<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
Quarterly Report Pursuant To Section 13 or 15 (d)
of the Securities Exchange Act of 1934
--------------------
For the Period Ended December 31, 1998 Commission File Number 0-18927
TANDY BRANDS ACCESSORIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2349915
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
690 East Lamar Boulevard, Suite 200, Arlington, TX 76011
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (817)-548-0090
Former name, former address and former fiscal year, if changed
since last report:
Not Applicable
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class Number of shares outstanding at December 31, 1998
Common stock, $1 par value 5,719,746
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<PAGE> 2
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
Form 10-Q
Quarter Ended December 31, 1998
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item Page No.
--------
<S> <C> <C>
1. Financial Statements 3 - 8
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9 - 11
3. Qualitative and Quantitative Disclosures About Market Risk 11
PART II -- OTHER INFORMATION
Item
4. Submission of Matter to a Vote of Security Holders 12
6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
INDEX TO EXHIBITS 14
</TABLE>
2
<PAGE> 3
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
File Number 0 -18927
Form 10 - Q
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
December 31 December 31
---------------------- -----------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Gross sales, less discounts, returns and allowances $ 54,122 $ 36,823 $ 98,403 $ 67,688
Cost of goods sold 34,053 23,292 61,854 42,541
-------- -------- -------- --------
Gross margin 20,069 13,531 36,549 25,147
Selling, general and administrative expenses 12,401 8,322 23,514 16,192
Depreciation and amortization 807 443 1,554 880
-------- -------- -------- --------
Total operating expenses 13,208 8,765 25,068 17,072
-------- -------- -------- --------
Operating income 6,861 4,766 11,481 8,075
Interest expense (843) (352) (1,588) (626)
Royalty, interest and other income 24 17 44 114
-------- -------- -------- --------
Income before provision for income taxes 6,042 4,431 9,937 7,563
Provision for income taxes 2,364 1,700 3,875 2,900
-------- -------- -------- --------
Net income $ 3,678 $ 2,731 $ 6,062 $ 4,663
======== ======== ======== ========
Earnings per common share $ 0.64 $ 0.49 $ 1.07 $ 0.84
======== ======== ======== ========
Earnings per common share - assuming dilution $ 0.63 $ 0.48 $ 1.05 $ 0.82
======== ======== ======== ========
Common shares outstanding 5,714 5,552 5,692 5,537
======== ======== ======== ========
Common shares outstanding - assuming dilution 5,795 5,732 5,782 5,684
======== ======== ======== ========
Cash dividends per common share None None None None
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
3
<PAGE> 4
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
File Number 0-18927
Form 10-Q
Condensed Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 713 $ 283
Accounts receivable, net 36,875 27,565
Inventories:
Raw materials and work in process 6,953 8,648
Finished goods 47,079 39,355
Other current assets 2,652 2,329
--------- ---------
Total current assets 94,272 78,180
--------- ---------
Property and equipment, at cost 17,322 16,110
Accumulated depreciation (6,127) (5,355)
--------- ---------
Net property and equipment 11,195 10,755
--------- ---------
Other assets:
Goodwill, less amortization 10,517 10,489
Other assets, less amortization 8,521 8,596
--------- ---------
Total other assets 19,038 19,085
--------- ---------
TOTAL ASSETS $ 124,505 $ 108,020
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 3,650 $ 7,600
Accounts payable 5,663 6,789
Accrued expenses 7,182 7,457
--------- ---------
Total current liabilities 16,495 21,846
--------- ---------
Other liabilities:
Notes payable 50,000 35,000
Other noncurrent liabilities 272 333
--------- ---------
Total other liabilities 50,272 35,333
--------- ---------
Stockholders' equity:
Preferred stock, $1 par value, 1,000,000 shares authorized,
none issued -- --
Common stock, $1 par value, 10,000,000 shares authorized,
5,719,746 shares and 5,616,724 shares issued and outstanding
as of December 31, 1998, and June 30, 1998, respectively 5,720 5,617
Additional paid-in capital 21,313 20,374
Retained earnings 30,705 24,850
--------- ---------
Total stockholders' equity 57,738 50,841
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 124,505 $ 108,020
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
4
<PAGE> 5
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
File Number 0-18927
Form 10-Q
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
---------------------------
1998 1997
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,062 $ 4,663
Adjustments to reconcile net income to net cash provided by (used for)
operating activities:
Depreciation 857 540
Amortization 765 411
Other (112) (134)
Change in assets and liabilities:
Accounts receivable (9,310) (6,952)
Inventories (6,029) (4,219)
Other assets (374) 27
Accounts payable (1,126) 636
Accrued expenses (336) 563
-------- --------
Net cash used for operating activities (9,603) (4,465)
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (2,059) (726)
-------- --------
Net cash used for investing activities (2,059) (726)
-------- --------
Cash flows from financing activities:
Exercise of employee stock options 171 204
Sale of stock to stock purchase program 871 595
Proceeds from borrowings 40,942 29,000
Payments under borrowings (29,892) (24,214)
-------- --------
Net cash provided by financing activities 12,092 5,585
-------- --------
Net increase in cash and cash equivalents 430 394
Cash and cash equivalents at beginning of period 283 554
-------- --------
Cash and cash equivalents at end of period $ 713 $ 948
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,139 $ 537
Income taxes 2,113 3,024
Noncash activities:
None.
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
5
<PAGE> 6
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
Notes to Condensed Financial Statements
(Unaudited)
Note 1 - Accounting Principles.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended December 31, 1998, are not necessarily indicative of the results that may
be expected for the year ended June 30, 1999. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Tandy Brands Accessories, Inc. and Subsidiaries Annual Report on Form 10-K for
the year ended June 30, 1998.
Note 2 - Impact of New Accounting Standards.
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards (" SFAS") No. 130, "Reporting
Comprehensive Income." This standard was adopted by the Company in the first
quarter of fiscal 1999. SFAS No. 130 requires that an enterprise report, by
major component and as a single total, the change in its equity during the
period from nonowner sources, which for the Company includes foreign currency
translation adjustments. The impact of the adoption of this statement was
primarily limited to the form and content of the Company's disclosures and does
not materially impact the Company's consolidated financial position or
statements of income, stockholders' equity and cash flows.
The components of comprehensive income, net of related tax, for the
three and six months ended December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
December 31 December 31
----------------------- -----------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 3,678 $ 2,731 $ 6,062 $ 4,663
Foreign currency translation adjustments (19) (187) (207) (185)
------- ------- ------- -------
Comprehensive income $ 3,659 $ 2,544 $ 5,855 $ 4,478
======= ======= ======= =======
</TABLE>
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 131 establishes annual and
interim reporting requirements for an enterprise's operating segments and
related disclosures about its products and services, geographical areas in which
it operates and major customers. The statement is effective for fiscal years
beginning after December 15, 1997, with earlier application permitted. The
effect of the adoption of SFAS No. 131 during fiscal year 1999 will primarily be
limited to the form and content of the Company's disclosures in its Annual
Report and is not expected to materially impact the Company's consolidated
financial position or statements of income, stockholders' equity and cash flows.
6
<PAGE> 7
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
Notes to Condensed Financial Statements
(Unaudited)
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted in years
beginning after June 15, 1999. Because of the Company's minimal use of
derivatives, management does not anticipate that the adoption of the new
Statement will have a significant effect on earnings or the financial position
of the Company.
Note 3 - Credit Arrangements
On November 2, 1998, the Company amended its $30,000,000 unsecured line
of credit with another bank to $35,000,000. Of this amount, $10,000,000 is an
uncommitted facility which expires on April 30, 1999. The $20,000,000 committed
facility thereunder was increased to $25,000,000 which expires on April 30,
2000. Each facility may be used for borrowings or letters of credit. The
amendment also made the Company's domestic subsidiaries co-guarantors of the
Company's indebtedness, eased certain financial covenants and set acquisition
purchase price thresholds over which the bank must give its written consent.
On November 17, 1998, the Company entered into a $40,000,000 unsecured
line of credit with another bank. Of this amount, $15,000,000 is an uncommitted
facility which expires on May 14, 2000. The $25,000,000 committed facility is a
$15,000,000 term note and a $10,000,000 committed revolving credit facility. The
$15,000,000 term note which expires on November 17, 2003 bears interest at LIBOR
plus 1%. The $10,000,000 committed revolving credit facility which expires on
May 14, 2000 bears interest at various rates with short-term durations.
Principal payments on the term note and committed revolving credit facility are
due on the expiration date. Each facility may be used for borrowings or letters
of credit.
On November 17, 1998, the Company entered into a five-year interest
rate swap agreement converting $15,000,000 of outstanding indebtedness from a
variable to a fixed interest rate. The average receive rate is based on a 90 day
LIBOR rate. At December 31, 1998, the receive and pay rates related to the
interest rate swap were 6.40% and 6.52%, respectively.
Note 4 - Public Offering of Common Stock
On October 1, 1998, the Company withdrew its registration statement
with the Securities and Exchange Commission for a public offering of 1,900,000
shares of common stock offered by the Company and a selling stockholder. The
Company withdrew the offering due to unsettled market conditions. The Company
believes it has adequate alternative sources of financing to meet its needs. The
Company intends to use its available debt capacity for seasonal working capital
needs and potential future acquisitions. The results of operations for the three
and six month periods ended December 31, 1998 include the write-off of
approximately $188,000 in costs associated with the withdrawal of the public
offering of the company's common stock.
7
<PAGE> 8
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
Notes to Condensed Financial Statements
(Unaudited)
Note 5 - Earnings Per Share.
The following sets forth the computation of basic and diluted earnings
per share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
December 31 December 31
-------------------- --------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per
share:
Net income $3,678 $2,731 $6,062 $4,663
====== ====== ====== ======
Denominator:
Weighted average shares outstanding 5,700 5,552 5,675 5,537
Contingently issuable shares 14 -- 17 --
------ ------ ------ ------
Denominator for basic earnings per
share - weighted average shares 5,714 5,552 5,692 5,537
Effect of dilutive securities:
Employee stock options 69 152 77 124
Director stock options 12 28 13 23
------ ------ ------ ------
Dilutive potential common shares 81 180 90 147
Denominator for diluted earnings per
share - adjusted weighted - average
shares 5,795 5,732 5,782 5,684
====== ====== ====== ======
Basic earnings per share $ 0.64 $ 0.49 $ 1.07 $ 0.84
====== ====== ====== ======
Diluted earnings per share $ 0.63 $ 0.48 $ 1.05 $ 0.82
====== ====== ====== ======
</TABLE>
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
GENERAL
Tandy Brands Accessories, Inc. ("the Company") is a leading designer,
manufacturer and marketer of branded men's, women's and children's accessories,
including belts and small leather goods such as wallets. The Company's product
lines also include handbags, socks, scarves, hats, hair accessories, suspenders
and neckwear. Tandy Brands' merchandise is marketed under a broad portfolio of
nationally recognized licensed and proprietary brand names, including Jones New
York(R), Greg Norman Collection(R), Rolfs(R), Haggar(R), Bugle Boy(R),
Canterbury(R), Prince Gardner(R), Princess Gardner(R), Amity(R), Accessory
Design Group(R) and Tiger(R), as well as private brands for major retail
customers. The Company sells its products through all major retail distribution
channels throughout the United States and Canada, including mass merchants,
national chain stores, department stores, men's and women's specialty stores,
golf pro shops and catalogs.
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THE THREE AND SIX
MONTHS ENDED DECEMBER 31, 1997
NET SALES
For the three month period ended December 31, 1998, net sales increased 47.0% to
$54,122,000 as compared to net sales of $36,823,000 for the same period last
year. For the six month period ended December 31, 1998, net sales increased
45.4% to $98,403,000 as compared to net sales of $67,688,000 for the same period
last year. The sales realized from our Amity/Rolfs products and Tiger
Accessories, Inc. acquisition contributed $16,374,000 and $25,899,000 to the
overall net sales increase for the three and six-month periods ended December
31, 1998, respectively. The remaining portion of the sales increase for the
three and six-month periods ended December 31, 1998 was realized from the
Company's existing men's and women's businesses.
GROSS MARGINS
Gross margins for the three month period ended December 31, 1998 increased 0.4%
to 37.1% as compared to the same period for the prior year. The slight increase
is the result of the higher department and specialty store sales as compared to
the same quarter in the prior year. Gross margins for the six-month period ended
December 31, 1998 approximated the prior year.
OPERATING EXPENSES
Selling, general and administrative expenses as a percentage of net sales for
the three months ended December 31, 1998 increased 0.3% as compared to the same
period of the prior year. The three and six month periods ended include the
write-off of approximately $188,000 in costs associated with the withdrawal of
the public offering of the company's common stock.
Depreciation and amortization expenses increased 82.2% and 76.6% to $807,000 and
$1,554,000 for the three and six months ended December 31, 1998, respectively,
as compared to the same periods of the prior year. Amortization expense
increased due to goodwill and related intangibles recorded in connection with
the Amity/Rolfs tradename purchase and Tiger Accessories, Inc. acquisition
during the fourth quarter of fiscal 1998. Depreciation expense increased due to
capital expenditures initiated at the end of fiscal 1998.
Interest expense for the three and six-month periods ended December 31, 1998
increased $491,000 and $962,000, respectively, as compared to the same period
for the prior year. The increase is primarily related to higher debt levels as a
result of the purchase of certain assets of Amity/Rolfs and the acquisition of
Tiger Accessories, Inc.
The effective tax rate for the three and six months ended December 31, 1998 was
approximately 39% compared to approximately 38% for the same prior year periods
due to increased state income taxes.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
Net income for the three-month period ended December 31, 1998 increased 34.7% to
$3,678,000 or $.63 per diluted share, compared to net income of $2,731,000 or
$.48 per diluted share, for the same three months last year. Net income for the
six-month period ended December 31, 1998 increased 30.0% to $6,062,000 or $1.05
per diluted share, compared to net income of $4,663,000 or $.82 per diluted
share, for the same period last year. The increase in net income was primarily
due to the Company's increase in net sales.
LIQUIDITY AND CAPITAL RESOURCES
Generally, the Company's primary sources of liquidity are cash flows from
operations and the Company's lines of credit. The Company has two unsecured
domestic bank credit lines aggregating $75,000,000, which can be used for
seasonal borrowings and letters of credit. The Company's borrowings under its
credit lines were $53,650,000 and $20,636,000 as of December 31, 1998 and 1997,
respectively.
See Note 3 for a discussion of certain amendments to these credit lines.
For the six months ended December 31, 1998, the Company's operating activities
used cash of $9,603,000 compared to $4,465,000 for the same period last year.
The increase was attributable to cash used to fund the purchase of inventory and
increases in accounts receivable due to higher sales during the six months ended
December 31, 1998.
Capital expenditures were $2,059,000 for the six months ended December 31, 1998.
The increase of $1,333,000 over the same prior year period is due primarily to
the purchase and installation of distribution center management systems and
capital expenditures related to the expansion of the Yoakum, Texas distribution
facility.
The Company believes that its sources of liquidity are sufficient to fund its
operations.
YEAR 2000 COMPLIANCE
Many existing computer programs utilize only two digits to identify a year in
the date field. These programs, if not corrected, could fail or create erroneous
results by or at the year 2000. This year 2000 issue is believed to affect
virtually all companies and organizations, including the Company. The Company
has undertaken a program to address its exposure to year 2000 issues. The
Company is currently testing its program modifications and believes that its
implementation plan will be successful. Although there can be no assurance with
respect thereto, the Company does not expect that the year 2000 issues
(including the cost of the Company's compliance program as currently estimated)
will have a material adverse effect on the Company's financial position or
results of operations.
The Company's year 2000 compliance plan requires the query of its significant
suppliers, subcontractors and customers that do not share information systems
with the Company ("external third parties"). This process is expected to be
completed by the end of fiscal 1999. To date, the Company is unaware of any
external third party with a year 2000 issue that would materially impact the
Company's results of operations, liquidity, or capital resources. However, the
Company has no means of ensuring that external third parties will be year 2000
ready. The inability of external third parties to complete their year 2000
resolution process in a timely fashion could materially impact the Company. The
effect of non-compliance by external third parties is not determinable.
10
<PAGE> 11
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
SEASONALITY
The Company's quarterly sales and net income results are fairly consistent
throughout the fiscal year, with a seasonal increase during the second quarter.
INFLATION
Although the Company's operations are affected by general economic trends, the
Company does not believe that inflation has had a material effect on the results
of operations.
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of financial condition and results of
operations and other sections of this Form 10-Q contain forward looking
statements that are based on current expectations, estimates and projections
about the industry in which the Company operates, management's beliefs and
assumptions made by management. In addition, other written or oral statements
which constitute forward-looking statements may be made by or on behalf of the
Company. Words such as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates," or variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in such
forward-looking statements. The Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.
ITEM 3. Qualitative and Quantitative Disclosures About Market Risk
The Company is subject to interest rate risk on its long term debt. The
Company manages its exposure to changes in interest rates by the use of variable
and fixed interest rate debt. In addition the Company has hedged its exposure to
changes in interest rates on a portion of its variable debt by entering into a
interest rate swap agreement to lock in a fixed interest rate for a portion of
these borrowings. At December 31, 1998 the Company had borrowings under its
credit lines of $53,650,000 bearing a weighted-average interest rate of 5.94%.
The Company entered into a five-year interest rate swap agreement converting
$15,000,000 of outstanding indebtedness from a variable to a fixed interest
rate. The average receive rate is based on a 90 day LIBOR rate. At December 31,
1998, the receive and pay rates related to the interest rate swap were 6.40% and
6.52%, respectively. The potential impact of market conditions on the fair value
of the Company's indebtedness is not expected to be material.
11
<PAGE> 12
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 4. Submission of Matter to a Vote of Security Holders.
(a) The annual meeting of stockholders was held on October 20, 1998.
(b) The matters voted upon were as follows:
(i) The election of two directors in Class II to serve for three-year
terms expiring in 2001, or until their successors are elected and
qualified. The number of votes cast for and against the election of
each nominee, as well as the number of abstentions and broker non-votes
with respect to the election of each nominee were as follows:
<TABLE>
<S> <C> <C>
Mr. C. A. Rundell, Jr.
----------------------
For 4,900,410 Against/Withheld 13,322 Abstain -0- Broker Non-votes -0-
Mr. Robert E. Runice
--------------------
For 4,900,410 Against/Withheld 13,322 Abstain -0- Broker Non-votes -0-
</TABLE>
Directors whose terms continued after the annual meeting are as
follows:
Mr. J.S.B. Jenkins
Dr. James F. Gaertner
Ms. Maxine K. Clark
Mr. Gene Stallings
Mr. Marvin J. Girouard
ITEM 6. Exhibits and Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended December 31,
1998. The exhibits filed as a part of this report are listed below.
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
10.29 Revolving Credit and Term Loan Agreement between Tandy
Brands Accessories, Inc. and NationsBank, N. A. dated
as of November 17, 1998.
10.30 ISDA Master Agreement between Tandy Brands
Accessories, Inc. and NationsBank, N. A. dated as of
November 17, 1998.
27.1 Financial Data Schedule
</TABLE>
12
<PAGE> 13
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TANDY BRANDS ACCESSORIES, INC.
(Registrant)
/s/ J.S.B. Jenkins
--------------------------------------
J.S.B. Jenkins
President and Chief Executive Officer
/s/ Stanley T. Ninemire
--------------------------------------
Stanley T. Ninemire
Senior Vice President, Chief Financial
Officer and Treasurer
Date: February 12, 1998
13
<PAGE> 14
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Incorporated by Reference
(If applicable)
-------------------------------------------------------
Exhibit Number and Description Form Date File No. Exhibit
- ------------------------------ --------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
(4) Instruments defining the rights
of security holders, including
indentures
4.1 Certificate of Designations,
Powers, Preferences and
Rights of Series A Junior
Participating Cumulative
Preferred Stock of Tandy
Brands Accessories, Inc. S-1 11/02/90 33-37588 4.1
4.2 Form of Common Stock
Certificate of Tandy
Brands Accessories, Inc. S-1 11/02/90 33-37588 4.2
4.3 Form of Preferred Share
Purchase Rights Certificate
Of Tandy Brands
Accessories, Inc. S-1 11/02/90 33-37588 4.3
4.4 Rights Agreement dated
November 7, 1990,
Between Tandy Brands
Accessories, Inc.
And First National
Bank of Boston S-1 11/02/90 33-37588 10.5
(10) Material Contracts
10.29 Revolving Credit and Term
Agreement between Tandy
Brands Accessories, Inc. and N/A N/A N/A N/A
NationsBank, N.A., dated as of
November 17, 1998.
10.30 ISDA Master Agreement
between Tandy Brands
Accessories, Inc. and
NationsBank, N.A. ,
dated as of
November 17, 1998. N/A N/A N/A N/A
(27) Financial Data Schedule
27.1 Financial Data Schedule N/A N/A N/A N/A
</TABLE>
14
<PAGE> 1
EXHIBIT 10.29
REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS REVOLVING CREDIT AND TERM LOAN AGREEMENT is entered into as of
the 17th day of November, 1998 by and between TANDY BRANDS ACCESSORIES, INC., a
Delaware corporation ("Borrower"), and NATIONSBANK, N.A., a national banking
association ("Lender").
WITNESSETH:
WHEREAS, Borrower has requested that Lender provide Borrower with a
$10,000,000.00 revolving credit facility (the "Revolving Credit Loan") and a
$15,000,000.00 term loan (the "Term Loan") to fund general corporate purposes
and working capital needs.
WHEREAS, Lender is willing to provide such facilities to Borrower upon
the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITION OF TERMS
1.1 Definitions. As used in this Agreement, all exhibits and schedules
hereto and in any note, certificate, report, or other Loan Documents made or
delivered pursuant to this Agreement, the following terms shall have the
respective meanings assigned to them in this Section I or in the Section or
recital referred to below:
"Acquisition Capital Expenditures" means for any period, the
aggregate expenditures, costs, financings (which shall include Capitalized
Lease financings or transactions including such leases), cash expended and stock
issued in connection with the acquisition of a business or the assets of a
business, i.e., the total "purchase price" of such acquisition which shall be
supported by appraisals, accounting practices, sales contracts or other evidence
generally utilized in reflected in the Borrower's financial statements.
"Adjusted Eurodollar Rate" means, with respect to any Interest Period,
an interest rate per annum (rounded upwards, if necessary, to the next 1/16th of
1%) equal to the quotient of (a) the Eurodollar Rate with respect to such
Interest Period, divided by (b) the remainder of 1.00 minus the Eurodollar
Reserve Requirement in effect on such date.
"Advance" means (a) the disbursement by Lender of a sum or sums lent
to Borrower pursuant to this Agreement, (b) the conversion of a Borrowing from
one type of Borrowing to another type of Borrowing pursuant to Section 2.14, and
(c) the continuation of a Eurodollar Borrowing to a new Interest Period pursuant
to Section 2.14.
"Advance Date" has the meaning set forth in Section 2.3.
Revolving Credit and Term Loan Agreement 1
<PAGE> 2
"Affiliate" of any Person means any other Person directly or
indirectly, controlling, controlled by, or under common control with, such
Person.
"Agreement" means this Revolving Credit and Term Loan Agreement,
including the schedules and exhibits hereto, as the same may be modified,
amended, renewed, or extended from time to time.
"Applicable Margin" means, at the time of determination thereof, the
interest margin over the Prime Rate, the Adjusted Eurodollar Rate or the Quoted
Rate, as the case may be, as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Revolving Credit Term Loan
Commitment Commitment
- --------------------------------------------------------------------------------
Eurodollar Prime Rate Quoted Rate Eurodollar
Borrowings Borrowings Borrowings Borrowings
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
.75% 0% .75% 1.0%
- --------------------------------------------------------------------------------
</TABLE>
"Borrowing" means a Eurodollar Borrowing, a Prime Rate Borrowing or a
Quoted Rate Borrowing.
"Business Day" means (a) for all purposes, any day other than a
Saturday, Sunday, or day on which national banks are authorized to be closed
under the laws of the State of Texas, and (b) for purposes of any Eurodollar
Borrowing, a day that satisfies the requirements of clause (a) and is a day when
commercial banks are open for domestic or international business in London.
"Capital Expenditures" means, for any period, the aggregate of all
expenditures and costs of the Borrower (whether paid in cash or accrued as
liabilities during that period and including that portion of Capitalized Leases
of the Borrower) during such period that, in conformity with GAAP, are required
to be included in or classified as property, plant or equipment or another
similar fixed asset account reflected on the balance sheet of the Borrower.
"Capital Lease Obligations" means, as to any Person, the obligations
of such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP. For purposes of this Agreement, the amount of
such Capital Lease Obligations shall be the capitalized amount thereof, as
determined in accordance with GAAP.
"Cash Interest Expense" means, for Borrower and its Subsidiaries for
any period, total interest expense in respect of Indebtedness actually paid or
that is payable during such period, including, without limitation, all
commissions, discounts, and other fees and charges with respect to letters of
credit, but excluding interest expense not payable in cash, all as determined in
accordance with GAAP.
"Code" means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated and rulings issued thereunder.
"Collateral Documents" means all guaranty agreements executed or
delivered to secure the repayment of the Obligation or any part thereof.
Revolving Credit and Term Loan Agreement 2
<PAGE> 3
"Consolidated Adjusted Net Income" means consolidated net earnings
(after income taxes) of Borrower and its Subsidiaries, but excluding (a)
extraordinary gains, (b) gains due to sales or write-up of assets, (c) earnings
of any Person newly acquired, if earned prior to acquisition, or (d) gains due
to acquisitions of any securities of Borrower or any of its Subsidiaries.
"Contract Rate" means (a) with respect to a Prime Rate Borrowing, the
Prime Rate plus the Applicable Margin, (b) with respect to a Eurodollar
Borrowing, the Adjusted Eurodollar Rate plus the Applicable Margin, and (c) with
respect to a Quoted Rate Borrowing, the Quoted Rate plus the Applicable Margin.
"Current Liabilities" means current liabilities determined in
accordance with Generally Accepted Accounting Principals.
"Current Maturities of Long-Term Debt" means, as of any date, the
aggregate amount of all regularly scheduled principal payments on all
outstanding Indebtedness of Borrower and Subsidiaries that are due and payable
within twelve (12) months following such date.
"Debtor Laws" means all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization,
or similar laws from time to time in effect affecting the rights of creditors
generally.
"Dividends" in respect of any corporation, means (a) cash
distributions or other distributions on, or in respect of, any class of capital
stock of such corporation, except for distributions made solely in shares of
stock of the same class, and (b) other payments or transfers made in respect of
the redemption, repurchase, or acquisition of such stock.
"EBITDA" means earnings before interest, taxes, depreciation and
amortization.
"Environmental Laws" means any Legal Requirements pertaining to air,
emissions, water discharge, noise emissions, solid or liquid waste disposal,
hazardous waste or materials, industrial hygiene, or other environmental,
health, or safety matters or conditions on, under or about real property or any
portion thereof, and similar laws of any Governmental Authority having
jurisdiction over real property as such Legal Requirements may be amended or
supplemented from time to time, and regulations promulgated and rulings issued
pursuant to such laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and published interpretations thereunder.
"ERISA Affiliate" means any Subsidiary or trade or business (whether
or not incorporated) which is a member of a group of which Borrower is a member
and which is under common control with Borrower within the meaning of Section
414 of the Code.
"Eurodollar Borrowing" means any portion of the principal of the Notes
with respect to which the interest rate is calculated by reference to the
Adjusted Eurodollar Rate for a particular Interest Period.
"Eurodollar Rate" means, for any Eurodollar Rate Borrowing for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) appearing on Dow Jones Markets Page 3750 (or any
successor page) as the London interbank offered rate for deposits in Dollars at
Revolving Credit and Term Loan Agreement 3
<PAGE> 4
approximately 11:00 a.m. (London time) two (2) Business Days prior to the first
day of such Interest Period for a term comparable to such Interest Period. If
for any reason such rate is not available, then the term "Eurodollar Rate" shall
mean, for any Eurodollar Rate Borrowing for any Interest Period therefor, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two (2) Business
Days prior to the first day of such Interest Period for a term comparable to
such Interest Period; provided, however, if more than one rate is specified on
Reuters Screen LIBO Page, then the applicable rate shall be the arithmetic mean
of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%).
"Eurodollar Reserve Requirement" means, on any day, that percentage
(expressed as a decimal fraction) that is in effect on such day, as provided by
the Board of Governors of the Federal Reserve System (or any successor
governmental body) applied for determining the maximum reserve requirements
(including, without limitation, basic, supplemental, marginal, and emergency
reserves) under Regulation D with respect to "Eurocurrency liabilities" as
currently defined in Regulation D, or under any similar or successor regulation
with respect to Eurocurrency liabilities or Eurocurrency funding. Each
determination by Lender of the Eurodollar Reserve Requirement shall, in the
absence of manifest error, be conclusive and binding.
"Event of Default" has the meaning set forth in Section 8.1
"Fixed Charges" means, for any period for Borrower and its
Subsidiaries, the sum of (a) Cash Interest Expense, (b) scheduled principal
payments of Indebtedness for borrowed money, (c) Capital Expenditures excluding
Acquisition Capital Expenditures, (d) cash Dividends, (e) treasury stock
repurchased and (f) cash tax expenses.
"Funding Loss" has the meaning set forth in Section 2.16(e).
"GAAP" means those generally accepted accounting principles and
practices, applied on a consistent basis, which are recognized as such by the
American Institute of Certified Public Accountants acting through its Accounting
Principles Board and the Financial Accounting Standards Board and/or their
respective successors and which are applicable in the circumstances as of the
date in question.
"Governmental Authority" means, with respect to any Person, any
government (or any political subdivision or jurisdiction thereof), court,
bureau, agency, or other governmental authority having jurisdiction over such
Person or any of its business, operations, or properties.
"Governmental Authorization" means any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Authority or pursuant to
any Legal Requirement.
"Guarantors" means TBAC Investment Trust, TBAC Management Company,
Ltd. and each of the Subsidiaries of Borrower except H.A. Sheldon Canada, Ltd.
"Guaranty" of any Person means any contract or understanding of such
Person pursuant to which such Person guarantees, or in effect guarantees, any
Indebtedness of any other Person (the "Primary Obligor") in any manner, whether
directly or indirectly, including agreements to assure the holder of the
Indebtedness of the Primary Obligor against loss in respect thereof; except,
that "Guaranty" shall not include endorsements, in the ordinary course of
business, of negotiable instruments or documents for deposit or collection.
Revolving Credit and Term Loan Agreement 4
<PAGE> 5
"Hazardous Material" means any hazardous, toxic, or dangerous waste,
substance, or material defined as such in or for the purpose of any
Environmental Law.
"Hedge Agreement" means any agreement between Borrower and Lender or
any affiliate of Lender now existing or hereafter entered into, which provides
for an interest rate or commodity swap, cap, floor, collar, forward foreign
exchange transaction, currency swap, cross-currency rate swap, currency option,
or any combination of, or option with respect to, these or similar transactions,
for the purpose of hedging Borrower's exposure to fluctuations in interest
rates, currency valuations or commodity prices.
"Indebtedness" means, with respect to any Person, all indebtedness,
obligations, and liabilities of such Person, including without limitation (a)
all "liabilities" which would be reflected on a balance sheet of such Person,
(b) all obligations of such Person in respect of any Guaranty, letter of credit,
or bankers' acceptance, (c) all obligations of such Person in respect of any
lease, which in conformity with GAAP, is required to be capitalized for balance
sheet purposes, (d) all obligations, indebtedness, and liabilities secured by
any lien or any security interest on any property or assets of such Person, and
(e) any obligation to redeem or repurchase any of such Person's capital stock,
warrants, or stock equivalents.
"Intangible Assets" of any Person means those assets of such Person
which are (a) deferred assets, other than prepaid insurance and prepaid taxes,
(b) patents, copyrights, trademarks, tradenames, franchises, goodwill,
experimental expenses, and other similar assets which would be classified as
intangible assets on a balance sheet of such Person, (c) unamortized debt
discount and expense, and (d) assets located, and notes and receivables due from
obligors domiciled, outside of the United States of America.
"Interest Period" means, with respect to a Eurodollar Borrowing, a
period commencing:
(a) on the Advance Date thereof; or
(b) on the conversion date pertaining to such Eurodollar Borrowing,
if such Eurodollar Borrowing is made pursuant to a conversion as described in
Section 2.14; or
(c) on the last day of the preceding Interest Period in the case of a
rollover to a successive Interest Period;
and ending 1, 2, 3, or 6 months thereafter, as Borrower shall elect in
accordance with Section 2.13 or Section 2.14, provided that:
(i) any Interest Period that would otherwise end on a day which is not
a Business Day shall be extended to the next succeeding Business Day, unless
such Business Day falls in another calendar month in which case such Interest
Period shall end on the next preceding Business Day;
(ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month or at the end of such Interest Period) shall, subject to
clause (i) above, end on the last Business Day of a calendar month; and
(iii) if the Interest Period for any Eurodollar Borrowing would
otherwise end after the final maturity date of the Loans, then such Interest
Period shall end on the final maturity date of the Loans.
Revolving Credit and Term Loan Agreement 5
<PAGE> 6
"Investment" in any Person means any investment, whether by means of
share purchase, loan, advance, extension of credit, capital contribution, or
otherwise, in or to such Person, the Guaranty of any Indebtedness of such
Person, or the subordination of any claim against such Person to other
Indebtedness of such Person.
"Legal Requirement" means any federal, state, local, municipal,
foreign, international, multi-national, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty as in effect on the date in question.
"Lien" means any lien, mortgage, security interest, tax lien, pledge,
encumbrance, conditional sale or title retention arrangement, or any other
interest in property designed to secure the repayment of Indebtedness, whether
arising by agreement or under any statute or law, or otherwise.
"Loan Documents" means this Agreement, the Notes, the Collateral
Documents, the Hedge Agreement and any agreements, documents (and with respect
to this Agreement, and such other agreements and documents, any renewals,
extensions, amendments, or supplements thereto), or certificates at any time
executed or delivered pursuant to the terms of this Agreement.
"Loans" means the Revolving Credit Loan and the Term Loan, and "Loan"
means either one of the Loans.
"Material Adverse Effect" means any material adverse changes in, or
effect upon, (a) the validity, performance, or enforceability of any Loan
Documents, (b) the financial condition or business operations of Borrower and
its Subsidiaries taken as a whole, or (c) the ability of Borrower to fulfill its
obligations under the Loan Documents.
"Maximum Rate" means the highest non-usurious rate of interest (if
any) permitted from day-to-day by applicable law. Lender hereby notifies and
discloses to Borrower that, for purposes of TEXAS FINANCE CODE as it may from
time to time be amended, the "applicable rate ceiling" shall be the "weekly
ceiling" from time to time in effect as limited by Section 303 of the Texas
Finance Code; provided, however, that to the extent permitted by applicable law,
Lender reserves the right to change the "applicable rate ceiling" from time to
time by further notice and disclosure to Borrower.
"Net Cash Flow" means, for Borrower and its Subsidiaries for any
period, (a) Consolidated Adjusted Net Income, minus (b) all non-cash items
increasing Consolidated Adjusted Net Income in accordance with GAAP, plus (c)
all non-cash items reducing Consolidated Adjusted Net Income in accordance with
GAAP, minus (d) all regularly scheduled payments on all outstanding Indebtedness
of Borrower and its Subsidiaries during such period.
"Notes" means the Revolving Credit Note and the Term Note, and "Note"
means either one of the Notes.
"Notice of Borrowing" means a notice in the form of Exhibit A attached
hereto.
"Obligation" means all present and future indebtedness, obligations,
and liabilities, and all renewals and extensions thereof, or any part thereof,
now or hereafter owed to Lender by Borrower, pursuant to any of the Loan
Documents, and all renewals and extensions thereof (including, but not limited
to, all obligations to Lender under letters of credit), together with all
interest accruing thereon and costs, expenses, and attorneys' fees incurred in
the enforcement or collection thereof.
Revolving Credit and Term Loan Agreement 6
<PAGE> 7
"Obligors" means Borrower and each of the Guarantors, and "Obligor"
means any one of the Obligors.
"Other Taxes" has the meaning set forth in Section 2.17.
"Person" includes an individual, corporation, joint venture, general
or limited partnership, trust, unincorporated organization, or government, or
any agency or political subdivision thereof.
"Prime Rate" means the variable rate of interest established from
time to time by Lender as its general reference rate of interest (which rate of
interest may not be the lowest rate charged by Lender on similar loans). Each
change in the Prime Rate shall become effective without prior notice to Borrower
automatically as of the opening of business on the date of such change in the
Prime Rate.
"Prime Rate Borrowing" means a borrowing bearing interest with
reference to the Prime Rate.
"Permitted Liens" means (a) Inchoate liens for taxes, assessments or
governmental charges or levies not yet due or liens for taxes, assessments or
governmental charges or levies being contested in good faith and by appropriate
proceedings for which adequate reserves have been established in accordance with
GAAP, (b) Liens in respect to property or assets of the Borrower or any of its
subsidiaries imposed by law, which were incurred in the ordinary course of
business, and do not secure mechanics' liens and other similar liens arising in
the ordinary course of business, and which do not in the aggregate materially
detract from the value of the Borrower's or such subsidiary's property or assets
or materially impair the use thereof in the operation of the business of the
Borrower or such subsidiary, or which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing the
forfeiture or sale of property or assets subject to any such lien, (c) Liens in
existence on the date of this Agreement, plus renewals and extensions of such
liens to the extent that the aggregate principal amount of the indebtedness, if
any, secured by such liens is not increased from the amount outstanding at the
time of any such renewal or extension, and any such renewals or extensions do
not encumber any additional assets or properties of the Borrower or any of its
subsidiaries, (d) Leases or subleases granted to other persons not materially
interfering with the conduct of the business of the Borrower and its
subsidiaries taken as a whole, (e) Liens placed on equipment or machinery used
in the ordinary course of business of Borrower or any of its subsidiaries, or on
real property of the Borrower or any of its subsidiaries, in each case at the
time of acquisition thereof by the Borrower or any such subsidiary or within
sixty days thereafter to secure indebtedness incurred to pay all or a portion
of the purchase price thereof, provided that the lien encumbering the equipment,
machinery or real property so acquired does not encumber any other asset of the
Borrower or such subsidiary, (f) Easements, right-of-way restrictions,
encroachments and other similar charges or encumbrances and minor title
deficiencies in each case not securing indebtedness and not materially
interfering with the conduct of the business of the Borrower or any of its
subsidiaries, (g) Statutory and common law landlord's liens under leases to
which the Borrower or any of its subsidiaries is a party, (h) Liens resulting
from pledges or deposits to secure payments of workmen's compensation,
unemployment insurance or other social security programs or securing the
performance of surety and bid and performance bonds, tenders, leases and other
obligations of similar nature, in each case incurred in the ordinary course of
business (exclusive of obligations in respect to the payment for borrowed
money) and (i) Liens in existence on the date of this Agreement relating to
Amity/Rolf, Inc.
"Plan" means an employee benefit plan or other plan maintained by
Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code, as
amended.
Revolving Credit and Term Loan Agreement 7
<PAGE> 8
"Potential Default" means the occurrence of any event which, with the
passage of time or the giving of notice, or both, could become an Event of
Default.
"Principal Debt" means, as of any date, the sum of the outstanding
principal balance of all outstanding Borrowings hereunder as of such date.
"Quoted Rate" shall mean a rate of interest per annum agreed upon by
Lender and Borrower on or prior to the first day of the Interest Period for
which such rate shall be in effect.
"Quoted Rate Borrowing" means a borrowing bearing interest at the
Quoted Rate.
"Receivables" means all present and future (a) accounts, receivables,
contract rights, chattel paper, documents, tax refunds, or payments of, or owned
by, Borrower or its Subsidiaries, (b) insurance proceeds, patent rights, license
rights, rights to refunds or indemnification, and other general intangibles of
every kind or nature of, or owned by, Borrower or its Subsidiaries, and (c) all
forms of obligations whatsoever owing to Borrower or its Subsidiaries together
with all instruments and all documents of title representing any of the
foregoing and all right, title, and interest in, and all securities and
guaranties with respect to, each Receivable.
"Revolving Credit Commitment" means $10,000,000.00, as the same may
be decreased by Borrower pursuant to Section 2.1, or terminated by Lender
pursuant to Section 8.2.
"Revolving Credit Loan" is defined in the recitals hereof.
"Revolving Credit Note" means that certain Revolving Credit Promissory
Note dated of even date herewith, executed by Borrower, as Maker, and payable to
the order of Lender, as Payee, in the original principal amount of
$10,000,000.00, together with any renewals, extensions, or modifications
thereof.
"Solvent" means, as to a Person, that (a) the aggregate fair market
value of its assets exceeds its liabilities, (b) it has sufficient cash flow to
enable it to pay its Liabilities as they mature, and (c) it does not have
unreasonably small capital to conduct its businesses.
"Subsidiary" means any corporation of which more than fifty percent
(50%) (in number of votes) of the issued and outstanding securities having
ordinary voting power for the election of at least a majority of the directors
is owned or controlled, directly or indirectly, by Borrower, any Subsidiary, or
any combination thereof.
"Taxes" has the meaning set forth in Section 2.17.
"Term Loan" is defined in the recitals hereof.
"Term Note" means that certain Promissory Note dated of even date
herewith, executed by Borrower, as Maker, and payable to the order of Lender, as
Payee, in the original principal amount of $15,000,000.00, together with any
renewals, extensions, or modifications thereof.
Revolving Credit and Term Loan Agreement 8
<PAGE> 9
"Termination Date" means (a) for the Revolving Credit Loan, the
earliest of (i) May 14, 2000, (ii) the date that Lender's commitment to fund
Advances hereunder is terminated pursuant to Section 8.2, or (iii) the date that
Lender's commitment to fund Advances hereunder is reduced to zero pursuant to
Section 2.1, and (b) for the Term Loan, November 17, 2003.
"Total Funded Indebtedness" means, as of any date, the sum of the
following (without duplication): (i) all Indebtedness of Borrower as of such
date, other than consolidated Current Liabilities, (ii) all Indebtedness which
would be classified as "funded indebtedness" or "long-term indebtedness" on a
consolidated balance sheet of Borrower prepared as of such date in accordance
with GAAP, (iii) all Indebtedness, whether secured or unsecured, of Borrower
having a final maturity (or which is renewable or extendible at the option of
the Obligor for a period ending more than one year after the date of creation
thereof), notwithstanding the fact that payments made by the Obligor less than
one year after the date of creation thereof and notwithstanding the fact that
any amount thereof is at the time included also in consolidated Current
Liabilities of such Obligor, (iv) all Indebtedness of Borrower outstanding under
a revolving credit or similar agreement providing for borrowings (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.
"Unused Commitment" means, as of any date, (a) the Revolving Credit
Commitment, minus (b) the Principal Debt of the Revolving Credit Note.
1.2 Accounting Terms. As used in this Agreement, in the Notes, and in
any certificate, report, or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.1, and accounting terms
partly defined in Section 1.1 to the extent not defined, shall have, as of any
date, the respective meanings given to them under GAAP and all references to
balance sheets or other financial statements means such statements, prepared in
accordance with GAAP as of such date.
1.3 Rules of Construction. When used in this Agreement: (a) "or" is not
exclusive; (b) a reference to a law includes any amendment or modification to
such law; (c) a reference to a Person includes its permitted successors and
permitted assigns; (d) except as provided otherwise, all references to the
singular shall include the plural, and vice versa; (e) except as provided in
this Agreement, a reference to an agreement, instrument, or document shall
include such agreement, instrument, or document as the same maybe amended,
modified, or supplemented from time to time in accordance with its terms and as
permitted by the Loan Documents; (f) all references to Sections, Schedules, or
Exhibits shall be to Sections, Schedules, or Exhibits of this Agreement, unless
otherwise indicated; (g) all Exhibits to this Agreement shall be incorporated
into this Agreement; (h) the words "include," "includes," and "including" shall
be deemed to be followed by the phrase "without limitation"; and (i) except as
otherwise provided herein, in the computation of time from a specified date to a
later specified date, tile word "from" means "from and including" and words "to"
and "until" each mean "to but excluding."
SECTION 2
THE REVOLVING CREDIT LOAN; TERM LOAN
2.1 The Revolving Credit Loan and Revolving Credit Commitment. Subject
to the terms and conditions of this Agreement, Lender agrees to extend to
Borrower, from the date hereof through the Termination Date, a revolving line of
credit which shall not exceed $10,000,000 at any one time outstanding (the
"Revolving Credit Commitment"). Within the limits of this Section 2.1, during
such period, Borrower
Revolving Credit and Term Loan Agreement 9
<PAGE> 10
may borrow, repay, and reborrow under the Revolving Credit Commitment in
accordance with this Agreement. Borrower shall have the right, upon three (3)
Business Days' prior written notice to Lender, to permanently reduce the
unutilized portion of the Revolving Credit Commitment; provided that any partial
reduction shall be in the minimum amount of $100,000.00 or a greater integral
multiple thereof.
2.2 The Term Loan. Subject to the terms and conditions of this
Agreement, Lender agrees to extend to Borrower, on or about the date hereof, the
Term Loan in an amount not to exceed $15,000,000.00. No portion of the Term Loan
may be repaid and then reborrowed.
2.3 Notice of Borrowing. Borrower may request an Advance under the
Revolving Credit Commitment by submitting to Lender a Notice of Borrowing, which
is irrevocable and binding on Borrower. Each Notice of Borrowing must be
received by Lender no later than noon (Dallas, Texas time) on the third (3rd)
Business Day before the date on which funds are requested (the "Advance Date")
for any Advance that will be a Eurodollar Borrowing or no later than noon
(Dallas, Texas time) on the Advance Date for any Advance that will be a Prime
Rate Borrowing or Quoted Rate Borrowing. Each Advance under the Revolving Credit
Commitment shall be in an amount of $100,000.00 or a greater integral multiple
of $25,000.00. Subject to the terms and conditions in this Agreement, by not
later than 2:00 p.m., Fort Worth, Texas time, on the date specified, Lender
shall make available to Borrower, at Lender's offices in Fort Worth, Texas, the
amount of a requested Advance under the Revolving Credit Commitment in
immediately available funds.
2.4 Commitment Fees.
(a) Unused Fee. Borrower agrees to pay to Lender a commitment fee
equal to one-fourth of one percent (0.25%) per annum on the daily Unused
Commitment. Such commitment fee shall be payable quarterly in arrears on the
last day of each December, March, June and September during the term hereof,
commencing on December 31, 1998, and continuing regularly thereafter so long as
the Revolving Credit Commitment is in effect, and on the Termination Date.
(b) Generally. Borrower acknowledges that the commitment fees payable
hereunder are bona fide commitment fees and are intended as reasonable
compensation to Lender for committing to make funds available to Borrower as
described herein and for no other purposes.
2.5 Revolving Credit Note and Note Payments.
(a) Revolving Credit Note. The Advances made under Section 2.1 by
Lender shall be evidenced by the Revolving Credit Note in form and substance
satisfactory to Lender, which Revolving Credit Note shall be (i) executed by
Borrower, (ii) dated the date hereof, (iii) in the amount of $10,000,000.00, and
(iv) payable to the order of Lender.
(b) Payments.
(1) Interest Payments. Accrued interest on each Eurodollar
Borrowing under the Revolving Credit Loan is due and payable on the
last day of its respective Interest Period. If any Interest Period is
a period greater than three (3) months, then accrued interest shall
also be due and payable on the date ending each three (3) month period
after the commencement of the Interest Period. Accrued interest on
each Prime Rate Borrowing under the Revolving Credit Loan shall be due
and payable on the last day of each calendar quarter during the term
hereof, commencing December 31, 1998, with a final scheduled interest
payment on all Borrowings under the Revolving Credit Loan on
Revolving Credit and Term Loan Agreement 10
<PAGE> 11
the Termination Date. Accrued Interest on each Quoted Rate Borrowing under the
Revolving Credit Loan shall be due and payable quarterly.
(2) Principal Payments. The unpaid Principal Debt of the
Revolving Credit Note shall be due and payable on the Termination
Date.
(3) Optional Prepayments. Borrower shall have the right,
from time to time, to prepay the unpaid Principal Debt of the
Revolving Credit Note, in whole or in part, without premium or penalty
(except for any Funding Loss), upon the payment of accrued interest on
the amount prepaid to and including the date of payment; provided,
however, that partial prepayments of the Principal Debt of the
Revolving Credit Note shall be in an amount equal to $ 100,000.00 or a
greater integral multiple of $25,000.00 (or, if less, the unpaid
Principal Debt of the Revolving Credit Note).
2.6 Term Note and Note Payments.
(a) Term Note. The Advance made under Section 2.2 by Lender shall be
evidenced by the Term Note in form and substance satisfactory to Lender, which
Term Note shall be (i) executed by Borrower, (ii) dated the date hereof, (iii)
in the amount of $15,000,000.00, and (iv) be payable to the order of Lender
(b) Payments.
(1) Interest Payments. Accrued interest on each Eurodollar
Borrowing under the Term Loan is due and payable on the last day of
its respective Interest Period. If any Interest Period is a period
greater than three (3) months, then accrued interest shall also be due
and payable on the date ending each three (3) month period after the
commencement of the Interest Period. Accrued interest on each Prime
Rate Borrowing under the Term Loan shall be due and payable on the
last day of each quarter during the term hereof, with a final
scheduled interest payment on all Borrowings under the Term Loan on
the Termination Date.
(2) Principal Payments. The unpaid Principal Debt of the
Term Note shall be due and payable on the Termination Date.
(3) Optional Prepayments. Borrower shall have the right,
from time to time, to prepay the unpaid Principal Debt of the Term
Note, in whole or in part, without premium or penalty, upon the
payment of accrued interest on the amount prepaid to and including the
date of payment; provided, however, that partial prepayments of the
Principal Debt of the Term Note shall be in an amount equal to
$100,000 or a greater integral multiple of $25,000 (or, if less, the
unpaid Principal Debt of the Term Note).
2.7 Manner and Application of Payments. All payments and prepayments
by Borrower on account of principal, interest, and fees hereunder shall be made
in immediately available funds. All such payments shall be made to Lender at its
principal office in Fort Worth, Texas, not later than 12:00 noon, Fort Worth,
Texas time, on the date due and funds received after that hour shall be deemed
to have been received by Lender on the next following Business Day. If any
payment is scheduled to become due and payable on a day which is not a Business
Day, then such payment shall instead become due and payable on the immediately
following Business Day and interest on the principal portion of such payment
shall be payable at the then applicable rate during such extension. All payments
made on the Revolving Credit Note shall be applied first
Revolving Credit and Term Loan Agreement 11
<PAGE> 12
to accrued interest and then to principal (in the inverse order of maturity in
the case of prepayments). All payments made on the Term Note shall be applied
first to accrued interest.
2.8 Interest Options. Except where specifically otherwise provided,
Borrowings under the Revolving Credit Loan shall bear interest at an annual
rate equal to the lesser of either (a) the sum of (i) the Prime Rate, (ii) the
Adjusted Eurodollar Rate or (iii) Quoted Rate (in each case as designated or
deemed designated by Borrower), as the case may be, plus (ii) the Applicable
Margin, or (b) the Default Rate. Except where specifically otherwise provided,
Borrowings under the Term Loan shall bear interest at an annual rate equal to
the lesser of either (a) the sum of the Adjusted Eurodollar Rate having an
interest period of three (3) months, plus (ii) the Applicable Margin, or (b) the
Default Rate. In the event that Section 2.16 is liable Borrowings under the Term
Loan shall bear interest at an annual rate equal to the lesser of (a) the
Contract Rate, or (b) the Default Rate. Each change in the Prime Rate and the
Default Rate is effective, without notice to Borrower or any other Person, upon
the effective date of change.
2.9 Quotation of Rates. A responsible officer of Borrower may call
Lender before delivering a Notice of Borrowing, to receive an indication of the
interest rates then in effect, but the indicated rates do not bind Lender or
affect the interest rate that is actually in effect when Borrower delivers its
Notice of Borrowing.
2.10 Default Rate. If permitted by law, all past-due principal of and
accrued interest on the Notes bears interest from maturity (stated or by
acceleration) at the lesser of (a) the Contract Rate plus three percent (3.0%),
or (b) the Maximum Rate, or if there is no Maximum Rate in effect, then at the
Contract Rate plus three percent (3.0%) per annum, until paid, regardless
whether payment is made before or after entry of a judgment.
2.11 Interest Recapture. If the Contract Rate applicable to any
Borrowing exceeds the Maximum Rate, then the interest rate on that Borrowing is
limited to the Maximum Rate, but any subsequent reductions in the Contract Rate
shall not reduce the interest rate thereon below the Maximum Rate until the
total amount of accrued interest equals the amount of interest that would have
accrued if Contract Rate had always been in effect. If at maturity (stated or by
acceleration) the total interest paid or accrued is less than the interest that
would have accrued if the Contract Rates had always been in effect, then, at
that time and to the extent permitted by law, Borrower shall pay an amount equal
to the difference between (a) the lesser of the amount of interest that would
have accrued if the Contract Rates had always been in effect and the amount of
interest that would have accrued if the Maximum Rate had always been in effect,
and (b) the amount of interest actually paid or accrued on the Notes.
2.12 Interest Calculations.
(a) Interest on any Eurodollar Borrowing will be calculated on the
basis of actual number of days (including the first day but excluding the last
day) elapsed but computed as if each calendar year consisted of 360 days (unless
the calculation would result in an interest rate greater than the Maximum Rate,
in which event interest will be calculated on the basis of a year of 365 or 366
days, as the case may be). Interest on any Prime Rate Borrowing or Quoted Rate
Borrowing will be calculated on the basis of actual number of days (including
the first day but excluding the last day) elapsed but computed as if each
calendar year consisted of 365 or 366 days, as the case may be. All interest
rate determinations and calculations by Lender are conclusive and binding absent
manifest error.
(b) The provisions of this Agreement relating to calculation of the
Prime Rate and the Eurodollar Rate are included only for the purpose of
determining the rate of interest or other amounts to be paid under this
Revolving Credit and Term Loan Agreement 12
<PAGE> 13
Agreement that are based upon those rates. Lender may fund and maintain its
funding of all or any part of each Borrowing as it selects.
2.13 Selection of Interest Option. On making a Notice of Borrowing
under Section 2.3, Borrower shall advise Lender as to whether the Advance shall
be (a) a Eurodollar Borrowing, in which case Borrower shall specify the
applicable Interest Period therefor, (b) a Prime Rate Borrowing or (c) a Quoted
Rate Borrowing. Notwithstanding anything to the contrary contained herein, no
more than five (5) Interest Periods shall be in effect at any one time with
respect to Eurodollar Borrowings.
2.14 Rollovers and Conversions. Subject to the dollar limits and
denominations of Section 2.1, Borrower may (a) convert a Eurodollar Borrowing
under the Revolving Credit Loan on the last day of the applicable Interest
Period to a Prime Rate Borrowing or a Quoted Rate Borrowing, (b) convert a Prime
Rate Borrowing under the Revolving Credit Loan at any time to a Eurodollar
Borrowing or a Quoted Rate Borrowing, (c) convert a Quoted Rate Borrowing under
the Revolving Credit Loan to a Prime Rate Borrowing or a Eurodollar Borrowing,
and (d) elect a new Interest Period for a Eurodollar Borrowing, by giving a
Notice of Borrowing to Lender no later than 12:00 noon on the third (3rd)
Business Day before the conversion date or the last day of the Interest Period,
as the case may be (for conversion to a Eurodollar Borrowing or election of a
new Interest Period), and no later than 12:00 noon one (1) Business Day before
the last day of the Interest Period (for conversion to an Prime Rate Borrowing).
Absent Borrower's Notice of Borrowing, a Eurodollar Borrowing shall be deemed
converted to a Prime Rate Borrowing effective when the applicable Interest
Period expires. Subject to the provisions of Section 2.16, a Eurodollar
Borrowing under the Term Loan shall convert on the last day of the applicable
Interest Period to another Eurodollar Borrowing having an Interest Period of
three (3) months.
2.15 Booking Borrowings. To the extent permitted by law, Lender may
make, carry, or transfer its Borrowings at, to, or for the account of any of its
branch offices or the office of any of its Affiliates. However, no Affiliate is
entitled to receive any greater payment under Section 2.16(b) than Lender
would have been entitled to receive with respect to those Borrowings. Lender
agrees that it will use its reasonable efforts (consistent with its internal
policies and applicable law) to make, carry, maintain, or transfer its
Borrowings with its Affiliates or branch offices in an effort to eliminate or
reduce to the extent possible the aggregate amounts due to it under Sections
2.16(b) and 2.16(c) if, in its reasonable judgment, such efforts will not be
disadvantageous to it.
2.16 Special Provisions for Eurodollar Borrowings.
(a) Basis Unavailable or Inadequacy of Eurodollar Loan Pricing. If
with respect to an Interest Period for any Eurodollar Borrowing, (a) Lender
determines that, by reason of circumstances affecting the interbank eurodollar
market generally, deposits in Dollars (in the applicable amounts) are not being
offered to or by Lender in the interbank eurodollar market for such Interest
Period, or (b) Lender determines that the Eurodollar Rate as determined by
Lender will not adequately and fairly reflect the cost to Lender of maintaining
or funding the Eurodollar Borrowing for such Interest Period, then Lender shall
forthwith give notice thereof to Borrower, whereupon until Lender notifies
Borrower that the circumstances giving rise to such suspension no longer exist,
(i) the obligation of Lender to make Eurodollar Borrowings shall be suspended
and (ii) Borrower shall either (A) repay in full the then-outstanding principal
amount of the Eurodollar Borrowings, together with accrued interest thereon by
the last day of the then current Interest Period applicable to such Eurodollar
Borrowings, or (B) convert such Eurodollar Borrowings to Prime Borrowings or
Quoted Rate Borrowings on the last day of the then-current Interest Period
applicable to each such Eurodollar Borrowing which shall bear interest at the
Contract Rate for the particular type of Borrowing.
Revolving Credit and Term Loan Agreement 13
<PAGE> 14
(b) Illegality. If, after the date of this Agreement, the adoption of
any applicable law, rule, or regulation, or any change therein, or any change in
the interpretation or administration thereof by any Governmental Authority,
central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender with any request or directive
(whether or not having the force of law) of any such authority, central bank, or
comparable agency shall make it unlawful or impossible for Lender to make,
maintain or fund Eurodollar Borrowings, then Lender shall so notify Borrower.
Before giving any notice pursuant to this Section, Lender shall designate a
different Eurodollar lending office if such designation will avoid the need for
giving such notice and will not be otherwise disadvantageous to any non-trivial
extent to Lender (as determined in good faith by Lender). Upon receipt of such
notice, Borrower shall either (i) repay in full the then outstanding principal
amount of all Eurodollar Borrowings, together with accrued interest thereon, or
(ii) convert each Eurodollar Borrowing to a Prime Rate Borrowing, on either (A)
the last day of the then-current Interest Period applicable to such Eurodollar
Borrowing if Lender may lawfully continue to maintain and fund such Eurodollar
Borrowing to such day or (B) immediately if Lender may not lawfully continue to
fund and maintain such Eurodollar Borrowing to such day, provided that Borrower
shall be liable for any Funding Loss arising pursuant to such conversion.
(e) Increased Costs for Eurodollar Borrowings. If any Governmental
Authority, central bank, or other comparable authority, shall at any time
impose, modify, or deem applicable any reserve (including, without limitation,
any imposed by the Board of Governors of the Federal Reserve System but
excluding any reserve requirement included in the Eurodollar Reserve
Requirement), special deposit, or similar requirement against assets of,
deposits with, or for the account of, or credit extended by, Lender, or shall
impose on Lender (or its Eurodollar lending office) or the interbank eurodollar
market any other condition affecting its Eurodollar Borrowings, the Notes, or
its obligation to make Eurodollar Borrowings; and the result of any of the
foregoing is to increase the cost to Lender of making or maintaining Eurodollar
Borrowings, or to reduce the amount of any sum received or receivable by Lender
under this Agreement, or under the Notes, by an amount deemed by Lender to be
material, then, within five (5) Business Days' after demand by Lender, Borrower
shall pay to Lender such additional amount or amounts as will compensate Lender
for such increased cost or reduction. Lender will promptly notify Borrower of
any event of which it has knowledge, occurring after the date hereof, which will
entitle Lender to compensation pursuant to this Section. No failure by Lender to
immediately demand payment of any additional amounts payable hereunder shall
constitute a waiver of Lender's right to demand payment of such amounts at any
subsequent time. A certificate of Lender claiming compensation under this
Section and setting forth the additional amount or amounts to be paid to it
hereunder, together with a description in reasonable detail of the manner in
which such amounts have been calculated, shall be conclusive in the absence of
manifest error. If Lender demands compensation under this Section, then Borrower
may at any time, upon at least five (5) Business Days' prior notice to such
Lender, either convert such Eurodollar Borrowings to Prime Rate Borrowings in
accordance with the provisions of this Agreement; provided, however, that
Borrower shall be liable for any Funding Loss arising pursuant to such actions.
(d) Effect on Prime Rate Borrowings. If notice has been given pursuant
to Section 2.16(a) or Section 2.16(b) requiring that Eurodollar Borrowings to be
repaid or converted, then unless and until Lender notifies Borrower that the
circumstances giving rise to such repayment no longer apply, all Borrowings
shall be Prime Rate Borrowings or Quoted Rate Borrowings, whichever bears
interest at the lesser rate at the particular time. If Lender notifies Borrower
that the circumstances giving rise to such repayment no longer apply, then
Borrower may thereafter select Borrowings to be Eurodollar Borrowings in
accordance with Section 2.13 and Section 2.14.
(e) Funding Losses. Borrower shall indemnify Lender against any loss
or reasonable expense (such loss or expense is referred to herein as a "Funding
Loss," such term including, but not limited to, any loss
Revolving Credit and Term Loan Agreement 14
<PAGE> 15
or reasonable expense sustained or incurred or to be sustained or incurred in
liquidating or reemploying deposits from third parties acquired to effect or
maintain such Borrowing or any part thereof as a Eurodollar Borrowing) which
Lender may sustain or incur as a consequence of (i) any failure by Borrower to
fulfill on the date of any Borrowing hereunder the applicable conditions set
forth in Section 4, (ii) any failure by Borrower to borrow hereunder or to
convert Borrowings hereunder after a Conversion Notice has been given, (iii) any
payment, prepayment, or conversion of a Eurodollar Borrowing required or
permitted by any other provisions of this Agreement, including, without
limitation, payments made due to the acceleration of the maturity of the
Borrowings pursuant to Section 8.2, or otherwise made on a date other than the
last day of the applicable Interest Period, (iv) any default in the payment or
prepayment of the principal amount of any Borrowing or any part thereof or
interest accrued thereon, as and when due and payable (at the due date thereof,
by notice of prepayment or otherwise), or (v) the occurrence of an Event of
Default. The term "Funding Loss" includes, without limitation, an amount equal
to the excess, if any, as determined by Lender of (A) its cost of obtaining the
funds for the Borrowing being paid, prepaid or converted or not borrowed or
converted (based on the Adjusted Eurodollar Rate applicable thereto) for the
period from the date of such payment, prepayment or conversion or failure to
borrow or convert to the last day of the Interest Period for such Borrowing (or,
in the case of a failure to borrow or convert, the Interest Period for the
Borrowing which would have commenced on the date of such failure to borrow or
convert) over (B) the amount of interest (as estimated by Lender) that would be
realized by Lender in reemploying the funds so paid, prepaid or converted or not
borrowed or converted for such period or Interest Period, as the case may be. A
certificate of Lender setting forth any amount or amounts which Lender is
entitled to receive pursuant to this Section 2.16(e), together with a
description in reasonable detail of the manner in which such amounts have been
calculated, shall be delivered to Borrower and shall be conclusive, absent
manifest error. Borrower shall pay to Lender the amount shown as due on any
certificate within five (5) business days after its receipt of the same.
Notwithstanding the foregoing, in no event shall Lender be permitted to receive
any compensation hereunder constituting interest in excess of the Maximum Rate.
Without prejudice to the survival of any other obligations of Borrower
hereunder, the obligations of Borrower under this Section 2.16(e) shall survive
the termination of this Agreement and/or the payment or assignment of the Notes.
2.17 Taxes.
(a) Any and all payments by Borrower hereunder or under the Notes
shall be made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges, or withholdings, and all
liabilities with respect thereto (hereinafter referred to as "Taxes"), excluding
taxes imposed on Lender's income, and franchise taxes imposed on Lender, by the
jurisdiction under the laws of which Lender is organized or is or should be
qualified to do business or any political subdivision thereof and, taxes imposed
on Lender's income, and franchise taxes imposed on Lender by the jurisdiction
of Lender's lending office or any political subdivision thereof. If Borrower
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder or under the Notes to Lender, then (i) the sum payable shall
be increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.17) Lender receives an amount equal to the sum it would have received had no
such deductions been made, (ii) Borrower shall make such deductions, and (iii)
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
(b) In addition, Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under the Loan Documents
or from the execution, delivery, or registration of, or otherwise with respect
to, this Agreement or the other Loan Documents (hereinafter referred to as
"Other Taxes")
Revolving Credit and Term Loan Agreement 15
<PAGE> 16
(c) Borrower will indemnify Lender for the full amount of Taxes or
Other Taxes (including, without limitation any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 2.17) paid by Lender or
any liability (including penalties and interest) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be made within five (5) business
days from the date Lender makes written demand therefor.
(d) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in this
Section 2.17 shall survive the payment in full of principal and interest
hereunder and under the other Loan Documents.
SECTION 3
GUARANTIES
3.1 Guaranties. Payment of the Obligation shall be guaranteed by each
of Borrower's Subsidiaries (except foreign Subsidiaries), subject to the
conditions and limitations set forth in the Guaranty Agreement dated of even
date herewith, executed by TBAC Investment Trust, TBAC Management Company, Ltd.
and each of Borrower's Subsidiaries (except foreign Subsidiaries) in favor of
Lender.
SECTION 4
CONDITIONS PRECEDENT
4.1 Initial Advance. The obligation of Lender to make the Term Loan
and the initial Advance under the Revolving Credit Loan is subject to the
conditions precedent that, on or before the date of such Advance, (a) Borrower
shall have paid to Lender (i) all fees to be received by Lender pursuant to this
Agreement or any other Loan Document and (ii) an amount equal to the estimated
costs and out-of-pocket expenses of Lender's counsel incurred in connection with
the preparation, execution, and delivery of the Loan Documents and the
consummation of the transactions contemplated thereby, and (b) Lender shall have
received duly executed copies of each of the documents listed on Exhibit B, each
dated as of the date hereof, and each in form and substance satisfactory to
Lender.
4.2 All Advances. The obligation of Lender to make any Advance under
this Agreement (including the Term Loan and the initial Advance under the
Revolving Credit Loan) shall be subject to the conditions precedent that, as of
the date of such Advance and after giving effect thereto: (a) there exists no
Potential Default or Event of Default; (b) no Material Adverse Effect has
occurred since the date of the financial statements referenced in Section 5.6;
(c) Lender shall have received from Borrower a Notice of Borrowing dated as of
the date of such Advance and all of the statements contained in such Notice of
Borrowing shall be true and correct; and (d) the representations and warranties
contained in each of the Loan Documents shall be true in all material respects
as though made on the date of such Advance except those representations and
warranties that specifically relate to a particular date.
Revolving Credit and Term Loan Agreement 16
<PAGE> 17
SECTION 5
REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loans hereunder, Borrower represents and
warrants to Lender that:
5.1 Organization and Good Standing. Each of Borrower and its
Subsidiaries is a corporation duly organized and in good standing under the laws
of the state of its incorporation, is duly qualified as a foreign corporation
and in good standing in all states in which it is doing business, has the
corporate power and authority to own its properties and assets and to transact
the business in which it is engaged in each jurisdiction in which it operates,
and is or will be qualified in those states wherein it proposes to transact
business in the future.
5.2 Authorization and Power. Each Obligor has full power and authority
to execute, deliver, and perform the Loan Documents to be executed by such
Person, all of which has been duly authorized by all proper and necessary
corporate action.
5.3 No Conflicts or Consents. Neither the execution and delivery of
the Loan Documents, nor the consummation of any of the transactions therein
contemplated, nor compliance with the terms and provisions thereof, will
contravene or materially conflict with any Legal Requirement to which any
Obligor is subject, any Governmental Authorization applicable to any Obligor,
any indenture, loan agreement, mortgage, deed of trust, or other agreement or
instrument binding on any Obligor, or any provision of the articles of
incorporation, certificate of incorporation, bylaws, certificate of limited
partnership, partnership agreement, or other constituent documents of any
Obligor. No consent, approval, authorization, or order of any court,
Governmental Authority, stockholder, or third party is required in connection
with the execution, delivery, or performance by any Obligor of any of the Loan
Documents.
5.4 Enforceable Obligations. The Loan Documents have been duly
executed and delivered by each Obligor and are the legal and binding obligations
each Obligor, enforceable in accordance with their respective terms, except as
limited by Debtor Laws.
5.5 No Liens. Except for the Permitted Liens, all of the properties
and assets of Borrower and its Subsidiaries are free and clear of all Liens and
other adverse claims of any nature, and such Persons have good and marketable
title to such properties and assets.
5.6 Financial Condition. Borrower has delivered to Lender copies of
the financial statements of (a) Borrower and its Subsidiaries as of June 30,
1998, which are true and correct, fairly represent the financial condition of
Obligors, as of such date, and have been prepared in accordance with GAAP; as of
the date hereof, there are no obligations, liabilities, or Indebtedness
(including contingent and indirect liabilities) of any Obligor which are
material and are not reflected in such financial statements; no Material Adverse
Effect has occurred since the date of such financial statements.
5.7 Full Disclosure. There is no fact known to Borrower that Borrower
has not disclosed to Lender which Could reasonably be expected to have a
Material Adverse Effect. No certificate or statement delivered by any Obligor
to Lender in connection with this Agreement contains any untrue statement of a
material fact or omits to state any material fact necessary to keep the
statements contained herein or therein from being misleading.
5.8 No Potential Default. No event has occurred and is continuing
which constitutes a Potential Default or an Event of Default.
Revolving Credit and Term Loan Agreement 17
<PAGE> 18
5.9 Material Agreements. No Obligor is in default in any material
respect under any contract or agreement to which it is a party or by which any
of its properties is bound.
5.10 No Litigation. There are no actions, suits, or legal, equitable,
arbitration, or administrative proceedings pending, or to the knowledge of any
Obligor threatened, against any Obligor that could, if adversely determined,
reasonably be expected to have a Material Adverse Effect.
5.11 Use of Proceeds; Margin Stock. The proceeds of the Loans will be
used by Borrower solely for the purposes specified set forth in the recitals.
None of such proceeds will be used for the purpose of purchasing or carrying any
"margin stock" as defined in Regulations T, U, or X of the Board of Governors of
the Federal Reserve System or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of such Regulations. If
requested by Lender, then Borrower will furnish to Lender a statement in
conformity with the requirements of the Federal Reserve Form U-1 referred to in
said Regulation U to the foregoing effect. No part of the proceeds of the Loans
will be used for any purpose which violates, or is inconsistent with, the
provisions of Regulation X.
5.12 Taxes. All material tax returns required to be filed by each
Obligor in any jurisdiction have been filed and all taxes (including mortgage
recording taxes), assessments, fees, and other governmental charges upon each
Obligor or upon any of its or their properties, income, or franchises have been
paid, except for taxes being contested in good faith by appropriate proceedings
diligently projected and as to which adequate reserves have been established in
accordance with GAAP. To the best of Borrower's knowledge, there is no proposed
tax assessment against any Obligor, and all tax liabilities of each Obligor are
adequately provided for. No income tax liability of any Obligor has been
asserted by the Internal Revenue Service for taxes in excess of those already
paid.
5.13 Principal Office, Etc. The principal office, chief executive
office, and principal place of business of Borrower is at 690 East Lamar, Suite
200, Arlington, Texas 76011.
5.14 Compliance with Law.
(a) Except as disclosed on Schedule 5.14-1: (i) each of Borrower and
its Subsidiaries is in compliance with its respective articles of incorporation,
charter, bylaws, certificate of limited partnership, partnership agreement, and
other constituent documents, and all Legal Requirements which are applicable to
it or to the conduct or operation of its business or the ownership or use of any
of its assets; and (ii) none of Borrower or any of its Subsidiaries has received
any notice or other communication from any Governmental Authority or other
Person of any event or circumstance that could reasonably be expected to
constitute a violation of, or failure to comply with, any Legal Requirement.
(b) Each of Borrower and its Subsidiaries is in material compliance
with all of the terms and requirements of each Governmental Authorization held
by such Person; (ii) none of Borrower or any of its Subsidiaries has received
any notice or other communication from any Governmental Authority or other
Person of any event or circumstance which could reasonably be expected to
constitute a violation of, or failure to comply with, any term or requirement of
any Governmental Authorization, or of any actual or potential revocation,
withdrawal, cancellation, or termination of, or material modification to, any
Governmental Authorization; (iii) all applications required to have been filed
for the renewal of any required Governmental Authorizations have been duly filed
on a timely basis with the appropriate Governmental Authorities, and all other
filings required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the appropriate
Governmental Authorities; (iv) upon consummation of the
Revolving Credit and Term Loan Agreement 18
<PAGE> 19
transactions contemplated hereby, Borrower and its Subsidiaries will lawfully
hold all such Governmental Authorizations; and (v) none of the Governmental
Authorizations of Borrower and its Subsidiaries will terminate upon consummation
of the transactions contemplated hereby.
5.15 Subsidiaries. Set forth on Exhibit C hereto is a complete and
accurate list of all Subsidiaries of Borrower as of the date hereof, showing as
of such date (as to each Such Subsidiary) the jurisdiction of its incorporation,
the number of shares of each class of capital stock or partnership interest
outstanding on the date hereof, the owner of the outstanding shares or
partnership interest of each such class owned and the jurisdictions in which
such Subsidiary is qualified to do business as a foreign corporation or
partnership. All of the outstanding capital stock or partnership interest of all
Subsidiaries has been validly issued, is fully paid and nonassessable, and is
owned by Borrower or a Subsidiary free and clear of all Liens.
5.16 Casualties. Neither the business nor the properties of Borrower
or any Subsidiary are affected by any environmental hazard, fire, explosion,
accident, strike, lockout, or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God, or other casualty (whether or not covered by
insurance), which could reasonably be expected to have a Material Adverse
Effect.
5.17 Corporate Name. Borrower, during the preceding five (5) years,
has not used any other corporate name or tradename.
5.18 Leases. Neither Borrower nor any Subsidiary is the lessee of any
real or personal property except as has been described to Lender in writing.
5.19 ERISA. Neither Borrower nor any ERISA Affiliate has any Plans.
5.20 Labor Matters. There are no controversies pending between
Borrower or any Subsidiary and any of their employees which could reasonably be
expected to have a Material Adverse Effect.
5.21 Burdensome Contracts. Neither Borrower nor any Subsidiary is
party to any contract, the breach, violation, or termination of which could
reasonably be expected to result in a Material Adverse Effect.
5.22 Representations and Warranties. Each Notice of Borrowing shall
constitute, without the necessity of specifically containing a written
statement, a representation and warranty by Borrower that no Potential Default
or Event of Default exists and that all representations and warranties contained
in this Section 5 or in any other Loan Document are true and correct in all
material respects on and as of the date the requested Advance is to be made
except those representations and warranties that specifically relate only to a
stated date.
5.23 Survival of Representations and Warranties in all material
respects. All representations and warranties by Borrower herein shall survive
delivery of the Notes and the making of the Loans, and any investigation at any
time made by or on behalf of Lender shall not diminish Lender's right to rely
thereon.
Revolving Credit and Term Loan Agreement 19
<PAGE> 20
SECTION 6
AFFIRMATIVE COVENANTS
So long as Lender has any commitment to make Advances hereunder, and
until payment in full of the Obligation, Borrower agrees that (unless Lender
shall otherwise consent in writing):
6.1 Financial Statements, Reports, and Documents. Borrower shall
deliver to Lender each of the following:
(a) Quarterly Statements. As soon as available, and in any event
within forty-five (45) days after the last day of each quarterly fiscal period
of each fiscal year of Borrower, copies of the consolidated balance sheet of
Borrower and its Subsidiaries as of the end of such quarterly fiscal period, and
statements of income, retained earnings, and changes in cash flow of Borrower
and its Subsidiaries for that quarterly fiscal period and for the portion of the
fiscal year ending with such period, all in reasonable detail, and certified by
the chief financial officer of Borrower as being true and correct and as having
been prepared in accordance with GAAP, subject to year-end audit adjustments;
(b) Annual Statements. As soon as available and in any event within
ninety (90) days after the last day of each fiscal year of Borrower, copies of
the consolidated balance sheet of Borrower and its Subsidiaries as of the close
of such fiscal year and statements of income, retained earnings, and changes in
cash flow of Borrower and its Subsidiaries for such fiscal year, all in
reasonable detail and accompanied by an opinion thereon (which shall not be
qualified by reason of any limitation imposed by Borrower) of independent public
accountants of recognized national standing selected by Borrower and
satisfactory to Lender, to the effect that (i) such consolidated financial
statements have been prepared in accordance with GAAP (except for changes in
which such accountants concur), and (ii) the examination of such accounts in
connection with such financial statements has been made in accordance with
generally accepted auditing standards and, accordingly, includes such tests of
the accounting records and such other auditing procedures as were considered
necessary under the circumstances;
(c) Other Information. Such other information concerning the
business, properties, or financial condition of any Obligor as Lender shall
reasonably request including audit reports, registration statements, or other
reports or notices provided to shareholders of Borrower.
6.2 Payment of Taxes and Other Liabilities. Borrower shall, and shall
cause each of its Subsidiaries to, pay and discharge (a) all taxes, assessments,
and governmental charges or levies imposed upon it or upon its income or
profits, or upon any property belonging to it, before delinquent, (b) all lawful
claims (including claims for labor, materials and supplies), which, if unpaid,
might give rise to a Lien upon any of its property, and (c) all of its other
Liabilities, except as prohibited under the Loan Documents; provided, however,
that Borrower and each of its Subsidiaries shall not be required to pay any such
tax, assessment, charge, or levy if and so long as the amount, applicability, or
validity thereof shall currently be contested in good faith by appropriate
proceedings and appropriate accruals and cash reserves therefor have been
established in accordance with GAAP.
6.3 Maintenance of Existence and Rights; Conduct of Business. Borrower
shall, and shall cause each of its Subsidiaries to, preserve and maintain its
corporate existence and all of its rights, privileges, and franchises necessary
or desirable in the normal conduct of its business, and conduct its business in
an orderly and efficient manner consistent with good business practices and in
accordance with all material Legal Requirements of any Governmental Authority.
6.4 Notice of Default. Borrower shall furnish to Lender, promptly upon
becoming aware of the existence of any condition or event which constitutes a
Potential Default or an Event of Default, written notice
Revolving Credit and Term Loan Agreement 20
<PAGE> 21
specifying the nature and period of existence thereof and the action which
Borrower is taking or proposes to take with respect thereto.
6.5 Other Notices. Borrower shall, and shall cause each of its
Subsidiaries to, promptly notify Lender of (a) any material adverse change in
its financial condition or its business, (b) any default under any material
agreement, contract, or other instrument to which it is a party or by which any
of its properties are bound, or any acceleration of the maturity of any material
Liabilities owing by Borrower or any Subsidiary, (c) any material adverse claim
against or affecting any Obligor or any of its properties, and (d) the
commencement of, and any material determination in, any litigation with any
third party or any proceeding before any Governmental Authority affecting any
Obligor.
6.6 Operations and Properties. Borrower shall, and shall cause each of
its Subsidiaries to, (a) act prudently and in accordance with customary industry
standards in managing and operating its assets and properties, and (b) keep in
good working order and condition, ordinary wear and tear excepted, all of its
assets and properties which are necessary to the conduct of its business.
6.7 Books and Records; Access. Borrower shall 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 to inspect any of the properties of Borrower.
Borrower shall, and shall cause each of its Subsidiaries to, maintain complete
and accurate books and records of its transactions in accordance with good
accounting practices.
6.8 Compliance with Law. Borrower shall, and shall cause each of its
Subsidiaries to, comply with all applicable Legal Requirements of any
Governmental Authority, a breach of which could reasonably be expected to have a
Material Adverse Effect.
6.9 Insurance. Borrower shall, and shall cause each of its
Subsidiaries to, keep all insurable property, real and personal, adequately
insured at all times in such amounts and against such risks as are customary for
Persons in similar businesses operating in the same vicinity, specifically to
include a policy of hazard, casualty, fire, and extended coverage insurance
covering all assets, business interruption insurance (where feasible), liability
insurance, and worker's compensation insurance, in every case under a policy
with a financially sound and reputable insurance company and with only such
deductibles as are customary.
6.10 Authorizations and Approvals. Borrower shall, and shall cause
each of its Subsidiaries to, promptly obtain, from time to time at its own
expense, all Governmental Authorizations as may be required to enable it to
comply with its obligations hereunder and under the other Loan Documents.
6.11 Further Assurances. Borrower shall, and shall cause each of its
Subsidiaries to, make, execute, and deliver or file, or cause the same to be
done, all such notices, additional agreements or other assurances, and take any
and all such other action, as Lender may, from time to time, deem reasonably
necessary or proper in connection with any of the Loan Documents, or the
obligations of Borrower or any Subsidiary thereunder.
6.12 Indemnity by Borrower. Borrower shall indemnify, defend, and hold
harmless Lender and its directors, officers, agents, attorneys, and employees
(each, an "Indemnitee" and collectively, the "Indemnitees") from and against
any and all loss, liability, obligation, damage, penalty, judgment, claim,
deficiency, and expense (including interest, penalties, attorneys' fees, and
amounts paid in settlement) to which the Indemnitees may become subject arising
out of this Agreement and the other Loan Documents, other than
Revolving Credit and Term Loan Agreement 21
<PAGE> 22
those which arise by reason of the gross negligence or willful misconduct of
Lender, BUT SPECIFICALLY INCLUDING ANY LOSS, LIABILITY, OBLIGATION, DAMAGE,
PENALTY, JUDGMENT, CLAIM, DEFICIENCY, OR EXPENSE ARISING OUT OF THE SOLE OR
CONCURRENT NEGLIGENCE OF LENDER. Borrower shall also indemnify, protect, and
hold each Indemnitee harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
proceedings, costs, expenses (including without limitation all reasonable
attorneys' fees and legal expenses whether or not suit is brought), and
disbursements of any kind or nature whatsoever which may at any time be imposed
on, incurred by, or asserted against such Indemnitee, with respect to or as a
direct or indirect result of the violation by Borrower of any Environmental Law,
or with respect to or as a direct or indirect result of Borrower's use,
generation, manufacture, production, storage release, threatened release,
discharge, disposal, or presence of a Hazardous Material on, under, from, or
about real property. The provisions of and undertakings and indemnifications set
forth in this Section 6.12 shall survive the satisfaction and payment of the
Obligation and termination of this Agreement, but only as to losses,
liabilities, obligations, damages, penalties, judgments, claims, deficiencies,
or expenses arising prior to the satisfaction and payment of the Obligation and
termination of this Agreement.
6.13 After-Acquired Subsidiaries. Concurrently upon the formation or
acquisition by Borrower or any Subsidiary of any domestic Subsidiary after the
date hereof (an "After-Acquired Subsidiary"), Borrower shall cause the
After-Acquired Subsidiary to deliver articles of incorporation, bylaws, and
resolutions and such opinions as Lender shall require and to execute a Guaranty
in favor of Lender.
6.14 Year 2000.
(a) Borrower has (i) begun analyzing the operations of Borrower and
its subsidiaries and affiliates that could be adversely affected by failure to
become Year 2000 compliant (that is, that computer applications, imbedded
microchips and other systems will be able to perform date-sensitive functions
prior to and after December 31, 1999) and; (ii) developed a plan for becoming
Year 2000 compliant in a timely manner, the implementation of which is on
schedule in all material respects. Borrower reasonably believes that it will
become Year 2000 compliant for its operations and those of its subsidiaries and
affiliates on a timely basis except to the extent that a failure to do so could
not reasonably be expected to have a material adverse effect upon the financial
condition of Borrower.
(b) Borrower will promptly notify Bank in the event Borrower
determines that any computer application which is material to the operations of
Borrower, its subsidiaries or any of its material vendors or suppliers will not
be fully Year 2000 compliant on a timely basis, except to the extent that such
failure could not reasonably be expected to have a material adverse effect upon
the financial condition of Borrower.
SECTION 7
NEGATIVE COVENANTS
So long as Lender has any commitment to make Advances hereunder, and
until payment in full of the Obligation, Borrower agrees that (unless Lender
shall otherwise consent in writing):
7.1 Negative Pledge. Borrower shall not, and shall not permit any of
its Subsidiaries to, create, incur, permit, or suffer to exist any Lien upon any
of its property or assets, now owned or hereafter acquired, except for Permitted
Liens.
Revolving Credit and Term Loan Agreement 22
<PAGE> 23
7.2 Negative Pledge Agreements. Borrower shall not, and shall not
permit any of its domestic Subsidiaries to, enter into any agreement (excluding
this Agreement or any other Loan Documents and the Credit Agreement dated June
30, 1994 between Borrower and Chase Bank of Texas, N.A., as amended) prohibiting
the creation or assumption of any Lien upon any of its property, revenues, or
assets, whether now owned or hereafter acquired, or the ability of any
Subsidiary to make any payments, directly or indirectly, to Borrower by way of
Dividends, advances, repayments of loans, repayments of expenses, accruals, or
otherwise.
7.3 Certain Transactions. Borrower shall not, and shall not permit any
of its Subsidiaries to, enter into any transaction with, or pay any management
fees to, any Affiliate; provided, however, that Borrower and its Subsidiaries
may enter into transactions with Affiliates upon terms not less favorable to
Borrower and its Subsidiaries than would be obtainable at the time in
comparable, arms-length transactions with Persons other than Affiliates.
7.4 Limitation on Sale of Properties. Borrower shall not, and shall
not permit any of its Subsidiaries to (a) sell, assign, exchange, lease, or
otherwise dispose of any of its properties, rights, assets or business, whether
now owned or hereafter acquired, in excess of $500,000 in the aggregate in any
fiscal year outside the ordinary course of its business, or (b) sell, assign, or
discount any Receivable.
7.5 Liquidation, Mergers, Consolidations, and Dispositions of
Substantial Assets. Borrower shall not, and shall not permit any of its
Subsidiaries to, (a) dissolve or liquidate, (b) become a party to any merger or
consolidation unless Borrower or the particular Subsidiary is the surviving
corporation, or (c) sell, transfer, lease, or otherwise dispose of any property
in excess of $500,000 in the aggregate in any fiscal year or assets, except in
the ordinary course of business for fair and adequate consideration.
7.6 Lines of Business; Receivables Policy. Borrower shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, engage in
any business other than those in which it is presently engaged, or discontinue
any of its material existing lines of business. Borrower shall not, and shall
not permit any of its Subsidiaries to, make any material change in its credit
and collection policy, which change would materially impair the collectibility
of its Receivables, or rescind, cancel, or modify any Receivable, except in the
ordinary course of business.
7.7 Guaranties. Borrower shall not, and shall not permit any of its
Subsidiaries to, become or be liable in respect of any Guaranty except in favor
of Chase Bank of Texas, N.A. and of NationsBank, N.A.
7.8 Total Funded Indebtedness to EBITDA Ratio. Borrower shall not
permit the ratio of (a) Total Funded Indebtedness as of such date, to (b) EBITDA
for the four (4) fiscal quarters ending on the date of determination, as of the
last day of each fiscal quarter of Borrower and its Subsidiaries to exceed 3.15
to 1.0 as of the last day of each fiscal quarter of Borrower and its
Subsidiaries until and including June 30, 1999 and 3.0 to 1.0 after June 30,
1999.
7.9 Fixed Charges Coverage. Borrower shall not permit the ratio of (a)
the sum of Consolidated Adjusted Net Income, plus federal, state, local, and
foreign income taxes deducted from Consolidated Adjusted Net Income in
accordance with GAAP, plus Fixed Charges, to (b) Fixed Charges, in each case for
Borrower and its Subsidiaries and for the four (4) fiscal quarters ending on the
date of determination, to be less than 1.5 to 1.0.
7.10 ERISA. Neither Borrower nor any ERISA Affiliate will create any
Plan.
Revolving Credit and Term Loan Agreement 23
<PAGE> 24
7.11 Fiscal Year. Borrower shall not, and shall not permit any of its
Subsidiaries to, change its fiscal year or method of accounting.
7.12 Loans and Advances To Foreign Subsidiaries. Make or permit to
exist any loans or advances to any foreign Subsidiaries or any guarantees of
obligations of any foreign Subsidiaries in an amount which exceeds (i) with
respect to H.A. Sheldon Canada, Ltd., $2,250,000.00 in the aggregate; and (ii)
with respect to all foreign Subsidiaries (including H.A. Sheldon Canada, Ltd.)
$3,500,000.00 in the aggregate.
SECTION 8
EVENTS OF DEFAULT
8.1 Events of Default. An "Event of Default" shall exist if any one or
more of the following events (herein collectively called "Events of Default")
shall occur and be continuing:
(a) Borrower shall fail to pay when due the Obligation or any part
thereof and the continuance of such failure for a period of at least five (5)
business days; or
(b) any representation or warranty made under this Agreement, or any
of the other Loan Documents, shall prove to be untrue or inaccurate in any
material respect as of the date on which such representation or warranty is made
or deemed to have been made; or
(e) default shall occur in the performance of any of the covenants or
agreements of any Obligor contained herein or in any of the other Loan Documents
and the continuance thereof for a period of at least thirty (30) days; or
(d) default shall occur in the payment of any material Indebtedness
(other than the Obligation) of any Obligor and such default results in
acceleration of such material Indebtedness or default shall occur in respect of
any note or credit agreement relating to any such material Indebtedness and such
default results in acceleration of such material Indebtedness; or
(e) any of the Loan Documents shall cease to be legal, valid, and
binding agreements enforceable against the Person executing the same in
accordance with its terms, shall be terminated, become or be declared
ineffective or inoperative or cease to provide the respective remedies, powers,
or privileges intended to be provided thereby; or any Obligor shall deny that
such Person has any further liability or obligation under any of the Loan
Documents; or
(f) any Obligor shall (i) apply for or consent to the appointment of a
receiver, trustee, custodian, intervenor, or liquidator of itself or of all or a
substantial part of such Person's assets, (ii) file a voluntary petition in
bankruptcy, admit in writing that such Person is unable to pay such Person's
debts as they become due, or generally not pay such Person's debts as they
become due, (iii) make a general assignment for the benefit of creditors, (iv)
file a petition or answer seeking reorganization of an arrangement with
creditors or to take advantage of any bankruptcy or insolvency laws, (v) file an
answer admitting the material allegations of, or consent to, or default in
answering, a petition filed against such Person in any bankruptcy,
reorganization, or insolvency proceeding, or (vi) take corporate, partnership,
or other action for the purpose of effecting any of the foregoing; or
Revolving Credit and Term Loan Agreement 24
<PAGE> 25
(g) an involuntary proceeding shall be commenced against any Obligor
seeking bankruptcy or reorganization of such Person or the appointment of a
receiver, custodian, trustee, liquidator, or other similar official of such
Person, or all or substantially all of such Person's assets, and such proceeding
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 competent authority approving a petition or
complaint seeking reorganization of any Obligor or appointing a receiver,
custodian, trustee, liquidator, or other similar official of such Person, or of
all or substantially all of such Person's assets; or
(h) any final judgment(s) for the payment of money in excess of the
sum of $500,000.00 in the aggregate shall be rendered against any Obligor and
such judgment(s) shall not be satisfied or discharged or bonded at least five
(5) business days prior to the date on which any of such Person's assets could
be lawfully sold to satisfy such judgment.
8.2 Remedies Upon Event of Default. If any Event of Default shall
occur and is continuing, then Lender may, without notice, exercise any one or
more of the following rights and remedies, and any other remedies provided in
any of the Loan Documents, as Lender in its sole discretion may deem necessary
or appropriate: (a) terminate Lender's commitment to lend hereunder; (b) declare
the Obligation or any part thereof to be forthwith due and payable, whereupon
the same shall forthwith become due and payable without presentment, demand,
protest, notice of default, notice of acceleration or of intention to
accelerate, or other notice of any kind, all of which Borrower hereby expressly
waives, anything contained herein or in the Notes to the contrary
notwithstanding; (c) reduce any claim to judgment; or (d) without notice of
default or demand, pursue and enforce any of Lender's rights and remedies under
the Loan Documents, or otherwise provided under or pursuant to any applicable
law or agreement; provided, however, that if any Event of Default specified in
Sections 8.1(f) or (g) shall occur, then the Obligation shall thereupon become
due and payable concurrently therewith, and Lender's obligation to lend shall
immediately terminate hereunder, without any further action by Lender and
without presentment, demand, protest, notice of default, notice of acceleration
or of intention to accelerate, or other notice of any kind, all of which
Borrower hereby expressly waives.
8.3 Performance by Lender. If Borrower fails to perform any covenant,
duty, or agreement contained in any of the Loan Documents, then Lender may
perform or attempt to perform such covenant, duty, or agreement on behalf of
Borrower. In such event, Borrower shall, at the request of Lender, promptly pay
any amount expended by Lender in Such performance or attempted performance to
Lender at its principal office in Fort Worth, Texas together with interest
thereon at the lesser of (a) the Contract Rate for Eurodollar Borrowings, plus
three percent or (b) Maximum Rate from the date of such expenditure until paid.
Notwithstanding the foregoing, it is expressly understood that Lender shall
not assume any liability or responsibility for the performance of any duties of
Borrower hereunder or under any of the Loan Documents and none of the
covenants or other provisions contained in this Agreement shall, or shall be
deemed to, give Lender the right or power to exercise control over the
management and affairs of Borrower.
SECTION 9
MISCELLANEOUS
9.1 Accounting Reports. All financial reports or projections furnished
by any Person to Lender pursuant to this Agreement shall be prepared in such
form and such detail as shall be satisfactory to Lender, shall be prepared on
the same basis as those prepared by such Person in prior years, and, where
applicable, shall be the same financial reports and projections as those
furnished to such Person's officers and directors.
Revolving Credit and Term Loan Agreement 25
<PAGE> 26
9.2 Waiver. No failure to exercise, and no delay in exercising, on the
part of Lender, any right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right. The rights of Lender under the Loan
Documents shall be in addition to all other rights provided by law. No
modification or waiver of any provision of any Loan Document, nor consent to
departure therefrom, shall be effective unless in writing and no such consent or
waiver shall extend beyond the particular case and purpose involved. No notice
or demand given in any case shall constitute a waiver of the right to take other
action in the same, similar, or other instances without such notice or demand.
9.3 Payment of Expenses. Borrower agrees to pay Lender on demand all
costs and expenses of Lender (including, without limitation, the reasonable
attorneys' fees of Lender's counsel) incurred in connection with the
preservation and enforcement of Lender's rights under the Loan Documents, and
all reasonable costs and expenses of Lender (including without limitation the
reasonable fees and expenses of Lender's counsel) in connection with the
negotiation, preparation, execution, delivery, and administration of the Loan
Documents.
9.4 Notices. Any communications required or permitted to be given by
any of the Loan Documents must be (a) in writing and personally delivered or
mailed by prepaid certified or registered mail, or (b) made by facsimile
transmission delivered or transmitted, to the party to whom such notice of
communication is directed, to the address of such party shown opposite its name
on the signature pages hereof. Any such communication shall be deemed to have
been given (whether actually received or not) on the day it is personally
delivered or, if transmitted by facsimile transmission, on the day that such
communication is transmitted as aforesaid subject to telephone confirmation of
receipt; provided, however, that any notice received by Lender after 10:00 a.m.
Fort Worth, Texas time on any day from Borrower pursuant to Section 2.3 (with
respect to a Notice of Borrowing) shall be deemed for the purposes of such
Section to have been given by Borrower on the next Succeeding day, or if mailed,
on the third (3rd) day after it is marked as aforesaid. Any party may change its
address for purposes of this Agreement by giving notice of such change to the
other parties pursuant to this Section 9.4.
9.5 Governing Law. This Agreement has been prepared, is being executed
and delivered, and is intended to be performed in the State of Texas and the
substantive laws of such state and the applicable federal laws of the United
States of America shall govern the validity, construction, enforcement, and
interpretation of this Agreement and all of the other Loan Documents.
9.6 Choice of Forum; Consent to Service of Process and Jurisdiction.
Any suit, action, or proceeding against Borrower with respect to this Agreement,
the Notes, or other Loan Documents, or any judgment entered by any court in
respect thereof, may be brought in the courts of the State of Texas, County of
Dallas, or in the United States courts located in the State of Texas as Lender
in its sole discretion may elect and Borrower hereby irrevocably submits to the
non-exclusive jurisdiction of such courts for the purpose of any such suit,
action, or proceeding. Borrower hereby irrevocably consents to the service of
process in any suit, action, or proceeding in said court by the mailing thereof
by Lender by registered or certified mail, postage prepaid, to Borrower's
address shown opposite its name on the signature pages hereof. Nothing herein or
in any of the other Loan Documents shall affect the right of Lender to serve
process in any other manner permitted by law or shall limit the right of Lender
to bring any action or proceeding against Borrower or with respect to any of its
property in courts in other jurisdiction. Borrower hereby irrevocably waives any
objections which it may now or hereafter have to the laying of venue of any
suit, action, or proceeding arising out of or relating to this Agreement, the
Notes, or any other Loan Documents brought in the courts located in the State of
Texas, County of Dallas, and hereby further irrevocably waives any claim that
any such suit, action, or proceeding
Revolving Credit and Term Loan Agreement 26
<PAGE> 27
brought in any such court has been brought in any inconvenient forum. Any action
or proceeding by Borrower against Lender shall be brought only in a court
located in Dallas County, Texas.
9.7 Invalid Provisions. Any provision of any Loan Document held by a
court of competent jurisdiction to be illegal, invalid or unenforceable and
shall not invalidate the remaining provisions of such Loan Document which shall
remain in full force and the effect thereof shall be confined to the provision
held invalid or illegal.
9.8 Maximum Interest Rate. Regardless of any provision contained in
any of the Loan Documents, Lender shall never be entitled to receive, collect,
or apply as interest (whether termed interest herein or deemed to be interest by
operation of law or judicial determination) on the Notes any amount in excess of
interest calculated at the Maximum Rate, and, in the event that the Lender ever
receives, collects, or applies as interest any such excess, then the amount
which would be excessive interest shall be deemed to be a partial prepayment of
principal and treated hereunder as such; and, if the principal amount of the
Obligation is paid in full, then any remaining excess shall forthwith be paid to
Borrower. In determining whether or not the interest paid or payable under any
specific contingency exceeds interest calculated at the Maximum Rate, Borrower
and Lender shall, to the maximum extent permitted Lender applicable law: (a)
characterize any non-principal payment as an expense, fee, or premium rather
than as interest; (b) exclude voluntary prepayments and the effects thereof; and
(c) amortize, prorate, allocate, and spread, in equal parts, the total amount of
interest throughout the entire contemplated term of the Notes; provided that, if
the Notes are paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period of
existence thereof exceeds interest calculated at the Maximum Rate, then Lender
shall refund to Borrower the amount of such excess or credit the amount of such
excess against the principal amount of the Notes and, in such event, Lender
shall not be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of interest
calculated at the Maximum Rate.
9.9 Non-liability of Lender. The relationship between Borrower and
Lender is, and shall at all times remain, solely that of borrower and lender,
and Lender has no fiduciary or other special relationship with Borrower.
9.10 Offset. Borrower hereby grants to Lender the right of offset, to
secure repayment of the Obligation, upon any and all moneys, securities, or
other property of Borrower and the proceeds therefrom, now or hereafter held or
received by or in transit to Lender or its agents, from or for the account of
Borrower or any Guarantor, whether for safe keeping, custody, pledge,
transmission, collection, or otherwise, and also upon any and all deposits
(general or special) and credits of Borrower, and any and all claims of Borrower
against Lender at any time existing.
9.11 Successors and Assigns. The Loan Documents shall be binding upon
and inure to the benefit of Borrower and Lender and their respective successors,
assigns, and legal representatives; provided, however, that Borrower may not,
without the prior written consent of Lender, assign any rights, powers, duties,
or obligations thereunder. Lender reserves the right to sell all or a portion of
its interest in the Loans and Lender shall have the right to disclose any
information in its possession regarding any Obligor in connection herewith to
any potential transferee of the Loans or any part thereof.
9.12 Section 346. Borrower and Lender hereby agree that, except for
Section 346.004 thereof, the provisions of Section 346 et seq. of the Texas
Finance Code, as amended (regulating certain revolving credit loans and
revolving tri-party accounts) shall not apply to the Loan Documents.
Revolving Credit and Term Loan Agreement 27
<PAGE> 28
9.13 Headings. Section headings are for convenience of reference only
and shall in no way affect the interpretation of this Agreement.
9.14 Survival. All representations and warranties made by Borrower
herein shall survive delivery of the Notes and the making, of the Loans.
9.15 Participations. Lender shall have the right to enter into
participation agreements with other banks with respect to the Notes, and grant
participations in the other Loan Documents but such participation shall not
affect the rights and duties of such Lender hereunder vis-a-vis Borrower. Each
actual or proposed participant shall be entitled to receive all information
received by Lender regarding the creditworthiness of Borrower, including,
without limitation, information required to be disclosed to a participant
pursuant to Banking Circular 181 (Rev., August 2, 1984), issued by the
Comptroller of the Currency (whether the actual or proposed participant is
subject to the circular or not).
9.16 No Third Party Beneficiary. The parties do not intend the
benefits of this Agreement to inure to any third party, nor shall any Loan
Document or any course of conduct by any party hereto be construed to make or
render Lender or any of its officers, directors, agents, or employees liable (a)
to any materialman, supplier, contractor, subcontractor, purchaser, or lessee of
any property owned by Borrower, or (b) for debts or claims accruing to any such
Persons against Borrower.
9.17 Capital Adequacy. If, after the date hereof, Lender shall have
determined that either (a) the adoption of any applicable law, rule, regulation,
or guideline regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any Governmental Authority,
central bank, or comparable agency charged with the interpretation or
administration thereof, or (b) compliance by Lender (or any lending office of
Lender) with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank, or comparable
agency, has or would have the effect of reducing the rate of return on Lender's
capital as a consequence of its or Borrower's obligations hereunder to a level
below that which Lender could have achieved but for such adoption, change, or
compliance (taking into consideration Lender's policies with respect to capital
adequacy) by an amount deemed by Lender to be material, then from time to time,
within fifteen (15) days after demand by Lender, Borrower shall pay to Lender
such additional amount or amounts as will adequately compensate Lender for such
reduction. Lender will promptly notify Borrower of any event of which it has
actual knowledge, occurring after the date thereof, which will entitle Lender to
compensation pursuant to this Section 9.17. A certificate of Lender claiming
compensation under this Section 9.17 and setting forth the additional amount or
amounts to be paid to it hereunder, together with the description of the manner
in which such amounts have been calculated, shall be conclusive in the absence
of manifest error. In determining such amount, Lender may use any reasonable
averaging and attribution methods.
9.18 Multiple Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same agreement, and any of the parties hereto may execute this Agreement by
signing any such counterpart.
9.19 Entirety. THIS AGREEMENT, THE NOTES, AND THE OTHER LOAN DOCUMENTS
REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO
AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OR
Revolving Credit and Term Loan Agreement 28
<PAGE> 29
DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE
PARTIES HERETO. THE PROVISIONS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO
WHICH BORROWER IS A PARTY MAY BE AMENDED OR WAIVED ONLY BY AN INSTRUMENT IN
WRITING SIGNED BY THE PARTIES HERETO.
Remainder of Page Intentionally Left Blank.
Signature Page to Follow.
Revolving Credit and Term Loan Agreement 29
<PAGE> 30
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
Address for Notice: BORROWER:
690 East Lamar Blvd., Suite 200 TANDY BRANDS ACCESSORIES, INC., a
Arlington, Texas 76011 Delaware corporation, as Borrower
Attn: Stan Ninemire
Telephone No: (817) 548-0090
Telecopy No: (817) 548-1144
By: /s/ STAN NINEMIRE
--------------------------------
Stan Ninemire, Chief Financial
Officer and Senior Vice President
Address for Notice: LENDER:
500 West Seventh Street NATIONSBANK, N.A., a national
Second Floor banking association Lender
Fort Worth, Texas 76102
Attn: Vincent A. Liberio
Telecopy No: (817)390-6452 By: /s/ VINCENT A. LIBERIO,
---------------------------------
Vincent A. Liberio,
Senior Vice President
Revolving Credit and Term Loan Agreement 30
<PAGE> 31
EXHIBIT A
NOTICE OF BORROWING
1. Submission Pursuant To Loan Agreement. This Notice of Borrowing is
executed and delivered by Tandy Brands Accessories, Inc. ("Borrower"), to
NationsBank, N.A. ("Lender") pursuant to the Revolving Credit and Term Loan
Agreement dated as of November 17, 1998 between Borrower and the Lender (the
"Agreement"). Any capitalized terms used and not defined herein shall have the
meanings assigned to them in the Agreement.
2. Request For Borrowing. Borrower hereby requests that Lender make an
Advance to Borrower pursuant to the Agreement as follows:
A. Base Rate Borrowing.
(i) Amount of Prime Rate Borrowing:
(Minimum of $100,000.00 or a greater integral multiple
of $25,000.00).
[ ] New Advance
[ ] Rollover/Conversion of Existing Advance
(ii) Date of Borrowing or Rollover/Conversion of Existing
Advance:
B. Eurodollar Borrowing.
(i) Amount of Eurodollar Borrowing:____________________________
(Minimum of $100,000.00, or a greater integral multiple of
$25,000.00).
[ ] New Borrowing
[ ] Rollover/Conversion of Existing Borrowing
(ii) Date of Advance or Rollover/Conversion of Existing
Borrowing:__________________.
(iii) Interest Period:____________ months
(one, two, three, or six months).
C. Quoted Rate Borrowing.
(i) Amount of Quoted Rate Borrowing:___________________________
(Minimum of $100,000.00 or a greater integral multiple of
$25,000.00).
[ ] New Advance
[ ] Rollover/Conversion of Existing Advance
Revolving Credit and Term Loan Agreement 31
<PAGE> 32
(ii) Date of Borrowing or Rollover/Conversion of Existing
Advance:
3. Representations, Warranties, and Certifications. Borrower hereby
represents, warrants, and certifies to Lender that, as of the date of the
Advance requested herein:
(a) No Potential Default or Event of Default exists.
(b) The representations and warranties of a continuing nature
contained in the Credit Agreement and each of the other Loan
Documents are true and correct in all material respects,
with the same force and effect as though made on and as of
the date of the Advance except those representations and
warranties that relate only to a particular date.
4. Proceeds of Borrowing. Lender is authorized to deposit the proceeds
of the Advance requested hereby, other than an Advance constituting a rollover
or conversion of an existing Advance, to:
5. Execution Authorized. This Notice of Borrowing is executed on
________, 19_____ by a responsible officer of Borrower. The undersigned, in such
capacity, hereby certifies each and every matter contained herein to be true and
correct.
-------------------------------------
-------------------------------------
of Tandy Brands Accessories, Inc., a
Delaware corporation
Revolving Credit and Term Loan Agreement 32
<PAGE> 33
EXHIBIT B
CLOSING DOCUMENTS
1. Credit Agreement.
2. Revolving Credit Note.
3. Term Note.
4. Guaranty executed by each Guarantor and each domestic Subsidiary.
5. Officer's Certificate certifying (a) the truth and accuracy of
that all of the representations and warranties contained in the
Loan Documents, (b) that no event has occurred and is continuing,
or would result from the Advance, which constitutes a Potential
Default or an Event of Default, (c) the resolutions of Borrower
approving the execution, delivery, and performance of the Loan
Documents delivered at closing and the transactions contemplated
therein, duly adopted by Borrower's Board of Directors, (d) the
names of the officers of Borrower authorized to sign each of the
Loan Documents delivered at closing, and (e) a copy of the
Articles of Incorporation of Borrower, and all amendments thereto,
and a copy of the Bylaws of Borrower, and all amendments thereto.
6. Officer's Certificates certifying (a) the truth and accuracy of
that all of the representations and warranties contained in the
Loan Documents, (b) that no event has occurred and is continuing,
or would result from the Advance, which constitutes a Potential
Default or an Event of Default, (c) the resolutions of each of
Subsidiaries approving the execution, delivery, and performance of
the Loan Documents delivered at closing and the transactions
contemplated therein, duly adopted by each of Subsidiaries' Boards
of Directors, (d) the names of the officers of each of Domestic
Subsidiaries authorized to sign each of the Loan Documents
delivered at closing, and (e) copies of the Articles of
Incorporation of each of Subsidiaries, and all amendments thereto,
and copies of the Bylaws of each of Subsidiaries, and all
amendments thereto.
7. Certificates of existence and good standing for Borrower and its
Subsidiaries issued by the state of incorporation.
8. Copies of the Articles of Incorporation of Borrower and its
Subsidiaries, and all amendments thereto, certified by the
Secretary of State of the applicable State of Incorporation.
9. Opinion from Borrower's counsel in form and substance acceptable
to Lender relating to authority and enforceability.
10. Stich other information as may be reasonably required by Lender.
Revolving Credit and Term Loan Agreement 33
<PAGE> 34
EXHIBIT C
SUBSIDIARIES - TANDY BRANDS ACCESSORIES, INC.
<TABLE>
<CAPTION>
Name and Address of Subsidiaries State of Organization Percentage Ownership
- -------------------------------- --------------------- --------------------
<S> <C> <C>
TBAC - Prince Gardner, Inc. Delaware 100%
TBAC General Management Company Delaware 100%
Amity/Rolfs, Inc. Delaware 100%
Accessory Design Group, Inc. Delaware 100%
Tiger Accessories, Inc. New York 100%
H. A. Sheldon Canada Ltd. Ontario, Canada 100%
TBAC - AIS, Inc. Delaware 100%
TBAC Canterbury, Inc. Delaware 100%
TBAC Investments, Inc. Delaware 100%
TBAC Investment Trust Pennsylvania 100%(1)
TBAC Management Company, Ltd. Delaware 100%(2)
</TABLE>
(1) Owned 100% by TBAC Investments, inc.
(2) TBAC General Management Company, General Partner (1%)
Tandy Brands Accessories, Limited Partner (99%)
Revolving Credit and Term Loan Agreement 34
<PAGE> 35
TERM NOTE
$15,000,000.00 November 17, 1998
FOR VALUE RECEIVED, the undersigned Tandy Brands Accessories, Inc., a
Delaware corporation (the "Company"), hereby unconditionally promises to pay to
the order of NationsBank, N.A. (the "Bank") the principal sum of fifteen million
dollars ($15,000,000.00) which principal shall be payable as provided in
Sections 2.6 and 2.7 of the Loan Agreement, together with the interest on the
unpaid principal balance until maturity (whether by acceleration or otherwise),
which interest shall be determined at the varying rates per annum, and shall be
payable as provided in Sections 2.6, 2.7, 2.8, 2.12 and 2.14 of the Loan
Agreement. Payments of both principal and interest herein shall be made to
Bank's account at 500 W. Seventh Street, Fort Worth, Texas, in lawful money of
the United States of America and in immediately available funds.
This Note has been executed and delivered pursuant to the terms of
that certain Revolving Credit and Term Loan Agreement (the "Loan Agreement") by
and between Company and NationsBank, N.A., dated as of November 17, 1998, and is
the "Term Note" referred to therein. Reference is hereby made to the Loan
Agreement for a statement of the repayment rights and obligations of Company and
for a statement of the events upon which the maturity of this Note may be
accelerated.
Each capitalized term used herein shall have the same meaning assigned
to it in the Loan Agreement, unless the context hereof otherwise requires or
provides.
Company agrees to pay all costs and expenses of Bank incurred in the
collection of this Note, including but not limited to court costs and reasonable
attorneys' fees and all other costs and expenses described in Section 9.3 of
the Loan Agreement.
Company and each surety, endorser, guarantor and any other party now
or hereafter liable for payment of any sums of money payable on this Note,
jointly and severally waive presentment and demand for payment, protest, notice
of protest and nonpayment, notice of intent to accelerate, notice of
acceleration and all other notices, filing of suit and diligence in collecting
this Note or enforcing any security with respect to same, and agree that their
liability under this Note shall not be affected by any renewal or extension in
the time of payment hereof, or in any indulgences, or by any release,
substitution or change in any security for the payment of this Note, and hereby
consent to any and all renewals, extensions, indulgences, releases or changes,
regardless of the number of such renewals, extensions, indulgences, releases or
changes.
Regardless of any provision contained in this Note, the Loan Agreement
or any other document executed or delivered in connection therewith, neither
Bank nor any holder hereof shall be deemed to have contracted for or be entitled
to receive, collect or apply as interest (including any fee, charge or amount
which is not denominated as "interest" but is legally deemed to be interest
under applicable law) on this Note, the Loan Agreement, the Loan Documents or
otherwise, any amount in excess of the Maximum Rate, and, in the event that Bank
or any holder hereof ever receives, collects or applies as interest any such
excess, such amount which would be excessive interest shall
<PAGE> 36
be applied to the reduction of the unpaid principal balance of this Note, and,
if the principal balance of this Note is paid in full, any remaining excess
shall forthwith be paid to Company. In determining whether or not the interest
paid or payable under any specific contingency exceeds the Maximum Rate,
Company, Bank and any other holder hereof shall, to the maximum extent permitted
under applicable law, (i) characterize any non-principal payment (other than
payments which are expressly designated as interest payments hereunder) as an
expense or fee rather than as interest, (ii) exclude voluntary prepayments and
the effect thereof, and (iii) amortize, prorate, allocate and spread the total
amount of interest throughout the entire contemplated term of this Note so that
the interest rate is uniform throughout the entire term; provided that, if this
Note is finally paid and performed in full prior to the end of the Rill
contemplated term hereof, and if the interest received for the actual period of
existence thereof exceeds the Maximum Rate, Bank or any holder hereof shall
refund to Company the amount of such excess, or credit the amount of such excess
against the principal amount of this Note and, in such event, neither Bank nor
any other holder shall be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving or receiving interest in excess of
the Maximum Rate.
This Note is being executed and delivered, and is intended to be
performed in the State of Texas. Except to the extent that the laws of the
United States may apply to the terms hereof, the substantive laws of the State
of Texas shall govern the validity, construction, enforcement and interpretation
of this Note.
TANDY BRANDS ACCESSORIES, INC., a
Delaware corporation
By: /s/ STAN NINEMIRE
-----------------------------------
Stan Ninemire, Chief Financial
Officer and Senior Vice President
-2-
<PAGE> 37
LOAN AND PAYMENT
TRANSACTION SCHEDULE
attached to and made a part of a Note
dated November 17, 1998, executed by
Tandy Brands Accessories, Inc.
<TABLE>
<CAPTION>
Amount Unpaid Initials
Amount Amount of of Principal of Person
of Amount of Principal Interest Balance Making
Date Advance Principal Repaid Paid of Note Notation
- ---- ------- --------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE> 38
REVOLVING CREDIT NOTE
$10,000,000,00 November 17,1998
FOR VALUE RECEIVED, the undersigned Tandy Brands Accessories, Inc., a
Delaware corporation (the "Company"), hereby unconditionally promises to pay to
the order of NationsBank, N.A. (the "Bank") the principal sum of ten million
dollars ($10,000,000.00), or such lesser aggregate amount of Advances as may be
made by Bank pursuant to Bank's Revolving Credit Commitment, which principal
shall be payable as provided in Sections 2.5 and 2.7 of the Loan Agreement,
together with the interest on the unpaid principal balance until maturity
(whether by acceleration or otherwise), which interest shall be determined at
the varying rates per annum, and shall be payable as provided in Sections 2.5,
2.7, 2.8, 2.12 and 2.14 of the Loan Agreement. Payments of both principal and
interest herein shall be made to Bank's account at 500 W. Seventh Street, Fort
Worth, Texas, in lawful money of the United States of America and in immediately
available funds.
This Note has been executed and delivered pursuant to the terms of
that certain Revolving Credit and Term Loan Agreement (the "Loan Agreement") by
and between Company and NationsBank, N.A., dated as of November 17, 1998, and is
the "Revolving Credit Note" referred to therein. Reference is hereby made to the
Loan Agreement for a statement of the repayment rights and obligations of
Company and for a statement of the events upon which the maturity of this Note
may be accelerated.
Each capitalized term used herein shall have the same meaning assigned
to it in the Loan Agreement, unless the context hereof otherwise requires or
provides.
Company agrees to pay all costs and expenses of Bank incurred in the
collection of this Note, including but not limited to court costs and reasonable
attorneys' fees and all other costs and expenses described in Section 9.3 of the
Loan Agreement.
Company and each surety, endorser, guarantor and any other party now
or hereafter liable for payment of any sums of money payable on this Note,
jointly and severally waive presentment and demand for payment, protest, notice
of protest and nonpayment, notice of intent to accelerate, notice of
acceleration and all other notices, filing of suit and diligence in collecting
this Note or enforcing any security with respect to same, and agree that their
liability under this Note shall not be affected by any renewal or extension in
the time of payment hereof, or in any indulgences, or by any release,
substitution or change in any security for the payment of this Note, and hereby
consent to any and all renewals, extensions, indulgences, releases or changes,
regardless of the number of such renewals, extensions, indulgences, releases or
changes.
Regardless of any provision contained in this Note, the Loan Agreement
or any other document executed or delivered in connection therewith, neither
Bank nor any holder hereof shall be deemed to have contracted for or be entitled
to receive, collect or apply as interest (including any fee, charge or amount
which is not denominated as "interest" but is legally deemed to be interest
under applicable law) on this Note, the Loan Agreement, the Loan Documents or
otherwise, any amount in excess of the Maximum Rate, and, in the event that Bank
or any holder hereof ever receives, collects or applies as interest any such
excess, such amount which would be excessive interest shall be applied to the
reduction of the unpaid principal balance of this Note, and, if the principal
balance
<PAGE> 39
of this Note is paid in full, any remaining excess shall forthwith be paid to
Company. In determining whether or not the interest paid or payable under any
specific contingency exceeds the Maximum Rate, Company, Bank and any other
holder hereof shall, to the maximum extent permitted under applicable law, (i)
characterize any non-principal payment (other than payments which are expressly
designated as interest payments hereunder) as an expense or fee rather than as
interest, (ii) exclude voluntary prepayments and the effect thereof, and (iii)
amortize, prorate, allocate and spread the total amount of interest throughout
the entire contemplated term of this Note so that the interest rate is uniform
throughout the entire term; provided that, if this Note is finally paid and
performed in full prior to the end of the full contemplated term hereof, and if
the interest received for the actual period of existence thereof exceeds the
Maximum Rate, Bank or any holder hereof shall refund to Company the amount of
such excess, or credit the amount of such excess against the principal amount of
this Note and, in such event, neither Bank nor any other holder shall be subject
to any penalties provided by any laws for contracting for, charging, taking,
reserving or receiving interest in excess of the Maximum Rate.
This Note is being executed and delivered, and is intended to be
performed in the State of Texas. Except to the extent that the laws of the
United States may apply to the terms hereof, the substantive laws of the State
of Texas shall govern the validity, construction, enforcement and interpretation
of this Note.
TANDY BRANDS ACCESSORIES, INC.,
a Delaware corporation
By: /s/ STAN NINEMIRE
--------------------------------------
Stan Ninemire, Chief Financial Officer
and Senior Vice President
-2-
<PAGE> 40
LOAN AND PAYMENT
TRANSACTION SCHEDULE
attached to and made a part of a Note
dated November 17, 1998, executed by
Tandy Brands Accessories, Inc.
<TABLE>
<CAPTION>
Amount Unpaid Initials
Amount Amount of of Principal of Person
of Amount of Principal Interest Balance Making
Date Advance Principal Repaid Paid of Note Notation
- ---- ------- --------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE> 1
EXHIBIT 10.30
(MULTICURRENCY-CROSS BORDER)
ISDA(R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of NOVEMBER 17, 1998
-----------------
NATIONSBANK, N.A. and TANDY BRANDS ACCESSORIES, INC.
- ------------------------------------ ----------------------------------------
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. INTERPRETATION
(a) Definitions. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value
on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the required
currency. Where settlement is by delivery (that is, other than by payment),
such delivery will be made for receipt on the due date in the manner
customary for the relevant obligation unless otherwise specified in the
relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to (1)
the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing, (2)
the condition precedent that no Early Termination Date in respect of the
relevant Transaction has occurred or been effectively designated and (3)
each other applicable condition precedent specified in this Agreement.
Copyright(C) 1992 by International Swap Dealers Association. Inc.
<PAGE> 2
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) Netting. If on any date amounts would otherwise be payable: --
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made without any
deduction or withholding for or on account of any Tax unless such deduction
or withholding is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, then in effect. If
a party is so required to deduct or withhold, then that party
("X") will: --
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including, the full amount required to be
deducted or withheld from any additional amount paid by X to Y under
this Section 2(d)) promptly upon the earlier of determining that such
deduction or withholding is required or receiving, notice that such
amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified copy),
or other documentation reasonably acceptable to Y, evidencing such
payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to
the payment to Which Y is otherwise entitled under this Agreement, such
additional amount as is necessary to ensure that the net amount
actually received by Y (free and clear of Indemnifiable Taxes, whether
assessed against X or Y) will equal the full amount Y would have
received bad no such deduction or withholding been required. However, X
will not be required to pay any additional amount to Y to the extent
that it would not be required to be paid but for: --
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant to Section
3(f) to be accurate and true unless such failure would not have
occurred but for (I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the
date on which a Transaction is entered into regardless of whether
such action is taken or brought with respect to a party to this
Agreement) or (II) a Change in Tax Law.
2
ISDA(R) 1992
<PAGE> 3
(ii) Liability. If:
(1) X is required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, to make any deduction
or withholding in respect of which X would not be required to pay an
additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against
X,
then, except to the extent Y has satisfied or then satisfies the liability
resulting from such Tax, Y will promptly pay to X the amount of such
liability (including any related liability for interest, but including any
related liability for penalties only if Y has failed to comply with or
perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:
(a) Basic Representations.
(i) Status. It is duly organized and validly existing under the laws of the
jurisdiction of its organization or incorporation and, if relevant under
such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its obligations
under this Agreement and any obligations it has under any Credit Support
Document to which it is a party and has taken all necessary action to
authorize such execution, delivery and performance;
(iii) No Violation or Conflict. Such execution, delivery and performance do
not violate or conflict with any law applicable to it, any provision of its
constitutional documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) Consents. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with; and
(v) Obligations Binding. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding in
equity or at law)).
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ISDA(R) 1992
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(b) Absence of Certain Events. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement of any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) Payer Tax Representation. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) Payee Tax Representations. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:
(a) Furnish Specified Information. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:
(i) any forms, documents or certificates relating to taxation specified in
the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation; and
(iii) upon reasonable demand by such other party, any form or document that
may be required or reasonably requested in writing in order to allow such
other party or its Credit Support Provider to make a payment under this
Agreement or any applicable Credit Support Document without any deduction
or withholding for or on account of any Tax or with such deduction or
withholding at a reduced rate (so long as the completion, execution or
submission of such form or document would not materially prejudice the
legal or commercial position of the party in receipt of such demand), with
any such form or document to be accurate and completed in a manner
reasonably satisfactory to such other party and to be executed and to be
delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated,
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ISDA(R)1992
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organised, managed and controlled, or considered to have its seat, or in which a
branch or office through which it is acting for the purpose of this Agreement
is located ("Stamp Tax Jurisdiction") and will indemnify the other party against
any Stamp Tax levied or imposed upon the other party or in respect of the other
party's execution or performance of this Agreement by any such Stamp Tax
Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the
party;
(ii) Breach of Agreement. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give
notice of a Termination Event or any agreement or obligation under Section
4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party
in accordance with this Agreement if such failure is not remedied on or
before the thirtieth day after notice of such failure is given to the
party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such party
to comply with or perform any agreement or obligation to be complied
with or performed by it in accordance with any Credit Support
Document if such failure is continuing after any applicable grace
period has elapsed;
(2) the expiration or termination of such Credit Support Document or
the failing or ceasing of such Credit Support Document to be in full
force and effect for the purpose of this Agreement (in either case
other than in accordance with its terms) prior to the satisfaction of
all obligations of such party under each Transaction to which such
Credit Support Document relates without the written consent of the
other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the
validity of, such Credit Support Document;
(iv) Misrepresentation. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made or
repeated by the party or any Credit Support Provider of such party in this
Agreement or any Credit Support Document proves to have been incorrect or
misleading in any material respect when made or repeated or deemed to have
been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity Of Such party
(1) defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of, an acceleration of obligations under, or an early termination of, that
Specified Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or delivery due
on the last payment, delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default continues for at
least three Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims, repudiates or
rejects, in whole or in part, a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate it or act
on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default, event
of default or other similar condition or event (however
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ISDA(R)1992
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described) in respect of such party, any Credit Support Provider of such party
or any applicable Specified Entity of such party under one or more agreements or
instruments relating to Specified Indebtedness of any of them (individually or
collectively) in an aggregate amount of not less than the applicable
Threshold Amount (as specified in the Schedule) which has resulted in such
Specified Indebtedness becoming, or becoming capable at such time of being
declared, due and payable under such agreements or instruments, before it would
otherwise have been due and payable or (2) a default by such party, such Credit
Support Provider or such Specified Entity (individually or collectively) in
making one or more payments on the due date thereof in an aggregate amount of
not less than the applicable Threshold Amount under such agreements or
instruments (after giving effect to any applicable notice requirement or grace
period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party or any
applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation, amalgamation or
merger); (2) becomes insolvent or is unable to pay its debts or fails or
admits in writing its inability generally to pay its debts as they become
due; (3) makes a general assignment, arrangement or composition with or for
the benefit of its creditors; (4) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any other
relief under any bankruptcy or insolvency law or other similar law
affecting creditors' rights, or a petition is presented for its winding-up
or liquidation, and, in the case of any such proceeding or petition
instituted or presented against it, such proceeding or petition (A) results
in a judgment of insolvency or bankruptcy or the entry of an order for
relief or the making of an order for its winding-up or liquidation or (B)
is not dismissed, discharged, stayed or restrained in each case within 30
days of the institution or presentation thereof; (5) has a resolution
passed for its winding-up, official management or liquidation (other than
pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes
subject to the appointment of an administrator, provisional liquidator,
conservator, receiver, trustee, custodian or other similar official for it
or for all or substantially all its assets; (7) has a secured party take
possession of all or substantially all its assets or has a distress,
execution, attachment, sequestration or other legal process levied,
enforced or sued on or against all or substantially all its assets and such
secured party maintains possession, or any such process is not dismissed,
discharged, stayed or restrained, in each case within 30 days thereafter;
(8) causes or is subject to any event with respect to it which, under the
applicable laws of any jurisdiction, has an analogous effect to any of the
events specified in clauses (1) to (7) (inclusive); or (9) takes any action
in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support Provider of
such party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and, at the
time of such consolidation, amalgamation, merger or transfer:--
(1) the resulting, surviving or transferee entity fails to assume all the
obligations of such party or such Credit Support Provider under this
Agreement or any Credit Support Document to which it or its predecessor was
a party by operation of law or pursuant to an agreement reasonably
satisfactory to the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend (without the
consent of the other party) to the performance by such resulting, surviving
or transferee entity of its obligations under this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event
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ISDA(R)1992
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Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below:
(i) Illegality. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a result
of a breach by the party of Section 4(b)) for such party (which will be the
Affected Party):
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in respect of
such Transaction or to comply with any other material provision of
this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or such
Credit Support Provider) has under any Credit Support Document
relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on which
a Transaction is entered into (regardless of whether such action is taken
or brought with respect to a party to this Agreement) or (y) a Change in
Tax Law, the party (which will be the Affected Party) will, or there is a
substantial likelihood that it will, on the next succeeding Scheduled
Payment Date (1) be required to pay to the other party an additional amount
in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a
payment from which an amount is required to be deducted or withheld for or
on account of a Tax (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) and no additional amount is required to be paid in
respect of such Tax under Section 2(d)(i)(4) (other than by reason of
Section 2(d)(i)(4)(A) or (B));
(iii) Tax Event Upon Merger. The party (the "Burdened Party") on the next
succeeding Scheduled Payment Date will either (1) be required to pay an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which
the other party is not required to pay an additional amount (other than by
reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a
party consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity (which
will be the Affected Party) where such action does not constitute an event
described in Section 5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified
in the Schedule as applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified Entity X consolidates or
amalgamates with, or merges with or into, or transfers all or substantially
all its assets to, another entity and such action does not constitute an
event described in Section 5(a)(viii) but the creditworthiness of the
resulting, surviving or transferee entity is materially weaker than that of
X, such Credit Support Provider or such Specified Entity, as the case my
be, immediately prior to such action (and, in such event, X or its
successor or transferee, as appropriate, will be the Affected Party); or
(v) Additional Termination Event. If any "Additional Termination Event is
specified in the Schedule or any Confirmation as applying, the occurrence
of such event (and, in such event, the Affected Party or Affected Parties
shall be as specified for such Additional Termination Event in the Schedule
or such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
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ISDA(R)1992
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6. EARLY TERMINATION
(a) Right to Terminate Following Event of Default. If at anytime an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying the
nature of that Termination Event and each Affected Transaction and will
also give such other information about that Termination Event as the other
party may reasonably require.
(ii) Transfer to Avoid Termination Event. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the
Affected Party, the Affected Party will, as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days after
it gives notice under Section 6(b)(i) all its rights and obligations under
this Agreement in respect of the Affected Transactions to another of its
Offices or Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject to
and conditional upon the prior written consent of the other party, which
consent will not be withheld if such other party's policies in effect at
such time would permit it to enter into transactions with the transferee on
the terms proposed.
(iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1) or a
Tax Event occurs and there are two Affected Parties, each party will use
all reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that Termination
Event.
(iv) Right to Terminate. If:
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to
all Affected Transactions within 30 days after an Affected Party
gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event Upon
Merger occurs and the Burdened Party is not the Affected Party.
either party in the case of an Illegality, the Burdened Party in the case of a
Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an
Additional Termination Event if there is more than one Affected Party, or the
party which is not the Affected Party in the case of a Credit Event Upon Merger
or an Additional Termination Event if there is only one Affected Party may, by
not more than 20 days notice to the other party and provided that the relevant
Termination Event is then
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continuing, a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all Affected Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early Termination
Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in
respect of the Terminated Transactions will be required to be made, but
without prejudice to the other provisions of this Agreement. The amount, if
any, payable in respect of an Early Termination Date shall be determined
pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of
written confirmation from the source of a quotation obtained in determining
a Market Quotation, the records of the party obtaining such quotation will
be conclusive evidence of the existence and accuracy of such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event of
Default) and on the day which is two Local Business Days after the day on
which notice of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a Termination Event).
Such amount will be paid together with (to the extent permitted under
applicable law) interest thereon (before as well as after judgement) in the
Termination Currency, from (and including) the relevant Early Termination
Date to (but excluding) the date such amount is paid, at the Applicable
Rate. Such interest will be calculated on the basis of daily compounding
and the actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs. the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment
method, either the "First Method" or the "Second Method". If the parties fail
to designate a payment measure or payment method in the Schedule, it will be
deemed that "Market Quotation" or the "Second Method", as the case may be, shall
apply. The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from an
Event of Default:
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the sum
of the Settlement Amount (determined by the Non-defaulting Party) in
respect of the Terminated Transactions and the Termination Currency
Equivalent of the Unpaid Amounts owing to the Non-defaulting Party
over (B) the Termination Currency Equivalent of the Unpaid Amounts
owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the
sum of the Settlement Amount (determined by the
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ISDA(R)1992
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Non-defaulting Party) in respect of the Terminated Transactions and
the Termination Currency Equivalent of the Unpaid Amounts owing to
the Non-defaulting Party less (B) the Termination Currency Equivalent
of the Unpaid Amounts owing to the Defaulting Party. If that amount
is a positive number, the Defaulting Party will pay it to the
Non-defaulting Party; if it is a negative number, the Non-defaulting
Party will pay the absolute value of that amount to the Defaulting
Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the absolute
value of that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a
Termination Event:
(1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies,
except that, in either case, references to the Defaulting Party and
to the Non-defaulting Party will be deemed to be references to the
Affected Party and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all the
Transactions are being terminated, Loss shall be calculated in
respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions, and
an amount will be payable equal to (I) the sum of (a) one-half of
the difference between the Settlement Amount of the party with
the higher Settlement Amount ("X") and the Settlement Amount of
the party with the lower Settlement Amount ("Y") and (b) the
Termination Currency Equivalent of the Unpaid Amounts owing to X
less (II) the Termination Currency Equivalent of the Unpaid
Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the Transactions
are being terminated, in respect of all Terminated Transactions)
and an amount will be payable equal to one-half of the difference
between the Loss of the party with the higher Loss ("X") and the
Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if it
is a negative number, X will pay the absolute value of that amount to
Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be
subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other under
this Agreement (and retained by such other party) during the period from
the relevant Early Termination Date to the date for payment determined
under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate of
loss and not a penalty. Such amount is payable for the loss of bargain and
the loss of protection against future risks and except as otherwise
provided in this Agreement neither party will be entitled to recover any
additional damages as a consequence of such losses.
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ISDA(R)1992
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7. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this Agreement will
be made in the relevant currency specified in this Agreement for that payment
(the "Contractual Currency"). To the extent permitted by applicable law, any
obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect Of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.
(b) Judgments. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgement being
obtained or claim or proof being made for any other sums payable in respect of
this Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
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<PAGE> 12
9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable and
may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding supplement to
this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. Offices; Multibranch Parties
(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organisation of such party, the obligations
of such party are the same as if it had entered into the Transaction through its
head or home office. This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document
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ISDA(R)1992
<PAGE> 13
to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered
or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any
13
ISDA(R)1992
<PAGE> 14
reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. Definitions
As used in this Agreement:
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii) on
which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
14
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<PAGE> 15
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"law" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have
15
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<PAGE> 16
been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions to be excluded
but, without limitation, any payment or delivery that would, but for the
relevant Early Termination Date, have been required (assuming satisfaction of
each applicable condition precedent) after that Early Termination Date is to be
included. The Replacement Transaction would be subject to such documentation as
such party and the Reference Market-maker may, in good faith, agree. The party
making the determination (or its agent) will request each Reference Market-maker
to provide its quotation to the extent reasonably practicable as of the same day
and time (without regard to different time zones) on or as soon as reasonably
practicable after the relevant Early Termination Date. The day and time as of
which those quotations are to be obtained will be selected in good faith by the
party obliged to make a determination under Section 6(e), and, if each party is
so obliged, after consultation with the other. It more than three quotations are
provided, the Market Quotation will be the arithmetic mean of the quotations,
without regard to the quotations having the highest and lowest values. If
exactly three such quotations are provided, the Market Quotation will be the
quotation remaining after disregarding the highest and lowest quotations. For
this purpose, if more than one quotation has the same highest value or lowest
value, then one of such quotations shall be disregarded. If fewer than three
quotations are provided, it will be deemed that the Market Quotation in respect
of such Terminated Transaction or group of Terminated Transactions cannot be
determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organized, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
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<PAGE> 17
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market
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ISDA(R)1992
<PAGE> 18
value of that which was (or would have been) required to be delivered as of the
originally schedule date for delivery, in each case together with (to the extent
permitted under applicable law) interest, in the currency of such amounts, from
(and including) the date such amounts or obligations were or would have been
required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding an the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
NATIONSBANK, N.A. TANDY BRANDS ACCESSORIES, INC.
By: /s/ ROGER H. HEINTZELMAN By: /s/ STAN NINEMIRE
---------------------------------- --------------------------------
Name: Roger H. Heintzelman Name: Stan Ninemire
Title: Vice President Title: Chief Financial Officer
and Senior Vice President
Date: December 4, 1998 Date:
18
<PAGE> 19
SCHEDULE to the MASTER AGREEMENT
dated as of November 17, 1998 between
NATIONSBANK, NA. ("Party A") and
TANDY BRANDS ACCESSORIES, INC. ("Party B")
PART 1: Termination Provisions
(a) "Credit Agreement" means the Revolving Credit and Term Loan Agreement
entered into as of November 17, 1998 by and between Tandy Brands
Accessories, Inc. and NationsBank, N.A., as amended, modified, restated or
replaced from time to time.
(b) "Specified Entity" means in relation to Party A for the purpose of
Section 5(a)(v), none;
Section 5(a)(vi), none;
Section 5(a)(vii), none; and
Section 5(b)(iv), none;
in relation to Party B for the purpose of.
Section 5(a)(v), any Affiliate of Party B;
Section 5(a)(vi), any Affiliate of Party B;
Section 5(a)(vii), any Affiliate of Party B; and
Section 5(b)(iv), any Affiliate of Party B.
(c) "Specified Transaction" will have the meaning specified in Section 14.
(d) The "Cross-Default" provisions of Section 5(a)(vi) (as amended in Part
5(g)) will apply to Party A and Party B and each Specified Entity of Party
B. In connection therewith, "Specified Indebtedness" will not have the
meaning specified in Section 14, and such definition shall be replaced by
the following: "any obligation in respect of the payment of moneys (whether
present or future, contingent or otherwise, as principal or surety or
otherwise), except that such term shall not include obligations in respect
of deposits received in the ordinary course of Party A's banking business."
and "Threshold Amount" means with respect to Party A an amount equal to
three percent of Party A's shareholders' equity, determined in accordance
with generally accepted accounting principles in such Party A's
jurisdiction of incorporation or organization, consistently applied, as at
the end of such party's most recently completed fiscal year, and with
respect to Party B, any amount.
With respect to Party B, any default (howsoever defined) under the Credit
Agreement shall be an Event of Default under this Agreement.
(e) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will apply to
Party A and Party B and each Specified Entity of Party B.
(f) The "Automatic Early Termination" provision of Section 6(a) will not apply
to Party A and will not apply to Party B.
(g) Payments on Early Termination. For the purpose of Section 6(e):
1
<PAGE> 20
(i) Loss will apply.
(ii) The Second Method will apply.
(h) "Termination Currency" means United States Dollars.
(i) Additional Termination Event. Additional Termination Event will apply. It
shall be an Additional Termination Event, Party B shall be the Affected
Party and Party A shall be the party entitled to designate an Early
Termination Date with respect to all Transactions and determine the amounts
payable under Section 6(e) of this Agreement if Party A ceases to be a
party to the Credit Agreement.
PART 2: Tax Representations
Not Applicable.
PART 3: AGREEMENT TO DELIVER DOCUMENTS
For the purpose of Section 4(a)(i) and (ii) of this Agreement, each party agrees
to deliver the following documents:
(a) Tax forms, documents or certificates to be delivered are: none
(b) Other documents to be delivered are:-
<TABLE>
<CAPTION>
Party
required Form/ Date by Covered by
to deliver Document/ which to be Section 3(d)
document Certificate delivered Representation
- ---------- ------------------------------ ----------------- ---------------
<S> <C> <C> <C>
Party A and Certified copies of all Upon execution Yes
Party B corporate authorizations and and delivery of
any other documents with this Agreement
respect to the execution,
delivery and performance of
this Agreement and any
Credit Support Document
Party A and Certificate of authority and Upon execution Yes
Party B specimen signatures of and delivery of
individuals executing this this Agreement
Agreement any Credit and thereafter
Support Document and upon request of
Confirmations. the other party
</TABLE>
PART 4: MISCELLANEOUS
(a) Address for Notices. For the purpose of Section 12(a) of this Agreement:-
Address for notice or communications to Party A acting through its head
office:
2
<PAGE> 21
NationsBank, N.A.
100 N. Tryon St., NCl-007-13-01
Charlotte, North Carolina 28255
Attention: Derivatives Documentation Unit
(Telex: 669959; Answerback: NATIONSBK CHA)
Facsimile: 704-386-4113
Address for notice or communications to Party B:
Tandy Brands Accessories, Inc.
690 East Lamar Blvd., Suite 200
Arlington, TX 76011
Attention: Stan Ninemire
Telephone No.: 817-548-0090
Facsimile No.: 817-548-1144
(b) Process Agent. For the purpose of Section 13(c):
Party A appoints as its Process Agent: Not applicable.
Party B appoints as its Process Agent: Not applicable.
(c) Offices. The provisions of Section 10(a) will apply to this Agreement:-
(d) Multibranch Party. For the purpose of Section 10 of this Agreement:
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(e) Calculation Agent. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction.
(f) Credit Support Document. Details of any Credit Support Document:-
Each Guaranty (as defined in the Credit Agreement) executed in connection
with the Credit Agreement by the Guarantors (as defined in the Credit
Agreement).
(g) Credit Support Provider. Credit Support Provider means in relation to Party
A,
Not applicable.
Credit Support Provider means in relation to Party B,
Guarantors (as defined in the Credit Agreement).
(h) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York (without reference to its
conflict of laws doctrine).
(i) Netting of Payments. Subparagraph (ii) of Section 2(c) will not apply to
any Transaction unless specified in the relevant Confirmation.
(j) "Affiliate" will have the meaning specified in Section 14 of this
Agreement.
3
<PAGE> 22
PART 5: Other Provisions
(a) Set-off. Any amount (the "Early Termination Amount") payable to one party
(the Payee) by the other party (the Payer) under Section 6(e), in
circumstances where there is a Defaulting Party or one Affected Party in
the case where a Termination Event under Section 5(b)(iv) or (v) has
occurred, will, at the option of the party ("X") other than the Defaulting
Party or the Affected Party (and without prior notice to the Defaulting
Party or the Affected Party), be reduced by its set-off against any
amount(s) (the "Other Agreement Amount") payable (whether at such time or
in the future or upon the occurrence of a contingency) by the Payee to the
Payer (irrespective of the currency, place of payment or booking office of
the obligation) under any other agreement(s) between the Payee and the
Payer or instrument(s) or undertaking(s) issued or executed by one party
to, or in favor of, the other party (and the Other Agreement Amount will be
discharged promptly and in all respects to the extent it is so set-off). X
will give notice to the other party of any set-off effected under this Part
5(a).
For this purpose, either the Early Termination Amount or the Other
Agreement Amount (or the relevant portion of such amounts) may be
converted by X into the currency in which the other is denominated at the
rate of exchange at which such party would be able, acting in a reasonable
manner and in good faith, to purchase the relevant amount of such currency.
If an obligation is unascertained, X may in good faith estimate that
obligation and set-off in respect of the estimate, subject to the relevant
party accounting to the other when the obligation is ascertained.
Nothing in this Part 5(a) shall be effective to create a charge or other
security interest. This Part 5(a) shall be without prejudice and in
addition to any right of set-off, combination of accounts, lien or other
right to which any party is at any time otherwise entitled (whether by
operation of law, contract or otherwise).
(b) Exchange of Confirmations. For each Transaction entered into hereunder,
Party A shall promptly send to Party B a Confirmation via telex or
facsimile transmission. Party B agrees to respond to such Confirmation
within three (3) Business Days, either confirming agreement thereto or
requesting a correction of any error(s) contained therein. Failure by Party
A to send a Confirmation or of Party B to respond within such period shall
not affect the validity or enforceability of such Transaction. Absent
manifest error, there shall be a presumption that the terms contained in
such Confirmation are the terms of the Transaction. The parties agree that
any such exchange of telexes or facsimile transmissions shall constitute a
Confirmation for all purposes hereunder.
(c) Furnishing Specified Information. Section 4(a)(iii) is hereby amended by
inserting "promptly upon the earlier of (i)" in lieu of the word "upon" at
the beginning thereof and inserting "or (ii) such party learning that the
form or document is required" before the word "any" on the first line
thereof.
(d) Notice by Facsimile Transmission. Section 12(a) is hereby amended by
inserting the words "2(b)," between the word "Section" and the number "5"
and inserting the words "or 13(c)" between the number "6" and the word
"may" in the second line thereof.
4
<PAGE> 23
(e) Recording of Conversations. Each party to this Agreement acknowledges and
agrees to the tape recording of conversations between the parties to this
Agreement whether by one or other or both of the parties or their agents,
and that any such tape recordings may be submitted in evidence in any
Proceedings relating to the Agreement.
(f) Eligible Swap Participant. Each party represents to the other that it is an
"eligible swap participant" as defined under the regulations of the
Commodity Futures Trading Commission, currently at 17 C.F.R. Section
35.1(b)(2).
(g) Cross Default. Section 5(a)(vi) of this Agreement is hereby amended
adding the following after the semicolon at the end thereof:
provided, however, that notwithstanding the foregoing (but subject to
any provision to the contrary contained in any such agreement or
instrument), an Event of Default shall not occur under either (1) or
(2) above if the default, event of default or other similar condition
or event referred to in (1) or the failure to pay referred to in (2)
is caused not (even in part) by the unavailability of funds but is
caused solely due to a technical or administrative error which has
been remedied within three Business Days after notice of such failure
is given to the party."
(h) Relationship Between Parties. Each party represents to the other party and
will be deemed to represent to the other party on the date on which it
enters into a Transaction that (absent a written agreement between the
parties that expressly imposes affirmative obligations to the contrary for
that Transaction):
(1) Non-Reliance. It is acting for its own account, and it has made its own
independent decisions to enter into that Transaction and as to whether that
Transaction is appropriate or proper for it based upon its own judgment and
upon advice from such advisors as it has deemed necessary. It is not
relying on any communication (written or oral) of the other party as
investment advice or as a recommendation to enter into that Transaction; it
being understood that information and explanations related to the terms and
conditions of a Transaction shall not be considered investment advice or a
recommendation to enter into that Transaction. Further, such party has not
received from the other party any assurance or guarantee as to the expected
results of that Transaction.
(2) Evaluation and Understanding. It is capable of evaluating and
understanding (on its own behalf or through independent professional
advice), and understands and accepts, the terms, conditions and risks of
that Transaction. It is also capable of assuming, and assumes, the
financial and other risks of that Transaction.
(3) Status of Parties. The other party is not acting as an agent, fiduciary
or advisor for it in respect of that Transaction.
(i) Waiver of Right to Trial by Jury. Each party hereby irrevocably waives any
and all rights to trial by jury with respect to any legal proceeding
arising out of or relating to this Agreement or any Transaction
contemplated hereby.
(j) Incorporation by Reference of Terms of Credit Agreement. The covenants,
terms and provisions of, including all representations and warranties of
Party B contained in the Credit Agreement, as in effect as of the date of
this Agreement, are hereby incorporated by reference in, and made part of,
this Agreement to the same extent as if such covenants,
5
<PAGE> 24
terms, and provisions were set forth in full herein. Party B hereby agrees that,
during the period commencing with the date of this Agreement through and
including such date on which all of Party B's obligations under this Agreement
are fully performed, Party B will (a) observe, perform, and fulfill each and
every such covenant, term, and provision applicable to Party B, as such
covenants, terms, and provisions, may be amended from time to time after the
date of this Agreement with the consent of Party A and (b) deliver to Party A at
the address for notices to Party A provided in Part 4 each notice, document,
certificate or other writing as Party B is obligated to furnish to any other
party to the Credit Agreement. In the event the Credit Agreement terminates or
becomes no longer binding on Party B prior to the termination of this Agreement,
such covenants, terms, and provisions (other than those requiring payments in
respect of amounts owed under the Credit Agreement) will remain in force and
effect for purposes of this Agreement as though set forth in full herein until
the date on which all of Party B's obligations under this Agreement are fully
performed, and this Agreement is terminated.
(k) Hedge Agreement. Party A and Party B agree that this Agreement is a Hedge
Agreement, as defined in the Credit Agreement.
Accepted and agreed:
NATIONSBANK, N.A. TANDY BRANDS ACCESSORIES, INC.
By: /s/ ROGER H. HEINTZELMAN By: /s/ STAN NINEMIRE
---------------------------------- --------------------------------
Name: Roger H. Heintzelman Name: Stan Ninemire
Title: Vice President Title: Chief Financial Officer
and Senior Vice President
Date: December 4, 1998 Date:
6
<PAGE> 25
SECRETARY'S CERTIFICATION
OF
AUTHORIZATION AND INCUMBENCY
I, JACQUELINE MacRORIE, Assistant Secretary of NationsBank, National
Association (formerly NationsBank, National Association (Carolinas), (the
"Association"), do hereby certify:
1. That Exhibit A attached hereto is a true copy of resolutions adopted by
the Board of Directors of the Association on July 28, 1993, which
resolutions remain in full force and effect on this date.
2. That the following named person has been properly elected and now holds
the office in the Association as indicated below, and that person has
been duly designated a key officer with the authority and powers to
engage in activities relating to derivative products as set out in
sections "(A)", "(B)", "(D)" and "(E)" on Exhibit A.
Name Title Signature
- ---- ----- ---------
Roger H. Heintzelman Vice President /s/ ROGER H. HEINTZELMAN
------------------------------
IN WITNESS WHEREOF, I have hereupon set my hand and affixed the seal of
said Association this 30th day of October, 1998.
/s/ JACQUELINE MACRORIE
------------------------------
Jacqueline MacRorie
(SEAL)
<PAGE> 26
EXHIBIT A
Securities and Related Trading Authority
NOW, THEREFORE, BE IT RESOLVED, that within the scope of their
respective authorities, any Executive Vice President (or other officer of
equivalent or higher rank or grade) within or responsible for the Investment
Banking, Global Trading and Distribution, Balance Sheet and Funds Management, or
Corporate Investments group (and their respective successor(s) in such
capacities) is hereby empowered to be responsible and to designate key officers
to be responsible for the overall supervision, coordination, execution and
delivery, including the maintenance of appropriate books and records, of all
transactions, contracts, agreements, arrangements and commitments by which the
business and activities of the functional area, group, unit, department or
division of the Bank under his control are conducted on behalf of the Bank,
including, to the extent permitted by federal law or regulation, purchasing,
investing in, or otherwise acquiring (including purchasing on margin and
borrowing funds through or from approved third parties and securing payment
thereof with property of the Bank to the extent permitted by law), possessing,
selling (including short sales), placing as agent, effecting transactions
pursuant to repurchase and reverse repurchase agreements, transferring, lending,
borrowing, exchanging or otherwise disposing of, and generally underwriting,
dealing and trading in (A) securities, mortgages, and instruments whether on a
current, mandatory forward or optional commitment basis, including: (1) United
States government securities and federal agency securities, on a when-issued or
current settlement basis; (2) mortgage-backed pass-through securities,
guaranteed as to payment of principal and interest by the Government National
Mortgage Association, Federal Home Loan Mortgage Corporation or the Federal
National Mortgage Association; (3) asset-backed securities and mortgage related
securities, including collateralized mortgage obligations, mortgage-backed debt
securities and mortgage-backed pass-through securities not enumerated in clause
A(2) above; (4) whole mortgage loans whether residential, commercial or project
related, and instruments and participation certificates evidencing an interest
in any such loans; (5) money market instruments, including federal funds,
deposits, redeposits, bankers acceptances, certificates of deposit, deposit
notes, bank notes and commercial paper (both foreign and domestic); (6)
municipal securities, including general obligation and revenue bonds and
variable rate demand notes; (7) equity securities and corporate debt
obligations, whether secured, unsecured or convertible, including bonds,
debentures and notes; (B) foreign currencies and foreign currency-denominated
securities, deposits and money market instruments including currency swaps,
cross-currency interest rate swaps, Eurocurrency deposits and redeposits,
certificates of deposit, notes and floating rate notes (FRN's) and bonds; (C)
foreign government and government agency securities; (D) derivative products,
including interest rate swaps, caps, collars, floors, swap options, forward rate
agreements, commodity derivatives, equity derivatives and the like; and (E)
futures and options (exchange listed or over-the-counter) on securities,
securities indices, financial instruments and foreign currencies.
<PAGE> 27
AND BE IT FURTHER RESOLVED, that such authority with respect to such
transactions, contracts, agreements, arrangements or commitments or with
respect to any transactions deemed by such key officers to be proper in
connection therewith includes the authority to give written (including
telecopied, telexed, telegraphic and electronic) or oral instructions, to pay in
cash or by check and/or draft drawn upon the funds of the Bank such sums as may
be necessary, and to bind and obligate the Bank to and for the carrying out of
any such transaction, contract, agreement, arrangement or commitment which shall
be entered into by any such officers for and on behalf of the Bank; to deliver
securities or other documents; to authorize or order the transfer or delivery
of securities or other documents; to enter into and bind the Bank to the terms
of any and all agreements with appropriate clearing organizations; to affix the
seal of the Bark to any documents, instruments or agreements or otherwise; to
endorse in the name of the Bank or otherwise any securities in order to pass
title thereto; to direct the sale or exercise of all rights with respect to any
securities; to sign for the Bank all releases, powers of attorney and/or other
documents in connection with any such transaction, contract, agreement,
arrangement or commitment and to agree to any terms or conditions in connection
therewith; to accept delivery of any securities, documents or other items; to
appoint any other person or persons to do any and all things which any of such
officers is empowered to do; and generally to do and take any and all action
necessary or considered desirable in connection with any such transaction,
contract, agreement, arrangement or commitment.
AND BE IT FURTHER RESOLVED, that all such lawful transactions,
contracts, agreements, arrangements and commitments which shall have been
entered into by or under the authority of the respective officers specified
above for and on behalf of the Bank on or after January 1, 1992 be and hereby
are ratified, confirmed, approved and adopted in all respects.
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TANDY BRANDS
ACCESSORIES, INC.'S DECEMBER 31, 1998, FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FILINGS. DOLLARS ARE IN THOUSANDS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 713
<SECURITIES> 0
<RECEIVABLES> 40,067
<ALLOWANCES> 3,192
<INVENTORY> 54,032
<CURRENT-ASSETS> 94,272
<PP&E> 17,322
<DEPRECIATION> 6,127
<TOTAL-ASSETS> 124,505
<CURRENT-LIABILITIES> 16,495
<BONDS> 50,000
0
0
<COMMON> 5,720
<OTHER-SE> 52,018
<TOTAL-LIABILITY-AND-EQUITY> 124,505
<SALES> 98,403
<TOTAL-REVENUES> 98,403
<CGS> 61,854
<TOTAL-COSTS> 61,854
<OTHER-EXPENSES> 1,554
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,588
<INCOME-PRETAX> 9,937
<INCOME-TAX> 3,875
<INCOME-CONTINUING> 6,062
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,062
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.05
</TABLE>
