U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
PEREGRINE INDUSTRIES, INC.
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(Name of Small Business Issuer in its charter)
FLORIDA 65-0611007
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(State of incorporation) (I.R.S. Employer Identification No.)
746 South Military Trail,
Deerfield Beach, FL 33442
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(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (954) 725-8041
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Securities to be registered pursuant to 12(b) of the Act: None
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Securities to be registered pursuant to 12(g) of the Act:
Common Stock $.0001 Par Value
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(Title of Class)
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Page 1 of pages 25
Exhibit Index begin page 25
TABLE OF CONTENTS
Page No.
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PART I
Item 1. Description of Business.........................................................................1
Item 2. Management's Discussion and Analysis or
Plan of Operation...............................................................................6
item 3. Description of Property........................................................................10
Item 4. Security Ownership of Certain Beneficial
Owners and Management..........................................................................11
Item 5. Directors, Executive Officers, Promoters and Control Persons...................................13
Item 6. Executive Compensation.........................................................................14
Item 7. Certain Relationships and Related Transactions.................................................20
Item 8. Description of Securities......................................................................21
PART II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters....................................................22
Item 2. Legal Proceedings..............................................................................23
Item 3. Changes in and Disagreements with Accountants..................................................23
Item 4. Recent Sales of Unregistered Securities........................................................23
Item 5. Indemnification of Directors and Officers......................................................23
PART FS
Financial Statements...........................................................................24
PART III
Item 1. Index to Exhibits..............................................................................25
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This discussion in this Registration Statement regarding the Company
and its business and operations contains "forward-looking statements." These
forward-looking statements use words such as "believes," "intends," "expects,"
"may," "will," "should," "plan," "projected," "contemplates," "anticipates," or
similar statements. These statements are based on the Company's beliefs, as well
as assumptions the Company has used based upon information currently available
to it. Because these statements reflect the Company's current views concerning
future events, these statements involve risks, uncertainties and assumptions.
Actual future results may differ significantly from the results discussed in the
forward-looking statements. A reader, whether investing in the Company's
securities or not, should not place undue reliance on these forward-looking
statements, which apply only as of the date of this Registration Statement.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Peregrine Industries, Inc. (the "Company") designs and manufactures
heat pump pool heaters, residential air conditioners and parallel flow coils for
the heating, ventilation and air conditioning (HVAC) industry. The Company's
current customer base includes companies in the United States, Canada, South
America, Europe and Africa.
The Company was formed under the laws of the State of Florida in
October 1995. Our Canadian operations are conducted through its subsidiary
Thermopompe Peregrine Heat Pump ("Peregrine Canada"), a Quebec corporation. In
June 1998 the Company formed a wholly-owned subsidiary, Peregrine Global, Inc.
("Peregrine Global"), a Virgin Islands corporation. Peregrine Global, a foreign
sales corporation, was formed to take advantage of more favorable income tax
rates on profits generated from export sales. In September 1998 the Company
formed Alcool, Inc. ("Alcool"), an Alabama corporation and a wholly-owned
subsidiary of the Company. Alcool was formed to manufacture the Company's
parallel flow coils. When used herein, the "Company" shall include Peregrine
Industries, Inc. and its subsidiaries Peregrine Canada, Alcool and Peregrine
Global.
The Company's fiscal year end is September 30 and its executive offices
are located at 746 South Military Trail, Deerfield Beach, Florida 33442. The
Company's telephone number is 954-725-8041.
Products
Pool Heaters
The Company is the designer and manufacturer of a complete line of
performance heat pump pool heaters whose standard features include
micro-processor digital controls, a dual thermostat and automatic pool pump
management. The Company distributes these
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products under private labels of certain of its wholesale customers, as well as
under the Company's brand name Smartemp(TM).
The Company is also the designer and manufacturer of the Smartemp
Plus(TM), an all-in-one, complete environmental control system. This single unit
heat pump functions as a residential air conditioner, hot water heater and
swimming pool heater. Smartemp Plus(TM) uses a micro-processor to manage the
operation and energy use of the air conditioner, pool heater and water heater,
as well as the pool filtration system. The unit components can also be
programmed to function independently, thus providing year round usage in a
variety of climates.
Both the Smartemp (TM) and Smartemp Plus (TM) units have been certified
by Applied Research Laboratories, a nationally recognized independent testing
facility, and meet the seasonal energy efficiency requirements (SEER) of the
National Appliance Energy Conservation Act of 1987.
Residential Air Conditioners
The Company is the designer and manufacturer of two residential central
air conditioning systems, the Seaire(TM) and the MicroCool. The design of pool
heaters and air conditioners is similar in that both use the common technology
of heat transfer through evaporating and condensing coils. The Company began
research and development activities on air conditioning products in early 1998
as a result of product inquiries from its customers seeking a low cost, high
efficiency air conditioner. The Company introduced its residential central air
conditioning systems in May 1999. Management of the Company believes the
Seaire(TM) is more compact that other models on the market as a result of the
incorporation of the Company's parallel flow coil. In management's opinion, the
Seaire(TM) is more efficient than any other central air conditioning system
currently on the market, with SEER ratings of approximately 16, as compared to
an industry average of 12.
Parallel Flow Coil
The Company designed and manufactures a propriety parallel flow coil
which is incorporated into the Company's products. The architecture of the new
coil allows more primary surface contact with the air while the secondary
surface, with shorter metallurgically bonded fins, allows for an even and flat
temperature gradient across the coil compared with round tube and fin coils. The
even and flat temperature gradient allows for a substantial increase (up to 30%
to 40%) in latent heat removal and an increase in evaporating temperature to as
high as 50 degrees. This technology lowers indoor humidity and energy
consumption.
Manufacturing and Distribution
The Company manufactures its pool heaters, environmental control
systems and residential air conditioners at its Deerfield Beach, Florida
location, and its parallel flow coil
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at its Montgomery, Alabama location. The Company's manufacturing process relies
on the purchase of certain components from a variety of third party suppliers
and in-house fabrication of the balance of the components used in the
manufacture of the Company's products. Other than the micro-processors which are
incorporated into the Company's products, the Company has secured multiple
sources at competitive prices for components purchased from third party
suppliers. The Company is reliant, however, on Viconics, Inc., a single
third-party source, for the micro-processors which are contained in the Smartemp
(TM) and Smartemp Plus (TM) products. The Company believes it will establish a
second source for these micro-processors, at substantially the same terms and
conditions, by the end of fiscal 2000.
The Company' products are distributed on a wholesale basis. Credit risk
of certain foreign customers is minimized through the purchase of insurance
policies covering the accounts receivables. See Part FS - Financial Statements.
As of June 30, 1999, the Company had two customers which accounted for 19% and
51%, respectively, of its revenues for the nine months then ended. Management of
the Company will continue its efforts begun in fiscal 1998 to broaden its
revenue base so as to minimize the Company's historical dependence upon these
two customers. Until management has been successful in its efforts, of which
there can be no assurance, the loss of one or more of these customers could have
a material adverse effect on the business and operations of the Company until
replacement customers are secured, of which there can be no assurances.
To date, all parallel flow coils manufactured by the Company have been
incorporated into the Company's products. During fiscal 2000 the Company
anticipates that it will begin marketing and selling these coils to other
manufacturers in the HVAC industry. Management of the Company cannot anticipate,
as of the date hereof, the degree of success, if any, the Company will meet with
in this area.
Product Service and Warranty
The Company's products are serviced and repaired by the distributors
who purchase the products from the Company. The Company offers a 12-60 month
warranty on its products. To date, the Company has experienced minimal warranty
expenses; however, as a result of the relatively short history of the Company,
it is unable to accurately forecast warranty costs in the future. There can be
no assurances that any reserves the Company may make for future warranty costs
will be adequate.
Industrial Development Bond
In March 1999, in connection with the establishment of the Company's
Montgomery, Alabama manufacturing facility, the Industrial Development Board of
the City of Montgomery, Alabama issued $2,460,000 aggregate principal amount of
Variable/Fixed Rate Industrial Development Bonds, Series 1999 (the "Bonds"). The
proceeds form the Bonds were used by the Company for long-term financing for the
acquisition of production equipment for Alcool, and for the partial repayment of
a commercial term loan. The Bonds
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were issued under a Trust Indenture dated February 1, 1999 and maturing on
February 1, 2007. Interest is payable monthly at a variable weekly rate based on
the average rate for similar issued as determined by the remarketing agent. The
rate at August 30, 1999 was 3.45%.
As collateral for the Bonds, the Company executed a Mortgage Security
Agreement and Assignment of Rents and Leases in favor of the bank, whereby the
bank was granted a mortgage on and a security interest in the Alcool production
equipment and an assignment of the interest of Alcool under its lease agreement
for its principal facilities in Montgomery, Alabama. The Bonds are also backed
by a letter of credit with an original amount of $2,503,809 issued by SouthTrust
Bank, N.A. which expires on February 15, 2007, subject to an earlier expiration
as set forth in the letter of credit. Mr. Merrill A. Yarbrough, the Company's
President and CEO, individually guaranteed the Bonds and assigned a key man life
insurance policy in the amount $1,000,000. Peregrine Global issued a corporate
guarantee dated February 1, 1999.
Merchant Capital, L.L.C., an NASD member firm, is the remarketing agent
for the Bonds. The Company is required to maintain certain financial ratios
while the Bonds remain outstanding, including fixed ratio coverage of 1.25:1 and
debt to tangible ratio coverage of 2:1. At June 30, 1999 the Company was in
default in certain of these ratios. As a result of such default, the Trustee has
the right to call the Bonds for redemption. See Item 2. Management's Discussion
and Analysis of Financial Condition or Plan of Operations and Part F/S,
Financial Statements.
The Company has further agreed to limit its capital expenditures
outside the United States to a maximum of $75,000 per year and to require its
customers (excluding Canadian customers) to tender payment in United States
Dollars. Finally, during the period in which the Bonds are outstanding, Mr.
Yarbrough must retain at least 51% ownership interest in the Company.
Government Regulation
The Company is subject to regulations promulgated under the National
Appliance Energy Conservation Act of 1987, as amended, and various state
regulations concerning the energy efficiency of its products. The Company has
developed its products to comply with these regulations, and does not believe
that such regulations will have a material adverse effect on its business.
Environmental laws that affect or could affect the Company's operations
include, among others, the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act, the Occupational Safety and Health Act, the
National Environmental Policy Act, the Toxic Substances Control Act, and
regulations promulgated under these acts, and various other Federal, state and
local laws and regulations governing environmental matters. The Company believes
it is in substantial compliance with such existing environmental laws and
regulations.
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Competition
The markets in which the Company does business are extremely
competitive and are dominated by companies with established brand recognition
and who have a longer history of operations and are better capitalized than the
Company. In particular, the Company competes against a variety of swimming pool
heat pump manufacturers and against numerous manufacturers of residential
central air conditioning systems including, but not limited to, York, Rheem,
Carrier and Lennox. Management believes the Company holds a competitive
advantage based upon the superior operating results of its products and the
incorporation of the Company's parallel flow coil into its products. There are
no assurances, however, that management's belief is correct. In addition, if the
Company is successful in marketing its parallel flow coil to other HVAC
manufacturers for incorporation into their products, the Company may lose a
portion of the competitive advantage it now holds. Ultimately, there can be no
assurance whatsoever that the Company will ever effectively compete in its
target markets.
Research and Development
The Company conducts on-going research and development for its existing
product to reduce manufacturing costs and increase product efficiency, as well
as research and development of new products. For the fiscal years ended
September 30, 1998 and 1997, the Company expended approximately $200,000 and
$105,400, respectively, in research and development costs. For the nine month
period ended June 30, 1999, the Company expended approximately $227,428 in
research and development costs related to the development of the Company's new
coil for the HVAC industry. See Part FS - Financial Statements.
Intellectual Property Rights
The Company holds a United States patent (patent number 5,802,864) on
the heat exchanger and heat transfer system which are the basis for the
Smartemp(TM) and Smartemp(TM) Plus products, which such patent was issued on
September 8, 1998. Although the Company has not secured registration of all of
its marks, it has made application to the United States Patent and Trademark
Office for a trademarks on the names " Smartemp", "Smartemp Plus" and "Seaire"
and for a patent on the parallel flow coil for the HVAC industry. The laws of
some foreign countries do not protect the Company's proprietary rights to the
same extent as do the laws of the United States, and effective patent,
copyright, trademark and trade secret protection may not be available in foreign
jurisdictions. In general, there can be no assurance that the Company's efforts
to protect its intellectual property rights through patent, copyright, trademark
and trade secret laws will be effective to prevent misappropriation of its
intellectual property. Any failure or inability by the Company to protect its
proprietary rights could materially adversely effect its business, financial
condition, and results of operations by lessening the value of the intellectual
property and possibly increasing competition.
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Employees
The Company currently has 35 full time employees, of which eight are
managerial or administrative personnel and 27 are production/assembly personnel.
The Company has no part-time employees. None of the Company's employees are
represented by a labor union, and it is not governed by any collective
bargaining agreements. Management believes its relationship with its employees
is good. As the Company expands its operations, it will become necessary for the
Company to increase its employee base. The Company faces a competitive
environment in the hiring of qualified employees. As a result, the Company may
encounter certain difficulties in expanding its labor force.
Availability of Additional Information
This Registration Statement, as filed by the Company, can be read and
copied at the public reference facilities maintained by the Securities and
Exchange Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549. Information about the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330. The Registration Statement is also available
to the public from commercial document retrieval services or via EDGAR on the
Commission's Web site at www.sec.gov.
Prior to the effective date of this Registration Statement, the Company
was not subject to the reporting requirements of the Securities Exchange Act of
1934 (the "Exchange Act") and did not file quarterly and annual reports with the
Commission. Commencing with the quarterly report for the period ending [ ,
1999], the Company will file these and other reports with the Commission. These
reports can be accessed via EDGAR at the Commission's Web site, www.sec.gov. In
addition, the Company will furnish its shareholders with annual reports
containing audited financial statements and may distribute quarterly reports
containing unaudited summary financial information for each of the first three
quarters of each fiscal year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Fiscal Year Ended September 30
Results of Operations
The Company reported an increase of approximately 43% in net sales for
fiscal 1998 versus fiscal 1997 as a result of what management believes to be
development of the Company's brand and the operating performance of its
products. Cost of sales as a percentage of net sales for fiscal 1998 declined
approximately 10% as a result of manufacturing costs improvements, and volume
purchasing of parts and components. The Company reported an increase of
approximately $376,858, or approximately 65%, in general and administrative
expenses. This increase was attributable to an increase in staffing to meet
growth needs, and participation at industry trade shows and similar
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marketing activities undertaken by the Company to increase market awareness of
its products. During fiscal 1998 the Company reported a loss of $30,258 on
foreign currency transactions. Prior to July 1998 Peregrine Canada, which
maintains its accounting records in Canadian dollars, translated assets and
liabilities into U.S. dollars at current exchange rates, and revenues and
expenses are translated at average exchange rates for the year. Resulting
translation adjustments were reflected as a separate component of stockholder's
equity. As a result of the decline in the Canadian dollar, the Company recorded
a one-time expense during fiscal 1998 to reflect the decrease in the value of
net assets at Peregrine Canada. Commencing in July 1998, the accounting records
for Peregrine Canada are translated into U.S. dollars prior to consolidation,
using an average exchange rate for the subject month. Accordingly, absence any
material fluctuations in the exchange rate for Canadian dollars, the Company
does not foresee additional losses on foreign currency transactions related to
Peregrine Canada. Lastly, the Company made a provision for income taxes of
$184,000 during fiscal 1998, when it made no such provision for fiscal 1997, as
a result of the conversion from an S corporation to a C corporation effective
April 1, 1998.
Liquidity and Capital Resources
The Company's working capital increased $765,018 at September 30, 1998
from September 30, 1997, which such increase is primarily attributable to the
Company's use of the proceeds it received in April 1998 from a private placement
of its Common Stock. See Part II - Item. 4 Recent Sales of Unregistered
Securities. In September 1998 the Company entered into a line of credit with a
commercial bank for $1,000,000 which is collateralized by accounts receivable,
inventory, property and equipment. This line of credit is also personally
guaranteed by Mr. Yarbrough, the Company's Chairman and Chief Executive Officer.
At September 30, 1998 the Company had a liability of $690,000 under this line of
credit, which such amount were used by the Company for general working capital.
See Part I - Item 7. Certain Relationships and Related Transactions and Part FS
Financial Statements.
Nine Months Ended June 30
Results of Operations
Revenues for the nine months ended June 30, 1999 decreased
approximately 15% from the comparable period in fiscal 1998. This reduction is
attributable to:
* a decrease of approximately 47% in orders from the Company's
Brazilian customers from the comparable period in fiscal 1998. This decrease is
the result of generally adverse economic conditions affecting in that country,
* a decrease of approximately 28% in shipments to the
Company's Canadian customers from the comparable period in fiscal 1998. This
decrease is related to the
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Company's inability to fill orders stemming from production delays during the
start-up of its Alabama facility,
* the delay in the Company's delivery of orders to its other customers
which was the result of delays in the start-up of the product manufacturing in
Alabama for the Company's new parallel flow coil.
At June 30, 1999 the Company had unfilled orders for approximately 300
of its pool heaters. These orders were from the Company's established customer
base. While the orders were subject to cancellation. Assuming that the Company
had been able to deliver this product on a timely basis, its sales to one of its
domestic customers, which was approximately 14% higher for the nine months ended
June 30, 1999 from the comparable period in fiscal 1998, would have been
approximately 25% higher for the nine months ended June 30, 1999 from the nine
months ended June 30, 1998. As of July 1, 1999, the Company had resolved the
initial difficulties encountered in its Montgomery, Alabama facility and the
facility is producing the parallel flow coils according to the production
schedule. Accordingly, management believes the Company will begin to report
quarterly increases in revenues with the period beginning October 1,1999.
General and administrative expenses increased approximately 51% for the
nine months ended June 30, 1999 from the comparable period in fiscal 1998 as a
result of increased marketing costs associated with introduction of the
Company's new products (approximately $150,000) and costs associated with an
expansion of the Company's infrastructure in anticipation of introduction of the
Company's new parallel flow coil and the residential central air conditioning
systems. Management anticipates the Company will continue to incur additional
general and administrative expenses during the balance of fiscal 1999 and into
fiscal 2000.
Research and development expenses for the nine months ended June 30,
1999 were attributable to costs associated with the parallel flow coil and the
new heat exchanger. As the Company continues to develop new products, management
anticipates the Company will continue to incur research and development costs;
however, as the majority of the current product development has been completed,
management does not anticipate any significant additional expenses through the
balance of fiscal 1999.
Approximately 20% of the pre-operating costs of new product lines was
attributable to the Company's new line of residential air conditioners, with the
balance attributable to the expansion of its operations through the Alcool
subsidiary. The Company did not have comparable costs in fiscal 1998.
Depreciation and amortization increased approximately 412% for the nine months
ended June 30, 1999 over the comparable period in fiscal 1998 as a result of the
establishment of Alcool's operations. Likewise, interest expense increased
approximately 838% for the nine months ended June 30, 1999 versus the nine
months ended June 30, 1998 primarily as a result of costs associated with the
Bonds. With the opening of Alcool's manufacturing facility, and the beginning of
production of the Company's parallel flow coil, in fiscal 1999 the Company has
begun generating revenue
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from the sale of scrap aluminum which is a by-product of the manufacturing
process. While the Company anticipates it will continue to report other income
from the sale of scrap aluminum, it anticipates the amount will decline with an
increase in manufacturing efficiencies at the Alabama plant.
Liquidity and Capital Resources
As described above, in connection with liabilities associated with the
Bonds, the Company is required to maintain certain financial ratios. Likewise,
the Company is required to maintain certain financial ratios in connection with
a commercial term loan in the original principal amount of $1,500,000 which was
incurred in connection with the establishment of the Alabama plant. The Company
was in default of certain of these covenants at June 30, 1999. The Company was
unable to maintain the ratios established by the commercial loan as a result of
initial difficulties incurred in commencing manufacturing at the new Alabama
location. Once the Company was in default under the commercial loan, it became
in default under the Bonds. As a result of these defaults, (i) the $2,460,000
principal amount of the Bonds and a portion of the bank term loan ($157,539)
were reclassified from long term liabilities to short term liabilities, and (ii)
the commercial lender may exercise its rights to declare all unmature
obligations immediately due and payable. At September 28, 1999, the amount
outstanding under the commercial term loan was approximately $88,834. As a
result of these reclassifications, the Company has a working capital deficit of
approximately $1,850,472 at June 30, 1999.
The Company has participated in ongoing discussions with the lender and
has been informally advised that the commercial bank does not presently intend
to call the loan. The lender, however, has not consented to an amendment to the
loan documents removing the ratio requirements. Based upon information known to
management as of the date of this Registration Statement, management believes
the Company will be in full compliance with the loan covenants on or before
November 30, 1999.
As a result of the Company's default under the covenants of the
commercial term loan, the trustee may exercise its rights to call the Bonds. The
Company does not believe it is likely the trustee would exercise its rights
based upon informal conversations with the trustee. As a result of its covenant
violations, the Bonds and the commercial term loan could be called on demand.
However, it is uncertain as to whether the Company will be able to repay the
debt obligations on demand, refinance it with its current lenders, or obtain
other sources of financing. The inability of the Company to repay or refinance
its debt obligations could have a material adverse impact on the Company's
financial position.
As described above, the Company entered into a line of credit
arrangement with a bank for $1,000,000 in September 1998; at June 30, 1999 the
amount outstanding to the bank was approximately $956,000. This credit facility
expires in September 1999 and the Company is presently negotiating an extension
to January 2000 with the lender. The Company has been informally advised by the
lender that the extension will be granted. In the event the Company is
unsuccessful in securing this extension, the Company's business and operations
will be materially and adversely impacted.
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The Company does not presently have any additional sources of working
capital. The Company is in preliminary discussions with an investment banking
regarding a private placement of the Company's securities. The Company has not
reached a firm understanding with the investment banking firm and, as it is
likely the private placement would be conducted on a "best efforts" basis, there
can be no assurances that the Company will raise any additional capital in this
contemplated private placement.
Year 2000 Compliance
The Company is aware of the issues associated with the programming code
in existing computer systems as the year 2000 approaches. The Year 2000 issue
relates to whether computer systems will properly recognize and process
information relating to dates in and after the year 2000. These systems could
fail or produce erroneous results if they cannot adequately process dates beyond
the year 1999, and are not corrected. Significant uncertainty exists in the
software industry concerning the potential consequences that may result from the
failure of software to adequately address the Year 2000 issue. The Company has
reviewed all software and hardware used internally by it in all support systems
to determine whether they are Year 2000 compliant. The software has already been
upgraded by the manufacturer or was recently purchased and is Year 2000
compliant. We do not believe that the aggregate cost for the Year 2000 issue
will be material. However, we cannot predict the effect of the Year 2000 issue
on entities with which we transact business. While the Company does not believe
any Year 2000 non-compliance by any entity with which it transacts business will
have a material adverse affect on the Company, there can be no assurances.
ITEM 3. DESCRIPTION OF PROPERTY
The Company presently leases approximately 28,000 square feet of
office/warehouse space in Deerfield Beach, Florida which houses the Company's
principal executive offices and Florida manufacturing facilities. These
facilities are covered under two separate lease agreements with an unaffiliated
third party. The first lease, which expires in August 2003, covers approximately
16,000 square feet at a current annual rent of approximately $99,000 (including
common area maintenance and other costs). The second lease, which expires in
September 2003, covers approximately 12,000 square feet at an annual rent of
approximately $80,436 (including common area maintenance and other costs).
Alcool leases an additional approximately 81,358 square feet of
office/warehouse space in Montgomery County, Alabama which houses the Company's
Alabama manufacturing operations. The lease, which is with an unaffiliated third
party and is guaranteed by the Company, expires in December 2003 and provides
for annual rent of approximately $265,860. The annual rental is comprised of
approximately $244,080 in base rent and approximately $21,780 in "additional
rent", which such amount is to amortize lessor's cost of $146,373 for certain
improvements made to the property at Alcool's request over a 10 year period,
using an interest factor of 8.5%. The lease may be renewed at
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Alcool's option for an additional five year term at the rate of $280,680 per
year in base rent, plus the approximate $21,780 annually in "additional rent."
At the option of Alcool, the principal amount may be prepaid at any time during
the term of the lease. If Alcool does not exercise its option to renew this
lease for an additional five year term, upon expiration of the initial term
Alcool shall be required to pay to the lessor $88,455 representing the then
remaining principal amount of the additional rent.
The Company's Canadian operations are conducted from a portion of the
residence of its Canadian sales manager. The Company pays the normal operating
costs associated with these operations, including telephone, postage and
miscellaneous office expenses. The Company does not pay any rental or lease
payments to its Canadian sales manager.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of September 28, 1999 there are 13,760,000 shares of Common Stock
issued and outstanding and 133,663 shares of Series A 5% Cumulative Convertible
Preferred Stock issued and outstanding. The Series A 5% Cumulative Convertible
Preferred Stock, which carries no voting rights, is convertible into shares of
Common Stock on a 1:1 basis. The following table sets forth, as of the close of
business on September 28, 1999, (a) the name, address and number of shares of
each person known by the Company to be the beneficial owner of more than 5% of
the Company's Common Stock and (b) the number of shares of Common Stock owned by
each director and all officers and directors as a group, together with their
respective percentage holdings of such shares, in both instances assuming that
the Series A 5% Cumulative Convertible Preferred Stock had been converted into
Common Stock at September 28, 1999. Except as otherwise specifically set forth
herein, the following tables give no effect to the exercise of any outstanding
stock options or the Placement Agent Warrants. See Part I - Item 7. Description
of Securities. Unless otherwise indicated, the address for each person is 746
South Military Trail, Deerfield Beach, FL 33442
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Name and Amount of Percentage
Address of Beneficial of
of Beneficial Owner Ownership of Stock Class
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<S> <C> <C>
Merrill A. Yarbrough and 8,776,618 63.3%
Debra Zweig Yarbrough
Joint Tenants (1)(2)
Howard E. Cobb(1)(3) 7,500 *
Benjamin Swirsky (4) 25,000 *
Richard Szelewicki(1)(5) 1,935,397 14.0%
Cameron Perkins(1)(6) 977,699 7.1%
Laura Perkins(1)(7) 967,693 7.0%
All Executive Officers
and Directors as a Group
(three people)(1)(2)(3)(4) 8,809,118 63.4%
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* represents less than 1%
(1) In connection with the Company's 1998 private placement, all
shareholders of the Company prior to such transaction delivered
"lock-up" letters to the Noble International Investments, Inc.
("Noble"), an NASD member firm which acted as the Company's placement
agent, irrevocably agreeing that such shareholder would not, directly
or indirectly, exercise, issue, sell, offer, contract to sell, or make
any short sale, pledge, grant any option to purchase, transfer, pledge,
assign, hypothecate, distribute or otherwise encumber or dispose of
(whether pursuant to Rule 144 of the General Rules and Regulations
under the Securities Act of 1933 or otherwise) any shares of Common
Stock or any securities convertible into or exchangeable or exercisable
for any other rights to purchase or acquire Common Stock the 24
month-period ending on May 6, 2000, without the prior written consent
of Noble. Noble has advised the Company that it does not have a general
policy with respect to the release of shares prior to the expiration of
a lock-up period.
(2) Includes (i) vested NSO options to purchase 15,000 shares of Common
Stock at $1.00 per share pursuant to the Company's 1998 Stock Option
Plan held by Mr. Yarbrough, (ii) 3,750 vested ISO option to purchase
3,750 shares of Common Stock at $1.00 per share pursuant to the
Company's 1998 Stock Option Plan held by Mrs. Yarbrough and (iii)
87,868 shares of Series A Preferred held by Mr. and Mrs. Yarbrough
which are convertible into 87,868 shares of Common Stock. Does not
include granted but unvested options held by either Mr. or Mrs.
Yarbrough nor the Executive Stock Options which may be earned by Mr.
Yarbrough pursuant to his employment agreement. See Part I - Item 6.
Executive
12
<PAGE>
Compensation and Part I - Item 7. Certain Relationships and Related
Transactions. Mr. and Mrs. Yarbrough are husband and wife.
(3) Includes vested ISO options to purchase 7,500 shares of Common Stock at
$1.00 per share pursuant to the Company's 1998 Stock Option Plan, but
excludes granted but unvested options. See Part I - Item 6. Executive
Compensation.
(4) Includes vested NSO options to purchase 25,000 shares of Common Stock
at $1.00 per share pursuant to the Company's 1998 Stock Option Plan.
See Part I - Item 6. Executive Compensation - Directors Compensation.
Mr. Swirsky's address is 350 Fairlawn Avenue, Toronto, Ontario, Canada.
(5) Includes 22,897 shares of Series A Preferred Stock which is convertible
into 22,897 shares of Common Stock. See Part I - Item 7. Certain
Relationships and Related Transactions. Mr. Szelewicki's address is
22384 Siesta Key Drive, Boca Raton, Florida 33428.
(6) Includes 11,449 shares of Series A Preferred Stock which is convertible
into 11,449 shares of Common Stock. See Part I - Item 7. Certain
Relationships and Related Transactions. Mr. Perkins' address is 5801 NE
14 Way, Fort Lauderdale, Florida 33334.
(7) Includes 11,449 shares of Series A Preferred Stock which is convertible
into 11,449 shares of Common Stock. See Part I - Item 7. Certain
Relationships and Related Transactions. Ms. Perkins' address is 2779
Arrandale Lane, Sun Valley, California 93063..
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names, positions with the Company
and ages of the executive officers and directors of the Company. Directors will
be elected at the Company's annual meeting of shareholders and serve for one
year or until their successors are elected and qualify. Officers are elected by
the Board and their terms of office are, except to the extent governed by
employment contract, at the discretion of the Board.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Merrill A. Yarbrough 56 President, Chief Executive Officer and
Chairman of the Board
Howard E. Cobb 72 Chief Financial Officer, Treasurer and
Director
Benjamin Swirksy 57 Director
</TABLE>
Merrill A. Yarbrough. Mr. Yarbrough has been President, Chief Executive
Officer and Chairman of the Board of the Company since its formation. Mr.
Yarbrough was also founder and President of Alternative Energy Systems, Inc., a
pool heater sales and
13
<PAGE>
installation company from its formation in 1987 until August 1995. See "Certain
Relationships and Related Transactions." Prior to founding the Company in 1985,
for approximately 15 years, Mr. Yarbrough was involved in the sales, service and
installation in the heating, ventilation and air conditioning industry,
primarily involving central air conditioning systems, heat pump pool heaters,
solar pool heaters and residential water heaters. Mr. Yarbrough received a
B.B.A. from the University of Miami.
Howard E. Cobb. Mr. Cobb has been Chief Financial Officer, Treasurer
and a director of the Company since October 1996. Mr. Cobb first joined the
Company in December 1995 as its Comptroller. Prior to joining the Company, from
March 1993 until December 1995, Mr. Cobb was self employed as a financial
consultant. Mr. Cobb has held senior financial management positions in the
high-technology operations of General Motors and International Telephone and
Telegraph. Mr. Cobb received a B.S. in Business Administration from West
Virginia Tech and has served as an officer in a chapter of Financial Executives
Institute.
Benjamin Swirsky. Mr. Swirsky has been a member of the Board of
Directors since October 1998 and serves on the Audit and Compensation Committees
of the Board of Directors. Since June 1998 Mr. Swirsky has been Chairman and CEO
of Nextel Group, Inc., a telecommunications company which is a subsidiary of
Easy Access, Inc., a publicly-traded company (OTCBB: EZZZ). From June 1993 until
January 1998, Mr. Swirsky was President and Chief Executive Officer of Slater
Steel, Inc., a publicly traded company listed on the Toronto Stock Exchange
(SSI) with investments in the steel, steel service, forging, pole-line hardware
and trucking industries. Mr. Swirsky is also a member of the Board of Directors
of the Four Seasons Hotel Corp., a chain of first class hotels located
throughout the world, and serves on the Audit, Compensation and Governance
committees of the Board. Mr. Swirsky also sits on the Board of Directors of a
number of other companies, including (i) PC DOCS Group International Inc., a
Canadian publicly-traded company (Nasdaq: DOCSF, TSE: DXX) where he currently
serves as Chairman, (ii) CamVec Corp., a Canadian publicly-traded company
(CAT.CV), (iii) MigraTEC Inc., a publicly-traded company (Nasdaq: MIGR) where he
currently serves as Chairman, (iv) Easy Access, Inc., a publicly traded company
listed on the OTC Bulletin Board (OTCBB: EZZZ), in which he is also a principal
shareholder, (iv) Commercial Alcohols, Inc., in which he is also a principal
shareholder, (v) Bee Line Monorail Systems, Inc. and (vi) Visual Data
Corporation (Nasdaq NMS: VDAT).
ITEM 6. EXECUTIVE COMPENSATION
Cash Compensation
The following table summarizes all compensation recorded by the Company
in each of the last three fiscal years for the Company's Chief Executive Officer
and each other executive officers serving as such whose annual compensation
exceeded $100,000.
14
<PAGE>
<TABLE>
<CAPTION>
Long - Term
Annual Compensation Compensation Awards
-----------------------------------------------------------------------------------
Name and Other Annual Restricted Options/ All Other
Principal Position Year Salary Bonus Compensation Stk Awds SARs(#) LTIP Compen.
- ------------------ ---- ------ ----- ------------ -------- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Merrill A. Yarbrough 1998 $ 105,850 $0 $0 0 20,000(1) 0 0
President, Chief 1997 $ 67,187(2) $0 $0 0 0 0 0
Executive Officer, 1996 $ 40,500(2) $0 $0 0 0 0 0
Chairman
</TABLE>
(1) Excludes unvested options which may be granted pursuant to his
Employment Agreement. See "Employment Agreements" and "Stock Option
Plan" below.
(2) Prior to January 1997, all compensation received by Mr. Yarbrough was
pursuant to management fees paid by the Company to Alternative Energy,
Inc., a Florida corporation of which Mr. Yarbrough is the beneficial
owner.
OPTION GRANTS IN YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------
No. of Securities % of Total Options
Underlying Granted to Employees Exercise Expiration
Name Options Granted in Fiscal Year Price Date
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Merrill A. Yarbrough,
President, Chief
Executive Officer
and Chairman 20,000(1) 30.1% $1.00 5-1-02
Howard E. Cobb,
Chief Financial
Officers, Treasurer
and Director 10,000(2) 15.4% $1.00 5-1-02
</TABLE>
- --------------
(1) Excludes options which may be granted under the Company's 1998 Stock
Option Plan providing Mr. Yarbrough remains an employee of the Company
or options which may be granted pursuant to his Employment Agreement.
See "Employment Agreements" and "Stock Option Plan" below.
(2) Excludes options which may be granted under the Company's 1998 Stock
Option Plan providing Mr. Cobb remains an employee of the Company. See
"Employment Agreements" below.
15
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN YEAR ENDED SEPTEMBER 30, 1998
AND YEAR-END OPTION VALUES
No. of Securities
Underlying Options Value of Unexercised
Options at In-the-Money options at
Shares September 30, 1998 September 30, 1998(1)
Acquired on Value ---------------------- ------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Merrill A. Yarbrough
President, Chief
Executive Officer,
and Director 0 n/a 20,000 10,000 $28,000 $14,000
Howard E. Cobb,
Chief Financial
Officer, Treasurer
and Director 0 n/a 10,000 10,000 $14,000 $14,000
</TABLE>
(1) The dollar value of the unexercised in-the-money options is calculated
based upon the difference between the option exercise price of $1.00
per share and $2.40 per share, being the closing price of the Company's
Common Stock on September 30, 1998 as reported NASD OTC Bulletin Board.
Employment Agreements
Merrill A. Yarbrough
Effective April 30, 1998 the Company entered into a three year
employment agreement with Merrill A. Yarbrough, the Company's Chief Executive
Officer, President and Chairman of the Board of Directors. The terms of this
agreement, which is renewable for additional one year terms at the Company's
option, provides for an annual base salary of $145,000 (as adjusted), which such
amount may be increased by vote of the Board of Directors (with Mr. Yarbrough
abstaining) in the event of a material change in the scope of his duties as a
result of a significant expansion of the Company's business and operations, a
material diversification of the Company's business activities, one or more
acquisitions or other similar long-term, permanent occurrences which would
result in Mr. Yarbrough undertaking additional responsibilities. The agreement
also provide, among other things, for (i) participation in any profit-sharing or
retirement plan and in other employee benefits applicable to employees and
executives of the Company, (ii) an automobile allowance and fringe benefits
commensurate with the duties and responsibilities of Mr. Yarbrough, and (iii)
benefits in the event of disability and contain certain non-disclosure and
non-competition provisions.
Under the agreement, Mr. Yarbrough was granted 20,000 four year NSO
options under the Company's 1998 Stock Option Plan to purchase shares of the
Company's Common Stock at $1.00 per share, which such options vested 10,000
options on May 1, 1998, 5,000 option on May 1, 1999 and the remaining 5,000
options vest on May 1, 2000.
16
<PAGE>
Under the terms of the agreement, on May 1, 1999, he was granted an additional
10,000 five year NSO options, exercisable at $4.00 per share, being fair market
value on the date of grant, and vesting in equal thirds on each of May 1, 2000,
2001 and 2002. Likewise, providing Mr. Yarbrough remains an employee of the
Company on May 1, 2000, he will be entitled to be granted an additional 10,000
five year NSO options, also exercisable at fair market value on the date of
grant, and vesting in equal thirds on each of May 1, 2001, 2002 and 2003. All of
the foregoing options are eligible for accelerated vesting (at the then current
fair market value of the Company's Common Stock) in the event of (i) a sale of
all or substantially all of the assets of the Company or (ii) a merger, stock
exchange or other form of business combination the result of which being that
the then current shareholders of the Company, will own, after the consummation
of such business combination, less that 49% of the then issued and outstanding
voting securities of the Company.
As a term of the employment agreement, Mr. Yarbrough has been given the
opportunity to earn certain stock options based upon the future performance of
the Company. During the two year period beginning October 1, 1997 and ending
September 30, 1999 (the "Performance Option Period"), Mr. Yarbrough will be
entitled to be granted one option to purchase one share of the Company's Common
Stock for each $3.20 of cumulative Net Income (as hereinafter defined) the
Company reports in excess of $2,000,000, up to a maximum of 250,000 options.
Subsequent to the Company reporting cumulative Net Income of $2,800,000 during
the Performance Option Period, additional Net Income, if any, during such period
will be accumulated until such time as the Company shall report Net Income
during the Performance Option Period of at least an additional $8,000,000 over
and above $2,800,000 cumulative Net Income. Thereafter, Mr. Yarbrough shall be
entitled to be granted one option to purchase one share of the Company's Common
Stock for each $5.00 of cumulative Net Income the Company reports in excess of
at least an additional $8,000,000 during the Performance Option Period, up to a
maximum of 250,000 options. The options earned will be computed quarterly based
on the Company's Financial Statements, and the exercise price of these options
will be the fair market value of the Company's Common Stock on the date so
earned. For the purposes of herein, the term "Net Income" shall mean the net
income, after taxes, as reported on either the Company's audited financial
statements for the year then ended, or unaudited financial statements for the
fiscal quarter then ended, in either case which such statements shall have been
prepared in accordance with generally accepted accounting principles
consistently applied and, in the case of the audited financial statements such
financial statements shall be accompanied by an unqualified report of the
Company's independent auditors. In the event such options are granted pursuant
to the results of the Company as reported in unaudited quarterly financial
statements, such statements shall have first been reviewed by the Audit
Committee of the Company's Board of Directors, if any, or by the outside
directors of the Company, who shall be satisfied in their sole discretion that
such unaudited financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied.
Under the terms of the Agreement, the Company may terminate the
employment of Mr. Yarbrough either with or without cause. If the Agreement is
terminated by the
17
<PAGE>
Company without good cause (which requires a six month notice provision), the
Company would be obligated to pay Mr. Yarbrough an amount equal to 18 months
then current base salary under the Agreement. To the extent that Mr. Yarbrough
is terminated for cause, no severance benefits shall be paid to him.
Howard E. Cobb
Effective April 30, 1998 the Company entered into a three year
employment agreement with Howard E. Cobb, the Company's Chief Financial Officer,
Treasurer and a member of the Board of Directors. The terms of this agreement,
which is renewable for additional one year terms at the Company's option,
provides for an annual base salary of $60,000 (as adjusted), which such amount
may be increased by vote of the Board of Directors (with Mr. Cobb abstaining) in
the event of a material change in the scope of his duties as a result of a
significant expansion of the Company's business and operations, a material
diversification of the Company's business activities, one or more acquisitions
or other similar long-term, permanent occurrences which would result in Mr. Cobb
undertaking additional responsibilities. The agreement also provide, among other
things, for (i) participation in any profit-sharing or retirement plan and in
other employee benefits applicable to employees and executives of the Company,
(ii) fringe benefits commensurate with the duties and responsibilities of Mr.
Cobb, and (iii) benefits in the event of disability and contain certain
non-disclosure and non-competition provisions.
Under the agreement, Mr. Cobb was granted 10,000 four year ISO options
under the Company's 1998 Stock Option Plan to purchase shares of the Company's
Common Stock at $1.00 per share, which such options vested 5,000 options on May
1, 1998, an additional 2,500 options vested on May 1, 1999, and the remaining
options vest on May 1, 2000. Under the terms of the agreement, on May 1, 1999
Mr. Cobb granted an additional 5,000 five year ISO options, exercisable $4.00
per share, being the fair market value on the date of grant, and vesting in
equal thirds on each of May 1, 2000, 2001 and 2002. Likewise, providing Mr. Cobb
remains an employee of the Company on May 1, 2000, he will be entitled to be
granted an additional 5,000 five year ISO options, also exercisable at fair
market value on the date of grant, and vesting in equal thirds on each of May 1,
2001, 2002 and 2003. All of the foregoing options are eligible for accelerated
vesting (at the then current fair market value of the Company's Common Stock) in
the event of (i) a sale of all or substantially all of the assets of the Company
or (ii) a merger, stock exchange or other form of business combination the
result of which being that the then current shareholders of the Company, will
own, after the consummation of such business combination, less that 49% of the
then issued and outstanding voting securities of the Company.
Under the terms of the Agreement, the Company may terminate the
employment of Mr. Cobb either with or without cause. If the Agreement is
terminated by the Company without good cause (which requires a 30-day notice
provision), the Company would be obligated to pay Mr. Cobb an amount equal to 11
months then current base salary under
18
<PAGE>
the Agreement. To the extent that Mr. Cobb is terminated for cause, no severance
benefits shall be paid to him.
Stock Option Plan
In May 1998, the Company adopted a qualified stock option plan, the
Peregrine Industries, Inc. 1998 Stock Option Plan (the "Plan"). The purpose of
the Plan was to increase the employees' and non-employee directors' proprietary
interest in the Company and to align more closely their interests with the
interests of the Company's shareholders, as well as to enable the Company to
attract and retain the services of experienced and highly qualified employees
and non-employee directors.
The Company reserved an aggregate of 1,000,000 shares of Common Stock
for issuance pursuant to options granted under the Plan ("Plan Options"). As of
September 28, 1999, an aggregate of 376,500 options (both ISO and NSO) have been
granted under the Plan. The Board of Directors or a Committee of the Board of
Directors (the "Committee") will administer the Plan including, without
limitation, the selection of the persons who will be granted Plan Options under
the Plan, the type of Plan Options to be granted, the number of shares subject
to each Plan Option and the Plan Option price.
Plan Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or options that do not so qualify
("Non-Qualified Options"). Any Incentive Option granted under the Plan must
provide for an exercise price of not less than 100% of the fair market value of
the underlying shares on the date of such grant, but the exercise price of any
Incentive Option granted to an eligible employee owning more than 10% of the
Company's Common Stock must be at least 110% of such fair market value as
determined on the date of the grant.
The term of each Plan Option and the manner in which it may be
exercised is determined by the Board of the Directors or the Committee, provided
that no Plan Option may be exercisable more than 10 years after the date of its
grant and, in the case of an Incentive Option granted to an eligible employee
owning more than 10% of the Company's Common Stock, no more than five years
after the date of the grant. The exercise price of Non-Qualified Options shall
be determined by the Board of Directors or the Committee.
The per share exercise price of shares granted under the Plan may be
adjusted in the event of certain changes in the Company's capitalization, but
any such adjustment shall not change the total purchase price payable upon the
exercise in full of Plan Options granted under the Plan. Officers, directors and
key employees of and consultants to the Company and its subsidiaries will be
eligible to receive Non-Qualified Options under the Plan. Only officers,
directors and employees of the Company who are employed by the Company or by any
subsidiary thereof are eligible to receive Incentive Options.
19
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1997, Merrill A. Yarbrough applied for a patent on the heat transfer
system he invented which is the basis for certain of the Company's products;
this patent was granted in September 1998. In April 1998 Mr. Yarbrough assigned
all rights under this patent, as well as any other intellectual property used by
the Company, to the Company. Mr. Yarbrough did not receive any additional
compensation for such assignment.
On April 24, 1997, the Company entered into a license agreement (the
"License Agreement") with Mr. Yarbrough relating to the heat transfer system,
related apparatus, and processes, and certain patent rights associated
therewith, which are used by the Company in the manufacture of the Smartemp
Plus(TM). The License Agreement granted the Company the right to manufacture,
use, sell and otherwise commercialize the licensed products for the life of the
patent, unless sooner terminated by the default of the Company as set forth in
the License Agreement. Pursuant to the terms of the License Agreement, the
Company agreed to pay Mr. Yarbrough a royalty of $10.00 on Smartemp Plus(TM)
product sold by the Company which incorporates Mr. Yarbrough's heat transfer
system. Mr. Yarbrough, in turn, entered into a separate agreement in July 1997
with Russell Lambert, a former shareholder of the Company, agreeing to pay Mr.
Lamberg a $2.00 per unit royalty on each unit of the Smartemp Plus(TM) sold by
the Company. In connection with the aforedescribed assignment of all
intellectual property rights owned by Mr. Yarbrough to the Company, this License
Agreement was terminated and the Company assumed the obligations of Mr.
Yarbrough under the agreement with Mr. Lambert. As of June 30, 1999, the Company
has sold an aggregate of 47 Smartemp Plus (TM) units, generating royalties of
$94 to Mr. Lambert.
In connection with the conversion of the Company's tax status from an S
corporation to a C corporation effective April 1, 1998, the Company made
aggregate distributions of $1,348,422 to its shareholders which represented all
S corporation net income reported by the Company for the fiscal year ended
September 30, 1997 and the subsequent six months ended March 31, 1998. In March
and April 1998, the Company distributed $215,000 of its net income to its
shareholders for the aforementioned periods. In addition, the Company
distributed $316,000 to shareholders during May and June 1998, and recorded an
additional distribution of $38,000 to the shareholders in accrued liabilities at
June 30, 1998. The final remaining distribution of approximately $748,000 was
recorded by the Company by offsetting advances to stockholder of $93,000 and
issuing unsecured promissory notes of $655,000 to its shareholders in an amount
equal to their proportionate share of the final remaining distribution based
upon their ownership interest in the Company. In September 1998 the principal
and all accrued but unpaid interest due under such notes were converted by the
holders into an aggregate of 133,663 shares of the Company's Series A 5%
Cumulative Convertible Preferred Stock.
During the fiscal years ended September 30, 1998 and 1997 the Company
recorded sales of approximately $58,000 and $104,000, respectively, to an entity
owned by Mr.
20
<PAGE>
Yarbrough. At September 30, 1998 all amounts receivable from such entity had
been collected and the entity is now inactive.
ITEM 8. DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 30,000,000 shares of Common Stock,
par value $.0001 per share, of which 13,760,000 shares were issued and
outstanding as of September 28, 1999. The issued and outstanding shares of
Common Stock are fully paid and nonassessable. Holders of the shares are
entitled to one vote per share on each matter submitted to a vote at a meeting
of shareholders. The shares of Common Stock do not have cumulative voting rights
or preemptive rights and there are no redemption or conversion privileges
attached thereto. Holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Company and to participate ratably in the
distribution of any assets legally available for distribution with respect to
the Common Stock. The Company does not expect to pay dividends for the
foreseeable future.
Lock-Up Restrictions
Pursuant to the terms of the April 1998 private placement, all
officers, directors and then existing shareholders of the Company executed
lock-up letters agreeing not to sell, transfer, assign, hypothecate or otherwise
dispose of the shares of Common Stock owned by them until May 2000 without the
prior consent of Noble. Noble does not have a general policy with regard to
early release of lock-up agreements.
Preferred Stock
The Articles of Incorporation for the Company provide for 5,000,000
shares of blank check preferred stock, par value $.0001, issuable in such series
and bearing such voting, dividend, conversion, liquidation and other rights and
preferences as the Board of Directors may determine. As of September 28, 1999
the Company has designated a series of 200,000 shares of preferred stock
entitled Series A 5% Cumulative Convertible Preferred Stock, of which 133,663
shares are issued and outstanding. The remaining 4,800,000 shares of preferred
stock remain without designation.
The designations, rights and preferences of the Series A 5% Cumulative
Convertible Preferred Stock provide (i) that such shares carry no voting rights,
(ii) such shares are convertible into shares of the Company's Common Stock at
any time at the option of either the Holder or the Company at the rate of one
share of Common Stock for each share of Series A 5% Cumulative Convertible
Preferred Stock so converted, (iii) the shares may be redeemed at any time at
the option of the Company for $5.00 per share, (iv) the shares pay an annual
dividend of 5% in arrears, payable in cash, shares of Common Stock, or any
combination thereof, (v) the shares carry a liquidation value of $5.00 per
share, and (vi) the shares are transferrable at any time at the holders' option.
21
<PAGE>
Placement Agent Warrants
In April 1998, in connection with the Company's private placement, the
Company granted Noble warrants to purchase 100,000 shares of the Company's
Common Stock for $1.00 per share. The Placement Agent Warrants are not
transferrable until April 1999, except to Noble's officers, consultants or
partners and to selected dealers, and may be exercised in whole or in part at
any time and from time to time during the period of four (4) years commencing
April 1999. The Placement Agent Warrants contain provisions providing for
adjustment of the exercise price and the number and type of securities issuable
upon exercise of the Placement Agent Warrants upon the occurrence of certain
events including subdivisions and combinations of Common Stock. Such
anti-dilution provisions are pari passu with all other shareholder groups. The
Placement Agent warrants also grant to the holders thereof certain registration
rights under the Securities Act of 1933 for the shares of Common Stock
underlying such Placement Agent Warrants.
Florida Anti-Takeover Statutes; Indemnification
Florida has enacted legislation that may deter or frustrate a take-over
of a Florida corporation. The Florida Control Share Act generally provides that
shares acquired in excess of certain specified thresholds will not possess any
voting rights unless such voting rights are approved by a majority of the
corporation's disinterested shareholders. The Florida Affiliated Transactions
Act generally requires super majority approval by disinterested directors or
shareholders of certain specified transactions between a corporation and holders
of more than 10% of the outstanding voting shares of the corporation (or their
affiliates). The Florida law permits the Company's Articles of Incorporation to
require the Company to indemnify the Company's directors, officers, employees
and agents.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER STOCKHOLDER MATTERS
The Company's Common Stock has been listed for trading on the OTC
Bulletin Board under the symbol "HVAC" since August 11, 1998. The following
table sets forth, for the period since August 11, 1998, the high and low closing
sales prices for the Common Stock as reported by the OTC Bulletin Board.
<TABLE>
<CAPTION>
Common Stock
------------
High Low
---- ---
<S> <C> <C>
August 11, 1998 - September 30, 1998 $2.75 $1.9375
October 1, 1998 - December 31, 1998 $2.4375 $1.875
January 1, 1999 - March 31, 1999 $3.875 $3.00
April 1, 1999 - June 30, 1999 $6.00 $3.00
</TABLE>
22
<PAGE>
At September 28, 1999 the closing bid price of the Common Stock as
reported on the OTC Bulletin Board was $2.45. At September 28, 1999 the Company
has approximately 20 record shareholders. The Company, however, believes that it
has in excess of 100 beneficial owners of its securities.
The transfer agent for the Company's Common Stock is Florida Atlantic
Stock Transfer, Inc., 7130 Nob Hill Road, Tamarac, Florida 33321.
Dividend Policy
The Company has never paid cash dividends on its Common Stock. The
designations, rights and preference of the Series A 5% Cumulative Convertible
Preferred Stock provide for annual dividends, in arrears, of 5%. See Part I,
Item 7. Description of Securities. The Company presently intends to retain
future earnings, if any, to finance the expansion of its business and does not
anticipate that any cash dividends will be paid in the foreseeable future. The
future dividend policy will depend on the Company's earnings, capital
requirements, expansion plans, financial condition and other relevant factors.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Not Applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
In April 1998 the Company sold an aggregate of 1,000,000 shares of its
Common Stock to a group of accredited or otherwise qualified investors in a
private placement exempt from registration under the Securities Act in reliance
on Section 3(b) and Rule 504, Regulation D thereof. The net proceeds received by
the Company of approximately $846,000. Noble a member of the NASD, acted as
placement agent in the offering and was paid a placement agent fee of 10%, a
non-accountable expense allowance of 3% and the Company sold Noble, or its
designees, for nominal consideration warrants to purchase 100,000 shares of the
Company's Common Stock for $1.00 per share. See Part I - Item 7. Description of
Securities.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Florida Business Corporation Act permits the indemnification of
directors, employees, officers and agents of Florida corporations. The Company's
Articles of Incorporation and Bylaws provide that the Company shall indemnify
its directors and officers to the fullest extent permitted by the Corporation
Act. Insofar as indemnification
23
<PAGE>
for liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
PART F/S
<TABLE>
<CAPTION>
Consolidated Financial Statements for the
Fiscal Years Ended September 30, 1998 and 1997
<S> <C>
Report of Independent Accountants................................................................................F-1
Balance Sheets...................................................................................................F-2
Statements of Income.............................................................................................F-3
Statements of Changes in Stockholders' Equity....................................................................F-4
Statements of Cash Flow..........................................................................................F-5
Notes to Consolidated Financial Statements.......................................................................F-6-F-14
Consolidated Financial Statements for
the Six Months Ended June 30, 1999
Balance Sheet at June 30, 1999 (unaudited) and September 30, 1998................................................F-1
Statement of Loss and Comparative Loss for the Six Months Ended June 30, 1999
and 1998 (unaudited)....................................................................................F-2
Statement of Changes in Stockholders' Equity for the Six
Months Ended June 30, 1999 and 1998 (unaudited).........................................................F-3
Statement of Cash Flow for the Six Months Ended
June 30, 1999 and 1998 (unaudited)......................................................................F-4
Notes to Unaudited Consolidated Financial Statements.............................................................F-5-F-15
</TABLE>
24
<PAGE>
Report of Independent Accountants
November 13, 1998
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, changes in stockholders' equity and cash
flows present fairly, in all material respects, the financial position of
Peregrine Industries, Inc. and its subsidiaries at September 30, 1998 and 1997,
and the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
F-1
<PAGE>
PEREGRINE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 45,515 $ 2,480
Accounts receivable, net of allowance for doubtful accounts of $15,000 875,400 472,059
in 1998 and $0 in 1997
Inventory 1,815,329 819,436
Prepaid and other current assets 62,344 27,922
Federal income tax deposits 110,426 0
Deferred tax asset 5,600 0
----------- -----------
Total current assets 2,914,614 1,321,897
Property and equipment, net 538,543 182,836
Deposits 131,865 19,073
Deferred tax asset, net 20,200 0
----------- -----------
Total assets $ 3,605,222 $ 1,523,806
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilites:
Bank overdraft $ 24,273 $ 22,939
Accounts payable 744,912 611,537
Accrued expenses and other payables 99,841 117,514
Line of credit 690,000 0
State income taxes payable 20,663 0
----------- -----------
Total current liabilities 1,579,689 751,990
Warranty reserve 71,778 56,907
----------- -----------
Total liablities 1,651,467 808,897
----------- -----------
Commitments and contingency
Stockholders' equity:
Preferred stock - $.0001 par value; 5,000,000 shares authorized,
200,000 shares designated as Series A, 5% cumulative,
convertible, 133,663 shares issued and outstanding 13 0
Common stock - $.0001 par value; 30,000,000 shares authorized,
13,760,000 issued and outstanding 1,376 10
Additional paid-in capital 1,582,782 69,990
Retained earnings 421,704 644,909
Foreign currency translation adjustment (52,120) 0
----------- -----------
Total stockholders' equity 1,953,755 714,909
----------- -----------
Total liabilities and stockholders' equity $ 3,605,222 $ 1,523,806
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
PEREGRINE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
for the years ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Net sales $ 8,334,293 $ 5,837,624
Cost of sales 5,940,446 4,553,720
----------- -----------
Gross Profit 2,393,847 1,283,904
----------- -----------
Operating expenses:
General and administrative 953,962 577,104
Depreciation and amortization 56,090 40,130
----------- -----------
Total operating expenses 1,010,052 617,236
----------- -----------
Income from operations 1,383,795 666,668
Other income (expenses):
Interest income 2,113 0
Interest expense (46,432) (34,294)
Loss on foreign currency transactions (30,258) 0
----------- -----------
Income before provision for income taxes 1,309,218 632,374
Provision for income taxes 184,000 0
----------- -----------
Net income $ 1,125,218 $ 632,374
=========== ===========
Net income per common and common
equivalent share:
Basic $ .09 $ .05
=========== ===========
Diluted $ .08 $ .05
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
PEREGRINE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the years ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
Foreign
Preferred Stock Common Stock Additional Currency
--------------- ------------------- Paid-in Retained Advances to Translation
Shares Amount Shares Amount Capital Earnings Stockholder Adjustment Total
------- ------ ---------- ------- ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, October 1, 1996
as restated for stock split
(Note 11) 0 $ 0 12,750,000 $ 1,275 $ 68,725 $ 12,53 $ 0 $ 0 $ 82,535
Net income 0 0 0 0 0 632,374 0 0 632,374
------- ---- ---------- ------- ---------- ---------- ------- --------- ----------
Balance, September 30, 1997 0 0 12,750,000 1,275 68,725 644,909 0 0 714,909
Sale of stock 0 0 1,010,000 101 845,755 0 0 0 845,856
Issuance of preferred stock 133,663 13 0 0 668,302 0 0 0 668,315
Distributions 0 0 0 0 0 (1,348,423) 0 0 (1,348,423)
Net income 0 0 0 0 0 1,125,218 0 0 1,125,218
Increase in advances to
stockholder 0 0 0 0 0 0 (93,025) 0 (93,025)
Decrease in advances to
stockholder 0 0 0 0 0 0 93,025 0 93,025
Foreign currency translation
adjustment 0 0 0 0 0 0 0 (52,120) (52,120)
------- ---- ---------- ------- ---------- ---------- ------- --------- ----------
Balance, September 30, 1998 133,663 $ 13 13,760,000 $ 1,376 $1,582,782 $ 421,704 $ 0 $ (52,120) $1,953,755
======= ==== ========== ======= ========== ========== ======= ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
PEREGRINE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,125,218 $ 632,374
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Accrued interest on stockholder notes 13,291 0
Deferred tax benefit (25,800) 0
Depreciation and amortization 56,090 40,130
Foreign currency translation adjustment (52,120) 0
Warranty reserve 14,871 33,018
Changes in operating assets and liabilities: 0
Accounts receivable (403,341) (401,018)
Inventory (995,893) (391,548)
Prepaid and other current assets (34,422) (1,114)
Federal income tax deposits (110,426) (11,000)
Deposits (112,792) (10,589)
Accounts payable 133,375 163,509
Accrued expenses and other payables (17,673) 77,931
State income taxes payable 20,663 0
----------- -----------
Net cash provided by (used in) operating activities (388,959) 131,693
----------- -----------
Cash flow from investing activities:
Expenditures for property and equipment (411,797) (141,506)
----------- -----------
Net cash used in investing activities (411,797) (141,506)
----------- -----------
Cash flows from financing activities:
Bank overdraft 1,334 12,293
Advances to stockholder (93,025) 0
Borrowings on line of credit, net 690,000 0
Distributions to stockholders (600,374) 0
Proceeds from sale of common stock 845,856 0
----------- -----------
Net cash provided by financing activities 843,791 12,293
----------- -----------
Net increase in cash and cash equivalents 43,035 2,480
----------- -----------
Cash and cash equivalents, beginning of year 2,480 0
----------- -----------
Cash and cash equivalents, end of year $ 45,515 $ 2,480
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 299,563 $ 7,867
=========== ===========
Supplemental disclosure of non-cash financing activities:
During the year ended September 30, 1998, the Company recorded distributions
to stockholders by offsetting advances to stockholder of $93,025 and issuing
notes payable to stockholders of $655,024. The notes payable to stockholders,
including accrued interest of $13,291, were subsequently exchanged for 133,663
shares of preferred stock (see Note 11).
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
PEREGRINE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Business:
Peregrine Industries, Inc. (the "Company") was formed on October 1, 1995
for the purpose of manufacturing residential pool heaters. The Company is
located in Deerfield Beach, Florida. Products are primarily sold
throughout the United States, Canada, and Brazil. In September 1998, the
Company formed a wholly-owned subsidiary, Alcool, Inc., in Montgomery,
Alabama, in order to expand its manufacturing capacity and product line
(see Note 13).
Foreign Sales Corporation
In June 1998, the Company formed a foreign sales corporation, Peregrine
Global, Inc. in St. Thomas, U.S. Virgin Islands. This wholly-owned
subsidiary was formed to take advantage of more favorable income tax
rates on profits generated from export business. For 1998, approximately
$1,100,000 in export sales were recorded under this provision and a sales
commission of approximately $68,000 was earned by Peregrine Global, Inc.
2. Summary of Significant Accounting Policies:
Principals of Consolidation
The consolidated financial statements include the accounts of Peregrine
Industries, Inc. and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Inventory
Inventory consists primarily of pool heaters and raw materials and is
valued at the lower of first-in, first-out (FIFO) cost or market.
Property and Equipment
Property and equipment are recorded at cost. Depreciation of equipment is
computed on the straight line method over the estimated useful lives of
the assets which range from five to seven years. Leasehold improvements
are amortized using the straight line method over six years. This period
represents the lesser of the lease term or the economic life of the
leasehold improvements. Upon the sale or retirement of equipment and
leasehold improvements, the cost and related accumulated depreciation are
eliminated from the respective accounts and the resulting gain or loss is
reflected in the statement of income. Repairs and maintenance are
expensed as incurred.
F-6
<PAGE>
PEREGRINE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. Summary of Significant Accounting Policies, Continued:
Income Taxes
Effective April 1, 1998, pursuant to its conversion from an S corporation
to a C corporation, the Company accounted for income taxes in accordance
with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes". Under SFAS No. 109, the
asset and liability method is used in accounting for income taxes. This
standard requires, among other things, recognition of future tax
benefits, measured by enacted tax rates, attributable to deductible
temporary differences between financial statement and income tax bases of
assets and liabilities to the extent that realization of such benefits is
more likely than not. See Note 12.
SFAS No. 109 requires a valuation allowance against deferred tax assets
if, based on the weight of available evidence, it is more likely than not
that some or all of the deferred tax assets will not be realized.
For the year ended September 30, 1997, the Company elected, under
Subchapter S of the Internal Revenue Code, to have its income taxed
directly to the stockholders. Prior to October 1, 1996, the Company was a
C corporation.
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
Revenue Recognition
Revenue is reported at the time products are shipped to customers.
Currency Translation
The Company considers the U.S. dollar as the functional currency of all
the Company's operations. Accordingly, the Canadian branch, which
maintains its accounting records in currency other than the U.S. dollar,
translates assets and liabilities into U.S. dollars at current exchange
rates and revenues and expenses are translated at average exchange rates
for the year. Resulting translation adjustments are reflected as a
separate component of stockholders' equity.
Transaction gains and losses that arise from exchange rate fluctuations
on transactions denominated in a currency other than the U.S dollar are
included in the results of operations as incurred.
Net Income Per Share
During 1997, the Company adopted SFAS No. 128, which requires the
presentation of both basic and diluted earnings per share. Basic net
income per share is calculated by dividing net income after dividend
requirements on preferred shares by the weighted average number of
common shares outstanding during the period. Diluted net income per
share is based on the weighted average common shares outstanding plus
the additional common shares resulting from the conversion of
convertible preferred shares and the exercise of stock options and
warrants if such conversion was dilutive.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less when
purchased to be cash equivalents.
F-7
<PAGE>
PEREGRINE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
3. Inventory:
Inventory consists of the following:
1998 1997
---------- ----------
Raw materials $1,267,078 $ 598,216
Work in process 56,230 193,433
Finished goods 492,021 27,787
---------- ----------
$1,815,329 $ 819,436
========== ==========
4. Property and Equipment:
Property and equipment consist of the following:
1998 1997
-------- --------
Computer equipment $ 51,577 $ 27,277
Furniture and fixtures 21,414 13,743
Leasehold improvements 44,520 40,413
Tooling at vendor 74,462 69,531
Production equipment 139,246 101,753
Construction in progress (Note 13) 333,293 0
-------- --------
664,512 252,717
Less accumulated depreciation and amortization 125,969 69,881
-------- --------
$538,543 $182,836
======== ========
F-8
<PAGE>
PEREGRINE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
5. Commitments and Contingency:
On September 1, 1996, the Company entered into a three year lease for an
operating facility located in Deerfield Beach, Florida. During June 1998,
the Company extended that lease through August 2003 and entered into a
new lease through the same date for additional space in the same
industrial complex. Future minimum lease payments for these operating
leases as of September 30, 1998 are approximately as follows:
September, 1999 $ 130,000
September, 2000 136,000
September, 2001 143,000
September, 2002 150,000
September, 2003 144,000
----------
$ 703,000
==========
Rent expense recorded under the above leases for the years ended
September 30, 1998 and 1997 was approximately $116,000 and $60,000,
respectively.
During 1997, the Company entered into a license agreement with a
stockholder of the Company related to certain patent rights owned by such
stockholder. Pursuant to the terms of the license agreement, the Company
agreed to pay the stockholder a royalty of $10 on each unit sold which
utilizes the patented technology. In connection with a private placement
offering of common stock in April 1998 (see Note 12), the stockholder
assigned the patent rights to the Company and terminated this license
agreement. In connection with this action, the Company agreed to assume
responsibility for such stockholder's obligation to pay a $2 per unit
royalty to a former shareholder and co-inventor. As of September 30,
1998, thirty nine such products had been sold.
6. Income Taxes:
The significant components of the net deferred tax assets as of September
30, 1998 are as follows:
Current Non-current
------- -----------
Deferred tax assets (liabilities):
Allowance for doubtful accounts $ 5,600 $ 0
Warranty reserve 0 27,000
Depreciation of property and equipment 0 (6,800)
-------- -------
Net deferred tax asset $ 5,600 $20,200
======== =======
F-9
<PAGE>
PEREGRINE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
6. Income Taxes, Continued:
The provision for income taxes at September 30, 1998 is comprised of the
following:
Current provision(1) $ 209,800
Deferred benefit (1,400)
---------
208,400
Net adjustment to deferred taxes for change in
tax status(2) (24,400)
---------
$ 184,000
=========
(1) In June 1998, the Company formed a wholly-owned subsidiary,
Peregrine Global, Inc., a foreign sales corporation. The tax
benefit of this structure for the year ended September 30, 1998 is
$13,500 which is included in the current provision.
(2) Effective April 1, 1998, the Company converted from an S
corporation to a C corporation. Accordingly, deferred tax assets
and liabilities have been recorded to recognize the temporary
differences between financial statement and income tax bases of
assets and liabilities at that date.
The provision for income taxes differs from the amount computed by
applying the statutory tax rates for 1998 to income before provision for
income taxes due principally to non-deductible expenses, state taxes, net
adjustment to deferred taxes for change in tax status, and the foreign
sales corporation tax benefit as discussed above.
7. Related Party Transactions:
During the years ended September 30, 1998 and 1997, the Company recorded
sales of approximately $58,000 and $104,000, respectively, to an entity
owned by a stockholder of the Company. At September 30, 1998, all amounts
receivable from such entity had been collected. The entity is now
inactive.
8. Significant Customers:
In the ordinary course of business, the Company extends credit to its
customers after completing a credit analysis based on certain financial
and other criteria. Credit risk of certain foreign customers is minimized
through the purchase of insurance policies. At September 30, 1998, one
Brazilian and one United States customer accounted for 46% and 18%,
respectively, of accounts receivable and 35% and 36%, respectively, of
net sales for the year then ended. At September 30, 1997, these two
customers individually accounted for 61% and 19% , respectively of
accounts receivable and 47% and 32%, respectively, of net sales for the
year then ended.
F-10
<PAGE>
PEREGRINE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
9. Savings Incentive Match Plan for Employees:
In November 1997, the Company introduced a Savings Incentive Match Plan
for Employees (SIMPLE IRA) for substantially all employees. Under terms
of the plan, employees may contribute up to $6,000 annually. The plan
also provides for Company matching contributions up to a limit of 3% of
the employee's annual compensation. During 1998 the Company incurred
expenses of approximately $6,000 under the plan.
10. Line of Credit:
In September 1998, the Company entered into a line of credit arrangement
with a bank for $1,000,000. Borrowings against the line bear interest at
1% over prime rate, are collateralized by accounts receivable, inventory
and property and equipment, and are personally guaranteed by a
stockholder of the Company. The line of credit expires in September 1999.
11. Net Income Per Common and Common Equivalent Share:
The calculation of basic and diluted net income per share for the years
ended September 31, 1998 and 1997 are as follows:
Years ended September 30,
-------------------------
1998 1997
---- ----
Basic net income per share:
Net income $ 1,125,218 $ 632,374
============================
Weighted average common shares
outstanding 13,256,384 12,750,000
============================
Basic net income per share $ .09 $ .05
============================
Diluted net income per share:
Weighted average common shares
outstanding 13,256,384 12,750,000
Convertible preferred shares 133,663 -
Stock options 9,284 -
----------------------------
Weighted average common and potential
common shares outstanding 13,399,331 12,750,000
============================
Net income $ 1,125,218 $ 632,374
============================
Diluted net income per share $ .08 $ .05
============================
12. Recapitalization:
Common Stock
In March 1998, the Company increased the authorized shares of common
stock to 30,000,000 shares in anticipation of offering for sale 1,000,000
shares as described in Note 12. In addition, the Company declared a stock
split of 12,750 to 1.
Preferred Stock
The articles of incorporation were further amended in September, 1998 to
authorize the issuance of 5,000,000 shares of 5% cumulative, convertible
preferred stock with a par value of $.0001 per share. At the same time,
Series A of such stock was designated, consisting of 200,000 shares. The
holders of the Series A preferred stock do not have voting rights and can
convert such shares into the Company's common stock on a one to one
ratio. The Company may redeem the Series A preferred stock at any time at
the stated value of $5 per share plus accrued but unpaid dividends.
As discussed in Note 12, the holders of promissory notes issued to former
Subchapter S stockholders exchanged those notes along with accumulated
interest for 133,663 shares of Series A preferred stock in September,
1998.
F-11
<PAGE>
PEREGRINE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
13. Sale of Stock:
In April 1998, the Company sold 1,000,000 shares of common stock at a
price of $1.00 per share. The funding occurred on May 11, 1998, and the
net proceeds to the Company from the sale of the shares was approximately
$846,000 after payment of the Placement Agent's commission of 10%,
non-accountable expenses of 3% and all other fees and expenses of this
offering. Of these net proceeds, the Company designated approximately
$385,000 for the payment of dividends to current shareholders pursuant to
the Company's conversion from an S corporation to a C corporation
effective April 1, 1998. The remaining net proceeds have been set aside
for general working capital and expansion of its business and operations.
Certain other offering costs were paid by issuing an additional 10,000
shares of stock.
The shares were offered without registration under the Securities Act of
1933 and pursuant to the exemptions under Sections 4(2) or 3(b) of the
Act and Rule 504 of Regulation D and state small corporate offering
registration provisions.
Employment Agreements
Prior to the closing of the offering, and as a condition of the Placement
Agent Agreement, a stockholder and three key employees have entered into
employment agreements with the Company upon terms and conditions
consistent with their current their current compensation arrangements.
Executive Stock Options
Pursuant to the terms of an employment agreement, a stockholder has been
given the opportunity to earn certain stock options based upon the future
performance of the Company. During the two year option period beginning
with fiscal year ending September 30, 1998, and continuing through fiscal
year ending September 30, 1999, the stockholder will be entitled to be
granted one option to purchase one share of the Company's common stock
for each $3.20 of cumulative net income, as defined, the Company reports
in excess of $2,000,000 during the two year period, up to a maximum of
250,000 options. The options earned will be computed and granted
quarterly, and the exercise price of these options will be the fair
market value of the Company's common stock at the end of each quarter
when earned. After reporting cumulative net income of $2,800,000,
additional net income, if any, during the two year period will be
accumulated toward the next threshold of $8,000,000. Thereafter, the
stockholder will be entitled to be granted one option to purchase one
share of the Company's common stock for each $5 of net income, as
defined, the Company reports in excess of $8,000,000 up to a maximum of
250,000 options with the exercise price being the fair market value of
the Company's common stock on September 30, 1999. Options will be
exercisable for five years from the date of the grant. At September 30,
1998, no options have been granted under this agreement.
F-12
<PAGE>
PEREGRINE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
13. Sale of Stock, Continued:
Stock Option Plan
Prior to the closing of the offering, the Company adopted a qualified
stock option plan. The Company has reserved an aggregate of 1,000,000
shares of common stock for issuance pursuant to options granted under the
Plan. Options granted under the Plan may either be qualifying incentive
options or non-qualifying options.
In May 1998, the Company granted non-qualified options to certain key
employees to purchase an aggregate of 52,000 shares of common stock at an
exercise price of fair market value at the date of grant. Options for
26,000 shares vest immediately and the remainder vest annually through
May 2000. At September 30, 1998, none of the options have been exercised.
Distributions
In connection with the conversion of the Company's tax status from an S
corporation to a C corporation effective April 1, 1998, the Company made
aggregate distributions of $1,348,423 to its shareholders which represent
all S corporation net income reported by the Company for the fiscal year
ended September 30, 1997 and the subsequent six months ended March 31,
1998. Prior to October 1, 1996, the Company was a C corporation. Net
income for the fiscal year ended September 30, 1997 was $632,374 and net
income for the six months ended March 31, 1998 was $716,049. In March and
April 1998, the Company used borrowings from its line of credit to
distribute $215,000 of its net income to its shareholders for the
aforementioned periods. In addition, the Company distributed from the
proceeds of the offering $366,000 to shareholders during May and June
1998 and recorded an additional distribution of $19,000 to the
shareholders in accrued liabilities at September 30, 1998.
The final remaining distribution of approximately $748,000, after the
distributions made as discussed above, was recorded by the Company by
offsetting advances to stockholder of $93,000 and issuing unsecured
promissory notes of $655,000 to its shareholders in an amount equal to
their proportionate share of the final remaining distribution based upon
their ownership interest in the Company. The notes were interest bearing
at 5% per year. In September 1998, majority stockholders adopted a
resolution, which permitted the promissory note holders to convert their
notes to Series A 5% cumulative, convertible preferred stock as discussed
in Note 11.
F-13
<PAGE>
PEREGRINE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
13. Sale of Stock, Continued:
Warrants
Immediately following the offering, the Company entered into a Financial
Advisory/ Investment Banking Agreement with the Placement Agent wherein
the Placement Agent will provide the Company certain investment banking
and consulting services related to corporate financial matters. The terms
of this 24 month agreement provide that the Placement Agent will receive
a monthly fee of $3,000 for the first six months of the agreement, a
monthly fee of $5,000 for the next six months, and thereafter, a monthly
fee of $6,000 for the remaining 12 months of the Agreement, plus
reimbursement for any reasonable expenses incurred. As of September 30,
1998, the Company had recorded consulting services of $15,000 under this
Agreement.
In addition, the Company has agreed to sell to the Placement Agent, or
its designees, for nominal consideration, warrants to purchase from the
Company an aggregate of 100,000 shares of common stock at a purchase
price of $1 per share. At September 30, 1998, no warrants have been sold.
14. New Manufacturing Subsidiary:
In September 1998 Alcool, Inc. was formed as an Alabama corporation. This
wholly-owned subsidiary will manufacture certain proprietary components
that replace those previously purchased from outside sources. During
1998, the Company issued purchase contracts totaling approximately
$2,000,000 for production equipment for that operation and had made cash
deposits thereon of approximately $283,000 at September 30, 1998. Such
amounts are included in construction in progress (see Note 4). An interim
equipment loan of $1,500,000 at 8 3/4% interest with a 7 year
amortization was closed with a local bank in October, 1998. The Company
is required to maintain certain levels of current ratios, debt to equity
comparisons, and similar balance sheet relationships. In addition, the
loan is guaranteed by a stockholder of the Company, and the Company must
maintain a $1,000,000 life insurance policy on such stockholder.
As of September 30, 1998, the Company had made an earnest money deposit
of $90,000 on the purchase of a 135,000 square foot manufacturing plant
in Montgomery, Alabama, on behalf of Alcool, Inc. In November, the
purchase contract was cancelled by the Company under terms that provide
full recovery of the deposit. A lease for a 80,000 square foot building
in Montgomery, Alabama, is in the final stage of negotiation with annual
rent payments of approximately $266,000 for the first five years and
$302,000 annual rent payments for the five year renewal option.
F-14
<PAGE>
<TABLE>
<CAPTION>
June 30, September 30,
ASSETS 1999 1998
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 524,528 $ 45,515
Accounts receivable, net of allowance for 842,776 875,400
doubtful accounts of $26,355
Inventory 1,864,898 1,815,329
Prepaid and other current assets 111,254 62,344
Deferred tax asset, net 191,287 5,600
Federal income tax deposits - 110,426
----------- -----------
Total current assets 3,534,743 2,914,614
Property and equipment, net 3,021,808 538,543
Deferred financing charges 105,338 131,865
Deposits and other 75,169 20,200
----------- -----------
Total assets $ 6,737,058 $ 3,605,222
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft $ - $ 24,273
Accounts payable 1,549,682 744,912
Accrued expenses and other payables 261,994 99,841
Line of credit 956,000 690,000
Bank term loan 157,539 -
Industrial development bonds 2,460,000 -
State and income taxes payable - 20,663
----------- -----------
Total current liabilities 5,385,215 1,579,689
Long-term liabilities:
Warranty reserve 36,014 71,778
----------- -----------
Total liabilities 5,421,229 1,651,467
----------- -----------
Commitments and contingency (Notes 8 and 15)
Stockholders' equity:
Preferred stock - $.0001 par value; 5,000,000 shares authorized,
200,000 shares designated as Series A, 5% cumulative,
convertible, 133,663 shares issued and outstanding 13 13
Common stock - $.0001 par value; 30,000,000 shares authorized,
13,760,000 shares issued and outstanding 1,376 1,376
Additional paid-in capital 1,582,782 1,582,782
Retained loss (earnings) (216,696) 421,704
Accumulated other comprehensive loss (51,646) (52,120)
----------- -----------
Total stockholders' equity 1,315,829 1,953,755
----------- -----------
Total liabilities and stockholders' equity $ 6,737,058 $ 3,605,222
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-1
<PAGE>
Peregrine Industries, Inc.
Consolidated Statement of Loss and Comprehensive Loss
For the nine months ended June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Net sales $ 5,460,039 $ 6,412,194
Cost of sales 4,385,623 4,529,398
----------- -----------
Gross profit 1,074,416 1,882,796
----------- -----------
Operating expenses:
General and administrative 1,137,888 734,948
Pre-operating costs of new product lines 284,256 -
Research and development 227,428 -
Depreciation and amortization 139,998 33,924
----------- -----------
Total operating expenses 1,789,570 768,872
----------- -----------
(Loss) income from operations (715,154) 1,113,924
----------- -----------
Other income (expenses):
Interest income 12,868 1,652
Interest expense (134,401) (15,678)
Other 7,000 -
----------- -----------
(114,533) (14,026)
----------- -----------
(Loss) income before income tax provision (829,687) 1,099,898
Income tax benefit (provision) 191,287 (123,500)
----------- -----------
Net loss (638,400) 976,398
----------- -----------
Other comprehensive income
Foreign currency translation adjustment, net of
income tax benefit of $0 474 -
----------- -----------
Comprehensive loss $ (637,926) $ 976,398
=========== ===========
Net (loss) income per common and common
equivalent share:
Basic $ .04 $ .07
=========== ===========
Diluted $ .04 $ .07
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
Peregrine Industries, Inc.
Consolidated Statement of Changes in Stockholders' Equity
For the nine months ended June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Preferred Stock Common Stock Additional Other
----------------- -------------------- Paid-in Retained Comprehensive
Shares Amount Shares Amount Capital Earnings Loss Total
------- ------ ---------- -------- ---------- ---------- ------------- -----------
(Loss)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1998 133,663 $ 13 13,760,000 $ 1,376 $1,582,782 $ 421,704 $ (52,120) $ 1,953,755
Net loss - - - - - (638,400) - (638,400)
Foreign currency translation
adjustment - - - - - - 474 474
------- ---- ---------- -------- ---------- ---------- --------- -----------
Balance, June 30, 1999 133,663 $ 13 13,760,000 $ 1,376 $1,582,782 $ (216,696) $ (51,646) $ 1,315,829
======= ==== ========== ======== ========== ========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Peregrine Industries, Inc.
Consolidated Statement of Cash Flows
For the nine months ended June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (638,400) $ 976,398
Adjustments to reconcile net loss to net
cash provided by operating activities:
Deferred tax provision (165,487) (41,500)
Depreciation and amortization 139,998 33,924
Bad debt provision 11,355 50,000
Foreign currency translation adjustment 474 (47,880)
Warranty reserve (35,764) 3,705
Changes in operating assets and liabilities:
Accounts receivable 21,269 (704,471)
Inventory (49,569) (772,033)
Prepaid and other current assets (48,910) (5,091)
Deposits and other 56,696 (7,053)
Accounts payable 804,770 272,077
Accrued expenses and other payables 141,490 43,302
Federal tax deposits 110,426 165,000
----------- -----------
Net cash (used in) provided by operating activities 348,348 (33,622)
----------- -----------
Cash flows from investing activities:
Expenditures for property and equipment (2,623,263) (362,177)
----------- -----------
Net cash used in investing activities (2,623,263) (362,177)
----------- -----------
Cash flows from financing activities:
Bank overdraft (24,273) 276,181
(Repayment) proceeds on line of credit 266,000 303,000
Proceeds from long-term debt 1,500,000 -
Repayments of long-term debt (1,342,461) -
Distribution to stockholders - (562,500)
Proceeds from sale of common stock - 845,856
Proceeds from Industrial Development Bonds 2,354,662 -
Advances to stockholders - (93,025)
----------- -----------
Net cash provided by financing activities 2,753,928 769,512
----------- -----------
Net increase (decrease) in cash and cash equivalents 479,013 373,713
----------- -----------
Cash and cash equivalents, beginning of period 45,515 2,480
----------- -----------
Cash and cash equivalents, end of period $ 524,528 $ 376,193
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 22,000 $ 69,563
=========== ===========
Cash paid for interest $ 134,401 $ 10,750
=========== ===========
Supplemental disclosure of noncash investing and financing activities:
During March 1999 the Company repaid long-term debt of $1,209,000 and incurred
loan costs of $105,338 with proceeds of the Industrial Development Bond.
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Peregrine Industries, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
1. Organization and Business:
Peregrine Industries, Inc. (the "Company") was formed on October 1, 1995
for the purpose of manufacturing residential pool heaters. The Company is
located in Deerfield Beach, Florida. Products are primarily sold
throughout the United States, Canada, and Brazil. In September 1998, the
Company formed a wholly-owned subsidiary, Alcool, Inc., in Montgomery,
Alabama, in order to expand its manufacturing capacity and product line
(see Note 14).
The financial information included herein has been prepared by the
Company without an audit. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to rules and regulations of the Securities and Exchange
Commission. However, the Company believes that the disclosures herein are
adequate to make the information presented not misleading. It is
suggested that these condensed consolidated financial statements be read
in conjunction with the financial statements and the notes thereto
included in the Company's latest annual report. The information furnished
reflects all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a
fair statement of the results for the interim periods. The results for
these interim periods are not necessarily indicative of results to be
expected for the full year, due to seasonal factors, among others.
Foreign Sales Corporation
In June 1998, the Company formed a foreign sales corporation, Peregrine
Global, Inc. in St. Thomas, U.S. Virgin Islands. This wholly-owned
subsidiary was formed to take advantage of more favorable income tax
rates on profits generated from export business. For the nine months
ended June 30, 1999, approximately $1,454,000, in export sales were
recorded under this provision and a sales commission of approximately
$92,000 was earned by Peregrine Global, Inc.
2. Summary of Significant Accounting Policies:
Principals of Consolidation
The consolidated financial statements include the accounts of Peregrine
Industries, Inc. and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Inventory
Inventory consists primarily of pool heaters and raw materials and is
valued at the lower of first-in, first-out (FIFO) cost or market.
F-5
<PAGE>
Peregrine Industries, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies, Continued:
Property and Equipment
Property and equipment are recorded at cost. Depreciation of equipment is
computed on the straight line method over the estimated useful lives of
the assets which range from three to five years. Leasehold improvements
are amortized using the straight line method over six years. This period
represents the lesser of the lease term or the economic life of the
leasehold improvements. Upon the sale or retirement of equipment and
leasehold improvements, the cost and related accumulated depreciation are
eliminated from the respective accounts and the resulting gain or loss is
reflected in the statement of income. Repairs and maintenance are
expensed as incurred.
Bond Costs
Costs associated with issuance of the Industrial Development Bonds are
being amortized over the contractual life of the Bonds, which is 8 years.
(See Note 7.)
Income Taxes
As required by Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS No. 109), the Company applies an
asset and liability approach to financial reporting for income taxes.
Deferred income tax assets and liabilities are recognized based on the
temporary differences between the financial reporting basis and the tax
basis of assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates applicable to
the periods in which the differences are expected to affect taxable
income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable for the period and changes during the period
in deferred tax assets and liabilities.
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
Revenue Recognition
Revenue is reported at the time products are shipped to customers.
F-6
<PAGE>
Peregrine Industries, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies, Continued:
Currency Translation
The Company considers the U.S. dollar as the functional currency of all
the Company's operations. Accordingly, the Canadian branch, which
maintains its accounting records in currency other than the U.S. dollar,
translates assets and liabilities into U.S. dollars at current exchange
rates and revenues and expenses are translated at average exchange rates
for the year. Resulting translation adjustments are charged directly to
accumulated other comprehensive loss as a separate component of
stockholders' equity.
Transaction gains and losses that arise from exchange rate fluctuations
on transactions denominated in a currency other than the U.S dollar are
included in the results of operations as incurred.
On October 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income", which established
standards for reporting and display of comprehensive income and its
components in a full set of financial statements. Comprehensive income is
defined as the change in stockholders' equity during a period from
transactions from nonowner sources. Comprehensive income consists of net
income and other comprehensive income, which includes all other nonowner
changes in stockholders' equity.
Net Income (Loss) Per Share
During 1997, the Company adopted SFAS No. 128, which requires the
presentation of both basic and diluted earnings per share. Basic net
income (loss) per share is calculated by dividing net income after
dividend requirements on preferred shares by the weighted average number
of common shares outstanding during the period. Diluted net income per
share is based on the weighted average common shares outstanding plus
the additional common shares resulting from the conversion of
convertible preferred shares and the exercise of stock options and
warrants if such conversion was dilutive.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less when
purchased to be cash equivalents.
Stock Options
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25.
"Accounting for Stock Issued to Employees". Compensation cost for stock
options, if any, is measured as the excess of the quoted market price of
the Company's stock at the date of grant over the amount an employee must
pay to acquire the stock. Restricted stock is recorded as compensation
cost over the requisite vesting periods based on the market value on the
date of grant.
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," established accounting and disclosure
requirements using a fair-value-based method of accounting for
stock-based employee compensation plans. The Company has elected to
remain on its current method of accounting as described above, and has
adopted the disclosure requirements of SFAS No. 123.
F-7
<PAGE>
Peregrine Industries, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
3. Inventory:
Inventory consists of the following:
Raw material $1,459,314
Work in process 274,018
Finished goods 131,566
----------
$1,864,898
==========
4. Property and Equipment:
Property and equipment consist of the following:
Furniture and fixtures $ 59,940
Computer equipment 86,329
Tooling at vendor 80,543
Production equipment 2,919,704
Leasehold improvements 133,037
Construction in process (Note 13) 8,223
----------
3,287,776
Less accumulated depreciation and amortization (265,968)
----------
$3,021,808
==========
5. Line of Credit:
In September 1998, the Company entered into a line of credit arrangement
with a bank for $1,000,000. Borrowings against the line bear interest at
1% over prime rate, are collateralized by accounts receivable, inventory
and property and equipment, and are personally guaranteed by a
stockholder of the Company. The line of credit expires in September 1999.
At June 30, 1999, the outstanding balance on this line of credit was
$956,000.
F-8
<PAGE>
Peregrine Industries, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
6. Bank Term Loan:
In October 1998, the Company borrowed $1,500,000 under a seven year term
loan agreement with interest at 8.75%. The loan requires monthly
principal and interest payments of $24,053, and borrowings are
collateralized by substantially all equipment located at Alcool, Inc. The
Company is required to maintain certain levels of current ratios, debt to
equity comparisons, and similar balance sheet relationships. In addition,
the loan is guaranteed by a stockholder of the Company, and the Company
must maintain a $1,000,000 life insurance policy on such stockholder.
The Company was in default of certain of the above covenants at June 30,
1999. As a result of such default, the lender may exercise its right to
declare all unmatured obligations immediately due and payable.
Accordingly, the balance outstanding of $157,539 has been classified as a
current liability in the accompanying consolidated balance sheet (see
Notes 7 and 15).
7. Industrial Development Bonds:
On March 8, 1999 the Industrial Development Board of the City of
Montgomery, Alabama issued $2,460,000 aggregate principal amount of
Variable/Fixed Rate Industrial Development Revenue Bonds, Series 1999
(the "Bonds"). The proceeds from the Bonds were used for long-term
financing for acquisition of production equipment for Alcool, Inc., the
Company's subsidiary in Alabama (see Note 13), and for partial repayment
of the bank term loan.
The Bonds were issued pursuant to a Trust Indenture dated February 1,
1999 and maturing on February 1, 2007. Interest is payable monthly at a
variable weekly rate based on the average rate for similar issues as
determined by the remarketing agent. The rate at June 30, 1999 was 3.9%.
As a collateral of the Bonds, the Company executed a Mortgage Security
Agreement and Assignment of Rents and Leases dated as of February 1, 1999
in favor of the bank, whereby the bank was granted a mortgage on and
security interest in the acquired production equipment and an assignment
of the interest of the Lessee under the Lease Agreement.
The Bonds were also backed by a letter of credit with an original amount
of $2,503,809, issued by SouthTrust Bank, National Association which
expires on February 15, 2007, unless certain events ensue earlier, as
provided by the Letter of Credit Agreement.
In addition, the president of the Company has executed an Individual
Guaranty Agreement dated as of February 1, 1999 with an assignment of
life insurance of the Individual Guarantor in an amount not less than
$75,000 and the Company's foreign subsidiary (see Note 1) has executed a
Corporate Guaranty Agreement dated February 1, 1999.
F-9
<PAGE>
Peregrine Industries, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
7. Industrial Development Bonds, Continued:
As discussed in Note 6, the Company was in default of certain financial
covenants under its Term Loan. Under the terms of the Bonds, due to the
default of the Company's Term Loan, the Bonds are considered in default.
Accordingly, the outstanding balance has been reclassified to current
liabilities (see Note 15).
The redemption of the Bonds shall be in accordance with the following
schedule:
Redemption date principal amount
(June 1) to be redeemed
-------- ----------------
2000 $ 295,000
2001 310,000
2002 330,000
2003 350,000
2004 370,000
2005 390,000
2006 415,000
-----------
$ 2,460,000
===========
8. Commitments and Contingency:
In September 1996, the Company entered into a three year lease for an
operating facility located in Deerfield Beach, Florida. During June 1998,
the Company extended that lease through August 2003 and entered into a
new lease through the same date for additional space in the same
industrial complex.
In December 1998, a subsidiary, Alcool, Inc., entered into a five year
lease for approximately 81,000 square foot plant in Montgomery, Alabama,
to manufacture coils for both internal use and sale to non-affiliates.
(See Note 13). This lease, which is guaranteed by the Company, provides
one five year renewal option.
F-10
<PAGE>
Peregrine Industries, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
8. Commitments and Contingency, Continued:
Future minimum lease payments for these operating leases as of June 30,
1999 are approximately as follows:
2000 $ 400,342
2001 407,078
2002 414,139
2003 421,553
2004 181,359
-----------
$ 1,824,471
===========
Rent expense recorded under the above leases for the nine months ended
June 30, 1999 was approximately $289,000.
During 1997, the Company entered into a license agreement with a
stockholder of the Company related to certain patent rights owned by such
stockholder. Pursuant to the terms of the license agreement, the Company
agreed to pay the stockholder a royalty of $10 on each unit sold which
utilizes the patented technology through 2014. In connection with a
private placement offering of common stock in April 1998, the stockholder
assigned the patent rights to the Company and terminated this license
agreement. In connection with this action, the Company agreed to assume
responsibility for such stockholder's obligation to pay a $2 per unit
royalty to a former shareholder and co-inventor. As of June 30, 1999, six
such units had been sold and royalty payments had been made accordingly.
9. Significant Customers:
In the ordinary course of business, the Company extends credit to its
customers after completing a credit analysis based on certain financial
and other criteria. Credit risk of certain foreign customers is
minimized through the purchase of insurance policies. At June 30, 1999,
one Brazilian and one United States customer accounted for 25% and 35%,
respectively, of accounts receivable. Such customers also accounted for
19% and 51%, respectively, of net sales for the nine months ended
June 30, 1999.
F-11
<PAGE>
Peregrine Industries, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
10. Savings Incentive Match Plan for Employees:
The Company sponsors a Savings Incentive Match Plan for Employees
(SIMPLE IRA) for substantially all employees. Under terms of the plan,
employees may contribute any amount and the Company will match such
contributions up to 3% of the employee's annual compensation. During the
nine months ended June 30, 1999, the Company incurred expenses of
approximately $8,000 under the plan.
11. Net (Loss) income Per Common and Common Equivalent Share:
The calculation of basic and diluted net (loss) income per share for the
nine months ended June 30, 1999 and 1998 are as follows:
Nine Months Ended June 30,
---------------------------
1999 1998
---- ----
(Unaudited)
Basic net income per share:
Net (loss) income $ (637,926) $ 976,398
Cumulative preferred dividend 25,062 -
----------------------------
(Loss) income applicable to common stock (612,864) 976,398
============================
Weighted average common shares
outstanding $13,760,000 $ 13,086,667
============================
Basic net (loss) income per share $ .04 $ .07
============================
Diluted net income per share:
Weighted average common shares
outstanding - 13,086,667
============================
Stock options - -
============================
Weighted average common and potential
common shares outstanding - 13,086,667
============================
Loss (income) applicable
to common stock $ - $ 976,398
============================
Diluted net income per share $ - $ .07
============================
Options to purchase common shares and the conversion of preferred shares
were not included in the computation of diluted loss per shares as the
effect would have been anti-dilutive.
12. Stock Options:
Pursuant to the terms of an employment agreement, a stockholder has been
given the opportunity to earn certain stock options based upon the future
performance of the Company. During the two year option period beginning
with fiscal year ending September 30, 1998, and continuing through fiscal
year ending September 30, 1999, the stockholder will be entitled to be
granted one option to purchase one share of the Company's common stock
for each $3.20 of cumulative net income, as defined, the Company reports
in excess of $2,000,000 during the two year period, up to a maximum of
250,000 options. The options earned will be computed and granted
quarterly, and the exercise price of these options will be the quoted
market price of the Company's common stock at the end of each quarter
when earned. After reporting cumulative net income of $2,800,000,
additional net income, if any, during the two year period will be
accumulated toward the next threshold of $8,000,000. Thereafter, the
stockholder will be entitled to be granted one option to purchase one
share of the Company's common stock for each $5 of net income, as
defined, the Company reports in excess of $8,000,000 up to a maximum of
250,000 options with the exercise price being the quoted market price of
the Company's common stock on September 30, 1999. Options will be
exercisable for five years from the date of the grant. At June 30, 1999,
no options have been granted under this agreement.
In connection with a private placement offering of common stock in April
1998, the Company adopted a qualified stock option plan and reserved an
aggregate of 1,000,000 shares of common stock for issuance pursuant to
options granted under the Plan. Options granted under the Plan may either
be qualifying incentive options or non-qualifying options.
The Company has granted non-qualified options to certain key employees to
purchase an aggregate of 65,000 shares of common stock at an exercise
price equal to quoted market price at the date of grant. Options for
26,000 shares vested immediately and the remainder vest annually through
May 2002. At June 30, 1999, none of the options have been exercised.
F-12
<PAGE>
Peregrine Industries, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
12. Stock Options, Continued:
In October 1998, the Company added an outside director to its Board of
Directors. In addition to normal director's fees and expenses, the
director was granted an option to purchase 100,000 shares of the
Company's common stock at $1.00 per share with 25,000 shares vesting
concurrent with the grant and 25,000 shares vesting on each of the first
three anniversary dates of the grant. The options expire in October 2003.
In accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," to the extent
that a stock option price is less than the quoted market price of the
stock as of the measurement date, such difference is compensation to the
optionee and an expense to the Company. The quoted market price was $1.93
on the first vesting date in October 1998; accordingly, the Company
incurred a charge to income in the amount of $23,250. Additional charges
to income for compensation are being accrued over the vesting period.
Information regarding the above options for the nine months ended June
30, 1999 is as follows:
Shares
Options outstanding, October 1, 1998 65,000
Options granted 100,000
-------
Options outstanding, June 30, 1999 165,000
-------
Options exercisable, June 30, 1999 51,000
-------
Weighted average exercise price, October 1, 1998 $ 1.00
Weighted average exercise price, June 30, 1999 $ 1.00
All shares of stock issued upon the exercise of options granted pursuant
to the employment agreement or stock option plan described above, shall
be "restricted securities" as that term is defined in Rule 144 of the
Securities Act of 1933.
F-13
<PAGE>
Peregrine Industries, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
13. Warrants:
In April 1998, the Company entered into a Financial Advisory/ Investment
Banking Agreement with the private placement offering Placement Agent
wherein the Placement Agent will provide the Company certain investment
banking and consulting services related to corporate financial matters.
The terms of this 24 month agreement provide that the Placement Agent
will receive a monthly fee of $3,000 for the first six months of the
agreement, a monthly fee of $5,000 for the next six months, and
thereafter, a monthly fee of $6,000 for the remaining 12 months of the
Agreement, plus reimbursement for any reasonable expenses incurred. For
the nine months ending June 30, 1999, the Company recorded consulting
services of $45,000 under this Agreement.
In addition, the Company has agreed to sell to the Placement Agent, or
its designees, for nominal consideration, warrants to purchase from the
Company an aggregate of 100,000 shares of common stock at a purchase
price of $1 per share. At June 30, 1999, no warrants have been sold.
14. New Manufacturing Subsidiary:
In September 1998, Alcool, Inc. was formed as an Alabama corporation.
This wholly-owned subsidiary will manufacture certain proprietary
components that replace those previously purchased from outside sources.
Such components are for use by the Company as well as for sale to
customers. As of June 30, 1999, production equipment costing
approximately $2,100,000 and product raw materials costing approximately
$128,000 had been purchased for that operation; purchase commitments for
additional equipment totaling approximately $202,000 were outstanding at
June 30, 1999. Costs incurred in connection with putting this new plant
into operation have been classified as pre-operating costs on the
accompanying statement of loss.
15. Comprehensive Income:
For the Company, other comprehensive income consists of a foreign
currency translation adjustment that amounted to $474 for the nine months
ended June 30, 1999. Accumulated other comprehensive loss at June 30,
1999 amounted to $51,646. The cumulative adjustment amount previously
reported as a separate component of stockholders' equity is now included
in accumulated other comprehensive loss in the consolidated balance
sheet.
F-14
<PAGE>
Peregrine Industries, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
16. Debt Covenant Violations:
As discussed in Notes 6 and 7, the Company is currently in violation of
certain of its covenants associated with its Industrial Development Bond
and Bank Term Loan. Accordingly, such obligations have been reclassified
into current liabilities. As a result of its covenant violations, such
debt obligations could be called on demand. However, it is uncertain as
to whether the Company will be able to repay the debt obligations on
demand, refinance them with its current lenders or obtain other sources
of financing. The inability of the Company to repay or refinance its
debt obligations could have a material adverse impact on the Company's
financial condition.
* * * *
F-15
<PAGE>
<TABLE>
<CAPTION>
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit Description of Document
- ------- -----------------------
<S> <C>
3(i) Articles of Incorporation, as amended of
Peregrine Industries, Inc.
3(ii) By-Laws of Peregrine Industries, Inc.
4(i) Form of Placement Agent Warrant
4(ii) Credit Agreement among Alcool, Inc., Peregrine
Industries, Inc. and Southtrust Bank, National
Association dated February 1, 1999
4(iii) Corporate Guaranty Agreement dated as of
February 1, 1999 by Peregrine Global, Inc. in
favor of Southtrust Bank, National Association
4(iv) Bond Purchase Agreement dated March 5, 1999
4(v) Bond Guaranty Agreement dated February 1, 1999
by Alcool, Inc. in favor of Southtrust Bank,
National Association, as Trustee
4(vi) Irrevocable Letter of Credit No. SB 2009 dated
March 8, 1999
4(vii) Mortgage Security Agreement, and Assignment of
Rents and Leases from The Industrial Development
Board of the City of Montgomery and Alcool, Inc.
to Southtrust Bank, National Association dated as
of February 1, 1999
10(i) Employment Agreement between Peregrine
Industries, Inc. and Merrill A. Yarbrough
10(ii) Employment Agreement between Peregrine
Industries, Inc. and Howard E. Cobb
10(iii) Placement Agent Agreement between Peregrine
Industries, Inc. and Noble International Investments, Inc.
10(iv) Lease Agreement dated December 9, 1998 by and between Industrial
Partners and Alcool, Inc.
10(v) Lease Agreement by and between Principal Mutual Life Insurance
Company and Peregrine Industries, Inc. and First Amendment to the
Lease Agreement by and between Principal Mutual Life Insurance
Company and Peregrine Industries, Inc.
10(vi) Letter Agreement dated October 8, 1996 executed by Trammell Crow
Company and Peregrine Industries, Inc.
10(vii) 1998 Stock Option Plan
21 Subsidiaries of the Registrant
</TABLE>
25
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the Registrant caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
PEREGRINE INDUSTRIES, INC.
By: /s/ Merrill A. Yarbrough
-------------------------------------------------------
Merrill A. Yarbrough, Chairman, Chief Executive Officer
and President
Date: September 28, 1999
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
October 5, 1995
CAPITAL CONNECTION
P.O. BOX 10349
TALLAHASSEE, FL 32302
The Articles of Incorporation for PEREGRINE INDUSTRIES, INC. were filed on
October 5, 1995 and assigned document number P95000076268. Please refer to this
number whenever corresponding with this office regarding the above corporation.
PLEASE NOTE: COMPLIANCE WITH THE FOLLOWING PROCEDURES IS ESSENTIAL TO
MAINTAINING YOUR CORPORATE STATUS. FAILURE TO DO SO MAY RESULT IN DISSOLUTION OF
YOUR CORPORATION.
A CORPORATION ANNUAL REPORT MUST BE FILED WITH THIS OFFICE BETWEEN JANUARY 1 AND
MAY 1 OF EACH YEAR BEGINNING WITH THE CALENDAR YEAR FOLLOWING THE YEAR OF THE
FILING DATE NOTED ABOVE AND EACH YEAR THEREAFTER. FAILURE TO FILE THE ANNUAL
REPORT ON TIME MAY RESULT IN ADMINISTRATIVE DISSOLUTION OF YOUR CORPORATION.
A FEDERAL EMPLOYER IDENTIFICATION (FEI) NUMBER MUST BE SHOWN ON THE ANNUAL
REPORT FORM PRIOR TO ITS FILING WITH THIS OFFICE. CONTACT THE INTERNAL REVENUE
SERVICE TO INSURE THAT YOUR RECEIVE THE FEI NUMBER IN TIME TO FILE THE ANNUAL
REPORT. TO OBTAIN A FEI NUMBER, CONTACT THE IRS AT 1-800-829-3676 AND REQUEST
FORM SS-4.
SHOULD YOUR CORPORATE MAILING ADDRESS CHANGE, YOU MUST NOTIFY THIS OFFICE IN
WRITING, TO INSURE IMPORTANT MAILINGS SUCH AS THE ANNUAL REPORT NOTICES REACH
YOU.
Should you have any questions regarding corporations, please contact this office
at the address given below.
Agnes Lunt, Corporate Specialist
New Filings Section Letter Number: 595A00045191
<PAGE>
ARTICLES OF INCORPORATION
OF
PEREGRINE INDUSTRIES, INC.
The undersigned Subscriber, being of natural person, competent to
contract for the purpose of forming a corporation under the laws of the State of
Florida, adopts the following Articles of Incorporation for such Corporation:
ARTICLE I - NAME
The name of the Corporation shall be PEREGRINE INDUSTRIES, INC.
ARTICLE II - PURPOSE
The purpose for which this Corporation is organized is to engage in any
activity or business permitted under the laws of the United States and the State
of Florida, including the transaction of any or all lawful business for which
corporations may be incorporated.
ARTICLE III - EXISTENCE
The Corporation is to have perpetual existence.
ARTICLE IV - STOCK
The total number of shares of stock which the corporation shall have
authority to issue is 10,000 shares of common stock, with a par value of $.01
per share.
ARTICLE V - ACQUISITION OF STOCK
The shareholders of the corporation shall have the preemptive right to
acquire unissued or treasury shares of the corporation, or securities of the
Corporation convertible into or carrying a right to subscribe to or acquire
shares of the Corporation.
-2-
<PAGE>
ARTICLE VI - PRINCIPAL OFFICE
The initial address of the principal office of the corporation is as
follows:
837 Southeast 8th Avenue
Deerfield Beach, Florida 33441
ARTICLE VII - REGISTERED AGENT
The name and address of the initial Registered Agent of the corporation
is:
Merrill Yarbrough
837 Southeast 8th Avenue
Deerfield Beach, Florida 33441
ARTICLE VIII - NUMBER OF DIRECTORS
The initial number of Directors of the Corporation shall be one (1).
The number of Directors may be increased or decreased by the Bylaws adopted by
the Shareholders at any time.
ARTICLE IX - NAME OF DIRECTORS
The name and address of the member of the first Board of Directors is:
Merrill Yarbrough
837 Southeast 8th Avenue
Deerfield Beach, Florida 33441
ARTICLE X - INCORPORATORS
The name and address of the incorporator is:
Merrill Yarbrough
837 Southeast 8th Avenue
Deerfield Beach, Florida 33441
------------------------
MERRILL YARBROUGH
-3-
<PAGE>
STATE OF FLORIDA )
: SS
COUNTY OF BROWARD )
I HEREBY CERTIFY that on this day personally appeared before me, an
officer duly authorized to administer oaths and take acknowledgments, MERRILL
YARBROUGH, who produced a driver's license as identification, or is personally
known to me and who executed the foregoing and acknowledged that same was
executed freely and voluntarily for the purpose therein expressed.
WITNESS my hand and seal at the County and State aforesaid this 2 day
of October, 1995.
Maria E. Minor
---------------------------
Notary Public.
Maria E. Minor
---------------------------
Notary (Print)
My Commission Expires:
-4-
<PAGE>
CERTIFICATE OF DESIGNATING PLACE OF BUSINESS OR DOMICILE
FOR THE SERVICE OF PROCESS WITHIN THIS STATE, NAMING
REGISTERED AGENT UPON WHOM PROCESS MAY BE SERVED
AND ACCEPTANCE OF REGISTERED AGENT
Pursuant to Chapter 48.091, Florida Statutes, the following is
submitted in compliance with said Act.
First, that PEREGRINE INDUSTRIES, INC., desiring to organize
under the laws of the State of Florida with its principal office as indicated in
the Articles of Incorporation, in the Deerfield Beach, Broward County, Florida,
has named MERRILL YARBROUGH, located at 837 Southeast 8th Avenue, Deerfield
Beach, Florida 33441, as its agent to accept service of process within this
State.
ACCEPTANCE BY REGISTERED AGENT
Having been named to accept service of process for the above
stated corporation, at place designed in this Certificate, I hereby accept to
act in this capacity, and agree to comply with the provisions of said Act
relative to keeping open said office.
Merrill A. Yarbrough
---------------------------
MERRILL YARBROUGH
-5-
<PAGE>
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
September 30, 1998
PEREGRINE INDUSTRIES, INC.
730 S MILITARY TR.
DEERFIELD BEACH, FL 33442US
Re: Document Number P95000076266
The Articles of Amendment to the Articles of Incorporation for PEREGRINE
INDUSTRIES, INC., a Florida corporation, were filed on September 29, 1998.
The certification requested is enclosed. To be official, the certification for a
certified copy must be attached to the original document that was electronically
submitted and filed under FAX audit number H98000018068.
Should you have any question regarding this matter, please telephone (850)
487-6050, the Amendment Filing Section.
Darlene Connell
Corporate Specialist
Division of Corporations Letter Number: 698A00048923
-6-
<PAGE>
STATE OF FLORIDA
Department of State
I certify the attached is a true and correct copy of the Articles of Amendment,
filed on September 29, 1998, to Articles of Incorporation for PEREGRINE
INDUSTRIES, INC., a Florida corporation, as shown by the records of this office.
I further certify the document was electronically received under FAX audit
number H98000018068. This certificate is issued in accordance with section
15.16, Florida Statutes, and authenticated by the code noted below.
The document number of this corporation is P95000076266.
Given under my hand and the Great Seal of the State
of Florida, at Tallahassee, the Capital, this the
Thirtieth day of September, 1998
Authentication Code: 698A00048923-093098-P95000076266-1/1
GREAT SEAL OF THE STATE OF FLORIDA
IN GOD WE TRUST
Sandra B. Mortham
--------------------------
Secretary of State
CR2E022 (1-95)
-7-
<PAGE>
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
PEREGRINE INDUSTRIES, INC.
The undersigned, being a natural person competent to contract, does
hereby make, subscribe and file the Articles of Amendment to the Articles of
Incorporation of Peregrine Industries, Inc., a Florida corporation, bearing
Document #P95000076266, pursuant to Section 607.1003 of the Florida Business
Corporation Act:
1. The name of the corporation is Peregrine Industries, Inc. (the
"Company").
2. Article IV - Stock of the Company's Articles of Incorporation, as
amended, is hereby deleted in its entirety and replaced with the following:
ARTICLE IV - STOCK
The total number of shares of stock which the Company shall have the
authority to issue is 30,000,000 shares of common stock, par value $.0001 per
share, and 5,000,000 shares of preferred stock, par value $.0001 per share.
Series of the preferred stock may be created and issued from time to time, with
such designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions providing for the creation and
issuance of such series of preferred stock as adopted by the Board of Directors
pursuant to the authority given in this paragraph.
Of such 5,000,000 shares of preferred stock, the Company hereby
designates a series consisting of 200,000 shares and designated as Series A 5%
Cumulative Convertible Preferred Stock. The designations, rights and preferences
of the Series A 5% Cumulative Convertible Preferred Stock are as follows:
A. Initial Number. The initial number of authorized shares of the
Series A 5% Cumulative Convertible Preferred Stock shall be 200,000 shares. Upon
issuance of the shares of Series A 5% Cumulative Convertible Preferred Stock
$5.00 per share shall be the stated capital of the Company.
B. Voting Rights. Except as otherwise provided by law, the holders of
the shares of Series A 5% Cumulative Convertible Preferred Stock shall not be
entitled to any voting rights.
Prepared by:
ROXANNE K. BEILLY, ESQ., Fla. Bar #851450
Atlas, Pearlman, Trop & Borkson, P.A.
200 E. Las Olas Blvd., #1900
Ft. Lauderdale, FL 33301 Phone: 954-763-1200
-8-
<PAGE>
C. Conversion Privilege. The shares of Series A 5% Cumulative
Convertible Preferred Stock are convertible at the option of either the holder
or the Company, upon 30 days prior written notice, into shares of the Company's
common stock, par value $.0001 per share, at the rate of one (1) share of common
stock for one (1) share of Series A 5% Cumulative Convertible Preferred Sock.
D. Redemption. The shares of Series A 5% Cumulative Convertible
Preferred Stock are redeemable at the sole option of the Company at any time and
from time to time at a redemption price of $5.00 per share plus any accrued but
unpaid dividends.
E. Dividends.
(i) The shares of Series A 5% Cumulative Convertible Preferred Stock
shall pay five percent (5%) annual dividends in arrears out of funds legally
available for the payment of dividends by the Company, which such dividends
shall be due and payable, so long as the shares are outstanding, on the 15th day
of the month immediately following the end of each fiscal quarter commencing
December 31, 1998 in preference and priority to any payment of any dividend on
the common stock of the Company. Such dividends shall accrue on any given share
from the day of original issuance of such share and shall accrue from day to day
whether or not earned or declared.
(ii) Any dividend payable on a dividend payment date may be paid, at
the option of the Company, either (a) in cash or (b) in shares of the Company's
common stock.
F. Liquidation. In the event of any voluntary or involuntary
dissolution or winding up of the Company, the holders of shares of Series A 5%
Cumulative Convertible Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Company available for distribution to its
shareholders an amount per share equal to $5.00 plus accrued but unpaid
dividends, without interest, and no more, before any payment shall be made to
the holders of any stock of the Company ranking junior to the Series A 5%
Cumulative Convertible Preferred Stock. A merger of consolidation of the Company
with or into any other corporation, share exchange or sale of conveyance of all
or any part of the assets of the Company which shall not in fact result in the
liquidation of the Company and the distribution of assets to its shareholders
shall not be deemed to be a voluntary or involuntary liquidation, dissolution or
winding up of the Company within the meaning of this Paragraph F.
-9-
<PAGE>
G. Transferability. The shares of Series A 5% Cumulative Convertible
Preferred Stock may be transferred at any time and from time to time at the sole
option of the holder.
3. The foregoing amendment was duly adopted by written consent of the
holders of a majority of the issued and outstanding voting securities of the
Company, which such votes cast for the amendment by such shareholders were
sufficient for approval, and the unanimous written consent of the Board of
Directors on September 29, 1998.
IN WITNESS WHEREOF, these Articles of Amendment to the Articles of
Incorporation has been executed on the 29th day of September, 1998.
Peregrine Industries, Inc.
By: /s/ Merrill A. Yarbrough
---------------------------
Merrill A. Yarbrough,
President
-10-
<PAGE>
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
April 16, 1998
PEREGRINE INDUSTRIES, INC.
730 S MILITARY TR.
DEERFIELD BEACH, FL 33442US
Re: Document Number P95000076266
The Articles of Amendment to the Articles of Incorporation for
PEREGRINE INDUSTRIES, INC., a Florida corporation, were filed on April 16, 1998.
The certification requested is enclosed. To be official, the
certification for a certified copy must be attached to the original document
that was electronically submitted and filed under FAX audit number H98000007188.
Should you have any question regarding this matter, please telephone
(850) 487-6050, the Amendment Filing Section.
Darlene Connell
Corporate Specialist
Division of Corporations Letter Number: 898A00020515
-11-
<PAGE>
STATE OF FLORIDA
Department of State
I certify the attached is a true and correct copy of the Articles of
Amendment, filed on April 16, 1998, to Articles of Incorporation for PEREGRINE
INDUSTRIES, INC., a Florida corporation, as shown by the records of this office.
I further certify the document was electronically received under FAX
audit number H98000007188. This certificate is issued in accordance with section
15.16, Florida Statutes, and authenticated by the code noted below.
The document number of this corporation is P95000076266.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this
the Sixteenth day of April, 1998
Authentication Code: 698A00020515-041698-P95000076266-1/1
GREAT SEAL OF THE STATE OF FLORIDA
IN GOD WE TRUST
Sandra B. Mortham
-----------------------
Secretary of State
CR2E022 (1-95)
-12-
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
PEREGRINE INDUSTRIES, INC.
The undersigned, being a natural person competent to contract,
does hereby make, subscribe and file the Articles of Amendment to the Articles
of Incorporation of Peregrine Industries, Inc., a Florida corporation, pursuant
to Sections 607.0704 and 607.0821 of the Florida Business Corporation Act:
1. The name of the corporation is Peregrine Industries, Inc.
(the "Company").
2. Article IV - Stock of the Company's Articles of
Incorporation is hereby deleted in its entirety and replaced with the following:
ARTICLE IV - STOCK
The total number of shares of stock which the corporation
shall have the authority to issue is 30,000,000 shares of
common stock, par value $.0001 per share.
3. All issued and outstanding shares of Common Stock of the
Company held by each holder of record on March 23, 1998 shall be automatically
increased at a rate of 12,750:1).
4. The foregoing amendment was duly adopted by unanimous
written consent of the Board of Directors and all of the shareholders of the
Company as of March 23, 1998.
IN WITNESS WHEREOF, these Articles of Amendment to the
Articles of Incorporation has been executed on the 7h day of April, 1998.
Peregrine Industries, Inc.
By: /s/ Merrill A. Yarbrough
-------------------------------
Merrill A. Yarbrough, President
Prepared by:
Roxanne K. Beilly, Esq.
Atlas, Pearlman, Trop & Borkson, P.A.
200 E. Las Olas Blvd.
Ft. Lauderdale, FL 33301
Fla Bar #851450
Phone: 954-763-1200
H98000007188
-13-
BY-LAWS OF
-----------------------------------------
ARTICLE I - OFFICES
The principal office of the Corporation shall be established and
maintained at _______________________________________ in the City of
_______________ County of State of Florida. The Corporation may also have
offices at such places within or without the State of Florida as the board may
from time to time establish, or as the business of the Corporation may require
from time to time.
ARTICLE II - SHAREHOLDERS
1. ANNUAL MEETINGS
The annual meeting of the shareholders of this Corporation shall be
hold on the _____________________________ day of __________________ of each year
or at such other time and place designated by the Board of Directors of the
Corporation. Business transacted at the annual meeting shall include the
election of Directors of the Corporation and all other matters properly before
the Board. If the designated day shall fall on a Sunday or legal holiday, then
the meeting shall be held on the first business day thereafter.
2. SPECIAL MEETINGS
Special meetings of the Shareholders shall be held when directed by the
President or the Board of Directors, or when requested in writing by the holders
of not less than 10% of all the shares entitled to vote at the meeting. A
meeting requested by Shareholders shall be called for a date not less than 10
nor more than 60 days after the request is made unless the Shareholders
requesting the meeting designate a later date. The call for the meeting shall be
issued by the Secretary, unless the President, Board of Directors, or
Shareholders requesting the meeting shall designate another person to do so.
3. PLACE
Meetings of Shareholders shall be held at the principal place of
business of the Corporation or at such other place as may be designated by the
Board of Directors
4. NOTICE
Written notice to each Shareholder entitled to vote stating the place,
day and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered not less than 10
nor more than 60 days before the meeting. If any Shareholder shall transfer his
stock after notice, it shall not be necessary
<PAGE>
to notify the transferee. Any Stockholder may waive notice of any meeting either
before, during or after meeting, by a writing signed by the Shareholders
entitled to the notice.
5. QUORUM AND VOTING
The majority of the Shares entitled to vote, represented in person or
by Proxy, shall constitute a Quorum at a meeting of Shareholders, but in no
event shall a Quorum consist of less than 1/3 of the shares entitled to vote at
the meeting.
After a Quorum has been established at a Shareholders. meeting, the
subsequent withdrawal of Shareholders, so as to reduce the number of share &
entitled to vote at the meeting below the number required for the Quorum, shall
not effect the validity of any action taken at the meeting or any adjournment
thereof.
If a quorum exists, action on a matter, other than the election of
directors, is approved if the votes cast by the holders of the Shares
represented at the meeting and entitled to vote on the subject matter favoring
the action exceed the votes cast opposing the action, unless a greater number of
affirmative votes or voting by classes is required by the Florida Business
Corporation Act or the Corporation's Articles of incorporation.
6. PROXY
Every Shareholder entitled to vote at a meeting of Shareholders, or to
express consent or dissent without a meeting, or his duly authorized
attorney-in-fact, may authorize another person or persons to act for him by
Proxy. The Proxy must be signed by the Shareholder or his attorney-in-fact. A
Proxy shall be effective when received by the Secretary of the Corporation or
other person authorized to tabulate votes. No Proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the Proxy.
ARTICLE III - DIRECTORS
1. BOARD OF DIRECTORS
The business of the Corporation shall be managed and its corporate
power exercised by a Board of Directors, each of whom shall be of full age. It
shall not be necessary for Directors to be Stockholders or residents of the
state of Florida.
2. ELECTION AND TERM OF DIRECTORS
Directors shall be elected at the annual meeting of Stockholders and
each Director elected shall hold office until his successor has been elected and
qualified, or until his prior resignation, removal, or death. Unless otherwise
provided in the Articles of incorporation, Directors shall be elected by a
plurality of the votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present.
2
<PAGE>
3. VACANCIES
If the office of any Director, member of a committee or other officer
becomes vacant, including a vacancy resulting from an increase in the numbers of
Directors, the remaining Directors in office, though less than a quorum, by a
majority vote, may appoint any qualified person to fill such vacancy, who shall
hold office for the unexpired term and until his successor shall be duly chosen.
4. REMOVAL OF DIRECTORS
Any or all of the Directors may be removed with or without cause by
vote of a majority of all of the stock outstanding and entitled to vote at an
annual meeting or special meeting of Stockholders called for that purpose.
5. NUMBER OF DIRECTORS; NEWLY CREATED DIRECTORSHIPS
The authorized number of directors shall not be less than ______ nor more than
______. The number of Directors may be increased by amendment of these By-Laws,
by the affirmative vote of a majority in interest of the Stockholders, at the
annual meeting or at a special meeting called for that purpose, and by like vote
the additional Directors may be chosen at such meeting to hold office until the
next annual election and until their successors are elected and qualify.
6. RESIGNATION
A Director may resign at any time by giving written notice to the
Board, the President or the Secretary of the corporation. Unless otherwise
specified in the notice, the resignation of such officer shall take effect upon
receipt thereof by the Board, and the acceptance of the resignation shall not be
necessary to make it effective.
7. QUORUM OF DIRECTORS AND VOTING
A majority of the Directors shall constitute a quorum for the transaction of
business. If at any meeting of the board there shall be less than a quorum
present, a majority of those present may adjourn the meeting from time to time
until a quorum is obtained, and no further notice thereof need be given other
than by announcement at the meeting which shall be so adjourned. If a quorum is
present when a vote is taken, the affirmative vote of a majority of Directors
present shall be the act of the Board of Directors.
8. PLACE AND TIME OF BOARD MEETINGS
The board may hold its meeting at the office of the Corporation or at
such other places, either within or without the State of Florida as it may from
time to time determine.
3
<PAGE>
9. NOTICE OF MEETINGS OF THE BOARD
A regular annual meeting of the Board may be held without notice at such time
and place as it shall from time to time determine. Special meetings of the Board
shall be held upon notice to the Directors and may be called by the President
upon three days notice to each Director either personally or by mail or by wore;
special meetings shall be called by the President or by the Secretary in a like
manner on written request of two Directors. Notice of a meeting need not be
given to any Director who submits a waiver of notice whether before or after the
meeting or who attends the meeting without protesting prior thereto or at its
commencement, the lack of notice to him.
10. REGULAR ANNUAL MEETING
A regular annual meeting of the Board shall be held immediately
following the annual meeting of Stockholders at the place of such annual meeting
of stockholders.
11. EXECUTIVE AND OTHER COMMITTEES
The Board, by resolution, may designate two or more of their members to
any committee. To the extent provided in said resolution or these By-Laws, said
committee may exercise the powers of the Board concerning the management of the
business of the Corporation.
12. COMPENSATION
No compensation shall be paid to Directors, as such, for their
services, but by resolution of the Board, a fixed sun and expenses for actual
attendance, at each regular or special meeting of the Board may be authorized.
Nothing herein contained shall be construed to preclude any Director from
serving the Corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV - OFFICERS
1. OFFICERS, ELECTION AND TERM
a) The Board may elect or appoint a Chairman, a President, one
or more Vice Presidents, a Secretary and a Treasurer, and such other officers as
it may determine, who shall have such duties and powers as hereinafter provided.
If specifically authorized by the Board of Directors, an officer may appoint one
or 'more officers or assistant officers.
b) All officers shall be elected or appointed to hold office
until the meeting of the Board following the next annual meeting of Stockholders
and until their successors have been elected or appointed and qualified.
c) Any two or more offices may be held by the same person.
4
<PAGE>
2. REMOVAL, RESIGNATION, SALARY, ETC.
a) Any officer elected or appointed by the Board may be
removed by the Board with or without cause.
b) In the event of the death, resignation or removal of an
officer, the Board in its discretion may elect or appoint a successor to fill
the unexpired term.
c) An officer may resign at any time by delivering a written
notice to the Corporation.
d) The salaries of all officers shall be fixed by the Board.
e) The Directors may require any officer to give security for
the faithful performance of his duties.
f) Any vacancy in any office may be filled by the Board of
Directors.
3. DUTIES
The officers of this Corporation shall have the following duties:
The President shall be the chief executive officer of the Corporation,
shall have general and active management of the business and affairs of the
Corporation subject to the directions of the Board of Directors, and shall
preside at all meetings of the Shareholders and Board of Directors.
In absence of the President or in the event of his death, inability or
refusal to act, the Vice-President (or in the event there is more than one
Vice-President, the Vice-Presidents in the order of their appointment) shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President.
The Secretary shall have custody of, and maintain, all of the corporate
records except the financial records; shall record the minutes of all meetings
of the Shareholders and Board of Directors, send all notices of all meetings and
perform such other duties as may be prescribed by the Board of Directors or the
President.
The Treasurer shall have custody of all corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual meetings of Shareholders and whenever else
required by the Board of Directors or the President, and shall perform such
other duties as may be prescribed by the Board of Directors or the President.
5
<PAGE>
ARTICLE V - STOCK CERTIFICATES
1. ISSUANCE
Every holder of shares in this Corporation shall be entitled to have a
certificate representing all shares of which he is entitled. No certificate
shall be issued for any share until such share is fully paid.
2. FORM
Certificates representing shares in this Corporation shall be signed by
the President or Vice President and the Secretary or an Assistant Secretary and
may be sealed with the seal of this Corporation or a facsimile thereof.
3. TRANSFER OF STOCK
The Corporation shall register a stock certificate presented to it for
transfer if the certificate is properly endorsed by the holder of record or by
his duly authorized attorney.
4. LOST, STOLEN OR DESTROYED CERTIFICATES
If the Shareholder shall claim to have lost or destroyed a certificate
of shares issued by the Corporation, a new certificate shall be issued upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen or destroyed, and at the discretion of the Board of
Directors, upon the deposit of a bond or other indemnity in such amount and with
such sureties, if any, as the Board may reasonably require.
ARTICLE VI - BOOKS AND RECORDS
1. BOOKS AND RECORDS
This Corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its Shareholders, Board of
Director and committees of Directors.
This Corporation shall keep at its registered office or principal place
of business a record of its Shareholders, giving the names and addresses of all
Shareholders and the number of the shares held by each.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
2. SHAREHOLDERS' INSPECTION RIGHTS
If he gives the Corporation written notice of his demand, made in good
faith and stating the purpose thereof, at least 5 business days before the date
an which he wishes to inspect and copy, a shareholder shall have the right to
examine, in person or by agent
6
<PAGE>
or attorney, during regular business hours for any proper purpose, the
Corporation's relevant books and records of accounts, minutes and records of
Shareholders and to make extract therefrom.
3. FINANCIAL INFORMATION
The Corporation shall furnish its shareholders annual financial
statements, which may be consolidated or combined statements of the Corporation
and one or more of its subsidiaries, as appropriate, that include a balance
sheet as of the end of the fiscal year, an income statement for that year, and a
statement of cash flows for that year. If financial statements are prepared for
the corporation on the basis of generally accepted accounting principles, the
annual financial statements for the shareholders also must be prepared on that
basis.
If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the President or the person responsible for the
Corporation's accounting records:
(1) stating his reasonable belief whether the statements were
prepared an the basis of generally accepted accounting principles and, if not,
describing the basis of preparation; and
(2) describing any respects in which the statements were not
prepared on a basis of accounting consistent with the statements prepared for
the preceding year.
The Corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year. Thereafter, on
written request from a shareholder who was not mailed the statements, the
Corporation shall mail him the latest annual financial statements.
ARTICLE VII - DIVIDEND
The Board may out of funds legally available therefor, at any regular
or special meeting, declare dividends upon the capital stock of the Corporation
as and when it deems expedient. Before declaring any dividend there may be set
apart out of any funds of the Corporation available for dividends, such sum or
sums as the Board from time to time in their discretion deem proper for working
capital or as a reserve fund to meet contingencies or for equalizing dividends
or for such other purposes as the Board shall deem conducive to the interests of
the Corporation.
ARTICLE VIII - CORPORATE SEAL
The seal of the Corporation shall be circular inform and bear the name
of the Corporation, the year of its organization and the words "CORPORATE SEAL,
FLORIDA." The seal may be used by causing it to be impressed directly on the
instrument or writing to be sealed, or upon adhesive substance affixed thereto.
The seal on the certificates for
7
<PAGE>
shares or on any corporate obligation for the payment of money may be facsimile,
engraved or printed.
ARTICLE IX - EXECUTION
All corporate instruments and documents shall be signed or
countersigned, executed, verified or acknowledged by, such officer or officers
or other person or persons as the Board may from time to time designate.
ARTICLE X - FISCAL YEAR
The fiscal year shall begin the first day of ___________________ in each year.
ARTICLE XI - NOTICE AND WAIVER OF NOTICE
Whenever any notice is required by these By-Laws to be given, personal
notice is not meant unless expressly so stated, and any notice so required shall
be deemed to be sufficient if given by depositing the same in the post office
box in a sealed post-paid wrapper, addressed to the person entitled thereto at
his last known post office address, and such notice shall be deemed to have been
given o the day of such mailing. Stockholders not entitled to vote shall not be
entitled to receive notice of any meetings except as otherwise provided by
Statute.
Whenever any notice is required to be given under the provisions of any
law, or under the provisions of the Articles of Incorporation of the
Corporation, or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time state
therein, shall be deemed equivalent thereto.
ARTICLE XII - CONSTRUCTION
Whenever a conflict arises between the language of these ByLaws and the
Articles of Incorporation, the Articles of Incorporation shall govern.
ARTICLE XIII - ACTION WITHOUT A MEETING
1. ACTION BY SHAREHOLDERS WITHOUT A MEETING.
Any action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting, without prior notice, and without a
vote if one or more consents in writing, setting forth the action so taken,
shall be signed and dated by the holders of the outstanding stock entitled to
vote with respect to the subject matter thereof and having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted, and shall be delivered to the Corporation for inclusion in the minute
book.
8
<PAGE>
2. ACTION BY DIRECTORS WITHOUT A MEETING.
Any action required or permitted to be taken by the Board of Directors
or a committee of the Board at a meeting may be taken without a meeting if all
the members of the Board or the committee take the action, each director or
committee member signs a written consent describing the action taken, and the
consents are filed with the records of the Corporation.
ARTICLE XIV - AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at any
annual meeting of the Stockholders or at any special meeting thereof if notice
of the proposed alteration or repeal to be made be contained in the notice of
such special meeting, by the affirmative vote of a majority of the stock issued
and outstanding and entitled to vote thereat, or by the affirmative vote of a
majority of the board at any regular meeting of the board or at any special
meeting of the board if notice of the proposed alteration or repeal to be made,
be contained in the notice of such special meeting.
9
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON
EXERCISE THEREOF MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE
DISPOSED OF, IN WHOLE OR IN PART, UNLESS ANY SUCH TRANSACTION IS REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER SAID ACT IS AVAILABLE, AND THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL TO SUCH EFFECT, WHICH OPINION IS REASONABLY
SATISFACTORY TO THE COMPANY.
PEREGRINE INDUSTRIES, INC.
COMMON STOCK PURCHASE WARRANT
I. Number and Price of Shares of Common Stock Subject to Common Stock
Purchase Warrant. Subject to the terms and conditions hereinafter set forth,
(the "Holder"), is entitled to purchase from Peregrine Industries, Inc., a
Florida corporation (the "Company"), at any time and from time to time during
the period from May 7, 1998 (the "Commencement Date") until 5:00 p.m., Miami,
Florida Time, on May 6, 2003 (the "Expiration Date"), at which time this Common
Stock Purchase Warrant (the "Warrant") shall expire and become void, an
aggregate of shares (the "Warrant Shares") of the Company's common stock, $.0001
par value per share (the "Common Stock"), which number of Warrant Shares is
subject to adjustment from time to time, as described below, upon payment
therefor of the exercise price $1.00 per Warrant Share in lawful funds of the
United States of America, such amounts (the "Basic Exercise Price") being
subject to adjustment in the circumstances set forth hereinbelow. This
applicable Basic Exercise Price, until such adjustment is made and thereafter as
adjusted from time to time, is called the "Exercise Price."
1. Exercise of Warrant. This Warrant may be exercised in whole or in part at any
time from and after the Commencement Date and on or before the Expiration Date,
provided however, if such Expiration Date is a day on which Federal or State
chartered banking institutions located in the State of Florida are authorized by
law to close, then the Expiration Date shall be deemed to be the next succeeding
day which shall not be such a day, by presentation and surrender to the Company
at its principal office, or at the office of any transfer agent for the Warrants
("Transfer Agent"), designated by the Company, of this Warrant accompanied by
the form of election to purchase on the last page hereof signed by the Holder
and upon payment of the Exercise Price for the Warrant Shares purchased thereby,
by cashier's check or by wire transfer of immediately available funds.
Notwithstanding anything contained herein to the contrary, the Exercise Price
for the Warrant may be satisfied by the delivery of an unexercised portion of
this Warrant to the Company or the Transfer Agent for cancellation having a
market value, as determined by the spread as of the date of surrender equal to
the difference between the then Exercise Price and the market price of the
shares of Common Stock underlying this Warrant, equal to the aggregate Exercise
Price of the portion of this Warrant desired to be then exercised. If this
Warrant is exercised in part only, the Company or Transfer Agent shall, promptly
after presentation of this Warrant upon such exercise, execute and deliver a new
Warrant, dated the date hereof, evidencing the rights of the Holder to purchase
the balance of the Warrant Shares purchasable hereunder upon the same terms and
conditions herein set forth. This Warrant shall be deemed to have been exercised
immediately prior to the close of
<PAGE>
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Warrant Shares or other securities issuable upon
such exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date. As promptly as practicable, the
Company shall issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of full Warrant Shares
issuable upon such exercise, together with cash in lieu of any fraction of a
share as provided below.
2. Registration Rights.
3.1 If, at any time prior to the Expiration Date, the Holders of a majority of
the Warrants Shares shall give notice to the Company requesting that the Company
file with the U.S. Securities and Exchange Commission (the "Commission") a
Registration Statement relating to the Warrant Shares, the Company shall
promptly give written notice of such proposed Registration Statement to the
Holders of such Warrants or Warrant Shares, and to any subsequent permissible
transferee of any of the Warrants or Warrant Shares (at the address of such
persons appearing on the books of the Company or its transfer agent) which
notice shall offer to include the Warrant Shares in the requested Registration
Statement. The Company shall, as expeditiously as possible, file and use its
best efforts to cause to become effective under the Securities Act of 1933, as
amended (the "Securities Act"), the Registration Statement covering such of the
Warrant Shares as the Company has been requested to register for disposition by
the Holders thereof, to the extent required to permit the public sale or other
public disposition thereof by the Holders. The Company shall cause the
Registration Statement to remain effective for a period of at least nine months
from the effective date of the Registration Statement or such earlier date as
all of the Warrant Shares have been sold or the Warrants expire (the "Effective
Period").
3.2 In addition, if at any time prior to the Expiration Date the Company shall
prepare and file one or more registration statements under the Securities Act,
with respect to a public offering of equity or debt securities of the Company,
or of any such securities of the Company held by its security holders, the
Company will include in any such registration statement such information as is
required, and such number of Warrant Shares held by the Holders thereof or their
respective designees or transferees as may be requested by them, to permit a
public offering of the Warrant Shares so requested; provided, however, that if,
in the written opinion of the Company's managing underwriter, if any, for such
offering, the inclusion of the Warrant Shares requested to be registered, when
added to the securities being registered by the Company or the selling security
holder(s), would exceed the maximum amount of the Company's securities that can
be marketed without otherwise materially and adversely affecting the entire
offering, then the Company may exclude from such offering that portion of the
Warrant Shares requested to be so registered, so that the total number of
securities to be registered is within the maximum number of shares that, in the
opinion of the managing underwriter, may be marketed without otherwise
materially and adversely affecting the entire offering, provided that at least a
pro rata amount of the securities that otherwise were proposed to be registered
for other shareholders is also excluded. The Company shall bear all fees and
expenses incurred by it in connection with the preparation and filing of such
registration statement other than fees and expenses of Holders' counsel, if any.
In the event of such a proposed registration, the Company shall furnish the then
Holders of Warrant Shares with not less than thirty (30) days' written notice
prior to the proposed date of filing of such registration statement. Such notice
shall continue to be given by the Company to Holders of Warrant Shares, with
respect to
<PAGE>
subsequent registration statements or post-effective amendments filed by the
Company, until such time as all of the Warrant Shares have been registered or
may be sold without registration under the Securities Act or applicable state
securities laws and regulations, and without limitation as to volume, pursuant
to Rule 144 of the Securities Act. The holders of Warrant Shares shall exercise
the rights provided for in this Subsection 3.3 by giving written notice to the
Company, within twenty (20) days of receipt of the Company's notice of its
intention to file a registration statement. The Company shall cause the
Registration Statement to remain effective for a period of at least nine months
from the effective date of the Registration Statement or such earlier date as
all of the Warrant Shares have been sold or the Warrants expire.
3.3 Notwithstanding anything contained herein to the contrary, the Holders may
not demand registration of the Warrant Shares if re-sale of the Warrant shares
is already covered by an effective Registration Statement or if the Warrant
Shares may otherwise be sold without registration under the Securities Act or
applicable state securities laws and regulations and without limitation as to
volume pursuant to Rule 144 of the Securities Act.
3.4 The Company shall bear all expenses incurred in the preparation and filing
of such registration statements or post-effective amendment (and related state
registrations, to the extent permitted by applicable law) and the furnishing of
copies of the preliminary and final prospectus thereof to the Holders, other
than expenses of the Holders' counsel, and other than sales commissions incurred
by the then Holders with respect to the sale of such securities.
3. Reservation of Common Stock. The Company covenants that, during the period
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares of Common Stock to provide
for the issuance of the Warrant Shares upon the exercise of this Warrant. The
Company agrees that its issuance of this Warrant shall constitute full authority
to its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for Warrant Shares upon the
exercise of this Warrant.
4. No Shareholder Rights. This Warrant, as such, shall not entitle the Holder to
any rights of a shareholder of the Company, until the Holder has exercised this
Warrant in accordance with Section 2 hereof.
5. Adjustment of Exercise Price and Number of Warrant Shares.
6.1 The number and kind of securities issuable upon the exercise of this Warrant
shall be subject to adjustment from time to time, and the Company agrees to
provide notice upon the happening of certain events, as follows:
a. If the Company is recapitalized through the subdivision or
combination of its outstanding shares of Common Stock into a larger or smaller
number of shares of Common Stock, the number of shares of Common Stock for which
this Warrant may be exercised shall be increased or reduced, as of the record
date for such recapitalization, in the same proportion as the increase or
decrease in the outstanding shares of Common Stock, and the Exercise Price shall
be adjusted so that the aggregate amount payable for the purchase of all of the
Warrant Shares issuable hereunder
<PAGE>
immediately after the record date for such recapitalization shall equal the
aggregate amount so payable immediately before such record date.
b. If the Company declares a dividend on its Common Stock
payable in shares of its Common Stock or securities convertible into shares of
its Common Stock, the number of shares of Common Stock for which this Warrant
may be exercised shall be increased as of the record date for determining which
holders of Common Stock shall be entitled to receive such dividend, in
proportion to the increase in the number of outstanding shares of Common Stock
(and shares of Common Stock issuable upon conversion of all such securities
convertible into shares of Common Stock) as a result of such dividend, and the
Exercise Price shall be adjusted so that the aggregate amount payable for the
purchase of all the Warrant Shares issuable hereunder immediately after the
record date for such dividend shall equal the aggregate amount so payable
immediately before such record date.
c. If the Company effects a general distribution to holders of its
Common Stock, other than as part of the Company's dissolution or liquidation or
the winding up of its affairs, of any shares of its capital stock, any evidence
of indebtedness or any of its assets (other than cash, shares of Common Stock or
securities convertible into shares of Common Stock), the Company shall give
written notice to the Holder of any such general distribution at least fifteen
(15) days prior to the proposed record date in order to permit the Holder to
exercise this Warrant on or before the record date. There shall be no adjustment
in the number of shares of Common Stock for which this Warrant may be exercised,
or in the Exercise Price, by virtue of any such general distribution, except as
otherwise provided herein.
d. If the Company offers rights or warrants (other than the Warrant) to
all holders of its Common Stock which entitle them to subscribe to or purchase
additional shares of Common Stock or securities convertible into shares of
Common Stock, the Company shall give written notice of any such proposed
offering to the Holder at least fifteen (15) days prior to the proposed record
date in order to permit the Holder to exercise this Warrant on or before such
record date.
e. In the event an adjustment in the Exercise Price or the number of
Warrant Shares issuable hereunder is made under subsection a. or b. above, and
such an event does not occur, then any adjustments in the Exercise Price or
number of Warrant Shares issuable upon exercise of this Warrant that were made
in accordance with such subsection a. or b. shall be re-adjusted to the Exercise
Price and number of Warrant Shares as were in effect immediately prior to the
record date for such an event.
f. If and whenever the Company issues or sells, or in accordance with
Subsection 6.1 is deemed to have issued or sold, any shares of its Common Stock
for a consideration per share less than the Exercise Price in effect immediately
prior to the time of such issuance or sale (except for the issuance or deemed
issuance of securities in a transaction described in paragraph g. of this
Subsection 6.1), then immediately upon such issuance or sale the Exercise Price
will be reduced to an Exercise Price determined by multiplying the Exercise
Price in effect immediately prior to the issuance or sale by a fraction, the
numerator of which shall be the sum of (i) the number of shares of Common Stock
outstanding prior to the issuance or sale plus (ii) the number of Warrant Shares
issuable hereunder that the maximum aggregate amount of consideration receivable
by the
<PAGE>
Company upon such issuance or sale would purchase at the Exercise Price in
effect immediately prior to the issuance or sale, and the denominator of which
shall be the number of shares of Common Stock deemed outstanding, as hereinafter
determined, immediately after such issuance or sale.
g. The following securities or transactions shall be excluded from the
operation of paragraph f. of this Subsection 6.1:
(i) The existence and any exercise of any option, convertible
promissory note, warrant, or other right to purchase Common Stock, that is
outstanding on the date hereof; and
(ii) Any grant or exercise of options for Common Stock granted under
the Company's stock option plans, in existence as of the date hereof, provided
said grant or exercise is not effectuated as a result of any amendment to such
plans subsequent to the date hereof, with an exercise price equal to at least
the fair market value of the shares of Common Stock on the date of grant.
h. If the Company in any manner grants any rights or options to
subscribe for or to purchase Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (such rights or options being
herein called "Rights" and such convertible or exchangeable stock or securities
being herein called "Convertible Securities"), and the price per share for which
Common Stock is issuable upon the exercise of such Rights or upon conversion or
exchange of such Convertible Securities is less than the Exercise Price in
effect immediately prior to the time of the granting of such Rights, then the
total maximum number of shares of Common Stock issuable upon the exercise of
such Rights or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Rights will be deemed
to be outstanding and to have been issued and sold by the Company for such price
per share. For purposes of this Section, the "price per share for which Common
Stock is issuable upon exercise of such Rights or upon conversion or exchange of
such Convertible Securities" will be determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for the
granting of such Rights, plus the minimum aggregate amount of additional
consideration payable to the Company upon exercise of all such Rights, plus, in
the case of Rights that relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
issuance or sale of such Convertible Securities and the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock then
issuable upon the exercise of such Rights or upon the conversion or exchange of
all Convertible Securities issuable upon the exercise of such Rights. Except as
otherwise provided in Subsections j. and k. below, no adjustment of the Exercise
Price will be made when Convertible Securities are actually issued upon the
exercise of such Rights or when Common Stock is actually issued upon the
exercise of such Rights or the conversion or exchange of such Convertible
Securities.
i. If the Company in any manner issues or sells any Convertible
Securities, and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Exercise Price in effect immediately
prior to the time of such issuance or sale, then the maximum number of shares of
Common Stock then issuable upon conversion or exchange of all such Convertible
Securities will be deemed to be outstanding and to have been issued and sold by
the Company for such price per share, as determined below. For the purposes of
this Section, the
<PAGE>
"price per share for which Common Stock is issuable upon such conversion or
exchange" will be determined by dividing (i) the total amount received or
receivable by the Company as consideration for the issuance or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock then
issuable upon the conversion or exchange of all such Convertible Securities.
Except as otherwise provided in Subsections j. and k. below, no adjustment of
the Exercise Price will be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such issuance
or sale of such Convertible Securities is made upon exercise of any Convertible
Securities for which adjustments of the Exercise Price had been or are to be
made pursuant to other provisions of this Section 6, no further adjustment of
the Exercise Price will be made by reason of such issuance or sale.
j. If the purchase price provided for in any Rights, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities, or the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock changes at any time (other
than under or by reason of provisions that are designed to protect against
dilution of the type set forth in this Section 6 and are no more favorable to
the holders of such Rights or Convertible Securities than this Section 6 would
have been if this Section 6 were included in such Rights or Convertible
Securities), then the Exercise Price in effect at the time of such change will
be re-adjusted to the Exercise Price that would have been in effect at such time
had such Rights or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration, or changed conversion rate, as
the case may be, at the time initially granted, issued, or sold; and such
adjustment of the Exercise Price will be made whether the result thereof is to
increase or reduce the Exercise Price then in effect under this Warrant,
provided that no such adjustment shall increase the Exercise Price above the
initial Exercise Price hereof and that such adjustments shall be made by the
Board of Directors of the Company, who shall promptly provide notice of the new
Exercise Price to the Holder.
k. Upon the expiration of any Right, or the termination of any right to
convert or exchange any Convertible Security, without the exercise of such
Right, or the conversion of such Convertible Security, the Exercise Price then
in effect hereunder will be adjusted to the Exercise Price that would have been
in effect at the time of such expiration or termination had such Right or
Convertible Security never been issued, but such subsequent adjustment shall not
affect the number of shares of Common Stock issued upon any exercise of this
Warrant prior to the date such adjustment is made.
l. If any shares of Common Stock, Rights, or Convertible Securities are
issued or sold or deemed to have been issued or sold for consideration that
includes cash, then the amount of cash consideration actually received by the
Company will be deemed to be the cash portion thereof. If any shares of Common
Stock, Rights, or Convertible Securities are issued or sold or deemed to have
been issued or sold for a consideration part or all of which is other than cash,
then the amount of the consideration other than cash received by the Company
will be the fair value of such consideration as determined by the Board of
Directors of the Company, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be the market value thereof as of the date of receipt. If any shares of
Common Stock,
<PAGE>
Rights, or Convertible Securities are issued in connection with any merger or
consolidation in which the Company is the surviving corporation, then the amount
of consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving corporation as is attributable
to such Common Stock, Rights, or Convertible Securities, as the case may be.
m. If any Right is issued in connection with the issuance or sale of
other securities of the Company, together comprising one integrated transaction
in which no specific consideration is allocated to such Right by the parties
thereto, the Right will be deemed to have been issued without consideration.
n. The number of shares of Common Stock deemed outstanding at any given
time shall include the number of shares of Common Stock outstanding, as adjusted
as provided herein, but shall not include shares owned or held by or for the
account of the Company, and the disposition of any shares so owned or held will
be considered an issuance or sale of Common Stock hereunder.
o. No adjustment of the Exercise Price shall be made if the amount of
such adjustment would be less than one cent per Warrant Share, but in such case
any adjustment that otherwise would be required to be made shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment that, together with any adjustment or adjustments so carried forward,
shall amount to not less than one cent per Warrant Share.
6.2 In the event of any reorganization or reclassification of the outstanding
shares of Common Stock (other than a change in par value, or from no par value
to par value, or from par value to no par value, or as a result of a subdivision
or combination) or in the event of any consolidation or merger of the Company
with another entity at any time prior to the expiration of this Warrant other
than a share exchange, merger or other business combination in which the Company
is the surviving entity, the Holder shall have the right to exercise this
Warrant. Upon such exercise, the Holder shall have the right to receive the same
kind and number of shares of capital stock and other securities, cash or other
property as would have been distributed to the Holder upon such reorganization,
reclassification, consolidation or merger. The Holder shall pay upon such
exercise the Exercise Price that otherwise would have been payable pursuant to
the terms of this Warrant. If any such reorganization, reclassification,
consolidation or merger results in a cash distribution in excess of the then
applicable Exercise Price, the Holder may, at the Holder's option, exercise this
Warrant without making payment of the Exercise Price, and in such case the
Company shall, upon distribution to the Holder, consider the Exercise Price to
have been paid in full, and in making settlement to the Holder, shall deduct an
amount equal to the Exercise Price from the amount payable to the Holder. In the
event of any such reorganization, merger or consolidation, the corporation
formed by such reorganization, consolidation or merger or the corporation which
shall have acquired the assets of the Company shall execute and deliver a
supplement hereto to the foregoing effect, which supplement shall also provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided in the Warrant.
6.3 If the Company shall, at any time before the expiration of this Warrant,
dissolve, liquidate or wind up its affairs, the Holder shall have the right to
exercise this Warrant. The Company shall give Holder notice of such action and
the Holder shall have fifteen (15) days from receipt of such
<PAGE>
notice to exercise this Warrant. Upon such exercise the Holder shall have the
right to receive, in lieu of the shares of Common Stock of the Company that the
Holder otherwise would have been entitled to receive, the same kind and amount
of assets as would have been issued, distributed or paid to the Holder upon any
such dissolution, liquidation or winding up with respect to such stock
receivable upon exercise of this Warrant on the date for determining those
entitled to receive any such distribution. If any such dissolution, liquidation
or winding up results in any cash distribution in excess of the Exercise Price
provided by this Warrant, the Holder may, at the Holder's option, exercise this
Warrant without making payment of the Exercise Price and, in such case, the
Company shall, upon distribution to the Holder, consider the Exercise Price to
have been paid in full and, in making settlement to the Holder, shall deduct an
amount equal to the Exercise Price from the amount payable to the Holder.
6.4 Upon each adjustment of the Exercise Price pursuant to Section 6 hereof, the
Holder shall thereafter (until another such adjustment) be entitled to purchase,
at the adjusted Exercise Price in effect on the date this Warrant is exercised,
the number of Warrant Shares, calculated to the nearest number of Warrant
Shares, determined by (a) multiplying the number of Warrant Shares purchasable
hereunder immediately prior to the adjustment of the Exercise Price by the
Exercise Price in effect immediately prior to such adjustment, and (b) dividing
the product so obtained by the adjusted Exercise Price in effect on the date of
such exercise. The provisions of Section 9 shall apply, however, so that no
fractional share of Common Stock or fractional Warrant shall be issued upon
exercise of this Warrant.
6.5 The Company may retain a firm of independent public accounts of recognized
standing (who may be any such firm regularly employed by the Company) to make
any computation required under this Section 6, and a certificate signed by such
firm shall be conclusive evidence of the correctness of any computation made
under this Section 6.
6. Notice to Holder. So long as this Warrant shall be outstanding (a) if the
Company shall pay any dividends or make any distribution upon the Common Stock
otherwise than in cash or (b) if the Company shall offer generally to the
holders of Common Stock the right to subscribe to or purchase any shares of any
class of capital stock or securities convertible into capital stock or any
similar rights or (c) if there shall be any capital reorganization of the
Company in which the Company is not the surviving entity, recapitalization of
the capital stock of the Company, consolidation or merger of the Company with or
into another corporation where the Company is not the surviving entity, sale,
lease or other transfer of all or substantially all of the property and assets
of the Company, or voluntary or involuntary dissolution, liquidation or winding
up of the Company, then in such event, the Company shall cause to be mailed by
registered or certified mail to the Holder, at least fifteen (15) days prior to
the relevant date described below (or such shorter period as is reasonably
possible if fifteen (15) days is not reasonably possible), a notice containing a
description of the proposed action and stating the date or expected date on
which a record of the Company's shareholders is to be taken for the purpose of
any such dividend, distribution of rights, reorganization, recapitalization,
consolidation, merger, sale, lease, transfer, dissolution, liquidation or
winding up is to take place and the date or expected date, if any is to be
fixed, as of which the holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such event.
<PAGE>
7. Certificate of Adjustment. Whenever the Exercise Price or number or type of
securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall promptly deliver to the Holder of this Warrant a
certificate of an officer of the Company setting forth the nature of such
adjustment and a brief statement of the facts requiring such adjustment.
8. No Fractional Shares. No fractional shares of Common Stock will be issued in
connection with any subscription hereunder. In lieu of any fractional shares
which would otherwise be issuable, the Company shall pay cash equal to the
product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
9. Transfer or Loss of Warrant.
10.1 All or any part of this Warrant may be transferred to any of the
shareholders, directors, officers, employees or partners of the Holder or any
successor upon the delivery of this Warrant as specified in Section 2 hereof
accompanied by a certificate from the Holder that each of the transferees have
such status with the Holder. Except as provided in the preceding sentence, prior
to any proposed transfer of this Warrant or the Warrant Shares received on the
exercise of this Warrant (the "Securities"), unless there is in effect a
registration statement under the Securities Act, covering the proposed transfer,
the Holder thereof shall give written notice to the Company of such Holder's
intention to effect such transfer. Each such notice shall describe the manner
and circumstances of the proposed transfer in sufficient detail, and shall, if
the Company so requests, be accompanied by an unqualified written opinion of
legal counsel who shall be reasonably satisfactory to the Company addressed to
the Company and reasonably satisfactory in form and substance to the Company's
counsel, to the effect that the proposed transfer of the Securities may be
effected without registration under the Securities Act, whereupon the Holder of
the Securities shall be entitled to transfer the Securities in accordance with
the terms of the notice delivered by the Holder to the Company. Each certificate
evidencing the Securities transferred as above provided shall not bear such
restrictive legends if in the opinion of counsel for the Company such legends
are not required in order to establish compliance with any provisions of the
Securities Act.
10.2 Upon receipt by the Company of evidence satisfactory to it of loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, of reasonably satisfactory indemnification, or, in the case of
mutilation, upon surrender of this Warrant, the Company will execute and
deliver, or instruct the Transfer Agent to execute and deliver, a new Warrant of
like tenor and date and any such lost, stolen or destroyed Warrant thereupon
shall become void.
10. Notices. Notices and other communications to be given to the Holder shall be
deemed sufficiently given if delivered by hand, or five days after mailing by
registered or certified mail, postage prepaid, to the Holder at Boca Corporate
Plaza, 1801 Clint Moore Road, Suite 110, Boca Raton, Florida 33487. Notices or
other communications to the Company shall be deemed to have been sufficiently
given if delivered by hand or five days after mailing if mailed by registered or
certified mail postage prepaid, to the Company at 730 South Military Trail,
Deerfield, Florida 33442. A party may change the address to which notice shall
be given by notice pursuant to this Section 11.
<PAGE>
11. Entire Agreement and Modification. The Company and the Holder of this
Warrant hereby represent and warrant that this Warrant is intended to and does
contain and embody all of the understandings and agreements, both written and
oral, of the parties hereto with respect to the subject matter of this Warrant,
and that there exists no oral agreement or understanding, express or implied,
whereby the absolute, final and unconditional character and nature of this
Warrant shall be in any way invalidated, impaired or affected. A modification or
waiver of any of the terms, conditions or provisions of this Warrant shall be
effective only if made in writing and executed with the same formality of this
Warrant.
12. Governing Law. This Warrant shall be governed by and construed in accordance
with the laws of the State of Florida, without application of the principles of
conflicts of laws.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the 7th day of
May, 1998.
PEREGRINE INDUSTRIES, INC.,
a Florida corporation
By:
Name:
Title:
<PAGE>
ELECTION TO PURCHASE
TO: Peregrine Industries, Inc.
The undersigned hereby irrevocably elects to exercise Warrants represented by
this Common Stock Purchase Warrant to purchase ____________________ shares of
Common Stock issuable upon the exercise of such Warrants and requests that
certificates for such shares be issued in the name of:
____________________________________________
(Please insert social security or other identifying number)
____________________________________________
(Please print name and address)
The undersigned also represents and warrants that the representations and
warranties made in Section 3 of the Subscription Agreement dated ____________,
1998 by and between Peregrine Industries, Inc. the undersigned and remain
accurate and in full force and effect as of the date hereof.
Dated: ____________________, 19__
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
CREDIT AGREEMENT
Among
ALCOOL, INC.,
PEREGRINE INDUSTRIES, INC.
and
SOUTHTRUST BANK, NATIONAL ASSOCIATION
February 1, 1999
<PAGE>
- --------------------------------------------------------------------------------
This instrument prepared by:
John F. Andrews
Capell & Howard, P.C.
P.O. Box 2069
Montgomery, Alabama 36102-2069
(334)241-8000
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
Parties .......................................................................... 1
Recitals ........................................................................... 1
ARTICLE 1
DEFINITIONS AND OTHER
PROVISIONS OF GENERAL APPLICATION
Section 1.01 Definitions............................................................... 2
Section 1.02 Effect of Headings and Table of Contents.................................. 7
Section 1.03 Date of Credit Agreement.................................................. 7
Section 1.04 Separability Clause....................................................... 7
Section 1.05 Counterparts.............................................................. 7
ARTICLE 2
ISSUANCE OF LETTER OF
CREDIT; REIMBURSEMENT AND FEES
Section 2.01 Issuance of the Letter of Credit.......................................... 8
Section 2.02 Reimbursement............................................................. 8
Section 2.03 Collateral Security....................................................... 8
Section 2.04 Fees...................................................................... 9
Section 2.05 Increased Costs.......................................................... 10
Section 2.06 Place and Time of Payments................................................ 11
Section 2.07 Late Payments............................................................. 11
Section 2.08 Computation of Charges.................................................... 12
Section 2.09 Statements of Account..................................................... 12
Section 2.10 Obligations of the Credit Obligors Absolute............................... 12
Section 2.11 Pledged Bonds............................................................. 13
ARTICLE 3
CONDITIONS PRECEDENT TO
ISSUANCE OF LETTER OF CREDIT
Section 3.01 Conditions Precedent to Issuance of Letter of Credit...................... 14
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
ARTICLE 4
REPRESENTATIONS AND COVENANTS
Section 4.01 General Representations of the Credit Obligors............................ 16
Section 4.02 Corporate Existence....................................................... 19
Section 4.03 Accounting Records........................................................ 19
Section 4.04 Reports to Bank........................................................... 19
Section 4.05 Incorporation of Covenants by Reference................................... 20
Section 4.06 Payment of Taxes.......................................................... 20
Section 4.07 Maintenance of Properties................................................. 21
Section 4.08 Operation of Collateral................................................... 21
Section 4.09 Amendments to Financing Documents......................................... 21
Section 4.10 Other Agreements.......................................................... 21
Section 4.11 Financing of Project...................................................... 21
Section 4.12 Maintenance of Insurance.................................................. 22
Section 4.13 Compliance with Environmental Laws........................................ 23
Section 4.14 Damage and Destruction.................................................... 23
Section 4.15 Condemnation.............................................................. 23
Section 4.16 Redemption of Bonds....................................................... 24
Section 4.17 Disposition of Collateral................................................. 25
Section 4.18 Creation of Liens..........................................................25
Section 4.19 Financing and Other Operating Covenants....................................25
Section 4.20 Subordination of Stockholder Indebtedness..................................26
ARTICLE 5
EVENTS OF DEFAULT AND REMEDIES
Section 5.01 Events of Default......................................................... 26
Section 5.02 Remedies.................................................................. 28
Section 5.03 Acceleration of Reimbursement............................................. 29
Section 5.04 No Remedy Exclusive....................................................... 30
Section 5.05 Agreement to Pay Attorneys' Fees.......................................... 30
Section 5.06 No Additional Waiver Implied by One Waiver................................ 30
Section 5.07 Remedies Subject to Applicable Law........................................ 30
Section 5.08 Waiver by Credit Obligors................................................. 31
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
ARTICLE 6
MISCELLANEOUS
Section 6.01 No Waiver................................................................. 31
Section 6.02 Entire Agreement.......................................................... 31
Section 6.03 Review by Credit Obligors................................................. 31
Section 6.04 Waiver of Trial by Jury................................................... 31
Section 6.05 Notices................................................................... 32
Section 6.06 Indemnification........................................................... 33
Section 6.07 Liability of the Bank..................................................... 33
Section 6.08 Continuing Obligation..................................................... 34
Section 6.09 Governing Law............................................................. 34
Section 6.10 Costs, Expenses and Taxes................................................. 34
Testimonium ...........................................................................35
Signatures ...........................................................................35
Exhibit A Letter of Credit
Exhibit B Project Equipment
Exhibit C Project Site
</TABLE>
(iii)
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of February 1, 1999, is entered into
among ALCOOL, INC., a corporation organized and existing under the laws of the
State of Alabama ("Alcool"), PEREGRINE INDUSTRIES, INC., a corporation organized
under the laws of the State of Florida ("Peregrine") and SOUTHTRUST BANK,
NATIONAL ASSOCIATION, a national banking association with a principal place of
business in Montgomery, Alabama. Alcool and Peregrine are herein sometimes
collectively called the "Credit Obligors."
R E C I T A L S:
Alcool has requested that The Industrial Development Board of the City
of Montgomery (the "Board") issue its $2,460,000 aggregate principal amount of
Variable Rate Industrial Development Revenue Bonds (Alcool, Inc. Project) Series
1999 (the "Bonds") in order to provide long-term financing for the cost of
acquiring certain manufacturing machinery and related personal property for use
by Alcool in the manufacture of aluminum heat exchanger coils (the "Project
Equipment"). The Project Equipment will be located in a building (the "Project
Building") owned by the Board and leased to Industrial Partners, a general
partnership ("Industrial Partners"), pursuant to a Lease Agreement dated
February 1, 1999 (the "Building Lease"). The Project Building will be subleased
by Industrial Partners to Alcool pursuant to a Lease Agreement dated December 9,
1998 (the "Building Sublease").
The Bonds will be issued pursuant to a Trust Indenture dated February
1, 1999 (the "Indenture") between the Board and SouthTrust Bank, National
Association (acting in such capacity, the "Trustee"). The Board will use the
proceeds of the Bonds (i) to reimburse Alcool for sums previously expended by
Alcool for the Project Equipment and (ii) to pay the remaining costs of the
Project Equipment. The Board will lease the Project Equipment to Alcool pursuant
to a Lease Agreement dated as of February 1, 1999 (the "Lease Agreement") and
Alcool will pay rent to the Board sufficient to pay the debt service on the
Bonds.
As security for the payment of the Bonds, the Credit Obligors will
cause SouthTrust Bank, National Association (herein, in its capacity as issuer
of the initial letter of credit referred to below, called the "Bank"), to issue
an irrevocable letter of credit in favor of the Trustee in the amount of (i) the
aggregate principal amount of the Bonds, to enable the Trustee to pay the
principal amount of the Bonds when due and to pay the principal portion of the
purchase price of Bonds tendered (or deemed tendered) for purchase, plus (ii)
interest on the Bonds for a period of 50 days at the rate of 13% per annum, to
enable the Trustee to pay interest on the Bonds when due and to pay the interest
portion of the purchase price of Bonds tendered (or deemed tendered) for
purchase. The initial letter of credit to be delivered to the Trustee and any
substitute letter of credit delivered to the Trustee pursuant to the Indenture
are herein referred to as the "Letter of Credit."
1
<PAGE>
As security for the Credit Obligors' obligations under this Agreement
with respect to the Letter of Credit, Alcool and the Board will execute a
Mortgage, Security Agreement and Assignment of Rents and Leases dated as of
February 1, 1999 (the "Mortgage") in favor of the Bank, whereby the Bank will be
granted a mortgage on and security interest in the Project Equipment and the
interest of Alcool as lessee under the Building Sublease.
As additional security for the Credit Obligors' obligations under this
Agreement with respect to the Letter of Credit, Merrill A. Yarbrough, Jr. will
execute an Individual Guaranty Agreement dated as of February 1, 1999 in favor
of the Bank and Peregrine Global, Inc., a United States Virgin Islands
corporation will execute a Corporate Guaranty Agreement dated as of February 1,
1999 in favor of the Bank.
References herein to the "Creditor Obligors" refers to the Credit
Obligors, jointly and severally, unless the context clearly indicates to the
contrary.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Bank to issue the Letter of Credit, the Credit Obligors and the Bank hereby
covenant, agree, and bind themselves as follows:
ARTICLE 1
DEFINITIONS AND OTHER
PROVISIONS OF GENERAL APPLICATION
Section 1.01 Definitions
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(1) The terms defined in this Article have the meanings assigned to
them in this Article. Singular terms shall include the plural as well as the
singular and vice versa.
(2) All accounting terms not otherwise defined herein have the meanings
assigned to them, and all computations herein provided for shall be made in
accordance with generally accepted accounting principles, consistently applied.
All references herein to "generally accepted accounting principles" refer to
such principles as they exist at the date of application thereof.
(3) All references in this instrument to a designated "Article,"
"Section" or other subdivision are to the designated articles, sections, and
subdivisions of this instrument as originally executed.
2
<PAGE>
(4) The terms "herein," "hereof," and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
article, section or other subdivision.
(5) The term "person" shall include any individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization and any government or any agency or political
subdivision thereof.
(6) Capitalized terms not otherwise defined in this Article shall have
the meaning assigned in the Indenture.
(7) As used in this Agreement, the following terms shall have the
following meanings unless the context hereof shall otherwise indicate:
"A Drawing" shall mean a drawing under the Letter of Credit to pay
the principal of the Bonds due to maturity, redemption, or
acceleration.
"Alcool" shall mean Alcool, Inc., a corporation organized and
existing under the laws of the State of Alabama, and its successors and
assigns as permitted herein.
"B Drawing" shall mean a drawing under the Letter of Credit to pay
interest on the Bonds.
"Bank" shall mean SouthTrust Bank, National Association, a national
banking association with a principal place of business in Montgomery,
Alabama, in its capacity as the issuer of the Letter of Credit, and its
successors and assigns.
"Base Rate" shall mean the variable rate of interest designated by
the Bank periodically as the Bank's Base Rate. The Base Rate is not
necessarily the lowest rate charged by the Bank. The Base Rate on the
date of this Agreement is 7.5%.
"Board" shall mean The Industrial Development Board of the City of
Montgomery, a public corporation organized and existing under the laws
of the State of Alabama, and its successors and assigns.
"Bonds" shall mean the $2,460,000 aggregate principal amount of
Variable Rate Industrial Development Revenue Bonds (Alcool, Inc.
Project) Series 1999 issued by the Company pursuant to the Indenture.
"Building Lease" shall mean the Lease Agreement dated as of
February 1, 1999 pursuant to which the Board has leased the Project
Site and Project Building to Industrial Partners.
3
<PAGE>
"Building Sublease" shall mean the Lease Agreement dated December
9, 1998 pursuant to which Industrial Partners has subleased the Project
Site and the Project Building to Alcool.
"Business Day" shall mean any day other than (i) a Saturday or
Sunday; (ii) a day on which banking institutions are required or
authorized to remain closed in (A) the city in which the principal
office of the Trustee is located, (B) the city in which the principal
office of the Remarketing Agent is located, or (C) the city in which
the office of the Bank where drawings under the Letter of Credit are to
be made is located; or (iii) a day on which the payment system of the
Federal Reserve System is not operational.
"C Drawing" shall mean a drawing under the Letter of Credit to pay
the purchase price of Tendered Bonds.
"Collateral" shall mean all property and rights mortgaged,
assigned, pledged, or otherwise subject to the lien of the Mortgage,
the Deerfield Security Agreement and all other collateral from time to
time securing the Obligations.
"Corporate Guarantor" shall mean Peregrine Global, Inc., a United
States Virgin Islands corporation.
"Corporate Guaranty Agreement" shall mean the Corporate Guaranty
Agreement dated as of February 1, 1999 executed by the Corporate
Guarantor in favor of the Bank.
"Credit Agreement" or "Agreement" shall mean this instrument as
originally executed or as it may from time to time be supplemented,
modified or amended by one or more instruments entered into pursuant to
the applicable provisions hereof.
"Credit Amount" shall mean the maximum amount available to be drawn
under the Letter of Credit, as reduced from time to time and reinstated
from time to time pursuant to the terms and conditions thereof.
"Credit Obligors" shall mean, collectively, Alcool and Peregrine.
References herein to the Credit Obligors shall mean each of the Credit
Obligors acting individually and the Credit Obligors acting jointly
unless the context clearly indicates to the contrary.
"Deerfield Equipment" shall mean the machinery, equipment and other
personal property owned by Peregrine as shown on Exhibit B hereto as
the "Deerfield Equipment."
4
<PAGE>
"Deerfield Security Agreement" shall mean the Security Agreement
dated as of February 1, 1999 between Peregrine and the Bank relating to
the Deerfield Equipment.
"Event of Default" shall have the meanings stated in Section 5.01
hereof. An Event of Default shall "exist" if an Event of Default shall
have occurred and be continuing.
"Financing Documents" shall mean the Indenture, the Lease
Agreement, the Building Sublease, this Agreement, the Mortgage, the
Deerfield Security Agreement, the Individual Guaranty Agreement and the
Corporate Guaranty Agreement.
"Financing Participants" shall mean the Credit Obligors, the Board,
the Bank, the Trustee, the Individual Guarantor, the Corporate
Guarantor, the Remarketing Agent and the holders of the Bonds.
"Indenture" shall mean that certain Trust Indenture dated as of
February 1, 1999, between the Board and the Trustee relating to the
Bonds, including any amendments or supplements to such instrument from
time to time entered into pursuant to the applicable provisions
thereof.
"Individual Guarantor" shall mean Merrill A. Yarbrough, Jr.
"Individual Guaranty Agreement" shall mean the Individual Guaranty
Agreement dated as of February 1, 1999 executed by the Individual
Guarantor in favor of the Bank.
"Lease Agreement" shall mean the Lease Agreement dated as of
February 1, 1999 between the Board, as lessor, and Alcool, as lessee,
relating to the Project Equipment, including any amendments or
supplements to such instrument from time to time entered into pursuant
to the applicable provisions thereof.
"Letter of Credit" shall mean the letter of credit with respect to
the Bonds to be issued by the Bank in favor of the Trustee pursuant to
this Agreement substantially in the form of Exhibit A.
"Mortgage" shall mean that certain Mortgage, Security Agreement and
Assignment of Rents and Leases dated as of February 1, 1999, executed
by Alcool and the Board in favor of the Bank, securing the obligations
of the Credit Obligors under this Agreement, including any amendments,
modifications, restatements, consolidations or supplements to such
instrument from time to time entered into pursuant to the applicable
provisions thereof.
5
<PAGE>
"Obligations" shall mean all indebtedness or obligations of the
Credit Obligors to the Bank under this Agreement or secured by the
Mortgage, including without limitation (i) the Credit Obligors'
obligation to reimburse the Bank for draws made under the Letter of
Credit and (ii) the Credit Obligors' obligation to pay fees and charges
to the Bank for the issuance and continuation of the Letter of Credit.
"Peregrine" shall mean Peregrine Industries, Inc., a corporation
organized and existing under the laws of the State of Florida, and its
successors and permitted assigns.
"Pledged Bonds" shall mean the Bonds purchased pursuant to the
optional or mandatory tender provisions of the Indenture with moneys
drawn under the Letter of Credit.
"Project" shall mean the Project Site, the Project Building and the
Project Equipment, as they may at any time exist.
"Project Building" shall mean the certain building and all other
structures now located on the Project Site or hereafter acquired or
constructed on the Project Site.
"Project Equipment" shall mean the machinery, equipment,
furnishings, fixtures and other personal property described on Exhibit
B (not including the Deerfield Equipment) and all other machinery,
equipment, furnishings, fixtures and other personal property of Alcool
now or hereafter located on the Project Site and used in the operation
of the Project.
"Project Site" shall mean the real property described in Exhibit C
hereto.
"Remarketing Agent" shall mean Merchant Capital, L.L.C. or its
successor or successors under the Remarketing Agreement.
"Remarketing Agreement" shall mean that certain Remarketing
Agreement dated as of February 1, 1999 among Alcool, the Board and
Merchant Capital, L.L.C., as remarketing agent.
"Revolving Line of Credit" shall mean the Revolving Line of Credit
from SouthTrust Bank, National Association to Peregrine in the current
maximum principal amount of $1,000,000.
"Security Documents" shall mean the Mortgage, the Deerfield
Security Agreement, the Individual Guaranty Agreement and the Corporate
Guaranty Agreement.
6
<PAGE>
"Stated Expiration Date" shall mean the date on which the Letter of
Credit will, by its terms, expire unless the Letter of Credit is
terminated on an earlier date in accordance with its terms.
"Subsidiary" shall mean any corporation, limited liability company,
partnership, or other business association of which either of the
Credit Obligors and/or one or more subsidiaries owns directly or
indirectly, 50% or more of capital stock or equity interest.
"Tendered Bonds" shall mean Bonds tendered (or deemed tendered) for
purchase pursuant to the optional or mandatory tender provisions of the
Indenture.
"Termination Date" shall mean the Stated Expiration Date, or such
earlier date on which the Letter of Credit terminates in accordance
with its terms.
"Trustee" shall mean SouthTrust Bank, National Association, a
national banking association with a principal place of business in
Birmingham, Alabama, in its capacity as trustee under the Indenture,
and its successors and assigns.
Section 1.02 Effect of Headings and Table of Contents
The article and section headings herein and in the Table of Contents
are for convenience only and shall not affect the construction hereof.
Section 1.03 Date of Credit Agreement
The date of this Agreement is intended as and for a date for the
convenient identification of this Credit Agreement and is not intended to
indicate that this Agreement was executed and delivered on said date.
Section 1.04 Separability Clause
If any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 1.05 Counterparts
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed an original, but all such counterparts shall
together constitute but one and the same instrument.
7
<PAGE>
ARTICLE 2
ISSUANCE OF LETTER OF
CREDIT; REIMBURSEMENT AND FEES
Section 2.01 Issuance of the Letter of Credit
(a) The Credit Obligors hereby request and instruct the Bank to issue
the Letter of Credit substantially in the form provided in Exhibit A hereto. The
Bank hereby agrees to issue the Letter of Credit, subject to the terms and
conditions of this Agreement.
(b) The Letter of Credit shall be issued on the date of delivery of the
Bonds to the original purchaser or purchasers thereof from the Board.
Section 2.02 Reimbursement
(a) On each date that the Bank honors any A Drawing or B Drawing under
the Letter of Credit, the Credit Obligors shall immediately reimburse the Bank
for the amount of such draw.
(b) The Credit Obligors shall reimburse the Bank for the amount of any
C Drawing within 90 days after the date such C Drawing is honored (or, if
sooner, on the Termination Date). In addition, the Credit Obligors shall pay to
the Bank interest on the unreimbursed amount of each C Drawing at a variable per
annum rate equal to the Base Rate plus 2% from the date such C Drawing is paid
by the Bank until the amount of such C Drawing is reimbursed in full to the
Bank. Such interest shall be payable in arrears on the first day of each month
following such C Drawing and on the date that such C Drawing is reimbursed in
full to the Bank.
(c) No interest shall be payable with respect to a C Drawing if the
Bank is reimbursed in full for such C Drawing by 12:00 noon (Montgomery, Alabama
time) on the same date that such C Drawing is paid by the Bank.
(d) All amounts received by the Bank in respect of principal, premium
or interest on Pledged Bonds shall be credited first against interest payable on
the unreimbursed amount of the C Drawing with respect to such Pledged Bonds and
the balance, if any, shall be credited against the amount of such C Drawing.
(e) Anything herein to the contrary notwithstanding, the Credit
Obligors will not reimburse the Bank for any A Drawing, B Drawing or C Drawing
until the same has been honored in full by the Bank, and no such reimbursement
shall be prepaid.
8
<PAGE>
Section 2.03 Collateral Security
As security for the performance of its Obligations under this
Agreement, Alcool and the Board shall execute the Mortgage and Peregrine shall
execute the Deerfield Security Agreement and deliver the same to the Bank
simultaneously with the delivery of this Agreement. In addition the Credit
Obligors shall cause the Individual Guarantor to execute the Individual Guaranty
Agreement and an assignment of life insurance on the life of Merrill A.
Yarbrough, Jr. in an amount not less than $750,000 and the Corporate Guarantor
to execute the Corporate Guaranty Agreement and deliver the same to the Bank
simultaneously with the delivery of this Agreement. The Obligations shall be
further secured by all security securing the Revolving Line of Credit.
Section 2.04 Fees
(a) The Credit Obligors agree to pay to the Bank an annual fee
calculated at the rate of 1.5% per annum on the daily average of the Credit
Amount available during the next succeeding year under the Letter of Credit. The
annual fee shall be payable in advance on the date of issuance of the Letter of
Credit for the period beginning on such date and ending on June 15, 1999 and
thereafter on each June 15 for the annual period beginning on June 16 and ending
on the next June 15 (or, if sooner, the Termination Date). Fees payable for the
first and the last annual payment shall be prorated based on the number of days
during which the Letter of Credit is outstanding during such periods.
(b) The fees payable for each annual period specified in subsection (a)
above shall be calculated on the assumption that the Credit Amount available
under the Letter of Credit on such due date will be available for the entire
annual period for which such commission is payable. At the end of such annual
period, the fee shall be recalculated based on the actual daily average of the
Credit Amount for such period and the difference, if any, shall be added to or
subtracted from, as the case may be, the next annual payment or, if no fee is
payable for the ensuing period, shall be paid to the party entitled thereto
within ten days of the end of such last period; provided, however, no adjustment
shall be made for reductions in the Credit Amount made during the last 15 days
(June 1 through June 15) of the annual period. If a Substitute Letter of Credit
is obtained by the Credit Obligors, no refund of fees already paid shall be
allowed for any period after the cancellation of the Letter of Credit unless the
Bank notified the Credit Obligors after such commission was paid that increased
costs will be payable pursuant to Section 2.05.
(c) Fees payable for the first annual period with respect to the
Letter of Credit shall be fully earned and shall be nonrefundable in the event
the Letter of Credit terminates during or at the end of such period. For each
annual period thereafter, if the Letter of Credit expires or terminates, the
Credit Obligors shall be entitled to a rebate of the annual fee paid with
respect to the expired or terminated Letter of Credit based upon the number of
days remaining in the annual period during which such termination occurs.
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(d) In addition to the fees payable under subsection (a) above, the
Credit Obligors shall pay to the Bank such amount as shall at the time of a
transfer of the Letter of Credit then be the charge which the Bank is
customarily making for transfers of similar letters of credit. Such charges
shall be paid within ten days of receipt by the Credit Obligors of a written
statement therefor.
(e) For each draw on the Letter of Credit the Credit Obligors shall pay
a processing fee in the amount of $75. The processing fee shall be due on the
date such draw is made.
Section 2.05 Increased Costs
(a) If, after the date of delivery of this Agreement, any change in any
law or regulation or in the interpretation, administration or enforcement
thereof by any court or governmental authority charged with the administration
thereof or any action by any governmental authority (whether or not constituting
or resulting from such change) shall either
(1) impose, modify or deem applicable any reserve, assessment,
special deposit or similar requirement against letters of credit issued
by the Bank, or
(2) impose on the Bank any other condition regarding this
Agreement or the Letter of Credit,
and the result of any such event shall be to increase the cost to the Bank of
issuing or maintaining the Letter of Credit (which increase in cost shall be the
result of the Bank's reasonable allocation of the aggregate of such cost
increases resulting from such events and shall be calculated without giving
effect to any participation granted in the Letter of Credit), then, upon demand
by the Bank, the Credit Obligors shall pay to the Bank from time to time, within
30 days of the Credit Obligors' receipt of the certificate referred to in
paragraph 2.05(b) below, as specified by the Bank in writing, such additional
amounts which shall be sufficient to compensate the Bank for the portion of such
increased costs that are allocable to the Letter of Credit.
(b) The Bank shall deliver to the Credit Obligors a certificate as to
such increased costs incurred by the Bank as a result of any event referred to
in subsection (a) of this Section, and such certificate shall be conclusive,
absent manifest error, as to the amount thereof. In making the determination
contemplated by such certificate, the Bank may make such reasonable estimates,
assumptions, allocations, and the like that the Bank deems to be appropriate.
(c) The Bank shall make a good faith effort to notify the Credit
Obligors when the Bank becomes aware of circumstances that may in the future
require the imposition of increased costs pursuant to this Section, but the
failure to give such notice shall not preclude the imposition of such increased
costs.
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(d) If, after the date of this Agreement, the Bank shall have
determined that the adoption or implementation of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on the Bank's capital, on this credit facility or
otherwise, as a consequence of its obligations hereunder and under the Letter of
Credit to a level below that which the Bank could have achieved but for such
adoption, change or compliance (taking into consideration the Bank's policies
with respect to capital adequacy) by an amount deemed by the Bank to be
material, then from time to time, promptly upon demand by the Bank, the Credit
Obligors hereby agree to pay the Bank such additional amount or amounts as will
compensate the Bank for such reduction. A certificate of the Bank claiming
compensation under this subsection and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive absent manifest error. In
determining any such amount, the Bank may use any reasonable averaging and
attribution methods.
(e) Upon the occurrence of any of the events described in paragraphs
2.05(a) or (d) above, the Credit Obligors may, at its option, provide a
substitute letter of credit for the Letter of Credit, in which event the Bank
will refund any prepaid Letter of Credit fees provided all Obligations have been
paid in full.
Section 2.06 Place and Time of Payments
(a) All payments by the Credit Obligors to the Bank hereunder shall be
made in lawful currency of the United States and in immediately available funds
to the Bank at its address set forth in Section 6.05 hereof or at such other
address within the continental United States as shall be specified by the Bank
by notice to the Credit Obligors.
(b) All amounts payable by the Credit Obligors to the Bank hereunder
for which a payment date is expressly set forth herein (including without
limitation payments due pursuant to Sections 2.02 and 2.04) shall be payable
without notice or written demand by the Bank. All amounts payable by the Credit
Obligors to the Bank hereunder for which no payment date is expressly set forth
herein shall be payable on written demand by the Bank to the Credit Obligors
within 15 days of receipt thereof.
(c) The Bank may, at its option, send written notice to the Credit
Obligors of amounts payable pursuant to Sections 2.02 and 2.04, but the failure
to send such notice shall not affect or excuse the Credit Obligors' obligation
to make payment of the amounts required by such Sections on the due date
specified in such Sections.
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(d) Payments which are due on a day which is not a Business Day shall
be payable on the next succeeding Business Day, and any interest payable thereon
shall be payable for such extended time at the specified rate.
Section 2.07 Late Payments
With respect to all amounts payable to the Bank by the Credit Obligors
pursuant to this Article (i) which are not paid on the due date, in the case of
amounts payable on a specified date, or (ii) which are not paid within 15 days
of written notice to the Credit Obligors, in the case of amounts payable on
demand, the Credit Obligors agree to pay to the Bank on demand interest at a
variable per annum rate equal to 2% in excess of the Base Rate for each day from
the specified date of payment, or the date of written demand for payment, as the
case may be, to the date payment is made.
Section 2.08 Computation of Charges
The interest and charges provided for in this Agreement payable in
arrears based upon annual rates shall be computed on the basis of a 360-day year
of 12 consecutive 30-day months, for actual days elapsed. All interest rates
based upon the Base Rate shall change when and as the Base Rate shall change,
effective on the opening of business on the date of any such change, unless such
change is announced after the close of regular banking hours, in which case such
change shall be effective on the following day.
Section 2.09 Statements of Account
The Bank will deliver to the Credit Obligors within a reasonable time
after request a statement of charges and payments made pursuant to this
Agreement.
Section 2.10 Obligations of the Credit Obligors Absolute
The obligations of the Credit Obligors under this Agreement shall be
absolute, unconditional, and irrevocable and shall be paid strictly in
accordance with the terms of this Agreement, under all circumstances whatsoever,
including, without limitation, the following:
(1) any lack of validity or enforceability of all or any of the
Letter of Credit, the Bonds, or any Financing Document;
(2) any amendment or waiver of or any consent to departure from all
or any of the Letter of Credit, the Bonds, or any Financing Document
unless consented to in writing by the Bank and the Credit Obligors;
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(3) the existence of any claim, setoff, defense or other rights
which the Credit Obligors may have at any time against any Financing
Participant, or any other person or entity, whether in connection with
this Agreement, the Letter of Credit, the Bonds, or any Financing
Document, or any unrelated transaction;
(4) any statement or any other document presented under the Letter
of Credit proves to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein proves to be untrue or inaccurate
in any respect whatsoever;
(5) payment by the Bank under the Letter of Credit against
presentation of a draft or certificate which does not comply with the
terms of the Letter of Credit, provided such payment shall not have
constituted gross negligence or willful misconduct by the Bank; and
(6) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, provided the same shall not have
constituted gross negligence or willful misconduct by the Bank.
No act of commission or omission of any kind at any time on the part of
the Bank in respect of any matter whatsoever, except for the gross negligence or
willful misconduct of the Bank, shall in any way affect or impair any right,
power or benefit of the Bank under this Agreement and, to the extent permitted
by applicable law, no setoff, claim, reduction, diminution of any obligation, or
any defense of any kind or nature which the Credit Obligors may have against the
Bank, except for the gross negligence or willful misconduct of the Bank, shall
be available against the Bank in any suit or action brought by the Bank to
enforce any right, power or benefit under this Agreement.
Section 2.11 Pledged Bonds
(a) As additional security for the performance of its obligations under
this Agreement, Alcool hereby pledges, assigns, hypothecates and transfers to
the Bank all of its right, title and interest in and to the Pledged Bonds, and
does hereby grant to the Bank a security interest in the Pledged Bonds and all
amounts payable thereon and the proceeds thereof.
(b) If the Bank is reimbursed for the purchase price of Pledged Bonds
with respect to which a C Drawing has been made, such Pledged Bonds shall be
released from the pledge and assignment made hereby and shall be delivered to or
upon the order of Alcool.
(c) All payments of principal and interest on Pledged Bonds shall be
made directly to the Bank. If, while the Bank or its designated agent holds
Pledged Bonds, Alcool shall receive any interest or principal payment in respect
of such Pledged Bonds, Alcool agrees to accept the same as agent for the Bank
and to hold the same in trust on behalf of the Bank and to deliver the same
forthwith to the Bank. All sums of money so paid in respect of principal,
premium or interest on
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such Pledged Bonds which are received by Alcool and paid to the Bank, or which
shall be received directly by the Bank from the Trustee, shall be credited
against the reimbursement obligation of the Credit Obligors as provided in
Section 2.02(d).
(d) If an Event of Default exists, the Bank may, without notice,
exercise all rights, privileges or options pertaining to any Pledged Bonds as if
it were the absolute owner thereof, upon such terms and conditions as it may
determine, all without liability except to account to Alcool for property
actually received by it. In addition to the rights and remedies granted to it in
this Agreement, the Bank or its designated agent shall have the authority to
exercise all rights and remedies of a secured party under the Alabama Uniform
Commercial Code. The Credit Obligors shall be liable for the deficiency if the
proceeds of any sale or other disposition of the Pledged Bonds and the
Collateral are insufficient to pay all amounts to which the Bank is entitled.
The Bank shall have no duty to exercise any of such rights, privileges or
options and shall not be responsible for any failure to do so or any delay in so
doing.
(e) Except as contemplated herein, without the prior written consent of
the Bank, Alcool agrees that it will not sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, the Pledged Bonds,
nor will it create, incur or permit to exist any pledge, lien, mortgage,
hypothecation, security interest, charge, option or any other encumbrance with
respect to any of the Pledged Bonds, or any interest therein, or any proceeds
thereof, except for the lien and security interest provided for by this
Agreement.
(f) Alcool further agrees to do or cause to be done all such other
reasonable acts and things as may be necessary to make any disposition or sale
of any portion or all of the Pledged Bonds permitted by this Agreement valid and
binding and in compliance with any and all applicable laws, regulations, orders,
writs, injunctions, decrees or awards of any and all courts or governmental
authorities having jurisdiction over any such disposition or sales, all at
Alcool's expense.
ARTICLE 3
CONDITIONS PRECEDENT TO
ISSUANCE OF LETTER OF CREDIT
Section 3.01 Conditions Precedent to Issuance of Letter of Credit
The obligation of the Bank to issue the Letter of Credit is subject to
the receipt by the Bank of the following documents, each of which shall be
satisfactory to the Bank in form and substance:
(1) Financing Documents. An executed counterpart of each of the
Financing Documents.
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(2) Issuance of Bonds. Evidence that the Bonds shall have been
executed, issued, authenticated, and delivered by the Board to the
purchaser thereof.
(3) Official Statement. A copy of the Official Statement
distributed in connection with the offering and sale of the Bonds,
executed or certified on behalf of Alcool and the Board.
(4) Opinion of Bond Counsel. An opinion of bond counsel (Capell &
Howard, P.C., Montgomery, Alabama) in form and substance satisfactory
to the Bank.
(5) Opinion of Counsel for the Credit Obligors. An opinion of
counsel for the Credit Obligors (Capell & Howard, P.C., Montgomery,
Alabama) in form and substance satisfactory to the Bank.
(6) Opinion of Counsel for the Board. An opinion of counsel for the
Board (Sol E. Brinsfield, Jr.) in form and substance satisfactory to
the Bank.
(7) Approvals of Credit Obligors. A certified copy of proceedings
of the Credit Obligors with respect to actions respectively taken by
the Credit Obligors approving the Financing Documents and the
consummation of the transactions contemplated thereby.
(8) Certificates of the Credit Obligors. A certificate by each of
the Credit Obligors to the effect that, as of the date of delivery of
the Letter of Credit and after giving effect thereto: (i) no Event of
Default shall have occurred and be continuing; (ii) no event shall have
occurred and be continuing which, with notice or lapse of time or both,
would constitute an Event of Default under this Agreement, and (iii)
the representations and warranties made by the Credit Obligor in
Section 4.01 hereof shall be true on and as of such date with the same
force and effect as if made on and as of such date.
(9) Insurance. Copies of all insurance policies required hereby.
(10) UCC Report. A report from the offices where Uniform Commercial
Code financing statements would be properly filed with respect to
property and interests of the Credit Obligors located in the State of
Alabama and the State of Florida indicating that there are no liens
against that portion of the Collateral constituting personal property
except for liens as shall be acceptable to the Bank.
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(11) Corporate Guaranty Agreement. The Corporate Guaranty Agreement
of Peregrine Global, Inc. in favor of the Bank guaranteeing all of the
obligations of the Credit Obligors hereunder.
(12) Individual Guaranty Agreement. The Individual Guaranty
Agreement of Merrill A. Yarbrough, Jr. in favor of the Bank
guaranteeing all of the Obligations of the Credit Obligors hereunder.
(13) Building Sublease. The Building Sublease.
(14) Origination Fee. Payment of the origination fee in the amount
of .25% of the face amount of the Letter of Credit.
(15) Appraisal. An appraisal of the Deerfield Equipment and such
other additional personal property constituting Collateral (not
including, however, collateral to be purchased with the proceeds of the
Bonds) which appraisal must indicate a value of not less than an amount
equal to 20% of the face amount of the Letter of Credit.
(16) Landlord's Lien Waiver and Non-Disclosure Agreement. An
agreement executed by the owner and any mortgagee of the Project
Building and Project Site, in form satisfactory to the Bank,
recognizing the Bank's security interest in the collateral and waiving
all liens prior thereto.
(17) Additional Evidence. Such additional legal opinions,
certificates, proceedings, instruments, and other documents as the Bank
or its counsel may reasonably request to evidence (i) compliance by the
Credit Obligors with legal requirements, (ii) the truth and accuracy,
as of the date of delivery of the Letter of Credit, of the
representations of Credit Obligors contained in the Financing
Documents, and (iii) the due performance or satisfaction by the Credit
Obligors, at or prior to the date of delivery of the Letter of Credit,
of all agreements then required to be performed and all conditions then
required to be satisfied by the Credit Obligors pursuant to the
Financing Documents.
Any proposed material change in the cost budget for the Project from the cost
budget originally approved by the Bank shall be subject to the Bank's approval.
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ARTICLE 4
REPRESENTATIONS AND COVENANTS
Section 4.01 General Representations of the Credit Obligors
The Credit Obligors each individually make the following
representations and warranties as the basis for the undertakings herein
contained:
(1) It is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Alabama, in the case of
Alcool, and the State of Florida, in the case of Peregrine, and is
authorized to do business in all jurisdictions in which the character
of its properties or the nature of its business requires such
qualifications or authorization.
(2) It has the power and authority to own its properties and assets
and to carry on its business as now being conducted and as now proposed
to be conducted.
(3) Its financial statements that have been furnished to the Bank
are complete and correct in all material respects and fairly present
its financial condition as of the date or dates indicated and for the
periods involved. There has been no materially adverse change in its
financial condition or operations since the date of its most recent
financial statements furnished to the Bank.
(4) It has good and marketable title to all its properties and
assets reflected on its most recent balance sheet furnished to the
Bank, except for such properties and assets as have been disposed of
since the date of such balance sheet as no longer used or useful in the
conduct of its business or as have been disposed of in the ordinary
course of its business. All such properties and assets are free and
clear of liens of any nature, except as disclosed in such financial
statements.
(5) It has filed or caused to be filed all federal, state and local
tax returns which are required to be filed by it as of the date hereof,
and has paid or caused to be paid all taxes as shown on such returns or
on any assessments received by it to the extent that such taxes have
become due and payable, except such taxes or returns the failure to pay
or file would not have a material adverse affect on the business or
operations of the Credit Obligors.
(6) It has not used, and does not intend to use, any part of the
proceeds of the Bonds, and has not incurred any indebtedness to be
reduced, retired, or purchased by it out of such proceeds, for the
purpose of purchasing or carrying any margin stock within the meaning
of Regulation U of the Board of Governors of the Federal Reserve
System, and it does not own and has no intention of acquiring any such
margin stock.
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(7) The execution and delivery of the Financing Documents to which
it is a party does not involve any prohibited transaction within the
meaning of the Employee Retirement Income Security Act of 1974, as
amended (ERISA), of the Internal Revenue Code. It has fulfilled its
obligations, if any, under minimum funding standards of ERISA and is in
compliance in all material respects with the applicable provisions of
ERISA.
(8) It has full legal power to consummate the transactions
contemplated by the Financing Documents to which it is a party.
(9) By proper action of its Board of Directors and Stockholders it
has duly authorized the execution and delivery of the Financing
Documents to which it is a party and the consummation of the
transactions contemplated therein.
(10) It has obtained all consents, approvals, authorizations, and
orders of governmental authorities that are required to be obtained by
it as a condition to the execution and delivery of the Financing
Documents to which it is a party.
(11) The execution and delivery by it of the Financing Documents to
which it is a party and the consummation by it of the transactions
contemplated therein do not and will not (i) conflict with, be in
violation of, or constitute (upon notice or lapse of time or both) a
default under its articles of incorporation or bylaws or any indenture,
mortgage, deed of trust or other contract, agreement or instrument to
which it is a party or is subject, or any resolution, order, rule,
regulation, writ, injunction, decree or judgment of any governmental
authority or court having jurisdiction over it which would result in a
material adverse effect on the business or operations of the Credit
Obligors or (ii) result in or require the creation or imposition of any
lien of any nature upon or with respect to any of its properties now
owned or hereafter acquired, except as contemplated by the Financing
Documents.
(12) The Financing Documents to which it is a party constitute
legal, valid, and binding obligations and are enforceable against it in
accordance with the terms of such instruments, except as enforcement
thereof may be limited by (i) bankruptcy, insolvency, or other similar
laws affecting the enforcement of creditors' rights and (ii) general
principles of equity, regardless of whether such enforceability is
considered in a proceeding at equity or at law.
(13) Except as described in the Official Statement relating to the
Bonds, there is no action, suit, proceeding, inquiry or investigation
pending before any court or governmental authority, or, to the best of
the Credit Obligor's knowledge, threatened against it or affecting it
or its properties, that (i) involves the consummation of the
transactions contemplated by, or the validity or enforceability
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of, any of the Financing Documents or (ii) could have a materially adverse
impact upon its financial condition or operations.
(14) All utility and sanitary sewage services necessary for the use
of the Project are available to the Project.
(15) Neither the Credit Obligor nor any of the Collateral is in
violation of any easements, covenants or restrictions affecting any the
Collateral, the violation of which could have a material adverse effect
on the business or operations of the Credit Obligor.
(16) It has obtained all necessary licenses, franchises, permits,
certificates of need and other authorizations necessary for the
operation of the Collateral under applicable laws, ordinances, and
regulations, except where the failure to do so would not have a
material adverse affect on the business or operations of the Credit
Obligor.
(17) Neither the Collateral nor the Credit Obligors are in material
violation of, or subject to, any existing, pending, or to the Credit
Obligors' knowledge, threatened investigation or inquiry by any
governmental authority or any remedial obligations under any applicable
laws, rules or regulations pertaining to health or the environment,
including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA")
or the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), and there are no facts, conditions or circumstances known to
them which are likely to result in any such investigation or inquiry if
such facts, conditions and circumstances, if any, were fully disclosed
to the applicable governmental authority, and the Credit Obligors will
promptly notify the Bank if the Credit Obligors become aware of any
such facts, conditions or circumstances or any such investigation or
inquiry; the Credit Obligors have obtained all material permits,
licenses, or similar authorizations to construct, occupy, operate or
use any buildings, improvements, fixtures or equipment in connection
with the Collateral constructed or to be constructed by reason of any
environmental laws, rules or regulations; no oil, toxic or hazardous
substances, solid wastes, irritants, contaminants, or infectious or
medical wastes have been disposed of or released at the site of the
Collateral, except in the ordinary course of business and in compliance
with all applicable laws and regulations, and the Credit Obligors agree
that they will not in their use of such property dispose of or release
oil, toxic or hazardous substances, solid wastes, irritants,
contaminants, or infectious or medical wastes on such property except
in the ordinary course of business and in compliance with all
applicable laws and regulations, (the terms "hazardous substance" and
"release" shall have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal," "dispose" or "disposed" shall have the
meanings specified in RCRA, except that if such acts are amended to
broaden the meanings thereof, the broader meaning shall apply herein).
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(18) No proceedings are pending, or, to the best of the Credit
Obligors' knowledge, threatened, to acquire any power of condemnation
or eminent domain, with respect to the Collateral or any interest
therein, or to enjoin or similarly prevent or restrict the operation of
the Collateral in any manner.
Section 4.02 Corporate Existence
The Credit Obligors shall do or cause to be done all things necessary
to keep their corporate existences in full force and effect and shall not merge
with any other entity or dissolve or transfer all or substantially all their
assets to any other person without the prior written consent of the Bank.
Section 4.03 Accounting Records
The Credit Obligors will maintain proper books of record and account,
in which full and correct entries regarding its business and affairs will be
made.
Section 4.04 Reports to Bank
Peregrine shall furnish to the Bank on a consolidated basis with Alcool
and all of its other subsidiaries:
(1) Not later than 20 days after the end of each calendar month, an
unaudited income and expense statement and balance sheet of Peregrine
certified by the chief financial officer of Peregrine, together with
statements in comparative form for the preceding month.
(2) Not later than 120 days after the end of each fiscal year of
Peregrine, audited financial statements of income and retained earnings
of Peregrine for such fiscal year, together with statements in
comparative form for the preceding such fiscal year, prepared by an
independent certified public accountant acceptable to the Bank.
(3) Together with the financial statements required by paragraphs
(1) and (2) above, a certificate of the chief financial officer of
Peregrine stating that, except as disclosed in such certificate, (i) no
event of default exists under any of the Financing Documents to which
the Credit Obligors are a party or under any instrument evidencing or
securing any other indebtedness or contingent liability of the Credit
Obligors, and (ii) no event has occurred and is continuing which, with
notice or lapse of time or both, would constitute an event of default
under any of the Financing Documents to which the Credit Obligors are a
party or under any instrument evidencing or securing any other
indebtedness or contingent liability of the Credit Obligors. If any
such event of default exists or any such event has
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occurred and is continuing, such certificate shall contain a
description of the nature and extent thereof.
(4) Not less than annually a certified personal financial statement
of Merrill A. Yarbrough, Jr.
(5) Such other information regarding the Collateral or the
financial condition or operations of Peregrine as the Bank shall
reasonably request.
Section 4.05 Incorporation of Covenants by Reference
The Credit Obligors agree that they will perform and comply with each
and every covenant and agreement required to be performed or observed by them in
the Financing Documents, which provisions, as well as related defined terms
contained therein, are hereby incorporated by reference herein with the same
effect as if each and every such provision were set forth herein in its
entirety. To the extent that any such incorporated provision permits the Trustee
or the holders of one or more Bonds or any other person to waive compliance with
such provision or requires that a document, opinion or other instrument or any
event or condition be acceptable or satisfactory to the Trustee or the holders
of one or more Bonds or any other person, for purposes of this Agreement, such
provision shall be complied with only if it is waived by the Bank and such
document, opinion or other instrument and such event or condition shall be
acceptable or satisfactory only if it is acceptable and satisfactory to the
Bank. No amendment to such covenants and agreements or defined terms made
pursuant to any of the Financing Documents shall be effective to amend such
covenants and agreements and defined terms as incorporated by reference herein
without the consent of the Bank.
Section 4.06 Payment of Taxes
The Credit Obligors will pay or cause to be paid as they become due and
payable, prior to penalty or the expiration of applicable grace periods, all
taxes, assessments and other governmental charges lawfully levied or assessed or
imposed upon them or their properties or any part thereof or upon any income
therefrom; provided, that the Credit Obligors shall not be required to pay and
discharge or cause to be paid and discharged any such tax, assessment or
governmental charge to the extent that the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate proceedings,
the Credit Obligors promptly notify the Bank of such contest and the Credit
Obligors shall have established and maintain with the Bank security satisfactory
to the Bank, or established reserves with respect thereto in accordance with
generally accepted accounting principles, against any loss, damage or injury
that may result if the Credit Obligors are unsuccessful in such contest. The
Bank may, at its option, require the Credit Obligors to make monthly escrow
deposits with the Bank for annual payments of ad valorem taxes and hazard
insurance premiums.
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Section 4.07 Maintenance of Properties
The Credit Obligors will cause all their properties necessary or useful
in the conduct of their businesses to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and will
cause to be made all necessary repairs, renewals, replacements, alterations,
betterments and improvements thereof, all as in the judgment of the Credit
Obligors may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
Section 4.08 Operation of Collateral
The Credit Obligors will conduct the operation of the Collateral at all
times in a prudent manner in compliance with applicable laws and regulations
relating thereto and will maintain in effect all material licenses, permits, and
certificates necessary for the use and operation of the Collateral.
Section 4.09 Amendments to Financing Documents
Unless the Bank shall otherwise consent in writing (which consent may
be granted or refused in the Bank's reasonable discretion), the Credit Obligors
agree not to enter into or consent to or effectuate any amendment to or
assignment of any of the Financing Documents.
Section 4.10 Other Agreements
The Credit Obligors shall not enter into any agreement containing any
provision which would be violated or breached by the performance of their
obligations hereunder or under the Financing Documents or under any instrument
or document delivered or to be delivered by them hereunder or in connection
therewith.
Section 4.11 Financing of Project
Simultaneously with the closing of the sale of the Bonds, the Credit
Obligors shall cause the Board to apply the net proceeds received from the sale
of the Bonds for the following purposes and in the following order:
(1) There shall be paid all costs of the issuance of the Bonds
including, without limitation, all recording costs, appraisal fees,
legal fees and expenses (including the legal fees and expenses of the
Bank's counsel), engineering fees, printing costs, and fiscal agent's
fees.
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(2) The balance, if any, of the proceeds of the Bonds shall be
deposited in the Construction Fund created under the Indenture and
disbursed as therein provided.
There shall also be paid from the Construction Fund, upon closing, all amounts
owing SouthTrust Bank, National Association under temporary loans the proceeds
of which were used on or after September 30, 1998 to purchase any part of the
Collateral. It is anticipated that the total Project Costs will exceed the
$2,460,000 principal amount of the Bonds and will be approximately $2,800,000.
Advances from the Construction Fund will be made as requested for the payment of
Project Costs so long as the total amount advanced does not exceed 80% of the
invoice purchase price of equipment purchased plus 80% of the appraised value of
additional collateral furnished (i.e., 80% of the appraised value of the
Deerfield Equipment or other equipment paid for by Alcool). If the full amount
of the proceeds in the Construction Fund have not been disbursed within 18
months from the date of closing, any remaining funds in the Construction Fund
shall be used to redeem Bonds.
Section 4.12 Maintenance of Insurance
The Credit Obligors will at all times maintain and keep in force
insurance of the types and in the amounts customarily carried in lines of
business similar to the Credit Obligors' and such other insurance as the Bank
may reasonably require, including, without limitation, property insurance
indicating all-risk coverage on the Project Equipment, in each case in amounts
sufficient to cover the replacement of the cost of the subject property,
containing a replacement cost endorsement, and insuring against such potential
causes of loss as shall be required by the Bank, including, but not limited to
loss or damage from wind, fire, ice and subsidence. The Credit Obligors shall
provide the Bank a mortgagee endorsement with respect thereto. The Credit
Obligors will also provide business interruption insurance in an amount mutually
acceptable to the Credit Obligors and the Bank. All policies shall name the Bank
as mortgagee and loss payee and provide that the Bank shall receive not less
than 30 days written notice of cancellation. The Credit Obligors will also
maintain and provide the Bank with evidence of liability insurance satisfactory
to the Bank, and will provide workman's compensation insurance, in an amount
required by Alabama law. In the event the survey indicates that any of the
Project lies within a flood hazard area, the Credit Obligors agree to furnish
flood insurance as required by the Bank. The issuer and form of all policies
shall be subject to the Bank's review and approval. The Credit Obligors shall
deliver to the Bank from time to time at the Bank's request copies of all such
insurance policies and certificates of insurance and schedules setting forth all
insurance then in effect.
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Section 4.13 Compliance with Environmental Laws
The Credit Obligors will at all times maintain all of their real
property and business operations in compliance with all applicable present and
future federal, state and local environmental laws, regulations and court or
administrative orders relating to pollution control and environmental
contamination unless such failure to comply would not have a material adverse
effect on the Credit Obligors; and immediately notify the Bank of any knowledge,
notice, actions, lien or other similar action alleging either the location of
any hazardous substances or the violation of any environmental laws with respect
to such real property.
Section 4.14 Damage and Destruction
(a) If before the Obligations are paid in full, all or any portion of
the Collateral is damaged or destroyed by fire, explosion or other hazard, and
if the Credit Obligors, within ten days after the event causing such damage or
destruction, advise the Bank in writing that in the Credit Obligors' opinion the
Collateral can be restored within six months after such event to substantially
the same operating utility that it had prior to such event, then at the Credit
Obligors' request the net proceeds of insurance resulting from such damage or
destruction shall be given to the Credit Obligors to be used, to the extent
necessary, for the purpose of reconstructing any damaged portion of the
Collateral or remedying a loss thereof, provided, however, that if the damage or
loss is of an amount in excess of $250,000 such proceeds shall be held by the
Bank prior to reconstruction or reinvestment in the Collateral and paid over to
the Credit Obligors only upon delivery of invoices or other appropriate
documentation. Any net proceeds of insurance that are not paid to the Credit
Obligors pursuant to the preceding sentence shall be paid to the Trustee and
applied toward prepayment of the Obligations, in any order, whether or not then
due.
(b) If before all Obligations are paid in full, all or any portion of
the Collateral is damaged or destroyed by fire, explosion or other hazard, and
if the Credit Obligors fail to advise the Bank, within ten days after the event
causing such damage or destruction, that in the Credit Obligors' opinion the
Collateral can be restored within six months after the event causing such damage
or destruction to substantially the same operating utility it had prior to such
event, then at the option of the Bank, the net proceeds of insurance resulting
from such damage or destruction shall be paid to the Bank and applied toward
prepayment of the Obligations, in any order, whether or not then due.
Section 4.15 Condemnation
If before all Obligations are paid in full, title to, or the temporary
use of, the Collateral or any portion thereof is taken under the exercise of the
power of eminent domain by any governmental body or by any person, firm or
corporation acting under governmental authority, the proceeds received by the
Credit Obligors and/or the Bank from any award in such eminent domain
proceedings shall be applied and certain related actions shall be taken as
follows:
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(1) if in the Bank's reasonable opinion exercised in good faith
such taking does not significantly impair the operating utility of the
Collateral, then the proceeds of such award shall be paid to the Credit
Obligors;
(2) if in the Bank's reasonable opinion exercised in good faith
such taking significantly impairs the operating utility of the
Collateral and
A. in the Credit Obligors' opinion, repairs, restorations,
modifications, relocations, rearrangements and acquisitions of
substitute facilities and improvements can be made within three
months after such taking to the extent necessary to restore the
Collateral to substantially the same operating utility that it had
prior to such taking and the Credit Obligors agree to make such
restoration and pay all of the costs thereof in excess of the
proceeds of such award, then the proceeds of such award shall be
paid to the Credit Obligors; or
B. in the Credit Obligors' opinion, the Collateral cannot
within three months after such taking be restored to substantially
the same operating utility that it had prior to such taking, or if
the Credit Obligors do not agree to undertake such restoration and
pay the costs thereof in excess of the proceeds of such award,
then the proceeds of such award shall be paid to the Bank and
applied toward prepayment of the Obligations, in any order,
whether or not then due.
Section 4.16 Redemption of Bonds
The Credit Obligors agree to cause the Board to redeem outstanding
Bonds pursuant to the optional redemption provisions contained in Article VI of
the Indenture in accordance with the following schedule:
Principal Amount
Redemption Date to be Redeemed
--------------- --------------
(June 1)
2000 $295,000
2001 310,000
2002 330,000
2003 350,000
2004 370,000
2005 390,000
2006 415,000
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The Credit Obligors shall make monthly payments, on the first day of each month
commencing July 1, 1999, to the Trustee for deposit into the Bond Fund in an
amount equal to one-twelfth (1/12) of the amount of the principal required to be
redeemed, as set forth above, on the next succeeding June 1. Such payments shall
be deemed "Basic Rental Payments" under Section 4.02(a) of the Lease Agreement.
The provisions of this Section 4.16 are for the benefit of the Bank only and may
be waived or terminated at any time by the Bank and may be modified or amended
at any time by the written agreement of the Bank and the Credit Obligors without
the consent of the Trustee or any other party; provided, however, the Bank shall
promptly notify the Trustee of any changes in the principal redemption schedule.
Section 4.17 Disposition of Collateral
The Credit Obligors hereby agree that as long as any of the Obligations
hereunder of the Credit Obligors to the Bank remain unpaid, the Credit Obligors,
unless the Bank consents in writing, shall not sell, assign, lease, convey or
otherwise dispose of any portion of the Collateral in any one fiscal year having
an aggregate market value in excess of $250,000, wherever located, whether now
owned or hereafter acquired, or permit any Subsidiary to do so, except in the
ordinary course of business. In addition, the Credit Obligors may repair or
replace inadequate, obsolete or worn out machinery and equipment so long as the
Credit Obligors substitute other machinery or equipment therefor of equal or
greater value.
Section 4.18 Creation of Liens
The Credit Obligors hereby agree that as long as any of the Obligations
hereunder of the Credit Obligors to the Bank remain unpaid, the Credit Obligors,
unless the Bank consents in writing, shall not create, incur or permit any
mortgage, encumbrance, lien, or security interest against any of the Collateral
except (i) those currently outstanding, (ii) those pledged previously to the
Bank or incurred pursuant to this Agreement, (iii) deposits regarding worker's
compensation unemployment insurance, pensions or other employee benefits, (iv)
tax liens for taxes not due or which are being contested in good faith, during
any fiscal year or (v) materialmen's lien for sums not yet due and payable.
Section 4.19 Financing and Other Operating Covenants
The Credit Obligors hereby covenant and agree that Peregrine, on a
consolidated basis with all of its Subsidiaries, shall at all times maintain
(1) Fixed Charge Coverage Ratio: a Fixed Charge Coverage Ratio of not
less than 1.25 to 1. As used herein, "Fixed Charge Coverage Ratio"
shall mean the ratio of net income plus depreciation, interest
expense and lease expense to current maturities of long-term debt
plus interest expense and lease
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expense. "Lease expense," as used herein, shall include without
limitation, rent payable under the Building Lease.
(2) Debt to Net Worth Ratio: a total Debt to tangible net worth ratio
not exceeding 2.0 to 1.0. As used herein, "Debt" shall mean (i) all
indebtedness for the repayment of borrowed money, (ii) all deferred
indebtedness for the payment of the purchase price of property or
assets purchased, (iii) all capitalized lease obligations and (iv)
all indebtedness secured by any mortgage or pledge of, or lien on,
property, whether or not indebtedness secured thereby shall have
been assumed.
The Credit Obligors further hereby covenant and agree that they
(including their Subsidiaries) shall
(1) make no capital expenditures outside of the United States in
any one fiscal year in excess of $75,000;
(2) maintain a Warranty Reserve Account at a level satisfactory to
the Bank, adjusted from time to time;
(3) continue to insure foreign receivables at the maximum amounts
insurable; and
(4) require payment from foreign customers in United States dollars
only, except for Canadian customers who may pay in Canadian dollars.
Accounting terms used herein but not otherwise defined in this Section 4.19
shall have the meanings given them under generally accepted accounting
principles.
Section 4.20 Subordination of Stockholder Indebtedness
Any indebtedness of the Credit Obligors now or hereafter existing which
is payable to any stockholder of the Credit Obligors shall be subordinated to
any indebtedness of the Credit Obligors due SouthTrust Bank, National
Association in terms of both collateral and payment; provided, however, payments
of current interest (but not principal payments) will be permitted subject to
the rate of interest being paid not exceeding the Bank's Base Rate; and
provided, further, the provisions of this Section 4.20 shall not apply to the
currently outstanding 5% cumulative convertible Preferred Stock of Peregrine.
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ARTICLE 5
EVENTS OF DEFAULT AND REMEDIES
Section 5.01 Events of Default
Any one or more of the following shall constitute an event of default
(an "Event of Default") under this Agreement (whatever the reason for such event
and whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body or whether committed by
either or both of the Credit Obligors):
(1) default in any payment required under Article 2 hereof as
and when the same shall become due and payable; or
(2) default in the performance or breach of any covenant or
warranty of the Credit Obligors in this Agreement (other than a
covenant or warranty, a default in the performance or breach of
which is elsewhere in this Section specifically dealt with), and
the continuance of such default or breach for a period of 30 days
after there has been given to the Credit Obligors by the Bank a
written notice specifying such default or breach; or
(3) the filing of a petition in bankruptcy (or other
commencement of a bankruptcy or similar proceeding) by the Credit
Obligors under any applicable bankruptcy, insolvency,
reorganization, or similar law, now or hereafter in effect; or
(4) the filing of a petition in bankruptcy (or other
commencement of a bankruptcy or similar proceeding) against the
Credit Obligors under any applicable bankruptcy, insolvency,
reorganization, or similar law, now or hereafter in effect, and
such petition shall not be discharged or dismissed within 90 days
after the date on which such petition was filed; or
(5) any representation or warranty made by the Credit Obligors
herein or in any document, instrument or certificate furnished to
the Bank in connection with the issuance of the Letter of Credit or
the consummation of the transactions contemplated by the Financing
Documents shall at any time prove to have been false or incorrect
in any material adverse respect as of the time made; or
(6) the occurrence of an Event of Default, as therein defined,
under any Financing Document and the expiration of the applicable
grace period, if any, specified therein; or
(7) if a judgment in excess of $100,000 is rendered against the
Credit Obligors or any Subsidiary and such judgment not having been
satisfied or released by the holder thereof within a period of 30
days after final adjudication thereof.
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(8) if any executive officer of the Credit Obligors shall
receive notice or otherwise have knowledge of hazardous discharge
or environmental complaint which may have a material adverse effect
on the Credit Obligors, and the Credit Obligors shall fail to give
notice of such hazardous discharge or environmental complaint to
the Bank within five days of such executive officer's first
knowledge thereof.
(9) if there exists any "prohibited transaction" under Section
406 of the Employee Retirement Income Security Act (ERISA) or
Section 4975 of the Internal Revenue Code, or any existence "of any
reportable event" under Section 4043 of ERISA, in any employee
benefit plan of the Credit Obligors or any Subsidiary subject to
ERISA or there occurs the termination of any defined benefit plan
of the Credit Obligors or any Subsidiary, and such transaction,
event or termination has a material adverse effect on the Credit
Obligors or creates a lien on any assets of the Credit Obligors
superior to the security interest granted the Bank in the Financing
Documents and such lien remains outstanding for a period of 30 days
without discharge.
(10) if either of the Credit Obligors or any Subsidiary
abandons its business, either voluntarily or involuntarily.
(11) if the Credit Obligors sell or otherwise transfer or
encumber the Project Equipment or any portion of the Collateral
without the prior written consent of the Bank except as may be
permitted by the Financing Documents.
(12) if the Individual Guarantor defaults in the payment or
performance of any obligation under the Individual Guaranty
Agreement or the Corporate Guarantor defaults in the payment or
performance of any obligation under the Corporate Guaranty
Agreement.
(13) if Peregrine defaults under the terms of the Revolving
Line of Credit.
(14) The sale of transfer by the Credit Obligors of any part of
the Collateral other than in the ordinary course of business
without the written consent of the Bank.
(15) The sale or transfer of all or any part of Peregrine's
100% ownership interest in Alcool or the reduction in the ownership
of Merrill A. Yarbrough, Jr. in Peregrine to below 51% of the
equity interest therein.
(16) The death of Merrill A. Yarbrough, Jr.; provided the Bank
shall take no remedial action under Section 5.02 because of the
death of Merrill A. Yarbrough, Jr. for a period of 60 days
immediately following the death of Merrill A. Yarbrough, Jr.
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Section 5.02 Remedies
(a) Upon the occurrence of any Event of Default, regardless of any
requirement that notice be given or a period of time elapse, the Bank shall have
the absolute right and at its option and election and in its sole discretion to
exercise alternatively or cumulatively any or all of the remedies set forth in
this Section 5.02.
(b) Without limitation upon the provisions of paragraph (a) above, if
any Event of Default shall have occurred and be continuing, the Bank may
exercise any of the following remedies:
(1) give written notice of an Event of Default under the Credit
Agreement to the Trustee directing the Trustee to effect a purchase of
the Bonds as provided in Section 4.05(a)(3) of the Indenture; or
(2) give written notice of an Event of Default under the Credit
Agreement to the Trustee directing the Trustee to "accelerate the
Bonds" pursuant to Sections 12.01(4) and 12.02 of the Indenture,
whereupon an event of default shall occur under the Indenture, and the
Trustee shall declare the Bonds immediately due and payable and shall
make a draw under the Letter of Credit to pay the principal of the
Bonds and the interest thereon to the date of such declaration; or
(3) upon notice to the Credit Obligors, declare all amounts, if
any, not otherwise immediately due under this Credit Agreement to be,
and all such amounts shall thereupon become, due and payable to the
Bank, without presentment, demand, protest, or other notice of any
kind, all of which are expressly waived, anything in this Credit
Agreement to the contrary notwithstanding; or
(4) exercise any or all rights, powers or remedies granted the Bank
under any or all of the Security Documents;
(5) exercise any or all rights, powers or remedies granted
SouthTrust Bank, National Association under the Revolving Line of
Credit or any document securing the same;
(6) exercise its banker's lien or right of set-off; or
(7) proceed to protect its rights by suit in equity, action at law
or other appropriate proceedings, whether for the specific performance
of any covenant or agreement of the Credit Obligors herein contained or
in aid of the exercise of any power or remedy granted to the Bank under
any Financing Document.
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Section 5.03 Acceleration of Reimbursement
If an Event of Default exists under this Agreement and the maturity of
the Bonds has not been accelerated pursuant to Section 12.02 of the Indenture,
the Credit Obligors agree to pay to the Bank, promptly upon demand by the Bank
therefor, an amount equal to the maximum amount available to be drawn under the
Letter of Credit. All amounts so paid to the Bank (or recovered by the Bank by
legal or other action in the event the Credit Obligors shall fail or refuse to
make payment as required by this Section) shall be held by the Bank in reserve
as security for reimbursement for any draws the Bank may be required to pay
under the Letter of Credit with respect to which an acceleration has not
occurred. The Bank may maintain any reserve held under the terms of this
Agreement in any manner the Bank may see fit, and the Bank shall invest the same
in such investment or investments (including but not limited to certificates of
deposit issued by the Bank) as the Bank may choose, subject to any applicable
arbitrage restriction or regulation. The Bank shall not be required to pay, or
to account to the Credit Obligors or anyone else for, any interest or other
earnings on any reserve at any time held by the Bank under this Agreement,
except that any income or profits from any investment of such reserve made by
the Bank shall become a part of such reserve. At such time as all of the
Obligations have been paid in full and the Letter of Credit has been terminated,
all amounts remaining in such reserve (if any) shall be paid to the Credit
Obligors.
Section 5.04 No Remedy Exclusive
No remedy herein conferred upon or reserved to the Bank is intended to
be exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
under this Agreement or now or hereafter existing at law or in equity or by
statute. No delay or omission to exercise any right or power accruing upon any
default shall impair any such right or power or shall be construed to be a
waiver thereof but any such right or power may be exercised from time to time
and as often as may be deemed expedient.
Section 5.05 Agreement to Pay Attorneys' Fees
If the Credit Obligors should default under any of the provisions of
this Agreement and the Bank should employ attorneys or incur other expenses for
the collection of any payments due hereunder or the enforcement of performance
or observance of any agreement or covenant on the part of the Credit Obligors
herein contained, the Credit Obligors will, within 15 days of the Credit
Obligors' receipt of demand therefor, pay to the Bank the reasonable fees of
such attorneys and such other reasonable expenses so incurred.
Section 5.06 No Additional Waiver Implied by One Waiver
If any agreement contained in this Agreement should be breached by the
Credit Obligors and thereafter waived by the Bank, such waiver shall be limited
to the particular breach so waived and shall not be deemed to waive any other
breach hereunder.
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Section 5.07 Remedies Subject to Applicable Law
All rights, remedies and powers provided by this Article may be
exercised only to the extent the exercise thereof does not violate any
applicable provision of law in the premises, and all the provisions of this
Article are intended to be subject to all applicable mandatory provisions of law
which may be controlling in the premises and to be limited to the extent
necessary so that they will not render this Agreement invalid or unenforceable.
Section 5.08 Waiver by Credit Obligors
The Credit Obligors hereby waive, as to the enforceability of this
Agreement, except as set forth herein or in any of the other Financing
Documents, presentation and demand for payment (or protest of nonpayment) of the
Obligations or, until the Obligations have been fully paid, any rights of
subrogation it may have against others by reason of performance under this
Agreement.
ARTICLE 6
MISCELLANEOUS
Section 6.01 No Waiver
No failure or delay on the part of the Bank in exercising any right,
power or remedy hereunder shall be construed as a waiver of such; nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof. The remedies herein provided are cumulative and not
exclusive of any other remedies provided by law.
Section 6.02 Entire Agreement
This Agreement contains the entire agreement between the parties
relating to the subject matter hereof and supersedes all oral statements and
prior writings and agreements with respect thereto.
Section 6.03 Review by Credit Obligors
The Credit Obligors expressly acknowledge that they have had an
adequate opportunity to review this Agreement and all documents related thereto,
that they are under no compulsion to execute this Agreement or any instruments
contemplated herein, that they have not in any way relied upon the advice or
recommendations of the Bank, its officers, shareholders, directors, employees,
or attorneys, except as set forth in this Agreement.
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Section 6.04 Waiver of Trial by Jury
TO THE EXTENT LEGALLY ENFORCEABLE, THE BANK AND THE CREDIT OBLIGORS
IRREVOCABLY WAIVE ALL RIGHTS TO A TRIAL BY JURY IN ANY COURT IN ANY ACTION: (a)
THE BANK BRINGS TO COLLECT AMOUNTS OWED THE BANK UNDER THIS AGREEMENT AND (b)
ALLEGING THAT (i) THE BANK HAS BREACHED THIS AGREEMENT, OR ANY AGREEMENT
RELATING TO THIS AGREEMENT, (ii) THE BANK HAS BREACHED ANY OTHER AGREEMENT,
EXPRESS OR IMPLIED, (iii) THE BANK OR ANY OF ITS OFFICERS, EMPLOYEES OR AGENTS
HAVE ACTED WRONGFULLY, NEGLIGENTLY OR OTHERWISE TORTIOUSLY WITH RESPECT TO THE
CREDIT OBLIGORS.
To the extent that any court of competent jurisdiction determines that
such jury waiver is inapplicable or unenforceable with respect to any claim or
dispute, such claim or dispute shall be submitted to and settled by final and
binding arbitration under the Federal Arbitration Act or other applicable law
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association. Such proceeding shall be held before a single arbitrator who is an
active attorney or retired judge. The party against which the decision is
rendered shall pay the costs and reasonable attorneys' fees of the prevailing
party for any arbitration proceeding.
Section 6.05 Notices
(a) Any request, demand, authorization, direction, notice, consent, or
other document provided or permitted by this Agreement to be made upon, given or
furnished to, or filed with, Alcool, Peregrine or the Bank shall be sufficient
for every purpose hereunder if in writing and (except as otherwise provided in
this Agreement) either (i) delivered personally to the party or, if such party
is not an individual, to an officer, partner, member or other legal
representative of the party to whom the same is directed, or (ii) mailed by
registered or certified mail, postage prepaid and addressed as follows:
If to Alcool:
Alcool, Inc.
2511 MidPark Road
Montgomery, AL 36109
Attention: President
If to Peregrine:
Peregrine Industries, Inc.
730 South Military Trail
Deerfield, FL 33442
Attn: Merrill A. Yarbrough, Jr.
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If to the Bank:
SouthTrust Bank, National Association
2895 Eastern Boulevard
Montgomery, Alabama 36116
Attention: John W. Livings
Any of such parties may specify a different address for the receipt of such
documents by mail by giving notice of the change in address to the other party
as provided in this Section.
(b) Any such notice or other document shall be deemed to be received
(i) as of the date delivered, if delivered personally in accordance with
subsection (a)(i) of this Section, or (ii) as of three days after the date
deposited in the mail, if mailed in accordance with subsection (a)(ii) of this
Section.
Section 6.06 Indemnification
(a) The Credit Obligors, jointly and severally, agree to defend,
indemnify, and hold harmless the Bank, its directors, officers, employees, and
agents from and against any and all claims, demands, judgments, damages,
actions, causes of action, injuries, orders, penalties, reasonable costs and
expenses, (including without limitation, costs of court and reasonable
attorney's fees) of any kind whatsoever in connection with the execution and
delivery or transfer of or payment or failure to pay under the Letter of Credit;
provided, however, said indemnities shall not apply to any claims, damages,
lawsuits, liabilities, costs, or expenses to the extent, but only to the extent,
caused by (i) the willful misconduct or negligence of the Bank in determining
whether a draft or certificate presented under the Letter of Credit complied
with the terms of the Letter of Credit; or (ii) the Bank's negligent or willful
failure to pay under the Letter of Credit after presentation to it by the
Trustee of a draft and certificate strictly complying with the terms and
conditions of the Letter of Credit.
(b) The Credit Obligors shall indemnify and hold the Bank harmless from
and against any fines, charges, expenses, fees, attorney fees and costs incurred
by the Bank in the event the Credit Obligors or the Collateral (whether or not
due to any fault of the Credit Obligors) are hereafter determined to be in
violation of any environmental laws, rules or regulations applicable thereto,
including, without limitation, those described in Section 4.01(17) of this
Agreement, but only with respect to such violations that occur or exist prior to
foreclosure of the Mortgage or transfer of deed in lieu of foreclosure, and this
indemnity shall survive any foreclosure of the Mortgage or deed in lieu of
foreclosure and repayment of the Obligations.
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Section 6.07 Liability of the Bank
For the exclusive benefit of the Bank and as between the Bank and the
Credit Obligors only, the Credit Obligors assume all risks of, but shall not be
liable or responsible to the Bank or any other person or entity for damages
arising out of, the acts or omissions of the Trustee and any transferee of the
Letter of Credit with respect to the Trustee's or such transferee's use of the
Letter of Credit. Neither the Bank nor any of its officers or directors shall be
liable or responsible for: (i) the use which may be made of the Letter of Credit
or for any acts or omissions of the Trustee and any such transferee in
connection therewith; (ii) the validity, sufficiency or genuineness of
documents, or of any endorsement(s) thereon, even if such documents should in
fact prove to be in any or all respects invalid, insufficient, fraudulent or
forged; (iii) payment by the Bank under the Letter of Credit against presentment
of documents which do not strictly comply with the terms of the Letter of
Credit, including but not limited to, failure of any documents to bear any
reference or adequate reference to the Letter of Credit; or (iv) any other
circumstances whatsoever in making or failing to make payment under the Letter
of Credit, except only that the Credit Obligors shall have a claim against the
Bank, and the Bank shall be liable to the Credit Obligors, to the extent, but
only to the extent, of any damages suffered by the Credit Obligors which were
caused by (A) the Bank's willful misconduct or gross negligence in determining
whether documents presented under the Letter of Credit comply with the terms of
the Letter of Credit or (B) the Bank's willful or negligent failure to pay under
the Letter of Credit after the presentation to it by the Trustee of a draft and
certificate strictly complying with the terms and conditions of the Letter of
Credit. In furtherance and not in limitation of the foregoing, the Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
Section 6.08 Continuing Obligation
This Credit Agreement is a continuing obligation and shall (i) be
binding upon the Credit Obligors, jointly and severally, and the Bank, their
successors and assigns, and (ii) inure to the benefit of and be enforceable by
the Credit Obligors and the Bank and their successors and assigns; provided,
that the Credit Obligors may not assign all or any part of this Credit Agreement
without the prior written consent of the Bank.
Section 6.09 Governing Law
The Letter of Credit shall be governed by and construed in accordance
with the laws of the State of Alabama.
Section 6.10 Costs, Expenses and Taxes
The Credit Obligors agree to pay at the time of the issuance of the
Bonds (i) the reasonable costs and expenses in connection with the preparation,
execution, and delivery of this Credit
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Agreement and any other documents which may be delivered in connection with this
Credit Agreement, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Bank with respect thereto, and (ii)
after the occurrence of an Event of Default, or the occurrence of an event which
the Bank reasonably believes may lead to an Event of Default, the reasonable
fees and out-of-pocket expenses of counsel for the Bank with respect to advising
the Bank as to its rights and responsibilities under this Credit Agreement. In
addition, the Credit Obligors shall pay any and all stamp and other taxes and
fees payable or determined to be payable in connection with the execution,
delivery, filing and recording of the Mortgage and such other documents and
agrees to save the Bank harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes
and fees.
36
<PAGE>
IN WITNESS WHEREOF, Alcool, Inc., Peregrine Industries, Inc. and
SouthTrust Bank, National Association have caused this instrument to be executed
and delivered by their duly authorized officers.
ALCOOL, INC.
By: /s/
----------------------------------
Its President
ATTEST:
- -----------------------------------
Its Secretary
PEREGRINE INDUSTRIES, INC.
By: /s/
----------------------------------
Its
ATTEST:
- -----------------------------------
Its
-------------------------------
SOUTHTRUST BANK,
NATIONAL ASSOCIATION
By: /s/
----------------------------------
- ------------------------------------ Its
37
<PAGE>
EXHIBIT A
to
Credit Agreement
between
Alcool, Inc., Peregrine Industries, Inc. and
SouthTrust Bank, National Association
Letter of Credit
<PAGE>
EXHIBIT B
to
Credit Agreement
between
Alcool, Inc., Peregrine Industries, Inc. and
SouthTrust Bank, National Association
Project Equipment
All furniture, furnishings, machinery, equipment and other personal property
owned by The Industrial Development Board of the City of Montgomery or by
Alcool, Inc. or Peregrine Industries, Inc. and located on the Real Property
described in Exhibit C hereto and used in connection with the operation of the
manufacturing facilities located thereon, including but not limited to the
following:
Alcool Facility
Item Description
---- -----------
1 (2) Indexing C.A.B Furnaces and Fluxer
2 (2) Manual Core Assembly Machines
3 FIN Machine #1
4 Continuous Core Builder #1
5 FIN Machine #2
6 Paint Line
7 Hydrophilic Coating Line
8 Jigs and Fixtures
9 (2) Test Tanks
10 Multi-Core Assembly Machine
11 (2) Cooling Towers
12 Air Compressor with Dryer
13 Furniture and Computers
14 Conveyors
15 (2) Fork Lifts
16 Serpentine Core Assembly Machine
17 Helium Leak Tester
18 Storage Racks
19 Floor Scrubber
20 Trash Compactor
21 TIG Welder
22 Bus Bar
B-1
Deerfield Equipment
<PAGE>
EXHIBIT C
to
Credit Agreement
between
Alcool, Inc., Peregrine Industries, Inc. and
SouthTrust Bank, National Association
PROJECT SITE
LEGAL DESCRIPTION
Lot 2-9B according to the Map of Part of Parcel 1-7 Gunter Industrial
Park Plat 1 and Parcel 2-9 Gunter Industrial Park Plat 2, being in the
west 1/2 of Section 35, T17N, R18E and Section 1, T16N, R18E,
Montgomery County, Alabama, as said map appears of record in the office
of the Judge of Probate of Montgomery County, Alabama, in Plat Book 27,
Page 80, containing 6.26 acres, more or less.
- --------------------------------------------------------------------------------
CORPORATE GUARANTY AGREEMENT
Dated as of February 1, 1999
by
PEREGRINE GLOBAL, INC.
in favor of
SOUTHTRUST BANK,
NATIONAL ASSOCIATION
This instrument prepared by:
John F. Andrews
Capell & Howard, P.C.
P. O. Box 2069
Montgomery, AL 36102-2069
(334) 241-8000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
Parties ...................................................... 1
Recitals ...................................................... 1
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.01 Definitions........................................... 2
SECTION 1.02 Effect of Headings.................................... 3
SECTION 1.03 Date of Agreement..................................... 3
SECTION 1.04 Separability Clause................................... 3
SECTION 1.05 Governing Law......................................... 3
SECTION 1.06 Counterparts.......................................... 3
ARTICLE 2
GUARANTY
SECTION 2.01 Guaranty of Obligations of Credit Obligors
under Credit Agreement................................ 3
SECTION 2.02 Absolute and Unconditional Nature of Guaranty......... 4
SECTION 2.03 Waivers............................................... 5
SECTION 2.04 Termination of Agreement.............................. 6
(i)
<PAGE>
ARTICLE 3
REPRESENTATIONS AND COVENANTS
SECTION 3.01 General Representations of Guarantor.................. 6
SECTION 3.02 Payment of Taxes...................................... 8
SECTION 3.03 Reports to Bank....................................... 8
ARTICLE 4
REMEDIES
SECTION 4.01 Events of Default..................................... 8
SECTION 4.02 Remedies.............................................. 9
SECTION 4.03 Agreement to Pay Attorneys Fees....................... 9
SECTION 4.04 No Additional Waiver Implied by One Waiver............ 10
SECTION 4.05 Subordination of Subrogation Right.................... 10
ARTICLE 5
MISCELLANEOUS
SECTION 5.01 Notices............................................... 10
SECTION 5.02 Successors and Assigns................................ 11
SECTION 5.03 Benefits of Agreement................................. 11
(ii)
<PAGE>
SECTION 5.04 Waiver of Jury Trial.................................. 11
Testimonium............................................................... 12
Signature and Acknowledgement............................................. 12
(iii)
<PAGE>
CORPORATE GUARANTY AGREEMENT
THIS CORPORATE GUARANTY AGREEMENT (this "Agreement") is made
as of the 1st day of February, 1999, by Peregrine Global, Inc., a United States
Virgin Islands corporation ("Guarantor") to SouthTrust Bank, National
Association, a national banking association (the "Bank").
R E C I T A L S:
Alcool, Inc., an Alabama corporation ("Alcool") has requested
that The Industrial Development Board of the City of Montgomery (the "Board")
issue its $2,460,000 aggregate principal amount of Variable/Fixed Rate
Industrial Development Revenue Bonds (Alcool, Inc. Project) Series 1999 (the
"Bonds") in order to provide long-term financing for the cost of acquiring
certain manufacturing machinery and related personal property for use by Alcool
in the manufacture of aluminum heat exchanger coils (the "Project Equipment").
The Project Equipment will be located in a building (the "Project Building")
owned by the Board and leased to Industrial Partners, a general partnership
("Industrial Partners"), pursuant to a Lease Agreement dated February 1, 1999
(the "Building Lease"). The Project Building will be subleased by Industrial
Partners to Alcool pursuant to a Lease Agreement dated December 9, 1998 (the
"Building Sublease").
The Bonds will be issued pursuant to a Trust Indenture dated February
1, 1999 (the "Indenture") between the Board and SouthTrust Bank, National
Association (acting in such capacity, the "Trustee"). The Board will use the
proceeds of the Bonds (i) to reimburse Alcool for sums previously expended by
Alcool for the Project Equipment and (ii) to pay the remaining costs of the
Project Equipment. The Board will lease the Project Equipment to Alcool pursuant
to a Lease Agreement dated as of February 1, 1999 (the "Lease Agreement") and
Alcool will pay rent to the Board sufficient to pay the debt service on the
Bonds.
As security for the payment of the Bonds, Alcool and its
parent corporation, Peregrine Industries, Inc., a Florida corporation
("Peregrine", and together with Alcool, the "Credit Obligors"), will cause
SouthTrust Bank, National Association (herein, in its capacity as issuer of the
initial letter of credit referred to below, called the "Bank"), to issue an
irrevocable letter of credit in favor of the Trustee in the amount of (i) the
aggregate principal amount of the Bonds, to enable the Trustee to pay the
principal amount of the Bonds when due and to pay the principal portion of the
purchase price of Bonds tendered (or deemed tendered) for purchase, plus (ii)
interest on the Bonds for a period of 50 days at the rate of 13% per annum, to
enable the Trustee to pay interest on the Bonds when due and to pay the interest
portion of the purchase price of Bonds tendered (or deemed tendered) for
purchase. The initial letter of credit will be issued pursuant to a credit
agreement among the Credit Obligors and the Bank (the "Credit Agreement") The
initial letter of credit to be delivered to the Trustee and any substitute
letter of credit delivered to the Trustee pursuant to the Indenture are herein
referred to as the "Letter of Credit."
As security for the Credit Obligors' obligations under the
Credit Agreement with respect to the Letter of Credit, Alcool and the Board will
execute a Mortgage, Security Agreement
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and Assignment of Rents and Leases dated as of February 1, 1999 (the "Mortgage")
in favor of the Bank, whereby the Bank will be granted a mortgage on and
security interest in the Project Equipment and the interest of Alcool as lessee
under the Building Sublease.
The Credit Agreement provides that as a condition preceding to
the issuance of the Letter of Credit, the Guarantor must execute and deliver
this Agreement to the Bank.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Bank to issue the Letter of Credit, the Guarantor hereby
covenants, agrees and binds himself as follows:
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.01......................Definitions
For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) Capitalized terms not otherwise defined herein shall have the meanings
assigned to them in the Credit Agreement.
(b) The terms defined in this Article shall have the meanings assigned to them
in this Article. Singular terms include the plural as well as the singular, and
vice versa.
(c) All accounting terms not otherwise defined herein have the meanings assigned
to them, and all computations herein provided for shall be made, in accordance
with generally accepted accounting principles. All references herein to
"generally accepted accounting principles" refer to such principles as they
exist at the date of application thereof.
(d) All references in this instrument to designated "Articles, Sections" and
other subdivisions are to the designated Articles, Sections and subdivisions of
this instrument as originally executed.
(e) The terms "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section or other subdivisions.
(f) The term "person" shall include any individual, corporation, limited
liability company, partnership, joint venture, association, trust,
unincorporated organization and any government or any agency or political
subdivision thereof.
2
<PAGE>
SECTION 1.02..............Effect of Headings
The Article and Section headings are for convenience only and
shall not affect the construction hereof.
SECTION 1.03...............Date of Agreement
The date of this Agreement is intended as and for a date for
the convenient identification of this Agreement and is not intended to indicate
that this Agreement was executed and delivered on said date.
SECTION 1.04..............Separability Clause
If any provision in this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 1.05....................Governing Law
This Agreement shall be construed in accordance with and
governed by the laws of the State of Alabama.
SECTION 1.06.....................Counterparts
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed an original, but all such counterparts
shall together constitute but one and the same instrument.
ARTICLE 2
GUARANTY
SECTION 2.01 Guaranty of Obligations of Credit Obligors under Credit
Agreement
(a) The Guarantor hereby guarantees to the Bank, full and prompt
payment of the following obligations (herein collectively referred to as the
"Obligations"):
(1) all Letter of Credit commissions, fees, charges and costs
becoming due and payable under the Credit Agreement in accordance with
the terms thereof;
3
<PAGE>
(2) all amounts becoming due and payable under the Credit
Agreement in accordance with the terms thereof as reimbursement of sums
paid by the Bank under the Letter of Credit;
(3) all interest becoming due and payable under the Credit
Agreement in accordance with the terms thereof;
(4) all amounts becoming due and payable under the Credit
Agreement in accordance with the terms thereof upon the occurrence and
continuance of an Event of Default, as therein defined, including,
without limitation, sums due under the indemnification provision of
Section 6.06 of the Credit Agreement;
(5) all other amounts payable by the Company to the Bank in
connection with the Letter of Credit, whether evidenced by the Credit
Agreement, the Mortgage, or other instruments, or by open account or
otherwise; and
(6) all renewals and extensions of any and/or all of the
Obligations of the Company described in paragraphs (1) through (5)
above (including without limitation any renewal or extension of, and
any substitute for, the Letter of Credit), whether or not any renewal
or extension agreement is executed in connection therewith.
(b) All payments by the Guarantor under this Agreement shall be made in
lawful money of the United States of America. Each and every default in payment
of the Obligations shall give rise to a separate cause of action hereunder, and
separate suits may be brought hereunder as each cause of action arises.
SECTION 2.02 Absolute and Unconditional Nature of Guaranty
The guaranty of the Guarantor herein contained is an absolute,
unconditional, irrevocable and continuing guaranty of payment, and not of
collectibility, and, except as otherwise provided by any mandatory provision of
law that may not be waived by the Guarantor, shall not be discharged, impaired,
modified or otherwise affected upon the happening from time to time of any
event, including without limitation any of the following, whether or not with
notice to, or the consent of, the Guarantor.
(1) the failure to give notice to the Guarantor of the
occurrence of any default or Event of Default under the Bonds or the
Financing Documents;
(2) the compromise, settlement, release or termination of any
or all of the obligations, covenants or agreements of the Financing
Participants under the Bonds, the Letter of Credit or the Financing
Documents;
(3) any assignment, pledge or mortgage of all or any part of
the interest of any of the Financing Participants in the trust estate
under the Indenture;
4
<PAGE>
(4) any waiver of the payment, performance or observance by
any of the Financing Participants of any obligation, agreement or
covenant of any of them contained in the Bonds, the Letter of Credit or
the Financing Documents;
(5) the extension of the time for payment of debt service on
the Bonds or any part thereof or of the time for performance of any
other obligations, agreements or covenants of any of the Financing
Participants under the Letter of Credit or the Financing Documents;
(6) the modification or amendment (whether material or
otherwise) of any obligation, agreement or covenant contained in the
Bonds, the Letter of Credit or the Financing Documents;
(7) any failure, omission, or delay on the part of any of the
Financing Participants or any holder of the Bonds to enforce, assert or
exercise any right, power or remedy conferred upon any of them by the
Bonds, the Letter of Credit, or the Financing Documents;
(8) the bankruptcy, insolvency, reorganization, appointment of
a receiver for, or dissolution of any of the Financing Participants, or
the entering by any or all of them into an agreement of composition
with creditors, or the making by any or all of them of an assignment
for the benefit of creditors;
(9) any rights of set-off, recoupment, counterclaim or other
defense, whether similar or dissimilar to the foregoing, which the
Guarantor might otherwise have against any of the Financing
Participants;
(10) the default or failure of any of the Financing
Participants to perform fully any obligation, covenant or agreement
contained in the Bonds, the Letter of Credit or the Financing
Documents;
(11) the release or discharge of any of the Financing
Participants by operation of law, to the extent that such release or
discharge may be lawfully avoided, from the performance or observance
of any agreement or covenant contained in the Bonds, the Letter of
Credit or the Financing Documents; and
(12) the invalidity or unenforceability of the Bonds, the
Letter of Credit, the Financing Documents or any provision of such
instruments.
SECTION 2.03 Waivers
The Guarantor hereby expressly waives notice in writing or otherwise
from the Bank of its acceptance and reliance on this Agreement. The Obligations
of the Guarantor hereunder shall attach
5
<PAGE>
absolutely and unconditionally when the Credit Agreement shall have been
executed and delivered by the parties to the Credit Agreement. The Guarantor
further waives, as to the enforcement of this Agreement, (i) all rights of
exemption that they may have under the constitution and laws of the State of
Alabama or any other state as to any levy on and sale of property and (ii)
presentation and demand for payment (or protest of nonpayment) of the
Obligations or any part thereof.
SECTION 2.04 Termination of Agreement
This Agreement shall terminate when the Letter of Credit is no longer
in effect, all Obligations have been fully paid, and such Obligations are not
subject to being refunded as a preference or fraudulent transfer under the
United States Bankruptcy Code or other applicable law.
ARTICLE 3
REPRESENTATIONS AND COVENANTS
SECTION 3.01 General Representations of Guarantor
The Guarantor makes the following representations and warranties as the
basis for the undertakings on its part herein contained:
(a) It is a corporation duly organized, validly existing, in
good standing under the laws of the United States Virgin Islands, and
is authorized to do business in all jurisdictions in which the
character of its properties or the nature of its business requires such
qualifications or authorization.
(b) It has the power and authority to own its properties and
assets and to carry on its business as now being conducted and as now
proposed to be conducted.
(c) Its financial statements that have been furnished to the
Bank are complete and correct in all material respects and fairly
present its financial condition as of the date or dates indicated and
for the periods involved. There has been no materially adverse change
in its financial condition or operations since the date of its most
recent financial statements furnished to the Bank.
(d) It has good and marketable title to all its properties and
assets reflected on its most recent balance sheet furnished to the
Bank, except for such properties and assets as have been disposed of
since the date of such balance sheet as no longer used or useful in the
conduct of its business or as have been disposed of in the ordinary
course of its business. All such properties and assets are free and
clear of liens of any nature, except as disclosed in such financial
statements.
6
<PAGE>
(e) It has filed or caused to be filed all federal, state and
local tax returns which are required to be filed by it as of the date
hereof, and has paid or caused to be paid all taxes as shown on such
returns or on any assessments received by it to the extent that such
taxes have become due and payable, except such taxes or returns the
failure to pay or file would not have a material adverse affect on the
business or operations of the Guarantor.
(f) The execution and delivery of this Guaranty Agreement does
not involve any prohibited transaction within the meaning of the
Employee Retirement Income Security Act of 1974, as amended (ERISA), of
the Internal Revenue Code. It has fulfilled its obligations, if any,
under minimum funding standards of ERISA and is in compliance in all
material respects with the applicable provisions of ERISA.
(g) It has full corporate power to consummate the transactions
contemplated by this Guaranty Agreement.
(h) By proper action of its board of directors it has duly
authorized the execution and delivery of this Guaranty Agreement and
the consummation of the transactions contemplated herein.
(i) It has obtained all consents, approvals, authorizations,
and orders of governmental authorities that are required to be obtained
by it as a condition to the execution and delivery of this Guaranty
Agreement.
(j) The execution and delivery by it of this Guaranty
Agreement and the consummation by it of the transactions contemplated
herein do not and will not (i) conflict with, be in violation of, or
constitute (upon notice or lapse of time or both) a default under its
certificate of incorporation or bylaws or any indenture, mortgage, deed
of trust or other contract, agreement or instrument to which it is a
party or is subject, or any resolution, order, rule, regulation, writ,
injunction, decree or judgment of any governmental authority or court
having jurisdiction over it which would result in a material adverse
effect on the business or operations of the Guarantor or (ii) result in
or require the creation or imposition of any lien of any nature upon or
with respect to any of its properties now owned or hereafter acquired,
except as contemplated hereby.
(k) This Guaranty Agreement constitutes a legal, valid, and
binding obligation of the Guarantor and is enforceable against it in
accordance with its terms, except as enforcement thereof may be limited
by (i) bankruptcy, insolvency, or other similar laws affecting the
enforcement of creditors' rights and (ii) general principles of equity,
regardless of whether such enforceability is considered in a proceeding
at equity or at law.
7
<PAGE>
(l) There is no action, suit, proceeding, inquiry or
investigation pending before any court or governmental authority, or,
to the best of the Guarantor's knowledge, threatened against it or
affecting it or its properties, that (i) involves the consummation of
the transactions contemplated by, or the validity or enforceability of,
this Guaranty Agreement or (ii) could have a materially adverse impact
upon its financial condition or operations.
(m) It has obtained all necessary licenses, franchises,
permits, certificates of need and other authorizations necessary for
the operation of its business under applicable laws, ordinances, and
regulations, except where the failure to do so would not have a
material adverse affect on the business or operations of the Guarantor.
(n) The Guarantor is not in material violation of, or subject
to, any existing, pending or to the Guarantor's knowledge, threatened
investigation or inquiry by any governmental authority or any remedial
obligations under any applicable laws, rules or regulations pertaining
to health or the environment, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA") or the Resource Conservation and Recovery
Act of 1976, as amended ("RCRA"), and there are no facts, conditions or
circumstances known to it which are likely to result in any such
investigation or inquiry if such facts, conditions and circumstances,
if any, were fully disclosed to the applicable governmental authority,
and the Guarantor will promptly notify the Bank if the Guarantor
becomes aware of any such facts, conditions or circumstances or any
such investigation or inquiry.
SECTION 3.02 Payment of Taxes
The Guarantor will pay or cause to be paid, prior to delinquency, all
taxes, assessments and other governmental charges lawfully levied or assessed or
imposed upon him, on his properties or any part thereof or upon any income
therefrom.
SECTION 3.03 Reports to Bank
The Guarantor shall furnish to the Bank the financial reports required
by Section 4.04 of the Credit Agreement for subsidiaries of Peregrine.
ARTICLE 4
REMEDIES
SECTION 4.01 Events of Default
Any one or more of the following shall constitute an event of default
(a "Guaranty Default") under this Agreement (whatever the reason for such event
and whether it shall be voluntary or
8
<PAGE>
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in any payment required under Section 2.01 hereof
as and when the same shall become due and payable; or
(2) default in the performance, or breach, of any covenant or
warranty of the Guarantor in this Agreement (other than a covenant or
warranty, a default in the performance or breach of which is elsewhere
in this Section specifically dealt with), which is not cured within 30
days after written notice from the Bank to the Guarantor as herein
provided; or, if such cure is not reasonably capable of being completed
within 30 days, such additional period of time as shall be necessary
(but not to exceed 90 days), provided that the Guarantor shall
diligently and in good faith prosecute said cure to completion; or
(3) the filing of a petition in bankruptcy (or other
commencement of a bankruptcy or similar proceeding) by or against the
Guarantor under any applicable bankruptcy, insolvency, reorganization,
or similar law, now or hereafter in effect (provided, however, that the
filing of such a petition or the commencement of such a proceeding
against any such Guarantor will not constitute an Event of Default
unless such petition or commencement is not dismissed or stayed within
60 days after the filing or commencement thereof); or
(4) the occurrence of an Event of Default, as therein defined,
under any other Financing Document and the expiration of the applicable
grace or cure period, if any, specified therein.
SECTION 4.02 Remedies
If a Guaranty Default exists, the Bank may proceed to protect its right
by suit in equity, action at law or other appropriate proceedings, whether for
the specific performance of any covenant or agreement of the Guarantor herein
contained or in aid of the exercise of any power or remedy granted to the Bank
under the other Financing Documents. The Bank may proceed directly against the
Guarantor hereunder without resorting to any other remedies which it may have
and without proceeding against any other security held by the Bank.
SECTION 4.03 Agreement to Pay Attorneys Fees
If the Guarantor should default under any of the provisions of this
Agreement and the Bank should employ attorneys or incur other expenses for the
collection of any payments due hereunder or the enforcement of performance or
observance of any agreement or covenant on the part of the Guarantor herein
contained, the Guarantor will on demand therefor pay to the Bank the reasonable
fees of such attorneys and such other expenses so incurred.
9
<PAGE>
SECTION 4.04 No Additional Waiver Implied by One Waiver
If any agreement contained in this Agreement should be breached by the
Guarantor and thereafter waived by the Bank, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
SECTION 4.05 Subordination of Subrogation Right
Guarantor expressly subordinates his right to payments of any
indebtedness (including both principal and interest) owing from the Credit
Obligors, or either thereof, to Guarantor, whether now existing or arising at
any time in the future (including, but not limited to, rights to payment arising
by virtue of any subrogation or indemnification upon payment by Guarantor of
amounts due from the Credit Obligors, or either thereof, to the Bank), to the
prior right of the Bank to receive or require payment in full of the
Obligations, until such time as the Obligations are fully paid (and including
interest accruing after any petition under the United States Bankruptcy Code,
which post-petition interest Guarantor agrees shall remain a claim that is prior
and superior to any claim of Guarantor notwithstanding any contrary practice,
custom or ruling in proceedings under the United States Bankruptcy Code
generally) and such payments are final and not subject to refund or rescission
under bankruptcy or other applicable law, and the Letter of Credit is
terminated; provided, however, the Guarantor may receive current interest
payments (but not principal payments) subject to the rate of interest being paid
not exceeding the Bank's Base Rate. Furthermore, upon the occurrence of an Event
of Default under the Financing Documents, Guarantor agrees not to accept any
payment or satisfaction of any kind of indebtedness of the Credit Obligors, or
either thereof, to the Guarantor or any security for such indebtedness. If
Guarantor should receive any such payment, satisfaction or security for any
indebtedness of the Credit Obligors to the Guarantor, each Guarantor agrees to
deliver the same promptly to the Bank in the form received, endorsed, or
assigned as may be appropriate for application on account of, or as security
for, the Obligations and until so delivered, agrees to hold the same in trust
for the Bank.
ARTICLE 5
MISCELLANEOUS
SECTION 5.01 Notices
(a) Any request, demand, authorization, direction, notice, consent, or
other document provided or permitted by this Agreement to be made upon, given or
furnished to, or filed with, the Guarantor or the Bank shall be sufficient for
every purpose hereunder if in writing and (except as otherwise provided in this
Agreement) either (i) delivered personally to the party or, if such party is not
an individual, to an officer, partner or other legal representative of the party
to whom the same is directed or (ii) mailed by express mail or certified mail,
postage prepaid and addressed to such person at the following address:
10
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If to the Guarantor:
Peregrine Global, Inc.
730 South Military Trail
Deerfield, FL 33442
If to the Bank:
SouthTrust Bank, National Association
Post Office Box 230517
Montgomery, Alabama 36123-0517
Attention: John W. Livings
(b) Any such notice or other document shall be deemed to be received
(i) as of the date delivered, if delivered personally in accordance with
subsection (a) of this Section, or (ii) as of the business day following the
date deposited, if mailed by express mail, or as of five days after the date
deposited in the mail, if mailed by certified mail, each as in accordance with
subsection (a) of this Section.
SECTION 5.02 Successors and Assigns
All covenants and agreements in this Agreement by the Guarantor shall
bind his executors, heirs and personal representatives, whether so expressed or
not.
SECTION 5.03 Benefits of Agreement
Nothing in this Agreement, express or implied, shall give to any
person, other than the Bank any benefit or any legal or equitable right, remedy
or claim under this Agreement.
11
<PAGE>
SECTION 5.04 Waiver of Jury Trial
GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM,
COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN
ANY WAY RELATED TO THIS AGREEMENT OR THE OBLIGATIONS, OR (B) IN ANY WAY
CONNECTED WITH OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF THE
BANK AND/OR THE COMPANY WITH RESPECT TO THE FINANCING DOCUMENTS OR IN CONNECTION
WITH THIS AGREEMENT OR THE EXERCISE OF ANY PARTY'S RIGHTS AND REMEDIES UNDER
THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP OF THE PARTIES
HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING
AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. GUARANTOR AGREES THAT THE
BANK MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE
KNOWING, VOLUNTARY, AND BARGAINED AGREEMENT OF GUARANTOR IRREVOCABLY TO WAIVE
HIS RIGHTS TO TRIAL BY JURY AS AN INDUCEMENT OF THE BANK TO ISSUE THE LETTER OF
CREDIT AND THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY DISPUTE OR
CONTROVERSY WHATSOEVER (WHETHER OR NOT MODIFIED HEREIN) BETWEEN GUARANTOR AND
THE BANK SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE
SITTING WITHOUT A JURY.
IN WITNESS WHEREOF, the Guarantor has duly executed this instrument as
of this 1st day of February, 1999.
PEREGRINE GLOBAL, INC.
By: /s/
-------------------------------------
- ------------------------------------
Its
---------------------------------
STATE OF ALABAMA
COUNTY OF MONTGOMERY
I, the undersigned, a Notary Public in and for said County in said
State, hereby certify that _____________________, whose name as
__________________ of Peregrine Global, Inc., a corporation, is signed to the
foregoing instrument, and who is known to me, acknowledged before me on this day
that, being informed of the contents of the said instrument, he, in his capacity
as such officer, and with full authority, executed the same voluntarily for and
as the act of said corporation.
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<PAGE>
GIVEN under my hand this the 8th day of March, 1999.
----------------------------------------
Notary Public
(SEAL)
My commission expires:
-----------------
13
BOND PURCHASE AGREEMENT
Dated: March 5, 1999
The Industrial Development Board of
the City of Montgomery
Montgomery, Alabama
Alcool, Inc.
Montgomery, Alabama
Re: $2,460,000 Variable/Fixed Rate Industrial Development Revenue
Bonds (Alcool, Inc. Project), Series 1999 issued by The
Industrial Development Board of the City of Montgomery
Gentlemen:
The undersigned, Merchant Capital, L.L.C. (the "Underwriter"), hereby
offers to enter into this Agreement for the purchase by the Underwriter and the
sale by The Industrial Development Board of the City of Montgomery (the "Board")
of $2,460,000 aggregate principal amount of Variable/Fixed Rate Industrial
Development Revenue Bonds (Alcool, Inc. Project) Series 1999 (the "Bonds"). This
offer is subject to the acceptance of this Agreement by the Financing
Participants referred to below prior to 9:00 a.m., Montgomery, Alabama time, on
the date hereof, and upon such acceptance this Agreement shall be in full force
and effect in accordance with its terms and shall be binding upon each of the
Financing Participants.
The Bonds shall be described in and shall be issued and secured under
and pursuant to a Trust Indenture dated as of February 1, 1999 (the "Indenture")
between the Board and SouthTrust Bank, National Association, a national banking
association (the "Trustee"). The Bonds are being issued to provide financing for
Alcool, Inc., an Alabama corporation (the "Company"). Proceeds of the Bonds will
be used to finance a portion of the costs of acquiring and installing certain
manufacturing equipment (the "Project Equipment") located in the City of
Montgomery, Alabama for the use of the Company.
Pursuant to a Lease Agreement dated as of February 1, 1999 between the
Board and the Company, the Board shall lease the Project Equipment to the
Company (the "Lease Agreement"). The Company shall make lease payments at such
times and in such amounts as shall be sufficient to pay the principal of and
interest on the Bonds and to pay the purchase price of Bonds tendered for
purchase pursuant to the optional or mandatory tender provisions of the
Indenture.
The Company will cause an irrevocable direct pay letter of credit (the
"Letter of Credit") in favor of the Trustee providing for payment of debt
service on the Bonds and payment of the purchase
<PAGE>
price of Bonds tendered for purchase pursuant to the optional or mandatory
tender provisions of the Indenture to be issued by SouthTrust Bank, National
Association (in the capacity of issuer of the Letter of Credit, the "Bank"). The
initial Letter of Credit will be issued by the Bank pursuant to a Credit
Agreement dated as of February 1, 1999 (the "Credit Agreement") among the Bank,
Peregrine Industries, Inc., a Florida corporation, and the Company whereby the
Company and Peregrine Industries, Inc. will agree, among other things, to
reimburse the Bank for all amounts drawn pursuant to the initial Letter of
Credit.
Under a Remarketing Agreement dated as of February 1, 1999 (the
"Remarketing Agreement") among the Company, the Board and the Underwriter, the
Underwriter is appointed as the initial Remarketing Agent.
The Bonds shall be limited obligations of the Board payable solely out
of (a) payments by the Company pursuant to the Lease Agreement, and (b) money
received from drawings on the Letter of Credit.
The plan of financing in connection with the issuance of the Bonds and
the terms of issuance shall be as described in the Official Statement dated
March 5, 1999 (the "Official Statement"), which has been delivered to the
Underwriter on this date.
Capitalized terms not otherwise defined in this Agreement shall have
the meaning assigned in the Official Statement or (if not defined in the
Official Statement ) in the Indenture. The Board and the Company are herein
collectively referred to as the "Financing Participants." For purposes of this
Agreement, the term "Financing Documents" shall mean the Indenture, the Lease
Agreement, the Credit Agreement, the Remarketing Agreement and this Bond
Purchase Agreement.
Section 1. Agreement to Purchase and Sell. Upon the terms and
conditions and in reliance on the representations, warranties and covenants
hereinafter set forth, the Underwriter hereby agrees to purchase from the Board
and the Board hereby agrees to sell to the Underwriter all (but not less than
all) of the Bonds at a purchase price of $2,435,000, which represents an
underwriting discount of $25,000.
The following actions shall take place not later than 11:00 a.m.,
Montgomery, Alabama time, on March 8, 1999, or at such other date or time as may
be mutually agreed upon by the parties hereto:
(a) The Bonds, duly executed and authenticated and dated the date of
closing, shall be delivered to the Underwriter at the offices of Capell &
Howard, P.C., Montgomery, Alabama, or at such other place as requested by the
Underwriter, in definitive fully registered form (all of such Bonds to be
printed or typed, bearing CUSIP numbers and to be of such authorized
denominations and registered in such names as the Underwriter requests).
(b) The Underwriter shall cause payment for the Bonds to be made in
immediately available funds.
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<PAGE>
(c) The other documents to be delivered pursuant to this Agreement
shall be delivered at the offices of Capell & Howard, P.C., Montgomery, Alabama.
Section 2. Official Statement.
(a) The Board and the Company consent to and ratify the use of the
Official Statement by the Underwriter prior to the date hereof in connection
with the offering of the Bonds.
(b) The Board and the Company each acknowledge and represent that the
Official Statement was deemed by it to be final except for the offering
price(s), interest rate(s), selling compensation, aggregate principal amount,
principal amount per maturity, delivery dates and other information relating to
pricing of the Bonds.
(c) Within three business days after the date of this Agreement, the
Company shall deliver to the Underwriter up to 15 printed copies of the Official
Statement. If necessary for the Underwriter to comply with Rule 15c2-12 of the
Securities and Exchange Commission or Rule G-32 of the Municipal Securities
Rulemaking Board, the Company shall, promptly upon request by the Underwriter,
deliver to the Underwriter additional printed copies of the Official Statement
as specified in such request.
(d) The Board and the Company hereby authorize and approve the
distribution of the Official Statement to prospective purchasers of the Bonds.
(e) Each of the Financing Participants agrees to notify the Underwriter
of any material adverse change in its respective business, properties or
financial condition occurring not later than 90 days after the end of the
placement period that would require a revision of the information in the
Official Statement in order to make the representations and requirements set
forth herein true and correct.
(f) Each of the Financing Participants who is a party to this Agreement
agrees to supplement the Official Statement if in the reasonable judgment of the
Underwriter such supplementation is required in connection with the distribution
of the Bonds by the Underwriter, provided that the request for such
supplementation is received by such Financing Participant not later than 90 days
after the end of the placement period.
(g) For purposes of this Agreement the term "end of the placement
period" means the later of (i) the Closing or (ii) the date that the Underwriter
no longer retains an unsold balance of the Bonds for sale to the public.
Section 3. Qualification Under Blue Sky Laws. The Board and the Company
agree to take such action as the Underwriter may reasonably request to qualify
the Bonds for offering and sale under the blue sky or other securities laws of
such jurisdictions as the Underwriter may request and to comply with such laws
so as to permit the continuance of sales and dealings in such jurisdiction for
as long as may be necessary to complete the distribution of the Bonds; provided
that
3
<PAGE>
neither the Board nor the Company shall be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction.
Section 4. Representations of the Board. In order to induce the
Underwriter to enter into this Agreement and in consideration of the execution
and delivery of this Agreement, the Board hereby represents and warrants to and
covenants with the Underwriter as follows:
(a) It is a public corporation organized under the laws of the State of
Alabama and is authorized pursuant to Article 4, Chapter 54, Title 11 of the
Code of Alabama 1975 (the "Enabling Law"), to issue the Bonds and to consummate
the transactions contemplated by the Indenture.
(b) By proper action of its governing body, it has duly authorized the
issuance and delivery of the Bonds, the execution of the Official Statement, the
distribution and use of the Official Statement in connection with the offering
and sale of the Bonds, the execution and delivery of the Financing Documents to
which it is a party, and the consummation of the transactions contemplated
therein.
(c) The issuance of the Bonds and the execution and delivery by it of
the Official Statement and the Financing Documents to which it is a party and
the consummation by it of the transactions contemplated therein will not (i)
conflict with, be in violation of, or constitute (upon notice or lapse of time
or both) a default under its charter or bylaws, any indenture, mortgage, deed of
trust or other contract, agreement or instrument to which it is a party or is
subject, or any resolution, order, rule, regulation, writ, injunction, decree or
judgment of any governmental authority or court having jurisdiction over it or
(ii) result in or require the creation or imposition of any lien of any nature
upon or with respect to any of its properties now owned or hereafter acquired,
except as contemplated by the Financing Documents.
(d) The Bonds and the Financing Documents to which it is a party will,
upon execution and delivery by the Board, constitute legal, valid and binding
obligations of the Board enforceable against it in accordance with the terms of
such instruments, except as enforcement thereof may be limited by (i)
bankruptcy, insolvency, or other similar laws affecting the enforcement of
creditors' rights and (ii) general principles of equity, including the exercise
of judicial discretion in appropriate cases.
(e) There is no action, suit, proceeding, inquiry or investigation
pending before any court or governmental authority, or threatened against or
affecting it or its properties, that involves the consummation of the
transactions contemplated by, or the validity or enforceability of, the
Financing Documents to which it is a party.
(f) The proceeds from the sale of the Bonds will be used by the Board
as provided in the Official Statement and the Financing Documents.
4
<PAGE>
(g) Neither the Securities and Exchange Commission nor any state
securities commission has issued or, to the best of the Board's knowledge,
threatened to issue, any order preventing or suspending the use of the Official
Statement.
(h) It has not within five years prior to the date hereof defaulted in
the payment of principal or interest on any of its bonds, notes or other
securities.
(i) The section of the Official Statement entitled "THE ISSUER" is true
and correct in all material respects and does not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 5. Representations of the Company. The Company represents and
warrants as follows:
(a) It is duly organized as a corporation under the laws of the State
of Alabama and is not in default under any of the provisions contained in its
charter or bylaws or in the laws of the State of Alabama.
(b) It has the corporate power and authority to own its properties and
assets and to carry on its business as now being conducted and is duly qualified
to do business in every jurisdiction where the character of its properties or
the nature of its activities makes such qualification necessary.
(c) It has the power to consummate the transactions contemplated by the
Financing Documents to which it is a party.
(d) By proper corporate action it has duly authorized the execution of
the Official Statement, the distribution of the Official Statement by the
Underwriter in connection with the offering and sale of the Bonds, the execution
and delivery of the Financing Documents to which it is a party, and the
consummation of the transactions contemplated therein.
(e) It has obtained, or will have obtained or caused to be obtained on
or prior to the Closing date, all consents, approvals, authorizations and orders
of governmental authorities that are required to be obtained by it as a
condition to the distribution and use of the Official Statement in connection
with the offering and sale of the Bonds, the execution and delivery of the
Financing Documents to which it is a party, and the consummation of the
transactions contemplated therein.
(f) The execution and delivery by it of the Financing Documents to
which it is a party and the consummation by it of the transactions contemplated
therein will not (i) conflict with, be in violation of, or constitute (upon
notice or lapse of time or both) a default under its charter or bylaws, any
indenture, mortgage, deed of trust or other contract, agreement or instrument to
which it is a party or is subject, or any resolution, order, rule, regulation,
writ, injunction, decree or judgment of any governmental authority or court
having jurisdiction over it or (ii) result in or require the creation
5
<PAGE>
or imposition of any lien of any nature upon or with respect to any of its
properties now owned or hereafter acquired, except as contemplated by the
Financing Documents.
(g) The Financing Documents to which it is a party will, upon execution
and delivery by it, constitute legal, valid and binding obligations enforceable
against it in accordance with the terms of such instruments, except as
enforcement thereof may be limited by (i) bankruptcy, insolvency, or other
similar laws affecting the enforcement of creditors' rights and (ii) general
principles of equity, including the exercise of judicial discretion in
appropriate cases.
(h) There is no action, suit, proceeding, inquiry or investigation
pending before any court or governmental authority, or, to the best of its
knowledge, threatened against it or affecting it or its properties, that (i)
involves the consummation of the transactions contemplated by, or the validity
or enforceability of, the Bonds or any other Financing Documents to which it is
a party or (ii) could have a material adverse effect upon its financial
condition or operations.
(i) It has obtained all necessary material licenses and permits to
carry on its business and operate all its properties and facilities, including
the Project Equipment.
(j) The proceeds from the sale of the Bonds will be applied as provided
in the Official Statement and the Financing Documents.
(k) Neither the Securities and Exchange Commission nor any state
securities commission has issued or, to the best of its knowledge, threatened to
issue, any order preventing or suspending the use of the Official Statement or
the offering or sale of the Bonds, it being understood that the Company has made
no specific inquiry in this regard.
(l) The sections of the Official Statement entitled "THE LESSEE," and
"THE PROJECT EQUIPMENT" are true and correct in all material respects and do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Section 6. Representations by the Underwriter. The Underwriter hereby
represents and warrants that it is lawfully authorized to execute this
Agreement, that, upon acceptance by the Financing Participants to whom this
Agreement is addressed, this Agreement shall be valid and binding upon the
Underwriter and that, to the best of the Underwriter's knowledge, any necessary
filings under federal securities laws and under the laws of any state where the
Bonds will be sold have been made.
Section 7. Closing.
(a) Not later than 11:00 a.m. (Montgomery, Alabama time) on March 8,
1999 or at such other time as shall have been mutually agreed upon by the Board,
the Company and the Underwriter, the Board will deliver, or cause to be
delivered, the Bonds to the Underwriter in definitive form, duly executed and
authenticated, together with the other documents required under this Agreement;
and
6
<PAGE>
the Underwriter will accept such delivery and pay the purchase price of the
Bonds to the Trustee, for the account of the Board, in immediately available
funds by wire transfer to an account of the Trustee maintained at a bank in the
continental United States, which account shall be identified by written notice
to the Underwriter at least one business day prior to the Closing. If at the
Closing the Board fails to deliver the Bonds to the Underwriter as provided
herein, or if at the Closing any of the conditions specified herein shall not
have been fulfilled to the satisfaction of the Underwriter, the Underwriter may
elect to be relieved of any further obligations under this Agreement without
thereby waiving any other rights the Underwriter may have by reason of such
failure or nonfulfillment.
(b) Delivery of the Bonds as aforesaid shall be made at the offices of
Capell & Howard, P.C. in Montgomery, Alabama, or at the option of the
Underwriter, at the office of a custodian or depositary for securities in New
York, New York and designated by the Underwriter at least one business day prior
to Closing. Delivery of the Bonds against payment as aforesaid is herein
referred to as the "Closing." The Bonds delivered at Closing shall be in the
form described in the Official Statement and the Indenture and shall be
registered in such names and shall be in such denominations as shall be
specified by the Underwriter by written instructions to the Trustee not less
than two business days prior to the Closing or, with respect to any portion of
the Bonds for which such instructions are not given, shall be registered in the
name of the Underwriter and shall be in such denominations as the Board and the
Trustee shall designate. The Bonds to be delivered at the Closing will be made
available to the Underwriter for checking and packaging not less than 24 hours
prior to the Closing.
Section 8. Conditions to Underwriter's Obligations. The obligations of
the Underwriter hereunder shall be subject (i) to the performance by each of the
Financing Participants of its obligations to be performed hereunder at and prior
to the Closing, (ii) to the accuracy of the representations and warranties of
the Financing Participants contained herein as of the date hereof and as of the
date of the Closing, and (iii) to the delivery by the Financing Participants of
the following documents in form and substance satisfactory to the Underwriter
and satisfaction of the conditions set forth below:
(1) Opinion of Bond Counsel. An opinion of bond counsel
(Capell & Howard, P.C., Montgomery, Alabama) dated the date of the
Closing, substantially in the form attached to the Official Statement.
(2) Opinion of Board Counsel. An opinion of Sol E. Brinsfield,
Jr., Counsel to the Board, dated the date of Closing, in form
satisfactory to the Underwriter.
(3) Supplemental Opinion of Bond Counsel. A supplemental
opinion of bond counsel, dated the date of the Closing in form
satisfactory to the Underwriter.
(4) Opinion of Counsel for the Company. An opinion of counsel
for the Company (Capell & Howard, P.C.), in form and substance
satisfactory to the Underwriter.
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<PAGE>
(5) Opinion of Counsel for the Bank. An opinion of counsel for
the Bank (Capell & Howard, P.C.) to the effect that the Letter of
Credit has been duly authorized by the Bank and is a valid and binding
obligation of the Bank.
(6) Preference Opinion. An opinion of Capell & Howard, P.C.,
dated the date of Closing, to the effect that (i) money drawn under the
Letter of Credit and/or remarketing proceeds used to pay the purchase
price of Bonds tendered for purchase will not be recoverable as a
preferential transfer under the United States Bankruptcy Code and (ii)
draws under the Letter of Credit and the use of money so drawn and/or
remarketing proceeds to pay debt service on the Bonds and the purchase
price of tendered Bonds will not be precluded by the automatic stay
provisions of the United States Bankruptcy Code.
(7) Financing Documents. An executed counterpart of each of
the Financing Documents.
(8) Letter of Credit. A copy of the executed Letter of Credit
with respect to the Bonds.
(9) Appointment of Remarketing Agent and Other Agents Under
the Indenture. Documents evidencing the appointment of the person or
persons serving as the Remarketing Agent under the terms of the
Indenture and the acceptance by such person or persons of the duties
and responsibilities associated with such appointment.
(10) Certificate of the Bank. A certificate by the Bank
stating in effect that the information in the Official Statement with
respect to the Bank is accurate.
(11) Specimen Bond. A copy of the Bond or Bonds delivered at
Closing.
(12) Certificate of Board. A certificate signed by the
Chairman of the Board, dated the date of Closing, in form and substance
satisfactory to the Underwriter, to the effect that (i) no event has
occurred since the date of the Official Statement that should be
disclosed in the Official Statement for the purpose for which it is to
be used or that is necessary to disclose therein in order to make the
statements and information therein not misleading in any material
respect as of the date of Closing; (ii) the representations and
warranties of the Board contained herein are true and correct as of the
date of Closing; and (iii) none of the proceedings or authority for the
issuance of the Bonds and the execution and delivery of the Official
Statement and the Financing Documents have been modified, amended or
repealed.
(13) Proceedings of Board. A certified copy of all action
taken by the Board approving the issuance of the Bonds and the Official
Statement and Financing Documents and the consummation of the
transactions contemplated thereby (including, without limitation, the
resolution or resolutions adopted by the governing body of the Board
for such purpose) and an incumbency certificate identifying officers of
the Board executing documents in connection with the issuance of the
Bonds.
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<PAGE>
(14) Certificate of the Company. A certificate executed on
behalf of the Company, dated the date of Closing, in form and substance
satisfactory to the Underwriter, to the effect that (i) no event
affecting the Company has occurred since the date of the Official
Statement that should be disclosed in the sections of the Official
Statement entitled "THE LESSEE" and "THE PROJECT EQUIPMENT" as it
relates to the Company for the purpose for which it is to be used or
that is necessary to disclose therein in order to make the statements
and information therein not misleading in any material respect as of
the date of Closing; (ii) the representations and warranties of the
Company contained in this Agreement are true and correct as of the date
of Closing; and (iii) none of the proceedings or authority for the
delivery of the Official Statement and the execution and delivery of
the Financing Documents to which the Company is a party have been
modified, amended or repealed.
(15) Organization of the Company and Approvals. A certified
copy of the charter and bylaws of the Company and all action taken by
the Company approving the Official Statement, the Financing Documents
and the consummation of the transactions contemplated thereby and an
incumbency certificate identifying officers of the Company executing
documents in connection with the issuance of the Bonds.
(16) Evidence of Tax Exemption. Evidence reasonably
satisfactory to the Underwriter that all actions necessary as of the
Closing for the interest on the Bonds to be tax-exempt has been taken,
including, without limitation, (i) a copy of the Volume Cap allocation,
(ii) an executed Arbitrage Certificate, and (iii) a copy of Form 8038
and evidence of the filing thereof.
(17) Additional Evidence. Such additional legal opinions,
certificates, proceedings, instruments and other documents as the
Underwriter may reasonably request to evidence (i) compliance by the
Board and the Company with legal requirements, (ii) the truth and
accuracy, as of the time of Closing, of the representations and
warranties of the Board and the Company contained herein, and (iii) the
due performance or satisfaction by the Board and the Company, at or
prior to such time, of all agreements then required to be performed and
all conditions then required to be satisfied by each of them hereunder.
Section 9. Termination.
(a) If the Board and the Company are unable to satisfy the conditions
imposed by this Agreement, or if the obligations of the Underwriter to purchase
and accept delivery of the Bonds shall be terminated for any reason permitted by
subsection (b) of this Section, or if the representations and warranties of the
Board and the Company contained herein are not accurate in all material respects
on the date of this Agreement and at Closing, or if the information contained in
the Official Statement is untrue or incorrect in any material respect on the
date of this Agreement and at Closing, this Agreement may be terminated by the
Underwriter by written notice to the Board and the Company. If this Agreement is
so terminated, the Underwriter, the Board and the Company shall have no further
obligation hereunder, except that their respective obligations to pay expenses,
as provided herein, shall continue in full force and effect. The Underwriter
may, in its discretion,
9
<PAGE>
waive any one or more of the conditions imposed by this Agreement for the
protection of the Underwriter and proceed with the Closing.
(b) The Underwriter shall have the right to terminate its obligation to
purchase the Bonds by notifying the Board and the Company in writing of its
election to do so between the date hereof and the Closing if, on or after the
date hereof and prior to the Closing:
(1) any legislation, ordinance or regulation shall be enacted
or be actively considered for enactment by any governmental body,
department or agency of the State of Alabama or its political
subdivisions, or a decision by any court of competent jurisdiction with
the State of Alabama shall be rendered which, in the opinion of the
Underwriter, could materially and adversely affect the market price of
the Bonds; or
(2) a stop order, ruling, regulation or official statement by
or on behalf of the Securities and Exchange Commission shall be issued
or made to the effect that the issuance, offering or sale of the Bonds,
or of obligations of the general character of the Bonds as contemplated
hereby, is in violation of any provision of the Securities Act of 1933,
as amended, the Securities Exchange Act of 1934, as amended, or the
Trust Indenture Act of 1939, as amended, or requires registration or
the qualification of the Bonds, the Official Statement or any of the
Financing Documents under one or more of such Acts; or
(3) there shall have occurred any outbreak of hostilities or
other national or international calamity or crisis or a financial
crisis, the effect of such outbreak, calamity or crisis on the
financial markets of the United States being such as, in the opinion of
the Underwriter, would materially and adversely affect the market price
of the Bonds; or
(4) trading shall be suspended, or new or additional trading
or loan restrictions shall be imposed by the New York Stock Exchange or
other national securities exchange or governmental authority with
respect to obligations of the general character of the Bonds, or a
general banking moratorium shall be declared by federal, Alabama or New
York authorities; or
(5) any litigation shall be instituted, pending or threatened,
other than as described in the Official Statement, to restrain or
enjoin the issuance or sale of the Bonds or in any way protesting or
affecting any authority for or the validity or enforceability of the
Bonds, any of the Financing Documents, or the existence or powers of
the Board, the Company or the Bank; or
(6) any action shall be taken by a rating agency to lower,
suspend or withdraw its rating of the Bonds, if any, as now described
in the Official Statement; or
(7) there shall have occurred any material adverse change in
the financial condition of any of the Financing Participants or the
Bank.
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The obligations of the Financing Participants hereunder are subject to
the performance by the Underwriter of its obligations hereunder. If any
Financing Participant shall be unable to satisfy the conditions to the
obligations of the Underwriter contained in this Bond Purchase Agreement, or if
the obligations of the Underwriter to purchase and accept delivery of the Bonds
shall be terminated for any reason permitted by this Agreement, this Agreement
shall terminate and neither the Underwriter nor any Financing Participant shall
be under further obligation hereunder, except that the respective obligations to
pay expenses, as provided in Section 11 hereof, shall continue in full force and
effect. The Underwriter may, in its discretion, waive any one or more of the
conditions imposed by this Agreement for the protection of the Underwriter and
proceed with the Closing.
Section 10. Survival of Representations. All representations,
warranties and agreements of each of the Financing Participants shall remain
operative and in full force and effect, regardless of any investigations made by
or on behalf of the Underwriter and shall survive delivery of and payment for
the Bonds or any termination of this Agreement by the Underwriter pursuant to
the terms hereof.
Section 11. Expenses.
(a) If the Bonds are sold to the Underwriter by the Board, the Board
shall pay, but solely out of the amounts on deposit in the Construction Fund, or
the Company shall otherwise pay, any expenses incident to the performance of the
Board's obligations hereunder, including but not limited to (i) the cost of the
preparation, reproduction, printing, distribution, mailing, execution, delivery,
filing and recording, as the case may be, of this Agreement, the Official
Statement and all other agreements and documents required in connection with the
consummation of the transactions contemplated hereby; (ii) the cost of the
preparation, engraving, printing, execution and delivery of the definitive
Bonds; (iii) the fees and disbursements of Bond Counsel, Board Counsel, Counsel
for the Bank, and any other experts retained by the Board; (iv) the fees and
disbursements of the Trustee and Tender Agent; and (v) CUSIP and MSRB fees.
(b) The Company shall pay any reasonable expenses incident to the
performance of the Board's obligations hereunder whether or not the Bonds are
sold by the Board to the Underwriter.
Section 12. Notice. Any notice or other communication to be given to
the Financing Participants or the Underwriter under this Agreement may be given
by delivering the same in writing as follows:
Board: The Industrial Development Board
of the City of Montgomery
c/o Sol E. Brinsfield, Jr.
Regions Bank Tower, Suite 1409
60 Commerce Street
Montgomery, AL 36104
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<PAGE>
Company: Alcool, Inc.
2511 MidPark Road
Montgomery, AL 36109
Underwriter: Merchant Capital, L.L.C.
250 Commerce Street
Montgomery, Alabama 36104
Section 13. Benefits of Agreement. This Agreement is made solely for
the benefit of the Financing Participants and the Underwriter (including the
successors or assigns of the Financing Participants and the Underwriter) and no
other person shall acquire or have any right hereunder or by virtue hereof.
Section 14. Indemnification. To the extent permitted by law, the
Company agrees to indemnify and hold harmless the Board and the Underwriter, and
any person who controls the Board or the Underwriter within the meaning of the
Securities Act of 1933, as amended, against any and all losses, claims, damages,
and liabilities arising out of any statement or information contained in the
Official Statement (other than information contained under the captions,
"ISSUER" and "THE BANK") that is untrue in any material respect, or the omission
therefrom of any information that should be contained therein in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading in any material respect, to the extent of the aggregate
amount paid in settlement of any litigation commenced or threatened arising from
a claim based upon any such untrue statement or omission if such settlement is
effected with the written consent of the Company. In case any claim shall be
made or action brought against the Board or the Underwriter or any controlling
person (as aforesaid) based upon the Official Statement, in respect of which
indemnity may be sought against the Company, the Board or the Underwriter, as
the case may be, shall promptly notify the Company in writing setting forth the
particulars of such claim or action, and the Company shall assume the defense
thereof including the retaining of counsel and the payment of all expenses. The
Board or the Underwriter, as the case may be, or any such controlling person
shall have the right to retain separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the party retaining such counsel unless the retaining
of such counsel has been specifically authorized by the Company. Such approval
shall not be unreasonably withheld. The Underwriter shall likewise indemnify and
hold harmless the Board and the Company, and every person who controls the Board
or the Company within the meaning of the Securities Act of 1933, as amended, or
upon any other statute or common law, based upon any statement or omission made
by the Board or the Company in reliance upon written information furnished to it
by the Underwriter.
Section 15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Alabama.
Section 16. Counterparts. This instrument may be executed in any number
of counterparts, each of which so executed shall be deemed an original, but all
such counterparts shall together constitute but one and the same instrument.
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Very truly yours,
MERCHANT CAPITAL, L.L.C.
By: ____/s/___________________________
Its _______________________________
ACCEPTED AND AGREED as of the
date first above written:
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF MONTGOMERY
By: ___/s/____________________________
Its Chairman
ALCOOL, INC.
By: __/s/____________________________
Its: President
13
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BOND GUARANTY AGREEMENT
Dated February 1, 1999
by
ALCOOL, INC.
in favor of
SOUTHTRUST BANK, NATIONAL ASSOCIATION,
As Trustee
This instrument prepared by:
John F. Andrews
Capell & Howard, P.C.
P. O. Box 2069
Montgomery, AL 36102-2069
(334) 241-8000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Parties ............................................................................1
Recitals ............................................................................1
ARTICLE I
Provisions of General Application
SECTION 1.01 Definitions.................................................................2
SECTION 1.02 Action Taken Directly or Indirectly.........................................3
SECTION 1.03 Governing Law...............................................................3
SECTION 1.04 Other Provisions............................................................3
SECTION 1.05 Effect of Hearings and Table of Contents....................................3
ARTICLE II
Guaranty
SECTION 2.01 Guaranty of Payment of Bonds................................................3
SECTION 2.02 Trustee to Draw on Letter of Credit.........................................4
SECTION 2.03 Character of Obligations Hereunder..........................................5
ARTICLE III
Determination of Taxability
SECTION 3.01 Payments by the Guarantor ..................................................8
SECTION 3.02 No obligation to Contest or Appeal..........................................8
ARTICLE IV
Events of Default and Remedies
SECTION 4.01 Events of Default...........................................................8
SECTION 4.02 Remedies....................................................................9
SECTION 4.03 Limitation on Suits.........................................................9
SECTION 4.04 Unconditional Right of Bondholders to Receive
Principal, Premium and Interest............................................10
SECTION 4.05 Application of Money Collected.............................................10
SECTION 4.06 Agreement to Pay Attorneys' Fees...........................................10
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 4.07 Waiver of Past Defaults....................................................10
SECTION 4.08 No Additional Waiver Implied by One Waiver.................................10
SECTION 4.09 Remedies Subject to Applicable Law.........................................11
</TABLE>
(ii)
<PAGE>
ARTICLE V
Miscellaneous
<TABLE>
<S> <C> <C>
SECTION 5.01 Consent to Service of Process..............................................11
SECTION 5.02 Benefit of the Agreement...................................................11
SECTION 5.03 Notices....................................................................11
SECTION 5.04 Amendments.................................................................12
SECTION 5.05 Reproduction of Documents..................................................13
SECTION 5.06 Survival...................................................................13
SECTION 5.07 Successors and Assigns.....................................................13
SECTION 5.08 Effective Date of Agreement................................................13
SECTION 5.09 Entire Agreement; Counterparts.............................................14
SECTION 5.10 Severability...............................................................14
SECTION 5.11 Date of Identification Purposes Only.......................................14
SECTION 5.12 Exceptions to Covenants....................................................14
SECTION 5.13 Subrogation................................................................14
SECTION 5.14 Termination of Agreement...................................................14
SECTION 5.15 Rights of Guarantor under other Financing Documents........................14
Testimonium ...........................................................................15
Signatures ...........................................................................15
</TABLE>
(iii)
<PAGE>
BOND GUARANTY AGREEMENT
THIS BOND GUARANTY AGREEMENT dated as of February 1, 1999 is entered
into by Alcool, Inc. (the "Guarantor") for the benefit of SouthTrust Bank,
National Association, a national banking association with a principal place of
business in Montgomery, Alabama (the "Trustee"), as trustee under the indenture
referred to below.
Recitals
Pursuant to and for the purposes expressed in Division 1 of Article 4
of Chapter 54 of Title 11 of the Code of Alabama 1975, as amended, (the
"Enabling Law"), the Issuer has duly authorized the creation, execution and
delivery of Variable/Fixed Rate Industrial Development Revenue Bonds (Alcool,
Inc. Project) Series 1999, dated the date of delivery and payment therefor (the
"Bonds") pursuant to a Indenture dated February 1, 1999 (the "Indenture") from
the Issuer to SouthTrust Bank, National Association, as trustee (the "Trustee")
to finance a "project" within the meaning of the Enabling Law, as more
particularly described herein (the "Project").
Simultaneously with the issuance of the Bonds the Issuer and the
Guarantor will enter into a Lease Agreement dated February 1, 1999 (the "Lease
Agreement"), whereby the Issuer will agree to lease the Project Equipment to the
Guarantor and the Guarantor will agree to pay rentals to the Issuer at such
times and in such amounts as shall be sufficient to pay when due the principal
of, premium (if any) and interest on the Bonds and the purchase price of Bonds
tendered for purchase pursuant to the mandatory or optional tender provisions of
the Indenture.
The Bonds shall be limited obligations of the Issuer payable solely out
of the rentals payable by the Guarantor pursuant to the Lease Agreement and any
other revenues, rentals or receipts derived by the Issuer from the leasing or
sale of the Project Equipment.
As additional security for the payment of Debt Service on the Bonds,
the Guarantor will enter into this Bond Guaranty Agreement dated February 1,
1999 in favor of the Trustee, whereby the Guarantor will guarantee payment when
due of Debt Service on the Bonds.
As additional security for the payment of the Bonds, SouthTrust Bank,
National Association, (in its capacity as issuer of the initial letter of credit
referred to below, the "Bank") will issue an irrevocable letter of credit in
favor of the Trustee in the amount of (i) the aggregate principal amount of the
Bonds, to enable the Trustee to pay the principal amount of the Bonds when due
and to pay the principal portion of the purchase price of Bonds tendered (or
deemed tendered) for purchase, plus (ii) interest on the Bonds for a period of
50 days at the rate of 13% per annum, to enable the Trustee to pay interest on
the Bonds when due and to pay the interest portion of the purchase price of
Bonds tendered (or deemed tendered) for purchase. The initial letter of credit
to be delivered to the Trustee and any substitute letter of credit delivered to
the Trustee pursuant to the Indenture are herein referred to as the "Letter of
Credit."
The initial Letter of Credit will be issued by the Bank pursuant to
application by the Guarantor to the Bank and a Credit Agreement dated February
1, 1999 (the "Credit Agreement")
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between the Bank and the Guarantor whereby the Guarantor will agree, among other
things, to pay the Bank for all amounts drawn by the Trustee pursuant to the
initial Letter of Credit.
As security for the Guarantor's obligations under the Credit Agreement,
the Issuer and the Guarantor shall execute a Mortgage, Security Agreement and
Assignment of Rents and Leases dated as of February 1, 1999 in favor of the
Bank, whereby the Issuer and the Guarantor will mortgage the Project Equipment
and assign the Guarantor's interest in the Lease Agreement and revenues
therefrom to the Bank.
NOW, THEREFORE, for and in consideration of the premises, the
consummation by the Issuer and the Trustee of the transactions contemplated by
the Indenture and the Lease Agreement and the purchase of the Bonds by all
holders thereof, the Guarantor hereby covenants, agrees and binds itself as
follows:
ARTICLE I
Provisions of General Application
SECTION 1.01 Definitions
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
"Beneficial Owners" shall mean the owners of the beneficial interests
in the Bonds.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Default" shall mean an event or condition the occurrence of which
would, with or without the lapse of time or the giving of notice or both, be an
Event of Default.
"Event of Default" shall mean an event as defined in Article VI.
"Financing Participants" shall have the meaning ascribed in Section
2.03(xiv).
"Holder" shall mean the Beneficial Owners of any of the Bonds or a
former Beneficial Owner of any of the Bonds entitled to enforce any rights
hereunder.
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest or lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease assignment or bailment for
security purposes. For the purposes of this Agreement, the Guarantor shall be
deemed to be the owner of any Property which it has acquired or holds or hold
subject to a conditional sale agreement,
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financing lease or other arrangement pursuant to which title to the Property has
been retained by or vested in some other person for security purposes.
"Material Adverse Effect" shall mean any act or circumstance or event
which (i) causes an Event of Default or Default, (ii) otherwise might be
material and adverse to the financial condition or business operations of the
Guarantor or (iii) would adversely affect the validity or enforceability of any
of the papers executed in connection with the Bonds.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, an association, a trust, a limited liability company, an
unincorporated organization and a government or any department, agency or
political subdivision thereof.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
SECTION 1.02 Action Taken Directly or Indirectly
Where any provision in this Agreement refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.
SECTION 1.03 Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of Alabama.
SECTION 1.04 Other Provisions
(1) Capitalized terms used herein without definition shall have the
meaning assigned to them in the Indenture.
(2) Singular terms shall include the plural as well as the singular,
and vice versa.
(3) All references in this instrument to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections and
subdivisions of this instrument as originally executed.
(4) The terms "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision.
SECTION 1.05 Effect of Hearings and Table of Contents
The Article and Section headings herein and in the Table of Contents
are for convenience only and shall not affect the construction hereof.
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<PAGE>
ARTICLE II
Guaranty
SECTION 2.01 Guaranty of Payment of Bonds
The Guarantor hereby absolutely and unconditionally guarantees (i) the
punctual payment when due (whether at stated maturity, by acceleration or call
for redemption or otherwise), in lawful money of the United States of America,
of any and all sums which may become due at any time or from time to time to
each Holder as principal of, purchase price of, premium, if any, and interest on
the Bonds, including interest on any past due amounts of Debt Service or such
purchase price (but without regard to any provision set forth in the Bonds or
the Indenture limiting the sources of payment of amounts becoming due on the
Bonds), (ii) the full and prompt payment of all costs and expenses, including
court costs and reasonable attorneys' fees, incurred by the Trustee or any
Holder in attempting to collect or enforce any such obligations), and (iii) the
prompt payment of all other amounts payable by the Issuer under the Indenture.
If a Holder or the Trustee shall fail to receive any such payment when due as
aforesaid, the Guarantor shall immediately pay to the Holder or the Trustee, as
appropriate, in lawful money of the United States of America, an amount equal to
the required payment; provided, anything herein to the contrary notwithstanding,
there shall be credited against any amounts to be paid to the Holders hereunder
(i) any amount drawn by the Trustee pursuant to the Letter of Credit for the
payment of amounts due such Holders and (ii) all amounts theretofore paid to the
Trustee by the Guarantor pursuant to any of the Financing Documents with respect
to the Bonds held by such Holders.
The guaranty set forth in this Section is an absolute and irrevocable
guaranty of payment and not of collectibility or performance and is in no way
conditioned or contingent upon any attempt to collect from the Issuer or any
other Person or to realize upon any Property subject to the lien of the
Indenture or the Mortgage or upon any other direct or indirect security for the
Bonds, or to resort to any other remedies, except as specifically provided in
Section 2.02.
The guaranty set forth in this Section shall remain in full force and
effect without reference to future changes in conditions, including, to the
extent permitted by applicable law, changes in law, until all Holders shall have
been indefeasibly paid in full all sums due under the terms and provisions of
the Bonds and the Lease Agreement notwithstanding any terms or provisions
contained in the Bonds (including any discharge or termination of the Indenture
as a result of deposits being made with the Trustee), and until such sums are
not subject to rescission or repayment upon any bankruptcy, insolvency,
arrangement, reorganization, moratorium, receivership or similar proceeding
affecting the Issuer or the Guarantor. Each default in payment of Debt Service
shall give rise to a separate cause of action hereunder and separate suits may
be brought hereunder as each cause of action arises.
The Guarantor hereby waives (a) any right (i) to have the Issuer joined
with the Guarantor in any suit brought against the Guarantor on this Agreement,
(ii) to require the Trustee or a Holder to forthwith bring suit against the
Issuer on the Bonds, and (ii) to require that the Trustee or a Holder obtain any
judgment against the Issuer on the Bonds in connection with the enforcement of
any rights
4
<PAGE>
against the Guarantor hereunder; (b) notice of acceptance hereof, notice of any
action taken or omitted in reliance hereon, notice of any defaults by the Issuer
in the payment of any such sums, and notice of the creation, renewal, or accrual
of any liability of the Issuer, (c) any presentment, demand, notice or protest
of any kind; and (d) any defense, counterclaim or offset which may in any manner
or to any extent vary the risk of the Guarantor or which might otherwise operate
as a discharge of the Guarantor and (d) all rights of exemption under the
constitution and laws of any state as to any levy on and sale of Property.
SECTION 2.02 Trustee to Draw on Letter of Credit
The Trustee agrees, by acceptance hereof, to submit a draft under the
Letter of Credit, if then in effect, in accordance with its terms, to the extent
of the amounts available to be drawn thereunder to pay amounts then due to the
Holders as principal of, purchase price of, premium (if any) and interest on the
Bonds (whether at stated maturity or due dates, by tender for optional or
mandatory purchase, acceleration, redemption or otherwise), prior to making any
claim or demand upon the Guarantor hereunder for the payment of such amounts.
The Guarantor agrees that honor in whole or in part by the Bank of any draft
upon the Letter of Credit shall not be a condition to the performance by the
Guarantor of its obligations hereunder.
SECTION 2.03 Character of Obligations Hereunder
All obligations of the Guarantor under this Agreement are joint,
several, unconditional, primary, absolute and irrevocable under any and all
circumstances. Without limiting the generality of the foregoing, to the fullest
extent permitted under applicable law, the obligations of the Guarantor
hereunder shall not be subject to or impaired by:
(i) any inability or failure on the part of any party thereto
to perform or comply with the Letter of Credit, the Financing Documents
or the Bonds;
(ii) any invalidity or irregularity in any statutory or other
proceedings relating to the formation or existence of the Issuer, to
the issuance of the Bonds or to the execution and delivery of any
Financing Document;
(iii) any invalidity or unenforceability of, or any
impairment, modification or release of liability of any party under, or
any impossibility, impracticability, illegality or frustration of
performance by any part of, the Letter of Credit, the Financing
Documents or the Bonds, for any reason whatsoever, including, without
limitation, any decision by any court invalidating or otherwise
affecting the obligations of any party under or in connection with the
Letter of Credit, the Financing Documents or the Bonds;
(iv) any inability or failure on the part of the Guarantor to
perform or comply with the Lease Agreement;
5
<PAGE>
(v) any invalidity or unenforceability of, or any impairment,
modification or release of liability of the Guarantor under, or any
impossibility, impracticability, illegality or frustration of
performance by the Guarantor of this Agreement;
(vi) the voluntary or involuntary liquidation, dissolution,
merger, consolidation, sale or other disposition of all or
substantially all of the assets, marshalling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, moratorium, arrangement, composition with
creditors or readjustment of debt of, or other similar proceedings
affecting, the Issuer (including any payments to be received by the
Issuer under the Lease Agreement in connection with any of the
aforementioned proceedings or events), the Bank or the Guarantor;
(vii) any waiver, consent, extension, indulgence or other
action or inaction in respect of the Letter of Credit, any Financing
Document, or the Bonds, including any modification, amendment or
supplement to any of the foregoing, the renewal or extension of the
Bonds, the release of any Property subject to the Lien of the Indenture
or the Mortgage or the Lease Agreement or any other similar act;
(viii) any right of setoff, counterclaim or defense, or any
act, omission or breach on the part of the Issuer, the Bank or the
Guarantor;
(ix) any claim whatsoever against the Issuer;
(x) any defect in the title, compliance with specifications,
value, condition, design, operation, merchantability, quality,
durability or suitability of, consequences of use or misuse of, or
unfitness for use of, the Project Equipment or any part thereof, any
abandonment, destruction, noncompletion, requisition, foreclosure of or
damage to the Project Equipment or any part thereof, or any event of
force majeure relating to the Project Equipment or any part thereof;
(xi) any breach of any representation or warranty relating to
the Bonds or the Project Equipment;
(xii) any release, extinguishment or satisfaction of the
Issuer's obligations to make payments of Debt Service until there have
been paid to the Trustee or the Holders in lawful currency of the
United States an amount sufficient to pay all Debt Service (including
interest on overdue amounts of Debt Service including, to the extent
permitted by applicable law, interest) that would have been due and
owing to the Holders by the Issuer had the Issuer's obligations not
been so released, extinguished or satisfied;
(xiii) the failure to give notice to the Guarantor of the
occurrence of any default or event of default under the Bonds, the
Letter of Credit or the Financing Documents;
6
<PAGE>
(xiv) the compromise, settlement, release or termination of
any or all of the obligations, covenants or agreements of any of the
parties to any of the Financing Documents (the "Financing
Participants") under the Bonds, the Letter of Credit or the Financing
Documents;
(xv) any assignment, pledge or mortgage of all or any part of
the interest of any of the Financing Participants in the Project
Equipment, the Trust Estate or the Collateral;
(xvi) any waiver of the payment, performance or observance by
any of the Financing Participants of any obligation, agreement or
covenant of any of them contained in the Bonds, the Letter of Credit or
the Financing Documents;
(xvii) the extension of the time for payment of Debt Service
on the Bonds or any part thereof or of the time for performance of any
other obligations, agreements or covenants of any of the Financing
Participants under the Bonds, the Letter of Credit or the Financing
Documents;
(xviii) the modification or amendment (whether material or
otherwise) of any obligation, agreement or covenant contained in the
Bonds, the Letter of Credit or the Financing Documents;
(xix) any failure, omission, or delay on the part of any of
the Financing Participants to enforce, assert or exercise any right,
power or remedy conferred upon any of them by the Bonds, the Letter of
Credit or the Financing Documents;
(xx) the bankruptcy, insolvency, reorganization, appointment
of a receiver for, or dissolution of any of the Financing Participants,
or the entering by any or all of them into an agreement of composition
with creditors, or the making by any or all of them of an assignment
for the benefit of creditors;
(xxi) any rights of set-off, recoupment, counterclaim or other
defense, whether similar or dissimilar to the foregoing, which the
Guarantor might otherwise have against any of the Financing
Participants or any other person;
(xxii) the default or failure of any one or more of the
Financing Participants to perform fully any obligation, covenant or
agreement contained in the Bonds, the Letter of Credit or the Financing
Documents;
(xxiii) the release or discharge of any one or more of the
Financing Participants by operation of law, to the extent that such
release or discharge may be lawfully avoided, from the performance or
observance of any agreement or covenant contained in the Bonds, the
Letter of Credit or the Financing Documents;
7
<PAGE>
(xxiv) the invalidity or unenforceability of the Bonds, the
Letter of Credit or any of the Financing Documents or of any provision
of such instruments.
The Guarantor acknowledges that this Agreement is executed for the
benefit of the Holders and the Trustee and that the Bonds will be purchased in
reliance on this Agreement. No act of commission or omission of any kind at any
time on the part of the Trustee or any Holder in respect of any matter
whatsoever shall in any way affect or impair any right, power or benefit of the
Trustee, or any Holder under this Agreement and, to the extent permitted by
applicable law, no setoff, claim, reduction, diminution of any obligation, or
any defense of any kind or nature which the Guarantor may have against the
Trustee or any Holder, shall be available against the Trustee or any Holder in
any suit or action brought by the Trustee or any Holder to enforce any right,
power or benefit under this Agreement. Any conflict or ambiguity between this
Agreement and the other Financing Documents shall be interpreted and determined
in the manner most favorable to the Trustee and the Holders.
The representations, warranties and covenants of the Guarantor
contained in this Agreement, and any other document, instrument and agreement
referred to or contemplated by this Agreement, shall remain operative and in
full force and effect regardless of (i) any investigation made by or on behalf
of the Issuer, any Holder or any other Person, or (ii) delivery of, and payment
for, the Bonds.
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ARTICLE III
Determination of Taxability
SECTION 3.01 Payments by the Guarantor
In connection with a Determination of Taxability, the Guarantor agrees
to pay, in addition to amounts specified in the Bonds, the reasonable fees and
expenses of the Trustee incurred in connection therewith.
SECTION 3.02 No Obligation to Contest or Appeal
No Holder shall have any duty to make any contest of such a
Determination of Taxability or to pursue any appeal of, or have any
communication with the Internal Revenue Service concerning, such Determination
of Taxability.
ARTICLE IV
Events of Default and Remedies
SECTION 4.01 Events of Default
An "Event of Default" shall exist under this Agreement if any of the
following occurs and is continuing (whatever the reason for such event and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) Particular Covenant Defaults. The Guarantor fails to
perform or observe any covenant or agreement contained in Sections 2.01
for a period of five Business Days after the earlier of (i)
notification by the Trustee or a Holder of such failure or (ii) such
other time as the Guarantor shall have actual knowledge thereof.
(b) Other Defaults. The Guarantor fails to comply with any
other provision of this Agreement, and such failure continues for a
period of 30 days after the earlier of (i) notification by the Trustee
or a Holder of such failure or (ii) such other time as the Guarantor
shall have actual knowledge thereof.
(c) Warranties or Representations. Any warranty,
representation or other statement by or on behalf of the Guarantor
contained in this Agreement, or in any instrument furnished in
compliance with or in reference to this Agreement, is false or
misleading in any material respect and action which eliminates such
falsity or misleading character is not completed for a period of 30
days after the earlier of (i)
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notification by the Trustee or any Holder of such false or misleading
statement or (ii) such other time as the Guarantor shall have actual
knowledge thereof.
(d) Other Defaults. The occurrence of an Event of Default, as
therein defined, under the Indenture or the Lease Agreement and the
expiration of the applicable grace period, if any, specified therein.
SECTION 4.02 Remedies
If a Guaranty Default exists, the Trustee may, subject to its
agreements under Section 2.02, proceed to protect its rights and the rights of
the Holders of the Bonds by suit in equity, action at law or other appropriate
proceedings, whether for the specific performance of any covenant or agreement
of the Guarantor herein contained or in aid of the exercise of any power or
remedy granted to the Trustee under the other Financing Documents and the
Trustee may proceed directly against the Guarantor hereunder without resorting
to any other remedies which it may have and without proceeding against any other
security held by the Trustee.
SECTION 4.03 Limitation on Suits
No Holder shall have any right to institute any proceeding, judicial or
otherwise, under or with respect to this Agreement, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Bonds shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceedings; and
(5) no direction inconsistent with such written consent has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Bonds,
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Agreement to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Agreement, except in the manner herein
provided and for the equal and ratable benefit of all Outstanding Bonds.
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SECTION 4.04 Unconditional Right of Bondholders to Receive Principal,
Premium and Interest
Notwithstanding any other provisions in this Agreement, the Holder of
any Bond shall have the right, which is absolute and unconditional, to receive
payment of the principal of (and premium, if any) and interest on such Bond on
the respective stated maturity and due dates expressed in such Bond (or, in the
case of redemption, on the redemption date) and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without
the consent of such Holder.
SECTION 4.05 Application of Money Collected
Any money collected by the Trustee pursuant to this Agreement shall be
applied to the payment of the whole amount then due and unpaid upon the
Outstanding Bonds for principal (and premium, if any) and interest, in respect
of which or for the benefit of which such money has been collected; and in case
such money shall be insufficient to pay in full the whole amount so due and
unpaid upon such Bonds, then to the payment of such principal (and premium, if
any) and interest, without any preference or priority, ratably according to the
aggregate amount so due.
SECTION 4.06 Agreement to Pay Attorneys' Fees
In the event the Guarantor should default under any of the provisions
of this Agreement and the Trustee (in its own name or in the name and on behalf
of the Holders) should employ attorney or incur other expenses for the
collection of any payments due hereunder or the enforcement of performance or
observance of any agreement or covenant on the part of the Guarantor herein
contained, the Guarantor will on demand therefor pay to the Trustee the
reasonable fees of such attorneys and such other reasonable expenses so
incurred.
SECTION 4.07 Waiver of Past Defaults
(a) Before any judgment or decree for payment of money due has been
obtained by the Trustee, the holders of not less than a majority in principal
amount of the Outstanding Bonds may, on behalf of the Holders of all the Bonds,
waive any past default hereunder and its consequences, except for a default in
the payment of any sums due pursuant to Article II.
(b) Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Agreement and the Indenture; but no such waiver shall extend to
any subsequent or other default or impair any right consequent thereon.
SECTION 4.08 No Additional Waiver Implied by One Waiver
If any agreement contained in this Agreement should be breached by the
Guarantor and thereafter waived by the Holders of not less than a majority in
principal amount of the Outstanding Bonds, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
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SECTION 4.09 Remedies Subject to Applicable Law
All rights, remedies and powers provided by this Article may be
exercised only to the extent the exercise thereof does not violate any
applicable provision of law in the premises, and all the provisions of this
Article are intended to be subject to all applicable mandatory provisions of law
which may be controlling in the premises and to be limited to the extent
necessary so that they will not render this Agreement invalid or unenforceable.
ARTICLE V
Miscellaneous
SECTION 5.01 Consent to Service of Process
The Guarantor irrevocably (a) agrees that any suit, action or other
legal proceeding arising out of this Agreement may be brought in the courts of
record of the State of Alabama or the courts of the United States located in the
State of Alabama; (c) consents to the jurisdiction of each such court in any
such suit, action or proceeding, and (c) waives any objection which the
Guarantor may have to the laying of venue of any such suit, action or proceeding
in any of such courts.
SECTION 5.02 Benefit of the Agreement
This Agreement is entered into by the Guarantor for the benefit of the
Trustee and the Holders from time to time of the Bonds, all of whom shall,
subject to the provisions hereof, be entitled to enforce performance and
observance of each and every provision of this Agreement to the same extent as
if they were parties signatory hereto. The Guarantor hereby expressly waives
notice from the Trustee or the Holders from time to time of the Bonds of their
acceptance and reliance on this Agreement. The Guarantor agrees to pay all
reasonable and necessary costs, expenses and fees, including all reasonable
attorneys' fees, which may be incurred by the Trustee or any Holder in enforcing
or attempting to enforce this Agreement pursuant to the provisions hereof,
whether the same shall be enforced by suit or otherwise.
SECTION 5.03 Notices
(a) Any request, demand, authorization, direction, notice, consent, or
other document provided or permitted by this Agreement to be made upon, given or
furnished to, or filed with, the Guarantor or the Trustee shall be sufficient
for every purpose hereunder if in writing and (except as otherwise provided in
this Agreement) either (i) delivered personally to the party or, if such party
is not an individual, to an officer, or other legal representative of the party
to whom the same is directed (provided that any document delivered personally to
the Trustee must be delivered at its Principal Office during normal business
hours) at the hand delivery address specified in Section 16.01 of the Indenture
(with respect to the Trustee) or specified opposite the signature of the
Guarantor hereunder (with respect to the Guarantor) or (ii) mailed by
first-class, registered or certified mail, postage prepaid and addressed as so
specified. Either party may change the address
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for receiving any such notice or document by giving notice of the change to the
other party as provided in this Section.
(b) Any such notice or other document shall be deemed delivered when
actually received by the party to whom directed (or, if such party is not an
individual, to an officer, or other legal representative of the party) at the
address specified pursuant to this Section, or, if sent by mail, three days
after such notice or document is deposited in the United States mail, proper
postage prepaid, addressed as provided above.
SECTION 5.04 Amendments
(a) This Agreement may not be amended without the prior written consent
of each party hereto and unless there has first been delivered to the Trustee,
the Guarantor and the Remarketing Agent an Opinion of Bond Counsel that such
action will not, whether solely or in conjunction with any other fact or
circumstances, cause the interest on the Bonds to be or to become Taxable.
(b) Without the consent of the Holders of any Bonds, the Guarantor may
from time to time enter into one or more amendments hereto, in form satisfactory
to the Trustee, for any of the following purposes:
(1) to add to the covenants of the Guarantor for the benefit
of the Holders and to make the occurrence, or the occurrence and
continuance, of a default in any of such additional covenants an Event
of Default permitting the enforcement of all or any of the several
remedies provided in this Agreement or the Indenture; provided,
however, that with respect to any such additional covenant such
amendment to this Agreement may provide for a particular period of
grace after default (which period may be shorter or longer than that
allowed in the case of other defaults) or may provide for an immediate
enforcement upon such default or may limit the remedies available to
the Trustee and the Holders upon such default; or
(2) to surrender any right or power herein conferred upon the
Guarantor; or
(3) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein or to make any other provision, with respect to matters or
questions arising under this Agreement, which shall not be inconsistent
with provisions of this Agreement; provided such action shall not, in
the judgment of the Trustee, adversely affect the interests of the
Holders.
(c) With the consent of the Holders of not less than a majority in
principal amount of the Bonds then Outstanding, the Guarantor may enter into an
amendment hereto for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Trustee or of the Holders under this Agreement;
provided, however, that no such amendment shall, without the consent of the
Holder of each Outstanding Bond affected thereby,
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(1) reduce the amount, coverage or scope of the obligations
contained in Article II,
(2) change the absolute and unconditional nature of such
obligations, or
(3) reduce the principal amount of Outstanding Bonds, the
Holders of which are required to consent to such amendment, change or
modification.
(d) If the Bank is not in default under the Letter of Credit, no
amendment or change to this Agreement may be made without the prior written
consent of the Bank (as defined in the Indenture).
SECTION 5.05 Reproduction of Documents
The Guarantor hereby agrees that any Financing Document and all
documents relating thereto, including, without limitation, (a) supplements,
consents, waivers and modifications which may hereafter be executed, (b)
documents received by any Holder at any closing of any purchase of the Bonds and
(c) financial statements, certificates and other information previously or
hereafter furnished to the Trustee or any Holder, may be reproduced by the
Trustee or such Holder by any photographic, photostatic, microfilm, microcard,
minature photographic or other similar process and they may destroy any original
document so reproduced. To the extent permitted by law, the Guarantor agrees and
stipulates that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by them
in the regular course of business) and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
SECTION 5.06 Survival
All warranties, representations and covenants made by the Guarantor
herein or on any certificate or other instrument delivered by them or on their
behalf under this Agreement shall be considered to have been relied upon by the
Trustee and the Holders regardless of any investigation made by them or on their
behalf. All statements in any such certificate or other instrument shall
constitute warranties and representations by the Guarantor hereunder.
SECTION 5.07 Successors and Assigns
The terms of this Agreement shall inure to the benefit of and be
binding upon the heirs, executors, administrators, successors and assigns of
each of the parties. The provisions of this Agreement are intended to e for the
benefit of all Holders, and shall be enforceable for the benefit of any such
Holder, whether or not an express assignment to such Holder of rights under this
Agreement has been made by any previous Holder or its successors or assigns.
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SECTION 5.08 Effective Date of Agreement
The obligations of the Guarantor hereunder shall arise absolutely and
unconditionally when the Bonds shall have been issued, sold and delivered by the
Issuer.
SECTION 5.09 Entire Agreement; Counterparts
This Agreement constitutes the entire agreement, and supersedes all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof and may be executed simultaneously in
several counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
SECTION 5.10 Severability
The invalidity or unenforceability of any one or more phrases,
sentences, clauses or sections contained in this Agreement shall not affect the
validity or enforceability of the remaining portions of this Agreement, or any
part thereof.
SECTION 5.11 Date for Identification Purposes Only
The date of this Agreement is for identification purposes only and is
not intended to indicate that this Agreement was executed on such date.
SECTION 5.12 Exceptions to Covenants
The Guarantor shall not be deemed to be permitted to take any action or
fail to take any action which is permitted as an exception to any of the
covenants contained herein or which is within the permissible limits of any of
the covenants contained herein if such action or omission would result in the
breach of any other covenant contained herein.
SECTION 5.13 Subrogation
Once the Bonds have been Fully Paid by virtue of payments by the
Guarantor under this Agreement, the Guarantor shall be subrogated to all rights
of the Trustee and the Bondholders under the Bonds, the Indenture and the other
Financing Documents.
SECTION 5.14 Termination of Agreement
This Agreement shall terminate when the Bonds have been Fully Paid.
SECTION 5.15 Rights of Guarantor under other Financing Documents
The provisions of this Guaranty Agreement shall not operate or be
construed to limit, restrict, or deny the exercise or enjoyment of any right,
privilege or option in favor of the Guarantor contained in any of the other
Financing Documents.
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<PAGE>
IN WITNESS WHEREOF the Guarantor has caused this Agreement to be
executed under seal, and the Trustee has executed this Agreement by causing its
name to be hereunto subscribed by one of its duly authorized officers, all as of
the day and year first above written.
ALCOOL, INC.
By: /s/
------------------------------------
Its President
ATTEST:
________________________________
Its Secretary
Accepted:
SOUTHTRUST BANK,
NATIONAL ASSOCIATION
By: /s/
----------------------------------
_________________________________ Its_________________________
_________________________________
16
Irrevocable Letter of Credit No. SB 2009
March 8, 1999
SouthTrust Bank, National Association
as Trustee under the Indenture referred to below
110 Office Park Drive, 2nd Level
Birmingham, Alabama 35223
ATTENTION: Corporate Trust Department
Dear Sirs:
1. For the joint accounts of Peregrine Industries, Inc., a corporation
organized under the laws of the State of Florida and Alcool, Inc., a corporation
organized under the laws of the State of Alabama (collectively, the "Credit
Obligors"), we hereby authorize you to draw on us at sight, as hereinafter
provided, an amount not exceeding $2,503,809 (such amount, as reduced from time
to time pursuant to paragraph 6 below and as reinstated from time to time
pursuant to paragraphs 10 and 11 below, being herein called the "Stated
Amount").
2. This Letter of Credit is irrevocable and is issued to you, as
trustee under the Trust Indenture dated as of February 1, 1999 (the
"Indenture"), between you and The Industrial Development Board of the City of
Montgomery, a public corporation organized under the laws of the State of
Alabama (the "Board") pursuant to which Indenture $2,460,000 in aggregate
principal amount of the Board's Variable/Fixed Rate Industrial Development
Revenue Bonds (Alcool, Inc. Project) Series 1999 dated the date of delivery and
payment therefor (the "Bonds") are being issued. This Letter of Credit is issued
pursuant to various credit and security documents between us and the Credit
Obligors, including that certain Credit Agreement dated as of February 1, 1999
(the "Credit Agreement"). Capitalized terms used herein without definition shall
have the respective meanings assigned to them in the Indenture.
3. Of the Stated Amount, (i) up to $2,460,000 which is an amount equal
to the principal amount of the Bonds (the "Principal Portion"), may be drawn
with respect to payment of the unpaid principal amount of the Bonds, or payment
of the principal portion of the purchase price of Bonds tendered (or deemed
tendered) to you for purchase in accordance with the optional or mandatory
tender provisions of the Indenture ("Tendered Bonds") and (ii) up to $43,809,
which is an amount equal to the maximum amount of interest payable on the Bonds
at the rate of 13% per annum for a period of 50 days, computed on the basis of a
365-day year (the "Interest Portion"), may be drawn with respect to payment of
accrued but unpaid interest on the Bonds, or payment of the interest
<PAGE>
portion of the purchase price of Tendered Bonds. This Letter of Credit does not
apply to any interest that may accrue on the Bonds after the Bonds become due
(whether by maturity, redemption, acceleration or otherwise), or to any premium
due upon redemption of Bonds.
4. Funds under this Letter of Credit are available to you against your
sight draft(s) drawn on us, stating on their face: "Drawn under SouthTrust Bank,
National Association Irrevocable Letter of Credit No. SB 2009" accompanied by
your written certificate signed by your authorized officer, appropriately
completed, in the form of Appendix A, B or C hereto, as indicated below.
Presentation of such drafts and certificates shall be made at our office located
at
SouthTrust Bank, National Association
420 N. 20th Street, 5th Floor (International Department)
Birmingham, Alabama 35203
or at any other office which may be designated by us by written notice delivered
to you (the office address specified above and any other office so designated by
us being herein called our "Principal Office"). We hereby agree that each draft
drawn under and in compliance with the terms of this Letter of Credit will be
duly honored by us with our own funds upon due delivery of the certificates, as
specified below, if presented at our Principal Office on or before the
expiration date hereof. All payments made by us pursuant to this Letter of
Credit will be made with our own funds.
5. If a drawing is made by you hereunder at or prior to 11:00 A.M.
(Birmingham, Alabama time) on a business day, and provided that the documents so
presented conform to the terms and conditions hereof, payment shall be made to
you, or to your designee, of the amount specified, in immediately available
funds, not later than 3:00 p.m. (Birmingham, Alabama time) on the same business
day. If a drawing is made by you hereunder after 11:00 A.M. (Birmingham, Alabama
time) on a business day, and provided that the documents so presented conform to
the terms and conditions hereof, payment shall be made to you, or to your
designee, of the amount specified, in immediately available funds, not later
than 3:00 P.M. (Birmingham, Alabama time) on the next succeeding business day.
Payment under this Letter of Credit may be made by deposit of immediately
available funds into a designated account that you maintain with us. As used
herein "business day" shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in the city where our Principal Office is
located are authorized or required by law to close.
6. Multiple drawings may be made hereunder, provided that drawings
honored by us hereunder shall not, in the aggregate, exceed the Stated Amount.
The Stated Amount shall be reduced as follows:
(a) Payment by us of drawings with respect to principal due
upon maturity, redemption or acceleration of the Bonds shall pro tanto
reduce the Principal Portion of the Stated Amount, without
reinstatement.
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(b) Payment by us of drawings with respect to interest due on
the Bonds shall pro tanto reduce the Interest Portion of the Stated
Amount, subject to reinstatement as provided in paragraph 10 below.
(c) Payment by us of drawings with respect to the purchase of
Tendered Bonds shall pro tanto reduce the Principal Portion of the
Stated Amount, to the extent of the principal portion of the purchase
price so drawn, and shall pro tanto reduce the Interest Portion of the
Stated Amount, to the extent of the interest portion of the purchase
price so drawn, in each case subject to reinstatement as provided in
paragraph 11 below.
(d) At any time after the principal amount of the Bonds
outstanding is reduced as a result of payment of the principal of Bonds
due upon maturity or redemption, the Interest Portion of the Stated
Amount may be reduced by delivery to us of written notice from you
certifying the maximum amount of interest that would be payable on the
Bonds then outstanding for a period of 50 days at the rate of 13% per
annum, computed on the basis of a 365-day year (the "Maximum Interest
Coverage"). Upon receipt by us of such notice from you, the Interest
Portion of the Stated Amount shall be reduced to the Maximum Interest
Coverage so certified by you and shall not thereafter be increased or
reinstated to an amount in excess of such Maximum Interest Coverage.
If, on the date of receipt of such notice by us, the Interest Portion
of the Stated Amount then available for drawing hereunder is less than
the Maximum Interest Coverage so certified (as a result of draws
against the Interest Portion for which no reinstatement has become
effective), the Interest Portion shall not thereafter be increased or
reinstated to an amount greater than the Maximum Interest Coverage so
certified by you.
7. For drawings under the Principal Portion to pay principal of the
Bonds due upon maturity, redemption or acceleration, your drafts must be
accompanied by your written certificate signed by your authorized officer and
appropriately completed in the form of Appendix A (an "A Drawing").
8. For drawings under the Interest Portion to pay the interest due on
the Bonds, your drafts must be accompanied by your written certificate signed by
your authorized officer and appropriately completed in the form of Appendix B (a
"B Drawing").
9. For drawings under the Principal Portion and (if applicable) the
Interest Portion to pay the purchase price of Tendered Bonds, your drafts must
be accompanied by your written certificate signed by your authorized officer and
appropriately completed in the form of Appendix C (a "C Drawing").
10. On or after the close of business on the 11th calendar day
following payment by us of any B Drawing hereunder, the Interest Portion of the
Stated Amount will be automatically reinstated by the amount of such B Drawing
unless prior to the close of business on the 10th day following payment of such
B Drawing you shall receive written notice from us (i) stating that an
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<PAGE>
Event of Default, as defined in the Credit Agreement, has occurred and is
continuing and (ii) directing that the Bonds be declared due and payable
pursuant to Sections 12.02 of the Indenture; provided, however, that the
Interest Portion shall never be reinstated to an amount in excess of the Maximum
Interest Coverage, as certified in the most recent notice with respect to
Maximum Interest Coverage received by us pursuant to paragraph 6 above.
11. Upon receipt by you of funds adequate and available to reimburse us
for a C Drawing with respect to any Tendered Bond or Bonds ("Reimbursement
Funds"), (i) the Principal Portion shall be reinstated by the amount of the
principal portion of the purchase price of such Tendered Bond or Bonds, and (ii)
the Interest Portion shall be reinstated by the amount of the interest portion
of the purchase price of such Tendered Bond or Bonds; provided, however, that
the Interest Portion shall never be reinstated to an amount in excess of the
Maximum Interest Coverage, as certified in the most recent notice with respect
to Maximum Interest Coverage received by us pursuant to paragraph 6 above. Bonds
with respect to which you receive such Reimbursement Funds shall no longer be
considered "Pledged Bonds" for purposes of the Indenture and the Credit
Agreement.
12. Reductions of the Stated Amount provided for in paragraph 6 above
shall reduce the amounts which you may draw hereunder notwithstanding:
(a) the fact that such reduction is the result of a payment
under this Letter of Credit against presentation of a sight draft or
certificate which does not substantially comply with the terms of this
Letter of Credit (including without limitation (i) the fact that any
draft or certificate presented upon this Letter of Credit, or any
endorsement thereon, proves to be forged, fraudulent, invalid,
unenforceable or insufficient in any respect or any statement therein
is inaccurate in any respect whatever or (ii) the failure of any
document to bear reference, or to bear adequate reference, to this
Letter of Credit);
(b) the use to which this Letter of Credit may be put or any
acts or omissions of the Trustee in connection therewith; or
(c) any other circumstances or happening whatsoever, whether
or not similar to any of the foregoing, in making payment under this
Letter of Credit;
provided that such payment shall not constitute gross negligence or willful
misconduct by us. In furtherance and not in limitation of the foregoing, we may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
13. Only you, as trustee under the Indenture, may make a drawing under
this Letter of Credit. Upon the payment to you or your account of the amount
specified in sight drafts drawn hereunder, we shall be fully discharged of our
obligation under this Letter of Credit with respect to such sight drafts and we
shall not thereafter be obligated to make any further payments under this Letter
of Credit in respect of such sight drafts to you or any other person who may
have made or makes a demand for payment of principal or interest with respect to
any Bond.
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14. This Letter of Credit shall be effective immediately and shall
automatically terminate upon the earliest of:
(a) the date of our honoring of the final drawing available to
be made hereunder; or
(b) the date of our receipt of a certificate in the form of
Appendix D hereto appropriately completed and purportedly signed by
your duly authorized officer; or
(c) 30 days after receipt by you of written notice from us (i)
stating that an Event of Default, as defined in the Credit Agreement,
has occurred and is continuing and (ii) directing that the Bonds be
declared due and payable pursuant to Sections 12.02 of the Indenture;
or
(d) 15 calendar days following the date that the Bonds have
been converted to bear the Term Rate (as defined in the Indenture); or
(e) our close of business on February 15, 2007 (the "Stated
Expiration Date").
Upon the expiration of this Letter of Credit, you shall immediately deliver the
same to us for cancellation.
15. You may transfer your rights in their entirety (but not in part) to
any transferee who has succeeded you as trustee under the Indenture, and such
transferred rights may be successively transferred. Such transfer shall be
effected upon the presentation to us of this Letter of Credit accompanied by a
transfer letter in the form attached hereto as Appendix E. Upon presentation of
such documents to us, we shall forthwith issue an irrevocable letter of credit
to your transferee with provisions consistent with this Letter of Credit.
16. This Letter of Credit is subject to the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce, Publication No. 500 (the "Uniform Customs") except that Article 13(b)
and Article 17 of the Uniform Customs shall not be included in this reference to
the Uniform Customs and shall not apply hereto. This Letter of Credit shall be
deemed to be a contract made under the laws of the State of Alabama, including
Article 5 of the Alabama Uniform Commercial Code; provided, however, that the
terms of ss.7-5-112 of the Alabama Uniform Commercial Code shall not govern the
terms of this Letter of Credit.
17. All documents, notices and other communications (hereinafter
"documents") provided or permitted by this Letter of Credit to be given or
presented to us shall be personally delivered to us at our Principal Office or
shall be sent to us by telecopy (in which case draft requirements are waived) to
the following number:
(205) 254-4285
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<PAGE>
or such other telex, telecopy , or facsimile number as we shall specify by
written notice to you. For purposes of this Letter of Credit, a document shall
be "presented" or a "presentation" of a document shall be made in accordance
with the terms hereof only when such document is actually received by our
International Department at our Principal Office, whether presented in person or
by telecopy as provided above. You may verify our receipt of documents delivered
by telecopy by telephone inquiry at (205) 254-5626, or at such other telephone
number as we shall specify by written notice to you.
18. All documents, notices and other communications provided or
permitted by this Letter of Credit to be given or presented to you shall be
personally delivered to you at SouthTrust Bank, National Association, 110 Office
Park Drive, Birmingham, Alabama 35223, Attention: Corporate Trust
Administration, or at any other address which may be designated by you by
written notice delivered to us, or shall be sent to you by telecopy to the
following number:
Telecopy No. (334) 254-4180
or such other telex, telecopy, or facsimile number as you shall specify by
written notice to us.
19. This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein
(including, without limitation, the Bonds), except only the certificates and the
sight drafts referred to herein; and any such reference shall not be deemed to
incorporate herein by reference any document, instrument or agreement except for
such certificates and such sight drafts.
20. This Letter of Credit may not be amended or modified in any way
unless there has been first delivered to the Trustee, the Credit Obligors and
the Remarketing Agent an Opinion of Bond Counsel that such action will not,
whether solely or in conjunction with any other fact or circumstances, cause the
interest on the Bonds to be or become taxable. This Letter of Credit is executed
as of the date and year first above written.
Very truly yours,
SOUTHTRUST BANK,
NATIONAL ASSOCIATION
By:_____________________________________
______________________________________
Name:________________________________
______________________________________
Title:_______________________________
______________________________________
6
<PAGE>
APPENDIX A
TO
SOUTHTRUST BANK, NATIONAL ASSOCIATION
IRREVOCABLE LETTER OF CREDIT NO. SB 2009
Certificate for A Drawing
SouthTrust Bank, National Association, as trustee (the "Trustee"),
hereby certifies to SouthTrust Bank, National Association (the "Bank"), with
reference to Irrevocable Letter of Credit No. SB 2009 (the "Letter of Credit";
capitalized terms not otherwise defined herein shall have the meaning assigned
to such terms in the Letter of Credit) issued by the Bank in favor of the
Trustee, that:
(1) The Trustee is the trustee under the Indenture.
(2) The Trustee is making a drawing under the Principal Portion of the
Letter of Credit in the amount of $______________ to be used for the payment of
unpaid principal on the Bonds due upon maturity, redemption or acceleration.
Such amount is due and payable with respect to the principal of the Bonds, or
will be due and payable on the date that the Bank is required to pay the
draft(s) accompanying this certificate.
(3) The aggregate amount of the sight draft(s) accompanying this
certificate that is allocable to the payment of principal of the Bonds does not
exceed the amount available on the date hereof to be drawn under the Principal
Portion of the Letter of Credit.
(4) After the Bonds with respect to which this draw is made are
retired, the aggregate amount of Bonds outstanding under the Indenture will be
$____________. After payment by you of this drawing (and any B Drawing submitted
to us for payment on the same date), the Maximum Interest Coverage (as defined
in paragraph 6(d) of the Letter of Credit) will be $__________.
IN WITNESS WHEREOF, the Trustee has caused this certificate to be
executed and delivered by its duly authorized officer on this _____ day of
________________, _____.
SOUTHTRUST BANK,
NATIONAL ASSOCIATION,
as Trustee
By:__/s/________________________________
______________________________________
Title:__________________________________
______________________________________
<PAGE>
APPENDIX B
TO
SOUTHTRUST BANK, NATIONAL ASSOCIATION
IRREVOCABLE LETTER OF CREDIT NO. SB 2009
Certificate for B Drawing
SouthTrust Bank, National Association, as trustee (the "Trustee"),
hereby certifies to SouthTrust Bank, National Association (the "Bank"), with
reference to Irrevocable Letter of Credit No. SB 2009 (the "Letter of Credit";
capitalized terms not otherwise defined herein shall have the meaning assigned
to such terms in the Letter of Credit) issued by the Bank in favor of the
Trustee, that:
(1) The Trustee is the trustee under the Indenture.
(2) The Trustee is making a drawing under the Interest Portion of the
Letter of Credit in the amount of $_____________ to be used for the payment of
unpaid interest due on the Bonds. Such amount is due and payable with respect to
interest on the Bonds, or will be due and payable on the date that the Bank is
required to pay the draft(s) accompanying this certificate.
(3) The aggregate amount of the sight draft(s) accompanying this
certificate does not exceed the amount available on the date hereof to be drawn
under the Interest Portion of the Letter of Credit.
IN WITNESS WHEREOF, the Trustee has caused this certificate to be
executed and delivered by its duly authorized officer on this _____ day of
________________, 19___.
SOUTHTRUST BANK,
NATIONAL ASSOCIATION,
as Trustee
By:___/s/_______________________________
______________________________________
Title:__________________________________
______________________________________
<PAGE>
APPENDIX C
TO
SOUTHTRUST BANK, NATIONAL ASSOCIATION
IRREVOCABLE LETTER OF CREDIT NO. SB 2009
Certificate for C Drawing
SouthTrust Bank, National Association, as trustee (the "Trustee"),
hereby certifies to SouthTrust Bank, National Association (the "Bank"), with
reference to Irrevocable Letter of Credit No. SB 2009 (the "Letter of Credit";
capitalized terms not otherwise defined herein shall have the meaning assigned
to such terms in the Letter of Credit) issued by the Bank in favor of the
Trustee, that:
(1) The Trustee is the trustee under the Indenture.
(2) The Trustee is making a drawing under the Letter of Credit in the
amount of $_____________ to be used to pay the purchase price of Tendered Bonds.
Of the aggregate amount drawn, $_________ is drawn under the Interest Portion of
the Letter of Credit to pay the interest portion of such purchase price and
$__________ is drawn under the Principal Portion of the Letter of Credit to pay
the principal portion of such purchase price. The aggregate amount so drawn is
due and payable with respect to the purchase price of Tendered Bonds, or will be
due and payable on the date that the Bank is required to pay the draft(s)
accompanying this certificate.
(3) The aggregate amount of the sight draft(s) accompanying this
certificate does not exceed the amount available on the date hereof to be drawn
under the Letter of Credit; the amount designated above as drawn against the
Interest Portion does not exceed the amount available on the date hereof to be
drawn under the Interest Portion of the Letter of Credit; and the amount
designated above as drawn against the Principal Portion does not exceed the
amount available on the date hereof to be drawn under the Principal Portion of
the Letter of Credit.
(4) This C Drawing is being made to pay the purchase price of the
following Tendered Bonds:
Certificate Number Principal
(if applicable) Amount
_____________________ _____________________
_____________________ _____________________
_____________________ _____________________
_____________________ _____________________
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this certificate to be
executed and delivered by its duly authorized officer on this _____ day of
________________, 19___.
SOUTHTRUST BANK,
NATIONAL ASSOCIATION,
as Trustee
By:____/s/______________________________
______________________________________
Title:__________________________________
______________________________________
<PAGE>
APPENDIX D
TO
SOUTHTRUST BANK, NATIONAL ASSOCIATION
IRREVOCABLE LETTER OF CREDIT NO. SB 2009
Certificate for Cancellation
SouthTrust Bank, National Association, as trustee (the "Trustee"),
hereby certifies to SouthTrust Bank, National Association (the "Bank"), with
reference to Irrevocable Letter of Credit No. SB 2009 (the "Letter of Credit";
capitalized terms not otherwise defined herein shall have the meaning assigned
to such terms in the Letter of Credit) issued by the Bank in favor of the
Trustee, that:
(1) The Trustee is the trustee under the Indenture.
(2) The Letter of Credit is hereby delivered to the Bank for
cancellation because:
(a) the Bonds have been fully paid, or provision for such
payment has been made, in accordance with the terms of Article 15 of
the Indenture; or
(b) the terms and conditions of the Indenture (and the Lease
Agreement referred to in the Indenture) for the acceptance by the
Trustee of a Substitute Letter of Credit (as such terms are defined in
the Indenture) and the cancellation of the Letter of Credit have been
satisfied.
IN WITNESS WHEREOF, the Trustee has caused this certificate to be
executed and delivered by its duly authorized officer on this _____ day of
________________, 19___.
SOUTHTRUST BANK,
NATIONAL ASSOCIATION,
as Trustee
By:___/s/_______________________________
______________________________________
Title:__________________________________
______________________________________
<PAGE>
APPENDIX E
TO
SOUTHTRUST BANK, NATIONAL ASSOCIATION
IRREVOCABLE LETTER OF CREDIT NO. SB 2009
Transfer Letter
SouthTrust Bank, National Association
2895 Eastern Boulevard
Montgomery, Alabama 36116
Attention: Commercial Loan Department
Date: ________________
Gentlemen:
With reference to your Irrevocable Letter of Credit No. SB 2009 (the
"Letter of Credit"; capitalized terms not otherwise defined herein shall have
the meaning assigned to such terms in the Letter of Credit), we hereby transfer
to ______________________ all right, title and interest of the undersigned in
and to the Letter of Credit.
We hereby certify that the transferee is the successor trustee under
the Indenture.
Please notify the transferee of this transfer.
The Letter of Credit (including amendments to this date, if any) is
returned herewith, and we request that you issue a new irrevocable letter of
credit in favor of the transferee with provisions consistent with the Letter of
Credit, as required by the terms of the Letter of Credit. This transfer shall be
void and of no effect if you fail to issue such a letter of credit to the
transferee.
Very truly yours,
SOUTHTRUST BANK,
NATIONAL ASSOCIATION,
as Trustee
By:___/s/_______________________________
______________________________________
Title:__________________________________
______________________________________
- --------------------------------------------------------------------------------
MORTGAGE, SECURITY AGREEMENT, AND
ASSIGNMENT OF RENTS AND LEASES
from
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF MONTGOMERY
and
ALCOOL, INC.
to
SOUTHTRUST BANK,
NATIONAL ASSOCIATION
dated as of February 1, 1999
This instrument prepared by
John F. Andrews
Capell & Howard, P.C.
P. O. Box 2069
Montgomery, AL 36102-2069
(334) 241-8000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Mortgage, Security Agreement and
Assignment of Rents and Leases
Page
Parties....................................................1
Recitals...................................................1
ARTICLE I
Definitions and Other Provisions
of General Application
Section 1.01 Definitions................................................2
Section 1.02 Effect of Headings and Table of Contents...................6
Section 1.03 Date of Mortgage...........................................6
Section 1.04 Separability Clause........................................6
Section 1.05 Governing Law..............................................6
Section 1.06 Counterparts...............................................6
ARTICLE II
Granting Clauses
I. The Project Equipment......................................6
II. Personal Property and Fixtures.............................7
III. Condemnation Awards and Insurance Proceeds.................7
IV. Special Funds..............................................7
V. Leases and Rents...........................................7
VI. Lease Agreement and Rights Thereunder......................8
VII. Other......................................................8
ARTICLE III
Representations and Warranties
Section 3.01 Board Representations and Warranties.......................9
Section 3.02 Alcool Representations and Warranties......................9
(i)
<PAGE>
ARTICLE IV
Covenants of Alcool
Section 4.01 Payment of Taxes and Other Assessments....................10
Section 4.02 Insurance.................................................10
Section 4.03 Condemnation Awards.......................................11
Section 4.04 Waste, Demolition, Alteration or Replacement..............11
Section 4.05 Compliance by Alcool with Terms of Other
Financing Documents.......................................11
Section 4.06 Environmental Compliance..................................11
ARTICLE V
Transfer of, or Liens on, Collateral
Section 5.01 Limitation on Conveyance and Encumbrance..................13
ARTICLE VI
Defeasance
Section 6.01 Satisfaction of Mortgage..................................13
ARTICLE VII
Events of Default
Section 7.01 Defaults..................................................14
ARTICLE VIII
Rights of Bank Upon Default
Section 8.01 Acceleration of Indebtedness..............................15
Section 8.02 Operation of Collateral by Bank...........................15
Section 8.03 Judicial Proceedings; Right to Receiver...................16
Section 8.04 Foreclosure Sale..........................................16
Section 8.05 Project Equipment.........................................17
Section 8.06 Conveyance After Sale.....................................17
Section 8.07 Rents and leases..........................................18
Section 8.08 Application of Proceeds...................................18
Section 8.09 Multiple Sales............................................19
(ii)
<PAGE>
Section 8.10 Waiver of Appraisement Laws...............................19
ARTICLE IX
Miscellaneous Provisions
Section 9.01 General Provisions Regarding Remedies.....................20
Section 9.02 Landlord-Tenant Relationship..............................20
Section 9.03 Enforceability............................................20
Section 9.04 Application of Payments...................................20
Section 9.05 Advances by Bank..........................................21
Section 9.06 Release or Extension by Bank..............................21
Section 9.07 Partial Payments..........................................21
Section 9.08 Addresses for Notices.....................................21
Section 9.09 Construction of Mortgage..................................22
Section 9.10 Limitation of Liability...................................22
Section 9.11 Cooperation with Alcool...................................23
Section 9.12 Collection and Disposition of Revenues and Receipts.......23
Section 9.13 Board to Keep Project Equipment Leased....................23
Testimonium...............................................24
Signatures and Acknowledgements...........................24
Exhibit A - Real Property
Exhibit B - Project Equipment
(iii)
<PAGE>
MORTGAGE, SECURITY AGREEMENT, AND
ASSIGNMENT OF RENTS AND LEASES
THIS MORTGAGE, SECURITY AGREEMENT, AND ASSIGNMENT OF RENTS AND LEASES
dated as of February 1, 1999 is entered into by THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF MONTGOMERY, a public corporation under the laws of Alabama (the
"Board"), and ALCOOL, INC., a corporation organized under the laws of the State
of Alabama ("Alcool") for the benefit of SOUTHTRUST BANK, NATIONAL ASSOCIATION,
a national banking association (the "Bank").
Recitals
Alcool has requested that The Industrial Development Board of the City
of Montgomery (the "Board") issue its $2,460,000 aggregate principal amount of
Variable Rate Industrial Development Revenue Bonds (Alcool, Inc. Project) Series
1999 (the "Bonds") in order to provide long-term financing for the cost of
acquiring certain manufacturing machinery and related personal property for use
by Alcool in the manufacture of aluminum heat exchanger coils (the "Project
Equipment"). The Project Equipment will be located in a building (the "Project
Building") owned by the Board and leased to Industrial Partners, a general
partnership ("Industrial Partners"), pursuant to a Lease Agreement dated
February 1, 1999 (the "Building Lease"). The Project Building will be subleased
by Industrial Partners to Alcool pursuant to a Lease Agreement dated December 9,
1998 (the "Building Sublease").
The Bonds will be issued pursuant to a Trust Indenture dated February
1, 1999 (the "Indenture") between the Board and SouthTrust Bank, National
Association (acting in such capacity, the "Trustee"). The Board will use the
proceeds of the Bonds (i) to reimburse Alcool for sums previously expended by
Alcool for the Project Equipment and (ii) to pay the remaining costs of the
Project Equipment. The Board will lease the Project Equipment to Alcool pursuant
to a Lease Agreement dated as of February 1, 1999 (the "Lease Agreement") and
Alcool will pay rent to the Board sufficient to pay the debt service on the
Bonds.
As security for the payment of the Bonds, Alcool and its parent
corporation, Peregrine Industries, Inc., a Florida corporation ("Peregrine" and
together with Alcool, the "Credit Obligors") will cause SouthTrust Bank,
National Association (herein, in its capacity as issuer of the initial letter of
credit referred to below, called the "Bank"), to issue an irrevocable letter of
credit in favor of the Trustee in the amount of (i) the aggregate principal
amount of the Bonds, to enable the Trustee to pay the principal amount of the
Bonds when due and to pay the principal portion of the purchase price of Bonds
tendered (or deemed tendered) for purchase, plus (ii) interest on the Bonds for
a period of 50 days at the rate of 13% per annum, to enable the Trustee to pay
interest on the Bonds when due and to pay the interest portion of the purchase
price of Bonds tendered (or deemed tendered) for purchase. The initial letter of
credit to be delivered to the Trustee and any substitute letter of credit
delivered to the Trustee pursuant to the Indenture are herein referred to as the
"Letter of Credit."
1
<PAGE>
As security for the Credit Obligors' obligations under the Credit
Agreement with respect to the Letter of Credit, the Credit Obligors and the
Board will execute this Mortgage, Security Agreement and Assignment of Rents and
Leases dated as of February 1, 1999 (the "Mortgage") in favor of the Bank,
whereby the Bank will be granted a mortgage on and security interest in the
Project Equipment and the interest of Alcool as lessee under the Building
Sublease.
As additional security for the Credit Obligors' obligations under the
Credit Agreement with respect to the Letter of Credit, Merrill A. Yarbrough, Jr.
will execute an Individual Guaranty Agreement dated as of February 1, 1999 in
favor of the Bank and Peregrine Global, Inc., a United States Virgin Islands
corporation will execute a Corporate Guaranty Agreement dated as of February 1,
1999 in favor of the Bank.
References herein to the "Creditor Obligors" refers to the Credit
Obligors, jointly and severally, unless the context clearly indicates to the
contrary.
NOW, THEREFORE, in consideration of the foregoing recitals and to
induce the Bank to enter into the Credit Agreement and to cause the issuance the
Letter of Credit, and in consideration of the payment of Ten Dollars and other
good and valuable consideration by the Bank to the Board and Alcool, and to
secure the prompt payment of all amounts due under the Credit Agreement and this
Mortgage, and also to secure the full and complete performance of each and every
obligation, covenant, duty and agreement of the Board and Alcool contained in
this Mortgage and the Credit Agreement:
ARTICLE I
Definitions and Other Provisions
of General Application
Section 1.01 Definitions.
For all purposes of this Mortgage, except as otherwise expressly
provided or unless the context otherwise requires:
(1) The terms defined in this Article have the meanings assigned to
them in this Article. Singular terms shall include the plural as well as the
singular and vice versa and words connoting one gender shall refer to all
genders.
(2) All references in this instrument to designated "articles,"
"sections" and other subdivisions are to the designated articles, sections and
subdivisions of this instrument as originally executed.
(3) The terms "herein," "hereof" and "hereunder" and other words of
similar import refer to this Mortgage as a whole and not to any particular
article, section or other subdivision.
2
<PAGE>
(4) The term "person" shall include any individual, corporation,
partnership, joint venture, association, trust, unincorporated organization and
any government or any agency or political subdivision thereof.
(5) Capitalized terms used herein without definition shall have the
respective meanings assigned thereto in the Indenture.
"Bank" shall mean SouthTrust Bank, National Association, a national
banking association, in its capacity as issuer of the Letter of Credit, its
successors and assigns.
"Board" shall mean The Industrial Development Board of the City of
Montgomery, a public corporation organized under the laws of the State of
Alabama, and its successors and assigns.
"Bonds" shall mean the $2,460,000 aggregate principal amount of
Variable/Fixed Rate Industrial Development Revenue Bonds (Alcool, Inc. Project)
Series 1999, issued by the Board pursuant to the Indenture.
"Building Sublease" shall mean the Lease Agreement dated December 9,
1998 pursuant to which Industrial Partners has subleased the Project Site and
the Project Building to Alcool.
"Code" shall mean the Internal Revenue Code of 1986, and all amendments
thereto.
"Collateral" shall mean all property and rights mortgaged, assigned,
pledged or otherwise subject to the lien of this Mortgage.
"Condemnation Awards" shall have the meaning stated in the third
Granting Clause of Article II.
"Corporate Guaranty Agreement" shall mean the Corporate Guaranty
Agreement dated as of February 1, 1999 executed by Peregrine Global, Inc. in
favor of the Bank.
"Credit Agreement" shall mean that certain Credit Agreement dated as of
February 1, 1999 among Alcool, Peregrine and the Bank, including any amendments
or supplements to such instrument entered into pursuant to the applicable
provisions thereof.
"Credit Amount" shall mean the maximum amount available to be drawn
under the Letter of Credit, as reduced from time to time and reinstated from
time to time pursuant to the terms and conditions of the Letter of Credit.
"Deerfield Security Agreement" shall mean the Security Agreement dated
as of February 1, 1999 between Peregrine and the Bank relating to certain
machinery and equipment of Peregrine located in Deerfield, Florida.
3
<PAGE>
"Event of Default" shall have the meanings stated in Article VII. An
Event of Default shall "exist" if an Event of Default shall have occurred and be
continuing.
"Financing Documents" shall mean (1) the Indenture, (2) the Lease
Agreement, (3) the Building Sublease, (4) the Credit Agreement, (5) this
Mortgage, (6) the Deerfield Security Agreement, (7) the Individual Guaranty
Agreement, and (8) the Corporate Guaranty Agreement.
"Indenture" shall mean that certain Trust Indenture dated as of
February 1, 1999 between the Board and the Trustee, including any amendments or
supplements to such instrument from time to time entered into pursuant to the
applicable provisions thereof.
"Individual Guaranty Agreement" shall mean the Individual Guaranty
Agreement dated as of February 1, 1999 executed by Merrill A. Yarbrough, Jr. in
favor of the Bank.
"Lease Agreement" shall mean the Lease Agreement between the Board and
Alcool dated as of February 1, 1999, and all amendments thereto.
"Leases" shall have the meaning stated in the fifth Granting Clause of
Article II.
"Letter of Credit" shall mean the letter of credit with respect to the
Bonds to be issued by the Bank in favor of the Trustee pursuant to the Credit
Agreement.
"Mortgage" shall mean this instrument as originally executed or as it
may from time to time be supplemented, modified or amended by one or more
instruments entered into pursuant to the applicable provisions hereof.
"Obligations" shall mean:
(1) all letter of credit commissions, fees, charges and costs
becoming due and payable under the Credit Agreement in accordance with
the terms thereof;
(2) all amounts becoming due and payable under the Credit
Agreement in accordance with the terms thereof as reimbursement of sums
paid under the Letter of Credit;
(3) all interest on late payments becoming due and payable
under the Credit Agreement in accordance with the terms thereof;
(4) all amounts becoming due and payable under the Credit
Agreement in accordance with the terms thereof upon the occurrence and
continuance of an event of default, as therein defined, under the
Credit Agreement;
4
<PAGE>
(5) all amounts payable by Alcool under the Credit Agreement
as reimbursement of increased costs to the Bank caused by changes in
laws or regulations or in the interpretation thereof;
(6) all other amounts payable by Alcool under the Credit
Agreement;
(7) all amounts payable by Alcool under the terms of this
Mortgage (including but not limited to reimbursement for advancements
made by the Bank under this Mortgage) and any other security
agreements, bank mortgage or other documents now or hereafter
evidencing or securing Alcool's performance of its obligations under
the Credit Agreement; and
(8) all renewals and extensions of any or all the obligations
of Alcool described in paragraphs (1) through (7) above (including
without limitation any renewal or extension of, and any substitute for,
the Letter of Credit), whether or not any renewal or extension
agreement is executed in connection therewith.
"Peregrine" shall mean Peregrine Industries, Inc., a Florida
corporation.
"Permitted Encumbrances" shall mean restrictions, exceptions,
reservations, conditions, limitations, interests and other matters affecting
title to the Project Equipment as approved by the Bank in writing.
"Project" shall mean the Project Site, the Project Building and the
Project Equipment, as they may at any time exist.
"Project Building" shall mean the certain building and all other
structures now located on the Project Site or hereafter acquired or constructed
on the Project Site.
"Project Equipment" shall mean the machinery, equipment, furnishings,
fixtures and other personal property described on Exhibit B and all other
machinery, equipment, furnishings, fixtures and other personal property of
Alcool or the Board now or hereafter located on the Project Site and used in the
operation of the Project.
"Project Site" shall mean the real property described in Exhibit A
hereto.
"Qualified Investments" shall have the meaning set forth therefor in
the Indenture.
"Remarketing Agreement" shall mean that certain Remarketing Agreement
dated as of February 1, 1999 among Alcool, the Board and Merchant Capital
L.L.C., as remarketing agent.
"Rents" shall have the meaning stated in the fifth Granting Clause of
Article II.
"Special Funds" shall mean all funds and accounts established pursuant
to the Indenture.
5
<PAGE>
"Trustee" shall mean SouthTrust Bank, National Association, in its
capacity as Trustee under the Indenture, and its successors and assigns.
Section 1.02 Effect of Headings and Table of Contents.
The article and section headings herein and in the Table of Contents
are for convenience only and shall not affect the construction hereof.
Section 1.03 Date of Mortgage.
The date of this Mortgage is intended as and for a date for the
convenient identification of this Mortgage and is not intended to indicate that
this Mortgage was executed and delivered on said date.
Section 1.04 Separability Clause.
If any provision in this Mortgage shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 1.05 Governing Law.
This Mortgage shall be construed in accordance with and governed by the
laws of the State of Alabama.
Section 1.06 Counterparts.
This Mortgage may be executed in any number of counterparts, each of
which so executed shall be deemed an original, but all such counterparts shall
together constitute but one and the same instrument.
ARTICLE II
Granting Clauses
The Board and Alcool have bargained and sold and hereby grant, bargain,
sell, transfer, assign, set-over and convey to the Bank, its successors and
assigns, the property and interests in property described in the following
Granting Clauses, and the Board and Alcool have granted and do hereby grant to
the Bank security title to and a continuing security interest in said property
and interests in property and all proceeds and products thereof.
6
<PAGE>
I.
(The Project Equipment)
The Project Equipment.
II.
(The Building Sublease)
All right, title and interest of Alcool in and under the Building
Sublease.
III.
(Condemnation Awards and Insurance Proceeds)
All awards or payments, including all interest thereon, together with
the right to receive the same, that may be made to the Board or Alcool with
respect to the Collateral as a result of the exercise of the right of eminent
domain, any damage to or destruction of the Collateral or any part thereof, or
any other injury to or decrease in the value of the Collateral (herein referred
to as "Condemnation Awards"), and all right, title and interest of the Board or
Alcool in and to any policies of insurance (and the proceeds thereof) with
respect to any damage to or destruction of the Collateral.
IV.
(Special Funds)
Money and investments from time to time on deposit in, or forming a
part of, and accounts established under the Indenture (herein referred to as the
"Special Funds"), subject to the prior lien of the Indenture with respect to the
Special Funds and the provisions of the Indenture permitting the application
thereof for the purposes and on the terms and conditions set forth therein.
V.
(Leases and Rents)
(a) All written or oral leases or other agreements for the use or
occupancy of all or any portion of the Collateral with respect to which the
Board or Alcool is the lessor and any and all extensions and renewals thereof,
now or hereafter existing (collectively, the "Leases");
(b) Any and all guaranties of performance by lessees under the Leases;
7
<PAGE>
(c) The immediate and continuing right to collect and receive all the
rents, income, receipts, revenues, issues and profits now due or that may
hereafter become due or to which the Board or Alcool may now be or may hereafter
(including during the period of redemption, if any) become entitled to demand or
claim, arising or issuing from or out of the Leases or from or out of the
Collateral, or any part thereof, including but not limited to minimum rents,
additional rents, percentage rents, common area maintenance charges, parking
charges, tax and insurance premium contributions, liquidated damages upon
default, the premium payable by any lessee upon the exercise of any cancellation
privilege provided for in any of the Leases, and all proceeds payable under any
policy of insurance covering loss of rents resulting from untenantability caused
by destruction or damage to the Collateral, together with any and all rights and
claims of any kind that Alcool may have against any such lessee under the Leases
or against any sublessees or occupants of the Collateral, all such moneys,
rights and claims described in this subparagraph (c) being hereinafter referred
to as the "Rents"; provided, however, that so long as no Event of Default has
occurred under this Mortgage, Alcool shall have the right under a license
granted hereby (but limited as provided in Section 8.07 of this Mortgage) to
collect, receive and retain the Rents (but not prior to accrual thereof); and
(d) Any award, dividend or other payment made hereafter to Alcool in
any court procedure involving any of the lessees under the Leases in any
bankruptcy, insolvency or reorganization proceeding in any state or federal
court and any and all payments made by lessees in lieu of rent, Alcool hereby
appointing the Bank as Alcool's irrevocable attorney-in-fact to appear in any
action and collect any such award, dividend or other payment.
VI.
(Lease Agreement and Rights Thereunder)
Alcool's leasehold estate and all other right, title and interest of
Alcool under and pursuant to the Lease Agreement, together with all the rights,
privileges and options set forth therein, and the rights of the Board under and
pursuant to the Lease Agreement, all lease rentals, revenues and receipts
derived by the Board from the leasing or sale of the Project Equipment,
including without limitation all rentals, revenues and receipts to be received
by the Board under and pursuant to the Lease Agreement, subject, however, to the
prior right of the Trustee to all such lease rentals, revenues and receipts so
long as there is no Event of Default existing hereunder.
8
<PAGE>
VII.
(Other)
Any and all other real or personal property of every kind and nature
from time to time hereafter by delivery or by writing of any kind conveyed,
mortgaged, pledged, assigned or transferred to the Bank as and for additional
security hereunder by the Board or Alcool or by anyone in the behalf of, or with
the written consent of, the Board or Alcool.
All of the property described in the foregoing Granting Clauses I
through VII, both inclusive, is herein sometimes together referred to as the
"Collateral."
TO HAVE AND TO HOLD the Collateral, together with all the rights,
privileges and appurtenances thereunto belonging, unto the Bank, as its
successors and assigns, forever.
9
<PAGE>
ARTICLE III
Representations and Warranties
Section 3.01 Board Representations and Warranties.
To induce the Bank to enter into the Credit Agreement and to cause the
issuance of the Letter of Credit, the Board represents and warrants that:
(1) Valid Title and Related Warranties. Alcool is lawfully
seized of a leasehold interest in and to the Project Equipment pursuant
to the Lease Agreement. The Board is lawfully seized of an indefeasible
estate in and to, and good title to, the Project Equipment; the Board
has a good right to sell and mortgage the Collateral; the Collateral is
subject to no liens, encumbrances or security interests other than
Permitted Encumbrances; and the Board will forever warrant and defend
the title to the Collateral unto the Bank against the claims of all
persons whomsoever, except those claiming under Permitted Encumbrances.
It is expressly understood and agreed that, with respect to the Special
Funds, the lien created by this Mortgage is junior and subordinate to
the lien created by the Indenture.
(2) Maintenance of Lien Priority. The Board shall take all
steps necessary to preserve and protect the validity and priority of
the liens on and security interests in the Collateral created hereby.
The Board shall execute, acknowledge and deliver such additional
instruments as the Bank may deem necessary in order to preserve,
protect, continue, extend or maintain the lien and security interest
created hereby as a lien on and security interest in the Collateral
subject only to Permitted Encumbrances, except as otherwise permitted
under the terms of this Mortgage. All costs and expenses incurred in
connection with the protection, preservation, continuation, extension
or maintaining of the liens and security interests hereby created shall
be paid by Alcool.
Section 3.02 Alcool Representations and Warranties.
To induce the Bank to enter into the Credit Agreement and to
cause the issuance of the Letter of Credit, Alcool represents and warrants that:
(1) Valid Title and Related Warranties. Alcool is lawfully
seized of a leasehold interest in and to the Project Equipment pursuant
to the Lease Agreement. Alcool has a good right to sell and mortgage
its rights in the Collateral; the Collateral is subject to no liens,
encumbrances or security interests other than Permitted Encumbrances;
and Alcool will forever warrant and defend the title to the Collateral
unto the Bank against the claims of all persons whomsoever, except
those claiming under Permitted Encumbrances. It is expressly understood
and agreed that, with respect to the Special Funds, the lien created by
this Mortgage is junior and subordinate to the lien created by the
Indenture.
10
<PAGE>
(2) Maintenance of Lien Priority. Alcool shall take all steps
necessary to preserve and protect the validity and priority of the
liens on and security interests in the Collateral created hereby.
Alcool shall execute, acknowledge and deliver such additional
instruments as the Bank may deem necessary in order to preserve,
protect, continue, extend or maintain the lien and security interest
created hereby as a lien on and security interest in the Collateral
subject only to Permitted Encumbrances, except as otherwise permitted
under the terms of this Mortgage. All costs and expenses incurred in
connection with the protection, preservation, continuation, extension
or maintaining of the liens and security interests hereby created shall
be paid by Alcool.
(3) Toxic or Hazardous Substances. To the best of Alcool's
knowledge no toxic or hazardous substances (including without
limitation asbestos) have been located, stored or dumped on the Project
Site, or used in connection with, or in the construction or operation
of the Project, or any part thereof.
ARTICLE IV
Covenants of Alcool
Section 4.01 Payment of Taxes and Other Assessments
Alcool will pay or cause to be paid all taxes, assessments and other
governmental, municipal or other public dues, charges, fines or impositions
imposed or levied upon the Collateral, or on the interests created by this
Mortgage or with respect to the filing of this Mortgage, and any tax or excise
on rents or other tax, however described, assessed or levied by any state,
federal or local taxing authority as a substitute, in whole or in part, for
taxes assessed or imposed on the Collateral or on the lien and other interests
created by this Mortgage, and at least 10 days before said taxes, assessments
and other governmental charges are due, Alcool will deliver receipts therefor to
the Bank or, in the case of mortgage filing privilege taxes, pay to the Bank an
amount equal to the taxes. Alcool may, at its own expense, in good faith contest
any such taxes, assessments and other governmental charges and, in the event of
any such contest, may permit the taxes, assessments or other governmental
charges so contested to remain unpaid during the period of such contest and any
appeal therefrom, provided that during such period enforcement of such contested
items shall be effectively stayed. Any tax or assessment levied, assessed or
imposed by any governmental authority on the Bank as a legal holder of any of
the Obligations or any interest in this Mortgage (other than federal and state
income taxes), shall be paid by Alcool promptly after they become due and
payable but in any event before they become delinquent unless such payment by
Alcool is unlawful.
Section 4.02 Insurance
(a) Alcool shall keep or cause to be kept the Collateral insured
against loss or damage by fire, windstorm, extended coverage perils, vandalism,
malicious mischief and such other hazards, casualties or other contingencies as
from time to time may be required by the Bank (including but not limited to
builder's risk during the period of construction or repair of the Project), in
such
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amounts, in such manner and in such companies as the Bank may reasonably
approve, including but not limited to all insurance required to be maintained
under the terms of the Credit Agreement.
(b) If the Project Equipment or any part thereof is damaged or
destroyed by fire or other casualty, Alcool shall comply with the provisions of
Section 4.14 of the Credit Agreement.
Section 4.03 Condemnation Awards
The entire proceeds of any Condemnation Award shall be applied as
provided in Section 4.15 of the Credit Agreement.
Section 4.04 Waste, Demolition, Alteration or Replacement
Alcool will cause the Collateral and every part thereof to be
maintained, preserved and kept in safe and good repair, working order and
condition, will not commit or permit waste thereon, will not remove, demolish or
materially alter the design or structural character of its Project Equipment
without the express prior written consent of the Bank, will comply with all laws
and regulations of any governmental authority with reference to the Collateral
and the manner and use of the same, and will from time to time make all
necessary and proper repairs, renewals, additions and restorations thereto so
that the value and efficient use thereof shall be preserved and maintained.
Alcool agrees not to remove any of the fixtures or personal property included in
the Collateral except as may be permitted by the Credit Agreement.
Section 4.05 Compliance by Alcool with Terms of Other Financing
Documents
Alcool shall comply, fully and faithfully, with all of its obligations
under the other Financing Documents. If Alcool fails or refuses to do so, the
Bank may, but shall not be required to, perform any and all of such obligations
of Alcool under the other Financing Documents, including but not limited to the
payment of any or all sums due from Alcool thereunder. Any sums so paid by the
Bank shall constitute part of the Obligations and shall be secured hereby.
Section 4.06 Environmental Compliance
(a) Alcool shall (1) not, and shall not permit any other person to,
bring any Hazardous Substances onto the Project Site except any such Hazardous
Substances that are used in the ordinary course of the contemplated businesses
as to be conducted on the Project Site and that are handled, stored, used and
disposed of in accordance with applicable Environmental Laws; (2) if any other
Hazardous Substances are brought on the Project Site, immediately remove and
properly dispose of the same in accordance with applicable Environmental Laws;
(3) cause the operations conducted on the Project Site (including all operations
conducted thereon by other persons) to comply with all Environmental Laws; (4)
permit the Bank from time to time to inspect the Project Site and observe the
operations thereon; (5) undertake any and all preventive, investigatory and
remedial action (including emergency response, removal, clean up, containment
and other remedial action) that is caused by Alcool and (A) required by any
applicable Environmental Law or (B) necessary to prevent
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or minimize any property damage (including damage to any of the Project Site),
personal injury, or harm to the environment, or the threat of any such damage or
injury, by releases of or exposure to Hazardous Substances in connection with
the operations on the Project Site; (6) promptly give notice to the Bank in
writing if Alcool should become aware of (A) any spill, release or disposal of
any Hazardous Substances, or imminent threat thereof, at the Project Site, in
connection with the operations on the Project Site, or at any adjacent property
that could migrate to, through or under the Project Site, (B) any violation of
Environmental Laws regarding the Project Site or operations on the Project Site,
and (C) any investigation, claim or threatened claim under any Environmental
Law, or any notice of violation under any Environmental Law, involving Alcool or
the Project Site; and (7) deliver to the Bank, at the Bank's request, copies of
any and all documents in Alcool's possession or to which Alcool has access
relating to Hazardous Substances or Environmental Laws and the Project Site, and
the operations on the Project Site, including laboratory analyses, site
assessments or studies, environmental audit reports and other environmental
studies and reports.
(b) If the Bank at any time reasonably believes that Alcool is not
complying with all applicable Environmental Laws or the requirements hereof
regarding the same, or that a material spill, release or disposal of Hazardous
Substances has occurred on or under the Project Site, the Bank may require
Alcool to furnish to the Bank an environmental audit or site assessment
reasonably satisfactory to the Bank with respect to the matters of concern to
the Bank. Such audit or assessment shall be performed at Alcool's expense by a
qualified consultant approved by the Bank.
(c) Alcool hereby warrants that, to the best of the information,
knowledge and belief thereof (1) there are no civil, criminal or administrative
environmental proceedings involving the Project Site that are pending or to
Alcool's knowledge threatened; (2) Alcool knows of no facts or circumstances
that might give rise to such a proceeding in the future; (3) the Project Site is
in compliance with all applicable federal, state and local statutory and
regulatory environmental requirements; and (4) the Project Site is free from any
and all Hazardous Substances.
(d) Alcool shall defend, indemnify and save harmless the Bank and the
Board from and against any and all claims, causes of action, judgments, damages,
fines, penalties, and other losses, costs and expense, including reasonable
attorneys' fees and costs of investigation and litigation, asserted against or
suffered by the Bank that are related to or arise out of or result from the
presence of Hazardous Substances which result from Alcool's use and occupancy of
the Project Site and any clean up or removal of, or other remedial action with
respect to, any Hazardous Substances which result from Alcool's use and
occupancy of the Project Site, or any part thereof, that may be required by any
Environmental Law or Governmental Authority. The provisions of this Section 4.06
shall survive the payment of the Bonds in full and the termination,
satisfaction, release (in whole or in part) and the foreclosure of this Mortgage
with respect to claims and losses asserted against or suffered by the Bank.
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For purposes of this Section 4.06 the following terms shall have the
following meanings:
"Environmental Law" shall mean and include all laws, rules,
regulations, ordinances, judgments, decrees, codes, orders, injunctions, notices
and demand letters of any Governmental Authority applicable to Alcool or the
Project Site (including the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601, et seq.)
relating to pollution or protection of human health or the environment,
including any relating to Hazardous Substances.
"Governmental Authority" shall mean any federal, state, county,
municipal, or other government, domestic or foreign, and any agency, authority,
department, commission, bureau, board, court or other instrumentality thereof.
"Hazardous Substances" shall mean and include all pollutants,
contaminants, toxic or hazardous wastes and other substances (including
asbestos, urea formaldehyde, foam insulation and materials containing either
petroleum or any of the substances referenced in Section 101(14) of CERCLA), the
removal of which is required or the manufacture, use, maintenance and handling
of which is regulated, restricted, prohibited or penalized by an Environmental
Law, or, even though not so regulated, restricted, prohibited or penalized,
might pose a hazard to the health and safety of the public or the occupants of
the property on which it is located or the occupants of the property adjacent
thereto.
ARTICLE V
Transfer of, or Liens on, Collateral
Section 5.01 Limitation on Conveyance and Encumbrance
Alcool covenants and agrees that it will not, without the express prior
written consent of the Bank, sell, transfer, convey or otherwise dispose of, or
create, or permit or suffer to exist, any lien, security interest or other
encumbrance (other than Permitted Encumbrances) on, all or any part of the
Collateral (including but not limited to any Leases and Rents) or any interests
therein, it being expressly understood and agreed that a violation of the
provisions of this Article V shall constitute an Event of Default under this
Mortgage. Any sale, transfer, conveyance, other disposition or act of creating,
permitting or suffering to exist any lien, security interest or other
encumbrance in violation of this Article V shall be null, void and of no effect.
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ARTICLE VI
Defeasance
Section 6.01 Satisfaction of Mortgage
If (i) Alcool shall pay in full and discharge all the Obligations; and
(ii) the Letter of Credit shall then be terminated; then this Mortgage and the
grants and conveyances contained herein shall become null and void, and the
Collateral shall revert to the Board and Alcool, and the entire estate, right,
title and interest of the Bank shall thereupon cease; and the Bank shall, upon
the request of Alcool and at Alcool's cost and expense, deliver to the Board and
Alcool proper instruments acknowledging satisfaction of this instrument and
terminating all financing statements filed in connection herewith; otherwise,
this Mortgage shall remain in full force and effect. Notwithstanding anything to
the contrary contained in this Article VI or elsewhere in this Mortgage, it is
expressly understood and agreed that, although there may be from time to time
occasions when no Obligations shall be outstanding, this Mortgage and the lien
hereof and security interests created hereby shall nevertheless remain in full
force and effect, and none of the estate, right, title and interest of the Bank
passing by this Mortgage shall divest nor shall the Collateral revert to the
Board and Alcool, so long as any one or more or all of the following
circumstances exist:
(1) the Letter of Credit has been issued and is outstanding;
or
(2) any Obligations are outstanding.
ARTICLE VII
Events of Default
Section 7.01 Defaults
Any one or more of the following shall constitute an event of default
(an "Event of Default") under this Mortgage (whatever the reason for such event
and whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):
(1) default in the performance, or breach, of any covenant,
condition or agreement on the part of Alcool contained in Sections 4.01
and 4.02 or Article V hereof; or
(2) default in the performance, or breach, of any covenant or
warranty of Alcool in this Mortgage (other than a covenant or warranty,
a default in the performance or breach of which is elsewhere in this
Section specifically described), and the continuance of such default or
breach for a period of 30 days after there has been given, by
registered or certified mail, to Alcool by the Bank a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "notice of default" hereunder; or
(3) any representation or warranty made by Alcool herein or in
any document, instrument or certificate furnished to the Bank in
connection with the issuance of the Letter of Credit or the
consummation of the transactions contemplated by the Financing
Documents shall at any time prove to have been false or incorrect in
any material respect as of the time made; or
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(4) the occurrence of an event of default, as therein defined,
under the Credit Agreement or any other Financing Document and the
expiration of the applicable grace period, if any, specified therein;
or
(5) the interest of the Bank in the Collateral shall become
endangered by reason of the enforcement of any prior lien or
encumbrance thereon (other than Permitted Encumbrances or the lien of
the Indenture with respect to the Special Funds); or
(6) the lien or security interest created by this Mortgage is
invalid or unenforceable as to any part of the Obligations or is
invalid or unenforceable as to any part of the Collateral.
ARTICLE VIII
Rights of Bank Upon Default
Section 8.01 Acceleration of Indebtedness
If an Event of Default exists, the Bank may notify the Trustee that an
event of default, as therein defined, under the Credit Agreement has occurred
and is continuing (it being agreed that the occurrence of an Event of Default
hereunder shall constitute an event of default under the Credit Agreement) and
may, by notice to Alcool, effective upon dispatch, declare all of the
Obligations, including but not limited to the obligation of Alcool to reimburse
the Bank under the Credit Agreement, to be forthwith due and payable, whereupon
all the Obligations shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by Alcool, and the Bank may immediately enforce payment
of all such amounts and exercise any or all of its rights and remedies under
this Mortgage and the Credit Agreement and available at law or equity.
Section 8.02 Operation of Collateral by Bank
In addition to all other rights herein and in the Credit Agreement
conferred on the Bank, if an Event of Default exists, the Bank (or any person,
firm or corporation designated by the Bank) may, but shall not be obligated to,
enter upon and take possession of any or all of the Collateral, exclude Alcool
therefrom, and hold, use, administer, manage and operate the same to the extent
that Alcool could do so, without any liability to Alcool resulting therefrom;
and the Bank may collect, receive and receipt for all proceeds accruing from
such operation and management, make repairs and purchase needed additional
property, and exercise every power, right and privilege of Alcool with respect
to the Collateral.
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Section 8.03 Judicial Proceedings; Right to Receiver
If an Event of Default exists, the Bank, in lieu of or in addition to
exercising the power of sale hereinafter given, may proceed by suit for a
foreclosure of its lien on and security interest in the Collateral, to sue
Alcool for damages on account of or arising out of said default or breach, or to
sue Alcool for specific performance of any provision contained herein, or to
enforce any other appropriate legal or equitable right or remedy, whether under
this Mortgage, the Credit Agreement or otherwise. The Bank shall be entitled, as
a matter or right, upon bill filed or other proper legal proceedings being
commenced for the foreclosure of this Mortgage, to the appointment by any
competent court or tribunal, without notice to Alcool or any other party, of a
receiver of the rents, issues and profits of the Collateral, with power to lease
and control the Collateral and with such other powers as may be deemed
necessary, subject to the rights of the Trustee under the Indenture.
Section 8.04 Foreclosure Sale
This Mortgage shall be subject to foreclosure and may be foreclosed as
now provided by law in case of past due mortgages, and the Bank shall be
authorized, at its option, whether or not possession of the Collateral is taken,
after giving 21 days' notice by publication once a week for three consecutive
weeks of the time, place and terms of each such sale together with a description
of the property to be sold by publication in some newspaper published in
Montgomery County, Alabama, to sell, or cause to be sold, all and singular the
Collateral, and all the estate, right, title and interest therein, in front of
the courthouse door of the Montgomery County Courthouse, at public outcry,
between the hours of 11:00 A.M. and 4:00 P.M., local time, to the highest bidder
for cash, or otherwise foreclose this mortgage as provided by applicable law.
The Bank, its successors and assigns, may bid at any sale or sales had under the
terms of the Mortgage and may purchase the Collateral, or any part thereof, if
the highest bidder therefor. The purchaser at any such sale or sales shall be
under no obligation to see to the proper application of the purchase money. At
any foreclosure sale any part or all of the Collateral, real, personal or mixed,
may be offered for sale in parcels or en mass for one total price, the proceeds
of any such sale en masse to be accounted for in one account without distinction
between the items included therein or without assigning to them any proportion
of such proceeds, Alcool hereby waiving the application of any doctrine of
marshalling or like proceeding. If the Bank, in the exercise of the power of
sale herein given, elects to sell the Collateral in parts or parcels, sales
thereof may be held from time to time, and the power of sale granted herein
shall not be fully exercised until all of the Collateral not previously sold
shall have been sold or all the Obligations shall have been paid in full. The
Board and Alcool hereby waive any equitable rights otherwise available to either
of them with respect to marshalling of assets hereunder, so as to require
separate sales of the fee estate and the leasehold estate encumbered hereby or
to require the Bank to exhaust its remedies against either one or the other; and
the Board and Alcool hereby express consent to and authorize, at the option of
the Bank, the sale, either separately or together, of the fee estate and
leasehold estate, or otherwise the merger, prior to sale, of the leasehold
estate into the fee estate in order that the fee estate may be sold free and
clear of the leasehold estate.
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Section 8.05 Project Equipment
(a) The Bank shall have and may exercise with respect to any or all of
the Project Equipment all rights, remedies and powers of a mortgagee under
Alabama law or a secured party under the Alabama Uniform Commercial Code with
reference to the Project Equipment or any other items in which a security
interest has been granted herein, including without limitation the right and
power to sell at public or private sale or sales or otherwise dispose of, lease
or utilize the Project Equipment and any part or parts thereof in any manner, to
the fullest extent authorized or permitted under the Alabama Uniform Commercial
Code after default hereunder, without regard to preservation of the Project
Equipment or their value and without the necessity of a court order. The Bank
shall have, among other rights, the right to take possession of the Project
Equipment and to enter upon any premises where the same may be situated for the
purpose of repossessing the same without being guilty of trespass and without
liability for damages occasioned thereby and to take any action deemed
appropriate or desirable by the Bank, at its option and in its sole discretion,
to repair, restore or otherwise prepare the Project Equipment for sale or lease
or other use or disposition. To the extent permitted by law, Alcool expressly
waives any notice of sale or any other disposition of the Project Equipment and
any rights or remedies of the Bank with respect to, and the formalities
prescribed by law relative to, the sale or disposition of the Project Equipment
or to the exercise of any other right or remedy of the Bank existing after
default. To the extent that such notice is required and cannot be waived, Alcool
agrees that if such notice is given to Alcool in accordance with the provisions
of Section 9.08 below, at least 10 days before the time of the sale or other
disposition, such notice shall be deemed reasonable and shall fully satisfy any
requirement for giving said notice.
(b) The Board and Alcool agree that the Bank may sell or dispose of the
Project Equipment in accordance with the rights and remedies granted under this
Mortgage with respect to the real property covered hereby. Alcool hereby grants
to the Bank the right, at its option after default by Alcool, to transfer at any
time to itself or its nominee the Project Equipment or any part thereof and to
receive the monies, income, proceeds and benefits attributable to the same and
to hold the same as additional Collateral or to apply it on the Obligations in
such order and manner as the Bank may elect. Alcool covenants and agrees that
all recitals in any instrument transferring, assigning, leasing or making other
disposition of the Project Equipment or any part thereof shall be full proof of
the matters stated therein, and no other proof shall be required to establish
the legal propriety of the sale or other action taken by the Bank and that all
prerequisites of sale shall be presumed conclusively to have been performed or
to have occurred.
Section 8.06 Conveyance After Sale
The Board and Alcool hereby authorize and empower the Bank or the
auctioneer at any foreclosure sale had hereunder, for and in the name of the
Board and Alcool, to execute and deliver to the purchaser or purchasers of any
of the Collateral sold at foreclosure good and sufficient deeds of conveyance or
bills of sale thereto.
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Section 8.07 Rents and Leases
(a) If an Event of Default exists, the Bank, at its option, shall have
the right, power and authority to exercise and enforce any or all of the
following rights and remedies with respect to Rents and Leases:
(1) to terminate the license granted to Alcool in Article II
hereof to collect the Rents, and, without taking possession, in the
Bank's own name to demand, collect, receive, sue for, attach and levy
the Rents, to give proper receipts, releases and acquittances therefor,
and after deducting all necessary and reasonable costs and expenses of
collection, including reasonable attorney's fees, to apply the net
proceeds thereof to the Obligations in such order and amounts as the
Bank may choose (or hold the same in a reserve as security for the
Obligations);
(2) without regard to the adequacy of the security, with or
without any action or proceeding, through any person or by agent, or by
a receiver to be appointed by court, to enter upon, take possession of,
manage and operate the Collateral or any part thereof for the account
of Alcool, make, modify, enforce, cancel or accept surrender of any
Sublease, remove and evict any sublessee, increase or reduce rents,
decorate, clean and make repairs, and otherwise do any act or incur any
cost or expenses the Bank shall deem proper to protect the security
hereof, as fully and to the same extent as Alcool could do if in
possession, and in such event to apply any funds so collected to the
operation and management of the Collateral (including payment of
reasonable management, brokerage and attorney's fees) and payment of
the Obligations in such order and amounts as the Bank may choose (or
hold the same in reserve as security for the Obligations);
(3) to take whatever legal proceedings may appear necessary or
desirable to enforce any obligation or covenant or agreement of Alcool
under this Mortgage.
(b) The collection of the Rents and application thereof (or holding
thereof in reserve) as aforesaid or the entry upon and taking possession of the
Collateral or both shall not cure or waive any default or waive, modify or
affect any notice of default under this Mortgage, or invalidate any act done
pursuant to such notice, and the enforcement of such right or remedy by the
Bank, once exercised, shall continue for so long as the Bank shall elect,
notwithstanding that the collection and application aforesaid of the Rents may
have cured the original default. If the Bank shall thereafter elect to
discontinue the exercise of any such right or remedy, the same or any other
right or remedy hereunder may be reasserted at any time and from time to time
following any subsequent default.
Section 8.08 Application of Proceeds
All payments then held or thereafter received by the Bank as proceeds
of the Collateral, as well as any and all amounts realized by the Bank in
connection with the enforcement of any right or remedy under or with respect to
this Mortgage, shall be applied by the Bank as follows:
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(1) to reimburse the Bank for any payments made under the
Letter of Credit, to accrued but unpaid commissions, fees, costs and
charges under the Credit Agreement, and to the payment of all costs and
expenses of any kind then or thereafter at any time reasonably incurred
by the Bank in exercising its rights under this Mortgage and under the
Credit Agreement or otherwise reasonably incurred by the Bank in
collecting or enforcing payment of the Obligations, as well as to the
payment of any other amount then or thereafter at any time owing by
Alcool to the Bank under the Credit Agreement or under this Mortgage,
all in such priority as among such principal, interest, costs, fees,
expenses and other amounts as the Bank shall elect;
(2) any balance remaining after payment in full of all amounts
referred to in paragraph (1) above shall be applied by the Bank to any
other Obligations then owing by Alcool to the Bank;
(3) any balance remaining after payment in full of all amounts
referred to in paragraphs (1) and (2) above shall be held by the Bank
as a cash collateral reserve against the making of any payment under
the Letter of Credit (if then outstanding); and
(4) any balance remaining after payment in full of all amounts
referred to in paragraphs (1), (2) and (3) above shall be paid by the
Bank to Alcool or to whomever else may then be legally entitled
thereto.
Section 8.09 Multiple Sales
The Bank shall have the option to proceed with foreclosure, either
through the courts or by proceeding with foreclosure as provided for in this
Mortgage, but without declaring all of the Obligations due. Any such sale may be
made subject to the unmatured part of the Obligations, and such sale, if so
made, shall not in any manner affect the unmatured part of the Obligations, but
as to such unmatured part of the Obligations this Mortgage shall remain in full
force and effect as though no sale had been made under the provisions of this
Section. Several sales may be made under the provisions of this Section without
exhausting the right of sale for any remaining part of the Obligations whether
then matured or unmatured, the purpose hereof being to provide for a foreclosure
and sale of the Collateral for any matured part of the Obligations without
exhausting any power of foreclosure and the power to sell the Collateral for any
other part of the Obligations, whether matured at the time or subsequently
maturing.
Section 8.10 Waiver of Appraisement Laws
The Board and Alcool waive, to the fullest extent permitted by law, the
benefit of all laws now existing or hereafter enacted providing for (i) any
appraisement before sale of any portion of the Collateral (commonly known as
appraisement laws) or (ii) any extension of time for the enforcement of the
collection of the Obligations or any creation or extension of a period of
redemption from any sale made in collecting the Obligations (commonly known as
stay laws and redemption laws).
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ARTICLE IX
Miscellaneous Provisions
Section 9.01 General Provisions Regarding Remedies
The exercise by the Bank of any option given under the terms of this
Mortgage shall not be considered as a waiver of the right to exercise any other
option given herein, and the filing of a suit to foreclose the lien and security
interest granted by this Mortgage, either on any matured portion of the
Obligations or for the whole of the Obligations, shall not be considered an
election so as to preclude foreclosure under power of sale after a dismissal of
the suit; nor shall the publication of notices for foreclosure preclude the
prosecution of a later suit thereon. No failure or delay on the part of the Bank
in exercising any right, power or remedy under this Mortgage shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder or thereunder. The remedies
provided in this Mortgage and in the Credit Agreement are cumulative and not
exclusive of any remedies provided by law. No amendment, or modification shall
be effective unless signed in writing by the parties hereto and no termination
or waiver of any provisions of this Mortgage or the Credit Agreement, nor
consent to any departure by Alcool therefrom, shall be effective unless the same
shall be in writing and signed by an executive officer of the Bank, and then
such waiver of consent, shall be effective only in the specific instance and for
the specific purpose for which given. No notice to or demand on Alcool in any
case shall entitle Alcool to any other or further notice or demand in similar or
other circumstances.
Section 9.02 Landlord-Tenant Relationship
Any sale of the Collateral under this Mortgage shall, without further
notice, create the relationship of landlord and tenant at sufferance between the
purchaser and Alcool.
Section 9.03 Enforceability
If any provision of this Mortgage is now or at any time hereafter
becomes invalid or unenforceable, the other provisions hereof shall remain in
full force and effect, and the remaining provisions hereof shall be construed in
favor of the Bank to effectuate the provisions hereof.
Section 9.04 Application of Payments
If the lien or the security interest created by this Mortgage is
invalid or unenforceable as to any part of the Obligations or is invalid or
unenforceable as to any part of the Collateral, the unsecured or partially
secured portion of the Obligations shall be completely paid prior to the payment
of the remaining and secured or partially secured portion of the Obligations,
and all payments made on the Obligations, whether voluntary or under foreclosure
or other enforcement action or procedures, shall be considered to have been
first paid on and applied to the full payment
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of that portion of the Obligations that is not secured or not fully secured by
the lien or security interest created hereby.
Section 9.05 Advances by Bank
If Alcool shall fail to comply with the provisions hereof with respect
to the securing of insurance, the payment of taxes, assessments and other
charges, the keeping of the Collateral in repair, or any other term or covenant
herein contained, the Bank may (but shall not be required to) make advances to
perform the same, and where necessary enter or take possession of the Collateral
for the purpose of performing any such term or covenant. Alcool agrees to repay
all sums advanced upon demand, with interest from the date such advances are
made, at the Post Default Rate (to the fullest extent permitted by applicable
law), and all sums so advanced, with interest, shall be secured hereby.
Section 9.06 Release or Extension by Bank
The Bank, without notice, may release any part of the Collateral or any
person liable for the Obligations without in any way affecting the rights of the
Bank hereunder as to any part of the Collateral not expressly released and may
agree with any party with an interest in the Collateral to extend the time for
payment of all or any part of the Obligations or to waive the prompt and full
performance of any term, condition or covenant of this Mortgage or the Credit
Agreement.
Section 9.07 Partial Payments
Acceptance by the Bank of any payment of less than the amount due on
the Obligations shall be deemed acceptance on account only, and the failure of
Alcool to pay the entire amount then due shall be and continue to constitute an
Event of Default, and at any time thereafter and until the entire amount due on
the Obligations has been paid, the Bank shall be entitled to exercise all rights
conferred on it by the terms of this Mortgage in case of the existence of an
Event of Default.
Section 9.08 Addresses for Notices
(a) Any request, demand, authorization, direction, notice, consent, or
other document provided or permitted by this Mortgage to be made upon, given or
furnished to, or filed with, Alcool, the Board or the Bank shall be sufficient
for every purpose hereunder if in writing and (except as otherwise provided in
this Mortgage) either (i) delivered personally to the party or, if such party is
not an individual, to an officer, or other legal representative of the party to
whom the same is directed, or (ii) mailed by certified mail, postage prepaid and
addressed as follows:
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(1) if to Alcool:
Alcool, Inc.
2511 MidPark Road
Montgomery, AL 36109
Attention: James Gowan, President
(2) if to the Board:
The Industrial Development Board
of the City of Montgomery
c/o Mr. Sol E. Brinsfield, Jr.
Suite 1409 Union Bank Tower
Montgomery, Alabama 36104
Attention: Chairman
(3) if to the Bank:
SouthTrust Bank,
National Association
Post Office Box 230517 [36123-0517]
2895 Eastern Boulevard
Montgomery, Alabama 36116
Attention: Mr. John W. Livings
Alcool, the Board and the Bank may specify a different address for the receipt
of such documents by mail by giving notice of the change in address to the other
parties identified in this subsection.
(b) Any such notice or other document shall be deemed to be received
(i) as of the date delivered, if delivered personally in accordance with
subsection (a)(i) of this Section, or (ii) as of 3 days after the date deposited
in the mail, if mailed in accordance with subsection (a)(ii) of this Section.
Section 9.09 Construction of Mortgage
This Mortgage may be construed as a mortgage, chattel mortgage,
conveyance, assignment, security agreement, pledge, financing statement,
hypothecation or contract, or any one or more of them, in order fully to
effectuate the lien hereof and security interest created hereby and the purposes
and agreements herein set forth.
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Section 9.10 Limitation of Liability
Anything contained herein to the contrary notwithstanding, the
obligations of the Board hereunder shall be limited obligations of the Board
payable solely from the payments by Alcool under the Lease Agreement and any
other revenues received by the Board from the lease or sale of the Project
Equipment.
No recourse shall be had for the payment of the principal of, premium
(if any), or interest on the Bonds or for any claims based thereon or upon any
obligation, covenant or agreement herein contained, against any incorporator of
the Board, or against any past, present or future officer, employee or member of
the board of directors of the Board or any successor corporation, as such,
either directly or through the Board or any successor corporation, under any
rule of law or equity, statute or constitution or by the enforcement of any
assessment or penalty or otherwise, and all such liability of any such
incorporators, officers, employees or directors of the Board as such is hereby
expressly waived and released as a condition of and in consideration for the
execution of this instrument and the issuance of the Bonds.
Section 9.11 Cooperation with Alcool
The Board will cooperate with Alcool to the end that the Project
Equipment may be leased by Alcool in the most successful and productive manner
possible.
Section 9.12 Collection and Disposition of Revenues and Receipts
The Board will promptly collect or cause to be collected all revenues
and receipts derived from the leasing or sale of the Project Equipment by the
Board as the same become due and will cause all such revenues and receipts as
collected to be paid over to and deposited with the Trustee for disposition in
accordance with and as provided in the Indenture and this Mortgage.
Section 9.13 Board to Keep Project Equipment Leased
The Board will cooperate with the Bank and Alcool to keep the Project
Equipment leased to lessees qualified under the Enabling Law at all times for a
rent sufficient to pay the installments of principal and interest on the Bonds
as the same mature and come due, and also, unless leased under an agreement
requiring the lessee to take out, maintain and pay for adequate and proper
insurance of the Project Equipment and requiring the lessee to keep and maintain
the Project Equipment in good repair and operating condition, sufficient also to
pay the cost of such insurance and such maintenance and repair. Should there be
a default under the Lease Agreement with the result that the right of possession
of the Project Equipment under the Lease Agreement is returned to the Board, the
Board shall fully cooperate with the Bank and shall diligently proceed in good
faith and use its best efforts to secure another qualified lessee or lessees for
the Project Equipment to the end that at all times sufficient revenues and
receipts will be derived from the Project Equipment promptly to meet and pay the
installments of principal and interest on the Bonds as the same become due and
payable, as well as covering the cost of maintaining and insuring the Project
Equipment. Nothing herein, however, shall be construed as requiring the Board to
operate the Project Equipment.
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IN WITNESS WHEREOF, the Board and Alcool have each caused this
instrument to be executed in its name under seal and attested, respectively, all
by its duly authorized officers, and the parties have caused this instrument to
be dated as of February 1, 1999.
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF MONTGOMERY
By:___/s/_______________________________
__________________________________
Its Chairman
ATTEST:
__________________________________
Its Secretary
STATE OF ALABAMA
COUNTY OF MONTGOMERY
I, the undersigned, a Notary Public in and for said County in said
State, hereby certify that R. E. Thornton, Jr., whose name as Chairman of The
Industrial Development Board of the City of Montgomery, a public corporation, is
signed to the foregoing instrument, and who is known to me, acknowledged before
me on this day that, being informed of the contents of the said instrument, he,
in his capacity as such officer, and with full authority, executed the same
voluntarily for and as the act of said corporation.
GIVEN under my hand this the 8th day of March, 1999.
________________________________________
Notary Public
(SEAL)
My commission expires:__________________
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ALCOOL, INC.
By:___/s/_______________________________
__________________________________
Its President
ATTEST:
__________________________________
Its Secretary
STATE OF ALABAMA
COUNTY OF MONTGOMERY
I, the undersigned, a Notary Public in and for said County in said
State, hereby certify that James D. Gowan, whose name as President of Alcool,
Inc., a corporation, is signed to the foregoing instrument, and who is known to
me, acknowledged before me on this day that, being informed of the contents of
the said instrument, he, in his capacity as such officer, and with full
authority, executed the same voluntarily for and as the act of said corporation.
GIVEN under my hand this the 8th day of March, 1999.
________________________________________
Notary Public
(SEAL)
My commission expires:__________________
26
<PAGE>
SOUTHTRUST BANK,
NATIONAL ASSOCIATION
By:___/s/_______________________________
__________________________________
Its__________________________________
__________________________________
STATE OF ALABAMA
COUNTY OF MONTGOMERY
I, the undersigned, a Notary Public in and for said County in said
State, hereby certify that ____________________________________, whose name as
_______________________ of SouthTrust Bank, National Association, a national
banking association, is signed to the foregoing instrument, and who is known to
me, acknowledged before me on this day that, being informed of the contents of
the said instrument, he, in his capacity as such officer, and with full
authority, executed the same voluntarily for and as the act of said association.
GIVEN under my hand this the 8th day of March, 1999.
________________________________________
Notary Public
(SEAL)
My commission expires:__________________
27
<PAGE>
EXHIBIT A
Real Property
Lot 2-9B according to the Map of Part of Parcel 1-7 Gunter Industrial
Park Plat 1 and Parcel 2-9 Gunter Industrial Park Plat 2, being in the
west 1/2 of Section 35, T17N, R18E and Section 1, T16N, R18E,
Montgomery County, Alabama, as said map appears of record in the office
of the Judge of Probate of Montgomery County, Alabama, in Plat Book 27,
Page 80, containing 6.26 acres, more or less.
<PAGE>
EXHIBIT B
Project Equipment
Item Description
---- -----------
1 (2) Indexing C.A.B Furnaces and Fluxer
2 (2) Manual Core Assembly Machines
3 FIN Machine #1
4 Continuous Core Builder #1
5 FIN Machine #2
6 Paint Line
7 Hydrophilic Coating Line
8 Jigs and Fixtures
9 (2) Test Tanks
10 Multi-Core Assembly Machine
11 (2) Cooling Towers
12 Air Compressor with Dryer
13 Furniture and Computers
14 Conveyors
15 (2) Fork Lifts
16 Serpentine Core Assembly Machine
17 Helium Leak Tester
18 Storage Racks
19 Floor Scrubber
20 Trash Compactor
21 TIG Welder
22 Bus Bar
All other furniture, furnishings, machinery, equipment and other personal
property owned by The Industrial Development Board of the City of Montgomery or
by Alcool, Inc. and located on the Real Property described in Exhibit A hereto
and used in connection with the operation of the manufacturing facilities
located thereon.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this
"Agreement") is made and entered into as of September 1, 1998 but is effective
as of April 30 , 1998 (the "Effective Date"), between Peregrine Industries,
Inc., a Florida corporation (the "Company"), whose principal place of business
is 730 South Military Trail, Deerfield Beach, Florida 33442 and Merrill A.
Yarbrough, an individual (the "Employee"), who resides at 2363 Loblolly Lane,
Deerfield Beach, FL 33442.
WHEREAS, the Company is engaged in the manufacture and distribution of
heat pump pool heaters and is presently expanding its manufacturing and
distribution to include both a single unit heat pump which functions as a
residential air conditioner, hot water heater and swimming pool heater and a
residential central air conditioning unit (collectively, the "Business
Activities"); and
WHEREAS, the Company desires to employ the Employee and the Employee
desires to be in the employ of the Company; and
WHEREAS, the Company has established a valuable reputation and goodwill
in its business, with expertise in all aspects of the Business Activities; and
WHEREAS, the Employee has created and established, at least in part,
and is in possession of, the manner, methods, trade secrets and other
confidential information pertaining to the Company's Business Activities.
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Employee do hereby agree as follows:
1. Recitals. The above recitals are true, correct, and are herein
incorporated by reference.
2. Employment. The Company hereby employs the Employee, and the
Employee hereby accepts employment, upon the terms and conditions hereinafter
set forth.
3. Authority and Power During Employment Period.
a. Duties and Responsibilities. During the term of this Agreement,
the Employee shall serve as Chief Executive Officer, President and Chairman of
the Board of Directors of the Company and shall have general executive and
operating supervision over the property, business and affairs of the Company,
subject to the guidelines and direction of the Board of Directors of the
Company. It is further the intention of the parties that at all time during the
"Term", as hereinafter defined, of this Agreement the Employee shall serve as a
member of the Board of Directors of the Company and shall be elected and serve
through the Term of the Agreement as Chairman of the Board of Directors.
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<PAGE>
b. Time Devoted. Throughout the Term of the Agreement, the Employee
shall devote substantially all of the Employee's business time and attention to
the business and affairs of the Company consistent with the Employee's position
with the Company, except for reasonable vacations and except for illness or
incapacity.
4. Term. The Term of employment hereunder will commence on the
Effective Date as set forth above and end three (3) years from the Effective
Date, subject to one (1) year extensions (the "Renewal Term(s)") to be
exercisable by written notice given the by the Employee to the Company at least
45 days before the expiration of the Term or the Renewal Term, as the case may
be, unless this Agreement shall have been terminated pursuant to Section 6 of
this Agreement.
5. Compensation and Benefits.
a. Salary. The Employee shall be paid a base salary (the "Base
Salary"), payable weekly, at an annual rate of One Hundred Thirty Thousand
Dollars ($130,000). At the sole discretion of the Board of Directors, Employee's
Base Salary may be increased during the term of this Agreement in the event of a
"material change" in the scope of Employee's duties. For the purposes of this
Agreement, "material change" shall mean a significant expansion of the Company's
business and operations, a material diversification of the Company's Business
Activities, one or more acquisitions or other similar long-term, permanent
occurrences which would result in the Employee undertaking additional
responsibilities for the Company. Notwithstanding anything contained herein, the
possible amount of and timing of any increase in the Base Salary is solely
within the discretion of the Board of Directors, with the Employee abstaining
from such vote, and there are no understandings, commitments, assurances or
guarantees the Board of Directors will vote to increase the Base Salary during
the term of this Agreement.
b. Stock Options.
i. Employee shall be granted 20,000 options (the "Initial
Options") to purchase shares of the Company's Common Stock at an exercise price
of $1.00 per share, which such options are granted under the Company's 1998
Stock Option Plan and pursuant to the form of Option attached hereto as Exhibit
A and incorporated herein by such reference. Such options shall be exercisable
from the date of vesting and shall vest (i) 10,000 options on May 1, 1998, (ii)
5,000 options on May 1, 1999, and (iii) the remaining 5,000 options on May 1,
2000. The Initial Options shall expire May 1, 2002.
ii. Provided Employee shall be in the employ of Company, Employee
shall be granted on May 1, 1999 options for an additional 10,000 shares, which
such options shall be granted under the Company's 1998 Stock Option Plan
pursuant to the form of Option attached hereto as Exhibit A and incorporated
herein by such reference. Such options (the "Additional Options") shall be
granted at Fair Market Value (as hereinafter defined) on April 30, 1999, shall
be exercisable for a period of five years from the vesting date, and shall vest
(i) 3,334 options on May 1, 2000, (ii) 3,333 options on
2
<PAGE>
May 1, 2001, and (iii) the remaining 3,333 options on May 1, 2002. The
Additional Options shall expire five years from the date of vesting.
iii. Provided Employee shall be in the employ of Company,
Employee shall be granted on May 1, 2000 options for an additional 10,000
shares, which such options shall be granted under the Company's 1998 Stock
Option Plan pursuant to the form of Option attached hereto as Exhibit A and
incorporated herein by such reference. Such options (the "Additional Options")
shall be granted at Fair Market Value (as hereinafter defined) on April 30,
1999, shall be exercisable for a period of five years from the vesting date, and
shall vest (i) 3,334 options on May 1, 2001, (ii) 3,333 options on May 1, 2002,
and (iii) the remaining 3,333 options on May 1, 2003. The Additional Options
shall expire five years from the date of vesting.
iv. In the event of (i) a sale of all or substantially all of the
assets of the Company or (ii) a merger, stock exchange or other form of business
combination (the "Business Combination") the result of which being that the
shareholders of the Company, giving proforma effect to the pending private
placement of 1,000,000 shares of Common Stock will own, after the consummation
of such Business Combination, less that 49% of the then issued and outstanding
voting securities of the Company, then, in such event, on the effective date of
either the sale of all or substantially all of the Company's assets or a
Business Combination, all Initial Options and Additional Options not theretofore
vested shall immediately vest at the then current Fair Market Value of the
Company's Common Stock.
c. Performance Based Stock Options. Employee shall be entitled to be
granted certain additional stock options based upon the future performance of
the Company, specifically:
i. During the two (2) year period beginning October 1, 1997 and
ending September 30, 1999 (the "Performance Option Period"), Employee will be
entitled to be granted one (1) option to purchase one (1) share of the Company's
Common Stock for each $3.20 of cumulative Net Income the Company reports in
excess of $2,000,000, up to a maximum of 250,000 options. Subsequent to the
Company reporting cumulative Net Income of $2,800,000 during the Performance
Option Period, additional Net Income, if any, during such period will be
accumulated until such time as the Company shall report Net Income during the
Performance Option Period of at least an additional $8,000,000 over and above
$2,800,000 cumulative Net Income. Thereafter, the Employee shall be entitled to
be granted one (1) option to purchase one (1) share of the Company's Common
Stock for each $5.00 of cumulative Net Income the Company reports in excess of
at least an additional $8,000,000 during the Performance Option Period, up to a
maximum of 250,000 options. The options earned will be computed quarterly based
on the Company's Financial Statements, and the exercise price of these options
will be the Fair Market Value of the Company's Common Stock on the date so
earned.
3
<PAGE>
ii. For the purposes of this Agreement, "Fair Market Value" shall
be equal to the closing price of the Company's Common Stock as reported on the
OTC Bulletin Board or the primary exchange on which the Company's Common Stock
shall be quoted. In the absence of a public trading market for the Company's
Common Stock, Fair Market Value shall be equal to the book value of a share of
the Company's Common Stock as reported in the financial statements of the
Company.
iii. For the purposes of this sub-Section 5(c), the term "Net
Income" shall mean the net income, after taxes, as reported on either the
Company's audited financial statements for the year then ended, or unaudited
financial statements for the fiscal quarter then ended, in either case which
such statements shall have been prepared in accordance with generally accepted
accounting principles consistently applied and, in the case of the audited
financial statements such financial statements shall be accompanied by an
unqualified report of the Company's independent auditors. In the event such
options are granted pursuant to the results of the Company as reported in
unaudited quarterly financial statements, such statements shall have first been
reviewed by the Audit Committee of the Company's Board of Directors, if any, or
by the outside directors of the Company, who shall be satisfied in their sole
discretion that such unaudited financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied.
iv. Upon the delivery of the Company of the financial statements
set forth in the preceding paragraph, and assuming the Employee shall be
entitled to the options based upon the Net Income of the Company as reported in
such financial statements, then the options shall be earned (the "Grant Date")
as of the last date of the period so covered and may thereafter be exercised at
any time and from time to time until the fifth (5th) anniversary of the Grant
Date.
d. Employee Benefits. The Employee shall be entitled to participate
in all benefit programs of the Company currently existing or hereafter made
available to executive and/or salaried employees including, but not limited to,
stock option plans, pension and other retirement plans, group life insurance,
hospitalization, surgical and major medical coverage, sick leave, salary
continuation, vacation and holidays, long-term disability, and other fringe
benefits.
e. Vacation. During each fiscal year of the Company, the Employee
shall be entitled to reasonable time and to utilize such vacation as the
Employee shall determine; provided, however, that the Employee shall evidence
reasonable judgment with regard to appropriate vacation scheduling.
Notwithstanding the foregoing, Employee shall be entitled to four (4) weeks
vacation per year.
f. Business Expense Reimbursement. During the Term of employment,
the Employee shall be entitled to receive proper reimbursement for all
reasonable, out of-pocket expenses incurred by the Employee (in accordance with
the policies and
4
<PAGE>
procedures established by the Company) in performing services hereunder,
provided the Employee properly accounts therefor.
g. Automobile Expense. The Company shall provide the Employee with
an automobile reasonably satisfactory to the Company and the Employee. The
Company shall also be responsible for all expenses in connection with such
automobile including, but not limited to, maintenance, insurance and gas.
h. Life Insurance. The Company shall pay the premiums and other
charges associated with a life insurance policy on the life of the Employee in
the amount of $750,000, the beneficiary of which shall be the Employee's spouse.
6. Consequences of Termination of Employment.
a. Death. In the event of the death of the Employee during the Term
of the Agreement, Base Salary shall be paid to the Employee's designated
beneficiary, or, in the absence of such designation, to the estate or other
legal representative of the Employee for a period of 30 days from and after the
date of death. Other death benefits will be determined in accordance with the
terms of the Company's benefit programs and plans.
b. Disability. In the event of the Employee's disability, the
Employee shall be entitled to compensation in accordance with the Company's
disability compensation practice for its senior officers. "Disability," for the
purposes of this Agreement, shall be deemed to have occurred in the event (A)
the Employee is unable by reason of sickness or accident, to perform the
Employee's duties under this Agreement for an aggregate of 90 days in any
12-month period or 45 consecutive days, or (B) the Employee has a guardian of
the person or estate appointed by a court of competent jurisdiction. Termination
due to disability shall be deemed to have occurred upon the first day of the
month following the determination of disability as defined in the preceding
sentence.
c. Termination by the Company for Cause.
i. Nothing herein shall prevent the Company from terminating
Employee for "Cause," as hereinafter defined. The Employee shall continue to
receive salary only for the period ending with the date of such termination as
provided in this Section 6(c). Any rights and benefits the Employee may have in
respect of any other compensation shall be determined in accordance with the
terms of such other compensation arrangements or such plans or programs.
ii. "Cause" shall mean (A) committing or participating in an
injurious act of fraud, gross neglect, misrepresentation, embezzlement or
dishonesty against the Company; (B) committing or participating in any other
injurious act or omission wantonly, willfully, recklessly or in a manner which
was grossly negligent against the Company, monetarily or otherwise; (C) engaging
in a criminal enterprise involving moral
5
<PAGE>
turpitude; (D) an act or acts (1) constituting a felony under the laws of the
United States or any state thereof; or (2) if applicable, loss of any state or
federal license required for the Employee to perform the Employee's material
duties or responsibilities for the Company; or (E) any assignment of this
Agreement by the Employee in violation of Section 13 of this Agreement.
iii. Notwithstanding anything else contained in this Agreement,
this Agreement will not be deemed to have been terminated for Cause unless and
until there shall have been delivered to the Employee a notice of termination
stating that the Employee committed one of the types of conduct set forth in
this Section 6(c) contained in this Agreement and specifying the particulars
thereof
d. Voluntary Termination. Notwithstanding anything contained herein
to the contrary, this Agreement may be terminated at any time upon the mutual
written consent of the Company and the Employee.
e. Termination by the Company Other Than For Cause. The foregoing
notwithstanding, the Company may terminate the Employee's employment for
whatever reason it deems appropriate; provided, however, that in the event such
termination is not based on Cause, as provided in Section 6(c) above, the
Company may terminate this Agreement upon giving six (6) months' prior written
notice to the Employee. During such six (6) month period, the Employee shall
continue to perform the Employee's duties pursuant to this Agreement, and the
Company shall continue to compensate the Employee in accordance with this
Agreement. Upon expiration of said six (6) month period, the Company shall
tender to Employee an amount equal to eighteen (18) months' then current Base
Salary under this Agreement.
7. Covenant Not to Compete and Non-Disclosure of Information.
a. Covenant Not to Compete. The Employee acknowledges and recognizes
the highly competitive nature of the Company's business constitutes a
substantial asset of the Company having been acquired through considerable time,
money and effort. Accordingly, in consideration of the execution of this
Agreement, the Employee agrees to the following:
i. That during the Restricted Period (as hereinafter defined) and
within the Restricted Area (as hereinafter defined), the Employee will not,
individually or in conjunction with others, directly or indirectly, engage in
any Business Activities (as hereinafter defined), whether as an officer,
director, proprietor, employer, partner, independent contractor, investor (other
than as a holder solely as an investment of less than one percent (1%) of the
outstanding capital stock of a publicly traded corporation), consultant,
advisor, agent or otherwise.
ii. That during the Restricted Period and within the Restricted
Area, the Employee will not, directly or indirectly, compete with the Company by
soliciting,
6
<PAGE>
inducing or influencing any of the Company's clients which have a business
relationship with the Company at the time during the Restricted Period to
discontinue or reduce the extent of such relationship with the Company.
iii. That during the Restricted Period and within the Restricted
Area, the Employee will not (A) directly or indirectly recruit, solicit or
otherwise influence any employee or agent of the Company to discontinue such
employment or agency relationship with the Company, or (B) employ or seek to
employ, or cause or permit any business which competes directly or indirectly
with the Business Activities of the Company (the "Competitive Business") to
employ or seek to employ for any Competitive Business any person who is then (or
was at any time within six (6) months prior to the date Employee or the
Competitive Business employs or seeks to employ such person) employed by the
Company.
iv. That during the Restricted Period the Employee will not
interfere with, or disrupt or attempt to disrupt any past, present or
prospective relationship, contractual or otherwise, between the Company and any
customer, employee or agent of the Company.
b. Non-Disclosure of Information. The Employee acknowledges that the
Company's trade secrets, private or secret processes, methods and ideas, as they
exist from time to time, customer lists and information concerning the Company's
Business Activities, including products, services, training methods,
development, technical information, marketing activities and procedures, credit
and financial data concerning the Company (the "Proprietary Information") are
valuable, special and unique assets of the Company, access to and knowledge of
which are essential to the performance of the Employee hereunder. In light of
the highly competitive nature of the industry in which the Company's Business
Activities are conducted, the Employee agrees that all Proprietary Information,
heretofore or in the future obtained by the Employee as a result of the
Employee's association with the Company, shall be considered confidential.
In recognition of this fact, the Employee agrees that the Employee,
during the Restricted Period, will not use or disclose any of such Proprietary
Information for the Employee's own purposes or for the benefit of any person or
other entity or organization (except the Company) under any circumstances unless
such Proprietary Information has been publicly disclosed generally or, unless
upon written advice of legal counsel reasonably satisfactory to the Company, the
Employee is legally required to disclose such Proprietary Information. Documents
(as hereinafter defined) prepared by the Employee or that come into the
Employee's possession during the Employee's association with the Company are and
remain the property of the Company, and when this Agreement terminates, such
Documents shall be returned to the Company at the Company's principal place of
business, as provided in the Notice provision (Section 9) of this Agreement.
c. Documents. "Documents" shall mean all original written, recorded,
or graphic matters whatsoever, and any and all copies thereof including, but not
limited to:
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<PAGE>
papers; books; records; tangible things; correspondence; communications; telex
messages; memoranda; work-papers; reports; affidavits; statements; summaries;
analyses; evaluations; client records and information; agreements; agendas;
advertisements; instructions; charges; manuals; brochures; publications;
directories; industry lists; schedules; price lists; client lists; statistical
records; training manuals; computer printouts; books of account, records and
invoices reflecting business operations; all things similar to any of the
foregoing however denominated. In all cases where originals are not available,
the term "Documents" shall also mean identical copies of original documents or
nonidentical copies thereof.
d. Restrictive Period. The "Restrictive Period" shall be deemed to
be during the Term or Renewal Term of this Agreement and for a period of twelve
(12) months following termination of this Agreement.
e. Restricted Area. The Restricted Area shall be deemed to mean any
county of any state in which the Company is engaged in Business Activities at
the time of termination.
f. Business Activities. "Business Activities" shall be deemed to
include the Business Activities the Company in which the Company is currently
engaged, as well as any additional activities which the Company or any of its
affiliates may engage in during the term of this Agreement.
g. Covenants as Essential Elements of this Agreement. It is
understood by and between the parties hereto that the foregoing covenants
contained in Sections 7(a) and (b) are essential elements of this Agreement, and
that but for the agreement by the Employee to comply with such covenants, the
Company would not have agreed to enter into this Agreement. Such covenants by
the Employee shall be construed to be agreements independent of any other
provisions of this Agreement. The existence of any other claim or cause of
action, whether predicated on any other provision in this Agreement, or
otherwise, as a result of the relationship between the parties shall not
constitute a defense to the enforcement of such covenants against the Employee.
In the event Employee shall be in violation of the aforementioned restrictive
covenants, the time limitation thereof with respect to the defaulting party
shall be extended for a period of time equal to the period of time during which
breach or breaches should occur; and in the event Company should require or seek
relief from breach in any court or other tribunal, any covenant shall be
extended for a period of time equal to the pendency of such proceeding,
including appeals thereof.
h. Survival After Termination of Agreement. Notwithstanding anything
to the contrary contained in this Agreement, the covenants in Sections 7(a) and
(b) shall survive the termination of this Agreement and the Employee's
employment with Company.
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<PAGE>
j. Remedies.
i. The Employee acknowledges and agrees that the Company's remedy
at law for a breach or threatened breach of any of the provisions of Section
7(a) or (b) herein would be inadequate and the breach shall be per se deemed as
causing irreparable harm to the Company. In recognition of this fact, in the
event of a breach by the Employee of any of the provisions of Section 7(a) or
(b), the Employee agrees that, in addition to any remedy at law available to the
Company, including, but not limited to monetary damages, all rights of the
Employee to payment or otherwise under this Agreement and all amounts then or
thereafter due to the Employee from the Company under this Agreement may be
terminated and the Company, without posting any bond, shall be entitled to
obtain, and the Employee agrees not to oppose the Company's request for
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may
then be available to the Company.
ii. The Employee acknowledges that the granting of a temporary
injunction, temporary restraining order or permanent injunction merely
prohibiting the use of Proprietary Information would not be an adequate remedy
upon breach or threatened breach of Section 7(a) or (b) and consequently agrees,
upon proof of any such breach, to the granting of injunctive relief prohibiting
any form of competition with the Company. Nothing herein contained shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach.
8. Withholding. Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Employee or the Employee's
estate or beneficiaries shall be subject to the withholding of such amounts, if
any, relating to tax and other payroll deductions as the Company may reasonably
determine it should withhold pursuant to any applicable law or regulation. In
lieu of withholding such amounts, the Company may accept other arrangements
pursuant to which it is satisfied that such tax and other payroll obligations
will be satisfied in a manner complying with applicable law or regulation.
9. Notices. Any notice required or permitted to be given under the
terms of this Agreement shall be sufficient if in writing and if sent postage
prepaid by registered or certified mail, return receipt requested; by overnight
delivery; by courier; or by confirmed telecopy, in the case of the Employee to
the Employee's last place of business or residence as shown on the records of
the Company, or in the case of the Company, to its principal office as set forth
in the first paragraph of this Agreement, or at such other place as it may
designate.
10. Waiver. Unless agreed in writing, the failure of either party, at
any time, to require performance by the other of any provisions hereunder shall
not affect its right thereafter to enforce the same, nor shall a waiver by
either party of any breach of any
9
<PAGE>
provision hereof be taken or held to be a waiver of any other preceding or
succeeding breach of any term or provision of this Agreement. No extension of
time for the performance of any obligation or act shall be deemed to be an
extension of time for the performance of any other obligation or act hereunder.
11. Completeness and Modification. This Agreement constitutes the
entire understanding between the parties hereto superseding all prior and
contemporaneous agreements or understandings among the parties hereto concerning
the Agreement. This Agreement may be amended, modified, superseded or canceled,
and any of the terms, covenants, representations, warranties or conditions
hereof may be waived, only by a written instrument executed by the parties or,
in the case of a waiver, by the party to be charged.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one agreement.
13. Binding Effect/Assignment. This Agreement shall be binding upon the
parties hereto, their heirs, legal representatives, successors and assigns. This
Agreement shall not be assignable by the Employee but shall be assignable by the
Company in connection with the sale, transfer or other disposition of its
business or to any of the Company's affiliates controlled by or under common
control with the Company.
14. Governing Law. This Agreement shall become valid when executed and
accepted by Company. The parties agree that it shall be deemed made and entered
into in the State of Florida and shall be governed and construed under and in
accordance with the laws of the State of Florida. Anything in this Agreement to
the contrary notwithstanding, the Employee shall conduct the Employee's business
in a lawful manner and faithfully comply with applicable laws or regulations of
the state, city or other political subdivision in which the Employee is located.
15. Further Assurances. All parties hereto shall execute and deliver
such other instruments and do such other acts as may be necessary to carry out
the intent and purposes of this Agreement.
16. Headings. The headings of the sections are for convenience only and
shall not control or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
17. Survival. Any termination of this Agreement shall not, however,
affect the ongoing provisions of this Agreement which shall survive such
termination in accordance with their terms.
18. Severability. The invalidity or unenforceability, in whole or in
part, of any covenant, promise or undertaking, or any section, subsection,
paragraph, sentence,
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<PAGE>
clause, phrase or word or of any provision of this Agreement shall not affect
the or enforceability of the remaining portions thereof.
19. Enforcement. Should it become necessary for any party to institute
legal action to enforce the terms and conditions of this Agreement, the
successful party will be awarded reasonable attorneys' fees at all trial and
appellate levels, expenses and costs.
20. Independent Legal Counsel. The parties have either (i) been
represented by independent legal counsel in connection with the negotiation and
execution of this Employment Agreement, or (ii) each has had the opportunity to
obtain independent legal counsel, has been advised that it is in their best
interests to do so, and by execution of this Employment Agreement has waived
such right.
21. Construction. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the document.
THE EMPLOYEE ACKNOWLEDGES THAT THE EMPLOYEE HAS READ ALL OF THE TERMS
OF THIS AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO ABIDE BY ITS TERMS
AND CONDITIONS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of date
set forth in the first paragraph of this Agreement.
Witness: THE COMPANY:
- --------------------------------- PEREGRINE INDUSTRIES, INC.
- --------------------------------- By: ----------------------------
Howard E. Cobb,
Chief Financial Officer
Witness: THE EMPLOYEE
- ---------------------------------
- --------------------------------- -------------------------------
Merrill A. Yarbrough
11
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") is
made and entered into as of September 1, 1998 but is effective as of April 30,
1998 (the "Effective Date"), between Peregrine Industries, Inc., a Florida
corporation (the "Company"), whose principal place of business is 730 South
Military Trail, Deerfield Beach, Florida 33442 and Howard E. Cobb, an individual
(the "Employee"), who resides at 6808 Rio Pinar, North Lauderdale, FL 33068.
WHEREAS, the Company is engaged in the manufacture and distribution of
heat pump pool heaters and is presently expanding its manufacturing and
distribution to include both a single unit heat pump which functions as a
residential air conditioner, hot water heater and swimming pool heater and a
residential central air conditioning unit (collectively, the "Business
Activities"); and
WHEREAS, the Company desires to employ the Employee and the Employee
desires to be in the employ of the Company; and
WHEREAS, the Company has established a valuable reputation and goodwill
in its business, with expertise in all aspects of the Business Activities; and
WHEREAS, the Employee has created and established, at least in part,
and is in possession of, the manner, methods, trade secrets and other
confidential information pertaining to the Company's Business Activities.
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Employee do hereby agree as follows:
1. Recitals. The above recitals are true, correct, and are herein
incorporated by reference.
2. Employment. The Company hereby employs the Employee, and the
Employee hereby accepts employment, upon the terms and conditions hereinafter
set forth.
3. Authority and Power During Employment Period.
a. Duties and Responsibilities. During the term of this Agreement, the
Employee shall serve as Chief Financial Officer and Treasurer of the Company and
shall have such responsibilities and duties as are customarily undertaken by
individuals in similar positions.
b. Time Devoted. Throughout the Term of the Agreement, the Employee
shall devote substantially all of the Employee's business time and attention to
the business and
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<PAGE>
affairs of the Company consistent with the Employee's position with the Company,
except for reasonable vacations and except for illness or incapacity.
4. Term. The Term of employment hereunder will commence on the
Effective Date as set forth above and end three (3) years from the Effective
Date, subject to such additional one (1) year extensions (the "Renewal Term(s)")
as the parties may agree to be exercisable by written notice given the by the
Employee to the Company at least 45 days before the expiration of the Term or
the Renewal Term, as the case may be, unless this Agreement shall have been
terminated pursuant to Section 6 of this Agreement.
5. Compensation and Benefits.
a. Salary. The Employee shall be paid a base salary (the "Base
Salary"), payable weekly, at an annual rate of Fifty Thousand Dollars
($50,000).At the sole discretion of the Board of Directors, Employee's Base
Salary may be increased during the term of this Agreement in the event of a
"material change" in the scope of Employee's duties. For the purposes of this
Agreement, "material change" shall mean a significant expansion of the Company's
business and operations^, a material diversification of the Company's Business
Activities, one or more acquisitions or other similar long-term, permanent
occurrences which would result in the Employee undertaking additional
responsibilities for the Company. Notwithstanding anything contained herein, the
possible amount of and timing of any increase in the Base Salary is solely
within the discretion of the Board of Directors, with the Employee abstaining
from such vote, and there are no understandings, commitments, assurances or
guarantees the Board of Directors will vote to increase the Base Salary during
the term of this Agreement.
b Options.
i. Employee shall be granted 10,000 options (the "Initial Options")
to purchase shares of the Company's Common Stock at an exercise price of $1.00
per share, which such options are granted under the Company's 1998 Stock Option
Plan and pursuant to the form of Option attached hereto as Exhibit A and
incorporated herein by such reference. Such options shall be exercisable from
the date of vesting and shall vest (i) 5,000 options on May 1, 1998, (ii) 2,500
options on May 1, 1999, and (iii) the remaining 2,500 options on May 1, 2000.
The Initial Options shall expire May 1, 2002.
ii. Provided Employee shall be in the employ of Company, Employee
shall be granted on May 1, 1999 options for 5,000 shares, which such options
shall be granted under the Company's 1998 Stock Option Plan and pursuant to the
form of Option attached hereto as Exhibit A and incorporated herein by such
reference. Such options (the "Additional Options") shall be granted at Fair
Market Value (as hereinafter defined), shall be exercisable for a period of five
years from the vesting date, and shall vest (i) 1,667 options on May 1, 2000,
(ii) 1,667 options on May 1, 2001, and (iii) the remaining 1,666 options on May
1, 2002. The Additional Options shall expire five years from the date of
vesting.
2
<PAGE>
iii. Provided Employee shall be in the employ of Company, Employee
shall be granted on May 1, 2000 options for 5,000 shares, which such options
shall be granted under the Company's 1998 Stock Option Plan and pursuant to the
form of Option attached hereto as Exhibit A and incorporated herein by such
reference. Such options (the "Additional Options") shall be granted at Fair
Market Value (as hereinafter defined), shall be exercisable for a period of five
years from the vesting date, and shall vest (i) 1,667 options on May 1, 2001,
(ii) 1,667 options on May 1, 2002, and (iii) the remaining 1,666 options on May
1, 2003. The Additional Options shall expire five years from the date of
vesting.
iv. In the event of (i) a sale of all or substantially all of the
assets of the Company; or (ii) a merger, stock exchange or other form of
business combination (the "Business Combination") the result of which being that
the shareholders of the Company, giving proforma effect to the pending private
placement of 1,000,000 shares of Common Stock will own, after the consummation
of such Business Combination, less that 49% of the then issued and outstanding
voting securities of the Company, then, in such event, on the effective date of
either the sale of all or substantially all of the Company's assets or a
Business Combination, all Initial Options and Additional Options not theretofore
vested shall immediately vest at the then current Fair Market Value of the
Company's Common Stock.
v. For the purposes of this Agreement, "Fair Market Value" shall be
equal to the closing price of the Company's Common Stock as reported on the OTC
Bulletin Board or the primary exchange on which the Company's Common Stock shall
be quoted. In the absence of a public trading market for the Company's Common
Stock, Fair Market Value shall be equal to the book value of a share of the
Company's Common Stock as reported in the audited financial statements of the
Company.
c. Employee Benefits. The Employee shall be entitled to participate in
all benefit programs of the Company currently existing or hereafter made
available to executive and/or salaried employees, including, but not limited to,
stock option plans, pension and other retirement plans, group life insurance,
hospitalization, surgical and major medical coverage, sick leave, salary
continuation, vacation and holidays, long-term disability, and other fringe
benefits.
d. Vacation. During each fiscal year of the Company, the Employee shall
be entitled to two (2) weeks vacation per year. Employee shall evidence
reasonable judgment with regard to appropriate vacation scheduling.
e. Business Expense Reimbursement. During the Term of employment, the
Employee shall be entitled to receive proper reimbursement for all reasonable,
out of-pocket expenses incurred by the Employee (in accordance with the policies
and procedures established by the Company) in performing services hereunder,
provided the Employee properly accounts therefor.
3
<PAGE>
6. Consequences of Termination of Employment.
a. Disability. In the event of the Employee's disability, the Employee
shall be entitled to compensation in accordance with the Company's disability
compensation practice for its senior officers. "Disability," for the purposes of
this Agreement, shall be deemed to have occurred in the event (A) the Employee
is unable by reason of sickness or accident, to perform the Employee's duties
under this Agreement for an aggregate of 90 days in any 12-month period or 45
consecutive days, or (B) the Employee has a guardian of the person or estate
appointed by a court of competent jurisdiction. Termination due to disability
shall be deemed to have occurred upon the first day of the month following the
determination of disability as defined in the preceding sentence.
b. Termination by the Company for Cause.
i. Nothing herein shall prevent the Company from terminating
Employee for "Cause," as hereinafter defined. The Employee shall continue to
receive salary only for the period ending with the date of such termination as
provided in this Section 6(b). Any rights and benefits the Employee may have in
respect of any other compensation shall be determined in accordance with the
terms of such other compensation arrangements or such plans or programs.
ii. "Cause" shall mean (A) committing or participating in an
injurious act of fraud, gross neglect, misrepresentation, embezzlement or
dishonesty against the Company; (B) committing or participating in any other
injurious act or omission wantonly, willfully, recklessly or in a manner which
was grossly negligent against the Company, monetarily or otherwise; (C) engaging
in a criminal enterprise involving moral turpitude; (D) an act or acts (1)
constituting a felony under the laws of the United States or any state thereof;
or (2) if applicable, loss of any state or federal license required for the
Employee to perform the Employee's material duties or responsibilities for the
Company; or (E) any assignment of this Agreement by the Employee in violation of
Section 13 of this Agreement.
iii. Notwithstanding anything else contained in this Agreement, this
Agreement will not be deemed to have been terminated for Cause unless and until
there shall have been delivered to the Employee a notice of termination stating
that the Employee committed one of the types of conduct set forth in this
Section 6(b) contained in this Agreement and specifying the particulars thereof
c. Voluntary Termination. Notwithstanding anything contained herein to
the contrary, this Agreement may be terminated at any time upon the mutual
written consent of the Company and the Employee.
d. Termination by the Company Other Than For Cause. The foregoing
notwithstanding, the Company may terminate the Employee's employment for
whatever reason it deems appropriate; provided, however, that in the event such
termination is not
4
<PAGE>
based on Cause, as provided in Section 6(b) above, the Company may terminate
this Agreement upon giving 30 days' prior written notice to the Employee. During
such 30 day period, the Employee shall continue to perform the Employee's duties
pursuant to this Agreement, and the Company shall continue to compensate the
Employee in accordance with this Agreement. Upon expiration of such 30-day
period, the Company shall tender to the Employee an amount equal to eleven (11)
months' then current Base Salary under this Agreement.
7. Non-Disclosure of Information.
a. Non-Disclosure of Information. The Employee acknowledges that the
Company's trade secrets, private or secret processes, methods and ideas, as they
exist from time to time, customer lists and information concerning the Company's
Business Activities, including products, services, training methods,
development, technical information, marketing activities and procedures, credit
and financial data concerning the Company (the "Proprietary Information") are
valuable, special and unique assets of the Company, access to and knowledge of
which are essential to the performance of the Employee hereunder. In light of
the highly competitive nature of the industry in which the Company's Business
Activities are conducted, the Employee agrees that all Proprietary Information,
heretofore or in the future obtained by the Employee as a result of the
Employee's association with the Company, shall be considered confidential.
In recognition of this fact, the Employee agrees that the Employee,
during the Restricted Period, will not use or disclose any of such Proprietary
Information for the Employee's own purposes or for the benefit of any person or
other entity or organization (except the Company) under any circumstances unless
such Proprietary Information has been publicly disclosed generally or, unless
upon written advice of legal counsel reasonably satisfactory to the Company, the
Employee is legally required to disclose such Proprietary Information. Documents
(as hereinafter defined) prepared by the Employee or that come into the
Employee's possession during the Employee's association with the Company are and
remain the property of the Company, and when this Agreement terminates, such
Documents shall be returned to the Company at the Company's principal place of
business, as provided in the Notice provision (Section 9) of this Agreement.
b. Documents. "Documents" shall mean all original written, recorded, or
graphic matters whatsoever, and any and all copies thereof, including, but not
limited to: papers; books; records; tangible things; correspondence;
communications; telex messages; memoranda; work-papers; reports; affidavits;
statements; summaries; analyses; evaluations; client records and information;
agreements; agendas; advertisements; instructions; charges; manuals; brochures;
publications; directories; industry lists; schedules; price lists; client lists;
statistical records; training manuals; computer printouts; books of account,
records and invoices reflecting business operations; all things similar to any
of the foregoing however denominated. In all cases where originals are not
available, the term "Documents" shall also mean identical copies of original
documents or nonidentical copies thereof.
5
<PAGE>
c. Restrictive Period. The "Restrictive Period" shall be deemed to be
during the Term or Renewal Term of this Agreement and for a period of twelve
(12) months following termination of this Agreement.
d. Business Activities. "Business Activities" shall be deemed to
include the Business Activities the Company in which the Company is currently
engaged, as well as any additional activities which the Company or any of its
affiliates may engage in during the term of this Agreement.
e. Covenants as Essential Elements of this Agreement. It is understood
by and between the parties hereto that the foregoing covenants contained in
Section 7(a) are essential elements of this Agreement, and that but for the
agreement by the Employee to comply with such covenants, the Company would not
have agreed to enter into this Agreement. Such covenants by the Employee shall
be construed to be agreements independent of any other provisions of this
Agreement. The existence of any other claim or cause of action, whether
predicated on any other provision in this Agreement, or otherwise, as a result
of the relationship between the parties shall not constitute a defense to the
enforcement of such covenants against the Employee. In the event Employee shall
be in violation of the aforementioned restrictive covenants, the time limitation
thereof with respect to the defaulting party shall be extended for a period of
time equal to the period of time during which breach or breaches should occur;
and in the event Company should require or seek relief from breach in any court
or other tribunal, any covenant shall be extended for a period of time equal to
the pendency of such proceeding, including appeals thereof.
f. Survival After Termination of Agreement. Notwithstanding anything to
the contrary contained in this Agreement, the covenants in Section 7(a) shall
survive the termination of this Agreement and the Employee's employment with
Company.
g. Remedies.
i. The Employee acknowledges and agrees that the Company's remedy at
law for a breach or threatened breach of any of the provisions of Section 7(a)
herein would be inadequate and the breach shall be per se deemed as causing
irreparable harm to the Company. In recognition of this fact, in the event of a
breach by the Employee of any of the provisions of Section 7(a), the Employee
agrees that, in addition to any remedy at law available to the Company,
including, but not limited to monetary damages, all rights of the Employee to
payment or otherwise under this Agreement and all amounts then or thereafter due
to the Employee from the Company under this Agreement may be terminated and the
Company, without posting any bond, shall be entitled to obtain, and the Employee
agrees not to oppose the Company's request for equitable relief in the form of
specific performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be available to the
Company.
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<PAGE>
ii. The Employee acknowledges that the granting of a temporary
injunction, temporary restraining order or permanent injunction merely
prohibiting the use of Proprietary Information would not be an adequate remedy
upon breach or threatened breach of Section 7(a) and consequently agrees, upon
proof of any such breach, to the granting of injunctive relief prohibiting any
form of competition with the Company. Nothing herein contained shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach.
8. Withholding. Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Employee or the Employee's
estate or beneficiaries shall be subject to the withholding of such amounts, if
any, relating to tax and other payroll deductions as the Company may reasonably
determine it should withhold pursuant to any applicable law or regulation. In
lieu of withholding such amounts, the Company may accept other arrangements
pursuant to which it is satisfied that such tax and other payroll obligations
will be satisfied in a manner complying with applicable law or regulation.
9. Notices. Any notice required or permitted to be given under the
terms of this Agreement shall be sufficient if in writing and if sent postage
prepaid by registered or certified mail, return receipt requested; by overnight
delivery; by courier; or by confirmed telecopy, in the case of the Employee to
the Employee's last place of business or residence as shown on the records of
the Company, or in the case of the Company, to its principal office as set forth
in the first paragraph of this Agreement, or at such other place as it may
designate.
10. Waiver. Unless agreed in writing, the failure of either party, at
any time, to require performance by the other of any provisions hereunder shall
not affect its right thereafter to enforce the same, nor shall a waiver by
either party of any breach of any provision hereof be taken or held to be a
waiver of any other preceding or succeeding breach of any term or provision of
this Agreement. No extension of time for the performance of any obligation or
act shall be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
11. Completeness and Modification. This Agreement constitutes the
entire understanding between the parties hereto superseding all prior and
contemporaneous agreements or understandings among the parties hereto concerning
the Agreement. This Agreement may be amended, modified, superseded or canceled,
and any of the terms, covenants, representations, warranties or conditions
hereof may be waived, only by a written instrument executed by the parties or,
in the case of a waiver, by the party to be charged.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one agreement.
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<PAGE>
13. Binding Effect/Assignment. This Agreement shall be binding upon the
parties hereto, their heirs, legal representatives, successors and assigns. This
Agreement shall not be assignable by the Employee but shall be assignable by the
Company in connection with the sale, transfer or other disposition of its
business or to any of the Company's affiliates controlled by or under common
control with the Company.
14. Governing Law. This Agreement shall become valid when executed and
accepted by Company. The parties agree that it shall be deemed made and entered
into in the State of Florida and shall be governed and construed under and in
accordance with the laws of the State of Florida. Anything in this Agreement to
the contrary notwithstanding, the Employee shall conduct the Employee's business
in a lawful manner and faithfully comply with applicable laws or regulations of
the state, city or other political subdivision in which the Employee is located.
15. Further Assurances. All parties hereto shall execute and deliver
such other instruments and do such other acts as may be necessary to carry out
the intent and purposes of this Agreement.
16. Headings. The headings of the sections are for convenience only and
shall not control or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
17. Survival. Any termination of this Agreement shall not, however,
affect the ongoing provisions of this Agreement which shall survive such
termination in accordance with their terms.
18. Severability. The invalidity or unenforceability, in whole or in
part, of any covenant, promise or undertaking, or any section, subsection,
paragraph, sentence, clause, phrase or word or of any provision of this
Agreement shall not affect the or enforceability of the remaining portions
thereof.
19. Enforcement. Should it become necessary for any party to institute
legal action to enforce the terms and conditions of this Agreement, the
successful party will be awarded reasonable attorneys' fees at all trial and
appellate levels, expenses and costs.
20. Independent Legal Counsel. The parties have either (i) been
represented by independent legal counsel in connection with the negotiation and
execution of this Employment Agreement, or (ii) each has had the opportunity to
obtain independent legal counsel, has been advised that it is in their best
interests to do so, and by execution of this Employment Agreement has waived
such right.
21. Construction. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the document.
8
<PAGE>
THE EMPLOYEE ACKNOWLEDGES THAT THE EMPLOYEE HAS READ ALL OF THE TERMS
OF THIS AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO ABIDE BY ITS TERMS
AND CONDITIONS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of date
set forth in the first paragraph of this Agreement.
Witness: THE COMPANY:
- --------------------------------- PEREGRINE INDUSTRIES, INC.
- --------------------------------- By:
-------------------------------------
Merrill A. Yarbrough, President
Witness: THE EMPLOYEE
- ---------------------------------
- --------------------------------- -----------------------------------------
Howard E. Cobb
9
PLACEMENT AGENCY AGREEMENT
--------------------------
As of April 8, 1998
Peregrine Industries, Inc.
730 South Military Trail
Deerfield Beach, Florida 33309
Dear Sirs:
Peregrine Industries, Inc., a Florida corporation (the "Company"),
hereby confirms its agreement with Noble International Investments, Inc. (the
"Placement Agent") as follows:
I. Introductory. The Company proposes to offer for sale through the Placement
Agent, as exclusive agent for the Company, 1,000,000 shares of common stock, par
value $.0001 per share (the "Shares"), on a "best efforts, all or none" basis
(the "Offering") during the period commencing on the date of the Memorandum (as
hereinafter defined) and ending on April 30, 1998, unless extended by mutual
agreement of the Company and the Placement Agent until May 15, 1998 (the
"Offering Period").
Subscriptions for the Shares will be accepted by the Company at a price
of $1.00 per Share (the "Offering Price"); provided, however, that the Placement
Agent may offer, and the Company may sell, Shares only to persons or entities
who qualify as an accredited investor ("Accredited Investor") as such term is
defined in Rule 501 of Regulation D promulgated under the Securities Act of
1933, as amended (the "Act"), or to non-accredited investors who are otherwise
qualified and meet the suitability standards set forth in the Memorandum.
Investors will be required to subscribe for the Shares by executing the
subscription documents (the "Subscription Agreement") set forth as an exhibit to
the Company's Confidential Private Offering Memorandum dated April 8, 1998
("Memorandum"). The Offering of the Shares will be made by the Company through
the Placement Agent pursuant to the Memorandum, in form and substance mutually
acceptable to the Placement Agent (and its counsel) and the Company (and its
counsel) and shall contain such legends and other information as the Placement
Agent and its counsel deem necessary and desirable to set forth in the
Memorandum.
"Offering Materials" as used in this Agreement means the Company's
Confidential Private Offering Memorandum dated April 8, 1998 relating to the
Offering, and all amendments, supplements, exhibits and appendices to such
Memorandum, taken as a whole. Unless otherwise defined, each term used in this
Agreement will have the same meaning as that set forth in the Memorandum.
<PAGE>
1. Representations and Warranties. The Company hereby represents and
warrants to the Placement Agent that:
(a) The Memorandum has been prepared by the Company in conformity
with the requirements of Regulation D, the Act and the requirements of all other
rules and regulations (the "Regulations") of the Securities and Exchange
Commission (the "SEC") relating to the private offering (as defined in
Regulation D ("Regulation D") as promulgated under Section 4(2) of the Act). The
Company has used its best efforts to ensure that the offer and sale of the
Shares by the Company has satisfied, and on the Closing Date (as hereinafter
defined) will have satisfied, in all material respects, all of the requirements
of Regulation D; the Shares are not disqualified from the exemption under Rule
504 contained in Regulation D, except that no representation or warrant is made
hereunder by the Company as to any disqualifications based upon Rule 262(b) and
(c) of Regulation A as it may be applied to the Placement Agent. The Memorandum
(i) describes the material aspects of an investment in the Company and (ii) does
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If any time prior to the Termination Date (as hereinafter defined)
or other termination of this Agreement any event shall occur as a result of
which it is necessary to amend or supplement the Memorandum so that it does not
include any untrue statement of any material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances then existing, not misleading, the Company will promptly notify
you and will supply you with amendments or supplements correcting such statement
or omission. Except as otherwise provided, no representations or warranties of
the Company will apply to statements or omissions made in reliance upon and in
conformity with written information furnished to the Company by the Placement
Agent expressly for use in the Memorandum or any amendment or supplement
thereto. The cover or inside cover page of the Memorandum contains the legend
required by Rule 502(d) of the Regulations.
(b) The Company will afford each prospective purchaser of Shares and
his purchaser representative, if any, the opportunity to ask questions of and
receive answers from it concerning the terms and conditions of the Offering and
the opportunity to obtain additional information necessary to verify the
accuracy of the Memorandum to the extent it possesses such information or can
acquire it without unreasonable expense.
(c) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Florida, and has all
requisite power and authority to own or lease and operate its properties and to
conduct its businesses as presently and proposed-to be conducted as described in
the Memorandum. The Company is duly qualified to transact business as a foreign
corporation and is in good standing under the laws of each jurisdiction wherein
the location of its properties or the character of its operations make such
qualification necessary, except where the failure to
2
<PAGE>
be so qualified would not have a material adverse effect on the Company. The
Company has all necessary authorizations, approvals, licenses, permits,
franchises and orders (the "Authorizations") of and from all governmental
officials and bodies to own or lease and operate its properties and to conduct
its businesses as presently and proposed to be conducted as described in the
Memorandum, except for those Authorizations the failure of which to obtain would
not have a material adverse effect on the Company, and the Company has the
requisite power and authority to enter into this Agreement, to carry out the
provisions and conditions hereof, and to issue and sell the Shares as provided
herein and in the Memorandum. The conduct of business by the Company as
presently and proposed to be conducted (as described in the Memorandum) is not
subject to continuing oversight or supervision by any governmental official or
body of the United States or any other jurisdiction wherein the Company conducts
or proposes to conduct such business, except as described in the Memorandum.
(d) This Agreement has been duly authorized, executed and delivered
on behalf of the Company and is the valid and binding obligation of the Company,
enforceable in accordance with its terms, subject only to the effect, if any, of
bankruptcy laws or similar laws relating to the insolvency of debtors and to
principles of equity and except as the Company's indemnification and/or
contribution obligations under this Agreement may be limited under Federal or
applicable state securities laws.
(e) The execution and delivery of, and the compliance with, this
Agreement by the Company and the consummation by the Company of the transactions
herein contemplated will not, with or without the giving of notice or the lapse
of time, or both: (i) result in a material conflict with or breach of any of the
material terms or provisions of, or constitute a default under, or result in the
modification or termination of, or require consent under, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the material properties or assets of the Company pursuant to the
terms of, any agreement or instrument to which the Company is a party or by
which the Company may be bound or to which any of the property or assets of the
Company is subject, or (ii) violate the Company's articles of incorporation or
by-laws or (iii) have any material effect on any material license, permit,
judgment, decree, order, statute, rule or regulation applicable to the Company
or any of its properties or businesses.
(f) The financial statements of the Company attached as an Exhibit
to the Memorandum present fairly the financial position of the Company as of the
respective dates specified and the results of its operations and changes in
financial position for the respective periods covered thereby. Such financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied through the periods involved.
(g) There has been no material adverse change since December 31,
1997 in the financial position or results of operations of the Company or in its
business, affairs,
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other than as set forth in the Memorandum and the capitalization, properties,
business and management of the Company conform in all material respects to the
descriptions thereof contained in the Memorandum. The Company has no material
liabilities of any kind, contingent or otherwise, except as set forth in the
Memorandum.
(h) No material default exists in the due performance or observance
of any term, covenant or condition of the material contracts, agreements or
documents referred to in the Memorandum to which the Company is a party or by
which the Company is bound or to which any of its property is subject
(collectively, the "Company Agreements") other than as described in the
Memorandum; the Company Agreements are accurately and fairly described in the
Memorandum; the Company Agreements are in full force and effect in accordance
with their respective terms; and no other party to any thereof has instituted
or, to the best of the Company's knowledge, threatened any action or proceeding
wherein the Company would or might be alleged to be in default thereunder. The
Company is not a party to any contract or instrument materially affecting its
financial condition, business, management, properties or prospects, other than
those referred to in the Memorandum.
(i) The authorized capital stock of the Company consists of
30,000,000 shares of Common Stock, of which 12,750,000 shares were outstanding
on the date of the Memorandum, all of which have been duly authorized and are
validly issued and fully paid and non-assessable. None of the outstanding shares
of Common Stock or options to purchase shares of Common Stock have been issued
in violation of the preemptive rights of any shareholder of the Company. Except
as disclosed within the Memorandum, there are no outstanding options, warrants
or other rights calling for issuances by the Company of, and no commitments,
plans or arrangements of the Company to issue any shares of capital stock of the
Company or any securities convertible into or exchangeable for such capital
stock. Except as set forth in the Memorandum, no holder of any of the Company's
securities has any rights, "demand," "piggy-back" or otherwise, to have such
securities registered under the Act.
(j) The Shares have been duly authorized, and when duly delivered
and paid for pursuant to the terms of the Memorandum and this Agreement, will be
validly issued, fully paid and non-assessable. No holder of the Shares will be
subject to personal liability by reason of being such a holder, and none of the
Shares are subject to the preemptive rights of any stockholder of the Company.
The Shares conform to all statements in relation thereto contained in the
Memorandum.
(k) No authorization, approval, consent, order, registration,
license or permit of any court or governmental agency or body, other than under
the Act, the Regulations and the rules and regulations of the state securities
laws of the states in which offers or sales will be made, is required for the
valid authorization, issuance, sale and delivery of the Shares in accordance
herewith or the consummation by the Company of the transactions contemplated by
this Agreement.
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<PAGE>
(l) The Company is not in violation of its articles of incorporation
or by-laws or any applicable statute, rule, regulation or ordinance, except as
may be set forth in the Memorandum, nor is the Company in default under any
order, writ, judgment, injunction or decree of any court, government agency or
arbitration tribunal applicable to the Company.
(m) Subsequent to the respective dates as of which information is
given in the Memorandum, and prior to the Closing Date, except as may otherwise
be indicated or contemplated therein, the Company will not have entered into any
transaction otherwise than in the ordinary course of business, or issued any
securities, or entered into any material transaction, unless the Memorandum is
amended or supplemented to reflect same, such changes to have been approved by
the Placement Agent and its counsel, which approval shall not be unreasonably
withheld or delayed.
(n) There is no litigation or governmental proceeding pending, or to
the best of the Company's knowledge, threatened against the Company or involving
its properties or business which, individually or in the aggregate, could be
reasonably expected to materially and adversely affect the value of the assets
or the business of the Company, except as described in the Memorandum. To the
best knowledge of the Company, there is no basis for any such action, suit,
proceeding, arbitration, claim or inquiry, except as set forth in the
Memorandum. There are no outstanding orders, judgments or decrees of any court,
governmental agency or other tribunal naming the Company and enjoining the
Company from taking, or requiring the Company to take, any action, or to which
the Company, its properties or businesses are bound or subject.
(o) Except as set forth in the Memorandum, the Company owns, or
possesses adequate rights to use, all patents, trademarks, service marks and
other rights necessary for the conduct of its business as described in the
Memorandum (collectively, the "Intangibles"). Except as set forth in the
Memorandum, the Company has not and is not infringing on the rights of others
with respect to the Intangibles and neither the Company, nor any officer or
director of the Company has received any notice of conflict with the asserted
rights of others with respect to the Intangibles in any respect which would
materially adversely affect the business of the Company and knows no basis
therefor. Prior to the Closing Date, Merrill A. Yarbrough will execute all
documents necessary to assign to the Company all rights and interest he may have
in and to United States Patent Application number 08/825,686 and the heat
transfer system which is the subject of such patent application.
(p) The Company has either good and marketable title to, or valid
and enforceable leasehold interests in, all items of real property and personal
property which are stated in the Memorandum to be owned or leased by it, in each
case free and clear of all liens, encumbrances, claims, security interests,
subleases and defects, other than those referred to in the Memorandum and those
which do not have a material adverse effect
5
<PAGE>
upon the operations of the Company. The Company has the right to operate all of
its facilities in its present locations and the operation of such facilities
does not violate the material provisions of any lease with respect thereto which
the Company is a party. The Company is not in violation of any applicable law,
ordinance, regulation, order or requirement relating to its owned or leased
properties except for violations which, individually or in the aggregate, do not
have a material adverse effect, and has not received any notice of an alleged
violation. The Company has adequately insured its properties against loss or
damage by fire or other casualty and maintains, in adequate amounts, such other
insurance as is usually maintained by companies engaged in the same or similar
businesses located in its geographical area.
(q) The Company has filed with the appropriate federal, state and
local governmental agencies, and all foreign countries and political
subdivisions thereof, all tax returns, including franchise tax returns, which
are required to be filed or has duly obtained extensions of time for the filing
thereof and has paid all taxes shown on such return and all assessments received
by it to the extent that the same have become due; and the provisions for income
taxes payable, if any, shown on the financial statements included as part of the
Memorandum are sufficient for all accrued and unpaid foreign and domestic taxes,
whether or not disputed, and for all periods to and including the dates of such
financial statements. Except as disclosed in writing to the Placement Agent, the
Company has not executed or filed with any taxing authority, foreign or
domestic, any agreement extending the period for assessment or collection of any
income taxes and is not a party to any pending action or proceeding by any
foreign or domestic governmental agency for assessment or collection of taxes;
and no claims for assessment or collection of taxes have been asserted by the
Company.
(r) The Company has not, directly or indirectly, at any time (i)
made any contributions to any candidate for political office in violation of law
or failed to disclose fully any such contribution, or (ii) made any payment to
any state, federal or foreign governmental office or official, or other person
charged with similar public or quasi-public duties, other than payments or
contributions required or allowed by applicable law. The Company's internal
accounting controls and procedures are sufficient to cause the Company to comply
in all material respects with the Foreign Corrupt Practices Act of 1977, as
amended.
(s) The Company represents that no director, executive officer, or
key employee of the Company has been convicted or any felony, experienced a
personal bankruptcy, or been an officer, director, or key employee of any
company that during their tenure with such company experienced any bankruptcy,
or had any trustee, receiver, or conservator appointed with respect to its
business or assets.
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<PAGE>
2. Purchase, Sale and Delivery of the Shares. On the basis of the
representations and warranties contained herein, and subject to the terms and
conditions set forth:
(a) The Company hereby appoints the Placement Agent as its exclusive
agent in connection with the offer and sale of 1,000,000 Shares pursuant to the
terms of the Memorandum. The Placement Agent has no obligation to purchase any
or all of the Shares.
(b) The Shares will be offered at the Offering Price and upon the
terms and conditions set forth in the Memorandum. The Placement Agent and the
Company agree to use their best efforts to assure that any sale of Shares is
made pursuant to the exemption from the registration requirements of the Act
provided by Section 4(2) thereof, including, but not limited to, Rule 504
thereunder, and the requirements of the state securities laws and the respective
rules and regulations thereunder in those jurisdictions in which the Shares are
offered and sold.
(c) As compensation for acting as the exclusive agent of the
Company, the Placement Agent will be entitled to receive (i) a commission equal
to ten percent (10%) of the aggregate offering price of all Shares sold in the
Offering (the "Placement Agent's Fee"); and (ii) a non-accountable expense
allowance equal to three percent (3%) of the aggregate offering price of all
Shares sold in the Offering, of which $25,000 has been paid by the Company to
the Placement Agent as an advance. The Placement Agent shall have the obligation
to satisfy the requirements set forth by the rules and regulations of the
National Association of Securities Dealers, Inc. ("NASD") as to the amount of
compensation allowable or payable to the Placement Agent by the Company. On the
Closing Date, the Company will have received from the Placement Agent's counsel,
Broad and Cassel, a signed opinion, reasonably satisfactory to the Company and
the Company's counsel, that the Placement agent has satisfied the requirements
set forth by the rules and regulations of the NASD as to the amount of
compensation allowable or payable to the Placement Agent in the Offering.
(d) Each prospective subscriber desiring to purchase Shares will be
required to complete and execute an original of the Subscription Agreement, in
the form attached as Exhibit A to the Memorandum, which Subscription Agreement
will be forwarded or delivered to SouthTrust Bank, N.A., the escrow agent
("Escrow Agent") for the Offering, together with (i) the subscriber's check in
the full amount of the investor's subscription made payable to Peregrine
Industries, Inc. Escrow Account for the number of Shares desired to be
purchased; and (ii) the Purchaser's Questionnaire in the form included as an
exhibit to the Memorandum. All proceeds received by the Company from subscribers
for the Shares offered hereby will be deposited in an interest bearing escrow
account with the Escrow Agent. If all 1,000,000 Shares offered hereby have not
been subscribed for by the expiration of the Offering Period, all proceeds
theretofore received
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<PAGE>
from subscribers will be refunded in full, with interest. If all 1,000,000
Shares are subscribed for prior to the expiration of the Offering Period, a
closing (the "Closing Date") will be held at the offices of the Placement Agent
as soon as practicable thereafter and the funds held in the escrow account will
be turned over to the Company.
(e) As promptly as practicable after receipt of subscription
documents, the Company will decide whether or not to accept the Subscription
Agreements of the subscribers named therein. If the Company elects not to accept
a Subscription Agreement, it will notify the Placement Agent and the
subscription proceeds of such subscriber will be returned to him without
interest or deduction.
(f) On the Closing Date, the Shares will be delivered against
payment therefor from the funds received by the Company.
(g) On the Closing Date, the Company shall remit to the Placement
Agent the Placement Agent's Fee which it is entitled and the balance due, if
any, on the non-accountable expense allowance as hereinbefore described in
sub-paragraph 3(c) hereof.
(h) The purchasers of the Shares shall have "piggy-back" and demand
registration rights with respect to the Shares. The terms of the registration
rights are more specifically described in the Memorandum.
(i) On the Closing Date, the Company will sell to the Placement
Agent the Placement Agent Warrants, for an aggregate price of $100, evidencing
the Placement Agent's right to purchase 100,000 shares at an exercise price of
$1.00 per share. The Placement Agent Warrants will be in the form attached
hereto as Exhibit A. The Placement Agent Warrants shall be non-exercisable and
non-transferrable (other than to officers, consultants, partners or directors of
the Placement Agent) for a period of 12 months following the Closing Date. The
Placement Agent Warrants shall be exercisable, in whole or in part, commencing
12 months from the Closing Date and for a period of four years thereafter (the
"Term"). If the Placement Agent Warrants are not exercised during the Term, they
shall, by their terms, automatically expire. The Placement Agent Warrants shall
contain customary anti-dilutive provisions relating to any recapitalization,
stock split, stock dividend or similar event involving the Company. The
Placement Agent Warrants shall also contain provisions providing for demand and
"piggyback" registration rights with respect to the Placement Agent Warrants and
the shares of Common Stock underlying such warrants, and shall not be
redeemable.
3. Further Covenants. The Company hereby covenants and agrees that:
(a) The Company will not at any time, whether before or after
Closing Date, prepare or use any amendment or supplement to the Memorandum of
which the Placement Agent will not previously have been advised and furnished
with a copy, or to
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<PAGE>
which the Placement Agent or its counsel will have objected in writing or orally
(confirmed in writing within 24 hours), or which is not in compliance with the
Act and the Regulations. As soon as the Company is advised thereof, the Company
will advise the Placement Agent and its counsel, and confirm the advice in
writing, of any order preventing or suspending the use of the Memorandum, or the
suspension of or the qualification or registration of the Shares for offering or
of any exemption for such qualification or registration of the Shares for
offering in any jurisdiction, or of the institution or threatened institution of
any proceedings for any of such purposes, and the Company will use its best
efforts to prevent the issuance of any such order and, if issued, to obtain as
soon as possible the lifting thereof.
(b) The Company has caused to be delivered to the Placement Agent
copies of the Memorandum, has consented, and hereby consents, to the use of such
copies for the purposes contemplated hereby permitted by the Act and applicable
state securities laws, and has authorized, and hereby authorizes, the Placement
Agent to use the Memorandum in connection with the sale of the Shares until the
expiration of the Offering Period, in each case subject to the limitations
contained therein and herein, and no person is or will be authorized to give any
information or make any representations other than those contained in the
Memorandum or to use any offering materials other than those contained in the
Memorandum in connection with the sale of the Shares. In the event of the
happening, at any time within such period, of any event to which the Company has
knowledge and which materially adversely affects, or may affect, the Company,
and which should in the opinion of the Placement Agent's counsel be set forth in
an amendment or supplement to the Memorandum in order to make the statement
therein not misleading, in light of the circumstances existing at the time the
Memorandum is required to be delivered to a purchaser of the Shares, or in case
it shall, in the opinion of counsel to the Placement Agent, be necessary to
amend or supplement the Memorandum to comply with any Federal or state
securities laws or with the Regulations or the rules and regulations of any
state in which the Memorandum is made available to a prospective subscriber, the
Company will forthwith prepare and furnish to the Placement Agent copies of such
amended Memorandum or of such supplement to be attached to the Memorandum in
such quantities as the Placement Agent may reasonably request, in order that the
Memorandum, as so amended or supplemented, will not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements in the Memorandum, in light of the circumstances under which they
were made, not misleading. The preparation, distribution and furnishing of any
such amendment to the Memorandum or any such supplement to be attached to the
Memorandum will be without expense to the Placement Agent.
(c) The Company will comply with the Act, the Regulations
(including, without limitation, Rule 504) so as to permit the continuance of the
sales of the Shares, and will file with the SEC, and will promptly thereafter
forward to the Placement Agent any and all reports on Form D as are required.
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<PAGE>
(d) During the Offering Period, the Company will make available for
review by prospective purchasers of the Shares, upon their request, all material
contracts or other documents described or listed in the Memorandum.
(e) The Company will use its best efforts to qualify the Shares for
sale under the securities laws of the States of Florida and New York, and the
Company will make such applications and furnish information as may be reasonably
required for such purposes, provided that the Company will not be required to
qualify as a foreign corporation in any jurisdiction. The Company will, from
time to time, prepare and file such statements and reports as are or may be
required to continue such qualifications, in effect for so long a period as the
Placement Agent may reasonably request.
(f) The Company will deliver to the Placement Agent from time to
time and without charge, until the Closing Date, as many copies of the
Memorandum as the Placement Agent may reasonably request.
(g) The Company will apply the net proceeds from the sale of the
Shares substantially for the purposes set forth under "Use of Proceeds" in the
Memorandum.
(h) For a period of five years from the Closing Date, the Company
will deliver to the Placement Agent (i) a copy of each unaudited quarterly
financial statement and together with any other documents or reports which may
be issued by the Company to the public, including, without limitation, reports
on Forms 8-K, 10-K and 10-Q and exhibits thereto, (ii) reports or communications
(financial or other) of the Company mailed to its security holders, and (iii)
every press release and every material news item and article in respect of the
Company or its affairs which was released by the Company. Further, for a period
of three years from the Closing Date, the Company will (i) furnish to the
Placement Agent and distribute the Company's shareholders annual financial
statements prepared by an independent auditor in conformity with generally
accepted accounting principles, consistently applied, which clearly set forth
the financial position of the Company and (ii) furnish to the Placement Agent a
duplicate list of shareholders of the Company at such time as reasonably
requested by the Placement Agent together with monthly DTC transfer sheets.
(i) The Company will pay all expenses incurred in connection with
the preparation and printing of all necessary offering documents and instruments
related to the Offering and the issuance of the Shares, and will also pay its
own expenses for accounting fees, legal fees, transfer agent fees and other
costs involved with the Offering. The Company will furnish at its expense such
quantities of the offering documents and instruments as the Placement Agent may
reasonably request.
(j) The Company will provide to the Placement Agent, for delivery to
all offerees and subscribers and their representatives, any additional
information, documents
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<PAGE>
and instruments which the Placement Agent or its counsel reasonably deems
necessary to comply with the Act and the Regulations and the securities laws and
the rules and regulations thereunder of those states in which the Shares are to
be offered and sold.
(k) The Company will comply with all registration, filing and
reporting requirements of the Act or the Exchange Act which may from time to
time be applicable to the Company.
(l) For a period of three years from the Closing Date, the Placement
Agent shall have the right of first refusal (the "Right of First Refusal") to
act as underwriter or agent for any and all public or private offerings of
securities (excluding all lease financing, bank financing or institutionally
placed property debt), of the Company, or any successor to or subsidiary of the
Company or other entity in which the Company either has a controlling equity
interest or is generally authorized to enter into contracts or otherwise act on
behalf of, (collectively referred to herein as the "Company") by the Company
(the "Subsequent Company Offering"). In addition, the Company will use its best
efforts to cause all officers, directors and holders of five percent (5%) or
more of the Company's equity securities (the "Principal Stockholders") to agree
in writing that the Placement Agent shall have such Right of First Refusal with
respect to any sale of the Company's securities by the Principal Stockholders
made during the three year period following the Closing Date. Accordingly, if
during such period the Company intends to make a Subsequent Company Offering,
the Company shall notify the Placement Agent in writing of such intention and of
the proposed terms of the offering. The Company shall thereafter promptly
furnish the Placement Agent with such information concerning the business,
condition and prospects of the Company as the Placement Agent may reasonably
request. If within 15 business days of the receipt of such notice of intention
and statement of terms, the Placement Agent does not accept in writing such
offer to act as underwriter or agent with respect to such offering upon the
terms proposed, the Company and each of the Principal Stockholders shall be free
to negotiate terms with other underwriters with respect to such offering and to
effect such offering on such proposed terms within six months after the end of
such 15 business days. Before the Company and each of the Principal Stockholders
and/or shall accept any modified proposal from such underwriter, the Placement
Agent's preferential right shall be reinstated and the same procedure with
respect to such modified proposal as provided above shall be adopted. The
failure of the Placement Agent to exercise its Right of First Refusal in any
particular instance shall not affect in any way such right with respect to any
other Subsequent Company Offering or Secondary Offering. Notwithstanding the
foregoing, (i) should an investment banking firm which is generally recognized
to be of a higher tier than the Placement Agent agree to the Subsequent Company
Offering resulting in aggregate gross proceeds of $15,000,000 or more and (ii)
the Placement Agent is permitted by such investment banking firm to participate
in the Subsequent Company Offering to the extent of at least ten percent (10%),
then the Right of First Refusal granted herein shall not apply to the Subsequent
Company Offering or any related offering.
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<PAGE>
(m) Within 90 days of the Closing Date, the Company shall
elect a minimum of two "outside" persons to the Company's Board of Directors,
which such individuals shall not be affiliates of the Company or family members
of the Company's existing directors, officers or shareholders, and the Board of
Directors of the Company shall create an audit committee consisting of a
majority of outside directors, which such audit committee will generally
supervise the financial affairs of the Company.
(n) For a period of five years from the Closing Date, the Placement
Agent shall have the right to designate a member to the Company's Board of
Director, which such individual shall be reasonably acceptable to the Company.
The Company shall, prior to the Closing Date, obtain from the officers,
directors and holders of five percent (5%) or more of the outstanding shares of
Common Stock of the Company, agreements in writing to vote the shares of Common
Stock respectively owned by them, whether directly or indirectly, during such
five-year period in favor of the election of such nominee. Following the
election of such nominee as director, such person shall receive the same
compensation paid to other non-officer directors of the Company for attendance
at meetings of the Board of Directors of the Company and shall be entitled to
receive reimbursement for all reasonable costs incurred in attending such
meetings to the extent permitted under applicable law, and on the same basis as
all other directors of the Company. The Company agrees to indemnify and hold
such director harmless, to the maximum extent permitted under applicable law,
against any and all claims, actions, awards and judgments arising out of his or
her service as a director and, in the event the Company maintains a liability
insurance policy affording coverage for the acts of its officers and directors,
indemnification and the benefits of such insurance shall, to the extend
possible, extend to the Placement Agent insofar as it may be or may be alleged
to be responsible for such director, provided that the extension of such rights
and benefits to the Placement Agent may be done without additional cost to the
Company.
In the event that the Placement Agent does not elect to designate one
member to the Company's Board of Directors, the Placement Agent shall have the
right during such five-year period to have one representative attend all
meetings of the Board of Directors of the Company, including any meetings of any
committees of the Board of Directors. All information received by such
representative at such meetings shall be kept confidential, shall not be
disclosed by the representative to any third party, and shall be dealt with in
full compliance with federal and state securities laws.
(o) For a period of five years from the Closing Date, the Company
shall use its best efforts to obtain and maintain a listing on the OTC Bulletin
Board, including taking such actions as are necessary to comply with any newly
enacted listing standards.
(p) For a period of one year from the Closing Date, and except as
contemplated in the Memorandum, the Company will not, without the Placement
Agent's prior written consent, redeem any securities outstanding at the Closing
Date nor declare
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<PAGE>
or pay any dividends or make any other cash distribution in respect of its
securities in excess of the amount of the Company's then current retained
earnings as reflected on its most recent balance sheet. The Company shall advise
the Placement Agent in writing at least five business days in advance of its
intent to either redeem any outstanding securities or declare and pay dividends.
4. Conditions of Placement Agent's Obligations. The obligations of the
Placement Agent hereunder are subject (as of the date hereof and on the Closing
Date) to the accuracy of and compliance with the representations and warranties
of the Company herein, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:
(a) On or prior to the Closing Date, no order suspending the use of
the Memorandum or enjoining the offering or sale of the Shares will have been
issued and no proceedings for that purpose or a similar purpose will have been
initiated or will be pending or, to the knowledge of the Placement Agent or the
Company, will be contemplated; and any request on the part of the SEC or any
securities authority of a state wherein the Shares are being offered for
additional information will have been complied with to the satisfaction of
counsel for the Placement Agent.
(b) On the date of the Memorandum and the Closing Date (i) the
Memorandum and any amendments or supplements thereto will contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and will conform in all material respects to the
requirements of the Act and the Regulations, and neither the Memorandum nor any
amendment or supplement thereto will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances under which they were made; (ii) since the respective dates as of
which information is given in the Memorandum, there will not have been any
material adverse change in the financial condition, results of operations or
affairs of the Company from that set forth or contemplated in the Memorandum,
except changes which the Memorandum indicates might occur after the date
thereof; (iii) since the date of the Memorandum, there shall have been no
material transaction, contract or agreement entered into by the Company, other
than in the ordinary course of business, which would be required to be set forth
in the Memorandum, other than as set forth therein; and (iv) no action, suit or
proceeding at law or in equity will be pending or, to the best of the knowledge
of the Company, threatened against the Company which would be required to be set
forth in the Memorandum, other than as set forth therein, and no proceedings
will be pending or, to the best of the knowledge of the Company, threatened
against the Company before or by any Federal, state or other tribunal or agency
wherein an unfavorable decision, ruling or finding would materially adversely
affect the business, properties, financial condition or results of operations of
the Company, other than as set forth in the Memorandum.
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<PAGE>
(c) The Placement Agent will have received evidence reasonably
satisfactory to the Placement Agent and the Placement Agent's counsel of the
assignment by Merrill A. Yarbrough to the Company of all rights and interest he
may have in and to United States Patent Application number 08/825,686 and the
heat transfer system which is the subject of such patent application.
(d) The Placement Agent will have received from the Company's
counsel, Atlas, Pearlman, Trop & Borkson, P.A., a signed opinion, reasonably
satisfactory to the Placement Agent and the Placement Agent's counsel.
(e) On the Closing Date, the Company and the Placement Agent shall
enter into a financial consulting agreement, in the form of Exhibit B attached
hereto, pursuant to which the Placement Agent will offer to provide financial
consulting services to the Company for a period of 24 months following the
Closing Date.
(f) Within three business days following the Closing Date, the
Company shall apply, on an expedited basis, for listing the Corporation Records
Service published by Standard and Poor's and/or Moody's Industrial Manual and
shall use its good faith efforts to have the Company's listing remain current
for a period of five years following the Closing Date.
(g) The Company shall have appointed a transfer agent reasonably
satisfactory to the Placement Agent.
(h) The Company shall have entered into employment agreements
reasonably satisfactory to the Placement Agent with each of Merrill A.
Yarbrough, Howard Cobb, Dennis Leszczynski and Waldemar Jadlowski.
(i) Merrill A. Yarbrough will have executed all documents necessary
to assign to the Company all rights and interest he may have in and to United
States Patent Application number 08/825,686 and the heat transfer system which
is the subject of such patent application, which such assignment shall be
reasonably satisfactory to the Placement Agent.
(j) The Company shall have entered into an agreement with Merrill A.
Yarbrough and Russell Lambert whereby the Company shall assume the obligations
of Mr. Yarbrough pursuant to that certain Agreement dated July 18, 1997 between
Merrill A. Yarbrough and Russell Lambert and Mr. Lambert shall waived any and
all rights and interest he may have in and to United States Patent Application
number 08/825,686 and the heat transfer system which is the subject of such
patent application, which such agreements shall be reasonably satisfactory to
the Placement Agent.
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(k) Within 90 days from the Closing Date, the Company will obtain
"key man" insurance in the amount of $1,000,000 on the life of Merrill A.
Yarbrough, of which the Company shall be the beneficiary, which such insurance
shall be purchased by the Company from the Placement Agent providing the terms
and costs thereof are commercially reasonable.
5. Indemnification.
(a) The Company will (i) indemnify and hold harmless the Placement
Agent and each person, if any, who controls the Placement Agent within the
meaning of the Act against any losses, claims, damages or liabilities, joint or
several (which will, for all purposes of this Agreement, include, but not be
limited to, all costs of defense and investigation and all reasonable attorneys'
fees, including appeals), to which either the Placement Agent or such
controlling persons may become subject, under the Act or otherwise, in
connection with the offer and sale of the Shares and (ii) reimburse the
Placement Agent and such controlling persons for any legal or other expenses
reasonably incurred in connection with investigating or defending against any
such loss, claim, action, proceeding or investigation; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense arises out of or is based upon (A) an
untrue statement or alleged untrue statement or an omission or alleged omission
made in the Memorandum in reliance upon and in conformity with written
information furnished to the Company by the Placement Agent or any such
controlling persons specifically for use in the preparation thereof, or (B) any
violations by the Placement Agent of the Act or state securities laws which does
not result from a violation thereof by the Company or any of its affiliates. In
addition to the foregoing agreement to indemnify and reimburse, the Company will
indemnify and hold harmless the Placement Agent against any costs, expenses,
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof), joint or several (which shall for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
reasonable attorneys' fees including appeals) to which the Placement Agent may
become subject insofar as such costs, expenses, losses, claims, damages or
liabilities arise out of or are based upon the claim of any person or entity
that he or it is entitled to broker's or finder's fees from the Placement Agent
in connection with the offering. The foregoing indemnity agreements will be in
addition to any liability which the Company may otherwise have.
(b) The Placement Agent will indemnify and hold harmless the Company
and each person, if any, who controls the Company within the meaning of the Act
against any losses, claims, damages or liabilities to which the Company or any
such person may become subject under the Act or otherwise insofar as such
losses, claims, damages, or liabilities (or actions, proceedings or
investigations in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Memorandum, or arise out of or are based upon the omission or the
15
<PAGE>
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statement therein not misleading (provided, however,
that the indemnity of the Placement Agent will apply in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in the Memorandum in reliance upon and
in conformity with written information furnished to the Company by the Placement
Agent, specifically for use in the preparation thereof; and will reimburse the
Company or any such person for any legal or other expenses reasonably incurred
in connection with investigating or defending against any such loss, claim,
damage, liability or action, proceeding or investigation to which such indemnity
obligation applies. In addition to the foregoing agreement to indemnify and
reimburse, the Placement Agent agrees to (i) indemnify and hold harmless the
Company and each person, if any, who controls the Company against any losses,
claims, damages or liabilities resulting solely from a violation by the
Placement Agent of the Act or state securities laws and (ii) reimburse the
Company and such controlling persons for any legal or other expense reasonably
incurred in connection with investigating and defending against any such loss,
claim, action, proceeding or investigation to which such indemnity obligation
applies. The foregoing indemnity agreements will be in addition to any liability
which the Placement Agent may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, proceeding or
investigation, such indemnified party, if a claim in respect thereof is to be
made against the indemnifying party under this Section 6, will notify the
indemnifying party of the commencement thereof; but the omission so to notify
the indemnifying party will not relieve it from any liability which it may have
to any indemnified party under this Section 6 unless the indemnifying party has
been substantially prejudiced by such omission. In case any such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party, to assume the defense thereof, subject to the provisions herein stated,
with counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable under this
Section 6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party will have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel will not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party. No
settlement of any action against an indemnified party will be made without the
consent of the indemnifying party and the indemnified party which shall not be
unreasonably withheld or delayed in light of all factors of importance to such
party.
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6. Contribution. To provide for just and equitable contribution, if (i)
an indemnified party makes a claim for indemnification pursuant to Section 6
hereof (subject to the limitations thereof) and it is finally determined, by a
judgment, order or decree not subject to further appeal, that such claims for
indemnification may not be enforced, even though this Agreement expressly
provides for indemnification in such case; or (ii) any indemnified or
indemnifying party seeks contribution under the Act, the Exchange Act, or
otherwise, then the Company (including, for this purpose, any contribution made
by or on behalf of any controlling person of the Company), as one entity, will
contribute to the losses, liabilities, claims, damages and expenses whatsoever
to which any of them may be subject, so that the Placement Agent is responsible
for ten percent (10%) thereof and the Company is responsible for the remaining
portion; provided, however, that if applicable law does not permit such
allocation, then, if applicable law permits, other relevant equitable
considerations such as the relative fault of the Company and the Placement Agent
in connection with the facts which resulted in such losses, liabilities, claims,
damages and expenses shall also be considered. The relative fault, in the case
of an untrue statement, alleged untrue statement, omission or alleged omission,
will be determined by, among other things, whether such statement, alleged
statement, omission or alleged omission relates to information supplied by the
Company or by the Placement Agent, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement,
alleged statement, omission or alleged omission. The Company and the Placement
Agent agree that it would be unjust and inequitable if the respective
obligations of the Company and the Placement Agent for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses or by any other method or allocation
that does not reflect the equitable considerations referred to in this Section
7. No person guilty of a fraudulent misrepresentation (within the meaning of
Section II(f) of the Act) will be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation. For purposes of this Section
7, each person, if any, who controls the Placement Agent within the meaning of
the Act will have the same rights to contribution as the Placement Agent, and
each person, if any, who controls the Company within the meaning of the Act will
have the same rights to contribution as the Company, subject in each case to the
provisions of this Section 7. Anything in this Section 7 to the contrary
notwithstanding, no party will be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 7 is intended to supersede, to the extent permitted by law, any right to
contribution under the Act, the Exchange Act or otherwise available.
7. Termination.
(a) This Agreement, except for Sections 6, 7, 10, 11, 12 and 13
hereof, may be terminated by the Placement Agent at any time prior to the
Closing Date, in which case the Placement Agent's obligations and rights
hereunder will forthwith cease (except for Section 6, 7, 10, 11, 12 and 13
hereof), if, in the Placement Agent's sole and absolute judgment, it is
impracticable to sell the Shares by reason of (i) the Company having
17
<PAGE>
sustained a material loss, whether or not insured, by reason of fire,
earthquake, flood, accident or other calamity, or from any labor dispute or
court or government action, order or decree, which in any such case may have a
material adverse effect upon the Company, (ii) trading in securities on the New
York Stock Exchange or the American Stock Exchange having been suspended or
limited or minimum prices having been established on either of such Exchanges,
(iii) material governmental restrictions having been imposed on trading in
securities generally (not in force and effect on the date hereof), (iv) a
banking moratorium having been declared by Federal or New York state
authorities, (v) a major catastrophe, national calamity, act of God or other
event which in the Placement Agent's judgment materially disrupts the financial
markets having occurred, (vi) an outbreak of major international hostilities or
other national or international calamity having occurred, (vii) the passage by
the Congress of the United States or by any state legislative body, of any act
or measure, or the adoption or proposed adoption of any orders, rules,
legislation or regulations by any governmental body or any authoritative
accounting institute or board, or any governmental executive, which is believed
by the Placement Agent to be likely to have a material adverse impact on the
business, prospects, financial condition or financial statements of the Company
or the market for the Units, or (viii) any material adverse change having
occurred since the respective dates as of which information is given in the
Memorandum in the condition of the Company, financial or otherwise, or in the
earnings, management, affairs or business or prospects of the Company, whether
or not arising in the ordinary course of business.
(b) If any of the conditions provided for in Section 5 have not been
fulfilled as of the date such condition was required to be fulfilled, and if
such condition has not been waived by the Placement Agent, this Agreement may be
canceled by notice by the Placement Agent to the Company, except for Sections 6,
7, 10, 11, 12 and 13 hereof, in which case the Placement Agent's obligations and
rights hereunder will forthwith cease (except for Sections 6, 7, 10, 11, 12 and
13 hereof).
8. Representations, Warranties and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of, and regardless of any access to information by, the Company or the
Placement Agent, or any of their officers or Directors or any controlling person
thereof, and will survive the sale of the Shares.
9. Notices. All communications hereunder will be in writing and, except
as otherwise expressly provided herein or after notice by one party to the other
of a change of address, if sent to the Placement Agent, will be mailed,
delivered, or telegraphed and confirmed to 1801 Clint Moore Road, Suite 110,
Boca Raton, Florida 33487, with a copy to Broad and Cassel, 201 South Biscayne
Boulevard, Suite 3000, Miami, Florida 33131, Attention: Linda C. Frazier,
Esquire.
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<PAGE>
10. Parties in Interest. The Agreement herein set forth is made solely
for the benefit of the Placement Agent, the Company, any person controlling
either of them, and their respective executors, administrators, successors and
assigns; and no other person will acquire or have any rights under or by virtue
of this Agreement. The term "successors and assigns" will not include any
purchaser, as such purchaser, of the Shares.
11. Applicable Law, etc. This Agreement will be governed by, construed
and enforced in accordance with the laws of the State of Florida applicable to
contracts made and to be performed wholly performed within such State. Any
action or proceeding in connection with this Agreement may be brought in a court
of record of the State of Florida in and for Broward County or in the United
States District Court for the Southern District of Florida, the Company hereby
consenting to the jurisdiction thereof. Service of process may be made upon the
Company by mailing a copy thereof to it, by certified or registered mail, at its
address to be used for the giving of notices under this Agreement.
12. Modifications. No provision of this Agreement may be changed or
terminated except by writing a signed by the party or parties to be charged
therewith.
13. Nature of Liability. Unless expressly so provided, no party to this
Agreement will be liable for the performance of any other party's obligations
hereunder.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become a
binding agreement between the Company and the Placement Agent in accordance with
its terms.
Very truly yours,
Noble International Investments, Inc.
By:________________________________
Nick Pronk, President
ACCEPTED AND AGREED AS OF
THE 8th DAY OF APRIL, 1998
Peregrine Industries, Inc.
By:___________________________________
Merrill A. Yarbrough, President
20
<PAGE>
SCHEDULE OF EXHIBITS TO PLACEMENT AGENCY AGREEMENT
Exhibit A Escrow Agreement with SouthTrust Bank, N.A.
Exhibit B Financial Consulting Agreement
STATE OF ALABAMA )
COUNTY OF MONTGOMERY )
LEASE AGREEMENT
THIS LEASE, made this 9th day of December, 1998, by and between
Industrial Partners, hereinafter referred to as "Lessor"; and Alcool, Inc.,
hereinafter, referred to as "Lessee":
WITNESSETH:
Premises 1. The Lessor, for and in consideration of the rents,
covenants, agreements, and stipulations hereinafter
mentioned, reserved and contained, to be paid, kept
and performed by the Lessee, has leased and rented
and hereby does lease and rent to the Lessee, and
said Lessee hereby agrees to lease and take upon the
terms and conditions which hereinafter appear, the
following described property (hereinafter called
"Premises"):
Situated in Montgomery County, Alabama, and known as
Lot2-9B according to the Map of Part of Parcel 1-7
Gunter Industrial Park Plat I and Parcel 2-9 Gunter
Industrial Park Plat 2, being in the west 1/2 of
Section 35, T17N, R18E and Section 1, T16N, R18E,
Montgomery County, Alabama, as said map appears of
record in the office of the Judge of Probate of
Montgomery County, Alabama, in Plat Book 27, Page 80,
containing 6.26 acres, more or less.
On this property is a partially constructed 81,358
square foot building known as Building "E" with the
civic address to be 2511 MidPark Road, Montgomery,
Alabama 36109.
Lessor shall cause commencement of the completion of
construction of the improvements upon the Premises to
occur immediately upon execution of this Lease, in
accordance with the architectural plans and building
specifications to be agreed upon by the parties
hereto. When the final plans and specifications are
agreed upon by the parties, a copy thereof shall be
signed by the parties and shall become part of the
Lease Agreement. If such plans and specifications are
not agreed to within 20 days from the date hereof,
this Lease Agreement shall terminate and be of no
further force and effect.
This Lease is subject to all encumbrances, easements,
covenants and restrictions of record. Lessor will
provide to Lessee a title opinion reasonably
satisfactory to Lessee.
Term 2. To have and to hold for a term of 5 years, said
term to begin on the date of issuance of a
certificate of occupancy (the "Commencement Date")
<PAGE>
and end at midnight on the day immediately prior to
the fifth anniversary of the Commencement Date.
Rental 3. Lessee shall pay to Lessor monthly base rental of
$20,340.00 (the "Basic Rent") and monthly additional
rental of $1,815.00 (the "Additional Rent") due on
the first day of each month, in advance, without
offset or demand, commencing on the "Commencement
Date". If the commencement Date occurs on a date
other than the first day of a calendar month, the
monthly rental for such fractional month shall be
prorated to the end of that calendar month, and all
succeeding installments of monthly rental shall be
payable on or before the first day of each calendar
month during the term.
The Additional Rent is to amortize Lessor's cost of
$146,373 for certain improvements to be completed at
Lessee's request, over a ten year period using an
interest factor of 8.50 percent. Lessee may prepay
the outstanding principal balance of the Additional
Rent at any time during the term of this Lease.
If Lessee does not exercise its option to extend the
term of this Lease for an additional five years under
paragraph 3 1, Lessee shall, upon expiration of the
original five year term, pay to Lessor $88,455, as
the remaining principal balance of the Additional
Rent.
Upon execution of this Lease and approval of the
plans and specifications for completion of the
building and improvements, Lessee shall pay to Lessor
$22,155 representing the first month's Basic Rent and
Additional Rent due hereunder. In the event Lessee
fails to pay the rent or any other payment called for
under this Lease within ten (10) days of its due
date, Lessee shall pay a late charge equal to five
percent (5%) of the unpaid amount, which late charge
shall be paid with the required payment. Lessor's
acceptance of a late rent payment not accompanied by
the late charge shall not constitute Lessor's waiver
of the right to collect such charge.
Utility Bills 4. Lessee shall place all utility bills in its name
and shall pay same, along with all assessments
pertaining to the Premises, including, but not
limited to,' natural gas, electricity, fire
protection and sanitary pick up bills for the
Premises, or used by Lessee in connection therewith.
If Lessee does not pay same, Lessor may pay the same
and such payment shall be added to and treated as
additional rental of the Premises. Lessor shall pay
water and sewer bills for ordinary use but Lessee
shall pay for any extraordinary use of such
utilities.
Mortgagee's Rights 5. Subject to the next succeeding sentence, Lessee's
rights shall be subject to any bona fide mortgage or
deed to secure debt which is now, or may hereafter
be, placed upon the Premises by Lessor, and Lessee
agrees to execute and deliver such documentation as
may be required by any such mortgagee to effect such
subordination within ten (10) days of receipt of a
request for execution of such document. Any
subordination of this Lease Agreement by the Lessee
shall be subject to the Lessor obtaining from each
mortgagee of the Premises a non-disturbance agreement
providing that the
2
<PAGE>
Lessee's possession of the Premises will not be
disturbed so long as Lessee fully performs its
obligations under this Lease Agreement.
Maintenance and
Repairs by Lessee 6. Lessee shall not allow the Premises to fall out of
repair or deteriorate, and, at Lessee's own expense
Lessee shall keep and maintain said Premises, except
portions of the Premises to be repaired by Lessor
under terms of Paragraph 7 below. Lessee also agrees
to keep all systems pertaining to water, fire
protection, drainage, sewer, electrical, heating,
ventilation, air conditioning and lighting in good
order and repair, and agrees to return same to Lessor
at the expiration of this Lease or renewal hereof in
good operating condition. The Lessee covenants and
agrees that during the term of this Lease and for
such further time as the Lessee or any person
claiming under it, shall hold the Premises or any
part thereof, it shall not cause the estate of the
Lessor in said Premises to become subject to any
lien, charge or encumbrance whatsoever, it being
agreed that the Lessee shall have no authority,
express or implied, to create any lien, charge or
encumbrance upon the estate of the Lessor in the
Premises.
Repairs by Lessor 7. Lessor agrees to keep in good repair the roof and
exterior walls, including exterior painting,
exclusive of all glass and exclusive of all exterior
doors. Lessor will maintain the grounds and
landscaping. Lessor gives to Lessee exclusive control
of premises and shall be under no obligation to
inspect said Premises. Lessee shall promptly notify
Lessor of any damage required under this paragraph to
be repaired by Lessor, and Lessee shall be under no
duty to repair unless it receives notice of such
damage.
Modifications and
Alteration to the
Premises 8. No modification or alterations to the building on
the Premises or openings cut through the roof are
allowed without prior written consent of Lessor. In
the event any such modifications or alterations are
performed, same shall be completed in accordance with
all applicable codes and regulations.
Return of Premises 9. Lessee agrees to return the Premises to Lessor, at
the expiration or prior termination of this Lease,
broom clean and in as good condition and repair as
when first received, natural wear and tear, damage by
storm, fire, lightning, earthquake or other casualty
alone excepted. Lessee agrees to remove its personal
property from the Premises at the expiration or prior
termination of this Lease.
Destruction of or
Damage to
Premises 10. If Premises are totally destroyed by storm, fire,
lightning, earthquake or other casualty, this Lease
shall terminate as of the date of such destruction,
and rental shall be accounted for as between Lessor
and Lessee as of that date, unless as of the date of
such destruction there remains at least 24 full
months of the lease term or Lessee is willing to
extend the term to at least 24 months following the
date of such destruction. If at least 24 months
remain in the term or the term is extended to at
least
3
<PAGE>
24 months from the date of a total destruction of the
Premises, or if Premises are damaged, but not wholly
destroyed by any such casualties, rental shall abate
in such proportion as use of Premises has been
destroyed, and Lessor shall restore Premises to
substantially the same conditions as before damage as
speedily as practicable, whereupon full rental shall,
recommence; provided further, however, that the same
cannot be reasonably repaired and restored within
three (3) months from date of the casualty, then
either Lessor or Lessee may cancel this Lease by
giving written notice to the other party within
thirty (30) days from the date of such casualty. In
the event of such cancellation, rental shall be
apportioned and paid up to the date of such casualty.
If following damage or destruction of the Premises,
Lessee believes that Lessee can restore the Premises
in a shorter time than proposed by Lessor, Lessee may
arrange for such restoration, subject to Lessor's
approval of plans and specifications, and Lessee
shall bear all costs in excess of the amount Lessor
would have incurred in such restoration.
Indemnity 11. (A) Lessee agrees to indemnify and save harmless
the Lessor against all claims for injuries to persons
or damages to property by reason of the use or
occupancy of the Premises, the improvements on the
Premises or the failure or cessation of services to
the Premises, other than for claims arising out of
Lessor's negligence, and all expenses incurred by
Lessor because of such injuries or occupancy
including attorneys' fees and court costs.
(B) Lessor agrees to indemnify and save harmless
the Lessee against all claims for injuries to persons
or damages to property by reason of the use or
occupancy of the Premises, the improvements on the
Premises or the failure or cessation of services to
the Premises, other than for claims arising out of
Lessee's negligence, and all expenses incurred by
Lessee because of such injuries or occupancy,
including attorney's fees and court costs.
Governmental
Orders 12. Lessee agrees, at its own expense, to promptly
comply with all requirements of any legally
constituted public authority made necessary by reason
of Lessee's use or occupancy of Premises or operation
of its business. Lessor agrees to promptly comply
with any such requirements if not made necessary by
reason of Lessee's occupancy or operation of the
Premises. It is mutually agreed, however, between
Lessor and Lessee, that in order to comply with such
requirements, the cost to Lessor or Lessee, as the
case may be, shall exceed a sum equal to three months
rent (as measured by the year in which the
requirements arise), then Lessor or Lessee who is
obligated to comply with such requirement shall be
entitled to terminate this Lease by giving written
notice of termination to the other party, which
termination shall become effective sixty (60) days
after receipt of such notice, and which notice shall
eliminate necessity of compliance with such
requirement by party giving notice unless party
receiving such notice of termination shall, before
termination becomes effective, pay to party giving
notice all cost of compliance in excess of three
months rent, or secure payment of such sum in a
manner satisfactory to party giving notice.
4
<PAGE>
Notwithstanding any provisions or limitations in this
paragraph to the contrary, Lessee shall be
responsible for any and all costs and expenses
arising from any violation of environmental laws or
regulations caused by Lessee's activities or
occupancy of the Premises. Further, Lessee's option
to terminate this Lease due to the cost of compliance
with environmental laws or regulations shall only be
available to Lessee if the law or regulation in
question was enacted after the date of this Lease.
Condemnation 13. If the whole of the Premises, or such portion
thereof as will make Premises unusable for the
purpose herein leased, shall be condemned by any
legally constituted authority for any public use or
purpose, or sold under threat of condemnation, then,
in any of said events the term hereby granted shall
cease from the time when possession or ownership
thereof is taken by public authorities and rental
shall be accounted for as between Lessor and Lessee
as of that date. Such termination, however, shall be
without prejudice to the rights of either Lessor or
Lessee to recover compensation and damage caused by
condemnation from the condemnor. It is further
understood and agreed that neither the Lessee, nor
the Lessor, shall have any rights in any award made
to the other by any condemnation.
Assignment 14. Lessee may not assign this Lease, or any interest
thereunder, or sublet the Premises in whole or in
part, without the prior express written consent of
Lessor which will not be unreasonably withheld.
Lessee shall remain liable to Lessor for all of
Lessee's obligations under this Lease notwithstanding
any assignment by Lessor. Lessee agrees not to assign
or sublease Premises to any one who will create a
nuisance or trespass, nor use the Premises for any
illegal purpose; nor in violation of any valid
regulations of any governmental body; nor in any
mariner to vitiate the insurance. Upon any such
sublease or assignment, Lessee shall provide Lessor
with copies of any and all documents pertaining to
such sublease or assignment.
Hazardous
Substances 15. Lessee will not use or suffer the use (by Lessee
or any other person or entity) of the Premises as a
landfill or as a dump for garbage or refuse, or as a
site for storage, treatment or disposal of hazardous
wastes, hazardous substances, or toxic substances
(defined as "hazardous waste" or "hazardous
substance" under Section 1004 of the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6801
et. seq., or Section 101 of the Comprehensive
Environmental Responses, Compensation, and Liability
Act, 42 U.S.C. Section 9601 et. seq. or under any
other applicable laws, ordinances or regulations);
Lessee shall not permit hazardous or toxic waste,
contaminants, asbestos, oil radioactive or other
material , the removal of which is required, or the
maintenance or storage of which is prohibited,
regulated, or penalized by any local, state, or
federal agency, authority, or governmental unit, to
be brought onto the Premises or so brought or found
located thereon, shall cause the same to be
immediately removed, unless same complies with all
applicable laws, and Lessee's obligation to so remove
shall survive the termination of this Lease; Lessee
will not use or suffer the use of the Premises in any
manner than in full compliance with all applicable
federal, state and local environmental laws
5
<PAGE>
ordinances and regulations. Lessee immediately shall
notify Lessor orally and in writing of any notice
from a government agency with respect to a violation
of environmental laws and regulations at the
premises. Lessee shall indemnify, defend and hold
Lessor harmless from and against any and all costs,
damages, and expenses (including, without limitation,
environmental compliance or response cost, costs for
all remedial action and/or damage to third parties,
attorney's fees and court costs at both trial and
appellate levels, and damages for business
interruption and any lost profits) resulting,
directly or indirectly, from any environmental
contamination of the Premises or any misstatement or
misrepresentation of facts concerning the matters
recited in this paragraph. Lessor represents that to
the best of its knowledge, the Premises have been
used in compliance with all applicable environmental
laws and are not contaminated by any hazardous
wastes, hazardous substances or toxic substances.
Lessor shall indemnify, defend and hold Lessee
harmless from and against any and all costs, damages,
and expenses (including without limitation,
environmental compliance or response costs, costs for
all remedial action and/or damage to third parties,
attorneys fees and court costs at both trial and
appellate levels, and damages for business
interruption and any lost profits) resulting,
directly or indirectly, from any environmental
contamination of the Premises not caused by Lessee.
Removal of Fixtures 16. Lessee may (if not in default hereunder) prior to
the expiration of this Lease, or any extension
hereof, remove all fixtures and equipment which
Lessee has placed in Premises, provided Lessee
repairs all damages to Premises caused by such
removal. Provided, however, Lessee shall not remove,
under any circumstances, the following: heating,
ventilating, air conditioning, plumbing, electrical
and lighting systems and fixtures or dock levelers.
In the event this Lease is terminated for any reason,
any property remaining in or upon the Premises shall
be deemed to be property of the Lessor and Lessor may
dispose of same as it deems proper with no liability
to Lessor and no obligation to Lessee; provided,
however, not toxic waste, toxic substance, hazardous
waste or hazardous substance shall under any
circumstances be deemed or become Lessor's property.
Default; Remedies 17. It is mutually agreed that in the event (A) the
rent herein reserved is not paid at the time and
place when and where due and Lessee fails to pay said
rent within ten (10) days after written demand from
Lessor; (B) the Premises shall be deserted or vacated
for a period of six consecutive months; (C) the
Lessee shall fail to comply with any term, provision,
condition, or covenant of this Lease, other than the
payment of rent, and shall not cure such failure
within thirty (30) days after notice to the Lessee
of such failure to comply unless such failure cannot
reasonably be cured within 30 days and Lessee is
diligently pursuing cure; (D) Lessee causes any lien
to be placed against the Premises or any part thereof
and does not remove same within thirty (30) days
after notice from Lessor to Lessee demanding removal
in any such events, Lessor shall have the option at
once, or during continuance of such default or
condition t9 do any of the following, in addition to,
and not limitation of, any other remedy permitted by
law, by statute, in equity, or by this Lease.
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(1) Terminate this Lease, in which event Lessee shall
immediately surrender the Premises to Lessor. Lessee
agrees to indemnify Lessor for all loss, damage and
expense which Lessor may suffer by reason of such
termination, whether through inability to relet the
Premises, through decrease in rent, through incurring
court costs, actual attorneys' fees or other costs in
enforcing this provision or otherwise;
(2) Lessor, as Lessee's agent, without terminating
this Lease, may terminate Lessee's right of
possession, and, at Lessor's option, enter upon and
rent Premises at the best price obtainable by
reasonable effort, without advertisement and by
private negotiations and for any term Lessor deems
proper. Lessee shall be liable to Lessor for the
deficiency, if any, between Lessee's rent hereunder
and the price obtained by Lessor or reletting and for
any damage, actual attorneys' fee or expenses
incurred by Lessor in enforcing its rights under this
provision.
(3) Lessor also retains the right to apply for and
obtain a dispossessory action against Lessee and to
hold Lessee liable for all costs incident to seeking
such dispossessory action, including actual
attorneys' fees and court costs.
Pursuit of any of the foregoing remedies shall not
preclude pursuit of any other remedies herein
provided or any other remedies provided by law.
Entry for Carding,
Etc. 18. Lessor may card Premises "For Lease" or "For
Sale" ninety (90) days before the termination of this
Lease. Lessor may enter the Premises at reasonable
hours during the term of this Lease to exhibit same
to prospective purchasers or tenants and to make
repairs required of Lessor under the terms hereof, or
to make repairs to Lessor's adjoining property, if
any.
Effects of
Termination of
Lease 19. No termination of this Lease prior to the normal
ending hereof, by lapse of time or otherwise, shall
affect Lessor's right to collect rent for the period
prior to termination hereof subject to any rights of
Lessee hereunder.
No Estate in Land 20. This Lease shall create the relationship of
landlord and tenant between Lessor and Lessee; no
estate shall pass out of Lessor; Lessee has only a
usufruct, not subject to levy and sale and not
assignable by Lessee except as provided in Paragraph
14 above.
Holding Over 21. If Lessee remains in possession of Premises after
expiration of the term hereof, with Lessor's
acquiescence and without any express agreement of
parties, Lessee shall be a month-to-month tenant upon
all of the same terms and conditions as contained in
this Lease, except that the rental rate shall become
one and one-half times the amount of rent in effect
at the end of said term of this Lease; and there
shall be no renewal of this Lease by operation of
law. Such month-to-month tenancy shall only require
7
<PAGE>
thirty (30) days notice by either party to the other
to terminate such tenancy and Lessee's right of
possession.
Rights Cumulative 22. All rights, powers and privileges conferred
hereunder upon parties hereto shall be cumulative but
not restrictive to those given by law.
Notices 23. Any notice given pursuant to this Lease shall be
in writing and sent by certified mail, return receipt
request, or by reputable overnight courier to:
(a) Lessee in care of Peregrine Industries, Inc., 730
South Military Trail, Deerfield Beach, Florida 33442,
Attention: President or such other address as Lessor
may hereafter designate in writing to Lessee.
(b) Lessor in care of Industrial Partners, P. O. Box
5190, Montgomery, Alabama 36103 Attention: Nim
Frazer, or such other addresses as Lessee may
hereafter designate in writing to Lessor. Any notice
sent in the manner set forth above shall be deemed
sufficiently given for all purposes hereunder on the
day said notice is deposited in the mail or with the
courier.
Waiver of Rights 24. No failure of either party to exercise
any power given the party hereunder, or to insist
upon strict compliance by the other party with its
obligations hereunder, and no custom or practice of
the parties at variance with the terms hereof shall
constitute a waiver of such party's right to demand
exact compliance with the terms hereof.
Time of Essence 25. Time is of the essence in this Lease.
Definitions 26. "Lessor" as used in this Lease shall include
Lessor, its heirs, representatives, assigns, and
successors in title to the Premises. "Lessee" shall
include Lessee, its heirs and representatives,
successors, and if this Lease shall be validly
assigned or sublet, shall include also Lessee's
assignees or sub-leases, as to Premises covered by
such assignment or sublease. "Lessor" and "Lessee"
include male and female, singular and plural,
corporation partnership or individual, as may fit the
particular parties.
Exterior Signs 27. Lessee is given permission to erect its customary
signs used to identify itself on the Premises,
provided any such signs conform to all ordinances
pertaining thereto and to the prior approval of
Lessor, based upon a scaled drawing provided by
Lessee, and provided further, that Lessee shall be
responsible for any damage to the building occasioned
by the installment and/or removal of such signs.
Ad Valorem Taxes 28. Lessee herein is leasing 81,358 square feet of a
81,358 square foot building. Therefore, wherever in
this Lease reference is made to "Lessee's pro rate
share", such reference shall mean 100%. Lessor will
pay all ad valorem taxes levied against the full
81,358 square foot building each year of the Lease
term or any renewal hereof. Commencing in the year
2000 and during each remaining year of the Lease term
herein granted, or any renewal hereof, Lessee, as
additional rent, shall reimburse Lessor for all sums
paid by Lessor for the above ad valorem taxes in
excess of the total amount of ad valorem taxes
payable for the year 1999. Upon being notified
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by Lessor of said pro rate share of increased ad
valorem taxes, Lessee will remit same to Lessor
within thirty (30) days.
Lessee shall have the right in the name of Lessor but
at Lessee's expense, to take whatever action
(including litigation) Lessee deems necessary to
contest the validity or amount of the assessed
valuation of the Premises or of the ad valorem tax
for any tax year, and Lessee at its cost and expense
may undertake by appropriate proceedings in the name
of Lessor, or Lessee, to contest or effect a review
of the validity or amount of said assessed valuation
or ad valorem tax for any tax year. Any documents
required to enable Lessee to prosecute any such
proceedings shall be executed and delivered by Lessor
within a reasonable time after demand therefor.
Lessor shall inform Lessee in time to permit Lessee
to undertake such contest or review, and shall
furnish all pertinent data required to undertake such
contest or review.
Real estate ad valorem taxes for the purpose of this
paragraph shall not include assessments for public
improvements.
If there is any remission or refund of all or any
part of Lessee's tax payment for any tax year for
which Lessee's tax payment has been paid, Lessee
shall be entitled, without demand, to an appropriate
refund for such taxes.
Lessor agrees to promptly notify Lessee in writing
should Lessor receive from any taxing authority any
notice that such taxing authority proposes to
increase, modify or change any of the ad valorem tax
assessments.
Lessor agrees that Lessee may actively participate in
any hearing before any taxing authority, including,
without limitation, the tax assessor, board of
equalization or other public authority, relative to
any modification or change of assessments or rate of
taxation. Lessor further agrees not to enter into any
agreement or understanding with respect to any
increase in, or change or modification of, the ad
valorem taxes without having first secured the
written consent of Lessee.
Use of Premises
and Insurance 29. (A) Premises shall be used only for manufacturing
and distribution purposes. Premises shall not be used
for any illegal purposes, nor in any manner to create
any nuisance or trespass, nor in any manner to
vitiate the insurance, based on the above purposes
for which the Premises are leased. Lessor warranties
Premises are zoned for the applicable use.
(B) Lessor will carry, at Lessor's expense, "All
Risk" Insurance Coverage on the full 81,358 square
foot building in an amount not less than the full
insurable value. The term "full insurable value"
shall mean the actual replacement cost, excluding
foundation and excavation costs, as determined by
Lessor. Commencing in the year 2000 and during each
remaining year of the Lease term herein granted, or
any renewal hereof, Lessee, as additional rent, shall
reimburse Lessor for Lessee's pro rata share of all
sum s paid by Lessor for the above coverage in excess
of the annual premium for said coverage for the year
1999, unless such increases are the result of
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<PAGE>
the occupancy or use by any other tenant in the
building, in which case Lessee shall have no
obligation to pay any portion of such increase.
However, if such increases are the result of the
occupancy or use by any sub-tenant or assignee of
Lessee, Lessee shall be responsible for the increase
on the entire building. Upon being notified by Lessor
of said increased sums, Lessee will remit to Lessor
said amount within thirty (30) days. Upon being
notified by Lessor of an increase in insurance costs,
Lessee may propose substitute insurance, if such
insurance can be located at lesser cost, and Lessor
will not unreasonably refuse to substitute such
insurance if comparable in coverage and with an
insurer of comparable financial ratings.
(C) Lessee will carry, at Lessee's own expense,
insurance coverage on all equipment, inventory,
fixtures, furniture, appliances and other personal
property on the Premises.
(D) All insurance provided for in this Lease shall be
effected under enforceable policies issued by
insurers of recognized responsibility licensed to do
business in the state where to Premises are located.
On request of Lessor the original renewal policy for
such insurance shall be delivered by the Lessee to
the Lessor. On request of the Lessor, the Lessee will
furnish satisfactory evidence of its payment. The
original policy or policies shall be delivered to
Lessor at the commencement of this Lease.
(E) Lessor and Lessee will each cause the other to be
named as an additional insured on their respective
liability insurance policies.
Miscellaneous 30 (A) Lessor's liability under this Lease shall be
limited to its interest in the Premises and no
judgement obtained by Lessee against Lessor or any of
its partners shall be enforceable against any other
property or asset.
(B) Each party shall, within ten (10) days of receipt
of written request from the other, furnish the
requesting party an estoppel certificate as to this
Lease in such form as shall be reasonably requested.
(C) This Lease contains the entire agreement of the
parties hereto, and no representations, inducements,
promises or agreements, oral or otherwise, between
the parties, not embodied herein, shall be of any
force or effect. This Lease shall be governed by the
Law of the State of Alabama.
(D) If any term, covenant or condition of this Lease
or the application thereof to any person, entity or
circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the
application of such term, covenant or condition to
persons, entities or circumstances other than these
which or to which used may be held invalid or
unenforceable, shall not be affected thereby, and
each term, covenant or condition of this Lease shall
be valid and enforceable to the fullest extent
permitted by law
Option to Renew 31. At the expiration of the original term of this
Lease, Lessee shall have the option to extend this
Lease for an additional term of five (5) years upon
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THIS IS ALL THAT WAS GIVEN TO BE SCANNED.
11
Quorum Business Center - Building 4
Peregrine Industries Inc.
730 South Military Trail
Deerfield Beach, Florida 33442
Lease Drafted: June 24, 1996
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between Principal
Mutual Life Insurance Company, an Iowa corporation ("Landlord"), Peregrine
Industries, inc., a Florida corporation ("Tenant")
W I T N E S S E T H:
1.01 Premises. In consideration of the obligation of Tenant to pay rent and of
the other terms, provisions and covenants hereof, Landlord leases to Tenant and
Tenant leases from Landlord, all that portion of certain real property situated
within the County of Broward State of Florida, legally described in Exhibit A ,
and the buildings and improvements to be constructed thereon as outlined on the
site plan contained in Exhibit B (the Premises'), including any truck loading
areas specifically marked in red on said Exhibit B for the exclusive use of
Tenant. The Premises and the building within which the Premises are located (the
*Building") are part of a larger development (the "Development") commonly known
as Quorum Business Center Building 2-6.
2.01 Term of Lease. The term of this lease shall commence on the"Rent
Commencement Date", as hereinafter defined, and ending 36 months thereafter,
provided however, that in the event the rent commencement date is a date other
than the first day of a calendar month, said term shall extend for said number
of months in addition to the remainder of the calendar month following the rent
commencement date.
3.01 Base Rent. Tenant agrees to pay to Landlord rent for the Premises, in
advance, without demand, deduction or set off, for the entire term hereof at the
rate of five thousand four hundred sixty nine & 40/100--Dollars ($ 5,469.40 ...
) per month. One such monthly installment shall be due and payable on the date
hereof and a like monthly installment shall be due and payable on or before the
first day of each calendar month succeeding the rent commencement date, except
that the rental payment for any fractional calendar month at the commencement of
the lease period shall be prorated. The rental payment is subject to adjustment
as provided below. See Paragraph 29.01 of the Rider.
4.01 Security Deposit. Tenant agrees to deposit with Landlord on the date hereof
the sum of Sixteen Thousand Eight Dollars and 00/10-0 Dollars ($16,008.00) which
sum shall be held by Landlord, without obligation for interest, as security for
the full, timely and faithful performance of Tenant's covenants and obligations
under this Lease, it being expressly agreed that such deposit is not an advance
rental deposit or a measure of Landlord's damages. Upon the occurrence of any
event of default by Tenant, Landlord may, from time to time, without prejudice
to any other remedy, use such funds to the extent necessary to make good any
arrears of rent or other payments duo Landlord hereunder, and any other damage,
injury, expense or liability caused by Tenant's default; and Tenant shall pay to
Landlord on demand the amount so applied in order to restore the security
deposit to its original amount. Although the security deposit shall be deemed
the property of
<PAGE>
Landlord, any remaining balance of such deposit shall be returned by Landlord at
such time after termination of this Lease when Landlord shall have determined
that all Tenant's obligations under this Lease have boon fulfilled.
5.01 Permitted Use. The Premises shall be continuously used for the sole purpose
of general business offices and/or for receiving, storing, shipping and selling
(other than at retail) products, materials and merchandise made and/or
distributed by Tenant and for no other use or purpose. Tenant shall at its own
cost and expense obtain any and all licenses and permits necessary for any such
use. The overnight parking of automobiles, trucks or other vehicles, and the
outside storage of any property including trash or garbage are prohibited.
Tenant agrees that it shall. at its own cost and expenses keep its employees,
agents, customers, invitees, and/or licensees from parking on any streets
running through or contiguous to the buildings or development of which the
Premises are part thereof. Tenant agrees that no washing of any type will take
place in the Premises including the truck apron and parking areas. Tenant shall
not permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the Premises, nor take any other action which would
constitute a nuisance or would disturb or endanger any other tenants of
Development or unreasonably interfere with such tenants' use of their respective
Premises or permit any use which would adversely affect the reputation of the
Development. Tenant shall not receive, store or otherwise handle any product,
material or merchandise which is explosive, highly flammable or constitutes a
hazardous substance or waste. Tenant shall not permit the Premises to be used
for any purpose (including, without limitation, the storage of merchandise) in
any manner which would render the insurance thereon void or increase the
insurance rate thereof. Tenant agrees to indemnify and hold Landlord harmless
against any and all loss, costs and claims, including attorney's fees relating
to the improper storage, handling, transportation or disposal of explosive,
highly flammable or hazardous materials or resulting from any other improper
use. Tenant shall comply with all governmental laws, ordinances and regulations
applicable to the Premises, and shall promptly comply with all governmental
orders and directives for the correction, prevention and abatement of any
violations or nuisances in or upon, or connected with, the Premises, all at
Tenant's sole expense. If, as a result of any change in the governmental laws,
ordinances and regulations, the Premises must be altered to accommodate lawfully
the use and occupancy thereof, such alterations shall be made only with the
consent of Landlord, but the entire cost thereof shall be borne by Tenant;
provided that the necessity of Landlord's consent shall in no way create any
liability against Landlord for failure of Tenant to comply with such laws,
ordinances and regulations. Tenant shall take whatever other actions are
necessary so that the Premises and Tenant's use thereof complies with the Fire
Prevention Code of the National Fire Protection Association and any other fire
prevention laws, ordinances, rules or regulations applicable to the Premises.
6.01 Tenant's Taxes. Tenant shall be responsible to pay before delinquency all
franchise taxes, assessments, levies or charges measured by or based in whole or
in part upon the rents payable hereunder or the gross receipts of Tenant and all
sales taxes and other taxes imposed upon or assessed by reason of the rents and
other charges payable hereunder. The Florida sales tax imposed on rent and on
other charges payable hereunder shall be paid by Tenant to Landlord with the
payment of Tenant's rental payments and other charges payable hereunder.
7.01 Definition of Operating Costs. The term "Operating Costs" shall mean all
costs and expenses paid or incurred by Landlord or on Landlord's behalf in
connection with the ownership, management, repair, replacement, remodeling.
maintenance and operation of the Development (including, without limitation, all
assessed real property taxes, assessments (whether general or
2
<PAGE>
special) and governmental charges of any kind and nature whatsoever including
assessments due to deed restrictions and/or owner's associations, which accrue
against the building and/or development of which the Premises are a part, the
costs of maintaining and repairing parking lots, parking structures, easements.
and landscaping. property management fees, utility costs to the extent not
separately metered, insurance premiums, depreciation of the costs of replacement
(as defined below) of the building and improvements in the Development but not
including any structural repairs or replacements which are normally chargeable
to capital accounts under sound accounting principles, and the Building's share
of costs of the Development). The term 'operating costs' does not include: (j)
costs of alterations of tenants' Premises; (ii) costs of curing construction
defects; (iii) interest and principal payments on mortgages, and other debt
cost; (iv) real estate brokers' leasing commissions or compensation; (v) any
cost or expenditure for which Landlord is reimbursed, whether by insurance
proceeds or otherwise; (vi) cost of any service furnished to any other occupant
of the Building which Landlord does not provide to tenant hereunder. Structural
repairs and replacements are repairs and replacements to the foundations,
load-bearing walls, columns and joists and replacement of roofing and roof deck.
Notwithstanding anything contained herein to the contrary, depreciation of any
capital improvements which are intended to reduce Operating Costs, or are
required under any governmental laws, regulations or ordinances which were not
applicable to the Building or the Development at the time it was constructed, or
are recommended by the N.F.P.A. Life Safety Code, shall be included in Operating
Costs. The useful life of any such improvement as well as all nonstructural
replacements shall be reasonably determined by Landlord. In addition, interest
on the undepreciated cost of any such improvement or non-structural replacement
(at the prevailing construction loan rate available to Landlord on the date the
cost of such improvement was incurred) shall also be included in Operating
Costs. If Landlord selects the accrual method of accounting rather than the cash
accounting method for Operating Costs purposes, Operating Costs shall be deemed
to have been paid when such expenses have accrued. Landlord shall have the right
at any time and from time to time to elect, which election shall be subject to
revocation, to exclude that portion of Operating Costs attributable to any
separately assessed part of the Development and any separate building within the
Development. During any period that Operating Costs attributable to any
separately assessed part of the Development and/or separate building are so
excluded from Operating Costs, then for the purposes of calculating Tenant's
proportionate share of Operating Costs as provided in Section 7.02, the
denominator shall not include the rentable area of such separately assessed part
of the Development and/or such separate building. Landlord may, in a reasonable
manner, allocate insurance premiums for so-called 'blanket" insurance policies
which insure other properties as well as the Development and said allocated
amount shall be deemed to be an Operating Cost.
If at any time during the term of this lease, the present method of taxation
shall be changed so that in lieu of the whole or any part of any taxes,
assessments or governmental charges levied, assessed or imposed on real estate
and the improvements thereon, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/ or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rents for the present or any future building or
buildings on the Premises, then all such taxes, assessments, levies or charges,
or the part thereof so measured or based, shall be deemed to be included within
the term "taxes' for the purposes hereof.
7.02 Tenant's Proportionate Share of Operating Costs. Tenant shall pay to
Landlord, as additional rent, its proportionate share of operating costs
calculated on the basis of the ratio set forth in Section 8.01. Any payments
with respect to any partial calendar year in which the Term commences or ends
shall be prorated. Tenant agrees to pay $2,534.60 per month as an escrow
3
<PAGE>
amount for operating costs as defined in Article 7.01. Landlord may, at any
time, deliver to Tenant its estimate (or revised estimate) of such additional
amounts payable under this Section for each calendar year. On or before the
first day of the next month and on or before the first day of each month
thereafter, Tenant shall pay to Landlord as additional rent such amount as
Landlord reasonably determines to be necessary to bring and keep Tenant current.
As soon as practicable after the close of each calendar year. Landlord shall
deliver to Tenant a statement showing the total amount payable by Tenant under
this Article. If such statement shows an amount due from Tenant that is less
than the estimated payments previously paid by Tenant, it shall be accompanied
by a refund of the excess to Tenant or at Landlord's option the excess shall be
credited against the next monthly installment of rent. If such statement shows
an amount due from Tenant that is more than the estimated payments paid by
Tenant, Tenant shall pay the deficiency to Landlord, as additional rent. In the
event an amount is due and is not paid within thirty (30) days after the date of
Landlord's statement to tenant, the unpaid amount shall bear interest at the
rate of eighteen (18%) percent per annum from the date of such statement until
payment by tenant. Landlord and Tenant acknowledge that certain of the costs of
management, operation and maintenance of the Development are allocated among all
of the buildings in the Development using methods of allocation that are
considered reasonable and appropriate under the circumstances. Tenant hereby
consents to such allocations provided that the determination of such costs and
the allocation of all or part thereof to Operating Costs hereunder shall be in
accordance with generally accepted accounting principles applied on a consistent
basis. Tenant or its representatives shall have the right after seven (7) days
prior written notice to Landlord to examine Landlord's books and records of
Operating Costs during normal business hours within twenty (20) days following
the furnishing of the statement to Tenant. Unless Tenant takes written exception
to any item within thirty (30) days following the furnishing of the statement to
Tenant (which item shall be paid in any event), such statement shall be
considered as final and accepted by Tenant. The taking of exception to any item
shall not excuse Tenant from the obligation to make timely payment based upon
the statement as delivered by Landlord.
8.01 Tenant's Proportionate Share. (a) Tenant's 'proportionate share" as used in
this Lease with respect to the Building shall mean a fraction the numerator of
which shall be the rentable area contained in the Premises and the denominator
of which shall be the rentable area contained in the Building, as determined by
Landlord. Tenant's 'proportionate share" as used in this Lease with respect to
costs relating to more than the Building, shall mean a fraction the numerator of
which shall be the rentable area contained in the Premises and the denominator
of which shall be the rentable area of all buildings, as determined by Landlord,
within the Development. Notwithstanding anything contained in the Lease to the
contrary, Landlord shall have the right. from time to time, to add to or exclude
from the Development real property and any buildings constructed thereon. In the
event Landlord elects to add to or exclude from the Development, Landlord shall
notify Tenant in writing of any such addition or exclusion which notice shall
describe the property added or excluded.
9.01 Tenant's Obligations. (a) Tenant shall at its own cost and expense keep and
maintain all parts of the Premises and such portion of the Development within
the exclusive control of Tenant in good condition, promptly making all necessary
repairs and replacements, whether ordinary or extraordinary, with materials and
workmanship of the same character, kind and quality as the original, including
but not limited to, windows, glass and plate glass, doors, skylights, any
special office entries, interior walls and finish work, floors and floor
coverings, heating and air conditioning systems, electrical systems and
fixtures, sprinkler systems, water heaters, dock board, truck doors, dock
bumpers, and plumbing work and fixtures. Tenant as part of its obligation
hereunder shall
4
<PAGE>
keep the whole of the Premises in a clean and sanitary condition. Tenant will as
far as possible keep all such parts of the Premises from deteriorating, ordinary
wear and tear excepted, and from failing temporarily out of repair, and upon
termination of this Lease in any way, Tenant will yield up the Premises to
Landlord in good condition and repair, loss by fire or other casualty covered by
insurance to be secured pursuant to Article 15 excepted (but not excepting any
damage to glass or loss not reimbursed by insurance because of the existence of
a deductible under the appropriate policy). Tenant shall not damage any demising
wall or disturb the integrity and supports provided by any demising wall and
shall, at its sole cost and expense, properly repair any damage or injury to any
demising wall caused by Tenant or its employees, agents or invitees. Tenant
shall, at its own cost and expense, as additional rent, pay for the repair of
any damage to the Premises, the Building, at the Development resulting from
and/or caused in whole or in part by the negligence or misconduct of Tenant, its
agents, servants, employees, patrons, customers, or any other person entering
upon the Development as a result of Tenant's business activities or caused by
Tenant's default hereunder.
(b) Tenant at its own cost and expense, enter into a regularly scheduled
preventive maintenance/service contract with a maintenance contractor approved
by Landlord, for servicing all heating and air conditioning systems and
equipment servicing the Premises and an executed copy of such contract shall be
delivered to Landlord. This service contract must include all services suggested
by the equipment manufacturer within the operations/maintenance manual and must
become effective within thirty (30) days of the date Tenant takes possession of
the Premises. Landlord may (but shall not be required to), upon notice to
Tenant, elect to enter into such a maintenance service contract on behalf of
Tenant or perform the work itself and, in either case, charge Tenant therefore,
together with a reasonable charge for overhead.
9.02 Landlord's Obligations. Landlord shall maintain in good repair, reasonable
wear and tear and any casualty covered by the provisions of Article 15 excepted,
all parts of the Development, other than tenants' demised Premises or portions
of the Development within the exclusive control of tenants of the Development,
making all necessary repairs and replacements. whether ordinary or extraordinary
structural or nonstructural. including root, foundation, walls. downspouts,
gutters, regular mowing of any grass, trimming, weed removal and general
landscape maintenance, including any rail spur areas, exterior painting,
exterior lighting, exterior signs and common sewage plumbing and the maintenance
of all paved areas including driveways and alleys, including, but not limited
to, cleaning, repaving, restripping and resealing. Tenant shall immediately give
Landlord written notice of any defect or need for repairs, after which Landlord
shall have a reasonable opportunity to repair the same or cure such defect.
Landlord's liability with respect to any defects, repairs or maintenance for
which Landlord is responsible under any of the provisions of this Lease shall be
limited to the cost of such repairs or maintenance or the curing of such defect.
The term 'Walls" as used herein shall not include windows, glass or plate glass,
doors, special store front or office entry.
10.01 Alterations. Tenant shall not make any alterations, additions or
improvements to the Premises (including, without limitation, the roof and wall
penetrations) without the prior written consent of Landlord. If Landlord shall,
consent to any alterations, additions or improvements proposed by Tenant, Tenant
shall construct the same in accordance with all governmental laws. ordinances.
rules and regulations and all requirements of Landlord's and Tenant's insurance
policies and only in accordance with plans and specifications approved by
Landlord; and any contractor or person selected by Tenant to make the same, or,
at Landlord's option and discretion, the alterations, additions or improvements
shall be made by Landlord for Tenant's account and Tenant shall fully reimburse
Landlord for the entire cost thereof. Tenant may, without the consent of
Landlord, but at its own cost and expense and in good workmanlike manner erect
such shelves,
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bins, machinery and other trade fixtures as it may deem advisable, without
altering the basic character of the Building or Development and without
overloading the floor or damaging such Building or Development, and in each case
after complying with all applicable governmental laws, ordinances, regulations
and other requirements. All shelves, bins, machinery and trade fixtures
installed by Tenant may be removed by Tenant prior to the termination of this
Lease if Tenant so elects, and shall be removed by the date of termination of
this Lease or upon earlier vacating of the Premises if required by Landlord;
upon any such removal Tenant shall restore the Premises to their original
condition. All such removals and restoration shall be accomplished in a good and
workmanlike manner so as not to damage the primary structure or structural
quality of the Building.
11.01 Signs and Window Treatment. Tenant shall not install any signs upon the
Building or Development. Landlord will provide, at Tenant's request and cost,
Landlord's standard identification sign, which sign shall be removed by Tenant
upon termination of this Lease at which time Tenant shall restore the property
to the same condition as prior to installation of said sign. Tenant shall not
install drapes, curtains. blinds or any window treatment without Landlord's
prior written consent. Landlord may from time to time require Tenant to change
its signage to conform to a revised standard for the Building, provided Landlord
pays the cost of removing and replacing such signs. Landlord shall maintain all
signs and the cost thereof shall be charged to Tenant.
12.01 Inspections. Landlord and Landlord's agents and representatives shall have
the right to enter and inspect the Premises at any reasonable time during
business hours, for the purpose of ascertaining the condition of the Premises or
in order to make such repairs as may be required or permitted to be made by
Landlord under the terms of this lease. During the period that is six (6) months
prior to the end of the term hereof, Landlord and Landlord's agents and
representatives shall have the right to enter the Premises at any reasonable
time during business hours for the purpose of showing the Premises and shall
have the right to erect on the Premises a suitable sign indicating the Premises
are available. Tenant shall give written notice to Landlord at least thirty (30)
days prior to vacating the Premises and shall arrange to meet with Landlord for
a joint inspection of the Premises prior to vacating. In the event of Tenant's
failure to give such notice or arrange such joint inspection, Landlord's
inspection at or after Tenant's vacating the Premises shall be conclusively
deemed correct for purposes of determining Tenant's responsibility for repairs
and restoration.
13.01 Utilities. Tenant shall pay for all gas, heat, light, power, telephone,
and other utilities and services used on or from the Premises, including without
limitation, Tenant's proportionate share as determined by Landlord for the use
of such utilities which are not separately metered and any central station
signaling system installed in the Premises or the Building, together with any
taxes, penalties and surcharges or the like pertaining thereto and any
maintenance charges for utilities. Tenant shall furnish and install all electric
light bulbs, tubes and ballasts, other than those originally provided to the
Premises by Landlord. Landlord shall in no event be liable for any interruption
or failure of utility services on or to the Premises.
14.01 Assignment and Subletting. (a) Tenant shall not have the right to assign,
sublet, transfer or encumber this lease, or any interest therein, without the
prior written consent of Landlord. Any attempted assignment, subletting,
transfer or encumbrance by Tenant in violation of the terms and covenants of
this Paragraph shall be void. All cash or other proceeds of any assignment, such
proceeds as exceed the rentals called for hereunder in the case of a subletting
and all cash or other proceeds of any other transfer of
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Tenant's interest in this lease shall be paid to Landlord, whether such
assignment, subletting or other transfer is consented to by Landlord or not,
unless Landlord agrees to the contrary in writing, and Tenant hereby assigns all
rights it might have or ever acquire in any such proceeds to Landlord. Any
assignment, subletting or other transfer of Tenant's interest in this lease
shall be for an amount equal to the then fair market value of such interest.
These covenants shall run with the land and shall bind Tenant and Tenant's
heirs, executors, administrators, personal representatives, representatives in
any bankruptcy proceeding, successors and assigns. Any assignee, sublessee or
transferee of Tenant's interest in this lease (all such assignees, sublessees
and transferees being hereinafter referred to as "successors"), by assuming
Tenant's obligations hereunder shall assume liability to Landlord for all
amounts paid to persons other than Landlord by such successors in contravention
of this Paragraph. No assignment, subletting or other transfer, whether
consented to by Landlord or not, shall relieve Tenant of its liability
hereunder. Upon the occurrence of an 'event of default" as hereinafter defined,
if the Premises or any part thereof are then assigned or sublet, Landlord, in
addition to any other remedies herein provided, as provided by law, may at its
option collect directly from such assignee or subtenant all rents becoming due
to Tenant under such assignment or sublease and apply such rent against any sums
due to Landlord for Tenant hereunder, and no such collection shall be construed
to constitute a novation or a release of Tenant from the further performance of
Tenant's obligations hereunder.
(b) If this lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code 11 U.S.C. 101 et seq., (The "Bankruptcy
Code"), any and all monies or other considerations payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Landlord, shall be and remain the exclusive property of Landlord and shall not
constitute property of Tenant or of the estate of Tenant within the meaning of
the Bankruptcy Code. Any and all monies or other considerations constituting
Landlord's property under the preceding sentence not paid or delivered to
Landlord shall be hold in trust for the benefit of the Landlord and be promptly
paid or delivered to Landlord.
(c) Any person or entity to which this lease is assigned pursuant to
the provisions of the Bankruptcy Code, shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this lease on and
after the date of such assignment. Any such assignee shall upon demand execute
and deliver to Landlord an instrument confirming such assumption.
15.01 Fire and Casualty Damage. (a) Landlord agrees to maintain insurance
covering the building of which the Premises are a part in an amount not less
than eighty (80%) percent (or such greater percentage as may be necessary to
comply with the provisions of any co-insurance clauses of the policy) of the
replacement cost thereof, insuring against the perils of Fire. Lightning,
Extended Coverage, Vandalism and Malicious Mischief, extended by Special
Extended Coverage Endorsement to insure against all other Risks of Direct
Physical Loss, such coverages and endorsements to be as defined, provided and
limited in the standard bureau forms prescribed by the insurance regulatory
authority for the state in which the Premises are situated for use by insurance
companies admitted in such state for the writing of such insurance on risks
located within such state. Subject to the provisions of subparagraphs 15.01 (c),
15.0 1 (d), and 15.01 (e) below. such insurance shall be for the sole benefit of
Landlord and under its sole control.
(b) If the building situated upon the Premises should be damaged or
destroyed by fire, tornado or other casualty, tenant shall give written notice
thereof to Landlord.
(c) If the buildings situated upon the Premises should be totally
destroyed by fire, tornado or other casualty, or if they should be so damaged
thereby that rebuilding or repairs cannot in Landlord's estimation be completed
within two hundred (200) days after the date upon which Landlord is notified by
Tenant of such damage, this lease shall terminate and the rent shall be abated
during the unexpired portion of this lease, effective upon the date of the
occurrence of such damage.
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(d) If the buildings situated upon the Premises should be damaged by
any peril covered by insurance to be provided by Landlord under subparagraph
15.01 (a) above, but only to such extent that rebuilding or repairs can in
Landlord's estimation be completed within two hundred (200) days after the date
upon which Landlord is notified by Tenant of such damage, this lease shall not
terminate, and Landlord shall at its sole cost and expense thereupon proceed
with reasonable diligence to rebuild and repair such buildings to substantially
the condition in which they existed prior to such damage, except that Landlord
shall not be required to rebuild, repair or replace any part of the partitions.
fixtures, additions and other improvements which may have been placed in, on or
about the Premises by Tenant and except that Tenant shall pay to Landlord upon
demand any amount by which Landlord's cost of such rebuilding, repair and/or
replacement exceeds net insurance proceeds paid to Landlord in connection with
such damage and except that Landlord may elect not to rebuild if such damage
occurs during the last year of the term of the lease exclusive of any option
which is unexercised at the time of such damage. If the Premises are
untenantable in whole or in part following such damage, the rent payable
hereunder during the period in which they are untenantable shall be reduced to
such extent as maybe fair and reasonable under all of the circumstances. In the
event that Landlord should fail to complete such repairs and rebuilding within
two hundred (200) days after the date upon which Landlord is notified by Tenant
of such damage, Tenant may at its option terminate this lease by delivering
written notice of termination to Landlord as Tenant's exclusive remedy,
whereupon all rights and or obligations hereunder shall cease and terminate.
Should construction be delayed because of changes, deletions, or additions in
construction requested by Tenant, strikes, lockouts, casualties, acts of God,
war, material or labor shortages, governmental regulation or control or other
causes beyond the reasonable control of Landlord, the period of restoration,
repair or rebuilding shall be extended for the time Landlord is so delayed.
(e) Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering the
Premises requires that the insurance proceeds be applied to such indebtedness,
then Landlord shall have the right to terminate this lease by delivering written
notice of termination to Tenant within fifteen (15) days after such requirement
is made by any such holder, whereupon all rights and obligations hereunder shall
cease and terminate.
(f) Each of Landlord and Tenant hereby releases the other from any loss
or damage to property caused by fire or any perils insured in policies of
insurance covering such property, even if such loss or damage shall have been
caused by the fault or negligence of the other party. or anyone for whom such
party may be responsible; provided, however, that this release shall be
applicable and in force and effect only with respect to loss or damage occurring
during such times as the releaser's policies shall contain a clause or
endorsement to the effect that any such release shall not adversely affect or
impair said policies or prejudice the right of the releaser to recover
thereunder and then only to the extent of the insurance proceeds payable under
such policies. Each of the Landlord and Tenant agrees that it will request its
insurance carriers to include in its policies such a clause or endorsement.
16.01 Liability. Landlord shall not be liable to Tenant or Tenant's employees,
agents, patrons or visitors, or to any other person whomsoever, for any injury
to person or damage to property on or about the Premises, resulting from and/or
caused in part or whole by the negligence or misconduct of Tenant, its agents,
servants or employees of any other person entering upon the Premises, or caused
by the buildings and improvements located on the Premises becoming out of
repair, or caused by leakage of gas, oil, water or steam or by electricity
emanating from the Premises, or due to any cause whatsoever, and Tenant hereby
covenants and agrees that it will at all times indemnify and hold safe and
harmless the property, the Landlord (including without
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limitation the trustee and beneficiaries if Landlord is a trust), Landlord's
agents and employees from any loss, liability, claims, suits, costs, expenses,
including without limitation attorney's fees and damages, both real and alleged,
arising out of any such damage or injury; except injury to persons or damage to
property the sole cause of which is the gross negligence of Landlord or the
failure of Landlord to repair any part of the Premises which Landlord is
obligated to repair and maintain hereunder within a reasonable time after the
receipt of written notice from Tenant of needed repairs. Tenant shall procure
and maintain throughout the term of the lease a policy or policies of insurance,
at its sole cost and expense, insuring both Landlord and Tenant against all
claims, demands or actions arising out of or in connection with (i) the
Premises; (ii) the condition of the Premises; (iii) Tenant's operations in and
maintenance and use of the Premises; and (iv) Tenant's liability assumed under
this lease, the limits of such policy or policies to be in the amount of not
less than $2,000,000 per occurrence in respect to injury to persons (including
death), and in the amount of not less than $250,000 per occurrence in respect to
property damage or destruction, including loss of use thereof. All such policies
shall be procured by Tenant from responsible insurance companies satisfactory to
Landlord. Certified copies of such policies, together with receipt evidencing
payment of premiums therefore, shall be delivered to Landlord prior to the
commencement date of this lease. Not less than fifteen (15) days prior to the
expiration date of any such policies, certified copies of the renewal thereof
(bearing notations evidencing the payment of renewal premiums) shall be
delivered to Landlord. Such policies shall further provide that not less than
thirty (30) days written notice shall be given to Landlord before such policy
may be canceled or changed to reduce insurance provided thereby.
17.01 Condemnation. (a) If the whole or any substantial part of the Premises or
Building should be taken for any public or quasi-public use under governmental
law, ordinance or regulation, or by right of eminent domain, or by private
purchase in lieu thereof and the taking would prevent or materially interfere
with the use of the Premises or Building for the purpose for which they are then
being used, this Lease shall terminate effective when the legal taking shall
occur as if the date of such taking were the date originally fixed in the Lease
for the expiration of the Term.
(b) If the part of the Premises or Building shall be taken for any
public or quasi-public use under governmental law, ordinance or regulation, or
by right of eminent domain, or by private purchase in lieu thereof, and this
Lease is not terminated as provided above, this Lease shall not terminate but
the rent payable hereunder during the unexpired portion of this Lease shall be
reduced to such extent as may be fair and reasonable under all of the
circumstances and Landlord shall undertake to restore the Premises to a
condition suitable for Tenant's use, as near to the condition thereof
immediately prior to such taking as is reasonably feasible under all the
circumstances.
(c) In the event of any such taking or private purchase in lieu
thereof, Landlord and Tenant shall each be entitled to receive and retain such
separate awards and/or portion of lump sum awards as may be allocated to their
respective interests in any condemnation proceedings; provided that Tenant shall
not be entitled to receive any award for the loss of any improvements paid for
by Landlord or for Tenant's loss of its leasehold interest, the right to such
award as to such items being hereby assigned by Tenant to Landlord.
18.01 Holding Over. Tenant will. at the termination of this lease by lapse of
time or otherwise, yield up immediate possession to Landlord with all repairs
and maintenance required herein to be performed by Tenant completed. If Landlord
agrees in writing that Tenant may hold over after the expiration or termination
of this lease, unless the parties hereto otherwise agree in writing on the terms
of such holding over, the hold over tenancy shall be subject to termination by
Landlord at any time upon not less than (5) days advance written notice, or by
Tenant at any time upon not less
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than thirty (30) days advance written notice, and all of the other terms and
provisions of this lease shall be applicable during that period, except that
Tenant shall pay Landlord from time to time upon demand, as rental for the
period of any hold over, an amount equal to double the rent in effect on the
termination date, computed on a daily basis for each day of the hold over
period. Tenant shall also pay to Landlord all damages sustained by Landlord
resulting from retention of possession by Tenant, including the loss of any
proposed subsequent tenant for any portion of the Premises. No holding over by
Tenant, whether with or without consent of Landlord, shall operate to extend
this lease except as otherwise expressly provided. The preceding provisions of
this paragraph shall not be construed as consent for Tenant to hold over.
19.01 Quiet Enjoyment. Landlord represents and warrants that it has full right
and authority to enter into this Lease and that Tenant, upon paying the rental
herein set forth and performing its other covenants and agreement is herein set
forth, shall peaceably and quietly have, hold and enjoy the Premises for the
Term without hindrance or molestation from Landlord, subject to the terms and
provisions of this Lease. Landlord agrees to make reasonable efforts to protect
Tenant from interference or disturbance by other tenants or third persons;
however, Landlord shall not be liable for any such interference or disturbance,
not shall Tenant be released from any of the obligations of this Lease because
of such interference or disturbance. In the event this Lease is a sublease, then
Tenant agrees to take the Premises subject to the provisions of the prior lease.
20.01 Events of Default. The following events shall be deemed to be events of
default by Tenant under this lease: (a) Tenant shall fail to pay any installment
of the rent herein reserved when due, or any other payment or reimbursement to
Landlord required herein when due and such failure shall continue for a period
of five (5) days from the date such payment was due.
(b) Tenant or any guarantor of Tenant's obligations hereunder shall
generally not pay its debts as they become due or shall admit in writing its
inability to pay its debts or shall make a general assignment for the benefit of
creditors; or Tenant or any such guarantor shall commence any case, proceeding
or other action seeking to have an order for relief entered on its behalf as a
debtor to adjudicate it as bankrupt or insolvent, or seeking reorganization or
relief of debtors or seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or of any substantial part of its
property; or Tenant or any such guarantor shall take any action to authorize or
in contemplation of any of the actions set forth above in this paragraph; or
(c) Any case, proceeding or other action against Tenant or any
guarantor of Tenant's obligations hereunder shall be commenced seeking to have
an order for relief entered against it as debtor or to adjudicate it as bankrupt
or insolvent, or seeking reorganization. arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to'
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property.
(d) A receiver or trustee shall be appointed for all or substantially
all of the assets of the Tenant.
(e) Tenant shall desert or vacate any substantial portion of the
Premises.
(f) Tenant shall fail to discharge any lien placed upon the Premises in
violation of Paragraph 26.01 hereof within twenty (20) days after any such lien
or encumbrance is filed against the Premises.
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(g) Tenant shall fail to comply with any term, provision or covenant of
this lease (other than the foregoing in this Paragraph 20.01, and shall not cure
such failure within twenty (20) days after written notice thereof to Tenant.
(h) Tenant shall fail to continuously operate its business at the
Premises for the permitted use sot forth in Paragraph 5.01 whether or not Tenant
is in default of the rental payment due under this Lease.
20.02 Remedies. (a) Upon the occurrence of any of such events of default
described in Paragraph 20.01 hereof. Landlord shall have the option to pursue
any one or more of the following remedies without any notice or demand
whatsoever;
(1) Terminate this lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails so to
do, Landlord may, without prejudice to any other remedy which
it may have for possession or arrearages in rent, enter upon
and take possession of the Premises and expel or remove Tenant
and any other person who may be occupying such Premises or any
part thereof, by force if necessary, without being liable for
prosecution or any claim of damages therefore.
(2) Enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying such
Premises or any part thereof. by force if necessary, without
being liable for prosecution or any claim for damages
therefore, and relet the Premises and receive the rent
therefore.
(3) Enter upon the Premises, by force if necessary, without being
liable for prosecution or any claim for damages therefore, and
do whatever Tenant is obligated to do under the terms of this
lease: and Tenant agrees to reimburse Landlord on demand for
any expenses which Landlord may incur in thus effecting
compliance with Tenant's obligations under this lease, and
Tenant further agrees that Landlord shall not be liable for
any damages resulting to the Tenant from such action, whether
caused by the negligence of Landlord or otherwise.
(4) Alter all locks and other security devices at the Premises
without terminating this lease.
(b) In the event Landlord may elect to regain possession of the
Premises by a forcible detainer proceeding, Tenant hereby specifically waives
any statutory notice which may be required prior to such proceeding, and agrees
that Landlord's execution of this lease is, in part, consideration for this
waiver.
(c) In the event Tenant fails to pay any installment of rent hereunder
as when such installment is due, to help defray the additional cost to Landlord
for processing such late payments Tenant shall pay to Landlord on demand a late
charge in an amount equal to five (5%) percent of such installment; and the
failure to pay such amount within five (5) days after demand therefore shall be
an event of default hereunder. The provision for such late charge shall be in
addition to all of Landlord's other rights and remedies hereunder or at law and
shall not be construed as liquidated damages or as limiting Landlord's remedies
in any manner.
(d) In the event Tenant's check, given to Landlord in payment. is
returned by the bank for non-payment. Tenant agrees to pay all expenses incurred
by Landlord as a result thereof.
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(e) Exercise by Landlord of any one or more remedies hereunder granted
or otherwise available shall not be deemed to be an acceptance of surrender of
the Premises by Tenant, whether by agreement or by operation of law, it being
understood that such surrender ran be effected only by the written agreement of
Landlord and Tenant. No such alteration of locks or other security devices and
no removal or other exercise of dominion by Landlord over the property of Tenant
or others at the Premises shall be deemed unauthorized or constitute a
conversion, Tenant hereby consenting, after any event of default, to the
aforesaid exercise of dominion over Tenant's property within the Premises. All
claims for damages by reason of such re-entry and/or repossession and/or
alteration of locks or other security devices are hereby waived, as are all
claims for damages by reason of any distress warrant, forcible detainer
proceedings, sequestration proceedings or other legal process. Tenant agrees
that any re-entry by Landlord may be pursuant to judgment obtained in forcible
detainer proceedings or other legal proceedings or without the necessity for any
legal proceedings, as Landlord may elect, and Landlord shall not be liable for
trespass or otherwise. (f) In the event Landlord elects to terminate the lease
by reason of an event of default, then notwithstanding such termination, Tenant
shall be liable for and shall pay to Landlord, at the address specified for
notice to Landlord herein, the sum of all rental and other indebtedness accrued
to date of such termination, plus, as damages, an amount equal to the greater of
(i) the total rental hereunder for the remaining portion of the lease term (had
such term not been terminated by Landlord prior to the date of expiration and
(ii) the then present value of the then fair rental value of the Premises for
such period.
(g) In the event that Landlord elects to repossess the Premises without
terminating the lease, or in the event Landlord elects to terminate the lease,
then Tenant at Landlord's option, shall be liable for and shall pay to Landlord,
at the address specified for notice to Landlord herein, all rental and other
indebtedness accrued to the date of such repossession, plus rental required to
be paid by Tenant to Landlord during the remainder of the lease term until the
date of expiration of the term as stated in Section 3.01 diminished by any net
sums thereafter received by Landlord through reletting the Premises during said
period (after deducting expenses incurred by Landlord as provided in
subparagraph 20.02 (h). In no event shall Tenant be entitled to any excess of
any rental obtained by reletting over and above the rental herein reserved.
Actions to collect amounts due by Tenant to Landlord under this subparagraph may
be brought from time to time, on one or more occasions, without the necessity of
Landlord's waiting until expiration of the lease term.
(h) In case of any evenly of default or breach by Tenant, or threatened
or anticipatory breach or default, Tenant shall also be liable for and shall pay
to Landlord, at the address specified for notice to Landlord herein, in addition
to any sum provided to be paid above, brokers' fees incurred by Landlord in
connection with reletting the whole or any part of the Premises; the costs of
removing and storing Tenant's or other occupant's property; the costs of
repairing, altering, remodeling or otherwise putting the Premises into condition
acceptable to a new tenant or tenants, and all reasonable expenses incurred by
Landlord in enforcing or defending Landlord's rights and/or remedies including
reasonable attorney's fees.
(i) In the event of termination or repossession of the Premises for an
event of default. Landlord shall not have any obligation to relet or to attempt
to relet the Premises, or any portion thereof, or to collect rental after
reletting; and in the event of reletting, Landlord may relet the whole or any
portion of the Premises for any period to any tenant and for any use and
purpose.
(j) If Tenant should fail to make any payment or cure any default
hereunder within the time heroin permitted, Landlord, without being under any
obligations to do so and without thereby waiving such default, may make such
payment and/or remedy such other default for the account of Tenant (and enter
the Premises for such purpose), and thereupon Tenant shall be obligated to,
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and hereby agrees, to pay Landlord upon demand, all costs, expenses and
disbursements (including reasonable attorney's fees) incurred by Landlord in
taking such remedial action.
(k) In the event that Landlord shall have taken possession of the
Premises pursuant to the authority herein granted then Landlord shall have the
right to keep in place and use all of the furniture, fixtures and equipment at
the Premises, including that which is owned or leased to Tenant at all times
prior to any foreclosure thereon by Landlord or repossession thereof by any
lessor thereof or third party having a lien thereon, Landlord shall also have
the right to remove from the Premises (without the necessity of obtaining a
distress warrant, writ of sequestration or other legal process) all or any
portion of such furniture, fixtures, equipment and other property located
thereon and to place same in storage at any Premises within the County in which
the Premises is located: and in such event, Tenant shall be liable to Landlord
for costs incurred by Landlord in connection with such removal and storage.
Landlord shall also have the right to relinquish possession of all or any
portion of such furniture, fixtures, equipment and other property to any person
('Claimant") claiming to be entitled to possession thereof who presents to
Landlord a copy of any instrument represented to Landlord by Claimant to have
been executed by Tenant (or an predecessor Tenant) granting Claimant the right
under various circumstances to take possession of such furniture, fixtures,
equipment or other property, without the necessity on the part of Landlord to
inquire into the authenticity of said instrument's copy of Tenant's or Tenant's
predecessor's signature(s) thereon and without the necessity of Landlord making
any nature of investigation or inquiry as to the validity of the factual or
legal basis upon which Claimant purports to act; and Tenant agrees to indemnify
and hold Landlord harmless from all cost, expense, loss, damage and liability
incident to Landlord's relinquishment of possession of all or any portion of
such furniture, fixtures, equipment or other property to Claimant. Any and all
property which may be removed from the Premises by Landlord pursuant to the
authority of this Lease or of Law, to which Tenant is or may be entitled, may be
handled, removed and stored, as the case may be, by or at the direction of
Landlord at the risk, cost and expense of Tenant, and Landlord shall in no event
be responsible for the value, preservation or safekeeping thereof. Tenant shall
pay to Landlord, upon demand any and all expenses incurred in such removal and
all storage charges against such property so long as the same shall be in
Landlord's possession or under Landlord's control. Any such property of Tenant
not retaken by Tenant from storage within thirty (30) days after the removal
from the Premises shall conclusively be presumed to have been conveyed by Tenant
to Landlord under this Lease as a bill of sale without further payment or credit
by Landlord to Tenant. The rights of Landlord herein stated shall be in addition
to any and all other rights which Landlord has or may hereafter have at law or
in equity; and Tenant stipulates and agrees that the rights herein granted
Landlord are commercially reasonable.
21.01 Rights Reserved to Landlord. Landlord reserves and may exercise the
following rights without affecting Tenant's obligations hereunder:
(a) To change the name or the street address of the Building or the
Development;
(b) To install and maintain a sign or signs on the exterior of the
Building:
(c) To designate all sources furnishing sign painting and lettering,
lamps and bulbs used on the Premises;
(d) To retain at all times pass keys to the Premises;
(e) To grant to anyone the exclusive right to conduct any particular
business or undertaking in the Building or the Development;
(f) To change the arrangement and/or location of entrances and
corridors in and to the Building and to add, remove, rename or
modify buildings, roadways, parking areas, walkways, landscaping,
lakes, grading and other improvements in or to the Development.
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22.01 Relocation of Premises. Landlord reserves the right to relocate Tenant
during the Term to other Premises in the Building or in another building within
the Development (the "New Premises"), in which event the New Premises shall be
deemed to be the Premises for all purposes under this Lease, provided: (a) the
New Premises shall be similar to the Premises in area and appropriateness for
the use of Tenant's purposes: (b) if Tenant is then occupying the Premises,
Landlord shall pay the reasonable expense of moving Tenant, its property and
equipment to the New Premises and such moving shall be done at such time and in
such manner so as to cause the least inconvenience to Tenant; (c) Landlord shall
give to Tenant not less than thirty (30) days prior written notice of such
substitution; and (d) Landlord shall, at its sole cost, improve the New Premises
with improvements substantially similar to those located in the Premises.
23.01 Landlord's Lien. In addition to any statutory lien for rent in Landlord's
favor, Landlord shall have and Tenant hereby grants to Landlord a continuing
security interest for all rentals and other sums of money becoming due hereunder
from Tenant, upon all goods, wares, equipment, fixtures, furniture, inventory,
accounts, contract rights, chattel paper and other personal property of Tenant
situated on the Premises, and such property shall not be removed therefrom
without the consent of Landlord until all arrearages in rent as well as any and
all other sums of money then due to Landlord hereunder shall first have been
paid and discharged. In the event of a default under this Lease, Landlord shall
have, in addition to any other remedies provided herein or by law, all rights
and remedies under the Uniform Commercial Code, including without limitation the
right to sell the property described in this Section at public or private sale
upon five (5) days notice to Tenant. Tenant hereby agrees to execute such
financing statements and other instruments necessary or desirable in Landlord's
discretion to perfect the security interest hereby created.
24.01 Subordination. Tenant accepts this Lease subject and subordinate to any
mortgage and/or deed of trust now or at any time hereafter constituting a lien
or charge upon the Development, the Building, or the Premises, without the
necessity of any act or execution of any additional instrument of subordination;
provided, however, that if the mortgagee, trustee, or holder of any such
mortgage or deed of trust elects to have Tenant's interest in this Lease
superior to any such instrument, then by notice to Tenant from such mortgagee,
trustee or holder, !his Lease shall be deemed superior to such lien, whether
this Lease was executed before or after said mortgage or deed of trust. Tenant
shall at any time hereafter on demand execute any instruments, releases or other
documents which may be required by any mortgagee for the. purpose of evidencing
the subjection and subordination of this Lease to the lien of any such mortgage
or for the purpose of evidencing the superiority of this Lease to the lien of
any such mortgage as may be the case.
25.01 Mechanics Liens and Other Taxes. (a) Tenant shall have no authority,
express or implied, to create or place any lien or encumbrance of any kind or
nature whatsoever upon, or in any manner to bind the interests of Landlord in
the Premises or to charge the rentals payable hereunder for any claim in favor
of any person dealing with Tenant, including those who may furnish materials or
perform labor for any construction or repairs, and each such claim shall affect
and each such lien shall attach to, if at all, only the leasehold interest
granted to Tenant by this instrument. Tenant covenants and agrees that it will
pay or cause to be paid all sums legally due and payable by it on account of any
labor performed or materials furnished in connection with any work performed on
the Premises on which any lien is or can be validly and legally asserted against
its leasehold interest in the Premises or the improvements thereon and that it
will save and hold Landlord harmless from any and all loss, cost or expense
based on or arising out of asserted claims or liens against the leasehold estate
or against the right, title and interest of the Landlord in the Premises or
under the terms of this lease. Tenant agrees to give Landlord immediate written
notice it any lien or encumbrance is placed on the Premises.
14
<PAGE>
(b) Tenant shall be liable for all taxes levied or assessed against
personal property, furniture or fixtures placed by Tenant in the Premises. If
any such taxes for which Tenant is liable are levied or assessed against
Landlord or Landlord's property and it Landlord elects to pay the same or if the
assessed value of Landlord's property is increased by inclusion of personal
property, furniture or fixtures placed by Tenant in the Premises, and Landlord
elects to pay the taxes based on such increase, Tenant shall pay to Landlord
upon demand that part of such taxes.
26.01 Notices. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
shall be deemed to be complied with when and if the following steps are taken:
(a) All rent and other payments required to be made by Tenant to
Landlord shall be payable to: Principal Mutual Life Insurance Company or to such
other entity at the such other address as Landlord may specify from time to time
by written notice delivered in accordance herewith.
(b) Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered, whether actually received or not,
when deposited in the United States Mail, postage prepaid, Certified or
Registered Mail, addressed to the parties hereto at the respective addresses set
out below, or at such other address as they have theretofore specified by
written notice delivered in accordance herewith:
Landlord: Principal Mutual Life Tenant::
Insurance Company Peregrine Industries, Inc.
711 High Street 730 South Military Trail
Des Moines, Iowa 50309 Deerfield Beach, Florida 33442
and
Trammell Crow Company
1515 South Federal Highway
Suite 113
Boca Raton, FL 33432
If and when included within the term "Landlord", or "Tenant-, as used
in this instrument, there is more than one person, firm or corporation, all
shall jointly arrange among themselves for their joint execution of such a
notice specifying some individual at some specific address for the receipt of
notices and payments. All parties included within the terms "Landlord" and
'Tenant", respectively, shall be bound by notices given in accordance with the
provisions of this paragraph to the same effect as if each had received such
notice.
27.01 Miscellaneous. (a) Words of any gender used in this Lease shall be held or
construed to include any other gender, and words in the singular number shall be
hold to include the plural, unless the context otherwise requires.
(b) The terms, provisions and covenants and conditions contained in
this Lease shall apply to, inure to the benefit of, and be binding upon, the
parties hereto and upon their respective heirs. legal representatives,
successors and permitted assigns, except as otherwise herein expressly provided.
Landlord shall have the right to assign any of its rights and obligations under
15
<PAGE>
this Lease and Landlord's grantee or Landlord's successor, as the case may be,
shall upon such assignment, become Landlord hereunder, thereby freeing and
relieving the grantor or assignor, as the case may be, of all covenants and
obligations of Landlord hereunder. Each party agrees to furnish to the other,
promptly upon demand, a corporate resolution, proof of due authorization by
partners, or other appropriate documentation evidencing the due authorization of
such party to enter into this Lease. Nothing herein contained shall give any
other tenant in the Development or the Building any enforceable rights either
against Landlord or Tenant as a result of the covenants and obligations of
either party set forth herein. If there is more than one Tenant, the obligations
of Tenant shall be joint and several. Any indemnification of, insurance of, or
option granted to Landlord shall also include or be exercisable by Landlord's
agents and employees.
(c) The captions inserted in this Lease are for convenience only and in
no way define, limit or otherwise describe the scope or intent of this Lease, or
any provision hereof, or in any way affect the interpretation of this Lease.
(d) In no event shall Landlord's liability for any breach of this Lease
exceed the amount of rental then remaining unpaid for the then current Term
(exclusive of any renewal periods which have not then actually commenced). This
provision is not intended to be a measure or agreed amount of Landlord's
liability with respect to any particular breach and shall not be utilized by any
court or otherwise for the purpose of determining any liability of Landlord
hereunder, except only as a maximum amount not to be exceeded in any event. In
addition, it is expressly understood and agreed that nothing in this Lease shall
be construed as creating any liability against Landlord, or its successors and
assigns, personally, and in particular without limiting the generality of the
foregoing, there shall be no personal liability to pay any indebtedness accruing
hereunder or to perform any covenant, either express or implied, herein
contained, and that all personal liability of Landlord, or its successors and
assigns, of every sort, if any, is hereby expressly waived by Tenant, and that
so far as Landlord, or its successors and assigns is concerned Tenant shall look
solely to the Building for the payment thereof.
(e) Except as set forth in Section 8.01 above, this Lease may not be
altered, changed or amended except by an instrument in writing signed by both
parties hereto.
(f) All obligations of Tenant not fully performed as of the expiration
or earlier termination of the term of this Lease shall survive the expiration or
earlier termination of the Term, including without limitation, all payment
obligations with respect to Operating Costs and all obligations concerning the
condition of the Premises. Upon the expiration or earlier termination of the
Term. and prior to Tenant vacating the Premises, Landlord and Tenant shall
jointly inspect the Premises and Tenant shall pay to Landlord any amount
estimated by Landlord as necessary to put the Premises, including without
limitation heating and air conditioning systems and equipment therein, in good
condition and repair. Any work required to be done by Tenant prior to its
vacation of the Premises which has not been completed upon such vacation, shall
be completed by Landlord and billed to Tenant at cost plus fifteen percent.
Tenant shall also, prior to vacating the Premises, pay to Landlord the amount,
as estimated by Landlord, of Tenant's obligation hereunder for Operating Costs.
All such amounts shall be used and held by Landlord for payment of such
obligations of Tenant hereunder, with Tenant being liable for any additional
costs therefor upon demand by Landlord, or with any excess to be returned to
Tenant after all such obligations have been determined and satisfied, as the
case may be. Any security deposit held by Landlord shall be credited against the
amount payable by Tenant under this Section.
(g) If any clause, provision or portion of this Lease or the
application thereof to any person or circumstance shall be invalid or
unenforceable under applicable law, such event shall not
16
<PAGE>
affect, impair or render invalid or unenforceable the remainder of this Lease
nor any other clause, phrase, provision or portion hereof, nor shall if affect
the application of any clause, phrase, provision or portion hereof to other
persons or circumstances, and it is also the intention of the parties to this
Lease that in lieu of each such clause, phrase, provision or portion of this
Lease that is invalid or unenforceable, there be added as a part of this Lease a
clause, phrase, provision or portion as similar in terms to such invalid or
unenforceable clause, phrase, provision or portion as may be possible and be
valid and enforceable.
(h) Submission of this Lease shall not be deemed to be a reservation of
the Premises. Landlord shall not be bound hereby until its delivery to Tenant of
an executed copy hereof signed by Landlord, already having been signed by
Tenant, and until such delivery Landlord reserves the right to exhibit and lease
the Premises to other prospective tenants. Notwithstanding anything contained
herein to the contrary Landlord may withhold delivery of possession of the
Premises from Tenant until such time as Tenant has paid to Landlord the security
deposit required hereunder and the first month's rent as required hereunder, and
any other sums required hereunder.
(i) Tenant shall at any time and from time to time within ten (10 )
days after written request from Landlord, execute and deliver to Landlord an
estoppel certificate, in form reasonable satisfactory to Landlord.
(j) Whenever a time period is prescribed for action to be taken by
Landlord, Landlord shall not be liable or responsible for, and there shall be
excluded from the computations for any such time period, any delays due to
causes beyond the control of Landlord.
(k) Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities. may present health risks to
persons who are exposed to it over a time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
public health unit. The above statement is incorporated in the lease as a
requirement in order to comply with Florida Statute 404.056(8).
28.01 Effective Date. All references in this Lease to "the date hereof" or
similar references shall be deemed to refer to the last date in point of time,
on which all parties hereto have executed this Lease.
The parties tending to be bound hereby execute or cause this Lease to
be executed this 22nd day of August, 1996.
WITNESSES: LANDLORD:
Principal Mutual Life Insurance Company,
an Iowa corporation
__________________________________ ________________________________________
__________________________________
By:_____________________________________
Timothy M. Dunbar, Assistant Director
________________________________________
Title: Commercial Real Estate Equities
17
<PAGE>
TENANT:
Peregrine Industries, Inc., a Florida
corporation
__________________________________ ________________________________________
__________________________________
By:_____________________________________
________________________________________
Title: President
18
<PAGE>
RIDER TO THE LEASE AGREEMENT BETWEEN
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, AN
IOWA CORPORATION, ("LANDLORD") AND
PEREGRINE INDUSTRIES, INC. ("TENANT")
FOR PREMISES LOCATED AT
730 South Military Trail, Deerfield Beach, Florida 33442
29.01 Base Rent:: Supplementing Paragraph 3.01 of the Lease, Tenant agrees to
pay Base Rent according to the following schedule:
Month Monthly Base Rent Annual Base Rent
- ----- ----------------- ----------------
1-12 $5,469.40 $65,632.80 1/14/96 - 10/31/97
13-24 $5,742.87 $68,914.44 11/1/97 - 10/31/98
25-36 $6,030.01 $72,360.12 11/1/98 - 10/31/99
30.01 Tenant Improvements: Landlord shall perform, or cause to be performed,
certain Tenant Improvements ("Tenant Improvements") to the Premises as
set forth in Exhibit C, attached and made a part hereof and mutually
agreed upon by Landlord and Tenant. Tenant shall perform, or cause to
be performed certain Tenant Improvements to the Premises as set forth
in Exhibit C, attached and made a part hereof and mutually agreed upon
by Landlord and Tenant. In no event shall Landlord incur any cost in
connection with the Tenant Improvements in excess of $1,000.00
("Landlord's Share") which includes the cost of all materials, labor,
permit fees, inspection fees, architectural fees and Landlord's 5%
construction management fee, computed upon Landlord's Share only. All
improvement costs in excess of Landlord's Share shall be borne solely
by Tenant ("Tenant's Share"). Tenant's Share, if any, shall be paid by
Tenant as additional rent, one-half upon construction commencement and
the balance upon occupancy.
All work not within the scope of Landlord's construction of the
Premises, including, but not limited to the furnishing and installation
of floor covering other than Building Standard, furniture, telephone
equipment, and office equipment, shall be furnished and installed by
Tenant at Tenant's expense. Tenant shall conduct its work in such a
manner as to maintain harmonious labor relations and as to not to
interfere unreasonably with or delay the work of Landlord's contractors
or the subcontractors of other tenants. Tenant's contractors,
subcontractors, and labor shall be reasonably approved by Landlord and
shall be subject to the administration supervision of Landlord's
construction supervisor. Contractors and subcontractors engaged by
Tenant shall employ persons and means to insure so far as may be
possible the progress of the work without interruption on account of
strikes, work stoppages, or similar causes for delay. Landlord shall
give access to the Premises to Tenant to adapt the Premises for
Tenant's use provided, however, that if such entry is prior to the Rent
Commencement Date, such entry shall be subject to all of the terms and
conditions of the Lease except the payment of rent, and such entry
shall not delay the Rent Commencement Date. All work performed by
Tenant 'or at Tenant's expense shall conform to and comply with any and
all local, state, and federal building codes, ordinances, and the
N.F.P.A. Life Safety Code.
19
<PAGE>
RIDER TO THE LEASE AGREEMENT BETWEEN
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, AN
IOWA CORPORATION, ("LANDLORD") AND
PEREGRINE INDUSTRIES, INC. ("TENANT")
FOR PREMISES LOCATED AT
730 South Military Trail, Deerfield Beach, Florida 33442
(continued)
31.01 Indemnification: The Tenant will indemnify and hold harmless the
Landlord against and from any and all claims arising from (i) the
Tenant's occupancy of the Premises, (including, but not limited to,
statutory liability and liability under workers' compensation laws),
(ii) any breach or default in the performance of any obligation on the
Tenant's part to be performed under the terms of this Lease, (iii) any
act or negligence of the Tenant, or any officer, agent, employee,
guest, or invitee of the Tenant, (iv) all costs, reasonable attorneys'
fees, expenses and liabilities incurred in or about any such claim or
any action or proceeding brought thereon, and, in any case, action or
proceeding brought against the Landlord by reason of any such claim.
The Tenant upon notice from the Landlord will defend the same at the
Tenant's expense.
The Tenant, as a material part of the consideration to the Landlord
assumes all risk of damage to property or injury to persons, in, upon
or about the Premises, (i) except that the Tenant does not assume any
risk for damage to the Tenant resulting from the willful misconduct or
gross negligence of the Landlord or its authorized representatives,
(ii) from any cause whatsoever except that which is caused by the
failure of the Landlord to observe any of the terms and conditions of
the Lease if such failure has persisted for an unreasonable period of
time after written notice of such failure.
The Landlord is not liable for any claims, costs or liabilities arising
out of or in connection with the acts or omissions of any other tenants
in the Building. The Tenant waives all of its claims in respect thereof
against the Landlord.
32.01 Insurance By Tenant: Tenant shall, during the Lease Tenn, procure at
its expense and keep in force the following insurance:
(1) Commercial general liability insurance naming the Landlord as
an additional insured against any and all claims for bodily
injury and property damage occurring in, or about the Premises
arising out of Tenant's use and occupancy of the Premises.
Such insurance shall have a combined single limit of not less
than One Million Dollars ($ 1,000,000) per occurrence with a
Two Million Dollar ($2,000,000) aggregate limit and excess
umbrella liability insurance in the amount of Two Million
Dollars ($2,000,000). If the Tenant has other locations that
it owns or leases, the policy shall include an aggregate limit
per location endorsement. Such liability insurance shall be
primary and not contributing to any insurance available to
Landlord and Landlord's insurance shall be in excess thereto.
In no event shall the
20
<PAGE>
RIDER TO THE LEASE AGREEMENT BETWEEN
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, AN
IOWA CORPORATION, ("LANDLORD") AND
PEREGRINE INDUSTRIES, INC. ("TENANT")
FOR PREMISES LOCATED AT
730 South Military Trail, Deerfield Beach, Florida 33442
(continued)
limits of such insurance be considered as limiting the
liability of Tenant under this lease.
(2) Personal property insurance insuring all equipment, trade
fixtures, inventory, fixtures and personal property located on
or in the Premises for perils covered by the cause of loss -
special form (all risk) except, coverage for flood, earthquake
and boiler and machinery. Such insurance shall be written on a
replacement cost basis in an amount equal to one hundred
percent (100%) of the full replacement value of the aggregate
of tile foregoing.
(3) Workers' compensation insurance in accordance with statutory
law and employers' liability insurance with a limit of not
less than $100,000 per employee and $500,000 per occurrence.
(4) Such other insurance as Landlord deems reasonably necessary
and prudent or required by Landlord's beneficiaries or
mortgagees of any deed of trust or mortgage encumbering the
Premises.
The policies required to be maintained by Tenant shall be with
companies rated AX or better in the most current issue of Best's
Insurance Reports. Insurers shall be licensed to do business in the
state in which the Premises are located and domiciled in the USA. Any
deductible amounts under any insurance policies required hereunder
shall not exceed $1,000. Certificates of insurance (certified copies of
the policies may be required) shall be delivered to Landlord prior to
the commencement date and annually thereafter at least thirty (30) days
prior to the expiration date of the old policy. Tenant shall have the
right to provide insurance coverage which it is obligated to carry
pursuant to the terms hereof in a blanket policy, provided such blanket
policy expressly affords coverage to the Premises and to Landlord as
required by this Lease. Each policy of insurance shall provide
notification to Landlord at least thirty (30) days prior to any
cancellation or modification to reduce the insurance coverage.
This clause shall supplement the clause in the body of the Lease
Paragraph 16.01.
21
<PAGE>
RIDER TO THE LEASE AGREEMENT BETWEEN
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, AN
IOWA CORPORATION, ("LANDLORD") AND
PEREGRINE INDUSTRIES, INC. ("TENANT")
FOR PREMISES LOCATED AT
730 South Military Trail, Deerfield Beach, Florida 33442
(continued)
33.01 Waiver of Subrogation: Landlord and Tenant hereby mutually waive their
respective rights to recovery against each other for any loss of, or
damage to, either parties' property, to the extent that such loss or
damage is insured by an insurance policy required by its insurer
whereby the insurer waives its rights of subrogation against the other
party. The provisions of this clause shall not apply in those instances
in which waiver of subrogation would cause either party's insurance
coverage to be voided or other-wise made uncollectible.
34.01 Acceptance of Premises/Tenant Improvements: Tenant acknowledges that it
has inspected the Premises, knows the condition thereof, and accepts
such Premises, and specifically the buildings and improvements
comprising the same, in their present condition, as suitable for the
purposes for which the Premises are ]eased, subject to landlord's
completion of the Tenant Improvements described in Paragraph 30.01. If
this lease is executed before the Premises become vacant or otherwise
available and ready for occupancy, of if any present tenant or occupant
of the Premises holds over, and Landlord cannot, using good faith
efforts, acquire possession of the Premises prior to the date above
recited as the commencement date of this lease, Landlord shall not be
deemed to be in default hereunder, nor in any way liable to Tenant
because of such failure, and Tenant agrees to accept possession of the
Premises at such time as Landlord is able to tender the same.
35.01 Insurance By Landlord: Landlord shall, during the Lease Term, procure
and keep in force the following insurance, the cost of which shall be
deemed as Tenant's Proportionate Share of Operating Costs payable, by
Tenant pursuant to Paragraph 7.02:
(1) Property insurance insuring the building and improvements and
rental value insurance for perils covered by the causes of
loss - special form (all risk) and in addition coverage for
flood, earthquake and boiler and machinery (if applicable).
Such coverage (except for flood and earthquake) shall be
written on a replacement cost basis equal to ninety percent
(90%) of the full insurable replacement value of the foregoing
and shall not cover Tenant's equipment, trade fixtures,
inventory, fixtures or personal property located on or in the
Premises.
(2) Commercial general liability insurance against any and all
claims for bodily injury and property damage occurring in or
about the Building or the Land. Such insurance shall have a
combined single limit of not less than One Million Dollars
($1,000,000) per occurrence per location with a Two Million
Dollar ($2,000,000) aggregate limit.
22
<PAGE>
RIDER TO THE LEASE AGREEMENT BETWEEN
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, AN
IOWA CORPORATION, ("LANDLORD") AND
PEREGRINE INDUSTRIES, INC. ("TENANT")
FOR PREMISES LOCATED AT
730 South Military Trail, Deerfield Beach, Florida 33442
(continued)
(3) Such other insurance as Landlord deems necessary and prudent
or required by Landlord's beneficiaries or mortgagees of any
deed of trust or mortgage encumbering the Premises.
36.01 ADA - General Compliance: Tenant, at Tenant's sole expense, shall
comply with all laws, rules, orders, ordinances, directions,
regulations and requirements of federal, state, county and municipal
authorities now in force or which may hereafter be in force, which
shall impose any duty upon the Landlord or Tenant with respect to the
use, occupation or alteration of the Premises, and that the Tenant
shall use all reasonable efforts to fully comply with the Americans
With Disabilities Act.
37.01 Hazardous Substance - General: The term "Hazardous Substances," as used
in this lease shall mean pollutants, contaminants, toxic or hazardous
wastes, or any other substances the use and/or the removal of which is
required or the use of which is restricted, prohibited or penalized by
any "Environmental Law," which term shall mean any federal, state or
local law, ordinance or other statute of a governmental or
quasi-governmental authority relating to pollution or protection of the
environment. Lessee hereby agrees that (i) no activity will be
conducted on the Premises that will produce any Hazardous Substance,
except for such activities that are part of the ordinary course of
Lessee's business activities (the "Permitted Activities") provided said
Permitted Activities are conducted in advance in writing by Lessor;
Lessee shall be responsible for obtaining any required permits and
paying any fees and providing any testing required by any governmental
agency, (ii) the Premises will not be used in any manner for the
storage of any Hazardous Substances except for the temporary storage of
such materials that are used in the ordinary course of Lessee's
business (the "Permitted Materials") provided such permitted Materials
are properly stored in a manner and location meeting all Environmental
Laws and approved in advance in writing by Lessor; Lessee shall be
responsible for obtaining any required permits and paying any fees and
providing any testing required by any governmental agency; (iii) no
portion of the Premises will be used as a landfill or a dump; (iv)
Lessee will not install any underground tanks of any type; (v) Lessee
will not allow any surface or subsurface conditions to exist or come
into existence that constitute, or with the passage of time may
constitute a public or private nuisance; (vi) Lessee will not permit
any Hazardous Substances to be brought into tile Premises, except for
the Permitted Materials described below, and if so brought or found
located thereon, the same shall be immediately removed, with proper
disposal, and all required cleanup procedures shall be diligently
undertaken pursuant to all Environmental Laws. Lessor or Lessor's
representative shall have the right but not the obligation to enter the
Premises for the purpose of inspecting the storage, use and disposal of
Permitted
23
<PAGE>
RIDER TO THE LEASE AGREEMENT BETWEEN
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, AN
IOWA CORPORATION, ("LANDLORD") AND
PEREGRINE INDUSTRIES, INC. ("TENANT")
FOR PREMISES LOCATED AT
730 South Military Trail, Deerfield Beach, Florida 33442
(continued)
Materials to ensure compliance with all Environmental Laws. Should it
be determined, in Lessor's sole opinion, that said Permitted Materials
are being improperly stored, used, or disposed of, then Lessee shall
immediately take such corrective action as requested by Lessor. Should
Lessee fall to take such corrective action within 24 hours, Lessor
shall have the right to perform such work and Lessee shall promptly
reimburse Lessor for any and all costs associated with said work. If at
any time during or after the term of the lease, the Premises is found
to be so contaminated or subject to said conditions, Lessee shall
diligently institute proper and thorough cleanup procedures at Lessee's
sole cost, and Lessee agrees to indemnify and hold Lessor harmless from
all claims, demand, actions, liabilities, costs, expenses, damages and
obligations of any nature arising from or as a result of the use of the
Premises by Lessee. The foregoing indemnification and the
responsibilities of Lessee shall survive the termination or expiration
of this Lease.
38.01 Landlord's Lien Protection: Tenant has no power to subject Landlord's
interest in the dernised Premises to any claim or lien of any kind or
character and any persons dealing with Tenant must look solely to the
credit of the Tenant for payment. Neither Tenant nor anyone claiming
by, through or under Tenant, including, without limitation,
contractors, subcontractors, materialmen, mechanics and laborers, shall
have any right to file or place mechanic's, materialmen's or other
liens of any kind whatsoever upon the dernised Premises or upon the
tract of land described on Exhibit A, or any portion thereof, on the
contrary, any such liens are specifically prohibited and shall be null
and void and of no further force or effect.
39.01 Brokers Disclosure: Tenant covenants, warrants and represents that no
broker or finder except Trammell Crow Realty Services, Inc. ("Broker")
were instrumental in consummating this Lease and that Tenant has had no
conversations or negotiations with any broker, except Broker,
concerning the subject matter of this Lease. Tenant agrees hereby to
indemnify and hold Landlord harmless against and from any and all
claims for any brokerage commissions or fees and all costs, expenses
and liabilities, including, without limitation, attorneys' fees and
expenses, arising out of any conversations or negotiations had by
Tenant with any broker, except Broker, or any breach of the foregoing
covenant, warranty and representation.
24
<PAGE>
RIDER TO THE LEASE AGREEMENT BETWEEN
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, AN
IOWA CORPORATION, ("LANDLORD") AND
PEREGRINE INDUSTRIES, INC. ("TENANT")
FOR PREMISES LOCATED AT
730 South Military Trail, Deerfield Beach, Florida 33442
(continued)
40.01 Prevailing Party: The parties hereto shall have all remedies existing
in law and equity to enforce the terms of or obligations arising out of
the Lease. In the event any legal action or proceeding is commenced to
interpret or enforce the terms of or obligations arising out of the
Lease, or to recover damages for the breach thereof, the party
prevailing in any such action or proceeding shall be entitled to
recover reasonable attorney's fees, court costs and expenses, at both
trial and appellate levels.
41.01 Utilities: Tenant's use and access to public utilities (including, but
not limited to telephone, electricity and water) shall be limited to
Tenant's Proportionate Share as defined in Paragraph 8.01 of the Lease.
25
<PAGE>
Quorum Business Center 4
EXHIBIT A
LEGAL DESCRIPTION
Approximately 16,008 square feet of office and/or warehouse space located in a
building containing approximately 65,479 square feet situated on a portion of
approximately 15.2046 acres on Lots 3, 4 and 5 Deerfield Commerce Park,
according to the plat thereof as recorded in Plat Book 111, page 15, of the
Public Records of Broward County, Florida and being more particularly described
as 730 South Military Trail, Deerfield Beach, Florida as shown in Exhibit A.
Further described as Quorum Business Park situated within a development known as
Quorum Business Park Buildings 2 through 6 consisting of approximately 334,535
square feet.
26
<PAGE>
RIDER TO THE LEASE AGREEMENT BETWEEN
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, AN
IOWA CORPORATION, ("LANDLORD") AND
PEREGRINE INDUSTRIES, INC. ("TENANT")
FOR PREMISES LOCATED AT
730 South Military Trail, Deerfield Beach, Florida 33442
(continued)
The parties intending to be bound hereby execute or cause this Rider to be
executed this 22nd day of August, 1996.
WITNESS LANDLORD
By: Principal Mutual Life Insurance Company,
------------------------------- an Iowa corporation
By: By: Timothy M. Dunbar
------------------------------- -------------------------------------
Timothy M. Dunbar
Title: Assistant Director Commercial Real
----------------------------------
Estate Equities
----------------------------------
WITNESS TENANT
By: Peregrine Industries, Inc., a Florida
------------------------------- corporation
By: By:
------------------------------- -------------------------------------
Title: President
----------------------------------
27
<PAGE>
Quorum Business Center 4
EXHIBIT A
LEGAL DESCRIPTION
Approximately 16,008 square feet of office and/or warehouse space located in a
building containing approximately 65,479 square feet situated oil a portion of
approximately 15.2046 acres on Lots 3, 4 and 5 Deerfield Commerce Park,
according to the plat thereof as recorded in Plat Book 111, page 15, of the
Public Records of Broward County, Florida and being more particularly described
as 730 South Military Trail, Deerfield Beach, Florida as shown in Exhibit A.
Further described as Quorum Business Park situated within a development known as
Quorum Business Park Buildings 2 through 6 consisting of approximately 3334,535
square feet.
28
<PAGE>
MEMORANDUM OF LEASE
(continued)
As to Tenant TENANT
STATE OF FLORIDA
COUNTY OF BROWARD
The foregoing instrument was acknowledged before me this 15th day of
August, 1996, by Merrill Yarbrough, a President of Peregrine Industries on
behalf of the Company. The above-named individual o is personally known to me,
or o has produced the following identification personally known which is current
or has been issued within the past five years and bears a serial or other
identifying number and did (did not) take an oath.
-----------------------------------------
Print Name
-------------------------------
NOTARY PUBLIC STATE OF FLORIDA
Commission Number: CC322350
-----------------------
My Commission Expires: 10./11/97
-------------------
LANDLORD
Principal Mutual Life Insurance Company,
an Iowa corporation
By: Timothy M. Dunbar
--------------------------------------
Timothy M. Dunbar
Title: Assistant Director Commercial Real
-----------------------------------
Estate Equities
-----------------------------------
As to Landlord LANDLORD
STATE OF FLORIDA
COUNTY OF BROWARD
The foregoing instrument was acknowledged before me this 22nd day of
August, 1996, by Timothy M. Dunbar, an Assistant Director of Commercial Real
Estate Equities of Principal Mutual Life Insurance Company on behalf of the
Corporation. The above-named individual / / is personally known to me, or
/ / has produced the following identification _____________ which is current or
has been issued within the past five years and bears a serial or other
identifying number and did (did not) take an oath.
29
<PAGE>
------------------------------------
Print Name
--------------------------
NOTARY PUBLIC STATE OF FLORIDA
Commission Number:
------------------
My Commission Expires:
--------------
30
<PAGE>
EXHIBIT C
Landlord's Work:
Landlord shall within thirty (30) days of full execution of this Lease, repair
or replace (as determined by Landlord) the overhead door serving the ramp in the
Premises.
Tenant's Work:
Tenant shall within fourteen (14) days of full execution of this Lease provide
Landlord with a full set of construction drawings for any proposed Tenant
Improvements in the Premises. These Plans must at a minimum contain the
following work:
1. Plans for the construction of an approved fire rated demising
wall on the eastern side of the Premise.
2. Plans for the separate control and metering of electrical
power to the Premises.
Landlord shall, within seven (7) days of receipt of all plans, provide approval
or disapproval with comments for said plans.
Tenant shall, within seven (7) days of Landlord's approval, submit all plans for
Tenant Improvements to the City of Deerfield Beach and diligently pursue
building permits to construct all improvements.
Tenant shall, within seven (7) days of receiving any building permits for
construction of approved improvements, begin and diligently pursue construction
said improvements.
If Tenant fails to provide Landlord with all plans, to diligently pursue
building permits after Landlord approval, or to diligently pursue construction
of the permitted improvements, Landlord has the right to obtain building permits
to construct the demising wall and separate the electrical service to the
Premises.
All costs associated with this additional Landlord's work including but not
limited to Architectural, Construction Management, Labor, Materials and Permit
Fees will be charged to Tenant and become immediately payable as additional
rent, one half upon construction Commencement and the balance upon completion.
31
<PAGE>
Quorum Building #5
746 South Military Trail
Deerfield Beach Florida 33442
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between Principal Mutual Life
Insurance Company, An Iowa Corporation ("Landlord"), and Peregrine Industries,
Inc., A Florida Corporation ("Tenant"):
WITNESSETH:
1.01 Premises: In consideration of the obligation of Tenant to pay rent
and of the other terms, provisions and covenants hereof, Landlord leases to
Tenant and Tenant leases from Landlord, all that portion of certain real
property situated within the County or Broward, State of Florida, legally
described in Exhibit A , and the buildings and improvements to be constructed
thereon as outlined on the site plan contained in Exhibit B (the "Premises"),
including any truck loading areas specifically marked in red on said Exhibit B
for the exclusive use of Tenant. The Premises and the building within which the
Premises are located (the "Building") are part of a larger development (the
"development") commonly known as Quorum Business Center Buildings 2-6.
2.01 Term of Lease: The term of this lease shall commence on the "Rent
Commencement Date", as hereinafter defined, and ending Sixty(60) months
thereafter, provided however, that in the event the rent commencement date is a
date other than the first day of a calendar month, said term shall extend for
said number of months in addition to the remainder of the calendar month
following the rent commencement date.
2.02 Rent Commencement Date: The "Rent Commencement Date" shall be
September 1, 1998. Tenant acknowledges that no representations as to the repair
of the premises have been made by Landlord, unless such are expressly set forth
in the lease. After such "Rent Commencement Date" Tenant shall, upon demand,
execute and deliver to Landlord a letter of acceptance of delivery of the
premises. In the event of any dispute as to substantial completion of work
performed, execute or required to be performed by Landlord, the certificate of
Landlord's architect or general contractor shall be conclusive.
3.01 Base Rent: Tenant agrees to pay to Landlord rent for the premises,
in advance, without demand, deduction or set off, for the entire term hereof
according to the following Schedule:
<TABLE>
<CAPTION>
Month Monthly Base Rent Annual Base Rent
----- ----------------- ----------------
<S> <C> <C> <C>
1-12 $4,777.71 $57,332.52
13-24 $5,016.60 $60,199.20
25-36 $5,267.43 $63,209.16
37-48 $5,530.80 $66,369.60
49-60 $5,807.34 $69,688.08
</TABLE>
Landlord: _____ Tenant: _____
<PAGE>
4.01 Security Deposit: Tenant agrees to deposit with Landlord on the
date hereof the sum of Seven Thousand One Hundred Eleven & 54/100 Dollars
($7,111.54 ), which sum shall be held by Landlord, without obligation for
interest, as security for the full, timely and faithful performance of Tenant's
covenants and obligations under this Lease, it being expressly agreed that such
deposit is not an advance rental deposit or a measure of Landlord's damages.
Upon the occurrence of any event of default by Tenant, Landlord may, from time
to time, without prejudice to any other remedy, use such funds to the extent
necessary to make good any arrears of rent or other payments due Landlord
hereunder, and any other damage, injury, expense or liability caused by Tenant's
default; and Tenant shall pay to Landlord on demand the amount so applied in
order to restore the security deposit to its original amount. Although the
security deposit shall be deemed the property of Landlord, any remaining balance
of such deposit shall be returned by Landlord at such time after termination of
this Lease when Landlord shall have determined that all Tenant's obligations
under this Lease have been fulfilled. In no event is the security deposit to be
returned until Tenant has vacated the Premises and delivered possession to
Landlord. Landlord shall not be obligated to hold the security deposit in a
separate fund, but may mix the security deposit with other funds of the
Landlord.
5.01 Permitted Use: The Premises shall be continuously used for the
sole purpose of general business offices and/or for receiving, storing, shipping
and selling (other than at retail) products, materials and merchandise made
and/or distributed by Tenant and for no other use or purpose. Tenant shall at
its own cost and expense obtain any and all licenses and permits necessary for
any such use. The overnight parking of automobiles, trucks or other vehicles,
and the outside storage of any property including trash or garbage are
prohibited. Tenant agrees that it shall, at its own cost and expenses keep its
employees, agents, customers, invitee, and/or licensees from parking on any
streets running through or contiguous to the buildings or development of which
the premises are part thereof. Tenant agrees that no washing of any type will
take place in the premises including the truck apron and parking areas. Tenant
shall not permit any objectionable or unpleasant odors, smoke, dust, gas, noise
or vibrations to emanate from the Premises, nor take any other action which
would constitute a nuisance or would disturb or endanger any other tenants of
Development or unreasonably interfere with such tenants' use of their respective
premises or permit any use which would adversely affect the reputation of the
Department. Tenant shall not receive, store or otherwise handle any product,
material or merchandise which is explosive, highly flammable or constitutes a
hazardous substance or waste. Tenant shall not permit the Premises to be used
for any purpose (including, without limitation, the storage of merchandise) in
any manner which would render the insurance thereon void or increase the
insurance rate thereof. Tenant agrees to indemnify and hold Landlord harmless
against any and all loss, costs and claims, including attorney's fees relating
to the improper storage, handling, transportation or disposal of explosive,
highly flammable or hazardous materials or resulting from any other improper
use. Tenant shall comply with all governmental laws, ordinances and regulations
applicable to the Premises, and shall promptly comply with all governmental
orders and directives for the correction, prevention and abatement of any
violations or nuisances in or upon, or connected with, the Premises, all at
Tenant's sole expense. If, as a result of any change in the governmental laws,
ordinances and regulations, the Premises must be altered to accommodate lawfully
the use and occupancy thereof, such alterations shall be made only with the
consent of Landlord, but the entire cost thereof shall be home by Tenant;
provided that the necessity of Landlord's consent shall in no way create any
liability against Landlord for failure of Tenant to
Landlord: _____ Tenant: _____
2
<PAGE>
comply with such laws, ordinances and regulations. Tenant shall take whatever
other actions are necessary so that the Premises and Tenant's use thereof
complies with the Fire Prevention Code of the National Fire Protection
Association and any other fire prevention laws, ordinances, rules or regulations
applicable to the Premises.
6.01 Tenant's Taxes: Tenant shall be responsible to pay before
delinquency all franchise taxes, assessments, levies or charges measured by or
based in whole or in part upon the rents payable hereunder or the gross receipts
of Tenant and all sales taxes and other taxes imposed upon or assessed by reason
of the rents and other charges payable hereunder. The Florida sales tax imposed
on rent and on other charges payable hereunder shall be paid by Tenant to
Landlord with the payment of Tenant's rental payments and other charges payable
hereunder.
7.01 Definition of Operating Costs: The term "Operating Costs" shall
mean all costs and expenses paid or incurred by Landlord or on Landlord's behalf
in connection with the ownership, management, repair, replacement, remodeling,
maintenance and operation of the Development (including, without limitation, all
assessed real property taxes, assessments (whether general or special) and
governmental charges of any kind and nature whatsoever including assessments due
to decd restrictions and/or owner's associations, which accrue against the
building and/or development of which the premises are a part, the costs of
maintaining and repairing parking lots, parking structures, easements, and
landscaping, property management fees, utility costs to the extent not
separately metered, insurance premiums, depreciation of the costs of replacement
(as defined below) of the building and improvements in the Development but not
including any structural repairs or replacements which are normally chargeable
to capital accounts under sound accounting principles, and the Building's share
of costs of the Development). 'file term "operating costs" does not include; (i)
costs of alterations of tenants' premises; (ii) costs of curing construction
defects; (iii) interest and principal payments on mortgages, and other debt
cost; (iv) real estate brokers' leasing commissions or compensation; (v) any
cost or expenditure for which Landlord is reimbursed, whether by insurance
proceeds or otherwise; (vi) cost of any service furnished to any other occupant
of the Building which Landlord does not provide to tenant hereunder. Structural
repairs and replacements are repairs and replacements to the foundations,
load-bearing walls, columns and joists and replacement of roofing and roof deck.
Notwithstanding anything contained herein to the contrary, depreciation of any
capital improvements which are intended to reduce Operating Costs, or are
required under any governmental laws, regulations or ordinances which were not
applicable to the Building or the Development at the time it was constructed, or
arc recommended by the N.F.P.A. Life Safety Code, shall be included in Operating
Costs. The useful life of any such improvement as well as all nonstructural
replacements shall be reasonably determined by Landlord. In addition, interest
on the undepreciated cost of any such improvement or non-structural replacement
(at the prevailing construction loan rate available to Landlord on the date the
cost of such improvement was incurred) shall also be included in Operating
Costs. If Landlord selects the accrual method of accounting rather than the cash
accounting method for Operating Costs purposes, Operating Costs shall be deemed
to have been paid when such expenses have accrued. Landlord shall have the right
at any time and from time to time to elect, which election shall be subject to
revocation, to exclude that portion of Operating Costs attributable to any
separately assessed part of the Development and any separate building within the
Development. During any period that Operating Costs attributable to any
separately assessed part of the Development and/or separate building are so
excluded from Operating Costs,
Landlord: _____ Tenant: _____
3
<PAGE>
then for the purposes of calculating Tenant's proportionate share of Operating
Costs as provided in Section 7.02, the denominator shall not include the
rentable area of such separately assessed part of the Development and/or such
separate building. Landlord may, in a reasonable manner, allocate insurance
premiums for so-called "blanket" insurance policies which insure other
properties as well as the Development and said allocated amount shall be deemed
to be an Operating Cost.
If at any time during the term of this lease, the present method of taxation
shall be changed so that in lieu of the whole or any part of any taxes,
assessments or governmental charges levied, assessed or imposed on real estate
and the improvements thereon, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly oil the rents received therefrom
and/ or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rents for the present or any future building or
buildings on the premises, then all such taxes, assessments, levies or charges,
or the part thereof so measured or based, shall be deemed to be included within
the term "taxes" for the purposes hereof.
7.02 Tenant's Proportionate Share of Operating Costs: Tenant shall pay
to Landlord, as additional rent, its proportionate share of operating costs
calculated on the basis of the ratio set forth in Section 8.0 1. Any payments
with respect to any partial calendar year in which the Term commences or ends
shall be prorated. Tenant agrees to pay $1,931.29 per month as an escrow amount
for operating costs as defined in Article 7.0 1. Landlord may, at any time,
deliver to Tenant its estimate (or revised estimate) of such additional amounts
payable under this Section for each calendar year. On or before the first day of
the next month and on or before the first day of each month thereafter, Tenant
shall pay to Landlord as additional rent such amount as Landlord reasonably
determines to be necessary to bring and keep Tenant current. As soon as
practicable after the close of each calendar year, Landlord shall endeavor to
deliver to Tenant a statement showing the total amount payable by Tenant under
this Article. If such statement shows an amount due from Tenant that is less
than the estimated payments previously paid by Tenant, it shall be accompanied
by a refund of the excess to Tenant or at Landlord's option the excess shall be
credited against the next monthly installment of rent. If such statement shows
an amount due from Tenant that is more than the estimated payments paid by
Tenant, Tenant shall pay the deficiency to Landlord, as additional rent. In the
event an amount is due and is not paid within thirty (30) days after the date of
Landlord's statement to tenant, the unpaid amount shall bear interest at the
rate of eighteen (18%) percent per annum from the date of such statement until
payment by tenant. Landlord's failure to submit statements as called for herein
shall not be deemed to be a waiver of Tenant's requirement to pay the sums
herein provided. Landlord and Tenant acknowledge that certain of the costs of
management, operation and maintenance of the Development are allocated among all
of the buildings in the Development using methods of allocation that arc
considered reasonable and appropriate under the circumstances. Tenant hereby
consents to such allocations provided that the determination of such costs and
the allocation of all or part thereof to Operating Costs hereunder shall be in
accordance with generally accepted accounting principles applied on a consistent
basis. Tenant or its' representatives shall have the right after seven (7) days
prior written notice to Landlord to examine Landlord's books and records of
Operating Costs during normal business hours within twenty (20) days following
the furnishing of the statement to Tenant. Unless Tenant takes written exception
to any item within thirty (30) days following the furnishing Of the statement to
Tenant (which item shall be paid in any event), such statement shall be
Landlord: _____ Tenant: _____
4
<PAGE>
considered as final and accepted by Tenant. The taking of exception to any item
shall not excuse Tenant from the obligation to make timely payment based upon
the statement as delivered by Landlord.
8.01 Tenant's Proportionate Share: (a) Tenant's "proportionate share"
as used in this Lease with respect to the Building shall mean a fraction the
numerator of which shall be the rentable area contained in the Premises and the
denominator of which shall be the rentable area contained in the Building, as
determined by Landlord. Tenant's "proportionate share" as used in this Lease
with respect to costs relating to more than the Building, shall mean a fraction
the numerator of which shall be the rentable area contained in the Premises and
the denominator of which shall be the rentable area of all buildings, as
determined by Landlord, within the Development. Notwithstanding anything
contained in the Lease to the contrary, Landlord shall have the right, from time
to time, to add to or exclude from the Development real property and any
buildings constructed thereon. In the event Landlord elects to add to or exclude
from the Development, Landlord shall notify Tenant in writing of any such
addition or exclusion which notice shall describe the property added or
excluded. Tenant's use and access to public utilities (including telephone
lines, electricity and water) shall be limited to Tenant's proportionate share
as defined herein.
9.01 Tenant's Obligations: (a) Tenant shall at its own cost and expense
keep and maintain all parts of the Premises and such portion of the Development
within the exclusive control of Tenant in good condition, promptly making all
necessary repairs and replacements, whether ordinary or extraordinary, with
materials and workmanship of the same character, kind and quality as the
original, including but not limited to, windows, glass and plate glass, doors,
skylights, any special office entries, interior walls and finish work, floors
and floor coverings, heating and air conditioning systems, electrical systems
and fixtures, sprinkler systems, water heaters, dock board, truck doors, dock
bumpers, and plumbing work and fixtures. Tenant as part of its obligation
hereunder shall keep the whole of the Premises in a clean and sanitary
condition. Tenant will as far as possible keep all such parts of the Premises
from deteriorating, ordinary wear and tear excepted, and from failing
temporarily out of repair, and upon termination of this Lease in any way, Tenant
will yield up the Premises to Landlord in good condition and repair, loss by
fire or other casualty covered by insurance to be secured pursuant to Article 15
excepted (but not excepting any damage to glass or loss not reimbursed by
insurance because of the existence of a deductible under the appropriate
policy). Tenant shall not damage any demising wall or disturb the integrity and
supports provided by any demising wall and shall, at its sole cost and expense,
properly repair any damage or injury to any demising wall caused by Tenant or
its employees, agents or invitees. Tenant shall, at its own cost and expense, as
additional rent, pay for the repair of any damage to the Premises, the Building,
or the Development resulting from and/or caused in whole or in part by the
negligence or misconduct of Tenant, its agents, servants, employees, patrons,
customers, or any other person entering upon the Development as a result of
Tenant's business activities or caused by Tenant's default hereunder.
(b) Tenant at its own cost and expense, enter into a regularly
scheduled preventive maintenance/service contract with a maintenance contractor
approved by Landlord, for servicing all heating and air conditioning systems and
equipment servicing the Premises and an executed copy of such contract shall be
delivered to Landlord. This service contract must include all services
Landlord: _____ Tenant: _____
5
<PAGE>
suggested by the equipment manufacturer within the operations/maintenance manual
and must become effective within thirty (30) days of the date Tenant takes
possession of the Premises. Landlord may (but shall not be required to), upon
notice to Tenant, elect to enter into such a maintenance service contract on
behalf of Tenant or perform the work itself and, in either case, charge Tenant
therefore, together with a reasonable charge for overhead.
9.02 Landlord's Obligations: Landlord shall maintain in good repair,
reasonable wear and tear and any casualty covered by the provisions of Article
15 excepted, all parts of the Development, other than tenants' demised premises
or portions of the Development within the exclusive control of tenants of the
Development, making All necessary repairs and replacements, whether ordinary or
extraordinary structural or nonstructural, including roof, foundation, walls,
down spouts, gutters, regular mowing of any grass, trimming, weed removal and
general landscape maintenance, including any rail spur areas, exterior painting,
exterior lighting, exterior signs and common sewage plumbing and the maintenance
of all paved areas including driveways and alleys, including, but not limited
to, cleaning, repaving, restripping and resealing. The term walls" as used
herein shall not include windows, glass or plate glass, doors, special store
front or office entry.
9.03 Interruptions of Service: Interruptions of any service shall not
be deemed an eviction or disturbance of Tenant's use and possession of the
Premises, or render Landlord liable for damages by abatement of rent or
otherwise or relieve Tenant from performance of Tenant's obligations under this
lease. Should any equipment or machinery furnished by Landlord cease to function
properly, Landlord shall use reasonable diligence to repair the same. Similarly,
the curtailment, rationing or restriction on use of water, gas, electricity or
any resource, service or utility shall not affect Tenant's obligations hereunder
and Landlord may cooperate in a reasonable manner with the efforts of national,
state or local governmental agencies or utilities in reducing energy or other
resource consumption.
9.04 Notice to Landlord to Repair: In the event Tenant discovers the
necessity for Landlord to repair any part of the Premises, Building or
Development, which Landlord is obligated to repair and maintain hereunder,
Tenant shall provide Landlord with written notice specifically describing the
repair or maintenance required. Landlord shall have 60 days to repair the
Premises, Building or Development if such repairs can be reasonably accomplished
in said time period. In no event shall Tenant be permitted to withhold rent or
terminate this Lease as a consequence of Landlord's failure to maintain or
repair the Premises, Building or Development.
10.01 Alterations: Tenant shall not make any alterations, additions or
improvements to the Premises (including, without limitation, the roof and wall
penetrations) without the prior written consent or Landlord. If Landlord shall,
consent to any alterations, additions or improvements proposed by Tenant, Tenant
shall construct the same in accordance with all governmental laws, ordinances,
rules and regulations and all requirements of Landlord's and Tenant's insurance
policies and only in accordance with plans and specifications approved by
Landlord; and any contractor or person selected by Tenant to make the same, or,
at Landlord's option and discretion, the alterations, additions or improvements
shall be made by Landlord for Tenant's account and Tenant shall fully reimburse
Landlord for the entire cost thereof. Tenant may, without the consent of
Landlord, but at its own cost and expense and in good workmanlike manner erect
such shelves, bins, machinery and other trade fixtures as it may deem advisable,
without altering the basic
Landlord: _____ Tenant: _____
6
<PAGE>
character of the Building or Development and without overloading the floor or
damaging such Building or Development, and in each case after complying with all
applicable governmental laws, ordinances, regulations and other requirements.
All shelves, bins, machinery and trade fixtures installed by Tenant may be
removed by Tenant prior to the termination or this Lease if Tenant so elects,
and shall be removed by the date of termination of this Lease or upon earlier
vacating of the Premises if required by Landlord; upon any such removal Tenant
shall restore the Premises to their original condition. All such removals and
restoration shall be accomplished in a good and workmanlike manner so as not to
damage the primary structure or structural quality of the Building.
11.01 Signs and Window Treatment: Tenant shall not install any signs
upon the Building or Development, Landlord will provide, at Tenant's request and
cost, Landlord's standard identification sign, which sign shall be removed by
Tenant upon termination of this Lease at which time Tenant shall restore the
property to the same condition as prior to installation of said sign. Tenant
shall not install drapes, curtains, blinds or any window treatment without
Landlord's prior written consent. Landlord may from time to time require Tenant
to change its signage to conform to a revised standard for the Building,
provided Landlord pays the cost of removing and replacing such signs. Landlord
shall maintain all signs and the cost thereof shall be charged to Tenant.
12.01 Inspections: Landlord and Landlord's agents and representatives
shall have the right to enter and inspect the premises at any reasonable time
during business hours, for the purpose of ascertaining the condition of the
premises or in order to make such repairs as may be required or permitted to be
made by Landlord under the terms of this lease. During the period that is six
(6) months prior to the end of the term hereof, Landlord and Landlord's agents
and representatives shall have the right to enter the premises at any reasonable
time during business hours for the purpose of showing the premises and shall
have the right to erect on the premises a suitable sign indicating the premises
are available. Tenant shall give written notice to Landlord at least thirty (30)
days prior to vacating the premises and shall arrange to meet with Landlord for
a joint inspection of the premises prior to vacating. In the event of Tenant's
failure to give such notice or arrange such joint inspection, Landlord's
inspection at or after Tenant's vacating the premises shall be conclusively
deemed correct for purposes of determining Tenant's responsibility for repairs
and restoration.
13.01 Utilities: Tenant shall pay for all gas, heat, light, power,
telephone, and other utilities and services used on or from the Premises,
including without limitation, Tenant's proportionate share as determined by
Landlord for the use of such utilities which are not separately metered and any
central station signaling system installed in the Premises or the Building,
together with any taxes, penalties and surcharges or the like pertaining thereto
and any maintenance charges for utilities. Tenant shall furnish and install all
electric light bulbs, tubes and ballasts, other than those originally provided
to the Premises by Landlord.
14.01 Assignment and Subletting: (a) Tenant shall not have the right to
assign, sublet, transfer or encumber this lease, or any interest therein,
without the prior written consent of Landlord. Any attempted assignment,
Subletting, transfer or encumbrance by Tenant in violation of the terms and
covenants of this Paragraph shall be void. All cash or other proceeds of any
assignment, such proceeds as exceed the rentals called for hereunder in the case
of a subletting and all cash or other proceeds of any other transfer of Tenant's
interest in this lease shall be paid
Landlord: _____ Tenant: _____
7
<PAGE>
to Landlord, whether such assignment, subletting or other transfer is consented
to by Landlord or not, unless Landlord agrees to the contrary in writing, and
Tenant hereby assigns all rights it might have or ever acquire in any such
proceeds to Landlord. Any assignment, subletting or other transfer of Tenant's
interest in this lease shall be for an amount equal to the then fair market
value of such interest. These covenants shall run with the land and shall bind
Tenant and Tenant's heirs, executors, administrators, personal representatives,
representatives in any bankruptcy proceeding, successors and assigns. Any
assignee, sublessee or transferee of Tenant's interest in this lease (all such
assignees, sublessee and transferees being hereinafter referred to as
"successors"), by assuming Tenant's obligations hereunder shall assume liability
to Landlord for all amounts paid to persons other than Landlord by such
successors in contravention of this Paragraph. No assignment, subletting or
other transfer, whether consented to by Landlord or not, .shall relieve Tenant
of its liability hereunder. Upon the occurrence of an "event of default" as
hereinafter defined, if the premises or any part thereof are then assigned or
sublet, Landlord, in addition to any other remedies herein provided, as provided
by law, may at its option collect directly from such assignee or subtenant all
rents becoming due to Tenant under such assignment or sublease and apply such
rent against any sums due to Landlord for Tenant hereunder, and no such
collection shall be construed to constitute a notation or a release of Tenant
from the further performance of Tenant's obligations hereunder.
(b) If this lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code 11 U.S.C. 101 et seq., (the "Bankruptcy
Code"), any and all monies or other considerations payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Landlord, shall be and remain the exclusive property of Landlord and shall not
constitute property of Tenant or of the estate or Tenant within the meaning of
the Bankruptcy Code. Any and all monies or other considerations constituting
Landlord's property under the preceding sentence not paid or delivered to
Landlord shall be held in trust for the benefit of the Landlord and be promptly
paid or delivered to Landlord.
(c) Any person or entity to which this lease is assigned pursuant to
the provisions of the Bankruptcy Code, shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this lease on and
after the date of such assignment. Any such assignee shall upon demand execute
and deliver to Landlord an instrument confirming such assumption.
15.01 Fire and Casualty Damage: (a) Landlord agrees to maintain
insurance covering the building of which the premises are a part in an amount
not less than eighty (80%) percent (or such greater percentage as may be
necessary to comply with the provisions of any co-insurance clauses of the
policy) of the replacement cost thereof, insuring against the perils of Fire,
Lightning, Extended Coverage, Vandalism and Malicious Mischief, extended by
Special Extended Coverage Endorsement to insure against all other Risks of
Direct Physical Loss, such coverages and endorsements to be as defined, provided
and limited in the standard bureau forms prescribed by the insurance regulatory
authority for the state in which the premises are situated for use by insurance
companies admitted in such state for the writing of such insurance on risks
located within such state. Subject to the provisions of subparagraphs 15.01 (c),
15.01 (d), and 15.01 (c) below, such insurance shall be for the sole benefit of
Landlord and under its sole control.
Landlord: _____ Tenant: _____
8
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(b) If the building situated upon the premises should be damaged or
destroyed by fire, tornado or other casualty, Tenant shall give written notice
thereof to Landlord.
(c) If the buildings situated upon the premises should be totally
destroyed by fire, tornado or other casualty, or if they should be so damaged
thereby that rebuilding or repairs cannot in Landlord's estimation be completed
within two hundred (200)days after the date upon which Landlord is notified by
Tenant of such damage, this lease shall terminate and the rent shall be abated
during the unexpired portion of this lease, effective upon the date of the
occurrence of such damage.
(d) If the buildings situated upon the premises should be damaged by
any peril covered by insurance to be provided by Landlord under subparagraph
15.01 (a) above, but only to such extent that rebuilding or repairs can in
Landlord's estimation be completed within two hundred (200) days after the date
upon which Landlord is notified by Tenant of such damage, this lease shall not
terminate, and Landlord shall at its sole cost and expense thereupon proceed
with reasonable diligence to rebuild and repair such buildings to substantially
the condition in which they existed prior to such damage, except that Landlord
shall not be required to rebuild, repair or replace any part of the partitions,
fixtures, additions and other improvements which may have been placed in, on or
about the premises by Tenant and except that Tenant shall pay to Landlord upon
demand any amount by which Landlord's cost of such rebuilding, repair and/or
replacement exceeds net insurance proceeds paid to Landlord in connection with
such damage and except that Landlord may elect not to rebuild if such damage
occurs during the last year of the term of the lease exclusive of any option
which is unexercised at the time of such damage. If the premises arc
untenantable in whole or in part following such damage, the rent payable
hereunder during the period in which they are untenantable shall be reduced to
such extent as may be fair and reasonable under all of the circumstances. In the
event that Landlord should fail to complete such repairs and rebuilding within
two hundred (200) days after the date upon which Landlord is notified by Tenant
or such damage. Tenant may at its option terminate this lease by delivering
written notice of termination to Landlord as Tenant's exclusive remedy,
whereupon all rights and or obligations hereunder shall cease and terminate.
Should construction be delayed because of changes, deletions, or additions in
construction requested by Tenant, strikes, lockouts, casualties, acts of God,
war, material or labor shortages, governmental regulation or control or other
causes beyond the reasonable control of Landlord, the period of restoration,
repair or rebuilding shall be extended for the Landlord is so delayed. To the
extent Landlord undertakes to rebuild or repair the Premises, Building or
Development as a result of a casualty as set forth herein, in no event shall
Landlord's obligations exceed the amount of insurance proceeds available.
(e) Notwithstanding anything hereunto the contrary, in the event the
holder of any indebtedness secured by mortgage or deed of trust covering the
premises requires that the insurance proceeds be applied to such indebtedness,
then Landlord shall have the right to terminate this lease by delivering written
notice of termination to Tenant within fifteen (15) days after such
requirement is made by any such holder, whereupon all rights and obligations
hereunder shall cease and terminate.
(f) Each of Landlord and Tenant hereby releases the other from any loss
or damage to property caused by fire or my perils insured in policies of
insurance covering such property, even if such loss or damage shall have been
caused by the fault or negligence of the other party, or
Landlord: _____ Tenant: _____
9
<PAGE>
anyone for whom such party may be responsible; provided, however, that this
release shall be applicable and in force and effect only with respect to loss or
damage occurring during such times as the releasor's policies shall contain a
clause or endorsement to the effect that any such release shall not adversely
affect or impair said policies or prejudice the right of the releasor to recover
thereunder and then only to the extent of the insurance proceeds payable under
such policies. Each of the Landlord and Tenant agrees that it will request its
insurance carriers to include in its policies such a clause or endorsement.
Landlord shall have no liability for any loss or damage to Tenant's business or
personal property arising out of, but not limited to any of the following
causes: hurricanes; excessive rain; roofing defects; bursting pipes; fire;
windstorm; malfunction of electrical system, HVAC, sewer or water system;
interruption of utility services; or any act or omission of Landlord or any of
Landlord's agents on or about the Premises, Building or Development.
16.01 Liability: Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the premises, resulting
from and/or caused in part or whole by the negligence or misconduct of Tenant,
its agents, servants or employees of any other person entering upon the
premises, or caused by the buildings and improvements located on the premises
becoming out of repair, or caused by leakage of gas, oil, water or steam or by
electricity emanating from the premises, or due to any cause whatsoever, and
Tenant hereby covenants and agrees that it will at all times indemnify and hold
safe and harmless the property, the Landlord (including without limitation the
trustee and beneficiaries if Landlord is a trust), Landlord's agents and
employees from any loss, liability, claims, suits, costs, expenses, including
without limitation attorney's fees and damages, both real and alleged, arising
out of any such damage or injury; except injury to persons or damage to property
the sole cause of which is the gross negligence or Landlord or the failure of
Landlord to repair any part of the premises which Landlord is obligated to
repair and maintain hereunder after proper notice in accordance with section
9.04 above. Tenant shall procure and maintain throughout the term of the lease a
policy or policies of insurance, at its sole cost and expense, insuring both
Landlord and Tenant against all claims, demands or actions arising out of or in
connection with (i) the premises; (ii) the condition of the premises; (iii)
Tenant's operations in and maintenance and use of the premises; and (iv)
Tenant's liability assumed under this lease, the limits of such policy or
policies to be in the amount or not less than $2,000,000 per occurrence in
respect to injury to persons (including death), and in the amount of not less
than $250,000 per occurrence in respect to property damage or destruction,
including loss of use thereon. All such policies shall be procured by Tenant
from responsible insurance companies satisfactory to Landlord. Certified copies
of such policies, together with receipt evidencing payment of premiums
therefore, shall be delivered to Landlord prior to the commencement date of this
lease. Not less than fifteen (15) days prior to the expiration date of any such
policies, certified copies of the renewal thereof (hearing notations evidencing
the payment of renewal premiums) shall be delivered to Landlord. Such policies
shall further provide that not less than thirty (30) days written notice shall
be given to Landlord before such policy may be canceled or changed to reduce
insurance provided thereby.
17.01 Condemnation: (a) If the whole or any substantial part or the
Premises or Building should be taken for any public or quasi-public use under
governmental law, ordinance or regulation,
Landlord: _____ Tenant: _____
10
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or by right of eminent domain, or by private purchase in lieu thereof and the
taking would prevent or materially interfere with the use of the Premises or
Building for the purpose for which they are then being used, this Lease shall
terminate effective when the legal taking shall occur as if the date of such
taking were the date originally fixed in the Lease for the expiration of the
Term.
(b) If the part of the Premises or Building shall be taken for any
public or quasi-public use under governmental law, ordinance or regulation, or
by right of eminent domain, or by private purchase in lieu thereof, and (his
Lease is not terminated as provided above, this Lease shall not terminate but
the rent payable hereunder during the unexpired portion of (his Lease shall be
reduced to such extent as may be fair and reasonable under al I of the
circumstances and Landlord shall undertake to restore the Premises to a
condition suitable for Tenant's use, as near to the condition thereof
immediately prior to such taking as is reasonably feasible under all the
circumstances.
(c) In the event of any such taking or private purchase in lieu
thereof, Landlord and Tenant shall each be entitled to receive and retain such
separate awards and/or portion of lump sum awards as may be allocated to their
respective interests in any condemnation proceedings; provided that Tenant shall
not be entitled to receive any award for the loss of any improvements paid for
by Landlord or for Tenant's loss of its leasehold interest, the right to such
award as to such items being hereby assigned by Tenant to Landlord.
18.01 Holding Over: Tenant will, at the termination of this lease by
lapse of time or otherwise, yield up immediate possession to Landlord with all
repairs and maintenance required herein to be performed by Tenant completed. If
Landlord agrees in writing that Tenant may hold over after the expiration or
termination of this lease, unless the parties hereto otherwise agree in writing
oil the terms of such holding over, the hold over tenancy shall be subject to
termination by Landlord at any time upon not less than (5) days advance written
notice, or by Tenant at any time upon not less than thirty (30) days advance
written notice, and all of the other terms and provisions of this lease shall be
applicable during that period, except that Tenant shall pay Landlord from time
to time upon demand, as rental for the period of any hold over, an amount equal
to double the rent in effect on the termination date, computed on a daily basis
for each day of the hold over period. Tenant shall also pay to Landlord all
damages sustained by Landlord resulting from retention of possession by Tenant,
including the loss of any proposed subsequent tenant for any portion of the
premises. No holding over by Tenant, whether with or without consent of
Landlord, shall operate to extend this lease except as otherwise expressly
provided. The preceding provisions of this paragraph shall not be construed as
consent for Tenant to hold over.
19.01 Quiet Enjoyment: Landlord represents and warrants that it has
full right and authority to enter into this Lease and that Tenant, upon paying
the rental herein set forth and performing its other covenants and agreements
herein set forth, shall peaceably and quietly have, hold and enjoy the Premises
for the Term without hindrance or molestation from Landlord, subject to the
terms and provisions of this Lease. Landlord agrees to make reasonable efforts
to protect Tenant from interference or disturbance by other tenants or third
persons; however, Landlord shall not be liable for any such interference or
disturbance, nor shall Tenant be released from any of the obligations of this
Lease because of such interference or disturbance. In the event this Lease is a
sublease, then Tenant agrees to take the Premises subject to the provisions of
the prior lease.
Landlord: _____ Tenant: _____
11
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20.01 Events of Default: The following events shall be deemed to be
events of default by Tenant under this lease: (a)Tenant shall fail to pay any
installment of the rent herein reserved when due, or any other payment or
reimbursement to Landlord required herein when due and such failure shall
continue for a period of five (5) days from the date such payment was due.
(b) Tenant or any guarantor of Tenant's obligations hereunder shall
generally not pay its debts as they become due or shall admit in writing its
inability to pay its debts or shall make a general assignment for the benefit of
.creditors; or Tenant or any such guarantor shall commence any case, proceeding
or other action seeking to have all order for relief entered on its behalf as a
debtor to adjudicate it as bankrupt or insolvent, or seeking reorganization or
relief of debtors or seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or of any substantial part of its
property; or Tenant or any such guarantor shall take any action to authorize or
in contemplation of any of the actions set forth above in this paragraph; or
(c) Any case, proceeding or other action against Tenant or any
guarantor of Tenant's obligations hereunder shall be commenced seeking to have
all order for relief entered against it as debtor or to adjudicate it as
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors, or
seeking appointment of a receive, trustee, custodian or other similar official
for it or for all or any substantial part of its property.
(d) A receiver or trustee shall be appointed for all or substantially
all of die assets of the Tenant.
(e) Tenant shall desert or vacate any substantial portion of the
premises.
(f) Tenant shall fail to discharge any lien placed upon the premises in
violation of Paragraph 26.01 hereof within twenty (20) days after any such lien
or encumbrance is filed against the premises.
(g) Tenant shall fail to comply with any term, provision or covenant of
this lease (other than the foregoing in this Paragraph 20.01, and shall not cure
such failure within twenty (20) days after written notice thereof to Tenant.
(h) Tenant shall fail to continuously operate its business at the
premises for the permitted use set forth in Paragraph 5.01 whether or not Tenant
is in default of the rental payment due under this lease.
20.02 Remedies: (a) Upon the occurrence of any of such events of
default described in Paragraph 20.01 hereof. Landlord shall have the option to
pursue any one or more of the following remedies without any notice or demand
whatsoever.
(1) Landlord, in addition to all rights and remedies provided in the Lease, may
declare the entire amount of the Annual Base Rental which would have become due
and payable during the remainder of the Term of this Lease, as adjusted from
time to time, to be due and payable immediately, along with the Additional Rent
as defined in the Lease due for the remainder of the
Landlord: _____ Tenant: _____
12
<PAGE>
term of the Lease. The projected operating costs due for the remainder of the
]case term, shall be actual operating costs due for the year of the default,
multiplied by the remaining term of the Lease. Tenant agrees to pay the
accelerated annual base rent, and additional rent charges to Landlord at once,
it being agreed that such payment shall constitute payment in advance of the
rent stipulated for the remainder of the Term. In the event Landlord collects
the accelerated rent from Tenant, Tenant shall be credited for rents received if
the premises are relet. It is expressly understood that Landlord shall have no
obligation to relet the Demised Premises. The acceptance by Landlord of the
payment of the accelerated rent shall not constitute a waiver of any default
then existing or thereafter occurring hereunder.
(2) In the event Landlord elects to repossess the Premises by eviction
proceedings or otherwise, lie may do so with or without terminating this Lease,
and shall have the option of accelerating the annual base rent and additional
rent charges as set forth herein, in addition to pursuing any of the other
remedies set forth in the Lease or permitted by law.
(3) Terminate this lease, in which event Tenant shall immediately surrender the
premises to Landlord, and if Tenant fails so to do, Landlord may, without
pre * judice to any other remedy which it may have for possession or arrearage
in rent, commence appropriate legal action for possession of the premises in
accordance with the laws of the state of Florida.
(4) Upon any termination of Tenant's right to possession only without
termination of the Lease, Landlord may, but need not, relet the Premises or any
part thereof for such rent and upon such terms as Landlord, in its sole
discretion, shall determine (including the right to relet the Premises for a
greater or lesser term than that remaining under this Lease, the right to relet
the Premises as a part of a larger area, and the right to change the character
use made of the Premises). If Landlord decides to relet the Premises or a duty
to relet is imposed upon Landlord by law, Landlord and Tenant agree that
Landlord shall only be required to use the same efforts Landlord then uses to
lease other properties Landlord owns or manages (or if the Premises is then
managed for Landlord, then Landlord will instruct such manager to use the same
efforts such manager then uses to lease other space or properties which it owns
or manages); provided, however, that Landlord (or its manager) shall not be
required to give any preference or priority to the showing or leasing of the
Premises over any other space that Landlord (or its manager) may be leasing or
have available and may place a suitable prospective tenant in any such available
space regardless of when such alternative space becomes available; provided,
further, that Landlord shall not be required to observe any instruction given by
Tenant about such reletting or accept any tenant offered by Tenant unless such
offered tenant has a credit worthiness acceptable to Landlord, leases the entire
Premises, agrees to use the Premises in a manner consistent with the Lease and
leases the Premises at the same rent, for no more than the current term and on
the same other terms and conditions as in this Lease without the expenditure by
Landlord for tenant improvements or broker's commissions. in an such case,
Landlord may, but shall not be required to, make repairs, alterations and
additions in or to the Premises and redecorate the same to the extent Landlord
deems necessary or desirable, and Tenant shall, upon demand, pay the cost
thereof, together with Landlord's expenses of reletting, including, without
limitation, any broker's commission incurred by Landlord. If (lie consideration
collected by Landlord upon any such reletting plus any sums previously collected
from Tenant are not sufficient to pay the full amount of all rent, including any
amounts treated as additional rent hereunder and other sums reserved in this
Lease for the remaining portion of the Term, together with the costs of repairs,
alterations, additions,
Landlord: _____ Tenant: _____
13
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redecorating, and Landlord's expenses of reletting and the collection of the
rent accruing therefrom (including attorney's fees and broker's commissions),
Tenant shall pay to Landlord the amount of such deficiency upon demand and
Tenant agrees that Landlord may file suit to recover any sums falling due under
this subsection from time to time:
(5) In the event Tenant fails to pay any installment of rent hereunder as when
such installment is due, to help defray the additional cost to Landlord for
processing such late payments Tenant shall pay to Landlord oil demand a late
charge in an amount equal to five (5%) percent of such installment; and the
failure to pay such amount within five (5) days after demand therefore shall be
all event of default hereunder. The provision for such late charge shall be ill
addition to all of Landlord's other rights and remedies hereunder or at law and
shall not be construed as liquidated damages or as limiting Landlord's remedies
in any manner.
(6) In the event Tenant's check, given to Landlord in payment, is returned by
the bank for non-payment, Tenant agrees to pay all expenses incurred by Landlord
as a result thereof.
(7) Pursuit of any of the foregoing remedies shall not preclude pursuit of any
of the other remedies herein provided or any other remedies provided by law (all
such remedies being cumulative), nor shall pursuit of any remedy herein provided
constitute a forfeiture or waiver of any rent due to Landlord hereunder or of
any damages accruing to Landlord by reason of the violation of any of the terms,
provisions and covenants herein contained. No act or thing done by Landlord or
its agents during the Term shall be deemed a termination of this Lease or an
acceptance of the surrender of the Premises, and no agreement to terminate this
Lease or accept a surrender of said Premises shall be valid unless in writing
signed by Landlord.
(8) In the event that Landlord elects to repossess the premises without
terminating the lease, or in the event Landlord elects to terminate the lease,
then Tenant at Landlord's option, shall be liable for and shall pay to Landlord,
at the address specified for notice to Landlord herein, all rental and other
indebtedness accrued to the date of such repossession, plus rental required to
be paid by Tenant to Landlord during the remainder of the lease term until (lie
date of expiration of the term as stated in Section 3.01 diminished by any net
sums thcrcaf1cr received by Landlord through reletting the premises during said
period (after deducting expenses incurred by Landlord as provided in
subparagraph 20.02 (h). In no event shall Tenant be entitled to any excess of
any rental obtained by reletting over and above the rental herein reserved.
Actions to collect amounts due by Tenant to Landlord under this subparagraph may
be brought from time to time, on one or more occasions, without the necessity of
Landlord's waiting until expiration of the lease term.
(9) In case of any event of default or breach by Tenant, or threatened or
anticipatory breach or default, Tenant shall also be liable for and shall pay to
Landlord, at the address specified for notice to Landlord herein, in addition to
any sum provided to be paid above, brokers' fees incurred by Landlord in
connection with reletting the whole or any part of the premises; the costs of
removing and storing Tenant's or other occupant's property; the costs of
repairing, altering, remodeling or otherwise putting the premises into condition
acceptable to a new tenant or tenants, arid all reasonable expenses incurred by
Landlord in enforcing or defending Landlord's rights and/or remedies including
reasonable attorney's fees.
Landlord: _____ Tenant: _____
14
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(10) If Tenant should fail to make any payment or cure any default hereunder
within the time herein permitted, Landlord, without being under any obligations
to do so and without thereby waiving such default, may make such payment and/or
remedy such other default for the account of Tenant (and enter the premises for
such purpose), arid thereupon Tenant shall be obligated to, and hereby agrees,
to pay Landlord upon demand, all costs, expenses arid disbursements (including
reasonable attorney's fees) incurred by Landlord in taking such remedial action.
21.01 Rights Reserved to Landlord: Landlord reserves and may exercise
the following rights without affecting Tenant's obligations hereunder:
(a) To change the name or the street address of the Building or the
Development;
(b) To install and maintain a sign or signs oil the exterior of the
Building;
(c) To designate all sources furnishing sign painting and lettering, lamps
and bulbs used on the Premises;
(d) To retain at all times pass keys to the Premises;
(e) To grant to anyone the exclusive right to conduct any particular
business or undertaking in the Building or the Development;
(f) To change the arrangement and/or location of entrances and corridors in
and to the Building and to add, remove, rename or modify buildings,
roadways, parking areas, walkways, landscaping, lakes, grading and
other improvements in or to the Development.
22.01 Relocation of Premises: Landlord reserves the right to relocate
Tenant during the Term to other premises in the Building or in another building
within the Development (the New Premises"), in which event the New Premises
shall be deemed to be the Premises for all purposes under this Lease, provided:
(a) the New Premises shall be similar to the Premises in area and
appropriateness for the use of Tenant's purposes; (b) if Tenant is then
occupying the Premises, Landlord shall pay the reasonable expense of moving
Tenant, its property and equipment to the New Premises and such moving shall be
done at such time and in such manner so as to cause the least inconvenience to
Tenant; (c) Landlord shall give to Tenant not less than thirty (30) days prior
written notice of such substitution; and (d) Landlord shall, at its sole cost,
improve the New Premises with improvements substantially similar to those
located in the Premises.
23.01 Landlord's Lien: In addition to any statutory lien for rent in
Landlord's favor, Landlord shall have and Tenant hereby grants to Landlord a
continuing security interest for all rentals and other sums of money becoming
due hereunder from Tenant, upon all goods, wares, equipment, fixtures,
furniture, inventory, accounts, contract rights, chattel paper and other
personal property of Tenant situated on the Premises, and such property shall
not be removed therefrom without the consent of Landlord until all arrearages in
rent as well as any and all other sums of money then due to Landlord hereunder
shall first have been paid and discharged. In the event of a default under this
Lease, Landlord shall have, in addition to any other remedies provided herein or
by law, all rights and remedies under the Uniform Commercial Code, including
without limitation the right to sell the property described in this Section at
public or private sale upon five (5) days notice to Tenant. Tenant hereby agrees
to execute such financing statements and other instruments necessary or
desirable in Landlord's discretion to perfect the security interest hereby
created.
Landlord: _____ Tenant: _____
15
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24.01 Subordination: Tenant accepts this Lease subject and subordinate
to any mortgage and/or deed of trust now or at any time hereafter constituting a
lien or charge upon the Development, the Building, or the Premises, without the
necessity of any act or execution of any additional instrument of subordination;
provided, however, that if the mortgagee, trustee, or holder of any such
mortgage or deed of trust elects to have Tenant's interest in this Lease
superior to any such instrument, then by notice to Tenant from such mortgagee,
trustee or holder, this Lease shall be deemed superior to such lien, whether
this Lease was executed before or after said mortgage or deed of trust. Tenant
shall at any time hercaf1cr oil demand execute any instruments, releases or
other documents which may be required by any mortgagee for the purpose of
evidencing the subjection and subordination of this Lease to the lien of any
such mortgage or for the purpose of evidencing the superiority of this Lease to
the lien of any such mortgage as may be the case.
25.01 Mechanics Liens and Other Taxes: (a) Tenant shall have no
authority, express or implied, to create or place any lien or encumbrance of any
kind or nature whatsoever upon, or in any manner to bind the interests of
Landlord in the premises or to charge the rentals payable hereunder for any
claim in favor of any person dealing with Tenant, including those who may
furnish materials or perform labor for any construction or repairs, and each
such claim shall affect and each such lien shall attach to, if at all, only the
Ieasehold interest granted to Tenant by this instrument. Neither Tenant nor
anyone claiming by, through or under Tenant, including, without limitation,
contractors, subcontractors, materialmen, mechanics and laborers, shall have any
right to file or place mechanic's, materialmen's or other liens of any kind
whatsoever upon the demised premises or upon the tract of land described on
Exhibit A, or any portion thereof, on the contrary, any such liens are
specifically prohibited and shall be null and void and of no further force or
effect.
Tenant covenants and agrees that it will pay or cause to be paid all sums
legally due and payable by it on account of any labor performed or materials
furnished in connection with any work performed on the premises on which any
lien is or can be validly and legally asserted against its leasehold interest in
the premises or the improvements thereon and that it will save and hold Landlord
harmless from any and all loss, cost or expense based on or arising out of
asserted claims or liens against the leasehold estate or against the right,
title and interest of the Landlord in the premises or under the terms of this
lease. Tenant agrees to give Landlord immediate written notice if any lien or
encumbrance if placed on the premises.
(b) Tenant shall be liable for all taxes levied or assessed against
personal property, furniture or fixtures placed by Tenant in the premises. If
any such taxes for which Tenant is liable are levied or assessed against
Landlord or Landlord's property and if Landlord elects to pay the same or if the
assessed value of Landlord's property is increased by inclusion of personal
property, furniture or fixtures placed by Tenant in the premises, and Landlord
elects to pay the taxes based on such increase, Tenant shall pay to Landlord
upon demand that part of such taxes.
26.01 Notices: Each provision of this instrument or any applicable
governmental laws, ordinances regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
shall be deemed to be complied with when and if the following steps arc taken:
Landlord: _____ Tenant: _____
16
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(a) All rent and other payments required to be made by Tenant to
Landlord shall be payable to: TCAC Principal Mutual Life Insurance
Company or to such other entity at the such other address as Landlord
may specify from time to time by written notice delivered in accordance
herewith.
(b) Any notice or document required or promised to be delivered
hereunder shall be deemed to be delivered, whether actually received or
not, when deposited in the United States Mail, postage prepaid,
Certified or Registered Mail, addressed to the parties hereto at the
respective addresses set out below, or at such other address as they
have theretofore specified by written notice delivered in accordance
herewith:
<TABLE>
<S> <C> <C> <C>
Landlord: Principal Mutual Life Insurance Company Tenant: Peregrine Industries
711 High Street 730 Military Trail
Des Moines, Iowa 50309 Deerfield Beach, Florida 33442
</TABLE>
and
c/o Trammell Crow Company
1515 South Federal Highway, Suite 113
Boca Raton, Florida 33432
If and when included within the term "Landlord", or "Tenant", as used in this
instrument, there is more than one person, firm or corporation, all shall
jointly arrange among themselves for their .joint execution of such a notice
specifying some individual at some specific address for the receipt of notices
and payments. All parties included within the terms "Landlord" and "Tenant",
respectively, shall be bound by notices given in accordance with the provisions
of this paragraph to the same effect as if each had received such notice.
27.01 Miscellaneous: (a) Words of any gender used in this Lease shall
be held or construed to include any other gender, and words in the singular
number shall be held to include the plural, unless the context otherwise
requires.
(b) The terms, provisions and covenants and conditions contained in
this Lease shall apply to, inure to the benefit of, and be binding
upon, the parties hereto and upon their respective heirs, legal
representatives, successors and permitted assigns, except as otherwise
herein expressly provided. Landlord shall have the right to assign any
of its rights and obligations under this Lease and Landlord's grantee
or Landlord's successor, as the case may be, shall upon such
assignment, become Landlord hereunder, thereby freeing and relieving
the grantor or assignor, as the case may be, of all covenants and
obligations of Landlord hereunder. Each party agrees to furnish to the
other, promptly upon demand, a corporate resolution, proof of due
authorization by partners, or other appropriate documentation
evidencing the due authorization of' such party to enter into this
Lease, Nothing herein contained shall give any other tenant in the
Development or the Building any enforceable rights either against
Landlord or Tenant as a result of the covenants and obligations of
either party set forth herein. If there is more than one Tenant, the
obligations
Landlord: _____ Tenant: _____
17
<PAGE>
of Tenant shall be joint and several. Any indemnification of, insurance
of, or option granted to Landlord shall also include or be exercisable
by Landlord's agents and employees.
(c) The captions inserted in this Lease are for convenience only and in
no way define, limit or otherwise describe the scope or intent of this
Lease, or any provision hereof, or in any way affect the interpretation
of this Lease.
(d) In no event shall Landlord's liability for any breach of this Lease
exceed the amount of rental then remaining unpaid for the then current
Term (exclusive of any renewal periods which have not then actually
commenced). This provision is not intended to be a measure or agreed
amount of Landlord's liability with respect to any particular breach
and shall not be utilized by any court or otherwise for the purpose of
determining any liability of Landlord hereunder, except only as a
maximum amount not to be exceeded ill any event. In addition, it is
expressly understood and agreed that nothing in this Lease shall be
construed as creating any liability against Landlord, or its successors
and assigns, personally, and in particular without limiting the
generality of the foregoing, there shall be no personal liability to
pay an), indebtedness accruing hereunder or to perform any covenant,
either express or implied, herein contained, and that all personal
liability of Landlord, or its successors and assigns, of every sort, if
any, is hereby expressly waived by Tenant, and that so far as Landlord,
or its successors and assigns is concerned Tenant shall look solely to
the Building for the payment thereof.
(e) Except as set forth in Section 8.01 above, this Lease may not be
altered, changed or amended except by all instrument in writing signed
by both parties hereto.
(f) All obligations of Tenant not fully performed as of the expiration
or earlier termination of the term of this Lease shall survive the
expiration or earlier termination of the Term, including without
limitation, all payment obligations with respect to Operating Costs and
all obligations concerning the condition of the Premises. Upon the
expiration or earlier termination of the Term, and prior to Tenant
vacating the Premises, Landlord and Tenant shall jointly inspect the
Premises and Tenant shall pay to Landlord any amount estimated by
Landlord as necessary to put the Premises, including without limitation
heating and air conditioning systems and equipment therein, in good
condition and repair. Any work required to be done by Tenant prior to
its vacation of the Premises which has not been completed upon such
vacation, shall be completed by Landlord and billed to Tenant at cost
plus fifteen percent. Tenant shall also, prior to vacating the
Premises, pay to Landlord the amount, as estimated by Landlord, of
Tenant's obligation hereunder for Operating Costs. All such amounts
shall be used and held by Landlord for payment of such obligations of
Tenant hereunder, with Tenant being liable for any additional costs
therefor upon demand by Landlord, or with any excess to be returned to
Tenant after all such obligations have been determined and satisfied,
as the case may be. Any security deposit held by Landlord shall be
credited against the amount payable by Tenant under this Section.
(g) If any clause, provision or portion of this Lease or the
application thereof to any person or circumstance shall be invalid or
unenforceable under applicable law, such event shall not affect, impair
or render invalid or unenforceable the remainder of this Lease nor any
other clause, phrase, provision or portion hereof, nor shall if affect
the application of
Landlord: _____ Tenant: _____
18
<PAGE>
any clause, phrase, provision or portion hereof to other persons or
circumstances, and it is also the intention of the parties to this
Lease that in lieu of each such clause, phrase, provision or portion of
this Lease that is invalid or unenforceable, there be added as a part
of this Lease a clause, phrase, provision or portion as similar in
terms to such invalid or unenforceable clause, phrase, provision or
portion as may be possible and be valid and enforceable.
(h) Submission of this Lease shall not be deemed to be a reservation of
the Premises. Landlord shall not be bound hereby until its delivery to
Tenant of an executed copy hereof signed by Landlord, already having
been signed by Tenant, and until such delivery Landlord reserves the
right to exhibit and lease the Premises to other prospective tenants.
Notwithstanding anything contained herein to the contrary Landlord may
withhold delivery of possession of the Premises from Tenant until such
time as Tenant has paid to Landlord the security deposit required
hereunder and the first month's rent as required hereunder, and any
other sums required hereunder.
(i) Tenant shall at any time and from time to time within ten (10 )
days after written request from Landlord, execute and deliver to
Landlord an estoppel certificate, in form reasonable satisfactory to
Landlord.
(j) Whenever a time period is prescribed for action to be taken by
Landlord, Landlord shall not be liable or responsible for, and there
shall be excluded from the computations for any such time period, any
delays due to causes beyond the control of Landlord.
(k) Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over a time. Levels of radon
that exceed federal and state guidelines have been found in buildings
in Florida. Additional information regarding radon and radon testing
may be obtained from your county public health unit. The above
statement is incorporated in the lease as a requirement in order to
comply with Florida Statute 404.056(8).
28.01 Effective Date: All references in this Lease to the "date hereof"
or similar references shall be deemed to refer to the last date in
point of time, on which all parses hereto have executed this Lease.
29.01 Surrender: Tenant shall peaceably surrender the premises to
Landlord oil the expiration date, in broom-clean condition and in as
good condition as when Tenant took possession, except for (i)
reasonable wear and tear; (ii) loss by fire or other casualty; and
(iii) loss by condemnation. Tenant shall, on Landlord's request, remove
Tenant's property on or before the expiration and promptly repair all
damage to the premises or building caused by such removal.
(b) If Tenant abandons or surrenders the premises, or is dispossessed
by process of law or otherwise, Tenant shall remove its personal
property from the Premises. If Tenant fails to remove its personal
property, Landlord, at its option may treat such failure as a hold over
as defined in the Lease, and/or may (without liability to Tenant for
loss thereof), at
Landlord: _____ Tenant: _____
19
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Tenant's sole cost and in addition to Landlord's other rights and
remedies under this Lease, at law or in equity: (a) remove and store
such items; and /or (b) upon ten days prior notice to Tenant, sell all
or any such items at private or public sale for such price as Landlord
at its discretion may obtain. Landlord shall apply the proceeds of any
such sale to any amounts due to Landlord under this Lease from Tenant
(including Landlord's attorneys fees and other costs incurred in the
removal, storage and/or sale of such items), with any remainder to be
paid to Tenant.
30.01 Tenant Improvements: Landlord shall perform, or cause to be
performed, certain Tenant Improvements ("Tenant Improvements") to the
Premises as set forth in Exhibit C ("Space Plan"), attached and made a
part hereof and mutually agreed upon by Landlord and Tenant. In no
event shall Landlord incur any cost in connection with the Tenant
Improvements in excess of $8,000.00 ("Landlord's Share") which includes
the cost of all materials, labor, permit fees, inspection fees,
architectural fees and Landlord's 5% construction management fee,
computed upon Landlord's Share only. All improvement costs in excess of
Landlord's Share shall be borne solely by Tenant ("Tenant's Share").
Tenant's Share, if any, shall be paid by Tenant as additional rent,
one-half upon construction commencement and the balance upon occupancy.
Within five (5) days following full execution of this Lease, Tenant
shall deliver sufficient instruction to enable Landlord's architect and
engineers to prepare complete plans and specifications, ("Construction
Drawings"). in the event that the information submitted by Tenant is
not sufficient for such purposes, Landlord shall notify Tenant within
ten (10) business days after receipt thereof specifying the reasons
wily the information provided by Tenant is not sufficient. Within five
(5) business days thereafter, Tenant shall provide to
Landlord the information which Landlord has requested in a form
sufficient to permit Landlord's architect to proceed with the
preparation of the Construction Drawings.
When the architect has completed the Construction Drawings, Landlord
shall submit to Tenant such Construction Drawings for approval or
revision. Tenant shall approve the Construction Drawings, or provide
sufficient information to architect to make revisions within five (5)
business days of submission by Landlord. Tenant's approval of such
Construction Drawings shall not be unreasonably withheld or delayed.
After receipt and approval by Tenant of the Construction Drawings,
Landlord shall perform, or cause to be performed the Tenant
Improvements Substantially in accordance with the Construction Drawings
provided, however, that Landlord may make non-material changes in
design or construction which are necessary in the judgment of Landlord
or its architects, contractors, agents, or representatives. Tenant also
may alter or modify the Construction Drawings at any time, but any such
change, alteration, or modification is subject to Landlord's reasonable
approval, and must conform to all relevant building codes, ordinances,
regulations energy regulations, and any other governmental
requirements. The cost of such change, alteration, or modification by
the Tenant shall be at the Tenant's sole cost and expense.
The cost of any changes and/or additions made to the Premises at the
request or Tenant after Landlord and Tenant have agreed on the
Construction Drawings, including, but not limited to, (lie actual cost
of such changes and/or additions, the cost of revisions in the
Landlord: _____ Tenant: _____
20
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plans and specifications and the cost of any delays in construction,
whether or not such changes are finally agreed to, shall be paid upon
Landlord's presentation of a bill therefore, such amount shall be
treated as additional rent.
All work not within the scope of Landlord's construction of the
Premises, such as the furnishing and installation of floor covering
other than Building Standard, furniture, telephone equipment, and
office equipment, shall be furnished and installed by Tenant at
Tenant's expense. Tenant shall conduct its work in such a manner as to
maintain harmonious labor relations and as to not to interfere
unreasonably with or delay the work of Landlord's contractors or the
subcontractors of other tenants. Tenant's contractors, subcontractors,
and labor shall be reasonably approved by Landlord and shall be subject
to the administration supervision of Landlord's construction
supervisor. Contractors and subcontractors engaged by Tenant shall
employ persons and means to insure so far as may be possible the
progress of the work without interruption on account of strikes, work
stoppages, or similar causes for delay. Landlord shall give access to
the Premises to Tenant to adapt the Premises for Tenant's use provided,
however, that if such entry is prior to tire Rent Commencement Date,
such entry shall be subject to all of the terms and conditions of the
Lease except the payment of rent, and such entry shall not delay the
Rent Commencement Date. All work performed by Tenant or at Tenant's
expense shall conform to and comply with any and all local, state, and
federal building codes, ordinances, and the N.F.P.A. Life Safety Code.
31.01 Indemnification: The Tenant will indemnify and hold harmless the
Landlord against and from any and all claims arising from (i) the
Tenant's occupancy of the Premises, (including, but not limited to,
statutory liability and liability under workers' compensation laws),
(ii) any breach or default in the performance of any obligation on the
Tenant's part to be performed under the terms of this Lease, (iii) any
act or negligence of the Tenant, or any officer, agent, employee,
guest, or invitee of the Tenant, (iv) all costs, reasonable attorneys'
fees, expenses and liabilities incurred in or about any such claim or
any action or proceeding brought thereon, and, in any case, action or
proceeding brought against the Landlord by reason of any such claim.
The Tenant upon notice from the Landlord will defend the same at the
Tenant's expense.
The Tenant, as a material part of the consideration to the Landlord
assumes all risk of damage to property or injury to persons, in, upon
or about the Premises, (i) except that the Tenant does not assume any
risk for damage to the Tenant resulting from the willful misconduct or
gross negligence of the Landlord or its authorized representatives,
(ii) from any cause whatsoever except that which is caused by the
failure of the Landlord to observe any of the terms and conditions of
the Lease if such failure has persisted for air unreasonable period of
time after written notice of such failure.
The Landlord is not liable for any claims, costs or liabilities arising
out of or in connection with the acts or omissions of any other tenants
in the Building. The Tenant waives all of its claims in respect there
of against the Landlord.
Landlord: _____ Tenant: _____
21
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32.01 Insurance By Tenant: Tenant shall, during the Lease Term, procure
at its expense and keep in force the following insurance:
(1) Commercial general liability insurance naming the Landlord as an
additional insured against any and all claims for bodily injury and
property damage occurring in, or about the Premises arising out of
Tenant's use and occupancy of the Premises. Such insurance shall have a
combined single limit of not less than One Million Dollars ($1,000,000)
per occurrence with a Two Million Dollar ($2,000,000) aggregate limit
and excess umbrella liability insurance in the amount of Two Million
Dollars ($2,000,000). If the Tenant has other locations that it owns or
leases, the policy shall include ail aggregate limit per location
endorsement. Such liability insurance shall be primary and riot
contributing to any insurance available to Landlord and Landlord's
insurance shall be in excess thereto. In no event shall the limits of
such insurance be considered as limiting the liability or Tenant under
this lease.
(2) Personal property insurance insuring all equipment, trade fixtures,
inventory, fixtures and personal property located on or in the Premises
for perils covered by the cause of loss - special form (all risk)
except, coverage for flood, earthquake and boiler and machinery. Such
insurance shall be written on a replacement cost basis in an amount
equal to one hundred percent (100%) of the full replacement value of
the aggregate of the foregoing.
(3) Workers' compensation insurance in accordance with statutory law
and employers' liability insurance with a limit of not less than
$100.000 per employee and $500,000 per occurrence.
(4) Such other insurance as Landlord deems reasonably necessary and
prudent or required by Landlord's beneficiaries or mortgages of any
deed of trust or mortgage encumbering the Premises.
The policies required to be maintained by Tenant shall be with
companies rated AX or better in the most current issue of Best's
Insurance Reports. Insurers shall be licensed to do business in the
state in which the Premises are located and domiciled in the USA. Any
deductible amounts under any insurance policies required hereunder
shall not exceed S 1,000. Certificates of insurance (certified copies
of the policies may be required) shall be delivered to Landlord prior
to the commencement date and annually thereafter at least thirty (30)
days prior to the expiration date of the old policy. Tenant shall have
the right to provide insurance coverage which it is obligated to carry
pursuant to the terms hereof in a blanket policy, provided such blanket
policy expressly affords coverage to the Premises and to Landlord as
required by this Lease. Each policy of insurance shall provide
notification to Landlord at least thirty (30) (lays prior to any
cancellation or modification to reduce the insurance coverage.
This clause shall supplement the clause in the body of the Lease
Paragraph 16.01.
33.01 Waiver of Subrogation: Landlord and Tenant hereby mutually waive
their respective rights to recovery against each other for any loss of,
or damage to, either parties' property, to the extent that such loss or
damage is insured by an insurance policy required
Landlord: _____ Tenant: _____
22
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by its insurer whereby the insurer waives its rights of subrogation
against the other party. The provisions of this clause shall not apply
in those instances in which waiver of subrogation would cause either
party's insurance coverage to be voided or otherwise made
uncollectible.
34.01 Acceptance of Premises/Tenant Improvements: Tenant acknowledges
that it has inspected the Premises, knows the condition thereof, and
accepts such Premises, and specifically the buildings and improvements
comprising the same, in their present condition, as suitable for the
purposes for which the Premises are leased, subject to Landlord's
completion of the Tenant Improvements described in Paragraph 30.01. If
this lease is executed before the Premises become vacant or otherwise
available and ready for occupancy, of if any present tenant or occupant
of the Premises holds over, and Landlord cannot, using good faith
efforts, acquire possession of the Premises prior to the date above
recited as the commencement date of this lease, Landlord shall not be
deemed to be in default hereunder, nor in any way liable to Tenant
because of such failure, and Tenant agrees to accept possession of the
Premises at such time as Landlord is able to tender the same.
35.01 Insurance By Landlord: Landlord shall, during the Lease Term,
procure and keep in force the following insurance, the cost of which
shall be deemed as Tenant's Proportionate Share of Operating Costs
payable, by Tenant pursuant to Paragraph 7.02: (1) Property insurance
insuring the building and improvements and rental value insurance for
perils covered by the causes of loss - special form (all risk) and in
addition coverage for flood, earthquake and boiler and machinery (if
applicable). Such coverage (except for flood and earthquake) shall be
written oil a replacement cost basis equal to ninety percent (90%) of
the full insurable replacement value of the foregoing and shall not
cover Tenant's equipment, trade fixtures, inventory, fixtures or
personal property located on or in the Premises.
(2) Commercial general liability insurance against any and all claims
for bodily injury and property damage occurring in or about the
Building or the Land. Such insurance shall have a combined single limit
of not less than One Million Dollars ($1,000,000) per occurrence per
location with a Two Million Dollar ($2,000,000) aggregate limit.
(3) Such other insurance as Landlord deems necessary and prudent or
required by Landlord's beneficiaries or mortgages of any deed of trust
or mortgage encumbering the Premises.
36.01 ADA - General Compliance: Tenant, at Tenant's sole expense, shall
comply with all laws, rules, orders, ordinances, directions,
regulations and requirements of federal, state, county and municipal
authorities now in force or which may hereafter be in force, which
shall impose any duty upon the Landlord or Tenant with respect to the
use, occupation or alteration of the premises, and that the Tenant
shall use all reasonable efforts to fully comply with the Americans
With Disabilities Act.
Landlord: _____ Tenant: _____
23
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37.01 Hazardous Substance - General: The term "Hazardous Substances,"
as used in this lease shall mean pollutants, contaminants, toxic or
hazardous wastes, or any other substances the use and/or the removal of
which is required or the use of which is restricted, prohibited or
penalized by any "Environmental Law," which term shall mean any
federal, state or local law, ordinance or other statute of a
governmental or quasi-governmental authority relating to pollution or
protection of the environment. Lessee hereby agrees that (i) no
activity will be conducted oil the premises that will produce any
Hazardous Substance, except for such activities that arc part of the
ordinary course of Lessee's business activities (the "Permitted
Activities") provided said Permitted Activities are conducted in
advance in writing by Lessor; Lessee shall be responsible for obtaining
my required permits and paying any fees and providing any testing
required by any governmental agency, (ii) the premises will not be used
in any manner for the storage of any hazardous Substances except for
the temporary storage of such materials that arc used in the ordinary
course of Lessee's business (the "Permitted Materials") provided such
permitted Materials are properly stored in a manner and location
meeting all Environmental Laws and approved in advance in writing by
Lessor; Lessee shall be responsible for obtaining any required permits
and paying any fees and providing any testing required by any
governmental agency; (iii) no portion of the premises will be used as a
landfill or a dump; (iv) Lessee will not install any underground tanks
of any type; (v) Lessee will not allow any surface or subsurface
conditions to exist or come into existence that constitute, or with the
passage of time may constitute a public or private nuisance; (vi)
Lessee will not permit any Hazardous Substances to be brought into the
premises, except for the Permitted Materials described below, and if so
brought or found located thereon, the same shall be immediately
removed, with proper disposal, and all required cleanup procedures
shall be diligently undertaken pursuant to all Environmental Laws.
Lessor or Lessor's representative shall have the right but not the
obligation to enter the premises for the purpose of inspecting the
storage, use and disposal of Permitted Materials to ensure compliance
with all Environmental Laws. Should it be determined, in Lessor's sole
opinion, that said Permitted Materials are being improperly stored,
used, or disposed of, then Lessee shall immediately take such
corrective action as requested by Lessor. Should Lessee fail to take
such corrective action within 24 hours, Lessor shall have the right to
perform such work and Lessee shall promptly reimburse Lessor for any
and all costs associated with said work. If at any time during or after
the term of the lease, the premises is found to be so contaminated or
subject to said conditions, Lessee shall diligently institute proper
and thorough cleanup procedures at Lessee's sole cost, and Lessee
agrees to indemnify and hold Lessor harmless from all claims, demand,
actions, liabilities, costs, expenses, damages and obligations of any
nature arising from or as a result of the use of the premises by
Lessee. The foregoing indemnification and the responsibilities of
Lessee shall survive the termination or expiration of this Lease.
38.01 Intentionally Deleted
39.01 Brokers Disclosure: Tenant covenants, warrants and represents
that no broker or finder except Trammell Crow Realty Services, Inc.
("Broker") was instrumental in consummating this Lease and that Tenant
has had no conversations or negotiations with any broker, except
Broker, concerning the subject matter of this Lease. Tenant agrees
Landlord: _____ Tenant: _____
24
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hereby to indemnify and hold Landlord harmless against and from any and
all claims for any brokerage commissions or fees and all costs,
expenses and liabilities, including, without limitation, attorneys'
fees and expenses, arising out of any conversations or negotiations had
by Tenant with any broker, except Broker, or any breach of the
foregoing covenant, warranty and representation.
40.01 Prevailing Party: The parties hereto shall have all remedies
existing in law and equity to enforce the terms of or obligations
arising out of the Lease. In the event any legal action or proceeding
is commenced to interpret or enforce the terms of or obligations
arising out of the Lease, or to recover damages for the breach thereof,
the party prevailing in any such action or proceeding shall be entitled
to recover reasonable attorney's fees, court costs and expenses, at
both trial and appellate levels.
41.01 Waiver of Jury Trial, Right To Counterclaim and Right of
Redemption: It is mutually agreed by and between Landlord and Tenant
that, to the fullest extent allowed by law, the respective parties
hereto do hereby waive trial by jury in any action, proceeding or
counterclaim brought by either party hereto against the other
pertaining to any matter whatsoever arising out of or in any way
connected with this Lease, Tenant's use of occupancy of the Premises or
any claim of in-jury or damage. It is further mutually agreed that in
the event Landlord commences any summary proceeding for possession of
the Premises, Tenant will not interpose any counterclaim of whatever
nature or description in any such proceeding but, rather, will assert
any Such claim which Tenant might have in a separate independent
action. Furthermore, Tenant hereby expressly waives ally and all rights
of redemption granted by or under any present or future laws in the
event of Tenant's being evicted or dispossessed for any cause, or in
the event of Landlord's obtaining possession of the Premises, by reason
of the violation by Tenant of any of the covenants and conditions of
this Lease, or otherwise to redeem and repossess the Premises, or any
part thereof, or to reinstate this Lease.
The parties intending to be bound hereby execute or cause this Lease to
be executed this 26th day of June, 1998.
<TABLE>
<S> <C>
WITNESSES: LANDLORD: Principal Mutual Life Insurance Company
________________________________ _________________________________________________
By:
________________________________ Title:___________________________________________
WITNESSES: TENANT:
________________________________ _________________________________________________
By:
________________________________ Title:___________________________________________
</TABLE>
Landlord: _____ Tenant: _____
25
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EXHIBIT C
LANDLORD'S WORK
Install two restrooms
Landlord: _____ Tenant: _____
<PAGE>
Quorum 5
EXHIBIT A
LEGAL DESCRIPTION
Approximately 12,070 square fee of office and/or warehouse space located in a
building containing approximately 73,052 square feet situated on a portion of
approximately 15.2046 acres on Lots 3, 4 and 5 Deerfield Commerce Par, according
to the plat thereof as recorded in Plat Book 111, page 15, of the Public Records
of Broward County, Florida and being more particularly described as 746 South
Military Trail, Deerfield Beach, Florida. Further described as Quorum Business
Center #5 situated within a development known as Quorum Business Center
consisting of approximately 408,874 square feet.
Landlord: _____ Tenant: _____
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT
BETWEEN PRINCIPAL MUTUAL LIFE INSURANCE COMPANY,
AN IOWA CORPORATION, ("LANDLORD") AND
PEREGRINE INDUSTRIES, INC., A FLORIDA CORPORATION ("TENANT")
FOR PREMISES LOCATED AT
730 South Military Trail, Deerfield Beach, Florida 33442
THIS FIRST AMENDMENT TO LEASE is made this 29th day of June, 1998 between
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, ("Landlord") and PEREGRINE INDUSTRIES,
INC., A FLORIDA CORPORATION, ("Tenant").
BACKGROUND
By the Original Lease dated August 22, 1996 referred above, Landlord leased to
Tenant approximately 16,008 square feet at 730 South Military Trail, Deerfield
Beach, Florida. The Original Lease together with the First Amendment to Lease
are hereinafter defined as "the Lease".
At this time, Landlord and Tenant wish to extend the term of the Lease and
modify the Base Rent.
AGREEMENT
In consideration of the mutual promises of the parties, intending to be legally
bound, hereby agree as follows:
1. Term: The Lease is hereby amended and extended for a period of 46
Months, beginning November 1, 1999 and expiring August 30, 2003
("Extended Term").
2. Base Rent: The Base Rent outlined in Paragraph 3.01 of the Lease and
Paragraph 29.01 of the Rider to Lease is hereby amended according to
the following schedule:
<TABLE>
<CAPTION>
Month of Monthly Annual
Extended Term Base Rent Base Rent
------------- --------- ---------
<S> <C> <C>
November 1, 1999 - October 31, 2000 $6,331.51 $75,978.12
November 1, 2000 - October 31, 2001 $6,648.09 $79,777.08
November 1, 2001 - October 31, 2002 $6,980.50 $83,766.00
November 1, 2002 - August 30, 2003 $7,329.53 $87,954.36
</TABLE>
3. Operating Costs: Tenant will continue to pay its proportionate share of
Operating Costs during the Extended Term as defined in Paragraph's 7.01
and 7.02 of the Lease.
4. Miscellaneous: Except as set forth in this First Amendment, the Lease
is not otherwise modified and where the provisions of this First
Amendment conflict with the Lease, this First Amendment shall override.
1
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT
BETWEEN PRINCIPAL MUTUAL LIFE INSURANCE COMPANY,
AN IOWA CORPORATION, ("LANDLORD") AND
PEREGRINE INDUSTRIES, INC., A FLORIDA CORPORATION ("TENANT")
FOR PREMISES LOCATED AT
730 South Military Trail, Deerfield Beach, Florida 33442
The parties intending to be bound hereby execute or cause this First
Amendment to be executed this 29th day of June, 1998.
WITNESSES: LANDLORD:
Principal Mutual Life Insurance Company,
an Iowa corporation
____________________________________ By: /s/ David P. Ellingson
------------------------------------
David P. Ellingson
____________________________________ Title: Vice President and Associate
General Counsel
TENANT:
Peregrine Industries, Inc., A Florida
corporation
____________________________________ By: /s/ Merrill A. Yarbrough
------------------------------------
____________________________________ Title: President
2
<PAGE>
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE, dated this 22nd day of August, 1996, by and
between Principal Life Insurance Company, an Iowa corporation whose address is
c/o Trammell Crow Company, 1515 South Federal Highway, Suite 113, Boca Raton,
Florida 33432 ("Landlord"), and Peregrine Industries, Inc., a Florida
corporation, whose address is 730 South Military Trail, Deerfield Beach, Florida
33442 (Tenant).
WITNESSETH:
Landlord hereby demises and leases unto Tenant and Tenant hereby hires
and takes from Landlord, upon and subject to the covenants and agreements set
forth in that certain Lease dated August 22, 1996, (the "Lease"), made between
Landlord and Tenant, certain premises ("Demised Premises") comprising part of
the commercial real property known as Quorum Business Center Buildings 2-6,
located upon the tract of land described in Exhibit A attached hereto and made a
part hereof, and consisting of the parcel of land, together with the building(s)
erected thereon.
Landlord and Tenant desire to record this Memorandum of Lease for the
purpose of placing the public on notice of inquiry as to the specific
provisions, terms, covenants and conditions of the Lease, all of which are
incorporated herein by reference with the same force and effect as if herein set
forth in full. Specifically, the Lease contains, among others, the following
covenants and agreements between the parties:
"Neither Tenant nor anyone claiming by, through or under Tenant,
including, without limitation, contractors, subcontractors, materialmen,
mechanics and laborers, shall have any right to file or place mechanic's,
materialmen's or other liens of any kine whatsoever upon the demised premises or
upon the tract of land described on Exhibit A, or any portion thereof; on the
contrary, any such liens are specifically prohibited and shall be null and void
and of no further force or effect."
Notice is hereby given pursuant to Section 713.10, Florida Statutes,
that the Lease contains the following provision:
"Tenant has no power to subject Landlord's interest in the demised
premises to any claim of lien of any kind or character and any persons dealing
with Tenant must look solely to the credit of the Tenant for payment."
This Memorandum of Lease is being recorded in lieu of recording the
Lease itself for the purpose of placing the public on notice or inquiry as to
the specific provisions, terms, covenants and conditions thereof, and nothing
herein contained is intended to or does change, modify or affect any of the
terms or provisions of the Lease or the rights, duties, obligations, easements
and covenants running with the land created hereby, all of which remain in full
force and effect.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have duly executed and sealed
this Notice of No Liability as of the day and year first above written.
TENANT: Peregrine Industries, Inc.,
a Florida corporation
By: /s/ Merrill A. Yarbrough
----------------------------------
Signature
Merrill A. Yarbrough
---------------------------------
Printed signature
Its: President
3431 S.W. 11 Street, Deerfield FL 33442
Post Office Address
2
Trammell Crow Company
1515 South Federal Highway
Suite 113
Boca Raton, FL 33432
561-394-3388
561-394-4414 fax
October 8, 1996
Mr. Merrill Yarbrough
President
Peregrine Industries, Inc.
730 South Military Trail
Deerfield Beach, FL 33442
Dear Mr. Yarbrough:
Please let this letter serve to document our understanding that the premises at
730 South Military Trail, Deerfield Beach, Florida is ready for occupancy as of
October 14, 1996. Under the terms of the Lease Agreement dated August 22, 1996,
the rental and any other monthly expenses such as operating expenses for the
facility will accrue from October 14, 1996.
The Rent Commencement Date of the Lease Agreement shall be established as
October 14, 1996 and the expiration date shall be established as October 31,
1999.
Please indicate your acceptance of the above by signing one copy of this letter
and returning it to us.
Sincerely, AGREED AND ACCEPTED:
TRAMMELL CROW COMPANY PEREGRINE INDUSTRIES, INC.
/s/ Andy Petry By: /s/ Merrill A. Yarbrough
- ------------------------------------ -----------------------------------
Andy Petry, Marketing Representative Merrill A. Yarbrough, President
PEREGRINE INDUSTRIES, INC.
1998 STOCK OPTION PLAN
1. Grant of Options; Generally. In accordance with the provisions
hereinafter set forth in this stock option plan, the name of which is the
PEREGRINE INDUSTRIES, INC. 1998 STOCK OPTION PLAN (the "Plan"), the Board of
Directors (the "Board") or, the Compensation Committee (the "Stock Option
Committee") of PEREGRINE INDUSTRIES, INC. (the "Corporation") is hereby
authorized to issue from time to time on the Corporation's behalf to any one or
more Eligible Persons, as hereinafter defined, options to acquire shares of the
Corporation's $.0001 par value common stock (the "Stock").
2. Type of Options. The Board or the Stock Option Committee is
authorized to issue Incentive Stock Options ("ISOs") which meet the requirements
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
which options are hereinafter referred to collectively as ISOs, or singularly as
an ISO. The Board or the Stock Option Committee is also, in its discretion,
authorized to issue options which are not ISOs, which options are hereinafter
referred to collectively as Non Statutory Options ("NSOs"), or singularly as an
NSO. The Board or the Stock Option Committee is also authorized to issue "Reload
Options" in accordance with Paragraph 9 herein, which options are hereinafter
referred to collectively as Reload Options, or singularly as a Reload Option.
Except where the context indicates to the contrary, the term "Option" or
"Options" means ISOs, NSOs and Reload Options.
3. Amount of Stock. The aggregate number of shares of Stock which may
be purchased pursuant to the exercise of Options shall be 1,000,000 shares. Of
this amount, the Board or the Stock Option Committee shall have the power and
authority to designate whether any Options so issued shall be ISOs or NSOs,
subject to the restrictions on ISOs contained elsewhere herein. If an Option
ceases to be exercisable, in whole or in part, the shares of Stock underlying
such Option shall continue to be available under this Plan. Further, if shares
of Stock are delivered to the Corporation as payment for shares of Stock
purchased by the exercise of an Option granted under this Plan, such shares of
Stock shall also be available under this Plan. If there is any change in the
number of shares of Stock due to of the declaration of stock dividends,
recapitalization resulting in stock split-ups, or combinations or exchanges of
shares of Stock, or otherwise, the number of shares of Stock available for
purchase upon the exercise of Options, the shares of Stock subject to any Option
and the exercise price of any outstanding Option shall be appropriately adjusted
by the Board or the Stock Option Committee. The Board or the Stock Option
Committee shall give notice of any adjustments to each Eligible Person granted
an Option under this Plan, and such adjustments shall be effective and binding
on all Eligible Persons. If because of one or more recapitalizations,
reorganizations or other corporate events, the holders of outstanding Stock
receive something other than shares of Stock then, upon exercise of an Option,
the Eligible Person will receive what the holder would have owned if the holder
had exercised the Option immediately before the first such corporate event and
not disposed of anything the holder received as a result of the corporate event.
The number of shares of Common Stock subject to this Plan (and not subject to
outstanding Option grants) shall not subsequently be
<PAGE>
affected by any forward or reverse stock splits or recapitalizations undertaken
by the Company.
A. Eligible Persons.
(a) With respect to ISOs, an Eligible Person means any individual who
has been employed by the Corporation or by any subsidiary of the Corporation,
for a continuous period of at least sixty (60) days.
(b) With respect to NSOs, an Eligible Person means (i) any individual
who has been employed by the Corporation or by any subsidiary of the
Corporation, for a continuous period of at least sixty (60) days, (ii) any
director of the Corporation or any subsidiary of the Corporation or (iii) any
consultant of the Corporation or any subsidiary of the Corporation.
Grant of Options. The Board or the Stock Option Committee has the
right to issue the Options established by this Plan to Eligible Persons. The
Board or the Stock Option Committee shall follow the procedures prescribed for
it elsewhere in this Plan. A grant of Options shall be set forth in a writing
signed on behalf of the Corporation or by a majority of the members of the Stock
Option Committee. The writing shall identify whether the Option being granted is
an ISO, an NSO or Reload Option and shall set forth the terms which govern the
Option. The terms shall be determined by the Board or the Stock Option
Committee, and may include, among other terms, the number of shares of Stock
that may be acquired pursuant to the exercise of the Options, when the Options
may be exercised, the period for which the Option is granted and including the
expiration date, the effect on the Options if the Eligible Person terminates
employment, whether the Eligible Person may deliver shares of Stock or other
consideration to pay for the shares of Stock to be purchased by the exercise of
the Option, and such other terms and conditions whether or not specifically
provided for under the terms hereinafter set forth. However, no term shall be
set forth in the writing which is specifically inconsistent with any of the
terms of this Plan. The terms of an Option granted to an Eligible Person may
differ from the terms of an Option granted to another Eligible Person, and may
differ from the terms of an earlier Option granted to the same Eligible Person.
1. Option Price. The option price per share shall be determined by the
Board or the Stock Option Committee at the time any Option is granted, and shall
be not less than (i) in the case of an ISO, the fair market value, (ii) in the
case of an ISO granted to a 10% or greater stockholder, 110% of the fair market
value, or (iii) in the case of an NSO, not less than the par value thereof, as
determined by the Board or the Stock Option Committee. Fair market value as used
herein shall be:
(a) If shares of Stock shall be traded on an exchange or
over-the-counter market, the mean between the high and low sales prices of Stock
on such exchange or over-the-counter market on which such shares shall be traded
on that date, or if such exchange or over-the-counter market is closed or if no
shares shall have traded on such date, on the last preceding date on which such
shares shall have traded.
2
<PAGE>
(b) If shares of Stock shall not be traded on an exchange or
over-the-counter market, the value as determined by a recognized appraiser as
selected by the Board or the Stock Option Committee.
2. Purchase of Shares. An Option shall be exercised by the tender to
the Corporation of the full purchase price of the Stock with respect to which
the Option is exercised and written notice of the exercise. The purchase price
of the Stock shall be in United States dollars, payable in cash, check,
Promissory Note secured by the Shares issued through exercise of the related
Options, or in property, Corporation stock, or other consideration if so
permitted by the Board or the Stock Option Committee in accordance with the
discretion granted in Paragraph 5 hereof, having a value equal to such purchase
price. The Corporation shall not be required to issue or deliver any
certificates for shares of Stock purchased upon the exercise of an Option prior
to (i) if requested by the Corporation, the filing with the Corporation by the
Eligible Person of a representation in writing that it is the Eligible Person's
then present intention to acquire the Stock being purchased for investment and
not for resale, and/or (ii) the completion of any registration or other
qualification of such shares under any government regulatory body, which the
Corporation shall determine to be necessary or advisable.
3. Grant of Reload Options. In granting an Option under this Plan, the
Board or the Stock Option Committee may include a Reload Option provision
therein, subject to the provisions set forth in Paragraphs 19 and 20 herein. A
Reload Option provision provides that if the Eligible Person pays the exercise
price of shares of Stock to be purchased by the exercise of an ISO, NSO or
another Reload Option (the "Original Option") by delivering to the Corporation
shares of Stock already owned by the Eligible Person (the "Tendered Shares"),
the Eligible Person shall receive a Reload Option which shall be a new Option to
purchase shares of Stock equal in number to the tendered shares. The terms of
any Reload Option shall be determined by the Board or the Stock Option Committee
consistent with the provisions of this Plan.
4. Stock Option Committee. The Stock Option Committee may be appointed
from time to time by the Corporation's Board of Directors. The Board may from
time to time remove members from or add members to the Stock Option Committee.
The Stock Option Committee shall be constituted so as to permit the Plan to
comply in all respects with the provisions set forth in Paragraph 9 herein. The
members of the Stock Option Committee may elect one of its members as its
chairman. The Stock Option Committee shall hold its meetings at such times and
places as its chairman shall determine. A majority of the Stock Option
Committee's members present in person shall constitute a quorum for the
transaction of business. All determinations of the Stock Option Committee will
be made by the majority vote of the members constituting the quorum. The members
may participate in a meeting of the Stock Option Committee by conference
telephone or similar communications equipment by means of which all members
participating in the meeting can hear each other. Participation in a meeting in
that manner will constitute presence in person at the meeting. Any decision or
determination reduced to writing and signed by all members of the Stock Option
Committee will be effective as if it had been made by a majority vote of all
members of the Stock Option Committee at a meeting which is duly called and
held.
3
<PAGE>
5. Administration of Plan. In addition to granting Options and to
exercising the authority granted to it elsewhere in this Plan, the Board or the
Stock Option Committee is granted the full right and authority to interpret and
construe the provisions of this Plan, promulgate, amend and rescind rules and
procedures relating to the implementation of the Plan and to make all other
determinations necessary or advisable for the administration of the Plan,
consistent, however, with the intent of the Corporation that Options granted or
awarded pursuant to the Plan comply with the provisions of Paragraph 19 and 20
herein. All determinations made by the Board or the Stock Option Committee shall
be final, binding and conclusive on all persons including the Eligible Person,
the Corporation and its stockholders, employees, officers and directors and
consultants. No member of the Board or the Stock Option Committee will be liable
for any act or omission in connection with the administration of this Plan
unless it is attributable to that member's willful misconduct.
6. Provisions Applicable to ISOs. The following provisions shall apply
to all ISOs granted by the Board or the Stock Option Committee and are
incorporated by reference into any writing granting an ISO:
(a) An ISO may only be granted within ten (10) years from May 1,
1998, the date that this Plan was originally adopted by the Corporation's Board
of Directors.
(b) An ISO may not be exercised after the expiration of ten (10)
years from the date the ISO is granted.
(c) The option price may not be less than the fair market value of
the Stock at the time the ISO is granted.
(d) An ISO is not transferrable by the Eligible Person to whom it is
granted except by will, or the laws of descent and distribution, and is
exercisable during his or her lifetime only by the Eligible Person.
(e) If the Eligible Person receiving the ISO owns at the time of the
grant stock possessing more than ten (10%) percent of the total combined voting
power of all classes of stock of the employer corporation or of its parent or
subsidiary corporation (as those terms are defined in the Code), then the option
price shall be at least 110% of the fair market value of the Stock, and the ISO
shall not be exercisable after the expiration of five (5) years from the date
the ISO is granted.
(f) The aggregate fair market value (determined at the time the ISO
is granted) of the Stock with respect to which the ISO is first exercisable by
the Eligible Person during any calendar year (under this Plan and any other
incentive stock option plan of the Corporation) shall not exceed $100,000.
4
<PAGE>
(g) Even if the shares of Stock which are issued upon exercise of an
ISO are sold within one year following the exercise of such ISO so that the sale
constitutes a disqualifying disposition for ISO treatment under the Code, no
provision of this Plan shall be construed as prohibiting such a sale.
(h) This Plan was adopted by the Corporation on May 1, 1998, by
virtue of its approval by the Corporation's Board of Directors and by the
stockholders of the Corporation.
7. Determination of Fair Market Value. In granting ISOs under this
Plan, the Board or the Stock Option Committee shall make a good faith
determination as to the fair market value of the Stock at the time of granting
the ISO.
8. Restrictions on Issuance of Stock. The Corporation shall not be
obligated to sell or issue any shares of Stock pursuant to the exercise of an
Option unless the Stock with respect to which the Option is being exercised is
at that time effectively registered or exempt from registration under the
Securities Act of 1933, as amended, and any other applicable laws, rules and
regulations. The Corporation may condition the exercise of an Option granted in
accordance herewith upon receipt from the Eligible Person, or any other
purchaser thereof, of a written representation that at the time of such exercise
it is his or her then present intention to acquire the shares of Stock for
investment and not with a view to, or for sale in connection with, any
distribution thereof; except that, in the case of a legal representative of an
Eligible Person, "distribution" shall be defined to exclude distribution by will
or under the laws of descent and distribution. Prior to issuing any shares of
Stock pursuant to the exercise of an Option, the Corporation shall take such
steps as it deems necessary to satisfy any withholding tax obligations imposed
upon it by any level of government.
9. Exercise in the Event of Death of Termination or Employment.
(a) Except as may otherwise be provided under the terms of the
Option, if an optionee shall die (i) while an employee of the Corporation or a
Subsidiary or (ii) within three months after termination of his employment with
the Corporation or a Subsidiary because of his disability, or retirement or
otherwise, his Options may be exercised, to the extent that the optionee shall
have been entitled to do so on the date of his death or such termination of
employment, by the person or persons to whom the optionee's right under the
Option pass by will or applicable law, or if no such person has such right, by
his executors or administrators, at any time, or from time to time. In the event
of termination of employment because of his death while an employee or because
of disability, his Options may be exercised not later than the expiration date
specified in Paragraph 5 or one year after the optionee's death, whichever date
is earlier, or in the event of termination of employment because of retirement
or otherwise, not later than the expiration date specified in Paragraph 5 hereof
or one year after the optionee's death, whichever date is earlier.
(b) Except as may otherwise be provided under the terms of the
Option, if an optionee's employment by the Corporation or a Subsidiary shall
terminate because of his disability
5
<PAGE>
and such optionee has not died within the following three months, he may
exercise his Options, to the extent that he shall have been entitled to do so at
the date of the termination of his employment, at any time, or from time to
time, but not later than the expiration date specified in Paragraph 5 hereof or
one year after termination of employment, whichever date is earlier.
(c) If an optionee's employment shall terminate by reason of his
retirement in accordance with the terms of the Corporation's tax-qualified
retirement plans if any, or with the consent of the Board or the Stock Option
Committee or involuntarily other than by termination for cause, and such
optionee has not died within the following three months, he may exercise his
Option to the extent he shall have been entitled to do so at the date of the
termination of his employment, at any time and from to time, but not later than
the expiration date specified in Paragraph 5 hereof or 30 days after termination
of employment, whichever date is earlier. For purposes of this Paragraph 14,
termination for cause shall mean; (i) termination of employment for cause as
defined in the optionee's Employment Agreement or (ii) in the absence of an
Employment Agreement for the optionee, termination of employment by reason of
the optionee's commission of a felony, fraud or willful misconduct which has
resulted, or is likely to result, in substantial and material damage to the
Corporation or a Subsidiary, all as the Board or the Stock Option Committee in
its sole discretion may determine.
(d) If an optionee's employment shall terminate for any reason other
than death, disability, retirement or otherwise, all right to exercise his
Option shall terminate at the date of such termination of employment absent
specific provisions in the optionee's Option Agreement.
10. Corporate Events. In the event of the proposed dissolution or
liquidation of the Corporation, a proposed sale of all or substantially all of
the assets of the Corporation, a merger or tender for the Corporation's shares
of Common Stock the Board of Directors may declare that each Option granted
under this Plan shall terminate as of a date to be fixed by the Board of
Directors; provided that not less than 30 days written notice of the date so
fixed shall be given to each Eligible Person holding an Option, and each such
Eligible Person shall have the right, during the period of 30 days preceding
such termination, to exercise his Option as to all or any part of the shares of
Stock covered thereby, including shares of Stock as to which such Option would
not otherwise be exercisable. Nothing set forth herein shall extend the term set
for purchasing the shares of Stock set forth in the Option.
11. No Guarantee of Employment. Nothing in this Plan or in any writing
granting an Option will confer upon any Eligible Person the right to continue in
the employ of the Eligible Person's employer, or will interfere with or restrict
in any way the right of the Eligible Person's employer to discharge such
Eligible Person at any time for any reason whatsoever, with or without cause.
12. Nontransferability. Except as may be provided under the terms of
any Option; no Option granted under the Plan shall be transferable other than by
will or by the laws of descent and distribution. During the lifetime of the
optionee, an Option shall be exercisable only by him.
6
<PAGE>
13. No Rights as Stockholder. No optionee shall have any rights as a
stockholder with respect to any shares subject to his Option prior to the date
of issuance to him of a certificate or certificates for such shares.
14. Amendment and Discontinuance of Plan. The Corporation's Board of
Directors may amend, suspend or discontinue this Plan at any time; however, no
such action may prejudice the rights of any Eligible Person who has prior
thereto been granted Options under this Plan. Further, no amendment to this Plan
which has the effect of (a) increasing the aggregate number of shares of Stock
subject to this Plan (except for adjustments pursuant to Paragraph 3 herein), or
(b) changing the definition of Eligible Person under this Plan, may be effective
unless and until approval of the stockholders of the Corporation is obtained in
the same manner as approval of this Plan is required. The Corporation's Board of
Directors is authorized to seek the approval of the Corporation's stockholders
for any other changes it proposes to make to this Plan which require such
approval, however, the Board of Directors may modify the Plan, as necessary, to
effectuate the intent of the Plan as a result of any changes in the tax,
accounting or securities laws treatment of Eligible Persons and the Plan,
subject to the provisions set forth in Paragraphs 18, 19 and 20.
15. Compliance with Rule 16b-3. This Plan is intended to comply in all
respects with Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), with respect to participants who are subject to Section 16 of
the Exchange Act, and any provision(s) herein that is/are contrary to Rule 16b-3
shall be deemed null and void to the extent appropriate by either the Stock
Option Committee or the Corporation's Board of Directors.
16. Compliance with Code. The aspects of this Plan on ISOs is intended
to comply in every respect with Section 422 of the Code and the regulations
promulgated thereunder. In the event any future statute or regulation shall
modify the existing statute, the aspects of this Plan on ISOs shall be deemed to
incorporate by reference such modification. Any stock option agreement relating
to any Option granted pursuant to this Plan outstanding and unexercised at the
time any modifying statute or regulation becomes effective shall also be deemed
to incorporate by reference such modification and no notice of such modification
need be given to optionee.
If any provision of the aspects of this Plan on ISOs is determined to
disqualify the shares purchasable pursuant to the Options granted under this
Plan from the special tax treatment provided by Code Section 422, such provision
shall be deemed null and void and to incorporate by reference the modification
required to qualify the shares for said tax treatment.
17. Compliance With Other Laws and Regulations. The Plan, the grant and
exercise of Options thereunder, and the obligation of the Corporation to sell
and deliver Stock under such options, shall be subject to all applicable federal
and state laws, rules, and regulations and to such approvals by any government
or regulatory agency as may be required. The Corporation shall not be required
to issue or deliver any certificates for shares of Stock prior to (a) the
listing of such shares on any stock exchange or over-the-counter market on which
the Stock may then be listed
7
<PAGE>
and (b) the completion of any registration or qualification of such shares under
any federal or state law, or any ruling or regulation of any government body
which the Corporation shall, in its sole discretion, determine to be necessary
or advisable. Moreover, no Option may be exercised if its exercise or the
receipt of Stock pursuant thereto would be contrary to applicable laws.
18. Disposition of Shares. In the event any share of Stock acquired by
an exercise of an Option granted under the Plan shall be transferable other than
by will or by the laws of descent and distribution within two years of the date
such Option was granted or within one year after the transfer of such Stock
pursuant to such exercise, the optionee shall give prompt written notice thereof
to the Corporation or the Stock Option Committee.
19. Name. The Plan shall be known as the "PEREGRINE INDUSTRIES, INC.
1998 Stock Option Plan."
20. Notices. Any notice hereunder shall be in writing and sent by
certified mail, return receipt requested or by facsimile transmission (with
electronic or written confirmation of receipt) and when addressed to the
Corporation shall be sent to it at its office, 730 South Military Trail,
Deerfield Beach, Florida 33442 and when addressed to the Board of Directors
shall be sent to it at 730 South Military Trail, Deerfield Beach, Florida 33442
subject to the right of either party to designate at any time hereafter in
writing some other address, facsimile number or person to whose attention such
notice shall be sent.
21. Headings. The headings preceding the text of Sections and
subparagraphs hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Plan nor shall they affect its meaning,
construction or effect.
22. Effective Date. This Plan, the PEREGRINE INDUSTRIES, INC. 1998
Stock Option Plan, was adopted by the Board of Directors of the Corporation on
May 1, 1998. The effective date of the Plan shall be the same date.
Dated as of May 1, 1998
PEREGRINE INDUSTRIES, INC.
By:_______________________
Merrill Yarbrough, President
8
<PAGE>
[NSO GRANT FORM]
PEREGRINE INDUSTRIES, INC.
730 South Military Trail
Deerfield Beach, Florida 33442
Date: __________
_______________________
_______________________
_______________________
Dear __________:
The Board of Directors of PEREGRINE INDUSTRIES, INC. (the
"Corporation") is pleased to award you an Option pursuant to the provisions of
the PEREGRINE INDUSTRIES, INC. 1998 Stock Option Plan (the "Plan"). This letter
will describe the Option granted to you. Attached to this letter is a copy of
the Plan. The terms of the Plan also set forth provisions governing the Option
granted to you. Therefore, in addition to reading this letter you should also
read the Plan. Your signature on this letter is an acknowledgment to us that you
have read and understand the Plan and that you agree to abide by its terms. All
terms not defined in this letter shall have the same meaning as in the Plan.
1. Type of Option. You are granted an NSO. Please see in particular
Section 11 of the Plan.
2. Rights and Privileges. Subject to the conditions hereinafter set
forth, we grant you the right to purchase __________ shares of Stock at
$__________ per share.
3. Time of Exercise. The Option may be exercised at any time and from
time to time beginning when the right to purchase the shares of Stock accrues
and ending when they terminate as provided in Section 5 of this letter.
4. Method of Exercise. The Options shall be exercised by written notice
to the Chairman of the Board of Directors at the Corporation's principal place
of business. The notice shall set forth the number of shares of Stock to be
acquired and shall contain a check payable to the Corporation in full payment
for the Stock or that number of already owned shares of Stock equal in value to
the total Exercise Price of the Option. We shall make delivery of the shares of
Stock subject to the conditions described in Section 13 of the Plan.
5. Termination of Option. To the extent not exercised, the Option shall
terminate upon the first to occur of the following dates:
<PAGE>
(a) __________, 199_, being __________ years from the date of grant
pursuant to the provisions of Section 2 of this Agreement; or
(b) The expiration of three months following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan for any reason, other than by reason of death or permanent
disability. As used herein, "permanent disability" means your inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months; or
(c) The expiration of 12 months following the date your employment
terminates with the Corporation and any of its subsidiaries included in the
Plan, if such employment termination occurs by reason of your death or by reason
of your permanent disability (as defined above).
6. Securities Laws.
The Option and the shares of Stock underlying the Option have not
been registered under the Securities Act of 1933, as amended (the "Act"). The
Corporation has no obligations to ever register the Option or the shares of
Stock underlying the Option. All shares of Stock acquired upon the exercise of
the Option shall be "restricted securities" as that term is defined in Rule 144
promulgated under the Act. The certificate representing the shares shall bear an
appropriate legend restricting their transfer. Such shares cannot be sold,
transferred, assigned or otherwise hypothecated without registration under the
Act or unless a valid exemption from registration is then available under
applicable federal and state securities laws and the Corporation has been
furnished with an opinion of counsel satisfactory in form and substance to the
Corporation that such registration is not required.
7. Binding Effect. The rights and obligations described in this letter
shall inure to the benefit of and be binding upon both of us, and our respective
heirs, personal representatives, successors and assigns.
8. Date of Grant. The Option shall be treated as having been granted to
you on the date of this letter even though you may sign it at a later date.
Very truly yours,
By:_______________________________
President
AGREED AND ACCEPTED:
____________________
2
<PAGE>
[ALTERNATIVE NSO GRANT FORM]
OPTION TO PURCHASE
COMMON STOCK
OF
PEREGRINE INDUSTRIES, INC.
This is to certify that __________________ ("Optionee") is entitled,
subject to the terms and conditions hereinafter set forth, to purchase
___________ shares of Common Stock, par value $.001 per share (the "Common
Shares"), of PEREGRINE INDUSTRIES, INC., a Florida corporation (the "Company"),
from the Company at the price per share and on the terms set forth herein and to
receive a certificate for the Common Shares so purchased on presentation and
surrender to the Company with the subscription form attached, duly executed and
accompanied by payment of the purchase price of each share purchased either in
cash or by certified or bank cashier's check or other check payable to the order
of the Company.
The purchase rights represented by this Option are exercisable
commencing on the date hereof through and including ___________________ at a
price per Common Share of $_____.
The purchase rights represented by this Option are exercisable at the
option of the registered owner hereof in whole at any time, or in part from time
to time, within the period specified; provided, however, that such purchase
rights shall not be exercisable with respect to a fraction of a Common Share. In
case of the purchase of less than all the Common Shares purchasable under this
Option, the company shall cancel this Option on surrender hereof and shall
execute and deliver a new Option of like tenor and date for the balance of the
Common Shares purchasable hereunder.
The Company agrees at all times to reserve or hold available a
sufficient number of Common Shares to cover the number of shares issuable on
exercise of this and all other Options of like tenor then outstanding.
This Option shall not entitle the holder hereof to any voting rights or
other rights as a stockholder of the Company, or to any other rights whatever
except the rights herein expressed and such as are set forth, and no dividends
shall be payable or accrue in respect of this Option or the interest represented
hereby or the Common Shares purchasable hereunder until or unless, and except to
the extent that, this Option shall be exercised.
In the event that the outstanding Common Shares hereafter are changed
into or exchanged
<PAGE>
for a different number or kind of shares or other securities of the Company or
of another corporation by reason of merger, consolidation, other reorganization,
recapitalization, reclassification, combination of shares, stock split-up or
stock dividend:
(a) The aggregate number and kind of Common Shares subject to this
Option shall be adjusted appropriately;
(b) Rights under this Option, both as to the number of subject Common
Shares and the Option price, shall be adjusted appropriately; and
(c) Where dissolution or liquidation of the Company or any merger or
combination in which the Company is not a surviving corporation is involved,
this Option shall terminate, but the registered owner of this Option shall have
the right, immediately prior to such dissolution, liquidation, merger or
combination, to exercise the Option in whole or in part to the extent that it
shall not have been exercised.
The Optionee shall have the right to exercise all or a portion of this
Option as follows:
(a) At any time and from time to time on or prior to the expiration
date, by surrendering at the principal office of the Company this Option and by
paying the exercise price by check or wire transfer to the Company as to the
number of Common Shares as to which the Option is being exercised (the "Exercise
Amount") and receiving in exchange therefor the number of Common Shares equal to
the Exercise Amount; and/or
(b) At any time and from time to time on or prior to the expiration
date, by surrendering at the principal office of the Company this Option and
receiving in exchange therefor the number of Common Shares equal to the product
of the Exercise Amount multiplied by a fraction, the numerator of which is the
market price less the exercise price and the denominator of which is such market
price. The market price shall be equal to the average closing price of the
Common Shares for the five trading days preceding the notice of exercise; and/or
(c) At any time and from time to time on or prior to the expiration
date, by surrendering at the principal office of the Company this Option and by
surrendering Common Shares of the Company valued at the market price, as
determined above, and receiving in exchange therefor the number of Common Shares
equal to the Exercise Amount.
(d) The Optionee may use one or more of the methods of exercise
outlined above when exercising this Option.
The foregoing adjustments and the manner of application of the
foregoing provisions may provide for the elimination of fractional share
interests.
The Option and all rights hereunder shall not be transferable otherwise
than by will or the
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<PAGE>
laws of descent and distribution.
The Company shall not be required to issue or deliver any certificate
for Common Shares purchased on exercise of this Option or any potion thereof
prior to fulfillment of all the following conditions:
(a) The completion of any required registration or other qualification
of such shares under any federal or state law or under the rulings or
regulations of the Securities and Exchange Commission or any other government
regulatory body which is necessary;
(b) The obtaining of any approval or other clearance from any federal
or state government agency which is necessary;
(c) The obtaining from the registered owner of the Option a
representation in writing, as required, that the owner is acquiring such Common
Shares for the owner's own account for investment and not with a view to, or for
sale in connection with, the distribution of any part thereof, if the Options
and the related shares have not been registered under the Securities Act of
1933, as amended (the "Act"); and
(d) The placing on the certificate, as required, of an appropriate
legend and the issuance of stop transfer instructions in connection therewith if
this Option and the related shares have not been registered under the Act to the
following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE LAWS OF ANY STATE
AND HAVE BEEN ISSUED PURSUANT TO AN EXEMPTION FROM REGISTRATION
PERTAINING TO SUCH SECURITIES AND PURSUANT TO A REPRESENTATION BY THE
SECURITY HOLDER NAMED HEREON THAT SAID SECURITIES HAVE BEEN ACQUIRED
FOR PURPOSES OF INVESTMENT AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF REGISTRATION. FURTHERMORE, NO
OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS TO TAKE PLACE WITHOUT
THE PRIOR WRITTEN APPROVAL OF COUNSEL OF THE ISSUER BEING AFFIXED TO
THIS CERTIFICATE. THE TRANSFER AGENT HAS BEEN ORDERED TO EXECUTE
TRANSFERS OF THIS CERTIFICATE ONLY IN ACCORDANCE WITH THE ABOVE
INSTRUCTIONS."
IN WITNESS WHEREOF, the Company has caused this Option to be executed
by the signature of its duly authorized officer.
PEREGRINE INDUSTRIES, INC.
By:_____________________________
Its: President
Dated:
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<PAGE>
SUBSCRIPTION FORM
(To be executed by the registered holder to exercise the
rights to purchase Common Shares evidenced by the within
Option.)
PEREGRINE INDUSTRIES, INC.
730 South Military Trail
Deerfield Beach, Florida 33442
The undersigned hereby irrevocably subscribes for ____________ Common
Shares pursuant to and in accordance with the terms and conditions of this
Option, and herewith makes payment of $________ therefor, and requests that a
certificate for such Common Shares be issued in the name of the undersigned and
be delivered to the undersigned at the address stated below, and if such number
of shares shall not be all of the shares purchasable hereunder, that a new
Option of like tenor for the balance of the remaining Common Shares purchasable
hereunder shall be delivered to the undersigned at the address stated below.
Dated:___________________ Signed:____________________________________
Address: ________________________________
________________________________
________________________________
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<PAGE>
[ISO GRANT FORM]
Date: ________________
PEREGRINE INDUSTRIES, INC.
730 South Military Trail
Deerfield Beach, Florida 33442
_______________________
_______________________
_______________________
Dear _______________:
The Board of Directors of PEREGRINE INDUSTRIES, INC. (the
"Corporation") is pleased to award you an Option pursuant to the provisions of
the PEREGRINE INDUSTRIES, INC. 1998 Stock Option Plan (the "Plan"). This letter
will describe the Option granted to you. Attached to this letter is a copy of
the Plan. The terms of the Plan also set forth provisions governing the Option
granted to you. Therefore, in addition to reading this letter you should also
read the Plan. Your signature on this letter is an acknowledgment to us that you
have read and under-stand the Plan and that you agree to abide by its terms. All
terms not defined in this letter shall have the same meaning as in the Plan.
1. Type of Option. You are granted an ISO. Please see in particular
Section 11 of the Plan.
2. Rights and Privileges. Subject to the conditions hereinafter set
forth, we grant you the right to purchase __________ shares of Stock at
$__________ per share, the current fair market value of a share of Stock.
3. Time of Exercise. The Option may be exercised at any time and from
time to time beginning when the right to purchase the shares of Stock accrues
and ending when they terminate as provided in Section 5 of this letter.
4. Method of Exercise. The Options shall be exercised by written notice
to the Chairman of the Board of Directors at the Corporation's principal place
of business. The notice shall set forth the number of shares of Stock to be
acquired and shall contain a check payable to the Corporation in full payment
for the Stock or that number of already owned shares of Stock equal in value to
the total Exercise Price of the Option. We shall make delivery of the shares of
Stock subject to the conditions described in Section 13 of the Plan.
5. Termination of Option. To the extent not exercised, the Option shall
terminate upon the first to occur of the following dates:
(a) _____________, 199___, being __________ years from the date of
grant
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<PAGE>
pursuant to the provisions of Section 2 of this Agreement; or
(b) The expiration of thirty (30) days following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan for any reason, other than by reason of death or permanent
disability. As used herein, "permanent disability" means your inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months; or
(c) The expiration of 12 months following the date your employment
terminates with the Corporation and any of its subsidiaries included in the
Plan, if such employment termination occurs by reason of your death or by reason
of your permanent disability (as defined above).
6. Securities Laws.
The Option and the shares of Stock underlying the Option have not
been registered under the Securities Act of 1933, as amended (the "Act"). The
Corporation has no obligations to ever register the Option or the shares of
Stock underlying the Option. All shares of Stock acquired upon the exercise of
the Option shall be "restricted securities" as that term is defined in Rule 144
promulgated under the Act. The certificate representing the shares shall bear an
appropriate legend restricting their transfer. Such shares cannot be sold,
transferred, assigned or otherwise hypothecated without registration under the
Act or unless a valid exemption from registration is then available under
applicable federal and state securities laws and the Corporation has been
furnished with an opinion of counsel satisfactory in form and substance to the
Corporation that such registration is not required.
7. Binding Effect. The rights and obligations described in this letter
shall inure to the benefit of and be binding upon both of us, and our respective
heirs, personal representatives, successors and assigns.
8. Date of Grant. The Option shall be treated as having been granted to
you on the date of this letter even though you may sign it at a later date.
Very truly yours,
By:_______________________________
Name: ____________________________
Its: President
AGREED AND ACCEPTED:
_______________________
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<PAGE>
[NSO GRANT FORM
WITH RELOAD OPTIONS]
PEREGRINE INDUSTRIES, INC.
730 South Military Trail
Deerfield Beach, Florida 33442
Date: __________
_______________________
_______________________
_______________________
Dear __________:
The Board of Directors of PEREGRINE INDUSTRIES, INC. (the
"Corporation") is pleased to award you an Option pursuant to the provisions of
the PEREGRINE INDUSTRIES, INC. 1998 Stock Option Plan (the "Plan"). This letter
will describe the Option granted to you. Attached to this letter is a copy of
the Plan. The terms of the Plan also set forth provisions governing the Option
granted to you. Therefore, in addition to reading this letter you should also
read the Plan. Your signature on this letter is an acknowledgment to us that you
have read and understand the Plan and that you agree to abide by its terms. All
terms not defined in this letter shall have the same meaning as in the Plan.
1. Type of Option. You are granted an NSO. Please see in particular
Section 11 of the Plan.
2. Rights and Privileges.
(a) Subject to the conditions hereinafter set forth, we grant you
the right to purchase __________ shares of Stock at $__________ per share.
(b) In addition to the Option granted hereby (the "Underlying
Option"), the Corporation will grant you a reload option (the "Reload Option")
as hereinafter provided. A Reload Option is hereby granted to you if you acquire
shares of Stock pursuant to the exercise of the Underlying Option and pay for
such shares of Stock with shares of Common Stock of the Corporation already
owned by you (the "Tendered Shares"). The Reload Option grants you the right to
purchase shares of Stock equal in number to the number of Tendered Shares. The
date on which the Tendered Shares are tendered to the Corporation in full or
partial payment of the purchase price for the shares of Stock acquired pursuant
to the exercise of the Underlying Option
<PAGE>
is the Reload Grant Date. The exercise price of the Reload Option is the fair
market value of the Tendered Shares on the Reload Grant Date. The fair market
value of the Tendered Shares shall be the low closing bid price per share of the
Corporation's Common Stock on the Reload Grant Date. The Reload Option shall
vest equally over a period of __________ (___) years, commencing on the first
anniversary of the Reload Grant Date, and on each anniversary of the Reload
Grant Date thereafter; however, no Reload Option shall vest in any calendar year
if it would allow you to purchase for the first time in that calendar year
shares of Stock with a fair market value in excess of $100,000, taking into
account ISOs previously granted to you. The Reload Option shall expire on the
earlier of (i) __________ (___) years from the Reload Grant Date, or (ii) in
accordance with Paragraph 5(b), or (iii) in accordance with Paragraph 5(c) as
set forth herein. If vesting of the Reload Option is deferred, then the Reload
Option shall vest in the next calendar year, subject, however, to the deferral
of vesting previously provided. Except as provided herein the Reload Option is
subject to all of the other terms and provisions of this Agreement governing
Options.
3. Time of Exercise. The Option may be exercised at any time and from
time to time beginning when the right to purchase the shares of Stock accrues
and ending when they terminate as provided in Section 5 of this letter.
4. Method of Exercise. The Options shall be exercised by written notice
to the Chairman of the Board of Directors at the Corporation's principal place
of business. The notice shall set forth the number of shares of Stock to be
acquired and shall contain a check payable to the Corporation in full payment
for the Stock or that number of already owned shares of Stock equal in value to
the total Exercise Price of the Option. We shall make delivery of the shares of
Stock subject to the conditions described in Section 13 of the Plan.
5. Termination of Option. To the extent not exercised, the Option shall
terminate upon the first to occur of the following dates:
(a) __________, 199_, being __________ years from the date of grant
pursuant to the provisions of Section 2 of this Agreement; or
(b) The expiration of three months following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan for any reason, other than by reason of death or permanent
disability. As used herein, "permanent disability" means your inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months; or
(c) The expiration of 12 months following the date your employment
terminates with the Corporation and any of its subsidiaries included in the
Plan, if such employment termination occurs by reason of your death or by reason
of your permanent disability (as defined above).
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<PAGE>
6. Securities Laws.
The Option and the shares of Stock underlying the Option have not
been registered under the Securities Act of 1933, as amended (the "Act"). The
Corporation has no obligations to ever register the Option or the shares of
Stock underlying the Option. All shares of Stock acquired upon the exercise of
the Option shall be "restricted securities" as that term is defined in Rule 144
promulgated under the Act. The certificate representing the shares shall bear an
appropriate legend restricting their transfer. Such shares cannot be sold,
transferred, assigned or otherwise hypothecated without registration under the
Act or unless a valid exemption from registration is then available under
applicable federal and state securities laws and the Corporation has been
furnished with an opinion of counsel satisfactory in form and substance to the
Corporation that such registration is not required.
7. Binding Effect. The rights and obligations described in this letter
shall inure to the benefit of and be binding upon both of us, and our respective
heirs, personal representatives, successors and assigns.
8. Date of Grant. The Option shall be treated as having been granted to
you on the date of this letter even though you may sign it at a later date.
Very truly yours,
By:_______________________________
Name: ____________________________
Its: President
AGREED AND ACCEPTED:
______________________
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Exhibit 21
Subsidiaries of the Registrant
Alcool, Inc., an Alabama corporation
Peregrine Global, Inc., a Virgin Islands corporation
Thermopompe Peregrine Heat Pump, a Quebec corporation
