is a
corporation and the chief executive officer, chief operating officer or
chief financial officer existing on the date of this Agreement shall resign
or otherwise cease to be actively employed by Borrower in such capacity,
Borrower shall appoint a replacement or substitution reasonably satisfactory
to Lender within fifteen (15) days after the effective date of such
resignation or the date such person ceases to be actively employed by
Borrower. If Borrower is a partnership and any general partner withdraws or
ceases to perform its duties in such capacity, such general partner shall be
replaced with a new general partner reasonably satisfactory to lender within
fifteen (1 5) days after the effective date of such withdrawal or the date
such general partner ceases to perform its duties.
5.8. Financial Covenants. Borrower shall:
(a) at all times maintain working capital of not less than NA Dollars
($NA), as determined in accordance with generally accepted accounting
principles in effect on the date hereof, consistently applied;
(b) at all times maintain net worth of not less than NA Dollars
($NA), as determined in accordance with generally accepted accounting
principles in effect on the date hereof, consistently applied; and
(c) not, directly or indirectly, expend or commit to expend, for
fixed or capital assets (including capital lease obligations) an amount in
excess of NA Dollars L$N& in any fiscal year of Borrower.
(d) maintain positive cash flow (defined as After Tax Profits plus
Depreciation plus Amortization) on a quarterly basis, beginning with
Borrower's third quarter-ending October 31, 1996, as determined in
accordance with generally accepted accounting principles in effect on the
date hereof, consistently applied.
(e) maintain profitability on a quarterly basis, as determined in
accordance with generally accepted accounting principles in effect on the
date hereof, consistently applied.
5.9. Litigation. There are no actions, suits, proceedings,
investigations or claims pending, or to the knowledge of Borrower
threatened, against Borrower or any of Borrower's assets, except as
disclosed to Lender in writing before the date of this Agreement. Borrower
shall promptly notify Lender in writing of any loss, damage, suit,
proceeding, investigation, or claim relating to a material portion of the
Collateral or that may result in a material adverse change in Borrower's
business, assets, liabilities or condition.
5.10. No Payments to Subordinated Creditors. Borrower shall not make
any payments to any of the Subordinated Creditors on account of principal,
interest or any other indebtedness, other than permitted payments as
consented to by Lender in writing, unless and until all of the Obligations
are indefeasibly paid and satisfied in full.
5.11. Survival and Continuation of Representations. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous and shall remain accurate, complete and not
misleading during the Term of this Agreement, and all such representations
and warranties shall survive the execution and delivery by Borrower and
Lender of this Agreement and the other Loan Documents.
5.12. Organization and Qualification. Borrower is, and shall continue
to be, a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of Rv incorporation. Borrower is
qualified and authorized to do business and is, and shall continue to be, in
good standing as a foreign corporation in each State where is conducts
business and in which the failure to so qualify would have a material
adverse effect on the financial condition, business or properties of
Borrower.
5.13. Corporate Power and Authority. Borrower is duly authorized and
empowered to enter into, execute, deliver and perform this Agreement and
each of the other Loan Documents to which it is a party. The execution,
delivery and performance of this Agreement and each of the other Loan
Documents have been duty authorized by all necessary corporate action and do
not and will not contravene Borrower's charter, articles or certificate of
incorporation or by-laws or result in a breach of or constitute a default
under any indenture, loan agreement or any other agreement, lease or
instrument to which. Borrower is a party or by which it or its properties
may be bound.
5.14. Legally Enforceable Agreement. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of Borrower enforceable against it in
accordance with its terms.
6. EVENTS OF DEFAULT AND REMEDIES
6.1. Events of Default. The occurrence of any one or more of the
following shall constitute an "Event of Default" under this Agreement:
(a) Borrower fails to pay as and when due any of the Obligations;
(b) Borrower fails to perform or breaches any of the material
covenants or terms of this Agreement, the Security Agreement or any other
Loan Document (other than a covenant or term which is dealt with
specifically elsewhere in this Section 6.1);
(c) Any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the Security Agreement or any other
Loan Document or otherwise, or to any affiliate of Lender, shall be
inaccurate or misleading in any material respect;
(d) Any guarantor revokes, terminates or fails to perform any of the
terms of any guaranty, endorsement or other agreement of such party in favor
of Lender or any affiliate of Lender;
(e) Notice of a federal tax lien is filed against Borrower or
Borrower fails to pay any payroll or withholding taxes;
(f) Any judgment, writ of attachment or similar process involving an
amount in excess of ten;
(g) Borrower or any guarantor (if Borrower or guarantor is a
partnership or corporation) or any general partner of Borrower or any
guarantor (if such general partner is a corporation), is dissolved, or
Borrower or any guarantor (if Borrower or guarantor is a corporation) fails
to maintain Rv corporate existence in good standing, or the usual business
of Borrower or any guarantor ceases or is suspended;
(h) Borrower (if Borrower is a natural person), any guarantor (if
such guarantor is a natural person) or any general partner of Borrower or
any guarantor (if Borrower or such guarantor is a partnership and the
general partner is a natural person), dies and, with respect to the death of
a guarantor or a general partner such guarantor or general partner has not
been replaced within ten (10) days of the death of such guarantor or general
partner by another person as creditworthy in Lender's reasonable judgment as
the original guarantor or general partner,
(i) Borrower or any guarantor becomes insolvent, makes an assignment
for the benefit of creditors, makes or sends notice of a bulk transfer or
calls a general meeting of Rv creditors or principal creditors;
(j) Any petition or application for any relief under the bankruptcy
laws of the United States now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed by or against Borrower or any
guarantor;
(k) The indictment of Borrower or any guarantor under any criminal
statute, or commencement of criminal or civil proceedings against Borrower
or any guarantor, pursuant to which statute or proceedings the penalties or
remedies sought or available include forfeiture of any of the property of
Borrower or such guarantor;
(l) Any default or event of default exists under any agreement,
document or instrument at any time executed and/or delivered to Lender or
any of Rv affiliates, by an affiliate of Borrower;
(m) If Borrower is a corporation, any change in the controlling
ownership of Borrower occurs;
(n) Borrower makes any payment to a Subordinated Creditor in
violation of the terms of any agreement entered into between such
Subordinated Creditor and Lender, a copy of which has been delivered to
Borrower.
6.2. Remedies. Upon the occurrence of an Event of Default and at any
time thereafter, Lender may, without notice, exercise any or all of the
rights and remedies provided in the Security Agreement, the other Loan
Documents or under applicable law, including the immediate termination of
any further Advances, inventory and other loans and Accommodations, the
declaration of all Obligations to be immediately due and payable, and the
enforcement of Lender's security interest in all or any portion of the
Collateral; provided, that immediately upon the occurrence of an Event of
Default of a type described in Section 6.1 (i) or 0), this Agreement shall
automatically terminate without notice or demand of any kind and the
Obligations shall be immediately due and payable.
7. GOVERNING LAW; WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; OTHER
WAIVERS.
7.1. Incorporation of Security Agreement Provisions Relating to
Governing Law, Waiver of Jury Trial, Consent to Jurisdiction No Implied
Waiver and Release. Sections 5.1, 5.2, 5.3, 5.4 and 5.5 of the Security
Agreement relating to governing law, waiver of jury trial, consent to
jurisdiction, no implied waiver and release apply to this Agreement and to
the Security Agreement and other Loan Documents, and are hereby incorporated
into this Agreement by reference.
7.2. Waiver of Setoff. Borrower hereby irrevocably waives any tight
to offset against amounts owed by Borrower to Lender under the Loan
Documents any claims or counterclaims that may be asserted by Borrower.
8. OTHER FEES AND EXPENSES; TERM OF AGREEMENT; MISCELLANEOUS
8.1. Other Fees and Expenses. Borrower shall pay Lender immediately
upon demand, those fees and expenses described in Section 3.6 of the
Security Agreement.
8.2. Effectiveness; Term. This Agreement shall only become effective
upon execution and delivery by Borrower and Lender and, unless earlier
terminated as provided in this Agreement, shall continue in full force and
effect for an initial term of 13 months from the date of this Agreement as
set forth in the introductory paragraph hereof and shall be deemed
automatically renewed for successive 6-month periods. Unless earlier
terminated as provided in this Agreement, all Obligations shall be due and
payable in full at the expiration of the last renewal Term. This Agreement
may be terminated prior to the end of the initial or any renewal term (each,
a "Term") as follows:
(a) Borrower or Lender may terminate this Agreement as of the end of
any Term by either party giving the other written notice at least thirty
(30) days prior to the end of such Term. If either Borrower or Lender so
notifies the other, all Obligations shall be due and payable in full at the
end of such Term;
(b) In addition to being able to terminate this Agreement at the end
of each Term, Borrower may terminate this Agreement at any other time after
giving Lender at least thirty (30) days prior written notice and paying
Lender an Early Termination Fee as set forth in Section 2.6. Any such
termination shall be effective upon payment to Lender in full of all
Obligations, including the Early Termination Fee; and
(c) Lender shall also have the light to terminate this Agreement as
set forth in Section 6.2 upon and after the occurrence of an Event of
Default or, as set forth in Section 6.2, this Agreement shall automatically
terminate following the occurrence of an Event of Default under Section
6.1(i) or (j). Upon any such termination following an Event of Default, all
Obligations, including the Early Termination Fee, shall be due and payable
in full.
8.3. Deposit to Allow for Open Accommodations and Remittance Items.
Upon termination of this Agreement by Borrower, as permitted herein, in
addition to payment of all Obligations, Borrower shall deposit such amount
of cash collateral as Lender determines is necessary to secure Lender from
loss or expense, including reasonable attorneys' fees, in connection with
any open Accommodations or remittance items or other payments provisionally
credited to the Obligations and/or to which Lender has not yet received
final and indefeasible payment.
8.4. Continuing Obligations Upon Termination. No termination of this
Agreement, including any termination set forth in Section 8.2 or 6.2, shall
relieve or discharge Borrower of its obligations, duties and covenants
hereunder until such time as all Obligations to Lender have been
indefeasibly paid and satisfied in full. Without limiting the generality of
the foregoing, all security interests and liens of Lender in and upon all
then-existing and thereafter- arising or acquired Collateral, and all
warranties, representations, covenants, agreements and waivers of Borrower,
shall continue in full force and effect until released and terminated by
Lender in writing after full and final payment of all Obligations.
8.5. Notices. Except as otherwise provided, all notices, requests and
demands hereunder shall be (a) made to Lender at its address set forth below
its signature line and to Borrower at Rv chief executive office set forth
below Rv signature line, or to such other address as either party may
designate by written notice to the other in accordance with this provision,
and (b) deemed to have been given or made: if by hand, immediately upon
delivery; if by telex, telegram or telecopy, immediately upon receipt; if by
overnight delivery service, one business day after dispatch, and if by first
class or certified mail, three (3) calendar days after mailing.
8.6. Participation; Securitization. Lender may assign and sell
participations in Rv rights and obligations under this Agreement and the
other Loan Documents. Lender may include the loans made pursuant to this
Agreement and the other Loan Documents in a pool of loans in which Lender
sells undivided interests as part of a securitization program.
(a) Assignment of Loans. Borrower understands that Lender may from
time to time transfer and assign Loans and its rights under this Agreement
to one or more assignees. Borrower hereby consents to these transfers and
assignments by Lender to one or more assignees. Borrower hereby consents
that any such assignee may exercise the rights of Lender hereunder.
Borrower further hereby consents and acknowledges that any and all defenses,
claims or counterclaims that A may have against Lender shall be limited to,
and may only be brought against, Lender and shall not extend to any
assignee, including but not limited to funding obligations.
(b) Borrower and Lender intend that any and all direct or indirect
assignees of the Lender of the type set forth above shall be third party
beneficiaries of this Agreement.
8.7 Severability. If any provision of this Agreement is held to be
invalid or unenforceable, such provision shall not affect the Agreement as a
whole, but this Agreement shall be construed as though R did not contain the
particular provision held to be invalid or unenforceable.
8.8. Integration. This Agreement, the Security Agreement and the
other Loan Documents contain the entire agreement of the parties as to the
subject matter hereof. All prior commitments, proposals and negotiations
concerning the subject matter hereof are merged herein. Neither this
Agreement, the Security Agreement nor any of the other Loan Documents shall
be amended, modified or discharged orally or by course of conduct, but only
by a written agreement signed by an authorized officer of Lender and
Borrower. This Agreement shall be binding upon and inure to the benefit of
each of the parties hereto and their respective successors and assigns,
except that Borrower shall not assign this Agreement or any of Rv rights
hereunder without the prior written consent of Lender.
8.9. Headings. All title and section headings used in this Agreement
are for convenience only and shall not be used in interpreting this
Agreement.
8.10. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall be an original but all of which
shall constitute one and the same agreement.
8.11. Definitions. All terms used herein which are defined in the
Uniform Commercial Code as in effect in California shall have the meanings
given therein unless otherwise defined in this Agreement. All references to
the singular or plural herein shall include the singular and plural, unless
the context otherwise requires. Unless otherwise specified any reference to
a "Section" shall refer to the relevant Section of this Agreement. The term
"including" is not limiting or exclusive. Capitalized terms used in this
Agreement shall have the following respective meanings when used herein:
"Accommodations" shall have the meaning set forth in Section 1.3.
"Accommodation Note" shall have the meaning set forth in Section 1.3.
"Administrative Fee" shall have the meaning set forth in Section 2.4.
"Advance" shall have the meaning set forth in Section 1.1.
"Advance Rate" shall have the meaning set forth in Section 1.1.
"Agreement" shall mean this Loan Agreement, as the same may be
amended, supplemented, extended or restated from time to time.
"Average Daily Balance" shall have the meaning set forth in Section
2.2.
"Borrower" shall mean the Borrower as identified in the introductory
paragraph of this Agreement, and Rv successors and assigns.
"Collateral" shall have the meaning set forth in the Security
Agreement.
"Early Termination Fee" shall have the meaning set forth in Section
2.6.
"Eligible Accounts" shall have the meaning set forth in Section 1.2.
"Event of Default" shall have the meaning set forth in Section 6.1.
"Facility Fee" shall have the meaning set forth in Section 2.1.
"Interest Rate" shall have the meaning set forth in Section 2.2.
"Inventory Rider" shall have the meaning set forth in Section 1.4.
"Lender" shall mean the Lender as identified in the introductory
paragraph of this Agreement, and its successors and assigns.
"Loan Documents" shall mean this Agreement, any Inventory Rider, any
Accommodation Notes, the Security Agreement, and all instruments,
documents, agreements and other writings signed by Borrower or any
Guarantor and delivered to Lender in connection with this Agreement or
otherwise, whether now existing or hereafter arising, as the same may
be amended, supplemented, extended or restated from time to time.
"Lockbox" shall have the meaning set forth in Section 3.3.
"Maximum Credit" shall have the meaning set forth in Section 1.1.
"Monthly Minimum Fee" shall have the meaning set forth in Section 2.5.
"Obligations" shall mean any and all loans, advances, fees, charges,
indebtedness and obligations of every kind owing by Borrower to
Lender, and/or Lender's affiliates, or incurred by Lender on behalf of
Borrower, however evidenced, whether arising under this Agreement, the
Security Agreement, any other Loan Documents or otherwise, and whether
now existing or hereafter arising, including all Advances, inventory
loans, Accommodations, Finance Fees, interest, Administrative Fees,
Early Termination Fees. Facility Fees. attorneys' fees and expenses.
"Reserves" shall have the meaning set forth in Section 1.5.
"Security Agreement" shall mean the Security Agreement executed by
Borrower and Lender dated May 13, 1996, pursuant to which Borrower
grants to Lender a security interest in and lien upon Rv personal
property, as the same may be amended, supplemented, extended or
restated from time to time.
"Subordinated Creditors" shall mean NA.
"Term" shall have the meaning set forth in Section 8.2.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first stated above.
"Borrower"
MRL, Inc.
By: /s/ Larry J. Stallings
Title: President and CEO
Address of Borrower's Chief Executive Office and Principal Place of
Business
287 N. Lindbergh, Suite 206
St. Louis, MO 63141
Telephone: 314 946-6900
Facsimile: 314 946-2860
"Lender"
CONCORD GROWTH CORPORATION
By: /s/ Julie M. Saltonstall
Title: Vice President
Address:
1170 East Meadow Drive
Palo Alto, CA 94303-4234
Telephone: 415-493-0921
Facsimile: 415-857-0900
Exhibit 10(r)
AMENDMENT TO
LOAN AGREEMENT
Amendment #1
Dated May 20, 1996
The LOAN AGREEMENT dated ________________ (the "Agreement"), between Concord
Growth Corporation, a California Corporation, and __________________, a
corporation is hereby amended in the specific section(s) as follows:
Section 5.8
Financial Covenants: Notwithstanding the terms set forth herein, the
following subsections have been amended as follows:
(d) Borrower shall remain positive cash flow (defined as Earnings
before Interest, Taxes, Depreciation, Amortization) on a quarterly basis,
beginning with Borrower's third quarter-ending October 31, 1996, as
determined in accordance with generally accepted accounting principles in
effect on the date hereof, consistently applied.
(e) This subsection has been deleted in its entirety.
The Amendment affects only the above listed Section(s) of the Agreement and
all other provisions of the Agreement shall remain unchanged and in force as
written or thereafter amended in writing.
This Amendment shall become effective when it is accepted and executed by an
authorized officer of Lender.
AGREED:
BORROWER:
BY: /s/ Larry J. Stallings
Larry J. Stallings, President and CEO
(PRINT NAME AND TITLE)
DATE: May 21, 1996
ACCEPTED:
LENDER:
CONCORD GROWTH CORPORATION
BY: /s/ Julie M. Saltonstall
Julie M. Saltonstall, Vice President
(PRINT NAME AND TITLE)
DATE: May 22, 1996
Exhibit 10(s)
SECURED PROMISSORY NOTE
$800,000.00 Date: May 13, 1996
FOR VALUE RECEIVED, MRL, Inc. (the "Borrower") hereby absolutely and
unconditionally promises to pay to Concord Growth Corporation (the
"Lender"), or order, on demand but in no event later than the date specified
in the Loan Agreement (as defined below) as the date on which all amounts
owing by the Borrower to the Lender are due and payable, in immediately
available funds, the principal amount of Eight Hundred Thousand Dollars
($800,000) (the Maximum Credit) or, if less, the aggregate principal amount
of this Note outstanding on such date, and to pay interest and fees on the
unpaid principal amount hereof, in immediately available funds, monthly in
arrears on the first day of each calendar month for the immediately
preceding month in the amounts specified in the Loan Agreement (as defined
below). This note evidences loans and other credit accommodations made or
to be made by the Lender to the Borrower pursuant to the Security Agreement
dated May 13, 1996 and the Loan Agreement dated May 13, 1996, by and between
Lender and Borrower (as amended and in effect from time to time, the "Loan
Agreement"). Capitalized terms defined in the Loan Agreement, whether
directly or indirectly by reference, shall have the respective meanings
herein assigned to such terms in the Loan Agreement.
The principal amount of this Note is subject to prepayment in whole or in
part in the manner and to the extent specified in the Loan Agreement. Upon
the occurrence of any Event of Default, the entire unpaid principal balance
of this Note, all of the unpaid interest and fees accrued thereon or with
respect thereto and all other amounts payable by Borrower to Lender under
the Loan Agreement or hereunder may automatically become immediately due and
payable, without demand, in the manner and with the effect provided in the
Loan Agreement.
This Note is secured by the security interests in, liens on and rights of
setoff against, the assets of the Borrower granted as collateral security
pursuant to the Loan Agreement and any other documents, instruments and
agreements executed and delivered from time to time in connections
therewith.
No delay or omission on the part of the Lender or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or
any other right of the Lender or of such holder, nor shall any delay,
omission or waiver of any one occasion be deemed a bar to or waiver of the
same or any other right or any other occasion. The Borrower and every
endorser and guarantor of this Note regardless of the time, order or place
of signing hereby waives presentment, demand, protest and notice of every
kind, and assents to any extension or postponement of the time for payment
or any other indulgence, to any substitution, exchange or release of
collateral, and to the addition or release of any other party or person or
entity primarily or secondarily liable.
All expenses of enforcement of the Lender's rights hereunder and other costs
and expenses in respect hereof (including reasonable court costs and legal
and other professional fees) shall be for the account of the Borrower.
Borrower acknowledges that Lender may assign and sell participations in its
rights and obligations under this Note, the Loan Agreement and any other
agreements. Lender may include its repayment rights under the Loan
Agreement, this Note and the other agreements in a pool of loan receivables
in which Lender sells undivided interests as part of a securitization
program. Borrower understands that Lender may from time to time transfer
and assign its rights under the Loan Agreement and this Note to one or more
assignees. Borrower hereby consents to these transfers and assignments by
Lender to one or more assignees. Borrower hereby agrees that any such
assignee may exercise the rights of Lender hereunder. Borrower hereby
consents and acknowledges that any and all defenses, claims or counterclaims
that it my have against Lender shall be limited to, and may only be brought
against, Lender and shall not extend to any assignee. Borrower and Lender
intend that any and all direct or indirect assignees of the Lender of the
type set forth above shall be third party beneficiaries of this Note.
This Note shall be binding upon the Borrower's successors and assigns, and
shall inure to the benefit of the Lender's successors and assigns.
THIS NOTE SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT REFERENCE TO CONFLICTS OF
LAW).
BORROWER, LENDER AND, BY ITS ACCEPTANCE HEREOF, EACH HOLDER, EACH WAIVE ALL
RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER
OF THEM AGAINST THE OTHER WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THE LOAN
AGREEMENT, THIS NOTE, THE OBLIGATIONS, THE COLLATERAL, ANY ALLEGED TORTUOUS
CONTACT BY BORROWER OR LENDER, OR WHICH IN ANY WAY, DIRECTLY OR INDIRECTLY,
ARISES FROM OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND LENDER. IN
NO EVENT WILL LENDER OR ANY HOLDER BE LIABLE FOR LOST PROFITS OR OTHER
SPECIAL OR CONSEQUENTIAL DAMAGES.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its
duly authorized officer to take effect as of the date first hereinabove
written.
BORROWER:
MRL, Inc.
By: /s/ Larry J. Stallings
Title: President and CEO
Exhibit 10(t)
SECURITY AGREEMENT
This Security Agreement (the "Agreement") is entered into as of May 13,
1996, between MRL, Inc., ("Borrower") and Concord Growth Corporation
("Lender"), in connection with various loans and other credit accommodations
by Lender to Borrower pursuant to the Loan Agreement dated May 13,
[concurrently herewith] between Borrower and Lender, as the same may be
amended, restated, supplemented, extended, or replaced from time to time
(collectively, the "Loan Agreement").
Capitalized terms used in this Agreement shall have either (a) the meanings
assigned to them in Section 6.6 of this Agreement, or (b) if such terms are
not otherwise defined in this Agreement, the respective meanings assigned to
them in the Loan Agreement.
This Agreement amends, restates, and supersedes that certain Factoring
Agreement dated November 14, 1995, by and among Concord Growth Corporation,
as Buyer and MRL, Inc., as Seller, as amended from time to time.
1. GRANT OF SECURITY INTEREST
1.1 Grant of Security Interest. To secure the payment and
performance in full of all Obligations, Borrower hereby grants to Lender a
continuing security interest in and lien upon, and a right of setoff
against, and Borrower hereby assigns and pledges to Lender for security
purposes, all of Borrower's right, title and interest in and to the
following property, whether now owned or existing or hereafter acquired or
arising, wherever located, (collectively, the "Collateral"), including any
Collateral not deemed eligible for lending purposes:
(a) All accounts;
(b) All chattel paper,
(c) All general intangibles, including, without limitation, all
rights to payment, causes of action, rights to receive tax refunds, contract
rights, customer lists, guaranties, deposit accounts, cash, rights in and
claims under insurance policies (including rights to unearned premiums),
copyrights, patents, trademarks, tradenames, rights under license agreements
and rights thereunder, all other intellectual property, and goodwill
(including the goodwill associated with trademarks and trademark licenses);
(d) All investment property (as defined in the Uniform
Commercial Code);
(e) All inventory;
(f) All equipment and fixtures;
(g) All documents, instruments, letters of credit and bankers'
acceptances;
(h) All consumer goods, farm products, crops, timber, minerals
or the like (including oil and gas);
(i) All books and records relating to any of the above,
including, without limitation, all computer programs, printed output and
computer readable data in the possession or control of the Borrower, any
computer service bureau or other third party; and
(j) All accessions, substitutions for and all replacements,
products, and cash and non-cash proceeds of the foregoing, in whatever form,
including all insurance proceeds and all claims against third parties for
loss or destruction of or damage to any of the foregoing.
2. APPOINTMENT AS ATTORNEY-IN-FACT; PRESERVATION OF COLLATERAL
2.1. Attorney-in-Fact. Borrower hereby appoints Lender and any
designee of Lender as Borrower's attorney-in-fact and authorizes Lender or
such designee, at Borrower's sole expense, to exercise at any times in
Lender's or such designee's discretion all or any of the following powers,
which powers, being coupled with an interest, shall be irrevocable until all
Obligations have been paid and satisfied in full:
(a) receive, endorse, assign, deliver, and deposit, in the name
of Lender or Borrower, any and all cash, checks, commercial paper, drafts,
remittances and other instruments and documents relating to the Collateral
or the proceeds thereof;
(b) notify account debtors, other obligors or any bailees of
the interest of Lender in the Collateral or request from account debtors or
such other obligors or bailees at any time, in the name of Borrower or
Lender or any designee of Lender, information concerning the Collateral and
any amounts owing with respect thereto;
(c) notify account debtors or other obligors to make payment
directly to Lender, or notify bailees as to the disposition of Collateral;
(d) execute in the name of Borrower and file against Borrower
in favor of Lender financing statements, deeds of trust, mortgages, or other
assignment documents, as well as any amendments with respect to any portion
of the Collateral;
(e) obtain insurance at Borrower's expense and, after an Event
of Default, to adjust or settle any claim or other matter arising pursuant
to Borrower's insurance or to amend or cancel such insurance;
(f) after an Event of Default, take or bring, in the name of
Lender or Borrower, all steps, actions, suits or proceedings deemed by
Lender necessary or desirable to direct collection of or other realization
upon the accounts and other Collateral;
(g) after an Event of Default, change the address for delivery
of mail to Borrower and to receive and open mail addressed to Borrower; and
(h) after an Event of Default, extend the time of payment of,
compromise or settle for cash, credit, return of merchandise, and upon any
terms or conditions, any and all accounts or other Collateral which includes
a monetary obligation and discharge or release the account debtor or other
obligor, without affecting any of the Obligations.
2.2. Limitations Upon Written Notice or After Event of Default.
Borrower shall not, without the prior written consent of Lender, (1) absent
an Event of Default, after receiving written notice from Lender, or (2)
after an Event of Default:
(a) grant any extension of time of payment of any of the
accounts or any of the other Collateral that includes a monetary obligation;
(b) compromise or settle any of the accounts or any such other
Collateral for less than the full amount thereof;
(c) release in whole or in part any account debtor or other
person liable for the payment of any of the accounts or any such other
Collateral; or
(d) grant any credits, discounts, allowances, deductions.
return authorizations or the like with respect to any of the accounts or any
such other Collateral.
2.3. Lender's Right to Cure. Lender may, at its option, cure any
default by Borrower under any agreement with a third party or pay or bond on
appeal any judgment entered against Borrower, discharge taxes, liens,
security interest or other encumbrances at any time levied on or existing
with respect to the Collateral and pay any amount or perform any act which,
in Lender's sole judgment, is necessary or appropriate to preserve, protect,
insure, or realize upon the Collateral. Lender may charge Borrower's loan
account for any amounts so expended, such amounts to be repayable by
Borrower on demand. Lender shall be under no obligation to effect such
cure, payment, bonding or discharge, and shall not, by doing so, be deemed
to have assumed any obligation or liability of Borrower.
2.4. Inspection Access to Collateral. Lender or its designee shall
have access at any time to all of the premises where Collateral is located
for the purposes of inspecting the Collateral and making copies of
Borrower's books and records. Lender may use such of Borrower's personnel,
equipment, including computer equipment, programs, printed output and
computer readable media, supplies and premises for the collection of
accounts and realization on other Collateral as Lender deems appropriate.
Borrower hereby irrevocably authorizes all accountants and third parties to
disclose and deliver to Lender all financial and other information in their
possession regarding Borrower. All such inspection, copying, use of
personnel, equipment and premises, and disclosure of information, shall be
at Borrower's sole expense.
3. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Borrower hereby represents, warrants and covenants to Lender the
following, the truth and accuracy of which, and compliance with which, shall
be continuing conditions of the making of loans or other credit
accommodations by Lender to Borrower under the Loan Agreement:
3.1. Trade Names. Borrower may from time to time render invoices to
account debtors under its trade names set forth in Schedule A hereto;
provided, that (a) each such trade name does not refer to another
corporation or other legal entity, and (b) all accounts and proceeds thereof
(including any returned merchandise) invoiced under any such trade names are
owned exclusively by Borrower and are subject to the security interest of
Lender.
3.2. Locations of Collateral. Borrower's books and records concerning
accounts and its chief executive office are and shall be maintained only at
the address set forth below Borrower's signature. Borrower's only other
places of business and the only other locations of Collateral, if any, are
and shall be the addresses set forth in Schedule A, except Borrower may
change such locations or open a new place of business after thirty (30) days
prior written notice to Lender. Prior to any change in location or opening
of any new place of business, Borrower shall execute and deliver or cause to
be executed and delivered to Lender such financing statements and other
agreements as Lender may require.
3.3. Encumbrances Against Collateral. Borrower has and at all times
will continue to have good and marketable title to all of the Collateral,
free and clear of all liens, security interests, claims or encumbrances of
any kind except, if any, those set forth on Schedule A hereto. The liens
and security interests granted by Borrower to Lender in the Collateral are
first priority liens and security interests, subject only to those liens and
security interests set forth on Schedule A, unless the holder of any such
liens and security interests subordinates to Lender.
3.4. Insurance. Borrower shall at all times maintain, with
financially sound and reputable insurers, casualty insurance with respect to
the Collateral and other assets. Borrower shall at the request of Lender,
name Lender as loss payee of such insurance. All such insurance policies
shall be in such form, substance, amounts and coverage as may be
satisfactory to Lender and shall provide for thirty (30) days' prior written
notice to Lender of cancellation or reduction of coverage. Borrower shall
deliver to Lender, in kind, all payments or instruments representing
proceeds of insurance received by Borrower. Insurance proceeds received by
Lender, at any time, may be applied, at Lender's option, to repay any of the
Obligations, whether or not due (and in any order determined by Lender), or
held as security therefor, or employed to replace or repair any portion of
the Collateral.
3.5 Supplemental Documentation. Upon Lender's request, at any time,
Borrower shall execute and deliver such agreements, documents and
instruments, and do such further acts as Lender in its discretion, deems
necessary or appropriate to create, preserve, perfect or evidence any
security interest of Lender, or the priority thereof, in the Collateral.
3.6. Other Fees and Expenses. Borrower shall pay to Lender
immediately upon Lendees demand, all fees and expenses, including reasonable
fees and expenses of attorneys and other professionals, incurred by Lender
in connection with any and all of the following: (a) preparing, amending,
supplementing, restating, negotiating or enforcing the Loan Agreement, any
of the other Loan Documents or any waivers or consents in connection with
the foregoing, (b) perfecting, protecting or enforcing Lender's interest in
the Collateral, (c) collecting the Obligations, or (d) defending or in any
way addressing any claims made or litigation initiated by or against Lender
as a result of Lender's relationship with Borrower or any guarantor. All
such fees and expenses shall be payable to Lender whether incurred before,
during or after any bankruptcy case or insolvency proceeding involving
Borrower, any guarantor or any account debtor.
3.7. Copyrights, Patents and Trademarks. Borrower owns or possesses
all of the copyrights, patents, trademarks and licenses necessary to conduct
its business. All such copyrights, patents, trademarks and licenses are
listed on Schedule A hereto.
4. EVENTS OF DEFAULT AND REMEDIES
4.1. Events of Default. The occurrence of an "Event of Default" under
the Loan Agreement constitutes an Event of Default under this Agreement.
4.2. Remedies. Upon the occurrence of an Event of Default and at any
time thereafter, Lender shall have all rights and remedies provided in this
Agreement, the Loan Agreement, any other Loan Documents, the Uniform
Commercial Code as in effect in California or other applicable law, all of
which rights and remedies may be exercised without notice to Borrower, all
such notices being hereby waived, except such notice as is expressly
provided for hereunder or is not waivable under applicable law. All rights
and remedies of Lender are cumulative and not exclusive and are enforceable,
in Lender's discretion, alternatively, successively, or concurrently on any
one or more occasions and in any order Lender any determine. Without
limiting the foregoing, Lender may:
(a) terminate the facility under the Loan Agreement with respect to
further Advances and other loans and Accommodations, whereupon no further
Advances, loans or other Accommodations will be made thereunder or pursuant
to any Inventory Rider;
(b) accelerate the payment of all Obligations and demand immediate
payment thereof to Lender whereupon all Obligations shall become immediately
due and payable without demand, presentation, protest, or further notice of
any kind;
(c) with or without judicial process or the aid or assistance of
others, enter upon any premises on or in which any of the Collateral may be
located and take possession of the Collateral or complete processing,
manufacturing and repair of all or any portion of the Collateral;
(d) require Borrower, at Borrower's expense, to assemble and make
available to Lender all or any portion of the Collateral at any place and
time designated by Lender;
(e) collect, foreclose, receive, appropriate, setoff and realize
upon, compromise or settle for cash, credit, return of merchandise, and upon
any terms or conditions, any and all accounts or other Collateral which
includes a monetary obligation and discharge or release the account debtor
or other obligor, without affecting any of the Obligations;
(f) sell, lease, transfer, assign, deliver or otherwise dispose of
any and all Collateral, at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with Lender having
the right to purchase the whole or any part of the Collateral at any public
sale and, to the extent authorized by applicable law, at any private sale.
If any of the Collateral is sold or leased by Lender upon credit terms or
for future delivery, the Obligations shall not be reduced as a result
thereof until payment therefor is finally collected by Lender. If notice of
disposition of Collateral is required by law, seven (7) days prior notice by
Lender to Borrower designating the time and place of any public sale or the
time after which any private sale or other intended disposition of
Collateral is to be made, shall be deemed to be reasonable notice thereof
and Borrower waives any other notice. If Lender institutes any action to
recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, Borrower waives the posting of any bond which might
otherwise be required.
4.3. Application of Collateral Proceeds. Lender may apply the cash
proceeds of Collateral actually received by Lender from any sale, lease,
foreclosure or other disposition of the Collateral to payment of any of the
Obligations, in whole or in part (including reasonable attorneys' fees and
legal expenses incurred by Lender with respect thereto or otherwise
chargeable to Borrower) and in such order as Lender may elect, whether or
not then due. Borrower shall remain liable to Lender for the payment of any
deficiency, together with interest at the rate provided in the Loan
Agreement plus the Default Rate as defined in the Loan Agreement, and all
costs and expenses of collection or enforcement, including reasonable
attorneys' fees and expenses.
4.4. Grant of License to Use Patents and Trademarks. To enable Lender
to exercise rights and remedies under Section 4.2 hereof Borrower hereby
grants to Lender an irrevocable, non-exclusive license (exercisable without
payment of royalty or other compensation to Borrower) to use, license or
sublicense any patent, trademark, trade secret, or copyright now owned or
hereafter acquired by Borrower, and including in such license reasonable
access to all media in which any of the licensed items may be recorded or
stored and to all computer and automatic machinery software and programs
used for the compilation or printout thereof.
5. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; AND RELEASE
5.1 Governing Law. This Agreement, the Loan Agreement and the other
Loan Documents shall be governed by, and construed in accordance with, the
laws of the State of California (without giving effect to principles of
conflicts of laws).
5.2. WAIVER OF JURY TRIAL. BORROWER HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY OF ANY ACTION OR PROCEEDING ASSERTING ANY CAUSE OF
ACTION, CLAIM, THIRD PARTY CLAIM OR COUNTERCLAIM (COLLECTIVELY, "CLAIMS-)
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE LOAN AGREEMENT, ANY OTHER
LOAN DOCUMENT, OR THE COLLATERAL THIS WAIVER EXTENDS TO ALL SUCH CLAIMS,
INCLUDING, WITHOUT LIMITATION, CLAIMS WHICH INVOLVE PERSONS OR ENTITIES
OTHER THAN LENDER, CLAIMS WHICH ARISE OUT OF OR ARE IN ANY WAY CONNECTED TO
THE RELATIONSHIP BETWEEN LENDER AND BORROWER, AND ANY CLAIMS FOR DAMAGES,
BREACH OF CONTRACT, SPECIFIC PERFORMANCE, TORT OR ANY EQUITABLE OR LEGAL
RELIEF OF ANY KIND.
5.3. Jurisdiction. Borrower hereby irrevocably submits to the
jurisdiction of any California State or Federal court sitting in San
Francisco County in any action or proceeding arising out of or relating to
this Agreement, the Loan Agreement or any of the Loan Documents, and
Borrower hereby irrevocably agrees that all claims with respect to such
action or proceeding may be heard and determined in such California State
court or, to the extent permitted by law, in such Federal court. Borrower
hereby irrevocably waives, to the fullest extent Borrower may effectively do
so, the defense of inconvenient forum to the maintenance of such action or
proceeding. Borrower irrevocably consents to the service of any and all
process in any such action or proceeding by the mailing of copies of such
process to Borrowees address specified in the Loan Agreement. Borrower
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 matter provided by law. Nothing in this Section
5.3 shall affect Lendees right to serve legal process in any other manner
permitted by law or affect Lender's right to bring an action or proceeding
against Borrower or Borrowees property in the courts of other jurisdictions.
5.4. No Implied Waiver. Lender shall not, by any act, delay, omission
or otherwise be deemed to have expressly or impliedly waived any of its
rights or remedies unless such waiver shall be in writing and signed by an
authorized officer of Lender. A waiver by Lender of any right or remedy on
any one occasion shall not be construed as a bar to or waiver of any such
right or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise.
5.5. Release. Borrower hereby releases and exculpates Lender, its
officers, employees and designees, from any liability arising from any acts
under this Agreement, the Loan Agreement or any other Loan Documents, or in
furtherance thereof, whether as attorney-in-fact or otherwise, whether of
omission or commission, and whether based upon any error of judgment or
mistake of law or fact, except for willful misconduct or gross negligence.
In no event will Lender have any liability to Borrower for lost profits or
other special, consequential, exemplary, or punitive damages.
6. TERM OF AGREEMENT: MISCELLANEOUS
6.1. Term. This Agreement shall remain in effect unless and until
Lender receives full, final and indefeasible payment of all Obligations, the
Loan Agreement shall be terminated and of no further force and effect, and
Lender notifies Borrower in writing that the foregoing have occurred.
6.2. Notices. Except as otherwise provided, all notices, requests and
demands hereunder shall be made in the manner and shall have the effect
provided in the Loan Agreement.
6.3. Severability. If any provision of this Agreement is held to be
invalid or unenforceable, such provision shall not affect the Agreement as a
whole, but this Agreement shall be construed as though it did not contain
the particular provision held to be invalid or unenforceable.
6.4. Headings. All title and section headings used in this Agreement
are for convenience only and shall not be used in interpreting this
Agreement.
6.5. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall be an original but all of which
shall constitute one and the same agreement.
6.6. Definitions. All terms used herein which are defined in the
Uniform Commercial Code as in effect in California shall have the meanings
given therein unless otherwise defined in this Agreement. All references to
the singular or plural herein shall include the singular and plural, unless
the context otherwise requires. The term "including" is not limiting or
exclusive. Capitalized terms used in this Agreement shall have the
following respective meanings when used herein:
"Collateral" shall have the meaning set forth in Section 1.1.
"Event of Default" shall have the meaning set forth in Section 4.1.
"Loan Agreement" shall have the meaning set forth in the introductory
paragraph of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date stated above.
"Borrower"
MRL, Inc.
By: /s/ Larry J. Stallings
Title: President and CEO
Address of Borrower's Chief Executive Office and Principal Place of
Business:
287 North Lindbergh Boulevard, Suite 206
St. Louis, Missouri 63141
Telephone: (314) 946-6900
Facsimile: (314) 946-2860
"Lender"
CONCORD GROWTH CORPORATION
By: /s/ Julie M. Saltonstall
Title: Vice President
Address:
1170 East Meadow Drive
Palo Alto, California 94303
SCHEDULE A
TO
SECURITY AGREEMENT
1. Trade Names (Section 3.11
Hesco, Division of MRL, Inc.
Precision Metals, Division of MRL, Inc.
2. Locations of Collateral (Section 3.2)
287 North Lindbergh Boulevard, Suite 206,
St. Louis, Missouri 63141-7840
1258 East Main, Piggott, Arkansas 72454
101 South Pine Street, Hoffman, Illinois 62250
3. Intentionally omitted.
4. Encumbrances Against Collateral (Section 3.3)
See Exhibit B
EXHIBIT B
TO
SECURITY AGREEMENT
<TABLE>
<CAPTION>
Filing Secured Party Description of
Number Date Jurisdication Collateral
<S> <C> <C> <C> <C>
754120 05.16.91 AR Landmark Bank Equipment
748892 04.11.94 AR City of Piggott Equipment
2264335 04.06.87 IL First of America Bank Illinois Equipment
2594849 07.06.89 IL Panasonic Co. Inventory
2666116 01.11.90 IL First of America Bank Illinois Blanket
2798879 01.14.91 IL Crown Credit Company Equipment
2805395 01.14.91 IL Norwest Equipment Fin. Equipment
2814568 02.06.91 IL Ameritech Credit Corp. Equipment
2820034 02.22.91 IL NBD Equipment Finance Equipment
2824003 03.05.91 IL Farmers State Bank Equipment
2861012 06.12.91 IL Macro Computer Products Equipment
2865583 06.24.91 IL NBD Equipment Finance Equipment
3020096 08.17.92 IL Unisys Corp. Equipment
3049921 11.09.92 IL Ameritech Credit Co. Equipment
3050703 11.10.92 IL Diesel Power Equipment Equipment
3110558 04.16.93 IL Yale Financial Equipment
3111038 04.19.93 IL Yale Financial Equipment
3117708 05.05.93 IL Farmers State Bank Other
3118579 05.07.93 IL Yale Financial Equipment
3141394 07.07.93 IL Yale Financial Equipment
3162680 09.01.93 IL United States Leasing Intl. Equipment
3222356 02.15.94 IL Unisys Corp. Equipment
1788404 10.16.89 MO Banc One Leasing Equipment
1973208 03.05.91 MO Farmers State Bank Equipment
2013998 06.19.91 MO Yale Material Handling Equipment
356 04.10.91 AR Clay City of Piggot Equipment
358 04.10.91 AR Clay City of Piggot Equipment
1271 11.15.95 AR Clay City of Piggot Other
1270 11.15.95 AR Clay City of Piggot Other
26282 10.16.89 MO St. Charles Banc One Leasing Equipment
4726 06.19.91 MO St. Charles Yale Financial Services Equipment
20766 03.31.94 MO St. Charles Ameritas Life Insurance Fixtures
</TABLE>
Exhibit 11
MRL, INC.
COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES
<TABLE>
<CAPTION>
FISCAL 1997 PERIOD
DAYS WEIGHTED
DATE BALANCE MAINTAINED SHARE DAYS AVERAGE
<S> <C> <C> <C> <C> <C>
Common shares
outstanding 05/01/96 2,685,694 92 247,083,848
Weighted average
number of shares,
three months ended
July 31, 1996 2,685,694
=========
Common shares
outstanding 02/01/96 2,685,694 182 488,796,308
Weighted average
number of shares,
six months ended
July 31, 1996 2,685,694
=========
<CAPTION>
FISCAL 1996 PERIOD
<S> <C> <C> <C> <C> <C>
Common shares
outstanding 05/01/95 2,685,694 92 247,083,848
Weighted average
number of shares,
three months ended
July 31, 1995 2,685,694
=========
Common shares
outstanding 02/01/95 2,585,694 41 106,013,454
03/14/95 2,685,694 140 375,997,160
--- ------------
181 482,010,614
Weighted average
number of shares,
six months ended
July 31, 1995 2,663,042
=========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Financial Statements for period ended July 31, 1996 and is qualified
in its entirety by reference to such Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JUL-31-1996
<CASH> (20,000)
<SECURITIES> 0
<RECEIVABLES> 715,000
<ALLOWANCES> 0<F1>
<INVENTORY> 945,000
<CURRENT-ASSETS> 1,703,000
<PP&E> 250,000
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 2,059,000
<CURRENT-LIABILITIES> 1,911,000
<BONDS> 778,000
0
0
<COMMON> 279,000
<OTHER-SE> (909,000)
<TOTAL-LIABILITY-AND-EQUITY> 2,059,000
<SALES> 2,587,000
<TOTAL-REVENUES> 2,587,000
<CGS> 1,989,000
<TOTAL-COSTS> 2,722,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 108,000
<INCOME-PRETAX> (243,000)
<INCOME-TAX> 86,000
<INCOME-CONTINUING> (157,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (157,000)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
<FN>
<F1>Allowances are not reported in interim statements.
<F2>Accumulated depreciation is not reported in interim statements.
</FN>
</TABLE>
