<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15D OF THE SECURITIES EXCHANGE
- --- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER, 31 1995 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15D OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________
Commission File Number
- ----------------------
1-10471
CRAFTMADE INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2057054
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
650 S. Royal Lane, Suite 100, Coppell, Texas 75019
- --------------------------------------------- -----
(Address of principal executive offices) Zip Code
Registrants' telephone number, including area code (214) 393-3800
--------------
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
----- -----
3,192,969 shares of Common Stock were outstanding as of January 26, 1996.
<PAGE> 2
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
Index to Quarterly Report on Form 10-Q
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Income for the
three months and six months ended December 31, 1995
and 1994.
Condensed Consolidated Balance Sheets as of December
31, 1995 and June 30, 1995.
Condensed Consolidated Statement of Changes in
Shareholders' Equity for the six months ended
December 31, 1995.
Condensed Consolidated Statements of Cash Flows for
the six months ended December 31, 1995 and 1994.
Notes to Condensed Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE> 3
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
------------------------------- ----------------------------------
December 31, December 31, December 31, December 31,
1994 1995 1994 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $7,987,662 $ 7,704,043 $17,642,492 $17,130,366
Cost of goods sold 5,135,673 5,114,773 11,185,947 11,127,859
---------- ----------- ----------- -----------
Gross profit 2,851,989 2,589,270 6,456,545 6,002,507
---------- ----------- ----------- -----------
Selling, general
and administrative
expenses 2,057,269 2,240,660 4,191,774 4,336,193
Interest expense,net 118,015 145,163 231,898 298,824
Depreciation and
amortization 62,114 42,759 129,644 85,718
---------- ----------- ----------- -----------
Total expenses 2,237,398 2,428,582 4,553,316 4,720,735
---------- ----------- ----------- -----------
Income before
income taxes 614,591 160,688 1,903,229 1,281,772
Provision for
income taxes 227,399 59,457 695,190 398,220
---------- ----------- ----------- -----------
Net income $ 387,192 $ 101,231 $ 1,208,039 $ 883,552
========== =========== =========== ===========
Earnings per
common share $ .11 $ .03 $ .35 $ .27
========== =========== =========== ===========
Weighted average
shares outstanding 3,496,555 3,303,205 3,487,380 3,303,820
========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 4
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
June 30, 1995
1995 (Unaudited)
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 268,703 $ 1,101,170
Accounts receivable - trade,
net of allowance 6,383,071 5,080,873
Inventory 8,605,483 8,891,575
Prepaid expenses and other
current assets 1,462,990 1,464,366
----------- -----------
Total current assets 16,720,247 16,537,984
----------- -----------
Property and equipment, net 396,758 9,673,813
----------- -----------
Other assets:
Goodwill, net 282,857 255,035
Other assets 230,773 195,094
----------- -----------
Total other assets 513,630 450,129
----------- -----------
$17,630,635 $26,661,926
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 5
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
June 30, 1995
1995 (Unaudited)
----------- -----------
<S> <C> <C>
Current liabilities:
Note payable, facility -
current portion $ - $ 472,444
Payable to bank 7,480,000 6,500,000
Accounts payable - trade and
commissions 346,303 483,636
Income taxes payable 136,961 -
Other accrued liabilities 101,987 114,585
----------- -----------
Total current liabilities 8,065,251 7,570,665
----------- -----------
Non-current liabilities:
Note payable, facility -
long term portion - 8,727,556
----------- -----------
Shareholders' equity:
Series A cumulative, convertible,
callable preferred stock, $1.00
par value, 2,000,000 shares
authorized; 32,000 shares issued 32,000 32,000
Common stock, $.01 par value,
15,000,000 shares authorized,
4,100,883 and 4,092,483 shares
issued as of December 31, 1995 and
June 30, 1995, respectively 40,925 41,009
Additional paid-in capital 7,024,265 7,058,301
Retained earnings 7,528,338 8,346,181
----------- -----------
14,625,528 15,477,491
Less: treasury stock, 809,414 and
801,414 common shares at cost as
of December 31, 1995 and June 30,
1995, respectively, and 32,000
preferred shares at cost (5,060,144) (5,113,786)
----------- -----------
Total shareholders' equity 9,565,384 10,363,705
----------- -----------
$17,630,635 $26,661,926
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 6
CRAFTMADE INTERNATIONAL, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31,
1995 (UNAUDITED)
<TABLE>
<CAPTION> Series A Additional
Voting Preferred Paid-in Retained
Common Stock Stock Capital Earnings Treasury Stock Total
------------------- --------- ----------- ---------- -------------- -----------
Shares Amount Amount
--------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of June 30, 1995 4,092,483 $40,925 $32,000 $7,024,265 $7,528,338 ($5,060,144) $ 9,565,384
Cash Dividends - - - - (65,709) - (65,709)
Employee Stock Options 8,400 84 - 34,036 - - 34,120
Stock Repurchase - - - - - (53,642) (53,642)
Net Income for the six months
ended December 31, 1995 - - - - 883,552 - 883,552
--------- ------- -------- ----------- ---------- ----------- -----------
4,100,883 $41,009 $ 32,000 $ 7,058,301 $8,346,181 ($5,113,786) $10,363,705
========= ======= ======== =========== ========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 7
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
-------------------------------
December 31, December 31,
1994 1995
----------- -----------
<S> <C> <C>
Net cash provided by
operating activities $ 600,068 $ 2,058,076
--------- -----------
Cash flows from investing activities:
Facility acquisition - (9,207,559)
Net additions to equipment (43,774) (123,984)
--------- -----------
Net cash used in investing activities (43,774) (9,331,543)
--------- -----------
Cash flows from financing activities:
Facility acquisition financing - 9,200,000
Stock repurchase - (53,642)
Net principal payments for
revolving line of credit (225,000) (980,000)
Proceeds from exercise of stock
options 25,900 5,880
Cash dividends (69,592) (65,709)
Other financing activities (12,304) (595)
--------- -----------
Net cash (used for) provided by
financing activities (280,996) 8,105,934
--------- -----------
Net increase in cash 275,298 832,467
Cash at beginning of year 116,311 268,703
--------- -----------
Cash at end of period $ 391,609 $ 1,101,170
========= ===========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
------------------------------
December 31, December 31,
1994 1995
--------- ---------
<S> <C> <C>
Cash paid during the period for:
Interest $ 231,898 $ 298,824
========= =========
Income taxes $ 793,934 $ 575,000
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF CRAFTMADE INTERNATIONAL, INC.
AND SUBSIDIARIES
DECEMBER 31, 1995
(Unaudited)
Note 1 - BASIS OF PREPARATION AND PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
and include all adjustments which are, in the opinion of management, necessary
for a fair presentation. The condensed consolidated financial statements
include the accounts of the Company and its subsidiaries. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. The Company believes that the
disclosures are adequate to make the information presented not misleading;
however, it is suggested that these financial statements be read in conjunction
with the financial statements and the notes thereto which are incorporated by
reference in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1995. The financial data for the interim periods may not necessarily
be indicative of results to be expected for the year.
Note 2 - RENEWAL OF THE COMPANY'S LINE OF CREDIT
On November 15, 1995, the Company's management negotiated an additional
$2,000,000 availability during the renewal of its existing line of credit
agreement, increasing its current line of credit to $12,000,000. This line of
credit bears interest at the bank's prime lending rate less 50 basis points and
is due on demand or, if no demand is made, at its scheduled maturity date of
November 14, 1996.
Note 3 - STOCK REPURCHASE
On December 28, 1995, the Company's Board of Directors, by unanimous consent,
amended the stock repurchase plan to allow the Company to repurchase up to
300,000 shares of its issued and outstanding common stock, an increase of
100,000 shares over the original plan. At December 31, 1995, the Company had
repurchased 200,000 of such shares at an aggregate cost of $1,706,267.
<PAGE> 9
Note 4 - FACILITIES
During December 1995, the Company's new facility, consisting of 378,000 square
feet of general office and warehouse space, was completed and operations were
relocated. The purchase price for this new facility was $9,207,559, which was
financed through a financial institution at an interest rate of 8.125% for a
term of twelve years. The Company has leased 80,000 square feet of this new
facility to an unaffiliated company for $20,000 a month for a term of three
years.
At December 31, 1995, the future principal payments on long-term debt are as
follows:
<TABLE>
<S> <C>
1996 $ 472,444
1997 512,292
1998 555,500
1999 602,356
2000 653,160
Thereafter 6,404,248
----------
$9,200,000
==========
</TABLE>
<PAGE> 10
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
Net sales decreased $283,619, or 3.6 %, for the three months ended December 31,
1995 to $7,704,043, down from $7,987,662 for the same three month period last
year. For the six months ended December 31, 1995, net sales were $17,130,366,
a decrease of $512,126, or 2.9%, from sales of $17,642,492 for the same six
month period last year. These decreases were primarily attributable to a
decrease in sales in the lamp division of approximately $790,000 for the six
month period, partially offset by a 2.9% increase in fan sales. Sales for the
Company were impacted by the relocation of the Company to its new facility
during the month of December, causing lamp production to be limited and a delay
in shipping from the fan division of approximately two days. However,
production has resumed, with lamp orders in hand being slightly up from last
year, and fan division shipments are now current.
Gross profit for the three month period ended December 31, decreased from
$2,851,989, or 35.7% of sales, in 1994 to $2,589,270, or 33.6% of sales, in
1995. For the six month period ended December 31, gross profit decreased from
$6,456,545, or 36.6% of sales, in 1994 to $6,002,507, or 35.0% of sales, in
1995. These decreases were primarily attributable to an increase in costs of
certain raw materials associated with the manufacture of its products incurred
during fiscal 1995, partially offset by a price increase to the Company's
customers implemented during May 1995, and labor incurred in the lamp division
that was not allocated to finished goods as a result of limited production
during the relocation of the Company's facility.
Total selling, general and administrative expenses increased $183,391 to
$2,240,660, or 29.1% of sales, for the three months ended December 31, 1995,
compared to $2,057,269, or 25.3% of sales, for the same three month period last
year. Total selling, general and administrative expenses increased $144,419 to
$4,336,193, or 25.3% of sales, for the six months ended December 31, 1995,
compared to $4,191,774, or 23.8% of sales, for the same six month period last
year. These increases were primarily attributable to relocation costs, legal
fees and certain other expenses incurred in the acquisition by the Company of a
new facility and subsequent relocation to this facility.
Interest expense increased $27,148, to $145,163 for the three months ended
December 31, 1995 from $118,015 for the same three month period in 1994. For
the six months ended December 31, 1995, interest expense was $298,824, an
increase of $66,926 from interest
<PAGE> 11
expense of $231,898 for the same six month period last year. These increases
were primarily the result of the increase in the banks' prime lending rates and
increases in the average outstanding indebtedness this year over last year
necessary for the financing of the Company's growth.
Management anticipates that the relocation of the Company's operations to the
new facility will initially result in lower annual operating lease expense more
than fully offset by increased depreciation and interest expense. However,
management believes that the long-term ownership of this facility should prove
advantageous for the Company as future lease arrangements for adequate
facility space would have resulted in an obligation in excess of the current
annual debt requirement under the new facility note payable and related
depreciation and interest expense.
Liquidity and Capital Resources
The Company's cash increased $832,467, from $268,703 at June 30, 1995 to
$1,101,170 at December 31, 1995. The Company's operating activities provided
cash of $2,058,076. This cash was primarily provided by net income of $883,552
and decreases in accounts receivable, partially offset by increases in
inventory levels.
Cash used for investing activities of $9,331,543 related to the acquisition of
the Company's new facility for $9,207,559 and the purchase of general warehouse
and office equipment.
Cash provided by financing activities of $8,105,934 was primarily the result of
the financing obtained for the new facility of $9,200,000, partially offset by
the $980,000 principal payments on the Company's line of credit, payment of
cash dividends totaling $65,709 and the repurchase of 8,000 shares of the
Company's common stock in connection with the Company's stock repurchase plan
at an aggregate cost of $53,642.
On November 15, 1995, the Company's management negotiated an additional
$2,000,000 availability during the renewal of its existing line of credit
agreement. At December 31, 1995, pursuant to the continued compliance with
certain covenants and restrictions, the Company had an additional $5,500,000
available on its $12,000,000 line of credit. The Company's management believes
that its current line of credit, combined with cash flows from operations, is
adequate to fund the Company's current operating needs, annual payments under
the note payable related to the facility acquisition approximating $1,600,000
and its projected growth over the next twelve months.
<PAGE> 12
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports of Form 8-K
a). Exhibits
Exhibit 10.1 Earnest Money Contract and Design/Build Agreement dated
May 8, 1995, between MEPC Quorum Properties II Inc. and
Craftmade International, Inc. (including exhibits).
Exhibit 10.2 Assignment of Rents and Leases dated December 21, 1995,
between Craftmade International, Inc. and Allianz Life
Insurance Company of North America (including exhibits).
Exhibit 10.3 Deed of Trust, Mortgage and Security Agreement made by
Craftmade International, Inc., dated December 21, 1995, to
Patrick M. Arnold, as Trustee for the benefit of Allianz
Life Insurance Company of North America (including
exhibits).
Exhibit 10.4 Second Amended and Restated Credit Agreement dated November
14, 1995, among Craftmade International, Inc., NationsBank
of Texas, N.A., as Agent and the Lenders defined therein
(including exhibits).
Exhibit 10.5 Lease Agreement dated November 30, 1995, between Craftmade
International, Inc. and TSE Prime, Inc.
Exhibit 27 Financial Data Schedule.
b). Reports on Form 8-K
none
<PAGE> 13
SIGNATURE
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.
CRAFTMADE INTERNATIONAL, INC.
-----------------------------
(Registrant)
Date January 26, 1996 JAMES R. RIDINGS
----------------------- ------------------------------
JAMES R.RIDINGS
President and Chief
Executive Officer
<PAGE> 14
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
Exhibit 10.1 Earnest Money Contract and Design/Build Agreement dated
May 8, 1995, between MEPC Quorum Properties II Inc. and
Craftmade International, Inc. (including exhibits).
Exhibit 10.2 Assignment of Rents and Leases dated December 21, 1995,
between Craftmade International, Inc. and Allianz Life
Insurance Company of North America (including exhibits).
Exhibit 10.3 Deed of Trust, Mortgage and Security Agreement made by
Craftmade International, Inc., dated December 21, 1995, to
Patrick M. Arnold, as Trustee for the benefit of Allianz
Life Insurance Company of North America (including
exhibits).
Exhibit 10.4 Second Amended and Restated Credit Agreement dated November
14, 1995, among Craftmade International, Inc., NationsBank
of Texas, N.A., as Agent and the Lenders defined therein
(including exhibits).
Exhibit 10.5 Lease Agreement dated November 30, 1995, between Craftmade
International, Inc. and TSE Prime, Inc.
Exhibit 27 Financial Data Schedule.
<PAGE> 1
EXHIBIT 10.1
EARNEST MONEY CONTRACT AND DESIGN/BUILD AGREEMENT
by and between
MEPC QUORUM PROPERTIES II INC.
(SELLER)
and
CRAFTMADE INTERNATIONAL, INC.
(PURCHASER)
<PAGE> 2
EARNEST MONEY CONTRACT AND DESIGN/BUILD AGREEMENT
THIS EARNEST MONEY CONTRACT AND DESIGN/BUILD AGREEMENT (this
"Contract") is made and entered into by and between MEPC QUORUM PROPERTIES II
INC., A DELAWARE CORPORATION (SELLER), and CRAFTMADE INTERNATIONAL, INC., a
Delaware corporation (PURCHASER) as of the Effective Date (hereinafter
defined).
R-E-C-I-T-A-L-S
A. Seller is under contract to acquire an approximate 31.9602
acre tract of land in Dallas County, Texas, as such property is more
particularly described in Exhibit "A" attached hereto and incorporated herein
by reference (the SELLER'S LAND);
B. Seller and Purchaser wish to enter into a formal binding
agreement pursuant to which Seller, conditioned upon its acquisition of the
Seller's Land and subject to the terms, conditions and covenants herein
contained, will (i) build on an approximate 17.52 acre portion of Seller's Land
(herein the LAND) certain improvements, as such improvements are generally and
preliminarily shown on the Site Plan (herein so called) attached hereto as
Exhibit "B" and incorporated herein by reference, and (ii) thereafter sell to
Purchaser the Land and such improvements, all in accordance with the terms and
conditions of this Contract.
W-I-T-N-E-S-S-E-T-H
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which being hereby acknowledged, the parties agree as follows:
1. SALE AND PURCHASE. For the consideration and upon and subject
to the terms, provisions and conditions hereinafter set forth, Seller agrees to
sell and convey unto Purchaser, and Purchaser agrees to purchase from Seller:
(a) the Land and the Improvements (hereinafter defined),
together with all rights and interests appurtenant thereto, specifically
including all rights, titles, powers, privileges, licenses, easements,
rights-of-way and interests, if any, of Seller, either at law or in equity, in
possession or in expectancy, in and to any real estate lying in the streets,
highways, roads, alleys, rights-of-way or sidewalks, open or proposed, in front
of, above, over, under, through or adjoining the Land and in and to any strips
or gores of real estate adjoining the Land; provided that if any of the
interests listed above are common to other properties adjacent to the Land,
then such conveyance will be on a "non-exclusive" basis with respect to such
interests; and
(b) all tangible personal property and fixtures of any kind
owned by Seller on the Closing Date (hereinafter defined) and attached to,
located on or used exclusively in connection with the maintenance or operation
of the Land or the Improvements, together with all plans and specifications and
surveys in Seller's possession and pertaining to the Land or the Improvements
and, to the extent they may exist and are assignable, all of Seller's rights,
titles and interests in and to all intangible assets relating to the Land and
Improvements, and all warranties received by Seller in connection with the
construction of the Improvements (collectively, the PERSONALTY).
The Land and Improvements are collectively referred to in this
Contract as the REAL PROPERTY. The Personalty and the Real Property are
collectively referred to in this Contract as the PROPERTY. Notwithstanding
subparagraph (a) and (b) above, this Contract does not pertain to and Seller is
not agreeing herein to convey Purchaser pursuant to this Contract or otherwise
any rights or interests that Seller receives in connection with the acquisition
of the Seller's Land that pertain to the right, including right of first
refusal rights, or
1
<PAGE> 3
option to purchase, lease or develop other property in the development in which
the Land is located. Neither the term "Land," Improvements or Personalty
include any such rights or interests.
2. PURCHASE PRICE. The Purchase Price (herein so called) for the
Property is NINE MILLION SEVENTY-TWO THOUSAND AND NO/100 DOLLARS
($9,072,000.00). The entire amount of the Purchase Price, as adjusted pursuant
to the terms of this Contract, is due and payable at the Closing in cash or
other Good Funds. GOOD FUNDS has the meaning set forth in Procedural Rule P-27
of the Basic Manual of Rules, Rates and Forms for the Writing of Title
Insurance in the State of Texas promulgated by the Texas State Board of
Insurance, and includes wire transfers, certified checks or cashier's checks to
the extent such Procedural Rule would permit the Title Company (hereinafter
defined) to immediately disburse such funds.
3. EARNEST MONEY. For the purpose of securing the performance of
Purchaser under the terms and provisions of this Contract and as a condition
precedent to Seller's obligations hereunder, within three (3) business days
after the Effective Date Purchaser will deliver in cash or other Good Funds the
amount of TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00) (the EARNEST
MONEY) to Republic Title of Texas, Inc. (the TITLE COMPANY), 300 Crescent
Court, Suite 100, Dallas, Texas 75201, Attn: Melvin Allred (fax: (214)
855-8848). The Title Company will, and is hereby instructed to, deposit the
Earnest Money into an interest bearing account at a federally insured bank or
savings institution acceptable to Seller and Purchaser. Interest accruing on
the Earnest Money shall not constitute additional Earnest Money but rather
shall be for the sole account of, and payable to Purchaser in all events, free
and clear of any and all claims by Seller, and will in all events be reported
under Purchaser's tax i.d. no. 75-2057054. If the Closing actually occurs, the
Earnest Money will be applied to the balance of the Purchase Price then due.
If the Contract is terminated, the Earnest Money will be delivered as provided
elsewhere in this Contract. If Purchaser fails to timely deposit the Earnest
Money as provided in this paragraph, Seller may terminate this Contract by
written notice to Purchaser at any time prior to the date Purchaser actually
delivers the Earnest Money to the Title Company.
4. TITLE.
(a) Title Commitment and Survey. Purchaser acknowledges
receipt of the Commitment for Title Insurance covering the Seller's Land, such
being issued on April 28, 1995 by American Title Company, as agent for Title
Resources Guaranty Company, effective as of March 30, 1995 under GF No.
95BC354868-L (the TITLE COMMITMENT), and the Survey (herein so called) covering
the Seller's Land prepared by G. Dennis Qualls of Rust Lichliter/Jameson and
last certified on April 10, 1995. Upon determination by the parties of the
exact portion of Seller's Land to be purchased by Purchaser, Seller will, at
its sole cost and expense, cause to be issued to Purchaser by Title Company an
updated Commitment for Title Insurance covering only the Land and an updated
survey showing only the Land. The updated survey must be sufficient to permit
the Title Company to modify, at Purchaser's expense, the standard printed
exception in the Owner's Policy (hereinafter defined) pertaining to
discrepancies in area or boundary lines, encroachments, overlapping of
improvements or similar matters to "Shortages in Area" only (herein called the
SURVEY EXCEPTION). The Survey will be certified to Purchaser, Purchaser's
lender, Seller and the Title Company. After approval, or deemed approval, by
Purchaser and Seller, the legal description of the Land contained in the field
notes to the updated survey will be attached hereto automatically as Exhibit
"A-1", and this Contract will be deemed amended by the substitution of such
field notes contained in the updated survey without the necessity of the
parties executing any additional written amendment to this Contract, and such
legal description will be the description of the Land attached to the Deed
(hereinafter defined) delivered at Closing.
2
<PAGE> 4
(b) Owner's Policy. Seller agrees to pay for and cause
to be delivered to Purchaser at Closing or as soon after the Closing as is
practical an Owner's Policy of Title Insurance (the OWNER'S POLICY) issued by
the Title Company on the standard form thereof in use in the State of Texas,
insuring (i) good and indefeasible title to the Property in Purchaser in the
amount of the Purchase Price, and subject only to the Permitted Exceptions
(hereinafter defined), except that Purchaser will be responsible for the cost
of any endorsements, deletions or modifications Purchaser desires to the
Owner's Policy (and that the Title Company is willing to issue) including,
without limitation, the costs of the Survey Exception, and (ii) insuring
Purchaser's easement interest under the Easement Agreement (hereinafter
defined) as it pertains to the Extended Truck Court Area (hereinafter defend),
subject only to the Permitted Exceptions.
(c) Permitted Exceptions. As used herein, the term
Permitted Exceptions means the following:
(i) any liens and encumbrances caused by Purchaser, inclusive of
any liens and encumbrances placed on the Property in
connection with any financing obtained by Purchaser or any
work performed by Purchaser's Agents;
(ii) the Title Company's standard pre-printed exceptions;
(iii) all Applicable Laws (hereinafter defined);
(iv) all matters shown in Schedule B to the Title Commitment;
(v) all matters shown on or disclosed by the Survey;
(vi) the Easement Agreement (hereinafter defined);
(vii) deed restrictions (the RESTRICTIONS) to be imposed by the
current owner of the Seller's Land containing substantially
similar terms as those set forth on Exhibit "C" attached
hereto and incorporated herein by reference including, without
limitation, all easements, licenses, assessment and lien and
other enforcement rights granted, reserved or provided for
therein, and all restrictions, obligations and obligations set
forth therein;
(viii) a Memorandum of Right of First Refusal and Option Agreement,
the form of which is attached hereto as Exhibit "K" and
incorporated herein by reference, pertaining to certain rights
of Seller to acquire other property in Freeport North. Seller
represents and warrants that such Memorandum will not affect
the development or use of the Land;
(ix) any reservation of rights or rights of repurchase to be
included in the special warranty deed from the seller of the
Seller's Land to Seller, such to be in substantially the form
of that attached hereto as Exhibit "L" and incorporated herein
by reference;
(x) any matters shown on the plat of the property recorded at
Volume 84203, Page 1835, et seq., of the Official Public
Records of Real Property in Dallas County, Texas; and
(xi) such other matter as Seller and Purchaser may agree.
With respect to the Restrictions, Seller represents, warrants and
covenants to Purchaser that Seller will comply with all requirements set forth
in the Restrictions pertaining to the development of the Land and the
construction of the Improvements and that at Closing there will be no violation
of the
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Restrictions that were caused by Seller or any Seller Parties (hereinafter
defined).
(d) Reciprocal Easement Agreement. Purchaser is aware that
at Closing Seller will own the property adjacent to and to the immediate west
of the Land (the ADJACENT TRACT). Upon development of the Adjacent Tract, it
is contemplated that a "truck court" area may be common to both the Adjacent
Tract and the Land. Additionally, prior to development of the Adjacent Tract
and as a part of the development of the Land, Seller will extend that part of
the truck court to be located on the Land onto the Adjacent Tract for
approximately 20 feet. Such Extended Truck Court Area is contemplated by the
general construction features described on Exhibit "D" and thereby constitutes
part of the Improvements to be built at Seller's cost. The Extended Truck
Court Area is necessary to meet Purchaser's specifications and requirements.
At Closing, Seller and Purchaser agree to enter into a Reciprocal Access
Easement and Maintenance Agreement (herein the EASEMENT AGREEMENT) governing
the rights of use and maintenance obligations of the owner of the Land and the
Adjacent Tract from time to time with respect to the truck court and access
thereto. Without limitation, the terms of the Easement Agreement will include
the following:
(i) Upon completion of the 20 foot extension of the truck court
onto the Adjacent Tract (herein the EXTENDED TRUCK COURT
AREA), Purchaser will have a non-exclusive easement over the
Extended Truck Court Area;
(ii) Provided that the Adjacent Tract is developed in such a way
that any part of the truck court built thereon (exclusive of
the Extended Truck Court Area) is contiguous with the Extended
Truck Court Area or any part of the truck court on the Land,
the owner of the Adjacent Tract will have unrestricted ingress
and egress rights over that portion of the truck court on the
Land extending 20 feet eastward from the west boundary line of
the Land. This area is identified on the Site Plan as the
RECIPROCAL EASEMENT AREA; however, the Reciprocal Easement
Area will also include the Extended Truck Court Area. The
owner of the Adjacent Tract will also have an easement for
ingress and egress to the Adjacent Tract over that portion of
the Land identified on the Site Plan as the SHARED ACCESS
DRIVE; and
(iii) Prior to the later to occur of (A) the Adjacent Tract being
developed in such a way that any part of the truck court built
thereon (exclusive of the Extended Truck Court Area) is
contiguous with the Extended Truck Court Area or any part of
the truck court on the Land, and (B) the date that the
Adjacent Tract is first occupied by a "user" thereof (i.e., an
occupant who is physically occupying the Adjacent Tract and
conducting business operations there), Purchaser will be
solely responsible for maintaining the Reciprocal Easement
Area (inclusive of the Extended Truck Court Area) and the
Shared Access Drive. From and after such time, the owner of
the Adjacent Tract will maintain that portion of the
Reciprocal Easement Area located on the Adjacent Tract
(comprised solely of the Extended Truck Court Area) and
Purchaser will maintain (A)that portion of the Reciprocal
Easement Area located on the Land, and (B) the Shared Access
Area; provided that the owner of the Adjacent Tract will be
responsible for 50% of the actual reasonable costs of
maintaining the Shared Access Drive. Notwithstanding the
above, if Purchaser, its employees, agents, vendors,
customers, lessees or licensees cause damage to the Shared
Access Drive or any portion of the Reciprocal Easement Area,
whether or not such portion is on the Land or part of the
Extended Truck Court Area, beyond reasonable wear and tear,
Purchaser will be solely responsible for repairing such damage
and the cost thereof. Likewise, if the owner of the Adjacent
Tract,
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its employees, lessees, agents, vendors, customers or
licensees cause damage to the Shared Access Drive or to any
portion of the Reciprocal Easement Area, whether or not such
portion is on the Land or part of the Extended Truck Court
Area, beyond reasonable wear and tear, the owner of the
Adjacent Tract will be solely responsible for the cost of
repairing such damage.
As soon as possible after the Effective Date, Seller and Purchaser
will finalize the form of the Easement Agreement and such will be attached to
this Contract as Exhibit "M" without further amendment hereto. Seller and
Purchaser will endeavor to finalize the Easement Agreement within thirty (30)
days after the Effective Date. Additionally, as soon as possible after the
Effective Date Seller will cause the Extended Truck Court Area to be surveyed
and a field notes description obtained such that Purchaser can cause the
easements in the Easement Agreement to be insured by the Title Company.
5. DUE DILIGENCE.
(a) Inspection. So long as this Contract is in effect,
Purchaser and Purchaser's agents, independent contractors, employees and
representatives (all such persons being referred to for purposes of this
paragraph as PURCHASER'S AGENTS) shall be permitted access to the Land to
conduct such tests and feasibility studies of the Property as Purchaser deems
reasonably necessary or advisable provided that such inspections, tests or
studies may not materially interfere with or delay the construction of the
Improvements. The costs and expenses of such inspections and investigation
will be borne solely by Purchaser. Purchaser must in all events restore the
Property to the condition it was in prior to such inspections immediately upon
completion thereof. Purchaser may not allow or permit any liens or
encumbrances to arise or exist against the Land or any part thereof as a result
of Purchaser's inspections. Purchaser hereby indemnifies, shall defend by
counsel acceptable to Seller and holds Seller harmless from and against any
claims, causes of action, damages and expenses (including attorney's fees)
incident to, resulting from or in any way arising out of Purchaser's or
Purchaser's Agent's presence in, on or about the Land, or out of any such test
or inspection conducted by Purchaser on the Land, except to the extent such
result was caused by the Seller's negligence and further provided that
Purchaser will not be liable for the mere discovery of adverse conditions
existing at the Land. Such indemnity shall survive the Closing or any
termination of this Contract and not be merged therein. PURCHASER ACKNOWLEDGES
AND AGREES THAT THE RIGHT OF INSPECTION GRANTED UNDER THIS PARAGRAPH IS GRANTED
MERELY AS A CONVENIENCE TO PURCHASER AND THAT PURCHASER HAS NOT BARGAINED FOR
AND IS NOT BEING GRANTED ANY TERMINATION RIGHT BASED UPON THE RESULTS OF ANY
INSPECTIONS CONDUCTED BY PURCHASER.
(b) Delivery of Documents by Seller. Seller agrees to
cooperate with Purchaser in connection with Purchaser's inspection efforts by
delivering to Purchaser such investigative reports and studies as are obtained
by Seller in connection with Seller's due diligence efforts relevant to its
purchase of Seller's Land or in connection with the Improvements to be
constructed by Seller, as hereinafter provided. Specifically, Purchaser
acknowledges receipt of the reports and studies described on Exhibit "F"
attached hereto and incorporated herein by reference. Seller represents and
warrants to Purchaser that as of the Effective Date these are the only
investigative reports and studies relevant to the matters discussed in the
first sentence of this subparagraph that have been obtained by Seller. Seller
further represents and warrants that it will provide Purchaser with a copy of
any similar studies or reports obtained by Seller after the Effective Date.
NOTWITHSTANDING THE ABOVE, AND EXCEPT AS EXPRESSLY AND SPECIFICALLY SET FORTH
IN PARAGRAPH 10(A) BELOW, SELLER HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR
VERIFICATION OF SUCH INFORMATION AND MAKES NO, AND HEREBY EXPRESSLY DISCLAIMS
ANY, REPRESENTATIONS OR WARRANTIES REGARDING THE TRUTH, ACCURACY OR
COMPLETENESS OF ANY INFORMATION HERETOFORE OR HEREAFTER PROVIDED OR MADE
AVAILABLE TO PURCHASER THAT WAS PREPARED BY THIRD PARTIES, AND
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PURCHASER ACKNOWLEDGES AND AGREES THAT ALL SUCH MATERIALS AND ANY OTHER SIMILAR
TYPE INFORMATION PROVIDED TO PURCHASER ARE PROVIDED AS A CONVENIENCE ONLY AND
THAT ANY RELIANCE OR USE OF SUCH MATERIALS OR OTHER INFORMATION WILL BE AT THE
SOLE RISK OF PURCHASER. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET
FORTH IN PARAGRAPH 10(A), SELLER SHALL NOT BE LIABLE FOR ANY NEGLIGENT
MISREPRESENTATION OR ANY FAILURE TO INVESTIGATE THE PROPERTY NOR SHALL SELLER
BE BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS,
APPRAISALS, ENVIRONMENTAL ASSESSMENT REPORTS, OR OTHER INFORMATION PERTAINING
TO THE PROPERTY OR THE OPERATION THEREOF, FURNISHED BY SELLER, OR BY ANY REAL
ESTATE BROKER, AGENT, REPRESENTATIVE, EMPLOYEE, SERVANT OR OTHER PERSON ACTING
ON SELLER'S BEHALF. Seller represents and warrants to Purchaser that Seller
has no current actual knowledge that any reports or studies heretofore
delivered to Purchaser are inaccurate and such representation and warranty will
apply also to any other reports or studies provided to Purchaser except to the
extent that Seller notifies Purchaser of any actual or suspected inaccuracies.
Seller will have no obligation to inquire as to the accuracy of any reports or
studies obtained by Seller and delivered to Purchaser.
6. DESIGN/BUILD AGREEMENT.
(a) Improvements to be Constructed. Seller agrees to
construct on the Land, at Seller's sole cost and expense (subject to
subparagraph (k) below), a warehouse building containing the features generally
set forth on Exhibit "D" attached hereto and incorporated herein by reference
and as depicted on the Site Plan (the IMPROVEMENTS). Subject to Force Majeure
(hereinafter defined) and delay(s) caused by Purchaser or Purchaser's Agents in
connection with Purchaser's inspection of the Real Property, the installation
of Purchaser's property and fixtures or otherwise, due to requests for changes
to the manner of construction of the Improvements not encompassed by the
construction features described on Exhibit "D" or the Plans (hereinafter
defined), due to Purchaser's requests for changes to the Plans, due to
Purchaser's requests for change orders after construction has commenced or due
to interference with Seller's architects, engineers or contractors by Purchaser
or Purchaser's Agents (individually a PURCHASER DELAY and collectively,
PURCHASER DELAYS), Seller will use good faith efforts to cause the Improvements
to be substantially completed (hereinafter defined) by that date that is 220
days after the Effective Date (the TARGET COMPLETION DATE).
(b) Plans and Specifications. Seller intends to prepare
plans and specifications for the construction of the Improvements on a
"staggered basis"; that is, the plans and specifications for earth moving and
foundation work will necessarily be prepared prior to plans and specifications
for subsequent work. the plans and specifications prepared by Seller will be in
substantial accordance with the general construction features described on
Exhibit "D". The parties agree that this method of plans and specifications
preparation is necessary to allow Seller to promptly commence earth moving and
foundation work and to substantially complete the Improvements by the Target
Completion Date. Seller will deliver to Purchaser plans and specifications for
the construction of each element of the Improvements as Seller's architect
prepares them. Purchaser will have five (5) business days after receipt of
plans and specifications submitted by Seller to approve or, in good faith,
disapprove of same, such to include specific reasons for the disapproval. The
parties agree to work in good faith to finalize all plans and specifications
for the construction of the Improvements. If Purchaser fails to approve or
disapprove of any submitted plans and specifications in writing within this
five (5) business day period, Purchaser will be deemed to have approved of same
in all respects. Plans and specifications as finally approved from time to
time are collectively referred to herein as the PLANS. As each aspect of the
plans and specifications are approved, or deemed approved, they will become a
part of this Contract as Exhibit "E" without the necessity of further amendment
hereto.
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(c) Commencement of Construction. Seller agrees to
commence construction of the Improvements within forty (40) days after the
Effective Date. Construction will be deemed to have commenced at that time
that Seller begins earth moving and grading work.
(d) Substantial Completion. As used herein the term
SUBSTANTIALLY COMPLETE or SUBSTANTIALLY COMPLETED means that, in the opinion of
Seller's architect, each of the following shall have occurred: (i) the
Improvements have been completed substantially in accordance with the Plans,
subject only to the completion of punch- list items, none of which may
materially affect Purchaser's intended use and enjoyment of the Improvements or
the Land and all of which will be completed within thirty (30) days after the
date of the walk-through inspection, as provided below, and (ii) the
Improvements have been completed as necessary for the applicable governmental
authority to issue a certificate of occupancy for the Improvements allowing
Purchaser to occupy the Improvements, and (iii) all utilities required for
Purchaser's operations of the Improvements are in place and operational to the
Improvements, including gas, electricity, water, sanitary sewer, and telephone.
Seller will notify Purchaser of the date that Seller's architect expects the
Improvements to be substantially complete, such notice not to be dated more
than forty-five (45) or less than thirty (30) days prior to the date that is
set forth in such notice for the Improvements to be substantially complete.
Upon receipt of notification from Seller's architect that the Improvements are
substantially complete, Purchaser shall verbally notify Seller of the date
Purchaser intends to make its walk-through inspection of the Improvements to
determine punch-list items, such date to be within five (5) days after
Purchaser's receipt of such notice. Seller's architect will accompany
Purchaser on the walk-through inspection so as to mutually determine the
punch-list of items to be completed or repaired by Seller. Satisfaction of
punch-list items or Purchaser's failure to conduct a walk-through inspection
will not delay the Closing. At Closing, 150% of the amount which, in the
reasonable opinion of Seller's architect, is necessary to complete the
punch-list of items remaining to be completed as determined pursuant to this
subparagraph will be held back from the funds delivered to Seller and held in
escrow by the Title Company. This amount will be delivered to Seller at such
time as the punch-list items have been completed. Seller will inform Purchaser
of the amount determined by Seller's architect necessary to complete the
punch-list items, and Purchaser may reasonably object to same. Nonetheless,
Seller will be responsible for paying the entire cost of completing the
punch-list items, even if such costs exceed the 150% holdback.
(e) Certificate of Substantial Completion. Following
Seller's architect's determination that the Improvements are substantially
complete and provided that (i) Purchaser has actually conducted its
walk-through inspection of the Improvements, or (ii) the time period
established for Purchaser to make its walk-through inspection has expired,
whichever comes first, Seller's architect will issue a Certificate of
Substantial Completion certifying as to the date that Seller's architect
determined the Improvements to be substantially complete, and such certificate
will be conclusive in any dispute as to the date that the Improvements were
substantially completed. The date that the Improvements were actually
substantially complete as noted in the Certificate of Substantial Completion
will be the DATE OF SUBSTANTIAL COMPLETION as that term is used herein.
(f) Contractors. Seller's general contractor will be
McFadden & Miller (CONTRACTOR). Seller agrees to provide Purchaser with a list
of all major subcontractors and major suppliers.
(g) Warranties. For a period of one (1) year following
the Closing Date, Seller will promptly repair all defects in the Improvements,
provided that Purchaser promptly notifies Seller of any defects. The one-year
warranty provided in this paragraph is in addition to and not in limitation of
any other express warranties provided in Paragraph 10(a) below. Seller further
agrees to
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assign to Purchaser at Closing any and all warranties Seller receives from its
contractors and suppliers in connection with the Improvements; provided that
such assignment shall not prevent Seller from enforcing same. In this regard,
Seller agrees to provide Purchaser with copies of all proposed warranties as
they are submitted to Seller from time to time in connection with the
construction of the Improvements. If for any reason Purchaser objects to the
form of the warranty, Seller agrees to cause its general contractor to "shop"
the work to be covered by the warranty in hopes of obtaining a warranty on
terms acceptable to Purchaser; provided, however, that any delay in
substantially completing the Improvements caused thereby will be a Purchaser's
Delay. Additionally, the Purchase Price will be increased or decreased by the
additional cost or savings to Seller obtained through shopping the work to be
covered by the warranty. Notwithstanding the above, Purchaser agrees that
standard industry warranties customary in the industry for the work to be
covered will not be objectionable, and Seller agrees to obtain at least
standard industry warranties from generally recognized contractors,
subcontractors and suppliers.
(h) Work by Purchaser's Agents. Upon request by Purchaser,
Seller shall permit Purchaser and its contractors to enter the Land prior to
the Date of Substantial Completion so that Purchaser may perform through its
own contractor(s) (who must be approved by Seller, such not to be unreasonably
withheld) other work and decorations Purchaser wants in the Improvements. This
license to enter prior to the Date of Substantial Completion is subject to
the following conditions:
o In the sole, but reasonable, opinion of Seller's architect,
the Improvements shall have been completed to a point that
work by Purchaser's Agents may commence without delaying the
completion of the Improvements or preventing the completion of
any aspect thereof or materially increasing the cost thereof;
o Purchaser's contractor(s) must work in harmony and not
unreasonably interfere with Seller's contractors and
subcontractors; and
o Purchaser must deliver evidence to Seller that Purchaser and
Purchaser's contractors are carrying insurance in a form and
in amounts reasonably acceptable to Seller.
Seller may revoke this license if any of the conditions are not
satisfied from time to time upon three business days notice to Purchaser. To
the extent that the conditions are satisfied, Seller will cause its general
contractor to ensure that it and its subcontractors do not unreasonably
interfere with the completion of work performed by Purchaser's Agents. Seller
will not be liable in any way for any injury, loss, or damage that occurs to
any of Purchaser's decorations or installations made prior to the Date of
Substantial Completion except to the extent due to Seller's or its
contractors, agents, officers, partners, servants, contractors and employees
(collectively SELLER PARTIES) negligence or willful misconduct. Purchaser
shall indemnify, defend, and hold Seller harmless from any claims, demands,
actions, losses, and damages arising from activities of Purchaser or any of
Purchaser's Agents except to the extent due to Seller's or any Seller
Parties' negligence or willful misconduct.
(i) Approval of Testing Standards. Purchaser
acknowledges that it has received and reviewed the construction materials
testing standards (CMTS) attached hereto as Exhibit "G" and incorporated herein
by reference. Seller agrees to perform, or cause to be performed, all tests
and inspections and cause all reports to be made as required by the CMTS.
(j) Construction Meetings. Seller agrees to formally
meet with Purchaser, Seller's architect and the general contractor together at
least once per month to jointly review the progress of construction and to
discuss any other matters pertaining to the construction of the Improvements.
Seller will cause
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minutes of these meetings to be prepared and provided to Purchaser. Seller
will otherwise keep Purchaser reasonably informed as to the progress of
Improvements and agrees to meet with Purchaser upon request to discuss same.
If Purchaser requests additional meetings with the architect, the general
contractor and/or the subcontractors, any professional fees incurred for such
additional meetings will be at Purchaser's sole cost (Seller agrees that no
such professional fees will be charged by Seller for such additional meetings).
Purchaser agrees that any comments or concerns it may have regarding the
construction of the Improvements should be directed solely to Seller and not to
its general contractor or any subcontractor. This is necessary to preserve
established lines of communication and to prevent confusion among the various
contractors as to from whom they are to receive instructions.
(k) Adjustment to the Purchase Price. The parties agree that
the Purchase Price is inclusive of the cost of completing the Improvements as
contemplated by the general construction features attached hereto as Exhibit
"D". Notwithstanding such, the Purchase Price will be adjusted upward by:
o any additional cost to Seller caused by the discovery of
adverse subsurface soil conditions not described in any of the
reports set forth on Exhibit "F"; provided that the Purchase
Price will not be increased more than $150,000.00 for such
adverse subsurface soil conditions;
o any additional cost to Seller in revising any preliminary
plans and specifications due to material changes thereto
requested by Purchaser not contemplated by the general
construction features described on Exhibit "D";
o any additional cost to Seller in completing the Improvements
due to change order or work order requests of Purchaser,
inclusive of the cost of preparing plans and specifications
therefor; and
o any costs incurred by Seller as a result of Purchaser Delays.
If any change order or work order requests result in a savings to Seller in
completing the Improvements, the Purchase Price will be reduced to reflect that
savings; provided, however that Purchaser may not request any change or work
order that materially varies from construction requirements generally described
on Exhibit "D" or the Plans or that would violate Applicable Laws.
7. CONDITIONS TO CLOSING. In addition to any other express
conditions to closing set forth in this Contract, the satisfaction of the
following will be conditions to Closing:
(a) Seller has informed Purchaser that Seller is under
contract to purchase the Seller's Land. Notwithstanding any provision herein
to the contrary, Seller's and Purchaser's obligations hereunder are expressly
conditioned upon Seller having acquired fee simple title to the Seller's Land
on or before May 31, 1995 [Purchaser's and Seller's benefit].
(b) The applicable governmental authority shall have issued a
certificate of occupancy allowing Purchaser to occupy the Improvements
[Purchaser's benefit].
(c) The Title Company shall be unconditionally and
irrevocably committed to issuing in Purchaser's name the Owner's Policy
insuring good and indefeasible fee simple title to the Land, subject only to
the Permitted Exceptions [Purchaser's benefit].
(d) If determined to be necessary by Seller or applicable
governmental authorities, the Land will have been replatted [Seller's benefit].
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In such event, Seller agrees to cause the Land to replatted at its sole cost;
provided that Purchaser shall cooperate with such efforts as requested by
Seller and will not unreasonably withhold its consent to any form of such
replat. Such replat and all matters shown thereon will also be Permitted
Exceptions as that term is used in this Contract.
(e) Purchaser shall have received an as-built survey of the
Land showing the Improvements thereon and true, correct and complete copies of
all plans, specifications and drawings utilized in the construction of the
Improvements, inclusive of the Plans [Purchaser's benefit].
(f) Seller shall have obtained and recorded lien waivers from
its general contractor and all subcontractors or other evidence reasonably
satisfactory to Purchaser that no such persons have any claim against the
Property by virtue of work performed or materials supplied by them [Purchaser's
benefit].
(g) Seller shall have obtained and delivered to Purchaser any
approvals, estoppel letters and other documents necessary to evidence that (i)
all applicable property owners' associations and applicable committee's thereof
have approved of the design of and the Plans for the Improvements, and (ii)
there are no unpaid assessments with respect to the Real Property and no liens
have been filed against the Real Property with respect to any unpaid
assessments.
In the event that all of the above conditions are not satisfied by the
date scheduled for closing or the date otherwise set forth above for
satisfaction thereof, the party for whom such condition was imposed may waive
the condition or conditioned upon giving ten (10) days notice and opportunity
to cure the failure of such condition, terminate this Contract by written
notice to the other, in which event the Earnest Money will be returned to
Purchaser and neither party will thereafter have any obligation to the other
except for those that by their terms expressly survive termination hereof. If
such condition is waived, the Closing will take place as scheduled with no
reduction in the Purchase Price. The failure of a condition to be satisfied
will not constitute an event of default hereunder by either party.
Notwithstanding the provisions of this paragraph to the contrary, no grace or
cure period will be required with respect to the condition set forth in
subparagraph (a) above.
Additionally, notwithstanding subsection (f) of this paragraph, if on
the Closing Date Seller or Purchaser is aware of any claim or threatened claim
by any of the persons referenced in subsection (f) against the Property for
work performed or materials supplied by or on behalf of Seller, and except as
provided in the last sentence of this paragraph, the Closing will take place
notwithstanding such claim and without reduction in the Purchase Price provided
that Seller will take such steps as required by the Title Company for it to
issue the Owner's Policy without exception to such lien (i.e., by bonding such
lien or escrowing with the Title Company an amount sufficient to pay the lien
in the event Seller cannot cause it to be removed). If any of several
alternatives are available to accomplish this, Seller may pick any such
alternative in its sole discretion. Seller will in any event indemnify and
hold Purchaser, Purchaser's lender and the Property harmless from and against
such claim. Additionally, if the claim evidenced by the lien is in excess of
$25,000.00, Purchaser may elect to delay the Closing until Seller has provided
reasonably satisfactory evidence that the lien has been released or satisfied
and further provided that if Seller has not caused such claim to be released or
satisfied by that date that is ninety (90) days after the Scheduled Closing
Date (hereinafter defined), as such may be extended, Purchaser may elect to
terminate this Contract.
8. CLOSING.
(a) Closing Date. The consummation of the sale and
purchase of the
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Property provided for in this Contract (the CLOSING) will occur on that date
(the SCHEDULED CLOSING DATE) that is twenty (20) days after the later to occur
of (i) the date of Purchaser's receipt of the Certificate of Substantial
Completion, and (ii) the date that Seller obtains and delivers to Purchaser a
certificate of occupancy allowing Purchaser to occupy the Improvements.
Additionally, if Purchaser informs Seller in writing prior to the Scheduled
Closing Date that Purchaser cannot close on that date because Purchaser's
lender is not in position to fund on that date, then the Scheduled Closing Date
will be extended for ten (10) days. The date upon which the Closing actually
occurs will be the CLOSING DATE as that term is used in this Contract.
(b) Documents and Other Items to be Delivered by Seller
at Closing. Seller will execute and deliver to the Title Company at or prior
to the Closing:
(i) A Special Warranty Deed (DEED) in the form of
Exhibit "H" attached hereto and incorporated herein by reference,
conveying the Real Property to Purchaser subject only to the Permitted
Exceptions;
(ii) A Bill of Sale and Assignment in the form of
that attached hereto as Exhibit "I" and incorporated herein by
reference transferring to Purchaser the Personalty;
(iii) Payment for the Owner's Policy in an amount
equal to the Purchase Price;
(iv) An affidavit in compliance with Section 1445
of the Internal Revenue Code of 1986 (IRC), as amended, and applicable
regulations promulgated thereunder, in the form set forth as Exhibit
"J" attached hereto and incorporated herein by reference, stating that
Seller is not a "foreign person" as that term is defined in the
Section 1445 of the IRC and the applicable regulations promulgated
thereunder;
(v) A Certificate of Affidavit of Debts, Liens and
Parties in Possession on the Title Company's standard form thereof;
(vii) The Easement Agreement; and
(viii) Such evidence or documents as may be
reasonably required by the Purchaser or the Title Company evidencing
the status and capacity of Seller and the authority of the person or
persons who are executing the various documents on behalf of the
Seller in connection with the sale of the Property.
(c) Documents and Other Items to be Delivered by
Purchaser at Closing. Purchaser will execute, as applicable, and deliver to
the Title Company at or prior to the Closing:
(i) The balance of the Purchase Price in cash or
other Good Funds (the Earnest Money being applied thereto) as adjusted
pursuant to the terms hereof;
(ii) The Easement Agreement; and
(iii) Such evidence or documents as may reasonably be
required by the Seller or the Title Company evidencing the status and
capacity of Purchaser and the authority of the person or persons who
are executing the various documents on behalf of the Purchaser in
connection with the sale of the Property.
(d) Closing Costs. In addition to any costs and expenses
allocated to Seller elsewhere in this Contract, Seller will pay at Closing the
cost of providing the Owner's Policy (provided that Seller will not be
responsible for
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the cost of any endorsements, deletions or modifications desired by Purchaser),
any transfer taxes and one-half of any escrow costs of the Title Company.
Purchaser will pay at Closing the costs of any modifications, deletions or
endorsements it desires to the Title Policy, including specifically the Survey
Exception, the cost of recording the Deed, and one-half of any escrow costs of
the Title Company. Subject to Paragraph 18(k) below, each party will pay their
own attorneys' fees in connection with the transactions contemplated hereby.
(e) Possession of the Property. Upon completion of the
Closing (and whether or not the Deed is actually recorded on the Closing Date),
Purchaser shall have the full and unrestricted right to possession of the
Property, subject to the Permitted Exceptions.
9. PRORATIONS AND ADJUSTMENTS. Ad valorem taxes for the Land for
the year in which the Closing occurs will be prorated at Closing effective as
of 11:59 p.m. on the date immediately preceding the Closing Date. Seller will
pay to Purchaser, in the form of a credit against the balance of the Purchase
Price then due, Seller's pro-rata portion of such taxes. Seller's pro rata
portion of such taxes will be based upon taxes actually assessed for the year
in which the Closing occurs; provided that if ad valorem taxes for such year
have not been assessed on the Real Property as of the Closing Date, such
proration will be estimated based upon ad valorem taxes for the immediately
preceding calendar year, and adjusted when actual amounts are available at the
request of either party hereto. In the event the Land has been assessed for
property tax purposes at such rates as would result in "roll-back" taxes upon a
change in land usage or ownership of the Property, Seller hereby agrees to pay
all such taxes and shall indemnify and save Purchaser harmless from and against
all claims and liability for such taxes. The provisions of this Paragraph 9
will survive the Closing and not merge therein.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Seller's Representations and Warranties. To induce
Purchaser to enter into this Contract, and in addition to any other
representations, warranties and covenants of Seller contained herein, Seller
specifically represents, warrants and covenants the following to Purchaser:
(i) (A) Seller is a duly organized and existing
Delaware corporation and is in good standing and duly qualified to
transact business in Texas; (B) Seller has all requisite power and
authority to enter into this Contract; (C) on the Closing Date Seller
will have all requisite power and authority to consummate the
transactions contemplated herein; (D) each of the persons executing
this Contract on behalf of Seller is authorized to do so; and (E) this
Contract constitutes a valid and legally binding obligation of Seller,
enforceable in accordance with its terms;
(ii) Other than the seller under the contract Seller
is under to purchase Seller's Land, and an agriculture lease that will
be terminated at or prior to Closing, and to Seller's current actual
knowledge on the Effective Date, there are no adverse or other parties
in possession of the Land or any part thereof and Seller has not
granted any license, lease, or other right relating to the use or
possession of the Land or any part thereof;
(iii) All utilities required pursuant to the general
construction features attached hereto as Exhibit "D" or by applicable
law are available to the boundary lines of the Land or, at Seller's
cost, will be made available to the boundary line of the Land in
connection with the construction of the Improvements including,
telephone, gas, water, electricity and sanitary and storm sewer. On
the Closing Date all such utilities will be available to and working
in the Improvements;
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(iv) The Land has, or upon completion of the
Improvements will have, access to a dedicated public right-of-way;
(v) Seller covenants and agrees to construct, or
cause to be constructed, the Improvements in a diligent, good and
workmanlike manner, in compliance with all Applicable Laws, in
accordance with the Plans and the recommendations of the reports
described in item number 2 on Exhibit "F" and using only new materials
of high quality as customary in the industry. As used herein, the
term APPLICABLE LAWS means (a) any and all judicial decisions, orders,
injunctions, writs, statutes, rulings, regulations, permits,
certificates or ordinances of any governmental authority having
jurisdiction over the Property including, without limitation, any of
the aforesaid dealing with the design, construction, ownership, use,
leasing, maintenance, service, operation, or condition of real
property, or zoning, or environmental matters, or parking requirements
and (b) the terms of any other written and oral agreements of which
Seller has knowledge, and any and all restrictions of record,
insurance requirements, documents, or instruments relating to the
Property, or to or by which the Property, or its owner, may be bound
or encumbered.
(vi) On the Closing Date Seller will have good and
indefeasible title to the Real Property and there will be no adverse
or other parties in possession of the Land or any part thereof and
Seller will not have granted any license, lease, or other right
relating to the use or possession of the Land or any part thereof
except pursuant to this Contract;
(vii) Seller has not received any notice of any
civil, criminal, administrative or other action, suit, proceeding
(including, without limitation, zoning or condemnation proceedings)
pending or threatened against the Land, at law or in equity or before
any federal, state municipal or other governmental department,
commission, board, agency or instrumentality;
(viii) Seller has no current actual knowledge that
the Land cannot be developed as contemplated by this Contract.
(ix) Except as may be provided in the documents
described in item no. 1 to Exhibit "F" attached hereto, Seller does
not have any current actual knowledge of any adverse environmental
conditions pertaining to or affecting the Land;
(x) No asbestos will be utilized in the construction
of the Improvements;
(xi) Seller is not a "foreign person" as that term
is defined in Section 1445 of the IRC, and any applicable regulations
promulgated thereunder;
(xii) During the period of Seller's ownership of the
Land, Seller will comply with and obey all Applicable Laws; and
(xiii) Notwithstanding anything in this Contract to
the contrary, that the lease to TSI Prime Time of, and the occupancy
by TSI Prime Time of, approximately 100,000 square feet of warehouse
space, inclusive of 3,000 square feet of office space, within the
Improvements will not cause the Improvements or any portion of the
Property to be in violation of any Applicable Laws.
As used herein, CURRENT ACTUAL KNOWLEDGE means the current, conscious
and actual knowledge of Seller without requirement of inquiry or investigation.
Each
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of the provisions contained in this Section 10(a) shall be true and correct
when made and on the Closing Date and shall survive the Closing for a period of
one (1) year thereafter.
(b) Purchaser's Warranties. In addition to any other
representations, warranties and covenants of Purchaser contained herein,
Purchaser specifically represents, warrants and covenants that (i) Purchaser
(i) is a duly organized and existing Delaware corporation and is in good
standing and duly qualified to transact business in Texas; (ii) Purchaser has
all requisite power and authority to enter into this Contract and to consummate
the transactions contemplated herein; (iii) each of the persons executing this
Contract on behalf of Purchaser is authorized to do so; and (iv) this Contract
constitutes a valid and legally binding obligation of Purchaser, enforceable in
accordance with its terms.
Each of the provisions contained in this Section 10(b) shall be true
and correct when made and on the Closing Date and shall survive the Closing for
a period of one (1) year thereafter.
(c) Disclaimer of Warranties. EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED IN PARAGRAPH 10(A) AND ELSEWHERE IN THIS CONTRACT, PURCHASER
HEREBY ACKNOWLEDGES AND AGREES THAT THE SALE OF THE LAND HEREUNDER IS AND WILL
BE MADE ON AN "AS IS, WHERE IS AND WITH ALL FAULTS" BASIS AND THAT SELLER HAS
NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY
REPRESENTATIONS, WARRANTIES OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER,
WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT, FUTURE OR
OTHERWISE, OF, AS TO, CONCERNING OR WITH RESPECT TO THE LAND, INCLUDING,
WITHOUT LIMITATION, (1) ENVIRONMENTAL MATTERS RELATING TO THE LAND OR ANY
PORTION THEREOF, (2) GEOLOGICAL CONDITIONS, INCLUDING, WITHOUT LIMITATION,
SUBSIDENCE, SUBSURFACE CONDITIONS, WATER TABLE, UNDERGROUND WATER RESERVOIRS,
LIMITATIONS REGARDING THE WITHDRAWAL OF WATER AND FAULTING, (3) WHETHER OR NOT
AND TO THE EXTENT TO WHICH THE PROPERTY OR ANY PORTION THEREOF IS AFFECTED BY
ANY STREAM (SURFACE OR UNDERGROUND), BODY OF WATER, FLOOD PRONE AREA, FLOOD
PLAIN, FLOODWAY OR SPECIAL FLOOD HAZARD, (4) DRAINAGE, (5) SOIL CONDITIONS,
INCLUDING THE EXISTENCE OF INSTABILITY, PAST SOIL REPAIRS, SOIL ADDITIONS OR
CONDITIONS OF SOIL FILL, OR SUSCEPTIBILITY TO LANDSLIDES, OR THE SUFFICIENCY OF
ANY UNDERSCORING, (6) THE PRESENCE OF HAZARDOUS SUBSTANCES IN OR ON, UNDER OR
IN THE VICINITY OF THE PROPERTY, (7) ANY OTHER MATTER AFFECTING THE STABILITY
OR INTEGRITY OF THE LAND, OR (8) THE POTENTIAL FOR FURTHER DEVELOPMENT OF THE
LAND.
(d) PURCHASER'S WAIVER AND RELEASE AS TO THE LAND. AS
PART OF PURCHASER'S AGREEMENT TO PURCHASE AND ACCEPT THE LAND "AS IS, WHERE IS
AND WITH ALL FAULTS", AND SUBJECT TO THE EXPRESS WARRANTIES AND REPRESENTATIONS
OF SELLER IN PARAGRAPH 10(A) AND ELSEWHERE IN THIS CONTRACT, PURCHASER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY AND ALL ACTUAL OR POTENTIAL RIGHTS
PURCHASER MIGHT HAVE REGARDING ANY FORM OF WARRANTY, INCLUDING IMPLIED
WARRANTIES, OF ANY KIND OR TYPE, RELATING TO THE LAND OR ANY OF THE MATTERS
REFERRED TO IN SUBPARAGRAPH (C) ABOVE (PROPERTY CONDITION). SUBJECT TO THE
EXPRESS WARRANTIES AND REPRESENTATIONS OF SELLER IN PARAGRAPH 10(A) AND
ELSEWHERE IN THIS CONTRACT, SUCH WAIVER IS ABSOLUTE, COMPLETE, TOTAL AND
UNLIMITED IN ANY WAY AND INCLUDES A WAIVER OF STRICT LIABILITY RIGHTS, AND
CLAIMS, LIABILITIES, DEMANDS OR CAUSES OF ACTION OF EVERY KIND AND TYPE,
WHETHER STATUTORY, CONTRACTUAL OR UNDER TORT PRINCIPLES, AT LAW OR IN EQUITY,
INCLUDING, BUT NOT LIMITED TO, CLAIMS REGARDING DEFECTS WHICH MIGHT HAVE BEEN
DISCOVERABLE, CLAIMS REGARDING DEFECTS WHICH WERE NOT OR ARE NOT DISCOVERABLE,
ALL OTHER EXTANT OR LATER CREATED OR CONCEIVED OF STRICT LIABILITY OR STRICT
LIABILITY TYPE CLAIMS AND RIGHTS, AND ANY CLAIMS UNDER CERCLA (AS DEFINED
BELOW). SUBJECT TO THE EXPRESS WARRANTIES AND REPRESENTATIONS OF SELLER IN
PARAGRAPH 10(A) AND ELSEWHERE IN THIS CONTRACT, EFFECTIVE UPON THE CLOSING
DATE, AND TO THE FULLEST EXTENT PERMITTED BY LAW, PURCHASER HEREBY RELEASES,
DISCHARGES AND FOREVER ACQUITS SELLER AND EVERY ENTITY AFFILIATED WITH SELLER
AND ALL OF THEIR OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS AND
INDEPENDENT CONTRACTORS AND THE
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SUCCESSOR OF EACH AND EVERY ONE OF THEM FROM ALL DEMANDS, CLAIMS, LIABILITIES,
OBLIGATIONS, COSTS AND EXPENSES WHICH PURCHASER MAY SUFFER OR INCUR RELATING TO
THE PROPERTY CONDITION OR ANY OTHER ASPECT OF THE LAND. AS PART OF THE
PROVISIONS OF THIS SUBPARAGRAPH (D), BUT NOT AS A LIMITATION THEREON, PURCHASER
HEREBY AGREES, REPRESENTS AND WARRANTS THAT THE MATTERS RELEASED HEREIN ARE NOT
LIMITED TO MATTERS WHICH ARE KNOWN OR DISCLOSED. IN THIS CONNECTION AND TO THE
EXTENT PERMITTED BY LAW, PURCHASER HEREBY AGREES, REPRESENTS AND WARRANTS THAT
PURCHASER REALIZES AND ACKNOWLEDGES THAT FACTUAL MATTERS NOW UNKNOWN TO IT MAY
HAVE GIVEN OR MAY HEREAFTER GIVE RISE TO CAUSES OF ACTION, CLAIMS, DEMANDS,
DEBTS, CONTROVERSIES, DAMAGES, COSTS, LOSSES AND EXPENSES WHICH ARE PRESENTLY
UNKNOWN, UNANTICIPATED AND UNSUSPECTED, AND PURCHASER FURTHER AGREES,
REPRESENTS AND WARRANTS THAT THE WAIVERS AND RELEASES HEREIN HAVE BEEN
NEGOTIATED AND AGREED UPON IN LIGHT OF THAT REALIZATION AND THAT PURCHASER
NEVERTHELESS HEREBY INTENDS TO RELEASE, DISCHARGE AND ACQUIT SELLER FROM ANY
SUCH UNKNOWN CAUSES OF ACTION, CLAIMS, DEMANDS, DEBTS, CONTROVERSIES, DAMAGES,
COSTS, LOSSES AND EXPENSES WHICH MIGHT IN ANY WAY BE INCLUDED IN THE WAIVERS
AND MATTERS RELEASED AS SET FORTH IN THIS SUBPARAGRAPH (D); PROVIDED THAT SUCH
WAIVERS AND RELEASES DO NOT NEGATE OR LIMIT THE EFFECT OF THE EXPRESS
WARRANTIES AND REPRESENTATIONS OF SELLER IN PARAGRAPH 10(A) AND ELSEWHERE IN
THIS CONTRACT. THE PROVISIONS OF THIS SUBPARAGRAPH (D) PERTAIN ONLY TO THE
PURCHASE OF THE LAND AND NOT THE IMPROVEMENTS. THE PROVISIONS OF THIS
SUBPARAGRAPH (D) ARE MATERIAL AND INCLUDED AS A MATERIAL PORTION OF THE
CONSIDERATION GIVEN TO SELLER BY PURCHASER IN EXCHANGE FOR SELLER'S PERFORMANCE
HEREUNDER.
(e) DTPA WAIVER. PURCHASER REPRESENTS AND WARRANTS TO
SELLER THAT PURCHASER HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS
MATTERS THAT ENABLE PURCHASER TO EVALUATE THE MERITS AND RISKS OF THE
TRANSACTION CONTEMPLATED BY THIS CONTRACT. FURTHER, PURCHASER ACKNOWLEDGES
THAT IT IS NOT IN A DISPARATE BARGAINING POSITION RELATIVE TO SELLER WITH
RESPECT TO THIS CONTRACT. ACCORDINGLY, TO THE EXTENT APPLICABLE AND PERMITTED
BY LAW (AND WITHOUT ADMITTING SUCH APPLICABILITY), PURCHASER HEREBY WAIVES THE
PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES- CONSUMER PROTECTION ACT,
CHAPTER 17, SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN
SECTION 17.555, WHICH IS NOT WAIVED).
(f) For purposes of this Contract, the term "Hazardous
Substances" means any hazardous, toxic or dangerous waste, substance or
material, pollutant or contaminant, as defined for purposes of the
Comprehensive Environmental Response, Compensation and Liability act of 1980
(42 U.S.C. Sections 9601 et seq.), as amended ("CERCLA"), or the Resource
Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.), as amended, or
any other federal, state or local law, ordinance, rule or regulation applicable
to the property, or any substance which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous, or any substance which contains gasoline, diesel fuel or other
petroleum hydrocarbons, polychlorinated biphenyls (pcbs), or radon gas, urea
formaldehyde, asbestos or lead.
(g) Mutual Release. Without limitation of and in
addition to any other releases or waivers contained in this Contract, Purchaser
and Seller mutually release the other from any and all claims, liabilities,
losses, suits and expenses arising from any adverse environmental condition
occurring on the Land due to the acts of third parties not under the control of
Seller or Purchaser. To the extent that this subparagraph is deemed or held to
conflict with Purchaser's waivers and release contained in subparagraph (d)
above, such subparagraph (d) will control to the extent of such conflict.
(h) Survival. The representations and warranties set
forth in subparagraph (a) and (b) above and elsewhere in this Contract will
survive the Closing for a period of one (1) year. The provisions of
subparagraphs (c), (d), (e), (f), and (g) above and this subparagraph (h) will
survive the Closing indefinitely.
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11. INDEMNIFICATION.
(a) By Seller. Notwithstanding the provisions of ParagraphS
10(c) and (d), but without in any way limiting the representations and
warranties of Paragraph 10(a), Seller hereby agrees to indemnify and hold
harmless Purchaser, and Purchaser's employees, officers, directors, partners,
representatives and agents from and against any and all debts, duties,
obligations, liabilities, suits, claims, demands, causes of action, damages,
losses, costs and expenses (including, without limitation, attorneys' fees and
expenses and court costs) in any way relating to, connected with or arising out
of the Property or the ownership, use, operation, maintenance and management
thereof to the extent, but only to the extent, that the occurrence causing or
leading to the enforcement of such indemnity occurred during the period of time
Seller owned the Property and was caused by Seller, any affiliate of Seller or
any party occupying or operating the Property under the supervision or control
of Seller (i.e., Seller will not be required to indemnify Purchaser for matters
or conditions, including environmental conditions, that existed on the Land or
first arose prior to the date Seller acquired title to the Land or which were
caused by any party other than Seller, an affiliate of Seller or any party
occupying or operating the Property under the supervision or control of
Seller).
(b) By Purchaser. Purchaser hereby agrees to indemnify,
protect, defend, save and hold harmless Seller, and Seller's employees,
officers, directors, partners, representatives and agents from and against any
and all debts, duties, obligations, liabilities, suits, claims, demands, causes
of action, damages, losses, costs and expenses (including, without limitation,
attorneys' fees and expenses and court costs) in any way relating to, connected
with or arising out of (i) the Property or the ownership, leasing, use,
operation, maintenance and management thereof from and after the Closing Date,
but, except as may be otherwise noted elsewhere herein, only to the extent that
the occurrence causing or leading to the enforcement of such indemnity first
occurred or arose during the period that Purchaser or any affiliate of
Purchaser owned, occupied, managed, controlled or operated the Property and was
caused by Purchaser or such affiliate or any party operating or occupying the
Property under the supervision or control of Purchaser; and (ii) Purchaser's
inspections or examination thereof as provided in Paragraph 5(a).
The indemnities in this Paragraph 11(a) and (b) will survive the
Closing indefinitely and not be merged therein.
12. PERMITTED TERMINATION BY PURCHASER. If Purchaser properly
terminates this Contract pursuant to a right granted to Purchaser hereunder to
do so, including the right to terminate for Seller's default set forth in
Paragraph 13(b), the Earnest Money will be returned to Purchaser. Upon
Purchaser's receipt of the Earnest Money, neither party will thereafter have
any further rights or obligations, one to the other, except for obligations
which by their terms expressly survive the termination of this Contract.
13. DEFAULT AND REMEDIES.
(a) Purchaser's Default.
(i) Purchaser acknowledges and agrees that, in
reliance upon the agreements of Purchaser contained herein, Seller
will incur significant expense in constructing the Improvements.
Additionally, the Improvements are being constructed specifically for
Purchaser and in accordance with design specifications required by
Purchaser, thereby being unique to Purchaser. If Purchaser defaults,
the Improvements could not be sold or leased to any other party, if at
all, without significant modification and additional expense.
Furthermore there is no certainty that the Improvements could be sold
or leased at a price equivalent to the Purchase Price. As such, this
transaction is not a common purchase/sale
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of real property in which the seller's position from the standpoint of
measurable costs changes very little between the time of contracting
and closing or default. In such event a seller's damages for default
by a purchaser is commonly limited solely to the earnest money paid by
the purchaser, the parties agreeing that the actual damages are
difficult to measure and the earnest money being a reasonable
approximation thereof and therefore liquidated damages for purchaser's
breach. Purchaser agrees that in this Contract, the Earnest Money may
be less than a reasonable approximation of the damages Seller will
suffer due to a default by Purchaser. Therefore, if Purchaser
defaults under this Contract prior to Closing, Seller will be entitled
to the Earnest Money and will have in addition any and all rights and
remedies available by reason of such default at law, including the
right to seek actual damages and the Purchase Price, or in equity,
and, specifically but without limitation, specific performance of
Purchaser's obligation to purchase the Property. In the event Seller
seeks actual damages, for a period of one (1) year from the date of
Seller's termination of this Contract due to Purchaser's default,
Seller will use reasonable efforts to mitigate and will not act in bad
faith in such efforts to mitigate; provided that Seller will have
satisfied its obligation to use reasonable efforts to mitigate if
Seller (a) places at least one (1) standard sign on the Land
advertising its availability for sale or lease, (b) sends standard
fliers to major real estate brokerage firms in accordance with
Seller's normal and customary business practice, and (c) responds to
inquirers concerning the Property in accordance with Seller's normal
and customary business practice. If Seller actually recovers any
portion of its damages due to a sale or lease of the Property within
five (5) years following termination of this Contract by Seller due to
Purchaser's default and failure to cure, or the entering into of a
sale contract or lease during this five (5) year period that is
actually consummated, whether or not such consummation occurs after
the expiration of this five (5) year period, Seller's actual damages
will be reduced by the amount of such recovery, less Seller's cost and
expense incurred in connection with same including, without
limitation, attorneys' fees, brokers' commissions, marketing costs and
the cost of modifying the Improvements to meet the requirements of
such new purchaser or tenant.
(ii) In the event of any breach by Purchaser after
Closing of any covenant, representation or indemnity, which survives
the Closing, Seller may recover from Purchaser its actual damages
arising from such default.
(iii) In the event Purchaser files a lis pendens or
an action for specific performance against Seller or otherwise clouds
Seller's title to the Property and fails to prevail in a final,
non-appealable judgment, Seller shall be entitled to pursue any
remedies available at law or in equity with respect thereto,
including, but not limited to, suit for damages, attorney's fees and
costs.
(iv) Notwithstanding the above, in no event will
Purchaser be liable to Seller for any punitive, speculative or
consequential damages.
(b) Seller's Default.
(i) If Seller wrongfully fails to close the
transaction contemplated by this Contract, or, and except as
specifically provided in subparagraph (b)(ii) below with respect to
Seller's failure to substantially complete the Improvements, if Seller
otherwise wrongfully fails to perform any of its obligations or
agreements hereunder, either prior to or at Closing, Purchaser may, AS
ITS SOLE AND EXCLUSIVE REMEDIES THEREFOR, either (a) terminate this
Contract and recover the Earnest Money and seek actual damages against
Seller for up to, but not in excess of
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$1,000,000.00, or (b) seek specific performance of Seller's
obligations hereunder. Except as provided in subparagraph (b)(iv), in
no event shall Seller be liable to Purchaser for any actual damages in
excess of $1,000,000.00 or any punitive, speculative, consequential or
other damages.
(ii) If for any reason other than Force Majeure or
Purchaser Delays, both the Date of Substantial Completion has not
occurred and a certificate of occupancy has not been obtained and
delivered to Purchaser by the later to occur of (1) 240 days after the
Effective Date, or (2) December 31, 1995, Seller will pay to Purchaser
as liquidated damages, and Purchaser's sole and exclusive remedy will
be, the amount of $2,500.00 per day from and after the later to occur
of (1) 240 days after the Effective Date, or (2) December 31, 1995,
and ending on the date that both the Date of Substantial Completion
has occurred and a certificate of occupancy has been obtained and
delivered to Purchaser. Additionally, and except as provided in
subparagraph (b)(iii) below, Seller will not be in default for failure
to substantially complete the Improvements such that Purchaser may
exercise any remedies provided for in this Contract other than that
provided in the preceding sentence, if applicable, unless the Date of
Substantial Completion has not occurred and Seller has not delivered
to Purchaser the certificate of occupancy (A) within 310 days after
the Effective Date for reasons other than Force Majeure or Purchaser
Delays; or (B) within 340 days after the Effective Date for any reason
other than Purchaser Delays, and in either of such events, Purchaser
will have the remedies set forth in subparagraph (b)(i) above for
Seller's default.
(iii) Notwithstanding any provision herein to the
contrary, Seller will be in default if Seller abandons the
construction site and stops construction for thirty (30) continuous
days for any reason other than Purchaser's default or Force Majeure
and Seller does not recommence construction within fifteen (15) days
after receipt of written notice, subject to Force Majeure; provided
that if Purchaser has previously given Seller two (2) such written
notices under this subparagraph, no further notice will be required as
a condition to Purchaser's exercise of the remedies set forth in
subparagraph (b)(i).
(iv) In the event of any default by Seller after
Closing of any covenant, warranty, representation or indemnity, which
survives the Closing, including specifically the warranty contained in
Paragraph 6(g) above, Purchaser may recover from Seller its actual
damages arising from such default and their will be no cap on the
amount of such actual damages.
(c) Disposition of the Earnest Money. In the event that
under any provision of this Contract one of the parties becomes entitled to the
Earnest Money, the other party agrees to promptly execute any documentation
requested by the Title Company to allow the release of the Earnest Money to
such entitle party and the failure to do so will constitute an event of default
hereunder.
(d) Notice and Opportunity to Cure. Notwithstanding
Paragraphs 13(a) and (b) above, no party will be in default hereunder until the
other party first provides written notice of the alleged default and such
default is not cured within ten (10) days after the effective date of such
notice. Additionally, if Purchaser fails to close on the date scheduled for
Closing due to a Major Event, Purchaser will not be in default hereunder unless
Purchaser fails to close within 90 days after receipt of written notice from
Seller. As used herein, a MAJOR EVENT means the physical destruction of or
damage to the plant or factory located in Taiwan and currently owned or
utilized by Purchaser to supply its United States operations to the extent that
Purchaser's operations in the United States are materially affected and cannot
be continued in the
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manner they were conducted immediately prior to such Major Event.
(e) Survival. The provisions of this Paragraph 13 will
survive the Closing and not be merged therein
14. COMMISSION AND ABSTRACT. If and only if, as and when this
transaction is closed, Seller shall be solely responsible for and shall pay a
real estate commission (the COMMISSION) to Jackson & Cooksey (hereinafter
referred to as the BROKERS, whether one or more) pursuant to the a separate
written agreement between Seller and Broker. It is expressly understood,
acknowledged and agreed that the Brokers' right to such Commission shall vest
only upon the actual Closing and consummation of this Contract and no
Commission shall be earned, due or owing in the event the purchase and sale
transaction contemplated herein shall fail to close for any reason whatsoever
including, but not limited to, the default of either Seller or Purchaser. The
Brokers shall divide the Commission as provided hereinabove, and Seller shall,
notwithstanding any contrary agreement for division of Commission, be fully
protected in paying such Commission (or portion thereof) then due and owing to
such Brokers in accordance with the allocation stated hereinabove or, at
Seller's option, by depositing such Commission then due and owing with the
Title Company pending resolution by all of the parties constituting Brokers of
any dispute with respect thereto. In no event whatsoever shall any Broker be
entitled to receive any portion of the Earnest Money. Each party hereto
represents to the other that, except as set forth above with respect to the
Brokers, it has not authorized any broker or finder to act on its behalf in
connection with the sale and purchase transaction contemplated hereby and that
it has not dealt with any broker or finder purporting to act for any other
party. Each as to any commission owed to Brokers pursuant to this paragraph,
which will be Seller's responsibility, each party hereto agrees to indemnify
and hold harmless the other party from and against any and all liabilities,
costs, damages and expenses of any kind or character arising from any claims
for brokerage or finder's fees, commissions or other similar fees in connection
with the transactions covered by this Contract insofar as such claims shall be
based upon alleged arrangements or agreements made by such party or on its
behalf, which indemnity shall expressly survive any termination or Closing of
this Contract. The Texas Real Estate License Act requires written notice to
Purchaser that Purchaser should have an attorney examine an abstract of title
to the Property or else obtain a title insurance policy. Notice to that effect
is, therefore, hereby given to Purchaser.
15. ASSIGNMENT. This Contract shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns; provided, however, that:
(a) except with respect to a Permitted Assignment
(hereinafter defined) Purchaser may not assign its rights or obligations
hereunder without the express prior written consent of Seller, such not to be
unreasonably withheld.
(b) except with respect to a Permitted Assignment, Seller may
not assign any of its rights or obligations under this Contract without the
express prior written consent of Purchaser.
(c) For purposes hereof, a Permitted Assignment is an
assignment to an entity controlling, controlled by, or under common control
with the entity seeking to assign.
(d) The assigning party agrees to furnish to the other party
such information with respect to a proposed assignee and the proposed terms of
the assignment as such party may request.
(e) No assignment will operate to release the assigning party
from any liability or obligations under this Contract by virtue of any such
assignment, and such party will remain primarily liable for such obligations.
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<PAGE> 21
Any assignment of this Contract in violation of the provisions of this
Paragraph 16 will be null and void.
16. CONDEMNATION/CASUALTY.
(a) Condemnation. In the event that all or any
substantial portion (hereinafter defined) of the Real Property is taken in
condemnation or by conveyance in lieu thereof or under the right of eminent
domain after the Effective Date and before the Closing, Purchaser may, at its
option, either (i) terminate this Contract by written notice thereof to Seller
within ten (10) days after Seller notifies Purchaser of the condemnation, or
(ii) proceed to close the transaction contemplated herein pursuant to the terms
hereof, in which event Seller shall deliver to Purchaser at the Closing any
proceeds actually received by Seller attributable to the Property from such
condemnation or eminent domain proceeding or conveyance in lieu thereof and
assign to Purchaser Seller's rights to such proceeds, and there shall be no
reduction in the Purchase Price. In the event Purchaser fails to timely
deliver written notice of termination as described in clause (i) above,
Purchaser will be deemed to have elected to proceed in accordance with clause
(ii) above. If the taking does not involve a substantial portion of the Real
Property, then Purchaser shall be obligated to close the transaction
contemplated herein according to the terms hereof, notwithstanding such taking,
and Seller will deliver to Purchaser at Closing any and all awards or
consideration attributable to such taking, and there will be no reduction in
the Purchase Price. For purposes of this paragraph, a SUBSTANTIAL PORTION will
be taken or condemned if (i) such taking or condemnation materially affects the
proposed use and utility of the Real Property to the extent that it cannot
reasonably be used for the purposes for which Purchaser intends or (ii) the
value of the area taken or condemned is equal to or greater than ten percent
(10%) of the value of the Real Property as established by the Purchase Price ,
(iii) the taking or condemnation affects ten percent (10%) or more of the
aggregate gross number of square feet contained in the Land, or (iv) such
taking or condemnation causes any portion of the remainder of the Real Property
to be in violation of Applicable Laws.
(b) Casualty. Risk of loss due to casualty shall be
borne by Seller until Closing. Seller shall carry or cause to be carried
insurance in amounts sufficient to restore any of the Improvements damaged by
casualty to the condition they were in immediately prior to such casualty.
Seller will in any event restore any of the Improvements damaged by casualty as
part of its obligation to construct the Improvements; provided that such event
will be and is included within the definition of Force Majeure for all
purposes.
17. CONFIDENTIALITY. Each party hereto agrees to keep
confidential any information obtained by such party or provided by the other
party in connection with the transaction contemplated by this Contract. Such
information includes, without limitation (i) financial information pertaining
to the other party, (ii) information contained in any studies or reports
provided to or obtained by a party and pertaining to the Property, and (iii)
the terms of this Contract. The foregoing covenants expressly and indefinitely
survive the termination of this Contract.
18. MISCELLANEOUS PROVISIONS.
(a) Entire Agreement. THE PARTIES HERETO EXPRESSLY
ACKNOWLEDGE AND AGREE THAT, WITH REGARD TO THE SUBJECT MATTER OF THIS CONTRACT
AND THE TRANSACTIONS CONTEMPLATED HEREIN (I) THERE ARE NO ORAL AGREEMENTS
BETWEEN THE PARTIES HERETO; AND (II) THIS CONTRACT, INCLUDING THE DEFINED TERMS
AND ALL EXHIBITS AND ADDENDUM, IF ANY, ATTACHED HERETO, AND ALL DOCUMENTS
EXECUTED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY (1) EMBODIES
THE FINAL AND COMPLETE AGREEMENT BETWEEN THE PARTIES; (2) SUPERSEDES ALL PRIOR
AND CONTEMPORANEOUS NEGOTIATIONS, OFFERS, PROPOSALS, AGREEMENTS, COMMITMENTS,
PROMISES, ACTS, CONDUCT, COURSE OF DEALING, REPRESENTATIONS, STATEMENTS,
20
<PAGE> 22
ASSURANCES AND UNDERSTANDINGS, WHETHER ORAL OR WRITTEN, AND (3) MAY NOT BE
VARIED OR CONTRADICTED BY EVIDENCE OF ANY SUCH PRIOR OR CONTEMPORANEOUS MATTER
OR BY EVIDENCE OF ANY SUBSEQUENT ORAL AGREEMENT OF THE PARTIES HERETO.
(b) Force Majeure. Neither Seller nor Purchaser shall be
held responsible for any delay in the performance of their respective
obligations hereunder caused by Force Majeure, and such delays shall be
excluded from the computation of the time allowed for the performance of such
obligations. As used herein, FORCE MAJEURE shall mean a delay caused by reason
of fire, acts of God, unreasonable delays in transportation, embargo, weather,
strike, other labor disputes, delays caused by governmental entities,
governmental preemption of priorities or other controls in connection with a
national or other public emergency, or shortages of fuel, supplies or labor or
any similar cause not within Seller's or Purchaser's, as applicable, reasonable
control. By the fifth day of each month, Seller will endeavor to provide
Purchaser with the number of days Seller expects that the Date of Substantial
Completion will be delayed by Force Majeure events occurring during the
previous month; provided that Seller will not be estopped from claiming such
delay days as being caused by Force Majeure unless Seller fails to notify
Purchaser in writing of such Force Majeure events during the calendar month
immediately following the month in which such events occurred.
(c) Nonwaiver. Unless otherwise expressly provided
herein, no waiver by Seller or Purchaser of any provision hereof shall be
deemed to have been made unless expressed in writing and signed by such party.
No delay or omission in the exercise of any right or remedy accruing to Seller
or Purchaser upon any breach under this Contract shall impair such right or
remedy or be construed as a waiver of any such breach theretofore or thereafter
occurring. The waiver by Seller or Purchaser of any breach of any term,
covenant or condition herein stated shall not be deemed to be a waiver of any
other breach, or of a subsequent breach of the same or any other term, covenant
or condition herein contained. All rights, powers, options or remedies
afforded to Seller or Purchaser either hereunder or by law shall be cumulative
and not alternative, and the exercise of one right, power, option or remedy
shall not bar other rights, powers, options or remedies allowed herein or by
law, unless expressly provided to the contrary herein.
(d) Further Acts and Assurances. In addition to the acts
and deeds recited herein and contemplated to be performed, executed and/or
delivered by the parties, the parties will perform, execute and/or deliver or
cause to be performed, executed and/or delivered at the Closing or after the
Closing, any and all further acts, deeds and assurances as each party or the
Title Company may reasonably require to consummate the transaction contemplated
hereunder.
(e) Governing Law. THIS CONTRACT SHALL BE CONSTRUED
UNDER AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS OTHER THAN THE
CONFLICT OF LAWS PRINCIPLES THEREOF. IN ANY PROCEEDING RELATING TO THE
TRANSACTION CONTEMPLATED BY THIS CONTRACT, THE VENUE FOR SUCH PROCEEDING SHALL
BE DALLAS COUNTY, TEXAS, UNLESS OTHERWISE REQUIRED BY LAW.
(f) Construction. The parties acknowledge that each
party and its counsel have reviewed and revised this Contract, and the parties
hereby agree that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Contract or any exhibits hereto. The headings
used throughout this instrument have been used for convenience only and do not
constitute matters to be considered in interpreting this Contract.
(g) Severability. In case any one or more of the
provisions contained in this Contract shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision hereof, and this
Contract shall be construed
21
<PAGE> 23
as if such invalid, illegal or unenforceable provision had never been contained
herein.
(h) Notices. All notices or other communications
required or permitted to be given pursuant to this Contract shall be given in
writing, sent by (i) personal or hand delivery, or (ii) expedited or overnight
delivery service with proof of delivery, or (iii) United States mail, postage
prepaid, registered or certified mail, or (iv) telecopy or fax (provided that
such telecopy or fax is confirmed by personal or hand delivery, expedited or
overnight delivery service or by mail in the manner previously described),
addressed as follows:
If to Seller: MEPC Quorum Properties II Inc.
Attn: Ab Atkins
15303 Dallas, Parkway
Suite 100, LB 10
Dallas, Texas 75201
Fax: (214) 851-7012
With copy to: Cooper Glasgow Kupchynsky & Kittelson, L.L.P.
Attn: Barnett D. Hammond, Jr.
8333 Douglas Ave., Suite 900
Dallas, Texas 75225
Fax: (214) 373-9879
If to Purchaser: Craftmade International, Inc.
Attn: Terry Culbertson
2700 112th Street
Grand Prairie, Texas 75050
Fax: (214) 647-4872
With copy to: Haynes & Boone, L.L.P.
Attn: William C. Wilshusen
3100 NationsBank Plaza
901 Main Street
Dallas, Texas 75202
Fax: (214) 651-5940
If to Title Company, at the address set forth in Paragraph 3 above,
or to such other address or to the attention of such other person as hereafter
shall be designated by ten (10) days prior notice in writing from the
applicable party and sent in accordance herewith. Unless expressly provided
elsewhere herein, any such notice or communication shall be deemed to have been
given and effective (i) at the time of the actual delivery of same to the
intended addressee or any party having actual or apparent authority (it being
agreed that any party accepting delivery at any of the addresses set forth
above shall be deemed to have apparent authority) to accept delivery for such
party, (ii) if sent by United States mail, postage prepaid, registered or
certified mail, upon deposit with the United States Postal Service, and (iii)
if sent by telecopy or fax, at the time of the transmission of same to the
telecopy or fax number set forth above for such addressee. In the event any
notice or communication is given in more than one of the manners set forth
above (for example, by personal delivery and by fax), such notice or
communication shall, for purposes of notice hereunder, be deemed given at the
earliest such time. Notice given in any other manner shall be effective only
if and when received by the addressee.
(i) Counterparts. This Contract may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the same
instrument.
(j) No Recording. In no event shall this Contract or any
memorandum hereof be recorded in the public records of the place in which the
22
<PAGE> 24
Property is situated, and any such recordation or attempted recordation shall
constitute a breach of this Contract by the party responsible for such
recordation or attempted recordation.
(k) Attorneys' Fees. Should either party employ an
attorney or attorneys to enforce any of the provisions hereof or to protect its
interest in any manner arising under this Contract, or to recover damages for
breach of this Contract, the non-prevailing party in any action pursued in a
court of competent jurisdiction (the finality of which is not legally
contested) agrees to pay to the prevailing party all reasonable costs, damages,
and expenses, including attorney's fees, expended or incurred in connection
therewith.
(l) Exhibits. Exhibits "A" through "M" are attached
hereto and incorporated herein by reference.
(m) Time for Performance. TIME IS OF THE ESSENCE in the
performance of each party's obligations hereunder.
(n) Amendments. Except where otherwise authorized,
permitted or required by the express terms of this Contract or where notice to,
consent or approval of, or joinder by any party has been expressly waived by
the provisions hereof, no amendment, modification, deletion, release,
termination or extension of, alteration, variance or change in, or supplement
to the provisions of, the Contract shall be valid and effective or otherwise
binding on the parties hereto, unless and until such amendment, etc. shall have
been reduced to writing and executed by the parties hereto with the same
formality as this Contract.
(o) Representative Capacity. The individual(s) executing
this Contract on behalf of Seller is doing so in their respective
representative capacity only, solely as a representative of Seller, and any
liability hereunder based on the actions of such individual shall merely be
that of Seller and not the individual.
(p) Site Plan. Purchaser acknowledges that the Site Plan
is only preliminary as of the Effective Date and may be changed by Seller in
non-material respects, subject to Purchaser's right to approve of same, such
not to be unreasonably withheld and to be deemed given if Purchaser fails to
object in writing within five (5) business days after their submission by
Seller. Any such modified Site Plan will automatically replacing that which is
attached hereto as Exhibit "B" without the necessity of amendment to this
Contract .
19. TAX ABATEMENT. Seller agrees to use good faith efforts to
obtain tax abatements from the City of Coppell, Texas with respect to the
Improvements on terms satisfactory to Purchaser; however, the failure of Seller
to obtain any abatement will not be a default hereunder or the failure of any
condition to Closing.
20. LOAN COMMITMENT. Purchaser covenants and agrees to provide
Seller with a binding loan commitment from Purchaser's bona fide third party
lender within forty-five (45) days after the Effective Date. Such commitment
must evidence the obligation of the lender named therein to loan to Purchaser
funds sufficient to allow Purchaser to perform all of its obligations hereunder
and that such lender will be in a position to loan such funds by the Scheduled
Closing Date. Purchaser's failure to provide such commitment to Seller within
forty-five (45) days after the Effective Date will, at Seller's option,
constitute an event of default by Purchaser hereunder upon notice thereof by
Seller, and, notwithstanding Paragraph 13(d) above, Purchaser will not be
entitled to any grace period or any opportunity to cure. In the event of such
default, and notwithstanding any provision of Paragraph 13(a) to the contrary,
Seller may, at its option and as its sole remedy, terminate this Contract and
thereby be entitled to the Earnest Money or, if Seller's actual damages are in
excess of the Earnest Money, Seller will be entitled to not only the Earnest
23
<PAGE> 25
Money but its actual damages in excess of the Earnest Money. For purposes of
this paragraph, Seller's actual damages will be Seller's actual out-of-pocket
costs incurred through the date of termination without mark-up or profit.
21. MULTIPLE OCCUPANCY. Purchaser acknowledges and agrees that
the agreements, covenants, representations and warranties of Seller herein are
all based upon the assumption that the Improvements will be constructed for
occupancy by Purchaser and TSI Prime Time and a portion of the Improvements
leased by Purchaser to TSI Prime Time. If Purchaser, either prior to or after
Closing, leases, subdivides or otherwise transfers any portion of the Land or
Improvements to any entity other than TSI Prime Time, and such (i) causes the
Property, or any portion thereof, to fail to comply with any Applicable Laws,
including parking requirements, (ii) causes any delay in the substantial
completion of the Improvements or the issuance of a certificate of occupancy,
or (iii) results in any of Seller's representations or warranties being untrue
in any respect or in Seller being in default under this Contract, then
notwithstanding the occurrence of (i), (ii), or (iii), Seller will not be in
default as a result thereof and Purchaser will have no remedy therefore.
Additionally, if such lease(s), transfer(s), or subdivision(s) increases the
cost of completing the Improvements, the Purchase Price will be increased
accordingly.
22. EFFECTIVE DATE. The EFFECTIVE DATE of this Contract will be
the latter of the two dates upon which this Contract is executed by Seller and
Purchaser where noted below; provided that if Purchaser fails to date its
execution hereof, the Effective Date will be the date Seller executes this
Contract. Additionally, this Contract will be null and void unless Purchaser
executes and delivers this Contract within four (4) business days after receipt
thereof by Purchaser. Until Seller has executed this Contract or a counterpart
thereof and Purchaser has delivered the Earnest Money provided for herein, this
Contract will not be binding on Seller and Seller may negotiate to sell or
lease the Property to other prospective purchasers or tenants.
IN WITNESS WHEREOF, the parties have executed this Contract to be
effective as of the Effective Date.
SELLER:
DATE: May ___, 1995 MEPC QUORUM PROPERTIES II INC., a
Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
By:______________________________
Name:____________________________
Title:___________________________
PURCHASER:
DATE: May __, 1995 CRAFTMADE INTERNATIONAL, INC., a
Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
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<PAGE> 26
Exhibits:
"A": Seller's Land
"A-1": The Land
"B": Site Plan
"C": Form of Deed Restrictions
"D": General Construction Features
"E": List of Approved Plans
"F": Reports and Studies delivered to Purchaser
"G": Construction Materials Testing Standards
"H": Deed
"I": Bill of Sale and Assignment
"J": Non-foreign status Certificate
"K": Memorandum of Right of First Refusal and Option Agreement
"L": Form of Special Warranty Deed to be received in connection with
acquisition of Seller's Land
"M": Easement Agreement
SIGNED by legal counsel for Purchaser, strictly for the purpose of satisfying
the requirements of Texas Business and Commerce Code 17.42(a)(3).
____________________________________
Purchaser's counsel
ACCEPTANCE BY TITLE COMPANY
The undersigned Title Company joins in the execution of this Contract for the
following sole and limited purposes: (i) to acknowledge receipt of the Earnest
Money and ___ original counterparts of this Contract on _______________, 1995;
(ii) to evidence its agreement to hold the Earnest Money in trust for the
parties hereto in accordance with the terms of this Contract; (iii) to
acknowledge that upon compliance by the parties with the terms of the Title
Commitment and payment of the applicable policy premium, the undersigned is
prepared to issue the Owner's Policy Title Insurance called for herein on
____________________; and (iv) to acknowledge its agreement to (a) timely file
a return with the Internal Revenue Service on Form 1099-B or such other form as
instructed by the Internal Revenue Service showing the gross proceeds of this
transaction, the recipient thereof and such other information as the Internal
Revenue Service may by form or regulation require from time to time, and (b)
furnish both Seller and Purchaser with a written statement showing the name and
address of the Title Company and the information shown on such return with
respect to the transaction. This return shall be filed to ensure that the
parties to this transaction will be in compliance with Section 6045(e) of the
Internal Revenue Code, as amended from time to time and as further set forth in
any regulations promulgated thereunder.
REPUBLIC TITLE OF TEXAS, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
Date: ____________________________
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<PAGE> 27
ACKNOWLEDGMENT BY BROKERS
The undersigned Agent joins in the execution of this Contract for the
sole and limited purpose of representing and warranting to Purchaser and Seller
that it: (i) is a duly licensed real estate broker under the Texas Real Estate
Licensing Act and its applicable regulations; (ii) is duly authorized to earn
and receive a commission in connection with the transaction evidenced by this
Contract; (iii) has contacted no other real estate broker, finder or other
party in connection with this transaction to whom fees may be due and payable;
and (iv) acknowledges and agrees to the terms and provisions of Paragraph 14
hereof. BROKER:
Jackson & Cooksey
By:_________________________
Name: ______________________
Title: _____________________
License No._________________
Date: ______________________
26
<PAGE> 28
Exhibit "A"
SELLER'S LAND
<PAGE> 29
Exhibit "A-1"
THE LAND
[To Be Attached]
<PAGE> 30
Exhibit "B"
SITE PLAN
<PAGE> 31
Exhibit "C"
FORM OF DEED RESTRICTIONS
<PAGE> 32
EXHIBIT "D"
CONSTRUCTION FEATURES
<PAGE> 33
EXHIBIT "E"
PLANS AND SPECIFICATIONS
[To Be Attached]
<PAGE> 34
EXHIBIT "F"
LIST OF REPORTS AND STUDIES
1. Environmental Site Assessment prepared by Professional Service
Industries, Inc., Project No. 633-5E006, dated March 31, 1995.
2. Geotechnical Report prepared by Reed Engineering, Project No. 2317,
dated March 17, 1995.
3. Report Regarding Noise Assessment of Aircraft Using Runway 16/34 East
over the City of Coppell prepared by Pelton, Marsh & Kinsella, Inc.
and dated June 1991.
<PAGE> 35
EXHIBIT "G"
CMTS
<PAGE> 36
EXHIBIT "H"
SPECIAL WARRANTY DEED
STATE OF TEXAS Section
Section KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF DALLAS Section
That MEPC QUORUM PROPERTIES II INC., a Delaware corporation (GRANTOR),
for and in consideration of the sum of Ten Dollars ($10.00) and other valuable
consideration paid to Grantor by Grantee (hereinafter defined), having an
address of 15303 Dallas Parkway, Suite 100, LB 10, Dallas, Texas 75248, the
receipt and sufficiency of which are hereby acknowledged, does hereby GRANT,
SELL, CONVEY, ASSIGN and DELIVER to CRAFTMADE INTERNATIONAL, INC.,, a Delaware
corporation (GRANTEE), the real property situated in Dallas County, Texas
described in Exhibit "A" attached hereto and made a part hereof (the LAND)
together with all improvements thereon, fixtures affixed thereto and, to the
extent that such pertain solely to the Land all rights and interests
appurtenant thereto (specifically including all rights, titles, powers,
privileges, licenses, easements, rights-of-way and interests, if any, of
Grantor, either at law or equity, in possession or in expectancy, in and to any
real estate laying in the streets, highways, roads, alleys, rights-of-ways or
sidewalks open or proposed, in front of, above, over, under, through or joining
said real property and in and to any strips or gores of land adjoining said
real property) (collectively, the PROPERTY), subject to general real estate
taxes on the Property for the current year, zoning laws, regulations and
ordinances of municipal and other governmental authorities, if any, affecting
the Property, and all of the matters described in Exhibit "B" attached hereto
and made a part hereof (all of the foregoing hereinafter called the PERMITTED
EXCEPTIONS). With respect to any rights, interest and appurtenances that are
common to the Land and other tracts of land adjacent to, contiguous with or in
close proximity to the Land, such rights, interest and appurtenances are
conveyed to Purchaser on a non-exclusive basis. Excluded from this conveyance
are any and all rights or interests that Grantor owns that pertain to the
right, including right of first refusal rights, or option to purchase, lease or
develop other property in the development in which the Land is located.
TO HAVE AND TO HOLD the Property, together with all and singular the
rights and appurtenances thereto in anywise belonging, unto Grantee, its
successors and assigns forever, and Grantor does hereby bind itself and its
successors and assigns to warrant and forever defend all and singular the
Property unto Grantee, its successors and assigns against every person
whomsoever lawfully claiming, or to claim the same, or any part thereof by,
through or under Grantor, but not otherwise, subject, however, to the Permitted
Exceptions.
Current ad valorem taxes on Property having been prorated, Grantee
hereby assumes the payment thereof.
IN WITNESS WHEREOF, this Special Warranty Deed is executed by Grantor
and Grantee to be effective as of the _____ day of _________, 1995.
GRANTOR:
MEPC QUORUM PROPERTIES II INC., a
Delaware corporation
By:_________________________________
Name:_______________________________
As Its:_____________________________
<PAGE> 37
Grantee's Address and when
recorded return to:
__________________________
__________________________
__________________________
STATE OF TEXAS
COUNTY OF DALLAS
This instrument was acknowledged before me on this _______ day of
____________, 1995, by _______________________ _________,
___________________________ of MEPC QUORUM PROPERTIES II INC., a Delaware
corporation, on behalf of said corporation.
___________________________________
Notary Public in and for
the State of Texas
My Commission Expires:
___________________________________
_____________________ Printed/Typed Name of Notary
STATE OF TEXAS
COUNTY OF DALLAS
This instrument was acknowledged before me on this ______ day of
____________, 1995, by ________________________ ________,
___________________________ of MEPC QUORUM PROPERTIES II INC., a Delaware
corporation, on behalf of said corporation.
___________________________________
Notary Public in and for
the State of Texas
My Commission Expires:
___________________________________
_____________________ Printed/Typed Name of Notary
<PAGE> 38
EXHIBIT "I"
BILL OF SALE AND ASSIGNMENT
STATE OF TEXAS Section
Section KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF DALLAS Section
By a Special Warranty Deed (the DEED) of even date with the effective
date hereof, MEPC Quorum Properties II Inc., a Delaware corporation (SELLER),
conveyed to Craftmade International, a Delaware corporation (PURCHASER), the
property (the PROPERTY) described on Exhibit "A" attached hereto and made a
part hereof for all purposes, together with all improvements located thereon.
As consideration for (a) the conveyance of the Property, (b) the
conveyance of the personal property described herein, and (c) the assignments
contained herein, Buyer paid the sum of TEN AND NO/100 DOLLARS ($10.00) and
other good and valuable consideration to Seller.
NOW, THEREFORE, for the consideration above specified, the receipt and
sufficiency of which are expressly confessed and acknowledged:
1. Seller has GRANTED, CONVEYED, SOLD, TRANSFERRED, SET-OVER and
DELIVERED, and by these presents does hereby GRANT, CONVEY, SELL, TRANSFER,
SET-OVER and DELIVER unto Purchaser, all fixtures and other items of personal
property situated in, on, or about the Property (all of the property described
in this Paragraph 1 is hereinafter referred to as the PERSONAL PROPERTY).
TO HAVE AND TO HOLD all and singular the Personal Property unto
Purchaser, its successors and assigns, and Seller does hereby bind itself and
its successors to WARRANT and FOREVER DEFEND all and singular the Leases unto
Purchaser, its successors and assigns, against every person whomsoever lawfully
claiming or attempting to claim the same, or any part thereof, by, through or
under Seller, but not otherwise, subject, however, to those matters described
on Exhibit "B" attached hereto and incorporated herein by reference.
2. Seller has ASSIGNED, TRANSFERRED and SET-OVER and by these
presents does ASSIGN, TRANSFER and SET-OVER unto Purchaser all of its right,
title and interest in and to all warranties, guarantees, rights of use and
licenses held by Seller pertaining to the buildings, improvements, fixtures,
personalty and/or other properties comprising the Property and/or Personal
Property, including, without limiting the generality of the foregoing, all
items and matters described in Exhibit "B" attached hereto and made a part
hereof; provided that Seller reserves the right to enforce same.
This Bill of Sale and Assignment and the provisions herein contained
shall be binding upon and inure to the benefit of Purchaser and Seller and
their respective successors and assigns.
SELLER:
DATE: _______________ MEPC QUORUM PROPERTIES II INC., a
Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
By:______________________________
Name:____________________________
Title:___________________________
<PAGE> 39
PURCHASER:
DATE:_______________ CRAFTMADE INTERNATIONAL, INC., a
Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
<PAGE> 40
EXHIBIT "J"
NON-FOREIGN AFFIDAVIT
Section 1445 of the Internal Revenue Code of 1986, as amended
(the"Code") provides that a transferee of a U.S. real property interest must
withhold tax if the transferor is a foreign person. To inform the transferee
that withholding of tax is not required upon the disposition of a U.S. real
property interest by MEPC Quorum Properties I Inc., a Delaware corporation (the
"Transferor"), the undersigned hereby certifies the following on behalf of the
Transferor:
1. The Transferor is not a foreign corporation, foreign
partnership, foreign trust or foreign estate (as those terms
are defined in the Code and treasury regulations promulgated
pursuant thereto);
2. The Transferor's U.S. employer identification number is
__________; and
3. The Transferor's office address is 15303 Dallas Parkway, Suite
100, LB 10, Dallas, Texas 75248.
The Transferor understands that this certification may be disclosed to
the Internal Revenue Service by the transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
Under penalty of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct
and complete, and I further declare that I have authority to sign this document
on behalf of the Transferor.
MEPC QUORUM PROPERTIES II INC., a
Delaware corporation
By:_________________________________
Name:_______________________________
As Its:_____________________________
STATE OF TEXAS
COUNTY OF DALLAS
This instrument was acknowledged before me on this _________ day of
____________, 1995, by _____________________ _____________,
____________________________________ of MEPC QUORUM PROPERTIES II INC., a
Delaware corporation, on behalf of said corporation.
___________________________________
Notary Public in and for
the State of Texas
My Commission Expires:
___________________________________
_____________________ Printed/Typed Name of Notary
<PAGE> 41
Exhibit "K"
MEMORANDUM OF RIGHT OF FIRST REFUSAL AND OPTION AGREEMENT
<PAGE> 42
Exhibit "L"
FORM OF SPECIAL WARRANTY DEED TO BE RECEIVED
IN CONNECTION WITH ACQUISITION OF SELLER'S LAND
<PAGE> 43
Exhibit "M"
EASEMENT AGREEMENT
[To Be Attached]
<PAGE> 1
EXHIBIT 10.2
ASSIGNMENT OF RENTS AND LEASES
This Assignment is made as of the _____ day of December, 1995, between
Craftmade International, Inc., a Delaware corporation, having an office and
usual place of business at 650 S. Royal, Coppell, Texas 75019 (herein called
the "Assignor") and Allianz Life Insurance Company of North America, a
Minnesota corporation, whose address is c/o Allianz Investment Corporation, 55
Greens Farms Road, P.O. Box 5160, Westport, Connecticut 06881-5160 (herein
called the "Assignee").
Recitals
The Assignor has executed and delivered to the Assignee its promissory
note of even date herewith in the principal amount of $9,200,000 (herein called
the "Note").
To secure payment of the Note, the Assignor has executed and delivered
to the Assignee a Deed of Trust, Mortgage and Security Agreement of even date
herewith (herein, together with all future amendments and supplements thereto,
called the "Deed of Trust"), covering certain property (herein called the
"Mortgaged Property") which, among other things, includes the real estate
described in Exhibit A attached hereto and the buildings, improvements,
fixtures and personal property now or hereafter located thereon.
The Assignee, as a condition to making the loan evidenced by the Note,
has required the execution of this Assignment.
ACCORDINGLY, in consideration of the premises and in further
consideration of the sum of One Dollar paid by the Assignee to the Assignor,
the receipt of which is hereby acknowledged, the Assignor does hereby grant,
transfer and assign to the Assignee all of the right, title and interest of the
Assignor in and to (i) any and all present or future leases or tenancies,
whether written or oral, covering or affecting any or all of the Mortgaged
Property (all of which, together with any and all extensions, modifications and
renewals thereof, are hereinafter collectively referred to as the "Leases" and
each of which is referred to as a "Lease"), (ii) all security deposits, rents,
profits and other income or payments of any kind due or payable or to become
due or payable to the Assignor as the result of any use, possession or
occupancy of all or any portion of the Mortgaged Property or as the result of
the use of or lease of any personal property constituting a part of the
Mortgaged Property (all of which are hereinafter collectively referred to as
"Rents"), whether the Rents accrue before or after foreclosure of the Deed of
Trust, all for the purpose of securing:
(a) Payment of all indebtedness evidenced by the Note and
all other sums secured by the Deed of Trust or this Assignment; and
(b) Performance and discharge of each and every
obligation, covenant and agreement of the Assignor contained herein, in the
Deed of Trust and other Loan Documents (as such term is defined in the Deed of
Trust).
Assignment of Rents and Leases - Page 1
<PAGE> 2
THE ASSIGNOR WARRANTS AND COVENANTS that it is and will remain the
absolute owner of the Rents and Leases free and clear of all liens and
encumbrances other than the lien granted herein; that it has not heretofore
assigned or otherwise encumbered its interest in any of the Rents or Leases to
any person; that it has the right under applicable law, under the Leases, under
its organizational documents and otherwise to execute and deliver this
Assignment and keep and perform all of its obligations hereunder; that there
are no existing defaults under the provisions thereof on the part of any party
to the Leases; that no Rents have been waived, anticipated, discounted,
compromised or released, except as may be stated in the Leases; and that
tenants have no defenses, setoffs, or counterclaims against Assignor; that it
will warrant and defend the Leases and Rents against all adverse claims,
whether now existing or hereafter arising.
The Assignor further covenants and agrees with the Assignee as
follows:
1. Performance of Leases. The Assignor will faithfully abide by,
perform and discharge each and every obligation, covenant and agreement which
it is now or hereafter becomes liable to observe or perform under any present
or future Lease, and, at its sole cost and expense, enforce or secure the
performance of each and every obligation, covenant, condition and agreement to
be performed by the tenant under each and every Lease. The Assignor will
observe and comply with all provisions of law applicable to the operation and
ownership of the Mortgaged Property. The Assignor will give prompt written
notice to the Assignee of any notice of default on the part of the Assignor
with respect to any Lease received from the tenant thereunder, and will also at
its sole cost and expense, appear in and defend any action or proceeding
arising under, growing out of or in any manner connected with any Lease or the
obligations, duties or liabilities of the Assignor or any tenant thereunder.
The Assignor will not execute any Lease of the Mortgaged Property without
obtaining the prior written consent of the Assignee with respect to such Lease.
Assignor further agrees not to cancel, terminate or consent to or acquiesce in
any surrender or abandonment of any of the Leases without the prior written
consent of Assignee; except in the ordinary course of business not to commence
any action of ejectment or any summary proceedings for dispossession of the
tenant under any of the Leases, nor exercise any right of recovery of leased
property provided in any Leases; not to modify or in any way alter the
covenants, agreements, terms, conditions or obligations of any Leases without
the prior written consent of Assignee; not to renew or extend the term of any
Leases of the Premises unless an option therefor was originally so reserved by
tenants in the Leases for a fixed and definite rental; and, except in the
ordinary course of business, not to relocate any said tenant within the
Premises, nor consent to any modification of the express purposes for which the
Premises have been leased, nor consent to any subletting of the Premises or any
part thereof or to any assignment of the Leases by any tenant thereunder or to
any further or other assignment or subletting of any sublease, without the
prior written consent of the Assignee, notwithstanding any previous consent of
Assignee.
2. Collection of Rents. The Assignor will not collect or accept
any Rents for the use or occupancy of the Mortgaged Property for more than one
month in advance. Security deposits which do not exceed two months rent shall
not be deemed Rents for purposes of this paragraph.
3. Protecting the Security of This Assignment. Should the
Assignor fail to perform or observe any covenant or agreement contained in this
Assignment, then the
Assignment of Rents and Leases - Page 2
<PAGE> 3
Assignee, but without obligation to do so and without releasing the Assignor
from any obligation hereunder, may make or do the same in such manner and to
such extent as the Assignee may deem appropriate to protect the security
hereof, including, specifically, without limiting its general powers, the right
to appear in and defend any action or proceeding purporting to affect the
security hereof or the rights or powers of the Assignee, and also the right to
perform and discharge each and every obligation, covenant and agreement of the
Assignor contained in the Leases and in exercising any such powers to pay
necessary costs and expenses, employ counsel and pay reasonable attorneys'
fees. The Assignor will pay immediately upon demand all sums expended by the
Assignee under the authority of this Agreement, together with interest thereon
at the Default Rate stated in the Note, and the same shall be added to said
indebtedness and shall be secured hereby and by the Deed of Trust.
4. Present Assignment. This Assignment shall constitute a
perfected, absolute and present assignment, provided that the Assignor shall
have the right to collect, but not prior to accrual (except as permitted by
paragraph 2 above), all of the Rents, and to retain, use and enjoy the same
unless and until an Event of Default shall occur under the Deed of Trust or the
Assignor shall have breached any warranty or covenant in this Assignment. Any
security deposits received by Assignor prior to an Event of Default shall be
assigned and paid over to Assignor immediately upon the occurrence of the Event
of Default. Any Rents which accrue prior to an Event of Default under the Deed
of Trust but are paid thereafter shall be paid to the Assignee.
5. Survival of Obligation to Comply with Deed of Trust and This
Assignment. This Assignment is given as security in addition to the Deed of
Trust. The Assignor covenants and agrees to observe and comply with all terms
and conditions contained in the Deed of Trust and in this Assignment and to
prevent any Event of Default from occurring under the Deed of Trust. All of
the Assignor's obligations under the Deed of Trust and this Assignment shall
survive foreclosure of the Deed of Trust and the Assignor covenants and agrees
to observe and comply with all terms and conditions of the Deed of Trust and
this Assignment and to prevent any Event of Default from occurring under the
Deed of Trust throughout any period of redemption after foreclosure of the Deed
of Trust.
6. Default, Remedies. Upon the occurrence of any Event of
Default specified in the Deed of Trust or upon the breach of any warranty or
covenant in this Assignment, the Assignee may, at its option, at any time:
(a) in the name, place and stead of the Assignor and
without becoming a mortgagee in possession (i) enter upon, manage and operate
the Mortgaged Property or retain the services of one or more independent
contractors to manage and operate all or any part of the Mortgaged Property;
(ii) make, enforce, modify and accept surrender of the Leases; (iii) obtain or
evict tenants, collect, sue for, fix or modify the Rents and enforce all rights
of the Assignor under the Leases; and (iv) perform any and all other acts that
may be necessary or proper to protect the security of this Assignment.
(b) with or without exercising the rights set forth in
subparagraph (a) above, give or require the Assignor to give notice to any or
all tenants under the Leases authorizing and directing the tenants to pay all
Rents under the Leases directly to the Assignee.
Assignment of Rents and Leases - Page 3
<PAGE> 4
(c) without regard to waste, adequacy of the security or
solvency of the Assignor, apply for, and the Assignor hereby consents to, the
appointment of a receiver of the Mortgaged Property, whether or not foreclosure
proceedings have been commenced under the Deed of Trust, and if such
proceedings have been commenced, whether or not a foreclosure sale has
occurred.
The exercise of any of the foregoing rights or remedies and the
application of the rents, profits and income pursuant to paragraph 7, shall not
cure or waive any Event of Default (or notice of default) under the Deed of
Trust or invalidate any act done pursuant to such notice.
7. Application of Rents, Profits and Income. All Rents collected
by the Assignee or the receiver each month shall be applied as follows:
(a) to payment of all reasonable fees of the receiver
approved by the court;
(b) to payment of all tenant security deposits then owing
to tenants under any of the Leases;
(c) to payment of all prior or current real estate taxes
and special assessments with respect to the Mortgaged Property, or if the Deed
of Trust requires periodic escrow payments for such taxes and assessments, to
the escrow payments then due;
(d) to payment of all premiums then due for the insurance
required by the provisions of the Deed of Trust, or if the Deed of Trust
requires periodic escrow payments for such premiums, to the escrow payments
then due;
(e) to payment of expenses incurred for normal
maintenance of the Mortgaged Property; and
(f) to the Assignee for payment of the indebtedness
secured by the Deed of Trust or this Assignment, but no such payment made after
acceleration of the indebtedness shall affect such acceleration.
The rights and powers of the Assignee under this Assignment and the
application of Rents under this paragraph 7 shall continue during the pendency
of any proceedings for the foreclosure and/or sale of the Mortgaged Property,
or any part thereof, unless all indebtedness secured hereby has been fully
satisfied.
8. No Liability for Assignee. The Assignee shall not be obligated
to perform or discharge, nor does it hereby undertake to perform or discharge,
any obligation, duty or liability of the Assignor under the Leases. This
Assignment shall not operate to place upon the Assignee responsibility for the
control, care, management or repair of the Mortgaged Property or for the
carrying out of any of the terms and conditions of the Leases. The Assignee
shall not be responsible or liable for any waste committed on the Mortgaged
Property, for any dangerous or defective condition of the Mortgaged Property,
for any negligence in the management, upkeep, repair or control of said
Mortgaged Property or for failure to collect the Rents.
Assignment of Rents and Leases - Page 4
<PAGE> 5
9. Assignor's Indemnification. THE ASSIGNOR SHALL AND DOES
HEREBY AGREE TO INDEMNIFY AND TO HOLD THE ASSIGNEE HARMLESS OF AND FROM ANY AND
ALL CLAIMS, DEMANDS, LIABILITY, LOSS OR DAMAGE (INCLUDING ALL COSTS, EXPENSES,
AND REASONABLE ATTORNEYS' FEES IN THE DEFENSE THEREOF) ASSERTED AGAINST,
IMPOSED ON OR INCURRED BY THE ASSIGNEE IN CONNECTION WITH OR AS A RESULT OF
THIS ASSIGNMENT OR THE EXERCISE OF ANY RIGHTS OR REMEDIES UNDER THIS ASSIGNMENT
OR UNDER THE LEASES OR BY REASON OF ANY ALLEGED OBLIGATIONS OR UNDERTAKINGS OF
THE ASSIGNEE TO PERFORM OR DISCHARGE ANY OF THE TERMS, COVENANTS OR AGREEMENTS
CONTAINED IN THE LEASES. THE FOREGOING INDEMNITY IS INTENDED TO BE APPLICABLE
AND BINDING UPON THE ASSIGNOR NOTWITHSTANDING THAT A CLAIM, DEMAND, LIABILITY,
LOSS OR DAMAGE ARISES OR IS ALLEGED TO HAVE ARISEN FROM THE SOLE OR CONCURRENT
NEGLIGENCE OF ASSIGNEE; HOWEVER, SAID INDEMNITY IS NOT INTENDED TO INCLUDE ANY
CLAIM, LIABILITY, LOSS OR DAMAGE ARISING FROM THE WILLFUL MISCONDUCT OF
ASSIGNEE. SHOULD THE ASSIGNEE INCUR ANY LIABILITY UNDER THE FOREGOING
INDEMNITY, THE AMOUNT THEREOF, TOGETHER WITH INTEREST THEREON, AT THE RATE
STATED IN THE NOTE, SHALL BE SECURED HEREBY AND BY THE DEED OF TRUST AND THE
ASSIGNOR SHALL REIMBURSE THE ASSIGNEE THEREFOR IMMEDIATELY UPON DEMAND.
10. Authorization to Tenant. Upon notice from the Assignee that
it is exercising the remedy set forth in paragraph 6(b) of this Assignment, the
tenants under the Leases are hereby irrevocably authorized and directed to pay
to the Assignee all sums due under the Leases, and the Assignor hereby consents
and directs that said sums shall be paid to the Assignee without the necessity
for a judicial determination that a default has occurred hereunder or under the
Deed of Trust or that the Assignee is entitled to exercise its rights
hereunder, and to the extent such sums are paid to the Assignee, the Assignor
agrees that the tenant shall have no further liability to the Assignor for the
same. The signature of the Assignee alone shall be sufficient for the exercise
of any rights under this Assignment and the receipt of the Assignee alone for
any sums received shall be a full discharge and release therefor to any such
tenant or occupant of the Mortgaged Property. Checks for all or any part of
the Rents collected under this Assignment shall upon notice from the Assignee
be drawn to the exclusive order of the Assignee.
11. Satisfaction. Upon the payment in full of all indebtedness
secured hereby as evidenced by a recorded release of the Deed of Trust, this
Assignment shall, without the need for any further satisfaction or release,
become null and void and be of no further effect.
12. Assignee an Attorney-In-Fact. The Assignor hereby irrevocably
appoints the Assignee, and its successors and assigns, as its attorney-in-fact
for the purposes set forth in this paragraph 12, which appointment is coupled
with an interest and shall be effective upon the occurrence of an Event of
Default. Pursuant to such appointment, upon the occurrence of an Event of
Default Assignee shall be the attorney-in-fact for Assignor with the right but
not the duty to exercise any rights or remedies hereunder and to execute and
deliver during the term of this Assignment such instruments as the Assignee may
deem appropriate to make this Assignment and any further assignment effective,
including without limiting the generality of the foregoing, the right to
endorse on behalf and in the name of the Assignor all checks from tenants in
payment of Rents that are made payable to the Assignor.
Assignment of Rents and Leases - Page 5
<PAGE> 6
13. Assignee Not a Mortgagee in Possession. Nothing herein
contained and no actions taken pursuant to this Assignment shall be construed
as constituting the Assignee a mortgagee in possession.
14. Specific Assignment of Leases. Until the indebtedness secured
hereby shall have been paid in full, Assignor will deliver to the Assignee
executed copies of any and all other and future Leases upon all or any part of
the Mortgaged Property. The Assignor will transfer and assign to the Assignee,
upon written notice by the Assignee, any and all specific Leases that the
Assignee requests. Such transfer or assignment by the Assignor shall be upon
the same or substantially the same terms and conditions as are herein
contained, and the Assignor will properly file or record such assignments, at
the Assignor's expense, if requested by the Assignee.
15. Unenforceable Provisions Severable. All rights, powers and
remedies provided herein may be exercised only to the extent that the exercise
thereof does not violate any applicable law, and are intended to be limited to
the extent necessary so that they will not render this Assignment invalid,
unenforceable or not entitled to be recorded, registered or filed under any
applicable law. If any term of this Assignment shall be held to be invalid,
illegal or unenforceable, the validity of other terms hereof shall in no way be
affected thereby. It is the intention of the parties hereto, however, that
this Assignment shall confer upon the Assignee the fullest rights, remedies and
benefits available pursuant to the laws of the State of Texas.
16. Successors and Assigns. The covenants and agreements herein
contained shall bind, and the rights hereunder shall inure to, the respective
successors and assigns of the Assignor and the Assignee, including any
purchaser at a foreclosure sale.
17. Captions; Amendments; Notices. The captions and headings of
the paragraphs of this Assignment are for convenience only and shall not be
used to interpret or define the provisions of this Assignment. This Assignment
can be amended only in writing signed by the Assignor and the Assignee. Any
notice from this Assignment to the Assignor under this Assignment shall be
deemed to have been given when given by the Assignee in accordance with the
requirements for notice by the Mortgagee under the Deed of Trust.
18. Counterparts. This Assignment may be executed in any number
of counterparts, each of which shall be an original but all of which shall
constitute one instrument.
19. Notices. Any notice which any party hereto may desire or may
be required to give to any other party shall be in writing and the mailing
thereof by certified mail, or equivalent, to the respective party's address as
set forth hereinabove or to such other place such party may by notice in
writing designate as its address, shall constitute service of notice hereunder.
Assignment of Rents and Leases - Page 6
<PAGE> 7
IN WITNESS WHEREOF the Assignor has executed this Assignment as of the
day and year first-above written.
CRAFTMADE INTERNATIONAL, INC.,
a Delaware corporation
By: __________________________________
Name: ________________________________
Title: _______________________________
STATE OF _________________________ Section
Section
COUNTY OF ________________ Section
This instrument was acknowledged before me on the _____ day of
December, 1995, by _________________________, _______________________ of
Craftmade International, Inc., a Delaware corporation, on behalf of said
corporation.
_________________________________
Notary Public
My Commission Expires:
_____________________
Assignment of Rents and Leases - Page 7
<PAGE> 8
EXHIBIT A
LEGAL DESCRIPTION
Being Lot 3R of REPLAT OF A PORTION OF "FREEPORT NORTH", an addition to the
City of Coppell, Texas, according to the Map thereof recorded in Volume 95245,
Page 2050, Map Records of Dallas County, Texas.
Assignment of Rents and Leases - Page 8
<PAGE> 1
EXHIBIT 10.3
When recorded, return to:
Patrick M. Arnold, Esq.
Fulbright & Jaworski L.L.P.
2200 Ross Avenue, Suite 2800
Dallas, Texas 75201
THE STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section
DEED OF TRUST, MORTGAGE AND SECURITY AGREEMENT
This Deed of Trust, Mortgage and Security Agreement ("Deed of Trust")
is made by Craftmade International, Inc., a Delaware corporation, having an
office and usual place of business at 650 S. Royal, Coppell, Texas 75019 (the
"Borrower"), to Patrick M. Arnold, as Trustee (the "Trustee"), whose address is
2200 Ross Avenue, Dallas, Texas 75201, for the benefit of Allianz Life
Insurance Company of North America, a Minnesota corporation, whose address is
c/o Allianz Investment Corporation, 55 Greens Farms Road, P.O. Box 5160,
Westport, Connecticut 06881-5160 (the "Lender").
FOR THE PURPOSE of securing (a) the repayment of the indebtedness
evidenced by the Borrower's promissory note of even date herewith, payable to
the order of the Lender in the original principal amount of Nine Million Two
Hundred Thousand and No/100 Dollars ($9,200,000.00), said principal sum, with
interest thereon at the rate therein provided being finally due and payable on
January 1, 2008, and all renewals, extensions and modifications thereof and any
note issued in substitution therefor (the "Note"); (b) the payment of all other
sums with interest thereon as may be advanced by the Lender in accordance with
this Deed of Trust, the Assignment of Rents and Leases of even date herewith
from the Borrower to the Lender (the "Assignment"), the Environmental Indemnity
of even date herewith from the Borrower to the Lender (the "Indemnity"), and
any other instruments securing payment of the Note (the Note, Deed of Trust,
Assignment, Indemnity and any other instruments securing payment of the Note
being herein together referred to as the "Loan Documents," and the indebtedness
evidenced by the Note and all such other sums being hereinafter collectively
referred to as the "Indebtedness"); and (c) the performance of all the
covenants and agreements of the Borrower contained in the Loan Documents, the
Borrower does hereby mortgage, grant, bargain, sell, assign, transfer and
convey unto the Trustee, for the benefit and security of the Lender, all the
tracts or parcels of land (hereinafter called the "Land"), located in Dallas
County, Texas, and described in Exhibit A attached hereto and made a part
hereof, together with (i) all of the buildings, structures and other
improvements now standing or at any time hereafter constructed or placed upon
the Land; (ii) all lighting, heating, ventilating, air conditioning, sprinkling
and plumbing fixtures, water and power systems, engines and machinery, boilers,
furnaces, oil burners, elevators and motors, communication systems, dynamos,
transformers, electrical equipment and all other fixtures of every description
owned by the Borrower and located in or on, or used, or intended to be used in
connection with the Land or any building now or hereafter located thereon;
(iii) all hereditaments, easements, appurtenances, riparian rights, rents,
issues, profits, insurance
Deed of Trust, Mortgage and Security Agreement - Page 1
<PAGE> 2
proceeds, condemnation awards, mineral rights, water rights, utility rights,
and development rights, now or hereafter belonging or in any way pertaining to
the Land or to any building now or hereafter located thereon and all the
estates, rights and interests of the Borrower in the Land; (iv) all building
materials, furniture, furnishings, maintenance equipment and all other personal
property that is (A) owned by the Borrower, (B) now or hereafter located in, or
on, the Land, and (C) used, or intended to be used, in connection with the
operation of the Land or any building now or hereafter located thereon and all
replacements and additions thereto (it being understood and agreed that in no
event shall this Deed of Trust cover any inventory or receivables of the
Borrower); (v) all rights of the Borrower under any contracts, licenses and
permits relating to the development or operation of the Land, including
specifically, without limitation, any rights of the Borrower arising from
membership in any owners' association relating to the Land or arising from any
restrictive covenants or other covenants running with the Land; (vi) all
additions, accessions, increases, parts, fittings, accessories, replacements,
substitutions, betterments, repairs and proceeds to any and all of the
foregoing (all of the foregoing, together with the Land, being hereinafter
referred to as the "Mortgaged Property"). With respect to any portion of the
Mortgaged Property which constitutes personal property, fixtures or other
property governed by the Texas Uniform Commercial Code, this Deed of Trust
shall constitute a security agreement between the Borrower as the debtor and
the Lender as the secured party, and the Borrower hereby grants the Lender a
security interest in such portion of the Mortgaged Property.
TO HAVE AND TO HOLD the Mortgaged Property unto Trustee, forever, and
the Borrower does hereby bind itself, its successors, and assigns to WARRANT
AND FOREVER DEFEND the title to the Mortgaged Property unto Trustee against
every person whomsoever lawfully claiming or to claim the same or any part
thereof, subject to the matters (the "Permitted Encumbrances") set forth on
Exhibit B attached hereto and made a part hereof; provided, however, that if
the Borrower shall pay (or cause to be paid) the Indebtedness as and when the
same shall become due and payable and shall fully perform and discharge (or
cause to be fully performed and discharged) all of its obligations set forth in
the Loan Documents on or before the date same are to be performed and
discharged, then the liens, security interests, estates, and rights granted by
the Loan Documents shall terminate, in accordance with the provisions hereof,
otherwise same shall remain in full force and effect. A certificate or other
written statement executed on behalf of the Trustee or the Lender confirming
that the Indebtedness has not been fully paid or the obligations of the
Borrower set forth in the Loan Documents have not been fully performed or
discharged shall be sufficient evidence thereof for the purpose of reliance by
third parties on such fact.
The Borrower represents, warrants and covenants to and with the Lender
that it is lawfully seized of the Land in fee simple, subject to the Permitted
Encumbrances, and has good right and full power and authority under all
applicable provisions of law and under its organizational documents to execute
this Deed of Trust and the Loan Documents and to mortgage the Mortgaged
Property; that the Mortgaged Property is free from all liens, security
interests and encumbrances except for the Permitted Encumbrances; and that all
buildings and improvements now or hereafter located on the Land are located
entirely within the boundaries of the Land. The covenants and warranties of
this paragraph shall survive foreclosure of this Deed of Trust and shall run
with the Land.
Deed of Trust, Mortgage and Security Agreement - Page 2
<PAGE> 3
The Borrower further covenants and agrees as follows:
1. Payment of the Note. The Borrower will duly and punctually
pay the principal of and interest on the Note in accordance with the terms of
the Note, and all other Indebtedness, when and as due and payable. The
provisions of the Note are hereby incorporated by reference into this Deed of
Trust as fully as if set forth at length herein. Time is of the essence hereof.
2. Fund for Taxes and Assessments.
(a) The Borrower shall pay to the Lender on the day monthly
installments of interest or principal and interest are payable under the Note,
until the Note is paid in full, a sum equal to one-twelfth of the yearly taxes
and assessments levied against the Mortgaged Property as estimated initially
and from time to time by the Lender, to be applied by the Lender to pay said
taxes and assessments (such amounts being hereafter referred to as the
"Funds"). The Lender shall apply the Funds to pay said taxes and assessments
prior to the date that penalty attaches for nonpayment so long as the amount of
Funds held by the Lender is sufficient at that time to make such payments. No
earnings or interest shall be payable to the Borrower on the Funds. Such Funds
shall not be, nor be deemed to be, trust funds, and the Lender shall have the
right to hold the Funds in any manner the Lender elects and may commingle the
Funds with other moneys held by the Lender.
(b) If the amount of the Funds held by the Lender shall exceed at
any time the amount deemed necessary by the Lender to provide for the payment
of taxes and assessments, such excess shall, at the option of the Lender,
either be promptly repaid to the Borrower or be credited to the Borrower on the
next monthly installment of Funds due. If at any time the amount of the Funds
held by the Lender shall be less than the amount deemed necessary by the Lender
to pay taxes and assessments as they fall due, the Borrower shall pay to the
Lender any amount necessary to make up the deficiency within ten (10) days
after notice from the Lender to the Borrower requesting payment thereof. The
Funds are pledged as additional security for the Indebtedness.
(c) Upon the occurrence of any Event of Default (as defined in
paragraph 18 hereof) the Lender may apply in any order as the Lender shall
determine in its sole discretion, any Funds held by the Lender at the time of
application to pay taxes and assessments which are then or will thereafter
become due or as a credit against the Indebtedness. Upon payment in full of
all Indebtedness, the Lender shall promptly refund to the Borrower any Funds
held by the Lender.
3. Application of Payments. All payments received by the Lender
from the Borrower under the Note or the Loan Documents shall be applied by the
Lender in the manner set forth in the Note.
4. Payment of Taxes, Assessments and Other Charges. Subject to
payments in the manner provided under paragraph 2 hereof and to paragraph 9
relating to contests, the Borrower shall pay before a penalty might attach for
nonpayment thereof, all taxes and assessments and all other charges whatsoever
levied upon or assessed or placed against the
Deed of Trust, Mortgage and Security Agreement - Page 3
<PAGE> 4
Mortgaged Property, except that assessments may be paid in installments so long
as no fine or penalty is added to any installment for the nonpayment thereof.
The Borrower shall likewise pay any and all governmental levies or assessments
such as maintenance charges, owner association dues or charges or fees, levies
or charges resulting from covenants, conditions and restrictions affecting the
Mortgaged Property, which are assessed or imposed upon the Mortgaged Property
or any part thereof or become due and payable, and which create, may create or
appear to create a lien upon the Mortgaged Property, or any part thereof. The
Borrower shall likewise pay all taxes, assessments and other charges, levied
upon or assessed, placed or made against, or measured by, this Deed of Trust,
or the recordation hereof, or the Indebtedness secured hereby. In the event of
any legislative action or judicial decision after the date of this Deed of
Trust, imposing upon the Lender the obligation to pay any such taxes,
assessments or other charges, or deducting the amount secured by this Deed of
Trust from the value of the Mortgaged Property for the purpose of taxation, or
changing in any way the laws now in force for the taxation of mortgages, deeds
of trust or debts secured thereby, or the manner of the operation of any such
taxes so as to affect the interests of the Lender, then, and in such event, the
Borrower shall bear and pay the full amount of such taxes, assessments or other
charges. Notwithstanding the foregoing provisions of this paragraph 4, if for
any reason payment by the Borrower of any such taxes, assessments or other
charges would be unlawful, or if the payment thereof would render the
indebtedness evidenced by the Note usurious, the Lender may declare the whole
sum secured by this Deed of Trust, with interest thereon, to be due and payable
upon thirty (30) days' prior written notice. The Borrower shall promptly
furnish to the Lender all notices received by the Borrower of amounts due under
this paragraph and in the event the Borrower shall make payment directly, the
Borrower shall promptly furnish to the Lender receipts evidencing such
payments.
5. Payment of Utility Charges. Subject to paragraph 9 relating
to contests, the Borrower shall pay all charges made by utility companies,
whether public or private, for electricity, gas, heat, water, or sewer,
furnished or used in connection with the Mortgaged Property or any part
thereof, and will, upon written request of the Lender, furnish proper receipts
evidencing such payment.
6. Liens. Subject to paragraph 9 hereof relating to contests,
the Borrower shall not create, incur or suffer to exist any lien, encumbrance
or charge on the Mortgaged Property or any part thereof, other than the lien of
this Deed of Trust and any lien described in Exhibit B hereto. The Borrower
shall pay, when due, the claims of all persons supplying labor or materials to
or in connection with the Mortgaged Property.
7. Compliance with Laws. Subject to paragraph 9 relating to
contests, the Borrower shall comply with all present and future statutes, laws,
rules, orders, regulations and ordinances affecting the Mortgaged Property, any
part thereof or the use thereof.
Deed of Trust, Mortgage and Security Agreement - Page 4
<PAGE> 5
8. Hazardous Substances.
(a) Definitions. As used in this Deed of Trust, the following
terms shall have the following meanings:
(i) "Environmental Law" means the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901 et seq., the Hazardous Materials Transportation Act. 49 U.S.C.
Section 1802 et seq., the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., the Federal Water Pollution Control Act, 33
U.S.C. Section 1251 et seq., the Clean Water Act, 33 U.S.C. Section
1321 et seq., the Clean Air Act 42 U.S.C. Section 7401 et seq., the
Texas Water Code, the Texas Solid Waste Disposal Act, the Texas Health
& Safety Code Section 361.001 et seq., and any other federal, state,
county, municipal, local or other statute, law, ordinance or
regulation which may relate to or deal with human health or the
environment, all as may be from time to time amended.
(ii) "Hazardous Substances" means asbestos
ureaformaldehyde, polychlorinated biphenyls ("PCBs"), nuclear fuel or
material, chemical waste, radioactive material, explosives, known
carcinogens, petroleum products and by-products and other dangerous,
toxic or hazardous pollutants, contaminants, chemicals, materials or
substances listed or identified in, or regulated by, any Environmental
Law.
(b) Representations and Warranties. The Borrower represents and
warrants to the Lender that:
(i) Except as disclosed by the Environmental Reports
described in subparagraph (d), to the best of the Borrower's knowledge
there are no Hazardous Substances present in, on or under the
Mortgaged Property.
(ii) To the best of the Borrower's knowledge, the
Mortgaged Property is not presently being used and has not in the past
been used for the handling, storage, transportation, manufacture,
release or disposal of any Hazardous Substances.
(iii) To the best of the Borrower's knowledge, there are no
present and have not been any past claims, investigations,
administrative proceedings, litigation, regulatory hearings or
requests or demands for remedial or response actions or for
compensation, which may be proposed, threatened or pending with
respect to the Mortgaged Property, alleging noncompliance with or
violation of any Environmental Law, seeking relief under any
Environmental Law or relating to any required environmental permits,
licenses or authorizations.
(iv) To the best of the Borrower's knowledge, all reports
and notices required by any Environmental Law have been duly made with
respect to the Mortgaged Property, and all permits, licenses and
authorizations required by any Environmental Law have been obtained
and are in full force and effect with respect to the Mortgaged
Property.
Deed of Trust, Mortgage and Security Agreement - Page 5
<PAGE> 6
(v) Except as disclosed by the Environmental Reports
described in subparagraph (d), to the best of the Borrower's knowledge
there is not now present, nor has there ever been present, in, on or
under the Mortgaged Property any above-ground or underground storage
tanks used for the storage of petroleum, petroleum by-products or any
other Hazardous Substances.
(vi) To the best of the Borrower's knowledge, the
Mortgaged Property is not and never has been listed on the United
States Environmental Protection Agency's National Priorities List of
Hazardous Waste Sites or on any other list, schedule, log, inventory
or record of hazardous waste sites maintained by any federal, state,
or local agency.
(vii) The Borrower has disclosed and delivered to the
Lender all environmental reports and investigations which the Borrower
has obtained or ordered with respect to the Mortgaged Property.
(c) Prohibited Uses. The Borrower shall not use, or permit the
use of, the Mortgaged Property for the handling, storage, transportation,
manufacture, release or disposal of any Hazardous Substances. In addition, the
Borrower shall not install or maintain, or permit the installation or
maintenance of, any above-ground or underground storage tanks for the storage
of petroleum, petroleum by-products or other Hazardous Substances in, about or
under the Mortgaged Property unless (i) the Borrower has obtained the prior
written consent of the Lender for such installation and maintenance, and (ii)
the Borrower installs and maintains such above-ground or underground storage
tanks in compliance with all applicable Environmental Laws. Notwithstanding
the foregoing, the Borrower or any tenant of the Borrower may use or store
immaterial amounts of commonly known and used materials which may be deemed
Hazardous Substances hereunder, provided that any such use or storage (A) does
not constitute a remunerative activity of the Borrower or any tenant, (B) is
incidental to the Borrower's or such tenant's primary use of the Mortgaged
Property and does not constitute a primary use thereof, and (C) complies at all
times with all applicable Environmental Laws.
(d) Environmental Reports. The Lender acknowledges receipt from
the Borrower of an Environmental Report dated March 31, 1995, prepared by
Professional Service Industries, Inc., as subsequently supplemented. Upon the
occurrence of an Event of Default hereunder or if the Lender receives
information which leads the Lender, in its sole discretion, to believe that
except as permitted in paragraph 8(c) above, any Hazardous Substance is present
on or is being handled, stored, transported, manufactured, released or disposed
of in, on or under the Mortgaged Property, the Lender may obtain, at the
Borrower's expense, further environmental reports from a reputable
environmental consultant of the Lender's choice. If any such environmental
report indicates any presence, handling, storage, transportation, manufacture,
release or disposal of Hazardous Substances in, on or under the Mortgaged
Property, the Lender may require the Borrower, at the Borrower's expense, to
remedy any such presence, handling, storage, transportation, manufacture,
release, or disposal to the satisfaction of the Lender.
Deed of Trust, Mortgage and Security Agreement - Page 6
<PAGE> 7
(e) Legal Proceedings and Remedial Actions. The Borrower shall
immediately notify the Lender in writing of any claim, investigation,
administrative proceeding, litigation, regulatory hearing or request or demand
for remedial or response action or for compensation which may be proposed,
threatened or pending, alleging the presence, handling, storage,
transportation, manufacture, release or disposal of Hazardous Substances in, on
or under the Mortgaged Property. The Lender shall have the right, but not the
obligation, to join and participate in any such investigation, administrative
proceeding, litigation, regulatory hearing or other action and to have its
attorneys' fees and expenses in connection therewith paid by the Borrower.
Without the Lender's prior written consent, the Borrower shall not take any
remedial or response action or enter into any settlement or other compromise
with respect to any claim, investigation, administrative proceeding,
litigation, regulatory hearing or request or demand for remedial or response
action or for compensation which, in the Lender's reasonable judgment, may
impair the value of the Lender's security under this Deed of Trust.
9. Permitted Contests. The Borrower shall not be required to (a)
pay any tax, assessment or other charge referred to in paragraph 4 hereof, (b)
pay any charge referred to in paragraph 5 hereof, (c) discharge or remove any
lien, encumbrance or charge referred to in paragraph 6 hereof, or (d) comply
with any statute, law, rule, regulation or ordinance referred to in paragraph 7
hereof, so long as the Borrower shall (i) contest, in good faith, the
existence, amount or the validity thereof, the amount of damages caused thereby
or the extent of its liability therefor, by appropriate proceedings which shall
operate during the pendency thereof to prevent (A) the collection of, or other
realization upon the tax, assessment, charge or lien, encumbrance or charge so
contested, (B) the sale, forfeiture or loss of the Mortgaged Property or any
part thereof, and (C) any interference with the use or occupancy of the
Mortgaged Property or any part thereof, and (ii) shall give such security to
the Lender as may be demanded by the Lender to ensure compliance with the
foregoing provisions of this paragraph 9. The Borrower shall give prompt
written notice to the Lender of the commencement of any contest referred to in
this paragraph 9.
10. Insurance.
(a) Risks to be Insured. The Borrower, at its sole cost and
expense, will maintain insurance of the following character:
(i) Insurance on the buildings and other improvements now
existing or hereafter erected on the Land and on the fixtures and
personal property included in the Mortgaged Property against loss by
fire, and other hazards covered by the so-called "all-risk" form of
policy without a coinsurance clause in an amount equal to the full
replacement cost thereof without deduction for physical depreciation,
which insurance shall in no event be less than the unpaid principal
balance of the Note at any given time. While any building or other
improvement is in the course of being constructed or rebuilt on the
Land, the Borrower shall provide the aforesaid hazard insurance in
builder's risk completed value form including coverage available on
the so-called "all-risk" non-reporting form of policy for an amount
equal to 100% of the insurable replacement cost of such building or
other improvement.
Deed of Trust, Mortgage and Security Agreement - Page 7
<PAGE> 8
(ii) If the Mortgaged Property includes steam boilers or
other equipment for the generation or transmission of steam, insurance
against loss or damage by explosion, rupture or bursting of steam
boilers, pipes, turbines, engines and other pressure vessels and
equipment, in an amount satisfactory to the Lender, without a
co-insurance clause.
(iii) If the Land or any part thereof is located in a
designated official flood-hazardous area, flood insurance insuring the
buildings and improvements now existing or hereafter erected on the
Land in an amount equal to the lesser of the principal balance of the
Note or the maximum limit of coverage made available with respect to
such buildings and improvements under the Federal Flood Disaster
Protection Act of 1973, as amended, and the regulations issued
thereunder.
(iv) Comprehensive general liability insurance protecting
against claims arising from any accident or occurrence in or upon the
Mortgaged Property in the form and amount acceptable to the Lender.
(v) While any building or improvement is in the course of
being constructed, renovated or rebuilt on the Land, such worker's
compensation insurance as is required by statute.
(vi) Insurance against interruption of business in respect
of the Mortgaged Property in an amount sufficient to pay one (1)
year's debt service on the Note, including principal and interest
thereof, tax and assessment payments described in paragraph 2,
insurance premiums for the coverages required in this paragraph 10,
and other operating expenses of the Mortgaged Property.
(b) Policy Provisions. All insurance policies and renewals
thereof maintained by the Borrower pursuant to subparagraphs (a)(i) through
(a)(iii) and (a)(vi) above shall be written by an insurance carrier
satisfactory to the Lender, contain a standard mortgagee clause in favor of and
in form acceptable to the Lender, contain an agreement of the insurer that it
will not cancel or modify the policy except after thirty (30) days prior
written notice to the Lender, and be reasonably satisfactory to the Lender in
all other respects. The insurance maintained pursuant to subparagraph (a)(iv)
and (a)(v) shall also be written by an insurance carrier acceptable to the
Lender and shall name the Lender as an additional insured.
(c) Delivery of Policy. The Borrower will deliver to the Lender
copies of policies satisfactory to the Lender evidencing the insurance which is
required under subparagraphs (a)(i) through (a)(iii) and (a)(vi), certificates
evidencing the insurance which is required under subparagraphs (a)(iv) and
(a)(v), and the Borrower shall promptly furnish to the Lender copies of all
renewal notices and all receipts of paid premiums received by it. At least
fifteen (15) days prior to the expiration date of a required policy, the
Borrower shall deliver to the Lender a copy of a renewal policy in form
satisfactory to the Lender. If the Borrower has a blanket insurance policy in
force providing coverage for several properties of the Borrower, including the
Mortgaged Property, the Lender will accept a certificate of such insurance
together with a copy of such blanket insurance policy; provided the certificate
sets forth the amounts of insurance and coverage, and such amounts are at least
equal to the amounts
Deed of Trust, Mortgage and Security Agreement - Page 8
<PAGE> 9
required hereinabove, the original policy of insurance is written by a carrier
or carriers acceptable to the Lender, insures against the risks set forth
hereinabove, cannot be amended, modified or canceled without thirty (30) days'
prior written notice to any mortgagee of the Borrower, is in an amount not less
than the unpaid principal balance secured by this Deed of Trust, and has a full
replacement cost endorsement meeting the requirements of paragraph 10(a)(i).
(d) Assignment of Policy. If the Mortgaged Property is sold at a
foreclosure sale or if the Lender shall acquire title to the Mortgaged
Property, the Lender shall have all of the right, title and interest of the
Borrower in and to any insurance policies required under subparagraphs 10(a)(i)
through (a)(iii) and (a)(vi) hereof and the unearned premiums thereon and in
and to the proceeds resulting from any damage to the Mortgaged Property prior
to such sale or acquisition.
(e) Notice of Damage or Destruction; Adjusting Loss. If the
Mortgaged Property or any part thereof shall be damaged or destroyed by fire or
other casualty, the Borrower will promptly give written notice thereof to the
insurance carrier and the Lender, and will not adjust any damage or loss unless
the Lender shall have joined in such adjustment; but if there has been no
adjustment of any such damage or loss within four months from the date of
occurrence thereof and if an Event of Default shall exist at the end of such
four-month period or at any time thereafter, the Lender may alone, make proof
of loss, adjust and compromise any claim under the policies and appear in and
prosecute any action arising from such policies. In connection therewith, the
Borrower does hereby irrevocably authorize, empower and appoint the Lender as
attorney-in-fact for the Borrower (which appointment is coupled with an
interest and is irrevocable) to do any and all of the foregoing in the name and
on behalf of the Borrower.
(f) Application of Insurance Proceeds. All sums paid under any
insurance policy required in subparagraphs 10(a)(i) through (a)(iii) and
(a)(vi), shall be paid to the Lender. Lender agrees to allow the use of sums
paid under the insurance policy required under subparagraph (a) above for
repair and reconstruction of the Mortgaged Property provided that, in the
Lender's sole and subjective judgment, (i) restoration or repair of the
Mortgaged Property is economically feasible, (ii) the value of the Lender's
security is not reduced, (iii) no lease has terminated as a result of the loss
or damage and all leases remain enforceable under their terms without
modification, (iv) the loss does not occur in the six month period preceding
the stated maturity date of the Note and Lender's independent consultant
certifies that the restoration of the Mortgaged Property can be completed at
least ninety days prior to the maturity date of the Note, (v) there exists no
Event of Default or other event which with the passing of time or the giving of
notice or both would constitute an Event of Default under the Note or this Deed
of Trust, (vi) insurance proceeds and additional funds deposited by the
Borrower with the Lender prior to the commencement of any repair or
reconstruction are adequate to complete repair and reconstruction of the
Mortgaged Property pursuant to plans and specifications approved by Lender,
(vii) disbursement procedures acceptable to Lender are in place, which
procedures shall include provisions for the deposit of construction shortfalls,
collection of lien waivers, issuance of title policies by a title insurance
company, payment of Lender's fees and expenses in disbursing, and coordination
of work, and Borrower shall have reimbursed Lender for all of its reasonable
out-of-pocket expenses in connection
Deed of Trust, Mortgage and Security Agreement - Page 9
<PAGE> 10
with such reconstruction and disbursement, including, without limitation, title
insurance fees, inspection fees, attorneys' fees, and architect's fees, and
(ix) Lender shall have received such consents and assurances from municipal
authorities, tenants in the Mortgaged Property and others as Lender may
request, including, without limitation, assurances from the tenants that they
will continue as tenants in the Mortgaged Property upon completion of the
repair or reconstruction work, that the leases remain in full force and effect
on substantially the same terms as before the occurrence of the damage
necessitating the repair or reconstruction work, that there are no unsatisfied
claims against the Borrower, and that the tenants are obligated to pay rent
without credit, offset or deduction, and that to the best of their knowledge,
there exists no default or state of facts which, with notice and/or the passage
of time, would constitute a default under any lease on the part of the
Borrower. Lender may establish other conditions it deems necessary to assure
the work is fully completed in a good and workmanlike manner free of all liens
or claims by reason thereof, and in compliance with all applicable laws, rules
and regulations. If the above conditions are not satisfied as to application of
insurance proceeds, and in any event as to condemnation awards, Lender shall
apply the same (after first deducting therefrom Lender's reasonable expenses
incurred in collecting the same, including but not limited to reasonable
attorneys' fees) to the reduction of the outstanding principal balance of the
Loan without a prepayment premium or to payment of the restoration, repair,
replacement or rebuilding of the property that is damaged or destroyed in such
manner as Lender may determine. Any application of insurance proceeds or
eminent domain proceeds shall not extend or postpone the due dates of the
monthly installments payable under the Note or change the amount of such
installments.
(g) Reimbursement of the Lender's Expenses. The Borrower shall
promptly reimburse the Lender upon demand for all of the Lender's expenses
incurred in connection with the collection of the insurance proceeds, including
but not limited to reasonable attorneys' fees, and all such expenses, together
with interest from the date of disbursement at the rate stated in the Note
(unless collection of interest from the Borrower at such rate would be contrary
to applicable law, in which event such amounts shall bear interest at the
highest rate which may be collected from the Borrower under applicable law)
shall be additional amounts secured by this Deed of Trust.
11. Preservation and Maintenance of the Mortgaged Property. The
Borrower (a) shall keep the buildings and other improvements now or hereafter
erected on the Land in safe and good repair and condition, ordinary
depreciation excepted; (b) shall, upon damage to or destruction of the
Mortgaged Property or any part thereof by fire or other casualty, restore,
repair, replace or rebuild the Mortgaged Property that is damaged or destroyed
to the condition it was in immediately prior to such damage or destruction,
whether or not any insurance proceeds are available or sufficient for such
purpose, unless the Lender shall have elected to apply such proceeds to
reduction of the Indebtedness; (c) shall constantly maintain the parking and
landscaped areas of the Mortgaged Property; (d) shall not commit waste or
permit impairment or deterioration of the Mortgaged Property; (e) shall not
remove from the Land any of the fixtures and personal property included in the
Mortgaged Property unless the same is immediately replaced with property of at
least equal value and utility, and this Deed of Trust becomes a valid first
lien on such property.
Deed of Trust, Mortgage and Security Agreement - Page 10
<PAGE> 11
12. Inspection. The Lender, or its agents, shall have the right
at all reasonable times, and only after reasonable prior notice to Borrower
except in the case of emergency, to enter upon the Mortgaged Property for the
purposes of inspecting the Mortgaged Property or any part thereof. The Lender
shall, however, have no duty to make such inspection.
13. Protection of the Lender's Security. Subject to the rights of
the Borrower under paragraph 9 hereof, if the Borrower fails to perform any of
the covenants and agreements contained in the Loan Documents or if any action
or proceeding is commenced which affects the Mortgaged Property or the interest
of the Lender therein, or the title thereto, then the Lender, at Lender's
option, may perform such covenants and agreements, defend against and/or
investigate such action or proceeding, and take such other action as the Lender
deems necessary to protect the Lender's interest. The Lender shall be the sole
judge of the legality, validity and priority of any claim, lien, encumbrance,
tax, assessment, charge and premium paid by it and of the amount necessary to
be paid in satisfaction thereof. Upon the occurrence of an Event of Default,
the Lender is hereby given the irrevocable power of attorney (which power is
coupled with an interest and is irrevocable) to enter upon the Mortgaged
Property as the Borrower's agent in the Borrower's name to perform any and all
covenants and agreements to be performed by the Borrower as herein provided.
Any amounts or expenses disbursed or incurred by the Lender pursuant to this
paragraph 13, with interest thereon, shall become additional Indebtedness of
the Borrower secured by this Deed of Trust. Unless the Borrower and the Lender
agree in writing to other terms of repayment, such amounts shall be immediately
due and payable, and shall bear interest from the date of disbursement at the
interest rate stated in the Note, unless collection from the Borrower of
interest at such rate would be contrary to applicable law, in which event such
amounts shall bear interest at the highest rate which may be collected from the
Borrower under applicable law. The Lender shall, at its option, be subrogated
to the lien of any mortgage or other lien discharged in whole or in part by the
Indebtedness or by the Lender under the provisions hereof, and any such
subrogation rights shall be additional and cumulative security for this Deed of
Trust. Nothing contained in this paragraph 13 shall require the Lender to
incur any expense or do any act hereunder, and the Lender shall not be liable
to the Borrower for any damages or claims arising out of action taken by the
Lender pursuant to this paragraph 13.
14. Condemnation. The Borrower hereby irrevocably assigns to the
Lender any award or payment which becomes payable by reason of any taking of
the Mortgaged Property, or any part thereof, whether directly or indirectly or
temporarily or permanently, in or by condemnation or other eminent domain
proceedings (hereinafter called "Taking"). Forthwith upon receipt by the
Borrower of notice of the institution of any proceeding or negotiations for a
Taking, the Borrower shall give notice thereof to the Lender. The Lender may
appear in any such proceedings and participate in any such negotiations and may
be represented by counsel. The Borrower, notwithstanding that the Lender may
not be a party to any such proceeding, will promptly give to the Lender copies
of all notices, pleadings, judgments, determinations and other papers received
by the Borrower therein. The Borrower will not enter into any agreement
permitting or consenting to the taking of the Mortgaged Property, or any part
thereof, or providing for the conveyance thereof in lieu of condemnation, with
anyone authorized to acquire the same in condemnation or by eminent domain
unless the Lender shall first have consented thereto in writing. All Taking
awards shall be adjusted jointly by the Borrower and the Lender. In the event
that the conditions set forth in clauses
Deed of Trust, Mortgage and Security Agreement - Page 11
<PAGE> 12
(i) through (ix) of paragraph 10(f) are satisfied, Lender agrees to allow the
use of sums paid as a result of a Taking (after first deducting therefrom
Lender's reasonable expenses incurred in collecting the same, including but not
limited to reasonable attorneys' fees) for repair or restoration of the
Mortgaged Property in the manner as provided in paragraph 10(f) relating to the
application of insurance proceeds. If the conditions set forth in paragraph
10(f) are not satisfied, Lender may apply proceeds of the Taking (after
deduction of Lender's reasonable expenses as aforesaid) to the reduction of the
outstanding principal balance of the Loan without a prepayment premium, or to
payment of the repair or restoration of the Mortgaged Property in such manner
as Lender may determine. Any application of Taking awards to principal of the
Note shall not extend or postpone the due dates of the monthly installments
payable under the Note or change the amount of such installments.
If the Taking involves a taking of any building or other improvement
now or hereafter located on the Land, the Borrower shall proceed, with
reasonable diligence, to demolish and remove any ruins and complete repair or
restoration of the Mortgaged Property as nearly as possible to its respective
size, type and character immediately prior to the Taking, whether or not the
condemnation awards are available or adequate to complete such repair or
restoration unless the Lender has applied the entire condemnation award to
payment of the Indebtedness (without prepayment premium). The Borrower shall
promptly reimburse the Lender upon demand for all of the Lender's expenses
(including reasonable attorneys' fees) incurred in the collection of awards and
their disbursement in accordance with this paragraph, and all such expenses,
together with interest from the date of disbursement at the rate stated in the
Note (unless collection of interest from the Borrower at such rate would be
contrary to applicable law, in which event such amounts shall bear interest at
the highest rate which may be collected from the Borrower under applicable law)
shall be additional amounts secured by this Deed of Trust.
15. Financial Covenants, Statements and Other Information; Books
and Records.
(a) Status of Borrower. Borrower is and, unless changed as
provided below, will continue to be a corporation duly organized and validly
existing under the laws of the State of Delaware and in good standing and
qualified to do business in the State of Texas. Borrower may not change its
form of organization or state of organization without the prior written consent
of Lender, which consent will not be withheld unless the proposed change will
have a material adverse effect on the rights of Lender under the Loan
Documents.
(b) Financial Reports as to Borrower. Borrower will deliver to
Lender within ninety (90) days after the end of each Fiscal Year of Borrower
financial statements that cover the last Fiscal Year of Borrower prepared by
independent certified public accountants of recognized national standing in
accordance with generally accepted accounting principles. If an Event of
Default occurs, Borrower will deliver to Lender upon demand year-to-date
financial statements prepared by independent certified public accountants of
recognized national standing in accordance with generally accepted accounting
principles.
Deed of Trust, Mortgage and Security Agreement - Page 12
<PAGE> 13
(c) Financial Reports as to the Mortgaged Property. The Borrower
will prepare or cause to be prepared at its expense and deliver to the Lender
for the Mortgaged Property (in such number as may reasonably be requested):
(i) As soon as practicable after the end of each calendar
year, and in no event later than ninety (90) days thereafter, a
separate unaudited statement of the income from and expenses incurred
with respect to the Mortgaged Property for such year, including a
balance sheet, an operating/financial statement and a current tenant
summary, setting forth in comparative form the figures for the
previous calendar year, all in reasonable detail and certified to be
true and correct by the Borrower. The tenant summary shall include
tenants' names, square footage, lease commencement and expiration
dates, base rent and other charges, security deposits, options and
other lease concessions, delinquencies, unleased space, vacant space
and, with respect to leases that have expired within the year or will
expire in the next year, the new or proposed lease terms for such
leases that have been renewed (a "Leasing Summary").
(ii) As soon as practicable after the occurrence of an
Event of Default, and in no event later than thirty (30) days
thereafter, and monthly thereafter until such time as there is not in
existence an uncured Event of Default, a Leasing Summary and an
unaudited statement of the income from and expenses incurred with
respect to the Mortgaged Property for each month and the year to date,
setting forth in comparative form the figures for the previous
calendar year, all in reasonable detail and prepared and certified to
be true and correct by Borrower.
(iii) Immediately upon becoming aware of the existence of
any condition or event which constitutes, or which after notice or
lapse of time or both would constitute, an Event of Default, written
notice specifying the nature and period of existence thereof and what
action the Borrower has taken, is taking or proposes to take with
respect thereto.
(d) Books and Records. Borrower shall keep and maintain at all
times at the Borrower's address stated below or at such other place as the
Lender may approve in writing, complete and accurate books of accounts and
records in sufficient detail to reflect correctly the results of the operation
of the Mortgaged Property and copies of all written contracts, leases and other
instruments which affect the Mortgaged Property. Such books, records,
contracts, leases and other instruments shall be subject to examination and
inspection by the Lender or its representative during ordinary business hours.
If the Borrower fails to provide the operating statements specified in
subparagraph (c) above, the Lender shall have the right to audit the Borrower's
books and records at the Borrower's expense.
16. No Secondary Financing. The Borrower shall not create or
permit to be created or to remain any subordinate lien on the Mortgaged
Property or any part thereof.
17. Security Interest. This Deed of Trust shall constitute a
security agreement with respect to (and the Borrower hereby grants the Lender a
security interest in) all personal property and fixtures included in the
Mortgaged Property as more specifically described in paragraphs (ii), (iv) and
(v) of the granting clause above. The Borrower will from
Deed of Trust, Mortgage and Security Agreement - Page 13
<PAGE> 14
time to time, at the request of the Lender, execute any and all financing
statements covering such personal property and fixtures (in a form satisfactory
to the Lender) which the Lender may reasonably consider necessary or
appropriate to perfect its security interest.
18. Events of Default; Acceleration. Each of the following
occurrences shall constitute an event of default hereunder (herein called an
"Event of Default"):
(a) The Borrower shall fail to make due and punctual payment of
any installment of interest or principal (or both) or any other payment
becoming due under the Note.
(b) The Borrower shall fail to make due and punctual payment of
any other amounts (not described in the foregoing paragraph 18(a) or paragraph
18(e) below) required to be paid under this Deed of Trust or any of the other
Loan Documents (excluding the Note, to which paragraph 18(a) applies) within
ten (10) days after the date upon which such amount becomes due.
(c) The Borrower shall default in the performance of or breach its
agreement contained in paragraph 16 hereof.
(d) The Borrower shall fail to duly and punctually pay when and as
due any payment for taxes and assessments required by paragraph 2 to be paid
(subject to paragraph 9 hereof relating to contests) or shall fail to provide
the insurance coverage required by paragraph 10(a).
(e) The Borrower shall fail duly to perform or observe any of the
covenants or agreements contained in the Loan Documents (other than a covenant
or agreement which is specifically dealt with elsewhere in this paragraph 18)
and such failure shall not be cured within thirty (30) days after written
notice to Borrower (or longer if reasonably necessary and Borrower is
proceeding diligently to cure such failure).
(f) The Borrower shall make an assignment for the benefit of its
creditors, or the Borrower shall generally not be paying its debts as they
become due, or a petition shall be filed by or against the Borrower under the
United States Bankruptcy Code, or the Borrower shall seek or consent to or
acquiesce in the appointment of any trustee, receiver or liquidator of a
material part of its properties or of the Mortgaged Property or any part
thereof or shall not, within thirty (30) days after the appointment (without
its consent or acquiescence) of a trustee, receiver or liquidator of any
material part of its properties or of the Mortgaged Property, have such
appointment vacated.
(g) A judgment, writ or warrant of attachment or execution, or
similar process shall be entered and become a lien on, issued or levied
against, the Mortgaged Property or any part thereof and shall not be released,
vacated or fully bonded within thirty (30) days after its entry, issue or levy.
(h) Except as provided in this subparagraph, the Mortgaged
Property, or any part thereof, without the prior written consent of Lender,
shall be sold, conveyed, transferred, encumbered or full possessory rights
therein transferred, or the controlling interest in the
Deed of Trust, Mortgage and Security Agreement - Page 14
<PAGE> 15
Borrower shall be sold, conveyed, transferred or encumbered, whether
voluntarily, involuntarily or by operation of law; and this provision shall
apply to each and every sale, transfer, conveyance or encumbrance regardless of
whether or not the Lender has consented or waived its rights, whether by action
or omission, in connection with any previous sale, transfer, conveyance or
encumbrance. Notwithstanding the preceding sentence, however, Borrower shall
have a one-time right to transfer the Mortgaged Property subject to the prior
written consent of Lender (which consent may be given or withheld in Lender's
sole discretion) provided that the transferee (i) assumes and agrees to perform
all of the obligations of Borrower under the Loan Documents, (ii) pays to
Lender a fee equal to one percent (1%) of the principal balance of the Loan,
(iii) pays all of the costs and expenses of Lender (including reasonable
attorneys' fees) incurred in connection with the transfer, and (iv) complies
with all other reasonable requirements of Lender in connection with the
transfer. The consent of Lender to this one-time transfer shall be based on
its review of the transferee (form of entity, credit history, financial
strength, net worth, liquidity, equity investment such as down payment, etc.),
terms of transfer, and the evaluation of the then current tenancies and the
then financial and physical status of the Mortgaged Property; all of which
shall be equivalent to or better than these conditions existing on the date of
this Deed of Trust. In the event of any such transfer, Borrower shall remain
liable for all of its obligations under the Note, this Deed of Trust and the
other Loan Documents.
(i) Any representation or warranty made by Borrower or any
shareholder of Borrower to Lender in connection with the loan secured hereby
proves to be untrue in any material respect.
Upon the occurrence of any Event of Default, Lender may, at its
option, declare the principal of and the accrued interest on the Note, and all
sums advanced hereunder, with interest thereon, to be forthwith due and
payable, and thereupon the Note and all other Indebtedness secured hereby,
including both principal and all unpaid interest accrued thereon, including all
applicable late payment charges and prepayment premium, and including all sums
advanced hereunder and interest thereon, shall be and become immediately due
and payable without presentment, demand or notice of any kind. Time is of the
essence hereof.
19. Remedies. Upon the occurrence of any Event of Default, then
and in every such case the Lender may, at the Lender's option, and by or
through Trustee, by the Lender itself or otherwise, do any one or more of the
following, in addition to any other remedies available to the Lender:
(a) the Lender may, prior or subsequent to the institution of any
foreclosure proceedings, enter upon the Mortgaged Property, or any part
thereof, and take exclusive possession of the Mortgaged Property and of all
books, records, and accounts relating thereto and exercise without interference
from the Borrower any and all rights which the Borrower has with respect to the
management, possession, operation, protection, or preservation of the Mortgaged
Property, including without limitation, the right to rent the same for the
account of the Borrower and to deduct from such Rents all costs, expenses, and
liabilities of every character incurred by the Lender in collecting such Rents
and in managing, operating, maintaining, protecting, or preserving the
Mortgaged Property and to apply the remainder
Deed of Trust, Mortgage and Security Agreement - Page 15
<PAGE> 16
of such Rents on the Indebtedness in such manner as the Lender may elect. All
such costs, expenses, and liabilities incurred by the Lender in collecting such
Rents and in managing, operating, maintaining, protecting, or preserving the
Mortgaged Property, if not paid out of Rents as hereinabove provided, shall
constitute a demand obligation owing by the Borrower and shall bear interest
from the date of expenditure until paid at the Default Rate, all of which shall
constitute a portion of the Indebtedness. If necessary to obtain the
possession provided for above, the Lender may invoke any and all legal remedies
to dispossess the Borrower, including specifically one or more actions for
forcible entry and detainer, trespass to try title, and restitution. In
connection with any action taken by the Lender pursuant to this subsection, the
Lender shall not be liable for any loss sustained by the Borrower resulting
from any failure to let the Mortgaged Property, or any part thereof, or from
any other act or omission of the Lender in managing the Mortgaged Property
unless such loss is caused by the willful misconduct of the Lender, nor shall
the Lender be obligated to perform or discharge any obligation, duty, or
liability under any lease or under or by reason hereof or the exercise of
rights or remedies hereunder. THE BORROWER SHALL AND DOES HEREBY AGREE TO
INDEMNIFY THE LENDER FOR, AND TO HOLD THE LENDER HARMLESS FROM, ANY AND ALL
LIABILITY, LOSS, OR DAMAGE (INCLUDING, WITHOUT LIMITATION, ANY LIABILITY, LOSS
OR DAMAGE ARISING FROM, OR ALLEGED TO HAVE ARISEN FROM, THE SOLE OR CONCURRENT
NEGLIGENCE OF LENDER) WHICH MAY OR MIGHT BE INCURRED BY THE LENDER UNDER ANY
SUCH LEASE OR UNDER OR BY REASON HEREOF OR THE EXERCISE OF RIGHTS OR REMEDIES
HEREUNDER, AND FROM ANY AND ALL CLAIMS AND DEMANDS WHATSOEVER (INCLUDING,
WITHOUT LIMITATION, CLAIMS AND DEMANDS ARISING FROM, OR ALLEGED TO HAVE ARISEN
FROM, THE SOLE OR CONCURRENT NEGLIGENCE OF LENDER) WHICH MAY BE ASSERTED
AGAINST THE LENDER BY REASON OF ANY ALLEGED OBLIGATIONS OR UNDERTAKINGS ON ITS
PART TO PERFORM OR DISCHARGE ANY OF THE TERMS, COVENANTS, OR AGREEMENTS
CONTAINED IN ANY SUCH LEASE. Should the Lender incur any such liability, the
amount thereof, including without limitation, costs, expenses, and reasonable
attorneys' fees, together with interest thereon from the date of expenditure
until paid at the Default Rate, shall be secured hereby, and the Borrower shall
reimburse the Lender therefor immediately upon demand. Nothing in this
subsection shall impose any duty, obligation, or responsibility upon the Lender
for the control, care, management, leasing, or repair of the Mortgaged
Property, nor for the carrying out of any of the terms and conditions of any
such Lease; nor shall it operate to make the Lender responsible or liable for
any waste committed on the Mortgaged Property by the tenants or by any other
parties, or for any Hazardous Substance on or under the Mortgaged Property, or
for any dangerous or defective condition of the Mortgaged Property or for any
negligence in the management, leasing, upkeep, repair, or control of the
Mortgaged Property resulting in loss or injury or death to any tenant,
licensee, employee, or stranger. The Borrower hereby assents to, ratifies, and
confirms any and all actions of the Lender with respect to the Mortgaged
Property taken under this subsection.
(b) The Lender may request the Trustee to proceed with foreclosure
under the power of sale which is hereby conferred, such foreclosure to be
accomplished in accordance with the following provisions:
Deed of Trust, Mortgage and Security Agreement - Page 16
<PAGE> 17
(i) The Trustee is hereby authorized and empowered, and
it shall be the Trustee's special duty, upon such request of Lender,
to sell the Mortgaged Property, or any part thereof, at public auction
to the highest bidder for cash, with or without having taken
possession of same. Any such sale (including notice thereof) shall
comply with the applicable requirements, at the time of the sale, of
Section 51.002 of the Texas Property Code, as amended, or, if and to
the extent such statute is not then in force, with the applicable
requirements, at the time of the sale, of the successor statute or
statutes, if any, governing sales of Texas real property under powers
of sale conferred by deeds of trust. If there is no statute in force
at the time of the sale governing sales of Texas real property under
powers of sale conferred by deeds of trust, such sale shall comply
with applicable law at the time of the sale.
(ii) At any time during the bidding, the Trustee may
require a bidding party (A) to disclose its full name, state and city
of residence, occupation, and specific business office location, and
the name and address of the principal the bidding party is
representing (if applicable), and (B) to demonstrate reasonable
evidence of the bidding party's financial ability (or, if applicable,
the financial ability of the principal of such bidding party), as a
condition to the bidding party submitting bids at the foreclosure
sale. If any such bidding party (the "Questioned Bidder") declines to
comply with the Trustee's requirement in this regard, or if such
Questioned Bidder does respond but the Trustee, in Trustee's sole and
absolute discretion, deems the information or the evidence of the
financial ability of the Questioned Bidder (or, if applicable, the
principal of such bidding party) to be inadequate, then the Trustee
may continue the bidding with reservation; and in such event (1) the
Trustee shall be authorized to caution the Questioned Bidder
concerning the legal obligations to be incurred in submitting bids,
and (2) if the Questioned Bidder is not the highest bidder at the
sale, or if having been the highest bidder the Questioned Bidder fails
to deliver the cash purchase price payment promptly to the Trustee,
all bids by the Questioned Bidder shall be null and void. The Trustee
may, in Trustee's sole and absolute discretion, determine that a
credit bid may be in the best interest of the Borrower and the Lender,
and elect to sell the Mortgaged Property for credit or for a
combination of cash and credit; provided, however, that the Trustee
shall have no obligation to accept any bid except an all cash bid. In
the event the Trustee requires a cash bid and cash is not delivered
within a reasonable time after conclusion of the bidding process, as
specified by the Trustee, but in no event later than 3:45 p.m. local
time on the day of sale, then said contingent sale shall be null and
void, the bidding process may be recommenced, and any subsequent bids
or sale shall be made as if no prior bids were made or accepted.
(iii) In addition to the rights and powers of sale granted
under the preceding provisions of this subsection, if default is made
in the payment of any installment of the Indebtedness, Lender may, at
Lender's option, at once or at any time thereafter while any matured
installment remains unpaid, without declaring the entire Indebtedness
to be due and payable, orally or in writing direct the Trustee to
enforce this trust and to sell the Mortgaged Property subject to such
unmatured Indebtedness and to the rights, powers, liens, security
interests, and assignments securing or providing recourse for payment
of such unmatured Indebtedness, in the same manner,
Deed of Trust, Mortgage and Security Agreement - Page 17
<PAGE> 18
all as provided in the preceding provisions of this subsection. Sales
made without maturing the Indebtedness may be made hereunder whenever
there is a default in the payment of any installment of the
Indebtedness, without exhausting the power of sale granted hereby, and
without affecting in any way the power of sale granted under this
subsection, the unmatured balance of the Indebtedness or the rights,
powers, liens, security interests, and assignments securing or
providing recourse for payment of the Indebtedness.
(iv) Sale of a part of the Mortgaged Property shall not
exhaust the power of sale, but sales may be made from time to time
until the Indebtedness is paid and the obligations of Borrower set
forth in the Loan Documents are performed and discharged in full. It
is intended by each of the foregoing provisions of this subsection
that the Trustee may, after any request or direction by Lender, sell
the Mortgaged Property as a unit or sell at any time or from time to
time any part or parts of the Mortgaged Property separately from the
remainder of the Mortgaged Property. It shall not be necessary to
have present or to exhibit at any sale any of the Mortgaged Property.
(v) After any sale under this subsection, the Trustee
shall make good and sufficient deeds, assignments, and other
conveyances to the purchaser or purchasers thereunder in the name of
the Borrower, conveying the Mortgaged Property or any part thereof so
sold to the purchaser or purchasers with general warranty of title by
the Borrower. It is agreed that in any deeds, assignments or other
conveyances given by the Trustee, any and all statements of fact or
other recitals therein made as to the identity of Lender, the
occurrence or existence of any Event of Default, the notice of
intention to accelerate, or acceleration of, the maturity of the
Indebtedness, the request to sell, notice of sale, time, place, terms
and manner of sale, and receipt, distribution, and application of the
money realized therefrom, the due and proper appointment of a
substitute trustee, and without being limited by the foregoing, any
other act or thing having been duly done by or on behalf of Lender or
by or on behalf of Trustee, shall be taken by all courts of law and
equity as prima facie evidence that such statements or recitals state
true, correct, and complete facts and are without further question to
be so accepted, and the Borrower does hereby ratify and confirm any
and all acts that Trustee may lawfully do in the premises by virtue
hereof.
(c) The Lender, or the Trustee, upon written request of the
Lender, may proceed by suit or suits, at law or in equity, to enforce the
payment of the Indebtedness and the performance and discharge of the
obligations of Borrower set forth in the Loan Documents in accordance with the
terms hereof, of the Note, and the other Loan Documents, to foreclose the liens
and security interests of this Deed of Trust as against all or any part of the
Mortgaged Property, and to have all or any part of the Mortgaged Property sold
under the judgment or decree of a court of competent jurisdiction. This remedy
shall be cumulative of any other nonjudicial remedies available to the Lender
with respect to the Loan Documents. Proceeding with a request or receiving a
judgment for legal relief shall not be or be deemed to be an election of
remedies or bar any available nonjudicial remedy of the Lender.
Deed of Trust, Mortgage and Security Agreement - Page 18
<PAGE> 19
(d) The Lender may be the purchaser of the Mortgaged Property or
any part thereof, at any sale thereof, whether such sale be under the power of
sale herein vested in the Trustee or upon any other foreclosure of the liens
and security interests hereof, or otherwise, and the Lender shall, upon any
such purchase, acquire good title to the Mortgaged Property so purchased, free
of the liens and security interests hereof, unless the sale was made subject to
an unmatured portion of the Indebtedness. The Lender, as purchaser, shall be
treated in the same manner as any third party purchaser and the proceeds of the
Lender's purchase shall be applied in accordance with subparagraph (h) below.
(e) Should any part of the Mortgaged Property come into the
possession of the Lender, whether before or after default, the Lender may (for
itself or by or through other persons, firms, or entities) hold, lease, manage,
use, or operate the Mortgaged Property for such time and upon such terms as the
Lender may deem prudent under the circumstances (making such repairs,
alterations, additions, and improvements thereto and taking such other action
as the Lender may from time to time deem necessary or desirable) for the
purpose of preserving the Mortgaged Property or its value, pursuant to the
order of a court of appropriate jurisdiction or in accordance with any other
rights held by the Lender in respect of the Mortgaged Property. The Borrower
covenants to promptly reimburse and pay to the Lender on demand, at the place
where the Note is payable, the amount of all reasonable expenses (including
without limitation the cost of any insurance, taxes, or other charges) incurred
by the Lender in connection with the Lender's custody, preservation, use, or
operation of the Mortgaged Property, together with interest thereon from the
date incurred by the Lender at the Default Rate; and all such expenses, costs,
taxes, interest, and other charges shall be and become a part of the
Indebtedness. It is agreed, however, that the risk of loss or damage to the
Mortgaged Property is on the Borrower, and the Lender shall have no liability
whatsoever for decline in value of the Mortgaged Property, for failure to
obtain or maintain insurance, or for failure to determine whether insurance in
force is adequate as to amount or as to the risks insured. Possession by the
Lender shall not be deemed an election of judicial relief, if any such
possession is requested or obtained, with respect to any Mortgaged Property or
collateral not in the Lender's possession.
(f) If the liens or security interests hereof shall be foreclosed
by power of sale granted herein, by judicial action, or otherwise, the
purchaser at any such sale shall receive, as an incident to purchaser's
ownership, immediate possession of the property purchased, and if the Borrower
or the Borrower's successors shall hold possession of said property or any part
thereof subsequent to foreclosure, the Borrower and the Borrower's successors
shall be considered as tenants at sufferance of the purchaser at foreclosure
sale (without limitation of other rights or remedies, at a reasonable rental
per day, due and payable daily, based upon the value of the portion of the
Mortgaged Property so occupied and sold to such purchaser), and anyone
occupying such portion of the Mortgaged Property, after demand is made for
possession thereof, shall be guilty of forcible detainer and shall be subject
to eviction and removal, forcible or otherwise, with or without process of law,
and all damages by reason of such eviction and removal are hereby expressly
waived.
(g) The proceeds from any foreclosure sale of the Mortgaged
Property shall be applied by the Trustee to the Indebtedness in the following
order and priority: (i) to the payment of all expenses of advertising,
selling, and conveying the Mortgaged Property or part
Deed of Trust, Mortgage and Security Agreement - Page 19
<PAGE> 20
thereof, and/or prosecuting or otherwise collecting Rents, proceeds, premiums,
or other sums including reasonable attorneys' fees and a reasonable fee or
commission to Trustee, not to exceed five percent of the proceeds thereof or
sums so received; (ii) to the Indebtedness and other obligations of the
Borrower set forth in the Loan Documents, in such order as Lender may determine
in its sole discretion; and (iii) the balance, if any, and to the extent
applicable, remaining after the full and final payment of the Indebtedness and
full performance and discharge of the obligations of the Borrower set forth in
the Loan Documents, to the holder or beneficiary of any inferior liens covering
the Mortgaged Property, if any, in order of the priority of such inferior liens
(Trustee and the Lender shall hereby be entitled to rely exclusively upon a
commitment for title insurance issued to determine such priority); and (iv) the
cash balance, if any, to the Borrower. The balance of the Indebtedness
remaining unpaid, if any, shall remain fully due and owing in accordance with
the terms of the Note or the other Loan Documents.
(h) In the event a foreclosure hereunder is commenced by the
Trustee in accordance with the terms of this Deed of Trust, at any time before
the sale, Trustee may abandon the sale, and the Lender may then institute suit
for the collection of the Indebtedness and for the foreclosure of the liens and
security interests hereof and of the Loan Documents. If the Lender should
institute a suit for the collection of the Indebtedness and for a foreclosure
of the liens and security interests, the Lender may, at any time before the
entry of a final judgment in said suit, dismiss the same and require the
Trustee to sell the Mortgaged Property or any part thereof in accordance with
the provisions of this Deed of Trust.
(i) Lender, as a matter of right and without regard to the
sufficiency of the security for repayment of the Indebtedness and performance
and discharge of the obligations of Borrower set forth in the Loan Documents,
without notice to the Borrower and without any showing of insolvency, fraud, or
mismanagement on the part of the Borrower, and without the necessity of filing
any judicial or other proceeding other than the proceeding for appointment of a
receiver, shall be entitled to the appointment of a receiver or receivers of
the Mortgaged Property or any part thereof, and of the rents from the Mortgaged
Property, and the Borrower hereby irrevocably consents to the appointment of a
receiver or receivers. Any receiver appointed pursuant to the provisions of
this subsection shall have the usual powers and duties of receivers in such
matters.
(j) In addition to any other remedies set forth herein, Lender
shall have all of the rights and remedies provided by the Texas Uniform
Commercial Code, including the right to proceed under the Texas Uniform
Commercial Code provisions governing default as to any fixtures, equipment,
instruments, general intangibles, accounts, contract rights, claims or personal
property which may be included in or related to the Mortgaged Property and as
to any deposits, policies, unearned premiums, proceeds, awards, payments or
consideration assigned to Lender as further security hereunder, separately from
the real estate included in the Mortgaged Property, or to proceed as to any or
all of such property in accordance with its rights and remedies in respect of
said real estate. If the Lender should elect to proceed separately as to any
such property, the Borrower agrees to make such property available to the
Lender at a place or places reasonably acceptable to Lender, and, if any
notification of intended disposition of any of such property is required by
law, such notification shall be
Deed of Trust, Mortgage and Security Agreement - Page 20
<PAGE> 21
deemed commercially reasonable and reasonably and properly given if mailed at
least ten (10) days before such disposition in the manner below provided.
(k) In the case of any receivership, insolvency, bankruptcy,
reorganization, arrangement, readjustment, composition, dissolution,
liquidation, termination or other judicial proceedings affecting Borrower, its
creditors or its property, Lender, to the extent permitted by law, shall be
entitled to file such proofs of claim and other documents as may be necessary,
or advisable in order to have its claims allowed in such proceedings for the
entire amount due and payable under the Note, this Deed of Trust and any other
instrument securing or referring to the Note, at the date of institution of
such proceedings, and for any additional amounts which may become due and
payable hereunder and thereunder after such date, including but not limited to
Lender's costs, expenses and attorneys' fees incurred in connection therewith.
20. Estoppel Certificate. The Borrower agrees at any time and
from time to time, upon not less than fifteen (15) days prior notice by the
Lender, to execute, acknowledge and deliver, without charge, to the Lender or
to any person designated by the Lender, a statement in writing certifying that
this Deed of Trust is unmodified (or if there have been modifications,
identifying the same by the date thereof and specifying the nature thereof),
the principal amount then secured hereby and the unpaid balance of the Note,
that the Borrower has not received any notice of default or notice of
acceleration or foreclosure of this Deed of Trust (or if the Borrower has
received such a notice, that it has been revoked, if such be the case), that to
the knowledge of the Borrower no Event of Default exists hereunder (or if any
such Event of Default does exist specifying the same and stating that the same
has been cured, if such be the case), that the Borrower to its knowledge has no
claims or offsets against the Lender (or if the Borrower has any such claims,
specifying the same), and the dates to which the interest and the other sums
and charges payable by the Borrower pursuant to the Note have been paid. Upon
reasonable advance written request, the Lender shall provide the Borrower a
statement in writing respecting the unpaid balance of the Note and whether, to
the knowledge of the Lender, any Event of Default exists.
21. Forbearance Not a Waiver; Rights and Remedies Cumulative. No
delay by the Lender in exercising any right or remedy provided herein or
otherwise afforded by law or equity shall be deemed a waiver of or preclude the
exercise of such right or remedy, and no waiver by the Lender of any particular
provision of this Deed of Trust shall be deemed effective unless in writing
signed by the Lender. All such rights and remedies provided for herein or
which the Lender or the holder of the Note may have otherwise, at law or in
equity, shall be distinct, separate and cumulative and may be exercised
concurrently, independently or successively in any order whatsoever, and as
often as the occasion therefor arises. The Lender's taking action pursuant to
paragraph 13 or receiving proceeds, awards or damages pursuant to paragraphs 10
or 14 shall not impair any right or remedy available to the Lender under
paragraph 19 hereof. Acceleration of maturity of the Note, once claimed
hereunder by the Lender, may, at the option of the Lender, be rescinded by
written acknowledgment to that effect by the Lender, but the tender and
acceptance of partial payments alone shall not in any way affect or rescind
such acceleration of maturity of the Note.
Deed of Trust, Mortgage and Security Agreement - Page 21
<PAGE> 22
22. Successors and Assigns Bound; Number; Gender; Agents;
Captions; Amendments. The covenants and agreements herein contained shall
bind, and the rights hereunder shall inure to, the respective heirs, legal
representatives, successors and assigns of the Lender and the Borrower;
provided, however, that this paragraph 22 shall not limit the effect of
paragraph 18(g). Wherever used, the singular number shall include the plural,
and the plural the singular, and the use of any gender shall apply to all
genders. The captions and headings of the paragraphs of this Deed of Trust are
for convenience only and are not to be used to interpret or define the
provisions hereof. No amendment of this Deed of Trust shall be effective
unless in a writing executed by the Borrower and the Lender.
23. Notice. (a) All notices hereunder shall be in writing, and
shall be deemed to have been sufficiently given or served for all purposes when
presented personally or, if sent by mail, on the third business day after being
deposited in the United States Mail, postage prepaid, registered or certified
with return receipt requested. Any notices delivered hereunder shall be
addressed as follows unless otherwise notified in accordance herewith:
Borrower: Craftmade International, Inc.
650 S. Royal
Coppell, Texas 75019
Lender: Allianz Life Insurance Company of North America
c/o Allianz Investment Corporation
55 Greens Farms Road
P.O. Box 5160
Westport, Connecticut 06881-5160
(b) Borrower hereby requests that any notice of default and any
notice of sale hereunder be mailed to it at the address set forth in paragraph
23 above; provided, however, that it is understood and agreed that any notice
of default, notice of intent to accelerate, notice of sale or any other notice
required to be given by statute or other applicable law to the Borrower may be
sent, and shall be deemed to be delivered, in the manner provided by such
statute or other applicable law.
24. Governing Law; Severability. This Deed of Trust shall be
governed by the substantive laws of the State of Texas. In the event that any
provision or clause of this Deed of Trust conflicts with applicable law, such
conflict shall not affect other provisions of this Deed of Trust which can be
given effect without the conflict provisions and to this end the provisions of
this Deed of Trust are declared to be severable.
25. Counterparts. This Deed of Trust may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
26. Production of Documents. The Borrower shall, while this Deed
of Trust is in full force and effect, furnish the Lender with such documents,
instruments and papers as the Lender may request from time to time in order for
the Lender to effectuate a sale or a participation in the loan evidenced by the
Note and this Deed of Trust.
Deed of Trust, Mortgage and Security Agreement - Page 22
<PAGE> 23
27. Waiver of Marshalling. The Borrower, any party who consents
to this Deed of Trust and any party who now or hereafter acquires a lien on the
Mortgaged Property and who has actual or constructive notice of this Deed of
Trust hereby waives any and all right to require the marshalling of assets in
connection with the exercise of any of the remedies permitted by applicable law
or provided herein.
28. Fixture Filing. From the date of its recording, this Deed of
Trust shall be effective as a financing statement filed as a fixture filing
with respect to all goods constituting part of the Mortgaged Property (as more
particularly described in item (ii) of the granting clause of this Deed of
Trust) which are or are to become fixtures related to the real estate described
herein. For this purpose, the following information is set forth:
(a) Name and Address of Debtor:
Craftmade International, Inc.
650 S. Royal
Coppell, Texas 75019
(Tax Identification No. 75-2057054)
(b) Name and Address of Secured Party:
Allianz Life Insurance Company of North America
c/o Allianz Investment Corporation
55 Greens Farms Road
P.O. Box 5160
Westport, CT 06881-5160
(Tax Identification No. 41-1366075)
(c) This documents covers goods which are or are to become
fixtures.
(d) The name of the record owner of the Land is the Debtor
described above.
29. Concerning the Trustee.
(a) The Trustee shall not be required to take any action toward
the execution and enforcement of the trust hereby created or to institute,
appear in, or defend any action, suit, or other proceeding in connection
therewith where, in his opinion, such action would be likely to involve him in
expense or liability, unless requested so to do by a written instrument signed
by Lender and, if Trustee so requests, unless the Trustee is tendered security
and indemnity satisfactory to the Trustee against any and all cost, expense,
and liability arising therefrom. Trustee shall not be responsible for the
execution, acknowledgment, or validity of the Loan Documents, or for the proper
authorization thereof, or for the sufficiency of the lien and security interest
purported to be created hereby, and Trustee makes no representation in respect
thereof or in respect of the rights, remedies, and recourses of Lender.
(b) With the approval of the Lender, the Trustee shall have the
right to take any and all of the following actions: (i) to select, employ, and
advise with counsel (who may be, but need not be, counsel for the Lender) upon
any matters arising hereunder, including the
Deed of Trust, Mortgage and Security Agreement - Page 23
<PAGE> 24
preparation, execution, and interpretation of the Loan Documents, and shall be
fully protected in relying as to legal matters on the advice of counsel, (ii)
to execute any of the trusts and powers hereof and to perform any duty
hereunder either directly or through his agents or attorneys, (iii) to select
and employ, in and about the execution of his duties hereunder, suitable
accountants, engineers and other experts, agents and attorneys-in-fact, either
corporate or individual, not regularly in the employ of Trustee, and Trustee
shall not be answerable for any act, default, negligence, or misconduct of any
such accountant, engineer or other expert, agent or attorney-in-fact, if
selected with reasonable care, or for any error of judgment or act done by
Trustee in good faith, or be otherwise responsible or accountable under any
circumstances whatsoever, except for Trustee's gross negligence or bad faith,
and (iv) any and all other lawful action as the Lender may instruct Trustee to
take to protect or enforce the Lender's rights hereunder. Trustee shall not be
personally liable in case of entry by Trustee, or anyone entering by virtue of
the powers herein granted to Trustee, upon the Mortgaged Property for debts
contracted for or liability or damages incurred in the management or operation
of the Mortgaged Property. Trustee shall have the right to rely on any
instrument, document, or signature authorizing or supporting any action taken
or proposed to be taken by Trustee hereunder, believed by Trustee in good faith
to be genuine. Trustee shall be entitled to reimbursement for expenses
incurred by Trustee in the performance of Trustee's duties hereunder and to
reasonable compensation for such of Trustee's services hereunder as shall be
rendered. The Borrower will, from time to time, pay the compensation due to
Trustee hereunder and reimburse Trustee for, and save Trustee harmless against,
any and all liability and expenses which may be incurred by Trustee in the
performance of Trustee's duties.
(c) All moneys received by Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were
received, but need not be segregated in any manner from any other moneys
(except to the extent required by applicable law) and Trustee shall be under no
liability for interest on any moneys received by Trustee hereunder.
(d) The Trustee may resign by the giving of notice of such
resignation in writing or verbally to Lender. If the Trustee shall die,
resign, or become disqualified from acting in the execution of this trust, or
if, for any reason, the Lender shall prefer to appoint a substitute trustee or
multiple substitute trustees, or successive substitute trustees or successive
multiple substitute trustees, to act instead of the forenamed Trustee, the
Lender shall have full power to appoint a substitute trustee (or, if preferred,
multiple substitute trustees) in succession who shall succeed (and if multiple
substitute trustees are appointed, each of such multiple substitute trustees
shall succeed) to all the estates, rights, powers, and duties of the forenamed
Trustee. Such appointment may be executed by any authorized agent of the
Lender, and if such Lender be a corporation and such appointment be executed in
its behalf by any officer of such corporation, such appointment shall be
conclusively presumed to be executed with authority and shall be valid and
sufficient without proof of any action by the board of directors or any
superior officer of the corporation. Borrower hereby ratifies and confirms any
and all acts which the forenamed Trustee, or his successor or successors in
this trust, shall do lawfully by virtue hereof. If multiple substitute
Trustees are appointed, each of such multiple substitute Trustees shall be
empowered and authorized to act alone without the necessity of the joinder of
the other multiple substitute trustees, whenever any action or undertaking of
such substitute trustees is requested or required under or pursuant to this
Deed of Trust or applicable law.
Deed of Trust, Mortgage and Security Agreement - Page 24
<PAGE> 25
(e) Should any deed, conveyance, or instrument of any nature be
required from the Borrower by any Trustee or substitute Trustee to more fully
and certainly vest in and confirm to the Trustee or substitute Trustee such
estates, rights, powers, and duties, then, upon request by the Trustee or
substitute Trustee, any and all such deeds, conveyances and instruments shall
be made, executed, acknowledged, and delivered and shall be caused to be
recorded and/or filed by Borrower.
(f) Any substitute Trustee appointed pursuant to any of the
provisions hereof shall, without any further act, deed, or conveyance, become
vested with all the estates, properties, rights, powers, and trusts of its or
his predecessor in the rights hereunder with like effect as if originally named
as Trustee herein; but nevertheless, upon the written request of the Lender or
of the substitute Trustee, the Trustee ceasing to act shall execute and deliver
any instrument transferring to such substitute Trustee, upon the trusts herein
expressed, all the estates, properties, rights, powers, and trusts of the
Trustee so ceasing to act, and shall duly assign, transfer and deliver any of
the property and moneys held by such Trustee to the substitute Trustee so
appointed in the Trustee's place.
(g) By accepting or approving anything required to be observed,
performed, or fulfilled or to be given to the Trustee or the Lender pursuant to
the Loan Documents, including without limitation, any officer's certificate,
balance sheet, statement of profit and loss or other financial statement,
survey, appraisal, or insurance policy, neither the Trustee nor the Lender
shall be deemed to have warranted, consented to, or affirmed the sufficiency,
legality, effectiveness, or legal effect of the same, or of any term,
provision, or condition thereof, and such acceptance or approval thereof shall
not be or constitute any warranty or affirmation with respect thereto by
Trustee or the Lender.
30. INDEMNITIES. THE BORROWER SHALL PROTECT, DEFEND, INDEMNIFY
AND SAVE HARMLESS THE LENDER AND THE TRUSTEE FROM AND AGAINST ALL LIABILITIES,
OBLIGATIONS, CLAIMS, DEMANDS, DAMAGES, PENALTIES, CAUSES OF ACTION, LOSSES,
FINES, COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES AND DISBURSEMENTS),
IMPOSED UPON OR INCURRED BY OR ASSERTED AGAINST THE LENDER AND/OR THE TRUSTEE
BY REASON OF: (A) OWNERSHIP OF THIS DEED OF TRUST OR ANY INTEREST IN THE
MORTGAGED PROPERTY OR RECEIPT OF ANY RENTS AND PROFITS; (B) ANY ACCIDENT,
INJURY TO OR DEATH OF PERSONS OR LOSS OF OR DAMAGE TO PROPERTY OCCURRING IN, ON
OR ABOUT THE MORTGAGED PROPERTY, OR ANY PART THEREOF, OR ON THE ADJOINING
SIDEWALKS, CURBS, ADJACENT PROPERTY OR ADJACENT PARKING AREAS, STREETS OR WAYS;
(C) ANY FAILURE ON THE PART OF THE BORROWER TO PERFORM OR COMPLY WITH ANY OF
THE TERMS OF THIS DEED OF TRUST; (D) ANY FRAUD OR MATERIAL MISREPRESENTATION
COMMITTED BY THE BORROWER IN CONNECTION WITH THE INDEBTEDNESS SECURED BY THIS
DEED OF TRUST; (E) ANY WASTE OF THE MORTGAGED PROPERTY ARISING FROM THE ACTS OF
THE BORROWER; (F) THE FAILURE OF THE BORROWER TO PAY TAXES, INSURANCE PREMIUMS,
UTILITY CHARGES AND OTHER EXPENSES OF OPERATING THE MORTGAGED PROPERTY; (G) THE
DISPOSITION OF INSURANCE OR CONDEMNATION PROCEEDS IN A MANNER NOT AUTHORIZED BY
THE PROVISIONS OF THIS DEED OF TRUST; (H) THE MISAPPLICATION OF SECURITY
DEPOSITS OR PREPAID RENTS BY THE BORROWER; (I) ANY FAILURE OF THE MORTGAGED
PROPERTY TO COMPLY WITH ANY
Deed of Trust, Mortgage and Security Agreement - Page 25
<PAGE> 26
APPLICABLE LAWS. THE FOREGOING INDEMNITY FOR THE BENEFIT OF LENDER AND TRUSTEE
IS INTENDED TO BE APPLICABLE AND BINDING UPON THE BORROWER NOTWITHTANDING THAT
A LIABILITY, OBLIGATION, CLAIM, DEMAND, DAMAGE, PENALTY, CAUSE OF ACTION, LOSS,
FINE, COST OR EXPENSE DESCRIBED IN THE PRECEDING PROVISIONS OF THIS PARAGRAPH
30 ARISES OR IS ALLEGED TO HAVE ARISEN FROM THE SOLE OR CONCURRENT NEGLIGENCE
OF LENDER OR TRUSTEE; HOWEVER, SAID INDEMNITY IS NOT INTENDED TO INCLUDE ANY
LIABILITIES, OBLIGATIONS, CLAIMS, DEMANDS, DAMAGES, PENALTIES, CAUSES OF
ACTION, LOSSES, FINES, COSTS OR EXPENSES ARISING FROM THE WILLFUL MISCONDUCT OF
LENDER OR TRUSTEE.
31. Further Documentation. At any time and from time to time
until payment in full of the Indebtedness, the Borrower will, at the request of
the Lender, promptly execute and deliver to the Lender such additional
instruments as may be reasonably required further to evidence the lien of this
Deed of Trust and further to protect the security interest of the Lender with
respect to the Mortgaged Property, including, without limitation, additional
security agreements, financing statements and continuation statements. Any
expenses incurred by the Lender in connection with the preparation and
recordation of any such instruments, including, but not limited to reasonable
attorneys' fees, shall become additional Indebtedness of the Borrower secured
by this Deed of Trust. Unless the Borrower and the Lender agree in writing to
other terms of repayment, such amounts shall be immediately due and payable,
and shall bear interest from the date of disbursement at the interest rate
stated in the Note, unless collecting from the Borrower of interest at such
rate would be contrary to applicable law, in which event such amounts shall
bear interest at the highest rate which may be collected from the Borrower
under applicable law.
32. Release. If the Indebtedness is paid in full in accordance
with the terms of this Deed of Trust, the Note, and the other Loan Documents,
and if the Borrower shall well and truly perform each and every one of the
obligations to be performed and discharged in accordance with the terms of this
Deed of Trust, the Note and the other Loan Documents, then this conveyance
shall become null and void and be released at Grantor's request and expense,
and the Lender shall have no further obligation to make advances under and
pursuant to the provisions hereof or in the other Loan Documents.
33. Performance at the Borrower's Expense. Subject to the
provisions of paragraph 34 hereof, the Borrower shall (a) pay all legal fees
incurred by the Lender in connection with the preparation of the Loan Documents
(including any amendments thereto or consents, releases, or waivers granted
thereunder); (b) reimburse the Lender, promptly upon demand, for all amounts
expended, advanced, or incurred by the Lender to satisfy any obligation of the
Borrower under the Loan Documents, which amounts shall include all court costs,
attorneys' fees (including, without limitation, for trial, appeal, or other
proceedings), fees of auditors and accountants and other investigation expenses
reasonably incurred by the Lender in connection with any such matters; and (c)
any and all other costs and expenses of performing or complying with any and
all of the obligations of the Borrower set forth in the Loan Documents. Except
to the extent that costs and expenses are included within the definition of
"Indebtedness," the payment of such costs and expenses shall not be credited,
in any way and to any extent, against any installment on or portion of the
Indebtedness.
Deed of Trust, Mortgage and Security Agreement - Page 26
<PAGE> 27
34. Usury Savings Clause. It is expressly stipulated and
agreed to be the intent of the Borrower and the Lender at all times to comply
with applicable Texas law governing the maximum rate or amount of interest
payable on the Note or the other indebtedness secured hereby and by the other
Loan Documents (or applicable United States federal law to the extent that it
permits Lender to contract for, charge, take, reserve or receive a greater
amount of interest than under Texas law). If any amount of interest charged,
taken or received by Lender shall be in excess of the maximum amount of
interest permitted by applicable law, then it is the Borrower's and the
Lender's express intent that (a) any excess amounts theretofore collected by
the Lender be credited on the principal balance of the Note (or, if the Note
has been or would thereby be paid in full, refunded to the Borrower), and (b)
the provisions of the Note, this Deed of Trust and the other Loan Documents
immediately be deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of any new
document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
All sums paid or agreed to be paid to Lender for the use, forbearance and
detention of the indebtedness secured hereby and by the other Loan Documents
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until
payment in full so that the rate or amount of interest on account of such
indebtedness does not exceed the usury ceiling from time to time in effect and
applicable to such indebtedness for so long as such debt is outstanding. To
the extent that the Lender is relying on Article 5069-1.04, as amended, of the
Revised Civil Statutes of Texas to determine the maximum lawful rate payable on
such indebtedness, the Lender will utilize the indicated (weekly) rate ceiling
from time to time in effect as provided in Article 5069-1.04, as amended and/or
succeeded. To the extent United States federal law permits the Lender to
contract for, charge or receive a greater amount of interest than Texas law,
the Lender will rely on United States federal law instead of such Article
5069-1.04, as amended and/or succeeded, for the purpose of determining the
maximum lawful rate. Additionally, to the extent permitted by applicable law
now or hereafter in effect, the Lender may, at its option and from time to
time, implement any other method of computing the maximum lawful rate under
such Article 5069-1.04, as amended or succeeded, or under other applicable law
by giving notice, if required, to the Borrower as provided by applicable law
now or hereafter in effect. The Borrower agrees that if, at any time, the
Borrower should have reason to believe that the Lender has contracted for,
charged or collected interest in excess of the maximum amount of interest
permitted by applicable law, then the Borrower will give the Lender notice of
such condition and the Lender shall have ninety (90) days after receipt of such
notice in which to make appropriate refund or other adjustment in order to
correct such condition, if in fact a refund or other adjustment is necessary in
order to comply with applicable usury laws. If the Lender makes any
appropriate refund or other adjustment necessary to comply with applicable
usury laws within such ninety (90) day period, then the Lender shall not be
subject to any penalties for contracting for, charging or receiving interest in
excess of the maximum lawful rate.
Deed of Trust, Mortgage and Security Agreement - Page 27
<PAGE> 28
35. Covenants Running with the Land. All obligations contained in
this Deed of Trust and the other Loan Documents are intended by the Borrower,
the Lender, and the Trustee to be, and shall be construed as, covenants running
with the Mortgaged Property until the lien of this Deed of Trust has been fully
released by the Lender.
36. Subrogation. If any or all of the proceeds of the Note have
been used to extinguish, extend or renew any indebtedness heretofore existing
against the Mortgaged Property, then, to the extent of such funds so used, the
Lender shall be subrogated to all of the rights, claims, liens, titles, and
interests existing against the Mortgaged Property heretofore held by, or in
favor of, the holder of such indebtedness and such former rights, claims,
liens, titles, and interests, if any, are not waived but rather are continued
in full force and effect in favor of the Lender and are merged with the lien
and security interest created herein as cumulative security for the repayment
of the Indebtedness and the performance and discharge of the obligations of
Borrower set forth in the Loan Documents.
IN WITNESS WHEREOF, the Borrower has caused this Deed of Trust to be
duly executed to be effective as of the ____ day of December, 1995.
CRAFTMADE INTERNATIONAL, INC.,
a Delaware corporation
By: __________________________________
Name: ________________________________
Title: _______________________________
Deed of Trust, Mortgage and Security Agreement - Page 28
<PAGE> 29
STATE OF _________ Section
Section
COUNTY OF _______ Section
This instrument was acknowledged before me on the _____ day of
December, 1995, by _________________________, _______________________ of
Craftmade International, Inc., a Delaware corporation, on behalf of said
corporation.
_________________________________
Notary Public
My Commission Expires:
_____________________
Deed of Trust, Mortgage and Security Agreement - Page 29
<PAGE> 30
EXHIBIT A
Legal Description
Being a tract or parcel of land situated in the William K. Payne Survey,
Abstract No. 1140, the T.J. Thweatt Survey, Abstract No. 1753, and the S.A. &
M.G.R.R. Survey, Abstract No. 1439, City of Coppell, Dallas County, Texas, same
being all of Lot 3R out of a Replat of Freeport North, recorded in Volume
95245, Page 2050, Dallas County Plat Records. Same also being a portion of
that certain 31.9602 acre tract conveyed to MEPC Quoruem Properties II, Inc. by
instrument of record in Volume 95098, Page 968, Dallas County Deeds Records.
Said tract being more particularly described by metes and bounds as follows:
BEGINNING at a 1/2" iron rod set for the northeasterly corner of said 31.9602
acre tract from which a found fence corner post bears North 89 degrees 40
minutes 00 seconds East, 2028.84 feet. Said iron rod also being the
northwesterly corner of that certain 100.00 acre tract of land conveyed to
Coppel Industrial N.V. by instrument of record in Volume 82071, Page 1061,
Dallas County Deed Records. Same also being in the southerly line of that
certain 214.09 acre tract of land conveyed to Angeles Esteve by instrument of
record in Volume 88246, Page 4209, Dallas County Deed Records;
THENCE along the common line of said 100.00 acre tract and said 31.9602 acre
tract, South 00 degrees 11 minutes 33 seconds East, 1115.00 feet to a 1/2" iron
rod set for corner;
THENCE departing said common line, South 89 degrees 48 minutes 27 seconds West,
450.00 feet to a 1/2" iron rod set for corner;
THENCE South 44 degrees 48 minutes 27 seconds West, 45.00 feet to a 1/2" iron
rod set for corner;
THENCE South 34 degrees 16 minutes 20 seconds West, 33.17 feet to a 1/2" iron
rod set for corner in the easterly right- of-way line of Royal Lane, 100 feet
wide;
THENCE along said easterly line the following three (3) courses:
(1) 239.13 feet along the arc of a non-tangent curve to the left
having a radius of 1050.00 feet, a central angle of 13 degrees
02 minutes 56 seconds and a chord bearing and distance on
North 62 degrees 15 minutes 08 seconds West, 238.62 feet to a
1/2" iron rod found for a point of tangency;
(2) North 68 degrees 46 minutes 36 seconds West, 150.00 feet to a
1/2" iron rod found for a point of curvature;
Deed of Trust, Mortgage and Security Agreement - Page 30
<PAGE> 31
(3) 275.29 feet along the arc of a tangent curve to the right
having a radius of 950.00 feet, a central angle of 16 degrees
36 minutes 11 seconds and a chord bearing and distance of
North 60 degrees 28 minutes 30 seconds West, 274.33 feet to a
1/2" iron rod set for corner;
THENCE departing said easterly line, North 89 degrees 41 minutes 59 seconds
East, 460.92 feet to a 1/2" iron rod set for corner;
THENCE North 00 degrees 18 minutes 01 seconds West, 869.55 feet to a 1/2" iron
rod set for corner in the southerly line of said 214.09 acre Esteve Tract;
THENCE along the common line of said Esteve Tract and said 31.9602 acre tract,
North 89 degrees 41 minutes 59 seconds East, 630.00 feet to the POINT OF
BEGINNING.
Deed of Trust, Mortgage and Security Agreement - Page 31
<PAGE> 32
EXHIBIT B
Permitted Encumbrances
1. Standby fees, taxes and assessments by any taxing authority for the
year 1996.
2. Terms, conditions, easements and liens contained in instrument
recorded in Volume 95098, Page 924, Deed Records of Dallas County,
Texas, and as noted on survey of Rust Lichliter/Jameson, certified to
by G. Dennis Qualls, R.P.L.S. #4276, dated December 13, 1995.
3. Unrecorded lease between TSI Prime, Inc. and Craftmade International,
Inc.
4. The following easements as shown on plat recorded in Volume 95245,
Page 2050, Map Records of Dallas County, Texas: 10' of a 30' firelane
and access easement along West property line; 20' drainage easement
along the North, West and East property lines; 20' x 20' utility
easement in the Southwestern portion of the property; 15' utility
easements in Southwestern portion and adjacent to Southwest property
lines; 24' firelanes and access easement adjacent to South, East and
North property lines, and as shown on survey of Rust
Lichliter/Jameson, certified to by G. Dennis Qualls, R.P.L.S. #4276,
dated December 13, 1995.
5. 10' and 60' setback lines as shown on survey of Rust
Lichliter/Jameson, certified to by G. Dennis Qualls, R.P.L.S. #4276,
dated December 13, 1995.
6. Reciprocal Easement and Maintenance Agreement dated as of December 20,
1995, by and between MEPC Quorum Properties II, Inc. and Craftmade
International, Inc., to be filed of record in the Real Property
Records of Dallas County, Inc.
Deed of Trust, Mortgage and Security Agreement - Page 32
<PAGE> 1
EXHIBIT 10.4
********************************************************************************
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
among
CRAFTMADE INTERNATIONAL, INC.
as Borrower
NATIONSBANK OF TEXAS, N.A.
as Agent
AND THE LENDERS
which are parties hereto
********************************************************************************
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE 1 - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 2 - Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.1 Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.2 The Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.3 Repayment of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.4 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.5 Requests for Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.6 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.7 Reduction or Termination of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.8 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 3 - Payments, Conversions and Continuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.1 Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.2 Voluntary Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.3 Mandatory Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.4 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.5 Conversions and Continuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 4 - Yield Protection and Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.1 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.2 Limitation on Types of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.3 Substitute Prime Rate Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.4 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.5 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.6 Changes in Law Rendering Loan Unlawful . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 5 - Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.1 Initial Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.2 All Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE - Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.1 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.2 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.3 Corporate Action; No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.4 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.5 Litigation and Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.6 Rights in Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.7 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
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Section 6.8 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.9 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.11 Use of Proceeds; Margin Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.13 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.15 Compliance with Laws and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.17 Current Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.18 Security Interest and Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.19 Corporate Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 7 - Positive Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.1 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.2 Maintenance of Existence; Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.3 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.4 Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.6 Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.7 Keeping Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.9 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.11 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 8 - Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.1 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.2 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.3 Mergers, Acquisitions and Dissolutions . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.4 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.5 Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.6 Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.7 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.8 Prepayment of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.9 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.10 Compliance with Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.11 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 9 - Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.1 Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.2 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.3 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.4 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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ARTICLE 10 - Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 10.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 10.2 Remedies Upon Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 10.3 Performance by Agent and Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 10.4 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 11 - The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 11.1 Appointment, Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 11.2 Rights of Agent as a Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 11.3 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 11.4 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 11.5 Independent Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 11.6 Several Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 11.7 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 12 - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 12.1 Expenses of Agent and Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 12.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.3 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.4 Lender Not Fiduciary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.5 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 12.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 12.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 12.9 Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 12.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 12.11 Applicable Law; Venue; Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 12.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 12.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 12.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 12.15 Non-Application of Chapter 15 of Texas Credit Code . . . . . . . . . . . . . . . . . . . . 42
Section 12.16 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 12.17 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
INDEX TO SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement")
is dated as of November 14, 1995 and is among CRAFTMADE INTERNATIONAL, INC.
("Borrower"), a Delaware corporation, NATIONSBANK OF TEXAS, N.A., a national
banking association, in its capacity as agent for the Lenders which are parties
hereto ("Agent"), and the Lenders named on the signature pages to this
Agreement (the "Lenders").
R E C I T A L S:
a. NationsBank of Texas, N.A. ("NationsBank") has previously
made a loan to Borrower in the maximum principal amount of
$6,000,000.00, pursuant to a certain Credit Agreement (the
"Original Credit Agreement") between Borrower and
NationsBank, dated January 11, 1993.
b. The Original Credit Agreement was amended and restated as
provided in that certain First Amended and Restated Credit
Agreement dated as of January 11, 1993, by and between Borrower and
NationsBank (the "First Restated Agreement").
c. The First Restated Agreement was amended as provided in that
certain First Amendment to First Amended and Restated Credit
Agreement dated as of December 13, 1993, by and between the
Borrower and NationsBank (the "First Amendment").
d. The First Restated Agreement was further amended as provided
in that certain Second Amendment to First Amended and Restated
Credit Agreement dated as of March 30, 1994, by and between the
Borrower and NationsBank (the "Second Amendment").
e. The First Restated Agreement was further amended as provided
in that certain Third Amendment to First Amended and Restated
Credit Agreement dated as of June 30, 1994, by and between the
Borrower and NationsBank (the "Third Amendment").
f. The First Restated Agreement was further amended as provided
in that certain Fourth Amendment to First Amended and Restated
Credit Agreement dated as of November 15, 1994, by and between the
Borrower and NationsBank (the "Fourth Amendment"; the First
Restated Agreement, as amended by the First Amendment, the Second
Amendment, the Third Amendment and the Fourth Amendment is referred
to hereinafter as the "Prior Credit Agreement").
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g. Borrower and Lenders desire to amend and restate the Prior
Credit Agreement as set out herein, including, without limitation,
to provide for a loan in the maximum principal amount of
$12,000,000.
AGREEMENTS:
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree that this Agreement amends
and restates the Prior Credit Agreement. The parties hereto further agree as
follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. As used in this Agreement, the
following terms have the following meanings:
"Accounts Receivable Aging Report" means a report, in form
satisfactory to Agent, showing all current accounts receivable of Borrower and
all other accounts receivable of Borrower aged in intervals of thirty, sixty,
ninety and ninety-one days or more past due.
"Additional Costs" has the meaning specified in SECTION 4.1.
"Advance" means an advance of funds by Lenders to Borrower pursuant
to ARTICLE 2.
"Advance Request Form" means a certificate, in substantially the form
of EXHIBIT "B" hereto, properly completed and signed by Borrower requesting an
Advance.
"Affiliate" means, as to any Person, any other Person (a) that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person; (b) that directly
or indirectly beneficially owns or holds five percent (5%) or more of any class
of voting stock of such Person; or (c) five percent (5%) or more of the voting
stock of which is directly or indirectly beneficially owned or held by the
Person in question. The term "control" means the possession, directly or
indirectly, of the power to direct or cause direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise; provided, however, in no event shall the Agent or any
Lender be deemed an Affiliate of Borrower or any of its Subsidiaries.
"Agent" means NationsBank of Texas, N.A., in its capacity as Agent
for the Lenders.
"Applicable Rate" means:
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(a) during the period that an Advance is a Prime
Rate Advance, the Prime Rate minus 1/2 of one percent (.5%)
and
(b) during the period that an Advance is a
Eurodollar Advance, the Eurodollar Rate plus (i) at all times
when the most recent compliance certificate delivered in
accordance with SECTION 7.1(C) shows that the Leverage Ratio
is less than or equal to 1.0 to 1, one and one-quarter percent
(1.25%), and (ii) at all times when the most recent compliance
certificate delivered in accordance with SECTION 7(C) shows
that the Leverage Ratio is greater than 1.0 to 1, one and
one-half percent (1.5%).
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and its Assignee and accepted by the Agent pursuant to SECTION
12.6, in substantially the form of EXHIBIT "K" hereto.
"Borrowing Base" means, at any particular time, an amount equal to the
sum of (a) eighty percent (80%) of Eligible Accounts, plus (b) fifty percent
(50%) of Eligible Inventory.
"Borrowing Base Report" means a report, substantially in the form of
EXHIBIT "C" hereto, properly completed and executed by an authorized officer of
Borrower.
"Business Day" means any day on which commercial banks are not
authorized or required to close in Dallas, Texas.
"Capital Lease Obligation" means Debt represented by obligations under
any lease of real or personal property that is required to be capitalized for
financial reporting purposes in accordance with GAAP, and the amount of such
Debt shall be the capitalized amount of such obligations determined in
accordance with GAAP.
"C/D/R" means C/D/R Incorporated, a Delaware corporation.
"C/D/R Guaranty" means the Amended and Restated Guaranty of C/D/R in
favor of the Agent and the Lenders in substantially the form of EXHIBIT "I"
hereto, as the same may be amended, supplemented or otherwise modified from
time to time.
"Change of Management" means the failure of James R. Ridings to
continue to perform his current or similar duties.
"Change of Ownership" means the ownership, legally and beneficially,
by any Person of fifty-one percent (51%) or more of the capital stock of
Borrower.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
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"Collateral" includes all of the collateral covered by the Security
Agreement, the Durocraft Security Agreement and the Pledge Agreement.
"Commitment" means, as to any Lender, the obligation of such Lender to
make Advances hereunder in an aggregate principal amount not to exceed the
amount set forth opposite the name of such Lender on the signature pages hereto
under the heading "Commitment," and "Commitments" means such obligation of all
Lenders, as such amounts may be reduced pursuant to SECTION 2.7 or otherwise.
"Consolidated Liabilities" means, at any particular time, all amounts
which, in conformity with GAAP, would be included as liabilities on a
consolidated balance sheet of Borrower and the Subsidiaries.
"Consolidated Tangible Net Worth" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as stockholders'
equity on a consolidated balance sheet of Borrower and the Subsidiaries;
provided, however, there shall be excluded therefrom: (a) any amount at which
shares of capital stock of Borrower appear as an asset on Borrower's balance
sheet, (b) goodwill, including any amounts, however designated, that represent
the excess of the purchase price paid for assets or stock over the value
assigned thereto, (c) patents, trademarks, trade names, and copyrights, (d)
deferred expenses, (e) loans and advances to any stockholder, director,
officer, or employee of Borrower or any Subsidiary or any Affiliate, and (f)
all other assets which are properly classified as intangible assets.
"Continue," "Continuation" and "Continued" shall refer to the
continuation pursuant to SECTION 3.5 of a Eurodollar Advance as a Eurodollar
Advance from one Interest Period to the next Interest Period.
"Convert," "Conversion" and "Converted" shall refer to a conversion
pursuant to SECTION 3.5 or ARTICLE 4 of one Type of Advance into another Type
of Advance.
"Debt" means as to any Person at any time (without duplication) all
items which would be properly characterized as liabilities on a balance sheet
of such Person prepared in accordance with GAAP.
"Default Rate" means the Maximum Rate or, if no Maximum Rate exists,
the sum of the Prime Rate in effect from day to day plus four percent (4%).
"Dollars" and "$" mean lawful money of the United States of America.
"Durocraft" means Durocraft International, Inc., a Texas corporation.
"Durocraft Guaranty" means the Amended and Restated Guaranty of
Durocraft in favor of the Agent and tile Lenders, in substantially the form of
EXHIBIT "E" hereto, as the same may be amended, supplemented, or otherwise
modified from time to time.
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<PAGE> 9
"Durocraft Security Agreement" means the Amended and Restated Security
Agreement of Durocraft in favor of the Agent and the Lenders in substantially
the form of EXHIBIT "F" hereto, as the same may be amended, supplemented or
otherwise modified from time to time.
"Eligible Accounts" means the aggregate of all accounts receivable of
Borrower that are acceptable to the Agent in its sole discretion and satisfy
the following conditions: (a) have been outstanding less than sixty (60) days
past the due date thereof; (b) have arisen in the ordinary course of business;
(c) represent complete bona fide transactions which require no further act
under any circumstances on the part of Borrower to make such accounts
receivable payable by the account debtor; (d) the goods of sale which gave rise
to such accounts receivable have been shipped or delivered to the account
debtor on an absolute sale basis and not on consignment, a sale or return
basis, a guaranteed sale basis, a bill and hold basis, or on the basis of any
similar understanding; (e) the goods of sale which gave rise to such accounts
receivable were not, at the time of sale thereof, subject to any Lien, except
as permitted by SECTION 8.2; (f) are not subject to any provision prohibiting
assignment or requiring notice of or consent to such assignment; (g) are
subject to a perfected, first priority security interest in favor of the Agent
and the Lenders and are not subject to any other Lien except as permitted by
SECTION 8.2; (h) are not subject to setoff, counterclaim, defense, allowance,
dispute, or adjustment other than normal discounts for prompt payment, and the
goods of sale which gave rise to such accounts receivable have not been
returned, rejected, repossessed, lost, or damaged; (i) the account debtor is
not insolvent or the subject of any bankruptcy or insolvency proceeding and has
not made an assignment for the benefit of creditors, suspended normal business
operations, dissolved, liquidated, terminated its existence, ceased to pay its
debts as they become due, or suffered a receiver or trustee to be appointed for
any of its assets or affairs; 0) are not evidenced by chattel paper or an
instrument of any kind; (k) are owed by a Person or Persons that are citizens
of or organized under the laws of the United States or any State and are not
owed by any Person located outside of the United States of America; (l) if any
accounts receivable are owed by the United States of America or any department,
agency, or instrumentality thereof, the Federal Assignment of Claims Act shall
have been complied with; and (m) are not owed by an Affiliate of Borrower. The
amount of any Eligible Accounts owed by an account debtor to Borrower shall be
reduced by the amount of all "contra accounts" and other obligations owed by
Borrower to such account debtor.
"Eligible Assignee" means (a) any Affiliate of a Lender, or (b) any
commercial bank, savings and loan association, savings bank, finance company,
insurance company, pension fund, mutual fund or other financial institution
(whether a corporation, partnership or other entity) acceptable to the Agent.
"Eligible Inventory" means, at any time, all inventory of finished
goods and unassembled lamp parts then owned by (and in the possession or under
the control of) Borrower and held for sale or disposition in the ordinary
course of Borrower's business, in which the Agent, for the ratable benefit of
the Lenders, has a perfected, first priority security interest, valued at the
lower of actual cost or fair market value. Eligible Inventory shall not
include (a) inventory that has been shipped or delivered to a customer on
consignment, a sale or return basis, or on the basis of any similar
understanding, (b) inventory with respect to which a claim exists disputing
Borrower's title to or right to possession of such inventory, (c) inventory
that is not in good condition or does not
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<PAGE> 10
comply with any applicable laws, rules, or regulations or the standards imposed
by any governmental authority with respect to its manufacture, use, or sale,
and (d) inventory that the Agent, in its sole discretion, has determined to be
unmarketable.
"Environmental Laws" means any and all federal, state, and local laws,
regulations, and requirements pertaining to health, safety, or the environment,
as such laws, regulations, and requirements may be amended or supplemented from
time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"Eurodollar Advances" means Advances the interest rates on which are
determined with reference to the Eurodollar Rate
"Eurodollar Business Day" means a Business Day on which dealings in
United States Dollars are carried out in the London interbank market.
"Eurodollar Rate" means, for any Eurodollar Advance for any Interest
Period therefore, a rate per annum equal to (a) the Interbank Offered Rate,
divided by (b) 1.00 minus the Reserve Requirement applicable to Eurodollar
Advances,
"Event of Default" has the meaning specified in SECTION 10.1.
"Fixed Charge Coverage Ratio" means, with respect to Borrower and the
Subsidiaries on a consolidated basis for the most recently completed four
quarter period preceding the date of determination, a ratio of (a) Pretax
Income for such period plus interest expense for such period plus Operating
Lease expense for such period to (b) interest expense for such period plus
Operating Lease expense for such period.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants and/or in statements
of the Financial Accounting Standards Board and/or their respective successors
and which are applicable in the circumstances as of the date in question.
Accounting principles are applied on a "consistent basis" when the accounting
principles observed in a current period are comparable in all material respects
to those accounting principles applied in a preceding period.
"Guaranty" means the Durocraft Guaranty and the C/D/R Guaranty,
individually and collectively.
"Guarantor" means Durocraft and C/D/R, jointly and severally.
"Hazardous Substance" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or
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<PAGE> 11
addressed under any Environmental Law, including, without limitation, asbestos,
petroleum, and polychlorinated biphenyls.
"Interbank Offered Rate" means, with respect to each Interest Period,
the rate of interest per annum at which deposits in immediately available
freely transferable funds in Dollars are offered by NationsBank (at
approximately 1:00 p.m. Dallas, Texas time, two (2) Eurodollar Business Days
prior to the first day of such Interest Period) to first class banks in the
London interbank market for delivery on the first day of such Interest Period,
such deposits being for a period of time equal or comparable to such Interest
Period and in an amount equal or comparable to the principal amount of the
Eurodollar Advance to which such Interest Period relates. Each determination
of the Interbank Offered Rate by Agent shall be conclusive in the absence of
manifest error.
"Interest Period" means, with respect to any Eurodollar Advances, each
period commencing on the date such Eurodollar Advances are made or Converted
from Advances of another Type, or, in the case of each subsequent, successive
Interest Period applicable to a Eurodollar Advance, the last day of the next
preceding Interest Period with respect to such Advance, and ending on the day
30, 60, 90 or 180 days thereafter, as Borrower may select as provided in
SECTION 2.5 or 3.5 hereof. Notwithstanding the foregoing: (a) each Interest
Period which would otherwise end on a day which is not a Eurodollar Business
Day shall end on the next succeeding Eurodollar Business Day; (b) any Interest
Period which would otherwise extend beyond the Termination Date shall end on
the Termination Date; (c) no more than three (3) Interest Periods for
Eurodollar Advances shall be in effect at the same time; (d) no Interest Period
shall have a duration of less than thirty (30) days and, if the Interest Period
for any Eurodollar Advances would otherwise be a shorter period, such Advances
shall not be available hereunder; and (e) no Interest Period may extend beyond
a principal repayment date unless, after giving effect thereto, the aggregate
principal amount of the Eurodollar Advances having Interest Periods that and
after such principal payment date shall be equal to or less than the Advances
to be outstanding hereunder after such principal repayment date.
"Leverage Ratio" means, at any particular time, the ratio of Debt to
Consolidated Tangible Net Worth.
"Lien" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment, preference,
priority, or other encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or title retention agreement), whether
arising by contract, operation of law, or otherwise.
"Loan Documents" means this Agreement and all promissory notes,
security agreements, pledge agreements, deeds of trust, assignments, letters of
credit, applications for letters of credit, guaranties, and other instruments,
agreements and documentation executed and delivered pursuant to or in
connection with this Agreement, as such instruments, agreements and
documentation may be amended, modified, renewed, extended, amended and restated
or supplemented from time to time.
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"Maximum Rate" means the maximum rate of nonusurious interest
permitted from day to day by applicable law, including as to Article 5069-1.04,
Vernon's Texas Civil Statutes (and as the same may be incorporated by reference
in other Texas statutes), but otherwise without limitation, that rate based
upon the "indicated rate ceiling" and calculated after taking into account any
and all relevant fees, payments, and other charges in respect of the Loan
Documents which are deemed to be interest under applicable law.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by Borrower or any
Subsidiary and which is covered by Title IV of ERISA.
"NationsBank" means NationsBank of Texas, N.A., a national banking
association.
"Net Income" means, for any period, the consolidated net income of
Borrower and the Subsidiaries for such period as determined in accordance with
GAAP.
"Notes" means the promissory notes of Borrower payable to the order of
each Lender, in substantially the form of EXHIBIT "A" hereto, and all
extensions, renewals, and modifications thereof.
"Obligated Party" means any Guarantor or any other Person who is or
becomes party to any agreement that guarantees or secures payment and
performance of the Obligations or any part thereof.
"Obligations" means all obligations, indebtedness, and liabilities of
Borrower to the Agent and the Lenders, now existing or hereafter arising,
whether direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several, including, without
limitation, the obligations, indebtedness, and liabilities of Borrower under
this Agreement and the other Loan Documents (including, without limitation, all
of Borrower's contingent reimbursement obligations in respect of letters of
credit), and all interest accruing thereon and all attorneys' fees and other
expenses incurred in the enforcement or collection thereof.
"Operating Lease" means any lease (other than a lease constituting a
Capital Lease Obligation) of real or personal property.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Person" means any individual, corporation, business trust,
association, company, partnership, joint venture, governmental authority, or
other entity.
"Plan" means any employee benefit or other plan established or
maintained by Borrower or any ERISA Affiliate and which is covered by Title IV
of ERISA.
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"Pledge Agreement" means the Amended and Restated Pledge Agreement of
Borrower and Durocraft in favor of the Agent and the Lenders in substantially
the form of EXHIBIT "I" hereto, as the same may be amended, supplemented or
otherwise modified from time to time.
"Potential Default" means any condition or event which, after notice
or lapse of time or both, would constitute an Event of Default.
"Pretax Income" means, for any period, Net Income for such period plus
(but only to the extent deducted in the determination of Net Income) tax
expense for such period.
"Prime Rate" means, at any time, the rate of interest per annum then
most recently established by NationsBank as its prime rate. The Prime Rate is
a reference rate set by NationsBank after taking into account such factors as
it may deem appropriate and does not necessarily represent the lowest or best
rate actually charged to any customer. The Prime Rate may not correspond with
future increases or decreases in interest rates charged by other lenders or
market rates in general and NationsBank may make various commercial or other
loans at rates of interest having no relationship to such rate.
"Prime Rate Advance" means Advances that bear interest at rates based
upon the Prime Rate.
"Prohibited Transaction" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Code.
"Regulatory Change" means, with respect to any Lender, any change
after the date of this Agreement in United States federal, state, or foreign
laws or regulations (including Regulation D) or the adoption or making after
such date of any interpretations, directives, or requests applying to a class
of banks including either Lender of or under any United States federal or
state, or any foreign, laws or regulations (whether or not having the force of
law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented fpom time to
time.
"Reportable Event" means any of the events set forth in Section 4043
of ERISA.
"Required Lenders" means Lenders holding fifty-one percent or more of
the outstanding Advances, or, if no Advances are outstanding, fifty-one percent
or more of the Commitments.
"Reserve Requirement" means, on any day, that percentage (expressed as
a decimal fraction) which is in effect on such day, as prescribed by the Board
of Governors of the Federal Reserve System (or any successor), for determining
the maximum reserve requirements (including, without limitations basic,
supplemental, marginal and emergency reserves) applicable to "eurocurrency
liabilities" as currently defined in Regulation D or under any other then
applicable similar or successor regulation which prescribes reserve
requirements applicable to
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eurocurrency liabilities or eurocurrency fundings. Each determination by Agent
of the Reserve Requirement shall be conclusive in the absence of manifest
error.
"RICO" means the Racketeer Influenced and Corrupt Organization Act of
1970, as amended from time to time.
"Security Agreement" means the Amended and Restated Security Agreement
of Borrower in favor of the Agent and the Lenders in substantially the form of
EXHIBIT "D" hereto, as the same may be amended, supplemented or otherwise
modified from time to time.
"Subsidiary" means any corporation of which more than fifty percent
(50%) of the issued and outstanding securities having ordinary voting power for
the election of a majority of directors is owned or controlled, directly or
indirectly, by Borrower, by Borrower and one or more other Subsidiaries, or by
one or more other Subsidiaries.
"Termination Date" means 11:00 a.m. Dallas, Texas time on November
15, 1996, or such earlier date and time on which the Commitments terminate as
provided in this Agreement.
"Type" means any type of Advance (i.e., Prime Rate Advance or
Eurodollar Advance).
Section 1.2 Other Definitional Provisions. All definitions
contained in this Agreement are equally applicable to the singular and plural
forms of the terms defined. The words "hereof", "herein", and "hereunder" and
words of similar import referring to this Agreement refer to this Agreement as
a whole and not to any particular provision of this Agreement. Unless
otherwise specified, all Article and Section references pertain to this
Agreement. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. Terms used herein that are defined in the
Uniform Commercial Code as adopted by the State of Texas, unless otherwise
defined herein, shall have the meanings specified in the Uniform Commercial
Code as adopted by the State of Texas.
ARTICLE 2
Advances
Section 2.1 Advances. Subject to the terms and conditions of
this Agreement, each Lender severally agrees to make one or more Advances to
Borrower from time to time from the date hereof to and including the
Termination Date, provided that (a) the aggregate outstanding amount of all
Advances shall not at any time exceed the lesser of the Commitments or the
Borrowing Base and (b) the outstanding Advances supported only by the Eligible
Inventory component of the Borrowing Base shall not at any time exceed fifty
percent (50%) of the aggregate outstanding amount of all Advances. Subject to
the foregoing limitations, and the other terms and provisions of this
Agreement, Borrower may borrow, repay, and reborrow hereunder.
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Section 2.2 The Notes. The obligation of Borrower to repay the
Advances shall be evidenced by the Notes executed by Borrower, and payable to
the order of each Lender, in the aggregate principal amount of the Commitments
as originally in effect and dated the date hereof.
Section 2.3 Repayment of Advances. Borrower shall repay the
unpaid principal amount of all Advances outstanding under the Notes on the
Termination Date.
Section 2.4 Interest. The unpaid principal amount of the
Advances shall bear interest prior to maturity at a varying rate per annum
equal from day to day to the lesser of (a) the Maximum Rate or (b) the
Applicable Rate, each such change in the rate of interest charged on the
Advances to become effective, without notice to Borrower, on the effective date
of each change in the Applicable Rate or the Maximum Rate, as the case may be;
provided, however, if at any time the rate of interest specified in clause (b)
preceding shall exceed the Maximum Rate, thereby causing the interest on the
Advances to be limited to the Maximum Rate, then any subsequent reduction in
the Applicable Rate shall not reduce the rate of interest on the Advances below
the Maximum Rate until such time as the aggregate amount of interest accrued on
the Advances equals the aggregate amount of interest which would have accrued
on the Advances if the interest rate specified in clause (b) preceding had at
all times been in effect. Accrued and unpaid interest on the Advances shall be
payable on the last Business Day of each month and at the end of each Interest
Period, commencing on November 30, 1995, and on the Termination Date. All past
due principal and interest shall bear interest at the Default Rate.
Section 2.5 Requests for Advances. Borrower shall give Agent
notice by means of an Advance Request Form of each requested Advance, at least
three (3) Eurodollar Business Days before the requested date of each Eurodollar
Advance, and by 12:00 p.m. (Dallas, Texas time) on the requested date of each
Prime Rate Advance specifying: (a) the requested date of such Advance (which
shall be a Business Day and, with respect to Eurodollar Advances, a Eurodollar
Business Day), (b) the amount of such Advance, (c) the Type of the Advance and
(d) in the case of a Eurodollar Advance, the duration of the Interest Period
for such Advance. Agent at its option may accept telephonic requests for
Advances, provided that such acceptance shall not constitute a waiver of
Agent's right to require delivery of an Advance Request Form in connection with
subsequent Advances. Any telephonic request for an Advance by Borrower shall
be promptly confirmed by submission of a properly completed Advance Request
Form to Agent. Each Eurodollar Advance shall be in a minimum principal amount
of One Hundred Thousand Dollars ($100,000.00) or an integral multiple thereof
and each Prime Rate Advance shall be in a minimum principal amount of Fifty
Thousand Dollars ($50,000.00). The aggregate amount of Eurodollar Advances
having the same Interest Period shall be at least equal to One Hundred Thousand
Dollars ($100,000.00). All notices under this SECTION 2.5 shall be irrevocable
and shall be given not later than 12:00 p.m. (Dallas, Texas time) on the day
specified above for such notice. Any Advance Request Form requesting an
Advance received after 12:00 p.m. (Dallas, Texas time) on a Business Day shall
be deemed to be received on the next succeeding Business Day.
Section 2.6 Use of Proceeds. The proceeds of Advances shall be
used for working capital support of accounts receivable and inventory of
Borrower.
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Section 2.7 Reduction or Termination of Commitments. Borrower
shall have the right at any time to terminate in whole or from time to time to
irrevocably reduce in part the Commitments upon at least three (3) Business
Days prior written notice to Agent specifying the effective date thereof,
whether a termination or reduction is being made, and the amount of any partial
reduction; provided, however, that each partial reduction shall be in the
amount of Two Hundred Fifty Thousand Dollars ($250,000.00) or an integral
multiple thereof and Borrower shall simultaneously prepay the amount by which
the aggregate outstanding amount of all Advances exceeds the Commitments (after
giving effect to such notice) plus accrued and unpaid interest on the principal
amount so prepaid. The Commitments may not be reinstated after they have been
terminated or reduced. Any reduction in the Commitments will reduce the
Commitment of each Lender pro rata based on its Commitment amount.
Section 2.8 Letters of Credit. At the request of Borrower, and
upon execution of letter of credit documentation satisfactory to NationsBank
(including, without limitation, an Application and Agreement for Commercial
Letter of Credit [for documentary letters of credit] or Standby Letter of
Credit Application and Agreement [for standby letters of credit] for each such
letter of credit in the form attached hereto as EXHIBIT "J") (the
"Application"), NationsBank shall issue documentary or standby letters of
credit ("Letters of Credit") from time to time for the account of Borrower for
its benefit or the benefit of its Subsidiaries in a face amount not exceeding
in the aggregate at any time outstanding the lesser of (a) $1,000,000.00 or (b)
$12,000,000 minus the aggregate outstanding principal balance of all Advances.
The Commitments shall at all times be reduced by the aggregate face amount of
outstanding Letters of Credit. The Letters of Credit shall be on terms
mutually acceptable to Borrower and NationsBank and no Letter of Credit shall
have an expiration date later than the Termination Date. Any amount paid by
NationsBank on any Letter of Credit which is not immediately reimbursed by
Borrower shall be treated as an Advance without the necessity for any request
by Borrower. Immediately upon the issuance of any Letter of Credit,
NationsBank shall be deemed to have sold and transferred to each other Lender,
and each such other Lender shall be deemed unconditionally and irrevocably to
have purchased and received from NationsBank, without recourse or warranty, an
undivided interest and participation, pro-rata based upon such other Lender's
Commitment compared to the aggregate Commitments, in such Letter of Credit (as
the same may thereafter be amended, renewed or extended pursuant to this
Agreement), each drawing thereunder and the obligations of Borrower under this
Agreement and the Application with respect thereto and any security therefor or
guaranty pertaining thereto. In the event and to the extent that any draft
drawn under any Letter of Credit shall not have been promptly reimbursed by
Borrower, NationsBank shall promptly notify Agent, and Agent shall promptly
notify each other Lender, of such failure, and each such other Lender shall, on
the first Business Day following such notification, and notwithstanding (A)
anything to the contrary contained in SECTION 2.1 or elsewhere in this
Agreement or (B) the existence of any Event of Default or the inability of or
failure by Borrower or any Subsidiary to comply with any condition precedent
set forth in ARTICLE 5, make an Advance, which Advance shall be a Prime Rate
Advance and shall be used to repay the applicable portion of NationsBank's
Advance thereon resulting from such drawing, in an amount equal to such
Lender's pro rata share of such drawing (based upon its Commitment compared to
the aggregate Commitments), which amount shall promptly and unconditionally be
made available to Agent for the account of NationsBank as reimbursement for
such drawing and interest accrued thereon, in immediately available funds.
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Borrower shall pay to NationsBank, at the time of issuance of each Letter of
Credit, a fee equal to the greater of (a) (i) one percent (1.0%) per annum for
documentary letters of credit or (ii) one and one-half (1.50) percent per annum
for standby letters of credit, times the face amount of the Letter of Credit or
(b) One Hundred Dollars ($100.00). In connection with the issuance of any
Letters of Credit, Borrower shall pay to NationsBank its standard fees and
charges, including the standard fees and charges provided for in the
Application. The obligations and indebtedness of Borrower to Lender under this
SECTION 2.8, the Letters of Credit, and the Applications, shall be part of the
Obligations.
ARTICLE 3
Payments, Conversions and Continuations
Section 3.1 Method of Payment. All payments of principal,
interest, and other amounts to be made by Borrower under this Agreement, the
Notes, and the other Loan Documents shall be made to Agent, for the ratable
benefit of the Lenders, at its office at 901 Main Street, Dallas, Texas 75202,
without setoff, deduction, or counterclaim, in Dollars and in immediately
available funds. Borrower shall, at the time of making each such payment,
specify to Agent the sums payable by Borrower under this Agreement, the Notes,
or other Loan Document to which such payment is to be applied (and in the event
Borrower fails to so specify, or if an Event of Default has occurred and is
continuing, Agent may apply such payment to the Obligations in such order and
manner as it may elect in its sole discretion). Whenever any payment under
this Agreement, the Notes, or any other Loan Document shall be stated to be due
on a day that is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of the payment of interest.
Section 3.2 Voluntary Prepayment. Borrower may prepay the Notes
in whole at any time or from time to time in part without premium or penalty
but with accrued interest to the date of prepayment on the amount so prepaid,
provided that (a) Eurodollar Advances may be prepaid only on the last day of
the Interest Period for such Advances and (b) each partial prepayment shall be
in the principal amount of $25,000.00 or an integral multiple thereof.
Section 3.3 Mandatory Prepayment. If at any time (a) the
aggregate amount of outstanding Advances exceeds the lesser of the Commitments
or the Borrowing Base or (b) the outstanding Advances supported by the Eligible
Inventory component of the Borrowing Base exceeds fifty percent (50%) of the
aggregate amount of outstanding Advances, Borrower shall promptly prepay the
amount of the excess plus (x) accrued and unpaid interest on the amount so
prepaid and (y) any amounts for the compensation of funding losses of the
Lenders pursuant to SECTION 4.4.
Section 3.4 Computation of Interest and Fees. Interest on the
indebtedness evidenced by the Notes and all fees provided for herein shall be
computed on the basis of a year of 360 days and the actual number of days
elapsed (including the first day but excluding the last day) unless such
calculation would result in a usurious rate, in which case interest shall be
calculated on the basis of a year of 365 or 366 days, as the case may be.
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Section 3.5 Conversions and Continuations. Borrower shall have
the right from time to time to Convert all or part of one Type of Advance into
another Type of Advance or to Continue all or part of any Eurodollar Advance by
giving the Agent written notice at least one (1) Eurodollar Business Day before
Conversion into a Prime Rate Advance and at least three (3) Eurodollar Business
Days before Conversion into or Continuation of a Eurodollar Advance,
specifying: (a) the Type of Advance to be converted, (b) the Conversion or
Continuation date, (c) the amount of the Advance to be Converted or Continued,
(d) in the case of Conversions, the Type of Advance to be Converted into and
(e) in the case of a Continuation of or Conversion into a Eurodollar Advance,
the duration of the Interest Period applicable thereto; provided that (i)
Eurodollar Advances may only be Converted on the last day of the Interest
Period and (ii) except for Conversions into Prime Rate Advances, no Conversions
shall be made while an Event of Default or Potential Default has occurred and
is continuing. All notices given under this SECTION 3.5 shall be irrevocable
and shall be given not later than 11:00 a.m. (Dallas, Texas time) on the date
which is not less than the number of Business Days or Eurodollar Business Days
specified above for such notice. If Borrower shall fail to give Agent the
notice as specified above for Continuation or Conversion of a Eurodollar
Advance prior to the end of the Interest Period with respect thereto, such
Eurodollar Advance shall automatically be Converted into a Prime Rate Advance
on the last day of the Interest Period for such Eurodollar Advance.
ARTICLE 4
Yield Protection and Illegality
Section 4.1 Additional Costs. Borrower shall pay directly to
each Lender from time to time such amounts as such Lender may determine to be
necessary to compensate it for any costs incurred by such Lender which such
Lender determines are attributable to its making or maintaining of any
Eurodollar Advances hereunder or its obligation to make any of such Eurodollar
Advances hereunder, or any reduction in any amount receivable by such Lender
hereunder in respect of any such Eurodollar Advance or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change which:
(a) changes the basis of taxation of any amounts payable
to such Lender under this Agreement or the Notes in respect of any of
such Advances (other than taxes imposed on the overall net income of
such Lender for any of such Advances);
(b) imposes or modifies any reserve, special deposit,
minimum capital, capital ratio, or similar requirement relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities or commitments of, such Lender (including any of such
Advances or any deposits referred to in the definition of "Eurodollar
Rate" in SECTION 1.1 hereof);
(c) increases such Lender's costs relating to Advances,
the Commitments, or any part thereof;
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(d) reduces the yield or rate of return of such Lender on
Advances, the Commitments, or any part thereof, to a level below that
which such Lender could have achieved but for such Regulatory Change;
or
(e) imposes any other condition affecting this Agreement
or the Notes or any of such extensions of credit or liabilities or
commitments.
Each Lender will notify Borrower of any event occurring after the date
of this Agreement which will entitle such Lender to compensation pursuant to
this SECTION 4.1 as promptly as practicable after it obtains knowledge thereof
and determines to request such compensation, and will designate a different
lending office for the Advances affected by such event if such designation will
avoid the need for, or reduce the amount of, such compensation and will not, in
the sole opinion of such Lender, violate any law, rule, or regulation or be in
any way disadvantageous to such Lender. Such Lender will finish Borrower with
a certificate setting forth the basis and the amount of each request of such
Lender for compensation under this section. If any Lender requests
compensation from Borrower under this section, Borrower may, by notice to such
Lender suspend the obligation of such Lender to make additional Eurodollar
Advances until the Regulatory Change giving rise to such request ceases to be
in effect (in which case the provisions of SECTION 4.3 hereof shall be
applicable). Determinations and allocations by any Lender for purposes of this
section shall be conclusive, provided that such determinations and allocations
are made on a reasonable basis.
Section 4.2 Limitation on Types of Advances. Anything herein to
the contrary notwithstanding, if with respect to any Eurodollar Advances for
any Interest Period therefor, any Lender determines (which determination shall
be conclusive) that the relevant rates of interest referred to in the
definition of "Eurodollar Rate" in SECTION 1.1 hereof on the basis of which the
rate of interest for Eurodollar Advances for such Interest Period is to be
determined do not accurately reflect the cost to such Lender of making or
maintaining Eurodollar Advances for such Interest Period, then such Lender
shall give Borrower prompt notice thereof specifying the relevant amounts or
periods, and so long as such condition remains in effect, such Lender shall be
under no obligation to make additional Eurodollar Advances or to Convert Prime
Rate Advances into Eurodollar Advances and Borrower shall, on the last day(s)
of the then current Interest Period(s) for the outstanding Eurodollar Advances
either prepay such Eurodollar Advances or Convert such Eurodollar Advances into
Prime Rate Advances in accordance with the terms of this Agreement.
Section 4.3 Substitute Prime Rate Advances. If the obligation of
any Lender to make Eurodollar Advances shall be suspended pursuant to SECTION
4.1 or 4.2 hereof, all Advances which would be otherwise made by such Lender as
Eurodollar Advances shall be made instead as Prime Rate Advances and all
Advances which would otherwise be Converted into Eurodollar Advances shall be
Converted instead into (or shall remain as) Prime Rate Advances and, to the
extent that Eurodollar Advances are so made as (or Converted into) Prime Rate
Advances, all payments and prepayments of principal which would otherwise be
applied to such Lender's Eurodollar Advances shall be applied instead to its
Prime Rate Advances.
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Section 4.4 Compensation. Borrower shall pay to each Lender,
upon the request of such Lender, such amount or amounts as shall be sufficient
(in the reasonable opinion of such Lender) to compensate it for any loss, cost,
or expense incurred by it as a result of:
(a) Any payment, prepayment or Conversion of a Eurodollar
Advance for any reason (including, without limitation, the
acceleration of outstanding Advances pursuant to SECTION 10.2) on a
date other than the last day of an Interest Period for such Eurodollar
Advance; or
(b) Any failure by Borrower for any reason (including,
without limitation, the failure of any conditions precedent specified
in ARTICLE 5 to be satisfied) to borrow, Convert, Continue, or prepay
a Eurodollar Advance on the date for such borrowing, Conversion,
Continuation, or prepayment, specified in the relevant notice of
borrowing, prepayment, Conversion, or Continuation under this
Agreement.
Section 4.5 Capital Adequacy. If after the date hereof, any
Lender shall have determined that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Lender (or its parent) with any
request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such Lender's (or its
parent's) capital as a consequence of its obligations hereunder or the
transactions contemplated hereby to a level below that which such Lender (or
its parent) could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's policies with respect to capital
adequacy) by an amount deemed by such Lender to be material, then from time to
time, within ten (10) Business Days after demand by such Lender, Borrower shall
pay to such Lender such additional amount or amounts as will compensate such
Lender (or its parent) for such reduction. A certificate of such Lender
claiming compensation under this SECTION 4.5 and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive, provided that
the determination thereof is made on a reasonable basis. In determining such
amount or amounts, such Lender may use any reasonable averaging and attribution
methods.
Section 4.6 Changes in Law Rendering Loan Unlawful. In the event
that (i) any change in applicable law, treaty or regulation or the
interpretation thereof (whether or not having the force of law) shall make it
unlawful or impossible for any Lender to make or continue to maintain all or
any portion of a Eurodollar Advance contemplated hereunder, or (ii) any central
bank or other fiscal, monetary or other authority having jurisdiction over such
Lender or all or any portion of a Eurodollar Advance shall request such Lender
in writing to comply with restrictions (whether or not having the force of law)
which seek to prohibit such Lender from making or continuing to maintain such a
Eurodollar Advance, then such Lender shall so notify Borrower, and Borrower
shall, upon demand by such Lender, either, at the option of Borrower, prepay
such Eurodollar Advance or convert such Eurodollar Advance to a Prime Rate
Advance in accordance with SECTION 3.5 hereof, except that, subject to the
provisions of SECTION 4.4 hereof, such prepayment or conversion need not be
effected on the last day of the Interest Period applicable to the
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Eurodollar Advance, and upon such demand or upon notice by such Lender, the
obligation of such Lender to make such Eurodollar Advance hereunder shall
terminate. Failure to prepay any such portion of a Eurodollar Advance shall be
deemed an election to convert to a Prime Rate Advance. Such demand or notice
shall be accompanied by a certificate of such Lender provided to Borrower as to
the reasons why it is no longer feasible for such Lender to make or continue to
maintain such Eurodollar Advance hereunder and such certificate shall, in the
absence of manifest error in calculation, be conclusive and binding.
ARTICLE 5
Conditions Precedent
Section 5.1 Initial Advance. The obligation of each Lender to
make any Advance concurrently with or subsequent to the execution of this
Agreement is subject to the condition precedent that Agent shall have received
on or before the day of such Advance all of the following, each dated (unless
otherwise indicated) effective as of the date hereof, in form and substance
satisfactory to Agent:
(a) Resolutions. Resolutions of the Board of Directors
of Borrower and each Guarantor certified by their respective Secretary
or Assistant Secretary which authorize the execution, delivery, and
performance by Borrower and each Guarantor of the Loan Documents to
which Borrower or such Guarantor, as applicable, is or is to be a
party;
(b) Incumbency Certificate. A certificate of incumbency
certified by the respective Secretary or Assistant Secretary of
Borrower and each Guarantor certifying the names of the officers of
Borrower and such Guarantor authorized to sign each of the Loan
Documents to which Borrower or such Guarantor, as applicable, is or is
to be a party (including the certificates contemplated herein),
together with specimen signatures of such officers;
(c) Articles of Incorporation. The articles of
incorporation of Borrower and each Guarantor, each certified by the
Secretary of State of its respective state of incorporation and dated
within ten (10) days prior to the date of execution hereof;
(d) Bylaws. The bylaws of Borrower and each Guarantor
certified by its respective Secretary or Assistant Secretary;
(e) Governmental Certificates. Certificates of the
appropriate government officials of the state of incorporation of
Borrower and each Guarantor as to the existence and good standing of
such Persons, together with certificates of the appropriate government
officials of the State of Texas as to the qualification to do business
as a foreign corporation and good standing of Borrower and each
Guarantor in the State of Texas, each dated within ten (10) days prior
to the date of execution hereof;
(f) Notes. The Notes executed by Borrower;
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(g) Security Agreement. The Security Agreement executed
by Borrower;
(h) Financing Statements and Assignments. Uniform
Commercial Code financing statements or amendments executed by
Borrower or Guarantor, as applicable, and covering such Collateral as
Agent may request, and Uniform Commercial Code terminations or
assignments relating to the Liens identified on SCHEDULE 6 hereto;
(i) Guaranty. The Durocraft Guaranty executed by
Durocraft, and the C/D/R Guaranty executed by C/D/R;
(j) Durocraft Security Agreement. The Durocraft Security
Agreement executed by Durocraft;
(k) Initial Borrowing Base Report. A Borrowing Base
Report dated October 31, 1995, properly completed and executed by an
authorized officer of Borrower reflecting the information required
thereby as of October 31, 1995;
(l) Landlord and Mortgagee Agreements. Landlord and
mortgagee subordinations or waivers executed by each landlord and
mortgagee identified on SCHEDULE 1 hereto;
(m) Insurance Policies. Summaries of all insurance
policies required by SECTION 7.5, together with loss payable
endorsements in favor of the Agent and the Lenders with respect to all
insurance policies covering Collateral;
(n) UCC Search. The results of Uniform Commercial Code
searches showing all financing statements and other documents or
instruments on file against Borrower or Guarantor in each applicable
jurisdiction listed on SCHEDULE 5 hereto, such searches to be as of a
date no more than ten (10) days prior to the date of execution hereof;
(o) Instruments, Documents and Chattel Paper. All
Collateral consisting of instruments, documents and chattel paper
(except as otherwise provided by the Security Agreement, the Durocraft
Security Agreement or the Pledge Agreement) endorsed, if applicable,
payable to the order of Agent and the Lenders; and
(p) Attorneys' Fees and Expenses. Evidence that the
costs and expenses (including reasonable attorneys' fees) referred to
in SECTION 11.1, to the extent incurred, shall have been paid in full
by Borrower.
Section 5.2 All Advances. The obligation of each Lender to make
any Advance (including the initial Advance) is subject to the following
additional conditions precedent:
(a) Advance Request Form. Agent shall have received in
accordance with Section 2.5 an Advance Request Form dated the date of
such Advance and executed by an
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authorized officer of Borrower, all of the statements in which shall
be true and correct on and as of such date;
(b) No Default. No Event of Default or Potential Default
shall have occurred and be continuing; and
(c) Additional Documentation. Agent shall have received
such additional approvals, opinions, or documentation as Agent or its
legal counsel, Jenkens & Gilchrist, P.C., may request.
ARTICLE 6
Representations and Warranties
To induce the Agent and the Lenders to enter into this Agreement,
Borrower represents and warrants to the Agent and the Lenders that, as of the
execution hereof:
Section 6.1 Corporate Existence. Borrower and each Subsidiary
(a) is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation; (b) has all requisite
corporate power and authority to own its assets and carry on its business as
now being or as proposed to be conducted; and (c) is qualified to do business
in all jurisdictions in which the nature of its business makes such
qualification necessary and where failure to so qualify would have a material
adverse effect on its business, condition (financial or otherwise), operations,
prospects, or properties. Borrower has the corporate power and authority to
execute, deliver, and perform its obligations under this Agreement and the
other Loan Documents to which it is or may become a party.
Section 6.2 Financial Statements. Borrower has delivered to
Agent audited consolidated financial statements of Borrower and its
Subsidiaries as at and for the fiscal year ended June 30, 1995, and unaudited
consolidated financial statements of Borrower and its Subsidiaries for the
three (3) month period ended September 30, 1995. Such financial statements are
true and correct, have been prepared in accordance with GAAP, and fairly and
accurately present, on a consolidated basis, the financial condition of
Borrower and its Subsidiaries as of the respective dates indicated therein and
the results of operations for the respective periods indicated therein.
Neither Borrower nor any of its Subsidiaries has any material contingent
liabilities, liabilities for taxes, material forward or long-term commitments,
or unrealized or anticipated losses from any unfavorable commitments not
reflected in such financial statements. There has been no material adverse
change in the business, condition (financial or otherwise), operations,
prospects, or properties of Borrower or any of its Subsidiaries since the
effective date of the most recent financial statements referred to in this
section.
Section 6.3 Corporate Action; No Breach. The execution,
delivery, and performance by Borrower of this Agreement and the other Loan
Documents to which Borrower is or may become a party have been duly authorized
by all requisite action on the part of Borrower and do not and will not violate
or conflict with the articles of incorporation or bylaws of Borrower or any
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law, rule, or regulation or any order, writ, injunction, or decree of any
court, governmental authority, or arbitrator, and do not and will not conflict
with, result in a breach of, or constitute a default under, or result in the
creation or imposition of any Lien (except those Liens in favor of the Agent
and the Lenders) upon any of the revenues or assets of Borrower or any
Subsidiary pursuant to the provisions of any indenture, mortgage, deed of
trust, security agreement, franchise, permit, license, or other instrument or
agreement by which Borrower or any Subsidiary or any of their respective
properties is bound.
Section 6.4 Operation of Business. Borrower and each of its
Subsidiaries possess all licenses, permits, franchises, patents, copyrights,
trademarks, and tradenames, or rights thereto, to conduct their respective
businesses substantially as now conducted and as presently proposed to be
conducted, and Borrower and each of its Subsidiaries are not in violation of
any valid rights of others with respect to any of the forgoing.
Section 6.5 Litigation and Judgments. To the knowledge of
Borrower, there is no action, suit, investigation, or proceeding before or by
any court, governmental authority, or arbitrator pending or threatened against
or affecting Borrower or any Subsidiary, that would, if adversely determined,
have a material adverse effect on the business, condition (financial or
otherwise), operations, prospects, or properties of Borrower or any Subsidiary
or the ability of Borrower to pay and perform the Obligations. There are no
outstanding judgments against Borrower or any Subsidiary.
Section 6.6 Rights in Properties; Liens. Borrower and each
Subsidiary have good and indefeasible title to or valid leasehold interests in
their respective properties and assets, real and personal, including the
properties, assets, and leasehold interests reflected in the financial
statements described in SECTION 6.2, and none of the properties, assets, or
leasehold interests of Borrower or any Subsidiary is subject to any Lien,
except as permitted by SECTION 8.2.
Section 6.7 Enforceability. This Agreement constitutes, and the
other Loan Documents to which Borrower is party, when delivered, shall
constitute the legal, valid, and binding obligations of Borrower, enforceable
against Borrower in accordance with their respective terms, except as limited
by bankruptcy, insolvency, or other laws of general application relating to the
enforcement of creditor's rights.
Section 6.8 Approvals. No authorization, approval, or consent
of, and no filing or registration with, any court, governmental authority, or
third party is or will be necessary for the execution, delivery, or performance
by Borrower of this Agreement and the other Loan Documents to which Borrower is
or may become a party or the validity or enforceability thereof.
Section 6.9 Debt. Borrower and its Subsidiaries have no Debt,
except as permitted by SECTION 8.1.
Section 6.10 Taxes. Borrower and each Subsidiary have filed all
tax returns (federal, state, and local) required to be filed, including all
income, franchise, employment, property, and sales taxes, and have paid all of
their respective liabilities for taxes, assessments, governmental
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charges, and other levies that are due and payable, and Borrower knows of no
pending investigation of Borrower or any Subsidiary by any taxing authority or
of any pending but unassessed tax liability of Borrower or any Subsidiary.
Section 6.11 Use of Proceeds; Margin Securities. Neither Borrower
nor any Subsidiary is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulations G, T, U, or X of
the Board of Governors of the Federal Reserve System), and no part of the
proceeds of any extension of credit under this Agreement will be used to
purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying margin stock.
Section 6.12 ERISA. Borrower and each Subsidiary have complied
with all applicable minimum funding requirements and all other applicable and
material requirements of ERISA and there are no existing conditions that would
give rise to liability thereunder. No Reportable Event has occurred in
connection with any Plan that might constitute grounds for the termination
thereof by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer such Plan.
Section 6.13 Disclosure. No statement, information, report,
representation or warranty made by Borrower in this Agreement or in any other
Loan Document or furnished to the Agent or any Lender in connection with this
Agreement or any transaction contemplated hereby contains any untrue statement
of a material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to
Borrower which has a material adverse effect, or which might in the future have
a material adverse effect, on the business, condition (financial or otherwise),
operations, prospects, or properties of Borrower or any Subsidiary that has not
been disclosed in writing to the Agent and the Lenders.
Section 6.14 Subsidiaries. Borrower has no Subsidiaries other
than those listed on SCHEDULE 3 hereto, and SCHEDULE 3 sets forth the
jurisdiction of incorporation of each Subsidiary and the percentage of
Borrower's ownership of the outstanding voting stock of each Subsidiary. All
of the outstanding capital stock of each Subsidiary has been validly issued, is
fully paid, and is nonassessable.
Section 6.15 Compliance with Laws and Agreements. Neither
Borrower nor any Subsidiary is in violation in any material respect of any law,
rule, regulation, order, or decree of any court, governmental authority, or
arbitrator. Neither Borrower nor any Subsidiary is in default in any respect
in the performance, observance, or fulfillment of any of the obligations,
covenants, or conditions contained in any agreement or instrument material to
its business to which it is a party.
Section 6.16 Environmental Matters.
(a) Borrower, each Subsidiary, and all of their
respective properties, assets, and operations are in full compliance
with all Environmental Laws. Borrower is not aware of, nor has
Borrower received notice of, any past, present, or future conditions,
events,
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activities, practices, or incidents which may interfere with or
prevent the compliance or continued compliance of Borrower and the
Subsidiaries with all Environmental Laws.
(b) Borrower and each Subsidiary have obtained all
permits, licenses, and authorizations which are required under
Environmental Laws.
(c) No Hazardous Substances exist on, about, or within or
have been used, generated, stored, transported, disposed of on, or
released from any of the properties or assets of Borrower or any
Subsidiary. The use which Borrower and the Subsidiaries make and
intend to make of their respective properties and assets will not
result in the use, generation, storage, transportation, accumulation,
disposal, or release of any Hazardous Substance on, in, or from any
such properties or assets.
(d) There is no action, suit, proceeding, investigation,
or inquiry before any court, administrative agency, or other
governmental authority pending or, to the knowledge of Borrower,
threatened against Borrower or any Subsidiary relating in any way to
any Environmental Law. Neither Borrower nor any Subsidiary has (i)
any liability for remedial action under any Environmental Law, (ii)
received any request for information by any governmental authority
with respect to the condition, use, or operation of any of its
properties or assets, or (iii) received any notice from any
governmental authority or other Person with respect to any violation
of or liability under any Environmental Law.
(e) No Lien arising under any Environmental Law has
attached to any of the properties or assets of Borrower or any of its
Subsidiaries.
Section 6.17 Current Locations. The principal place of business
and chief executive office of the Borrower is located at the address for
notices specified below the Borrower's name on the signature pages hereto.
SCHEDULE 1 attached hereto sets forth all the locations where any of the
Obligated Parties maintain any books or records relating to any of the
Collateral and all other locations where any of the Obligated Parties has a
place of business. No Obligated Party does business in any location other than
as set forth on SCHEDULE 1 and SCHEDULE 1 correctly identifies each address
where any of the Obligated Parties' inventory or equipment are located.
SCHEDULE 1 correctly identifies the landlords or mortgagees (other than the
Lenders), if any, of each location identified on SCHEDULE 1. SCHEDULE 1 sets
forth the names and addresses of all Persons other than the Obligated Parties
who have possession of any of the Obligated Parties' Collateral. None of the
Collateral has been located in any location within the past four months other
than as set forth on SCHEDULE 1.
Section 6.18 Security Interest and Liens. The Security Agreement,
the Durocraft Security Agreement and the Pledge Agreement create in favor of
the Agent and the Lenders valid 'and enforceable Liens on the Collateral
described therein which secure the payment and performance of the Obligations,
including without limitation, all future Advances pursuant to this Agreement
and the Notes and all extensions, renewals and other modifications thereof Upon
the filing of Uniform Commercial Code Financing Statements naming Borrower or
Durocraft, as
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applicable, as debtor and the Agent as secured party in the applicable
jurisdictions set forth in SCHEDULE 5 hereto, and delivery to Agent of the
Collateral covered by the Pledge Agreement, and the release or assignment to
Agent of the Liens described on SCHEDULE 6 hereto, the Liens created by the
Loan Documents shall constitute perfected, first priority Liens upon the
Collateral which shall be superior and prior to the rights of all third Persons
now existing or hereafter arising.
Section 6.19 Corporate Name. The exact corporate name of Borrower
as it appears in its certificate of incorporation is set forth in the
introduction to this Agreement, and Borrower has not done business in any
location under any other name.
ARTICLE 7
Positive Covenants
Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Lender has any Commitment hereunder,
Borrower will perform and observe the following positive covenants, unless the
Agent and each Lender shall otherwise consent in writing:
Section 7.1 Reporting Requirements. Borrower will furnish to
Agent:
(a) Annual Financial Statements. As soon as available,
and in any event within ninety (90) days after the end of each fiscal
year of Borrower, beginning with the fiscal year ending June 30, 1995,
(i) a copy of the annual audit report of Borrower and the Subsidiaries
for such fiscal year containing, on a consolidated basis, balance
sheets, statements of income, and statements of cash flows as at the
end of such fiscal year and for the twelve-month period then ended, in
each case setting forth in comparative form the figures for the
preceding fiscal year, all in reasonable detail and audited and
certified by independent certified public accountants of recognized
standing acceptable to Agent, to the effect that such report has been
prepared in accordance with GAAP; and (ii) a certificate of such
independent certified public accountants to Agent (A) stating that to
their knowledge no Event of Default and no Potential Default has
occurred and is continuing, or if in their opinion an Event of Default
or Potential Default has occurred and is continuing, a statement as to
the nature thereof, and (B) confirming the calculations set forth in
the Covenant Compliance Certificate delivered simultaneously
therewith;
(b) Monthly Financial Statements. As soon as available,
and in any event within thirty (30) days after the end of each month,
a copy of an unaudited financial report of Borrower and the
Subsidiaries as of the end of such month, and for the portion of the
fiscal year then ended, containing, on a consolidated and
consolidating basis, balance sheets, statements of income, and
statements of cash flows, in each case setting forth in comparative
form the figures for the corresponding period of the preceding fiscal
year, all in reasonable detail certified by the chief financial
officer of Borrower to have been prepared in accordance with GAAP and
to fairly and accurately present (subject to year-end audit
adjustments) the financial condition and results of operations of
Borrower and
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the Subsidiaries, on a consolidated and consolidating basis, at the
date and for the periods indicated therein;
(c) Covenant Compliance Certificate. Concurrently with
the delivery of each of the financial statements referred to in
SUBSECTIONS 7.1(A) and 7.1(B), a certificate of the chief executive
officer or chief financial officer of Borrower (i) stating that to the
best of such officer's knowledge, no Event of Default and no Potential
Default has occurred and is continuing, or if an Event of Default or
Potential Default has occurred and is continuing, a statement as to
the nature thereof and the action which is proposed to be taken with
respect thereto, and (ii) showing in reasonable detail the
calculations demonstrating compliance with ARTICLE 9;
(d) Notice of Litigation. Promptly after the
commencement thereof, notice of all actions, suits, and proceedings
before any court or governmental department, commission, board,
bureau, agency, or instrumentality, domestic or foreign, affecting
Borrower or any Subsidiary which, if determined adversely to Borrower
or such Subsidiary, could have a material adverse effect on the
business, condition (financial or otherwise), operations, prospects,
or properties of Borrower or such Subsidiary;
(e) Notice of Default. As soon as possible and in any
event within five (5) days after the occurrence of each Event of
Default and Potential Default, a written notice setting forth the
details of such Event of Default or Potential Default and the action
which Borrower has taken and proposes to take with respect thereto;
(f) ERISA Reports. Promptly after the filing or receipt
thereof, copies of all reports, including annual reports, and notices
which Borrower or any Subsidiary files with or receives from the PBGC
or the U.S. Department of Labor under ERISA; and as soon as possible
and in any event within five (5) days after Borrower or any Subsidiary
knows or has reason to know that any Reportable Event or Prohibited
Transaction has occurred with respect to any Plan or that the PBGC or
Borrower or any Subsidiary has instituted or will institute
proceedings under Title IV of ERISA to terminate any Plan, a
certificate of the chief financial officer of Borrower setting forth
the details as to such Reportable Event or Prohibited Transaction or
Plan termination and the action that Borrower proposes to take with
respect thereto;
(g) Notice of Environmental Law Violation. As soon as
possible and in any event within five (5) days after the occurrence
thereof, written notice of any violation of any Environmental Law that
Borrower or any Subsidiary reports or is required to report to any
governmental authority;
(h) Notice of Material Adverse Effect. As soon as
possible and in any event within five (5) days after the occurrence
thereof, written notice of any matter that could have a material
adverse effect on the business, condition (financial or otherwise),
operations, prospects, or properties of Borrower or any Subsidiary;
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(i) Borrowing Base Report and Accounts Receivable Aging
Report. As soon as available, and in any event within thirty (30)
days after the end of each calendar month, a Borrowing Base Report and
an Accounts Receivable Aging Report, each certified by the chief
executive officer or chief financial officer of Borrower;
(j) Proxy Statements, Etc. As soon as available, one
copy of each financial statement, report, notice or proxy statement
sent by Borrower or any Subsidiary to its stockholders generally and
one copy of each regular, periodic or special report, registration
statement, or prospectus filed by Borrower or any Subsidiary with any
securities exchange or the Securities and Exchange Commission or any
successor agency;
(k) Uninsured Liabilities. Promptly upon receipt of
notice thereof, written notice of any actual or potential uninsured
liabilities of Borrower or any Subsidiary in excess of One Hundred
Thousand Dollars ($100,000.00); and
(l) General Information. Promptly, such other
information concerning Borrower or any Subsidiary as Agent may from
time to time reasonably request.
Section 7.2 Maintenance of Existence; Conduct of Business.
Borrower will preserve and maintain, and will cause each Subsidiary to preserve
and maintain, its corporate existence and all of its leases, privileges,
licenses, permits, franchises, qualifications and rights that are necessary or
desirable in the ordinary conduct of its business, and conduct, and cause each
Subsidiary to conduct, its business as presently conducted in an orderly and
efficient manner in accordance with good business practices.
Section 7.3 Maintenance of Properties. Borrower will maintain,
keep, and preserve, and cause each Subsidiary to maintain, keep, and preserve,
all of its properties (tangible and intangible) necessary or useful in the
proper conduct of its business in good working order and condition.
Section 7.4 Taxes and Claims. Borrower will pay or discharge,
and will cause each Subsidiary to pay or discharge, at or before maturity or
before becoming delinquent (a) all taxes, levies, assessments, and governmental
charges imposed on it or its income or profits or any of its property, and (b)
all lawful claims for labor, material, and supplies, which, if unpaid, might
become a Lien upon any of its property; provided, however, that neither
Borrower nor any Subsidiary shall be required to pay or discharge any tax,
levy, assessment, or governmental charge which is being contested in good faith
by appropriate proceedings diligently pursued, and for which adequate reserves
have been established.
Section 7.5 Insurance. Borrower will maintain, and will cause
each Subsidiary to maintain, with financially sound and reputable insurance
companies worker's compensation insurance, liability insurance, and insurance
on its property, assets, and business at least in such amounts and against such
risks as are usually insured against by Persons engaged in similar businesses.
Each insurance policy covering Collateral shall name Agent and the Lenders as
loss
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payee and provide that such policy will not be canceled without thirty (30)
days prior written notice to Agent.
Section 7.6 Inspection Rights. At any reasonable time and from
time to time, Borrower will permit, and will cause each Subsidiary to permit,
representatives of Agent to examine and make copies of the books and records
of, and visit and inspect the properties of Borrower and any Subsidiary, and to
discuss the business, operations, and financial condition of Borrower and the
Subsidiaries with their respective officers and employees and with their
independent certified public accountants.
Section 7.7 Keeping Books and Records. Borrower will maintain,
and will cause each Subsidiary to maintain, proper books of record and account
in which full, true, and correct entries in conformity with GAAP shall be made
of all dealings and transactions in relation to its business and activities.
Section 7.8 Compliance with Laws. Borrower will comply, and will
cause each Subsidiary to comply, in all material respects with all applicable
laws, rules, regulations, and orders of any court, governmental authority, or
arbitrator.
Section 7.9 Compliance with Agreements. Borrower will comply,
and will cause each Subsidiary to comply, in all material respects with all
contracts, agreements, and instruments binding on it or affecting its
properties or business.
Section 7.10 Further Assurances. Borrower will execute and
deliver, and will cause each Subsidiary to execute and deliver, such further
instruments as may be requested by Agent to carry out the provisions and
purposes of this Agreement and the other Loan Documents and to preserve and
perfect the Liens of the Agent and the Lenders in the Collateral.
Section 7.11 ERISA. Borrower will comply, and will cause each
Subsidiary to comply, with all minimum funding requirements, and all other
material requirements, of ERISA, if applicable, so as not to give rise to any
liability thereunder.
ARTICLE 8
Negative Covenants
Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Lender has any Commitment hereunder,
Borrower will perform and observe the following negative covenants, unless the
Agent and each Lender shall otherwise consent in writing:
Section 8.1 Debt. Borrower will not incur, create, assume, or
permit to exist, and will not permit any Subsidiary to incur, create, assume,
or permit to exist, any Debt, except:
(a) Debt to the Agent and the Lenders;
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(b) Existing Debt described on SCHEDULE 2 hereto; and
(c) Debt incurred to finance the purchase of property to
be used in the ordinary course of Borrower's business in an aggregate
amount during any one fiscal year not to exceed Four Hundred Thousand
Dollars ($400,000.00) or, during the fiscal year commencing July 1,
1995, Nine Million Six Hundred Thousand Dollars ($9,600,000.00).
Section 8.2 Limitation on Liens. Borrower will not incur,
create, assume, or permit to exist, and will not permit any Subsidiary to
incur, create, assume, or permit to exist, any Lien upon any of its property,
assets, or revenues, whether now owned or hereafter acquired, except:
(a) Liens disclosed on SCHEDULE 4 hereto;
(b) Liens in favor of the Agent and the Lenders;
(c) Encumbrances consisting of minor easements, zoning
restrictions, or other restrictions on the use of real property that
do not (individually or in the aggregate) materially affect the value
of the assets encumbered thereby or materially impair the ability of
Borrower or the Subsidiaries to use such assets in their respective
businesses, and none of which is violated in any material respect by
existing or proposed structures or land use;
(d) Liens for taxes, assessments, or other governmental
charges which are not delinquent or which are being contested in good
faith and for which adequate reserves have been established;
(e) Liens of mechanics, materialmen, warehousemen,
carriers or other similar statutory Liens securing obligations that
are not yet due and are incurred in the ordinary course of business;
(f) Liens resulting from good faith deposits to secure
payments of worker's compensation or other social security programs or
to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, or contracts (other than for payment of Debt)
in the ordinary course of business- and
(g) Liens created to secure purchase money Debt permitted
by SECTION 8.1(C) provided that such Liens do not extend to or cover
any property of Borrower other than the property being acquired with
the Debt permitted by SECTION 8.1(C).
Section 8.3 Mergers, Acquisitions and Dissolutions. Without the
prior written consent of the Agent and the Lenders, Borrower will not, and will
not permit any Subsidiary to, become a party to a merger or consolidation, or
purchase or otherwise acquire all or a substantial part of the assets of any
Person or any shares or other evidence of beneficial ownership of any Person,
or dissolve or liquidate.
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Section 8.4 Restricted Payments. Without the prior written
consent of the Agent and the Lenders, Borrower will not declare or pay any
dividends or make any other payment or distribution (in cash, property, or
obligations) on account of its capital stock, or redeem, purchase, retire, or
otherwise acquire any of its capital stock, or set apart any money for a
sinking or other analogous fund for any dividend or other distribution on its
capital stock or for any redemption, purchase, retirement, or other acquisition
of any of its capital stock, or grant or issue any capital stock or any
warrant, right, or option pertaining to its capital stock, or issue any
security convertible into capital stock, or permit any of its Subsidiaries to
purchase or otherwise acquire any capital stock of Borrower or another
Subsidiary; provided, however, that so long as no Potential Default or Event of
Default exists, Borrower may pay quarterly dividends on its capital stock, in
an amount not to exceed forty percent (40%) of Borrower's net profit before
taxes, as determined on a quarterly basis in accordance with GAAP (as reflected
in the monthly financial statements delivered by Borrower to Agent in
accordance with SECTION 7.1(B) of this Agreement and as confirmed by the annual
financial statements delivered by Borrower to Agent in accordance with SECTION
7.1(A) of this Agreement), unless the payment of any such dividend would create
or result in the existence of an Event of Default or Potential Default.
Section 8.5 Loans and Investments. Borrower will not make, and
will not permit any Subsidiary to make, any advance, loan, extension of credit,
or capital contribution to or investment in, or purchase, or permit any
Subsidiary to purchase, any stock, bonds, notes, debentures, or other
securities of any Person, except:
(a) readily marketable direct obligations of the United
States of America;
(b) fully insured certificates of deposit of NationsBank
with maturities of one year or less from the date of acquisition; and
(c) loans or advances to employees of Borrower in an
aggregate amount not to exceed $25,000.
Section 8.6 Transactions With Affiliates. Borrower will not
enter into, and will not permit any Subsidiary to enter into, any transaction,
including, without limitation, the purchase, sale; or exchange of property or
the rendering of any service, with any Affiliate of Borrower or such
Subsidiary, except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to Borrower or such Subsidiary than would be
obtained in a comparable arm's-length transaction with a Person not an
Affiliate of Borrower or such Subsidiary.
Section 8.7 Disposition of Assets. Borrower will not sell,
lease, assign, transfer, or otherwise dispose of any of its assets, or permit
any Subsidiary to do so with any of its assets, except (a) dispositions of
inventory in the ordinary course of business and (b) from the date of this
Agreement until the Termination Date, dispositions of assets (other than
inventory) in the ordinary course of business having an aggregate fair market
value of $100,000 or less
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Section 8.8 Prepayment of Debt. Borrower will not prepay, and
will not permit any Subsidiary to prepay, any Debt, except the Obligations.
Section 8.9 Nature of Business. Borrower will not, and will not
permit any Subsidiary to, engage in any business other than the businesses in
which they are engaged as of the date hereof.
Section 8.10 Compliance with Environmental Laws. Borrower will
not, and will not permit any of its Subsidiaries to, (a) use (or permit any
tenant to use) any of their respective properties or assets for the handling,
processing, storage, transportation, or disposal of any Hazardous Substance,
(b) generate any Hazardous Substance, (c) conduct any activity which is likely
to cause a release or threatened release of any Hazardous Substance, or (d)
otherwise conduct any activity or use any of their respective properties or
assets in any manner that is likely to violate any Environmental Law.
Section 8.11 Accounting. Borrower will not make, and will not
permit any of its Subsidiaries to make, any change in accounting treatment or
reporting practices, except as required by GAAP.
ARTICLE 9
Financial Covenants
Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Lender has any Commitment hereunder,
Borrower will observe and perform the following financial covenants. unless the
Agent and each Lender shall otherwise consent in writing:
Section 9.1 Consolidated Tangible Net Worth. Borrower will at
all times maintain Consolidated Tangible Net Worth in an amount not less than
Eight Million Dollars ($8,000,000.00).
Section 9.2 Fixed Charge Coverage Ratio. Borrower will at all
times maintain a Fixed Charge Coverage Ratio of not less than 1.75 to 1.0.
Section 9.3 Leverage Ratio. Borrower will at all times maintain
a Leverage Ratio of not greater than 2.5 to 1.0.
Section 9.4 Capital Expenditures. Borrower will not permit the
aggregate capital expenditures of Borrower and the Subsidiaries to exceed Four
Hundred Thousand Dollars ($400,000.00) during any fiscal year, or during the
fiscal year commencing July 1, 1995, Nine Million Six Hundred Thousand Dollars
($9,600,000.00).
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ARTICLE 10
Default
Section 10.1 Events of Default. Each of the following shall be
deemed an "Event of Default":
(a) Borrower shall fail to pay when due the Obligations
or any part thereof.
(b) Any representation, warranty, certification or
statement made or deemed made by Borrower or any Obligated Party (or
any of their respective officers) in any Loan Document or in any
certificate, report, notice, or financial statement furnished at any
time in connection with this Agreement shall be false, misleading, or
erroneous in any material respect when made or deemed to have been
made.
(c) Borrower or any Obligated Party shall fail to
perform, observe, or comply with any covenant, agreement, or term
contained in this Agreement or any other Loan Document.
(d) Borrower, any Subsidiary, or any Obligated Party
shall commence a voluntary proceeding seeking liquidation,
reorganization, or other relief with respect to itself or its debts
under any bankruptcy, insolvency, or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian, or other similar official of it or a
substantial part of its property or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it or shall
make a general assignment for the benefit of creditors or shall
generally fail to pay its debts as they become due or shall take any
corporate action to authorize any of the foregoing.
(e) An involuntary proceeding shall be commenced against
Borrower, any Subsidiary, or any Obligated Party seeking liquidation,
reorganization, or other relief with respect to it or its debts under
any bankruptcy, insolvency, or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official for it or a substantial part of
its property, and such involuntary proceeding shall remain undismissed
and unstayed for a period of thirty (30) days.
(f) Borrower, any Subsidiary, or any Obligated Party
shall fail to discharge within a period of thirty (30) days after the
commencement thereof any attachment, sequestration, or similar
proceeding or proceedings involving an aggregate amount in excess of
Fifty Thousand Dollars ($50,000.00) against any of its assets or
properties.
(g) Borrower, any Subsidiary, or any Obligated Party
shall fail to satisfy and discharge promptly any judgment or judgments
against it for the payment of money in an aggregate amount in excess
of Fifty Thousand Dollars ($50,000.00).
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(h) Borrower, any Subsidiary, or any Obligated Party
shall fail to pay when due any principal of or interest on any Debt
(other than the Obligations), or the maturity of any such Debt shall
have been accelerated, or any such Debt shall have been required to be
prepaid prior to the stated maturity thereof, or any event shall have
occurred that permits (or, with the giving of notice or lapse of time
or both, would permit) any holder or holders of such Debt or any
Person acting on behalf of such holder or holders to accelerate the
maturity thereof or require any such prepayment.
(i) This Agreement or any other Loan Document shall cease
to be in full force and effect or shall be declared null and void or
the validity or enforceability thereof shall be contested or
challenged by Borrower, any Subsidiary, any Obligated Party or any of
their respective shareholders, or Borrower or any Obligated Party
shall deny that it has any further liability or obligation under any
of the Loan Documents, or any lien or security interest created by the
Loan Documents shall for any reason cease to be a valid, first
priority perfected security interest in and lien upon any of the
Collateral purported to be covered thereby.
(j) Any of the following events shall occur or exist with
respect to Borrower or any Subsidiary: (i) any Prohibited Transaction
involving any Plan; (ii) any Reportable Event with respect to any
Plan; (iii) the filing under Section 4041 of ERISA of a notice of
intent to terminate any Plan or the termination of any Plan; (iv) any
event or circumstance that might constitute grounds entitling the PBGC
to institute proceedings under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to administer, any
Plan, or the institution by the PBGC of any such proceedings; (v)
complete or partial withdrawal under Section 4201 or 4204 of ERISA
from a Multiemployer Plan or the reorganization, insolvency, or
termination of any Multiemployer Plan; and in each case above, such
event or condition, together with all other events or conditions, if
any, have subjected or could in the reasonable opinion of Agent
subject Borrower to any tax, penalty, or other liability to a Plan, a
Multiemployer Plan, the PBGC, or otherwise (or any combination
thereof) which in the aggregate exceed or could reasonably be expected
to exceed Fifty Thousand Dollars ($50,000.00).
(k) The occurrence of a Change of Ownership or Change of
Management.
(l) Borrower, any of its Subsidiaries, or any Obligated
Party, or any of their properties, revenues, or assets, shall become
subject to an order of forfeiture, seizure, or divestiture (whether
under RICO or otherwise) and the same shall not have been discharged
within thirty (30) days from the date of entry thereof.
Section 10.2 Remedies Upon Default. If any Event of Default shall
occur, the Lenders may without notice terminate their Commitments to make
Advances and declare the Obligations or any part thereof to be immediately due
and payable, and the same shall thereupon become immediately due and payable,
without notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest, or other formalities of any kind, all of which are hereby expressly
waived by Borrower; provided,
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however, that upon the occurrence of an Event of Default under SECTION 10.1(D)
or SECTION 10.1(E), the Commitments of Lenders to make Advances shall
automatically terminate, and the Obligations shall become immediately due and
payable without notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest, or other formalities of any kind, all of which are hereby expressly
waived by Borrower. If any Event of Default shall occur, the Agent and the
Lenders may exercise all rights and remedies available to them in law or in
equity, under the Loan Documents, or otherwise.
Section 10.3 Performance by Agent and Lenders. If Borrower shall
fail to perform any covenant, duty, or agreement contained in any of the Loan
Documents, Agent and Lenders may perform or attempt to perform such covenant,
duty, or agreement on behalf of Borrower. In such event, Borrower shall, at
the request of Agent, promptly pay any amount expended by the Agent and any
Lender in such performance or attempted performance to Agent, together with
interest thereon at the Default Rate from the date of such expenditure until
paid. Notwithstanding the foregoing, it is expressly agreed that neither the
Agent nor any Lender shall have any liability or responsibility for the
performance of any obligation of Borrower under this Agreement or any other
Loan Document.
Section 10.4 Setoff. Each Lender shall have the right to set off
and apply against the Obligations in such manner as such Lender may determine,
at any time and without notice to Borrower, any and all deposits (general or
special, time or demand, provisional or final) or other sums at any time
credited by or owing from such Lender to Borrower whether or not the
Obligations are then due. As further security for the Obligations, Borrower
hereby grants to each Lender a security interest in all money, instruments, and
other property of Borrower now or hereafter held by such Lender, including,
without limitation, property held in safekeeping. In addition to each Lender's
right of setoff and as further security for the Obligations, Borrower hereby
grants to each Lender a security interest in all deposits (general or special,
time or demand, provisional or final) and other accounts of Borrower now or
hereafter on deposit with or held by any Lender and all other sums at any time
credited by or owing from any Lender to Borrower. The rights and remedies of
Lenders hereunder are in addition to other rights and remedies (including,
without limitation, other rights of setoff) which Lenders may have.
ARTICLE 11
The Agent
Section 11.1 Appointment, Powers and Immunities. Each Lender
hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder and under the other Loan Documents with such powers as are
specifically delegated to the Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Neither the Agent nor any of its Affiliates, officers,
directors, employees, attorneys or agents shall be liable for any action taken
or omitted to be taken by any of them hereunder or otherwise in connection with
this Agreement or any of the other Loan Documents except for its or their own
gross negligence or willful misconduct. Without limiting the generality
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of the preceding sentence, the Agent (a) may treat the payee of any Note as the
holder thereof until the Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the Agent,
(b) shall have no duties or responsibilities except those expressly set forth
in this Agreement and the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee or fiduciary for any Lender,
(c) shall not be required to initiate any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by
the Required Lenders, (d) shall not be responsible to the Lenders for any
recitals, statements, representations or warranties contained in this Agreement
or any other Loan Document, or any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any other
Loan Document, or for the value, validity, effectiveness, enforceability or
sufficiency of this Agreement or any other Loan Document, or any other document
referred to or provided for herein or therein or for any failure by any Person
to perform any of his or its obligations hereunder or thereunder, (e) may
consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts, and (f) shall incur no liability under or in respect of
any Loan Document, by acting upon any notice, consent, certificate or other
instrument or writing reasonably believed by it to be genuine and signed or
sent by the proper party or parties. As to any matters not expressly provided
for by this Agreement, the Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with instructions
signed by the Required Lenders, and such instructions of the Required Lenders
and any action taken or failure to act pursuant thereto shall be binding on all
of the Banks; provided, however, that the Agent shall not be required to take
any action which exposes the Agent to liability or which is contrary to this
Agreement or any other Loan Document or applicable law.
Section 11.2 Rights of Agent as a Lender. With respect to its
Commitment, the Advances made by it and the Note issued to it, NationsBank (and
any successor acting as Agent) in its capacity as a Lender hereunder shall have
the same rights and powers hereunder as any other Lender and may exercise the
same as though it were not acting as the Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the Agent in
its individual capacity. The Agent and its Affiliates may (without having to
account therefor to any Lender) accept deposits from, lend money to, act as
trustee under indentures of, provide merchant banking services to, own
securities of, and generally engage in any kind of banking, trust or other
business with, the Borrower, the Guarantors or any of their Affiliates and any
other Person who may do business with or own securities of the Borrower, the
Guarantors, or any of their Affiliates, all as if it were not acting as the
Agent and without any duty to account therefor to the Lenders.
Section 11.3 Defaults. The Agent shall not be deemed to have
knowledge or notice of the occurrence of an Event of Default or Potential
Default unless the Agent has received notice from a Lender or the Borrower
specifying such Event of Default and stating that such notice is a "Notice of
Default". In the event that the Agent receives such a notice of the occurrence
of an Event of Default or Potential Default, the Agent shall give prompt notice
thereof to the Lenders. The Agent shall (subject to SECTION 11.1 take such
action with respect to such Event of Default as shall be directed by the
Required Lenders, provided that unless and until the Agent shall have
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received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
as it shall seem advisable and in the best interest of the Lenders.
Section 11.4 INDEMNIFICATION. THE LENDERS HEREBY AGREE TO
INDEMNIFY THE AGENT FROM AND HOLD THE AGENT HARMLESS AGAINST, BUT WITHOUT
LIMITING THE OBLIGATIONS OF THE BORROWER AND THE GUARANTORS UNDER THIS
AGREEMENT, RATABLY IN ACCORDANCE WITH THEIR RESPECTIVE COMMITMENTS, ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES) AND
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY THE
AGENT UNDER OR IN RESPECT OF ANY OF THE LOAN DOCUMENTS; PROVIDED, FURTHER, THAT
NO LENDER SHALL BE LIABLE FOR ANY PORTION OF THE FOREGOING TO THE EXTENT CAUSED
BY THE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF
THE FOREGOING, IT IS THE EXPRESS INTENTION OF THE LENDERS THAT THE AGENT SHALL
BE INDEMNIFIED HEREUNDER FROM AND HELD HARMLESS AGAINST ALL OF SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES) AND
DISBURSEMENTS OF ANY KIND OR NATURE DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE AGENT (EXCEPT TO THE
EXTENT THE SAME ARE CAUSED BY THE AGENT'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT). WITHOUT LIMITING ANY OTHER PROVISION OF THIS SECTION 11.4, EACH
LENDER AGREES TO REIMBURSE THE AGENT PROMPTLY UPON DEMAND FOR SUCH LENDER'S PRO
RATA SHARE (CALCULATED ON THE BASIS OF ITS COMMITMENT) OF ANY AND ALL
OUT-OF-POCKET EXPENSES (INCLUDING ATTORNEYS' FEES) INCURRED BY THE AGENT IN
CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION,
MODIFICATION, AMENDMENT OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL
PROCEEDINGS OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF OBLIGATIONS,
RIGHTS, REMEDIES OR RESPONSIBILITIES UNDER, THE LOAN DOCUMENTS, TO THE EXTENT
THAT THE AGENT IS NOT PROMPTLY REIMBURSED FOR SUCH EXPENSES BY THE BORROWER.
Section 11.5 Independent Credit Decisions. Each Lender agrees
that it has independently and without reliance on the Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Borrower and the Guarantors,
and its own decision to enter into this Agreement and that it will,
independently and without reliance upon the Agent or any other Lender, and
based upon such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under this Agreement or any of the other Loan Documents.
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The Agent shall not be required to keep itself informed as to the performance
or observance by the Borrower or Guarantors of this Agreement or any other Loan
Document, or to inspect the properties or books of the Borrower or Guarantors.
Except for notices, reports and other documents and information expressly
required to be furnished to the Lenders by the Agent hereunder or under the
other Loan Documents, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other financial information concerning
the affairs, financial condition or business of the Borrower or Guarantors (or
any of their Affiliates) which may come into the possession of the Agent or any
of its Affiliates.
Section 11.6 Several Commitments. The Commitments and other
obligations of the Lenders under this Agreement are several. The default by
any Lender in making an Advance in accordance with its Commitment shall not, in
and of itself, relieve the other Lenders of their obligations under this
Agreement (which obligations, however, shall continue to be subject to the
conditions set forth in the Loan Documents). In the event of any default by
any Lender in making any Advance, each nondefaulting Lender shall not be
obligated to advance the amount which the defaulting Lender was required to
advance hereunder. In no event shall any Lender be required to advance an
amount or amounts which would in the aggregate exceed such Lender's Commitment.
No Lender shall be responsible for any act or omission of any other Lender.
Section 11.7 Successor Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Required Lenders shall have the right to appoint another
Lender as successor Agent. If no successor Agent shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Agent's giving of notice of resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be
a commercial bank organized under the laws of the U.S. or any state thereof and
having combined capital and surplus of at least $100,000,000. Upon the
acceptance of its appointment as successor Agent, such successor Agent shall
thereupon succeed to and become vested with all rights, powers, privileges,
immunities and duties of the resigning Agent, and the resigning Agent shall be
discharged from its duties and obligations under this Agreement and the other
Loan Documents. After any Agent's resignation as Agent, the provisions of this
ARTICLE 11 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was the Agent.
ARTICLE 12
Miscellaneous
Section 12.1 Expenses of Agent and Lenders. Borrower hereby
agrees to pay Agent and Lenders on demand: (a) all costs and expenses incurred
by Agent and Lenders in connection with the preparation, negotiation, and
execution of this Agreement and the other Loan Documents executed in connection
herewith, including, without limitation, the fees and expenses of Agent's and
Lenders' legal counsel not to exceed $5,000.00 in the aggregate, plus all costs
and expenses incurred by the Agent and the Lenders in connection with the
preparation, negotiation and execution of any and all amendments,
modifications, renewals, extensions, and supplements
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thereof and thereto, including, without limitation, the fees and expenses of
Agent's and Lenders' legal counsel, (b) all costs and expenses incurred by
Agent and Lenders in connection with the enforcement of this Agreement or any
other Loan Document, including, without limitation, the fees and expenses of
Agent and Lenders' legal counsel, and (c) all other costs and expenses incurred
by Agent and Lenders in connection with this Agreement or any other Loan
Document, including, without limitation, all costs, expenses, taxes,
assessments, filing fees, and other charges levied by a governmental authority
or otherwise payable in respect of this Agreement or any other Loan Document or
in obtaining any audit or appraisal in respect of the Collateral.
Section 12.2 Indemnification. Borrower hereby indemnities the
Agent, each Lender and each Affiliate thereof and their respective officers,
directors, employees, attorneys, and agents from, and holds each of them
harmless against, any and all losses, liabilities, claims, damages, penalties,
judgments, disbursements, costs, and expenses (including attorneys' fees) to
which any of them may become subject which directly or indirectly arise from or
relate to (a) the negotiation, execution, delivery, performance,
administration, or enforcement of any of the Loan Documents, (b) any of the
transactions contemplated by the Loan Documents, (c) any breach by Borrower of
any representation, warranty, covenant, or other agreement contained in any of
the Loan Documents, (d) the presence, release, threatened release, disposal,
removal, or cleanup of any Hazardous Substance located on, about, within, or
affecting any of the properties or assets of Borrower or any Subsidiary or (e)
any investigation, litigation, or other proceeding, including, without
limitation, any threatened investigation, litigation, or other proceeding
relating to any of the foregoing. WITHOUT LIMITING ANY PROVISION OF THIS
AGREEMENT OR OF ANY OTHER LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE
PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION SHALL BE
INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES,
CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES
(INCLUDING ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM THE SOLE OR
CONTRIBUTORY NEGLIGENCE OF THE PERSON TO BE INDEMNIFIED.
Section 12.3 Limitation of Liability. Neither the Agent, any
Lender nor any Affiliate, officer, director, employee, attorney, or agent of
the Agent or any Lender shall have any liability with respect to, and Borrower
hereby waives, releases, and agrees not to sue any of them upon, any claim for
any special, indirect, incidental, or consequential damages suffered or
incurred by Borrower in connection with, arising out of, or in any way related
to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the other Loan Documents.
Borrower hereby waives, releases, and agrees not to sue the Agent or any Lender
or any of the Agent's or any Lender's Affiliates, officers, directors,
employees, attorneys, or agents for punitive damages in respect of any claim in
connection with, arising out of, or in any way related to, this Agreement or
any of the other Loan Documents, or any of the transactions contemplated by
this Agreement or any of the other Loan Documents.
Section 12.4 Lender Not Fiduciary. The relationship between
Borrower, on the one hand, the Agent and/or Lenders on the other hand, is
solely that of debtor and creditor, and neither the Agent nor any Lender has
any fiduciary or other special relationship with Borrower,
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and no term or condition of any of the Loan Documents shall be construed so as
to deem the relationship among Borrower, the Agent and the Lenders to be other
than that of debtor and creditor.
Section 12.5 No Waiver; Cumulative Remedies. No failure on the
part of the Agent or any Lender to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power, or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power, or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right, power, or
privilege. The rights and remedies provided for in this Agreement and the
other Loan Documents are cumulative and not exclusive of any rights and
remedies provided by law.
Section 12.6 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns. Neither the Borrower nor any Guarantor may assign or
transfer any of his or its rights or obligations hereunder or under
the other Loan Documents without the prior written consent of the
Agent and the Lenders. Any Lender may sell participations to one or
more banks or other institutions in all or a portion of its rights and
obligations under this Agreement and the other Loan Documents
(including, without limitation, all or a portion of its Commitment and
the Advances owing to it); provided, however, that (i) such Lender's
obligations under this Agreement and the other Loan Documents
(including, without limitation, its Commitment) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the
Borrower and the Guarantor (as applicable) for the performance of such
obligations, (iii) such Lender shall remain the holder of its Note for
all purposes of this Agreement, (iv) the Borrower and the Guarantors
shall continue to deal solely and directly with such Lender in
connection with such Lender's or the Borrower or such Guarantor's
rights and obligations under this Agreement and the other Loan
Documents, and (v) such Lender shall not sell a participation that
conveys to the participant the right to vote or give or withhold
consents under this Agreement or any other Loan Document, other than
(if and to the extent that such Lender so agrees) the right to vote
upon or consent to (A) any increase of such Lender's Commitment (other
than an increase resulting from an assignment to or in favor of such
Lender from another Lender in accordance with this Agreement), (B) any
reduction of the principal amount of, or interest to be paid on, the
Advances of such Lender, (C) any reduction of any fee or other amount
payable to such Lender under any Loan Document if and to the extent
that such reduction would decrease the fee or other amount payable to
the participant, (D) any postponement of any date for the payment of
any amount payable in respect of the Advances of such Lender, (E) any
release of a material portion of the Collateral from the Liens created
by the Security Documents and not otherwise expressly authorized by
the Loan Documents, and (F) any release of the Borrower or any
Guarantor from liability under the Loan Documents.
(b) The Borrower and each of the Lenders agree that any
Lender (the "Assigning Lender") may at any time assign to one or more
Eligible Assignees all, or a
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proportionate part of all, of its rights and obligations under this
Agreement and the other Loan Documents (including, without limitation,
its Commitment and Advances) (each an "Assignee"); provided, however,
that (i) each such assignment shall be of constant (as opposed to
varying) percentage of the Assigning Lender's rights and obligations
under this Agreement and the other Loan Documents, (ii) except in the
case of an assignment of all of a Lender's rights and obligations
under this Agreement and the other Loan Documents, the amount of the
Commitment and Advances of the Assigning Lender being assigned
pursuant to each assignment (determined as of the date of the
Assignment and Acceptance with respect to such assignment) shall in no
event be less than $1,000,000, and (iii) the parties to each such
assignment shall execute and deliver to the Agent for its acceptance
and recording in the Register (as defined below), an Assignment and
Acceptance, together with the Note subject to such assignment, and a
processing and recordation fee of $2,500. Upon such execution,
delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date
shall be at least five Business Days after the execution thereof, or,
if so specified in such Assignment and Acceptance, the date of
acceptance thereof by the Agent, (A) the Assignee thereunder shall be
a party hereto as a "Lender" and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and under the Loan Documents, and (B) the Assigning Lender
thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this
Agreement and the other Loan Documents (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of a
Lender's rights and obligations under the Loan Documents, such Lender
shall cease to be a party thereto).
(c) By executing and delivering an Assignment and
Acceptance, the Assigning Lender thereunder and the Assignee
thereunder confirm to and agree with each other and the other parties
hereto as follows: (i) other than as provided in such Assignment and
Acceptance, such Assigning Lender makes no representation or warranty
and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan
Documents, or the execution, legality, validity, enforceability,
genuineness, sufficiency or value thereof or any other instrument or
document furnished pursuant thereto; (ii) such Assigning Lender makes
no representation or warranty and assumes no responsibility with
respect to the financial condition or performance of the Borrower or
any Guarantor or the performance or observance by Borrower or any
Guarantor of his or its obligations under the Loan Documents, (iii)
such Assignee confirms that it has received a copy of the other Loan
Documents, together with copies of the financial statements referred
to in Section 6.2 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such Assignee will,
independently and without reliance upon the Agent or such Assigning
Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan
Documents; (v) such Assignee confirms that it is an Eligible Assignee;
(vi) such Assignee appoints and
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Second Amended and Restated Credit Agreement
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authorizes the Agent to take such action as agent on its behalf and
exercise such powers under the Loan Documents as are delegated to the
Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; and (vii) such Assignee agrees that it
will perform in accordance with their terms all of the obligations
which by the terms of the Loan Documents are required to be performed
by it as a Lender.
The Agent shall maintain at its office a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the recordation
of the names and addresses of the Lender and the Commitment of, and principal
amount of the Advances owing to, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for
all purposes, absent manifest error, and the Borrower, the Guarantors, the
Agent and the Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes under the Loan Documents. The
Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance
executed by an Assigning Lender and Assignee representing that it is
an Eligible Assignee, together with the Note subject to such
assignment, the Agent shall, if such Assignment and Acceptance has
been completed and is in substantially the form of EXHIBIT "K" hereto,
(i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register, and (iii) give prompt written
notice thereof to the Borrower. Within five Business Days after its
receipt of such notice the Borrower, at its expense, shall execute and
deliver to the Agent in exchange for each surrendered Note, a new Note
payable to the order of such Eligible Assignee in an amount equal to
the portion of such Note assigned to it and, if the Assigning Lender
has retained any Commitment, a new Note evidencing each such
Commitment payable to the order of the Assigning Lender in the amount
of such Commitment retained by it (each such promissory note shall
constitute a "Note" for purposes of the Loan Documents). Such new
Notes shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of EXHIBIT
A hereto.
(e) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
SECTION 12.6, disclose to the Assignee or participant or proposed
Assignee or participant any information relating to the Borrower, any
Guarantor or any of his or its Affiliates furnished to such Lender by
or on behalf of such Person.
(f) Any Lender may assign and pledge the Note held by it
to any Federal Reserve Bank or the U.S. Treasury as collateral
security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such
Federal Reserve System and/or Federal Reserve Bank; provided, that,
any payment made by the Borrower for the benefit of such assigning
and/or pledging Lender in accordance with the terms of the Loan
Documents shall satisfy the Borrower's obligations under the Loan
Documents in respect thereof to the extent of such payment. No such
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Second Amended and Restated Credit Agreement
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assignment and/or pledge shall release the assigning and/or pledging
Lender from its obligations hereunder.
Section 12.7 Survival. All representations and warranties made in
this Agreement or any other Loan Document or in any documentation, statement,
or certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by the Agent or any Lender or any closing shall affect the
representations and warranties or the right of the Agent and the Lenders to
rely upon them. Without prejudice to the survival of any other obligation of
Borrower hereunder, the obligations of Borrower under ARTICLE 4 and SECTIONS
12.1 and 12.2 shall survive repayment of the Notes and termination of the
Commitments.
SECTION 12.8 ENTIRE AGREEMENT; AMENDMENT AND RESTATEMENT
AMENDMENT. THIS AGREEMENT, THE NOTES, AND THE OTHER LOAN DOCUMENTS REFERRED TO
HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO
ORAL AGREEMENTS AMONG THE PARTIES HERETO. Without limiting the generality of
the foregoing, this Agreement and the other Loan Documents amend and restated
in their entirety the documentation executed in connection with the Prior
Credit Agreement. No amendment or waiver of any provision of this Agreement,
the Notes or any other Loan Document to which the Borrower or any Guarantor is
a party, nor any consent to any departure by the Borrower or any Guarantor
therefrom, shall in any event be effective unless the same shall be agreed or
consented to by the Required Lenders and the Borrower or such Guarantor (as
applicable) in writing, and each such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given;
provided, that no amendment, waiver or consent shall, unless in writing and
signed by all of the Lenders and the Borrower, do any of the following: (a)
increase the Commitments of the Lenders or subject the lenders to any
additional obligations; (b) reduce the principal of, or interest on, the Notes
or any fees or other amounts payable hereunder; (c) postpone any date fixed for
any payment (including, without limitation, any mandatory prepayment) of
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder; (d) waive any of the conditions precedent specified in ARTICLE 5;
(e) change any Commitment or the aggregate unpaid principal amount of any Note
or the number of Lenders which shall be required for the Lenders or any of them
to take any action under this Agreement or any other Loan Document; (f) modify
the definition of "Required Lenders" contained in SECTION 1.1; (g) except as
expressly authorized by this Agreement, release any Collateral from any of the
Liens created by any of the Loan Documents; or (h) waive any Event of Default
or amend any covenant contained herein.
Section 12.9 Maximum Interest Rate. No provision of this
Agreement or of any other Loan Document shall require the payment or the
collection of interest in excess of the Maximum Rate. If any excess of
interest in such respect is hereby provided for, or shall be adjudicated to
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Second Amended and Restated Credit Agreement
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be so provided, in any Loan Document or otherwise in connection with this loan
transaction, the provisions of this SECTION 12.9 shall govern and prevail and
neither Borrower nor the sureties, guarantors, successors, or assigns of
Borrower shall be obligated to pay the excess amount of such interest or any
other excess sum paid for the use, forbearance, or detention of sums loaned
pursuant hereto. In the event the Agent or any Lender ever receives, collects,
or applies as interest any such sum, such amount which would be in excess of
the maximum amount permitted by applicable law shall be applied as a payment
and reduction of the principal of the indebtedness evidenced by the Notes; and,
if the principal of the Notes have been paid in full, any remaining excess
shall forthwith be paid to Borrower. In determining whether or not the
interest paid or payable exceeds the Maximum Rate, Borrower, Agent and Lenders
shall, to the extent permitted by applicable law, (a) characterize any
nonprincipal payment as an expense, fee, or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the indebtedness evidenced
by the Notes so that interest for the entire term does not exceed the Maximum
Rate.
Section 12.10 Notices. All notices and other communications
provided for in this Agreement and the other Loan Documents to which Borrower
is a party shall be given or made in writing and telecopied, mailed by
certified mail return receipt requested, or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof; or, as to any party at such other address as shall be designated by
such party in a notice to the other party given in accordance with this SECTION
12.10. Except as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given when transmitted by telecopy, subject
to telephone confirmation of receipt, or when personally delivered or, in the
case of a mailed notice, when duly deposited in the mails, in each case given
or addressed as aforesaid; provided, however, notices to Agent pursuant to
ARTICLE 2 and SECTION 3.5 shall not be effective until received by Agent.
Section 12.11 Applicable Law; Venue; Service of Process. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas and the applicable laws of the United States of America. This
Agreement has been entered into in Dallas County, Texas, and it shall be
performable for all purposes in Dallas County, Texas. Any action or proceeding
against Borrower under or in connection with any of the Loan Documents may be
brought in any state or federal court in Dallas County, Texas. Borrower hereby
irrevocably (a) submits to the nonexclusive jurisdiction of such courts, and
(b) waives any objection it may now or hereafter have as to the venue of any
such action or proceeding brought in any such court or that any such court is
an inconvenient forum. Borrower agrees that service of process upon it may be
made by certified or registered mail, return receipt requested, at its address
specified or determined in accordance with the provisions of SECTION 12.10.
Nothing herein or in any of the other Loan Documents shall affect the right of
the Agent and the Lenders to serve process in any other manner permitted by law
or shall limit the right of the Agent and the Lenders to bring any action or
proceeding against Borrower or with respect to any of its property in courts in
other jurisdictions. Any action or proceeding by Borrower against the Agent or
any Lender shall be brought only in a court located in Dallas County, Texas.
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
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Section 12.12 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
Section 12.13 Severability. Any provision of this Agreement held
by a court of competent jurisdiction to be invalid or unenforceable shall not
impair or invalidate the remainder of this Agreement and the effect thereof
shall be confined to the provision held to be invalid or illegal.
Section 12.14 Headings. The headings, captions, and arrangements
used in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 12.15 Non-Application of Chapter 15 of Texas Credit Code.
The provisions of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil
Statutes, Article 5069-15) are specifically declared by the parties hereto not
to be applicable to this Agreement or any of the other Loan Documents or to the
transactions contemplated hereby.
Section 12.16 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO
ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE
ACTIONS OF THE AGENT AND THE LENDERS IN THE NEGOTIATION, ADMINISTRATION, OR
ENFORCEMENT THEREOF.
Section 12.17 ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR
AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY RELATED AGREEMENTS
OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT,
SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL
ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW). THE RULES OF
PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF JUDICIAL
ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.), AND THE "SPECIAL RULES"
SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL
CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION,
INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
i. Special Rules. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY
OF THE BORROWER'S DOMICILE AT TIME OF THIS AGREEMENT'S
EXECUTION AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
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Second Amended and Restated Credit Agreement
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ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM
ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE
COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION;
FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE,
BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP
TO AN ADDITIONAL 60 DAYS.
ii. Reservation of Rights. NOTHING IN THIS AGREEMENT SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE
APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS
CONTAINED IN THIS AGREEMENT; OR (II) BE A WAIVER BY THE AGENT
OR ANY LENDER OF THE PROTECTION AFFORDED TO IT BY 12 U.S. C.
SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III)
LIMIT THE RIGHT OF THE AGENT AND THE LENDERS (A) TO EXERCISE
SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B)
TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL,
OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY
REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT
OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE AGENT AND
THE LENDERS MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON
SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY
REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT.
NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE
INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF
THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH
ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM
OCCASIONING RESORT TO SUCH REMEDIES.
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
43
<PAGE> 48
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BORROWER:
CRAFTMADE INTERNATIONAL, INC.,
a Delaware corporation
By: _________________________________
Name: James R. Ridings
Title: Chief Executive Officer
Address for Notices:
2700 112th Street
Grand Prairie, Texas 75050
Fax No.: (214) 647-4872
Telephone No.: (214) 647-8099
Attention: Kenneth M. Cancienne
Chief Financial Officer
AGENT:
NATIONSBANK OF TEXAS, N.A.
By: _________________________________
Name: Andrew N. McLean
Title: Vice President
Address for Notices:
901 Main Street, 7th Floor
P.O. Box 831000
Dallas, Texas 75283-1000
Fax No.: (214) 508-0388
Telephone No.: (214) 508-0361
Attention: Andrew N. McLean
Vice President
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
44
<PAGE> 49
LENDER:
Commitment: NATIONSBANK OF TEXAS, N.A.
$6,000,000.00
By: __________________________________
Name: Andrew N. McLean
Title: Vice President
Address for Notices:
901 Main Street, 7th Floor
P.O. Box 831000
Dallas, Texas 75283-1000
Fax No.: (214) 508-0388
Telephone No.: (214) 508-0361
Attention: Andrew N. McLean
Vice President
Commitment: OVERTON BANK AND TRUST
$6,000,000.00
By: __________________________________
Name: Dale Griggs
Title: Executive Vice President
Address for Notices:
4200 South Hulen
Fort Worth, Texas 76109
Fax No.: (817) 731-9123
Telephone No.: (817) 731-0101
Attention: Dale Griggs
Executive Vice President
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
45
<PAGE> 50
CONFIRMATION OF GUARANTY
Durocraft hereby represents, warrants, covenants and agrees to and
with the Agent and the Lenders that (1) Durocraft is aware of this Agreement
and the transactions contemplated herein (this Agreement and such transactions
being hereinafter collectively called the "Modification"), (2) Durocraft
consents to the Modification, (3) notwithstanding the Modification, the
Durocraft Guaranty shall be and remain a continuing, absolute, unconditional
and irrevocable guaranty of payment and performance of the Guaranteed
Indebtedness, as defined in the Durocraft Guaranty, binding and enforceable in
accordance with the terms of such guaranty, and such guaranty shall not be
deemed to have been terminated, impaired, modified or otherwise affected by the
Modification, except that the obligations guaranteed shall include the
Obligations as defined herein in addition to any other amounts included in the
Guaranteed Indebtedness, and (4) there are no claims, defenses, counterclaims
or offsets to the liability of Durocraft under the Durocraft Guaranty.
EXECUTED on November ___, 1995, to be effective as of November 14,
1995
DUROCRAFT INTERNATIONAL, INC.,
a Texas corporation
By: __________________________________
James R. Ridings,
Chief Executive Officer
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
46
<PAGE> 51
CONFIRMATION OF GUARANTY
C/D/R hereby represents, warrants, covenants and agrees to and with
the Agent and the Lenders that (1) C/D/R is aware of this Agreement and the
transactions contemplated herein (this Agreement and such transactions being
hereinafter collectively called the "Modification"), (2) C/D/R consents to the
Modification, (3) notwithstanding the Modification, the C/D/R Guaranty shall be
and remain a continuing, absolute, unconditional and irrevocable guaranty of
payment and performance of the Guaranteed Indebtedness, as defined in the C/D/R
Guaranty, binding and enforceable in accordance with the terms of such
guaranty, and such guaranty shall not be deemed to have been terminated,
impaired, modified or otherwise affected by the Modification, except that the
obligations guaranteed shall include the Obligations as defined herein in
addition to any other amounts included in the Guaranteed Indebtedness, and (4)
there are no claims, defenses, counterclaims or offsets to the liability of
C/D/R under the C/D/R Guaranty.
EXECUTED on November ___, 1995, to be effective as of November 14,
1995.
C/D/R INCORPORATED
a Delaware corporation
By: _________________________________
Name: _______________________________
Title: ______________________________
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
47
<PAGE> 52
EXHIBIT "A"
Note
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
<PAGE> 53
PROMISSORY NOTE
$______________ Dallas, Texas November 14, 1995
FOR VALUE RECEIVED, the undersigned, CRAFTMADE INTERNATIONAL, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of
________________, a _________________ ("Payee"), at the offices of the Agent at
901 Main Street, Dallas, Dallas County, Texas 75283, in lawful money of the
United States of America, the principal sum of ________________________ Dollars
($______________), or so much thereof as may be advanced and outstanding
hereunder, together with interest on the outstanding principal balance as
hereinafter described.
This Note is one of the Notes provided for in that certain Second
Amended and Restated Credit Agreement of even date herewith among Maker,
NationsBank of Texas, N.A., as Agent, and the Lenders which are parties thereto
(as the same may be amended or otherwise modified, herein referred to as the
"Agreement"). Capitalized terms not otherwise defined herein shall have the
same meanings as set forth in the Agreement. Reference is hereby made to the
Agreement for provisions affecting this Note, including, without limitation,
provisions regarding the Maker's rights to borrow, repay and reborrow
hereunder, the limitation of interest charged hereunder, the Collateral
securing this Note, Potential Defaults and Events of Default and Payee's rights
arising as a result of the occurrence thereof.
Subject to the terms of the Agreement, the outstanding principal
balance hereunder shall bear interest prior to maturity at a varying rate per
annum which shall from day to day be equal to the lesser of (a) the Maximum
Rate or (b) the Applicable Rate, each such change in the rate of interest
charged hereunder to become effective, without notice to Maker, on the
effective date of each change in the Applicable Rate or the Maximum Rate, as
the case may be; provided, however, if at any time the rate of interest
specified in clause (b) preceding shall exceed the Maximum Rate, thereby
causing the interest rate hereon to be limited to the Maximum Rate, then any
subsequent reduction in the Applicable Rate shall not reduce the rate of
interest hereon below the Maximum Rate until such time as the aggregate amount
of interest accrued hereon equals the aggregate amount of interest which would
have accrued hereon if the interest rate specified in clause (b) preceding had
at all times been in effect. All outstanding principal advanced under this
Note shall be due and payable on the Termination Date. Accrued and unpaid
interest on this Note shall be due and payable on the last Business Day of each
month, commencing November 30, 1995, and on the Termination Date. All past due
principal and interest shall bear interest at the Default Rate.
Interest on the indebtedness evidenced by this Note shall be computed
on the basis of a year of 360 days and the actual number of days elapsed
(including the first day but excluding the last day) unless such calculation
would result in a usurious rate, in which case interest shall be calculated on
the basis of a year of 365 or 366 days, as the case may be.
PROMISSORY NOTE - Page 1
<PAGE> 54
If the holder hereof expends any effort in any attempt to enforce
payment of all or any part or installment of any sum due the holder hereunder,
or if this Note is placed in the hands of an attorney for collection, or if it
is collected through any legal proceedings, Maker agrees to pay all costs,
expenses and fees incurred by the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the
laws of the State of Texas and the applicable laws of the United States of
America. This Note is performable in Dallas County, Texas.
Maker and each surety, guarantor, endorser and other party ever liable
for payment of any sums of money payable on this Note jointly and severally
waive notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, diligence in collecting, grace, and all
other formalities of any kind, and consent to all extensions without notice for
any period or periods of time and partial payments, before or after maturity,
and any impairment of any collateral securing this Note, all without prejudice
to the holder. The holder shall similarly have the right to deal in any way,
at any time, with one or more of the foregoing parties without notice to any
other party, and to grant any such party any extensions of time for payment of
any of said indebtedness, or to release or substitute part or all of the
collateral securing this Note, or to grant any other indulgences or
forbearances whatsoever, without notice to any other party and without in any
way affecting the personal liability of any party hereunder.
Maker hereby authorizes the holder hereof to record in its records all
advances made to Maker hereunder and all payments made on account of the
principal thereof, which records shall be prima facie evidence as to the
outstanding principal amount of this Note; provided, however, any failure by
the holder hereof to make any such records shall not limit or otherwise affect
the obligations of Maker under the Agreement or this Note.
This Note is executed in renewal, extension, and increase of, but not
in novation, discharge, or satisfaction of the indebtedness evidenced by, that
certain Promissory Note dated November 15, 1994, in the original principal
amount of $10,000,000 made by the Maker payable to the order of NationsBank of
Texas, N.A. (the "Prior Note"). This Note, and the other Notes executed
concurrently herewith pursuant to the Agreement, evidence the indebtedness
outstanding on the date hereof under the Prior Note.
PROMISSORY NOTE - Page 2
<PAGE> 55
THIS WRITTEN AGREEMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS AS
WRITTEN, REPRESENTS THE FINAL AGREEMENT BETWEEN MAKER AND PAYEE AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF MAKER AND PAYEE. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
MAKER AND PAYEE.
CRAFTMADE INTERNATIONAL, INC.
By: __________________________________
Name: James R. Ridings
Title: Chief Executive Officer
PROMISSORY NOTE - Page 3
<PAGE> 56
EXHIBIT "B"
Advance Request Form
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
<PAGE> 57
ADVANCE REQUEST FORM
TO: NationsBank of Texas, N.A., as Agent
Attention: Andrew N. McLean
Vice President
901 Main Street, 7th Floor
Dallas, Texas 75283-1000
Gentlemen:
The undersigned is an officer of Craftmade International, Inc. (the
"Borrower") and is authorized to make and deliver this certificate pursuant to
that certain Second Amended and Restated Credit Agreement dated as of November
14, 1995, among Borrower, NationsBank of Texas, N.A., as Agent, and the Lenders
which are parties thereto (the "Credit Agreement"). All capitalized terms
defined in the Credit Agreement shall have the same meanings herein. In
accordance with the Agreement, Borrower hereby requests that Lenders make an
Advance in the amount set forth in item (e) below.
In connection with the foregoing and pursuant to the terms and
provisions of the Credit Agreement, the undersigned hereby certifies that the
following statements are true and correct:
(i) The representations and warranties contained in Article 6
of the Credit Agreement and in each of the other Loan Documents are
true and correct on and as of the date hereof with the same force and
effect as if made on and as of such date.
(ii) No Event of Default or Potential Default has occurred and
is continuing.
(iii) There has been no material adverse change in the business,
condition (financial or otherwise), operations, prospects, or
properties of Borrower or any Subsidiary.
(iv) Borrower has not, and will not after giving effect to the
credit extended pursuant to this request, exceed the credit limits set
forth in the Credit Agreement.
(v) All information supplied below is true, correct, and
complete as of the date hereof.
ADVANCE REQUEST INFORMATION
(i) Commitments . . . . . . $_______
(ii) Borrowing Base (as reflected
ADVANCE REQUEST FORM - Page 2
<PAGE> 58
on most recent Borrowing Base Report) . . . . . . $_______
(iii) Aggregate outstanding amount of
Advances . . . . . . . . $_______
(iv) Net availability
(i) (Lesser of Commitments or
Borrowing Base) minus line (c) . . . . $_______
(ii) Outstanding Advances supported by
Eligible Inventory (not to exceed
50% of line (c)) . . . . . . . . . . . $_______
(v) Amount of requested Advance (not
to exceed line (d)(i) in aggregate)
<TABLE>
<CAPTION>
Advance Type Interest Period (if Eurodollar Advance) Amount of
(Prime Rate or Eurodollar) (30, 60, 90 or 180 days) Advance
- -------------------------- --------------------------------- ---------
<S> <C> <C>
1. _____________ ___________________________ $________
2. _____________ ___________________________ $________
3. _____________ ___________________________ $________
</TABLE>
(vi) . . . Date of requested Advance
. . . . . . _________, 19__
BORROWER:
CRAFTMADE INTERNATIONAL, INC.
By: ___________________________________
Name: James R. Ridings
Title: Chief Executive Officer
Dated as of: _________________
[insert date of
requested Advance]
ADVANCE REQUEST FORM - Page 3
<PAGE> 59
EXHIBIT "C"
Borrowing Base Report
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
<PAGE> 60
BORROWING BASE REPORT
TO: NationsBank of Texas, N.A.
Attention: Andrew N. McLean
Vice President
901 Main Street, 7th Floor
Dallas, Texas 75283-1000
Gentlemen:
This Borrowing Base Report ("Report") for the month ending
_____________, 19__ is executed and delivered by Craftmade International, Inc.
("Borrower") to NationsBank of Texas, N.A., as Agent (the "Agent"), pursuant to
that certain Second Amended and Restated Credit Agreement (the "Credit
Agreement") dated as of November 14, 1995, among Borrower, the Agent and the
Lenders which are parties thereto. All capitalized terms used herein shall
have the meanings assigned to them in the Credit Agreement.
Borrower represents and warrants to the Agent and the Lenders that all
information contained herein is true, correct, and complete, and that the total
Eligible Accounts and Eligible Inventory referred to below represent the
Eligible Accounts and Eligible Inventory that qualify for purposes of
determining the Borrowing Base under the Credit Agreement. Borrower further
represents and warrants to the Agent and the Lenders that attached hereto as
Exhibit "A" is an Accounts Receivable Aging Report dated as of the date hereof.
i. Eligible Accounts
(i) Gross Accounts $_______
(ii) . . . Less:
(i) Accounts over 60
days past due . . . . . $_______
(ii) Affiliate Accounts . . $_______
(iii) Accounts subject to setoff
or dispute . . . . . . $_______
(iv) Other ineligibles . . . $_______
(v) Total Ineligible Accounts
(sum of lines (i)-(iv)) $_______
(iii) . . . Total Eligible
Accounts (line (a) minus line (b)(v)) .
$_______ x 80% = $_______
BORROWING BASE REPORT - Page 1
<PAGE> 61
ii. Eligible Inventory
(i) . . . Gross finished inventory
(at lesser of cost or market) . $_______
(ii) Gross unassembled lamp parts
(at lesser of cost or market) . $_______
(iii) . . . Total Gross Inventory
(sum of (a) + (b)) . . . . . . $_______
(iv) . . . Less: Ineligibles $_______
(v) . . . Total Eligible Inventory
(line (c) minus line (d)). . $_______ x 50% = $_______
iii. Total Borrowing Base
(line 1(c) plus line 2(e) . . . . . . . . . . . . . $_______
iv. Outstanding principal amount
of Advances . . . . . . . . . . . . . . . . . $_______
v. Net Availability
(i) . . . (Lesser of Commitments [minus
outstanding face amount of Letters of Credit] or
Borrowing Base (line 3)) minus line 4 . . $_______
(ii) . . . Outstanding Advances supported by
Eligible Inventory (not to exceed
50% of line 4) . . . . . . . . . . . . . $_______
(iii) . . . Amount by which line 5(b) exceeds
50% of line 4 . . . . . . . . . . . . . . $_______
If the number listed on line 5(a) is a negative number or if any
amount is listed on line 5(c), Borrower will promptly repay such amount plus
accrued interest thereon to the Agent, for the ratable benefit of the Lenders,
in accordance with the Credit Agreement.
Borrower further represents and warrants to the Agent and the Lenders
that the representations and warranties contained in Article 6 of the Credit
Agreement and in each of the other Loan Documents are true and correct on and
as of the date of this Report as if made on and as of the date hereof, and that
no Event of Default or Potential Default has occurred and is continuing.
BORROWING BASE REPORT - Page 2
<PAGE> 62
Date:_________________
BORROWER:
CRAFTMADE INTERNATIONAL, INC.
By: __________________________________
Name: James R. Ridings
Title: Chief Executive Officer
BORROWING BASE REPORT - Page 3
<PAGE> 63
EXHIBIT "A"
TO
BORROWING BASE REPORT
Accounts Receivable Aging Report
EXHIBIT "A", Accounts Receivable Aging Report
<PAGE> 64
EXHIBIT "D"
Security Agreement
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
<PAGE> 65
AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (the "Agreement") dated
as of November 14, 1995, is by and between CRAFTMADE INTERNATIONAL, INC., a
Delaware corporation (the "Debtor") and NATIONSBANK OF TEXAS, N.A., a national
banking association, as Agent for the Lenders (as defined below) (in such
capacity, the "Secured Party").
RECITALS:
A. NationsBank of Texas, N.A. ("NationsBank") has previously made
a loan to Debtor in the maximum principal amount of $6,000,000.00, pursuant to
a certain Credit Agreement (the "Original Credit Agreement") between Debtor and
Lender, dated January 11, 1993.
B. In conjunction with the execution of the Original Credit
Agreement, Debtor and NationsBank entered into that certain Security Agreement
dated as of January 11, 1993 (the "Original Security Agreement"), pursuant to
which the Debtor granted liens on certain of its assets as security for its
obligations under the Original Credit Agreement.
C. The Original Credit Agreement was amended and restated as
provided in that certain First Amended and Restated Credit Agreement dated as
of January 11, 1993, by and between Debtor and NationsBank (the "First Restated
Agreement").
D. The First Restated Agreement was amended as provided in that
certain First Amendment to First Amended and Restated Credit Agreement dated as
of December 13, 1993, by and between the Debtor and NationsBank (the "First
Amendment").
E. The First Restated Agreement was further amended as provided
in that certain Second Amendment to First Amended and Restated Credit Agreement
dated as of March 30, 1994, by and between the Debtor and NationsBank (the
"Second Amendment").
F. The First Restated Agreement was further amended as provided
in that certain Third Amendment to First Amended and Restated Credit Agreement
dated as of June 30, 1994, by and between the Debtor and NationsBank (the
"Third Amendment").
G. The First Restated Agreement was further amended as provided
in that certain Fourth Amendment to First Amended and Restated Credit Agreement
dated as of November 15, 1994, by and between the Debtor and NationsBank (the
"Fourth Amendment"; the First Restated Agreement, as amended by the First
Amendment, the Second Amendment, the Third Amendment and the Fourth Amendment
is referred to hereinafter as the "Prior Credit Agreement").
H. Concurrently herewith, the Borrower, the Secured Party and
the lenders which are parties thereto (the "Lenders") are amending and
restating the Prior Credit Agreement as set out
AMENDED AND RESTATED SECURITY AGREEMENT - Page 1
<PAGE> 66
in that certain Second Amended and Restated Credit Agreement dated as of
November 14, 1995 (the "Credit Agreement"), including without limitation, to
provide for a loan in the maximum principal amount of $12,000,000.
I. The Secured Party and the Lenders have required the Debtor to
execute and deliver this Agreement in amendment and restatement of the Original
Security Agreement as a condition to their execution of the Credit Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. Capitalized terms used in this Agreement,
to the extent not otherwise defined herein, shall have the same meanings as set
forth in the Credit Agreement. Terms used herein which are defined in the
Uniform Commercial Code as adopted by the State of Texas, unless otherwise
defined herein or in the Credit Agreement, shall have the meanings set forth in
the Uniform Commercial Code as adopted by the State of Texas.
ARTICLE 2
Security Interest
Section 2.1 Security Interest. Subject to the terms of this
Agreement and to secure the Obligations, Debtor hereby grants to Secured Party,
for the ratable benefit of the Lenders, a security interest in any and all of
Debtor's right, title and interest in and to all accounts, equipment,
inventory, chattel paper, documents, instruments, and general intangibles of
Debtor, whether now owned or hereafter acquired and wherever arising or
located, and all accessions and attachments thereto and all products and
proceeds thereof, including, without limitation, all patents, patent
applications, trademarks, trademark applications, trade names, trade name
applications and other intellectual property rights (all of the foregoing
property hereinafter sometimes referred to as the "Collateral").
ARTICLE 3
Representations and Warranties
To induce Secured Party and the Lenders to enter into this Agreement
and the Credit Agreement, Debtor represents and warrants to Secured Party and
the Lenders that:
AMENDED AND RESTATED SECURITY AGREEMENT - Page 2
<PAGE> 67
Section 3.1 Accounts. Unless Debtor has given Secured Party written
notice to the contrary, whenever the security interest granted hereunder
attaches to an account, Debtor shall be deemed to have represented and
warranted to Secured Party and the Lenders as to each and all of its accounts
that (a) each account is genuine and in all respects what it purports to be,
(b) each account represents the legal, valid, and binding obligation of the
account debtor evidencing indebtedness unpaid and owed by such account debtor
arising out of the performance of labor or services by Debtor or the sale or
lease of goods by Debtor, (c) the amount of each account represented as owing
is the correct amount actually and unconditionally owing except for normal
trade discounts granted in the ordinapy course of business, and (d) no account
is subject to any offset, counterclaim, or other defense.
Section 3.2 Delivery of Collateral. Except as otherwise contemplated
by Section 4.5 hereof, all of Debtor's existing instruments, documents and
chattel paper pledged pursuant hereto have been delivered to Secured Party.
ARTICLE 4
Covenants
Debtor covenants and agrees with Secured Party and the Lenders that
until the Obligations are paid and performed in full and as long as any Lender
has any Commitment under the Credit Agreement, Debtor shall observe and perform
the following covenants:
Section 4.1 Modification of Collateral. Except as contemplated by
Section 4.6, Debtor shall not impair the rights of Secured Party and the
Lenders in the Collateral and without the prior written consent of Secured
Party, Debtor shall not grant any extension of time for any payment with
respect to the Collateral, or compromise, compound, or settle any of the
Collateral, or release in whole or in part any person or entity liable for
payment with respect to the Collateral, or allow any credit or discount for
payment with respect to the Collateral other than normal trade discounts
granted in the ordinary course of business, or release any lien, security
interest, or assignment securing the Collateral, or otherwise amend or modify
any of the Collateral.
Section 4.2 Warehouse Receipts Non-Negotiable. Debtor agrees that if
any warehouse receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of its inventory, such warehouse receipt or receipt in the
nature thereof shall not be "negotiable" (as such term is used in Section 7-104
of the Uniform Commercial Code as adopted by the State of Texas).
Section 4.3 Corporate Changes. Debtor shall not change its name,
identity, or corporate structure in any manner that might make any financing
statement filed in connection with this Agreement seriously misleading unless
Debtor shall have given Secured Party thirty (30) days prior written notice
thereof and shall have taken all action deemed necessary or desirable by
Secured Party to make each financing statement not seriously misleading.
Debtor shall not change its principal place of business, chief executive
office, or the place where it keeps its books and
AMENDED AND RESTATED SECURITY AGREEMENT - Page 3
<PAGE> 68
records unless it shall have given Secured Party thirty (30) days prior written
notice thereof and shall have taken all action deemed necessary or desirable by
Secured Party to cause its security interest in the Collateral to be perfected
with the priority required by this Agreement.
Section 4.4 Location of Collateral. Debtor shall not move any of its
equipment or inventory from the locations specified for Debtor on Schedule 1 of
the Credit Agreement without the prior written consent of Secured Party.
Notwithstanding the foregoing, in the ordinary course of business Debtor may
move inventory from any location identified for Debtor on Schedule 1 to the
Credit Agreement to any other location identified for Debtor on Schedule 1 to
the Credit Agreement. Debtor shall not establish any place of business in any
location other than the locations listed for Debtor on Schedule 1 of the Credit
Agreement. Debtor shall not permit any Persons other than Secured Party to
have possession of Collateral unless Debtor shall have obtained Secured Party's
prior written consent.
Section 4.5 Delivery of Collateral. Upon receipt, Debtor shall
deliver to Secured Party, properly endorsed to Secured Party, if applicable,
all of its instruments, documents, and chattel paper pledged pursuant hereto;
provided that so long as no Event of Default or Potential Default shall have
occurred and shall be continuing, Debtor may retain for collection in the
ordinary course of business any instrument received by it in the ordinary
course of business and any documents received and further negotiated in the
ordinary course of business. After the occurrence and during the continuance
of an Event of Default or Potential Default and if Secured Party so requests,
Debtor shall deliver to Secured Party the instruments retained for collection
in the ordinary course of its business and the documents retained in the
ordinary course of its business. Subject to the limitations imposed by the
Credit Agreement on the disposition of assets and except as otherwise disclosed
in reports required by the Credit Agreement, Debtor shall promptly inform
Secured Party of any material additions to or material deletions from the
Collateral pledged by Debtor and shall not permit any items of property pledged
pursuant hereto to become a fixture to real property or an accession to other
personal property (except such personal property covered hereby or personal
property otherwise subject to a perfected security interest in favor of Secured
Party).
Section 4.6 Collection of Accounts. Debtor shall collect from its
account debtors, as and when due, any and all amounts owing under or on account
of each account (including without limitation accounts which are delinquent,
such accounts to be collected in accordance with lawful collection procedures)
and apply forthwith upon receipt thereof all such amounts as are so collected
to the outstanding balance of such account, except that, unless an Event of
Default or Potential Default has occurred and is continuing, Debtor may allow
in the ordinary course of business as adjustments to amounts owing under its
accounts (a) an extension or renewal of the time or times of payment, or
settlement for less than the total unpaid balance, which Debtor finds
appropriate in accordance with sound business judgment and (b) a refund or a
credit due as a result of a return of or damage to merchandise, or in
accordance with Debtor's ordinary course of business consistent with its
historical collection practices.
AMENDED AND RESTATED SECURITY AGREEMENT - Page 4
<PAGE> 69
ARTICLE 5
Rights of Secured Party
Section 5.1 Power of Attorney. Debtor hereby irrevocably constitutes
and appoints Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the name of Debtor or in its own name, to take any and
all action and to execute any and all documents and instruments which Secured
Party at any time and from time to time deems necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, Debtor hereby gives Secured Party the power and right on
behalf of Debtor and in its own name to do any of the following, without notice
to or the consent of Debtor:
a. to demand, sue for, collect, or receive in the name
of Debtor or in its own name, any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral and, in
connection therewith, endorse checks, notes, drafts, acceptances, money orders,
documents of title, or any other instruments for the payment of money under the
Collateral or any policy of insurance;
b. to pay or discharge taxes, liens, security interests,
or other encumbrances levied or placed on or threatened against the Collateral;
c. to send requests for verification to account debtors
and other obligors;
d. (i) to direct account debtors and any other parties
liable for any payment under any of the Collateral to make payment of any and
all monies due and to become due thereunder directly to Secured Party or as
Secured Party shall direct; (ii) to receive payment of and receipt for any and
all monies, claims, and other amounts due and to become due at any time in
respect of or arising out of any Collateral; (iii) to sign and endorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, proxies, stock powers,
verifications, and notices in connection with accounts and other documents
relating to the Collateral; (iv) to commence and prosecute any suit, action, or
proceeding at law or in equity in any court of competent jurisdiction to
collect the Collateral or any part thereof and to enforce any other right in
respect of any Collateral; (v) to defend any suit, action, or proceeding
brought against Debtor with respect to any Collateral; (vi) to settle,
compromise, or adjust any suit, action, or proceeding described above and, in
connection therewith, to give such discharges or releases as Secured Party may
deem appropriate; (vii) to exchange any of the Collateral for other property
upon any merger, consolidation, reorganization, recapitalization, or other
readjustment of the issuer thereof and, in connection therewith, deposit any of
the Collateral with any committee, depositary, transfer agent, registrar, or
other designated agency upon such terms as Secured Party may determine; (viii)
to add or release any guarantor, indorser, surety, or other party to any of the
Collateral or the Obligations; (ix) to renew, extend, or otherwise change the
terms and conditions of any of the Collateral or Obligations; (x) to insure,
and to
AMENDED AND RESTATED SECURITY AGREEMENT - Page 5
<PAGE> 70
make, settle, compromise, or adjust claims under any insurance policy covering,
any of the Collateral; and (xi) to sell, transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though Secured Party were the absolute owner thereof for all
purposes, and to do, at Secured Party's option and Debtor's expense, at any
time, or from time to time, all acts and things which Secured Party deems
necessary to protect, preserve, or realize upon the Collateral and Secured
Party's security interest therein.
This power of attorney is a power coupled with an interest and shall
be irrevocable. Secured Party shall be under no duty to exercise or withhold
the exercise of any of the rights, powers, privileges, and options expressly or
implicitly granted to Secured Party in this Agreement, and shall not be liable
for any failure to do so or any delay in doing so. Secured Party shall not be
liable for any act or omission or for any error of judgment or any mistake of
fact or law in its individual capacity or in its capacity as attorney-in-fact
except acts or omissions resulting from its willful misconduct. This power of
attorney is conferred on Secured Party solely to protect, preserve, and realize
upon its security interest in the Collateral. Secured Party shall not be
responsible for any decline in the value of the Collateral and shall not be
required to take any steps to preserve rights against prior parties or to
protect, preserve, or maintain any security interest or lien given to secure
the Collateral.
Section 5.2 Performance by Secured Party. If Debtor fails to perform
or comply with any of its agreements contained herein, Secured Party itself
may, at its sole discretion, cause or attempt to cause performance or
compliance with such agreement and the expenses of Secured Party, together with
interest thereon at the Default Rate, shall be payable by Debtor to Secured
Party on demand and shall constitute obligations secured by this Agreement.
Notwithstanding the foregoing, it is expressly agreed that Secured Party shall
not have any liability or responsibility for the performance of any obligation
of Debtor under this Agreement.
Section 5.3 Assignment by Secured Party. Subject to the provisions
of Section 12.6 of the Credit Agreement, Secured Party and the Lenders may from
time to time assign the Obligations and any portion thereof and/or the
Collateral and any portion thereof, and the assignee shall be entitled to all
of the rights and remedies of Secured Party and the Lenders under this
Agreement in relation thereto.
ARTICLE 6
Default
Section 6.1 Rights and Remedies. Upon the occurrence of an Event of
Default, Secured Party shall have the following rights and remedies and may do
any one or more of the following:
a. In addition to all other rights and remedies granted
to Secured Party in this Agreement and under the Loan Documents, Secured Party
shall have all of the rights and remedies of a secured party under the Uniform
Commercial Code as adopted by the State of Texas. Without limiting the
generality of the foregoing, Secured Party may (i) without demand or notice
AMENDED AND RESTATED SECURITY AGREEMENT - Page 6
<PAGE> 71
to Debtor, collect, receive, or take possession of the Collateral or any part
thereof and for that purpose Secured Party may enter upon any premises on which
the Collateral is located and remove the Collateral therefrom or render it
inoperable, and/or (ii) sell, lease, or otherwise dispose of the Collateral, or
any part thereof, in one or more parcels at public or private sale or sales, at
Secured Party's offices or elsewhere, for cash, on credit, or for future
delivery. Upon the request of Secured Party, Debtor shall assemble the
Collateral and make it available to Secured Party at any place designated by
Secured Party that is reasonably convenient to Debtor and Secured Party.
Debtor agrees that Secured Party shall not be obligated to give more than ten
(10) days written notice of the time and place of any public sale or of the
time after which any private sale may take place and that such notice shall
constitute reasonable notice of such matters. Debtor shall be liable for all
expenses of retaking, holding, preparing for sale, or the like, and all
attorneys' fees, legal expenses, and all other costs and expenses incurred by
Secured Party in connection with the collection of the Obligations and the
enforcement of Secured Party's rights under this Agreement. Secured Party may
apply the Collateral against the Obligations in such order and manner as
Secured Party may elect in its sole discretion. Debtor shall remain liable for
any deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay the Obligations in full. Debtor waives all rights of
marshalling in respect of the Collateral.
b. Secured Party may cause any or all of the Collateral
held by it to be transferred into the name of Secured Party or the name or
names of Secured Party's nominee or nominees.
c. Secured Party may exercise or cause to be exercised
all voting rights and corporate powers in respect of the Collateral.
ARTICLE 7
Miscellaneous
Section 7.1 No Waiver; Cumulative Remedies. No failure on the part
of Secured Party or any Lender to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power, or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power, or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right, power, or
privilege. The rights and remedies provided for in this Agreement are
cumulative and not exclusive of any rights and remedies provided by law or
under the Loan Documents.
Section 7.2 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Debtor, Secured Party and the Lenders and
their respective successors and assigns, except that Debtor may not assign any
of its rights or obligations under this Agreement without the prior written
consent of Secured Party. Any assignment in violation of this Section 7.2
shall be void.
AMENDED AND RESTATED SECURITY AGREEMENT - Page 7
<PAGE> 72
Section 7.3 Amendment and Restatement; Entire Agreement; Amendment.
This Agreement amends and restates in its entirety the Original Security
Agreement (but does not extinguish the security interests created thereby) and
embodies the final, entire agreement among the parties hereto and supersedes
any and all prior commitments, agreements, representations, and understandings,
whether written or oral, relating to the subject matter hereof (including,
without limitation, the Original Security Agreement) and may not be
contradicted or varied by evidence of prior, contemporaneous or subsequent oral
agreements or discussions of the parties hereto. There are no oral agreements
among the parties hereto. Debtor hereby acknowledges and agrees that the
security interests in the Collateral created under the Original Security
Agreement are not extinguished but are extended and continued by this Agreement
without change to the priority thereof. The provisions of this Agreement may
be amended or waived only by an instrument in writing signed by the parties
hereto.
Section 7.4 Notices. All notices and other communications provided
for in this Agreement shall be given or made in accordance with the terms of
the Credit Agreement.
Section 7.5 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas and the applicable
laws of the United States of America. This Agreement has been entered into in
Dallas County, Texas.
Section 7.6 Headings. The headings, captions and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 7.7 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
Section 7.8 Waiver of Bond. In the event Secured Party seeks to take
possession of any or all of the Collateral by judicial process, Debtor hereby
irrevocably waives any bonds and any surety or security relating thereto that
may be required by applicable law as an incident to such possession, and waives
any demand for possession prior to the commencement of any such suit or action.
Section 7.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 7.10 Obligations Absolute. Until the Obligations are paid in
full and the obligation of Secured Party and the Lenders under the Credit
Agreement have been terminated, the obligations of Debtor under this Agreement
shall be absolute and unconditional and shall not be released, discharged,
reduced, or in any way impaired by any circumstance whatsoever, including,
without limitation, any amendment, modification, extension, or renewal of any
Loan
AMENDED AND RESTATED SECURITY AGREEMENT - Page 8
<PAGE> 73
Documents (other than this Agreement), the Obligations, or any release or
subordination of collateral, or any waiver, consent, extension, indulgence,
compromise, settlement, or other action or inaction in respect of this
Agreement, any other Loan Document, or the Obligations, or any exercise or
failure to exercise any right, remedy, power, or privilege in respect of the
Obligations.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
DEBTOR:
CRAFTMADE INTERNATIONAL, INC.
By: __________________________________
Name: James R. Ridings
Title: Chief Executive Officer
SECURED PARTY:
NATIONSBANK OF TEXAS, N.A., as Agent
By: __________________________________
Name: Andrew N. McLean
Title: Vice President
AMENDED AND RESTATED SECURITY AGREEMENT - Page 9
<PAGE> 74
EXHIBIT "E"
Durocraft Guaranty
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
<PAGE> 75
AMENDED AND RESTATED GUARANTY AGREEMENT
(DUROCRAFT)
This AMENDED AND RESTATED GUARANTY AGREEMENT (the "Guaranty
Agreement") is executed effective as of November 14, 1995, by DUROCRAFT
INTERNATIONAL, INC., a Texas corporation (the "Guarantor") to and in favor of
the AGENT and the LENDERS, as such terms are defined below.
RECITALS:
A. NationsBank of Texas, N.A. ("NationsBank") has previously made
a loan to Craftmade International, Inc. (the "Borrower") in the maximum
principal amount of $6,000,000.00, pursuant to a certain Credit Agreement (the
"Original Credit Agreement") between Borrower and NationsBank, dated January
11, 1993.
B. In conjunction with the execution of the Original Credit
Agreement, Guarantor executed that certain Guaranty Agreement dated as of
January 11, 1993, to and in favor of NationsBank (the "Original Guaranty").
C. The Original Credit Agreement was amended and restated as
provided in that certain First Amended and Restated Credit Agreement dated as
of January 11, 1993, by and between Borrower and NationsBank (the "First
Restated Agreement").
D. The First Restated Agreement was amended as provided in that
certain First Amendment to First Amended and Restated Credit Agreement dated as
of December 13, 1993, by and between the Borrower and NationsBank (the "First
Amendment").
E. The First Restated Agreement was further amended as provided
in that certain Second Amendment to First Amended and Restated Credit Agreement
dated as of March 30, 1994, by and between the Borrower and NationsBank (the
"Second Amendment").
F. The First Restated Agreement was further amended as provided
in that certain Third Amendment to First Amended and Restated Credit Agreement
dated as of June 30, 1994, by and between the Borrower and NationsBank (the
"Third Amendment").
G. The First Restated Agreement was further amended as provided
in that certain Fourth Amendment to First Amended and Restated Credit Agreement
dated as of November 15, 1994, by and between the Borrower and NationsBank (the
"Fourth Amendment"; the First Restated Agreement, as amended by the First
Amendment, the Second Amendment, the Third Amendment and the Fourth Amendment
is referred to hereinafter as the "Prior Credit Agreement").
H. Concurrently herewith, Borrower, the lenders which are parties
thereto (the "Lenders") and NationsBank, as agent for the Lenders (the "Agent")
are entering into that certain
AMENDED AND RESTATED GUARANTY AGREEMENT - Page 1
<PAGE> 76
Second Amended and Restated Credit Agreement (the "Credit Agreement"), amending
and restating the Prior Credit Agreement in its entirety as set out therein,
including, without limitation, to provide for a loan in the maximum principal
amount of $12,000,000.
I. The Agent and the Lenders require the Guarantor to deliver
this Guaranty Agreement as an amendment and restatement of the Original
Guaranty as a condition to entering into the Credit Agreement.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, Guarantor hereby irrevocably and
unconditionally guarantees to the Agent and the Lenders the full and prompt
payment and performance of the Guaranteed Indebtedness (as hereinafter
defined), this Guaranty Agreement being upon the following terms:
i. The term "Guaranteed Indebtedness" as used
herein means all of the "Obligations" as defined in
the Credit Agreement. The term "Guaranteed
Indebtedness" shall include any and all post-petition
interest and expenses (including attorneys' fees)
whether or not allowed under any bankruptcy,
insolvency, or other similar law. All initially
capitalized terms not specifically otherwise defined
herein shall have the meanings prescribed in the
Credit Agreement.
ii. This instrument shall be an absolute,
continuing, irrevocable, and unconditional guaranty
of payment and performance, and not a guaranty of
collection, and Guarantor shall remain liable on its
obligations hereunder until the payment and
performance in full of the Guaranteed Indebtedness.
No set-off, counterclaim, recoupment, reduction, or
diminution of any obligation, or any defense of any
kind or nature which Borrower may have against the
Agent or any Lender or any other party, or which
Guarantor may have against Borrower, the Agent or any
Lender, or any other party, shall be available to, or
shall be asserted by, Guarantor against the Agent or
any Lender or any subsequent holder of the Guaranteed
Indebtedness or any part thereof or against payment
of the Guaranteed Indebtedness or any part thereof.
iii. The obligations of Guarantor hereunder shall
be limited to an aggregate amount equal to the
largest amount that would not render its obligations
hereunder subject to avoidance under Section 548 of
the United States Bankruptcy Code, as amended (or any
successor statute) or to being set aside, avoided, or
annulled under any applicable state law relating to
fraudulent transfers or fraudulent obligations.
iv. If Guarantor becomes liable for any
indebtedness owing by Borrower to the Agent or any
Lender by endorsement or otherwise, other than under
this Guaranty Agreement, such liability shall not be
in any
AMENDED AND RESTATED GUARANTY AGREEMENT - Page 2
<PAGE> 77
manner impaired or affected hereby, and the rights of
the Agent and the Lenders hereunder shall be
cumulative of any and all other rights that the Agent
and the Lenders may ever have against Guarantor. The
exercise by the Agent or any Lender of any right or
remedy hereunder or under any other instrument, or at
law or in equity, shall not preclude the concurrent
or subsequent exercise of any other right or remedy.
v. In the event of default by Borrower in
payment or performance of the Guaranteed
Indebtedness, or any part thereof, when such
Guaranteed Indebtedness becomes due, whether by its
terms, by acceleration, or otherwise, Guarantor shall
promptly pay the amount due thereon to the Agent, for
the ratable benefit of the Lenders, without notice or
demand in lawful currency of the United States of
America and it shall not be necessary for the Agent
or any Lender, in order to enforce such payment by
Guarantor, first to institute suit or exhaust its
remedies against Borrower or others liable on such
Guaranteed Indebtedness, or to enforce any rights
against any collateral which shall ever have been
given to secure such Guaranteed Indebtedness.
vi. Notwithstanding anything to the contrary
contained in this Guaranty Agreement, Guarantor
hereby irrevocably waives any and all rights it may
now or hereafter have under any agreement or at law
or in equity to assert any claim against or seek
subrogation, contribution, indemnification or any
other form of reimbursement from Borrower or any
other party liable for payment of any or all of the
Guaranteed Indebtedness for any payment made by
Guarantor under or in connection with this Guaranty
Agreement or otherwise until the Guaranteed
Indebtedness shall have been paid in full in cash.
vii. This Guaranty Agreement shall continue to be
effective, or be automatically reinstated, as the
case may be, if at any time payment, in whole or in
part, of any of the Guaranteed Indebtedness is
rescinded or must otherwise be restored or returned
by the Agent or any Lender as a preference,
fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though
such payment had not been made; provided that in the
event any Guaranteed Indebtedness is rescinded or
must be restored or returned, all costs and expenses
(including without limitation any legal fees and
disbursements) incurred by the Agent or any Lender in
defending or enforcing such reinstatement shall be
deemed to be included as Guaranteed Indebtedness
hereunder.
viii. If acceleration of the time for payment of
any amount payable by Borrower under the Guaranteed
Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such
amounts otherwise
AMENDED AND RESTATED GUARANTY AGREEMENT - Page 3
<PAGE> 78
subject to acceleration under the terms of the
Guaranteed Indebtedness shall nonetheless be payable
by Guarantor hereunder forthwith on demand by Agent.
ix. Guarantor hereby agrees that its obligations
under this Guaranty Agreement shall not be released,
discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any
event, including, without limitation, one or more of
the following events, whether or not with notice to
or the consent of Guarantor: (a) the taking or
accepting of collateral as security for any or all of
the Guaranteed Indebtedness or the release,
surrender, exchange, or subordination of any
collateral now or hereafter securing any or all of
the Guaranteed Indebtedness; (b) any partial release
of the liability of Guarantor hereunder, or the full
or partial release of any other guarantor from
liability for any or all of the Guaranteed
Indebtedness; (c) any disability of Borrower, or the
dissolution, insolvency, or bankruptcy of Borrower,
Guarantor, or any other party at any time liable for
the payment of any or all of the Guaranteed
Indebtedness; (d) any renewal, extension,
modification, waiver, amendment, or rearrangement of
any or all of the Guaranteed Indebtedness or any
instrument, document, or agreement evidencing,
securing, or otherwise relating to any or all of the
Guaranteed Indebtedness; (e) any adjustment,
indulgence, forbearance, waiver, or compromise that
may be granted or given by the Agent or the Lenders
to Borrower, Guarantor, or any other party ever
liable for any or all of the Guaranteed Indebtedness;
(f) any neglect, delay, omission, failure, or refusal
of the Agent or the Lenders to take or prosecute any
action for the collection of any of the Guaranteed
Indebtedness or to foreclose or take or prosecute any
action in connection with any instrument, document,
or agreement evidencing, securing, or otherwise
relating to any or all of the Guaranteed
Indebtedness; (g) the unenforceability or invalidity
of any or all of the Guaranteed Indebtedness or of
any instrument, document, or agreement evidencing,
securing, or otherwise relating to any or all of the
Guaranteed Indebtedness; (h) any payment by Borrower
or any other party to the Agent or any Lender is held
to constitute a preference under applicable
bankruptcy or insolvency law or if for any other
reason the Agent or any Lender is required to refund
any payment or pay the amount thereof to someone
else; (i) the settlement or compromise of any of the
Guaranteed Indebtedness; (j) the non-perfection of
any security interest or lien securing any or all of
the Guaranteed Indebtedness; (k) any impairment of
any collateral securing any or all of the Guaranteed
Indebtedness; (l) the failure of the Agent or any
Lender to sell any collateral securing any or all of
the Guaranteed Indebtedness in a commercially
reasonable manner or as otherwise required by law;
(m) any change in the corporate existence, structure,
or ownership of Borrower; or (n) any other
circumstance which
AMENDED AND RESTATED GUARANTY AGREEMENT - Page 4
<PAGE> 79
might otherwise constitute a defense available to, or
discharge of, Borrower or Guarantor.
x. Guarantor represents and warrants to the
Agent and the Lenders as follows:
(i) Guarantor has the corporate power
and authority and legal right to
execute, deliver, and perform its
obligations under this Guaranty
Agreement and this Guaranty Agreement
constitutes the legal, valid, and
binding obligation of Guarantor,
enforceable against Guarantor in
accordance with its respective terms,
except as limited by bankruptcy,
insolvency, or other laws of general
application relating to the
enforcement of creditor's rights.
(ii) The execution, delivery, and
performance by Guarantor of this
Guaranty Agreement have been duly
authorized by all requisite action on
the part of Guarantor and do not and
will not violate or conflict with the
articles of incorporation or bylaws of
Guarantor or any law, rule, or
regulation or any order, writ,
injunction or decree of any court,
governmental authority or agency, or
arbitrator and do not and will not
conflict with, result in a breach of, or
constitute a default under, or result in
the imposition of any lien upon any
assets of Guarantor pursuant to the
provisions of any indenture, mortgage,
deed of trust, security agreement,
franchise, permit, license, or other
instrument or agreement to which
Guarantor or its properties is
bound.
(iii) No authorization, approval, or
consent of, and no filing or
registration with, any court,
governmental authority, or third party
is necessary for the execution, delivery
or performance by Guarantor of this
Guaranty Agreement or the validity or
enforceability thereof.
(iv) The value of the consideration
received and to be received by Guarantor
as a result of Borrower, the Agent and
the Lenders entering into the Credit
Agreement and Guarantor executing and
delivering
AMENDED AND RESTATED GUARANTY AGREEMENT - Page 5
<PAGE> 80
this Guaranty Agreement is reasonably
worth at least as much as the liability
and obligation of Guarantor hereunder,
and such liability and obligation and
the Credit Agreement have benefited and
may reasonably be expected to benefit
Guarantor directly or indirectly.
(v) Guarantor has, independently and
without reliance upon the Agent or any
Lender and based upon such documents and
information as Guarantor has deemed
appropriate, made its own analysis and
decision to enter into this Guaranty
Agreement.
xi. Guarantor covenants and agrees that, as long
as the Guaranteed Indebtedness or any part thereof is
outstanding or any Lender has any Commitment under
the Credit Agreement:
(a) Guarantor will furnish promptly to the Agent written
notice of the occurrence of any default under this Guaranty Agreement
or any Event of Default or Potential Default under the Credit
Agreement of which Guarantor has knowledge.
(b) Guarantor will promptly furnish to the Agent any and
all such information, writings, and further assurances relating to
Guarantor or this Guaranty Agreement as the Agent may from time to
time request.
(c) Guarantor will from time to time obtain any and all
authorizations, licenses, consents, or approvals as may now or
hereafter be necessary or desirable under applicable laws or
regulations or otherwise in connection with the execution, delivery,
and performance of this Guaranty Agreement and will promptly furnish
copies thereof to the Agent.
(d) Guarantor will at all times own directly or
indirectly and free and clear of all liens or encumbrances whatsoever
at least the same percentage of voting shares of Borrower, if any, as
Guarantor owns directly or indirectly on the date hereof.
xii. The Agent and each Lender shall have the
right to set off and apply against this Guaranty
Agreement or the Guaranteed Indebtedness or both, at
any time and without notice to Guarantor, any and all
deposits (general or special, time or demand,
provisional or final) or other sums at any time
credited by or owing from the Agent or any Lender to
Guarantor whether or not the Guaranteed Indebtedness
is then due and irrespective of whether or not the
Agent or any Lender shall have made any demand under
this Guaranty Agreement. As security for this
Guaranty Agreement and the Guaranteed Indebtedness,
Guarantor hereby grants to the Agent, for the
AMENDED AND RESTATED GUARANTY AGREEMENT - Page 6
<PAGE> 81
ratable benefit of the Lenders, a security interest
in all money, instruments, certificates of deposit,
and other property of Guarantor now or hereafter held
by the Agent or any Lender, including without
limitation, property held in safekeeping. In
addition to the Agent's and the Lenders' right of
setoff and as further security for this Guaranty
Agreement and the Guaranteed Indebtedness, Guarantor
hereby grants to the Agent, for the ratable benefit
of the Lenders, a security interest in all deposits
(general or special, time or demand, provisional or
final) and all other accounts of Guarantor now or
hereafter on deposit with or held by the Agent or any
Lender and all other sums at any time credited by or
owing from the Agent or any Lender to Guarantor. The
rights and remedies of the Agent and the Lenders
hereunder are in addition to other rights and
remedies (including, without limitation, other rights
of setoff) which the Agent and the Lenders may have.
xiii. Guarantor hereby agrees that the Subordinated
Indebtedness shall be subordinate and junior in right
of payment to the prior payment in full of all
Guaranteed Indebtedness, and Guarantor hereby assigns
the Subordinated Indebtedness to the Agent, for the
ratable benefit of the Lenders, as security for the
Guaranteed Indebtedness. If any sums shall be paid
to Guarantor by Borrower or any other person or
entity on account of the Subordinated Indebtedness,
such sums shall be held in trust by Guarantor for the
benefit of Agent and the Lenders and shall forthwith
be paid to the Agent without affecting the liability
of Guarantor under this Guaranty Agreement and may be
applied by the Agent against the Guaranteed
Indebtedness in such order and manner as the Agent
may determine in its sole discretion. Upon the
request of the Agent, Guarantor shall execute,
deliver, and endorse to the Agent such documents and
instruments as the Agent may request to perfect,
preserve, and enforce its rights and the rights of
the Lenders hereunder. For purposes of this Guaranty
Agreement, the term "Subordinated Indebtedness" means
all indebtedness, liabilities, and obligations of
Borrower to Guarantor, whether such indebtedness,
liabilities, and obligations now exist or are
hereafter incurred or arise, or whether the
obligations of Borrower thereon are direct, indirect,
contingent, primary, secondary, several, joint and
several, or otherwise, and irrespective of whether
such indebtedness, liabilities, or obligations are
evidenced by a note, contract, open account, or
otherwise, and irrespective of the person or persons
in whose favor such indebtedness, obligations, or
liabilities may, at their inception, have been, or
may hereafter be created, or the manner in which they
have been or may hereafter be acquired by Guarantor.
(i) Guarantor agrees that any and all
liens, security interests, judgment
liens, charges, or other
AMENDED AND RESTATED GUARANTY AGREEMENT - Page 7
<PAGE> 82
encumbrances upon Borrower's assets
securing payment of any Subordinated
Indebtedness shall be and remain
inferior and subordinate to any and all
liens, security interests, judgment
liens, charges, or other encumbrances
upon Borrower's assets securing payment
of the Guaranteed Indebtedness or any
part thereof, regardless of whether such
encumbrances in favor of Guarantor, the
Agent or any Lender presently exist or
are hereafter created or attached.
Without the prior written consent of the
Agent, Guarantor shall not (i) file suit
against Borrower or exercise or enforce
any other creditor's right it may have
against Borrower, or (ii) foreclose,
repossess, sequester, or otherwise take
steps or institute any action or
proceedings (judicial or otherwise,
including without limitation the
commencement of, or joinder in, any
liquidation, bankruptcy, rearrangement,
debtor's relief or insolvency
proceeding) to enforce any liens,
security interests, collateral rights,
judgments or other encumbrances held by
Guarantor on assets of Borrower.
(ii) In the event of any receivership,
bankruptcy, reorganization,
rearrangement, debtor's relief, or other
insolvency proceeding involving Borrower
as debtor, the Agent and the Lenders
shall have the right to prove and vote
any claim under the Subordinated
Indebtedness and to receive directly
from the receiver, trustee or other
court custodian all dividends,
distributions, and payments made in
respect of the Subordinated
Indebtedness. The Agent may apply any
such dividends, distributions, and
payments against the Guaranteed
Indebtedness in such order and manner as
the Agent may determine in its sole
discretion.
(iii) Guarantor agrees that all
promissory notes, accounts receivable,
ledgers, records, or any other evidence
of Subordinated Indebtedness shall
contain a specific written notice
thereon that the indebtedness evidenced
thereby is subordinated under the terms
of this Guaranty Agreement.
AMENDED AND RESTATED GUARANTY AGREEMENT - Page 8
<PAGE> 83
xiv. No amendment or waiver of any provision of
this Guaranty Agreement or consent to any departure
by the Guarantor therefrom shall in any event be
effective unless the same shall be in writing and
signed by the Agent. No failure on the part of the
Agent to exercise, and no delay in exercising, any
right, power, or privilege hereunder shall operate as
a waiver thereof; nor shall any single or partial
exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege.
The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
xv. Any acknowledgment or new promise, whether by
payment of principal or interest or otherwise and
whether by Borrower or others (including Guarantor),
with respect to any of the Guaranteed Indebtedness
shall, if the statute of limitations in favor of
Guarantor against the Agent and the Lenders shall
have commenced to run, toll the running of such
statute of limitations and, if the period of such
statute of limitations shall have expired, prevent
the operation of such statute of limitations.
xvi. This Guaranty Agreement is for the benefit of
the Agent and the Lenders and their respective
successors and assigns, and in the event of an
assignment of the Guaranteed Indebtedness, or any
part thereof, the rights and benefits hereunder, to
the extent applicable to the indebtedness so
assigned, may be transferred with such indebtedness.
This Guaranty Agreement is binding not only on
Guarantor, but on Guarantor's successors and assigns.
xvii. Guarantor recognizes that the Agent and the
Lenders are relying upon this Guaranty Agreement and
the undertakings of Guarantor hereunder in making and
continuing to make extensions of credit to Borrower
under the Credit Agreement and further recognizes
that the execution and delivery of this Guaranty
Agreement is a material inducement to the Agent and
the Lenders in entering into the Credit Agreement.
Guarantor hereby acknowledges that there are no
conditions to the full effectiveness of this Guaranty
Agreement.
xviii. This Guaranty Agreement shall be governed by
and construed in accordance with the laws of the
State of Texas.
xix. Guarantor shall pay on demand all reasonable
attorneys' fees and all other reasonable costs and
expenses incurred by the Agent and the Lenders in
connection with the administration, enforcement and
collection of this Guaranty Agreement.
AMENDED AND RESTATED GUARANTY AGREEMENT - Page 9
<PAGE> 84
xx. Guarantor hereby waives promptness,
diligence, notice of any default under the Guaranteed
Indebtedness, demand of payment, notice of acceptance
of this Guaranty Agreement, presentment, notice of
protest, notice of dishonor, notice of the incurring
by Borrower of additional indebtedness, and all other
notices and demands with respect to the Guaranteed
Indebtedness and this Guaranty Agreement.
xxi. The Credit Agreement, and all of the terms
thereof, are incorporated herein by reference, the
same as if stated verbatim herein, and Guarantor
agrees that the Agent and the Lenders may exercise
any and all rights granted to them under the Credit
Agreement and the other Loan Documents (as defined in
the Credit Agreement) without affecting the validity
or enforceability of this Guaranty Agreement.
xxii. Guarantor hereby represents and warrants to
the Agent and the Lenders that Guarantor has adequate
means to obtain from Borrower on a continuing basis
information concerning the financial condition and
assets of Borrower and that Guarantor is not relying
upon the Agent or any Lender to provide (and neither
the Agent nor any Lender shall have any duty to
provide) any such information to Guarantor either now
or in the future.
xxiii. THIS GUARANTY AGREEMENT EMBODIES THE
FINAL, ENTIRE AGREEMENT OF GUARANTOR, THE
AGENT AND THE LENDERS WITH RESPECT TO
GUARANTOR'S GUARANTY OF THE GUARANTEED
INDEBTEDNESS AND SUPERSEDES ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF. THIS
GUARANTY AGREEMENT IS INTENDED BY GUARANTOR,
THE AGENT AND THE LENDERS AS A FINAL AND
COMPLETE EXPRESSION OF THE TERMS OF THE
GUARANTY AGREEMENT, AND NO COURSE OF DEALING
BETWEEN GUARANTOR, ON THE ONE HAND, AND THE
AGENT AND THE LENDERS ON THE OTHER HAND, NO
COURSE OF PERFORMANCE, NO TRADE PRACTICES,
AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR
OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL
BE USED TO CONTRADICT, VARY, SUPPLEMENT OR
MODIFY ANY TERM OF THIS GUARANTY AGREEMENT.
THERE ARE
AMENDED AND RESTATED GUARANTY AGREEMENT - Page 10
<PAGE> 85
NO ORAL AGREEMENTS AMONG GUARANTOR, THE AGENT
AND THE LENDERS.
xxiv. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, GUARANTOR HEREBY IRREVOCABLY AND EXPRESSLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS GUARANTY AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF
THE AGENT AND THE LENDERS IN THE NEGOTIATION,
ADMINISTRATION, OR ENFORCEMENT THEREOF.
xxv. ARBITRATION. ANY CONTROVERSY OR CLAIM
BETWEEN OR AMONG THE GUARANTOR, ON THE ONE HAND, AND
THE AGENT AND THE LENDERS, ON THE OTHER HAND,
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR
RELATING TO THIS GUARANTY AGREEMENT OR ANY RELATED
AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM BASED
ON OR ARISING FROM AN ALLEGED TORT, SHALL BE
DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH
THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE,
THE APPLICABLE STATE LAW). THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES
OF JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC.
(J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW.
IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES
SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD
MAY BE ENTERED IN ANY COURT HAVING JURISDICTION.
GUARANTOR, THE AGENT OR ANY LENDER MAY BRING AN
ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING,
TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO
WHICH THIS GUARANTY AGREEMENT APPLIES IN ANY COURT
HAVING JURISDICTION OVER SUCH ACTION.
(a) Special Rules. THE ARBITRATION SHALL BE CONDUCTED IN
THE CITY OF THE GUARANTOR'S DOMICILE AT TIME OF THIS GUARANTY
AGREEMENT'S EXECUTION AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM
ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED
WITHIN 90 DAYS OF THE DEMAND FOR
AMENDED AND RESTATED GUARANTY AGREEMENT - Page 11
<PAGE> 86
ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF
CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP
TO AN ADDITIONAL 60 DAYS.
(b) Reservation of Rights. NOTHING IN THIS GUARANTY
AGREEMENT SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS
CONTAINED IN THIS GUARANTY AGREEMENT; OR (II) BE A WAIVER BY THE AGENT
OR ANY LENDER OF THE PROTECTION AFFORDED TO IT BY 12 U.S. C. SEC. 91
OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF
THE AGENT AND THE LENDERS (A) TO EXERCISE SELF HELP REMEDIES SUCH AS
(BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR
PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT
PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A
RECEIVER. THE AGENT AND THE LENDERS MAY EXERCISE SUCH SELF HELP
RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR
ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS GUARANTY AGREEMENT.
NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR
MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY
REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF
THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
xxvi. This Guaranty Agreement is executed in
amendment and restatement of, but not in discharge or
satisfaction of the obligations of Guarantor under,
the Original Guaranty.
EXECUTED as of the 14th day of November, 1995.
GUARANTOR:
DUROCRAFT INTERNATIONAL, INC.,
a Texas corporation
By: __________________________________
Name: James R. Ridings
Title: Chief Executive Officer
<PAGE> 87
Address:
2700 112th Street
Grand Prairie, Texas 75050
Fax No.: 214-647-4872
Telephone No.: 214-647-8099
Attention: James R. Ridings
Chief Executive Officer
AMENDED AND RESTATED GUARANTY AGREEMENT - Page 13
<PAGE> 88
EXHIBIT "F"
Guarantor Security Agreement
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
<PAGE> 89
AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (the "Agreement") dated
as of November 14, 1995, is by and between DUROCRAFT INTERNATIONAL, INC., a
Texas corporation (the "Debtor") and NATIONSBANK OF TEXAS, N.A., a national
banking association, as Agent for the Lenders (as defined below) (in such
capacity, the "Secured Party").
RECITALS:
A. NationsBank of Texas, N.A. ("NationsBank") has previously made
a loan to Craftmade International, Inc. (the "Borrower") in the maximum
principal amount of $6,000,000.00, pursuant to a certain Credit Agreement (the
"Original Credit Agreement") between Borrower and NationsBank, dated January
11, 1993.
B. In conjunction with the execution of the Original Credit
Agreement, Debtor and NationsBank entered into that certain Security Agreement
dated as of January 11, 1993 (the "Original Security Agreement"), pursuant to
which the Debtor granted liens on certain of its assets as security for the
obligations of the Borrower under the Original Credit Agreement.
C. The Original Credit Agreement was amended and restated as
provided in that certain First Amended and Restated Credit Agreement dated as
of January 11, 1993, by and between Borrower and NationsBank (the "First
Restated Agreement").
D. The First Restated Agreement was amended as provided in that
certain First Amendment to First Amended and Restated Credit Agreement dated as
of December 13, 1993, by and between the Borrower and NationsBank (the "First
Amendment").
E. The First Restated Agreement was further amended as provided
in that certain Second Amendment to First Amended and Restated Credit Agreement
dated as of March 30, 1994, by and between the Borrower and NationsBank (the
"Second Amendment").
F. The First Restated Agreement was further amended as provided
in that certain Third Amendment to First Amended and Restated Credit Agreement
dated as of June 30, 1994, by and between the Borrower and NationsBank (the
"Third Amendment").
G. The First Restated Agreement was further amended as provided
in that certain Fourth Amendment to First Amended and Restated Credit Agreement
dated as of November 15, 1994, by and between the Borrower and NationsBank (the
"Fourth Amendment"; the First Restated Agreement, as amended by the First
Amendment, the Second Amendment, the Third Amendment and the Fourth Amendment
is referred to hereinafter as the "Prior Credit Agreement").
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<PAGE> 90
H. Concurrently herewith, the Borrower, the Secured Party and
the lenders which are parties thereto (the "Lenders") are amending and
restating the Prior Credit Agreement as set out in that certain Second Amended
and Restated Credit Agreement dated as of November 14, 1995 (the "Credit
Agreement") including, without limitation, to provide for a loan in the maximum
principal amount of $12,000,000.
I. The Secured Party and the Lenders have required the Debtor to
execute and deliver this Agreement in amendment and restatement of the Original
Security Agreement as a condition to their execution of the Credit Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. Capitalized terms used in this Agreement,
to the extent not otherwise defined herein, shall have the same meanings as set
forth in the Credit Agreement. Terms used herein which are defined in the
Uniform Commercial Code as adopted by the State of Texas, unless otherwise
defined herein or in the Credit Agreement, shall have the meanings set forth in
the Uniform Commercial Code as adopted by the State of Texas.
ARTICLE 2
Security Interest
Section 2.1 Security Interest. Subject to the terms of this
Agreement and to secure the Obligations, the Durocraft Guaranty and all present
and future obligations of Debtor under this Agreement (collectively the
"Secured Obligations"), Debtor hereby grants to Secured Party, for the ratable
benefit of the Lenders, a security interest in any and all of Debtor's right,
title and interest in and to all accounts, equipment, inventory, chattel paper,
documents, instruments, and general intangibles of Debtor, whether now owned or
hereafter acquired and wherever arising or located, and all accessions and
attachments thereto and all products and proceeds thereof, including, without
limitation, all patents, patent applications, trademarks, trademark
applications, trade names, trade name applications and other intellectual
property rights (all of the foregoing property hereinafter sometimes referred
to as the "Collateral").
Section 2.2 Limitation. The obligations of Debtor hereunder shall be
limited to an aggregate amount equal to the largest amount that would not
render its obligations hereunder subject to avoidance under Section 548 of the
United States Bankruptcy Code, as amended (or any successor statute) or to
being set aside, avoided or annulled under any applicable state law relating to
fraudulent transfers or fraudulent obligations.
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ARTICLE 3
Representations and Warranties
To induce Secured Party and the Lenders to enter into this Agreement
and the Credit Agreement, Debtor represents and warrants to Secured Party and
the Lenders that:
Section 3.1 Title. Except for the security interests granted herein,
Debtor owns, and with respect to Collateral acquired after the date hereof
Debtor will own, the Collateral free and clear of any lien, security interest,
or other encumbrance.
Section 3.2 Accounts. Unless Debtor has given Secured Party written
notice to the contrary, whenever the security interest granted hereunder
attaches to an account, Debtor shall be deemed to have represented and
warranted to Secured Party and the Lenders as to each and all of its accounts
that (a) each account is genuine and in all respects what it purports to be,
(b) each account represents the legal, valid, and binding obligation of the
account debtor evidencing indebtedness unpaid and owed by such account debtor
arising out of the performance of labor or services by Debtor or the sale or
lease of goods by Debtor, (c) the amount of each account represented as owing
is the correct amount actually and unconditionally owing except for normal
trade discounts granted in the ordinary course of business, and (d) no account
is subject to any offset, counterclaim, or other defense.
Section 3.3 Delivery of Collateral. Except as otherwise contemplated
by Section 4.13, all of Debtor's existing instruments, documents and chattel
paper pledged pursuant hereto have been delivered to Secured Party.
Section 3.4 Organization and Authority. Debtor is a corporation duly
organized, validly existing, and in good standing under the laws of its state
of incorporation and is qualified to do business in all jurisdictions in which
the nature of its business makes such qualification necessary and where failure
to so qualify would have a material adverse effect on its business, financial
condition or operations. Debtor has the corporate power and authority to
execute, deliver, and perform this Agreement, and the execution, delivery, and
performance of this Agreement by Debtor have been authorized by all necessary
corporate action on the part of Debtor and do not and will not violate any law,
rule or regulation or the articles of incorporation or bylaws of Debtor and do
not and will not conflict with, result in a breach of, or constitute a default
under the provisions of any indenture, mortgage, deed of trust, security
agreement, or other instrument or agreement pursuant to which Debtor or any of
its property is bound.
Section 3.5 Principal Place of Business; Corporate Name. The
principal place of business and chief executive office of Debtor, and the
office where Debtor keeps its books and records, is located at the "address for
notices" set forth below Debtor's name on the signature pages hereof. The
exact corporate name of Debtor as it appears in its certificate of
incorporation is set
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<PAGE> 92
forth in the introduction to this Agreement and Debtor has not done business in
any location under any other name.
Section 3.6 Validity of Security Interest. The security interests
granted by Debtor constitute valid, legal and perfected first priority security
interests (except for security interests permitted under the Credit Agreement)
in all the Collateral which secure the payment and performance of the Secured
Obligations.
Section 3.7 Benefit to Debtor. The operations of Debtor and Borrower
are interrelated and interdependent and, therefore, loans and extensions of
credit to Borrower produce direct financial benefits to the Debtor. The value
of the consideration received and to be received by Debtor as a result of
Borrower, Secured Party and the Lenders entering into the Credit Agreement and
Debtor's executing and delivering this Agreement is reasonably worth at least
as much as the liability and obligations of Debtor hereunder and under the
other Loan Documents to which it is a party, is necessary and convenient to the
conduct, promotion and attainment of the business of Debtor, and such liability
and obligations have benefited and may reasonably be expected to benefit Debtor
directly and indirectly.
Section 3.8 No Reliance. Debtor has, independently and without
reliance upon the Secured Party, and based upon such information as it has
deemed appropriate, made its own business analysis and decision to enter into
this Agreement and the other Loan Documents to which it is a party.
Section 3.9 Enforceability. This Agreement constitutes the legal,
valid, and binding obligation of Debtor enforceable against Debtor in
accordance with its terms, except as limited by bankruptcy, insolvency, or
other laws of general application relating to the enforcement of creditors'
rights.
Section 3.10 Location of Collateral. All inventory and equipment of
Debtor is located at the places specified for Debtor on Schedule 1 to the
Credit Agreement. Debtor has exclusive possession and control of its inventory
and equipment.
ARTICLE 4
Covenants
Debtor covenants and agrees with Secured Party and the Lenders that
until the Obligations are paid and performed in full and as long as any Lender
has any Commitment under the Credit Agreement, Debtor shall observe and perform
the following covenants, unless Secured Party shall otherwise consent in
writing:
Section 4.1 Maintenance. Debtor shall maintain the Collateral in
good operating condition and repair and shall not permit any waste or
destruction of the Collateral or any part thereof. Debtor shall not use or
permit the Collateral to be used in violation of any law or inconsistently
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<PAGE> 93
with the terms of any policy of insurance. Debtor shall not use or permit the
Collateral to be used in any manner or for any purpose that would impair the
value of the Collateral or expose the Collateral to unusual risk.
Section 4.2 Encumbrances. Debtor shall not create, permit, or suffer
to exist, and shall defend the Collateral against, any lien, security interest,
or other encumbrance on the Collateral except the security interest of Secured
Party hereunder, and shall defend Debtor's rights in the Collateral and Secured
Party's security interest in the Collateral against the claims of all persons
and entities.
Section 4.3 Modification of Collateral. Except as contemplated by
Section 4.14, Debtor shall not impair the rights of Secured Party in the
Collateral and without the prior written consent of Secured Party, Debtor shall
not grant any extension of time for any payment with respect to the Collateral,
or compromise, compound, or settle any of the Collateral, or release in whole
or in part any person or entity liable for payment with respect to the
Collateral, or allow any credit or discount for payment with respect to the
Collateral other than normal trade discounts granted in the ordinary course of
business, or release any lien, security interest, or assignment securing the
Collateral, or otherwise amend or modify any of the Collateral.
Section 4.4 Disposition of Collateral. Debtor shall not sell, lease,
or otherwise dispose of the Collateral or any part thereof without the prior
written consent of Secured Party, except Debtor may sell inventory and
equipment in the ordinary course of business.
Section 4.5 Further Assurances. At any time and from time to time,
upon the request of Secured Party, and at the sole expense of Debtor, Debtor
shall promptly execute and deliver all such further instruments and documents
and take such further action as Secured Party may deem necessary or desirable
to preserve and perfect its security interest in the Collateral and carry out
the provisions and purposes of this Agreement, including, without limitation,
the execution and filing of such financing statements as Secured Party may
require. A carbon, photographic, or other reproduction of this Agreement or of
any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement and may be filed as a financing statement.
Section 4.6 Insurance. Debtor, at its own expense, shall maintain,
with financially sound and reputable companies, insurance policies (a) insuring
the Collateral against loss by fire, explosion, theft, and such other risks and
casualties as are customarily insured against by companies engaged in the same
or a similar business, and (b) insuring Debtor and Secured Party against
liability for personal injury and property damage relating to the Collateral,
such policies to be in such amounts and covering such risks as are customarily
insured against by companies engaged in the same or a similar business, with
losses payable to Debtor and Secured Party as their respective interests may
appear. All insurance with respect to the Collateral shall provide that no
cancellation, reduction in amount, or change in coverage thereof shall be
effective unless Secured Party has received thirty (30) days prior written
notice thereof. Debtor shall deliver to Secured Party copies of all insurance
policies covering the Collateral or any part thereof.
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<PAGE> 94
Section 4.7 Warehouse Receipts Non-Negotiable. Debtor agrees that if
any warehouse receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of its inventory, such warehouse receipt or receipt in the
nature thereof shall not be "negotiable" (as such term is used in Section 7-104
of the Uniform Commercial Code as adopted by the State of Texas).
Section 4.8 Inspection Rights. Debtor shall permit Secured Party and
its representatives to examine or inspect the Collateral wherever located and
to examine, inspect, and copy Debtor's books and records at any reasonable time
and as often as Secured Party may desire.
Section 4.9 Notification. Debtor shall promptly notify Secured Party
of (a) any lien, security interest, encumbrance, or claim made or threatened
against the Collateral, (b) any material change in the Collateral, including,
without limitation, any material damage to or loss of the Collateral, and (c)
the occurrence or existence of any Event of Default or Potential Default.
Section 4.10 Corporate Changes. Debtor shall not change its name,
identity, or corporate structure in any manner that might make any financing
statement filed in connection with this Agreement seriously misleading unless
Debtor shall have given Secured Party thirty (30) days prior written notice
thereof and shall have taken all action deemed necessary or desirable by
Secured Party to make each financing statement not seriously misleading.
Debtor shall not change its principal place of business, chief executive
office, or the place where it keeps its books and records unless it shall have
given Secured Party thirty (30) days prior written notice thereof and shall
have taken all action deemed necessary or desirable by Secured Party to cause
its security interest in the Collateral to be perfected with the priority
required by this Agreement.
Section 4.11 Compliance with Agreements and Loans. Debtor shall
comply in all material respects with all mortgages, deeds of trust,
instruments, and other agreements binding on it or affecting its properties or
business. Debtor shall comply with all applicable laws, rules, regulations,
and orders of any court or governmental authority.
Section 4.12 Location of Collateral. Debtor shall not move any of
its equipment or inventory from the locations specified for Debtor on Schedule
1 of the Credit Agreement, unless Debtor shall have obtained Secured Party's
prior written consent. Notwithstanding the foregoing, in the ordinary course
of business Debtor may move inventory from any location identified for Debtor
on Schedule 1 to the Credit Agreement to any other location identified for
Debtor on Schedule 1 to the Credit Agreement. Debtor shall not establish any
place of business in any location other than the locations listed for Debtor on
Schedule 1 to the Credit Agreement. Debtor shall not permit any Persons other
than Secured Party to have possession of Collateral unless Debtor shall have
obtained Secured Party's prior written consent.
Section 4.13 Delivery of Collateral. Upon receipt, Debtor shall
deliver to Secured Party, properly endorsed to Secured Party, if applicable,
all of its instruments, documents, and chattel paper pledged pursuant hereto;
provided that so long as no Event of Default or Potential Default exists,
Debtor may retain for collection in the ordinary course of business any
instrument received
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<PAGE> 95
by it in the ordinary course of business and any documents received and further
negotiated in the ordinary course of business. After the occurrence and during
the continuance of an Event of Default or Potential Default and if Secured
Party so requests, Debtor shall deliver to Secured Party the instruments
retained for collection in the ordinary course of its business and the
documents retained in the ordinary course of its business. Subject to the
limitations imposed by the Credit Agreement on the disposition of assets,
Debtor shall promptly inform Secured Party of any material additions to or
material deletions from the Collateral pledged by Debtor outside the ordinary
course of business and shall not permit any items of property pledged pursuant
hereto to become a fixture to real property or an accession to other personal
property (except such personal property covered hereby or personal property
otherwise subject to a perfected security interest in favor of Secured Party).
Section 4.14 Collection of Accounts. Debtor shall collect from its
account debtors, as and when due, any and all amounts owing under or on account
of each account (including without limitation accounts which are delinquent,
such accounts to be collected in accordance with lawful collection procedures)
and apply forthwith upon receipt thereof all such amounts as are so collected
to the outstanding balance of such account, except that, unless an Event of
Default or a Potential Default has occurred and is continuing, Debtor may allow
in the ordinary course of business as adjustments to amounts owing under its
accounts (a) an extension or renewal of the time or times of payment, or
settlement for less than the total unpaid balance, which Debtor finds
appropriate in accordance with sound business judgment, and (b) a refund or a
credit due as a result of a return of or damage to merchandise, or in
accordance with Debtor's ordinary course of business consistent with its
historical collection practices.
ARTICLE 5
Rights of Secured Party
Section 5.1 Power of Attorney. Debtor hereby irrevocably constitutes
and appoints Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the name of Debtor or in its own name, to take any and
all action and to execute any and all documents and instruments which Secured
Party at any time and from time to time deems necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, Debtor hereby gives Secured Party the power and right on
behalf of Debtor and in its own name to do any of the following, without notice
to or the consent of Debtor:
a. to demand, sue for, collect, or receive in the name
of Debtor or in its own name, any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral and, in
connection therewith, endorse checks, notes, drafts, acceptances, money orders,
documents of title, or any other instruments for the payment of money under the
Collateral or any policy of insurance;
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<PAGE> 96
b. to pay or discharge taxes, liens, security interests,
or other encumbrances levied or placed on or threatened against the Collateral;
c. to send requests for verification to account debtors
and other obligors;
d. (i) to direct account debtors and any other parties
liable for any payment under any of the Collateral to make payment of any and
all monies due and to become due thereunder directly to Secured Party or as
Secured Party shall direct; (ii) to receive payment of and receipt for any and
all monies, claims, and other amounts due and to become due at any time in
respect of or arising out of any Collateral; (iii) to sign and endorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, proxies, stock powers,
verifications, and notices in connection with accounts and other documents
relating to the Collateral; (iv) to commence and prosecute any suit, action, or
proceeding at law or in equity in any court of competent jurisdiction to
collect the Collateral or any part thereof and to enforce any other right in
respect of any Collateral; (v) to defend any suit, action, or proceeding
brought against Debtor with respect to any Collateral; (vi) to settle,
compromise, or adjust any suit, action, or proceeding described above and, in
connection therewith, to give such discharges or releases as Secured Party may
deem appropriate; (vii) to exchange any of the Collateral for other property
upon any merger, consolidation, reorganization, recapitalization, or other
readjustment of the issuer thereof and, in connection therewith, deposit any of
the Collateral with any committee, depositary, transfer agent, registrar, or
other designated agency upon such terms as Secured Party may determine; (viii)
to add or release any guarantor, indorser, surety, or other party to any of the
Collateral or the Obligations; (ix) to renew, extend, or otherwise change the
terms and conditions of any of the Collateral or Obligations; (x) to insure,
and to make, settle, compromise, or adjust claims under any insurance policy
covering, any of the Collateral; and (xi) to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though Secured Party were the absolute owner thereof for all
purposes, and to do, at Secured Party's option and Debtor's expense, at any
time, or from time to time, all acts and things which Secured Party deems
necessary to protect, preserve, or realize upon the Collateral and Secured
Party's security interest therein.
This power of attorney is a power coupled with an interest and shall
be irrevocable. Secured Party shall be under no duty to exercise or withhold
the exercise of any of the rights, powers, privileges, and options expressly or
implicitly granted to Secured Party in this Agreement, and shall not be liable
for any failure to do so or any delay in doing so. Secured Party shall not be
liable for any act or omission or for any error of judgment or any mistake of
fact or law in its individual capacity or in its capacity as attorney-in-fact
except acts or omissions resulting from its willful misconduct. This power of
attorney is conferred on Secured Party solely to protect, preserve, and realize
upon its security interest in the Collateral. Secured Party shall not be
responsible for any decline in the value of the Collateral and shall not be
required to take any steps to preserve rights against prior parties or to
protect, preserve, or maintain any security interest or lien given to secure
the Collateral.
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Section 5.2 Performance by Secured Party. If Debtor fails to perform
or comply with any of its agreements contained herein, Secured Party itself
may, at its sole discretion, cause or attempt to cause performance or
compliance with such agreement and the expenses of Secured Party, together with
interest thereon at the Default Rate, shall be payable by Debtor to Secured
Party on demand and shall constitute Secured Obligations. Notwithstanding the
foregoing, it is expressly agreed that Secured Party shall not have any
liability or responsibility for the performance of any obligation of Debtor
under this Agreement.
Section 5.3 Assignment by Secured Party. Subject to the provisions
of Section 12.6 of the Credit Agreement, Secured Party and the Lenders may from
time to time assign the Obligations and any portion thereof and/or the
Collateral and any portion thereof, and the assignee shall be entitled to all
of the rights and remedies of Secured Party and the Lenders under this
Agreement in relation thereto.
ARTICLE 6
Default
Section 6.1 Rights and Remedies. Upon the occurrence of an Event of
Default, Secured Party shall have the following rights and remedies and may do
any one or more of the following:
a. In addition to all other rights and remedies granted
to Secured Party in this Agreement and under the Loan Documents, Secured Party
shall have all of the rights and remedies of a secured party under the Uniform
Commercial Code as adopted by the State of Texas. Without limiting the
generality of the foregoing, Secured Party may (A) without demand or notice to
Debtor, collect, receive, or take possession of the Collateral or any part
thereof and for that purpose Secured Party may enter upon any premises on which
the Collateral is located and remove the Collateral therefrom or render it
inoperable, and/or (B) sell, lease, or otherwise dispose of the Collateral, or
any part thereof, in one or more parcels at public or private sale or sales, at
Secured Party's offices or elsewhere, for cash, on credit, or for future
delivery. Upon the request of Secured Party, Debtor shall assemble the
Collateral and make it available to Secured Party at any place designated by
Secured Party that is reasonably convenient to Debtor and Secured Party.
Debtor agrees that Secured Party shall not be obligated to give more than ten
(10) days written notice of the time and place of any public sale or of the
time after which any private sale may take place and that such notice shall
constitute reasonable notice of such matters. Debtor shall be liable for all
expenses of retaking, holding, preparing for sale, or the like, and all
attorneys' fees, legal expenses, and all other costs and expenses incurred by
Secured Party in connection with the collection of the Secured Obligations and
the enforcement of Secured Party's rights under this Agreement. Secured Party
may apply the Collateral against the Secured Obligations in such order and
manner as Secured Party may elect in its sole discretion. Debtor shall remain
liable for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay the Secured Obligations in full. Debtor
waives all rights of marshalling in respect of the Collateral.
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<PAGE> 98
b. Secured Party may cause any or all of the Collateral
held by it to be transferred into the name of Secured Party or the name or
names of Secured Party's nominee or nominees.
c. Secured Party may exercise or cause to be exercised
all voting rights and corporate powers in respect of the Collateral.
ARTICLE 7
Miscellaneous
Section 7.1 No Waiver; Cumulative Remedies. No failure on the part
of Secured Party or any Lender to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power, or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power, or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right, power, or
privilege. The rights and remedies provided for in this Agreement are
cumulative and not exclusive of any rights and remedies provided by law.
Section 7.2 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Debtor, Secured Party and the Lenders and
their respective successors and assigns, except that Debtor may not assign any
of its rights or obligations under this Agreement without the prior written
consent of Secured Party. Any assignment in violation of this Section 7.2
shall be void.
Section 7.3 Amendment and Restatement; Entire Agreement; Amendment.
This Agreement amends and restates in its entirety the Original Security
Agreement (but does not extinguish the security interests created thereby) and
embodies the final, entire agreement among the parties hereto and supersedes
any and all prior commitments, agreements, representations, and understandings,
whether written or oral, relating to the subject matter hereof (including,
without limitation, the Original Security Agreement) and may not be
contradicted or varied by evidence of prior, contemporaneous or subsequent oral
agreements or discussions of the parties hereto. There are no oral agreements
among the parties hereto. Debtor hereby acknowledges and agrees that the
security interests in the Collateral created under the Original Security
Agreement are not extinguished but are extended and continued by this Agreement
without change to the priority thereof. The provisions of this Agreement may
be amended or waived only by an instrument in writing signed by the parties
hereto.
Section 7.4 Notices. All notices and other communications provided
for in this Agreement shall be given or made in writing and telecopied, mailed
by certified mail return receipt requested, or delivered to the intended
recipient at the "Address for Notices" specified below its name on the
signature pages hereof; or, as to any party at such other address as shall be
designated by such party in a notice to the other party given accordance with
this Section. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have
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been duly given when transmitted by telecopy, subject to telephone confirmation
of receipt, or when personally delivered or, in the case of a mailed notice,
when duly deposited in the mails, in each case given or addressed as aforesaid.
Section 7.5 Applicable Law; Venue; Service of Process. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas and the applicable laws of the United States of America. This
Agreement has been entered into in Dallas County, Texas, and it shall be
performable for all purposes in Dallas County, Texas. Any action or proceeding
against Debtor under or in connection with this Agreement or any other
instrument or agreement securing, evidencing, or relating to the Secured
Obligations or any part thereof may be brought in any state or federal court in
Dallas County, Texas. Debtor hereby irrevocably (a) submits to the
nonexclusive jurisdiction of such courts, and (b) waives any objection it may
now or hereafter have as to the venue of any such action or proceeding brought
in such court or that such court is an inconvenient forum. Debtor agrees that
service of process upon it may be made by certified or registered mail, return
receipt requested, at its address specified or determined in accordance with
the provisions of Section 7.4 of this Agreement. Nothing in this Agreement or
any other instrument or agreement securing, evidencing, or relating to the
Secured Obligations or any part thereof shall affect the right of Secured Party
or any Lender to serve process in any other manner permitted by law or shall
limit the right of Secured Party or any Lender to bring any action or
proceeding against Debtor or with respect to any of the Collateral in any state
or federal court in any other jurisdiction. Any action or proceeding by Debtor
against Secured Party or any Lender shall be brought only in a court located in
Dallas County, Texas.
Section 7.6 Headings. The headings, captions and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 7.7 Survival of Representations and Warranties. All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by Secured Party or any Lender shall affect the
representations and warranties or the right of Secured Party and the Lenders to
rely upon them.
Section 7.8 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
Section 7.9 Waiver of Bond. In the event Secured Party seeks to take
possession of any or all of the Collateral by judicial process, Debtor hereby
irrevocably waives any bonds and any surety or security relating thereto that
may be required by applicable law as an incident to such possession, and waives
any demand for possession prior to the commencement of any such suit or action.
Section 7.10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such
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<PAGE> 100
prohibition or unenforceability without invalidating the remaining provisions
of this Agreement, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
Section 7.11 Construction. Debtor and Secured Party acknowledge that
each of them has had the benefit of legal counsel of its own choice and has
been afforded an opportunity to review this Agreement with its legal counsel
and that this Agreement shall be construed as if jointly drafted by Debtor and
Secured Party.
Section 7.12 Obligations Absolute. Until the Obligations are paid in
full and the obligation of Secured Party and the Lenders under the Credit
Agreement have been terminated, the obligations of Debtor under this Agreement
shall be absolute and unconditional and shall not be released, discharged,
reduced, or in any way impaired by any circumstance whatsoever, including,
without limitation, any amendment, modification, extension, or renewal of any
Loan Documents (other than this Agreement), the Obligations, or any release or
subordination of collateral, or any waiver, consent, extension, indulgence,
compromise, settlement, or other action or inaction in respect of this
Agreement, any other Loan Documents, or the Obligations, or any exercise or
failure to exercise any right, remedy, power, or privilege in respect of the
Obligations.
Section 7.13 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, DEBTOR HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO
A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF SECURED PARTY AND THE
LENDERS IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
DEBTOR:
DUROCRAFT INTERNATIONAL, INC.
By: __________________________________
Name: James R. Ridings
Title: Chief Executive Officer
AMENDED AND RESTATED SECURITY AGREEMENT - Page 12
<PAGE> 101
Address for Notices:
2700 112th Street
Grand Prairie, Texas 75050
Fax No.: (214) 647-4872
Telephone No.: (214) 647-8099
Attention: Kenneth M. Cancienne
Chief Financial Officer
SECURED PARTY:
NATIONSBANK OF TEXAS, N.A., as Agent
By: __________________________________
Name: Andrew N. McLean
Title: Vice President
Address for Notices:
901 Main Street, 7th Floor
P. O. Box 831000
Dallas, Texas 75283-1000
Fax No.: 214-508-0388
Telephone No.: 214-508-0324
Attention: Andrew N. McLean
Vice President
AMENDED AND RESTATED SECURITY AGREEMENT - Page 13
<PAGE> 102
EXHIBIT "G"
Covenant Compliance Certificate
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
<PAGE> 103
COVENANT COMPLIANCE CERTIFICATE
NationsBank of Texas, N.A.
Attention: Andrew N. McNeal
Vice President
901 Main Street, 7th Floor
Dallas, Texas 75283-1000
Gentlemen:
This Covenant Compliance Certificate covers the period from
________________, 19__ to ________________, 19__ and is delivered pursuant to
that certain Second Amended and Restated Credit Agreement (the "Credit
Agreement") dated as of November 14, 1995, among Craftmade International, Inc.,
NationsBank of Texas, N.A., as Agent, and the Lenders which are parties
thereto. All capitalized terms used herein, unless otherwise defined herein,
shall have the same meanings as set forth in the Credit Agreement.
The undersigned, an authorized officer of Borrower, does hereby
certify to the Agent and the Lenders that:
i. No Default. To the best of the undersigned's
knowledge, no Event of Default and no Potential
Default has occurred and is continuing (or if an
Event of Default or Potential Default has occurred
and is continuing, Exhibit "A" attached hereto
outlines the nature thereof and the action which is
proposed to be taken by Borrower with respect
thereto).
ii. Consolidated Tangible Net Worth
(must not be less than $8,000,000) . . . . $________
iii. Fixed Charge Coverage Ratio
(i) Pretax Income . . . . . . . . $________
(ii) Interest expense . . . . . . $________
(iii) Operating Lease expense . . . $________
COVENANT COMPLIANCE CERTIFICATE - Page 1
<PAGE> 104
(d) Fixed Charge Coverage Ratio [(sum of (a)
+ (b) + (c) divided by sum of (b) + (c)]
(must not be less than 1.75) . . . . . _________
iv. Leverage Ratio
(i) Debt . . . . . . . . . . . . $________
(ii) Consolidated Tangible Net
Worth . . . . . . . . . . . . . . . . $________
(iii) Leverage Ratio ((a) divided by (b))
(must not be greater than 2.5) . . . . _________
v. Capital Expenditures
(Beginning of current fiscal year through date
hereof) (must not exceed $400,000 in any fiscal year
or $9,600,000 in the fiscal year beginning July 1,
1995) . . . . . . . . . . . . . . . . . . . $________
Attached hereto are Schedules setting forth the calculations
supporting the computations set forth in items 2, 3, 4 and 5 of this
certificate. All information contained herein and on the attached Schedules is
true and correct.
IN WITNESS WHEREOF, the undersigned has executed this certificate
effective this _____ day of ________________, 19__.
CRAFTMADE INTERNATIONAL, INC.
By: __________________________________
Name: James R. Ridings
Title: Chief Executive Officer
COVENANT COMPLIANCE CERTIFICATE - Page 2
<PAGE> 105
EXHIBIT "H"
C/D/R Guaranty
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
<PAGE> 106
AMENDED AND RESTATED GUARANTY AGREEMENT
(C/D/R)
This AMENDED AND RESTATED GUARANTY AGREEMENT (the "Guaranty
Agreement") is executed effective as of November 14, 1995, by C/D/R
INCORPORATED, a Delaware corporation (the "Guarantor") to and in favor of the
AGENT and the LENDERS, as such terms are defined below.
RECITALS:
A. NationsBank of Texas, N.A. ("NationsBank") has previously made
a loan to Craftmade International, Inc. (the "Borrower") in the maximum
principal amount of $6,000,000.00, pursuant to a certain Credit Agreement (the
"Original Credit Agreement") between Borrower and NationsBank, dated January
11, 1993.
B. The Original Credit Agreement was amended and restated as
provided in that certain First Amended and Restated Credit Agreement dated as
of January 11, 1993, by and between Borrower and NationsBank (the "First
Restated Agreement").
C. In conjunction with the execution of the First Restated
Agreement, Guarantor executed that certain Guaranty Agreement dated as of
January 11, 1993, to and in favor of NationsBank (the "Original Guaranty").
D. The First Restated Agreement was amended as provided in that
certain First Amendment to First Amended and Restated Credit Agreement dated as
of December 13, 1993, by and between the Borrower and NationsBank (the "First
Amendment").
E. The First Restated Agreement was further amended as provided
in that certain Second Amendment to First Amended and Restated Credit Agreement
dated as of March 30, 1994, by and between the Borrower and NationsBank (the
"Second Amendment").
F. The First Restated Agreement was further amended as provided
in that certain Third Amendment to First Amended and Restated Credit Agreement
dated as of June 30, 1994, by and between the Borrower and NationsBank (the
"Third Amendment").
G. The First Restated Agreement was further amended as provided
in that certain Fourth Amendment to First Amended and Restated Credit Agreement
dated as of November 15, 1994, by and between the Borrower and NationsBank (the
"Fourth Amendment"; the First Restated Agreement, as amended by the First
Amendment, the Second Amendment, the Third Amendment and the Fourth Amendment
is referred to hereinafter as the "Prior Credit Agreement").
H. Concurrently herewith, Borrower, the lenders which are parties
thereto (the "Lenders") and NationsBank, as agent for the Lenders (the "Agent")
are entering into that certain Second Amended and Restated Credit Agreement
(the "Credit Agreement"), amending and
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restating the Prior Credit Agreement in its entirety as set out therein,
including, without limitation, to provide for a loan in the maximum principal
amount of $12,000,000.
I. The Agent and the Lenders require the Guarantor to deliver
this Guaranty Agreement as an amendment and restatement of the Original
Guaranty as a condition to entering into the Credit Agreement.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, Guarantor hereby irrevocably and
unconditionally guarantees to the Agent and the Lenders the full and prompt
payment and performance of the Guaranteed Indebtedness (as hereinafter
defined), this Guaranty Agreement being upon the following terms:
1. The term "Guaranteed Indebtedness" as used herein means all of
the "Obligations" as defined in the Credit Agreement. The term "Guaranteed
Indebtedness" shall include any and all post-petition interest and expenses
(including attorneys' fees) whether or not allowed under any bankruptcy,
insolvency, or other similar law. All initially capitalized terms not
specifically otherwise defined herein shall have the meanings prescribed in the
Credit Agreement.
2. This instrument shall be an absolute, continuing, irrevocable,
and unconditional guaranty of payment and performance, and not a guaranty of
collection, and Guarantor shall remain liable on its obligations hereunder
until the payment and performance in full of the Guaranteed Indebtedness. No
setoff, counterclaim, recoupment, reduction, or diminution of any obligation,
or any defense of any kind or nature which Borrower may have against the Agent
or any Lender or any other party, or which Guarantor may have against Borrower,
the Agent or any Lender, or any other party, shall be available to, or shall be
asserted by, Guarantor against the Agent or any Lender or any subsequent holder
of the Guaranteed Indebtedness or any part thereof or against payment of the
Guaranteed Indebtedness or any part thereof.
3. The obligations of Guarantor hereunder shall be limited to an
aggregate amount equal to the largest amount that would not render Guarantor's
obligations hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code, as amended (or any successor statute), or to being set
aside, avoided, or annulled under any applicable state or federal law relating
to fraudulent or preferential transfers or obligations.
4. If Guarantor becomes liable for any indebtedness owing by
Borrower to the Agent or any Lender by endorsement or otherwise, other than
under this Guaranty Agreement, such liability shall not be in any manner
impaired or affected hereby, and the rights of the Agent and the Lenders
hereunder shall be cumulative of any and all other rights that the Agent and
the Lenders may ever have against Guarantor. The exercise by the Agent or any
Lender of any right or remedy hereunder or under any other instrument, or at
law or in equity, shall not preclude the concurrent or subsequent exercise of
any other right or remedy.
5. In the event of default by Borrower in payment or performance
of the Guaranteed Indebtedness, or any part thereof, when such Guaranteed
Indebtedness becomes due, whether by its terms, by acceleration, or otherwise,
Guarantor shall promptly pay the amount due thereon to
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the Agent, for the ratable benefit of the Lenders, without notice or demand in
lawful currency of the United States of America, and it shall not be necessary
for the Agent or any Lender, in order to enforce such payment by Guarantor,
first to institute suit or exhaust its remedies against Borrower or others
liable on such Guaranteed Indebtedness, or to enforce any rights against any
collateral which shall ever have been given to secure such Guaranteed
Indebtedness.
6. Notwithstanding anything to the contrary contained in this
Guaranty Agreement, Guarantor hereby irrevocably waives any and all rights it
may now or hereafter have under any agreement or at law or in equity to assert
any claim against or seek subrogation, contribution, indemnification or any
other form of reimbursement from Borrower or any other party liable for payment
of any or all of the Guaranteed Indebtedness for any payment made by Guarantor
under or in connection with this Guaranty Agreement or otherwise until the
Guaranteed Indebtedness shall have been paid in full in cash.
7. This Guaranty Agreement shall continue to be effective, or be
automatically reinstated, as the case may be, if at any time payment, in whole
or in part, of any of the Guaranteed Indebtedness is rescinded or must
otherwise be restored or returned by the Agent or any Lender as a preference,
fraudulent conveyance or otherwise under any bankruptcy, insolvency or similar
law, all as though such payment had not been made; provided that in the event
any Guaranteed Indebtedness is rescinded or must be restored or returned, all
costs and expenses (including without limitation any legal fees and
disbursements) incurred by the Agent or any Lender in defending or enforcing
such reinstatement shall be deemed to be included as Guaranteed Indebtedness
hereunder.
8. If acceleration of the time for payment of any amount payable
by Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject
to acceleration under the terms of the Guaranteed Indebtedness shall
nonetheless be payable by Guarantor hereunder forthwith on demand by Agent.
9. Guarantor hereby agrees that its obligations under this
Guaranty Agreement shall not be released, discharged, diminished, impaired,
reduced, or affected for any reason or by the occurrence of any event,
including, without limitation, one or more of the following events, whether or
not with notice to or the consent of Guarantor: (a) the taking or accepting of
collateral as security for any or all of the Guaranteed Indebtedness or the
release, surrender, exchange, or subordination of any collateral now or
hereafter securing any or all of the Guaranteed Indebtedness; (b) any partial
release of the liability of Guarantor hereunder, or the full or partial release
of any other guarantor from liability for any or all of the Guaranteed
Indebtedness; (c) any disability of Borrower, or the dissolution, insolvency,
or bankruptcy of Borrower, Guarantor, or any other party at any time liable for
the payment of any or all of the Guaranteed Indebtedness; (d) any renewal,
extension, modification, waiver, amendment, or rearrangement of any or all of
the Guaranteed Indebtedness or any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Indebtedness; (e) any adjustment, indulgence, forbearance, waiver, or
compromise that may be granted or given by the Agent or the Lenders to
Borrower, Guarantor, or any other party ever liable for any or all of the
Guaranteed Indebtedness; (f) any neglect, delay, omission, failure, or refusal
of the Agent or the Lenders to
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take or prosecute any action for the collection of any of the Guaranteed
Indebtedness or to foreclose or take or prosecute any action in connection with
any instrument, document, or agreement evidencing, securing, or otherwise
relating to any or all of the Guaranteed Indebtedness; (g) the unenforceability
or invalidity of any or all of the Guaranteed Indebtedness or of any
instrument, document, or agreement evidencing, securing, or otherwise relating
to any or all of the Guaranteed Indebtedness; (h) any payment by Borrower or
any other party to the Agent or any Lender is held to constitute a preference
under applicable bankruptcy or insolvency law or for any other reason the Agent
or any Lender is required to refund any payment or pay the amount thereof to
someone else; (i) the settlement or compromise of any of the Guaranteed
Indebtedness; (j) the non-perfection of any security interest or lien securing
any or all of the Guaranteed Indebtedness; (k) any impairment or release of any
collateral securing any or all of the Guaranteed Indebtedness; (l) the failure
of the Agent or any Lender to sell any collateral securing any or all of the
Guaranteed Indebtedness in a commercially reasonable manner or as otherwise
required by law; (m) any change in the corporate existence, structure, or
ownership of Borrower; or (n) any other circumstance which might otherwise
constitute a defense available to, or discharge of, Borrower or Guarantor.
10. Guarantor represents and warrants to the Agent and the Lenders
as follows:
(a) Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation, and Guarantor is qualified to do business in all
jurisdictions in which the nature of the business conducted by
Guarantor makes such qualification necessary and where failure to so
qualify would have a material adverse effect on the business,
financial condition, or operations of Guarantor.
(b) Guarantor has the corporate power and authority and
legal right to execute, deliver, and perform its obligations under
this Guaranty Agreement, and this Guaranty Agreement constitutes the
legal, valid, and binding obligation of Guarantor, enforceable against
Guarantor in accordance with its respective terms, except as limited
by bankruptcy, insolvency, or other laws of general application
relating to the enforcement of creditor's rights.
(c) The execution, delivery, and performance by Guarantor
of this Guaranty Agreement have been duly authorized by all requisite
action on the part of Guarantor and do not and will not violate or
conflict with the articles of incorporation or bylaws of Guarantor or
any law, rule, or regulation or any order, writ, injunction or decree
of any court, governmental authority or agency, or arbitrator and do
not and will not conflict with, result in a breach of, constitute a
default under, or result in the imposition of any lien upon any assets
of Guarantor pursuant to the provisions of any indenture, mortgage,
deed of trust, security agreement, franchise, permit, license, or
other instrument or agreement by which Guarantor or its properties is
bound.
(d) No authorization, approval, or consent of, and no
filing or registration with, any court, governmental authority, or
third party is necessary for the execution, delivery
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<PAGE> 110
or performance by Guarantor of this Guaranty Agreement or the validity
or enforceability hereof.
(e) The value of the consideration received and to be
received by Guarantor as a result of Borrower, the Agent and the
Lenders entering into the Credit Agreement and Guarantor executing and
delivering this Guaranty Agreement is reasonably worth at least as
much as the liability and obligation of Guarantor hereunder, and such
liability and obligation and the Credit Agreement have benefitted and
may reasonably be expected to benefit Guarantor directly or
indirectly.
(f) Guarantor has, independently and without reliance
upon the Agent or any Lender and based upon such documents and
information as Guarantor has deemed appropriate, made its own analysis
and decision to enter into this Guaranty Agreement.
11. Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or any Lender has any
Commitment under the Credit Agreement:
(a) Guarantor will furnish promptly to the Agent written
notice of the occurrence of any default under this Guaranty Agreement
or any Event of Default or Potential Default under the Credit
Agreement of which Guarantor has knowledge.
(b) Guarantor will promptly furnish to the Agent any and
all such information, writings, and further assurances relating to
Guarantor or this Guaranty Agreement as the Agent may from time to
time request.
(c) Guarantor will from time to time obtain any and all
authorizations, licenses, consents, or approvals as may now or
hereafter be necessary or desirable under applicable laws or
regulations or otherwise in connection with the execution, delivery,
and performance of this Guaranty Agreement and will promptly furnish
copies thereof to the Agent.
(d) Guarantor will at all times own directly or
indirectly and free and clear of all liens or encumbrances whatsoever
at least the same percentage of voting shares of Borrower, if any, as
Guarantor owns directly or indirectly on the date hereof.
12. The Agent and each Lender shall have the right to set off and
apply against this Guaranty Agreement or the Guaranteed Indebtedness or both,
at any time and without notice to Guarantor, any and all deposits (general or
special, time or demand, provisional or final) or other sums at any time
credited by or owing from the Agent or any Lender to Guarantor, whether or not
the Guaranteed Indebtedness is then due and irrespective of whether or not any
Lender shall have made any demand under this Guaranty Agreement. As security
for this Guaranty Agreement and the Guaranteed Indebtedness, Guarantor hereby
grants to the Agent, for the ratable benefit of the Lenders, a security
interest in all money, instruments, certificates of deposit, and other property
of Guarantor now or hereafter held by the Agent or any Lender, including
without limitation, property held in safekeeping. In addition to the Agent's
and the Lenders' right of
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setoff and as further security for this Guaranty Agreement and the Guaranteed
Indebtedness, Guarantor hereby grants to the Agent, for the ratable benefit of
the Lenders, a security interest in all deposits (general or special, time or
demand, provisional or final) and all other accounts of Guarantor now or
hereafter on deposit with or held by the Agent or any Lender and all other sums
at any time credited by or owing from the Agent or any Lender to Guarantor.
The rights and remedies of the Agent and the Lenders hereunder are in addition
to other rights and remedies (including without limitation other rights of
setoff) which the Agent and the Lenders may have.
13. For purposes of this Guaranty Agreement, the term
"Subordinated Indebtedness" means all indebtedness, liabilities, and
obligations of Borrower to Guarantor, whether such indebtedness, liabilities,
and obligations now exist or are hereafter incurred or arise, or whether the
obligations of Borrower thereon are direct, indirect, contingent, primary,
secondary, several, joint and several, or otherwise, and irrespective of
whether such indebtedness, liabilities, or obligations are evidenced by a note,
contract, open account, or otherwise, and irrespective of the person or persons
in whose favor such indebtedness, obligations, or liabilities at their
inception have been, or may hereafter be created, or the manner in which they
have been or may hereafter be acquired by Guarantor. With respect to the
Subordinated Indebtedness, Guarantor hereby agrees as follows:
(a) The Subordinated Indebtedness shall be subordinate
and junior in right of payment to the prior payment in full of all
Guaranteed Indebtedness, and Guarantor hereby assigns the Subordinated
Indebtedness to the Agent, for the ratable benefit of the Lenders, as
security for the Guaranteed Indebtedness. If any sums shall be paid
to Guarantor by Borrower or any other person or entity on account of
the Subordinated Indebtedness, such sums shall be held in trust by
Guarantor for the benefit of the Agent and the Lenders and shall
forthwith be paid to the Agent without affecting the liability of
Guarantor under this Guaranty Agreement and may be applied by the
Agent against the Guaranteed Indebtedness in such order and manner as
the Agent may determine in its sole discretion. Upon the request of
the Agent, Guarantor shall execute, deliver, and endorse to the Agent
such documents and instruments as the Agent may request to perfect,
preserve, and enforce its rights and the rights of the Lenders
hereunder.
(b) Any and all liens, security interests, judgment
liens, charges, or other encumbrances upon Borrower's assets securing
payment of any Subordinated Indebtedness shall be and remain inferior
and subordinate to any and all liens, security interests, judgment
liens, charges, or other encumbrances upon Borrower's assets securing
payment of the Guaranteed Indebtedness or any part thereof, regardless
of whether such encumbrances in favor of Guarantor, the Agent or any
Lender presently exist or are hereafter created or attached. Without
the prior written consent of the Agent, Guarantor shall not (i) file
suit against Borrower or exercise or enforce any other creditor's
right it may have against Borrower, or (ii) foreclose, repossess,
sequester, or otherwise take steps or institute any action or
proceedings (judicial or otherwise, including without limitation the
commencement of, or joinder in, any liquidation, bankruptcy,
rearrangement, debtor's relief or insolvency proceeding) to enforce
any liens, security interests, collateral rights, judgments or other
encumbrances held by Guarantor on assets of Borrower.
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(c) In the event of any receivership, bankruptcy,
reorganization, rearrangement, debtor's relief, or other insolvency
proceeding involving Borrower as debtor, the Agent and the Lenders
shall have the right to prove and vote any claim under the
Subordinated Indebtedness and to receive directly from the receiver,
trustee or other court custodian all dividends, distributions, and
payments made in respect of the Subordinated Indebtedness. The Agent
may apply any such dividends, distributions, and payments against the
Guaranteed Indebtedness in such order and manner as the Agent may
determine in its sole discretion.
(d) All promissory notes, accounts receivable, ledgers,
records, or any other evidence of Subordinated Indebtedness shall
contain a specific written notice thereon that the indebtedness
evidenced thereby is subordinated under the terms of this Guaranty
Agreement.
14. No amendment or waiver of any provision of this Guaranty
Agreement or consent to any departure by the Guarantor therefrom shall in any
event be effective unless the same shall be in writing and signed by the Agent.
No failure on the part of the Agent to exercise, and no delay in exercising,
any right, power, or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power, or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power, or privilege. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
15. Any acknowledgment or new promise, whether by payment of
principal or interest or otherwise and whether by Borrower or any others
(including Guarantor) with respect to any of the Guaranteed Indebtedness shall,
if the statute of limitations in favor of Guarantor against the Agent and the
Lenders shall have commenced to run, toll the running of such statute of
limitations and, if the period of such statute of limitations shall have
expired, prevent the operation of such statute of limitations.
16. This Guaranty Agreement is for the benefit of the Agent and
the Lenders and their respective successors and assigns, and in the event of an
assignment of the Guaranteed Indebtedness, or any part thereof, the rights and
benefits hereunder, to the extent applicable to the indebtedness so assigned,
may be transferred with such indebtedness. This Guaranty Agreement shall be
binding not only on Guarantor but also on Guarantor's successors and assigns.
17. Guarantor recognizes that the Agent and the Lenders are
relying upon this Guaranty Agreement and the undertakings of Guarantor
hereunder in making and continuing to make extensions of credit to Borrower
under the Credit Agreement and further recognizes that the execution and
delivery of this Guaranty Agreement is a material inducement to the Agent and
the Lenders in entering into the Credit Agreement. Guarantor hereby
acknowledges that there are no conditions to the full effectiveness of this
Guaranty Agreement.
18. This Guaranty Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
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19. Guarantor shall pay on demand all reasonable attorneys' fees
and all other reasonable costs and expenses incurred by the Agent and the
Lenders in connection with the administration, enforcement and collection of
this Guaranty Agreement.
20. Guarantor hereby waives promptness, diligence, notice of any
default under the Guaranteed Indebtedness, demand of payment, notice of
acceptance of this Guaranty Agreement, presentment, notice of protest, notice
of dishonor, notice of the incurring by Borrower of additional indebtedness,
notice of intent to accelerate, notice of acceleration, and all other notices
and demands with respect to the Guaranteed Indebtedness and this Guaranty
Agreement.
21. The Credit Agreement, and all of the terms thereof, are
incorporated herein by reference, the same as if stated verbatim herein, and
Guarantor agrees that the Agent and the Lenders may exercise any and all rights
granted to them under the Credit Agreement and the other Loan Documents (as
defined in the Credit Agreement) without affecting the validity or
enforceability of this Guaranty Agreement.
22. Guarantor hereby represents and warrants to the Agent and the
Lenders that Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition and assets of
Borrower and that Guarantor is not relying upon the Agent or any Lender to
provide (and neither the Agent nor any Lender shall have any duty to provide)
any such information to Guarantor either now or in the future.
23. THIS GUARANTY AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT
OF GUARANTOR, AGENT AND THE LENDERS WITH RESPECT TO GUARANTOR'S GUARANTY OF THE
GUARANTEED INDEBTEDNESS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF. THIS GUARANTY AGREEMENT IS INTENDED BY
GUARANTOR, THE AGENT AND THE LENDERS AS A FINAL AND COMPLETE EXPRESSION OF THE
TERMS OF THE GUARANTY AGREEMENT, AND NO COURSE OF DEALING BETWEEN GUARANTOR ON
THE ONE HAND, AND THE AGENT AND THE LENDERS ON THE OTHER HAND, NO COURSE OF
PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY
NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS
GUARANTY AGREEMENT. THERE ARE NO ORAL AGREEMENTS AMONG GUARANTOR, THE AGENT
AND THE LENDERS.
24. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, GUARANTOR
HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS GUARANTY AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED
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HEREIN OR THE ACTIONS OF THE AGENT AND THE LENDERS IN THE NEGOTIATION,
ADMINISTRATION, OR ENFORCEMENT THEREOF.
25. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
GUARANTOR, ON THE ONE HAND, AND THE AGENT AND THE LENDERS, ON THE OTHER HAND,
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS GUARANTY
AGREEMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM BASED
ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION
IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE
APPLICABLE STATE LAW). THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION
OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC.
(J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY
INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION
AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. GUARANTOR, THE AGENT OR
ANY LENDER MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO
COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS GUARANTY AGREEMENT
APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
(a) Special Rules. THE ARBITRATION SHALL BE CONDUCTED IN
THE CITY OF THE GUARANTOR'S DOMICILE AT TIME OF THIS GUARANTY
AGREEMENT'S EXECUTION AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM
ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED
WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR
SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
(b) Reservation of Rights. NOTHING IN THIS GUARANTY
AGREEMENT SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS
CONTAINED IN THIS GUARANTY AGREEMENT; OR (II) BE A WAIVER BY THE AGENT
OR ANY LENDER OF THE PROTECTION AFFORDED TO IT BY 12 U.S. C. SEC. 91
MR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF
THE AGENT AND THE LENDERS (A) TO EXERCISE SELF HELP REMEDIES SUCH AS
(BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR
PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT
PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A
RECEIVER. THE AGENT AND THE LENDERS MAY EXERCISE SUCH SELF HELP
RIGHTS, FORECLOSE UPON SUCH
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PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE,
DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT
PURSUANT TO THIS GUARANTY AGREEMENT. NEITHER THIS EXERCISE OF SELF
HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR
FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A
WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH
ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM
OCCASIONING RESORT TO SUCH REMEDIES.
26. This Guaranty Agreement is executed in amendment and
restatement of, but not in discharge or satisfaction of the obligations of
Guarantor under, the Original Guaranty.
EXECUTED as of the 14th day of November, 1995.
GUARANTOR:
C/D/R INCORPORATED,
a Delaware corporation
By: __________________________________
Name: Terry L. Culbertson
Title: President
Address:
2700 112th Street
Grand Prairie, Texas 75050
Fax No.: 214-647-4872
Telephone No.: 214-647-8099
Attention: Terry L. Culbertson
President
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EXHIBIT "I"
The Pledge Agreement
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Second Amended and Restated Credit Agreement
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AMENDED AND RESTATED PLEDGE AGREEMENT
THIS AMENDED AND RESTATED PLEDGE AGREEMENT (this "Agreement") is dated
as of November 14, 1995, and is by and between CRAFTMADE INTERNATIONAL, INC.
("Borrower"), a Delaware corporation, and DUROCRAFT INTERNATIONAL, INC.
("Durocraft"), a Texas corporation, both of whose address is 2700 112th Street,
Grand Prairie, Texas 75050, and NATIONSBANK OF TEXAS, N.A., in its capacity as
Agent for the Lenders (as defined below) ("Secured Party"), whose address is
901 Main Street, 7th Floor, P.O. Box 831000, Dallas, Texas 75283-1000.
RECITALS:
A. NationsBank of Texas, N.A. ("NationsBank") has previously made
a loan to Borrower in the maximum principal amount of $6,000,000.00, pursuant
to a certain Credit Agreement (the "Original Credit Agreement") between
Borrower and NationsBank, dated January 11, 1993.
B. The Original Credit Agreement was amended and restated as
provided in that certain First Amended and Restated Credit Agreement dated as
of January 11, 1993, by and between Borrower and NationsBank (the "First
Restated Agreement").
C. In conjunction with the execution of the First Restated
Agreement, the Borrower and Durocraft executed and delivered to NationsBank
that certain Pledge Agreement dated as of January 13, 1993 (the "Original
Pledge Agreement"), as security for the obligations of the Borrower under the
First Restated Agreement.
D. The First Restated Agreement was amended as provided in that
certain First Amendment to First Amended and Restated Credit Agreement dated as
of December 13, 1993, by and between the Borrower and NationsBank (the "First
Amendment").
E. The First Restated Agreement was further amended as provided
in that certain Second Amendment to First Amended and Restated Credit Agreement
dated as of March 30, 1994, by and between the Borrower and NationsBank (the
"Second Amendment").
F. The First Restated Agreement was further amended as provided
in that certain Third Amendment to First Amended and Restated Credit Agreement
dated as of June 30, 1994, by and between the Borrower and NationsBank (the
"Third Amendment").
G. The First Restated Agreement was further amended as provided
in that certain Fourth Amendment to First Amended and Restated Credit Agreement
dated as of November 15, 1994, by and between the Borrower and NationsBank (the
"Fourth Amendment"; the First Restated Agreement, as amended by the First
Amendment, the Second Amendment, the Third
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Amendment and the Fourth Amendment is referred to hereinafter as the "Prior
Credit Agreement").
H. Concurrently herewith, the Borrower, the Secured Party and the
lenders which are parties thereto (the "Lenders") are amending and restating
the Prior Credit Agreement as set out in that certain Second Amended and
Restated Credit Agreement dated as of November 14, 1995 (the "Credit
Agreement"), including, without limitation, to provide for a loan in the
maximum principal amount of $12,000,000.
I. The Secured Party and the Lenders have required the Borrower
and Durocraft to execute and deliver this Agreement in amendment and
restatement of the Original Pledge Agreement as a condition to their execution
of the Credit Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
AGREEMENTS:
Except as otherwise specified, "Pledgor" as used herein shall mean
Borrower and Durocraft collectively, individually, jointly and severally. All
initially capitalized terms not specifically otherwise defined herein shall
have the meanings prescribed in the Credit Agreement.
ARTICLE 1
Security Interest and Pledge
Section 1.1 Security Interest and Pledge. As collateral security for
the prompt payment in full when due of the Obligations (whether at stated
maturity, by acceleration, or otherwise) and all present and future obligations
of Pledgor under this Agreement, Pledgor hereby pledges and grants to Secured
Party, for the ratable benefit of the Lenders, a first priority security
interest in the following property (such property being hereinafter sometimes
called the "Collateral"):
a. All of Pledgor's shares of capital stock in C/D/R/
Incorporated (the "Corporation"), a Delaware corporation, now owned or
hereafter acquired, including, without limitation, the shares of common capital
stock of evidenced by certificates number 1 and 2; and
b. All products, proceeds, revenues, distributions,
dividends, stock dividends, securities, and other property, rights, and
interests that Pledgor receives or is at any time entitled to receive on
account of any such stock.
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ARTICLE 2
Representations and Warranties
Pledgor represents and warrants to Secured Party and the Lenders that:
Section 2.1 Title. Pledgor owns, and with respect to Collateral
acquired after the date hereof, Pledgor will own, legally and beneficially, the
Collateral free and clear of any Lien, security interest, pledge, claim, or
other encumbrance or any right or option on the part of any third Person to
purchase or otherwise acquire the Collateral or any part thereof, except for
the security interest granted hereunder. The Collateral is not subject to any
restriction on transfer or assignment except for compliance with applicable
federal and state securities laws and regulations promulgated thereunder.
Pledgor has the unrestricted right to pledge the Collateral as contemplated
hereby. All of the Collateral has been duly and validly issued and is fully
paid and nonassessable.
Section 2.2 Organization and Authority. Borrower and Durocraft each
is a corporation duly organized, validly existing, and in good standing under
the laws of its state of incorporation. Borrower and Durocraft each has the
corporate power and authority to execute, deliver, and perform its obligations
under this Agreement, and the execution, delivery, and performance of by
Borrower and Durocraft each of its obligations under this Agreement have been
duly authorized by all necessary corporate action and do not and will not
violate or conflict with the articles of incorporation or bylaws of Borrower or
Durocraft or any law, rule, or regulation or any order, writ, injunction, or
decree of any court, governmental authority, or arbitrator and do not and will
not conflict with, result in a breach of, or constitute a default under the
provisions of any indenture, mortgage, deed of trust, security agreement, or
other instrument or agreement binding on either Borrower or Durocraft or any
property of either of them.
Section 2.3 Principal Place of Business. The principal place of
business and chief executive office of Pledgor, and the office where Pledgor
keeps its books and records, is located at the address of Pledgor shown at the
beginning of this Agreement.
Section 2.4 Litigation. There is no litigation, investigation, or
governmental proceeding pending or threatened against either Borrower or
Durocraft or any property of either of them which if adversely determined would
have a material adverse effect on the Collateral or the financial condition,
operations, or business of Borrower or Durocraft.
Section 2.5 Percentage of Stock. The Collateral constitutes one
hundred percent (100%) of the issued and outstanding shares of capital stock in
the Corporation.
Section 2.6 First Priority Perfected Security Interest. This
Agreement, together with the delivery to Secured Party of the Collateral,
creates in favor of Secured Party and the Lenders a
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perfected, first priority security interest in the Collateral. There are no
conditions precedent to the effectiveness of this Agreement that have not been
fully and permanently satisfied.
Section 2.7 Holding Period. The Collateral has been beneficially
owned by Pledgor and the purchase price for the Collateral has been paid in
full since the Corporation came into existence on October 2, 1992. For
purposes of this provision, in calculating the period of Pledgor's fully paid
beneficial ownership, Pledgor is excluding the period, if any, that Pledgor had
a "short position" in, or any put or other option to sell, any shares of the
same class of securities as the Collateral or any securities convertible into
any such shares.
ARTICLE 3
Affirmative and Negative Covenants
Pledgor covenants and agrees with Secured Party and the Lenders that:
Section 3.1 Delivery. Prior to or concurrently with the execution
and delivery of this Agreement, Pledgor shall deliver to Secured Party all
certificate(s) identified in SECTION 1.1(A) hereof, accompanied by undated
stock powers duly executed in blank.
Section 3.2 Encumbrances. Pledgor shall not create, permit, or
suffer to exist, and shall defend the Collateral against, any Lien, security
interest, or other encumbrance on the Collateral except the pledge and security
interest of Secured Party hereunder, and shall defend Pledgor's rights in the
Collateral and Secured Party's and the Lenders' security interest in the
Collateral against the claims of all Persons.
Section 3.3 Sale of Collateral. Pledgor shall not sell, assign, or
otherwise dispose of the Collateral or any part thereof without the prior
written consent of Secured Party.
Section 3.4 Distributions. If Pledgor shall become entitled to
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a distribution in connection
with any reclassification, increase, or reduction of capital or issued in
connection with any reorganization), option or rights, whether as an addition
to, in substitution of, or in exchange for any Collateral or otherwise, Pledgor
agrees to accept the same as Secured Party's agent and to hold the same in
trust for Secured Party and the Lenders, and to deliver the same forthwith to
Secured Party in the exact form received, with any appropriate endorsement of
Pledgor and appropriate undated stock powers duly executed in blank, to be held
by Secured Party as additional Collateral for the Obligations, subject to the
terms hereof. Any sums paid upon or in respect of the Collateral upon the
liquidation or dissolution of the issuer thereof shall be paid over to Secured
Party to be held by it as additional Collateral for the Obligations subject to
the terms hereof; and if any distribution of capital shall be made on or in
respect of the Collateral or any property shall be distributed upon or with
respect to the Collateral pursuant to any recapitalization or reclassification
of the capital of the issuer thereof or pursuant to any reorganization of the
issuer thereof, the property so distributed shall be delivered to Secured Party
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to be held by it as additional Collateral for the Obligations, subject to the
terms hereof. All sums of money and property so paid or distributed in respect
of the Collateral that are received by Pledgor shall, until paid or delivered
to Secured Party, be held by Pledgor in trust as additional security for the
Obligations.
Section 3.5 Further Assurances. At any time and from time to time,
upon the request of Secured Party, and at the sole expense of Pledgor, Pledgor
shall promptly execute and deliver all such further instruments and documents
and take all such further actions as Secured Party may deem necessary or
desirable to preserve or perfect its and the Lenders' security interest in the
Collateral and carry out the provisions and purposes of this Agreement,
including without limitation the execution and filing of such financing
statements as Secured Party may require. A carbon, photographic, or other
reproduction of this Agreement or of any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement and
may be filed as a financing statement. Subject to the right of Pledgor to
receive cash dividends under SECTION 4.03 hereof, in the event any Collateral
is ever received by Pledgor, Pledgor shall promptly transfer and deliver to
Secured Party such Collateral so received by Pledgor (together with any
necessary endorsements in blank or undated stock powers duly executed in
blank), which Collateral shall thereafter be held by Secured Party pursuant to
the terms of this Agreement. Secured Party shall at all times have the right
to exchange any certificates representing Collateral for certificates of
smaller or larger denominations for any purpose consistent with this Agreement.
Section 3.6 Inspection Rights. Pledgor shall permit Secured Party
and its representatives to examine, inspect, and copy Pledgor's books and
records at any reasonable time and as often as Secured Party may desire.
Section 3.7 Taxes. Pledgor agrees to pay or discharge prior to
delinquency all taxes, assessments, levies, and other governmental charges
imposed on it or its property, except Pledgor shall not be required to pay or
discharge any tax, assessment, levy, or other governmental charge if (i) the
amount or validity thereof is being contested by Pledgor in good faith by
appropriate proceedings diligently pursued, (ii) such proceedings do not
involve any risk of sale, forfeiture, or loss of the Collateral or any interest
therein, and (iii) adequate reserves therefor have been established in
conformity with GAAP.
Section 3.8 Notification. Pledgor shall promptly notify Secured
Party of (i) any Lien, security interest, encumbrance, or claim made or
threatened against the Collateral, (ii) any material change in the Collateral,
including, without limitation, any material decrease in the value of the
Collateral and (iii) the occurrence or existence of any Event of Default or the
occurrence or existence of any condition or event that, with the giving of
notice or lapse of time or both, would be an Event of Default.
Section 3.9 Books and Records; Information. Pledgor shall keep
accurate and complete books and records of the Collateral and Pledgor's
business and financial condition in accordance with GAAP. Pledgor shall from
time to time at the request of Secured Party deliver to Secured Party such
information regarding the Collateral, the Corporation, and Pledgor as Secured
Party
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may request. Pledgor shall mark its books and records to reflect the security
interest of Secured Party and the Lenders under this Agreement.
Section 3.10 Compliance with Agreements. Pledgor shall comply in all
material respects with all agreements, contracts, and instruments binding on it
or affecting its properties or business.
Section 3.11 Compliance with Laws. Pledgor shall comply in all
material respects with all applicable laws, rules, regulations, and orders of
any court, governmental authority or arbitrator.
Section 3.12 Additional Securities. Pledgor shall not consent to or
approve the issuance of any additional shares of any class of capital stock of
the issuer of the Collateral, or any securities convertible into, or
exchangeable for, any such shares or any warrants, options, rights, or other
commitments entitling any Person to purchase or otherwise acquire any such
shares.
Section 3.13 Provide Information. Pledgor shall fully cooperate, to
the extent requested by Secured Party, in the completion of any notice, form,
schedule, or other document filed by Secured Party on its own or the Lenders'
behalf or on behalf of Pledgor, including without limitation any required
notice or statement of beneficial ownership or of the acquisition of beneficial
ownership of equity securities constituting part of the Collateral or any
notice of proposed sale of any such securities pursuant to Rule 144 as
promulgated by the SEC under the Securities Act of 1933, as amended. Without
limiting the generality of the foregoing, Pledgor shall furnish to Secured
Party any and all information which Secured Party may reasonably request for
purposes of any such filing regarding Pledgor, the Collateral, and any issuer
of any of the Collateral, and Pledgor shall disclose to Secured Party all
material adverse information known by Pledgor with respect to the operations of
any issuer of any of the Collateral.
Section 3.14 Notification of Changes in Beneficial Ownership.
Pledgor shall promptly notify Secured Party of any sale of securities of the
Corporation by Pledgor or by any other Person and shall furnish promptly to
Secured Party a copy of any Form 144 filed in respect of any such sale. In
addition, if Pledgor or any other Person shall file with the SEC a form or
other document reporting any change in the beneficial ownership of the stock of
the Corporation, Pledgor shall promptly furnish to Secured Party a copy of such
form or document.
Section 3.15 Restriction on Sales after Default. Pledgor shall not
sell or suffer or permit any Person to sell any shares of the same class of
securities as the Collateral at any time after any Event of Default or
Potential Default shall have occurred.
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ARTICLE 4
Rights of Secured Party and Pledgor
Section 4.1 Power of Attorney. Pledgor hereby irrevocably
constitutes and appoints Secured Party and any officer or agent thereof as
Pledgor's true and lawful attorney-in-fact, coupled with an interest, with full
power of substitution and with full, irrevocable power and authority in the
place and stead and in the name of Pledgor or in its own name, from time to
time in Secured Party's discretion, to take any and all action and to execute
any and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, hereby gives Secured Party the power and right on behalf of
Pledgor and in its own name to do any of the following (subject to the rights
of Pledgor under SECTIONS 4.2 and 4.3 hereof), without notice to or the consent
of Pledgor:
a. To demand, sue for, collect, or receive in the name
of Pledgor or in its own name, any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral and, in
connection therewith, endorse checks, notes, drafts, acceptances, money orders,
or any other instruments for the payment of money under the Collateral;
b. To pay or discharge taxes, Liens, security interests,
or other encumbrances levied or placed on or threatened against the Collateral;
c. (i) To direct account debtors and any other parties
liable for any payment under any of the Collateral to make payment of any and
all monies due and to become due thereunder directly to Secured Party or as
Secured Party shall direct; (ii) to receive payment of and receipt for any and
all monies, claims, and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (iii) to sign and endorse any
drafts, assignments, proxies, stock powers, verifications, notices, and other
documents relating to the Collateral; (iv) to commence and prosecute any suit,
actions, or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce any
other right in respect of any Collateral; (v) to defend any suit, action, or
proceeding brought against Pledgor with respect to any Collateral; (vi) to
settle, compromise, or adjust any suit, action, or proceeding described above
and, in connection therewith, to give such discharges or releases as Secured
Party may deem appropriate; (vii) to exchange any of the Collateral for other
property upon any merger, consolidation, reorganization, recapitalization, or
other readjustment of the issuer thereof and, in connection therewith, deposit
any of the Collateral with any committee, depositary, transfer agent,
registrar, or other designated agency upon such terms as Secured Party may
determine; (viii) to add or release any guarantor, indorser, surety, or other
party to any of the Collateral or the obligations; (ix) to renew, extend, or
otherwise change the terms and conditions of any of the Collateral or
Obligations; (x) to insure any of the Collateral; (xi) to sell, transfer,
pledge, make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though Secured Party were the absolute
owner thereof for all purposes, and from time to time to do, at Secured Party's
option and Pledgor's expense, all acts and things which Secured Party
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deems necessary to protect, preserve, or realize upon the Collateral and
Secured Party's and the Lenders' security interest therein; and (xii) to
complete, execute and file with the SEC one or more notices of proposed sale of
securities pursuant to Rule 144.
This power of attorney is a power coupled with an interest and shall
be irrevocable. Secured Party shall be under no duty to exercise or withhold
the exercise of any of the rights, powers, privileges, and options expressly or
implicitly granted to Secured Party in this Agreement and shall not be liable
for any failure to do so or any delay in doing so. Secured Party shall not be
liable for any act or omission or for any error of judgment or any mistake of
fact or law in its individual capacity or in its capacity as attorney-in-fact,
including without limitation any negligent acts or omissions by Secured Party,
except acts or omissions resulting from willful misconduct by Secured Party.
This power of attorney is conferred on Secured Party solely to protect,
preserve, and realize upon its and the Lenders' security interest in the
Collateral.
Section 4.2 Voting Rights. Unless and until an Event of Default
shall have occurred and be continuing, Pledgor shall be entitled to exercise
any and all voting rights pertaining to the Collateral or any part thereof for
any purpose not inconsistent with the terms of this Agreement or the Credit
Agreement. Secured Party shall execute and deliver to the Pledgor all such
proxies and other instruments as Pledgor may reasonably request for the purpose
of enabling Pledgor to exercise the voting rights which it is entitled to
exercise pursuant to this section.
Section 4.3 Dividends. Unless and until an Event of Default shall
have occurred and be continuing, Pledgor shall be entitled to receive and
retain any dividends on the Collateral paid in cash out of earned surplus to
the extent and only to the extent that such dividends are permitted by the
Credit Agreement.
Section 4.4 Performance by Secured Party. If Pledgor fails to
perform or comply with any of its agreements contained herein, Secured Party
itself may, at its sole discretion, cause or attempt to cause performance or
compliance with such agreement and the expenses of Secured Party, together with
interest thereon at the maximum nonusurious per annum rate permitted by
applicable law, shall be payable by Pledgor to Secured Party on demand and
shall constitute Obligations secured by this Agreement. Notwithstanding the
foregoing, it is expressly agreed that neither Secured Party nor any Lender
shall have any liability or responsibility for the performance of any
obligation of Pledgor under this Agreement.
Section 4.5 Setoff; Property Held by Secured Party. Secured Party
shall have the right to set off and apply against the Obligations, at any time
and without notice to Pledgor, any and all deposits (general or special, time
or demand, provisional or final) or other sums at any time credited by or owing
from Secured Party or any Lender to Pledgor whether or not the Obligations are
then due. As additional security for the Obligations, Pledgor hereby grants to
Secured Party, for the ratable benefit of the Lenders, a security interest in
all money, instruments, and other property of Pledgor now or hereafter held by
Secured Party or any Lender, including, without limitation, property held in
safekeeping. In addition to Secured Party's and the Lenders' right of setoff
and as further security for the Obligations, Pledgor hereby grants to Secured
Party, for the
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ratable benefit of the Lenders, a security interest in all deposits (general or
special, time or demand, provisional or final) and other accounts of Pledgor
now or hereafter maintained with Secured Party or any Lender and all other sums
at any time credited by or owing from Secured Party or any Lender to Pledgor.
The rights and remedies of Secured Party and the Lenders hereunder are in
addition to other rights and remedies (including without limitation other
rights of setoff) which Secured Party and the Lenders may have.
Section 4.6 Secured Party's Duty of Care. Other than the exercise of
reasonable care in the physical custody of the Collateral while held by Secured
Party hereunder, Secured Party shall have no responsibility for or obligation
or duty with respect to all or any part of the Collateral or any matter or
proceeding arising out of or relating thereto, including without limitation any
obligation or duty to collect any sums due in respect thereof or to protect or
preserve any rights against prior parties or any other rights pertaining
thereto, it being understood and agreed that Pledgor shall be responsible for
preservation of all rights in the Collateral. Without limiting the generality
of the foregoing, Secured Party shall be conclusively deemed to have exercised
reasonable care in the custody of the Collateral if Secured Party takes such
action, for purposes of preserving rights in the Collateral, as Pledgor may
reasonably request in writing, but no failure or omission or delay by Secured
Party in complying with any such request by Pledgor, and no refusal by Secured
Party to comply with any such request by Pledgor, shall be deemed to be a
failure to exercise reasonable care.
Section 4.7 Assignment by Secured Party. Subject to the provision of
Section 12.6 of the Credit Agreement, Secured Party and each Lender may at any
time and from time to time assign the Obligations and the Collateral or any
portion of them, and the assignee shall be entitled to all of the rights and
remedies of Secured Party and the Lenders under this Agreement in relation
thereto.
ARTICLE 5
Default
Section 5.1 Rights and Remedies. If any Event of Default shall
occur, Secured Party shall have the following rights and remedies:
a. In addition to all other rights and remedies granted
to Secured Party in this Agreement and in any other instrument or agreement
securing, evidencing, or relating to the Obligations, Secured Party shall have
all of the rights and remedies of a secured party under the Uniform Commercial
Code as adopted by the State of Texas. Without limiting the generality of the
foregoing, Secured Party may do any or all of the following: (i) without
demand or notice to Pledgor, collect, receive, or take possession of the
Collateral or any part thereof; (ii) sell or otherwise dispose of the
Collateral, or any part thereof, in one or more parcels at public or private
sale or sales, at Secured Party's offices or elsewhere, for cash, on credit, or
for future delivery; or (iii) bid and become a purchaser at any sale free of
any right or equity of redemption in Pledgor, which right or equity is hereby
expressly waived and released by Pledgor. Upon request
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by Secured Party, Pledgor shall assemble the Collateral and make it available
to Secured Party at any place designated by Secured Party that is reasonably
convenient to Pledgor and Secured Party. Pledgor agrees that Secured Party
shall not be obligated to give more than five (5) days' written notice of the
time and place of any public sale or of the time after which any private sale
may take place and that such notice shall constitute reasonable notice of such
matters. Secured Party shall not be obligated to make any sale of the
Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. Pledgor shall be
liable for all expenses of retaking, holding, preparing for sale, or the like
and all attorneys' fees and other expenses incurred by Secured Party in
connection with the collection of the Obligations and the enforcement of
Secured Party's rights under this Agreement, all of which expenses and fees
shall constitute additional Obligations secured by this Agreement. Secured
Party may apply the Collateral against the Obligations in such order and manner
as Secured Party may elect in its sole discretion. Pledgor shall remain liable
for any deficiency if the proceeds of any sale or disposition of the Collateral
are insufficient to pay the Obligations. Pledgor waives all rights of
marshalling in respect of the Collateral and any and all other collateral or
security for the Obligations.
b. Secured Party may cause any or all of the Collateral
held by it to be transferred into the name of Secured Party or the name or
names of Secured Party's nominee or nominees.
c. Secured Party may collect or receive all money or
property at any time payable or receivable on account of or in exchange for any
of the Collateral, but shall be under no obligation to do so.
d. Secured Party shall have the right, but shall not be
obligated, to exercise or cause to be exercised all voting, consensual, and
other powers of ownership pertaining to the Collateral, and Pledgor shall
deliver to Secured Party, if requested by Secured Party, irrevocable proxies
with respect to the Collateral in form satisfactory to Secured Party.
e. Pledgor hereby acknowledges and confirms that Secured
Party may be unable to effect a public sale of any or all of the Collateral by
reason of certain prohibitions contained in the Securities Act of 1933, as
amended, and applicable state securities laws and may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers who will
be obligated to agree, among other things, to acquire any shares of the
Collateral for their own respective accounts for investment and not with a view
to distribution or resale thereof. Pledgor further acknowledges and confirms
that any such private sale may result in prices or other terms less favorable
to the seller than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner, and Secured Party shall be under no
obligation to take any steps in order to permit the Collateral to be sold at a
public sale. Secured Party shall be under no obligation to delay a sale of any
of the Collateral for any period of time necessary to permit any
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issuer thereof to register such Collateral for public sale under the Securities
Act of 1933, as amended, or under applicable state securities laws.
f. If Secured Party determines that it will sell all or
part of the Collateral pursuant to SECTION 5.1 hereof and if, in the opinion of
Secured Party it is necessary or advisable to have the Collateral, or that
portion thereof to be sold, registered under the Securities Act of 1933, as
amended, Pledgor will, at Pledgor's expense, cause each issuer of the
Collateral, or that portion thereof to be sold, to execute and deliver, and
cause the directors and officers of each such issuer to execute and deliver all
such instruments and documents and cause such issuer(s), directors, and
officers to do or cause to be done all such other acts and things as may be
necessary or, in Secured Party's opinion, advisable to register the Collateral,
or that portion thereof to be sold, under the Securities Act of 1933, as
amended, and to cause the registration statement relating thereto to become
effective and to remain effective for a period of one year from the date of the
first public offering of the Collateral, or that portion thereof to be sold,
and to make all amendments thereto and to the related prospectus that, in
Secured Party's opinion, are necessary or advisable, all in conformity with the
requirements of the Securities Act of 1933, as amended, and the rules and
regulations of the SEC applicable thereto. Pledgor agrees to cause each issuer
of the Collateral, or that portion thereof to be sold, to comply with
Securities Act of 1933, as amended, and the blue sky laws of any jurisdiction
that Secured Party shall designate and cause each such issuer to make available
to its security holders, as soon as practical, an earnings statement (which
need not be audited) that will satisfy the provisions of the Securities Act of
1933, as amended.
g. On any sale of the Collateral, Secured Party is
hereby authorized to comply with any limitation or restriction with which
compliance is necessary, in the view of Secured Party's counsel, in order to
avoid any violation of applicable law or in order to obtain any required
approval of the purchaser or purchasers by any applicable governmental
authority.
ARTICLE 6
Miscellaneous
Section 6.1 Expenses; Indemnification. Pledgor agrees to pay on
demand all costs and expenses incurred by Secured Party and the Lenders in
connection with the preparation, negotiation, and execution of this Agreement
and any and all amendments, modifications, and supplements hereto. Pledgor
agrees to pay and to hold Secured Party and the Lenders harmless from and
against all fees and all excise, sales, stamp, and other taxes payable in
connection with this Agreement or the transactions contemplated hereby.
Pledgor hereby indemnifies Secured Party and the Lenders and each affiliate
thereof and their respective officers, directors, employees, attorneys, and
agents from and holds each of them harmless against, any and all losses,
liabilities, claims, damages, penalties, judgments, costs, and expenses
(including attorneys' fees) to which any of them may become subject which
directly or indirectly arise from or relate to (i) the negotiation, execution,
delivery, performance, administration, or enforcement of this Agreement, (ii)
any of the transactions contemplated by this Agreement, (iii) any breach by
Pledgor of any
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representation, warranty, covenant, or other agreement contained in this
Agreement, or (iv) any investigation, litigation, or other proceeding,
including without limitation any threatened investigation, litigation, or other
proceeding relating to any of the foregoing. WITHOUT LIMITING ANY PROVISION OF
THIS AGREEMENT OR ANY OTHER INSTRUMENT, OR AGREEMENT SECURING, EVIDENCING, OR
RELATING TO THE OBLIGATIONS OR ANY PART THEREOF, IT IS THE EXPRESS INTENTION OF
THE PARTIES HERETO THAT EACH PERSON OR ENTITY TO BE INDEMNIFIED UNDER THIS
SECTION SHALL BE INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, COSTS, AND EXPENSES
(INCLUDING ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM THE SOLE OR
CONTRIBUTORY NEGLIGENCE OF THE PERSON OR ENTITY TO BE INDEMNIFIED.
Section 6.2 No Waiver; Cumulative Remedies. No failure on the part
of Secured Party or any Lender to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power, or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power, or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right, power, or
privilege. The rights and remedies provided for in this Agreement are
cumulative and not exclusive of any rights and remedies provided by law.
Section 6.3 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Pledgor, Secured Party and the Lenders and
their respective heirs, successors, and assigns, except that Pledgor may not
assign any of its rights or obligations under this Agreement without the prior
written consent of Secured Party.
Section 6.4 Amendment and Restatement; Entire Agreement; Amendment.
This Agreement amends and restates in its entirety the Original Pledge
Agreement (but does not extinguish the security interests created thereby) and
embodies the final, entire agreement among the parties hereto and supersedes
any and all prior commitments, agreements, representations, and understandings,
whether written or oral, relating to the subject matter hereof (including,
without limitation, the Original Pledge Agreement) and may not be contradicted
or varied by evidence of prior, contemporaneous or subsequent oral agreements
or discussions of the parties hereto. There are no oral agreements among the
parties hereto. Pledgor hereby acknowledges and agrees that the security
interests in the Collateral created under the Original Pledge Agreement are not
extinguished but are extended and continued by this Agreement without change to
the priority thereof. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by the parties hereto.
Section 6.5 Notices. All notices and other communications provided
for in this Agreement shall be given or made by telex, telegraph, telecopy,
cable or in writing and telexed, telecopied, telegraphed, cabled, mailed by
certified mail return receipt requested, or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof; or as to any party, at such other address as shall be designated by
such party in a notice
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to the other party given in accordance with this section. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have
been duly given when transmitted by telex or telecopy, subject to telephone
confirmation of receipt, or delivered to the telegraph or cable office, subject
to telephone confirmation of receipt, or when personally delivered or, in the
case of a mailed notice, when duly deposited in the mails, in each case given
or addressed as aforesaid.
Section 6.6 Applicable Law; Venue; Service of Process. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas and the applicable laws of the United States of America. This
Agreement has been entered into in Dallas County, Texas, and it shall be
performable for all purposes in Dallas County, Texas. Any action or proceeding
against Pledgor under or in connection with this Agreement or any other
instrument or agreement securing, evidencing, or relating to the Obligations or
any part thereof may be brought in any state or federal court in Dallas County,
Texas. Pledgor hereby irrevocably (i) submits to the nonexclusive jurisdiction
of such courts and (ii) waives any objection it may now or hereafter have as to
the venue of any such action or proceeding brought in such court or that such
court is an inconvenient forum. Pledgor agrees that service of process upon it
may be made by certified or registered mail, return receipt requested, at its
address specified or determined in accordance with the provisions of SECTION
6.5 of this Agreement. Nothing in this Agreement or any other instrument or
agreement securing, evidencing, or relating to the Obligations or any part
thereof shall affect the right of Secured Party and the Lenders to serve
process in any other manner permitted by law or shall limit the right of
Secured Party and the Lenders to bring any action or proceeding against Pledgor
or with respect to any of its property in courts in other jurisdictions. Any
action or proceeding by Pledgor against Secured Party or any Lender shall be
brought only in a court located in Dallas County, Texas.
Section 6.7 Headings. The headings, captions, and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 6.8 Survival. All representations and warranties made in
this Agreement shall survive the execution and delivery of this Agreement, and
no investigation by Secured Party or any Lender shall affect the
representations and warranties of Pledgor herein or the right of Secured Party
and the Lenders to rely upon them.
Section 6.9 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 6.10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
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Section 6.11 Construction. Pledgor and Secured Party acknowledge
that each of them has been afforded an opportunity to review this Agreement
with legal counsel of its own choice and that this Agreement shall be construed
as if jointly drafted by Pledgor and Secured Party.
Section 6.12 Obligations Absolute. The obligations of Pledgor under
this Agreement shall be absolute and unconditional and shall not be released,
discharged, reduced, or in any way impaired by any circumstance whatsoever,
including without limitation any amendment, modification, extension, or renewal
of this Agreement, the Obligations, or any document or instrument evidencing,
securing, or otherwise relating to the Obligations, or any release,
subordination, or impairment of collateral, or any waiver, consent, extension,
indulgence, compromise, settlement, or other action or inaction in respect of
this Agreement, the Obligations, or any document or instrument evidencing,
securing, or otherwise relating to the Obligations, or any exercise or failure
to exercise any right, remedy, power, or privilege in respect of the
Obligations.
Section 6.13 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, PLEDGOR HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO
A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF SECURED PARTY IN THE
NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
Section 6.14 ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG
THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING
ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY
BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW). THE RULES OF PRACTICE AND PROCEDURE FOR
THE ARBITRATION OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION
SERVICES, INC. (J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE
EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY
ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS
AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
i. Special Rules. THE ARBITRATION SHALL BE CONDUCTED IN
THE CITY OF THE PLEDGOR'S DOMICILE AT TIME OF THIS AGREEMENT'S
EXECUTION AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR;
IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION
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ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED
WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR
SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
ii. Reservation of Rights. NOTHING IN THIS AGREEMENT
SHALL BE DEEMED TO (1) LIMIT THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE
AND ANY WAIVERS CONTAINED IN THIS AMENDMENT; OR (II)
BE A WAIVER BY THE SECURED PARTY OR ANY LENDER OF THE
PROTECTION AFFORDED TO IT BY 12 U.S. C. SEC. 91 OR
ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III)
LIMIT THE RIGHT OF THE SECURED PARTY AND THE LENDERS
(A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT
LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY
REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO
OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES
SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT
OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE
SECURED PARTY AND THE LENDERS MAY EXERCISE SUCH SELF
HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN
SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING
OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING
BROUGHT PURSUANT TO THIS AMENDMENT. NEITHER THIS
EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR
MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A
WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE
CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS
OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO
SUCH REMEDIES.
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Amended and Restated Pledge Agreement
15
<PAGE> 132
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
PLEDGOR:
CRAFTMADE INTERNATIONAL, INC.
By:____________________________________
Name: James R. Ridings
Title: Chief Executive Officer
DUROCRAFT INTERNATIONAL, INC.
By:____________________________________
Name: James R. Ridings
Title: Chief Executive Officer
Address for Notices:
2700 112th Street
Grand Prairie, Texas 75050
Fax No.: 214-647-4872
Telephone No.: 214-647-8099
Attention: Kenneth M. Cancienne
Chief Financial Officer
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Amended and Restated Pledge Agreement
16
<PAGE> 133
SECURED PARTY:
NATIONSBANK OF TEXAS, N.A., as Agent
By:___________________________________
Name: Andrew N. McLean
Title: Vice President
Address for Notices:
901 Main Street, 7th Floor
P. O. Box 831000
Dallas, Texas 75283-1000
Fax No.: 214-508-0388
Telephone No.: 214-508-0324
Attention: Andrew N. McLean
Vice President
Craftmade International, Inc.
Amended and Restated Pledge Agreement
17
<PAGE> 134
EXHIBIT "J"
Form of Application
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
<PAGE> 135
EXHIBIT "K"
Form of Assignment and Acceptance
Craftmade International, Inc.
Second Amended and Restated Credit Agreement
<PAGE> 136
ASSIGNMENT AND ACCEPTANCE
Date: _______________, 19__
Reference is made to the Second Amended and Restated Credit Agreement
dated as of November 14, 1995 (as the same may be amended and in effect from
time to time, the "Credit Agreement"), among Craftmade International, Inc., a
Delaware corporation (the "Borrower"), the Lenders named therein (the
"Lenders"), and NationsBank of Texas, N.A., as agent for the Lenders (in such
capacity, the "Agent"). Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. This Assignment and Acceptance is being executed pursuant to
Section 12.6 of the Credit Agreement.
___________________________ (the "Assignor") and ____________________
(the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, the following interest
in and to the Assignor's rights and obligations under the Credit Agreement and
the other Loan Documents as of the Effective Date (as defined below):
A ____% interest in the Commitments (which percentage interest
represents a $________ Commitment with respect to the aggregate
Commitments of $12,000,000).
After giving effect to this Assignment and Acceptance, the Commitment
of Assignor will be $__________________.
2. The Assignor (i) represents that, as of the date hereof, its
Commitment is $_______________, and its pro rata share of the Letters of Credit
outstanding under its Commitment is $___________ (all as unreduced by any
assignments which have not yet become effective); (ii) makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement or
any other Loan Document, other than that it is the legal and beneficial owner
of the interest being assigned by it hereunder and that such interest is free
and clear of any adverse claim; (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or any Obligated Party or the performance or observance by the
Borrower or any Obligated Party of any of its obligations under the Credit
Agreement or any other Loan Document; and (iv) attaches the Note held by
Assignor and requests that the Agent exchange such Note for a new Note payable
to the order of (A) the Assignee in an amount equal to the principal amount of
Assignor's Commitment assumed
ASSIGNMENT AND ACCEPTANCE - Page 1
<PAGE> 137
by Assignee hereunder, and (B) the Assignor in an amount equal to the principal
amount of the Commitment retained by Assignor.
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (ii) confirms that it
has received a copy of the Credit Agreement, together with copies of the most
recent financial statements delivered pursuant to Section 7.1 thereof, and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance;
(iii) agrees that it will, independently and without reliance upon the Agent,
the Assignor or any other Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Credit Agreement and the
other Loan Documents; (iv) confirms that it is an Eligible Assignee; (v)
appoints and authorizes the Agent to take such action on the Assignee's behalf
and to exercise such powers under the Loan Documents as are delegated to the
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; and (vi) agrees that it will perform in accordance with
their terms all obligations which by the terms of the Credit Agreement and the
other Loan Documents are required to be performed by it as a Lender.
4. The effective date for this Assignment and Acceptance shall be
___________ ____, 19__ (the "Effective Date")(1). Following the execution of
this Assignment and Acceptance, it will be delivered to the Agent for
acceptance and recording by the Agent.
5. Upon such acceptance and recording, from and after the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, shall have the rights
and obligations of a Lender thereunder and under the other Loan Documents and
(ii) the Assignor shall, to the extent provided in this Assignment and
Acceptance, relinquish its rights and be released from its obligations under
the Credit Agreement and the other Loan Documents.
6. Upon such acceptance and recording, from and after the
Effective Date, the Agent shall make all payments in respect of the interest
assigned hereby (including payments of principal, interest, fees and other
amounts) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement and the Notes for periods
prior to the Effective Date directly between themselves.
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS
__________________________________
(1) Such date shall be at least five (5) Business Days after the execution
of this Assignment and Acceptance and delivery thereof to the Agent
(unless otherwise agreed by the Agent).
ASSIGNMENT AND ACCEPTANCE - Page 2
<PAGE> 138
(WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES) AND APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
8. The Assignee's address for notices for purposes of the Credit
Agreement (until such address is subsequently changed in accordance with the
Credit Agreement) is specified below its name on the signature pages of this
Assignment and Acceptance.
[NAME OF ASSIGNOR]
By: ___________________________________
Name: _________________________________
Title: ________________________________
[NAME OF ASSIGNEE]
By: ___________________________________
Name: _________________________________
Title: ________________________________
Address for Notices:
______________________________________
______________________________________
______________________________________
Fax No. (_____) ______________________
Telephone No. (_____) ________________
Attention: ___________________________
ASSIGNMENT AND ACCEPTANCE - Page 3
<PAGE> 139
ACCEPTED BY:
NATIONSBANK OF TEXAS, N.A., as Agent for the Lenders
By: ___________________________________
Name: _________________________________
Title: ________________________________
Date: _________________________________
ASSIGNMENT AND ACCEPTANCE - Page 4
<PAGE> 140
SCHEDULE 1
TO
CREDIT AGREEMENT
Locations of Collateral
Except for any Collateral in the possession of the Agent,
2700 112th Street
Grand Prairie, Texas 75050
Also, an alternative address for C/D/R is,
300 Delaware Avenue, Suite 1704
Wilmington, Delaware 19801
SCHEDULE 1, Locations of Collateral - Page 1
<PAGE> 141
SCHEDULE 2
TO
CREDIT AGREEMENT
Existing Debt
1. Revolving Credit Note dated _______________, 199__, in the maximum
amount of $_______________, from Borrower to C/D/R, maturing ten years
from the date thereof, bearing interest at the rate of ten percent,
executed pursuant to a Loan Agreement dated October ___, 1992.
2. Agreement dated October 1, 1992, between Craftmade and C/D/R,
providing for certain royalties to be paid by Craftmade to C/D/R for
the use of the trademark and trade name "Craftmade."
SCHEDULE 2, Existing Debt - Page 1
<PAGE> 142
SCHEDULE 3
TO
CREDIT AGREEMENT
List of Subsidiaries
<TABLE>
<CAPTION>
Jurisdiction Percentage of
Name of Subsidiary of Incorporation Stock Owned by Borrower
------------------ ---------------- -----------------------
<S> <C> <C> <C>
1. Durocraft International, Inc. Texas 100%
T.I.N. 75-2342081
2. C/D/R Incorporated Delaware 95% direct
T.I.N. 51-0343395 5% indirect
</TABLE>
SCHEDULE 3, List of Subsidiaries - Solo Page
<PAGE> 143
SCHEDULE 4
TO
CREDIT AGREEMENT
Existing Liens
Liens securing the following capital leases:
<TABLE>
<CAPTION>
Lease Date Item Cost Lessor
- ---------- ---- ---- ------
<S> <C> <C> <C>
12/1/88 Phone System $17,399 T.S.I., Inc.
P.O. Box 298731
Houston, Texas 77298-0731
7/1/90 Forklifts (2) $27,556 Toyota Motor Credit Corporation
1515 West 190th Street
Torrance, California 90509
12/31/90 Computer $59,389 G.E. Capital
P.O. Box 910020
Dallas, Texas 75391
4/4/91 Fax Machine $4,435 Danka Leasing
P.O. Box 728
Upper Saddle River, NJ 07458
4/15/91 Copier $9,883 Eaton Financial Services
1505 Luna Road, #134
Carrollton, Texas 75006
7/1/90 NP-1218 Copier $4,510 Innovative Office System
14875 Landmark Boulevard
Dallas, Texas 75240
7/1/90 386-20 Computer $4,100 All Systems
P.O. Box 151616
Arlington, Texas 76015
7/1/90 Forklift $7,477 Kalmar Capital Corp.
777 Manor Park Drive
Columbus, Ohio 43228
7/1/90 1990 Chrysler $16,225 Curry Auto Leasing
5422 Alpha Road
Dallas, Texas 75240
</TABLE>
SCHEDULE 4, Existing Liens - Solo Page
<PAGE> 144
SCHEDULE 5
TO
CREDIT AGREEMENT
UCC Filing Jurisdictions
Borrower and Durocraft - Secretary of State of Texas
SCHEDULE 5, UCC Filing Jurisdictions - Solo Page
<PAGE> 145
SCHEDULE 6
TO
CREDIT AGREEMENT
Liens to be Released or Assigned
None.
SCHEDULE 6, Liens to be Released or Assigned - Solo Page
<PAGE> 146
CERTIFICATE OF CORPORATE OFFICERS
(Craftmade)
The undersigned hereby certifies that the undersigned is now, and at
all times mentioned herein has been, the duly elected, qualified, and acting
Secretary of CRAFTMADE INTERNATIONAL, INC. (the "Corporation"), a Delaware
corporation, and, as such officer, the undersigned has access to the records of
the Corporation, which records reflect that:
1. Resolutions. The Resolutions attached as EXHIBIT A hereto and
incorporated herein by reference constitute a true and correct copy of
resolutions which have been duly adopted by the board of directors of the
Corporation in compliance with, and not in contravention of, the articles of
incorporation and bylaws of the Corporation; none of such resolutions have been
repealed or modified in any respect, and all such resolutions are in full force
and effect as of the execution hereof.
2. Incumbency. The following named individuals are the duly
elected, qualified and acting officers of the Corporation, holding the offices
set forth opposite their respective names as of the date hereof, and the
signatures set opposite the respective names and titles of said officers are
their true, authentic signatures.
<TABLE>
<CAPTION>
Name Title Specimen Signature
---- ----- ------------------
<S> <C> <C>
James R. Ridings Chief Executive Officer _________________________
Kenneth M. Cancienne Chief Financial Officer _________________________
Terry L. Culbertson Secretary _________________________
</TABLE>
3. Certificate of Incorporation. Attached hereto as EXHIBIT B is
a true and correct copy of the Certificate of Incorporation of the Corporation
as certified by the Secretary of State of Delaware on ___________, 1995.
Except as described on EXHIBIT B, the Certificate of Incorporation of the
Corporation has not been repealed, terminated, amended, modified, supplemented
or replaced in any respect.
4. Bylaws. Attached hereto as EXHIBIT C is a true and correct
copy of the Bylaws of the Corporation as in effect on the date hereof. Except
as described on EXHIBIT C, the Bylaws of the Corporation have not been
repealed, terminated, amended, modified, supplemented or replaced in any
respect.
5. Shareholders. The shareholders of the Corporation and their
respective stock ownership positions have not changed between January 11, 1993
and the execution hereof.
Craftmade International, Inc.
Certificate of Corporate Officers (Craftmade)
<PAGE> 147
6. Corporate Standing, Taxes and Authority. The Corporation is a
duly organized and validly existing corporation in good standing under the laws
of the State of Delaware and is duly authorized and qualified to do business in
the State of Texas, and all taxes, assessments and franchise fees due of the
Corporation have been fully paid, all as evidenced by the Certificates of
Existence, Good Standing and Foreign Qualification attached hereto as EXHIBIT
D. The execution and delivery of the documents described in the attached
resolutions will not violate any provision of the articles of incorporation and
bylaws of the Corporation.
IN WITNESS WHEREOF, I have duly executed this Certificate to be
effective as of the 14th day of November, 1995.
SECRETARY:
_____________________________________
Terry L. Culbertson
I, James R. Ridings, hereby certify that I am now the duly elected,
qualified and acting President of the Corporation; that the person executing
and delivering the foregoing Certificate (herein so called) is the duly
elected, qualified and acting officer of the Corporation as indicated in the
Certificate; that the signature set forth above beside each person's name is
each person's correct signature; and that the certifications set forth above
are true and correct as of the date hereof.
PRESIDENT:
_____________________________________
James R. Ridings
STATE OF TEXAS Section
COUNTY OF ____________ Section
This instrument was acknowledged before me on November __, 1995, by
TERRY L. CULBERTSON.
(NOTARY STAMP)
_____________________________________
Notary Public, State of Texas
My Commission Expires:
_____________________________________
Printed Name
Craftmade International, Inc.
Certificate of Corporate Officers (Craftmade)
<PAGE> 148
STATE OF TEXAS Section
COUNTY OF ____________ Section
This instrument was acknowledged before me on November __, 1995, by
JAMES R. RIDINGS.
(NOTARY STAMP)
_____________________________________
Notary Public, State of Texas
My Commission Expires:
_____________________________________
Printed Name
Craftmade International, Inc.
Certificate of Corporate Officers (Craftmade)
<PAGE> 149
EXHIBIT A
RESOLUTIONS
Craftmade International, Inc.
Certificate of Corporate Officers (Craftmade)
<PAGE> 150
EXHIBIT B
CERTIFICATE OF INCORPORATION
Craftmade International, Inc.
Certificate of Corporate Officers (Craftmade)
<PAGE> 151
EXHIBIT C
BYLAWS
Craftmade International, Inc.
Certificate of Corporate Officers (Craftmade)
<PAGE> 152
EXHIBIT D
CERTIFICATES OF EXISTENCE,
GOOD STANDING AND FOREIGN QUALIFICATION
Craftmade International, Inc.
Certificate of Corporate Officers (Craftmade)
<PAGE> 153
CERTIFICATE OF CORPORATE OFFICERS
(C/D/R)
The undersigned hereby certifies that the undersigned is now, and at
all times mentioned herein has been, the duly elected, qualified, and acting
Secretary of C/D/R INCORPORATED (the "Corporation"), a Delaware corporation,
and, as such officer, the undersigned has access to the records of the
Corporation, which records reflect that:
1. Resolutions. The Resolutions attached as EXHIBIT A hereto and
incorporated herein by reference constitute a true and correct copy of
resolutions which have been duly adopted by the board of directors of the
Corporation in compliance with, and not in contravention of, the articles of
incorporation and bylaws of the Corporation; none of such resolutions have been
repealed or modified in any respect, and all such resolutions are in full force
and effect as of the execution hereof.
2. Incumbency. The following named individuals are the duly
elected, qualified and acting officers of the Corporation, holding the offices
set forth opposite their respective names as of the date hereof, and the
signatures set opposite the respective names and titles of said officers are
their true, authentic signatures.
<TABLE>
<CAPTION>
Name Title Specimen Signature
---- ----- ------------------
<S> <C> <C>
Terry L. Culbertson President ________________________________
John P. Garniewski Secretary ________________________________
</TABLE>
3. Certificate of Incorporation. Attached hereto as EXHIBIT B is
a true and correct copy of the Certificate of Incorporation of the Corporation
as certified by the Secretary of State of Delaware on ___________, 1995.
Except as described on EXHIBIT B, the Certificate of Incorporation of the
Corporation has not been repealed, terminated, amended, modified, supplemented
or replaced in any respect.
4. Bylaws. Attached hereto as EXHIBIT C is a true and correct
copy of the Bylaws of the Corporation as in effect on the date hereof. Except
as described on EXHIBIT C, the Bylaws of the Corporation have not been
repealed, terminated, amended, modified, supplemented or replaced in any
respect.
5. Shareholders. All of the shareholders of the Corporation and
their respective stock ownership positions are as indicated on EXHIBIT D
attached hereto and incorporated herein by reference.
6. Corporate Standing, Taxes and Authority. The Corporation is a
duly organized and validly existing corporation in good standing under the laws
of the State of Delaware and is duly
Craftmade International, Inc.
Certificate of Corporate Officers (C/D/R)
<PAGE> 154
authorized and qualified to do business in the State of Texas, and all taxes,
assessments and franchise fees due of the Corporation have been fully paid, all
as evidenced by the Certificates of Existence, Good Standing and Foreign
Qualification attached hereto as EXHIBIT E. The execution and delivery of the
documents described in the attached resolutions will not violate any provision
of the articles of incorporation and bylaws of the Corporation.
IN WITNESS WHEREOF, I have duly executed this Certificate to be
effective as of the 14th day of November, 1995.
SECRETARY:
_______________________________________
John P. Garniewski
I, Terry L. Culbertson, hereby certify that I am now the duly elected,
qualified and acting President of the Corporation; that the person executing
and delivering the foregoing Certificate (herein so called) is the duly
elected, qualified and acting officer of the Corporation as indicated in the
Certificate; that the signature set forth above beside each person's name is
each person's correct signature; and that the certifications set forth above
are true and correct as of the date hereof.
PRESIDENT:
_______________________________________
Terry L. Culbertson
STATE OF DELAWARE Section
COUNTY OF ____________ Section
This instrument was acknowledged before me on November __, 1995, by
JOHN P. GARNIEWSKI.
(NOTARY STAMP)
_______________________________________
Notary Public, State of Texas
My Commission Expires:
_______________________________________
Printed Name
Craftmade International, Inc.
Certificate of Corporate Officers (C/D/R)
<PAGE> 155
STATE OF TEXAS Section
COUNTY OF ____________ Section
This instrument was acknowledged before me on November __, 1995, by
TERRY L. CULBERTSON.
(NOTARY STAMP)
_______________________________________
Notary Public, State of Texas
My Commission Expires:
_______________________________________
Printed Name
Craftmade International, Inc.
Certificate of Corporate Officers (C/D/R)
<PAGE> 156
EXHIBIT A
RESOLUTIONS
Craftmade International, Inc.
Certificate of Corporate Officers (C/D/R)
<PAGE> 157
EXHIBIT B
Certificate of Incorporation
Craftmade International, Inc.
Certificate of Corporate Officers (C/D/R)
<PAGE> 158
EXHIBIT C
Bylaws
Craftmade International, Inc.
Certificate of Corporate Officers (C/D/R)
<PAGE> 159
EXHIBIT D
Shareholders and Ownership Positions
<TABLE>
<CAPTION>
Shareholder Percentage Ownership
- ----------- --------------------
<S> <C>
Craftmade International, Inc. 95%
Durocraft International, Inc. 5%
</TABLE>
Craftmade International, Inc.
Certificate of Corporate Officers (C/D/R)
<PAGE> 160
EXHIBIT E
Certificates of Existence, Good Standing and
Foreign Qualification
Craftmade International, Inc.
Certificate of Corporate Officers (C/D/R)
<PAGE> 161
CERTIFICATE OF CORPORATE OFFICERS
(Durocraft)
The undersigned hereby certifies that the undersigned is now, and at
all times mentioned herein has been, the duly elected, qualified, and acting
Secretary of DUROCRAFT INTERNATIONAL, INC. (the "Corporation"), a Texas
corporation, and, as such officer, the undersigned has access to the records of
the Corporation, which records reflect that:
1. Resolutions. The Resolutions attached as EXHIBIT A hereto and
incorporated herein by reference constitute a true and correct copy of
resolutions which have been duly adopted by the board of directors of the
Corporation in compliance with, and not in contravention of, the articles of
incorporation and bylaws of the Corporation; none of such resolutions have been
repealed or modified in any respect, and all such resolutions are in full force
and effect as of the execution hereof.
2. Incumbency. The following named individuals are the duly
elected, qualified and acting officers of the Corporation, holding the offices
set forth opposite their respective names as of the date hereof, and the
signatures set opposite the respective names and titles of said officers are
their true, authentic signatures.
<TABLE>
<CAPTION>
Name Title Specimen Signature
---- ----- ------------------
<S> <C> <C>
James R. Ridings Chief Executive Officer _________________________
Kenneth M. Cancienne Chief Financial Officer _________________________
Terry L. Culbertson Secretary _________________________
</TABLE>
3. Articles. Attached hereto as EXHIBIT B is a true and correct
copy of the Articles of Incorporation of the Corporation as certified by the
Secretary of State of Texas on ___________, 1995. Except as described on
EXHIBIT B, the Articles of Incorporation of the Corporation have not been
repealed, terminated, amended, modified, supplemented or replaced in any
respect.
4. Bylaws. Attached hereto as EXHIBIT C is a true and correct
copy of the Bylaws of the Corporation as in effect on the date hereof. Except
as described on EXHIBIT C, the Bylaws of the Corporation have not been
repealed, terminated, amended, modified, supplemented or replaced in any
respect.
5. Shareholders. The shareholders of the Corporation and their
respective stock ownership positions have not changed between January 11, 1993
and the execution hereof.
Craftmade International, Inc.
Certificate of Corporate Officers (Durocraft)
<PAGE> 162
6. Corporate Standing, Taxes and Authority. The Corporation is a
duly organized and validly existing corporation in good standing under the laws
of the State of Texas and is duly authorized and qualified to do business in
the State of Texas, and all taxes, assessments and franchise fees due of the
Corporation have been fully paid, as evidenced by the Certificates of
Existence, Good Standing and Foreign Qualification attached hereto as EXHIBIT
D. The execution and delivery of the documents described in the attached
resolutions will not violate any provision of the articles of incorporation and
bylaws of the Corporation.
IN WITNESS WHEREOF, I have duly executed this Certificate to be
effective as of the 14th day of November, 1995.
SECRETARY:
_______________________________________
Terry L. Culbertson
I, James R. Ridings, hereby certify that I am now the duly elected,
qualified and acting President of the Corporation; that the person executing
and delivering the foregoing Certificate (herein so called) is the duly
elected, qualified and acting officer of the Corporation as indicated in the
Certificate; that the signature set forth above beside each person's name is
each person's correct signature; and that the certifications set forth above
are true and correct as of the date hereof.
PRESIDENT:
_______________________________________
James R. Ridings
STATE OF TEXAS Section
COUNTY OF ____________ Section
This instrument was acknowledged before me on November __, 1995, by
TERRY L. CULBERTSON.
(NOTARY STAMP)
_______________________________________
Notary Public, State of Texas
My Commission Expires:
_______________________________________
Printed Name
Craftmade International, Inc.
Certificate of Corporate Officers (Durocraft)
<PAGE> 163
STATE OF TEXAS Section
COUNTY OF ____________ Section
This instrument was acknowledged before me on November __, 1995, by
JAMES R. RIDINGS.
(NOTARY STAMP)
_______________________________________
Notary Public, State of Texas
My Commission Expires:
_______________________________________
Printed Name
Craftmade International, Inc.
Certificate of Corporate Officers (Durocraft)
<PAGE> 164
EXHIBIT A
RESOLUTIONS
Craftmade International, Inc.
Certificate of Corporate Officers (Durocraft)
<PAGE> 165
EXHIBIT B
ARTICLES OF INCORPORATION
Craftmade International, Inc.
Certificate of Corporate Officers (Durocraft)
<PAGE> 166
EXHIBIT C
BYLAWS
Craftmade International, Inc.
Certificate of Corporate Officers (Durocraft)
<PAGE> 167
EXHIBIT D
CERTIFICATES OF EXISTENCE,
GOOD STANDING AND FOREIGN QUALIFICATION
Craftmade International, Inc.
Certificate of Corporate Officers (Durocraft)
<PAGE> 1
EXHIBIT 10.5
GREATER DALLAS ASSOCIATION OF REALTORS(R), INC.
COMMERCIAL LEASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
------- ----
<S> <C>
ARTICLE ONE: DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE TWO: LEASE AND LEASE TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE THREE: RENT AND SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE FOUR: TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE FIVE: INSURANCE AND INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE SIX: USE OF DEMISED PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE SEVEN: PROPERTY CONDITION, MAINTENANCE, REPAIRS
AND ALTERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE EIGHT: DAMAGE OR DESTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE NINE: CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE TEN: ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE ELEVEN: DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE TWELVE: LANDLORD'S CONTRACTUAL LIEN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE THIRTEEN: PROTECTION OF LENDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE FOURTEEN: PROFESSIONAL SERVICE FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE FIFTEEN: ENVIRONMENTAL REPRESENTATIONS AND INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE SIXTEEN: MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE SEVENTEEN: ADDITIONAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
An Exhibit or Exhibits may be attached to this Lease which shall be made a part
of this Lease for all purposes [check all boxes which apply]:
EXHIBITS TO LEASE
<TABLE>
<S> <C> <C> <C>
[x] Exhibit A Floor Plan/Site Plan Exhibit E
[x] Exhibit B Legal Description of Property [ ] Exhibit F
[x] Exhibit C Renewal Options [ ] Exhibit G
[ ] Exhibit D [x] Exhibit H Construction of Improvements
[x] Addendum
</TABLE>
Page 1
<PAGE> 2
ARTICLE ONE: DEFINED TERMS
As used in this Lease, the following terms set forth in this Article
One shall have the respective meanings set forth hereinbelow:
1.01 DATE OF LEASE: ___________________________________, 1995.
1.02 LANDLORD: CRAFTMADE INTERNATIONAL, INC., a Delaware corporation
Address of Landlord: 2700 112th Street, Grand Prairie, Texas
75050
Telephone: (214) 647-8099
1.03 TENANT: TSI PRIME, INC.
Address of Tenant: 5005 Hillsdale Circle, El Dorado,
California 95762
Telephone: (800) 856-1100
1.04 PREMISES:
A. Street address (including county): 650 S. Royal,
Coppell, Dallas County, Texas
B. Floor or site plan: Being a floor area of
approximately 80,000 square feet and being approximately ___ by
_____________ feet measured to the exterior of outside walls and to
the center of the interior walls, and being more particularly shown in
outline on the floor/site plan attached hereto as Exhibit A. (The
aforementioned street address and the floor or site plan shall
collectively be referred to herein as the "Demised Premises".)
C. Legal description: The legal description of the
property on which the floor/site plan is situated is more particularly
described in Exhibit B attached hereto (the "Property").
1.05 LEASE TERM: 3 years and no months beginning on the
Commencement Date and ending on the 31st day of December, 1998. See Addendum.
1.06 BASE RENT: $720,000 total Base Rent for the Lease Term
payable in monthly installments of $20,000 per month in advance. See Addendum.
1.07 SECURITY DEPOSIT: $20,000
1.08 PERMITTED USE: [See Section 6.01] General warehouse and
distribution center.
1.09 PRINCIPAL BROKER: [If one, so state] None
Address: ____________________________________________________
1.10 COOPERATING BROKER: [If none, so state] None
Address: ____________________________________________________
1.01 HOLDOVER RENT: [See Section 2.04] $22,000 per month in
advance.
1.12 DAILY LATE CHARGE: [See Section 3.03] ________________________
Dollars ($_______________) per day.
1.13 ACCEPTANCE: [See Section 16.13] The number of days for
acceptance of this offer to lease shall be 10 (10) days.
ARTICLE TWO: LEASE AND LEASE TERM
Page 2
<PAGE> 3
2.01 LEASE OF THE DEMISED PREMISES FOR LEASE TERM. Landlord
leases the Demised premises to Tenant and Tenant leases the Demised Premises
from Landlord for the Lease Term stated in Section 1.05. As used herein, the
"Commencement Date" shall be the date specified in the Addendum.
2.02 DELAY IN COMMENCEMENT. Landlord shall not be liable to Tenant
if Landlord does not deliver possession of the Demised Premises to Tenant on
the first date specified in Section 1.05 above. Landlord's nondelivery of
possession of the Demised Premises on that date shall not affect this Lease or
the obligations of Tenant under this Lease. However, the Commencement Date
shall be delayed until possession of the Demised Premises is delivered to
Tenant. The Lease Term shall be extended for a period equal to the delay in
delivery of possession of the Demised Premises to Tenant, plus the number of
days necessary for the Lease Term to expire on the last day of a month. If
Landlord does not deliver possession of the Demised Premises to Tenant within
thirty (30) days after the first date specified in Section 1.05 above, Tenant
may elect to cancel this Lease by giving written notice to Landlord within ten
(10) days after the 30-day period ends. If Tenant gives such notice, the Lease
shall be canceled effective as of the date of its execution, and no party
hereto shall have any obligations, one to the other. If Tenant does not give
such notice within the time specified, Tenant shall have no right to cancel the
Lease, and the Lease Term is delayed, Landlord and Tenant shall, upon such
delivery, execute an amendment to this Lease setting forth the Commencement
Date and expiration date of the Lease Term.
2.03 EARLY OCCUPANCY. If Tenant occupies the Demised Premises
prior to the Commencement Date, Tenant's occupancy of the Demised Premises
prior to the Commencement Date, Tenant's occupancy of the Demised Premises
shall be subject to all of the provisions of this Lease, except as provided in
the Addendum. Early occupancy of the Demised Premises shall not advance the
expiration date of the Lease Term.
2.04 HOLDING OVER. Tenant shall vacate the Demised Premises upon
the expiration of the Lease Term or earlier termination of this Lease. Tenant
shall reimburse Landlord for and indemnify Landlord against all damages
incurred by Landlord as a result of any delay by Tenant in vacating the Demised
Premises. If Tenant does not vacate the Demised Premises shall be a "month to
month" tenancy, subject to all the terms of this Lease applicable to a month to
month tenancy, except that the Base Rent per month then in effect shall be the
amount designated in Section 1.12.
ARTICLE THREE: RENT AND SECURITY DEPOSIT
3.01 MANNER OF PAYMENT. All sums payable hereunder by Tenant (the
"Rent") shall be made to the Landlord at the address designated in Section 1.02
or to such other party or address as Landlord may designate. Any and all
payments made to a designated third party for the account of the Landlord shall
be deemed made to Landlord when received by said designated third party. All
sums payable by Tenant hereunder, whether or not expressly denominated as rent,
shall constitute rent for the purposes of Section 502(b)(6) of the Bankruptcy
Code and for all other purposes. The Base Rent is the minimum rent for the
Demised Premises and is subject to the terms and conditions contained in this
Lease together with the Exhibits attached hereto, if any.
3.02 TIME OF PAYMENT. Upon execution hereof, Tenant shall pay the
installment of rent for the first month of the Lease Term. On or before the
first day of the second month of the Lease Term and of each month thereafter,
the installment of rent and other sums due hereunder shall be due and payable,
in advance, without off-set, deduction or prior demand. If the Lease Term
commences or ends on a day other than the first or last day of a calendar
month, the rent for any fractional calendar month following the Commencement
Date or preceding the end of the Lease Term shall be prorated by days.
3.03 LATE CHARGES. Tenant's failure to pay sums due hereunder
promptly may cause Landlord to incur unanticipated costs. the exact amount of
such costs are impractical or extremely difficult to ascertain. Such costs may
include, but are not limited to, processing and accounting charges and late
charges which may be imposed on Landlord by any ground lease, deed of trust or
mortgage encumbering the Demised Premises. Therefore, if any sum due hereunder
is not received when due, Tenant shall pay the Landlord a late charge equal to
the Daily Late Chart for each day after the due date until such delinquent sum
is received. If any check tendered in payment of any sum due from Tenant
hereunder is dishonored for any reason, Tenant shall pay a late charge for each
day after said due date until good funds are received by the Landlord. The
parties agree that such late charge represents a fair and reasonable estimate
of the costs Landlord will incur by reason of such late payment or such
dishonored check.
Page 3
<PAGE> 4
3.04 SECURITY DEPOSIT. Upon execution hereof, Tenant shall deposit
with Landlord a cash Security Deposit in the sum stated in Section 1.07.
Landlord shall apply all or part of the Security Deposit to any unpaid rent or
other charges due from Tenant or to cure any other defaults of Tenant. If
Landlord uses any part of the Security Deposit, Tenant shall restore the
Security Deposit to its full amount within ten (10) days after Landlord's
written demand. Tenant's failure to restore the full amount of the Security
Deposit within the time specified shall be a default under this Lease. No
interest shall be paid on the Security Deposit. Landlord shall not be required
to keep the Security Deposit separate from its other accounts and no trust
relationship is created with respect to the Security Deposit. Upon any
termination of this Lease not resulting from Tenant's default, and after Tenant
has vacated the Demised Premises in the manner required by this Lease, Landlord
shall refund the unused portion of the Security Deposit to Tenant.
3.05 GOOD FUNDS PAYMENTS. If, for any reason whatsoever, any two
or more payments by check from Tenant to Landlord for Rent are dishonored and
returned unpaid, thereafter, Landlord may, at Landlord's sole option, upon
written notice to Tenant, require that all future payments of Rent for the
remaining term of the Lease shall be made by cash, cashier's check, or money
order and that the delivery of Tenant's personal or corporate check will no
longer constitute payment of Rent as provided in this Lease. Any acceptance by
Landlord of a payment for Rent by Tenant's personal or corporate check
thereafter shall not be construed as a waiver of Landlord's right to insist
upon payment by good funds as set forth in this Section 3.05.
ARTICLE FOUR: TAXES
4.01 PAYMENT BY LANDLORD. Landlord shall pay the real estate taxes
on the Demised Premises during the Lease Term.
4.02 IMPROVEMENTS BY TENANT. In the event the real estate taxes
levied against the Demised Premises for the real estate tax year in which the
Lease Term commences are increased in the current tax year or subsequent tax
years as a result of any alterations, additions or improvements made by Tenant
or by Landlord at the request of Tenant, Tenant shall pay to Landlord upon
demand the amount of such increase and continue to pay such increase during the
term of this Lease. Landlord shall use reasonable effort to obtain from the
tax assessor or assessors a written statement of the total amount of such
increase.
4.03 PERSONAL PROPERTY TAXES. Tenant shall pay all taxes assessed
against trade fixtures, furnishings, equipment, or any other personal property
belonging to Tenant. Tenant shall use reasonable effort to have its personal
property taxed separately from the Demised Premises, but if any of Tenant's
personal property is taxed with the Demised Premises, Tenant shall pay the
taxes for the personal property within fifteen (15) days after Tenant receives
a written statement for such personal property taxes.
ARTICLE FIVE: INSURANCE AND INDEMNITY
5.01 CASUALTY INSURANCE. During the Lease Term, Landlord shall
maintain policies of insurance covering loss of or damage to the Demised
Premises in such amount or percentage of replacement value as Landlord deems
reasonable in relation to the age, location, type of construction and physical
condition of the Demised Premises and the availability of such insurance at
reasonable rates. Such policies shall provide protection against all perils
included within the classification of fire and extended coverage and any other
perils which Landlord deems necessary, Landlord may obtain insurance coverage
for Tenant's fixtures, equipment or building improvements installed by Tenant
in or on the Demised Premises. Tenant shall, at Tenant's expense, maintain
such primary or additional insurance on its fixtures, equipment and building
improvements as Tenant deems necessary to protect its interest. Tenant shall
not do or permit to be done anything which invalidates any such insurance
policies. Any casualty insurance which may be carried by Landlord or Tenant
shall be for the sole benefit of the party carrying such insurance and under
its sole control.
5.02 INCREASE IN PREMIUMS. Tenant shall not permit any operation
or activity to be conducted or storage or use of any volatile or any other
materials on or about the Demised Premises that would cause suspension or
cancellation of any fire and extended coverage insurance policy carried by
Landlord, or increase the premiums therefor, without the prior written consent
of Landlord. If Tenant's use and occupancy of the Demised Premises causes an
increase in the premiums for any fire and extended coverage insurance policy
carried by Landlord as of the day immediately prior to Tenant's possession of
the Demised Premises under this Lease, Tenant shall pay, as additional rental,
the amount of such increase to Landlord upon demand and presentation of written
evidence of the increase by Landlord.
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5.03 LIABILITY INSURANCE. During the Lease Term, Tenant shall
maintain a policy of comprehensive public liability insurance, at Tenant's
expense, insuring Landlord against liability arising out of the ownership, use,
occupancy, or maintenance of the Demised Premises. The initial amount of such
insurance shall be at least $1,000,00 combined single-limit bodily injury and
property damage, for each occurrence, and shall be subject to periodic
increases based upon such economic factors as Landlord shall determine, in
Landlord's discretion, exercised in good faith. However, the amount of such
insurance shall not limit Tenant's liability nor relieve Tenant of any
obligation hereunder. The policy shall contain cross-liability endorsements,
if applicable, and shall insure Tenant's performance of the indemnity
provisions of Section 5.04. Such policy shall contain a provision which
prohibits cancellation or modification of the policy except upon thirty (30)
days' prior written notice to Landlord. Tenant may discharge its obligations
under this Section by naming Landlord as an additional insured under a policy
of comprehensive liability insurance maintained by Tenant and containing the
coverage and provisions described in this Section. Tenant shall deliver a copy
of such policy or certificate (or a renewal thereof) to Landlord prior to the
Commencement Date and prior to the expiration of any such policy during the
Lease Term. If Tenant fails to maintain such policy, Landlord may elect to
maintain such insurance at Tenant's expense. Tenant shall, at Tenant's
expense, maintain such other liability insurance as Tenant deems necessary to
protect Tenant.
5.04 INDEMNITY. Landlord shall not be liable to Tenant or Tenant's
employees, agents, invitees or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the Demised Premises or
any adjacent area owned by Landlord caused by the negligence or misconduct of
Tenant, its employees, subtenants, licensees or concessionaires or any other
person entering the Demised Premises under express or implied invitation of
Tenant, or arising out of the use of the Demised Premises by Tenant and the
conduct of its business therein, or arising out of any breach or default by
Tenant in the performance of its obligations hereunder; and Tenant hereby
agrees to indemnify and hold Landlord harmless rom any loss, expense or claims
arising out of such damage or injury. Tenant shall not be liable for any
injury or damage caused by the negligence or misconduct of Landlord, or its
employees or agents, and Landlord agrees to indemnify and hold Tenant harmless
from any loss, expense or damage arising out of such damage or injury.
5.05 COMPARATIVE NEGLIGENCE. Tenant hereby unconditionally and
irrevocably agrees to indemnify, defend and hold Landlord and Landlord's
officers, agents, subsidiaries, partners, employees, licensees and counsel
harmless, to the extent of Tenant's comparative negligence, if any, from and
against any and all loss, liability, demand, judgment, suit, claim, deficiency,
interest, fee, charge, cost or expense (including, without limitation,
interest, court costs and penalties, attorney's fees and disbursements and
amounts paid in settlement, or liabilities resulting from any change in
federal, state or local law or regulation or interpretation hereof) of whatever
nature, on a comparative negligence basis, even when caused in part by
Landlord's negligence or the joint or concurring negligence of Landlord and any
other person or entity, which may result or to which Landlord and/or any of
Landlord's officers, agents, directors, employees, partners, licensees and
counsel may sustain, suffer, incur or become subject to in connection with or
arising in any way whatsoever out of the leasing, operation, promotion,
management, maintenance, repair, use or occupation of the Demised Premises, or
any other activity of whatever nature in connection therewith, or arising out
of or by reason of any investigation, litigation or other proceedings brought
or threatened, arising out of or based upon the leasing, operation, promotion,
management, maintenance, repair, use or occupancy of the Demised Premises, or
any other activity on the Demised Premises. This provision shall survive the
termination of this Lease.
5.06 WAIVER OF SUBROGATION. Each party hereto waives any and every
claim which arises or may arise in its favor against the other party hereto
during the term of this Lease or any renewal or extension thereof for any and
all loss of, or damage to, any of its property located within or upon, or
constituting a part of, the Demised Premises, which loss or damage is covered
by valid and collectible fire and extended coverage insurance policies, to the
extent that such loss or damage is recoverable under such insurance policies.
Such mutual waivers shall be in addition to, and not in limitation or
derogation of, any other waiver or release contained in this Lease with respect
to any loss of, or damage to, property of the parties hereto. Inasmuch as such
mutual waivers will preclude the assignment of any aforesaid claim by way of
subrogation or otherwise to an insurance company (or any other person), each
party hereby agrees immediately to give to each insurance company which has
issued to such party policies of fire and extended coverage insurance, written
notice of the terms of such mutual waivers, and to cause such insurance
policies to be properly endorsed, if necessary, to prevent the invalidation of
such insurance coverages by reason of such waivers.
ARTICLE SIX: USE OF DEMISED PREMISES
6.01 PERMITTED USE. Tenant may use the Demised Premises only for
the permitted use stated in Section 1.08. The parties hereto acknowledge that
the current use of the Demised Premises or the improvements located on the
Demised Premises, or both, may or may not conform to the city zoning ordinance
with respect to the permitted use, height, setback requirements, minimum
parking
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requirements, coverage of improvements to total area of land and other matters
which may have a significant economic impact upon the intended use of Tenant.
Tenant acknowledges that Tenant has or will independently investigate and
verify to Tenant's satisfaction the extent of any such limitations or
nonconforming uses of the Demised Premises. Tenant further acknowledges that
Tenant is not relying upon any warranties or representations of Landlord or the
Brokers who are participating in the negotiation of this Lease concerning the
permitted use of the Demised Premises or with respect to any nonconforming uses
of the improvements located on the Demised Premises.
6.02 COMPLIANCE WITH LAW. Tenant shall comply with all
governmental law, ordinances and regulations applicable to the use of the
Demised Premises, and shall promptly comply with all governmental orders and
directives for the correction, prevention and abatement of nuisances and other
activities in or upon, or connected with the Demised Premises, all at Tenant's
sole expense, including any expense or cost resulting from the compliance with
improvements for handicapped or disabled persons mandated by governmental
regulations.
6.03 SIGNS. Without the prior written consent of Landlord, Tenant
shall not place or affix any signs or other objects upon or to the Demised
Premises, including but not limited to the roof or exterior walls of the
building or other improvements thereon, or paint or otherwise deface said
exterior walls. Any signs installed by Tenant shall conform with applicable
laws and deed and other restrictions. Tenant shall remove all signs at the
termination of this Lease and shall repair any damage and close any holes
caused or revealed by such removal.
6.04 UTILITY SERVICES. Tenant shall pay the cost of all utility
services, including but not limited to initial connection charges, all charges
for gas, water, sewerage, storm water disposal, communications and electricity
used on the Demised Premises and for all electric lights, lamps and tubes.
6.05 LANDLORD'S ACCESS. Landlord and its authorized agents shall
have the right, during normal business hours, to enter the Demised Premises (a)
to inspect the general condition and state of repair thereof, (b) to make
repairs required or permitted under this Lease, (c) to show the Demised
Premises or the Property to any prospective tenant or purchaser, or (d) for any
other reasonable purpose. During the final ninety (90) days of the Lease Term,
Landlord and its authorized agents shall have the right to erect and maintain
on or about the Demised Premises customary signs advertising the Demised
Premises for lease or for sale.
6.06 QUIET POSSESSION. If Tenant pays the rent and complies with
all other terms of this Lease, Tenant may occupy and enjoy the Demised Premises
for the full Lease Term, subject to the provisions of this Lease.
6.07 EXEMPTIONS FROM LIABILITY. Landlord shall not be liable for
any damage or injury to the person, business (or any loss of income therefrom),
goods, wares, merchandise or other property of Tenant, Tenant's employees,
invitees, customers or any other person in or about the Demised Premises,
whether such damage or injury is caused by or results from: (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage, obstruction or
other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning, or lighting fixtures or any other cause; (c) conditions arising
on or about the Demised Premises or upon other portions of any building of
which the Demised Premises is a part, or from other sources or places; or (d)
any act or omission of any other tenant of any building of which the Demised
Premises is a part. Landlord shall not be liable for any such damage or injury
even though the cause of or the means of repairing such damage or injury are
not accessible to Tenant. The provisions of this Section 6.08 shall not,
however, exempt Landlord from liability for Landlord's gross negligence or
willful misconduct.
ARTICLE SEVEN: PROPERTY CONDITION, MAINTENANCE, REPAIRS AND ALTERATIONS
7.01 PROPERTY CONDITION. Landlord represents that on the
Commencement Date, the plumbing, electrical and lighting system, exterior
doors, any fire protection sprinkler system, heating system, air conditioning
equipment, dock levelers and elevators in the Demised Premises are in good
operating condition.
7.02 ACCEPTANCE OF DEMISED PREMISES. Tenant acknowledges that
prior to the Commencement Date a full and complete inspection of the Demised
Premises and adjacent common area shall have been made by Tenant and Tenant
shall have had the opportunity to determine the existence of any defects which
would interfere with Tenant's use of the Demised Premises for their intended
commercial purpose. Tenant specifically acknowledges that as a result of such
inspection and disclosure, Tenant shall take possession of the Demised Premises
and have made its own determination to fully accept same in it as-is condition.
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7.03 OBLIGATION TO REPAIR. Except as otherwise provided herein,
Landlord shall be under no obligation to perform any repair, maintenance or
management service in the Demised Premises or adjacent common areas. Tenant
shall be fully responsible, at its expense, for all repair, maintenance and
management services other than those which are expressly assumed by Landlord.
A. LANDLORD'S OBLIGATION TO REPAIR.
(1) Subject to the provisions of Article Eight
(Damage or Destruction) and Article Nine (Condemnation) and
except for damage caused by any act or omission of Tenant,
Landlord shall keep the foundation, room and the structural
portions of exterior walls of the improvements of the Demised
Premises in good order, condition and repair. Landlord shall
not be obligated to maintain or repair windows, doors, plate
glass or the surfaces of walls. In addition, Landlord shall
not be obligated to make any repairs under this Section until
a reasonable time after receipt of written notice from Tenant
of the need of such repairs. If any repairs are required to
be made by Landlord, Tenant shall, at Tenant's sole cost and
expense, promptly remove Tenant's fixtures, inventory,
equipment and other property, to the extent required to enable
Landlord to make such repairs. Landlord's liability hereunder
shall be limited to the cost of such repairs or corrections.
Tenant waives the benefit of any present or future law which
might give Tenant the right to repair the Demised Premises at
Landlord's expense or to terminate the Lease because of the
condition.
(2) Landlord and Tenant expressly agree that all
repair, maintenance management and other services to be
performed by Landlord or Landlord's agents exclusively consist
of the exercise of professional judgment by such service
providers, and Tenant expressly waives any claims for breach
of warranty arising from the performance of such services.
B. TENANT'S OBLIGATION TO REPAIR. Subject to the
provisions of the last sentence of Section 7.01, the preceding Section
7.03.A, Article Nine(Condemnation), Tenant shall, at all times, keep
all other portions of the Demised Premises in good order, condition
and repair, including but not limited to repairs (including all
necessary replacements) of the windows, plate glass, doors, heating
system, air conditioning equipment, electrical and light system, dock
levelers, elevators, interior plumbing and the interior of the
building in general. In addition, Tenant shall, at Tenant's expense,
repair any damage to any portion of the Property, including the roof,
foundation, or structural portions of exterior walls of the Demised
Premises, caused by Tenant's acts or omissions. If Tenant fails to
maintain and repair the Property as required by this Section, Landlord
may, on ten (10) days' prior written notice, enter the Demised
Premises and perform such maintenance or repair on behalf of Tenant,
except that no notice shall be required in case of emergency, and
Tenant shall reimburse Landlord for all costs incurred in performing
such maintenance or repair immediately upon demand.
7.04 ALTERATIONS, ADDITIONS AND IMPROVEMENTS. Tenant shall not
create any openings in the roof or exterior walls, or make any alterations,
additions or improvements to the Demised Premises without the prior written
consent of Landlord. Consent for nonstructural alterations, additions or
improvements shall not be unreasonably withheld by Landlord. Tenant shall have
the right to erect or install shelves, bins, machinery, air conditioning or
heating equipment and trade fixtures, provided that Tenant complies with all
applicable governmental laws, ordinances, codes, and regulations. At the
expiration or termination of this Lease, Tenant shall, subject to the
restrictions of Section 7.05 below, have the right to remove such items so
installed by it, provided Tenant is not in default at the time of such removal
and provided further that Tenant shall, at the time of removal of such items,
repair in good and workmanlike manner any damage caused by installation or
removal thereof. Tenant shall pay for all costs incurred or arising out of
alterations, additions or improvements in or to the Demised Premises and shall
not permit a mechanic's or materialmen's lien to be filed against the Demised
Premises. Upon request by Landlord, Tenant shall deliver to Landlord proof of
payment reasonably satisfactory to Landlord of all costs incurred or arising
out of any such alterations, additions or improvements.
7.05 CONDITION UPON TERMINATION. Upon the termination of the
Lease, Tenant shall surrender the Demised Premises to Landlord, broom clean and
in the same condition as received except for ordinary wear and tear which
Tenant was not otherwise obligated to remedy under any provision of the Lease.
Tenant shall not be obligated to repair any damage which Landlord is required
to repair under Article Eight (Damage or Destruction). In addition, landlord
may require Tenant to remove any alterations, additions or improvements
(whether or not made with Landlord's consent) prior to the termination of the
Lease and to restore the Demised Premises to its prior condition, all at
Tenant's expense. All alterations, additions and improvements which Landlord
has not required Tenant to
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remove shall become Landlord's property and shall be surrendered to Landlord
upon the termination of the Lease. In no event, however, shall Tenant any of
the following materials or equipment without Landlord's prior written consent:
any power wiring or power panels; light or lighting fixtures; wall coverings;
drapes; blinds or other window coverings; carpets or other floor coverings;
heaters, air conditioners or any other heating or air conditioning equipment;
fencing or security gates; or other similar building operating equipment and
decorations.
ARTICLE EIGHT: DAMAGE OR DESTRUCTION
8.01 NOTICE. If the building or other improvements situated on the
Demised Premises should be damaged or destroyed by fire, tornado or other
casualty, Tenant shall immediately give written notice thereof to Landlord.
8.02 PARTIAL DAMAGE. If the building or other improvements
situated on the Demised Premises are damaged by fire, tornado, or other
casualty but not to such an extent that rebuilding or repairs cannot reasonably
be completed within one hundred twenty (120) days from the date Landlord
receives written notification by Tenant of the happening of the damage, this
Lease shall not terminate, but Landlord shall, at its sole cost and risk,
proceed forthwith and use reasonable diligence to rebuild or repair such
building and other improvements on the Demised Premises (other than leasehold
improvements made by Tenant or any assignee, subtenant or other occupant of the
Demised Premises) to substantially the condition in which they existed prior to
such damage; provided, however, if the casualty occurs during the final nine
(9) months of the Lease Term. Landlord shall not be required to rebuild or
repair such damage unless Tenant shall exercise its renewal option (if any is
contained herein) within fifteen (15) days after the date of receipt by
Landlord of the notification of the occurrence of the damage. If Tenant does
not elect to exercise its renewal option or if there is no renewal option
contained herein or previously unexercised at such time, this Lease shall
terminate at the option of landlord and the Rent shall be abated for the
unexpired portion of this Lease, effective from the date of actual receipt by
Landlord of the written notification of the damage. If the building and other
improvements are to be rebuilt or repaired and are untenantable in whole or in
part following such damage, the monthly installments of Rent payable hereunder
during the period in which they are untenantable shall be adjusted equitably.
8.03 SUBSTANTIAL OR TOTAL DESTRUCTION. If the building or other
improvements situated on the Demised Premises are substantially or totally
destroyed by fire, tornado, or other casualty, or so damaged that rebuilding
cannot reasonably be completed within one hundred twenty (120) days from the
date Landlord receives written notification by Tenant of the happening of the
damage, this Lease shall terminate at the option of either Landlord or Tenant
and monthly installments of Rent shall be abated for the unexpired portion of
this Lease, effective from the date of receipt by Landlord or Tenant of such
written notification. If this Lease is not terminated, the building and the
improvements shall be rebuilt or repaired and monthly installments of Rent
abated to the extent provided under Section 8.02.
ARTICLE NINE: CONDEMNATION
If, during the term of this Lease or any extension or renewal thereof,
all or a substantial part of the Demised Premises are taken for any public or
quasi-public use under any governmental law, ordinance or regulation or by
right of eminent domain, or are sold to the condemning authority under threat
of condemnation, this Lease shall terminate and the monthly installments of
Rent shall be abated during the unexpired portion of this Lease, effective from
the date of taking of the Demised Premises by the condemning authority. If
less than a substantial part of the Demised Premises is taken for public or
quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, or is sold to the condemning authority under threat of
condemnation, Landlord, at its option, may be written notice terminate this
Lease or shall forthwith at its sole expense restore and reconstruct the
buildings and improvements (other than leasehold improvements made by Tenant or
any assignee, subtenant or other occupant of the Demised Premises) situated on
the Demised Premises in order to make the same reasonably tenantable and
suitable for the use for which the Demised Premises is leased as defined in
Section 6.01. The monthly installments of Base Rent payable hereunder during
the unexpired portion of this Lease shall be adjusted equitably. Landlord and
Tenant shall each be entitled to receive and retain such separate awards and
portions of lump sum awards as may be allocated to their respective interests
in any condemnation proceedings. The termination of this Lease shall not
affect the rights of the respective parties to such awards.
ARTICLE TEN: ASSIGNMENT AND SUBLETTING
Tenant shall not, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld, assign this Lease or sublet the
Demised Premises or any portion thereof. Any assignment or subletting shall be
expressly subject to all terms and
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provisions of this Lease, including the provisions of Section 6.01 pertaining
to the use of the Demised Premises. In the event of any assignment or
subletting, tenant shall remain fully liable for the full performance of all
Tenant's obligations under this Lease. Tenant shall not assign its rights
hereunder or sublet the Demised Premises without first obtaining a written
agreement from the assignee or sublessee whereby the assignee or sublessee
agrees to assume the obligations of Tenant hereunder and to be bound by the
terms of this Lease. No such assignment or subletting shall constitute a
novation. In the event of the occurrence of an event of default while the
Demised Premises is assigned or sublet, Landlord, in addition to any other
remedies provided herein or by law, may at Landlord's option, collect directory
from such assignee or subtenant all rents becoming due under such assignment or
subletting and apply such rent against any sums due to Landlord hereunder. No
direct collection by Landlord from any such assignee or subtenant shall release
Tenant from the performance of its obligations hereunder.
ARTICLE ELEVEN: DEFAULT AND REMEDIES
11.01 DEFAULT. Each of the following events shall be an event of
default under this Lease:
A. Failure of Tenant to pay any installment of the Rent
or other sum payable to Landlord hereunder on the date that same is
due and such failure shall continue for a period of ten (10) days.
B. Failure of Tenant to comply with any term, condition
or covenant of this Lease, other than the payment of Base Rent or
other sum of money, and such failure shall not be cured within thirty
(30) days after written notice thereof to Tenant;
C. Tenant or any guarantor of Tenant's obligations
hereunder shall generally fail to pay its debts as they become due or
shall admit in writing its inability to pay its debts, or shall make a
general assignment for the benefit of creditors;
D. Tenant or any guarantor of Tenant's obligations
hereunder shall commence any case, proceeding or other action seeking
reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its property;
E. Any case, proceeding or other action against Tenant
or any guarantor of Tenant's obligations hereunder shall be commenced
seeking to have an order for relief entered against it as debtor, or
seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating
to bankruptcy, insolvency, reorganization or relief of debtors, or
seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its property,
and Tenant (i) fails to obtain a dismissal of such case, proceeding,
or other action within sixty (60) days of its commencement; or (ii)
converts the case from one chapter of the Federal Bankruptcy Code to
another chapter; or (iii) is the subject of an order of relief which
is not fully stayed within seven (7) business days after the entry
thereof; and
F. Abandonment by Tenant of any substantial portion of
the Demised Premises or cessation of the use of the Demised Premises
for the purpose leased.
11.02 REMEDIES. Upon the occurrence of any of the events of default
listed in Section 11.01, Landlord shall have the option to pursue any one or
more of the following remedies without any prior notice or demand whatsoever:
A. Terminate this Lease, in which event Tenant shall
immediately surrender the Demised Premises to Landlord. If Tenant
fails to so surrender the Demised Premises, Landlord may, without
prejudice to any other remedy which it may have for possession of the
Demised Premises or arrearage in Rent, enter upon and take possession
of the Demised Premises and expel or remove Tenant and any other
person who may be occupying the Demised Premises or any part thereof,
by force if necessary, without being liable for prosecution or any
claim for damages therefor. Tenant shall pay to Landlord on demand
the amount of all loss and damage which Landlord may suffer by reason
of such termination, whether through inability to relet the Demised
Premises on satisfactory terms or otherwise.
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B. Enter upon and take possession of the Demised
Premises, by force if necessary, without terminating this Lease and
without being liable for prosecution or for any claim for damages
therefor, and expel or remove Tenant and any other person who may be
occupying the Demised Premises or any part thereof. Landlord may
relet the Demised Premises and receive the rent therefor. Tenant
agrees to pay to Landlord monthly or on demand from time to time any
deficiency that may arise by reason of any such reletting. In
determining the amount of such deficiency, the professional service
fees, attorneys' fees, remodeling expenses and other costs or
reletting shall be subtracted from the amount of rent received under
such reletting.
C. Enter upon the Demised Premises, by force if
necessary, without terminating this Lease and without being liable for
prosecution or for any claim for damages therefor, and do whatever
Tenant is obligated to do under the terms of this Lease. Tenant
agrees to pay Landlord on demand for expenses which Landlord may incur
in thus effecting compliance with Tenant's obligations under this
Lease, together with interest thereon at the rate of twelve percent
(12%) per annum from the date expended until paid. Landlord shall not
be liable for any damages resulting to Tenant from such action,
whether caused by negligence of Landlord or otherwise.
D. In addition to the foregoing remedies, Landlord shall
have the right to change or modify the locks on the Demised Premises
in the event Tenant fails to pay the monthly installment of Rent when
due. Landlord shall not be obligated to provide another key to Tenant
or allow Tenant to regain entry to the Demises Premises unless and
until Tenant pays Landlord all Rent which is delinquent. Tenant
agrees that Landlord shall not be liable for any damages resulting to
the Tenant from the lockout. At such time that Landlord changes or
modified the lock, Landlord shall post a "Notice of Change of Locks"
on the front of the Demised Premises. Such Notice shall state the
following:
(1) That Tenant's monthly installment of Rent is
delinquent, and therefore, under authority of Section 11.02D
of Tenant's Lease, the Landlord has exercised its contractual
right to change or modify Tenant's door lock;
(2) That the Notice has been posted on the
Tenant's front door by a representative of Landlord and that
Tenant should make arrangements to pay the delinquent
installment of Rent when Tenant picks up the key; and
(3) That the failure of the Tenant to comply with
the provisions of the Lease and the Notice and/or tampering
with or changing the door lock(s) by Tenant may subject the
Tenant to legal liability.
E. No re-entry or taking possession of the Demised
Premises by Landlord shall be construed as an election to terminate
this Lease, unless a written notice of such intention is given to
Tenant. Notwithstanding any such reletting or re-entry or taking
possession, Landlord may, at any time thereafter, elect to terminate
this Lease for a previous default. Pursuit of any of the foregoing
remedies shall not preclude pursuit of any of the other remedies
provided by law, nor shall pursuit of any remedy herein provided
constitute a forfeiture or waiver of any monthly installment of Rent
due to Landlord hereunder or of any damages accruing to Landlord by
reason of the violation of any of the terms, provision and covenants
herein contained. Forbearance by Landlord to enforce one or more of
the remedies herein provided upon an event of default shall not be
deemed or construed to constitute a waiver of any other violation or
default. The loss or damage that Landlord may suffer by reason of
termination of this Lease or the deficiency from any reletting as
provided for above shall include the expense of repossession and any
repairs or remodeling undertaken by Landlord following possession.
Should Landlord terminate this Lease at any time for any default, in
addition to any other remedy Landlord may have, Landlord may recover
from Tenant all damages Landlord may incur by reason of such default,
including the cost of recovering the Demised Premises and the cost of
the rental then remaining unpaid.
11.03 NOTICE OF DEFAULT. Tenant shall give written notice of any
failure by Landlord to perform any of its obligations under this Lease to
Landlord and to any ground lessor, mortgagee or beneficiary under any deed to
trust encumbering the Demised Premises whose name and address have been
furnished to Tenant in writing. Landlord shall not be in default under this
Lease unless Landlord (or such ground lessor, mortgagee or beneficiary) fails
to cure such nonperformance within thirty (30) days to cure, Landlord shall not
be in default if such cure is commenced within such 30-day period and
thereafter diligently pursued to completion.
11.04 LIMITATION OF LANDLORD'S LIABILITY. As used in this Lease,
the term "Landlord" means only the current owner or owners of the fee title to
the Demised Premises or the leasehold estate under a ground lease of the
Demised Premises at the time in question. Each Landlord is obligated to
perform the obligations of Landlord under this Lease only during the time such
landlord owns such interest or
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title. Any Landlord who transfers its title or interest is relieved of all
liability with respect to the obligations of Landlord under this Lease accruing
on or after the date of transfer. However, each Landlord shall deliver to its
transferee the Security Deposit held by Landlord if such Security Deposit has
not then been applied under the terms of this Lease.
ARTICLE TWELVE: LANDLORD'S CONTRACTUAL LIEN
In addition to the statutory Landlord's lien, Tenant hereby grants to
Landlord a security interest to secure payment of all Rent and other sums of
money becoming due hereunder from Tenant, upon all goods, wares, equipment,
fixtures, furniture and other personal property of Tenant situated in or upon
the Demised Premises, together with the proceeds from the sale or lease
thereof. Such property shall not be removed without the consent of Landlord
until all arrearage in Rent and other sums of money then due to Landlord
hereunder shall first have been paid and discharged. Upon the occurrence of an
event of default, Landlord may, in addition to any other remedies provided
herein or by law, enter upon the Demised Premises and take possession of any
and all goods, wares, equipment, fixtures, furniture and other personal
property of Tenant situated on the Demised Premises without liability for
trespass or conversion, and sell the same at public or private sale, with or
without having such property at the sale, after giving Tenant reasonable
notice of the time and place of any such sale. Unless otherwise required by
law, notice to Tenant of such sale shall be deemed sufficient if given in the
manner prescribed in this Lease at least ten (10) days before the time of the
sale. Any public sale made under this Article shall be deemed to have been
conducted in a commercially reasonable manner if held on the Demised Premises
or where the property is located, after the time, place and method of sale and
a general description of the types of property to be sold have been advertised
in a daily newspaper published in the county where the Demised Premises is
located for five (5) consecutive days before the date of the sale. Landlord or
its assigns may purchase at a public sale and, unless prohibited by law, at a
private sale. The proceeds from any disposition dealt with in this Article,
less any and all expenses connected with the taking of possession, holding and
selling of the property (including reasonable attorneys' fees and legal
expenses), shall be applied as a credit against the indebtedness secured by the
security interest granted herein. Any surplus shall be paid to Tenant or as
otherwise required by law; Tenant shall pay any deficiencies forthwith. Upon
request by landlord, Tenant agrees to execute and deliver to Landlord a
financing statement in form sufficient to perfect the security interest of
Landlord in the aforementioned property and proceeds thereof under the
provisions of the Business and Commerce Code in force in the State of Texas.
The statutory lien for rent is expressly reserved; the security interest herein
granted is in addition and supplementary thereto. Notwithstanding anything to
the contrary, provided Tenant is not in default under any of the terms of this
Lease, Tenant may request Landlord to subordinate its statutory and contractual
landlord's lien to any institutional third party financing of Tenant incurred
for the purpose of securing inventory, fixtures or equipment used in the
Demised Premises. Approval by landlord of Tenant's request for this
subordination will not be unreasonably withheld by Landlord.
ARTICLE THIRTEEN: PROTECTION OF LENDERS
13.01 SUBORDINATION. Landlord shall have the right to subordinate
this Lease to any future ground Lease, deed of trust or mortgage encumbering
the Demised Premises, and advances made on the security thereof and any
renewals, modifications, consolidations, replacements or extensions thereof,
whenever made or recorded. Landlord's right to obtain such a future
subordination is subject to Landlord's providing Tenant with a written
Subordination, Nondisturbance and Attornment Agreement from any such ground
lessor, beneficiary or mortgagee wherein Tenant's right to peaceable possession
of the Demised Premises during the Lease Term shall not be disturbed if Tenant
pays the Rent and performs all of Tenant's obligations under this Lease and is
not otherwise in default. If any ground lessor, beneficiary, or mortgagee
elects to have this Lease superior to the lien of its ground lease, deed of
trust or mortgage and gives written notice thereof to Tenant, this Lease shall
be deemed superior to such ground lease, deed of trust or mortgage whether this
Lease is dated prior or subsequent to the date of said ground lease, deed of
trust or mortgage or the date of recording thereof. Tenant's rights under this
Lease, unless specifically modified at the time this Lease is executed, are
subordinated to any existing ground lease, deed of trust or mortgage
encumbering the Demised Premises.
13.02 ATTORNMENT. If Landlord's interest in the Demised Premises is
transferred voluntarily or involuntarily to any ground lessor, beneficiary
under a deed of trust, mortgagee or purchaser at a foreclosure sale, Tenant
shall attorn to the transferee of or successor to Landlord's interest in the
Demised Premises and recognize such transferee or successor as Landlord under
this Lease. Tenant waives the protection of any statute or rule of law which
gives or purports to give Tenant any right to terminate this Lease or surrender
possession of the Demised Premises upon the transfer of Landlord's interest.
Page 11
<PAGE> 12
13.03 SIGNING OF DOCUMENTS. Tenant shall sign and deliver any
instruments or documents necessary or appropriate to evidence any such
attornment or subordination or agreement to do so. If Tenant fails to do so
within ten (10) days after written request, Tenant hereby makes, constitutes
and irrevocably appoints Landlord, or any transferee or successor of Landlord,
the attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
13.04 ESTOPPEL CERTIFICATES.
A. Upon Landlord's written request, Tenant shall
execute, acknowledge and deliver to Landlord a written statement
certifying: (i) that none of the terms or provisions of this Lease
have ben changed (or if they have been changed, stating how they have
been changed); (ii) that this Lease has not been canceled or
terminated; (iii) the last date of payment of the Base Rent and other
charges and the time period covered by such payment; and (iv) that
Landlord is not in default under this Lease (or, if Landlord is
claimed to be in default, stating why). Tenant shall deliver such
statement to Landlord within ten (10) days after Landlord's request.
Any such statement by Tenant may be furnished by Landlord to any
prospective purchaser or lender of the Demised Premises. Such
purchaser or lender may rely conclusively upon such statement as true
and correct.
B. If Tenant does not deliver such statement to Landlord
within such 10-day period, Landlord, and any prospective purchaser or
lender, may conclusively presume and rely upon the following facts:
(i) that the terms and provision of this Lease have not been changed
except as otherwise represented by Landlord; (ii) that this Lease has
not been canceled or terminated except as otherwise represented by
Landlord; (iii) that not more than one monthly installment of Base
Rent or other charges have been paid in advance; and (iv) that
Landlord is not in default under the Lease. In such event, Tenant
shall be estopped from denying the truth of such facts.
13.05 TENANT'S FINANCIAL CONDITION. Within ten (10) days after
written request from Landlord, Tenant shall deliver to Landlord such financial
statements as are reasonably required by Landlord to verify the net worth of
Tenant, or any assignee, subtenant, or guarantor of Tenant. In addition,
Tenant shall deliver to any lender designated by Landlord any financial
statements required by such lender to facilitate the financing or refinancing
of the Demised Premises. Tenant represents and warrants to Landlord that each
such financial statement is a true, complete, and accurate statement as of the
date of such statement. All financial statements shall be confidential and
shall be used only for the purposes set forth herein.
ARTICLE FOURTEEN: PROFESSIONAL SERVICE FEES
ARTICLE FIFTEEN: ENVIRONMENTAL REPRESENTATIONS AND INDEMNITY
15.01 TENANT'S COMPLIANCE WITH ENVIRONMENTAL LAWS. Tenant, at
Tenant's expense, shall comply with all laws, rules, orders, ordinances,
directions, regulations and requirements of federal, state, county and
municipal authorities pertaining to Tenant's use of the Property and with the
recorded covenants, conditions and restrictions, regardless of when they become
effective, including, without limitation, all applicable federal, state and
local laws, regulations or ordinances pertaining to air and water quality,
Hazardous Material (as defined hereinafter), waste disposal, air emissions and
other environmental matters, all zoning and other land use matters, and with
any direction of any public officer or officers, pursuant to law, which shall
impose any duty upon Landlord or Tenant with respect to the use or occupation
of the Property.
15.02 TENANT'S INDEMNIFICATION. Tenant shall not cause or permit
any hazardous material to be brought upon, kept or used in or about the
Property by tenant, its agents, employees, contractors or invitees without the
prior written consent of Landlord. If Tenant breaches the obligations stated
in the preceding Section or sentence, or if the presence of Hazardous Material
on the Property or any other property by Hazardous Material otherwise occurs
for which Tenant is legally liable to Landlord for damage resulting therefrom,
then Tenant shall indemnify, defend and hold Landlord harmless from any and all
claims, judgments, damages, penalties, fines, costs, liabilities or losses
(including, without limitation, diminution in value of the Property, damages
for the loss or restriction on use of rentable or unusable space or of any
amenity or appurtenance of the Property, damages arising from any adverse
impact on marketing of building space or land area, and sums paid in settlement
of claims, attorneys' fees, consultant fees and expert fees) which arise during
or after the Lease Term as a result of such contamination. The indemnification
of Landlord by Tenant includes, without limitation, costs incurred in
connection with any investigation of site conditions or any clean-up, remedial
work, removal or restoration work required by any federal, state or local
government agency or political subdivision because of Hazardous material
present in the soil or ground water on or under
Page 12
<PAGE> 13
the Property. Without limiting the foregoing, if the presence of any Hazardous
Material on the Property or any other property caused or permitted by Tenant
results in any contamination of the Property, Tenant shall promptly take all
actions at its sole expense as are necessary to return the Property to the
condition existing prior to the introduction of any such hazardous Material to
the Property, provided that Landlord's approval of such actions shall first be
obtained. The foregoing indemnity shall survive the expiration or earlier
termination of this Lease.
15.03 LANDLORD'S REPRESENTATIONS AND WARRANTIES. Landlord
represents and warrants to Landlord's current actual knowledge that any
hackling, transportation, storage, treatment or usage of Hazardous Material
that has occurred on the Property to date has been in compliance with all
applicable federal, state, and local laws, regulations and ordinances.
Landlord further represents and warrants that no leak, spill, release,
discharge, emission or disposal of Hazardous Material has occurred on the
Property to date and that the soil or groundwater on or under the Property is
free of Hazardous Material as of the date that the term of this Lease commences
unless expressly disclosed by Landlord to Tenant in writing.
15.04 LANDLORD'S INDEMNIFICATION. Landlord hereby indemnifies,
defends and holds Tenant harmless from any claims, judgments, damages,
penalties, fines, costs, liabilities, (including sums paid in settlements of
claims) or loss, including, without limitation, attorneys' fees, consultant
fees, and expert fees, which arise during or after the term of this Lease from
or in connection with the presence or suspected presence of Hazardous Material
in the soil or groundwater on or under the Property, if the Hazardous Material
is released by Landlord or is present solely as a result of the negligence or
willful conduct of Landlord, its officers, employees or agents. Without
limiting the generality of the foregoing, the indemnification provided by this
Article 15.04 shall specifically cover costs incurred in connection with any
investigation of site conditions or any clean-up, remedial work, removal or
restoration work required by any federal, state or local governmental agency or
political subdivision because of the presence or suspected presence of
Hazardous Material in the soil or groundwater on or under the Property, unless
the Hazardous Material is released by Landlord or is present solely as a result
of the negligence or willful conduct of Landlord, its officers, employees, or
agents.
15.05 DEFINITIONS. For purposes of this Article 15, the term
"Hazardous Material" shall mean any pollutant, toxic substance, hazardous
waste, hazardous material, hazardous substance, or oil as defined in or
pursuant to the Resource Conservation and Recovery Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Federal Clean Water Act, as amended, or any other federal, state
or local environment law, regulation, ordinance, rule or bylaw, whether
existing as of the date hereof, previously enforced or subsequently enacted.
15.06 SURVIVAL. The indemnities contained in this Article 15 shall
survive the expiration or earlier termination of this Lease.
ARTICLE SIXTEEN: MISCELLANEOUS
16.01 FORCES MAJEURE. In the event performance by Landlord of any
term, condition or covenant in this Lease is delayed or prevented by any Act of
God, strike, lockout, shortage of material or labor, restriction by any
governmental authority, civil riot, flood, or any other cause not within the
control of Landlord, the period for performance of such term, condition or
covenant shall be extended for a period equal to the period Landlord is so
delayed or hindered.
16.02 INTERPRETATION. The captions of the Articles or Sections of
this Lease are to assist the parties in reading this Lease and are not a part
of the terms or provisions of this Lease. Whenever required by the context of
this Lease, the singular shall include the plural and the plural shall include
the singular. For convenience, each party hereto is referred to in the neuter
gender, but the masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents, employees, contractors,
invitees, successors or others using the Demised Premises with Tenant's
expressed or implied permission.
16.03 WAIVERS. All waivers must be in writing and signed by the
waiving party. Landlord's failure to enforce any provisions of this Lease or
its acceptance of late installments of Rent shall not be waiver and shall not
estop Landlord from enforcing that provision or any other provision of this
Lease in the future. No statement on a payment check from Tenant or in a
letter accompanying a payment check shall e binding on Landlord. Landlord may,
with or without notice to Tenant, negotiate, cash, or endorse such check
without being bound to the conditions of such statement.
Page 13
<PAGE> 14
16.04 SEVERABILITY. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is invalid or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.
16.05 JOINT AND SEVERAL LIABILITY. All parties signing this Lease
as Tenant shall be jointly and severally liable for all obligations of Tenant.
16.06 INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS. This Lease
is the only agreement between the parties pertaining to the lease of the
Demised Premises and no other agreements are effective. All amendments to this
Lease shall be in writing and signed by all parties. Any other attempted
amendment shall be void.
16.07 NOTICES. All notices required or permitted under this Lease
shall be in writing and shall be personally delivered or shall be deemed to be
delivered, whether actually received or not, when deposited in the United
States mail, postage pre-paid, registered or certified mail, return receipt
requested, addressed as stated herein. Notices to Tenant shall be delivered to
the address specified in Section 1.03 above, except that, upon Tenant's taking
possession of the Demised Premises, the Demised Premises shall be Tenant's
address for notice purposes. Notices to any other party hereto shall be
delivered to the address specified in Article One as the address for such
party. Any party hereto may change its notice address upon written notice to
the other parties.
16.08 ATTORNEYS' FEES. If on account of any breach or default by
any party hereto in its obligations to any other party hereto including but not
limited to the Principal Broker), it shall become necessary for the
nondefaulting party to employ an attorney to enforce or defend any of its
rights or remedies hereunder, the defaulting party agrees to pay the
nondefaulting party its reasonable attorneys' fees, whether or not suit is
instituted in connection therewith.
16.09 VENUE. All obligations hereunder, including but not limited
to the payment of fees to the Principal Broker, shall be performable and
payable in the county in which the Property is located.
16.10 GOVERNING LAW. The laws of the State of Texas shall govern
this Lease.
16.11 SURVIVAL. All obligations of any party hereto not fulfilled
at the expiration or the earlier termination of this Lease shall survive such
expiration or earlier termination as continuing obligations of such party.
16.12 BINDING EFFECT. This Lease shall inure to the benefit of and
be binding upon each of the parties hereto and their respective heirs,
representatives, successors and assigns; provided, however, Landlord shall have
no obligation to Tenant's successors or assigns unless the rights or interests
of such successors or assigns are acquired in accordance with the terms of this
Lease.
16.13 EXECUTION AS OFFER. The execution of this Lease by the first
party to do so constitutes an offer to lease the Demised Premises. Unless
within the number of days stated in Section 1.14 above after the date of its
execution by the first party to do so, this Lease is signed by the other party
and a fully executed copy is delivered to the first party, such offer shall be
automatically withdrawn and terminated.
ARTICLE SEVENTEEN: ADDITIONAL PROVISIONS
Additional provisions may be set forth in the blank space below,
and/or an Exhibit or Exhibits may be attached hereto which shall be made a part
of this Lease for all purposes.
See the Addendum attached hereto.
Page 14
<PAGE> 15
EFFECTIVE as of the date stated in Section 1.01 above.
LANDLORD:
CRAFTMADE INTERNATIONAL, INC.,
A DELAWARE CORPORATION
By: ___________________________________
Name: _________________________________
Title: ________________________________
Date of Execution by Landlord: ________
TENANT:
TSI PRIME, INC.,
A CALIFORNIA CORPORATION
By: ___________________________________
Name: _________________________________
Title: ________________________________
Date of Execution by Tenant: __________
********************************************************************************
[For voluntary use only by members of the Greater Dallas
Association of REALTORS(R), Inc.]
Page 15
<PAGE> 16
GREATER DALLAS ASSOCIATION OF REALTORS(R), INC.
EXHIBIT C
RENEWAL OPTIONS
PROPERTY ADDRESS OR DESCRIPTION: 650 S. Royal, Coppell, Texas
DATE OF LEASE: ____________________, 1995
1. OPTION(S) TO EXTEND TERM
Landlord hereby grants to Tenant two (2) option(s) [the "Option(s)"]
to extend the Lease Term for additional term(s) of one (1) year each [the
"Extension(s)"], on the same terms, conditions and covenants set forth in the
Lease Agreement, except as provided below. Each Option shall be exercised only
by written notice delivered to the Landlord at least one hundred twenty (120)
days before the expiration of the Least Term or the preceding Extension of the
Lease Term. If Tenant fails to deliver Landlord written notice of the exercise
of an Option within the prescribed time period, such Option and any succeeding
Options shall lapse, and there shall be no further right to extend the Lease
Term. Each Option shall be exercisable by Tenant on the express condition that
at the time of the exercise, and at all times prior to the commencement of such
Extension(s), Tenant shall not be in default under any of the provisions of
this Lease. The foregoing Option(s) are personal to Tenant and may not be
exercised by any assignee or subtenant.
2. CALCULATION OF RENT
The Base Rent during the Extension(s) shall be equal to $20,000 per
month.
INITIALS: LANDLORD: INITIALS: TENANT:
__________ __________
__________ __________
<PAGE> 17
GREATER DALLAS ASSOCIATION OF REALTORS(R), INC.
EXHIBIT H
CONSTRUCTION OF IMPROVEMENTS
PROPERTY ADDRESS OR DESCRIPTION: 650 S. Royal, Coppell, Texas
DATE OF LEASE: __________________, 1995
1. CONSTRUCTION OF IMPROVEMENTS:
A. Landlord agrees to construct (or complete) a building
and other improvements upon the Demised Premises in accordance with
detailed Plans and Specifications to be prepared forthwith by Landlord
and delivered to Tenant. Upon approval by Tenant, two or more sets of
said Plans and Specifications shall be signed by both parties, with
one signed set retained by Tenant. Changes to said Plans and
Specifications thereafter shall be made only by written addenda signed
by both parties.
B. Upon approval of said Plans and Specifications,
Landlord shall forthwith begin construction and pursue same to
completion with reasonable diligence in a good and workmanlike manner.
2. COMPLETION DATE:
A. It is estimated by Landlord that the building and
other improvements shall be completed by December 31, 1995.
B. Landlord shall notify Tenant in writing when
construction has been completed. Tenant shall thereupon inspect the
building and other improvements, and if same have in fact been
completed in accordance with the Plans and Specifications, the Lease
Term shall begin upon the date of completion with Base Rent due and
payable as provided in Article Three of the Lease.
C. If the building and other improvements have not in
fact been completed in accordance with the Plans and Specifications,
written notification of the items deemed incomplete shall be given by
Tenant to Landlord immediately following inspection. Landlord shall
forthwith proceed to finish the incomplete items, and the lease term
shall begin upon the date that such items are in fact complete.
D. Completion, as used herein, shall mean substantial
completion. Substantial completion shall mean at such time as the
Landlord obtains a Certificate of Occupancy issued by the local
municipal authorities whose jurisdiction includes the Demised
Premises, and is the stage when the construction is sufficiently
complete in accordance with the Plans and Specifications that the
Tenant can occupy or utilize the Demised premises for its intended
use, except for minor "punch list" items remaining to be completed.
3. LETTER OF ACCEPTANCE: Tenant agrees to execute and deliver to
Landlord a Letter of Acceptance, addressed to Landlord and signed by Tenant (or
its authorized representative) acknowledging that construction has been
completed in accordance with the Plans and Specifications and acknowledging the
Commencement Date of the Lease Term.
4. TAKING OF POSSESSION: The taking of possession of the Demised
Premises by Tenant shall be deemed conclusively to be acknowledgment by Tenant
that construction has been completed in accordance with Plans and
Specifications and that the Lease Term has begun as of the date of completion.
INITIALS: LANDLORD: INITIALS: TENANT:
__________ __________
__________ __________
<PAGE> 18
5. FAILURE TO COMPLETE: In the event that the building and other
improvements have not been completed in accordance with the Plans and
Specifications by February 1, 1996, or by such date as extended by application
of Section 16.01, Tenant shall have the right and option to terminate this
Lease by giving written notice of Tenant's intention to terminate as of a
certain date not less than fifteen (15) days prior to said certain date. If
the building and other improvements have not been completed by said certain
date, the lease shall, at the option of Tenant, terminate with no further
liability of one party to the other.
INITIALS: LANDLORD: INITIALS: TENANT:
__________ __________
__________ __________
<PAGE> 19
FIRST AMENDMENT TO COMMERCIAL LEASE AGREEMENT
This First Amendment to Commercial Lease Agreement (this "Amendment")
is made and entered into as of the 20th day of December, 1995 by and between
Craftmade International, Inc. ("Landlord") and TSI Prime, Inc. ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant have heretofore executed that certain
Commercial Lease Agreement (the "Lease") dated January 1, 1995 concerning
approximately 80,000 square feet in the building located at 650 S. Royal,
Coppell, Dallas County, Texas; and
WHEREAS, Landlord and Tenant now desire to amend the Lease to the
extent and as provided herein;
NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Landlord and Tenant hereby agree as follows:
1. The Lease is hereby amended to provide that if Landlord's
lender ("Lender") has elected to foreclose on the Demised Premises and Lender,
in Lender's sole discretion, determines that Lender is not willing to consent
to the Option, then Lender shall have the right to revoke Tenant's Option to
renew by delivering to Tenant written notice of such election by Lender at
least ninety (90) days before the expiration of the Lease Term, in which event
Tenant's Option shall be revoked and the Lease Term shall expire without the
Extension.
2. The Lease is hereby amended to provide that the liability of
Landlord to Tenant for any default by Landlord under the terms of the Lease
shall be limited to Landlord's interest in the Demised Premises, and Tenant
agrees to look solely to Landlord's interest in the Demised Premises for the
recovery of any judgment against Landlord, it being intended that neither
Landlord nor any of Landlord's officers, directors, shareholders, agents,
affiliates or lenders shall be personally liable for any judgment or
deficiency.
3. Any capitalized terms in this Amendment that are not expressly
defined in this Amendment, but are expressly defined in the Lease, shall have
the same meaning herein as set forth in the Lease.
4. As amended by this Amendment, the Lease remains in full force
and effect.
FIRST AMENDMENT TO COMMERCIAL LEASE AGREEMENT - Page 1
<PAGE> 20
Executed and effective as of the date first set forth hereinabove.
CRAFTMADE INTERNATIONAL, INC.,
a Delaware corporation
By: __________________________________
Name: ____________________________
Title: ___________________________
TSI PRIME, INC., a California
corporation
By: __________________________________
Name: ____________________________
Title: ___________________________
FIRST AMENDMENT TO COMMERCIAL LEASE AGREEMENT - Page 2
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