EXHIBIT 10.1
LOAN AGREEMENT
October 12, 2001
TERAFORCE TECHNOLOGY CORPORATION
1240 East Campbell Road
Richardson, Texas 75081
Ladies and Gentlemen:
This Loan Agreement (the "Loan Agreement") will serve to set forth the
terms of the financing transactions by and between TERAFORCE TECHNOLOGY
CORPORATION ("Borrower"), and BANK ONE, NA with its main office in Chicago,
Illinois ("Bank"):
1. CREDIT FACILITY. Subject to the terms and conditions set forth in this
Loan Agreement and the other agreements, instruments and documents evidencing,
securing, governing, guaranteeing and/or pertaining to the Loan, as hereinafter
defined (collectively, together with the Loan Agreement, referred to hereinafter
as the "Loan Documents"), Bank hereby agrees to provide to Borrower the credit
facility set forth hereinbelow (the "Credit Facility"):
Revolving Line of Credit. Subject to the terms and conditions set forth
herein, Bank agrees to lend to Borrower, on a revolving basis from time to
time during the period commencing on the date hereof and continuing through
the maturity date of the promissory note evidencing this Credit Facility
from time to time, such amounts as Borrower may request hereunder;
provided, however, the total principal amount outstanding at any time shall
not exceed $1,500,000.00 (the "Revolving Line of Credit"). Subject to the
terms and conditions hereof, Borrower may borrow, repay and reborrow
hereunder.
All advances under the Credit Facility shall be collectively called the "Loan".
Bank reserves the right to require Borrower to give Bank not less than one (1)
business day prior notice of each requested advance under the Credit Facility,
specifying (i) the aggregate amount of such requested advance, (ii) the
requested date of such advance, and (iii) the purpose for such advance, with
such advances to be requested in a form satisfactory to Bank.
2. PROMISSORY NOTE. The Loan shall be evidenced by the note of even date
herewith (together with any renewals, extensions and increases thereof, the
"Note") duly executed by Borrower and payable to the order of Bank, in form and
substance acceptable to Bank. Interest on the Note shall accrue at the rate set
forth therein. The principal of and interest on the Note shall be due and
payable in accordance with the terms and conditions set forth in the Note and in
this Loan Agreement with final maturity on May 31, 2002.
3. REPAYMENT IN THE EVENT OF A MAJOR TRANSACTION. Upon the occurrence
of a Major Transaction, as herein defined, (a) the entire unpaid balance of
principal of the Note, together with all accrued but unpaid interest thereon,
shall become immediately due and payable without further notice, demand,
presentation, notice of dishonor, notice of intent to accelerate, notice of
acceleration, protest or notice of protest of any kind, all of which are
expressly waived by Borrower, and (b) further advances under the Note shall
cease and no further advances shall be available under this Credit Facility.
The term "Major Transaction", as used herein, shall mean net cash proceeds to
Borrower of more than $10,000,000.00 as the result of (a) the sale, transfer or
other disposition of any assets, other than in the normal course of business,
of Borrower or any subsidiary of Borrower, (b) the sale, pledge or transfer of
any subsidiary or business division of Borrower or any subsidiary of Borrower,
or (c) the settlement of litigation or collection by Borrower of a final
judgment in such litigation.
4. GUARANTOR. As a condition precedent to the Bank's obligation to make
the Loan to Borrower, Borrower agrees to cause O.S. Wyatt, Jr. (the
"Guarantor") to each execute and deliver to Bank contemporaneously herewith a
guaranty agreement, in form and substance satisfactory to Bank.
5. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants, and upon each request for an advance under the Credit Facility further
represents and warrants, to Bank as follows:
(a) Existence. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
all other states where it is doing business, and has all requisite power
and authority to execute and deliver the Loan Documents.
(b) Binding Obligations. The execution, delivery, and performance of
this Loan Agreement and all of the other Loan Documents by Borrower have
been duly authorized by all necessary action by Borrower, and constitute
legal, valid and binding obligations of Borrower, enforceable in accordance
with their respective terms, except as limited by bankruptcy, insolvency or
similar laws of general application relating to the enforcement of
creditors' rights and except to the extent specific remedies may generally
be limited by equitable principles.
(c) No Consent. The execution, delivery and performance of this Loan
Agreement and the other Loan Documents, and the consummation of the
transactions contemplated hereby and thereby, do not (i) conflict with,
result in a violation of, or constitute a default under (A) any provision
of its articles or certificate of incorporation or bylaws, if Borrower is a
corporation, or its partnership agreement, if Borrower is a partnership, or
any agreement or other instrument binding upon Borrower, or (B) any law,
governmental regulation, court decree or order applicable to Borrower, or
(ii) require the consent, approval or authorization of any third party.
(d) Financial Condition. Each financial statement of Borrower
supplied to the Bank truly discloses and fairly presents Borrower's
financial condition as of the date of each such statement. There has been
no material adverse change in such financial condition or results of
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operations of Borrower subsequent to the date of the most recent financial
statement supplied to the Bank.
(e) Litigation. Except as disclosed as of the date hereof in
Borrower's filings with the Securities and Exchange Commission, there are
no actions, suits or proceedings, pending or, to the knowledge of Borrower,
threatened against or affecting Borrower or the properties of Borrower,
before any court or governmental department, commission or board, which, if
determined adversely to Borrower, would have a material adverse effect on
the financial condition, properties, or operations of Borrower.
(f) Taxes: Governmental Charges. Borrower has filed all material
federal, state and local tax reports and returns required by any law or
regulation to be filed by it and has either duly paid all taxes, duties and
charges indicated due on the basis of such returns and reports, or made
adequate provision for the payment thereof, and the assessment of any
material amount of additional taxes in excess of those paid and reported is
not reasonably expected.
6. CONDITIONS PRECEDENT TO ADVANCES. Bank's obligation to make any
advance under this Loan Agreement and the other Loan Documents shall be subject
to the conditions precedent that, as of the date of such advance and after
giving effect thereto (i) all representations and warranties made to Bank in
this Loan Agreement and the other Loan Documents shall be true and correct in
all material respects, as of and as if made on such date, (ii) no material
adverse change in the financial condition of Borrower since the effective date
of the most recent financial statements furnished to Bank by Borrower shall have
occurred and be continuing, (iii) no event has occurred and is continuing, or
would result from the requested advance, which with notice or lapse of time, or
both, would constitute an Event of Default (as hereinafter defined), and (iv)
Bank's receipt of all Loan Documents appropriately executed by Borrower and all
other proper parties.
7. AFFIRMATIVE COVENANTS. Until (i) the Note and all other obligations
and liabilities of Borrower under this Loan Agreement and the other Loan
Documents are fully paid and satisfied, and (ii) the Bank has no further
commitment to lend hereunder, Borrower agrees and covenants that it will, unless
Bank shall otherwise consent in writing:
(a) Accounts and Records. Maintain its books and records in
accordance with generally accepted accounting principles.
(b) Right of Inspection. Permit Bank to visit its properties and
installations and to examine, audit and make and take away copies or
reproductions of Borrower's books and records, at all reasonable times.
(c) Right to Additional Information. Furnish Bank with such
additional information and statements, lists of assets and liabilities, tax
returns, and other reports with respect to Borrower's financial condition
and business operations as Bank may request from time to time.
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(d) Compliance with Laws. Conduct its business in an orderly and
efficient manner consistent with good business practices, and perform and
comply with all statutes, rules, regulations and/or ordinances imposed by
any governmental unit upon Borrower its businesses, operations and
properties (including without limitation, all applicable environmental
statutes, rules, regulations and ordinances).
(e) Taxes. Pay and discharge when due all of its indebtedness and
obligations, including without limitation, all assessments, taxes,
governmental charges, levies and liens, of every kind and nature, imposed
upon Borrower or its properties, income, or profits, prior to the date on
which material penalties or penalties which are not otherwise waived would
attach, and all lawful claims that, if unpaid, might become a lien or
charge upon any of Borrower's properties, income, or profits; provided,
however, Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy, lien or claim so long as (i) the legality of
the same shall be contested in good faith by appropriate judicial,
administrative or other legal proceedings, and (ii) Borrower shall have
established on its books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien or claim in accordance with generally
accepted accounting principles, consistently applied.
(f) Insurance. Maintain insurance, including but not limited to,
fire insurance, comprehensive property damage, public liability, worker's
compensation, business interruption and other insurance deemed reasonably
necessary or otherwise reasonably required by Bank.
(g) Notice of Indebtedness. Promptly inform Bank of the creation,
incurrence or assumption by Borrower of any actual or contingent material
liabilities not permitted under this Loan Agreement.
(h) Notice of Litigation. Promptly after the commencement thereof,
notify Bank of all actions, suits and proceedings before any court or any
governmental department, commission or board which could reasonably be
expected to have a material affect on Borrower or any of its properties.
(i) Notice of Material Adverse Change. Promptly inform Bank of (i)
any and all material adverse changes in Borrower's financial condition, and
(ii) all claims made against Borrower which could materially affect the
financial condition of Borrower.
(j) Additional Documentation. Execute and deliver, or cause to be
executed and delivered, any and all other agreements, instruments or
documents which Bank may reasonably request in order to give effect to the
transactions contemplated under this Loan Agreement and the other Loan
Documents.
8. NEGATIVE COVENANTS. Until (i) the Note and all other obligations and
liabilities of Borrower under this Loan Agreement and the other Loan Documents
are fully paid and satisfied, and (ii)
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the Bank has no further commitment to lend hereunder, Borrower will not,
without the prior written consent of Bank:
(a) Nature of Business. Except for any Major Transaction, make any
material change in the nature of its business as carried on as of the date
hereof.
(b) Liquidations, Mergers, Consolidations. Liquidate, merge or
consolidate with or into any other entity.
(c) Liens. Create or incur any lien or encumbrance on any of its
assets, other than (i) liens and security interests securing indebtedness
owing to Bank, (ii) liens for taxes, assessments or similar charges either
(1) not yet due or (2) being contested in good faith by appropriate
proceedings and for which Borrower has established adequate reserves, (iii)
liens in connection with any reimbursement obligation to the Guarantor from
transactions arising out of this Loan Agreement or to issuers of letters of
credit arising out of that certain Business Loan Agreement dated June 1,
2001 between Borrower and Bank (the "June Loan Agreement"), and (iv) liens
and security interest existing as of the date hereof which have been
disclosed to and approved by the Bank in writing.
(d) Indebtedness. Create, incur or assume any indebtedness for
borrowed money or issue or assume any other note, debenture, bond or other
evidences of indebtedness, or guarantee any such indebtedness or such
evidences of indebtedness of others, other than (i) borrowings from Bank,
(ii) indebtedness or reimbursement obligations to the Guarantor from
transactions arising out of this Loan Agreement or to issuers of letters of
credit arising out of the June Loan Agreement, (iii) indebtedness not
exceeding $1,000,000.00 in the aggregate, and (iv) borrowings outstanding
on the date hereof and disclosed in writing to Bank.
(e) Change in Management. Permit a change in the senior management of
Borrower.
(f) Loan. Make any Loan to any person or entity.
(g) Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property
or the rendering of any service, with any Affiliate (as hereinafter
defined) of Borrower, except in th
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agrees not to declare or pay any dividends on any shares of Borrower's
capital stock, make any other distributions with respect to any payment on
account of the purchase, redemption, or other acquisition or retirement of
any shares of Borrower's capital stock, or make any other distribution,
sale, transfer or lease of any of Borrower's assets other than in the
ordinary course of business, unless any such amounts are directly utilized
for the payment of principal or interest on indebtedness and obligations
owing from time to time by Borrower to Bank.
11. EVENTS OF DEFAULT. Each of the following shall constitute an "Event
of Default" under this Loan Agreement:
(a) The failure, refusal or neglect of Borrower to pay when due any
part of the principal of, or interest on, the Note or any other
indebtedness or obligations owing to Bank by Borrower from time to time.
(b) The failure of Borrower or any Obligated Party (as defined
below) to timely and properly observe, keep or perform any covenant,
agreement, warranty or condition required herein or in any of the other
Loan Documents.
(c) The occurrence of an event of default under any of the other
Loan Documents or under any other agreement now existing or hereafter
arising between Bank and Borrower.
(d) Any representation contained herein or in any of the other Loan
Documents made by Borrower or any Obligated Party is false or misleading
in any material respect.
(e) The occurrence of any event which permits the acceleration of
the maturity of any indebtedness owing by Borrower to any third party
under any agreement or understanding.
(f) If Borrower or any Obligated Party: (i) becomes insolvent, or
makes a transfer in fraud of creditors, or makes an assignment for the
benefit of creditors, or admits in writing its inability to pay its debts
as they become due; (ii) generally is not paying its debts as such debts
become due; (iii) has a receiver, trustee or custodian appointed for, or
take possession of, all or substantially all of the assets of such party,
either in a proceeding brought by such party or in a proceeding brought
against such party and such appointment is not discharged or such
possession is not terminated within sixty (60) days after the effective
date thereof or such party consents to or acquiesces in such appointment or
possession; (iv) files a petition for relief under the United States
Bankruptcy Code or any other present or future federal or state insolvency,
bankruptcy or similar laws (all of the foregoing hereinafter collectively
called "Applicable Bankruptcy Law") or an involuntary petition for relief
is filed against such party under any Applicable Bankruptcy Law and such
involuntary petition is not dismissed within sixty (60) days after the
filing thereof, or an order for relief naming such party is entered under
any Applicable Bankruptcy Law, or any composition, rearrangement,
extension, reorganization or other relief of debtors now or hereafter
existing is requested or consented to by such party; (v) fails to have
discharged within a period of thirty (30)
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days any attachment, sequestration or similar writ levied upon any property
of such party; or (vi) fails to pay within thirty (30) days any final money
judgment against such party.
(g) If Borrower or any Obligated Party is an entity, the liquidation,
dissolution, merger or consolidation of any such entity or, if Borrower or
any Obligated Party is an individual, the death or legal incapacity of any
such individual.
(h) The entry of any judgment against Borrower or the issuance or
entry of any attachment or other lien against any of the property of
Borrower for an amount in excess of $2,000,000.00, if undischarged,
unbonded or undismissed within thirty (30) days after such entry.
Nothing contained in this Loan Agreement shall be construed to limit the events
of default enumerated in any of the other Loan Documents and all such events of
default shall be cumulative. The term "Obligated Party", as used herein, shall
mean any party other than Borrower who secures, guarantees and/or is otherwise
obligated to pay all or any portion of the indebtedness evidenced by the Note.
12. REMEDIES. Upon the occurrence of any one or more of the foregoing
Events of Default, (a) the entire unpaid balance of principal of the Note,
together with all accrued but unpaid interest thereon, and all other
indebtedness owing to Bank by Borrower at such time shall, at the option of
Bank, become immediately due and payable without further notice, demand,
presentation, notice of dishonor, notice of intent to accelerate, notice of
acceleration, protest or notice of protest of any kind, all of which are
expressly waived by Borrower, and (b) Bank may, at its option, cease further
advances under any of the Note; provided, however, concurrently and
automatically with the occurrence of an Event of Default under subparagraph (f)
in the immediately preceding paragraph (i) further advances under the Note shall
cease, and (ii) the Note and all other indebtedness owing to Bank by Borrower at
such time shall, without any action by Bank, become due and payable, without
further notice, demand, presentation, notice of dishonor, notice of
acceleration, notice of intent to accelerate, protest or notice of protest of
any kind, all of which are expressly waived by Borrower. All rights and remedies
of Bank set forth in this Loan Agreement and in any of the other Loan Documents
may also be exercised by Bank, at its option to be exercised in its sole
discretion, upon the occurrence of an Event of Default.
13. RIGHTS CUMULATIVE. All rights of Bank under the terms of this Loan
Agreement shall be cumulative of, and in addition to, the rights of Bank under
any and all other agreements between Borrower and Bank (including, but not
limited to, the other Loan Documents), and not in substitution or diminution of
any rights now or hereafter held by Bank under the terms of any other agreement.
14. WAIVER AND AGREEMENT. Neither the failure nor any delay on the part of
Bank to exercise any right, power or privilege herein or under any of the other
Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. No
waiver of any provision in this Loan Agreement or in any of the other Loan
Documents and no departure by Borrower therefrom shall be effective unless the
same shall be in writing and signed by Bank, and then shall be effective only in
the
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specific instance and for the purpose for which given and to the extent
specified in such writing. No modification or amendment to this Loan Agreement
or to any of the other Loan Documents shall be valid or effective unless the
same is signed by the party against whom it is sought to be enforced.
15. BENEFITS. This Loan Agreement shall be binding upon and inure to the
benefit of Bank and Borrower, and their respective successors and assigns,
provided, however, that Borrower may not, without the prior written consent of
Bank, assign any rights, powers, duties or obligations under this Loan
Agreement or any of the other Loan Documents.
16. NOTICES. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and given by (i) personal delivery, (ii) expedited delivery service
with proof of delivery, or (iii) United States mail, postage prepaid,
registered or certified mail, return receipt requested, sent to the intended
addressee at the address set forth on the signature page hereof and shall be
deemed to have been received either, in the case of personal delivery, as of
the time of personal delivery, in the case of expedited delivery service, as of
the date of first attempted delivery at the address and in the manner provided
herein, or in the case of mail, upon deposit in a depository receptacle under
the care and custody of the United States Postal Service. Either party shall
have the right to change its address for notice hereunder to any other location
within the continental United States by notice to the other party of such new
address at least thirty (30) days prior to the effective date of such new
address.
17. CONSTRUCTION. This Loan Agreement and the other Loan Documents have
been executed and delivered in the State of Texas, shall be governed by and
construed in accordance with the laws of the State of Texas, and shall be
performable by the parties hereto in the county in Texas where the Bank's
address set forth on the signature page hereof is located.
18. INVALID PROVISIONS. If any provision of this Loan Agreement or any of
the other Loan Documents is held to be illegal, invalid or unenforceable under
present or future laws, such provision shall be fully severable and the
remaining provisions of this Loan Agreement or any of the other Loan Documents
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance.
19. EXPENSES. Borrower shall pay all costs and expenses (including,
without limitation, reasonable attorneys' fees) in connection with (i) any
action required in the course of administration of the indebtedness and
obligations evidenced by the Loan Documents, and (ii) any action in the
enforcement of Bank's rights upon the occurrence of Event of Default.
20. PARTICIPATION OF THE LOAN. Borrower agrees that Bank may, at its
option, sell interests in the Loan and its rights under this Loan Agreement to
a financial institution or institutions and, in connection with each such sale,
Bank may disclose any financial and other information available to Bank
concerning Borrower to each perspective purchaser.
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21. Entire Agreement. This Loan Agreement (together with the other Loan
Documents) contains the entire agreement among the parties regarding the
subject matter hereof and supersedes all prior written and oral agreements and
understandings among the parties hereto regarding same.
22. Conflicts. In the event any term or provision hereof is inconsistent
with or conflicts with any provision of the other Loan Documents, the terms and
provisions contained in this Loan Agreement shall be controlling.
23. Counterparts. This Loan Agreement may be separately executed in any
number of counterparts, each of which shall be an original, but all of which,
taken together, shall be deemed to constitute one and the same instrument.
If the foregoing correctly sets forth our mutual agreement, please so
acknowledge by signing and returning this Loan Agreement to the undersigned.
Very truly yours,
BANK ONE, NA with its main
office in Chicago, Illinois
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Bank's Address:
Dallas Commercial - Dallas
1717 Main Street
Dallas, Texas 75201
ACCEPTED as of the date first
written above.
BORROWER Borrower's Address:
TERAFORCE TECHNOLOGY 1240 East Campbell Road
CORPORATION Richardson, Texas 75081
By: /s/ Robert S. Capps
-----------------------------
Name: Robert S. Capps
---------------------------
Title: Executive Vice President
--------------------------
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