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DRAFT 03/08/2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): February 23, 2000
TBM HOLDINGS, INC.
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(Exact Name of Registrant as Specified in its Charter)
Florida 0-18707 59-282441
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
136 Main Street, Westport, Connecticut 06880
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(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (203) 227-6140
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N/A
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On February 23, 2000, TBM Holdings, Inc., a Florida corporation
(the "Company"), acquired Long Reach Holdings, Inc., a Delaware corporation
("LRH"), pursuant to the Amended and Restated Agreement and Plan of Merger,
dated February 4, 2000, among the Company, TBM Acquisition I, Inc., a Delaware
corporation (the "Merger Sub"), LRH and certain shareholders of LRH. Based in
Houston, Texas, LRH is a manufacturer of lift truck attachments and material
handling equipment. This acquisition was effected by the merger of LRH with and
into the Merger Sub (the "Merger"), with the Merger Sub being the surviving
corporation (the Merger Sub is referred to hereafter as the "Surviving
Corporation"). Immediately following the Merger, the Surviving Corporation was
renamed Long Reach Holdings, Inc. The Company's press release issued on March 9,
2000, relating to the Merger is attached to this Form 8-K as Exhibit 99.1.
The aggregate consideration paid by the Company in respect of the
acquisition described above was $18,420,804, consisting of (i) payment of
$1,500,000 of cash, (ii) the issuance of 500,000 restricted shares of the
Company's common stock, par value $.001 (the "Common Stock"), valued at
$3,000,000, (iii) the assumption by the Surviving Corporation of subordinated
notes of LRH to certain of its shareholders in the principal amount of
$3,000,000, and (iv) the assumption by the Surviving Corporation of LRH's
indebtedness to Bank One, Texas, N.A. (the "Bank") in the amount of $10,920,804,
comprised of a revolving line of credit and a term loan, which debt was
refinanced with the Bank upon the closing of the Merger as described below. In
addition, in the event certain net sales targets are met in calendar year 2000,
the Surviving Corporation will issue Contingent Subordinated Notes to certain
shareholders, warrant holders, option holders and subordinated noteholders of
LRH (the "Stakeholders") in an aggregate amount not to exceed $2,000,000. The
Subordinated Notes are and, if issued, the Contingent Subordinated Notes will be
guaranteed by the Company. The Company used a portion of the net cash proceeds
from its private placement offering in June 1999 to fund the cash portion of the
consideration.
The consideration for the acquisition was determined through arms'
length negotiations between management of the Company on the one hand and LRH
and LRH's shareholders on the other hand, which negotiations took into account
LRH's financial position, operating history, products and sales trends and other
factors relating to LRH's business. Prior to the Merger, neither LRH nor its
shareholders had any material relationship with the Company, any affiliates of
the Company, any director or officer of the Company or any associate of any such
director or officer.
Effective upon the closing of the Merger, the Surviving
Corporation assumed and refinanced LRH's outstanding loans with the Bank. As
part of the refinancing (i) an outstanding revolving line of credit with the
Bank was increased from $8,000,000 to $10,000,000, or such lesser amount as
determined from time to time based on a percentage of the Surviving
Corporation's outstanding eligible accounts receivable and inventory, and (ii)
an outstanding term loan with the Bank was reduced to $2,500,000. The interest
rate on the revolving and term loans is the Bank's prime rate plus 1.00% which
can be reduced by .50% and by a further .25% if certain cash flow and loan
availability objectives are met during the next twenty-two (22) months. The
maturity date on both the revolving loan and the term loan is March 31, 2003.
Principal payments on the term loan begin on January 1, 2001, in the amount of
$60,000 a month until December 1, 2001, and thereafter at $50,000 a month until
maturity when the balance of the outstanding principal amount of the term loan
will become due. The Company has guaranteed these loans.
The above description of the Surviving Corporation's loans with
the Bank does not purport to be complete and is qualified in its entirety by
reference to the provisions of Amendment One to Loan and Security Agreement,
which is attached hereto as Exhibit 10.4, the Loan and Security Agreement, which
is attached hereto as Exhibit 10.3, and the Unlimited Guaranty, which is
attached hereto as Exhibit 10.5, all of which are incorporated herein by
reference.
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This Current Report on Form 8-K is qualified in its entirety by
the Amended Merger Agreement which was previously filed as an exhibit to the
Company's Current Report on Form 8-K dated February 4, 2000, filed with the
Commission on February 15, 2000, and which is incorporated herein by reference.
This Current Report on Form 8-K contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as amended. The
forward-looking statements contained herein involve risks and uncertainties.
Actual results and developments may differ materially from those described or
incorporated by reference in this Report. For more information about the Company
and risks arising when investing in the Company, investors are directed to the
Company's most recent report on Form 10-KSB and most recent reports on Form
10-QSB as filed with the Securities and Exchange Commission.
ITEM 5. OTHER EVENTS.
On February 23, 2000, the Company completed a private placement of
its Common Stock, in which it issued and sold an aggregate of 916,667 restricted
shares of Common Stock at $6.00 per share, for aggregate proceeds of $5,500,000.
The offering was made solely to accredited investors. In addition, J.H. Whitney
exercised its option to purchase 500,000 restricted shares of Common Stock at
$5.00 per share, for aggregate proceeds of $2,500,000. The proceeds of the
private placement will be used for working capital and to fund operating costs
of the Surviving Corporation and may be used for future acquisitions.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
As of the date of filing this Current Report on Form 8-K, it is
impracticable for the Company to provide the financial statements required by
this Item 7(a). In accordance with Item 7(a)(4) of Form 8-K, such financial
statements shall be filed by amendment to this Form 8-K no later than May 8,
2000.
(b) Pro Forma Financial Information.
As of the date of filing this Current Report on Form 8-K, it is
impracticable for the Company to provide the pro forma financial information
required by this Item 7(b). In accordance with Item 7(b) of Form 8-K, such
financial statements shall be filed by amendment to this Form 8-K no later than
May 8, 2000.
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Exhibit No. Description
2.1* Amended and Restated Agreement and Plan of Merger, dated February 4, 2000, among TBM
Holdings, Inc., TBM Acquisition I, Inc., Long Reach Holdings, Inc. and certain
shareholders of Long Reach Holdings, Inc.
4.1 Form of Subordinated Promissory Note by TBM Acquisition I, Inc. in favor of each of
the Subordinated Noteholders identified on the Schedule attached thereto.
10.1 Guaranty Agreement, dated as of February 23, 2000, by TBM Holdings, Inc. in favor of
Golub Associates Incorporated, as agent for the benefit of the holders of the
Subordinated Notes.
10.2 Lease Agreement, dated February 23, 2000, between TBM Acquisition I, Inc. and LR Real
Property, LLC.
10.3 Loan and Security Agreement, dated April 20, 1999, between Long Reach Holdings, Inc.
and Bank One, Texas, N.A.
10.4 Amendment One to Loan and Security Agreement, dated February 23, 2000, between Long
Reach Holdings, Inc. and Bank One, Texas, N.A.
10.5 Unlimited Guaranty, dated February 23, 2000, by TBM Holdings, Inc. in favor of Bank
One, Texas, N.A.
21 Subsidiaries of the Company.
99.1 Press Release dated March 9, 2000.
</TABLE>
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* Previously filed as an exhibit to Form 8-K dated February 4, 2000, filed
with the Commission on February 15, 2000.
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Exhibit Index
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Exhibit No. Description
2.1* Amended and Restated Agreement and Plan of Merger, dated February 4, 2000, among TBM
Holdings, Inc., TBM Acquisition I, Inc., Long Reach Holdings, Inc. and certain
shareholders of Long Reach Holdings, Inc.
4.1 Form of Subordinated Promissory Note by TBM Acquisition I, Inc. in favor of each of
the Subordinated Noteholders identified on the Schedule attached thereto.
10.1 Guaranty Agreement, dated as of February 23, 2000, by TBM Holdings, Inc. in favor of
Golub Associates Incorporated, as agent for the benefit of the holders of the
Subordinated Notes.
10.2 Lease Agreement, dated February 23, 2000, between TBM Acquisition I, Inc. and LR Real
Property, LLC.
10.3 Loan and Security Agreement, dated April 20, 1999, between Long Reach Holdings, Inc.
and Bank One, Texas, N.A.
10.4 Amendment One to Loan and Security Agreement, dated February 23, 2000, between Long
Reach Holdings, Inc. and Bank One, Texas, N.A.
10.5 Unlimited Guaranty, dated February 23, 2000, by TBM Holdings, Inc. in favor of Bank
One, Texas, N.A.
21 Subsidiaries of the Company.
99.1 Press Release dated March 9, 2000.
</TABLE>
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* Previously filed as an exhibit to Form 8-K dated February 4, 2000, filed
with the Commission on February 15, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TBM HOLDINGS, INC.
By: /s/ William A. Schwartz
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William A. Schwartz
President
Dated: March 9, 2000
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Exhibit 4.1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY STATE. THIS NOTE MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE NOTE UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY TO THE EFFECT THAT NO SUCH REGISTRATION IS REQUIRED.
THIS NOTE IS SUBORDINATED TO CERTAIN SENIOR INDEBTEDNESS OF THE COMPANY. THE
HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF COVENANTS AND AGREES THAT AMOUNTS
OWING WITH RESPECT TO THIS NOTE SHALL BE SUBORDINATED IN ACCORDANCE WITH THE
PROVISIONS OF THE AMENDED AND RESTATED SUBORDINATION AND STANDBY AGREEMENT DATED
AS OF FEBRUARY 23, 2000 AMONG THE ORIGINAL HOLDERS OF THE NOTES, BANK ONE,
TEXAS, N.A. AND THE COMPANY, AND THE HOLDER ACCEPTS AND AGREES TO BE BOUND BY
SUCH PROVISIONS.
TBM ACQUISITION I, INC.
SUBORDINATED PROMISSORY NOTE
$____________ February 23, 2000
Westport, Connecticut
TBM ACQUISITION I, INC., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to
_______________________ (the "Holder"), or registered assigns, in lawful money
of the United States of America, the principal sum of
______________________________________ DOLLARS ($__________) or such lesser
principal amount as shall then be unpaid, or, if not sooner paid on February 23,
2005, together with interest (computed on the basis of the actual number of days
elapsed over a year of 360 days), which shall accrue from January 1, 2001 at a
rate of six percent (6.0%) per annum, compounded monthly, subject to adjustment
as provided herein. Interest accruing on this Note until February 1, 2002 shall
be added to principal.
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Commencing on March 1, 2002 and thereafter on the first day of
each month occurring during the remainder of the term of this Note, the Company
shall make payments of interest as follows: (i) from March 1, 2002 through and
including February 1, 2004, at a rate of six percent (6.0%) per annum, and (ii)
from March 1, 2004 through maturity, at a rate per annum equal to the Senior
Debt Rate (as defined in the Merger Agreement) plus two percent (2.0%).
If any principal of or interest on this Note is not paid when
due, or there exists a material Event of Default, this Note shall bear interest
thereafter, until such overdue principal or interest is paid in full or such
material Event of Default is cured, at a rate per annum equal to the Senior Debt
Rate plus two percent (2.0%).
Payments of principal and interest shall be made in lawful
currency of the United States of America by check mailed and addressed to the
registered holder hereof at the address shown in the register maintained by the
Company for such purpose, or, at the option of the Holder, at such other place
in the United States of America as the Holder shall have designated to the
Company in writing.
This Note is one of the Subordinated Notes (collectively, the
"Notes") referred to in, and is entitled to the benefits and obligations of (i)
the Amended and Restated Agreement and Plan of Merger dated as of February 4,
2000 among the Company, TBM Holdings, Inc. (the "Parent"), Long Reach Holdings
Inc. ("LRH") and certain shareholders of LRH (the "Merger Agreement"), pursuant
to which LRH was merged with and into the Company on the date hereof, (ii) the
Guaranty dated as of February 23, 2000 (the "Guaranty") by the Parent in favor
of the Holder and the holders of the other Notes (collectively, the "Holders"),
and (iii) the Security Documents referred to below (the Notes, the Merger
Agreement, the Guaranty and the Security Documents being collectively referred
to as the "Note Documents").
Capitalized terms used herein without definition have the
meanings given thereto in the Merger Agreement.
The Notes may be prepaid, in whole at any time or in part from
time to time, without premium or penalty, provided that any such prepayment
shall be made pro rata among all the Notes.
This Note is a registered Note and is transferable only by
surrender hereof at the principal office of the Company in Westport,
Connecticut, duly endorsed or accompanied by a written instrument of transfer
duly executed by the registered holder of this Note or his attorney duly
authorized in writing. The Company may treat the registered holder hereof (or,
when presented duly endorsed, the holder hereof) as the absolute owner of this
Note for the purpose of
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receiving any payments hereon and for all other purposes; and each holder from
time to time of this Note, by accepting or holding the same, consents to and
agrees with the provisions hereof.
Collateral Security for the Notes
The Notes are secured pursuant to the following security
documents (the "Security Documents"): (i) the Security Agreement dated as of
April 20, 1999, as amended as of the date hereof, by the Company (as successor
by merger to LRH) in favor of Golub Associates Incorporated, as agent (the
"Agent") for the Holders, and (ii) the Subordinated Deed of Trust, Security
Agreement and Assignment of Rents and Leases dated as of April 20, 1999, as
amended as of the date hereof, by the Company (as successor by merger to LRH) in
favor of the Agent, in respect of the Company's property located at 12300 Amelia
Drive, Houston, Texas 77045.
Covenants of the Company
1. The Company agrees that, without the prior written consent of the
Majority Stakeholders, so long as any amounts are due and owing under the Notes,
the Company will not:
(a) incur any indebtedness or guaranty obligation which ranks pari
passu with or senior to the Notes, except for the Senior Debt and other
indebtedness which ranks pari passu (both as to payment and collateral security)
with the existing Senior Debt;
(b) sell, lease, transfer or otherwise dispose of any of its
properties, assets and rights to any person except (i) sales of inventory in the
ordinary course of business, (ii) sales or other dispositions in the ordinary
course of business of equipment which is obsolete, uneconomical or no longer
useful in its business or which is being replaced with other equipment of
substantially equal or greater utility, (iii) dispositions of obsolete
inventory, and (iv) other sales or other dispositions of property, the aggregate
fair market value of which, together with all such other property so sold or
disposed of in any 12-month period, shall not exceed 20% of the Company's
consolidated tangible assets as at the beginning of such 12-month period;
provided, that if the holder(s) of the Senior Debt (the "Senior Lender")
consents to actions of the Company set forth above in this paragraph (b), the
Holder shall be deemed to have consented to such action;
(c) (i) declare or pay, or set apart any funds for the payment of, any
dividends in any fiscal year on any shares of its capital stock ("Shares") of
the Company, (ii) apply any of its funds, property or assets to, or set apart
any funds, property or assets for, the purchase, redemption or retirement of, or
make any distribution, by reduction of capital or otherwise, in respect of any
of its Shares or other securities, whether now or hereafter outstanding, except
that any Subsidiary may from time to time declare and pay dividends to the
Company and the Company may make distributions to the Parent in order to satisfy
any tax liability of the Parent resulting solely from the operations of the
Company;
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(d) except as provided in the next sentence of this paragraph (d),
transfer any cash or property to any Affiliate of the Company, enter into any
contract or transaction with any such Affiliate, or modify any outstanding
contract or transaction with any such Affiliate, including without limitation
the purchase, lease, sale or exchange of property or the rendering of any
service to any such Affiliate. Notwithstanding anything to the contrary
contained in this paragraph (d), without the consent of the Majority Holders the
Company may (i) pay compensation to its full-time employees (whether or not
Affiliates) in the ordinary course of business in amounts that are customary for
businesses similar to that of the Company to pay to employees with similar
responsibilities, (ii) pay compensation to any employee hired pursuant to the
Consulting Agreement with TBM Consulting, Inc., and (iii) so long as no Default
or Event of Default is in existence or would be caused thereby, pay compensation
to TBM Consulting, Inc. or to a stockholder or Affiliate of the Company who is
not an employee of the Company for services rendered in accordance with the
provisions of an agreement which is approved by a majority of the disinterested
members of the Company's Board of Directors and is on terms comparable in all
material respects to the terms which would prevail in an arm's-length
transaction between unaffiliated third parties; or
(e) make any principal payment of or interest payment on, or purchase
or acquire, or prepay, any indebtedness which is subordinate or junior to , or
pari passu with, the Notes other than trade debt, or permit any notes or
agreements evidencing indebtedness which is subordinate or junior to, or pari
passu with, the Notes, or any subordination agreement executed in connection
therewith, to be modified or amended or any agreement or consent to be given
thereunder, whereby (i) any provisions thereof relating to the subordination
thereof to the Notes are waived, modified or discharged, or (ii) there is any
acceleration of the maturities therein provided.
2. The Company agrees that it will:
(a) (i) permit one non-voting representative designated by the
Majority Stakeholders to attend all meetings of the Board of Directors (or any
comparable governing body), and of all committees thereof, of each of the Parent
and the Company, (ii) pay the reasonable expenses of such representative in
connection with meetings and other activities of such Boards of Directors,
committees thereof or other such governing bodies of the Parent and the Company,
(iii) provide to such representative all notices, documents and information
furnished to the directors of each of the Parent and the Company, at the same
time as furnished to such directors, and (iv) use best efforts to notify such
representative of, and permit such representative to participate by telephone
in, emergency meetings of the Boards of Directors, committees thereof or other
such governing bodies of each of the Parent and the Company, and to provide such
representative copies of the minutes of all such meetings promptly after they
are held;
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(b) maintain in full force and effect (i) insurance of the types
referred to in Section 3.14 of the Merger Agreement which covers at least the
same risks as the insurance maintained by LRH immediately prior to its merger
into the Company, and which is in amounts equal to or greater than the insurance
maintained by LRH at such time, and (ii) directors' and officers' liability
insurance for the benefit of LRH's pre-Merger directors, officers and Majority
Stakeholders (at the expense of the Majority Stakeholders);
(c) keep proper books of record and account in which full and true
entries will be made of all dealings or transactions relating to the business
and affairs of the Company, and the Company shall cause to be furnished to the
Holder:
(i) as soon as practicable and in any event within thirty (30)
days after the end of each month, but only if the same are prepared for
internal use by the Company or for creditors, equity holders or others:
(x) unaudited consolidated statements of income, retained earnings and
cash flows of the Company and its consolidated Subsidiaries for such
month, and unaudited consolidated balance sheets of the Company and its
consolidated Subsidiaries as of the end of such month, in the forms
prepared by the Company and its consolidated Subsidiaries for their
internal use consistent with past practice, and (y) in comparative
form, figures for the actual results for the corresponding month in the
immediately preceding fiscal year) and amounts projected for such
month, together with explanations of any material variances;
(ii) at the same time furnished to the Senior Lender, a copy
of all financial and other information furnished to the Senior Lender;
and
(iii) as soon as practicable (but in any event not more than
five (5) business days after any officer of the Company obtains
knowledge of the occurrence of an event or the existence of a
circumstance giving rise to a Default or an Event of Default), notice
of any and all Defaults and Events of Default hereunder;
(d) Golub Associates Incorporated, as agent (the "Agent") for the
Holders, or any person designated by such agent, shall have the right, from time
to time hereafter, upon prior notice to the Company to call at the place or
places of business of the Company during ordinary business hours (i) to inspect,
audit and check any of their books, records, journals, orders, receipts and any
correspondence and other data relating to the business of the Company or to any
transactions among the parties to the Note Documents, and (ii) to discuss the
affairs, finances and business of the Company with any of its officers or
directors;
(e) the Company shall, and shall cause each Subsidiary to (i) maintain
its corporate existence, (ii) maintain in full force and effect all bonds,
franchises, patents and trademarks, and all governmental licenses, permits and
authorizations, in each case which are material to the conduct of its business,
(iii) maintain in full force and effect all leases, contracts and other rights,
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and all non-governmental licenses, permits and authorizations, in each case the
loss of which would have a Material Adverse Effect, unless the Company is able
to replace the same to the reasonable satisfaction of the Holders within 30
days, and (iv) comply with all applicable laws, orders, regulations and
ordinances of all Governmental Authorities, except for such laws, orders,
regulations and ordinances the violation of which would not be reasonably likely
to have a Material Adverse Effect;
(f) the Company shall pay or cause to be paid all of the Company's
license fees, bonding premiums and related taxes and charges and shall pay or
cause to be paid all of the Company's real and personal property taxes,
assessments and charges and all of the Company's franchise, income,
unemployment, use, excise, old age benefit, withholding, sales and other taxes
and other governmental charges assessed against the Company, or payable by the
Company, at such times and in such manner as to prevent any penalty from
accruing or any lien or charge from attaching to its property (except for liens
or charges relating to such taxes that are not yet payable), provided that the
Company shall have the right to contest in good faith, by an appropriate
proceeding promptly initiated and diligently conducted, the validity, amount or
imposition of any such tax, assessment or charge, and upon such good faith
contest to delay or refuse payment thereof, if the Company establishes adequate
reserves to cover such contested taxes, assessments or charges;
(g) the Company shall, as soon as possible, and in any event within
five (5) days after the Company learns of any of the following, give written
notice to the Holder of:
(i) any proceeding(s) being instituted or threatened to be
instituted by or against the Company in any federal, state, local or
foreign court or before any Governmental Authority in which injunctive
relief is requested or in which the amount in controversy exceeds
$50,000, and any litigation, proceeding, investigation or claim that
relates in any material way to (i) any of the Note Documents, or (ii)
the Certificate of Incorporation or By-laws of the Company;
(ii) any change in the business, assets or condition,
financial or otherwise, of the Company which can reasonably be expected
to have a Material Adverse Effect; and
(iii) the occurrence of any Event of Default as defined in the
documents governing any Senior Debt; and
(h) the Company shall promptly provide the Holder with copies of all
amendments, consent letters, waivers or modifications to, and any material
notices or reports provided by any Person to the Company pursuant to the terms
of or in connection with, any Note Document or any document governing the Senior
Debt, or the Certificate of Incorporation or Bylaws of the Company, or by the
Company to any such Person.
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Events of Default
If any of the following conditions or events shall occur and be
continuing:
(1) the Company fails to pay all or any portion of the
principal of the Notes when due; or the Company fails to pay any
interest on the Notes and such failure continues for more than ten (10)
days after such interest becomes due in accordance with the terms
hereof; or
(2) the Company or the Parent, as the case may be, shall
default in the performance of or compliance with any other term of the
Note Documents, and such default shall continue for thirty (30) days
(or, if such default is susceptible of cure, an additional period of up
to thirty (30) days so long as the Company or the Parent, as the case
may be, is diligently working to cure or remedy the same); or a default
shall occur under any other indebtedness or guaranty of the Company or
Parent or under any agreement relating thereto; or
(3) any warranty or representation heretofore, now or
hereafter made by the Company or the Parent in or pursuant to the
Merger Agreement or the Guaranty is untrue or incorrect in any material
respect, or any schedule, certificate, statement, report, financial
data, notice or other writing furnished at any time to the Majority
Stakeholders by the Company or the Parent under or pursuant to the
Merger Agreement or the Guaranty, is untrue or incorrect in any
material respect on the date as of which made; or
(4) the Company or the Parent shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to pay
its debts generally as they become due, or shall file a voluntary
petition in bankruptcy, or shall file any petition or answer seeking
for itself any reorganization, arrangement, composition, adjustment,
liquidation, dissolution or similar relief under any present or future
statute, law or regulation, or shall file any answer admitting or not
contesting the material allegations of a petition filed against it in
any such proceeding, or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of it or of all or
any substantial part of its properties, or it or its directors shall
take any action looking to its dissolution or liquidation; or the
Company or the Parent voluntarily or involuntarily dissolves or is
dissolved, or its existence terminates or is terminated; or the Company
or the Parent becomes insolvent or fails generally to pay its debts as
they become due; or
(5) within 90 days after the commencement of any action
against the Company or the Parent seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
similar relief under any present or future statute, law or regulation,
such action shall not have been dismissed or all orders or proceedings
thereunder affecting its operations or the business stayed, or if the
stay of any such order
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or proceeding shall thereafter be set aside, or within 90 days after
the appointment without the consent or acquiescence of the Company or
the Parent or of any trustee, receiver or liquidator of it or of all or
any substantial part of properties, such appointment shall not have
been vacated; or
(6) any material portion of the assets of the Company or the
Parent is attached, seized, subjected to a writ or distress warrant, or
is levied upon, or comes within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors; or
(7) the Agent, for the benefit of the Holders, shall cease to
have a valid and perfected security interest in or mortgage of any of
the collateral or property securing the Notes, subject only to the
prior security interest therein or mortgage thereof in favor of the
Senior Lender; or
(8) the Guaranty or any Security Document shall cease to be in
full force and effect or shall be declared by a court or other
Governmental Authority of competent jurisdiction to be void, voidable
or unenforceable against any obligor party thereto; the validity or
enforceability of any thereof against any Obligor party thereto shall
be contested by any Obligor or any Affiliate; or any Obligor or
Affiliate shall deny that any Obligor has any further liability or
obligation thereunder; or
(9) there shall occur a Change of Control (as defined below)
of the Parent; or the Parent shall no longer own all of the outstanding
capital stock of the Company; then, and in any such event, (x) if such
event is of the type described in paragraph (4) or (5) above, the Notes
shall automatically become due and payable, or (y) in any other such
event, and at any time thereafter, the Majority Holders by notice to
the Company may declare the entire outstanding principal amount of the
Notes to be, and the same shall thereupon become, immediately due and
payable.
As used herein, "Default" shall mean any of the events
specified in paragraphs (1) through (9) above, whether or not any requirement
for the giving of notice, the lapse of time, or both, or the happening of any
other condition, has been satisfied; and "Event of Default" shall mean any of
the events specified in paragraphs (1) through (9) above, provided that any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
As used herein, "Change of Control" shall mean the occurrence
of any of the following events: (i) any person or any persons acting together
which would constitute a "group" for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended (other than TBM Consulting Group, Inc., Colt
Services, Inc., J.H. Whitney & Co. and each of their respective Affiliates),
together with any Affiliates thereof, shall beneficially own, directly or
<PAGE> 9
indirectly, at least 50% of the total voting stock of the Parent; or (ii) all or
substantially all of the Parent's assets are sold as an entirety to any person
or related group of persons or there shall be consummated any consolidation or
merger of the Parent (A) in which the Parent is not the continuing or surviving
corporation (other than a consolidation or merger with a wholly-owned Subsidiary
of the Parent in which all shares of Common Stock of the Parent outstanding
immediately prior to the effectiveness thereof are changed into or exchanged for
the same consideration) or (B) pursuant to which the Common Stock of the Parent
would be converted into cash, securities or other property, other than (in the
case of each of (A) and (B) above) a sale of assets or consolidation or merger
of the Parent in which the holders of the Common Stock of the Parent immediately
prior to the sale of assets or consolidation or merger have, directly or
indirectly, at least a majority of the common stock of the transferee or
continuing or surviving corporation immediately after such sale of assets or
consolidation or merger.
No remedy granted under the Note Documents or otherwise
available to the Holder is intended to be exclusive of any other available
remedy, but each and every remedy shall be cumulative and in addition to every
other remedy granted to the Holder under the Note Documents. The Holder may
exercise any all remedies concurrently or in any order which the Holder, in its
sole discretion, elects.
This Note shall be governed by and construed in accordance
with the laws of the State of Connecticut.
TBM ACQUISITION I, INC.
By:
Name: William A. Schwartz
Title: President
<PAGE> 10
SCHEDULE
LONG REACH HOLDINGS, INC.
(FORMERLY TBM ACQUISITION I, INC.)
SUBORDINATED PROMISSORY NOTES
<TABLE>
<CAPTION>
Holder Amount
- ------ ------
<S> <C>
LEG PARTNERS, L.P. $ 13,410
LEG PARTNERS SBIC, L.P. $1,401,150
LEG PARTNERS II, L.P. $1,302,930
MARWIT CAPITAL COMPANY, L.P. $ 282,510
</TABLE>
<PAGE> 1
Exhibit 10.1
EXECUTION COPY
GUARANTY AGREEMENT
GUARANTY, dated as of February 23, 2000, by TBM Holdings, Inc.
(the "Parent"), in favor of Golub Associates Incorporated, as agent (the
"Agent") for the benefit of the holders from time to time of the Subordinated
Notes hereinafter referred to (the "Noteholders").
W I T N E S S E T H:
WHEREAS, capitalized terms used in this Guaranty have the
meanings given thereto in the Amended and Restated Agreement and Plan of Merger,
dated as of February 4, 2000, among the Parent, TBM Acquisition I, Inc. (the
"Company"), Long Reach Holdings, Inc. ("LRH") and certain shareholders of LRH
(the "Merger Agreement");
WHEREAS, the Parent is sole holder of all of the capital stock
of the Company; and
WHEREAS, the Noteholders are unwilling to consummate the
transactions contemplated by the Merger Agreement unless the Parent issues this
Guaranty;
NOW, THEREFORE, in consideration of the premises, the Parent
hereby agrees with and for the benefit of the Agent and the Noteholders as
follows:
1. Guaranty. The Parent hereby unconditionally guarantees to
the Agent for the benefit of the Noteholders and their respective successors,
endorsees, transferees and assigns, (a) the prompt payment when due of (whether
at stated maturity, upon demand, by acceleration or otherwise, including amounts
which would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a) or any successor
provision thereto or any comparable provision under the laws of any foreign
jurisdiction), and the faithful performance of and compliance with, all
obligations of the Company now or hereafter existing under the Subordinated
Notes (as defined in the Merger Agreement) whether for principal, interest,
fees, expenses or otherwise (the "Obligations"), and (b) the prompt and complete
payment on demand of any and all out-of-pocket expenses incurred by or on behalf
of the Agent or the Noteholders in enforcing any rights under this Guaranty
("Expenses"). The Parent will take all lawful and reasonable steps to assist the
Agent and the Noteholders in their efforts to collect the Obligations.
2. No Subrogation, Contribution, Reimbursement or Indemnity.
Notwithstanding anything to the contrary in this Guaranty, the Parent hereby
irrevocably waives all rights which may have arisen in connection with this
Guaranty to be subrogated to any of the
1
<PAGE> 2
rights of the Agent or the Noteholders against any other party or against any
collateral security or guaranty held by the Agent or the Noteholders for the
payment of the Obligations hereunder as long as this Guaranty remains in effect.
The Parent hereby further irrevocably waives all contractual, common law,
statutory or other rights of reimbursement, contribution or exoneration (or any
similar right) from or against any other person which may have arisen in
connection with this Guaranty.
3. Guaranty Absolute. (a) The liabilities of the Parent under
this Guaranty shall be absolute and continuing guaranties of payment and
performance (and not merely of collection) and shall in no way be released,
limited or affected by: (i) the validity, regularity, or enforceability of the
Subordinated Notes, the Security Documents referred to therein or any other
agreement or instrument relating to the Obligations; (ii) any change in the
time, manner, or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to or departure
from the Subordinated Notes; (iii) any exchange, release, or non-perfection of
any collateral, or any release or amendment or waiver of, or consent to or
departure from any other guaranty, securing all or any of the Obligations; or
(iv) any other circumstance which might otherwise constitute a defense available
to, or a discharge of, the Company or the Parent in respect of the Obligations.
(b) This Guaranty shall continue to be effective, or be reinstated, as
the case may be, if at any time any payment, or any part thereof, of any of the
Obligations is rescinded or must otherwise be restored or returned by the Agent
or the Noteholders upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company, the Parent or any other person, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Company or any other person, or any
substantial part of any of their respective property, or otherwise, all as
though such payments had not been made. This provision shall survive any
termination of this Guaranty. Neither the Agent nor the Noteholders shall be
required (i) to proceed against the Company, or any other person, corporation,
or other business entity, or any collateral securing all or any of the
Obligations before resorting to the Parent for payment, or (ii) to protect,
secure, perfect or insure any collateral security document or property subject
thereto at any time held as security for the Obligations or this Guaranty.
(c) The Parent shall remain obligated hereunder notwithstanding that,
without any reservation of rights against the Parent and without notice to or
further assent by the Parent (i) any demand for payment of any of the
Obligations hereunder made by or on behalf of the Agent or the Noteholders may
be rescinded by or on behalf of the Agent or the Noteholders and any of the
Obligations continued, (ii) the obligations, or the liability of the Company or
any other party upon or for any part thereof, or any collateral security or
guaranty therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by or on behalf of the Agent or the
Noteholders, as the Agent or the Noteholders may deem advisable from time to
time, (iii) the Subordinated Notes and the Security Documents referred to
therein, and any agreement, instrument, schedule, annexure, supplement,
collateral security document or
2
<PAGE> 3
guaranty, or other document delivered in connection therewith, may be amended,
modified, increased, renewed, extended, supplemented or terminated, in whole or
in part, as the Agent or the Noteholders may deem advisable from time to time,
and (iv) any collateral security, guaranty or right of offset at any time held
by the Agent or the Noteholders for the payment of the obligations may be sold,
exchanged, waived, surrendered or released.
(d) Subject to paragraph 3(b) above, the Parent's obligations under
this Guaranty shall terminate one year and one day following the payment,
performance and satisfaction in full of all of the Obligations and Expenses.
4. Covenants.
I. The Parent agrees that, without the prior written consent of the
Agent, so long as any amounts are due and owing under the Notes, the Parent will
not:
(a) (i) declare or pay, or set apart any funds for the payment of, any
dividends in any fiscal year on any shares of its capital stock ("Shares") of
the Parent, (ii) apply any of its funds, property or assets to, or set apart any
funds, property or assets for, the purchase, redemption or retirement of, or
make any distribution, by reduction of capital or otherwise, in respect of any
of its Shares or other securities, whether now or hereafter outstanding, except
that the Company may make distributions to the Parent in order to satisfy any
tax liability of the Parent resulting solely from the operations of the Company
any other Subsidiary may from time to time declare and pay dividends to the
Parent and; or
(b) except as provided in the next sentence of this paragraph (b),
transfer any cash or property to any Affiliate of the Parent, enter into any
contract or transaction with any such Affiliate, or modify any outstanding
contract or transaction with any such Affiliate, including without limitation
the purchase, lease, sale or exchange of property or the rendering of any
service to any such Affiliate. Notwithstanding anything to the contrary
contained in this paragraph (b), without the consent of the Agent the Parent may
(i) pay compensation to its full-time employees (whether or not Affiliates) in
the ordinary course of business in amounts that are customary for businesses
similar to that of the Parent to pay to employees with similar responsibilities,
(ii) pay compensation to any employee hired pursuant to the Consulting Agreement
with TBM Consulting, Inc., (iii) pay compensation to TBM Consulting, Inc.
pursuant to the Consulting and Management Services Agreement between the Parent
and TBM Consulting, Inc., (iv) pay compensation to Colt Services, Inc. ("Colt")
pursuant to the Consulting agreement between Colt and the Parent, (v) pay
compensation to either Colt or TBM Consulting, Inc. pursuant to the Consulting
Agreement among Colt, TBM Consulting, Inc. and the Parent, and (vi) so long as
no Default or Event of Default is in existence or would be caused thereby, pay
compensation to TBM Consulting, Inc. or to a stockholder or Affiliate of the
Parent who is not an employee of the Parent for services rendered in accordance
with the provisions of an agreement which is approved by a majority of the
disinterested members of the Parent's Board of
3
<PAGE> 4
Directors and is on terms comparable in all material respects to the terms which
would prevail in an arm's-length transaction between unaffiliated third parties.
II. The Parent agrees that it will:
(a) (i) permit one non-voting representative designated by the
Majority Stakeholders to attend all meetings of the Board of Directors (or any
comparable governing body), and of all committees thereof, of each of the Parent
and the Company, (ii) pay the reasonable expenses of such representative in
connection with meetings and other activities of such Boards of Directors,
committees thereof or other such governing bodies of the Parent and the Company,
(iii) provide to such representative all notices, documents and information
furnished to the directors of each of the Parent and the Company, at the same
time as furnished to such directors, and (iv) use best efforts to notify such
representative of, and permit such representative to participate by telephone
in, emergency meetings of the Boards of Directors, committees thereof or other
such governing bodies of each of the Parent and the Company, and to provide such
representative copies of the minutes of all such meetings promptly after they
are held;
(b) (i) maintain in full force and effect insurance of the types
referred to in Section 3.14 of the Merger Agreement which covers at least the
same risks as the insurance maintained by LRH immediately prior to its merger
into the Company, and which is in amounts equal to or greater than the insurance
maintained by LRH at such time, and (ii) cause the Company to maintain in full
force and effect directors' and officers' liability insurance for the benefit of
LRH's pre-Merger directors, officers and Majority Stakeholders (at the expense
of the Majority Stakeholders);
(c) keep proper books of record and account in which full and true
entries will be made of all dealings or transactions relating to the business
and affairs of the Parent, and the Parent shall cause to be furnished to the
Agent:
(i) as soon as practicable and in any event within thirty (30)
days after the end of each month, but only if the same are prepared for
internal use by the Parent or for creditors, equity holders or others:
(x) unaudited consolidated statements of income, retained earnings and
cash flows of the Parent and its consolidated Subsidiaries for such
month, and unaudited consolidated balance sheets of the Parent and its
consolidated Subsidiaries as of the end of such month, in the forms
prepared by the Parent and its consolidated Subsidiaries for their
internal use consistent with past practice, and (y) in comparative
form, figures for the actual results for the corresponding month in the
immediately preceding fiscal year) and amounts projected for such
month, together with explanations of any material variances;
(ii) at the same time furnished to the Senior Lender, a copy
of all financial and other information furnished to the Senior Lender;
and
4
<PAGE> 5
(iii) as soon as practicable (but in any event not more than
five (5) business days after any officer of the Parent obtains
knowledge of the occurrence of an event or the existence of a
circumstance giving rise to a Default or an Event of Default), notice
of any and all Defaults and Events of Default hereunder;
(d) the Agent, or any person designated by the Agent, shall have the
right, from time to time hereafter, to call at the place or places of business
of the Parent during ordinary business hours (i) to inspect, audit and check any
of their books, records, journals, orders, receipts and any correspondence and
other data relating to the business of the Parent or to any transactions among
the parties to the Note Documents, and (ii) to discuss the affairs, finances and
business of the Parent with any of its officers or directors;
(e) the Parent shall, and shall cause each Subsidiary to (i) maintain
its corporate existence, (ii) maintain in full force and effect all bonds,
franchises, patents and trademarks, and all governmental licenses, permits and
authorizations, in each case which are material to the conduct of its business,
(iii) maintain in full force and effect all leases, contracts and other rights,
and all non-governmental licenses, permits and authorizations, in each case the
loss of which would have a Material Adverse Effect, unless the Parent is able to
replace the same to the reasonable satisfaction of the Agent within 30 days, and
(iv) comply with all applicable laws, orders, regulations and ordinances of all
Governmental Authorities, except for such laws, orders, regulations and
ordinances the violation of which would not be reasonably likely to have a
Material Adverse Effect;
(f) the Parent shall pay or cause to be paid all of the Parent's
license fees, bonding premiums and related taxes and charges and shall pay or
cause to be paid all of the Parent's real and personal property taxes,
assessments and charges and all of the Parent's franchise, income, unemployment,
use, excise, old age benefit, withholding, sales and other taxes and other
governmental charges assessed against the Parent, or payable by the Parent, at
such times and in such manner as to prevent any penalty from accruing or any
lien or charge from attaching to its property (except for liens or charges
relating to such taxes that are not yet payable), provided that the Parent shall
have the right to contest in good faith, by an appropriate proceeding promptly
initiated and diligently conducted, the validity, amount or imposition of any
such tax, assessment or charge, and upon such good faith contest to delay or
refuse payment thereof, if the Parent establishes adequate reserves to cover
such contested taxes, assessments or charges;
(g) the Parent shall, as soon as possible, and in any event within five
(5) days after the Parent learns of any of the following, give written notice to
the Agent of:
(i) any proceeding(s) being instituted or threatened to be
instituted by or against the Parent in any federal, state, local or
foreign court or before any Governmental Authority in which injunctive
relief is requested or in which the amount in controversy exceeds
$50,000, and any litigation, proceeding, investigation or claim that
relates in any
5
<PAGE> 6
material way to (i) any of the Note Documents, or (ii) the Certificate
of Incorporation or By-laws of the Parent;
(ii) any change in the business, assets or condition,
financial or otherwise, of the Parent which can reasonably be expected
to have a Material Adverse Effect; and
(iii) the occurrence of any Event of Default as defined in the
documents governing any Senior Debt; and
(h) the Parent shall promptly provide the Agent with copies of all
amendments, consent letters, waivers or modifications to, and any material
notices or reports provided by any Person to the Parent pursuant to the terms of
or in connection with, any Note Document or any document governing the Senior
Debt, or the Certificate of Incorporation or By-laws of the Parent, or by the
Parent to any such Person.
5. Default. If any Event of Default (as defined in the
Subordinated Notes) shall occur, then the Obligations shall at the election of
the Agent be deemed immediately due and payable and the Parent's liabilities
hereunder shall forthwith become and be immediately due and payable.
6. Demands and Notices. The Parent hereby waives demand,
presentment, protest, notice of acceptance and all other demands and notices of
any description in connection with this Guaranty.
7. No Waiver; Remedies Cumulative. No failure to exercise and
no delay in exercising, on the part of the Agent or the Noteholders, any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege preclude any other
or further exercise thereof, or the exercise of any other power or right. The
rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies provided by law.
8. Payments. The Parent hereby guarantees that payments
hereunder by the Parent will be paid to the Agent for the benefit of the
Noteholders in U.S. Dollars at the Agent's office at 230 Park Avenue, 19th
Floor, New York, NY 10169.
9. Severability. Any provision of this Guaranty 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 hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. The paragraph headings
used in this Guaranty are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in the
interpretation hereof.
6
<PAGE> 7
10. Rights Limited to Agent and Noteholders. This Guaranty
shall not create any right in any person except the Agent and the Noteholders
(and their permitted successors and assigns), and shall not be construed in any
respect to be a contract in whole or in part for the benefit of any other
person.
11. Further Assurances. The Parent agrees that at any time and
from time to time upon the reasonable written request of the Agent or the
Noteholders, the Parent will furnish to the Agent or the Noteholders such
information and execute and deliver such further documents and instruments and
do such other things as the Agent or the Noteholders may reasonably request in
order to preserve the Agent and/or the Noteholders' rights under, and otherwise
to effect the purposes of, this Guaranty.
12. Integration; Waivers and Amendments; Successors and
Assigns; Governing Law. This Guaranty represents the agreement of the Parent
with respect to the subject matter hereof and there are no promises or
representations relative to the subject matter hereof not reflected in this
Guaranty, the Merger Agreement, the Subordinated Notes or the Security Documents
referred to therein. None of the terms or provisions of this Guaranty may be
waived, amended or supplemented or otherwise modified except by a written
instrument executed by the Parent and the Agent. This Guaranty shall be binding
upon the assigns of the Parent and shall inure to the benefit of the Agent and
the Noteholders and their respective successors and assigns. This Guaranty may
not be assigned by the Parent without the prior written consent of the Agent and
the Noteholders. This Guaranty shall be governed by and be construed and
interpreted in accordance with the laws of the State of Connecticut. EACH OF THE
AGENT, THE NOTEHOLDERS AND THE PARENT HEREBY WAIVES TRIAL BY JURY IN ANY ACTION
ARISING OUT OF THIS GUARANTY AND ANY COUNTERCLAIM THEREON.
13. Submission to Jurisdiction; Waiver of Jury Trial. The
Parent represents that the Parent has no immunity with respect to any action or
proceeding brought in connection with this Guaranty, and agrees that any legal
or equitable action or proceeding with respect to this Guaranty may be brought
in any Federal or State court of competent jurisdiction located in the State of
Connecticut and, by execution and delivery of this Guaranty, the Parent accepts
for the Parent the jurisdiction of the aforesaid courts and any related
appellate court, and irrevocably waives any objection the Parent may now or
hereafter have as to the venue of any such action or proceeding brought in such
a court or that such court is an inconvenient forum. Nothing herein shall affect
the right of the Agent or the Noteholders to serve process in any other manner
prescribed by law or the right to bring legal or equitable actions or
proceedings in other competent jurisdictions. Any judicial proceeding by the
Parent against the Agent and/or the Noteholders involving, directly or
indirectly, any matter in any way arising out of, related to or connected with
this Guaranty shall be brought only in a court located in the State of
Connecticut.
7
<PAGE> 8
IN WITNESS WHEREOF, the undersigned has executed this Guaranty
as of the date first above written.
TBM HOLDINGS, INC.
/s/ William A. Schwartz
By: _________________________
Name: William A. Schwartz
Title: President
8
<PAGE> 1
Exhibit 10.2
Execution Copy
LEASE AGREEMENT
AGREEMENT OF LEASE made as of the 23rd day of February, 2000, between
LR REAL PROPERTY, LLC, with an address at 12300 Amelia Drive, Houston, Texas
77045 (Attn: D.M. Buchanan) ("Landlord") and TBM Acquisition I, Inc. (d/b/a LONG
REACH HOLDINGS, INC.), a Delaware corporation with an address at 136 Main
Street, Westport, Connecticut 06880 ("Tenant").
W I T N E S S E T H
Terms not otherwise defined herein shall have the meaning given to them
in the Amended and Restated Merger Agreement, dated as of February 4, 2000,
among TBM Holdings, Inc., TBM Acquisition I, Inc. and Long Reach Holdings, Inc.,
among others (the "Merger Agreement"). Landlord and Tenant, for themselves and
their respective successors and assigns, hereby covenant and agree as follows:
ARTICLE 1
Demise; Premises; Term; Use
1.01 Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord, upon and subject to the covenants, agreements, terms, provisions and
conditions of this Lease, the "Demised Premises" (as hereinafter defined),
subject to an easement hereby reserved in favor of Landlord in, over and through
the Demised Premises for access purposes and in connection with Landlord's
rights and obligations under this Lease, use of such easement not to
unreasonably interfere with Tenant's operations. The Demised Premises consist of
the land described in Exhibit A attached to this Lease and incorporated herein
("Land"), and the building and improvements on the Land (collectively,
"Building"), located at 3700 Old Shackleford Road, Little Rock, Arkansas.
1.02 The term of this Lease shall commence on the Effective Time of the
Merger Agreement ("Commencement Date"), and shall terminate on the day
immediately preceding the second anniversary of the Commencement Date
("Expiration Date"), or shall end on such earlier date upon which said term may
expire or be canceled or terminated pursuant to any of the provisions of this
Lease or pursuant to law. Notwithstanding anything to the contrary contained
herein, provided Tenant is not in default under this Lease, Tenant may terminate
this Lease at any time upon 120 days' prior written notice. All rent under this
Lease shall be apportioned as of the Expiration Date.
1.03 Tenant shall use and occupy the Demised Premises solely for the
manufacture of construction and excavation equipment and machinery substantially
similar to that being manufactured at the Demised Premises on the date hereof,
and for no
<PAGE> 2
other purpose, without first obtaining Landlord's prior written consent (which
consent shall not be unreasonably withheld or delayed).
1.04 Tenant shall not suffer or permit the Demised Premises or any part
thereof to be used in any manner, or anything to be done therein, which would in
any way (a) violate any laws, ordinances or requirements of public authorities
or any covenants or agreement to which the Demised Premises are subject, (b)
make void or voidable any fire or liability or other insurance policy then in
force with respect to the Demised Premises, (c) make unobtainable from reputable
insurance companies authorized to do business in the State of Arkansas at
standard rates any casualty insurance or liability, boiler or other insurance
that Landlord or Tenant may carry, (d) constitute a public or private nuisance,
or (e) constitute a breach or Event of Default (as hereinafter defined) under
this Lease.
1.05 Tenant shall not at any time use or occupy, or suffer or permit
anyone to use or occupy the Demised Premises, or do or permit anything to be
done in the Demised Premises, in violation of the Certificate of Occupancy for
the Demised Premises and/or Building. Tenant shall conduct its business at the
Demised Premises at all times in a professional and businesslike manner
consistent with all reputable business standards and practices.
1.06 Tenant's use of the systems and equipment in the Building
(including, without limitation, the electrical, HVAC, plumbing and heating
systems) shall not exceed the recommended mechanical or electrical loads of such
Building equipment or systems.
1.07 Tenant acknowledges that it has inspected the Demised Premises and
accepts them in their "AS IS" condition on the Commencement Date. Tenant
acknowledges that neither Landlord nor any agent of Landlord has made any
promises or representations regarding the Demised Premises or the use or
occupancy thereof upon which Tenant is relying in entering into this Lease.
Tenant acknowledges that there are no agreements, representations,
understandings or obligations on the part of Landlord to perform any
alterations, repairs or improvements with respect to the Demised Premises except
as specifically provided for in this Lease.
ARTICLE 2
Rent
2.01 For the first eighteen months of this Lease, Tenant shall pay to
Landlord as rent for the Demised Premises ("Net Rent") the aggregate amount of
ONE and 50/100 Dollars ($1.50), and thereafter for the remaining six months of
the term at the rate of TEN THOUSAND and 00/100 DOLLARS ($10,000) per month. The
Net Rent shall be paid in advance, without demand, on the first day of each
calendar month, as applicable, and shall be paid at Landlord's address set forth
above or at such other address as Landlord may designate by notice.
2
<PAGE> 3
2.02 In addition to Net Rent, all other amounts which Tenant is or
becomes obligated to pay Landlord hereunder shall be deemed additional rent and,
unless otherwise provided herein, shall be paid within ten days after demand by
Landlord. All amounts payable by Tenant to Landlord pursuant to this Lease shall
be paid without any deduction, recoupment, set-off or counterclaim.
2.03 If Tenant shall fail to pay any Net Rent or additional rent within
fifteen days after the due date thereof, the late payment shall be subject to a
late charge of three percent (3%) of the overdue amount.
2.04 It is the purpose and intent of Landlord and Tenant that the Net
Rent shall be absolutely net to Landlord so that this Lease shall yield, net to
Landlord, the Net Rent specified herein in each year during the term of this
Lease, and that all operating costs, expenses and obligations of every kind and
nature whatsoever, relating to the Demised Premises which may arise or become
due during or out of the term of this Lease shall be paid by Tenant, except as
otherwise set forth in this Lease.
ARTICLE 3
Insurance; Nonliability; Indemnity
3.01 (a) During the term of this Lease, Tenant, at its sole cost and
expense, shall keep the Demised Premises insured for the benefit of Landlord and
any mortgagee of Landlord against loss or damage by (i) fire and other risks set
forth in insurance policies of "all risk of physical loss" insurance, including
difference in conditions insurance (inclusive of earthquake and flood coverage,
to the extent same is in effect on the date hereof), and (ii) boiler and
machinery insurance with "comprehensive" coverage, which policies of insurance
shall be in an amount at least equal to one hundred percent (100%) of the
current replacement cost of the Demised Premises (per loss, exclusively
available to the Demised Premises), which replacement cost shall be determined
annually by Tenant's insurer and which as of the Commencement Date be no less
than $5,000,000.
(b) The insurance required in (a) above shall: (i) be on a
"replacement cost" claim recovery basis; (ii) include "contingent liability"
coverage for the value of the undamaged building portion, actual demolition
costs and increased costs of construction in the event of a governmentally
mandated demolition following a casualty; (iii) permit a waiver of subrogation
as contained in this Lease, the existence of which will not affect otherwise
available insurance recovery; (iv) not contain a deductible provision without
Landlord's prior written consent; and (v) satisfy any coinsurance requirements
under the applicable policy.
3.02 Tenant, at its sole cost and expense, but for the mutual benefit
of Landlord and Tenant and such other party or parties as may be designated by
Landlord as named insureds as their interests may appear, shall maintain: (a)
standard Comprehensive General Commercial Liability Insurance covering the
Demised Premises on an occurrence basis with minimum limits of liability in an
amount of not less than
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$2,000,000 combined single limit, with a contractual liability endorsement
covering Tenant's indemnity obligations under this Lease, and with respect to
damage to property including water damage and sprinkler leakage legal liability
arising out of any one occurrence, which insurance shall contain
products/completed operations coverage and which insurance shall be primary (and
any insurance maintained by Landlord or any other additional insureds hereunder
shall be excess and noncontributory); (b) rent insurance against loss of rent
due to any risk included in the policies required to be maintained under
Subsection 3.01(a), for the Net Rent and additional rent payable under this
Lease, with respect to each loss; (c) workers' compensation insurance as
required by statute, and employer's liability insurance in the amount of at
least $500,000 per occurrence; and (d) such other insurance, and in such greater
amounts as may from time to time be reasonably required by Landlord against the
same and/or other insurable hazards which at the time are commonly insured
against in the case of premises similarly situated and utilized.
3.03 All insurance provided for in this Article shall be effected under
valid and enforceable policies issued by insurers of recognized responsibility
which are licensed to do business in the State of Arkansas, are well rated by
national rating organizations, and have been approved in writing by Landlord,
which approval shall not be unreasonably withheld. On or before the occupancy of
any part of the Demised Premises, and thereafter not less than 30 days prior to
the expiration dates of the expiring policies theretofore furnished pursuant to
this Article, or any other Article of this Lease, originals of the policies
bearing notations evidencing the payment of premiums or accompanied by other
evidence reasonably satisfactory to Landlord of such payments, shall be
delivered by Tenant to Landlord and certificates showing Landlord and others
designated by Landlord as additional insureds (and similarly with respect to
leasehold improvements). All such policies shall contain a provision to the
effect that the same will be nonalterable and noncancellable except upon 30 days
written notice to Landlord and the holder of any mortgage on the Demised
Premises. Landlord and Tenant waive their right to recover damages against each
other for any reason whatsoever to the extent the damaged party recovers
indemnity from its insurance carrier and waive all rights of subrogation of
their respective insurers. Any insurance policy procured by a party with respect
to the Demised Premises or its property therein which does not name the other
party as an additional insured shall contain a waiver of subrogation as
contained in this Lease, the existence of which will not affect otherwise
available insurance recovery. All public liability and property damage policies
shall contain a severability of interest clause.
3.04 If at any time during the term of this Lease, Landlord shall
request that the amount of insurance provided by Tenant, as required by this
Article, be increased on the ground that such coverage is inadequate properly to
protect the interest of Landlord, or if Landlord shall require other insurance
pursuant to subsection 3.02(c), and Tenant shall refuse to comply with any such
request or requirement, the dispute shall be submitted to arbitration as
provided in Article 18 hereof. Tenant shall thereafter carry the amount, and
such kind, of insurance as determined by such arbitration to be adequate and
required, but in no event shall the amount of insurance be less than the amount
specified in Sections 3.01 and 3.02.
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3.05 Landlord shall have the right, at its expense, to maintain any
additional insurance with respect to the Demised Premises not required under
this Article.
3.06 Tenant waives all claims against Landlord or its employees or
agents for any injury or damage to persons or property resulting from any
occurrence in or about the Demised Premises, including, without limitation,
fire, explosion, falling debris, steam, gas, electricity, water, rain or snow or
any other casualty, or leaks from any part of the Demised Premises, or from the
pipes, appliances or plumbing works or from the roof, street or subsurface or
from any other place or by dampness or by any other cause of any nature
whatsoever, unless arising out of the gross negligence of Landlord or its
agents, employees or contractors. Tenant agrees to look solely to and seek
recovery only from its insurance carriers in the event of any such losses; for
purposes hereof, any deductible amount shall be treated as though it were
recoverable under such policies.
3.07 Tenant will indemnify against, and hold Landlord and Landlord's
employees and agents harmless from, any and all demands, claims, causes of
action, proceedings, fines, penalties, damages, losses, liabilities, judgments,
orders, decrees, costs and expenses (including, without limitation, court costs
and reasonable attorneys' fees and disbursements) incurred in connection with or
arising materially from: (a) the use or occupancy of the Demised Premises by
Tenant or any person claiming under Tenant; (b) any activity, work or thing
done, or permitted or suffered by Tenant on or about the Demised Premises; (c)
any acts, omissions, or negligence of Tenant or any person claiming under
Tenant, or the contractors, agents, employees, invitees, customers or visitors
of Tenant or any such person; (d) any breach, violation or nonperformance by
Tenant or any person claiming under Tenant or the employees, agents,
contractors, invitees, customers or visitors of Tenant or any such person of any
term, covenant or provision of this Lease or of law or any legal requirements or
requirements of governmental authorities; or (e) (except for loss of use of all
or any portion of the Demised Premises or Tenant's property located within the
Demised Premises which is proximately caused by or results proximately from the
gross negligence of Landlord or Landlord's employees or agents), any injury or
damage to the person, property or business of Tenant, its employees, agents,
contractors, invitees, customers, visitors or any other person entering upon or
about the Demised Premises. If any action or proceeding is brought against
Landlord or Landlord's employees or agents by reason of any such claim, Tenant,
upon notice from Landlord, will defend the claim at Tenant's expense with
counsel reasonably satisfactory to Landlord. Without limiting the generality of
the foregoing, Tenant specifically acknowledges that the indemnity undertaking
herein shall apply to claims in connection with or arising out of the
transportation, use, storage, maintenance, generation, manufacturing, handling,
disposal, release or discharge of any "Hazardous Material" as described in
ARTICLE 20 (whether or not such matters shall have been theretofore approved by
Landlord) by Tenant or any person claiming under Tenant, or the contractors,
agents, employees, invitees, customers or visitors of Tenant or any such person.
Landlord acknowledges that it or its Affiliates (as defined in the Merger
Agreement) remains liable for the transportation, use, storage, maintenance,
generation,
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manufacturing, handling, disposal, release or discharge of any "Hazardous
Material" arising at or with respect to the Demised Premises at all times prior
to the date hereof.
3.08 Tenant shall give Landlord notice in case of fire or accidents in
the Demised Premises, which notice shall be given promptly after Tenant becomes
aware of any such event.
3.09 Tenant agrees to look solely to Landlord's estate and interest in
the Demised Premises for the satisfaction of any right or remedy of Tenant or
for the collection of a judgment (or other judicial process) requiring the
payment of money by Landlord, in the event of any liability by Landlord under
this Lease, and no other property or assets of Landlord shall be subject to
levy, execution, attachment or other enforcement procedure for the satisfaction
of Tenant's remedies under or with respect to this Lease, the relationship of
Landlord and Tenant hereunder, or Tenant's use and occupancy of the Demised
Premises, or any other liability of Landlord to Tenant hereunder.
3.10 In any litigation between the parties regarding this Lease, the
losing party shall pay to the prevailing party all reasonable expenses and court
costs including attorneys' fees incurred by the prevailing party. A party shall
be considered the prevailing party if:
(a) it initiated the litigation and substantially obtains
the relief it sought, either through a judgment or
the losing party's voluntary action before
arbitration (after it is scheduled), trial, or
judgment;
(b) the other party withdraws its action without
substantially obtaining the relief it sought; or
(c) it did not initiate the litigation and judgment is
entered for either party, but without substantially
granting the relief sought.
ARTICLE 4
Maintenance; Repairs; Services
4.01 Throughout the term of this Lease, Tenant, at its sole cost and
expense, will take good care of the Demised Premises and will keep the same in
good working order, repair and condition (which condition shall also be safe,
clean and sanitary and generally will be maintained in the condition as of the
date hereof, ordinary wear and tear excepted), and make all necessary repairs
thereto (which repairs shall include necessary replacements and capital
expenditures and compliance with laws). Landlord, at its expense, shall make all
necessary repairs to the (a) roof, exterior walls, foundation and other
structural elements of the Building; (b) parking areas, driveways and sidewalks
on the Land; and (c) to the pipes, conduits and utilities serving the Building
up to the perimeter of the Building, provided the cost of such repairs is fully
covered by insurance
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proceeds from coverage maintained by Tenant as contemplated by ARTICLE 3 hereof.
Landlord shall make such repairs promptly after receiving reasonable notice from
Tenant of the necessity for such repairs, provided that any damage shall not
have been caused as a result of ordinary wear and tear or by any act or omission
of, or violation of this lease by, Tenant or any other occupant of the Demised
Premises, or any of their employees, agents, invitees or contractors (in which
cases Tenant shall be obligated to make the necessary repairs in accordance with
the first sentence of this Section 4.01). When used in this Article 4, the term
"repairs" shall include all necessary replacements, renewals, alterations,
additions and betterments. No repairs will be required to be made by Landlord or
Tenant to a standard higher than pertains with respect to the Demised Premises
as of the Commencement Date (after reasonable allowance for ordinary wear and
tear) or as required by law.
4.02 The necessity for and adequacy of repairs to the Demised Premises
pursuant to Section 4.01 hereof shall be measured by the standard which is
appropriate for buildings of similar construction and class and use, provided
that neither Landlord nor Tenant shall have an obligation to repair or maintain
the Demised Premises in any condition superior to that which pertains with
respect to the Demised Premises as of the Commencement Date (after reasonable
allowance for ordinary wear and tear) or as required by law.
4.03 Tenant shall put, keep and maintain all portions of the Demised
Premises and the sidewalks, curbs, parking areas and passageways adjoining the
same in a clean and orderly condition, free of dirt, rubbish, snow, ice and
unlawful obstructions.
4.04 Landlord shall not be required to furnish any services or
facilities or to make any repairs or alterations in or to the Demised Premises,
except as set forth above. Tenant shall pay all charges for electricity
(including, without limitation, for HVAC), gas, fuel oil, water, telephones,
sanitary sewer and any other utilities used by it in connection with the Demised
Premises. Tenant, at its expense, shall supply its own requirements for heat,
hot water, air-conditioning, cleaning, refuse removal and any other services
required with respect to the Demised Premises.
4.05 With respect to the maintenance and operation of the Demised
Premises, Tenant shall comply with all applicable governmental laws, ordinances,
rules and regulations.
4.06 In case any dispute shall arise at any time between Landlord and
Tenant as to the standard of care and maintenance of the Demised Premises, such
dispute shall be determined by arbitration as provided in Article 18 hereof.
4.07 If Tenant shall fail to make repairs in accordance with its
obligations hereunder, Landlord shall have the right, at its option, after
Landlord shall have given to Tenant ten days' notice (except in case of an
emergency), to make such repairs on behalf and for the account of Tenant, to
enter upon the Demised Premises for such purposes, and
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Tenant shall pay the cost thereof as additional rent within ten days after
demand by Landlord.
ARTICLE 5
Changes and Alterations; Ownership of Improvements
5.01 Tenant shall have the right at any time and from time to time
during the term of this Lease, whether at the commencement of the term hereof or
at any time thereafter, to make, at its sole cost and expense, changes and
alterations in or of the Demised Premises, subject, however, in all cases to the
following:
(a) No change or alteration which is (i) non-interior, (ii)
structural, (iii) affects the mechanical, electrical, plumbing or HVAC systems
of the Demised Premises, or (iv) involves an estimated cost of more than
$25,000, shall be made without the prior written consent of Landlord (which
approval shall not be unreasonably withheld or delayed).
(b) Landlord reserves the right to impose reasonable
requirements as a condition of any such consent, including, without limitation,
payment by Tenant of Landlord's reasonable costs and expenses in connection with
evaluating, monitoring or otherwise responding to any such request by or on
behalf of Tenant.
(c) No change or alteration shall be undertaken until Tenant
shall have procured and paid for, so far as the same may be required from time
to time, all permits and authorizations of all municipal departments and
governmental subdivisions having jurisdiction. Landlord shall join in the
application for such permits or authorizations whenever such action is
necessary.
(d) Any change or alteration requiring Landlord's consent
under subsection (a) above shall be conducted under the supervision of an
architect and/or engineer selected by Tenant and approved in writing by Landlord
(which approval shall not be unreasonably withheld), and no such change or
alteration shall be made except in accordance with detailed plans and
specifications and cost estimates prepared and approved in writing by Landlord
(which approval shall not be unreasonably withheld).
(e) Any change or alteration shall, when completed, be of such
a character as not to reduce the value of the Demised Premises below its value
immediately before such change or alteration.
(f) Any change or alteration shall be made promptly
(unavoidable delays excepted) and in a good and workmanlike manner, with
materials that are new, high quality and free of material defects, and in
compliance with all applicable permits and authorizations and building and
zoning laws and ordinances and with all other laws, ordinances, orders, rules,
regulations and requirements of all federal, state and municipal governments,
departments, commissions, boards and officers, any national or local Board
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of Fire Underwriters, or any other body hereafter exercising functions similar
to those of any of the foregoing, and strictly in compliance with the detailed
plans and specifications approved by Landlord.
(g) The cost of any such change or alteration shall be paid in
cash or its equivalent, so that the Demised Premises shall at all times be free
of liens for labor and materials supplied or claimed to have been supplied to
Tenant.
(h) Worker's compensation insurance in statutory limits
covering all persons employed in connection with the work and with respect to
whom death or bodily injury claims could be asserted against Landlord, Tenant or
the Demised Premises, and general liability insurance for the mutual benefit of
Tenant and Landlord in such limits as Landlord may reasonably require, shall be
maintained by Tenant at Tenant's sole cost and expense at all times when any
work is in process in connection with any change or alteration. All such
insurance shall be in a company or companies of recognized responsibility, and
all policies or certificates therefor issued by the respective insurers, bearing
notations evidencing the payment of premiums or accompanied by other evidence
satisfactory to Landlord of such payment, shall be delivered to Landlord.
5.02 All alterations, installations, additions or improvements upon the
Demised Premises made by any party prior to or during the term of this Lease
shall, at the expiration of the term hereof, become the property of Landlord and
be surrendered with said premises as part thereof at the end of the term, unless
Landlord shall give Tenant notice to remove any of same, in which event Tenant
shall remove same prior to the expiration of the term.
5.03 At or before the Expiration Date, or the date of any earlier
termination of this Lease, Tenant at its expense, shall remove from the Demised
Premises all of Tenant's property and shall repair any damage to the Demised
Premises resulting from such removal. Any other items of Tenant's property which
shall remain in the Demised Premises after the Expiration Date or after a period
of 15 days following an earlier termination date, may, at the option of
Landlord, be deemed to have been abandoned, and in such case either may be
retained as Landlord as its property or may be disposed of, without
accountability, in such manner as Landlord may see fit at Tenant's expense.
5.04 (a) Tenant, at its expense, shall procure promptly the
cancellation or discharge of all notices of violation arising from or otherwise
connected with Tenant's work which shall be issued by any public authority
having or asserting jurisdiction. Tenant shall defend, indemnify and save
harmless Landlord against any and all mechanic's and other liens in connection
with Tenant's work, repairs or installations, including but not limited to the
liens of any conditional sale of, or chattel mortgages upon, any materials,
fixtures, or articles so installed in and constituting part of the Demised
Premises and against all cost, attorneys' fees, fines, expenses and liabilities
reasonably incurred in connection with any such lien, conditional sale or
chattel mortgage
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or any action or proceeding brought thereon. Tenant shall pay in full for all
materials, fixtures, equipment and other articles prior to installation in the
Demised Premises.
(b) Tenant, at its expense, shall procure the satisfaction or
discharge, by bonding or otherwise, of all such liens within 30 days of the
filing of such lien against the Demised Premises. If Tenant shall fail to cause
such lien to be discharged within the period aforesaid, then in addition to any
other right or remedy, Landlord may, but shall not be obligated to, discharge
the same either by paying the amount claimed to be due or by procuring the
discharge of such lien, by deposit or by bonding proceedings, and in any such
event Landlord shall be entitled, if Landlord so elects, to compel the
prosecution of an action for the foreclosure of such lien by the lienor and to
pay the amount of the judgment in favor of the lienor with interest, costs and
allowances. Any amount so paid by Landlord and all costs and expenses incurred
by Landlord in connection therewith, together with Interest thereon from the
respective dates of Landlord's making of the payment or incurring the cost and
expenses shall constitute additional rent payable by Tenant under this Lease and
shall be paid by Tenant on demand.
ARTICLE 6
[INTENTIONALLY LEFT BLANK]
ARTICLE 7
Assignment and Subletting
Except with respect to any security interest required by the Senior
Debt, neither this Lease, nor the term and estate hereby granted, nor any part
hereof or thereof, nor the interest of Tenant in any sublease or the rentals
thereunder, shall be assigned, mortgaged, pledged, encumbered, hypothecated, or
otherwise transferred by Tenant, Tenant's legal representative or successors in
interest by operation of law or otherwise, and neither the Demised Premises, nor
any part thereof, shall be encumbered in any manner by reason of any act or
omission on the part of Tenant or anyone claiming under or through Tenant, or
shall be sublet or be used or occupied or permitted to be used or occupied by
anyone other than Tenant (all of the foregoing are hereinafter collectively
referred to as "Transfers" and any party to whom or which any Transfer is made
or sought to be made is hereinafter referred to as a "Transferee"), or for any
purpose other than as permitted by this Lease without the prior written consent
of Landlord in each case, which consent may be withheld, conditioned or delayed
in Landlord's sole discretion; provided, however, no consent shall be required
for a Transfer to an Affiliate. Any Transfer made without complying with this
ARTICLE shall, at Landlord's option, be null, void and of no effect (which shall
not be in limitation of Landlord's other remedies).
For purposes of this Lease, the term "Transfer" shall also include each
of the following, whether accomplished directly or indirectly: (i) the
dissolution, merger, consolidation or other reorganization of Tenant; (ii) the
sale or other transfer of more than a cumulative aggregate of 50% of the voting
shares of Tenant or the effective transfer of
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the power to direct the policies and management of Tenant; and (iii) the sale,
mortgage, hypothecation or pledge of more than a cumulative aggregate of 50% of
Tenant's net assets.
ARTICLE 8
Damage and Destruction
8.01 If the Demised Premises shall be partially or totally damaged or
destroyed by fire or other casualty, Landlord shall, subject to Section 8.03
hereof and any requirements of any mortgagee(s) and such mortgagee(s)' right to
control, apply or withhold the applicable insurance proceeds, if any, repair the
damage and restore and rebuild the Demised Premises as nearly as may be
reasonably practicable to its condition and character immediately prior to such
damage or destruction, with reasonable diligence, after notice to it of the
damage or destruction; provided that Landlord shall not be obligated to expend
upon such repair or restoration any amount in excess of the net insurance
proceeds received by Landlord pursuant to insurance maintained under Article 3
and provided that Landlord's obligations shall be subject to then applicable
zoning and planning regulations and no part of such proceeds shall be applied to
restore or repair Tenant's property. Landlord shall not be liable in any way for
any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's
business or property resulting in any way from such casualty, damage or the
repair thereof.
8.02 If the Demised Premises and/or access thereto shall be partially
or totally damaged or destroyed by fire or other casualty, the rents payable
hereunder shall be abated to the extent that the Demised Premises shall have
been rendered untenantable, from the date of such damage or destruction to the
date the damage shall be substantially repaired or restored. Should Tenant
reoccupy a portion of the Demised Premises during the period that the repair or
restoration is in progress and prior to the date that the same are made
completely tenantable, rents allocable to such portion shall be payable by
Tenant from the date of such occupancy to the date the Demised Premises are made
tenantable.
8.03 Landlord and Tenant shall each have the option of terminating this
Lease and the term and estate hereby granted upon the occurrence of either of
the following events: (1) if Landlord estimates that renovation of the Demised
Premises shall exceed the shorter of (a) 180 days (60 days in the event of a
casualty within the last six months of the term) from the date of the damage, or
(b) the unexpired term of this Lease, or (2) the Building is rendered
untenantable by fire or other casualty and Landlord elects not to repair or
restore the same. Either party shall exercise such termination option by
notifying the other party in writing of such termination within 45 days of the
date of the damage. Tenant agrees that Landlord's obligation to restore, and the
abatement of rent provided for hereunder, shall be Tenant's sole recourse in the
event of such damage, and waives any other rights Tenant may have under any
applicable law to terminate this Lease by reason of such damage except as
provided herein.
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8.04 In the event that a notice of termination shall be given pursuant
to Section 8.03, this Lease and the term and estate hereby granted shall expire
as of the date of such termination with the same effect as if that were the date
hereinbefore set for the expiration of the term of this Lease, and the rent due
and to become due hereunder shall be apportioned as of such date if not earlier
abated pursuant to Section 8.01.
8.05 No damages, compensation or claim shall be payable by Landlord for
inconvenience, loss of business or annoyance arising from any repair or
restoration of any portion of the Demised Premises pursuant to this Article
Landlord shall use diligent efforts to effect any required repair or restoration
promptly and in such manner as not to unreasonably interfere with Tenant's use
and occupancy.
8.06 Landlord shall not carry insurance of any kind on Tenant's
property, and shall not be obligated to repair any damage thereto or replace the
same.
8.07 The provisions of this Article shall be considered an express
agreement governing any case of damage or destruction of the Demised Premises by
fire or other casualty, and any law to the contrary, now or hereafter in force,
shall have no application in such case.
8.08 Notwithstanding any of the foregoing provisions of this Article,
if Landlord or the holder of any superior mortgage shall be unable to collect
all of the insurance proceeds (including rent insurance proceeds) applicable to
damage or destruction of the Demised Premises by fire or other cause, by reason
of some action or inaction on the part of the Tenant or any of its employees,
agents or contractors, then, without prejudice to any other remedies which may
be available against Tenant, the abatement of Tenant's rents provided for in
this Article shall not be effective to the extent of the uncollected insurance
proceeds.
ARTICLE 9
EMINENT DOMAIN
9.01 In the event that the Demised Premises or any part thereof shall
be taken in condemnation proceedings or by the exercise of any right of eminent
domain or by agreement between Landlord on the one hand and any governmental
authority authorized to exercise such right on the other hand for a period in
excess of the shorter of (i) one year, and (ii) the balance of the term
remaining under this Lease, Landlord shall be entitled to collect from any
condemnor the entire award or awards that may be made in any such proceeding
without deduction therefrom for any estate hereby vested in or owned by Tenant,
to be paid out as in this Article provided and except as provided in Section
9.04 hereof. Tenant hereby expressly assigns to Landlord all of its right, title
and interest in or to every such award and also agrees to execute any and all
further documents that may be required in order to facilitate the collection
thereof by Landlord.
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9.02 (a) At any time during the term of this Lease if title to 20% or
more of the Land shall be taken in condemnation proceedings or by the exercise
of any right to eminent domain or by agreement between Landlord on the one hand
and any governmental authority authorized to exercise such right on the other
hand, Landlord or Tenant shall have the right to terminate this Lease by written
notice to the other party within 30 days after the taking. In the event a notice
of termination shall be given pursuant to the immediately-preceding sentence,
this Lease shall terminate and expire on the date of such taking, and the Net
Rent and additional rent provided to be paid by Tenant shall be apportioned and
paid to the date of such taking.
(b) At any time during the term of this Lease if title to the
Building or 40% or more of the Land shall be taken in condemnation proceedings
or by the exercise of any right to eminent domain or by agreement between
Landlord on the one hand and any governmental authority authorized to exercise
such right on the other hand, this Lease shall terminate and expire on the date
of such taking and the Net Rent and additional rent provided to be paid by
Tenant shall be apportioned and paid to the date of such taking.
9.03 If this Lease does not terminate under Section 9.02, this Lease
shall continue in full force and effect, and the Net Rent apportioned to the
part taken shall be prorated and adjusted as of the date of taking, and from
such date the Net Rent and additional rent shall be reduced to the amount
apportioned to the remainder of the Demised Premises.
9.04 Notwithstanding the foregoing provisions of this Article and
subject to the interest of any mortgagee of Landlord, Tenant shall be entitled
separately to appear, claim, prove and receive in the proceedings relating to
any such taking such portion of each award made therein as represents the then
value of Tenant's property, if any, and/or the costs of relocating, if any are
granted, provided any such award is separately payable to Tenant and the same
does not reduce Landlord's or any mortgagee's award.
9.05 In the event of any such taking which does not result in a
termination of this Lease, Landlord, at its expense, shall proceed with
reasonable diligence to repair, alter and restore the remaining part of the
Demised Premises to substantially the same condition as it was in immediately
prior to such taking to the extent that the same may be feasible, so as to
constitute a tenantable Demised Premises, provided that Landlord's liability
under this Section shall be limited to the net amount received by Landlord from
the award arising out of such taking.
ARTICLE 10
Access to Premises
Landlord and its authorized representatives shall have the right to
enter upon the Demised Premised during all regular business hours for the
purpose of inspecting the same or exhibiting the same to prospective purchasers,
mortgagees and tenants. Landlord and its authorized representatives shall also
have the right to enter upon the Demised Premises during all regular business
hours (and in emergencies at all times) for the
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purpose of making any repairs thereto as Landlord may deem necessary; and in
connection therewith, Landlord shall have the right to bring and store
materials, tools and equipment, without the same constituting an actual or
constructive eviction of Tenant from the Demised Premises or any part thereof.
All entries by Landlord and its representatives (except in case of emergency)
shall be upon reasonable prior notice to Tenant, which notice may be by means of
personal or telephonic communication or by ordinary mail. Any such entry by
Landlord shall be conducted in a manner designed to minimize interference with
the conduct of Tenant's business.
ARTICLE 11
Subordination; Attornment; Estoppel Certificate
11.01 Provided Tenant receives a so-called non-disturbance agreement
from the Lender (and further provided that furnishing such non-disturbance
agreement shall not be a condition to Tenant's subordination if Tenant is in
default hereunder), this Lease and all of Tenant's rights hereunder are and
shall be subject and subordinate at all times to all mortgages, deeds of trust,
ground leases or any other method of financing or refinancing, in any amount,
and all advances thereon, which may now or hereafter be placed against or affect
any or all of the Demised Premises by Landlord, and to all renewals,
modifications, consolidations, replacements and extensions thereof. The
aforesaid provisions shall be self operative and no further instrument of
subordination shall be necessary unless required by any such mortgagee or other
lender, in which case Tenant shall execute, acknowledge and deliver any
requested subordination agreement within 10 days after request. If any
foreclosure or power of sale proceedings are initiated by any mortgagee(s) or a
deed in lieu is granted, Tenant agrees, upon written request of any such
mortgagee(s) or any purchaser at such sale, to attorn and pay Net Rent and other
amounts payable hereunder to such party and to execute and deliver any
instruments necessary or appropriate to effectuate such attornment. Tenant
agrees to give any mortgagee(s) by certified mail, return receipt requested, a
copy of any notice of default served by Tenant upon Landlord, provided that
prior to such notice Tenant has been notified in writing of the name and address
of any such mortgagee(s). Tenant further agrees that if Landlord has failed to
cure any such default within the time permitted Landlord for cure under this
Lease, any such mortgagee(s) whose address has been so provided to Tenant shall
have an additional period of thirty days in which to cure (or such additional
time as may be required due to causes beyond such mortgagee's control, including
time to obtain possession of the Demised Premises by power of sale or judicial
action).
11.02 Within ten days after request, Tenant shall execute and deliver to
Landlord or to any party designated by Landlord a so-called "estoppel
certificate", in the form submitted by Landlord to Tenant, whereby Tenant
represents and certifies as to such various facts and matters relating to this
Lease as Landlord may reasonably request.
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ARTICLE 12
Default
12.01 The following are "Events of Default": (a) Tenant fails to pay
when due any Net Rent; or Tenant fails to pay when due any additional rent or
other sums or charges reserved hereunder and such default continues for five
days after written notice from Landlord;
(b) Tenant vacates or abandons the Demised Premises;
(c) This Lease or the Demised Premises or any part of the
Demised Premises are taken upon execution or by other process of law directed
against Tenant, or are taken upon or subjected to any attachment by any creditor
of Tenant or claimant against Tenant, and such attachment is not discharged
within 30 days after its levy;
(d) Tenant files a petition in bankruptcy or insolvency or for
reorganization or arrangement under the bankruptcy laws of the United States or
under any insolvency act of any state, or is dissolved, or makes an assignment
for the benefit of creditors;
(e) Involuntary proceedings under any such bankruptcy laws or
insolvency act or for the dissolution of Tenant are instituted against Tenant,
or a receiver or trustee is appointed for all or substantially all of Tenant's
property, and such proceeding is not dismissed or such receivership or
trusteeship is not vacated within 90 days after such institution or appoint;
(f) Tenant admits its insolvency or its inability to pay its
debts as they come due; or
(g) Tenant fails to observe or perform any term or condition of
this :Lease (other than the payment of amounts as described in clause (a) above)
unless such failure is cured, if susceptible to cure, within the time specified
herein or within a reasonable time (and in any event no later than forty-five
(45) days after written notice thereof is given by Landlord to Tenant).
Failure by Tenant to comply with the same term or condition of
this Lease on three occasions during any twelve month period shall, at
Landlord's discretion, constitute an incurable Event of Default.
12.02 If any one or more Events of Default set forth in Section
12.01 above occurs, then Landlord may elect the alternatives set forth in
subsections (a) or (b) below as follows (which remedies are distinct, separate
and cumulative with and in addition to any other right or remedy allowed under
any law or other provision of this Lease):
(a) Give Tenant written notice of its intention to terminate all
of Tenant's rights under this Lease on the date of such notice or on any later
date specified in such notice, and, on the date specified in such notice,
Tenant's right to possession of the
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Demised Premises will cease and this Lease will be terminated (except as to
Tenant's obligations under the Lease which shall continue), as if the expiration
of the term fixed in such notice were the end of the term of this Lease. In such
event, Landlord may recover from Tenant (i) any unpaid Net Rent and other
amounts payable hereunder, (ii) the amount by which any unpaid Net Rent and
other amounts payable hereunder which would have accrued after the termination
date during the balance of the term of this Lease exceeds the reasonable rental
value of the Demised Premises under substantially equivalent terms to those of
this Lease (after deduction of all reasonable costs of reletting), and (iii) any
other amounts necessary to compensate Landlord for all damages proximately
caused by Tenant's failure to perform its obligations under this Lease. Landlord
will be entitled to collect such damages from Tenant monthly on the days on
which the rent and other amounts would have been payable under this Lease if
this Lease had not been terminated and Landlord will be entitled to receive such
damages from Tenant on each such day; or
(b) (1) Without demand or notice, re-enter and take possession
of the Demised Premises or any part of the Demised Premises; and repossess the
Demised Premises as of Landlord's former estate; and expel Tenant from the
Demised Premises and those claiming through or under Tenant; and remove the
effects of both or either, without being deemed guilty of any manner of trespass
and without prejudice to any remedies for arrears of rent or preceding breach of
covenants or conditions (and if applicable law permits, and Landlord shall not
have expressly terminated this Lease in writing, any such action shall be deemed
a termination of Tenant's right of possession only). If Landlord elects to
re-enter, as provided in this subsection (b) or if Landlord takes possession of
the Demised Premises pursuant to legal proceedings or pursuant to any notice
provided by law, Landlord may, from time to time, without terminating this
Lease, re-let the Demised Premises or any part of the Demised Premises, in
Landlord's or Tenant's name but for the account of Tenant, for such term or
terms (which may be greater or less than the period which would otherwise have
constituted the balance of the term of this Lease) and on such terms and
conditions (which may include, without limitation, concessions of free rent, and
the alteration and repair of the Demised Premises) as Landlord, in its
reasonable discretion, may determine. Landlord reserves the right following any
such re-entry or re-letting, or both, to exercise its right to terminate this
Lease by giving Tenant such written notice, and, in that event the Lease will
terminate as specified in such notice. (2) If Landlord elects to take possession
of the Demised Premises according to this subsection (b) without terminating the
Lease, Tenant will pay Landlord (i) the rent and other sums which would be
payable under this Lease if such repossession had not occurred, less (ii) the
net proceeds, if any, of any re-letting of the Demised Premises after deducting
all of Landlord's reasonable expenses incurred in connection with such
re-letting, including, without limitation, all repossession costs, brokerage
commissions, legal expenses, attorneys' fees, expenses of employees, alteration,
remodeling, repair costs, and expenses of preparation for such re-letting. If,
in connection with any reletting, the new lease term extends beyond the existing
term or the Demised Premises covered by such re-letting include areas which are
not part of the Demised Premises, a fair apportionment of the rent received from
such re-letting and the
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expenses incurred in connection with such re-letting will be made in determining
the net proceeds received from such re-letting. In addition, in determining the
net proceeds from such re-letting, any rent concessions will be apportioned over
the term of the new lease. Tenant will pay such amounts to Landlord monthly on
the days on which the rent and all other amounts owing under this Lease would
have been payable if possession had not been retaken and Landlord will be
entitled to receive the rent and other amounts from Tenant on each such day.
12.03 Landlord shall at all times have the right without prior demand or
notice except as required by applicable law to: (i) seek any declaratory,
injunctive or other equitable relief, and specifically enforce this Lease or
restrain or enjoin a violation of any provision hereof, and Tenant hereby waives
any right to require that Landlord post a bond in connection therewith, and (ii)
sue for and collect any unpaid Net Rent or other amounts payable hereunder which
has accrued. Notwithstanding anything to the contrary contained in this Lease,
to the extent not expressly prohibited by applicable law, upon the occurrence of
any Event of Default, Landlord may terminate this Lease or Tenant's right to
possession of the Demised Premises and accelerate and declare that all Net Rent
and other amounts payable hereunder reserved for the remainder of the term of
this :Lease shall be immediately due and payable, provided that such amounts
shall be discounted to the then present value at 6% per annum in accordance with
accepted financial practice, and Landlord, after receiving payment of same from
Tenant, shall be obligated to turn over to Tenant any actual net reletting
proceeds thereafter received during the remainder of the term of this Lease, up
to the amount so received from Tenant pursuant to this provision. Any failure by
Landlord to mitigate its damages shall only reduce the amounts otherwise payable
by Tenant to Landlord hereunder and shall not give rise to a claim by Tenant
against Landlord for damages.
12.04 The parties waive trial by jury in any action, proceeding or
counterclaim brought by either party against the other on any matter whatsoever
arising out of or in any way connected with this Lease, the relationship of
landlord and tenant created hereby, Tenant's use or occupancy of the Demised
Premises, or any claim for injury or damage. Tenant hereby irrevocably waives
any right otherwise available under any applicable law to redeem or reinstate
this Lease or Tenant's right to possession after this Lease or Tenant's right to
possession is terminated based on an Event of Default.
12.05 Tenant shall pay, as additional rent, a service charge of $200
for bookkeeping and administrative expenses, if any portion of rent is not
received when due. Any amounts payable hereunder not paid when due shall accrue
interest from the due date at the rate of 12% per annum until payment is
received by Landlord. If Tenant fails to perform any obligation under this
Lease, Landlord shall have the right (but not the duty) to perform such
obligation on behalf and for the account of Tenant. In such event, Tenant shall
reimburse Landlord upon demand, as additional rent, for all expenses incurred by
Landlord in performing such obligation together with interest thereon at 12% per
annum from the date such expenses were incurred.
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ARTICLE 13
Quiet Enjoyment
Tenant, upon performing and observing all of the terms, covenants and
condition of this Lease on Tenant's part to be performed and observed, shall
peaceably and quietly have and enjoy the Demised Premises during the term of
this Lease, free of interference from Landlord or any party claiming through or
under Landlord.
ARTICLE 14
Surrender of Premises
Upon the expiration or sooner termination of the term of this Lease,
Tenant shall quit and surrender the Demised Premises, broom clean, in as good
condition and repair as Tenant is required to maintain the same throughout the
term of this Lease, together with all keys. All leasehold improvements and other
fixtures, whether installed by Tenant or Landlord, shall be Landlord's property
and shall remain, all without compensation, allowance or credit to Tenant and as
though conclusively conveyed by Tenant to Landlord as if by bill of sale,
including, without limitation, all electrical, mechanical, HVAC, plumbing and
other utility systems, connections and appliances and all installed cranes,
except those cranes which Tenant re-installs and uses at another location owned
by Tenant. If Tenant shall fail to remove any of Tenant's property at the
Demised Premises, such property shall, at the option of Landlord, either be
deemed abandoned and become the exclusive property of Landlord, or Landlord
shall have the right to remove and dispose of such property in accordance with
ARTICLE 5, at the expense of Tenant, and hold Tenant responsible for any and all
net charges and expenses incurred by Landlord therefor.
ARTICLE 15
Holding Over
Should Tenant remain in possession of the Demised Premises after the
expiration of the term hereof without the execution of a new lease, such holding
over, in the absence of a written agreement to the contrary, shall be deemed to
have created and be construed to be a tenancy at sufferance terminable
immediately at any time by Landlord, at a monthly Net Rent equal to $20,000,
subject to all the other terms, covenants and conditions of this Lease, and
Landlord shall have such other remedies for holdover as may be available to
Landlord under other provisions of this Lease or applicable laws.
ARTICLE 16
No Waiver
The failure of Landlord or Tenant to insist upon the strict performance
of any provision of this Lease, or the failure of Landlord or Tenant to exercise
any right, option or remedy hereby reserved shall not be construed as a waiver
for the future of any such provision, right, option or remedy or as a waiver of
a subsequent breach thereof. The
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consent or approval by Landlord of any act by Tenant requiring Landlord's
consent or approval shall not be construed to waive or render unnecessary the
requirement for Landlord's consent or approval of any subsequent similar act by
Tenant. The receipt by Landlord of rent or other charges or sums with knowledge
of a breach of any provision of this Lease shall not be deemed a waiver of such
breach. No provision of this Lease shall be deemed to have been waived unless
such waiver shall be in writing signed by the party to be charged. No payment by
Tenant or receipt by Landlord of a lesser amount than the rents, charges and
other sums hereby reserved shall be deemed to be other than on account of the
earliest rents, charges and other sums then unpaid, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment by Tenant
be deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
rents, charges and other sums due, or Landlord may pursue any other remedy in
this Lease provided or by law permitted.
ARTICLE 17
Notices
Except as otherwise provided in this Lease, every notice, demand,
consent, approval, request or other communication which may be or is required to
be given under this Lease or by law shall be in writing and shall be sent either
by United States Certified Mail, postage prepaid, return receipt requested, or
by Federal Express or another nationally recognized overnight courier service,
and shall be addressed or delivered, as set forth in the Merger Agreement. Every
notice or other communication hereunder shall be deemed to have been given as of
the second business day following the date of such mailing or dispatch by
courier or immediately if personally delivered.
ARTICLE 18
Arbitration
18.01 Landlord and Tenant shall not have been deemed to have agreed to
determination of any dispute arising out of this Lease by arbitration unless
determination in such manner shall have been specifically and unequivocally
provided for in this Lease and in no other case or cases.
18.02 Every dispute between the parties which is expressly provided in
this Lease to be determined by arbitration shall be resolved in the manner
provided in this Article.
18.03 The party requesting arbitration shall do so by giving notice to
that effect to the other party and shall simultaneously request the appointment
of a single arbitrator by the American Arbitration Association (or any successor
thereto) in accordance with its rules then prevailing, or, if the American
Arbitration Association (or such successor organization) shall fail to appoint
said arbitrator within sixty (60) days after such request is made, then either
party may apply, on notice to the other, to any court having jurisdiction for
the appointment of such arbitrator and the other party shall not raise any
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question as to such court's full power to entertain the application and make the
appointment. Each arbitrator appointed pursuant to this Section shall be a
disinterested person having at least ten years experience in the State of
Arkansas in a calling connected with the dispute.
18.04 The arbitrator shall render his or her decision and award within
30 days after the final hearing. Such decision and award shall be in writing and
counterpart copies thereof shall be delivered to each of the parties. In
rendering such decision and award, the arbitrator shall not add to, subtract
from or otherwise modify the provisions of this Lease. Judgment may be entered
on the determination and award made by the arbitrator in any court of competent
jurisdiction and may be enforced in accordance with the Laws of the State of
Arkansas.
18.05 If, for any reason whatsoever, the written decision and award of
the arbitrator shall not be rendered within the time limit set forth in Section
18.04, either party may apply to any court having jurisdiction, by action,
proceeding or otherwise (but not by a new arbitration proceeding) as may be
proper to determine the question in dispute consistently with the provisions of
this Lease.
18.06 The arbitrator shall determine the division, if any, between the
parties, of the expenses of the arbitration, including fees to the arbitrators,
counsel and witness fees.
ARTICLE 19
Taxes
19.01 The term "Taxes" shall mean the total of all taxes and special,
general, extraordinary or other assessments, sewer rents, water charges,
occupancy taxes, school taxes, and other taxes, fees, levies or other
impositions of every kind and nature, whether foreseen or unforeseen or charges
of any kind or nature levied, assessed, imposed or attributable at any time by
any governmental authority (including, without limitation, any town, city,
district, county, village, school district or public transportation authority)
upon or against or in connection with the Demised Premises, and also any tax,
assessment, or charge, levied, assessed or imposed at any time by any
governmental authority in connection with the receipt of income or rents from
the Demised Premises, and personal property taxes imposed upon the fixtures,
machinery, equipment, apparatus, systems, appurtenances, furniture and other
personal property used in connection with the Demised Premises. Notwithstanding
the foregoing, Taxes shall not include excess profits taxes, franchise taxes,
gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes,
federal and State income taxes, and other taxes to the extent applicable to
Landlord's general or net income. If, due to a future change in the method of
taxation or in the taxing authority, or for any other reason, a franchise,
income, transit, profit or other tax or governmental imposition, however,
designated, shall be levied against Landlord in substitution in whole or in part
for the Taxes, then such franchise, income, transit, profit or other tax or
governmental imposition shall be deemed to be included within the definition of
"Taxes" for the purposes of this Article. As to special assessments which
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are payable over a period of time extending beyond the term of this Lease, only
a pro rata portion thereof, covering the portion of the term of this Lease
unexpired at the time of the imposition of such assessment, shall be included in
Taxes.
19.02 Tenant shall pay all Taxes directly to the taxing authority on or
before the due date of the required payments and shall simultaneously therewith
provide evidence thereof to Landlord. Any failure to pay any Taxes in a timely
manner shall be deemed a failure to pay rent under this Lease. If Tenant fails
to pay any Taxes on or before the due date thereof, Landlord may, but shall not
be obligated to, pay such Taxes and notify Tenant of the same. Tenant shall
reimburse Landlord for any such payment, as additional rent, within ten (10)
days after receipt of any such statement. Taxes payable by Tenant shall be
apportioned to the term of this Lease. Tenant shall pay increased Taxes whether
Taxes are increased as a result of increases in the assessment or valuation of
the Demised Premises (whether based on a sale, change in ownership or
refinancing of the Demised Premises or otherwise), increases in tax rates,
reduction or elimination of any rollbacks or other deductions available under
current law, scheduled reductions of any tax abatement, elimination, invalidity
or withdrawal of any tax abatement, or for any other cause whatsoever.
ARTICLE 20
Miscellaneous
20.01 This Lease, including the Exhibits and Schedules attached hereto,
sets forth the entire agreement between the parties with respect to the Demised
Premises. All prior conversations or writings between the parties hereto or
their representatives with respect to the Demised Premised are merged herein and
extinguished. Tenant has relied on Tenant's inspections, due diligence and
investigations in entering into this Lease and not on any representations or
warranties made by or on behalf of Landlord concerning the condition or
suitability of the Demised Premises for any particular purpose.
20.02 This Lease shall not be modified except by a writing signed by the
party to be charged. The Article captions appearing herein are inserted as a
matter of convenience and are not intended to define, construe or describe the
scope or intent of any provision of this Lease.
20.03 If any provision of this Lease or the application thereof to any
person or circumstance shall be held void or unenforceable, then the remainder
of this Lease or the application of such provision to persons or circumstances
other than those as to which it is held void or unenforceable shall not be
affected thereby.
20.04 Except as otherwise expressly provided in this Lease, all the
terms, covenants conditions and provisions of this Lease shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
administrators, executors, successors and permitted assigns.
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20.05 The person or persons executing this Lease on behalf of Tenant
hereby covenant, represent and warrant that Tenant is a duly incorporated
corporation authorized to do business in Arkansas; and that the person or
persons executing this Lease on behalf of Tenant is an officer or are officers
of such Tenant, and that he or they as such officers are duly authorized to
execute, acknowledge and deliver this Lease to Landlord.
20.06 This Lease may be executed in several counterparts, each of which
shall be deemed an original, and all such counterparts shall together constitute
one and the same instrument.
20.07 This Lease shall be governed and controlled by the law of the
State of Arkansas.
20.08 IN THE INTEREST OF OBTAINING A SPEEDIER AND LESS COSTLY HEARING
AND RESOLUTION OF ANY DISPUTE, EACH OF LANDLORD AND TENANT HEREBY EXPRESSLY
WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER
PARTY AGAINST THE OTHER AND ANY RIGHTS TO A TRIAL BY JURY UNDER ANY STATUTE,
RULE OF LAW OR PUBLIC POLICY IN CONNECTION WITH ANY MATTER WHATSOEVER ARISING
OUT OF OR IN ANY WAY RELATING TO THIS LEASE.
20.09 Neither this Lease nor any memorandum of lease or short form lease
shall be recorded by Tenant in connection with the Demised Premises without the
prior written consent of Landlord (which consent shall not unreasonably be
withheld or delayed).
20.10 If Landlord shall fail to perform any obligation under this Lease
required to be performed by Landlord, Landlord shall not be deemed to be in
default hereunder nor subject to claims for damages of any kind, unless such
failure shall have continued for a period of thirty days after written notice
thereof by Tenant to Landlord or such additional time as may be required due to
force majeure. Except in case of emergency, Tenant shall have no right of
self-help to perform repairs or any other obligation of Landlord, and shall have
no right to withhold, set off, or abate any amount otherwise payable hereunder.
20.11 In case Landlord or any successor owner of the Demised Premises
shall convey or otherwise dispose of any portion thereof to another party (and
nothing herein shall be construed to restrict or prevent such conveyance or
disposition), such other party shall thereupon be and become landlord hereunder
and shall be deemed to have fully assumed and be liable for all obligations of
this Lease to be performed by Landlord. Tenant shall attorn to such party, and
Landlord or such successor owner shall, from and after the date of conveyance ,
be free of all liabilities and obligations hereunder.
20.12 Tenant shall be responsible for compliance with all requirements
of the Americans With Disabilities Act of 1990 (42 U.S.C. Section12101 et seq.)
and the regulations and guidelines promulgated thereunder.
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20.13 For purposes hereof, "Hazardous Material" means any chemical,
substance, material or waste or component thereof which is now or hereafter
listed, defined or regulated as a hazardous or toxic chemical, substance,
material or waste or component thereof by any federal, State or local governing
or regulatory body having jurisdiction, or which would trigger any employee or
community "right-to-know" requirements adopted by any such body, or for which
any such body has adopted any requirements for the preparation or distribution
of a material safety data sheet issued by the manufacturer thereof. All actions
relating in any manner whatsoever (except in case of emergency) to Hazardous
Material in connection with the Demised Premises shall require and be subject to
delivery of prior written notice to Landlord. If any Hazardous Material is
released, discharged or disposed of by Tenant or any other occupant of the
Demised Premises, or their employees, agents or contractors, on or about the
Demised Premises, Tenant shall immediately inform Landlord and shall be
responsible for all remediation thereof in compliance with applicable law at
Tenant's expense.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Lease to be executed as of the day and year first above written.
Landlord:
LR REAL PROPERTY, LLC
/s/ D. M. Buchanan
By: ______________________________
Name: D. M. Buchanan
Title: President
Tenant:
TBM ACQUISITION I, INC.
/s/ William A. Schwartz
By: ______________________________
Name: William A. Schwartz
Title: Chief Executive Officer
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EXHIBIT 10.3
LOAN AND SECURITY AGREEMENT
BETWEEN
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
LONG REACH HOLDINGS, INC.
DATED
APRIL 20, 1999
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS
Section 1.1 Definitions........................................................................... 1
Section 1.2 Additional Terms Related to Definitions............................................... 16
Section 1.3 Exhibits and Schedules................................................................ 17
ARTICLE II REVOLVING CREDIT FACILITY AND TERM LOAN FACILITY
Section 2.1 Revolving Loan........................................................................ 17
Section 2.2 Advances Under the Revolving Loan..................................................... 17
Section 2.3 Repayment of the Revolving Loan....................................................... 18
Section 2.4 Revolving Note........................................................................ 18
Section 2.5 Term Loan............................................................................. 18
Section 2.6 Repayment of Term Loan................................................................ 18
Section 2.7 Term Note............................................................................. 19
Section 2.8 Disbursement of Loans................................................................. 19
Section 2.9 Mandatory Prepayment.................................................................. 19
Section 2.10 Financial Accommodations.............................................................. 19
ARTICLE III
GENERAL LOAN PROVISIONS; FEES AND EXPENSES
Section 3.1 Interest.............................................................................. 20
Section 3.2 Fees and Expenses..................................................................... 21
Section 3.3 Manner of Payment..................................................................... 22
Section 3.4 Records............................................................................... 22
Section 3.5 Termination of Agreement.............................................................. 23
ARTICLE IV CONDITIONS PRECEDENT
Section 4.1 Conditions Precedent.................................................................. 23
Section 4.2 Closing Documents..................................................................... 23
Section 4.3 Conditions to Subsequent Advances..................................................... 26
Section 4.4 No Waiver............................................................................. 26
Section 4.5 Conditions Precedent for the Benefit of Lender........................................ 27
Section 4.6 Effect of Notice of Borrowing......................................................... 27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BORROWER
Section 5.1 Representations and Warranties........................................................ 27
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Section 5.2 Survival of Representations........................................................... 32
ARTICLE VI SECURITY INTEREST AND COLLATERAL COVENANTS
Section 6.1 Security Interest..................................................................... 32
Section 6.2 Continued Priority of Security Interest............................................... 32
Section 6.3 Collection of Accounts................................................................ 33
Section 6.4 Verification and Notification......................................................... 33
Section 6.5 Disputes, Returns and Adjustments..................................................... 34
Section 6.6 Invoices.............................................................................. 34
Section 6.7 Delivery of Instruments............................................................... 34
Section 6.8 Ownership and Defense of Title........................................................ 34
Section 6.9 Location of Offices and Collateral.................................................... 35
Section 6.10 Records Relating to Collateral........................................................ 35
Section 6.11 Inspection............................................................................ 35
Section 6.12 Maintenance........................................................................... 36
Section 6.13 Power of Attorney..................................................................... 36
Section 6.14 Notice of Litigation and Other Matters................................................ 36
ARTICLE VII AFFIRMATIVE COVENANTS
Section 7.1 Preservation of Corporate Existence and Similar Matters............................... 37
Section 7.2 Compliance with Applicable Law........................................................ 37
Section 7.3 Conduct of Business................................................................... 37
Section 7.4 Payment of Taxes and Claims........................................................... 37
Section 7.5 Accounting Methods and Financial Records.............................................. 37
Section 7.6 Use of Proceeds....................................................................... 37
Section 7.7 Hazardous Waste and Substances; Environmental Requirements............................ 38
Section 7.8 Accuracy of Information............................................................... 38
Section 7.9 Revisions or Updates to Schedules..................................................... 38
Section 7.10 ERISA................................................................................. 38
Section 7.11 Insurance............................................................................. 39
Section 7.12 Payroll Taxes......................................................................... 39
Section 7.13 Year 2000............................................................................. 39
Section 7.14 Key Man Life Insurance................................................................ 40
Section 7.15 Audited Financial Statements; Patent and Trademark Search; Flood Insurance............ 40
ARTICLE VIII FINANCIAL AND COLLATERAL REPORTING
Section 8.1 Financial Statements.................................................................. 41
Section 8.2 Compliance Certificate................................................................ 42
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Section 8.3 Collateral Information and Reports.................................................... 42
Section 8.4 Copies of Other Reports............................................................... 43
ARTICLE IX NEGATIVE COVENANTS
Section 9.1 Financial Ratios...................................................................... 43
Section 9.2 Investments........................................................................... 44
Section 9.3 Prohibited Distributions and Payments, Etc............................................ 44
Section 9.4 Indebtedness.......................................................................... 44
Section 9.5 Liens................................................................................. 44
Section 9.6 Merger, Consolidation, Sale of Assets, Acquisitions................................... 44
Section 9.7 Transactions with Affiliates.......................................................... 45
Section 9.8 Guaranties............................................................................ 45
Section 9.9 Officers' Salaries.................................................................... 45
Section 9.10 Benefit Plans......................................................................... 45
Section 9.11 Sales and Leasebacks.................................................................. 45
Section 9.12 Ineligible Securities................................................................. 45
Section 9.13 Management Fees....................................................................... 45
Section 10.1 Events of Default..................................................................... 45
Section 10.2 Remedies.............................................................................. 48
Section 10.3 Application of Proceeds............................................................... 50
Section 10.4 Power of Attorney..................................................................... 51
Section 10.5 Miscellaneous Provisions Concerning Remedies.......................................... 51
Section 10.6 Trademark License..................................................................... 52
ARTICLE XI MISCELLANEOUS
Section 11.1 Notices............................................................................... 52
Section 11.2 Expenses.............................................................................. 53
Section 11.3 Setoff................................................................................ 54
Section 11.4 Venue; Service of Process............................................................. 54
Section 11.5 Assignment; Participation............................................................. 55
Section 11.6 Amendments............................................................................ 55
Section 11.7 Performance of Borrower's Duties...................................................... 55
Section 11.8 Indemnification....................................................................... 55
Section 11.9 All Powers Coupled with Interest...................................................... 56
Section 11.10 Survival.............................................................................. 56
Section 11.11 Severability of Provisions............................................................ 56
Section 11.12 Governing Law......................................................................... 56
Section 11.13 Counterparts.......................................................................... 56
Section 11.14 Consent to Advertising and Publicity.................................................. 56
Section 11.15 Final Agreement....................................................................... 57
</TABLE>
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<TABLE>
<S> <C>
Section 11.16 Jury Waiver........................................................................... 57
Section 11.17 Arbitration........................................................................... 57
</TABLE>
EXHIBITS AND SCHEDULES
EXHIBIT A FORM OF BORROWING BASE CERTIFICATE
EXHIBIT B FORM OF COMPLIANCE CERTIFICATE
SCHEDULE 5.1(a) Jurisdictions in Which Borrower is Qualified as a
Foreign Corporation
SCHEDULE 5.1(c) Capital Stock
SCHEDULE 5.1(g) Liens
SCHEDULE 5.1(h) Indebtedness for Money Borrowed and Guaranties
SCHEDULE 5.1(i) Litigation
SCHEDULE 5.1(l) ERISA
SCHEDULE 5.1(q) Locations of inventory
SCHEDULE 5.1(r) Locations of equipment
SCHEDULE 5.1(s) Location of Chief Executive Office
SCHEDULE 5.1(t) Corporate and Fictitious Names
SCHEDULE 5.1(z) Intellectual Property
SCHEDULE 7.6 Use of Proceeds
SCHEDULE 9.4 Existing Indebtedness
SCHEDULE 10.6 List of trademarks, patents, etc.
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement is executed by and between BANK ONE,
TEXAS, NATIONAL ASSOCIATION, a national banking association, and LONG REACH
HOLDINGS, INC., a Delaware corporation, as of April 20, 1999.
Lender and Borrower hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. When used in this Agreement, the capitalized
terms set forth below shall have the definitions assigned to such terms below:
"Account Debtor" means, with respect to any account, a Person who is
obligated on such account.
"ACH Liability Reserve" means any and all reserves established by the
Lender from time to time in its sole discretion in respect of ACH Transaction
Liabilities.
"ACH Transaction Liability" means all debts, liabilities, and
obligations now or hereafter arising from or related to the automatic clearing
house transfer of funds for the account of Borrower.
"Advance" means an advance of funds by Lender to Borrower hereunder.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities or
partnership or other interests, by contract or otherwise.
"Agreement" means this Agreement and all amendments, modifications and
supplements hereto and thereto and restatements hereof and thereof.
"Agreement Date" means the date of this Agreement as set forth in the
first introductory paragraph hereof.
"Banker's Acceptance" means any "acceptance" by the Lender of a draft
drawn by Borrower. As used in this definition, the term "acceptance" means the
Lender's signed agreement to pay the draft as presented.
"Benefit Plan" means an employee benefit plan as defined in Section
3(35) of ERISA
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(other than a Multiemployer Plan) in respect of which a Person or any Related
Company is, or within the immediately preceding 6 years was, an "employer" as
defined in Section 3(5) of ERISA, including such plans as may be established
after the Agreement Date.
"Blocked Account" means an account maintained with a Collecting Bank
pursuant to an Blocked Account Agreement.
"Blocked Account Agreement" means an agreement among Borrower, the
Lender and a Collecting Bank (if other than the Lender) concerning the
collection of payments which represent the proceeds of accounts or of any other
Collateral.
"Borrower" means Long Reach Holdings, Inc., a Delaware corporation, and
its successors and assigns.
"Borrowing Base" means, as of any date, an amount equal to the sum of:
(a) eighty-five percent (85%) (or such lesser percentage as the Lender may in
its sole and absolute discretion determine from time to time) of Eligible
Accounts on such date, PLUS (b) the lesser of (i) the sum of (A) sixty percent
(60%) (or such lesser percentage as the Lender may in its sole and absolute
discretion determine from time to time) of the value of Eligible Inventory
consisting of raw material metal stock (based upon the lower of cost (computed
on a first-in-first-out basis), fair market value or orderly liquidation as
determined by Lender in its sole discretion), PLUS (B) fifty percent (50%) (or
such lesser percentage as the Lender may in its sole and absolute discretion
determine from time to time) of the value of Eligible Inventory other than metal
stock (based upon the lower of cost (computed on a first-in-first-out basis),
fair market value or orderly liquidation as determined by Lender in its sole
discretion) or (ii) the lesser of (A) $4,000,000, or (B) one hundred forty
percent (140%) of the aggregate advances against Eligible Accounts in the first
year following the date hereof (and one hundred twenty-five percent (125%)
thereafter), MINUS (c) the Financial Accommodation Reserve, and MINUS (d) the
Reserve.
"Borrowing Base Certificate" means a certificate in the form of EXHIBIT
A attached hereto.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks in Dallas, Texas are authorized to close.
"Capital Expenditures" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets which
are not, in accordance with GAAP, treated as expense items for such Person in
the fiscal year made or incurred.
"Capitalized Lease" means a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.
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<PAGE> 8
"Capitalized Lease Obligation" means Indebtedness represented by
obligations under a Capitalized Lease, and the amount of such Indebtedness shall
be the capitalized amount of such obligations determined in accordance with
GAAP.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means and includes all of Borrower's now owned or
hereafter acquired assets, whether tangible or intangible, including without
limitation all of Borrower's right, title and interest in and to each of the
following, wherever located and whether now existing or hereafter arising:
(a) all accounts,
(b) all inventory,
(c) all equipment,
(d) all contract rights,
(e) all general intangibles,
(f) all Intellectual Property,
(g) all deposit accounts,
(h) all investment property,
(i) all instruments,
(j) all chattel paper,
(k) all goods,
(l) all documents,
(m) all real estate,
(n) all insurance and certificates of insurance pertaining to any
and all items of Collateral,
(o) all files, correspondence, computer programs, tapes, disks and
related data processing software which contain information identifying or
pertaining to any of the Collateral
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<PAGE> 9
or any Account Debtor or showing the amounts thereof or payments thereon or
otherwise necessary or helpful in the realization thereon or the collection
thereof,
(p) all cash deposited with the Lender or any Affiliate thereof, and
(q) any and all products and cash and non-cash proceeds of the
foregoing (including, but not limited to, any claims to any items referred to in
this definition and any claims against third parties for loss of, damage to or
destruction of any or all of the Collateral or for proceeds payable under or
unearned premiums with respect to policies of insurance) in whatever form.
"Collection Account" means a special account maintained with Lender in
the name of Borrower styled "Collection Account" over which Lender alone has the
power of withdrawal.
"Collecting Bank" means (i) the Lender, and (ii) any banking
institution (other than Lender) with which a Blocked Account has been
established pursuant to an Blocked Account Agreement.
"Committed Sum" means $8,000,000.
"Contract Rate" shall mean the sum of the PRIME RATE in effect from
time to time, plus three quarters of one percent percent (0.75%); provided,
however, the Contract Rate shall be reduced to the sum of the PRIME RATE in
effect from time to time, plus one half percent (0.50%) in the event that (i)
Borrower meets or exceeds pre-tax income projected in the base case projections
provided to Lender for the fiscal year ending June 30, 2000 as reflected in the
year-end audited financial statements of Borrower, (ii) no Default or Event of
Default has occurred and is continuing, and (iii) Borrower has maintained
$500,000 or more in average excess loan availability under the Revolving
Facility for the previous twelve (12) months. Any change in the Contract Rate
resulting from a change in the Prime Rate shall become effective on the day such
change in the Prime Rate is announced by Lender.
"Default" means any of the events specified in SECTION 10.1 that, with
the passage of time or giving of notice or both, would constitute an Event of
Default.
"Default Rate" means the Contract Rate plus two percent (2%).
"Dollar" and "$" means freely transferable United States dollars.
"Effective Date" means the later of (a) the Agreement Date, and (b) the
first date on which all of the conditions set forth in ARTICLE IV shall have
been fulfilled to the satisfaction of Lender or waived by the Lender.
"Eligible Accounts" shall mean all accounts of Borrower which are
deemed by the Lender
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<PAGE> 10
in the exercise of its sole and absolute discretion to be eligible for inclusion
in the calculation of the Borrowing Base net of any and all interest, finance
charges, sales tax, fees, returns, discounts, claims, credits, charges, contra
accounts, exchange contracts or other allowances, offsets and rights of offset,
deductions, counterclaims, disputes, rejections, shortages or other defenses and
all credits owed or allowed by Borrower upon any of its accounts and further
reduced by the aggregate amount of all reserves, limits and deductions provided
for in this definition and elsewhere in this Agreement. Eligible Accounts shall
not include the following:
(a) accounts which remain unpaid more than NINETY (90) days past their
invoice dates;
(b) accounts which are not due and payable within THIRTY (30) days
after their invoice dates, except for accounts created by sales made under sixty
(60) day dating terms; provided, however, accounts deemed eligible due to such
dating terms may not exceed at any time the lesser of (i) $500,000, or (ii) ten
percent (10%) of Eligible Accounts;
(c) accounts owing by a single Account Debtor, including a currently
scheduled account, if FIFTY PERCENT (50%) or more of the balance owing by said
Account Debtor upon all accounts payable by such Account Debtor is ineligible
pursuant to clauses (a) or (b) above;
(d) accounts with respect to which the Account Debtor is an Affiliate
of Borrower;
(e) accounts with respect to which the obligation of payment by the
Account Debtor is or may be conditional for any reason whatsoever including,
without limitation, accounts arising with respect to goods that were (i) not
sold on an absolute basis, (ii) sold on a bill and hold sale basis, (iii) sold
on a consignment sale basis, (iv) sold on a guaranteed sale basis, (v) sold on a
sale or return basis, or (vi) sold on the basis of any other similar
understanding;
(f) accounts with respect to which the Account Debtor is not a resident
or citizen of, or otherwise located in, the continental United States of
America, or with respect to which the Account Debtor is not subject to service
of process in the continental United States of America, unless such account is
backed in full by an irrevocable letter of credit in form and substance
satisfactory to Lender issued by a domestic commercial bank acceptable to Lender
or backed by acceptable export insurance; provided, however, that (i) accounts
backed by a letter of credit or insurance may not exceed $1,000,000 in the
aggregate, and (ii) subject to the requirements set forth in PARAGRAPHS (a)
through (e) and (g) through (r) of this definition, (A) accounts owed by Account
Debtors located in Canada may be included in Eligible Accounts up to a maximum
of $250,000 in the aggregate, (B) accounts owed by Account Debtors located in
Puerto Rico may be included in Eligible Accounts up to a maximum of $50,000 in
the aggregate;
(g) accounts in excess of $100,000 in the aggregate with respect to
which the Account Debtor is the United States of America or any other federal
governmental body or any
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department, agency or instrumentality of any of the foregoing unless such
accounts are duly assigned to the Lender in compliance with all applicable
governmental requirements (including, without limitation, the Federal Assignment
of Claims Act of 1940, as amended, if applicable) so that the Lender is
recognized by the Account Debtor to have all of the rights of an assignee of
such accounts;
(h) accounts with respect to which Borrower is or may be liable to the
Account Debtor for goods sold or services rendered by such Account Debtor, but
only to the extent of such liability to such Account Debtor (i.e. the excess of
the aggregate face amount of accounts of such Account Debtor to Borrower over
the aggregate liability of Borrower to such Account Debtor shall constitute an
Eligible Account unless otherwise excepted under the terms of this definition);
(i) accounts with respect to which the goods giving rise thereto have
not been shipped and delivered to and accepted as satisfactory by the applicable
Account Debtor or with respect to which the services performed giving rise
thereof have not been completed and accepted as satisfactory by the Account
Debtor thereon;
(j) accounts which are not invoiced (and dated as of such date) and
sent to the Account Debtor thereof concurrently with or not later than FIVE (5)
DAYS after the shipment and delivery to and acceptance by said Account Debtor of
the goods giving rise thereto or the performance of the services giving rise
thereto;
(k) accounts with respect to which possession and/or control of the
goods sold giving rise thereto is held, maintained or retained by Borrower (or
by any agent or custodian of Borrower) for the account of or subject to further
and/or future direction from the Account Debtor;
(l) accounts as to which the Lender, at any time or times hereafter,
determines, in good faith, that the prospect of payment or performance by the
Account Debtor is or will be impaired in any material respect;
(m) accounts of an Account Debtor to the extent, but only to the
extent, that the same exceed a credit limit determined by the Lender in its
reasonable discretion, at any time or times hereafter;
(n) accounts with respect to which the Account Debtor is located in any
state requiring the filing of a Notice of Business Activities Report or similar
report in order to permit Borrower to seek judicial enforcement in such state of
payment of such account, unless Borrower has qualified to do business in such
state or has filed a Notice of Business Activities Report or equivalent report
for the then current year;
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(o) accounts which are not subject to a first priority perfected
security interest in favor of Lender;
(p) accounts that Lender, in its sole discretion, has determined to be
ineligible;
(q) accounts subject to any provision prohibiting assignment or
requiring notice of or consent to such assignment; and
(r) that portion of an account balance owed by a single Account Debtor
which exceeds TWENTY PERCENT (20%) of total accounts otherwise deemed eligible
hereunder, unless waived in writing by Lender.
"Eligible Inventory" means, as at any date of determination, all
inventory owned by and in the possession of Borrower and located in the United
States of America that Lender, in its sole and absolute discretion, deems to be
eligible for borrowing purposes. Without limiting the generality of the
foregoing, unless otherwise agreed by Lender, the following is not Eligible
Inventory:
(a) work-in-process;
(b) finished goods subject to a specific purchase order which do not
meet the specifications of such purchase order;
(c) inventory which Lender determines, in its sole and absolute
discretion exercised in good faith, to be unacceptable for borrowing purposes
due to age, quality, type, category, value and/or quantity;
(d) inventory with respect to which Lender does not have a valid, first
priority and fully perfected security interest;
(e) inventory with respect to which there exists any Lien (other than a
Permitted Lien) in favor of any Person other than Lender;
(f) packaging or shipping material or maintenance supplies;
(g) shipping or product labels;
(h) inventory that is obsolete;
(i) inventory that has been returned or repossessed unless such
inventory is in new, unused and saleable condition;
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(j) inventory that consists of used goods taken in trade;
(k) inventory produced in violation of the Fair Labor Standards Act, in
particular provisions contained in Title 29 U.S.C. 215 (a)(i);
(l) inventory located in a jurisdiction other than the United States of
America and inventory located at a location for which Lender does not have a
valid landlord's or warehouseman's waiver or subordination on terms and
conditions acceptable to Lender in its sole discretion; and
(m) inventory located at any location other than those listed on
SCHEDULE 5.1(q).
"Environmental Laws" means all federal, state, local and foreign laws
now or hereafter in effect relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or industrial, toxic
or hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water or land) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, removal, transport or handling of pollutants, contaminants, chemicals
or industrial, toxic or hazardous substances or wastes, and any and all
regulations, notices or demand letters issued, entered, promulgated or approved
thereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
in effect from time to time, and any successor statute.
"Event of Default" means any of the events specified in SECTION 10.1.
"Financial Accommodation Reserve" means the sum of (i) the ACH
Liability Reserve, (ii) the Letter of Credit Reserve, plus (iii) the amount of
all outstanding Banker's Acceptances.
"Fiscal Month" means the four or five week period used by Borrower for
financial reporting purposes in accordance with GAAP.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of (i)
consolidated Net Income of Borrower after income taxes, plus depreciation and
amortization and other non-cash expenses, plus interest expense and plus lease
expense, to (ii) interest expense, plus lease expense, plus current maturities
of Funded Indebtedness, plus current maturities of Capitalized Lease
Obligations, plus Non-Financed Capital Expenditures, and plus dividends, plus
principal payments on Subordinated Indebtedness if such payments are permitted
by the Subordination Agreement.
"Funded Indebtedness" means, as of any date, the sum of the following
(without
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duplication): (i) the aggregate of all Indebtedness for Money Borrowed of
Borrower as of such date, other than current liabilities, (ii) all indebtedness
which would be classified as "funded indebtedness" or "long-term indebtedness"
(or other similar classification) on a consolidated balance sheet of Borrower
prepared as of such date in accordance with GAAP, (iii) the aggregate of all
indebtedness of Borrower outstanding under any revolving credit or similar
agreement providing for borrowing (and renewals and extensions thereof) over a
period of more than one year, notwithstanding the fact that any such
indebtedness is created within one year of the expiration of such agreement, and
(iv) the amount of all Capitalized Lease Obligations of Borrower booked in
accordance with GAAP.
"GAAP" means generally accepted accounting principles and practices
consistently applied.
"Governmental Approvals" means all authorizations, consents, approvals,
permits, licenses and exemptions of, registrations and filings with, and reports
to, all governmental bodies, whether federal, state, local, foreign national or
provincial, and all agencies thereof.
"Governmental Authority" means any government or political subdivision
or any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"Guaranty" or "Guaranteed" means, with respect to any obligation of
another Person, (i) a guaranty (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), directly or
indirectly, in any manner, of any part or all of such obligation of such other
Person, and (b) any agreement, direct or indirect, contingent or otherwise, and
whether or not constituting a guaranty, the practical effect of which is to
assure the payment or performance (or payment of damages in the event of
nonperformance) of any part or all of such obligation of such other Person.
"Indebtedness" of any Person means, without duplication, (a) all
Liabilities, (b) all obligations for money borrowed or for the deferred purchase
price of property or services or in respect of reimbursement obligations under
letters of credit, (c) all obligations represented by bonds, debentures, notes
and accepted drafts that represent extensions of credit, (d) Capitalized Lease
Obligations, (e) all obligations (including, during the noncancellable term of
any lease in the nature of a title retention agreement, all future payment
obligations under such lease discounted to their present value in accordance
with GAAP) secured by any Lien to which any property or asset owned or held by
such Person is subject, whether or not the obligation secured thereby shall have
been assumed by such Person, (f) all obligations of other Persons which such
Person has Guaranteed, including, but not limited to, all obligations of such
Person consisting of recourse liability with respect to accounts receivable sold
or otherwise disposed of by such Person, and (g) in the case of the Borrower,
the Loans (without duplication).
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"Intellectual Property" means, as to any Person, all of such Person's
then owned and existing and future acquired or arising patents, patent rights,
copyrights, works which are the subject of copyrights, trademarks, service
marks, trade names, trade styles, patent, trademark and service mark
applications, and all licenses and rights related to any of the foregoing, and
all rights to sue for past, present and future infringements of any of the
foregoing.
"Investment" means any investment, whether by means of share purchase,
loan, advance, purchase of debt instrument, extension of credit (other than (i)
accounts receivable arising from the sale of goods or services in the ordinary
course of business, and (ii) notes, accepted in the ordinary course of business,
evidencing overdue accounts receivable arising in the ordinary course of
business), capital contribution or otherwise, in or to any Person, the Guaranty
of any Indebtedness of any Person or the subordination of any claim against any
Person to other indebtedness of such Person.
"Lender" means BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national
banking association, and its successors and assigns.
"Lender's Office" means the office of the Lender located at 1717 MAIN
STREET, 3RD FLOOR, DALLAS, TEXAS 75201 or such other office as Lender may
designate from time to time.
"Letter of Credit" means any letter of credit issued by the Lender for
the account of Borrower.
"Letter of Credit Reserve" means, at any time, 100% of THE SUM OF (i)
the aggregate undrawn amount of all Letters of Credit outstanding at such time,
PLUS (ii) the aggregate amount of all drawings under Letters of Credit for which
the Lender has not been reimbursed.
"Liabilities" means all liabilities of a Person determined in
accordance with GAAP.
"Lien", with respect to any Person, means any security interest,
chattel mortgage, charge, mortgage, deed to secure debt, deed of trust, lien,
pledge, Capitalized Lease, conditional sale or other title retention agreement,
or other security interest or encumbrance of any kind in respect of any property
of such Person or upon the income or profits therefrom.
"Loans" means the Revolving Loan and the Term Loan, collectively, and
"Loan" means any of such Loans.
"Loan Documents" means, collectively, this Agreement, the Notes, each
writing now or hereafter executed and delivered by any Person to secure the
Obligations or evidencing any security therefor and each other instrument,
agreement and document now or hereafter executed and delivered by Borrower or
any Obligor in connection with this Agreement.
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"Lockbox" means the U.S. Post Office Box(es) specified in, or
established pursuant to, (i) a Blocked Account Agreement, or (ii) a Lockbox
agreement, in form and substance acceptable to Lender, executed between Borrower
and Lender or an Affiliate of Lender.
"Maximum Rate" means the maximum nonusurious interest rate, if any,
that at any time, or from time to time, may be contracted for, taken, reserved,
charged, or received on the Loans under the laws which are presently in effect
of the United States and the State of Texas applicable to Lender and such
indebtedness or, to the extent permitted by law, under such applicable laws of
the United States and the State of Texas which may hereafter be in effect and
which allow a higher maximum nonusurious interest rate than applicable laws now
allow. To the extent federal law permits Lender to contract for, charge or
receive a greater amount of interest, Lender will rely on federal law instead of
the Texas Finance Code, as supplemented by Texas Credit Title, for the purpose
of determining the Maximum Rate. Additionally, to the maximum extent permitted
by applicable law now or hereafter in effect, Lender may, at its option and from
time to time, implement any other method of computing the Maximum Rate under the
Texas Finance Code, as supplemented by Texas Credit Title, or under other
applicable law, by giving notice, if required, to Borrower as provided by
applicable law now or hereafter in effect, and further subject to any right
Lender may have subsequently, under applicable law, to change the method of
determining the Maximum Rate.
"Material Adverse Effect" means any act, omission, event or undertaking
which would, singly or in the aggregate, have a materially adverse effect upon
(a) the business, assets, properties, liabilities, condition (financial or
otherwise), or results of operations of Borrower and its Subsidiaries taken as a
whole, (b) the ability of Borrower to perform any obligations under this
Agreement or any other Loan Document to which it is a party, or (c) the
legality, validity, binding effect, enforceability or admissibility into
evidence of any Loan Document or the ability of Lender to enforce any rights or
remedies under or in connection with any Loan Document.
"Money Borrowed" means (a) Indebtedness for money borrowed, (b)
Indebtedness (i) represented by notes payable and drafts accepted, that
represent extensions of credit, (ii) constituting obligations evidenced by
bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid (other than trade Indebtedness) or that was issued
or assumed as full or partial payment for property, and (c) Indebtedness that
constitutes a Capitalized Lease Obligations, and (d) Indebtedness that is such
by virtue of CLAUSE (f) of the definition thereof, but only to the extent that
the obligations Guaranteed are obligations that would constitute Indebtedness
for Money Borrowed.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or a Related Company is required to
contribute or has contributed within the immediately preceding 6 years.
"Net Income" or "Net Loss" means, as applied to any Person, the net
income (or net loss)
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<PAGE> 17
of such Person for the period in question (after provision for income taxes)
determined in accordance with GAAP, provided that the impact of any
extraordinary gains, determined in accordance with GAAP, shall be excluded from
the determination of "Net Income" or "Net Loss".
"Net Worth" of any Person means the total shareholders' equity
(including capital stock, additional paid-in capital and retained earnings,
after deducting treasury stock) which would appear as such on a balance sheet of
such Person prepared in accordance with GAAP, plus the principal amount of
Subordinated Indebtedness.
"Non-Financed Capital Expenditures" means Capital Expenditures that are
made with funds other than funds obtained from a financial institution,
including without limitation Lender or an Affiliate of Lender for the specific
purpose of making such Capital Expenditure; provided, however, that Capital
Expenditures funded from the Revolving Credit Facility shall be considered
Non-Financed Capital Expenditures.
"Notes" means the Revolving Note and the Term Note, and "Note" means
any of such Notes.
"Notice of Borrowing" has the meaning set forth in SECTION 2.2.
"Obligations" shall mean (i) all Loans or other Advances made by Lender
to Borrower pursuant to this Agreement or otherwise including, without
limitation, the Revolving Loan and the Term Loan, (ii) all future advances or
other value, of whatever class or for whatever purpose, at any time hereafter
made or given by Lender to Borrower, whether or not the advances or value are
given pursuant to commitment and whether or not Borrower is indebted to Lender
at the time of such advance; (iii) any and all other debts, liabilities and
duties of every kind and character of Borrower to Lender, whether now or
hereafter existing, and regardless of whether such present or future debts,
liabilities or duties are direct or indirect, primary or secondary, joint,
several, or joint and several, fixed or contingent, and regardless of whether
such present or future debts, liabilities or duties may, prior to their
acquisition by Lender, be or have been payable to, or be or have been in favor
of, some other Person or have been acquired by Lender in a transaction with one
other than Borrower (it being contemplated that Lender may make such
acquisitions from others), howsoever such Indebtedness shall arise or be
incurred or evidenced; (iv) any and all other debts, liabilities and duties of
every kind and character of Borrower to any Affiliate of Lender, whether now or
hereafter existing, and regardless of whether such present or future debts,
liabilities or duties are direct or indirect, primary or secondary, joint,
several, or joint and several, fixed or contingent, and regardless of whether
such present or future debts, liabilities or duties may, prior to their
acquisition by such Affiliate, be or have been payable to, or be or have been in
favor of, some other Person or have been acquired by such Affiliate in a
transaction with one other than Borrower (it being contemplated that Affiliates
of Lender may make such acquisitions from others), howsoever such Indebtedness
shall arise or be incurred or evidenced;
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<PAGE> 18
(v) interest on all of the debts, liabilities and duties set forth in (i), (ii),
(iii) and (iv) above; (vi) all costs, fees and expenses payable by Borrower to
Lender or any of its Affiliates pursuant to any of the Loan Documents, and (vii)
any and all renewals and extensions of the debts, liabilities and duties set
forth in (i), (ii), (iii), (iv), (v) and (vi) above, or any part thereof.
"Obligor" means the Borrower, each party to the Loan Documents (other
than the Lender and the holders of the Subordinated Indebtedness), and each
other party at any time primarily or secondarily, directly or indirectly, liable
on any of the Obligations.
"Operating Lease" means any lease (other than a lease constituting a
Capitalized Lease) of real or personal property determined in accordance with
GAAP.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"Permitted Indebtedness" means (i) Indebtedness consisting of the sum
of (A) the purchase money Indebtedness outstanding on the Effective Date secured
solely by the property purchased plus (B) up to an additional $100,000 of such
purchase money debt for each fiscal year occurring after the date hereof (which
for the fiscal year ending June 30, 1999 shall be limited to an additional
$25,000 of purchase money debt), and (ii) Subordinated Indebtedness.
"Permitted Investments" means Investments of Borrower in: (a)
negotiable certificates of deposit issued by the Lender, (b) any direct
obligation of the United States of America or any agency or instrumentality
thereof which has a remaining maturity at the time of purchase of not more than
one year and repurchase agreements relating to the same, (c) loans (including
loans to employees and officers) not to exceed $75,000 outstanding in the
aggregate at any one time, and (d) loans to Brudi Pacific, Inc. not to exceed
the sum of normal trade credit plus $250,000.
"Permitted Liens" means: (a) Liens securing taxes, assessments and
other governmental charges or levies (excluding any Lien imposed pursuant to any
of the provisions of ERISA) or the claims of materialmen, mechanics, carriers,
warehousemen or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, but (i) in all cases, only if payment shall not
at the time be required to be made in accordance with SECTION 7.4, and (ii) in
the case of warehousemen or landlords controlling locations where inventory is
located, only if such liens have been waived or subordinated to the security
interest of Lender in a manner satisfactory to Lender; (b) Liens consisting of
deposits or pledges made in the ordinary course of business in connection with,
or to secure payment of, obligations under workers' compensation, unemployment
insurance or similar legislation or under surety or performance bonds, in each
case arising in the ordinary course of business; (c) Liens constituting
encumbrances in the nature of zoning restrictions, easements and rights or
restrictions of record on the use of Borrower's real estate, which in the sole
judgment of the Lender do not materially detract from the value of such real
estate or impair the use thereof in the business of Borrower; (d) Liens of the
Lender arising under this Agreement and the other Loan Documents, (e) Liens
securing Permitted Indebtedness
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consisting of purchase money Indebtedness and Liens securing Subordinated
Indebtedness, (f) Liens on the assets of Brudi Pacific, Inc., a wholly owned
subsidiary of Borrower, securing Indebtedness owed to Borrower, and (g) Liens
(not to exceed $100,000 in the aggregate) securing appeal and surety bonds.
"Person" means an individual, corporation, limited liability company,
partnership, joint venture, association, trust or unincorporated organization or
a government or any agency or political subdivision thereof.
"Prime Rate" means the per annum rate of interest publicly announced by
the Lender from time to time as its "prime or base rate". Any change in an
interest rate resulting from a change in the Prime Rate shall become effective
on the day such change is announced by Lender. The Prime Rate is a reference
used by the Lender in determining interest rates on certain loans and is not
intended to be the lowest rate of interest charged on any extension of credit to
any debtor.
"Prohibited Distribution" by any Person means (a) the retirement,
redemption, purchase, or other acquisition for value of any capital stock or
other equity securities or partnership interests issued by such Person, (b) the
declaration or payment of any dividend or distribution on or with respect to any
such securities (excluding distributions made solely in shares of stock of the
same class) or partnership interests, and (c) any other payment by such Person
in respect of such securities or partnership interests.
"Prohibited Payment" means (a) any redemption, repurchase or prepayment
or other retirement, prior to the stated maturity thereof or prior to the due
date of any regularly scheduled installment or amortization payment with respect
thereto, of any Indebtedness of a Person (other than the Obligations and trade
debt), (b) the payment by any Person of the principal amount of or interest on
any Indebtedness (other than trade debt or Subordinated Indebtedness) owing to
an Affiliate of such Person, and (c) any payment with respect to any
Subordinated Indebtedness that is made in violation of the terms of the
applicable Subordination Agreement.
"Related Company" means, as to any Person, any (a) corporation which is
a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as such Person, (b) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Code) with such Person, or (c) member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
such Person or any corporation described in CLAUSE (A) above or any partnership,
trade or business described in CLAUSE (B) above.
"Reserve" at any time shall mean an amount from time to time
established by Lender in its sole discretion as a reserve in reduction of the
Borrowing Base in respect of contingencies or other potential factors which, in
the event they should occur, could adversely affect or otherwise
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reduce the anticipated amount of timely collections in payment of Eligible
Accounts or the value (whether at cost, market or orderly liquidation value) of
Eligible Inventory. The "Reserve," if any from time to time, does not represent
cash funds.
"Revolving Loan" means the Advances made to Borrower pursuant to
SECTION 2.1.
"Revolving Credit Facility" shall mean the revolving loan facility made
available to Borrower hereunder.
"Revolving Note" means the promissory note executed by the Borrower and
made payable to the order of the Lender evidencing the obligation of the
Borrower to repay the Revolving Loan (and any renewal, extension, increase, or
modification thereof).
"Schedule of Accounts" means a schedule delivered by Borrower to the
Lender pursuant to the provisions of SECTION 8.3(A).
"Schedule of Inventory" means a schedule delivered by Borrower to the
Lender pursuant to the provisions of SECTION 8.3(C).
"Solvent" means, when used in connection with any Person, that such
Person has assets of a fair value which exceeds the amount required to pay its
debts (including contingent, subordinated, unmatured and unliquidated
liabilities) as they become absolute and matured, and such Person is able to and
anticipates that it will be able to meet its debts as they mature and has
adequate capital to conduct the business in which it is or proposes to be
engaged.
"Subordination Agreement" means the written agreement, in form and
substance acceptable to Lender, executed between Borrower and the holder of the
Subordinated Indebtedness to evidence the subordination of the Indebtedness
described therein to the Obligations.
"Subordinated Indebtedness" means Indebtedness of Borrower that has
been subordinated to the Obligations pursuant to a written subordination
agreement, in form and substance acceptable to Lender, executed by Lender and
the holders of such Indebtedness.
"Subsidiary" means, with respect to any Person that is a corporation,
any other corporation or limited liability company in which such Person directly
or indirectly owns 50% or more of any class of voting stock or ownership
interest, whether of record or beneficially, and includes any Subsidiary of such
other corporation or limited liability company or its Subsidiaries.
"Tangible Net Worth" means, as applied to any Person, the Net Worth of
such Person at the time in question, after deducting therefrom amounts due from
Affiliates and shareholders of such Person and all other items which should
properly be treated as intangibles in accordance
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with GAAP.
"Term Loan" means the loan made to Borrower pursuant to SECTION 2.5.
"Term Note" means the promissory note executed by the Borrower and made
payable to the order of the Lender evidencing the obligation of the Borrower to
repay the Term Loan (and any renewal, extension, increase, or modification
thereof)
"Termination Date" means APRIL 20, 2002.
"Termination Event" means (a) a "Reportable Event" as defined in
Section 4043(b) of ERISA, but excluding any such event as to which the provision
for 30 days' notice to the PBGC is waived under applicable regulations, (b) the
filing of a notice of intent to terminate a Benefit Plan or the treatment of a
Benefit Plan amendment as a termination under Section 4041 of ERISA, or (c) the
institution of proceedings to terminate a Benefit Plan by the PBGC under Section
4042 of ERISA or the appointment of a trustee to administer any Benefit Plan.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of Texas.
"Unfunded Vested Accrued Benefits" means, with respect to any Benefit
Plan at any time, the amount (if any) by which (a) the present value of all
vested nonforfeitable benefits under such Benefit Plan exceeds (b) the fair
market value of all Benefit Plan assets allocable to such benefits, as
determined using such reasonable actuarial assumptions and methods as are
specified in the Schedule B (Actuarial Information) to the most recent Annual
Report (Form 5500) filed with respect to such Benefit Plan.
Section 1.2 Additional Terms Related to Definitions.
(a) All terms defined in this Agreement shall have the above
established definitions when used in any other Loan Documents, unless otherwise
expressly set forth therein.
(b) All accounting terms not specifically defined herein shall have the
meanings generally attributed to such terms under GAAP.
(c) The words "hereof", "herein" and "hereunder" and similar words when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provisions of this Agreement.
(d) Titles of Articles and Sections in this Agreement are for
convenience only and neither limit nor amplify the provisions of this Agreement.
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(e) Whenever the phrase "to the knowledge of the Borrower" or similar
words are used herein, such phrase shall mean and refer to (i) the actual
knowledge of any of the officers of Borrower, or (ii) the knowledge that such
officers would have obtained if they had engaged in good faith in the diligent
performance of their duties, including the making of such reasonable inquiries
as would a prudent person.
(f) The terms accounts, chattel paper, contract rights, deposit
account, documents, equipment, general intangibles, instruments, investment
property, general intangibles, goods and inventory, as and when used (without
being capitalized) in this Agreement or the Loan Documents, shall have the
meanings given to such terms in the UCC.
Section 1.3 Exhibits and Schedules. All Exhibits and Schedules attached
hereto are by reference made a part hereof.
ARTICLE II
REVOLVING CREDIT FACILITY AND TERM LOAN FACILITY
Section 2.1 Revolving Loan. Subject to the terms and conditions of this
Agreement, the Lender shall make Advances under the Revolving Loan to Borrower
from time to time from the Effective Date to the Termination Date, as Borrower
may request in accordance with SECTION 2.2, in an aggregate principal amount
outstanding not to exceed at any time the LESSER OF (a) the Committed Sum MINUS
the Financial Accommodations Reserve AND MINUS the Reserve, OR (b) the Borrowing
Base. Borrower may borrow, repay and reborrow the principal of the Revolving
Loan in accordance with the terms of this Agreement.
Section 2.2 Advances Under the Revolving Loan. A request for an Advance
under the Revolving Loan shall be made, or shall be deemed to be made, in the
following manner:
(i) Borrower may request an Advance under the Revolving Loan
by notifying the Lender (a "NOTICE OF BORROWING"), before 12:00 noon (Central
time) on the proposed borrowing date, of its intention to borrow and specifying
the effective date and amount of such proposed Advance. Any Notice of Borrowing
may be made by telephone and confirmed in writing (including facsimile) with
each writing being in a form acceptable to the Lender, PROVIDED that the failure
to provide written confirmation shall not invalidate any telephonic notice and,
if such written confirmation differs in any respect from the action taken by the
Lender, the records of the Lender shall control absent manifest error.
(ii) Whenever a check is presented to the Lender for payment
against an account of Borrower maintained with Lender in an amount greater than
the then available balance in such account, such presentation shall be deemed to
be a request for an Advance under the Revolving Loan on the date of such
presentment in an amount equal to the excess of such check over such available
balance, and such request shall be irrevocable. Lender shall not,
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however, have any obligation to make any Advances to cover any overdrafts and
any such Advances shall be made in the sole discretion of Lender.
(iii) Unless payment is otherwise made by the Borrower, the
becoming due of any amount required to be paid under any Loan Document
(including principal and/or interest under the Notes) or of any Obligation shall
be deemed to be a request for an Advance under the Revolving Loan on the due
date in the amount required to pay such amount, and such request shall be
irrevocable.
(iv) Whenever a drawing is made under a Letter of Credit or a
Banker's Acceptance and Borrower fails to reimburse the Lender therefor, such
failure to reimburse shall be deemed to be a request for an Advance under the
Revolving Loan in the amount so unreimbursed.
Section 2.3 Repayment of the Revolving Loan. The Revolving Loan shall
be repaid as follows: (a) the outstanding principal amount of, and all accrued
and unpaid interest on, the Revolving Loan is due and payable on the Termination
Date; (b) if at any time the aggregate unpaid principal amount of the Revolving
Loan exceeds the lesser of (i) the Committed Sum MINUS the Financial
Accommodations Reserve and MINUS the Reserve, or (ii) the Borrowing Base,
Borrower shall repay the Revolving Loan in the amount of such excess, together
with accrued and unpaid interest on the amount repaid to the date of repayment;
and (c) the Borrower hereby instructs the Lender to repay the Revolving Loan on
any day in an amount equal to the amount received by the Lender on such day
pursuant to SECTION 6.3.
Section 2.4 Revolving Note. The Revolving Loan shall be evidenced by
the Revolving Note.
Section 2.5 Term Loan. Upon the terms and conditions of this Agreement,
the Lender agrees to make a Term Loan to Borrower on the Effective Date in the
amount of $4,850,000.
Section 2.6 Repayment of Term Loan. The Term Loan is due and payable as
follows: (i) accrued and unpaid interest, calculated at the rate set forth in
SECTION 3.1, shall be due and payable commencing on MAY 1, 1999, and continuing
on the first (1st) day of each month thereafter, and (ii) principal installments
in the amount of $51,196 each, shall be due and payable commencing on AUGUST 1,
1999, and continuing on the first (1st) day of each month thereafter until APRIL
20, 2002, when the then unpaid balance of Term Loan, together with all accrued
and unpaid interest, shall be due and payable in full.
Section 2.7 Term Note. The Term Loan and the obligation of Borrower to
repay such Loan shall be evidenced by the Term Note.
Section 2.8 Disbursement of Loans. The Borrower hereby irrevocably
authorizes the
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Lender to disburse the proceeds of Loans requested, or deemed to be requested,
pursuant to this ARTICLE II as follows: (i) the proceeds of the Term Loan and
each Advance requested under SECTION 2.2 (i) OR (ii) shall be disbursed by the
Lender in lawful money of the United States of America in immediately available
funds, (A) in the case of the Term Loan and the initial Advance under the
Revolving Loan, in accordance with the terms of the written instructions from
the Borrower to the Lender, and (B) in the case of each subsequent Advance, by
credit to such account of Borrower maintained with Lender or any Affiliate(s) of
Lender as may be agreed upon by Borrower and the Lender from time to time; and
(ii) the proceeds of each Advance requested under SECTION 2.2(iii) OR (iv) shall
be disbursed by the Lender by way of direct payment of the relevant principal,
interest or other Obligation, as the case may be.
Section 2.9 Mandatory Prepayment. Upon any sale by Borrower of any of
its equipment, any and all amounts received by Borrower as proceeds from the
sale of any such equipment shall either (i) be paid, promptly upon receipt by
Borrower, to the Lender, for application to the principal installments of the
Term Loan in the inverse order of maturity, or (ii) be used, promptly upon
receipt by Borrower, for the purchase of replacement equipment free and clear of
any Liens other than the Liens in favor of Lender. Borrower shall also be
obligated to prepay the Term Loan in full together with accrued and unpaid
interest thereon upon any termination of this Agreement pursuant to SECTION 3.5
or otherwise or upon any acceleration of the Term Loan or the Revolving Loans
pursuant to ARTICLE X.
Section 2.10 Financial Accommodations. Upon the terms and conditions of
this Agreement, Lender shall, from time to time, upon request by Borrower, issue
Letters of Credit and Banker's Acceptances for the account of Borrower provided
that (i) the maximum undrawn face amount of all Letters of Credit and Banker's
Acceptances outstanding at any time (including the amount of the requested
Letter of Credit or Banker's Acceptance) shall not exceed $500,000, (ii)
Borrower would be entitled to an advance under SECTION 2.1 in the amount of the
requested Letter of Credit or Banker's Acceptance, (iii) the Letter of Credit or
Banker's Acceptance is for a business purpose, and (iv) any Letter of Credit or
Banker's Acceptance issued hereunder shall terminate on or before the
Termination Date. As a condition to the issuance of any Letter of Credit,
Borrower shall execute and deliver to Lender its customary Letter of Credit
application and shall pay to Lender upon issuance of such Letter of Credit, in
addition to clerical issuance and transaction costs charged by Lender, a Letter
of Credit fee as provided therein, in an amount equal to THREE PERCENT (3%) PER
ANNUM of the unfunded face amount thereof. As a condition to the issuance of any
Banker's Acceptance, Borrower shall execute and deliver to Lender such documents
as it may request and pay to Lender upon the issuance of such Banker's
Acceptance, in addition to clerical issuance and transaction costs charged by
Lender, a Banker's Acceptance fee in the amount required by Lender. Each Letter
of Credit and Banker's Acceptance shall be issued in a form satisfactory to
Lender.
ARTICLE III
GENERAL LOAN PROVISIONS; FEES AND EXPENSES
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Section 3.1 Interest.
(a) Loans. Borrower will pay interest on the unpaid principal amount of
the Revolving Loan and the Term Loan at a rate per annum equal to the LESSER OF
(A) the Maximum Rate, OR (B) Contract Rate, payable monthly in arrears on the
first day of each calendar month commencing May 1, 1999, and computed by
applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding.
(b) Other Obligations. The Borrower shall pay interest on the unpaid
principal amount of each Obligation other than a Loan for each day from the day
such Obligation becomes due and payable until such Obligation is paid at the
LESSER OF (A) the Maximum Rate, OR (B) the Contract Rate, payable on demand.
(c) Default Rate. From and after the occurrence of an Event of Default,
the unpaid principal amount of each Obligation shall, at the option of Lender,
bear interest until paid in full (or, if earlier, until such Event of Default is
cured or waived in writing by the Lender) at a rate per annum equal to the
LESSER OF (A) the Maximum Rate, OR (B) the Default Rate, payable on demand. The
interest rate provided for in this SECTION 3.1(c) shall to the extent permitted
by applicable law apply to and accrue on the amount of any judgment entered by a
court of competent jurisdiction with respect to any Obligation and shall
continue to accrue at such rate during any proceeding described in SECTION
10.1(e) or (f).
(d) Usury Savings Clause. This Agreement, the Notes and all of the
other Loan Documents are intended to be performed in accordance with, and only
to the extent permitted by, all applicable usury laws. If any provision hereof
or of any of the other Loan Documents or the application thereof to any Person
or circumstance shall, for any reason and to any extent, be invalid or
unenforceable, NEITHER THE APPLICATION OF SUCH PROVISION TO ANY OTHER PERSON OR
CIRCUMSTANCE NOR THE REMAINDER OF THE INSTRUMENT IN WHICH SUCH PROVISION IS
CONTAINED SHALL BE AFFECTED THEREBY AND shall be enforced to the greatest extent
permitted by law. It is expressly stipulated and agreed to be the intent of
Lender and Borrower to comply at all times with the usury and other applicable
laws now or hereafter governing the interest payable on the Obligations. If the
applicable law is ever revised, repealed or judicially interpreted so as to
render usurious any amount called for under the Obligations or under any of the
Loan Documents, or contracted for, charged, taken, reserved or received with
respect to the Obligations, or if the acceleration of the maturity of
Obligations, or if any prepayment by Borrower results in Borrower having paid
any interest in excess of that permitted by law, then it is the express intent
of Borrower and Lender that all excess amounts theretofore collected by Lender
be credited on the principal balance of the Obligations (or, if the Obligations
have been paid in full, repaid to Borrower), and the provisions of the Loan
Documents immediately shall be deemed reformed and the amounts thereafter
collectable thereunder reduced, without the
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necessity of the execution of any new document, so as to comply with the then
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder or thereunder. All sums paid, or agreed to be paid, by
Borrower for the use, forbearance, detention, taking, charging, receiving or
reserving to Lender under the Notes or arising under or pursuant to the other
Loan Documents shall, to the maximum 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 rate or amount of interest on
account of such indebtedness does not exceed the usury ceiling from time to time
in effect and applicable to such indebtedness for so long as such indebtedness
is outstanding. To the extent federal law permits Lender to contract for, charge
or receive a greater amount of interest, Lender will rely on federal law instead
of the Texas Finance Code, as supplemented by Texas Credit Title for the purpose
of determining the Maximum Rate. Additionally, to the maximum extent permitted
by applicable law now or hereafter in effect, Lender may, at its option and from
time to time, implement any other method of computing the Maximum Rate under the
Texas Finance Code, as supplemented by Texas Credit Title, or under other
applicable law by giving notice, if required, to Borrower as provided by
applicable law now or hereafter in effect. Notwithstanding anything to the
contrary contained herein or in any of the other Loan Documents, it is not the
intention of Lender to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned interest at the
time of such acceleration.
In no event shall Chapter 346 of the Texas Finance Code (which
regulates certain revolving loan accounts and revolving tri-party accounts)
apply to this Agreement or the Loans. To the extent that Chapter 303 of the
Texas Finance Code is applicable to the Loans or the Notes, the "WEEKLY CEILING"
specified in Chapter 303 is the applicable ceiling; provided that, if any
applicable law permits greater interest, the law permitting the greatest
interest shall apply.
Section 3.2 Fees and Expenses.
(a) Unused Facility Fee. As consideration for the Lender's commitment
hereunder, Borrower agrees to pay to Lender an unused facility fee equal to ONE
QUARTER PERCENT (0.25%) per annum of the average daily unused portion of the
Committed Sum in effect from time to time, payable monthly in arrears, beginning
May 1, 1999, and continuing on the first day of each month thereafter during the
term of this Agreement and on the Termination Date.
(b) Commitment Fee. Subject to SECTION 3.1(d), on the Agreement Date
the Borrower shall pay to the Lender a commitment fee in the amount of $46,875
in consideration for Lender's agreement to make the Loans in accordance with the
terms of this Agreement and in order to compensate the Lender for the costs
associated with the Revolving Loan and the Term Loan. Such fee is in addition to
the expenses that the Borrower has agreed to pay elsewhere in this Agreement.
(c) Letter of Credit and Banker's Acceptance Fees. See SECTION 2.10.
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(d) Early Termination fees. See SECTION 3.5(b).
(e) Expenses. See SECTION 11.2.
(f) General. To the extent permitted under applicable law, Borrower and
Lender agree that all fees are for compensation for Lender's commitment to make
Advances hereunder and for services and are not interest or a charge for the
use, forbearance or detention of money. All fees shall be fully earned by the
Lender when due and shall not be subject to refund or rebate. BORROWER HEREBY
AUTHORIZES THE LENDER TO INCREASE THE PRINCIPAL AMOUNT OF THE REVOLVING LOAN IN
THE AMOUNT OF ANY FEES AND EXPENSES OWED BY THE BORROWER THAT ARE NOT PAID WHEN
DUE.
Section 3.3 Manner of Payment. (a) Each payment by Borrower on account
of the principal of or interest on the Loans or of any fee or other amount
payable to the Lender shall be made not later than 1:00 p.m. (Dallas, Texas
time) on the applicable due date (or if such day is not a Business Day, the next
succeeding Business Day). All payments shall be made to the Lender at the
Lender's Office, in Dollars, in immediately available funds and shall be made
without any setoff, counterclaim or deduction whatsoever.
(b) Borrower hereby irrevocably authorizes the Lender and each
Affiliate of the Lender to charge any account of Borrower maintained with the
Lender or such Affiliate with such amounts as may be necessary from time to time
to pay any Obligations which are not paid when due.
Section 3.4 Records. The date and amount of each Advance made hereunder
and each payment of principal, interest, costs, fees and expenses shall be
maintained by the Lender in its records. All statements of account rendered by
Lender to Borrower relating to the Obligations shall, in the absence of manifest
error, be presumed to be correct unless, within thirty (30) days after receipt
thereof by Borrower, Borrower shall deliver to Lender written objection to such
statement, specifying the errors contained therein.
Section 3.5 Termination of Agreement.
(a) Required Payments. On the Termination Date, the Borrower shall pay
to the Lender (i) the aggregate amount of all Loans outstanding on such date,
(ii) accrued and unpaid interest on such Loans, (iii) all fees accrued and
unpaid pursuant to SECTION 3.2 through the Termination Date, (iv) any amounts
payable to the Lender pursuant to the other provisions of this Agreement,
including, without limitation, SECTIONS 10.2, 11.2 and 11.8, (v) any and all
other Obligations then outstanding, and (vi) an amount equal to the Financial
Accommodations Reserve to be held by the Lender as cash collateral security for
the payment of any outstanding Letter of Credit or Banker's Acceptance. Further,
Borrower shall provide to Lender an
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indemnification agreement in form and substance satisfactory to the Lender with
respect to returned and dishonored items and such other matters as the Lender
shall require.
(b) Early Termination. Upon 60 days prior written notice to the Lender,
the Borrower may terminate this Agreement prior to the Termination Date. If
Borrower terminates this Agreement prior to the Termination Date, Borrower
acknowledges that (i) such termination would result in the loss to Lender of the
benefits of this Agreement and that the damages incurred by Lender as a result
of such termination are and would be difficult of ascertainment, and (ii) no
such termination shall be effective until Borrower has paid to Lender all of the
Obligations in immediately available funds, together with a sum certain as
liquidated damages. Such liquidated damages, being Borrower' and Lender's best
and fairest estimate of Lender's damages caused by such termination, shall be
equal to (i) $75,000 if the termination occurs on or prior to the first
anniversary of the Agreement Date, (ii) $50,000 if the termination occurs after
the first anniversary of the Agreement Date but on or prior to the second
anniversary of the Agreement Date, and (iii) $25,000 if the termination occurs
after the second anniversary of the Agreement Date. Notwithstanding the
foregoing, no early termination fee (other than any unpaid paid fees owed under
SECTION 3.2(b) above) shall be payable in the event that Bank One, Texas, N.A.
corporate banking group refinances the Loans in full with a conventional bank
facility.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 Conditions Precedent. Notwithstanding any other provision
of this Agreement, the Lender's obligation to make the first Advance under the
Revolving Loan or any Advance under the Term Loan is subject to the fulfillment
of each of the conditions precedent set forth in SECTIONS 4.2 and 4.3 prior to
or contemporaneously with the making of such Advance.
Section 4.2 Closing Documents. The Lender shall have received each of
the following, all of which shall be satisfactory in form and substance to the
Lender and its counsel:
(1) This Agreement;
(2) The Notes;
(3) A certified copy of the articles of incorporation, and all
amendments thereto, of Borrower, issued by the Secretary of
State of the state of Borrower's incorporation together with a
certificate of existence and good standing for Borrower issued
by the such Secretary of State or the Comptroller of such
State, as appropriate;
(4) A copy of the bylaws, and all amendments thereto, of Borrower;
(5) Certification of incumbency of all officers of Borrower,
certifying the name and
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signature of each such officer;
(6) Corporate resolutions of Borrower duly adopted by Borrower's
board of directors;
(7) Certification by each jurisdiction in which Borrower is
qualified (or is required to be qualified) as a foreign
corporation to transact business, to the effect that Borrower
is in good standing with respect to payment of franchise and
similar taxes in such states;
(8) All financing statements required by Lender in connection with
perfection of Lender's security interests in the Collateral
and all termination statements and other amendments to
financing statements required by Lender to make Lender's
security interest in the Collateral a first priority (and
only) security interest therein subject, however, to the
Permitted Liens;
(9) Evidence of insurance in compliance with the requirements of
this Agreement and such loss payable endorsements as may be
required by Lender;
(10) Executed landlord's waivers and consents for each location
leased by Borrower and a mortgagee's waiver for each location
owned by Borrower;
(11) A Schedule of Inventory, a Schedule of Accounts and a Schedule
of Equipment, each prepared as of a recent date;
(12) Such Blocked Account Agreements as shall be required by the
Lender duly executed by the applicable Collecting Bank and
Borrower together with such Lockbox agreements as Lender shall
require;
(13) A Borrowing Base Certificate prepared as of the Effective Date
duly executed and delivered by the chief financial officer of
the Borrower;
(14) A letter from Borrower to the Lender requesting the first
Advance under each Loan to Borrower and specifying the method
of disbursement;
(15) Copies of all the financial statements referred to in SECTION
5.1(k) and meeting the requirements thereof;
(16) A certificate of the President of Borrower stating that, to
the best of his knowledge and based on an examination
sufficient to enable him to make an informed statement, (a)
all of the representations and warranties made or deemed to be
made under this Agreement are true and correct as of the
Effective Date, both with and without giving effect to the
Loans to be made at such time and the application of the
proceeds thereof, and (b) no Default or Event of Default has
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occurred and is continuing;
(17) A signed opinion of Mayor, Day, Caldwell and Keeton and such
local counsel as the Lender shall deem necessary or desirable;
(18) Each of the other Loan Documents duly executed by the parties
thereto;
(19) Evidence reasonably satisfactory to Lender that after giving
effect to the transactions contemplated herein that Borrower
is Solvent;
(20) A validity assurance agreement of D. M. Buchanan and D. Eugene
Peters;
(21) Satisfactory review by Lender of all licenses, contracts and
contingent liabilities;
(22) Receipt and approval of the consolidated and consolidating
financial statements for Borrower for the period ending
February 28, 1999;
(23) Borrower shall have not less than $600,000 in excess
availability under the Revolving Facility at closing after
giving effect to the Advances to be made at Closing;
(24) An title insurance policy on the real estate owned by Borrower
and located in Texas and Arkansas, with such exceptions to
title as are acceptable to Lender;
(25) A survey of each tract of real property of Borrower located in
Texas and Arkansas;
(26) A deed of trust or mortgage on each tract of real property
located in Texas and Arkansas granting to Lender a first lien
therein and the deposit with the title company of a sufficient
amount to pay all delinquent real estate taxes on such
properties;
(27) A Subordination Agreement executed by each holder of
Indebtedness for Money Borrowed of Borrower;
(28) An assignment of patents and trademarks assigning to Lender
the patents and trademarks described on SCHEDULE 5.1 (z); and
(29) Such other agreements, documents, instruments, certificates
and financing statements as Lender may require.
Section 4.3 Conditions to Subsequent Advances. The obligation of Lender
to make
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each Advance subsequent to the initial Advance is subject to the following
conditions precedent:
(a) Conditions to First Advance. All of the conditions
precedent set forth in Section 4.2 were satisfied prior to the making
of the initial Advance.
(b) No Defaults. As of the date of the making of the requested
Advance, there exists no Default or Event of Default.
(c) Notice of Borrowing; Borrowing Base Report. Lender shall
have received from Borrower (i) a duly executed Notice of Borrowing
dated as of the date of the requested Advance, and (ii) a Borrowing
Base Certificate executed by Borrower prepared as of a date not more
than five (5) Business Days prior to the date of the requested Advance.
(d) Representations and Warranties. The representations and
warranties contained in ARTICLE V hereof and in each of the other Loan
documents shall be true in all material respects on the date of making
of such Advance, with the same force and effect as though made on and
as of such date.
(f) Adverse Change. No changes having a Material Adverse
Effect (or that could reasonably be expected to cause or have a
Material Adverse Effect) have occurred since the date of the financial
statements referenced in SECTION 5.1(k).
Section 4.4 No Waiver. Except as otherwise set forth in writing, no
Advance shall constitute a waiver of any condition precedent to the obligation
of Lender to make any further Advance or preclude Lender from thereafter
declaring the failure of Borrower to satisfy such condition precedent to be an
Event of Default.
Section 4.5 Conditions Precedent for the Benefit of Lender. All
conditions precedent to the obligation of Lender to make Advances are for the
benefit of Lender.
Section 4.6 Effect of Notice of Borrowing. Each Notice of Borrowing
shall be deemed to be a representation and warranty by Borrower that the matters
set forth in SECTION 4.3 are true and correct as of the date of the requested
Advance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
Section 5.1 Representations and Warranties. The Borrower jointly and
severally represent and warrant to the Lender as follows:
(a) Organization; Power; Qualification. Borrower is a corporation duly
organized,
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validly existing and in good standing under the laws of the state of its
incorporation and is authorized to do business in each other state in which the
nature of its properties or its activities requires such authorization. The
jurisdictions in which Borrower is qualified to do business as a foreign
corporation are listed on SCHEDULE 5.1(a).
(b) Authorization; Enforceability. Borrower has the corporate power and
authority to, and is duly authorized to, execute and deliver the Loan Documents
to be executed by Borrower. All of the Loan Documents to which Borrower is a
party, constitute the legal, valid and binding obligations of Borrower,
enforceable in accordance with their terms, except as limited by bankruptcy,
insolvency or similar laws of general application relating to the enforcement of
creditors' rights generally.
(c) Subsidiaries; Ownership. Except as shown SCHEDULE 5.1(c), Borrower
does not have any Subsidiaries. The outstanding stock of Borrower has been duly
and validly issued and is fully paid and nonassessable and, as of the date
hereof, the number and owners of such shares of capital stock are set forth on
SCHEDULE 5.1(c).
(d) Conflicts. Neither the execution and delivery of the Loan
Documents, nor consummation of any of the transactions therein contemplated nor
compliance with the terms and provisions thereof, will contravene any provision
of law, statute, rule or regulation to which Borrower or any Obligor or is
subject or any judgment, decree, license, order or permit applicable to Borrower
or any Obligor or will conflict or be inconsistent with, or will result in any
breach of any of the terms of the covenants, conditions or provisions of, or
constitute a delay under, or result in the creation or imposition of a Lien
(except Liens in favor of Lender) upon, any of the property or assets of
Borrower or any Obligor pursuant to the terms of any indenture, mortgage, deed
of trust, agreement or other instrument to which Borrower or any Obligor is a
party or by which Borrower or any Obligor may be bound or subject, or violate
any provision of the Articles of Incorporation or bylaws of Borrower or any
Obligor.
(e) Consents, Governmental Approvals, Etc. No Governmental Approval nor
any consent, approval, authorization or order of any third Person (other than
those which have been obtained prior to the date hereof and of which Borrower
have notified Lender in writing on the date of the making of this representation
and warranty) is required in connection with the execution, delivery and
performance by Borrower and each Obligor of the Loan Documents executed by such
Person. Borrower is in compliance with all applicable Governmental Approvals and
in compliance with all other applicable laws including, without limitation, all
Environmental Laws and all applicable occupational health and safety laws the
noncompliance with which would reasonably be expected to have a Material Adverse
Effect.
(f) Business. Borrower is engaged principally in the business of the
manufacture of materials handling equipment and accessories.
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(g) Title; Liens. Except for items described in SCHEDULE 5.1(g) and for
Permitted Liens, all of the properties and assets of Borrower are free and clear
of all Liens and other adverse claims of any nature, and Borrower has good and
marketable title to such properties and assets. Other than financing statements
in favor of Lender, no financing statement is on file under the Uniform
Commercial Code of any state naming Borrower as "Debtor". Each Lien granted, or
intended to be granted, to Lender pursuant to the Loan Documents is a valid,
enforceable, perfected, first priority lien and security interest, subject only
to Permitted Liens.
(h) Indebtedness and Guaranties. Set forth on SCHEDULE 5.1(h) is a
complete and correct listing of all of Borrower's (i) Indebtedness for Money
Borrowed, and (ii) Guaranties. Borrower is not in default of any provision of
any agreement evidencing or relating to such any such Indebtedness or Guaranty.
(i) Suits, Actions, Etc.. Except as disclosed on SCHEDULE 5.1 (i),
there are no actions, suits, or proceedings pending or, to the knowledge of
Borrower, threatened in any court or before or by any Governmental Authority
against or affecting Borrower, any Obligor or any of the Collateral that would
reasonably be expected to have a Material Adverse Effect.
(j) Tax Returns and Payments. All tax returns required to be filed by
Borrower in any jurisdiction have been filed and all taxes (including property
taxes), assessments, fees and other governmental charges upon Borrower or upon
any of its properties, income or franchises have been paid prior to the time
that such taxes could give rise to a lien thereon, except for any such
nonpayment which is at the time permitted under SECTION 7.4.
(k) Financial Condition. Borrower has delivered to Lender copies of (i)
the consolidated balance sheet of Borrower for its fiscal year ending, June 30,
1998, and the related statements of income and retained earnings for the year
ended on such date, and (ii) its unaudited balance sheet as of February 28,
1999, and the related statement of income for the eight month period then ended;
such financial statements fairly present the financial condition of Borrower as
of such date and have been prepared in accordance with GAAP (except for the
omission of footnotes). As of the date hereof, there are no obligations,
liabilities or Indebtedness (including contingent and indirect liabilities and
obligations or unusual forward or long-term commitments) of Borrower which are
not reflected in such financial statements; and no event or circumstance has
occurred since the date of such financial statements which has had or could
reasonably be expected to have a Material Adverse Effect.
(l) ERISA. Neither Borrower nor any Related Company maintains or
contributes to any Benefit Plan other than those listed on SCHEDULE 5.1(l).
Further, (i) no Reportable Event (is defined in ERISA) has occurred and is
continuing with respect to any Benefit Plan, (ii) the PBGC has not instituted
proceedings to terminate any Benefit Plan, (iii) neither Borrower nor any
duly-appointed administrator of any Benefit Plan (A) has incurred any liability
to the PBGC with respect to any Benefit Plan other than for premiums not yet due
or payable, or (B) has
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instituted or intends to institute proceedings to terminate any Benefit Plan
under Sections 4041 or 4041A of ERISA or withdraw from any Multi-Employer
Pension Plan (as that term is defined in Section 3(37) of ERISA), (iv) each
Benefit Plan of Borrower has been maintained and funded in all material respects
in accordance with its terms and with all provisions of ERISA applicable
thereto, and (v) no material liability to the PBGC or to a Multiemployer Plan
has been, or is expected by Borrower to be, incurred by Borrower or any Related
Company.
(m) Defaults. No Default or Event of Default has occurred and is
continuing.
(n) No Untrue Statements. No certificate or statement delivered to
Lender by Borrower or any Obligor in connection herewith contains any untrue
statement of a material fact or fails to state any material fact necessary to
keep the statements contained therein from being materially misleading. To the
best of Borrower's knowledge, there is no existing fact or condition that has
not been disclosed to Lender in writing which could reasonably be expected to
have a Material Adverse Effect.
(o) Solvency. After giving effect to the transactions contemplated by
this Agreement, Borrower is Solvent.
(p) Accounts. All Accounts of Borrower now or hereafter listed or
referred to on any Borrowing Base Certificate delivered to Lender are Eligible
Accounts as of the date of such report unless otherwise indicated in such
report.
(q) Inventory. All inventory included in any Borrowing Base Certificate
is Eligible Inventory, except as disclosed in such Borrowing Base Certificate.
All inventory of Borrower is in good condition and is currently saleable in the
normal course of Borrower's business. Set forth on SCHEDULE 5.1(q) is (i) the
address of each facility at which inventory is located, and (ii) if the facility
is leased or is a third party warehouse or processor location, the name of the
landlord or such third party warehouseman or processor. All inventory is located
on the premises set forth on SCHEDULE 5.1(q) or is in transit to one of such
locations, except as otherwise disclosed in writing to the Lender.
(r) Equipment. All equipment is in good order and repair in all
material respects. Set forth on SCHEDULE 5.1(r) is (i) the address of each
facility at which equipment (other than motor vehicles) is located, and (ii) if
such facility is leased, the name of the landlord. Except as set forth on
SECTION 5.1(r), within the past five (5) years no equipment has been located at
any other location.
(s) Place of Business. The place of business of Borrower (or if
Borrower has more than one place of business, its chief executive office) is at
the address or addresses set forth on SCHEDULE 5.1 (s) and the books and records
relating to the accounts are located at the address or addresses set forth on
SCHEDULE 5.1(s). Except as set forth on SCHEDULE 5.1(s), Borrower has not
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maintained its chief executive office or the books and records relating to any
accounts at any other address at any time during the previous five (5) years.
(t) Corporate and Fictitious Names; Trade Names. Except as disclosed on
SCHEDULE 5.1 (t), Borrower has not, during the five (5) years preceding the date
hereof, (i) been known as or used any other corporate, fictitious or tradenames,
(ii) been the surviving corporation of a merger or consolidation, or (iii)
acquired all or substantially all of the assets of any Person.
(u) Federal Regulations. Borrower is not (i) engaged, principally or as
one of its important activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock" (as each of the quoted
terms is defined or used in Regulations G and U of the Board of Governors of the
Federal Reserve System), or (ii) an "investment company" or a company
"controlled" by an "investment company" (as each of the quoted terms is defined
or used in the Investment Company Act of 1940, as amended).
(v) Employee Relations. Borrower is not aware of any pending,
threatened or contemplated strikes, work stoppage or other labor disputes
involving its employees. Further, Borrower is not a party to any collective
bargaining agreement nor has any labor union been recognized as the
representative of Borrower's employees;
(w) Intellectual Property. Borrower owns or possesses all Intellectual
Property required to conduct its business as now and presently planned to be
conducted without, to its knowledge, conflict with the rights of others, and
SCHEDULE 5.1(z) lists all material Intellectual Property owned by Borrower.
(x) Payroll Taxes. Borrower has made all payroll tax deposits for all
of its employees on or before the date when due. Each Advance for payroll was
for the gross payroll and included the amount of all necessary or appropriate
tax deposits.
(y) Year 2000. Borrower represents and warrants as follows to Lender
that: (i) as of the date of any request for an advance under the Revolving
Credit Facility, (ii) as of the date of any renewal, extension or modification
of the Revolving Credit Facility, and (iii) at all times the Revolving Credit
Facility or Lender's commitment to make advances under the Revolving Credit
Facility is outstanding:
(A) All devices, systems, machinery, information technology,
computer software and hardware, and other date sensitive technology
(jointly and severally the "Systems") necessary for Borrower to carry
on its business as presently conducted and as contemplated to be
conducted in the future are Year 2000 Compliant or will be Year 2000
Compliant within a period of time calculated to result in no material
disruption of any of Borrower's business operations except where a
failure to be Year 2000 Compliant would not reasonably be expected to
have a Material Adverse Effect. For purposes of these
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provisions, "Year 2000 Compliant" means that such Systems are designed
to be used prior to, during and after the Gregorian calendar year 2000
A.D. and will operate during each such time period without error
relating to date data, specifically including any error relating to, or
the product or, date data which represents or references different
centuries or more than one century.
(B) Borrower has:(1) undertaken a detailed inventory, review,
and assessment of all areas within its business and operations that
could be adversely affected by the failure of Borrower to be Year 2000
Compliant on a timely basis; (2) developed a detailed plan and time
line for becoming Year 2000 Compliant on a timely basis, and (3) to
date, implemented that plan in accordance with that timetable in all
material respects.
(C) Borrower has made written inquiry of each of its key
suppliers, vendors, and customers and has obtained written
confirmations from all such persons, as to whether such persons have
initiated programs to become Year 2000 Compliant and on the basis of
such confirmations, Borrower reasonably believes that all such persons
will be or become so compliant. For purposes hereof, "key suppliers,
vendors, and customers" refers to those suppliers, vendors, and
customers of Borrower whose business failure would, with reasonable
probability, result in a Material Adverse Effect. For purposes of this
paragraph, Lender, as a lender of funds under the Revolving Credit
Facility, confirms to Borrower that Lender has initiated its own
corporate-wide Year 2000 program with respect to its lending
activities.
(D) The fair market value of all real and personal property,
if any, pledged to Lender as Collateral to secure the Obligations is
not and shall not be less than currently anticipated and is not subject
to substantial deterioration in value because of the failure of such
Collateral to be Year 2000 Compliant.
Section 5.2 Survival of Representations. All representations and
warranties by Borrower herein shall be deemed to have been made on the Effective
Date and the date of each Advance; provided, however, that representations and
warranties which, by their terms are applicable only to one date shall be deemed
to be made only as of such date. All such representations and warranties shall
survive the execution, delivery and termination of this Agreement, and any
investigation at any time made by or on behalf of Lender shall not diminish
Lender's right to rely thereon.
ARTICLE VI
SECURITY INTEREST AND COLLATERAL COVENANTS
Section 6.1 Security Interest. To secure the payment and performance of
the Obligations, Borrower hereby mortgages, pledges and assigns to the Lender
all of the Collateral of Borrower, and grants to the Lender a security interest
and Lien in and upon, all of the
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Collateral of Borrower.
Section 6.2 Continued Priority of Security Interest. (a) Except as
otherwise consented to in writing by Lender, the security interest of Lender in
the Collateral shall at all times be valid, perfected and enforceable as
security for the Obligations, and the Collateral shall not at any time be
subject to any Liens that are prior to, on a parity with or junior to the
security interest of Lender, other than Permitted Liens.
(b) Borrower shall, at its sole cost and expense, take all actions that
may be necessary or desirable, or that the Lender may reasonably request, to at
all times maintain the validity, perfection, enforceability and first priority
of the security interest of Lender in the Collateral in conformity with the
requirements of SECTION 6.2(a) and to enable the Lender to exercise or enforce
its rights hereunder.
(c) Borrower shall: (i) pay all taxes, assessments and other claims
lawfully levied or assessed on any of the Collateral, except to the extent that
such taxes, assessments and other claims constitute Permitted Liens or are
permitted by SECTION 7.4, (ii) diligently seek to obtain, after the Agreement
Date, landlords', mortgagees' or mechanics' releases, subordinations or waivers,
(iii) deliver to the Lender, endorsed or accompanied by such instruments of
assignment as the Lender may specify, and stamped or marked in such manner as
the Lender may reasonably specify, any and all chattel paper, instruments,
letters and advices of guaranty and documents evidencing or forming a part of
the Collateral, and (iv) execute and deliver financing statements, pledges,
designations, hypothecation, notices and assignments, in each case in form and
substance reasonably satisfactory to the Lender, relating to the creation,
validity, perfection, maintenance or continuation of the security interest of
Lender in the Collateral under the UCC or other applicable law.
Section 6.3 Collection of Accounts. (a) Borrower shall cause all
moneys, checks, notes, drafts and other payments relating to or constituting
proceeds of accounts, or of any other Collateral, to be forwarded to a Lockbox
for deposit in (i) the Collection Account, if such Lockbox is maintained
pursuant to a Lockbox agreement with Lender, and (ii) a Blocked Account, if such
Lockbox is maintained with a Collecting Bank pursuant to a Blocked Account
Agreement, in accordance with the procedures set out in the corresponding
Blocked Account Agreement. In particular, Borrower will (i) advise each Account
Debtor to address to a Lockbox specified by Lender all remittances with respect
to amounts payable on all accounts, and (ii) stamp all invoices relating to any
such amounts with a legend satisfactory to the Lender indicating that payment is
to be made to Borrower via such specified Lockbox.
(b) The Borrower and the Lender shall cause all balances in each
Blocked Account to be transmitted daily to the Collection Account by wire
transfer or depository transfer check or Automated Clearing House transfer in
accordance with the procedures set forth in the corresponding Blocked Account
Agreement. All deposits in the Collection Account shall be
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credited to the payment of the Obligations, on the Business Day of actual
receipt by Lender. Such credits shall be conditioned upon final payment in cash
or solvent credits of the items giving rise to such credits. So long as no
Default or Event of Default has occurred and is continuing, any balance
remaining after payment in full of the Obligations shall be transferred to such
account as the Borrower and the Lender may agree. Notwithstanding that deposits
will be applied to the Obligations on the date of receipt, Lender shall charge
to Borrowers two days' float on all such deposits for purposes of interest
calculations. The charging of float days as aforesaid shall in all respects be
subject to SECTION 3.1(d) and limited so that interest on the Obligations is at
all times less than interest at the Maximum Rate.
(c) Any moneys, checks, notes, drafts or other payments referred to in
CLAUSE (a) of this SECTION 6.3 which are received by or on behalf of Borrower
will be held in trust for the Lender and will be (i) deposited in the Collection
Account, or (ii) delivered to the Lender at the Lender's Office, in each case as
promptly as possible in the exact form received, together with any necessary
endorsements.
Section 6.4 Verification and Notification. The Lender shall have the
right at any time and from time to time (a), in the name of the Lender, an
assumed name of Lender or in the name of Borrower, to verify the validity,
amount or any other matter relating to any accounts by mail, telephone,
facsimile, e-mail, hand delivery or otherwise, and (b) to notify the Account
Debtors of the assignment of such accounts to the Lender and to direct such
Account Debtor to make payment of all amounts due or to become due thereunder
directly to the Lender and, upon such notification and at the expense of the
Borrower, to enforce collection of any such accounts and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as Borrower might have done.
Section 6.5 Disputes, Returns and Adjustments. (a) In the event amounts
due and owing under any account in excess of $75,000 are in dispute between the
Account Debtor and Borrower, Borrower shall provide the Lender with prompt
written notice thereof.
(b) Borrower shall notify the Lender promptly of all returns and
credits in respect of any account, which notice shall specify the accounts
affected and be included in the Borrowing Base Certificate delivered to Lender
in accordance with SECTION 8.3(e). If Borrower becomes aware of any pending
return or credit in excess of $75,000, Borrower shall notify Lender promptly
thereof and shall specify the account affected, the related Account Debtor and
the goods to be returned.
(c) Borrower may, in the ordinary course of business and prior to a
Default or an Event of Default, grant any extension of time for payment of any
account or compromise, compound or settle the same for less than the full amount
thereof or release wholly or partly any Person liable for the payment thereof or
allow any credit or discount whatsoever thereon; PROVIDED that (i) no such
action results in the reduction of the amount payable with respect to
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any account by the lesser of ten percent (10%) or $10,000, and (ii) the Lender
is notified promptly (but not less often than ten (10) days after the end of
each Month) of the amount of such adjustments and the account(s) affected
thereby.
Section 6.6 Invoices. Upon the reasonable request of the Lender,
Borrower shall deliver to the Lender, at the Borrower' expense, copies of
customers' invoices or the equivalent, original shipping and delivery receipts
or other proof of delivery, customers' statements, the original copy of all
documents, including, without limitation, repayment histories and present status
reports, relating to accounts and such other documents and information relating
to the accounts as the Lender shall specify.
Section 6.7 Delivery of Instruments. In the event any account is at any
time evidenced by a promissory note or notes, trade acceptance or any other
instrument for the payment of money, the Borrower will promptly thereafter
deliver such instruments to the Lender, appropriately endorsed to the Lender,
together with all related or supporting documentation.
Section 6.8 Ownership and Defense of Title. (a) Except for Permitted
Liens, Borrower shall at all times be the sole owner of each and every item of
Collateral and shall not grant, create, suffer or permit to exist any Lien on,
or sell, lease, exchange, assign, transfer, or covey title to, or otherwise
dispose of, any of the Collateral or any interest therein, except for (i) sales
of inventory in the ordinary course of business and (ii) dispositions resulting
from casualty or condemnation. The inclusion of "proceeds" of the Collateral
under the security interest of Lender shall not be deemed a consent by+ the
Lender to any other sale or other disposition of any part or all of the
Collateral.
(b) Borrower shall defend its title in and to the Collateral and shall
defend the security interest of Lender in the Collateral against the claims and
demands of all Persons.
(c) Borrower shall (i) protect and preserve all properties material to
its business, including Intellectual Property, and maintain all tangible
property in accordance with prudent business practices, and (ii) from time to
time make or cause to be made all needed and appropriate repairs, renewals,
replacements and additions to such properties necessary for the conduct of its
business.
Section 6.9 Location of Offices and Collateral. Borrower will not
change the location of its place of business (or, if it has more than one place
of business, its chief executive office) or the place where it keeps its books
and records relating to the Collateral or change its name, identity or corporate
structure without giving the Lender 30 days' prior written notice thereof. All
inventory, other than inventory in transit to any such location, and all
equipment, other than motor vehicles, will at all times be kept by the Borrower
at one of the locations set forth in SCHEDULES 5.1(q) and 5.1(r), respectively,
and shall not, without the prior written consent of the Lender, be removed
therefrom except for sales of inventory in the ordinary course of Borrower's
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business and, so long as no Event of Default shall have occurred and be
continuing, sales of equipment permitted under SECTION 2.9.
Section 6.10 Records Relating to Collateral. (a) Borrower will at all
times keep and maintain (i) complete and accurate records of inventory on a
basis consistent with past practices of Borrower, itemizing and describing the
kind, type and quantity of inventory and Borrower's cost therefor and a current
price list for such inventory, (ii) complete and accurate records of all other
Collateral, (iii) a list of all customers of Borrower with names, addresses and
phone numbers, (iv) a list of all distributors for each product line included in
such Borrower's inventory, (v) a current customer open order report against
current inventory, and (vi) a current list of all salesmen and employees of
Borrower. Data bases containing the foregoing shall at all times be accessible
and available to Lender.
(b) Borrower will conduct a physical count of all inventory, wherever
located, at least annually and make adjustments to its books and records to
reflect the findings of such count and such adjustments shall be immediately
reported to Lender.
Section 6.11 Inspection. The Lender (by any of its officers, employees
or agents) shall have the right at any time or times to (a) visit the properties
of Borrower, inspect the Collateral and the other assets of Borrower and inspect
and make extracts from the books and records of Borrower, all during customary
business hours, (b) discuss Borrower's business, financial condition, results of
operations and business prospects with Borrower's (i) principal officers, and
(ii) independent accountants and other professionals providing services to
Borrower, (c) verify the amount, quantity, value and condition of, or any other
matter relating to, any of the Collateral and in this connection to review,
audit and make extracts from all records and files related to any of the
Collateral, and (d) access and copy the records, lists, reports and data bases
referred to in SECTION 6.10. Borrower will deliver to the Lender upon request
any instrument necessary to authorize an independent accountant or other
professional to have discussions of the type outlined above with the Lender or
for the Lender to obtain records from any service bureau maintaining records on
behalf of Borrower.
Section 6.12 Maintenance. Borrower shall maintain in good working order
and condition all of its equipment that is in operating condition on the date
hereof.
Section 6.13 Power of Attorney. Borrower hereby appoints the Lender as
its attorney, with power (a) to endorse the name of Borrower on any checks,
notes, acceptances, money orders, drafts or other forms of payment or security
that may come into the Lender's possession, and (b) to sign the name of Borrower
on any invoice or bill of lading relating to any accounts, inventory or other
Collateral, on any drafts against customers related to letters of credit, on
schedules and assignments of accounts furnished to the Lender by Borrower, on
notices of assignment, financing statements and other public records relating to
the perfection or priority of the security interest of Lender or verifications
of account and on notices to or from customers.
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Section 6.14 Notice of Litigation and Other Matters. Borrower shall
provide to Lender prompt notice of:
(a) the commencement, to the extent Borrower is aware of the same, of
all proceedings and investigations by or before any governmental or
nongovernmental body and all actions and proceedings in any court or before any
arbitrator against or in any other way relating adversely to, or adversely
affecting, Borrower or any Affiliate of Borrower or any of their respective
property, assets or businesses which could reasonably be expected to, singly or
in the aggregate, have a Material Adverse Effect,
(b) any amendment of the articles of incorporation or by-laws of
Borrower,
(c) any change in the business, financial condition, results of
operations or business prospects of Borrower or any Affiliate of Borrower which
has had or could reasonably be expected to have any Material Adverse Effect and
any change in the executive officers of Borrower, and
(d) any (i) Default or Event of Default, or (ii) event that, with the
passage of time or giving of notice or both, would constitute a default or event
of default by Borrower under any material agreement (other than this Agreement)
to which Borrower is a party or by which Borrower or any of its property may be
bound.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as this Agreement shall be in effect or any of the Obligations
shall be outstanding, Borrower covenants and agrees as follows:
Section 7.1 Preservation of Corporate Existence and Similar Matters.
Borrower shall preserve and maintain its corporate existence, rights,
franchises, licenses and privileges in the jurisdiction of its incorporation and
qualify and remain qualified as a foreign corporation and authorized to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification or authorization including,
without limitation, the jurisdictions described on SCHEDULE 5.1(a).
Section 7.2 Compliance with Applicable Law. Borrower shall comply with
all applicable laws relating to Borrower except where noncompliance would not
reasonably be expected to have a Material Adverse Effect.
Section 7.3 Conduct of Business. Borrower shall engage only in
substantially the same businesses conducted by Borrower on the Effective Date.
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Section 7.4 Payment of Taxes and Claims. Borrower shall pay or
discharge when due (a) all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or upon any properties belonging
to it, and (b) all lawful claims of materialmen, mechanics, carriers,
warehousemen and landlords for labor, materials, supplies and rentals which, if
unpaid, might become a Lien on any properties of Borrower, EXCEPT that this
SECTION 7.4 shall not require the payment or discharge of any such tax,
assessment, charge, levy or claim which is being contested in good faith by
appropriate proceedings and for which adequate reserves have been established on
the appropriate books.
Section 7.5 Accounting Methods and Financial Records. Borrower shall
maintain a system of accounting, and keep such books, records and accounts
(which shall be true and complete), as may be required or as may be necessary to
permit the preparation of financial statements in accordance with GAAP
consistently applied.
Section 7.6 Use of Proceeds. Borrower shall (a) use the proceeds of (i)
the first Advance and the Term Loan to pay the amounts indicated in SCHEDULE 7.6
to the Persons indicated therein, and (ii) all subsequent Advances under the
Revolving Loan only for working capital and general business purposes, and (b)
not use any part of such proceeds to purchase or carry, or to reduce or retire
or refinance any credit incurred to purchase or carry, any margin stock (within
the meaning of Regulation G or U of the Board of Governors of the Federal
Reserve System) or for any other purpose which would involve a violation of such
Regulation G or U or Regulation T or X of such Board of Governors or for any
other purpose prohibited by law or by the terms and conditions of this
Agreement.
Section 7.7 Hazardous Waste and Substances; Environmental Requirements.
(a) Borrower shall (i) except where noncompliance would not reasonably be
expected to have Material Adverse Effect, comply with all laws, governmental
standards and regulations applicable to Borrower or to any of its assets in
respect of occupational health and safety laws, rules and regulations and
Environmental Laws, (ii) promptly notify the Lender of its receipt of any notice
of a violation of any such law, rule, standard or regulation, and (iii)
indemnify and hold the Lender harmless from all loss, cost, damage, liability,
claim and expense incurred by or imposed upon the Lender on account of
Borrower's failure to perform its obligations under this SECTION 7.7.
(b) Whenever Borrower gives notice to the Lender pursuant to this
SECTION 7.7, Borrower shall, at the Lender's request and Borrower' expense, (i)
cause an independent environmental engineer acceptable to the Lender to conduct
such tests of the site where the noncompliance or alleged noncompliance with
Environmental Laws has occurred and prepare and deliver to the Lender a report
setting forth the results of such tests, a proposed plan to bring Borrower into
compliance with such Environmental Laws and an estimate of the costs thereof,
and (ii) provide to the Lender a supplemental report of such engineer whenever
the scope of the
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noncompliance or the response thereto or the estimated costs thereof shall
materially change.
Section 7.8 Accuracy of Information. All written information, reports,
statements and other papers and data furnished to the Lender shall be, at the
time the same is so furnished, complete and correct in all material respects to
the extent necessary to give the Lender true and accurate knowledge of the
subject matter; provided, however, that with respect to any forecast or
projection, such forecast or projection shall be based upon reasonable
assumptions made by Borrower.
Section 7.9 Revisions or Updates to Schedules. Should any of the
information or disclosures provided on any of the Schedules originally attached
hereto become outdated or incorrect in any material respect, Borrower shall
provide promptly to the Lender such revisions or updates to such Schedule(s) as
may be necessary or appropriate to update or correct such Schedule(s); PROVIDED
that no such revisions or updates to any Schedule(s) shall be deemed to have
cured any breach of warranty or representation resulting from the inaccuracy or
incompleteness of any such Schedule(s) unless and until the Lender, in its sole
discretion, shall have accepted in writing such revisions or updates to such
Schedule(s).
Section 7.10 ERISA. Borrower shall provide to Lender, as soon as
possible and in any event within 30 days after the date that: (a) any
Termination Event with respect to a Benefit Plan has occurred or will occur, (b)
the aggregate present value of the Unfunded Vested Accrued Benefits under all
Plans has increased to an amount in excess of $0, or (c) Borrower is in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan required by reason of its complete or partial withdrawal
(as described in Section 4203 or 4205 of ERISA) from such Multiemployer Plan, a
certificate of the President or the chief financial officer of Borrower setting
forth the details of such of the events described in CLAUSES (a) through (c) as
applicable and the action which is proposed to be taken with respect thereto
and, simultaneously with the filing thereof, copies of any notice or filing
which may be required by the PBGC or other agency of the United States
government with respect to such of the events described in CLAUSES (a) through
(c) as applicable.
Section 7.11 Insurance. Borrower shall keep or cause to be kept
adequately insured by financially sound and reputable insurers all of its
property usually insured by persons or entities engaged in the same or similar
businesses. Without limiting the foregoing, Borrower shall insure the Collateral
and all real estate and improvements owned by Borrower against loss or damage by
fire, theft, burglary, pilferage, business interruption and such other hazards
as usual and customary in Borrower's industry, and all premiums thereon shall be
paid by Borrower and copies of the policies delivered to Lender. If Borrower
fails to do so, Lender may procure such insurance and charge the cost to
Borrower's account. Each policy of insurance covering the Collateral and/or real
estate and improvements shall provide that at least ten (10) days prior written
notice of cancellation or notice of lapse must be given to Lender by the
insurer. All insurance policies required under this SECTION 7.11 shall name the
Lender as an additional named
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insured and shall contain loss payable endorsements in the form provided by the
Lender. So long as no Event of Default has occurred and is continuing, (i)
proceeds of insurance in respect of a loss of $300,000 or less shall be remitted
to Borrower to rebuild, restore or replace the damaged or destroyed property,
and (ii) proceeds of insurance in respect of a loss of more than $300,000 shall
be paid to Lender and, at its option, either (A) used to rebuild, restore or
replace the damaged or destroyed property, or (B) applied to the payment or
prepayment of the Obligations in such order as Lender may require. After the
occurrence and during the continuation of an Event of Default, all insurance
proceeds shall be, at the option of the Lender in its sole discretion, either
(i) applied to rebuild, restore or replace the damaged or destroyed property, or
(ii) applied to the payment or prepayment of the Obligations.
Section 7.12 Payroll Taxes. Borrower shall at all times make all
payroll tax deposits for all of its employees on or before the date when due.
Further, Borrower understands and agrees that Advances for payroll shall only be
made for "gross payroll", which shall include all necessary or appropriate
payroll tax deposits.
Section 7.13 Year 2000. Borrower covenants and agrees with Lender that,
while any Obligations are outstanding or while the Revolving Credit Facility is
in effect, Borrower will:
(a) Furnish such additional information, statements and other reports
with respect to Borrower's activities, course of action and progress towards
become Year 2000 Compliant as Lender may request from time to time.
(b) In the event of any change in circumstances that causes or will
likely cause any of Borrower's representations and warranties with respect to
its being or become Year 2000 Compliant to no longer be true (hereinafter,
referred to as a "Change in Circumstances") then Borrower shall promptly, and in
any event within ten (10) days of receipt of information regarding a Change in
Circumstance, provide Lender with written notice (the "Notice") that describes
in reasonable detail the Change in Circumstances and how such Change in
Circumstances caused or will likely cause Borrower's representations and
warranties with respect to being or become Year 2000 Compliant to no longer be
true. Borrower shall, within ten (10) days of a request, also provide Lender
with any additional information Lender requests of Borrower in connection with
the Notice and /or Change in Circumstances.
(c) Promptly upon its becoming available, furnish to Lender one copy of
each financial statement, report, notice, or proxy statement sent by Borrower to
stockholders generally and of each regular or periodic report, registration
statement or prospectus filed by Borrower with any securities exchange or the
Securities and Exchange Commission or any successor agency, and of any order
issued by any Governmental Authority in any proceeding to which Borrower is a
party. For purposes of these provisions, "Governmental Authority" shall mean any
government (or any political subdivision or jurisdiction thereof), court,
bureau, agency or other governmental entity having or asserting jurisdiction
over Borrower or any of its business, operations or properties.
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(d) Give any representative of Lender access during all business hours
to, and permit such representative to examine, copy or make excerpts from any
and all books, records and documents in the possession of Borrower and relating
to its affairs, and to inspect any of the properties and Systems of Borrower,
and to project test the Systems to determine if they are Year 2000 Compliant in
an integrated environment, all at the sole cost and expense of Lender.
Section 7.14 Key Man Life Insurance. Within thirty (30) days after the
date hereof, Borrower shall deliver to Lender (i) the originals of key man life
insurance polices in the amount of $1,000,000 on each of D. M. Buchanan and G.
E. Peters, and (ii) an assignment of such policies duly executed by the issuer
thereof and D. M. Buchanan and G. E. Peters. Further, Borrower shall at all
times maintain such policies in full force and effect.
Section 7.15 Audited Financial Statements; Patent and Trademark Search;
Flood Insurance. Within thirty (30) days after the date hereof, Borrower shall
deliver to Lender (i) the audited, consolidated balance sheet of Borrower for
its fiscal year ending June 30, 1998, and the related statements of income and
retained earnings for the year ended on such date, certified by independent
public accountants to Borrower without qualification, (ii) a search of the U.S.
Patent and Trademark Office showing title to the patents and trademarks on
SCHEDULE 5.1 (z) to be in Borrower, free and clear of any Liens, or, in the
event there exist any Liens, releases thereof, and (iii) an opinion from
Borrower's counsel that this Agreement and the Notes Constitute "Debt
Agreements" under the Borrower's Series D Preferred Stock, in form and substance
acceptable to Lender.
ARTICLE VIII
FINANCIAL AND COLLATERAL REPORTING
So long as this Agreement shall be in effect or any of the Obligations
shall be outstanding, the Borrower shall furnish to the Lender at the Lender's
Office:
Section 8.1 Financial Statements.
(a) Audited Year-End Statements. As soon as available, but in any event
within one hundred twenty (120) days after the end of each fiscal year of
Borrower, copies of the audited consolidated balance sheet of Borrower and its
Subsidiaries as of the end of such fiscal year and the related audited
statements of income, shareholders' equity and cash flow for such fiscal year,
in each case setting forth in comparative form the figures for the previous year
of Borrower and each of its Subsidiaries and certified by independent certified
public accountants selected by Borrower and acceptable to the Lender.
(b) Monthly Financial Statements. As soon as available, but in any
event within thirty (30) days after the end of each month of Borrower, copies of
the unaudited consolidated
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balance sheet of Borrower and its Subsidiaries as of the end of such month and
the related unaudited income statement for Borrower and its Subsidiaries for
such month and for the portion of the fiscal year of Borrower through such
month, certified by the chief financial officer of Borrower as presenting fairly
the financial condition and results of operations of the Borrower and its
Subsidiaries as of the date thereof and for the periods ended on such date,
subject to normal year end adjustments.
(c) Projected Financial Statements. Within 60 days prior to the end of
each fiscal year of Borrower, forecasted financial statements, prepared by
Borrower, consisting of consolidated and consolidating balance sheets, cash flow
statements and income statements of Borrower and its Subsidiaries, reflecting
projected borrowing hereunder and setting forth the assumptions on which such
forecasted financial statements were prepared, covering the one-year period
until the next fiscal year end.
All financial statements referred to in CLAUSES (a) and (b) shall be complete
and correct in all material respects and shall be prepared in accordance with
GAAP (except, with respect to interim financial statements, for the omission of
footnotes) applied consistently throughout the periods reflected therein. The
projections set forth in CLAUSE (c) above shall be based upon reasonable
assumptions made by Borrower as of the date of such projections.
Section 8.2 Compliance Certificate. Together with each delivery of
financial statements required by SECTION 8.1(a) and (b), a certificate of
Borrower's President or chief financial officer in substantially the form of
EXHIBIT B (a) stating that, based on an examination sufficient to enable him to
make an informed statement, no Default or Event of Default exists or, if such is
not the case, specifying such Default or Event of Default and its nature, when
it occurred, whether it is continuing and the steps being taken by the Borrower
with respect to such Default or Event of Default, and (b) setting forth the
calculations necessary to establish whether or not the Borrower were in
compliance with the covenants contained in SECTIONS 9.1(a), (b), (c), 9.2 AND
9.3 as of the date of such statements.
Section 8.3 Collateral Information and Reports.
(a) Schedules of Accounts. Not less often than fifteen (15) days after
the end of each calendar month, a Schedule of Accounts listing all accounts of
Borrower as of the last Business Day of such month setting forth (A) the name of
each Account Debtor together with account balances detailed by invoice number,
amount (and any applicable rebate or discount), invoice date and terms, (B)
aging of all accounts setting forth accounts thirty (30) days old or less,
accounts over thirty (30) days but less than sixty-one (61) days old, accounts
over sixty (60) days but less than ninety-one (91) days old, accounts over
ninety (90) days old and less than one hundred twenty-one (121) days and
accounts over one hundred twenty (120) days old, and (C) a reconciliation of the
Schedule of Accounts to the Lender's loan ledger report and Borrower' month-end
general ledger and monthly financial statement.
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(b) Schedules of Accounts Payable. Not less often than fifteen (15)
days after the end of each calendar month, a statement of accounts payable of
Borrower as of the last Business Day of such month setting forth (A) a detailed
aged trial balance of all Borrower's then existing accounts payable, specifying
the name of and the balance due to each creditor, and (B) a reconciliation to
the schedule of accounts payable delivered in respect of the next preceding
month.
(c) Schedule of Inventory. Not less often than fifteen (15) days after
the end of each calendar month, (i) a Schedule of Inventory, based upon
Borrower' perpetual inventory, as of the last Business Day of such month,
itemizing by description, part number, quantity and location all inventory of
Borrower and the cost thereof and, if the foregoing is not available on computer
disk, a summary of inventory by category, (ii) a detailed statement of all
inventory that is not located on the premises described on SCHEDULE 5.1(q),
(iii) an inventory turnover report, in form and substance acceptable to Lender,
and (iv) a reconciliation of the Schedule of Inventory to the Lender's loan
ledger report and Borrower's general ledger.
(d) Borrowing Base Certificate. Not less often than five (5) days after
the last Business Day of each week, a Borrowing Base Certificate, along with
supporting documentation, in form and substance satisfactory to Lender
(including but not limited to information on sales, credit, collections,
adjustments and inventory changes), prepared as of the close of business on the
last Business Day of such week signed by the president, chief financial officer
or treasurer of Borrower, which Borrowing Base Certificate upon delivery shall
be deemed to (i) reaffirm Borrower's compliance with all covenants,
representations, and warranties in this Agreement and (ii) confirm to be true,
correct and complete all supporting documentation and schedules as of the date
indicated thereon.
(e) Other Information. The Lender may, in its discretion, from time to
time require the Borrower to deliver the schedules and certificates described in
SECTION 8.3 more or less often and on different schedules than specified in such
Section, and the Borrower shall comply with such requests. Borrower shall also
furnish to the Lender such other information with respect to the Collateral as
the Lender may from time to time reasonably request.
Section 8.4 Copies of Other Reports. (a) Promptly upon receipt thereof,
copies of all reports, if any, submitted to Borrower or its Board of Directors
by its independent public accountants, including, without limitation, all
management reports.
(b) From time to time and promptly upon each request, such forecasts,
data, certificates, reports, statements, documents or further information
regarding the business, assets, liabilities, financial condition, results of
operations or business prospects of Borrower as the Lender may reasonably
request.
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ARTICLE IX
NEGATIVE COVENANTS
So long as this Agreement shall be in effect or any of the Obligations
shall be outstanding, Borrower covenants and agrees that it shall not, directly
or indirectly:
Section 9.1 Financial Ratios.
(a) Leverage Ratio. Permit the ratio of (i) the Borrower's consolidated
total Liabilities minus Subordinated Indebtedness, to (ii) Borrower's
consolidated Tangible Net Worth as of the last day of any fiscal quarter, to be
greater than 3.50 to 1.
(b) Minimum Fixed Charge Coverage Ratio. Permit, as of the last day of
any fiscal quarter during any period set forth below, Borrower's Fixed Charge
Coverage Ratio for the three consecutive months ending with such quarter end, to
be less the ratio set forth opposite such period below:
<TABLE>
<CAPTION>
Period Fixed Charge Coverage Ratio
------ ---------------------------
<S> <C>
April 1, 1999 through June 30, 1999 0.80 to 1.0
July 1, 1999 through September 30, 1999 1.10 to 1.0
October 1, 1999 through December 31, 1999 1.15 to 1.0
March 31, 2000 and each quarter thereafter 1.25 to 1.0
</TABLE>
(c) Minimum Tangible Net Worth. Permit, as of the last day of any
fiscal quarter during any period set forth below, the consolidated Tangible Net
Worth of Borrower to be less than the amount set forth opposite such period
below:
<TABLE>
<CAPTION>
Period Tangible Net Worth
------ ------------------
<S> <C>
Effective Date through December 31, 1999 $6,750,000
January 1, 2000 and thereafter $7,000,000
</TABLE>
In the event any change in GAAP shall materially alter the calculation of the
financial covenants in this SECTION 9.1, the parties shall negotiate in good
faith to make any adjustments to such covenants as are necessary or appropriate
so that such covenants, after giving effect to any change in GAAP, are
substantially comparable to those in effect prior to such change.
Section 9.2 Investments. Acquire any Investment or permit any
Investment to be outstanding, other than Permitted Investments.
Section 9.3 Prohibited Distributions and Payments, Etc. Declare or make
any
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Prohibited Distribution or Prohibited Payment.
Section 9.4 Indebtedness. Except as disclosed on SCHEDULE 9.4, create,
assume, or otherwise become or remain obligated in respect of, or permit or
suffer to exist or to be created, assumed or incurred or to be outstanding any
Indebtedness for Money Borrowed, except for Permitted Indebtedness.
Section 9.5 Liens. Create, assume or permit or suffer to exist or to
be created or assumed any Lien on any of the property or assets of the Borrower,
real, personal or mixed, tangible or intangible, except for Permitted Liens or
the liens identified on SCHEDULE 5.1(g).
Section 9.6 Merger, Consolidation, Sale of Assets, Acquisitions. Merge
or consolidate with any other Person or sell, lease or transfer or otherwise
dispose of all or a substantial portion of Borrower's assets to any Person or
acquire all or substantially all of the assets of any Person or the assets
constituting the business or a division or operating unit of any Person.
Section 9.7 Transactions with Affiliates. Except for Permitted
Investments, effect any transaction with any Affiliate on a basis less favorable
to the Borrower than would be the case if such transaction had been effected
with a Person not an Affiliate; provided, that Borrower shall not enter into any
lease with any Affiliate.
Section 9.8 Guaranties. Become or remain liable with respect to any
Guaranty of any obligation of any other Person.
Section 9.9 Officers' Salaries. Permit the base salary, plus bonuses,
of any non-sales executive of Borrower to exceed one hundred twenty percent
(120%) of the base salary, plus bonus paid to such executive for the prior
fiscal year; provided, however, so long as no Event of Default has occurred and
is continuing, Borrower may pay salaries to such executives of up to one hundred
twenty percent (120%) of the base salary paid for the prior fiscal year, plus
bonuses under the Borrower's incentive compensation program, a copy of which has
been provided to Lender.
Section 9.10 Benefit Plans. Permit, or take any action which would
result in, the aggregate present value of the Unfunded Vested Accrued Benefits
under all Benefit Plans of the Borrower to exceed $0.
Section 9.11 Sales and Leasebacks. Enter into any arrangement with any
Person providing for the leasing from such Person of real or personal property
which has been or is to be sold or transferred, directly or indirectly, by the
Borrower to such Person.
Section 9.12 Ineligible Securities. Use any portion of any advance or
loan made under this Agreement to purchase, directly or indirectly, ineligible
securities, as defined by applicable
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regulations of the Federal Reserve Board, underwritten by any Affiliate of Banc
One Corporation during the underwriting period and for 30 days thereafter.
Section 9.13 Management Fees. Directly or indirectly pay or agree to
pay any management or similar fees to any Person except as provided in the
Consulting Agreement dated as of June 19, 1996 between Borrower and Golub
Advisors Incorporated.
ARTICLE X
DEFAULT
Section 10.1 Events of Default. Each of the following events shall
constitute an Event of Default:
(a) The failure or refusal of Borrower to make any payment of
the Obligations when due;
(b) The failure of Borrower or any Obligor to timely and
properly observe, keep or perform any covenant, agreement, warranty or
condition (i) in this Agreement, or (ii) in any of the other Loan
Documents;
(c) The occurrence of an event of default under any of the
other Loan Documents;
(d) Any representation made by Borrower or any Obligor
contained herein or contained in any of the other Loan Documents is
false or misleading in any material respect as of the date made or
deemed made;
(e) Borrower or any Obligor shall (i) apply for or consent to
the appointment of a receiver, trustee, custodian, intervenor or
liquidator of such Person or of all or a substantial part of such
Person's assets, (ii) file a voluntary petition in bankruptcy, (iii)
admit in writing that such Person is unable to pay such Person's debts
as they become due, (iv) make a general assignment for the benefit of
creditors, (v) file a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy or
insolvency proceeding, or (vii) take corporate or partnership action
for the purpose of effecting any of the foregoing;
(f) An involuntary petition or complaint shall be filed
against Borrower or any Obligor seeking bankruptcy or reorganization of
such Person or the appointment of a receiver, custodian, trustee,
intervenor or liquidator of such Person, or of all or substantially all
of such Person's assets, and such petition or complaint shall not have
been dismissed within sixty (60) days of the filing thereof; or an
order, order for relief, judgment or decree shall be entered by any
court of competent jurisdiction or other
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competent authority approving a petition or complaint seeking
reorganization of such intervenor or liquidator of such Person, or of
all or substantially all of such Person's assets;
(g) the failure of Borrower or any Obligor to pay any final,
nonappealable money judgment against such Person at least thirty (30)
days prior to the date on which such Person's assets may be sold to
satisfy such judgment;
(h) the failure, within a period of ten (10) days after the
commencement thereof, to have discharged or stayed any attachment,
sequestration, or similar proceedings against Borrower's or any
Obligor's assets;
(i) The filing of a tax lien notice (regarding taxes in excess
of $25,000) by the United States, any state or any governmental
subdivision thereof against any of the property of Borrower or any
Obligor;
(j) The occurrence of a default or event of default under any
other Indebtedness of Borrower or any Obligor (other than the
Subordinated Indebtedness) which Indebtedness exceeds $75,000 or under
any agreement relating thereto or the occurrence of any event or
condition which, with the giving of notice or lapse of time or both,
could become a default or event of default under such other
Indebtedness or related agreement;
(k) a default by Borrower under the Subordinated Indebtedness
which is not cured within the time period provided therefor, if any,
unless such default is waived in writing or otherwise ceases to exist;
(l) the occurrence of a default or event of default under any
agreements, leases, indebtedness or other obligations in excess of
$75,000 between Borrower or any Obligor and Lender or between Borrower
or any Obligor and any Affiliate of Lender;
(m) Lender shall cease to have a valid, perfected and first
priority Lien on any of the Collateral, except as otherwise expressly
permitted herein or consented to in writing by Lender;
(n) (i) Any Termination Event with respect to a Benefit Plan
of Borrower shall occur that, after taking into account the excess, if
any, of (A) the fair market value of the assets of any other Benefit
Plan of Borrower with respect to which a Termination Event occurs on
the same day (but only to the extent that such excess is the property
of Borrower) over (B) the present value on such day of all vested
nonforfeitable benefits under such other Benefit Plan, results in an
Unfunded Vested Accrued Benefit in excess of $0, (ii) any Benefit Plan
of Borrower shall incur an "accumulated funding deficiency"
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(as defined in Section 412 of the Code or Section 302 of ERISA) for
which a waiver has not been obtained in accordance with the applicable
provisions of the Code and ERISA, or (iii) Borrower is in "default" (as
defined in Section 4219(c)(5) of ERISA) with respect to payments to a
Multiemployer Plan resulting from Borrower's complete or partial
withdrawal (as described in Section 4203 or 4205 of ERISA) from such
Multiemployer Plan;
(o) D. M. Buchanan, D. E. Peters and the holders of the
Subordinated Indebtedness, collectively, shall cease to own a majority
of stock in Borrower (including stock that has been issued following
the exercise or conversion of any warrants or convertible securities
owned by such Persons); or
(p) D. M. Buchanan shall for any reason cease to be the President
of Borrower, or D. E. Peters shall for any reason cease to be the Chief
Financial Officer of Borrower and 60 days shall have elapsed during
which time no replacement reasonably satisfactory to the Lender shall
have been appointed.
Section 10.2 Remedies.
(a) Automatic Acceleration and Termination of Facilities. Upon the
occurrence of an Event of Default specified in SECTION 10.1(e) or (f), (i) the
principal of and the interest on the Loans and the Notes at the time
outstanding, and all other amounts owed to the Lender under this Agreement or
any of the Loan Documents and all other Obligations, shall thereupon become due
and payable without presentment, demand, protest, notice of protest and
non-payment, notice of default, notice of acceleration or intention to
accelerate, or other notice of any kind, all of which are expressly waived,
anything in this Agreement or any of the Loan Documents to the contrary
notwithstanding, and (ii) the Revolving Credit Facility and the commitment of
the Lender to make advances thereunder or under this Agreement shall immediately
terminate.
(b) Other Remedies. If any Event of Default (other than as specified in
SECTION 10.1(e) or (f)) shall have occurred and be continuing, the Lender, in
its sole and absolute discretion, may do any of the following:
(i) declare the principal of and interest on the Loans and the
Notes at the time outstanding, and all other amounts owed to the Lender
under this Agreement or any of the Loan Documents and all other
Obligations, to be forthwith due and payable, whereupon the same shall
immediately become due and payable without presentment, demand,
protest, notice of protest and non-payment, notice of default, notice
of acceleration or intention to accelerate, or other notice of any
kind, all of which are expressly waived, anything in this Agreement or
the Loan Documents to the contrary notwithstanding; and
(ii) terminate the Revolving Credit Facility and any commitment of
the Lender to make advances hereunder.
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(c) Further Remedies. If any Event of Default shall have occurred and
be continuing, the Lender, in its sole and absolute discretion, may do any of
the following:
(i) notify, or request Borrower to notify, in writing or otherwise,
any Account Debtor or obligor with respect to any one or more of the
accounts to make payment to the Lender or any agent or designee of the
Lender, at such address as may be specified by the Lender, and, if,
notwithstanding the giving of any notice, any Account Debtor or other
such obligor shall make payments to Borrower, Borrower shall hold all
such payments it receives in trust for the Lender, without commingling
the same with other funds or property of, or held by, Borrower and
shall deliver the same to the Lender or any such agent or designee
immediately upon receipt by Borrower in the identical form received,
together with any necessary endorsements;
(ii) settle or adjust disputes and claims directly with Account
Debtors and other obligors on accounts for amounts and on terms which
the Lender reasonably considers advisable and in all such cases only
the net amounts received by the Lender in payment of such amounts,
after deductions of costs and attorneys' fees, shall constitute
Collateral, and the Borrower shall have no further right to make any
such settlements or adjustments or to accept any returns of
merchandise;
(iii) enter upon any premises on which any Collateral may be
located and, without resistance or interference by Borrower, take
physical possession of any or all thereof and maintain such possession
on such premises or move the same or any part thereof to such other
place or places as the Lender shall choose, without being liable to the
Borrower on account of any loss, damage or depreciation that may occur
as a result thereof, so long as the Lender shall act reasonably and in
good faith;
(iv) require the Borrower to, and Borrower shall, without charge to
the Lender, assemble the Collateral and maintain or deliver it into the
possession of the Lender or any agent or representative of the Lender
at such place or places as the Lender may designate;
(v) at the expense of the Borrower, cause any of the inventory and
equipment to be placed in a public or field warehouse, and the Lender
shall not be liable to the Borrower on account of any loss, damage or
depreciation that may occur as a result thereof, so long as the Lender
shall act reasonably and in good faith;
(vi) without notice, demand or other process, and without payment
of any rent or any other charge, enter Borrower's premises and, without
breach of the peace, until the Lender completes the enforcement of its
rights in the Collateral, take possession of such premises or place
custodians in exclusive control thereof, remain on such premises and
use the same and any of Borrower's equipment, for the purpose of (A)
completing any
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work in process, preparing any inventory for disposition and disposing
thereof, and (B) collecting any account, and the Lender is hereby
granted a license or sublicense and all other rights as may be
necessary, appropriate or desirable to use the Intellectual Property in
connection with the foregoing, and the rights of Borrower under all
licenses and franchise agreements shall inure to the Lender's benefit
(provided, however, that any use of any federally registered trademarks
as to any goods shall be subject to the control as to the quality of
such goods of the owner of such trademarks and the goodwill of the
business symbolized thereby);
(vii) exercise any and all of its rights under any and all of the
Loan Documents;
(viii) apply any cash Collateral to the payment of the Obligations
in any order in which the Lender may elect or use such cash in
connection with the exercise of any of its other rights hereunder or
under any of the Loan Documents;
(ix) establish or cause to be established one or more Lockboxes or
other arrangement for the deposit of proceeds of accounts, and, in such
case, Borrower shall cause to be forwarded to the Lender at the
Lender's Office, on a daily basis, copies of all checks and other items
of payment and deposit slips related thereto deposited in such
Lockboxes, together with collection reports in form and substance
satisfactory to the Lender; and
(x) exercise all of the rights and remedies of a secured party
under the UCC (whether or not the UCC is applicable) and under any
other applicable law, including, without limitation, the right, without
notice except as specified below and with or without taking the
possession thereof, to repossess the Collateral and to sell the
Collateral or any part thereof in one or more parcels at public or
private sale, at any location chosen by the Lender, for cash, on credit
or for future delivery and at such price or prices and upon such other
terms as the Lender may deem commercially reasonable. Borrower agrees
that, to the extent notice of sale shall be required by law, at least
10 DAYS' NOTICE to Borrower of the time and place of any public sale or
the time after which any private sale is to be made shall constitute
reasonable notice, but notice given in any other reasonable manner or
at any other reasonable time shall also constitute reasonable
notification. The Lender shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Lender
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 10.3 Application of Proceeds. All proceeds from each sale of,
or other realization upon, all or any part of the Collateral following an Event
of Default shall be applied or paid over as follows:
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(a) First: to the payment of the Obligations (with the Borrower
remaining liable for any deficiency) in any order which the Lender may elect;
(c) Second: to the creation of a fund in an amount equal to the
Financial Accommodations Reserve, which fund shall be held by the Lender as
security for and applied to the payment of any amounts which may thereafter
become due under all outstanding Letters of Credit and Banker's Acceptances;
(d) Third: the balance (if any) of such proceeds shall be paid to the
Borrower or, subject to any duty imposed by law or otherwise, to whomsoever is
entitled thereto.
THE BORROWER SHALL REMAIN LIABLE AND WILL PAY, ON DEMAND, ANY DEFICIENCY
REMAINING IN RESPECT OF THE OBLIGATIONS, TOGETHER WITH INTEREST THEREON AT A
RATE PER ANNUM EQUAL TO THE HIGHEST RATE THEN PAYABLE HEREUNDER ON SUCH
OBLIGATIONS, WHICH INTEREST SHALL CONSTITUTE PART OF THE OBLIGATIONS.
Section 10.4 Power of Attorney. In addition to the authorizations
granted to the Lender under any other provision of this Agreement or any of the
Loan Documents, after the occurrence and during the continuation of any Event of
Default, Borrower hereby irrevocably designates, makes, constitutes and appoints
the Lender (and all Persons designated by the Lender from time to time) as
Borrower's true and lawful attorney and agent in fact, and the Lender or any
agent of the Lender may, without notice to Borrower, and at such time or times
as the Lender or any such agent in its sole discretion may determine, in the
name of Borrower or the Lender,
(a) demand payment of the accounts, enforce payment thereof by legal
proceedings or otherwise, settle, adjust, compromise, extend or renew any or all
of the accounts or any legal proceedings brought to collect the accounts,
discharge and release the accounts or any of them and exercise all of the
Borrower's rights and remedies with respect to the collection of accounts,
(b) prepare, file and sign the name of Borrower on any proof of claim
in bankruptcy or any similar document against any Account Debtor or any notice
of Lien, assignment or satisfaction of Lien or similar document in connection
with any of the Collateral,
(c) endorse the name of Borrower upon any chattel paper, document,
instrument, notice, freight bill, bill of lading or similar document or
agreement relating to the accounts, the inventory or any other Collateral,
(d) to effect delivery of proceeds of collateral, use the stationery of
Borrower, notify the post office authorities to change the address for delivery
of Borrower's mail to an address designated by the Lender and sign the name of
Borrower to verifications of the accounts and on any notice to the Account
Debtors,
(e) use the information recorded on or contained in any data processing
equipment
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and computer hardware and software relating to the accounts, inventory or other
Collateral to which Borrower has access.
Section 10.5 Miscellaneous Provisions Concerning Remedies.
(a) Rights Cumulative. The rights and remedies of the Lender under this
Agreement, the Note and each of the Loan Documents shall be cumulative and not
exclusive of any rights or remedies which it would otherwise have. In exercising
such rights and remedies, the Lender may be selective and no failure or delay by
the Lender in exercising any right shall operate as a waiver of such right nor
shall any single or partial exercise of any power or right preclude its other or
further exercise or the exercise of any other power or right.
(b) Waiver of Marshalling. Borrower hereby waives any right to require
any marshalling of assets and any similar right.
(c) Limitation of Liability. Nothing contained in this ARTICLE X or
elsewhere in this Agreement or in any of the Loan Documents shall be construed
as requiring or obligating the Lender or any agent or designee of the Lender to
make any demand or to make any inquiry as to the nature or sufficiency of any
payment received by it or to present or file any claim or notice or take any
action with respect to any account or any other Collateral or the moneys due or
to become due thereunder or in connection therewith or to take any steps
necessary to preserve any rights against prior parties, and neither the Lender
nor any of its agents or designees shall have any liability to the Borrower for
actions taken pursuant to this ARTICLE X, any other provision of this Agreement
or any of the Loan Documents, so long as the Lender or such agent or designee
shall act reasonably and in good faith.
(d) Appointment of Receiver. In any action under this ARTICLE X, the
Lender shall be entitled to the appointment of a receiver, without notice of any
kind whatsoever, to take possession of all or any portion of the Collateral and
to exercise such power as the court shall confer upon such receiver.
Section 10.6 Trademark License. All trademarks, patents, copyrights,
service marks, and licenses related to the foregoing owned by Borrower are
listed on SCHEDULE 10.6. Each Borrower hereby grants to the Lender the
nonexclusive right and license to use the trademarks described on SCHEDULE 10.6
and any other trademark now or hereafter used by Borrower, for the purposes set
forth in SECTION 10.2(c)(vi) and to permit any purchaser of any portion of the
Collateral through a foreclosure sale or any other exercise of the Lender's
rights and remedies under the Loan Documents to use, sell or otherwise dispose
of the Collateral bearing any such trademark. Such right and license is granted
free of charge, without the requirement that any monetary payment whatsoever be
made to Borrower or any other Person by the Lender. The Borrower hereby jointly
and severally represent, warrant, covenant and agree that it presently has, and
shall continue to have, the right, without the approval or consent of others, to
grant the
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license set forth in this SECTION 10.6.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices.
(a) Method of Communication. Except as specifically provided in this
Agreement or in any of the Loan Documents, all notices and the communications
hereunder and thereunder shall be in writing or by telephone subsequently
confirmed in writing. Notices in writing shall be delivered personally or sent
by overnight courier service, by certified or registered mail, postage pre-paid,
or by facsimile transmission and shall be deemed received, in the case of
personal delivery, when delivered, in the case of overnight courier service, on
the next Business Day after delivery to such service, in the case of mailing, on
the third day after mailing (or, if such day is a day on which deliveries of
mail are not made, on the next succeeding day on which deliveries of mail are
made) and, in the case of facsimile transmission, upon transmittal; provided
that in the case of notices to the Lender, the Lender shall be charged with
knowledge of the contents thereof only when such notice is actually received by
the Lender. A telephonic notice to the Lender as understood by the Lender will
be deemed to be the controlling and proper notice in the event of a discrepancy
with or failure to receive a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to it at
the following addresses, or any other address of which all the other parties are
notified in writing.
If to the Borrower: Long Reach Holdings, Inc.
12300 Amelia Dr.
Houston, Texas 77045
Attention: President
Facsimile No.: 713-433-5197
If to the Lender: Bank One, Texas, N.A.
1717 Main, 3rd Floor
Dallas, Texas 75201
Attention: Asset Based Finance Group
Facsimile No.: (214) 290-5382
Section 11.2 Expenses. Within ten (10) days after presentation of an
invoice for such costs and expenses, outlining such items in reasonable detail,
the Borrower agrees to pay or reimburse all reasonable costs and expenses
incurred by the Lender arising out of or in connection with this Agreement and
the Loans including, without limitation, (a) the reasonable fees and expenses of
counsel in connection with the negotiation, preparation, execution, delivery,
enforcement and termination of this Agreement and each of the other Loan
Documents, (b) the
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out-of-pocket costs and expenses incurred in connection with the administration
and interpretation of this Agreement and the other Loan Documents, (c) the costs
and expenses of lien searches, (d) all stamp, registration, recordation and
similar taxes, fees or charges related to the Collateral and charges of filing
financing statements and continuations and the costs and expenses of taking
other actions to perfect, protect, and continue the security interest of Lender;
(e) costs and expenses related to the preparation, execution and delivery of any
waiver, amendment, supplement or consent by the Lender relating to this
Agreement or any of the Loan Documents; (f) sums paid or obligations incurred in
connection with the payment of any amount or taking any action required of
Borrower under the Loan Documents that Borrower fails to pay or take; (g) costs
of inspections and verifications of the Collateral, including, without
limitation, $500.00 PER DIEM per examiner plus out of pocket expenses for
travel, lodging, and meals arising in connection with inspections of the
Collateral and the Borrower' operations and books and records by the Lender's
agents; (h) costs and expenses of forwarding loan proceeds, collecting checks
and other items of payment, and establishing and maintaining each account of
Borrower maintained with Lender and each Blocked Account and Lockbox; (i) costs
and expenses of preserving and protecting the Collateral; (j) after the
occurrence and during the continuation of any Event of Default, costs and
expenses related to consulting with and obtaining opinions and appraisals from
one or more Persons, including personal property appraisers, accountants and
lawyers, concerning the value of any Collateral for the Obligations or related
to the nature, scope or value of any right or remedy of the Lender hereunder or
under any of the Loan Documents, including any review of factual matters in
connection therewith, which expenses shall include the fees and disbursements of
such Persons; and (k) after the occurrence and during the continuation of any
Event of Default, costs and expenses paid or incurred to obtain payment of the
Obligations, enforce the security interest of Lender, sell or otherwise realize
upon the Collateral, and otherwise enforce the provisions of the Loan Documents,
or to prosecute or defend any claim in any way arising out of, related to or
connected with, this Agreement or any of the Loan Documents, which expenses
shall include the reasonable fees and disbursements of counsel and of experts
and other consultants retained by the Lender.
The foregoing shall not be construed to limit any other provisions of the Loan
Documents regarding costs and expenses to be paid by the Borrower. THE BORROWER
HEREBY AUTHORIZES THE LENDER, UPON NOTICE TO BORROWER, TO DEBIT BORROWER'S LOAN
ACCOUNT (BY INCREASING THE PRINCIPAL AMOUNT OF THE REVOLVING LOAN) IN THE AMOUNT
OF ANY COSTS, FEES AND EXPENSES OWED BY BORROWER WHEN DUE.
Section 11.3 Setoff. In addition to any rights now or hereafter granted
under applicable law, and not by way of limitation of any such rights, upon and
after the occurrence of any Event of Default, the Lender and any participant
with the Lender in the Loans are hereby authorized by Borrower at any time or
from time to time, without notice to Borrower or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all deposits (general or special, time or demand, including, but not
limited to, indebtedness evidenced by certificates of deposit, whether matured
or unmatured) and any other indebtedness
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at any time held or owing by the Lender or any participant to or for the credit
or the account of Borrower against and on account of the Obligations
irrespective or whether or not (a) the Lender shall have made any demand under
this Agreement or any of the Loan Documents, or (b) the Lender shall have
declared any or all of the Obligations to be due and payable as permitted by
SECTION 10.2 and although such Obligations shall be contingent or unmatured.
Section 11.4 Venue; Service of Process. THE BORROWER AND THE LENDER
HEREBY AGREE THAT THE FEDERAL COURT OF THE NORTHERN DISTRICT OF TEXAS (DALLAS
DIVISION) OR, AT THE OPTION OF THE LENDER, ANY COURT IN WHICH THE LENDER SHALL
INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY AND WHICH SITS IN A JURISDICTION IN
WHICH BORROWER TRANSACTS BUSINESS SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE BORROWER AND THE LENDER,
PERTAINING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR THE LOAN DOCUMENTS OR TO
ANY MATTER ARISING THEREFROM. The Borrower expressly submits and consents in
advance to such jurisdiction in any action or proceeding commenced in such
courts, hereby waiving personal service of the summons and complaint or other
process or papers issued therein and agreeing that service of such summons and
complaint or other process or papers may be made by registered or certified mail
addressed to the Borrower at the address set forth in SECTION 11.1(b), which
service shall be deemed made upon receipt thereof. The non-exclusive choice of
forum set forth in this section shall not be deemed to preclude the enforcement
of any judgment obtained in such forum or the taking of any action under this
agreement to enforce the same in any appropriate jurisdiction. ALL PARTIES
HERETO AGREE THAT VENUE IS PROPER IN DALLAS COUNTY, TEXAS, THAT SUCH COUNTY IS A
CONVENIENT FORUM IN WHICH TO DECIDE ANY DISPUTE ARISING HEREUNDER AND HEREBY
AGREE NOT TO ASSERT ANY ARGUMENT THAT SUCH COUNTY IS AN INCONVENIENT OR IMPROPER
FORUM FOR ANY SUCH DISPUTE.
Section 11.5 Assignment; Participation. All the provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or transfer any of their rights under this Agreement. The Lender may
assign to one or more Persons, or sell participations to one or more Persons in,
all or a portion of its rights and obligations hereunder and under the Note and,
in connection with any such assignment or sale of a participation, may assign
its rights and obligations under the Loan Documents. The Lender may, in
connection with any assignment or proposed assignment or sale or proposed sale
of a participation, disclose to the assignee or proposed assignee or participant
or proposed participant any information relating to the Borrower furnished to
the Lender by or on behalf of the Borrower.
Section 11.6 Amendments. Any term, covenant, agreement or condition of
this Agreement or any of the other Loan Documents may be amended or waived and
any departure therefrom may be consented to if, but only if, such amendment,
waiver or consent is in writing signed by the Lender and, in the case of an
amendment, by the Borrower. Unless otherwise specified in such waiver or
consent, a waiver or consent given hereunder shall be effective only
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in the specific instance and for the specific purpose for which given.
Section 11.7 Performance of Borrower's Duties. If Borrower shall fail
to do any act or thing which it has covenanted to do under this Agreement or any
of the Loan Documents, the Lender may (but shall not be obligated to) do the
same or cause it to be done either in the name of the Lender or in the name and
on behalf of Borrower, and Borrower hereby irrevocably authorizes the Lender so
to act.
SECTION 11.8 INDEMNIFICATION. THE BORROWER SHALL REIMBURSE THE LENDER
FOR ALL REASONABLE COSTS AND EXPENSES, INCLUDING LEGAL FEES AND EXPENSES,
INCURRED AND TO INDEMNIFY AND HOLD THE LENDER HARMLESS FROM AND AGAINST ALL
LOSSES SUFFERED BY THE LENDER IN CONNECTION WITH (a) THE EXERCISE BY THE LENDER
OF ANY RIGHT OR REMEDY GRANTED TO IT UNDER THIS AGREEMENT OR ANY OF THE LOAN
DOCUMENTS, (b) ANY CLAIM, AND THE PROSECUTION OR DEFENSE THEREOF, ARISING OUT OF
OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS, EXCEPT
IN THE CASE OF A DISPUTE BETWEEN THE BORROWER AND THE LENDER IN WHICH THE
BORROWER PREVAILS IN A FINAL UNAPPEALED OR UNAPPEALABLE JUDGMENT, AND (c) THE
COLLECTION OR ENFORCEMENT OF THE OBLIGATIONS OR ANY OF THEM; EXCLUDING, HOWEVER,
LOSSES INCURRED BY LENDER AS A RESULT OF LENDER'S GROSS NEGLIGENCE, WILLFUL
MISCONDUCT OR VIOLATION OF LAW OR LOSSES INCURRED AS A RESULT OF ACTIONS TAKEN
BY LENDER AFTER TAKING POSSESSION OF ANY COLLATERAL. BORROWER AND LENDER
EXPRESSLY INTEND THAT THE FOREGOING INDEMNITY SHALL COVER, AND THAT BORROWER
SHALL INDEMNIFY AND HOLD LENDER HARMLESS FROM AND AGAINST, COSTS, EXPENSES AND
LOSSES SUFFERED AS A RESULT OF THE NEGLIGENCE OF LENDER.
Section 11.9 All Powers Coupled with Interest. All powers of attorney
and other authorizations granted to the Lender and any Persons designated by the
Lender pursuant to any provisions of this Agreement or any of the Loan Documents
shall be deemed coupled with an interest and shall be irrevocable so long as any
of the Obligations remain unpaid or unsatisfied or the Revolving Credit Facility
has not been terminated.
Section 11.10 Survival. Notwithstanding any termination of this
Agreement, (a) until all Obligations have been paid in full and the Revolving
Credit Facility terminated, the Lender shall retain its security interest in the
Collateral and shall retain all rights under this Agreement and each of the Loan
Documents with respect to the Collateral as fully as though this Agreement had
not been terminated, and (b) the indemnities to which the Lender is entitled
under the provisions of this Agreement and the Loan Documents shall continue in
full force and effect and shall protect the Lender against events arising after
such termination as well as before.
Section 11.11 Severability of Provisions. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
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Section 11.12 Governing Law. This Agreement and the Note shall be
construed in accordance with and governed by the law of the State of Texas.
Section 11.13 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.
Section 11.14 Consent to Advertising and Publicity. The Borrower agree
that the Lender may issue and disseminate to the public information describing
the credit accommodation entered into pursuant to this Agreement, including the
name and address of the Borrower and the amount and a general description of the
credit facilities provided hereunder.
Section 11.15 Final Agreement. This Agreement and the other Loan
Documents are intended by the parties hereto as the final, complete and
exclusive expression of the agreement among them with respect to the subject
matter hereof and thereof. This Agreement and the other Loan Documents supersede
any and all prior oral or written agreements between the parties hereto relating
to the subject matter hereof and thereof.
Section 11.16 JURY WAIVER. BORROWER AND LENDER HEREBY VOLUNTARILY,
KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) BETWEEN OR AMONG THE BORROWER AND LENDER ARISING OUT OF OR IN ANY WAY
RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY RELATIONSHIP BETWEEN
LENDER AND BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO
PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.
Section 11.17 Arbitration. Lender and Borrower agree that upon the
written demand of either party, whether made before or after the institution of
any legal proceedings, but prior to the rendering of any judgment in that
proceeding, all disputes, claims and controversies between them, whether
individual, joint, or class in nature, arising from this Agreement, any Loan
Document or otherwise, including without limitation contract disputes and tort
claims, shall be resolved by binding arbitration pursuant to the Commercial
Rules of the American Arbitration Association ("AAA"). Any arbitration
proceeding held pursuant to this arbitration provision shall be conducted in the
city nearest the Borrower's address having an AAA regional office, or at any
other place selected by mutual agreement of the parties. No act to take or
dispose of any Collateral shall constitute a waiver of this arbitration
agreement or be prohibited by this arbitration agreement. This arbitration
provision shall not limit the right of either party during any dispute, claim or
controversy to seek, use, and employ ancillary, or preliminary rights and/or
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remedies, judicial or otherwise, for the purposes of realizing upon, preserving,
protecting, foreclosing upon or proceeding under forcible entry and detainer for
possession of, any real or personal property, and any such action shall not be
deemed an election of remedies. Such remedies include, without limitation,
obtaining injunctive relief or a temporary restraining order, invoking a power
of sale under any deed of trust or mortgage, obtaining a writ of attachment or
imposition of a receivership, or exercising any rights relating to personal
property, including exercising the right of set-off, or taking or disposing of
such property with or without judicial process pursuant to the Uniform
Commercial Code. Any disputes, claims or controversies concerning the lawfulness
or reasonableness of an act, or exercise of any right or remedy concerning any
Collateral, including any claim to rescind, reform, or otherwise modify any
agreement relating to the Collateral, shall also be arbitrated; provided,
however that no arbitrator shall have the right or the power to enjoin or
restrain any act of either party. Judgment upon any award rendered by any
arbitrator may be entered in any court having jurisdiction. The statute of
limitations, estoppel, waiver, laches and similar doctrines which would
otherwise be applicable in an action brought by a party shall be applicable in
any arbitration proceeding, and the commencement of an arbitration proceeding
shall be deemed the commencement of any action for these purposes. The Federal
Arbitration Act (Title 9 of the United States Code) shall apply to the
construction, interpretation, and enforcement of this arbitration provision.
Section 11.18 Confidentiality. Lender shall use its reasonable efforts
to hold all nonpublic information obtained from the Borrower or any of its
respective officers, employees, agents, attorneys, accountants or Affiliates in
accordance with safe and sound business practices provided that in any event
Lender may make disclosure to such of its respective Affiliates, officers,
directors, employees, agents, accountants, lawyers, and other advisors and
representatives as need to know such information in connection with this
Agreement. Lender may also make disclosure reasonably required or requested by
any Governmental Agency or representative thereof, or pursuant to legal process
(provided that Lender shall reasonable efforts to inform Borrower prior to such
disclosure, but without any liability for failure to do so).
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
BORROWER:
Long Reach Holdings, Inc.
/s/ D.M. Buchanan
By: ______________________________
D.M. Buchanan
President
57
<PAGE> 63
LENDER:
BANK ONE, TEXAS, NATIONAL ASSOCIATION
/s/ Carl C. Prudhomme III
By: ______________________________
Carl C. Prudhomme III
Vice President
58
<PAGE> 1
Exhibit 10.4
AMENDMENT ONE TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT ONE TO LOAN AND SECURITY AGREEMENT (this "Amendment"),
dated as of February 23, 2000, is made and entered into by and between BANK ONE,
TEXAS, NATIONAL ASSOCIATION ("LENDER") and LONG REACH HOLDINGS, INC., a Delaware
corporation ("BORROWER").
RECITALS
A. Borrower and Lender entered into that certain Loan and Security
Agreement, dated April 20, 1999 (the "LOAN AGREEMENT").
B. Borrower is the surviving corporation of a merger of Long Reach
Holding, Inc., a Delaware corporation, into TBM Acquisition I, Inc., a Delaware
corporation (the "MERGER") pursuant to the Amended and Restated Agreement and
Plan of Merger dated as of February 4, 2000 by and among TBM Holdings, Inc., TBM
Acquisition I, Inc., Long Reach Holdings, Inc. and the shareholders of Long
Reach Holdings, Inc. (the "MERGER AGREEMENT").
C. Lender and Borrower desire to amend the Loan Agreement as herein set
forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by both parties, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same definitions
assigned to such terms in the Loan Agreement, as amended hereby.
ARTICLE II
Amendments to the Loan Agreement
Section 2.01. Amendment of Definitions. SECTION 1 of the Loan Agreement
is hereby amended by deleting the definitions of "Borrowing Base," "Committed
Sum," "Contract Rate," "Eligible Inventory," "Fixed Charge Coverage Ratio,"
"Tangible Net Worth" and "Termination Date" in their entirety and substituting
therefor the following:
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<PAGE> 2
"'Borrowing Base' means, as of any date, an amount equal to
the sum of: (a) eighty-five percent (85%) (or such lesser percentage as
the Lender may in its sole and absolute discretion determine from time
to time) of Eligible Accounts on such date, PLUS (b) the lesser of (i)
the sum of (A) sixty percent (60%) (or such lesser percentage as the
Lender may in its sole and absolute discretion determine from time to
time) of the value of Eligible Inventory consisting of raw material
metal stock (based upon the lower of cost (computed on a
first-in-first-out basis), fair market value or orderly liquidation as
determined by Lender in its sole discretion), PLUS (B) fifty percent
(50%) (or such lesser percentage as the Lender may in its sole and
absolute discretion determine from time to time) of the value of
Eligible Inventory other than metal stock (based upon the lower of cost
(computed on a first-in-first-out basis), fair market value or orderly
liquidation as determined by Lender in its sole discretion) or (ii) the
lesser of (A) $4,000,000, or (B) one hundred twenty-five percent (125%)
of the aggregate advances against Eligible Accounts from the date of
Amendment One hereto through December 31, 2000 (and one hundred percent
(100%) after December 31, 2000), MINUS (c) the Financial Accommodation
Reserve, and MINUS (d) the Reserve."
"'Committed Sum' means $10,000,000."
"'Contract Rate' shall mean the sum of the Prime Rate in
effect from time to time, plus one percent percent (1.0%); PROVIDED,
HOWEVER, the Contract Rate shall be reduced to the sum of the Prime
Rate in effect from time to time, plus one half of one percent (0.50%)
in the event that (i) the Borrower's audited financial statements for
the ten month fiscal year ending December 31, 2000 establish that
Borrower's Net Cash Flow Available for Principal Payments for such
fiscal year is no worse than a negative $714,000, (ii) no Default or
Event of Default has occurred and is continuing at the time Borrower's
audited financial statements for the fiscal year ending December 31,
2000 are delivered to Lender, and (iii) Borrower has maintained
$650,000 or more in Average Excess Loan Availability under the
Revolving Facility for the twelve (12) consecutive months ending
December 31, 2000; any such reduction in the Contract Rate resulting
from achieving such parameters shall become effective on the first day
of the calendar month after the Borrower's audited financial statements
for the ten month fiscal year ending December 31, 2000 are delivered to
Lender. If Borrower qualified for a rate reduction pursuant to the
immediately preceding sentence, the Contract Rate shall be further
reduced by one quarter of one percent (0.25%) (or in the event that
Borrower did not qualify for a rate reduction pursuant to the
immediately preceding sentence, the Contract Rate shall be reduced by
one half of one percent (0.5%)) in the event that (i) the Borrower's
audited financial statements for the calendar year ending December 31,
2001 establish that Borrower's Net Cash Flow Available for Principal
Payments for such calendar year equals or exceeds $1,021,000, (ii) no
Default or Event of Default has occurred and is continuing at the time
Borrower's audited financial statements for the calendar year ending
December 31, 2001 are delivered to Lender, and (iii) Borrower has
maintained
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<PAGE> 3
$650,000 or more in Average Excess Loan Availability under the
Revolving Facility for the twelve (12) consecutive months ending
December 31, 2001; any such reduction in the Contract Rate resulting
from achieving such parameters shall become effective on the first day
of the calendar month after the Borrower's audited financial statements
for the calendar year ending December 31, 2001 are delivered to Lender.
Any change in the Contract Rate resulting from a change in the Prime
Rate shall become effective on the day such change in the Prime Rate is
announced by Lender."
"'Eligible Inventory' means, as at any date of determination,
all inventory owned by and in the possession of Borrower and located in
the United States of America that Lender, in its sole and absolute
discretion, deems to be eligible for borrowing purposes; provided,
however, that upon the effectiveness of Amendment One to this
Agreement, a reserve of $100,000 shall be established (the "INITIAL
INVENTORY RESERVE") that shall reduce the amount of Eligible Inventory
otherwise determined hereunder, and as of each calendar month end
occurring after the effectiveness of such Amendment One, such
eligibility reserve shall be increased by $100,000; provided, further,
that when Borrower delivers to Lender an inventory line item turn
report, in form and detail satisfactory to Lender in its sole
discretion, that establishes to Lender's satisfaction the proper amount
of a reserve (the "TURN REPORT RESERVE") against Eligible Inventory
equal to purchased parts raw materials and finished goods on hand in
excess of one year's supply, as demonstrated by historical sales, such
Turn Report Reserve shall be used in place of the Initial Inventory
Reserve (as it may have been increased) as long as such inventory line
item turn report is delivered to Lender within fifteen days of each
fiscal quarter end; otherwise, the Initial Inventory Reserve shall be
reinstated at the amount last used and shall continue to increase each
month end by $100,000. Without limiting the generality of the
foregoing, unless otherwise agreed by Lender, the following is not
Eligible Inventory:
(a) work-in-process;
(b) finished goods subject to a specific purchase order which
do not meet the specifications of such purchase order;
(c) inventory which Lender determines, in its sole and
absolute discretion exercised in good faith, to be
unacceptable for borrowing purposes due to age, quality, type,
category, value and/or quantity;
(d) inventory with respect to which Lender does not have a
valid, first priority and fully perfected security interest;
(e) inventory with respect to which there exists any Lien
(other than a Permitted Lien) in favor of any Person other
than Lender;
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<PAGE> 4
(f) packaging or shipping material or maintenance supplies;
(g) shipping or product labels;
(h) inventory that is obsolete;
(i) inventory that has been returned or repossessed unless
such inventory is in new, unused and saleable condition;
(j) inventory that consists of used goods taken in trade;
(k) inventory produced in violation of the Fair Labor
Standards Act, in particular provisions contained in Title 29
U.S.C. 215 (a)(i);
(l) inventory located in a jurisdiction other than the United
States of America and inventory located at a location for
which Lender does not have a valid landlord's or
warehouseman's waiver or subordination on terms and conditions
acceptable to Lender in its sole discretion; and
(m) inventory located at any location other than those listed
on SCHEDULE 5.1(q), as amended from time to time."
"'Fixed Charge Coverage Ratio' means, for any period, the
ratio of (i) consolidated Net Income of Borrower and its Subsidiaries
after income taxes, PLUS, without duplication and to the extent
deducted in determining Net Income, depreciation and amortization and
other non-cash expenses for such period, interest expense paid in cash
during such period, lease expense for such period, Allowed Kaizen
Expenses for such period, Allowed Restructuring Expenses for such
period to (ii) the sum of the following, without duplication, interest
expense paid in cash during such period, plus lease expense for such
period, plus current maturities of Funded Indebtedness, plus current
maturities of Capitalized Lease Obligations, plus Non-Financed Capital
Expenditures, plus dividends on preferred stock paid in cash, plus
principal payments on Subordinated Indebtedness if such payments are
permitted by the Subordination Agreement."
"'Tangible Net Worth' means, as applied to Borrower, the
consolidated Net Worth of Borrower and its Subsidiaries at the time in
question, after deducting therefrom amounts due from Affiliates and
shareholders of such Person and all other items which should properly
be treated as intangibles in accordance with GAAP, plus Subordinated
Indebtedness then outstanding."
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<PAGE> 5
"'Termination Date' means March 31, 2003."
Section 2.02. Amendment of Section 1. SECTION 1 is further amended by
adding thereto the following definitions:
"'Allowed Kaizen Expenses' means costs and expenses incurred
by Borrower to provide Kaizen consulting and training; provided, that,
such costs and expenses shall not exceed an aggregate $360,000 for
calendar year 2001, $300,000 for calendar year 2002 and $60,000 for the
period from January 1, 2003 through the Termination Date."
"'Allowed Restructuring Expenses' means costs and expenses
incurred by Borrower related to the merger of Long Reach Holdings, Inc.
into TBM Acquisition I, Inc. during calendar year 2000; provided, that,
such costs and expenses shall not exceed an aggregate $1,250,000 for
calendar year 2000 and an aggregate $500,000 for calendar year 2001 and
no amount in subsequent years."
"'Average Excess Loan Availability' means, for any period, the
amount obtained by, first, adding the difference, as of the end of each
day during such period, between (i) the Borrowing Base and (ii) the
unpaid principal balance of the Revolving Loan and, then, by dividing
such sum by the number of days in such period."
"'EBITDA' means, for any period, the consolidated Net Income
of Borrower and its Subsidiaries for such period, PLUS, without
duplication and to the extent deducted from revenues in determining Net
Income for such period, (a) the aggregate amount of income tax expense
for such period, (b) the aggregate amount of interest expense for such
period, and (c) all amounts attributable to depreciation and
amortization for such period, and MINUS, without duplication and to the
extent added to revenues in determining Net Income for such period, all
non-cash non-recurring gains during such period, in each case
determined in accordance with GAAP."
"'Loan Availability' means, at any time of determination, the
amount, if any, by which the Borrowing Base at such time exceeds the
unpaid principal balance of the Revolving Loan at such time."
"'Net Cash Flow Available for Principal Payments' means, for
any period, EBITDA for such period, LESS the sum of the following
without duplication: interest expense paid in cash during such period,
income taxes due with respect to such period, the increase or decrease
in non-cash working capital for such period, Non-Financed Capital
Expenditures made during such period, costs and expenses incurred by
Borrower in such period to provide Kaizen consulting and training, and
restructuring expenses incurred by Borrower in such period (not
including, with respect to Kaizen expenses and restructuring expenses,
amounts reserved for such expenses but not charged against
-5-
<PAGE> 6
income for such period), in each case determined in accordance with
GAAP unless otherwise defined herein."
Section 2.03. Amendment of Section 2.6. SECTION 2.6 of the Loan
Agreement is hereby amended in its entirety to read as follows:
"Section 2.6 Repayment of Term Loan. The Term Loan is due and
payable as follows: (i) accrued and unpaid interest, calculated at the
rate set forth in SECTION 3.1, shall be due and payable commencing on
MARCH 1, 2000, and continuing on the first (1st) day of each month
thereafter, and (ii) principal installments (a) in the amount of
$60,000 each shall be due and payable on the first (1st) day of each
month, commencing on JANUARY 1, 2001, and continuing thereafter through
and including DECEMBER 1, 2001, and (b) in the amount of $50,000 each
shall be due and payable on the first (1st) day of each month,
commencing on JANUARY 1, 2002, and continuing thereafter through the
Termination Date, when the then unpaid principal balance of the Term
Loan, together with all accrued and unpaid interest, shall be due and
payable in full."
Section 2.04 Amendment of Section 3.2. SECTION 3.2 of the Loan
Agreement is hereby amended by adding thereto the following as subsection (g):
"(g) Borrower shall pay to Lender, in consideration of
consenting to the merger of Borrower and TBM Acquisition I, Inc. and
entering into Amendment One to the Loan Agreement and waiving the
Events of Default existing prior to the execution of Amendment One, a
closing fee of $125,000, one-half payable upon execution of Amendment
One and the remaining amount payable on or before the earlier of (i)
the termination of this Agreement or (ii) April 1, 2001. Such closing
fee shall be fully earned upon the execution of Amendment One to the
Loan Agreement."
Section 2.05. Amendment of Section 3.5(b). SECTION 3.5(b) of the Loan
Agreement is hereby amended in its entirety to read as follows:
"(b) Early Termination. Upon 60 days prior written notice to
the Lender, the Borrower may terminate this Agreement prior to the
Termination Date. If Borrower terminates this Agreement prior to the
Termination Date, Borrower acknowledges that (i) such termination would
result in the loss to Lender of the benefits of this Agreement and that
the damages incurred by Lender as a result of such termination are and
would be difficult of ascertainment, and (ii) no such termination shall
be effective until Borrower has paid to Lender all of the Obligations
in immediately available funds, together with a sum certain as
liquidated damages. Such liquidated damages, being Borrower' and
Lender's best and fairest estimate of Lender's damages caused by such
termination, shall be equal to (i) $100,000 if the termination occurs
on or prior to March 31, 2001, (ii)
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<PAGE> 7
$75,000 if the termination occurs after March 31, 2001 but on or prior
to March 31, 2002. No liquidated damages will be payable if the
termination occurs after March 31, 2002."
Section 2.06. Amendment of Section 4.3. SECTION 4.3(f) of the Loan
Agreement is hereby amended in its entirety to read as follows:
"(f) Adverse Change. No changes having a Material Adverse
Effect (or that could reasonably be expected to cause or have a
Material Adverse Effect) have occurred since the date of Amendment One
to this Agreement."
Section 2.07. Amendment of Section 6.1. SECTION 6.1 of the Loan
Agreement is hereby amended in its entirety to read as follows:
"Section 6.1 Security Interest. To secure the payment and
performance of the Obligations, Borrower hereby mortgages, pledges and
assigns to Lender for itself, and as agent for its Affiliates, all of
the Collateral, and grants to Lender for itself, and as agent for its
Affiliates, a security interest and Lien in and upon, all of the
Collateral."
Section 2.08. Amendment of Article VI. ARTICLE VI of the Loan Agreement
is hereby amended by adding thereto the following as SECTION 6.15:
"Section 6.15 Release of Houston Real Estate. Upon the
effectiveness of Amendment One to this Agreement, Lender shall release
the Borrower's Little Rock, Arkansas real estate from any Lien. Lender
agrees to release the Borrower's Houston, Texas real estate from any
Lien if, but only if, (i) Borrower's Net Cash Flow Available for
Principal Payments for the calendar year ending December 31, 2001, as
established by Borrower's audited financial statements for such year,
equals or exceeds $1,021,000 and (ii) at the time such financial
statements are delivered to Lender there is no Default or Event of
Default then existing."
Section 2.09. Amendment of Section 8.1. SECTION 8.1(b) of the Loan
Agreement is hereby amended in its entirety to read as follows:
"(b) Monthly Financial Statements. As soon as available, but
in any event within forty (40) days after the end of each month of
Borrower, copies of the unaudited consolidated balance sheet of
Borrower and its Subsidiaries as of the end of such month and the
related unaudited income statement for Borrower and its Subsidiaries
for such month and for the portion of the fiscal year of Borrower
through such month, certified by the chief financial officer of
Borrower as presenting fairly the financial condition and results of
operations of the Borrower and its Subsidiaries as of the date thereof
and for the periods ended on such date, subject to normal year end
adjustments."
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<PAGE> 8
Section 2.10. Amendment of Section 8.4. SECTION 8.4 of the Loan
Agreement is hereby amended by adding thereto the following as subsection (c):
"(c) Within five Business Days of the filing thereof, copies
of all Forms 10-K and Forms 10-Q filed by TBM Holdings, Inc. with the
Securities Exchange Commission."
Section 2.11. Amendment of Section 9.1. SECTION 9.1 of the Loan
Agreement is hereby amended by deleting subsections (b) and (c) in their
entirety and substituting therefor the following subsections (b) and (c) and
adding thereto the following subsection (d):
"(b) Minimum Fixed Charge Coverage Ratio. Permit, as of the
last day of any calendar month during any period set forth below, the
Fixed Charge Coverage Ratio for such month, to be less than the ratio
set forth opposite such period below:
<TABLE>
<CAPTION>
Period Fixed Charge Coverage Ratio
------ ---------------------------
<S> <C>
January 1, 2001 through December 31, 2001 1.00 to 1.0
January 1, 2002 and thereafter 1.10 to 1.0
</TABLE>
(c) Minimum Tangible Net Worth. Permit the Tangible Net Worth
of Borrower and its Subsidiaries on the date of Amendment One to this
Agreement to be less than $7,500,000 less balance sheet adjustments
proposed by Borrower within thirty (30) days of the date of such
Amendment One and to which Lender consents in writing (such balance
sheet adjustments are referred to herein as the "ADJUSTMENTS") or
permit, at any time during any period set forth below, the consolidated
Tangible Net Worth of Borrower and its Subsidiaries to be less than the
amount set forth opposite such period below:
<TABLE>
<CAPTION>
Period Minimum Tangible Net Worth
------ --------------------------
<S> <C>
Effective Date through September 29, 2001 $5,000,000 less the Adjustments
September 30, 2001 through December 30, 2001 $5,250,000 less the Adjustments
December 31, 2001 through March 30, 2002 $5,500,000 less the Adjustments
March 31, 2002 through June 29, 2002 $5,750,000 less the Adjustments
June 30, 2002 through September 29, 2002 $6,250,000 less the Adjustments
September 30, 2002 and thereafter $6,500,000 less the Adjustments
</TABLE>
(d) Minimum Net Income. Permit its Net Income for any period
set forth below to be more negative than the negative amount set forth
opposite such period below:
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<PAGE> 9
<TABLE>
<CAPTION>
Period Minimum Net Income
<S> <C>
Fiscal quarter ending June 30, 2000 $(650,000)
Fiscal quarter ending September 30, 2000 $(950,000)
Fiscal quarter ending December 31, 2000 $(600,000)
Fiscal quarter ending March 31, 2001 $(600,000)
Two consecutive Fiscal quarters ending June 30, 2001 $(377,000)"
</TABLE>
Section 2.12. Amendment of Section 9.2. SECTION 9.2 of the Loan
Agreement is hereby amended in its entirety to read as follows:
"Section 9.2 Investments. Acquire any Investment or permit any
Investment to be outstanding, other than Permitted Investments and
other than Investments (a) with respect to which Borrower has provided
to Lender at least fifteen (15) days written notice prior to the
closing thereof and (b) which (i) constitute the acquisition of a
company or product line that have products complimentary with Borrower
and its Subsidiaries and (ii) entail either consolidation of existing
production facilities or cost savings in general and administrative
expenses by selling products through existing channels with Borrower's
sales representative and independent sales representatives and (c) the
integration of which or the consummation of which will not cause a
Default or Event of Default."
Section 2.13. Amendment of Section 9.3. SECTION 9.3 of the Loan
Agreement is hereby amended in its entirety to read as follows:
"Section 9.3 Prohibited Distributions and Payments, Etc.
Declare or make any Prohibited Distribution or Prohibited Payment;
provided, that Borrower may declare and pay dividends to TBM Holdings,
Inc. ("HOLDINGS"), in an aggregate amount equal to the income tax
liability of Holdings attributable to the separate taxable income of
Borrower and its Subsidiaries.
Section 2.14. Amendment of Section 9.6. SECTION 9.6 of the Loan
Agreement is hereby amended in its entirety to read as follows:
"Section 9.6 Merger, Consolidation, Sale of Assets,
Acquisitions. (i) Merge or consolidate with any other Person or (ii)
sell, lease or transfer or otherwise dispose of all or a substantial
portion of Borrower's assets to any Person or (iii) acquire all or
substantially all of the assets of any Person or the assets
constituting the business or a division or operating unit of any Person
unless with respect to such acquisition the parameters for Investments
set forth in SECTION 9.2 are met."
Section 2.12. Amendment of Section 9.9. SECTION 9.9 of the Loan
Agreement is hereby deleted in its entirety and replace with the following:
"Section 9.9 [This section is intentionally omitted.]"
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<PAGE> 10
Section 2.13. Amendment of Section 9.13. SECTION 9.13 of the Loan
Agreement is hereby amended in its entirety to read as follows:
"Section 9.13 Management Fees. Directly or indirectly pay or
agree to pay any management, consulting, training or similar fees and
expenses (other than payments to consultants hired by Borrower in lieu
of salaries paid to officers of Borrower) to any Person that exceed, in
the aggregate for any calendar year, the amounts set forth below for
the applicable calendar year:
<TABLE>
<CAPTION>
Applicable Calendar Year Maximum Aggregate Amount
<S> <C>
2000 $450,000
2001 $450,000
2002 $375,000
2003 through the Termination Date $75,000
</TABLE>
provided, that the existing contractual obligation of TBM Holdings,
Inc. to Colt Capital Group, Inc. in the amount of $150,000 per year,
payable monthly, may be paid in addition to the management fees
permitted by this Section 9.13 as long as no Event of Default is
existing at the time of such payment or would be caused thereby."
Section 2.14. Amendment of Article IX. ARTICLE IX of the Loan Agreement
is hereby amended by adding thereto the following as SECTION 9.14 and SECTION
9.15:
"Section 9.14 Minimum Availability. Permit its Loan
Availability at any time to be less than $400,000."
"Section 9.15 Balance Sheet Adjustments. Make any adjustments
to its balance sheet as at the date of Amendment One hereto without the
prior written consent of Lender."
Section 2.15. Amendment of Section 10.1. SECTIONS 10.1(o) AND 10.1(p)
of the Loan Agreement are hereby amended in their entirety to read as follows:
"(o) TBM Holdings, Inc., shall cease to own a majority of the
outstanding shares of capital stock of Borrower entitled to vote for
directors (including stock that has been issued following the exercise
or conversion of any warrants or convertible securities owned by any
Person);
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<PAGE> 11
(p) William A. Schwartz shall for any reason cease to serve as
President of TBM Holdings, Inc., or William J. Sample shall for any
reason no longer serve as either the Vice President or Chief Executive
Officer of Borrower and 60 days shall have elapsed during which time no
replacement reasonably satisfactory to the Lender shall have been
appointed; or"
Section 2.16. Amendment of Section 10.1. SECTION 10.1 of the Loan
Agreement shall be further amended by adding thereto the following as subsection
(q):
"(q) TBM Holdings, Inc. shall (i) repudiate its obligations
under, or commit an anticipatory breach of, its unlimited guaranty of
the Obligations executed for the benefit of Lender or (ii) attempt to
terminate such guaranty or (iii) commence any legal proceeding to
terminate or hold invalid in any respect such guaranty."
ARTICLE III
Conditions Precedent
--------------------
Section 3.01. Conditions Precedent. The effectiveness of this Amendment
is subject to the satisfaction of the following conditions precedent, unless
specifically waived in writing by Lender:
(a) The representations and warranties of Borrower contained
herein and of Borrower and TBM Acquisition I, Inc. in the Merger
Agreement shall be true and correct as of the date hereof as if made on
the date hereof;
(b) After giving effect to the provisions of this Amendment,
no Default or Event of Default shall have occurred and be continuing
under the Loan Agreement;
(c) Lender shall have received this Amendment and the Renewal
and Extension Revolving Note and the Renewal and Extension Term Note in
the forms of EXHIBIT A and EXHIBIT B attached hereto, duly executed by
Borrower;
(d) TBM Holdings, Inc. shall have executed and delivered to
Lender an unlimited guaranty of the Obligations, in form and substance
acceptable to Lender in its sole discretion;
(e) Lender shall receive an opinion of Borrower's counsel, in
form and substance acceptable to Lender in its sole discretion;
(f) Upon the Merger, Borrower shall make such payments to
Lender as are necessary to reduce the outstanding principal balance of
the Revolving Loan to
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<PAGE> 12
$5,500,000 and to reduce the outstanding principal balance of the Term
Loan to $2,500,000;
(g) Borrower's Loan Availability upon the effectiveness of the
Merger and after all payments required in connection with the Merger or
as conditions to effectiveness of this Amendment shall be at least
$1,000,000;
(h) Upon the effectiveness of the Merger, the outstanding
principal of Subordinated Debt of the Borrower shall not exceed
$4,000,000;
(i) Patrick H. Peyton shall be serving as Borrower's Chief
Financial Officer;
(j) The holders of the Subordinated Debt shall have executed
and delivered to Lender amendments of the Subordination Agreements
governing such Subordinated Debt in form and substance acceptable to
Lender in its sole discretion;
(k) Lender shall have received from a title insurance company
acceptable to Lender in its sole discretion a Commitment for Mortgagee
Policy of Title Insurance on Borrower's Houston, Texas real estate
providing for the issuance of mortgagee title policy in the amount of
$2,100,000 and containing only such exceptions as are acceptable to
Lender in its sole discretion;
(l) Borrower shall have executed and delivered to Lender a
Modification of Deed of Trust in such form and content as is required
by Lender in its sole discretion relating to Borrower's Houston, Texas
real estate;
(m) Borrower shall have paid to Lender, in consideration of
consenting to the Merger and amending the Loan Agreement as set forth
herein and waiving the Events of Default existing prior hereto,
one-half of the $125,000 closing fee;
(n) Borrower shall have delivered to Lender certified board of
directors resolutions and certificates of incumbency, in such form and
content as is acceptable to Lender in its sole discretion, for both
Borrower and TBM Holdings, Inc.;
(o) Borrower shall have delivered to Lender a Certificate of
Merger issued by the Secretary of State of Delaware certifying that the
Merger has become effective;
(p) Borrower shall execute and deliver to Lender such
financing statements and amendments to financing statements as Lender
shall require for filing with various governmental offices;
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<PAGE> 13
(q) 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
reasonably satisfactory to Lender and its legal counsel.
ARTICLE IV
Ratifications, Representations, and Warranties
----------------------------------------------
Section 4.01. Ratifications by Borrower. The terms and provisions set
forth in this Amendment shall modify and supersede all inconsistent terms and
provisions set forth in the Loan Agreement and, except as expressly modified and
superseded by this Amendment, the terms and provisions of the Loan Agreement are
ratified and confirmed and shall continue in full force and effect. The Loan
Agreement as amended by this Amendment shall continue to be the legal, valid,
binding and enforceable in accordance with its terms. Borrower, as the surviving
corporation of the Merger, acknowledges that it is primarily liable for all
Obligations, now existing or hereafter arising under the Loan Agreement.
Section 4.02. Renewal and Extension of Security Interests and
Assignments. Borrower hereby renews and affirms the liens and security interests
created and granted in the Loan Agreement and all other Loan Documents. Borrower
agrees that this Amendment shall in no manner affect or impair the liens and
security interests securing the Obligations, and that such liens and security
interests shall not in any manner be waived, the purposes of this Amendment
being to modify the Loan Agreement as herein provided, and to carry forward all
liens and security interest securing same, which are acknowledged by Borrower to
be valid and subsisting.
Section 4.03. Representations and Warranties. Borrower represents and
warrants to Lender as follows: (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 or any agreement to which Borrower is a party; (ii) the
representations and warranties of Borrower and TBM Acquisition I, Inc.,
contained in the Merger Agreement are true and correct on and as of the date
hereof as though made on and as of the date hereof; (iii) no Default or Event of
Default under the Loan Agreement as amended hereby has occurred and is
continuing; and (iv) Borrower is in full compliance with all covenants and
agreements contained in the Loan Agreement, as amended hereby.
Section 4.04. Waiver of Defaults. Upon the effectiveness of this
Amendment, any and all Defaults and Events of Default that previously existed
under the Loan Agreement prior to amendment hereby or under any of the other
Loan Documents shall be waived.
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<PAGE> 14
ARTICLE V
Miscellaneous
-------------
Section 5.01. Survival of Representations and Warranties. All
representations and warranties made in the Merger Agreement, this Amendment or
any other 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 such
representations and warranties or the right of Lender to rely thereon.
Section 5.02. Reference to Loan Agreement. Each of the Loan Documents,
including the Loan 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 Loan Agreement as amended hereby, are hereby
amended so that any reference in such Loan Documents to the Loan Agreement shall
mean a reference to the Loan Agreement as amended hereby.
Section 5.03. Expenses of Lender. 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 (provided that the legal fees reimbursable by Borrower
for the preparation, negotiation and execution of this Amendment and such Loan
Documents shall be limited to $10,000). Borrower agrees to pay on demand all
costs and expenses incurred by Lender in connection with any and all future
amendments, modifications, and supplements to the Loan Agreement, 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 Loan Agreement, as amended hereby, or any
other Loan Document, including, without limitation, the reasonable costs and
fees of Lender's legal counsel.
Section 5.04. 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.
SECTION 5.05. APPLICABLE LAW. THIS AMENDMENT SHALL BE DEEMED TO HAVE
BEEN MADE AND TO BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW.
Section 5.06. Successors and Assigns. This Amendment is binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, assigns, heirs, executors, and
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<PAGE> 15
legal representatives, except that none of the parties hereto other than Lender
may assign or transfer any of its rights or obligations hereunder without the
prior written consent of Lender.
Section 5.07. 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. This Amendment may be executed and delivered by facsimile
transmission.
Section 5.08. Headings. The headings, captions, and arrangements used
in this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
Section 5.09. Conflicting Provisions. If any provision of the Loan
Agreement as amended hereby conflicts with any provision of any other Loan
Document, the provision in the Loan Agreement shall control.
SECTION 5.10. RELEASE. AS OF THE DATE HEREOF, BORROWER HEREBY
ACKNOWLEDGES THAT BORROWER HAS NO DEFENSE, COUNTERCLAIM, OFFSET,
CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE
ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF BORROWER'S LIABILITY TO REPAY
THE LOAN OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM
LENDER. BORROWER VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES
LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL
POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES,
AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED,
SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS
EXECUTED, WHICH BORROWER MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND
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<PAGE> 16
ASSIGNS, IF ANY, AND IRRESPECTIVE OR WHETHER ANY SUCH CLAIMS ARISE OUT OF
CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM
ANY LOAN, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING,
RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE
APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR
OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.
Section 5.11 Forbearance Agreement. The First Amended and Restated
Forbearance Agreement (the "FORBEARANCE AGREEMENT") among Lender, Borrower and
the Subordinated Creditors named therein, dated as of January 31, 2000, is
terminated upon the effectiveness of this Amendment, and accordingly Lender's
obligations (i) to forbear from exercising any rights or remedies upon the
occurrence of a Default or Event of Default and (ii) to make any overadvances to
Borrower shall likewise terminate.
SECTION 5.12. ENTIRE AGREEMENT. THIS AMENDMENT, THE LOAN AGREEMENT AND
ALL OTHER LOAN DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION WITH AND PURSUANT
TO THIS AMENDMENT AND THE LOAN AGREEMENT REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the date first written above.
LONG REACH HOLDINGS, INC. BANK ONE, TEXAS, NATIONAL ASSOCIATION
/s/ William A. Schwartz /s/ F. W. McCollum
By:_____________________________ By:____________________________
William A. Schwartz F. W. McCollum
Name:_________________________ Name:_________________________
CEO Vice President
Title:__________________________ Title:__________________________
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<PAGE> 1
EXHIBIT 10.5
UNLIMITED GUARANTY
THIS UNLIMITED GUARANTY ("Guaranty") is made as of February 23, 2000,
by Guarantor (as hereinafter defined) for the benefit of Bank (as hereinafter
defined).
1. Definitions. As used in this Guaranty, the following terms shall
have the meanings indicated below:
(a) The term "Bank" shall mean BANK ONE, TEXAS, NATIONAL
ASSOCIATION, whose address for notice purposes is the following:
1717 Main, 3rd Floor
Dallas, Dallas County, Texas 75201
Attn: Asset Based Lending Dept.
(b) The term "Borrower" shall mean Long Reach Holdings, Inc.,
a Delaware corporation, and the survivor by merger of Long Reach
Holdings, Inc., a Delaware corporation, into TBM Acquisition I, Inc, a
Delaware corporation.
(c) The term "Guaranteed Indebtedness" shall mean (i) all
indebtedness, obligations and liabilities of Borrower to Bank of any
kind or character, now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, and regardless of
whether such indebtedness, obligations and liabilities may, prior to
their acquisitions by Bank, be or have been payable to or in favor of a
third party and subsequently acquired by Bank (it being contemplated
that Bank may make such acquisitions from third parties), including
without limitation all indebtedness, obligations and liabilities of
Borrower to Bank now existing or hereafter arising by note, draft,
acceptance, guaranty, endorsement, letter of credit, assignment,
purchase, overdraft, discount, indemnity agreement or otherwise, (ii)
all accrued but unpaid interest on any of the indebtedness described in
(i) above (including, without limitation, all interest which would have
accrued but for the filing of a petition under the United States
Bankruptcy Code, as amended, or any other bankruptcy or insolvency
law), (iii) all obligations of Borrower to Bank under any documents
evidencing, securing, governing and/or pertaining to all or any part of
the indebtedness described in (i) and (ii) above (collectively, the
"Loan Documents"), (iv) all Obligations as defined in that certain Loan
and Security Agreement dated as of April 20, 1999 between Borrower and
Bank, as amended from time to time, (v) all costs and expenses incurred
by Bank in connection with the collection and administration of all or
any part of the indebtedness and obligations described in (i), (ii),
(iii) and (iv) above or the protection or preservation of, or
realization upon, the collateral securing all or any part of such
UNLIMITED GUARANTY - PAGE 1
<PAGE> 2
indebtedness and obligations, including without limitation all
reasonable attorneys' fees (including, without limitation, attorneys'
fees and expenses incurred by Bank in connection with any proceedings
involving Guarantor or Borrower under the United States Bankruptcy
Code, as amended, or any other bankruptcy or insolvency law) and (vi)
all renewals, extensions, modifications and rearrangements of the
indebtedness and obligations described in (i), (ii), (iii),(iv) and (v)
above.
(d) The term "Guarantor" shall mean TBM HOLDINGS, INC., a
Delaware corporation, whose address for notice purposes is the
following:
136 Main Street
Westport, Connecticut 06880.
2. Obligations. As an inducement to Bank to extend or continue to
extend credit and other financial accommodations to Borrower, Guarantor, for
value received, does hereby unconditionally and absolutely guarantee the prompt
and full payment and performance of the Guaranteed Indebtedness when due or
declared to be due and at all times thereafter.
3. Character of Obligations. This is an absolute, continuing and
unconditional guaranty of payment and not of collection and if at any time or
from time to time there is no outstanding Guaranteed Indebtedness, the
obligations of Guarantor with respect to any and all Guaranteed Indebtedness
incurred thereafter shall not be affected. All Guaranteed Indebtedness
heretofore, concurrently herewith or hereafter made by Bank to Borrower shall be
conclusively presumed to have been made or acquired in acceptance hereof.
Guarantor shall be liable, jointly and severally, with Borrower and any other
guarantor of all or any part of the Guaranteed Indebtedness.
4. Right of Revocation. Guarantor understands and agrees that Guarantor
may revoke its future obligations under this Guaranty at any time by giving Bank
written notice that Guarantor will not be liable hereunder for any indebtedness
or obligations of Borrower incurred on or after the effective date of such
revocation. Such revocation shall be deemed to be effective on the day following
the day Bank receives such notice delivered either by: (a) personal delivery or
delivery by nationally recognized overnight service to the address and
designated department of Bank identified in subparagraph 1(a) above, or (b)
United States mail, registered or certified, return receipt requested, postage
prepaid, addressed to Bank at the address shown in subparagraph 1(a) above.
Notwithstanding such revocation, Guarantor shall remain liable on its
obligations hereunder until payment in full to Bank of (x) all of the Guaranteed
Indebtedness that is outstanding on the effective date of such revocation, and
any renewals and extensions thereof, and (y) all loans, advances and other
extensions of credit made to or for the account of Borrower on or after the
effective date of such revocation pursuant to the obligation of Bank under a
commitment or agreement made to or with Borrower prior to the effective date of
such
UNLIMITED GUARANTY - PAGE 2
<PAGE> 3
revocation. The terms and conditions of this Guaranty, including without
limitation the consents and waivers set forth in paragraph 7 hereof, shall
remain in effect with respect to the Guaranteed Indebtedness described in the
preceding sentence in the same manner as if such revocation had not been made by
Guarantor.
5. Representations and Warranties. Guarantor hereby represents and
warrants the following to Bank:
(a) This Guaranty may reasonably be expected to benefit,
directly or indirectly, Guarantor, and (i) if Guarantor is a
corporation, the Board of Directors of Guarantor has determined that
this Guaranty may reasonably be expected to benefit, directly or
indirectly, Guarantor, or (ii) if Guarantor is a partnership, the
requisite number of its partners have determined that this Guaranty may
reasonably be expected to benefit, directly or indirectly, Guarantor;
and
(b) Guarantor is familiar with, and has independently reviewed
the books and records regarding, the financial condition of Borrower
and is familiar with the value of any and all collateral intended to be
security for the payment of all or any part of the Guaranteed
Indebtedness; provided, however, Guarantor is not relying on such
financial condition or collateral as an inducement to enter into this
Guaranty; and
(c) Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition of
Borrower and Guarantor is not relying on Bank to provide such
information to Guarantor either now or in the future; and
(d) Guarantor has the power and authority to execute, deliver
and perform this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith, and the execution, delivery and
performance of this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith do not and will not violate (i)
any agreement or instrument to which Guarantor is a party, (ii) any
law, rule, regulation or order of any governmental authority to which
Guarantor is subject, or (iii) its articles or certificate of
incorporation or bylaws, if Guarantor is a corporation, or its
partnership agreement, if Guarantor is a partnership; and
(e) Neither Bank nor any other party has made any
representation, warranty or statement to Guarantor in order to induce
Guarantor to execute this Guaranty; and
(f) The financial statements and other financial information
regarding Guarantor heretofore and hereafter delivered to Bank are and
shall be true and correct in all material respects and fairly present
the financial position of Guarantor as of the dates thereof, and no
material adverse change has occurred in the financial condition of
UNLIMITED GUARANTY - PAGE 3
<PAGE> 4
Guarantor reflected in the financial statements and other financial
information regarding Guarantor heretofore delivered to Bank since the
date of the last statement thereof; and
(g) As of the date hereof, and after giving effect to this
Guaranty and the obligations evidenced hereby, (i) Guarantor is and
will be solvent, (ii) the fair saleable value of Guarantor's assets
exceeds and will continue to exceed its liabilities (both fixed and
contingent), (iii) Guarantor is and will continue to be able to pay its
debts as they mature, and (iv) if Guarantor is not an individual,
Guarantor has and will continue to have sufficient capital to carry on
its business and all businesses in which it is about to engage.
6. Covenants. Guarantor hereby covenants and agrees with Bank as
follows:
(a) Guarantor shall not, so long as its obligations under this
Guaranty continue, transfer or pledge any material portion of its
assets for less than full and adequate consideration; and
(b) Guarantor shall promptly furnish to Bank at any time and
from time to time such financial statements and other financial
information of Guarantor as the Bank may reasonably require, in form
and substance satisfactory to Bank; and
(c) Guarantor shall comply with all terms and provisions of
the Loan Documents that apply to Guarantor; and
(d) Guarantor shall promptly inform Bank of (i) any litigation
or governmental investigation against Guarantor or affecting any
security for all or any part of the Guaranteed Indebtedness or this
Guaranty which, if determined adversely, might have a material adverse
effect upon the financial condition of Guarantor or upon such security
or might cause a default under any of the Loan Documents, (ii) any
claim or controversy which might become the subject of such litigation
or governmental investigation, and (iii) any material adverse change in
the financial condition of Guarantor.
7. Consent and Waiver.
(a) Guarantor waives (i) promptness, diligence and notice of
acceptance of this Guaranty and notice of the incurring of any
obligation, indebtedness or liability to which this Guaranty applies or
may apply and waives presentment for payment, notice of nonpayment,
protest, demand, notice of protest, notice of intent to accelerate,
notice of acceleration, notice of dishonor, diligence in enforcement
and indulgences of every kind, and (ii) the taking of any other action
by Bank, including without limitation, giving any
UNLIMITED GUARANTY - PAGE 4
<PAGE> 5
notice of default or any other notice to, or making any demand on,
Borrower, any other guarantor of all or any part of the Guaranteed
Indebtedness or any other party.
(b) Guarantor waives any rights Guarantor has under, or any
requirements imposed by, Chapter 34 of the Texas Business and Commerce
Code, as in effect on the date of this Guaranty or as it may be amended
from time to time.
(c) Bank may at any time, without the consent of or notice to
Guarantor, without incurring responsibility to Guarantor and without
impairing, releasing, reducing or affecting the obligations of
Guarantor hereunder: (i) change the manner, place or terms of payment
of all or any part of the Guaranteed Indebtedness, or renew, extend,
modify, rearrange, increase or alter all or any part of the Guaranteed
Indebtedness; (ii) change the interest rate accruing on any of the
Guaranteed Indebtedness (including, without limitation, any periodic
change in such interest rate that occurs because such Guaranteed
Indebtedness accrues interest at a variable rate which may fluctuate
from time to time); (iii) sell, exchange, release, surrender,
subordinate, realize upon or otherwise deal with in any manner and in
any order any collateral for all or any part of the Guaranteed
Indebtedness or this Guaranty or setoff against all or any part of the
Guaranteed Indebtedness; (iv) neglect, delay, omit, fail or refuse to
take or prosecute any action for the collection of all or any part of
the Guaranteed Indebtedness or this Guaranty or to take or prosecute
any action in connection with any of the Loan Documents; (v) exercise
or refrain from exercising any rights against Borrower or others, or
otherwise act or refrain from acting; (vi) settle or compromise all or
any part of the Guaranteed Indebtedness and subordinate the payment of
all or any part of the Guaranteed Indebtedness to the payment of any
obligations, indebtedness or liabilities which may be due or become due
to Bank or others; (vii) apply any deposit balance, fund, payment,
collections through process of law or otherwise or other collateral of
Borrower to the satisfaction and liquidation of the indebtedness or
obligations of Borrower to Bank, if any, not guaranteed under this
Guaranty pursuant to paragraph 4 herein; and (viii) apply any sums paid
to Bank by Guarantor, Borrower or others to the Guaranteed Indebtedness
in such order and manner as Bank, in its sole discretion, may
determine.
(d) Should Bank seek to enforce the obligations of Guarantor
hereunder by action in any court or otherwise, Guarantor waives any
requirement, substantive or procedural, that (i) Bank first enforce any
rights or remedies against Borrower or any other person or entity
liable to Bank for all or any part of the Guaranteed Indebtedness,
including without limitation that a judgment first be rendered against
Borrower or any other person or entity, or that Borrower or any other
person or entity should be joined in such cause, or (ii) Bank shall
first enforce rights against any collateral which shall ever have been
given to secure all or any part of the Guaranteed Indebtedness or this
Guaranty.
UNLIMITED GUARANTY - PAGE 5
<PAGE> 6
Such waiver shall be without prejudice to Bank's right, at its option,
to proceed against Borrower or any other person or entity, whether by
separate action or by joinder.
(e) In addition to any other waivers, agreements and covenants
of Guarantor set forth herein, Guarantor hereby further waives and
releases all claims, causes of action, defenses and offsets for any act
or omission of Bank, its directors, officers, employees,
representatives or agents in connection with Bank's administration of
the Guaranteed Indebtedness, except for Bank's willful misconduct or
gross negligence.
8. Obligations Not Impaired.
(a) Guarantor agrees that its obligations hereunder shall not
be released, diminished, impaired, reduced or affected by the
occurrence of any one or more of the following events: (i) the death,
disability or lack of corporate power of Borrower, Guarantor or any
other guarantor of all or any part of the Guaranteed Indebtedness, (ii)
any receivership, insolvency, bankruptcy or other proceedings affecting
Borrower, Guarantor or any other guarantor of all or any part of the
Guaranteed Indebtedness, or any of their respective property; (iii) the
partial or total release or discharge of Borrower or any other
guarantor of all or any part of the Guaranteed Indebtedness, or any
other person or entity from the performance of any obligation contained
in any instrument or agreement evidencing, governing or securing all or
any part of the Guaranteed Indebtedness, whether occurring by reason of
law or otherwise; (iv) the taking or accepting of any collateral for
all or any part of the Guaranteed Indebtedness or this Guaranty; (v)
the taking or accepting of any other guaranty for all or any part of
the Guaranteed Indebtedness; (vi) any failure by Bank to acquire,
perfect or continue any lien or security interest on collateral
securing all or any part of the Guaranteed Indebtedness or this
Guaranty; (vii) the impairment of any collateral securing all or any
part of the Guaranteed Indebtedness or this Guaranty; (viii) any
failure by Bank to sell any collateral securing all or any part of the
Guaranteed Indebtedness or this Guaranty in a commercially reasonable
manner or as otherwise required by law; (ix) any invalidity or
unenforceability of or defect or deficiency in any of the Loan
Documents; or (x) any other circumstance which might otherwise
constitute a defense available to, or discharge of, Borrower or any
other guarantor of all or any part of the Guaranteed Indebtedness.
(b) This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of all or
any part of the Guaranteed Indebtedness is rescinded or must otherwise
be returned by Bank upon the insolvency, bankruptcy or reorganization
of Borrower, Guarantor, any other guarantor of all or any part of the
Guaranteed Indebtedness, or otherwise, all as though such payment had
not been made.
UNLIMITED GUARANTY - PAGE 6
<PAGE> 7
(c) In the event Borrower is a corporation, joint stock
association or partnership, or is hereafter incorporated, none of the
following shall affect Guarantor's liability hereunder: (i) the
unenforceability of all or any part of the Guaranteed Indebtedness
against Borrower by reason of the fact that the Guaranteed Indebtedness
exceeds the amount permitted by law; (ii) the act of creating all or
any part of the Guaranteed Indebtedness is ultra vires; or (iii) the
officers or partners creating all or any part of the Guaranteed
Indebtedness acted in excess of their authority. Guarantor hereby
acknowledges that withdrawal from, or termination of, any ownership
interest in Borrower now or hereafter owned or held by Guarantor shall
not alter, affect or in any way limit the obligations of Guarantor
hereunder.
9. Actions against Guarantor. In the event of a default in the payment
or performance of all or any part of the Guaranteed Indebtedness when such
Guaranteed Indebtedness becomes due, whether by its terms, by acceleration or
otherwise, Guarantor shall, without notice or demand, promptly pay the amount
due thereon to Bank, in lawful money of the United States, at Bank's address set
forth in subparagraph 1(a) above. One or more successive or concurrent actions
may be brought against Guarantor, either in the same action in which Borrower is
sued or in separate actions, as often as Bank deems advisable. The exercise by
Bank of any right or remedy under this Guaranty or under any other agreement or
instrument, at law, in equity or otherwise, shall not preclude concurrent or
subsequent exercise of any other right or remedy. The books and records of Bank
shall be admissible in evidence in any action or proceeding involving this
Guaranty and shall be prima facie evidence of the payments made on, and the
outstanding balance of, the Guaranteed Indebtedness.
10. Payment by Guarantor. Whenever Guarantor pays any sum which is or
may become due under this Guaranty, written notice must be delivered to Bank
contemporaneously with such payment. Such notice shall be effective for purposes
of this paragraph when contemporaneously with such payment Bank receives such
notice either by: (a) personal delivery or delivery by nationally recognized
overnight service to the address and designated department of Bank identified in
subparagraph 1(a) above, or (b) United States mail, certified or registered,
return receipt requested, postage prepaid, addressed to Bank at the address
shown in subparagraph 1(a) above. In the absence of such notice to Bank by
Guarantor in compliance with the provisions hereof, any sum received by Bank on
account of the Guaranteed Indebtedness shall be conclusively deemed paid by
Borrower.
11. Notice of Sale. In the event that Guarantor is entitled to receive
any notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any collateral
securing all or any part of the Guaranteed Indebtedness or this Guaranty,
reasonable notice shall be deemed given when such notice is deposited in the
United States mail, postage prepaid, at the address for Guarantor set forth in
subparagraph 1(d) above, ten (10) days prior to the date any public sale, or
after which any private sale, of any such
UNLIMITED GUARANTY - PAGE 7
<PAGE> 8
collateral is to be held; provided, however, that notice given in any other
reasonable manner or at any other reasonable time shall be sufficient.
12. Waiver by Bank. No delay on the part of Bank in exercising any
right hereunder or failure to exercise the same shall operate as a waiver of
such right. In no event shall any waiver of the provisions of this Guaranty be
effective unless the same be in writing and signed by an officer of Bank, and
then only in the specific instance and for the purpose given.
13. Successors and Assigns. This Guaranty is for the benefit of Bank,
its successors and assigns. This Guaranty is binding upon Guarantor and
Guarantor's heirs, executors, administrators, personal representatives and
successors, including without limitation any person or entity obligated by
operation of law upon the reorganization, merger, consolidation or other change
in the organizational structure of Guarantor.
14. Costs and Expenses. Guarantor shall pay on demand by Bank all costs
and expenses, including without limitation, all reasonable attorneys' fees
incurred by Bank in connection with the preparation, administration, enforcement
and/or collection of this Guaranty. This covenant shall survive the payment of
the Guaranteed Indebtedness.
15. Severability. If any provision of this Guaranty is held by a court
of competent jurisdiction to be illegal, invalid or unenforceable under present
or future laws, such provision shall be fully severable, shall not impair or
invalidate the remainder of this Guaranty and the effect thereof shall be
confined to the provision held to be illegal, invalid or unenforceable.
16. No Obligation. Nothing contained herein shall be construed as an
obligation on the part of Bank to extend or continue to extend credit to
Borrower.
17. Amendment. No modification or amendment of any provision of this
Guaranty, nor consent to any departure by Guarantor therefrom, shall be
effective unless the same shall be in writing and signed by an officer of Bank,
and then shall be effective only in the specific instance and for the purpose
for which given.
18. Cumulative Rights. All rights and remedies of Bank hereunder are
cumulative of each other and of every other right or remedy which Bank may
otherwise have at law or in equity or under any instrument or agreement, and the
exercise of one or more of such rights or remedies shall not prejudice or impair
the concurrent or subsequent exercise of any other rights or remedies.
19. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS.
UNLIMITED GUARANTY - PAGE 8
<PAGE> 9
20. Venue. This Guaranty has been entered into in the county in Texas
where Bank's address for notice purposes is located, and it shall be performable
for all purposes in such county. Courts within the State of Texas shall have
jurisdiction over any and all disputes arising under or pertaining to this
Guaranty and venue for any such disputes shall be in the county or judicial
district where the Bank's address for notice purposes is located.
21. Compliance with Applicable Usury Laws. Notwithstanding any other
provision of this Guaranty or of any instrument or agreement evidencing,
governing or securing all or any part of the Guaranteed Indebtedness, Guarantor
and Bank by its acceptance hereof agree that Guarantor shall never be required
or obligated to pay interest in excess of the maximum nonusurious interest rate
as may be authorized by applicable law for the written contracts which
constitute the Guaranteed Indebtedness. It is the intention of Guarantor and
Bank to conform strictly to the applicable laws which limit interest rates, and
any of the aforesaid contracts for interest, if and to the extent payable by
Guarantor, shall be held to be subject to reduction to the maximum nonusurious
interest rate allowed under said law.
22. Descriptive Headings. The headings in this Guaranty are for
convenience only and shall not define or limit the provisions hereof.
23. Gender. Within this Guaranty, words of any gender shall be held and
construed to include the other gender.
24. Entire Agreement. This Guaranty contains the entire agreement
between Guarantor and Bank regarding the subject matter hereof and supersedes
all prior written and oral agreements and understandings, if any, regarding
same; provided, however, this Guaranty is in addition to and does not replace,
cancel, modify or affect any other guaranty of Guarantor now or hereafter held
by Bank that relates to Borrower or any other person or entity.
UNLIMITED GUARANTY - PAGE 9
<PAGE> 10
EXECUTED as of the date first above written.
GUARANTOR:
TBM HOLDINGS, INC.
/s/ William A. Schwartz
By:________________________
President
Its:_______________________
UNLIMITED GUARANTY - PAGE 10
<PAGE> 1
Exhibit 21
List of Operating Subsidiaries
<TABLE>
<CAPTION>
Names under which
Name of Company Jurisdiction of Incorporation Subsidiary conducts business
- --------------- ----------------------------- ----------------------------
<S> <C> <C>
Long Reach Holdings, Inc. Delaware Long Reach
Rol-Lift
Brudi
Long Reach Brudi Pacific Pty. Ltd. Australia Brudi Pacific Pty. Ltd.
</TABLE>
<PAGE> 1
Exhibit 99.1
Contact: William Schwartz, President
(203) 227-6140
TBM HOLDINGS CLOSES MERGER ACQUISITION OF
LONG REACH HOLDINGS AND RAISES $8 MILLION ADDITIONAL EQUITY
Westport, Connecticut (March 9, 2000) - TBM Holdings (OTC Bulletin Board:TBMH)
today announced that it has completed the acquisition of Long Reach Holdings,
Inc. The final consideration paid for the company was $7.5 million plus the
assumption of approximately $10.9 million of senior bank debt for a total
transaction value of approximately $18.4 million.
In operation since 1930, Long Reach is a major North American manufacturer of
hydraulic material handling equipment including lift truck attachments, pallet
trucks, pallet stackers and industrial lift tables. The company reported net
revenues of approximately $38.0 million for fiscal year ended June 30, 1999.
Products are marketed under the Long Reach, Brudi, and Rol-Lift brand names.
Long Reach operates facilities in Texas, Arkansas and Australia.
Anand Sharma, Chairman and CEO of TBMH, noted, "We view the acquisition of Long
Reach as a first and very important step in growing in the material handling
industry. We see a lot of opportunity to increase market share through
implementing operating efficiencies as well as growing through strategic
acquisitions."
William Schwartz, President of TBMH commented, "Our operating team is ready to
get into the company and begin working to improve the operations at Long Reach.
We look forward to working with the employees there to satisfy customers and
establish a positive growth trend."
Pursuant to the terms of its July 1999 private placement, the Company will use
reasonable efforts to cause the shares purchased in the July, 1999 private
placement to be registered with the Securities and Exchange Commission as soon
as practicable.
Additionally, on February 23, 2000, TBMH completed a private placement of its
Common Stock, in which it issued and sold an aggregate of 916,667 restricted
shares of Common Stock at $6.00 per share, for aggregate proceeds of $5,500,000.
The offering was made solely to accredited investors. In addition, J.H. Whitney
exercised its option to purchase 500,000 restricted shares of Common Stock at
$5.00 per share, for aggregate proceeds of $2,500,000. The proceeds of the
private placement will be used for working capital and to fund operating costs
of Long Reach and may be used for future acquisitions. The total number of
shares outstanding for TBMH is now 4,514,080.
TBMH seeks to acquire underperforming manufacturing companies and use the Kaizen
Growth Strategy to improve operating performance and profitability.
This press release contains forward looking statements, as defined under the
Private Securities Litigation Reform Act of 1995. Actual results may differ
materially from those anticipated as a result of various risks and
uncertainties, including risks and uncertainties detailed from time to time in
the Company's periodic reports on Forms 10-KSB, 10-QSB and 8-K filed with the
Securities and Exchange Commission. Readers are cautioned not to place undue
reliance on these forward looking statements which speak only as of the date
hereof. TBMH undertakes no obligation to publish revised forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
