UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 333-44273
FWT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 75-1040743
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
5750 E. I-20
FORT WORTH, TEXAS 76119
(ADDRESS, INCLUDING ZIP CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
(817) 255-3060
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
701 HIGHLANDER BLVD., SUITE 200, ARLINGTON, TEXAS 76015
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [ ] NO [X]
INDICATED BELOW IS THE NUMBER OF SHARES OUTSTANDING OF EACH CLASS OF THE
REGISTRANT'S COMMON STOCK AS OF MARCH 17, 1999.
THERE WERE 136.14 SHARES OF THE REGISTRANT'S COMMON STOCK, PAR VALUE
$10.00 PER SHARE, OUTSTANDING AS OF MARCH 17, 1999.
<PAGE>
FWT, INC.
FORM 10-QSB - Quarter Ended January 31, 1999
PART I. FINANCIAL INFORMATION.
<TABLE>
<CAPTION>
Item 1. Financial Statements Page Number
<S> <C>
Balance Sheets (unaudited) as of January 31, 1999 and April 30, 1998 ............ 3
Statements of Income (unaudited) for the Three and Nine Month Periods Ending .... 4
January 31, 1999 and 1998
Statements of Cash Flows (unaudited) for the Three and Nine Month Periods ....... 5
Ending January 31, 1999 and 1998
Statement of Shareholders' Equity (Deficit) (unaudited) for the Nine months ended
January 3,1999 .................................................................. 6
Notes to Financial Statements ................................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition ................... 12
And Results of Operation
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ............................................................. 18
Item 2. Changes in Securities ......................................................... 18
Item 3. Defaults Upon Senior Securities ............................................... 18
Item 4. Submission of Matters to a Vote of Security Holders ........................... 18
Item 5. Other Information ............................................................. 18
Item 6. Exhibits and Reports on Form 8-K .............................................. 19
Signatures
</TABLE>
2
<PAGE>
FWT, INC.
BALANCE SHEETS
UNAUDITED
AS OF JANUARY 31, 1999 AND APRIL 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1999 1998
----------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents .......................... $ 437 $ 5,890
Accounts receivable, net of allowance for doubtful
accounts of $218 and $175 respectively ............. 5,159 6,743
Inventories ........................................ 7,676 8,828
Prepaid expenses ................................... 317 2,327
Other
assets ............................................. 46 52
----------- ---------
Total current assets .......................... 13,635 23,831
----------- ---------
Property, plant & equipment
Land and land improvements ......................... 1,508 924
Buildings and building improvements ................ 5,342 4,810
Machinery and equipment ............................ 8,998 6,802
----------- ---------
15,848 12,536
Less accumulated depreciation ...................... (4,083) (3,062)
Net property, plant, and equipment ............ 11,765 9,474
Deferred tax asset ................................... -- 20,607
Other noncurrent assets .............................. 5,316 5,807
=========== =========
Total assets ......................................... $ 30,716 $ 59,719
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt .................. $ -- $ --
Accounts payable ................................... 5,429 6,026
Accrued interest ................................... 2,198 4,763
Accrued expenses and other liabilities ............. 3,568 4,031
Notes payable ...................................... 4,095 52
Total current
liabilities ................................... 15,290 14,872
Long-term debt, less current portion ................. 105,000 105,000
----------- ---------
Total liabilities ............................. 120,290 119,872
----------- ---------
Commitments and Contingencies
Shareholders' Equity (Deficit):
Common stock, $10 par value; 1,000 shares authorized, 4 4
372 shares issued, 372 shares outstanding
Additional paid-in capital ......................... 29,583 29,676
Treasury stock, at cost, 235.86 shares ............. (83,100) (83,100)
Retained earnings (deficit) ........................ (36,061) (6,640)
----------- ---------
Total shareholders' equity (deficit): ......... (89,574) (60,153)
----------- ---------
Total liabilities and shareholders' equity (deficit) . $ 30,716 $ 59,719
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
FWT, INC.
Statements of Income
UNAUDITED
FOR THE THREE AND NINE MONTH PERIODS ENDED JANUARY 31, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
JANUARY 31, JANUARY 31,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales .............................. $ 14,235 $ 20,691 $ 50,256 $ 58,041
Cost of sales ...................... 14,229 14,692 41,965 41,344
-------- -------- -------- --------
Gross profit ....................... 6 5,999 8,291 16,697
Selling, administrative and
general expenses ................... 3,222 2,874 8,773 8,263
-------- -------- -------- --------
Operating income ................... (3,216) 3,124 (482) 8,434
Interest income .................... -- 65 70 311
Interest expense ................... (2,887) (2,601) (8,675) (3,004)
Other income (expense) net ......... 71 71 273 210
Gain/loss on sale of fixed assets .. -- 34 0 176
-------- -------- -------- --------
Total other income and expenses .... (2,816) (2,431) (8,331) (2,307)
Income before tax provision ........ (6,032) 694 (8,813) 6,127
Income tax provision ............... 20,607 255 20,607 368
-------- -------- -------- --------
Net income before extraordinary item (26,639) 439 (29,421) 5,759
Extraordinary item, net of tax
benefit of $863 .................... -- (1,517) -- (1,517)
-------- -------- -------- --------
Net income (loss) .................. ($26,639) ($ 1,078) ($29,421) $ 4,242
======== ======== ======== ========
Pro Forma Financial Information:
Pro Forma adjustment for federal
tax provision .................... -- -- -- $ 2,038
======== ======== ======== ========
Pro Forma net income ............... -- -- -- $ 2,204
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
FWT, INC.
STATEMENTS OF INCOME
UNAUDITED
FOR THE THREE AND NINE MONTH PERIODS ENDED JANUARY 31, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JANUARY 31, JANUARY 31,
------------------------- -------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income beforeextraordinary item .......................... $ (26,639) $ 439 $ (29,421) $ 5,759
ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET --
CASH PROVIDED BY OPERATING ACTIVITIES --
Provision for losses on accounts receivable .................. 328 354
Depreciation ................................................. 4,015 264 1,020 674
Amortization ................................................. 238 142 491 142
Net loss (gain) on sale of property and equipment ............ -- (45) -- (187)
ADJUSTMENTS TO WORKING CAPITAL ACCOUNTS --
Accounts receivable .......................................... 6,260 533 1,221 1,660
Inventories .................................................. 4,212 137 1,151 (2,933)
Prepaid expenses ............................................. 540 (208) 2,010 (1,565)
Other assets ................................................. 20,808 610 20,613 (272)
Accounts payable ............................................. (4,298) 500 (589) (4,511)
Accrued expenses and other liabilities ....................... (2,938) 192 (3,036) 1,620
--------- --------- --------- ---------
Net cash provided by operating activities ............... 2,526 2,564 (6,185) (9,931)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment ....................... (292) (316) (3,311) (985)
Proceeds from sales of property and equipment ................. 34 1 239
--------- --------- --------- ---------
Net cash used in investing activities ................... (292) (282) (3,310) (746)
--------- --------- --------- ---------
Proceeds from notes payable, net of financing costs .......... 23,902 97,141 31,245 117,141
Payments of notes payable .................................... (22,179) (120,468) (27,203) (120,468)
Proceeds from long-term debt issued, net of
issuance costs ........................................... -- 99,830 -- 99,830
Payments of long-term debt, including current
maturities .............................................. (1,598) -- (1,700)
Payments for acquisition of treasury stock ................... -- (80,483) -- (80,483)
Distributions paid to shareholders ........................... -- -- (21,000)
--------- --------- --------- ---------
Net cash used in financing activities .................. $ 1,723 $ (5,578) $ 4,042 $ (6,680)
--------- --------- --------- ---------
Net Increase (Decrease) In Cash and Cash Equivalents .............. 343 (3,296) (5,453) 2,505
--------- --------- --------- ---------
Cash and Cash Equivalents, beginning of period .................... 94 10,284 5,890 4,483
--------- --------- --------- ---------
Cash and Cash Equivalents, end of period .......................... $ 437 $ 6,988 $ 437 $ 6,988
========= ========= ========= =========
</TABLE>
5
<PAGE>
FWT, INC.
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDING JANUARY 31, 1999
UNAUDITED
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TREASURY STOCK TOTAL
----------------------- PAID-IN EARNINGS ----------------------- SHAREHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) SHARES AMOUNT EQUITY
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance April 30, 1998 ............ 372 $ 4 $ 29,583 ($ 6,640) 235.86 ($ 83,100) ($ 60,153)
Net Loss for the nine months
ended January 31, 1999 ....... ($ 29,421)
========== ========== ========== ========== ========== ========== ==========
Balance January 31, 1999 .......... 372 $ 4 $ 29,583 ($ 36,061) 235.86 ($ 83,100) ($ 29,421)
========== ========== ========== ========== ========== ========== ==========
</TABLE>
6
<PAGE>
FWT, INC.
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
Basis of Presentation
These unaudited financial statements reflect all normal and recurring
adjustments that are, in the opinion of management, necessary to present a fair
statement of FWT, Inc.'s ("FWT" or the "Company") financial position as of
January 31, 1999 and the results of its operations for the three and nine month
periods ending January 31, 1999 and 1998. These financial statements include
estimates and assumptions made by management that affect the reported amounts of
assets and liabilities, the reported amounts of revenues and expenses, and
provisions for and the disclosure of contingent assets and liabilities. Actual
results could differ from such estimates. Results of operations for interim
periods are not necessarily indicative of results to be obtained for the full
fiscal year.
Note 1 - Recapitalization and Stock Purchase
On November 12, 1997, the Company, FWT Acquisition Inc., T.W. Moore, Betty
Moore, Roy J. Moore, Thomas F. Moore and Carl R. Moore (each of the natural
persons, (the "Former Shareholders") entered into and consummated the
transactions set forth in a Stock Purchase and Redemption Agreement and related
agreements. Such agreements contemplated two primary transactions. The "Initial
Transaction" included (i) the incurrence by the Company of $100 million senior
secured indebtedness (the "Senior Indebtedness"), (ii) redemption by the Company
of an aggregate of 235.86 shares of the Company's common stock from the Former
Shareholders for consideration totaling approximately $83.6 million, (iii) the
repayment of outstanding indebtedness of the Company totaling approximately
$22.1 million, and (iv) the distribution of an immaterial amount of selected
assets to certain Former Shareholders (such transactions are collectively
referred to as the "Recapitalization"). The second transaction included the
purchase by FWT Acquisition, Inc. of an aggregate of 108.91 shares of the
Company's common stock from Former Shareholders for consideration totaling
approximately $36 million (the "Stock Purchase"). As a result of the Stock
Purchase, FWT Acquisition, Inc. holds 80% of the issued and outstanding Common
Stock, and three of the Former Shareholders hold 20% of the issued and
outstanding Common Stock. For financial reporting purposes, the Recapitalization
was accounted for as an acquisition of treasury stock.
The borrowings under the Senior Indebtedness, cash from the Company of
approximately $5.0 million, notes payable of approximately $2.5 million to the
Former Shareholders, and distribution of selected assets to certain former
shareholders, were used to consummate the Recapitalization. In order to repay
the Senior Indebtedness, the Company issued $105.0 million aggregate principal
amount of 9 7/8 % Senior Subordinated Notes (the "Senior Subordinated Notes").
The Senior Subordinated Notes were subsequently redeemed pursuant to an Exchange
Offer that expired on April 12,1998. All outstanding Senior Subordinated Notes
were redeemed in the exchange for 9 7/8% Senior Subordinated Notes (the
"Notes") having substantially the same terms and conditions.
Note 2 -- Cash Equivalents
The Company considers all highly liquid short-term investments purchased with
original maturities of three months or less to be cash equivalents. The cost of
such short-term investments approximated fair value.
Note 3 -- Inventories
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out (FIFO) method. Inventory costs include material, labor
and factory overhead. Total inventories as of January 31, 1999 and April 30,
1998 included the following (amounts in thousands):
January 31, April 30,
1999 1998
----------- ---------
Finished goods ........................... $ 4,746 $ 4,847
Work-in process and raw materials ........ 2,930 3,981
----------- ---------
Total Inventories ........................ $ 7,676 $ 8,828
=========== =========
7
<PAGE>
Note 4 -- Revenue Recognition
Revenue from sales is recognized when the earnings process is complete, which is
generally at the time of product shipment. In circumstances where shipments are
delayed at the customer's request, revenue is recognized upon completion of the
product and payment is received from the customer. Management believes that
payment represents acknowledgment by the customer that all contractual terms are
binding, the product has been manufactured according to customer specifications
and engineering design, and the product is available for delivery according to
the schedule fixed by the customer. Accordingly, management believes that the
risk of ownership has passed and the earnings process is complete.
During the nine months ended January 31, 1999 the Company received orders from a
customer pursuant to a long-term contract under which the Company was to
provide, among other things, engineering services, shelters, construction
service for the build out of a fiber optic network. Sales of approximately $3.5
million were recognized during the nine months ended January 31, 1999. On
January 20, 1999 the contract for construction services and other services was
terminated and all work in process related thereto was invoiced. The Company
continues to provide shelters to this customer.
Note 5 -- Federal and State Income Taxes
Effective November 12, 1997, the Company elected to be taxed as a Subchapter C
corporation. Prior to November 12, 1997, the Company was a Subchapter S
corporation. Accordingly, no provision for federal income taxes is reflected in
the accompanying statements of income for the three and nine month periods ended
January 31, 1998, as well as for the periods prior to November 11, 1997. The
provisions recorded relate to the period subsequent to November 12, 1998 and pro
forma information discloses what the tax provision would have looked like if the
corporation had been taxed as a Subchapter C Corporation for the entire
accounting period from May 1, 1997 through January 31, 1998.
During the time that the Company was a Subchapter S Corporation, it had made an
election under Section 444 of the Internal Revenue Code of 1986 as Amended (the
"Code") to retain a fiscal year end of April 30. As a result of such election,
the Company was required to pay an amount held by the IRS to offset timing
differences in the payment of estimated taxes by the Company's shareholders. As
of January 31, 1998 the Company had made payments pursuant to this requirement
of $1,960,702 that were included in prepaid expenses at January 31, 1998. Such
amount was refunded in fiscal year 1999 and thus the related amount was removed
from prepaid expenses by January 31, 1999.
The accompanying statements of income include provisions for state income taxes.
For the periods through November 11, 1998, such provisions include amounts for
various states in which the Company was subject to income taxes and those states
did not recognize Subchapter S corporations.
In connection with the transactions discussed in Note 1, the parties to the
transactions elected jointly to treat the Recapitalization and Stock Purchase as
an asset acquisition under Section 338(h)(10) of the Code. As a result, the
Company recorded a deferred tax asset of $20.6 million (net of a valuation
allowance of $20.0 million) and is included in other noncurrent assets as of
January 31, 1998, with a corresponding credit to additional paid-in capital. The
deferred tax asset is related to future tax deductions for the net excess of the
tax bases of the assets and liabilities over the financial statement carrying
amounts.
Current results of operations and the matters discussed in Note 7 do not
indicate that future taxable income will be sufficient to realize the net
deferred tax asset. Therefore a provision of $20.6 million, was made in the
period ended January 31, 1999 to increase the valuation allowance.
Note 6 -- Notes Payable and Long-Term Debt
Notes payable and long-term debt of the Company as of January 31, 1999 and April
30, 1998, consisted of the following (amounts in thousands):
8
<PAGE>
JANUARY 31, APRIL 30,
1999 1998
----------- ---------
Subordinated promissory notes payable to existing
Shareholders, interest at prime (8.5% at 1/31/98),
principal and accrued interest due 4/10/98 ..... -- $ 38
Note payable under revolving line of credit,
interest at prime plus 1% (8.75% at 1/31/99),
due 7/31/2000, collateralized by substantially
all assets (See Note 7) ........................ $ 4,094 14
Senior subordinated notes, bearing interest at
9 7/8% and payable semiannually on 5/15 and
11/15, principal due at maturity on 11/15/2007 105,000 105,000
----------- ---------
Total notes payable and long-term debt ......... 109,094 105,052
Less - current portion ......................... (4,094) (52)
----------- ---------
Notes payable and long-term debt, less current portion $ 105,000 $ 105,000
=========== =========
In connection with the transactions discussed in Note 1, the Company issued
subordinated promissory notes to each of the Existing Shareholders totaling
$911,853 (the "Purchase Price Adjustment Notes") and $1,582,500 (the "Tax
Notes"). The Purchase Price Adjustment Notes bear interest at the prime rate and
were originally payable (subject to adjustment based upon the audited working
capital of the Company as of October 31, 1998), in monthly installments of
principal of $75,987, plus accrued interest, through October 15, 1998, with a
final principal installment of $75,994, plus accrued interest, on November 15,
1998. The Tax Notes bear interest at the prime rate and were payable on April
10, 1998, plus accrued interest. Each of the Purchase Price Adjustment Notes and
Tax Notes are unsecured obligations of the Company.
In November, 1997, the Company entered into a revolving credit facility with BT
Commercial Corporation and Bankers Trust Company ("the Revolving Credit
Facility") that allowed the Company to borrow up to $25,000,000, subject to
borrowing base limitations and the satisfaction of customary borrowing
conditions. The Revolving Credit Facility contains certain financial covenants
that require the Company to maintain, based upon the latest twelve months of
operations, minimum ratios of consolidated EBITDA to consolidated interest
expense, minimum ratios of consolidated total debt to consolidated EBITDA, and
minimum levels of consolidated EBITDA. The Revolving Credit Facility also
limits, among other items, the Company's annual capital expenditures and the
Company's ability to incur additional indebtedness. The Revolving Credit
Facility was amended on January 20, 1999 to reduce the facility size to
$15,000,000, amend the definition of the Borrowing Base to exclude items that
have been billed but not yet shipped, limit the facility to Eligible Accounts
Receivable advanced at 85% plus $3,000,000 and amend the ratio's discussed
above. As of January 31, 1999, the Company was in default under certain
financial covenants set forth in the agreement.
Subsequent to the completion of the transactions discussed in Note 1, the
Company issued $105,000,000 of Notes, the proceeds from which were used to repay
senior secured indebtedness incurred by the Company in connection with the
Recapitalization and distributions made to certain Existing Shareholders during
October 1997 in anticipation of the Recapitalization. Interest on the Notes is
payable semiannually on May 15 and November 15 of each year, commencing on May
15, 1998. The Notes mature on November 15, 2007. The Notes are unsecured senior
subordinated obligations of the Company and are subordinated in right of payment
to all existing and future Senior Indebtedness (as defined in the indenture
governing the notes, the "Indenture") of the Company. The Notes are redeemable,
in whole or in part, at the option of the Company on or after November 12, 2002.
In addition, at any time on or prior to November 15, 2000, the Company may, at
its option, redeem up to 35% of the aggregate principal amount of the Notes from
the proceeds of one or more public equity offerings, at a redemption price equal
to 109.875% plus accrued and unpaid interest. Upon a Change of Control (as
defined in the Indenture), each holder of the Notes will have the right to
require that the Company make an offer to purchase all outstanding Notes at a
price equal to 101% plus accrued interest. The Indenture contains certain
covenants that limit the ability of the Company to, among other things, incur
additional indebtedness, pay dividends or make investments and certain other
restricted payments, consummate certain asset sales, enter into certain
transactions with affiliates, incur liens, merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. In addition, the Company will be
obligated to offer to repurchase the Notes at 100% plus accrued and unpaid
interest in the event of certain Asset Sales (as defined in the Indenture). The
Notes also contain certain registration rights.
9
<PAGE>
Note 7 - Events Subsequent to January 31, 1999
On March 26, 1999, BT Commercial Corporation issued notice to the Company that
BT Commercial Corporation would not lend any additional amounts to the Company
under the Revolving Credit Facility after March 30, 1999 as a result of certain
events of default.
On April 1, 1999, BT Commercial Corporation gave the Company notice that as a
result of events of default under the Revolving Credit Facility, all amounts
owing under the Revolving Credit Facility were immediately due and payable. As a
result of such acceleration and the Company's lack of working capital, the
Company and its majority and minority shareholders entered into a series of
agreements dated as of April 8, 1999, whereby the following transactions were
consummated:
1. An entity affiliated with the minority shareholders of the Company
loaned the Company $7,000,000 for use as working capital. The
Company granted to such lender a security interest in certain real
and personal property of the Company. The interest rate on such loan
is 8% and the loan is due within 180 days.
2. The minority shareholders of the Company, Carl R. Moore, Thomas F.
Moore and Roy J. Moore (the "Minority Shareholders"), purchased the
interest of the majority shareholder of the Company, FWT
Acquisition, Inc., an affiliate of Baker Capital Corp., thereby
acquiring 100% of the outstanding common stock of the Company. The
amount paid by the Minority Shareholders for the stock held by FWT
Acquisition, Inc. was $1. The Minority Shareholders, along with T.W.
Moore and Betty Moore, were the key operating personnel of the
Company prior to the acquisition by FWT Acquisition, Inc. of control
of the Company in November, 1997.
3. The Company, FWT Acquisition, Inc. and the Minority Shareholders,
along with T.W. Moore and Betty Moore, exchanged various releases
with respect to certain possible causes of action that each may have
had with respect to the others. The Company also agreed to pay off
all amounts due and owing under the Revolving Credit Facility by May
5, 1999. In addition, the Company agreed to take no action which
could under the guaranty of the Revolving Credit Facility by Baker
Communications Fund, L.P. ("Baker") which could either (i) adversely
affect the rights of Baker or (ii) increase the exposure of Baker.
4. Three of the Company's directors, John C. Baker, Edward W. Scott and
Lawrence A. Bettino, (collectively the "Former Directors") resigned
from the Board of Directors effective as of April 8, 1999. Messrs.
Baker, Scott and Bettino are all affiliates of Baker Capital Corp.
5. Carl R. Moore and Thomas F. Moore were elected directors of the
Company, thereby creating a three man Board of Directors along with
the current continuing director, Roy J. Moore.
6. The following persons were appointed officers of the Company: Roy J.
Moore, Chief Executive Officer, Carl R. Moore, President, and Thomas
F. Moore, Chairman of the Executive Committee.
On April 16, 1999, the Company filed its voluntary petition (the "Bankruptcy
Petition") for bankruptcy protection under Chapter 11 of the United States
Bankruptcy Code in the Northern District of Texas, Fort Worth Division, (the
"Bankruptcy Court") in order to facilitate an orderly reorganization of the
Company's financial status and enable the Company to emerge from bankruptcy as a
viable operating company.
On April 21,1999, the Bankruptcy Court entered an agreed order providing for the
lenders under the Revolving Credit Facility to receive all accounts receivable
proceeds of the Company in order to pay off all amounts due and owing. The
Company estimates these amounts should be paid in full by June 30, 1999. The
Management believes it currently has adequate working capital in order to fill
its current customer orders. The Company continues to search for a new secured
lender and believes this search will be facilitated by the Company's filing of
the Bankruptcy Petition as well as the pay off of all amounts owing under the
Revolving Credit Facility.
Note 8 Contingent Liabilities
In connection with a Sales and Use Tax audit for the four years ended June 30,
1998, a preliminary assessment of taxes due to the state of Texas during the
audit period is approximately $678,000 including penalties and interest. The
Company is currently appealing the assessment. Management of the Company
believes that a substantial portion of the tax, penalty and interest currently
assessed may be repealed. No accrual has been made as the amount as the amount
due is not determinable at this time.
10
<PAGE>
The Company received notice of assessment on April 15, 1999 of Franchise Taxes
due to the State of Texas in the amount of $897,494.27 for the year ended of
1998 assessed on the financial performance of the Company for the year ended
April 30, 1997. The return for the period of assessment has not been prepared or
filed by the Company, although an estimated tax payment of approximately
$150,000 was made on the due date of the return. The Company is currently
attempting to prepare and file such return and can not determine the accuracy or
appropriateness of such an assessment. No accrual for such assessment had been
made in the books and records of the Company as of January 31, 1999.
On April 19, 1999, a class action lawsuit was filed against the Company, Roy J.
Moore and the Former Directors for violations of the Worker Adjustment and
Retraining Notification Act ( the "WARN Act"). The suit alleges that the Company
failed to give adequate notice of its layoff of workers in January of 1999 as
required by the WARN Act. The Management believes it has meritorious defenses to
this claim and intends to vigorously defend against any claims by the
plaintiffs.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
OVERVIEW
On November 12, 1997, the Company, FWT Acquisition, Inc, T.W. Moore, Betty
Moore, Roy J. Moore, Thomas F. Moore and Carl R. Moore (each of the natural
persons, the "Former Shareholders") entered into and consummated the
transactions set forth in a Stock Purchase and Redemption Agreement and related
agreements. Such agreements contemplated two primary transactions. The "Initial
Transaction" included (i) the incurrence by the Company of $100 million senior
secured indebtedness, (ii) redemption by the Company of an aggregate of 235.86
shares of the Company's common stock from the Former Shareholders for
consideration totaling approximately $83.6 million, (iii) the repayment of
outstanding indebtedness of the Company totaling approximately $22.1 million,
and (iv) the distribution of an immaterial amount of selected assets to certain
Former Shareholders (such transactions are collectively referred to as the
"Recapitalization"). The second transaction included the purchase by FWT
Acquisition, Inc. of an aggregate of 108.91 shares of the Company's common stock
from Former Shareholders for consideration totaling approximately $36 million
(the "Stock Purchase"). As a result of the Stock Purchase, FWT Acquisition, Inc.
holds 80% of the issued and outstanding Common Stock, and three of the Former
Shareholders hold 20% of the issued and outstanding Common Stock. For financial
reporting purposes, the Recapitalization was accounted for as an acquisition of
treasury stock.
The borrowings under the Senior Credit Facility, cash from the Company of
approximately $5.0 million, notes payable of approximately $2.5 million to the
Former Shareholders, and distribution of selected assets to certain former
shareholders, were used to consummate the Recapitalization. In order to repay
the Senior Credit Facility, the Company issued $105.0 million aggregate
principal amount of 9 7/8 % Senior Subordinated Notes (the "Notes"). The Notes
were subsequently redeemed pursuant to an Exchange Offer that expired on April
12,1998. All outstanding Notes were redeemed in the exchange for 9 7/8% Senior
Subordinated Notes having substantially the same terms and conditions.
MANAGEMENT CHANGES
On December 30, 1998 the Company's Board of Directors (the "Board")
terminated the employment of Douglas A. Standley, the Company's President and
Chief Executive Officer, created an operating committee to manage the day-to-day
operations of the Company (the "Operating Committee), and retained outside
consultants to assist the Operating Committee in performing its duties. The
Board approved the Operating Committee's plan to significantly reduce the
Company's overall expenses, including a reduction of the Company's workforce
from 295 to 162 employees on January 4, 1999. This compares to 413 employees on
January 14, 1998. Included in this layoff were the Vice Presidents of Sales and
Operations as well as all members of the outside sales force leaving the Chief
Financial Officer and the Controller as the remaining Officers of the Company.
The Committee also consolidated administrative functions from a 16,000 square
foot leased facility into an existing Company-owned facility. Management
believes that it continues to have the operating capacity to meet the level and
nature of customer demands.
RESULTS OF OPERATIONS
Sales. Sales for the three-month period ended January 31, 1999 were $14.2
million as compared to sales of $20.7 million for the same period in 1998. The
decrease in sales of $6.5 million or 31.4% for the three-months ended January
31,1999 compared to the same period in 1998, is primarily attributed to a
decrease in the industry demand for Towers and related products. The Company
experienced an increase in the sale of Monopoles during the three-month period
ended January 31,1999 as compared to the same period in 1998, partially
offsetting the decline in sales attributable to other Tower products. In
addition, the Company's customer base of primary telecommunication service
providers has, in some instances, postponed the capital expenditure process for
the construction of cell site locations due to the recent entry into the market
of "build-to-suit" providers, who are also part of the Company's customer base.
As a result of the entry of build-to-suit providers into the market, the Company
believes the demand for the Company's products has been pushed forward to future
periods.
Sales for the nine month period ended January 31,1999 were $50.3 million
as compared to sales of $58.0 million for the same period in 1998. The decrease
in sales of $7.8 million or 13.4% for the nine months ended January 31,1999
compared to the same period in 1998 is primarily attributable to a decrease in
demand for towers and related products. The Company believes the decrease in
demand for these products is due to the focus by the primary telecommunication
service providers in the construction of co-location and corridor sites, greater
co-location and an increasing reliance on build-to-suit providers.
Gross Profit. Gross profit for the three-month period ended January
31,1999 decreased by $ 6.0 million as compared to the same period in 1998. As a
percent of sales, gross profit decreased to .04% from 29.0% for the three-month
period ended
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January 31,1999 as compared to the same period in 1998. The decrease is due to
the under absorption of fixed labor costs and manufacturing overhead during the
three-months ended January 31,1999 and the write down of $2.2 million in
obsolete inventories. The Company reduced its labor force by approximately 133
employees the first week in January to mitigate the effect of cost increases
associated with its manufacturing operations in future periods. Due to the short
tenure of those employees that were terminated, the Company was not required to
incur additional costs associated with the reduction in force. In addition, the
Company continued to experience pricing pressure on its Monopole products due to
excess capacity levels in the market and the overall decrease in industry
demand.
Gross profit for the nine-month period ended January 31,1999 decreased by
$8.4 million as compared to the same period in 1998. As a percent of sales,
gross profit decreased to 16.5% from 28.8% for the nine-month period ended
January 31,1999 as compared to the same period in 1998. The decrease in gross
profit as a percent of sales is due to under-absorption of fixed labor cost and
manufacturing overhead during the nine-month period, the write down of $2.2
million in obsolete inventories and pricing pressure across all products.
Selling, Administrative and General Expenses. Operating expenses increased
by $348,000 for the three-month period ended January 31,1999 as compared to the
same period in 1998. As a percent of sales, operating expenses increased to
22.6% from 13.9% for the three-month period ended January 31,1999 as compared to
the same period in 1998. The increase is due in part to an increase in total
general administrative expenses of $714,000 for the third quarter of 1999 as
compared to the same period of the prior year, which was partially offset by the
decrease of $366,000 in selling expenses for the quarter ended January 31, 1999
as compared the same quarter in the prior year. The increase in administrative
expenses was due in part to increased professional fees for accountants,
attorneys, consultants, and management fees for the period noted of $714,000 and
an increase of $328,000 to the bad debt expense for the same period. These
expenses were offset by decreases in payroll related expenses of $236,000 and
miscellaneous decreases in other overhead areas of $92,000 for the quarter ended
January 31, 1999 as compared to the same quarter of 1998. The decrease in
selling expenses of $366,000 for the quarter ended January 31, 1999 as compared
to the same quarter of 1998 resulted largely from the termination of the entire
outside sales staff effective January 4, 1999 and related decreases in travel
and entertainment.
As a percent of sales, operating expenses increased to 17.5% from 14.2%
for the nine-month period ended January 31,1998 as compared to the same period
in 1998. The dollar increase for the nine-month period ended January 31,1999 of
$510,000 was primarily attributed to the following:
(i) An increase in professional fees of $1.2 million resulting from the
increased use of attorneys, outside accountants, outside consultants
and outside management fees.
(ii) An increase of $519,000 in office overhead expenses resulting from
executive travel increasing $320,000, and increases related to the
opening of a corporate office headquarters site of telephone, office
rental and supplies expenses of approximately $199,000.
(iii) An increase in depreciation of $265,000 related to the addition of
approximately $4 million in capital assets.
(iv) An offsetting decrease in payroll related expense in the amount of
$779,000 due to the decrease of $375,000 to profit sharing expenses
and decreases in bonuses.
(v) The offsetting decrease in selling direct expenses, specifically
commissions of approximately $688,000 and other miscellaneous
selling expense reductions of $7,000 account for the balance of the
change.
Operating Profit. Operating profit for the three-month period ended
January 31,1999 decreased by $6.3 million as compared to the same period in
1998. The decrease in operating profit was due to a decrease in gross profit
margins.
Operating profit for the nine-month period ended January 31,1999 decreased
by $8.9 million as compared to the same period in 1998. The decrease in
operating profit was due to a decrease of $7.7 million in sales, a lack or
corresponding drop in cost of goods sold resulting in a drop in gross profit of
$8.4 million and an increase in operating expenses of $510,000 as discussed
above for the period ended January 31,1999 as compared to the same period in
1998.
Interest Expense. Interest expense increased for the three-month period
ended January 31,1999 by $287,000 as compared to the same period in 1998. The
increase in interest expense is due to primarily to increased outstandings
under the Revolving Credit Facility for the three-month period ended January
31,1999 as compared to the same period in 1998.
Other Income and Expense, Net. Other income decreased for the three-month
period ended January 31,1999 by $99,000 as compared to the same period in 1998.
The decrease was due to the sale of assets no longer required by the Company
resulting in a gain of $34,000 and interest income in the amount of $65,000 for
the three months ended January 31, 1998 with no corresponding transactions for
the same period in 1999.
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Other income decreased for the nine-month period ended January 31,1999 by
$354,000 as compared to the same period in 1998. The decrease was due to the
sale of capital assets no longer required by the Company and interest income
from the Company investing its cash in overnight investments for the nine-month
period ended January 31,1998 as compared to the same period for 1999.
Provision for Income Taxes. The provision for income taxes increased to
$20.6 million for the three-month period ended January 31, 1999 as a result of
the write-off of the deferred tax asset related to future tax deductions for
the net excess of the tax basis of the assets and liabilities over the
financial statement carrying value. Current results of operations do not
indicate that future taxable income after debt service will be sufficient to
realize the net deferred tax asset. No negative provision was taken for the
three months or nine months ended January 31, 1999 to reflect the benefit of
loss carry forwards due to the uncertainty of the realization of such future
benefits.
Effective November 12, 1997, the Company elected to be taxed as a
Subchapter C corporation and, accordingly, has recorded a provision for federal
income taxes since such date in the accompanying statements of income for the
three and nine month periods ended January 31, 1999. Prior to November 12,
1998, the Company was a Subchapter S corporation. Accordingly, no provision for
federal income taxes is reflected in the accompanying statements of income for
the period from May 1, 1997 through November 11, 1997 included in the
accompanying statements of income for the three and nine month period ended
January 31, 1998.
Extraordinary Item, Net of Taxes. Extraordinary items decreased for the
three-month and nine-month period ended January 31,1999 by $1.5 million as
compared to the same periods in 1998. The extraordinary item for 1998
represented the write-off of deferred financing costs associated with the
Senior Indebtedness used as initial financing for the Recapitalization of the
Company.
Net Income (Loss). Net income (loss) decreased for the three-month period
and nine-month period ended January 31,1999 by $25.6 million and $33.7million,
respectively, as compared to the same periods in 1998. The decrease in net
income was due primarily to: (i) decreased sales, (ii) no offsetting reduction
in cost of sales expense, (iii) write down of obsolete inventory, (iv) higher
interest expense associated with the Recapitalization of the Company, and (v)
the write-off of the deferred tax asset due to uncertainty of realization by
the Company.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its operations through internally
generated funds and existing cash reserves. The Company produced a net cash
flow (deficit) of $(3.3) million and $2.5 million for the three month and nine
month periods ending January 31,1997 and 1998, respectively.
The net cash flow provided by operating activities for the three and nine
month periods ending January 31, 1999 was $2.5 million and $(6.2) million,
respectively. The primary changes in working capital accounts for the
three-month period ending January 31, 1999 were as follows:
(i) accounts receivable decreased by approximately $6.2 million as a
result of an intensified collection effort by management;
(ii) inventories decreased by $4.2 million as a result of management's
efforts to ship finished goods and a $2.2 write down of obsolescent
inventory;
(iii) other assets decreased by approximately $20.8 million due to the
write off of the net tax benefit resulting from the write-off of the
deferred tax asset related to future tax deductions for the net
excess of tax basis of the assets and liabilities over the financial
statement carry values;
(iv) accounts payable increased by approximately $4.3 due to a shortage
of available cash with which to pay vendors; and
(v) accrued expenses increased by $2.9 million due to the increase in
interest due on the subordinated debentures.
The primary changes in working capital accounts for the nine-month period ending
January 31, 1999 were as follows:
(i) accounts receivable decreased by approximately $1.2 million as a
result of an intensified collection effort by management;
(ii) inventories decreased by $1.2 million as a result of a $2.2 million
write down of obsolescent inventory partially offset by increased
shelter component inventory of approximately $1.0 million;
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prepaid expenses decreased by approximately $2.0 million primarily
as a result of a refund of taxes paid to the IRS pursuant to Section
444 of the IRS Code;
(iii) other assets decreased $20.6 million due to the write off of the net
tax benefit resulting from the write-off of the deferred tax asset
related to future tax deductions for the net excess of tax basis of
the assets and liabilities over the financial statement carry
values;
(iv) accounts payable increased $589,000 due to increased expenses and
scarcity of cash available to pay vendors; and
(v) accrued expenses increased by approximately $3.0 million primarily
as a result of interest accrued relating to the subordinated
debentures.
The cash flow used by investing activities was $292,000 and $3.3 million
for the three and nine month periods ending January 31, 1999, respectively,
reflecting the Company's capital equipment requirements during such periods.
The cash flow provided by financing activities was $1.7 million and $4.0
million for the three and nine month periods ending January 31, 1999,
respectively. The net cash flow from notes payable resulted from borrowings in
excess of payments under the Revolving Credit Facility.
The Company determines its short-term liquidity needs based upon its cash
requirements over the next twelve months, and its long-term liquidity needs
based upon its cash requirements for periods in excess of twelve months. The
Company entered into the Revolving Credit Facility which subject to borrowing
base limitations and the satisfaction of customary borrowing conditions and
financial covenants, allows the Company to borrow up to $15.0 million as
amended on January 20, 1999, and provides for a $3.0 million overline
guaranteed by an affiliate of the Company's former majority shareholders. The
Company's principal sources of short term and long term liquidity are cash flow
generated from operations and borrowings under the Revolving Credit Facility.
The principal uses of liquidity are to meet debt service requirements, finance
the Company's capital expenditures, and provide working capital needs. As of
January 31,1999, the Company would have had approximately $2.4 million of
availability under the terms of the Revolving Credit Facility. The Company had
approximately $4.1 million drawn against the Revolving Credit Facility as of
January 31,1999.
The Company had a capital expenditure budget of approximately $4.5 million
for the calendar year 1998, of which an estimated $1.5 million was carried
forward to be spent in Fiscal Year 1999, for the completion of certain
projects. These projects included $1.9 million for the build-out of additional
production space, and $1.8 million for additional manufacturing equipment. The
1999 capital budget of $1.5 million has been spent in upgrading warehouse and
office equipment and computer programs and implementation to ensure that the
Company is year 2000 compliant. The management of the Company is confident that
the Year 2000 issue will not affect the ongoing operations of the Company.
Pursuant to an agreed order with the lender under the Revolving Credit
Facility, which order was entered by the Bankruptcy Court on April 21, 1999,
the Company has agreed to allow such lender to retail all accounts receivable
proceeds until such time as all amounts due and owing under the Revolving
Credit Facility are paid in full. As of April 23, 1999, there was $1.2 million
due and owing under the Revolving Credit Facility. On April 8, 1999 the Company
entered into a loan agreement with affiliates of its current shareholders,
providing for a loan of $7 million at 8% interest for 180 days. Management
believes it currently has adequate working capital in order to fill its current
customers orders. The Company continues to search for a new secured lender and
believes this search will be facilitated by the Company's filing of the
Bankruptcy Petition as the pay off of all amounts under the Revolving Credit
Facility.
INFLATION
Certain of the Company's expenses, such as compensation, benefits, raw
materials and equipment repair and replacement, are subject to normal
inflationary pressures. While the Company to date has been able to offset
inflationary cost increases through increased operating efficiencies and price
increases to its customers, there can be no assurance that the Company will be
able to offset any future inflationary cost increases through these or similar
means.
CERTAIN FACTORS THAT MAY AFFECT THE COMPANY'S BUSINESS OR FUTURE OPERATING
RESULTS
This report contains various forward-looking statements and information
that are based on Management's beliefs as well as assumptions made by and
information currently available to Management. When used in this report, the
words "anticipate", "estimate", "expect", "predict", "project", and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks, uncertainties and assumptions. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those
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anticipated, expected or projected. Among the key factors that may have a direct
bearing on the Company's results are set forth below.
The filing of the Bankruptcy Petition may have a negative effect on both
the Company's Customers as well as the Company's vendors. Both of these may
either alone or together, have a material adverse effect on the Company's
business, financial condition and profitability.
Future trends for revenue and profitability remain difficult to predict.
The Company continually faces risks and uncertainties including, among others,
general and specific market economic conditions, dependence on certain key
customers and the wireless communications industry in general, risk of
nonpayment of accounts receivable, competitive factors, supplier related issues,
working capital constraints and the ability to service a high level of
indebtedness.
General economic conditions in the United States could affect the pricing
on raw materials such as steel and zinc used in many of the Company's products.
Because steel and zinc constitute a substantial portion of the Company's cost of
goods sold, any increase in the price of such materials could have a material
effect on future profitability. There can be no assurance that the Company will
be successful in passing along any cost increases to its customers.
A substantial portion of the Company's revenues are generated from a few
key customers. As customers acquire and merge with other customers in the
industry, the Company expects that its customer base will continue to become
more concentrated. Loss of key customers, or significant declines in revenues
from key customers, could have a material adverse effect on the Company's
business, financial condition and profitability.
The Company's business depends upon the capital expenditures of wireless
service providers that, in turn, depend upon current and anticipated market
demand for wireless communications. The future success of the Company depends to
a considerable extent upon the continued growth and increased availability of
cellular and other wireless communications services. The wireless communications
industry has experienced downturns that have resulted in a decrease in demand
for the Company's products. There can be no assurance that the wireless
communications industry will not continue to experience a prolonged downturn in
the future or that the industry will reverse its course and expand. Continued
significant decreases in the level of capital expenditures could have a material
adverse effect on the Company's business, financial condition and profitability.
Management continues to closely monitor customer orders and the
creditworthiness of its customers. The Company has not experienced abnormal
increases in losses associated with accounts receivable. The Company has
provided allowances that it believes to be adequate to reflect the risk
associated with collection of accounts receivable. Unforeseen market conditions
may, however, compel the Company to increase such allowances.
The telecommunications infrastructure industry is highly competitive. The
Company faces substantial competition in each of its markets from established
competitors, some of which have greater financial, engineering, manufacturing
and marketing resources than the Company. In addition, the Company has recently
experienced competition from "build-to-suit" suppliers. The Company's
competitors can be expected to continue to improve the design of their products,
to introduce new products with competitive prices and to improve customer
satisfaction. During the past twelve months the Company has experienced
significant pricing pressure and there can be no assurance that competitive
pressures will not necessitate future price reductions that would adversely
affect operating results. Although the Company believes it has certain
advantages over its competitors, a high level of investment in sales, marketing
and other services will be required in order to maintain these advantages. There
can be no assurance that the Company will have sufficient resources to make such
investments or that the Company will be able to maintain its current competitive
advantages.
Certain components used in the Company's products are obtained from a
single source or a limited number of suppliers. Reliance on these suppliers
involves certain risks, including a potential inability to obtain an adequate
supply of required components in a timely manner and on terms favorable to the
Company, as well as maintenance of the Company's quality standards. The Company
continually seeks to reduce its dependence on its sole or limited source
suppliers; however, the loss of certain of these suppliers could have at least a
temporary material adverse effect on the Company. Further, significant price
increases in one or more of these components could materially adversely affect
future profitability.
The Company's future success will, in part, depend upon its ability to
increase its production volume on a timely basis while maintaining product
quality and per unit production costs. The Company has, in the past, experienced
delays in its ability to fulfill customer orders on a timely basis due to limits
on its ability to purchase product. Any significant delays in fulfilling
customer orders for an extended period could damage customer relations that
could materially adversely affect the Company's business, financial condition
and profitability. Production schedules for each of the Company's products are
based upon orders for such products. A significant increase in demand for any of
the Company's products could result in the Company's inability,
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on a short-term basis, to fully satisfy demand. Failure by the Company to
forecast its production requirements accurately could result in inventory
surpluses or shortages that could have a material adverse impact on the
Company's financial condition and profitability.
The Company maintains a high level of indebtedness. As a result, a
significant portion of the Company's cash flow is dedicated to the payment of
interest on, and the repayment of, such indebtedness. The Company's ability to
satisfy its obligations will depend upon its future operating performance. At
the present time the Company anticipates that it will not have adequate
operating cash flow to meet operating expenses and satisfy debt service
requirements.
IMPACT OF THE YEAR 2000
Many existing computer programs use only two digits to identify a year in
the date field. Certain of the Company's computer programs that have time
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000. If not corrected, many computer applications could fail or create
erroneous results. The Year 2000 issue affects virtually all companies and
organizations.
The Company has installed new information systems and modified others so
that its computers will function properly with respect to dates in the Year 2000
and thereafter. The Company management presently believes that, the Year 2000
issue will not pose any significant operational problems. The Company has not
discussed the Year 2000 issue with its customers and suppliers. There can be no
assurance that the computer systems of these other companies will be timely
converted. The failure of the Company's significant customers and suppliers to
make necessary modifications could have a material adverse impact on the
Company's operations.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In the normal course of business, the Company is involved in various pending
legal proceedings and claims. On April 19, 1999, a class action lawsuit was
filed against the Company, Roy J. Moore and the Former Directors for violations
of the Worker Adjustment and Retraining Notification Act (the "WARN Act"). The
suit alleges that the Company failed to give adequate notice of its layoff of
workers in January of 1999 as required by the WARN Act. The Management believes
if has meritorious defenses to this claim and intends to vigorously defend
against any claims by the plaintiffs. In the opinion of management, the ultimate
resolution of such matters will not likely have a material impact on the
financial condition or the future results of operations of the Company.
Item 2. Changes in Securities.
(a). Not applicable.
(b). Not applicable.
Item 3. Defaults Upon Senior Securities.
(a). The Company is currently in default under its Revolving Credit
Facility with BT Commercial Corporation and Bankers Trust Company. The amount
owing under the facility is $1,124,452. See Note 7 to the Financial Statements.
(b). 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 on Form 8-K.
Exhibit (1) Stock Purchase, Settlement and Release Agreement dated April 8,
1999.
Exhibit (2) Order Approving Agreement Regarding Cash, Collateral, Other
Collateral, Adequate Protection, and Limited Relief from Automatic Stay.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
FWT, INC.
April 27, 1998 By : /s/ Roy J. Moore
Roy J. Moore
Chief Executive Officer
(signing in the capacity of
principal financial officer and
principal accounting officer)
18
EXHIBIT 1
STOCK PURCHASE, SETTLEMENT AND RELEASE AGREEMENT
THIS STOCK PURCHASE, SETTLEMENT AND RELEASE AGREEMENT (this "AGREEMENT"),
dated as of April 8, 1999, is by and among Carl R. Moore, Thomas F. "Fred" Moore
and Roy J. Moore, (such individuals are collectively referred to as the
"Purchasers"), T.W. Moore and Betty Moore (such individuals together with the
Purchasers are sometimes collectively referred to as the "Moores"), FWT
Acquisition, Inc., a Delaware corporation (the "Seller"), FWT, Inc., a Texas
corporation (the "Company") and Baker Communications Fund, L.P., a Delaware
limited partnership ("Baker Fund").
PRELIMINARY STATEMENTS
A. Each of the Seller, the Company and the Moores entered into that
certain Stock Purchase and Redemption Agreement, dated as of November 12, 1997
(together with the Schedules, Annex and Exhibits thereto, the "1997 Purchase
Agreement"). Capitalized terms used in this Agreement, but not otherwise
defined, will have the meanings ascribed thereto in the 1997 Purchase Agreement.
B. After giving effect to the Closing Transactions under the 1997 Purchase
Agreement and prior to giving effect to the transactions contemplated herein,
the Purchasers owned an aggregate of 27.2283 shares of the Company's common
stock, par value $10.00 per share ("Common Stock"), representing 19.99995593% of
the outstanding Common Stock of the Company, and the Seller owned 108.9135
shares of Common Stock, representing 80.00004407% of the outstanding Common
Stock of the Company.
C. The Seller desires to sell to the Purchasers, and the Purchasers desire
to purchase from the Seller, 108.9135 shares of Common Stock.
D. The Seller is willing to relinquish and waive any claims or rights
which the Seller has, or in the future may have, to all amounts currently held
in escrow in accordance with the Terms of the 1997 Purchase Agreement (the
"Released Amount") in order to make $7,000,000 available as promptly as
practicable to the Company in exchange for the Company's release of any claims
it may have against the Seller or Baker Fund,
E. The Company desires to receive such $7,000,000 and is willing to
release any claims it may have against the Seller or Baker Fund in exchange
therefor.
F. The parties hereto desire to settle all claims with respect to the
matters set forth herein and desire to enter into this Agreement to effect such
settlement.
G. Upon the terms and conditions set forth in this Agreement, the parties
have simultaneously executed this Agreement and effected the transactions
described herein.
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STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing preliminary statements
and the terms and conditions of this Agreement, and other good, valuable and
binding consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, now
agree as follows:
ARTICLE I.
PURCHASE AND SALE OF SECURITIES
Section 1.1 CLOSING. On the date hereof (the "CLOSING DATE"), the
parties have executed and delivered, or have caused to be executed and
delivered, this Agreement and each of the agreements and documents listed in
Section 1.4 (such agreements and documents delivered pursuant to Section 1.4 are
collectively referred to as the "Ancillary Agreements") and have consummated
each of the other transactions described in this Article I (the "CLOSING").
Section 1.2 STOCK PURCHASE TRANSACTIONS. The Purchasers shall
purchase an aggregate of 108.9135 shares of Common Stock representing all of the
shares of Common Stock owned by the Seller (the "Purchased Shares") from the
Seller for an aggregate cash consideration paid at Closing of $1. The Purchased
Shares shall be allocated among the Purchasers as set forth on Schedule I
hereto.
The Seller shall deliver to the Purchasers the certificates
representing the Purchased Shares held by it duly endorsed for transfer. After
giving effect to the purchase of the Purchased Shares the Purchasers shall hold
136.1418 shares of Common Stock, representing 100% of the outstanding Common
Stock.
Section 1.3 TERMINATION OF ALL AGREEMENTS, ARRANGEMENTS AND
UNDERSTANDINGS.
(a) TERMINATION OF SHAREHOLDERS' AGREEMENT. Each of the Seller, the
Purchasers, the Company and Baker Fund (i) hereby terminates that certain
Shareholders' Agreement, dated as of November 12, 1997, among the Seller, the
Purchasers, the Company, and, for the limited purposes set forth therein, Baker
Fund (the "SHAREHOLDERS' Agreement") and (ii) acknowledges and agrees that the
Shareholders' Agreement is without further force and effect.
(b) TERMINATION OF REGISTRATION RIGHTS AGREEMENT. Each of the
Seller, the Company and the Purchasers (i) hereby terminates that certain
Registration Rights Agreement, dated as of November 12, 1997, among the Seller,
the Purchasers and the Company (the "REGISTRATION RIGHTS AGREEMENT") and (ii)
acknowledges and agrees that the Registration Rights Agreement is without
further force and effect.
(c) TERMINATION OF THE ESCROW AGREEMENT. Each of the Moores and the
Seller acknowledges that that certain Escrow Agreement, dated November 12, 1997,
among the Seller, each of the Moores and U.S. Trust Company of Texas, N.A. (the
"ESCROW Agent"), is terminated and rendered without force and effect pursuant to
and except as otherwise provided in the Escrow Instructions (as such term is
defined below).
(d) TERMINATION OF ALL ARRANGEMENTS. Each of the Moores, the Seller,
the Company and Baker Fund acknowledges and agrees that, except as expressly
provided for in this Agreement and the Ancillary Agreements, (i) any and all
agreements (including those set forth above in this Section 1.3), arrangements
and understandings, both written and oral, between or among any of the Moores,
the Seller, the Company or Baker Fund are hereby terminated and without any
further force and effect and (ii) no agreements, arrangements or understandings,
either written or oral, exist between or among any of the Moores, the Seller,
the Company or Baker Fund.
Section 1.4 EXECUTION OF ANCILLARY AGREEMENTS.
(a) ESCROW INSTRUCTIONS AND TERMINATION AGREEMENT. Each of the
Moores and the Seller has executed and delivered to the Escrow Agent the escrow
instructions and termination agreement in the form attached as Schedule II
hereto (the "ESCROW Instructions").
(b) RESIGNATION FROM COMPANY'S BOARD OF DIRECTORS. The Seller has
delivered to the Company a written notice of resignation from the Company's
board of directors executed by each of John C. Baker, Edward W. Scott and
Lawrence A. Bettino (the "FORMER DIRECTORS") effective as of the Closing Date.
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ARTICLE II
CERTAIN RELEASES AND WAIVERS
Section 2.1 RELEASE AND RESERVATION OF SPECIFIED OBLIGATIONS BY THE
SELLER AND BAKER FUND.
(a) RELEASE OF SPECIFIED OBLIGATIONS. Subject to the provisions of
Section 2.1(b), the Seller and Baker Fund, on behalf of themselves and their
respective Affiliates and their Affiliates' respective successors, assigns and
transferees, hereby releases, acquits and forever discharges each of the Moores
and their respective Affiliates and their respective heirs, legal
administrators, successors, assigns and transferees (collectively, the "MOORE
RELEASED PARTIES"), of and from any and all obligations, claims, demands,
liabilities, suits or causes of action of any kind whatsoever, whether known or
unknown, at common law or by statute or otherwise (except for any obligations,
claims, demands, liabilities, suits or causes of action arising out of or under
this Agreement or the Ancillary Agreements), which the Seller or Baker Fund or
their respective Affiliates or their Affiliates' respective successors, assigns
or transferees has or may have or may hereafter claim to have, against a Moore
Released Party relating to the following (together, the "MOORE OBLIGATIONS");
(i) any inaccuracy in any representation or warranty of the
company or any of the Moores under the 1997 Purchase Agreement or in any Closing
Document (as such term is defined in the 1997 Purchase Agreement);
(ii) any failure to perform or observe any covenant or agreement
to be performed by the Company or any of the Moores set forth in the 1997
Purchase Agreement, any Closing Document or any document delivered to the Seller
pursuant to the 1997 Purchase Agreement; and
(iii) any actions or omissions occurring prior to the Closing
Date by any of the Moore Released Parties with respect to the operation or
business of the Company:
and, subject to the provisions of Section 2.1(b), each of the
Seller and Baker Fund on behalf of themselves and their respective Affiliates
and their and their Affiliates' successors, assigns and transferees covenants
not to sue any of the Moore Released Parties under any municipal, local, state
or federal law. common or statutory, for any actions or omissions whatsoever
with regard to the satisfaction of all obligations relating to the Moore
Obligations.
(b) RESERVATION OF SPECIFIED OBLIGATIONS. Nothing contained in this
Agreement will constitute a release, acquittal or discharge of any claims or a
covenant not to sue on any claims which the Seller or Baker Fund, or any
Affiliate of the Seller or Baker Fund, has or may hereafter have if any claims
or lawsuits are asserted by any party, including the Company and its
Subsidiaries but excluding the Moore Released Parties (other than the Company
and its subsidiaries) and such claims or lawsuits arise out of or relate to the
Company, including without limitation, in connection with the Company's 9-7/8%
Senior Subordinated Notes due 2007 or the Company's indebtedness for borrowed
money (collectively, the "RELEVANT CLAIMS"), in which case nothing in this
Agreement will restrict the ability of the Seller or Baker Fund, or any
Affiliate of the Seller or Baker Fund, to pursue any claim against the Moore
Released Parties.
Section 2.2 RELEASE AND RESERVATION OF SPECIFIED OBLIGATIONS BY THE
MOORES.
(a) RELEASE OF SPECIFIED OBLIGATIONS. Subject to the provisions of
Section 2.2(b), each of the Moores, on behalf of themselves and their respective
Affiliates (other than the Company and its subsidiaries) and their Affiliates'
respective legal administrators, successors, assigns and transferees, hereby
releases, acquits and forever discharges the Seller, Baker Fund, their
respective Affiliates and their respective officers, directors, shareholders,
partners, employees, agents, successors, assigns and transferees (collectively,
the "SELLER RELEASED PARTIES"), of and from any and all obligations, claims,
demands, liabilities, suits or causes of action of any kind whatsoever, whether
known or unknown, at common law or by statute or otherwise (except for any
obligations, claims, demands, liabilities, suits or causes of action arising out
of or under this Agreement or the Ancillary Agreements), which any of the Moores
or their respective Affiliates (other than the Company and its subsidiaries) or
their or their Affiliates' respective legal administrators, successors, assigns
or transferees has or may have or may hereafter claim to have, against a Seller
Released Party relating to the following (together, the "SELLER OBLIGATIONS"):
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(i) any inaccuracy in any representation or warranty of the
Seller under the 1997 Purchase Agreement or in any Closing Document (as such
term is defined in the 1997 Purchase Agreement);
(ii) any failure to perform or observe any covenant or
agreement to be performed by the Seller set forth in the 1997 Purchase
Agreement, any Closing Document or any document delivered to the Company or the
Moores pursuant to the 1997 Purchase Agreement; and
(iii) any actions or omissions occurring prior to the Closing
Date by any of the Seller Released Parties with respect to the operation or
business of the Company;
and, subject to the provisions of Sec.6. on 2.2(b), each of the Moores, on
behalf of themselves and their respective Affiliates (other than the Company and
its subsidiaries) and their and their Affiliates' respective legal
administrators, successors, assigns and transferees, covenants not to sue any of
the Seller Released Parties under any municipal, local, state or federal law,
common or statutory, for any actions or omissions whatsoever with regard to the
satisfaction of all obligations relating to the Seller Obligations.
(b) RESERVATION OF SPECIFIED OBLIGATIONS. Nothing contained in this
Agreement will constitute a release, acquittal or discharge of any claims or a
covenant not to sue on any claims which any of Moores, or any Affiliate of the
Moores (other than the Company and its subsidiaries), has or may hereafter have
if any claims or lawsuits are asserted by any party other than the Seller
Released Parties arising out of or relating to the Relevant Claims, in which
case nothing in this Agreement will restrict the ability of the Moores, or any
Affiliate of the Moores (other than the Company and its subsidiaries), to pursue
any claim against the Seller Released Parties.
Section 2.3 RELEASE OF SPECIFIED OBLIGATIONS BY THE COMPANY. The Company,
on behalf of itself and its Affiliates (other than the Moores) and its and its
Affiliates' respective legal administrators, successors, assigns and
transferees, hereby releases, acquits and forever discharges the Moore Released
Parties and the Seller Released Parties of and from any and all obligations,
claims, demands, liabilities, suits or causes of action of any kind whatsoever,
whether know or unknown, at common law or by statute or otherwise (except for
any obligations, claims, demands,' liabilities, suits or causes of action
arising out of or under this Agreement), which the Company or its Affiliates
(other than the Moores) or its or its Affiliates' respective legal
administrators, successors, assigns or transferees has or may have or may
hereafter claim to have, against a Moore Released Party or a Seller Released
Party relating to the following (together, the "ADDITIONAL OBLIGATIONS"):
(i) any inaccuracy in any representation or warranty of the
Moores or the Seller under the 1997 Purchase Agreement or in any Closing
Document (as such term is defined in the 1997 Purchase Agreement);
(ii) any failure to perform or observe any covenant or
agreement to be performed by the Moores or the Seller set forth in the 1997
Purchase Agreement. any Closing Document or any document delivered to the
Company pursuant to the 1997 Purchase Agreement; and
(iii) any actions or omissions occurring prior to the Closing
Date by any of the Moore Released Parties or the Seller Released Parties with
respect to the operation or business of the Company; and the Company, on behalf
of itself and its Affiliates (other than the Moores) and its and its Affiliates'
respective legal administrators, successors, assigns and transferees, covenants
not to sue any of the Moore Related Parties or the Seller Released parties under
any municipal, local, state or federal law, common or statutory, for any acts or
omissions whatsoever with regard to the satisfaction of all obligations relating
to the Additional Obligations.
Section 2.4 RIGHT TO OFFICER AND DIRECTOR INDEMNIFICATION. Nothing
contained in this Agreement will constitute a release, acquittal or discharge of
any claims of the Former Directors for indemnification by Company of its
officers and directors to the extent that such right to indemnification as an
officer or director of Company existed on or before the date hereof; PROVIDED,
HOWEVER, that nothing in this Section 2.4 will be deemed (a) to expand or
increase Company's obligation to indemnify the Former Directors in their
capacity as an officer or director of Company and (b) to affect or diminish in
any way Company's fight to contest a claim by the Former Directors for
indemnification as an officer or director of Company based upon a fact,
circumstance or defense existing on or prior to the date of this Agreement or
arising after the date hereof.
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Section 2.5 CERTAIN WAIVERS BY THE COMPANY, THE MOORES, THE SELLER AND
BAKER FUND. The Company, the Moores, Seller and Baker Fund hereby acknowledge
that the law firm of Akin, Gump, Strauss, Hanar & Feld, L.L.P. ("AGSH&F") has
provided in the past, currently provides and may in the future provide legal
representation past, current or future to both Baker Fund and its Affiliates, as
well as the Company. Each of the Company, the Seller and Baker Fund hereby waive
any and all conflicts of interest as a result of AGSH&F's past, current or
future legal representation of Baker Fund and its Affiliates, on the one hand,
and its legal representation of the Company, on the other hand. The Moores
hereby waive any and all conflicts of interest as a result of AGSH&F's future
legal representation of Baker Fund and its Affiliates, on the one hand, and its
future legal representation of the Company, on the other hand. In the event a
conflict of interest arises in the future with respect to AGSH&F's legal
representation of the Company, on the one hand, and Baker Fund and its
Affiliates, on the other hand, each of the Company, the Moores, the Seller and
Baker Fund hereby consent to AGSH&F's withdrawal from its legal representation
of the Company and its continued legal representation of Baker fund and its
Affiliates.
ARTICLE III. COVENANTS
The Company and the Moores jointly and severally covenant to the
Seller and Baker Fund as follows:
Section 3.1 AMENDMENT OF CREDIT AGREEMENT. Neither the Company nor the
Moores shall, without the prior written consent of Baker Fund, amend, modify or
take any action, including, without limitation, any assignment or transfer, of
that certain Credit Agreement, dated as of November 12, 1997, as amended, by and
among the Company, the financial institutions listed on the signature pages
thereof and BT Commercial Corporation, as agent for the lenders (the "BT CREDIT
AGREEMENT"), or any agreement relating to or entered into in connection with the
BT Credit Agreement, which could in the reasonable opinion of Baker Fund
directly or indirectly adversely affect Baker Fund's rights or obligations or
otherwise increase the exposure of the Baker Fund under that certain Guaranty,
dated January 20, 1999, by Baker Fund in favor of the lenders under the BT
Credit Agreement.
Section 3.2 ADDITIONAL CAPITAL. The Company shall use its best efforts to
continue the search initiated by the Board of Directors and senior management of
the Company prior to the date hereof to locate new working capital and lenders
capable and willing to provide sufficient funding to allow the Company to
continue its operations.
Section 3.3 RELEASED AMOUNT. At the Closing an Affiliate of one or more of
the Moores shall lend or contribute to the Company, substantially on the terms
set forth in Schedule III hereto, $7,000,000, by wire transfer of immediately
available federal funds. The Company shall use a portion of the proceeds of such
financing to pay in full any and all amounts owing to the lenders pursuant to
the BT Credit Agreement and any agreement relating to or entered into in
connection therewith by May 5, 1999, or such earlier date as may be required by
such lenders.
Section 3.4 LEGAL ASSISTANCE; CERTAIN INFORMATION. Each of the Company and
the Moores shall (i) provide the Seller and/or Baker Fund with such legal
assistance (at no out-of-pocket expense to the Company or the Moores) as shall
be reasonably requested by the Seller and/or Baker Fund in connection with any
Relevant Claims, (ii) keep the Seller and Baker Fund or their designated
representative fully informed on a weekly basis as to the status of any and all
negotiations, discussions, agreements or arrangements with the holders of the
Relevant Claims. and (iii) provide the Seller, Baker Fund and their respective
representatives with access to any and all other information in the possession
or under the control of the Moores or the Company deemed relevant by the Seller
or Baker Fund.
Section 3.5 RESIGNATIONS FROM BOARD OF DIRECTORS. The Company hereby
accepts the letters of resignation from the Board of Directors of the Company
referred to in Section 1.4(b).
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE MOORES
Each of the Moores, severally but not jointly, hereby represents and
warrants to the Seller, Baker Fund and the Company that the statements made in
this Article IV were true, correct and complete immediately prior to the
consummation of the Closing.
Section 4.1 CAPACITY OF THE PURCHASERS. Each of the Moores is an
individual which possesses the requisite legal
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capacity and the right to execute, deliver and perform this Agreement and each
Ancillary Agreement to which such person ix a party, without obtaining any
approval or giving any notice.
Section 4.2 EXECUTION, DELIVERY AND ENFORCEABILITY. Each of the Moores has
duly executed and delivered this Agreement and each Ancillary Agreement to which
it is a party, and each such agreement constitutes a valid, legal and binding
obligation of such person, enforceable against such person in accordance with
its terms.
Section 4.3 CONSENTS. Each of the Moores' execution, delivery and
performance of this Agreement and each Ancillary Agreement to which it is a
party does not require such person to obtain any approval or consent from, make
any filing with, or give any notice to any Person.
Section 4.4 CONFLICTS. Each of the Moores' execution, delivery and
performance of this Agreement and each Ancillary Agreement to which it is a
party does not directly or indirectly breach or violate any applicable Order,
agreement or contract to which any of the Purchasers or any of their assets is
subject or bound.
Section 4.5 NO PROHIBITIONS. Each of the Moores' execution, delivery and
performance of this Agreement and each Ancillary Agreement to which it is a
party does not violate any material Applicable Law, and no Lawsuit before any
court or other Governmental Authority is pending or, to such person's knowledge,
threatened that could prohibit any of the Purchasers from consummating any of
the transactions contemplated by this Agreement or any Ancillary Agreement.
Section 4.6 CERTAIN PROTECTION. Other than the stock purchase and the loan
to the Company contemplated hereby and the services which certain of the Moores
have agreed to provide to the Company, none of the Moores has 'taken any action
on or prior to the date hereof in connection with any Relevant Claims, as a
result of which any of the Moore Released Parties is or could become entitled to
any release, protection or other benefit. None of the Moores has received or is
a party to any release, agreement to release or agreement to provide protection
or other benefit to any of the Moores as of the date hereof relating to the
matters contemplated hereby.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND BAKER FUND
Each of the Seller and Baker Fund, for and on behalf of itself only,
hereby represents and warrants to each of the Moores and the Company that the
statements made in this Article V were true. correct and complete immediately
prior to the consummation of the Closing.
Section 5.1 ORGANIZATION. The Sellor is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware.
Baker Fund is a limited partnership duly organized and validly existing under
the laws of the State of Delaware.
Section 5.2 POWER AND AUTHORITY. Each of the Seller and Baker Fund
possesses the requisite power and authority to execute deliver and perform this
Agreement and each Ancillary Agreement to which it is a party, without obtaining
any approval or giving any notice, other than approvals or notices properly
obtained prior to the execution hereof.
Section 5.3 EXECUTION, DELIVERY AND ENFORCEABILITY. Each of the Seller and
Baker Fund has duly authorized, executed and delivered this Agreement and each
Ancillary Agreement to which it is a party, and each such agreement constitutes
a valid, legal and binding obligation of such pony, enforceable against such a
party in accordance with its terms, subject to any Law Affecting Creditors'
Rights.
Section 5.4 CONSENTS. Each of the Seller's and Baker Fund's execution,
delivery and performance of this Agreement and each Ancillary Agreement to which
it is a party does not require such party to obtain any approval or consent
from, make any filing with, or give any notice to any Person, other than
approvals, consents or notices properly obtained prior to the execution hereof.
Section 5.5 CONFLICTS. Each of the Seller's and Baker Fund's execution,
delivery and performance of this Agreement and each Ancillary Agreement to which
it is a party will not directly or indirectly breach or violate any applicable
Order agreement or contract to which such party or any of its assets is subject
or bound.
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Section 5.6 NO PROHIBITIONS. Each of the Seller's and Baker Fund's
execution, delivery and performance of this Agreement and each Ancillary
Agreement to which it is a party will not violate any material Applicable Law,
and no lawsuit before any court or other Governmental Authority is pending or,
to such party's knowledge, threatened that could prohibit such party from
consummating the transactions contemplated by this Agreement or may Ancillary
Agreement.
Section 5.7 NO BROKER. Neither the Seller nor Baker Fund has any
obligation or liability to any broker, finder or other Person for any broker or
similar services with respect to the transactions contemplated hereby.
Section 5.8 SHARES. All the Purchased Shares have been validly authorized
and issued, are fully paid and nonassessable, and were not issued in breach or
violation of any Applicable Law, Contract or contractual or statutory preemptive
rights. Except as set forth in the Shareholders Agreement, no restrictions exist
upon the transfer of the Purchased Shares and the certificates representing the
Purchased Shares do not contain any legends indicating the existence of any such
restrictions, other than restrictions under applicable securities laws.
Section 5.9 OWNERSHIP OF THE SHARES. All the Purchased Shares have been
transferred free and clear of all Liens other than restrictions on transfer
arising under applicable securities laws, and the Purchased Shares constitute
all of the Seller's ownership interests in Company. Upon consummation of the
transactions contemplated herein, the Seller will not hold, directly or
indirectly, any securities (including debt securities) of Company or its
affiliates.
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ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Seller, Baker Fund and
each of the Moores that the statements made in this Article VI were true,
correct and complete immediately prior to the consummation of the Closing.
Section 6.1 ORGANIZATION. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas.
Section 6.2 POWER AND AUTHORITY. The Company possesses the requisite power
and authority to execute, deliver and perform this Agreement without obtaining
any approval or giving any notice, other than approvals or notices properly
obtained prior to the execution hereof.
Section 6.3 EXECUTION, DELIVERY AND ENFORCEABILITY. The Company has duly
authorized, executed and delivered this Agreement, and this Agreement
constitutes a valid, legal and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to any law Affecting
Creditors' Rights.
Section 6.4 CONSENTS. The Company's execution, delivery and performance of
this Agreement does not require the Company to obtain any approval or consent
from, make any filing with, or give any notice to any Person, other than
approvals, consents or notices properly obtained prior to the execution hereof.
Section 6.5 CONFLICTS. The Company's execution, delivery and performance
of this Agreement will not directly or indirectly breach or violate any
applicable Order, agreement or contract to which the Company or any of its
assets is subject or bound.
Section 6.6 NO PROHIBITIONS. The Company's execution, delivery and
performance of this Agreement will not violate any material Applicable Law, and
no lawsuit before any court or other Governmental Authority is pending or, to
the Company's knowledge, threatened that could prohibit the Company from
consummating the transactions contemplated by this Agreement.
Section 6.7 NO BROKER. The Company does not have any obligation or
liability to any broker, finder or other Person for any broker or similar
services with respect to the transactions contemplated hereby.
ARTICLE VII.
GENERAL
Section 7.1 AMENDMENT. No amendment to this Agreement will be effective
unless in a writing signed by each of the parties.
Section 7.2 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original agreement, but all
of which will constitute one and the same agreement. Any party may execute and
deliver this Agreement by an executed signature page transmitted by a facsimile
machine, If a party transmits its signature page by a facsimile machine, such
party will promptly thereafter deliver an originally executed signature page to
the other parties, provided that any failure to deliver such an originally
executed signature page will not affect the validity, legality or enforceability
of this Agreement.
Section 7.3 ENTIRE AGREEMENT. This Agreement, together with the Ancillary
Agreements, constitute the entire agreement and understanding among the parties
and supersedes all prior agreements and understandings, both written and oral,
with respect to the subject matter of this Agreement.
Section 7.4 GOVERNING LAW. This Agreement will be governed by the laws of
the State of New York, regardless of the laws that might otherwise govern under
the conflicts of laws principles of the State of New York.
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Section 7.5 NO THIRD PARTY BENEFICIARIES. Except as expressly stated in
this Agreement, this Agreement is solely for the benefit of the parties and no
other Person will have any right, interest or claim under this Agreement.
Section 7.6 NOTICE. All claims, consents, designations, notices, waivers
and other communications in connection with this Agreement or any Ancillary
Agreement will be in writing and delivered in accordance with Section 9.9 of the
1997 Purchase Agreement.
Section 7.7 REPRESENTATION BY LOYAL COUNSEL. Each party is a sophisticated
Person that was advised by experienced legal counsel and other advisors in the
negotiation and preparation of this Agreement and the Ancillary Agreements. All
costs and expenses of such representation will be borne by the parties incurring
such costs and expenses.
Section 7.8 SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction will not invalidate the
remaining provisions of this Agreement or affect the validity or enforceability
of such provision in any other jurisdiction. Any such prohibited or
unenforceable provision will be given effect to the extent possible in the
jurisdiction where such provision is prohibited or unenforceable.
Section 7.9 SUCCESSORS. This Agreement will be binding upon and will inure
to the benefit of each party and its heirs, legal representatives, and
successors, provided that this section will not permit the assignment or other
transfer of this Agreement, whether by operation of law or otherwise, if such
assignment or other transfer is not otherwise permitted under this Agreement.
Section 7.10 TIME OF THE ESSENCE. Time is of the essence in the
performance of this Agreement and all dates and periods specified in this
Agreement.
Section 7.11 WAIVER. No provision of this Agreement will be considered
waived unless such waiver is in writing and signed by the party that benefits
from the enforcement of such provision. No waiver of any provision in this
Agreement, however, will be deemed a waiver of a subsequent breach of such
provision or a waiver of a similar provision.
Section 7.12 FURTHER ASSURANCES. Subject to the other terms and conditions
of this Agreement, at any time and from time to time after the Closing, each
party will execute and deliver all instruments and documents and take all other
action that any other party may reasonably request to consummate or to evidence
the consummation of the transactions contemplated by this Agreement.
Section 7.13 REMEDIES. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, the
parties hereto will be entitled to specific performance of the obligations of
any other party under this Agreement or the Ancillary Agreements without the
showing of economic loss and without any bond or other security being required.
Each of the parties hereto (severally and not jointly) agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of
any breach of its obligations described in the foregoing sentence and each
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
[SIGNATURES ON THE NEXT PAGE]
1N WITNESS WHEREOF, each party has executed and delivered, or has caused a
duly authorized Person to execute and deliver, this Agreement to be effective as
of the Closing Date.
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SELLER: FWT ACQUISITION, INC.
PURCHASERS: /S/ JOHN C. BAKER
JOHN C. BAKER
CHAIRMAN OF THE BOARD AND PRESIDENT
/S/ CARL R. MOORE
CARL R. MOORE, IN HIS INDIVIDUAL CAPACITY
/S/THOMAS P "FRED" MOORE
THOMAS P "FRED" MOORE, IN HIS INDIVIDUAL
CAPACITY
/S/ ROY J. MOORE
ROY J. MOORE, IN HIS INDIVIDUAL CAPACITY
/S/ T.W. MOORE
T.W. MOORE, IN HIS INDIVIDUAL CAPACITY
/S/ BETTY MOORE
BETTY MOORE, IN HER INDIVIDUAL CAPACITY
BAKER: BAKER COMMUNICATIONS FUND, L.P.
BY: BAKER CAPITAL PARTNERS, LLC
TITLE: GENERAL PARTNER
BY: /S/JOHN C. BAKER
JOHN C. BAKER, MANAGER
COMPANY: FWT, INC.
BY:/S/ JOHN BAKER
NAME: JOHN BAKER
TITLE: CHAIRMAN
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IN WITNESS WHEREOF, each party has executed and delivered, or has caused a
duly authorized Person to execute and deliver, this Agreement to be effective as
of the Closing Date.
SELLER: FWT ACQUISITION, INC.
/S/ JOHN C. BAKER
JOHN C. BAKER
CHAIRMAN OF THE BOARD AND PRESIDENT
PURCHASER: /S/ CARL R. MOORE
CARL R. MOORE, IN HIS INDIVIDUAL CAPACITY
/S/ THOMAS P. "FRED" MOORE
THOMAS P "FRED" MOORE, IN HIS INDIVIDUAL
CAPACITY
/S/ ROY J. MOORE
ROY J. MOORE, IN HIS INDIVIDUAL CAPACITY
/S/ T.W. MOORE
T.W. MOORE, IN HIS INDIVIDUAL CAPACITY
/S/ BETTY MOORE
BETTY MOORE, IN HER INDIVIDUAL CAPACITY
BAKER: BAKER COMMUNICATIONS FUND, L.P.
BY: BAKER CAPITAL PARTNERS, LLC
TITLE: GENERAL PARTNER
BY: /S/ JOHN C. BAKER
JOHN C. BAKER, MANAGER
BAKER: FWT, INC.
BY:
NAME:
TITLE:
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SCHEDULE I
ALLOCATION OF PURCHASED SHARES
PURCHASER ALLOCATION
Carl R, Moore 33.3%
Thomas F. "Fred" Moore 33.3%
Roy J. Moore 33.3%
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SCHEDULE II
ESCROW INSTRUCTIONS AND TERMINATION AGREEMENT
THIS ESCROW INSTRUCTIONS AND TERMINATION AGREEMENT (this "AGREEMENT"),
dated as of April 8, 1999 (the "CLOSING DATE"), by and among Carl R. Moore,
Thomas F. "Fred" Moore, Roy J. Moore, T. W. Moore and Betty Moore (such
individuals are sometimes collectively referred to as the "MOORES,"), FWT
Acquisition, Inc., a Delaware corporation (the "SELLER") and U.S. Trust Company
of Texas, N.A., as escrow agent ("ESCROW AGENT"). The Moores, the Seller and the
Escrow Agent are sometimes collectively referred to as the "PARTIES," and
individually referred to as a "PARTY."
PRELIMINARY STATEMENTS
A. Each of the Moores, the Seller and FWT, Inc., a Texas corporation (the
"COMPANY") are parties to that certain Stock Purchase and Redemption Agreement,
dated as of November 12, 1997, among the Moores, the Seller and certain other
parties (the "I997 PURCHASE AGREEMENT").
B. In connection with the 1997 Purchase Agreement, the Parties entered
into that certain Escrow Agreement, dated as of November 12, 1997 (the "ESCROW
AGREEMENT").
C. Each of the Moores and the Seller have determined a mutually acceptable
distribution of the Escrow Assets (the "RELEASED AMOUNT") in settlement of their
respective obligations under the 1997 Purchase Agreement and in consideration of
the transactions set forth in that certain Stock Purchase, Settlement and
Release Agreement, dated as of the Closing Date, among the Moores, the Seller,
the Company, and Baker Communications Fund, L.P. (the "STOCK PURCHASE
AGREEMENT").
D. Each of the Moores and the Seller desire to instruct the Escrow Agent
to make such distribution of the Released Amount and terminate the Escrow
Agreement.
E. Capitalized terms used in this Agreement, but not otherwise defined,
will have the meanings ascribed in the Escrow Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing preliminary statements
and the terms and conditions of this Agreement, and other good, valuable and
binding consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties, intending to be legally bound hereby, now agree as
follows:
13
<PAGE>
ARTICLE I.
ADJUSTMENTS UNDER THE 1997 PURCHASE AGREEMENT;
TERMINATION OF ESCROW ACCOUNT AND AGREEMENT
Section 1.1 AGGREGATE CONSIDERATION AND ADJUSTMENTS. The Parties hereby
agree that all of the Parties' respective obligations resulting from or
contained in Article II of the 1997 Purchase Agreement will be satisfied in full
upon the execution and delivery of this Agreement and distribution of the
Released Amount in accordance with the instructions contained herein.
Section 1.2 EFFECT OF DISTRIBUTION OF THE RELEASED AMOUNT: TERMINATION OF
THE ESCROW AGREEMENT. Upon distribution of the Released Amount as provided
herein, the Escrow Account will be deemed closed and the Escrow Agreement will
be deemed terminated; PROVIDED, however, that any additional funds, including
earnings on the Released Amount, received in the Escrow Account after the
Closing Date shall be paid in accordance with Section 2.1 hereof; provided,
further, that the terms of Section 3.5 of the Escrow Agreement will survive.
ARTICLE II.
INSTRUCTIONS TO ESCROW AGENT
Section 2.1 DISTRIBUTION OF THE RELEASED AMOUNT. In consideration of the
settlement of their respective obligations under the 1997 Purchase Agreement and
in consideration of the other transactions set forth in the Stock Purchase
Agreement, each of the Moores and the Seller hereby jointly instruct the Escrow
Agent to distribute the Released Amount, and any additional funds, including
earnings on the Released Amount, received in the Escrow Account after the
Closing Date to the account of the Moores as set forth on Schedule I hereto.
Section 2.2 ESCROW FEES. Any and all fees payable pursuant to the terms of
the Escrow Agreement will be satisfied immediately prior to the distribution
described in Section 2.1 above.
ARTICLE III. MISCELLANEOUS
Section 3.1 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will for all purposes be deemed to be an original
and all of which when taken together will constitute the same agreement. Any
Party may execute and deliver this Agreement by an executed signature page
transmitted by a facsimile machine. If a Party transmits its signature page by a
facsimile machine, such Party will 'promptly thereafter deliver an originally
executed signature page to the other Parties, provided that any failure to
deliver such an originally executed signature page will not affect the validity,
legality or enforceability of this Agreement.
Section 3.2 HEADINGS. The captions and headings used in this Agreement are
inserted for convenience only and will not be deemed to constitute part of this
Agreement or to affect the construction or interpretation hereof.
Section 3.3 NO THIRD-PARTY BENEFICIARIES. Nothing in this Agreement will
create or confer upon any Person, other than the Parties or their respective
successors and permitted assigns, any rights, remedies, obligations or
liabilities, except as expressly provided herein.
Section 3.4 NOTICES. Unless otherwise provided herein, any notice,
request, instruction, consent or other document required or permitted to be
given pursuant to this Agreement will be in writing and delivered personally, by
facsimile or by a nationally recognized overnight courier service to the address
or location listed on Schedule II for each Party, or at such other address or
location for a Party as will be specified in writing by that Party. Any notice,
request, instruction, consent or other document delivered as provided herein
will be deemed effectively given on the day after the dispatch of such notice.
Section 3.5 GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed wholly within such jurisdiction.
Section 3.6 ENTIRE AGREEMENT. This Agreement constitutes the sole
understanding of the Parties with respect
14
<PAGE>
to the matters contemplated hereby and supersedes and renders null and void all
prior agreements and understandings, written and oral, between the Parties with
respect to such matters. No Party will be liable or bound to the other Parties
in any manner by any promises, conditions, representations, warranties or
covenants except as specifically set forth herein.
Section 3.7 AMENDMENT. Except as otherwise specifically provided for in
this Agreement, no amendment, modification or alteration of the terms or
provisions of this Agreement, including any schedules or exhibits, will be
binding unless the same will be in writing and duly executed by the Party
against whom such amendment, modification or alteration is sought to be
enforced.
[SIGNATURES ON THE NEXT PAGE]
15
<PAGE>
IN WITNESS WHEREOF, each Party has executed and delivered, or has caused a
duly authorized Person to execute and deliver, this Agreement to be effective as
of the Closing Date.
MOORES: /S/ T.W. MOORE
T.W. Moore
/S/ BETTY MORE
Betty Moore
/S/ ROY J. MOORE
Roy J. Moore
/S/ THOMAS F. "FRED" MOORE
Thomas F. "Fred" Moore
/S/ CARL R. MOORE
Carl R. Moore
SELLER: FWT ACQUISITION, INC.
By: /S/ JOHN C. BAKER
John C. Baker
Chairman of the Board and President
ESCROW AGENT: U.S. TRUST COMPANY OF TEXAS, N.A.
By: ________________________
Name: ________________________
Title: ________________________
16
<PAGE>
SCHEDULE I
Wire Instructions
SELLERS DISTRIBUTION PERCENTAGE
T.W. Moore 25.25%
Wire Instructions: Banc One
Dallas, Texas
ABA No. 111000614
Credit to the account of: T.W. Moore and Betty Moore
Account No.: 1180654491
Betty J. Moore 25.25%
Wire Instructions: Banc One
Dallas, Texas
ABA No. 111000614
Credit to the account of: T.W. Moore and Betty Moore
Account No.: 1180654491
Roy J. Moore 16.5%
Wire Instructions: Banc One
Arlington, Texas
ABA No. 111000614
Credit to the account of Roy J. Moore
Account No.: 1570666360
Carl R. Moore 16.5%
Wire Instructions: Bank of New York
ABA No. 021000018
Credit to: Paine Webber, Inc. RMA
Account No.: 8900114088
FFC: Carl Reagan Moore/Special Account
Account: FW-41012-10
Thomas F. Moore 16.5%
Wire Instructions: Bank of New York
ABA No. 021000018
Credit to: Paine Webber, Inc. RMA
Account No.: 8900114088
FFC: Fred Moore and Cheryl Moore
Account: FW-40100-10
17
<PAGE>
SCHEDULE III
TERMS OF LOAN TO THE COMPANY
[Attached]
COMPANY
FWT, Inc.
1901 East Loop 820 South
Fort Worth, Texas 76112-7899
MOORES
T.W. Moore
5901 Bay Club Drive
Arlington, TX 76013
Betty J. Moore:
5901 Bay Club Drive
Arlington, TX 76013
Roy J. Moore
3508 Orchid Court
Arlington. TX 76016
Carl R. Moore
4104 Flower Garden
Arlington, TX 76016
Thomas F. Moore
5820 Bay Club Drive
Arlington, TX 76013
SELLER
FWT Acquisition, Inc.
540 Madison Avenue, 29th Floor
New York, NY 10022
ESCROW AGENT
U.S. Trust Company of Texas
2001 Ross Avenue
Suite 2700
Dallas, TX 75201-2936
Attn: Melissa Scott
214.754-1236
18
<PAGE>
LOAN TO FWT, INC
TERM SHEET
(1) Amount: $7,000,000
(2) Lender; Brocko, Inc, a Texas corporation
(3) Interest Rate: 8.0% per annum
(4) Prepayment penalty: None
(5) Payments: Principal and interest at maturity
(6) Maturity Date: 180 days
(7) Collateral: First lien deed of trust on all real estate owned
by FWT, Inc. and first security interest in all
personal assets of FWT, Inc.
(8) Conditions to Loan: (a) Consent of Banker's Trust and trustee for
the bondholders
(b) Mortgagee title policy in the amount of the
loan in favor of the lender reflecting that
the lien of the deed of trust is a first and
prior lien
(c) FWT to pay all attorneys fees and the
premium on the mortgagee policy of title
insurance
(d) Full release of funds in escrow account of U.S.
Trust Company of Texas to T.W. Moore, Betty
Moore, Roy Moore, Carl Moore and Fred Moore
(e) Approval of terms of loan and of full
release of all funds in the escrow account
at U.S. Trust company of Texas to T.W.
Moore, Betty Moore, Roy Moore, Carl Moore
and Fred Moore by FWT Inc. FWT Acquisition,
Inc., the trustee for the bondholders, BT
Alex Brown, SBC Warburg Dillon Read, Inc.
and Smith Barney, Inc.
(f) Capital expenditures in excess of $100,000
in the aggregate must be approved in advance
in writing by Lender
(g) Hazard insurance in the amount of the loan
reflecting Lender as mortgagee
(h) Lender must be satisfied as to amount and
status of all claims against FWT, Inc.
(i) Amount owned under contracts between FWT,
Inc. and each of Roy Moore, Carl Moore and
Fred Moore to be paid through Aril 1, 1999,
(not to exceed $175,000) in consideration
for services to be rendered.
(9) Repayment of the loan not subject to offset or claims of recoupment.
(10) Right to accelerate maturity date if a financial restructuring of FWT,
Inc. and an agreement with respect to releases has not been agreed to by
the advisors to the bondholders committee, FWT, Inc. FWT Acquisition,
Inc., Baker Communications Fund, L.P., BT Alex Brown, SBC Warburg Dillon
Read, Inc. and Smith Barney, Inc. by May 14, 1999.
(11) Expiration of Commitment: April 8, 1999 at 10:00 a.m.
19
EXHIBIT 2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
IN RE:
FWT, INC. CASE NO. 99-42066-MT-11
DEBTOR
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERAL, OTHER COLLATERAL,
ADEQUATE PROTECTION, AND LIMITED RELIEF FROM AUTOMATIC STAY
CAME ON FOR CONSIDERATION the Motion for Authority to Use Cash Collateral
(the "Motion") filed by FWT, Inc. (the "Debtor"). It appears to this Court that
adequate notice of the Motion and the hearing thereon has been given pursuant to
the Federal Rules of Bankruptcy Procedure, and that BT Commercial Corporation.
Individually and as agent for itself and other lenders (the "Lenders"), and the
Debtor have agreed to the terms of this Order (the "Agreed Order") to be entered
upon the Motion. This Court accordingly finds, concludes, and orders:
OPPORTUNITY TO OBJECT
1. PURSUANT TO BANKRUPTCY RULE 4001(D)(2), ANY OBJECTION TO THIS AGREED
ORDER REGARDING CASH COLLATERAL, OTHER COLLATERAL, ADEQUATE PROTECTION, AND
LIMITED RELIEF FROM THE AUTOMATIC STAY MUST BE FILED WITH THE COURT WITHIN
FIFTEEN (15) DAYS OF THE DATE OF MAILING HEREOF TO THOSE PARTIES REQUIRED UNDER
BANKRUPTCY RULE 4001(D)(1). IF NO OBJECTION TO THIS AGREED ORDER IS MADE WITHIN
SUCH TIME PERIOD, THIS
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERAL, OTHER COLLATERAL, ADEQUATE
PROTECTION, AND.LMITED RELIEF FROM AUTOMATIC STAY - Page I
<PAGE>
AGREED ORDER SHALL BE SUBJECT TO NO FURTHER OBJECTION AND SHALL BE FINAL. THE
MAILING OF A COPY OF THIS AGREED ORDER BY FIRST CLASS MAIL, POSTAGE PREPAID, ON
THOSE ENTITIES REQUIRED UNDER BANKRUPTCY RULE 4001 (D)(1) SHALL BE DEEMED TO
CONSTITUTE COMPLIANCE WITH THE APPLICABLE NOTICE PROVISIONS OF BANKRUPTCY RULE
4001.
STATEMENT OF JURISDICTION
2. This Court has jurisdiction over this matter pursuant to 28 U.S.C.
ss.ss. 1334 and 157 This matter concerns the administration of this bankruptcy
estate, an order modifying the automatic stay and an order approving the use of
cash collateral and, thus, this matter is a core proceeding pursuant to 28
U.S.C. ss. 157(b)(2)(A), (G) and (M).
VALIDITY OF LOAN DOCUMENTS AND. SECURITY INTERESTS
3. At 4:07 p.m. on April 16, 1999 (the "Petition Date"), the Debtor flied
its voluntary petition for relief under Chapter 11 of Title 11 of the United
States Code (the "Code")
4. The Debtor has filed the Motion requesting that the Court (a) approve
its use Of Lenders' Collateral, including its sale of the inventory portion of
the Collateral (as defined below); (b) approve the provision of adequate
protection of the Lenders' interest (as defined below), and (c) modify the
automatic stay for the limited purpose of allowing the Lenders to continue to
receive the proceeds of the Debtor's accounts receivable and other Cash
Collateral and apply the same to the retirement of the Lenders' Claim (as
defined below).
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERAL OTHER COLLATERAL, ADEQUATE
PROTECTION, AND LIMITED RELIEF FROM AUTOMATIC, STAY - Page 2
<PAGE>
5. Prior to the Petition Date, the Debtor executed and delivered to
Lenders certain instruments and documents including, without limitation, the
following (collectively, the "Indebtedness Documents"):
(a) Credit Agreement dated as of November 12, 1997, among the
Debtor, BT Commercial Corporation, as Agent (in such capacity,
"Agent"), and the Lenders, as amended by that certain First
Amendment to Credit Agreement dated as of February 8, 1 gg8,
and Second Amendment to Credit Agreement dated as of January
20, 1999 (as amended, the "Credit Agreement");
(b) Revolving Note dated as of November 12, 1997, in the maximum
amount of $25,000,000 executed by the Debtor and payable to
the order of the Lenders; and
(c) Any and all other documents executed in connection with or
related To the indebtedness evidenced by the Notes, or which
evidence any other indebtedness or obligations of the Debtor
to Lenders.
True and correct copies of certain of the Indebtedness Documents are retained by
Lenders and the Debtor The terms and provisions of the Indebtedness Documents
are referenced and incorporated herein as if set forth IN HAEC VERBA. The
Lenders assert that the indebtedness evidenced by the Indebtedness Documents is
valid, existing, and legally enforceable.
6. The Lenders assert that the indebtedness evidenced by the Indebtedness
Documents and all other obligations of the Debtor to Lenders are secured by
perfected,
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERAL, OTHER COLLATERAL, ADEQUATE
PROTECTION, AND LIMITED RELIEF FROM AUTOMATIC STAY - Page 3
<PAGE>
First-priority security interests and liens in all personal property of the
Debtor including, without limitation, All equipment, inventory, accounts,
contract rights, chattel paper, documents, instruments, general Intangibles,
assigned agreements, deposit accounts, trademarks, tradenames, tradesecrets,
business Names, patents, patent applications, licenses, copyrights,
registrations, franchise rights, investment Property, fixtures, books and
records, and all proceeds, products, rents, and profits of or from all such
Property (collectively, the "Collateral") granted pursuant to certain documents
including, without limitation,
The following (collectively, the "Collateral Documents"):
(a) Company Security Agreement dated as of November 12, 1997, executed
by the Debtor in favor of the Lenders;
(b) Company Pledge Agreement dated as of November 12, 1997, executed by
the Debtor in favor of the Lenders;
(c) Company Trademark Security Agreement dated as of November 12, 1997,
executed by the Debtor in favor of the Lenders;
(d) Company Patent Security Agreement dated as of November 12, 1997,
executed by the Debtor in favor of the Lenders; and
(e) Any and all other documents which grant Lenders security interests
or liens on property of the Debtor.
True and correct copies of certain of the Collateral Documents are retained by
the Lenders and the Debtor. The terms and provisions of the Collateral Documents
are referenced and incorporated herein as if set forth IN HAEC verba.
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERAL, OTHER COLLATERAL, ADEQUATE
PROTECTION AND LIMITED RELIEF FROM AUTOMATIC STAY - Page 4
<PAGE>
7. The Indebtedness Documents, Collateral Documents, and Perfection
Documents (as hereinafter Defined) shall be referred to herein collectively as
the "Loan Documents." Unless otherwise Defined herein, all defined terms used
herein shall have the same meaning ascribed to them in the Loan Documents.
8. The Loan Documents are genuine, valid, and existing. The original Loan
Documents, or true and accurate copies of them, are hereby deemed identified,
authentic, and admissible in any proceeding or matter in which they are
applicable.
THE LENDERS' CLAIM
9. Prior to the Petition Date, the Debtor had defaulted pursuant to the
terms and provisions of the Loan Documents.
10. The Lenders hold a claim (as defined in Code ss. 101(5)) against the
Debtor as of the Petition Date, pursuant to the Loan Documents and applicable
law, for unpaid principal, accrued but unpaid interest, plus reasonable costs,
attorneys' fees, and any and all other amounts to the extent permitted by the
Code and applicable law (the "Lenders' Claim"). As of the Petition Date, the
Lenders' Claim includes at least $1,227,582.60 in unpaid principal and
$11,747.27 in accrued but unpaid interest.
THE LENDERS' COLLATERAL
11. The Lenders assert that, pursuant to the Loan Documents, the Lenders
were granted first priority security interests and liens in the Collateral,
which secure the Lenders' Claim. As used herein, the term "Collateral " shall
include pre-petition and/or post-petition property of the Debtor.
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERALI OTHER COLLATERAL, ADEQUATE
PROTECTION, AND LIMITED RELIEF FROM AUTOMATIC STAY. Page 5
<PAGE>
12. The Lenders assert that they have properly perfected their first
priority liens and security interests in the Collateral by several means,
including, without limitation, filing UCC-1 Financing Statements with the
Secretary of State of Texas, and other appropriate county filing offices (the
"Perfection Documents") The Lenders assert that the liens and security interests
of the Lenders in the Collateral are first-priority, perfected, valid, existing,
and legally enforceable.
13. As of the Petition Date, the value of the Lenders' interest in the
Collateral, which secures the Lenders' Claim, was greater than the amount of the
Lenders' Claim. The Lenders assert that they have an enforceable,
first-priority, perfected security interest and lien in the Collateral and the
Cash Collateral (as hereinafter defined), plus any other property as provided
under Code ss. 552(b), this Agreed Order and applicable law in the amount of the
Lenders' Claim, without limitation (the "Lenders' Interest").
14. The Lenders assert that this Agreed Order constitutes conclusive
evidence concerning issues of existence, validity, perfection, and priority of
the Lenders' Claim and the Lenders' Interest in property of this bankruptcy
estate, wherever located.
15. This Agreed Order constitutes a binding agreement. The agreements and
arrangements authorized in this Agreed Order have been negotiated at arm's
length, are fair and equitable under the circumstances, and are enforceable
pursuant to their terms. The Lenders and the Debtor have acted in good faith in
the negotiation and preparation of this Agreed Order, have been represented by
counsel, and intend to be bound by its terms.
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERAL, OTHER COLLATERAL, ADEQUATE
PROTECTION, AND LIMITED RELIEF FROM AUTOMATIC STAY - Page 6
<PAGE>
SEGREGATION, ACCOUNTING, AND RESTRICTED USE OF CASH COLLATERAL
16. To the extent of Lenders' interest as permitted by this Agreed Order
and 1he Code, all cash Equivalents, whether in the form of cash, negotiable
instruments, documents of title, securities, deposit Accounts, or in any other
form, whenever acquired, which represent income, proceeds, products, rents, or
Profits of the Collateral that is now in the possession, custody or control of
the Debtor (or persons in privity With the Debtor), or in which the Debtor will
obtain an interest during the pendency of this bankruptcy Case, are and shall be
treated as the "cash collateral" of the Lenders as that term is defined in Code
ss.363(a) (collectively, the "Cash Collateral'". The Lenders assert that they
have a first priority perfected Lien and security interest in the Cash
Collateral pursuant to the applicable provisions of the Loan Documents in
accordance with Code ss.ss. 363(a) and 552(b)-
17. The debtor shall segregate and account to the court and to the lenders
for all Cash Collateral, if any, which it now possesses, which it has permitted
to be transferred into the possession of others, which is being held by those
in privity with it, or which they might hereafter obtain The Debtor is
Prohibited from using the Cash Collateral except as provided herein.
THE LENDERS' ACCOUNTS
18. The Debtor shall immediately segregate, remit, and deposit all of the
Cash Collateral in the Debtor's possession, custody, or control and which the
Debtor may receive in the future, with Lenders in the preexisting blocked
accounts at Bank One, Texas, N.A. (Accounts Nos. 1561676150 and 1180161000)
pursuant to terms and provisions of the Lockbox Agreement dated as of November
12, 1997, the Blocked Account Agreement
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERAL, OTHER COLLATERAL,
ADEQUATE PROTECTION, AND LIMITED RELIEF FROM AUTOMATIC STAY - Page 7
<PAGE>
(dated as of the same date, and the Letter Agreement dated as of March 31, 1999
(the "Lender Accounts"). The Debtor shall immediately, and on an ongoing basis,
direct all account debtors of the Debtor to make and continue to make all
payments directly into the Lockbox established under the Lockbox Agreement for
deposit into the Lender Accounts. The Debtor shall not withdraw funds from the
Lender Accounts. The Lender Accounts shall be maintained for the purpose of
complying with this Agreed Order until such time as the Lenders' Claim has been
fully and finally paid, and the Lender Accounts shall Be and remain separate
from any other accounts of the Debtor, which have been or will be established as
"debtor-in-possession" accounts.
THE DEBTOR'S USE OF THE COLLATERAL
19. The Debtor may not transfer or use Cash Collateral except for the
payment of the Lenders' Claim in accordance with this Agreed Order.
20. Except for the Cash Collateral, the Debtor is authorized to use the
Collateral and to sell the inventory portion of the Collateral in the ordinary
course of its business, subject to the rights of third parties.
ADEQUATE PROTECTION
21. As adequate protection of the Lenders' Interest in accordance with
Code ss.ss. 361 and 363(e) and applicable law, the Debtor shall provide the
following measures to the Lenders: (a) all Cash Collateral, as received in the
Lockbox or as remitted by the Debtor, shall be immediately applied to the
retirement of the Lenders' Claim; (b) the Lenders shall continue to receive
(from the remittances of Cash Collateral through the Lender Accounts)
postpetition interest on Lenders' Claim; (c) the Debtor hereby grants to
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERAL, OTHER COLLATERAL, ADEQUATE
PROTECTION, AND LIMITED RELIEF FROM AUTOMATIC STAY - Page 8
<PAGE>
the Lenders continuing, perfected, first-priority replacement liens and security
interests in the Collateral and the Cash Collateral and in all of the property
of the Debtor acquired after the Petition that constitutes Collateral under the
terms of the Loan Documents; (d) in the event and to the extent such liens and
security interests do not adequately protect the Lenders' interest in the
Property, Collateral and Cash Collateral of the Debtor, the Lenders shall have
an administrative expense priority in an amount equal to the extent of such
failure of adequate protection with priority over any and all administrative
expenses of the kind specified in Code ss.ss. 503 and 507; (e) the Debtor shall
maintain, with financially sound and reputable insurance companies or
associations, casualty insurance covering the Collateral in the amount of at
least the Lenders' Claim (and continuing to name the Lenders as loss payee
thereunder), and, at the Lenders' request, deliver to the Lenders evidence of
the maintenance of such insurance; (f) the Debtor shall maintain the Collateral
in good repair and condition, not permit or commit any waste thereof, make all
necessary replacements thereof, and operate the same properly and efficiently;
and (g) the Debtor shall preserve, maintain, and protect all patents, licenses,
authorities, privileges, franchises, certificates, and the like and shall take
all steps necessary to MAINTAIN the value and usefulness of such intellectual
property.
22. The value of the Collateral securing the Lenders' Claim exceeds the
amount of the Lenders' Claim. For purposes of determining whether the Lenders
have been adequately protected under this Agreed Order, adequate protection, and
any failure of same, shall be measured by the amount of Lenders' Claim minus the
amount the Lenders actually receive for or on account of the Collateral and the
Cash Collateral,
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERAL, OTHER COLLATERAL ADEQUATE
PROTECTION, AND LIMITED RELIEF FROM AUTOMATIC STAY - Page 9
<PAGE>
REPORTING REQUIREMENTS
23. The Debtor shall comply with all reporting requirements ret forth
herein and in the Loan Documents.
24. The Debtor shall continue to deliver to the Lenders such financial
reports in such form and detail as required by the Loan Documents which shall be
prepared in Accordance with accounting principles consistently applied with past
accounting practices and reporting of the Debtor to the Lenders end shall be
certified to be true and correct by the Debtor's Chief Executive Officer.
25. The Debtor shell deliver to the Lenders copies of all operating
budgets prior to filing same with the Court and shall deliver to the Lenders
copies of ell reports filed with the office of the United States Trustee
contemporaneously with such filing. The Debtor shall within five (5) days
furnish to the Lenders and the Lenders' counsel, at the Lenders' request, such
additional financial or other Information concerning the acts. Conduct.
Property, assets, liabilities, operations, finand4el condition, transactions of
the Debtor, or any matter which may affect the administration of the estate, as
the Lenders may from time to time request.
26. With respect to the security interest and lien granted In Paragraph 21
hereof. The Lenders shall not be required to, but may, file financing statements
or record any other documents in any jurisdiction or lake any other action in
order to validate and perfect the liens and security interests granted to the
Lenders pursuant to the terms end provision. Of the Loan Documents and this
Agreed Order. The Debtor agrees that the Lenders'
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERAL, OTHER COLLATERAL, ADEQUATE
PROTECTION, AND LIMITED RELIEF FROM AUTOMATIC STAY - Page 10
<PAGE>
Interest extends to the Collateral, wherever located, and any moving of the
Collateral or other property of this bankruptcy estate shall have no effect on
the validity or perfection of the Lender's Interest. If the Lenders shall, in
their sole and absolute discretion, choose to file such financing statements or
record such documents that otherwise confirm perfection of such liens and
security interests, the Debtor shall execute all such financing statements,
similar instruments, and other documents as required by the Lenders, and such
instruments and documents shall be deemed to have been filed or RECORDED as OF
THE Petition Date.
27. The terms and provisions of this Agreed Order shall be binding upon
and inure to the benefit of the Lenders and the Debtor for all purposes in this
bankruptcy case, and their respective successors and assigns including, but not
limited to, any Chapter 11 or Chapter 7 Trustee hereinafter appointed for the
bankruptcy estate of the Debtor, or any entity in privity with the Debtor.
28. The Debtor will operate its business pursuant to the provisions of the
Code applicable to debtors-in-possession, including seeking court approval for
transactions outside the ordinary course, and shall comply with all terms of
this Agreed Order.
29. The Lenders and the Agent shall have access upon reasonable notice
during normal business hours to the Debtor's business premises to review,
appraise, and evaluate the Collateral and the Cash Collateral and other
properties of the estate and to inspect the financial records and all other
records of the Debtor concerning the Collateral, the Cash Collateral, other
properties of the estate, and the operation of the Debtor's business, and for
review of the Debtor's overall financial condition, the expenditure of funds
generated
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERAL, OTHER COLLATERAL, ADEQUATE
PROTECTION, AND LIMITED RELIEF FROM AUTOMATIC STAY - Page 11
<PAGE>
Therefrom, the accrual of expenses relating thereto and any and all other
records relating to the Debtor. The Debtor shall fully cooperate with the
Lenders regarding such reviews, evaluations, and inspections, and shall make its
employees and professionals available to the Lenders and the Lenders'
professionals to conduct such reviews, evaluations, and inspections.
30. To the extent the Debtor has made or makes any deposits for the
benefit of utility companies, such deposits shall be, and hereby are, subject to
first-priority perfected liens and security interests of the Lenders granted by
the Loan Documents and this Agreed Order, and the Debtor assigns and sets over
all such deposits to the Lenders effective upon the earlier to occur of (a) any
conversion of the Debtor's proceedings to Chapter 7 of the Code or (b) the
foreclosure of the liens and security interests of Lenders, provided that at all
times the utilities with whom such deposits are posted shall have prior and
senior rights to such deposits.
31. Any remittance of Cash Collateral to the Lenders since the Petition
Date is hereby authorized pursuant to the applicable provisions of Code ss.ss.
361 and 363(e).
32. To any extent necessary, the automatic stay of Code ss.362 is hereby
modified to permit the transfers, acts, and actions contemplated herein. All
transfers of Cash Collateral arising in this bankruptcy case shall be applied
against the Lenders' Claim as determined by the Lenders in its sole and absolute
discretion.
33. The Debtor's failure to timely and fully comply with the terms and
provisions of this Agreed Order shall constitute a default under this Agreed
Order.
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERAL, OTHER COLLATERAL, ADEQUATE
PROTECTION, AND LIMITED RELIEF FROM AUTOMATIC STAY. Page 12
<PAGE>
34. The Court finds that the terms and provisions of this Agreed Order are
necessary and appropriate to enable the Debtor to continue its business
operations and to retire the Lenders' Claim, which Lenders assert, is fully
secured, in a prompt and reasonable manner. The Court further finds that entry
of this Agreed Order at this time is necessary and concludes that it is
appropriate to avoid immediate and irreparable harm to the Debtor or any estate
of such entity pending passage of the time for objections hereto. The notice
provided to interested parties and the opportunity for objection to this Agreed
Order and a hearing thereon is appropriate under the circumstances.
35. If any or all of the provisions of this Agreed Order are modified,
vacated or stayed by subsequent Order of this or any other Court such stay,
modification or vacation shall not affect the validity and enforceability of any
lien or priority claim authorized by this Agreed Order prior to such stay,
modification or vacation. The reversal or modification on appeal of any or all
of the provisions of this Agreed Order shall not affect the validity or
enforceability of any lien, security interest or priority claim authorized by
this Agreed Order prior to the obtaining of a stay pending appeal of this Agreed
Order. This Agreed Order is immediately valid and fully effective upon its entry
by this Court.
36. The Debtor shall execute and deliver such further instruments as may
be deemed necessary or desirable by Lenders to carry out the provisions and
purposes of this Agreed Order.
37. Nothing contained herein shall waive or modify any rights and remedies
which the Lenders may have at law, in equity, or otherwise or be deemed or
construed to limit the rights of the Lenders to seek additional relief in this
bankruptcy case in accordance
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERAL, OTHER COLLATERAL, ADEQUATE
PROTECTION, AND LIMITED RELIEF FROM AUTOMATIC STAY - Page 13
<PAGE>
with this Agreed Order or applicable law. The Lenders shall not be subject to
any Surcharge under Code ss. 506(c).
38. Any notice, report, or other document required to be given hereunder
shall Be deemed given upon its deposit In the United States mail, postage
pre-paid, and Addressed as follows:
(a) If to the Lenders:
BT Commercial Corporation
Attn: Douglas R. Lies, Vice President
300 South Grand Avenue
Los Angeles, California 90071
With a copy to:
Daniel C. Stewart
Josiah M. Daniel, III
Winsteed Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270-2199
(b) If to the Debtor:
FWT, Inc.
Attn: Roy Moore
5750 East Interstate 20
Fort Worth, Texas 76119
With a copy to:
Joseph Colvin
Mark J. Petrocchi
Colvin & Petrocchi
801 Cherry 8treat, Suite 1035
Fort Worth, Texas 76102
39. The findings of fact and conclusions of law of this Court set forth in
this Agreed Order shall be deemed effective upon the entry of this Agreed Order.
To the extent
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERAL, OTHER COLLATERAL, ADEQUATE
PROTECTION. AND UMITED RELIEF FROM AUTOMATIC STAY - Page 14
<PAGE>
that such findings may constitute conclusions, and vice versa, they hereby are
deemed as such.
SIGNED this 21st day of April 1999.
/S/ MASSIE TILLMAN
HONORABLE MASSIE TILLMAN
UNITED STATES BANKRUPTCY JUDGE
AGREED TO AND ACCEPTED:
COLYIN & PETROCCHI
801 Cherry Street, Suite 1035 Fort Worth, Texas 76102
Tel: (817) 336-7883
Fax: (817) 338-9209
By: /S/JOSEPH COLVIN
Joseph Colvin
Mark Petrocchi
ATTORNEYS FOR THE DEBTOR
WINSTEAD SECHREST & MINICK P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270-2199
Tel: (214) 745-5400
Fax: (214) 745~5390
By: /S/JOSIAH M. DANIEL, III
Josiah M. Daniel lII SBN 05358500
ATTORNEYS FOR BT COMMERCIAL CORPORATION
ORDER APPROVING AGREEMENT REGARDING CASH COLLATERAL, OTHER COLLATERAL, ADEQUATE
PROTECTION, AND LIMITED RELIEF FROM AUTOMATIC STAY - Page 15
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