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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 27, 1995
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La-Man Corporation
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(Exact name of registrant as specified in its charter)
Nevada 0-14427 33-2286268
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2180 West State Road 434, Suite 6136, Longwood, FL 32779
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (407) 865-5995
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On December 27, 1995, the Registrant refinanced $1,080,096.49 mortgage and
other indebtedness of Don Bell Industries, Inc. ("Don Bell"), a wholly-owned
subsidiary of the Registrant acquired in September 1995, and replaced the
Registrant's previous $350,000 operating line of credit facility with a $500,000
operating line, with the proceeds of three loans made to the Registrant by The
Bank of Winter Park (the "Bank") pursuant to a Loan and Security Agreement among
the Registrant, its direct and indirect wholly-owned subsidiaries (hereinafter
"Subsidiary" or "Subsidiaries"), and the Bank (the "Loan Agreement"). A copy of
the Loan Agreement is filed as Exhibit 1 to this Report and incorporated by
reference herein. The Loan Agreement superseded the Loan Agreement dated as of
February 13, 1995 among the Registrant, its Subsidiaries and the Bank.
The Loan Agreement provides for the borrowing by the Registrant from the
Bank up to the principal sum of $1,590,000 through the following loan
facilities:
$500,000 Revolving Credit Line
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The Loan Agreement provides that the Bank will loan to the Registrant up to the
principal amount of $500,000 from time to time under a revolving line of credit.
Provided the Registrant is not in default, outstanding amounts under the credit
line may be repaid or reborrowed from time to time subject to the terms,
conditions and limitations set forth in the Loan Agreement. The outstanding
principal amounts under the credit line bear interest at the rate of 1% above
the prime interest rate as announced by the Wall Street Journal ("Prime Rate").
The Registrant is required to pay interest monthly on all principal amounts
outstanding under the credit line for a period of two years until December 27,
1997, at which time all outstanding principal and accrued but unpaid interest
becomes due and payable.
$840,000 Mortgage Loan
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The Loan Agreement also provides for a mortgage loan to the Registrant in the
principal amount of $840,000, bearing interest at the rate of 1.5% above the
Prime Rate. The Registrant is required to make monthly payments of principal
and interest in the amount of $8,106.18 (subject to adjustment upon changes in
the applicable interest rate) for a period of five years, based upon a 20-year
amortization schedule, with a balloon payment of the remaining principal balance
and accrued but unpaid interest, if any, being due on December 27, 2000.
$250,000 Term Loan
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The Loan Agreement also provides for a term loan to the Registrant in the
principal amount of $250,000, bearing interest at the rate of 2% above the Prime
Rate and repayable in monthly installments of principal in the amount of
$4,166.67, plus accrued interest, for a period of five years until December 27,
2000.
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At the December 27, 1995 closing under the Loan Agreement, $1,080,096.49 of
the net proceeds from the loans was used to repay certain long-term and current
mortgage and other indebtedness of Don Bell. The Registrant also took down
$39,117.50 under the $500,000 credit line (bringing total borrowings under the
credit line to $289,117.00 at December 27, 1995) to pay loan closing costs.
The Loan Agreement contains certain covenants of the Registrant, including
the following:
(a) The Registrant is required to maintain a tangible net worth
(i.e., total assets minus total liabilities minus any intangible
assets as defined under generally accepted accounting principles)
of no less than $750,000, to be measured at the end of each
fiscal quarter of the Registrant commencing December 31, 1995;
(b) The Registrant is required to maintain an interest coverage
ratio, defined as earnings before interest and taxes divided by
interest, of no less than 3-to-1, to be measured at each fiscal
year end commencing June 30, 1996;
(c) The Registrant is required to maintain a cash flow coverage,
defined as net income plus depreciation divided by current
maturities of long term debt and capitalized leases, of no less
than 2.5-to-1.0 at each fiscal year end commencing June 30, 1996;
(d) The Registrant is prohibited, without the Bank's written consent,
from making other borrowings or incurring any other direct or
indirect, fixed or contingent indebtedness in excess of an
aggregate of $100,000.00; however, the Registrant has the right
to acquire the stock or assets of another corporation or entity
in exchange for capital stock of the Registrant, provided the
Registrant and its Subsidiaries on a consolidated basis continue
to satisfy the applicable representations, warranties and
covenants contained in the Loan Agreement and provided that
neither the Registrant nor any of its Subsidiaries assumes any
debt of the acquired corporation or entity.
All obligations of the Registrant under the Loan Agreement are secured
by security interests granted by the Registrant and each of the Subsidiaries in
their respective accounts receivable and inventory, by a security interest in
equipment of Don Bell, and by the separate continuing guaranties of the
Subsidiaries. The guaranty obligations of the Subsidiaries are joint and
several. The $840,000 mortgage loan is secured by a first mortgage on the Don
Bell manufacturing facility and underlying real property located in Volusia
County, Florida. The obligations under the $500,000 credit line and the
$250,000 term loan are also secured by a first mortgage from the Registrant to
the Bank on the Registrant's real property and improvements in Steuben County,
Indiana. The $250,000 term loan is also further secured by a second mortgage on
certain other real property of Don Bell located in Volusia County, Florida.
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In the event the Registrant fails to pay any monetary obligation
within 10 days after the date due, or in the event the Registrant or any
Subsidiary fails to remedy or cure to the satisfaction of the Bank any
representation, warranty or covenant of the Registrant or any of the
Subsidiaries within 30 days after written notice from the Bank, or if there is a
change in the Registrant's present executive management without the prior
written approval of the Bank, the Bank has the right to accelerate the maturity
of all obligations of the Registrant under the Loan Agreement and exercise all
rights granted to the Bank with respect to the collateral securing such
obligations.
The foregoing summary description of certain material terms of the
Loan Agreement is qualified in its entirety by reference to the actual terms and
provisions of such document.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
c. Exhibits
1. Loan and Security Agreement dated December 27, 1995 between
and among La-Man Corporation, Heritage Packaging Services,
Inc., Nevada SEMCO, Inc., J.M. Stewart Corporation, J.M.
Stewart Industries, Inc., Vision Trust Marketing, Inc.,
TracTel Communications, Inc., Don Bell Industries, Inc., Don
Bell Industries of Nevada, Inc., and The Bank of Winter
Park.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 8-K to be signed on its behalf by
the undersigned hereunto duly authorized.
LA-MAN CORPORATION
January 12, 1996 By: /s/ J. William Brandner
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J. William Brandner
President and Chief Executive Officer
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EXHIBIT 1
LOAN AND SECURITY AGREEMENT
dated December 27, 1995 between and among La-Man Corporation,
Heritage Packaging Services, Inc., Nevada SEMCO, Inc., J.M. Stewart
Corporation, J.M. Stewart Industries, Inc., Vision Trust Marketing, Inc.,
TracTel Communications, Inc., Don Bell Industries, Inc., Don Bell Industries
of Nevada, Inc., and The Bank of Winter Park
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LOAN AND SECURITY AGREEMENT
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Effective December 27, 1995, La-Man Corporation, a Nevada corporation
authorized to do business in Florida as La-Man Corporation of Nevada, whose
executive office is located at 2180 West State Road 434, Suite 6136, Longwood,
Florida 32779 (herein called the "the Borrower") hereby applies to THE BANK OF
WINTER PARK (herein called the "Bank") for loans and other financial
accommodations and, in consideration of the Bank extending the same, agrees with
the Bank as follows:
SECTION 1. THE LOAN.
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1.1 Subject to the terms and conditions of this Loan Agreement, the Bank
will lend and the Borrower will borrow up to a principal sum of One Million Five
Hundred Ninety Thousand and 00/100 Dollars ($1,590,000.00), which borrowing
shall be evidenced by a renewal note in the amount of $350,000.00, future
advance note in the amount of $150,000.00, and consolidated master note in the
amount of $500,000.00 (hereinafter "Loan A"), a mortgage note in the amount of
$840,000.00 (hereinafter "Loan B"), and note in the amount of $250,000.00
(hereinafter "Loan C").
1.2 Loan A is a revolving line of credit and the principal amount under
the Loan may increase or decrease from time to time as the Borrower draws and
repays Loan funds thereunder. Provided the Borrower is not in default,
outstanding amounts under the Loan may be repaid or re-borrowed from time to
time subject to the terms, conditions and limitations set forth in this
Agreement, but the principal balance of the Loan outstanding from time to time
shall not exceed the original, principal amount of the Note. Loan A requires
monthly payments of interest only for a period of two years from the date of
funding. Loan B is a term loan requiring monthly payments of principal and
interest in the amount of $8,106.18 for a period of five years from the date of
funding, based upon a twenty (20) year amortization schedule, with a balloon
payment of the remaining principal balance and accrued interest, if any, being
due and payable on December 27, 2000. Loan C is a term loan requiring monthly
payments of principal in the amount of $4,166.67, plus accrued interest for a
period of five years from the date of funding.
1.3 The Borrower represents, warrants and agrees that the proceeds of
Loans A, B and C made hereunder will be used solely for the following purposes:
(a) contemporaneously with the initial draw hereunder, the proceeds of such
initial draw shall be used to the extent necessary to pay all indebtedness of
the Don Bell Industries, Inc., a Florida corporation, d/b/a Don Bell & Company
to First Union, Florida, Bank of America, California, Ed Neff, Lloyd B. Patrick,
Jr. and Charles L. Waller III and Midland Bank, Missouri; and (b) all other
proceeds shall be used for working capital by the Borrower and its subsidiaries
Heritage Packaging Services, Inc., Nevada SEMCO, Inc., J.M. Stewart Corporation,
J.M. Stewart Industries, Inc., Vision Trust Marketing, Inc., TracTel
Communications, Inc., Don Bell Industries, Inc., and Don Bell Industries of
Nevada, Inc. (herein referred to individually as "Subsidiary" and collectively
as the "Subsidiaries"). Disbursement of Loan proceeds for purposes not within
the
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foregoing shall be at the Bank's sole discretion, and the Bank shall under no
circumstances be obligated to disburse Loan proceeds except as expressly set
forth in this Agreement.
1.4 The maturity date of Loan A is December 27, 1997. On the Loan A
maturity date, all sums outstanding under Loan A shall be immediately due and
payable, and the Bank's obligation to fund shall cease and terminate. The
maturity date of Loan B is December 27, 2000. On the loan B maturity date, all
sums outstanding under Loan B shall be immediately due and payable. The
maturity date of Loan C is December 27, 2000. On the Loan C maturity date, all
sums outstanding under Loan C shall be immediately due and payable.
1.5 The Borrower shall pay to the Bank a commitment fee of $4,700.00 as to
Loan A, to be paid on acceptance , receipt of which is acknowledged by the Bank.
The Borrower shall also pay to the Bank a document preparation fee of $250.00 as
to Loan A. Such document preparation fee shall be due and payable in full at
the time of the Borrower's first draw under the Loan.
1.6 The Borrower shall pay to the Bank a commitment fee of $8,400.00 as to
Loan B, to be paid upon acceptance, receipt of which is acknowledged by the
Bank. The Borrower shall also pay a document preparation fee of $250.00 as to
Loan B. Such document preparation fee shall be due and payable in full at the
time of funding under the Loan.
1.7 The Borrower shall pay to the Bank a commitment fee of $2,000.00 as to
Loan C, to be paid upon acceptance receipt of which is acknowledged by the Bank.
The Borrower shall also pay a document preparation fee of $250.00 as to Loan C.
Such document preparation fee shall be due and payable in full at the time of
funding under the Loan.
SECTION 2. THE BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. The
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Borrower represents, warrants and covenants as follows:
2.1 The Borrower is a corporation, duly organized, existing and in good
standing under the laws of the State of Nevada, and is duly qualified and in
good standing in Florida and in every other state in which it is doing business.
2.2 The execution, delivery and performance of this Agreement are within
the Borrower's corporate powers, have been duly authorized, are not in
contravention of law or the terms of its charter, by-laws or other incorporation
papers, or of any indenture, agreement or undertaking to which it is a party or
by which it is bound.
2.3 At the time any Account becomes subject to a security interest in
favor of the Bank: the Account shall be a valid Account representing an
undisputed indebtedness incurred by the account debtor for Inventory held
subject to delivery instructions or theretofore shipped or delivered pursuant to
a contract of sale, or for services theretofore performed by the Borrower or a
Subsidiary; as to each such Account, there shall be no set-offs or
counterclaims, no agreement under which any deduction or discount may be claimed
shall have been made with
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the account debtor unless written notice thereof has theretofore been or
concurrently is given to the Bank, and no agreement under which any goods may be
returned shall have been made with the account debtor, where such set-offs or
counterclaims, agreement for deductions or discounts or agreement for returns
have an aggregate value of more than $25,000.00 per Account; and the Borrower or
a Subsidiary, as applicable, shall be the lawful owner of the Account and shall
have good right to subject the same to a security interest in the Bank.
2.4 The Borrower and its Subsidiaries are, and as to Inventory to be
acquired after the date hereof, shall be, the owner of all Inventory and shall
neither create or suffer to exist any lien or encumbrance thereon or security
interest therein nor sell, assign, transfer or create or suffer to exist any
lien or encumbrance on or security interest in any Account to or in favor of any
person other than the Bank.
2.5 At the time the Borrower or any Subsidiary pledges, sells, assigns or
transfers to the Bank any instrument, document of title, security, chattel paper
or other property (including Inventory and Accounts) or any proceeds or products
thereof, or any interest therein, the Borrower or its Subsidiary shall be the
lawful owner thereof and shall have good right to pledge, sell, assign or
transfer the same; none of such property shall have been pledged, sold,
assigned, or transferred to any person other than the Bank or in any way
encumbered; and the Borrower and its Subsidiaries shall defend the same against
the claims and demands of all persons.
2.6 The Borrower shall give the Bank written notice of each location at
which Inventory is or will be kept and of each office of the Borrower or any
Subsidiary at which the records pertaining to Accounts Receivable are kept.
2.7 The Borrower shall maintain a "Tangible Net Worth" of no less than
$750,000, to be measured at the end of each fiscal quarter, commencing December
31, 1995, and of no less than $1,500,000 to be measured at the end of each
fiscal quarter, commencing June 30, 1996. "Tangible Net Worth" means total
assets minus total liabilities minus any intangible assets as defined by
Generally Accepted Accounting Principles (e.g., good will).
2.8 The Borrower shall maintain an interest coverage ratio, defined as
earnings before interest and taxes divided by interest, of no less than 3 to 1,
to be measured at each fiscal year end commencing June 30, 1996.
2.9 The Borrower shall maintain a cash flow coverage, defined as net
income plus depreciation divided by current maturities of long term debt and
capitalized leases, of no less than 2.5 to 1.0 at each fiscal year end
commencing June 30, 1996.
2.10 Subject to any limitations stated therein or in connection therewith,
all balance sheets, earnings statements and other financial data which have been
or may hereafter be furnished to the Bank to induce it to enter into this
Agreement or otherwise in connection herewith, do or shall fairly represent the
financial condition of the Borrower and its Subsidiaries as of the dates and the
results of their operations for the periods for which the same are
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furnished, and all other information, reports and other papers and data
furnished to the Bank are, or shall be at the time the same are so furnished,
accurate and correct in all material respects and complete insofar as
completeness may be necessary to give the Bank true and accurate knowledge of
the subject matter.
2.11 The Borrower shall pay any excise, sales or other tax or charge which
may become due and payable with respect to any sale or other transaction giving
rise to an Account or other right to the payment of money, or with respect to
the collection thereof and shall reimburse the Bank for any payment by it of any
such tax or charge.
2.12 The Borrower will not, unless the Bank shall consent in writing, make
any loans or capitalized leases to any person, nor guarantee, endorse, become
surety for, or otherwise in any way become or be responsible for, obligations of
any other person, whether by agreement to purchase the indebtedness of any other
person, or agreement for the furnishing of funds, directly or indirectly,
through purchase of goods, supplies, or services (or by way of stock purchase,
capital contribution, advance, or loan) or for the purpose of payment of
indebtedness of any other person, or otherwise (except that the Borrower may
endorse negotiable instruments for collection in the ordinary course of
business), in excess of an aggregate of ONE HUNDRED THOUSAND AND NO\100 DOLLARS
($100,000.00) per year. Notwithstanding the foregoing, the Borrower shall have
the right to acquire the stock or assets of another corporation or other entity
in exchange for stock of the Borrower, providing the Borrower and its
Subsidiaries continue to satisfy the applicable representations, warranties and
covenants of this Agreement and provided that neither the Borrower nor any
Subsidiary assume any debt of the acquired corporation or other entity.
2.13 This Loan is only for business or commercial purposes of the Borrower
and the proceeds of the Loan are not being used for personal, household, family
or agricultural purposes.
2.14 There are not now, nor to the Borrower's knowledge after reasonable
investigation have there ever been, tanks or other facilities on, under, or at
any real estate owned or occupied by the Borrower or any Subsidiary that
contained materials which, if known to be present in soils or ground water,
would require cleanup, removal or some other remedial action under Environmental
Laws. To the Borrower's knowledge after reasonable investigation, there are no
other conditions existing currently or likely to exist during the term of this
Agreement that would subject the Borrower or any Subsidiary to any claim for
damages, penalties, injunctive relief or cleanup costs under Environmental Laws
or that require or are likely to require cleanup, removal, remedial action or
other response pursuant to Environmental Laws by the Borrower or any Subsidiary.
The Borrower affirms and incorporates by reference the representations and
warranties contained in that certain Environmental Affidavit of even date
herewith.
2.15 All covenants, representations and warranties set forth herein shall
be true, correct and complete at the time this Agreement is executed and shall
be deemed continuing.
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SECTION 3. BANK ACCOUNTS. Unless the Bank shall otherwise consent in writing,
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the Borrower and each Subsidiary agree that the Bank will be their primary
concentration and disbursement bank while these facilities are in effect, and
the Borrower and each Subsidiary agree to maintain their respective primary
operating accounts with the Bank. The Borrower and its Subsidiaries agree to
maintain balances in each of such accounts in amounts sufficient to compensate
the Bank for servicing these accounts. If the Bank determines that the balances
maintained in such accounts are not sufficient to compensate the Bank for
servicing the accounts, the Bank may charge the Borrower and its Subsidiaries
such amounts as the Bank determines necessary to compensate itself for such
service, which charge shall be computed in accordance with the customary method
employed by the Bank, and shall be immediately due and payable by the Borrower.
SECTION 4. PROMISES TO PAY. The Borrower promises to pay to the Bank:
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4.1 The current amount due according to the terms of the Renewal Note,
Future Advance Note and Consolidated Master Note as to Loan A, and the current
amount due according to the terms of the Note as to Loan B;
4.2 Any and all charges customarily made by the Bank;
4.3 All taxes, charges and expenses of every kind or description including
attorney's fees and expenses of litigation, reasonably incurred or expended by
the Bank in connection with the preparation of this Agreement or any amendment
hereof, the making of any loans hereunder, the collection or sale or attempted
collection or sale of Accounts or Obligations, the supervision, protection and
collection of any realization upon any Collateral, and the protection or
enforcement of the Bank's rights hereunder.
SECTION 5. INSURANCE; REPORTS; INSPECTION OF RECORDS; FURTHER ASSURANCES.
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5.1 The Borrower and each Subsidiary shall have and maintain at all times
with respect to Inventory and Equipment, insurance against risks of fire, so-
called extended coverage, sprinkler leakage and other risks customarily insured
against by companies engaged in similar businesses, in amounts, containing such
terms, in such form, for such periods and written by such companies as may be
satisfactory to the Bank, such insurance to be payable to the Bank and to the
Borrower, and each applicable Subsidiary, as their interests may appear. All
policies of insurance shall provide for ten (10) days' written minimum
cancellation notice to the Bank. In the event of failure to provide and
maintain insurance as herein provided, the Bank may, at its option, provide such
insurance and charge the amount thereof to the Loan Account. The Borrower shall
furnish to the Bank certificates or other evidence satisfactory to the Bank of
compliance with the foregoing insurance provisions. Evidence of insurance
satisfactory to the Bank must be in place prior to the initial draw by the
Borrower as to Loan A and the funding of Loan B.
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5.2 The Borrower shall maintain and shall cause each Subsidiary to
maintain a standard and modern system for accounting in accordance with
generally accepted principles of accounting consistently applied throughout all
accounting periods; and shall furnish to the Bank such information respecting
the business, assets and financial condition of the Borrower and its
Subsidiaries as the Bank may reasonably request and, without request, furnish to
the Bank:
(a) Within thirty (30) days after the end of each month, unaudited
monthly statements of profit and loss for the Borrower and each of its
Subsidiaries, such statements being in form and substance satisfactory to the
Bank; and
(b) Within 45 days after the end of each of the first three quarters
of each fiscal year of the Borrower (i) consolidated balance sheets of the
Borrower and all of its Subsidiaries as of the close of such quarter and of the
comparable quarter in the preceding fiscal year; and (ii) consolidated
statements of income and surplus of the Borrower and all of its Subsidiaries for
such quarter and for that part of the fiscal year ending with such quarter and
for the corresponding periods of the preceding fiscal year; all in reasonable
detail and certified as true and correct (subject to audit and normal year-end
adjustments) by the chief financial officer of the Borrower; and
(c) As soon as available, and in any event within 90 days after the
close of each fiscal year of the Borrower, a copy of the audit report for such
year and accompanying consolidated financial statements of the Borrower and its
Subsidiaries, as prepared by independent public accountants of recognized
standing selected by the Borrower and satisfactory to the Bank, which audit
report shall be accompanied by an opinion of such accountants, in form
satisfactory to the Bank, to the effect that the same fairly present the
financial condition of the Borrower and its Subsidiaries and the results of its
and their operations as of the relevant dates thereof; together with copies of
any management letters issued by such accountants in connection with such audit;
and
(d) As soon as available, copies of all reports or materials submitted
or distributed to shareholders of the Borrower or filed with the SEC or other
governmental agency having regulatory authority over the Borrower or any
Subsidiary or with any national securities exchange; and
(e) Promptly, and in any event within 10 days, after the Borrower has
knowledge thereof a statement of the chief financial officer of the Borrower
describing: (i) any event which, either of itself or with the lapse of time or
the giving of notice or both, would constitute a default hereunder together with
a statement of the actions which the Borrower proposes to take with respect
thereto; (ii) any pending or threatened litigation or administrative proceeding
involving an amount in excess of $5000.00; and (iii) any fact or circumstance
which is materially adverse to the property, financial condition or business
operations of the Borrower or any Subsidiary.
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5.3 The Borrower shall at all reasonable times and from time to time allow
the Bank by or through any of its officers, agents, attorneys, or accountants,
to examine, inspect or make extracts from the Borrower's books and records, and
those of any Subsidiary or other related company, and to arrange for
verification of Accounts under reasonable procedures, directly with account
debtors or by other methods; and shall do, make, execute and deliver all such
additional and further acts, things, deeds, assurances and instruments as the
Bank may require, including adjusting for clerical errors in any Loan
documentation if deemed necessary or desirable in the reasonable discretion of
the Bank, to vest in and assure to the Bank its rights hereunder or in any
Collateral and to carry into effect the provisions and intent of this Agreement.
SECTION 6. SECURITY INTEREST OF THE BANK IN COLLATERAL.
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6.1 As security for the payment and performance of all obligations, the
Bank shall have and the Borrower and each Subsidiary hereby grants to the Bank a
continuing security interest in the following property of the Borrower and each
Subsidiary, whether such property is now owned or existing or is owned,
acquired, or arises hereafter, and whether or not such property is specifically
assigned to the Bank: all Inventory of the Borrower and its Subsidiaries; all
Accounts Receivable of the Borrower and its Subsidiaries; all interest of the
Borrower and its Subsidiaries in goods as to which an Account Receivable shall
have arisen; all Equipment of Don Bell Industries, Inc. described as all
furniture, fixtures, equipment, motor vehicles, rolling stock and other tangible
personal property of the Debtor of every description, except inventory, and
includes without limitation all property included in the definition of
"equipment" as used in Section 679.109 of the Florida Statutes, Uniform
Commercial Code, and all files, records (including without limitation computer
programs, tapes and related electronic data processing software) and writings of
the Borrower and its Subsidiaries or in which any of them has an interest in any
way relating to the foregoing property. The security interest of the Bank in
the equipment of Don Bell Industries, Inc. d/b/a Don Bell and Company shall be
subordinate to the security interest in that certain equipment described in the
UCC-1 filings in favor of Heller Financial, Inc., file number 940000087141, and
Vendor Funding Co., Inc., file number 910000121548, copies of which are attached
hereto as Composite Exhibit "C" and incorporated herein by reference. The Bank
is also given a lien and security interest in all property of the Borrower and
its Subsidiaries now in or at any time hereafter coming into the control,
custody, or possession of the Bank, whether for the express purpose of being
used by the Bank as Collateral, or for any other purpose, and upon any balance
or balances to the credit of any accounts maintained with the Bank by the
Borrower and its Subsidiaries.
6.2 The Borrower and its Subsidiaries agree to execute and deliver
Security Agreements and U.C.C. Financing Statements required by the Bank to
perfect said security interests.
6.3 As additional security for Loans A and C, the Borrower shall grant to
the Bank a first mortgage on the property described on Exhibit "A" attached
hereto and made a part hereof.
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6.4 As additional security for Loan C, Don Bell Industries, Inc., a
Florida corporation, d/b/a Don Bell & Company, a subsidiary of the Borrower,
shall grant to the Bank a second mortgage on the property described on Exhibit
"B" attached hereto and made a part hereof. As security for Loan B, Don Bell
Industries, Inc., a Florida corporation, d\b\a Don Bell & Company, a subsidiary
of the Borrower, shall grant to the Bank a first mortgage on the property
described on Exhibit "C" attached hereto and made a part hereof.
6.5 Borrower shall not remove or demolish any building or other property
forming a part of the Mortgaged Property without the written consent of the
Bank. Borrower shall not permit, commit, or suffer any waste, impairment or
deterioration of the Mortgaged Property or any part thereof, and shall keep the
same and improvements thereon in good condition and repair. Borrower shall
notify the Bank in writing within five (5) days of any damage or impairment of
the Mortgaged Property. The Bank may, at the Bank's discretion, have the
Mortgaged Property inspected at any time and Borrower shall pay all costs
incurred by the Bank in executing such inspection.
SECTION 7. EVENTS OF DEFAULT. ACCELERATION.
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7.1 Any and all of the Obligations of the Borrower to the Bank, shall, at
the option of the Bank and notwithstanding the provisions of any instrument
evidencing any Obligation, be immediately due and payable without notice or
demand upon the occurrence of any of the following events of default:
(a) a default in the payment or performance, when due or payable
(after any applicable grace period), of any Obligation by the Borrower or by any
endorser, guarantor or surety for any Obligation;
(b) failure of the Borrower to pay, prior to the date for imposition
of penalty, any tax not being contested in good faith, where the amount of tax,
penalties and interest exceeds $10,000.00;
(c) The making by the Borrower or any Subsidiary of any
misrepresentation to the Bank for the purpose of obtaining credit or an
extension of credit, or the Borrower or any Subsidiary shall fail to perform or
observe any other term, covenant, or agreement contained in this Agreement on
its part to be performed or observed and any such failure remains unremedied for
a period of THIRTY (30) days after written notice thereof shall have been given
to the Borrower by the Bank;
(d) failure of the Borrower, within thirty (30) days after request by
the Bank, to furnish financial information or to permit inspection of the books
and records of the Borrower or any Subsidiary;
(e) the Borrower or any endorser, guarantor or surety of any
Obligation, shall: (i) file a voluntary petition in bankruptcy or a petition or
answer seeking or acquiescing in any
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<PAGE>
reorganization or for an arrangement, composition, readjustment, liquidation,
dissolution, or similar relief for itself pursuant to the United States
Bankruptcy Code or any similar law or regulation, federal or state, relating to
any relief for debtors, now or hereafter in effect; or (ii) makes an assignment
for the benefit of creditors or admits in writing its inability to pay or fails
to pay its debts as they become due; or (iii) suspends payment of its
obligations or takes any action in furtherance of the foregoing; or (iv)
consents to or acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator or other similar official of the Borrower, or any
Subsidiary, for all or any part of the Collateral or other assets of such party,
or either; or (v) has filed against it an involuntary petition, arrangement,
composition, readjustment, liquidation, dissolution, or an answer proposing an
adjudication of it as a bankrupt or insolvent, or is subject to reorganization
pursuant to the United States Bankruptcy Code, or an action seeking to appoint a
trustee, receiver, custodian, conservator, or liquidator, under any similar law,
federal or state, now or hereafter in effect, and such action is approved by any
court of competent jurisdiction and the order approving the same shall not be
vacated or stayed within sixty (60) days from entry; or (vi) consents to the
filing of any such petition or answer, or shall fail to deny the material
allegations of the same in a timely manner;
(f) final judgments for the payment of money in excess of Twenty Five
Thousand Dollars ($25,000.00), excluding claims covered by insurance, shall be
rendered against the Borrower or any Subsidiaries and the same shall remain
undischarged for a period of thirty (30) consecutive days during which execution
shall not be effectively stayed, provided that a judgment shall be deemed
"final" only when the time for appeal shall have expired without an appeal
having been claimed, or all appeals and further review claimed have been
determined adversely to it;
(g) the occurrence of any material adverse change in the financial
condition or affairs of the Borrower or any endorser, guarantor or surety of any
Obligation which causes the Bank to deem itself insecure;
(h) termination of any guaranty by any guarantor of the Borrower's
Obligations;
(i) the Borrower or any endorser, guarantor or surety of any
Obligation shall grant a security interest in any Collateral to any third party;
(j) the Borrower or any endorser, guarantor, or surety of any
Obligation fails, in any material respect, to maintain, preserve and keep all
its property, leased buildings, equipment, furniture and fixtures necessary for
the operation of its business in good repair and condition, ordinary wear and
tear excepted, and if it fails, from time to time, to make all needful, proper
and necessary repairs and replacements thereof;
(k) the Borrower or any endorser, guarantor, or surety of any
Obligation fails to pay, when due, or within fifteen (15) days of receipt by
Borrower of notice from the appropriate governmental body that such a mount is
due, salaries and wages of employees and
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<PAGE>
any and all Federal and other taxes lawfully assessed or imposed upon it,
provided, however, that nothing herein contained shall be construed as
prohibiting the payor from contesting, in good faith, the validity of any such
taxes; or
(l) in the event there is any change in the Borrower's present
executive management, i.e., the president and chief executive officer, without
the prior written approval of the Bank.
7.2 Upon any event of default (as defined above) by the Borrower, the Bank
shall have all the remedies for default provided in this Agreement, the Notes,
the Security Agreements and all other documents executed in connection with the
Loan, as well as all applicable law. Nothing herein contained shall be
construed as making it obligatory upon the Bank to follow any particular course
of action or to pursue any particular remedy in advance of any other or others
accruing to the Bank by virtue of the Borrower's default.
SECTION 8. DISPOSITION OF COLLATERAL. Upon the occurrence of any event of
-------------------------
default and at any time thereafter (such default not having been cured), the
Bank shall have the right to take immediate possession of the Collateral, and
for that purpose the Bank may, so far as the Borrower and its Subsidiaries can
give authority therefor, enter upon any premises on which Collateral may be
situated and remove the same therefrom. The Borrower waives demand and notice
with respect to and assents to any repossession of Collateral. Except for
Collateral which is perishable or threatens to decline speedily in value or
which is of a type customarily sold on a recognized market, the Bank shall give
to the Borrower at least FIVE (5) days' prior written notice of the time and
--------
place of any public sale of Collateral or of the time after which any private
sale or any other intended disposition is to be made. The Bank shall also have
in any jurisdiction where enforcement hereof is sought, in addition to all other
rights and remedies, the rights and remedies of a secured party under the
Uniform Commercial Code of Florida. The residue of any proceeds of collection
or sale, after satisfying all Obligations in such order of preference as the
Bank may determine and making proper allowance for interest on Obligations not
then due, shall be credited to any deposit account maintained by the Borrower
with the Bank. The Borrower shall remain liable for any deficiency.
SECTION 9. SET-OFF. Regardless of the adequacy of Collateral, upon any event
-------
of default, any deposits or other sums at any time credited by or due from the
Bank to the Borrower or any Subsidiary may at any time be applied to or set off
against Obligations on which the Borrower is primarily liable. Upon the
occurrence of any default hereunder, the Bank shall have the right, immediately,
without notice, and without further action by it, to set off against the
Borrower's Obligations hereunder, all money owed by the Bank to the Borrower,
and the Bank shall have been deemed to have exercised such right of set-off and
to have made a charge against any such money immediately upon the occurrence of
such default even though such charge is made or entered on the books of the Bank
subsequent hereto.
SECTION 10. WAIVERS. The Borrower waives demand, notice, protest, notice of
-------
acceptance of this Agreement, notice of loans made, credit extended, Collateral
received,
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<PAGE>
delivered or repossessed or other action taken in reliance thereon, and all
other demands and notices of any description. With respect to both Obligations
and Collateral, the Borrower assents to any extension or postponement of the
time of payment or other indulgence, to any substitution, exchange or release of
Collateral, to the addition or release of any party or person primarily or
secondarily liable, to the acceptance of partial payments thereon and the
settlement, compromising or adjusting of any thereof, all in such manner and at
such time or times as the Bank may deem advisable. The Bank may exercise its
rights with respect to Collateral without resorting to or regard to other
collateral or sources of reimbursement for Obligations. The Bank shall not be
deemed to have waived any of its rights upon or under Obligations or Collateral
unless such waiver be in writing and signed by the Bank. No delay or omission
on the part of the Bank in exercising any right shall operate as a waiver of
such right or any other right. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right on any future occasion. All rights
and remedies of the Bank, whether evidenced hereby or by any other instrument or
papers, shall be cumulative and may be exercised separately or concurrently, and
may be exercised by the Bank from time to time, at such times and in such order,
as the Bank, in its sole discretion, shall determine.
SECTION 11. NOTICES. Any notice required hereunder or by reason of the
-------
application of any law shall be deemed to have been given by either party
hereto, when the same shall have been personally delivered or deposited in the
United States Mail, postage prepaid, at least Five (5) calendar days prior to
----
the action proposed thereby, addressed:
(a) If to Borrower, at 2180 West State Road 434, Suite 6136
Longwood, Florida 32779
Attn: J. William Brandner, President
(b) With copy to: Marshall S. Harris, Esquire
Smith, MacKinnon, Harris, et al
255 S. Orange Avenue, Suite 800
Orlando, Florida 32801
(c) If to Bank, at 2006 Aloma Avenue
P.O. Box 8050
Winter Park, Florida 32790-8050
Attn: Robert Baldwin, Asst. Vice President
(d) With copy to: Frank L. Pohl, Esquire
Pohl & Short, P.A.
280 W. Canton Avenue, Suite 410
Post Office 3208
Winter Park, Florida 32790-3208
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<PAGE>
SECTION 12. ADDITIONAL PROVISIONS.
---------------------
12.1 The captions herein are inserted only as a matter of convenience and
for reference and in no way define, limit, or describe the scope of this
Agreement or the intent of any provision hereof.
12.2 As an inducement to the granting of the Loan secured hereby, written
Guaranty Agreements from each Subsidiary will be required to guaranty the
payment of this Loan, interest and any costs of collection, including a
reasonable attorneys' fee, which written Guaranty Agreements shall be on a form
prescribed by the Bank. Guarantors jointly and severally guarantee payment of
the Bank's credit to the Borrower.
12.3 The Borrower agrees to pay any and all documentary stamps and taxes
applicable to this Loan and any similar tax or taxes which are directly assessed
on this Loan.
12.4 No delay or failure on the part of the Bank in exercising any right,
power or privilege under the terms of this Agreement shall affect such right,
power or privilege; nor shall a single or partial exercise thereof preclude any
further exercise thereof, or the exercise of any other right, power or
privilege.
12.5 In the event that the Borrower or any Subsidiary, or any of them,
jointly or severally, shall default in their obligations hereunder and in the
opinion of the Bank it becomes necessary or proper to employ an attorney to
enforce its collection of the indebtedness owed by the Borrower to the Bank or
to enforce compliance by the Borrower with any of the provisions herein
contained, the Borrower agrees to pay a reasonable attorneys' fee and any and
all other costs that may reasonably be incurred in connection therewith, and
this provision shall not be deemed a limitation of any other obligation of the
Borrower to pay costs of collection and reasonable attorneys' fees pursuant to
the terms and provisions of any other document or agreement, such as the
promissory note or any security agreements or guaranty agreements executed by
the Borrower or the Subsidiaries hereunder.
12.6 This Agreement shall remain in full force and effect for so long as
there shall remain unpaid principal, interest, or costs of collection, including
reasonable attorneys' fees, under and pursuant to the terms and provisions of
that certain renewal note, future advance note, and consolidated master note as
to Loan A, and the note as to Loan B, evidencing the loan request by the
Borrower from the Bank and agreed to be made by the Bank to the Borrower.
12.7 This Agreement shall not be modified or amended except by a written
instrument signed by all of the parties hereto.
12.8 This Agreement and all the documents executed in connection therewith
and all matters relating thereto shall be governed by and construed and
interpreted in accordance with the laws of the State of Florida. The Borrower
and all of its Subsidiaries hereby submit to the
13
<PAGE>
jurisdiction of the state and federal courts located in Florida and agree that
the Bank may, at its option, enforce its rights under such loan documents in
such courts.
12.9 If at any time or times by assignment or otherwise, the Bank transfers
any Obligation and Collateral therefor, such transfer shall carry with it the
Bank's powers and rights under this Agreement with respect to the Obligation and
Collateral transferred and the transferee shall become vested with said powers
and rights whether or not they are specifically referred to in the transfer.
This Agreement shall be effective as a sealed instrument when it is received at
the office of the Bank as set forth in Section 13(b) of this Agreement. The
provisions of this Agreement are severable, and if any of these provisions shall
be held by any court of competent jurisdiction to be unenforceable, such holding
shall not affect or impair any other provision hereof.
12.10 Provided there has occurred an event of default under this
Agreement, the Borrower hereby constitutes any officer of the Bank as its
attorney-in-fact, with power to receive and open all mail addressed to the
Borrower; to endorse the Borrower's name on any notes, acceptances, checks,
drafts, money orders or other evidences of payment or collateral that may come
into the Bank's possession; to sign the Borrower's name on any invoice or bill
of lading relating to any assigned Account, on drafts against customers, to send
requests for verification of Accounts to any customer; and to do all other acts
and things necessary to carry out this Agreement. All acts of said Attorney or
designee are hereby ratified and approved by the Borrower, and said Attorney or
designee shall not be liable for any acts of commission or omission nor for any
error of judgment or mistake of fact or law. This power, being coupled with an
interest, is irrevocable while any assigned Account shall remain unpaid, or any
money remains due to the Bank from the Borrower.
12.11 The terms "the Bank" and "the Borrower," as used in this Agreement,
shall include their respective successors and assigns.
12.12 The parties mutually agree that neither party, nor any partner,
assignee, heir, or legal representative of any party (all of whom are
hereinafter referred to as "parties") shall seek a jury trial in any lawsuit,
proceedings, counter-claim, or any litigation procedure based upon or arising
out of this Agreement or any instrument evidencing, securing or relating to the
indebtedness and other obligations evidenced hereby, any related agreement or
instrument, any other collateral for the indebtedness evidenced hereby or the
dealings or the relationship between or among the parties, or any of them. None
of the parties will seek to consolidate any such action, in which a jury trial
has been waived, with any other action in which a jury trial has not been
waived. The provisions of this paragraph have been fully negotiated by the
parties with the Bank, and these provisions shall be subject to no exceptions.
The Bank has in no way agreed with or represented to any of the parties that the
provisions of this paragraph will not be fully enforced in all instances. The
waiver contained herein is irrevocable and constitutes a knowing and voluntary
waiver.
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<PAGE>
SECTION 13. DEFINITIONS. As used in this Agreement:
-----------
13.1 "Obligations" means any and all obligations of the Borrower to the
Bank of every kind and description, direct or indirect, absolute or contingent,
primary or secondary, due or to become due, now existing of hereafter arising,
regardless of how they arise or by what agreement or instrument they may be
evidenced or whether evidenced by any agreement or instrument, and includes
obligations to perform acts and refrain from taking action as well as
obligations to pay money.
13.2 "Inventory " means goods, merchandise and other personal property,
now owned or hereafter acquired by the Borrower or any Subsidiary, which are
held for sale or lease or are furnished or to be furnished under a contract of
service or are raw materials, work in process or materials used or consumed or
to be used or consumed in the business of the Borrower or any Subsidiary.
13.3 "Accounts" has the meaning ascribed to said term in Section 679.106
of the Florida Statutes, Uniform Commercial Code.
13.4 "General Intangibles" has the meaning ascribed to said term in
Section 679.106 of the Florida Statutes, Uniform Commercial Code.
13.5 "Equipment" has the meaning ascribed to said term in Section 679.109
of the Florida Statutes, Uniform Commercial Code.
13.6 "Accounts Receivable" means all present and future Accounts, General
Intangibles, chattel paper, instruments, notes, acceptances, documents or other
rights to payment and all form of obligations owing at any time to the Borrower
or any Subsidiary, arising out of the sale or lease of Inventory or rendering of
services or otherwise made in the ordinary course of business; all rights of the
Borrower or any Subsidiary earned or yet to be earned under contracts to sell
Inventory or render services and all warehouse receipts or documents of any kind
in respect of any of the foregoing, and all the proceeds thereof of every kind
and nature and in whatsoever form.
13.7 "Collateral" means any and all personal property of the Borrower or
its Subsidiaries in which the Bank now has, by this Agreement acquires or
hereafter acquires, a security interest, as more fully described in Section 6
herein.
13.8 "Environmental Laws" means all federal, state, and local laws
including statutes, regulations, ordinances, codes, rules, and other
governmental restrictions and requirements relating to the discharge of air
pollutants, water pollutants, or process waste water or otherwise relating to
the environment or hazardous substances including, but not limited to, the
Federal Solid Waste Disposal Act, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976, the
Federal Comprehensive Environmental
15
<PAGE>
Responsibility Cleanup and Liability Act of 1980, regulations of the
Environmental Protection Agency, regulations of the Nuclear Regulatory Agency,
and regulations of any state department of natural resources or state
environmental protection agency now or at any time hereafter in effect.
IN WITNESS WHEREOF, the Borrower and the Bank have executed this Agreement
as of the date first above written.
LA-MAN CORPORATION, a Nevada
corporation doing business in Florida as
La-Man Corporation of Nevada
BY: /s/ J. William Brandner
--------------------------------------
J. William Brandner, as its President
THE BANK OF WINTER PARK
BY: /s/ Robert Baldwin
--------------------------------------
Robert Baldwin, as its
Assistant Vice President
16
<PAGE>
The Guarantors of the Loan secured hereby agree to abide by the terms and
conditions of this Agreement.
<TABLE>
Heritage Packaging Services, Inc., Nevada SEMCO, Inc.,
an Indiana corporation a Nevada Corporation
<S> <C>
BY: /s/ J. William Brandner BY: /s/ J. William Brandner
----------------------------- -----------------------------
J. William Brandner, as its President J. William Brandner, as its Vice President
J.M. Stewart Corporation, J.M. Stewart Industries, Inc.
a Florida corporation a Florida corporation
BY: /s/ J. William Brandner BY: /s/ J. William Brandner
------------------------------ -----------------------------
J. William Brandner, as its Vice President J. William Brandner, as its Vice President
Vision Trust Marketing, Inc., TracTel Communications, Inc.,
a Florida corporation a Florida corporation
BY: /s/ J. William Brandner BY: /s/ J. William Brandner
------------------------------ -----------------------------
J. William Brandner, as its President J. William Brandner, as its President
Don Bell Industries, Inc., Don Bell Industries of Nevada, Inc.,
a Florida corporation, a Nevada corporation
d/b/a Don Bell & Company
BY: /s/ J. William Brandner BY: /s/ J. William Brandner
------------------------------ -----------------------------
J. William Brandner, as its Vice President J. William Brandner, as its Vice President
</TABLE>
17
