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EXHIBIT 10.11
NATIONSBANK OF TENNESSEE, N.A.
LOAN AGREEMENT
This Loan Agreement is made effective the ___ day of February, 1996, by and
among NationsBank of Tennessee, N.A., a national banking association with
offices located at 6363 Poplar Avenue, Suite 230, Memphis, Tennessee 38119
("Bank"), NPF Company and National Picture & Frame Company, each a Delaware
corporation with offices at 1500 Commerce Street, Greenwood, Mississippi 38930
(collectively, the "Borrower").
In consideration of the mutual promises and covenants contained herein,
and other good and valuable consideration, the receipt of which is hereby
acknowledged by each of the parties hereto, the parties agree as follows:
1. DEFINITIONS AND REFERENCE TERMS. In addition to any other terms defined in
this Loan Agreement, the following terms shall have the meaning set forth with
respect thereto, unless the context clearly otherwise requires:
A. AGREEMENT. Agreement means this Loan Agreement, as amended or
supplemented from time to time in accordance with the terms hereof.
B. BUSINESS DAY. Any day other than a Saturday, Sunday, or other day on
which commercial banks in Memphis, Tennessee are authorized or required to
close under the laws of the State of Tennessee or the United States of
America.
C. CASH FLOW COVERAGE RATIO. Cash Flow Coverage Ratio means as of the end
of any fiscal quarter a fraction the numerator of which is net income
after taxes of Borrower and its Subsidiaries for the preceding four fiscal
quarters prior to any deduction for depreciation, amortization, and
interest expense, minus dividends paid during the preceding four fiscal
quarters and the denominator of which is the sum of the following items
payable by Borrower and its Subsidiaries: (a) interest expense during the
preceding four fiscal quarters, (b) the aggregate of the current portion
of long-term debt and capital lease obligations for the prior fiscal year.
D. FUNDED DEBT. Funded Debt means at any time, all of the following
obligations (without duplication) of Borrower and its Subsidiaries as of
such date: (a) All obligations for borrowed money; (b) All obligations
evidenced by bonds, debentures, notes or other similar instruments; (c)
All obligations to pay the deferred purchase price of property, except
trade accounts payable arising in the ordinary course of business; (d) All
obligations as lessee under capitalized leases; (e) All obligations to
purchase securities or other property which arise out of or in connection
with the sale of the same or substantially similar securities or property;
(f) All non-contingent obligations to reimburse any bank or other person
in respect of amounts actually paid under a letter of credit or similar
instrument; and (g) All debt of others secured by a Lien on any assets of
Borrower or its Subsidiaries, whether or not such debt is assumed.
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E. FUNDED DEBT RATIO. Funded Debt Ratio means as of the end of any fiscal
quarter a fraction the numerator of which is Funded Debt and the
denominator of which is the net income of Borrower and its Subsidiaries
for the preceding four fiscal quarters prior to any deduction for interest
expense, taxes, depreciation, depletion or amortization.
F. HAZARDOUS MATERIALS. Hazardous Materials include all materials defined
as hazardous wastes or substances under any local, state or federal
environmental laws, rules or regulations, and petroleum, petroleum
products, oil and asbestos.
G. LIEN. Any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance securing
indebtedness (statutory or other), or preference, priority, or other
security agreement or preferential arrangement, charge, or encumbrance
securing indebtedness of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of
the foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of
the foregoing).
H. LOANS. Loan or Loans means collectively any and all loans heretofore or
hereafter made by Bank to Borrower pursuant to this Loan Agreement.
I. LOAN DOCUMENTS. Loan Documents means this Loan Agreement and any and
all promissory notes executed by Borrower in favor of Bank and all other
security agreements, documents, instruments, guarantees, certificates and
agreements executed and/or delivered by Borrower, any guarantor or third
party in connection with any Loan.
J. PERSON. An individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
K. PERMITTED LIENS. Permitted Liens means:
(a) Liens with respect to indebtedness incurred pursuant to
this Loan Agreement;
(b) Liens incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment
insurance and other types of social security benefits, or to secure
the performance of statutory obligations, surety and appeal bonds,
bids, tenders, leases, performance and return-of-money bonds and
other similar obligations not incurred in connection with the
borrowing of money;
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(c) Liens for taxes, assessments or governmental charges not
then due and delinquent or the validity of which is being contested
in good faith and as to which the Borrower has established adequate
reserves on its books;
(d) Liens arising in connection with court proceedings,
provided, that the executions of such Liens are effectively stayed
and such Liens are contested in good faith and as to which the
Borrower has established adequate reserves on its books;
(e) Liens arising in the ordinary course of business, including
encumbrances in the nature of zoning restrictions, easements, rights
and restrictions of record on the use of real property, which do not
materially interfere with the conduct of the business of the
Borrower;
(f) Liens incidental to the conduct of business or the
ownership of properties and assets (including warehousemen's and
attorney's liens, mechanics' liens, materialmen's liens, carriers'
liens and statutory landlords' liens) and Liens to secure the
performance of bids, tenders or trade contracts, or to secure
statutory obligations, surety or appeal bonds or other Liens of a
like general nature incurred in the ordinary course of business;
(g) Liens on fixed assets created or incurred within 180 days
of the date of acquisition to secure or provide for all or a portion
of the purchase price of such fixed assets provided that (i) such
liens do not extend to other property of the Borrower, and (ii) the
aggregate principal amount of Indebtedness secured by such Liens
does not exceed at the time of purchase or incurrence 100% of the
lesser of the fair market value or the purchase price of the fixed
assets subject to such Liens;
(h) Liens created upon the incurrence or assumption of capital
lease obligations or Indebtedness in connection with a
transaction permitted under this Loan Agreement; provided that (i)
such liens do not extend to the property of the Borrower, and (ii)
the aggregate principal amount of Indebtedness secured by such Liens
does not exceed at the time of purchase or incurrence 100% of the
lesser of the fair market value or the purchase price of the fixed
assets subject to such Liens; and
(i) Precautionary filings under the Uniform Commercial Code by
bailors, lessors or consignors.
L. SUBSIDIARY. As to Borrower, a corporation of which shares of stock
having ordinary voting power (other than stock having such power only by
reason of the happening of a contingency) to elect a majority of the board
of directors or other managers of such corporation are at the time owned,
or the management of which is otherwise controlled, directly, or
indirectly through one or more intermediaries, or both, by Borrower.
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M. TANGIBLE NET WORTH. Tangible Net Worth means the amount by which total
assets of Borrower and its Subsidiaries exceed total liabilities of
Borrower and its Subsidiaries in accordance with GAAP, less the net book
value of all items of the following character which are included in such
total assets: (a) goodwill, (b) organizational expense, (c) acquisition
expenses, (d) research and development expenses, (e) patents, trademarks,
trade names, and copyrights, (f) treasury stock, (g) stock held by
Borrower in any Subsidiary, (h) any advance to an Subsidiary, (i) any
advance to an officer of Borrower or any of its Subsidiaries, and (j) any
other assets of an intangible nature.
N. ACCOUNTING TERMS. All accounting terms not specifically defined or
specified herein shall have the meanings generally attributed to such
terms under generally accepted accounting principles, as in effect from
time to time, consistently applied ("GAAP").
2. LOANS.
A. LOANS. Bank hereby agrees to make Loans to Borrower in the aggregate
principal amount up to $25,000,000, consisting of one Loan in the
principal amount up to $10,000,000 to provide funds for working capital
(the "Line") and, one Loan in the principal amount up to $15,000,000 to
provide funds for up to 75% of the cost of capital items (the "Capital
Loan"). The obligations to repay the Loans are evidenced by promissory
notes of even date herewith (the promissory notes together with any and
all renewals, extensions or rearrangements thereof being hereafter
referred to as the "Notes"), having maturity dates, repayment terms,
prepayment terms and interest rates as set forth in the Notes.
B. REVOLVING CREDIT LINE. The Line provides for a revolving line of credit
under which Borrower may from time to time, borrow, repay and re-borrow
funds. Requests for advances under the Line shall be made by authorized
representatives of Borrower. Borrower shall provide Bank with the names of
its authorized representatives and any changes by notice as provided in
Section 10.
C. CAPITAL LOAN. The Capital Loan provides for a revolving line of credit
under which Borrower may borrower from time to time, borrow, repay and
re-borrower funds; provided, however, as of the end of each December 31,
commencing December 31, 1996, the then outstanding balance of the Capital
Loan shall be converted to a term loan requiring equal monthly payments of
principal over a period not exceeding 60 months. Bank will advance under
the Capital Loan only against purchase invoices presented by Borrower for
capital items and such advances shall be limited to 75% of the cost of
each such item.
D. FEES. Borrower will pay on the date hereof and on the first day of each
fiscal quarter thereafter until the Line is fully repaid, a loan fee of
$2500.00. Borrower will pay on the date hereof and on the first day of
each fiscal quarter thereafter until the Capital Loan is fully repaid, a
loan fee of $2500.00.
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E. BORROWING BASE. The Line is subject to the Borrowing Base Agreement
attached hereto as Exhibit A and by reference made a part hereof.
3. USE OF PROCEEDS. The proceeds of the advances under the Loan Documents will
be used as following:
A. LINE. The proceeds of the Line will be used solely for (1) the
repayment of certain indebtedness owed to existing lenders, (2)
reimbursement of all out-of-pocket expenses of Bank incurred in connection
with the negotiation and preparation of the Loan Documents, including
legal fees and expenses, and (3) working capital of Borrower.
B. CAPITAL LOAN. The proceeds of the Capital Loan will be used solely to
provide up to 75% of the cost of capital items acquired by Borrower for
use in its business.
4. CONDITIONS OF LENDING. The obligation of Bank to perform under this Loan
Agreement and to make advances under the Loan Documents is subject to the
performance by Borrower of the following conditions precedent:
A. LOAN DOCUMENTS. The Loan Documents shall have been duly authorized,
executed and delivered to Bank by all of the parties thereto.
B. AUTHORIZATION. The Bank shall have received certified board resolutions
in form and substance satisfactory to Bank whereby the directors of
Borrower authorize the execution, delivery and performance of the Loan
Documents.
C. INCUMBENCY AND SIGNATURE CERTIFICATE OF BORROWER. The Bank shall have
received a certificate dated as of the date of this Loan Agreement of the
Secretary or Assistant Secretary of Borrower certifying the names and true
signatures of the authorized officers authorized to sign the Loan
Documents to which it is a party and the other documents to be delivered
by Borrower under this Loan Agreement.
D. CHARTER. The Bank shall have received a copy of: (1) the Certificate of
Incorporation of Borrower, together with all amendments certified within
30 days of the date of this Loan Agreement by the Secretary of the State
of Delaware, or, with Bank's approval by its Secretary or Assistant
Secretary; (2) certificates of existence or good standing for Borrower,
issued within a date acceptable to Bank by the Secretary of State of the
States of Delaware and Mississippi and by the Secretary of State of each
additional state wherein it is required to qualify to do business or other
evidence, acceptable to Bank, of such qualifications; (3) a copy of the
Bylaws of Borrower certified within a date acceptable to Bank by its
Secretary or Assistant Secretary.
E. EXHIBITS, SCHEDULES. The Bank shall have received all of the exhibits
and schedules to the Loan Documents, in a form satisfactory to Bank.
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F. ATTORNEY'S OPINION. The Bank shall have received the written opinion of
legal counsel for Borrower approved by Bank to the effect that: (1)
Borrower is a duly organized and validly existing corporation in good
standing under the laws of the State of Delaware. The Borrower is duly
authorized to do business as foreign corporation under the laws of the
State of Mississippi; (2) Borrower has all requisite corporate power and
authority to execute, deliver and perform its obligations under each of
the Loan Documents; (3) the execution and delivery of each of the Loan
Documents and the performance of its obligations thereunder have been duly
authorized by all necessary corporate action on the part of Borrower; (4)
each of the Loan Documents has been duly executed and delivered and
constitutes the legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with its terms; (5) neither the
execution and delivery by Borrower of the Loan Documents, the performance
by Borrower of its obligations thereunder, nor the consummation of the
transactions contemplated thereby, constitutes or will result in a breach
of Borrower's Certificate of Incorporation or Bylaws, or constitutes or
will result in a violation of any law, rule or regulation, or any
judgment, order or decree of any court or governmental authority that is
applicable to Borrower; (6) neither the execution and delivery by Borrower
of the Loan Documents, the performance by Borrower of its obligations
thereunder, nor the consummation of the transactions contemplated thereby,
will conflict with, or result in any material breach of, or constitute a
default under, or result in the creation or imposition of any Lien (other
than Permitted Liens) upon any property or assets of Borrower pursuant to,
or require any consent not obtained under, any contract, indenture,
mortgage, deed of trust, lease, agreement or other instrument to which
Borrower is a party or by which it or any of its property or assets is
bound or to which it is subject; (7) the provisions of the security
agreement are effective to create, in favor of Bank valid and enforceable
security interests in Borrower's rights, title and interests in the
collateral described therein to the extent that a security interest can be
created therein under Article 9 of the UCC in the applicable jurisdiction;
(8) the Financing Statements to be filed in Mississippi are in appropriate
form for filing; (9) to the extent security interests in the collateral
can be perfected by filing financing statements in the applicable
jurisdictions under the UCC, upon proper filing of the financing
statements in the offices listed on Exhibit 5I attached hereto, the
security interests will be perfected and will secure payment of Borrower's
obligations; and (9) except as disclosed in an exhibit, there is no
action, suit or proceeding or governmental investigation pending or
threatened against Borrower, and no order, writ, judgment, injunction or
decree against Borrower before or by any court, arbitrator or governmental
or administrative body that challenges the validity of any of the Loan
Documents or the transactions contemplated thereby or that restrains,
prevents or imposes material adverse conditions upon, or seeks to
restrain, prevent or impose material adverse conditions upon, any such
transaction or that, if adversely decided, would have a material adverse
effect (i) on the business, condition or results of operations of
Borrower, taken as a whole, or (ii) upon the rights and remedies of Bank,
or (iii) the ability of Borrower to perform its obligations under the Loan
Documents.
G. REPRESENTATIONS AND WARRANTIES TRUE; NO DEFAULT. The Bank shall have
received a certificate from Borrower to the effect that the representations
and warranties set forth in Section 5 and in the other Loan Documents shall
be true and correct as of the date of the
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initial advance under the Loan Documents and that no Default or Event of
Default shall have occurred and be continuing.
H. INSURANCE. The Bank shall have received satisfactory evidence of the
insurance coverages required by Section 6E hereof.
I. MATERIAL ADVERSE CHANGE. For the period from April 30, 1995 to the
closing date, there shall have been (i) no material adverse change in the
business, operations, properties, assets or financial condition of Borrower
and its Subsidiaries taken as a whole and (ii) no occurrence or event which
shall have a material adverse effect on the rights and remedies of Bank or
on the ability of Borrower to perform its obligations to Bank. The Bank
shall not have become aware of any undisclosed materially adverse
information with respect to (i) the business, operations, properties,
assets or financial condition of Borrower or its Subsidiaries taken as a
whole, (ii) the ability of Borrower to perform its obligations under the
Loan Documents or (iii) the rights and remedies of Bank under the Loan
Documents.
5. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants to
Bank as follows:
A. GOOD STANDING. Borrower is a Delaware corporation with offices at, duly
organized, validly existing and in good standing under the laws of Delaware
and has the power and authority to own its property and to carry on its
business in each jurisdiction in which Borrower does business.
B. AUTHORITY AND COMPLIANCE. Borrower has full power and authority to
execute and deliver the Loan Documents and to incur and perform the
obligations provided for therein, all of which have been duly authorized
by all proper and necessary action of the appropriate governing body of
Borrower. No consent or approval of any public authority or other third
party is required as a condition to the validity of any Loan Document, and
Borrower is in compliance with all laws and regulatory requirements to
which it is subject.
C. BINDING AGREEMENT. This Loan Agreement and the other Loan Documents
executed by Borrower constitute valid and legally binding obligations of
Borrower, enforceable in accordance with their terms, except to the extent
the enforceability thereof may be limited (i) by bankruptcy,
reorganization, or other similar laws affecting the rights and remedies of
creditors generally, or (ii) by the availability of any discretionary
equitable remedies.
D. LITIGATION. There is no proceeding involving Borrower or any of its
Subsidiaries pending or, to the knowledge of Borrower, threatened before
any court or governmental authority, agency or arbitration authority,
which would reasonably be expected to have a material adverse effect on
the financial condition of the Borrower, except as disclosed to Bank in
writing and acknowledged by Bank prior to the date of this Loan Agreement.
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E. NO CONFLICTING AGREEMENTS. There is no charter, bylaw, stock provision,
partnership agreement or other document pertaining to the organization,
power or authority of Borrower and no provision of any existing agreement,
mortgage, indenture or contract binding on Borrower or affecting its
property, which would conflict with or in any way prevent the execution,
delivery or carrying out of the terms of this Loan Agreement and the other
Loan Documents.
F. OWNERSHIP OF ASSETS. Borrower and each of its Subsidiaries has good
title to its assets, and its assets are free and clear of Liens, except
(i) Permitted Liens which singularly or in the aggregate do not have a
material adverse effect on the financial condition or business of the
Borrower, and (ii) Liens on assets directly related to a plastics business
which are granted in favor of Deposit Guaranty National Bank.
G. TAXES. Borrower has filed or caused to be filed all tax returns that to
its knowledge are required to be filed (except for returns not yet due),
and has paid all taxes shown to be due and payable on said returns and all
other taxes, impositions, assessments, fees or other charges imposed on it
by governmental authority, agency, or instrumentality, prior to any
delinquency with respect thereto (other than taxes, impositions,
assessments, fees, and charges currently being contested in good faith by
appropriate proceedings, for which appropriate amounts have been reserved).
H. FINANCIAL STATEMENTS. The financial statements of Borrower heretofore
delivered to Bank have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved and fairly present
Borrower's financial condition as of the date or dates thereof, and there
has been no material adverse change in Borrower's financial condition or
operations since April 30, 1995. To the best of Borrower's knowledge, all
factual information furnished by Borrower to Bank in connection with this
Loan Agreement and the other Loan Documents is and will be accurate and
complete on the date as of which such information is delivered to Bank and
is not and will not be incomplete by the omission of any material fact
necessary to make such information not misleading.
I. PLACE OF BUSINESS. The records with respect to all intangible personal
property constituting a part of the collateral security for the Loan are
maintained at Borrower's chief executive office which has an address of
1500 Commerce Street, Greenwood, Mississippi 38930. All tangible personal
property constituting a part of the collateral security for the Loan is or
will be located at the specific locations set forth in the attached
Exhibit 5I.
J. ENVIRONMENTAL LAW COMPLIANCE. The conduct of Borrower's business
operations do not and will not violate any federal laws, rules or
ordinances for environmental protection, regulations of the Environmental
Protection Agency and any applicable local or state law, rule, regulation
or rule of common law and any judicial interpretation thereof relating
primarily to the environment or Hazardous Materials and Borrower will not
use or permit any other party to use any Hazardous Materials at any of
Borrower's places of business or at any other property owned by Borrower
except such materials as are incidental
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to Borrower's normal course of business, maintenance and repairs and which
are handled in compliance with all applicable environmental laws. Borrower
agrees to permit Bank, its agents, contractors and employees to enter and
inspect any of Borrower's places of business or any other property of
Borrower at any reasonable times upon three (3) days prior notice for the
purposes of conducting an environmental investigation and audit (including
taking physical samples) to insure that Borrower is complying with this
covenant and Borrower shall reimburse Bank on demand for the costs of any
such environmental investigation and audit. Borrower shall provide Bank,
its agents, contractors, employees and representatives with access to and
copies of any and all data and documents relating to or dealing with any
Hazardous Materials used, generated, manufactured, stored or disposed of
by Borrower's business operations within five (5) days of the request
therefore.
K. LABOR DISPUTES AND ACTS OF GOD. Neither the business nor the properties
of Borrower or any Subsidiary are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God, or other casualty (whether or not covered
by insurance) materially and adversely affecting such business or
properties or the operation of Borrower or any Subsidiary.
L. ERISA. The Borrower and each Subsidiary is in substantial compliance in
all material respects with all applicable provisions of ERISA.
M. NO DEFAULTS ON OUTSTANDING JUDGMENTS OR ORDERS. The Borrower and its
Subsidiaries have satisfied all judgments and neither Borrower nor any
Subsidiary is in material default with respect to any judgment, writ,
injunction, decree, rule, or regulation of any court, arbitrator, or
federal, state, municipal, or other governmental authority, commission,
board, bureau, agency, or instrumentality, domestic or foreign.
N. CONTINUATION OF REPRESENTATION AND WARRANTIES. All representations and
warranties made under this Loan Agreement shall be deemed to be made at
and as of the date hereof and at and as of the date of any future advance
under any Loan.
6. AFFIRMATIVE COVENANTS. Until full payment and performance of all obligations
of Borrower under the Loan Documents, Borrower will, unless Bank consents
otherwise in writing (and without limiting any requirement of any other Loan
Document):
A. TANGIBLE NET WORTH. Maintain as of the end of each fiscal quarter a
Tangible Net Worth of not less than $17,500,000.00, plus 40% of the net
income after taxes for each fiscal year ending after the date hereof.
B. FUNDED DEBT RATIO. Maintain as of the end of each fiscal quarter a
Funded Debt Ratio of not more than 3.0 to 1.0.
C. CASH FLOW COVERAGE RATIO. Maintain as of the end of each fiscal quarter
a Cash Flow Coverage Ratio of not less than 2.0 to 1.0.
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D. FINANCIAL STATEMENTS AND OTHER INFORMATION. Maintain a system of
accounting satisfactory to Bank and in accordance with GAAP applied on a
consistent basis throughout the period involved, permit Bank's officers or
authorized representatives to visit and inspect Borrower's books of account
and other records at such reasonable times and as often as Bank may desire,
and pay the reasonable fees and disbursements of any accountants or other
agents of Bank selected by Bank for the foregoing purposes. Unless written
notice of another location is given to Bank, Borrower's books and records
will be located at Borrower's chief executive office set forth above. All
financial statements called for below shall be prepared in form and content
acceptable to Bank and by independent certified public accountants
acceptable to Bank.
In addition, Borrower will furnish to Bank:
(1) audited financial statements of Borrower for each fiscal year of
Borrower, within 150 days after the close of each such fiscal year;
(2) unaudited financial statements (including a balance sheet and
profit and loss statement) of Borrower for each quarter of each
fiscal year of Borrower, within 45 days after the close of each such
period;
(3) a borrowing base certificate within five days after the end of
each month;
(4) a compliance certificate for (and executed by an authorized
representative of) Borrower, concurrently with and dated as of the
date of delivery of each of the financial statements as required in
paragraphs (1) and (2) above, containing (a) a certification that
the financial statements of even date fairly present Borrower's
consolidated financial condition as of the date thereof and that the
Borrower is not in default under the terms of this Loan Agreement or
any of the other Loan Documents, and (b) computations and
conclusions, in such detail as Bank may request, with respect to
compliance with this Loan Agreement, and the other Loan Documents,
including computations of all quantitative covenants;
(5) if as of the end of any fiscal quarter the Funded Debt Ratio
shall exceed 1.0, an accounts receivable aging (listing of accounts
receivable aged from date of invoice) as of the end of such quarter;
and
(6) promptly such additional information, reports and statements
respecting the business operations and financial condition of
Borrower, from time to time, as Bank may reasonably request.
E. INSURANCE. Maintain insurance with responsible insurance companies on
such of its properties, in such amounts and against such risks as is
customarily maintained by similar businesses operating in the same
vicinity, specifically to include fire and extended coverage insurance
covering all assets, business interruption insurance, workers compensation
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insurance and general liability insurance, all to be with such companies
and in such amounts as are satisfactory to Bank and with respect to
insurance on the collateral securing the Loan or referred to in any of the
Loan Documents, to contain a mortgagee clause naming Bank as a loss payee
or an additional insured (as applicable) as its interest may appear and
providing for at least 30 days prior notice to Bank of any cancellation
thereof. Satisfactory evidence of such insurance will be supplied to Bank
prior to funding under the Loan(s) and 30 days prior to each policy
renewal.
F. EXISTENCE AND COMPLIANCE. Maintain its existence, good standing and
qualification to do business, where required and comply with all laws,
regulations and governmental requirements including, without limitation,
environmental laws applicable to it or to any of its property, business
operations and transactions.
G. ADVERSE CONDITIONS OR EVENTS. Promptly advise Bank in writing of (i)
any condition, event or act which comes to its attention that would or
might materially adversely affect Borrower's financial condition or
operations, the collateral securing the Loan, or Bank's rights under the
Loan Documents, (ii) any litigation filed by or against Borrower, (iii)
any event that has occurred that would constitute an event of default
under any Loan Documents and (iv) any uninsured or partially uninsured
loss through fire, theft, liability or property damage in excess of an
aggregate of $250,000.
H. TAXES AND ASSESSMENTS; TAX INDEMNITY. Borrower shall (a) file all tax
returns and appropriate schedules thereto that are required to be filed
under applicable law, prior to the date of delinquency, (b) pay and
discharge all taxes, assessments and governmental charges or levies
imposed upon Borrower, upon its income and profits or upon any properties
belonging to it, prior to the date on which penalties attach thereto, and
(c) pay all taxes, assessments and governmental charges or levies that, if
unpaid, might become a Lien or charge upon any of its properties;
provided, however, that Borrower in good faith may contest any such tax,
assessment, governmental charge or levy described in the foregoing clauses
(b) and (c) so long as appropriate reserves are maintained with respect
thereto. If any tax is or may be imposed by any governmental entity in
respect of sales of Borrower's Inventory or the merchandise that is the
subject of such sales, or as a result of any other transaction of
Borrower, which tax Bank is or may be required to withhold or pay,
Borrower agrees to indemnify and hold harmless Bank in connection with
such taxes (including penalties and interest), and Borrower shall
immediately reimburse Bank for any such amounts paid by Bank, and such
amounts shall be added to the Secured Obligations pursuant to the terms
hereof.
I. MAINTENANCE. Maintain all of its tangible property in good condition
and repair and make all necessary replacements thereof, and preserve and
maintain all licenses, trademarks, privileges, permits, franchises,
certificates and the like necessary for the operation of its business.
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J. NOTIFICATION OF ENVIRONMENTAL CLAIMS. Borrower shall immediately advise
Bank in writing of (i) any and all enforcement, cleanup, remedial, removal,
or other governmental or regulatory actions instituted, completed or
threatened pursuant to any applicable federal, state, or local laws,
ordinances or regulations relating to any Hazardous Materials affecting
Borrower's business operations; and (ii) all claims made or threatened by
any third party against Borrower relating to damages, contribution, cost
recovery, compensation, loss or injury resulting from any Hazardous
Materials. Borrower shall immediately notify Bank of any remedial action
taken by Borrower with respect to Borrower's business operations.
7. NEGATIVE COVENANTS. Until full payment and performance of all obligations
of Borrower under the Loan Documents, Borrower will not, without the prior
written consent of Bank (and without limiting any requirement of any other Loan
Documents):
A. TRANSFER OF ASSETS. Sell, lease, assign or otherwise dispose of or
transfer any assets, except in the normal course of its business.
B. LIENS. Grant, suffer or permit any Lien on any of its assets now or
hereafter owned, except (i) Permitted Liens which singularly or in the
aggregate do not have a material adverse effect on the financial condition
or business of the Borrower, or (ii) Liens on assets directly related to a
plastics business which are granted in favor of Deposit Guaranty National
Bank.
C. CHARACTER OF BUSINESS. Change the general character of business as
conducted at the date hereof, or engage in any type of business not
reasonably related to its business as presently conducted.
D. CREATION OF DEBT. Incur, create or suffer to exist any indebtedness for
borrowed money, or issue, discount or sell any obligation of the Borrower,
excluding only: (a) the indebtedness to the Bank incurred under this Loan
Agreement; (b) indebtedness arising in the ordinary course of business
under a line of credit not to exceed the principal amount of $5,000,000
with Deposit Guaranty National Bank; and (c) seller financing not to
exceed the principal amount of $1,000,000, incurred in connection with the
acquisition of all of the issued and outstanding capital stock of
Universal Cork, Inc.
8. DEFAULT. Borrower shall be in default under this Loan Agreement and under
each of the other Loan Documents if (a) it shall default in the payment of any
amounts due and owing under the Loans and such default is not cured within ten
(10) days thereof, or (b) should it fail to timely and properly observe, keep or
perform any other term, covenant, agreement or condition in any Loan Document or
in any other loan agreement, promissory note, bond, trust indenture, security
agreement, deed of trust, mortgage, assignment or other contract securing or
evidencing payment of any indebtedness of Borrower to Bank or any affiliate or
subsidiary of NationsBank Corporation and such failure is not cured within
thirty (30) days following written notice to Borrower thereof, or (c) should any
representation or warranty made by the Borrower in this Loan Agreement or which
is contained in any certificate, document, or financial or other statement
furnished at any time under
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or in connection with the Loans was materially untrue or misleading on or as of
the date made or deemed made. Notwithstanding the foregoing, Bank is not
required to give any notice of default and no cure period is permitted should
Borrower fail to timely and properly observe, keep or perform any term,
covenant, agreement or condition in subsections A, B, C, E, G or J of Section 6.
9. REMEDIES UPON DEFAULT. If an event of default shall occur Bank shall have
all rights, powers and remedies available under each of the Loan Documents as
well as all rights and remedies available at law or in equity.
10. NOTICES. All notices, requests or demands which any party is required or
may desire to give to any other party under any provision of this Loan Agreement
must be in writing delivered to the other party at the following address:
Borrower: National Picture & Frame Company
NPF Company
1500 Commerce Street
Greenwood, Mississippi 38930
Attn: M. Wesley Jordan, Jr., Vice President Finance and
Chief Financial Officer
Bank: NationsBank of Tennessee, N.A.
6363 Poplar Avenue, Suite 230
Memphis, Tennessee 38119
Attn: Lisa B. Barksdale, Vice President
or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or made
as follows: (i) if sent by hand delivery, upon delivery; (ii) if sent by mail,
upon the earlier of the date of receipt or five (5) days after deposit in the
U.S. Mail, first class postage prepaid; and (iii) if sent by commercial courier
guaranteeing next day delivery, upon the next business day after timely
delivery to the courier.
11. COSTS. EXPENSES AND ATTORNEY'S FEES. Borrower shall pay to Bank all costs
and expenses, including reasonable attorneys' fees incurred by Bank in
connection with (a) negotiation and preparation of this Loan Agreement and each
of the Loan Documents up to $3750, and (b) Bank's continued administration
thereof.
12. CONFIDENTIALITY. Bank agrees to keep confidential (and to cause its
officers, directors, employees, agents and representatives to keep
confidential), to the same extent, and in the same manner, as it protects its
own such comparable information, all information, material and documents
furnished to Bank by Borrower in connection with this Loan Agreement or any of
the other Loan Documents (the "Confidential Information"). Notwithstanding the
foregoing, the Bank shall be permitted to disclose Confidential Information (a)
to such of its officers, directors, employees, agents and representatives as
need to know such Confidential Information in connection with its participation
in any of the Loans contemplated hereby or the administration of the Loans,
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this Loan Agreement or the other Loan Documents; (b) to the extent required by
applicable laws and regulations or by any subpoena or similar legal process, or
requested by any governmental agency or authority; (c) to the extent such
Confidential Information (1) becomes publicly available other than as a result
of a breach of this Loan Agreement, (2) becomes available to the Bank on a
non-confidential basis from a source other than the Borrower, or (3) was
available to the Bank on a non-confidential basis prior to its disclosure to
the Bank by the Borrower; (d) to the extent the Borrower shall have consented
to such disclosure in writing; or (e) in connection with the sale of any
Collateral pursuant to the provisions of this Loan Agreement or any of the
other Loan Documents.
13. MISCELLANEOUS. Borrower and Bank further covenant and agree as follows,
without limiting any requirement of any other Loan Document:
A. CUMULATIVE RIGHTS AND NO WAIVER. Each and every right granted to Bank
under any Loan Document, or allowed it by law or equity shall be cumulative
of each other and may be exercised in addition to any and all other rights
of Bank, and no delay in exercising any right shall operate as a waiver
thereof, nor shall any single or partial exercise by Bank of any right
preclude any other or future exercise thereof or the exercise of any other
right. Borrower expressly waives any presentment, demand, protest or other
notice of any kind, including but not limited to notice of intent to
accelerate and notice of acceleration. No notice to or demand on Borrower
in any case shall, of itself, entitle Borrower to any other or future
notice or demand in similar or other circumstances.
B. APPLICABLE LAW. This Loan Agreement and the rights and obligations of
the parties hereunder shall be governed by and interpreted in accordance
with the laws of Tennessee and applicable United States federal law.
C. AMENDMENT. No modification, consent, amendment or waiver of any
provision of this Loan Agreement, nor consent to any departure by Borrower
therefrom, shall be effective unless the same shall be in writing and
signed by an officer of Bank, and then shall be effective only in the
specified instance and for the purpose for which given. This Loan Agreement
is binding upon Borrower, its successors and assigns, and inures to the
benefit of Bank, its successors and assigns; however, no assignment or
other transfer of Borrower's rights or obligations hereunder shall be made
or be effective without Bank's prior written consent, nor shall it relieve
Borrower of any obligations hereunder. There is no third party beneficiary
of this Loan Agreement.
D. DOCUMENTS. All documents, certificates and other items required under
this Loan Agreement or the other Loan Documents to be executed and/or
delivered to Bank shall be in form and content satisfactory to Bank and
its counsel.
E. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision
of this Loan Agreement shall not affect the enforceability or validity of
any other provision herein and the invalidity or unenforceability of any
provision of any Loan Document to any person or
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circumstance shall not affect the enforceability or validity of such
provision as it may apply to other persons or circumstances.
F. INDEMNIFICATION. Borrower shall indemnify, defend and hold Bank and its
successors and assigns harmless from and against any and all claims,
demands, suits, losses, damages, assessments, fines, penalties, costs or
other expenses (including reasonable attorneys' fees and court costs)
arising from or in any way related to any of the transactions contemplated
hereby, including but not limited to actual or threatened damage to the
environment, agency costs of investigation, personal injury or death, or
property damage, due to a release or alleged release of Hazardous
Materials, arising from Borrower's business operations, any other property
owned by Borrower or in the surface or ground water arising from Borrower's
business operations, or gaseous emissions arising from Borrower's business
operations or any other condition existing or arising from Borrower's
business operations resulting from the use or existence of Hazardous
Materials, whether such claim proves to be true or false. Borrower further
agrees that its indemnity obligations shall include, but are not limited
to, liability for damages resulting from the personal injury or death of an
employee of Borrower, regardless of whether Borrower has paid the employee
under the workmen's compensation laws of any state or other similar
federal or state legislation for the protection of employees. The term
"property damage" as used in this paragraph includes, but is not limited
to, damage to any real or personal property of Borrower, Bank, and of any
third parties. The Borrower's obligations under this paragraph shall
survive the repayment of the Loan and any deed in lieu of foreclosure or
foreclosure of any deed to secure debt, deed of trust, security agreement
or mortgage securing the Loan.
The foregoing notwithstanding, the indemnity provided herein does not
apply with respect to any claims, demands, suits, losses, damages,
assessments, fines, penalties, costs or other expenses to the extent they
arise directly out of the Bank's gross negligence or willfull misconduct.
G. SURVIVABILITY. Except as otherwise provided herein, all covenants,
agreements, representations and warranties made herein or in the other
Loan Documents shall survive the making of the Loan and shall continue in
full force and effect so long as the Loan is outstanding or the obligation
of Bank to make any advances under the Line shall not have expired.
H. NUMBER AND GENDER. The use of any gender pronoun shall be deemed to
include all other genders, and the use of any singular noun, pronoun, or
verb shall be deemed to include the plural, and vice versa, whenever the
context plainly requires.
I. LIMITATION OF LIABILITY. In administering the loan evidenced and
secured by the Loan Documents and dealing with the collateral securing
the Loan, Bank makes no representation and assumes no responsibility to
Borrower, or any other Person with respect to: (a) the value,
marketability, quality, quantity, ownership or condition of any of the
collateral securing the Loan or covered by the Loan Documents; or (b) the
truth, correctness,
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validity or enforceability of any instrument, certificate, inventory,
appraisal, opinion or other document delivered or to be delivered to Bank
in connection with the Loan Documents. Nothing in the Loan Documents will
entitle any parties other than Bank and Borrower to rely thereon and no
Person will be deemed a third party beneficiary thereof. So long as Bank
acts in good faith in the administration of the loan evidenced by the Loan
Documents and the enforcement of the Loan Documents, Bank will incur no
liability whatsoever to Borrower, or any other party and will be
responsible only for the gross negligence and willful misconduct of Bank
and Bank's agents, officers and employees. The Bank will have the right to
consult with legal counsel of Bank's choice and to be fully exonerated
from liability for any action taken in good faith in accordance with the
advice of such legal counsel.
J. VENUE AND JURISDICTION. It is agreed that the debt evidenced by the
Loan Documents was contracted in Shelby County, Tennessee, and Borrower's
Note, the Loan Documents and all other instruments of indebtedness are
hereby deemed to have been given when received and accepted by the Bank at
the Bank's principal offices in Memphis, Tennessee. The Borrower and Bank
hereby waive all objections to venue and consent to the jurisdiction of
any state or federal court located in Shelby County, Tennessee in
connection with any action instituted by the Bank or Borrower by reason of
or arising out of the execution, delivery or performance of any of the
Loan Documents.
K. FURTHER ASSURANCES. The parties further agree that upon request, they
shall do such further acts and deeds, and shall execute, acknowledge,
deliver and record such other documents and instruments, as may be
reasonably necessary from time to time to evidence, confirm or carry out
the intent and purposes of this Loan Agreement.
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 LOAN
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), AND 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 LOAN AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS
LOAN AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF
MEMPHIS AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM
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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 LOAN AGREEMENT SHALL BE DEEMED
TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS LOAN AGREEMENT; OR (II)
BE A WAIVER BY THE BANK 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 BANK
HERETO (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
BANK 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 LOAN 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 RIGHT OF THE
CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OF
CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
15. NO ORAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be duly executed under seal by their duly authorized representatives as of the
date first above written.
Bank: Borrower:
NATIONSBANK OF TENNESSEE, N.A. NATIONAL PICTURE & FRAME
COMPANY
By: By:
------------------------------------ --------------------------------------
Lisa B. Barksdale, Vice President M. Wesley Jordan, Jr., Vice President
Finance and Chief Financial Officer
NPF COMPANY
By:
--------------------------------------
M. Wesley Jordan, Jr., Vice President
Finance and Chief Financial Officer
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