<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
SPINNAKER INDUSTRIES, INC.
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(Name of Issuer)
Common Stock, no par value per share
and
Class A Common Stock, no par value per share
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(Title of Class of Securities)
848926101
848926200
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(CUSIP Number)
Timothy R. Vaughan, Crouch & Hallett, L.L.P.
717 N. Harwood, Suite 1400, Dallas, Texas 75201; (214) 922-4167
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
September 2, 1997 and September 22, 1997
- -------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement9. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP Nos.: 848926101 Page 2 of 86
848926200 SCHEDULE 13D
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(1) Names of Reporting Persons.
S.S. or I.R.S. Identification Nos. of Above Persons
Boyle Fleming & Co., Inc. 75-2493518
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(2) Check the Appropriate Box if a Member (a) / /
of a Group* (b) / /
N/A
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(3) SEC Use Only
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(4) Source of Funds*
BK
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(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) / /
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(6) Citizenship or Place of Organization
Delaware
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Number of Shares (7) Sole Voting Power
Beneficially Owned Common Stock 659,045
by Each Reporting Class A Common Stock 659,045
Person With --------------------------------------------------
(8) Shared Voting Power
None
--------------------------------------------------
(9) Sole Dispositive Power
Common Stock 659,045
Class A Common Stock 659,045
--------------------------------------------------
(10) Shared Dispositive Power
None
- -------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
Common Stock 659,045
Class A Common Stock 659,045
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(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares*
/ /
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(13) Percent of Class Represented by Amount in Row (11)
Common Stock 18.43%
Class A Common Stock 18.43%
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(14) Type of Reporting Person*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP Nos.: 848926101 Page 3 of 86
848926200 SCHEDULE 13D
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(1) Names of Reporting Persons.
S.S. or I.R.S. Identification Nos. of Above Persons
Richard J. Boyle
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(2) Check the Appropriate Box if a Member (a) / /
of a Group* (b) / /
N/A
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(3) SEC Use Only
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(4) Source of Funds*
None
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(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) / /
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(6) Citizenship or Place of Organization
United States
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Number of Shares (7) Sole Voting Power
Beneficially Owned 472
by Each Reporting --------------------------------------------------
Person With (8) Shared Voting Power
None (See Item 5)
--------------------------------------------------
(9) Sole Dispositive Power
472
--------------------------------------------------
(10) Shared Dispositive Power
None (See Item 5)
- -------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
Common Stock 472 (See Item 5)
Class A Common Stock None (See Item 5)
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(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares* /X/
**Excludes shares owned by Boyle Fleming & Co., Inc.
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(13) Percent of Class Represented by Amount in Row (11)
Common Stock 0.01%
Class A Common Stock 0.00%
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(14) Type of Reporting Person*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP Nos.: 848926101 Page 4 of 86
848926200 SCHEDULE 13D
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(1) Names of Reporting Persons.
S.S. or I.R.S. Identification Nos. of Above Persons
Ned N. Fleming, III
- -------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member (a) / /
of a Group* (b) / /
N/A
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(3) SEC Use Only
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(4) Source of Funds*
N/A
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(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) / /
- -------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
United States
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Number of Shares (7) Sole Voting Power
Beneficially Owned None
by Each Reporting --------------------------------------------------
Person With (8) Shared Voting Power
None (See Item 5)
--------------------------------------------------
(9) Sole Dispositive Power
None
--------------------------------------------------
(10) Shared Dispositive Power
None (See Item 5)
- -------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
None (See Item 5)
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(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares* /X/
**Excludes shares owned by Boyle Fleming & Co., Inc.
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(13) Percent of Class Represented by Amount in Row (11)
Common Stock 0.00%
Class A Common Stock 0.00%
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(14) Type of Reporting Person*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP Nos.: 848926101 Page 5 of 86
848926200
ITEM 1. SECURITY AND ISSUER.
This Amendment No. 2 ("Amendment") to Statement of Schedule 13D (as
previously amended, the "Statement") relates to the Common Stock, no par value
(the "Common Stock"), and the Class A Common Stock, no par value (the "Class A
Common Stock"), of Spinnaker Industries, Inc., a Delaware corporation f/k/a
Safety Railway Service Corporation ("Spinnaker"), which has its principal
executive offices located at 600 N. Pearl Street, Suite 2160, Dallas, Texas
75201.
ITEM 2. IDENTITY AND BACKGROUND.
This Amendment is being filed by Boyle Fleming & Co., Inc., a corporation
organized under the laws of the State of Texas ("BF") Richard J. Boyle and
Ned N. Fleming, III. BF is an investment and management concern, which has
its principal offices located at 600 N. Pearl Street, Suite 2160, Dallas,
Texas 75201. The directors, executive officers and shareholders of BF are:
Richard J. Boyle Director, Managing Director and shareholder
Ned N. Fleming III Director, Chairman of the Board, President
and Managing Director and shareholder
Mr. Boyle is Chairman of the Board and Chief Executive Officer of
Spinnaker, and Mr. Fleming is the President and Chief Operating Officer of
Spinnaker. Each of them is also a member of Spinnaker's Board of Directors.
Each of Mr. Boyle and Mr. Fleming has his principal business address at
BF's office in Dallas, Texas. Messrs. Boyle, and Fleming are sometimes
hereinafter collectively referred to as the "Reporting Individuals." Each of
the Reporting Individuals is a citizen of the United States of America and
each may be deemed to control BF and beneficially own the shares of Common
Stock and Class A Common Stock owned by BF; however, the Reporting
Individuals specifically disclaim beneficial ownership of such shares.
The Reporting Persons and BF do not admit that they constitute a group
for purposes of Rule 13d-1(f) of the Securities Exchange Act of 1934, as
amended.
During the last five years, none of BF nor the Reporting Individuals has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
During the last five years, none of BF nor the Reporting Individuals was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction, as a result of which he or it was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation of such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
As previously reported in the Statement, in June 1994, pursuant to the
terms of the Warrant Purchase Agreement, dated June 13, 1993 (the "Purchase
Agreement"), between Spinnaker and BF, Spinnaker issued to BF a warrant (the
"Class A Warrant") to purchase up to 301,753 shares of Class A Common Stock.
See Item 6 of this Amendment for a more complete description of the terms of the
Purchase Agreement. Spinnaker declared a 3 for 2 stock split in December 1994
and a 3 for 2 stock split
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CUSIP Nos.: 848926101 Page 6 of 86
848926200
in December 1995 (the "Stock Splits"). Thus, after giving effect to the
Stock Splits, the Class A Warrant was exercisable for 678,945 shares of
Spinnaker's then-outstanding Common Stock (which has been renamed "Class A
Common Stock").
On April 5, 1996, in connection with a financing transaction between
Spinnaker and Bankers Trust Company ("BTC"), BF exercised the Class A Warrant in
part and acquired 187,476 shares of Class A Common Stock in exchange for the
payment of $500,000. The shares so acquired were pledged to BTC to secure
Spinnaker's repayment of indebtedness (the "Bridge Loan") incurred in such
financing transaction. In August 1996, Spinnaker declared a stock dividend
(the "Dividend") of one share of Common Stock for each share of Spinnaker's
then outstanding Common Stock (which was then renamed "Class A Common
Stock"). Thus, after giving effect to the Dividend, BF held warrants to
purchase 491,469 shares of Common Stock and 491,469 shares of Class A Common
Stock, and BTC held, as security for the Bridge Loan, 187,476 shares of
Common Stock and 187,476 shares of Class A Common Stock (collectively, the
"BTC Pledged Shares"). The BTC Pledged Shares were released from the pledge
to BTC when the Bridge Loan was repaid by Spinnaker in full in October 1996.
Messrs. Boyle and Fleming provided the funds to BF that were used by BF to
pay for the shares by drawing on a preexisting personal line of credit.
On September 2, 1997, BF exercised the Class A Warrant in part and acquired
149,812 shares of Common Stock and 149,812 shares of Class A Common Stock, which
BF intends to hold for investment purposes, for a payment of $399,998.04. On
September 22, 1997, BF again exercised the Class A Warrant in part and acquired
an additional 113,158 shares of Common Stock and 113,158 shares of Class A
Common Stock for $302,131.86. BF utilized an existing credit line with Comerica
Bank-Texas (the "Bank") to obtain the funds used by BF to pay for the aggregate
262,970 shares of Common Stock and 262,970 shares of Class A Common Stock
acquired through such exercises.
ITEM 4. PURPOSE OF TRANSACTION.
The Class A Warrant was issued to BF as part of a series of related
transactions in June 1994, whereby BF agreed to provide management services to
Spinnaker and its subsidiaries, pursuant to the terms of a management agreement
(the "Management Agreement"), which was terminated in August 1996. In
connection with the foregoing transactions, Mr. Boyle and Mr. Fleming were
elected to the Board of Directors of Spinnaker and became the Chairman and Chief
Executive Officer, and President, respectively, of Spinnaker. Although the
Management Agreement was terminated in August 1996, Mr. Boyle and Mr. Fleming
continue to serve in those same capacities at Spinnaker.
See Item 6 of this Amendment for a more complete description of the terms
of the Purchase Agreement, the Management Agreement and the other arrangements
and understandings among Spinnaker, BF, the Reporting Individuals and certain
other stockholders of Spinnaker.
Upon the partial exercise of the Class A Warrant in connection with the
Bridge Loan, it became fully exercisable in accordance with its terms. Since
that time, it has been BF's intention to exercise the Class A Warrant in part to
convert some of its interest in the Class A Warrant into shares of stock issued
by Spinnaker for investment purposes, as it proceeded to do in September 2,
1997, and again on September 22, 1997. Neither BF nor the Reporting Persons has
any present intention to sell the shares obtained through such exercises;
however, BF has pledged an aggregate of 280,634 shares of Common Stock and
280,634 shares of Class A Common Stock to secure bank and other indebtedness
incurred by it, and BF may from time to time pledge additional shares to secure
other indebtedness incurred by BF.
<PAGE>
CUSIP Nos.: 848926101 Page 7 of 86
848926200
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) and (b): The Class A Warrant granted to BF the right to acquire up to
678,945 shares of Common Stock and up to 678,945 shares of Class A Common Stock
(as subsequently adjusted to reflect the Stock Splits and the Dividend) at an
exercise price of approximately $2.67 for one share of both Common Stock and
Class A Common Stock. Pursuant to exercises of the Class A Warrant by BF,
450,446 shares of Common Stock and 450,446 shares of Class A Common Stock have
been issued to BF under the Class A Warrant to date. In addition, BF has
donated 20,000 shares of Common Stock and 20,000 shares of Class A Common Stock
to certain charitable trusts and BF acquired a total of 100 shares of Class A
Common Stock (pre-Dividend) in open market purchases in March 1996. The shares
of Common Stock and Class A Common Stock owned by BF, together with the 228,499
shares of Common Stock and Class A Common Stock issuable under the Class A
Warrant, constitute approximately 19% of the outstanding Common Stock and 19% of
the outstanding Class A Common Stock, respectively (calculated according to Rule
13d-3(d)(1)(i)). Except for certain call rights of Spinnaker under the
Purchase Agreement (all more particularly described in Item 6 of this
Statement), BF has the sole voting and dispositive power with respect to the
430,546 shares of Common Stock and 430,546 shares of Class A Common Stock owned
by it and the 228,499 shares of both classes issuable upon exercise of the Class
A Warrant.
Messrs. Boyle and Fleming may be deemed to benefically own and to exercise
shared voting and dispositive power over the shares of Common Stock and Class A
Common Stock owned by BF or issuable upon exercise of the Class A Warrant by
virtue of their being deemed to exercise control over BF. Messrs. Boyle and
Fleming both disclaim beneficial ownership of the shares of Common Stock and
Class A Common Stock owned by BF or issuable to BF under the Class A Warrant.
Mr. Boyle owns an additional 472 shares of Common Stock individually. Mr.
Boyle has the sole voting and dispositive power with respect to such shares.
(c): On September 2, 1997, BF exercised the Class A Warrant in part and
acquired 149,812 shares of Common Stock and 149,812 shares of Class A Common
Stock, at an acquisition price of $2.67 for one share of both classes of stock,
for a payment of $399,998.04. On September 22, 1997, BF exercised the Class A
Warrant in part and acquired 113,158 shares of Common Stock and 113,158 shares
of Class A Common Stock, at an acquisition price of $2.67 for one share of both
classes of stock, for a payment of $302,131.86.
(d): Not applicable.
(e): Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Pursuant to the Purchase Agreement, Spinnaker issued to BF the Class A
Warrant in June 1994 to purchase up to 678,945 shares of Common Stock and
678,945 shares of Class A Common Stock (as subsequently adjusted to reflect the
Stock Splits and the Dividend) at any time on or before June 10, 1999. The
Class A Warrant became fully exercisable on its third anniversary, in accordance
with its terms.
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CUSIP Nos.: 848926101 Page 8 of 86
848926200
In consideration of the issuance of the Class A Warrant, under the Purchase
Agreement BF has granted to Spinnaker (i) the right to receive 25% of certain
fees received by BF from parties not affiliated with Spinnaker and (ii) certain
co-investment rights that permit Spinnaker to participate as an investor in any
acquisitions or investments made by BF or its affiliates, other than certain
personal investments. In accordance with the Purchase Agreement, Spinnaker
obtained the right to repurchase the Class A Warrant as a result of the
termination of the Management Agreement in August 1996. If Spinnaker exercises
its right to repurchase the Class A Warrant from BF, the purchase price will be
equal to the difference between (i) the sum of the Market Prices (as defined
below) of the shares issuable under the Class A Warrant and (ii) the aggregate
amount to be paid as the exercise price for all such shares. The Market Price
of each share issuable under the Class A Warrant shall be equal to the average
of the market price of such share's class of common stock over the 30 days
immediately preceding Spinnaker's exercise of its right to repurchase the Class
A Warrant.
If BF proposes to sell the Class A Warrant, or shares of Common Stock or
Class A Common Stock issuable upon exercise of the Class A Warrant ("Warrant
Shares"), for cash, then Spinnaker also has a right of first refusal to purchase
the Warrant Shares proposed to be sold at the same price pursuant to the
Purchase Agreement. In connection with the financing provided by BTC in April
1996, Spinnaker waived its rights of first refusal as to the BTC Pledged Shares
previously pledged by BF to BTC.
In connection with the issuance of the Class A Warrant to BF, Spinnaker
also granted to BF the right to cause its sale of Warrant Shares to be
registered by Spinnaker pursuant to the Securities Act of 1933, as amended.
Upon BF's exercise of such registration rights, however, Spinnaker has the right
to repurchase the Warrant Shares proposed to be registered at a price per share
computed in the same manner as upon Spinnaker's exercise of its Class A Warrant
repurchase rights.
BF has pledged 113,158 shares of Common Stock and 113,158 shares of Class A
Common Stock to secure its payment of a promissory note (the "Note") dated
August 18, 1997, payable to Michael L. George, a former shareholder of BF
("George"), in the original principal amount of $2,050,000. The Note was issued
to George in connection with his withdrawal from BF and the sale of his equity
interests in BF to BF, and is due and payable on January 15, 1998, at which time
the pledged shares shall be released.
In order to provide the additional funds necessary to partially exercise
the Class A Warrant in connection with the purchase of George's equity interests
in BF, BF entered into a Loan Agreement dated June 24, 1997 (the "Loan
Agreement") with the Bank. The Loan Agreement was amended in August 1997 to
increase the Bank's commitment thereunder to an aggregate principal amount of
$8,000,000. Messrs. Boyle and Fleming each guaranteed individually BF's
repayment and other obligations under the Loan Agreement. In addition, BF has
pledged 167,476 shares of Common Stock and 167,476 shares of Class A Common
Stock owned by BF to the Bank to secure BF's repayment and other obligations
owed to the Bank under the Loan Agreement and related documents.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit A Warrant Purchase Agreement (filed as Exhibit A to the Statement).
Exhibit B Class A Warrant (filed as Exhibit B to the Statement).
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CUSIP Nos.: 848926101 Page 9 of 86
848926200
Exhibit C Loan Agreement, dated as of June 24, 1997, between Boyle Fleming
& Co., Inc. and Comerica Bank-Texas, together with all amendments
thereto.
Exhibit D Pledge Agreement between Boyle Fleming & Co., Inc. and Comerica
Bank-Texas
Exhibit E Letter Agreement between Messrs. Boyle and Fleming, Boyle Fleming
& Co., Inc., Michael L. George, George Group Employee Partners
and George Group Incorporated
Exhibit F Pledge Agreement made by Boyle Fleming & Co., Inc. in favor of
Michael L. George
SIGNATURE. After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
BOYLE FLEMING & CO., INC.
By: /s/ Ned N. Fleming, III Date: October 6, 1997
--------------------------------- --------------------------
Ned N. Fleming, III
Chairman of the Board, President
and Managing Director
/s/ Ned N. Fleming, III Date: October 6, 1997
--------------------------------- --------------------------
Ned N. Fleming, III
/s/ Richard J. Boyle Date: October 6, 1997
--------------------------------- --------------------------
Richard J. Boyle
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CUSIP Nos.: 848926101 Page 10 of 86
848926200
EXHIBIT INDEX
Sequentially
Exhibit Document Numbered Page
------- -------- -------------
Exhibit A Warrant Purchase Agreement (filed as --
Exhibit A to the Statement).
Exhibit B Class A Warrant (filed as Exhibit B to --
the Statement).
Exhibit C Loan Agreement, dated as of June 24, 1997, 11
between Boyle Fleming & Co., Inc. and
Comerica Bank-Texas, as amended.
Exhibit D Pledge Agreement between Boyle Fleming 54
& Co., Inc. and Comerica Bank-Texas.
Exhibit E Letter Agreement between Messrs. Boyle 66
and Fleming, Boyle Fleming & Co., Inc.,
Michael L. George, George Group Employee
Partners and George Group Incorporated
Exhibit F Pledge Agreement made by Boyle Fleming & 73
Co., Inc. in favor of Michael L. George
<PAGE>
CUSIP Nos.: 848926101 Page 11 of 86
848926200
EXHIBIT C
*******************************************************************************
BOYLE, FLEMING & CO., INC.
LOAN AGREEMENT
DATED AS OF JUNE 24, 1997
$4,000,000
COMERICA BANK-TEXAS
******************************************************************************
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CUSIP Nos.: 848926101 Page 12 of 86
848926200
TABLE OF CONTENTS
Page
----
ARTICLE I - Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Definitional Provisions . . . . . . . . . . . . . . 4
ARTICLE II - Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.1 Commitment. . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.2 The Note. . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.3 Repayment of Principal of Advances. . . . . . . . . . . . 5
Section 2.4 Interest. . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.5 Borrowing Procedure . . . . . . . . . . . . . . . . . . . 5
Section 2.6 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III - Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.1 Method of Payment . . . . . . . . . . . . . . . . . . . . 6
Section 3.2 Prepayment. . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.3 Computation of Interest . . . . . . . . . . . . . . . . . 6
ARTICLE IV - Yield Protection. . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.1 Capital Adequacy. . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V - Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.1 Collateral. . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.2 Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VI - Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . 8
Section 6.1 Initial Advance . . . . . . . . . . . . . . . . . . . . . 8
Section 6.2 All Advances. . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VII - Representations and Warranties . . . . . . . . . . . . . . . . 10
Section 7.1 Financial Statements. . . . . . . . . . . . . . . . . . . 10
Section 7.2 No Breach . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7.3 Litigation and Judgments. . . . . . . . . . . . . . . . . 11
Section 7.4 Rights in Properties. . . . . . . . . . . . . . . . . . . 11
Section 7.5 Enforceability. . . . . . . . . . . . . . . . . . . . . . 11
Section 7.6 Approvals . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.8 Use of Proceeds; Margin Securities. . . . . . . . . . . . 11
-i-
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CUSIP Nos.: 848926101 TABLE OF CONTENTS Page 13 of 86
848926200 (CONTINUED)
Page
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Section 7.9 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.10 Agreements. . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.11 Compliance with Laws. . . . . . . . . . . . . . . . . . . 12
ARTICLE VIII - Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.1 Reporting Requirements. . . . . . . . . . . . . . . . . . 12
Section 8.2 Maintenance of Collateral Value . . . . . . . . . . . . . 13
Section 8.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8.4 Compliance with Laws. . . . . . . . . . . . . . . . . . . 14
Section 8.5 Compliance with Agreements. . . . . . . . . . . . . . . . 14
Section 8.6 Further Assurances. . . . . . . . . . . . . . . . . . . . 14
Section 8.7 Limitation on Liens . . . . . . . . . . . . . . . . . . . 14
Section 8.8 Limitation on Debt. . . . . . . . . . . . . . . . . . . . 15
Section 8.9 Maintenance of Existence; Conduct of Business . . . . . . 15
Section 8.10 Maintenance of Properties . . . . . . . . . . . . . . . . 15
Section 8.11 Taxes and Claims. . . . . . . . . . . . . . . . . . . . . 15
Section 8.12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8.13 Inspection Rights . . . . . . . . . . . . . . . . . . . . 16
Section 8.14 Keeping Books and Records . . . . . . . . . . . . . . . . 16
Section 8.15 Mergers, Etc. . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.16 Restricted Payments . . . . . . . . . . . . . . . . . . . 16
Section 8.17 Loans and Investments . . . . . . . . . . . . . . . . . . 16
Section 8.18 Limitation on Issuance of Capital Stock . . . . . . . . . 16
Section 8.19 Transactions With Affiliates . . . . . . . . . . . . . . 17
Section 8.20 Disposition of Assets . . . . . . . . . . . . . . . . 17
ARTICLE IX - Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9.1 Events of Default . . . . . . . . . . . . . . . . . . . . 17
Section 9.2 Remedies Upon Default . . . . . . . . . . . . . . . . . . 18
Section 9.3 Performance by the Lender . . . . . . . . . . . . . . . . 19
ARTICLE X - Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 10.1 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 10.2 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 19
Section 10.3 Limitation of Liability . . . . . . . . . . . . . . . . . 20
Section 10.4 No Duty . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.5 Lender Not Fiduciary. . . . . . . . . . . . . . . . . . . 20
Section 10.6 Equitable Relief. . . . . . . . . . . . . . . . . . . . . 21
Section 10.7 No Waiver; Cumulative Remedies. . . . . . . . . . . . . . 21
Section 10.8 Successors and Assigns. . . . . . . . . . . . . . . . . . 21
Section 10.9 Survival. . . . . . . . . . . . . . . . . . . . . . . . . 21
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Page
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Section 10.10 ENTIRE AGREEMENT; AMENDMENT . . . . . . . . . . . . . . 21
Section 10.11 Maximum Interest Rate . . . . . . . . . . . . . . . . . . 22
Section 10.12 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 10.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . 22
Section 10.14 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 22
Section 10.15 Severability. . . . . . . . . . . . . . . . . . . . . . . 22
Section 10.16 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 10.17 Non-Application of Chapter 15 of Texas Credit Code. . . . 23
Section 10.18 Participations. . . . . . . . . . . . . . . . . . . . . . 23
Section 10.19 Construction. . . . . . . . . . . . . . . . . . . . . . . 23
Section 10.20 Independence of Covenants . . . . . . . . . . . . . . . . 23
Section 10.21 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . 23
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LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of June 24, 1997, is between BOYLE, FLEMING
& CO., INC., a Texas corporation (the "Borrower"), and COMERICA BANK-TEXAS, a
Texas state banking association (the "Lender").
R E C I T A L S :
The Borrower has requested the Lender to make a loan to the Borrower with
advances thereunder not to exceed an aggregate principal amount of Four
Million Dollars ($4,000,000) outstanding at any time. The Lender is willing
to make such loan to the Borrower upon the terms and conditions hereinafter
set forth.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. As used in this Agreement, the following
terms have the following meanings:
"ADVANCE" means an advance of funds by the Lender to the Borrower
pursuant to Article II.
"ADVANCE REQUEST FORM" means a certificate, in substantially the form
of Exhibit "A" hereto, properly completed and signed by the Borrower
requesting an Advance.
"BASLE ACCORD" means the proposals for risk-based capital framework
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988, as amended,
supplemented and otherwise modified and in effect from time to time, or any
replacement thereof.
"BUSINESS DAY" means any day on which commercial banks are authorized
to conduct business or are not required to close in Dallas, Texas.
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"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"COLLATERAL" has the meaning specified in Section 5.1.
"COMMITMENT" means the obligation of the Lender to make Advances
hereunder in an aggregate principal amount at any one time outstanding up
to but not exceeding Four Million Dollars ($4,000,000), as such obligation
may be terminated pursuant to Section 9.2.
"DEBT" means as to any Person at any time (without duplication): (a)
all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, notes, debentures, or other similar
instruments, (c) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable of
such Person arising in the ordinary course of business that are not past
due by more than ninety (90) days, (d) all Debt or other obligations of
others Guaranteed by such Person, (e) all obligations secured by a Lien
existing on property owned by such Person, whether or not the obligations
secured thereby have been assumed by such Person or are non-recourse to the
credit of such Person, and (f) all reimbursement obligations of such Person
(whether contingent or otherwise) in respect of letters of credit, bankers'
acceptances, surety or other bonds and similar instruments.
"DEFAULT" means an Event of Default or the occurrence of an event or
condition which with notice or lapse of time or both would become an Event
of Default.
"DEFAULT RATE" means the lesser of (a) the Maximum Rate, or (b) the
sum of the Prime Rate in effect from day to day plus five percent (5%).
"DOLLARS" and "$" mean lawful money of the United States of America.
"EFFECTIVE DATE" means June 24, 1997.
"EVENT OF DEFAULT" has the meaning specified in Section 9.1.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or in
statements of the Financial Accounting Standards Board and/or their
respective successors and which are applicable in the circumstances as of
the date in question. Accounting principles are applied on a "consistent
basis" when the accounting principles applied in a current period are
comparable in all material respects to those accounting principles applied
in a preceding period.
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"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory, or administrative functions of or
pertaining to government.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person to directly or indirectly guarantee any Debt or
other obligation of any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(b) entered into for the purpose of assuring in any other manner the
obligee of such Debt or other obligation of the payment thereof or to
protect the obligee against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"GUARANTIES" has the meaning specified in Section 5.1.
"GUARANTORS" means Richard J. Boyle and Ned N. Fleming, III.
"LIEN" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment, preference,
priority, or other encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or title retention agreement),
whether arising by contract, operation of law, or otherwise.
"LOAN DOCUMENTS" means this Agreement and all promissory notes,
security agreements, deeds of trust, assignments, guaranties, and other
instruments, documents, and agreements executed and delivered pursuant to
or in connection with this Agreement, as such instruments, documents, and
agreements may be amended, modified, renewed, extended, or supplemented
from time to time.
"MAXIMUM RATE" means, at any time, the maximum rate of interest under
applicable law that the Lender may charge the Borrower. The Maximum Rate
shall be calculated in a manner that takes into account any and all fees,
payments, and other charges in respect of the Loan Documents that
constitute interest under applicable law. Each change in any interest rate
provided for herein based upon the Maximum Rate resulting from a change in
the Maximum Rate shall take effect without notice to the Borrower at the
time of such change in the Maximum Rate. For purposes of determining the
Maximum Rate under Texas law, the applicable rate ceiling shall be the
indicated rate
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ceiling described in, and computed in accordance with, Article 5069-1.04,
Vernon's Texas Civil Statutes.
"NOTE" means the promissory note of even date herewith of the Borrower
payable to the order of the Lender, in the original principal amount of
$4,000,000, and all extensions, renewals, and modifications thereof.
"OBLIGATED PARTY" means any Person who is or becomes party to any
agreement that guarantees or secures payment and performance of the
Obligations or any part thereof.
"OBLIGATIONS" means all obligations, indebtedness, and liabilities of
the Borrower to the Lender, now existing or hereafter arising, whether
direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several, including, without
limitation, the obligations, indebtedness, and liabilities of the Borrower
under this Agreement and the other Loan Documents, and all interest
accruing thereon and all attorneys' fees and other expenses incurred in the
enforcement or collection thereof.
"PAYMENT DATE" means the 5th day each month, the first of which shall
be the first such day after the date of this Agreement.
"PERSON" means any individual, corporation, business trust,
association, company, partnership, joint venture, Governmental Authority,
or other entity.
"PLEDGE AGREEMENT" means the Pledge Agreement of the Borrower in favor
of the Lender of even date herewith, as the same may be amended,
supplemented, or modified.
"PRIME RATE" means, at any time, the rate of interest per annum then
most recently established by the Lender as its prime rate, which rate may
not be the lowest rate of interest charged by the Lender to its borrowers.
Each change in any interest rate provided for herein based upon the Prime
Rate resulting from a change in the Prime Rate shall take effect without
notice to the Borrower at the time of such change in the Prime Rate.
"PRINCIPAL OFFICE" means the principal office of the Lender, presently
located at 1601 Elm Street, Dallas, Texas.
"TERMINATION DATE" means 11:00 a.m. Dallas, Texas time on June 24,
1999, or such earlier date and time on which the Commitment terminates as
provided in this Agreement.
"UCC" means the Uniform Commercial Code as in effect in the State of
Texas.
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Section 1.2 OTHER DEFINITIONAL PROVISIONS. All definitions contained
in this Agreement are equally applicable to the singular and plural forms of
the terms defined. The words "hereof", "herein", and "hereunder" and words
of similar import referring to this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Unless
otherwise specified, all Article and Section references pertain to this
Agreement. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. Terms used herein that are defined in the
UCC, unless otherwise defined herein, shall have the meanings specified in
the UCC.
ARTICLE II
ADVANCES
Section 2.1 COMMITMENT. Subject to the terms and conditions of this
Agreement, if at the time of the Borrower's request therefor Lender so elects
in its sole discretion upon its review of the financial condition of the
Borrower, the Guarantors, and the Collateral, the Lender shall make one or
more Advances to the Borrower from time to time from the date hereof to and
including the Termination Date, provided that the aggregate amount of all
Advances at any time outstanding shall not exceed the amount of the
Commitment. Subject to the foregoing limitations, and the other terms and
provisions of this Agreement, the Borrower may borrow, repay, and reborrow
hereunder until the Termination Date.
Section 2.2 THE NOTE. The obligation of the Borrower to repay the
Advances and interest thereon shall be evidenced by the Note executed by the
Borrower, payable to the order of the Lender, in the principal amount of the
Commitment as originally in effect and dated the date hereof.
Section 2.3 REPAYMENT OF PRINCIPAL OF ADVANCES. The Borrower shall
repay the unpaid principal amount of all Advances on the Termination Date.
Section 2.4 INTEREST. The unpaid principal amount of the Advances
shall bear interest prior to maturity at a varying rate per annum equal from
day to day to the lesser of (a) the Maximum Rate, or (b) the sum of the Prime
Rate plus one-half percent (1/2%). If at any time the Prime Rate shall
exceed the Maximum Rate, thereby causing the interest accruing on the
Advances to be limited to the Maximum Rate, then any subsequent reduction in
the Prime Rate shall not reduce the rate of interest below the Maximum Rate
until the aggregate amount of interest accrued equals the aggregate amount of
interest which would have accrued if the Prime Rate had at all times been in
effect. Accrued and unpaid interest on the Advances shall be due and payable
on each Payment Date and on the Termination Date. Notwithstanding the
foregoing, any outstanding principal and (to the fullest extent permitted by
law) any other amount payable by the Borrower under this Agreement or any
other Loan Document that is not paid in full when due (whether at
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stated maturity, by acceleration, or otherwise) shall bear interest at the
Default Rate for the period from and including the due date thereof to but
excluding the date the same is paid in full. Interest payable at the Default
Rate shall be payable from time to time on demand.
Section 2.5 BORROWING PROCEDURE. The Borrower shall give the Lender
notice by means of an Advance Request Form of each requested Advance, at
least one (1) Business Day before the requested date of each Advance,
specifying: (a) the requested date of such Advance (which shall be a Business
Day), (b) the amount of such Advance, and (c) the purpose of such Advance.
The Lender at its option may accept telephonic requests for Advances,
provided that such acceptance shall not constitute a waiver of the Lender's
right to delivery of an Advance Request Form in connection with subsequent
Advances. Any telephonic request for an Advance by the Borrower shall be
promptly confirmed by submission of a properly completed Advance Request Form
to the Lender. Each Advance shall be in a minimum principal amount of
$10,000 or an integral multiple thereof. Subject to the terms and conditions
of this Agreement, each Advance shall be made available to the Borrower by
depositing the same, in immediately available funds, in an account of the
Borrower maintained with the Lender at the Principal Office designated by the
Borrower. All notices under this Section shall be irrevocable and shall be
given not later than 11:00 a.m. Dallas, Texas, time on the day which is not
less than the number of Business Days specified above for such notice.
Section 2.6 USE OF PROCEEDS. The proceeds of Advances shall be used
by the Borrower to refinance Debt owed to Lender by the Guarantors, for
investments, and other corporate and working capital purposes (excluding
investments in margin stock).
ARTICLE III
PAYMENTS
Section 3.1 METHOD OF PAYMENT. All payments of principal, interest,
and other amounts to be made by the Borrower under this Agreement and the
other Loan Documents shall be made to the Lender at the Principal Office in
Dollars and immediately available funds, without setoff, deduction, or
counterclaim, not later than 11:00 a.m., Dallas, Texas, time on the date on
which such payment shall become due (each such payment made after such time
on such due date to be deemed to have been made on the next succeeding
Business Day). The Borrower shall, at the time of making each such payment,
specify to the Lender the sums payable by the Borrower under this Agreement
and the other Loan Documents to which such payment is to be applied (and in
the event the Borrower fails to so specify, or if an Event of Default has
occurred and is continuing, the Lender may apply such payment to the
Obligations in such order and manner as it may elect in its sole discretion).
Whenever any payment under this Agreement or any other Loan Document shall
be stated to be due on a day that is not a Business Day, such payment shall
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be made on the next succeeding Business Day, and such extension of time shall
in such case be included in the computation of the payment of interest and
commitment fee, as the case may be.
Section 3.2 PREPAYMENT. The Borrower may prepay the Advances in whole
at any time or from time to time in part without premium or penalty but with
accrued interest to the date of prepayment on the amount so prepaid.
Section 3.3 COMPUTATION OF INTEREST. Interest on the Advances and all
other amounts payable by the Borrower hereunder shall be computed on the
basis of a year of 360 days and the actual number of days elapsed (including
the first day but excluding the last day) unless such calculation would
result in a usurious rate, in which case interest shall be calculated on the
basis of a year of 365 or 366 days, as the case may be.
ARTICLE IV
YIELD PROTECTION
Section 4.1 CAPITAL ADEQUACY. If after the date hereof, the Lender
shall have determined that the adoption or implementation of any applicable
law, rule, or regulation regarding capital adequacy (including, without
limitation, any law, rule, or regulation implementing the Basle Accord), or
any change therein, or any change in the interpretation or administration
thereof by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or compliance by the Lender (or its
parent) with any guideline, request, or directive regarding capital adequacy
(whether or not having the force of law) of any such central bank or other
Governmental Authority (including, without limitation, any guideline or other
requirement implementing the Basle Accord), has or would have the effect of
reducing the rate of return on the Lender's (or its parent's) capital as a
consequence of its obligations hereunder or the transactions contemplated
hereby to a level below that which the Lender (or its parent) could have
achieved but for such adoption, implementation, change, or compliance (taking
into consideration the Lender's policies with respect to capital adequacy) by
an amount deemed by the Lender to be material, then the Lender will provide
the Borrower written notice thereof, and commencing sixty (60) days after
such notice is sent such amounts shall begin to accrue and from time to time,
within ten (10) Business Days after demand by the Lender, the Borrower shall
pay to the Lender (or its parent) such additional amount or amounts as will
compensate the Lender for such reduction. A certificate of the Lender
claiming compensation under this Section and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive, provided
that the determination thereof is made on a reasonable basis. In determining
such amount or amounts, the Lender may use any reasonable averaging and
attribution methods.
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ARTICLE V
SECURITY
Section 5.1 COLLATERAL. To secure full and complete payment and
performance of the Obligations, the Borrower shall execute and deliver or cause
to be executed and delivered the documents described below covering the property
and collateral described in this Section 5.1 (which, together with any other
property and collateral which may now or hereafter secure the Obligations or any
part thereof, is sometimes herein called the "Collateral"):
(a) The Borrower shall grant to the Lender a first priority perfected
security interest in shares of common capital stock of Spinnaker
Industries, Inc., a Delaware corporation, in an amount sufficient to cause
compliance with Section 8.2 hereof, whether now owned or hereafter
acquired, and all dividends thereon and all products and proceeds thereof,
pursuant to the Pledge Agreement.
(b) The Borrower shall execute and cause to be executed such further
documents and instruments, including without limitation, Uniform Commercial
Code financing statements, as the Lender, in its sole discretion, deems
necessary or desirable to create, preserve, evidence, and perfect its liens
and security interests in the Collateral.
(c) The Guarantors shall jointly and severally guarantee the payment
and performance of the Obligations by execution of Guaranty Agreements (the
"Guaranties") in form and substance satisfactory to Lender.
Section 5.2 SETOFF. If an Event of Default shall have occurred and be
continuing, Lender shall have the right to set off and apply against the
Obligations in such manner as the Lender may determine, at any time and without
notice to the Borrower, any and all deposits (general or special, time or
demand, provisional or final) or other sums at any time credited by or owing
from the Lender to the Borrower whether or not the Obligations are then due. As
further security for the Obligations, the Borrower hereby grants to the Lender a
security interest in all money, instruments, and other property of the Borrower
now or hereafter held by the Lender, excluding, however, property held in any
trust capacity. In addition to the Lender's right of setoff and as further
security for the Obligations, the Borrower hereby grants to the Lender a
security interest in all deposits (general or special, time or demand,
provisional or final) and other accounts of the Borrower now or hereafter on
deposit with or held by the Lender and all other sums at any time credited by or
owing from the Lender to the Borrower, excluding any deposits or accounts of the
Borrower acting in any trust capacity. The rights and remedies of the Lender
hereunder are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which the Lender may have.
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ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 INITIAL ADVANCE. The obligation of the Lender to make the
initial Advance is within the reasonable discretion of Lender and is subject to
the condition precedent that the Lender shall have received on or before the day
of such Advance all of the following, each dated (unless otherwise indicated)
the date hereof, in form and substance satisfactory to the Lender:
(a) RESOLUTIONS. Resolutions of the Board of Directors of the
Borrower certified by the Secretary or an Assistant Secretary of the
Borrower which authorize the execution, delivery, and performance by the
Borrower of this Agreement and the other Loan Documents to which the
Borrower is or is to be a party;
(b) INCUMBENCY CERTIFICATE. A certificate of incumbency certified by
the Secretary or an Assistant Secretary of the Borrower certifying the
names of the officers of the Borrower authorized to sign this Agreement and
each of the other Loan Documents to which the Borrower is or is to be a
party (including the certificates contemplated herein) together with
specimen signatures of such officers;
(c) CERTIFICATE OF INCORPORATION. The certificate of incorporation
of the Borrower certified by the Secretary of State of state of
incorporation of the Borrower and dated within ten (10) days prior to the
date of the Advance;
(d) BYLAWS. The bylaws of the Borrower certified by the Secretary or
an Assistant Secretary of the Borrower;
(e) GOVERNMENTAL CERTIFICATES. Certificates of the appropriate
government officials of the State of Texas as to the existence and good
standing of the Borrower and its authority to conduct business in such
state, each dated within ten (10) days prior to the date of the Advance;
(f) NOTE. The Note executed by the Borrower;
(g) PLEDGE AGREEMENT. The Pledge Agreement executed by the Borrower;
(h) FINANCING STATEMENTS. Uniform Commercial Code financing
statements executed by the Borrower and covering such Collateral as the
Lender may request;
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(i) PLEDGED STOCK. Certificates evidencing the shares of stock of
Spinnaker Industries, Inc., which are the subject of the Pledge Agreement,
together with stock powers duly executed in blank;
(j) GUARANTIES. The Guaranties executed by the Guarantors;
(k) UCC SEARCH. The results of a Uniform Commercial Code search
showing all financing statements and other documents or instruments on file
against the Borrower in the office of the Secretary of State of Texas, such
search to be as of a date no more than ten (10) days prior to the date of
the initial Advance; and
(l) ATTORNEYS' FEES AND EXPENSES. Evidence that the costs and
expenses (including reasonable attorneys' fees) referred to in Section
10.1, to the extent incurred, shall have been paid in full by the Borrower.
Section 6.2 ALL ADVANCES. The obligation of the Lender to make any
Advance (including the initial Advance) is within the sole and absolute
discretion of Lender and is subject to the following additional conditions
precedent:
(a) ADVANCE REQUEST FORM. Lender shall have received, in accordance
with Section 2.5, an Advance Request Form, dated the date of such Advance,
executed by the Borrower;
(b) NO DEFAULT. No Default shall have occurred and be continuing,
or would result from such Advance;
(c) NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, or condition (financial or otherwise) of the
Borrower, either Guarantor, or Spinnaker Industries, Inc., shall have
occurred in the determination of Lender;
(d) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties contained in Article VII hereof and in the other Loan
Documents shall be true and correct on and as of the date of such Advance
with the same force and effect as if such representations and warranties
had been made on and as of such date; and
(e) ADDITIONAL DOCUMENTATION. Lender shall have received such
additional approvals, opinions, or documents as the Lender or its legal
counsel, Winstead Sechrest & Minick P.C., may reasonably request.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement, the Borrower
represents and warrants to the Lender that:
Section 7.1 FINANCIAL STATEMENTS. The Borrower has delivered to the
Lender financial statements of the Borrower for the year ended December 31,
1996. Such financial statements are true and correct, and fairly and
accurately present, the financial condition of the Borrower as of the
respective dates indicated therein. The Borrower does not have any material
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments, or unrealized or anticipated losses from any unfavorable
commitments except as referred to or reflected in such financial statements.
There has been no material adverse change in the business, condition
(financial or otherwise), operations, prospects, or properties of the
Borrower since the effective date of the most recent financial statements
referred to in this Section.
Section 7.2 NO BREACH; CORPORATE EXISTENCE. The execution, delivery,
and performance by the Borrower of this Agreement and the other Loan
Documents to which the Borrower is or may become a party and compliance with
the terms and provisions hereof and thereof do not and will not (a) violate
or conflict with, or result in a breach of, or require any consent under (i)
any applicable law, rule, or regulation or any order, writ, injunction, or
decree of any Governmental Authority or arbitrator, or (ii) the Borrower's
certificate of incorporation or bylaws or any agreement or instrument to
which the Borrower is a party or by which his property is bound or subject,
or (b) constitute a default under any such agreement or instrument, or result
in the creation or imposition of any Lien (except as provided in Article V)
upon any of the revenues or assets of the Borrower. The Borrower (a) is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation; (b) has all requisite
corporate power and authority to own its assets and carry on its business as
now being or as proposed to be conducted; and (c) is qualified to do business
in all jurisdictions in which the nature of its business makes such
qualification necessary and where failure to so qualify would have a material
adverse effect on its business, condition (financial or otherwise),
operations, prospects, or properties. The Borrower has the corporate power
and authority to execute, deliver, and perform its obligations under this
Agreement and the other Loan Documents to which it is or may become a party.
Section 7.3 LITIGATION AND JUDGMENTS. There is no action, suit,
investigation, or proceeding before or by any Governmental Authority or
arbitrator pending, or to the knowledge of the Borrower, threatened against
or affecting the Borrower.
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Section 7.4 RIGHTS IN PROPERTIES. The Borrower has good and
indefeasible title to or valid leasehold interests in its respective
properties and assets, real and personal, including the properties, assets,
and leasehold interests reflected in the financial statements described in
Section 7.1, except as otherwise indicated on said financial statements. The
Borrower has no subsidiaries.
Section 7.5 ENFORCEABILITY. This Agreement constitutes, and the other
Loan Documents to which the Borrower is party, when delivered, shall
constitute legal, valid, and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their respective terms, except as
limited by bankruptcy, insolvency, or other laws of general application
relating to the enforcement of creditors' rights.
Section 7.6 APPROVALS. No authorization, approval, or consent of, and
no filing or registration with, any Governmental Authority or third party is
or will be necessary for the execution, delivery, or performance by the
Borrower of this Agreement and the other Loan Documents to which the Borrower
is or may become a party or the validity or enforceability thereof.
Section 7.7 TAXES. The Borrower has filed all tax returns (federal,
state, and local) required to be filed, including all income, property, and
sales tax returns, or has received valid extensions relating to said filings,
and have paid all of his liabilities for taxes, assessments, governmental
charges, and other levies that are due and payable. The Borrower knows of no
pending investigation of the Borrower by any taxing authority or of any
pending but unassessed tax liability of the Borrower.
Section 7.8 USE OF PROCEEDS; MARGIN SECURITIES. No part of the
proceeds of any Advance will be used to purchase or carry any margin stock
(within the meaning of Regulations G, T, U, or X of the Board of Governors of
the Federal Reserve System) or to extend credit to others for the purpose of
purchasing or carrying margin stock.
Section 7.9 DISCLOSURE. No statement, information, report,
representation, or warranty made by the Borrower in this Agreement or in any
other Loan Document or furnished to the Lender in connection with this
Agreement or any of the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading. There is no fact known
to the Borrower which has a material adverse effect, or which could
reasonably be expected to have a material adverse effect, on the business,
condition (financial or otherwise), operations, prospects, or properties of
the Borrower that has not been disclosed in writing to the Lender.
Section 7.10 AGREEMENTS. The Borrower is not a party to any indenture,
loan, or credit agreement, or to any lease or other agreement or instrument,
or subject to any charter or corporate restriction which could reasonably be
expected to have a material adverse effect on the business,
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condition (financial or otherwise), operations, prospects, or properties of
the Borrower, or the ability of the Borrower to pay and perform its
obligations under the Loan Documents. The Borrower is not in default in any
respect in the performance, observance, or fulfillment of any of the
obligations, covenants, or conditions contained in any agreement or
instrument material to its business to which it is a party.
Section 7.11 COMPLIANCE WITH LAWS. The Borrower is not in violation in
any material respect of any law, rule, regulation, order, or decree of any
Governmental Authority or arbitrator.
ARTICLE VIII
COVENANTS
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or the Lender has any Commitment hereunder, the
Borrower will perform and observe the following covenants, unless the Lender
shall otherwise consent in writing:
Section 8.1 REPORTING REQUIREMENTS. The Borrower will furnish or
cause to be furnished to the Lender:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any
event within ninety (90) days after the end of each fiscal year of the
Borrower, beginning with the fiscal year ending December 31, 1997, (i) a
copy of the annual report of the Borrower for such fiscal year containing
balance sheets and statements of income, retained earnings, and cash flow
as at the end of such fiscal year and for the 12-month period then ended,
in each case setting forth in comparative form the figures for the
preceding fiscal year, all in reasonable detail and certified by the
chief financial officer of Borrower, to the effect that such report has
been prepared in accordance with GAAP; and (ii) a certificate of the
chief financial officer of Borrower to the Lender stating that to his
knowledge no Default has occurred and is continuing, or if in his opinion
a Default has occurred and is continuing, a statement as to the nature
thereof;
(b) SEMIANNUAL FINANCIAL STATEMENTS. As soon as available, and in
any event within forty-five (45) days after each June 30 and December 31,
a copy of an unaudited financial report of the Borrower as of the end of
such fiscal quarter and for the portion of the fiscal year then ended,
containing balance sheets and statements of income, retained earnings,
and cash flow, in each case setting forth in comparative form the figures
for the corresponding period of the preceding fiscal year, all in
reasonable detail certified by the chief financial officer of the
Borrower to have been prepared in accordance with GAAP and to fairly and
accurately present (subject to year-end audit adjustments) the financial
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condition and results of operations of the Borrower at the date and for the
periods indicated therein;
(c) ANNUAL TAX RETURN. As soon as available, and in any event
within ten (10) days after the filing thereof with the Internal Revenue
Service, a copy of the Borrower's annual federal income tax return as
filed with the Internal Revenue Service;
(d) NOTICE OF DEFAULT. As soon as possible and in any event within
five (5) days after the occurrence of each Default, a written notice
setting forth the details of such Default and the action that the
Borrower has taken and proposes to take with respect thereto;
(e) NOTICE OF MATERIAL ADVERSE CHANGE. As soon as possible and in
any event within five (5) days after the occurrence thereof, written
notice of any matter that could reasonably be expected to have a material
adverse effect on the business, condition (financial or otherwise),
operations, prospects, or properties of the Borrower;
(f) SEMIANNUAL AND ANNUAL SEC REPORTS, PROXY STATEMENTS, ETC. As
soon as available, one copy of each financial statement, report, notice
or proxy statement sent by Spinnaker Industries, Inc. to its stockholders
generally and one copy of each regular, periodic or special report,
registration statement, or prospectus filed by Spinnaker Industries, Inc.
with any securities exchange or the Securities and Exchange Commission or
any successor agency, including without limitation its Forms 10Q and 10K;
and
(g) GENERAL INFORMATION. Promptly, such other information
concerning the Borrower, either Guarantor, or Spinnaker Industries, Inc.
as the Lender may from time to time reasonably request, subject to
fiduciary obligations of the Guarantors as directors of Spinnaker
Industries, Inc., and the restrictions imposed upon them by federal and
state securities laws.
Section 8.2 MAINTENANCE OF COLLATERAL VALUE. Borrower shall cause to
be subject to a first priority perfected security interest in favor of Lender
pursuant to the terms of the Pledge Agreement, shares of the Class A common
and common capital stock of Spinnaker Industries, Inc., which at all times
have an aggregate fair market value (determined on the basis of the closing
bid and/or last closing (as applicable) price thereof as of the date of
computation) of not less than two hundred percent (200%) of the outstanding
principal balance of the Obligations.
Section 8.3 INSURANCE. The Borrower will maintain insurance with
financially sound and reputable insurance companies in such amounts and
covering such risks as is usually carried
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by Persons engaged in similar businesses and owning similar properties in the
same general areas in which the Borrower operates.
Section 8.4 COMPLIANCE WITH LAWS. The Borrower will comply in all
material respects with all applicable laws, rules, regulations, orders, and
decrees of any Governmental Authority or arbitrator.
Section 8.5 COMPLIANCE WITH AGREEMENTS. The Borrower will comply with
all agreements, contracts, and instruments binding on him or affecting his
properties or business for which the Borrower's failure to comply could
reasonably be expected to have a material adverse effect on the financial
condition of the Borrower.
Section 8.6 FURTHER ASSURANCES. The Borrower will execute and deliver
such further agreements and instruments and take such further action as may
be reasonably requested by the Lender to carry out the provisions and
purposes of this Agreement and the other Loan Documents and to create,
preserve, and perfect the Liens of the Lender in the Collateral.
Section 8.7 LIMITATION ON LIENS. The Borrower will not incur, create,
assume, or permit to exist any Lien upon any of its property, assets, or
revenues, whether now owned or hereafter acquired, except:
(a) Liens heretofore disclosed to Lender in writing;
(b) Liens in favor of the Lender;
(c) Encumbrances consisting of minor easements, zoning
restrictions, or other restrictions on the use of real property that do
not (individually or in the aggregate) materially affect the value of the
assets encumbered thereby or materially impair the ability of the
Borrower to use such assets in its businesses, and none of which is
violated in any material respect by existing or proposed structures or
land use;
(d) Liens for taxes, assessments, or other governmental charges
which are not delinquent or which are being contested in good faith and
for which adequate reserves have been established;
(e) Liens of mechanics, materialmen, warehousemen, carriers, or
other similar statutory Liens securing obligations that are not yet due
and are incurred in the ordinary course of business;
(f) Liens resulting from good faith deposits to secure payments of
workmen's compensation or other social security programs or to secure the
performance of tenders,
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statutory obligations, surety and appeal bonds, bids, or contracts (other
than for payment of Debt), or leases made in the ordinary course of
business; and
(g) Liens to secure the Debt permitted by Section 8.8(b) upon
assets which do not constitute Collateral.
Section 8.8 LIMITATION ON DEBT. The Borrower will not incur, create,
assume, or permit to exist any Debt except (a) Debt to Lender, (b) other Debt
in the aggregate not to exceed $5,000,000 at any time outstanding and
incurred when no Default exists or will result therefrom, and (c) existing
Debt.
Section 8.9 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS. The
Borrower will preserve and maintain its corporate existence and all of its
leases, privileges, licenses, permits, franchises, qualifications, and rights
that are necessary or desirable in the ordinary conduct of its business. The
Borrower will conduct its business in an orderly and efficient manner in
accordance with good business practices.
Section 8.10 MAINTENANCE OF PROPERTIES. The Borrower will maintain,
keep, and preserve all of its properties (tangible and intangible) necessary
or useful in the proper conduct of its business in good working order and
condition.
Section 8.11 TAXES AND CLAIMS. The Borrower will pay or discharge, and
will cause each Subsidiary to pay or discharge, at or before maturity or
before becoming delinquent (a) all taxes, levies, assessments, and
governmental charges imposed on it or its income or profits or any of its
property, and (b) all lawful claims for labor, material, and supplies, which,
if unpaid, might become a Lien upon any of its property; PROVIDED, however,
that the Borrower shall not be required to pay or discharge any tax, levy,
assessment, or governmental charge which is being contested in good faith by
appropriate proceedings diligently pursued, and for which adequate reserves
have been established.
Section 8.12 INSURANCE. The Borrower will maintain insurance with
financially sound and reputable insurance companies in such amounts and
covering such risks as is usually carried by corporations engaged in similar
businesses and owning similar properties in the same general areas in which
the Borrower operates, provided that in any event the Borrower will maintain
workmen's compensation insurance, property insurance, comprehensive general
liability insurance, products liability insurance, and business interruption
insurance reasonably satisfactory to the Lender.
Section 8.13 INSPECTION RIGHTS. At any reasonable time and from time
to time, the Borrower will permit representatives of the Lender to examine,
copy, and make extracts from its
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books and records, to visit and inspect its properties, and to discuss its
business, operations, and financial condition with its officers, employees,
and independent certified public accountants.
Section 8.14 KEEPING BOOKS AND RECORDS. The Borrower will maintain
proper books of record and account in which full, true, and correct entries
in conformity with GAAP shall be made of all dealings and transactions in
relation to its business and activities.
Section 8.15 MERGERS, ETC. The Borrower will not become a party to a
merger or consolidation, or purchase or otherwise acquire all or any part of
the assets of any Person or any shares or other evidence of beneficial
ownership of any Person, or wind-up, dissolve, or liquidate. The Borrower
will not create or permit to exist any subsidiaries of the Borrower.
Section 8.16 RESTRICTED PAYMENTS. The Borrower will not declare or pay
any dividends or make any other payment or distribution (in cash, property,
or obligations) on account of its capital stock, or redeem, purchase, retire,
or otherwise acquire any of its capital stock or set apart any money for a
sinking or other analogous fund for any dividend or other distribution on its
capital stock or for any redemption, purchase, retirement, or other
acquisition of any of its capital stock. Notwithstanding the foregoing, when
no Default exists or would result therefrom, the Borrower may redeem shares
of its capital stock issued to its employees, partners, or agents (other than
Guarantors) in the ordinary course of business.
Section 8.17 LOANS AND INVESTMENTS. The Borrower will not make any
advance, loan, extension of credit, or capital contribution to or investment
in, or purchase, any stock, bonds, notes, debentures, or other securities of
any Person, except the Collateral and:
(a) readily marketable direct obligations of the United States of
America;
(b) fully insured certificates of deposit with maturities of one year
or less from the date of acquisition of any commercial bank operating in the
United States having capital and surplus in excess of $50,000,000.00;
(c) commercial paper of a domestic issuer if at the time of purchase
such paper is rated in one of the two highest rating categories of Standard
and Poor's Corporation or Moody's Investors Service;
(d) existing investments; and
(e) investments made in the ordinary course of its business.
Section 8.18 LIMITATION ON ISSUANCE OF CAPITAL STOCK. The Borrower
will not at any time issue, sell, assign, or otherwise dispose of (a) any of
its capital stock, (b) any securities
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exchangeable for or convertible into or carrying any rights to acquire any of
its capital stock, or (c) any option, warrant, or other right to acquire any
of its capital stock. Notwithstanding the foregoing, when no Default exists
or would result therefrom, the Borrower may issue additional shares of its
capital stock, or rights to acquire such shares, so long as at all times
Guarantors own and control at least eighty percent (80%) of the Borrower's
outstanding capital stock on a fully diluted basis.
Section 8.19 TRANSACTIONS WITH AFFILIATES. The Borrower will not enter
into any transaction, including, without limitation, the purchase, sale, or
exchange of property or the rendering of any service, with any affiliate of
the Borrower, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's business and upon fair and reasonable terms no
less favorable to the Borrower than would be obtained in a comparable
arm's-length transaction with a Person not an affiliate of the Borrower.
Section 8.20 DISPOSITION OF ASSETS. The Borrower will not sell, lease,
assign, transfer, or otherwise dispose of any of its assets, except
dispositions of investments in the ordinary course of business.
ARTICLE IX
DEFAULT
Section 9.1 EVENTS OF DEFAULT. Each of the following shall be deemed
an "Event of Default":
(a) The Borrower shall fail to pay when due the Obligations or any
part thereof.
(b) Any representation or warranty made by the Borrower in any Loan
Document or in any certificate, report, notice, or financial statement
furnished at any time in connection with this Agreement shall be false,
misleading, or erroneous in any material respect when made.
(c) The Borrower shall fail to perform, observe, or comply with any
covenant, agreement, or term contained in this Agreement or any other
Loan Document and such failure shall continue for 10 days after the
earlier of (i) the Borrower has knowledge of such failure, or (ii) the
Lender sends the Borrower written notice of such failure.
(d) The Borrower, either Guarantor, or Spinnaker Industries, Inc.
shall commence a voluntary proceeding seeking liquidation, reorganization,
or other relief with
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respect to itself or its debts under any bankruptcy, insolvency, or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian, or other similar official of it
or a substantial part of its property or shall consent to any such relief
or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it or shall make a
general assignment for the benefit of creditors or shall generally fail
to pay its debts as they become due or shall take any corporate action to
authorize any of the foregoing.
(e) An involuntary proceeding shall be commenced against the
Borrower, either Guarantor, or Spinnaker Industries, Inc. seeking
liquidation, reorganization, or other relief with respect to it or its
debts under any bankruptcy, insolvency, or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian, or other similar official for it or a substantial
part of its property, and such involuntary proceeding shall remain
undismissed and unstayed for a period of thirty (30) days.
(f) The Borrower shall fail to pay when due any principal of or
interest on any Debt with a then-current outstanding principal balance in
excess of $100,000 (other than the Obligations) and such failure shall
continue beyond expiration of any cure period therefor, if any, or the
maturity of any such Debt shall have been accelerated, or any such Debt
shall have been required to be prepaid prior to the stated maturity
thereof, or any event shall have occurred that permits (or, with the
giving of notice or lapse of time or both, would permit) any holder or
holders of such Debt or any Person acting on behalf of such holder or
holders to accelerate the maturity thereof or require any such
prepayment, except in the event that the Borrower is diligently
contesting any such event by proper proceedings and has made appropriate
reserves therefor, or taken such other action, reasonably acceptable to
the Lender.
(g) This Agreement or any other Loan Document shall cease to be in
full force and effect or shall be declared null and void or the validity
or enforceability thereof shall be contested or challenged by the
Borrower, or the Borrower shall deny that it has any further liability or
obligation under any of the Loan Documents, or any lien or security
interest created by the Loan Documents shall for any reason cease to be a
valid, first priority perfected security interest in and lien upon any of
the Collateral purported to be covered thereby.
(h) Either Guarantor shall cease to be active in the management of
Borrower and Spinnaker Industries, Inc.
(i) The common capital stock or Class A common stock of Spinnaker
Industries, Inc. shall cease to be traded on NASDAQ or a national
securities exchange.
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Section 9.2 REMEDIES UPON DEFAULT. If any Event of Default shall
occur and be continuing, the Lender may without notice terminate the
Commitment and declare the Obligations or any part thereof to be immediately
due and payable, and the same shall thereupon become immediately due and
payable, without notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest, or other formalities of any kind, all of which are hereby expressly
waived by the Borrower; provided, however, that upon the occurrence of an
Event of Default under Section 9.1(d) or Section 9.1(e), the Commitment shall
automatically terminate, and the Obligations shall become immediately due and
payable without notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest, or other formalities of any kind, all of which are hereby expressly
waived by the Borrower. If any Event of Default shall occur and be
continuing, the Lender may exercise all rights and remedies available to it
in law or in equity, under the Loan Documents, or otherwise.
Section 9.3 PERFORMANCE BY THE LENDER. If the Borrower shall fail to
perform any covenant or agreement contained in any of the Loan Documents, the
Lender may perform or attempt to perform such covenant or agreement on behalf
of the Borrower. In such event, the Borrower shall, at the request of the
Lender, promptly pay any amount reasonably expended by the Lender in
connection with such performance or attempted performance to the Lender,
together with interest thereon at the Default Rate from and including the
date of such expenditure to but excluding the date such expenditure is paid
in full. Notwithstanding the foregoing, it is expressly agreed that the
Lender shall not have any liability or responsibility for the performance of
any obligation of the Borrower under this Agreement or any other Loan
Document.
ARTICLE X
MISCELLANEOUS
Section 10.1 EXPENSES. The Borrower hereby agrees to pay on demand:
(a) all costs and expenses of the Lender in connection with the preparation,
negotiation, execution, and delivery of this Agreement and the other Loan
Documents and any and all amendments, modifications, renewals, extensions,
and supplements thereof and thereto, including, without limitation, the
reasonable fees and expenses of legal counsel for the Lender, (b) all costs
and expenses of the Lender in connection with any Default and the enforcement
of this Agreement or any other Loan Document, including, without limitation,
the reasonable fees and expenses of legal counsel for the Lender, (c) all
transfer, stamp, documentary, or other similar taxes, assessments, or charges
levied by any Governmental Authority in respect of this Agreement or any of
the other Loan Documents, (d) all costs, expenses, assessments, and other
charges incurred in connection with any filing, registration, recording, or
perfection of any security interest or Lien contemplated by this Agreement or
any other Loan Document, and (e) all other costs and expenses incurred by the
Lender in connection with this Agreement or any other Loan Document,
including, without
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limitation, all costs, expenses, and other charges incurred in connection
with obtaining any audit or appraisal in respect of the Collateral.
Section 10.2 INDEMNIFICATION. THE BORROWER SHALL INDEMNIFY THE LENDER
AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, ATTORNEYS, AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS
AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES,
JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) TO
WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM
OR RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE,
ADMINISTRATION, OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE
TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY THE
BORROWER OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT
CONTAINED IN ANY OF THE LOAN DOCUMENTS, (D) THE PRESENCE, RELEASE, THREATENED
RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON,
ABOUT, WITHIN, OR AFFECTING ANY OF THE PROPERTIES OR ASSETS OF THE BORROWER,
OR (E) ANY INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER PROCEEDING,
RELATING TO ANY OF THE FOREGOING; BUT EXCLUDING ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND
EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) ARISING AS A RESULT OF THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER. Without limiting any
provision of this Agreement or of any other Loan Document, it is the express
intention of the parties hereto that each Person to be indemnified under this
Section shall be indemnified from and held harmless against any and all
losses, liabilities, claims, damages, penalties, judgments, disbursements,
costs, and expenses (including attorneys' fees) arising out of or resulting
from the sole or contributory negligence of such Person.
Section 10.3 LIMITATION OF LIABILITY. Neither the Lender nor any
Affiliate, officer, director, employee, attorney, or agent of the Lender
shall have any liability with respect to, and the Borrower hereby waives,
releases, and agrees not to sue any of them upon, any claim for any special,
indirect, incidental, or consequential damages suffered or incurred by the
Borrower in connection with, arising out of, or in any way related to, this
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Agreement or any of the other Loan Documents. The
Borrower hereby waives, releases, and agrees not to sue the Lender or any of
the Lender's Affiliates, officers, directors, employees, attorneys, or agents
for punitive damages in respect of any claim in connection with, arising out
of, or in any way related to, this Agreement or any of the other Loan
Documents, or any of the transactions contemplated by this Agreement or any
of the other Loan Documents. Nothing in this Section shall impair or
restrict the
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Borrower's right to sue the Lender for actual damages arising as a result of
the gross negligence or willful misconduct of the Lender.
Section 10.4 NO DUTY. All attorneys, accountants, appraisers, and
other professional Persons and consultants retained by the Lender shall have
the right to act exclusively in the interest of the Lender and shall have no
duty of disclosure, duty of loyalty, duty of care, or other duty or
obligation of any type or nature whatsoever to the Borrower or any of the
Borrower's shareholders or any other Person.
Section 10.5 LENDER NOT FIDUCIARY. The relationship between the
Borrower and the Lender is solely that of debtor and creditor, and the Lender
has no fiduciary or other special relationship with the Borrower, and no term
or condition of any of the Loan Documents shall be construed so as to deem
the relationship between the Borrower and the Lender to be other than that of
debtor and creditor.
Section 10.6 EQUITABLE RELIEF. The Borrower recognizes that in the
event the Borrower fails to pay, perform, observe, or discharge any or all of
the Obligations, any remedy at law may prove to be inadequate relief to the
Lender. The Borrower therefore agrees that the Lender, if the Lender so
requests, shall be entitled to temporary and permanent injunctive relief in
any such case without the necessity of proving actual damages.
Section 10.7 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of
the Lender to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power, or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege.
The rights and remedies provided for in this Agreement and the other Loan
Documents are cumulative and not exclusive of any rights and remedies
provided by law.
Section 10.8 SUCCESSORS AND ASSIGNS. This Agreement is binding upon
and shall inure to the benefit of the Lender and the Borrower and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Lender.
Section 10.9 SURVIVAL. All representations and warranties made in this
Agreement or any other Loan Document or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by the Lender or any closing shall affect the representations
and warranties or the right of the Lender to rely upon them. Without
prejudice to the survival of any other obligation of the Borrower hereunder,
the obligations of the Borrower under Sections 10.1 and 10.2 shall survive
repayment of the Note and termination of the Commitment.
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Section 10.10 ENTIRE AGREEMENT; AMENDMENT. THIS AGREEMENT, THE NOTE,
AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN
OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR
VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS
OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE
PARTIES HERETO. The provisions of this Agreement and the other Loan
Documents to which the Borrower is a party may be amended or waived only by
an instrument in writing signed by the parties hereto.
Section 10.11 MAXIMUM INTEREST RATE. No provision of this Agreement or
any other Loan Document shall require the payment or the collection of
interest in excess of the maximum amount permitted by applicable law. If any
excess of interest in such respect is hereby provided for, or shall be
adjudicated to be so provided, in any Loan Document or otherwise in
connection with this loan transaction, the provisions of this Section shall
govern and prevail and neither the Borrower nor the sureties, guarantors,
successors, or assigns of the Borrower shall be obligated to pay the excess
amount of such interest or any other excess sum paid for the use,
forbearance, or detention of sums loaned pursuant hereto. In the event the
Lender ever receives, collects, or applies as interest any such sum, such
amount which would be in excess of the maximum amount permitted by applicable
law shall be applied as a payment and reduction of the principal of the
indebtedness evidenced by the Note; and, if the principal of the Note has
been paid in full, any remaining excess shall forthwith be paid to the
Borrower. In determining whether or not the interest paid or payable exceeds
the Maximum Rate, the Borrower and the Lender shall, to the extent permitted
by applicable law, (a) characterize any non-principal payment as an expense,
fee, or premium rather than as interest, (b) exclude voluntary prepayments
and the effects thereof, and (c) amortize, prorate, allocate, and spread in
equal or unequal parts the total amount of interest throughout the entire
contemplated term of the indebtedness evidenced by the Note so that interest
for the entire term does not exceed the Maximum Rate.
Section 10.12 NOTICES. All notices and other communications provided
for in this Agreement and the other Loan Documents to which the Borrower is a
party shall be given or made by telex, telegraph, telecopy, cable, or in
writing and telexed, telecopied, telegraphed, cabled, mailed by certified
mail return receipt requested, or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof;
or, as to any party at such other address as shall be designated by such
party in a notice to the other party given in accordance with this Section.
Except as otherwise provided in this Agreement, all such communications shall
be deemed to have been duly given when transmitted by telex or telecopy,
subject to telephone confirmation of receipt, or delivered to the telegraph
or cable office, subject to telephone confirmation of receipt, or when
personally delivered or, in the case of a mailed
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notice, three (3) days after being duly deposited in the mails, in each case
given or addressed as aforesaid; PROVIDED, however, notices to the Lender
pursuant to Article II shall not be effective until received by the Lender.
Section 10.13 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas and the
applicable laws of the United States of America. This Agreement has been
entered into in Dallas County, Texas, and it shall be performable for all
purposes in Dallas County, Texas.
Section 10.14 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Telecopies of
signatures shall be binding and effective as originals.
Section 10.15 SEVERABILITY. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not
impair or invalidate the remainder of this Agreement and the effect thereof
shall be confined to the provision held to be invalid or illegal.
Section 10.16 HEADINGS. The headings, captions, and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 10.17 NON-APPLICATION OF CHAPTER 15 OF TEXAS CREDIT CODE. The
provisions of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil
Statutes, Article 5069-15) are specifically declared by the parties hereto
not to be applicable to this Agreement or any of the other Loan Documents or
to the transactions contemplated hereby.
Section 10.18 PARTICIPATIONS. The Lender shall have the right at any
time and from time to time to grant participations in the Note and any other
Loan Documents. Each actual or proposed participant shall be entitled to
receive all information received by the Lender regarding the Borrower and its
Subsidiaries, including, without limitation, information required to be
disclosed to a participant pursuant to Banking Circular 181 (Rev., August 2,
1984), issued by the Comptroller of the Currency (whether the actual or
proposed participant is subject to the circular or not).
Section 10.19 CONSTRUCTION. The Borrower and the Lender acknowledge
that each of them has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review this Agreement and the other Loan
Documents with its legal counsel and that this Agreement and the other Loan
Documents shall be construed as if jointly drafted by the Borrower and the
Lender.
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Section 10.20 INDEPENDENCE OF COVENANTS. All covenants hereunder shall
be given independent effect so that if a particular action or condition is
not permitted by any of such covenants, the fact that it would be permitted
by an exception to, or be otherwise within the limitations of, another
covenant shall not avoid the occurrence of a Default if such action is taken
or such condition exists.
Section 10.21 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO
A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED
UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE
LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF
LENDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
BORROWER:
BOYLE, FLEMING & CO., INC.
By: /s/ Ned N. Fleming III
------------------------------
Title:
Address for Notices:
600 N. PEARL STREET, SUITE 2160
DALLAS, TX 75201
Fax No.: (214) 855-0093
Telephone No.: (214) 855-0322
LENDER:
COMERICA BANK-TEXAS
By: /s/ Wes O. Barnhart
-----------------------------------
Wes O. Barnhart
Senior Vice President
Address for Notices:
Mail Code 6594
P.O. Box 650282
Dallas, TX 75265-0282
Fax No.: (214) 890-4327
Telephone No.: (214) 890-4314
Attention: Wes O. Barnhart
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EXHIBIT "A"
TO
LOAN AGREEMENT
Advance Request Form
--------------------
<PAGE>
CUSIP Nos.: 848926101 Page 42 of 86
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TO: Comerica Bank-Texas
1300 NorthPark Center
Dallas, Texas 75225
Attention: Wes O. Barnhart
Ladies and Gentlemen:
The undersigned (the "Borrower") make and deliver this certificate pursuant
to that certain Loan Agreement dated as of June 24, 1997, between the Borrower
and Comerica Bank-Texas (the "Lender") (as the same has been amended,
supplemented or modified from to time, the "Loan Agreement"). Capitalized terms
used and not otherwise defined herein shall have the same meanings as set forth
in the Loan Agreement. In accordance with the Loan Agreement, the Borrowers
hereby request that the Lender make an Advance in the amount set forth in item
(d) below.
In connection with the foregoing and pursuant to the terms and provisions
of the Loan Agreement, the undersigned hereby certify to Lender that the
following statements are true and correct:
(i) The representations and warranties contained in Article VI of the
Loan Agreement and in each of the other Loan Documents are true and
correct on and as of the date hereof with the same force and effect as
if made on and as of such date.
(ii) No default has occurred and is continuing nor would any Default
result from the Advance requested hereunder.
(iii) The amount of the Advance requested hereunder, when added to
all outstanding Advances, will not exceed the Commitment.
(iv) All information supplied below is true, correct, and complete as
of the date hereof.
(v) The proceeds of the Advance shall be used for the following
purpose:
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CUSIP Nos.: 848926101 Page 43 of 86
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LOAN REQUEST INFORMATION
------------------------
(a) Total Commitment ........................................ $4,000,000
(b) Outstanding principal amount of Advances ................ $_________
(c) Net Availability [line (a) minus line (b)] .............. $_________
(d) Amount of Requested Advance (minimum $10,000) ........... $_________
(e) Date of Requested Advance (must be a Business Day)....... _________, 19__
(f) Market Value of Collateral .............................. $_________
(g) Ratio of Collateral Value to Obligations (at least 2:1).. $_________
BORROWER:
BOYLE, FLEMING & CO., INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Dated as of: _______________________
[insert date of requested
Advance]
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CUSIP Nos.: 848926101 Page 44 of 86
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FIRST AMENDMENT TO LOAN AGREEMENT AND GUARANTIES
THIS FIRST AMENDMENT TO LOAN AGREEMENT AND GUARANTIES (the "Amendment"),
dated as of August 29, 1997, is among BOYLE, FLEMING & CO., INC., a Texas
corporation ("Borrower"), COMERICA BANK-TEXAS ("Lender"), RICHARD J. BOYLE
and NED N. FLEMING, III.
RECITALS:
A. Borrower and Lender have entered into that certain Loan Agreement (the
"Agreement") dated as of June 24, 1997.
B. Pursuant to the Agreement, each of Richard J. Boyle and Ned N.
Fleming, III executed those certain Guaranty Agreements dated as of
June 24, 1997 which guaranteed to Lender the payment and performance
of the Obligations (as defined in the Agreement).
C. Borrower and Lender now desire to increase the principal amount of the
loans which may be made from time to time to $8,000,000 and amend the
Agreement as herein set forth, and Guarantors and Lender now desire to
amend the Guaranties (as defined in the Agreement) as set forth
herein.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
1.1 DEFINITIONS. Capitalized terms used in this Amendment, to the
extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
ARTICLE II
Amendments
2.1 AMENDMENT TO CERTAIN DEFINITIONS. Effective as of the date hereof,
the definitions of Commitment, Note and Termination Date set forth in Section
1.1 of the Agreement are hereby amended in their entirety to read as follows:
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CUSIP Nos.: 848926101 Page 45 of 86
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"Commitment" means the obligation of the Lender to make Advances
hereunder in an aggregate principal amount at any one time outstanding
up to but not exceeding $8,000,000, as such obligation may be
terminated pursuant to Section 9.2.
"Note" means the Promissory Note dated as of August 29, 1997, of
the Borrower payable to the order of the Lender in the original
principal amount of $8,000,000, and all extensions, renewals, and
modifications thereof.
"Termination Date" means 11:00 a.m. Dallas, Texas time on
February 26, 1999, or such earlier date and time on which the
Commitment terminates as provided in this Agreement.
2.2 AMENDMENT TO MAINTENANCE OF COLLATERAL VALUE. Effective as of the
date hereof, Section 8.2 of the Agreement is hereby amended in its entirety
to read as follows:
Section 8.2 MAINTENANCE OF COLLATERAL VALUE. Borrower shall
cause to be subject to a first priority perfected security interest in
favor of Lender pursuant to the terms of a Pledge Agreement, shares of
the Class A common and common capital stock of Spinnaker Industries,
Inc., which at all times have an aggregate fair market value
(determined on the basis of the closing bid and/or last closing (as
applicable) price thereof as of the date of computation) of not less
than the percent set forth on Schedule 1 hereto during the applicable
periods based on the outstanding principal amount of the Obligations
as set forth on Schedule 1 hereto; provided that at such time as
Spinnaker Industries, Inc. shall have received net cash proceeds in an
amount not less than $25,000,000 from a firmly underwritten registered
public offering of its common stock, a material portion of which
proceeds are received from sales of such common stock in broad
distribution to noninstitutional investors, then such percent shall at
all times thereafter be equal to two hundred percent (200%).
2.3 AMENDMENT TO LIMITATION ON DEBT. Effective as of the date hereof,
Section 8.8 of the Agreement is hereby amended in its entirety to read as
follows:
Section 8.8 LIMITATION ON DEBT. The Borrower will not incur,
create, assume, or permit to exist any Debt except (a) Debt to Lender,
(b) other Debt in the aggregate not to exceed $2,500,000 at any time
outstanding and incurred when no Default exists or will result
therefrom, and (c) existing Debt.
2.4 AMENDMENT TO ARTICLE VIII. Effective as of the date hereof, Article
VIII is hereby amended to add thereto the following Section 8.21:
Section 8.21 MINIMUM TANGIBLE NET WORTH. The Borrower will at
all times maintain Tangible Net Worth in an amount not less than one
hundred twenty-five percent (125%) of the outstanding principal amount
of the Obligations. As used herein, "Tangible
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CUSIP Nos.: 848926101 Page 46 of 86
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Net Worth" means, at any time, all amounts which, in conformity with
GAAP, would be included as stockholders' equity on a consolidated
balance sheet of the Borrower; provided, however, there shall be
excluded therefrom (a) any amount at which shares of capital stock of
the Borrower appear as an asset on the Borrower's balance sheet, (b)
goodwill, including any amounts, however designated, that represent the
excess of the purchase price paid for assets or stock over the value
assigned thereto, (c) patents, trademarks, trade names, and copyrights,
(d) deferred expenses, (e) loans and advances to any stockholder,
director, officer, or employee of the Borrower or any affiliate of the
Borrower, and (f) all other assets which are properly classified as
intangible assets.
2.5 AMENDMENT TO REPORTING REQUIREMENTS. Effective as of the date
hereof, Section 8.1 of the Agreement is hereby amended to add thereto the
following subsection (h):
(h) COMPLIANCE CERTIFICATE. In connection with the annual
financial statements and semiannual financial statements required to
be delivered by subsections (a) and (b) above, the certificate of the
Chief Financial Officer of the Borrower required to be delivered in
connection with all such financial statements shall include a
statement showing in reasonable detail the calculations demonstrating
compliance with Section 8.21 of this Agreement.
2.6 AMENDMENT TO GUARANTY OF RICHARD J. BOYLE. Effective as of the date
hereof, Section 7(f) of the Guaranty of Richard J. Boyle is hereby amended in
its entirety to read as follows:
(f) Guarantor and Ned N. Fleming, III will at all times maintain
on hand cash and cash equivalent investments, exclusive of investments
in Spinnaker Industries, Inc., in an aggregate amount not less than
the minimum liquidity amount required as set forth on Schedule 1 to
the Loan Agreement as determined in accordance with the outstanding
principal amount of the Obligations from time to time.
2.7 AMENDMENT TO GUARANTY OF NED N. FLEMING, III. Effective as of the
date hereof, Section 7(f) of the Guaranty of Ned N. Fleming, III is hereby
amended in its entirety to read as follows:
(f) Guarantor and Richard J. Boyle will at all times maintain on
hand cash and cash equivalent investments, exclusive of investments in
Spinnaker Industries, Inc., in an aggregate amount not less than the
minimum liquidity amount required as set forth on Schedule 1 to the
Loan Agreement as determined in accordance with the outstanding
principal amount of the Obligations from time to time.
2.8 AMENDMENT TO GUARANTIES. Effective as of the date hereof, all
references in the Guaranties to the loan made by the Lender to the Borrower
in the aggregate principal amount of up to $4,000,000 are hereby amended to
mean references to the loan made by the Lender to the Borrower in the
aggregate principal amount of up to $8,000,000. The Guaranties are hereby
ratified and confirmed. Each Guarantor hereby consents and agrees to this
Amendment and agrees that his respective Guaranty shall remain in full
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force and effect and shall continue to be the legal, valid and binding
obligation of such Guarantor enforceable against such Guarantor in accordance
with its terms. The Guaranteed Indebtedness under and as defined in each
Guaranty shall include, without limitation, the loan made by the Lender to
the Borrower pursuant to the Agreement, as amended hereby, and as increased
hereby to the aggregate principal amount of up to $8,000,000.
2.9 AMENDMENT TO AGREEMENT. Effective as of the date hereof, the
Agreement is hereby amended to add thereto a Schedule 1, which Schedule 1
shall read in the form of Schedule 1 attached hereto.
ARTICLE III
CONDITIONS PRECEDENT
3.1 CONDITIONS. The effectiveness of this Amendment is subject to the
satisfaction of the following conditions precedent:
(a) Lender shall have received all of the following, each dated
(unless otherwise indicated) the date of this Amendment, in form
and substance satisfactory to Lender:
(1) RESOLUTIONS. Resolutions of the Board of Directors of
Borrower certified by its Secretary or an Assistant
Secretary which authorize the execution, delivery, and
performance by Borrower of this Amendment and the other Loan
Documents to which Borrower is or is to be a party
hereunder;
(2) INCUMBENCY CERTIFICATE. A certificate of incumbency
certified by the Secretary or an Assistant Secretary of
Borrower certifying the names of the officers of Borrower
authorized to sign this Amendment and each of the other Loan
Documents to which Borrower is or is to be a party hereunder
(including the certificates contemplated herein) together
with specimen signatures of such officers;
(3) ARTICLES OF INCORPORATION. Any amendments to the articles
of incorporation of Borrower adopted between June 24, 1997,
and the date of this Amendment and certified by the
Secretary or an Assistant Secretary of Borrower;
(4) BYLAWS. Any amendments to the bylaws of Borrower adopted
between June 24, 1997, and the date of this Amendment and
certified by the Secretary or an Assistant Secretary of
Borrower; and
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(5) ADDITIONAL INFORMATION. Lender shall have received such
additional documents, instruments and information as Lender
or its legal counsel, Winstead Sechrest & Minick P.C., may
request.
(b) Borrower shall have executed and delivered to Lender the Note and
a Form U-1 duly completed.
(c) Borrower shall have paid to Lender the commitment fee and
facility fee due to Lender as a condition of Lender's obligations
hereunder.
(d) The representations and warranties contained herein and in all
other Loan Documents, as amended hereby, shall be true and
correct as of the date hereof as if made on the date hereof.
(e) No Event of Default shall have occurred and be continuing and no
event or condition shall have occurred that with the giving of
notice or lapse of time or both would be an Event of Default.
(f) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents,
instruments, and other legal matters incident thereto shall be
satisfactory to Lender and its legal counsel, Winstead Sechrest &
Minick P.C.
ARTICLE IV
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
4.1 RATIFICATIONS. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions set forth in
the Agreement and the Guaranties and except as expressly modified and
superseded by this Amendment, the terms and provisions of the Agreement and
the Guaranties are ratified and confirmed and shall continue in full force
and effect. Borrower and Lender agree that the Agreement as amended hereby
shall continue to be legal, valid, binding and enforceable in accordance with
its terms. Borrower hereby ratifies and confirms the Pledge Agreement and
acknowledges and agrees that the Collateral secures the Obligations as
increased and modified by this Amendment.
4.2 REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lender that (i) the execution, delivery and performance of this
Amendment and any and all other Loan Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the articles of incorporation or
bylaws of Borrower, (ii) the representations and warranties contained in the
Agreement, as amended hereby, and any other Loan Document are true and
correct on and as of the date hereof as though made on and as of the date
hereof, (iii) no Event of Default has occurred and is continuing and no event
or condition has occurred that with
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the giving of notice or lapse of time or both would be an Event of Default,
and (iv) Borrower and Guarantors are in full compliance with all covenants
and agreements contained in the Agreement and the Guaranties as amended
hereby.
ARTICLE V
MISCELLANEOUS
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in this Amendment or any other Loan Document including any
Loan Document furnished in connection with this Amendment shall survive the
execution and delivery of this Amendment and the other Loan Documents, and no
investigation by Lender or any closing shall affect the representations and
warranties or the right of Lender to rely upon them.
5.2 REFERENCE TO AGREEMENT. Each of the Loan Documents, including the
Agreement and any and all other agreements, documents, or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to
the terms of the Agreement as amended hereby, are hereby amended so that any
reference in such Loan Documents to the Agreement shall mean a reference to
the Agreement as amended hereby.
5.3 EXPENSES OF LENDER. As provided in the Agreement, Borrower agrees
to pay on demand all costs and expenses incurred by Lender in connection with
the preparation, negotiation, and execution of this Amendment and the other
Loan Documents executed pursuant hereto and any and all amendments,
modifications, and supplements thereto, including without limitation the
costs and fees of Lender's legal counsel, and all costs and expenses incurred
by Lender in connection with the enforcement or preservation of any rights
under the Agreement, as amended hereby, or any other Loan Document, including
without limitation the costs and fees of Lender's legal counsel.
5.4 SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
5.5 APPLICABLE LAW. This Amendment and all other Loan Documents
executed pursuant hereto shall be deemed to have been made and to be
performable in Dallas, Dallas County, Texas and shall be governed by and
construed in accordance with the laws of the State of Texas.
5.6 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall
inure to the benefit of Lender, Borrower, and Guarantors and their respective
successors and assigns, except none of Borrower and Guarantors may assign or
transfer any of their respective rights or obligations hereunder without the
prior written consent of Lender.
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5.7 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the
same instrument. Telecopies of signatures shall be binding and effective as
originals.
5.8 EFFECT OF WAIVER. No consent or waiver, express or implied, by
Lender to or for any breach of or deviation from any covenant, condition or
duty by Borrower or either Guarantor shall be deemed a consent or waiver to
or of any other breach of the same or any other covenant, condition or duty.
5.9 HEADINGS. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
5.10 NON-APPLICATION OF CHAPTER 15 OF TEXAS CREDIT CODE. The provisions
of Chapter 15 of the Texas Credit Code (Vernon's Annotated Texas Statutes,
Article 5069-15) are specifically declared by the parties not to be
applicable to this Amendment or any of the Loan Documents or the transactions
contemplated hereby.
5.11 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS,
DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS
AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY
NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE
NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
Executed as of the date first written above.
BORROWER:
BOYLE, FLEMING & CO., INC.
By: /s/ Ned N. Fleming III
------------------------------------
Name: Ned N. Fleming, III
----------------------------------
Title: President
---------------------------------
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LENDER:
COMERICA BANK-TEXAS
By: /s/ Wes O. Barnart
---------------------------------------
Wes O. Barnhart, Senior Vice President
GUARANTORS:
/s/ Richard J. Boyle
--------------------------------------------
RICHARD J. BOYLE
/s/ Ned N. Fleming III
--------------------------------------------
NED N. FLEMING, III
-8-
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SCHEDULE 1
<TABLE>
OUTSTANDING PRINCIPAL SECTION 8.2 REQUIRED GUARANTY MINIMUM LIQUIDITY
AMOUNT OF OBLIGATIONS MINIMUM REQUIREMENT
PERCENTAGE
<S> <C> <C>
LESS THAN OR EQUAL TO $4,000,000 200% $2,000,000
GREATER THAN $4,000,000 but
LESS THAN OR EQUAL TO $4,100,000 203% $2,050,000
GREATER THAN $4,100,000 but
LESS THAN OR EQUAL TO $4,200,000 205% $2,100,000
GREATER THAN $4,200,000 but
LESS THAN OR EQUAL TO $4,300,000 208% $2,150,000
GREATER THAN $4,300,000 but
LESS THAN OR EQUAL TO $4,400,000 210% $2,200,000
GREATER THAN $4,400,000 but
LESS THAN OR EQUAL TO $4,500,000 213% $2,250,000
GREATER THAN $4,500,000 but
LESS THAN OR EQUAL TO $4,600,000 215% $2,300,000
GREATER THAN $4,600,000 but
LESS THAN OR EQUAL TO $4,700,000 218% $2,350,000
GREATER THAN $4,700,000 but
LESS THAN OR EQUAL TO $4,800,000 220% $2,400,000
GREATER THAN $4,800,000 but
LESS THAN OR EQUAL TO $4,900,000 223% $2,450,000
GREATER THAN $4,900,000 but
LESS THAN OR EQUAL TO $5,000,000 225% $2,500,000
GREATER THAN $5,000,000 but
LESS THAN OR EQUAL TO $5,100,000 228% $2,550,000
GREATER THAN $5,100,000 but
LESS THAN OR EQUAL TO $5,200,000 230% $2,600,000
GREATER THAN $5,200,000 but
LESS THAN OR EQUAL TO $5,300,000 233% $2,650,000
GREATER THAN $5,300,000 but
LESS THAN OR EQUAL TO $5,400,000 235% $2,700,000
GREATER THAN $5,400,000 but
LESS THAN OR EQUAL TO $5,500,000 238% $2,750,000
GREATER THAN $5,500,000 but
LESS THAN OR EQUAL TO $5,600,000 240% $2,800,000
GREATER THAN $5,600,000 but
LESS THAN OR EQUAL TO $5,700,000 243% $2,850,000
GREATER THAN $5,700,000 but
LESS THAN OR EQUAL TO $5,800,000 245% $2,900,000
GREATER THAN $5,800,000 but
LESS THAN OR EQUAL TO $5,900,000 248% $2,950,000
GREATER THAN $5,900,000 but
LESS THAN OR EQUAL TO $6,000,000 250% $3,000,000
GREATER THAN $6,000,000 but
LESS THAN OR EQUAL TO $6,100,000 253% $3,025,000
GREATER THAN $6,100,000 but
LESS THAN OR EQUAL TO $6,200,000 255% $3,050,000
</TABLE>
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<TABLE>
OUTSTANDING PRINCIPAL SECTION 8.2 REQUIRED GUARANTY MINIMUM LIQUIDITY
AMOUNT OF OBLIGATIONS MINIMUM REQUIREMENT
PERCENTAGE
<S> <C> <C>
GREATER THAN $6,200,000 but
LESS THAN OR EQUAL TO $6,300,000 258% $3,075,000
GREATER THAN $6,300,000 but
LESS THAN OR EQUAL TO $6,400,000 260% $3,100,000
GREATER THAN $6,400,000 but
LESS THAN OR EQUAL TO $6,500,000 263% $3,125,000
GREATER THAN $6,500,000 but
LESS THAN OR EQUAL TO $6,600,000 265% $3,150,000
GREATER THAN $6,600,000 but
LESS THAN OR EQUAL TO $6,700,000 268% $3,175,000
GREATER THAN $6,700,000 but
LESS THAN OR EQUAL TO $6,800,000 268% $3,175,000
GREATER THAN $6,800,000 but
LESS THAN OR EQUAL TO $6,900,000 273% $3,225,000
GREATER THAN $6,900,000 but
LESS THAN OR EQUAL TO $7,000,000 275% $3,250,000
GREATER THAN $7,000,000 but
LESS THAN OR EQUAL TO $7,100,000 278% $3,275,000
GREATER THAN $7,100,000 but
LESS THAN OR EQUAL TO $7,200,000 280% $3,300,000
GREATER THAN $7,200,000 but
LESS THAN OR EQUAL TO $7,300,000 283% $3,325,000
GREATER THAN $7,300,000 but
LESS THAN OR EQUAL TO $7,400,000 285% $3,350,000
GREATER THAN $7,400,000 but
LESS THAN OR EQUAL TO $7,500,000 288% $3,375,000
GREATER THAN $7,500,000 but
LESS THAN OR EQUAL TO $7,600,000 290% $3,400,000
GREATER THAN $7,600,000 but
LESS THAN OR EQUAL TO $7,700,000 293% $3,425,000
GREATER THAN $7,700,000 but
LESS THAN OR EQUAL TO $7,800,000 295% $3,450,000
GREATER THAN $7,800,000 but
LESS THAN OR EQUAL TO $7,900,000 298% $3,475,000
GREATER THAN $7,900,000 but
LESS THAN OR EQUAL TO $8,000,000 300% $3,500,000
</TABLE>
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EXHIBIT D
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT dated as of June 24, 1997, is by and between BOYLE,
FLEMING & CO., INC., a Texas corporation (the "Pledgor"), and COMERICA
BANK-TEXAS, a Texas state banking association (the "Secured Party").
R E C I T A L S:
A. Pledgor and Secured Party have entered into that certain Loan
Agreement of even date herewith (such Loan Agreement, as the same may be amended
or modified from time to time, being hereinafter referred to as the "Loan
Agreement"; terms defined in the Loan Agreement and not otherwise defined herein
being used as defined therein).
B. Secured Party has conditioned its obligations under the Loan Agreement
upon the execution and delivery of this Agreement by Pledgor.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
SECURITY INTEREST AND PLEDGE
1.1 SECURITY INTEREST AND PLEDGE. As collateral security for the prompt
payment in full when due of the Obligations (whether at stated maturity, by
acceleration, or otherwise) and all present and future obligations of Pledgor
under this Agreement, Pledgor hereby pledges and grants to Secured Party a
first priority security interest in the following property (such property
being hereinafter sometimes called the "Collateral"):
(a) 150,000 shares of common and 100,000 shares of Class A common
capital stock of Spinnaker Industries, Inc., a Delaware corporation, now
owned or hereafter acquired;
(b) all shares of capital stock of Spinnaker Industries, Inc.
hereafter delivered by Pledgor to Secured Party pursuant to the terms
hereof; and
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(c) all products, proceeds, revenues, distributions, dividends,
stock dividends, securities, and other property, rights, and interests
that Pledgor receives or is at any time entitled to receive on account of
the same.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Pledgor represents and warrants to Secured Party that:
2.1 TITLE. Pledgor owns, and with respect to Collateral acquired after
the date hereof, Pledgor will own, legally and beneficially, the Collateral
free and clear of any Lien, security interest, pledge, claim, or other
encumbrance or any right or option on the part of any third Person to
purchase or otherwise acquire the Collateral or any part thereof, except for
the security interest granted hereunder. The Collateral is not subject to
any restriction on transfer or assignment except for compliance with
applicable federal and state securities laws and regulations promulgated
thereunder. Pledgor has the unrestricted right to pledge the Collateral as
contemplated hereby. All of the Collateral has been duly and validly issued
and is fully paid and nonassessable.
2.2 FIRST PRIORITY PERFECTED SECURITY INTEREST. This Agreement creates
in favor of Secured Party a first priority perfected security interest in the
Collateral. There are no conditions precedent to the effectiveness of this
Agreement that have not been fully and permanently satisfied.
2.3 HOLDING PERIOD. The Collateral has been beneficially owned by
Pledgor for at least one year, and if any of the Collateral was acquired by
purchase, the purchase price therefor has been paid in full for at least one
year. For purposes of this provision, in calculating the one-year period of
Pledgor's fully paid beneficial ownership, Pledgor is excluding the period,
if any, that Pledgor had a "short position" in, or any put or other option to
sell, any shares of the same class of securities as the Collateral or any
securities convertible into any such shares.
ARTICLE III
AFFIRMATIVE AND NEGATIVE COVENANTS
Pledgor covenants and agrees with Secured Party that:
3.1 DELIVERY. Prior to or concurrently with the execution and delivery
of this Agreement, Pledgor shall deliver to Secured Party all certificate(s)
identified in Section 1.1(a) hereof, accompanied by undated stock powers duly
executed in blank.
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3.2 ENCUMBRANCES. Pledgor shall not create, permit, or suffer to exist,
and shall defend the Collateral against, any Lien, security interest, or
other encumbrance on the Collateral except the pledge and security interest
of Secured Party hereunder, and shall defend Pledgor's rights in the
Collateral and Secured Party's security interest in the Collateral against
the claims of all Persons.
3.3 SALE OF COLLATERAL. Pledgor shall not sell, assign, or otherwise
dispose of the Collateral or any part thereof without the prior written
consent of Secured Party.
3.4 DISTRIBUTIONS. With respect to Collateral, if Pledgor shall become
entitled to receive or shall receive any stock certificate (including,
without limitation, any certificate representing a stock dividend or a
distribution in connection with any reclassification, increase, or reduction
of capital or issued in connection with any reorganization), option or
rights, whether as an addition to, in substitution of, or in exchange for any
Collateral or otherwise, Pledgor agrees to accept the same as Secured Party's
agent and to hold the same in trust for Secured Party, and to deliver the
same forthwith to Secured Party in the exact form received, with the
appropriate endorsement of Pledgor when necessary and/or appropriate undated
stock powers duly executed in blank, to be held by Secured Party as
additional Collateral for the Obligations, subject to the terms hereof. Any
sums paid upon or in respect of the Collateral upon the liquidation or
dissolution of the issuer thereof shall be paid over to Secured Party to be
held by it as additional Collateral for the Obligations subject to the terms
hereof; and in case any distribution of capital shall be made on or in
respect of the Collateral or any property shall be distributed upon or with
respect to the Collateral pursuant to any recapitalization or
reclassification of the capital of the issuer thereof or pursuant to any
reorganization of the issuer thereof, the property so distributed shall be
delivered to the Secured Party to be held by it, as additional Collateral for
the Obligations, subject to the terms hereof. All sums of money and property
so paid or distributed in respect of the Collateral that are received by
Pledgor shall, until paid or delivered to Secured Party, be held by Pledgor
in trust as additional security for the Obligations.
3.5 FURTHER ASSURANCES. At any time and from time to time, upon the
request of Secured Party, and at the sole expense of Pledgor, Pledgor shall
promptly execute and deliver all such further instruments and documents and
take such further action as Secured Party may deem necessary or desirable to
preserve and perfect his security interest in the Collateral and carry out
the provisions and purposes of this Agreement, including, without limitation,
the execution and filing of such financing statements as Secured Party may
require. A carbon, photographic, or other reproduction of this Agreement or
of any financing statement covering the Collateral or any part thereof shall
be sufficient as a financing statement and may be filed as a financing
statement. Subject to the right of Pledgor to receive cash dividends under
Section 4.3 hereof, in the event any Collateral is ever received by Pledgor,
Pledgor shall promptly transfer and deliver to Secured Party such Collateral
so
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received by Pledgor (together with any necessary endorsements in blank or
undated stock powers duly executed in blank), which Collateral shall
thereafter be held by Secured Party pursuant to the terms of this Agreement.
Secured Party shall at all times have the right to exchange any certificates
representing Collateral for certificates of smaller or larger denominations
for any purpose consistent with this Agreement.
3.6 TAXES. Pledgor agrees to pay or discharge prior to delinquency all
taxes, assessments, levies, and other governmental charges imposed on him or
his property, except Pledgor shall not be required to pay or discharge any
tax, assessment, levy, or other governmental charge if (i) the amount or
validity thereof is being contested by Pledgor in good faith by appropriate
proceedings diligently pursued, and (ii) such proceedings do not involve any
risk of sale, forfeiture, or loss of the Collateral or any interest therein.
3.7 NOTIFICATION. Pledgor shall promptly notify Secured Party of (i)
any Lien, security interest, encumbrance, or claim made or threatened against
the Collateral, (ii) any material change in the Collateral, including,
without limitation, any material decrease in the value of the Collateral, and
(iii) the occurrence or existence of any Event of Default or the occurrence
or existence of any condition or event that, with the giving of notice or
lapse of time or both, would be an Event of Default.
3.8 COMPLIANCE WITH AGREEMENTS. Pledgor shall comply in all respects
with all agreements, contracts, and instruments binding on him or affecting
his properties or employment with which Pledgor's failure to comply would
have a material adverse effect on the financial condition of Pledgor.
3.9 COMPLIANCE WITH LAWS. Pledgor shall comply in all material respects
with all applicable laws, rules, regulations, and orders of any court or
Governmental Authority.
3.10 PROVIDE INFORMATION. Pledgor shall fully cooperate, to the extent
requested by Secured Party, in the completion of any notice, form, schedule,
or other document filed by Secured Party on its own behalf or on behalf of
Pledgor, including, without limitation, any required notice or statement of
beneficial ownership or of the acquisition of beneficial ownership of equity
securities constituting part of the Collateral and any notice of proposed
sale of any such securities pursuant to Rule 144 as promulgated by the SEC
under the Securities Act of 1933, as amended. Without limiting the
generality of the foregoing, Pledgor shall furnish to Secured Party any and
all information which Secured Party may reasonably request for purposes of
any such filing, regarding Pledgor, the Collateral, and any issuer of any of
the Collateral.
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3.11 NOTIFICATION OF CHANGES IN BENEFICIAL OWNERSHIP. Pledgor shall
promptly notify Secured Party of any sale of securities of Spinnaker
Industries, Inc. by Pledgor, either Guarantor, or by any Person resident in
the household of either Guarantor or under the control of such Persons and
shall furnish promptly to Secured Party a copy of any Form 144 filed in
respect of any such sale. In addition, if Pledgor, either Guarantor, or any
other Person resident in either Guarantor's household or under the control of
such Persons shall file with the SEC a form or other document reporting any
change in the beneficial ownership of the common stock of Spinnaker
Industries, Inc., Pledgor shall promptly furnish to Secured Party a copy of
such form or document.
3.12 RESTRICTION ON SALES AFTER DEFAULT. Pledgor shall not sell or
suffer or permit either Guarantor, either Guarantor's spouse or any other
resident of either Guarantor's household to sell any shares of the same class
of securities as the Collateral at any time after any Event of Default shall
have occurred, and shall not sell or permit to be sold any other such shares
held by Pledgor or any of such Persons as trustee, nominee or in any similar
capacity or otherwise subject to the direction or control of such Persons.
ARTICLE IV
RIGHTS OF SECURED PARTY AND PLEDGOR
4.1 POWER OF ATTORNEY. Pledgor hereby irrevocably constitutes and
appoints Secured Party and any officer or agent thereof, with full power of
substitution, as Pledgor's true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead and in the name of
Pledgor or in its own name, from time to time in Secured Party's discretion,
when an Event of Default exists, to take any and all action and to execute
any and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives Secured Party the power and right
on behalf of Pledgor and in its own name to do any of the following (subject
to the rights of Pledgor under Sections 4.2 and 4.3 hereof), without notice
to or the consent of Pledgor, after the occurrence and during the
continuation of an Event of Default:
(i) to demand, sue for, collect, or receive in the name of Pledgor
or in its own name, any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral and, in
connection therewith, endorse checks, notes, drafts, acceptances, money
orders, or any other instruments for the payment of money under the
Collateral;
(ii) to pay or discharge taxes, Liens, security interests, or other
encumbrances levied or placed on or threatened against the Collateral;
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(iii) (A) to direct account debtors and any other parties liable
for any payment under any of the Collateral to make payment of any and
all monies due and to become due thereunder directly to Secured Party or
as Secured Party shall direct; (B) to receive payment of and receipt for
any and all monies, claims, and other amounts due and to become due at
any time in respect of or arising out of any Collateral; (C) to sign and
endorse any drafts, assignments, proxies, stock powers, verifications,
notices, and other documents relating to the Collateral; (D) to commence
and prosecute any suit, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any part
thereof and to enforce any other right in respect of any Collateral; (E)
to defend any suit, action, or proceeding brought against Pledgor with
respect to any Collateral; (F) to settle, compromise, or adjust any suit,
action, or proceeding described above and, in connection therewith, to
give such discharges or releases as Secured Party may deem appropriate;
(G) to exchange any of the Collateral for other property upon any merger,
consolidation, reorganization, recapitalization, or other readjustment of
the issuer thereof and, in connection therewith, deposit any of the
Collateral with any committee, depositary, transfer agent, registrar, or
other designated agency upon such terms as Secured Party may determine;
(H) to add or release any guarantor, indorser, surety, or other party to
any of the Collateral or the Obligations; (I) to renew, extend, or
otherwise change the terms and conditions of any of the Collateral or
Obligations; (J) to insure any of the Collateral; (K) to sell, transfer,
pledge, make any agreement with respect to or otherwise deal with any of
the Collateral as fully and completely as though Secured Party were the
absolute owner thereof for all purposes, and to do, at Secured Party's
option and Pledgor's expense, at any time, or from time to time, all acts
and things which Secured Party deems necessar to protect, preserve, or
realize upon the Collateral and Secured Party's security interest
therein; and (L) to complete, execute and file with the SEC one or more
notices of proposed sale of securities pursuant to Rule 144.
This power of attorney is a power coupled with an interest and shall be
irrevocable. Secured Party shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges, and options expressly or
implicitly granted to Secured Party in this Agreement, and shall not be
liable for any failure to do so or any delay in doing so. Secured Party
shall not be liable for any act or omission or for any error of judgment or
any mistake of fact or law in its individual capacity or in its capacity as
attorney-in-fact except acts or omissions resulting from its gross negligence
or willful misconduct. This power of attorney is conferred on Secured Party
solely to protect, preserve, and realize upon its security interest in the
Collateral.
4.2 VOTING RIGHTS. Unless and until an Event of Default shall have
occurred and be continuing, Pledgor shall be entitled to exercise any and all
voting rights pertaining to the Collateral or any part thereof for any
purpose not inconsistent with the terms of this Agreement or the Loan
Agreement. Secured Party shall execute and deliver to the Pledgor all such
proxies and other
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instruments as Pledgor may reasonably request for the purpose of enabling
Pledgor to exercise the voting rights which he is entitled to exercise
pursuant to this Section.
4.3 DIVIDENDS. Unless and until an Event of Default shall have occurred
and be continuing, Pledgor shall be entitled to receive and retain any
dividends on the Collateral paid in cash.
4.4 PERFORMANCE BY SECURED PARTY. If Pledgor fails to perform or comply
with any of the agreements contained herein, Secured Party itself may, at its
sole discretion, cause or attempt to cause performance or compliance with
such agreement and the reasonable expenses of Secured Party, together with
interest thereon at the maximum nonusurious per annum rate permitted by
applicable law, shall be payable by Pledgor to Secured Party on demand and
shall constitute Obligations secured by this Agreement. Notwithstanding the
foregoing, it is expressly agreed that Secured Party shall not have any
liability or responsibility for the performance of any obligation of Pledgor
under this Agreement.
4.5 SECURED PARTY'S DUTY OF CARE. Other than the exercise of reasonable
care in the physical custody of the Collateral while held by Secured Party
hereunder, Secured Party shall have no responsibility for or obligation or
duty with respect to all or any part of the Collateral or any matter or
proceeding arising out of or relating thereto, including, without limitation,
any obligation or duty to collect any sums due in respect thereof or to
protect or preserve any rights against prior parties or any other rights
pertaining thereto, it being understood and agreed that Pledgor shall be
responsible for preservation of all rights in the Collateral. Without
limiting the generality of the foregoing, Secured Party shall be conclusively
deemed to have exercised reasonable care in the custody of the Collateral if
Secured Party takes such action, for purposes of preserving rights in the
Collateral, as Pledgor may reasonably request in writing, but no failure or
omission or delay by Secured Party in complying with any such request by
Pledgor, and no refusal by Secured Party to comply with any such request by
Pledgor, shall be deemed to be a failure to exercise reasonable care.
4.6 ASSIGNMENT BY SECURED PARTY. Secured Party may at any time and from
time to time assign the Obligations and any portion thereof and/or the
Collateral and any portion thereof, and the assignee shall be entitled to all
of the rights and remedies of Secured Party under this Agreement in relation
thereto.
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ARTICLE V
DEFAULT
5.1 RIGHTS AND REMEDIES. If any Event of Default shall exist, Secured
Party shall have the following rights and remedies:
(i) In addition to all other rights and remedies granted to Secured
Party in this Agreement and in any other instrument or agreement securing,
evidencing, or relating to the Obligations, Secured Party shall have all of
the rights and remedies of a secured party under the Uniform Commercial
Code as adopted by the State of Texas. Without limiting the generality of
the foregoing, Secured Party may (A) without demand or notice to Pledgor,
collect, receive, or take possession of the Collateral or any part thereof,
(B) sell or otherwise dispose of the Collateral, or any part thereof, in
one or more parcels at public or private sale or sales, at Secured Party's
offices or elsewhere, for cash, on credit, or for future delivery, and/or
(C) bid and become a purchaser at any sale free of any right or equity of
redemption in Pledgor, which right or equity is hereby expressly waived and
released by Pledgor. Upon the request of Secured Party, Pledgor shall
assemble the Collateral and make it available to Secured Party at any place
designated by Secured Party that is reasonably convenient to Pledgor and
Secured Party. Pledgor agrees that Secured Party shall not be obligated to
give more than ten (10) days written notice of the time and place of any
public sale or of the time after which any private sale may take place and
that such notice shall constitute reasonable notice of such matters.
Secured Party shall not be obligated to make any sale of the Collateral
regardless of notice of sale having been given. Secured Party may adjourn
any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. Pledgor shall be
liable for all expenses of retaking, holding, preparing for sale, or the
like, and all reasonable attorneys' fees and other expenses incurred by
Secured Party in connection with the collection of the Obligations and the
enforcement of Secured Party's rights under this Agreement, all of which
expenses and fees shall constitute additional Obligations secured by this
Agreement. Secured Party may apply the Collateral against the Obligations
in such order and manner as Secured Party may elect in its sole discretion.
Pledgor shall remain liable for any deficiency if the proceeds of any sale
or disposition of the Collateral are insufficient to pay the Obligations.
Pledgor waives all rights of marshalling in respect of the Collateral.
(ii) Secured Party may cause any or all of the Collateral held by it
to be transferred into the name of Secured Party or the name or names of
Secured Party's nominee or nominees.
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(iii) Secured Party may collect or receive all money or property
at any time payable or receivable on account of or in exchange for any of
the Collateral, but shall be under no obligation to do so.
(iv) Secured Party shall have the right, but shall not be obligated
to, exercise or cause to be exercised all voting, consensual, and other
powers of ownership pertaining to the Collateral, and Pledgor shall deliver
to Secured Party, if requested by Secured Party, irrevocable proxies with
respect to the Collateral in form satisfactory to Secured Party.
(v) Pledgor hereby acknowledges and confirms that Secured Party may
be unable to effect a public sale of any or all of the Collateral by reason
of certain prohibitions contained in the Securities Act of 1933, as
amended, and applicable state securities laws and may be compelled to
resort to one or more private sales thereof to a restricted group of
purchasers who will be obligated to agree, among other things, to acquire
any shares of the Collateral for their own respective accounts for
investment and not with a view to distribution or resale thereof. Pledgor
further acknowledges and confirms that any such private sale may result in
prices or other terms less favorable to the seller than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner, in accordance with the Uniform Commercial Code, as adopted in the
State of Texas, and Secured Party shall be under no obligation to take any
steps in order to permit the Collateral to be sold at a public sale.
Secured Party shall be under no obligation to delay a sale of any of the
Collateral for any period of time necessary to permit any issuer thereof to
register such Collateral for public sale under the Securities Act of 1933,
as amended, or under applicable state securities laws.
(vi) If Secured Party determines that it will sell all or part of the
Collateral pursuant to Section 5.1 hereof, and if, in the opinion of
Secured Party it is necessary or advisable to have the Collateral, or that
portion thereof to be sold, registered under the Securities Act of 1933, as
amended, Pledgor will, at Pledgor's expense, cause each issuer of the
Collateral, or that portion thereof to be sold, to execute and deliver, and
cause the directors and officers of each such issuer to execute and deliver
all such instruments and documents and cause such issuer(s), directors, and
officers to do or cause to be done all such other acts and things as may be
necessary or, in Secured Party's opinion, advisable to register the
Collateral, or that portion thereof to be sold, under the Securities Act of
1933, as amended, and to cause the registration statement relating thereto
to become effective and to remain effective for a period of one year from
the date of the first public offering of the Collateral, or that portion
thereof to be sold, and to make all amendments thereto and to the related
prospectus that, in Secured Party's opinion, are necessary or advisable,
all in conformity with the requirements of the Securities Act of 1933, as
amended, and the rules
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and regulations of the SEC applicable thereto. Pledgor agrees to cause each
issuer of the Collateral, or that portion thereof to be sold, to comply with
Securities Act of 1933, as amended, and the blue sky laws of any
jurisdiction that Secured Party shall designate and cause each such issuer
to make available to its security holders, as soon as practical, an earnings
statement (which need not be audited) that will satisfy the provisions of
the Securities Act of 1933, as amended.
(vii) On any sale of the Collateral, Secured Party is hereby
authorized to comply with any limitation or restriction with which
compliance is necessary, in the view of Secured Party's counsel, in order
to avoid any violation of applicable law or in order to obtain any required
approval of the purchaser or purchasers by any applicable Governmental
Authority.
ARTICLE VI
MISCELLANEOUS
6.1 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of Secured
Party to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under this Agreement shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power, or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege.
The rights and remedies provided for in this Agreement are cumulative and not
exclusive of any rights and remedies provided by law.
6.2 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of Pledgor and Secured Party and their respective heirs,
successors, and assigns, except that Pledgor may not assign any of his rights
or obligations under this Agreement without the prior written consent of
Secured Party.
6.3 AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER
HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES
HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. The
provisions of this Agreement may be amended or waived only by an instrument
in writing signed by the parties hereto.
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6.4 NOTICES. All notices and other communications provided for in this
Agreement shall be given as provided in the Loan Agreement.
6.5 APPLICABLE LAW; VENUE; SERVICE OF PROCESS. This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas
and the applicable laws of the United States of America. This Agreement has
been entered into in Dallas County, Texas, and it shall be performable for
all purposes in Dallas County, Texas.
6.6 HEADINGS. The headings, captions, and arrangements used in this
Agreement are for convenience only and shall not affect the interpretation of
this Agreement.
6.7 SURVIVAL. All representations and warranties made in this Agreement
shall survive the execution and delivery of this Agreement, and no
investigation by Secured Party shall affect the representations and
warranties of Pledgor herein or the right of Secured Party to rely upon them.
6.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Telecopies of
signatures shall be binding and effective as originals.
6.9 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
6.10 CONSTRUCTION. Pledgor and Secured Party acknowledge that each of
them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and
that this Agreement shall be construed as if jointly drafted by Pledgor and
Secured Party.
6.11 OBLIGATIONS ABSOLUTE. The obligations of Pledgor under this
Agreement shall be absolute and unconditional and shall not be released,
discharged, reduced, or in any way impaired by any circumstance whatsoever,
including, without limitation, any amendment, modification, extension, or
renewal of this Agreement, the Obligations, or any document or instrument
evidencing, securing, or otherwise relating to the Obligations, or any
release of any other collateral or any guarantor, or any subordination or
impairment of any collateral, or any waiver, consent, extension, indulgence,
compromise, settlement, or other action or inaction in respect of this
Agreement, the Obligations, or any document or instrument evidencing,
securing, or otherwise relating to the
-11-
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Obligations, or any exercise or failure to exercise any right, remedy, power,
or privilege in respect of the Obligations.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
PLEDGOR:
BOYLE, FLEMING & CO., INC.
By: /s/ Ned N. Fleming III
------------------------------------
Title: President
------------------------------
Address for Notices:
600 North Pearl Street, Suite 2160
Dallas, TX 75201
Fax No.: (214) 855-0093
Telephone No.: (214) 855-0322
SECURED PARTY:
COMERICA BANK - TEXAS
By: /s/ Wes O. Barnhart
-------------------------------------
Wes O. Barnhart
Senior Vice President
Address for Notices:
Mail Code 6594
P.O. Box 650282
Dallas, TX 75265-0282
Fax No.: (214) 890-4327
Telephone No.: (214) 890-4314
Attention: Wes O. Barnhart
-12-
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EXHIBIT E
August 18, 1997
Ned N. Fleming, III
Richard J. Boyle
Boyle, Fleming & Co., Inc.
600 N. Pearl, Suite 2160
Dallas, Texas 75201
Re: That certain Withdrawal Agreement, dated as of July 5, 1996, among
Boyle, Fleming & Co., Inc., a Texas corporation ("BF"), Richard J.
Boyle, Ned N. Fleming III, Michael L. George, Michael L. George, Jr.,
George Group Employee Partners and George Group Incorporated, as
amended by that certain letter agreement dated February 26, 1997
(collectively, the "Withdrawal Agreement")
Gentlemen:
Reference is made to the Withdrawal Agreement described above. All defined
terms in this letter shall, if not otherwise defined herein, have the meaning
given to them in the Withdrawal Agreement.
It is our mutual intent that BF complete its repurchase of my prior
ownership in BF. To effect such repurchase, concurrently with the execution and
delivery of this Agreement, BF shall (i) deliver to me immediately available
funds in the amount of $2,050,000, and (ii) execute and deliver a Promissory
Note payable to me in the principal amount of $2,050,000 in the form attached
hereto as Exhibit A (the "Note"). In addition, concurrently herewith BF shall
execute and deliver a Pledge Agreement (the "Pledge Agreement") in the form of
Exhibit B hereto and deliver to me warrants (the "Warrants") representing the
right to purchase 113,158 shares of Common Stock of Spinnaker Industries, Inc.,
a Delaware corporation ("Spinnaker"), and 113,158 shares of Class A Common Stock
of Spinnaker, both of which are registered in the name of BF, along with duly
executed assignments relating thereto with signatures guaranteed on each
assignment. In addition, concurrently herewith BF shall execute UCC-1 financing
statements in the form attached hereto as Exhibit C. The $2,050,000 cash
payment shall be delivered by either cashier's check or by wire transfer (such
that the wire is received by me today). On or prior to September 20, 1997, BF
shall substitute, as collateral, 113,158 shares of Common Stock of Spinnaker and
113,158 shares of Class A Common Stock of Spinnaker (collectively, the "Shares")
(such amounts to be adjusted for events such as stock dividends, splits, reverse
splits, recapitalizations and the like).
If BF does not pay all amounts due pursuant to the terms set forth in the
Note, I shall be entitled to retain the Collateral (as defined in the Pledge
Agreement). If BF substitutes the Shares as Collateral for the Warrants and if
I retain the Collateral (as described in the immediately preceding sentence), I
will be required to pay BF (i) an amount (the "Warrant Exercise Amount")
determined by multiplying the number of shares with respect to which I foreclose
by the per share exercise price paid by BF upon exercise of the Subject Warrant
(such amount to be adjusted for events such as stock dividends, splits, reverse
splits, recapitalizations and the like) plus (ii) an amount of interest
determined as if BF had lent me the Warrant Exercise Price on the day it
substituted Shares as Collateral for the Warrants (such interest rate to be
5.72% per annum, compounded monthly). At my election, I may, in lieu of
delivering cash pursuant to the
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preceding sentence, deliver shares of Spinnaker stock valued at a price of
$10.3915 per share (such amount to be adjusted for events such as stock
dividends, splits, reverse splits, recapitalizations and the like).
Subsequent sales of Shares received by me upon foreclosure shall be subject
to BF's right of first refusal in the manner and to the extent described in the
Withdrawal Agreement.
It is our intent that the provisions of this letter amend the Withdrawal
Agreement for the purposes set forth herein. Accordingly I have requested the
parties to the Withdrawal Agreement, other than you, to evidence their consent
to the foregoing as well.
Please acknowledge your agreement with the foregoing by signing in the
space provided below.
Very truly yours,
/s/ Michael L. George
--------------------------------------
Michael L. George
Acknowledged and Accepted as
of the 18th day of August 1997
/s/ Ned N. Fleming III
- ----------------------------------
Ned N. Fleming, III
/s/ Richard J. Boyle
- ----------------------------------
Richard J. Boyle
Boyle, Fleming & Co., Inc. (formerly
Boyle, Fleming, George & Co., Inc.)
By: /s/ Ned N. Fleming III
- ----------------------------------
The following persons, being parties to the
Withdrawal Agreement, hereby acknowledge their
consent to the foregoing:
George Group Employee Partners
By: George Group Incorporated, Managing General Partner
By: /s/ Michael L. George
- ----------------------------------
Michael L. George, Chairman
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George Group Incorporated
By: /s/ Michael L. George, Chairman
- ----------------------------------
Michael L. George, Chairman
/s/ Michael L. George
- ----------------------------------
Michael L. George, Jr.
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EXHIBIT A TO LETTER AGREEMENT
PROMISSORY NOTE
August 18, 1997
Boyle, Fleming & Co., Inc., a Texas corporation (the "Maker"), for value
received, hereby promises to pay to the order of Michael L. George (the
"Payee"), at the time and in the manner hereinafter provided, the principal sum
of Two Million and Fifty Thousand Dollars ($2,050,000), together with interest
computed thereon at the rate hereinafter provided. This Note shall be payable
at the office of the Payee or at such other address as the holder of this Note
shall from time to time designate.
The outstanding principal amount of this Note shall bear interest from the
date hereof until the due date at the rate of five and seventy-two hundreths
percent (5.72%) per annum, compounded monthly. The principal amount of this
Note and accrued interest thereon shall be due and payable on January 15, 1998.
All sums of principal and interest past due under the terms of this Note
shall bear interest at a per annum interest rate equal to the lesser of eighteen
percent (18%) per annum or the maximum rate allowed by law from the due date
thereof until paid.
In the event of default hereunder and this Note is placed in the hands of
an attorney for collection (whether or not suit is filed), or if this Note is
collected by suit or legal proceedings or through bankruptcy proceedings, the
Maker agrees to pay in addition to all sums then due hereon, including principal
and interest, all expenses of collection, including, without limitation,
reasonable attorneys' fees.
This Note may be prepaid in whole or in part from time to time, without
premium or penalty. Each prepayment of principal shall be accompanied by an
amount equal to the accrued interest on the principal amount prepaid to the date
of such prepayment.
If default is made in any payment of this Note or in the observance of any
covenant in this Note or in the Pledge Agreement (hereinafter defined), then the
holder of this Note may at any time, at such holder's option, by written notice
to Maker declare the entire principal balance and accrued but unpaid interest
hereunder to be due and payable, whereupon the same shall forthwith mature and
become due and payable without presentment, demand, protest or notice, all of
which are hereby waived. If Maker shall (a) apply for or consent to the
appointment of a receiver, trustee, intervenor, custodian or liquidator of Maker
or of all or a substantial part of its assets, (b) file a voluntary petition for
bankruptcy or admit in writing that Maker is unable to pay its debts as they
become due, (c) within sixty days after the commencement of any proceeding
against Maker seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, such proceeding shall not have been dismissed or, within
sixty days after the appointment without the consent or acquiescence of Maker or
of any trustee, receiver or liquidator of Maker or of all or any substantial
part of its properties, such appointment shall not have been vacated, (d) make a
general assignment for the benefit of creditors, (e) file a petition or answer
seeking reorganization or an arrangement with creditors or to take advantage of
any bankruptcy or
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insolvency laws, or (f) take other action for the purpose of effecting any of
the foregoing, then the entire principal balance and accrued but unpaid
interest shall at once become due and payable.
The Maker and any and all sureties, guarantors and endorsers of this Note
and all other parties now or hereafter liable hereon, severally waive grace,
demand, presentment for payment, notice of dishonor, protest and notice of
protest, notice of intention to accelerate, notice of acceleration, any other
notice and diligence in collecting and bringing suit against any party hereto
and agree (i) to all extensions and partial payments, with or without notice,
before or after maturity, (ii) to any substitution, exchange or release of any
security now or hereafter given for this Note, (iii) to the release of any party
primarily or secondarily liable hereon, and (iv) that it will not be necessary
for the holder hereof, in order to enforce payment of this Note, to first
institute or exhaust such holder's remedies against the Maker or any other party
liable therefor or against any security for this Note. No delay on the part of
the Payee in exercising any power or right under this Note shall operate as a
waiver of such power or right, nor shall any single or partial exercise of any
power of right preclude further exercise of that power or right.
A security interest in the shares of capital stock of Spinnaker Industries,
Inc. and/or warrants to purchase shares of capital stock of Spinnaker
Industries, Inc. has been granted by Maker to the Payee to secure the payment of
this Note pursuant to the terms and conditions of that certain Pledge Agreement
(the "Pledge Agreement") from Maker to Payee of even date herewith and to secure
the payment of any costs and expenses incurred by the Payee in the collection
and enforcement hereof.
The Maker shall have no personal liability to pay the indebtedness
evidenced by this Note or any accrued interest on this Note. The holder of this
Note shall look solely to the collateral described in the Pledge Agreement in
satisfaction of the indebtedness evidenced by this Note and any accrued interest
on this Note.
The Maker understands that this Note may be pledged to secure certain
obligations of the Payee and hereby consents to any such pledge.
All agreements between the Maker and the holder hereof, whether now
existing or hereafter arising and whether written or oral, are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of the maturity hereof, or otherwise, shall the amount paid, or
agreed to be paid, to the holder hereof for the use, forbearance or detention of
the funds advanced pursuant to this Note, or otherwise, or for the payment or
performance of any covenant or obligation contained herein or in any other
document or instrument evidencing, securing or pertaining to this Note exceed
the maximum amount permissible under applicable law. If from any circumstances
whatsoever fulfillment of any provision hereof or any other document or
instrument exceeds the maximum amount of interest prescribed by law, then IPSO
FACTO, the obligation to be fulfilled shall be reduced to the limit of such
validity, and if from any such circumstances the holder hereof shall ever
receive anything of value deemed interest by applicable law, which would exceed
interest at the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance of
this Note or on account of any other principal indebtedness of the Maker to the
holder hereof, and not to the payment of interest, or if such excessive interest
exceeds the unpaid principal balance of this Note and such other indebtedness,
such excess shall be refunded to the Maker. All sums paid, or agreed to be
paid, by the Maker for the use, forbearance or detention of the indebtedness of
the Maker to the holder of this Note shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of such indebtedness until payment in full so that the actual rate of
interest on account of such indebtedness is uniform throughout
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the term hereof. The terms and provisions of this paragraph shall control and
supersede every other provision of all agreements between the Maker and the
holder hereof.
This Note shall be governed by and construed in accordance with the laws of
the State of Texas.
All references to the Maker herein shall, and shall be deemed to, include
its successors and permitted assigns, and all covenants, stipulations, promises
and agreements contained herein by or on behalf of the Maker shall be binding
upon its successors and permitted assigns, whether so expressed or not.
BOYLE, FLEMING & CO., INC.
By: /s/ Ned N. Fleming III
------------------------------------
Name: Ned N. Fleming
----------------------------------
Title: President
---------------------------------
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EXHIBIT B TO LETTER AGREEMENT
(SEE EXHIBIT F TO THIS SCHEDULE 13D)
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EXHIBIT F
PLEDGE AGREEMENT
This Pledge Agreement (this "AGREEMENT") is made as of August 18, 1997 by
Boyle, Fleming & Co., Inc., a Texas corporation ("PLEDGOR"), in favor of Michael
L. George ("PLEDGEE").
W I T N E S S E T H:
WHEREAS, Pledgor and Pledgee are parties to a letter agreement of even date
herewith (the "LETTER AGREEMENT") pursuant to which Pledgor executed and
delivered to Pledgee a Promissory Note of even date herewith, payable to the
order of Pledgee, in the principal amount of $2,050,000 (together with all
renewals, extensions, increases, modifications, amendments and restatements
thereof, the "NOTE"); and
WHEREAS, Pledgee has required, as a condition precedent to consummation of
the transactions contemplated by the Letter Agreement, that Pledgor execute and
deliver to Pledgee a security agreement granting to Pledgee, for the benefit of
Pledgee, a security interest in the Collateral (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees with Pledgee as follows:
ARTICLE I
DEFINITIONS AND REFERENCES
Section 1.1. GENERAL DEFINITIONS. As used herein, the terms "AGREEMENT,"
"LETTER AGREEMENT," "NOTE," "PLEDGEE," and "PLEDGOR," shall have the meanings
indicated above, and the following terms shall have the following meanings:
"CODE" means the Uniform Commercial Code in effect in the State of Texas on
the date hereof.
"COLLATERAL" means all property of whatever type, in which Pledgee at any
time has a security interest pursuant to SECTION 2.1 or SECTION 2.2.
"EVENT OF DEFAULT" means the occurrence of any of the following events:
(a) an event of default under the Note, (b) the Pledgor's non-compliance with,
or failure to perform, any agreement contained herein, or (c) the making of any
representation, statement or warranty of the Pledgor contained herein or given
pursuant hereto that is untrue as of the date made.
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"OBLIGATION DOCUMENTS" means the Letter Agreement, the Note, this Agreement
and all other documents and instruments under, by reason of which, or pursuant
to which, any or all of the Obligations are evidenced, governed, secured, or
otherwise dealt with, and all other agreements, certificates, and other
documents, instruments and writings heretofore or hereafter delivered in
connection herewith or therewith.
"OBLIGATIONS" means all present and future indebtedness, obligations and
liabilities of whatever type which are or shall be secured pursuant to SECTION
2.3.
"PLEDGED SECURITIES" has the meaning given to it in SECTION 2.2.
"PLEDGED SHARES" has the meaning given to it in SECTION 2.2.
"PLEDGED WARRANTS" has the meaning given to it in SECTION 2.1.
Section 1.2. OTHER DEFINITIONS. All terms used in this Agreement which
are defined in the Code and not otherwise defined herein shall have the same
meanings herein as set forth therein, except where the context otherwise
requires.
Section 1.3. EXHIBITS. All exhibits attached to this Agreement are a
part hereof for all purposes.
Section 1.4. AMENDMENT OF DEFINED INSTRUMENTS. Unless the context
otherwise requires or unless otherwise provided herein, references in this
Agreement to a particular agreement, instrument or document also refer to and
include all renewals, extensions, amendments, modifications, supplements or
restatements of any such agreement, instrument or document, provided that
nothing contained in this SECTION 1.4 shall be construed to authorize any person
to execute or enter into any such renewal, extension, amendment, modification,
supplement or restatement.
Section 1.5. REFERENCES AND TITLES. All references in this Agreement to
Exhibits, Articles, Sections, subsections, and other subdivisions refer to the
Exhibits, Articles, Sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any subdivision are for convenience only and do not constitute any
part of any such subdivision and shall be disregarded in construing the language
contained in this Agreement. The words "this Agreement," "herein," "hereof,"
"hereby," "hereunder" and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited. The
phrases "this Section" and "this subsection" and similar phrases refer only to
the Sections or subsections hereof in which the phrase occurs. The word "or" is
not exclusive, and the word "including" (in all of its forms) means "including
without limitation". Pronouns in masculine, feminine and neuter gender shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa unless the context otherwise
requires.
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ARTICLE II
SECURITY INTEREST
Section 2.1. GRANT OF SECURITY INTEREST. As collateral security for all
of the Obligations, Pledgor hereby pledges and assigns to Pledgee and grants to
Pledgee a continuing first priority security interest for the benefit of Pledgee
in and to all of the following rights, interests and property:
(a) warrants to purchase 113,158 shares of Common Stock of Spinnaker
Industries, Inc., a Delaware corporation ("SPINNAKER"), and 113,158 shares of
Class A Common Stock of Spinnaker (collectively, the "PLEDGED WARRANTS");
(b) all cash, securities, dividends and other property at any time and
from time to time received, receivable or otherwise distributed in respect of,
in exchange for, or upon exercise of any or all of the Pledged Securities
(hereinafter defined) or any other property that becomes Collateral by virtue of
this clause (b) or clause (c) of this Section 2.1; and
(c) any and all Proceeds and other sums arising from or by virtue of the
Pledged Securities or any other property that becomes Collateral by virtue of
this clause (c) or clause (b) of this Section 2.1.
Section 2.2 SUBSTITUTION OF COLLATERAL. Pledgor agrees that on or
before September 20, 1997 it will deliver to Pledgee the number of shares of
Common Stock of Spinnaker and the number of shares of Class A Common Stock of
Spinnaker into which the Pledged Warrants are exercisable (collectively, the
"PLEDGED SHARES") along with duly executed blank stock powers with signatures
guaranteed on each stock power. The Pledged Shares would be substituted as
Collateral for the Pledged Warrants. As used herein, "PLEDGED SECURITIES" means
collectively, the Pledged Warrants and the Pledged Shares.
Section 2.3. OBLIGATIONS SECURED. The security interest created hereby
in the Collateral constitutes continuing collateral security for all of the
following obligations, indebtedness and liabilities, whether now existing or
hereafter incurred:
(a) NOTE INDEBTEDNESS. The payment, as and when due and payable, of all
amounts from time to time owing under or in respect of the Letter Agreement, the
Note or any of the other Obligation Documents.
(b) RENEWALS. All renewals, extensions, amendments, modifications,
supplements, or restatements of, or substitutions for, any of the foregoing.
(c) PERFORMANCE. The due performance and observance by Pledgor of all of
its other obligations from time to time existing under or in respect of any of
the Obligation Documents.
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ARTICLE III
REPRESENTATIONS WARRANTIES AND COVENANTS
Section 3.1. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
warrants as follows:
(a) OWNERSHIP AND LIENS. Pledgor has good and marketable title to the
Collateral free and clear of all liens, encumbrances, adverse claims, options,
warrants, puts, calls or other rights of third persons, and restrictions, other
than (i) those liens arising under this Agreement, (ii) restrictions on
transferability imposed by applicable state and federal securities laws and
(iii) a right of first refusal in favor of Spinnaker in the event that Pledgor
receives (and desires to accept) a bona fide offer for the purchase for cash of
all or a portion of the Warrant or the shares purchasable upon exercise of the
Warrant (as described in Section 10.01(b) of that certain Warrant Purchase
Agreement dated June 10, 1994 between BF and Spinnaker). No effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any recording office except such as have been filed in
favor of Pledgee relating to this Agreement.
(b) NO CONFLICTS OR CONSENTS. Neither the ownership or the intended use
of the Collateral by Pledgor, nor the grant of the security interest by Pledgor
to Pledgee herein, nor the exercise by Pledgee of its rights or remedies
hereunder, will (i) conflict with any provision of (a) any domestic or foreign
law, statute, rule or regulation, (b) the articles of incorporation, charter or
bylaws of Pledgor, or (c) any agreement, judgment, license, order or permit
applicable to or binding upon Pledgor, or (ii) result in or require the creation
of any lien, charge or encumbrance upon any assets or properties of Pledgor
except as expressly contemplated in the Obligation Documents. No consent,
approval, authorization or order of, and no notice to or filing with, any court,
governmental authority or third party is required in connection with the grant
by Pledgor of the security interest herein, or the exercise by Pledgee of its
rights and remedies hereunder.
(c) SECURITY INTEREST. Pledgor has and will have at all times full right,
power and authority to grant a security interest in the Collateral to Pledgee in
the manner provided herein, free and clear of any lien, adverse claim, or
encumbrance. This Agreement creates a valid and binding security interest in
favor of Pledgee in the Collateral securing the Obligations. The taking
possession by Pledgee of all certificates, instruments and cash constituting
Collateral from time to time and the filing of the financing statements
delivered concurrently herewith by Pledgor to Pledgee will perfect, and
establish the first priority of, Pledgee's security interest hereunder in the
Collateral securing the Obligations. No further or subsequent filing, recording,
registration, other public notice or other action is necessary or desirable to
perfect or otherwise continue, preserve or protect such security interest except
for continuation statements or filings as contemplated in SECTION 3.3(b).
(d) PLEDGED WARRANTS. (i) Pledgor is the record and beneficial owner of
the Pledged Warrants, (ii) the Pledged Warrants are duly authorized and issued,
fully paid and non-assessable, and all documentary, stamp or other taxes or fees
owing in connection with the issuance, transfer and/or pledge thereof hereunder
have been paid, (iii) no dispute, right of setoff, counterclaim or defense
exists with respect to all or any part of the Pledged Warrants, (iv) Pledgor has
full right and authority to pledge the Pledged Warrants for the
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purposes and upon the terms set out herein and (v) warrants representing the
Pledged Warrants have been delivered to Pledgee together with duly executed
blank assignments with signatures guaranteed for each assignment.
(e) PLEDGED SHARES. Pledgor agrees that upon delivery of the Pledged
Shares pursuant to SECTION 2.2 hereof, it will be considered to represent and
warrant to Pledgee that (i) Pledgor is the record and beneficial owner of
the Pledged Shares, (ii) the Pledged Shares are duly authorized and issued,
fully paid and non-assessable, and all documentary, stamp or other taxes or
fees owing in connection with the issuance, transfer and/or pledge thereof
hereunder have been paid, (iii) no dispute, right of setoff, counterclaim or
defense exists with respect to all or any part of the Pledged Shares, (iv)
Pledgor has full right and authority to pledge the Pledged Shares for the
purposes and upon the terms set out herein and (v) certificates representing
the Pledged Shares have been delivered to Pledgee, together with a duly
executed blank stock power with signatures guaranteed, for each certificate.
Section 3.2. AFFIRMATIVE COVENANTS. Unless Pledgee shall otherwise
consent in writing, Pledgor will at all times comply with the covenants
contained in this SECTION 3.2 from the date hereof and so long as any part of
the Obligations is outstanding.
(a) OWNERSHIP AND LIENS. Pledgor will maintain good and marketable
title to all Collateral free and clear of all liens, encumbrances, adverse
claims, options, warrants, puts, calls or other rights of third parties, and
restrictions except for those that exist on the date hereof (as described in
Section 3.1(a) above). Pledgor will cause to be terminated any financing
statement or other registration with respect to the Collateral, except such
as may have been filed in favor of Pledgee. Pledgor will defend Pledgee's
right, title and special property and security interest in and to the
Collateral against the claims of any person.
(b) FURTHER ASSURANCES. Pledgor will at any time and from time to time,
promptly execute and deliver all further instruments and documents and take
all further action that may be necessary or desirable or that Pledgee may
request in order (i) to perfect and protect the security interest created or
purported to be created hereby and the first priority of such security
interest; (ii) to enable Pledgee to exercise and enforce its rights and
remedies hereunder in respect of the Collateral; or (iii) to otherwise effect
the purposes of this Agreement, including, without limitation: (A) executing
and filing such financing or continuation statements, or amendments thereto,
as may be necessary or desirable or that Pledgee may request in order to
perfect and preserve the security interest created or purported to be created
hereby; and (B) furnishing to Pledgee from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Pledgee may reasonably request,
all in reasonable detail.
(c) DELIVERY OF PLEDGED WARRANTS. All certificates, instruments and
writings evidencing the Pledged Warrants shall be delivered to Pledgee on or
prior to the execution and delivery of this Agreement. All other
certificates, instruments and writings hereafter evidencing or constituting
Pledged Securities shall be delivered to Pledgee promptly upon the receipt
thereof by or on behalf of Pledgor. All such Pledged Securities shall be
held by or on behalf of Pledgee pursuant hereto and shall be delivered in the
same manner and with the same effect as described in SECTION 2.1, SECTION 2.2
and SECTION 3.1 hereof. Upon delivery, such securities shall thereupon
constitute "Pledged Securities" and shall be subject to the liens herein
created, for
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the purposes and upon the terms and conditions set forth in this Agreement
and the other Obligation Documents.
(d) PROCEEDS OF PLEDGED SECURITIES. If Pledgor shall receive, by virtue
of its being or having been an owner of any Pledged Securities, any (i)
shares of capital stock (including any certificate representing any shares of
capital stock or distribution in connection with any increase or reduction of
capital, reorganization, reclassification, merger, consolidation, sale of
assets, or spinoff or split-off), promissory note or other instrument or
writing; (ii) option or right, whether as an addition to, substitution for,
or in exchange for, any Pledged Securities or otherwise; (iii) dividends
payable in cash or in securities or other property; or (iv) dividends or
other distributions in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or
paid-in surplus, Pledgor shall receive the same in trust for the benefit of
Pledgee, shall segregate it from Pledgor's other property, and shall promptly
deliver it to Pledgee in the exact form received, with any necessary
endorsement or appropriate stock powers duly executed in blank, to be held by
Pledgee as Collateral.
(e) STATUS OF PLEDGED SECURITIES. The certificates and instruments
evidencing the Pledged Securities shall at all times be valid and genuine and
shall not be altered. The Pledged Securities at all times shall be duly
authorized, validly issued, fully paid, and non-assessable, shall not be
issued in violation of the preemptive rights of any Person or of any
agreement by which Pledgor is bound, and shall not be subject to any
restrictions or conditions with respect to the transfer, voting or capital of
any Pledged Securities.
Section 3.3. NEGATIVE COVENANTS. Unless Pledgee shall otherwise
consent in writing, Pledgor will at all times comply with the covenants
contained in this SECTION 3.3 from the date hereof and so long as any part of
the Obligations is outstanding.
(a) TRANSFER OR ENCUMBRANCE. Pledgor will not sell, assign (by
operation of law or otherwise), transfer, exchange, lease or otherwise
dispose of any of the Collateral, nor will Pledgor grant a lien upon or
execute, file or record any financing statement or other registration with
respect to the Collateral, nor will Pledgor allow any such lien, financing
statement, or other registration to exist or deliver actual or constructive
possession of the Collateral to any other person other than liens in favor of
Pledgee.
(b) FINANCING STATEMENT FILINGS. Pledgor recognizes that financing
statements pertaining to the Collateral have been or may be filed where
Pledgor maintains any Collateral, has its records concerning any Collateral
or has its chief executive office or chief place of business. Without
limitation of any other covenant herein, Pledgor will not cause or permit any
change to be made in its name, identity or corporate structure, or any change
to be made to a jurisdiction in (i) the location of any records concerning
any Collateral, or (ii) in the location of its chief executive office or
chief place of business, unless Pledgor shall have notified Pledgee of such
change at least 30 days prior to the effective date of such change, and shall
have first taken all action required by Pledgee for the purpose of further
perfecting or protecting the security interest in favor of Pledgee in the
Collateral. In any notice furnished pursuant to this subsection, Pledgor
will expressly state that the notice is required by this Agreement and
contains facts that may require additional filings of financing statements or
other notices for the purposes of continuing perfection of Pledgee's security
interest in the Collateral.
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(c) IMPAIRMENT OF SECURITY INTEREST. Pledgor will not take any action
which would in any manner impair the enforceability of Pledgee's security
interest in any Collateral nor will it fail to take any action needed to ensure
the enforceability of Pledgee's security interest in the Collateral.
(d) RESTRICTIONS ON PLEDGED SECURITIES. Pledgor will not enter into any
agreement creating, or (except for restrictions that exist on the date hereof,
as described in Section 3.1(a) hereof) otherwise permit to exist, any
restriction or condition upon the transfer, voting or control of any Pledged
Securities.
ARTICLE IV.
REMEDIES, POWERS AND AUTHORIZATIONS
Section 4.1. PROVISIONS CONCERNING THE COLLATERAL.
(a) ADDITIONAL FINANCING STATEMENT FILINGS. Pledgor hereby authorizes
Pledgee to file, without the signature of Pledgor where permitted by law, one or
more financing or continuation statements, and amendments thereto, relating to
the Collateral. Pledgor further agrees that a carbon, photographic or other
reproduction of this Agreement or any financing statement describing any
Collateral is sufficient as a financing statement and may be filed in any
jurisdiction Pledgee may deem appropriate.
(b) POWER OF ATTORNEY. Pledgor hereby irrevocably appoints Pledgee as
Pledgor's attorney-in-fact and proxy, with full authority in the place and stead
of Pledgor and in the name of Pledgor or otherwise, from time to time in
Pledgee's discretion, to take any action and to execute any instrument,
certificate or notice which Pledgee may deem necessary or advisable to
accomplish the purposes of this Agreement including, without limitation: (i) to
request or instruct Pledgor or Spinnaker (and each registrar, transfer agent, or
similar Person acting on behalf of Pledgor or Spinnaker) to register the pledge
or transfer of the Collateral to Pledgee; (ii) to otherwise give notification to
Pledgor or Spinnaker, registrar, transfer agent, financial intermediary, or
other person of Pledgee's security interests hereunder; (iii) to ask, demand,
collect, sue for, recover, compound, receive and give acquittance and receipts
for moneys due and to become due under or in respect of any of the Collateral;
(iv) to receive, indorse and collect any drafts or other instruments, documents
and chattel paper; and (v) to file any claims or take any action or institute
any proceedings which Pledgee may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce the rights of Pledgee with
respect to any of the Collateral.
(c) PERFORMANCE BY PLEDGEE. If Pledgor fails to perform any agreement or
obligation contained herein, Pledgee may itself perform, or cause performance
of, such agreement or obligation, and the expenses of Pledgee incurred in
connection therewith shall be payable by Pledgor under SECTION 4.4.
(d) COLLECTION RIGHTS. Pledgee shall have the right at any time, upon the
occurrence and during the continuance of an Event of Default, to notify any or
all obligors (including without limitation Pledgor) under any accounts or
general intangibles included among the Collateral of the assignment thereof to
Pledgee and to direct such obligors to make payment of all amounts due or to
become due to Pledgor thereunder directly to Pledgee and, upon such notification
and at the expense of Pledgor and to the extent permitted by law, to enforce
collection thereof and to adjust, settle or compromise the amount or payment
thereof, in the
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same manner and to the same extent as Pledgor could have done. After Pledgor
receives notice that Pledgee has given any notice referred to above in this
subsection, (i) all amounts and proceeds (including instruments and writings)
received by Pledgor in respect of such accounts or general intangibles shall
be received in trust for the benefit of Pledgee hereunder, shall be
segregated from other funds of Pledgor and shall be forthwith paid over to
Pledgee in the same form as so received (with any necessary indorsement) to
be held as cash collateral and (A) released to Pledgor upon the remedy of all
Events of Default, or (B) if any Event of Default shall have occurred and be
continuing, applied as specified in SECTION 4.3, and (ii) Pledgor will not
adjust, settle or compromise the amount or payment of any such account or
general intangible or release wholly or partly any account debtor or obligor
thereof or allow any credit or discount thereon.
(e) THE PLEDGEE'S DUTY OF CARE. Other than the exercise of reasonable
care in the physical custody of the Collateral while held by the Pledgee
hereunder, the Pledgee shall have no responsibility for, or obligation or
duty with respect to, all or any part of the Collateral or any matter or
proceeding arising out of or relating thereto, including, without limitation,
any obligation or duty to collect any sums due with respect thereto or to
protect or preserve any right against prior parties or any other rights
pertaining thereto, it being understood and agreed that the Pledgor shall be
responsible for preservation of all rights in the Collateral. Without
limiting the generality of the foregoing, the Pledgee shall be conclusively
deemed to have exercised reasonable care in the custody of the Collateral, if
it takes such action, for purposed of preserving rights in the Collateral, as
the Pledgor may reasonably request in writing; provided, however, that no
refusal, failure, omission or delay by the Pledgee in complying with any such
request shall be deemed to be a failure to exercise reasonable care.
Section 4.2. EVENT OF DEFAULT REMEDIES. If an Event of Default shall
have occurred and be continuing, Pledgee may from time to time in its
discretion, without limitation and without notice except as expressly
provided below:
(a) exercise in respect of the Collateral, in addition to other rights
and remedies provided for herein, under the other Obligation Documents or
otherwise available to it, all the rights and remedies of a secured party on
default under the Code (whether or not the Code applies to the affected
Collateral);
(b) require Pledgor to, and Pledgor hereby agrees that it will upon
request of Pledgee forthwith, assemble all or part of the Collateral as
directed by Pledgee and make it available to Pledgee at a place to be
designated by Pledgee which is reasonably convenient to both parties;
(c) reduce its claim to judgment against Pledgor or foreclose or
otherwise enforce, in whole or in part, the security interest created hereby
by any available judicial procedure;
(d) dispose of, at its office, on the premises of Pledgor or elsewhere,
all or any part of the Collateral, as a unit or in parcels, by public or
private proceedings, and by way of one or more contracts (it being agreed
that the sale of any part of the Collateral shall not exhaust Pledgee's power
of sale, but sales may be made from time to time, and at any time, until all
of the Collateral has been sold or until the Obligations have been paid and
performed in full), and at any such sale it shall not be necessary to exhibit
any of the Collateral;
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(e) buy the Collateral, or any part thereof, at any public sale;
(f) buy the Collateral, or any part thereof, at any private sale if the
Collateral is of a type customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price quotations;
(g) apply by appropriate judicial proceedings for appointment of a
receiver for the Collateral, or any part thereof, and Pledgor hereby consents to
any such appointment; and
(h) at its discretion, retain the Collateral in satisfaction of the
Obligations whenever the circumstances are such that Pledgee is entitled to do
so under the Code or otherwise.
Pledgor agrees that, to the extent notice of sale shall be required by law, at
least five days' notice to Pledgor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification. Pledgee shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Pledgee may adjourn any public
or private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
Section 4.3. APPLICATION OF PROCEEDS. If any Event of Default shall have
occurred and be continuing, Pledgee may in its discretion apply any cash held by
Pledgee as Collateral, and any cash proceeds received by Pledgee in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral, to any or all of the following in such order as Pledgee may elect:
(a) To the repayment of the reasonable costs and expenses, including
reasonable attorneys' fees and legal expenses, incurred by Pledgee in connection
with (i) the administration of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization upon,
any Collateral, (iii) the exercise or enforcement of any of the rights of
Pledgee hereunder, or (iv) the failure of Pledgor to perform or observe any of
the provisions hereof;
(b) To the payment or other satisfaction of any liens, encumbrances, or
adverse claims upon or against any of the Collateral;
(c) To the reimbursement of Pledgee for the amount of any obligations of
Pledgor paid or discharged by Pledgee pursuant to the provisions of this
Agreement or the other Obligation Documents, and of any expenses of Pledgee
payable by Pledgor hereunder or under the other Obligation Documents;
(d) To the satisfaction of any other Obligations or any indebtedness of
Pledgor to Pledgee;
(e) By holding the same as Collateral;
(f) To the payment of any other amounts required by applicable law
(including, without limitation, Section 9.504(a)(3) of the Code or any successor
or similar, applicable statutory provision); and
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(g) By delivery to Pledgor or to whomsoever shall be lawfully entitled to
receive the same or as a court of competent jurisdiction shall direct.
Section 4.4. RELEASE AND EXPENSES. In addition to, and not in
qualification of, any similar obligations under other Obligation Documents:
(a) Pledgor agrees to release and forever discharge Pledgee from and
against any and all claims, losses and liabilities growing out of or resulting
from this Agreement (including, without limitation, enforcement of this
Agreement). The foregoing release and discharge shall apply whether or not such
claims, losses and liabilities are in any way or to any extent owed, in whole or
in part, under any claim or theory of strict liability or are, to any extent
caused, in whole or in part, by any negligent act or omission of any kind by
Pledgee.
(b) Pledgor will upon demand pay to Pledgee the amount of any and all
costs and expenses, including the fees and disbursements of Pledgee's counsel
and of any experts and agents, which Pledgee may incur in connection with (i)
the exercise or enforcement of any of the rights of Pledgee hereunder after an
Event of Default; or (ii) the failure by Pledgor to perform or observe any of
the provisions hereof, except expenses resulting from Pledgee's gross negligence
or willful misconduct.
Section 4.5. NON-JUDICIAL REMEDIES. In granting to Pledgee the power to
enforce its rights hereunder without prior judicial process or judicial hearing,
Pledgor expressly waives, renounces and knowingly relinquishes any legal right
which might otherwise require Pledgee to enforce its rights by judicial process.
In so providing for non-judicial remedies, Pledgor recognizes and concedes that
such remedies are consistent with the usage of trade, are responsive to
commercial necessity, and are the result of a bargain at arm's length. Nothing
herein is intended to prevent Pledgee or Pledgor from resorting to judicial
process at either party's option.
Section 4.6. OTHER RECOURSE. Pledgor waives any right to require Pledgee
to proceed against any other person, exhaust any Collateral or other security
for the Obligations, or to have any other party joined with Pledgor in any suit
arising out of the Obligations or this Agreement, or pursue any other remedy in
Pledgee's power. Pledgor further waives any and all notice of acceptance of
this Agreement. Until all of the Obligations shall have been paid in full,
Pledgor shall have no right to subrogation and Pledgor waives the right to
enforce any remedy which Pledgee has or may hereafter have against any other
party, and waives any benefit of and any right to participate in any other
security whatsoever now or hereafter held by Pledgee. Pledgor authorizes
Pledgee, without notice or demand and without any reservation of rights against
Pledgor and without affecting Pledgor's liability hereunder or on the
Obligations, from time to time to (a) take or hold any other property of any
type from any other person as security for the Obligations, and exchange,
enforce, waive and release any or all of such other property, (b) apply the
Collateral or such other property and direct the order or manner of sale thereof
as Pledgee may in its discretion determine, (c) renew, extend for any period,
accelerate, modify, compromise, settle or release any of the obligations of any
other party in respect to any or all of the Obligations or other security for
the Obligations, (d) waive, enforce, modify, amend or supplement any of the
provisions of any Obligation Document with any person other than Pledgor, and
(e) release or substitute any other liable party.
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Section 4.7. VOTING RIGHTS, DIVIDENDS ETC. IN RESPECT OF PLEDGED
SECURITIES.
(a) Any and all (i) dividends and interest paid or payable in respect of,
and instruments and other property received, receivable or otherwise distributed
in respect of or in exchange for, any Pledged Securities, and (ii) cash paid,
payable or otherwise distributed in redemption of, or in exchange for, any
Pledged Securities, shall be, and shall forthwith be delivered to Pledgee to
hold as, Pledged Securities and shall, if received by Pledgor, be received in
trust for the benefit of Pledgee, be segregated from the other property or funds
of Pledgor, and be forthwith delivered to Pledgee in the exact form received
with any necessary indorsement or appropriate stock powers duly executed in
blank, to be held by Pledgee as Collateral.
(b) Upon the occurrence and during the continuance of an Event of Default,
Pledgee may at its option exercise the voting and other consensual rights in
respect of the Collateral as well as any and all rights of conversion, exchange,
subscription or any other rights, privileges or options pertaining to any of the
Pledged Securities as if it were the absolute owner thereof, including, without
limitation, the right to exchange, in its discretion, any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other adjustment of Pledgor or Spinnaker, or upon the exercise by Pledgor or
Spinnaker of any right, privilege or option pertaining to any Pledged
Securities, and, in connection therewith, to deposit and deliver any and all of
the Pledged Securities with any committee, depository, transfer, agent,
registrar or other designated agent upon such terms and conditions as it may
determine. In addition, Pledgor will not exercise or refrain from exercising
any such right, if Pledgee gives notice that, in Pledgee's judgment, such action
would adversely affect the value of the Pledged Securities or the benefits to
Pledgee of its security interest hereunder.
Section 4.8. PRIVATE SALE OF PLEDGED SECURITIES. Pledgor recognizes that
Pledgee may deem it impracticable to effect a public sale of all or any part of
the Pledged Securities and that Pledgee may, therefore, determine to make one or
more private sales of any such securities to a restricted group of purchasers
who will be obligated to agree, among other things, to acquire such securities
for their own account, for investment and not with a view to the distribution or
resale thereof. Pledgor acknowledges that any such private sale may be at
prices and on terms less favorable to the seller than the prices and other terms
which might have been obtained at a public sale and, notwithstanding the
foregoing, agrees that such private sales shall be deemed to have been made in a
commercially reasonable manner and that Pledgee shall have no obligation to
delay the sale of any such securities for the period of time necessary to permit
registration of such securities for public sale under the Securities Act of
1933, as amended. Pledgor further acknowledges and agrees that any offer to
sell such securities which has been (a) publicly advertised on a BONA FIDE basis
in a newspaper or other publication of general circulation in the financial
community of Dallas, Texas (to the extent that such an offer may be so
advertised without prior registration under the Securities Act), or (b) made
privately in the manner described above to not less than fifteen (15) BONA FIDE
offerees shall be deemed to involve a "public sale" for the purposes of Section
9.504(c) of the Code (or any successor or similar, applicable statutory
provision) as then in effect in the State of Texas, notwithstanding that such
sale may not constitute a "public offering" under the Securities Act of 1933, as
amended, and that Pledgee may, in such event, bid for the purchase of such
securities.
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ARTICLE V
MISCELLANEOUS
Section 5.1. NOTICES. Any notice or communication required or permitted
hereunder shall be given in writing, sent by personal delivery, by delivery
service with proof of delivery, or by registered or certified United States
mail, postage prepaid, addressed to the appropriate party as follows:
TO PLEDGOR: Boyle, Fleming & Co., Inc.
600 N. Pearl
Suite 2160
Dallas, Texas 75201
TO PLEDGEE: Michael L. George
13355 Noel Road
Suite 1100
Dallas, Texas 75240
or to such other address or to the attention of such other individual as
hereafter shall be designated in writing by the applicable party sent in
accordance herewith. Any such notice or communication shall be deemed to have
been given (a) in the case of personal delivery or delivery service, as of the
date of first attempted delivery at the address or in the manner provided
herein, or (b) in the case of registered or certified United States mail, three
days after deposit in the mail.
Section 5.2. AMENDMENTS. No amendment of any provision of this Agreement
shall be effective unless it is in writing and signed by Pledgor and Pledgee and
no waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall be effective unless it is in writing and signed by
Pledgee, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given and to the extent
specified in such writing.
Section 5.3. PRESERVATION OF RIGHTS. No failure on the part of Pledgee
to exercise, and no delay in exercising, any right hereunder or under any other
Obligation Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. Neither the execution nor the
delivery of this Agreement shall in any manner impair or affect any other
security for the Obligations. The rights and remedies of Pledgee provided
herein and in the other Obligation Documents are cumulative of and are in
addition to, and not exclusive of, any rights or remedies provided by law. The
rights of Pledgee under any Obligation Document against any party thereto are
not conditional or contingent on any attempt by Pledgee to exercise any of its
rights under any other Obligation Document against such party or against any
other person.
Section 5.4. UNENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition
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or invalidity without invalidating the remaining portions hereof or thereof
or affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 5.5. SURVIVAL OF AGREEMENTS. All representations and warranties
of Pledgor herein, and all covenants and agreements herein shall survive the
execution and delivery of this Agreement, the execution and delivery of any
other Obligation Documents, the creation of the Obligations and consummation of
the transactions contemplated hereby.
Section 5.6. OTHER LIABLE PARTY. Neither this Agreement nor the exercise
by Pledgee or the failure of Pledgee to exercise any right, power or remedy
conferred herein or by law shall be construed as relieving any other liable
party from liability on the Obligations or any deficiency thereon. This
Agreement shall continue irrespective of the fact that the liability of any
other liable party may have ceased or irrespective of the validity or
enforceability of any other Obligation Document to which Pledgor or any other
liable party may be a party, and notwithstanding the reorganization, death,
incapacity or bankruptcy of any other liable party, and notwithstanding the
reorganization or bankruptcy or other event or proceeding affecting any other
liable party.
Section 5.7. BINDING EFFECT AND ASSIGNMENT. This Agreement creates a
continuing security interest in the Collateral and (a) shall be binding on
Pledgor and its successors and permitted assigns, and (b) shall inure, together
with all rights and remedies of Pledgee hereunder, to the benefit of Pledgee its
successors, transferees and assigns. Without limiting the generality of the
foregoing, Pledgee may pledge, assign or otherwise transfer any or all of its
rights under any or all of the Obligation Documents to any other person, and
such other person shall thereupon become vested with all of the benefits in
respect thereof granted herein or otherwise. None of the rights or duties of
Pledgor hereunder may be assigned or otherwise transferred without the prior
written consent of Pledgee.
Section 5.8. TERMINATION. Upon the satisfaction in full of the
Obligations, and upon written request for the termination hereof delivered by
Pledgor to Pledgee, this Agreement and the security interest created hereby
shall terminate and all rights to the Collateral shall revert to Pledgor.
Pledgee will, upon Pledgor's request and at Pledgor's expense, (a) return to
Pledgor such of the Collateral as shall not have been sold or otherwise disposed
of or applied pursuant to the terms hereof, and (b) execute and deliver to
Pledgor such documents as Pledgor shall reasonably request to evidence such
termination.
SECTION 5.9. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF
THE UNITED STATES OF AMERICA.
Section 5.10. COUNTERPARTS. This Agreement may be separately executed in
any number of counterparts, all of which when so executed shall be deemed to
constitute one and the same Agreement.
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IN WITNESS WHEREOF, Pledgor has executed and delivered this Agreement, as
of the date first above written.
PLEDGOR:
BOYLE, FLEMING & CO., INC.
By: /s/ Ned N. Fleming III
----------------------------------
Name: Ned N. Fleming, III
--------------------------------
Title: President
-------------------------------
PLEDGEE:
/s/ Michael L. George
--------------------------------------
Michael L. George
